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A.A. Anthony Securities Sdn. Bhd. (17812-U)

A Participation Organisation of Bursa Malaysia Securities Berhad

A.A. Anthony Securities Sdn. Bhd.

wee23

Website: http://www.aaasec.com.my

Recommendation

KDN PP 14119/03/2010 (023515)

Company Update: 30 April 2009

Zhulian Corporation Berhad (5131)

By Tan Chin Wooi ( [email protected] )

BUY

Current Price : RM 1.24 Target Price : RM 1.43

Investment Highlights

Sustainable high dividend payout (Dividend payout policy according to prospectus '07 ­ 60% of profit). Strong balance sheet with cash taking up more than one third of the book. No borrowing. Expansion underway in Vietnam and Philippine. East Malaysia will be next. Good growth achieved in Thailand. Profit margin of 24% -- more profitable than most of its peers. Strong multi-level marketing agency force. Conservative and able management team. Company Background

Listing Par Value Share Issue : : : Main Board RM 0.50 345,000,000 Sector Financial Year End Market Capitalization : : : Trading/Services End November RM 427,800,000

Nature of Business Zhulian Corporation Berhad started out humbly in 1989, when its founder and CEO Mr Teoh Beng Seng decided to dabble in the gold-plated jewellery market. Few years later, Zhulian diversified its product lines ranging from Food & Beverage, water treatment, air purifier, nutritional, personal care, home care, bolsters, pillows, mattress pads and other therapeutic products through the concept of Multi-Level Marketing. Share Price Performance

Share Price Performance

1.2 1.15 Price (RM) 1.1 1.05 1 0.95 0.9

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1/ 23 /0 1/ 9 28 /0 9 2/ 2/ 09 2/ 7/ 0 2/ 9 12 /0 2/ 9 17 /0 2/ 9 22 /0 2/ 9 27 /0 9 3/ 4/ 09 3/ 9/ 0 3/ 9 14 /0 3/ 9 19 /0 3/ 9 24 /0 3/ 9 29 /0 9 4/ 3/ 09 4/ 8/ 0 4/ 9 13 /0 9

Date

A.A. Anthony Securities Sdn. Bhd.

Prices 1 Mth Prices 3 Mth Prices 12 Mths Volume 12 Mths

High 1.290 (21-Apr-09) 1.290 (21-Apr-09) 1.290 (21-Apr-09) 7,540 (21-Apr-08)

Low 0.930 (23-Mar-09) 0.930 (23-Mar-09) 0.850 (30-Oct-08) 10 (20-Aug-08)

Substantial Shareholders as at 27 February 2009

Teoh Beng Seng Zhulian Holdings Sdn. Bhd. The Best Source Holdings Pte. Ltd Teoh Meng Keat Direct % In Direct % 11.52 52.49 35.00 17.34 5.84 Source: Zhulian's Annual Report

Fundamental Review & Comparison

Financial Summary Details (RM) Turnover Profit Before Taxation Profit After Taxation Reserves Retained Profits Shareholders Fund Short-term Borrowings Long-term Borrowings Cash & Bank Balances NTAB EPS (Annualized) PER DPS (sen) Dividend Yield (%) # For 1Q only Ratio Analysis Ratio Profit Margin (Before Tax) Return on Shareholders Equity Total Assets Turnover Current Ratio Gearing Ratio Debt Ratio Total Debt To Equity Ratio 28 February 09 (1Q) 71,085,000 22,326,000 16,844,000 113,495,000 113,521,000 285,995,000 99,678,000 0.8290 19.52 6.35 3.00# 2.42# 30 November 08 303,577,000 94,993,000 74,690,000 107,000,000 107,027,000 279,500,000 106,529,000 0.8101 21.65 5.73 11.00 8.87 30 November 07 220,546,000 74,348,000 58,927,000 77,179,000 77,187,000 249,679,000 120,133,000 0.7237 18.05 6.87 12.67 10.22

28 February 09 (1Q) 31.41 3.87 0.1912

30 November 08 31.29 28.23 0.89 3.47 0.2250

30 November 07 33.71 25.81 0.78 5.80 0.1351

Source: Zhulian's quarterly and annual reports

Corporate Developments Operations Review The Group recorded a profit before taxation of RM22.326 million and revenue of RM71.085 million for the first quarter of FY 2009.

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A.A. Anthony Securities Sdn. Bhd.

The revenue for the current quarter under review was lower than the immediate preceding quarter, mainly due to lower demand from overseas markets. The profit before tax has also decreased which was in line with the decrease in sales. Future Outlook New Markets After maintaining a strong presence in West Malaysia, Thailand, Singapore and Indonesia, Zhulian is entering new markets like Vietnam and Philippine. We think these markets will provide tremendous opportunity for Zhulian to grow. Besides that, Zhulian is planning to aggressively develop the business in East Malaysia. New Plant In 2008, ZHULIAN has officially opened its 3rd Plant - with a built-up area of 18,000 sq. meters, it is expected to increase the production capacity of ZHULIAN's Food and Beverage as well as Health and Nutrition Products' manufacturing division under its subsidiary ZHULIAN INDUSTRIES SDN. BHD. This new plant also aims at venturing into new product lines such as nutraceutical products in the form of capsules, tablets and liquid. ZHULIAN Corp Bhd will invest RM18 million this year to expand its international headquarters in Bayan Lepas Industrial Estate, Penang, as part of its initiatives to propel future growth. The company said the expansion involved the building of a bigger warehouse and a new manufacturing plant. The project was expected to be completed by end2010. Valuation & Recommendation Valuation First quarter EPS for the FYE 09' came in at 4.88 sen, which improved slightly year over year. We think the result is somewhat impressive given the very challenging economic environment in the past few months. Therefore, we have increased our FYE 09' forecasted EPS to19 sen from 18 sen. After taking into account its sustainable high dividend yield, cash flow generating business and the potential growth ahead, we think valuing it at a PER of 7.5X would be fair. Even with a conservative FYE 09'forecasted EPS of 19 sen, intrinsic value stands at RM1.43. We have a BUY call on Zhulian Corporation Berhad with the target price of RM 1.43.

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Rating Key Trading Buy Buy Neutral Sell Trading Sell Potential upside expected to hit more than 30% over a 12 ­ month period Potential upside expected to range between 10% - 30% over a 12 ­ month period Potential expected to stay between 10% and -10% over a 12 ­ month period Potential downside expected to range between 10% - 30% over a 12 ­ month period Potential downside expected to dip more than 30% over a 12 ­ month period

* The target prices of shares mentioned in the accompanying text are based on the assumed investment horizon of 12-months. If company notes are published on these shares in the future, the target prices mentioned in the new notes will have priority.

The information in this report has been obtained from sources believed by A.A. Anthony Securities Sdn Bhd (AAA) to be reliable but its accuracy or completeness is not guaranteed. Opinions contained herein are subject to change without notice. This report is for informational purposes only and is not to be construed as an offer or solicitation for the purchase or sale of any financial instrument. This report does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report and is not a substitute for the exercise of independent judgement. We accept no liability for any direct or indirect loss arising from the use of this report. Copyright and database rights protection exists in this report and it may not be reproduced, distributed or published by any person for any purpose without the prior express consent of AAA. All rights are reserved.

Principal Office - Penang 1st Floor, Bangunan Heng Guan, 171, Jalan Burmah,10050 Pulau Pinang. Tel: 604-229 9318 Fax: 604-226 8788 Sri Hartamas Branch N-1-3 Plaza Damas, 60 Jalan Sri Hartamas 1, 50480 Sri Hartamas. Tel: 603-6201 1155 Fax: 603-6201 1001 Johor Jaya Branch 70 Jalan Rosmerah 2/17, Taman Johor Jaya, 81100 Johor Baru. Tel: 607-351 3218 Fax: 607-351 3843 Alor Setar Branch Lots 4, 5 & 5A, 1st Floor, EMUM 55, No. 55, Jalan Gangsa, Kawasan Perusahaan Mergong 2,Seberang Jalan Putra, 05150 Alor Setar, Kedah. Tel: 604-732 2111 Fax: 604-732 2777 Teluk Intan Branch 29G, Jalan Intan 2, Bandar Baru, 36000 Teluk Intan, Perak Darul Ridzuan. Tel: 605621 6010 Fax: 605-621 6011 Johor Bahru Branch Levels 6, 7, & 8, Menara Sarawak Enterprise, 5, Jln Bukit Meldrum, 80300 Johor Bahru, Johor Darul Takzim, Malaysia. Tel: 604-229 9318 Fax: 604-226 8788 Bukit Mertajam Branch 2 Jalan Perniagaan 2, Pusat Perniagaan Alma, 14000 Bukit Mertajam. Tel: 604-554 1388 Fax: 604-5541 1389 Kulai Branch 42-8 Main Road, Kulai Besar, 81000 Kulai. Tel: 607-663 6658 Fax: 607 663 6653 Nusa Bestari Branch 171, Ground Floor, Jalan Bestari 1/5, Taman NUsa Bestari, 81300 Skudai, Johor. Tel: 607-512 1633 Fax: 607-512 1933

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