JCY falls to 5-month low on HDD outlook woes (5161)

KUALA LUMPUR: Shares of JCY International Bhd fell to a five-month low of RM1.12 in late afternoon trade on Thursday on concerns about the weakening outlook for the hard-disk drive manufacturing industry as PC sales slumped.

At 3.10pm, it was down 22 sen to RM1.12 as trading volume surged to 39.64 million shares.

The FBM KLCI fell 1.3 points to 1,650.95. Turnover was 775.52 million shares valued at RM707.05mil. There were 255 gainers, 397 losers and 315 counters unchanged.

On Aug 16, CIMB Equities Research lowered its target price for JCY from RM2.22 to RM1.41 and advised investors to lock in profits as earnings have peaked in the near term and the share price is unlikely to outperform.

It had also said that JCY's nine-month net profit for the period ended June 30, 2012 at 59% of FY12 forecast and 82% of consensus, 9MFY9/12 net profit was 10% ahead of consensus but 43% below its.

"Factoring in lower sales and gross margins, we slash our forecasts and cut the stock from Trading Buy to Neutral as near-term earnings deceleration will cap upside. Our target price is still based on 6 times CY13 P/E, in line with its peers," it said.

CIMB Research said although JCY still expected to see significant on-year profit growth in 4QFY9/13, "we believe that it will see further sequential contraction as both WD and Seagate have guided flat on-quarter volume growth in the September quarter.

"We also understand from our industry contacts that current build plans for WD and Seagate point to low single-digit qoq growth in the traditionally busiest December quarter," it said.

Meanwhile, wire reports said Hewlett-Packard swung to a US$8.9bil quarterly loss as personal computer sales shrank again and it swallowed a huge write-down linked to its US$13.9bil purchase of Electronic Data Systems.

Dell Inc reported an 18% drop in profit during its fiscal second quarter as revenue fell 7.5% on a steep decline in sales of desktop and notebook computers, wire reports said.