RAAAWWWRRRRR!!!

An old report from KE:

The lion's appetite for lime and steel

Since our last update, LAP has almost completed the disposal of itsmotorcycle businesses in China which were beginning to face declining profits. The company found a new focus in the production of quicklime -a purifying agent commonly used in steel manufacturing. LAP's limestone processing plant in Banting commenced trial production in Apr 07 with acapacity of 215k tpa, making it the single largest plant in Malaysia.

Possible plans for expansion include backward integration involving thepurchase of a quarry, which will give it better margins. Subsequently,LAP may also diversify into the production of high quality quicklime used in water treatment, as it offers more lucrative returns.

Volatile earnings for remaining businesses

Although subsidiary Advent Electronics expects FY07 revenue to outperform last year's $70m, bottomline profits will be lower thanFY06's due to higher provisions for inventory obsolescence. Given itscompetitive operating environment, margins for the business remains at~3-4%. In our view, the earnings trend will continue to fluctuate as itis largely dependent on the number of projects secured.

On the new automotive component trading unit, we see a possible slowdown in 2H earnings while LAP irons out technical issues involving the conversion of parts from left to right-hand drive to cater to the Malaysian market.

Anhui Auto stake is worth $0.325 per share LAP owns a 6.16% stake (66m shares) in Anhui Jianghuai Automobile Co.(AHJA), which is listed on the Shanghai bourse. At RMB10.02, this investment has a market value of S$132m ($0.325 per LAP share) or 145%of LAP's entire market cap; meaning that investors will be getting LAP'sother businesses for free.

We also view LAP as a cheap proxy to the booming Chinese automobile market. AHJA's 21x FY07 IBES consensus P/E compares favourably to its more expensive peers' 19x-75x.

Deep discount to SOTP value, Upgrade to BUY with $0.36 TP

Using SOTP valuation, we have included inter alia 1) marked-to-marketvalue of S$132m for its 6.16% stake in AHJA, 2) share of proceeds fromsale of Zhejiang Victor Motorcycle and 3) the group's strong net cash position of $39m. We also abscribed a conservative 5x P/E to our earnings forecasts for LAP's limestone, electronics and tradingbusinesses. After taking into account the dilutive effects of LAP'soutstanding warrants, we derive a fair value of $0.36. This gives acompelling 60% upside potential for a grossly undervalued stock which offers significant hidden value and indirect exposure to China's fast growing automotive sector.

Upgrade to BUY.

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MYOB:

At 26.5 cents, LAP's market cap = $107.5million
Huge amount of cash: S$62 million
Investment in AHJA: 79.38 million shares @ RMB8.5 = S$131 million
Limestone business

Make it your business? Yeah, in anticipation of a handout after divesting AHJA. The limestone business, the cash, and the electronic business are all free.