KENCANA - OSK keeps 'buy' call on Kencana

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



Kencana Petroleum Bhd is expected to land some new contracts soon given the improving sentiment in the local oil and gas (O&G) industry, said OSK Research.

In its research note today, OSK said the contracts may include fabrication and hook-up and commissioning jobs.

OSK said with crude oil price stabilising at close to a one-year high since the fourth quarter of 2009 of US$70-US$80 a barrel, Petroliam Nasional Bhd and its production-sharing contractors would commence major capital expenditure.

"Also, since the O&G sector has been quiet over the past two years, any new contracts would start with fabrication and cascade down to other support services such as support vessels, pipe laying and so on," it said.

It said it was upbeat Kencana should be receiving new contracts anytime soon.

The research house has maintained its ''buy'' call on the company and raised the target price to RM2.57.

"The higher valuation was based on expectation that the listing of Malaysia Marine and Heavy Engineering Holdings Bhd has started the ball rolling for a re-rating of most of the share prices of O&G stocks," it said. -- Bernama

MAYBANK - OSK Research upgrades earnings estimates for 5 banks

Stock Name: MAYBANK
Company Name: MALAYAN BANKING BHD
Research House: OSK

KUALA LUMPUR: OSK Research has upgraded its earnings estimates for five out of seven banks under its coverage.

In its research note on Friday, Nov 12, it said the upgrades were largely premised on stronger loans growth and lower loan loss provision.

'We also note that the likes of CIMB, RHB Capital and AMMB could provide more earnings upside surprises on the back of a stronger than expected capital market earnings rebound in the upcoming quarters with the strong pick up in bond origination flows.

'We are maintaining our overweight recommendations and deem any market correction as an opportunity to accumulate. Our large cap banking top picks are CIMB (BUY, TP: RM9.77), MAYBANK (BUY, TP: RM10.07) and mid-cap stock RHB Cap (BUY, TP: RM9.56). We also upgrade AMMB to a BUY with TP of RM6.90,' it said.

CIMB - OSK Research upgrades earnings estimates for 5 banks

Stock Name: CIMB
Company Name: CIMB GROUP HOLDINGS BERHAD
Research House: OSK

KUALA LUMPUR: OSK Research has upgraded its earnings estimates for five out of seven banks under its coverage.

In its research note on Friday, Nov 12, it said the upgrades were largely premised on stronger loans growth and lower loan loss provision.

'We also note that the likes of CIMB, RHB Capital and AMMB could provide more earnings upside surprises on the back of a stronger than expected capital market earnings rebound in the upcoming quarters with the strong pick up in bond origination flows.

'We are maintaining our overweight recommendations and deem any market correction as an opportunity to accumulate. Our large cap banking top picks are CIMB (BUY, TP: RM9.77), MAYBANK (BUY, TP: RM10.07) and mid-cap stock RHB Cap (BUY, TP: RM9.56). We also upgrade AMMB to a BUY with TP of RM6.90,' it said.

PMETAL - AmResearch: Press Metal transforming into integrated aluminium giant

Stock Name: PMETAL
Company Name: PRESS METAL BHD
Research House: AMMB

KUALA LUMPUR: AmResearch has initiated coverage on PRESS METAL BHD [] with a BUY call and a fair value of RM3.30/share. This pegs the stock to a target PE of 11 times ' at a steep 28% discount to its larger pure integrated global aluminium peers.

In its research note on Thursday, Nov 11, it said Press Metal is on the cusp of a structural transformation into an integrated aluminium giant within Asean, following the successful rollout of its smelter in Mukah, Sarawak.

Press Metal's Mukah plant will crucially have unencumbered access to cheap hydro power and the first mover advantage as the country's first smelter.

Press Metal's Mukah smelter is one of only two operating within Asean' which together with China ' has a base consumption of 20 million tonnes (or circa half of global aluminium demand).

AmResearch said the recent emergence of Japan's Sumitomo as a cornerstone investor in the smelter (20% stake plus option for another 5%) has further enhanced the stock's value proposition.

'Additionally, Press Metal is in a strong position to secure an additional power of 510MW from Sarawak Energy Bhd at attractive rates against the spectre of an insufficient off-take in the state when Bakun comes on stream by end-1H11,' it said.

The research house said Press Metal is a direct play on the debasement of the US dollar and its associated reflationary pressure on base metal prices. London Metal Exchange aluminium prices have surged 10% YTD to US$2,389/tonne, amid an extended commodity rally since September.

Earnings are at an inflexion point ' with a robust FY10F-12F EPS CAGR of 64%. Core earnings surged six-fold to RM30mil just from a six-month contribution from Phase 1A (70% of group profits).

With capex for the entire Phase 1 (US$300mil) already frontloaded, AmResearch expects sequential earnings momentum to gain traction along with rapid expansion in margins.

Total capacity should double to 120,000 tonnes in FY11 with the commissioning of Phase 1B by year-end.

AmResearch has conservatively assumed average LME-based selling prices of US$2,400/tonne-US$2,425/tonne for FY11F-12F (FY10F:US$2,200/tonne) against the backdrop of an improving global aluminium imbalance.

'Valuations are exceedingly compelling, at FY10F-12F PEs of only 6x-14x against EPS CAGR of 62%. We believe Press Metal deserves to trade at a scarcity premium given its deepening progression as an integrated regional aluminium player ' with a further capacity kicker stemming from Phase 2 of its Mukah expansion (US$600 mil),' it said.

KKB - KKB Eng top gainer on strong earnings, OSK FV RM2.76

Stock Name: KKB
Company Name: KKB ENGINEERING BHD
Research House: OSK

KUALA LUMPUR: Shares of KKB ENGINEERING BHD [] climbed in early trade on Friday, Nov 12 after it registered a strong set of earnings in the third quarter.

At 9.28am, it was up 14 sen to RM2.05 with 2.21 million shares done.

The FBM KLCI shed 3.32 points to 1,510.38. Turnover was 168.35 million shares valued at RM143.45 million. There were 140 gainers, 204 losers and 177 stocks unchanged.

OSK Research had a fair value of RM2.76, derived from 10 times FY11 EPS.

'We are amazed with KKB Engineering (KKB) striking a 3Q net profit of RM23.3 million that was more than double that in 3QFY09 and 73.4% higher q-o-q,' it said.

The research house said the astounding quarter, during which its nine-months bottomline marginally surpassed its full-year estimate, was mainly attributed to the 16% revenue increase in the engineering and CONSTRUCTION [] division, which also recorded an exceptionally strong EBIT margin of 49.1%.

'We understand that the company secured a fast track construction job that offered an attractive margin in 3Q. Apart from that, the manufacturing division's EBIT margin of 44.6% was extraordinary although sales dropped q-o-q,' it said.

MUHIBAH - CIMB Research ups Muhibbah to Trading Buy, TP RM2

Stock Name: MUHIBAH
Company Name: MUHIBBAH ENGINEERING (M) BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research begins coverage on Muhibbah Engineering Bhd with a Trading Buy call and target price of RM2, pegged to a 20% discount to its RNAV.

The research house said on Thursday, Nov 11 that the company is'' a midsized contractor that has diversified into cranes, shipbuilding and airport/road maintenance concessions.

'In addition to riding on the improving outlook for project flows in both the local and overseas markets, Muhibbah may soon see a resolution to the payment issue for the Asia Petroleum Hub project, which has been a major drag on its share price.

In addition to the likely resolution of the APH project, CIMB Research said the share price could be catalysed by (i) better-than-expected quarterly performances, (ii) more contract wins, and (iii) a recovery in investors' sentiment on the stock as its foreign shareholding has plunged from 41% in 2007 to a low of 6% now.

MEGB - OSK Research lowers Masterskill TP to RM3.59

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

KUALA LUMPUR: OSK Research has cut its earnings outlook for Masterskill Education Group Bhd following delays in student intake at its two new campuses in Kuching and Johor.

The research house said on Thursday, Nov 11 the delays and also lower margin assumptions necessitate a cut in its earnings forecast for FY10 and FY11 by 13.4% and 12.6% respectively.

'This subsequently lowers our TP from RM4.12 to RM3.59 based on 12x PER on FY11 EPS. However, given the more than 40% upside following the plunge in the share price, we are upgrading our recommendation from Neutral to Trading Buy,' it said.

OSK Research said the execution risk in delivering student growth expectations and concerns over its high dependence on the PTPTN scheme, as well as a potential selldown by its pre-IPO shareholders, especially after the moratorium period ends next week, may continue to haunt the stock.

HSL - OSK Research maintains Buy on Hock Seng Lee, TP RM2.32

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

KUALA LUMPUR: OSK Research is maintaining its Buy call on HOCK SENG LEE BHD [] (HSL) and raised the target price to RM2.32.

HSL won a rural road job worth RM67 million, which brings its YTD wins to OSK Research's FY10 target of RM500 million.

'We see HSL as a key beneficiary of more infra jobs in Sarawak, fuelled by the upcoming state election,' said the research house on Thursday, Nov 11.

The potential jobs include road packages, education institutions, Mukah Airport and Phase 2 of the wastewater system.

OSK Research said it valued HSL at 14.5 times on FY11 earnings given its impeccable fundamentals. Maintain BUY, TP raised to RM2.32.

SUNREIT - RHB Research maintains Outperform on Sunway REIT, unch FV RM1.05

Stock Name: SUNREIT
Company Name: SUNWAY REAL ESTATE INVT TRUST
Research House: RHB

KUALA LUMPUR: RHB Research Institute is maintaining its Outperform call on Sunway REIT, with an unchanged fair value (FV) of RM1.05.

In a research note on Thursday, Nov 11, it said the FV was based on a 7% target yield on its FY12 dividend per unit (DPU) forecast of 7.3 sen.

RHB Research said Sunway REIT's 1QFY11 realised net profit of RM38.4 million was in line with its and market expectations.

'Note that, 1QFY11 earnings contribution only started since 8th July 2010. A 1.51 sen DPU was declared during the quarter, on track to meet our DPU forecast of 6.7 sen for FY11,' it said

The research house expected earnings from the remaining nine months of FY11 to come in stronger.

DAYANG - Dayang continues to slide

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

KUALA LUMPUR: Dayang Enterprise extended its losses on Wednesday, Nov 10 as investors were negative about its proposed rights issue.

At 11.52am, Dayang was down 11 sen to RM2.18. Volume traded was 1.23 million shares.

The FBM KLCI was down 0.41 of a point to 1,526.12. Turnover was 821.5 million shares valued at RM912.35 million. There were 289 gainers, 414 losers and 293 stocks unchanged.

ECM Libra Investment Research had raised its estimates to reflect stronger marine charter margins. It added'' Dayang has gained significantly in recent weeks, surging past its previous RM2.65 target price and the stock was fully valued now.

'Also, we view that the much talk about oncoming orders is already be priced in. We are revising Dayang from buy to HOLD as there is only 4% upside to our revised TP of RM3.17.

'The revised TP reflects FY11 EPS pegged to a 15 times price-to-earningsE (15 times is the average PE of small-mid cap oil & gas stocks). To note, the group announced a proposal for a one-for-four bonus issue to be followed by a one-for-four rights issue on Monday,' it said.

HARTA - OSK Research maintains Buy on Hartalega, TP RM7.20

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

KUALA LUMPUR: OSK Research said HARTALEGA HOLDINGS BHD []'s 1HFY11 results were within expectations, as the robust results were due to the right product mix of 70% nitrile and 30% natural rubber gloves.

It said on Wednesday, Nov 10 that most nitrile gloves in general are sold to big healthcare multinational corporations, from which purchase orders are more stable than those for natural rubber gloves.

'This is especially so for powdered gloves targeting the developing countries, for which orders can fluctuate according to demand and supply. We continue to like the company's market leadership in the nitrile gloves market,' it said.

OSK Research said its target price for Hartalega was RM7.20 based on the existing PER of 13 times FY12 EPS.

LINGUI - Strong log demands to keep Lingui going

Stock Name: LINGUI
Company Name: LINGUI DEVELOPMENT BHD
Research House: CIMB

Lingui Developments Bhd
(Nov 8, RM1.26)
Maintain sell at RM1.24 with a target price of 94 sen: Although core net profit in the first quarter ended Sept 30, 2010 worked out to 110% of our forecast on an annualised basis, we deem it as within our and market expectations. This is because we expect weaker earnings in the remaining quarters due to higher transportation costs and a likely weakening of the US dollar.

Also within expectations was the decision against an interim dividend per share.We maintain our earnings per share forecast and target price of 94 sen which we continue to base on the stock's 12-month average price-to-book value ratio of 0.4 time. Until the company can deliver sustainable quarterly earnings, we will continue to use asset-based valuation for the stock.

Lingui remains a sell, with the potential downside catalysts being a weaker-than-expected recovery in Japan's housing market, and an oversupply in the plywood market. Worth noting are the potential anti-dumping duties by South Korea and other countries.

Lingui recorded a RM39 million net profit in the first quarter. However, stripping out a RM16 million gain from changes in the net fair value of its plantation assets and RM7 million unrealised foreign exchange gains, core net profit was only RM16 million.

Core earnings over the next few quarters could be weaker. Although log and plywood prices should remain firm in FY11, this is expected to be offset by the stronger ringgit as timber products are priced in US dollars. Also worth noting is rising transportation cost due to high crude oil prices.

Demand remained strong for logs during the quarter, mainly from India and China. Lingui sold 188,662 m3 at an average selling price of RM461 per m3, a 7.2% quarterly increase.

During the period, Lingui exported 62,531m3 of plywood, down by an annual rate of 18%. On anti-dumping duties. South Korea is expected to make a decision on plywood imported from Malaysia by year-end. ' CIMB Research, Nov 8


This article appeared in The Edge Financial Daily, November 9, 2010.

MASTEEL - Masteel hopeful of riding on govt projects

Stock Name: MASTEEL
Company Name: MALAYSIA STEEL WORKS (KL)BHD
Research House: OSK

Upgrade to trading buy at 98 sen with a target price of RM1.22: We visited Malaysia Steel Works (KL) Bhd (Masteel) last week and gather that its management is hopeful of riding on a long list of projects announced by the government.

After spending some RM60 million to RM70 million over the past two years to modify its furnace and billet caster, Masteel expects its billet capacity to progressively increase from 450,000 tonnes per year (tpy) to 650,000 tpy in FY12 by deploying in stages, 130mm billets instead of the original 120mm entities.

The company has also identified a plant near its existing rolling mill to embark on its downstream expansion. As the plant only requires minimum modification conversion to install a new rolling facility, the company has identified three machine suppliers from China to expedite the delivery of the required machines.

The management is targeting to increase its rolling capacity to 500,000 tpy upon full commissioning in FY12. It hopes this would be on time to ride on the string of public infrastructure and building projects announced by the government recently.

While we expect weak financial performance from steel mills in the second half of FY2010 (2HFY10), Masteel suggests that the company's sales is encouraging. Managing director/chief executive officer Datuk Seri Tai Hean Leng said the company had endeavored to import containerised scrap metal after the liberalisation of the scrap market since end-2008.

Although we are surprised at the possible increase in sales volume, we think Masteel might have benefited from being centrally located in the catchment areas of steel demand. Also being a smaller mill, the volume it produces is way easier for the market to absorb. We also suspect that its management might have accumulated enough experience in dealing with cheaper scrap imports by container, which are normally priced at about US$20 (RM61.80) discount compared to bulk imports.

Therefore, we are revising upwards our FY10 net profit estimates by 62.7% to RM42.4 million and FY11 numbers by 7% to RM47.5 million. As its earnings may exceed market expectation, we upgrade our call to Trading Buy, with a new target price of RM1.22. ' OSK Research, Nov 8


This article appeared in The Edge Financial Daily, November 9, 2010.

DAYANG - Dayang falls, despite positive earnings outlook

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

KUALA LUMPUR: Shares of Dayang Enterprise Bhd fell in the afternoon session on Tuesday, Nov 9 despite the stronger earnings and upbeat outlook for the company but some investors might not have favoured its rights issue plan,

At 3.04pm, it was down 11 sen to RM2.93 with 2.28 million shares done. The FBM KLCI rose 3.15 points to 1,522.99. Turnover was 1.0 billion shares valued at RM1.18 billion.

Dayang's third quarter earnings doubled to RM22.63 million from RM11.03 million a year ago due to higher value of work orders received and performed.

It also proposed a one-for-four bonus issue of 88 million new shares and also a renounceable rights issue of 110 million new shares on the basis of one rights shares for every four shares held.

RHB Research said the near-term outlook for Dayang was positive on sustained news flow.

'After our earnings revision, our fair value has been raised to RM3.86/share (from RM3.01 previously), based on FY11 EPS of 25.7 sen on unchanged 15 times PER. This implies an upside of 26.9%. Maintain Outperform,' it said.

AIRASIA - AirAsia rating cut on potential price war

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



AirAsia Bhd was cut to "underperform" from "outperform" at RHB Research Institute Sdn Bhd to reflect a potential price war after Malaysian Airline System Bhd announced plans to expand its Firefly budget carrier unit.

AirAsia's indicative fair value was cut to RM2.10 from RM3.01, RHB said in a report today. -- Bloomberg

DAYANG - Dayang Ent cut to 'hold' at ECM Libra

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



Dayang Enterprise Holdings Bhd, a Malaysian oil and gas services provider, was cut to "hold" from "buy" at ECM Libra Capital Sdn Bhd because the stock has limited upside as incoming orders have already been priced in.

The share price estimate was raised to RM3.17 from RM2.65, analyst Bernard Ching, said in a report today.

The stock rose in Kuala Lumpur trading, set for a record close after the company proposed a bonus share issue and third-quarter profit more than doubled.

The stock climbed 1 per cent to RM3.07 at 9:13 am local time. -- Bloomberg

F&N - AmResearch reaffirms Buy on F&N

Stock Name: F&N
Company Name: FRASER & NEAVE HOLDINGS BHD
Research House: AMMB

KUALA LUMPUR: AmResearch reaffirms its BUY rating on Fraser & Neave Holdings Bhd (F&N) with an unchanged fair value of RM15.20 a share.

F&N had on Monday, Nov 8 declared a special interim net dividend of RM1.10/share, effectively distributing the entire net gain of RM324.7 million from the divestment of Malaya Glass Products Sdn Bhd back in May 2010.

The group also declared a final net dividend of 38 sen a share, bringing total net dividends to RM1.64 a share for FY10.

'Our 12-month fair value of RM15.20/share offers a potential total return of 15%, based on the current theoretical ex-price of RM13.50 a share,' said AmResearch in its research note on Tuesday.

PBBANK - OSK Research maintains Public Bank TP at RM14.20

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

KUALA LUMPUR: OSK Research is maintaining its TP of RM14.20 for Public Bank, which implies an ROE of 26% and FY11 price-to-book value multiplier of 3.80 times.

It said on Tuesday, Nov 9 the immediate term catalysts for the stock, which has lagged the market, are its lower provisions and upside surprise to loans growth.

OSK Research said in its recent meeting with management, the discussion largely centered on:

1) the sustainability of its current dividend payout,

2) the potential of maintaining a risk weighted annual asset growth of 15% p.a without raising additional capital, and

3) impact of the recent move to impose a 70% loan to value (LTV) cap on third property financing on the group's mortgage growth.

OSK Research said Public Bank's management said it was able to appease investors concerns on all three fronts.

MAS - Hong Leong Investment Research: Maintain Hold on MAS with TP RM2.27

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

KUALA LUMPUR: Hong Leong Investment Bank Research maintain its Hold recommendation on MALAYSIAN AIRLINE SYSTEM BHD [] (MAS) with Target Price of RM2.27.

It said on Tuesday, Nov 9 MAS' unit FlyFirefly plans to expand using 30 Boeing 737-800 jet aircraft. Firefly is currently profitable, but contribution to MAS is relatively insignificant with less than 5% to 1H10 revenue.

MAS management claimed to have competitive cost structure as compared to Airasia, enabling Firefly to price its fares competitively. MAS also said it did not require fund raising exercise for the expansion plan.

'Positive on Firefly expansion plan to defend MAS market share and leverage to MAS group operations to enjoy economies of scale. There might be potential market cannibalisation from MAS to Firefly,' it said.

However, HLIB Research said passengers would incur higher tariffs departing from KLIA's main terminal building.

The research house said Airasia would continue to be Southeast Asia largest LCC operator, with first mover advantage while offering largest regional routes connectivity.

'Key concern with MAS is on the execution risk,' it said.

MASTEEL - OSK Research: Masteel may report surge in 2H

Stock Name: MASTEEL
Company Name: MALAYSIA STEEL WORKS (KL)BHD
Research House: OSK

KUALA LUMPUR: OSK Research says Malaysia Steel Works (KL) Bhd may report a surprise surge in 2H, in tandem with its efforts to import cheaper scrap metal by containers.

In a research note issued on Monday, Nov 8, it said Masteel's smallish size enable easier maneuvering of sales during a weak market.

'Therefore, we are upgrading our call to Trading BUY resulting from the higher earnings, with our new fair value tagged at RM1.22,' it said.

SUNRISE - Sunrise surges on takeover offer

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

KUALA LUMPUR: RHB Research is maintaining its Outperform on SUNRISE BHD [] with a revised fair value of RM3 (cum dividend basis of the offer price) following a notice of conditional takeover offer from UEM LAND HOLDINGS BHD [].

The research house said on Monday, Nov 8 that given that the offer involves share swap, the share price performance of Sunrise will largely depend on the price performance of UEM Land shares. Some weakness in share price may be expected after ex-dividend date, as some shareholders may not want to own UEM Land shares but would like to benefit from the dividend.

'We maintain our Outperform rating on the stock with a revised fair value of RM3 (cum dividend basis of the offer price),' it said.

Last Thursday, Sunrise has received a notice of conditional takeover offer from UEM Land to acquire all Sunrise shares at an offer price of RM2.80 per share to be satisfied in either of the following manner, at the election of shareholders:

(i) through the issuance of new ULHB shares at an issue price of RM2.10 each and Sunrise shareholders will receive about 1.33 ULHB shares for every share surrendered; or

(ii) through the issuance of redeemable convertible preference shares (RCPS) at an issue price of RM1.00 each and Sunrise shareholders will receive 2.80 RCPS for every share surrendered.