KLCI Stock - XINQUAN / 5155 - 2010 Quarter 4

Market Cap : 307330000*1.48 = 454,848,400 (Small)
NTA per share : 351924/304804 = 1.15
P/BV : 1.48/1.15 = 1.287
Forecast P/E now : (1.48-0.05)/0.3797 = 3.77 (Moderate)
ROE : 29.9% (High)
DY : 0.05/1.48*100 = 3.38% (Low)
Fixed Asset Turnover(3 year) : (1.3786+1.871+1.758)/3 = 1.6692 (High)
Liquidity Ratio : 356137/90018 = 3.9563 (High)
Receivables Collection Period : (56563+66141)/2/(609259/365) = 36 days (Acceptable)
My Target Price : 1.9+0.05 = 1.95 (PE 5, EPS 0.3797, DPS 0.05)
My Decision : BUY
My Comment : Revenue and profit compare to preceding year is increasing, good cash flow, low debt and decreasing, navps increasing, SSE index increasing, new factory building in progress, retails increasing
Technical Support Price : 1.4
Risk Rating : MODERATE

My notes based on 2010 Quarter 4 report (number in '000):

- The Group achieved an increase of 39.1% and 12.4% 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 9.8 million pairs in FY2009 to approximately 12.5 million pairs in FY2010, increase in the sale of outdoor and indoor sports and leisure shoes from approximately 5.4 million in FY2009 to approximately 6.3 million pairs in FY2010 and increase in the sale of sports apparels and accessories from approximately 5 million units in FY2009 to approximately 7.9 million units in FY2010

- The increase also due to increase in average selling price of outdoor and indoor sports and leisure shoes from RMB82.7 per pair in FY2009 to RMB99.11 per pair in FY2010

- Last, the increase due to increase in penetration in the PRC market. The number of retail locations of our "Addnice" products increased from 1596 retail locations as at June 2009 to 2003 retail locations as at June 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 decrease of 15.8% and 27.9% in revenue and PBT respectively for the current quarter compared to the preceding quarter due to the decrease in the sales of the sports and leisure shoes and the sport apparels and accessories as the contribution for Q4FY10 is from Summer/Spring products that has lower selling prices as compared to Autumn/Winter products. Autumn/Winter products such as jackets, sweaters and leather-based shoes will have higher selling prices as compared to Spring/Summer products such as T-shirt and shirt

- Estimate next 4Q eps after 2010 Q4 result announced = 0.3452*1.1 = 0.3797, estimate PE on current price 1.48 = 3.77(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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