Broadway Industrial's core net loss hit S$7.8m

Its hard disk drive segment remained a drag.

According to CIMB, Broadway reported a higher core net loss of S$7.8m versus its estimate of a S$5.1m loss due to higher than  expected opex.  Its FY13-14 EPS estimates fall by 8.5% as it adjusts its numbers; it also introduces its  FY15 forecast. Its target price remains pegged at 0.5x CY13 P/BV  (the lower end of its 5-yr band). 

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Key variances from our forecast and Broadway’s core net loss came from higher than expected sales and marketing expenses, but this was largely offset by non-core, flood related insurance claims of about S$9.4m.

Its weak top line was expected due to by weak end-demand and OEM inventory adjustment for HDD components in 2H12. On a brighter note, its foam plastics segment performed well, and is expected to continue to do so in FY13.

Broadway has made significant strides in right sizing its HDD business by reallocating excess capacity, while trying to acquire new customers for its non-HDD business, and consolidating its operations. We believe the positive effects of these measures could show up in 2H13.

The HDD segment is also expected to remain weak for 1H13 but may slowly stabilise. Management believes that the time of wild swings in HDD volumes are over.

The absence of a final dividend may be a disappointment for investors but management has opted to conserve cash.