Highlights

We left the analyst briefing with positive takeaways as the management is confident to invert the seasonally weak 3QFY14 with newly secured businesses (test services and assembly) whereby revenue is guided to grow 3-5% yoy.

Ipoh S-Site:

1. Secured a tier 1 US customer to consolidate its test hub into Carsem involving ~40 test systems;

2. Front end modules (FEM) devices ramp for the latest smartphone to be released by Apr 2014; and

3. Tire pressure module sensor (TPMS) orders went up by 20% by a tier 1 US customer.

Ipoh M-Site: Exciting new product production in 3QFY14 including PM6 impact sensor and UB/UC speed sensor.

Assembled a team of experts at SuZhou plant as MPI is making an entry into LGA and FBGA markets. It sees a great opportunity in this market which is estimated with a size of USD6bn and still growing strongly with CAGR of 10%, along with the proliferation of low cost smartphone. This new venture will entail more CAPEX in 4QFY14.

SuZhou:

1. AMOLED screen driver begins to ramp for the world #1 smartphone producer;

2. LGA starts pre-production for RF PA devices; and

3. FBGA starts qualification with China #2 baseband design house.

2QFY14 utilization rate was 80%.

Revenue contributions from smartphone/tablet continued to strengthen by 2.0-ppt to 35% at the expense of feature phone segment (see Figure #4).

Surprisingly, PC segment gained the most during the quarter with 4.0-ppt to 14% and MPI attributed this to yearend sales in conjunction of festive and holiday seasons.

MPI reiterated the commitment to capture more market share in automotive segment as it sees good margins and stable market demand outlook.

Over the long term, MPI targets to achieve the revenue mix for smartphone/tablet, automotive and PC segments’ with 40%, 25-30% and 10% respectively.

Catalysts

• Improved consumer confident.
• Technological advancement and creation of new electronics applications.

Risks

FOREX and weak consumer demand.

Rating

Not Rated

Positives – Appreciation of greenback, proliferations of smartphones, tablets, wearable techs and hybrid / electric automobiles.

Negatives – intense competition from Taiwanese peers, higher input costs, challenging economic outlook which will eventually hampers consumer confident and stalemate in electronics innovation.

Source:Hong Leong Investment Bank Research - 29 Jan 2014