Bursa Malaysia Stock Price Target: 02/13/11

February 18, 2011

WASEONG - ECM Libra Maintain 'Buy' on Wah Seong

Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Research House: ECMLIBRA

OSK Research has maintained its "neutral" call for Wah Seong Corporation, with the target price remaining unchanged at RM2.29, based on the existing price earning ratio of 16x financial year 2011 earnings.

"We see a brighter 2011 for this company, contributed by its Gorgon pipe coating business, better gas compressor business and consistent performance from its non-oil and gas divisions," it said in a research note today.

The Gorgon pipe coating project involves coating an 850km pipeline worth about US$162.9 million (RM551.2 million).

"We believe the gross margin would be somewhere between that for conventional and deepwater coating of 20-30 per cent and a bulk of the job is expected to be executed this year," it added.

Meanwhile, Midf Research in its research note today, also recommended to maintain 'neutral' call for Wah Seong due to the rising trend of the capital investment in oil and gas industry, expected to have a positive impact on the company's future performance.

"We maintain our neutral call with a target price of RM2.35 until we hear more positive news with regard to new contract awards," it said.

ECM Libra however, maintained its 'buy' call for Wah Seong with an unchanged target price at RM2.70.

" Financial year 2011 will see full year contribution from the Gorgon job which slated for completion in first quarter financial year 2012. On top of that, we expect contract wins this year to drive earnings for next year," ECM Libra said.

The group has a tender book of some RM5.7 billion currently, of which some 40 per cent is for pipe coating jobs. -- Bernama

WASEONG - MIDF stays 'neutral' on Wah Seong

Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Research House: MIDF

YTLPOWR - YTL Power lifted to 'market perform' at RHB

Stock Name: YTLPOWR
Company Name: YTL POWER INTERNATIONAL BHD
Research House: RHB

YTL Power International Bhd was upgraded to “market perform” from “underperform” at RHB Research Institute Sdn Bhd, which said it raised its outlook to reflect the growth prospects of its Singapore power utility.

The stock’s fair value was raised to RM2.57 from RM2.20, RHB analyst Lim Tee Yang said in a report today. -- Bloomberg

CSCSTEL - CSC Steel raised to 'trading buy' at OSK

Stock Name: CSCSTEL
Company Name: CSC STEEL HOLDINGS BERHAD
Research House: OSK

CSC Steel Holdings Bhd, a Malaysian producer of steel pipes and cold-rolled coils, was raised to “trading buy” from “neutral” at OSK Research Sdn Bhd to reflect its improving earnings outlook, according to a report today.

The stock climbed 1.7 per cent to RM1.79 at 9:07 a.m. local time, set for its highest close since November 12. -- Bloomberg

MBMR - MBM Resources climb on stronger earnings

Stock Name: MBMR
Company Name: MBM RESOURCES BHD
Research House: OSK

KUALA LUMPUR: Shares of MBM Resources rose to RM3.34 in early trade on Friday, Feb 18 after its net profit for the fourth quarter (4Q) ended Dec 31, 2010 rose 36.2% to RM28.2 million from RM20.7 million a year ago.

At 9.13am, it was up 12 sen to RM3.34 with 70,400 shares done.

The FBM KLCI rose 1.68 points to 1,510.24. Turnover was 89.10 million shares valued at RM54.33 million. Advancers beat gainers 157 to 74 while 136 stocks were unchanged.

MBM's earnings were underpinned by the overall strong total industry volume in the automotive sector.

Revenue for the quarter rose to RM389.88 million from RM292.46 million in 2009. Earnings per share were 11.64 sen, while net assets per share was RM4.19.

It declared a special second tax-exempt interim dividend of five sen per share totaling RM12.13 million, and a special tax-exempt dividend of three sen per share totaling RM7.28 million.

For the financial year ended Dec 31, MBM's net profit surged to RM141.24 million from RM66.53 million a year earlier, on the back of revenue of RM1.55 billion.

MAYBANK - OSK Research: Accumulate CIMB, Maybank on weakness

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

KUALA LUMPUR: OSK Research said the share prices of CIMB Group Holdings Bhd, and to a lesser extent MALAYAN BANKING BHD [], have underperformed the KL Finance index due to concerns that their Indonesian units, CIMB Niaga and PT Bank Internasional Indonesia Tbk, may be hit by renewed concerns of inflationary pressure and aggressive interest rate hikes in Indonesia that may dampen loans growth and asset quality.

With the current monetary tightening cycle seen to be gradual and on the back of historically low interest rates amid a stable economic growth outlook, CIMB Niaga and BII's asset quality and loans growth should remain largely intact.

'And any correction in their share prices sparked by further rate hikes in Indonesia that may dampen sentiment on CIMB and Maybank will provide an excellent opportunity to accumulate on weakness. Maintain BUY CIMB (TP: RM9.77) and Maybank (TP: RM10.07),' it said.

CIMB - OSK Research: Accumulate CIMB, Maybank on weakness

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

KUALA LUMPUR: OSK Research said the share prices of CIMB Group Holdings Bhd, and to a lesser extent MALAYAN BANKING BHD [], have underperformed the KL Finance index due to concerns that their Indonesian units, CIMB Niaga and PT Bank Internasional Indonesia Tbk, may be hit by renewed concerns of inflationary pressure and aggressive interest rate hikes in Indonesia that may dampen loans growth and asset quality.

With the current monetary tightening cycle seen to be gradual and on the back of historically low interest rates amid a stable economic growth outlook, CIMB Niaga and BII's asset quality and loans growth should remain largely intact.

'And any correction in their share prices sparked by further rate hikes in Indonesia that may dampen sentiment on CIMB and Maybank will provide an excellent opportunity to accumulate on weakness. Maintain BUY CIMB (TP: RM9.77) and Maybank (TP: RM10.07),' it said.

UNISEM - OSK Research maintains Take Profit call on Unisem

Stock Name: UNISEM
Company Name: UNISEM (M) BHD
Research House: OSK

KUALA LUMPUR: OSK Research expects Unisem's 4QFY10 results, due to be released next Thursday, Feb 24'' to mirror the performance of MPI, with earnings growth likely to be on a declining trend.

The research house said on Friday, Feb 18 that during the company's previous analyst briefing on its 3QFY10 results, Unisem's management had guided for a 10% on-quarter drop in 4QFY10 revenue, mainly due to inventory adjustments.

'We maintain our Take Profit call on potential earnings disappointments for 4QFY10 and 1QFY11, and the foreseeable far slower earnings for FY11 as sentiment dampeners,' it said.

WASEONG - OSK Research mainains Neutral on Wah Seong

Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD
Research House: OSK

KUALA LUMPUR: OSK Research said despite the 54% drop in FY10 net profit, Wah Seong Corp's FY10 results were above expectations with 4Q profit jumping 98% q-o-q.

It said on Friday, Feb 18 that overall, the group delivered a better set of 4QFY10 numbers, mainly contributed by enhanced performance across all its division, especially its O&G unit, in which the gas compressor and pipe coating businesses improved.

OSK Research said nevertheless, 2010 remained a 'washout' year for Wah Seong although 'we see a brighter 2011, contributed by its Gorgon pipe coating business, better gas compressor business and consistent performance from its non-oil and gas divisions. Maintain Neutral,' it said.

February 17, 2011

AIRPORT - MAHB operationally strong despite FRS139 setback

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

Malaysia Airports Holdings Bhd
(Feb 17, RM6.03)
Upgrade to buy at RM6.20 with revised target price RM7.20 (from RM5.95): MAHB's FY10 revenue of RM1.81 billion was within ours and consensus' expectations, coming at 104.1% and 98.1% of full-year estimates respectively. FY10 revenue grew by 10.7% year-on-year (y-o-y) on the back of strong growth in airport operations, with retail revenues growing by 17.2% y-o-y.

MAHB's FY10 net profit was below expectations coming at 87% and 83.1% of ours and consensus estimations respectively. Net profit for FY10 declined by 22.2% to RM293.9 million due to the higher losses in an associate company, coming from the adoption of FRS139.

However, we are pleased that its FY10 operating profit remained solid with an increase of 10.7% y-o-y to RM544.2 million. This is due to the strong growth in passenger, cargo and aircraft movement registered in FY10. As we expected, MAHB registered its strongest quarter in 4QFY10 in terms of passenger, cargo and aircraft movement, growing by 6.5% y-o-y, 3.4% y-o-y and 3.8% y-o-y respectively. FY10's passenger, cargo and aircraft movement grew by 12.7% y-o-y, 14.2% y-o-y and 7.9% y-o-y respectively.

We are not worried by the marginal decline of 0.8% y-o-y of FY10's total revenue per passenger movements to register RM30.31. This was due to the 2.4% y-o-y decline in aeronautical revenue per passenger to RM15.02. However, the non-aeronautical revenue per passenger movement grew by 1.4% y-o-y to RM13.95. Non-aeronautical revenue in FY10 was RM806.5 million, a growth of 14.2% y-o-y, suggesting that MAHB is able to grow its retail business.

We revise our target price for MAHB to RM7.20 (from RM5.96) as we switch our valuation method from PER multiple to discounted cash flow method (discounted at a weighted average cost of capital of 8.5%) to better reflect the future potential of MAHB. We expect that MAHB will continue to be impacted by the losses in an associate company in FY11. However, we believe the impact will lessen, while MAHB's operations remain strong and stable, and we expect it to strengthen further after the completion of the new low-cost carrier terminal. As the expected total return of the revised target price is more than 15% to current share price, we are upgrading MAHB to 'buy'. ' MIDF Research, Feb 17

This article appeared in The Edge Financial Daily, February 18, 2011.

PETDAG - PetDagang heading for a record quarter

Stock Name: PETDAG
Company Name: PETRONAS DAGANGAN BHD
Research House: CIMB

Petronas Dagangan Bhd
(Feb 17, RM12.70)
Maintain outperform at RM12.50 with target price RM15.40: Petronas Dagangan's (PetDagang) record quarterly net profit of RM236 million for 3QFY11 took 9M bottom line to an all-time high of RM641 million. At 73% of our full-year forecast, it met our expectations as we anticipate a stronger 4Q. However, at 82% of consensus numbers, it beat market expectations. The absence of an interim dividend was expected. We maintain our forecasts and continue to value the stock at our target market PER of 14.5 times, leading to an unchanged target price of RM15.40. PetDagang remains an 'outperform' based on the potential re-rating catalysts of: (i) leadership in the retail and lubricant segments; (ii) an overseas venture; and (iii) earnings upgrades by the market. Its 6.8% dividend yield, the highest in the sector locally and the second highest regionally, adds to the attraction.

Net profit in 3Q rose 26% year-on-year (y-o-y), thanks to an improvement in volume and margin supported by a bigger petrol station network and higher vehicle population. Furthermore, the steady movement of the oil price in October to December helped stabilise the selling prices of products that do not come under the automatic pricing mechanism. These positive factors boosted earnings before interest and tax (Ebit) margin to 5.5%, the highest since 1QFY10's 5.8%.

The government raised the selling price of RON 95 petrol by 5 sen per litre in December while the price of RON 97 petrol was adjusted upwards twice by 5 sen in November and 15 sen in December. However, the price increases did not have a major impact on sales volume as the increases were not unexpected.

Furthermore, the double hikes for RON 97 affected mostly high-end users with performance cars. An estimated 75% to 80% of motorists use RON 95, which is kept affordable at RM1.90 per litre. RON 97 retails at RM2.50 per litre.

PetDagang is Malaysia's No 1 petroleum retailer. It is also tops in the commercial and LPG segments. However, the company still trails behind Shell in the retail and lubricant segments. Management targets to wrest the retail leadership position from Shell within three years. In the lubricant segment, where it is a late entrant, PetDagang aims to be the leader in five years.

PetDagang is currently mandated to operate only in Malaysia. However, this may change as management is mulling the possibility of operating outside Malaysia. In addition to the eventual reality of hitting a saturation point, we believe its interest in widening its market exposure may have been triggered by the likelihood of full deregulation of the domestic market. ' CIMB Research, Feb 17

This article appeared in The Edge Financial Daily, February 18, 2011.

DIALOG - Dialog has good long-term growth prospects

Stock Name: DIALOG
Company Name: DIALOG GROUP BHD
Research House: MAYBANK

Dialog Group Bhd
(Feb 17, RM2.20)
Maintain buy at RM2.13 with target price RM2.60: Dialog's 2QFY11 net profit of RM36 million (+9% quarter-on-quarter) took 1H earnings to RM69 million (+24% year-on-year), on track to meet our forecasts. We remain optimistic about Dialog's long-term growth prospects, driven by its centralised tankage facility (CTF) projects in Pengerang. Dialog is also touted to be in the running to co-develop Petronas' marginal oilfield projects, a major positive in our view. We maintain our 'buy' call with an unchanged RM2.60 sum-of-parts (SOP) target price.

1HFY11 net profit of RM69 million (+24% y-o-y) on improved earnings before interest, tax, depreciation and amortisation (Ebitda) margin (+3.6 percentage points y-o-y; 14.9%) but lower revenue (-9% y-o-y) accounts for 50% of our and 47% of consensus full-year estimates. Geographically, all divisions reported growth. Overseas operations reported stronger pre-tax growth (+46% y-o-y) than domestic (+14%), but the latter's contribution (RM47 million) was 2.8 times the former's RM22 million.

Associates' profits grew 32% y-o-y to RM20 million in 1H, accounting for 22% of group pre-tax profit. The underlying strength was largely driven by its 30%-owned CTF operations in Kertih, Terengganu. Although earnings from the CTF operations are equity accounted, it provides Dialog with growing income stream, cash flows and dividends. No dividend was declared in 2Q. Dialog remains cash rich, with RM210 million net cash, which equals 11 sen per share.

We retain our FY11/13 earnings forecasts, which imply a 3-year net profit compound annual growth rate of 10%. There is ample room to upgrade, for we have not incorporated potential earnings from its Pengerang CTF operations (10 times the size of Kertih CTF), Saudi Arabia supply base, and Phase 3 and beyond for the Tanjung Langsat CTF into our forecasts.

Our target price is based on a SOP valuation, which has incorporated one million cu m of production from the Pengerang CTF (20% of full capacity). Pending the necessary environmental approvals, the Pengerang CTF (part of the Economic Transformation Programme) is scheduled to break ground in April and to complete the first phase by end-2012 or early 2013. ' Maybank IB Research, Feb 17

This article appeared in The Edge Financial Daily, February 18, 2011.

AXIATA - Axiata sure to meet expectations

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

Axiata Group Bhd
(Feb 17, RM5.08)
Maintain buy at RM4.97 with fair value RM6.40: We maintain our 'buy' conviction on Axiata with a fair value of RM6.40. Our valuation is based on FY11 earnings, with confidence bottom line growth will range at least between 22% and 32% in the next two years.

Essentially, our valuation implies a EV/Ebitda multiple of 6.3 times, a deep discount to its regional comparable peers considering the earnings growth we expect in the next two years.

Regional peers' valuation ranges from 6.5 to 10.5 times with comparatively slower bottom line growth. In addition, Axiata now offers a dividend angle, albeit a relatively small one ' payout of 30%. The payouts of comparable telcos are above 75%. Nevertheless, we like Axiata for its capital growth, which should more than compensate the shortcomings in dividends.

We are confident that its FY10 results will at least match our initial forecast, if not surpass it. Operating company Celcom Axiata Bhd only needs to make RM350 million in 4QFY10 to match our forecast. It made at least RM440 million in quarterly profit in the past three quarters.

XL earned 2.89 trillion rupiah for the full-year, a splendid 70% jump from FY09. This came on the back of a 20% increase in revenue and a much slower growth in costs. As a result, its earnings before interest, tax, depreciation and amortisation (Ebidta) margin grew to 54% from 45% the previous year.

On a normalised basis, earnings were even higher at IDR3.04 trillion. Normalised earnings is affected by the recognition that during the year, XL made an accelerated depreciation of around 3.04 trillion rupiah.

Dialog results were also very encouraging. Overall, it made 5.05 billion Sri Lanka rupees for the full year. This matched our forecast, contributing 4.4% of consolidated group forecast.

Overall, all operating companies that have come out with full-year results account for 33.2% on a consolidated basis of the group's expected FY10 earnings.

India will not be in the driving seat for FY11, as intense capex to lay the groundwork for 3G services may push Idea's operating costs. However, we are a taking long-term view on Idea and are not concerned with the developments in India.

Valuation is still attractive at the prevailing price, which implies a trailing EV/Ebitda of only 6.3 times (against SingTel's 10.5 times and other regional (developing) peers 6.2 times). This is attractive because Axiata has exposure in high-growth, under-penetrated countries, with further upside in earnings growth. ' AmResearch, Feb 17

This article appeared in The Edge Financial Daily, February 18, 2011.

CMSB - Cahya Mata Sarawak: All eyes on 10MP and SCORE

Stock Name: CMSB
Company Name: CAHYA MATA SARAWAK BHD
Research House: CIMB

Cahya Mata Sarawak Bhd
(Feb 16, RM2.79)
Maintain hold at RM2.82 with revised target price RM3.16 (from RM3): Though the rollout of projects in the Sarawak Corridor of Renewable Energy (SCORE) is likely to gain momentum, there is still little to suggest that the planned Sarawak Aluminium Company Sdn Bhd (Salco) aluminium smelter plant will make swift progress given the unresolved issues for the Bakun dam, which is supposed to supply electricity to the Salco plant.

Earnings drivers for CMS will remain the manufacturing and construction material division which should continue to benefit from the pickup in the rollout of jobs under SCORE and the 10th Malaysia Plan (10MP) in Sarawak.

We maintain our 'hold' rating. Our target price, which is based on a 10% discount to our target market PER, is raised from RM3 to RM3.16 for a higher target market PER of 14.5 times. We prefer Muhibbah Engineering (M) Bhd which is our top small-cap construction pick.

We were too cautious on the stock which rallied in 2010. Stoked by news flow on potential project flows in SCORE and the award of a road project, CMS's share price surged 80% last year, outperforming the construction stocks under our coverage which rose 36% on average.

This year marks the implementation of Phase 2 of SCORE. Various road and infrastructure projects under the 10MP and the Economic Transformation

Programme (ETP) have yet to be implemented. Execution will be a key theme for this year, backed by the 10MP's RM4.6 billion budget for Sarawak.

CMS is likely to release its 4Q10 results in the last week of February. We expect an earnings before interest and tax (Ebit) margin of around 13% to 14% for the full year driven by manufacturing and construction materials.

The Sarawak state election may be around the corner, given the expectations that the general election may be called as early as 2H11. However, the upside from the election factor may already be largely in CMS's share price which shot up 80% in 2010. ' CIMB Research, Feb 16

This article appeared in The Edge Financial Daily, February 17, 2011.

PETDAG - Petronas Dagangan 'hold' call remains

Stock Name: PETDAG
Company Name: PETRONAS DAGANGAN BHD
Research House: HWANGDBS

HWANGDBS Vickers Research Sdn Bhd has maintained its 'hold' recommendation on Petronas Dagangan Bhd (PDB) at a higher target price of RM12.50 from RM10.15.

The research house said PDB remained cash-rich and as at end-December 2010, it has net cash of RM1 billion even though it has paid out RM633 million dividends.

"We believe it could sustain a high dividend payout," it said in a research note today.

HwangDBS said it has also raised PDB's FY11-FY13 net profit forecast by 6.7-9.4 per cent, factoring in overall higher crude oil to US$90-US$105 per barrel in 2011-2013 from US$80-US$95 per barrel, previously.

PDB yesterday reported that pre-tax profit for the third quarter ended Dec 31, 2010 rose to RM331.897 million from RM256.924 million in the same period of 2009.

Revenue increased to RM5.932 billion from RM5.337 billion previously. -- BERNAMA

PROTON - Proton cut to 'sell' on possible Q3 loss

Stock Name: PROTON
Company Name: PROTON HOLDINGS BHD
Research House: UOB

PROTON Holdings Bhd, Malaysia’s state-controlled carmaker, was downgraded at UOB Kay Hian Holdings Ltd, which cited a possible loss in the fiscal third quarter amid “substantially” lower cash levels.

The stock was cut to “sell” from “hold” and its share price estimate reduced to RM3.75 from RM5.20, Vincent Khoo, an analyst at UOB Kay Hian, wrote in a report today. - Bloomberg

IOICORP - IOI downgraded to 'market perform'

Stock Name: IOICORP
Company Name: IOI CORPORATION BHD
Research House: RHB

IOI Corp, the Malaysian palm oil producer, was downgraded to “market perform” from “outperform” at RHB Research Institute Sdn Bhd, citing lower- than-expected second-quarter earnings.

Its share price estimate was cut to RM6.70 from RM7.65, RHB analyst Hoe Lee Leng said in a report today. - Bloomberg

IOICORP - OSK Research maintains Sell on IOI Corp, TP at RM4.41

Stock Name: IOICORP
Company Name: IOI CORPORATION BHD
Research House: OSK

KUALA LUMPUR: OSK Research'' said IOI Corp's annualised 1HFY11 core net profit of RM920.5 million was 11.3% below its recently raised forecast of RM2074.7 million and 16.5% below consensus expectation.

'If we knock off the RM61 million one-off gain from the disposal of investment property, the core number would have been worse,' it said on Thursday, Feb 17.

'We are maintaining our Sell call on IOI Corp with our target price remaining at the recently downgraded RM4.41. Based on our CPO price assumption of RM3,200 for CY11, IOI is trading in excess of 19x earnings. Its stretched valuation has resulted in sub-par stock price performance and we believe this will continue to be the case in the foreseeable future until the company gets more aggressive with its new planting,' it added.

OSK Research said among PLANTATION [] stocks in its coverage, IOI has the lowest ratio of young mature to total mature trees and the lowest percentage of trees not yet at peak maturity, which means it has the slowest production growth rate.

AMWAY - RHB Research maintains Outperform on Amway, fair value at RM10.23

Stock Name: AMWAY
Company Name: AMWAY (M) HOLDINGS BHD
Research House: RHB

KUALA LUMPUR: RHB Research Institute said '' Amway's FY12/10 net profit of RM78.3 million (+7.9% on-year) was below expectations, accounting for 94% and 95% of its and consensus forecasts respectively.

The research house said on Thursday, Feb 17 the main variance to its forecasts was the higher-than-expected selling and distribution expenses during the year, which was 14% higher than its estimates.

Amway declared a fourth interim single tier dividend of 9.0 sen for the quarter, bringing its full-year FY10 dividends to 66 sen, 3 sen higher than the research house's projected 63 sen, and 37.5% higher than FY09's 48 sen. This translates to net payout of 130% for FY10 (FY09: 109%) and a yield of 7.6%.

'We are maintaining our FY11-12 forecasts, pending Amway's analysts' briefing this 22 Feb. We also introduce our FY13 forecasts. Our fair value is maintained at RM10.23 based on unchanged WACC of 8.9%. Maintain Outperform,' said RHB Research.

February 16, 2011

TAANN - Oil palm deal benefits Jasa Tiasa and Ta Ann

Stock Name: TAANN
Company Name: TA ANN HOLDINGS BHD
Research House: AMMB

Timber sector
Initiate coverage with overweight recommendation: We initiate coverage on the timber sector with an 'overweight' call, recommending a 'buy' on Jaya Tiasa Holdings Bhd and a 'hold' on Ta Ann Holdings Bhd with fair values of RM6 and RM5.61 respectively, based on a PER of 15 times.
Our recommendations are grounded on three key points:

1.'' ''Timber price recovery.
The timber industry has recovered from the ebbs of the recent global economic crisis. Plywood prices fell to a low of around US$350 (RM1,225)/cu m in 2009 but have rebounded to a high of US$485/cu m in recent weeks. Additionally, Meranti regular logs, which plunged to a low of US$120-U$130/cu m then, have in recent weeks traded at a high of US$290/cu m.

2.'' ''Structural transformation.
The two companies are reaping the fruit of their venture into oil palm about a decade ago. CPO is now trading at between RM3,900 and RM4,000/tonne against an average of RM2,700 per tonne last year. Their rapid growth in oil palm has simply become too significant to ignore.

3.'' ''Potential reclassification.
For the two companies, a reclassification from the industrial products sector to plantations appears to be inevitable ' perhaps within the next three years. This will increase their profile among investors.

Our stance mainly stems from the high-octane growth in their oil palm business. As of FY10, the oil palm division accounted for about 45% of Jaya Tiasa's pre-tax profit against only 6% in FY06 while as of'' FY09, oil palm earnings of RM37 million represented 40% of Ta Ann's pre-tax profit compared with a mere 1.4% in FY06.

Jaya Tiasa and Ta Ann's fair values are based on a PER of 15 times their FY11F earnings per share of 40 sen and 37.4 sen, respectively. To account for their oil palm segment's growing prominence, with timber to boot, the fair PER is at the high end of the PER range of the small cap plantation companies under our coverage but just a notch below IJM Plantations Bhd's fair PER of 16 times.

Jaya Tiasa and Ta Ann's mature oil palm areas are comparable to that of IJM Plantations'. As at FY10, Jaya Tiasa and Ta Ann have total planted areas of 50,424ha and an estimated 27,500ha, respectively, against IJM Plantations' 30,528ha. Jaya Tiasa and Ta Ann's mature hectarages are expected to rise to 25,000ha and 20,000ha, respectively, in FY11F.

The risks to our projections include: (i) A significant decline in CPO prices: (ii) A sharper than expected appreciation of the ringgit; and (iii) Rising logistics and transport costs due to the withdrawal of fuel subsidies and rising diesel prices in the local market. ' AmResearch, Feb 14

This article appeared in The Edge Financial Daily, February 16, 2011.

JTIASA - Oil palm deal benefits Jasa Tiasa and Ta Ann

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

Timber sector
Initiate coverage with overweight recommendation: We initiate coverage on the timber sector with an 'overweight' call, recommending a 'buy' on Jaya Tiasa Holdings Bhd and a 'hold' on Ta Ann Holdings Bhd with fair values of RM6 and RM5.61 respectively, based on a PER of 15 times.
Our recommendations are grounded on three key points:

1.'' ''Timber price recovery.
The timber industry has recovered from the ebbs of the recent global economic crisis. Plywood prices fell to a low of around US$350 (RM1,225)/cu m in 2009 but have rebounded to a high of US$485/cu m in recent weeks. Additionally, Meranti regular logs, which plunged to a low of US$120-U$130/cu m then, have in recent weeks traded at a high of US$290/cu m.

2.'' ''Structural transformation.
The two companies are reaping the fruit of their venture into oil palm about a decade ago. CPO is now trading at between RM3,900 and RM4,000/tonne against an average of RM2,700 per tonne last year. Their rapid growth in oil palm has simply become too significant to ignore.

3.'' ''Potential reclassification.
For the two companies, a reclassification from the industrial products sector to plantations appears to be inevitable ' perhaps within the next three years. This will increase their profile among investors.

Our stance mainly stems from the high-octane growth in their oil palm business. As of FY10, the oil palm division accounted for about 45% of Jaya Tiasa's pre-tax profit against only 6% in FY06 while as of'' FY09, oil palm earnings of RM37 million represented 40% of Ta Ann's pre-tax profit compared with a mere 1.4% in FY06.

Jaya Tiasa and Ta Ann's fair values are based on a PER of 15 times their FY11F earnings per share of 40 sen and 37.4 sen, respectively. To account for their oil palm segment's growing prominence, with timber to boot, the fair PER is at the high end of the PER range of the small cap plantation companies under our coverage but just a notch below IJM Plantations Bhd's fair PER of 16 times.

Jaya Tiasa and Ta Ann's mature oil palm areas are comparable to that of IJM Plantations'. As at FY10, Jaya Tiasa and Ta Ann have total planted areas of 50,424ha and an estimated 27,500ha, respectively, against IJM Plantations' 30,528ha. Jaya Tiasa and Ta Ann's mature hectarages are expected to rise to 25,000ha and 20,000ha, respectively, in FY11F.

The risks to our projections include: (i) A significant decline in CPO prices: (ii) A sharper than expected appreciation of the ringgit; and (iii) Rising logistics and transport costs due to the withdrawal of fuel subsidies and rising diesel prices in the local market. ' AmResearch, Feb 14

This article appeared in The Edge Financial Daily, February 16, 2011.

CMSB - Cahya Mata Sarawak: All eyes on 10MP and SCORE

SIME - Abu Dhabi energy firm files suit against Sime Engineering

Stock Name: SIME
Company Name: SIME DARBY BHD
Research House: RHB

Sime Darby Bhd
(Feb 16, RM9.28)
Maintain outperform at RM9.28 with fair value RM11.10: According to a news report, Abu Dhabi-based energy firm, Emirates International Energy Services (EMAS), has filed a US$200 million (RM610 million) lawsuit against Sime Engineering Sdn Bhd,'' stemming from a dispute over tender bids. The media report stated that Sime had backed out of seven large-scale projects 'to help other unnamed foreign companies win tenders'.

Sime has clarified in a press statement that it did sign an exclusive agency agreement with EMAS in Sept 2006, where EMAS was to identify suitable O&G projects for Sime to participate in, but that Sime is under no obligation to accept EMAS' recommendations and that there is no time bound requirement in the agreement to decline their recommendations. Management further noted that while EMAS did bring several projects to its attention, Sime did not tender for these projects, after deeming them unsuitable.

EMAS wrote a letter to Sime in August 2010, claiming losses for not accepting those projects, but after seeking legal advice, Sime replied to EMAS that there was no basis for the claims according to the agreement, and that such a claim is grounds to treat the agreement as being repudiated and a ground for termination. As at the time of the press release, Sime had yet to receive any official lawsuit from EMAS.

We understand the agreement stated that payment to the agent would only be made if Sime were to tender for the projects and that payment was to be based on a certain percentage of the project cost. Given that Sime did not actually tender for any of the projects brought to them by EMAS, there shouldn't be any basis for the lawsuit, and we are not too worried about it, unless it turns out to be for a different claim.

Our forecasts remain unchanged. The risks include: (i) A convincing reversal in crude oil price trends resulting in the reversal of CPO and other vegetable oils price trends; (ii) Weather abnormalities resulting in an over or under-supply of vegetable oils; (iv) Increased emphasis on implementing global biofuel mandates and trans-fat policies; and (v) a slower than expected global economic recovery resulting in lower than expected demand for vegetable oils.

We make no change to our target price of RM11.10 and our 'outperform' recommendation. ' RHB Research, Feb 16

This article appeared in The Edge Financial Daily, February 17, 2011.

MHB - MMHE poised for margin re-rating

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

Malaysia Marine & Heavy Engineering Holdings Bhd
(Feb 16, RM6.44)
Maintain buy at RM6.12 with revised fair value RM8.10 (from RM7.15): We maintain our 'buy' on Malaysia Marine & Heavy Engineering Holdings Bhd (MMHE) but our higher earnings expectations have raised the stock's fair value to RM8.10 (from RM7.15) based on an unchanged FY12F PER of 25 times.

We have raised MMHE's FY12F/13F earnings by 13% due to a more optimistic pre-tax margin assumption ' up from 9% to 11% against 16% for Kencana in FY10 and 20% for Singapore's deepwater specialist Keppel FELS and Sembcorp Marine.

We are convinced about MMHE's radical re-rating due to: (i) Change in management with the appointment of Dominique de Soras from Technip's subsea division, who has extensive experience in implementing deepwater projects; (ii) Strong likelihood of a quick turnaround from the reaping of 'low-hanging fruit' efficiencies; (iii) Prolific wave of upcoming projects by June this year as half of MMHE's Pasir Gudang yard will be unutilised when the topside structure of Gumusut-Kakap floating production storage semi-submersible is lifted onto its hull; (iv) Most of MMHE's tenders of RM9 billion are more complex structures than the jobs undertaken by other domestic operators. Hence, we expect the new large contracts to set new margin benchmarks for Malaysia: and (v) Potential M&A plays on the back of the government-encouraged rationalisation of domestic fabricators. Among fabricators, we expect the strategic location of Sime Engineering's yards in Pasir Gudang and Teluk Ramunia to be the best option for MMHE.

We expect these new developments to catalyse MMHE's premium valuations even further given its heavy weight capitalisation of RM10 billion ' which could mean inclusion into the FBM KLCI.

We view that the recent slew of news flow on marginal fields has largely been factored into Kencana Petroleum's sharp re-rating over the past two months. Hence, we advocate investors to switch from Kencana to MMHE for new contracts windfalls and upcoming margin re-rating.

The stock currently trades at an attractive FY12F PER of 20 times, below SapuraCrest Petroleum's peak of 29 times in 2007. ' AmResearch, Feb 16

This article appeared in The Edge Financial Daily, February 17, 2011.

MEDIAC - Ride the MCIL dragon

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

Media Chinese International Ltd
(Feb 16, 88 sen)
Initiate coverage with buy call at 87.5 sen and target price RM1.22: We like Media Chinese International (MCIL) for its dominance in the Chinese newspaper segment. With a growing circulation, it will be able to capture a larger share of newspaper adex. Trading at an attractive 10 times CY11 PER (lowest among the media stocks) and offering a decent 5.3% net dividend yield (highest among peers), MCIL offers value. Investors can also expect M&A or higher dividends for more upside potential.

MCIL is a Chinese language newspaper and magazine publisher. Its Malaysian newspapers command more than 70% share of daily circulation of Chinese newspapers.

In Hong Kong, Ming Pao Daily News has the third highest daily circulation. With Yazhou Zhoukan, it is highly regarded for being credible and independent.

Malaysia contributes more 60% to revenue but more than 90% to earnings before interest, tax, depreciation and amortisation (Ebitda).

Daily circulation of its Malaysian newspapers has been growing steadily at 2% four-year compound annual growth rate, while all the other major mainstream newspapers have been experiencing otherwise. In a virtuous cycle, stronger daily circulation will allow MCIL to capture a larger share of newspaper adex. In fact, figures provided by Nielsen Media Research indicate that MCIL's Malaysian Chinese gross newspaper adex rose by an astounding 20% year-on-year in 2010.

Our target price is based on modest 13.5 times CY11 PER, backed by RM1.25 discounted cash flow per share. MCIL's current valuation is even below minus one standard deviation of Media Prima Bhd and Star Publications (M) Bhd's mean PERs. This is despite MCIL catching up in earnings and even better in operations.

Also, MCIL offers higher net dividend yields than Media Prima and Star.

We estimate that MCIL's net cash position will burgeon to RM188.1 million or 11 sen per share by the financial year-end. Management has expressed interest in expanding its global reach before. Otherwise, it can raise the high range of its net dividend payout policy (DPR) from 60% to even as high as 75% (the low range is 30%). Our forecasts assume 50% payout. ' Maybank IB Research, Feb 16

This article appeared in The Edge Financial Daily, February 17, 2011.

IGB - IGB falls on plan to inject The Gardens Mall into KrisAssets

Stock Name: IGB
Company Name: IGB CORPORATION BHD
Research House: AMMB

KUALA LUMPUR: Securities of IGB Corp Bhd fell in late morning on Wednesday, Feb 16 after it announced its plan to inject The Gardens Mall into its 75%-owned KRISASSETS HOLDINGS BHD [].

At 11.01am, IGB was down 11 sen to RM2.21 with 5.07 million shares done and the call warrants IGB-CB lost 8.5 sen to 27.5 sen with 25,000 units transacted.

The FBM KLCI fell 2.34 points to 1,502.99. Turnover was 691.9 million shares valued at RM575.26 million. There were 218 gainers, 382 losers and 263 stocks unchanged.

IGB announced on Monday that it had entered into a heads of agreement with KrisAssets for the proposed disposal of 100,000 ordinary shares of RM1 each representing the entire paid-up share capital in Mid Valley City Gardens Sdn Bhd (MVCG) to KrisAssets for a cash consideration.

It would be based on the net tangible asset of MVCG based on the audited financial statements for the financial year ended Dec 31, 2010 and also the market value of the piece of land together with The Gardens Mall with an indicative value of RM820 million.

AmResearch said on Wednesday it was maintaining its HOLD for IGB with the fair value revised to RM2.33 a share.

'Our fair value is arrived at after applying a 45% discount to our revised NAV estimate of RM4.24/share. Our NAV is revised as we rolled over our valuation to FY11F while also including new development projects,' it said.

ALAM - OSK still 'overweight' on O&G sector

Stock Name: ALAM
Company Name: ALAM MARITIM RESOURCES BHD
Research House: OSK

OSK Research has maintained its overweight position on the local oil and gas (O&G) sector as it believes the impact on the crude oil price will not be so severe due to tensions in Egypt.

Its top "buy" picks are Kencana with a target price of RM3.05, Petra Perdana RM1.57, Petra Energy RM2.16 and Alam Maritim RM 1.80.

In a research note today, OSK said, a minimal local O&G companies have exposure in the Middle East. "So far, we can think of only two that have exposure in the Middle East, but then again they are not in Egypt," it added.

The companies are KNM, which has manufacturing plants in Saudi Arabia and Dubai and Alam Maritim, that has chartered some vessels to Middle Eastern customers.

"We do not see the threat of unrest affecting its activities as they are in different geographical locations, one on land and the other in water," it explained.

It also remained unchanged on the oil price assumption for 2011 and 2012 at US$80-US$90 per barrel and US$90-US$100 per barrel respectively.

"However, we may increase our range in the event there is significant and prolonged unrest in the Middle East or if it spreads across a few countries with high petroleum reserves," the research house said.

Following a period of tension, Egyptian president Hosni Mubarak stepped down recently, which somewhat capped the surge in oil price. -- Bernama

PENERGY - OSK still 'overweight' on O&G sector

Stock Name: PENERGY
Company Name: PETRA ENERGY BHD
Research House: OSK

PETRA - OSK still 'overweight' on O&G sector

Stock Name: PETRA
Company Name: PETRA PERDANA BHD
Research House: OSK

KENCANA - OSK still 'overweight' on O&G sector

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

IGB - OSK maintains 'buy' call on IGB Corp

Stock Name: IGB
Company Name: IGB CORPORATION BHD
Research House: OSK

OSK Research Sdn Bhd maintains a "buy" call on the IGB Corporation stock based on the potential net gain it may get from the sale of The Gardens Mall at Mid Valley City.

On Monday, IGB proposed to sell The Gardens Mall to its 75 per cent-owned subsidiary KrisAssets Holdings Bhd.

The property's disposal may potentially give rise to a 11.4 sen net gain after tax based on the estimated RM820 million market value, it said in a research note today.

OSK Research estimated that the RM820 million could translate into a net yield of six to seven per cent, a relatively fair valuation for any prime shopping mall in the Klang Valley.

OSK has adjusted its target price for the stock from RM2.44 to RM2.50 for this year despite having to revise down its core earnings forecast by 23 per cent to reflect the mall's disposal to KrisAssets on higher minority interest.

At 12.14pm, IGB Corporation's stock dwindled 13 sen to RM2.19. OSK Research said that if they were to impute the potential net gain of 11.4 sen from The Gardens Mall's sale based on the above assumptions, this may translate this year's stock target price to RM2.64.

"(However), We're not imputing this potential gain into our valuation for now pending finalisation of the mall's selling price.

"Although the mall is valued at RM820 million by an independent valuer, the selling price will only be agreed upon 60 days from now," it added. -- Bernama

SIGN - OSK Research initiates coverage of Signature International, TP RM1.18

Stock Name: SIGN
Company Name: SIGNATURE INTERNATIONAL BHD
Research House: OSK

KUALA LUMPUR: OSK Research is initiating coverage on SIGNATURE INTERNATIONAL BHD [] with a BUY recommendation and target price of RM1.18.

The research house said on Wednesday, Feb 16 the company's flagship brand name, Signature Kitchen, is widely known among Malaysian households as an interior fit-out (IFO) specialist.

As its brand name suggests, Signature International is an IFO player with a niche in kitchen systems. Emerging from a slow start in FY10, OSK Research believes Signature International's earnings will return to its previous peak in FY09 on a slew of IFO contract awards secured this year.

'We believe this high billings momentum will boost its FY12 IFO earnings while its retail division will continue to grow at single digit,' it said.

SUPERMX - OSK Research: Supermax FY10 results within expectations, TP unchanged at RM7.84

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

KUALA LUMPUR: OSK Research said Supermax Corp Bhd's FY10 results were within expectations and as anticipated, the results were lower on-quarter owing to spiralling latex price and no improvement in forex.

The research house said on Wednesday, Feb 16 although the company is the closest to Top Glove in terms of product mix, it has managed to differentiate itself by having a higher OBM mix as well as distribution income to smoothen its manufacturing profits.

'Our target price for Supermax remains unchanged at RM7.84, based on the existing PER of 13x FY11 EPS. Supermax remains one of our top two picks for the sector besides Kossan. Although we maintain Neutral on the sector, Supermax's valuation still stands out over some of its peers given its single-digit valuation.

'Going forward, we believe the stock would come in for a re-rating when latex price gets toppish, which we think would be sometime in May 2011 when the wintering season of rubber trees is over,' it said.

February 14, 2011

AIRPORT - MAHB well placed for current upcycle

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

Malaysia Airports Holdings Bhd
(Feb 14, RM6.03)
Maintain buy at RM6.02 with target price of RM7.12: MAHB will release its 4Q10 results on Feb 16. The last quarter of the calender year is seasonally the best. Based on the operating statistics published, we expect recurring net income of RM154 million (11.9% year-on-year, 63.4% quarter-on-quarter) ' this is MAHB's best quarter ever. MAHB is our top aviation pick as it is well placed to enjoy the current air travel upcycle. Maintain 'buy', no change to our RM7.12 discounted cash flow-based target price.

Passenger growth in 4Q10 was 6.5% y-o-y, lower than our 10% growth assumption as the industry was negatively impacted by the severe snowstorms in the northern hemisphere.

The bulk of the traffic growth came from international passengers (12% y-o-y) while domestic grew by 1.8% y-o-y. This will have a very positive impact on the group as international passengers command four to seven times higher passenger service charge.

MAHB's 2010 passenger traffic growth rate of 12.7% was the second highest after the record 15.5% growth set in 2004. However, 2004's results were distorted because of the previous years' poor showing due to 9/11 and SARS. 2010's result is compelling because it was achieved on the back of robust traffic growth of the previous three years.

KLIA carried 34.1 million people in 2010. We estimate this makes it the 32nd busiest airport in the world, surpassing big names such as Narita Japan and Newark USA. More impressive, KLIA's growth of 14.8% makes it the fourth fastest growing large airport (more than 30 million passengers carried per year) after Pudong, Jakarta and Dubai. Overseas bound passengers consist of 48.4% of the total, an increase of 3.5 percentage points from the previous year.

We have tweaked numbers by +0.6%, 1.1% and 1.2% for 2010/12 respectively, after imputing the published operating statistics. MAHB is highly attractive compared with its global peers: 8.1 times price-to-cash-flow ratio (P/CFO), a 24% discount to peers, 110% return on capital (53% higher) and it is not highly geared at 0.26 times against its peers' average of 0.74 times. ' Maybank IB Research

This article appeared in The Edge Financial Daily, February 16, 2011.

AIRASIA - AirAsia defers 2012 deliveries

Stock Name: AIRASIA
Company Name: AIRASIA BHD
Research House: ECMLIBRA

AirAsia Bhd
(Feb 14, RM2.72)
Maintain buy at RM2.69 with target price of RM3.50: AirAsia announced last Friday that it will defer the deliveries of 10 A320 aircraft originally scheduled for 2012 to 2015. With the deferment, AirAsia will receive 14 instead of 24 aircraft in 2012, and the number of deliveries in 2015 will be increased from 9 to 19 planes. AirAsia will not bear any penalties from the deferment.

According to AirAsia, the decision to defer the deliveries in 2012 was made to allow the group to switch from its order of the classic Airbus A320s to a newer variant, the A320 NEO (New Engine Option), which is designed to reduce fuel consumption by 8% to 15%. AirAsia has agreed to a firm order of 175 Airbus A320s to be delivered between December 2005 and October 2014. So far, the group has taken delivery of 16 A320 in 2010 and is looking at eight more this year. Most of these will be deployed in Thailand and Indonesia, in order to grow the associates' fleet size in line with their increase in flight frequency and the addition of new routes. The 14 planes expected in 2012 will be mainly for its joint ventures in the Philippines and Vietnam.

Based on our assumptions, we expect the change of delivery schedule to increase FY12 earnings per share (EPS) by 6.2% as a result of lower depreciation and finance cost, after accounting for lower aircraft lease income. Meanwhile, net gearing is expected to decline by 5% to 1.5 times. At the moment, we keep our FY12 forecasts unchanged until further guidance from management during its 4Q results briefing. The group is expected to release its 4QFY10 results on Feb 24. We maintain a 'buy' recommendation on AirAsia with a target price of RM3.50 based on 10 times FY11 EPS. ' ECM Libra Investment Research, Feb 14

This article appeared in The Edge Financial Daily, February 16, 2011.

JTIASA - AmResearch initiates coverage on timber with overweight stance

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

KUALA LUMPUR: AmResearch initiates coverage on the timber sector with an OVERWEIGHT stance, recommending a BUY on JAYA TIASA HOLDINGS BHD [] and a HOLD on TA ANN HOLDINGS BHD [] with fair values of RM6.00/share and RM5.61/share, respectively, based on a PE of 15x.

It said on Monday, Feb 14 its recommendations are based on the timber price recovery; structural transformation, and potential reclassification and its stance is underpinned by the 'high-octane growth' in their oil palm business.

As of FY10, the oil palm division accounted for about 45% of Jaya Tiasa's pre-tax profit versus only 6% in FY06, while as of its FY09, oil palm earnings of RM37mil represented 40% of Ta Ann's pre-tax profit compared with a mere 1.4% in FY06. Jaya Tiasa's and Ta Ann's fair values are based on a PE of 15x their FY11F EPS of 40 sen and 37.4 sen, respectively.

To account for their oil palm segment's growing prominence, with timber to boot, the fair PE is at the high end of the PE range of the small capitalisation PLANTATION [] companies under our coverage but just a notch below IJM PLANTATIONS BHD []'s (IJMP) fair PE of 16x.

TAANN - AmResearch initiates coverage on timber with overweight stance

Stock Name: TAANN
Company Name: TA ANN HOLDINGS BHD
Research House: AMMB

KUALA LUMPUR: AmResearch initiates coverage on the timber sector with an OVERWEIGHT stance, recommending a BUY on JAYA TIASA HOLDINGS BHD [] and a HOLD on TA ANN HOLDINGS BHD [] with fair values of RM6.00/share and RM5.61/share, respectively, based on a PE of 15x.

It said on Monday, Feb 14 its recommendations are based on the timber price recovery; structural transformation, and potential reclassification and its stance is underpinned by the 'high-octane growth' in their oil palm business.

As of FY10, the oil palm division accounted for about 45% of Jaya Tiasa's pre-tax profit versus only 6% in FY06, while as of its FY09, oil palm earnings of RM37mil represented 40% of Ta Ann's pre-tax profit compared with a mere 1.4% in FY06. Jaya Tiasa's and Ta Ann's fair values are based on a PE of 15x their FY11F EPS of 40 sen and 37.4 sen, respectively.

To account for their oil palm segment's growing prominence, with timber to boot, the fair PE is at the high end of the PE range of the small capitalisation PLANTATION [] companies under our coverage but just a notch below IJM PLANTATIONS BHD []'s (IJMP) fair PE of 16x.

POS - OSK Research maintains Buy on Pos Malaysia, unchanged target price of RM4.45

Stock Name: POS
Company Name: POS MALAYSIA BHD
Research House: OSK

KUALA LUMPUR: OSK Research is maintaining its BUY call on Pos Malaysia with an unchanged target price of RM4.45 based on a sum of parts valuation.

It said on Monday, Feb 14 the potential review of the Postal Land Act and announcement of the potential buyer of the 32.2% stake are the catalysts for Pos Malaysia.

The Edge weekly reported Feb 14 has been set as the deadline for bidders to submit their offers for the 32.2% stake in Pos Malaysia. There are likely to be four to five consortia bidding for the Government investment arm's stake in the national postal

services provider. Names that have cropped up are Tan Sri Syed Mokhtar's consortium, Sapura Group, which has tied up with Deutsche Post, SCOMI MARINE BHD [] with an European Postal group, and according to sources, two other groups led by individuals are also likely to put in bids for Pos Malaysia.

While it is uncertain how much the bidders will have to fork out for Khazanah's stake in the company, at a closing price of RM3.35 per share last Friday, the 32.21% stake would be worth as much as RM579.54m.

OSK Research said judging from Khazanah's objective in divesting its 32.21% stake in Pos Malaysia, it appears that the key criteria for the potential buyer would be one with strategic fit to transform Pos Malaysia into an entity that would mirror the postal

transformation trend seen globally, and is 51% owned and led by a Malaysian company.

'The buyer should also possess strengths in areas such as the retail and courier segments other than conventional postal services. The new strategic shareholder must also be acceptable to Pos Malaysia's other shareholders i.e. Permodalan Nasional Bhd, the second largest shareholder in Pos Malaysia with a 7.32% stake, Aberdeen Asset Management (7.03%), Skim Amanah Bumiputera (6.15%) and the Employees Provident Fund, with 5.91%,' it said.