We came away from the conference call hosted by Mi Technovation’s (MI) management yesterday with more guidance on the company’s outlook in the respective regional operations. We think 2021 will be an exciting year for the company as it is the start of the next growth phase for the company, driven by the diversification of semiconductor equipment sales while the automation and robotics segment is expected to grow leaps and bounds for a third straight year. Meanwhile, the proposed acquisition of Taiwan-based Accurus Scientific is set to drive the company further in the 2H. We make no changes to our earnings forecast. Maintain Outperform call with an unchanged TP of RM6.34 based on 45x FY22 EPS.

• Focusing on three key areas. Going forward, management guided that that they will focus their automated equipment and automation & robotics products on i) semiconductor, ii) automotive and iii) smart city fields. This year, management has allocated higher capex of RM40m (vs FY20: RM34.7m) and also a significant increase in R&D expenditure, totaling RM18m compared to FY20’s RM10.8m to expand its production capacity and widen its product portfolio. It is worth noting that the capex guidance does not include any future capex required by Accurus Scientific, in which the proposed acquisition is pending completion.

• Starting to reap gains from the diversification. 2021 will be the start of the next growth phase for the company, with semiconductor equipment sales contribution coming from four countries with each specializing on one type following the successful technology transfers from the set-up of technology and manufacturing centres overseas. Under the Mi Equipment Group, the Malaysian operation which is focused on the flagship Mi Series sorting & taping semiconductor equipment, will continue to be the key growth driver for the overall semiconductor equipment sales. We expect double-digit sales growth this year. Taiwan operation, which is specializing on the vision inspection equipment (Vi Series), is expected to double up its sales contribution this year. Korea and China’s operations, which are focused on the die bonding equipment (Ai Series) and final test (Si Series) equipment, are tipped to be the key growth drivers in 2023 as both started from scratch. China’s plant is currently in the midst of going through prototype testing and quality control with existing customers. Lastly, the automation & robotics arm is set to see a surge in demand this year banking on the Oto (automation) and Kobot (robotics) products. The Batu-Kawan plant utilization rate currently stands at 40%-45%.

• Proposed acquisition of Accurus Scientific likely to conclude soon. It is currently in the hands of the Taiwan Investment Commission stage, though is expected to be concluded by April-May 2021. Based on our rough estimates, it could potentially contribute additional earnings of 10%-12% to our existing FY21 earnings forecasts.

Source: PublicInvest Research - 23 Feb 2021