[DKKBF]Datacraft Asia keeps profit forecast amid US profit warnings
singapore.cnet.com
By Bloomberg, Singapore.CNET.com
Friday, October 13 2000
SINGAPORE--Datacraft Asia Ltd yesterday said it is sticking by its earnings forecast made two months ago even as investors begin to worry its earnings may be hurt after US computer and phone-equipment makers issued profit warnings.
Datacraft, which has set up a quarter of Asia's communications networking systems, took its biggest two-day drop in nearly six months, shedding 12 percent and US$410 million in market value. Its share price fell US$0.15, or 2.3 percent, to US$6.50 yesterday, and the stocks is the worst-performer on the Singapore benchmark Straits Times Index this month.
"We see no problem in doubling our earnings in the next two years," said Ron Cattell, Datacraft chief executive.
Cattell's comments point to growing demand for networking and communications systems in Asia, in spite of slower-than-expected personal computer sales in other parts of the world.
Apple Computer Inc, Dell Computer Corp and Intel Corp have warned they will miss sales targets or have issued profit warnings. Motorola Inc and Lucent Technologies Inc became the latest to say results will disappoint.
Datacraft was the second Singapore company to quell concern over slower profit growth. Creative Technology Ltd, the world's biggest soundcard maker, said yesterday it will maintain its fiscal first-quarter sales forecast of a 10 percent rise from a year ago.
Unconvinced
Still, the recent string of profit warnings in the US could mean slower orders for some Singapore companies, forcing many investors to take a second look at their valuations.
Creative Technology posted it biggest drop in nearly five months yesterday, shedding S$1.80, or 5.9 percent, to S$28.70. Investors and analysts are likely to remain unconvinced.
"According to consensus estimates, annual growth of 41 percent have been assumed over the next two years," said Victor Lim, an analyst at HSBC Securities Pte Ltd in his report published Tuesday on Datacraft. "We believe that growth of more than 40 percent is unsustainable beyond fiscal year 2001, and have thus reduced our target price to $6.50."
HSBC Securities downgraded Datacraft to "reduce" from "add" two days ago.
In August, the company said profit for the full year ended June rose 47 percent to US$31.5 million and sales rose 64 percent to US$417.7 million. Then, the company said it expected earnings and sales to double over the next two years.
Expensive
Datacraft is currently priced at 89 times its earnings of US0.073 per share this year. That's about five times the Straits Times Index's price-earnings ratio of 19.
"There's nothing fundamentally wrong with the company, but when I was looking at it about three months ago, it looked expensive in terms of valuations," said Jason See, who helps manage S$3.7 billion as chief investment officer at OUB Asset Management Ltd.
OUB Asset sold all its shares in Datacraft about three months ago, See said.
See is not alone. Teo Jwee Liang, a senior portfolio manager at Dresdner Asset Management Ltd who helps manage US$2 billion in Asia, also trimmed his holdings in electronics and computer-related stocks recently.
"Most of the high valuations stocks have been sold off quite aggressively, and that includes Datacraft on concern over the global slowdown in PC demand and that could affect their earnings going forward," said Teo. "We recently trimmed our tech position to a bare minimum."
And investors are in no hurry to buy these stocks as more profit warnings is expected to come out of the United States.
The recent decline "has discounted the current bad news, but the question now is who is next," said Franki Chung, executive director who helps handle US$800 million in Asia excluding Japan at TAL CEF Global Asset Management Ltd in Hong Kong. "The new worry is whether there'll be more downgrades of earnings from US companies--I would not bargain hunt now."
Datacraft is a unit of Dimension Data Holdings Ltd, South Africa's biggest computer-services company.
Copyright 2000, Bloomberg L.P. All Rights Reserved.
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