Weaker sales pegged for Amtek Engineering in FY13

Chinese and European customers will be slashing demand, predicts Maybank Kim Eng.

Expected delays in enterprise casing programs add up to what looks to be a poorer-performing fiscal year 2013.

Here's more from Maybank Kim Eng:

A mixed bag. Although FY12 results were within expectations, results were boosted by a lower effective tax rate. In addition, the outlook has dimmed with more major customers cutting their outlooks than those who raised.

Barely within expectations. Amtek reported net profit of SGD33.6m, slightly above our forecast of SGD33m. Revenue decline (-2% in 4Q12, -1% for the full year) was within expectations, as was full year gross margin of 16.4% (-1.4 percentage points YoY). However, we estimate about 3% of Amtek’s full year profit came from a lower-than-expected provision for tax in the final quarter, as effective tax rate fell to 11% in 4Q12 compared to its normal 22% tax rate.

Turning cautious. We expect FY13 to start off on a weak note. Three major customers in the casing & enclosure (25% of group revenue) are not doing well, and have recently cut guidance. Automotive (15% of sales) is slowing faster-than-expected as demand wanes in China and Europe. Amtek expects 2H13 to benefit from new enterprise casing programs with a key customer, but the expected new launches may very well be delayed.

Cutting forecasts. As a result, we have cut our FY13 forecast by 17%. Also, we expect capex to rise, driven by an ambitious automation program worldwide. While this is positive in the long term, it
will create a greater funding strain in the short term.

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