Amtek

Amtek: 2Q13 net profit of $5.9 mn (-2% QoQ, -27% YoY) was below expectations driven by continued revenue weakness. Rev decline (-4.4% QoQ, -0.3% YoY) was evident across most of the industry segments. Grp note that demand outlook for Europe continues to be weak, although China demand (especially Auto) is showing signs of recovery in the last couple of months. Record tooling sales in 2Q13 could be a precursor to a rev turnaround in 1H14. With margins now close to 2010 lows, the mgt is also focussed on improving operating efficiencies. Relocation of some Singapore operations to Batam (Indonesia) is on track (should provide decent wage cost savings). Along with further rationalizing headcount, Amtek is also investing in increasing automation. Mgt remains cautious on 2H13 outlook, but is confident of a revenue turnaround in FY14 based on demand indicators. Expect further consensus earnings downgrades near term. At 12-month consensus P/E of 8.0x (+1.9 sd), valuations do not look attractive relative to history. Ratings as follow: CIMB maintains Neutral with $0.56 TP CS maintains Neutral with $0.70 TP