ATA IMS recovery may be bumpy, maintain 'sell' with TP at 30 sen - AmInvestment Bank

KUALA LUMPUR, Nov 30 -- ATA IMS Bhd’s recovery may be bumpy following the crisis it currently faced and it may not be in the most favourable position to negotiate with potential new customers, said AmInvestment Bank.

In a note, the research firm said while efforts have been made to mitigate the damage to its reputation and recoup investors and stakeholders’ confidence, it reckoned any concrete progress from the proposed solutions could only be seen over the medium term of six to nine months' time, with no guarantee of a positive outcome.

"As such, we opine that the company’s short-term operational risks remain high, largely stemming from the ongoing manpower shortage crisis, forced labour allegation, potential assets overhang, diseconomies of scales and dented reputation which intensify the challenges in securing new customers and orders," it said while maintaining a cautious stance on the outlook for the electronics manufacturing service (EMS) provider.

AmInvestment Bank also maintained a 'sell' rating on the company with a new target price (TP) of 30 sen per share from an earlier 56 sen per share. 

"Our change in valuation largely stems from concerns of assets overhang after the loss of ATA’s major customer, which accounts for 80 per cent of the group’s sales and has recently terminated its contract with the company, as well as potential goodwill impairment," it said.

As at 12.30 pm, the share price of ATA was up one sen to 53 sen with 784.20 million shares traded on Bursa Malaysia. 

-- BERNAMA