1QFY16 (Jun) core earnings of MYR44.1m (+121.3% YoY; +28.4% QoQ) trumped expectations as demand, ASPs as well as profitability marginsall held up better-than-expected. Maintain BUY with our upgraded MYR11.46 TP (from MYR8.93, 56% upside). A first interim DPS of 8.0 sen was declared, translating into a payout ratio of 38.1% for the quarter.

Results review. 1QFY16 (Jun) revenue reached MYR386.6m (+18.0% YoY; +3.7% QoQ) boosted by an improved utilisation and favourable forex environment. This is as the USD averaged MYR4.05 in 1QFY16(vs MYR3.66 in 2Q15 and MYR3.19 in 1QFY15). EBITDA, meanwhilejumped to MYR115.1m (+52.0% YoY; +15.2% QoQ) as margin expanded to 29.8% on lower material costs arising from lower commodity prices during the quarter. All in, core earnings more than doubled YoY and grew 28.4% QoQ to MYR44.1m, trumping both our/consensus expectations at 37.4%/35.9% of the respective full-year estimates. We attribute the outperformance to the better-than-expected sales momentum as both demand and ASPs held up well while profitability margins too expanded on greater economies of scale.

1QFY16 DPS of 8.0 sen. Malaysian Pacific Industries’ (MPI) declared its first interim DPS of 8.0 sen (vs 7.0 sen in 1QFY15). This translates into a payout ratio of 38.1% (vs 73.8% in 1QFY15) for the quarter. On a side note, its net cash balance closed at MYR141.9m (or MYR0.68/share) as at September, with 11m treasury shares held.

Forecasts revised. Taking into account the strong 1QFY16 showing, we are upgrading our FY16F-18F EPS by 12.5-35.0% by factoring in higher utilisation rates, slower average ASPs decline, as well as lower unit production costs. We continue to expect FY16-18 sales momentum to be driven by its smartphone and auto segments (which we estimate to make up a combined 60-65% of its 1QFY16 sales), leveraging on new products launches and new design wins by its direct customers

Maintain BUY. We revise our TP to MYR11.46 based on an unchanged 15x 2016F P/E following our earnings revision. Given the appealingupside of close over 50%, we reiterate our BUY call.