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Monday, February 28, 2011

JCY - maintain NEUTRAL (CIMB)

JCY’s core net profit for 1QFY9/11, which excludes RM2.3m forex loss, tumbled 88% yoy to RM9.9m or just 4% of our full-year forecast and 6% of consensus estimates. It was 64% below our expectations, with the key variance being the slower-than-expected recovery of sales and margin. Although our estimates are already the lowest in the market, we are scaling back our FY11-13 forecasts by 22-34% as its performance suggests a slower recovery in sales and margins. Still applying 8x CY12 P/E, which we think is a fair P/E for HDD component suppliers, we cut our target price from RM0.92 to RM0.72. The stock remains a NEUTRAL until we see evidence of a gradual recovery in earnings.

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