1. 1QFY12 Results Review
> BSL’s revenue in 1QFY12 increased slightly by 7.1% to RM48.1m from RM44.9m in 1QFY11. Growth mainly came from its Printed Circuit Board (PCB) and module assembly division, whose revenue rose 23.6% to RM13.1m from RM10.6m during the period under review. The increase was due to additional assembly work done for a multi-national electronics company in 1QFY12.
> Meanwhile, BSL metal stamping division saw revenue up marginally to RM32.5m from RM31.6m.
Orders for metal back covers and other components for LCD and LED TVs were steady in 1QFY12,
which is a seasonally low period.
> BSL’s operating profit in 1QFY12 was up slightly to RM4.0m from RM3.5m in 1QFY11. Higher OP in
the module assembly division (rose to RM1.7m from RM0.7m) offset lower OP in stamping division (fell
to RM2.6m from RM2.9m).
> OP margin in stamping division fell to 7.9% in 1QFY12 from 9.2% in 1QFY11 due to fulfilment of cost
down requests from its clients.
2. Key Investment Risks
> BSL exited the automotive component manufacturing business in FY11. As such, the company now
mainly depends on its stamping division to drive growth. Meanwhile, if BSL module assembly division is
unable to secure constant assembly jobs, the division will continue to dampen Group earnings in FY12. In
FY11, the division made operating loss of RM1.2m as it has yet to achieve profitable level of economies
of scale.
> Both stamping and module assembly divisions mainly depend on clients from electrical and electronics
sectors. Demand for such products may be adversely affected by the current global economic uncertainties
in the US and Europe.
3. Earnings Outlook
> In the stamping division, BSL’s management is taking steps to mitigate expected lower orders from clients
due to weak economies in the US and Europe. However, the management hopes that TV makers will be
gearing up for expected higher demand driven by the 2012 Olympics Games in London. Sales of LCD and
LED TVs tend to increase when major sports events such as Olympics and World Cup Football are held.
> On the division’s OP margin, BSL is aiming for 8% in FY12, versus 8.7% in FY11. The slightly lower OP
margin is due to cost down requests from clients. BSL explained that such requests are a norm because
prices of electronics products are higher at the early stage of its product life cycle and decline over time
until new models are introduced.
> On BSL’s module assembly division, the new factory in Rawang, which has 80,000 sq ft for assembly
work and 40,000 sq ft for warehousing, will be completed in 2QFY12. BSL management said it is chasing
for assembly work for the new factory among existing and potential clients. BSL management hopes to
achieve profits for the division in FY12. The division performance in 1QFY12 is an indication of its
profitability if it is able to achieve economies of scale.
> We maintain our forecast operating profit of RM12.8m and RM14.7m in FY12 and FY13 respectively,
from RM7.8m in FY11. Its earnings growth is banked on BSL’s ability to grow its stamping division with
OP margin of about 8%, as well as achieving breakeven for its module assemble division.
> Take note that FY11 earnings were impacted by impairment of RM1.9m due to cessation of the
automotive parts division and losses in module assembly division.
4. Valuation & Recommendation
> BSL is trading at 34.5 sen currently. Based on forecast EPS of 9.3 sen and 10.8 sen in FY12 and FY13
respectively, it is trading at single digit forward PE of 3.7 times and 3.2 times. Also take note that BSL is
in net cash position of RM11.2m cash, or net cash of 11sen per share.
> Hence, we are maintaining a BUY call on BSL with a target price of 47 sen, imputing a PER of about five
times on forecast FY12 EPS of 9.3 sen. BSL’s small market capitalisation and lack of trading liquidity are
a consideration on the single-digit PER valuation given.
> Nevertheless, the target price implies a potential upside of about 34%, and is reasonable as it is imputes a
forward PER of only 3.9 times on an ex-cash basis and is about half of its book value of 89 sen as at end-
November 2011.
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