• JADASON ENTERPRISES LTD (SGX:J03) reported a net loss of S$1.8m for 2Q19. 1H19 net loss of S$3.3m formed 55% of our full-year net loss forecast.
• The loss was mainly due to a decline PCB drilling segment sales.
• The company continues to guide for a challenging 2H given the trade tensions between China and the US, which affects Jadason’s end customers.
• Maintain ADD and Target Price of S$0.059.

1H19 Deemed in Line

• We deem Jadason's 1H19 loss of S$3.3m (55% of our full-year net loss forecast) in line. We expect 2H19 to remain challenging for Jadason.
• Including cash and bills receivables, Jadason remains in a net cash position.
• Cash flow generation remained healthy despite the losses. In 2Q19, net cash from operations was S$2.8m, while in 1H19, net cash from operations was S$1.2m.
• No interim dividend was declared.

Expecting a Challenging 2H

• The trade conflict between China and the US continues to have a negative impact on Jadason’s customers, leading to lower demand for its PCB drilling service. Although 5G roll-out in China may stimulate demand, the pace of the roll-out is now uncertain given the adverse business environment.

Maintain ADD

• Our Target Price remains set at its FY19 BVPS of S$0.059.
• Risks include further order declines.
• Potential re-rating catalysts are resolution of the trade war and stronger-than-expected orders, especially for 5G mobile services.

Source: CGS-CIMB Research - 15 Aug 2019