KLK - KL Kepong buys land at reasonable price

Stock Name: KLK
Company Name: KUALA LUMPUR KEPONG BHD
Research House: ECMLIBRA



The acquisition of 7,177 hectares will add to the 133,114-hectare oil palm landbank of Kuala Lumpur Kepong Bhd (KLK) in Indonesia, according to ECM Libra Investment Research.

KLK announced yesterday its subsidiary KL-Kepong Plantation Holdings Sdn Bhd was buying 95 per cent of PT Bumi Makmur Sejahtera Jaya (PTBMS) from Tjong Hasan Agus Salim and Tjhang Ardy Fadrinata.

PTBMS holds two certificates of Izin Lokasi for land measuring 2,336.62 hectares in Desa Mentawak and Desa Air Kelik, Kecamatan Kepala Kampit, Belitung Timur, and another 4,840 hectares in Desa Lilangan, Desa Limbongan, Desa Jangkar Asam, and Desa Gantung, Kecamatan Gantung, Belitung Timur.

"In terms of purchase price for the Izin Lokasi (location permit) land, the purchase price comes up to roughly RM12,300 per hectare," ECM Libra Investment said in an equity note today.

"Generally, RM12,000 per hectare for green-field land is a reasonable price to pay, whether in Malaysia or in Indonesia," it said.

ECM Libra Investment said that KLK has a planting target of 15,000 hectares per annum.

"With its current unplanted landbank in Indonesia (including the acquisition) and assuming no new acquisitions, the group will take 4.2 more years to complete planting. Major maturities in Indonesia will kick in two to three years' time," it said.

ECM Libra Investment said it continued to have a "buy" on KLK with a target price of RM21.70. -- Bernama

LIONIND - OSK Research ups TP for Lion Industries Corp to RM2.32

Stock Name: LIONIND
Company Name: LION INDUSTRIES CORPORATION
Research House: OSK

OSK Research has maintained its trading buy call on Lion Industries Corp at RM1.96 and raised its target price for the stock to RM2.32 (from RM2.18) after the company's 73%-owned subsidiary Lion Forest Industries (LFI) announced that its 84.2%-owned Silverstone Corporation (SCB) has disposed of 100% equity interest in Silverstone Bhd for a cash consideration of RM462 million to Toyo Tire & Rubber Co Ltd.

The research house said the net disposal gain of RM140 million to LFI, and the RM102 million that would accrue to Lion Industries' P&L, should be classified as exceptional.

"Although a potential earnings dilution prompts us to slash our estimates by 6.4% for FY6/11 and 12.4% for FY6/12, we are hopeful of the negative implications being compensated by a potential special cash payout of as much as RM233.6 million to Lion Industries, and taking into account the 14 sen enhancement to the company's NTA.

"We are also tweaking our PER multiple to 6 times from 5 times but retain our NTA/share parameter at 0.6 times, after which our 12-month target price is revised upwards to RM2.32. Trading Buy," it said in a note on Friday, Oct 22.

AXIATA - Axiata may raise dividend payout next year

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



Axiata Group Bhd, owner of Malaysia's second-biggest mobile-phone operator, may raise its dividend payout next year, according to CIMB Investment Bank Bhd after meeting its management.

"There is room to increase its payout from 30 per cent and still maintain a healthy balance sheet," Kelvin Goh, an analyst at CIMB said in a report today. Axiata's current payout is "conservative" given its strong free cashflow to equity of about RM4 billion per annum, he said.

Goh raised his share-price forecast to RM5.90 from RM5.30 and kept his "outperform" rating on the stock. -- Bloomberg

KLK - Kuala Lumpur Kepong a 'buy': Citigroup

Stock Name: KLK
Company Name: KUALA LUMPUR KEPONG BHD
Research House: CITI GROUP



Kuala Lumpur Kepong Bhd had its stock rating raised to "buy" from "hold" by Penny Yaw at Citigroup, who cited a higher palm oil price forecast and better prospects for manufacturing and retail.

The brokerage increased its share-price estimate by 20 per cent to RM21.50. -- Bloomberg

GENM - Genting Malaysia taking a breather

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

Genting Malaysia Bhd
(Oct 20, RM3.51)
Revise to hold at RM3.56 with higher target price of RM3.52 (from RM3.45): Since we upgraded Genting Malaysia from 'hold' to 'buy' in our 2QFY10 results note dated Aug 27, it has appreciated by 19% with 2.7 sen net dividend per share (1% net dividend yield). This was largely attributable to its success in securing the Aqueduct project, resilient operations at Resorts World Genting and the possibility of rewarding its shareholders with its 1.4 billion shares (18% shareholding) in Genting Hong Kong.

We understand that Genting Malaysia's 3QFY10 results will still be relatively flat year-on-year (y-o-y). Recall that its 6MFY10 revenue and earnings before interest, tax, depreciation and amortisation would have been flat y-o-y had they experienced the normal luck factor. This is impressive given the intense competition from the Singaporean Integrated Resorts. Genting Malaysia has still managed to improve yield management and marketing efforts on non-Johor and Singapore patrons.

Daily win per machine at Empire City at Yonkers Raceway has recently hit as high as US$322 (RM1,006.76) on the gradually recovering American economy. Given Aqueduct's superior location within the New York City limits, its machines may just attain the US$400 daily win per machine that management guided (previous FY11 assumption: US$300). Aqueduct is due to open with 1,600 machines in April 2011.

We understand that rumours of Genting Malaysia's 1.4 billion shares in Genting Hong Kong being distributed to the former's shareholders in specie may not be entirely unfounded. This is to streamline Genting Malaysia's investments and soothe investors who are still jaded with the RM2.1 billion Genting UK acquisition. That said, we believe Genting Malaysia's last price already reflects the full value of its holdings in Genting Hong Kong.

Table games at Aqueduct require at least three years to materialise as changes to the state legislature need to be passed. Genting Malaysia is bidding for the Newham casino but regulators may frown on its already leading position in the UK (and it is not expected to contribute materially to earnings). Our revised ex-cash discounted cash flow-based target price of RM3.52 (RM3.45 previously) warrants our revised call on Genting Malaysia 'hold'. Even including cash, our target price rises to only RM4, or merely 12% upside potential. ' ECM Libra Investment Research, Oct 20


This article appeared in The Edge Financial Daily, October 21, 2010.

KFC - KFCH, from the hatchery to the table

Stock Name: KFC
Company Name: KFC HOLDINGS (M) BHD
Research House: OTHER

KFC Holdings (Malaysia) Bhd
(Oct 20, RM3.20)
Initiate coverage at RM3.24 with neutral call and target price of RM3.43: We are initiating coverage on KFC Holdings (Malaysia) Bhd (KFC) with a target price (TP) of RM3.43 and a 'neutral' call. We derive our TP by pegging a 20% premium to KFC's three-year average PER of 13 times to FY11 EPS of 22 sen.

Total return of 7.9% (including 2% dividend yield) is commendable thanks to: (i) KFC's strong expansion drive in terms of the number of restaurants, locally and regionally; (ii) new market penetration in India, which is expected to boost KFC's revenue growth; (iii) encouraging consumer sentiment outlook underpinned by higher disposable income thanks to tame inflation; and (iv) strong economic outlook for 2010 and 2011 (BIMB Securities 2010 GDP forecast: 6.7%; 2011: 5.7%).

KFC has a fully integrated business model with operations and market reach spanning the entire country. Its integrated business model includes: (i) poultry processing plant, (ii) feed mill, and (iii) chicken farm. KFC announced last March that it is going to invest about RM10 million in a farm in Sedenak, Johor. It will be used to supply chicken to its third processing plant located in Bandar Tenggara, Johor. In addition, its Bandar Tenggara processing plant will receive chicken supply from its 10 contract farmers in Johor.

KFC has received approval to open restaurants from YUM! Brands in Pune and Mumbai (both in India). Both cities are located in the third largest state in India with a combined population of'' 100 million. Note that KFC is currently running 79 restaurants in India, which include 37 restaurants by YUM! Brands (directly) and two by KFC Holdings. KFC is expecting to open eight new restaurants this year while looking to acquire two existing restaurants from other KFC franchisees. ' BIMB Securities Research, Oct 20


This article appeared in The Edge Financial Daily, October 21, 2010.

BURSA - Bursa still weak

Stock Name: BURSA
Company Name: BURSA MALAYSIA BHD
Research House: CIMB

Bursa Malaysia Bhd
(Oct 20, RM8.20)
Maintain neutral at RM8.35 with higher target price of RM8.64: Bursa eked out a mere 2.5% year-on-year (y-o-y) rise in September's net profit of RM83.3 million, which works out to just 60% of our full-year forecast and 65% of consensus. The main culprit was September's velocity which came in at only 31% against our projection of 35% for FY10. The absence of a dividend for 3Q was well expected and left the year-to-date net dividend per share at 9.5 sen. In view of these results, we cut our FY10 EPS forecast by 15.4% as we factor in a velocity of 31% for the full year. However, our rollover of the target price to CY11 pushes it from RM7.80 to RM8.64, still pegged to a PER of 27 times, or a 10% discount to its three-year average. We think a 10% discount is reasonable as the poor velocity in September reflects the weak underlying trend in the near term. Although we anticipate a pickup in velocity to 35% in 2011, it will still be 12.5% lower than the 40% registered in the past three years. On this score, the stock remains a 'neutral' in our book.

Equity trading revenue climbed 11% higher y-o-y to RM117.1 million in September, thanks to a 17% y-o-y rise in average daily trading volume to RM1.42 billion. The trading value was predominantly lifted by a 26% y-o-y expansion of market capitalisation to RM1.15 trillion following a rise in the KLCI from 1,202.1 a year ago to 1,463.5 as at end-September. Market velocity, however, dwindled from 36% a year ago to only 31% in September.

Conversely, derivative revenue fell 11% y-o-y to RM27.1 million in September as daily average contracts dropped 8% y-o-y to 23,831. The average daily contracts declined for both major derivative products ' by 6% y-o-y for FCPO to 15,351 and 10% y-o-y for FKLI (index futures) to 8,029.

We are lowering our FY10 EPS forecast by 15.4% for a slower velocity of 31% instead of 35%. Our earnings projections for FY11/12 are intact. Despite the earnings downgrade, our target price rises from RM7.80 to RM8.64 as we roll it a year forward to CY11. Our target price is based on an unchanged PER of 27 times, which is a 10% discount to the stock's three-year historical average PER. We apply the discount in view of Bursa's earnings underperformance for three consecutive quarters and its weak velocity despite the sustained performance of the KLCI. ' CIMB Research, Oct 20


This article appeared in The Edge Financial Daily, October 21, 2010.

PUNCAK - ECM keeps 'sell' call on Puncak Niaga

Stock Name: PUNCAK
Company Name: PUNCAK NIAGA HOLDINGS BHD
Research House: ECMLIBRA



ECM Libra Investment Research has maintained the "sell" call on Puncak Niaga Holdings Bhd, amid cash flow problems due to a non-water tariff revision of 37 per cent, and a hazy outlook to a resolution of the protracted Selangor water restructuring exercise.

ECM Libra Investment said it made no changes to its estimates pending the outcome of the tender by Puncak Niaga for a water supply and treatment project in India.

Puncak Niaga yesterday entered into two separate joint venture agreements with P&C Constructions (P) Ltd in India to jointly bid for the water supply and flourosis mitigation project, called the Tamilnadu Water Supply and Drainage Board in India.

Puncak Niaga together with P&C would form a joint venture (JV) called PNHB-P&C Joint Venture (PPJV) to bid for Packages III and V of the Hogenakkal project for the Dharmapuri and Krishnagiri districts.

Puncak Niaga will lead the joint venture with a 60 per cent stake, with the remaining 40 per cent held by P&C.

The Hogenakkal Water Supply project is valued at RM1.4 billion, comprising five packages to be undertaken in two phases, with completion expected by December 2012.

The project also comes with a five-year operation and maintenance period.

"Based on our preliminary estimates, Package III and Package V, which are for the laying of pipelines for a total of 6,117km, could be worth approximately RM756 million.

"The five year operation and maintenance is estimated to be worth about RM124.9 million," ECM Libra Investment said.

It said the project is in line with Puncak Niaga's efforts to expand its presence in India.

Puncak Niaga had entered into joint venture agreement with P&C in August 2010 to jointly participate in an international competitive tender for a pipeline project in Mangalore, India. -- Bernama

WCT - More to come for WCT, says MIDF

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

MIDF Research has maintained its buy recommendation on WCT BHD [] at RM3.11 and raised its target price for the stock to RM4.24, pegged at sectoral'' average of 14.5 times FY11 earnings versus previous valuation of RM3.87.

The research house said WCT's order book ballooned to RM4.4 billion and was still growing after the company landed a RM1.36 billion project in Doha and another RM127 million hospital project in Tuaran, Sabah.

MIDF Research said it was revising its forecast for WCT to take into account the income from the CONSTRUCTION [] of the new contracts, adding it was looking at a possibly higher replenishment target for 2011, as it expects more new domestic-based jobs to awarded in the near future.

"As outlined in the 2011 Budget and the ETP, potential awards include packaged for (i) Klang Valley LRT extension, (ii) Langat 2 water treatment plant, (iii) various highway projects.

"We are of the opinion that more news flow on potential awards could intensify in the next 12 months," it said in a note on Thursday, Oct 21.

GENTING - UBS raises Genting price estimate

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



Genting Bhd, Asia's third-biggest listed casino operator, climbed to a record in Kuala Lumpur trading after UBS AG raised its share-price estimate for the stock to reflect higher market revenue forecasts in Singapore.

The stock rose 1.3 per cent to RM10.66 at 9.16 am local time. Nicole Goh, an analyst at UBS, raised her share estimate for the stock to RM14.35 from RM12.90, according to a report today. She kept her "buy" rating.

Its Genting Malaysia Bhd affiliate added 0.9 per cent to RM3.54 ringgit after saying it will jointly bid for a London casino license and develop a leisure project with Apollo Resorts & Leisure Ltd. - Bloomberg

KENCANA - Kencana rated 'buy' at AmResearch

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



AmResearch notes that Kencana Petroleum Bhd group order book of RM1.9 billion is likely to rise further with new jobs from tenders of RM4 billion, largely from the Kebabangan cluster platform contracts.

The research house projects new orders of RM1.5 billion to RM1.8 billion for financial year 2011-13 against RM1 billion in financial year 2010.

AmResearch also expects further margin expansions.

"Kencana's EBITDA margins have consistently been improving, rising by a commendable 9 percentage points over the past four years to 18 per cent in financial year 2010 largely due to improving operational efficiencies."

AmResearch sees Kencana a "buy" at RM2.50. - Reuters

TRC - New lease on life for TRC Synergy

Stock Name: TRC
Company Name: TRC SYNERGY BHD
Research House: HWANGDBS

TRC Synergy Bhd
(Oct 19, RM1.39)
Upgrade to buy from fully valued at RM1.38 with revised target price RM1.85 (from 94 sen): We base our upgrade on TRC to 'buy' on a higher 12 times PER multiple and higher earnings. This is a 35% discount to the sector's 18 times average to reflect its smaller market cap and less diversified business portfolio. We also raise FY10/12 EPS by 8% to 112% to account for higher new order assumptions of RM250 million to RM800 million for those years, coupled with higher margins of 7% to 8% (against RM158 million to RM300 million and 6% margins). The stock is the cheapest in our universe, trading at one-year forward nine times PER and 0.8 times price to net tangible assets, while its balance sheet is strong with 79 sen net cash per share.

TRC will see substantial order book replenishment over the next three to six months after a period of muted contract wins. We understand it is the front runner to clinch the main contractor role for the 9.2km Kelana Jaya line (Kelana Jaya station to Summit). This is part of the 17.7km stretch which closed for tender in late-August and is awaiting award. Total contract value could be at least RM1 billion to RM1.5 billion, half of the RM2.5 billion to RM3 billion for Package A that includes 7.2km of the Ampang line. The closest competitor is UEM Builders, but apparently TRC has been recommended to the Ministry of Finance by Syarikat Prasarana Negara Bhd. We understand the Kelana Jaya line is more complex with a higher contract value. This could see its order book quadruple to RM1.9 billion from RM400 million currently, implying four or five years earnings visibility.

TRC's total RM3.3 billion tender book includes circa RM1 billion for the LRT extensions and infrastructure works in the Sarawak Corridor of Renewable Energy (SCORE) and East Coast Economic Region (RM200 million). We understand there are 15 packages in SCORE that are opened to UPK licence holders. TRC's UPK licence allows it to compete in the closed Sarawak construction market dominated by a handful of players. Contract flows in the state are expected to be strong, given the anticipated rollout of more projects in SCORE and the upcoming state elections. ' HwangDBS Vickers Research, Oct 19


This article appeared in The Edge Financial Daily, October 20, 2010.

MEGB - Masterskill at the top of its class

Stock Name: MEGB
Company Name: MASTERSKILL EDUCATION GROUP
Research House: CIMB

Masterskill Education Group Bhd
(Oct 19, RM3.34)
Initiate coverage at RM3.18 with outperform call and target price RM4.62: Masterskill is the ideal pick for investors seeking long-term exposure to two defensive sectors ' education and healthcare. It boasts strong fundamentals and growth, backed by its segment leadership, favourable healthcare education prospects, shortage of healthcare professionals and expansion plans. The negative impact of the delays of two new campuses in FY10 should subside in FY11/12. Masterskill's share price has recovered from its recent low but is still below its RM3.80 IPO price.

We begin coverage with an 'outperform' call and end-CY11 target price of RM4.62, based on 13.8 times CY12 PER which is in line with our target market PER, but a discount to the average PER of listed domestic and regional comparables. Potential re-rating catalysts include: (i) better than expected student growth and quarterly results; (ii) an improvement in investor sentiment on the stock; and (iii) investor preference for growth and defensive plays.

Growth is essentially a volume game for education providers. Masterskill has a total expandable student capacity of 36,000. Revenue is pegged to two sectors ' healthcare and education ' where demand is relatively resilient to macro factors. This underpins the group's growth outlook, backed by future capacity expansion which should ensure continued growth in student population. The shortage of healthcare professionals locally and globally is overall positive for the group.

Masterskill's (i) leading position in the industry with the highest market share in its segment; (ii) Ebitda margin of over 40%, superior to local education companies' 15% to 20%; and (iii) exposure to the healthcare and education sectors are key factors that will ensure strong fundamentals over the long term. ' CIMB Research, Oct 19


This article appeared in The Edge Financial Daily, October 20, 2010.

ILB - Integrated Logistics named partner in Hong Leong Asia's new warehouse project

Stock Name: ILB
Company Name: INTEGRATED LOGISTICS BHD
Research House: RHB

Integrated Logistics Bhd
(Oct 19, 94 sen)
Maintain outperform at 93 sen with fair value RM1.47: Hong Leong Asia revealed during a recent investors' conference that its refrigeration and cooling products division under Frestech/Xinfei, based in Henan, China, has formed a 'partnership with Integrated Logistics China to build and operate a central distribution centre'.

We consider Frestech/Xinfei a high-growth blue-chip client on which ILB can piggyback to expand its presence and scale of operations in China. Frestech/Xinfei is the second largest refrigerator and freezer maker in China. Analysts project the market for refrigerators and freezers in China to grow by a compound annual growth rate of 9.9% between 2009 and 2013.

We understand that backed by a five+five-year long-term lease agreement with Frestech/Xinfei, ILB's US$25 million (RM77.5 million) investment in the warehouse will have a pay-back period of eight to10 years. Based on our estimate, the first full-year contribution from the warehouse in FY12 ending December will boost ILB's FY12 net profit by 20%.

We are cutting our FY10 net profit forecast by 42% largely to reflect: (i) a three-month delay in the completion of the disposal of its Malaysian assets; and (ii) higher tax. FY12 net profit forecast is raised by 20% largely to reflect the first full-year contribution from the new Frestech/Xinfei warehouse.

Risks include: (i) a double dip in the global economy, hence China's export sector; (ii) prolonged downturn in Dubai; and (iii) rising costs in China, particularly, labour.

With the disposal of its business in Malaysia, ILB has very much become a high-growth China-based company listed in Malaysia. Indicative fair value is kept relatively unchanged at RM1.47 based on 13 times FY11 EPS, at a 30% premium to our benchmark one-year forward target PER for the transport and logistics sector of 10 times to reflect ILB's superior earnings growth visibility with the good execution of its second wave of investment/expansion in China. ' RHB Research Institute, Oct 19


This article appeared in The Edge Financial Daily, October 20, 2010.

BHIC - BHIC secures LOI for 6 patrol vessels

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

Boustead Heavy Industries Corporation Bhd
(Oct 19, RM4.59)
Upgrade to buy at RM4.56 with revised fair value RM5.50: We upgrade our rating on Boustead Heavy Industries Corp Bhd (BHIC) from 'hold' to 'buy' with a raised fair value of RM5.50 per share by removing the 20% discount to our unchanged sum-of-parts valuation of RM5.50 per share. Our fair value implies an FY11F PER of 10 times.

BHIC's 21% effectively owned Boustead Naval Shipyard Sdn Bhd (BNS) has received a letter of intent (LOI) to construct six second-generation patrol vessels (PV) from the Ministry of Defence.

This announcement is not a surprise as we have highlighted that BNS would be securing the LOI soon, given that the sixth and final patrol vessel (KD Selangor) of the first generation batch is expected to be delivered next month.

While the value and duration of the project are still being negotiated with the government, we understand that the batch of six new PVs could reach a massive RM8 billion, assuming a 20% increase from the first batch's price tag of RM6.7 billion.

We understand that the letter of award will be despatched over the next four to six months after the price has been finalised.

We have already assumed a new order of RM7 billion from the six PVs in our assumptions, with the project expected to commence in 4QCY11. We have also assumed that 30% of the BNS contract will be undertaken by BHIC's Penang shipyard.

Admittedly, the group's earnings track record has disappointed over the past year. Hence, we maintain FY10F/12F earnings pending: (i) a significant quarterly earnings improvement; and (ii) the actual award of the new PV contract.

But the LOI indicates that the new flow of awards is likely to gather momentum, which could catalyse a re-rating on the stock. Other contracts in the pipeline could be: (i) New maintenance contracts for the first two patrol vessels, delivered in 2006, potentially worth up to RM60 million annually; and (ii) Two patrol vessels worth RM500 million each, for the Malaysian Maritime Enforcement Agency.

The stock currently trades at an attractive FY11F PER of eight times, which is a bargain for the sole military yard in the country with massive order book prospects. ' AmReseach, Oct 19


This article appeared in The Edge Financial Daily, October 20, 2010.

MAHSING - Mah Sing's landbanking will gather momentum

Stock Name: MAHSING
Company Name: MAH SING GROUP BHD
Research House: MIDF



MIDF Research believes Mah Sing Bhd's landbanking activities will gather momentum despite the company's recent RM1.1 billion acquisition of Kinrara, Subang-Damansara and Bukit Jelutong land parcels.

Mah Sing's combined gross development value balance and unbilled sales presently stood at RM6.27 billion and RM1.17 billion respectively, the research house in its equity note today.

It also expected Mah Sing's year-on-year earnings growth for the second half of this year to be in the region of 25 per cent.
Mah Sing has revised its sales target for this year to RM1.5 billion after exceeding its earlier target of RM1 billion in July with aggressive new launches.

MIDF Research said Mah Sing would be able to replenish its unbilled sales with the planned new launches in the fourth quarter of this year, thus translating into higher revenue and therefore earnings going forward.

Projects that are scheduled to be launched include Garden Plaza in Cyberjaya, Star Avenue (Damansara), Southbay Plaza (Penang), Icon City (Petaling Jaya) and Kinrara Residence.

MIDF Research said the proposed issuance of RM325 million seven-year redeemable convertible secured bonds (RCSB) was part of Mah Sing's medium-term strategy to focus on acquiring sizeable land bank for potential mass housing development.

"The RCSB proceeds would be sufficient to acquire sizeable piece of circa 190-200 acres of development land in Cyberjaya," it added.

Mah Sing's current projects in Cyberjaya are Garden Residence and Garden Plaza. -- Bernama

AIRASIA - AirAsia up on MIDF Research upgrade

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

KUALA LUMPUR: AIRASIA BHD [] shares advanced on Wednesday, Oct 20 after MIDF Research upgraded the stock to a buy with a target price of RM2.88 based on FY11 EPS pegged at PER of 8.5 times, which is the mean PER of its peers.

At 12noon, AirAsia was up 8 sen to RM2.53 with 4.33 million shares done.

MIDF Research said it was upbeat on the continuing growth of AirAsia as demand for travelling continues and its ability to resist past shocks.

"Hence, we are revising our full year FY11 net earnings by 26.9% to RM834.5m in FYE11.

"We believe that Air Asia will perform strongly in FYE11 and we expect that ancillary income will grow 19%y-o-y and load factor to reach 78%," it said in a note on Wednesday.

TENAGA - AmResearch downgrades Tenaga to Hold

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

KUALA LUMPUR: AmResearch is downgrading its call on TENAGA NASIONAL BHD [] from BUY to HOLD with a lower discounted cashflow-derived fair value of RM9 a share from RM10 previously due to lower earnings expectations.

It said on Wednesday, Oct 20 this is partly due to a higher usage of coal, against a backdrop of a decline in natural gas output.

'The stock currently trades at a fair FY11F PE of 14 times ' which is Tenaga's three-year average. Tenaga's 4QFY10 results, which will be released on Oct 28, is likely to disappoint,' it said.

The main factors were higher coal usage arising from natural gas curtailment, delayed impact from higher coal prices in 3QFY10, and potential year-end provisions.

BURSA - AmResearch maintains Buy on Bursa, FV RM9.60

Stock Name: BURSA
Company Name: BURSA MALAYSIA BHD
Research House: AMMB

KUALA LUMPUR: AmResearch is maintaining its BUY call on BURSA MALAYSIA BHD [] with an enhanced fair value of RM9.60 (from RM8 a share previously).

It said on Wednesday, Oct 20 it was rolling forward its base year to FY11 from FY10. Its fair value is pegged to an unchanged fair P/E of 30 times.

'We remain positive about Bursa. The stock is still a highly leverage play on improvements in the capital market. It is the main beneficiary of the government's initiatives to revitalise the capital markets.

'Our net earnings estimates for FY11 represents 70% of Bursa's net earnings of RM240.6 million in FY07, still some way off and an indication plenty of room for improvement,' it said.

AJIYA - OSK Research: Ajiya's earnings below estimates

Stock Name: AJIYA
Company Name: AJIYA BHD
Research House: OSK

KUALA LUMPUR: OSK Research said Ajiya's earnings came in below its estimates as earnings dipped in 3Q as higher operating expenses and lower other income undermined its bottom-line earnings although the higher-than-expected decline was a surprise.

The research house said on Wednesday, Oct 20 that the higher costs stemmed from the commencement of Ajiya's new production line, which was still at the gestation phase during 3Q.

Although this will translate into lower earnings growth this year,'' this investment will bring about future gains as it ramps up plant utilization to cater to the government development plans outlined in Budget 2011, which will spur demand for building materials.

'We cut our earnings estimates (~5%), which reduces our TP to RM2.74 from RM2.81 previously,' it said.

SUNCITY - RHB Research upgrades valuation for property stocks

Stock Name: SUNCITY
Company Name: SUNWAY CITY BHD
Research House: RHB

KUALA LUMPUR: RHB Research has upgraded its valuations for the property stocks, as many have almost hit its target prices recently.

'We still see values in the sector led by sustained property prices and demand, and valuations are still attractive at about +1 standard deviation above the average of P/B,' it said on Wednesday, Oct 20.

RHB Research said it expected the liquidity play and margin expansion will first flow to the big caps.

'Our favourite four are SP Setia (Upgrade to OP, FV upgraded to RM5.94); IJM Land (OP; FV upgraded to RM3.50), Suncity (OP, FV upgraded to RM5.80) and Mah Sing (OP, FV = RM2.33). Maintain Overweight on the sector,' it said.

SPSETIA - RHB Research upgrades valuation for property stocks

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

KUALA LUMPUR: RHB Research has upgraded its valuations for the property stocks, as many have almost hit its target prices recently.

'We still see values in the sector led by sustained property prices and demand, and valuations are still attractive at about +1 standard deviation above the average of P/B,' it said on Wednesday, Oct 20.

RHB Research said it expected the liquidity play and margin expansion will first flow to the big caps.

'Our favourite four are SP Setia (Upgrade to OP, FV upgraded to RM5.94); IJM Land (OP; FV upgraded to RM3.50), Suncity (OP, FV upgraded to RM5.80) and Mah Sing (OP, FV = RM2.33). Maintain Overweight on the sector,' it said.

CARLSBG - Breweries brewing boisterously

Stock Name: CARLSBG
Company Name: CARLSBERG BREWERY MALAYSIA BHD
Research House: MAYBANK

Brewery
Upgrade to overweight from neutral: The silence on excise duties for alcoholic beverages was confirmed to be good news for brewers, following a press statement from Guinness Anchor Bhd (GAB) regarding another year of reprieve. We upgrade net profit forecasts for GAB by 3% to 12% for FY11/13, and our call to a 'buy' (from 'hold') and our target price (TP) to RM9.60 (from RM8.40). Maintain 'buy' on Carlsberg with a higher discounted cash flow-based TP of RM5.70 (from RM5.50) after raising our 2010/12 net profit forecasts by 4% to 6%.

The government surprised everyone by omitting any mention of excise duty changes for alcoholic drinks for a sixth consecutive year since 2005. Leading local brewers had only just individually reported the first year of increased sales volumes in 2009 that cumulatively also exceeded 2005's sales volumes for the first time.

We initially imputed a 4% to'' 5% excise duty hike in 2010/12. The absence of a hike in 2010 is highly positive for sales volumes in 2010/11 and net profits for both Carlsberg and GAB. As a result, we now expect a minimum 5% volume growth for the industry instead of just 1% in 2010. In tandem with a now lower 3% increase in average prices instead of 8%, this will raise GAB's FY10/12 net profit forecasts by a further 3%, 9% and 12% respectively. arlsberg is less positively affected due to its high share of earnings contribution from overseas, but its 2010/12 net profit should still rise a further 4% to 5% from our initial forecasts.

The brewers' oft-repeated line that excise duty on beer is the second highest globally seems to be effective still. Possibly, it is also hoped that without excise-led price hikes, the illicit sale of alcoholic beverages will not scale the heights of illicit tobacco sales in the country, reported to be the second-highest level globally.

With the government's recent stress on the increased importance of tourism revenue and raising the country's attractiveness to conduct business, brewers may have been an unwitting, collateral beneficiary. If tourism and business conduciveness are truly the main aims, there could be yet significant further upside to our 2011/12 forecasts for both brewers.

We raise our FY11/13 forecasts for GAB by 3% to 12% and DCF-based TP to RM9.60 from RM8.40 as a result. We are also buyers of Carlsberg with a raised DCF-based TP of RM5.70 (from RM5.50) after raising our 2010/12 net profit forecasts by 4% to 6%. ' Maybank Investment Bank Bhd Research, Oct 18


This article appeared in The Edge Financial Daily, October 19, 2010.

GAB - Breweries brewing boisterously

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

Brewery
Upgrade to overweight from neutral: The silence on excise duties for alcoholic beverages was confirmed to be good news for brewers, following a press statement from Guinness Anchor Bhd (GAB) regarding another year of reprieve. We upgrade net profit forecasts for GAB by 3% to 12% for FY11/13, and our call to a 'buy' (from 'hold') and our target price (TP) to RM9.60 (from RM8.40). Maintain 'buy' on Carlsberg with a higher discounted cash flow-based TP of RM5.70 (from RM5.50) after raising our 2010/12 net profit forecasts by 4% to 6%.

The government surprised everyone by omitting any mention of excise duty changes for alcoholic drinks for a sixth consecutive year since 2005. Leading local brewers had only just individually reported the first year of increased sales volumes in 2009 that cumulatively also exceeded 2005's sales volumes for the first time.

We initially imputed a 4% to'' 5% excise duty hike in 2010/12. The absence of a hike in 2010 is highly positive for sales volumes in 2010/11 and net profits for both Carlsberg and GAB. As a result, we now expect a minimum 5% volume growth for the industry instead of just 1% in 2010. In tandem with a now lower 3% increase in average prices instead of 8%, this will raise GAB's FY10/12 net profit forecasts by a further 3%, 9% and 12% respectively. arlsberg is less positively affected due to its high share of earnings contribution from overseas, but its 2010/12 net profit should still rise a further 4% to 5% from our initial forecasts.

The brewers' oft-repeated line that excise duty on beer is the second highest globally seems to be effective still. Possibly, it is also hoped that without excise-led price hikes, the illicit sale of alcoholic beverages will not scale the heights of illicit tobacco sales in the country, reported to be the second-highest level globally.

With the government's recent stress on the increased importance of tourism revenue and raising the country's attractiveness to conduct business, brewers may have been an unwitting, collateral beneficiary. If tourism and business conduciveness are truly the main aims, there could be yet significant further upside to our 2011/12 forecasts for both brewers.

We raise our FY11/13 forecasts for GAB by 3% to 12% and DCF-based TP to RM9.60 from RM8.40 as a result. We are also buyers of Carlsberg with a raised DCF-based TP of RM5.70 (from RM5.50) after raising our 2010/12 net profit forecasts by 4% to 6%. ' Maybank Investment Bank Bhd Research, Oct 18


This article appeared in The Edge Financial Daily, October 19, 2010.

SIME - Sime Darby is a dark horse

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

Sime Darby Bhd
(Oct 18, RM8.81)
Upgrade to buy at RM8.84 with revised target price RM11.80 (from RM7.75): Year-to-date, Sime Darby's stock lags significantly behind the FBM KLCI's 17.6% gain at a -1.45% decline, making it a serious laggard. With improving crude palm oil (CPO) fundamentals, we believe Sime's plantation segment could shine through the problems that Sime Engineering has caused.

We expect the Malaysian equity market to be driven by foreign net equity inflows in 4QCY10, and in this respect Sime is also a laggard. Its foreign shareholding hit a high of about 22.3% in early 2008 before the commodity price crash. Management says foreign shareholding is at 14% as at 3QCY10, which indicates there may be upside should foreigners take further interest in the stock. To note, quarter-on-quarter, foreign shareholding has already gained 0.9 percentage point.

Keeping CPO prices buoyant at the moment are: (i) stronger exports driven by new demand from Pakistan and Egypt, as well as demand from the US and EU; (ii) production is a bit weak as October production surge may not be sufficient to take the industry through the upcoming festive season and 1QCY11 cyclical downturn in production; and (iii) potential for a supply crunch in the soyabean market despite record crops in North America as supplies are eing mopped up by China and from bio-diesel demand.

We are raising our FY11 CPO average selling price (ASP) to RM2,700 per metric ton from RM2,400 previously and raising FY12 CPO ASP from RM2,400 to RM2,600. Changes to our EPS actually show a decline from previous estimates as we have made adjustments to other segments, which are: (i) assuming that the E&U division breaks even at best (previously we were forecasting some RM150 million profit); (ii) lower property segment margins from 33% to 25% as were seen in FY10; and (iii) flattened growth prospects for the industrial segment due to slow machine orders.

When CPO prices reached past RM3,000 in early 2008, Sime traded at a rolling forward PER in excess of 25 times. Currently, Sime still trades at 18 times on FY11 EPS. We believe there is still room to run given the said fundamentals. As such, we are raising our PER target to +1 standard deviation above historical average which gives a PER of 24 times. Pegging FY11 EPS to 24 times raises our target price to RM11.80 (RM7.75 previously on 15 times PER) which implies 35% upside from the current price. ' ECM Libra Investment Research, Oct 18


This article appeared in The Edge Financial Daily, October 19, 2010.

PLUS - PLUS - Attractive exit opportunity

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

PLUS Expressways Bhd
(Oct 18, RM4.34)
Downgraded to hold from buy at RM4.46 with target price RM4.60: EPF and UEM, via a special purpose vehicle (SPV) made a joint offer to buy all the assets and liabilities of PLUS both locally and abroad for RM23 billion or RM4.60 per share. This is not a general offer, and minorities will receive a cash payment via special dividends and a capital repayment later that will be equivalent to RM4.60 per share. We see limited upside to the offer price and investors may want to take profit as the process could be lengthy and a capital repayment requires High Court approval. The offer price is also at a 9.5% premium to our discounted cash flow-derived target price (TP) of RM4.20 (WACC 6.1%, beta 0.7 times).

There is no clarity on PLUS' toll rates in the longer term, but Budget 2011 disclosed that toll rates for all'' PLUS' four concessions would remain flat for the next five years. Despite the SPV's strong financial backing and the potential restructuring of PLUS' debt to release more upfront cash flow, it remains challenging to extract further value from PLUS at the offer price. And at RM4.60 per share, the 4% dividend yield is lower than EPF's distribution yield of more than 5% and 10-year MGS yield of 4.4%.

The strong 7.7% traffic volume growth year-to-date August 2010 will not be sustainable in 2011. The eventual unwinding of fuel subsidies as proposed by Pemandu, and higher base effect in 2010, will result in more tepid traffic volume growth. We are comfortable with our 2% traffic growth forecast for 2011. We also think recent consensus upgrades in TP, which are above the offer price, assume too aggressive traffic growth.

Overseas acquisitions are nascent and contribution will be immaterial. PLUS is making inroads into India with the most recent acquisition, the 127.6km NHAI project in the state of Gujarat possibly enabling it to get more projects with the IDFC. But its 26% stake is small and will not help its KPIs. On the local front, we also see little room for further acquisitions until the government addresses the toll rates issue. ' HwangDBS Vickers Research Sdn Bhd, Oct 18


This article appeared in The Edge Financial Daily, October 19, 2010.

JTINTER - Tobacco spared a hike in excise duty

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

Tobacco sector
Maintain neutral: As we have anticipated, Budget 2011does not contain any hike in excise duty nor indirect taxes on tobacco products. This marks the second time tobacco excise duty was spared in the budget.

Despite this, we maintain 'neutral' on the tobacco sector. A contraction in legitimate total industry volume (TIV) is imminent moving forward, following the unexpected hike in excise duty on cigarettes by 16% on Oct 1. Recall, tobacco excise duty was raised by three sen per stick from 19 sen per stick to 22 sen per stick then.

In response, cigarette manufacturers British American Tobacco (BAT) and JT International (JTI) raised retail selling prices by 8%. Consequently, a premium 20s label now retails at RM10 per pack, as opposed to RM9.30 per pack previously.

We make no change to our recently revised TIV contraction of 3% and 4% in 2010 and 2011. Compared with the 11% year-on-year (y-o-y) decline in 2009, we reckon the contraction in TIV would be much milder this time around, given improving consumer sentiment in tandem with the broad-based economy.

Notwithstanding the high level of illicits at 40%, which continue to hamper growth of legitimate TIV, growth of ELPCs (exceptionally-low-priced-cigarettes) has turned stable. Besides, TIV volume (sticks sold) for 1H10 as measured by Nielsen Retail Audit is flat y-o-y, suggesting a potential downward trend reversal.

Despite the lack of positive catalysts for industry growth, both tobacco stocks are still attractive for their defensive attributes. We maintain 'hold' on BAT with an unchanged discounted cash flow-based (DCF) fair value of RM44.30 per share for the group's stellar dividend track record as premised on a >90% dividend payout. Net dividend yield of 5% per year is still decent.

For exposure to the sector, we prefer JTI for its more resilient earnings as underpinned by a better product portfolio mix of premium to VFM labels. aintain 'buy' on JTI with an unchanged DCF-based fair value of RM6.15 per share.

We expect JTI's market expansion to continue on the back of a stronger brand equity moving forward, with Winston as a stronger contender within the VFM segment. In addition, our conservative dividend payout assumption of 55% per year (net dividend yield: 5%) and the group's growing cash pile suggest a potential dividend surprise. ' AmResearch Sdn Bhd, Oct 18


This article appeared in The Edge Financial Daily, October 19, 2010.

BAT - Tobacco spared a hike in excise duty

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

Tobacco sector
Maintain neutral: As we have anticipated, Budget 2011does not contain any hike in excise duty nor indirect taxes on tobacco products. This marks the second time tobacco excise duty was spared in the budget.

Despite this, we maintain 'neutral' on the tobacco sector. A contraction in legitimate total industry volume (TIV) is imminent moving forward, following the unexpected hike in excise duty on cigarettes by 16% on Oct 1. Recall, tobacco excise duty was raised by three sen per stick from 19 sen per stick to 22 sen per stick then.

In response, cigarette manufacturers British American Tobacco (BAT) and JT International (JTI) raised retail selling prices by 8%. Consequently, a premium 20s label now retails at RM10 per pack, as opposed to RM9.30 per pack previously.

We make no change to our recently revised TIV contraction of 3% and 4% in 2010 and 2011. Compared with the 11% year-on-year (y-o-y) decline in 2009, we reckon the contraction in TIV would be much milder this time around, given improving consumer sentiment in tandem with the broad-based economy.

Notwithstanding the high level of illicits at 40%, which continue to hamper growth of legitimate TIV, growth of ELPCs (exceptionally-low-priced-cigarettes) has turned stable. Besides, TIV volume (sticks sold) for 1H10 as measured by Nielsen Retail Audit is flat y-o-y, suggesting a potential downward trend reversal.

Despite the lack of positive catalysts for industry growth, both tobacco stocks are still attractive for their defensive attributes. We maintain 'hold' on BAT with an unchanged discounted cash flow-based (DCF) fair value of RM44.30 per share for the group's stellar dividend track record as premised on a >90% dividend payout. Net dividend yield of 5% per year is still decent.

For exposure to the sector, we prefer JTI for its more resilient earnings as underpinned by a better product portfolio mix of premium to VFM labels. aintain 'buy' on JTI with an unchanged DCF-based fair value of RM6.15 per share.

We expect JTI's market expansion to continue on the back of a stronger brand equity moving forward, with Winston as a stronger contender within the VFM segment. In addition, our conservative dividend payout assumption of 55% per year (net dividend yield: 5%) and the group's growing cash pile suggest a potential dividend surprise. ' AmResearch Sdn Bhd, Oct 18


This article appeared in The Edge Financial Daily, October 19, 2010.

BSTEAD - Target price on Boustead Hldgs raised

Stock Name: BSTEAD
Company Name: BOUSTEAD HOLDINGS BHD
Research House: HWANGDBS



HwangDBS has raised its target price on Boustead Holdings to RM6.70, with a "buy" recommendation.

The research outfit said Boustead "remains our high conviction pick. We nudged up our price target to RM6.70 after updating market values of its listed entities and applying similar 20 per cent holding company discount.

HwangDBS noted that Bousteads 65 per cent-owned BHIC announced that its associate company, Boustead Naval Shipyard had received a LOI from the Malaysian Ministry of Defence to construct six second-generation patrol vessels with combatant capabilities.

The contract value and duration were not disclosed pending negotiation with the government.

But if the initial six vessels are a benchmark, this could be worth at least RM6.7 billion, almost triple its current RM2.5 billion orderbook.

MEDIA - Media Prima a 'buy': Maybank

Stock Name: MEDIA
Company Name: MEDIA PRIMA BHD
Research House: MAYBANK



Maybank recommended a "buy" call on Media Prima with a target price of RM2.85, saying the stock offered earnings growth and dividend yield.

"We expect Media Prima's market-leading TV and radio stations and 'Harian Metro' daily; nationwide outdoor reach from airports to highways, trains and malls; and innovative on-line presence to attract a growing share of the advertising pie," said Maybank.

Maybank expected 15 per cent per annum EPS growth and a 4 per cent net dividend yield that was expected to rise.

"We think the 20-50 per cent dividend policy is ripe for review.

"The RM595m net debt as at 30 June will soon be easily covered if EBITDA continues to accumulate at the expected pace exceeding RM300m per annum.

PBBANK - 'Hold' call on Public Bank at RM12.50

Stock Name: PBBANK
Company Name: PUBLIC BANK BHD
Research House: MAYBANK



Public Bank is rated a "hold" at Maybank with a target price of RM12.50.

"We retain our 15 per cent loan growth forecast for 2010," said Maybank

"Our forecasts are for an 18 per cent growth in net profit for 2010. We also retain our 60 sen cash DPS forecast for 2010, which is based on 53 per cent net profit payout, in line with an earlier guidance of 50-55 per cent, " Maybank added.

Meanwhile, HwangDBS rated Public Bank a "hold" at RM13.10.

As expected, no dividends were declared, HwangDBS pointed out.

"We believe Basel III issues have been watered down with an unlikely need to raise equity capital, but we understand Public Bank will retain its 50-55 per cent dividend payout guidance," added HwangDBS.

IJM - TA Securities cuts IJM to 'sell'

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



TA Securities has lowered its stock rating on IJM to "sell" with a target price of RM5.51.

"We believe that management's RM2 billion new orderbook target in this financial year is not farfetched," said TA.

The research firm noted that IJM's management hinted that for FY11, bottomline would be flat, if not slightly weak.

"However, most of the legacy projects, except the Municipal Corporation of Delhi building in New Delhi, India (expected to be completed by December 2010) have been completed.

"In addition, management also guided that work progress for the BESRAYA extension would somewhat be slow due to certain clauses in the contract that needs to be ironed out.," said TA Securities.

PBBANK - RHB Research retains fair value for Public Bank at RM14.70

Stock Name: PBBANK
Company Name: PUBLIC BANK BHD
Research House: RHB

KUALA LUMPUR: RHB Research Institute has retained its fair value of RM14.70 (based on target FY11 PER of 16 times) and Outperform call on PUBLIC BANK BHD [].

'We continue to like the stock for its above-industry growth and asset quality. This, in our view, would be further supported by factors such as the stock's high weightage in the FBM KLCI and a premium valuation gap that has narrowed vis-''-vis peers,' it said on Tuesday, Oct 19.

RHB Research said Public Bank, in its view, is the best proxy to the domestic economy in terms of loan growth.

ZHULIAN - OSK Research: Zhulian's earnings below street forecast

Stock Name: ZHULIAN
Company Name: ZHULIAN CORPORATION BHD
Research House: OSK

KUALA LUMPUR: Zhulian's 9MFY10 revenue grew 4.2% to RM237.7 million while net profit rose 9.5% to RM62.8 million, but OSK Research said these were below its and street earnings forecasts.

OSK Research said on Tuesday, Oct 19 the results were mainly driven by the stronger 1HFY10 numbers, which were boosted by robust business at its Thai unit YTD. 3QFY10 revenue and net profit fell 11.9% and 16.7% respectively on softer demand and the stronger RM against USD.

'We cut our FY10/11 earnings forecast by 17%-21% in line with our house forecast of a stronger RM/USD and weaker sales, which reduces our TP to RM2.36.

'While we maintain a BUY on the stock given the 22% upside, we believe the share price will react negatively to Zhulian's weak 3QFY10 results and poor earnings visibility,' it said.

Zhulian declared a third interim single tier dividend of 3 sen per share.

TSH - TSH up after MIDF ups target price to RM2.65

Stock Name: TSH
Company Name: TSH RESOURCES BHD
Research House: MIDF

KUALA LUMPUR: TSH RESOURCES BHD [] shares advanced on Tuesday, Oct 19 after MIDF Research maintained its buy call on the stock at RM2.26 and raised its target price to RM2.65 from RM2.30 previously.

At 9.43am, TSH was up two sen to RM2.31 with 50,400 shares done.

The research house said it was raising its forecast earnings for TSH for FY11 by 5%, translating into a 27% growth from its unchanged FY10 earnings forecast.

"This is in accordance with the management's projection for total output to increase by 11.5% next year with the maturing of 3,100ha of the planted areas.

"With CPO prices traded between RM2,700'RM2,900, and is expected to rise until early 2011, the 27% increase in FY11 forecast earnings seem reasonable," it said in a note on Tuesday.

PBBANK - OSK keeps 'buy' call on Public Bank

Stock Name: PBBANK
Company Name: PUBLIC BANK BHD
Research House: OSK



Public Bank Bhd's domestic collective impairment will continue to rise in tandem with its robust loans growth given its adoption of Bank Negara Malaysia's 1.5 per cent transitional collective impairment guidelines.

OSK Research said this would raise the group's already highly conservative loan loss reserves, it said. "The group's allowance for impairment increased 15.8 per cent quarter-to-quarter.

"It is largely due to higher collective impairment from it relatively strong domestic loans growth and lumpy provisions on selective domestic corporate accounts," it said in its research note today.

OSK said Public Bank has surpassed the RM1 billion mark by recording a pre-tax profit of RM1.05 billion in the third quarter ended Sept 30, 2010, from RM856.51 million a year ago.

For the nine months ended Sept 30, it recorded a net profit of RM2.20 billion, 20 per cent higher compared with RM1.84 billion in the corresponding period of 2009.

The research house expected the bank to record a stronger performance, underpinned by higher net interest income from a larger loans base and stable net interest margins.

It said it would maintain its 'buy' call and target price of RM14.20. -- Bernama

KLK - A leap and a bound for KLK

Stock Name: KLK
Company Name: KUALA LUMPUR KEPONG BHD
Research House: ECMLIBRA

KL Kepong Bhd
(Oct 15, RM19)
Upgrade to buy at RM19 with revised target price of RM21.70 (from RM16.20): KLK over the past week has managed to catch up to the FBM KLCI amid rising crude palm oil (CPO) prices. To note, CPO futures closed at RM2,916 per metric ton (mt) on Oct 14. Year-to-date, the stock has gained 15.2% against FBM KLCI's gain of 17.6%. We view with current fundamentals there is a chance that KLK could extend gains into CY11.

We expect the Malaysian equity market to be driven by foreign net equity inflows in 4QCY10 and in this respect, KLK is also a laggard. KLK's foreign shareholding hit a high of about 25% back in mid-2008 before the commodity price crash. The management indicated foreign shareholding is currently at 17.3%, showing there may be upside should foreigners take further interest in the stock.

Key fundamental drivers for CPO prices at the moment are (1) stronger exports driven by new demand from Pakistan and Egypt, as well as demand from US and EU; (2) production is a bit weak as October's production surge may not be sufficient to take the industry through the upcoming festive season and 1QCY11 cyclical downturn in production; and (3) potential for a supply crunch in the soyabean market despite record crops in North America as supplies are being mopped up by China and also from biodiesel demand. We believe that these three key factors will keep CPO prices buoyant.

We are raising our FY10 CPO average selling price (ASP) to RM2,450/mt from RM2,400/mt previously (EPS +3.4%). To note, for 9MFY10 the group has achieved ASP of RM2,390/mt. For FY11, we raise CPO ASP from RM2,400/mt to RM2,700/mt and similarly for FY12. On the flipside, we are lowering yields slightly as newly matured hectarage dilutes group yields.

FY11 earnings are to be better year-on-year (y-o-y) with the turnaround of Crabtree & Evelyn as well as maturing hectarage from Indonesia. Looking back, when CPO prices reached past RM3,000/mt, KLK managed to trade into the 30 times PER range. KLK currently trades at only 19.6 times on FY11 EPS. Pegging FY11 EPS of 96.9 sen to the +1 standard deviation PER of 22.4 times raises our target price to RM21.70 (RM16.20 previously based on 20 times PER) which implies 14.2% upside from current prices. ' ECM Libra Investment Research, Oct 15


This article appeared in The Edge Financial Daily, October 18, 2010.

PLUS - PLUS falls on HwangDBS downgrade

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



PLUS Expressways Bhd, Malaysia's biggest toll-road operator, fell the most in almost one month in Kuala Lumpur trading after the Employees Provident Fund and UEM Group Bhd made a RM23 billion buyout offer that valued the company at RM4.60 per share.

Its shares fell 1.1 per cent to RM4.41 at 9.25 am local time, their biggest drop since Sept. 20.

HwangDBS Vickers Research Sdn Bhd downgraded the stock to "hold" from "buy" and said in a report today that there was now limited upside to the stock and investors may want to take profit.

Meanwhile, PLUS was downgraded to "underperform" from "outperform" at RHB Research Institute Sdn Bhd which cut its fair value to match a buyout offer from the Employees Provident Fund and UEM Group Bhd.

The research said in a report today it cut its fair value to RM4.60 from RM4.76. - Bloomberg

SIME - Sime lifted to 'buy' at ECM

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



Sime Darby Bhd, the world's biggest listed palm oil producer, was upgraded to "buy" at ECM Libra Capital Sdn Bhd which said the company's plantation unit will benefit from higher palm oil prices.

The share price estimate was raised to RM11.80 from RM7.75, analyst Bernard Ching said in a report today. - Bloomberg