MALAYSIA INVESTMENT RESEARCH REPORT KDN PP13226/04/2010 (023662)

JF APEX SECURITIES BERHAD

(47680-X)

JF Apex Securities Berhad Newsletter (Initial Coverage)

16 June 2010 Target Price: RM1.50

Voir Holdings Bhd

Price (15 Jun 10)
KLCI Stock Data Bursa / Bloomberg code Market / Sector Syariah Compliant status Issued shares (m) Par Value (RM) Market cap. Price over NTA 52-week price Range Beta (against KLCI) 3-m Average Daily Volume 3-m Average Daily Value^
^ based on closing price

Benefiting from rising consumer income RM1.33

1298.37

BUY

7240 / Voir MK Main / Ind Yes 60.0 1.00 RM79.80m 1.11 RM1.20 1.61 0.46 0.06 RM0.08

Voir Holdings Berhad or Voir is principally involved in designing, developing, branding, marketing and retailing of apparels and accessories. Besides fashion retailing business, the group has also ventured into Food&Beverage business under the brand name Garden Lifestyle Store and Caf. The group currently owns seven in-house brands and one licensed brand. On the back of better economic prospect in 2010, we believe that Voir is well-positioned to benefit from the expected higher disposable income among consumers. In this issue, we are initiating our coverage on Voir with a Buy call at a target price of RM1.50.
Highlights o Fashion apparels and accessories Tracing its history back to the 1970s, Voir started out as a sole proprietorship by venturing into retailing of ladies wear. Over the years, the group has grown into a multi-brand fashion wear, casual apparels and lifestyle enterprise by expanding its products range to include ladies, men and children apparels, eyewear, shoes, home furnishing and decoration, accessories, tableware and bed&bath products. Focusing on the mid to high-end market, the group currently owns seven in house brands (Voir, Soda, Noir, G&H, Applemints, SouthChinaSea as well as Garden Lifestyle Store and Caf) which altogether constitutes about 90% of Voirs revenue in FY2009. Besides that, the group also distributes one international licensed brand (Diadora) through its network of retail outlets. o Government focus on high-income economy On the back of supportive government policies to focus on highincome economy (in which per capita income of Malaysian is projected to reach RM26,420 and RM38,850 in 2010 and 2015, respectively), we believe that Voir should benefit from the rising consumer purchasing power. Overall, we expect revenue growth of 10% in FY2010 and 11% in FY2011. o Ventured into Food&Beverage business Besides fashion retailing business, the group has also ventured into Food&Beverage business through its subsidiary, Graceful Hall Sdn Bhd, under the brand name Garden Lifestyle Store and Caf. This segment is expected to provide further growth opportunities for Voir and to date, two Garden Caf outlets were opened in 2009. The group plans to open 3-4 outlets in 2010.

Major Shareholders 1) Marvellous Future Sdn Bhd 2)Ulasan Teguh Sdn Bhd 3) Heng Kear Huat Share Performance (as at 15 Jun 10) 1m Absolute (%) -2.2 Relative (%-pts) 0.9 Historical PE FY Highest Lowest Financial Forecast
FYE dec (RMm) Revenue Operating profit Pretax profit Core Net profit EPS (sen) PER (X) DPS (sen) Div Yield (%) 08A 149.45 14.95 12.66 6.50 16.27 8.17 0.00 0.00 09A 149.71 9.36 7.79 7.70 8.57 15.52 5.00 3.76 10F 164.68 14.49 13.27 9.95 16.64 7.99 5.00 3.76

55.78% 12.43% 6.82%

3m 0 -2.1

12m 6.4 -10.6

FY07 9.68 3.38

FY08 8.54 3.05

FY09 15.65 7.32

11F 182.80 19.12 17.90 13.43 22.44 5.93 5.00 3.76

Important Balance Sheet Items (as at 31 Mar 10) NTA / share (RM) 1.23 Trade Receivables (RM m) 18.56 Trade Payables (RM m) 2.42 Total Assets (RM m) 112.72 Net Cash /(Debt) (RM m) (25.59) * N.M = not meaningful

o Stronger Revenue and Net Profit in 1QFY10 - In 1QFY10,

Voir posted stronger revenue of RM41.42m (up 18.3% y-o-y), mainly due to the stronger consumer spending power and the groups efforts in achieving revenue growth. Besides that, the group recorded higher net profit of RM1.61m (up 124% y-o-y),

Please read carefully the important disclosures at end of this publication

16 Jun 2010

Initial Coverage Voir Holdings Bhd

JF APEX SECURITIES

mostly due to the increase in sales and better control of operating expenses.

o Buy with TP RM1.50 We value Voir at 6.7x PER (10%

premium to its peers), which we deem reasonable given that the proposed share split is expected to enhance the liquidity of Voirs shares. With our forecast EPS 2011 of 22.4 sen, we value Voir at RM1.50. BUY. Company Background

Founded in 1970s

Voir Holdings Berhad or Voir traces its history back to the 1970s when Mr. Seow Khim Soon and his mother first ventured into retailing of ladies wear with its own brand Voir under sole proprietorship. In 1988, the family business was then transferred to a private limited and thereafter, registering their owned brand Voir in 1990. About 20 years later, Voir achieved its listing status as the group was listed on the Second Board of Bursa Malaysia Securities Berhad in 2007. From the date of its listing, the group continues to progress and was finally transferred to Main Board of Bursa Malaysia Securities Berhad on 27-November-2008.

Corporate Structure

Fashion apparels, eyewear, shoes, accessories, home furnishing&decoration, tableware and bed&bath products

Voir group has grown into a multi-brand fashion wear, casual apparels and lifestyle enterprise by expanding its products range to include ladies, men and children apparels, eyewear, shoes, home furnishing and decoration, accessories, tableware and bed&bath products. Focusing on the mid to high-end market, the group currently owns seven in house brands (Voir, Soda, Noir, G&H, Applemints, SouthChinaSea as well as Garden Lifestyle Store and Caf) which altogether constitutes about 90% of Voirs revenue in FY2009. Besides that, the group distributes one international licensed brand (Diadora) through its network of retail outlets. Overall, Voirs revenue is primarily derived from the local market (98% of revenue in FY2009), followed by overseas markets (2% of revenue in FY2009)

16 Jun 2010

Initial Coverage Voir Holdings Bhd

JF APEX SECURITIES

Strong in ladies wear segment

Among all of its products, the group is particularly strong in ladies wear segment as it accounted for about 75% of total revenue in FY2009. Meanwhile, the groups flagship brand Voir was the groups major revenue contributor in FY2009 as it contributed the biggest chunk of revenue (Voir: 42-43%, Soda: 25-26% and Other brands: 31-33%). Figure 1: Revenue contribution breakdown by brand

Other Brands 33%

Voir 42%

Soda 25%

Voir

Soda

Other Brands

*Other brands include Noir, G&H, Applemints, SouthChinaSea, Diadora and Garden Lifestyle Store and Caf

Business model: Consignment, Own Boutique and Outright Sale

Voir currently has three distinct business models: i) consignment (375 counters) ii) own boutique (38 single brand boutiques; 7 multi-brand galleries) and iii) outright sales. For consignment business model, the group engages with departmental store such as Jusco, Parkson and Sogo to open its store. Upon selling of its product, the departmental store will receive the cash on behalf of Voir. After deducting the trade margin, the departmental store will then pay the remaining balance to Voir. At the export front, the groups products are currently available in Indonesia, Thailand, Brunei, UAE, Reunion Island, Mautitius and Dubai. In all its export markets, the group engages in outright sales to overseas distributors by appointing distributors in the respective countries. These appointed distributors will then decide to penetrate the market through the departmental stores or retail outlets channels. While the group develops its own brand of apparels and accessories, it does not manufacture its own products. The manufacturing processes are outsourced to third party manufacturers through appointed buying house. This strategy has been successful so far in creating competitive advantage at the business level as the group is able to minimise its operating costs and does not have to bear fixed manufacturing and maintenance costs. As the group adopts the multi-brand strategy, Voir has continuously engaged in brand promotion activities in order to enhance its brand awareness. In FY2009, 2% of total revenue was allocated to advertising and promotion activities. Brands such as Voir and Soda have spawned a number of sub-labels that are to cater the different needs and preferences of consumers. The group was awarded the Malaysian Superbrand awards in 2004 for two of its brands, namely Voir and Soda. Strong branding is an essential element in ensuring continued success as the group is able to command a better price for its products, which is expected to increase its profit margin in the long run. Meanwhile, its own team of 40 designers designs all its in-house branded products.

Outsourcing manufacturing process

Strong brand name and experienced design team

16 Jun 2010

Initial Coverage Voir Holdings Bhd

JF APEX SECURITIES

Earnings Outlook & Recent Development

Per capita income is projected to reach RM26,420 and RM38,850 in 2010 and 2015, respectively

Although there is no readily available public industry figure, we believe that the demand for apparels is income elastic. (i.e. as income increase, demand increases faster than income). On the back of the supportive government policy to focus on high-income economy (in which per capita income of Malaysian is projected to reach RM26,420 and RM38,850 in 2010 and 2015, respectively), we believe that Voir should benefit from the rising consumer purchasing power. The group plans to expand its sales network by opening 2 multi-brand galleries, 4 single-brand boutiques, 3-4 Garden caf outlets and 20-30 consignment counters in 2010. We view its expansion plans positively as it will allow the group to expand its sales network as well as sales volumes. As a result, we have assigned 10% growth rate for Voirs revenue in FY2010. For FY2011, we are projecting for its revenue to grow 11% y-o-y. Overall, we believe our projection is justified given that the management has guided towards double-digit revenue growth for FY2010 and FY2011. Apart from that, we also noticed that Consumer Sentiment Index has recovered from the recent low of 71.4 in Dec-08 to 109.6 as of Dec-09, with the trend of the index seemed to move back to pre-recession level by mid of 2010. Figure 2: Consumer Sentiment Index

Revenue growth of 10% to 11% for FY10 and FY11, supported by outlet expansion

Consumer Sentiment Index has recovered

Source: Malaysian Institute of Economic Research

New growth engine: Food&Beverage Business

Besides fashion retailing business, the group has also ventured into Food&Beverage business through its subsidiary, Graceful Hall Sdn Bhd, under the brand name Garden Lifestyle Store and Caf. This segment is expected to provide further growth opportunities for Voir and to date, two Garden Caf outlets were opened in 2009. The group plans to open 3-4 outlets in 2010 due to encouraging response from consumers. We expect this segment to contribute about 10% of the group's revenue by 2010. Voir proposed a share-split exercise on the basis of one share of RM1 each into two shares of 50 sen each. The proposed share split is expected to enhance the liquidity of Voirs shares. However, the proposal is still subject to the approval from Shareholders at the forthcoming AGM.

Proposed share split 1 into 2

16 Jun 2010

Initial Coverage Voir Holdings Bhd

JF APEX SECURITIES

Financial Review

Healthy revenue growth in the past five years

Voirs revenue has been growing steadily in the past five years with CAGR of 7.2%. For FY2010 and FY2011, we have projected revenue growth of 10% and 11%, respectively. For FY2010, we expect the growth rate to surpass FY2009 rate of 0.2% due to better economy outlook, which should translate into higher consumer spending. Meanwhile, the food&beverage segment is expected to provide further growth opportunities for Voir on the back of aggressive expansion plan. In FY2009, Voirs core net profit rose 18.5% to RM7.7m (excluding one-off expenses of RM2.57m) as compared to last year due to better control of operating expenses and after excluding one-off gains of RM3.31m attained in FY2008. For FY2010, we have assumed operating costs to be stable and thus arriving at net profit forecast of RM9.95m. The groups balance sheet remains healthy, with improving gearing ratio and current ratio. As at 31 Dec 2009, Voirs gearing ratio stood at 0.35x (vs 0.46x in FY2008). Meanwhile, we also noticed that its current ratio has improved to 2.04x from 1.8x in FY2008. In FY2009, the group paid out total dividend of 5 sen per share. On the back of better earnings expectation, we believe that Voir should be able to pay out at least 5 sen per share dividend in FY2010, which translates into 3.8% dividend yield. Figure 3: Voir historical and forecast revenue
Revenue (RM 'm) Growth Rate (%)

Core net profit recovered in FY2009

Improving gearing ratio and current ratio

Expect 5 sen dividend in FY2010

200.00 180.00 160.00 140.00 120.00 100.00 80.00 60.00 40.00 20.00 0.00 2005 2006 2007 2008 2009 2010F 2011F

18% 16% 14% 12% 10% 8% 6% 4% 2% 0%

Source: Company, JF Apex estimation

16 Jun 2010

Initial Coverage Voir Holdings Bhd

JF APEX SECURITIES

Figure 4: Voir historical Core Net Profit

Core Net Profit (RM 'm) Growth Rate (%)

12.00 10.00 8.00 6.00 4.00 2.00 0.00 2005 2006 2007 2008 2009

40% 30% 20% 10% 0% -10% -20% -30% -40% -50%

Source: Company, JF Apex estimation

In 1QFY10, Voir posted stronger revenue of RM41.42m (up 18.3% y-o-y, -1.9% qo-q), mainly due to the stronger consumer spending power and the groups efforts in achieving revenue growth. Besides that, the group recorded higher net profit of RM1.61m (up 124% y-o-y), mostly due to the increase in sales and better control of operating expenses as the net profit margin has increased to 6.7% from 4.1% in 1QFY09.

Stronger revenue and net income in 1QFY10

Investment Risks

Possible poor economy in FY2010

As Voirs target market is on the mid to high-end market, the groups revenue is sensitive to economy growth. Although we are positive on 2010 economic prospect, there is no guarantee that this will be achieved. Should the economy growth is weaker than expected, consumer purchasing power will likely be eroded, causing pressure to Voirs revenue and net income. The success of the business is dependent on Voirs ability to create trendy and fashionable designs that meet consumers preferences and tastes. The groups performance will be affected if there are any adverse changes in consumer preferences and fashion trends as there is no assurance that the demand for Voirs products will be sustained in the foreseeable future. The Group does not manufacture its own apparels and rely on buying houses/suppliers for continuous and consistent supply of quality products. Besides that, the group does not enter into long-term supply contracts with its buying houses/suppliers, which could affect the groups business if there are any supply disruptions. Valuation

Uncertainty in fashion trend

Over-dependence on Buying Houses or Suppliers

Buy at RM1.50

We have chosen Padini Holdings Bhd, Bonia Bhd, Hing Yiap Knitting Industries Bhd and Teo Guan Lee Corp to perform our peer comparison with Voir. As a result, we have arrived at average industry PER of 6.1x. However, we value Voir at 6.7x PER (10% premium to its peers), which we deem reasonable given that the proposed share split is expected to enhance the liquidity of Voirs shares. With our forecast EPS 2011 of 22.4 sen, we value Voir at RM1.50. BUY.

16 Jun 2010

Initial Coverage Voir Holdings Bhd

JF APEX SECURITIES

Security Hing Yiap Knitting Industries Bhd. Teo Guan Lee Corp. Padini Holdings Bhd. Bonia Corp. Bhd.

Figure 5: Voir Price To Earnings Valuation Mkt Cap (RM 'm) Price (RM) EPS11F (RM) 45.97 43.75 484.22 203.59 1.10 1.09 3.68 1.01 Average PE 10% Premium FY2011F EPS (sen) Target Price (RM) 0.24 0.18 0.49 0.17

PER11F 4.6 6.2 7.5 5.9 6.1 6.7 22.4 1.50

Figure 6: Historical Price Movement 15/6/2008 15/6/2010

16 Jun 2010

Initial Coverage Voir Holdings Bhd

JF APEX SECURITIES

Figure 7: Voir 1Q2010 results RESULTS SUMMARY Financial Item/Quarter Revenue (RM m) Operating Profit (RM m) Profit before Taxation (RM m) Net Profit (RM m) Operating margin (%) 1Q10 41.42 2.79 2.42 1.61 6.74% 4Q09 42.24 2.90 2.50 1.40 6.87% 1Q09 35.00 1.45 1.00 0.72 4.09% QoQ -1.94% -3.79% -3.20% 15.00% N.M. YoY 18.34% 92.41% 142.00% 123.61% N.M.

FYE Jun (RM m) Revenue COGS Other Operating Income

Figure 8: Financial Statement Forecast FY08 FY09 FY10F FY11F 149.45 149.71 164.68 182.80 -79.82 -80.93 -89.03 -100.72 5.26 1.50 1.50 1.50 -49.44 -10.49 14.95 2.70 17.65 -2.09 -0.20 12.66 -2.85 6.50 -0.05 9.76 16.27 8.17 0.00 0.00 -50.20 -10.72 9.36 3.89 13.25 -1.57 0.00 7.79 -2.66 7.70 0.02 5.14 8.57 15.52 5.00 3.76 -51.71 -10.96 14.49 4.14 18.63 -1.22 0.00 13.27 -3.32 9.95 0.03 9.98 16.64 7.99 5.00 3.76 -53.26 -11.20 19.12 4.34 23.46 -1.22 0.00 17.90 -4.48 13.43 0.04 13.47 22.44 5.93 5.00 3.76

Selling & Distribution Expense Admin Expense EBIT Depr & Amort EBITDA Finance Cost Associates PBT Tax Core Net Profit Minority Interest Net Profit (Equity) EPS (sen) PER Gross DPS (sen) Div Yield (%) Margin EBITDA PBT Net Profit

11.81% 8.47% 6.57%

8.85% 5.20% 3.42%

11.31% 8.06% 6.04%

12.84% 9.79% 7.34%

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Initial Coverage Voir Holdings Bhd

JF APEX SECURITIES

JF APEX SECURITIES BERHAD CONTACT LIST

JF APEX SECURITIES BHD Head Office: th 6 Floor, Menara Apex Off Jalan Semenyih Bukit Mewah 43000 Kajang Selangor Darul Ehsan Malaysia General Line: (603) 8736 1118 Facsimile : (603) 8737 4532 PJ Office: th 15 Floor, Menara Choy Fook On No. 1B, Jalan Yong Shook Lin 46050 Petaling Jaya Selangor Darul Ehsan Malaysia General Line: (603) 7620 1118 Facsimile : (603) 7620 6388 DEALING TEAM Head Office: Kong Ming Ming (ext 3237) Shirley Chang (ext 3211) Norisam Bojo (ext 3233) Derrick Ng Wei Yee (ext 3239) Edwin Loh Ming Hon (ext 3236) Wong Wing Haur, Alvin (ext 3226) Gan Huai Hsia (ext 3214) Institutional Dealing Team: Lim Teck Seng Sanusi Manso (ext 740) Edy Sukasma (ext 745) Fathul Rahman Buyong (ext 741) Ramlee Sulaiman (ext 742) Ahmad Mansor (ext 744) Lum Meng Chan (ext 743) PJ Office: Mohd Hanif Wan Said (ext 111) RESEARCH TEAM Head Office: Norhashmilaidi Hashim (ext 758) Ng Keat Yung (ext 753) Lim Seong Chun (ext 759) Phoon Thai Yoon (ext 755) Jason Tan (ext 752))

JF APEX SECURITIES - RESEARCH RECOMMENDATION FRAMEWORK

STOCK RECOMMENDATIONS BUY HOLD SELL TRADING BUY
: The stocks total returns* are expected to exceed 10% within the next 12 months. : The stocks total returns* are expected to be within +10% to 10% within the next 12 months. : The stocks total returns* are expected to be below -10% within the next 12 months. : The stocks total returns* are expected to exceed 10% within the next 3 months.

TRADING SELL : The stocks total returns* are expected to be below -10% within the next 3 months. SECTOR RECOMMENDATIONS OVERWEIGHT
: The industry as defined by the analyst is expected to exceed 10% within the next 12 months.

MARKETWEIGHT : The industry as defined by the analyst is expected to be within +10% to 10% within the next 12 months. UNDERWEIGHT
: The industry as defined by the analyst, is expected to be below -10% within the next 12 months.

*capital gain + dividend yield

JF APEX SECURITIES BERHAD - DISCLAIMER

Disclaimer: The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of JF Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report. Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of JF Apex Securities Berhad and are subject to change without notice. JF Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. JF Apex Securities Berhad 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 JF Apex Securities Berhad. JF Apex Securities Berhad may from time to time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written approval of JF Apex Securities Berhad.

JF Apex Securities Berhad (47680-X) (A Participating Organisation of Bursa Malaysia Securities Berhad)

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