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PP 7767/09/2010(025354)

Malaysia Corporate Highlights

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

R e su l ts N o t e
14 May 2010

Cuscapi Share Price

Fair Value
Sluggish Outlook Ahead Recom : Underperform

Table 1 : Investment Statistics (Cuscapi; Code: 0051) Bloomberg: CUSC MK

Net EPS Net
FYE Revenue EPS Profit Growth PER C.EPS* P/NTA P/CF ROE Gearing GDY
Dec (RMm) (sen) (RMm) (%) (x) (sen) (x) (x) (%) (x) (%)
2009 38.8 0.2 0.1 (76.1) 138.3 - 1.1 11.8 0.6 Cash 0.0
2010f 40.5 2.8 1.2 >100 8.0 - 0.7 4.1 7.2 Cash 13.0
2011f 45.1 4.7 2.1 69.8 4.7 - 0.7 3.4 11.7 Cash 13.0
2012f 48.1 5.7 2.6 21.2 3.9 - 0.6 3.2 13.2 Cash 13.0
ACE Market Listing / Non-Trustee Stock
RHBRI Vs. Consensus
♦ Above expectations. Cuscapi’s 1QFY10 net profit of RM0.71m (-4.5qoq, Above

+42.3yoy) was above our expectations, accounting for 32.3% of our full- In Line
year forecast. The variance was mainly due to: 1) higher contribution
from China’s F&B as well as retail, hospitality and consulting services; 2)
Issued Capital (m shares) 222.4
cost-cutting measures; and 3) higher contribution from its international
Market Cap(RMm) 22.2
Daily Trading Vol (m shs) 0.0
♦ Outlook remains dim. Cuscapi is currently undergoing restructuring 52wk Price Range (RM) 0.075-0.145
Major Shareholders: (%)
in order to strategically move towards higher international growth.
Transight Systems S/B 11.8
Note that Cuscapi has a presence in 29 countries (international clients
Her Chor Siong 10.4
contributed 35-40% of revenue in 4Q09) focusing on consulting services.
However, we believe demand for IT solution would remain slow amid still
sluggish corporate IT spending going into 2H2010. FYE Dec FY10 FY11 FY12
EPS chg (%) +27.3 +17.5 +14
♦ Risks. 1) Faster-than-expected recovery in global demand for F&B Var to Cons (%) -4 - -
managed services; 2) Less intense competition from international players;
PE Band Chart
and 3) Favourable exchange rate environment.

♦ Dividends. Management has declared an interim gross dividend of

PER = 45x
1.3sen which translates into a net yield of 9.8%. Assuming there are no PER = 30x
more dividends declared for the rest of the year, this would imply a net PER = 15x

payout ratio of 81.9% based on our full year EPS forecast. The
entitlement date is 3 Jun-10 and the payment date is 30 Jun-10.

♦ Forecasts. We have raised our FY10-12 net earnings forecast by 27.3%,

17.5%, and 14% respectively after factoring in: 1) expansion into the Relative Performance To FBM KLCI
international market; and 2) lower operating expenses.
♦ Valuations. Accordingly, we have raised our fair value to RM0.11/share
(from RM0.09/share) based on unchanged 9x FY10 PER. Although FBM KLCI

Cuscapi’s longer-term prospects appear positive given its expansion

internationally with the roll-out of new software and recovering global
economy, we highlight that medium-term earnings growth remains weak
given faster-than-expected margin erosion on the back of intense
competition from China and Taiwan. Hence, we reiterate our
Coverage under CMDF – Bursa
Underperform call on the stock.
Research Scheme

Wong Chin Wai

(603) 92802158
Please read important disclosures at the end of this report.
Yap Huey Chiang

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14 May 2010

Table 2. Earnings Review

1Q09 4Q09 1Q09 qoq yoy Comments
(RMm) (%) (%)
Revenue 7.4 11.0 10.5 (4.5) 42.3 Higher yoy due to higher contributions from international
clients and higher contribution retail, hospitality and China’s
F&B, but lower qoq due to higher operating costs
Cost of sales (3.4) (4.8) (4.7) (1.4) 41.0
Gross profit 4.0 6.2 5.8 (6.9) 43.3
Other income 0.1 0.0 0.4 >100 >100
Operating expenses (4.7) (5.0) (5.0) (0.5) 5.9
EBIT (0.6) 1.2 1.2 (0.6) >100 Lower yoy and qoq due to cost-cutting measures and lower
operating expenses from its international business
development activities.

Finance cost 0.0 0.0 0.0 n.m. n.m.

EI 0.0 0.0 0.0 n.m. n.m.
Pretax profit (0.6) 1.2 0.8 (33.4) <100
Taxation (0.0) (0.1) (0.1) (37.6) >100
Minority interest 0.0 0.0 0.0 n.m. n.m.
Net profit (0.7) 1.1 0.7 (32.8) >100
Norm profit (0.7) 1.1 0.7 (32.8) >100

Source: Company, RHBRI

Table 3. Earnings Forecasts Table 4. Forecast Assumptions

FYE Dec (RMm) FY09 FY10F FY11F FY12 FYE Dec FY10F FY11F FY12F
Managed services 10.6 12.8 14.7 16.2 Revenue growth (%) 16.5 11.6 6.6
Systems Integration 24.1 27.7 30.5 32.0 Managed services 20.0 15 10
Turnover 38.8 40.5 45.1 48.1 Systems Integration 15.0 10 5

Cost of sales (17.6) (17.1) (18.8) (19.8) Gross profit margin (%) 55.8 56.3 56.8
Managed services 90.0 90.0 90.0
EBITDA 3.7 7.2 7.7 6.9 Systems Integration 43.0 43.0 43.0
EBITDA margin (%) 9.6 17.8 17.1 14.3

Depreciation (2.5) (2.7) (2.9) (3.2)

EBIT 1.2 4.5 4.8 3.7

EBIT margin (%) 3.1 11.2 10.6 7.8

Interest income 0.1 0.1 0.1 0.2

Interest expense 0.0 0.0 0.0 0.0
Others income/exp 0.0 0.1 0.1 0.1
Exceptionals 0.0 0.0 0.0 1.0

Pretax profit 0.5 3.7 5.0 5.0

Taxation 0.2 (1.0) (1.3) (1.3)
Minority interest 0.0 0.0 1.0 2.0

Net profit 0.2 2.8 4.7 5.7

Source: Company data, RHBRI estimates

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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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securities, subject to the duties of confidentiality, will be made available upon request.

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