Tuesday, August 23, 2011

CIMB Research retains Trading Buy on JCY

KUALA LUMPUR: CIMB Equities Research is retaining its TRADING BUY on hard disk drive manufacturer JCY International Bhd and target price of 58 sen (8.0 times CY12 price-to-earnings) as a gradual earnings recovery in FY12 should act as a catalyst.

It said on Tuesday, Aug 23 lower-than-expected gross margins led to a 3QFY9/11 core net loss of RM16.1 million, below its RM16.4 million profit estimate.

CIMB Research said JCY's 3Q core net loss excludes a RM15.3 million inventory write-off and RM200,000'' forex loss.

The nine-months net loss came in at RM11.9 million, short of its full-year forecast of RM64.3 million profit and consensus estimates of RM94.6m profit. Factoring in the poor results and lower margins, we now expect JCY to report a full-year net loss of RM7.8 million.

'But our FY12-13 forecasts are intact as we assume a recovery in sales and margins due to higher volumes from WD and Seagate after their mergers with HGST and Samsung, respectively, in 4Q. 'Although JCY's share price may react negatively to these results, we retain our TRADING BUY and target price of 58 sen,' it said.

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