Company Name: MALAYSIAN AIRLINE SYSTEM BHD
| Research House: HLG | Price Call: SELL | Target Price: 1.19 |
Stock Name: AIRASIA
Company Name: AIRASIA BHD
| Research House: HLG | Price Call: BUY | Target Price: 4.50 |
Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD
| Research House: HLG | Price Call: BUY | Target Price: 4.61 |
Stock Name: HSL
Company Name: HOCK SENG LEE BHD
| Research House: HLG | Price Call: BUY | Target Price: 2.09 |
TdC (BUY '')
Regional Expansion Plans Approved
'''' In yesterday's EGM, TdC's minority shareholders voted in approval of the proposed acquisition of a group of companies within the telco industry. Upon completion, the acquisitions will effectively transition TdC into a regional telco player.
'''' Comments: The solid poll results (more than 75% voted in favor of all the resolutions) showed strong shareholder' support and confidence in TdC's long term growth strategy and leadership of the management team.
'''' Going forward, TdC is required to seek approval from High Court, Securities Commission and creditors before the overall proposal can materialize. This is targeted to complete by February 2012.
'''' In view of the approval, we expect TdC to be more transparent and provide guidance of the enlarged entity's business growth roadmap and strategy.
'''' Maintain our Buy call with unchanged SOP target price of RM0.82.
''
MAS (SELL '')
Gloomy Outlook
'''' Newly appointed MAS CEO, Ahmad Yahya highlighted the group immediate strategies:
1.'' Withdrawal from unprofitable routes ' long hauls;
2.'' Redeploy aircrafts into more profitable routes ' short and medium hauls;
3.'' Active yield management to improve overall revenues;
4.'' Aggressive in marketing and sales;
5.'' Upgrade fleets efficiency with new aircrafts delivery; and
6.'' Simultaneously return leased old aircrafts.
'''' Banking on potential cash back from PDP (Pre-Delivery Payment - currently RM3bn), management insisted that there will be no need for cash call exercise despite current low cash level at RM1bn.
'''' MAS expects 4Q11 to make operating losses due to weak forward bookings, downward trend in yields, and high jet fuel prices. On FY12 outlooks, MAS hopes to at least achieve operational breakevens.
'''' MAS has hedged 24% of its 4Q11 jet fuel requirement at US$122/bbl and 9% of FY12 requirement at US$127.
'''' Maintain SELL with unchanged TP of RM1.19.
''
AirAsia (BUY '')
Lookout for JVs Growth
'''' In line ' Reported 3Q11 core net profit of RM179m, in line with our expectations but behind consensus. 9M11 core earning was RM445.5m, achieved 60.7% of HLIB estimates and 54.5% of consensus. We expect strong 4Q11 earning due to seasonally stronger demand.
'''' 3Q11 passenger yield increased 17.2% qoq and 11.5% yoy due to the implementation of fuel surcharge since May 11. Yield is likely to improve further in 4Q11 due to seasonally stronger demand and ease of price competition.
'''' Maiden earnings contribution from AAE Travel (Expedia JV) of RM7.0m and Asian Aviation Centre (CAE JV) of RM3.1m despite commencement of operations during this quarter. We expect exponential growth from the JVs especially from AAE Travel and BIG Loyalty Program.
'''' Management seeking to bring forward A320s delivery or lease-in A320s in anticipation of strong demand growth in low cost travel in Asia region.
'''' Net gearing remained healthy at 1.5x.
'''' Jet fuel hedged at 30% for 4Q11 and 1H12 at average of US$125/bbl. We expect fuel surcharge to be maintained as jet fuel price remained high at US$126/bbl.
'''' Maintain BUY with unchanged TP of RM4.50.
''
Mudajaya Group (BUY '')
Commendable 3Q performance
'''' Mudajaya 9MFY11 PATAMI grew by 9% to RM164.5m (36.2 sen/share), making up 70% and 67% of both ours and consensus estimates respectively.
'''' Progress for the EP portion of the IPP project is 30% whereas civil works is 20%, on track for Phase 1 to be completed by end-2012.
'''' Overall, Mudajaya has an outstanding order book of ~RM2.3bn, translating to ~3.2x FY10's construction revenue and ~2x order book-to-market cap ratio.
'''' Maintain BUY call with TP of RM4.61 based on SOP valuation. The company is also trading below our base case valuation scenario (excludes the Indian IPP and additional RM300m equity outlay) which works out to RM2.87/share.
''
Hock Seng Lee (BUY '')
3Q11 on track for another record earnings
'''' HSL's 9MFY11 PATAMI grew by 18%, bringing earnings to RM61.1m (11.1 sen/share), making up 68% of both ours and consensus estimates. We consider results to be inline because we are expecting stronger sequential earnings growth for the final quarter as 4Q earnings in the past 2 years made up 30% of full year earnings.
'''' Overall, HSL has an outstanding order book of ~RM1bn, translating to ~2.2x FY10's construction revenue and ~1.4x order book-to-market cap ratio.
'''' We maintain our BUY call on HSL with a TP of RM2.09 based on 12x average FY11 and FY12 earnings.
''
KLCI: Taking cue from overseas
'''' We reiterate our view that investors should capitalize on rebounds to trim their positions or maintain a short-term trading oriented approach, given the start of year end school holidays and concerns about contagion from the debt crisis in Europe. Meanwhile, the failure of the super-committee to reach a compromise on a debt-reduction plan exposes the US sovereign rating to more downgrades as early as end Dec.
'''' Immediate resistance levels are 1357-1481 whilst supports fall on 1400-1420.
''
DJIA: Crucial short term supports near 11222-11344 levels
'''' Following the break below major supports of mid Bollinger band (11927) and 100-d SMA (11650), the Dow may retest lower supports at 11344 (50% FR) and 11122 (61.8%). Stronger supports are seen at 11000 and 10847 pts. Immediate resistance levels are 11967-12284 levels.
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