Wednesday, September 01, 2010

What's Down With JCY???

JCY is in a bear market on its own. What gives?

Deepika Padukone

1) Announcement
- Extension of Time to Obtain Completion and Compliance Certification

We refer to the approval letter dated 26 January 2010 (“Approval Letter”) from the Securities Commission (“SC”) for the listing of JCY on the Main Market of Bursa Malaysia Securities Berhad. Condition 1.2 (ii) imposed by the SC in the Approval Letter states that with regards to the property located at Plot 296 (PTD 63734), Tebrau IV Industrial Area, Mukim Tebrau, 81100 Johor Bahru, Johor Darul Takzim (“Property”), JCY is to obtain the Completion and Compliance Certification (“CCC”) within six (6) months from the date of the said Approval Letter.

On behalf of the Company, we wish to announce that an application for an extension of time of six (6) months up to 25 January 2011 for JCY to obtain the CCC from the relevant authorities in relation to the Property (“Proposed Extension of Time”), has been submitted to the SC and is currently pending the decision of the SC.

An announcement will be made upon receipt of the decision of the SC.

This announcement is dated 3 August 2010.
(A negative factor but does not explain the price weakness)

2) Some employees strike at Tebrau factory.
Press Release
In response to the recent foreign workers issues at JCY HDD Technology Sdn. Bhd.’ssub-contractor hostels at Kawasan Perindustrian Tebrau IV, Johor Bahru, both the company and the foreign worker representatives have met this afternoon and the issues had been resolved amicably with the workers returning to work immediately. Among the key issues highlighted by the foreign workers, the management had in conjunction with the sub-contactor for the hostel, shall take remedial actions as summarized below:
1. Company will provide a vehicle and driver on 24 hour standby at the main hostel to facilitate the emergency transportation of worker to hospital for any emergency treatments.
2. The company had agreed to revise and standardize the pay structure of the workers.
3. The criteria for the deduction of salary in relations to worker coming to factory late shall be revised and improved.
4. On top of the normal workmen compensation benefits, the company had agreed to improve the contribution to the beneficiary of the worker.
(Seems to have been resolved over the past few days)

3) CIMB had earlier estimated RM359m in profits for 2010, but 3 quarters now and profits is only RM198m, will not be getting close to CIMB's optimism. Mind you CIMB has also predicted RM441m profit for 2011. Recently CIMB did some updates: 2010 earnings is now lowered to 297.3 million and fy 2011 earnings is now lowered to 370.8 million, but damage is done and is unrealistic. How is the company going to post a RM95m in the 4Q??? Hence the downgrade is also suspiciously optimistic.
(This may explain some selling)

4) The continued paying down of debts owed to owner by the company, which has the net effect of a negative cash flow.
(This does not bode well in the midst of a weakening stock)

Deepika Padukone

5) No activity to shore up share price. Everybody's mum, no buybacks.
(The silence is deafening as they say)

6) Its a cyclical stock. There are similar valuations of just 3x-5x earnings. It looks likely a base will be found at 65-75 sen, even then its not excitingly cheap.

7) The iPad effect. Primary losers: (1) Microsoft, given the impact of lost Windows sales and its lack of a competitive tablet response, (2) Intel and AMD, as they suffer lost unit volumes to ARM-based competitors, (3) HDD makers, Marvell, LSI given the move to solid state storage from hard drives in tablets. Secondary losers: Micron, Acer, ASUSTeK, Barnes & Noble, RadioShack, Best Buy.
(This weighs down JCY again)

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1 comment:

ronnie said...

Dali. You should be appointed Head of Research of CIM, I say this respectfully. The few salient points you wrote is equivalent to 95 pages written by all the other analysts. Kudos.