Elec and Eltek’s (E&E) taiwanese listed competitor Tripod Tech said that its expects customers in the notebook, handset and optoelectronics business segments to drive 3Q ending Sept’09 sales up another 15% while gross margins will exceed 2Q09’s 20%, and management remains optimistic of prospects in 4Q09, underpinned by their robust orders from key customers.

Last Friday, E & E’s major customer Intel Corp also raised its 3Q ended Sept’09 sales forecast from at least US$8.1bln to at least US$8.8bln reflecting stronger than expected demand from the PC industry, likely in anticipation of the upgrade cycle as a result Microsoft’s new Windows 7 launch next month. (Intel’s gross profit margin has also been revised upwards to an average of 54% versus 53% previously).

And Dell and HP are expecting their corporate customers to upgrade their systems next year as most of their systems are very old now.

E & E is currently only trading at 7-8x PE, 0.7x price to book and 0.6x price to sales versus Tripod Tech’s 16-17x PE, 2.3x price to book and 5.5x price to sales.

LIttle wonder that its major shareholder Kingboard wanted to privatize the company at US$1.20 a share (this failed as its independent adviser deemed the offer price too low), which should provide downside support in the event of a widely anticipated market correction.

While we maintain our BUY recommendation on E & E, we note that it had omitted interim dividend when releasing results for H1’09 (on Aug 14), vs 10 US cents a year ago.

While this can always be “justified” by the 46% profit decline in H1’09, the company actually raised final dividend last year to 5 US cents from 4.5 cents, despite a sharp 62% drop in profit for Q4’08. E & E however cut special for 2008 to 5.5 US cents from 8 cents in 2007.

It seems quite clear the omission was intended to “punish” shareholders for rejecting the voluntary delisting offer, which had to be withdrawn on Aug 21st..