1997.HK Bouncing back from Trough

of 10 /10
For ratings definitions and other important disclosure, refer to the Disclosure Section at the end of this report. May 3, 2012 Company Report BUY Price TargetHK$ 3.2 Upside+82% Price(HK$) 1.76 Shares Outstanding 575 Market Cap. (HK$ m) 3,604 Free float (%) 27.6 52 Week Range 1.44/ 2.9 Controlling Shareholder TSMT (72.4%) BVPS(USD) 0.17 Debt ratio (%) 61.1 Related ResearchRegent MannerTop player in SMTMarch 16, 2012 Regent MannerSpecialized in SMT with multiple growth driversApril 15, 2011 Electronics SectorGrowth Opportunities in Accelerating Industry UpgradeMarch 11, 2011 Investment Highlights 1Q12 result. Revenue grew by 20% to USD 389m, +17% QoQ. Gross margin dropped to 6.9% from 9.1% in 1Q11(11Q4: 6.8%) thanks to surging wages and R&D expenses. Net profit dropped 17.8% to USD 16.3m. Recovery in downstream panel industry driving shipment growth in LCD control board. Panel prices increased by 1-2% in late April across all major applications (monitor, laptop and TV). Panel makers like AU Optronics and CMI, which are the major customers of RMIHs control board, are increaseing capacity utilization. The new iPad (& possibly iPad Mini) and lower cost direct-type LED TV are catalysts for LED light bar growth . 1.)Sharp started shipping the new iPad panel in 2Q 2.) Apple might launch iPad Mini in 2H, which might drive the related supply chain 3Q shipments 3.)lower-cost direct type LED TV started to gain popularity. Increasing LED-TV penetration might further promote the growth of LED light bar business. White appliance and LED lighting sectors are new the value drivers. We expect new subsidy policy for energy saving would launch in this summer that might boost DC-inverter products volume supplied to Haier. RMIH is producing LED ballast for Philips and plans to work on LED light bulbs assembly. LED lighting is expected to account for 5-15% FY12 revenue and RMIH expects to earn 30-50% of Philips market share. We maintain our BUY rating with target price of HK$ 3.2. We expect ~10% and ~20% QoQ growth in 2Q and 3Q respectively, implying annual revenue growth target of 20-30%. Current share price is trading at FY12 P/E of 4.4x, which is a deep discount compared to its parent co. TSMT(6278.TT)s valuation (P/E of 8.7x). Financial Summary Year to Dec 2010A 2011A 2012E 2013E 2014E Turnover (USD m) 1,143 1,477 1,846 2,338 2,970 Turnover Growth (%) 69.5 29.2 25.0 26.7 27.0 Net Profit (USD m) 79 85 108 139 179 Net Profit Growth (%) 49.9 7.9 27.2 28.6 28.8 EPS (USD) 0.039 0.042 0.052 0.067 0.086 CFO per share(USD) 0.045 0.055 0.069 0.096 0.106 P/E (x) 5.8 5.4 4.4 3.4 2.6 P/B (x) 1.6 1.33 0.92 0.92 0.77 DPS(HKD) 0.17 0.14 0.18 0.23 0.29 Regent Manner1997.HKBouncing back from Trough Key Data Price Performance Chart Technology & Telecom AnalystBill Fan, CPA SFC CE No.: AUT752 00852-28998331 bill.[email protected]

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For ratings definitions and other important disclosure, refer to the Disclosure Section at the end of this report.
May 3, 2012
Free float (%) 27.6
Controlling Shareholder TSMT (72.4%)
March 16, 2012
multiple growth drivers
April 15, 2011
Accelerating Industry Upgrade
March 11, 2011
Investment Highlights
1Q12 result. Revenue grew by 20% to USD 389m, +17% QoQ. Gross
margin dropped to 6.9% from 9.1% in 1Q11(11Q4: 6.8%) thanks to
surging wages and R&D expenses. Net profit dropped 17.8% to USD
16.3m.
Recovery in downstream panel industry driving shipment growth in
LCD control board. Panel prices increased by 1-2% in late April across
all major applications (monitor, laptop and TV). Panel makers like AU
Optronics and CMI, which are the major customers of RMIH’s control
board, are increaseing capacity utilization.
The new iPad (& possibly iPad Mini) and lower cost direct-type LED
TV are catalysts for LED light bar growth . 1.)Sharp started shipping
the new iPad panel in 2Q 2.) Apple might launch iPad Mini in 2H, which
might drive the related supply chain 3Q shipments 3.)lower-cost direct
type LED TV started to gain popularity. Increasing LED-TV penetration
might further promote the growth of LED light bar business.
White appliance and LED lighting sectors are new the value drivers.
We expect new subsidy policy for energy saving would launch in this
summer that might boost DC-inverter products volume supplied to Haier.
RMIH is producing LED ballast for Philips and plans to work on LED
light bulbs assembly. LED lighting is expected to account for 5-15%
FY12 revenue and RMIH expects to earn 30-50% of Philips market
share.
We maintain our BUY rating with target price of HK$ 3.2. We expect
~10% and ~20% QoQ growth in 2Q and 3Q respectively, implying
annual revenue growth target of 20-30%. Current share price is trading at
FY12 P/E of 4.4x, which is a deep discount compared to its parent co.
TSMT(6278.TT)’s valuation (P/E of 8.7x).
Financial Summary
Turnover Growth (%) 69.5 29.2 25.0 26.7 27.0
Net Profit (USD m) 79 85 108 139 179
Net Profit Growth (%) 49.9 7.9 27.2 28.6 28.8
EPS (USD) 0.039 0.042 0.052 0.067 0.086
CFO per share(USD) 0.045 0.055 0.069 0.096 0.106
P/E (x) 5.8 5.4 4.4 3.4 2.6
P/B (x) 1.6 1.33 0.92 0.92 0.77
DPS(HKD) 0.17 0.14 0.18 0.23 0.29
Regent Manner1997.HK
\

6.9%(11Q4: 6.8%)
17.8% 1.63
LCD : 4
TFT-LCD
1%-2% ()
iPad 2 2.)
iPad Mini 3.)
3Q 1020%
20-30 2012 4.4,
(6278.TT)(P/E 8.7x)
12 3.2
31/12 2010A 2011A 2012E 2013E 2014E (USD m) 1,143 1,477 1,846 2,338 2,970 (%) 69.5 29.2 25.0 26.7 27.0 (USD m) 79 85 108 139 179 (%) 49.9 7.9 27.2 28.6 28.8 (USD) 0.039 0.042 0.052 0.067 0.086 (USD) 0.045 0.055 0.069 0.096 0.106 (x) 5.8 5.4 4.4 3.4 2.6 (x) 1.6 1.33 0.92 0.92 0.77 (HKD) 0.17 0.14 0.18 0.23 0.29
1997.HK
2012 5 3

2012 20% 3.89 17
iPad LED TFT-LCD
LCD
( LED) 9.1%
1: 23

2:

50 LCD
LCD 44%32%14% 10%

2012 5 3

TFT-LCD 1-2
1%-2% PC

2Q124-15%,
1Q 78% 80-85% 2Q12
10-20%, 1Q 8085 2Q 90 2Q LCD
10%
LED 48%
LED LED
12%33%25% 30%
4: iPad
LED LED LED LED LCD
NICHIA

2012 5 3

iPadLED,iPad15-20%
iPad2 CMILG Display 10%,50% 40%
iPadLG Display SHARP SHARP
Garter iPad 7300
LG Display iPad 1Q iPad
2Q iPad Mini,
2Q-3Q LED
40-50% 30-50%
TV CCFL 7-10% CCFL 30-40% LED 30-40%
Digitimes
LED TV 2010 2011 LED TV CCFL LCD
TV 30-40% LED TV
LED TV CCFL LCD TV 10%
1,750 LED 3
32 50
20125-10%15201330-50


7-11% 8-9% 6-7% 6-7%

2012 5 3


18.4623.3829.725%26.7%27%
8-92012-2014EPS0.0520.0670.086

1,698,036 1,918,781 2,149,034
(%) 15% 13% 12%
119,505 137,070 155,786
(%) 17% 15% 14%
99,189 113,768 129,302
(%) 17% 15% 14%
(USD) 0.0476 0.0546 0.0620
1,993,347 2,651,151 3,287,427
(%) 35% 33% 24%
140,290 189,349 238,187
(%) 38% 35% 26%
116,441 157,160 197,695
(%) 34% 35% 26%
(USD) 0.0559 0.0754 0.0948
2012 5 3

(6278.TT)(Forward P/E 8.7x)SMT
3.212137.96.2
(1997.HK) 5.5 4.4 3.4
(6278.TT) 12.3 8.7 6.9
(6176.TT) 12.8 10.7 9.5
11.8 8.5 7.0
1143 1477 1846 2338 2970
(1030) (1353) (1681) (2128) (2700)
113 123 164 210 270
9.9 8.3 8.9 9.0 9.1
(2) (2) (3) (4) (5)
(19) (25) (31) (40) (51)
2 3 (1) (1) (1)
1 3 1 1 2
96 102 130 167 215
(17) (17) (22) (28) (37)
79 85 108 139 179
0 0 0 0 0
79 85 108 139 179
(USD) 0.039 0.042 0.052 0.067 0.086
(HKD) 0.17 0.14 0.18 0.23 0.29

2012 5 3

53.99 83.93 58.57 91.89 148.9
168.34 108.42 311.02 340.04 394.72
23.17 15.23 39.05 58.69 83.71
7.9 9.02 19.39 31.84 52.51
253.4 216.59 428.03 522.46 679.84
84.15 90.49 95.93 144.8 186.53
: 91.56 98.92 103.04 151.89 194.53
344.96 315.51 531.07 674.35 874.37
151.21 108.69 281.04 323.61 402.54
12.89 12.84 13.11 36.22 57.72
17.22 13.11 18.87 34.59 40.87
181.32 134.64 313.02 394.42 501.13
0 0 0 0 27.7
1.32 1.66 1.13 3.26 5
1.32 1.66 1.13 3.26 32.7
182.64 136.29 314.15 397.68 533.83
0 0 0 0 0
162.32 179.22 216.92 276.67 340.54
344.96 315.51 531.07 674.35 874.37
(USD) 0.093 0.090 0.108 0.138 0.170

2012 5 3

Stock Ratings:
BUY: A return potential of 10 % or more relative to overall market within 6 – 12 months.
NEUTRAL: A return potential ranging from -10% to 10% relative to overall market within 6 – 12 months.
SELL: A negative return of 10% or more relative to overall market within 6 –12 months.
Sector Ratings:
BUY: The sector will outperform the overall market by 10% or higher within 6 –12 months.
NEUTRAL: The sector performance will range from -10% to 10% relative to overall market within 6 –12 months.
SELL: The sector will underperform the overall market by 10% or lower within 6 – 12 months.
Interest disclosure statement
The analyst is licensed by the Hong Kong Securities and Futures Commission. Neither the analyst nor his/her associates
serves as an officer of the listed companies covered in this report and has no financial interests in the companies.
Guosen Securities (HK) Brokerage Co., Ltd. and its associated companies (collectively “Guosen Securities (HK)”) has
no disclosable financial interests (including securities holding) or make a market in the securities in respect of the listed
companies. Guosen Securities (HK) has no investment banking relationship within the past 12 months, to the listed
companies. Guosen Securities (HK) has no individual employed by the listed companies.
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rather than profit made as a result of buying and selling securities.
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notification.
2012 5 3


6-1210%
6-1210%
6-1210%
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