Saturday, May 2, 2015

JCY ... Not All Doom & Gloom For HDD Industry !!

A proliferation of mobile devices may have led to softer demand for PCs and laptops, but it is not all doom and gloom for the HDD industry.

This is because HDDs are a cheaper alternative to the SSDs that cater for the ever growing need for content storage.

The drop in PCs is made up for by an increase in enterprise hard drives for near line storage. Near line storage is used by corporations, including data warehouses, as an inexpensive, scalable way to store large volume of data.

SSD is a good solution when it comes to accessing emails but SSD is still too costly when it comes to storage. That’s why it had a hybrid drive that only needs 6GB to 10GB for accessing emails and when you want to store something you can ship the information to hard drives.

The usage of PCs and laptops will continue to decline which would result in flat growth in the HDD market in 2015. There might even be a small decline but that decline would be in the PC segment and not in the enterprise market.

JCY which manufactures four main HDD mechanical components, namely base plates, top cover assembly, actuator pivot flex circuit assembly and anti disc, supplies to the largest computer HDD manufacturers in the world include Seagate and Western Digital. It produces about 25% of the world’s HDD base plates and commands 8% to 28% of the global market.

It bounced back from a net loss of rm61.61 million in its financial year ended Sept 30 2013 to register a net profit of rm120 million in FY2014. This was on the back of an increase in volume shipped and an improvement in the average selling price.

It has a dividend policy of distributing at least 50% of its earnings.

Due to the strong USD, it raked in a net profit of rm50.19 million in 1QFY2105 ended Dec 31 up 66% from rm30.25 million a year ago,

It will spend rm200 million to rm300 million on automating its plans over the next five years.

A stronger USD and low crude oil prices will benefit JCY in the near future.

JCY is talking to several parties for potential M&As.

As at Dec 31 2014 the group had cash and bank balances of rm320 million and total short term borrowings of rm111.56 million.

The catalysts in the HDD market include pent up demand from new gaming consoles, increased usage of surveillance cameras and equipment on aircraft that record engine performances.

AS a supplier, JCY would benefit if Hitachi Global Storage Tech and Western Digital merge in China.

Seagate’s rm1.05 billion investment in Penang is a good news for JCY because its plants are mainly in Malaysia.

Going forward, robust cloud storage growth is expected to spur HDD storage demand. Data storage requirements will continue to rise, driven by enterprise HDD storage demand.

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Please note that all data given are merely blogger's opinion. It is strongly recommended that you do your own analysis and research before investing.