KUALA LUMPUR: OSK Research is maintaining its Neutral view on hard disk drive (HDD) manufacturer JCY International.
In a research note issued on Friday, Oct 1, the research house said at the current price, JCY is trading close to the 10 times historical peak PER valuation of Notion and Engtek over the last five years and 11 years respectively.
Due to a lack of historical valuation given that JCY was only listed earlier this year, it is still too early to gauge the valuation range that the market is ascribing to the Malaysia's largest HDD components manufacturer.
'As the valuation of the other HDD component makers have fallen slightly, we are valuing JCY based on 8.0 times FY11 PER, from which we derive a fair value of RM1.15. For now, we think JCY's share price could be supported by the decent 6% FY10 net dividend yield based on a 48% dividend payout.
'However, this is not attractive enough to alter our Neutral view given the potential of more earnings disappointments for the next two quarters,' it said.
Meanwhile, the six-month moratorium on the company's IPO shares ended last month. While JCY's shares have fallen by about 30% from the IPO price, which we believe is mainly due to an unattractive offer price and disappointing results.
In a research note issued on Friday, Oct 1, the research house said at the current price, JCY is trading close to the 10 times historical peak PER valuation of Notion and Engtek over the last five years and 11 years respectively.
Due to a lack of historical valuation given that JCY was only listed earlier this year, it is still too early to gauge the valuation range that the market is ascribing to the Malaysia's largest HDD components manufacturer.
'As the valuation of the other HDD component makers have fallen slightly, we are valuing JCY based on 8.0 times FY11 PER, from which we derive a fair value of RM1.15. For now, we think JCY's share price could be supported by the decent 6% FY10 net dividend yield based on a 48% dividend payout.
'However, this is not attractive enough to alter our Neutral view given the potential of more earnings disappointments for the next two quarters,' it said.
Meanwhile, the six-month moratorium on the company's IPO shares ended last month. While JCY's shares have fallen by about 30% from the IPO price, which we believe is mainly due to an unattractive offer price and disappointing results.
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