We maintain our view that TPV is one of the proxies to the theme of export recovery and SOE restructuring. Maintain BUY with a new target price of HK$5.46.

Revenue contracted 32.3% yoy to US$1.7b in 2Q09, but rebounded 24.4% qoq. Net profit fell 22.6% yoy to US$39.8m in 2Q09. TPV has been generating a strong operating cash flow since 2H08. The Group was in a net cash position as at end of Jun 09 vs net gearing of 31% as at Dec 08. An interim dividend of 0.6 US cents has been declared.

Key part of TFT-LCD supply chain in China. Without the support of domestic panel makers, local TV manufacturers are highly reliant on supply from panel manufacturers in Korea and Taiwan. According to the local Chinese press, the Chinese government plans to build up its own TFT-LCD supply chain locally. TPV’s management believes that CEC’s entry into theTFT-LCD panel manufacturing business would be a positive move in the long term. CEC is likely to leverage TPV for the process of assembling LCD TV sets. We still believe that CEC is likely to increase its stake in TPV to over 51% to consolidate it as a subsidiary in order to build up its TFT-LCD supply chain in China.

LCD-TV outsourcing. Hon Hai Precision has agreed to buy 90% stake in most of Sony’s Mexican units which produce TFT-LCD TVs. Under the agreement, Hon Hai Precision will buy Sony’s Baja California and manufacturing assets related to the Mexican units’ Tijuana factory. Sony will retain the remaining 10% stake in the Mexican units, while the Mexican factory will continue to manufacture LCD TVs for Sony. TV makers are now looking to outsource manufacturing operations and are in search of cost reduction opportunities. According to iSuppli, LCD TV makers outsourced about 28.7% of TV production to contract manufacturers in 2008. More outsourcing by TV makers will create growth opportunities for OEM/ODM manufacturers, including TPV. According to the management, the Group can look forward to growth opportunities in 2010 as a result of the band of customers it has built up.

We maintain our view that TPV is one of the proxies to play the recovery theme and is a beneficiary of SOE restructuring. After the earnings revisions, our forecasts are still the highest among all houses. TPV is now trading at 0.8x P/BV and is one of the few leading exporters trading below book value. We believe more outsourcing by TV makers will create growth opportunities for OEM/ODM manufacturers, especially for TPV which is likely to be one of the key beneficiaries of this trend. Maintain BUY with a new target price of HK$5.46 based on 1x 2009 P/BV vs the previous target price of 1x 2008 P/BV.