Excerpts from UOBKayHian report

Aztech Global (SGX: 8AZ)

• We visited Aztech Global’s manufacturing facility in Dongguan and R&D centre in Shenzhen to better understand its manufacturing flow and R&D capabilities. In the plant, we observed high-volume production and operational efficiencies.
• Aztech Global’s ability to leverage on its R&D expertise and provision of one-stop design and manufacturing services allows it to attract and build long-lasting relationships with its clients.

Maintain BUY. Target price: S$1.00

Highly efficient operations in Dongguan facility

Aztech Global’s (Aztech) largest manufacturing facility in Dongguan, China is strategically located near Guangzhou and Shenzhen, and enjoys an extensive expressway network that connects it to other cities in the Greater Bay Area.

During our tour of the 500,000sf facility, we observed highly efficient production of goods ranging from IoT devices and security cameras to LED lighting on the factory floor.

As a one-stop design and manufacturing service provider, achieving operational efficiency is key to delivering high quality products to its customers.

This was seen in its electronics manufacturing flow, where the system testing of printed circuit board assembly (PCBA) is automated. On top of this, facility operations are run 24/7 by a long-serving team, maximising both output and efficiency.

From our understanding, many factories in Dongguan were grappled with prolonged shutdowns and leaves of absence during the COVID-19 pandemic, leading to low utilisation rates or worse, closures.

The fact that Aztech has successfully weathered the crisis proves its strong manufacturing capabilities and steady orderbook.

Working closely with customers for smooth production

At the facility, we learned that Aztech Global actively engages both existing and potential customers in its production processes.

We witnessed Aztech’s transparency towards its customers on its order processes as they were brought on a separate plant tour, demonstrating Aztech Global’s commitment to achieving quality products and customer satisfaction.

Strength in R&D capabilities

Aztech has four R&D centres in Singapore, Hong Kong and China (Shenzhen and Dongguan). The multispecialty R&D team consists of 65 employees across the centres, specialising in hardware design, firmware design, mechanical design and more.

These teams are therefore highly competent in providing full turnkey design services solutions. This includes software development, industrial design and rapid prototyping, in-house testing lab facilities for product reliability testing and others.

During our visit, we saw the team’s plethora of products conceptualised that were brought to fruition, showcasing Aztech’s strong R&D capabilities.

Valuation/Recommendation

Maintain BUY and target price of S$1.00, pegged to an unchanged 8.6x 2023F EPS. This is based on Aztech’s long-term mean PE. We continue to like Aztech as it is a proxy to high-growth IoT products, for which we believe orders will continue to grow in 2023.

You can find the full report here and the company website here.