PROTON - OSK maintains 'buy' call for Proton

Stock Name: PROTON
Company Name: PROTON HOLDINGS BHD
Research House: OSK



OSK Research maintains "buy" recommendation for Proton Holdings as the results were in line with its estimates.

"Proton continued to display another commendable set of results for its third quarter financial year 2011, fuelled by resilient domestic vehicle sales, which is anticipated to progress into the next year.

This is following the recent launch of the Proton Inspira and Persona, OSK said in a research note today.

"With the results being in line with our consensus estimates, we make no changes in our target price of RM6.18 and retain our Buy," said the research house.

As the margins appear healthy, it continues to see profits being sustained at this level, taking the cue from the higher revenue Proton could potentially fetch from the recently launched Inspira given its low capital expenditure costs. -- Bernama

PUNCAK - OSK Research maintains Buy on Puncak, TP RM3.85

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

KUALA LUMPUR: OSK Research said Puncak Niaga's earnings came within its and consensus expectations.

The research house said on Friday, Nov 26 that in view of low water consumption growth c.3% in the Selangor state, revenue for Puncak came flat on a quarter-on-quarter basis.

'We note that as part of its 2010 YTD revenues, Puncak booked in RM309.6 million being a sum payable by the Selangor State Government in respect to a delay in the water tariff rate hike by 37% initially scheduled to be implemented in January 2009,' it said.

GENM - OSK Research maintains Neutral on Genting Malaysia, higher TP RM3.24

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

KUALA LUMPUR: OSK Research said Genting Malaysia Bhd reported 9MFY10 earnings that were largely in line with its full-year estimates.

'We are maintaining our NEUTRAL recommendation but confer a higher TP of RM3.24 as we roll forward our valuations to FY11, although pegging the same 8x EV/EBITDA to its domestic casino business,' it said on Friday, Nov 26.

OSK Research said its fair value imputed a 10% discount on RNAV. The group's relatively attractive valuations of 6x EV/EBITDA vs the regional average of 10x will help to anchor its share price.

'Nonetheless, we continue to prefer its parent company, GENTING BHD [], as a proxy to Genting Singapore's more compelling growth story,' it said.

MSPORTS - Multi Sports Holdings sees normalised sales from new capacity

Stock Name: MSPORTS
Company Name: MULTI SPORTS HOLDINGS LTD
Research House: OSK

Multi Sports Holdings Bhd
(Nov 24, 51 sen)
Maintain buy at 49.5 sen with lower target price of 87 sen (from 93 sen): While Multi Sports reported strong 9MFY10 revenue and core net profit ' revenue increased by 40.7% year-on-year (y-o-y) to RM203.4 million and 30% y-o-y to RM49.2 million ' its annualised full-year earnings of RM65.6 million, came in below our full-year estimate of RM75.7 million as we overestimated the production volume from new capacity on an annualised basis.

Compared with the strong sales growth of 57.5% (net profit +49.5%) y-o-y in 2QFY10, the group recorded a slower 17% top line y-o-y growth (net profit +3.2% y-o-y) in 3QFY10 as the group has added in extra capacity in 3QFY09, hence the 17% y-o-y growth in the current quarter is a normalised growth.

Multi Sports added five production lines for EVA MD in 3QFY09. Production volume continued to increase by 34% to 23.4 million in 9MFY10 (3QFY10: +14%) while the average selling price improved by 4.4% to RM18.9 (3QFY10: +2.2% y-o-y), mainly driven by the higher demand for EVA MD products.

9MFY10 earnings before interest and tax (Ebit) margin was lower at 28.3% against 33.7% in the previous year due to higher labour costs as the group revised wages upwards, administrative expenses and foreign exchange loss on fundraising from rights share issue which are recognised in the current quarter. The slower core earnings growth compared with top line growth was further explained by the higher interest expense incurred during this quarter on additional short-term loan drawdown.

We trim our FY10 and FY11 earnings forecast by 6.8% to 15% to factor in the lower production volume from new capacity on an annualised basis. We forecast the group will register flat profit in the next quarter due to capacity constraints. We are also expecting Multi Sports to register flat net profit in FY11 given the higher depreciation expense incurred for the new plant and higher effective tax rate of 25% against 12.5% currently. Our target price is reduced to 87 sen, based on 5.5 times FY11 EPS instead of FY10. The construction of its new plant on Xibin Land was completed in November and the group is targeting to move in completely by next month. ' OSK Investment Research, Nov 24


This article appeared in The Edge Financial Daily, November 25, 2010.

IJMPLNT - IJM Plantations 2QFY11 a super prime year

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

IJM Plantations Bhd
(Nov 24, RM2.92)
Maintain buy at RM2.89 with revised target price of RM3.99 (from RM3.65): IJM Plantations (IJMP) reported strong 1HFY11 results, which made up 9% of our full-year estimates and 61% of consensus estimates. The group recorded its strongest quarter in 2QFY11 since 1QFY09 which recorded RM44 million in profits on crude palm oil (CPO) average selling price (ASP) of RM3,306 per tonne. Earnings have beaten our estimates because of stronger yields rather than higher than expected CPO ASP. Net profit in 2QFY11 was up 73% quarter-on-quarter (q-o-q) and 173% year-on-year (y-o-y). Its 1HFY11 results beat 1HFY10 numbers by 196%. For the quarter, the group achieved a CPO ASP of RM2,592 per tonne compared to the MPOB average of RM2,639 per tonne. Year-to-date, 1HFY11 CPO ASP now stands at RM2,540 per tonne compared with RM2,207 per tonne in 1HFY10.

This year, IJMP's estates are at an average age of 12 years, which is typically the peak production period of an oil palm tree life. As such, the group has bucked the industry trend and reported 26.5% improvement in fresh fruit bunches (FFB) production on a q-o-q basis and 15.8% on a y-o-y basis. We were initially of the view that the group would be impacted by lower yields in Sabah, similar to the rest of the industry, due to unfavourable weather conditions this year. However, good estate management coupled with a prime age profile has given a surge to IJMP's earnings. We view that its yields this year could'' clock in at 26 to 28 tonnes per hectare, above our estimates of 25 tonnes per ha. As such, we are revising our estimates up to reflect the stronger yields. We raise our FFB yield expectations for FY11 to 27 per tonne per ha (EPS +9.1%). We also raise FY12 yields to 26 tonnes per ha from 25 tonnes per ha (EPS +4.1%) and similarly for FY13 (EPS +4.2%).

We continue to rate IJMP a "buy". Our target price of RM3.65, following the earnings upgrade, is raised to RM3.99. This represents FY11 EPS pegging a PER of 24.3 times. We have derived this PER target based on +1 time standard deviation above IJMP's historical average one-year rolling forward PER. This methodology is supported by past observation ' when CPO prices breached RM3,000 per tonne level in 2008, IJMP managed to trade close to its +1 time standard deviation PER of 24.3 times. In comparison, the stock is currently trading at a forward PER of 17.6 times based on FY11 EPS. As such, we view there is room for more upside, given current fundamentals supporting strong CPO prices. ' ECM Libra Investment Research, Nov 24


This article appeared in The Edge Financial Daily, November 25, 2010.

NOTION - Fortunes change, risk abates at Notion

Stock Name: NOTION
Company Name: NOTION VTEC BHD
Research House: MAYBANK

Notion Vtec Bhd
(Nov 24, RM1.64)
Upgrade to buy from sell at RM1.63 with target price of RM1.95: Results in 4Q were better than expected, with net profit rising 2.8-fold quarter-on-quarter (q-o-q) and earnings before interest, tax, depreciation and amortisation (Ebitda) margin expanding by 10.2 percentage points q-o-q. We upgrade Notion to a 'buy' (non-consensus) with an unchanged RM1.95 target price. On balance, we believe the negatives have been priced in after a 37% fall in share price following the disastrous 3Q results. Valuations are inexpensive, with a four to six times FY11/12 PER and improving business outlook.

4QFY10 net profit of RM8 million (+183% q-o-q; -37% y-o-y) took FY10 earnings to RM37 million (+4% y-o-y), ahead of our expectations but in line with consensus. This better performance was due to: (i) production turnaround (lower R&D costs, improved material yields, low incidence of rework and quality issue of its 2.5' base plate resolved); and (ii) improved product mix. The camera segment led sales in 4Q, followed by hard disk drive (HDD) and auto with a 48:35:17 mix (3Q: 38:46:16).

We are keeping our earnings unchanged, which implies a two-year net profit compounded average growth rate (CAGR) of 27%. We expect the camera segment to drive growth in FY11/12, fuelled by Nikon's increased orders. HDD will take a back seat. Capacity ramp-up will be moderate until issues pertaining to Samsung's 2.5' base plate production are fully resolved. With improving operations, it seems unlikely that Notion will drop the Samsung project now. Notion expects camera: HDD: auto segments to contribute a 54:32:14 sales mix in FY11.

Our RM1.95 target price is based on four times FY11 EV/Ebitda, which implies six times PER, reflecting regional (ex- Japan) HDD component makers valuations. Our upgraded 'buy' call is non-consensus ' we believe the management can sustain this turnaround, and demand for its products is at an early stage of business recovery. Notion declared an interim dividend per share of 4.5 sen in 4Q (-10% y-o-y; goes ex on Dec 29). ' Maybank IB Research, Nov 24


This article appeared in The Edge Financial Daily, November 25, 2010.

MAYBULK - Maybulk outperforms in 3QFY10

Stock Name: MAYBULK
Company Name: MALAYSIAN BULK CARRIERS BHD
Research House: AMMB

Malaysian Bulk Carriers Bhd
(Nov 24, RM2.91)
Maintain buy at RM2.87 with higher fair value of RM3.70: We reiterate our 'buy' rating on Malaysian Bulk Carriers Bhd (Maybulk), with a higher fair value of RM3.70 following an upward revision to our earnings projection. Our valuation continues to peg Maybulk at 14 times FY11F earnings, on par with peers' average.

Maybulk reported a core net profit of RM75 million for its 3QFY10, which brought 9MFY10 earnings to RM170 million. This came in well ahead of our expectation as well as consensus.

While rates were lower (down 8% to 20% quarter-on-quarter), the positive surprise was that margins expanded significantly ' particularly considering that the weaker US dollar is a net negative given that revenue is recognised in the greenback. This was partly driven by better fleet utilisation and lower operating cost (-5% q-o-q).

Utilisation rate increased tremendously, driven by more hire days (+34% q-o-q). Given the high operating leverage nature of shipping operators, this translated into much better gross margins (+8.9 percentage points q-o-q).

Additionally, fuel cost was 4% lower q-o-q, reflected in the average bunker cost of US$462 (RM1,451) per tonne in 2QFY10 to US$444 per tonne in 3QFY10.

We have revised upwards our projections by 20% to 25% over FY10F/12F to reflect more hire days (+10%) and lower than expected bunker fuel cost. Year-to-date, bunker fuel averaged at US$461 per tonne, 4% lower than our earlier estimate of US$480 per tonne. Implied core net margin for our FY10 projection rises from 46% to 55%.

According to Clarksons Research Services, the global dry bulk fleet growth rate will peak in 2010 at +16% to 534 million dead-weight tonnes (dwt), and should start to see a slowdown in 2011, with just a 12% growth. This should provide some positives for the sector as we head into FY11F.

Valuation-wise, Maybulk is trading at a 20% discount to peers' average of 14 times FY11F earnings. We expect catalysts to materialise in the form of: (i) Maybulk's capacity buildup via acquisitions; (ii) improving industry core fundamentals from gradually slowing global fleet growth; and (iii) seasonally stronger 4Q as the winter season drives coal demand. ' AmResearch, Nov 24


This article appeared in The Edge Financial Daily, November 25, 2010.

AXIATA - Axiata climbs to 5-week high

Stock Name: AXIATA
Company Name: AXIATA GROUP BERHAD
Research House: CREDIT SUISSE



Axiata Group Bhd, a Malaysian mobile phone operator, rose to a five-week high in Kuala Lumpur trading after OSK Research Sdn Bhd and Credit Suisse Group AG raised their share forecasts.

The stock gained 1.6 per cent to RM4.56 at 9:10 a.m. local time, set for its highest close since October 14.

Axiata yesterday reported a 27 per cent rise in third-quarter net income. OSK and Credit Suisse both raised their share estimates to RM5.80, according to separate reports by the research houses today. -- Bloomberg

PLUS - PLUS downgraded to 'neutral' at OSK

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



PLUS Expressways Bhd, Malaysia's biggest toll-road operator, was downgraded to "neutral" from "buy" at OSK Research Sdn Bhd after UEM Group Bhd and the Employees Provident Fund offered to buyout the company at RM4.60 a share, offering a limited upside.

The share price estimate was cut to RM4.60 from RM4.84, OSK said in a report today. -- Bloomberg

NAIM - AmResearch maintains Naim Holdings FV at RM5.09

Stock Name: NAIM
Company Name: NAIM HOLDINGS BHD
Research House: AMMB

KUALA LUMPUR: AmResearch is maintaining its earnings forecast and fair value of RM5.09 a share for NAIM HOLDINGS BHD [], pending further updates from management ' with an upward bias.

'We continue to like Naim for exposure to a re-acceleration of infrastructure spending ahead of the Sarawak state elections (due by July 2011) ' with added oil & gas kickers coming from Dayang,' it said on Thursday, Nov 25.

AmResearch said Naim reported 9MFY10 results which were above expectations. 3QFY10 earnings surged 52% YoY to RM37 million ' bringing profits for 9MFY10 to RM75 million (+26% YoY). This constitutes 84%-87% of both consensus and its full-year estimates, respectively.

KNM - OSK Research maintains KNM target price at 56 sen

Stock Name: KNM
Company Name: KNM GROUP BHD
Research House: OSK

KUALA LUMPUR: OSK Research said KNM Bhd's 9MFY10 results were above consensus but within its expectations, making up 83% and 78% of the FY10 forecasts respectively.

It said on Thursday, Nov 25 the improvement in the 3QFY10 numbers showed that PBT soared 393% to RM41.0m q-o-q, mainly contributed by higher utilization of its plants as well as a better product mix.

However, on a YTD comparison, the 9MFY10 PBT was still lower by 77.4% due to lower selling prices and higher cost of operation.

The ex-date for the company's share consolidation of every four shares into one share has been set for Dec 2.

'Our target price for KNM remains unchanged at 56 sen, based on a PER of 9x FY11 EPS. In the immediate term, we believe there may be some upside to its share price once the shares are consolidated as worries over its liquidity would be successfully addressed by then.

'Going forward, we expect KNM's outlook to gradually improve in line with the recovery of the global O&G industry,' said OSK Research.

PETRA - OSK Research: Petra Perdana to break even by 4Q

Stock Name: PETRA
Company Name: PETRA PERDANA BHD
Research House: OSK

KUALA LUMPUR: OSK Research said PETRA PERDANA BHD []'s'' 9MFY10 results were within its'' expectations, with a cumulative net loss of RM53.1 million year-to-date.

'We expect the company to break even by 4QFY10, unless the monsoon season turns out worse than expected and cause some of its contracted vessels being put on hold,' it said on Thursday, Nov 25

OSK Research said the lower 3QFY10 net loss of RM23.7 million gave a good indication that the worst for the company may be over. The better q-o-q results were contributed by 1) higher utilization of vessels, and 2) lower mobilization costs during the quarter.

'Nevertheless, we think the share price may have hit bottom and hence are upgrading our call to Trading Buy, with a target price of 94 sen,' it said.

DIALOG - A good start for Dialog

Stock Name: DIALOG
Company Name: DIALOG GROUP BHD
Research House: CIMB

Dialog Group Bhd
(Nov 23, RM1.44)
Maintain underperform at RM1.44 with revised target price of RM1.10 (from 95 sen): Dialog's 1QFY11 net profit beat our expectations by coming in at 28% of our full-year forecast, though it was broadly in line with consensus estimates at 22%. We had underestimated contributions from the plant maintenance business. Assuming higher contributions from the plant maintenance business and operations at the Tanjung Langsat terminal (TLT), we raise our EPS forecasts by 4.8% for FY11, 19% for FY12 and 19.6% for FY13. The earnings upgrades and the rollover of our target price to end-CY11 increase our target price from 95 sen to RM1.10, pegged to our revised target market PER of 13.8 times (15 times previously). Dialog remains an 'underperform', with the potential downside triggers being: (i) a slowdown in engineering and construction order book replenishment; and (ii) delay in the Pengerang project. Our top oil and gas pick is SapuraCrest.

In 1QFY11, revenue fell 15% year-on-year (y-o-y) following the completion of major engineering and construction projects in Malaysia and Asia-Pacific. However, net profit rose 23% mostly due to higher contributions from two divisions: (i) Plant maintenance: The division has about RM100 million orders on hand currently and has completed significant works in Malaysia and Singapore; (ii) Centralised tankage facilities: Terminal 1 of TLT started its Phase 1 operations in September 2009 with a capacity of 130,000m''. The 270,000m'' capacity at Phase 2 has been utilised since last April.

Dialog has started work on the RM80 million construction of Terminal 1's Phase 3 (capacity: 80,000m'') and RM180 million construction of Terminal 2 (capacity: 180,000m''). The construction is expected to be completed by end-CY11. Dutch trader Trafigura is both a partner and a client, ensuring long-term commitment and consistent utilisation.

In June 2009, Dialog and the Johor government signed a memorandum of understanding to set up an independent deepwater petroleum terminal in Pengerang. Last month, the state government awarded Dialog exclusive rights to develop the terminal for a 60-year period. We have yet to include its potential contribution in our forecasts. Using the Kertih facility as guidance, we estimate that pre-tax contribution from Pengerang may be no less than RM30 million per year. Dialog is now working on the environmental assessment, which is slated to finish by early CY11. 'CIMB Research, Nov 23


This article appeared in The Edge Financial Daily, November 24, 2010.

MHB - MMHE ready for more in 2QFY11

Stock Name: MHB
Company Name: MALAYSIA MARINE AND HEAVY ENG
Research House: ECMLIBRA

Malaysia Marine and Heavy Engineering Holdings Bhd
(Nov 23, RM4.48)
Maintain buy at RM4.50 with revised target price of RM5.19 (from RM4.72): Annualised net profit made up 46% of our full-year estimates and 49% of consensus. While profit was down 30% quarter-on-quarter (q-o-q), on a year-on-year (y-o-y) basis, the group's net profit for 1HFY11 has ballooned by 184.5%. As expected, revenue has come in lower this year as the Turkmenistan Phase 1 job is near completion. However, the group's net margins have grown to 8.6% for 1HFY11 compared with only 2.1% in 1HFY10, as the Gemusut Kakap FPS (floating production system) job is in the fabrication stage. The second quarter also marks the end of the Tangga Barat processing platform job which was worth RM848 million, which also explains the drop in earnings on a q-o-q basis.

We believe that MMHE's earnings will be good y-o-y, but not exciting q-o-q from here into mid-FY12 as it reaches the tail end of its existing RM5 billion order book. We expect at least RM4 billion of job replenishment to kick in 1HCY11. Jobs that we prospect include Malaysia's first Tension Leg Platform for which MMHE has been approved as the yard of choice. What waits to be decided for that job is the design contractor, which appears to be a race between Modec, Floatec and SBM Offshore. We also expect the group to snag some shallow water jobs and marine conversion jobs coming from the Petronas re-gassing project. Along with that, we view that once Phase 1 is completed in Turkmenistan, Phase 2 should come into play.

We have some indications that the marine segment may see improvement come next year with revived global FPSO demand and also repair jobs. As such, we are upping our estimates slightly to reflect this improvement. Our FY11 estimates remain unchanged and FY12F numbers are raised by 13.7% and FY13F by 1%. Our estimates for the E&C segment remain unchanged and continue to be conservative as we believe that large, new, long-term projects would not contribute significantly in their initial year.

We continue to rate MMHE a 'buy' and raise our target price in line with our earnings upgrade. We continue to peg CY11 EPS to a PER of 20 times, which represents the average of peak cycle industry PERs, to derive a target price of RM5.19 (previously RM4.72). ' ECM Libra Investment Research, Nov 23


This article appeared in The Edge Financial Daily, November 24, 2010.

AIRASIA - AirAsia's 3Q to surprise on strong yields

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

AirAsia Bhd
(Nov 23, RM2.48)
Maintain buy at RM2.48 with revised target price of RM2.94 (from RM2.38): AirAsia will release its 3Q10 results tomorrow. Its 3Q10 is expected to be highly profitable, buoyed by strong passenger growth, high load factors, and positive outlook on yields. We raise our earnings forecasts to account for higher yields, off-setting higher fuel costs. Maintain 'buy', with a raised target price of RM2.94 (+23% from previous) based on 10.1 times 2011 PER ' 10% discount to peers.

Load factor for the Malaysian operations jumped to 78.3% (+2.9 percentage points [ppts] year-on-year) in 3Q10 with 12.4% y-o-y passenger growth. The Thai and Indonesian associates also recorded strong performances with load factors of 76% and 80.8% respectively. Collectively, the group produced a load factor of 78.2% (+2.2 ppts y-o-y) ' perhaps the highest for 3Q since inception.

We estimate the group's 3Q10 core net income to be RM146.8 million, a growth of 508% y-o-y after adjusting for FRS 139 derivative mark-to-market (MTM) and deferred taxation assets which are non-cash. The drivers are higher yields, reversal from losses at the Thai operations, lower operational cost stemming from new aircraft deployed into the fleet and the market fuel price being 9% lower than our initial forecast.

AirAsia is a stock trader's darling; share price has surged by 77% since January making it the top performing LCC stock in the world. In addition, volatility ('') has risen from 1.02 in January to 1.37 currently ' an increase of 34%. Based on these risk factors, we have imputed a 10% discount to global peers in our valuation.

We have upgraded our earnings forecast by 29% for 2010, 21% for 2011 and 1% for 2012 to account for higher yields, higher fuel price (average US$100/bbl, previously US$95/bbl) and higher contribution from associates. AirAsia remains the cheapest LCC globally with superior earnings growth prospects. ' Maybank IB, Nov 23


This article appeared in The Edge Financial Daily, November 24, 2010.

CIMB - CIMB gaining regional traction

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

CIMB Group Holdings Bhd
(Nov 23, RM8.31)
Maintain buy at RM8.41 with fair value of RM9.60: We are maintaining our 'buy' rating on CIMB Group Holdings Bhd with an unchanged fair value of RM9.60. Our fair value is based on an unchanged return on equity (ROE) of 17.2% in FY11F, which translates into a fair price-to-book value of 2.6 times.

CIMB reported net earnings of RM923.5 million in 3QFY10, representing an increase of 3.8% quarter-on-quarter (q-o-q) and 27.1% year-on-year (y-o-y). On an annualised basis, net earnings came in just a tad below our forecast of RM3.57 billion (-0.4%) and were in line with consensus' RM3.56 billion.

Given that 2QFY10 included a RM150 million gain from the sale of up to 65 properties to the Employees Provident Fund, we view the 3.8% q-o-q increase as resilient earnings growth.

The company declared a special net dividend of 13.45 sen in 3QFY10. This is something of a positive surprise to us, given that we had expected a special dividend to be announced in conjunction with its 4QFY10. Together with the interim dividend tax-exempt dividend per share (DPS) 4.63 sen announced in 2QFY10, this brings the total net DPS to 18.1 sen for 9MFY10. This means it is on track to meet our projected overall net DPS of 18.5 sen for FY10F.

Its absolute gross impaired loans declined 7.9% q-o-q, which is positive. The gross impaired loans ratio declined to 6.6% as at end-September from 7.2% at end-June. Loan loss cover was raised to 79.3% at end-September from 78.4% at end-June.

Elsewhere, loan growth is flattish at only 0.3% q-o-q, but we are reassured that this was related to previous short-term bridging financing in 2QFY10 which has now lapsed. Further, net interest margin declined by 15 basis points q-o-q, which we believe was due largely to lag impact from repricing of fixed deposits. We believe this is more of an industry trend, and thus do not view this negatively in the context, in relation to CIMB.

Otherwise, regional contributions from CIMB Niaga (excluding sale of ex-Lippo bonds) is higher, estimated at 25.9% in 3QFY10 (2QFY10: 24.6% 1QFYQ10: 22.4%). Total earnings contribution from regional countries has now increased to 53% in 3QFY10, from 44% in 2QFY10.

We maintain our view that CIMB is underrated for its regional banking platform. Key re-rating catalysts are: (i) a stronger than expected non-interest income; (ii) reaffirmation of a higher ROE target of 18% for FY11F; and (iii) confirmation of a higher dividend. ' AmResearch, Nov 23


This article appeared in The Edge Financial Daily, November 24, 2010.

IJMLAND - RHB Research: Prospects for IJM Land-MRCB merger good

Stock Name: IJMLAND
Company Name: IJM LAND BERHAD
Research House: RHB

KUALA LUMPUR: RHB Research Institute said the proposed merger between IJM Land and MRCB offered good prospects.

Under the merger plan, a new company will be formed (Newco) to facilitate the proposal, and IJM Land and MRCB shares will be exchanged for shares in Newco, or a combination of Newco shares and cash.

The exchange will be determined based on RM3.65 per IJM Land share and RM2.30 per MRCB share. The exchange will also apply to convertible securities ' RCULS, and a scheme will be included for IJM Land warrants (which should reflect the value of mother shares).

RHB Research said on Wednesday, Nov 24 at the offer price of RM3.65, which is just 4.3% above its previous fair value of RM3.50, it implied a CY11 PE of 20.6x and PB of 2.43x (based on current outstanding shares and BV as at 2QFY11), which are fairly attractive in its opinion.

Post-merger exercise, the Newco will have a market cap of RM7 billion to RM8 billion and landbank of 9,000 acres.

'Prospects for Newco are good, as it will have the access to IJM Land's existing strategic landbank in Klang Valley - 2,000-acre Canal City land (in the southern side), and have a chance to participate in the 3,300-acre Rubber Research Institute land (in the northern side).

'We believe the Newco, as a big cap property stock, is likely to trade at a premium (to RNAV), due to its size, landbank location, and liquidity, possibly on par with SP Setia and UEM Land-Sunrise,' it said.

MRCB - MRCB, IJM Land falls on merger plan

Stock Name: MRCB
Company Name: MALAYSIAN RESOURCES CORP
Research House: RHB



Malaysian Resources Corp and IJM Land Bhd fell in Kuala Lumpur trading after the two property developers planned to merge in a RM6.4 billion (US$2 billion) share swap.

Shares of Malaysian Resources dropped 3.3 per cent to RM2.08 at 9:11 a.m. local time, set for its steepest slide since November 16.

Its indicative fair value was cut to RM2.30 from RM2.48 at RHB Research Institute Sdn Bhd. IJM Land declined 2.9 per cent to RM2.99. -- Bloomberg

MRCB - OSK maintains 'neutral' call for MRCB

Stock Name: MRCB
Company Name: MALAYSIAN RESOURCES CORP
Research House: OSK



OSK Research maintains a 'neutral' recommendation for Malaysian Resources Corporation Bhd (MRCB) on the basis that the details of the proposed merger with IJM Land Bhd have yet to be finalised.

Yesterday, MRCB and IJM Land inked a Memorandum of Understanding (MoU) on the two companies' proposed merger, which will effectively give rise to the country's second largest property player.

The merged entity will have a combined revalued net asset value of about RM6.5 billion. In a research note today, OSK said the offer price was fair but not that attractive.

"Although there has been no decision on whether the proposed merger will be satisfied via a pure share swap for shares in the newly incorporated company (newco) or a combination of shares in newco and cash, the exchange offer price for each MRCB and IJM Land share has been fixed at RM2.30 and RM3.65 respectively.

"The RM2.30 offer price for MRCB offers only seven per cent and 12.2 per cent upside from the last closing price and our previous fair value respectively.

"As such, we view the offer price as somewhat fair and yet not that attractive, owing to the rather limited premium or upside," it said.

Nevertheless, it did not rule out the possibility of MRCB's share price overshooting the offer price over the short term, driven by the excitement over the proposed merger.

Both parties are expected to enter into a definitive merger agreement within three weeks from the date of the MoU. -- Bernama

QL - OSK raises QL Resources forecast

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



OSK Research has raised QL Resources Bhd's financial year 2011/2012 net profit forecast by 3.1 per cent to 9.7 per cent to RM128.2 million and RM152.7 million respectively, as the previous forecast was too conservative.

"As it was too conservative and also taking into account the lower interest expenses and a higher crude palm oil price of RM2,700 per tonne, we are raising our net profit forecast," the research firm said in a research note today.

For the third quarter ended September 30, 2010, QL Resources recorded a higher pre-tax profit of RM42.813 million compared to RM33.921 million in the same period last year. Its revenue rose to RM438.725 million from RM337.167 million previously.

QL Resources is primarily involved in marine processing manufacturing, integrated livestock farming and palm oil activities. -- Bernama

CIMB - OSK maintains 'buy' call on CIMB Group

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



OSK Research expects CIMB Group's fourth quarter financial year ending 2010 sequential growth to be even stronger than the third quarter result.

This is due to a hefty lift in investment banking income arising from the recent Petronas Chemical Group initial public offering (IPO).

"Corporate advisory, underwriting and other capital market derived fee income remained sluggish quarter-on-quarter (-38.5 per cent), representing a marginal 3.3 per cent of the group's total non-interest income.

"But, we expect a strong lift in the fourth quarter on the back of the mega Petronas Chemical IPO," it said in a research note today.

CIMB Group recorded a higher pre-tax profit of RM1.184 billion for the third quarter ended September 30, 2010, from RM1 billion in the third quarter of 2009. Revenue rose to RM2.91 billion from RM2.78 billion in the corresponding period.

The research house is maintaining a 'buy' call on its share with a target price of RM9.77. -- Bernama

CIMB - CIMB Group downgraded to 'hold' at ECM

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



CIMB Group Holdings Bhd, Malaysia's second biggest lender by market value, was downgraded to "hold" from "buy" at ECM Libra Capital Sdn Bhd.

The research house said in a report today that the stock has already almost reached its share price estimate. ECM Libra said in cut its share target to RM8.80 from RM8.83.

CIMB rose 1.2 per cent to RM8.51 in Kuala Lumpur at 9:25 a.m.

CIMB - HDSVR maintains Buy on CIMB, TP RM10.10

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

KUALA LUMPUR:'' Hwang DBS Vickers Research is maintaining a Buy on CIMB Group and target price of RM10.10 after the banking group's 3Q10 net profit of RM916 million brought 9M10 earnings to RM2.6 billion, which was within expectations.

The research house said on Tuesday, Nov 23 that 3Q10 earnings were driven by lower loan provisions despite extra provisions set aside for its SME portfolio.

Profit across segments fell on-quarter except for Treasury and Investments, and CIMB Thai. Asset quality continued to improve with gross non-performing loans ratio falling to 6.6% from 7.2% a quarter ago. Net interest margins slipped 11bps to 2.71% largely due to lower yields in other assets (not loans). Loans only grew 1% on-quarter following a drop in corporate loans (bridging loans).

Meanwhile, low-cost deposits grew 6% on-quarter, but 9% year-to-date growth still fell short of the bank's 18% target for the year. CIMB adopted Basel II this quarter, which caused Tier-1 CAR and RWCAR to rise to 15.0% each at bank level. CIMB declared a special 13.45 sen DPS (ex-date: 3 Dec 10; payment before Dec 31, 2010).

MEGB - OSK Research: Masterskill results within expectations, maintains TP RM3.59

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

KUALA LUMPUR: OSK Research said Masterskill Education Group's 9MFY10 results were within its and consensus expectations, making up about 73.8% and 72% of the research house's and consensus expectation.

The research house said on Tuesday, Nov 23 that in 9MFY10, revenue rose 17.9% on-year while net profit was up by only 9.5%, largely due to weaker margins as EBIT margin dipped from 42.8% in 9MFY09 to 38.5% for 9MFY10.

'While the results were within our expectations, we maintain our forecast and Trading Buy recommendation at an unchanged TP of RM3.59 based on 12x PER on FY11 EPS. After its sharp share price retracement, Masterskill is now trading at a rather appealing 7.1x PER on FY11 EPS compared to its peers' 14x PER on FY11 EPS,' it said.

TCHONG - TCM to see good Q4 results says OSK

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



Tan Chong Motor Holdings (TCM) will see a favourable fourth quarter following mixed sales, expecially a volume and margin boost, from the launch of the all-new Nissan Teana tommorow, says OSK Research.

To date, 1,500 units of the Teana have been confirmed.

"We continue to remain optimistic of TCM's prospects and see a positive growth in volume and earnings," it said in its research note today.

TCM's net profit for the third quarter ended Sept 30, grew 43 per cent to RM49.34 million from RM34.43mil in the previous corresponding period while revenue increased 17 per cent to RM871.6mil from RM745.77mil previously.

Going into next year, TCM remains committed in bringing in two new CKD models along with three new CBUs.

"As the TCM plants in both Vietnam and Kota Kinabalu, which would produce a CKD Navara, are also expected to be operational by then, we remain bullish on the company's outlook.

"In Sabah, TCM is expected to post commendable margins by taking advantage of Indonesia's lower effective excise duty and tax rate of 20 per cent on its pick-ups and the higher selling prices there," OSK said.-- Bernama

YTLPOWR - YTL Power a 'buy' at AmResearch

Stock Name: YTLPOWR
Company Name: YTL POWER INTERNATIONAL BHD
Research House: AMMB



YTL Power International Bhd, which last week launched a WiMax service in Malaysia, was upgraded to "buy" from "hold" at AmResearch Sdn Bhd.

Its fair value was increased to RM2.97 from RM2.15, the research house said in a report today. -- Bloomberg

DIGI - DiGi skids in thin trade

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

KUALA LUMPUR: DIGI.COM BHD [] share prices skidded in early trade on Monday, Nov 22 on concerns of stiffening competition from the launch of YTL Group's 4G mobile broadband services last Friday.

At 9.24am, DiGi was down 58 sen to RM25.05 with 1,000 shares done.

The FBM KLCI rose 2.88 points to 1,508.93. Turnover was 94.39 million shares done valued at RM71.21 million. Gainers beat losers 201 to 78.

OSK Research said on Monday,'' the entry of YTL Communication will raise the competition in the telco sector by several notches given the more attractive price points and the innovative bundling incentives on data/SMS.

The research house said YTL Communications benefits from the strong financial backing and support of YTL Power and its entry is likely to further marginalize the smaller WiMAX operators whose network rollout and subscriber growth remains patchy to date.

'Overall, we feel that YTL Communications' entry could potentially instigate a price war over the medium term as its headline tariffs are 44%-75% below the incumbents. We are not overly concerned over the impact on mobile broadband providers as YES' effective tariffs are consistent with regular offerings in the market and are likely to appeal to light data users although it could up the ante on broadband access prices,' it said.

OSK Research said its top pick for exposure to the sector remains AXIATA (BUY, TP: RM5.50), the only Malaysian telco that offers regional exposure to mitigate the rising competitive pressure domestically. It maintained its NEUTRAL recommendations on DiGi (TP: RM24.40), TM (TP: RM3.28) and Maxis (TP: RM5.40).

AXIATA - DiGi skids in thin trade

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

KUALA LUMPUR: DIGI.COM BHD [] share prices skidded in early trade on Monday, Nov 22 on concerns of stiffening competition from the launch of YTL Group's 4G mobile broadband services last Friday.

At 9.24am, DiGi was down 58 sen to RM25.05 with 1,000 shares done.

The FBM KLCI rose 2.88 points to 1,508.93. Turnover was 94.39 million shares done valued at RM71.21 million. Gainers beat losers 201 to 78.

OSK Research said on Monday,'' the entry of YTL Communication will raise the competition in the telco sector by several notches given the more attractive price points and the innovative bundling incentives on data/SMS.

The research house said YTL Communications benefits from the strong financial backing and support of YTL Power and its entry is likely to further marginalize the smaller WiMAX operators whose network rollout and subscriber growth remains patchy to date.

'Overall, we feel that YTL Communications' entry could potentially instigate a price war over the medium term as its headline tariffs are 44%-75% below the incumbents. We are not overly concerned over the impact on mobile broadband providers as YES' effective tariffs are consistent with regular offerings in the market and are likely to appeal to light data users although it could up the ante on broadband access prices,' it said.

OSK Research said its top pick for exposure to the sector remains AXIATA (BUY, TP: RM5.50), the only Malaysian telco that offers regional exposure to mitigate the rising competitive pressure domestically. It maintained its NEUTRAL recommendations on DiGi (TP: RM24.40), TM (TP: RM3.28) and Maxis (TP: RM5.40).

CIMB - Hwang DBS Vickers Research maintains Buy on CIMB, ups TP to RM10.10

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

KUALA LUMPUR: Hwang DBS Vickers Research is maintaining a Buy call on CIMB and raised TP to RM10.10, implying 2.7x CY11 BV ' a value proxy to the healthy capital markets, regional exposure, and cheaper alternative to Indonesia banks.

The research house said on Monday, Nov 22 that CIMB regularly wins a sizeable share of corporate deals with its excellent track record in investment banking. It tops in equity and debt issuance with 27% and 36% of domestic market share. Regionally, CIMB is expanding its footing in Singapore and Indonesia, especially in broking and equity issuance.

Upcoming major deals for CIMB include the IPO of Petronas Chemical (c.RM12.8bn) and financing for the RM40bn MRT project. We expect more upside in underwriting commission, corporate advisory and placement fees, and raised FY10-12F earnings by 3-4% to reflect higher non-interest income.

'CIMB is well-capitalized at 14% Tier-1 CAR and 15% RWCAR, and would not need to raise additional equity to comply with Basel III rules at this juncture. This gives leeway to CIMB to consider a higher dividend payout than the current 18.5 sen (31% payout). Our sensitivity analysis shows that for every 10% increase in payout, Tier-1 and RWCAR would fall by 20 bps but ROE would rise by 20 bps,' it said.