Serial System

Serial System: SIAS believe that revenue and profitability are returning to growth following a challenging FY12. 2Q13 revenue grew by US$33m, of which US$2.8m was contributed by newly acquired subsidiary Serial AMSC Microelectronics. Greater China accounted for the bulk of revenue growth or US$20m, followed by South Korea, which accounted for US$7m of revenue growth. Gross margin remained stable at 9.2% compared to 9.1% a quarter ago. Economies of scale are being realized as operating expenses rose by only US$1.1m in spite of a US$3.3m improvement in gross profit from higher revenue. Of the US$1.1m of additional operating expenses, a net US$0.24m of costs were due to one-off items such as allowance for inventory obsolescence and gain on disposal of investment property. New revenue drivers include larger contribution from the Japan subsidiary and the possible sign up of new product lines in 2H 2013. Serial recently acquired some offices in Korea and Shanghai to manage rental costs. SIAS raised estimates upwards, has an INCREASE EXPOSURE rating and TP of $0.18.