Period 1QFY13/3MFY13
Actual vs. Expectations The
group’s reported net loss for 1QFY13 of RM22.7m came in below ours and the
consensus expectations. Excluding the exceptional item (which was the
recognition of fire damages of a total RM24.9m), the adjusted net profit of
RM2.2m, merely accounted for 5% and 6% of ours and the consensus full year
estimates respectively.
Dividends No
dividend was declared for the quarter under review.
Key Result Highlights
YoY, the 1QFY13 revenue soared by 24.0%. While
the growth appeared to be decent, this came mainly from a low base effect from
the Thai’s flood period back in 1QFY11 (where two of its major customers
temporarily ceased operations due to the flooding in Oct 2011). The group’s
EBIT meanwhile was dragged to the red due to the recognition of asset losses of
RM24.9m from the fire incident at its main factory located in Klang on 31 Dec 2012.
Recall that the group has an insurance coverage for the business interruption
and it had submitted claims of RM50.1m to the insurer (will this cover the
assets losses). However, it has yet to recognise the claims amount at this juncture
as the adjusters are still evaluating the claim. Stripping out the exceptional
loss of RM24.9m, the PAT would have been RM2.2m (compared to –RM4.8m a year ago).
QoQ, the 1QFY13
revenue halved by 44.6% due to the weak demand from its HDD and camera
customers as the prolonged economic uncertainties in Europe remained a drag to
the consumer confidence and spending. If we were to measure the growth of
adjusted PAT on a QoQ basis, the adjusted PAT would have dropped significantly
by 88.2%, dragged down by certain ongoing fixed costs amid weak revenue growth.
Outlook While
we are cautiously optimistic on the sector recovery on the US side based on the
recovering global semiconductor sales data provided by SIA, we believe that the
outlook for local tech companies could continue to be overshadowed by a
sluggish PC demand amidst the current prolonged global economic
uncertainties.
Hence, we believe
that any lights at the end of the tunnel could only be seen in 2HCY13.
Change to Forecasts We have lowered our revenue forecast by 13% in
FY13 to account for a lower HDD and camera parts revenue amid a weaker consumer
confidence.
On the cost side, we
are now assuming a higher overhead cost of an additional RM6m each for FY13 and
FY14 respectively, which is also in line with the management guidance. As a
result, our net profit has been lowered by 17%-31% in FY13 and FY14
respectively.
Rating Downgrade to UNDERPERFORM
Valuation Due to lower FY13 earnings expectation, our TP
has been lowered to RM0.60 (from RM0.78) based on a targeted PER of 5.3x which
implied an unchanged -1SD below the 3-year forward PER mean
Risks Higher labour cost arising from the
implementation of the minimum wage policy.
Greater losses
arising from the fire incident.
Adverse currency
translation.
Sluggish PC and
electronics demand.
Source: Kenanga
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