Mi Equipment Holdings Bhd ("Mi Equipment), the first Main Market listing in 2018, is an established equipment manufacturer focusing on advanced wafer level packaging within the semiconductor industry. BUY with a target price of RM2.30 based on 16x PER FY19 as per Industry peers average. 

Mi Equipment mainly involves in the design, development, manufacture and sale of Wafer Level Chip Scale Packaging (WLCSP) sorting machines with Inspection and testing capabilities for the semiconductor industry. More than 80% of its sales are derived from international market, with a strong customer base of Tier-1 global semiconductor players such as Advanced Semiconductor Engineering, Global A&T Electronics and Mari Amertron. 

RM140m or 73% of the IPO proceeds is earmarked for the construction of 2 new factories located in Bayan Lepas and Batu Kawan with the latterto cater for large sales order (>40 machines per month). These facilities will enhance its production capacity by more than 10x from its current capacity of 8 machines per month to 90 machines per month over the next 2 years. 

The group intends to Introduce new assembly and packaging machines with new applications to broaden its product portfolio. Additionally, Mi Equipment's venture into the fabrication of precision parts is expected to bring In new revenue source (target commencement in 2Q2018). This division will improve the machine build cycle time besides generating additional sales by producing fabricated precision parts to external semiconductor customers. 

The company's balance sheet remains healthy post with near zero gearing ratio. The company has a dividend policy of 20%, translating to a dividend yield circa 2% in FY19. Mi Equipments technical expertise in WLCSP sorting machines will enable them to capitalise on the growing mobile communications Industry. EPS is expected to expand by around 6% and 15% for FY18 and FY19 respectively. 

Source: Rakuten Research - 20 Jun 2018