Salutica : Proxy to rising adoption of Bluetooth HOLD

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Salutica : Proxy to rising adoption of Bluetooth                                  HOLD

We initiate coverage on Salutica with a HOLD recommendation and a fair value of RM1.70/share. Our fair value is based on FY19F PE of 15x. Our P/E multiple is slightly higher than the peer average of 13x as we think Salutica deserves scarcity premium for being the only listed Bluetooth player in Malaysia. Salutica is an electronics manufacturing services (EMS) company, primarily specialised in Bluetooth devices such as stereo headsets. Salutica works with some of the most prominent players in the wireless headphone market including Plantronics, Jaybird and Sony.

We forecast Salutica's PATAMI to grow from RM24mil in FY16 to RM44mil in FY19F, representing a 3-year CAGR of 22%. This is premised on the accelerated uptake of wireless Bluetooth earphones, a pickup in AirBar orders, replacements of expensive touchscreen solutions such as capacitive with Neonode's zForce technology, and the rising adoption of Salutica's TPMS products (FOBO) by logistic companies. One of Salutica's major customers will be rolling out a new headphone model in the third

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