S$1.18; using a similar 10x blended FY08/09 PER.Man Wah recently proposed a 1-for-1 bonus share issue

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PER and 4.5x FY09 PER (financial year ended March), which is

undemanding even if we factor in the current market weakness.

Indeed, at our fair value, the use of 10x blended FY08/09 PER

represents about 50% discount to its peers? current 19x. We

project 52% net profit CAGR for Man Wah in our FY08-10 forecast

periods, which implies an attractive 0.2x PEG at our new fair value.Point: Man Wah?s share price is currently trading at 6.3x FY08

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indicate positive sales outlook for both its export and domestic

markets in October/November, while the stable raw material price

trend is likely to support a normalised gross margin of 30% in

2H08. Hence, we have kept our net profit estimates unchanged at

HK$176.7m in FY08 and HK$243.6m in FY09. Maintain BUY.Relevance: Our recent conversations with management

Attractive current net dividend yield.

per share of interim net dividend, with the ex-dividend date on this

Friday, 30 November. We expect Man Wah to pay another HK$0.0668 per

share of final dividend for 2H08, equivalent to 25% of net profit. Man

Wah?s current net dividend yield is 4.0% for FY08 and 5.5% for FY09.Man Wah will be paying HK$0.0653

Man Wah Holdings Limited

by Jenna Koh

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FAX 65-6536 443565-6531 1221

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jennakohsq@phillip.com.sg22 October 2007

Man Wah Holdings Limited (?Man Wah?) announced on 16 October 2007 that

Schieder Cheers GmBH, a company which is 40% owned by Man Wah and 60%

by the Schieder Group, has been declared insolvent by the German courts as a

result of its parent company, the Schieder Group being declared insolvent.

Insolvent German associate.

incorporation of the above named subsidiary with the Schieder Group. The subsidiary

was to act as a sales agency of furniture and furniture parts of Man Wah to be sold

inland and abroad. Since the inception of subsidiary, the European market has

contributed approximately 20.32% of the Group?s revenue; hence with the insolvency

of the subsidiary, we anticipate the European market?s contribution to the Group?s

revenue for FY2008 to decline by approximately 10% (before the inception of the

subsidiary, the European market contributed approximately 10% of the Group?s

revenue).On 8 February 2007, the Group announced the

Resting on laurels? Not just yet.

investors of their positive financial performance for 1HFY2008, stating substantial

increase in the Group?s net profit before tax resulting from enhanced marketing

efforts, higher productivity, and successful implementation of price increases across

its product lines and stabilisation in the price for raw materials. However, with the

insolvency of the European subsidiary, we believe that 2HFY2008?s results will a

better gauge of the Group?s profit growth.The Group has issued a statement informing

Increase in spending.

Furniture Industrial Park is still in the pipeline. With the commencement, we would

anticipate higher spending by the management in FY2008.Phase 3 of the construction of the Man Wah Holdings

Unresolved housing woes in US.

sales in the US have dropped to a seven (7) year low. According to Bloomberg, the

housing market situation will worsen as stricter lending rules and higher mortgage

rates make it more difficult for potential buyers to get financing.Following on from the initiation report, home

Technical view of Man Wah?s shares.

expected in the near term as MACD turns negative with trading support at S$0.65

and S$0.615 per share.According to Figure 1, weakness is

Reiterate sell.

derived from a P/E of 7x (based on the Group?s P/E band) pegged to FY2008

earnings, implying a 42.25% downside. Our negative view is based on the technical

outlook of the Group?s shares, insolvency

We have revalued our fair value estimate to S$0.41 per share,