Multi-Chem 2Q results on 25th July 2007

Bad results...
As expected from the current electronics slump, profit attributed to shareholders tumbled another 49%. This is the 3rd decline in 3 running quarters.

But...
Fortunately, the entire picture painted by Multi-chem is not all dark and gloomy. Its IT distribution segment continue to grow specularly, on track to be its saviour in years to come.

Reading between the lines...
Its IT distribution segment revenue (selling and supporting IT security products) grow from 12.2m in 4Q 2006 to 21.8m in current quarter, 2Q 2007:

• 4Q 2006: 12.2m
• 1Q 2007: 16.2m +32.7%
• 2Q 2007: 21.8m +34.5%

...

PCB segment contributed about 76.1% of the earnings for financial year 2006 which was a good year. Quarterly earnings was about 4m and thus PCB contributed about 3m. In order for the IT distribution to match this 3m, the revenue will have to grow to 42.9m per quarter (Traditionally, the IT distribution business operating margin is about 7 to 8% before tax)

Thus, assuming revenue growth of IT segment to maintain at 30% and margin to remain at 7%, it will take at least 3 quarters for the IT segment to match the PCB earnings in their best quarter, and hence maintain Multi-chem's overall earnings per quarter at 4m.

Expectation
Hence I expect to see earnings improve significantly by 1Q 2008 or latest 2Q 2008. Looking at it another way, I have 3 more quarters of bad results to load up more after each results announcement. Time to queue for more tomorrow.