July 30, 2010

QCAPITA - Quill Capita cut to 'hold'

Stock Name: QCAPITA
Company Name: QUILL CAPITA TRUST
Research House: MAYBANK



Quill Capita Trust, a Malaysian property trust partly owned by Singapore's CapitaCommercial Trust, dropped 1 per cent to RM1.04, set for its biggest decline since July 7.

Quill was cut to "hold" from "buy" at Maybank Investment Bank Bhd, which said investor interest on the stock is expected to be diverted to the country's two biggest property trusts which were listed earlier this month. -- Bloomberg


PLUS - PLUS sells stake in Indonesian highway for insignificant gain

Stock Name: PLUS
Company Name: PLUS EXPRESSWAYS BHD
Research House: OSK

PLUS Expressways Bhd
(July 29, RM3.75)
Maintain buy'' at RM3.70 with increased target price of RM4.30 (from RM4.25)
: PLUS announced on Wednesday that it had entered into a sale and purchase agreement to dispose of its 60% stake in the Cimanggis-Cibitung Tollway to PT Bakrie & Brothers for IDR57.8 billion (about RM20.2 million). Currently, Bakrie owns 25% of the'' highway. The disposal will be satisfied in cash.

There is a rationale for disposal. The 25km highway is supposed to link Cimanggis and Cibitung to form part of the Jakarta Outer Ring Road 2.

Recall that the concession agreement (CA) was never signed between the Ministry of Works and the JV parties. This was mainly due to the absence of a land capping clause, without which the concessionaire would not be protected from high land prices and may end up paying more than what was initially estimated.

The risks of this were amplified because the highway cuts through urban areas. With the land issue unresolved, PLUS has decided to dispose of its stake in the joint venture.

There are minimal gains from disposal. PLUS has invested RM17.8 million in its 60% stake. Including some expenses incurred in the past few years, the expected gain from the disposal is an insignificant RM1 million.

We are not making any changes to our dividend projections as the RM20.2 million cash proceeds are small compared to our annual free-cash-close-to-equity (FCFE) projection of RM1.2 billion to RM 1.6 billion.

Domestic traffic volume is still strong. Year-to-date (June) traffic volume growth along the North-South Expressway (NSE) has remained at a strong 9.8% year-on-year. Management has revised up its traffic volume guidance from 3% to 4% to 5% this year.

As for the proposed lane expansion along certain stretches of the NSE and New Klang Valley Expressway costing RM1.14 billion, management has guided that this will not affect its dividend policy (75% payout ratio).

We raise our traffic volume projection to 5% in line with management's guidance and the strong 1H numbers.

This increases our FY2010 ending Dec 31, to FY2012 earnings by about 1.4%. Earnings are expected to jump 35% next year due to the scheduled rate hike along the NSE. Our target prices continue to be based on a 20% discount to the FCFE valuation (9.2% equity cost).

We like PLUS for its defensive nature and decent forward yields of 4.6% to 5.9%. ' OSK Research, July 29


This article appeared in The Edge Financial Daily, July 30, 2010.


HAIO - Membership in Hai-O to contract in FY2011

Stock Name: HAIO
Company Name: HAI-O ENTERPRISE BHD
Research House: RHB

Hai-O Enterprise Bhd
(July 29, RM3.66)
Downgrade to underperform (from market perform) at RM3.70 with reduced fair value of RM3.63 (from RM4.06)
: We believe that due to the revised Direct Selling Act (DSA), Hai-O's membership drive will be affected, as well as its retention of existing members.

We have adjusted our forecast to include a net membership contraction of 1,200 per month, which consequently reduces our FY2011 ending April 30, 2011, to FY2013 core distribution force (CDF) assumption by 5.1% to 10%.

One of the reasons for contraction is that the revised DSA has tightened the regulations in the MLM industry to stop MLM members from front-loading stocks, as this could subsequently lead to its members not being able to sell the excess shares.

It also deters MLM leaders or members who were previously front-loading to continue their recruitment activities as they are now unable to make quick profits as they did previously.

While the more stringent ruling will lead to a temporary slowdown in recruitment, we believe that it could also lead to negative growth of MLM members, given that some of the members who were previously making quick profits may drop out of the company.

We are thus cutting our revenue per member growth assumption to negative 10% (from negative 5% previously), for FY2011 because we believe that member productivity will decline as they are no longer able to front-load their stocks. For FY2012 to FY2013, however, we are maintaining our revenue/member growth at 1% for each year.

Although the MLM division outlook is bleak, the negative impact is cushioned somewhat by the fact that all the other divisions are on track, especially its energy division, which has drawn interest from various parties with regard to its heat transference technology.

Private placement is still a no-go and the recently announced cancellation of its proposed private placement is positive news in our view.

The private placement would have diluted earnings-per-share (EPS) by 6.9% and reduced FY2011 projected dividends to 15.6 sen, from 17.1 sen currently.

The risks to the stock include termination of supply agreements from its suppliers in China, stronger-than-expected strengthening of the US dollar; and weaker-than-expected increase in consumer spending.

We are reducing our FY2011 to FY2013 earnings forecast by 8% to 11.8% after incorporating the contraction in membership numbers and a reduction in revenue/member as previously highlighted.

The temporary setback to the MLM business will affect earnings significantly in the near term. However, we believe that Hai-O will be able to pull through and come back stronger in the longer term, with members of higher quality and productivity.

Nonetheless, we are downgrading our call to underperform, as we have reduced fair value to RM3.63 from RM4.06, based on unchanged 10 times CY2011 EPS. ' RHB Research Institute, July 29


This article appeared in The Edge Financial Daily, July 30, 2010.


SIME - Dust at Sime to settle only in November

Stock Name: SIME
Company Name: SIME DARBY BHD
Research House: CIMB

Sime Darby Bhd
(July 29, RM7.69)
Maintain neutral at RM7.76 with lower target price of RM8.15 (from RM8.40)
: Among the key takeaways from our recent visits are that the final results of the forensic audits on the energy and utilities (E&U) losses will be known at end-August.

We gather that the losses are due to poor management of the projects. The group was unable to secure contractors in a timely manner, for example.

It faced cost overruns and was poor in its control of claims management. The losses were revealed and provided for in mid-May 2010 after the Board Work Group reported their findings to the board of directors.

We gather that the group has completed and delivered the Qatar Petroleum and Marine projects. As such, we believe the risk of further provisions for these two projects is low. The Maersk Oil Qatar project, however, is only 96% complete and the final handover is targeted for September.

Another project pending completion is the Bakun project, which is also 96% complete. We believe there is a risk of further provisioning for these two projects before the final handover.

We are more concerned about Bakun as the consortium members may not be willing to fork out their share of the disputed losses and there are still no details on the breakdown of the Bakun cost overruns.

In FY2010 ended June 30, fresh-fruit-bunch (FFB) production fell 0.2% year-on-year, which is below our forecast.

We are cutting our FY2010 to FY2012 earnings forecasts by 2% to 6% to account for lower-than-expected FFB yields due to poor weather.

Also, the contracts for top management will be up for renewal in November and Sime Darby will be holding its AGM then.

News reports have touched on the possibility that some of the top management may leave when their contracts expire. We would not be surprised by a management reshuffle in November, after which the dust may finally start to settle for the group.

This has the effect of lowering our sum-of-parts (SOP)-based target price from RM8.40 to RM8.15. We remain neutral on the stock as our positive take on the appointment of a new CEO is offset by the ongoing probe into the E&U unit and the possibility of a management reshuffle and changes to the group's strategy.

Sime Darby appointed Datuk Mohd Bakke Salleh as acting president and group chief executive on July 15, replacing Datuk Seri Ahmad Zubir Murshid. The appointment of Mohd Bakke, former president/CEO of Felda Global Ventures Holdings Sdn Bhd, came close to a month after Sime announced that he had been picked as the new CEO.

According to news reports, Bakke's first task is to implement a new group-wide organisation and reporting structure, which is the second phase of the ongoing review of gaps in the management, organisation and reporting structure at the energy and utilities division.

He will also be working on the group's future strategy. ' CIMB Research, July 29


This article appeared in The Edge Financial Daily, July 30, 2010.


NHFATT - OSK Research raises target price for New Hoong Fatt to RM2.85

Stock Name: NHFATT
Company Name: NEW HOONG FATT HOLDINGS BHD
Research House: OSK

KUALA LUMPUR: OSK Research has maintained its buy call on NEW HOONG FATT HOLDINGS BHD [] at RM2.29 with a higher target price of RM2.85 (from RM2.62) and said the company's 2QFY10 revenue and net profit for the quarter were in line within its forecasts.

The company's revenue continued to scale new highs, growing organically by double digits, it said.

"We continue to like NHF's stable organic growth. Rolling over our valuation to FY11 EPS and pegging it at a lower PE multiple of 6 times (from 7 times), we derive a target price of RM2.85 (previously RM2.62), with our buy call maintained," it said.


July 29, 2010

AXIATA - Axiata at highest since Sept 2008

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

KUALA LUMPUR: Axiata Group Bhd's share price rose to its highest since September 2008 in late afternoon on Thursday, July 29 after analysts upgraded the telco on expectations of further earnings surprises.

At 3.18pm, it was up 20 sen to RM4.35 in active trade with 26.74 million shares done.

CIMB Equities Research had maintained its OUTPERFORM call and sum-of-parts based target price of RM4.95 for Axiata.

"A likely catalyst for the stock is further earnings surprises. Our forecasts are 21-23% higher than consensus although the gap is down from 30-34% two months ago," it said.

CIMB Research said falling competitive risks in India should buoy the stock. Axiata remains its top Malaysian telco pick but XL Axiata remains its favourite regional play.




JCY - JCY hits lowest since listing

Stock Name: JCY
Company Name: JCY INTERNATIONAL BERHAD
Research House: CIMB

KUALA LUMPUR: Shares of JCY International Bhd fell to its lowest since listing to RM1.32 in late afternoon on Thursday, July 29 in very active trade.

At 3.35pm, it was down four sen to RM1.32 with 13.2 million shares done. Its highest was RM1.98.

It was listed on Feb 25 at an offer price of RM1.60. Since then, its share price is down 28 sen or 21%.

In a report issued on July 20, CIMB Equities Research had a Sell on JCY at RM1.48, based on its technical charts.

"The stock has fallen back to its debut price after hitting a high of RM1.98. The pullback has been severe and does not look like a correction. We expect further price weakness in the medium term as it is now forming a bearish flag pattern," it said on July 20.

CIMB Research said a break below the RM1.44 would signal that prices are heading lower towards RM1.30, based on the height of the flag. There is also a good chance that it could even drop below RM1.30.

JCY'' manufactures hard disk drive mechanical components.




FREIGHT - Freight management sailing the high seas

Stock Name: FREIGHT
Company Name: FREIGHT MANAGEMENT HLDGS BHD
Research House: OSK

Freight Management Holdings Bhd (Freight)
(July 28, RM1.04)
Maintain buy at RM1.03 with higher target price of RM1.40 (from 95 sen)
: Freight has drawn strong buying since last week, which has driven its share price up by 27% to RM1.03,'' well above our target price. The daily average volume traded over the past one week was also higher than usual. From our checks, we gather that it's business as usual. As such, we believe that the heavy interest in the stock was possibly spurred by its sound fundamentals and future prospects, as well as attractive valuations.

Taking the cue from NCB's Northport's (buy, target price RM3.72) encouraging 2QCY2010 container throughput volume, which reached a historical high, we see Freight potentially chalking up similarly robust numbers during the quarter, which would translate into higher earnings. This will be positive for Freight's newly set up haulage division, which currently earns a higher than industry average margin.

The management has also indicated that July's handling volume remained encouraging and expects the outlook to remain favourable, although we acknowledge that economic growth in 2HCY2010 will be more subdued as the low base effect wears out.

It has been acknowledged that major liners are currently facing container shortages after the global slump disrupted the production of new containers, which has in turn resulted in higher freight rates. The management indicated that the company has been spared because Freight acts'' only as an intermediary between the liners and importer/exporters. This crisis has instead opened the opportunity for Freight to leverage on the situation by maximising its profit spread on freight shipments.

While the tug and barge division will remain weak over the next few quarters given that the oversupply of barges from the Middle East, we see heightening construction activities in Malaysia come 2011 supporting a recovery in the segment in the form of higher shipments of building materials.

Furthermore, as unveiled in the 10MP, land reclamation for the expansion of Westport requires the shipment of sand, thus potentially benefitting tug and barge operators like FMH. ' OSK Research, July 28


This article appeared in The Edge Financial Daily, July 29, 2010.


GENP - Genting Plantations' Indonesian estates to start 'fruiting' soon

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

Genting Plantations Bhd
(July 28, RM7.10)
Maintain underperform at RM6.65 with higher fair value RM6.70 (from RM6.50)
: Key highlights from our meeting with Genting Plantations (GP) include: (i) CPO price outlook; (ii) No El Nino impact yet, slower production growth seen in 2HFY2010; (iii) Indonesian plantation contributions to start coming through from FY2011; (iv) change in labour permit regulations; (v) production costs to rise, not drop in FY2010; and (vi) quiet on property development front, but potential coming from Chelsea Outlets and Kulai project.

GP's fresh fruit bunch (FFB) production growth has recovered from the weakness seen in 1H2009, to post an 11.7% year-on-year (y-o-y) growth year-to-date June 2010. Going forward, however, management expects this y-o-y growth to slow in 2H2010, given the recovery in FFB production which was seen in 2H2009. For the whole of 2H2010, management expects FFB production to be relatively flat y-o-y, which would bring FY2010 FFB production growth to approximately 6-7% y-o-y. Contributions from GP's Indonesian plantations should already start contributing in FY2011, albeit very minimally, but we expect a larger impact from Indonesia to be felt from FY2012, contributing about 11% to total production.

We believe more exciting prospects await once GP's Chelsea Premium Outlets and the surrounding area in Kulai start to be developed, given that the land is within the Iskandar economic zone and is easily accessible at the intersection between the Second Link to Singapore and the North-South Expressway. In addition, we understand there will be a trumpet interchange going into the area which is targeted to be completed by Oct 2011 (built by Ireka Bhd), which will make access even more convenient.

Main risks include: (i) a convincing reversal in crude oil price trend resulting in reversal of CPO and other vegetable oils price trend; (ii) weather abnormalities resulting in an over or under supply of vegetable oils; iii) revision in global biofuel mandates and trans-fat policies; and (iv) a quick global economic recovery, resulting in higher than expected demand for vegetable oils.

We tweaked our forecasts by -2% for FY2010, +2.9% for FY2011 and +9.1% for FY2012.

Post-earnings revision, we raise our fair value to RM6.70 (from RM6.50), based on an unchanged 14.5 times CY2011 target PER. We maintain our underperform recommendation, as we believe valuations remain stretched at current levels. Catalysts would include a spike in CPO prices, given GP's sensitivity to this, as well as foreseeable contributions from its integrated property project in Kulai. ' RHB Research Institute, July 28


This article appeared in The Edge Financial Daily, July 29, 2010.


SAPCRES - AmResearch maintains overweight call on O&G sector

Stock Name: SAPCRES
Company Name: SAPURACREST PETROLEUM BHD
Research House: AMMB

Oil & Gas sector
Maintain overweight
: We recently visited five oil and gas (O&G) companies in Singapore with some fund managers. We met with fabricators, offshore installation providers and vessel operators ' Keppel Corp, Sembcorp Marine, Otto Marine, Ezra Holdings and Cosco Corp (S) Ltd.

We came away with the impression that the management of these companies are generally cautiously optimistic near term while remaining highly positive on the rollout of O&G projects in the long term.

Keppel Corp and SembCorp Marine's managements indicated that the deepwater ban in the US Gulf of Mexico (GOM) could mean higher value jobs in the longer term given a more stringent safety regime.

Petrobras is expected to call for tenders for 28 deepwater rigs, potentially worth US$20 billion (RM63.8 billion), over the next three weeks. We understand that there could be up to three successful bidders as the contracts could be awarded in four separate packages of seven drillships. Keppel Corp and Sembcorp Marine are among nine contenders.

This positive feedback reaffirms our overweight call on the sector given: (i) RM4 billion fabrication contracts for Malaysian shallow fields to be awarded in 2H2010; (ii) a RM3 billion Petronas liquefied natural gas re-gasification plant in Melaka; (iii) new maintenance and hook-up commissioning services for offshore platforms, potentially worth RM3.2 billion; (iv) Exxon-Mobil's enhanced oil recovery investments worth over RM7 billion; (v) revival of the RM2 billion Sabah Oil & Gas Terminal project in Kimanis; and (vi) proposed listing of MISC's Malaysia Marine Heavy Engineering and Petronas' petrochemical division by end-2010.

We maintain our buy calls on SapuraCrest, Alam Maritim, Kencana, Wah Seong, Tanjung Offshore, Dialog Group and Petronas Gas. Our top pick continues to be SapuraCrest given its huge lock-in order book of almost RM10 billion. We maintain our sell call on KNM Group given its poor earnings delivery. ' AmResearch, July 28


This article appeared in The Edge Financial Daily, July 29, 2010.


SIME - CIMB Research maintains Neutral on Sime Darby

Stock Name: SIME
Company Name: SIME DARBY BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research is maintaining a NEUTRAL recommendation on SIME DARBY BHD [] with a lower target price of RM8.15.

It said on Thursday, July 29 that in line with the earnings downgrade, it is lowering its sum-of-parts (SOP) based target price from RM8.40 to RM8.15.

'There is no change to our valuation basis of 10% discount to SOP. The discount essentially factors in ongoing concern and uncertainty over corporate governance and the group's direction,' it said.

CIMB Equities Research said there is no change to its NEUTRAL call on the stock. We are positive on the appointment of a new CEO which could bring positive changes to the group.

'However, this is clouded by near-term uncertainty over the probe into the E&U division, a possible management reshuffle and changes in the group's strategy,' it said.


DAIBOCI - CIMB Research retains Outperform on Daibochi

Stock Name: DAIBOCI
Company Name: DAIBOCHI PLASTIC & PACKAGING
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research reiterated its Outperform call on Daibochi Plastic and Packaging Bhd.

It said on Thursday, July 29 that factors that could catalyse the stock include i) margin expansion over the next few quarters, ii) contracts from major non-F&B companies and, iii) attractive dividend yields of around 7%.

CIMB Research said Daibochi's 1H10 results met its and market expectations. Although annualised 1H10 core net profit worked out to only 80% of its forecast, it considered it to be in line as 2H should be a stronger half.

The 2.5 sen interim tax-exempt DPS took YTD DPS to 6.0 sen, within market and its expectations.

'We maintain our earnings forecasts and RM4.60 target price, which we continue to base on 12x CY11 P/E, a 20% discount to our 15x target P/E for the market.

'Daibochi's medium-term prospects look promising given the positive initial feedback on its anti-static packaging for electronic products which was finally certified last month,' it said.


HPI - CIMB Research: Sell on HPI at RM1.84

Stock Name: HPI
Company Name: HPI RESOURCES BHD
Research House: CIMB

KUALA LUMPUR: CIMB Retail Research has a Sell on HPI Resources at RM1.84, which pegs its price-to-earnings for FY11 at 5.6 times and price-to-book value of 0.7 times.

It said on Thursday, July 29 that Wednesday's pullback confirmed the bearish engulfing pattern formed on Tuesday. Next downleg would likely drag HPI towards its 38.2% FR at RM1.75, and possibly even the 50% Retracement level at RM1.68.

'Technical indicators are also showing signs of exhaustion. MACD is about to turn south while its histograms also show an easing trend. Meanwhile, RSI is diving towards the neutral zone,' it said.

CIMB Retail Research said it appears that the RM2 high would likely be its near term peak. Hence, any rebound towards this level is an opportunity to sell into strength. Only a break above RM2.02 would cancel out the negative momentum.

HPI Resources manufactures corrugated boards, carton boxes, and plastic film packaging products.


SCOMI - AmResearch maintains Buy on Scomi Group

Stock Name: SCOMI
Company Name: SCOMI GROUP BHD
Research House: AMMB

KUALA LUMPUR: AmResearch maintains its BUY rating on SCOMI GROUP BHD [] but have raised its fair value to 80 sen a share (from 76 sen a share previously) based on 5% discount to its sum-of-parts (SOP) of 84 sen a share.

'We believe Scomi is undervalued, as it will certainly benefit from potential new contracts for SCOMI ENGINEERING BHD [] (SEB) - its 70%-owned subsidiary,' it said on Thursday, July 29.

Scomi associate SCOMI MARINE BHD []'s (SMB) recent proposed disposal of its Indonesian associate could result in impairment losses of RM433 million - Scomi's portion: RM185mil.

AmResearch said operational wise, its oil & gas unit will ride on stronger drilling activities globally. Scomi does have a pedigree in monorail works based on track record.

'We believe Scomi's subsidiary SEB is a leading candidate for the KL Monorail expansion. In addition there could be more earnings upside (a further 15%-20%) for SEB, via: (i) LRT - Ampang/Kelana Jaya extension & new Cheras-Kota Damansara line; and (ii) MRT involvement - via M&E works - worth RM400 million to RM500 million,' it said.


July 28, 2010

FREIGHT - Freight Mgt 'buy' call maintained: OSK

Stock Name: FREIGHT
Company Name: FREIGHT MANAGEMENT HLDGS BHD
Research House: OSK



OSK likes Freight Management for the company's consistency in posting double digit earnings growth since its listing in 2005.

"We see the company repeating the stellar showing amid favourable trade and demand conditions, which prompts us to nudge up our earnings forecast by some 10 per cent and 16 per cent respectively for financial year 2011 and financial year 2012."

OSK added that with the company's valuations rolled over to FY11 numbers pegged at a higher price earnings multiple of 9 times, it upgraded the target price on the company to RM1.40, with its 'BUY' call maintained. - Reuters


APM - HLG Research neutral on APM automotive

Stock Name: APM
Company Name: APM AUTOMOTIVE HOLDINGS BHD
Research House: HLG

APM Automotive Holdings Bhd
(July 27, RM4.77)
Neutral at RM4.75 with target price of RM4.90
: Since our accumulate call at RM3.90 on June 16, its share price has already rallied 26% in less than a month to as high as RM4.90 on July 26.

We believe the surge was mainly due to: (i) strong industry TIV (total industry volume) growth ahead, as MAA has revised its FY2010 forecast to 570,000 units (previously 550,000) on a stronger-than-expected 19.8% growth in TIV year to date; (ii) sustained strengthening of the ringgit against the US dollar and yen which would help to reduce the costs of imported materials; (iii) improving consumer sentiment and business conditions; (iv) its diversification to increase sales to sister company Tan Chong rather than overdependence on Perodua and Proton; and (v) reaping the benefits of its restructuring via the streamlining of plants and labour force over the past five years.

APM enjoyed a good spell over the past few days but the share price could encounter some stiff resistance soon as the relative strength index and moving average convergence-divergence readings are heading towards the overbought zones whilst the slow stochastic indicator is trending down.

If the candles break below the five-day simple moving average (SMA) of RM4.56, selling pressure could accelerate. This would drag prices towards more solid supports at RM4.45 (10-day SMA), RM4.33 (20-day SMA) and RM4.20 (50-day SMA). While we think the long-term uptrend channel is still intact, following the positive breakout above the RM4.50 neckline last week, the share price may come under pressure over the next few days as profit taking intensifies following the formation of a bearish shooting star.

Although we cannot discount the possibility of further gains towards the RM5 zone (the upward channel), we think the odds are slowly turning in favour of the bears. Therefore, traders should adopt sell into strength.

We are neutral on APM now after its recent sharp rally. We see limited upside in the short term to our technical target of RM4.90, implying 8.8 times FY2011 PER (in line with its average 10-year PER of 8.5 times). ' HLG Research, July 27


This article appeared in The Edge Financial Daily, July 28, 2010.




BHIC - Boustead's BHIC regaining its lustre

Stock Name: BHIC
Company Name: BOUSTEAD HEAVY INDUSTRIES CORP
Research House: TA

Boustead Holdings Bhd
(July 27, RM3.91)
Maintain buy at RM3.90 with target price of RM4.40
: We understand that Boustead's 65% owned subsidiary, BHIC is close to finalising the service and maintenance job for the navy's Scorpene submarines which, if it materialises, would potentially boost 2H2010 earnings.

We have highlighted in previous reports that this job could be worth RM1 billion to RM1.2 billion against RM600 million (over six years) as originally envisioned. The actual work already commenced in 1Q2010, although BHIC was not able to recognise the revenue as the contract is still being negotiated to include the expanded job scope.

Hence, 3Q2010 earnings may be substantially higher as the results would include three quarters recognition of the maintenance job.

To recap, a consortium comprising BHIC and French based DCNS SA (on a 60:40 equity basis) received the letter of intent (LOI) to undertake the maintenance and technical support for the two Scorpene submarines acquired by the Ministry of Defence.

We believe that Boustead is also close to securing the LOI for construction of the second batch of patrol vessels (PVs), which is in our view the most significant catalyst for re-rating of the share price.

We understand the contract value could be significantly higher at RM8 billion to RM9 billion (RM6.7 billion for the first batch) due to an upgrade to frigates, which are more technologically advanced than PVs. The group has already delivered five PVs and the last is scheduled for delivery in August/September. We think a successful completion and delivery of the first batch of PVs will significantly enhance Boustead's chances of securing the second batch.

Recall that the first batch, originally granted to PSCI Bhd, was plagued with numerous delays and scandals. Hence, we believe that from the government's perspective, completion of the first batch will be regarded as the main KPI before committing on the second batch.

We have also highlighted the possibility of BHIC clinching the service and maintenance contract for the first batch PVs.

We now understand that BHIC is in negotiation to secure the maintenance contract for the first three PVs that were commissioned in June 2006, August 2006 and June 2009, respectively. The contract value could range between RM20 million and RM30 million per PV, according to the management, compared with our initial estimate of RM30 million to RM40 million per PV.

However, no deal has materialised so far. That said, we note that it has been four years since the first two PVs were commissioned. Therefore, we believe the Navy is unlikely to delay any further the maintenance contract.

We maintain earnings forecasts and target price at RM4.40 based on sum-of-parts valuation methodology. We continue to see significant upside risk to earnings forecasts if management can deliver on new contracts, expand property development landbanks and extract merger synergy from the acquisition of Pharmaniaga.

Our current earnings forecasts are already some 12% lower than consensus, reflecting our conservative take on earnings outlook, particularly in the heavy equipment segment.

Maintain Boustead as buy. We continue to like the stock as a growth story and attractive dividend yield. ' TA Securities, July 27


This article appeared in The Edge Financial Daily, July 28, 2010.




TM - Telekom UniFi subscriber rate most encouraging

Stock Name: TM
Company Name: TELEKOM MALAYSIA BHD
Research House: AMMB

Telekom Malaysia Bhd (TM)
(July 27, RM3.36)
Maintain buy at RM3.33 with fair value of RM3.90
: Our checks with the company reveal that UniFi has attracted over 7,000 subscribers since its launch almost five months ago. This encouraging subscriber base is achieved on the back of 18 new areas covered, from just four at the time of the launch.

We find the speed of subscriber acquisition strong, as we are looking at a high year-end target for UniFi of 20,000 subscribers.

We believe UniFi's strength is largely due to the faster-than-planned launches, which have opened up a much bigger pool of potential subscribers.

Some key areas, which we believe gained the most subscribers, are Damansara, USJ and Klang. These 18 areas ' initially targeted to be launched in 3Q2010 ' were launched a full quarter early. Next, TM is expecting to roll out services in another 16 areas, which include the high-density areas of Cheras and Petaling Jaya.

It is also indicated that TM now receives an average of 100 new orders a day, a huge push from an estimated 50 before the launch of the 18 new areas.

According to our sources, TM has been able to meet 80% to 90% of the daily installations.

To date, the total number of premises covered by UniFi has increased to at least 400,000, against the 750,000 targeted for December 2010.

The original target for UniFi was to cover at least one million households by 2011; a target we believe would easily be surpassed.

For FY2012, the guidance remains at 1.3 million premises covered.

Recall that in our FY2010 estimate, we imputed 20,000 subscribers, on a base-case scenario, by the end of this year. We had also assumed an ARPU'' (average revenue per user) of RM115 per subscriber during the period.

Although the actual pricing is RM149 (the cheapest package), we believe deviation would be compensated for by the fact that the earlier customers were given three months of rent-free promotion. Thus, we see the net impact to TM's bottom line will be insignificant.

The bigger bandwidth of UniFi allows for a greater amount of traffic within its fibre optic cables, giving TM greater manoeuvrability in terms of product offering, especially in the content-selling business.

TM is also actively seeking new business opportunities. It is on a quest to diversify from riding on the rental of its facilities.

We maintain our preference on TM for its unique buffer dividend policy. We continue to rate TM a buy with a fair value of RM3.90 per share on discounted cash flow-based valuation (terminal growth 1.5% and weighted average cost of capital 9.7%).

On dividend yield comparison, TM offers a slightly higher yield of 5.2%. This compared against 5.1% offered by DiGi.Com Bhd and 4.7% by Maxis Bhd. ' AmResearch, July 27


This article appeared in The Edge Financial Daily, July 28, 2010.




KPJ - KPJ courting medical tourists

Stock Name: KPJ
Company Name: KPJ HEALTHCARE BHD
Research House: OSK

KPJ Healthcare Bhd
(July 27, RM3.64)
Maintain buy at RM3.71 with higher target price of RM4.62 (from RM3.92)
: With KPJ committed to pursuing its expansion strategy, we believe it will maintain its lead in the private healthcare sector as well as sustain growth. Its community-based business model has enabled KPJ to build strong brand equity and loyalty as well as allowed the group to grow with the community it is in. The recent openings of the new Tawakal Hospital and Penang Specialist Hospital in August last year are strong testimony to its business model, through which it has increased capacity and broadened its service offerings in line with rising demand from the local community.

We see KPJ recently turning up the heat with more aggressive advertising activities, judging from the number of outdoor and electronic media advertisements placed locally and abroad. We are positive on this move as we have long held the belief that there is a sizeable untapped medical tourism market for Malaysia. Given the right marketing and promotion strategies as well as its undisputed position as the country's leading private healthcare provider, KPJ stands to benefit the most from tapping this huge market potential.

We have upgraded our earnings forecasts for FY2010 and FY2011 by 6.5% and 6.3% respectively, after taking into account the earnings contribution from Sabah Medical Centre, of which the acquisition was completed recently, as well as higher margins assumption.

We maintain our buy recommendation at higher target price of RM4.62 from RM3.92 previously, premised on our earnings upgrade as well as rolling over our EPS from FY2010 to FY2011. Our target price is based on 18.5 times FY2011 EPS. Although KPJ is no longer the cheapest healthcare stock in the region following its sharp price appreciation over the last one year, the stock is still trading at a significant discount to its comparable peer, Parkway, which currently commands 27 times PER on FY2010 EPS. ' OSK Research, July 27


This article appeared in The Edge Financial Daily, July 28, 2010.




SUPERMX - Kossan Rubber, Supermax rated 'buy'

Stock Name: SUPERMX
Company Name: SUPERMAX CORPORATION BHD
Research House: CITI GROUP



Kossan Rubber Industries Bhd and Supermax Corp were rated "buy" in new coverage by Citigroup Inc analysts Fiona Leong and Lawrence Ye, who said the companies are trading at undemanding valuations.

The brokerage has a share-price estimate of RM4.95 for Kossan Rubber and RM7.40 for Supermax. - Bloomberg



IVORY - Ivory Properties makes impressive debut

Stock Name: IVORY
Company Name: IVORY PROPERTIES GROUP BERHAD
Research House: AMMB

KUALA LUMPUR: Ivory PROPERTIES [] Bhd made an impressive debut on the Main Market of Bursa Malaysia on Wednesday, July 28 and was up 21 sen to RM1.21 at 9.30am. It was also the most actively traded counter with 21.8 million shares done.

AmResearch's fair value is RM1.75 per share pegged to a 35% discount to its estimated net asset value of RM2.70 per share.

The research house described the company as an established developer with a strong track record in Penang.

AmResearch said Ivory has strong localised knowledge and an impeccable execution track record, with quick turnaround times, adding that it is at the forefront of urban renewal in Penang.

"The redevelopment of the Escoy tin smelter into prolific Penang Times Square is a good case in point ' it provides Ivory bargaining leverage to negotiate future redevelopments. Ivory will be accelerating presales from RM500mil in FY10F to RM750mil in FY11F," it said.

"We are forecasting earnings of RM36mil in FY10F, rising by 51% to RM54mil in FY11F and a further 30% to RM70mil in FY12F ' putting its 3-year earnings CAGR at a solid 63% off an earnings base of just RM17mil in FY09.

"Balance sheet is strong, with net gearing of 10% in FY11F. We see scope for transformational growth from large NAV-accretive land deals under negotiation. The IPO is attractively priced ' at just 3.4x FY11F's earnings, and at a steep 63% discount to our NAV of RM2.70/share. It is also trading at deep discount to its small-cap peers ' despite Ivory's stronger earnings growth."


TDM - CIMB Research: Unload TDM on strength

Stock Name: TDM
Company Name: TDM BHD
Research House: CIMB

KUALA LUMPUR: CIMB Retail Research has advised investors to unload TDM BHD [] on strength. At the last traded price of RM2.22, it is trading at a price-to-book value of 0.8 times.

The research house said on Wednesday, July 28 the Evening Star formed on Monday is an early warning that the trend is about to reverse. If prices fall below Tuesday's low of RM2.19, expect more room to the downside with near term support seen at RM2.09.

'The bulls are looking exhausted at the moment. Both MACD and RSI have flattened out, suggesting that buying momentum has faded. If RM2.09 is violated, next downside targets are RM2.02 (also its 38.2% FR) and RM1.86, the 30-day SMA,' it said.

CIMB Research said its'' strategy here is to unload on strength. As it stated that it cannot completely write off the possibility of further rally, always put a buy stop at RM2.30.


KOSSAN - Kossan Rubber, Supermax rated 'buy'

Stock Name: KOSSAN
Company Name: KOSSAN RUBBER INDUSTRIES BHD
Research House: CITI GROUP



Kossan Rubber Industries Bhd and Supermax Corp were rated "buy" in new coverage by Citigroup Inc analysts Fiona Leong and Lawrence Ye, who said the companies are trading at undemanding valuations.

The brokerage has a share-price estimate of RM4.95 for Kossan Rubber and RM7.40 for Supermax. - Bloomberg



WCT - WCT a 'buy' at RM3.60: HwangDBS

Stock Name: WCT
Company Name: WCT BHD
Research House: HWANGDBS



WCT Bhd, a Malaysian builder and property group, had its stock rating raised to "buy" from "fully valued" at HwangDBS Vickers Research Sdn Bhd to reflect higher new order wins and property rental income.

The share price estimate was increased to RM3.60 from RM2.25, HwangDBS said in a report today.


EONCAP - EONCap rated a 'hold' by AmBank

Stock Name: EONCAP
Company Name: EON CAPITAL BHD
Research House: AMMB



EON Capital(EONCap) announced that its EGM has been set on August 19 for the purposed of considering Hong Leong Bank's offer to buy the entire assets andliabilities of EONCap for a cash consideration of RM5.06 billion.

AmBank said recent events reinforce its view that the takeover will likely proceed pending a favourable outcome to the defendants.

AmBank noted its fair value for EONCap remains at RM7.30 per share. - Reuters


July 27, 2010

TCHONG - Tan Chong Teana takes off in high gear

Stock Name: TCHONG
Company Name: TAN CHONG MOTOR HOLDINGS BHD
Research House: OSK

Tan Chong Motor Holdings Bhd
(July 26, RM4.80)
Maintain buy at RM4.78 with higher target price of RM6.40 (from RM5.73)
: Tan Chong's preview of its completely knocked-down (CKD) Teana last week was well attended by customers. After a series of similar events in Penang, it has scooped up bookings for 1,200 units. The Nissan Teana (CKD), which boasts a sleek exterior and luxurious interior, comes in two variants (2.0-litre and 2.5-litre). It is expected to garner favourable sales given its competitive pricing among the D segment which has been long dominated by the Accord and Camry. To achieve economies of scale in production, management has deferred the launch date to November (from September), and also surprised by announcing that it will be launching the Nissan X-Trail next month.

While there is little change in the models launching outlook since our last report, apart from the Nissan X-Trail, management also says its upcoming CKD B segment line-up (the Nissan March) will see a higher localisation rate of 50%, higher than the 30% for the Grand Livina.

Tan Chong says it intends to secure an exclusive distributorship licence in Myanmar to complete its Indo-China footprint. In serving these markets, management will make its Vietnam plant (due to commence production by 2012) the production hub, with an initial production volume of 1,200 units annually which will see it gradually increasing by 12,000 units annually over the next five years to serve the under-penetrated motor vehicle market.

We are keeping our earnings pending the release of its 2Q results next month. Valuation-wise, we have rolled our earnings to FY2011, which we continue to peg to a PER multiple of 13 times, to derive a new target price of RM6.40 (previously RM5.73). We deem as fair a multiple of 13 times since Tan Chong is undergoing PER expansion and structural changes that will see volume and earnings rev up by a CAGR of 17% and 35% respectively over the next three years. ' OSK Investment Research, July 26


This article appeared in The Edge Financial Daily, July 27, 2010.




TOPGLOV - Top Glove drops on JPMorgan downgrade

Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD
Research House: JP MORGAN CHASE



Top Glove Corp, the world's biggest rubber-glove maker, slid 3.3 percent to RM6.53, on course for its largest drop since May 6.

The company's rating was cut to "underweight" from "neutral" at JPMorgan Chase & Co because the stock has surpassed its share price estimate of RM6.30 and is trading at a premium to its peers.

It's "looking toppish," JPMorgan analyst Nicole Goh said in a report dated July 26. - Bloomberg




GAB - GAB post-tournament depression turned celebration

Stock Name: GAB
Company Name: GUINNESS ANCHOR BHD
Research House: TA

Guinness Anchor Bhd
(July 26, RM8)
Maintain buy at RM7.79 with target price RM8.70
: The brewers have had an amazing year so far as volume climbed in the absence of an excise duty hike. Brewer of the Year ' Guinness Anchor Bhd (GAB) ' is poised to perform with outstanding FY2010 results soon. Apart from media sources, we also note the FIFA World Cup season boosted sales by 30% at its trade partners' outlets, pubs and coffee shops.

GAB spent approximately RM10 million on promotions during the sporting season which we have imputed in our earnings assumptions. GAB's flagship outlets had about 750 viewing parties which recorded approximately 90,000 people. However, it was reported that some outlets recorded a tremendous 320% increase in sales year-on-year.

As mentioned previously, we anticipate strong growth in sales during the FIFA World Cup season. However, given that the event took place in June/July, we believe the full impact will not be felt in its FY2010 results ended June. Note that although there were more games held in June, the popular ones that is the semifinals and finals were played in July.

In 4QFY2010, we estimate sales to record 18% to 20% growth quarter-on-quarter. This is reflected in our 20.6% upward revision in net profit for the quarter. On that note, we also raise our projection for FY2010 by 5.1% to RM163.9 million. We believe the FIFA World Cup impact on the malt liquor market volume was underrated.

A potential threat to our estimates would be a possible excise duty hike in the budget this year which brewers have escaped for four consecutive years. Given the recent hike in gaming tax, we would not be surprised to see an excise duty hike on malt liquor this year. An increase in excise duty may significantly cause volume to contract as seen in previous years. Rolling over our valuation, we derive a new target price for GAB at RM8.70 ' based on discount dividend model (DDM) with an unchanged rate of return of 8.5%. Maintain buy on GAB. ' TA Securities Holdings, July 26


This article appeared in The Edge Financial Daily, July 27, 2010.




TGOFFS - CIMB Research: Sell on Tanjung Offshore at RM1.53

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

KUALA LUMPUR: CIMB Retail Research has a Sell call on Tanjung Offshore at RM1.53, which is trading at FY11 price-to-earnings of 9.6 times and price-to-book value of 1.2 times.

In its technical outlook on Tuesday, July 27 it said the bearish engulfing pattern formed yesterday suggests that the RM1.59 high could probably be its near term peak.

If the candles fail to take out this resistance soon, expect further weakness in prices as the candles would likely swing towards the RM1.45-RM1.38 zone. The 38.2% FR at RM1.34 could also be a magnet for prices.

Indicators are showing signs of exhaustion. MACD histograms are losing some momentum here while its RSI has also hooked downward.

'Unless the RM1.59 level is taken out, we would rather stay defensive in the immediate term. Our strategy is to unload on strength,' it said.


TM - AmResearch has Buy on TM, fair value RM3.90

Stock Name: TM
Company Name: TELEKOM MALAYSIA BHD
Research House: AMMB

KUALA LUMPUR: AmResearch has a Buy call on Telekom Malaysia with a fair value of RM3.90.

It said TM's Unifi attracted a total of over 7,000 subscribers since its launch almost five months ago. This encouraging subscriber base came in on back of 18 new areas covered, from just four areas during the launch.

'We find the speed of subscriber acquisition strong - we are also looking at a rather high year-end target for Unifi of 20,000 subscribers. To date, total number of premises passed has increased to at least 400,000, versus 750,000 targeted for December 2010,' it said.

AmResearch said the bandwidth of Unifi allows for greater amount of traffic within its fibre optic cables.

The research house maintained its preference on TM on its unique buffer dividend policy. It'' continues to rate TM a BUY with fair value of RM3.90/share on DCF-based valuation (terminal growth 1.5% and WACC 9.7%).

On dividend yield comparison, it said TM offers a slightly higher yield of 5.2% (versus 5.1% at DiGi and 4.7% in Maxis).


TENAGA - Tenaga rating raised to 'trading buy'

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



Tenaga Nasional Bhd had its stock ratings raised to "trading buy" from "neutral" at CIMB Investment Bank Bhd as the Malaysian power producer is poised to benefit from the government's cuts in subsidies.

"We are turning bullish on the local power sector as power subsidies could be the next target after the recent price hikes for fuel and sugar," CIMB said in a report today. -- Bloomberg


July 26, 2010

COCOLND - Cocoaland's latest development seen as positive surprise

Stock Name: COCOLND
Company Name: COCOALAND HOLDINGS BHD
Research House: AMMB

Cocoaland Holdings Bhd
(July 23, RM2.76)
Maintain buy at RM2.85 with fair value of RM3
: According to a Bursa Malaysia announcement, Cocoaland Holdings is in the final stages of negotiations with potential partners for a placement of new shares. One of the partners may commence due diligence on the group by next week.

To recap, on July 21 Cocoaland revealed it is in discussions with potential partners to broaden its growth.

The group has since indicated potential new placement of shares at 20% to 30% of its issued and paid-up capital, with completion at end-August.

This latest development is a positive surprise, but we are cautiously optimistic due to insufficient details at this juncture. Stock price has ran up 11% over the last two days, driven by news of potential strategic partner.

The group indicated potential earnings enhancement through product and market development. While any strategic tie-up would be positive for earnings growth, there is risk it may not be immediately accretive.

Commercialisation of the group's maiden PET bottle operations should commence soon, in August-September 2010, while the commissioning of another PET production line is expected to double total capacity to 240 million bottles per year by end-FY2011F.

Additionally, the installation of a third production line for group's core product of fruit gummies is underway, boosting total capacity by 60% to 6,700 tonnes upon completion.

Expect acceleration in sales momentum of the group's Cocopie chocolate on further rollouts to under-penetrated markets.

No change to our earnings forecast and buy recommendation with fair value of RM3, based on PER of 12 times FY2011F earnings, pending further details. Our PER of 12 times is pegged to a 10% discount to the average PER of consumer stocks. ' AmResearch Sdn Bhd


This article appeared in The Edge Financial Daily, July 26, 2010.




MAMEE - Mamee - the well-loved blue monster

Stock Name: MAMEE
Company Name: MAMEE-DOUBLE DECKER (M) BHD
Research House: OSK

Mamee-Double Decker Bhd
(July 23, RM3.70)
Initiating coverage with buy recommendation at RM3.70 with target price of RM4
: Mamee Double-Decker (Mamee) is one of the leading manufacturers and marketers of snacks, instant noodles and beverages, with 80% of its group revenue coming from snacks and instant noodles. Mamee has been able to defend its leadership in the snacks market because most of its brands are themselves market leaders. The dominant brand in Mamee's snacks division is Mister Potato, which toppled previous leader Pringles (from Procter & Gamble) for pole position when it snared 45% of the potato crisps market. The company's concerted efforts to create brand awareness via aggressive advertising and promotions will continue to drive sales.

Other than a strong presence in Malaysia, Mamee is also growing overseas. In Myanmar, it is one of the leading instant noodle brands behind 'Mama' and 'Yum Yum' noodles. In France, Mamee commands the largest market share in instant noodles at 35%.

Mamee has a wide network of distribution channels covering the major retail chains as well as distributors who serve single retail outlets throughout Malaysia. The group also exports to more than 80 countries. Its top export markets are Australia, Singapore, Russia, Hong Kong and The Netherlands. Australian sales contribute close to 20% of its total revenue. Mamee is targeting to grow the contribution of its export segment to 50% from 31% currently. The company plans to focus on the five top export markets by increasing the number of distributors from two to five per country. Mamee also plans to allocate more advertising expenses to these export markets.

Mamee has net cash of RM45.7 million and is well supported by a healthy net operating cash flow of RM20 million to RM30 million a year. The group has a 50% dividend payout policy, which translates into a dividend yield of 4.4% based on our FY2010 dividend forecasts.

Given the recent rally in the share price, upside to our target price of RM4, based on the PER of 11 times over FY2011 EPS, is rather limited. Nonetheless, given the current strong sentiment on consumer stocks, we initiate on Mamee with a buy. ' OSK Investment Research


This article appeared in The Edge Financial Daily, July 26, 2010.




TCHONG - Tan Chong up after share estimate raised

Stock Name: TCHONG
Company Name: TAN CHONG MOTOR HOLDINGS BHD
Research House: OSK



Tan Chong Motor Holdings Bhd, an assembler of Nissan cars in Malaysia, rose to the highest level in more than three months after OSK Research Sdn Bhd increased its share price estimate to reflect earnings growth prospects.

The stock climbed 1.9 per cent to RM4.87 at 10.14 am in Kuala Lumpur, set for its highest close since April 13.

The share price estimate was raised to RM6.40 from RM5.73, OSK said in a report today. - Bloomberg





BOLTON - CIMB Research: Sell on Bolton at 90.5 sen

Stock Name: BOLTON
Company Name: BOLTON BHD
Research House: CIMB

KUALA LUMPUR: CIMB Retail Research has a Sell call on Bolton at 90.5 sen, which sees it trading at a price-to-book value of 0.6 times.

The research house said on Monday, July 26 that the property-based Bolton rose to a new 52-week high of 97.5 last week but follow though momentum was weak.

'The doji pattern is probably a reflection that the trend is about to reverse. Coupled with the bearish confirmation from the past two days, the stock is now a SELL,' it said.

CIMB Retail Research said technical indicators also show signs of exhaustion. MACD histogram bars are losing some pace here while its RSI has hooked downward.

'Immediate support is at 84 sen, also its 38.2% FR. If this level is also violated, next downside targets are 80 sen and 76 sen. Put a buy stop at 97.5 sen, just in case,' it said.


HELP - CIMB Research: Sell on HELP

Stock Name: HELP
Company Name: HELP INTERNATIONAL CORPORATION
Research House: CIMB

KUALA LUMPUR: CIMB Retail Research has a Sell on HELP International at RM4.33 which is FY11 price-to-earnings 16.8 times and'' price-to-book value of 3.6 times.

It said on Monday, July 26 that HELP rallied to an all time high of RM4.80 last week but momentum failed to carry through. The black candles formed over the past few days suggest that the RM4.80 high is a level of significance.

'Unless prices can overcome this level, the stock could head towards the RM3.73 support trend line soon. The gap at RM4.30-RM4.05 could also be a magnet for prices. Falling further below its 30-day SMA at RM3.36 would likely confirm that the uptrend from June has ended,' it said.

CIMB Retail Research said although it cannot write off the possibility for a stronger rebound, it thinks this is a low probability scenario. Hence, its strategy here is to unload on strength, especially near the RM4.80 resistance.