New Coverage
- JCY International is principally involved in precision engineering for hard disk drive mechanical components, with plants in Malaysia, Thailand and China. The company is one of the largest HDD component manufacturers in the world with an estimated monthly capacity of 32m pieces.
- JCY’s main customers are the world’s top HDD vendors i.e. Western Digital and Seagate. Together, they combine a market share of 59%. JCY is estimated to command a global market share of 25% for the base plate, 16% of the top cover, and 12% of the APFA.
- We like JCY given: 1) its proven track record of manufacturing capability; 2) it is a leading HDD component manufacturer; and 3) its ability to diversify into various HDD components.
- We estimate FY09-12 EPS CAGR of 28.4% on good earnings visibility given the strong demand outlook for hard disk drives. We have assumed a target PER of 12x for JCY after imputing a discount to the peers’ weighted average FY11 PER of 13.6x to reflect its mid-range market cap.
- We initiate coverage on JCY with an Outperform call and a fair value of RM2.16 based on 12x FY11 PER.
RHB Equity 360° - 25 June 2010 (JCY, Top Glove, IJM Land, QSR, Gamuda, SapuraCrest; Technical: HL Bank)
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