Broadway's executive chairman, Mr Wong Sheung Sze is expecting double digit growth for this year's HDD sector globally.

ANALYSTS MAINTAINED their ‘Buy’ and ‘Outperform’ calls on leading HDD actuator arm maker, Broadway, after it doubled its interim dividend to 2 cents a share.

During 2Q10, the component maker acquired equipment to expand the annual capacity of this segment by 7.5%, in line with its target to raise capacity by 20% by end 2010. 

It is also acquiring a new manufacturing facility in Suzhou, in expectation of higher orders from the semiconductor equipment market.

The planned acquisition is expected to be completed in 3Q2010 and contribute to top-line growth in 4Q2010.

It will also begin producing paper pulp packaging products this during 3Q10.

Its tax-exempt interim dividend will be paid on 8 Sep.

Broadway 2Q10 revenues shift to non HDD.

What the analysts say

Analyst: James Lim

DMG has maintained its earnings forecast for Broadway today, and it remains the broker’s top pick among technology stocks.

Mr Lim has a 'Buy' call on Broadway and target price of S$1.46.

Discounting a forex loss of S$2.5m arising from a sudden spike in the Chinese RMB after the government decided to allow it to appreciate, Broadway’s operational results has met the DMG analyst’s expectations.

Mr Lim likes the bullish macro outlook for the HDD and semicon equipment sectors and expects the two segments to grow respectively by about 23% and 110% in 2010.

The analyst expects higher labour costs in China to impact 3Q10, but believes sequentially higher contributions from all of its businesses should more than mitigate this negative aspect.

The analyst thus anticipates that net profitability in 3Q10 will be no lower than 2Q10.

Broadway is a leading HDD actuator arm component maker, but wants to diversify from HDD.

DBS Vickers

Analyst: Tan Ai Teng

DBS analyst Tan Ai Teng maintained her ‘Buy’ call and target price of S$1.50 on Broadway.

Despite sales being below forecasts, but 2Q10 net earnings of S$10.3m was above her expectations.  She is positive on the following:

1) Expansion of gross margins to 16.6% from 15% in 1Q10 and 13.8% in 4Q09, thanks to effective cost control and better product mix.

2) Non-HDD sales expanded 9% q-o-q while foam packaging grew 18% q-o-q.

Excluding S$2.5 million of marked-to-market forex losses (mostly unrealised), 2Q10 core net profit of S$12.8m (+81% yoy) was 42% above consensus and 38% above CIMB estimates.