Stock Downgraded: Jurong Tech to "hold" by DBS Research

DBS Equity Research said it has downgraded its rating for electronics contract manufacturer Jurong Technologies to "hold" from "buy" and reduced its 12-month price target to 1.78 sgd from 2.41 sgd amid doubts that the company can sustain its growth this year. "We downgrade the stock to 'hold' and would recommend investors to consider the stock at levels below 1.50 sgd, based on current expectations," DBS said in a note to clients. "We believe doubts are growing over Jurong Tech's growth prospects in the current year, given possible margin squeeze by key customers and the prospective loss of hard-disk-drive orders in the second half of 2006," DBS said. "Jurong Tech has enjoyed strong earnings growth over the last five years. However, we see the group entering a crossroads, now that it could lose a major portion of its business as Seagate acquires Maxtor, while Motorola sees competition rising within the handset space," it said. "Jurong Tech has worked hard to diversify its customer base but it is insufficient, in our view at this point, to sustain earnings momentum," it said. DBS said it has cut its estimates of net profit for Jurong Tech for this year by 12 pct to 69.90 mln sgd and for next year by 18 pct to 77 mln sgd. Last year, Jurong Tech posted a net profit of 66.40 mln sgd, compared to 48. 10 mln sgd in 2004. At 11.16 am, Jurong Tech was down 0.04 sgd or 2.37 pct at 1.65, with 392, 000 shares traded.