Broadway Industrial

Broadway Industrial: OSK DMG expects Company to report an operating loss for both its 4Q12 and full year FY12 results. House believe that the group has not done enough to scale down its manufacturing force amidst the bleak hard disk drive (HDD) industry outlook. According to Gartners, worldwide PC shipment fell 4.9% y/y to 90.3m unit in 4Q12 indicating structurally declining demand for traditional PC and HDD with the rise of the mobile devices. Broadway has successfully shifted its labour-intensive HDD back-end operation from Shenzhen to Chongqing. The newly running plant in Chongqing enables the group to be more competitive than its peers in labour cost savings and tax incentives. However, the group has also open its chequebook for automating the production line which will induce more fixed overheads costs over the next few years. Maintain SELL, with an unchanged TP of $0.265 based on 0.5x FY12 P/B (-1 S.D. 5-yr historical). Company is estimated to release its results on 20 Feb 2013.