OT[DKKBF] Friday July 20, 8:23 PM - DATACRAFT ASIA (BUY) - - I
HUAN HSIN HOLDINGS (BUY) - - Major changes in shareholding, MANUFACTURING INTEGRATION TECHNOLOGY (SELL) - - Profit Warning, DATACRAFT ASIA (BUY) - - I
By Xie Da Hong, Pu Wei Dong & Joseph Yap
In April 2001 Huan Hsin (Singapore: HUAN.SI - news) obtained new to contract to produce casings for notebook and commenced production in May 2001 with monthly volume of 55,000 to 70,000 units. Huan Hsin, with its plant in Shanghai, expects to benefit from the outsourcing trend in the PC and notebook industry.
Huan Hsin recently agreed to buy 10% of Shanghai Long Fong Foods Co. Ltd (SLF) for US$3.6m. SLF is a Taiwanese frozen food manufacturer with intention to list in China. With the recent liberalisation of listing rules for foreign companies in China, SLF has a very good chance to be listed on Shanghai stock exchange as it has a track record. Should the listing fails, Huan Hsin will have its capital investment refunded with interest of 10% per annum.
Huan Hsin's current valuation of 6.7x FY01E earning is not demanding. BUY.
Manufacturing Integration Technology (MIT) expected a net loss for 1HFY01 due to the slowdown in the semiconductor industry.
We estimate that MIT's revenue has fallen 40% in 1HFY01, compared to 1HFY00. Net loss per share, which excludes provisions, is expected to range from 0.5 cent - 1.0 cent.
Debts totalled $22.6m in Dec00. Given the deteriorating operating environment, we expect MIT to make provisions for bad debts in FY01.
The stock is trading at 8% discount to its book value. At NTA/share of 19.1 cents, the stock is valued at 1.2x P/B. SELL.
US-based Nortel Networks (Nortel), one of the biggest maker of telecommunications networks, announced a record loss for 2QFY (Dec) 01. However, the record losses included a one-time write-off of goodwill arising from acquisitions made over the last two years. Excluding the one-time charge, the loss of US$0.48 is in line with market expectation. Nortel said that it does not expect telecommunications equipment spending to rebound until the second half of 2002.
Meanwhile, in term of geographical sales, Nortels performance was weighed down by a sharp 51% y-o-y decline in sales in the US. Revenue from international market (including Europe, Latin America and Asia) fell only 7%. Nortel expressed cautiousness on Europe and Latin America but remained bullish on Asia.
We view Nortel's bullish outlook on Asian market as positive for Datacraft (Singapore: DCFT.SI - news) (which derived more than 90% of its sales from Asia). This indicated that networking business in Asia had not been adversely affected as has happened in the US. Datacraft is expected to report its FY (June) 01 results on 16 August. We maintain our EPS FY01 forecast at US0.10 (PER of 35.4x). We reiterate BUY ON WEAKNESS.
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