Business Outlook��

There is growing demand for IT services in view of the computerisation needs of business and government processes. Sinobest needs to step up its effort to clinch more deals at profitable rates. The current global economic slowdown may be helpful by easing costs. While business spending may be affected, government spending should not.

Valuation & Recommendation�� Low returns and net margin as well as
inconsistent cash flow make internally funded growth challenging. The business environment remains challenging. Qualitatively, further improvement in internal processes is needed to achieve better margins. Quantitatively, the shares are undervalued. While waiting for further improvement in fundamentals, we would value the shares at 9 cents, a shade below the cash per share level. The moment Sinobest is able to implement better pricing and cost controls would see a potentially higher re-rating of the counter.

Speculative Buy. Target Price S$0.09