Proforma Third Quarter Financial Statement for the Period Ended 30/09/2007

Balance Sheet

Review of Performance

The Group recorded lower revenue of S$239.9m for the July–September 2007 quarter ("3Q07") compared to S$282.8 million for 3Q06. In line with the lower revenue, the Group's net profit attributable to shareholders for 3Q07 declined to S$13.3 million from S$18.6 million in 3Q06.

Sequentially, the Group's revenue rose 21.9% compared to S$196.0 million in 2Q07 while net profit declined 4.3% from S$13.9 million in 2Q07 (includes one-time gain of S$3.8 million on disposal of investment in 2Q07).

The better sequential performance is backed by increased orders from its major customer with increased orders of handset PCBA and modules compared to 2Q07. The wireless accessories segment, in particular battery packs, also recorded healthy shipment volumes with continued strong orders from new and existing customers.

The Group's efforts to diversify its customer base are also progressing smoothly as it commenced volume production of Ultra Low-Cost ("ULC") GSM modules and related products, such as Wireless Local Loop ("WLL") phones and ULC mobile phones in 3Q07. It is also starting to see increasing contribution from its non-handset product segments, in particular personal computer motherboards as a customer in Brazil continued to introduce new models.

The Group has made several strategic acquisitions over the last few quarters to drive greater vertical integration and increase operational efficiency. It is now capable of providing precision metal machining and plastics moulding services, which has enabled the Group to reduce outsourcing needs and move up the value chain to become an Original Design Manufacturer ("ODM").

Commentary On Current Year Prospects

The Group believes the near-term outlook for the handset industry will remain buoyant, driven by demand in emerging markets and introduction of high-end products, such as smart phones, to mature markets.

Its major handset customer has guided for a stronger 4Q07 with the introduction of new handset models to capitalise on expected higher seasonal demand. As such, the Group expects orders for its handset PCBA to increase accordingly in 4Q07.

It is also expecting higher orders for its wireless accessories segment, in particular battery packs, and complete handset box-build services from both new and existing customers.

The Group expects to continue ramping up production of its new ULC GSM modules and other related products to meet higher orders from its new customers, which included several global wireless products distributors and handset makers in various regions, such as Latin America.

In the non-handset segment, the Group expects increasing contributions from the consumer electronics segment with higher orders for digital TV solutions and Bluetooth solutions while volume for PC motherboards is expected to increase with the launch of several new models. It also expects to commence pilot production for new contract wins from the automotive and medical industry in 4Q07 with volume production expected from 1Q08 onwards.

The Group will continue to drive greater vertical integration to enhance value content of products and services to reduce outsourcing needs and support its box build and ODM products. It will also continue to build a more efficient supply chain management system to ensure cost leadership and supplier quality.

In view of the above factors, the Group expects its performance in 4Q07 to be better than that of 3Q07.

↑ top