PP 7767/09/2010(025354)

14 June 2010

Malaysia Corporate Highlights

RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

R e su l ts Pr e v i e w
14 June 2010
MARKET DATELINE

Adventa Share Price

Fair Value
:
:
RM3.14
RM5.19
Delay In Expansion Plan Recom : Outperform
(Maintained)

Table 1 : Investment Statistics (ADV; Code: 7191) Bloomberg: ADV MK

Net Core Core EPS Core Net
FYE Turnover Profit EPS EPS Growth PER C.EPS P/NTA Gearing ROE GDY
Oct (RMm) (RMm) (sen) (sen) (%) (x) (sen) (x) (%) (%) (%)
2009 282.9 17.0 11.7 22.0 86.9 14.3 - 2.5 0.4 18.1 2.8
2010f 406.3 41.9 28.9 28.9 31.3 10.9 29.0 2.2 0.5 21.1 3.6
2011f 525.6 57.9 39.9 39.9 38.1 7.9 40.0 1.8 0.4 24.8 4.3
2012f 651.7 75.8 52.2 52.2 30.8 6.0 50.0 1.5 0.3 26.7 5.1
Main Market Listing /Non-Trustee Stock/Syariah Approved Stock By The SC #Excluding EI * Consensus Based On IBES
E i

2Q10 results preview. Adventa is due to announce its 2QFY10 results on

Issued Capital (m shares) 150.7
15 Jun. We expect Adventa to post low double-digit yoy revenue growth Market Cap (RMm) 474.8
largely due to a combination of higher volume sales as a result of Daily Trading Vol (m shs) 1.6
expansion in capacity, which came on-stream in the later part of 2009. 52wk Price Range (RM) 1.06-4.21
This, however, would be offset by the higher raw material cost as latex Major Shareholders: (%)
price rose 62.7% yoy and weaker US$ (-7.4% yoy) against RM and as a Low Chin Guan & family 56.7
Lembaga Tabung Haji 5.2
result, core earnings could be flat yoy.
Populus Mutual Fund 6.2

Qoq, earnings expected to be lower. Qoq, revenue is expected to be FYE Oct FY10F FY11F FY12F
higher by mid-single digit mainly due to higher selling prices in order to EPS chg (%) 8.3 6.7 -
pass on the higher raw material costs to customers. However, we believe Var to Cons (%) (0.3) (0.2) 4.5
the increase in selling prices would not be enough to offset the higher raw
PE Band Chart
material prices (+24.8% qoq) and weaker US$ (-2.5% qoq) due to the
time lag in passing on the higher cost. Consequently, we expect 2Q10 net
profit to be lower qoq.
PER = 11x

Delay in capacity expansion. Management has guided that the

PER = 9x
PER = 7x
commercial production for its new factory in Kluang, Johor has been
delayed due to the delay in shipment of some parts for the lines by the
supplier. The new factory, which will house seven new lines now expected
to be installed progressively starting from next month. Following that, in
2011, the management plans to add another five double former lines, Relative Performance To FBM KLCI
which will increase Adventas annual production capacity for dental and
examination gloves to 5.5bn pieces by end-2011 from 4.5bn pieces at end-
2010. Capex guided by management is RM30m per year, which will be Adventa
funded internally and via borrowings.

Risks. The risks include: 1) sharp surge in latex price, which may result in
margin squeeze; 2) an appreciating RM against the US$; and 3) execution FBM KLCI
risk from its capacity expansion.

Forecasts. We have lowered our FY10-11 revenue projection by 1.2-1.5%

after factoring in the slight delay in expansion plan. At the same time, we
have also lowered our FY10-FY11 EBITDA margins assumptions by 1.1-
1.2%-pts, to reflect the time lag in passing on the cost increase to
consumers. As a result, our FY10-11 earnings forecasts have been lowered
by 6.7-8.3%. We maintain our FY12 earnings forecasts for now.

Investment case. Despite the cut in our earnings forecasts, our

David Chong, CFA
indicative fair value has been raised to RM5.19 as we roll-forward our
(603) 92802179
valuation year to FY11 (from RM4.34 based on CY10). No change to our david.chong@rhb.com.my
target PER of 13x and Outperform call on the stock.

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 14 June 2010

Table 2 : Earnings Forecasts Table 3 : Forecast Assumptions

FYE Oct (RMm) FY09a FY10F FY11F FY12F FYE Oct FY10F FY11F FY12F

Turnover 282.9 406.3 525.6 651.7 Production

Turnover growth (%) 63.0 43.6 29.4 24.0 - surgical (m pairs) 350 449 480
- exam/dental (m pcs) 5,040 5,640 6,240
EBITDA 49.9 61.5 80.1 100.3
EBITDA margin (%) 17.6 15.1 15.2 15.4

Depreciation (11.0) (12.2) (13.5) (14.8)

EBIT
38.9 49.3 66.6 85.5
EBIT margin (%) 13.8 12.1 12.7 13.1
Net Interest (5.6) (5.0) (5.4) (5.6)
Associates 0.0 0.0 0.0 0.0
Exceptionals (14.9) 0.0 0.0 0.0
Pretax Profit 18.4 44.3 61.1 79.9
Tax (1.5) (2.2) (3.1) (4.0)
Minorities 0.1 (0.1) (0.1) (0.1)
Net Profit 17.0 41.9 57.9 75.8
Core net profit 31.9 41.9 57.9 75.8
Source: Company data, RHBRI estimates

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank
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The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
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The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or
more over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take
on higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

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