Nishin ... Aug11

WILSON & YORK Research


RESULTS REPORT
YTD 1H FY11 revenue rose 2.7% vs 1H FY10. The convex mirror segment grew more than 18% over the same period, continuing its good performance. Though operating margins are still slightly negative YTD
1H FY11, losses are getting smaller, and we may see a small profit for the full year. In light of the significant slowdown in the Japanese economy over 1H 2011, these results are reasonably good. NHR is looking to Europe for new distributors and customers, and is currently making fairly large promotional and marketing investments. These investments may take two to three quarters to bear fruit.

INVESTMENT RISKS

Risks to our recommendation and target price include: i) increases in the MYR exchange rate, ii) rising promotional costs, iii) a sharp slowdown in the general level of economic activity in the economies of the company’s trading partners, e.g. Japan, Taiwan, Singapore and South Korea, and iv) continued rises in stainless steel prices would be an additional concern.

RECOMMENDATION
Ni Hsin Resources Bhd is facing a number of challenges, however the current share price has discounted many of the headwinds. In addition, management has put in place a number of initiatives that are likely to
result in improved sales and higher factory utilisation. We rate the shares a BUY with a fair value of MYR 0.23.

The company’s up to date manufacturing assets alone are worth some MYR 0.15 per share. Thus there is not a great deal of downside for the shares at current levels. The balance sheet is very clean, and management
has been able to operate the company at minimal losses given the severe damage to the Japanese economy. Moreover, should stainless steel prices come off, or capacity utilisation increase in the quarters ahead,
net margins would likely double or triple from their current levels.

COMPANY PROFILE
Ni Hsin Resources Bhd (“NHR”) is one of the leading cookware manufacturers listed in Malaysia. The company has its roots in Taiwan, and was incorporated in Malaysia in 1989 and listed in 2005. About 20% of total revenue is realised in Malaysia, with Japan, Taiwan, Singapore, and South Korea accounting for the lion’s share of the company’s substantial export revenue. Revenue this quarter comprised 53% cookware products, 20% convex mirror and 27% clad metals.