Avi-Tech Electronics downgraded by RHB after TSMC cuts outlook

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RHB downgraded Avi-Tech Electronics to Neutral from Buy on expectations TSMC’s outlook cut will hurt the supply chain.

“Avi-Tech’s engineering and manufacturing customers supply wafer machines to TSMC, which trimmed its full-year revenue target due to softer demand for smartphones and uncertainty over crypto mining,” RHB said in a note on Tuesday. “This will likely have a negative impact on Avi-Tech’s customers as orders for machines and parts would be delayed, which would in turn affect Avi-Tech.”

RHB also pointed to a slowdown in many semiconductor peers globally. That led the brokerage to cut its 2018 earnings estimates by 36 percent and to lower its target price to S$0.43 from S$0.59.

But RHB did point to some positives for the stock.

“The stock is however backed by an attractive 2018F yield of 5.4 percent, and management is actively exploring M&A opportunities. Any potential earnings accretive M&As (given its war chest of S$32 million) would be a positive for shareholders,” it said.

The stock ended Tuesday down 2.20 percent at S$0.445.