Wednesday, December 1, 2010

JCY at fresh low since listing as results disappoint, downgrade

KUALA LUMPUR: JCY International Bhd's shares fell to their lowest since listing after the hard-disk drive manufacturer posted fourth quarter losses and was downgraded by analysts.

At 4.06pm, it was down 5.5 sen to 84 sen with 15.6 million shares done on Wednesday, Dec 1.

CIMB Equities Research had downgraded JCY to Underperformwith a target price of 92 sen after it slipped into the red in 4QFY10 with a net loss of RM22 million (RM73.5m profit in 4QFY09), which took FY10 net profit to RM176 million (-15% yoy), 33% below consensus and our forecast.

The negative surprises were lower-than-expected sales and a more severe margin erosion arising from the weaker US$ and higher costs.

'We slash our FY11-12 EPS estimates by 20-28%. In view of the murky near-term outlook and P/E compression for HDD suppliers, we cut our target P/E from 12x CY11 to 8x CY12, in line with the industry average. This reduces our target price from RM1.88 to 92 sen.

'We downgrade the stock from Outperform to UNDERPERFORM as the stock could be de-rated by these poor results. Although we remain positive on its long-term prospects, we believe a better time to revisit the stock would be 2H11,' it said.

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