• Business profile: Insas is involved in the following segments: 1) Financial services and credit & leasing (RM13m or 20% of 9MFY15 PBT): Stock broking and dealing in securities, provision of corporate finance and advisor y services, credit and leasing and granting of loans and other related financing activities, provision of share registration services, management services and nominee agents; 2) Property investment and development (incurred pretax loss of RM1.7m in 9MFY15); 3) Investment holding and trading of quoted securities and other related financial instruments (incurred pretax loss of RM22.2m in 9MFY15); 4) Retail trading and car rental (RM3.5m or 5% of 9MFY15 PBT): Cars and limousines for hire/rental, wine merchant, retail and trading of high fashion wear, leather goods and other lifestyle-related products and operating food and beverages outlets; and 5) IT-related manufacturing and services (RM73.2m, including exceptional gain from quoted securities, or 110% of 9MFY15 PBT), mainly via its 27% stake (RM675m marketcap) in Inari.
• Meanwhile, Insas is also holding a 13% stake in HOHUP (RM51m marketcap), 11% stake in OMESTI (RM28m marketcap) and 9% in SYF (RM30m marketcap).
• Riding on the Inari’s success. Insas main asset is its 27% stake or RM675m in Inari, which already exceeded Insas marketcap of RM575m, implying that the market is valuing its Financial service and credit & leasing division; Property investment and development division; Investment holding and trading division; Retail trading and car rental division businesses for free!
• Undervalued gem. Valuations are undemanding as share prices are trading at 57.6% discount to BVPS of RM1.90 and 51.2% discount to RNAV of RM1.65. We think such valuations have provided a sufficient margin of safety and cushion further share price decline, thanks to its strong earnings visibility from its retail trading and car rental and IT-related manufacturing businesses, solid balance sheet (with net cash RM433m or 62 sen per share) and robust shareholders equity of RM1.25bn (9MFY15).
• Grossly oversold and ripe for a rebound. To recap, after surging to a 14-yr high of RM1.36 on 3 Apr 2014, Insas share prices corrected 45% to a low of RM0.75 on 16 Dec 2014 before consolidating upward to end at RM0.805 yesterday. The stock is building its base near RM0.80, with lower supports at RM0.775 (9 July low) and RM0.75 (16 Dec low). A strong push above RM0.825 (30-d SMA and downtrend line) bodes well for the stock to advance higher to RM0.85 (50-d SMA) , RM0.905 (200-d SMA) and our long term objective of RM0.98 (38.2% FR). Cut loss below RM0.73.

Source: Hong Leong Investment Bank Research - 30 Jul 2015