Broadway

Broadway: 1Q revenues declined 8% y/y to $145.1m, mainly due to the continued weakness in the HDD market, as the demand for personal computers fell. Sales from the non-HDD precision component business also fell due to a slowdown in the semi-conductor industry, which consequently led to an earnings declined of 96% y/y to $609k. The company's best segment came from the foam plastics division, increasing 37.2% y/y to $49.6m due to overall strong demand as well as the delayed sales of some packaging products. The strength of this segment does not seem sustainable in the longer term, with relatively lower profit margins coupled with a competitive packaging market; as well as the holdback of sales products from the product manufacturers which could possibly be due to a poor undertaking of demand. Going forward, research firms project a decline of 1.3% for PC shipments in 2013; Market Intel firm tracked 135.8m HDD shipments for 4Q12, and a marginal decline to 135.0m for 1Q13, suggesting that shipment volumes have bottomed out- in line with Western Digital and Seagate's guidance that shipments will begin to recover in 2H13 as customers had worked through their inventory rebalancing. Broadway is still cautious on its prospects for FY13; besides its right-sizing initiatives, the group is diversifying into non-HDD related business to optimise its capacity utilisation.