After reporting four consecutive quarters of losses, JCY finally returned to the black  in 1QFY14.  During the quarter, it  posted  core earnings of MYR39m, which  was  ahead  of  our  and  consensus  full-year  estimates. That  said,  we  are  ceasing  coverage  on  JCY  due  to  its  low  business visibility. Accordingly, we change our call on the stock to NOT RATED. Our previous recommendation was SELL, with a FV of MYR0.45.

• Above  expectations.  After  reporting  four  consecutive  quarters  of losses, JCY finally returned into the black  in 1QFY14. During the quarter, it registered  core earnings of MYR39m, which came in ahead of our and consensus’  full-year estimates. The  better performance was attributable to:  i)  higher  shipment  volume,  ii)  improving  average  selling  prices (ASPs),  and iii)  a stronger USD vs MYR.  The company has declared an interim dividend of 1 sen (vs 1QFY13: 0 sen)
• Outlook.  Western  Digital  and  Seagate  have  guided  for  1QCY14 worldwide HDD shipments to decline 5-7% q-o-q (4QCY13: 142m units). We  expect  the  sluggish  PC  market  to  continue  to  drag  down  HDD demand, as  more than 50% of HDD shipments are for the PC market. That  said,  demand  from  the  gaming  and  enterprise  segments  should mitigate some of the decline in the PC space given the general need for affordable bulk data storage devices.
• Discontinuing coverage.  We are ceasing coverage on JCY due to  the low  visibility in its  business.  In tandem with this,  we change our call on the stock to NOT RATED. Our previous recommendation was SELL , with a FV of MYR0.45, based on 0.9x CY14 P/NTA. This  represented  -1SD from the domestic HDD sector mean

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SWOT Analysis

Company Profile
JCY International is a global manufacturer of HDD mechanical components, including: i) base plates, ii) top cover assembly, i ii) actuator pivot flex assembly, and iv) anti-discs.

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Source: RHB