PETGAS - Petronas Gas gets LNG regasification plant

Stock Name: PETGAS
Company Name: PETRONAS GAS BHD
Research House: OSK

Petronas Gas Bhd
(Dec 2, RM11.40)
Maintain buy at RM11.14 with revised target price of RM13.65 (from RM13.50): Petronas Gas (PTG) has signed a Heads of Agreement (HoA) with Petroliam Nasional Bhd (Petronas) for the development and provision of liquefied natural gas (LNG) facilities and services in the vicinity of Sungai Udang Port, Melaka. The facilities will include two floating and storage units to receive and store LNG, an island jetty and regasification units and pipelines to transport the LNG to the peninsular gas utilisation (PGU) network. The regasification plant will have a maximum capacity of 3.8 million tonnes per annum and be completed by July 2012. The terms of operation will be spelled out in a regasification services agreement (RSA) expected to be signed by March 2011.

While we had known the LNG plant would be built, it was previously not known who would get to operate it, given the track record of previous large gas projects such as the Sabah Sarawak Gas Pipeline (SSGP) where Petronas Carigali is the owner rather than PTG. With this HoA, PTG will now act as the plant's owner and operator. We expect the RSA to contain revenue terms comprising a fixed component to allow for the recouping of capex and a volume-driven component to maximise PTG's service levels. We understand that the capex involved will be about RM1 billion and the EPCC contract will be tendered out. The exact revenue drivers will only be unveiled with the RSA signing. Note that this plant will resolve the problem of gas supply constraints in Peninsular Malaysia and allow the possible extension of first generation power purchase agreements as well as increase the supply of gas for non-power users such as the rubber glove makers.

We had already built in RM1 billion of capex for this plant as well as RM1 billion for the refurbishment and rehabilitation of gas processing plants 2 and 3.

We now include additional gas volume which will be transported by PTG through the PGU in FY13 and FY14. As two million tonnes of LNG are roughly equivalent to 250mmscfd of sales gas, we are conservatively assuming 89mmscfd additional gas from LNG for FY13 and 211mmscfd for FY14. This will boost PTG's gas transport revenue. We are not building in any additional revenue from regasification pending the RSA terms.

Our FY14 net profit forecast is raised by 2% although this should eventually be higher with the potential regasification revenue. Our discounted cash flow-based fair value is raised to RM13.65 and we are becoming increasingly more positive on PTG's longer-term growth prospects with this plant. ' OSK Investment Research, Dec 2


This article appeared in The Edge Financial Daily, December 3, 2010.

DIALOG - Dialog expanding into New Zealand fabrication

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

Dialog Group Bhd
(Dec 2, RM1.58)
Maintain hold at RM1.50 with fair value of RM1.32: Dialog Group Bhd has entered into a conditional agreement to acquire a 90% stake in Fitzroy Engineering Group Ltd from Peter Clayton White-Robinson for NZ$14 million (RM32 million) cash. Fitzroy's current managing director Richard Ellis will own the remaining 10% stake and White-Robinson will remain as chairman of the company. Given Dialog's net cash balance of RM191 million, the group can easily fund the proposed acquisition, expected to be completed by 1Q2011.

New Plymouth-based Fitzroy is one of New Zealand's largest heavy fabrication and multidiscipline engineering companies. It owns a large fabrication yard on 4ha of leased land, with a capacity of 2,000 tonnes and over 9,000 sq m of covered workshops in Waiwhakaiho, New Plymouth, North Island, New Zealand. The fabrication yard is linked to Port Taranaki's deepwater port by a wide-load heavy-haul transport corridor.

New Zealand's reserves are relatively small, with an annual production of 21 million barrels of oil equivalent (3% of Malaysia's 606 million BOE). The government is encouraging more exploration in the Taranaki Basin and other basins for oil and gas potential. The Taranaki Basin currently has 10 producing fields. Auctions are planned for Pegasus and the Great South Basin areas in 2011 and 2012. The rationale for the proposed acquisition is for Dialog to expand its fabrication presence into the New Zealand and Australian markets.

We are positive about the acquisition as Dialog appears to be acquiring Fitzroy at a bargain five times FY11F PER based on an annualised net profit of NZ$2 million for the six-month period ending Sept 30. But PBV is high at three times (compared with the sector's 2.4 times) based on a book value of NZ$5 million ' which is a condition precedent on completion of the acquisition.

There is currently a legal dispute over Fitzroy's offer to acquire the land on which the lease will expire within two years. But assuming the purchase price of the land at NZ$300 per sq m or NZ$12 million, the combined price tag for Fitzroy still translates to a low PER of seven times. Assuming interest rates at 7%, this acquisition could slightly enhance Dialog's FY12F earnings by 2%.

Dialog currently trades at a CY11F PER of 20 times, at a premium to the oil & gas sector's 11 times due to its defensive earnings profile. We maintain our 'hold' rating for now on Dialog with an unchanged fair value of RM1.32 based on our sum-of-parts valuation. ' AmResearch, Dec 2


This article appeared in The Edge Financial Daily, December 3, 2010.

SUNWAY - Sunway Holdings to build more factories in China?

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

Sunway Holdings Bhd
(Dec 2, RM2.28)
Maintain buy at RM2.25 with target price of RM2.60: Sunway Holdings announced on Nov 29 it entered into a memorandum of understanding (MoU) with the Jiangsu Changshu Economic Development Zone Authority to acquire two pieces of land measuring 50,000 sq m and 100,000 sq m to build factories to manufacture undercarriage parts and hoses.

Details on the MoU and the proposed project are scant at this point, but conditions appear conducive for an investment in manufacturing facilities in the vicinity. The land Sunway proposes to acquire is located within the 71 sq km Changshu Economic Development Zone (CEDZ), established in 1992. CEDZ has grown into one of the Top 10 Economic Development Zones in Jiangsu province, with US$6 billion (RM19 billion) invested by 230 foreign firms. It is easily accessible via highways and railways, with tax incentives, warehousing and transport facilities. We feel the strongest advantage of the CEDZ is its close proximity to the deepwater international port of Changshu as the group caters for a large export market. Although it will undoubtedly contribute to the group's earnings growth, we do not see this happening in the near term until the land acquisition is sorted out and construction takes place.

Sunway is our top 'buy' for the construction sector. This is premised on: (i) strong earnings growth of 86.5% in FY10: (ii) undemanding forward PER valuation of 8.8 times; (iii) more landbank acquisitions in the pipeline; and (iv) strength in securing overseas construction contracts. Although our RNAV estimate stands at RM3.61, our target price is adjusted to reflect the offer price of RM2.60 in the proposed merger of the group with sister company Sunway City Bhd. ' ECM Libra Investment Research, Dec 2


This article appeared in The Edge Financial Daily, December 3, 2010.

GLOMAC - ECM keeps 'buy' call for Glomac

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



ECM Libra has reiterated a "Buy" call for property developer, Glomac Bhd, and has raised estimates of financial year 2011 to financial year 2013 by between 0.3 per cent and 11.1 per cent after taking into account higher project launches over the next 12 months.

It said Glomac remains a buy premise on its strong three-year earnings compound annual growth rate of 24.9 per cent.

"Our earnings upgrade led to target price revision from RM1.93 to RM1.98, which are derived from historical average nine times per earnings on 2011.

"We believe Glomac has the financial capacity to grow, given its strong balance sheet with net debt/equity of just 0.12 times," it said in a research note today.

The research house said Glomac was entering into a new growth phase as it aims to launch RM1 billion worth of projects over the next 12 months, of which 60 per cent are residential and 40 per cent commercial.

Meanwhile, AmResearch said it was placing its rating and fair value on Glomac under review, pending a meeting with the management later. -- Bernama

TM - TM upgraded to 'buy' at ECM

Stock Name: TM
Company Name: TELEKOM MALAYSIA BHD
Research House: ECMLIBRA



Telekom Malaysia Bhd was raised to "buy" from "hold" at ECM Libra Capital Sdn Bhd to reflect prospects that the fixed-line operator may use the cash from selling shares in Axiata Group Bhd for a special dividend. - Bloomberg

IJM - IJM Corp cut to 'neutral' at OSK

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



IJM Corp was cut to "neutral" from "trading buy" at OSK Research Sdn Bhd following the recent surge in the Malaysian builder's stock price. -- Bloomberg

GAMUDA - Buy Gamuda at RM4.90: HwangDBS

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



HwangDBS Vickers has given a "buy" recommendation to Gamuda and raised the stock's target price to RM4.90.

"Like for MMC, we built in realistic assumptions for the RM40 billion MRT project - 50 per cent probability the MMC-Gamuda JV would clinch the RM14 billion tunneling works, " says HwangDBS.

GLOMAC - OSK Research maintains FV for Glomac at RM1.84

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

KUALA LUMPUR: OSK Research said Glomac's 1HFY11 results were spot on with its estimates and within consensus expectations when annualised.

It said on Friday, Dec 5 that after stripping out the RM4.9 million fair value gain on PROPERTIES [], its 1HFY11 turnover and core net profit improve significantly by 99% (+12% q-o-q) and 47% (+40% q-o-q) respectively on the back of higher progress billings from its high unbilled sales.

OSK Research said Glomac's latest unbilled sales stood at RM572 million (1.8 times FY10's turnover).

'Leaving our earnings forecast unchanged for now, we continue to value Glomac at RM1.84 based on 0.9 times CY11 P/NTA. Maintain BUY,' it said.

TM - OSK Research: Telekom Malaysia's valuations stretched

Stock Name: TM
Company Name: TELEKOM MALAYSIA BHD
Research House: OSK

KUALA LUMPUR: OSK Research said its fundamental view on Telekom Malaysia remains unchanged and it is retaining its NEUTRAL recommendation.

The research house said on Friday, Dec 3 that TM is trading at a stretched 20.1 times FY11 EPS, which is not justified given the structural erosion in its traditional fixed line business, competition risks in the mobile broadband segment and persistent margin pressure.

'Our target price of RM3.28 is 5% below the current share price,' it said, in its comments after TM proposed to undertake the disposal of up to 191.5 million Axiata shares which were previously issued as part of an ESOS programme, for which the options were not exercised and lapsed on Set 16.

The disposal will be carried out via a private placement executed through a book building exercise to institutional/sophisticated investors and/or in the open market.

'We are not surprised by the latest move, which is currently the talk of the investment community and consistent with its focus to monetise its non-core investments and assets. The key unknown is what management intends to do with the proceeds, which based on the last close of Axiata's shares, would work out to RM907.5 million (25 sen per TM share), giving a resultant gain on disposal of RM473 million (TM's cost of investment is RM2.27 for the 2.7% stake).

TM had said the proceeds would be used for working capital, investments and/or acquisitions, including the repayment of borrowings. TM is slated to repay a US$250 million (RM800 million) bond due by end-4Q10.

PETGAS - Petronas Gas stronger 2Q, target price raised

Stock Name: PETGAS
Company Name: PETRONAS GAS BHD
Research House: MAYBANK

Petronas Gas Bhd
(Dec 1, RM11.14)
Maintain buy at RM11.14 with revised target price of RM14.10 (from RM12.80): We raise Petronas Gas Bhd's (PetGas) discounted-cash-flow target price to RM14.10 (+10%), following a 10% rise in our earnings forecast on the revision of transport fees forecast to RM1.30/GJ (GigaJoule). Overall, we see PetGas as a major beneficiary as Malaysia liberalises its gas supply and prices. We expect sustained earnings growth as it reaps transport income from third party gas injected into the PGU network pipeline by 2014 or earlier.

Results were ahead of expectations ' 2QFY11 net profit of RM389 million (+2% quarter-on-quarter; +91% year-on-year) took 1H earnings to RM772 million (+63% y-o-y). This is 60% and 58% of our and consensus initial full-year forecasts. The flat q-o-q performance was better than expected considering that 2Q results tend to be seasonally weaker largely due to deferment of maintenance costs (estimated RM100 million to RM150 million per annum) in 2H. An interim single-tier dividend per share of 15 sen was declared, payable on Dec 15.

Throughput services were the leading contributor, contributing 90% of PetGas's gross revenue in 2Q. Contributions from gas processing and gas transportation services were almost equal, with a 48:52 mix. The utilities division reported a 6% q-o-q drop in gross profit on weaker margins (-2.5 percentage points q-o-q) despite a higher revenue (+4% q-o-q).

FY11/13 earnings were lifted by 10%, to reflect the stronger 1H results but weaker 2H (-15% half-on-half). We raise throughput services gross profit by 13% to RM1.7 billion on higher capacity reservation charge (CRC) assumptions for transport rates (from RM1.18/GJ to RM1.30/GJ). We also raise the utilities division's gross margin by 4%.

We see upside to earnings if Petronas commercialises its first regasification plant (3.8 million tonnes par annum capacity) before 2014. We have not incorporated earnings from the: (i) 60%-owned 300MW Kimanis power plant; and (ii) two 40%-owned floating storage units (FSUs) for the first regasification plant in Melaka. PetGas may co-own more than two FSUs if a second regasification plant (similar to Melaka) is built in Johor by 2020. ' Maybank-IB Research, Dec 1


This article appeared in The Edge Financial Daily, December 2, 2010.

AEON - Aeon Co's 3Q results above expectations

Stock Name: AEON
Company Name: AEON CO. (M) BHD
Research House: BIMB

Aeon Co (M) Bhd
(Dec 1, RM6.01)
Maintain buy at RM6 with revised target price of RM7.30 (from RM6.70): Aeon's revenue for the quarter rose by 1.38% year-on-year (y-o-y) to RM708.8 million thanks to: (i) the opening of new stores (Bandar Mahkota Cheras and Bandar Melaka); and (ii) higher contribution from existing stores after refurbishment.

Furthermore, net profit shot up strongly by 42% y-o-y to RM46.2 million due to lower finance cost and higher interest income (+17.6%).

On a sequential basis, Aeon's revenue and net profit increased by 1.9% and 39.4%, thanks to higher spending during school holidays and major festivals (Hari Raya Aidilfitri).

Aeon's 9MFY10 revenue and net profit came in at 5% and 56% higher y-o-y. Higher net profit growth was driven mainly by lower finance cost, higher interest income (net finance reduced by 137%) and lower operating expenses on the back of the company's continuous cost control measures to improve efficiency.
As results came in above our expectations, we are raising our FY10 and FY11 net profit forecasts by 9.5% and 9% to largely factor in lower operating and net interest expenses.

We are bullish on Aeon's future outlook as consumer sentiment remains stable (3Q10 CSI: 115.8 pts), coupled with strong economic recovery as 3Q10 GDP grew by 5.3%.

Aeon's FY10 and FY11 net profit is forecast to grow by 20.6% and 13.7% y-o-y to be supported by: (i) the opening of new stores and the refurbishment of existing stores; (i) the improvement in consumer sentiment as a leading indicator to boost consumer spending; (iii) the visibility of festive seasons such as Christmas and Chinese New Year; and (iv) the company's continuous cost control efforts to improve efficiency.

We are raising our target price on Aeon from RM6.70 to RM7.30 based on target PER of 14 times and revised FY11 EPS of 52.2 sen. As total return, including FY11 dividend yield of 3%, is at 24.8%, we are maintaining our buy call on the counter. ' BIMB Securities Research, Dec 1


This article appeared in The Edge Financial Daily, December 2, 2010.

MAXIS - Better margins for Maxis

Stock Name: MAXIS
Company Name: MAXIS BERHAD
Research House: HWANGDBS

Maxis Bhd
(Dec 1, RM5.30)
Maintain hold at RM5.29 with target price of RM5.10: Revenue in 3Q10 inched up 1% quarter-on-quarter (q-o-q) mainly supported by 8% increase in the non-voice segment (37% of group revenue) to RM809 million, which helped to cushion the lower interconnect revenue. The non-voice segment was partly driven by the 36% q-o-q growth in the wireless broadband segment (to RM106 million) on the back of stable average revenue per user (ARPU) of RM70 and 17% growth in subscriber base (to 524,000). Mobile voice revenue dipped 3% q-o-q following the reduction in termination rates and 2% to 3% q-o-q decline in postpaid and prepaid ARPUs. During the quarter, Maxis' voice subscriber base grew 4% q-o-q to 13 million (478,000 net adds).

Earnings before interest, tax, depreciation and amortisation (Ebitda) margin expanded 4.4 percentage points q-o-q to 51.4% due to lower customer acquisition costs, that is subsidies and devices to secure customers and lower interconnect rates (started in July 2010). Sales and marketing costs also dropped 7% q-o-q following lower expenses incurred on World Cup 2010 promotions.

Maxis announced its third interim net dividend per share of eight sen which translates into 2% yield. Maintain hold with discounted cash flow-based target price of RM5.10 (8% WACC; 1% terminal growth). Net yield of 6.6% should lend support to its share price. ' HwangDBS Vickers Research, Dec 1


This article appeared in The Edge Financial Daily, December 2, 2010.

SAPCRES - SapuraCrest wins new contract

Stock Name: SAPCRES
Company Name: SAPURACREST PETROLEUM BHD
Research House: RHB

SapuraCrest Petroleum Bhd
(Dec 1, RM2.80)
Maintain outperform at RM2.65 with fair value of RM3.34: Sapuracrest announced on Nov 30 its SapuraAcergy venture had won a contract from PTTEP Australasia (Ashmore Cartier) Pty Ltd (PTTEPAAA) worth US$160 million (RM506.4 million) for the provision of offshore transport and construction for PTTEPAAA's Montara Development Project in Australia. The job is expected to be executed in 2011 and should be completed within the year.

As the project is performed by SapuraAcergy which is a 50:50 joint-venture between SapuraCrest and Acergy, the earnings will be recognised as a JV contribution. Based on a 7.5% net margin assumption, the contract could reap JV earnings of RM18 million. This is the company's second win of the year. Its first win was in India for the transport and installation of platform jackets in the Mumbai High North Field project.

Things have been pretty quiet on SapuraCrest's end after winning the RM3 billion umbrella contract from Petronas. However, we take the recent contract win as a sign that the company is still committed to expanding its international contributions. The government's recent tax incentive move could potentially result in more demand for the company's self-erecting tender-assist rigs, given tender rig charter rates do not fluctuate as much as jack-up rigs, thus providing a cheaper alternative for marginal oilfield development. The stronger contract pipeline expected in 2011 for the sector will also be very positive for the company given its solid track record

Risks include: (i) rising costs of materials, labour and assets; (ii) potential margin squeeze for the installation of pipeline and facilities (IPF) division due to price competition for new contracts; and (iii) continued losses on the marine division.

No change to forecasts at this juncture. We look forward to the company's 3QFY11 results in December to reassess our earnings assumptions.

We reiterate our outperform call on the stock with an unchanged fair value of RM3.34 based on a first-month FY12 target PER of 18 times. ' RHB Research, Dec 1


This article appeared in The Edge Financial Daily, December 2, 2010.

RHBCAP - HLIB Research maintains Buy on RHB, TP at RM9.36

Stock Name: RHBCAP
Company Name: RHB CAPITAL BHD
Research House: HLG

KUALA LUMPUR: Hong Leong Investment Bank Research (HLIB Research) is maintaining its Buy call and target price of RM9.36 for RHB CAPITAL BHD [], based on Gordon Growth with returns on equity of 15.3% and WACC of 9.3%.

The research house said on Thursday, Dec 2 that the Employees Provident Fund's (EPF) undertaking to subscribe for no less than 51% remains unchanged but subject to written confirmation from the Ministry of Finance (via Bank Negara) that there is no objection for EPF to hold more than 45% of RHB Cap.

In the event the confirmation is withheld, EPF irrevocable undertakes to subscribe for a minimum of 45% of the rights issue.

EPF currently holds 53.4% in RHB Cap and is further pairing down its stake in the company via private placement (of 200 million shares or 9.3%) to meet the regulatory requirement of holding not more than 45% (40% holding block as the strategic shareholder and another 5% buffer for change in shareholding by both internal and external Fund Managers) by June 2011.

If the placement is successful, it could reduce EPF's stake to circa 44.1% or less. If the placement is not successful, and confirmation is withheld, EPF's stake will be reduced post rights issue.

"We believe the placement would be well received as valuations are still relatively lower vis-''-vis its larger peers as well as expectation of strong earnings growth ahead," it said.

ALAM - OSK Research cautions of potential provisions by Alam Maritim

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

KUALA LUMPUR: OSK Research has cautioned of potential provision for doubtful debts by Alam Maritim following its exposure to Vastalux which is currently undergoing debt restructuring.

'We are downgrading our FY10-11 earnings by 12%-18% respectively and cut the stock to a Neutral, with a lower target price of RM1,' it said on Thursday, Dec 2. The previous target price was RM1.46.

OSK Research said Vastalux had proposed a debt restructuring scheme with its creditors, one of which is Alam Maritim.

The amount owing by Vastalux to its creditors is about RM146.8 million, to be resolved through: i) new ordinary shares of Vastalux (20%); ii) redeemable cumulative unsecured loan stocks (RCULS) (50%), and iii) the balance 30% to be waived.

Alam together with the other creditors has until Friday to decide whether to accept the proposal, to re-negotiate further, or consider the amount owing as bad debts.

'We understand that management is still considering their options and no decision had been made to date. Also, we gathered that the amount owing to Alam is less than RM30 million,' said the research house.

DIALOG - OSK Research maintains TP for Dialog at RM1.47

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

KUALA LUMPUR: OSK Research is maintaining its'' target price for DIALOG GROUP BHD [] at RM1.47 based on a sum-of-parts valuation following the latest corporate development involving the acquisition of Fitzroy Engineering Group Limited (FEGL) for a total cash consideration of NZ$13.5 million (RM31.7m).

'We understand that FEGL has been generating an average net profit of about NZ$3 million (RM7 million) over the past three years. This amount is of course immaterial compared to our net profit forecast for Dialog of about RM139 million and RM149 million for FY11 and FY12 respectively.

'Given that the earnings contribution for Dialog's FY11 is immaterial as announced, we are keeping our FY11-12 earnings unchanged for now,' it said on Thursday, Dec 2.

The acquisition of FEGL to strengthen and enhance its fabrication business in the O&G and petrochemical industries. This would also enable it to penetrate into the New Zealand and Australian markets.

BSTEAD - Boustead Holdings looking forward to 2011

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

Boustead Holdings Bhd
(Nov 30, RM5.34)
Maintain buy at RM5.25 with revised target price RM5.96 (from RM6.70): Boustead Holdings reported 9MFY10 net profit that came to 61% of our full-year estimates and 62% of consensus estimates. Earnings of Boustead Naval Shipyard (BNS), in which the company owns 80%, came in below our projections. We had projected for higher recognition from the RM700 million SLEP (Service Life Extension) job this year than was actually recognised. We expected about RM100 million would be recognised this year but in 3Q only RM25 million has been recognised so far. The group notes that recognition will be higher towards the end of the five-year job and as such we revise our estimates for that.

For the 9MFY10 period, the group has seen year-on-year fresh fruit bunch (FFB) growth of 1% so far, better than the industry average decline of 1%. Higher crude palm oil average selling price (CPO ASP) in 4Q will give numbers a boost. To note, CPO ASP for the quarter was at RM2,565 per tonne compared with Malaysian Palm Oil Board average of RM2,637 per tonne.

We view that 2011 will be a better year. Besides the full-year contributions from the SLEP job, earnings from the RM1.3 billion submarine service contract will also kick in. The maiden contributions from Pharmaniaga will come in 2011 and possibly the six recently awarded vessel jobs that could be worth RM7 billion. A bonus for earnings would be a new property development project or sale of Sumatran estates. Also, CPO ASP forecast in FY11 is higher at RM2,700 compared with FY10's RM2,600. We project 28% EPS growth in FY11.

We adjust FY10 numbers down by 12.8% to reflect lower BNS earnings. FY11 is also adjusted down for BNS earnings as well as from higher interest expense following the RM600 million MTN issuance. FY12 is only adjusted for higher interest expense. With the adjustment to FY11 EPS, our target price (TP) reduces from RM6.70 to RM5.96 and with a 12% upside, we maintain our 'buy' call. To recap, our TP is derived from FY11 EPS pegging a 12 times PER (+1 standard deviation above historical average). We view this as justified as the group has managed to trade up to 14 times previously when CPO prices exceeded RM3,000 per tonne and BNS numbers were strong from the navy vessel contributions. Also, dividend payout has outperformed ours as of 3Q (27 sen payout versus our 23 sen estimate) and we are raising our full-year payout estimate to 34 sen. As such, we are expecting a 7 sen single tier final dividend in 4QFY10. ' ECM Libra Investment Research, Nov 30


This article appeared in The Edge Financial Daily, December 1, 2010.

DELLOYD - Best numbers on record for Delloyd Ventures

Stock Name: DELLOYD
Company Name: DELLOYD VENTURES BHD
Research House: OSK

Delloyd Ventures Bhd
(Nov 30, RM3.13)
Maintain buy at RM3.13 with target price RM3.90: Delloyd Ventures (DV) registered a core net profit of RM13.3 million for the quarter on the back of revenue of RM99 million, with quarter-on-quarter (q-o-q) growth of 10% and 30.7% respectively. Revenue growth was witnessed across all segments, as DV reaped the benefits from its robust Indonesian autoparts division and higher output from its plantation side, which saw earnings more than double q-o-q as we expected.

While the results were lower at the PBT level (as minority income was somewhat distorted by translation losses), representing 71% of our full-year forecast (in line with consensus nonetheless), we deem the results in line as we expect to see another uptick in earnings in 4Q in view of the uptrend in crude palm oil (CPO) prices and the delivery of its buses.

DV's margins continued to expand, with earnings before interest and tax (Ebit) margin rising to its highest level of 17% owing to significant yield improvement in its plantation division amid surging CPO prices in the past few months. However, auto margins during the period were relatively lower as the lower volume generated from its Malaysia operation affected margins, while its distribution division has become operationally profitable given the increase in number of vehicles sold.

We remain optimistic on DV's prospects and diversification into the plantation business, which have proven the naysayers wrong. DV also benefitted from the growth of its automotive autoparts segment in Indonesia,which capitalised on the robust demand for vehicles in that country, and increasing orders for its elongated buses. With our earnings unchanged, we retain our target price of RM3.90 and 'buy' call. ' OSK Investment Research, Nov 30


This article appeared in The Edge Financial Daily, December 1, 2010.

LMCEMNT - Lafarge boosted by price hikes

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

Lafarge Malayan Cement Bhd
(Nov 30, RM7.52)
Maintain hold at RM7.97 with revised fair value RM7.50 (from RM6.85): We are maintaining our 'hold' rating on Lafarge Malayan Cement Bhd with fair value raised from RM6.85 to RM7.50. This pegs the stock at a higher target PER of 14 times, along with an expected improvement in domestic cement demand in FY11F.

Lafarge posted a 9MFY10 net profit of RM215 million on the back of RM1.7 billion in sales. Its results were below expectations, coming in at only 67% of our full-year estimate and 61% of consensus.

While we had expected a stronger 3QFY10 (+20% quarter-on-quarter) on account of a full-quarter impact from the 9% domestic price hikes in May, the quantum of growth was still below our expectations.

Lafarge's 9MFY10 revenue slipped 8% year-on-year (y-o-y) to RM1.7 billion. This was largely due to muted domestic demand, exacerbated by weak US dollar-denominated export sales.

Its bottom line fell by a steeper 27% y-o-y due to a lumpy one-off plant/repair cost incurred in 1QFY10 and escalating input cost (coal). Its Singapore-based ready-mixed associates incurred losses of RM5.3 million in the period (3QFY10: RM1.8 million). Not surprisingly, group earnings before interest and taxes (Ebit) margin shrank to 19% from 21.3% a year earlier.

We have tweaked downwards our FY10 net profit forecast by 0.8%, as we lower our domestic demand growth assumption from 3% to 2%.

On the flip side, we expect domestic cement demand to pick up in FY11 as the rollout of domestic infrastructure projects starts to gain traction. Amid narrowing rebates, we have raised our FY11F/12F net profit by 2% and 3.3% respectively.

We are inclined to maintain our 'hold' rating on Lafarge. We believe the stock has already priced in most (year-to-date: +26%) of the positive news flow at current forward FY10F/11F PERs of 15'' to 21 times.

For exposure to the building materials play, we prefer the steel and aluminium companies for their more compelling earnings growth trajectory and cheaper valuations. Our top picks within this space are Ann Joo Resources Bhd, Lion Industries Bhd and Press Metal Bhd.

Lafarge remains attractive from a dividend standpoint. The group paid a third single-tier interim dividend per share (DPS) of eight sen during the quarter ' or 24 sen per share for 9MFY10 (9MFY09: 15 sen). Our current DPS forecast implies yields of 4% to 5% over the next three years. ' AmResearch, Nov 30


This article appeared in The Edge Financial Daily, December 1, 2010.

KLK - Early Yuletide cheer for KLK

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

Kuala Lumpur Kepong Bhd
(Nov 30, RM20.22)
Maintain trading buy at RM19.98 with revised target price RM22.84 (from RM20.20): KL Kepong's 9MFY10 net profit met expectations, squeaking 2% past our forecast and 5% past consensus forecasts. The better performance came from higher investment income and retail profit. A final single-tier dividend of 45 sen was declared, bringing the full-year net dividend to 60 sen, above our forecast of 50 sen.

We are raising our FY11/12 EPS forecasts by 2% to 6% for higher retail profit and rubber prices. Our sum-of-parts-based target price increases from RM20.20 to RM22.84 as we apply a higher price-to-book ratio to its property and retail divisions due to rising land values and Crabtree & Evelyn's improved performance.

KLK remains a 'trading buy' and our top pick among the Malaysian planters as we are positive on crude palm oil (CPO) price and fresh fruit bunch (FFB) output growth prospects for KLK. Potential catalysts include higher CPO prices and potential M&A.

In fourth quarter (4Q), the group recorded a higher write-back of RM76 million relating to its investment in Yule Catto. However, this was partially offset by the impairment of some manufacturing assets. The retail division, represented by Crabtree, posted lower losses due to successful restructuring aimed at reducing operating costs. The effective tax rate was also marginally lower than expected due to tax allowances.

In 4Q, net profit grew 28% year-on-year (y-o-y) due to higher contributions from all divisions except manufacturing. Plantation profit rose 19% y-o-y as a result of higher production (+5% y-o-y) and better selling prices for its palm products and rubber.

Losses from the retail division narrowed due to successful efforts to cut costs for its overseas operations. Manufacturing earnings slumped 52% y-o-y because of lower profit margins from its oloechemical division and impairment of assets in a non-oleochem ical subsidiary. For the full-year, the group posted a 65% jump in its net profit, thanks to better performances from all its divisions plus a higher write-back of the allowance for diminution in the value of investments.

We expect the group to record earnings growth of 13% in 2011, driven by: (i) increased FFB output due to higher yields from its young estates and new mature areas; (ii) stronger earnings from its manufacturing division due to increased capacity and improved demand for oleochemical products; and (iii) higher earnings contribution from its retail division following a successful restructuring. ' CIMB Research, Nov 30


This article appeared in The Edge Financial Daily, December 1, 2010.

JCY - JCY at fresh low since listing as results disappoint, downgrade

Stock Name: JCY
Company Name: JCY INTERNATIONAL BERHAD
Research House: CIMB

KUALA LUMPUR: JCY International Bhd's shares fell to their lowest since listing after the hard-disk drive manufacturer posted fourth quarter losses and was downgraded by analysts.

At 4.06pm, it was down 5.5 sen to 84 sen with 15.6 million shares done on Wednesday, Dec 1.

CIMB Equities Research had downgraded JCY to Underperformwith a target price of 92 sen after it slipped into the red in 4QFY10 with a net loss of RM22 million (RM73.5m profit in 4QFY09), which took FY10 net profit to RM176 million (-15% yoy), 33% below consensus and our forecast.

The negative surprises were lower-than-expected sales and a more severe margin erosion arising from the weaker US$ and higher costs.

'We slash our FY11-12 EPS estimates by 20-28%. In view of the murky near-term outlook and P/E compression for HDD suppliers, we cut our target P/E from 12x CY11 to 8x CY12, in line with the industry average. This reduces our target price from RM1.88 to 92 sen.

'We downgrade the stock from Outperform to UNDERPERFORM as the stock could be de-rated by these poor results. Although we remain positive on its long-term prospects, we believe a better time to revisit the stock would be 2H11,' it said.

WASEONG - OSK Research: Wah Seong results below consensus

Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Research House: OSK

KUALA LUMPUR: OSK Research said Wah Seong Corp Bhd's 9MFY10 results were below consensus and its estimates, making up 39% and 37% of consensus and its FY10 forecasts respectively.

The research house said on Wednesday, Dec 1 the continuously poor performance was mainly due to delay in the commencement of the Gorgon pipe coating project by about two months due to changes in specifications.

th'However, we have reduced the target price for Wah Seong to RM2 (previously RM2.40) based on the existing PER of 14 times on FY11 earnings following our FY11 earnings downgrade. We believe the company is still supported by an orderbook of more than RM1 billion,' it said.

''

WASEONG - Wah Seong cut to 'sell' at AmResearch

Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Research House: AMMB



Wah Seong Corp, a Malaysian pipe-coating company, was cut to "sell" from "hold" at AmResearch Sdn Bhd to reflect its weak earnings outlook after third-quarter net income slid 60 per cent from a year earlier.

The stock's fair value was reduced to RM1.80 from RM2.20, Alex Goh, an analyst at AmResearch, said in a report today. -- Bloomberg

MAXIS - OSK Research maintains Maxis TP at RM5.40

Stock Name: MAXIS
Company Name: MAXIS BERHAD
Research House: OSK

KUALA LUMPUR: OSK Research is maintaining its target price of RM5.40 for Maxis Bhd with limited upside seen from the last traded price of RM5.29.

The research house said on Wednesday, Dec 1 Maxis reported flattish 3QFY10 and FY10 core earnings y-o-y of RM613 million and RM1.7 billion respectively. Core 9MFY10 earnings, when annualised, were 5% to 6% below its and consensus forecast.

'Backing off the interconnect revenue loss, we estimate Maxis' underlying mobile revenue grew some 2.2% q-o-q, reflecting the contraction in voice revenue but upheld by strong data revenue growth. This is on par with the normalised q-o-q growth witnessed by both Celcom and Digi of 2%-3.5%. An expected eight sen/share quarterly DPS has been declared, payable on Dec 30. (YTD DPS : 24 sen/share),' it said.

OSK Research said Maxis' 3QFY10 results reflected sharply lower World Cup related costs and falling interconnection costs, which brought its 9MFY10 numbers broadly in line with consensus and our forecasts.

The research house said Maxis was not spared the systemic weakness in industry voice revenue, with topline growth trickling down to 1.1% q-o-q in 3Q10. The key positive was the mobile broadband segment, where revenue more than doubled y-o-y.

'We are retaining our forecast and expect some pressure on margins in 4Q10 from the iPhone 4 launch and pick-up in year-end acquisitions. NEUTRAL,' it said.

ALAM - Weak results at Alam Maritim, but pipelay barge could re-rate stock

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

Alam Maritim Resources Bhd
(Nov 29, RM1.09)
Maintain buy at RM1.09 with revised fair value of RM1.31: We reaffirm our 'buy' rating on Alam Maritim, but with a lower fair value of RM1.31, pegging its FY11F earnings to a PER of 15 times its three-year historical average.

Alam's 3QFY10 earnings came in at RM9 million, bringing its 9MFY10 earnings to RM47 million ' a decline of 39% year-on-year (y-o-y) on the back of a 21% drop in revenue.

The main reason for the underperformance is non-renewal of its underwater services order book. Alam is recognising current contracts which are at the tail end.

The focus now will be on consolidating this unit with a recently launched pipelay barge ' a JV with Swiber. Alam has three or four idle vessels awaiting new tenders.

We are cutting our estimates for FY10F/12F by 42% to 45% to RM61 million to RM79 million due to a weaker contribution from both the underwater services and vessel chartering divisions.

Demand for vessels in our waters will be anchored by the 21 vessels Petronas Carigali will require. Recall, 14 vessels needed next year are for deepwater works, boding well for Alam which expects delivery of two DP2 deepwater anchor handling vessels by end-this year.

Apart from Petronas Carigali's requirements, there are few others in the market: (i) rejuvenation works for Petroliam Nasional Bhd (Petronas); (ii) enhanced oil recovery services and so on; and (iii) demand from other PSCs such as Shell and ExxonMobil

With the pipelay barge ready, Alam's target is to be involved in shallow-water pipelaying works in Malaysia ' part of SapuraCrest Petroleum Bhd's 'umbrella contract'.

We believe there is a strong chance for Alam to get some slices of the available jobs because: (i) favourable demand/supply dynamics of this vessel; and (ii) the availability of the underwater unit is an added advantage over competitors.

Concerns over vessel ownership issues have been abated with the recent release of its two vessels ' Setia Ulung and Setia Aman.
Management believes the incidents were one-off and will not recur.

Alam is currently trading at a PER of 13 ' a 13% discount to its historical average of 15 times.

We believe this can be explained by: (i) concerns over litigation issues which saw its two vessels impounded but since released; and (ii) lack of news flow on new contracts. ' AmResearch, Nov 29

ANNJOO - Domestic demand emerging at Ann Joo

Stock Name: ANNJOO
Company Name: ANN JOO RESOURCES BHD
Research House: MAYBANK

Ann Joo Resources Bhd
(Nov 29, RM2.79)
Maintain buy at RM2.86 with target price of RM3.05: Ann Joo Resources' 9MFY10 net profit of RM123 million made up 69% of our and consensus' full-year forecast.

We consider this to be within our expectations as Ann Joo is likely to report a rebound in earnings in 4QFY10 on higher sales volume and better average selling prices (ASPs).

We remain positive on Ann Joo given our expectation of a domestic demand rebound in 2011/12. We maintain 'buy', with an unchanged RM3.05 target price (11 times fully diluted 2011 PER).

Key takeaways from 3QFY10 results: (i) Net profit fell to RM10 million (-77% year-on-year, -85% quarter-on-quarter) on lower manufacturing sales volume of 126,000 tonnes (-21% y-o-y, -45% q-o-q) as management held back sales to the export market in view of weak ASPs. Export sales tonnage fell substantially by 86% q-o-q and only accounted for 13% of total sales volume (2Q10: 50%); (ii) Group earnings before interest and tax (Ebit) margin dropped to 5.7% (-8.2 percentage points y-o-y, -8 percentage points q-o-q) on weak steel ASPs of estimated US$560 per tonne (-10% q-o-q) and higher scrap inventory; and (iii) Net gearing increased to 1.2 times (June 2010: 1 time) due to higher utilisation of trade facilities as inventory level rose to RM1.2 billion (+21% q-o-q).

We understand that domestic steel demand is edging up slowly, driven by the recently awarded KLIA2 project.

Ann Joo has also resumed exports since October, with 20,000 tonnes transacted, and is in the processof concluding another 20,000 tonnes of sales (against 16,000 tonnes in 3QFY10).

We are also encouraged that steel demand in China remains firm, as evident from the rising steel ASPs of US$680 per tonne in China (around 6% premium to our local steel ASPs).

We anticipate earnings to rebound in 4QFY10 owing to restocking activities and better ASPs.

Additionally, Ann Joo's mini blast furnace (+30% billet capacity by January 2011), in the final stage of construction of the auxiliary facilities (underground pipe-laying), will help the company to save costs (lower energy and scrap usage) and catch the domestic steel recovery in 2011/12.

We maintain our earnings forecasts, rating and target price. ' Maybank IB Research, Nov 29


This article appeared in The Edge Financial Daily, November 30, 2010.

SIME - A noteworthy recovery at Sime Darby

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

Sime Darby Bhd
(Nov 29, RMxx)
Upgrade to buy with revised target price RM10.20 (from RM9): Sime Darby reported 1QFY11 earnings of RM654.7 million (-4% year-on-year; reversing from 4QFY10 loss) ' in line with our forecast on an annualised basis. Top line grew 14% to RM8.78 billion, driven by the motor, property, industrial, and utilities segments, thanks to robust demand for the group's products.

However, earnings before intrest and tax (Ebit) was affected by weaker plantations performance (due to lower volumes) and losses in engineering (due to a lack of new projects). We understand that Sime is currently bidding for three new fabrication projects. No dividends were declared for 1QFY11.

The group's oil palm harvesting in Indonesia suffered a one-off setback in 1QFY11 due to flooding in South Kalimantan, which has since receded.

Fresh fruit bunch (FFB) harvesting in Indonesia is on track to recover in subsequent quarters. However, Malaysian FFB yield will fall behind our initial expectations as the lagged impact brought on by the drought in early CY10 is worse than expected.

We reduce FY11F/13F plantations Ebit by 8% to 15% on cuts in overall yields. However, the motor segment Ebit contribution is raised by 65% to 67%, industrial (8% to 9%) and property (7%). Hence, CY11F/13F earnings are raised by 2% to 6% and target price lifted by 13% to RM10.20 (based on sum-of-parts).

Recovery in most of the group's businesses has exceeded our expectations.

We believe Sime deserves a second look as the current earnings growth momentum still has legs and the shares offer a 17% potential upside to our RM10.20 target price. ' HwangDBS-Vickers Research, Nov 29


This article appeared in The Edge Financial Daily, November 30, 2010.

TM - TM books maiden contribution from Unifi in 3QFY10

Stock Name: TM
Company Name: TELEKOM MALAYSIA BHD
Research House: ECMLIBRA

Telekom Malaysia Bhd
(Nov 29, RM3.39)
Maintain hold at RM3.35 with target price of RM3.54: Telekom Malaysia's 9MFY10 core net profit of RM324.5 million is in line with our expectations but below consensus, making up of 76.8% and 59.7% of full-year estimates respectively.

Despite launching Unifi in March, TM only started to bill its early customers in July, which explains the quarter-on-quarter (q-o-q) improvements in earnings before interest, tax, depreciation and amortisation (Ebitda) margins from 32% to 33.8%. TM also benefitted from lower outpayment cost from paying out lower interconnect rate of 5.0 sen/minute (from 8.5 sen per minute previously), although this was offset by content costs from its IPTV business.

Currently, TM has 21,000 Unifi subscribers, with another 8,000 firm orders. Positively, 30% of these subscribers are new TM customers, which is quite a high percentage. Management guided that as Unifi's coverage area improves, the take-up rate will also increase accordingly. It expects a 20% to 30% Unifi subscriber compound annual growth rate (CAGR) over the next two years. The year 2011 will be a ramp-up year for Unifi, while 2012 will see significant revenue contribution from Unifi.

For now, TM plans to stick to its dividend policy of paying RM700 million or 90% of net profit, whichever is higher. Any changes in its dividend policy will only be considered after the announcement of its last quarter results. During the quarter, TM received RM252.1 million in proceeds and booked RM141.7 million of gain from the disposal of its 60 million shares in Measat. This has helped to boost its cash pile to RM3.80 billion (from RM3.60 billion in 2QFY10). Net gearing has fallen to 0.34 time, from 0.40 time in 2QFY10. It still has 193 million Axiata shares which it has yet to monetise.

We maintain our 'hold' call with target price of RM3.54 using an unchanged dividend discount model (LT growth rate: 1.5%, WACC: 7%). ' ECM Libra Investment Research Nov 29


This article appeared in The Edge Financial Daily, November 30, 2010.

KINSTEL - Kinsteel's target price cut by OSK

Stock Name: KINSTEL
Company Name: KINSTEEL BHD
Research House: OSK



OSK says the surprise loss at Kinsteel's downstream operations and worse than expected loss from 37 per cent -owned Perwaja again let them down.

The loss was mainly attributed to the wide mismatch between higher raw materials costs vis-���-vis lower selling prices of steel products, OSK added.

As OSK expect the quantum of improvement anticipated for fourth quarter to be rather limited

It thus cuts estimates by 65.5 per cent for financial year 2010 and 13.2 per cent for financial year 2011. This translate into a lower target price of RM0.83 - Reuters

BSTEAD - HDBSVR: High conviction Buy on Boustead

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

KUALA LUMPUR: Hwang DBS Vickers Research has a high conviction Buy on BOUSTEAD HOLDINGS BHD [] as the major rerating catalyst is in property.

The research house said on Tuesday, Nov 30 that Lembaga Tabung Angkatan Tentera (LTAT) is finalising two lucrative government land deals ' (i) 60 acres of Jalan Cochrane land, and (ii) 245-acre Batu Cantonment army base in Jalan Ipoh.

'We estimate these projects could add RM2.05/share, raising our SOP value to RM10.35. This excludes its recent rights to reclaim valuable land in Penang.

'The recent RM1bn MTN program suggests these land deals are imminent. Valuations remain a bargain at 8x FY11F PE and 1.1x P/NTA, coupled with 6.0% yield,' it said.

LITRAK - OSK keeps 'buy' call on Litrak

Stock Name: LITRAK
Company Name: LINGKARAN TRANS KOTA HOLDINGS
Research House: OSK



According to OSK, Litrak's first half earnings of RM57 million made up 56 per cent of the full-year estimates and this is in line given expectations of higher losses at SPRINT in the second against the first half.

Although no dividend was declared, OSK expects a full year amount of 18 sen, thus implying a 5.1 per cent yield.

OSK maintains a 'buy' call on the company with a higher target price of RM4.22, given the possibility of investors switching from PLUS to Litrak, as the former may soon be privatised. - Reuters

KLK - KL Kepong downgraded to 'hold'

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



Kuala Lumpur Kepong Bhd, a Malaysian palm oil producer, was downgraded to 'hold' from 'buy' at HwangDBS Vickers Research Sdn Bhd on the stock's limited upside.

The share price estimate was unchanged at RM21.00, HwangDBS wrote in a report today.

Kuala Lumpur Kepong Bhd, a Malaysian palm oil producer, rose the most in three weeks in Kuala Lumpur trading after announcing a 28 per cent gain in fourth-quarter net income.

Its shares climbed 1.1 per cent to RM20.20 at 9:05 a.m. local time, set for their biggest gain since Nov. 8. -- Bloomberg

RHBCAP - RHBCap a 'buy', says HwangDBS

Stock Name: RHBCAP
Company Name: RHB CAPITAL BHD
Research House: HWANGDBS



RHB Capital's (RHBCap) 15 per cent loan growth as at September 10 has met HwangDBS' financial year 2010 forecast.

Given the solid loan growth and lower provisions, it raised financial year 2010-2011(forecast) loan growth to 15-18 per cent from 12-15 per cent, HwangDBS said.

Our target price of RM10 assumes 5 per cent long term growth rate, 10.5 per cent cost of equity, and 16 per cent return on equity.

RHB Cap remains one of the cheapest large cap banks in Malaysia. - Reuters

PCHEM - OSK Research downgrades Petronas Chemicals to Neutral

Stock Name: PCHEM
Company Name: PETRONAS CHEMICALS GROUP BHD
Research House: OSK

KUALA LUMPUR: OSK Research said Petronas Chemicals Group Bhd's 1HFY11 results were within expectations.

It said on Tuesday, Nov 30 that overall, the numbers showed a year-to-date improvement, attributed to higher realised prices on increasing demand and higher volume sold following an improvement in plant utilisation.

'Nevertheless, we are downgrading our call from Subscribe to Neutral given that the share price has rallied and is nearing our target price of RM5.51, from its IPO price of RM5.20,' it said.

The institutional price was RM5.20 and for retailers, it was RM5.04.

PERWAJA - OSK Research slashes estimates for Perwaja after losses

Stock Name: PERWAJA
Company Name: PERWAJA HOLDINGS BERHAD
Research House: OSK

KUALA LUMPUR: OSK Research said it was once again disappointed with Perwaja's deeper than expected losses in 3Q due to the mismatch between expensive iron ore pellets and lower selling prices of billets and Direct Reduced Iron (DRI).

It said on Tuesday, Nov 30 that although it could see a ray of light in 4Q, it still expect limited profit as the prolonged high premium on pellets may squeeze the margins of DRI and indirectly, billets.

'We are slashing our estimates for the next two years by a hefty 96.7% for FY10 and 34% for FY11. The new earnings translate into a lower target price of 97 sen, which implies limited downside. We remain NEUTRAL on Perwaja,' it said.

QSR - CIMB Research downgrades QSR to Neutral

Stock Name: QSR
Company Name: QSR BRANDS BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research has downgraded QSR Brands to NEUTRAL.

The research house said on Tuesday, Nov 30, it likes QSR even without the takeover angle. As at end-September, the same-store sales growth was encouraging at 5% for Pizza Hut and 3% for KFC.

Also, average ticket prices remained at all-time highs of RM40 for Pizza Hut and RM20 for KFC for the second consecutive quarter in 2Q.

'However, the takeover offers have whipped up investor interest, sending QSR's share price to a record RM6.29 on Monday, which offers limited upside to our target price. We, therefore, downgrade our recommendation from outperform to NEUTRAL,' it said.

CIMB Research said this was its first downgrade since it became the first research house to initiate coverage on QSR at RM3.30 on Nov 20, 2007.

'Our EPS forecasts and target price of RM6.50, which factors in a 10% discount to the average valuation of bigger F&B producers, are intact. YTD, the share prices of QSR and KFCH have soared 89% and 113%, outperforming the FBM KLCI by 72% and 95%, respectively.

'Our top F&B pick is now CI Holdings, which is the exclusive franchise holder for Pepsi in Malaysia,' it said.

BPURI - Bina Puri's earnings forecast revised up

Stock Name: BPURI
Company Name: BINA PURI HOLDINGS BHD
Research House: KENANGA



KENANGA Research has revised upward the earnings forecast of Bina Puri Holdings by five per cent for the financial year 2011 after imputing the amount of contract to be recognised.

Kenanga Research in a statement Monday said it has maintained a "buy" recommendation on the company's shares but placed a higher target price of RM1.92 from RM1.79 previously.

The research company also forecast Bina Puri to record a RM33 million net profit for the financial year 2012, reflective of a higher recognition of two significant projects, the Low Cost Carrier Terminal (LCCT) and Light Rail Transit (LRT) contracts with a two per cent net margin assumption.

It added, media reports of a joint venture company between Bina Puri and Tim Sekata Sdn Bhd having been appointed the contractor for phase one of the LRT Ampang extension from Sri Petaling to Putra Heights, bodes well for the company's earnings for financial year 2011.

It also added, the RM635 million LRT project as well as a RM68 million contract to fabricate and deliver the segmental box girder, will add some earnings visibility for the next two and a half years.

This Kenanga Research explained, will contribute to the bottomline, mainly in financial year 2011 and 2012. - BERNAMA

SUNRISE - ECM revises Sunrise rating to 'hold'

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



ECM Libra has revised Sunrise Bhd recommendation to "hold" from "buy" but maintained the target price at RM2.80 per share following UEM Land Holdings' takeover offer to acquire all the company's equity last week.

It said UEM Land offer price of RM2.80 has increased the company's share price by 8.3 per cent to RM2.73, close to the offer price.

While Sunrise's revised net asset value is estimated to be at RM3.46 per share, near term upside is expected to be capped by the offer price, it said in a research note.

Prior to the acquisition, ECM Libra said UEM land did not intend to maintain the listing status of Sunrise if the company did not fulfil the minimum public shareholding spread as a result of the takeover offer. - Bernama

TM - ECM keeps 'hold' call on TM

Stock Name: TM
Company Name: TELEKOM MALAYSIA BHD
Research House: ECMLIBRA



ECM Libra Investment Research is maintaining its "hold" call on Telekom Malaysia (TM) with an unchanged target price of RM3.54.

In its research note here today, it said TM's nine-month financial year 2010 core net profit of RM324.5 million, was in-line with its expectations but below consensus expectation.

The research house projected TM's Unifi subscribers growth at 20-30 per cent Compound Annual Growth Rate (CAGR)over the next two years.

"2011 will be a ramp-up year for Unifi, while 2012 will see significant revenue contribution from Unifi," it added.

ECM said, TM plans to stick to its dividend policy of paying RM700 million or 90 per cent of net profits, whichever is higher.

"Any changes in its dividend policy will only be considered after the announcement of its last quarter result," it added.

Meanwhile, AmResearch said it is maintaining a "buy" call on TM with a fair value of RM3.90.

The research house said, TM made RM446.6 million in the third quarter financial year 2010, against RM497 million of its full-year estimate.

"We were hoping that the second half 2010 would be able to register a better performance due to the festive season," it added.

It said, against the last quarter, there was an expected reduction in revenue from voice business, by 2.2 per cent, which may have been caused by the bundle packages.

"The implication of which is, as more subscribers upgrade to bundle packages, the contribution from voice business would decline in tandem," it added. -- Bernama

EONCAP - 'EONCap takeover likely to proceed'

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



AmResearch Sdn Bhd is maintaining its view that the EON Capital Bhd (EONCap) takeover by Hong Leong Bank Bhd (HLBB) will likely proceed.

The fair value for EON Cap remains at RM7.30 per share, it said in its research note today.

HLBB and EON Cap have announced that HLBB had extended the deadline for EON Cap to accept its offer to acquire the latter's entire assets and liabilities to April 30 next year from Nov 30, 2010.

AmResearch said, there is no surprise, as it had been widely expected following news that the High Court had provided further dates for the hearing of Primus (M) Sdn Bhd''s first petition, which stretches to March next year.

This is in relation to the petition filed by Primus, EON Cap's major shareholder, essentially on grounds that selected directors had neither performed their fiduciary duties nor acted in the best interest of the company.

Primus also felt the proposed takeover is not structured in the best interest of shareholders.

"We still think that EON Cap's acceptance is pending, only on one main condition, which is the outcome of the lawsuit.

"This is because we consider EON Cap to have fulfilled most of the conditions set by HLBB in order to comply with the latter's Nov 30, 2010 timeline," AmResearch said. -- Bernama

SUNWAY - ECM maintains 'buy' call on Sunway

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



The earnings estimate of Sunway Holdings Bhd has been revised upward by 1.1 per cent for the financial year 2012, taking into account the contributions to be generated by the Tampines development, says ECM Libra Investment Research.

Last week, Sunway Holdings in filing with Bursa Malaysia said the Housing and Development Board of Singapore had awarded the tender for a parcel of land in Tampines Avenue 8 on a 99-year lease term at S$187.59 million or about RM450 million.

The tender was jointly submitted by Hoi Hup Realty Pte Lt, SC Wong Holdings Pte Ltd and Sunway Developments Pte Ltd, a wholly-owned subsidiary of the group.

"We are positive about the project as the group has significant experience in the Singaporean property market, having launched three projects since 2008.

"Another private housing development located in Yishun is slated for launch in the second half of next year," ECM Libra said in a research note today.

The research firm said the group's Singaporean projects have thus far registered strong sales.

ECM Libra said Sunway remains its top "buy" for the construction sector.

This is premised on a strong earnings growth of 86.5 per cent in this financial year, more landbank acquisitions in the pipeline and strength in securing overseas construction contracts, the research firm said. -- Bernama

ANNJOO - AmResearch cuts Ann Joo's fair value

Stock Name: ANNJOO
Company Name: ANN JOO RESOURCES BHD
Research House: AMMB



AmResearch Sdn Bhd is projecting Ann Joo Resources Bhd's net profit for the financial year 2011 to expand by 59 per cent year-on-year to RM244 million.

This is largely backed by maiden contributions from its new blast furnace amid an imminent steel price upcycle, it said in its research note today.

AmResearch has maintained a "buy" call on Ann Joo with a lower fair value of RM4.02 per share from RM4.20 previously.

Ann Joo recorded a nine months financial year 2010 net profit of RM123 million against RM9 million a year earlier.

"While we expect a better performance in the fourth quarter financial year 2010, we have clipped the financial year 2010 net profit forecast by 13 per cent to RM154 million to account for some slight hiccups in the roll-out of its new blast furnace.

"But, hot commissioning works, are still on track to kick off by end of this year. More than 90 per cent of the plants' equipment/structures have been installed," AmResearch said.

Ann Joo is seeing an imminent upswing in steel prices in the fourth quarter financial year 2010 given low global inventories. It also revealed that export enquiries have resumed since two weeks ago.

With its steel-making unit running at full capacity, AmResearch said Ann Joo is also well positioned to benefit from a revitalisation of domestic steel demand in fourth quarter financial year 2010. -- Bernama

ANNJOO - OSK Research ups Ann Joo TP to RM2.76

Stock Name: ANNJOO
Company Name: ANN JOO RESOURCES BHD
Research House: OSK

KUALA LUMPUR: OSK Research said Ann Joo's 3Q net profit plummeted to RM10.4 million but this was well within its estimates.

In its research note issued on Monday, Nov 29, it said the poor numbers were attributed to lower steel prices and demand, which were further worsened by escalating material costs.

'While we see an improvement in 4Q, we think the recovery may be limited. Compounded by another delay in commissioning its blast furnace and the lack of major earnings surprises, the stock's expensive valuation versus its peers warrant no change in our NEUTRAL recommendation, with its target price revised up slightly to RM2.76 on rolling over its valuation to FY11,' it said.

OSK Research pervious target price was RM2.64 while the last traded price was RM2.86.

TM - OSK Research keeps Telekom target price unch at RM3.28

Stock Name: TM
Company Name: TELEKOM MALAYSIA BHD
Research House: OSK

KUALA LUMPUR: OSK Research said Telekom Malaysia's annualised 9MFY10 core earnings were in line with its but below consensus estimates.

The research house on Monday, Nov 29 there were no surprises in that its fixed line (DEL) business continued to languish with the internet and data segments providing the silver lining.

'We make no change to our forecast noting that Unifi will be dilutive to earnings over the medium term. TM is expensive on PER terms and lacks share price catalysts," it said.

OSK Research said however TM's decent dividend yield of 7.8% should mitigate any share price downside. Our TP is unchanged at RM3.28.

'We prefer DiGi for dividend exposure,' it said.

SIME - AmResearch maintains Buy on Sime Darby, FV RM9.90

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

KUALA LUMPUR: AmResearch reiterates its BUY call on SIME DARBY BHD [] but lowered its earnings expectations.

The research house said on Monday, Nov 29 it had reduced its fair value from RM10.45 a share to RM9.90 a share, pegged to an unchanged 10% discount to its sum-of-parts value of RM10.98 a share.

'Our fair value implies a CY11F PE of 17 times'' - at parity to its three-year average. The group's 1QFY11 net profit of RM655 million (-4% YoY) came in below expectations, accounting for 19% of our earlier FY11F earnings of RM3.4billion and 21% of street estimate's RM3.1 billion,' it said.

AmResearch said this largely stemmed from the lower-than-expected earnings rebound from higher crude palm oil prices. The stock currently trades at an attractive CY11F PE of 15 times, below its three-year average of 17 times.

SIME - Sime upgraded to 'buy' at HwangDBS

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



Sime Darby Bhd, the world's biggest publicly traded palm oil producer, was upgraded to "buy" from "hold" at HwangDBS Vickers Research Sdn Bhd, after recovery in most of the group's businesses exceeded expectations.

"We believe Sime deserves a second look as current earnings growth momentum still has legs," HwangDBS said in a report today.

The share price estimate was raised to RM10.20 from RM9.00. - Bloomberg