Period  4Q14/FY14

Actual vs. Expectations   Within house expectation. The group reported 4Q14 core net profit (NP) of RM21.5m, bringing FY14 core

NP to RM65.9m (after excluding the one-off provision of RM8m for the discontinuation of its stamp lead frame business in 2Q and the one-off settlement cost of RM12.8m for its MLP's patent litigation with Amkor) which made up 103% and 109% of our and the consensus full-year NP estimates, respectively.

Dividends  Below expectations. No dividend was declared for the quarter under review. We were previously expecting a total NDPS of 20.0 sen to be declared in FY14 whereas the group has only declared up to 15.0sen NDPS.

Key Result Highlights YoY, FY14 revenue increased by 5% to RM1291.8m, led by Asia (+15%) and USA (+3%); covering for the weaker sales in Europe (-11%). While the group’s revenue growth mimicked the pace of recovery in the global semiconductor sales, EBIT improved significantly by c.3x to RM67.5m (vs. EBIT of RM26.3m in FY13) driven by its shift towards higher profit margin products (driven by impact sensor and speed sensor for the Automotive segment and FEM devices ramp for the Smartphones/Tablets (S/T) segment) coupled with lower commodity material prices and strengthening of USD against MYR.

 QoQ, 3Q14 revenue remained flat as the robust growth in USA (+3%) and Europe (>100%) was negated by lower sales in the lion share revenue contributor- Asia segment (-20%). Despite flat revenue, core PATAMI soared 2x to RM21.5m with high margins products driving yield.

Outlook  We believe the group’s near-term outlook will remain resilient with its: (i) technical edge and product exposure which augur well for the current tech upcycle as well as the upcoming tech wave, and (ii) strategic product mix which gives a balanced exposure of both cyclical and defensive segments.

 Note that the share price has surged by 256% since our OUTPERFORM recommendation back in end-August 2013. Nonetheless, it remains our top pick in the semiconductor space given the investment merits mentioned above.

Change to Forecasts We maintain our FY14 and FY15 earnings estimates for now pending further details from the briefing today.

Rating UNDER REVIEW

Valuation  We review our CALL and TP pending further details from the briefing today. Our previous recommendation was OP with a TP of RM6.03 (with upside bias) based on a targeted FY14 PBV of 1.5x (which represents +1.5SD above its historical average 4-year forward PBV).

Risks to Our Call    Adverse currency fluctuations.

 Industry’s recovery faltering halfway.

Source: Kenanga