MPI's 1QFY12 core earnings plunged  to  RM0.4m  compared  with  the  preceding quarter.  The  results  were  generally  below  our and consensus' expectations but  despite  the  gloom,  the  company  declared  an  interim  dividend  of  5.4  sen/share.  Meanwhile,  we  see  potential  of  2QFY12  -  typically  the  strongest  quarter  for  worldwide semiconductor sales ' being marred by tepid growth as guidance from  international  upstream  and  downstream  players  point  to  a  weak  quarter  ahead.  We are likely to trim our estimates after the company's analyst briefing today. Our  recommendation and FV are under review.
 
Below  forecasts.  As guided by management, MPI's 1QFY13 revenue was flat q-o-q  and y-o-y. However, its core bottom-line declined sharply to RM0.4m against RM13.1m  in the preceding quarter. Based on the limited information on hand, we roughly attribute  the q-o-q decline to: i) the group's flat top-line, ii) a slight compression in EBITDA margin  (-40bps  q-o-q),  and iii)  lack  of  other  operating  income  during  the  quarter  under  review.  Hence, the results were essentially below our and consensus' expectations. Despite the  gloom, the company declared an interim dividend of 5.4 sen/share.
 
Asia, US the laggards. On a segmental basis, the revenue contribution from Asia and  US contracted by 5%-8% q-o-q and y-o-y. However, the sequential 17% growth (+18%  y-o-y) in Europe was more than sufficient to offset the decline from these two continents.

Challenging  2Q  outlook.  According  to  the  Semiconductor  Industry  Association  (SIA),  worldwide  semiconductor  sales  in  September  only  ticked  up  2%  m-o-m  to  USD24.8bn  after trending flat in the preceding three months. Sales in regions like the Americas and  Asia  Pacific  rebounded  by  1%-6%  m-o-m,  while  Europe  and  Japan  experienced  stagnant  growth.  On  a  y-o-y  basis,  monthly  sales  were  down  2%-11%  across  all  continents  while  overall  global  sales  contracted  by  4.6%  y-o-y.  Furthermore,  the  September book-to-bill ratio also stayed below parity at 0.81x.

Under review.  The group's performance in 2QFY12,  typically  the  strongest  quarter  for  worldwide  semiconductor  sales,  may  be  marred  by  tepid  growth,  as  guidance  from  international upstream and downstream players indicates a weak quarter ahead (please
see Table 1). In view of the grim outlook, we are likely to revise downward our financial  forecasts  pending  the  analyst  briefing  later  today.  We  are  therefore  putting  our  recommendation and FV under review.

Source: OSK