DMX Technologies

Overweight
Current Price Fair Value Up / (downside) S$0.205 S$0.35 +56%

3Q13 results update 26 November 2013

Could be better
dragged by a forex loss. DMX's 3Q13 net profit of US$7.2m was in line with our expectation but included a US$1.1m forex loss due to the sharp depreciation of Indonesian Rupiah (to-date, DMX has suffered total US$1.5m loss for this). The other key variances include better-thanexpected sales but offset by lower-than-expected margins. 9M13 results represent 51% of our-full-year forecast. However, 4Q is traditionally the strongest quarter for DMX. Cut 6% FY13 estimates, but still glaring undemanding valuation. We have lowered our FY13 forecast on lower margins assumption given its growth from mobile solution services was somewhat disappointing. Nevertheless, demand from Infrastructure solution remains strong as order book was up 3.6% yoy to US$72.7m as at 30 September 2013. We maintain our FY2014 and FY15 earnings estimates. As such, our fair value remains S$0.35, still pegged at 10x FY14 PER (33% discount to its peer comparison now). Given its potential re-rating and 56% upside, maintain Overweight recommendation. Digital world creates new opportunities. In July, Gartner lowered its expectations for growth this year in global IT spending, from 4% growth forecast earlier this year to 2%. Additionally, Gartner last month projected IT spending in the Asia Pacific region to reach US$767 bn in 2014, a 5.5% increase from 2013. And in China, IT spending is forecast to grow 6.7% in 2013 and accelerate to 8.7% growth in 2014. It says Chinas very powerful growing middle class is having a huge impact on the rest of the economy and IT, moving consumer and enterprise markets. Automation of health, banking, government, communications and manufacturing are major IT drivers. However, we believe these vertical industries will continue to benefit DMX in the next 5 years. 3Q13 sales increased by 14% yoy to US$110m led by both ICT solution and Digital Media divisions, ICTs sales increased by 12.7% yoy and Digital Media division jumped 16.2% yoy in revenue to US$46.7m EBITDA margins improved marginally by 0.1% pts yoy to 12.5% in 3Q13 as a result of the groups improved revenue mix, with higher contributions from recurring software and service businesses. However, this was offset by the US$1.1m forex loss. Balance sheet remains healthy. DMX generated US$4.3m of negative free cash flow as a result of higher working capital requirements and capex spending. As a result, net cash decreased to US$20m at the end of the September quarter from US$24m previous quarter.
Key Financial Data (US$ m, FYE Dec) Sales Gross Profit Net Profit EPS (cents) EPS growth (%) PER (x) NTA/share (US cents) DPS (US cents) Div Yield (%) Source: Company, NRA Capital estimates

Stock Statistics Market cap 52-low 52-high Avg daily vol No of share Free float S$256.6m S$0.20 S$0.285 1,176,932 1166.6m 31%

Key Indicators ROE 13F ROA 13F P/BK Net gearing 6% 5% 0.52x Net cash

Major Shareholders KDDI Corp Venture Corp Jismly Teo 51.5% 12.3% 5.0%

Historical Chart

Source: Bloomberg

Jacky Lee (+65) 6236-6887 jacky.lee@nracapital.com www.nracapital.com

2011 335.7 74.8 18.6 1.6 19.0 10.9 27.1 0.2 1.4

2012 379.6 87.4 20.9 1.8 11.8 9.8 28.5 0.2 1.4

2013F 403.3 98.0 23.6 2.0 11.8 8.7 30.6 0.2 1.4

2014F 459.0 111.5 31.5 2.7 33.5 6.5 33.5 0.2 1.4

2015F 511.5 124.3 36.2 3.1 15.1 5.7 37.0 0.2 1.4

DMX Technologies
Results comparison
FYE Dec (US$ m) Revenue Operating costs EBITDA EBITDA margin (%) Depn & amort. EBIT Interest expense Interest & invt inc Associates' contrib Exceptionals Pretax profit Tax Tax rate (%) Minority interests Net profit EPS (cts) Source: NRA Capital estimates 3Q13 110.0 (96.2) 13.8 12.5 (5.3) 8.5 (0.3) (0.5) 0.0 0.0 7.7 (0.6) 7.8 0.1 7.2 0.6 3Q12 96.3 (84.3) 12.0 12.4 (5.3) 6.7 (0.2) 0.3 0.0 0.0 6.8 (0.7) 11.0 (0.2) 5.8 0.5 yoy % chg 14 14 15 1 27 43 (298) 0 0 14 (19) 148 23 23 2Q13 93.9 (83.0) 10.9 11.6 (5.5) 5.4 (0.2) 0.1 0.0 0.0 5.3 (1.0) 18.6 (0.3) 4.1 0.4 QoQ % chg 17 16 27 8 (3) 57 21 (477) 0 0 44 (39) (58) 133 76 76 Prev. 3Q13F 103.7 (89.8) 13.9 13.4 (5.5) 8.4 (0.1) 0.3 0.0 0.0 8.6 (1.3) 15.0 (0.3) 7.0 0.6 Comments 6% above expectation Above, higher-than-expected sales In line 0.6% pt below our expectations In line In line Above, higher-than-expected effective interest rate Below, due to US$1.1m forex loss

Below, due to US$1.1m forex loss Below, lower-than-expected taxation

In line

Peers comparison
Code Name DMX TECHNOLOGIES CISCO SYSTEMS KDDI CORP IBM NTT DATA CORP ZTE CORP-H CHINA COMM SER-H ITOCHU TECHNO SO F5 NETWORKS POLYCOM INC CACI INTL-A Large CAP average NET ONE SYSTEMS COMBA TELECOM SY CSE GLOBAL LTD INES CORP CIBER INC SMS MANAGEMENT & Mid CAP average ECS HOLDINGS LTD ABPL OAKTON LTD ASSECOBS NCI INC-A Small CAP average Overall average Source: Bloomberg consensus, NRA Capital Research DMX SP CSCO US 9433 JP IBM US 9613 JP 763 HK 552 HK 4739 JP FFIV US PLCM US CACI US Price (Local) 0.205 21.46 6460.00 181.30 3810.00 17.50 5.01 3940.00 82.94 10.80 71.64 MktCap (S$ m) 238.1 143675.4 71340.9 246514.9 13158.0 10915.0 5604.6 2910.6 8060.2 2304.7 2101.5 50658.6 679.4 648.3 523.8 394.2 360.0 328.5 489.0 217.7 212.6 168.0 177.6 105.1 176.2 Total Equity (S$m) 470.7 74737.8 30604.2 23190.9 9012.6 4435.5 4114.9 2186.3 1930.9 1747.7 1532.0 15349.3 808.6 608.7 232.7 570.2 438.5 143.7 467.1 341.0 160.2 119.4 102.1 89.0 162.4 7162.6 Actual PER (x) 9.8 12.8 15.4 11.6 40.6 na 11.2 17.3 23.5 141.2 11.6 31.7 97.0 na 10.9 21.9 34.6 13.3 35.5 6.6 12.6 16.3 16.7 11.4 12.7 26.8 Y1 PER (x) 8.7 10.8 16.1 10.8 34.6 27.1 10.4 16.1 16.3 20.3 12.2 17.5 76.1 53.7 10.6 19.5 38.1 15.7 35.6 6.4 9.7 15.2 16.4 12.3 12.0 20.8 Y2 PER (x) 6.5 10.2 13.1 10.0 22.9 17.9 9.0 14.1 14.2 15.0 12.5 13.9 18.4 14.8 10.5 15.3 17.3 12.7 14.8 5.1 8.5 13.7 15.7 15.7 11.7 13.3 EV/ EBITDA (x) 3.8 6.5 4.8 9.3 5.9 210.9 6.5 na 13.0 11.3 6.6 30.5 6.5 na 5.4 na 10.3 9.9 8.0 6.7 6.6 6.5 8.5 3.8 6.4 18.0 PBR (x) 0.5 1.9 2.1 9.9 1.6 2.2 1.3 1.4 4.2 1.3 1.3 2.7 0.9 1.1 2.1 0.5 0.8 2.3 1.3 0.6 1.3 1.4 1.8 1.1 1.2 1.9 ROE (%) 5.2 17.7 13.9 77.9 4.2 -12.0 12.2 8.5 19.3 -1.0 12.8 15.4 0.9 -5.2 20.3 2.3 -5.9 17.4 5.0 9.6 10.4 8.7 10.5 -30.9 1.7 9.0 Yield (%) 1.4 3.2 1.9 2.1 1.6 0.0 3.5 2.8 0.0 0.0 0.0 1.5 5.5 0.0 4.2 2.4 0.0 8.9 3.5 3.7 0.0 8.3 6.0 0.0 3.6 2.5

7518 JP 2342 HK CSE SP 9742 JP CBR US SMX AU

620.00 2.63 1.02 667.00 3.81 4.09

ECS SP ABE PW OKN AU ABS PW NCIT US

0.60 32.50 1.63 13.15 6.50

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DMX Technologies
Profit & Loss (US$ m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates' contribution Exceptional items Pretax profit Tax Minority interests Net profit Wt. shares (m) Shares at year-end (m) Balance Sheet (US$ m, as at Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders' funds Minority interests NTA/share (US$) Total Assets Total Liabilities + Sholders' funds Cash Flow (US$ m, FYE Dec) Pretax profit Depreciation & non-cash adjustments Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt) KEY RATIOS (FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days) Source: Company, NRA Capital estimates 2011 335.7 (296.8) 39.0 (18.8) 20.2 1.1 0.0 0.0 21.3 (1.8) (0.9) 18.6 1,149.8 1,149.8 2011 11.6 51.2 20.2 83.0 55.1 15.7 259.1 18.0 347.8 46.9 15.9 2.0 64.8 0.1 1.1 1.1 362.5 2.4 0.27 430.8 430.8 2011 21.3 21.4 (44.0) (1.3) 0.0 (2.6) (21.0) (7.3) 0.1 (28.2) (6.9) (1.0) 0.0 4.9 (3.0) (33.9) (27.0) 39.1 2011 24.1 13.8 6.3 5.5 39.3 8.5 14.8 281.7 21.9 65.6 2012 379.6 (333.4) 46.1 (20.2) 25.9 (0.0) 0.0 0.0 25.9 (4.0) (1.0) 20.9 1,158.4 1,158.4 2012 11.2 51.6 0.2 63.1 46.5 21.8 309.7 23.8 401.9 59.4 14.8 4.1 78.3 0.0 1.3 1.3 382.0 3.3 0.29 465.0 465.0 2012 25.9 20.4 (44.5) (1.7) 0.0 0.1 (20.9) 19.5 (3.2) (4.5) 0.8 0.2 (1.3) (1.9) (2.2) (6.6) (7.5) 31.7 2012 13.1 18.5 6.8 5.5 45.6 15.4 13.4 297.8 27.2 74.2 2013F 403.3 (351.8) 51.5 (22.9) 28.5 (0.3) 0.0 0.0 28.2 (4.2) (0.4) 23.6 1,166.6 1,166.6 2013F 13.6 46.3 0.2 60.1 71.9 24.4 290.4 23.8 410.6 36.6 24.2 2.1 62.9 0.0 1.3 1.3 402.8 3.7 0.31 470.7 470.7 2013F 28.2 22.2 (6.3) (5.4) 0.0 38.7 (20.0) 0.0 0.0 (20.0) 9.4 0.0 (2.8) 0.1 6.7 25.4 16.0 47.7 2013F 6.2 11.5 7.0 5.8 39.8 15.0 11.9 262.8 29.2 43.8 2014F 459.0 (399.5) 59.5 (24.1) 35.4 2.1 0.0 0.0 37.5 (5.6) (0.5) 31.5 1,166.6 1,166.6 2014F 15.7 40.1 2.5 58.3 84.6 27.8 312.1 23.8 448.3 41.7 25.2 2.8 69.8 0.0 1.3 1.3 431.4 4.1 0.34 506.6 506.6 2014F 37.5 20.4 (20.2) (3.4) 0.0 34.3 (20.0) 0.0 0.0 (20.0) 1.0 0.0 (2.8) 0.1 (1.7) 12.7 11.6 59.3 2014F 13.8 15.6 8.2 6.9 50.5 15.0 8.9 248.2 29.2 43.8 2015F 511.5 (445.5) 66.0 (25.3) 40.7 2.5 0.0 0.0 43.2 (6.5) (0.5) 36.2 1,166.6 1,166.6 2015F 17.3 33.2 4.9 55.4 103.4 31.0 332.5 23.8 490.6 46.5 25.6 3.2 75.3 0.0 1.3 1.3 464.8 4.6 0.37 546.0 546.0 2015F 43.2 20.9 (18.8) (4.1) 0.0 41.2 (20.0) 0.0 0.0 (20.0) 0.3 0.0 (2.8) 0.1 (2.4) 18.8 18.5 77.8 2015F 11.4 10.9 8.4 7.1 57.2 15.0 7.7 237.3 29.2 43.8

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DMX Technologies

NRA Capital Pte. Ltd (NRA Capital) has received compensation for this valuation report. This publication is confidential and general in nature. It was prepared from data which NRA Capital believes to be reliable, and does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. No representation, express or implied, is made with respect to the accuracy, completeness or reliability of the information or opinions in this publication. Accordingly, neither we nor any of our affiliates nor persons related to us accept any liability whatsoever for any direct, indirect, special or consequential damages or economic loss that may arise from the use of information or opinions in this publication. Opinions expressed are subject to change without notice. NRA Capital and its related companies, their associates, directors, connected parties and/or employees may own or have positions in any securities mentioned herein or any securities related thereto and may from time to time add or dispose of or may be materially interested in any such securities. NRA Capital and its related companies may from time to time perform advisory, investment or other services for, or solicit such advisory, investment or other services from any entity mentioned in this report. The research professionals who were involved in the preparing of this material may participate in the solicitation of such business. In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additional information is, subject to the duties of confidentiality, available on request. You acknowledge that the price of securities traded on the Singapore Exchange Securities Trading Limited ("SGX-ST") are subject to investment risks, can and does fluctuate, and any individual security may experience upwards or downwards movements, and may even become valueless. There is an inherent risk that losses may be incurred rather than profit made as a result of buying and selling securities traded on the SGXST. You are aware of the risk of exchange rate fluctuations which can cause a loss of the principal invested. You also acknowledge that these are risks that you are prepared to accept. You understand that you should make the decision to invest only after due and careful consideration. You agree that you will not make any orders in reliance on any representation/advice, view, opinion or other statement made by NRA Capital, and you will not hold NRA Capital either directly or indirectly liable for any loss suffered by you in the event you do so rely on them. You understand that you should seek independent professional advice if you are uncertain of or have not understood any aspect of this risk disclosure statement or the nature and risks involved in trading of securities on the SGX-ST.

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