S$0.25-CWOH.SI
The company reported its maiden quarterly results, with 1Q ended May ’11 sales up 3.9%, thanks to higher demand from automotive customers (+47%), but offset somewhat by weaker demand from HDD (-19%) and precision metal stamping (-26%) customers due to disruption in their customer’s supply chain on the back of the Japanese disaster as well as weaker demand conditions.
The 3.9% growth represents a significant moderation compared to last year’s 22% growth.
Bottom-line unfortunately fell 55% to $2.9mln due to faster rise in raw material, labor and other operating expenses. The higher tax rate also did not help.
The 55% decline in profit is a sharp reversal from last year’s 29% rise.
While we do not have a rating on Cheung Woh Tech, we believe its results would provide some indication of what can be expected of some of its peers such as Armstrong, Broadway and Adampak.
We are currently neutral to negative on the sector and believe that investors should continue to await for better re-entry levels sometime in late 2011 when the sector typically benefits from the seasonal ramp as well as consolidation of the major HDD players Seagate/Samsung & Western Digital/Hitachi.
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