Following the conclusion of China's annual energy work conference last week, which  outlined  aggressive  domestic  solar  power  development  targets,  many  solar related  shares  have  rallied.  We  believe  that  Swing  Media,  a  company  with  a  stable cash  cow  business  while  also  tapping  on  the  robust  domestic  demand  for  solar power  in  China,  is  currently  undervalued,  trading  at 4.1x  FY13  P/E  and  0.22x  FY13 P/B. Reiterate BUY, with a TP of S$0.240 based on 0.5x (industry average) FY13 P/B.

Counter-cyclical cash cow optical media business. Challenged by the obsolescence in technology,  the  optical  media industry  has entered into  a  consolidation  phase.  Being  one of  the  earliest  players  with  a  team of  experience management  and  a strong  track  record, Swing  Media  managed  to  take  up  more  market  share  in  the  shrinking  pie.  Growing  at  a CAGR  of  14%  in  the  past  four  years,  this  counter-cyclical  optical  media  business  has helped the group sail through the financial crisis, generating decent profits and cash flow. 

Capturing  the  domestic  demand  for  solar  power.  Swing  Media  has  successfully diversified  into the solar power installation business, targeting at China's robust domestic demand.  In  demonstrating  its  determination,  government  has  recently  outlined  concrete targets in boosting the domestic solar power install capacity, aiming to grow by 40% to 10 gigawatts  this  year.  Shares  of  the  solar  panel  makers  had  rallied  following  the  news  as market had turned positive towards the industry As such, we believe that the demand for
Swing Media's system integrating services will be robust.

State-owned  enterprise  is  a  good  customer  to  start with. Swing Media has started to execute  its  solar  panel  installation  contract  with  PetroChina,  building  eight  of  them  in Shanghai,  ZheJiang and  in  Tibet.  Management  shared  that  the  group  possesses  enough engineers  to  scale  up  to  installing  20  -  30  petrol  stations  at  any  one  point  of  time.  The group  aims  to  complete  200  stations  progressively  over  two  years,  generating  aggregate revenue and profits of HKD180m and HKD35m respectively.

Source:  OSK