Company Name: HOCK SENG LEE BHD
| Research House: HLG | Price Call: BUY | Target Price: 2.09 |
Stock Name: TRC
Company Name: TRC SYNERGY BHD
| Research House: HLG | Price Call: BUY | Target Price: 0.72 |
Banking (OVERWEIGHT)
Sep Bank Stats ' Leading Indicators Slowed
'''' Loans growth accelerated due to business but household decelerated.'' Leading indicators lower mom but approval rate maintained at >50%.''
'''' LD ratio decreased slight, ample liquidity (RM273bn).
'''' Still supports loans growth, albeit at slower rate.'' Maintain 2011 projection at 12% and expect it to slow to 9% in 2012.''
'''' Business segment expected to continue support loans growth with ETP and Petronas awards.'' Household segment to sustain on back of budget goodies for lower income.
'''' Lending rate flat but pressure on NIM to continue, sustain loans growth to mitigate the impact.''
'''' Asset quality improved.'' Deterioration in certain purposes but none exhibits any alarming trend, mitigating major earnings risk.''
'''' Capital ratios declined but still robust to support growth, M&A and more active capital management.
'''' Maintain Overweight.'' Top picks remained Maybank and AFG.''
''
Hock Seng Lee (BUY)
Samalaju water treatment plant project
'''' HSL has secured a RM90.28m contract from Jabatan Kerja Raya Sarawak for a rural water treatment plant project located in Samalaju, Bintulu. The project is due to be completed by Apr-13.
'''' This contract also marks HSL's first successful tender to be directly awarded by RECODA (Regional Corridor Development Authority) and it indicates the growing presence HSL has within the Sarawak construction landscape.
'''' Overall, HSL has secured RM244m worth of new orders YTD, which comes close to our jobs win assumption of RM300m for FY11. The latest order will boost HSL's outstanding order book to ~RM1.06bn, translating to ~2.3x FY10's construction revenue and ~1.26x order book-to-market cap ratio.
'''' We maintain BUY call on HSL with a TP of RM2.09 with a positive outlook in the construction activities within the SCORE region and potential treasury share distribution (currently 5.9% of issued shares).
''
TRC Synergy (BUY)
Secures Lumut jetty upgrade project
'''' Following the major Bruneian job win, TRC continued to build up on their order book with a RM51.4m contract from Jabatan Kerja Raya to upgrade the infrastructures and facilities for the jetty operations in Lumut, Perak. Thus, bringing its YTD order book wins to RM483m.
'''' Overall, total outstanding order book climbed slightly to ~RM1.52bn, translating to ~4x FY10's revenue and ~5x order book-to-market cap ratio.
'''' We maintain our BUY call on TRC Synergy with a TP of RM0.72 in view of its huge order book which provides clear earnings visibility over the next few years and strong balance sheet (net cash of ~25 sen/share).
''
Highlights of BNM Statistics (Sep 2011)
'''' M1 growth softened slightly to 13.3% yoy (Aug: +13.7% yoy) while M3 growth picked up to 12.2% yoy (Aug: +10.3% yoy) despite decline in BNM reserves (Sep: -US$5.3bn; Aug: +US$0.9bn) due to outflows of foreign funds during the month.''
'''' We estimated that 3Q GDP had expanded by 4.5% yoy (2Q: +4.0%) judging from the resilient M1 growth of 13.9% yoy in 3Q coupled with the latest IPI and trade numbers.
'''' We reiterate our expectations of a higher 2H GDP growth of 4.7% on the back of resilient consumer spending and improvement in mining output. We maintain our GDP growth forecast of 4.6% for 2011 and 4.5% for 2012.
'''' We expect BNM to focus on growth agenda given the recent external developments while inflation is on moderation trend. We see BNM holding the OPR steady at 3.00% until end-2012.
'''' Indicators of liquidity in the banking system shot up in September reflecting higher level of excess cash holding after the massive equity selldown during the month.
''
Due for a pullback
'''' Technically speaking, after reversing path to cut above the downtrend line resistance, the FBM KLCI will probably stage a mild consolidation due to overbought indicators and weakening external backdrops. Immediate supports are 1430-1450 whilst resistances are 1500-1515.
''
Crude oil: A breakdown below uptrend line support will spur prices lower to US$85-87/barrel''
'''' In the wake of overbought technical readings, oil prices are expected to consolidate its gains near immediate uptrend line support near US$90.65 (61.8% FR from top $114.8 and low of $75.7). A break down will spur prices lower towards US$87 (mid Bollinger band) and US$85 (30-d SMA). For upside, oil prices will encounter stiff resistance at US$95-100.
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