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This Week’s “Falling Knife”: Broadway Industrial

BroadwayLogoBroadway Industrial Group Limited (SGX: B69) fell 6% during the holiday-shortened trading week. It is our “Falling Knife” share of the week.

Broadway is a global leader in the manufacture of precision-machined components. It also provides foam plastic solutions.

Broadway is one of the top manufacturers of actuator arms and related assembled parts for the global hard disk drive (HDD) industry. It is also a leading provider of eco-friendly foam solutions for packaging, insulation, automotive, medical and other applications, with a track record of over 40 years.

Last month, Broadway announced that second-quarter profit slumped 97% to $0.16m from a year ago. The basic earnings per share were also down by the same percentage. The company said sales from the HDD division declined 19% from a year ago. That was because of exceptional demand in 2012 following the floods in Thailand.

Shares in the company have been on the wane since the end of last month. They have fallen almost 15%.The negative results caused a plunge in the stock price. They have been on the decline since 30 July.

The HDD sector may see more headwinds as pointed out by the company. Consequently, the company has “embarked on right-sizing initiatives for our HDD division since 4Q2012 and will continue to right-size according to industry demands.

Broadway said it is “Diversifying the Group’s income stream to secure more non-HDD related business, and are cautious of securing new non-HDD customers in FY2013 to optimise our capacity utilisation.”

It added that “We will continue our efforts to drive the growth of our foam business, particularly in terms of packaging products.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.  Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.