Oppstar closed the year with a record-high profit of RM21.4m (+29% yoy) which transcended our/consensus expectations by 5%/6% respectively. We see enormous growth opportunities that can supercharge a three-year revenue/core net profit CAGR of 36%/37% from FY23, premised on aggressive expansions, cutting-edge R&D and technology knowhow alongside huge untapped potential augmented by Malaysia’s geopolitical neutrality. Maintain BUY with a higher target price of RM2.53.
• Aggressive expansions to capture sea of opportunities. Note that out of the gross proceeds of RM104.3m, Oppstar has earmarked RM50m for the expansion of its workforce to: a) support its existing and potential customers, and b) continue developing its human resource capabilities, thereby ensuring its long-term sustainability. Eventually, Oppstar aims to achieve this by increasing its total workforce by 280, comprising design engineers (locals or expatriates from India and Indonesia) for IC design and engineers/technicians for postsilicon validation services, to be based in Penang and Kuala Lumpur. The increase is expected to happen over 36 months.
• Strong orderbook backlog. It is noteworthy that the group has received enquiries from existing and potential customers from different regions for both specific design services and turnkey design services, with the enquires possibly requiring up to 200 design engineers. As at end-Jan 23, Oppstar’s orderbook stood at RM34.3m, mainly consisting of turnkey design services to be delivered in the next 12 months.
• Forecasting a three-year revenue/core net profit CAGR of 33%/35%, on the back of assuming: a) higher revenue per engineer on an hourly basis, b) progressively higher utilisation rate on increasing available vs billable time, and c) progressively higher headcount of design engineers towards FY25. Note that the group’s headcount stands at 169 as of FY22 with utilisation rate of 89.8% in terms of available vs billable time basis. The group has earmarked RM50m for the expansion of its workforce to: a) support the needs of its existing and potential customers, and b) continue developing its human resources capabilities, ensuring its long-term sustainability.
Don't keep this counter. This is semiconductor sub-contractor for design service. This business is very competitive, always fight for low cost price. When econ go downturn trend, majority projects will cancel due to cost cutting.
this company is supplying design services (sub con) to Huawei (sanctioned by US) illegally using design automation tools from US (synopsys, cadence and so on). of course its too small for DOJ to come after oppstar but if you read their prospectus you can see that their main customer is Kirin Huawei chip (which is illegal if you use US technology).
Also if you read their prospectus, you can see that they said they deliver project A, project B, project C and so on.. but this is just sub-con donkey work without building anything to sell as their own product. Then they say building IP, but cant even say what IP. reason is because they have always been supplying contractors since 2014 to do donkey job that companies have no time to do.
This is not a tech stock. this is just a sub-con that supply engineering talents as contractors. Their product is basically their engineers that they send as contractors.
just like most IPO in malaysia, this is just a way for the insiders to sell to public and run. Imagine a guy who used to be senior manager in Intel, suddenly having RM 220+ million in stocks due to this IPO. Most of these guys will sell after 6 months (moratorium) and run. Read the prospectus. Most of the insider shareholders are previous ex managers from Intel trying to make a quick buck. They just selling engineers for contract job. Luckily for them Huawei got banned and Huawei had to use illegal tricks to get US technology and this is one of the way they playing tricks with DOJ.
Maybe some sell because: 1) To realise profits, 2) High PE, overvalue but cannot see high growth, 3) Good QR (Q1) but no surprise, 4) Expansion - not much progress, seems like not easy to expand to other geography beside China, 5) Six months moratorium - end around September (hopefully they don't sell their shares), 6) Order book - remaining order book around 20 millions (my personal main concern - the current order book can contribute to normal results in Q2, however if management cannot secure new projects, then Q3 & Q4 ice cream). Lastly, i think the management should do more online engagement to explain their business, update progress and share their future plan, bukan syiok sendiri just because you the only one public listed company in upstream business. I will continue to top up from time to time (not all in la) and give more time to the management to see if they can performance (especially QR for Q3 & Q4). Good luck all
no doubt going to drop atleast to rm1.. pe is too high.. no new orderbook.. and they only relying to one single customer that contribute 70% revenue from xiamen only.. could not make any growth because the top 3 owner are too slow...
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