MPI reported a weaker-than-expected set of results, posting a YTD loss of RM33.3m as fixed costs remained high while assets were under-utilized. Nonetheless, a second interim dividend of RM0.05/share was declared. We anticipate a potential turnaround in 2HCY12 on the back of a slew of positive demand drivers. We are maintaining our TRADING BUY call on the stock but we are revising our FV from RM3.70 to RM3.64 as we rollover our valuation to FY13 (pegged to 1.1x P/NTA). We advise investors to accumulate MPI shares in the event of a pull back in the share price today.
Poor overall performance. MPI's 3QFY12 revenue was below our expectations but inline with consensus, making up only 68% and 72% of the respective full-year estimates. However, its headline earnings disappointed and fell short of consensus and our expectations on the back of sequential losses. Having experienced weaker demand from the US and Europe for the third consecutive quarter, the company's revenue fell marginally by 1.2% q-o-q to RM275.8m (-17.6% y-o-y, YTD: -18.9% y-o-y). This suggests that its assets were under-utilized while its fixed costs remained high. However, the impact to the bottom-line was somewhat cushioned by a sequential improvement of RM8.8m that, we suspect, arose from a shift in product mix to highermargin segments. It also declared a second interim dividend of RM0.05/share during the quarter.
Recovery in the pipeline. Revenue contribution from the US declined by 7.1% q-o-q to RM68.4m (-8.8% y-o-y, YTD: -12.0%), while that of Europe fell by 5.5% q-o-q to RM71.3m (-30.8 y-o-y, YTD: -30.2%). On the other hand, top-line contribution from Asia grew 4.6% q-o-q to RM136m (-13.2% y-o-y, YTD: -14.8% y-o-y). We still maintain our view that semiconductor sales would improve in 2HCY12, premised on a set of leading indicators that point to increasing demand moving forward. Furthermore, the book-to-bill ratio of semiconductor equipment manufacturers is above the parity level for the second month in a row. Note that recovery in the semiconductor space may be swifter than expected, since major upstream players from the US are guiding for sequential revenue growth of approximately 3%-12% (please refer to our sector report entitled, Turning Positive, on 5 April).
Maintain TRADING BUY with revised FV of RM3.64. We are revising downwards our FY12/FY13 earnings forecasts by RM30.2m/RM1.2m to realign with our estimates and factor in the weaker financial performance for 9MFY12. We were overly generous with our opex assumptions prior to the results release, which led to the variance in our earnings projections vs the actual figures. Since we are fast approaching FY13, we feel compelled to roll over our valuation to the next financial year. Consequently, our fair value is revised from RM3.70 to RM3.64, based on 1.1x FY13 P/NTA. Maintain our TRADING BUY recommendation.