Serial System

Serial System: Firing on all cylinders; NRA Capital maintains Overweight with TP of $0.25, indicating 74% potential upside, supported by generous dividend of 7-9% projected.

Despite Serial's 2Q14 turnover being 9% below its expectation, earnings of US$4.6m came in line due to better-than-expected gross profit margins. Other variables included US$1.4m fair value loss on derivative financial instruments, loss on associates due to higher-than-expected loss from Bull Will and lower-than-expected taxation.

The Semiconductor Industry Association (SIA) announced that the global semiconductor industry posted record sales totalling US$335.8b in 2014, an increase of 9.9% yoy. Total sales for the year exceeded projections from the World Semiconductor Trade Statistics organization’s industry forecast. According to Gartner, worldwide semiconductor revenue is forecast to reach US$358bn in 2015, a 5.4% increase from 2014, but down from the previous quarter's forecast of 5.8% growth. The market is being driven by strong growth in application-specific standard products in smartphones, along with DRAM and NAND flash in ultramobiles and solid-state drives.

NRA believes Serial can improve its revenue and economies of scale through the integration of supply chain and operations after completing its acquisition of the entire distribution and trading entity arm of GSH Corporation and a 49%-equity stake of Achieva, as it extends its regional distribution business beyond components such as chip sets to finished consumer products.