KUALA LUMPUR (Nov 15): Analysts expect NationGate Holdings Bhd to continue to see earnings recovery going into the final quarter after its nine-month results came within expectations.
Kenanga Research and PhilipCapital expect the company to deliver another sequential earnings for the upcoming fourth-quarter (4Q) results on the back of continuous improvement in customer demand.
PhillipCapital has reiterated their "buy" rating on NationGate with target price at RM1.80 based on 27 times price earning (PE) multiple on forecast financial year 2024 (FY2024f) earnings per share (EPS).
According to the research house, the group is a prime beneficiary of the trade diversion, and strategically positioned in the key secular growth trends such as 5G, artificial intelligence (AI) data centre and electric vehicle, which are expected to drive a three-year net profit compound annual growth rate (CAGR) of 27% over 2022-2025.
Meanwhile, Kenanga maintained an "outperform" stance for the group with unchanged target price at RM1.70 based on unchanged 25 times FY2024f PER.
Kenanga said they are confident that the positive earnings momentum in 3Q2023 will be extended into 4Q2023, as it takes on the production of a broader range of products of its key customer specialising in optical transceivers.
In addition, the research house said NationGate also expects to onboard a new data centre customer, xFusion, in 2Q2024, involving the printed circuit board assembly (PCBA) process.
THE leading electronic manufacturing services (EMS) provider, reported a 25.5% year-on-year (y-o-y) decline in its core net profit to RM45.6 million for the nine months ended Sept 30, 2023 (9MFY2023).
The financial result has shown a 15% quarter-on-quarter (q-o-q) increase in revenue to RM166 million and a 55% q-o-q increase in core net profit to RM19 million.
Kenanga Research said the results were within their expectations, as the group expects a strong fourth quarter (4Q2023) performance.
Likewise, PhillipCapital Research acknowledged the result in line with their estimation, but missed the consensus expectation, representing 72% and 65% of both respective full-year estimates.
Separately, NationGate has attributed the improved performance to the recovery in their financial result which was driven by both their networking and telecommunication and data computing segments, which saw higher customer orders and consignment-based revenue.
The group’s other segments, namely industrial instruments, data computing, consumer electronics, automotive and semiconductor, recorded positive growth in 9M2023, partially offsetting the decline in the network and telco segment.
At the time of writing, the shares in NationGate were up two sen or 1.65% to RM1.23, valuing the company at RM2.55 billion.