Mediaring; SELL S$0.39 (Downgrade from Hold) Price Target : 12 Months S$ 0.30 (Prev S$ 0.42)

Mediaring has warned that they could report operating losses for 1H07 compared to US$2.4m gain in the

same period last year. Because of one-off gains from PacNet disposals, the company should report net profit

though. The company attributed the losses to (1) weaker topline (2) lower gross margins and (3) impairment

of assets following a review of goodwill. We had expected Mediaring to register 40% growth in earnings yo-

y and report US$3.3m in operating profits. Given the highly competitive business environment, we revise

our estimates down for FY07-FY08 recurring income by 45%-42% respectively. At a similar ex-cash PE ratio

of 16x for FY08, we derive a fair value of S$0.30 for Mediaring. We downgrade our recommendation to SELL

from HOLD. The high valuations for the stock in the past were justified by high growth expectations (FY06-

FY08 EPS growth of 37% CAGR previously), which is not coming through due to increased competition in the