Period     1QFY13/3MFY13

Actual vs. Expectations   The group reported a 1QFY13 net profit (NP) of RM0.8m which made up of c.8% of ours and the consensus full-year estimates respectively.

We deem the results to be within expectations as 1Q typically makes up only c.7%-13% of the full-year NP amid the seasonal weakness in the quarter.

Dividend     A tax-exempt DPS of 2.0 sen has been proposed, which came in below expectations. Notably, ours and the market’s DPS projections are 2.6 sen and 2.8 sen respectively. 

Key Result Highlights    YoY,  the group’s 1QFY13 revenue decreased by 10% as the decent growth in its Malaysia operation (+105% on the back of the new revenue contribution from its newly-acquired subsidiary, Puritec Technologies (M) Sdn Bhd) and its China operation (+186% due to the commencement of a key base build project in the LCD industry) were offset by lower revenues in its Taiwan and Singapore operations owing to a slower number of new jobs secured. While the group recorded a lower revenue, its net profit grew by 1% on higher-margin projects clinched. This resulted in a gain of 0.4ppts in its NP margin of 3.4%.  

QoQ, the 1QFY13 revenue decreased by 39% amid the seasonal weakness in the 1Q of its financial year. Coupled with the higher effective tax rate of 19%, the group’s NP margin shrank to 3.4% (-1.8ppts).

Outlook    We believe that the industry recovery is likely to be seen in 2HCY13, underpinned by a recovery in the global chip demand amid a better global economic condition.

The group has an order book of RM63.7m, of which RM39.7m remained outstanding as at 31 March 2013.

Change to Forecasts   Our FY13 and FY14 NP estimates remained unchanged. 

Rating  Maintain MARKET PERFORM

Valuation     Our TP has been raised from RM0.53 to RM0.56 as we rolled forward our valuation base year from 8.0x FY13 PER to 8.0x FY14 PER (representing a -0.5SD below its 1-year forward average PER)  

Risks    Fluctuation in foreign currencies.

The industry recovery may falter halfway.

Delays in new projects.

Source: Kenanga