1QFY16 (Jun) core earnings registered MYR45.5m, coming in within expectations at 24.6%/23.9% of our/consensus full-year estimates. Maintain BUY with unchanged fully-diluted TP of MYR4.55 (19% upside).Management declared its first interim DPS of 2.3 sen and a special DPS of 0.5 sen (vs 2.2 sen declared in 1QFY15), which translates into a payout ratio of 44.9% for the quarter.

Results review. 1QFY16 revenue closed at MYR274.9m (+23.9% YoY; +7.8% QoQ) driven by higher production capacity under its radio frequency (RF) division to satisfy the volume requirements by its customer Avago Technologies (Avago) (AVGO US, NR). By the same token, core earnings recorded MYR45.5m (+47.6% YoY; +4.6% QoQ). We deem this within expectations, at 24.6%/23.9% of our/consensus fullyear estimates.

Generous dividend. Management declared a first interim DPS of 2.3 sen and a speial DPS of 0.5 sen. These translate into a decent payout ratio of 44.9% for the quarter, which we deem in line with its dividend policy of up to 40% payout. On a side note, the group is currently sitting on a net cash pile of MYR205.6m, which works out to be 28.1 sen per share based on its outstanding share base.

Forecasts and risks. No changes to our earnings forecasts. We continue to expect its RF division to propel earnings to new highs going forward. To recap, the group currently houses over 700 units of testers. We expect the group to hit its full capacity of more than 850 testers by 3Q16. We are forecasting for revenue from this segment to grow at 35%/20%/5% for FY16, FY17 and FY18. Key risks include potential margins erosion upon maturity of its product life cycle and competitive pressure from its peers such as Foxconn International (2038 HK, NR) and Advanced Semiconductor Engineering (2311 TT, NR).

Maintain BUY. All in, we maintain our BUY call with our fully-diluted SOP-based TP unchanged at MYR4.55. We advise investors to ride on the earnings accretion from the favourable forex environment as well as RF capacity expansion, while full-year earnings accretion from its P13 plant should kick in come FY18.