SGX:8AZ.SI:Aztech Global

CGS International’s William Tng has maintained a “reduce” rating and a 41-cent target price on SGX:8AZ.SI:Aztech Global, citing persistent weakness in the company’s near-term outlook.

In a note dated June 16, Tng pointed to continued caution among U.S. consumers amid trade tensions and broader economic concerns. He also highlighted that excess inventory from Aztech’s key clients—mainly U.S.-based—remains a drag, stemming from over-ordering during the pandemic.

Aztech has shifted its primary manufacturing base to Malaysia, with its 300,000 sq ft Pasir Gudang plant in Johor positioned to scale up if new opportunities arise. An additional 86,000 sq ft facility in Gelang Patah remains vacant but could be activated to support new customer needs.

“U.S. companies are reassessing their supply chains in Asia, and Malaysia is still seen as a potential winner, despite tariff risks,” said Tng.

He noted that Aztech still has $110 million in unused proceeds from its March 2021 IPO, which could be deployed for future expansion. Meanwhile, its Dongguan plant in China is operating at just 30% of its past capacity following rationalisation efforts, although the company has not fully exited China due to the strength of its electronics supply chain.

Despite onboarding five new customers in 1QFY2025, Tng believes their contribution this fiscal year will be marginal. He warned that diversification into new product lines for its main customer is unlikely to bear fruit before FY2026.

Tng continues to value the stock at 8.4 times FY2026 earnings, in line with its four-year historical average. His base-case target price remains at 41 cents.

While upside risks include new customer wins or increased project flow from its core client, Tng cautioned that downside catalysts include order cancellations, foreign exchange volatility, and over-reliance on its largest customer. A significant drop in orders from this key client could materially impact Aztech’s earnings, he warned.

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