Company Name: MALAYSIAN RESOURCES CORP
| Research House: HLG | Price Call: BUY | Target Price: 2.22 |
Liquidity Injection, Bad Omen Or Good Karma?
'''' Similar move in Mar 08 resulted in a 1-1/2-mth rally but plunged thereafter, especially after Lehman collapse.
'''' Macro conditions are different, unlikely to see meltdown.''
'''' If history repeats, CI could hit 1600-1632 by CNY.
'''' Though history unlikely to follow scrip, potential for ST positive market exist given generally positive returns in Dec and CNY, local funds underinvested and pre-election rally.
'''' Announcement of GE may see selling ahead but also provide opportunity if GE results are better-than-expected.
'''' 6-mth later, though another collapse is unlikely, investors could turn jittery again given execution risk from EU, especially if the market had a good run.
'''' Technical readings suggest inflection point for a ST more positive market is 1503 with target projection of 1600.
'''' Maintain end 2011 and 2012 targets at 1440 and 1555 respectively and remain defensive but market could overshoot our 2012 target during 1H of next year.
'''' If trigger inflection point, stocks (from our ICPM - see our picks in the full report) with decent fundamentals, 3-mth avg daily vol of > 4m, Beta > 1.5 and potential return > 10% likely to outperform.
'''' Although index-linked heavyweights will lead, we also enlisted stocks (see full report) from our universe that are expected to outperform the general market.
''
MRCB (BUY)
Breathing life into KL river
'''' Ekovest-MRCB JV (60:40 stake) has entered into a PDP agreement with the Government for the River of Life (RoL) project. The appointment as the PDP is for a 3-year period and the JV will earn a maximum fee of 1% of the total estimated RoL project cost of RM2.2bn and will also enjoy monetary incentives with respect to the river rehabilitation and beautification works.
'''' The PDP fee is 1% and translates to an immaterial sum of RM22m. However, we can reasonably assume that the JV will not bear the risks of cost overrun or LAD penalty. We view this positively as we are not too bullish on the river cleaning stage as it involves too many government divisions (>20) and is faced with difficulties in educating the public on proper waste disposal.
'''' Our FY11-FY13 earnings were tweaked downwards by between -1% to -8% to reflect slower construction/ property progress. However, we maintain a BUY call on MRCB with a higher TP of RM2.22 based on SOP valuation. The higher TP is largely due to rolling over the assigned construction P/E to next 2-year's average earnings.
''
KLCI: Choppy ahead of EU summit
'''' Ahead of the EU summit and the S&P's downgrade warnings on euro zone countries en masse, the local bourse will waver for the rest of this week. Immediate resistance stays at 200-d SMA (1503 pts) whilst supports fall on mid Bollinger band (1465) and 100-day SMA (1471) levels.
''
TRC: Poised for a triangle breakout
'''' TRC is still consolidating in a huge triangle pattern but the stock is ripe for a stronger rebound, once the 50-day and mid Bollinger band (both at 0.62 now) are breached. Expect momentum to pick up strongly toward RM0.70 (38.2% FR) and RM0.75 (downtrend line from 2008) once the candles swing above the RM0.64 level. Supports are RM0.59 (uptrend line) and RM0.57 (61.8% FR). Cut loss below RM0.57.
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