KUALA LUMPUR: Oppstar Bhd's collaboration with Samsung Electronics Co Ltd to produce industrial integrated circuit (ICs) will see investors paying premium valuations for IC designers with collaboration with semiconductor foundries.
Kenanga Research said it is positive on Oppstar's latest development as investors globally are willing to pay an average price to earnings ratio (PER) of 54 times for financial year 2024 (FY24) for IC designers with collaboration with semiconductor foundries versus Oppstar's FY25F PER of only 25 times as at March.
"Nevertheless, the latest development aside, we anticipate an upswing in Oppstar's earnings (after a soft patch recently) on the back of the doubling of its order book to RM24.7 million (as of Feb 2024) on recurring turnkey design jobs from its existing customer, Xiamen KirinCore, as well as the addition of orders from the recently-acquired design company in Japan," it said in a note.
The access to wafer foundries transforms IC design houses like Oppstar into enablers such as converting concepts into tangible products, for fabless tech players such as Nvidia and Qualcomm, among others.
Kenanga Research maintained an "Outperform" call on the stock with a target price of RM1.70 due to the substantial disparity in revenue size between Oppstar and its global counterparts.
It noted that the demand for customised IC design is strong on the back of the proliferation of internet of things devices, autonomous vehicles, and artificial intelligence (AI) applications.
Oppstar announced that its unit will work with Samsung to produce industria ICs manufactured using Samsung 14 nanometer FinFET technology foundry process.
Oppstar Technology Sdn Bhd, a subsidiary of Oppstar, is a leading Malaysian provider of custom-designed chip solutions, specialising in ICs such as CPUs, SOCs, ASICs and FPGAs.