AIRASIA - Credit Suisse: AirAsia can weather high oil price, keeps TP of RM4.30

Stock Name: AIRASIA
Company Name: AIRASIA BHD
Research House: CREDIT SUISSE

KUALA LUMPUR: Credit Suisse Research remains positive on AirAsia as it believes the low-cost'' carrier'' can weather the high oil price environment.

In a research note issued on Thursday, March 17, it said AirAsia's management was not in favour of imposing a fuel surcharge, preferring instead to raise loads and ancillary income (higher baggage fees, new services, etc).

Credit Suisse Research said AirAsia management was comfortable with its margins with jet fuel at US$150 per barrel but could impose a surcharge if prices are sustainable at around these levels.

"We estimate that the company needs to raise total fares by merely RM1 to compensate for a US$1 per barrel increase in jet fuel prices. If jet fuel averages at US$120, fares would have to rise by RM10 to compensate. This is less than the price of a large McValue meal (RM11.20), thus, in our view, would not significantly impact demand,' it said.

Credit Suisse Research forecast US$110 for FY11-FY13 jet fuel (+20% on-year versus FY10). AirAsia effectively pays the market rate, as it only hedges 25% of its forward quarter requirements.

It also said AirAsia's management had been actively addressing market's various concerns over the company by improving transparency, strengthening its team and reducing aircraft rollout in an effort to contain gearing.

The research house said AirAsia had also proposed to monetise its 'other business units' including the AirAsia Academy (pilot and crew training) and 16%-owned sister-company, AirAsia X (AAX, unlisted).

The future listing of its long-haul carrier AAX, and its subsequent spin off, is the final part of the restructuring to counter the perceived dilution in AirAsia's short haul business model.

Credit Suisse Research said AirAsia was considering paying its first maiden dividend. In its view, the potential dividend would be a small but symbolic amount to signal the market that it is on a better financial footing.

'We estimate that a 10% payout ratio would result in a dividend yield of 1.2%. We believe that this move will be well received by local institutional funds in Malaysia, which could reverse the stock's low local shareholdings and provide fresh impetus to the share price,' it said.

The research house said it remained positive on AirAsia, which has the second largest airline fleet in Asia, with a combined fleet of 93 aircraft. Although Singapore Airlines has110 aircraft, the company 'only' carried 16.6 million passengers in 2010 which is 35% less than AirAsia's combined total of 25.7 million.

SPSETIA - ECM Libra maintains SP Setia at 'Hold'

Stock Name: SPSETIA
Company Name: SP SETIA BHD
Research House: ECMLIBRA

Several research houses have maintained "buy" calls on SP Setia Bhd, reflecting its within-expectation first quarter 2011 results.

Both HwangDBS Vickers Research and OSK Research today left their target prices unchanged at RM7.90 and RM7.23 respectively.

"SP Setia is in a good position to win more land deals given its strong execution track record and solid balance sheet which is set to be enhanced further by a RM1 billion placement," HwangDBS Vickers said in its note today.

OSK Research said SP Setia was set for an impressive showing this year, driven by unbilled sales of more than RM2.2 billion and new launches.

ECMLibra Research, meanwhile, maintained its "hold" recommendation on SP Setia and said RM6.00 would be its fair value.

"Although we expect more landbank acquisitions but we believe this has been priced-in and the impending 15 per cent private placement may cap further upside in the near-term," ECMLibra added. -- Bernama

SPSETIA - SP Setia a 'buy' at HwangDBS, OSK

Stock Name: SPSETIA
Company Name: SP SETIA BHD
Research House: OSK

Several research houses have maintained "buy" calls on SP Setia Bhd, reflecting its within-expectation first quarter 2011 results.

Both HwangDBS Vickers Research and OSK Research today left their target prices unchanged at RM7.90 and RM7.23 respectively.

"SP Setia is in a good position to win more land deals given its strong execution track record and solid balance sheet which is set to be enhanced further by a RM1 billion placement," HwangDBS Vickers said in its note today.

OSK Research said SP Setia was set for an impressive showing this year, driven by unbilled sales of more than RM2.2 billion and new launches.

ECMLibra Research, meanwhile, maintained its "hold" recommendation on SP Setia and said RM6.00 would be its fair value.

"Although we expect more landbank acquisitions but we believe this has been priced-in and the impending 15 per cent private placement may cap further upside in the near-term," ECMLibra added. -- Bernama

TAANN - Ta Ann shares rise to 32-month high

Stock Name: TAANN
Company Name: TA ANN HOLDINGS BHD
Research House: CREDIT SUISSE

Ta Ann Holdings Bhd, a Malaysian timber company, rose to a 32-month high in Kuala Lumpur trading after the stock was upgraded to “outperform” at Credit Suisse Group AG with a RM6.50 share forecast.

The Sarawak-based company climbed 2.9 per cent to RM5.64 at 10:42 a.m. local time, set for its highest close since July 9, 2008. Ta Ann has gained 19.5 per cent since Japan’s earthquake and tsunami on March 11, after brokerages including AmResearch Sdn Bhd said it’s likely to benefit from increased plywood orders as the country rebuilds. -- Bloomberg

FABER - OSK Research maintains Trading Buy on Faber, unch TP RM3.02

Stock Name: FABER
Company Name: FABER GROUP BHD
Research House: OSK

KUALA LUMPUR: OSK Research is maintaining a Trading Buy on FABER GROUP BHD [] at an unchanged target price of RM3.02 based on SOP valuation.

The research house said on Friday, March 18 that it still thinks'' Faber should be able to get its existing concession renewed in view of its track record and excellent execution of the existing concession, which should provide the upward catalyst for its share price.

On Thursday, Faber announced a capital reduction by way of cancellation of 75 sen of the existing par value of each RM1 ordinary share, and ii) a share premium reduction of RM116m to reduce the accumulated losses in Faber Group.

'The proposals came in as no surprise given that we had mentioned in our last March 16 report that Faber was in the midst of finalising proposals to strengthen its balance sheet, largely with regard to 'legacy' accumulated losses at the company level.

'As we had mentioned earlier, despite the company's willingness to pay a higher dividend payout, its ability to increase the payout ratio had been constrained by its accumulated losses at the company level,' it said.

OSK Research said the main rationale for the proposed corporate exercise is to enable Faber to beef up its capacity to raise its dividend payout and provide higher dividend returns to its shareholders.

SPSETIA - HDBSVR maintains Buy on SP Setia, TP of RM7.90

Stock Name: SPSETIA
Company Name: SP SETIA BHD
Research House: HWANGDBS

KUALA LUMPUR: Hwang DBS Vickers Research said SP Setia's 1QFY11 net profit came in at RM62m (+62% on-year, +10% on-quarter ex-exceptional), constituting 22% of its'' estimates respectively.

The research house said on Friday, March 18 that SP Setia's EBIT margin continued to improve to 17% (+2.9 percentage points on-year, +3.6 percentage points on-quarter) in spite of higher selling & marketing expenses (+158% on-year ), driven by increased ASP and more meaningful contribution from newer projects.

'We expect earnings momentum to continue to build driven by record ~RM2.2bn unbilled sales and new launches,' it said.

HDBSVR reiterated a Buy and TP of RM7.90, based on 5% premium to RNAV of RM7.55 (to factor in more earnings-accretive land acquisitions). Fully diluted RNAV post placement and one-for-two bonus issue is estimated at RM4.80.

UMW - OSK Research maintains UMW as top buy for auto sector, TP unch RM8.92

Stock Name: UMW
Company Name: UMW HOLDINGS BHD
Research House: OSK

KUALA LUMPUR: OSK Research said it was positive about UMW securing'' a contract from Petronas Carigali Sdn Bhd'' for the provision of its jack-up drilling rig "Naga 3" to Petronas' domestic operations in Malaysian waters.

The contract is valued at approximately US$41.5 million for duration of one year, with a 1+1 year option for renewal. The rig will be mobilized sometime in March.

OSK Research said on Friday, March 18 with its last Naga jack-up rig finally chartered out and ready to be mobilised sometime this month, it expected UMW's oil and gas segment getting on course for a profitable year.

''

'We estimate that this division will register a net profit of RM121.8m in FY11 and reverse its FY10 losses of RM46 million. We continue to maintain UMW as our top BUY for the automotive sector, with our TP unchanged at RM8.92,' it said.

UMW - OSK Research maintains UMW as top buy for auto sector, TP unch RM8.92

Stock Name: UMW
Company Name: UMW HOLDINGS BHD
Research House: OSK

KUALA LUMPUR: OSK Research said it was positive about UMW securing'' a contract from Petronas Carigali Sdn Bhd'' for the provision of its jack-up drilling rig "Naga 3" to Petronas' domestic operations in Malaysian waters.

The contract is valued at approximately US$41.5 million for duration of one year, with a 1+1 year option for renewal. The rig will be mobilized sometime in March.

OSK Research said on Friday, March 18 with its last Naga jack-up rig finally chartered out and ready to be mobilised sometime this month, it expected UMW's oil and gas segment getting on course for a profitable year.

''

'We estimate that this division will register a net profit of RM121.8m in FY11 and reverse its FY10 losses of RM46 million. We continue to maintain UMW as our top BUY for the automotive sector, with our TP unchanged at RM8.92,' it said.

TOPGLOV - Malaysia glovemakers upgraded at OSK

Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD
Research House: OSK

Malaysia’s glove-making industry was upgraded to “overweight” from “neutral” at OSK Research Sdn Bhd, which said that the worst is over for these companies given that latex prices have started falling.

Rubber price may continue to drop, helping earnings by cutting raw material costs OSK analyst Jason Yap said in a report today.

His top picks for the sector were Top Glove Corp, Supermax Corp and Kossan Rubber Industries Bhd. -- Bloomberg

UMW - AmResearch 'neutral' on auto industry

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

AmResearch is in favour of automotive stock, APM Automotive Holdings Bhd, and has recommended a "buy" call and a fair value of RM7 per share.

"We like APM for its role in Tan Chong Motor (TCM) group's regionalexpansion, increased localisation and influx of foreign marques into the country," it said in a research note today.

AmResearch also maintained a "hold" call on TCM with a fair value of RM5 per share and UMW Holdings Bhd with a fair value of RM7.40 per share.

However, the research house maintained its "neutral" call on the automotive sector as margins were expected to be crimped by potentially higher completely knock-down kit prices and a weaker ringgit versus yen.

"We estimate every one per cent strengthening of the yen will hit TCM and UMW's bottomline by between two and three per cent as both companies import 30-40 per cent of their raw materials in yen and the remaining in US dollars," it added. -- Bernama

TOPGLOV - Research houses mixed on Top Glove

Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD
Research House: AMMB

Top Glove Corp Bhd has been upgraded to a "Hold" from "Fully Valued" by HwangDBS Vickers Research today, with expectations that margins and earnings would recover in the second-half of the
year.

"Restocking activities should pick up pace, following minimum orders in the last two quarters, and margin pressure would also ease as latex prices fall," it said in a research note today.

It raised the target price to RM5.30, from RM4.60 earlier, citing that a more balanced product mix would enable the company weather volatile material costs.

Meanwhile, AmResearch, in a separate research note, maintained its "Sell" stance on the company, following its weak earnings performance.

"We cut our financial year 2011 net profit forecast by 17 per cent to 20 per cent following both lower capacity utilisation rates and margin assumptions," it said.

Following the drop in rubber futures contract traded on the Tokyo Commodity Exchange after earthquake hit Japan, the research house was turning more optimistic of a meaningful correction in latex prices.

"We expect benefits of a more favourable cost structure to impact after some time lag, possibly post two to three months," it said.

It also lowered its fair value to RM4.30, from RM4.70 previously, after a downward earnings revision of the group. -- Bernama

TCHONG - AmResearch retains Neutral on auto sector, rising yen worries assemblers

Stock Name: TCHONG
Company Name: TAN CHONG MOTOR HOLDINGS BHD
Research House: AMMB

KUALA LUMPUR: AmResearch is maintaining its Neutral recommendation on the automobile sector as the strengthening yen as a result of the Japanese earthquake is a rising concern for local assemblers.

The research house said on Thursday, March 17 the assemblers' margins will be crimped by potentially higher completely knocked-down (CKD)'' kit price and a weaker ringgit versus yen.

AmResearch said the impact on local assemblers could come in two forms. The first is that their Japanese principals may decide to raise CKD kit prices in order to cushion the impact of the rising Yen. Toyota still builds 38% of its vehicles in Japan, while Nissan and Honda's local plants make up 24% and 22% of total production, respectively.

Secondly, local assemblers could be hit by higher raw material costs. Tan Chong Motors and UMW import 30%-40% of raw materials in yen, with the remaining in US$ (these are mainly imports from Thailand and Indonesia).

'On the contrary, ringgit trends against the US$ seem to be flattening out. We estimate that every 1% strengthening of the yen will hit Tan Chong Motors and UMW's bottomline by 2%-3%,' it said.

'We re-iterate our HOLD calls on Tan Chong Motors (FV: RM5.00/share) and UMW (FV: RM7.40/share). Our top pick in the sector remains to be APM (BUY, FV: RM7.00/share) as a play on Tan Chong group's regional expansion, increasing localisation domestically and influx of foreign marques into the country,' it said.

''

APM - AmResearch retains Neutral on auto sector, rising yen worries assemblers

Stock Name: APM
Company Name: APM AUTOMOTIVE HOLDINGS BHD
Research House: AMMB

KUALA LUMPUR: AmResearch is maintaining its Neutral recommendation on the automobile sector as the strengthening yen as a result of the Japanese earthquake is a rising concern for local assemblers.

The research house said on Thursday, March 17 the assemblers' margins will be crimped by potentially higher completely knocked-down (CKD)'' kit price and a weaker ringgit versus yen.

AmResearch said the impact on local assemblers could come in two forms. The first is that their Japanese principals may decide to raise CKD kit prices in order to cushion the impact of the rising Yen. Toyota still builds 38% of its vehicles in Japan, while Nissan and Honda's local plants make up 24% and 22% of total production, respectively.

Secondly, local assemblers could be hit by higher raw material costs. Tan Chong Motors and UMW import 30%-40% of raw materials in yen, with the remaining in US$ (these are mainly imports from Thailand and Indonesia).

'On the contrary, ringgit trends against the US$ seem to be flattening out. We estimate that every 1% strengthening of the yen will hit Tan Chong Motors and UMW's bottomline by 2%-3%,' it said.

'We re-iterate our HOLD calls on Tan Chong Motors (FV: RM5.00/share) and UMW (FV: RM7.40/share). Our top pick in the sector remains to be APM (BUY, FV: RM7.00/share) as a play on Tan Chong group's regional expansion, increasing localisation domestically and influx of foreign marques into the country,' it said.

''

NOTION - Nikon closes 4 plants in Japan, OSK Research Neutral on Notion VTec

Stock Name: NOTION
Company Name: NOTION VTEC BHD
Research House: OSK

KUALA LUMPUR: OSK Research is maintaining its Neutral call on Notion VTec for now with an unchanged target price of RM1.85 at 7.0 times FY11 PER after Nikon Corp said four of its production plants in Japan were closed.

Reuters reported on Thursday, March 17 the facilities included two out of its precision equipment plants, but the effect on cameras and lenses is seen as minor, since almost all output for those devices is done in Thailand.

Nikon does not have a timetable to re-open the plants.

Shares of Notion VTec fell three sen to RM1.71 at 4.23pm with 316,500 shares done.

OSK Research said it was maintaining its'' NEUTRAL call for now at an unchanged TP of RM1.85 at 7x FY11 PER pending more affirmative signals from Nikon as the magnitude of damage to its core facilities and the restoration timeline are currently uncertain.

'The downside risks to earnings are likely to go up if Nikon's suspension of operations and production halt are prolonged,' it said.

Notion's camera division contributed more than 50% of its consolidated revenue as of 1QFY11, with Nikon as its key customer.

'Prolonged disruption in Nikon's operation and production could put a dent on our earnings forecasts although we gather from management that there is no immediate stop order on its cam barrel production for now,' it said.

OSK Research also said it understood the company wasactively discussing with Nikon on possible relocation of all machining works previously handled at the Sendai Nikon factory to Notion's Factory 3 in Klang, which has clean room facilities and ample room for such contingencies.

The research house said Factory 3 has a built-up of 190,000 sq ft and was previously meant for 2.5-inch baseplate production.

'Nonetheless, we gather that the agreement has yet to be finalised at this point of time,' it said.

TAANN - Timber-related stocks advance at mid-morning

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

KUALA LUMPUR: Timber-related stocks advanced on Thursday, March 17 on expectations of an increase in demand for products following the earthquake in Japan last Friday.

At 11.10am, Ta Ann jumped 26 sen to RM5.24, Jaya Tiasa up 10 sen to RM5.20 and WTK added four sent to RM1.58.

AmResearch has maintained its overweight rating on the timber sector and its buy call on Ta Ann and Jaya Tiasa, with fair values of RM6.30 and RM6 respectively.

The research house said that the Ta Ann management informed it that there had been no supply disruption so far to Japan.

'Orders are placed once or twice in a month. Its shipments go through Osaka, south of Tokyo in the central-southern region, which was not affected by the tsunami,' it said.

Meanwhile, MIDF Research in a note March 17 said local timber companies will be the main beneficiary when Japans starts to rebuild the earthquake disaster areas as Malaysia is their largest plywood exporter accounting for 48% of Japan's total plywood.

Japan imports more than 50% of the total plywood for its consumption, it said.

'We believe the main beneficiary will be WTK and Ta Ann since these companies exposure to the Japan market is about 80-90% of their plywood sales.

'Between them, WTK has greater ''leverage since it is a pure timber company compared to Ta Ann whose earnings mainly ''comes from CPO with its plywood division registering loss due to the usage of more ''costly eco-friendly raw material sourced from its Tasmanian operation.

Lingui is the other beneficiary as it has close to 50% exposure to Japan's plywood sales, it said.

EVERGRN - OSK Research keeps Buy call on Evergreen, lowers TP to RM1.73

Stock Name: EVERGRN
Company Name: EVERGREEN FIBREBOARD BHD
Research House: OSK

KUALA LUMPUR: OSK Research said it recently received an update on Evergreen Fibreboard (EFB)'s business operations and found that a spate of increases in the prices of raw materials had chipped away the company's profits.

The research house said on Thursday, March 17 that Evergreen was also hit by a shortage of raw material and was unable to sell as much timber products, which in turn also affected its topline.

'These factors prompt us to lower our earnings estimates and arrive at a lower target price of RM1.73 from RM2.02 previously. The stock remains a BUY,' it said.

TOPGLOV - HDBSVR upgrades Top Glove to Hold, ups TP to RM5.30

Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD
Research House: HWANGDBS

KUALA LUMPUR: Hwang DBS Vickers Research upgraded Top Glove to Hold (from Fully Valued) and raised its target price to RM5.30 (from RM4.60) based on 13 times PE, after rolling forward our valuation base to CY12.

The research house said on Thursday, March 17 the key re-rating catalyst for the stock is a recovery in margins and earnings.

HDBSVR said the glove maker's 2QFY11 net profit of RM25.4m (-30% qoq; -64% yoy) was below its and market expectations.

'1HFY11 net profit of RM61.5m is only 31% of our full year forecast. The weak result was mainly due to (i) high latex prices (+29% qoq); (ii) continued weakening of USD vs the ringgit (-2% qoq); and (iii) flat demand.

'The company also took a longer time to pass on the higher costs to customers. Revenue edged down 1% qoq vs 9% drop in 1QFY11, while EBIT margin fell to 6.4% against 1Q's 9%. No dividend was declared for the quarter,' it said.

HDBSVR said post-2QFY11 results, it cut FY11F earnings by 10% and raised FY12-13F earnings marginally.

'We expect margins and earnings to recover in 2H FY11,' it said.

''

Firstly, restocking activities should pick up pace, following minimum orders in the last two quarters.

''

Secondly, margin pressure should ease as latex prices fall. Latex prices had tumbled from RM10.90/kg on 22 Feb to RM8.56 (-21%) on March 15.

''

Thirdly, a more balanced product mix would enable the company to weather volatile raw material costs.

''

'Top Glove has effectively raised nitrile gloves production share from 7% in 1Q to 11% in 2Q, and is targeting 15% by end 2011,' it said.

TAANN - Ta Ann jumps on AmResearch upgrade

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

KUALA LUMPUR: Shares of TA ANN HOLDINGS BHD [] advanced on Wednesday, March 16 following AmResearch upgrading the stock to a Buy with a higher target price of RM6.30 (from RM5.61).

At 3.50pm, Ta Ann rose 18 sen to RM5.05 with 418,200 shares done.

AmResearch said the upgrade was premised on the anticipated surge in demand, and more importantly higher prices, for plywood in the wake of Japan's worst earthquake that has devastated a large swath of land along the country's north-eastern coastline.

Ta Ann exports over 90% of its plywood products to Japan, it said.

'Consequentially, log prices are also expected to strengthen. Many of the country's plywood and wood-based mills are located in the cities of Sendai and Ishinomaki in the Miyagi Prefecture, which was one of the worst hit areas by the ensuing tsunamis that reached heights of up to 10m (over 30 feet).

'It is believed that many of the plywood facilities were destroyed. This is apart from the thousands of buildings, including homes, which had been wiped out,' it said.

YNHPROP - HLIB initiates coverage on YNH, target price RM2.68

Stock Name: YNHPROP
Company Name: YNH PROPERTY BHD
Research House: HLG

KUALA LUMPUR: Hong Leong Investment Bank Research (HLIB) has initiated coverage on YNH with a Buy and price target of RM2.68.

It said on Wednesday, March 16 this was based on 40% discount to its RNAV estimate.

'We like them for their landbank (sizeable, low-cost and fully paid-for), and property margins that consistently beat industry peers.

'Key catalysts: Numerous value-enhancing developments in Seri Manjung township; RM7.3bn of balance GDV; Klang Valley projects will benefit from new MRT line,' it said.

FABER - OSK Research maintains Buy on Faber, TP RM3.02

Stock Name: FABER
Company Name: FABER GROUP BHD
Research House: OSK

KUALA LUMPUR: OSK Research is maintaining its Trading Buy recommendation at an unchanged TP of RM3.02 based on a sum-of-part valuation.

The research house said on Wednesday, March 16 its current valuation for Faber is based on the assumption that the concession will be renewed based on the existing terms and rates.

OSK Research said during Tuesday's analyst briefing, Faber's management elaborated on its FY10 financial performance as well as provided updates on the company.

'Based on management's response to questions related to its existing hospital support services (HSS) concession, we maintain our view that the contract will be renewed and would be announced in a matter of time,' it said.

TIMECOM - HLIB maintains Buy on Time dotCom, keeps TP unch 95c

Stock Name: TIMECOM
Company Name: TIME DOTCOM BHD
Research House: HLG

KUALA LUMPUR: Hong Leong Investment Research (HLIB) is maintaining its Buy call on Time dotCom at 95 sen.

It said on Wednesday, March 16, that due diligence has been completed on the proposed acquisitions of GTL, GTC and AIMS.

It said the independent valuations performed by Pricewaterhouse Coopers Capital (PwC) on the acquiree companies resulted in a total acquisition value of between RM284m and RM347m.

'This was based on the income approach method and cross-checked with the market approach,' it said.

HLIB Research said Time dotCom and the transacting parties involved have reached a mutual agreement on the purchase consideration, which now amounts to RM322m ('RM17m or a -5% discount from RM339m previously).

This would be satisfied by RM88m in cash (previously RM90.9m) and RM234.0m in shares (previously RM248.1m). TDC is required to submit the draft circular on the acquisitions no later than 31 March 2011.

'We leave our forecasts and target price unchanged and maintain our Buy call on the stock pending the outcome of the proposed acquisitions,' it said.

TAANN - AmResearch upgrades Ta Ann to Buy, ups FV to RM6.30

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

KUALA LUMPUR: AmResearch has upgraded TA ANN HOLDINGS BHD [] to a BUY from HOLD previously, with a raised fair value to RM6.30/share (from RM5.61/share previously).

It said on Wednesday, March 16 this was pegged at an upward revised FY11F EPS of 42 sen/share to an unchanged fair PE of 15x .

'We maintain our BUY call on JAYA TIASA HOLDINGS BHD [], with a fair value of RM6.00/share, premised on an unchanged fair PE of 15x against its FY11F EPS of 40 sen/share,' it said.

AmResearch said the upgrade is premised on the anticipated surge in demand, and more importantly higher prices, for plywood in the wake of Japan's worst earthquake that has devastated a large swath of land along the country's north-eastern coastline. Ta Ann exports over 90% of its plywood products to Japan.

"Consequentially, log prices are also expected to strengthen. Many of the country's plywood and wood-based mills are located in the cities of Sendai and Ishinomaki in the Miyagi Prefecture, which was one of the worst hit areas by the ensuing tsunamis that reached heights of up to 10m (over 30 feet)," it said.

AmResearch'' said it is believed that many of the plywood facilities were destroyed. This is apart from the thousands of buildings, including homes, which had been wiped out.

BJTOTO - Good time to buy Berjaya Sports shares - ECM

Stock Name: BJTOTO
Company Name: BERJAYA SPORTS TOTO BHD
Research House: ECMLIBRA

Berjaya Sports Toto Bhd, a Malaysian lottery operator, was raised to “buy” from “hold’ at ECM Libra Capital Sdn Bhd, which said that it is a good time to accumulate the stock as its share price has fallen from a recent peak.

Its share price estimate was maintained at RM4.56, ECM Libra analyst Bernard Ching wrote in a report today. -- Bloomberg

TAANN - Ta Ann at 2-week high on 'buy' call

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

Ta Ann Holdings Bhd, a Malaysian timber company, climbed to a two-week high in Kuala Lumpur trading after the stock was upgraded to “buy” at AmResearch Sdn Bhd with a higher fair value of RM6.30 .

Ta Ann shares rose 1.2 per cent to RM4.93 at 9:34 a.m. local time, set for its highest close since Feb. 28.

The upgrade is premised on an anticipated surge in demand for logs and plywood for reconstruction after Japan’s earthquake and tsunami, AmResearch said in a report today. -- Bloomberg

NTPM - Higher pulp prices may erode NTPM's margins

Stock Name: NTPM
Company Name: NTPM HOLDINGS BHD
Research House: OSK

NTPM Holdings Bhd
(March 14, 54.5 sen)
Maintain neutral at 54.5 sen with target price 52 sen: NTPM's 9MFY11 results were within our full-year net profit forecast of RM50.5 million. Revenue grew 9.0% year-on-year (y-o-y) to RM315.8 million while net profit fell 10.4% y-o-y to RM40.5 million. While the group raised selling prices in November in view of rising pulp prices, its actual impact was felt only in January. Hence, the better sales were mainly driven by higher sales. Geographically, local sales jumped 9.4% y-o-y while overseas revenue grew by 8.2% y-o-y.

While the group has been aggressively promoting its sanitary napkins (+8.3% y-o-y) and baby diapers (+67.3% y-o-y) by offering competitive prices, the bulk of the revenue was still mainly driven by tissue product sales, which made up of 89.7% of its 9MFY11 revenue. On a quarter-on-quarter (q-o-q) basis, revenue grew 7.9% while net profit surged 27.3%.

Despite the higher sales, which would have helped NTPM achieve higher economies of scale, the lower cumulative net profit y-o-y was due to higher raw material prices. Prices of pulp, making up 80%-90% total raw material costs, rose 12.7% from the corresponding period previously. Accordingly, earnings before interest and tax (Ebit) margin narrowed from 20.3% in 9MFY10 to 17.3% in 9MFY11. Nonetheless, despite the higher pulp price q-o-q, Ebit margin improved by 1.9 percentage points q-o-q, driven mainly by the higher selling price imposed in November 2010, although the actual impact was only felt in January 2011.

To improve the quality of its products to maintain market share, the group currently uses 100% pulp to produce its pocket and facial tissue. We see margins in the following quarter staying at the current level after accounting for the higher selling price and stronger US dollar against the ringgit, which will collectively offset the seasonally lower sales and higher pulp prices.

We maintain our FY11 and FY12 earnings forecasts at RM50.5 million and RM58.9 million respectively. Our target price is maintained at 52 sen, based on 10 times FY12 EPS. Although year-to-date net profit was lower at RM40.5 million versus RM45.1 million in 9MFY10, the group has declared a single tier dividend per share of 1.45 sen, the same as that paid in 3QFY10. ' OSK Research, March 14


This article appeared in The Edge Financial Daily, March 15, 2011.

JTIASA - Jtiasa to benefit from Japan's rebuilding

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

Ta Ann Holdings Bhd
(March 15, RM4.87)
Upgrade to buy with revised fair value RM6.30 (from RM5.61): We are upgrading Ta Ann Holdings Bhd to a 'buy' from 'hold' previously, with a raised fair value to RM6.30 (from RM5.61 previously) pegging an upward revised FY11F earnings per share of 42 sen to an unchanged fair price-earnings ratio of 15 times . We maintain our 'buy' call on Jaya Tiasa Holdings Bhd, with a fair value of RM6, premised on an unchanged fair PER of 15 times against its FY11F EPS of 40 sen per share.

The upgrade is premised on the anticipated surge in demand, and more importantly higher prices, for plywood in the wake of Japan's worst earthquake, which devastated a large swath of land along the country's northeastern coastline. Ta Ann exports over 90% of its plywood products to Japan. Consequentially, log prices are also expected to strengthen.

Many of the country's plywood and wood-based mills are located in the cities of Sendai and Ishinomaki in the Miyagi Prefecture, which was one of the worst hit areas by the ensuing tsunamis that reached heights of up to 10m. It is believed that many of the plywood facilities were destroyed. This is apart from the thousands of buildings, including homes, which were wiped out.

According to the Japan External Trade Organisation (TETO), Miyagi is home to numerous saw mills and chip plants that use the prefecture's inland timber resources. According to TETO, 'the Ishinomaki region in particular boasts of the largest agglomeration of plywood manufacturing plants in Japan, as well as paper factories based in the vicinity of the Port of Ishinomaki, an important transport hub, while the Iwanuma region is the home of numerous paper factories, and so on'. Judging by the extent of the damage, no industry, including Japan's timber enterprises, has escaped unscathed.

In our alert last Friday in the immediate aftermath of the disaster, we reported that timber players are expecting a probable steady rise in demand of wood. Given the massive scale of the devastation, we now believe demand is bound to pick up, though not in the immediate term, given the uphill task in the clean-up.

We raise Ta Ann's FY11F net profit by 11% to RM107 million from RM96 million previously, while tweaking FY12F's earnings by 4% to RM127 million from RM122 million previously. The revisions translate into EPS of 42 and 49 sen for FY11F and FY12F respectively. On the downside, Ta Ann is still hampered by operating losses at its Tasmania veneer manufacturing facilities.

We maintain our 'buy' rating on Jaya Tiasa with an unchanged fair value of RM6. Though it will most certainly benefit as well if demand and prices were to pick up, its exposure to Japan accounts for less than 10% of both its total logs and plywood exports. ' AmResearch, March 15


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

AIRASIA - AirAsia's growth not sustainable

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

AirAsia Bhd
(March 15, RM2.47)
Downgrade to fully valued at RM2.48 with reduced target price of RM2 (from RM3.75): We see a repeat of 2008, when higher fares and fuel surcharges imposed by full-service carriers shifted demand to cheaper, short-haul flights. In this case, AirAsia could benefit as the largest low-cost carrier in the region, meaning its load factor may be sustainable.

But fuel recovery rate (per barrel) could drop if the group decides to absorb higher fuel costs to keep fares low to retain demand. Hence, while passenger volume may increase this year, earnings could be hit by higher jet fuel costs as higher yields and a weakening US dollar may not be sufficient to offset the impact. Note, fuel accounts for 50% to 60% of AirAsia's total costs.

We slash FY11F/12F earnings by 46% to 49% after raising jet fuel cost assumptions by 17% to 20% to US$125 (RM382.50) and US$131 for the respective years, based on DBS's latest forecasts.

We expect FY11F earnings to fall 39% year-on-year due to circa 40% rise in jet fuel prices and only 6% increase in yield (ticket sales), while load factor (revenue passenger kilometers [RPK] divided by available seat kilometers [ASK]) will remain flat at 75% (but RPK will grow 4%). Note, AirAsia has hedged 21% of its fuel requirement up to 2Q11, but this may be insufficient to support earnings.

We also cut ancillary income per pax assumption to RM40 on lower spending as fares rise. AirAsia derives 90% of its ancillary revenue from flight'related services.

We downgrade the stock to 'fully valued' and cut our target price'' to RM2 (from RM3.75) based on 11 times FY11F earnings per share (EPS). The share price has fallen by 17% since its peak in January.

We expect it to retreat further in the near term, given the current high oil prices (based on historical trend). AirAsia's foreign shareholding level stands at 51% (as at Jan 11).

The stock is currently trading at high 14 times FY11F EPS and nine times FY11F earned value/earnings before interest, taxes, depreciation and amortisation against peers' 12 times and 7 times, respectively. ' HwangDBS Vickers Research, March 15


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

GAMUDA - Gamuda: A lull in news flow, concerns in property

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

Gamuda Bhd
(March 15, RM3.68)
Downgrade to hold at RM3.71 with target price RM3.99: According to Prasarana, the infrastructure cost for the first radial line is estimated at RM18 billion which suggests the total cost of the MRT project could reach RM54 billion compared with earlier estimate of RM36.6 billion. Works for the elevated portions of the first line remain on track to start in July. We understand that the government is working towards finalisation of the entire network for approval by the end of CY11. Depending on the finalisation progress of the entire MRT network, contracts for the tunnelling portions could either be awarded line-by-line or as a whole package in late 2011 or early 2012.

The recent rounds of dong devaluation have raised concerns about the group's exposure to the Vietnam property market. There may be impairment to the group's investment in Vietnam which will hit the balance sheet but not the income statement. Housing affordability may be an issue going forward but this is mitigated by our understanding that a large majority of property buyers do not rely on borrowings to finance their purchase, opting instead to settle in cash. Furthermore, properties are viewed as a natural hedge in an environment of rising inflation and falling currency.

For the investor who remains concerned about macroeconomic conditions in Vietnam, a worst-case scenario where no contributions from the group's property projects in Vietnam are factored in would see FY11/FY13 earnings decline by 2.2% to 20%. On the other hand, FY11/FY13 earnings may be raised by 7.1% to 15.8% due to margin recovery from the double track project. That said, management may again choose to be conservative as building material prices are trending upwards again.

We cut our FY11 earnings by 1% in FY11 but raise FY12 earnings by 7.8% to account for later than expected award of tunnelling works as well as the revised launch schedule of Gamuda City. As the award of the tunnelling works for the MRT is only expected in early 2012, we expect a period of lull in news flow for Gamuda. Furthermore, concerns about further dong devaluation hang in the balance. As such, we are downgrading Gamuda from a 'trading buy' to a 'hold' by pegging CY11 earnings per share to historical average price-earnings ratio of 19.5 times instead of 25 times (one times standard deviation above average). Re-rating catalysts include: (i) margin recovery from double track project; (ii) award of the tunnelling works for all three lines instead of one; and (iii) stronger than expected property sales in Vietnam. ' ECM Libra Research, March 15


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

AFFIN - Affin setting the tone for 2011

Stock Name: AFFIN
Company Name: AFFIN HOLDINGS BHD
Research House: RHB

Affin Holdings Bhd
(March 15, RM3.30)
Maintain outperform at RM3.30 with fair value RM4.30: Affin held an analyst briefing on Monday regarding its 4QFY10 ending December. Management shed some light on net interest margin (Nim) compression (-26 basis points [bps] quarter-on-quarter) and uptick in impaired loans noted in the 4QFY10 results.

Management attributed the Nim compression to competition (impacting both asset yields and funding cost) and higher cost of financing'' due to the repricing of liabilities. Apart from that, spreads earned from government agency deposits were also lower. As for the uptick in impaired loans, this was attributed to the adoption of more stringent classification criteria.

Management's 2011 loan growth target was unchanged at 12% to 15%, which would be above our expected loan growth of 8% to 9% for the banking system. Although this will be lower than the 17.1% loan growth in 2010, Affin will now be coming from a higher base. Key loan drivers would be: (i) consumer segment (mortgage and HP), where management targets growth of 15%; and (ii) business banking (around 12% growth), with targeted segments being education and oil and gas, among others.

The loan pipeline is healthy and would bode well for loan growth in 1H11. However, unfavourable external developments could have an adverse impact on 2H11 loan growth. Our FY11/FY12/FY13 gross loan growth projections currently stand at 11%/9%/9% respectively.

Management emphasised its loan growth would not come at the expense of asset quality. Given the smaller base, the group can afford to remain selective in terms of its choice of sectors and customers. Affin's gross impaired loan ratio as at end-December was 3.6% and, barring unfavourable developments, this ratio is expected to fall further. As for credit cost, this was guided to remain stable this year (FY10: 38 bps). Our FY11/13 earnings projections assume slightly more conservative credit cost of 43 to 44 bps per annum.

Broadly, management targets to match deposit growth with loan growth. Emphasis would be to grow current account, saving account (Casa) deposits in order to provide funding stability and help mitigate Nim pressure (Casa ratio was 19.5% as at end-FY10).

Management expects Nims will continue to be under pressure due to competition as well as recent hike in statutory reserve requirement (SRR) but this will be cushioned by efforts to grow Casa deposits. On the whole, management was hopeful Nims would hold steady this year. In our model, we factored in Nim contraction of seven bps this year, followed by another two to three bps contraction per year in FY12 and FY13.

Our earnings projections are unchanged, as is our indicative fair value of RM4.30, which is based on target CY11 price-earnings ratio of 12 times. We maintain our 'outperform' call. ' RHB Research, March 15


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

GAMUDA - Gamuda cut to 'hold' at ECM

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

Gamuda Bhd. was cut to “hold” from “trading buy” at ECM Libra Capital Sdn Bhd to reflect concerns over the Malaysian builder’s exposure to Vietnam’s property market, according to a report today. -- Bloomberg

AIRASIA - Deutsche Bank cuts AirAsia profit forecasts

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

AirAsia Bhd.’s profit forecasts for this year and 2012 were cut at Deutsche Bank AG, which said higher fuel prices pose earnings risk to Southeast Asia’s biggest budget carrier.

The airline’s earnings estimates were reduced by 18 percent in 2011 and 15 percent next year, Michelle Foong, an analyst at Deutsche, said in a report dated March 14. The share price estimate was reduced to RM3.02 from RM3.55. -- Bloomberg

AXIATA - OSK Research maintains Buy on Axiata, TP RM5.83

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

KUALA LUMPUR: OSK Research is maintaining a Buy recommendation on Axiata with a target price of RM5.83.

It said on Tuesday, March 15 that India press reports indicated that Axiata's 19.3%-owned associate. Idea Cellular (Idea) has received a cancellation notice from the Department of Telecommunications (DOT) on March 11 for its mobile license in Punjab.

'We believe at stake is Idea's inherited license from Spice Telecom following the merger last year given the overlapping circles of both Idea and Spice,' it said.

OSK Research said the issue is currently under arbitration as Idea had earlier written to DOT to surrender the licenses in overlapping circles but received no reply.

'Idea contributes less than 5% of our sum-of-parts and less than 10% of our core PATAMI forecast for Axiata. We are maintaining our forecast. Axiata's share price has not been spared the recent sell-down in the market.

'The current weakness in its share price presents a good buying opportunity given its compelling FY12 PER of just 12 times,' it said. ''

LIONIND - RHB Research has market perform on Lion Industries, FV RM1.80

Stock Name: LIONIND
Company Name: LION INDUSTRIES CORPORATION
Research House: RHB

''KUALA LUMPUR: RHB Research Institute has a Market Perform recommendation on LION INDUSTRIES CORPORATION [] Bhd (LICB) with an indicative fair value is RM1.80 based on 'sum-of-parts' basis

It said on Wednesday, March 15 that Lion Industries Corporation Bhd (LICB) is the largest integrated long steel producer in Malaysia, with total annual billet production capacity of 3.05m tonnes.

RHB Research said the basis of its investment case for LICB are: 1) Largest long steel producer with dominant market share in Malaysia; 2) A value play as stakes in listed entities are worth more than its market capitalisation; and 3) Stronger balance sheet compare to peers.

'However, its recently proposed blast furnace project increases potential investment risk. The project is still pending approval from minority shareholders. If the project gets rejected, this would serve as a re-rating catalyst for LICB's share price,' it said.

PARKSON - RHB Research downgrades Parkson to Market Perform, reduces FV to RM5.90

Stock Name: PARKSON
Company Name: PARKSON HOLDINGS BHD
Research House: RHB

KUALA LUMPUR: RHB Research Institute has expressed concern over one of Parkson's major shareholders, Lion Industries (LICB) decision to invest RM281.3m for a 29% stake in Lion Blast Furnace (LBF),

The research house said on Tuesday, March 15 that under the terms of the loan facilitiy, LICB is required to create a second charge over its 14% equity interest in Parkson as collateral in the event that LFB defaults on its loan of RM2.3bn.

'We believe this development will dampen investor sentiment on the stock. Note that the JV is subject to shareholders approvals at their respective EGMs. In view of the above risks, we are attributing a 10% discount to our SOP-based fair value for Parkson, and reducing our fair value to RM5.90 (from RM6.55 previously).

'Given the limited upside to our fair value, we are downgrading our recommendation on the stock to Market Perform,' it said.

TENAGA - Tenaga on a tight rope

Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD
Research House: RHB

Tenaga Nasional Bhd
(March 14, RM6.03)
Maintain market perform at RM6.20 with fair value RM6.90: The government has been rolling back subsidies on items such as fuel, and management believes gas could be next. This is more so given the government's decision to freeze toll hikes for the next five years. In fact, gas is the government's second largest subsidy at RM13.6 billion in 2009, after education (RM31.4 billion). Recall the government's assurance that any increase in gas price will be accompanied with a tariff increase. The odds of a tariff review, however, could be diminished by political interference, we believe.

Management reiterated its guidance of 5%-6% electricity demand growth for FY11. Year-to-date, i.e. September 2010-January 2011, electricity demand growth of 3.8% was tepid due to a seasonally weak January (due to December holidays) and a high base effect in FY10. However, management expects growth to pick up for the remainder of FY11 from March onwards.

Management kept its FY11 average coal cost guidance of US$110 per tonne (RM334). As at last week, coal prices stood at US$130 per tonne, creeping back towards the US$138 peak seen in January. However, we understand from management that coal prices are seasonally higher during the March-April period as Japanese energy utilities lock in their coal supply. Subsequently, management expects coal prices to trend lower.

We gather that Tenaga may not necessarily be able to use more gas as part of its fuel mix (subsidised gas is cheaper than coal market price) despite the recent major oil and gas discoveries offshore Sarawak by Petroliam Nasional Bhd (Petronas). Petronas has little incentive to supply gas at subsidised prices to Tenaga when it can export at higher market prices. Preliminary evaluation by Petronas indicates around 100 million barrels of oil and 200 billion standard cubic feet of gas in place.

Despite some criticism in the media, Tenaga is firm that nuclear power is needed to address future energy needs as the cheapest source of power in the long run. Malaysia may deplete its natural gas reserves in two years (excluding Sarawak discovery) while the volatility of coal prices is hurting Tenaga's profitability. We gather that a nuclear power plant, tentatively to be commissioned by 2021, may cost RM20 billion and would largely be government-funded.

Risks include: 1) slower-than-expected demand growth; 2) depreciating ringgit; and 3) rise in coal prices.

We have left our earnings forecasts unchanged.

We maintain our indicative fair value of RM6.90 based on unchanged target CY11 PER of 13 times. Tenaga lacks catalysts due to slowing electricity demand growth of 5.5% for FY11 (FY10: 8.8%) and no clear timeline for a formal fuel cost pass-through formula to help address the issue of fluctuating fuel prices. Maintain market perform. ' RHB Research, March 14


This article appeared in The Edge Financial Daily, March 15, 2011.

GAMUDA - Gamuda results to meet expectations, MRT euphoria fading out

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

Gamuda Bhd
(March 11, RM3.69)
Downgrade to market perform at RM3.75 with revised fair value RM4.03 (from RM4.51): Taking a cue from the firmer construction margins recorded by peers IJM Land Bhd and WCT Bhd in their just released October to December 2010 results, we expect Gamuda's 1HFY11 results to come in within expectations. We expect Gamuda's 2QFY11 core net profit to come in at RM90 million to RM100 million. Cumulatively, 1H net profit of RM179 million to RM189 million will have grown 37% to 44% year-on-year and made up 46% to 49% of our full-year forecast and the full-year market consensus.

We downgrade our 'trading buy' call to 'market perform' on the heels of our downgrade of indicative fair value to RM4.03 from RM4.51 to reflect: (i) our expectations of a lower overall margin of 12% from the MRT project (vis-''-vis 18% previously), taking a cue from the repeated public statements from the government of late that the MRT project will be closely scrutinised to ensure maximum cost savings; and (ii) A higher 50% discount to our net present value estimates for Gamuda's property project in Vietnam (30% previously) against a backdrop of heightened economic uncertainty in Vietnam.

Also, with the news of Gamuda's involvement in the MRT already out in the open, we believe the next round of re-rating will not take place until the market is more sure about the exact timing of the 'first oil' from the project that could well be four to six quarters away given the still preliminary and tentative nature of various aspects of the project.

We maintain our forecasts. Risks to our view include: (i) New contracts secured in FY11/13 (excluding the MRT) to come in below our target of RM2 billion per year; (ii) The RM40 billion MRT project fails to get off the ground; and (iii) Rising input costs.

Over the immediate term, we expect the construction sector in general to perform only in line with the broarder market due to 'news flow fatigue'. We suspect the market is already tired of the same old news flow from the same old projects such as the LRT extension, MRT, 'River of Life' and those under the 10th Malaysia Plan (10MP). We believe that as it stands now, the market has substantially gone past the 'news flow' phase of the cycle for construction stocks.'' ' RHB Research, March 11


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

NTPM - OSK Research maintains Neutral on NTPM, TP 52c

Stock Name: NTPM
Company Name: NTPM HOLDINGS BHD
Research House: OSK

KUALA LUMPUR: OSK Research is maintaining its Neutral stance on NTPM and keeping its Target Price at 52 sen, based on 10x FY12 EPS.

OSK Research said NTPM's 9MFY11 revenue, which grew 9.0% y-o-y to RM315.8m while net profit fell 10.4% y-o-y to RM40.5m, were within its expectation.

The higher revenue was mainly driven by higher sales (mainly of tissue products) as the higher selling price of 5%-10% had only a 1-month impact on the current quarter.'' EBIT margin narrowed from 20.3% in 9MFY10 to 17.3% in 9MFY11.

'Despite rising raw material prices, we see margins hovering at the current level as NTPM revised upwards selling prices by 5%-10% in Nov 2010,' it said.

OSK Research said it maintained our FY11 and FY12 earnings forecasts at RM50.5m and RM58.9m respectively. Our TP is kept at RM0.52, based on 10x FY12 EPS. Maintain NEUTRAL.