Hi Folks,
welcome back to Investment Income for Life. Today we are
looking at a stock with high dividend yield that some investors in Singapore
have owned at some point: Aztech Global (SGX: 8AZ). I have previously warned against buying this stock at S$1.28 during its IPO back in March 2021- please refer to this
previous post. As at 29 October 2026,
the share price has plunged from around S$1.06 to just S$0.40, a drop of
roughly 62%. For a counter that was once a darling of yield hunters, that is a
brutal re-rating. Let's quickly unpack what happened.
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| Price Chart Trending of Aztech Global Since IPO- Gone with the Wind |
1.
Severe Revenue and Profit Contraction
The market aggressively re-priced
the stock after a string of weak financial updates. The latest Q3 2026 business
update confirmed that the tech slowdown is biting hard:
•
Top-line collapse: Q3 2026 revenue plummeted
39.8% year-on-year to S$80.4 million.
•
Profit plunge: Q3 2026 net profit also fell
39.8% to S$6.5 million.
•
Nine-month picture: Cumulative net profit for 9M
2026 cratered 40.9% to S$15.9 million.
This came on
the back of an already weak first half, where revenue fell 18.4% to S$151.4
million and net profit dropped 41.7% to S$9.4 million. And note that the 1H
number was flattered by a one-off S$2.5 million gain from selling a property in
Dongguan, China. Strip that out and core earnings look even thinner.
2.
Cyclical Downturn in IoT and Smart Home Demand
Aztech is
essentially an electronics manufacturing services (EMS) player that designs and
builds IoT devices, smart home products and data-communication equipment for
global brand owners. When consumer electronics demand softens, Aztech feels it
almost immediately.
Key
customers have delayed product launches and cut order volumes on existing
programmes. Management had already flagged softer demand for 2H 2026 back in
July, warning that new projects were unlikely to fully offset lower volumes
from existing customers. The Q3 numbers show that warning was, if anything,
understated.
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| Past 12mths Market Price |
3.
Tighter Competition and Pricing Power Issues
Contract
manufacturing is a tough business. Aztech faced stiffer competition and had to
accept lower pricing to keep volumes flowing, which squeezed margins. Net
profit margin in 2Q 2026 was just 6.2%, down from 10.2% a year earlier.
Currency was
another headwind. In the first half alone, Aztech booked a S$2.8 million
foreign exchange loss due to the weaker US Dollar. Since most of its sales are
in USD while it reports in SGD, a soft greenback directly erodes the bottom
line.
4.
Severe Analyst Downgrades and Valuation Adjustments
With little visibility on FY2027
earnings, the research houses turned decisively bearish:
•
DBS Group Research halved its target price from
S$0.66 to S$0.33 in October 2026, maintaining a "Fully Valued" (Sell)
call.
•
Consensus EPS estimates for FY2026 were slashed
from S$0.057 to just S$0.023.
When
earnings estimates get cut by more than half, the share price usually follows.
That is exactly what we have seen here.
5.
Unsustainable Dividend Yield Fears
This is the
part that hurts income investors the most. Aztech entered this cycle sporting a
headline trailing yield of close to 30%, boosted by generous special dividends
paid out of its big cash pile in earlier years. But a trailing yield only tells
you what was paid, not what will be paid.
With profits
shrinking and free cash flow no longer comfortably covering such heavy payouts,
the market quickly priced in a dividend cut. The interim dividend for 1H 2026
was just 0.5 cent per share, half of the 1 cent paid for 1H 2025.
Income-focused holders rushed for the exit, adding fuel to the sell-off.
6.
Is There Any Silver Lining?
To be fair,
Aztech is not a company in financial distress. As at 30 June 2026, it still had
a net cash position of about S$190.6 million. With roughly 772 million shares
outstanding, that works out to around S$0.25 per share in net cash. At S$0.40,
close to 60% of the share price is backed by cash on the balance sheet.
The company
also remains profitable and has been winning new projects and customers in
areas like MedTech, security and industrial segments. So the business is not
broken; it is shrinking in a cyclical downturn.
7. Parting
Thoughts
My personal thought and concern here
is that Aztech’s past substantial owners
have this habit of offering to take the company private using a low-ball offer and then after a few years, they
will re-list part or all of the business in another form. With the huge plunge,
the current low share price may become a target to do a buy-over at the worst
possible time & price. I will continue to stay far far away from this
stock.
Ok folks,
that's all from me today. Have a great week ahead!
Disclaimer:
This post is for educational purposes only and is not a recommendation to buy
or sell any security. Please do your own due diligence or consult a licensed
financial adviser before investing.
