IQ’s  1HFY15  (Mar)  results  beat  our  estimates,  with MYR109m  revenue (+21% YoY) and  MYR14m net profit (+67% YoY)  reaching  59% and 99% of  our  respective  full-year  estimates,  driven  by  strong  overseas  sales and favourable foreign exchange rates.  Maintain BUY with a higher TP of MYR2.51 (47.6% upside), pegged to a FY15F P/E of 12x.  We raise our FY15 earnings estimate by 29% and introduce our FY16-17 forecasts.

Above expectations.  IQ Group’s (IQ) 1HFY15 results were  above our expectations,  with  revenue  of  MYR109m  (+21%  YoY)  and  net  profit  of MYR14m  (+67%  YoY)  accounting  for  59%  and  99%  of  our  respective full-year  estimates.  By  segment,  both  manufacturing  and  trading divisions  recorded  higher  sales  contributions  in  1HFY15,  up  26%  and 20% YoY respectively.  The better results were driven by higher  export sales and favourable foreign exchange rates. 

Interim  DPS  of  4  sen.  IQ  proposed  an  interim  dividend  of  4  sen  per share to reward its shareholders. This is the first dividend payout since FY07 (4 sen per share), suggesting that the company’s performance has improved  and  it  would  like  to  resume  its  policy  of  paying  dividendsannually. 

Maintain BUY  with a higher MYR2.51 TP. We believe IQ could do well in  FY15  as  exports  to  the  US,  Europe  and  Japan  markets  remain encouraging.  We  have  tweaked  our  FY15F  revenue  and  net  profit forecasts  higher  by  10%  and  29%  respectively,  to  reflect  its  better performance,  and  introduce  our  FY16-17  forecasts.  We  maintain  our BUY call on IQ, with a higher TP of MYR2.51 (from MYR2.03), pegged to a FY15F P/E of 12x  –  which is within the range of 10-15x P/Es of the consumer  stocks  (excluding  consumer  staples)  under  the  coverage  of our  consumer  analyst.  As  at  end-Sep  2014,  IQ  had  MYR18m  cash  in hand with zero borrowings.

v

Source: RHB