ECS Holdings (ECS) reported a 8.6% YoY decline in its 3Q12 PATMI to S$8.3m on the back of a 9.5% fall in revenue to S$897.3m. Adjusting for exceptional items, we estimate that its core earnings rose instead by 8.3% YoY to S$8.7m, which beat our expectations. We see positives from major new vendor product launches in 4Q12, but the combination of the lacklustre macro economy, competitive pressures and supply constraints could limit the growth opportunities for ECS. Looking ahead, ECS would place stronger emphasis on its higher margin Enterprise Systems segment. We raise our FY12F core earnings forecast by 3.5% but retain our FY13F projection. Rolling forward our valuations on ECS to 5.8x FY13F EPS, we derive a higher fair value estimate of S$0.56 (previously S$0.52). Maintain BUY on cheap valuations, with the stock trading at FY13F P/NTA of 0.48x.
3Q12 core earnings above our expectations
In line with the general weakness in the PC industry, ECS Holdings (ECS) reported a 9.5% YoY fall in its 3Q12 revenue to S$897.3m, although this was partially offset by higher demand from mobility devices (smartphones and tablets). Correspondingly, PATMI declined 8.6% to S$8.3m. Adjusting for exceptional items, we estimate core PATMI of S$8.7m, an increase of 8.3% YoY. Topline came in within our expectations but core PAMTI exceeded due largely to lower-than-expected operating expenses and finance costs. For 9M12, revenue slipped 2.2% to S$2,622.5m, or 72.5% of our full-year estimates. Reported PATMI decreased by 25.3% to S$22.6m, while estimated core PATMI fell 19.0% to S$22.7m, which formed 75.5% of our FY12 forecast.
Boost likely from new vendor products, but headwinds remain
Although 4Q12 would likely see contribution from new vendor product launches such as Microsoft’s Windows 8 operating system, Apple’s iPad Mini and fourth generation iPad, we believe the lacklustre macro economy, competitive pressures and supply constraints could limit the growth opportunities for ECS. In addition, based on shipment details, we believe that more meaningful sales from ECS’s distribution of Apple’s iPhone 5 in China would only occur from 1Q13. Demand for ultrabooks has also been below expectations thus far, according to management.
Maintain BUY
Looking ahead, macro headwinds will continue to impact the overall global IT industry negatively, especially for PCs and notebooks, in our opinion. But we expect mobility devices to form an increasing proportion of ECS’ revenue, given their still robust demand. Stronger focus would also be placed on its Enterprise Systems segment (carries higher margins than its Distribution segment) which includes developing its own cloud-based solutions and products. We raise our FY12F core earnings forecast by 3.5% but retain our FY13F projection. Rolling forward our valuations on ECS to 5.8x FY13F EPS, we derive a higher fair value estimate of S$0.56 (previously S$0.52). ECS is currently trading at FY13F P/NTA of 0.48x, which we view as an attractive entry point. Maintain BUY.
In line with the general weakness in the PC industry, ECS Holdings (ECS) reported a 9.5% YoY fall in its 3Q12 revenue to S$897.3m, although this was partially offset by higher demand from mobility devices (smartphones and tablets). Correspondingly, PATMI declined 8.6% to S$8.3m. Adjusting for exceptional items, we estimate core PATMI of S$8.7m, an increase of 8.3% YoY. Topline came in within our expectations but core PAMTI exceeded due largely to lower-than-expected operating expenses and finance costs. For 9M12, revenue slipped 2.2% to S$2,622.5m, or 72.5% of our full-year estimates. Reported PATMI decreased by 25.3% to S$22.6m, while estimated core PATMI fell 19.0% to S$22.7m, which formed 75.5% of our FY12 forecast.
Boost likely from new vendor products, but headwinds remain
Although 4Q12 would likely see contribution from new vendor product launches such as Microsoft’s Windows 8 operating system, Apple’s iPad Mini and fourth generation iPad, we believe the lacklustre macro economy, competitive pressures and supply constraints could limit the growth opportunities for ECS. In addition, based on shipment details, we believe that more meaningful sales from ECS’s distribution of Apple’s iPhone 5 in China would only occur from 1Q13. Demand for ultrabooks has also been below expectations thus far, according to management.
Maintain BUY
Looking ahead, macro headwinds will continue to impact the overall global IT industry negatively, especially for PCs and notebooks, in our opinion. But we expect mobility devices to form an increasing proportion of ECS’ revenue, given their still robust demand. Stronger focus would also be placed on its Enterprise Systems segment (carries higher margins than its Distribution segment) which includes developing its own cloud-based solutions and products. We raise our FY12F core earnings forecast by 3.5% but retain our FY13F projection. Rolling forward our valuations on ECS to 5.8x FY13F EPS, we derive a higher fair value estimate of S$0.56 (previously S$0.52). ECS is currently trading at FY13F P/NTA of 0.48x, which we view as an attractive entry point. Maintain BUY.
No comments:
Post a Comment