Innotek

Innotek: disappointing 4Q12 results. Revenue at $51.7m, -29% yoy, largely due to the economic slowdown in China and the recent political tension between Japan and China, which impacted sales of TV components to major Japanese customers. Net loss of $8.5m, deeper than the $1.1m net loss yoy, with the loss due mainly to lower revenue and lower gross profit from Office Automation pdts and existing automotive component programmes, due to competitive pricing and higher labor costs. Embedded in bottom line is the start up loss of $1.3m from the new mobility business and early end-of-life of certain existing pdts. Also the new plant in Wuhan suffered a loss of $0.5m, due to low revenue as major Japanese automotive customers delayed plans to set up plant facilities in Wuhan due to the Sino-Japan political tension. The co declared 1 ct div, down from 5ct dividend in each of FY08-11. . Mgt notes the group continues to be impacted by the ongoing European debt crisis and slower economic growth in China. Business outlook of the group’s main industry sub-sectors – TV components, Office Automation and Automotive components – remains uncertain as Japanese TV-related customers continue to face fierce competition from producers from other countries with lower cost structure. This is in addition to the challenges posed by rising min wage in China and weakening of the USD relative to RMB. On a positive note, the group’s new mobility business is expected to start reporting revenue in FY13. Nevertheless, overall, mgt expects the group’s 1Q13 performance to improve qoq, and FY13 performance to improve yoy with the restructuring and rightsizing of operations. The stock is down 9.5% at $0.335, which translates to 0.48x P/B.