Support ... Dec09

Standard and Poors

Results Review & Earnings Outlook• SIHB’s 3QFY10 (Jan) results were below our expectations, with
9MFY10 net profit of MYR5.1 mln reaching 41% of our previous FY10
projection. The deviation was mainly due to lower-than-expected
contributions from both the manufacturing and property divisions.

• 3QFY10 revenue and net profit fell 39% and 35% YoY to MYR18.9
mln and MYR1.5 mln respectively, in the absence of contributions
from the discontinued production of cables, connectors and interphone
products in September 2008. In addition, the manufacturing division,
which produces audio speakers, toys and other plastic products, also
suffered an 18% YoY decline in sales.

• 3QFY10 earnings were largely supported by the manufacturing
segment, as contribution from the property development arm was
negligible in 3QFY10. We understand SIHB’s maiden Aman Bayu
property project in Butterworth, Penang, has a 50% take-up rate.

• We lower our FY10 net profit estimate by 17% to MYR10.4 mln after
factoring in smaller contributions from the manufacturing and property
divisions. We maintain our FY11 net profit projection of MYR23.8 mln.
The earnings jump is premised on increased manufacturing sales
supported by expected new contracts and maiden contributions from
the property division.

Recommendation & Investment Risks
• We maintain our Hold recommendation on SIHB but raise our 12-
month target price to MYR1.30 (from MYR0.90).

• Our target price is raised on assigning a higher PER multiple of 12x to
our CY10 earnings, which is approximately a 30% premium to the
blended PER of 9x which we had assigned previously. This premium
largely reflects SIHB’s recent move into China, which, if successful,
opens up the potential for an alternative earnings source.

• On Nov. 23, 2009, SIHB entered into a Strategic Cooperation
Agreement with Digital China Advanced Systems Services Ltd
(DCASS), a subsidiary of Digital China Holdings Ltd (00861 HK,
HKD9.54, Not Ranked) to appoint DCASS as the technical adviser for
the Citizen Card and Mobile Electronic Business Project (CCMEB) in
Hunan Province, China. We believe SIHB is also working to secure the
concession from the local government as the operator of the CCMEB,
which would provide for enhanced revenue if successful. While its
potential growth in China is exciting, we believe the recent price run-up
has already factored in this positive development. At a prospective
CY10 PER of 11.5x, the stock appears to be fully valued at this
juncture, in our opinion.

• Risks to our recommendation and target price include the failure in its
China venture to take off and weaker-than-expected contributions from
existing businesses.