PP 7767/09/2010(025354)

Corporate Highlights 4 March 2010

Malaysia RHB Research

Institute Sdn Bhd
A member of the
R e su l ts N o t e RHB Banking Group
Company No: 233327 -M

4 March 2010
Adventa
MARKET DATELINE

Share Price : RM3.38

1Q10 Earnings Within Expectations Fair Value : RM4.34
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 15.4 - 2.7 0.4 18.1 2.8
2010f 412.4 45.7 31.5 31.5 43.2 10.7 29.0 2.3 0.5 22.8 3.6
2011f 532.1 62.0 42.8 42.8 35.7 7.9 40.0 1.9 0.4 25.9 4.3
2012f 651.7 75.8 52.2 52.2 22.1 6.5 50.0 1.5 0.3 26.0 5.1
Main Market Listing /Non-Trustee Stock/Syariah Approved Stock By The SC #Excluding EI * Consensus Based On IBES
E i

♦ Within expectations. Adventa’s 1QFY10/10 net profit of RM9.4m RHBRI Vs. Consensus
Above
(+24.7% yoy), accounted for 20.5% and 22.3% of our and consensus full-
√ In Line √
year net profit estimates respectively. We consider this to be in line with
Below
our forecast as we expect stronger earnings ahead following additional
capacity expansion that is expected to come on stream in 2H2010. As Issued Capital (m shares) 145.9
expected, no dividend was declared during the quarter. Market Cap(RMm) 492.1
Daily Trading Vol (m shs) 1.3
♦ 1Q revenue grew 2.5% qoq while core earnings grew 19.5% qoq. 52wk Price Range (RM) 0.80-4.21
Qoq, revenue grew 2.5% qoq mainly on the back of higher selling prices in Major Shareholders: (%)
order to pass on the higher raw material costs to customers. The increase Low Chin Guan & family 56.7
Lembaga Tabung Haji 5.2
in selling prices more than offset the higher raw material prices (+24.2%
Populus Mutual Fund 6.2
qoq) and weaker US$ (-2.3% qoq), as 1Q10 EBIT margin expanded by
1.7%-pts qoq. Coupled with lower effective tax rate of 6.7% (against FYE Oct FY10F FY11F FY12F
11.5% in 4Q09), offset by a higher minority interest, 1Q core net profit EPS chg (%) - - -
grew 19.5%. Var to Cons (%) 8.7 6.9 4.5

♦ Capacity expansion. Management has guided that the commercial PE Band Chart

production for its new factory in Kluang, Johor that houses seven double
former lines (+1.5 bn pieces), is on track to start by 2Q2010. This new
PER = 12x
seven double former lines will focus on producing dental and examination PER = 12x
gloves, which will increase the current annual production capacity of 3bn PER = 12x
PER = 12x
pieces to 4.5bn pieces by end-2010. Following that, in 2011, the
management plans to add another five double former lines, which will
increase Adventa’s annual capacity production for dental and examination
gloves to 5.5bn pieces by end-2011. Capex guided by the management is
RM30m per year, which will be funded internally and via borrowings. Relative Performance To FBM KLCI

♦ 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
Adventa
risk from its capacity expansion.

♦ Forecasts. We are keeping our FY10-12 earnings forecasts unchanged for FBM KLCI
now.

♦ Investment case. We maintain our indicative fair value of RM4.34, which

is based on target CY10 PER of 13x. No change to our Outperform call on
the stock.
David Chong, CFA
(603) 92802179
david.chong@rhb.com.my
Please read important disclosures at the end of this report.

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 4 March 2010

Table 2: Quarterly Earnings

1Q 4Q 1Q
FYE Oct (RMm) QoQ (%) YoY (%) Comments
FY09 FY09 FY10
Revenue 68.2 74.8 76.6 2.5 12.5 Yoy growth driven by continuous
capacity expansion and further
supported by higher selling prices to
pass on the higher raw material costs.
Operating profit 8.5 9.7 11.3 16.1 32.7
Net interest expense (1.5) (1.2) (1.2) 1.7 (15.8) Net gearing reduced to 0.4x as at 1Q10
(1Q09:0.5x)
Exceptional items (4.3) (2.4) - n.m. n.m. Relates to hedging loss on forex.
Pre-tax profit 2.8 6.1 10.1 65.3 >+100
Tax 0.5 (0.7) (0.7) (4.3) ->100
Minority interest (0.0) 0.0 (0.0) ->100 (19.0)
Net profit 3.2 5.4 9.4 73.3 +>100
Core net profit 7.5 7.9 9.4 19.5 24.7

Margins (%)
Operating profit 12.5 13.0 14.7 Qoq and yoy margin expansion as a
result of higher ravenue, which more
than offset higher latex prices (+24.2%
yoy) and strengthening of RM against
US$ (+2.3% yoy)
Pre-tax 4.1 8.1 13.1
Effective tax rate (17.9) 11.5 6.7 Lower than statutory rate due to
pioneer status and utilisation of
reinvestment allowances.
Net profit 4.7 7.2 12.2
Core net profit 11.0 10.5 12.2
Source: Company, RHBRI

Table 3 : Earnings Forecasts Table 4 : Forecast Assumptions

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

Turnover 282.9 412.4 532.1 651.7 Production

Turnover growth (%) 63.0 45.8 29.0 22.5 - surgical (m pairs) 350 449 480
- exam/dental (m pcs) 5,040 5,640 6,240
EBITDA 49.9 67.6 86.7 104.2
EBITDA margin (%) 17.6 16.4 16.3 16.0

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

EBIT
38.9 55.3 73.2 89.4
EBIT margin (%) 13.8 13.4 13.8 13.7
Net Interest (5.6) (7.0) (7.7) (9.5)
Associates 0.0 0.0 0.0 0.0
Exceptionals (14.9) 0.0 0.0 0.0
Pretax Profit 18.4 48.3 65.5 79.9
Tax (1.5) (2.4) (3.3) (4.0)
Minorities 0.1 (0.1) (0.1) (0.1)
Net Profit 17.0 45.7 62.0 75.8
Core net profit 31.9 45.7 62.0 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
Berhad (previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law.
The opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may
differ or be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is
not to be construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated
herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its
associated persons may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives
of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or
strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts
any liability for any loss or damage arising out of the use of all or any part of this report.

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 4 March 2010

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as
providing investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of
the RHB Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or
equity securities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other
services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

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.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended
securities, subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for
the actions of third parties in this respect.

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