Aztech Group

Kim Eng on 13 June 2012

Background: Primarily an electronics manufacturer best known in the 1990s as a soundcard specialist, Aztech’s diversification started in 2009. Today, it is involved in the following businesses:
 Electronics. Home networking products sold to private label customers or under its own brand.
 LED lighting. LED lighting solutions for offices, buildings and public housing.
 Materials supply. Supply of construction materials such as sand, aggregates and rocks.
 Marine logistics. Provision of marine logistics support and vessel brokerage services.
 Food supply. Manufacturing of canned and frozen food under the Jade brand.

Why are we highlighting it? We were impressed by the plugged-in nature of Aztech’s home networking and LED products, which tap into the latest broadband and lighting trends. Its troubled marine logistics business has also been cleaned up with the needed impairment charges. Recently, it started to buy back shares again after almost a year’s hiatus, signalling the possible emergence of value.

Attuned to market trends. Aztech’s latest networking and lighting products show that it is very well attuned to the latest market trends. Two recent products are (1) a hub that converts a regular TV into an Internet one, tapping into the current smart TV trend, and (2) a wireless pan-and-tilt IP camera that can be remotely viewed on a smartphone, tapping into demand for cheap and convenient security and surveillance. A new HD set-top box is next in the pipeline. On the lighting side, Aztech’s LED solutions have also been proven to be commercially successful.

Was 1Q12 a watershed quarter? After two quarters in the red, Aztech recorded a profit of SGD2m in 1Q12, its highest quarterly profit since 4Q09. While it is too soon to tell if the momentum can be sustained, its formerly troubled businesses have been cleaned up, such as writing down the fleet value of its marine logistics business to reflect market conditions. Further, after a parched 2010, its construction materials supply business has started to win contracts again. More importantly, its balance sheet remains strong with net gearing of 0.3x and 1Q12 cash flow in the black.