S$0.24-AMPK.SI
• The key point at yesterday’s meeting is that 4Q’11 will be a challenging quarter for the company as its core hard disk drive business which accounts for 50% of business will see a drastic 20-30% drop in volumes sequentially as a result of the flooding in Thailand and other electronics/telecoms business is also seeing uncertainties from the unstable macro environment caused by the debt problems in Europe.
• While management said that they have bought comprehensive insurance coverage from a subsidiary of Thai Farmer’s Bank for their assets in Thailand as well as business disruption, it is currently too early and preliminary to forecast how much they are able to recover. Management disclosed that their assets in Thailand had cost them about US$1mln.
• Industry sources told us that the claims would likely take a period of time to review and finalize before payments can be made, hence, we believe Adampak would likely have to take impairment losses first before registering the claims sometime later. Fortunately, their asset value in Thailand is not too big at about US$1mln relative to shareholders funds of US$42mln and 9 month to Sept’11 profit of US$5.1mln. And the company has no borrowings and net cash of US$13mln, representing 27% of its share price.
• While prospects are weak, like Armstrong, Adampak’s share price has also stopped reacting to bad news and at 1x price to book it is already below its historical average of 1.2x (low of 0.6x and high of 1.8x), hence we continue to maintain a Neutral rating on the stock.
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