• Precision engineer’s timely shift into more complex, profitable product lines bearing fruit
• Only 8-9x FY11/12 PE for 59% earnings CAGR plus 5-6% dividend yield
• Initiate coverage with Buy TP of S$1.65

Re-engineered for high growth, high return.
Amtek is a pioneering metal stamper founded in Singapore in 1970. After a private equity buyout in 2007, management quickly re-organised the business to move it further up the value chain and to improve the cross selling of higher value added products and services to existing and new customers. The benefits of this restructuring are increasingly evident with Amtek’s 1Q11 adjusted net profit rising 41% y-o-y on moderate sales growth of 11%.

Earnings to grow at CAGR of 59% from FY10-FY13F.
Amtek is a principal beneficiary of the outsourcing of precision engineering parts and module assembly. To keep pace with demand, we expect Amtek to expand its automotive, industrial and consumer electronics sectors in FY11/12. Amtek’s well-timed shift further up the value chain (e.g. via ‘cold forging’ detailed below) should translate into rising profitability over the next few years.

Recommend Buy, TP of S$1.65 offers 27% upside plus 5-6% dividend yield.
Despite offering a faster earnings growth rate than its peers, Amtek is still trading at a FY11/12 PER of 8X, below the sector average of 10-11x. Although this suggests the market has yet to fully factor in Amtek’s increasingly rosy prospects, we expect this gap to narrow on stronger earnings and rising investor awareness. We initiate coverage on Amtek with a Buy recommendation and a target price of S$1.65.