Pelikan International Corp - New product & markets to power Pelikan

Pelikan International Corp - New product & markets to power Pelikan (Company Update)
Price: RM3.78
Target Price: RM5.10
Recommendation: BUY



· PowerPad and Hardcopy products formally launched in Asia this month. The innovative PowerPad product that is now available in Europe and Malaysia is expected to generate a potential RM30.2m and RM62.6m in FY08 and FY09 revenue respectively.

· Emerging markets of Latin America and Asia to be next avenues for growth. The firm expects FY08 sales to grow by 20% and 60% in Latin America and Asia respectively. The firm has re-acquired all its brand rights in Latin America except for Columbia and expects to increase profitability in the region by managing its own manufacturing and distribution. As for Asia, Pelikan has tied-up with several large distributors in India (Reliance Retail), China (Parkson Retail Group) and Malaysia (Parkson Holdings, Tech Asia, Giant, Carrefour) and is marketing its Hardcopy products in this region for the first time.

· ICULS fully-exercised, with all RM98.9m worth of ICULS converted as at 11 February 2008. Approximately RM63.9m RCULS remain outstanding.

· Re-iterate BUY recommendation with target price of RM5.10, based on unchanged 13.5x PER applied to FY08 FD EPS of 37.8 sen. The stock is currently trading at undemanding 10x and 8x FY08 and FY09 PERs. The stock should trade at higher valuations given Pelikan's rapid global expansion and growth prospects.


KENANGA INVESTMENT BANK BERHAD (15678-H)

Research Department