New facility construction underway. We recently spoke with ForelandFabrictech for an update on expansion as well as its operations. On itsexpansion plan, Foreland has started the construction of its new facility,and subject to the construction progress, management expects the newfacility to be up and running in 2H09. As mentioned in our earlier report, webelieve that the capacity increase of 40% is likely to be done in phases tomaximize utilization. In light of the still very uncertain economic outlook,we think that this measured approach is prudent. In any case, funding forthe new facility has already been secured and Foreland should not faceany impact from the ongoing credit crunch situation.

Credit control and other measures. And speaking of the credit crunch,Foreland recognises that some of its customers - especially those focusedon the export business - are facing some liquidity issues. As such,management has increased its emphasis on credit control. Besides focusingmore on domestic-demand customers, customer diversification is alsoanother strategy - we understand its top three customers each accountsfor around 5% of its total sales. In addition, Foreland has declined to extendcredit to new or unfamiliar customers without first accepting a deposit. Sofar, these measures have been working and it has been able to steadilybring down its AR (Accounts Receivable) days from 59 days in 1Q08 to 53days in 3Q08.

Domestic demand still growing. Meanwhile, Foreland has been seeinga steady stream of new customers, especially from those who work thedomestic market. It believes that there is a growing demand for functionalfabrics as Chinese consumers are generally more quality conscious,boosted by the continued modernization, rise of living standards, and thegrowth in disposable income. And to further increase domestic consumption,China has come up with several measures, including a RMB4 trillion aidpackage. We believe this bodes well for Foreland but we see differentiationas key in the competitive garment industry. On its part, Foreland intends tocontinuously update/revise its existing products with better specificationsas well as launch new products to meet demand and also sustain itsmargins.

Maintain BUY. As we had already cut our FY09 estimates by 25% previously,we see no need to adjust our numbers again, hence our fair value remainsat S$0.20 (4x FY09F PER). We believe that most of the negatives havealso been captured in its share price. Maintain BUY.