TPV Technology Ltd - Forex whammy

TPV issued a warning last night that its FY08 profit would decline significantly yoy. We have cut our FY08 profit forecast by 34% as we now expect TPV to report its first quarterly loss in 4Q08. We also cut our FY09-10 forecasts by 34-37% to factor in lower sales and margin assumptions. Despite our earnings revisions, the stock remains cheap at less than 0.4x P/BV, much lower than valuations in the previous two crises (Asian crisis and Internet bubble burst). As such, we are keeping our Outperform rating with a slightly reduced target price of HK$3.71/S$0.70, still based on 0.7x P/BV, a slight discount to its previous trough. We expect a gradual recovery in earnings in 4Q09 to act as a catalyst.

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