BJCORP ... Dec09

BCorp released its 2Q FY10 results.
Overall results were within expectations. The group has been recently
undertaking a few major corporate exercises. We have upgraded our fair value of BCorp to RM2.24

Results.
Revenue for the quarter increased over both preceding and corresponding quarters by 0.4% and 0.6% respectively. Net profit was substantially stronger as well and was 29.2% higher than the preceding quarter while increasing 400% against the corresponding year quarter.

Review.
Revenue was marginally higher attributable to higher revenue contribution from the consumer marketing segment especially from Cosway both locally and abroad.
The stock-broking segment had also registered higher revenue. This in turn attributed to higher PBT and net profit.

Cosway.
BCorp has sold its 90% stake in Cosway (M) Sdn Bhd to Berjaya Holdings (HK) Limited (BHK) for a consideration of RM900mil. This would be settled by a combination of cash, exchange of shares and issuance of ICULS. As a result of the exercise, BHK has changed its name to Cosway Corporation Limited (CCL) and will continue to be listed in Hong Kong. The effective stake of BCorp on CCL would be slightly under 75% after the exercise. CCL had also purchased the remaining 10% stake in Cosway (M) Sdn Bhd from Madison Country LLC. Under the exercise, CCL had also purchased and acquired
eCosway. The exercise will provide BCorp with stronger cash positions and cash flows while providing a channel to realize greater valuations in Cosway. Cosway is currently performing very strongly internationally especially in Hong Kong and Taiwan. We are positive with the longer term developments.

Berjaya Retail Bhd. To recap, the group has planned to list Singer and 7-Eleven through Berjaya Retail Bhd. BCorp has also proposed to distribute a dividend-inspecie
on the basis of 1 Berjaya Retail share for every 10 existing shares of BCorp of RM1.00 each. It is proposed that a minimum of 71.9mil up to 101.9mil shares of
Berjaya Retail together with 5mil Berjaya Retail ICPS be offered for sale. The offer price is RM0.50 for both.

7-Eleven.
7-Eleven is geared to grow strongly. It plans to open 2,000 stores nationwide in 3
to 5 years. This large push will be made possible by its new franchise scheme which would free capital for 7-Eleven to push for supernormal growth over these few years. Initial stores which were franchised recorded a 20% growth in sales in a matter of days. It is expected that even higher efficiencies will be achieved over a longer period of time. With the large store growth, 7-Eleven will be able to achieve even greater economies of scale in terms of distribution
networks, marketing and purchases.

Berjaya Land.
Bland has been recently launching its projects in Vietnam in Thach Ban, Hanoi
and Bien Hoa, Dong Nai. The recent launch in Bien Hoa has been fully sold while the Thach Ban launch has almost sold out within a short period of time. The developments indicates promising future launches moving forward. Locally Bland has launched several projects as well and has been well received as well.

Berjaya Media.
The group had previously proposed dividend-in-specie of ordinary shares of RM0.80 each in Berjaya Media Bhd to the shareholders of BCorp. The exercise has been approved while the group has submitted the application to Bursa Malaysia Depository Sdn Bhd. We expect the exercise to be completed at the end of December or January.

Outlook.
The group is set to perform better with the H1N1 scare being over. The hotel and
resorts business will be the key sectors benefiting from this. Meanwhile the overall property market has been stronger industry wide. Moreover the group’s property divisions had reportedly done very well over the past few months. We expect the consumer marketing segment to continue to grow moving forward.

Risk.
Risks to the performance of BCorp would be a reversal of the recovery of the economy.
However, parts of the group are relatively resilient to such downturns.

Recommendation. SJ Security maintain our buy recommendation on BJCorp with a fair value of RM2.24. This is based on a discount of 35% on the fully diluted RNAV per share of RM3.45.