JTINTER - JT International results as expected: OSK

Stock Name: JTINTER
Company Name: JT INTERNATIONAL BHD
Research House: MIDF



Financial results of JT International Bhd, the second largest tobacco manufacturer in Malaysia, are within expectation for the first half of the current financial year, say research firms.

OSK Research Sdn Bhd attributed the 19.6 per cent increase in JTI's total market share to its flagship value-for-money cigarette brand, Winston.

JTI also declared a first interim dividend of 15 sen per share, less 25 per cent tax, which is half of OSK's full-year estimated 30 sen per share.

"We are maintaining our dividend estimates as we are keeping our expectations in line with the management guidance of not declaring any special dividend for this financial year," it said in a research note.

However, JTI's second quarter financial year 2010 earnings before interest tax (EBIT) margin was 15.1 per cent lower compared with 16.2 per cent previously due to higher marketing expenditure incurred in the second quarter.

Earnings in the first half of this year were higher by 13.3 per cent to RM71.3 million as compared with RM63 million previously.

"The increase in both revenue and earnings were mainly driven by higher sales volume and higher cigarette prices," it said in its research note.

With an estimated long-term maintainable dividend per share of 33 sen and a required return of 6.16 per cent, MIDF said it will maintain its "Neutral Buy" with a target price of RM5.36. - Bernama

EONCAP - OSK, MIDF keep neutral call on EONCap

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



OSK has maintained its "neutral" call on EONCap stock at an unchanged target price of RM7.30, despite the decent first half year 2010 financial numbers release yesterday.

It said the stand reflected the takeover offer price from Hong Leong Bank, given the high probability of the deal being completed.

"Even if we were to roll forward our valuation parameters to FY11, on a more optimistic scenario, we would derive target price of RM7.60, which is marginally above the offer price from HLB," it said in its research note today.

OSK said EONCap's first-half 2010 results were above expectations.

The group continued to report healthy annualised deposit growth rates of 13.2 per cent, while its capital buffers remained steady at 14.1 per cent for risk-weighted capital ratio and 13.2 per cent for tier 1 capital.

Meanwhile, MIDF Research also maintained its neutral call on the stock with target price also unchanged at RM7.10.

"We retain our view that we expect competition for deposits to be stiffer as banks compete for deposits in anticipation of more hikes in overnight policy rate (OPR).

"We expect net interest margins of the banking groups to be normalised back as due to higher rates for deposits offered by banks," it added.- Bernama

BOLTON - Bolton starts landbanking

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

Bolton Bhd
(Aug 11, 95.5 sen)
Maintain buy at 98 sen with target price RM1.50: Bolton is buying 23 acres of leasehold land (99 years) in Ukay Perdana, Kuala Lumpur, for RM72 million or RM72 psf. Although this is higher than recent transactions of RM40 to RM50 psf, it is fair because the land comes with a development order and substantial earthworks have been done.

Bolton plans to amend the layout to 92 semi-detached units and six bungalows, instead of 184 semi-detached, terrace and townvilla units, to ride on the strong demand for gated and guarded high-end landed developments in the area. The acquisition is expected to be completed by 4QFY2011.

Based on RM220 million gross development value (average selling price: RM2.2 to RM3 million per unit) and RM45 million GDV, the project should boost FY2012/13F earnings by 16% to 35% and realised net asset value (RNAV) by eight or 3% (development over three years).

Assuming 80% debt financing for the land, net gearing will only increase to 24% from 10% currently (Bolton recently secured a RM195 million debt facility).

With strong bookings for 6 Ceylon and Arata@Kenny Hills, Bolton's unbilled sales should triple to about RM400 million from RM133 million. Bolton is in a good position to accelerate launches and replenish its landbank, including participating in government land redevelopment in the Klang Valley (there is a scarcity of bumiputera developers with a track record in high-end development). Valuation is attractive at 62% discount to RNAV and 0.7 times P/BV, against small/mid-cap developers' average of 45% and 0.8 times respectively. ' HwangDBS Vickers Research, Aug 11


This article appeared in The Edge Financial Daily, August 12, 2010.

AXIATA - Axiata firing on all cylinders

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

Axiata Group Bhd
(Aug 11, RM4.25)
Maintain buy at RM4.30 with higher fair value RM6 (from RM5.05): We reaffirm our 'buy' call on Axiata Group Bhd and raise our fair value RM6 (against RM5.05) on revision of its sum-of-parts valuation by 19%, to account for significant adjustments in XL and Dialog. XL outpaced Celcom in earnings growth and is set to match contribution by FY2012.

With that, our earnings estimate for FY2010 and FY2011 is revised to 33.7sen per share (against 28.8sen per share or 17%) and 45.8 sen per share (against 39.8 sen per share or 13%) respectively.

Our main investment theses on the group: (i) Stronger than previously estimated growth at XL and Dialog ' flowing in from significant revenue growth and margin expansion; (ii) Dividend surprise in store; and (iii) An attractive valuation for a company with operations in high growth, under-penetrated countries.

XL came ahead in 1H2010 and may gain traction because of impressively strong data and value added service (VAS) revenue. It leads other players in its ratio of data and VAS to voice, at 0.68 times (against Indosat's 0.17 times and Telkomsel's 0.48 times). Earnings delivery is on a fast track because of cost optimisation on top of an expanding earnings before interest, tax, depreciation and amortisation (Ebitda) margin of almost 10 percentage points over the last five quarters.

Dialog is set to ride on strong further cost optimisation benefit, trickling in from savings in network costs. The group may also benefit from a potential divestment of Dialog's pay TV operation. In 1H2010, Dialog TV narrowed net losses to LKR182 million (against LKR529 million loss in FY2009).

We mentioned in our earlier reports than Axiata would be announcing its dividend policy. While we are not expecting a competitive payout as high as other local telco companies (more than 75% payout policy), but establishing a dividend policy would offer another investment angle.

Free cash flow generation turned positive last year. Carving out capex requirement for FY2011 and FY2012 in the region of RM3.5 billion to RM3.7 billion per year, we believe Axiata has the ability to pay up to a 60% payout.

But we expect the range to be 30% to 50%, translating to 23 sen for FY2011. This would be more than the 25 sen per share Celcom will pay Axiata in FY2010.

Despite share price outperformance, we believe the valuation is attractive at the prevailing price, which implies a trailing EV/Ebitda of only 6.3 times (against SingTel's 10.5 times and other regional (developing) peers' 6.2 times). This is attractive ' Axiata's exposure in high-growth, under-penetrated countries, with further upside in earnings growth. ' AmResearch, Aug 10


This article appeared in The Edge Financial Daily, August 12, 2010.

HARTA - Hartalega's earnings growth trend

Stock Name: HARTA
Company Name: HARTALEGA HOLDINGS BHD
Research House: CIMB

Hartalega Holdings Bhd
(Aug 11, RM7.84)
Maintain outperform at RM7.90 with target price RM12.73: Hartalega's 1QFY3/11 results were broadly in line with our expectations. Annualised 1Q core net profit came in at 98% of consensus forecast and 90% of our forecast. We consider the company to be on track given the likelihood of stronger quarters ahead as a result of the company's expansion plans and higher demand from growing usage of nitrile gloves. No dividends were announced for the quarter, which was no surprise as the company usually declares dividends from 2Q onwards. We make no changes to our earnings forecasts or our target price of RM12.73 as we continue to value the stock at 14.9 times PER, a 10% discount to Top Glove's target PER of 16.5 times. Hartalega remains an outperform, with the potential re-rating catalyst being its ability to keep its margins high with the help of superior operational efficiency and premium products.

Hartalega's core net profit advanced 57% year-on-year (y-o-y) in 1QFY2011. But on quarter-on-quarter (q-o-q) basis, it declined almost 11% due to a steep rise in latex prices, depreciating US dollar, recognition of share-based payment expenses of RM1 million and the effect of the adoption of FRS 139 amounting to RM2.5 million. Should we exclude the share-based payment expenses and the effect of adoption of FRS 139, the company's bottom line would be RM44.9 million, a decrease of just 3% q-o-q, and when annualised would make up 97% of our FY forecast of RM185.2 million. Natural latex prices went up 3% on average to RM7.26/kg while nitrile latex prices increased about 7% q-o-q. On top of that, the US dollar depreciated almost 4% against the ringgit to RM3.24:US$1 during the quarter. The time lag in passing on higher latex costs and the weakening US dollar has resulted in the earnings before interest and tax (Ebit) margin narrowing 3.2 percentage points q-o-q to 31.7%.

Although the demand boost from the H1N1 outbreak last year has subsided, demand for Hartalega's nitrile gloves remains intact. The recent results released by rubber glove manufacturers have shown margin and earnings contraction due to a rise in raw material costs and the weak US dollar. But we are not worried as this is not the first time glove manufacturers are facing this situation. As in the past, average selling prices can be adjusted for higher costs and a weaker US dollar. ' CIMB Research, Aug 11


This article appeared in The Edge Financial Daily, August 12, 2010.

GENM - Genting Malaysia's UK casino acquisition - chalk or cheese?

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

Genting Malaysia Bhd
(Aug 11, RM2.78)
Maintain sell at RM2.80 with target price RM2.40: Shareholders of vendor Genting Singapore (GS) will meet on Aug 18; Genting Malaysia (GM) will meet on Aug 24. The circulars and notices of EGMs have been despatched. GS's documents imply the ''340 million (RM1.7 billion) cash consideration for the UK casino businesses is generous while GM's say it is fair. We agree with the former.

GM sees a growth opportunity in being the largest UK casino operator. It believes the UK economy is in a trough and sees synergies, operating efficiencies and new business opportunities. Still, it agrees the earnings impact will not be material in the near term. Pro forma, the acquisition would have added RM4 million or 0.3% to GM's 2009 net profit. The UK casinos made ''700,000 net profit in 1Q2010 and ''10 million in 2009, following losses totalling ''53 million in the previous three years.

GS sniffs at 'narrow synergies'. It notes the UK operations are of 44 casino-centric properties spread throughout England and Scotland. In contrast, Resorts World Singapore is a tourism destination encompassing a casino, hotels, restaurants, retail, theatre and a theme park. We note GM's existing Genting Highlands resort in the Pahang mountains is a similar tourism destination.

Optimism surrounding UK gaming industry has dissipated. In its letter to the independent directors of GS, KPMG Corporate Finance notes the 14.1 times FY2009 EV/Ebitda selling multiple surpasses the 13.1 times mean and median of comparable transactions. Further, it notes comparable transactions were completed from'' 2003 to 2006 at a 'relatively buoyant time'. Since then, aspects of regulation and implementation have disappointed industry analysts.

RHB Investment Bank says 11.2 times FY2011 EV/Ebitda is 'fair'. However, we disagree with what it considers'' 'comparable companies'. Its list includes global gaming giants and Macau plays. GM minority shareholders will decide a week from Tuesday. Major shareholder Genting Bhd and related parties collectively holding 49% of the shares will abstain from voting. ' Maybank IB Research, Aug 11


This article appeared in The Edge Financial Daily, August 12, 2010.

KOSSAN - OSK Research maintains overweight on rubber glove industry

Stock Name: KOSSAN
Company Name: KOSSAN RUBBER INDUSTRIES BHD
Research House: OSK

KUALA LUMPUR: OSK Research is maintaining its overweight recommendation oon the rubber gloves industry although it is now less positive compared with the previous years since some of the prevailing concerns ' of which it had been aware since last year ' have finally reared their ugly heads.

The research house had on Thursday, Aug 12 recommended that investors continue to stick to the bigger rubber glove manufacturers like Top Glove (BUY, TP: RM7.57), Supermax (BUY, TP: RM9.11) and Kossan (BUY, TP: RM5.65) as it believes these companies have the financial muscle to withstand any unexpected future setbacks.

OSK Research said recent developments have cast a cloud over the rubber glove sector, and were met with mixed views on the industry's outlook.

While funds that are still positive on the sector are busy 'shopping'' given that the share prices of most rubber gloves companies have dropped by 10%-20%, those who are neutral are still sitting on their existing shareholdings, which have been bought at a much lower cost.

Meanwhile, some funds are shying away from the sector out of fears stoked by rising concerns on its near term prospects.

'We believe that recent concerns which have crept into investors' radars in a big way did not emerge out of the blue and have probably been made known to them in early 2010.

'These investors, we believe, would have prepared themselves for such negative news when they decided to invest in or hold on to their shares in rubber glove companies. Hence, we do not think the recent negative developments in the sector would have caught investors off-guard,' it said.

PLUS - PLUS at 2-week high on fair value raise

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



PLUS Expressways Bhd, Malaysia's biggest toll road operator, rose the most in two weeks after AmResearch Sdn Bhd raised its fair value for the stock to reflect a more "bullish" outlook on traffic growth.

The stock climbed 1.1 per cent to RM3.74 at 10:49 a.m. local time, set for its steepest gain since July 30. The fair value was increased to RM4.33 from RM4, AmResearch analyst Hoy Ken Mak said in a report today. - Bloomberg

TOPGLOV - OSK Research maintains overweight on rubber glove industry

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

KUALA LUMPUR: OSK Research is maintaining its overweight recommendation oon the rubber gloves industry although it is now less positive compared with the previous years since some of the prevailing concerns ' of which it had been aware since last year ' have finally reared their ugly heads.

The research house had on Thursday, Aug 12 recommended that investors continue to stick to the bigger rubber glove manufacturers like Top Glove (BUY, TP: RM7.57), Supermax (BUY, TP: RM9.11) and Kossan (BUY, TP: RM5.65) as it believes these companies have the financial muscle to withstand any unexpected future setbacks.

OSK Research said recent developments have cast a cloud over the rubber glove sector, and were met with mixed views on the industry's outlook.

While funds that are still positive on the sector are busy 'shopping'' given that the share prices of most rubber gloves companies have dropped by 10%-20%, those who are neutral are still sitting on their existing shareholdings, which have been bought at a much lower cost.

Meanwhile, some funds are shying away from the sector out of fears stoked by rising concerns on its near term prospects.

'We believe that recent concerns which have crept into investors' radars in a big way did not emerge out of the blue and have probably been made known to them in early 2010.

'These investors, we believe, would have prepared themselves for such negative news when they decided to invest in or hold on to their shares in rubber glove companies. Hence, we do not think the recent negative developments in the sector would have caught investors off-guard,' it said.

AIRASIA - RHB lifts AirAsia earnings forecast to 16pc

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



AirAsia Bhd's earnings forecasts for 2010 to 2012 were raised 7 to 16 per cent to reflect higher yields and traffic, RHB Research Institute Sdn Bhd said in a report today.

AirAsia's second-quarter earnings result will exceed RHB's expectations, it said. The carrier's fair value was raised to RM2.08 from RM1.88, according to the report. - Bloomberg

AIRPORT - MAHB raised to 'buy' on growth prospects

Stock Name: AIRPORT
Company Name: MALAYSIA AIRPORT HOLDINGS BHD
Research House: MAYBANK



Malaysia Airports Holdings Bhd was raised to "buy" from "hold" at Maybank Investment Bank Bhd because the company will benefit from robust passenger traffic growth and the new low-cost carrier terminal.

The share price estimate was increased to RM6.12 from RM4.70, Maybank analyst Khair Mirza said in a report today. - Bloomberg

IJM - HDBSVR maintains Buy on IJM, ups TP to RM6.20

Stock Name: IJM
Company Name: IJM CORPORATION BHD
Research House: HWANGDBS

KUALA LUMPUR: Hwang DBS Vickers Research is maintaining its Buy call on IJM Corp and raised the target price to RM6.20 with 24% upside.

It said on Thursday, Aug 12 that IJM has zero legacy jobs in its orderbook currently. 1Q FY11 (Apr-June) results due-end August will be the last quarter of more benign margins.

Hwang DBS Vickers Research said a more pronounced uptick in CONSTRUCTION [] margins will be seen from 2QFY11 onwards, driven by more meaningful contributions from RM545m Grand Hyatt (18% completed), RM640m Besraya, RM247m Mukah access roads and RM350m Penang approach roads.

'We expect robust property sales of RM300m-RM400m in 1QFY11 following RM1.2bn record sales in FY10.

'The strength was seen across its mass-market projects in Klang Valley, Penang and Sabah. For IJM PLANTATION []s, we are expecting a 55% on-quarter jump in 1Q FY11 earnings (excluding exceptional items), given RM100 rise in CPO average selling price, expected lower tax rate, and absence of impairment loss,' it said.

BAT - Kenanga Research maintains Hold on BAT

Stock Name: BAT
Company Name: BRITISH AMERICAN TOBACCO (M)
Research House: KENANGA

KUALA LUMPUR: Kenanga Investment Research has recommended a Hold on BRITISH AMERICAN TOBACCO (M) [] Bhd with a fair value of RM40.10.

It said on Thursday, Aug 12 that news reports said that with effect from Sept 1, cigarette makers will have to pay half-a-sen for every stick sold as cess to the National and Tobacco Board (LKTN).

The new cess, which is an extra tax, is in addition to the Customs duty and comes with enforcement of the LKTN Act in April 2010.

The additional cost impact of 10 sen per pack from the new cess will have to be borne by cigarette manufacturers.

'Although the increment may be minimal, but nevertheless it will translate a decrease of 7% to our FY2011's full year net profit of RM721.6m (RM780.2m without cess) assuming no pass-through to consumers in a price increase.

'The impact on FY2010's bottomline is only 2% decrease to RM766.8m (RM780.2m without cess) as the new tax is only effective for the remaining four months of this year,' it said.

Kenanga Research believed the bottom line impact is moot given that any duty and/or excise hikes are usually passed on to end consumers, leaving tobacco manufacturers' bottomline intact.

KOSSAN - AmResearch reaffirms underweight on glove makers

Stock Name: KOSSAN
Company Name: KOSSAN RUBBER INDUSTRIES BHD
Research House: AMMB

KUALA LUMPUR: AmResearch reaffirmed its underweight recommendation on the glove makers and following its company visits, it believes a share price de-rating may be imminent.

In its research report issued on Wednesday, Aug 11 it said demand growth has peaked and continues to decelerate. There is also further contraction in order lead time from 50 days to 40 days compared with 80 days to 90 days during the AH1N1 outbreak.

AmResearch said there was also overcapacity with supply glut of 3 to 6 billion pieces of gloves over 2011-12, or up to +4% if demand falls below 10% per annum.

It added there was growing margin risk on persistently strong headwinds. The factors were risks of cost-pass through of over 90% during the height of A(H1N1) falling below the typical 70%-80% threshold.

'We re-affirm our UNDERWEIGHT stance on the sector, as underlying industry dynamics remain disapproving. Reiterate HOLD on Top Glove with unchanged fair value of RM6.25/share based on target PE of CY11F earnings, HOLD on Kossan with unchanged fair value of RM3.82/share based on target PE of 11x FY10F earnings,' it said.

HARTA - OSK Research: Hartalega's 1Q results within expectations

Stock Name: HARTA
Company Name: HARTALEGA HOLDINGS BHD
Research House: OSK

KUALA LUMPUR: OSK Research says Hartalega's 1QFY11 results ended June 30 were within expectations.

It said on Wednesday, Aug 11 that overall, although revenue was higher on-quarter, net profit fell slightly as rubber glove demand normalised, which affected the company's ability to pass on 100% of its costs in a timely manner.

'Also, we understand that its performance was squeezed by the strengthening ringgit against the US dollar (USD), recognition of share-based payment expenses and the negative effects of adopting FRS 139. Nevertheless, we continue to like the company's market leadership in the nitrile gloves market. Maintain Buy,' it said.

OSK Research said its target price for Hartalega is RM11.89, based on the existing PER of 14x FY12 EPS.

The investment risks include: 1) slower-than-expected examination rubber glove demand from the US and Europe markets; 2) protracted weakening of the dollar against RM since the bulk of its sales is from exports, and 3) high reliance on 2 major customers, Medline and Microflex, which together account for more than 50% of total sales.

TOPGLOV - AmResearch reaffirms underweight on glove makers

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

KUALA LUMPUR: AmResearch reaffirmed its underweight recommendation on the glove makers and following its company visits, it believes a share price de-rating may be imminent.

In its research report issued on Wednesday, Aug 11 it said demand growth has peaked and continues to decelerate. There is also further contraction in order lead time from 50 days to 40 days compared with 80 days to 90 days during the AH1N1 outbreak.

AmResearch said there was also overcapacity with supply glut of 3 to 6 billion pieces of gloves over 2011-12, or up to +4% if demand falls below 10% per annum.

It added there was growing margin risk on persistently strong headwinds. The factors were risks of cost-pass through of over 90% during the height of A(H1N1) falling below the typical 70%-80% threshold.

'We re-affirm our UNDERWEIGHT stance on the sector, as underlying industry dynamics remain disapproving. Reiterate HOLD on Top Glove with unchanged fair value of RM6.25/share based on target PE of CY11F earnings, HOLD on Kossan with unchanged fair value of RM3.82/share based on target PE of 11x FY10F earnings,' it said.

CSCSTEL - Stronger-than-expected 1H for CSC Steel, with more to come

Stock Name: CSCSTEL
Company Name: CSC STEEL HOLDINGS BERHAD
Research House: AMMB

CSC Steel Holdings Bhd
(Aug 10, RM1.81)
Maintain buy at RM1.78 with a higher fair value of RM2.19: We maintain our buy call on CSC, with a higher fair value of RM2.19, as we raise FY10F-12F EPS by 8% to 11% following the group's stellar 1H10 results. Our higher fair value pegs the stock to its: (1) three-year average PER of 4.6 times, at a 20% discount to its long-term PER; and (2) net cash of 76 sen (43% of current share price).

CSC's 1HFY10 results were above expectations. Its net profit of RM62 million constituted 63% of our previous full-year forecast and 73% of consensus.

2QFY10 earnings grew by a robust 235% year-on-year and 3% quarter-on-quarter as the group rode on improved steel prices and better domestic demand for flat products.

This was evident from its higher average utilisation of 70% in 1HFY10 against 63% last year.

We expect CSC's earnings before interest, tax, depreciation and amortisation (Ebitda) margins to normalise moving into 2HFY10 (1HFY10: 17%). Product orders have slowed near term as CSC's clients adopt a more cautious approach amid current volatility in iron ore prices.

However, impact will be mitigated by CSC's efficient inventory management and preferential hot rolled coil (HRC) prices ' with strong support from parent China Steel Corp (CSC Corp). CSC's Ebit margins averaged at 15% over the last four quarters ' well
above its peers' 9% to 12%.

Chinese HRC prices have rebounded from a trough of US$590 per tonne on July 16 to US$630 per tonne last week. Current CRC-HRC spread is about 25% ' slightly higher than in 2006. Malaysia's flat steel prices typically track Chinese HRC prices, albeit with a one-quarter lag.

With CSC Corp expecting higher HRC prices in 3Q2010, we expect domestic cold-rolled coil (CRC) prices to recover in tandem with renewed regional pricing sentiment in 4Q2010.

CSC is a well-managed company, with further valuation support coming from its: (a) minimum dividend payout policy of 50%; and (b) proactive share buyback policies.

The company offers investors an opportunity to ride the current volatility in the steel sector ' backed by its attractive yields of 8% to 10%.

We project CSC's net profit to surge 18% y-o-y to RM108 million in FY10F, and rising to RM116 million-RM126 million in FY11F-12F.
Group's balance sheet remains strong; it remains debt free with a projected net cash position of RM354 million for FY10F.

CSC trades at an ex-cash FY11F PER of only 5.7 times, a steep 29% discount to its peers.

This is unjustified in our view, given (i) CSC's dominant 40% market share in the local CRC market; (ii) the industry's leading ROEs of 13% to 14%; (iii) CSC's proactive capital management; and (iv) strong backing from parent CSC Corp (one of the world's leading HRC players). ' AmResearch, Aug 10


This article appeared in The Edge Financial Daily, August 11, 2010.

GAB - On-trade sales 3 times higher than off-trade

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

Guinness Anchor Bhd
(Aug 10, RM8.24)
Maintain hold at RM8.21 with target price of RM8.40: Post Guinness' analyst briefing for its FY10 results, we have reviewed our assumptions and marginally lowered earnings forecasts for FY11-FY13 by 2% to 3%.

We still see value in Guinness for its strong operational fundamentals and dividends. The only major downside risk to its growth would be a likely excise duty hike this October. Maintain hold with an unchanged target price.

We trimmed our earnings forecasts by 2% to 3% as 4QFY10 operating costs came in higher than expected. Operating costs could escalate in FY11, mainly from salaries due to staff headcount expansion and more active advertising and promotion.

On the business spectrum, management advised that the margin for on-trade sales is three times higher than off-trade. With more than 70% of Guinness' revenue generated from the more profitable segment, we see this as a positive sign for future earnings growth.

In the absence of any excise duty hike of more than 4% to 5%, we believe Guinness is capable of achieving a three-year earnings compound annual growth rate (CAGR) of 5% to 6%, given its 10-year historical EPS CAGR of 10%.

With the four sen increase in net dividend per share (DPS) for FY10, we expect Guinness to continue raising its DPS.

We forecast an increase of two to three sen per annum for FY11-FY13, representing a net profit payout of 82% to 90%, in line with recent trends of 80% to 90% payout.

Management believes that the probability of an excise duty hike in the upcoming Budget is relatively low. However, we opine that there may be a small excise duty hike of about 4% to 5% as there are larger aspects to consider, such as the level of indirect taxes as well as religious sensitivities.

With a healthy balance sheet on the back of a growing earnings base, we think that the only major downside is the possible excise duty hike. Maintain hold with RM8.40 discounted cash flow-based target price. ' Maybank IB Research, Aug 10


This article appeared in The Edge Financial Daily, August 11, 2010.

AMWAY - Favourable outlook for Amway

Stock Name: AMWAY
Company Name: AMWAY (M) HOLDINGS BHD
Research House: OSK

Amway (Malaysia) Holdings Bhd
(Aug 10, RM8.00)
Maintain buy at RM8.12 with target price of RM10.83: Amway's 1HFY10 results grew 8.4%, while earnings increased by 7.8% year-on-year (y-o-y) mainly due to strong 2Q revenue (+9.8% y-o-y) and net profit growth (+33.5% y-o-y). The better results were mainly attributed to new product launches and well-received product promotions, as well as the more favourable ringgit to US dollar exchange rate. While we understand that the higher revenue was mainly driven by the higher number of members, management said the productivity of its members improved after the company implemented a new strategy in March 2010 to boost distributor productivity.

Despite the higher distribution expenses as a result of the full impact from its five shops (in Seremban, Kuala Terengganu, Kota Bharu, Batu Pahat and Bintulu) opened since 2Q2009, 1H earnings before interest and tax (Ebit) margin was flat y-o-y, given the wide Ebit margin in 2Q of 17.8%, against the weaker 12.7% in 1QFY10. While we see the ringgit weakening slightly against the US dollar towards the year-end, and Amway having accepted a price transfer from the US at an average 2% in May 2010 versus the 8% price hike approved in 2009, we believe these would have negligible impact on Amway's margins given (i) the improving consumer spending, (ii) the group's partial hedge of its currency risks and (iii) its inventory, which usually lasts 11 to 12 weeks, will help to buffer the impact of higher cost.

Given the positive feedback and performance of its retail shops, Amway plans to convert its regional distribution centres in Brunei and Melaka to retail shops. The group has opened eight shops in the past two years and has earmarked three shops for 2010.

Amway sees no reason to cut its dividend payout due to its small capex commitment (about RM15 million in 2010 for the renovation of its new office and the opening of new shops) and huge cash pile.

Hence, we are maintaining our dividend payout ratio of 100%. It is worth mentioning that Amway renewed its direct selling licence recently, becoming the first MLM company to be awarded a 10-year licence. We maintain our FY10/11 earnings forecast and target price of RM10.83, which is based on a discount dividend model valuation. ' OSK Investment Research, Aug 10


This article appeared in The Edge Financial Daily, August 11, 2010.

HUAAN - Sino Hua-An a 'buy': OSK

Stock Name: HUAAN
Company Name: SINO HUA-AN INTERNATIONAL BHD
Research House: OSK



OSK Research Sdn Bhd has recommended a "buy" on Sino Hua-An International Bhd with the target price revised up to 47 sen from 40 sen after China moved to eliminate small coking firms.

In a research note today, OSK said China has eliminated small coking firms with a combined capacity of 84.12 million tonnes per year last year, slightly above the 80 million tonnes per year targeted during the 11th Five-Year Plan period (2006-2010).

"The further elimination of plants with 25.87 million tonnes per year coking capacity is indeed good news for Sino Hua-An, but we reckon the permanent closure would likely come in below the figures reported by the press," it said.

OSK said its view was backed by the possibility of some companies being impacted by this measure might have obtained approvals to set up newer and more efficient coking plants.

It said this news may spur interest in coke producers' counters as the full impact of this development remained uncertain and might take a while before any positive impact to Sino Hua-An's profit and loss was reflected.

The research house also expected the company to return to the black in the second quarter, although the upside might be capped by the subsequent weakening of the steel market.

OSK said Sino Hua-An was set to announce its results on August 24. -- Bernama

FABER - Faber to appreciate further: MIDF

Stock Name: FABER
Company Name: FABER GROUP BHD
Research House: MIDF



Faber Group Bhd's shares, which surged more than 75 per cent, year-to-date, to RM2.82, is set to rise further given the expected double-digit earnings growth per annum and 20 per cent return on equity for FY10 and FY11, respectively.

Its net profit is expected to grow to RM91.4 million in FY10, compared with RM82.7 million last year, while revenue is anticipated to increase to RM908.3 million from RM805.3 million.

"Based on sum-of-parts method, we derived our target price of RM3.50, providing an upside of 24.1 per cent," MIDF Research said in its note today.

It said the target price was expected to be realised should a new 15-year concession be awarded to the company.

Faber Medi-Serve Sdn Bhd, a subsidiary of Faber, was awarded a 15-year Hospital Support Services concession for public hospitals in the northern region of Peninsular Malaysia and East Malaysia by the Health Ministry in 1996.

The group submitted an application to review the concession agreement and was awaiting government reply in October.

"Any increase in concession rate would boost Faber's revenue,"

MIDF said, adding that the renewal of concession would offer another 15-year earnings visibility to the company.

"We believe the likelihood of Faber signing a new concession agreement is high.

"More importantly, Faber's business prospects remain favourable and promising, moving forward, in line with the growing healthcare sector," it said.

Increasing contribution from abroad and the potential lucrative dividend yield in the mid-to-long term horizon might be another attractive point for Faber.

MIDF said Faber has a dividend policy to pay up to 20 per cent of net earnings and the management has indicated that the number would eventually increase to 40 per cent.

"This means current net dividend yield of about two per cent may double to four per cent," it added.

Faber's share price dipped four sen to close the morning session at RM2.75. It closed at RM2.82 yesterday. -- Bernama

TGOFFS - CIMB Retail Research: Sell Tanjung Offshore into strength

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

KUALA LUMPUR: CIMB Retail Research advises traders to sell Tanjung Offshore into strength as long as prices remain below RM1.80, the odds still favour the bears.

It said on Tuesday, Aug 10 that Tanjung Offshore is hovering at the upper band of its rising channel. The resistance trend line remains in effect and this will likely limit the upside potential of the stock in the near term.

'Unless prices can take out the RM1.72-RM1.76 levels, we think correction is imminent,' it said. At RM1.64, Tanjung Offshore is trading at a FY11P/E of 10.0 times while price-to-book value is 1.3 times.

CIMB Retail Research said indicators are showing signs of exhaustion. MACD is poised for a negative crossover soon while its RSI has also hooked downward. Next downside targets are RM1.60, RM1.45 and RM1.33.

'As long as prices remain below RM1.80, we believe the odds still favour the bears. Hence, selling into strength seems to be the best option here. Put a buy stop at RM1.80, just in case,' it said.

CSCSTEL - OSK Research cautious on CSC Steel

Stock Name: CSCSTEL
Company Name: CSC STEEL HOLDINGS BERHAD
Research House: OSK

KUALA LUMPUR: OSK Research remains cautious on CSC Steel in view of a potentially weaker 2H,'' although its 1H numbers were way above the research house and consensus estimates when annualised.

OSK Research said on Tuesday, Aug 10 that as its higher dividend payout ratio assumption also translates into lower net cash, this marginally reduces its target price, which is derived from 6x EPS plus net cash per share on FY10 projections.

The research house said CSC Steel has been paying attractive dividend in the past, having committed to paying not less than a 50% gross payout from the respective years' net profit.

OSK Research said with the net cash position continuing to grow and the net payout ratio exceeding 60% in FY09, CSC management had verbally confirmed that CSC Steel will raise its dividend payout to at least 50% at the net level. These changes are also in line with the shift among Malaysian corporates to pay single tier dividends.

'As such, we have revised upwards our payout ratio to match the changes from our previous assumption of 37.5%. The changes in payout ratio also translate into a marginal drop in our net cash forecast. Thus our fair value, which is derived from 6x EPS plus net cash per share on FY10, is lowered to RM1.95.

'Together with the potentially weaker 2H, we are maintaining our NEUTRAL recommendation on CSC Steel despite seeing limited downside from the present level and potential buying interest on the fairly good 2Q results,' it said.

HARTA - Maybank Research sees Hartalega reporting RM42m net profit

Stock Name: HARTA
Company Name: HARTALEGA HOLDINGS BHD
Research House: MAYBANK

KUALA LUMPUR: Maybank IB Research expects Hartalega Bhd, which will release its earnings on Tuesday, Aug 10, to likely meet its expectations of around RM42 million net profit'' (+59% YoY, -9% QoQ).

It said though overcrowding is a concern, it thinks Hartalega has the operating scale, market share, superior margins (7-18 percentage points premium to peers) and track record to defend against this short to mid-term setback better than smaller scale peers/new start-ups.

Maintain Buy and DCF-based TP of RM10.10.

Maybank Research said YoY growth is believed to have been derived from higher sales volume (estimated +25% YoY) owing to the commercialisation of two new lines at Plant 5 in 4QFY10 (+10% to 6.4 billion pieces per annum).

On a QoQ basis, earnings is expected to fall 9% due to lower effective tax rate in 4QFY10 (18% vs. 9MFY10 of 20%) and time-lag in passing on higher nitrile cost. Latex and nitrile costs peaked in Apr-May '10 at RM7.50/kg and RM4.50/kg respectively.

'In conjunction with the current fundamental demand shift to nitrile gloves (from latex) on lower ASPs (5-15% discount to powder free latex), glove-makers (i.e. Kossan, Adventa are also expanding their nitrile capacities,' it said.

Maybank Research said in the coming quarters, glove makers might offer more competitive ASPs to utilise their new capacities, leading to a price war.

'However, we think Hartalega has the margin strength (7-18-ppt premium to peers) to battle this out. We have factored in this concern, on declining EBIT margin trend,' it said.

GENTING - Genting raised to 'hold' at ECM Libra

Stock Name: GENTING
Company Name: GENTING BHD
Research House: ECMLIBRA



Genting Bhd, Asia's second-biggest listed casino operator, was raised to "hold" from "sell" at ECM Libra Capital Sdn Bhd to reflect higher earnings from its Singapore unit.

The share-price estimate was increased to RM7.67 from RM5.90, ECM analyst Yin Shao Yang said in a report today. -- Bloomberg

AIRPORT - MAHB rises to record on CIMB upgrade

Stock Name: AIRPORT
Company Name: MALAYSIA AIRPORT HOLDINGS BHD
Research House: CIMB



Malaysia Airports Holdings Bhd (MAHB) rose to a record in Kuala Lumpur trading after the company was rated new �??outperform'' at CIMB Investment Bank Bhd. with a share price estimate of RM6.10.

The stock climbed 2.8 per cent to RM5.44 at 9.41 am local time.

The airport operator provides an "attractive and less risky leverage" to the aviation industry, CIMB analyst Loke Wei Wern said in a report today. - Bloomberg