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 All required disclosures and analyst certification appear on the last two pages of this report. Additional information is available upon request.
 
Redistribution or reproduction is prohibited without written permission. Copyright © 2010 The McGraw-Hill Companies, Inc. Page 1 of 4
Yikon Corporation
Recommendation:
HOLD
Stock Code:
7139
Bloomberg:
YCB MK
Price:
MYR0.20
12-Month Target Price:
MYR0.30
Date:
 August 24, 2010
Price (MYR)
0.000.501.001.502.002.503.00Price30 Day Moving Average
 
Board:
 
Main
 
Sector:
 
Consumer Products
 
GICS:
 
Consumer Discretionary/Apparel, Accessories &Luxury Goods
Market Value - Total:
MYR8.6 mln
 
Summary:
Yikon is an investment holding company withsubsidiaries engaged in the manufacture, trading and exportof gold jewelry and ornaments.
 Analyst:
 
Lorraine Tan, CFA
Vol ('000)
04080120160Aug 07Oct 07Jan 08Mar 08May 08Jul 08Oct 08Dec 08Feb 09Apr 09Jun 09Sep 09Dec 09Apr 10Jun 10Aug 10Volume
 
Results Review & Earnings Outlook
 
Yikon turned in a profit of MYR0.7 mln in 2Q10 following a drop in itscost of goods sold, lower other operating expenses and higher other income. The latter, we believe, is due to a reversal in a receivableimpairment of MYR1.6 mln. Hence, stripping this out, Yikon wouldreport a net recurring loss of MYR0.85 mln in 2Q10. This nonethelessrepresents an improvement over 1Q10’s net loss of MYR1.4 mln,which had been dampened by a hedging loss.
 
Assuming that Yikon can continue to contain costs, we expect animproving performance in 2010 although the company is likely tocontinue to make losses this year. With the disposal of its Malaysianassets last year, Yikon’s profit is largely driven by its China retailoperations. At this stage, revenue does not indicate fast growth andwe assume 10% and 20% growth in 2010-2011, respectively.
 
Gross profit margins have jumped, however, to 18.1% and 31.5% in1Q10 and 2Q10, respectively. This marks an improvement over 14.1%in 2009. We believe this is due to the closure of its Malaysianoperations. We have, however, lowered our full year gross profitmargin assumption to 25% from 30% to factor in the risk of a morechallenging 2H10 environment as global growth slows.
 
After finetuning our assumptions and factoring in the receivablereversal, our 2010 net loss is lowered to MYR1.1 mln from MYR1.3mln. Our 2011 net profit is reduced to MYR0.8 mln from MYR1.2 mln.
Recommendation & Investment Risks
 
Yikon’s share price has fallen sharply in the past year and slid a further 55.6% since end-March, 2010. It should be noted that the shares rarelytrade. As such, while the current price level is below Yikon’sNTA/share of 26.2 sen as of end-June, 2010, there remains significanttrading risk from the lack of activity. Nonetheless, we believe that thecurrent price level better reflects the fundamentals of the company andwe raise our recommendation to Hold from Strong Sell.
 
The lack of profit leaves Yikon’s valuation difficult to ascertain by mostmarket measures. Although we previously valued Yikon at 2x NTA, tobe more prudent in light of the sharp price fall recently, we base our 12-month target price at 1x estimated 2010 NTA. This results in areduction in our target price to MYR0.30 from MYR0.67.
 
Visibility for Yikon’s profitability remains challenging in the absence of any sustained revenue improvement and periodic risk of trading/hedging losses. Hence, upside drivers will need to come fromevidence that its China operations are gaining ground.
 
Risks to our recommendation and target price include unexpectedcollection difficulties and trading losses. The lack of liquidity also addstrading risk to its shares. Limited free cash flow and high net gearingmeans the company has little financing flexibility and this may result ina higher chance of cash calls.
Key Stock Statistics
FY Dec.
2009 2010E
Reported EPS (sen)
-16.9 -2.6
PER (x)
NM NM
Dividend/Share (sen)
0.0 0.0
NTA/Share (MYR)
0.35 0.32
Book Value/Share (MYR)
0.35 0.32
No. of Outstanding Shares (mln)52-week Share Price Range (MYR)Major Shareholders:Global Gold Holdings LtdChin Kok OnChin Poh On* Stock deemed Shariah compliant by the Securities Commission.
7.27.243.10.20 - 0.85%29.4
 
Per Share Data
FY Dec.
2007200820092010E
Book Value (MYR)0.780.530.350.32Cash Flow (sen)-37.2-24.9-15.8-1.8Reported Earnings (sen)-42.0-30.8-16.9-2.6Dividend (sen)0.00.00.00.0Payout Ratio (%)0.00.00.00.0PER (x)NMNMNMNMP/Cash Flow (x)NMNMNMNMP/Book Value (x)0.30.40.60.6Dividend Yield (%)0.00.00.00.0ROE (%)-42.3-47.4-38.4-7.6Net Gearing (%)54.866.072.474.9* Data for 2008 is for 14-month period due to change in FY end to Dec
 
 
 All required disclosures and analyst certification appear on the last two pages of this report. Additional information is available upon request.
 
Redistribution or reproduction is prohibited without written permission. Copyright © 2010 The McGraw-Hill Companies, Inc. Page 2 of 4
Yikon Corporation
Recommendation:
HOLD
Stock Code:
7139
Bloomberg:
YCB MK
Price:
MYR0.20
12-Month Target Price:
MYR0.30
Date:
 August 24, 2010
FY Dec. / MYR mln
2Q102Q09% Change
Reported Revenue3.73.8-1.1Reported Operating Profit1.1-1.3NMDepreciation & Amortization-0.1-0.2-46.1Net Interest Income / (Expense)-0.3-0.5-35.4Reported Pre-tax Profit0.8-1.8NMReported Net Profit0.7-1.8NMReported Operating Margin (%)28.6-35.7-Reported Pre-tax Margin (%)20.2-48.8-Reported Net Margin (%)19.1-48.8-* Data for 3Q08 is not available.Source: Company data
Quarterly Performance
 
Profit & Loss
FY Dec. / MYR mln
200820092010E2011E
Reported Revenue57.114.515.919.1Reported Operating Profit-10.7-5.90.11.9Depreciation & Amortization-2.5-0.5-0.40.6Net Interest Income / (Expense)-2.0-1.9-1.1-1.0Reported Pre-tax Profit-13.2-7.8-1.10.9Effective Tax Rate (%)NMNM0.05.0Reported Net Profit-13.3-7.3-1.10.8Reported Operating Margin (%)-18.7-40.40.610.2Reported Pre-tax Margin (%)-23.1-53.6-7.04.6Reported Net Margin (%)-23.2-50.0-7.04.4* Data for 2008 is for 14-month period due to change in FY end to DecSource: Company data, S&P Equity Research
 
 
 
Required Disclosures
Redistribution or reproduction is prohibited without written permission. Copyright © 2010 The McGraw-Hill Companies, Inc. Page 3 of 4
Standard & Poor’s Equity Research Services
Standard & Poor’s Equity Research Services U.S. includes Standard & Poor’sInvestment Advisory Services LLC; Standard & Poor’s Equity Research ServicesEurope includes Standard & Poor’s LLC- London; Standard & Poor’s EquityResearch Services Asia includes Standard & Poor’s LLC’s offices in Hong Kongand Singapore, Standard & Poor’s Malaysia Sdn Bhd, and Standard & Poor’sInformation Services (Australia) Pty Ltd.
GlossaryStrong Buy:
Total return is expected to outperform the total return of the KLCI or KL Emas Index respectively, by a wide margin over the coming 12 months, withshares rising in price on an absolute basis.
Buy:
Total return is expected to outperform the total return of the KLCI or KL EmasIndex respectively, over the coming 12 months, with shares rising in price on anabsolute basis.
Hold:
Total return is expected to closely approximate the total return of the KLCI or KL Emas Index respectively, over the coming 12 months with shares generallyrising in price on an absolute basis.
Sell:
Total return is expected to underperform the total return of the KLCI or KLEmas Index respectively, over the coming 12 months and share price is notanticipated to show a gain.
Strong Sell:
Total return is expected to underperform the total return of the KLCI or KL Emas Index respectively, over the coming 12 months by a wide margin, withshares falling in price on an absolute basis.
 S&P 12 Month Target Price
 – The S&P equity analyst’s projection of the marketprice a given security will command 12 months hence, based on a combination of intrinsic, relative, and private market valuation metrics.
Shariah-compliant stock -
As defined by the Shariah Advisory Council of Malaysia’s Securities Commission
Required Disclosures All of the views expressed in this research report accurately reflect theresearch analyst's personal views regarding any and all of the subjectsecurities or issuers. No part of analyst compensation was, is, or will be,directly or indirectly, related to the specific recommendations or viewsexpressed in this research report. Additional information is available upon request.Other Disclosures
 This report has been prepared and issued by Standard & Poor’s and/or one of itsaffiliates. In the United States, research reports are prepared by Standard & Poor’sInvestment Advisory Services LLC (“SPIAS”). In the United States, research reportsare issued by Standard & Poor’s (“S&P”); in the United Kingdom by Standard &Poor’s LLC (“S&P LLC”), which is authorized and regulated by the FinancialServices Authority; in Hong Kong by Standard & Poor’s LLC, which is regulated bythe Hong Kong Securities Futures Commission; in Singapore by Standard & Poor’sLLC, which is regulated by the Monetary Authority of Singapore; in Malaysia byStandard & Poor’s Malaysia Sdn Bhd (“S&PM”), which is regulated by theSecurities Commission; in Australia by Standard & Poor’s Information Services(Australia) Pty Ltd (“SPIS”), which is regulated by the Australian Securities &Investments Commission; and in Korea by SPIAS, which is also registered in Koreaas a cross-border investment advisory company.The research and analytical services performed by SPIAS, S&P LLC, S&PM, andSPIS are each conducted separately from any other analytical activity of Standard& Poor’s.A reference to a particular investment or security by Standard & Poor’s and/or oneof its affiliates is not a recommendation to buy, sell, or hold such investment or security, nor is it considered to be investment advice.Indexes are unmanaged, statistical composites and their returns do not includepayment of any sales charges or fees an investor would pay to purchase thesecurities they represent. Such costs would lower performance. It is not possible toinvest directly in an index.Standard & Poor's and its affiliates provide a wide range of services to, or relatingto, many organizations, including issuers of securities, investment advisers, broker-dealers, investment banks, other financial institutions and financial intermediaries,and accordingly may receive fees or other economic benefits from thoseorganizations, including organizations whose securities or services they mayrecommend, rate, include in model portfolios, evaluate or otherwise address.
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This report has been prepared by S&PM for purposes of CBRS administered byBursa Malaysia Berhad, independent from any influence from CBRS or the subjectcompany. S&P will receive total compensation of RM15,000 each year for eachcompany covered by it under CBRS. For more information about CBRS, pleasevisit Bursa Malaysia’s website at:http://www.bursamalaysia.com/website/bm/ 
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 This material is based upon information that we consider to be reliable, but neither S&P nor its affiliates warrant its completeness, accuracy or adequacy and it shouldnot be relied upon as such. With respect to reports issued to clients in Japan and inthe case of inconsistencies between the English and Japanese version of a report,the English version prevails. With respect to reports issued to clients in Germanyand in the case of inconsistencies between the English and German version of areport, the English version prevails. Neither S&P nor its affiliates guarantee theaccuracy of the translation. Assumptions, opinions and estimates constitute our  judgment as of the date of this material and are subject to change without notice.Neither S&P nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is notnecessarily indicative of future results.This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. Any opinionsexpressed herein are given in good faith, are subject to change without notice, andare only correct as of the stated date of their issue. Prices, values, or income fromany securities or investments mentioned in this report may fall against the interestsof the investor and the investor may get back less than the amount invested. Wherean investment is described as being likely to yield income, please note that theamount of income that the investor will receive from such an investment mayfluctuate. Where an investment or security is denominated in a different currency tothe investor’s currency of reference, changes in rates of exchange may have anadverse effect on the value, price or income of or from that investment to theinvestor. The information contained in this report does not constitute advice on thetax consequences of making any particular investment decision. This material is notintended for any specific investor and does not take into account your particular investment objectives, financial situations or needs and is not intended as arecommendation of particular securities, financial instruments or strategies to you.Before acting on any recommendation in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professionaladvice.For residents of the U.K. This report is only directed at and should only be relied onby persons outside of the United Kingdom or persons who are inside the UnitedKingdom and who have professional experience in matters relating to investmentsor who are high net worth persons, as defined in Article 19(5) or Article 49(2) (a) to(d) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, respectively.For residents of Singapore - Anything herein that may be construed as arecommendation is intended for general circulation and does not take into accountthe specific investment objectives, financial situation or particular needs of anyparticular person. Advice should be sought from a financial adviser regarding thesuitability of an investment, taking into account the specific investment objectives,financial situation or particular needs of any person in receipt of therecommendation, before the person makes a commitment to purchase theinvestment product.For residents of Malaysia. All queries in relation to this report should be referred toAlexander Chia, Desmond Ch’ng or Ching Wah Tam.
 
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