Summary: Electrotech Investments Limited (EIL) posted a pretty muted set of 3Q07 results but from the sequential improvements in both top and bottom lines, it looks like the worst is likely over. Going forward, EIL is expecting its Mechatronics division to grow its FY07 revenue by 15-20%, led by its medical segment. Based on our calculations, it implies a growth of 23% YoY in 4Q07. As for its EMS division, EIL is looking for lower YoY revenue growth for FY07. In particular, EIL believes its keypad business will be 25% lower YoY, but we expect this shortfall to be partially offset by strong growth of its office automation (OA) and automotive (AU) segments. Over the medium term, management is working to shift its focus from keypads to its OA and AU business to enhance long-term stability. EIL is sitting on a healthy cash hoard of S$38.8m, or S$0.12 per share, which it could return to shareholders via special dividend or capital reduction means, if it can not find any use for it. We do not have a rating on the stock.
(Carey Wong) For more information on the above, visit www.ocbcresearch.com for detailed report.
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