HDI  to  grow,  E&E  with  it.  According  to  Prismark,  the  market  for  handset  high  density interconnection  (HDI)  should  reach  US$6.3bn  in  2012.  This  means  that  with  E&E's estimated revenues of US$110m in this area, E&E holds close to 2% of  the global market share. With current HDI production capacity running at more than 90%, E&E will ramp up production  by  38%  to  18k  sqf  by  2H13  in  order  to  satisfy  the  surging  demand  from Samsung. As the HDI overall market is projected to grow by a CAGR of 8.8% until 2016, we believe that E&E is poised to tap on the growth.

Specialised  enterprise  niche  protects  E&E  from  PC  woes.  While  the  outlook  for  PC industry  is  expected  to  remain  lacklustre,  E&E's  Computer  &  Computer  Peripherals business segment (representing 36% of 9MFY12 revenue) is actually cushioned from the industry  woes.  This  is  due  to  the  fact  that  the  end  customers  are  the  likes  of  IBM  and Hitachi  and  the  end  products  are  enterprise  servers  and  hard  disks  with  the  demand remain resilient. Furthermore, management is expecting restocking activities to pick up in 2Q13. As such, we believe that the market has excessively priced-in the negative impact of PC's decline.  

Solid cash cow delivers yet another year of stable dividends While it has been tested during  multiple  market  conditions,  E&E  has  been  consistently  delivering  profits  and dividends  for  the  past  few  years.  We  believe  the  group  has  little  problem  in  declaring  at least 7 US¢ in the upcoming 4Q12 results, translating to an attractive annual yield of 7.6%.

Source: OSK