Broadway: CIMB maintains OutPerform Rating with $1.84 TP, based on 8xCY12 PE. Raise FY11-12 estimates by 1% after incorporating higher sales but lower margin and effective tax assumptions. Also introduce FY13 forecasts….
Note that Business remains healthy, with The HDD component business benefiting from
greater allocations from key customers as a result of quality issues at one of its major competitors…
Non-HDD components are benefiting from greater outsourcing from the West to Asia. The packaging business is also expected improve with increased capacity and the closure of the loss-making Xinjiang operation (S$1.8m losses in FY10). To combat rising labour costs in China, labour-intensive coilbonding processes will be shifted inland in 2011. This is expected to result in higher operating expenses in 2011. Completion of relocation is expected by end-2011.