China Kunda Technology - has been easing in a long term downtrend

Customers remain cautious although there has been a marked improvement in sentiment since the low of 4Q08. We previously highlighted M&A ambitions, especially into plastic injection for automobile related parts. Such discussions are still ongoing.

Kunda is also working hard to acquire new customers for its IMD business and automotive mould business. Efforts to diversify into moulds for aircraft-related interior components are also ongoing.

Still cautious customers and the holiday season in Europe could see Kunda’s delivery schedule being pushed back and a significant portion of their mould orders are slated for delivery in August/September period. This could cause 1HFY3/10 net profit to come in at a lower percentage versus our full year forecast of HK$60.1m. As management is not seeing any order cancellation, we suspect Kunda could see its full year net profit being second-half loaded.

No changes to our forecast and recommendation. Maintain BUY with S$0.23 target price. Meiban’s average CY09-10 P/E has risen to 6.9x versus 5.6x when we initiated coverage on Kunda.

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