CIMB - What?s on the table

Broadway Industrial (S$0.95) - Initiating coverage - No mean player

We initiate coverage of Broadway, a major HDD component and foam plastic supplier, with an Outperform rating and target price of S$1.93, offering 103% upside potential. We expect Broadway?s net profit to grow by 32% CAGR between FY06 and FY09, underpinned by both its component and packaging businesses. Broadway is one of the world?s top-three actuator-arm suppliers, and looks set to benefit from healthy HDD shipments. Its packaging business in China is also expected to benefit from rising manufacturing activities. Our target pegs Broadway at 10x CY08 EPS, a level we use for most of the HDD component suppliers under our coverage. We see potential catalysts from a healthy set of half-yearly results (announcement in Feb 08) and the company?s expansion into non-HDD component businesses.