KLCI Stock - XINQUAN / 5155 - 2010 Quarter 3

Market Cap : 307330000*1.85 = 568,560,500 (Medium)
NTA per share : 331086/303965 = 1.09
P/BV : 1.85/1.09 = 1.6972
Forecast P/E now : (1.85-0.025)/0.4 = 4.56 (Moderate)
ROE : 34.7% (High)
DY : 0.025/1.85*100 = 1.35% (Low)
Fixed Asset Turnover(2 year) : (1.3051+1.9399)/2 = 1.6225 (High)
Liquidity Ratio : 378940/111538 = 3.3974 (High)
Receivables Collection Period : (75572+80119)/2/(577682/365) = 49 days (Acceptable)
My Target Price : 2.28+0.025 = 2.31 (PE 6, EPS 0.38, DPS 0.025)
My Decision : BUY
My Comment : Revenue and profit increasing, good cash flow, low debt and slightly decreased, navps increasing, SSE index decreasing, new factory building in progress, retails increasing
Technical Support Price : 1.6, 1.3
Risk Rating : MODERATE

My notes based on 2010 Quarter 3 report (number in '000):
- The Group achieved an increase of 59.6% and 44.9% in revenue and PBT for the current quarter compared to the corresponding quarter in preceding year
- The increase are due to increase in sales volume across all product segments, particularly the increase in the sale of shoe soles from from approximately 7.2 million pairs in year 2009 to approximately 8.9 million pairs in year 2010 and increase in the sale of outdoor and indoor sports and leisure shoes from approximately 4.1 million in year 2009 to approximately 4.9 million pairs in year 2010
- The increase also due to increase in average selling price of outdoor and indoor sports and leisure shoes from RMB81.23 per pair in year 2009 to RMB97 per pair in year 2010
- Last, the increase due to increase in penetration in the PRC market. The number o9f retail locations of our "Addnice" products increased from 1450 retail locations at year 2009 to 1801 retail locations at year 2010
- Addnice Sports(full exempted from 2006-2007, 50% reduction from 2008-2010), Addnice China(5 year tax holiday from 1 Jan 2008) and Xingquan Plastic(full state corporate income tax during the financial years and periods under review) are entitled full exemption from income tax and reduction in income tax
- The Group recorded a slight decrease of 0.7% in revenue for the current quarter compared to the preceding quarter
- The PBT for the current quarter represents and increase of 16.3% as compared to the preceding quarter. This was mainly due to the decrease in the selling and distribution expenses and the exclusion of unrealized exchange loss arising from the Ringgit advances by Xingquan International to its wholly-owned subsidiary, Addnice Holdings Limited which is now disclosed separately under other comprehensive income
- Estimate next 4Q eps after 2010 Q3 result announced = 0.095*4 = 0.38(0.095 is average of recent 2Q minus little eps due to end of tax exemption and reduction), estimate PE on current price 1.85 = 4.8(DPS 0.025)
- Estimate next 4Q eps after 2010 Q2 result announced = 0.1584*2*1.1 = 0.3485, estimate highest/lowest PE = 3.77/3 (DPS 0.025)
- Estimate next 4Q eps after 2010 Q1 result announced = 0.0834*4 = 0.3336, estimate highest/lowest PE = 4.2/3.15
- Estimate next 4Q eps after 2009 Q4 result announced = 0.4288, estimate highest/lowest PE = 3.59/3.03

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