Innotek

Innotek: weak 1Q12 results. Revenue from continuing operations was $70.4m, -15% yoy, mainly due to the halving of Assembly and Tooling revenue to $12.9m. The main Stamping revenue was roughly flat at $57.5m. Performance was also affected by the supply chain disruption caused by Thai flooding in Oct. Net loss from continuing operation was $4.5m, vs net profit of $0.5m yoy, driven by decline in gross margin to 12.1% from 15.8%, due to greater contribution from lower margin Office Automation (“OA”) products, vs the higher margin TV components previously. The GP margin was also affected by the lower GP for automotive components as most of their prices were fixed for one to two years before commencement of mass production while steel prices and labour cost in China continue to rise over the years. In additional, there were losses from start-up cost relating to the new mobile business and the new Wuhan plant amounting to $1.1m. To mitigate pricing pressure, subsidiary MSF Group did a retrenchment exercise to reduce indirect labour resulting in retrenchment charges totaling $1.3m in 1Q12. Discontinued operation involved the sale of shares in its Netherlands based subsidiary, Exerion Precision Tech on 20 Feb ’12, resulting in a disposal gain of $1.6m. This was offset by a provision for potential claim of $1.6m for exposure of certain inventories and receivable. On outlook, mgt expects sequential recovery from the Thai supply chain disruptions in 2Q12. says the recent disposal of non-core operations, restructuring (which resulted in one-off expenses this qtr) and the invmts in the new mobile business as well as a new plant in Wuhan should collectively contribute to FY12 performance. The group has net cash of $23.3m or 10.4 cts/sh. During the qtr, InnoTek purchased a further 1.3m treasury shares, bringing the treasury shares held to 22.7 m, equivalent to 8% of shares out. The stock trades at 0.47x P/B.