Actual vs.  Expectations   The group's FY12 reported net loss of RM32.3m came in below expectations, mainly dragged down by the impairment losses on assets, a provision for one-time write-off on inventory and retrenchment costs.

 

Dividends   A final tax-exempt dividend of 2.0 sen per share was declared.

 

Key Result Highlights   YoY, the FY12 revenue dropped by 6% as the robust growth in the USA segment (25%) was offset by lower revenues in the Asia (-6%) and Europe (-40%) segments. FY12 EBIT was dragged to the red as a result of a full-year  provision of RM20.8m for the impairment of assets (RM13.4m) coupled with a onetime write-off in inventories (RM5.1m), capitalised expenditure (RM1.3m) and receivables (RM0.9m) due to the discontinuation of  certain low margin and unprofitable product lines.

 QoQ, its 4QFY12 revenue growth remained flattish as robust growth from the USA segment (+77%) was offset by lower revenue in the Asia segment (-28.0%) and a flat revenue growth in its Europe segment (-1.9%). 4QFY12 EBIT was in the red also, dragged by the provision of RM20.8 coupled with retrenchment costs from the efficiency exercises carried out by the group.

 

Outlook   According to Semiconductor Industry Association, global semiconductor sales continued its growth momentum in Dec (+3.8% YoY), narrowing the negative gap from -3.9% to -2.7% on a YTD basis. 

 While we are cautiously optimistic on the sector recovery, we believe that the outlook for local tech companies could continue to be overshadowed by a sluggish PC demand coupled with the prolonged global economic uncertainties. 

 Having said that, we believe that any lights at the end of the tunnel could only be seen in 2HCY13.

 

Change to Forecasts    We have trimmed our FY13 sales forecast by 1.4% to RM1.14b for fine-tuning purposes. We are also introducing our FY14 earnings estimates. 

 We have also reduced our EBITDA margin assumption from 18.4% previously to 15.9% to account for the higher labour cost arising from the minimum wage policy implementation. All in all, our FY13 NP estimate has been revised down to RM17.7m from RM28.0m.

 

Rating     Maintain MARKET PERFORM 

Valuation    We are maintaining our TP of RM0.99, which implies a 0.65x FY13 PBV (close to -1SD below its historical 3-year mean). 

Risks   Foreign currency exchange rate.

 The industry's recovery may falter halfway. 

Source: Kenanga