Broadway

Broadway: 2Q10 profit jumps 34.9% yoy on revenue of S$141m up marginally 1.7% yoy. Gross margin improves from 13.3% to 16.6%. Adjusted for non-operational and unrealized mark-to-market forex charge of S$2.9m, its profit records a 65% yoy increase. It proposes interim dividend of S$0.02(1H09: S$0.01). However, Broadway feels lukewarm HDD demand in 2Q with 11.4% yoy decrease. HDD still contributes 70% of revenue, so this segment drags total revenue down 6.2% qoq and earnings down 17% qoq…

Although the Mgmt declares HDD is in line with seasonal weakness and non-HDD sectors like semicon and foam plastic offset the impact, HDD may have yet to hit the bottom of the most-recent sector sales cycle. Broadway still heavily depends on HDD, compared with Armstrong (30% rev from HDD), whose result is on Aug 12, so headwinds would weigh more on Broadway in 2H. Seagate and WD’s 2Q revenue declined 12% and 9% qoq, respectively, anticipating single-digit qoq in 3Q that disappointed investors.