TA Securities A Member of the TA Group COMPANY UPDATE Monday, January 13, 2014 FBMKLCI: 1,826.61 MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Sector: Technology Page 1 of 11 IRIS Corporation Berhad TP: RM0.54(+40.3%) Has the Capability to “Make An Island Habitable” Last traded: RM0.385 THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* BUY Tan Kam Meng, CFA +603-2167-9605 [email protected]www.taonline.com.my Dubbed “2014 Star Performer”, IRIS Corporation (IRIS) has lived up to market expectations by far with the upsurge in share price last week from 29.0sen to 38.5sen. Importantly, the price rally is believed to be fundamentally-linked to the group’s promising earnings prospect as well as the profound effect of the change in major shareholder list. Key takeaways from a recent analyst and fund manager meeting are: 1. IRIS has a “complete” model and solution to key global concerns like poverty, pollution, food safety, employment and education; 2. IRIS holds a trump card after establishing business presence in 25 countries and having favourable relationship with top government officials; and 3. The importance of FELDA’s support. We raise our FY15-16 earnings projections by 11.2% and 12.2% after making some changes to our assumptions: • We now assume more housing contracts from FELDA which is worth RM75mn each for FY15 and FY16; • We raise FY15-16 capex requirement by additional RM20mn each year to RM50mn, and • Drawdown RM100mn of borrowing in FY15 to fund capex. IRIS’ fair value is revised higher to 54sen/share (from 34sen/share previously) based on revised 15x CY15 earnings. We reiterate our Buy recommendation given the upside potential of 40%. Earnings Summary (RM’mn) FYE March 31 (RMmn) FY12* FY13 FY14F FY15F FY16F Revenue 483.8 537.1 724.9 1,038.4 1,101.9 EBITDA 84.9 71.7 120.7 179.6 199.9 EBITDA margin (%) 17.5 13.4 16.6 17.3 18.1 Pretax profit 58.1 34.0 69.1 116.8 143.3 Net profit 43.7 21.1 31.4 60.6 74.9 Core net profit 43.7 21.1 31.4 60.6 74.9 EPS (sen) 2.9 1.1 1.6 3.1 3.8 Diluted EPS (sen) 2.3 1.1 1.6 3.1 3.8 EPS growth (%) 17.6 (54.1) 49.2 92.9 23.5 PER (x) 16.5 36.0 24.1 12.5 10.1 GDPS (sen) 0.5 0.5 0.5 0.5 0.5 Div yield (%) 1.2 1.2 1.2 1.2 1.2 Core ROE (%) 9.3 5.1 6.4 10.1 11.4 * comprising 15-month earnings from Jan-11 to March-12 Share Information Bloomberg Code ICB MK Stock Code 0010 Listing ACE Market Share Cap (mn) 1970.5 Market Cap (RMmn) 758.6 Par Value 0.15 52-wk Hi/Lo (RM) 0.40/0.155 12-mth Avg Daily Vol ('000 shrs) 11646.0 Estimated Free Float (%) 62.3 Beta 0.94 Major Shareholders (%) FELDA - 26.7 Datuk Tan Say Jim - 11.0 Forecast Revision FY14 FY15 Forecast Revision (%) 0.0 11.2 Net profit (RMm) 31.4 60.6 Consensus - - TA's / Consensus (%) - - Previous Rating Financial Indicators FY14 FY15 Net Debt/Equity (%) 45.7 53.9 CFPS (sen) (5.8) (3.3) Price/CFPS (x) nm nm ROE (%) 6.4 10.1 NTA/Share (RM) 0.2 0.2 Price/NTA (x) 1.8 1.6 Share Performance (%) Price Change IRIS FBM KLCI 1 mth 42.6 (0.7) 3 mth 51.0 2.3 6 mth 97.4 2.3 12 mth 120.0 8.6 Buy (Maintained) (12-Mth) Share Price relative to the FBM KLCI Source: Bloomberg
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TA SecuritiesA Member of the TA Group
C O M P A N Y U P D A T E
Monday, January 13, 2014
FBMKLCI: 1,826.61
MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Sector: Technology
Page 1 of 11
IRIS Corporation Berhad
TP: RM0.54(+40.3%) Has the Capability to “Make An Island Habitable” Last traded: RM0.385 THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* BUY
Tan Kam Meng, CFA +603-2167-9605 [email protected] www.taonline.com.my
Dubbed “2014 Star Performer”, IRIS Corporation (IRIS) has lived up to
market expectations by far with the upsurge in share price last week from
29.0sen to 38.5sen. Importantly, the price rally is believed to be
fundamentally-linked to the group’s promising earnings prospect as well as
the profound effect of the change in major shareholder list.
Key takeaways from a recent analyst and fund manager meeting are:
1. IRIS has a “complete” model and solution to key global concerns like
poverty, pollution, food safety, employment and education;
2. IRIS holds a trump card after establishing business presence in 25
countries and having favourable relationship with top government
officials; and
3. The importance of FELDA’s support.
We raise our FY15-16 earnings projections by 11.2% and 12.2% after making
some changes to our assumptions:
• We now assume more housing contracts from FELDA which is worth
RM75mn each for FY15 and FY16;
• We raise FY15-16 capex requirement by additional RM20mn each year
to RM50mn, and
• Drawdown RM100mn of borrowing in FY15 to fund capex.
IRIS’ fair value is revised higher to 54sen/share (from 34sen/share previously)
based on revised 15x CY15 earnings. We reiterate our Buy recommendation
---> Felda 20k housing req - 0 0 75 75 # Based on annualised 12-month earnings
Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness are not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any
direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein.
This report has been prepared by TA SECURITIES HOLDINGS BERHAD for purposes of CMDF-Bursa Research Scheme ("CBRS") administered by Bursa Malaysia Berhad and will be compensated to undertake the scheme. TA SECURITIES HOLDINGS BERHAD has produced this report independent of any influence from the CBRS or the subject
company. For more information about CBRS and other research reports, please visit Bursa Malaysia’s website at: http://www.bursamalaysia.com/market/listed-companies/research-repository/research-reports
for TA SECURITIES HOLDINGS BERHAD(14948-M)
(A Participating Organisation of Bursa Malaysia Securities Berhad)