WILSON & YORK 15/4/2011

Financial Year End 31/12/2010 MALAYSIA EQUITY

Report Period Ending 31/12/2010 IRIS CORP BHD
COMPANY PROFILE

Recom m endation HOLD Iris Corp Bhd (“ICB”) is one of a handful of competitors in the digital
Target Price (MYR) 0.15 identity solutions market in Malaysia. Much of the company's initial suc-
cess was driven by demand from government agencies within Malaysia;
Current Price (MYR) 0.18
it has achieved mixed success in other countries. ICB suffered a large
setback in Australia in 4Q04 and 1Q05. Purchased in the 1990’s, the
Industry Group Electronics company’s technology is dated and much of its overseas revenue has
Industry Sub Group Identification Sys/Dev been derived from very low income nations in Africa. Consequently, the
company has recently diversified into other non related areas, such as
waste incineration. Iris Corp Bhd was incorporated in 1994 and listed in
Key Company Statistics 2002.
Bloomberg Ticker ICB MK
Bursa Stock Code 0010 INVESTMENT RISKS
Issued Share Capital (mn) 1,417.5
Market Capitalisation (MYR mn) 248.1 Risks to our recommendation and target price include i) reductions in the
52 w eek High (MYR) 0.26 general level of government expenditure in Malaysia and in ICB’s export
52 w eek Low (MYR) 0.12 markets, ii) a noticeable shift in the industry away from specialised hard-
ware solutions to software solutions which are increasingly based on ubiq-
Average Volume (3 month) ‘000 5,755.8
uitous smartphones, and iii) there are at least two cases of litigation on-
1 Yr Return (%) 16.7 going, which if settled against the company would likely dampen share
appreciation prospects.
Major Shareholders (%)
RECOMMENDATION
Versatile Paper Boxes Sdn Bhd 6.9
MCS Microsystems Sdn Bhd 4.6
TL Technology Research (HK) Ltd 4.0 We maintain our HOLD recommendation with a Fair Value of MYR 0.15
per share. Debt levels continue to grow and interest cover is getting
uncomfortably small. It is possible that the company’s shift into new busi-
FTSE-BURSA INDEX MEMBERSHIP ness areas will pay off, but investors may well desire to “wait and see”.
Though net profits have been on a rising annual trend, 4Q10 results were
disappointing versus the previous quarter, falling more than 60% versus
FBMKLCI FBM70 FBMEMAS FBMHIJRAH 3Q10, and rising by less than 11% when compared to 4Q09. Investors
No No No No are well advised to discount the share price for ICB’s heavy exposure to
low income, unstable economies such as Nigeria and Senegal.

REPORT INDEX 4-YEAR HISTORICAL PERFORMANCE SUMMARY

Contents Page 2007 2008 2009 2010 4 Yr CAGR

Investment Summary 1 Revenue 219.5 285.5 331.7 366.1 13.6%
Sales By Segment, Peer Group Analysis 2 Net Profit 7.5 10.4 15.6 27.3 38.0%
Financial Statements, 2Yr Actual, 2 Yr Fct 3 Owners' Equity 256.0 271.9 308.4 346.3 7.8%
Sales, Profits, Margins, D/E Last 8 Yrs 4 Net Margins 3.4% 3.6% 4.7% 7.5%
Share Price Last 8 Yrs, Valuation Metrics 5 ROE 2.9% 3.8% 5.1% 7.9%
Analyst's Disclosure, Prior Recommendations 6

SHARE PRICE LAST 12 MONTHS (MYR) ANNUAL RESULTS AND METRICS (MYR mn)
$0.30

FY Dec 2009 2010 2011F 2012F

Revenue 331.7 366.1 341.6 415.2
Revenue g (%) 16.2 10.4 -6.7 21.6
$0.25

Net Profit 15.6 27.3 17.2 20.9

Net Profit g (%) 50.1 75.1 -36.9 21.6
Share Price (MYR)

Dividends 0.0 0.0 0.0 0.0

$0.20

Ow ners' Equity 308.4 346.3 363.5 384.4

Total Liabilities 241.6 311.9 337.7 365.5
Debt/Equity (%) 78.4 90.1 92.9 95.1
$0.15

EPS (sen) 1.1 1.9 1.2 1.5

P-S (x) 0.7 0.6 0.7 0.6
P-E (x) 14.1 8.1 14.4 11.9
$0.10
12-09

1-10
2-10

3-10

4-10

5-10

6-10

7-10

8-10

9-10

10-10

11-10

12-10

1-11

2-11

3-11

4-11

P-BV (x) 0.7 0.6 0.7 0.6

ROE % 5.1 7.9 4.7 5.4

Copyright 2011, Wilson & York Global Advisers Sdn Bhd | See important disclosures at end of this report Page 1 of 6
 WILSON & YORK 15/4/2011

MALAYSIA EQUITY
IRIS CORP BHD

SALES BY SEGMENT (MYR mn)

2006 2007 2008 2009 2010 5 Yr CAGR

Manuf ac turing/ Digital Identity Bus iness Solutions

233.8 218.7 283.9 305.3 362.5 9.2%
Sof tw are/Others 1.1 0.8 1.6 26.4 3.6 na

T o tal 234.9 219.5 285.5 331.7 366.1 9.3%

SALES BY REGION (MYR mn)

2006 2007 2008 2009 2010* 5 Yr CAGR

Malay s ia 234.9 219.5 152.8 160.5 170.0 -6.3%

Res t of World 0.0 0.0 132.7 171.2 196.1 13.9%

T o tal 234.9 219.5 285.5 331.7 366.1 9.3%

*Direction of Sales by Region only publihed in the Dec 2010 Annual Report, which for Iris Corp Bhd is not due out until late April or May
2011.

COMPETITOR’S METRICS (All figures in MYR mn unless otherwise indicated)

N2N SMR
Iris Corp Cuscapi Connect Technolgie
Current Year Bhd Bhd Bhd s Bhd
Dec-11 Dec-11 Dec-11 Dec-11 Dec-11

Revenue 341.6 50.0 15.0 13.0

Net Profit 17.2 6.5 1.0 0.3
Ow ners' Equity 363.5 51.5 41.0 27.6
Dividends 0.0 2.0 0.0 0.0

Market Cap 248.1 62.3 77.7 17.6

P-S (x) 0.7 1.2 5.2 1.4
P-E (x) 14.4 9.6 77.7 58.7
P-BV (x) 0.7 1.2 1.9 0.6
Div Yield (%) 0.0 3.2 0.0 0.0

Net Margins (%) 5.0 13.0 6.7 2.3

ROE (%) 4.7 12.6 2.4 1.1
Payout Ratio (%) 0.0 30.8 0.0 0.0

*Consensus data used for peers where available

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 WILSON & YORK 15/4/2011

MALAYSIA EQUITY
IRIS CORP BHD

PROFIT & LOSS (All figures in MYR mn unless otherwise indicated)

FY Dec 2009 2010 2011F 2012F

Revenue 331.7 366.1 341.6 415.2

Operating Profit 43.8 57.9 43.7 50.5
Other Income 2.1 -2.0 -0.8 -0.8
Share of Associates -0.5 -1.7 -0.8 -0.8
Depreciation/Amortization -11.4 -10.8 -11.0 -11.4
Finance Costs -11.7 -15.2 -19.1 -20.6
Pre Tax Profit 30.4 41.6 24.6 29.9
Tax -14.8 -14.3 -7.4 -9.0
Minority Interest 0.0 0.0 0.0 0.0
Net Profit to Shareholders 15.6 27.3 17.2 20.9

Operating Margin (%) 13.2 15.8 12.8 12.2

PBT Margin (%) 9.2 11.4 7.2 7.2
Net Margin (%) 4.7 7.5 5.0 5.0
Effective Tax Rate (%) 48.8 34.5 30.0 30.0

BALANCE SHEET (All figures in MYR mn unless otherwise indicated)

FY Dec 2009 2010 2011F 2012F

Total Assets 550.0 658.2 701.2 749.9

Fixed Assets 112.8 114.8 119.5 124.3
Current Assets 274.8 346.1 363.3 384.3
Other LT Assets 162.4 197.3 218.3 241.3
Current Liabilities 197.1 191.8 207.6 224.7
LT Liabilities 44.5 120.2 130.1 140.8
Total Liabilities 241.6 311.9 337.7 365.5
Share Capital 216.4 216.4 216.4 216.4
Minority Interest 0.0 0.0 0.0 0.0
Ow ners' Equity 308.4 346.3 363.5 384.4
Total Equity 308.4 346.3 363.5 384.4
Total Liabilities & Equity 550.0 658.2 701.2 749.9

PER SHARE DATA (All figures in sen unless otherwise indicated)

FY Dec 2009 2010 2011F 2012F

Revenue 23.4 25.8 24.1 29.3

Cash Flow 1.9 2.7 2.0 2.3
Earnings 1.1 1.9 1.2 1.5
Dividends 0.0 0.0 0.0 0.0
Book Value 21.8 24.4 25.6 27.1
Payout (%) 0.0 0.0 0.0 0.0
P-S (x) 0.7 0.6 0.7 0.6
P-CF (x) 8.1 5.8 8.8 7.7
P-E (x) 14.1 8.1 14.4 11.9
P-BV (x) 0.7 0.6 0.7 0.6
Dividend Yield (%) 0.0 0.0 0.0 0.0
ROE (%) 5.1 7.9 4.7 5.4
Total Debt/Equity (%) 78.4 90.1 92.9 95.1

Copyright 2011, Wilson & York Global Advisers Sdn Bhd | See important disclosures at end of this report Page 3 of 6
 Operating Margins Turnover MYR (mn)
-20.0% -10.0% 0.0% 10.0% 20.0% 30.0% 0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0
9-03 6-02
12-02
3-04
6-03
9-04
12-03
3-05
6-04
9-05 12-04
3-06 6-05
WILSON & YORK

9-06 12-05
6-06
3-07

OPERATING PROFIT MARGINS

12-06
9-07
6-07
3-08
12-07
9-08 6-08
3-09 12-08

9-09 6-09
12-09
3-10
REVENUE (QUARTERLY,LAST 8 YEARS,MYR mn)

6-10
9-10
12-10

Total Debt/Owner Equity Net Profits MYR (mn)

0.0% 50.0% 100.0% 150.0% 200.0% 250.0% 300.0% 350.0% -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0
9-03 6-02

3-04 12-02

9-04 6-03

Copyright 2011, Wilson & York Global Advisers Sdn Bhd | See important disclosures at end of this report
12-03
3-05
6-04
9-05
12-04
3-06 6-05
9-06 12-05

3-07 6-06
12-06
9-07
6-07
TOTAL DEBT/OWNER EQUITY
3-08
12-07
9-08
6-08
3-09 12-08
9-09 6-09

3-10 12-09
6-10
9-10
NET PROFIT (Q’TERLY,LAST 8 YRS,MYR mn)
IRIS CORP BHD
MALAYSIA EQUITY

Page 4 of 6
15/4/2011

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 WILSON & YORK 15/4/2011

MALAYSIA EQUITY
IRIS CORP BHD

SHARE PRICE (MONTHLY,LAST 8 YEARS,MYR) P-BV (X) (MONTHLY,LAST 8 YEARS)

10.0
1.40
1.20

8.0
1.00
Share Price (MYR)

6.0
0.80

P-BV (X)
0.60

4.0
0.40

2.0
0.200.00

0.0
7-02

7-03

7-04

7-05

7-06

7-07

7-08

7-09

7-10
7-02

7-03

7-04

7-05

7-06

7-07

7-08

7-09

7-10

VALUATION METRICS RETURN ON EQUITY

30.0%

Apply Apply
His toric His tor ic
20.0%

Curre nt P-BV to ROE to

Cur re nt Ye ar Ye ar Cur re nt Curr e nt Fair
De c 2011 M e tr ics BV BV V alue *
10.0%
Return on Owner Equity

Sales (MY R mn) 341.6

-50.0% -40.0% -30.0% -20.0% -10.0% 0.0%

Book V alue (MY R mn) 363.5

9-03

3-04

9-04

3-05

9-05

3-06

9-06

3-07

9-07

3-08

9-08

3-09

9-09

3-10

9-10

Earnings (MY R mn) 17.2 18.2

ROE 4.7% 5.0%

P-BV (x) 0.7 0.7

P-E (x) 14.4 12.0

Market Cap (MY R mn) 248.1 239.9 218.1

Pric e (MY R) 0.18 0.17 0.15 0.15

Ave r age Fair V alue

(M YR) ** 0.16

*Proprietary Fair Value Model

** A check on our Proprietary Fair Value Model Price

Copyright 2011, Wilson & York Global Advisers Sdn Bhd | See important disclosures at end of this report Page 5 of 6
 WILSON & YORK 15/4/2011

MALAYSIA EQUITY
IRIS CORP BHD

ANALYST’S DISCLOSURE

BUY: Share price may exceed 10% over the next 12 months

TRADING BUY: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain

HOLD: Share price may fall within the range of +/- 10% over the next 12 months

TAKE PROFIT: Target price has been attained. Look to accumulate at lower levels

SELL: Share price may fall by more than 10% over the next 12 months

NOT RATED (NR): Stock is not within regular research coverage

All research is based on materials compiled from data considered to be reliable at the time of writing. However, information and opinions
expressed are subject to change at short notice, and no part of this report is to be construed as an offer or solicitation of an offer to transact
any securities or financial instruments whether referred to herein or otherwise.

We do not accept any liability directly or indirectly that may arise from investment decision-making based on this report. The company, its
directors, officers, employees and/or connected persons may periodically hold an interest and/or underwriting commitments in the secu-
rities mentioned.

All Rights Reserved. No part of this publication may be used or re-produced without expressed permission from Wilson & York Global
Advisers Sdn Bhd.

J Charles Wilson
Head of Research

ANALYST’S RECOMMENDATION RECORD

Price At Date of % Price Change Since

Ticker Date Recommendation FairValue Recommendation Prior Recommendation
ICB MK Equity 24-Feb-11 HOLD 0.15 0.15
ICB MK Equity 15-Apr-11 HOLD 0.15 0.18 16.7%

QUESTIONS? CONTACT THE INVESTMENT ADVISER:

Wilson & York Global Advisers Sdn Bhd

Suite B-11-3A, Level 11, Block B, Plaza Mont’ Kiara
2, Jalan Kiara, Mont’ Kiara
50480 Kuala Lumpur
Malaysia

Tel: +603 6203 2280

Fax: +603 6203 2281

E-mail info@wygainvesments.com
Website: www.wygainvestments.com

Copyright 2011, Wilson & York Global Advisers Sdn Bhd Page 6 of 6