MORNING CALL: 25/8/23

Mercury Securities says promising horizons await QES group

Transcript

00:00 This morning, we're taking a look at QES Group, which makes and distributes inspection,

00:06 test, measuring, analytical and automated handling equipment.

00:10 Mercury Securities has a buy recommendation on the stock and target price of 70 cen.

00:16 The counter settled yesterday at 60 cen.

00:19 QES just announced two Q results and according to Mercury, they were within expectations.

00:25 Revenue was at 47.6% of the research house's full year estimates, while net profit was at 44.6%.

00:33 Among the investment highlights, order book is at RM106 million as of July 2023,

00:39 cash position at RM42.5 million, up 27.6% year-on-year.

00:44 QES is building a new factory in Batu Kawan, Penang that will enable it to diversify its

00:50 geographic revenue stream outside of the ASEAN region.

00:53 It boasts a consistent annual recurring income of approximately RM50 million via the maintenance

00:59 and service of large equipment install base.

01:03 Mercury revising its revenue estimates by -6.1% for FY23 and +0.2% for FY24,

01:11 as well as its earnings forecasts by -5.4% for FY23 and -1% for FY24,

01:18 in line with a slowdown of the overall semiconductor industry.

01:22 It said it likes the stock due to its attractive growth prospects,

01:26 and the fact that it's well positioned to leverage on the semiconductor industry.

01:31 According to Bloomberg data, two other research houses have QES in their stock universe.

01:36 Apex Securities has a buy recommendation and target price of 73c.

01:41 RHB Research has a target price of 62c, though it did not rate the stock.

01:46 So that's two buy recommendations in total, with target prices averaging out to 73c.

01:52 QES last closed at 60c, that's a potential upside of about 21.7%.

01:58 [MUSIC]