DAYANG - Dayang snags RM802m TMS contract

Stock Name: DAYANG
Company Name: DAYANG ENTERPRISE HOLDINGS BHD
Research House: ECMLIBRA

Dayang Enterprise Holdings Bhd
(Feb 11, RM2.23)
Maintain hold at RM2.27 with target price revised to RM2.04 (from RM1.63): Dayang announced on Feb 10 that it had been awarded a five-year contract to provide topside maintenance services (TMS) to Petronas Carigali Sdn Bhd (PCSB). The contract covers Sabah, Sarawak and Peninsular Malaysia and is only the first of two packages that should total RM1.2 billion. The contract is notably a 'call-up' contract made up of work orders, which will be awarded at the discretion of PCSB during the duration of the contract. The values of the work orders are based on the contract schedule of rates.

The contract has been widely expected by the market and as such, we have built it into our forward estimates and therefore no changes are required following the award of contract. In terms of margins, we have factored in margins of some 40% at Ebit level, similar to previous TMS jobs the group had done.

We believe that news on contract flow has been pretty much priced into Dayang but other catalysts have now emerged. Its recent fundraising exercise of some RM245 million (RM135 million from the sale of Borcos Shipping Sdn Bhd and RM110 million from the rights issue) indicates to us that the group is out shopping. Whether it will be buying new assets (in the form of work boats or barges) or buying out competitors remains to be seen. We will be on the lookout for further developments on this.

Our previous downgrade of Dayang arose from reducing our PER from 15 times to 12 times (which is the +1 standard deviation of one-year rolling average PER). We were of the view that no further PER expansion should occur, given that most of the new contracts were already priced in. However, given our view that M&A are on the cards, we believe that Dayang can be deserving of a higher multiple. If the group acquires, it would be more comparable to bigger cap oil and gas stocks like Wah Seong and SapuraCrest. These stocks typically trade at an average 15 times PER. As such, we are raising our PER target on Dayang back to 15 times. Pegging this to FY11 earnings per share of 13.6 sen, we derive our revised target price of RM2.04 from RM1.63 previously (RM2.55 pre-bonus and rights). We maintain our 'hold' call on the stock. ' ECM Libra Investment Research, Feb 11


This article appeared in The Edge Financial Daily, February 14, 2011.

CIMB - Impact of SRR hike is minimal

Stock Name: CIMB
Company Name: CIMB GROUP HOLDINGS BERHAD
Research House: AMMB

Banking sector
Maintain overweight: In the recent monetary policy statement, Bank Negara Malaysia (BNM) said the large and volatile shift in global liquidity is leading to a build-up of liquidity in the domestic financial system. While the liquidity has been manageable, going forward, additional policy tools, such as the statutory reserve requirement (SRR) and macroprudential lending measures, may be considered to avoid the risks of macroeconomic and financial imbalances.

BNM had lowered the SRR by three percentage points (ppt) since the start of the global financial crisis in 2008. This brought the SRR to a historical low of 1% currently from 4% in November 2008.

We have done a sensitivity analysis to gauge the impact on banks' earnings, assuming the SRR rate is increased by 1%. We estimate possible downgrades to banks' net earnings ranging between 0.3% and 2.2%. The ones which may be affected the most would be EON Capital Bhd (EONCap) (-2.2%), Alliance Financial Group Bhd (AFG) (-2.1%), Malayan Banking Bhd (Maybank) (-2.1%) and Public Bank Bhd (PBB) (-1.4%). For EONCap and AFG, it would be due to the small earnings base, while for Maybank and PBB, it would be due to the large deposit base (PBB's local market share of deposit is estimated to be the highest at 14.6% while Maybank's is the second highest at 14.0%).

We estimate every 1ppt increase in SRR rate would reduce the amount available for lending by RM7.65 billion, just for the eight banks alone. However, we believe this is representative of the bulk of the banking system, as the local market share of these eight banks is estimated at 67.8% for deposits and 75.2% for loans. Thus, we would conclude that a reduction in liquidity of RM7.65 billion for the eight local banks is not expected to have a major impact on the system liquidity of RM255 billion currently, or the overall lending ability of the banking system.

To sum up, we expect minimal changes to our banks' net earnings arising from the possible rise in the SRR. We will be building in an SRR hike of 1ppt to 2% from our current assumption of 1% when we review our earnings estimates in the upcoming results. Further, based on the current loan-to-deposit ratio and the liquidity in the banking system, we conclude that an SRR hike is not expected to affect current liquidity or the lending ability of the banking system. Banks' share prices have taken a beating last week, which we believe to be in line with the generally weaker regional market. However, we remain positive about the banking sector. We believe a stronger top line growth in terms of loans growth and non-interest income arising from sustained capital market activities from a successful execution of the Economic Transformation Programme is not yet fully reflected. Our buys are CIMB, Maybank, Hong Leong Bank Bhd and RHB Capital Bhd. ' AmResearch, Feb 11


This article
appeared in The Edge Financial Daily, February 14, 2011.

SUPERMX - Supermax: Getting a grip on 4QFY10 results

Stock Name: SUPERMX
Company Name: SUPERMAX CORPORATION BHD
Research House: CIMB

Supermax Corporation Bhd
(Feb 11, RM4.26)
Maintain buy at RM4.36 with target price of RM8.22: We believe Supermax may report an 8% to 21% quarter-on-quarter (q-o-q) decline in 4QFY10 net profit to RM30 million to RM35 million when it releases its results sometime next week. This implies a FY10 net profit of RM165 million to RM170 million or a shortfall of 8% to 10% against our forecast of RM183.8 million and 5% to 7% against consensus. We maintain our numbers but flag the likelihood of a 10% to 15% downgrade of FY11/12 net profit to RM180 million to RM200 million. Despite the potential earnings letdown, we remain positive about Supermax's long-term earnings outlook and will not change our recommendation when the results are released. For now, we retain our target price of RM8.22, based on an unchanged CY12 PER of 11.6 times, or a 20% discount to Top Glove's target PER of 14.5 times. The stock remains an 'outperform'. Potential re-rating catalysts include: (i) an earnings recovery for its associates; and (ii) the restart of its Sungai Buloh plant.

We believe the primary reason for the sequential decline in earnings is due to intense competition in the nitrile market and a delay in passing on higher raw material costs.

We remain positive on Supermax's earnings growth prospects for FY11/12. Over the next two fiscal years, we expect Supermax to shave five percentage points off its tax rate to 10% as the company benefits from its regional distribution status. Also, we expect its Sungai Buloh plant to be fully operational by FY12, adding circa 350 million pairs of surgical gloves to capacity.

Supermax is trading at a CY12 PER of just 6.2 times or 50% below the market's forward PER of 12.7 times. In our view, these valuations are

undemanding given Supermax's three-year earnings per share compound annual growth rate of 22.5%, which is well supported by long-term structural trends such as: (i) the modernisation of the healthcare sector in China and India; (ii) increasing hygiene awareness; and (iii) increased medical coverage due to the US healthcare reform bill. ' CIMB Research, Feb 11


This article appeared in The Edge Financial Daily, February 14, 2011.

WCT - WCT to post record 2011 earnings

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

WCT Bhd
(Feb 11, RM3.39)
Maintain buy at RM3.34 with target price of RM3.75: The results for 4QFY10, to be released on Feb 25, may surprise on the upside, despite a possible provision for Bakun CW2. There is no change to our net profit forecasts for now; we anticipate 33% growth in 2011 and 13% in 2012. WCT is expected to post record earnings in 2011. Our target price is unchanged at sum-of-parts RM3.75 after rolling over our valuation period, but based on fully diluted earnings per share with an estimated'' 158 million new warrants coming onstream. WCT stays a 'buy'.

Dam impoundment is progressing well, with wet testing scheduled for March/April. WCT may provide for additional costs for the remaining 4% of works to complete the contract. The amount could be as much as RM25 million, based on its 7.7% share in the consortium undertaking the CW2 contract. WCT's 2010 net profit, after the provision, could still surpass our RM138 million forecast due to: (i) a revaluation gain for the BBT AEON mall; and (ii) the final account close (in October 2010) for the Abu Dhabi F1 contract.

In 2010, job wins totalled RM2.2 billion, while the internal target for 2011 is a modest RM2 billion (50% domestic, 50% from'' the Middle East). The prospect is brighter for new Middle East jobs especially in Qatar, the host of the FIFA World Cup 2022 football tournament. On the domestic front, hopes are for a slice of the Klang Valley LRT extension Phase 2 works. The tender will be called in 2Q11. WCT remains in the running for a major water infrastructure job in Sabah worth RM2.8 billion, which may be parcelled out.

We retain our 2010/12 net profit forecasts pending the release of the 2010 final results. Outstanding construction order book of RM3.88 billion (September 2010), our RM2 billion'' job win per annum assumption and higher property sales in 2011 will support earnings expansion. There is still the possibility of a write-back for Bakun post-final account close beyond 2011, and re-recognition of Meydan Racecourse (Dubai) profit after the conclusion of its arbitration this year. WCT provided RM28 million for Bakun in 2004. It reversed RM84 million in profit for Meydan in 2008. ' Maybank IB Research, Feb 11


This article appeared in The Edge Financial Daily, February 14, 2011.

DAYANG - HDBSVR raises Dayang target price to RM2.70 per share from RM2.20 after RM802m contract

Stock Name: DAYANG
Company Name: DAYANG ENTERPRISE HOLDINGS BHD
Research House: HWANGDBS

KUALA LUMPUR: Hwang DBS Vickers Research has raised the target price for Dayang Enterprise Bhd to RM2.70 per share (previously RM2.20 ex-bonus and rights) based on 15.5 times FY11F EPS.

'Our PE multiple is based on valuations for comparable size peers, excluding larger caps that are trading at large premiums to the sector,' it said on Friday, Feb 11.

Dayang had on Thursday announced it has secured the RM802 million five-year TSM contract from Petronas Carigali.

'The contract win was within our expectation - we had said Dayang was in a strong position to secure it given it is the incumbent operator. The contract would be on a 'call-up' basis, and we believe the overall contract value is likely to be higher than the original value because there is almost always additional work required,' it said.

HDBSVR said the latest win puts Dayang's order book at RM1.8 billion, giving five years of earnings visibility. The contract win reaffirmed its view that Dayang will be one of the companies with the strongest earnings growth in the oil & gas space.

The research house said the order book was also in line with its RM1.0 billion contract win estimate for 2011, and hence, it is retaining its forecast.

'We expect sustainable c.24% EBIT margin from the contract on the back of quality asset ownership,' said HDBSVR.

'Valuation undemanding, maintain Buy. Dayang is still trading at attractive 13x FY11F PE against the sector's 17x, despite stronger earnings growth of 46.2% CAGR over FY09-11F on superior margins against 13.5% growth for the sector,' it said.

AIRPORT - MAHB remains a 'buy': OSK Res

Stock Name: AIRPORT
Company Name: MALAYSIA AIRPORT HOLDINGS BHD
Research House: OSK

OSK Research Sdn Bhd has maintained its earnings and "buy" recommendation on Malaysia Airports Holdings Bhd (MAHB), with a RM8.47 target price, based on the discounted cash flow (DCF) valuations of all its Malaysia-based airports of RM7.97.

"MAHB remains our defensive pick in the aviation space in view of the significant upside and its decent dividend yield of three per cent," OSK said in its research note today.

The country's airport operator will continue to see fairly encouraging air travel momentum, although growth is expected to moderate to 8.6 per cent and 5.6 per cent for this year and next year respectively, it added.

"Our earnings growth projections for 2011 and 2012 are 17.5 per cent and 0.3 per cent respectively, whereby the double digit growth in 2011 earnings will be driven by higher commercial sales and cost-cutting to boost margins," OSK explained.

It also said that in profit terms, MAHB’s commercial segment continues to be a key revenue and margin driver, although earnings projections are somewhat conservative, said the research house.

It noted that MAHB continues to heavily bank on the potential growth in commercial sales over the next few years, with management targeting passenger spending per pax to grow from RM36 currently to RM50 by 2014.

"By which time, commercial spending is expected to make up 50 per cent of MAHB’s terminal revenue," it highlighted. - BERNAMA

PELIKAN - Pelikan cut to 'hold' on earnings risk

Stock Name: PELIKAN
Company Name: PELIKAN INT.CORPORATION BHD
Research House: HWANGDBS

PELIKAN International Corp, a Malaysian pen and stationary maker, was cut to “hold” from “buy” at HwangDBS Vickers Research Sdn Bhd, which said the company faces growing earnings risk.

The share price estimate was reduced to RM1.20 from RM1.40, Hon Seow Mee, an analyst at HwangDBS, said in a report today. - Bloomberg

MAHSING - Mah Sing now a 'buy': Nomura

Stock Name: MAHSING
Company Name: MAH SING GROUP BHD
Research House: NOMURA

MAH Sing Group Bhd, a Malaysian property developer, was rated new “buy” at Nomura Holdings Inc., which said the company is a beneficiary of the industry re-rating, which will spur stronger outperformance for the shares.

The share price estimate was RM3.08, Jacinda Loh, an analyst at Nomura, said in a report today. - Bloomberg

MAYBANK - OSK maintains 'buy' call on Maybank

Stock Name: MAYBANK
Company Name: MALAYAN BANKING BHD
Research House: OSK

OSK Research Sdn Bhd has maintained a "buy" call for Malayan Banking (Maybank) with a target price of RM10.07 based on its subsidiary, Bank Internasional Indonesia's (BII), profits contribution to the group.

OSK also said it was leaving its earnings estimates unchanged for now, pending the group's upcoming conference call for clarity on a high effective tax rate and an unusual 15 per cent quarter-on-quarter spike in operating expenses.

As at 12.28pm today, Maybank's share price stood at RM8.68.
In a research note here today, OSK said Maybank had set a three-year target for investment in BII, to break even against the funding cost that the group incurred in acquiring the bank.

"Judging purely from BII's reported financial year 2010 results, which reflect above-industry costs and credit charge off rates, the group may require 4.5 years to achieve this target," OSK added.

However, OSK noted that BII was aggressively expanding by new hiring and increasing its branch network by nearly 43 per cent over the next one-and-a-half years.

It also said the operating leverage will begin to flow from an expanded presence.

"This would naturally help bring down the cost to income ratio, closer to the industry average," it added. - BERNAMA

TM - OSK ups TM target price to RM3.50

Stock Name: TM
Company Name: TELEKOM MALAYSIA BHD
Research House: OSK

OSK Research has increased its target price on Telekom Malaysia (TM) to RM3.50 from RM3.28.

This follows the upgrading its forecast for the 2011 and 2012 financial years by nine to 10 per cent to incorporate interest savings from the repayment of US$260 million debt in the fourth quarter of 2010.

At the end of morning session, TM rose six sen to RM3.94 despite the FTSE Bursa Malaysia KLCI losing 15.45 points to 1,520.62.

OSK Research said: "TM's share price has risen appreciably on expectations of an upcoming special dividend.

"We do not rule out the possibility of TM returning excess cash on the back of the disposals of its shares in Measat and Axiata, which enriched its RM3.6 billion coffers by RM667 million in the third and fourth quarters of 2010."

TM is expected to release its fourth quarter and full year 2010 results on Feb 25 and may make a decision on the special dividend payment after announcing the results. - BERNAMA

MRCB - MRCB likely to secure ETP projects: OSK

Stock Name: MRCB
Company Name: MALAYSIAN RESOURCES CORP
Research House: OSK

MALAYSIAN Resources Corporation Bhd (MRCB) stands a good chance in securing some government projects under the Economic Transformation Programme, OSK Research says.

The projects mentioned by the research house were the River of Life project, the development of RRIM land in Sungai Buloh and Phase 2 of LRT extension project which are expected to begin this year.

In a research note today, it said the project to clean up and develop Klang river (River of Life project) was estimated to be worth around RM8 billion to RM10 billion with Phase 1 estimated at RM1 billion to RM2 billion.

For the RRIM land development, it said the masterplan was expected to come out by mid-2011.

"Other than RRIM, we also gather that MRCB is in talks with the government to jointly develop around 5ha to 6ha of land in Brickfields. MRCB is also in talks to acquire or jointly develop a sizeable prime land in the Petaling Jaya area," it added.

OSK Research also said it was turning more optimistic on the property outlook for KL Sentral and had raised its land value assumption for KL Sentral from RM1,280 psf to RM1,640 psf.

Meanwhile, the research house revised upward its fair value for MRCB shares from RM2.05 to RM2.58.

"With the sizeable upside, we upgrade our recommendation from 'neutral' to 'trading buy' at the target price of RM2.58." - BERNAMA

MRCB - HDBSVR raises MRCB TP to RM3.15

Stock Name: MRCB
Company Name: MALAYSIAN RESOURCES CORP
Research House: HWANGDBS

KUALA LUMPUR: Hwang DBS Vickers Research raised the target price for MALAYSIAN RESOURCES CORP [] Bhd (MRCB) to RM3.15 after its earnings were away above its and consensus expectations.

'BUY, raised TP of RM3.15. We continue to like MRCB as a strong 10MP and election proxy, and raised our TP to reflect the higher earnings. The strong 4Q10 result shows earnings delivery is improving and execution risk is well contained,' it said on Thursday, Feb 10.

HDBSVR said MRCB's 4Q10 net profit of RM42 million (up 2.8 times on-quarter; and up 3.3 times on-year) takes FY10 net profit to RM67 million, 'way above our and consensus expectations'.

This was largely due to a turnaround in CONSTRUCTION [] profits, which swung from a RM3 million loss in 3Q10 to RM39 million EBIT in 4Q10, as well as strong property billings largely from on-going works at Lot G.

HDBSVR raised FY11-FY12 EPS by 3%-12% after imputing larger new order wins of RM700 million to RM800 million versus RM600 million previously, while also taking into account timing of recognition of existing contracts which are largely on track.

'There is room to raise our forecasts further as we had not included some key projects such as Penang Sentral (RM2 billion GDV), Batu Feringghi (RM184 million GDV) and Kia Peng Condo (RM260 million GDV), and our assumed margins for both construction and property are conservative,' it said.

COASTAL - OSK Research maintains Buy on Coastal Contracts, TP unch RM4.41

Stock Name: COASTAL
Company Name: COASTAL CONTRACTS BHD
Research House: OSK

KUALA LUMPUR: OSK Research is maintaining its Buy call on COASTAL CONTRACTS BHD [] with an unchanged target price of RM4.41, based on the existing PER of 8.0 times FY11 earnings.

'Despite being only a shipbuilder, we continue to like Coastal for its strong delivery track record,' it said on'' Thursday, Oct 10.

On Wednesday, Coastal announced that its units had collectively secured contracts for the sale of seven offshore support vessels; ii) three tug boats, and iii) two oil barges.

OSK Research said it came to understand the seven offshore support vessels are Anchor Handling Tug and Supply vessels (AHTS). The new contracts are worth a total of RM268 million.

'With this contract on board, we believe that Coastal's orderbook should keep the company busy for at least for the next 12 months. Nevertheless, we think that this may mark the start of more newbuild contract awards, especially for offshore support vessels.

'Hence we expect more to follow given the increase in O&G activities in the region. Also, newbuilds are required as most of Coastal's customers would need to replace their vessels after having put off ordering new ones in the past two years,' it said.

NAIM - AmResearch maintains Naim as 'buy'

Stock Name: NAIM
Company Name: NAIM HOLDINGS BHD
Research House: AMMB

AMRESEARCH Sdn Bhd has maintained its "Buy" recommendation on Naim Holdings Bhd, with unchanged RM5.09 fair value per share, as it views Permodalan Nasional Behad's (PNB) acquisition of 12.5 million shares as representing a five per cent stake in Naim.

PNB bought the shares from Naim's Chief Executive Officer Datuk Hasmi Hassan for RM3.40 per share.

"We view this development positively as a greater institutionalisation of Naim's shareholding structure would help promote a greater share price discovery for the stock apart from strengthening its shareholding base," it said in a research note today.

Besides PNB, Naim's other major institutional shareholders are Employees Provident Fund (EPF) and Pilgrims' Fund Board (Tabung Haji).

Given its entrenched position as one of Sarawak's leading contractors, the research firm believes Naim should be in a strong position to bid for supporting infrastructure works, including access roads leading to the proposed dams under Sarawak's SCORE (Sarawak Corridor of Renewable Energy).

"This is on top of additional work packages that the group is trying to crystallise under Kuching Flood Mitigation Scheme," added AmResearch. - BERNAMA

KLK - RHB Research trims KL Kepong earnings forecast

Stock Name: KLK
Company Name: KUALA LUMPUR KEPONG BHD
Research House: RHB

KUALA LUMPUR: RHB Research Institute said after a stellar FY09/10, KL Kepong recorded a 10.4% on-yeaqr drop in production in 1QFY11, due mainly to the impact of wet weather which affected harvesting activities.

In its report issued on Wednesday, Feb 9 it said KLK was not alone as all Malaysian planters under its coverage recorded lower fresh fruit bunches (FFB) production during the quarter, ranging from -8% to as high as -23% on-year.

'Despite this, management is sticking to its 10% FFB growth target for FY09/11 for now, expecting productivity to improve in the next few quarters. We prefer to be more conservative, and are adjusting down our FFB yield projections by 0.5t/ha to 23-24t/ha for FY11-13 (from 24-25t/ha previously), resulting in FFB production growth of 8.5% for FY11, 4.7% for FY12 and 6.3% for FY13,' it said.

RHB Research said one bright spot is KLK's 22,787ha of rubber PLANTATION []s, which in FY09/10 yielded an operating profit per mature ha of RM6,718/ha (with average price of RM9.80/kg), not too far from its CPO division's RM7,061/ha.

It said given that rubber prices are now at RM16.73/kg, profitability for KLK's rubber division is expected to jump significantly in FY09/11, assuming prices stay at these levels. Based on our estimates, we project operating profit for the rubber division to almost double yoy in FY09/11, although contribution to total group profit will remain relatively small, at about 10%.

' We trim our forecasts by 8.1-9.6% for FY09/11-13. Post-earnings revision, we reduced our SOP-based fair value for KLK to RM25.95 (from RM27.35), but maintain our Outperform rating,' it said.

HELP - OSK Research maintains Buy on HELP International

Stock Name: HELP
Company Name: HELP INTERNATIONAL CORPORATION
Research House: OSK

KUALA LUMPUR: OSK Research said following its recent meeting with the management od Help International Bhd, it gathers that HELP's on-going local and overseas expansion plans are well in progress.

The research house said on Wednesday, Feb 9 that this year, HELP expects to announce several ventures locally and abroad, largely via joint ventures and potential acquisitions.

'We maintain our BUY recommendation with an unchanged TP of RM2.59, based on 14x PER on FY11 EPS plus the current net cash per share of RM0.32 as at end-FY10. We believe that the company offers a sustainable growth story in a defensive sector that is backed by a strong management team,' it said.

DAYANG - RHB lowers EPS forecasts for Dayang

Stock Name: DAYANG
Company Name: DAYANG ENTERPRISE HOLDINGS BHD
Research House: RHB

RHB Research Institute Sdn Bhd has reduced financial year 2011-2013 earnings per share forecast for Dayang Enterprise by 35.2 per cent, 35.3 per cent and 35.4 per cent to adjust bonus and right issues.

The firm said it has increased the target price earning ratio (PER) of the stock by 17x from 15x previously as it believes the company's earnings have breached new levels that are even above its nearest peer, Petra Energy.

Earlier, Petra Energy traded at peak historical one year forward PERs of 18-20x.

"Our revised earnings forecasts and new target PER imply a new fair value of RM2.60 per share from RM3.54 per share previously," it said in its corporate highlights report today.

"While we are still positive on the company, we are downgrading our call on the stock to a 'market perform' from 'outperform' previously as we estimate the one-year return to be only 13 per cent in line with the estimated 10 per cent return for the market.

"We would consider re-rating the stock again for merger and acquisition activities or higher-than-expected contract wins," it added. - BERNAMA

TM - TM in hunt for more Unifi subscribers

Stock Name: TM
Company Name: TELEKOM MALAYSIA BHD
Research House: ECMLIBRA

TELEKOM Malaysia (TM) has become more aggressive in its efforts to acquire more Unifi subscribers as evidenced by the free one-month subscription to new customers who sign up online and waiving RM200 worth of installation free.

In a research note today, ECM Libra said they see a proactive measure by TM to acquire more retail subscribers before competition in the fixed-broadband space steps up a notch with the imminent arrival of Maxis.

ECM Libra also said even TM has at least one-year head start over its competitors, they believe some potential new customers could be adopting a wait-and-see attitude before deciding whether to opt for TM's Unifi or Maxis' fixed broadband service.

"The lengthy 24-month lock-in period for Unifi customers might also discourage new customers from hastily signing up and locking themselves, especially since Maxis will be launching its service soon," it said.

"As TM's share price has achieved our target price of RM3.80, we downgrade our recommendation to 'hold' as we believe the current price has priced in the expectation of a special dividend in the fourth quarter financial year 2010.

"We recommend to investors to switch to Axiata which is our top pick in the telco sector as it is exhibiting higher earning growth while trading at undemanding valuation," it added. - BERNAMA

F&N - F&N advances on strong earnings

Stock Name: F&N
Company Name: FRASER & NEAVE HOLDINGS BHD
Research House: AMMB

KUALA LUMPUR: Shares of Fraser & Neave Holdings Bhd (F&N) advanced to RM15.30 in late morning trade on Tuesday, Feb 8 after its net profit for the first quarter ended Dec 31, 2010 rose 37.74% to RM107.08 million from RM77.74 million a year ago.

At 11.32am, F&N rose 32 sen to RM15.30 with 60,900 shares done.

The FBM KLCI rose 5.74 points to 1,541.34. Turnover was 1.39 billion shares done valued at RM896.35 million. There were 358 gainers, 312 losers and 283 stocks unchanged.

AmResearch said it reaffirmed its BUY rating on F&N with an unchanged fair value of RM17.20/share, based on a target PE of 18 times CY11F earnings. The 18 times PE is close to its three-year historical PE average of 17 times.

'Notwithstanding some moderation in margin going forward on higher input costs particularly sugar, the sustained volume expansion should provide a comfortable buffer against volatile raw material prices,' it said.

HARTA - OSK Research ups Hartalega TP to RM7.40

Stock Name: HARTA
Company Name: HARTALEGA HOLDINGS BHD
Research House: OSK

KUALA LUMPUR: OSK Research said Hartalega's 9MFY11 results were within expectations, which it believed were contributed by its higher-end product mix comprising 80% nitrile gloves.

In its research report issued on Tuesday, Feb 8, it said these gloves are mostly sold to big healthcare MNCs which mostly place constant orders that do not fluctuate significantly even during a pandemic.

'Based on the encouraging numbers, we are upgrading our FY11-12 earnings by 3%-8%. We continue to like the company's market leadership in the nitrile gloves market. Maintain Buy but with a higher target price of RM7.40,' OSK Research said.

QL - RHB Research maintains Outperform on QL Resources

Stock Name: QL
Company Name: QL RESOURCES BHD
Research House: RHB

KUALA LUMPUR: RHB Research Institute is maintaining its Outperform recommendation on QL Resources following its strong positioning as a basic food player.

It said on Tuesday, Feb 8 that post placement and share split, its fair value is revised to RM3.44 (from RM6.50 previously) based on a new target of 18x FY12 PER (from 17x CY11 previously).

'We have raised the target PER of 1x to reflect the increased liquidity of its stock post the private placement and share split, as well as QL's strong positioning as a basic food player, especially given the intensifying news flow on global food shortages driven by lack of supply,' it said.

F&N - Inter-Pacific Research maintains neutral on F&N

Stock Name: F&N
Company Name: FRASER & NEAVE HOLDINGS BHD
Research House: INTER PACIFIC

KUALA LUMPUR: Inter-Pacific Research has reiterated its neutral recommendation on Fraser & Neave Holdings Bhd at RM14.98 with an unchanged target price of RM14.90 and said the company's upside in the long term included the re-development of its 12.7acre factory in Section13, Petaling Jaya with estimated GDV of more than RM1 billion.

Other positives for the company include its dairy product expansion into Laos and Cambodia, and its geographical expansion of their soft drinks division into Thailand and Brunei, said the research house.

Inter-Pacific Research said risks for F&N include (1) rising raw material prices; and (2) constrained setting in Thailand's soft drinks market which might lessen sales.

MAYBULK - OSK Research ups Maybulk to Buy, downgrades MISC

Stock Name: MAYBULK
Company Name: MALAYSIAN BULK CARRIERS BHD
Research House: OSK

KUALA LUMPUR: OSK Research said trimming excess supply is now vital in restoring shipping rates.

It said on Tuesday, Feb 8 that given the higher incidence of scrapping among smaller vessels (generally the older ones), it prefers shipping players with a higher composition of smaller ships.

OSK Research said nevertheless, as supply and demand is still imbalanced, it continues to maintain its NEUTRAL call on the sector as the tide has yet to turn positive.

'We have upgraded Malaysian Bulk Carriers (Maybulk) to BUY (TP RM3.10) as we believe that the BDI may soon bottom. However, we have downgraded MISC to NEUTRAL (TP RM8.72) on an earnings cut of 6%-7% as tanker rates continue to languish,' it said.

MISC - OSK Research ups Maybulk to Buy, downgrades MISC

Stock Name: MISC
Company Name: MISC BHD
Research House: OSK

KUALA LUMPUR: OSK Research said trimming excess supply is now vital in restoring shipping rates.

It said on Tuesday, Feb 8 that given the higher incidence of scrapping among smaller vessels (generally the older ones), it prefers shipping players with a higher composition of smaller ships.

OSK Research said nevertheless, as supply and demand is still imbalanced, it continues to maintain its NEUTRAL call on the sector as the tide has yet to turn positive.

'We have upgraded Malaysian Bulk Carriers (Maybulk) to BUY (TP RM3.10) as we believe that the BDI may soon bottom. However, we have downgraded MISC to NEUTRAL (TP RM8.72) on an earnings cut of 6%-7% as tanker rates continue to languish,' it said.

RCECAP - Kenanga lowers target price on RCE Cap

Stock Name: RCECAP
Company Name: RCE CAPITAL BHD
Research House: KENANGA

Kenanga Research has lowered the rating on RCE Capital to "hold" and the target price to RM0.56, believing the company's current business outlook for the lending to civil servants, remains challenging.

In a statement today, it said financial year 2012 would be the year for RCE to be on the defensive.

"That said, RCE's management and the Koperasi Wawasan Pekerja Pekerja Bhd(KOWAJA) should have the urgency to work closely with the Cooperatives Commission of Malaysia (CCM) towards resolution for a full compliance of the GP6 and GP7 (new guidelines).

"This is so that, the company is not at a point of seeing a negative impact, on the group's future profitability," Kenanga added.

It also lowered its financial year 2012/2013 forecasts by 16.2 per cent/16 per cent respectively.

"Our revised financial year 2012/2013 net profit estimates are four per cent/14 per cent respectively below consensus," it said.

Kenanga cut its target price from RM1.10 previously to RM0.56, representing four times the financial year ending 2011 price earnings ratio, and lowered the rating from "buy" to "hold".

The research house explained that further hard work is needed before RCE can start disbursing loans, as well as cutting its product pricing, which it thinks is the main hurdle to securing the full compliance status. -- Bernama

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.