1Q20 turn profit, in-line with expectation albeit lower revenue

TWPH’s posted lower revenue of RM84.0 (yoy:-4.3%) below our expectation, accounted for 21.4% of our forecast of RM393.3m however manage to turn a profit - posted PATMI of RM2.1m compare to LATMI of RM3.7m same quarter last year and LATMI of RM5.8m in previous quarter. PATMI accounted for 25.7% of our forecast of RM8.0m.

The lower revenue was mainly due to reduction in sales under a major customer’s contract while the earnings improve albeit lower revenue was due to better efficiencies in Vietnam operation resulting in RM2.1m lower freight cost and RM3.0m higher margin from Indonesia operation from the revised proving with a major customer.

Recovery 2020 hampered by Covid-19 outbreak

After several difficult years for the Group, management has proactively implemented cost saving measures and repositioned the Group for profitability however the recovery in 2020 appears to be hampered by Covid-19 which is still largely uncertain and remain a risk. Given the challenging outlook, we maintain our Sell recommendation at RM 0.94 pegged at P/E of 13.0x of FY20F EPS for TWPH.

Source: Mercury Research - 13 Jul 2020