March 19, 2010

SPSETIA - Price Target News

Stock Name: SPSETIA
Company Name: SP SETIA BHD
Research House: OSK

KUALA LUMPUR: OSK Research maintains its Take Profit call on SP Setia with a current year (CY10) target price of RM3.59 based on 1.69 times CY10 price/ net tangible assets. It said on Friday, March 19 that SP Setia's 1QFY10 annualised results came in 29% below its expectation and 23% below that of consensus. "This was primarily due to the seasonal slower progress billings in the quarter as well as much lower profit from investment activities," it said. OSK Research said the 1QFY10 year-on-year turnover and net profit improved significantly by 22.5% respectively on the back of much improved new property sales. Quarter-on-quarter turnover and net profit, however, fell by 8% and 33% respectively. These were mainly due to certain elements of seasonal factor. However, progress billings from its recent impressive improvement in new property sales will likely to pick up more steam in the later quarters, it maintained its earnings forecast for now, OSK Research said.

WASEONG - Price Target News

Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research is maintaining its Outperform on Wah Seong Corp Bhd at RM2.52 with a target price of RM2.96. The research house said Wah Seong is making progress with its takeover talks with both Orleans and Socotherm. "We now understand that the Socotherm deal may be completed earlier. Wah Seong has sufficient funds to finance the acquisitions and has ruled out a fundraising exercise. As at December 2009, the group had cash reserves of RM471 million," it said. CIMB Research said the acquisition plans, assuming they pan out, would give Wah Seong access to a string of new markets, namely Nigeria, Angola, Brazil, the Middle East and the Gulf of Mexico, thereby narrowing the gap between itself and Bredero, whose annual sales are in excess of US$1 billion. "Apart from the M&A efforts, we expect newsflow to also remain active on the order book front as Wah Seong awaits the awards of pipe coating contracts from clients in Australia and Papua New Guinea. "We maintain our forecasts and target price of RM2.96, pegged to an unchanged target market P/E of 15x. Wah Seong remains an OUTPERFORM, premised on the potential re-rating triggers of an expanding order book, and M&As," it said.

IJMLAND - Price Target News

Stock Name: IJMLAND
Company Name: IJM LAND BERHAD
Research House: KENANGA

IJM Land Bhd (March 18, RM2.30)
Initiating coverage with buy and RM2.79 target price
: We like IJM Land given its promising growth prospects (two-year CAGR of 75%; three-year CAGR 32%). It is an alternative proxy to Malaysia's property sector with a geographically diversified strategic landbank with large GDV (gross development value) pipeline.

There is also positive news flow on the stock from headline projects like The Light, Changchun @ China as well as the potential of the company benefiting from foreign investors' re-entry given its low foreign shareholding levels currently.

Its fair value of RM2.79 is based on diluted (ex-warrants only) sum-of-parts (SOP) revised net asset value (RNAV) excluding Canal City. Our RNAV conservatively assumes overall 14% net margins, 12% WACC (weighted average cost of capital) rates and longer project durations of more than five years.

IJM Land is currently trading at FY11 PER of 16 times and 1.5 times PBV (price-to-book value). Our fair value provides 22% upside to current share price (RM2.28 on March 17).

IJM Land owns one of the largest landbank (more than 7,600 acres) with estimated RM25 billion GDV in Malaysia. Sizeable lands are in key property growth regions like the Klang Valley, Penang island, Johor Bahru (JB), Seremban, Sarawak and Sabah.

IJM Land is one of the few developers with expertise in almost all property segments; ideal for capitalising on all property cycles. A promising future lies ahead for IJM Land given two large pipeline projects - The Light and Sebana Cove.

The Light - Phase I (residential component) of RM1.2 billion GDV is enjoying brisk sales. The Light Linear (Linear) and The Light Point has achieved 85% and 70% take-up rate.

The residential portion should yield around 35% gross margins. We do expect future margin and GDV enhancement given ability to price up. The Light's residential component makes up 5% of our revised asset value.

There's also the China development worth RM500 million in GDV. IJM Land and Talam Corp Bhd (50:50 JV) are to develop a high-end condominium cum retail podium development along Xian Road, Changchun, Jilin Province.

Changchun is one of China's largest automotive cities. Site is located along the city's prime main road and has obtained development approvals.

The balance sheet is strong. Current net gearing stood of 0.25 times is healthy versus sector range of 0.2 times to 0.4 times. Ample room to gear up for reclamation of The Light-Phase II, given large cash pile of RM414 million as at Dec 31, 2009 is more than sufficient to cover estimated reclamation cost of RM224 million.

We estimate between RM1 billion to RM1.3 billion sales for FY10-11E, implying a FY10-11E net profit of RM104 million (+103% y-o-y) to RM161 million (+55% y-o-y).

Unbilled sales remain strong at RM800 million (excluding around RM200 million bookings sales) as at Dec 31, 2009 with sales touching the RM1 billion mark. Key earnings drivers are its townships such as Seremban 2, The Light and en bloc sale of AEON Mall @ Melaka. - Kenanga Research, March 18 This article appeared in The Edge Financial Daily, March 19, 2010.

MPI - Price Target News

Stock Name: MPI
Company Name: MALAYSIAN PACIFIC INDUSTRIES
Research House: RHB

Semiconductor sector
Maintain overweight; top pick Unisem with RM3.07 fair value
: We believe the semiconductor sector is poised for a stronger recovery in 2010 given stronger outlook for key product segments (ie mobile PCs, smart phones and LCD tablets) as well as new electronic gadgets/applications, as these will drive chips demand going forward.

We expect stronger silicon wafer demand ahead. Already, Gartner expects 2010 silicon wafer demand to increase 29.5% year-on-year (versus -18% y-o-y in 2009) largely due to production ramp-up by major foundries to replenish the low inventory level plus anticipation of higher chips demand ahead.

Given the sharp pull-back in capital expenditure (capex) in 2009 (-45% y-o-y) as well as stronger chips demand ahead, we expect capex spending to increase significantly over the next two years.

Hence, against the backdrop of improved earnings visibility and stronger chip sales in 2010, we are reiterating our overweight stance on the sector. Our top pick for the sector is Unisem (M) Bhd.

Unisem is riding on Chengdu's growth. Its management expects FY10 revenue contribution from Unisem Chengdu to increase to 35% before rising to over 50% in FY11 (from 20% in FY09).

The company expects Chengdu's FY10 earnings to double on the back of higher capacity and margin expansion. Hence, against the backdrop of improved earnings visibility and stronger-than-expected chip sales in 1Q10 and extending into 2Q10, we are reiterating our outperform call on the stock with an unchanged fair value of RM3.07.

We believe Malaysian Pacific Industries Bhd's (MPI) medium-term earnings visibility remains bright given still-resilient chips demand from China. We maintain our outperform call with fair value of RM8.15, which is based on unchanged 15 times calendar year 2010 PER (price-to-earnings ratio).

In 2010, we believe chip players would likely focus on specific segments in which they have technological advantage to improve its profit margins. We are positive on the latest development as this would benefit chip assemblers as margins for Unisem and MPI, which would likely remain resilient, supported by its customers' higher-margin products. - RHB Research Institute, March 18 This article appeared in The Edge Financial Daily, March 19, 2010.

UNISEM - Price Target News

Stock Name: UNISEM
Company Name: UNISEM (M) BHD
Research House: RHB

Semiconductor sector
Maintain overweight; top pick Unisem with RM3.07 fair value
: We believe the semiconductor sector is poised for a stronger recovery in 2010 given stronger outlook for key product segments (ie mobile PCs, smart phones and LCD tablets) as well as new electronic gadgets/applications, as these will drive chips demand going forward.

We expect stronger silicon wafer demand ahead. Already, Gartner expects 2010 silicon wafer demand to increase 29.5% year-on-year (versus -18% y-o-y in 2009) largely due to production ramp-up by major foundries to replenish the low inventory level plus anticipation of higher chips demand ahead.

Given the sharp pull-back in capital expenditure (capex) in 2009 (-45% y-o-y) as well as stronger chips demand ahead, we expect capex spending to increase significantly over the next two years.

Hence, against the backdrop of improved earnings visibility and stronger chip sales in 2010, we are reiterating our overweight stance on the sector. Our top pick for the sector is Unisem (M) Bhd.

Unisem is riding on Chengdu's growth. Its management expects FY10 revenue contribution from Unisem Chengdu to increase to 35% before rising to over 50% in FY11 (from 20% in FY09).

The company expects Chengdu's FY10 earnings to double on the back of higher capacity and margin expansion. Hence, against the backdrop of improved earnings visibility and stronger-than-expected chip sales in 1Q10 and extending into 2Q10, we are reiterating our outperform call on the stock with an unchanged fair value of RM3.07.

We believe Malaysian Pacific Industries Bhd's (MPI) medium-term earnings visibility remains bright given still-resilient chips demand from China. We maintain our outperform call with fair value of RM8.15, which is based on unchanged 15 times calendar year 2010 PER (price-to-earnings ratio).

In 2010, we believe chip players would likely focus on specific segments in which they have technological advantage to improve its profit margins. We are positive on the latest development as this would benefit chip assemblers as margins for Unisem and MPI, which would likely remain resilient, supported by its customers' higher-margin products. - RHB Research Institute, March 18 This article appeared in The Edge Financial Daily, March 19, 2010.

CIHLDG - Price Target News

Stock Name: CIHLDG
Company Name: C.I. HOLDINGS BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research maintains a Buy on CI Holdings with the potential re-rating catalysts being additional production capacity, and an increasingly marketable product line. "We note that CIH may be an effective indirect exposure to PepsiCo given that PepsiCo brands make up 85% of CIH's product portfolio and 80% of the company's revenue," it said in a research note on Friday, March 19. CIMB Equities Research maintains its earnings forecasts and target price of RM2.63, pegged to an unchanged 20% discount to its 15 times target market P/E given the stock's relatively low liquidity. CIH remains a BUY. CIH's Bangi plant is expected to hit maximum production in at least five years but Tropicana's wild success has shortened it to two years. To address the capacity constraint and allow for future growth, the company is now installing a RM45 million new production line. The new line will have the capacity to manufacture about RM300 million worth of products. "We maintain our earnings forecasts and target price of RM2.63, pegged to an unchanged 20% discount to our 15x target market P/E given the stock's relatively low liquidity," it said.

March 18, 2010

TOPGLOV - Price Target News

Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research said Top Glove Corp Bhd's 1H net profit exceeded its forecast by 4% and consensus by 9% and it expects an even stronger 2H given the additional capacity that is coming in.

"We are raising our FY10-12 forecasts by 8-13% after adjusting our capacity and utilisation figures as well as latex, average selling price and margin assumptions. This increases our target price from RM16.99 to RM17.90 which we continue to peg to a 10% premium over our target market P/E of 15x," it said on Thursday, March 18.

It reiterated its BUY call, with the earnings outperformance being a potential share price catalyst, along with the continuing uptick in glove demand and Top Glove's upcoming expansion.

ASTRO - Price Target News

Stock Name: ASTRO
Company Name: ASTRO ALL ASIA NETWORKS PLC
Research House: HWANGDBS

ASTRO All Asia Networks Plc, Malaysia's largest pay-TV operator, was upgraded to 'hold' from 'fully valued' at HwangDBS Vickers Research Sdn Bhd after billionaire Tan Sri T Ananda Krishnan led an offer of as much as RM2.5 billion (US$759 million) to buy full control of the company.

HwangDBS Vickers raised its share price target to RM4.30, from RM3.56. - Bloomberg

ASTRO - Price Target News

Stock Name: ASTRO
Company Name: ASTRO ALL ASIA NETWORKS PLC
Research House: RHB

ASTRO All Asia Networks Plc, Malaysia's largest pay-television operator, was raised to "trading buy" from "underperform" at RHB Research Institute Sdn Bhd following a buyout offer by a group led by billionaire Tan Sri T Ananda Krishnan. - Bloomberg

TENAGA - Price Target News

Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD
Research House: MAYBANK

Tenaga Nasional Bhd
(March 17, RM7.95)
Maintain buy at RM7.95, target price lowered to RM11.80
: Fluctuating power tariffs is the new economic reality. New fossil-fuel plants will be required to fulfil power demand growth in Peninsular Malaysia if Bakun power is not crossing over.

Coal and gas to fuel these plants will have to be imported at global prices subject to market vagaries. The sooner Malaysians accept this reality, the easier the adjustment. We expect the government to act sooner rather than later.

The New Economic Model (NEM) espouses innovation and creativity, which are encouraged by market forces and fair prices. Reinstating the tariff formula liberates the government and private sector.

The former can focus on nation building; the latter on efficiency gains instead of lobbying for energy subsidies which cannot be sustained.

Higher rates can be applied to rich, heavy consumers. Tenaga has locked in most of its coal needs for the financial year ending August 2010. The tariff formula can be reinstated without fuel cost pass-through adjustments. The opportunity can be used to introduce base tariffs to the public lexicon and implement a base-tariff hike for Tenaga.

A 5% hike would be equivalent to just 0.2% of Malaysia's some RM700 billion GDP, assuming users make no effort to reduce power consumption. The impact would be even smaller if efficiency measures are taken.

The NEM will be announced at Invest Malaysia on March 30-31. Tenaga's foreign shareholding has dwindled to 8% on continued tariff disappointments.

Overall foreign interest in the market is also waning. Restoring the tariff formula will send a strong signal that Malaysia will walk the talk, and help improve investor confidence.

We adjust our earnings forecasts following changes to our assumptions. Firstly, demand growth has rebounded sharply following the 3.2% contraction in FY ended Aug 2009.

Power demand has grown 5.2% in the five months to Jan 2010. Growth was broad based; and secondly, a 4% net tariff hike effective June 2010. We had previously assumed 2% per annum in March 2010 and 2011. However, we think conditions are right for the government to implement a base tariff hike.

We assume 4% and not 5%, as we think "under 5%" is a psychologically acceptable number for the public. 4% will be sufficient for Tenaga to recover the cost of capacity payments to new independent power producer Jimah.

Our discounted cash flow-based (DCF) target price falls to RM11.80 from RM12.10 as we make other longer-range adjustments to our earnings forecasts. We continue to use a 9.9% equity discount rate, based on a 4% risk-free rate, 6.5% market risk premium and 0.9 beta and 2% terminal growth rate assumption. Our target price is equivalent to 16 times FY11 earnings.

Without a tariff hike, our FY10-FY12 EPS (earnings per share) forecasts fall by 9%, 28% and 30% respectively, and DCF value would fall to RM9 per share. - Maybank IB, March 17 This article appeared in The Edge Financial Daily, March 18, 2010.

GENM - Price Target News

Stock Name: GENM
Company Name: GENTING MALAYSIA BERHAD
Research House: AMMB

KUALA LUMPUR: AmResearch Sdn Bhd has accorded fair value of RM3.40 for Genting Malaysia and has a Buy at the current price of RM2.82.

It said on Thursday, March 18 that GenM has subscribed for US$18 million (RM59 million) nominal amount of 9% senior secured notes issued by MGM Mirage Inc due March 2020. This is GenM's third investment into the papers of its peers.

The Notes were offered as part of a placement of US$845 million of the Notes announced by MGM on March 9. Proceeds from the Notes will be used by MGM to repay its
borrowings. Notes are secured by a mortgage on MGM Grand Las Vegas.

"We estimate annual coupon payments from all of GenM's investments in the notes of various gaming companies at RM28mil. This is about 2% of GenM's FY10F net profit of RM1.3 billion," it said.

"From previous conference calls, we understand that GenM is investing in papers of casino companies and not companies from other industries, as the gaming industry is an industry, which the group understands very well," it added.

AmResearch said it appears that for now, GenM's preferred investment exposure into United States is via debt instruments of other gaming companies. However, we believe that there are opportunities to invest directly into casino assets in US. Reuters reported MGM Mirage would be selling its 50% stake in Borgata Hotel Casino & Spa in favour of its investments in Macau.

"Hence, we are keeping GenM as a BUY for potential overseas investments and its huge cash reserves. Earnings are also resilient driven by the group's domestic-centric casino business," it said.

GENP - Price Target News

Stock Name: GENP
Company Name: GENTING PLANTATIONS BERHAD
Research House: AFFIN

Genting Plantations Bhd
(March 17, RM6.69)
Maintain buy at RM6.60, target price at RM7.48
: New plantings have raised planted area in Indonesia to 17,695ha and total planted area for the group to about 77,200ha - an increase of almost 30% from 59,534ha in 2007.

These new plantings will mature progressively, with over 1,000ha starting to yield fruits this year. However, the big jump in fresh fruit bunch (FFB) production would be in 2013 when more palms reach maturity and some approach or reach prime, which is normally seven years after plantings.

Including new plantings so far in this year, total Indonesian planted area is around 20,000ha. The target this year is again 20,000ha. The capital expenditure (capex) allocated for 2010 is about RM300 million, to be funded with about 70% of debt and 30% of equity.

Total borrowings could rise to RM300 million by end-2010, still a very manageable level compared to group cash reserves of RM498 million as at end-2009 and rising due to buoyant CPO prices.

High interest costs arising from initial massive capex plans coupled with low initial yields however implies continued marginal losses in the Indonesian operations until 2013/14.

Production, depressed in 2009, expected to rebound to 2008 level FFB production declined by 6.1% in 2009 to 1.16 million tonnes from 1.23 million tonnes in 2008 due to unfavourable weather conditions.

Subject to weather conditions in the next 10 months, management expects FFB production in 2010 to reach the level achieved in 2008, a growth of around 7%. FFB production increased by 5.8% year-on-year in Jan-Feb 2010.

Cost of production in 2009 was RM1,031/MT, up 7.6% y-o-y and slightly above management's target of RM1,000/MT due to lower prices of fertiliser supplies secured as well as lower FFB yields in 2009.

Fertiliser requirements for 1HFY2010, which is more than 50% of annual usage, have been secured at prices 10%-12% lower than in FY09. However, prices have risen again with crude and other commodity prices, thereby potentially pushing up costs in 2HFY10.

Management hence expects average FY10 cost of production to be around last year's level.

With management's focus on growing the plantation business and four township developments located in Kulai, Batu Pahat, Sg Petani, and Melaka (at tail-end), contributions from the property division remains small. However, activities may be building up nicely soon in its Indahpura development in Kulai.

Approximately 150 acres (61ha) has just been given to the state government for a Cyberjaya-type development while the 50:50 joint venture to establish Chelsea Premium outlets is expected to be finalised soon, with the first outlet in Indahpura likely to be in operation by 1HFY11.

We are tweaking our assumptions on FFB production (-3.6% to 1.23 million tonnes) and cost of production (+5% to RM1,050/tonne), we are trimming FY10, FY11 and FY12 net profit forecasts by 5.2%, 8.1% and 8.0%, respectively. CPO price assumptions are unchanged at RM2,450 in 2010 and RM2,550/ tonne in 2011-13.

Its stock price has appreciated by another 7.8% in the last one month. But we see room for further upsides. At RM6.60, the stock is trading at a CY10 PE (price earnings) of 15 times compared to between 16 times and 20 times for larger planters like IOI Corp, KL Kepong and Sime Darby.

Going forward, we see calendar year 2011 PE dropping to 13.2 times. Based on our DPS (dividend per share) forecast of 10 sen, dividend yield is an unexciting 1.5%. But this is not unexpected as the company invest heavily to expand its planted hectarage significantly. Target price is maintained at RM7.48, which implies a CY10 PE target of 17 times, pending an upgrade. - Affin Research, March 17 This article appeared in The Edge Financial Daily, March 18, 2010.

JOBST - Price Target News

Stock Name: JOBST
Company Name: JOBSTREET CORPORATION BHD
Research House: HWANGDBS

Jobstreet Corporation Bhd
(March 17, RM2.05)
Initiating coverage with buy at RM1.89, target price of RM3.20
: Jobstreet operates an asset-light and highly scalable online recruiting business which has strong cash generation. It is poised to ride on the global economic recovery as topline growth should have a leveraged impact on GDP growth. In the past, for every 1% GDP growth, sales revenue grew 3% to 5%.

Jobstreet could gain market share from the traditional print advertising as the market becomes more educated and aware of its more effective cost per ad due to extensive reach of over six million jobseekers in the Asia-Pacific region.

SEEK Ltd upped its stake in Jobstreet recently to 21.3% and paid RM2.05/share in a recent off-market crossing. The price, which was 11.4% premium to the market price reflects SEEK's confidence in Jobstreet's solid growth prospect.

We believe there could be potential synergies from SEEK in terms of product innovation and positioning, and sharing of expertise across Jobstreet's operations.

We initiate coverage on Jobstreet with a buy recommendation and a RM3.20 price target, based on one time price earnings-to-growth (PEG) on its FY09-FY12 net profit compound annual growth rate (CAGR) of 25%.

This implies 19.9 times FY12 price earnings (PE) which is justifiable given its high-growth prospects being in the right industry, over 20% average return on equity (ROE) and 15 sen/share cash as at end-2009.

During the period 2000-2004 when Star Publication was growing by 23% CAGR and gaining market share, it also commanded premium valuations (on average 24% to market). In fact, SEEK's recent acquisition price already implied a ready 14% upside potential to Jobstreet's share price.

During the recession period in 2009, we saw Jobstreet's revenue and net profit decline by 10% and 19% respectively.

We expect the employment rate to recover in 2010 after the Malaysian GDP showed three consecutive improvements in GDP growth recorded in 2Q09 (-3.9%) 3Q09 (-1.2%) and 4Q09 (+4.5%) from its bottom of 6.2% in 1Q09.

There are no comparable listed peers in Malaysia, probably due to its business niche. The closest rival would be JobsDB which is a privately-owned operator.

As a result, we mapped Jobstreet on the comparison horizon with some of the big names listed overseas like SEEK, 51Job Inc, 104 Corp, Monster Worldwide and Dice Holdings Inc. - HwangDBS Vickers Research, March 17 This article appeared in The Edge Financial Daily, March 18, 2010.

March 17, 2010

TOPGLOV - Price Target News

Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD
Research House: RHB

KUALA LUMPUR: RHB Research Institute is maintaining its FY10-12 earnings for Top Glove Corp Bhd unchanged for now. It said on Wednesday, March 17 the fair value of RM15.50 and Outperform call on the stock remains unchanged. It said Top Glove's Medi-Flex (Not rated), reported 1HFY10 net profit of RM5.4 million (against a net loss of RM2.5 million in 1HFY09). "We believe the improvement in earnings was largely due to operating leverage effects on the back of higher utilisation rates, which more than offset the higher latex prices and weaker US$ against the ringgit," it said. On a half-on-half basis, revenue rose by 62.3% on the back of a higher average utilisation rate. Medi-Flex recorded an operating profit of RM6.6 million for the period (versus operating loss of RM1.7 million in 2HFY09). This improvement was on the back of: 1) operating leverage effects due to the higher utilisation rate; and 2) production of higher value products as powder-free latex and nitrile medical gloves have higher value than clean room gloves. Consequently, 1HFY10 net profit jumped to RM5.4 million as compared to a core net loss of RM2.1 million in 2HFY09. "Top Glove plans to add another eight new production lines at Medi-Flex's existing factory, F18. These new lines are interchangeable and can be used to produce clean room gloves, as well, which remains as Medi-Flex's main product line. Management remains optimistic that demand for clean room gloves would return as economic conditions continue to recover," it said.

MEDIAC - Price Target News

Stock Name: MEDIAC
Company Name: MEDIA CHINESE INTERNATIONAL LT
Research House: AFFIN

Media Chinese International Ltd (MCIL)
(March 16, 67 sen)
Maintain buy at 65.5 sen, target price at 98 sen
: MCIL has finally proved sceptics wrong as the stock price performance of this laggard has surged 22% over the past month. The key driver to its share price climb, in our view, is attributed to its strong 3Q financial year ending March 2010. This also reaffirmed its strong positive earnings momentum trend, which we have highlighted since 1QFY10.

To recap, 9MFY10 net profit of RM104 million which was up 41% year-on-year (y-o-y) has been underpinned by a combination of lower newsprint prices, firmer adex and cost control. The operational improvement is best highlighted by the improving margin trend. MCIL's publishing pre-tax profit margins have gradually risen from 9.7% in 1Q10 to 25.3% in 3Q10.

Two key areas that the management continues to believe that it can extract values are limiting newspaper returns. Considering that group circulation approaches one million copies daily, return rates range as high as 10% per publication leads to considerable newsprint wastage. Based on MCIL's annual newsprint consumption of 150,000 tonnes, a 1% reduction in newspaper returns alone could save the group RM2.8 million per annum (based on newsprint price of US$550/tonne and an exchange rate of RM3.35 per US dollar).

The second key area is improving adex yields. We understand that discounts offered to advertisers are still as high as 30%. With MCIL's dominance in the local Chinese print segment (about 89% of daily circulation in Peninsular Malaysia), we believe that the discounting practice can be further narrowed going forward.

We are upgrading our FY10 dividend per share (DPS) assumption to four sen from 2.5 sen based on a revised payout ratio of 54% from 34% previously.

Although the company does not have a written dividend policy in place, its historical theoretical payout ratios have ranged between 30% and 60% (58% payout in FY09), providing some comfort to our revised DPS forecast.

Despite a steep 20% run-up in share price, MCIL still trades at a highly appealing CY10 price earnings (PE) of eight times versus' Star Publication's 14 times FY2010 earnings per share (EPS). Its attractive valuations coupled with strong earnings recovery prospects as well as appealing dividend yields clearly support further capital appreciation.

Our investment thesis for MCIL and target price of 98 sen (based on 12 times CY10 EPS) remains unchanged. We like this under-researched stock for its cheap valuations and believe that investors are continuing to ignore MCIL's dominant position in the Chinese newsprint segment and its overseas footprint, which will be its longer-term growth driver. - Affin Research, March 16


This article appeared in The Edge Financial Daily, March 17, 2010.

MBMR - Price Target News

Stock Name: MBMR
Company Name: MBM RESOURCES BHD
Research House: OSK

KUALA LUMPUR: OSK Research is maintaining its Buy on MBM RESOURCES BHD [] at RM2.59 with a slightly lower target price of RM3.54 from its previous RM3.56 as its lowers the earnings. The research house said on Wednesday, March 17 that MBM's valuations remain attractive, as MBM is still trading at a forward PE of only 6.6 times, making it one of the cheapest auto stock in its coverage backed by its sound balance sheet and its diverse range of vehicle line-up to all kinds of vehicle segments. The report was prepared following a briefing by MBM's on its strategic direction namely, the development of its prime assets to rationalize and strengthen its distributorship network. This will also involve the consolidation of both the Hino and Daihatsu distributorships under a single entity. This will eventually broaden its top-line base coupled with a higher margin from its additional range of new offerings. "While some may highlight concerns on lower dividends, we think otherwise as MBM is backed by its strong balance sheet and increasing cash pile," it said MBM also announced that it has decided to sell its subsidiary, WSA Capital, following an MBO offer of RM11.1 million. "Stripping out WSA's revenue and earnings for FY10-12 and including some housekeeping on the higher capex spending, this reduces our earnings forecast by 1% for FY10-FY11 thus effectively reducing our TP to RM3.54 from RM3.56 with our BUY call maintained," it said.

TANJONG - Price Target News

Stock Name: TANJONG
Company Name: TANJONG PUBLIC LIMITED COMPANY
Research House: RHB

Tanjong plc
(March 16, RM17.48)
Maintain outperform at RM17.48, fair value at RM19.10
: Tanjong is expected to report its 4Q results for the financial year ended January 2010 some time next week. Our full-year net profit estimate implies that 4Q net profit could be down by around 20% year-on-year (y-o-y) (ex-4QFY09 exceptionals) and 30% quarter-on-quarter (q-o-q).

Both the power and gaming divisions are expected to post weaker earnings y-o-y and q-o-q while we expect a q-o-q drop in contribution from Tropical Island largely due to seasonal factors.

For the power division, lumpy items such as business development and bidding costs as well as scheduled maintenance expenses were relatively minimal in 9MFY10 but could skew 4Q's numbers.

As an example, business and corporate development costs alone totalled RM42 million in 9MFY09. A weaker US dollar versus the ringgit (-4.8% y-o-y; -2.2% q-o-q) would also impact the division's contribution slightly.

As for the gaming segment, we expect weaker operating profit for the quarter largely on expectations of a higher prize payout for the number forecasting operation (NFO) division as the ratio normalises. 9M prize payout was low at an estimated 63.3%, as compared to our full-year assumption of 65%.

We expect Tanjong to declare an interim gross dividend per share (DPS) of 17.5 sen (4QFY09: 17.5 sen) and a final gross DPS of 22 sen (FY09 final gross DPS: 20 sen). This will bring the total gross DPS for FY10 to 92 sen (FY09: 90 sen) and translates to a gross yield of 5.3%.

In our view, growth for the power division would depend on acquisitions. Tanjong targets to double its power capacity to 8,000MW over the next four to five years. As liquidity begins to flow again, we believe there is greater possibility of a new acquisition.

As for the gaming division, we believe it is just a matter of time before Tanjong introduces a new game. Assuming the new game brings in around RM1 million in sales per draw, we estimate our earnings projections could be raised by around 2%.

There is no change to our forecast for now. We keep our sum-of-parts-derived fair value of RM19.10 and outperform call unchanged. Tanjong's quarterly numbers have, thus far, reaffirmed our view that the stock is fundamentally solid, with decent gross dividend yields of 5% to 5.5% per annum. - RHB Research Institute, March 16


This article appeared in The Edge Financial Daily, March 17, 2010.

March 16, 2010

TGOFFS - Price Target News

Stock Name: TGOFFS
Company Name: TANJUNG OFFSHORE BHD
Research House: OSK

KUALA LUMPUR: OSK Research is maintaining its Sell call on Tanjung Offshore unchanged for now pending the 1QFY10 results. "Our target price for Tanjung Offshore remains unchanged at 88 sen based on a PER of 7.0 times FY10 EPS," it said in a research note issued on Tuesday, March 16. The report was issued after Tanjung Offshore secured long-term contracts from Petronas Carigali Sdn Bhd to provide two vessels for four and five years and the the contracts are valued at RM114.6 million Earlier, OSK Research was concerned about losses from its UK subsidiary, Citech Energy Recovery Systems UK Ltd, which manufactures CITECH waste heat recovery units. However, Tanjung Offshore as the group managed to break even in its 4QFY09 result with a net profit of RM2.4 million. "We await a better performance in the coming quarters before we upgrade our existing call and target price," it said.

NOTION - Price Target News

Stock Name: NOTION
Company Name: NOTION VTEC BHD
Research House: RHB

Notion Vtec Bhd
(March 15, RM3.14)
Initiating coverage with an outperform recommendation, fair value of RM4.59 based on 10 times FY2011 earnings
: We like Notion for the following reasons: 1) growing demand in the PC & consumer electronics segment; 2) partnership & technological enhancement in the entrance of a corporate shareholder; 3) high earnings & stable margins; and 4) high technical capabilities.

Notion, which supplies high precision components to the world's biggest manufacturers such as Western Digital (WD), Seagate, Hitachi, Nikon, and Continental, has three main business segments: 1) hard disk drives (HDD); 2) camera; and 3) auto & industrial.

Notion is expected to produce 2.5" base plates components extensively with initial production of 100,000 units per month rising sharply to one million units per month by June and two million pieces per month by end-2010.

We estimate FY2010-2012 EPS compounded average growth rate (CAGR) of 34.6% on good earnings for the next 24 months given the strong demand outlook for all business segments. We have derived a target PER of 10 times which implies a 29% discount to the peers' weighted average FY2011 PER of 14 times as historically the share has been trading at these levels. Therefore, we estimate a fair value of RM4.59 based on 10 times FY2011 EPS.

We expect the HDD segment to be the main revenue contribution accounting for 45%-47% (vs 43% and 44% in FY08 and FY09 respectively). We expect FY2011-2012 revenue growth of 30% and 25% respectively driven mainly by; 1) robust order from Samsung and WD; and 2) stronger global HDD demand stemming from rising PC and consumer electronics (CE) sales.

Also, we believe the camera segment will eventually overtake HDD's revenue contribution in 2012 due to: 1) higher volume growth for cameras given volume loadings from Nikon; and 2) camera ASP to remain stable, supported by a growing proportion of camera barrel lens that are more complex.

We forecast sales for the camera segment to grow by 25%, 37%, and 40% in FY2010, FY2011, and FY2012 respectively given volume loadings from Nikon, which recently acquired 8.98% of Notion via a private placement exercise which raised some RM33.8 million. - RHB Research Institute, March 15


This article appeared in The Edge Financial Daily, March 16, 2010.

March 15, 2010

AXIATA - Price Target News

Stock Name: AXIATA
Company Name: AXIATA GROUP BERHAD
Research House: HWANGDBS

KUALA LUMPUR: Hwang DBS Vickers Research (HDBSVR) is fine tuning its forecasts for Axiata Group and it is mantaining a Hold call on Axiata at RM3.86 with a 12-months target price of RM4.20 from a previous RM3.90.

"In reviewing our forecasts, we raise Excelcomindo's FY10F net income by 17% and FY11F by 19%. This led to 5% and 3% upgrade for Axiata's group net income respectively. Hence, sum-of-part TP is raised to RM4.20, but HOLD call is maintained," it said on Monday, March 15.

Celcom to continue gaining share, driven by innovative product launches as well as more handset and broadband bundling. Also, it continues to focus on its strength in the Blackberry segment (said to be the largest seller in Southeast Asia) while Digi plans to launch its maiden iPhones soon.

India remains our key concern in light of price wars. Call tariff had battered down to <5 sen a minute with SMS as low as seven sen each. An industry consolidation may see Axiata pumping in more funds (like it did with the Spice-IDEA Cellular merger).

"Maintain HOLD. Lacking in near term catalyst while India remains an overhanging issue, we maintain our HOLD call on Axiata. It trades at expensive 19 times FY10F PE and 7 times EV/EBITDA multiples vs. 13 times and 7 times respectively of regional telco, SingTel's," it said.

TOPGLOV - Price Target News

Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD
Research House: MAYBANK

KUALA LUMPUR: Maybank Equities Research is retaining a Buy on Top Glove at a share price of Rm12.26 while the target price has been increased from RM11.30 to RM14.50.

It said on Monday, March 15 that it has raised the FY10-12 net profit and DPS forecasts by 7-10% and 40-50% respectively ahead of a stronger 2Q result. Top Glove has also raised core dividend payout to 40% (+10 percentage points) of net profits on strong free cash flow expectation.

"Our DCF (discounted cashflow) derived RM14.50 TP implies 14x PER on 2011 earnings. Buy," it said.

Maybank Research said the 2QFY10 results (due on March 17, Wednesday) are expected to be slightly better than 1Q's net profit of RM65m (+1-4% QoQ), which should lift 1HFY10 earnings to RM131 million to RM133 million. Annualised FY10 net profit should surpass the research house's earlier forecast and street estimates of RM240 million to RM244 million.

The sequential strength was attributable to improved earnings from 76%-owned Mediflex (listed on Singapore Exchange) and higher output from the new Plant 19 facilities. Elsewhere, average selling ASP grew 4-5% QoQ to compensate for rising latex prices (+30% QoQ).

SPSETIA - Price Target News

Stock Name: SPSETIA
Company Name: SP SETIA BHD
Research House: ECMLIBRA

S P Setia Bhd
(March 12, RM4.23)
Maintain buy at RM4.26, target price at RM4.05
: S P Setia announced last Thursday that it had secured the all-important investment certificate for its project in Lai Thieu Town, Thuan An District, Binh Duong Province, Vietnam. Recall that, in October 2009, the company had entered into an in-principle agreement with Investment and Industrial Development Corp (Becamex IDC Corp) for the acquisition of the 26.79-acre (10.72 hectare) land involving a cash consideration of US$16.26 million (RM55.3 million).

Under the investment certificate, Setia Lai Thieu One Member Company Ltd will be established with a charter capital of US$6.5 million to undertake the project, which will be known as Eco-Xuan Lai Thieu, for a term of 50 years.

The project entails a mixed-development comprising shophouses, terrace houses, semi-detached houses, commercial centres, club house and apartments all for sale and/or lease in accordance with the laws of Vietnam. S P Setia will commence construction works for the initial phase upon the relevant development approvals and/or permits being obtained. This is a positive development as the procurement of investment certificate in Vietnam has often been cited as reason for delay in project commencement. The project with a gross development value of RM880 million is likely to start within a year.

As such, earnings contribution will only commence from financial year (FY) ending October 2011. We have yet to factor in any contribution from this project into our earnings estimate.

Although S P Setia's share price has achieved our target price of RM4.05 (based on upper-end price-to-earnings ratio valuation of 20 times on calendar year 2010 earnings per share) since we upgraded S P Setia to a buy in December 2009, there is scope for earnings and target price upgrade given strong sales performance so far which has exceeded our expectation.

The management has also recently raised its FY10 sales target from RM1.65 billion to RM2 billion. We maintain our buy call and will review our estimates and target price when S P Setia announces its 1QFY10 results on Thursday. - ECM Libra, March 12


This article appeared in The Edge Financial Daily, March 15, 2010.

AIRASIA - Price Target News

Stock Name: AIRASIA
Company Name: AIRASIA BHD
Research House: MAYBANK

AirAsia Bhd, Southeast Asia's biggest budget carrier, was downgraded to "sell" from "hold" at Maybank Investment Bank Bhd, which said slower profit growth may prompt write-offs.

The share price estimate for the stock was reduced to RM1.15 from RM1.33, Maybank Investment said in a report today.

The shares of the airline dropped 2.3 per cent to RM1.30 at midday close, set for the lowest close since December 9. -- Bloomberg

KENCANA - Price Target News

Stock Name: KENCANA
Company Name: KENCANA PETROLEUM BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research is maintainings its Outperform on KENCANA PETROLEUM BHD [] as it maintains its forecasts and target price of RM2 as its continues to apply its target market price-to-earnings of 15 times to the stock.

It said on Monday, March 15 that Kencana remains an OUTPERFORM, with the potential re-rating catalysts being active order book replenishment, and mergers and acquisitions.

"Kencana's 2QFY7/10 results are scheduled to be announced on March 25. We expect the company to deliver a net profit of around RM31 million (flat growth YoY and QoQ), bringing 1H bottomline to RM62 million (+3% YoY) or 47% of its full-year forecast. But the results are likely to be 9% lower than consensus estimates," it said.

CIMB Research said Kencana is gunning for contracts in Malaysia and India worth a collective RM4.5 billion. The company is also in the running for a contract for Australia's Gorgon project.

"If successful, Kencana would be the second company from Malaysia to be involved in the Gorgon project, after Wah Seong. We maintain our forecasts and target price of RM2 as we continue to apply our target market P/E of 15 times to the stock," it said.

NTPM - Price Target News

Stock Name: NTPM
Company Name: NTPM HOLDINGS BHD
Research House: OSK

KUALA LUMPUR: OSK Research has raised its earnings outlook for NTPM HOLDINGS BHD [] for FY10 and FY11 by 16%-24% to RM64.4m and RM66.8m respectively given the better than expected results.

It said on Monday, March 15 the target price was raised to 60 sen from 50 sen.

NTPM reported a good set of results with cumulative 9MFY10 revenue and earnings coming in at RM289.7 million (+10% y-o-y) and RM45.1 million (+44.5% y-o-y) respectively, above OSK Research's full year earnings forecast of RM51.8 million.

Aside from the continued growth in sales volume of its main products (tissue products, sanitary napkins and diapers), the stronger than expected results were mainly attributed to the low raw material costs.

Nine-months FY10 EBIT margin surged to 20.3% versus 15.9% in 9MFY09. Nonetheless, the research house sees margin compression in FY11 as stocks are depleted.

NAIM - Price Target News

Stock Name: NAIM
Company Name: NAIM HOLDINGS BHD
Research House: OSK

KUALA LUMPUR: OSK Research maintains a Buy on Naim Holdgings Bhd with a target price of RM4.21, based on the second stage sum-of-parts.

"We continue to view Naim as a good proxy for the thematic Sarawak state elections play (polls expected to be held early-mid 2011)," it said in a research note on Monday, March 15.

Last Friday, Naim had entered into a Memorandum of Understanding (MOU) with the General Board of Privatisation & Investment (GBPI) of Libya.

The MOU is for both parties to work together to come up with a concept for the development of a parcel of land (100 ha) situated about 30km from the Tripoli City Centre in Libya.

"We continue to like Naim's efforts to diversify geographically out of Sarawak. Last year the company had secured two road projects in Fiji. For this recent MOU, we do not discount the possibility of a JV being set up between Naim and Libya in which Naim will hold an associate stake. Under this framework, the JV would then award some of the CONSTRUCTION [] packages back to Naim," it said.

The development is known as the Solar Oasis Science and Business Park (Solar Oasis). The development will mainly be commercial in nature. Facilities such as an exhibition centre, conference centre, workshops, recreation club houses, office buildings, business centre, transportation links, parks, utilities and medical services will be constructed in the Solar Oasis.

BJTOTO - Price Target News

Stock Name: BJTOTO
Company Name: BERJAYA SPORTS TOTO BHD
Research House: CIMB

Berjaya Sports Toto Bhd (BToto)
(March 12, RM4.36)
Maintain outperform at RM4.41, target price at RM5.45
: BToto announced last Thursday that it had obtained the necessary approvals to replace its Super Toto 6/49 with a new lotto variant - Supreme Toto 6/58. Supreme Toto is based on a RM2 per bet and offers a guaranteed minimum upfront jackpot of RM8.88 million, the highest in town.

BToto will be launching this new lotto game on March 18, 2010.

This latest news is just a mild surprise for us as it is not the first time that BToto has successfully negotiated for a replacement game. Notably, in June 2009, the number forecast operator announced the replacement of the Toto 6/42 Jackpot with Power Toto 6/55.

Before that, it replaced Toto 4/49 with the Mega 6/52 Jackpot game in June 2007. Although BToto will still be offering three lotto games, we believe that Supreme Toto 6/58 is a replacement for the better as it should appeal more to the average punter given its attractive jackpot prize in excess of RM8 million, which is the highest in town.

Comparatively, the jackpot for the outgoing Super Toto 6/49 starts from RM1 million. The higher jackpot should help BToto's sales given the strong correlation between jackpot sizes and ticket sales.

Besides its much higher minimum jackpot offering and larger number matrix, Supreme Toto also stands out from BToto's two other lotto variants in its minimum bet of RM2 which is higher than the RM1 minimum for Mega Toto 6/52 and Power Toto 6/55.

With the addition of Supreme Toto, all of BToto's lotto games now boast top-heavy payout structures and no ceiling on the jackpot. This differs from the outgoing 6/49 variant whose prize money feeds into two running jackpots (1st prize and 2nd prize).

We note that top-heavy payout structures usually result in a faster jackpot snowballing, which should also propel buying interest. From a payout perspective, we expect Supreme Toto's payout to mirror the payout of about 55% for its lotto peers.

We are positive about this replacement game as its attractive jackpot provides a good platform to propel lotto revenue growth. We see this replacement game as BToto's retaliation against Magnum's 4D Jackpot game, which has been generating strong sales given its above RM20 million jackpot offering.

BToto's new game should help to arrest any shift in market share to Magnum.

Given the minimal earnings adjustments, we retain our financial years ending April 2010 to 2012 dividend per share forecasts as we stick to our 76% to 78% payout ratio. As such, our end-calendar year 2010 dividend discount model-based target price stays at RM5.45.

BToto remains an outperform. We reiterate our outperform call on BToto, with the potential share price catalysts being this announcement of a new lotto game variant, and less-than-expected cannibalisation from Magnum's 4D Jackpot game. - CIMB Research, March 12


This article appeared in The Edge Financial Daily, March 15, 2010.