Company Name: AIRASIA BHD
| Research House: HLG | Price Call: BUY | Target Price: 4.24 |
Finding a niche in IBS
'''' Kimlun is poised to benefit from the gradual structural shift in the construction sector towards the Industrialised Building Systems (IBS) method. The Government has already mandated that 70% of public-sector buildings will have to be made up of IBS content while private sector projects will have to attain 50% IBS content by 2015.
'''' Demand for Kimlun's precast concrete products will continue to be strong due to the continued expansion of Singapore's MRT network. The project along with other infrastructure works is estimated to be worth ~S$50bn over the next 10 years. With only two major competitors, there is clear visibility for order book to be replenished.
'''' Outstanding construction orderbook stands at RM900m, translating to 1.8x FY10's construction revenue and 2.4x market cap. Meanwhile, outstanding orders for the manufacturing division stood at RM80m, which translates to 1.6x FY10's manufacturing revenue.
'''' By applying a FY12 P/E multiple of 9x based on companies of similar size as Kimlun, it would imply that Kimlun's share price should be trading around RM1.95, providing potential upside of 20.4% from the current price level.
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AirAsia (BUY '')
AirAsia to Share-Swap with MAS
'''' Tune Air (own 23.1% AirAsia) will swap shares with MAS.
'''' Tony Fernandes (through Tune Air) will own 20% stake in MAS and have control over MAS management. Khazanah to remain as MAS largest shareholder (currently 69.4%).
'''' There will be no direct change in AirAsia's shareholdings.
'''' Positive on the move as the collaboration will enable both airlines to leverage on each other strengths while complementing each other weaknesses.
'''' AirAsia will be leveraging on MAS existing subsidiaries for ground handling services, MRO services etc.
'''' Achieve bigger bargaining power and better economy of scales as well as improve market competitiveness.
'''' Common understanding in determining routes and fares (i.e. less competition) between MAS, Firefly and AirAsia.
'''' However, we do have concerns on the priority in determining the route between the MAS, Firefly and AirAsia.
'''' Recommendation: Maintain buy with TP of RM4.24.
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MAS (Under Review)
MAS to Share-Swap with AirAsia
'''' MAS will swap shares with Tune Air (own 23.1% AirAsia) in a bid to pull MAS out of red.
'''' Tony Fernandes (through Tune Air) will become one of MAS largest shareholders with 20% stake. Khazanah is likely to remain as MAS largest shareholder (currently 69.4%).
'''' There is likely a management revamp in MAS.
'''' Positive on the move as the collaboration will enable both airlines to leverage on each other strengths while complementing each other weaknesses.
'''' MAS will be able to leverage on AirAsia's management expertise in further trimming its cost and improve its revenue.
'''' Achieve bigger bargaining power and better economy of scales as well as improve market competitiveness.
'''' Common understanding in determining routes and fares (i.e. less competition) between MAS, Firefly and AirAsia.
'''' However, we do have concerns on the priority in determining the route between the MAS, Firefly and AirAsia.
'''' Recommendation: Under review pending details.
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FBM KLCI - Volatility to continue despite anticipating mild rebound
'''' Technically, short term KLCI outlook has turned more negative as the index is now trading below the 200-d SMA (near 1531 pts). Nonetheless, the Hammer formation does suggests potential technical rebound and for the medium to longer-term, we remain positive unless the YTD low of 1470 pts solid base is taken out. Initial support is seen at the 1500 pts. Relief rally targets are 1531-1550 pts. ''
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Dow Jones - All eyes on FOMC meeting on 9 Aug''
'''' For Dow, the 1st major support is 11k psychological mark, followed by 10860 (61.8% FR from 12876 and 9614). A more solid support is situated at 10383 (76.4% FR). Relief rally targets are 11994 (200-d SMA) and 12250 (50-d SMA) levels.
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Trading Idea - Technical rebound plays:
'''' Although our market is expected to have a rocky start this week, further losses would aggravate oversold market conditions. We see further dips could be buying opportunity for risk takers, on the back of strong commitment from the government to drive domestic expansionary measures and ahead of the incoming 13th general election. As such, bargain hunters should look to accumulate on weakness blue chips, GLC-related and M&A-related stocks (please refer to the technical rebound plays table) for an eventual technical rebound.
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