Huan Hsin Holdings
Aug 13 closing: 81.5 cents

HUAN Hsin's Q2 performance was slightly below expectations. This was due to losses from associates, and higher raw material prices.

The group suffered a 13 per cent year-on-year decline in Q2 earnings to $7.8 million (but profit was up 18.5 per cent quarter-on-quarter).

Net earnings amounted to $14.4 million in H1, up 6 per cent year-on-year. Revenue rose 43 per cent to $105.3 million in Q2, bringing H1 revenue to $206.95 million.

The plastic division was again the star performer, with revenue rising 61 per cent to $180.8 million and accounting for 87 per cent of total revenue.

It was also the largest profit contributor, with a 36 per cent increase in pre-tax profit to $18.8 million in H1.

Management has maintained the same interim dividend of 0.8 of a cent. We have lowered our FY04 estimate to take into account the weaker-than-expected Q2, higher raw material prices, rising oil prices and continued losses from the keyboard operation.

We are lowering FY04 earnings to $31.7 million from $36.4 million.

We are also lowering our fair value estimate to $1.25 from $1.45 to reflect the current weak sentiment for tech stocks as well as lower FY04 earnings expectations.

Despite the above, the group's plastics division is still growing and we are retaining our OUTPERFORM rating.

- OCBC INVESTMENT RESEARCH, Aug 13

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