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RESULTS UPDATE

TA Securities
A Member of the TA Group
Monday, 27 August, 2012 FBMKLCI: 1,648.22 Sector: Manufacturingl
MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048

IRIS Corporation Berhad


Rimbunan Kaseh to come in next quarter
THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY*

TP: RM0.31(+77.1%)
Last traded: RM0.175

BUY
kmtan@ta.com.my www.taonline.com.my
Share Information Bloomberg Code ICB MK Stock Code 0010 Listing ACE Market Share Cap (mn) 1575.0 Market Cap (RMmn) 275.6 Par Value 0.15 52-wk Hi/Lo (RM) 0.205/0.13 12-mth Avg Daily Vol ('000 shrs) 6147.0 Estimated Free Float (%) 83.6 Beta 0.93 Major Shareholders (%) Perbadanan Nasional Bhd - 8.4 Versatile Paper Boxes S/B - 8.03 Forecast Revision Forecast Revision (%) Net profit (RMm) Consensus TA's / Consensus (%) Previous Rating Financial Indicators Net Debt/Equity (%) CFPS (sen) Price/CFPS (x) ROE (%) NTA/Share (RM) Price/NTA (x) SCORECARD vs TA vs Consensus Share Performance (%) Price Change 1 mth 3 mth 6 mth 12 mth % of FY 18.3 Within FY13 23.5 (1.1) na 10.5 0.2 0.9 FY14 13.8 2.8 5.8 10.3 0.2 0.8 FY13 FY14 45.6 48.9 Buy (Maintained)

Tan Kam Meng, CFA

+603-2072-1277 ext:1614

Review 1Q13 net profit of RM8.3mn accounted for 18.3% of our full-year forecast. However, we consider this within our expectation as we have assumed contributions from two key projects, i.e.: Rimbunan Kaseh and the waste-to-energy incineration plant in Phuket, to begin from 2Q13 onwards. 1Q13 net profit surged 42% largely due to lower effective tax rate as compared with the same period of last year. At the pre-tax level, earnings dropped 14% despite a 7.5% growth in revenue due to increased contribution from low-margin contracts. Sequentially, 1Q13 revenue surged 32.5% and this has filtered down to bottom line with a 32.8% increase in net profit. For this quarter, the group derived significant revenue from existing projects namely, Malaysian e-Passport Inlays and Tanzania e-ID cards, and new project, i.e.: the implementation of Malaysian e-Passport ICAO compliance project. Impact No change to our FY13-15 earnings projections. Outlook Iris procured a Rimbunan Kaseh project from Pahang State Government worth RM23mn in end-June/12. Given the short construction duration of 60 days, we expect the project to contribute RM6.4mn profit before tax in 2Q-3Q, assuming a margin of 28%. This represents 61% of PBT achieved in 1Q13. Note that Iris 51%-owned PJT technology has completed the construction of a waste-to-energy incineration plant in Phuket, which is expected to commence operations soon. Based on an average offtake rate of THB6.42/kWh, the plant could potentially generate approximately RM42mn in revenue per annum. We believe Iris involvement in the ticketing solution system for Kelana Jaya Line and Ampang Line would provide the company an opportunity to secure the MRT ticketing solution system, when the tender is called. Valuation We maintain our target price at RM0.31/share, based on unchanged 10x CY13 earnings. Maintain BUY.

IRIS 9.4 6.1 (2.8) 25.0

FBM KLCI 1.4 6.3 5.7 14.1

(12-Mth) Share Price relative to the FBM KLCI

Source: Bloomberg

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TA Securities
A Member of the TA Group

27-Aug-12

Earnings Summary (RMmn)


FYE March 31 (RMmn) FY10# Revenue 366.1 EBITDA 71.5 EBITDA margin (%) 19.5 Pretax profit 41.6 Net profit 27.3 Core net profit 27.3 EPS (sen) 1.7 Diluted EPS (sen) 1.7 EPS growth (%) 75.1 PER (x) 10.1 GDPS (sen) 0.5 Div yield (%) 2.6 Core ROE (%) 7.9 * comprising 15-month earnings from Jan-11 to March-12 # ended December FY12* 509.0 95.5 18.8 66.3 45.2 45.2 2.9 2.5 42.2 7.1 0.5 2.6 11.4 FY13F 534.8 99.1 18.5 70.2 45.6 45.6 2.9 2.5 1.0 7.0 0.5 2.9 10.5 FY14F 552.3 103.5 18.7 75.3 48.9 48.9 3.1 2.7 7.2 6.6 0.5 2.9 10.3 FY15F 578.7 103.8 17.9 75.8 49.3 49.3 3.1 2.7 0.6 6.5 0.5 2.9 9.5

2QFY12 Results Analysis (RMmn) YE Mar Revenue EBITDA Depr & Amor. Interest Expenses Associate Pre-tax Profit Tax Expenses MI Net Profit EPS (sen) DPS (sen)
EBITDA Margin (%) Pre-tax Margin (%) Net-Margin (%) Effective tax rate (%) * Change of financial year to March from December

2Q12* 95.3 16.5 (1.2) (2.8) (0.4) 12.1 (6.3) 0.0 5.8 0.41 0 17.3 12.7 6.1 51.8

5O12* 77.3 10.0 (1.2) (2.6) (0.8) 5.4 (0.3) 1.1 6.3 0.42 0.45 13.0 7.0 8.1 5.2

1Q13 102.5 14.3 (1.2) (2.5) (0.1) 10.4 (3.2) 1.0 8.3 0.5 0.0 13.9 10.2 8.1 30.2

QoQ (%) 32.5 42.4 (3.2) (3.2) (82.9) 93.0 >100 (8.5) 32.8 26.2 nm 1.0 3.2 0.0 25.0

YoY (%) 7.5 (13.2) 4.9 (10.0) (64.7) (14.0) (49.9) nm 42.5 29.3 nm (3.3) (2.6) 2.0 (21.6)

Disclaimer
The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is 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 Malaysias website at: http://www.bursamalaysia.com/website/bm/listed_companies/cmdf_bursa_research_scheme/eResearch.jsp for TA SECURITIES HOLDINGS BERHAD(14948-M) (A Participating Organisation of Bursa Malaysia Securities Berhad) Kaladher Govindan Head of Research

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