TejariRR1H09

Tejari Technologies BerhadResearch Report For The First Half Year Ended 31 May 2009

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1. FINANCIAL HIGHLIGHTS

The following is the summary of the consolidated audited financial results of Tejari Technologies Berhad(“TTB” or “Company”) and its subsidiaries (“TTB Group” or “Group”) for the past four (4) financialyears and unaudited six (6)-month financial period ended 31 May 2009:-

Financial year ended (“FYE”) 30 November 6-month periodended 31 May 2009

Proforma * Audited

2005 2006 2007 2008

RM’000 RM’000 RM’000 RM’000 RM’000

Turnover 16,796 20,948 23,809 28,994 6,701

Consolidated Profit before tax/Loss before tax

(“PBT/(LBT)”)

3,419 3,508 4,346 3,164 (1,918)

PBT/(LBT) Margin (%) 20.36 16.75 18.25 10.91 (28.62)

Consolidated Profit after tax/Loss after tax

(“PAT/(LAT)”)

3,014 3,360 4,039 3,065 (1,918)

PAT/(LAT) Margin (%) 17.94 16.04 16.96 10.57 (28.62)

Gross earnings/(Loss) per share EPS/(LPS)

(sen)

2.8 2.9 2.9 1.94 (1.18)

Net EPS/(LPS) (sen) 2.4 2.7 2.7 1.88 (1.18)

Weighted average number of shares in issue

(‘000)

123,000# 123,000# 152,260 163,000 163,000

Notes:-* Proforma Group figures as extracted from TTB’s prospectus dated 16 February 2007.# For FYEs 30 November 2005 to 2006, the gross/ net EPS is calculated based on the proforma profit before/ after tax

attributable to shareholders of TTB Group and the number of shares in issue after:(i) the acquisitions of Tejari Sdn Bhd (TSB), Tejari Controls Sdn Bhd (TCSB), Tejari Controls (JB) Sdn Bhd (TCJSB)

and Tejari Hoseal Solutions Sdn Bhd (THSSB); and(ii) the sub-division of TTB’s 12,300,000 ordinary shares of par value of RM1.00 each into 123,000,000 ordinary

shares of RM0.10 each.

Commentary on the financial performance of the TTB Group

TTB Group recorded total unaudited revenue of RM6.701 million for the 6 months period ended 31 May 2009,representing a decrease of 55.34% in sales compared with preceding period of RM15.004 million. The lowerrevenue was mainly due to deteriorating demand in the hydraulic market in the global economic slowdown.

The Group has suffered a loss before taxation of RM1.918 million for the 1st half of 2009 as compared to profitbefore taxation of RM2.128 million in the preceding period. The revenue was mainly due to lower revenue withdecrease in sales margin as a result of intense competition coupled with the weakening of Ringgit against Dollarwhich had increased the cost of certain materials.


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2. OUTLOOK OF THE INDUSTRY

Outlook of Malaysian Economy

The Malaysian economy contracted by 6.2% (4Q 08: +0.1%) in the first quarter of 2009, amidst a significantdeterioration in external demand, following the deepening recession in advanced economies. The largeinventory drawdown, particularly in the manufacturing and commodity sectors, also contributed to the declinein growth in the first quarter. Fixed investment registered a decline due to weaker business sentiment. Publicsector spending, however, provided some support to growth. On the supply side, all sectors recorded contractionexcept for the construction sector.

During the quarter, domestic demand registered a decline of 2.9% (4Q 08: 2.8%) as a result of more cautiousspending by businesses and households following the weakening of overall business and economic conditions.Private consumption also declined marginally by 0.7% (4Q 08: 5.3%) as expenditure was affected bydeteriorating labour market conditions. Consumer sentiments had, however, improved in March, with the MIERConsumer Sentiments Index increased to 78.9 points from 71.4 points in the fourth quarter of 2008. Meanwhile,public consumption expanded by 2.1%, underpinned by higher spending on emoluments as well as supplies andservices.

During the quarter, gross fixed capital formation declined by 10.8% (4Q 08: -10.2%), due mainly to the weakerprivate investment activity, as business confidence deteriorated amidst the decline in external demand.Nevertheless, higher public sector capital spending, particularly on education, agriculture and ruraldevelopment, reflected the Government’s commitment to mitigate the adverse impact of external developmentson the domestic economy. Gross exports declined sharply by 20% following a sharp contraction inmanufactured exports (-18%), as well as lower commodity exports. Performance of manufacturing exports wasaffected by lower demand for both electronics and electrical (E&E) and non-E&E products from major markets.In addition, commodity exports turned negative (-23.8%; 4Q 08: 6.1%), reflecting the impact of lower pricesand weaker demand.

The Malaysian economy has been adversely impacted by these negative global developments that have resultedin the sharp decline in exports and its consequent effect on the economy in the first quarter. These effects havecontinued into the second quarter. The domestic economy is expected to improve in the second half of the year,supported by stabilisation in global economic conditions, and reinforced by the accelerated implementation ofthe fiscal measures, the further moderation in inflation, continued access to financing, as well as from thecumulative effects of the accommodative monetary environment. As exports are expected to continue todecline, growth will be supported by domestic demand, particularly by the implementation of fiscal stimulus. Inthis environment, the Bank’s efforts will continue to be directed at ensuring access to credit by all segments ofthe economy.

(Source: Bank Negara Malaysia, Economic and Financial Developments in Malaysia in the First Quarter of2009, 27 May 2009)

3. BUSINESS DEVELOPMENT PLAN AND FUTURE PROSPECTS OF TTB

The Board is expecting a challenging year ahead for the hydraulic industry as the global economic slump willfurther dampen demand.

Based on the above and barring unforeseen circumstances, the Board will continue to ensure efficiencies of theGroup’s business operations.


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4. RESEARCH AND DEVELOPMENT

The Group believes that continuous investments in R&D is pivotal to keep abreast with the latest hydraulictechnological advancements, changes in customers’ demands and industry developments. The Groupstrengthens its core competencies in design, development and production of eHAS by utilizing its R&Dcapabilities to continuously enhance and develop eHAS solutions. The Group also endeavours to be pro-activetowards developments in the eHAS industry and continues to identify business opportunities. In order tomaintain its competitive advantage and sustainability in the industry, the Group’s strategies for future growthcontinues to be based on the following:-

(a) Enhancement of R&D capabilities to ensure competitiveness in the industry;

(b) Venturing into R&D projects to expand product range by leveraging on the Group’s R&D and designcapabilities. Please refer below for the list of the Group’s ongoing R&D projects;

(c) Increase sales in eHAS projects to industries such as marine, logistics, chemical and oil & gas; and

(d) Proactively working with customers to offer innovative engineering solutions in view of the developmentand changing trends of the eHAS industry.

The on-going R&D activities undertaken by the Group are as follows:

(A) Hydraulic Application Development:

Research and development of hydraulic application is on going with the objective to add more features andapplications to meet different industries needs.

(B) Alternate Energy Development:

Complete development of Crude Palm Oil based biodiesel production reactor. A pilot production plant withcapacity of 1 metric ton per hour was set up. Further development using feedstock other than palm oil is alsoinitiated.

(C) Further Development:

Development of hydraulic fluid for protection of industrial pipe system from rusting during system flushing andfire resistant hydraulic fluid for power drive unit is on-going. Commercialization of products is expected in 2nd

half of 2009.


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The status of the research initiatives and the expenses spent is as follows:

Research Initiatives StatusR&D expenditure From

1 December 2008 to 31 May 2009RM’000

(A) Hydraulic Application Development On-going 37

(B) Alternate Energy Development On-going 129

(C) Further Development On-going 45

The R&D expenditure raised from the public issue is expected to be fully utilized within the intended timeframeand the R&D allocation is expected to improve the future financial performance of TTB Group.

5. TOP 10 SHAREHOLDERS AS AT 15 JULY 2009

No. Name of shareholders No of shares held Percentage (%)

1 Komsama Holdings Sdn Bhd 30,892,810 18.95

2 Goh Boon Leong 12,500,000 7.67

3 Ooi Chan Huat 7,018,334 4.31

4 Chan Ah Ba 6,494,480 3.98

5 Teoh Geok Cheng 6,350,923 3.90

6 H’ng Sok Kheng 6,155,439 3.78

7 Lee Teoh Kee 4,311,600 2.65

8 Yang Mi Nah @ Minah Yong 3,702,997 2.27

9 Ooi Tok Lan 3,534,167 2.17

10 Ng Swee Fong 2,982,900 1.83

6. FINANCIAL FORECAST

The Group has not publically disclosed any profit forecast for the financial year ended 30 November 2009 in theProspectus dated 16 February 2007.


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7. UTILISATION OF PROCEEDS

TTB was listed on the MESDAQ Market of Bursa Securities on 9 March 2007. The status and breakdown ofutilisation of proceeds raised from the public issue as at 29 February 2008 is set out below:-

Purpose ProposedUtilisation

Actual UtilisationAs at

31 May 2009

Intendedtimeframe for

utilisation

Deviation Explanations

RM’000 RM’000 RM’000 (%)Expansion of factorybuilding

2,650 2,650 18 monthsfrom listing

Research &Developmentexpenditure


Repayment of bankborrowings

1,300 1,300 6 months fromlisting

Purchase of machineryand equipment


Sales and marketingexpenditure


Working capital 1,800 1,836 24 monthsfrom listing

36 2.0 See # below

Estimated listingexpenses

1,350 1,314 6 months fromlisting

(36) (2.7) See # below

Total 11,200 11,149

#The unused portion of listing expenses is allocated to working capital

TejariRR1H09

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