not vested
Trading Buy: 0196-QES
(Last price: RM0.255, Potential upside +21.6%)
Company Profile
QES is principally involved in the distribution of inspection, test and measurement equipment, materials and engineering solutions (81% of FY18 revenue). It also manufactures optical inspection equipment, automated handling equipment as well as advance wafer measurement system (about 19% to FY18 revenue).
Trading Catalyst
Despite rising 18.6% YTD, we expect QES to advance further towards RM0.27-0.305 in the medium to long term after staging a bullish downtrend line breakout yesterday, premised on its (i) cheap valuations at 11.8x FY19 P/E (37% discount to peers’ of 18.8x P/E), supported by a strong 22% FY18-20 EPS CAGR and RM53m net cash (28% of market cap);
(ii) Three new high margins automated products in the pipeline i.e. Fully Automated Vision Inspection System (FAVIS), Automated Wafer Packing System (AWPS) and Automatic Wafer Identification (AWID) to drive its manufacturing segment post FY20;
(iii) strong recurring income from its distribution and maintenance businesses (averaging c60-70% to sales);
(iv) Well-diversified clientele with more than 2400 customers (Malaysia and Asia markets) mainly in the semiconductor, E&E and automotive industries and
(v) relatively insensitive to forex fluctuations, as 55-60% of its revenues are quoted in USD with natural hedging from its USD-denominated purchases (c.60%).
Technical View
Resistance: RM0.270 / RM0.285 / RM0.310
Support: RM0.240 / RM0.230
Cut loss: RM0.225
Key Financial Stats
Trading at 11.8x FY19E (37% lower than its peers), supported by a strong 22% FY18-20 EPS CAGR with 7sen net cash/share
Source: HLIB