Macquarie: Downgrade ASMPT (00522) to "Neutral" rating, lower target price to 68 Hong Kong dollars.

Macquarie has released a research report stating that it has downgraded ASMPT (00522) to "Neutral" and significantly lowered the target price from HK$111 to HK$68. The profit forecasts for ASMPT for this year and next year have been reduced by 85% and 67% respectively, which is equivalent to a forecasted P/E ratio of 1.8 times. The firm believes that investors should wait for a better entry point. Macquarie stated that ASMPT's performance in the fourth quarter of last year was worse than expected, mainly due to the low gross profit margin in the surface mount technology (SMT) business, with revenue staying flat year-on-year at HK$3.4 billion, roughly in line with expectations. The gross profit margin dropped by 509 basis points year-on-year, below expectations, and earnings per share fell by 94% year-on-year, also below expectations. The firm believes that the company's SMT business will continue to be under pressure, as a result of a weak end-market, leading to significant sales and price pressure. They believe that this situation will persist and may further erode profit margins. Management has stated that visibility on SMT orders is low, especially in sectors such as automotive and industrial, which are currently showing weak performance. The firm expects that the bottom may be reached in the second half of this year, but there is an upside risk of an earlier recovery.