Period  4Q13/FY13

Actual vs. Expectations  The group reported a 4Q13 net profit (NP) of RM10.7m, bringing its total FY13 NP to RM10.9m. The results came in strongly above expectations compared to our FY13 forecast of RM4m and consensus’ RM7m due to the effective cost management and its shift towards better profit margin products.

Dividends  No dividend was declared for the quarter underreviewed.

Key Result Highlights  YoY, the FY13 revenue merely inched up by 3% to RM1226.3m contributed mainly by the USA segment (+20%) which was offset by weaker revenues in both the Asia and Europe segments (-1% and -7% respectively). In terms of regional market share contributions, the recovery in the US market has made it a larger contributor to revenue at 30% in FY13 vs. 25% in FY12 while Asia and Europe both saw their revenue contributions being reduced by 2ppts each. Meanwhile, the EBIT improved significantly to RM26.3m vs. a LBIT of RM22.3m in FY12 buoyed by higher revenue coupled with effective cost down initiatives and shift to a highermargin product portfolio.

 QoQ, the 4Q13 revenue posted a decent growth of 14% with better sales seen in the Asia (26%), USA (5%) and Europe (3%) segments in conjunction with the recovery in the semiconductor industry. Positively, EBIT also rebounded by >100% with better overall EBIT margin seen at 4.7% (vs 1.8% in3Q13) as a result of better operational efficiency on the back of higher sales volume and stringent cost control measures.

Outlook  We are turning more sanguine as the group's performance has finally started to reflect the positive spill-over effect from the recovery of the semiconductor industry, although the overall improvement is still modest at this juncture.

Change to Forecasts  Post FY13 full year result, we have marginally increased our FY14 earnings estimate by 2% for house-keeping purposes.

Rating   Upgrade to OUTPERFORM

Valuation  Our TP has been raised to RM2.94 (from RM2.59), which is based on a higher targeted PBV of 0.8x (from 0.7x, up by 0.5 notch from -1.0SD to -0.5SD below its historical 3-year mean) as we are turning more sanguine on the group’s outlook as mentioned above.

Risks  Adverse currency fluctuations.

 Industry’s recovery may falter halfway.

Source: Kenanga