Aztech Global Ltd: Steep plunge in 1Q25 results on demand weakness, below expectations
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- Weak 1Q25 results, revenue fell 67.3% y/y and net profit plunged 90.6% to just SGD1.5m; would be net loss excluding interest income.
- New customer wins not enough to offset weakness from key customer
- Downside risk to our FY25F forecasts, despite already being the lowest on the Street.
- Maintain FULLY VALUED rating and SGD0.52TP. We believe current share price is likely supported by SGD10cts DPS, going ex-dividend on 17th April 2025 but is unlikely to be sustained thereafter.
1Q25 results below expectations on weak demand. Aztech reported a weak first quarter for FY2025, with revenue declining 67.3% y/y to SGD42.0m, primarily due to reduced demand for IoT and data communication products. Net profit plunged 90.6% to just SGD1.5m, with net margin of 3.6% on lower operating leverage, supported by disciplined cost control and SGD2.6m in interest income. Excluding the interest income, the group would have recorded net loss of about SGD1.1m. 1Q25 revenue and net profit account for only 9%/4% of our forecast, way below expectations. On a positive note, the group generated net cash of $18.6m from operating activities with tight working capital management.
New wins unable to close gap; expect further downside to our FY25F forecast, already the street’s lowest. Operationally, Aztech continued to build strategic capabilities at its Malaysia facility, which is being positioned as a key site to support supply chain diversification amid ongoing geopolitical and tariff-related risks. A new automated production line is on track to be commissioned in 2Q 2025, with the facility already securing five new customers from the consumer, health-tech, and industrial segments. Commercial production is expected to start in 2H25, but contributions will likely be modest in the near term. With a significant drop in orders from the key customer and limited short-term uplift from new wins, we expect further downside risk to our FY25F forecasts, which is already the lowest in the street. Our FY25F revenue projection of SGD466m is about 13% below consensus, while net profit forecasts of SGD40.5m is 25% below the street average. We maintain our Fully Valued call and TP of SGD0.52. We believe the current share price of SGD0.73, is supported by the DPS of 10 Scts (3 Scts final + 7 Scts special) which goes ex-dividend on 17th April 2025, but is unlikely to be sustained thereafter.
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