Innotek

Innotek / Japan electronics: Negative newsflow on Japanese electronics firms, which contribute an aggregate ~70% of Innotek’s 2Q12 sales. Panasonic, Japan’s 2nd biggest TV maker, and Innotek’s key customer (at 14% of sales) plunged by the daily limit in Tokyo trading after forecasting a loss 30x bigger than analyst estimates bcs of restructuring costs and falling demand. Panasonic dropped 19% to 414 yen at 9.33am Tokyo time, headed for the lowest close since Feb 1975. The co forecasts that net loss for FYMar13 maybe 765b yen, scrapping its May projection of 50b yen in net income. Panasonic said it wont’ pay a dividend for the first time since 1950 bcs of an “urgent need” to improve its financial position. Toshiba (3% of Innotek's sales) also missed sales estimates by >5%. Sony, set to report earnings today, fell 4.6% in Tokyo. Sharp (4% of Innotek's sales) will be announcing results, which is expected to show a widening full year loss. In late Sep, Lim & Tan highlighted that Panasonic temporarily closed plants in Qingdao, Suzhou, Zhuhai and are checking on damages sustained at their facilities as a result of the protests by Chinese nationals in China over heightened tensions btwn Japan and China in the South China sea. Canon (9% of Innotek sales) was also reported to have closed 2 plants in Guangdong and one plant in Jiangsu while another smaller customer Honda has reported damage to their dealership from fire set off by protesters and also closed several plants for days. The house notes Innotek already lost close to $7m in 1H12 vs a small profit yoy, and looks likely to continue losing money in 2H12. Notes with its weak near term fundamentals and likely discontinuation of the usual 5cts div early next year, sees no reason to bottom fish yet. Innotek is down 40% from its Feb ’12 high at $0.55.