MPI - Poor 3M12 results widely off the mark

Period     1Q13/3M13

Actual vs. Expectations     The group’s 3M13 net profit of RM0.1m came in worse-than-expected as compared to ours and the street’s full-year net profit forecasts of RM32.2m and RM36.2m respectively.

However, the revenue for the quarter of RM318.4m was in line with expectations and accounted for 25.2% and 24.5% of ours and the consensus’ full- year estimates.

Dividends     An interim dividend of 5.4 sen was announced during the quarter.

Key Result Highlights     YoY, the 1Q13 revenue increased slightly by 0.9% to RM318.3m due to the shift in the revenue mix from Asia (-3%) and Europe (-3%) to USA (+6%). The group also recorded a higher PBT of RM2.7m (vs. a loss of RM9.9m in 1Q12) due to the strengthening of USD against RM, better cost control measures and lower commodity prices.

QoQ, due to the overall semiconductor industry slowdown, the revenue was lower by 0.9% due to weaker sales from Asia (-7%) and Europe (-11%) although the USA segment saw a much higher sales increase of 21% from 4Q12. Meanwhile, the 3M13 PBT decreased significantly by 58% QoQ to RM2.7m as a result of the lower revenue, and PBT margin (0.8% vs. 2.0%).

Outlook   As expected, the semiconductor industry’s outlook has moderated. We believe that the continued uncertainty and bearishness in the global economy will continue to affect the earnings and growth visibility of the industry.

The industry outlook is also being affected by the slowdown in the PC segment as some consumers have shifted their demands to smartphones and tablets. Note, however, that the growth in the latter may also see a slowdown as well from its rapid growth pace in the past few years if the current weak global economic conditions persist. Hence, on the overall, the demand for all segments of the industry is now seen as weaker and uncertain and this poses a higher risk for the company’s outlook and earnings ahead.

Change to Forecasts     We have revised down our FY13E-FY14E earnings forecasts substantially by 54% and 49% to RM14.7m and RM31.0m respectively to factor in the lower sales and higher commodity prices. We will review our earnings forecasts again after the company’s result briefing today for analysts.

Rating      Downgraded to MARKET PERFORM

Lower earnings prospect will hurt the group’s share price performance going forward.

Valuation     We have revised down our TP to RM2.78 (from RM3.10) based on a targeted FY13 PBV of 0.85x (which is -1.5 SD from the mean).

Risks     Foreign currency exchange rate.

Industry recovery may falter halfway.

Source: Kenanga