Higher costs muted profitability

• Revenue up, net profit down. Sky One recorded a growth of 12.9%
in its revenue of HK$64.9m (S$12.5m) for the six months ended 30 Sep 08 compared to the same period last year. However the top line growth did not translate positively to bottom line earnings as net profit declined by 21% yoy to HK$5.6m (S$1.1m) due to the following reasons:-

o Poorer 1H08 margins… were attributed to the Olympics as custom clearances costs rose with the run up to the Beijing Olympics to discourage movement of goods into China for the purpose of enhancing domestic security. Nonetheless these custom taxes and charges have since reverted to normal levels.

o Greater selling and distribution expenses… due to the incurrence of corporate expenses such as listing fees as well as staff improvement costs.

Recommendation – Downgrade to SELL

TP: S$0.05