Following MPI’s analyst briefing, we maintain our NEUTRAL call on the company, with an unchanged FV of MYR2.70. Although we like what it is doing internally, the external environment has not been as supportive. We are cautiously optimistic on the semiconductor sector because despite the positive indicators shown recently, its outlook visibility remains low.
3QFY13 revenue to be flat q-o-q. During its analyst briefing yesterday, MPI attributed the q-o-q decline in its 2QFY13 revenue to the persistently soft demand from its leadframe business. However, management shared that its high yielding offerings like the micro leadframe packaging (MLP) and its turn-key test service business continued to grow robustly. Management guided that 3QFY13 revenue will be broadly similar to that of 2QFY13 and cited strong growth potential in 4QFY13 and beyond.
High-margin business paying off. Compared to a year ago, we think MPI has indeed positioned itself very well by successfully transitioning into the high-margin businesses of: i) high density packaging, ii) MLP, and iii) test. The company’s 1HFY13 EBITDA grew by 41% y-o-y, while its EBITDA margin expanded by 4.4% y-o-y. In the MLP space, management highlighted that the company had shipped more than 200m units of products related to its radio frequency (RF) and multi-die businesses in 1HFY13.
Maintain NEUTRAL, FV unchanged at MYR2.70. Although we are positive with what MPI is doing internally to turn around and flourish its business, the external environment may be an obstacle, suppressing its prospects. Visibility of the semiconductor sector remains short but with the recent positive indicators, we are cautiously optimistic. Hence, we maintain our NEUTRAL recommendation on the stock, with an unchanged FV of RM2.70, based on 0.8x CY14 P/NTA (40% discount to the historical five-year sector average of 1.4x).
3QFY13 revenue to be flat q-o-q. During its analyst briefing yesterday, MPI attributed the q-o-q decline in its 2QFY13 revenue to the persistently soft demand from its leadframe business. However, management shared that its high yielding offerings like the micro leadframe packaging (MLP) and its turn-key test service business continued to grow robustly. Management guided that 3QFY13 revenue will be broadly similar to that of 2QFY13 and cited strong growth potential in 4QFY13 and beyond.
High-margin business paying off. Compared to a year ago, we think MPI has indeed positioned itself very well by successfully transitioning into the high-margin businesses of: i) high density packaging, ii) MLP, and iii) test. The company’s 1HFY13 EBITDA grew by 41% y-o-y, while its EBITDA margin expanded by 4.4% y-o-y. In the MLP space, management highlighted that the company had shipped more than 200m units of products related to its radio frequency (RF) and multi-die businesses in 1HFY13.
Maintain NEUTRAL, FV unchanged at MYR2.70. Although we are positive with what MPI is doing internally to turn around and flourish its business, the external environment may be an obstacle, suppressing its prospects. Visibility of the semiconductor sector remains short but with the recent positive indicators, we are cautiously optimistic. Hence, we maintain our NEUTRAL recommendation on the stock, with an unchanged FV of RM2.70, based on 0.8x CY14 P/NTA (40% discount to the historical five-year sector average of 1.4x).
The company’s 1HFY13 EBITDA grew by 41% y-o-y, while its EBITDA margin expanded by 4.4% y-o-y. This indicates the successful transitioning over to the high margin businesses.
We are not concern with the low capex spending in 2QFY13 given that MPI had aggressively done so in the two previous quarters.
S&T-related products still growing robustly. The smartphone and tablet (S&T) segment continues to weigh in heavily on MPI’s sales, representing approximately 33% of its top-line. Regionally, its US business was the prime beneficiary of the booming S&T segment whereby its revenue grew by 22.5% y-o-y in 1HFY13. We understand that RF, Bluetooth modules, microelectromechanical systems (MEMS) and gyroscopes were the main contributor of growth in the S&T segment.
Automotive segment still relevant. Management also shared that its legacy leaded packages is still an important business as MPI intends to support the mature industries of: i) automotive, ii) industrial and iii) consumer electronic appliances. It was highlighted that the automotive industry is relatively stable and secure, providing MPI sound basis for organic growth moving forward. Note, currently half of the leaded packages business comes from this segment.
Update on the Carsem/Amkor dispute. As for the ongoing Carsem/Amkor dispute, on 15 Sept 2012, MPI’s 70%-subsidiary Carsem had filed a request to the US Patent and Trademark Office (PTO) to re-examine Amkor’s 277 patents. On 10 Jan 2013, the PTO issued an Office Action rejecting all 25 claims on the patents, including 11 claims of the International Trade Commission (ITC) proceedings. Amkor is now required to respond within two months.
Automotive segment still relevant. Management also shared that its legacy leaded packages is still an important business as MPI intends to support the mature industries of: i) automotive, ii) industrial and iii) consumer electronic appliances. It was highlighted that the automotive industry is relatively stable and secure, providing MPI sound basis for organic growth moving forward. Note, currently half of the leaded packages business comes from this segment.
Update on the Carsem/Amkor dispute. As for the ongoing Carsem/Amkor dispute, on 15 Sept 2012, MPI’s 70%-subsidiary Carsem had filed a request to the US Patent and Trademark Office (PTO) to re-examine Amkor’s 277 patents. On 10 Jan 2013, the PTO issued an Office Action rejecting all 25 claims on the patents, including 11 claims of the International Trade Commission (ITC) proceedings. Amkor is now required to respond within two months.
Source: OSK
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