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Tuesday, August 23, 2011

JCY - Below; 3QFY9/11 hit by provisions and yields (CIMB)

Lower-than-expected gross margins led to a 3QFY9/11 core net loss of RM16.1m, below our RM16.4m profit estimate. 3Q core net loss excludes a RM15.3m inventory write-off and RM0.2m forex loss. 9M net loss came in at RM11.9m, short of our full-year forecast of RM64.3m profit and consensus estimates of RM94.6m profit. Factoring in the poor results and lower margins, we now expect JCY to report a full-year net loss of RM7.8m. But our FY12-13 forecasts are intact as we assume a recovery in sales and margins due to higher volumes from WD and Seagate after their mergers with HGST and Samsung, respectively, in 4Q. Although JCY’s share price may react negatively to these results, we retain our TRADING BUY and target price of RM0.58 (8x CY12 P/E) as a gradual earnings recovery in FY12 should act as a catalyst.

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