2Q09 boosted by restocking bounce and margin expansion. We expect Q2 sales to rebound 10% sequentially to S$80m after two quarters of deep and broad-based de-stocking. Notwithstanding improved business, management has not lifted cost control measures, which coupled with operating leverage, would drive margin higher in Q2. Hence, we believe net profit could grow stronger 15% q-o-q to S$3.3m.

3Q09 would be the strongest quarter, based on continued seasonal ramp for key customers. Meiban is a key printer enclosure supplier for HP and contract manufacturer for Dyson vacuum cleaner. Our checks indicated that capacity utilization is running as high as 90%, compared to 70-75% in Q1.

Solid cashflow boost cash. Meiban generated S$11m of free cashflow in Q1 and ended the quarter with S$28.6m (9cts/sh) net cash. Considering a tightened capex of S$7m in FY09, Meiban could potentially grow its kitty to S$38m (12cts/sh) by year-end, giving more scope for special dividend.

Raised forecast, Upgrade to Buy. We have revised FY09 profit forecast to S$13m for improved orderflows and better than expected margin seen in Q1 results. Our new target price is S$0.35, based on 8x FY09/10 blended earnings. Stock is compelling at 6x P/E and only 0.6x book with an attractive yield of 8%. Upgrade to Buy.