Kelington - OUTPERFORM - 28 May 2012

Period    1Q12

Actual vs.  Expectations

 Turnover of RM26.7m (+38% YoY) was in line with expectations and accounted for 16.2% of ours and 16.0% of the consensus’ full year estimate. Meanwhile, the NP of RM0.8m (+2% YoY) also came in within ours and the consensus’ full year estimate. 

 Despite 1Q12 NP being only at 7.5% (or 9.0% should we add back the one-off transfer listing expenses thus bringing the NP to a normalised level of RM0.9m) of ours and the consensus’ full year estimate, we deemed the result to be in line with expectations given that 1Q is normally low and accounts for an approximately 7%-10% of the full year NP based on the company’s historical financial trend.  

Dividends   No dividend was announced during the quarter. For the full financial year, we expect the group to declare a total of 3.5 sen dividends for FY12, translating into a 3.4% net dividend yield.

Key Result Highlights

 YoY, the revenue increased by 38% thanks to higher revenue contribution from its Taiwan (+176%) and Singapore (+345%) divisions, boasted by its newly-acquired subsidiary (Puritec Technologies). The PBT margin however declined to 3.7% (vs. 4.1% previously) as a result of higher administrative expenses led by acquisition expenses as well as transfer listing expenses of RM140k. Meanwhile, the NP only increased 1.5% YoY due to a higher tax rate bracket of 19% for the quarter vs. 2% previously.

 QoQ, the revenue and earnings declined by 41% and 74% respectively to RM45.4m and RM3.0m due to the seasonally lower sales in the 1Q as highlighted above.  

Outlook   We remain positive on the tech sector and expect a better 2H for CY12 (in contrast to a likely weaker 1H), underpinned by likely higher market demand led by consumer electronic products.

 

 The group has secured a total of RM72m in orders as of 25 May, out of which RM44.6m or 62% has not been recognised yet.  

Change to Forecasts

 No changes in our FY12-13E forecasts. 

Rating  OUTPERFORM (maintained)

Valuation    Our current TP is RM1.10 based on Fwd PER of 8.0x on our FY12E EPS of 13.5 sen.

Risks   Foreign currency exchange.

 Semiconductor industry downturn.  

Source: Kenanga