���� Within expectationsWithin expectations

3Q06 revenue fell 41% Y/Y, while net profit rose 9% to $18.6m. Net profit of $52m for the nine months to Sept  2006 met 72% of our full-year forecast of $72m. Gross profit actually jumped 34% Y/Y, but was diluted by higher operating expenses (e.g. $6m of the $9.1m increase was due to higher equipment rental in new start-up locations, part of Jurong Tech?s risk management measures).

���� Accessories business more than doubledAccessories business more than doubled

The new wireless accessory business (finally revealed to be battery pack assembly for Motorola in Tianjin and Brazil) did very well, with revenue up 141% Q/Q to 17% of total sales from just 8% in 2Q06. Since production only started in May, there were no contributions in Q106. All product segments, except HDD (as expected) and networking (a very small business), registered sequential growth.

���� Wireless to remain the key driver in 2007���� Wireless to remain the key driver in 2007

Jurong Tech is guiding for the wireless accessories business to grow to at least 30% of revenue in 2007 as it is a new business starting from a low base, and the company is gaining market share from existing suppliers as customer Motorola is intent on consolidating the supply chain. PCBA is also expected to remain strong due to the continuing success of Motorola?s new models (e.g. KRZR, MotoQ and MotoMing).

���� But balance sheet needs to be re-jigged���� But balance sheet needs to be re-jigged

Net gearing of 0.9x is a bit worrying. However, Jurong Tech seems to be managing the financing burden well. It is also exploring options to strengthen its balance sheet, although new equity does not appear to be among them and management seemed to be wary of hybrids.

Converting more borrowings to longer-term loans is a certainty though, despite the slightly higher costs.

���� Full-year growth on track; Maintain BUYFull-year growth on track; Maintain BUY

Jurong Tech is on track to deliver 10% full-year growth, with management guiding for sequential growth in Q406. For now, we forecast 12% growth in 2007, but given present momentum, it could very well do better. We maintain target price at $1.31 or 7x 2007 earnings.