Post 12-for-1 bonus issue, Genetec rides on Thailand’s EV ecosystem growth

EVEN after its 12-for-1 bonus issue exercise, CGS-CIMB Research has retained a bullish outlook on high-flying ACE Market counter Genetec Technology Bhd by retaining an “add” rating with an unchanged target price of RM4.15.

Recall that the research house initiated coverage on Genetec in September 2021 with an “add” rating and a target price of RM50 on grounds that the developer of automation systems is well-positioned to benefit from the growing demand for electric vehicles (EVs) and stationary energy storage solutions (ES) via its major customers in these sectors.

Yesterday (Jan 11), Genetec inked a memorandum of understanding (MOU) with Thailand-based Asia Precision Public Company Ltd (APCS) to collaborate and conduct a feasibility study in relation to the potential development of an automation facility for energy storage system (ESS) business in the country.

“We see the MOU with APCS opening new opportunities for Genetec to expand its customer base in the energy storage segment which is part of the group’s customer diversification plan,” opined analyst Mohd Shanaz Noor Azam in a company update.

“We also see exciting potential for Genetec to participate in Thailand’s EV ecosystem development given that the country is aggressively pushing to become the EV production hub in Southeast Asia.”

In 2020, the Thai Government established a National Electric Vehicle Policy Committee (NEVPC) to accelerate the country’s national EV roadmap.

The NEVPC has recently launched its roadmap which lays out the framework for Thailand’s EV development from 2021-2035 with the aim of transforming its existing automotive supply chain from internal combusting engine towards zero-emission vehicles.

Among others, it has set a target of over 1 million EVs to be on the road by 2025F and 16 million EVs by 2035F.

Additionally, NEVPC expects Thailand to produce over 1 million EVs by 2025F and 18 million EVs by 2035F. “Overall, this is an exciting opportunity for Genetec to potentially supply automation solutions for ESS going into EVs and charging infrastructure,” CGS-CIMB Research pointed out.

All-in-all, the research house foresees higher-than-expected order book replenishment, a rise in institutional funds’ holdings, expansion into new customers or verticals, and potential interest in Genetec as an ESG (environmental, social and governance) play as potential re-rating catalysts for the stock.

“Meanwhile, lower order book replenishment due to delays in customers’ plans and appreciation in the ringgit against the greenback are potential downside risks to our call,” added CGS-CIMB Research.

At 10.02am, Genetec was down 4 sen or 1.36% to RM2.90 with 2.74 million shares traded, thus valuing the company at RM1.98 bil. – Jan 12, 2022

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