Highlight JCY sees better results in FY14

Highlight JCY sees better results in FY14
Business & Markets 2013
Written by Zatil Husna Wan Fauzi of theedgemalaysia.com
Monday, 22 July 2013 08:39

KUALA LUMPUR: Hard disk drive (HDD) component maker JCY International Bhd expects sales and earnings to pick up in the second half (2H) to at least “break even” for the 2013 financial year (FY13) ending Sept 30. The group incurred losses of RM46.51 million for 1H ended March 31.

Finance director James Wong said he is optimistic about the group’s performance in FY13 for a “better upcoming financial year”.

“We are positive about the industry outlook as we see to break even for FY13. Moving forward, we see improvements in earnings due to certain success, which can only be attained in the next financial year (FY14),” said Wong in an interview with The Edge Financial Daily.

He said FY14 looks brighter for JCY to manufacture the new 5mm hybrid drives.

“The 5mm hybrid drives will improve our earnings for FY14,” Wong said, adding that with the launch of the new drives, the group will increase its production level by 20%.

JCY’s current average production capacity is about 100 million units per quarter for each component, comprising base plate, cover plate, actuator and anti-disk.

Although the group sees return to profitability for 2HFY13, Wong cautioned that such gains may be offset by inventory and wage adjustment — the latter due to the implementation of minimum wages in the country.

With the core HDD segment becoming more challenging, Wong said JCY is constantly looking at diversifying. However, it will be in the form of a merger and acquisition in the same segment with the aim to expand its HDD components production, instead of diversifying into other businesses as done by other HDD manufacturers, Wong said.

The group believes the HDD component segment will continue to grow due to needs in the market for large data storage such as desktop computers in offices.

According to Wong, the current drop in demand for HDD components is affected by a fall in demand for data storage in portable computers such as laptops.

“HDD components for laptops fell since the introduction of personal tablets like iPad, Samsung tablets and smartphones.

“However, for desktop computers, HDD components are heavily needed as data storage is crucial for any business segment in the world, especially with the recovery in the global economy,” he said.

JCY recorded a net loss of RM20.8 million for the second quarter (2Q) of FY13, compared with a net profit of RM163 million for 2QFY12. Revenue stood at RM401.4 million, a 30.4% fall from RM576.6 million previously

The group said in a filing with Bursa Malaysia the decline in revenue and profit for 2Q was attributed to the reduction in volume shipped, lower average selling prices and higher operating expenses.

JCY has allocated RM80 million in capital expenditure (capex) for FY13 mainly for new machines and renovation of its plants in Guangzhou and Suzhou in China. Capex for FY14 has been set aside at about RM75 million.

The group continues to have a significant global market share in HDD components, such as base plate (25% global market share), cover plate (15%), actuator (30%) and anti-disk (30%).

However, due to slowing demand and falling HDD prices, JCY’s share price declined about 50% from its high of RM1.60 in the middle of last year to 76 sen last Friday. At 76 sen, it has a market capitalisation of RM1.47 billion.

All five research houses polled by Bloomberg have a “sell” or “underperform” rating on the stock, with target prices from 37 sen to 54 sen.


This article first appeared in The Edge Financial Daily, on July 22, 2013.