Broadway Industrial

Broadway Industrial: Broadway reported a higher core net loss of $7.8m vs street estimates. Broadway’s core net loss came from higher than expected sales and marketing expenses, but this was largely offset by non-core, flood related insurance claims of about $9.4m. Its weak top line was expected due to by weak end-demand and OEM inventory adjustment for HDD components in 2H12. On a brighter note, its foam plastics segment performed well, and is expected to continue to do so in FY13 CIMB note that Broadway has made significant strides in right sizing its HDD business by reallocating excess capacity, while trying to acquire new customers for its non-HDD business, and consolidating its operations. Believe the positive effects of these measures could show up in 2H13. The HDD segment is also expected to remain weak for 1H13 but may slowly stabilise. Mgt believes that the time of wild swings in HDD vol are over. The absence of a final dividend may be a disappointment for investors but mgt has opted to conserve cash. Although Broadway trades at a low P/BV, see few rerating catalysts given its still weak outlook. Ratings as follow: CIMB maintains UnderPerform with $0.27 TP.