KLCI Stock - XINQUAN / 5155 - 2011 Quarter 3

Company Info

Market Capital (Capital Size)	356,502,800 (Small)
Par Value	USD 0.10

My Analysis

Forecast P/E now	(1.16-0.025)/0.3469 = 3.27 (Moderate)
Target Price	1.56+0.025 = 1.59 (PE 4.5, EPS 0.3469, DPS 0.025)
Decision	Watching, buy when stock sell quantity low
Comment	Revenue decreased 6.4% but higher than preceding year corresponding quarter 8.6%, eps increased 33.4% but lower than preceding year corresponding quarter 9%, no cash generated from operating due to largely increased receivables and still got large expenses of investing, financing expenses use bank borrowings to cover, cash decreasing, weaker liquidity ratio but still at high level now, lower gearing ratio at below moderate level now, high receivables but working capital did not increase, going to dilute around 14% eps due to issuing new shares, new brand GERTOP growing
First Support Price	1.1
Second Support Price	1.0
Risk Rating	MODERATE

Research House

Mercury Target Price

1.9 (2011-05-19)

Accounting Ratio

Return on Equity	24.82%
Dividend Yield	2.16%
Profit Margin	20.46%
Tax Rate	21.64%
Asset Turnover	1.2949
Net Asset Value Per Share	1.32
Net Tangible Asset per share	1.32
Price/Net Tangible Asset Per Share	0.88
Cash Per Share	0.55
Liquidity Current Ratio	3.6562
Liquidity Quick Ratio	3.4165
Liquidity Cash Ratio	1.6165
Gearing Debt to Equity Ratio	0.2757
Gearing Debt to Asset Ratio	0.2161
Working capital per thousand Ringgit sale	41.3%
Days to sell the inventory	19
Days to collect the receivables	102
Days to pay the payables	47

My notes based on 2011 quarter 3 report (number in '000):
- The increase in revenue is contributed by the following:
i) Increase in sales volume of shoe sole from approximately 8.9 million pairs in FPE2010 to approximately 11.8 million pairs in FPE2011
ii) Increase in average selling price of shoe sole from RMB105 per pair in FPE2010 to RMB110.6 per pair in FPE2011, and increase in average selling price of apparels from RMB74 per piece in FPE2010 to RMB102.1 per piece in FPE2011

- The increase in selling and distribution expenses mainly due to higher expenses in relation to renovation subsidies for the outlet amounting to RMB14.8 million, display shelf for the outlet amounting to RMB11.8 million and expansion of sales network expenses amounting to RMB38.4 million

- The decrease in revenue was due to a slight decrease in the sales of the shoes, apparels & accessories as the contribution is mainly for Summer/Spring products that has lower selling prices as compared to Autumn/Winter products

- Higher pbt mainly due to the lower selling and distribution costs

- Estimate next 4Q eps after 2011 Q3 result announced = 0.3154*1.1 = 0.3469, estimate PE on current price 1.16 = 3.27(DPS 0.05)
- Estimate next 4Q eps after 2011 Q1 result announced = 0.3452*1.1 = 0.3797, estimate highest/lowest PE = 3.56/2.82 (DPS 0.05)
- Estimate next 4Q eps after 2010 Q4 result announced = 0.3452*1.1 = 0.3797, estimate highest/lowest PE = 4.87/3.56 (DPS 0.05)
- 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 highest/lowest PE = 4.93/2.91 (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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