MPI  registered  a  core  loss  of  RM3.7m  in  2QFY13  after staying  in  the  black  for  twoconsecutive quarters. The results were below our and consensus' expectations. The company  did  not  declare  a dividend  for  the  period  under review.  Given  the  subpar performance,  we  are  cutting  our  FY13/FY14  core  earnings  forecasts  by  30%/15% respectively.  Maintain  NEUTRAL,  FV  unchanged  at  MYR2.70,  based  on  0.8x  CY14 P/NTA.

Missing  estimates.  The  group's  2QFY13  revenue  contracted  by  7%  (+6%  y-o-y),  falling short of management's guidance for flat numbers at its last analyst briefing. This gave rise to  a  core  loss  of  RM3.7m  after  two  consecutive  quarters  of  being  in  the  black.  On  a cumulative  basis,  MPI's 1HFY13  revenue  expanded  to  RM613.7m  (+3%  y-o-y),  which pared  down  its  core  loss  to  -RM3.3m  from  -RM28.7m  a  year  ago.  Even  so,  the group's 1HFY13 results were still below our and consensus' expectations. With the limited info on hand, we attribute the group's subpar performance to its: i) weak top-line, ii) high operating leverage,  and  iii)  lack  of  other  operating  income  during  the  quarter.  No  dividends  were declared for the period under review.

Downside  surprise.  During  the  quarter  under  review,  MPI's  q-o-q  revenue  from Asia/Europe/US  declined  by  6%/8%/9%  respectively,  probably  due  to  an  unfavourable product  mix.  This  took  us  by  surprise  as  we  had  initially  expected  more  upside  to  our projections  based  on  data  available  up  to  November  2012,  which  showed  that  Oct-Nov 2012  global  semiconductor  sales  in  the  Americas/APAC  region  grew  18%/4%  from  the July-Aug period. 

Maintain  NEUTRAL,  FV  unchanged  at  MYR2.70. In view of the subpar 2QFY13 results and the traditionally weaker performance expected in the next two quarters, we are cutting our FY13/FY14 core earnings forecasts by 30%/15% respectively. We are also rolling over our valuation to CY14, but keeping our FV at MYR2.70, based on 0.8x CY14 P/NTA. This represents a 40% discount to historical five-year sector average of 1.4x. Given the limited upside  potential,  we  maintain  our  NEUTRAL  call  until  we  get  an  update  from  the company's analyst briefing later today.

Source: OSK