Mercury Securities Sdn Bhd

UPDATE REPORT
27 Aug 2012 RM0.44 RM239.1m ACE Market Technology

Ingenuity Solutions Berhad

Stock Code/Name: Analyst: Research Team 0034 / INGENS

Market Price: Market Capitalisation: Board: Sector:

Ingenuity Solutions Berhad (Ingenuity) has been in the limelight recently as an actively traded stock. Lets examine the basic fundamentals behind this company.

and the wholly-owned sub-subsidiary of group, namely Ingenuity Sdn Bhd.

the

Sole local vendor for ZTE mobile devices Subsequently on 15th August 2012, NineZTE, was appointed by ZTE (Malaysia) Corporation Sdn Bhd ("ZTE Malaysia"), to act as a sole local vendor for ZTE mobile devices. The group aims to assist resellers via its efficient marketing arm and after-sales service with its business partner, Ninetology. Ingenuitys management expects that this joint venture would help boost its ICT distribution business and contribute a significant profit for the group in the near future. Currently, Ninetology has more than 2400 dealers, 32 service centres and collection centres nationwide to provide sales support and after-sales service to ZTE customers. Ingenuity will, through NineZTE, strive to pave a strong foothold in the telecommunications distribution and services segments. The strategic partnership will bring Ingenuity closer towards realising its vision of becoming a leading onestop solutions provider in the nation. ZTE (Malaysia) Corporation Sdn Bhd is the Malaysian subsidiary of ZTE Corporation from China. ZTE Corporation is a leading global provider of telecommunications equipment and network solutions, and has a network of operators across 140 countries. It connects global customers via voice, data, multimedia and WLAN. Founded in 1985, ZTE is listed on both the Hong Kong and Shenzhen Stock Exchanges and is China's largest listed telecommunications equipment company.

COMPANY BACKGROUND
Ingenuity is basically a "Total Business ICT Solutions Provider" in Malaysia. With over a decade of operational history, the group has evolved and transformed itself by going beyond providing Business Software Solutions to System Integration & Services, IT Hardware and Software Distribution & Services, as well as Telecommunication Products Distribution & Services. Ingenuity plays a role in the distribution of ICT hardware and software ranging from laptops, desktops, software, computer technology products, mobile devices, multimedia-related equipment including accessories, to Telco services from several Malaysian telecommunication operators. The groups rapid expansion and commitment to service excellence has positioned itself as one of the nation's leading ICT distributors with more than 800 growing dealers nationwide. Ingenuity represents well-known vendors such as Acer, Toshiba, ZTE, Samsung, BenQ and Seagate.

RECENT DEVELOPMENTS
On 2nd August 2012, the group had announced the formation of NineZTE Sdn Bhd ("NineZTE"), a JV company between Ninetology Marketing Sdn Bhd ("Ninetology")

All information, views and advice are given in good faith but without legal responsibility. Mercury Securities Sdn. Bhd. or companies or individuals connected with it may have used research material before publication and may have positions in or may be materially interested in any stocks in the markets mentioned.

Mercury Securities Sdn Bhd Distributor for P1 Fiber Broadband On 27th August 2012, Packet One Networks (Malaysia) Sdn Bhd (P1) had appointed Unified Synergy Sdn Bhd (Unified Synergy), a subsidiary of Ingenuity as the distributor for its newly- launched P1 fiber broadband for businesses known as P1 ForBizFiber. P1 ForBiz Fiber is competitively priced in the market specially targeted at SoHos and small and medium enterprises (SMEs) in the country. SoHos and SMEs targeted P1 aims to provide businesses especially SoHos and SMEs with a all-in-one business communications package, incorporating high speed fiber-optic Internet access with lowest price business voice call rates in the country. Ingenuity through its subsidiary Unified Synergy, targets to sell 15,000 lines within a year. Sizeable untapped market Meanwhile, Ingens Sdn Bhd a wholly-owned subsidiary of Ingenuity, was appointed the sole distributor for P1 4G WiMAX modem last April. The high-speed broadband (HSBB) coverage for businesses in Malaysia is between 300,000 and 350,000, while only about 46,000 are fiber broadband users. As such, P1 expects to sell 50,000 subscriptions over a period of two years. P1 offers SoHos and SMEs preferred fiber Internet access at an affordable limited-time promotion starting from RM99/month for 5Mbps and RM199/month for 20Mbps. All P1 ForBiz Fiber Internet plans come with a free P1 Voice line and users can also enjoy nationwide call rates of 15 sen/minute to any fixed or mobile phone lines locally.

(Page 2/3) 27 Aug 2012

LATEST RESULTS
1Q/ 30 Jun Rev (RMm) PBT (RMm) NPAT(RMm) EPS* (sen) 1Q13 129.8 3.7 3.2 0.6 1Q12 2.8 (0.4) (0.4) (0.1) yoy % 4,491.5 1,141.4 1,006.2 1,006.2 4Q12 37.5 (1.2) (1.3) (0.2) qoq% 246.5 403.5 349.0 349.0

*based on 543.3 million shares; *FY13 end is 31st March 2013

Q1 first profitable quarter in quite awhile Ingenuity recorded promising results for its 1Q/FY13 ended 30th June 2012. During the quarter, the group had recorded revenue of RM129.8 million and NPAT (net profit after tax) of RM3.2 million. This is a turn-around from its earlier quarters (reportedly since 2006), which recorded net losses. We note that Ingenuity had bought VistaVision Resources Sdn Bhd back in February 2012. VistaVision is involved in the ICT Distribution business. This acquisition had helped to push up the groups overall revenue and strengthened the groups balance sheet. During the past year, the group had been implementing its internal reorganisation plan, undergoing a transformation to better streamline its businesses into 4 core areas (as mentioned earlier). There was much rebuilding and hiring of key teams. Ingenuity foray into the telecommunications sector has resulted in collaborations with industry players such as P1 Wimax and U Mobile. According to a press release, the groups management reasonably believes that it can achieve its internal targets (RM800 million revenue and RM12.5 million NPAT) for its FY13E. Group management is focused on improving its product lines as well as continually looking to acquire new strategic partners. Group management aims to be able to transfer its listing status to the Main Market of Bursa Malaysia, hopefully within the next 3 years.

Update Report

INGENS

All information, views and advice are given in good faith but without legal responsibility. Mercury Securities Sdn. Bhd. or companies or individuals connected with it may have used research material before publication and may have positions in or may be materially interested in any stocks in the markets mentioned.

Mercury Securities Sdn Bhd

(Page 3/3) 27 Aug 2012

Ingenuity: Share Price and Volume

Source: Bursa

KEY FINANCIALS
Key Stock Stats NPAT margin (%) Earnings/Share (sen) P/E Ratio (x) Dividend/Share (sen) Dividend Yield (%) NTA/Share (RM) Book Value/Share (RM) P/Book Value (x) ROE (%) Net Gearing (or Net Cash)(x) Issued Capital (mil shares) 52-weeks share price (RM) Major Shareholders: .Chin Boon Long . 2013E 1.6 2.3 19.1 0.0 0.0 0.08 0.09 4.68 24.5 (0.06) 543.3 0.035 0.51 % 30.2

*RM0.10 par value *2013E figures are based on Ingenuitys internal targets as mentioned here and its latest available balance sheet

# This stock is not under our core coverage and this report is provided for informational purposes only. #No Recommendation or Target Price is provided, i.e. this stock is Not Rated.

All information, views and advice are given in good faith but without legal responsibility. Mercury Securities Sdn. Bhd. or companies or individuals connected with it may have used research material before publication and may have positions in or may be materially interested in any stocks in the markets mentioned.