NOT RATED
Target Price: RM1.38
The share price of JCY fell sharply last week by as much as 20.9%, with the price closing on Friday at RM1.13, down 21.0% week-onweek. It's not clear at this stage what was the actual cause of the huge selldown although this could be due to the weakening of the industry fundamentals brought about by the persistent uncertainties in the Eurozone, a slowdown in the emerging markets (China and India) and the weak consumer sentiment in the PC market. In addition, in the case of HDD, there has been a compression of the ASP after the Thai flood as the HDD vendors have slowly returned to their usual suppliers after the flood while there have also been lower HDD unit shipments due to a softening demand. As such, the tide in the industry may have turned negative and JCY being the leader in the local HDD sector, is likely be the first to feel the adverse impact. This may have prompted investors to move out from the stock as seen in the sharp fall last week. While we have no coverage on the stock yet, we reckon that JCY could be fairly valued at RM1.38 based on the consensus FY13 EPS of RM0.187 and the tech industry average forward PER of 7.4x. While the stock could be oversold at its current levels given the 22% upside to its fair value, we note that the share price movement could continue to be overshadowed by the negative factors the industry is facing as highlighted earlier.
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