IQ Group rises 7% in morn trade, among top gainers

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KUALA LUMPUR (Sept 11): Shares of IQ Group Holdings Bhd advanced 7.3% today in morning session as investors still see valuation upside in the company compared with its peers, continuing its rally on the back of stronger first-quarter financial results.

By the close of morning trading session today, IQ Group was traded at a 52-week high of RM2.06, up 14 sen or 7.3%, with 775,700 shares done. The counter, which was traded between RM1.92 and RM2.10 today, was the third-largest gainer on Bursa Malaysia.

IQ Group's share price has surged by almost 65% in the past two weeks, up from RM1.25 on Aug 27.

The company is now trading above its net asset per share of RM1.23 as at end-June this year, with a price-to-book value (P/BV) ratio of 1.67 times, which still translates to a cheaper valuation when compared with its peers.

IQ Group supplies security and convenience products, such as motion sensors, wirefree radio and door entry products, to some of the world’s major retail and wholesale companies within the UK, Europe, Japanese and North American markets.

In a research note dated Aug 28, RHB Retail Research consumer analyst Chaw Sook Ting had compared IQ Group with the Taiwan-listed Everspring Industry Co Ltd which currently trades at P/BV of 2.5 times.

“We believe IQ Group should rightfully have comparable valuations to Everspring. Even if we applied a 2 times P/BV on IQ, which is still 25% lower compared with Everspring’s valuation of 2.5 times P/BV, IQ’s share price could be worth RM2.28 based on its book value as at March 31, 2014,” said Chaw.

The research house is maintaining a “buy” call on IQ Group, with a revised RM2.03 fair value from RM1.84 previously.

On Aug 27, IQ Group announced that its net profit jumped 391% to RM7.47 million for its first financial quarter ended June 30, 2014 (1QFY15), from RM1.52 million a year ago, mainly due to higher revenue and improved gross margin.

Revenue rose 46.1% to RM56.74 million from RM38.83 million, thanks to the sales contribution from new products launched in the last two to three years and a favorable US dollar exchange rate against the ringgit.

To recap, IQ Group enjoyed two positive years in FY06 and FY07 before being impacted by several years of deteriorating performances. The company sank in the red for three financial years from FY09 to FY11, before returning to the black in FY12.

The Penang-based IQ Group has manufacturing facilities in Malaysia and China, marketing operations in the UK as well as sales and marketing in Japan.