KCE Shares Continue Their Downtrend As Earnings Disappoint

Witawat (Ed) Wijaranakula, Ph.D.
Thu Mar 9, 2017

KCE Electronics Public Company Ltd. (SET:KCE), 25.64% stake owned by Mr. Pitharn Ongkosit, KCE Electronics President and CEO, and two other Ongkosit family members, is a Thailand-based manufacturer and distributor of electric printed circuit board (PCB) products. The company operates three business segments: manufacture and distribution of prepreg and laminate segment, manufacture and distribution of printed circuit board products segment, which is manufactured from an epoxy glass copper lead laminate under the KCE trademark, and manufacture and distribution of chemical products segment, which are the chemical solutions used in the production of printed circuit board and chemical recycling operations. 

Its subsidiaries include KCE Technology Co., Ltd., KCE International Co., Ltd., Chemtronic Technology (Thailand) Co., Ltd., Thai Laminate Manufacturer Co., Ltd. and KCE (Thailand) Co., Ltd.

The KCE Electronics key customer base includes manufacturers of automotive electronic equipments, telecommunication devices, computer networks, industrial equipments, medical equipments and consumer products worldwide. Most of its products are exported to the United States and many countries in Europe and Asia. Therefore, earnings could be sensitive to the global economic environment and foreign exchange rates. More important are the prices of commodities, including copper, one of the key materials used in PCB production. Copper price volatility could significantly affect the bottom-line of the company. 

KCE Electronics said on February 14 that its fourth-quarter 2016 revenues were 3.17 billion baht, down 1.36% year-on-year, missing the 3.4 billion baht consensus estimate by four analysts, according to Thomson Reuters. The company posted fourth-quarter 2016 earnings of 1.17 baht per share, up 3.54% year-on-year, missing the 1.29 baht per share consensus estimate of four analysts. 

The company reported a full-year 2016 EPS of 5.18 baht, up 35.3% year-on-year, missing the 5.27 baht consensus estimate of 11 analysts, on revenues of 13.8 billion baht, compared to a consensus estimate of 14.4 billion baht. The revenues were up 10.8% year-on-year. In the press release, the company cited that the increase in revenues was primarily due to higher production volumes supported by an increase in capacity utilization from Phase 1 & 2 at the new plant, while the strong earnings were due in part to better efficiency from recent capacity expansion, sales growth and the effect of changing foreign currency exchange rates.

From our technical viewpoint, shares of KCE plunged over 21% from its December high of 130 baht per share and broke down an ascending channel at about the 105 baht level. The stock could continue to drip lower, while the next technical support is at the 90 baht level. There is also a good chance that shares of KCE could be stuck in the trading range between 90 and 105 baht for some time.

As of March 4, 2017, the consensus forecast amongst 12 investment analysts polled by Thomson Reuters advises investors that the company will Outperform the market, with the median 12-month price target of 112 baht per share.

Disclosure: No position and no recommendation.


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