Broker: UOB Kay Hian
Date of Report: 29 July 2025

Oxford Innotech: Precision Engineering Powerhouse Poised for Explosive Multi-Sector Growth in 2026

Company Overview: Driving Innovation Across High-Growth Sectors

Oxford Innotech (OXB) is redefining the landscape of integrated engineering solutions. Specializing in the design and manufacture of precision metal and plastic parts, mechanical assembly, automation, and robotics, OXB serves a diverse clientele across the automobile, electrical & electronics, ergonomic furniture, semiconductor, telecom, and modular building systems industries.

• GICS Sector: Metalworking Machinery
• Shares Issued: 710 million
• Market Cap: RM205.9 million (US\$48.8 million)
• Share Price: RM0.29
• Target Price: RM0.48 (Upside 65.5%)
• FY25 Net Asset Value/Share: RM0.33
• FY25 Net Cash/Share: RM0.19
• Major Shareholders: Ng Thean Gin (27.7%), Lee Lai Chan (14.7%), Teh Teng Wah (13.0%)

Investment Highlights: Growth Engines and Strategic Expansion

OXB is set for a breakout year, leveraging its dual growth drivers—semiconductors and modular building systems. The company is listing at an attractive 12.3x 2026F PE, with 2025 positioned as a consolidation year before a projected revenue/core net profit surge of 38%/60% in 2026.

• Diversified Revenue Streams: OXB’s strategic presence across multiple defensive and high-growth sectors has insulated it from industry-specific downturns and positioned it to capitalize on sector upswings. Even during the semiconductor industry slump in 2023, OXB maintained profitability with RM8.0 million net profit (-2% YoY) at a 16% margin.
• Expansion Strategy: The company is deploying RM41.6 million in proceeds to construct a new factory (+2.25x floorspace) and purchase new machinery (+16% capacity). By 3Q27, total manufacturing area will reach 193,000 sf, with 25 additional machines boosting production capacity. Current machine utilization stands at an optimal 75% (two shifts), underscoring robust demand.
• Key Client Partnership: OXB’s partnership with Sweden-based SIBS AB Group, a major disruptor in modular construction, has driven record-breaking 2024 performance (revenue/core net profit: +88%/+94%). The modular building systems segment now generates 46% of OXB’s revenue, supported by a 10-year supply deal with SIBS and a US\$1.27 billion orderbook fueling future growth.

Financial Performance: Robust Margins and Accelerating Earnings

Strategic Consolidation and Growth Outlook

• 23-Year Track Record: Since 2002, OXB has evolved from a precision engineering specialist to a comprehensive solutions provider, integrating automation robotics and high-precision manufacturing.
• Breakout Year in 2024: A convergence of proven capabilities, market tailwinds, and enhanced customer confidence—termed the “Lollapalooza Effect”—drove substantial supply contracts, notably with SIBS.
• 2025 Temporary Dip, Strong Rebound Expected: OXB forecasts a revenue/core net profit dip of 20%/34% in 2025 due to a brief order gap post-Saudi Arabia project, capex delays, and industry consolidation. However, a strong recovery is anticipated in 2026, fueled by increased semiconductor orders and new SIBS contracts in Saudi Arabia and the UK.

Valuation and Recommendation

• Initiate with BUY: Target price set at RM0.48, using a conservative 20.0x 2026F PE—reflecting a 40% discount to historical sector averages. This approach factors in a mid-cycle valuation due to the expected 2025 lull.
• Potential Upside: At the listing price, OXB trades at a compelling 12.3x 2026F PE (20x 2025F PE on trough earnings), with significant rerating potential as 2026 profits are projected to surge.
• Further Upside Scenario: On a 25.0x 2026F PE, in line with other integrated engineering solution providers, OXB’s fair value would reach RM0.58.

Peer Comparison: Competitive Positioning

IPO Proceeds Utilization: Fueling Future Growth

Comprehensive Financial and Operational Metrics

• Operating Margins: EBITDA margins projected to rise from 24.1% in 2025F to 29.7% by 2027F.
• Net Margins: Improving from 14.0% in 2025F to 17.1% in 2027F.
• Return on Assets (ROA): Gradually climbing from 5.8% in 2025F to 9.2% in 2027F.
• Return on Equity (ROE): Rebounding from 8.5% in 2025F to 13.3% in 2027F.
• Leverage: Net debt/(cash) to equity forecasted to shift from 21.1% in 2024 to net cash positions in subsequent years.
• Dividend Payout: Dividend yield projected between 1.3% and 2.4% over 2025F-2027F.

Conclusion: A Strategic Leap for Investors

With its robust expansion strategy, deepening customer integration, and diversified sector exposure, Oxford Innotech stands out as a compelling investment. The company’s trajectory points to strong earnings recovery and structural growth, underpinned by blue-chip client partnerships, aggressive capacity expansion, and a proven track record. Supported by attractive valuations and a clear roadmap for future growth, OXB is well-positioned to deliver significant shareholder value in the coming years.

Disclosures and Important Information

This report is prepared by UOB Kay Hian. It is provided for informational purposes only and does not constitute investment advice or a solicitation to buy or sell securities. Investors should seek independent financial advice tailored to their individual circumstances before making investment decisions.