GENM - Gaming in for year of planting and harvesting

Stock Name: GENM
Company Name: GENTING MALAYSIA BERHAD
Research House: CIMB

Gaming sector
Maintain overweight: Two themes are likely to hog the gaming spotlight in 2011 ' i) positive newsflow on mergers and acquisitions, and major corporate exercises, and ii) stronger-than-expected earnings growth for Genting Malaysia, given the stronger contribution from its US and UK assets. We continue to 'overweight' the Malaysian gaming sector, with Genting Bhd staying as our top pick. Given the emergence of more visible re-rating catalysts, we upgrade Genting Malaysia from neutral to outperform. Factors that could catalyse the sector include i) positive newsflow on regional expansion, and ii) stronger-than-expected earnings growth for regional operators.

There is upside to our earnings estimates for Genting Malaysia's US asset as there could be a change to the initial plan for 4,500 video lottery terminals for Resorts World New York (RWNY) which may be scaled back to house higher value electronic gaming tables. Also, we believe that patronage of its UK casinos will continue to improve given the revamping of its provincial casinos and rollout of the membership marketing programme.

There appears to be no let-up in Genting group's pursuit of regional assets. Hot on the heels of its UK and US expansion, Genting Malaysia is vying for the Vietnam market. Genting Singapore is looking at the Japanese market while Genting HK is exploring the Macau market. Separately, the potential entry of a strategic investor into B-Toto could be a prelude to a privatisation. Meanwhile, Multi-Purpose has acknowledged that it is considering a relisting of Magnum in early 2HCY11.

We now see more potential for an upward re-rating of Genting Malaysia, given i) stronger regional expansion newsflow, ii) stronger-than-expected earnings growth for its US and UK businesses, and iii) lower-than-expected cannibalisation by RWS. We upgrade the stock from neutral to outperform with a higher target price of RM4.30 (RM3.90 previously) as we no longer apply a 10% discount to its sum-of-parts (SOP) value.

We remain overweight on the Malaysian gaming sector. Our SOP target price for our top pick, Genting Bhd, is nudged up from RM15.20 to RM15.50 following our target price upgrade for Genting Malaysia. We continue to view the stock as a cheaper indirect play on Singapore's potential as a regional gaming and tourism hub. ' CIMB Research, Feb 7


This article appeared in The Edge Financial Daily, February 8, 2011.

BSTEAD - HDBSVR ups Boustead Holdings TP to RM8.10

Stock Name: BSTEAD
Company Name: BOUSTEAD HOLDINGS BHD
Research House: HLG

KUALA LUMPUR: Hwang DBS Vickers Research raised the target price of BOUSTEAD HOLDINGS BHD [] to RM8.10.

It said on Monday, Feb 7, the higher TP was derived after assuming higher values for some of its projects, for example the remaining 10 corporate lots in Mutiara Damansara at RM540 psf vs RM450 psf previously.

HDBSVR said another factor was the higher land values of RM15 psf for Bukit Raja vs RM7 psf previously.

It also factored in a lower discount of 15% (vs 20%) to its sum-of-parts value as it expected execution risk to be minimal given the strong earnings delivery.

'Valuation remains compelling at 9x FY11 PE and 1.2x P/NTA with 5.6% yields,' it said.

GENTING - Gaming in for year of planting and harvesting

Stock Name: GENTING
Company Name: GENTING BHD
Research House: CIMB

Gaming sector
Maintain overweight: Two themes are likely to hog the gaming spotlight in 2011 ' i) positive newsflow on mergers and acquisitions, and major corporate exercises, and ii) stronger-than-expected earnings growth for Genting Malaysia, given the stronger contribution from its US and UK assets. We continue to 'overweight' the Malaysian gaming sector, with Genting Bhd staying as our top pick. Given the emergence of more visible re-rating catalysts, we upgrade Genting Malaysia from neutral to outperform. Factors that could catalyse the sector include i) positive newsflow on regional expansion, and ii) stronger-than-expected earnings growth for regional operators.

There is upside to our earnings estimates for Genting Malaysia's US asset as there could be a change to the initial plan for 4,500 video lottery terminals for Resorts World New York (RWNY) which may be scaled back to house higher value electronic gaming tables. Also, we believe that patronage of its UK casinos will continue to improve given the revamping of its provincial casinos and rollout of the membership marketing programme.

There appears to be no let-up in Genting group's pursuit of regional assets. Hot on the heels of its UK and US expansion, Genting Malaysia is vying for the Vietnam market. Genting Singapore is looking at the Japanese market while Genting HK is exploring the Macau market. Separately, the potential entry of a strategic investor into B-Toto could be a prelude to a privatisation. Meanwhile, Multi-Purpose has acknowledged that it is considering a relisting of Magnum in early 2HCY11.

We now see more potential for an upward re-rating of Genting Malaysia, given i) stronger regional expansion newsflow, ii) stronger-than-expected earnings growth for its US and UK businesses, and iii) lower-than-expected cannibalisation by RWS. We upgrade the stock from neutral to outperform with a higher target price of RM4.30 (RM3.90 previously) as we no longer apply a 10% discount to its sum-of-parts (SOP) value.

We remain overweight on the Malaysian gaming sector. Our SOP target price for our top pick, Genting Bhd, is nudged up from RM15.20 to RM15.50 following our target price upgrade for Genting Malaysia. We continue to view the stock as a cheaper indirect play on Singapore's potential as a regional gaming and tourism hub. ' CIMB Research, Feb 7


This article appeared in The Edge Financial Daily, February 8, 2011.

GENTING - Genting slips as investors take profit

Stock Name: GENTING
Company Name: GENTING BHD
Research House: CIMB

KUALA LUMPUR: GENTING BHD [] gave up its early gains on Monday, Feb 7 as investors were quick to lock in gains despite a positive outlook from CIMB Research which had raised the target price to RM15.50.

At 12.06pm, Genting was down 36 sen to RM10.98, a contrast from the early high of RM11.52.

The decline in Genting's share price weighed on the market. The FBM KLCI was just up 2.04 points to 1,533.86. Turnover was 1.46 billion shares valued at RM1.08 billion. There were 362 gainers, 332 losers and 276 stocks unchanged.

CIMB Research said it remains Overweight on the Malaysian gaming sector.

'Our SOP target price for our top pick, Genting Bhd, is nudged up from RM15.20 to RM15.50 following our target price upgrade for Genting Malaysia. We continue to view the stock as a cheaper indirect play on Singapore's potential as a regional gaming and tourism hub,' it said.

KENCANA - Kencana rises on raised 'fair value'

Stock Name: KENCANA
Company Name: KENCANA PETROLEUM BHD
Research House: RHB

Kencana Petroleum Bhd, a Malaysian oil and gas services provider, rose to its highest level in almost three weeks after RHB Research Institute Sdn Bhd raised the stock’s “fair value” to RM2.85 from RM2.68.

The stock climbed 1.1 per cent to RM2.66 at 9:42 a.m. in Kuala Lumpur trading, on course for its highest close since Jan. 18. -- Bloomberg

MHB - New jobs potential on the horizon for MMHE

Stock Name: MHB
Company Name: MALAYSIA MARINE AND HEAVY ENG
Research House: ECMLIBRA

Malaysia Marine and Heavy Engineering Holdings Bhd
(Feb 7, RM6.10)
Maintain hold at RM6.06 with target price RM5.81: Last week, it was announced that Technip together with Daewoo Shipbuilding & Marine Engineering won a FEED (front-end engineering and design) contract for Petronas' floating liquefied natural gas (FLNG) vessel. The FEED contract for the one million tonnes per annum (mtpa) unit is due for completion by 2HCY11. Technip will likely team up with MMHE for the hull design and with Daewoo for the topside, industry sources said.

Besides that, MMHE is participating in a tender for the Block B-17 Muda-Jengka gas project in the Malaysia-Thailand JDA. Carigali-PTTEP Operating Company (CPOC) has invited yards to qualify for a contract to build three platforms. Formal tender documents are expected to be issued in 2QCY11 Potential contenders include, Kencana Petroleum, Sime Darby, MMHE, Thai Nippon Steel and Cuel.

News on the FLNG is positive as it will beef up the group's marine segment (where they provide vessel conversion and repair services) order book, which at the moment continues to be rather slow at less than RM30 million of jobs on a month to month basis. Another job that is due for the marine segment is the conversion of two tankers from MISC to become floating storage units (FSU's) that will serve the Petronas regasification project. On the platform job for B-17, we view that MMHE does have some capacity to take on small shallow water jobs in 2HCY11 as its Tangga Barat Topside job (14,505-tonnes) has recently been completed and it will complete the similar-sized Kinabalu topside by 1QCY12. Total annual tonnage of MMHE is 69,700 tonnes, and the Gemusut-Kakap FPS takes up 38,000mtpa. We estimate current available yard capacity at 17,000mtpa which could be a sizeable shallow water job worth up to RM800 million. To note, MMHE is also bidding for a platform job in Iraq and another gas compressor job in Thailand.

We view that replenishment of jobs such as the ones mentioned above have been captured into our estimates. More importantly, our concerns on order book replenishment are somewhat eased, given the active bidding activity by the group. Timing of job awards remains the only variable and it will be crucial that jobs in Turkmenistan are replenished on time (2QCY11) and the Malikai TLP also awarded on time (3/4QCY11).

MMHE currently trades at only 4.4% above our RM5.81 target price (TP) and we maintain our hold call for now citing that good news has been factored in. The only wildcard will be on merger and acquisition activity that may come into fruition in 2QCY11 but we will be writing separately on that. To note, our TP of RM5.81 is based on a P/E multiple of 20 times pegging CY11 EPS of 29 sen. ' ECM Libra Investment Research, Feb 7


This article appeared in The Edge Financial Daily, February 8, 2011.

JTIASA - Improving timber prices, rising FFB output to drive Jaya Tiasa's earnings

Stock Name: JTIASA
Company Name: JAYA TIASA HOLDINGS BHD
Research House: RHB

Jaya Tiasa Holdings Bhd
(Feb 7, RM5.00)
Maintain outperform at RM4.88 with fair value raised to RM6.30 (from RM5.78): A pickup in demand for tropical logs and the tight supply situation in Sarawak drove up average log selling prices for Jaya Tiasa from US$172/ cubic metre (m3) in May 2010 to US$221/m3 in Dec 2010. Jaya Tiasa believes that the current strong log prices will hold at least for another six months, even after log production in Sarawak starts to normalise as the seasonal wet weather conditions end.

Average selling prices achieved by Jaya Tiasa for its plywood division are lower compared with its peers (such as Ta Ann and WTK) due to the difference in product mix. Hence, despite rising plywood prices reported by the industry, average selling prices achieved by Jaya Tiasa have fluctuated from month to month.

Jaya Tiasa said it plans to increase its veneer sales to about 25%-30% of its production due to the better margin achieved compared with plywood. We are slightly sceptical on whether this could be achieved as we believe the current high selling price for veneer is only temporary due to log shortage problem in plywood mills in other countries.

Jaya Tiasa said that its fresh fruit bunch (FFB) production forecasts are conservative and that the forecasts could be as much as 25% lower than the actual production numbers. This is mainly due to its treatment of mature areas, where areas that mature during a particular financial year will only be reflected in the next financial year forecast.

Risks include timber and crude palm oil prices falling; a slower-than-expected recovery in the global economy; and significant increase in crude oil-related glue and logistics costs.

We raised our FY04/11-13 net profit by 7.7%-11.3%, after adjusting for: 1) Higher log prices; and 2) Lower plywood prices.

We raised our target price for Jaya Tiasa to RM6.30 (from RM5.78 previously) based on unchanged target PER of 12 times CY11 earnings for the timber division and 13x CY11 earnings for the plantation division. We like Jaya Tiasa as we expect strong earnings growth going forward due to the sharp increase in FFB production owing to increasing mature hectarage.

There is going to be a significant change to Jaya Tiasa's earnings profile, where its plantation division will contribute about 70%-75% of earnings from FY04/11 onwards. Maintain outperform. ' RHB Research, Feb 7


This article appeared in The Edge Financial Daily, February 8, 2011.

AXIATA - XL adopts new 30% dividend payout policy

Stock Name: AXIATA
Company Name: AXIATA GROUP BERHAD
Research House: ECMLIBRA

Axiata Group Bhd
(Feb 2, RM4.86)
Maintain buy at RM4.80 with target price RM6.25: XL Axiata's full-year FY10 core net profits of 3.04 trillion rupiah (RM1.02 billion) came in 7.3% higher than consensus estimates, driven by a strong revenue growth of 27% (three times higher than expected industry average of 8%) and earnings before interest, tax, depreciation and amortisation (Ebitda) margins of 52.7% (which expanded by 800 basis points year-on-year).

Voice revenue was flat quarter-on-quarter (q-o-q) as XL stimulated voice usage successfully (during off-peak hours) by bringing down voice tariffs in response to its competitors lowering down their prices. Data and value-added service revenue fell q-o-q after the peak Lebaran season in 3QFY10. SMS revenue however, continued to grow strongly by 17.1% q-o-q. Going forward, XL expects its FY11 revenue growth to be in line or faster than the industry average. XL however, cautioned that they should not grow too much faster than the market as they see this as a risk that could potentially backfire on themselves (by triggering competitive response by its rivals, that is lowering of tariffs, etc.).

Ebitda margins continued to expand by 60 basis points q-o-q, driven by a 27.3% q-o-q decline in infrastructure expense owing to a new calculation method for 2G frequency fee implemented since December 2010. This was however, offset by a 24.3% q-o-q increase in marketing cost as it intensified its promotional campaigns in 4QFY10. Going into FY11, management guided Ebitda margins to be more 50%, although worse-than expected competition could pose some downside risks to margins.

XL introduced a new dividend policy of a minimum 30% payout ratio of the preceding year's normalised net income. XL has the intention to progressively increase the payout ratio in the future, as its free cash flow improves further. With a 66.7% stake in XL, we estimate that Axiata would stand to pocket about RM205 million in dividends from XL this year.

We reiterate 'buy' on Axiata with a sum-of-parts derived target price of RM6.25. Valuations are not demanding, given that earnings are expected to grow strongly. The maiden dividends to be paid this year will act as a share price catalyst, going forward. Risks include potential loss of valuable 900Mhz spectrum for Celcom in the upcoming spectrum refarming exercise and worse-than-expected competition in Indonesia. ' ECM Libra Investment Research, Feb 2


This article appeared in The Edge Financial Daily, February 7, 2011.

AZRB - OSK Research maintains Buy on AZRB, TP RM1.55

Stock Name: AZRB
Company Name: AHMAD ZAKI RESOURCES BHD
Research House: OSK

KUALA LUMPUR: OSK Research is maintaining its Buy call on AHMAD ZAKI RESOURCES BHD [] (AZRB) at a target price of RM1.55 based on 12 times FY11 earnings.

AZRB announced on Monday, Jan 31 it had won a RM125 million contract for a public housing job in Terengganu.

OSK Research said on Wednesday, Feb 2 the management was positive on RM500 million to RM600 million in new wins this year. The potential jobs include packages of the East Coast Expressway (RM140 million) and private finance initiative campus job (RM400 million).

'The approved sale of EPIC at RM112 million would move AZRB into a net cash position. No changes to our earnings estimates as the job wins are still within our RM400 million replenishment target. Maintain BUY at a RM1.55 TP based on 12x FY11 earnings,' it said.

GPACKET - HDBSVR downgrades Green Packet to Hold, cuts TP to 80c from RM1.40

Stock Name: GPACKET
Company Name: GREEN PACKET BHD
Research House: HWANGDBS

KUALA LUMPUR: Hwang DBS Vickers Research said the recovery for Green Packet has been delayed and it expects weak 4Q2010 results.

The research house said on Wednesday, Feb 2 it had slashed the earnings before interest, tax and amortisation (EBITDA) for Green Packet by 56% to 78%.

'Higher sales and marketing costs and declining average revenue per user could postpone EBITDA turnaround to later this year.'' Downgrade to Hold, TP cut to 80 sen (from RM1.40) based on sume of the parts,' said Hwang DBS Vickers Research.

''

GAMUDA - Gamuda's PDP role formalised

Stock Name: GAMUDA
Company Name: GAMUDA BHD
Research House: MAYBANK

Gamuda Bhd
(Feb 2, RM3.87)
Maintain buy at RM3.81 with target price RM4.45: The formal appointment of MMC-Gamuda as the project delivery partner (PDP) for the Greater KL mass rapid transit (MRT) project puts to rest any lingering concerns on the joint-venture's (JV) role. The Cabinet had on Dec 17, 2010 given its blessing for the JV's participation. The award is positive and will potentially drive mid-term earnings. There is no change to our forecasts for now and we have already imputed a 50 sen impact from the MRT project in our RM4.45 RNAV-based target price.

MMC-Gamuda JV (50:50) had on Jan 28 received a letter of award from Syarikat Prasarana Negara Bhd (SPNB) appointing the JV as PDP for the Greater KL MRT project. The appointment will be subject to: (i) the terms of the finalised and executed project agreement between the government and SPNB, and (ii) the execution of a comprehensive and definitive agreement between the JV and SPNB.

We believe the terms of the PDP role, announced by the prime minister in December 2010, are unchanged: (i) Gamuda-MMC to be paid a fee to manage the project, taking on the delivery (timing and cost) risk, (ii) the JV is not a turnkey contractor, and the works will be awarded individually through open tender, (iii) the JV would not be allowed to tender for any works except the tunnel works, and (iv) the tunnel works will be awarded to the most competitive bid.

Unknown presently are the exact project value, MMC's and Gamuda's respective stake in the JV undertaking the PDP role, and status of the tunnel sub-contracting works. Our estimated 50 sen per share impact for Gamuda assumes: (i) a RM36 billion project value, (ii) a 50:50 JV structure, (iii) the tunnel sub-contracting works make up 30% of the RM36 billion project value, (iv) 3% gross margin for the PDP role, and 15% gross margin for the tunnelling works. This translates into 20 sen per share for the PDP role and 30 sen for the tunnel sub-contracting. ' Maybank IB Research, Feb 2


This article appeared in The Edge Financial Daily, February 7, 2011.

AXIATA - RHB Research ups Axiata fair value to RM5.75 from RM5.52

Stock Name: AXIATA
Company Name: AXIATA GROUP BERHAD
Research House: RHB

KUALA LUMPUR: RHB Research Institute said Axiata's 67%-subsidiary, XL Axiata (XL) full year FY10 core net profit of Rp 3,035 billion (+>100% on-year) came in within its but above consensus full-year estimates at 104% and 107% respectively.

It said on Wednesday, Feb 2 the 4Q revenue grew 4.7% on-quarter mainly driven by strong data & VAS revenue (+18% qoq) and SMS (+10% qoq) growth. EBITDA margin rose 40bp to 53.3% due to continuous lean cost management.

XL added 1.9m prepaid subscribers in 4Q (3Q: +3.3m).'' Revenue growth moderating for XL with FY11 revenue growth guidance of in line or above the industry (which management estimates at 8%), compared to the 27% increase achieved in FY10. XL will commit to a minimum payout of 30% of normalised net profit of the previous year, with the intention to increase progressively the payout ratio in the future.

'Axiata's FY11-12 net profit forecasts raised by around 2% after revising XL's EBITDA margin assumptions upward from 50% to 52%. We revise our SOP fair value to RM5.75 (previously RM5.52) after: 1) upgrading earnings forecasts for XL; and 2) updating our valuation parameters (e.g. latest market prices and exchange rates),' it added.

PBBANK - OSK keeps 'buy' call on Public Bank

Stock Name: PBBANK
Company Name: PUBLIC BANK BHD
Research House: OSK

OSK Investment Research has maintained a "buy" call for Public Bank Bhd as its Return on Equity (ROE) was raised marginally to 26.3 per cent from 26 per cent and the target price from RM14.20 to RM14.40.

In a research note today, OSK said the potential upside in the medium term ROE targets on the back of a more focused strategy in growing Public Bank's higher ROE fee income business line, could serve as a re-rating catalyst for the bank.

"The group''s financial year 2010 results were spot on with our full year estimates, but slightly ahead of consensus. It represents 99.6 per cent and 104.8 per cent of our and consensus full-year forecast respectively.

"The results are commendable as the group continued to register above industry growth rates.

"This translates into a one-presentation transcript improvement in ROE to a record 27.1 per cent, despite the competitive domestic banking landscape, which has put immense pressure on industry wide retail lending yields and upward pressure on deposit rates in general," it said.

The research firm has also raised its financial year 2011 and financial year 2012 earnings forecast by 2.9 per cent and 3.7 per cent respectively, taking into account the stronger fee based income growth from the bank's bancassuarce business.
-- BERNAMA

MEDIAC - MCIL raises ad rates for Sin Chew, China Press

Stock Name: MEDIAC
Company Name: MEDIA CHINESE INTERNATIONAL LT
Research House: RHB

Media Chinese International Ltd
(Feb 2, 87.5 sen)
Maintain outperform at 87 sen with fair value at RM1.20: We recently paid management a visit and set out below the key takeaways from the visit.

According to management, the company has raised its ad rates by 3%-5% for some of its newspapers. Ad rates for both Sin Chew and China Press were revised up by 5% while for Nanyang and Guang Ming, ad rates were maintained. For its Hong Kong publications, management has revised the ad rates by 3%. Management added that 2011 adex is off to a good start thanks to the Chinese New Year celebrations, which spurred advertising demand from hypermarkets and beer companies.

We understand that Nanyang had been repositioned last November and is now more business-focused. The response thus far, according to management, has been encouraging. While still early days, we note that 4QCY10 adex for Nanyang grew 26.8% year-on-year (y-o-y) and 13.4% quarter-on-quarter (q-o-q), although this could also be explained by factors such as economic recovery (y-o-y growth) as well as seasonality (q-o-q growth). Nevertheless, if the repositioning exercise is successful, this could help arrest Nanyang's declining adex market share, which slipped to 5.8% in 2010 versus 6.1% in 2009 and 7% in 2008.

Newsprint prices have been on an uptrend since 2HFY10 and are currently hovering around US$720 (RM2,182) to US$780 per tonne. However, this is still significantly lower than newsprint prices of US$925-US$950/tonne in early-4Q08.

In mitigation, the weakening US dollar versus the ringgit would work to the advantage of the print media players given that newsprint is priced in US dollar. MCIL is currently carrying about six to eight months worth of stock at an average cost of US$650-US$680/tonne and in order to mitigate the rising newsprint price, the management is looking at reducing newsprint usage (as newsprint accounts for 30% to 40% of production cost) through pagination control and managing wastage more effectively.

The risks include: 1) weaker-than-expected adex; 2) higher-than-expected newsprint costs; and 3) a depreciating ringgit versus the US dollar.

As we have forecast FY12 and 13 ad revenue to grow by 4% and 3.5% respectively, we have left our FY11-13 earnings forecasts unchanged for now.

Our indicative fair value is maintained at RM1.20, which is based on unchanged CY11 PER of 13 times. We reiterate our 'outperform' call on the stock. ' RHB Research, Feb 2


This article appeared in The Edge Financial Daily, February 7, 2011.