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
MARKET DATELINE

1 March 2010

Euro Holdings Share Price

Fair Value
:
:
RM0.48
RM0.28
Recom : Underperform
(Maintained)
Within Expectations

Table 1 : Investment Statistics (EURO;Code: 7208) Bloomberg: EUHO MK

Net Net
FYE Turnover profit EPS Growth PER C.EPS* P/CF P/NTA ROE Gearing GDY
Dec (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (%) (x) (%)
2009 64.9 (3.5) (4.3) (167.9) (11.5) - 10.8 0.6 (5.2) 0.3 0.0
2010f 103.6 2.7 3.3 (176.9) 15.0 5.0 5.0 0.6 3.9 0.3 3.0
2011f 112.2 4.3 5.3 57.6 9.5 7.0 4.6 0.56 5.9 0.0 4.4
2012f 125.7 6.5 8.1 53.1 6.2 - 3.7 0.5 8.4 0.0 5.0
Main Market Listing / Non-Trustee Stock / Not Syariah-Approved Stock By The SC * Consensus Based On IBES
E i
RHBRI Vs. Consensus
♦ Wthin expectations. Euro’s 4Q net loss narrowed to RM0.3m from 3Q’s Above
net loss of RM1.0m. For the full-year, Euro reported a net loss of RM3.5m √ In Line
(FY08: net profit of RM5.2m), which was in line with our but below Below √

consensus estimates. As expected, no dividend was declared during the Issued Capital (m shares) 81.0
quarter. Market Cap(RMm) 40.5
Daily Trading Vol (m shs) 0.1
♦ Revenue up 11.6% qoq while 4Q net loss narrowed to RM0.3m 52wk Price Range (RM) 0.40-0.59
from RM1.0m in 3Q. Revenue increase by 11.6% qoq as a result of more Major Shareholders: (%)
Liew Fatt Sin 22.3
projects secured during the quarter, in tandem with improving economic
Dato’ Mohd Haniff A. Aziz 9.4
conditions. With better utilisation rates, 4Q net loss narrowed to RM0.3m
Law Sim Shee 13.3
from RM1.0m in 3Q.
FYE Dec FY10 FY11 FY12
♦ Full-year revenue fell 39.9% yoy, which management attributed to the EPS chg (%) (4.6) (4.3) n.a.
Var to Cons (%) (33.3) (24.9) n.a.
slow down in demand, especially in the first half of the year, as a result of
the softening of the global economy. Due to the lower revenue, Euro
Share Price Chart
recorded an operating loss of RM4.0m (FY08: operating profit of RM7.3m)
and as a result, Euro recorded a net loss of RM3.5m in FY09.

♦ Outlook. We expect Euro to return to the black in FY10 on the back of a

continued recovery in demand and project flows as the global economy
improves. Potential dampeners ahead, however, could include rising raw
material costs and forex fluctuations.

♦ Risks. 1) Lower raw material prices (aluminium and steel); 2) Larger- Relative Performance To FBM KLCI
than-expected new projects secured; and 3) Weaker RM (vs. the US$) as
exports sales make up 40-43% of total sales in 1HFY09. FBM KLCI

♦ Forecasts. We have tweaked our FY10 and FY11 earnings forecasts Euro Holdings
slightly to reflect the balance sheet of Euro as at Dec ’09. We introduced
our FY12 numbers.

♦ Investment case. Our fair value have been lowered to RM0.28 (from
RM0.30), which is based on unchanged target FY10 PER of 8.5x. Maintain Coverage Under CMDF-Bursa
Research Scheme
Underperform call on the stock.
David Chong, CFA
(603) 92802179
Please read important disclosures at the end of this report. david.chong@rhb.com.my

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Table 2. Earnings Review

QoQ YoY YoY
FYE Dec (RMm) 4Q08 3Q09 4Q09 (%) (%) FY08 FY09 (%) Comments
Revenue 23.5 17.5 19.6 11.6 (16.8) 107.9 64.9 (39.9) Lower yoy due to the drop in demand
arising from the weak global economic
situation. Higher qoq as a result of
more projects secured during the
quarter.

EBIT 1.4 (1.0) (0.4) (59.2) nm 7.3 (4.0) nm Sharper yoy decline due to margin
squeeze.
Interest Expense (0.2) (0.2) (0.3) 14.8 7.3 (0.9) (0.9) (1.0)
Pretax Profit 1.2 (1.2) (0.7) (45.2) ->100 6.3 (4.9 ->100 Yoy largely filtered down from EBIT
level.
Taxation (0.1) 0.2 0.3 37.5 +>100 6.3 (4.9) ->100
Net Profit 1.1 (1.0) (0.3) (64.8) ->100 5.2 (3.5) ->100

Margin (%)
EBIT 6.1 (5.6) (2.0) 6.7 (6.1) Yoy margin contraction due to
operating leverage effects resulting
from lower utilisation rates.
Pre-tax margin 5.1 (6.9) (3.4) 5.9 (7.5)
Effective tax rate 9.2 19.2 48.0 18.3 28.1 Full-year effective tax rate higher than
the statutory tax rate primarily due to
non-deductible expenses, partially
mitigated by reinvestment allowances
claimed.
Net profit 4.6 (5.6) (1.8) 4.8 (5.4)
Source: Company, RHBRI

Table 3 : Earnings Forecasts Table 4: Forecast Assumptions

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

Turnover 64.9 103.6 112.2 125.7 Capacity (tonnes p.a.) 292,896 439,344 439,344
Turnover growth (%) (39.9) 59.5 8.3 12.0 Chairs 228,096 342,144 342,144
Workstations 64,800 97,200 97,200
EBIT (4.0) 5.5 7.6 10.6 Utilisation rate
53% 60% 65%
EBIT margin (%) (6.1) 5.3 6.8 8.5

Net Interest (0.9) (1.9) (1.9) (1.9)

Pretax Profit (4.9) 3.6 5.7 8.7

Tax 1.4 (0.9) (1.4) (2.2)
Minorities - - - -
Net Profit (3.5) 2.7 4.3 6.5
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
(previously known as RHB Sakura Merchant Bankers). 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.

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.

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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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