KUALA LUMPUR (Sept 11): Ambest Group Bhd (KL:AMBEST) is undervalued by investors at a time when the precision parts manufacturer has further earnings upside ahead, said Kenanga Investment Bank.

At current prices, Ambest is at a discount of more than 40% to regional and local peers, the research house said in initiating coverage with an ‘outperform’ call. Ambest should be valued at RM1.80 for the structural growth prospects amid an upcycle in wafer fabrication equipment, Kenanga noted.

“We believe there remains further earnings upside as the upcycle continues to unfold,” the house said.

Tradeview Research is the only other house covering Penang-based Ambest and also rates the stock a ‘buy’ with a target price of RM1.60.

Shares of Ambest, which supplies mission-critical parts to semiconductor equipment manufacturers, have surged nearly 500% since its listing in February to RM1.48 on Friday. At the last price, the company has a market capitalisation of RM755 million.

The semiconductor industry is entering a major upcycle in wafer fabrication equipment fuelled by a spending spree on data centres to train and run artificial intelligence, which will benefit Ambest, Kenanga said.

Ambest’s exposure to wafer fabrication equipment is projected to rise to about 70% from 47% of revenue in 2024, the house noted. “Coupled with the transition towards higher-value and more complex wafer-fab equipment, Ambest is well positioned to capture this upcycle,” Kenanga added.

Further, the company is a beneficiary of the supply chain shift to Southeast Asia, Kenanga said. Only those already qualified and embedded within the semiconductor equipment supply chain are positioned to capture this growth and “Ambest ticks these boxes”, the house added.