Brokers' call: Memtech International

MEMTECH INTERNATIONAL

Broker: CIMB

Call: Buy

Target Price: 17 cents

Memtech's year-on-year decline of 2.6 per cent in second-quarter revenue was largely due to delays in orders from the consumer electronics segment, which have since resumed.

Management expects greater sales volume in this half-year, especially from stronger orders placed by Amazon in anticipation of the year-end gift season.

Memtech has also obtained design approval from Beats for its next-generation product and is the only supplier of silicone rubber parts for this new model. Production is expected to start in early 2016.

Meanwhile, the management has concluded a buyback of 1.5 million shares in August, reducing its share capital and increasing the earnings per share for the 2015 to 2017 financial years by 0.1 to 0.2 per cent.

Indicative dividend for the 2015-2017 financial years is 6.2 per cent to 9.2 per cent.


CITIC ENVIROTECH

Broker: OCBC Investment Research

Call: Hold

Target Price: $1.40

Citic Envirotech Ltd (CEL) saw its share price tumbling as much as 26 per cent, from an intra-day high of $1.835 on July 14 to an intra-day low of $1.355 on Sept 30 despite putting out a relatively decent set of results in the second quarter.

The main reason was probably the recent tumble in Hong Kong-listed water treatment companies like Beijing Enterprise Water. Another reason could be news that a 17 per cent value-added tax (VAT) was levied on water treatment companies in China from July. However, the impact is likely minimal.

Orders have also started to flow with CEL announcing three contract wins worth a total of 263 million yuan ($58.9 million), which it intends to finance using its usual 30:70 mix of internal funds and bank financing.

CEL has recently tendered for several projects and the results of these will be announced sometime this month.


INNOVALUES

Broker: CIMB

Call: Buy

Target Price: 93 cents

Five years ago, the estimated number of sensors in a car was 30 to 40. This has increased to more than 50 now and could go up to 200. The level of sensor usage in high-end brands is greater than in basic models.

This will drive up Innovalues' overall topline growth of 13 per cent per annum for financial years 2015 to 2017.

The third-quarter outlook for the automobile industry may be softer, but could be offset by a stronger office automation segment. New projects are expected to contribute more significantly in the 2016-2017 financial year. The company has promising growth prospects, cash-generative business and an attractive dividend yield of 5.2 to 6.7 per cent for FY2015 to 2017.


EZRA HOLDINGS

Broker: OCBC Investment Research

Call: Hold

Target Price: 16 cents

There was some interest in the market when it was revealed last Monday that Norway's DNB Bank had acquired 207 million shares in Ezra at 12 cents apiece, lifting its holding to 7.04 per cent.

In Ezra's latest binding share sale and subscription agreement with Chiyoda, it also appears that there are still plans for a sale and leaseback of the Lewek Constellation.

After rising about 15 per cent since news of the proposed sale of a stake in the sub-sea business to Chiyoda, Ezra's share price has trended downwards slightly since its recent peak of $0.132.

Given the dim industry outlook and few positive catalysts in sight, a hold rating is maintained.

A version of this article appeared in the print edition of The Straits Times on October 05, 2015, with the headline 'Brokers'Call'. Print Edition | Subscribe