Swing Media: New Business, New Fortunes? (BUY\S$0.07\Target S$0.105)

James Lim (62323892, james.lim@dmgaps.com.sg)

Terence Wong, CFA (62323896, terence.wong@dmgaps.com.sg)

Initiate coverage with BUY; Target price at S$0.105.

one of the sexiest business around, given that it is a highly matured industry. But ironically, the

intense competition has killed off many of the bit players over the past five years, benefiting the

larger ones like Swing Media. It should continue to ride on the rising demand for DVDs, particularly

in its key market China. In addition to its core business, Swing Media is also targeting new solar

business to spur its growth. Currently looking undervalued at 0.5x FY10 P/B, we believe that it has

the capacity to trade up to its historical average of 0.7x P/B. Initiate with BUY recommendation and

target price of S$0.105.Manufacturing DVDs may not seem like

China-focused optical storage medium maker.

video cassettes and computer peripherals as well as engages in the trading of chemical dyes and

stampers from its plants in Hong Kong and Taiwan. Its primary product is the DVD-R while its main

export market is China, which had accounted for 62% of its total revenue in FY09.Swing Media manufactures DVD-Rs, CD-Rs,

Positive macro outlook.

Asia-Pacific entertainment and media industry is expected to grow at 4.5% CAGR to reach

US$413b by 2013, demand for optical storage medium is poised to rise. Furthermore, current

forecasts are gunning for global DVD-R shipments to increase by over 1b discs (+11.7%) from

2008 to 2011. Coupled with industry consolidation, Swing Media is thus well-positioned to grow its

market share.As China is anticipated to be one of the fastest growing nations and the

Move into green energy may boost earnings.

diversifying into the green energy field with the acquisition of a China-based specialist in the

installation of solar energy systems in petrol stations. If this project takes off, we estimate that

earnings may rise by 4% in FY10 and 36% in FY11.Swing Media just announced that it will be

FYE Mar (HK$m) FY07 FY08 FY09 FY10F FY11F

Turnover 450 .2 527 .4 634 .9 705 .3 777 .2

Net Profit 33.5 37.0 38.1 40.1 44.5

% chg YoY na 10.5% 3.1% 5.2% 11.1%

EPS (Są) 1.96 1.73 1.50 1.34 1.16

DPS (Są) 0.28 0.20 0.10 0.10 0.10

Div Yield 4.7% 3.3% 1.7% 1.7% 1.7%

ROE 10.0% 8.2% 7.6% 7.0% 7.4%

ROA 5.0% 4.6% 3.9% 4.1% 4.4%

P/E (x) 3.6 4.1 4.7 5.2 6.0

P/B (x) 0.3 0.4 0.4 0.5 0.4