Armstrong

Armstrong: Announced 3Q11 results which was below expectations. Rev at $56m, -3.4% yoy and +6.3% qoq, while net profit at 0.1m, -97.3% yoy and -94.2% qoq, which was largely attributed to unrealized mark-to-market losses of $5.7m, otherwise, core net profit at $3.5m, -19.3% yoy and +55.9% qoq.

Operations-wise, the various businesses showed sequential recovery. Despite US$ weakness, data storage managed 4% YoY growth. Consumer electronics fell 20% YoY on the lingering effects of the Mar 2011 Japanese earthquake, but nevertheless there was a 5% QoQ improvement. Automotive stood out for its quick recovery from the earthquake, driven by customers in China and Thailand.

Going forward, Kim Eng expect a weak 4Q11 and 1H12. In particular, the effects of the Thai flood is expected to impact Armstrong’s data storage business, both directly and its two major customers, Seagate and WD. There is likely to be asset impairment charges in 4Q11 as
well. However, cashflow remains strong, and house expect a final div of $0.01/share. House maintains Hold with $0.19 TP, and switches valuations to 0.9x FY12 P/B.