What had started as one of 2010’s largest IPOs is ending the year as one of its biggest disappointments. JCY International Bhd is not only shaping out to be among the worst-performing IPOs this year, the news got worse as it slipped into the red in the latest quarter.
Yesterday, the hard-disk drive (HDD) manufacturer posted pre-tax and net losses of RM15.67 million and RM22.55 million, respectively, in its 4QFY10 ended Sept 30. This was in stark contrast to the net profit of RM73.5 million chalked up a year ago.
Revenue for the quarter declined 3% to RM485.97 million from RM501.21 million a year ago. The company attributed the losses to a decline in average selling prices, foreign exchange losses, as well as higher production and labour costs.
For the financial year ended Sept 30, 2010, the company still made a net profit of RM176.38 million, or 8.63 sen per share, down 14.9% from RM207.28 million a year ago.
However, this was substantially below analysts’ earlier forecasts during the pre-IPO stage, which called for earnings growth of 70%-80% for FY10. This priced the IPO at about eight to nine times 2010 earnings, justifying the RM1.60 price-tag. At it turned out, based on the just-released results, the IPO price now valued JCY at a hefty 18.6 times 2010 earnings.
No doubt, the HDD industry has been facing a host of challenges over the past half year. Investor confidence in the industry was shaken by a number of events, including unfavourable outlook projections from the major HDD giants, weakening demand and prices, concerns over the rising popularity of solid-state drives and the weakening US dollar versus the ringgit. But it should be noted that these problems are faced by all the HDD players.
Yet, JCY’s main competitors — which are much smaller — stayed profitable during the most recent quarter, although their profits did fall. As the biggest player on the scene, JCY should enjoy better economies of scale and be able weather through the downturn better.
In the quarter ended Sept 30, 2010, Notion VTec Bhd’s net profit fell 37.7% y-o-y to RM8.08 million on the back of revenue of RM52.99 million. Its pre-tax profit margin fell from 30.2% to 12.7%.
Meanwhile, Dufu Technology Corp Bhd saw its net profit decline 75.9% y-o-y to RM0.77 million, with revenue totaling RM27.11 million. Its pre-tax profit margin fell from 12.7% to 4.4%.
A year ago, JCY’s pre-tax margin totalled 14.4%. It is now posting losses. Apart from forex losses due to the depreciation of the US dollar versus the ringgit, JCY also attributed the quarter’s losses to “increased production costs due to higher raw material cost and labour costs resulting from shortage of workers in Malaysia”.
An industry observer said this could be the effects of the highly publicised foreign workers protests at its plant in Johor in mid-August, which was sparked by the death of a Nepali worker.
Another note to its financial accounts is worth highlighting. It said that a subsidiary has received claims dated Dec 14, 2009 from Tenaga Nasional Bhd for RM8.36 million in respect of electricity charges supposedly undercharged from September 2007 to November 2009 due to incorrect meter reading from electricity meters that were either defective or tampered.
JCY said it is disputing the claims and had provided TNB with the third party audited production reports. JCY was listed in February this year amid much fanfare. However, it also attracted detractors who noted that all the proceeds from the IPO — totalling some RM750 million — went directly to its controlling shareholder, founder Yong Yoon Kiong.
In contrast, Notion VTec’s IPO in 2005 saw all proceeds accruing to the company, and none to its major shareholders.
JCY’s shares fell two sen to 89.5 sen yesterday. Its shares have plunged 44% from its IPO price of RM1.60 and 55% from a record high of RM1.98 set in May this year. - by Financial Daily
No comments:
Post a Comment