Karin Technology

Karin Technology: 1H13 revenue exceeded OCBC expectations but core PATMI was in line due to lower-than-expected gross margin. Revenue surged 39.7% y/y to HK$2.1b and formed 54.4% of house FY13 forecast. Reported PATMI jumped 47.5% y/y to HK$33.7m. However, after adjusting for exceptional items, we estimate that core PATMI came in at HK$26.8m (+5.1% YoY) and constituted 50.1% of OCBC's full-year projection. Karin’s robust topline growth was driven largely by its Consumer Electronics Products segment, which reported a 56.7% increase in sales, although this also resulted in margin compression given the high volume, low margin nature of the business. Karin declared an interim dividend of 7.2 HK cents/share, higher than the 7 HK cents/share in 1H12 (3.5 HK cents of interim and special DPS each). Karin also returned to a net cash position of HK$69.4m in 1H13 (2H12: net debt of HK$31.7m), aided by strong free-cashflows generated of HK$99.7m. OCBC maintain its HOLD rating on Karin but TP of $0.25 is under review.