Stock Name: TA
Company Name: TA ENTERPRISE BHD
Company Name: TA ENTERPRISE BHD
| Research House: NETRESEARCH | Price Call: HOLD | Target Price: 0.60 |
December 30, 2011
BERJAYA CORPORATION BERHAD - 2QFY12 RESULTS - BUMPY ROAD AHEAD
Stock Name: BJCORP
Company Name: BERJAYA CORPORATION BHD
Company Name: BERJAYA CORPORATION BHD
| Research House: CIMB | Price Call: HOLD | Target Price: 1.00 |
Affin Research lowers UMW fair value from RM7.90 to RM7.25
Stock Name: UMW
Company Name: UMW HOLDINGS BHD
KUALA LUMPUR (Dec 30): Affin Investment Research lowered its sum-of-parts based fair value from RM7.90 a share to RM7.25 after its earnings downgrade.
It said on Friday that at its fair value, the implied valuation of 11.8 times CY12 EPS is at parity to the stock's average five-year price-to-earnings ratio (PER).
'Whilst earnings forecasts were cut, we left our dividend forecasts unchanged. We opine our assumed dividend payout ratios of 65% for FY12 and 61% for FY13 are reasonable, predicated on dividend payouts of between 61%-66% over FY09-10,' it said.
Affin Research said at the current share price, investors can look forward to an attractive net dividend yield of 5.8% for 2012.
Company Name: UMW HOLDINGS BHD
| Research House: AFFIN | Price Call: HOLD | Target Price: 7.25 |
KUALA LUMPUR (Dec 30): Affin Investment Research lowered its sum-of-parts based fair value from RM7.90 a share to RM7.25 after its earnings downgrade.
It said on Friday that at its fair value, the implied valuation of 11.8 times CY12 EPS is at parity to the stock's average five-year price-to-earnings ratio (PER).
'Whilst earnings forecasts were cut, we left our dividend forecasts unchanged. We opine our assumed dividend payout ratios of 65% for FY12 and 61% for FY13 are reasonable, predicated on dividend payouts of between 61%-66% over FY09-10,' it said.
Affin Research said at the current share price, investors can look forward to an attractive net dividend yield of 5.8% for 2012.
December 29, 2011
Maybulk advances on rising volume despite cautious outlook
KUALA LUMPUR (Dec 29): MALAYSIAN BULK CARRIERS BHD [] (Maybulk) share price advanced in late afternoon trade on Thursday, climbing to a high of RM1.59, despite concerns about a tough 2012 environment for the dry bulk shipping industry.
At 3.57pm, Maybulk was up 13 sen to RM1.58. There were 5.09 million shares done at prices ranging from RM1.46 to RM1.59.
In a recent report, TA Securities Research said its Underweight stance on the dry bulk shipping industry remained intact as it believed the global shipping market was posed for a tough 2012.
'Indeed, Malaysian Bulk Carriers Berhad (Maybulk)'s management foresee a challenging operating environment going forward. Capacity glut and unstable operating costs, primarily due to volatile bunker costs will continue to threaten shipping line profit margins,' it said.
TA Research said the situation may be exacerbated by unusual weather conditions and natural disasters.
Due to the lacklustre industry outlook and the industry's chronically low profitability, it believed the share price appreciation potential is limited for Maybulk. It added the recurring problem in the shipping sector was still the oversized orderbook as there would be another wave of big ships coming to the industry next year.
'We reiterate our Sell recommendation on Maybulk with a target price of RM1.10 based on Sum-of-Parts valuation methodology. We believe Maybulk appears fully valued within the sector with the recent increase in share prices.
'Potential catalysts to upgrade our target price include: (i) a strong and sustained rebound in Baltic Dry Index, (ii) a faster-than-expected economic recovery; and (iii) better than expected earnings contribution from POSH (PACC Offshore Services Holdings Pte Ltd),' TA Research said.
Maybulk advances on rising volume despite cautious outlook
Stock Name: MAYBULK
Company Name: MALAYSIAN BULK CARRIERS BHD
Larger Smaller Reset KUALA LUMPUR (Dec 29): MALAYSIAN BULK CARRIERS BHD [] (Maybulk) share price advanced in late afternoon trade on Thursday, climbing to a high of RM1.59, despite concerns about a tough 2012 environment for the dry bulk shipping industry.
At 3.57pm, Maybulk was up 13 sen to RM1.58. There were 5.09 million shares done at prices ranging from RM1.46 to RM1.59.
In a recent report, TA Securities Research said its Underweight stance on the dry bulk shipping industry remained intact as it believed the global shipping market was posed for a tough 2012.
'Indeed, Malaysian Bulk Carriers Berhad (Maybulk)'s management foresee a challenging operating environment going forward. Capacity glut and unstable operating costs, primarily due to volatile bunker costs will continue to threaten shipping line profit margins,' it said.
TA Research said the situation may be exacerbated by unusual weather conditions and natural disasters.
Due to the lacklustre industry outlook and the industry's chronically low profitability, it believed the share price appreciation potential is limited for Maybulk. It added the recurring problem in the shipping sector was still the oversized orderbook as there would be another wave of big ships coming to the industry next year.
'We reiterate our Sell recommendation on Maybulk with a target price of RM1.10 based on Sum-of-Parts valuation methodology. We believe Maybulk appears fully valued within the sector with the recent increase in share prices.
'Potential catalysts to upgrade our target price include: (i) a strong and sustained rebound in Baltic Dry Index, (ii) a faster-than-expected economic recovery; and (iii) better than expected earnings contribution from POSH (PACC Offshore Services Holdings Pte Ltd),' TA Research said.
Company Name: MALAYSIAN BULK CARRIERS BHD
| Research House: TA | Price Call: SELL | Target Price: 1.10 |
Larger Smaller Reset KUALA LUMPUR (Dec 29): MALAYSIAN BULK CARRIERS BHD [] (Maybulk) share price advanced in late afternoon trade on Thursday, climbing to a high of RM1.59, despite concerns about a tough 2012 environment for the dry bulk shipping industry.
At 3.57pm, Maybulk was up 13 sen to RM1.58. There were 5.09 million shares done at prices ranging from RM1.46 to RM1.59.
In a recent report, TA Securities Research said its Underweight stance on the dry bulk shipping industry remained intact as it believed the global shipping market was posed for a tough 2012.
'Indeed, Malaysian Bulk Carriers Berhad (Maybulk)'s management foresee a challenging operating environment going forward. Capacity glut and unstable operating costs, primarily due to volatile bunker costs will continue to threaten shipping line profit margins,' it said.
TA Research said the situation may be exacerbated by unusual weather conditions and natural disasters.
Due to the lacklustre industry outlook and the industry's chronically low profitability, it believed the share price appreciation potential is limited for Maybulk. It added the recurring problem in the shipping sector was still the oversized orderbook as there would be another wave of big ships coming to the industry next year.
'We reiterate our Sell recommendation on Maybulk with a target price of RM1.10 based on Sum-of-Parts valuation methodology. We believe Maybulk appears fully valued within the sector with the recent increase in share prices.
'Potential catalysts to upgrade our target price include: (i) a strong and sustained rebound in Baltic Dry Index, (ii) a faster-than-expected economic recovery; and (iii) better than expected earnings contribution from POSH (PACC Offshore Services Holdings Pte Ltd),' TA Research said.
Alam Maritim edges up on contract from S'wak Shell
Stock Name: ALAM
Company Name: ALAM MARITIM RESOURCES BHD
KUALA LUMPUR (Dec 29): ALAM MARITIM RESOURCES BHD [] shares edged up on Thursday after its unit Alam Maritim (M) Sdn Bhd received a letter of award from Sarawak Shell Bhd for the modules offshore transportation and installation contract valued at RM29.80 million.
At 9.15am, Alam added 1.5 sen to 75.5 sen with 142,100 shares done.
The nine-month contract started the current fourth quarter and the expected date of completion was May 2012.
Affin Investment Bank Bhd Research said in a note Dec 29 said it was positive on the contract win, which was inline with management's intention to move up the O&G value chain into the transportation and installation segment.
However, the research house maintained its FY11-13 net earnings forecasts as it had imputed RM50 million of transportation and installation contract win for FY11.
'Maintain ADD on Alam Maritim with an unchanged TP of RM0.87, based on 12x CY12 earnings.
'Key re-rating catalysts are winning of long-term OSV charter contracts, award of SOGT pipelaying work and/or other major offshore installation & CONSTRUCTION [] (OIC) contracts,' it said.
''
Company Name: ALAM MARITIM RESOURCES BHD
| Research House: AFFIN | Price Call: BUY | Target Price: 0.87 |
KUALA LUMPUR (Dec 29): ALAM MARITIM RESOURCES BHD [] shares edged up on Thursday after its unit Alam Maritim (M) Sdn Bhd received a letter of award from Sarawak Shell Bhd for the modules offshore transportation and installation contract valued at RM29.80 million.
At 9.15am, Alam added 1.5 sen to 75.5 sen with 142,100 shares done.
The nine-month contract started the current fourth quarter and the expected date of completion was May 2012.
Affin Investment Bank Bhd Research said in a note Dec 29 said it was positive on the contract win, which was inline with management's intention to move up the O&G value chain into the transportation and installation segment.
However, the research house maintained its FY11-13 net earnings forecasts as it had imputed RM50 million of transportation and installation contract win for FY11.
'Maintain ADD on Alam Maritim with an unchanged TP of RM0.87, based on 12x CY12 earnings.
'Key re-rating catalysts are winning of long-term OSV charter contracts, award of SOGT pipelaying work and/or other major offshore installation & CONSTRUCTION [] (OIC) contracts,' it said.
''
Faber gains on concession extension news
Stock Name: FABER
Company Name: FABER GROUP BHD
Faber Group Bhd, a Malaysian hospital support-services provider and property group, rose the most in more than two months after the Star newspaper reported that its unit may get extension for a support-services concession from the government.
The stock gained 5.4 percent to RM1.55 at 9:45 a.m. local time in Kuala Lumpur trading, set for its steepest increase since Oct. 21. -- Bloomberg
Company Name: FABER GROUP BHD
| Research House: OSK | Price Call: TRADING BUY | Target Price: 2.24 |
Faber Group Bhd, a Malaysian hospital support-services provider and property group, rose the most in more than two months after the Star newspaper reported that its unit may get extension for a support-services concession from the government.
The stock gained 5.4 percent to RM1.55 at 9:45 a.m. local time in Kuala Lumpur trading, set for its steepest increase since Oct. 21. -- Bloomberg
'Compelling regional growth' for Maybank
Stock Name: MAYBANK
Company Name: MALAYAN BANKING BHD
The acquisition of Singapore's banking franchise, Kim Eng Holdings, and the longer-term growth potential of Bank Internasional Indonesia (BII), will set the stage for a potentially compelling regional growth for Malayan Banking Bank Bhd (Maybank).
OSK Research said the bank's latest quarter net profit year-on-year (y-o-y) growth of 25.1 per cent and quarter-on-quarter growth of 11.4 per cent, respectively, far outpaced the industry's aggregate of 15.6 per cent and 8.2 per cent, respectively.
"Its earnings were propelled by an industry-beating loans growth of 17.6 per cent, y-o-y, the hefty 62.1 per cent drop in loans loss provision and maiden contribution from Kim Eng," OSK Research said in a note today.
It said BII was also aggressively expanding via new hiring and enlarging its branch network by 43 per cent over the next one-and-a-half years.
The research firm said BII's operating leverage would begin to flow through by financial year 2012 and financial year 2013 on a more stable cost base while generate new revenue from its enlarged presence.
"This would naturally help bring down the cost-to-income ratio closer to the industry average, driven largely by revenue growth from its enhanced infrastructure investments, as costs stabilises," it said.
OSK Research is maintaining a "Buy" call and fair value of RM9.60 on Maybank given the qualities provided by the bank and its alluring 7.6 per cent dividend yield which is the highest among domestic banking stocks. -- Bernama
Company Name: MALAYAN BANKING BHD
| Research House: OSK | Price Call: BUY | Target Price: 9.60 |
The acquisition of Singapore's banking franchise, Kim Eng Holdings, and the longer-term growth potential of Bank Internasional Indonesia (BII), will set the stage for a potentially compelling regional growth for Malayan Banking Bank Bhd (Maybank).
OSK Research said the bank's latest quarter net profit year-on-year (y-o-y) growth of 25.1 per cent and quarter-on-quarter growth of 11.4 per cent, respectively, far outpaced the industry's aggregate of 15.6 per cent and 8.2 per cent, respectively.
"Its earnings were propelled by an industry-beating loans growth of 17.6 per cent, y-o-y, the hefty 62.1 per cent drop in loans loss provision and maiden contribution from Kim Eng," OSK Research said in a note today.
It said BII was also aggressively expanding via new hiring and enlarging its branch network by 43 per cent over the next one-and-a-half years.
The research firm said BII's operating leverage would begin to flow through by financial year 2012 and financial year 2013 on a more stable cost base while generate new revenue from its enlarged presence.
"This would naturally help bring down the cost-to-income ratio closer to the industry average, driven largely by revenue growth from its enhanced infrastructure investments, as costs stabilises," it said.
OSK Research is maintaining a "Buy" call and fair value of RM9.60 on Maybank given the qualities provided by the bank and its alluring 7.6 per cent dividend yield which is the highest among domestic banking stocks. -- Bernama
'Buy' calls on Axiata, Telekom Malaysia
Stock Name: TM
Company Name: TELEKOM MALAYSIA BHD
OSK Research Sdn Bhd has maintained a "buy" call on Axiata Group Bhd with a target price of RM5.60.
In a research statement today, OSK said in the face of global economic uncertainties, the Axiata management has undertaken good strategic initiatives to keep operating cost lean.
"Axiata is also promoting sharing of infrastructure on the back of accelerating data usage, and it remains as an inexpensive regional mobile exposure," it said.
OSK said a major re-rating catalyst would come from a higher dividend payout.
Meanwhile, the research firm has rated Telekom Malaysia Bhd (TM) a "buy" with target price of RM5.15.
It said TM's core earnings were expected to pick up in financial year 2012 as Unifi's footprint expanded to 1.3 million premises.
"We also gather from TM that Unifi's base rose above 200,000 at end-November 2011, beating the management's own expectations and our estimate," it said.
OSK said TM would also benefit from the ramp-up in wholesale contribution following the inking of High-Speed Broadband wholesale agreements with Maxis and P1 this year.
It said the stock remained one of its top picks for exposure to the telecommunications sector.
"Its foreign shareholding level rose 19 per cent at end-October, a level last seen in 2008, reflecting renewed optimism on the stock," it said. -- Bernama
Company Name: TELEKOM MALAYSIA BHD
| Research House: OSK | Price Call: BUY | Target Price: 5.15 |
OSK Research Sdn Bhd has maintained a "buy" call on Axiata Group Bhd with a target price of RM5.60.
In a research statement today, OSK said in the face of global economic uncertainties, the Axiata management has undertaken good strategic initiatives to keep operating cost lean.
"Axiata is also promoting sharing of infrastructure on the back of accelerating data usage, and it remains as an inexpensive regional mobile exposure," it said.
OSK said a major re-rating catalyst would come from a higher dividend payout.
Meanwhile, the research firm has rated Telekom Malaysia Bhd (TM) a "buy" with target price of RM5.15.
It said TM's core earnings were expected to pick up in financial year 2012 as Unifi's footprint expanded to 1.3 million premises.
"We also gather from TM that Unifi's base rose above 200,000 at end-November 2011, beating the management's own expectations and our estimate," it said.
OSK said TM would also benefit from the ramp-up in wholesale contribution following the inking of High-Speed Broadband wholesale agreements with Maxis and P1 this year.
It said the stock remained one of its top picks for exposure to the telecommunications sector.
"Its foreign shareholding level rose 19 per cent at end-October, a level last seen in 2008, reflecting renewed optimism on the stock," it said. -- Bernama
OSK upbeat on AirAsia's outlook
Stock Name: AIRASIA
Company Name: AIRASIA BHD
OSK Research Sdn Bhd is optimistic on AirAsia Bhd's outlook for 2012 on anticipation that earnings will climb 21 per cent on the back of lower fuel prices amid resilient growth in low-cost travel.
OSK said as low-cost air travel dominated Asean skies with 32 per cent penetration, AirAsia was the best proxy to this resilient segment during times of economic uncertainty.
"AirAsia, which stands to benefit from its two new hubs in Manila and Tokyo,will also get an earnings boost from its fruitful AirAsia Expedia joint venture and its ability to monetise its training academy," it said in an investment note
today.
It said it expected more yields upside for AirAsia going forward as the competitive barriers between it and Malaysian Airlines (MAS) came down after the two agreed to collaborate.
"Under the tie-up, MAS and AirAsia will serve their own target markets and steer clear of head-on competition via heavy airfare discounts.
"AirAsia would be able to reap more benefits from the collaboration following the cessation of Firefly's jet services," it said.
OSK has maintained its "buy" call on AirAsia with a fair value of RM4.57. -- BERNAMA
Company Name: AIRASIA BHD
| Research House: OSK | Price Call: BUY | Target Price: 4.57 |
OSK Research Sdn Bhd is optimistic on AirAsia Bhd's outlook for 2012 on anticipation that earnings will climb 21 per cent on the back of lower fuel prices amid resilient growth in low-cost travel.
OSK said as low-cost air travel dominated Asean skies with 32 per cent penetration, AirAsia was the best proxy to this resilient segment during times of economic uncertainty.
"AirAsia, which stands to benefit from its two new hubs in Manila and Tokyo,will also get an earnings boost from its fruitful AirAsia Expedia joint venture and its ability to monetise its training academy," it said in an investment note
today.
It said it expected more yields upside for AirAsia going forward as the competitive barriers between it and Malaysian Airlines (MAS) came down after the two agreed to collaborate.
"Under the tie-up, MAS and AirAsia will serve their own target markets and steer clear of head-on competition via heavy airfare discounts.
"AirAsia would be able to reap more benefits from the collaboration following the cessation of Firefly's jet services," it said.
OSK has maintained its "buy" call on AirAsia with a fair value of RM4.57. -- BERNAMA
'Neutral' call on Alam Maritim stays
Stock Name: ALAM
Company Name: ALAM MARITIM RESOURCES BHD
OSK Research Sdn Bhd has maintained a 'neutral' call on investment holding company, Alam Maritim Resources Bhd, at an
unchanged price of 85 sen.
In a research note today, OSK said in comparison with other listed vessel operators like Perdana Petroleum, Petra Energy and Tanjung Offshore, Alam Maritim has outperformed its peers in terms of new contracts and quarterly earnings performance.
"The results of its peers were mostly flat or were in red ink quarter after quarter as a result of poor vessels utilisation and dearth of new contracts.
"Although we think Alam Maritim is out-performing its peers, this
development has been partly factored into its share price valuation," it said.
OSK said it was positive on the company but maintained its forecast for financial year 2011-12 results.
It said Alam Maritim was expected to clinch more long-term vessel charters in the future.
"About 50 per cent of its vessels are now on long-term charters averaging about a year while the balance 50 per cent are on spot charter.
"Hence, although its utilisation rate fluctuates monthly, we understand that on average it is still hovering at 60 to 80 per cent," it said.
OSK said judging from the industry's current operating environment, the rate was reasonable in view of the fact that Petroliam Nasional Bhd and its production-sharing contractors were still handing out minimal new vessel contracts. -- BERNAMA
Company Name: ALAM MARITIM RESOURCES BHD
| Research House: OSK | Price Call: HOLD | Target Price: 0.85 |
OSK Research Sdn Bhd has maintained a 'neutral' call on investment holding company, Alam Maritim Resources Bhd, at an
unchanged price of 85 sen.
In a research note today, OSK said in comparison with other listed vessel operators like Perdana Petroleum, Petra Energy and Tanjung Offshore, Alam Maritim has outperformed its peers in terms of new contracts and quarterly earnings performance.
"The results of its peers were mostly flat or were in red ink quarter after quarter as a result of poor vessels utilisation and dearth of new contracts.
"Although we think Alam Maritim is out-performing its peers, this
development has been partly factored into its share price valuation," it said.
OSK said it was positive on the company but maintained its forecast for financial year 2011-12 results.
It said Alam Maritim was expected to clinch more long-term vessel charters in the future.
"About 50 per cent of its vessels are now on long-term charters averaging about a year while the balance 50 per cent are on spot charter.
"Hence, although its utilisation rate fluctuates monthly, we understand that on average it is still hovering at 60 to 80 per cent," it said.
OSK said judging from the industry's current operating environment, the rate was reasonable in view of the fact that Petroliam Nasional Bhd and its production-sharing contractors were still handing out minimal new vessel contracts. -- BERNAMA
A niche luxury lifestyle developer
Stock Name: E&O
Company Name: EASTERN & ORIENTAL BHD
Company Name: EASTERN & ORIENTAL BHD
| Research House: ZJ | Price Call: BUY | Target Price: 1.60 |
December 28, 2011
RHBInvest Research Highlights 28th December 2011
Stock Name: WCT
Company Name: WCT BHD
Company Name: WCT BHD
| Research House: RHB | Price Call: BUY | Target Price: 2.08 |
28th December 2011
| Top Story Motor Sector ' An Uphill Climb Underweight Sector Update '' The more cautious outlook and slowing economy in 2012 will likely see households and businesses alike reassess spending on big-ticket items. '' We expect total industry volumes (TIV) to remain relatively flat at 607,000 units in 2012 (2011E: 604,000). '' We see some selective supply constraints of certain models continuing into 1Q12 arising from the flooding in Thailand , with Honda the most severely affected.
|
JCY climbs to 13-month at midday on strong HDD demand
Stock Name: JCY
Company Name: JCY INTERNATIONAL BERHAD
KUALA LUMPUR (Dec 28): Shares of JCY International Bhd rose to a 13'' month high at midday on Wednesday on sustained buying interest as the hard disk drive (HDD) manufacturer was not affected by the recent severe Thai floods and due to strong demand.
At midday, it was up 3.5 sen to RM1. There were 17.19 million shares transacted at prices ranging from 97 sen to RM1.01.
OSK Research had on Dec 23 upgraded the TECHNOLOGY [] sector a Neutral as the worst impact from the Thai floods should be over while restoration of production in Thailand was going on at full steam.
The research house had said it came to understand that Western Digital and Seagate had used this opportunity to push for higher prices of their HDD products (50%-100%) whilst cutting down warranty periods
' We are keeping our earnings forecasts unchanged for Engtek and Notion but revising our valuation from 0.7 times to 0.9 times price-to-book value. They are both upgraded to Neutral from Sell. Engtek at RM1.52 and Notion at RM1.69.
' As for JCY, we are raising our earnings forecast by more than 100% as their equipment was unscathed. Valuation switched from 0.9 times PBV to 8 times FY12 PER. Call upgraded to Trading Buy with FV of RM1.30. We understand that there are rumours of a strong price push over the next one month,' it said.
''
Company Name: JCY INTERNATIONAL BERHAD
| Research House: OSK | Price Call: BUY | Target Price: 1.30 |
KUALA LUMPUR (Dec 28): Shares of JCY International Bhd rose to a 13'' month high at midday on Wednesday on sustained buying interest as the hard disk drive (HDD) manufacturer was not affected by the recent severe Thai floods and due to strong demand.
At midday, it was up 3.5 sen to RM1. There were 17.19 million shares transacted at prices ranging from 97 sen to RM1.01.
OSK Research had on Dec 23 upgraded the TECHNOLOGY [] sector a Neutral as the worst impact from the Thai floods should be over while restoration of production in Thailand was going on at full steam.
The research house had said it came to understand that Western Digital and Seagate had used this opportunity to push for higher prices of their HDD products (50%-100%) whilst cutting down warranty periods
' We are keeping our earnings forecasts unchanged for Engtek and Notion but revising our valuation from 0.7 times to 0.9 times price-to-book value. They are both upgraded to Neutral from Sell. Engtek at RM1.52 and Notion at RM1.69.
' As for JCY, we are raising our earnings forecast by more than 100% as their equipment was unscathed. Valuation switched from 0.9 times PBV to 8 times FY12 PER. Call upgraded to Trading Buy with FV of RM1.30. We understand that there are rumours of a strong price push over the next one month,' it said.
''
Fifth Biggest in the World
Stock Name: SCIENTX
Company Name: SCIENTEX INCORPORATED BHD
Company Name: SCIENTEX INCORPORATED BHD
| Research House: TA | Price Call: BUY | Target Price: 2.90 |
Affin Research maintains Buy on WCT, RM3.56 target price
Stock Name: WCT
Company Name: WCT BHD
KUALA LUMPUR (Dec 28): Affin Equities Research is maintaining its Buy call on WCT BHD [] at RM2.30 with a price target of RM3.56.
WCT had announced on Tuesday its unit was awarded an investment certificate to undertake a residential and commercial mixed development on a 46,577 sq m (11.5 acre) site in Ho Chi Minh City, Vietnam.
Affin Research said on Wednesday since the land area was only 11.5 acres, it did not believe the project would take 50 years to develop.
'We continue to believe in the long term potential of the property development business in Vietnam but with the eurozone debt crisis still unfolding and global economy expected to slow in 2012, short-term uncertainties remain,' it said.
The research house said that on the upside, there was recent good response to Gamuda's Celadon City (Ho Chi Minh City) and Gamuda City (Hanoi) projects.
'Pending guidance on project launch date and gross development value, we maintain our FY11-13 forecasts, target price (at 15 times CY12 EPS) and BUY call for WCT.
'Recent tender failures and likely inability to secure RM2 billion of new projects this year are key concern,' Affin Research pointed out.
Company Name: WCT BHD
| Research House: AFFIN | Price Call: BUY | Target Price: 3.56 |
KUALA LUMPUR (Dec 28): Affin Equities Research is maintaining its Buy call on WCT BHD [] at RM2.30 with a price target of RM3.56.
WCT had announced on Tuesday its unit was awarded an investment certificate to undertake a residential and commercial mixed development on a 46,577 sq m (11.5 acre) site in Ho Chi Minh City, Vietnam.
Affin Research said on Wednesday since the land area was only 11.5 acres, it did not believe the project would take 50 years to develop.
'We continue to believe in the long term potential of the property development business in Vietnam but with the eurozone debt crisis still unfolding and global economy expected to slow in 2012, short-term uncertainties remain,' it said.
The research house said that on the upside, there was recent good response to Gamuda's Celadon City (Ho Chi Minh City) and Gamuda City (Hanoi) projects.
'Pending guidance on project launch date and gross development value, we maintain our FY11-13 forecasts, target price (at 15 times CY12 EPS) and BUY call for WCT.
'Recent tender failures and likely inability to secure RM2 billion of new projects this year are key concern,' Affin Research pointed out.
December 27, 2011
Sunway secures RM28m construction contract
Stock Name: SUNWAY
Company Name: SUNWAY BERHAD
Larger Smaller Reset Sunway Bhd
(Dec 27, RM2.50)
Maintain buy at RM2.46 with target price of RM2.79: Sunway announced that its wholly-owned subsidiary, Sunway Geotechnics (M) Sdn Bhd had on Dec 22, 2011 accepted a letter of award from Hap Seng Land Development Sdn Bhd for the construction and completion of earthworks, piling, basement and ground floor reinforced concrete structures for one block of 43-storey serviced apartments at Jalan Tun Razak, Kuala Lumpur. The contract value is RM27.6 million and the project is targeted to be completed by Dec 12, 2012, with a construction period of 12 months.
We make no changes to our FY11 to FY13 net earnings forecasts as the contract value is small (compared with Sunway's RM2.9 billion construction order book) and we have imputed over RM1 billion of yearly new contract wins for FY11/FY12. Maintain 'buy' on Sunway with an unchanged target price of RM2.79, based on a 30% discount to realisable net asset value. Notwithstanding our cautious stance on the domestic medium- to high-end property market in view of the rising global economic uncertainties and potential tightening of bank mortgages, we continue to like Sunway for its: (i) integrated real estate business model; (ii) strategic landbank; (iii) extensive experience in the construction sector with a proven track record; and (iv) established international footprint in Singapore and China (property development) and Middle East (construction). Besides, we believe Sunway's short-to medium-term earnings will be cushioned from any unexpected short-term market downturn given their high property unbilled sales of RM2 billion, construction order book of RM2.9 billion and recurring income from the Sunway REIT and its theme park operations. ' Affin IB Research, Dec 27
''
This article appeared in The Edge Financial Daily, December 28, 2011.
Company Name: SUNWAY BERHAD
| Research House: AFFIN | Price Call: BUY | Target Price: 2.79 |
Larger Smaller Reset Sunway Bhd
(Dec 27, RM2.50)
Maintain buy at RM2.46 with target price of RM2.79: Sunway announced that its wholly-owned subsidiary, Sunway Geotechnics (M) Sdn Bhd had on Dec 22, 2011 accepted a letter of award from Hap Seng Land Development Sdn Bhd for the construction and completion of earthworks, piling, basement and ground floor reinforced concrete structures for one block of 43-storey serviced apartments at Jalan Tun Razak, Kuala Lumpur. The contract value is RM27.6 million and the project is targeted to be completed by Dec 12, 2012, with a construction period of 12 months.
We make no changes to our FY11 to FY13 net earnings forecasts as the contract value is small (compared with Sunway's RM2.9 billion construction order book) and we have imputed over RM1 billion of yearly new contract wins for FY11/FY12. Maintain 'buy' on Sunway with an unchanged target price of RM2.79, based on a 30% discount to realisable net asset value. Notwithstanding our cautious stance on the domestic medium- to high-end property market in view of the rising global economic uncertainties and potential tightening of bank mortgages, we continue to like Sunway for its: (i) integrated real estate business model; (ii) strategic landbank; (iii) extensive experience in the construction sector with a proven track record; and (iv) established international footprint in Singapore and China (property development) and Middle East (construction). Besides, we believe Sunway's short-to medium-term earnings will be cushioned from any unexpected short-term market downturn given their high property unbilled sales of RM2 billion, construction order book of RM2.9 billion and recurring income from the Sunway REIT and its theme park operations. ' Affin IB Research, Dec 27
''
This article appeared in The Edge Financial Daily, December 28, 2011.
Earnings volatility and dividend risk at Star
Stock Name: STAR
Company Name: STAR PUBLICATIONS (M) BHD
Larger Smaller Reset Star Publications (Malaysia) Bhd
(Dec 27, RM3.24)
Maintain reduce at RM3.18 with target price of RM3.04: For 9M11, Star Publications' non-core businesses (excluding its publication and radio business) contributed to a revenue loss of RM114.5 million and a pre-tax loss of RM6.2 million. The main contributor to its non-core business is its event management and exhibition operations ' via 59%-owned Cityneon Holdings. This division is going through a rough patch having contributed positively in the year before (9M10: revenue RM146.6 million and RM8.6 million profit). The sharp swing in earnings highlights the increased volatility of Star's earnings, as opposed to its relatively more stable revenue and earnings from its publication and radio business. Moreover, we see heightened risk to Star's earnings after successive investments in other non-core assets. Recall that since May 2011, Star has made four additional investments amounting for RM56 million, which includes a radio station, a TV channel, an online media business and most recently a Chinese weekly publication. Note that as at 9M11, Star accounted for maiden pre-tax losses of RM2.5 million from its TV channel, Li TV.
But we believe that Star's acquisition trail could persist into 2012, judging from its unutilised proceeds of its medium-term notes (MTN) raised earlier this year. Approximately RM48 million of the RM200 million raised remains unutilised. Star had nevertheless sought to raised up to a total of RM750 million in commercial paper and MTN for working capital, capital expenditure and corporate purposes earlier, leading us to believe that Star may continue to step up its diversification programme. This, in our view, increases the vulnerability of its free cash flow and leaves greater downside implications for its dividend outlook. Disappointingly, Star trimmed its 1H11 dividend per share to 9 sen (1H10: 10.5 sen).
Back to its core operations, Star's circulation has improved from 279,000 for the July-December 2010 period to 288,000 for January-June 2011. Star's circulation could have further improved in recent months with its promotional efforts to spur circulation, although any spike is likely to be one-off. The declining circulation trend is likely to persist, not merely for the Star newspaper, but for English mainstream papers as a whole. This is coming at the expense of other media platforms, in particular online media, especially with improved broadband. Longer term, this negative trend will continue to hamper advertising expenditure revenue to the print segment and particularly the English newspaper sub segment. Note that adex to the Malay and Chinese print segments has turned increasingly important as an advertising channel (English accounted for 53% of print adex in 2000, declining to 44% as at end-2010). ' Affin IB Research, Dec 27
''
This article appeared in The Edge Financial Daily, December 28, 2011.
Company Name: STAR PUBLICATIONS (M) BHD
| Research House: AFFIN | Price Call: SELL | Target Price: 3.04 |
Larger Smaller Reset Star Publications (Malaysia) Bhd
(Dec 27, RM3.24)
Maintain reduce at RM3.18 with target price of RM3.04: For 9M11, Star Publications' non-core businesses (excluding its publication and radio business) contributed to a revenue loss of RM114.5 million and a pre-tax loss of RM6.2 million. The main contributor to its non-core business is its event management and exhibition operations ' via 59%-owned Cityneon Holdings. This division is going through a rough patch having contributed positively in the year before (9M10: revenue RM146.6 million and RM8.6 million profit). The sharp swing in earnings highlights the increased volatility of Star's earnings, as opposed to its relatively more stable revenue and earnings from its publication and radio business. Moreover, we see heightened risk to Star's earnings after successive investments in other non-core assets. Recall that since May 2011, Star has made four additional investments amounting for RM56 million, which includes a radio station, a TV channel, an online media business and most recently a Chinese weekly publication. Note that as at 9M11, Star accounted for maiden pre-tax losses of RM2.5 million from its TV channel, Li TV.
But we believe that Star's acquisition trail could persist into 2012, judging from its unutilised proceeds of its medium-term notes (MTN) raised earlier this year. Approximately RM48 million of the RM200 million raised remains unutilised. Star had nevertheless sought to raised up to a total of RM750 million in commercial paper and MTN for working capital, capital expenditure and corporate purposes earlier, leading us to believe that Star may continue to step up its diversification programme. This, in our view, increases the vulnerability of its free cash flow and leaves greater downside implications for its dividend outlook. Disappointingly, Star trimmed its 1H11 dividend per share to 9 sen (1H10: 10.5 sen).
Back to its core operations, Star's circulation has improved from 279,000 for the July-December 2010 period to 288,000 for January-June 2011. Star's circulation could have further improved in recent months with its promotional efforts to spur circulation, although any spike is likely to be one-off. The declining circulation trend is likely to persist, not merely for the Star newspaper, but for English mainstream papers as a whole. This is coming at the expense of other media platforms, in particular online media, especially with improved broadband. Longer term, this negative trend will continue to hamper advertising expenditure revenue to the print segment and particularly the English newspaper sub segment. Note that adex to the Malay and Chinese print segments has turned increasingly important as an advertising channel (English accounted for 53% of print adex in 2000, declining to 44% as at end-2010). ' Affin IB Research, Dec 27
''
This article appeared in The Edge Financial Daily, December 28, 2011.
TA Enterprise's Sydney launch a success
Stock Name: TA
Company Name: TA ENTERPRISE BHD
Larger Smaller Reset TA Enterprise Holdings Bhd
(Dec 27, 58 sen)
Maintain buy at 59 sen with a target price of RM1.10: Net profit for 9MFY12 of RM72 million is 70% of our FY12 profit, led by higher hotel and broking income. Net profit for 3QFY12 fell 55% quarter-on-quarter (q-o-q) after a RM15 million foreign exchange translation loss on financing activities and higher effective tax rate (29%) due to underprovision in previous years. As expected, property contribution remained small at 3% of total earnings before interest and tax. Bursa Malaysia's trading volume in the August to October quarter rose 18% to RM1 billion and value was up 3% to RM1.6 billion. As a result, broking income grew 18%. No dividends were declared in the quarter.
TA Global (TAG) launched the first parcel of Little Bay Cove, Sydney, Australia, in December. Called 'The Solis', the 45 apartments were offered at prices starting from A$495,000 (RM1.6 million) each. Registrations in Sydney and Malaysia have been encouraging so far. This is TAG's maiden venture in the Australian property market.
Our RM1.10 sum-of-parts-based target price is based on 45% discount to realisable net asset value for property and 0.8 times price-to-book value (P/BV) for broking. TAG's future property launches in Malaysia and overseas could be earnings and rerating catalysts. Its current project in Malaysia is Damansara Avenue with about RM1.3 billion in gross development value, while its projects in Canada are expected to rake in RM400 million and Australia RM900 million.
Future developments, including the 0.9ha parcel in a prime KLCC area and 1.2ha in Bukit Bintang, will further unlock its land values. Its broking business may be valued higher, as Singapore's UOB recently offered to buy Innosabah Securities at 1.4 times P/BV. ' HwangDBS Vickers Research, Dec 27
''
This article appeared in The Edge Financial Daily, December 28, 2011.
Company Name: TA ENTERPRISE BHD
| Research House: HWANGDBS | Price Call: BUY | Target Price: 1.10 |
Larger Smaller Reset TA Enterprise Holdings Bhd
(Dec 27, 58 sen)
Maintain buy at 59 sen with a target price of RM1.10: Net profit for 9MFY12 of RM72 million is 70% of our FY12 profit, led by higher hotel and broking income. Net profit for 3QFY12 fell 55% quarter-on-quarter (q-o-q) after a RM15 million foreign exchange translation loss on financing activities and higher effective tax rate (29%) due to underprovision in previous years. As expected, property contribution remained small at 3% of total earnings before interest and tax. Bursa Malaysia's trading volume in the August to October quarter rose 18% to RM1 billion and value was up 3% to RM1.6 billion. As a result, broking income grew 18%. No dividends were declared in the quarter.
TA Global (TAG) launched the first parcel of Little Bay Cove, Sydney, Australia, in December. Called 'The Solis', the 45 apartments were offered at prices starting from A$495,000 (RM1.6 million) each. Registrations in Sydney and Malaysia have been encouraging so far. This is TAG's maiden venture in the Australian property market.
Our RM1.10 sum-of-parts-based target price is based on 45% discount to realisable net asset value for property and 0.8 times price-to-book value (P/BV) for broking. TAG's future property launches in Malaysia and overseas could be earnings and rerating catalysts. Its current project in Malaysia is Damansara Avenue with about RM1.3 billion in gross development value, while its projects in Canada are expected to rake in RM400 million and Australia RM900 million.
Future developments, including the 0.9ha parcel in a prime KLCC area and 1.2ha in Bukit Bintang, will further unlock its land values. Its broking business may be valued higher, as Singapore's UOB recently offered to buy Innosabah Securities at 1.4 times P/BV. ' HwangDBS Vickers Research, Dec 27
''
This article appeared in The Edge Financial Daily, December 28, 2011.
OSK keeps 'buy' call on Sunway
Stock Name: SUNWAY
Company Name: SUNWAY BERHAD
Sunway Bhd shares gained four sen to RM2.50 with 243,800 shares traded as at 10.20am today after its wholly-owned subsidiary, Sunway Geotechnics (M) Sdn Bhd, secured a RM27.57 million contract from Hap Seng Land Development (JTR) Sdn Bhd.
The contract is for the proposed construction and completion of earthworks and piling for basements one and two and ground floor reinforces concrete structures for a 43-storey service apartment at Jalan Tun Razak, Kuala Lumpur.
OSK Research viewed the contract positively although the size was small relative to the other contracts Sunway had secured earlier in the year.
"More importantly, it was in line with Sunway's intention to focus more on niche and specialised contracts for its construction division following the completion of its merger," it said in a research note today.
Sunway's construction orderbook valued at about RM2.8 billion will last it for at least another 1.5 years.
Nevertheless, it is continuously bidding for more contracts with an order book replenishment target of RM1.5 billion, annually.
"We believe it stands a good chance of securing more contracts from Iskandar Region for next year as well as potential contracts from the KL MRT project, further supported by its good track record," OSK Research said.
It maintained a buy recommendation on Sunway at an unchanged fair value of RM3.31 per share. -- Bernama
Company Name: SUNWAY BERHAD
| Research House: OSK | Price Call: BUY | Target Price: 3.31 |
Sunway Bhd shares gained four sen to RM2.50 with 243,800 shares traded as at 10.20am today after its wholly-owned subsidiary, Sunway Geotechnics (M) Sdn Bhd, secured a RM27.57 million contract from Hap Seng Land Development (JTR) Sdn Bhd.
The contract is for the proposed construction and completion of earthworks and piling for basements one and two and ground floor reinforces concrete structures for a 43-storey service apartment at Jalan Tun Razak, Kuala Lumpur.
OSK Research viewed the contract positively although the size was small relative to the other contracts Sunway had secured earlier in the year.
"More importantly, it was in line with Sunway's intention to focus more on niche and specialised contracts for its construction division following the completion of its merger," it said in a research note today.
Sunway's construction orderbook valued at about RM2.8 billion will last it for at least another 1.5 years.
Nevertheless, it is continuously bidding for more contracts with an order book replenishment target of RM1.5 billion, annually.
"We believe it stands a good chance of securing more contracts from Iskandar Region for next year as well as potential contracts from the KL MRT project, further supported by its good track record," OSK Research said.
It maintained a buy recommendation on Sunway at an unchanged fair value of RM3.31 per share. -- Bernama
OSK 'overweight' on media sector
Stock Name: MEDIA
Company Name: MEDIA PRIMA BHD
Stock Name: CATCHA
Company Name: CATCHA MEDIA BERHAD
OSK Research expects media advertisement expenditure (ADEX) growth to close 2011 at double the in-house gross domestic
product forecast of 5.2 per cent.
OSK Research in a research note today said the expectation is based on the strength in domestic consumption that can still be seen.
The research house said according to the AC Nielsen Media Research, the first nine months of 2011 saw ADEX grow by a robust 10.4 per cent year-on-year (y-o-y) shored up by resilient domestic consumer spending despite concerns of slowing recovery and weakening consumer confidence on the global economic front.
It said that advertisement spending on the three core divisions -- newspapers, television and radio channels -- made up a total of 94 per cent of the combined ADEX, rising by 10.7 per cent y-o-y to RM5.75 billion.
Meanwhile, the Internet segment remained the fastest growing, chalking up 34.4 per cent y-o-y growth but accounting for an insignificant 0.7 per cent share of total ADEX.
OSK Research maintains an "overweight" call on the sector as it believes that thematic factors such as an impending polls and the Euro 2012 football tournament would be the key catalysts in 2012.
OSK Research said that the top picks -- Media Chinese, Media Prima and Catcha Media -- are all pegged with a "buy" call and fair value at RM3.17, RM3.09 and RM1.21 respectively.
Meanwhile the research firm has rated a "neutral" call on Star with a fair value of RM3.34. -- Bernama
Company Name: MEDIA PRIMA BHD
| Research House: OSK | Price Call: BUY | Target Price: 3.09 |
Stock Name: CATCHA
Company Name: CATCHA MEDIA BERHAD
| Research House: OSK | Price Call: BUY | Target Price: 1.21 |
OSK Research expects media advertisement expenditure (ADEX) growth to close 2011 at double the in-house gross domestic
product forecast of 5.2 per cent.
OSK Research in a research note today said the expectation is based on the strength in domestic consumption that can still be seen.
The research house said according to the AC Nielsen Media Research, the first nine months of 2011 saw ADEX grow by a robust 10.4 per cent year-on-year (y-o-y) shored up by resilient domestic consumer spending despite concerns of slowing recovery and weakening consumer confidence on the global economic front.
It said that advertisement spending on the three core divisions -- newspapers, television and radio channels -- made up a total of 94 per cent of the combined ADEX, rising by 10.7 per cent y-o-y to RM5.75 billion.
Meanwhile, the Internet segment remained the fastest growing, chalking up 34.4 per cent y-o-y growth but accounting for an insignificant 0.7 per cent share of total ADEX.
OSK Research maintains an "overweight" call on the sector as it believes that thematic factors such as an impending polls and the Euro 2012 football tournament would be the key catalysts in 2012.
OSK Research said that the top picks -- Media Chinese, Media Prima and Catcha Media -- are all pegged with a "buy" call and fair value at RM3.17, RM3.09 and RM1.21 respectively.
Meanwhile the research firm has rated a "neutral" call on Star with a fair value of RM3.34. -- Bernama
MIDF retains 'buy' on Petronas Gas
Stock Name: PETGAS
Company Name: PETRONAS GAS BHD
MIDF Research Sdn Bhd has reiterated its "buy" recommendation on Petronas Gas (PGas) with a higher trading price of RM15.60 from RM14.40.
PGas ended trading today at RM14.40, up 26 sen from yesterday's closing of RM14.14.
"Taking into account its potential earnings upgrade and good dividend yield, we believe it is more justifiable to raise our valuation to its historical mean since 2007 of 18.4 times from a conservative 16.5 times PER (price earnings ratio) implied previously," MIDF said in its research note.
"We like PGas' sole ownership of Peninsular Malaysia's gas pipelines system and the up-coming regasification facility in Melaka, leveraging on the gas sector liberalisation initiatives," it said.
According to MIDF, the first import of LNG agreement, which had been signed between Petronas and GDF Suez was expected to kick off in the third quarter of next year.
MIDF also said the regasification business could generate RM100 million-RM240 million net profit to PGas from 2013-2015. -- BERNAMA
Company Name: PETRONAS GAS BHD
| Research House: MIDF | Price Call: BUY | Target Price: 15.60 |
MIDF Research Sdn Bhd has reiterated its "buy" recommendation on Petronas Gas (PGas) with a higher trading price of RM15.60 from RM14.40.
PGas ended trading today at RM14.40, up 26 sen from yesterday's closing of RM14.14.
"Taking into account its potential earnings upgrade and good dividend yield, we believe it is more justifiable to raise our valuation to its historical mean since 2007 of 18.4 times from a conservative 16.5 times PER (price earnings ratio) implied previously," MIDF said in its research note.
"We like PGas' sole ownership of Peninsular Malaysia's gas pipelines system and the up-coming regasification facility in Melaka, leveraging on the gas sector liberalisation initiatives," it said.
According to MIDF, the first import of LNG agreement, which had been signed between Petronas and GDF Suez was expected to kick off in the third quarter of next year.
MIDF also said the regasification business could generate RM100 million-RM240 million net profit to PGas from 2013-2015. -- BERNAMA
December 23, 2011
UMW Holdings (Hold): Reduced losses from WSP in 3Q11
Stock Name: UMW
Company Name: UMW HOLDINGS BHD
WSP continues to hurt. WSP, a 23% China-based associate of UMW, continues to be loss making for the last 9 consecutive quarters with net loss of USD17m in 3Q11 and USD50m for 9M11. Against this backdrop, we have trimmed UMW's 2011-12 earnings by 1-3% with a higher net loss assumption at WSP (see Table 1). Coupled with headwinds at the auto division, there are minimal catalysts to re-rate UMW, which is a Hold with an unchanged RM6.10 target price, pegged at 11x 2012 EPS.
Maybank research (23 December 2011)
Click here for full report
Company Name: UMW HOLDINGS BHD
| Research House: MAYBANK | Price Call: HOLD | Target Price: 6.10 |
WSP continues to hurt. WSP, a 23% China-based associate of UMW, continues to be loss making for the last 9 consecutive quarters with net loss of USD17m in 3Q11 and USD50m for 9M11. Against this backdrop, we have trimmed UMW's 2011-12 earnings by 1-3% with a higher net loss assumption at WSP (see Table 1). Coupled with headwinds at the auto division, there are minimal catalysts to re-rate UMW, which is a Hold with an unchanged RM6.10 target price, pegged at 11x 2012 EPS.
Maybank research (23 December 2011)
Click here for full report
JCY International up after upgrade by OSK Research
Stock Name: JCY
Company Name: JCY INTERNATIONAL BERHAD
KUALA LUMPUR (Dec 23): JCY International Bhd shares rose on Friday after OSK Investment Research raised its recommendation on JCY Trading Buy from Sell.
At 9.35am, JCY added half a sen'' to 91.5 sen with 844,400 shares traded.
OSK Research on Thursday upgraded the TECHNOLOGY [] sector to Neutral and said that better HDD pricing could help mitigate losses from the Thailand flood.
It said that against the backdrop of the massive works in progress to restore operations following Thailand's crippling floods, the worst could well be over.
The research said it had become less bearish on the hard-hit HDD components sector given the ongoing accelerated restoration as well as potential price hike over the immediate term, which could mitigate the earnings pressure from forgone capacity in the short term.
'As for JCY, we are raising our earnings forecast by more than 100% as their equipment was unscathed. Valuation switched from 0.9x PBV to 8x FY12 PER.
'Call upgraded to Trading Buy with Fair Value of RM1.30. Understand that there are rumours of a strong price push over the next 1 month,' it said.
Company Name: JCY INTERNATIONAL BERHAD
| Research House: OSK | Price Call: TRADING BUY | Target Price: 1.30 |
KUALA LUMPUR (Dec 23): JCY International Bhd shares rose on Friday after OSK Investment Research raised its recommendation on JCY Trading Buy from Sell.
At 9.35am, JCY added half a sen'' to 91.5 sen with 844,400 shares traded.
OSK Research on Thursday upgraded the TECHNOLOGY [] sector to Neutral and said that better HDD pricing could help mitigate losses from the Thailand flood.
It said that against the backdrop of the massive works in progress to restore operations following Thailand's crippling floods, the worst could well be over.
The research said it had become less bearish on the hard-hit HDD components sector given the ongoing accelerated restoration as well as potential price hike over the immediate term, which could mitigate the earnings pressure from forgone capacity in the short term.
'As for JCY, we are raising our earnings forecast by more than 100% as their equipment was unscathed. Valuation switched from 0.9x PBV to 8x FY12 PER.
'Call upgraded to Trading Buy with Fair Value of RM1.30. Understand that there are rumours of a strong price push over the next 1 month,' it said.
December 22, 2011
Bouncing Back After 8 Dismal Quarters
Stock Name: HAIO
Company Name: HAI-O ENTERPRISE BHD
Company Name: HAI-O ENTERPRISE BHD
| Research House: OSK | Price Call: HOLD | Target Price: 1.70 |
KFC Holdings (Hold) Boards accepted offer
Stock Name: KFC
Company Name: KFC HOLDINGS (M) BHD
Accepts offer. KFC's board has accepted MESB's offer to take over KFC's assets and liabilities, and it does not intend to seek alternative bids. We maintain that the offer price of RM4.00 per KFC share is fair to minorities because it values KFC at a 2012 PER of 19.4x and 2.6x P/B, based on our forecasts. The high prospective PER is fair for an M&A involving an entire business - our previous fair value for KFC shares was RM3.12 based on DCF which implies 15x 2012 PER.
Maybank research (22 December 2011)
Click here for full report
Company Name: KFC HOLDINGS (M) BHD
| Research House: MAYBANK | Price Call: HOLD | Target Price: 4.00 |
Accepts offer. KFC's board has accepted MESB's offer to take over KFC's assets and liabilities, and it does not intend to seek alternative bids. We maintain that the offer price of RM4.00 per KFC share is fair to minorities because it values KFC at a 2012 PER of 19.4x and 2.6x P/B, based on our forecasts. The high prospective PER is fair for an M&A involving an entire business - our previous fair value for KFC shares was RM3.12 based on DCF which implies 15x 2012 PER.
Maybank research (22 December 2011)
Click here for full report
AEON Co. (Buy): Land acquisition in Kulai, Johor
Stock Name: AEON
Company Name: AEON CO. (M) BHD
Positive, for continuous organic growth. AEON Co.'s recent land transaction at Kulai, Johor, which should be near the newly opened Johor Premium Outlet (JPO), is positive for its provides an organic growth to the group which already has a good reach in the Klang Valley. We maintain our forecasts and PER based RM7.90 target price (14x 2012) as earnings contribution will be beyond 2013. AEON Co. is our top pick for consumer sector. Maintain Buy.
Maybank research (22 December 2011)
Click here for full report
Company Name: AEON CO. (M) BHD
| Research House: MAYBANK | Price Call: BUY | Target Price: 7.90 |
Positive, for continuous organic growth. AEON Co.'s recent land transaction at Kulai, Johor, which should be near the newly opened Johor Premium Outlet (JPO), is positive for its provides an organic growth to the group which already has a good reach in the Klang Valley. We maintain our forecasts and PER based RM7.90 target price (14x 2012) as earnings contribution will be beyond 2013. AEON Co. is our top pick for consumer sector. Maintain Buy.
Maybank research (22 December 2011)
Click here for full report
Berjaya Land Berhad - 2QFY12 Results - Realty check
Stock Name: BJLAND
Company Name: BERJAYA LAND BHD
Company Name: BERJAYA LAND BHD
| Research House: CIMB | Price Call: SELL | Target Price: 0.78 |
OSK Research maintains Neutral on Lion Industries, FV RM1.50
Stock Name: LIONIND
Company Name: LION INDUSTRIES CORPORATION
Larger Smaller Reset KUALA LUMPUR (Dec 22): OSK Investment Research has maintained its Neutral call on Lion Industries Corp Bhd with a fair value of RM1.50 and said it welcomed that the group was ''actively seeking mining assets, although the details were scarce.
The research house however added that the steel market was still fraught with challenges considering the slow execution of domestic projects and the impending consolidation of China's steel industry, which may hurt global sentiment.
'Talks with potential investors on the sale of its steel units are still ongoing but we see an indefinite delay in the outcome.
'Thus, we keep our NEUTRAL call with a Fair Value of RM1.50 in the absence of immediate catalysts,' it said on Thursday.
Company Name: LION INDUSTRIES CORPORATION
| Research House: OSK | Price Call: HOLD | Target Price: 1.50 |
Larger Smaller Reset KUALA LUMPUR (Dec 22): OSK Investment Research has maintained its Neutral call on Lion Industries Corp Bhd with a fair value of RM1.50 and said it welcomed that the group was ''actively seeking mining assets, although the details were scarce.
The research house however added that the steel market was still fraught with challenges considering the slow execution of domestic projects and the impending consolidation of China's steel industry, which may hurt global sentiment.
'Talks with potential investors on the sale of its steel units are still ongoing but we see an indefinite delay in the outcome.
'Thus, we keep our NEUTRAL call with a Fair Value of RM1.50 in the absence of immediate catalysts,' it said on Thursday.
December 21, 2011
Hong Leong Bank in for the long haul
Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD
Larger Smaller Reset Hong Leong Bank Bhd
(Dec 21, RM 10.54)
Maintain buy with fair value of RM12.33 from RM12.15: The group is well positioned post merger to capitalise on growth opportunities but we believe that the market may not have fully appreciated the revenue synergies that the larger organisational platform can potentially attain.
Maintain 'buy' with a higher fair value of RM12.23, or 1.95 times FY12 price to book value (P/BV), based on the Gordon Growth model. This valuation is supported by 14.8% return on equity (ROE), 9.2% cost of capital (COE) and 4% long-term growth rate.
The key catalysts are: (i) a bigger-than-expected upside in revenue and operational synergy, (ii) more resilient-than-expected asset quality and (iii) stronger-than-expected growth from 20% associate Bank of Chengdu in China. The stock's 1.6 times (P/BV) is compelling against ROE of 14% to 15%.
Management is now guiding for FY12 loan growth to come in at the lower end of its earlier 10% to 15% loan growth targets as macroeconomic uncertainties persist. The group's recent 1Q12 quarter-on-quarter (q-o-q) loan growth grew by a relatively subdued 1.3%, or an annualised rate of just 5.2% partially weighed down by lumpy loan repayments.
As such, its earlier 10% to 15% loan growth guidance does look optimistic. We have correspondingly lowered our FY12 and FY13 loan growth targets from 13.6% and 14.1% to 9.7% and 13.1% respectively.
Current loan growth trajectory is largely driven by secured mortgage and non-residential properties but HLB intends to enhance its community SME business banking portfolio.
This is because its much larger branch network now allows the realignment of some of its branches to expand its reach to this market segment more aggressively which is also positive for longer-term lending yields.
EON Capital's loan portfolio has been holding up stronger than expected with the merged entity's absolute impaired loans declining 5% q-o-q in the recent quarter.
In fact, the actual additional impairment on EON Capital's loans book as a consequence of harmonising with HLB's more stringent impaired loan criteria only led to a RM30.9 million increase in impaired loans for EON Capital, which is small in relation to the RM673 million excess loan loss cover the group is currently sitting on.
We have consequently lowered our credit cost assumption for the group in FY12 and FY13 from 51 basis points (bps) and 42bps to 41bps and 35bps respectively. ' OSK Research, Dec 21
This article appeared in The Edge Financial Daily, December 22, 2011.
Company Name: HONG LEONG BANK BHD
| Research House: OSK | Price Call: BUY | Target Price: 12.33 |
Larger Smaller Reset Hong Leong Bank Bhd
(Dec 21, RM 10.54)
Maintain buy with fair value of RM12.33 from RM12.15: The group is well positioned post merger to capitalise on growth opportunities but we believe that the market may not have fully appreciated the revenue synergies that the larger organisational platform can potentially attain.
Maintain 'buy' with a higher fair value of RM12.23, or 1.95 times FY12 price to book value (P/BV), based on the Gordon Growth model. This valuation is supported by 14.8% return on equity (ROE), 9.2% cost of capital (COE) and 4% long-term growth rate.
The key catalysts are: (i) a bigger-than-expected upside in revenue and operational synergy, (ii) more resilient-than-expected asset quality and (iii) stronger-than-expected growth from 20% associate Bank of Chengdu in China. The stock's 1.6 times (P/BV) is compelling against ROE of 14% to 15%.
Management is now guiding for FY12 loan growth to come in at the lower end of its earlier 10% to 15% loan growth targets as macroeconomic uncertainties persist. The group's recent 1Q12 quarter-on-quarter (q-o-q) loan growth grew by a relatively subdued 1.3%, or an annualised rate of just 5.2% partially weighed down by lumpy loan repayments.
As such, its earlier 10% to 15% loan growth guidance does look optimistic. We have correspondingly lowered our FY12 and FY13 loan growth targets from 13.6% and 14.1% to 9.7% and 13.1% respectively.
Current loan growth trajectory is largely driven by secured mortgage and non-residential properties but HLB intends to enhance its community SME business banking portfolio.
This is because its much larger branch network now allows the realignment of some of its branches to expand its reach to this market segment more aggressively which is also positive for longer-term lending yields.
EON Capital's loan portfolio has been holding up stronger than expected with the merged entity's absolute impaired loans declining 5% q-o-q in the recent quarter.
In fact, the actual additional impairment on EON Capital's loans book as a consequence of harmonising with HLB's more stringent impaired loan criteria only led to a RM30.9 million increase in impaired loans for EON Capital, which is small in relation to the RM673 million excess loan loss cover the group is currently sitting on.
We have consequently lowered our credit cost assumption for the group in FY12 and FY13 from 51 basis points (bps) and 42bps to 41bps and 35bps respectively. ' OSK Research, Dec 21
This article appeared in The Edge Financial Daily, December 22, 2011.
AMMB in cautious mode
Stock Name: AMMB
Company Name: AMMB HOLDINGS BHD
Larger Smaller Reset AMMB Holdings Bhd
(Dec 21, RM5.90)
Maintain hold with target price RM5.80 from RM6.70: Competition for deposits remains intense, and we expect further pressure in funding costs.
AMMB's portfolio re-balancing appears to be biased towards a rate hike ' variable rate loans were 53% of total loans as at September compared with 47% a year ago. However, this strategy to better position itself for a rising interest rate environment could work against AMMB, as we expect Bank Negara to shift to an easing mode and cut overnight policy rate by 50 basis points to 2.5% (from 3%) by end of 1Q12 to pre-empt any slowdown in the economy.
Management relayed a cautious tone post 2Q12 results. We raised operating expenses as AMMB invests and improves its core banking platform and FY12-14F cost-to-income ratio assumptions were adjusted to 42%/42%/41% (from 40%/40%/39%), in line with management's guidance.
We also raised provisions in FY12 in anticipation of a more proactive provisioning stance in 2HFY12. Other growth levers were unchanged ' FY12F loan and deposit growth targets were maintained at 8%. AMMB's non-interest income will remain susceptible to capital market flows as more than half (52%) stem from market-related activities.
We expect fund raising activities in the small-to mid-market segment (AMMB's captive market) to remain weak in the near term, given the cautious market outlook.
Maintain 'hold', target price cut to RM5.80 based on the Gordon Growth Model, after earnings revisions and assuming 14.5% return on equity (from 15.5%), 6% growth and 11.5% cost of equity. Our RM5.80 implies 1.4 times CY12 book value, which is equivalent to +1 standard deviation from mean. ' HwangDBS Vickers Research, Dec 21
This article appeared in The Edge Financial Daily, December 22, 2011.
Company Name: AMMB HOLDINGS BHD
| Research House: HWANGDBS | Price Call: HOLD | Target Price: 5.80 |
Larger Smaller Reset AMMB Holdings Bhd
(Dec 21, RM5.90)
Maintain hold with target price RM5.80 from RM6.70: Competition for deposits remains intense, and we expect further pressure in funding costs.
AMMB's portfolio re-balancing appears to be biased towards a rate hike ' variable rate loans were 53% of total loans as at September compared with 47% a year ago. However, this strategy to better position itself for a rising interest rate environment could work against AMMB, as we expect Bank Negara to shift to an easing mode and cut overnight policy rate by 50 basis points to 2.5% (from 3%) by end of 1Q12 to pre-empt any slowdown in the economy.
Management relayed a cautious tone post 2Q12 results. We raised operating expenses as AMMB invests and improves its core banking platform and FY12-14F cost-to-income ratio assumptions were adjusted to 42%/42%/41% (from 40%/40%/39%), in line with management's guidance.
We also raised provisions in FY12 in anticipation of a more proactive provisioning stance in 2HFY12. Other growth levers were unchanged ' FY12F loan and deposit growth targets were maintained at 8%. AMMB's non-interest income will remain susceptible to capital market flows as more than half (52%) stem from market-related activities.
We expect fund raising activities in the small-to mid-market segment (AMMB's captive market) to remain weak in the near term, given the cautious market outlook.
Maintain 'hold', target price cut to RM5.80 based on the Gordon Growth Model, after earnings revisions and assuming 14.5% return on equity (from 15.5%), 6% growth and 11.5% cost of equity. Our RM5.80 implies 1.4 times CY12 book value, which is equivalent to +1 standard deviation from mean. ' HwangDBS Vickers Research, Dec 21
This article appeared in The Edge Financial Daily, December 22, 2011.
Easy to take YTL Cement private
Stock Name: YTL
Company Name: YTL CORPORATION BHD
Larger Smaller Reset KUALA LUMPUR: YTL Corp Bhd may be able to take YTL Cement Bhd private without a single EGM, leaving little room for minority shareholders of the latter to voice their issues.
YTL Corp is seeking a waiver from the 'requirement to seek shareholder approval' from Bursa Malaysia on grounds that it has obtained authorisation from its shareholders at its AGM on Nov 29 to issue up to 10% of its current issued shares without the need for shareholder approval.
Likewise, YTL Cement may not have an EGM either as its company secretary Ho Say Keng told The Edge Financial Daily in an email reply. 'This is a voluntary offer and no EGM is required of YTL Cement,' he said.
To recap, YTL Cement shareholders have been offered 3.17 YTL Corp shares for each YTL Cement share at an offer price of RM4.50, and 1.56 YTL Corp shares for each RM1 in irredeemable convertible unsecured loan stocks (Iculs) at an offer price of RM2.21.
YTL Corp only has to issue 747.19 million shares or 5.3% of its current issued shares for the 47.8% of YTL Cement's shares that aren't already owned or held by any parties acting in concert, according to estimates by The Edge Financial Daily.
The Minority Shareholder Watchdog Group (MSWG) told The Edge Financial Daily that while the offer looks good for YTL Corp, it has some concerns for YTL Cement's minority shareholders and may not get a chance to raise them if neither company has an EGM.
When YTL Cement shareholders exchange their shares for YTL Corp shares, they will face a drop in dividend yield, an increase in price-to-book (P/B) and increased gearing, said MSWG.
YTL Corp says YTL Cement's privatisation is a voluntary offer and no EGM is required. The company is seeking a waiver from 'requirement to seek shareholder approval' from Bursa Malaysia. A report by Affin Investment Bank Bhd believes the valuation appears fair and explained, 'The proposed offer is not an exit offer but rather a merger of two companies and thus no premium was offered.'
Affin's report reiterated Tan Sri Francis Yeoh's justification: it will provide trading liquidity to minority shareholders.
However, YTL Cement shareholders will experience a drop in dividend yield, said MSWG, based on YTL Cement's price of RM4.50 and historical dividend payouts of 13 sen and YTL Corp shares at RM1.42 and a historical dividend payout of two sen.
The offer will also create many odd-lots due to the odd conversion ratio, said MSWG, and hopes the odd-lots will be eliminated by distributing a dividend.
A separate report by RHB Research Institute Bhd released yesterday noted, 'The lack of acquisition premium above the existing share price suggests that YTL Corp is not going all-out to privatise YTL Cement.'
A more ideal time to privatise YTL Cement would have been after November 2012, when the existing Iculs, which are 97% held by YTL Corp and related parties, can be converted into YTL Cement shares at a better conversion rate, said RHB.
RHB believes that the offer will go unconditional since the current stake held by YTL Corp and related parties of 52.8% already exceeds the 50% threshold rate.
A market observer said the crucial shareholding level to watch will be whether YTL Corp receives a minimum acceptance of 90%, to guarantee a full acquisition and the delisting of YTL Cement.
Any acceptance above that level would result in a mandatory acquisition of YTL Cement, including the shares of dissenting minority shareholders.
It is worth noting that the top 30 shareholders of YTL Cement already own 86.5% of the company, as at Sept 30.
RHB maintained its 'market perform' recommendation for YTL Cement shares, which it gave a fair value of RM4.75.
According to Affin's report, the acquisition will boost YTL Corp's earnings per share for FY13 by 6% from 11.9 sen to 12.6 sen.
Accounting for a 15% holding company discount, Affin raised its target price from RM1.55 to RM1.65 and maintains an 'add' call, and noted, 'The acquisition will be value enhancing given the lower price-to-earnings ratio acquisition price tag.'
On a separate note, MSWG told The Edge Financial Daily that it had voiced concerns about the disparity between YTL Cement's strong earnings growth and flat dividend payout at the company's AGM on Nov 29.
'YTL Cement had explained that the cash will be conserved in view that the global economy will be bad next year,' said a MSWG spokesperson.
YTL Cement's earnings have been growing at an average rate of 21% per annum for the past four years, compared to dividends which have been relatively flat and averaged 16.2 sen in the same period. This has led to a build-up to RM1.2 billion in YTL Cement's cash pile, compared to RM866 million in debt.
YTL Cement yesterday closed 14 sen lower or by 3.04% to RM4.46 from RM4.60, while YTL Corp remained unchanged at RM1.54.
This article appeared in The Edge Financial Daily, December 21, 2011.
Company Name: YTL CORPORATION BHD
| Research House: AFFIN | Price Call: BUY | Target Price: 1.65 |
Larger Smaller Reset KUALA LUMPUR: YTL Corp Bhd may be able to take YTL Cement Bhd private without a single EGM, leaving little room for minority shareholders of the latter to voice their issues.
YTL Corp is seeking a waiver from the 'requirement to seek shareholder approval' from Bursa Malaysia on grounds that it has obtained authorisation from its shareholders at its AGM on Nov 29 to issue up to 10% of its current issued shares without the need for shareholder approval.
Likewise, YTL Cement may not have an EGM either as its company secretary Ho Say Keng told The Edge Financial Daily in an email reply. 'This is a voluntary offer and no EGM is required of YTL Cement,' he said.
To recap, YTL Cement shareholders have been offered 3.17 YTL Corp shares for each YTL Cement share at an offer price of RM4.50, and 1.56 YTL Corp shares for each RM1 in irredeemable convertible unsecured loan stocks (Iculs) at an offer price of RM2.21.
YTL Corp only has to issue 747.19 million shares or 5.3% of its current issued shares for the 47.8% of YTL Cement's shares that aren't already owned or held by any parties acting in concert, according to estimates by The Edge Financial Daily.
The Minority Shareholder Watchdog Group (MSWG) told The Edge Financial Daily that while the offer looks good for YTL Corp, it has some concerns for YTL Cement's minority shareholders and may not get a chance to raise them if neither company has an EGM.
When YTL Cement shareholders exchange their shares for YTL Corp shares, they will face a drop in dividend yield, an increase in price-to-book (P/B) and increased gearing, said MSWG.
YTL Corp says YTL Cement's privatisation is a voluntary offer and no EGM is required. The company is seeking a waiver from 'requirement to seek shareholder approval' from Bursa Malaysia. A report by Affin Investment Bank Bhd believes the valuation appears fair and explained, 'The proposed offer is not an exit offer but rather a merger of two companies and thus no premium was offered.'
Affin's report reiterated Tan Sri Francis Yeoh's justification: it will provide trading liquidity to minority shareholders.
However, YTL Cement shareholders will experience a drop in dividend yield, said MSWG, based on YTL Cement's price of RM4.50 and historical dividend payouts of 13 sen and YTL Corp shares at RM1.42 and a historical dividend payout of two sen.
The offer will also create many odd-lots due to the odd conversion ratio, said MSWG, and hopes the odd-lots will be eliminated by distributing a dividend.
A separate report by RHB Research Institute Bhd released yesterday noted, 'The lack of acquisition premium above the existing share price suggests that YTL Corp is not going all-out to privatise YTL Cement.'
A more ideal time to privatise YTL Cement would have been after November 2012, when the existing Iculs, which are 97% held by YTL Corp and related parties, can be converted into YTL Cement shares at a better conversion rate, said RHB.
RHB believes that the offer will go unconditional since the current stake held by YTL Corp and related parties of 52.8% already exceeds the 50% threshold rate.
A market observer said the crucial shareholding level to watch will be whether YTL Corp receives a minimum acceptance of 90%, to guarantee a full acquisition and the delisting of YTL Cement.
Any acceptance above that level would result in a mandatory acquisition of YTL Cement, including the shares of dissenting minority shareholders.
It is worth noting that the top 30 shareholders of YTL Cement already own 86.5% of the company, as at Sept 30.
RHB maintained its 'market perform' recommendation for YTL Cement shares, which it gave a fair value of RM4.75.
According to Affin's report, the acquisition will boost YTL Corp's earnings per share for FY13 by 6% from 11.9 sen to 12.6 sen.
Accounting for a 15% holding company discount, Affin raised its target price from RM1.55 to RM1.65 and maintains an 'add' call, and noted, 'The acquisition will be value enhancing given the lower price-to-earnings ratio acquisition price tag.'
On a separate note, MSWG told The Edge Financial Daily that it had voiced concerns about the disparity between YTL Cement's strong earnings growth and flat dividend payout at the company's AGM on Nov 29.
'YTL Cement had explained that the cash will be conserved in view that the global economy will be bad next year,' said a MSWG spokesperson.
YTL Cement's earnings have been growing at an average rate of 21% per annum for the past four years, compared to dividends which have been relatively flat and averaged 16.2 sen in the same period. This has led to a build-up to RM1.2 billion in YTL Cement's cash pile, compared to RM866 million in debt.
YTL Cement yesterday closed 14 sen lower or by 3.04% to RM4.46 from RM4.60, while YTL Corp remained unchanged at RM1.54.
This article appeared in The Edge Financial Daily, December 21, 2011.
Streamlining its Assets
Stock Name: BSTEAD
Company Name: BOUSTEAD HOLDINGS BHD
Company Name: BOUSTEAD HOLDINGS BHD
| Research House: TA | Price Call: BUY | Target Price: 6.21 |
Felda Eyeing KFC, QSR Too?
Stock Name: KFC
Company Name: KFC HOLDINGS (M) BHD
Company Name: KFC HOLDINGS (M) BHD
| Research House: OSK | Price Call: HOLD | Target Price: 3.97 |
Tanjung Offshore (Sell): Disappointment ahead
Stock Name: TGOFFS
Company Name: TANJUNG OFFSHORE BHD
Downgrade to Sell, TP cut to RM0.70 (-14%, to 0.6x PBV), ahead of a disappointing 4Q results, hit by a confluence of issues at its engineering equipment division. For this, we forecast TOFF to end 2011 with a higher net loss of RM14m, making consensus and our initial estimates untenable. The stock is unlikely to re-rate until the company shows tangible signs of managing costs effectively.
Maybank research (21 December 2011)
Click here for full report
Company Name: TANJUNG OFFSHORE BHD
| Research House: MAYBANK | Price Call: SELL | Target Price: 0.70 |
Downgrade to Sell, TP cut to RM0.70 (-14%, to 0.6x PBV), ahead of a disappointing 4Q results, hit by a confluence of issues at its engineering equipment division. For this, we forecast TOFF to end 2011 with a higher net loss of RM14m, making consensus and our initial estimates untenable. The stock is unlikely to re-rate until the company shows tangible signs of managing costs effectively.
Maybank research (21 December 2011)
Click here for full report
Aeon Credit gains on firm 3Q earnings
Stock Name: AEONCR
Company Name: AEON CREDIT SERVICE (M) BHD
Larger Smaller Reset KUALA LUMPUR (Dec 21): Aeon Credit Services (M) Bhd shares advanced on Wednesday after its net profit for the third quarter ended Nov 20, 2011 rose 57.4% to RM25.25 million from RM16.04 million a year earlier, due mainly to growth in revenue.
At 9.40am, Aeon Credit was up three sen to RM6.60 with 34,500 shares traded.
The company said on Tuesday that its revenue for the quarter was up 31.7% to RM89.81 million from RM68.18 million.
Earnings per share for the quarter was 21.05 sen compared to 13.37 sen in 2010, while net assets per share was RM2.53.
For the nine months ended Nov 20, Aeon Credit's net profit increased to RM67.89 million from RM44.03 million in 2010, while revenue jumped to RM249.99 million from RM195.88 million.
Reviewing its performance, Aeon Credit said the increase in revenue was due mainly to growth in business and receivabled based on increased financing transaction volume as a result of marketing and promotion activities during the festive periods.
OSK Research in a note Dec 21 said Aeon Credit's 9MFY12 earnings were above consensus and its full-year forecasts.
Revenue and net profit expanded by 27.6% and 54.3% year-on-year due to better performance from personal financing, credit card and other income in conjunction with Hari Raya festival, it sid.
'However, credit card base growth slowed down due to BNM regulation on credit card which will take effect next year. ''NPL trended up to 1.93% which is still well below the industry average. CAR stood at 20.8%.
'Maintain Buy with a higher fair value of RM7.20 as we roll forward our valuation to FY13 EPS pegged to 2-year PE band of 9 times,' it said.
Company Name: AEON CREDIT SERVICE (M) BHD
| Research House: OSK | Price Call: BUY | Target Price: 7.20 |
Larger Smaller Reset KUALA LUMPUR (Dec 21): Aeon Credit Services (M) Bhd shares advanced on Wednesday after its net profit for the third quarter ended Nov 20, 2011 rose 57.4% to RM25.25 million from RM16.04 million a year earlier, due mainly to growth in revenue.
At 9.40am, Aeon Credit was up three sen to RM6.60 with 34,500 shares traded.
The company said on Tuesday that its revenue for the quarter was up 31.7% to RM89.81 million from RM68.18 million.
Earnings per share for the quarter was 21.05 sen compared to 13.37 sen in 2010, while net assets per share was RM2.53.
For the nine months ended Nov 20, Aeon Credit's net profit increased to RM67.89 million from RM44.03 million in 2010, while revenue jumped to RM249.99 million from RM195.88 million.
Reviewing its performance, Aeon Credit said the increase in revenue was due mainly to growth in business and receivabled based on increased financing transaction volume as a result of marketing and promotion activities during the festive periods.
OSK Research in a note Dec 21 said Aeon Credit's 9MFY12 earnings were above consensus and its full-year forecasts.
Revenue and net profit expanded by 27.6% and 54.3% year-on-year due to better performance from personal financing, credit card and other income in conjunction with Hari Raya festival, it sid.
'However, credit card base growth slowed down due to BNM regulation on credit card which will take effect next year. ''NPL trended up to 1.93% which is still well below the industry average. CAR stood at 20.8%.
'Maintain Buy with a higher fair value of RM7.20 as we roll forward our valuation to FY13 EPS pegged to 2-year PE band of 9 times,' it said.
December 20, 2011
HLIB Research 20 December 2011 (Sunway; Traders Brief)
Stock Name: SUNWAY
Company Name: SUNWAY BERHAD
Company Name: SUNWAY BERHAD
| Research House: HLG | Price Call: BUY | Target Price: 3.12 |
Sunway (BUY)
The sun shines in Medini
'''' Sunway announced a JV with Khazanah to acquire 2 parcels of leased land measuring 691 acres in Medini Iskandar (see Figure #1) worth RM745.3m (RM25.73/sq ft) with an estimated GDV of RM12bn over 10 years. The deal is expected to be concluded by May-12.
'''' We are positive on this development as it will boost Sunway's total land bank by 30% to 2,798 acres, while its effective GDV will also rise by 48% to RM20.7bn.
'''' We maintain our BUY call on Sunway with a TP of RM3.12.
''
''KLCI: Holding well above 1450''
'''' Technical readings have turned better following yesterday 11.6 pts gain to stage a strong breakout above the downtrend line. However, given the persistent negative headlines from Europe and thin volume ahead of the year-end holidays, we expect the local bourse to remain volatile albeit with an upward bias due to the window dressing activities. Crucial support is the 50-d SMA or uptrend line near 1458 whilst resistance zones are 1487-1502.
''
DJIA: Crucial 11500 support levels''''
'''' Following the breakdown of 200-d SMA (11936), mid Bollinger band (11831) and 50-d SMA (11821) supports coupled with the negative technical readings, the Dow may retest lower uptrend line and 100-d SMA supports near 11500. A violation of 11500 will push index lower towards a more solid support of lower Bollinger band at 11250. Immediate resistance levels are 11936-12284 levels.
''
Margin recovery for rubber gloves in 2012
Stock Name: KOSSAN
Company Name: KOSSAN RUBBER INDUSTRIES BHD
Larger Smaller Reset Rubber gloves
Latex is trading below RM7 per kg mainly due to softer demand from tyre manufacturers and traders in China affected by tighter credit. Assuming raw material prices remain low and cost savings are retained (instead of passing them on to customers), we expect glovemakers' earnings and margins will recover substantially.
We believe they will certainly try to retain as much of the savings as possible, after having absorbed higher raw material costs previously. Our sensitivity analysis shows that every 1% drop in raw material cost could lift earnings by'' about 3% (assuming all cost savings are retained).
The US dollar has strengthened against the ringgit to 3.15 (+7% from August 2011's low of 2.97) and this will translate to higher export revenue. Our sensitivity analysis shows that every 1% increase in the greenback against the ringgit could lift earnings by about 5%.
Glovemakers are likely to hedge their US dollar exposures, and given the volatile currency trend this could give rise to wide fluctuations in translation gains or losses upon maturity or marking-to-market.
We remain cautious on the sustainability of current raw material prices. As such, we are maintaining our 2012 latex and nitrile price assumptions (average of RM8.30 per kg for latex and RM5.20 per kg for nitrile) for now. The start of the wintering season from February to May, when latex production is usually lower, coupled with potential pent up demand from car manufacturers could drive up latex and synthetic rubber prices again.
At this juncture, it is still early to impute a strong earnings rebound for Kossan Rubber Industries Bhd and Hartalega Holdings Bhd, while our earnings forecast for Top Glove Corp Bhd is at the higher end of consensus estimates. We like Hartalega ('buy', target price: RM6.50) for its superior operating margins (27% against 16% industry average) and return on equity (36% against 22% industry average).
We maintain 'hold' for Top Glove (TP: RM4.05) and Kossan (TP: RM2.70). The key to margin recovery is sustainability of raw material prices, which could trigger upgrades. ' HwangDBS Vickers Research, Dec 20
This article appeared in The Edge Financial Daily, December 21, 2011.
Company Name: KOSSAN RUBBER INDUSTRIES BHD
| Research House: HWANGDBS | Price Call: HOLD | Target Price: 2.70 |
Larger Smaller Reset Rubber gloves
Latex is trading below RM7 per kg mainly due to softer demand from tyre manufacturers and traders in China affected by tighter credit. Assuming raw material prices remain low and cost savings are retained (instead of passing them on to customers), we expect glovemakers' earnings and margins will recover substantially.
We believe they will certainly try to retain as much of the savings as possible, after having absorbed higher raw material costs previously. Our sensitivity analysis shows that every 1% drop in raw material cost could lift earnings by'' about 3% (assuming all cost savings are retained).
The US dollar has strengthened against the ringgit to 3.15 (+7% from August 2011's low of 2.97) and this will translate to higher export revenue. Our sensitivity analysis shows that every 1% increase in the greenback against the ringgit could lift earnings by about 5%.
Glovemakers are likely to hedge their US dollar exposures, and given the volatile currency trend this could give rise to wide fluctuations in translation gains or losses upon maturity or marking-to-market.
We remain cautious on the sustainability of current raw material prices. As such, we are maintaining our 2012 latex and nitrile price assumptions (average of RM8.30 per kg for latex and RM5.20 per kg for nitrile) for now. The start of the wintering season from February to May, when latex production is usually lower, coupled with potential pent up demand from car manufacturers could drive up latex and synthetic rubber prices again.
At this juncture, it is still early to impute a strong earnings rebound for Kossan Rubber Industries Bhd and Hartalega Holdings Bhd, while our earnings forecast for Top Glove Corp Bhd is at the higher end of consensus estimates. We like Hartalega ('buy', target price: RM6.50) for its superior operating margins (27% against 16% industry average) and return on equity (36% against 22% industry average).
We maintain 'hold' for Top Glove (TP: RM4.05) and Kossan (TP: RM2.70). The key to margin recovery is sustainability of raw material prices, which could trigger upgrades. ' HwangDBS Vickers Research, Dec 20
This article appeared in The Edge Financial Daily, December 21, 2011.
Margin recovery for rubber gloves in 2012
Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD
Larger Smaller Reset Rubber gloves
Latex is trading below RM7 per kg mainly due to softer demand from tyre manufacturers and traders in China affected by tighter credit. Assuming raw material prices remain low and cost savings are retained (instead of passing them on to customers), we expect glovemakers' earnings and margins will recover substantially.
We believe they will certainly try to retain as much of the savings as possible, after having absorbed higher raw material costs previously. Our sensitivity analysis shows that every 1% drop in raw material cost could lift earnings by'' about 3% (assuming all cost savings are retained).
The US dollar has strengthened against the ringgit to 3.15 (+7% from August 2011's low of 2.97) and this will translate to higher export revenue. Our sensitivity analysis shows that every 1% increase in the greenback against the ringgit could lift earnings by about 5%.
Glovemakers are likely to hedge their US dollar exposures, and given the volatile currency trend this could give rise to wide fluctuations in translation gains or losses upon maturity or marking-to-market.
We remain cautious on the sustainability of current raw material prices. As such, we are maintaining our 2012 latex and nitrile price assumptions (average of RM8.30 per kg for latex and RM5.20 per kg for nitrile) for now. The start of the wintering season from February to May, when latex production is usually lower, coupled with potential pent up demand from car manufacturers could drive up latex and synthetic rubber prices again.
At this juncture, it is still early to impute a strong earnings rebound for Kossan Rubber Industries Bhd and Hartalega Holdings Bhd, while our earnings forecast for Top Glove Corp Bhd is at the higher end of consensus estimates. We like Hartalega ('buy', target price: RM6.50) for its superior operating margins (27% against 16% industry average) and return on equity (36% against 22% industry average).
We maintain 'hold' for Top Glove (TP: RM4.05) and Kossan (TP: RM2.70). The key to margin recovery is sustainability of raw material prices, which could trigger upgrades. ' HwangDBS Vickers Research, Dec 20
This article appeared in The Edge Financial Daily, December 21, 2011.
Company Name: TOP GLOVE CORPORATION BHD
| Research House: HWANGDBS | Price Call: HOLD | Target Price: 4.05 |
Larger Smaller Reset Rubber gloves
Latex is trading below RM7 per kg mainly due to softer demand from tyre manufacturers and traders in China affected by tighter credit. Assuming raw material prices remain low and cost savings are retained (instead of passing them on to customers), we expect glovemakers' earnings and margins will recover substantially.
We believe they will certainly try to retain as much of the savings as possible, after having absorbed higher raw material costs previously. Our sensitivity analysis shows that every 1% drop in raw material cost could lift earnings by'' about 3% (assuming all cost savings are retained).
The US dollar has strengthened against the ringgit to 3.15 (+7% from August 2011's low of 2.97) and this will translate to higher export revenue. Our sensitivity analysis shows that every 1% increase in the greenback against the ringgit could lift earnings by about 5%.
Glovemakers are likely to hedge their US dollar exposures, and given the volatile currency trend this could give rise to wide fluctuations in translation gains or losses upon maturity or marking-to-market.
We remain cautious on the sustainability of current raw material prices. As such, we are maintaining our 2012 latex and nitrile price assumptions (average of RM8.30 per kg for latex and RM5.20 per kg for nitrile) for now. The start of the wintering season from February to May, when latex production is usually lower, coupled with potential pent up demand from car manufacturers could drive up latex and synthetic rubber prices again.
At this juncture, it is still early to impute a strong earnings rebound for Kossan Rubber Industries Bhd and Hartalega Holdings Bhd, while our earnings forecast for Top Glove Corp Bhd is at the higher end of consensus estimates. We like Hartalega ('buy', target price: RM6.50) for its superior operating margins (27% against 16% industry average) and return on equity (36% against 22% industry average).
We maintain 'hold' for Top Glove (TP: RM4.05) and Kossan (TP: RM2.70). The key to margin recovery is sustainability of raw material prices, which could trigger upgrades. ' HwangDBS Vickers Research, Dec 20
This article appeared in The Edge Financial Daily, December 21, 2011.
Margin recovery for rubber gloves in 2012
Stock Name: HARTA
Company Name: HARTALEGA HOLDINGS BHD
Larger Smaller Reset Rubber gloves
Latex is trading below RM7 per kg mainly due to softer demand from tyre manufacturers and traders in China affected by tighter credit. Assuming raw material prices remain low and cost savings are retained (instead of passing them on to customers), we expect glovemakers' earnings and margins will recover substantially.
We believe they will certainly try to retain as much of the savings as possible, after having absorbed higher raw material costs previously. Our sensitivity analysis shows that every 1% drop in raw material cost could lift earnings by'' about 3% (assuming all cost savings are retained).
The US dollar has strengthened against the ringgit to 3.15 (+7% from August 2011's low of 2.97) and this will translate to higher export revenue. Our sensitivity analysis shows that every 1% increase in the greenback against the ringgit could lift earnings by about 5%.
Glovemakers are likely to hedge their US dollar exposures, and given the volatile currency trend this could give rise to wide fluctuations in translation gains or losses upon maturity or marking-to-market.
We remain cautious on the sustainability of current raw material prices. As such, we are maintaining our 2012 latex and nitrile price assumptions (average of RM8.30 per kg for latex and RM5.20 per kg for nitrile) for now. The start of the wintering season from February to May, when latex production is usually lower, coupled with potential pent up demand from car manufacturers could drive up latex and synthetic rubber prices again.
At this juncture, it is still early to impute a strong earnings rebound for Kossan Rubber Industries Bhd and Hartalega Holdings Bhd, while our earnings forecast for Top Glove Corp Bhd is at the higher end of consensus estimates. We like Hartalega ('buy', target price: RM6.50) for its superior operating margins (27% against 16% industry average) and return on equity (36% against 22% industry average).
We maintain 'hold' for Top Glove (TP: RM4.05) and Kossan (TP: RM2.70). The key to margin recovery is sustainability of raw material prices, which could trigger upgrades. ' HwangDBS Vickers Research, Dec 20
This article appeared in The Edge Financial Daily, December 21, 2011.
Company Name: HARTALEGA HOLDINGS BHD
| Research House: HWANGDBS | Price Call: BUY | Target Price: 6.50 |
Larger Smaller Reset Rubber gloves
Latex is trading below RM7 per kg mainly due to softer demand from tyre manufacturers and traders in China affected by tighter credit. Assuming raw material prices remain low and cost savings are retained (instead of passing them on to customers), we expect glovemakers' earnings and margins will recover substantially.
We believe they will certainly try to retain as much of the savings as possible, after having absorbed higher raw material costs previously. Our sensitivity analysis shows that every 1% drop in raw material cost could lift earnings by'' about 3% (assuming all cost savings are retained).
The US dollar has strengthened against the ringgit to 3.15 (+7% from August 2011's low of 2.97) and this will translate to higher export revenue. Our sensitivity analysis shows that every 1% increase in the greenback against the ringgit could lift earnings by about 5%.
Glovemakers are likely to hedge their US dollar exposures, and given the volatile currency trend this could give rise to wide fluctuations in translation gains or losses upon maturity or marking-to-market.
We remain cautious on the sustainability of current raw material prices. As such, we are maintaining our 2012 latex and nitrile price assumptions (average of RM8.30 per kg for latex and RM5.20 per kg for nitrile) for now. The start of the wintering season from February to May, when latex production is usually lower, coupled with potential pent up demand from car manufacturers could drive up latex and synthetic rubber prices again.
At this juncture, it is still early to impute a strong earnings rebound for Kossan Rubber Industries Bhd and Hartalega Holdings Bhd, while our earnings forecast for Top Glove Corp Bhd is at the higher end of consensus estimates. We like Hartalega ('buy', target price: RM6.50) for its superior operating margins (27% against 16% industry average) and return on equity (36% against 22% industry average).
We maintain 'hold' for Top Glove (TP: RM4.05) and Kossan (TP: RM2.70). The key to margin recovery is sustainability of raw material prices, which could trigger upgrades. ' HwangDBS Vickers Research, Dec 20
This article appeared in The Edge Financial Daily, December 21, 2011.
AMMB-Kurnia deal likely earnings neutral for bank
Stock Name: AMMB
Company Name: AMMB HOLDINGS BHD
Larger Smaller Reset AmBank Group
(Dec 20, RM5.70)
Maintain neutral with target price RM6.26: We do not view AMMB's proposed acquisition of Kurnia Insurans (M) Bhd as a re-rating catalyst as it is unlikely to boost its earnings in the near term. Based on our estimate, the deal is expected to be largely earnings neutral for AMMB.
Given AMMB's keen interest in expanding its insurance business, we are not surprised by its proposal to acquire Kurnia. We continue to value AMMB at a 10% discount to its discounted dividend model (DDM) value and rate the stock a 'neutral'. We prefer Malayan Banking Bhd.
AmG Insurance, AMMB's 51%-owned general insurance unit, has submitted an application to Bank Negara to enter into an agreement to acquire 100% of Kurnia Insurans from Kurnia Asia. No details on the pricing were given by the company but it was reported that Kurnia is likely to sell at 2.5 to three times book value, valuing it at RM1.8 billion to RM2.2 billion.
Kurnia is one of the major general insurers in Malaysia, with total gross premiums of RM814.6 million in 9MFY11. It recorded a net profit of RM36.8 million in the nine-month period.
AmG will emerge as the second largest general insurer in Malaysia following the acquisition of Kurnia. It was the fifth largest in 2010. However, this will have minimal impact on earnings in the near term.
We estimate the impact on the bottom line to be between -RM4 million and +RM3 million (or 0.2% of FY13 net profit) based on the assumptions of: (i) a purchase consideration of RM1.8 billion to RM2.2 billion; (ii) financing cost of 5%; and (iii) an FY12 net profit of RM73.7 million for Kurnia based on consensus estimates.
However, this is in line with its plan to increase exposure to motor insurance. The reported valuation range of 2.5 to three times price-to-book value is on the high side compared with previous transactions ' 1.6 times for Pacific Insurance Bhd and 2.2 times for Jerneh Insurance Bhd.
We do not advise investors to buy AMMB given the poorer prospects for the investment banking business and loan growth, which overwhelm the benefits from the continuous group revamp. Also, the proposed acquisition of Kurnia will not act as a catalyst in the near term. ' CIMB IB Research, Dec 20
This article appeared in The Edge Financial Daily, December 21, 2011.
Company Name: AMMB HOLDINGS BHD
| Research House: CIMB | Price Call: HOLD | Target Price: 6.26 |
Larger Smaller Reset AmBank Group
(Dec 20, RM5.70)
Maintain neutral with target price RM6.26: We do not view AMMB's proposed acquisition of Kurnia Insurans (M) Bhd as a re-rating catalyst as it is unlikely to boost its earnings in the near term. Based on our estimate, the deal is expected to be largely earnings neutral for AMMB.
Given AMMB's keen interest in expanding its insurance business, we are not surprised by its proposal to acquire Kurnia. We continue to value AMMB at a 10% discount to its discounted dividend model (DDM) value and rate the stock a 'neutral'. We prefer Malayan Banking Bhd.
AmG Insurance, AMMB's 51%-owned general insurance unit, has submitted an application to Bank Negara to enter into an agreement to acquire 100% of Kurnia Insurans from Kurnia Asia. No details on the pricing were given by the company but it was reported that Kurnia is likely to sell at 2.5 to three times book value, valuing it at RM1.8 billion to RM2.2 billion.
Kurnia is one of the major general insurers in Malaysia, with total gross premiums of RM814.6 million in 9MFY11. It recorded a net profit of RM36.8 million in the nine-month period.
AmG will emerge as the second largest general insurer in Malaysia following the acquisition of Kurnia. It was the fifth largest in 2010. However, this will have minimal impact on earnings in the near term.
We estimate the impact on the bottom line to be between -RM4 million and +RM3 million (or 0.2% of FY13 net profit) based on the assumptions of: (i) a purchase consideration of RM1.8 billion to RM2.2 billion; (ii) financing cost of 5%; and (iii) an FY12 net profit of RM73.7 million for Kurnia based on consensus estimates.
However, this is in line with its plan to increase exposure to motor insurance. The reported valuation range of 2.5 to three times price-to-book value is on the high side compared with previous transactions ' 1.6 times for Pacific Insurance Bhd and 2.2 times for Jerneh Insurance Bhd.
We do not advise investors to buy AMMB given the poorer prospects for the investment banking business and loan growth, which overwhelm the benefits from the continuous group revamp. Also, the proposed acquisition of Kurnia will not act as a catalyst in the near term. ' CIMB IB Research, Dec 20
This article appeared in The Edge Financial Daily, December 21, 2011.
Sunway in JV with Khazanah in RM12b development
Stock Name: SUNWAY
Company Name: SUNWAY BERHAD
Larger Smaller Reset Sunway Berhad
(Dec 20, RM2.43)
Maintain neutral with target price of RM2.55 from RM2.28: Sunway Bhd's wholly-owned subsidiary Sunway City Sdn Bhd (Suncity) has entered into an agreement with Dayang Bunting Sdn Bhd, a wholly-owned subsidiary of Khazanah Nasional Bhd to establish a JV company, Semerah Cahaya Sdn Bhd (SCSB).
SCSB will acquire two parcels of land in Zone F, Medini Iskandar, measuring 276.4ha from Global Capital and Development Sdn Bhd for a total purchase consideration of up to RM745.3 million.
A 99-year lease interest will be granted by Iskandar Investment Bhd commencing in 2012. The lease will be extended for a further 30 years with the extension premium estimated to be 10% of the final purchase consideration.
SCSB will conceptualise, manage, implement and develop the land into an integrated township development. Sunway will manage the overall operations of SCSB, with a management team lead by a CEO and COO appointed by Sunway.
SCSB will also apply for approved developer status to enjoy various incentives such as exemption on income tax, bumiputera quota, low-cost housing requirement and minimum threshold of foreign purchase.
The purchase consideration of RM745.3 million will be funded by equity investment of RM360 million and borrowings of RM385 million. Additional equity of RM198 million and borrowings of RM215 million will be invested to finance the lease extension premium of the land and working capital of the project.
Sunway's initial equity investment is RM136.8 million or 38% of the total shareholdings of the JV. Nevertheless, Sunway will subscribe to additional shares worth RM198 million in four annual tranches of RM49.5 million, commencing on the 18th month anniversary of the date of the lease purchase agreement. With the additional subscription, Sunway will eventually own 60% of SCSB.
The purchase consideration of RM745.3 million translates into RM24.70 psf. The land price in Zone F is significantly lower than the RM65 psf average land price of UEM Land's Lifestyle Retail Mall and Residence@ Medini North in a more established location.
UEM's project is directly connected to Legoland, hence should command a premium over Sunway's land. The land price in Zone F is also lower than Eastern & Oriental Bhd's Medini Central Wellness Township. Average land price for the Wellness Township was RM38 psf.
Zone F's purchase price could go slightly lower as there will be a further discount on the purchase price if the transaction is completed before May 2012. ' MIDF Research, Dec 20
This article appeared in The Edge Financial Daily, December 21, 2011.
Company Name: SUNWAY BERHAD
| Research House: MIDF | Price Call: HOLD | Target Price: 2.55 |
Larger Smaller Reset Sunway Berhad
(Dec 20, RM2.43)
Maintain neutral with target price of RM2.55 from RM2.28: Sunway Bhd's wholly-owned subsidiary Sunway City Sdn Bhd (Suncity) has entered into an agreement with Dayang Bunting Sdn Bhd, a wholly-owned subsidiary of Khazanah Nasional Bhd to establish a JV company, Semerah Cahaya Sdn Bhd (SCSB).
SCSB will acquire two parcels of land in Zone F, Medini Iskandar, measuring 276.4ha from Global Capital and Development Sdn Bhd for a total purchase consideration of up to RM745.3 million.
A 99-year lease interest will be granted by Iskandar Investment Bhd commencing in 2012. The lease will be extended for a further 30 years with the extension premium estimated to be 10% of the final purchase consideration.
SCSB will conceptualise, manage, implement and develop the land into an integrated township development. Sunway will manage the overall operations of SCSB, with a management team lead by a CEO and COO appointed by Sunway.
SCSB will also apply for approved developer status to enjoy various incentives such as exemption on income tax, bumiputera quota, low-cost housing requirement and minimum threshold of foreign purchase.
The purchase consideration of RM745.3 million will be funded by equity investment of RM360 million and borrowings of RM385 million. Additional equity of RM198 million and borrowings of RM215 million will be invested to finance the lease extension premium of the land and working capital of the project.
Sunway's initial equity investment is RM136.8 million or 38% of the total shareholdings of the JV. Nevertheless, Sunway will subscribe to additional shares worth RM198 million in four annual tranches of RM49.5 million, commencing on the 18th month anniversary of the date of the lease purchase agreement. With the additional subscription, Sunway will eventually own 60% of SCSB.
The purchase consideration of RM745.3 million translates into RM24.70 psf. The land price in Zone F is significantly lower than the RM65 psf average land price of UEM Land's Lifestyle Retail Mall and Residence@ Medini North in a more established location.
UEM's project is directly connected to Legoland, hence should command a premium over Sunway's land. The land price in Zone F is also lower than Eastern & Oriental Bhd's Medini Central Wellness Township. Average land price for the Wellness Township was RM38 psf.
Zone F's purchase price could go slightly lower as there will be a further discount on the purchase price if the transaction is completed before May 2012. ' MIDF Research, Dec 20
This article appeared in The Edge Financial Daily, December 21, 2011.
Dawn of a golden era for BHIC
Stock Name: BHIC
Company Name: BOUSTEAD HEAVY INDUSTRIES CORP
Boustead Heavy Industries Corp Bhd
(Dec 19, RM3.16)
Maintain buy at RM3.15 with target price of RM4: BHIC announced last Friday that its 21%-owned associate, Boustead Naval Shipyard (BN Shipyard), has received a letter of award from the Ministry of Defence to design, construct and deliver six units of second generation patrol vessels littoral combat ships (frigate class) with a ceiling price of RM9 billion. The delivery of the first vessel is estimated in 2017 with the other vessels to be delivered every six months thereafter. Each vessel weighs 2,400 tonnes and can transport one EC275 helicopter made by Eurocopter, a subsidiary of EADS.
We had expected the contract to come by end-2011. The major surprise was the higher than expected contract value of RM9 billion as opposed to our initial forecast of RM7 billion. We believe the earnings impact on BHIC will not be confined to its associate company level given its leading role in weaponry, combat systems, vessel design, naval electronics and so on, which could be undertaken on a sub-contract basis from BN Shipyard. With the massive contract, it has expunged concerns over BHIC earnings visibility.
We maintain our earnings forecast and target price for now pending details on the contract's implementation schedule and higher than expected ceiling. BHIC is a clear bargain, trading at only 9.5 times FY12 earnings per share despite its enviable monopolistic position in naval vessel construction and maintenance for the Royal Malaysian Navy. We expect BHIC to be re-rated following this news, which has been long overdue. ' HwangDBS Vickers Research, Dec 19
This article appeared in The Edge Financial Daily, December 20, 2011.
Company Name: BOUSTEAD HEAVY INDUSTRIES CORP
| Research House: HWANGDBS | Price Call: BUY | Target Price: 4.00 |
Boustead Heavy Industries Corp Bhd
(Dec 19, RM3.16)
Maintain buy at RM3.15 with target price of RM4: BHIC announced last Friday that its 21%-owned associate, Boustead Naval Shipyard (BN Shipyard), has received a letter of award from the Ministry of Defence to design, construct and deliver six units of second generation patrol vessels littoral combat ships (frigate class) with a ceiling price of RM9 billion. The delivery of the first vessel is estimated in 2017 with the other vessels to be delivered every six months thereafter. Each vessel weighs 2,400 tonnes and can transport one EC275 helicopter made by Eurocopter, a subsidiary of EADS.
We had expected the contract to come by end-2011. The major surprise was the higher than expected contract value of RM9 billion as opposed to our initial forecast of RM7 billion. We believe the earnings impact on BHIC will not be confined to its associate company level given its leading role in weaponry, combat systems, vessel design, naval electronics and so on, which could be undertaken on a sub-contract basis from BN Shipyard. With the massive contract, it has expunged concerns over BHIC earnings visibility.
We maintain our earnings forecast and target price for now pending details on the contract's implementation schedule and higher than expected ceiling. BHIC is a clear bargain, trading at only 9.5 times FY12 earnings per share despite its enviable monopolistic position in naval vessel construction and maintenance for the Royal Malaysian Navy. We expect BHIC to be re-rated following this news, which has been long overdue. ' HwangDBS Vickers Research, Dec 19
This article appeared in The Edge Financial Daily, December 20, 2011.
Tomei Cons a 'buy', says OSK Retail
Stock Name: TOMEI
Company Name: TOMEI CONSOLIDATED BHD
OSK Retail Research has made a "buy" call on Tomei Consolidated Bhd with a target price of 95 sen in view of the company's stable earnings growth over the years.
In a research note today, OSK said Tomei also has attractive projected financial year (FY) 2012 dividend yield of 7.1 per cent and undemanding valuation of less than three times FY2012 earnings forecast.
"The company has strong collaboration with Parkson in the local market and will be tapping Parkson's regional presence in Vietnam and China," it said.
To date, the gold and jewellery retailer has 17 retail kiosks in Vietnam and China, which were mainly located in Parkson shopping complexes, it said.
It said the group planned to open two outlets each in these countries.
"There are 11 new stores in Tomei's outlet pipeline for the local market, while it is expected to close down about three or four non-performing outlets," OSK said.
At mid-day today, the stock was flat at 77 sen. -- Bernama
Company Name: TOMEI CONSOLIDATED BHD
| Research House: OSK | Price Call: BUY | Target Price: 0.95 |
OSK Retail Research has made a "buy" call on Tomei Consolidated Bhd with a target price of 95 sen in view of the company's stable earnings growth over the years.
In a research note today, OSK said Tomei also has attractive projected financial year (FY) 2012 dividend yield of 7.1 per cent and undemanding valuation of less than three times FY2012 earnings forecast.
"The company has strong collaboration with Parkson in the local market and will be tapping Parkson's regional presence in Vietnam and China," it said.
To date, the gold and jewellery retailer has 17 retail kiosks in Vietnam and China, which were mainly located in Parkson shopping complexes, it said.
It said the group planned to open two outlets each in these countries.
"There are 11 new stores in Tomei's outlet pipeline for the local market, while it is expected to close down about three or four non-performing outlets," OSK said.
At mid-day today, the stock was flat at 77 sen. -- Bernama
AMMB Holdings (Hold): To review proposal on Kurnia Insurans
Stock Name: AMMB
Company Name: AMMB HOLDINGS BHD
Still early days. That AMMB could potentially acquire Kurnia Insurans Malaysia Bhd (KIMB) is a very preliminary consideration. Much depends on how negotiations develop and depending on pricing. Our scenario below points to little impact (+1%) on AMMB's earnings. We maintain our Hold call on AMMB with an unchanged TP of RM6.30 (1.6x CY12 P/BV, ROAE: 13.5%)
Maybank research (20 December 2011)
Click here for full report
Company Name: AMMB HOLDINGS BHD
| Research House: MAYBANK | Price Call: HOLD | Target Price: 6.30 |
Still early days. That AMMB could potentially acquire Kurnia Insurans Malaysia Bhd (KIMB) is a very preliminary consideration. Much depends on how negotiations develop and depending on pricing. Our scenario below points to little impact (+1%) on AMMB's earnings. We maintain our Hold call on AMMB with an unchanged TP of RM6.30 (1.6x CY12 P/BV, ROAE: 13.5%)
Maybank research (20 December 2011)
Click here for full report
Perdana Petroleum (Hold): A cleaner house
Stock Name: PERDANA
Company Name: PERDANA PETROLEUM BERHAD
Tidying up has begun, but the outlook is still challenging. Cashflows have eased following the refinancing of its RM130m debt, originally due in 2012-13. While this is a positive, the operating outlook remains a challenge. Old vessels continue to drag on earnings, while the direction over its 27% stake in Petra Energy remains unclear. Perdana remains a Hold with an unchanged RM0.70 TP (0.7x P/BV).
Maybank research (20 December 2011)
Click here for full report
Company Name: PERDANA PETROLEUM BERHAD
| Research House: MAYBANK | Price Call: HOLD | Target Price: 0.70 |
Tidying up has begun, but the outlook is still challenging. Cashflows have eased following the refinancing of its RM130m debt, originally due in 2012-13. While this is a positive, the operating outlook remains a challenge. Old vessels continue to drag on earnings, while the direction over its 27% stake in Petra Energy remains unclear. Perdana remains a Hold with an unchanged RM0.70 TP (0.7x P/BV).
Maybank research (20 December 2011)
Click here for full report
HDBSVR keeps Buy call on Sunway, TP of RM3.30
Stock Name: SUNWAY
Company Name: SUNWAY BERHAD
KUALA LUMPUR (Dec 20): Hwang DBS Vickers Research said Sunway Bhd's valuations remain cheap at 8.0 times FY12F price-to-earnings and 1.0 times price-to-book value on the back of three-year EPS CAGR of 9%.
'We maintain our BUY rating and TP of RM3.30 based on a 10% discount to SOP valuation,' it said on Tuesday.
On Monday, Sunway announced a joint venture with Khazanah Nasional to acquire a 691-acre land lease in Zone F Medini Iskandar for RM745 million (or RM25 per sq ft).
'This appears cheap versus recent land deals of RM38-RM65 psf. It will initially own 38% in the JV, rising to 60% in 54 months via additional equity subscriptions,' it said.
HDBSVR said while there will be no immediate impact on Sunway's balance sheet (net gearing of 0.5 times) and profit will be equity accounted (38%), impact will be more significant upon reaching 60% stake.
'We do not discount the possibility of a rights issue later given the magnitude of the deal. The total GDV for this 10-year project is RM12 billion with an implied pricing for the residential portion at RM400 psf and commercial at 15%-20% higher. We think this is conservative given its prime location at Medini Living, the southern most tip of Medini Node, existing infrastructure in place and just five minutes drive from the second link,' it said.
Company Name: SUNWAY BERHAD
| Research House: HWANGDBS | Price Call: BUY | Target Price: 3.30 |
KUALA LUMPUR (Dec 20): Hwang DBS Vickers Research said Sunway Bhd's valuations remain cheap at 8.0 times FY12F price-to-earnings and 1.0 times price-to-book value on the back of three-year EPS CAGR of 9%.
'We maintain our BUY rating and TP of RM3.30 based on a 10% discount to SOP valuation,' it said on Tuesday.
On Monday, Sunway announced a joint venture with Khazanah Nasional to acquire a 691-acre land lease in Zone F Medini Iskandar for RM745 million (or RM25 per sq ft).
'This appears cheap versus recent land deals of RM38-RM65 psf. It will initially own 38% in the JV, rising to 60% in 54 months via additional equity subscriptions,' it said.
HDBSVR said while there will be no immediate impact on Sunway's balance sheet (net gearing of 0.5 times) and profit will be equity accounted (38%), impact will be more significant upon reaching 60% stake.
'We do not discount the possibility of a rights issue later given the magnitude of the deal. The total GDV for this 10-year project is RM12 billion with an implied pricing for the residential portion at RM400 psf and commercial at 15%-20% higher. We think this is conservative given its prime location at Medini Living, the southern most tip of Medini Node, existing infrastructure in place and just five minutes drive from the second link,' it said.
AMMB, KAB Submits Application to Commence M&A Talks
Stock Name: KURASIA
Company Name: KURNIA ASIA BHD
Company Name: KURNIA ASIA BHD
| Research House: TA | Price Call: SELL | Target Price: 0.65 |
Landbanking Down Under
Stock Name: TRC
Company Name: TRC SYNERGY BHD
Company Name: TRC SYNERGY BHD
| Research House: OSK | Price Call: TRADING BUY | Target Price: 0.76 |
Finally, It's Here!
Stock Name: KURASIA
Company Name: KURNIA ASIA BHD
Company Name: KURNIA ASIA BHD
| Research House: OSK | Price Call: BUY | Target Price: 0.68 |
YTL Cement falls below YTL Corp offer price in privatisation move
Stock Name: YTLCMT
Company Name: YTL CEMENT BHD
Larger Smaller Reset KUALA LUMPUR (Dec 20): Shares of YTL CEMENT BHD [] fell on Tuesday to below the offer price of RM4.50 made by YTL CORPORATION BHD [] in its privatisation exercise while sentiment was also dented by the overall cautious market.
At 3.37pm, YTL Cement was down 14 sen to RM4.46 while YTL Corp lost 8.0 sen to RM1.46 at 3.37pm.
The FBM KLCI fell 12.27 points to 1,465.51. Turnover was 1.20 billion shares valued at RM818.41 million. Declining stocks led advancers 440 to 285 while 267 counters were unchanged.
On Monday, YTL Corp extended a voluntary share exchange offer to YTL Cement shareholders on the basis of RM4.50 for each YTL Cement share, or 3.17 shares of 10 sen each in YTL Corp for every one ordinary share of 50 sen each held in YTL Cement.
RHB Research Institute said as at Nov 30, YTL Corp and its related parties owned a combined 52.8% in YTL Cement.
The research house said based on current stake held by YTLCorp and its related parties, the share exchange offer would likely go unconditional as the hurdle rate is just to achieve a more than 50% stake in YTL Cement.
'We believe some minority shareholders might take this opportunity to exit due to the low liquidity issues of YTL Cement shares. At the reference price of RM4.50, YTL Cement is valued at about 6.0 times EV/EBITDA on a fully-diluted basis, lower than Lafarge current valuation of about 8.5 times EV/EBITDA.
'We do note that minority shareholders will receive the more liquid YTL Corp shares, which then provides the more attractive exit route,' it said.
RHB Research said its indicative fair value remained at RM4.75 based on 10 times fully-diluted CY2012 EPS of 47.5sen, at 4.0 times multiple discount to its one-year forward target PER for the cement sub-sector to reflect YTL Cement's relatively low share liquidity.
'Due to the recent run-up in share price and limited upside to our fair value, we hence downgrade our recommendation on YTL Cement to Market Perform. In the near term, we believe share price of YTL Cement is more likely to track YTL Corp's share price due to this proposed share exchange offer. At current YTL Corp's share price of RM1.54, YTL Cement is effectively valued at RM4.88 based on the terms of the proposed share exchange offer,' it said.
Company Name: YTL CEMENT BHD
| Research House: RHB | Price Call: HOLD | Target Price: 4.75 |
Larger Smaller Reset KUALA LUMPUR (Dec 20): Shares of YTL CEMENT BHD [] fell on Tuesday to below the offer price of RM4.50 made by YTL CORPORATION BHD [] in its privatisation exercise while sentiment was also dented by the overall cautious market.
At 3.37pm, YTL Cement was down 14 sen to RM4.46 while YTL Corp lost 8.0 sen to RM1.46 at 3.37pm.
The FBM KLCI fell 12.27 points to 1,465.51. Turnover was 1.20 billion shares valued at RM818.41 million. Declining stocks led advancers 440 to 285 while 267 counters were unchanged.
On Monday, YTL Corp extended a voluntary share exchange offer to YTL Cement shareholders on the basis of RM4.50 for each YTL Cement share, or 3.17 shares of 10 sen each in YTL Corp for every one ordinary share of 50 sen each held in YTL Cement.
RHB Research Institute said as at Nov 30, YTL Corp and its related parties owned a combined 52.8% in YTL Cement.
The research house said based on current stake held by YTLCorp and its related parties, the share exchange offer would likely go unconditional as the hurdle rate is just to achieve a more than 50% stake in YTL Cement.
'We believe some minority shareholders might take this opportunity to exit due to the low liquidity issues of YTL Cement shares. At the reference price of RM4.50, YTL Cement is valued at about 6.0 times EV/EBITDA on a fully-diluted basis, lower than Lafarge current valuation of about 8.5 times EV/EBITDA.
'We do note that minority shareholders will receive the more liquid YTL Corp shares, which then provides the more attractive exit route,' it said.
RHB Research said its indicative fair value remained at RM4.75 based on 10 times fully-diluted CY2012 EPS of 47.5sen, at 4.0 times multiple discount to its one-year forward target PER for the cement sub-sector to reflect YTL Cement's relatively low share liquidity.
'Due to the recent run-up in share price and limited upside to our fair value, we hence downgrade our recommendation on YTL Cement to Market Perform. In the near term, we believe share price of YTL Cement is more likely to track YTL Corp's share price due to this proposed share exchange offer. At current YTL Corp's share price of RM1.54, YTL Cement is effectively valued at RM4.88 based on the terms of the proposed share exchange offer,' it said.
December 19, 2011
High Costs Dampen Margins
Stock Name: NTPM
Company Name: NTPM HOLDINGS BHD
Company Name: NTPM HOLDINGS BHD
| Research House: OSK | Price Call: HOLD | Target Price: 0.48 |
Planes, Trains and Automobiles
Stock Name: MMCCORP
Company Name: MMC CORPORATION BHD
Company Name: MMC CORPORATION BHD
| Research House: OSK | Price Call: BUY | Target Price: 3.65 |
Back in the Game!
Stock Name: BSTEAD
Company Name: BOUSTEAD HOLDINGS BHD
Company Name: BOUSTEAD HOLDINGS BHD
| Research House: TA | Price Call: BUY | Target Price: 6.21 |
Stellar 1Q/FY12 results above expectations. Maintain Buy Call, with higher Target Price.
Stock Name: POHKONG
Company Name: POH KONG HOLDINGS BHD
Company Name: POH KONG HOLDINGS BHD
| Research House: MERCURY | Price Call: BUY | Target Price: 0.58 |
Top Glove improves q-o-q
Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD
Top Glove Corp Bhd
(Dec 19, RM4.48)
Maintain buy at RM4.44 and target price of RM5.26: Year-on-year earnings were 12.8% lower. Earnings before interest and tax (Ebit) margin was also lower from 8.4% to 6.8%. The lower earnings were not a surprise because the latex price averaged RM8.34 per kg compared with RM7.19 per kg in the same period the previous year.
With the slightly lower latex prices in the current quarter, quarter-on-quarter (q-o-q) Ebit has shown improvement of 45% over the previous quarter. Ebit margin has also improved to 6.8% from 4.8%.
The latex price peaked in early 2011 at RM10.90 per kg. It has since moved south and stabilised in the range of RM6.60 to RM6.80 per kg.
Despite the 1QFY12 figures coming in lower than our forecast, we are maintaining our FY12 earnings estimates at RM159.5 million as we expect earnings to improve in the next quarter given the lower latex price. Our FY13 earnings estimate is also unchanged at RM169.7 million. The company's financial position has improved with net cash per share of 34 sen compared with the previous quarter's 24 sen.
Target price is unchanged at RM5.26 based on an average five-year price-earnings ratio band of 20 times over CY12 earnings per share of 26.3 sen. In our previous sector update dated Nov 15, we upgraded the rubber glove sector to 'overweight' and Top Glove to 'buy' following the sharp decrease in latex price. Maintain 'buy'. ' BIMB Research, Dec 19
This article appeared in The Edge Financial Daily, December 20, 2011.
Company Name: TOP GLOVE CORPORATION BHD
| Research House: BIMB | Price Call: BUY | Target Price: 5.26 |
Top Glove Corp Bhd
(Dec 19, RM4.48)
Maintain buy at RM4.44 and target price of RM5.26: Year-on-year earnings were 12.8% lower. Earnings before interest and tax (Ebit) margin was also lower from 8.4% to 6.8%. The lower earnings were not a surprise because the latex price averaged RM8.34 per kg compared with RM7.19 per kg in the same period the previous year.
With the slightly lower latex prices in the current quarter, quarter-on-quarter (q-o-q) Ebit has shown improvement of 45% over the previous quarter. Ebit margin has also improved to 6.8% from 4.8%.
The latex price peaked in early 2011 at RM10.90 per kg. It has since moved south and stabilised in the range of RM6.60 to RM6.80 per kg.
Despite the 1QFY12 figures coming in lower than our forecast, we are maintaining our FY12 earnings estimates at RM159.5 million as we expect earnings to improve in the next quarter given the lower latex price. Our FY13 earnings estimate is also unchanged at RM169.7 million. The company's financial position has improved with net cash per share of 34 sen compared with the previous quarter's 24 sen.
Target price is unchanged at RM5.26 based on an average five-year price-earnings ratio band of 20 times over CY12 earnings per share of 26.3 sen. In our previous sector update dated Nov 15, we upgraded the rubber glove sector to 'overweight' and Top Glove to 'buy' following the sharp decrease in latex price. Maintain 'buy'. ' BIMB Research, Dec 19
This article appeared in The Edge Financial Daily, December 20, 2011.
RHB Research maintains market perform on Kurnia Asia, FV 51c
Stock Name: KURASIA
Company Name: KURNIA ASIA BHD
KUALA LUMPUR (Dec 20): RHB Research Institute is maintaining its market peform on Kurnia Asia with a fair value of 51 sen, based on an unchanged FY12 target PER of 10 times.
The research house said on Tuesday that Kurnia Asia had submitted an application to Bank Negara Malaysia (BNM) to review a proposal to enter into an agreement with AmG Insurance for the possible disposal of its 100% equity interest in Kurnia Insurance Malaysia (KIMB).
'We believe the valuation of KIMB would range around 2.0 times to 2.5 times price-to-book value based on the recent mergers and acquisitions in the general insurance sector.
'Assuming a full cash transaction, this implies that KIMB could be sold at RM1.4 billion to RM1.7 billion based on FY2010 book value,' it said.
RHB Research said until BNM approves the deal, it is maintaining its fair value for Kurnia at 51 sen, based on an unchanged FY12 target PER of 10 times and is reiterating our Market Perform call on the stock.
Company Name: KURNIA ASIA BHD
| Research House: RHB | Price Call: HOLD | Target Price: 0.51 |
KUALA LUMPUR (Dec 20): RHB Research Institute is maintaining its market peform on Kurnia Asia with a fair value of 51 sen, based on an unchanged FY12 target PER of 10 times.
The research house said on Tuesday that Kurnia Asia had submitted an application to Bank Negara Malaysia (BNM) to review a proposal to enter into an agreement with AmG Insurance for the possible disposal of its 100% equity interest in Kurnia Insurance Malaysia (KIMB).
'We believe the valuation of KIMB would range around 2.0 times to 2.5 times price-to-book value based on the recent mergers and acquisitions in the general insurance sector.
'Assuming a full cash transaction, this implies that KIMB could be sold at RM1.4 billion to RM1.7 billion based on FY2010 book value,' it said.
RHB Research said until BNM approves the deal, it is maintaining its fair value for Kurnia at 51 sen, based on an unchanged FY12 target PER of 10 times and is reiterating our Market Perform call on the stock.
Gamuda (Buy): Strong start to FY12
Stock Name: GAMUDA
Company Name: GAMUDA BHD
Overshot expectations. 1QFY12 net profit of RM132m (+50% YoY) was 28% of both our and consensus full-year forecast. Construction margin, at 11.2% gross, surprised on the upside, and management expects this to sustain. We maintain our earnings forecasts and RNAV-based TP of RM4.10 for now. Gamuda is our top pick in construction, as we remain confident of a major order book win over the near-term.
Maybank research (19 December 2011)
Click here for full report
Company Name: GAMUDA BHD
| Research House: MAYBANK | Price Call: BUY | Target Price: 4.10 |
Overshot expectations. 1QFY12 net profit of RM132m (+50% YoY) was 28% of both our and consensus full-year forecast. Construction margin, at 11.2% gross, surprised on the upside, and management expects this to sustain. We maintain our earnings forecasts and RNAV-based TP of RM4.10 for now. Gamuda is our top pick in construction, as we remain confident of a major order book win over the near-term.
Maybank research (19 December 2011)
Click here for full report
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