IOICORP - Plantations on an extendable rally

Stock Name: IOICORP
Company Name: IOI CORPORATION BHD
Research House: ECMLIBRA

Plantation sector
Upgrade to overweight: We view that there may be impetus for crude palm oil (CPO) prices to run further in coming months. The key drivers for prices are: (i) strong exports which are already up 6.4% year-to-date (YTD); (ii) weak production that is only up 1.6% YTD; (iii) upcoming festive season demand may see CPO stock levels tumble; and (iv) the soyabean market faces a tightening in supplies due to China's demand. Just to illustrate the severity of point (iv), 9MCY10 imports by China already make up some 94% of full-year 2009 imports.

For 2011, we see that CPO prices have a good potential to average at RM2,700 per tonne. It might appear low compared with current CPO prices, but let us not forget that CPO prices are volatile. We view that prices will be stronger in 4Q10/1H11, given the factors mentioned above, but then may calm down in the later part of the year as supplies of other oil seeds may recover, cooling demand for palm oil. Of course, this is assuming there are no weather shocks next year affecting palm oil or other major oil seeds.

The picture we paint appears to make for another CPO price rally, however, there are always risks we have to watch out for: (i) a strong South American crop may balance out soya market supplies; (ii) a drop-off in exports due to overstocking in countries like China; (iii) strong production of other oil seeds may reduce the need for palm oil as a replacement; and (iv) structural changes like import duties or quotas that may affect exports.

Following our series of earnings and call upgrades for the stocks under our coverage we are now formalising our 'overweight' view on the sector. We note that Sime Darby (YTD -1.2%) and IOI (YTD +6.2%) particularly have been laggards compared with the FBM KLCI (YTD +17.3%). KLK (YTD + 17.6%) and Genting Plantations (YTD +36.5%), on the other hand, have been stronger YTD. Hence, we view more upside potential for Sime Darby and IOI, citing them as the top picks for the sector. ' ECM Libra Investment Research, Oct 28


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

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SIME - Plantations on an extendable rally

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

Plantation sector
Upgrade to overweight: We view that there may be impetus for crude palm oil (CPO) prices to run further in coming months. The key drivers for prices are: (i) strong exports which are already up 6.4% year-to-date (YTD); (ii) weak production that is only up 1.6% YTD; (iii) upcoming festive season demand may see CPO stock levels tumble; and (iv) the soyabean market faces a tightening in supplies due to China's demand. Just to illustrate the severity of point (iv), 9MCY10 imports by China already make up some 94% of full-year 2009 imports.

For 2011, we see that CPO prices have a good potential to average at RM2,700 per tonne. It might appear low compared with current CPO prices, but let us not forget that CPO prices are volatile. We view that prices will be stronger in 4Q10/1H11, given the factors mentioned above, but then may calm down in the later part of the year as supplies of other oil seeds may recover, cooling demand for palm oil. Of course, this is assuming there are no weather shocks next year affecting palm oil or other major oil seeds.

The picture we paint appears to make for another CPO price rally, however, there are always risks we have to watch out for: (i) a strong South American crop may balance out soya market supplies; (ii) a drop-off in exports due to overstocking in countries like China; (iii) strong production of other oil seeds may reduce the need for palm oil as a replacement; and (iv) structural changes like import duties or quotas that may affect exports.

Following our series of earnings and call upgrades for the stocks under our coverage we are now formalising our 'overweight' view on the sector. We note that Sime Darby (YTD -1.2%) and IOI (YTD +6.2%) particularly have been laggards compared with the FBM KLCI (YTD +17.3%). KLK (YTD + 17.6%) and Genting Plantations (YTD +36.5%), on the other hand, have been stronger YTD. Hence, we view more upside potential for Sime Darby and IOI, citing them as the top picks for the sector. ' ECM Libra Investment Research, Oct 28


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

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DAYANG - Positive surprises in store from Dayang

Stock Name: DAYANG
Company Name: DAYANG ENTERPRISE HOLDINGS BHD
Research House: HWANGDBS

Dayang Enterprise Holdings Bhd
(Oct 28, RM2.39)
Maintain buy at RM2.35 with target price of RM3: The RM2 billion hook-up and commissioning contract (four packages) might be awarded as early as next month. Dayang has a solid track record in this segment, and has secured 57% of the jobs awarded in 2010.

We believe Dayang's strong footing places it among the favourites to secure at least one of the packages. Assuming the packages are of equal value, Dayang could add RM500 million into its backlog, bringing its total order book to a record high RM1.5 billion or book-to-bill ratio of five times.

We estimate net profit at RM20 million to RM23 million, underpinned by contribution from the Shell contract and hook-up and commissioning jobs. Dayang has secured about RM600 million worth of jobs in 2010, within our expectation. But there could be positive surprises to our 2011 new wins assumption if Dayang succeeds in its bid for one of the packages of the above contract. Every RM100 million increase to our contract win assumption would raise FY11/FY12F earnings by 6% or 7% each.

We reiterate our 'buy' call on this growth story in the making. We like Dayang for its growth story (FY09/FY11F net profit CAGR of 46.2%), underpinned by a strong order book and superior margins. Dayang is also expected to be among the beneficiaries of potential new contracts. It is our high conviction call for the sector, and our RM3 target price is pegged to 11 times FY11F EPS. Dayang is trading at an attractive FY11F PER of 8.6 times against the sector's 10.3 times. ' HwangDBS Vickers Research, Oct 28


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

LMCEMNT - Comparing Lafarge and YTL Cement

Stock Name: LMCEMNT
Company Name: LAFARGE MALAYAN CEMENT BHD
Research House: RHB

Building materials
Maintain neutral: In this report, we make a comparison between the two largest cement players in Malaysia, Lafarge and YTL Cement. Year-to-date (YTD), Lafarge's share price has outperformed the FBM KLCI, while YTL Cement's share price has underperformed. Based on our estimate, Lafarge is currently trading at 17.1 times our revised FY11 ending December EPS forecast of 46.4 sen, while YTL Cement is trading at just 11 times our CY11 fully-diluted EPS forecast of 43 sen. We think a six times multiple discount is excessive and we outline two reasons why the discount should narrow over time.

We do not doubt that Lafarge is poised to benefit more than YTL Cement from the anticipated pick-up in domestic cement consumption, given its leadership position in the domestic cement market and strategic location of its plants. But YTL Cement is actually not that far behind Lafarge in terms of domestic market share, or far off'' Lafarge in terms of the location of its plants. As such, we see no reason why YTL Cement should trade at such a wide discount to Lafarge.

We have cut Lafarge's FY10/FY11 earnings forecasts by 5.8% to 16.2% and raised Lafarge's FY12 earnings forecasts by 5.4% after adjusting for the ratio of domestic versus export sales, domestic net selling price and effective tax rates.

We increase YTL Cement's FY11/FY13 ending June earnings by 1.9% to 7.4% after adjusting for a higher domestic net selling price. Our FY11/FY13 domestic sales volume growth assumption for YTL Cement remains unchanged at about 1% per year.

The risks include: (i) delays in the roll-out of projects, resulting in lower cement consumption; (ii) steep rise in energy prices; and (iii) potential price war in the industry when new capacity (CIMA expansion and Hume Cement's new plant in Perak) come onstream near end-2012.

Given investors' better risk appetite for cement stocks in the near term, we raise our one-year target forward PER for the cement stocks under our coverage from 11 to 14 times to 13 to 16 times. Following the raise in one-year target forward PER, our indicative fair values for the cement stocks are raised by 7.8% to 19.2%. Nevertheless, our recommendations for the respective companies are maintained. Hence, our 'neutral' call on the cement sub-sector is maintained as well. ' RHB Research Institute, Oct 28


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

YTLCMT - Comparing Lafarge and YTL Cement

Stock Name: YTLCMT
Company Name: YTL CEMENT BHD
Research House: RHB

Building materials
Maintain neutral: In this report, we make a comparison between the two largest cement players in Malaysia, Lafarge and YTL Cement. Year-to-date (YTD), Lafarge's share price has outperformed the FBM KLCI, while YTL Cement's share price has underperformed. Based on our estimate, Lafarge is currently trading at 17.1 times our revised FY11 ending December EPS forecast of 46.4 sen, while YTL Cement is trading at just 11 times our CY11 fully-diluted EPS forecast of 43 sen. We think a six times multiple discount is excessive and we outline two reasons why the discount should narrow over time.

We do not doubt that Lafarge is poised to benefit more than YTL Cement from the anticipated pick-up in domestic cement consumption, given its leadership position in the domestic cement market and strategic location of its plants. But YTL Cement is actually not that far behind Lafarge in terms of domestic market share, or far off'' Lafarge in terms of the location of its plants. As such, we see no reason why YTL Cement should trade at such a wide discount to Lafarge.

We have cut Lafarge's FY10/FY11 earnings forecasts by 5.8% to 16.2% and raised Lafarge's FY12 earnings forecasts by 5.4% after adjusting for the ratio of domestic versus export sales, domestic net selling price and effective tax rates.

We increase YTL Cement's FY11/FY13 ending June earnings by 1.9% to 7.4% after adjusting for a higher domestic net selling price. Our FY11/FY13 domestic sales volume growth assumption for YTL Cement remains unchanged at about 1% per year.

The risks include: (i) delays in the roll-out of projects, resulting in lower cement consumption; (ii) steep rise in energy prices; and (iii) potential price war in the industry when new capacity (CIMA expansion and Hume Cement's new plant in Perak) come onstream near end-2012.

Given investors' better risk appetite for cement stocks in the near term, we raise our one-year target forward PER for the cement stocks under our coverage from 11 to 14 times to 13 to 16 times. Following the raise in one-year target forward PER, our indicative fair values for the cement stocks are raised by 7.8% to 19.2%. Nevertheless, our recommendations for the respective companies are maintained. Hence, our 'neutral' call on the cement sub-sector is maintained as well. ' RHB Research Institute, Oct 28


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

TENAGA - Tenaga earnings forecast lowered

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



MIMB Investment Bank Bhd has revised downwards Tenaga Nasional Bhd's earnings forecast between seven per cent and 12 per cent for the 2011/2012 financial year.

It attributed the revision to fuel generation mix in view of higher coal requirements by the Jimah power plant in Port Dickson, the research bank said in a note today.

It also cut TNB's earnings per share by 12 per cent for the 2011 financial year after adjusting the generation mix on escalating coal usage.

"We see no price catalyst in the near-term. A re-rating will be in order when industry-wise reforms materialise," the investment bank said.

In the post earning revision, the research house has downgraded the target price for TNB to RM8.54 per share from RM9.24 per share previously.

Meanwhile, ECMLibra Investment Research is maintaining a buy on TNB at RM10.10 per share due to TNB's decent earnings growth.

"Coal prices are currently hovering at US$97 per tonne and historically, they tend to peak in September and October due to seasonally higher winter demand before tapering off," it said. - BERNAMA

TENAGA - Tenaga cut to 'neutral' at JPMorgan

Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD
Research House: JP MORGAN CHASE



Tenaga Nasional Bhd was cut to "neutral" from "overweight" at JPMorgan Chase & Co after the Malaysian power utility reported fiscal fourth-quarter profit that was below expectations.

The share-price estimate was reduced to RM9.20 from RM10.40, Simone Yeoh, an analyst at JPMorgan, said in a report today. -- Bloomberg

NESTLE - OSK raises earning forecasts for Nestle

Stock Name: NESTLE
Company Name: NESTLE (M) BHD
Research House: OSK



OSK Research has raised Nestle (Malaysia) Bhd's earnings forecasts for the financial year 2010 and 2011 by 18 per cent and 20 per cent to RM459.6 million and RM504.7 million respectively, factoring a stronger ringgit and better operating efficiency.

The research house, in its note today, said Nestle's results for the nine-months ended Sept 30, 2010, surpassed earlier etimates with revenue and earnings growing 9.6 per cent and 32.6 per cent, respectively, fuelled by strong domestic and export sales.

On Thursday, Nestle reported a higher pre-tax profit of RM132.65 million for the third-quarter compared with RM106.41 million chalked-up in the same period last year.

The profit was achieved over a bigger revenue of RM991.076 million.

Against this backdrop, OSK has revised upwards its target price for Nestle to RM47.90 per share from RM38.53 per share estimated previously. - BERNAMA

TENAGA - AmResearch maintains Hold On Tenaga

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

KUALA LUMPUR: AmResearch reiterated its HOLD call on TENAGA NASIONAL BHD [] with an unchanged DCF-derived fair value of RM9 share after its FY10 core net profit came in right on the dot of its forecast but below 15% below street estimates.

'We have become less sanguine about Tenaga and have fine-tuned FY11F-FY12F earnings due to the US$10/tonne increase in coal cost assumption to US$100/tonne,' it said on Friday, Oct 29

AmResearch said however, that was largely offset by a revision to its exchange rate projection from RM3.10/US$1 to RM3.00/US$1. The stock currently trades at a fair FY11F PE of 14 times, which is Tenaga's three-year average.

PLENITU - OSK Research: FV for Plenitude at RM5.56

Stock Name: PLENITU
Company Name: PLENITUDE BHD
Research House: OSK

KUALA LUMPUR:'' OSK Rsearch said Plenitude's proposed one-for-one bonus issue will go ex on Nov 12, 2010. The entitlement date for the bonus is Nov 16.

The bonus issue involves an issuance of up to 135 million shares. However, OSK Research said on Friday, Oct 29 the bonus issue exercise would not have an impact on its earnings forecast.

Ex-bonus, the earnings per share and net tangible asset/share will be reduced by 50% (FY11: from 72.4 sen and RM5.94 to 36.2 sen and RM2.97 respectively).

'Plenitude is one of our top picks for the Malaysian property sector as we believe that the company will ride high on the coming property upcycle between now and 2012/13, which will be primarily led by mid-to-high end landed PROPERTIES [],' it said.

OSK Research also stated that as this is also the first time that Plenitude is actually being proactive in addressing the issue of the stock's liquidity since its listing in 2003, there is a possibility of the stock trading at a premium even to its historical valuation.

'Our recent target price of RM4.84 (cum) was derived from 0.8 times CY11 price/net tangible asset. If we ascribe a liquidity premium of 15% to the stock's historical valuation, this would translate into our new fair value of RM5.56 for Plenitude (or RM2.78 ex-bonus), equivalent to 0.9 times CY11 P/NTA,' it said.

OSK Research said the stock was well-supported by anticipated strong earnings growth, a healthy balance sheet with a net cash of RM2.02/share (40% of current share price), and the fact that it is trading below its net asset value.

TENAGA - Maybank IB Research: Sell Tenaga

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

KUALA LUMPUR: Maybank Investment Bank Bhd Research (Maybank IB) sees more challenges ahead for TENAGA NASIONAL BHD [] and has a Sell call with an unchanged target price of RM7.50.

The research house said on Friday, Oct 29 that its 4Q net profit plunged 23% on-quarter to RM414 million on seasonally high "other costs" and rising coal prices.

"The final dividend was raised to 20 sen/share, but the 3% gross full-year yield is still not particularly compelling. We tweak our EPS forecasts on post-result housekeeping and still expect FY11 net profit contraction on higher coal prices," it said.

Maybank IB Research said the market had focused on its low 13% foreign ownership and gains from a weak US dollar.

"However, we see higher coal prices and gas supply constraints as the key issues. We maintain our below-consensus earnings forecasts. It could be even worse if gas supply constraints force Tenaga to burn costly distillate to meet power demand growth," it said.

AIRPORT - MAHB jumps on share estimate boost

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



Malaysia Airports Holdings Bhd (MAHB) rose 1.9 per cent to RM5.97, set for its steepest gain since September 30.

The share price estimate was raised to RM7.12 from RM6.63 by Khair Mirza, an analyst at Maybank Investment Bank Bhd, who cited growth potential from investment in an airport in Turkey. - Bloomberg

GENM - Genting Malaysia rating cut at Morgan

Stock Name: GENM
Company Name: GENTING MALAYSIA BERHAD
Research House: MORGAN STANLY



Genting Malaysia Bhd had its stock rating lowered to "equal-weight" from "overweight" at Morgan Stanley, which said it saw limited room for further gains in the near term. -- Bloomberg

STAR - OSK raises 2010 adex forecast

Stock Name: STAR
Company Name: STAR PUBLICATIONS (M) BHD
Research House: OSK



OSK Research has nudged up advertising expenditure (adex) growth forecast for 2010 to 15 per cent from 14 per cent previously.

In a research note today, OSK said this followed the recent upgrade in its gross domestic product (GDP) growth projection for the year to 7.5 per cent from seven per cent.

"As we expect adex growth for the fourth quarter of 2010 (4Q10) to moderate, we believe it is on track to meet our adex growth projection of 15 per cent for 2010.

"Based on this forecast, we see adex for 4Q10 growing at 10 per cent year-on-year and 3.5 per cent quarter-on-quater.

"This is in line with the slower GDP projection for the quarter, as well as a bigger base impact, whereby adex for 4Q09 accounted for some 29 per cent of total adex in for 2009," it said.

OSK said despite the rosier sector outlook, it was maintaining a 'neutral' call on the sector as there were now limited investment choices following the privatization of Astro All Asia Networks plc, and given the fact that investors had factored in robust adex growth for 2010 into stock prices.

"Media Prima is a good choice for investors seeking the widest exposure in the media sector, supported by its position as the only integrated media player in Malaysia with exposure to all media platforms," it said.

It recommended a 'buy' on the stock at the target price of RM2.45.

OSK said despite the recent windfall from its special dividend, the medium-term and long-term prospects for Star was rather unattractive, especially if one considered its relatively expensive valuation. It maintained its 'neutral' call on Star at a target price of RM3.68.

Meanwhile, it said Chinese Media was an attractive valuation proposition as the stock was currently trading below ten times its price earnings ratio on one-year forward earnings per share.
It recommended a 'buy' on the stock at a target price of RM1.35. -- Bernama

MEDIA - OSK raises 2010 adex forecast

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



OSK Research has nudged up advertising expenditure (adex) growth forecast for 2010 to 15 per cent from 14 per cent previously.

In a research note today, OSK said this followed the recent upgrade in its gross domestic product (GDP) growth projection for the year to 7.5 per cent from seven per cent.

"As we expect adex growth for the fourth quarter of 2010 (4Q10) to moderate, we believe it is on track to meet our adex growth projection of 15 per cent for 2010.

"Based on this forecast, we see adex for 4Q10 growing at 10 per cent year-on-year and 3.5 per cent quarter-on-quater.

"This is in line with the slower GDP projection for the quarter, as well as a bigger base impact, whereby adex for 4Q09 accounted for some 29 per cent of total adex in for 2009," it said.

OSK said despite the rosier sector outlook, it was maintaining a 'neutral' call on the sector as there were now limited investment choices following the privatization of Astro All Asia Networks plc, and given the fact that investors had factored in robust adex growth for 2010 into stock prices.

"Media Prima is a good choice for investors seeking the widest exposure in the media sector, supported by its position as the only integrated media player in Malaysia with exposure to all media platforms," it said.

It recommended a 'buy' on the stock at the target price of RM2.45.

OSK said despite the recent windfall from its special dividend, the medium-term and long-term prospects for Star was rather unattractive, especially if one considered its relatively expensive valuation. It maintained its 'neutral' call on Star at a target price of RM3.68.

Meanwhile, it said Chinese Media was an attractive valuation proposition as the stock was currently trading below ten times its price earnings ratio on one-year forward earnings per share.
It recommended a 'buy' on the stock at a target price of RM1.35. -- Bernama

IJMPLNT - AmResearch keeps Buy on IJM Plantations, ups FV to RM3.20

Stock Name: IJMPLNT
Company Name: IJM PLANTATIONS BHD
Research House: AMMB

KUALA LUMPUR: AmResearch is keeping its BUY''on IJM PLANTATION []S BHD [] with an increased fair value of RM3.20/share to account for a higher CPO price assumption.

'We like IJM Plantations for its pure exposure to CPO prices. We estimate that for every RM100/tonne change in CPO price, IJM Plantation's net profit would improve by 3% to 4%,' it said on Thursday, Oct 28.

AmResearch assumed an unchanged PE of 17 times on IJM Plantations' FY12F basic EPS. Its PE-multiple assumption''is within IJM P's four-year historical PE band of 6 times to 28 times. The group's average PE was 19 times for the past four years.

SEALINK - AmResearch reaffirms Buy on Sealink

Stock Name: SEALINK
Company Name: SEALINK INTERNATIONAL BHD
Research House: AMMB

KUALA LUMPUR: AmResearch reaffirms its BUY rating on SEALINK INTERNATIONAL BHD [] with an unchanged fair value at 86 sen a share based on a PE target of 7.0 times.

Sealink announced on Wednesday, Oct 27 the sale of two supply vessels worth RM67 million, valued at RM33.5 million each, which is at par to the current going rate.

'We understand these vessels are still under CONSTRUCTION [] and should be ready for delivery by year-end. We are keeping our estimates as we have assumed five to six vessels to be sold in our earnings model,' AmResearch said on Thursday.

'We gather that the group is looking to finalise the sale of two more vessels before the year closes out. Management guided that a RM55 million to RM60 million earnings range is within reach. Management also guided of the possibility of being awarded a long-term charter contract by year-end,' it said.

HAIO - OSK Research keeps Sell on Hai-O

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

KUALA LUMPUR: OSK Research said the road to recovery for Hai-O's multi-level marketing (MLM) business is longer than expected as membership growth and buying sentiment among members has slowed down further.

Meanwhile, Hai-O announced that it is venturing into the property business, another non-core business, after diversifying into the TECHNOLOGY [] business earlier.

'While this could help reduce the company's reliance on the MLM business, we are concerned that the group is taking on more risk since its MLM business is struggling to regain its footing locally and establishing itself in Indonesia. Maintain SELL,' OSK Research said on Thursday, Oct 28.

HSL - Hock Seng Lee jumps to 13-year high

Stock Name: HSL
Company Name: HOCK SENG LEE BHD
Research House: MAYBANK



Hock Seng Lee Bhd, a builder, advanced 2.2 per cent to RM1.86,
its highest level since September 1997.

The share-price estimate was raised to RM2.30 from RM1.90 by Wong Chew Hann, an analyst at Maybank Investment Bank Bhd, citing rising construction orders. - Bloomberg

PARKSON - Parkson sees new market growth

Stock Name: PARKSON
Company Name: PARKSON HOLDINGS BHD
Research House: BIMB

Parkson Holdings Bhd
(Oct 25, RM5.85)
Upgrade to buy at RM6 with target price RM7.57: Parkson recorded a strong same store sales (SSS) growth in the first six months of FY10 with +11% recorded in Malaysia, +26.9% Vietnam, and 11.3% China.

The strong SSS growth was mainly driven by its aggressive expansion strategy throughout the year. Eight new stores were opened in Kota Baru, Kota Kinabalu, and Kluang (Malaysia), Changsu, Lanzhou, Shijiazhuang, and Shaoxing (China), and Ho Chi Min City (Vietnam).

The management is committed to continue with its aggressive expansion plans in the future. Parkson expects to open at least five new stores in China and one or two new ones in Malaysia and Vietnam in the immediate term.

So far, Parkson has 35 stores in Malaysia, six in Vietnam, and 46 in China. Note that Parkson's operation in China is run by the Parkson Retail Group (PRG) in which Parkson has 51.5% equity interest. In the future, Parkson will transfer all its direct owned stores for PRG to operate. For that, Parkson expects to spend more than RM200 million on capex.

Parkson management reaffirmed that Parkson Cambodia will start operations in 2012, in addition to seriously looking into the Indonesian market.

The penetration strategy into the highly populated nation will bode well for the group as the company's earnings growth is primarily driven by new store openings.

We are positive on this as Indonesia and Cambodia have a combined population in excess of 200 million people, at least seven times bigger than Malaysia.

Concessionaire sales contribute about 73% of the annual revenue in Malaysia with 90% in China and 92% in Vietnam.

Moving forward, Parkson will focus to increase its revenue contribution by concessionaire sales, which basically include the commissions that come from the sales of tenants in Parkson stores.
Parkson does not have a formal dividend policy but has been consistently paying dividends to its shareholders. Parkson expects to pay about 30% of net profit as dividend in the future, which translates into 1.6% dividend yield (FY11).

We have made some adjustment to our earnings forecast in tandem with the aggressive expansion plans by Parkson. As a result, FY11 earnings have been bumped up by 16% to RM369 million. Hence, we upgrade our call to a 'buy' from 'outperform' with a target price of RM7.57 based on sum-of-parts valuation. Total return is at a sterling 27.8% including 1.6% dividend yield. ' BIMB Securities Research (Oct 26)


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

MAS - Structural issues at MAS cap yield growth

Stock Name: MAS
Company Name: MALAYSIAN AIRLINE SYSTEM BHD
Research House: RHB

Malaysian Airline System Bhd
(Oct 26, RM2.29)
Maintain underperform at RM2.31 with fair value RM1.91: Despite the strong recovery in the global aviation sector, a strong rebound in yields has so far eluded MAS largely due to two key structural issues: (i) its inability to immediately roll out higher-yielding product offerings, predominantly those at the front end, as the delivery of newer aircraft is still pending; and (ii) MAS's main hub, Kuala Lumpur, is not quite a natural market for higher-yielding business travellers.

Based on its existing confirmed aircraft orders with an estimated cost of RM15.6 billion ' 35 planes of the B787-800 range, 17 planes of'' the A330-300/F range and six of the A380-800 model ' MAS does not see the need to make another round of cash calls. However, if the national airline is to exercise its options for an additional 20 B787-800 and 12 A330-300/F planes, with an estimated cost of RM7.8 billion, it does not rule out the possibility of some form of fund-raising exercise down the road.

MAS confirmed news reports that it is considering re-deploying its 37 older-generation B737-400 to its low-cost operation under Firefly. If MAS is to proceed with the plan, the jet services, likely to be branded 'Firefly Jet', will operate out of the LCCT at KLIA, and not SAAS Airport in Subang. We do not find the Firefly Jet model compelling largely because: (i) it is without the very key advantage of Firefly, namely, operating out of a city airport; and (ii) It will be in direct competition with AirAsia.
Our forecasts remain relatively unchanged as they reflect MAS's relatively muted yield outlook over the short term.

Risks to our view include: (i) a stronger-than-expected recovery in MAS's yields; (ii) lower jet fuel costs; and (iii) effective containment of outbreaks of pandemic diseases.

We maintain our 'underperform' call. We believe the airline sector is poised for improved prospects over the medium term in line with the recovery in the global economy. However, we remain cautious on MAS as: (i) it is still saddled with fuel hedges at high prices; (ii) its quarterly operating results remain volatile with losses during the latest two quarters; and (iii) there may be cash calls down the road, assuming MAS is to exercise its options for additional new aircraft. Indicative fair value is relatively unchanged at RM1.91 based on 14 times FY11 EPS, in line with its nearest comparable issue Singapore Airlines Ltd. ' RHB Research Institute Sdn Bhd (Oct 26)


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

TENAGA - Rising coal price could dampen Tenaga earnings

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

Tenaga Nasional Bhd
(Oct 26, RM8.88)
Maintain buy at RM8.80 with target price RM10.35: In the previous earnings announcement, the group posted a strong top line growth due to a 9.9% year-on-year growth in demand. However, despite the better than expected numbers, we retain our forecast as earnings in 4Q10 could be under pressure from the increasing coal prices and higher utilisation of coal for power generation.

A limited gas supply resulted in higher coal usage. The situation was exacerbated by the higher coal prices against FY09. The cost of coal has risen since Dec 2009, pushing Tenaga's average coal price to US$92 per tonne (current: about US$100) as compared with US$82 per tonne in 1H10. Expectations for the average coal price have increased to US$95 for FY10. As such, gross margins suffered, declining to 23.3% in 3Q10 from 32.1% in 2Q10.

In 3QFY10 Tenaga's forex exposure was at an average of RM3.26/US dollar (FY09: RM3.53), while ringgit/Japanese yen was averaging RM3.56 (FY09: RM3.75/Y100). The current RM/US dollar is at circa RM3.10, while the yen is around RM3.83/Y100. Despite the rise in the yen, the average for FY10 is hardly affected, thus the overall impact is expected to be marginal. As at 3Q10, gearing was at 43.2% against 46.5% in FY09, where almost 24% of its RM21.6 billion debt is in yen (22.2% in US dollars).

No tariff review will happen this year and any developments would be after the next general election. The government would not want to introduce unpopular measures at this point in time so it would be a lengthy wait for any firm decision on the matter.

We maintain 'buy' with target price unchanged at RM10.35. We are maintaining our FY10 numbers for the time being but, as mentioned, we are wary about the impact of the rising cost of coal with potential margin compression in 4Q10. Target price is pegged at 13 times FY11 earnings. ' MIDF Research (Oct 26)


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

DIGI - MIDF raises Digi's 2010/2011 forecast

Stock Name: DIGI
Company Name: DIGI.COM BHD
Research House: MIDF



MIDF Research has raised its 2010 and 2011 revenue forecast for DiGi.Com Bhd by 2.4 per cent and 3.3 per cent respectively, to reflect the growth in data revenue.

The research house said data revenue had the potential to grow further and the expected collaboration with Celcom, will bring substantial cost saving benefits to DiGi.

It also believes, the mobile internet market in Malaysia is set to grow significantly, based on the rising popularity of smart phones with an explosion of Android and Symbian based models to rival the iPhone 4.

"With the entry point projects (EPP) announced, stressing on increasing connectivity, we expect that data will increasingly be the new driver for growth.

"We like the fact that Digi has moved from handset subsidies to monthly discount on contracts to attract users and we believe this is a key reason for the good performance in 3Q10.

DiGi, yesterday announced an interim dividend of 50 sen, which brings the total dividend announced in FY10 to RM1.20.

"We believe that its consistently above-market dividend yield will enhance the attractiveness of the stock. We expect dividend yield to reach 6.1 per cent, based on current price in FY10," MIDF added.

It has also upgraded DiGi to a "buy" with a higher target price of RM27.00 from RM24.00 previously. -- Bernama

DIGI - DiGi advances after RHB Research maintains Outperform call

Stock Name: DIGI
Company Name: DIGI.COM BHD
Research House: RHB

KUALA LUMPUR: DIGI.COM BHD [] shares advanced on Wednesday, Oct 27 after RHB Research maintained its Outperform call on the stock with a DCF-derived fair value of RM26.35.

At 9.20am, DiGi was up 12 sen to RM24.78.

RHB Research said DiGi's net profit came in within its and consensus estimates at 77%-78% of full year estimates.

Revenue was up 1.2% on-quarter, and would have been higher at 3.5% if not for RM30m lost due to lower mobile termination rates. The lower mobile termination rates effective July 2010 caused postpaid and prepaid Average Revenue Per Minute (ARPM) to dip marginally on-quarter.

"Overall net additions' momentum slowed down in 3Q10, adding only 142k subscribers (2Q10: +158,000). Ebitda margins improved 0.6 basis points on-quarter to 43.9% as DiGi replaced upfront handset subsidies with monthly discounts on contracts," it said.

TENAGA - No stellar Q4 earnings for Tenaga: OSK

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



Tenaga Nasional Bhd's full-year earnings forecast was cut by 8 per cent at OSK Research Sdn Bhd to reflect lower tariff estimates and higher coal prices.

"We don't expect Tenaga to announce stellar" earnings for the fourth quarter ended August 31 on October 28, Chris Eng, an analyst at OSK, said in a report today.

"Our previous effective tariff forecast had been too bullish."

He reduced his fair value for the Malaysian power utility to RM9.76 from RM9.90. -- Bloomberg

TENAGA - MIDF keeps Q4 Tenaga earnings forecast

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



MIDF Research has retained its fourth quarter earnings forecast for Tenaga Nasional Bhd (TNB) as rising coal prices could weigh down the company's result.

"We are maintaining our financial year 2010 number for time being. We are wary of the impact from the rising cost of coal with potential margin compression in the fourth quarter 2010," it said in its research note today.

It added that expectation on this year's average coal price has increased to US$95 for 2010. The cost of coal has risen since December 2009, pushing Tenaga's average coal price to US$92 per tonne, as compared to US$82 per tonne in the first half this year.

As such, gross margin suffered, declining to 23.3 percent in the third quarter 2010 from 32.1 percent in the second quarter.
MIDF has also maintained a "buy" call on Tenaga Nasional Bhd with its target price remaining unchanged at RM10.35. -- Bernama

NCB - NCB maintained a 'neutral' at MIDF

Stock Name: NCB
Company Name: NCB HOLDINGS BHD
Research House: MIDF



MIDF Research has maintained a "neutral" call on NCB Holdings Bhd with a revised target of RM3.66 from RM4.00 due to cautious prospects in financal year 2011.

"We are revising our expectations on a dividend payout to 65 per cent for financial year 2010," it said in its research note today.

The transport and logistics services provider's revenue was below the expectations of the research house, coming at 66.7 per cent of full year estimates.

This was due to the continuing decline of haulage/logistics revenue which fell by 9.9 per cent year-on-year.

Pre-tax profit for its third quarter ended Sept 30, 2010, fell to RM54.3 million from RM56.1 million in the same quarter last year.

However, for the nine-month period, the group's pre-tax profit increased to RM149.8 million from RM129.5 million in the same period last year while revenue rose to RM658.8 million from RM606.8 million previously. -- Bernama

KENCANA - OSK Research maintains Buy on Kencana

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

KUALA LUMPUR: OSK Research is maintaining its Buy call on Kencana Petroleum and its target price remains unchanged at RM2.06, based on a calendarised PER of 16 times FY11 EPS.

'The stock remains our top pick for the oil and gas (O&G) sector due to its strong delivery track record and reputation in the industry,' said the research house on Tuesday, Oct 26.

To recap, despite the slowdown in new O&G contract awards this year, Kencana's cumulative awards to-date since April 2010 has reached about RM700 million, which represents half of OSK Research's forecast revenue for the company.

OSK Research said Kenanca's order book also has increased to RM1.8 billion (from RM1.6 billion earlier) while its tender book stands at about RM2 billion.

KOSSAN - OSK Research maintains Buy on Kossan

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

KUALA LUMPUR: OSK Research is maintaining its Buy on Kossan and its target price for Kossan is RM5.25, based on PER of 13x FY11 EPS.

'We like the company's equal emphasis on natural rubber and nitrile gloves, which we believe is important in weathering the current period of normalizing demand for examination gloves,' it said on Tuesday, Oct 26.

OSK Research said it also liked the company's strong emphasis on higher margin examination gloves.

Kossan also differentiated itself from its peers with a product mix comprising 60% natural rubber and 40% nitrile gloves.

OSK Research said having this balanced mix ensures earnings sustainability for the company as this gives it more flexibility in shifting its glove mix whenever demand shifts as it would have the production lines and distribution arms ready and markets to sell to.

SUNWAY - ECM keeps 'buy' call on Sunway

Stock Name: SUNWAY
Company Name: SUNWAY HOLDINGS BHD
Research House: ECMLIBRA



ECM Libra Investment Research has maintained a "buy" call on Sunway Holdings Bhd with its target price remaining unchanged at RM2.61.

This is premised on strong earnings growth of 67.6 per cent in the financial year 2010, more landbank acquisitions in the pipeline, and its strength in securing overseas construction contracts, ECM Libra Investment said in a research note today.

Last Friday, Sunway announced that it had entered into a Memorandum of Understanding (MoU) with Shanghai Zhushengyuan Real Estate Co. Ltd (SZRE). - Bernama

IJM - IJM Corp up after AmResearch raises TP to RM6.30

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

KUALA LUMPUR: IJM Corp Bhd shares advanced in the afternoon session on Monday, Oct 25 after AmResearch maintained its buy call on the stock at RM5.48 and raised its target price RM6.30 based on the sum-of-parts methodology.

It said the upcoming months would likely be momentous for IJM ' with news flow momentum focusing on an expected re-acceleration of contract flows, exciting presales pipeline and exposure to rising crude palm oil (CPO) prices via IJM PLANTATION []S BHD [] (IJMP).

"We recommend a switch from GAMUDA BHD [] to IJM as our top large-cap pick for the CONSTRUCTION [] sector, given the latter's cheaper valuation (11%-20% discount on FY11F-12F earnings).

"IJM's foreign shareholding has nudged up to ~33% currently, but still below its peak of 65% in mid-2007," it said in a note on Monday.

SPSETIA - SP Setia upgraded to 'buy' at Kenanga

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



SP Setia Bhd, Malaysia's largest property developer, had its stock rating upgraded at Kenanga Investment Bank Bhd to reflect the company's earnings growth prospects.

The company was raised to "buy" from "trading buy" and its fair value increased to RM5.50 from RM4.78, Yeow Yeonzon, an analyst, said in a report today. -- Bloomberg

ALAM - Maybank IB positive on Alam Maritim's partnership with Yayasan Sabah

Stock Name: ALAM
Company Name: ALAM MARITIM RESOURCES BHD
Research House: MAYBANK

MAYBANK Investment Bank Bhd Research (Maybank IB) maintained its hold call on ALAM MARITIM RESOURCES BHD [] at RM1.07 and target price RM1.15 and said it was positive on the company's partnership with Yayasan Sabah Group.

It said the partnership creates a Sabah-based O&G company and sends out a strong signal of intent to capitalise on O&G opportunities in the state.

"The SOGT [Sabah Oil and Gas Terminal] and pipe-laying projects would be among the jobs that it could target.

"Maintain Hold with a RM1.15 target price, based on 10 times 2011 EPS," it said in a note on Monday, Oct 25.

QL - QL up after RHB Research raises TP to RM5.50

Stock Name: QL
Company Name: QL RESOURCES BHD
Research House: RHB

KUALA LUMPUR: QL RESOURCES BHD [] share price rose on Monday, Oct 25 after RHB Research Institute Sdn Bhd maintained its outperform call on the stock and raised its target price to RM5.50 from RM5.41 previously.

At 9.50am, QL was up four sen to RM5.12 with 2,000 shares traded.

In a note on Monday, RHB Research said QL was in the midst of constructing its 13ha Breeder and 17 hectare Layer plant in Cianjur district, located approximately two hours from Jakarta.

The plant is expected to contribute 12 million day old chicks per year by end FY11, and one million eggs per day by end FY12.

Similarly in Tay Ninh, Vietnam, QL started CONSTRUCTION [] on its egg plant in May of this year. The plant is expected to produce 500,000/eggs per day by end FY12, with similar margins as Malaysia, ie 24 sen-25 sen/egg selling price and about 7%-8% in PBT margins.

For its MPM division, QL is expecting to complete Phase 1 of its new plant in Surabaya, Indonesia by March 2011.

The Surimi and Fishmeal plant is situated on a 10 hectare land, and the overall cost would be around RM30 million-RM35 million. With capacity of 5,000 tonnes of Surimi and 5,000 tonnes of fishmeal, the plant will increase QL's current capacity by 20%.

QL has finished planted 8,500 hectares of land in Eastern Kalimantan around the middle of this year. By FY13, the group aims to finish planting 15,000 hectares.

The 8,500ha that was planted is expected to mature in FY13, thus doubling its production from FY12.

"After tweaking our ILF assumptions, our FY12-13 earnings are thus lifted by 2-6%. Our fair value is raised slightly to RM5.50 (RM5.41 previously) based on unchanged target 16x CY11 EPS. Maintain Outperform," it said.