LII HEN – LAST CHANCE BEFORE ANNOUCEMENT OF 2Q2010 FINANCIAL RESULTS

Price of Lii Hen suddenly surged to close at RM1.43/share (with intra-day high of RM1.45/share) last Friday on 20/8/2010. Prior to that, its price was hovering at around RM1.38/share level.

Its volume have also increased significantly to 873,200 for this normally thinly traded counter.

This may be a prelude to a good set of financial results to be announced – expected on this Monday or Tuesday!

For more details, please refer back to the earlier posting dated July 26, 2010.

OGAWA - WITH BUSINESS COSTING ALMOST FREE

OGAWA WORLD BHD
Primary Symbol & Exchange:
5128 - Ordinary Shares - Malaysian Stock Exchange

Price/share @ 20/8/2010 RM: 0.44
Mkt Cap RM’m : 52.80
Shares (m): 120.00
Par RM: 0.50

SECTOR CLASSIFICATION
MSEB: Trading
Fox Capital: Healthcare equipment
Executive Chairman: Wong Lee Keong
Managing Director: Wong Lee Keong

KNOWN MAJOR SHAREHOLDER(S) (as at 30/06/2009)
Great Genesis Sdn Bhd* 51.0%

* Deemed interested by the Chairman,Wong Lee Keong (32.0%), Lim Poh Khian (27.8%), Lim Mee Ling (12.1%), Cheah Yew Kong (12.1%), Chong Swee Main (8.9%) and Lim Wai Heng (7.2%). In addition,Wong Lee Keong also hold direct interest of 0.88%


Contact Info
No. 22 Jalan Anggerik Mokara 31/47, Kota Kemuning, 40460 Shah Alam, Selangor
Phone: 603-51214286
Fax: 603-51214386
Corporate website: http://www.ogawaworld.net/

BACKGROUND

Ogawa World (Ogawa) is a retailer of health and wellness equipment products, with a distribution network in eight countries in Asia Pacific. Products are marketed under in-house brands of “Ogawa” and “Deki”. Listed on the Main Board of Bursa Malaysia in April 2007, Ogawa is 51% owned by Great Genesis, which in turn is owned by Wong Lee Keong (32.0%), Lim Poh Khian (27.8%), Lim Mee Ling (12.1%), Cheah Yew Kong (12.1%), Chong Swee Main (8.9%) and Lim Wai Heng (7.2%). Cofounders Wong Lee Keong and Lim Poh Khian currently act as the Executive Chairman and Deputy Executive Chairman of Ogawa while the remaining four shareholders of Great Genesis also sit on the Board of Ogawa as Executive Directors.

Ogawa operates retail outlets in four proprietary markets (Malaysia, Singapore, Hong Kong and China) through 100%-owned subsidiaries. Ogawa does not own any equity interest in the operations of its four distributor markets (Australia, Indonesia, Thailand and Vietnam) – these markets are instead served by sole distributors appointed by Ogawa.

Ogawa’s history can be traced back to 1986 when co-founders Wong Lee Keong and Lim Poh Khian began trading household and electrical products such as water purifiers and kitchenware in Malaysia. Diversification into the health and wellness equipment market came in 1996 where the initial focus was on retailing a range of small massaging equipment and water filters.
Efforts were then put in place to increase product range and create market awareness for health and wellness equipment products – which was a relatively new concept in Malaysia. The “Ogawa” brand was developed in 1996 after which extensive marketing went into creating awareness of the brand name. In 2006, the “Deki” brand was developed for the lower-priced products to penetrate into new and under-served consumer markets including lower income customers and young executives.

Ogawa’s products are conceptualized in-house, helped by latest market trends and customer and supplier feedback. Designs and specifications are then submitted to external contract manufacturers – initially for a prototype production, and later for replication manufacturing. Some 5-10 new products, features and designs are introduced each year and to-date, Ogawa has obtained approvals for over 19 trademarks and has submitted applications for the registration over 20 additional trademarks.

Products sold can be divided into five categories, namely:
i) relaxation (products such as massage chairs);
ii) therapeutic (products such as foot massagers);
iii) fitness (products such slimming equipment);
iv) diagnostic (products such as blood pressure monitors and
v) hygiene (products such as air purifiers).

Massage chair products are Ogawa’s top selling item and make up 60%-70% of revenue. Foot massage products are the second top selling product and make up 15%-20% of revenue while portable massages are the third largest product sold (4%-5% of revenue).

In 2002, Ogawa expanded into regional markets, starting with Singapore and Indonesia. Ogawa has since built up a presence in five other regional countries, including most recently in Thailand, where operations started in January 2008. The distribution and retailing operations in these eight markets are conducted through two business models – either through proprietary markets, where the retail or POS (point of sales) outlet is owned and operated by Ogawa (Malaysia, China, Hong Kong and Singapore) or through distributor markets where sole distributors are appointed (Australia, Indonesia, Thailand and Vietnam).

Market Penetration Markets Year Penetrated
Peninsular Malaysia…… 1996
East Malaysia…………… 2001
Singapore and Indonesia. 2002
Australia…………………. 2003
China…………………….. 2005
Hong Kong and Vietnam. 2006
Thailand…………………..2008
Saudi Arabia……………..2009
Source: Company data

Contract manufacturing of Ogawa’s products is done in China, and here, Ogawa works with five to seven key suppliers. Ogawa pays for the contract manufacturing in US$ and the cost of the merchandise makes up an estimated 40%-45% of revenue. For the proprietary markets, rental makes up the second largest cost component, at 12%-15% of revenue while staff cost is the third largest component, at 10%-12% of revenue for an average sized outlet of 800 sq. ft. Aside from the initial training and technical services provided, there are generally no costs associated with the distributor markets, where Ogawa instead receives an average 15% margin of the sales to the distributors.

The health and wellness equipment market in Malaysia is dominated by two larger players – Ogawa, with the higher 36% market penetration share and Osim International, with a 21% market penetration share. Other smaller players include OTO Bodycare, Panasonic Malaysia and Gintell. The smaller players generally have a more limited range of products, with a smaller number of model types and in some cases, are not involved in product design and development.

In Ogawa’s overseas markets, competition comes primarily from Osim International and other smaller players – both local and international. Ogawa is being positioned as an international brand in these markets and strategic A&P efforts are in place to help this development. A&P activities center around both thematic advertising for longer term brand awareness and tactical promotions which encourage consumers to buy (such as launching contests with attractive prices).

Geographically, the Malaysian market remains the largest revenue contributor with RM 85.7 million, accounting for 66.7% of Group revenue as at 30/6/2009 but overseas business had increased to 33.3% at RM 42.8 million compared to 28.0% in the last financial year ended 30/6/2008.

During the financial year of 30/6/2009, Ogawa have successfully penetrated into Saudi Arabia with the appointment of a distributor. Today, Ogawa’s products can be found in 10 outlets in Jeddah and Riyadh. The distributor in Thailand had however ceased operations in January 2009. Therefore, Ogawa are now in 9 countries namely Malaysia, Singapore, China, Hong Kong, Australia, Indonesia, Vietnam, Myanmar and Saudi Arabia with a total of 150 outlets.



WHY WE FEEL OGAWA IS UNDERVALUED?


1) Ogawa is very financially strong with improving net cash holdings as follows:-

FYE…………….Net cash (Net cash/share)
30/6/2008…….. RM32.4m (27.0 sen/share)
30/6/2009…….. RM42.4m (35.4 sen/share)
30/6/2010…….. RM48.4m (40.3 sen/share)

Based on last traded price of 44.0 sen/share as at 20/8/2010, the market is only assigning value of only 4 sen/share for Ogawa’s business!



2) Ogawa has managed to make a convincing turnaround as follows:-

FYE…...…….……Net EPS
30/6/2005……..7.75 sen
30/6/2006……..9.56 sen
30/6/2007……..18.46 sen
30/6/2008……..-6.98 sen
30/6/2009……..-10.36 sen
30/6/2010……..6.91 sen


3) Ogawa’s has registered its best quarterly earnings for FYE 30/6/2010 since listing as follows:-
1Q2010…0.07 sen
2Q2010…0.31 sen
3Q2010…1.43 sen
4Q2010…5.10 sen
--------------------
Total.…….6.91 sen
--------------------

4) If Ogawa is able to maintain its earning performance, Ogawa is currently, extremely, undervalued!

5) We remain positive on the group’s earnings outlook, based on its revenue growth, which indicate recovery from recession. We see Ogawa well positioned to benefit from improving retail market conditions as the world continues its recovery from recession. Ogawa’s established presence in its home market of Malaysia indicates steady domestic revenues, while its export efforts mean that overseas markets, such as China and Singapore, would be longer term growth drivers.

6) Trading volume for Ogawa have surged significantly last week for this normally thinly traded counter with no even no trading for certain days:-

16/8/2010 1,295,000
17/8/2010 3,130,400
18/8/2010 15,151,800
19/8/2010 1,530,500
20/8/2010 3,883,300

Genting Singapore's target price upgraded by analysts

The Edge Malaysia for the week of 16/8/2010 - 22/8/2010 reports "Genting Singapore outshines Genting Malaysia".

It says Genting Singapore plc has played its cards well as proven by its recent sterling performance. For a casino that has been in operation for one full quarter, Genting Singapore seems to outshined its sister company, Genting Malaysia Bhd, which has been operating casino for four decades.

For 2Q2010 ended 30/6/2010, Genting Singapore reported a net profit of S$396.5m (RM925.9m) compared to a net loss of S$50.7m in 2009. Revenue soared to S$979.3m from S$120.1m previously. This translates to a net profit margin of ~40%, which is impressive by any standard.

This impressive set of results is attributed to the strong business generated by its integrated resort, Resorts World Sentosa (RWS) which contributed ~ 83% of group revenue. RWS, which took some 3 years to build, opened its doors to visitors on 14/2/2010. Contribution from UK casino is relatively pale by comparison.

The integrated resort recorded revenue of S$860.8m and Etitda of S$503.5m for 2Q2010 with its Ebitda margin standing at 58% on the back of a higher-than-industry-average win percentage in the premium-players market.

As anticipated, following the announcement of its 2Q2010 results, its share price jumped 18 cents or 14.06% in a day to an all-time high of S$1.46/share at last Friday's close.

Its group Ebitda of S$513.9m for 2Q2010 was way above consensus forecast of S$220m. Given the surprising earnings, analysts have upgraded their forecast and target price for Genting Singapore. It has 17 "buy" recommendations on it.

1. Aaron Fisher, a casinos analyst at CLSA Ltd in Hong Kong states that with such a strong set of results, their fair value for the counter will likely be revised to at least S$1.50.

2. Macquarie research says, while revenues were within expactations, 2Q2010's Ebitda margin of 58% was significantly above expectation. It maintains its "out-perform" call on the counter and raised its target price to S$1.60.

3. Credit Suisse estimates Genting Singapore's net profit for FY2010 to be S$380.4m and earnings to hit S$1.1 billion by FY2012.

4. JPMorgan maintains its "overweight" call on Genting Singapore with upgraded target price of S$1.55. It notes that its management remain upbeat on prospects and will continue to gradually ramp up its operation.

5. OSK Research have raised their target price for Genting Singapore from S$1.26 to S$2.02 while maintaining their BUY recommendation. Their valuation is based on SOP, to which we assign a 16x multiple on RWS’ FY11 EBITDA. This reflects a 20% premium on the valuation multiples of Macau casinos, which they think is justified given: i) the more transparent regulatory framework in Singapore, ii) strong EBITDA run rates from the stable and higher margin mass market segment, and iii) favorable supply dynamics ensuring robust initial organic growth as its catchment market expands. The stock is trading at an undemanding 8.2x FY11 EV/EBITDA and at a discount to Macau casinos’ 13x-14x.

Trading opportunity in GENTING SINGAPORE

GENTING SINGAPORE PLC
Primary Symbol & Exchange: GENS
G13 - Ordinary Shares - Singapore Exchange

Price/share @ 6/8/2010 SGD:1.26
Mkt Cap SGD (m) : 15,323.97
Shares (m): 12,161.88
Par -

SECTOR CLASSIFICATION
SGX: Services
Fox Capital: Gaming

Executive Chairman: Tan Sri Lim Kok Thay
Director/President & COO: Mr Tan Hee Teck

KNOWN MAJOR SHAREHOLDER(S) (as at 9/3/2010)
Genting Berhad + 51.77%

Contact Info
HEAD OFFICE

9 Penang Road,

#13-10 Park Mall

Singapore 238459

Tel : +65 6823 9888Fax : +65 6823 9878

BACKGROUND

Genting Singapore PLC* ("Genting Singapore") is a leading integrated resorts development specialist with over 20 years of international gaming expertise and global experience in developing, operating and/or marketing internationally acclaimed casinos and integrated resorts in different parts of the world, including Australia, the Americas, Malaysia, the Philippines and the United Kingdom (“UK”). It is a subsidiary of Genting Berhad and was incorporated in 1984 to invest in leisure and gaming-related businesses outside Malaysia. Genting Group is a collective name for Genting Berhad and its subsidiaries and associates. Genting Group is one of Asia’s leading and best managed multinationals. The Group is renowned for its strong management leadership, financial prudence and sound investment discipline. Genting Singapore is listed on the Main Board of the Singapore Exchange Securities Trading Limited ("Singapore Exchange").

Its principal activities are:
Development and operation of integrated resort
Casino operations
International sales and marketing services
IT application related services
Genting Singapore has an experienced management team that is focused on and committed to growing its business globally. The Group is the largest casino operator in the UK and is operator of a newly opened - world-class integrated family resort in Singapore.Genting Singapore is constantly reviewing new opportunities in the gaming, leisure and hospitality businesses.

WHY WE FEEL THAT THIS IS AN OPPORTUNITY FOR TRADING BUY BEFORE 2Q 2010 RESULTS ARE ANNOUNCED?


1) Genting Singapore (GENS) is scheduled to release its June period results on 12/8/2010 (next Thursday). Upbeat 2Q results are anticipated and this may be a strong catalyst for its share price.

2) Only 1/7/2010, GENS announced the disposal of its UK casinos for Sterling Pound350 million (RM1.67 billion) to Genting Malaysia Bhd. The deal is viewed favourably for GENS on the grounds that the proceeds will lighten the debt burden by removing the UK unit’s Sterling Pound 96 million in net debt from its balance sheet. Moreover, the disposal will allow GENS to concentrate on its SGD6 billion Resort World Sentosa (RWS) integrated resort in Singapore.

Genting UK casinos are not likely to bring significant value to GENS ‘s earnings given its weak and volatile earnings performance, attributed by the hike in UK gaming duties, the ban on smoking and the lack of scale to buffer volatile effects of hold rates [luck factor] in its VIP market.

3) On 2/8/2010, UBS raised target price to SGD1.52 from SGD1.23 after increasing 2011 EBITDA estimate by 18 per cent to SGD1.2 billion to assume higher margins. Kept Buy call. Said even if Marina Bay Sands manages to increase market share, what matters is absolute growth in revenue and profit.

4) JP Morgan has a “buy” recommendation on GENS with a fair value of SGD1.45. It believes that GENS will continue to be the market leader in Singapore despite the opening of Marina Bay Sands, predicting a daily net gaming revenue of SGD6.1 million and 45% margin this year.