Valuation and recommendation -Xingquan (CIMB)

Maintain OUTPERFORM. We maintain our earnings forecasts. Our target price is unchanged at RM2.60, still based on 6.0x CY10 P/E, a 60% discount to listed peers under our coverage in view of Xingquan’s smaller size. Xingquan is a candidate for a re-rating as its unexpectedly weak share price has taken its P/Es to just 3-4x, which do not reflect its niche position as an outdoor sports player. We recommend that investors accumulate this stock which is the cheapest sportswear stock under our coverage. We reiterate our OUTPERFORM recommendation. Re-rating catalysts include better-than-expected September trade fair order value growth and same-store sales improvement in 4Q09.