UOB Kay Hian Private Limited
Date of Report: Friday, 05 September 2025
Metasurface Technologies Holdings: Precision Engineering Powerhouse Positioned for Explosive Growth in Semiconductors and Aerospace
Executive Summary
Metasurface Technologies Holdings (HKEX: 8637 HK) has emerged as a dynamic player in the precision engineering landscape, with a focus on large-format components for semiconductor and aerospace end-markets. UOB Kay Hian initiates coverage with a resounding BUY recommendation, citing massive upside potential, robust earnings growth, and a rapidly expanding addressable market driven by semiconductor supply chain investments and a surge in aerospace maintenance demand.
Company Overview
Headquartered in Singapore, Metasurface Technologies Holdings offers comprehensive build-to-print precision engineering services, including precision machining and welding. The company primarily serves the semiconductor equipment and aerospace industries, providing critical components such as vacuum chambers.
Key Stock & Shareholder Data
| Metric |
Data |
| Share Price |
HK\$1.15 |
| Target Price |
HK\$2.90 |
| Upside Potential |
152.2% |
| Market Cap (HK\$m/US\$m) |
173 / 25 |
| Shares Outstanding (m) |
150 |
| Major Shareholders |
- Chua Chwee Lee – 37.51%
- Jee Wee Jene – 15.60%
- Thng Chong Kim – 8.20%
|
| FY25 NAV/Share |
HK\$0.52 |
| FY25 Net Debt/Share |
HK\$0.79 |
| 52-Week High/Low |
HK\$1.51 / HK\$0.60 |
Investment Thesis: Positioned for Multi-Year Growth
- Strong Demand Tailwinds: The complexity of advanced chip fabrication is driving surging demand for wafer fabrication equipment (WFE), which in turn benefits suppliers like Metasurface. The company’s Singapore base is strategically advantageous, supported by incentives and a favourable geopolitical climate.
- Aerospace Expansion: Airlines are leaning on aging fleets due to supply constraints, fueling demand for maintenance, repair, and overhaul (MRO) services. Metasurface is expanding its aerospace footprint, including a new engine MRO venture, seizing opportunities created by capacity limitations among established MRO players.
- Proven Profitability and Margin Expansion: The company’s high-margin precision welding segment and operating efficiencies are set to drive robust margin expansion.
- Valuation Upside: With a target price of HK\$2.90 (over 150% upside), the stock is pegged at a modest 7.9x 2026F PE, reflecting a 50% discount to larger, more liquid peers.
Industry Backdrop: Semiconductor Boom and Aerospace Tailwinds
The semiconductor precision engineering market in Singapore is expected to post a compound annual growth rate (CAGR) of 13.4% from 2024 to 2028, underpinned by the escalating complexity of advanced node fabrication. More wafer processing steps, additional mask layers, and increased metrology requirements are all driving increased equipment needs.
On the aerospace side, global airline capacity constraints—exacerbated by production bottlenecks and trade uncertainties—are prolonging aircraft service lives and amplifying MRO demand. Key established MRO firms are themselves facing labor shortages, opening the door for nimble entrants like Metasurface.
Financial Performance: Key Metrics and Outlook
| Year to 31 Dec (Rmbm) |
2023 |
2024 |
2025F |
2026F |
2027F |
| Net Turnover |
38,769 |
37,722 |
46,171 |
54,577 |
63,839 |
| EBITDA |
10,746 |
9,516 |
14,052 |
18,404 |
21,745 |
| Operating Profit |
5,054 |
5,941 |
10,176 |
14,081 |
16,913 |
| Net Profit (Adj.) |
7,511 |
5,797 |
7,251 |
9,106 |
11,093 |
| EPS (cent) |
n.a. |
3.9 |
4.8 |
6.1 |
7.4 |
| P/E (x) |
n.a. |
5.0 |
4.0 |
3.2 |
2.6 |
| Dividend Yield (%) |
n.a. |
3.3 |
7.5 |
9.4 |
11.4 |
| Net Margin (Adj) (%) |
19.4 |
15.4 |
15.7 |
16.7 |
17.4 |
| ROE (%) |
17.7 |
8.7 |
13.5 |
17.7 |
20.0 |
Business Segment Analysis and Revenue Growth
Metasurface’s revenue is driven by two core divisions: Precision Machining and Precision Welding. The company is seeing a dramatic shift in revenue contribution, with aerospace engineering expected to rise from 8.0% in 2024 to 19.8% in 2027.
| Segment (S\$000) |
2024 |
2025F |
2026F |
2027F |
| Total Revenue |
37,722 |
46,171 |
54,577 |
63,839 |
| Precision Machining |
17,077 |
23,874 |
30,051 |
36,860 |
| Semiconductor |
13,014 |
17,313 |
19,910 |
23,014 |
| Existing Component Business |
11,306 |
15,264 |
17,553 |
20,186 |
| Sub-Assembly Business |
1,708 |
2,049 |
2,357 |
2,828 |
| Aerospace |
3,025 |
5,445 |
8,982 |
12,641 |
| Engine Overhaul Business |
– |
– |
2,720 |
5,440 |
| Data Storage |
786 |
865 |
908 |
953 |
| Others |
252 |
252 |
252 |
252 |
| Precision Welding |
20,645 |
22,297 |
24,526 |
26,979 |
Growth Trajectory by Segment
- Precision Machining revenue is projected to surge from S\$17.1m in 2024 to S\$36.9m in 2027, a CAGR of 29.2%.
- Aerospace revenue is set to leap from S\$3.0m in 2024 to S\$12.6m in 2027, with the engine overhaul business expected to double from S\$2.7m in 2026 to S\$5.4m in 2027.
- Precision Welding remains a consistent growth engine, rising from S\$20.6m in 2024 to S\$27.0m in 2027.
- Net profit margins (adjusted) are forecast to climb from 15.7% in 2025 to 17.4% in 2027, reflecting operational leverage and higher-value business mix.
Valuation & Peer Comparison
Metasurface’s target valuation is set at 7.9x 2026F PE, a significant discount to peers such as UMS Holdings, Grand Venture Technology, and Frencken Group, which average 15.7x. The discount accounts for Metasurface’s smaller scale and lower liquidity profile—yet strong growth prospects argue for multiple expansion as the business scales.
The DCF-derived valuation assumes an equity market premium of 11.2%, a 64/36 equity-to-debt split, and a WACC of 19.0% to factor in extra risk from lower market cap and trading liquidity.
Balance Sheet and Cash Flow Highlights
| Balance Sheet (Rmbm) |
2024 |
2025F |
2026F |
2027F |
| Fixed Assets |
5,710 |
5,900 |
6,910 |
7,870 |
| Other LT Assets |
38,635 |
37,570 |
36,683 |
35,400 |
| Cash/ST Investment |
9,225 |
17,974 |
21,091 |
25,215 |
| Total Assets |
69,860 |
76,500 |
83,816 |
89,700 |
| Shareholders’ Equity |
26,997 |
39,412 |
44,455 |
51,386 |
| Net Debt to Equity (%) |
43.8 |
36.9 |
21.9 |
11.2 |
Profitability and Key Ratios
- Gross margins are forecast to improve from 34.1% in 2025 to 40.0% in 2027.
- ROE is expected to nearly double from 9.6% in 2025 to 23.2% in 2027.
- Pre-tax margin is set to rise sharply from 8.6% in 2024 to 23.8% in 2027.
- Interest coverage increases meaningfully, reflecting stronger cash generation and lower leverage.
Dividend Outlook
Dividend yields are projected to rise steadily, from 3.3% in 2025 to an attractive 11.4% in 2027, underpinned by robust earnings and cash flow growth.
Conclusion: High-Conviction Buy for Semicon & Aerospace Upside
Metasurface Technologies Holdings stands at a strategic inflection point, capturing surging demand in both semiconductors and aerospace. With improving margins, explosive profit growth, a strong balance sheet, and substantial upside to the target price, the company offers a compelling risk-reward profile for investors seeking exposure to the next wave in precision engineering.
Disclosure
This article is based solely on research published by UOB Kay Hian. Investors should consult their financial adviser before investing.
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