Stock Outperform Call: Cheung Woh Tech target price raised to 0.22

CIMB-GK Research has raised its rating for Cheung Woh Technologies Ltd, a maker of hard disk drive (HDD) components, to "outperform" from "neutral" and increased its target price to 0.22 sgd per share as it believes the company has turned the corner and that its business looks set to recover. Cheung Woh will release its first half to August results on Friday. While CIMB-GK expects earnings for the period to remain weak, it sees Cheung Woh's business recovering in the second half to February 2007. "We believe margins for the HDD components business would still be under pressure in the first half of fiscal 2007 in view of the decline in volume for both VCM plates and disk clamps," CIMB-GK said in a note. "However, this trend should reverse in the second half of FY 2007, as we understand that all old inventories have been fully utilised in mid-August. Together with an anticipated improvement in volume for VCM plates and the sourcing of raw materials in-house, we expect margins to expand by 2.6 pct points in the second half of FY 2007, compared to the first," it added. At 2.53 pm, Cheung Woh was up 0.015 sgd or 8.57 pct at 0.19 with 97,000 shares traded.