Encouraging set of 4QFY09 results. Avi-Tech Electronics recently turned in a set of better-than-expected 4QFY09 results. Revenue fell 50.1% YoY (+22.5% QoQ) to S$6.6m amid the difficult business environment, but was still ahead of our expectation of S$5.7m. Similarly, while net profit declined 29.6% YoY (+100.7% QoQ) to S$1.1m, it exceeded our forecast of S$0.6m, due to a more favorable sales mix and stronger-than-expected operating income. As a result, FY09 revenue of S$31.3m (-57.8%) was 2.9% above our sales estimate of S$30.5m, while net profit of S$5.4m (-54.4%) was 10.5% higher than our earnings projection of S$4.9m. The group expectedly ended the fiscal year by declaring a final cash dividend of 0.5 S cent/share, hence bringing the total FY09 dividend to 1 S cent/share (or 5.0% yield). Confident of riding out current downturn. While there are tentative signs of improvement in business activity, management cautions that the global recovery is likely to be subdued, and that the current economic climate is expected to continue to pose challenges to the group in the near term.

However, the group also highlighted that it is confident of riding out the current economic downturn, given its healthy balance sheet and strong cash position (S$0.13 net cash/share). In addition, it noted that its strategies to grow its businesses within the medical and life sciences industries and to broaden its service offerings had begun to take-off, having fulfilled its first orders for the respective equipment. In order to further pursue these new business opportunities, Avi-Tech had also established a wholly-owned subsidiary in the US. On this front, we understand that the group had since received an increased number of orders for Burn-In boards in the region.

Maintain HOLD with S$0.19 fair value. We view this stronger-thanexpected performance positively as it suggests that the worst may probably be over, and that the company is currently on track for recovery. For FY10, we also expect its healthy margins to sustain amid stronger percentage contribution from its higher-value Burn-In board manufacturing and services segments. As the group progresses into the new fiscal year, we now introduce our FY11 forecasts. Applying a 1x FY10F NTA (0.65x FY10F NTA previously), our fair value is raised from S$0.11 to S$0.19. However, as the stock appears to be fairly priced at the current share price, we maintain our HOLD rating on Avi-Tech.