Elec & Eltek

Elec & Eltek: weak 3Q12 results with US$8.5m in profits, -45% yoy, and US$137.4m in revenue, -18% yoy. 9M12 net profit at US$25.6m came in below expectation due to, i) weaker sales as a result of the slump in the PC industry, and ii) poorer margins attributable to higher mnftg overhead. Despite strong demand for E&E’s High Density Interconnect (HDI) PCB (for communication & network customers), its traditional PCB business (for computer & compter peripheral customers) declined by ~28% yoy for 9M12. With IBM reporting poor 3Q results and Dell losing mkt share, demand from these two companies has weakened, making way for Samsung and Ericsson to become E&E’s top two largest customers in 3Q. The communications & network segment now accounts for 30% of group revenue. DMG lowers FY12-13e earnings by 23-25% respectively, But notes while the business environment remains challenging, it is confident the group ahs little problem in paying out most of its earnings as div, translating to an attractive FY12e yield of 8.2%. The house maintains Neutral with revised TP at US$2.23, based on 10x blended FY12/13 P/E.