KENANGA RESEARCH Result Note

5 October 2010

HOLD Supportive Int’l Holdings

RM2.30
Target Price: RM0.96 1H11 still under expectations
Stock data l 1H11 net profit of RM1.7m was below expectations, accounting for 7% of our
Market cap (RMm): 502.5 FY11E net profit of RM25.5m (10% of our FY11E core net profit of RM16.5m).
Issued shares (m): 218.5 Topline of RM27.9m only made up 29% of our FY11E revenue of RM97.7m,
52-week range: RM0.80-RM2.35 largely because the property development earnings are not in full force.
3-mth avg daily volume: 1,158,184 shrs Supportive Int’l Holdings (SIH) disappointing results was largely let by margins
Bloomberg code: SIHB MK compressions arising from the plastics division.
YTD price chg: +72.9%
YTD KLCI chg: +14.9% l QoQ, 2Q11 revenue rose 18% to RM15.1m, led by improved volume sales in
Est. free float: 33.5% plastics division and recognition of property development revenue. Although
Major shareholders: property development operating margins improved slightly by 0.4ppt QoQ to
SuppTech Holdgs. Sdn 66.5% 20.6%, plastics segment large margin compression by 17.6ppt QoQ to -1.9%
Bhd dragged-down overall performances. We believe plastics margins may be
impacted by higher cost of materials and/or one-off costs. Hence, the 52% YoY
dip in 1H11 net profit.
KLCI FBM30 FBM70 Syariah Hijrah
No No No Yes No l Lowering FY11E net profit by 27% to RM18.5m (core: RM9.5m) as we tone
Consensus down our operating margin assumptions for the plastic division to 9% from 20%
FYE 31 Jan 2011E 2012E previously. We still include RM9m worth of tax refunds, recognizable in FY11.
Net profit (RMm): n.a. n.a. We also expect a significantly stronger 2H11 as we expect the property division
EPS (sen): n.a. n.a. to record higher billings; recall the Aman Bayu project is close to completion and
Forecast revision will be ready for BTS sale by 2H11, meaning immediate high earnings
FYE 31 Jan 2011E 2012E recognition in a short period of time, as the company is waiting to convert a large
Prev. net profit (RMm): 25.5 23.3 part of the >60% ‘bookings’ rates into SPA sales upon the project’s completion.
Revision (%): -27% -19%
Revised net profit (RMm): 18.5 18.9 l Lower fair value of RM0.96 (RM1.00 previously) based on blended 11x PER.
Share price chart We are using a higher E&E/EMS sector PER of 12x applied on 54% of our
FY12E EPS of 8.6sen while applied 10x peer PER on the remaining is
unchanged. We are awarding higher PER valuations as Digital China valuations
(FY11E PER of 16x) are rubbing-off on SIH; even if we valued SIH at 16x using
full FY12E EPS, fair value is only RM1.40. We still think valuations are rich as
their venture with Digital China to manufacture and manage one-stop-solution ID
cards in Chang De have yet to commence. HOLD maintained pending more
updates from management on the latest.
The Research Team Tel: 603-2713 2292 l For those looking at purer exposures into the electronics manufacturing, we
[email protected] would prefer VS Industry (BUY : RM1.85) or PIE (BUY : RM5.20) while MahSing
(BUY : RM2.10) offers better property exposure given their size, quick turnaround
model, aggressive landbanking and yields of >4%.
Result summary
FYE: 31 Jan (previously: 30 Sep) 2Q10 3Q10 4Q10 1Q11 2Q11 QoQ% YoY% 1H10 1H11 Ytd-YoY
Revenue 13.3 18.9 17.4 12.8 15.1 18% 10% 28.4 27.9 -2%
Op costs w/o depn/amort (10.9) (15.8) (18.1) (10.3) (13.8) -33% -27% (21.8) (24.1) -11%
Other Op Income 0.0 0.0 0.8 0.2 0.0 -83% 88% 0.6 0.3 -57%
EBITDA 2.4 3.2 0.1 2.7 1.3 -51% -33% 7.2 4.0 -44%
EBIT 1.7 2.4 (0.7) 2.0 0.6 -70% -44% 5.7 2.5 -56%
Interest expense (0.2) (0.2) (0.2) (0.2) (0.2) -1% 15% (0.4) (0.4) 17%
Pretax profit 1.4 2.3 (0.9) 1.8 0.4 -78% -47% 5.3 2.2 -59%
Taxation (0.5) (0.7) (0.0) (0.4) (0.1) 85% 89% (1.7) (0.5) 74%
Net profit 0.9 1.5 (0.9) 1.4 0.3 -76% -38% 3.6 1.7 -52%
EPS (sen) 0.42 0.70 -0.39 0.63 0.15 -76% -39% 1.63 0.78 -52%
Diluted EPS (sen) 0.42 0.70 -0.39 0.63 0.15 -76% -39% 1.63 0.78 -52%
DPS (sen) 0.00 0.00 0.00 0.00 0.00 0.00 0.00
NTA/share (RM) 0.32 0.33 0.32 0.33 0.33 0% 3% 0.32 0.33 3%
Net gearing/(cash) (x) 0.11 0.02 (0.03) (0.02) 0.00 117.2% -536.7% 0.11 0.00
EBITDA margin 18% 17% 0% 21% 9% 25% 14%
Pretax margin 11% 12% -5% 14% 3% 19% 8%
Effective tax rate 37% 33% -1% 23% 15% 33% 21%
PP7004/02/2011(029201)
 Result Review
QoQ 1Q11 2Q11 Chg Comments
(RMm)
Revenue 12.8 15.1 18% Improvement because of improved
property and plastics revenue.
PBT 1.8 0.4 -78% Decline largely attributed to margin
compressions in plastics division and
lowers other operating income.

YoY 1H10 1H11 Chg Comments

(RMm)
Revenue 28.4 27.9 -2% Slight dip due to lower plastics revenue.
Net Profit 3.6 1.7 -52% Dip because of 2Q11 weakness in plastics
segment margins.

Earnings Estimates
2009A-
FYE: 31 Jan (previously: 30 Sep) 2007A 16mths 2010A 2011F 20012F
Revenue 53.9 90.8 64.7 97.7 116.0
Pretax profit 0.5 14.2 6.7 13.2 26.2
Net profit 0.4 13.1 4.2 18.5 18.9
EPS (sen) 0.2 6.0 1.9 8.5 8.6
Recur. EPS (sen) 0.2 2.7 1.9 4.3 8.6
Recur. EPS growth (%) 104% 1473% -30% 125% 99%
NTA/ share (RM) 0.21 0.30 0.32 0.37 0.45
PER (x) 1317.8 38.4 119.3 27.2 26.6
P/NTA (x) 11.2 7.5 7.1 6.3 5.1
EV/EBITDA (x) 256.7 66.6 48.1 29.5 16.6
ROE % 0.9% 25.3% 6.9% 27.4% 23.1%
Dividend Yield (%) 0.0% 0.0% 0.0% 0.0% 0.0%

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Supportive International Holdings – 5 October 2010 Page 2 of 2