GAMUDA - Research houses mixed on Gamuda

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

OSK Research has maintained its "buy" call on Gamuda Bhd with a higher target price at RM4.96 from RM4.78 previously, as it expects the firm's construction margins to expand, going forward.

In a note today, OSK said it viewed the Gamuda-MMC Bhd's joint venture as the lead contender in the race for the mass rail transit's (MRT) underground portion where tenders would be called in the fourth quarter.

"Given the high risk and technically challenging nature of this package, we expect margins to be high at 15 per cent (pre-tax level).

"We are raising our financial year 2011 earnings by two per cent to reflect this," it said.

ECM Libra has maintained its 'hold' call on Gamuda with unchanged target price at RM3.99.

It said the cost of MRT tunnelling contracts was expected to be higher-than- expected.

ECM Libra said it viewed the risk of rising building material prices largely due to volatile crude oil price movements.

Meanwhile, Kenanga Research has downgraded Gamuda's financial year 2011 earnings by two per cent to RM402 million.

It, however, expected a stronger second half performance, which would be driven by higher construction revenue recognition and increased property income.

It has maintained its "hold" call on Gamuda, with unchanged target price of RM4.12. -- Bernama

GAMUDA - Research houses mixed on Gamuda

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

OSK Research has maintained its "buy" call on Gamuda Bhd with a higher target price at RM4.96 from RM4.78 previously, as it expects the firm's construction margins to expand, going forward.

In a note today, OSK said it viewed the Gamuda-MMC Bhd's joint venture as the lead contender in the race for the mass rail transit's (MRT) underground portion where tenders would be called in the fourth quarter.

"Given the high risk and technically challenging nature of this package, we expect margins to be high at 15 per cent (pre-tax level).

"We are raising our financial year 2011 earnings by two per cent to reflect this," it said.

ECM Libra has maintained its 'hold' call on Gamuda with unchanged target price at RM3.99.

It said the cost of MRT tunnelling contracts was expected to be higher-than- expected.

ECM Libra said it viewed the risk of rising building material prices largely due to volatile crude oil price movements.

Meanwhile, Kenanga Research has downgraded Gamuda's financial year 2011 earnings by two per cent to RM402 million.

It, however, expected a stronger second half performance, which would be driven by higher construction revenue recognition and increased property income.

It has maintained its "hold" call on Gamuda, with unchanged target price of RM4.12. -- Bernama

MISC - AmResearch downgrades MISC to Hold from Buy, lowers FV to RM7.30

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

KUALA LUMPUR: AmResearch has downgraded MISC BHD []'' to Hold from Buy previously and lowers its discounted cashflow-derived fair value to RM7.30 a share from RM11.80 a share.

The research house said on Friday, March 25 that it had cut its earnings projections and attached a higher 10% discount to its sum-of-parts valuation from 5% previously given deteriorating shipping fundamentals.

'We have cut our projections by 48-57% over FY11F-13F after factoring in lower tanker and container rates as well as higher bunker fuel cost assumptions. Reflecting our bearish view, our projections are now 32%-34% below consensus estimates over the FY11-13 forecast period,' it said.

AmResearch said tanker rates have been weaker than expected, as seen by the absence of winter peak in 4QCY10.'' Accelerating fleet growth and a shift forward in delayed orders means oversupply will worsen over the next 2 years.

The research house added that Clarksons projects global tanker fleet growth at 6.4% in 2011 and 6.7% in 2012 versus the past 4-year average fleet growth of 5.8%.

'MISC's valuation is already rich at 30x FY12F earnings, versus the broader market's PER of 14x. MISC's status as a high-beta cyclical stock positions it unfavourably in the current volatile market environment. At just 21% YoY EPS growth and 114% premium valuation to the KLCI, MISC is likely to underperform the index over the next 12 months,' it said.

SEG - RHB Research positive on SEGi dividend plan, FV RM4.44

Stock Name: SEG
Company Name: SEG INTERNATIONAL BHD
Research House: RHB

KUALA LUMPUR: RHB Research Institute is positive on SEG International's plans to pay out 50% of its earnings as dividends.

RHB Research said on Friday, March 25 it was maintaining its FY11-13 annual gross dividends of 17 sen to 30 sen a share, which translate to gross yields and net payout ratios of 3.7%-6.5% and 49.6%-51.0% respectively.

It has a fair value for SEGi at RM4.44.

SEGi announced on Thursday it has set a dividend policy to distribute a minimum of 50% of the group net profits to its shareholders, with effect from the financial year ending Dec 31, 2011.

SEGi said the board''believes that the dividend payout of a minimum of 50% of its net profits is within the group's financial capability considering its future earnings growth.

KOSSAN - HDBSVR ups Kossan TP to RM3.90

Stock Name: KOSSAN
Company Name: KOSSAN RUBBER INDUSTRIES BHD
Research House: HWANGDBS

KUALA LUMPUR: Hwang DBS Vickers Research has raised the Target Price for Kossan to RM3.90 after rolling forward its valuation base to FY12F, based on 8.5 times PE.

'We raised FY11-12 EPS by 10%-11% after revising up GP margins to 14% (from 13%) on the back of Kossan's good cost management.

'Kossan's earnings are proven to be resilient despite being hit by rising latex costs and a weakening US dollar. A key re-rating catalyst for Kossan would be re-emergence of the demand cycle to lift valuations,' it said.

BHIC - BHIC continues ascend

Stock Name: BHIC
Company Name: BOUSTEAD HEAVY INDUSTRIES CORP
Research House: HWANGDBS

KUALA LUMPUR: BOUSTEAD HEAVY INDUSTRIES CORP []oration Bhd (BHIC) extended its gains in early trade on Friday, March 25.

At 9.30am, BHIC was up 11 sen to RM4.05 with 12,000 shares traded.

HwangDBS Vickers Research on March 24 initiated coverage on the stock with a Buy rating and target price RM6.55.

The research house said BHIC was a a bargain for its strong earnings visibility.

It said BHIC had a monopoly in naval vessel contracts, and enjoyed strong government patronage, especially from the Royal Malaysian Navy.

It also said that as one of seven Petronas-licensed fabricators, BHIC was poised to benefit from the booming O&G industry.

'With Petronas emphasizing more on the local front, and strong news flow on marginal oil field and brownfield services, and deepwater development, fabricators will be the first beneficiary of the cycle,' it said.

GAMUDA - CIMB Research maintains Outperform on Gamuda, TP RM5.60

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

KUALA LUMPUR: CIMB Equities Research said although Gamuda's annualised 1HFY7/11 core net profit made up 99% of its forecast and 98% of consensus, it'' considered the performance to be above expectations.

It said on Friday, March 25 that it expects 2H11 to be stronger due to the gradual rise of CONSTRUCTION [] margins as key projects enter their mature phase.

'The reason for the deviation was our underestimation of EBIT margin. We now up our FY11-13 EPS forecasts by 8-10%, which raises our RNAV-based target price from RM5.45 to RM5.60,' it said.

CIMB Research said these strong results could catalyse the stock, along with project awards and newsflow on the MRT project for which Gamuda is the PDP and potentially the contractor for the tunnelling works.

'The RM6bn-7bn tunnelling portion for the SBK line is expected to be awarded in early 2012. We reiterate our OUTPERFORM call,' it said.

JCY - More tsunami woes for HDD parts

Stock Name: JCY
Company Name: JCY INTERNATIONAL BERHAD
Research House: OSK

Technology sector
Maintain underweight: Japanese hard disk drive (HDD) component makers, including hard disk media maker Showa Denko (SDK) and HDD-use substrate makers Furukawa Denko and Kobe Steel, have all reported damage to facilities as well as injuries to their employees due to the earthquake and tsunami on March 11.'' Certain facilities have since resumed operations but production volume is likely to be limited due to constraints in electricity, raw materials and fuel supply.

SDK is the world's second largest hard disk media maker by volume behind Western Digital (WD), with about 25% global market share. It fabricates 22 million disks a month with production facilities in Singapore, Taiwan and Japan. Operations at its sites in the Tohoku and Kanto regions were suspended from March 14 to 16.

Certain facilities have since resumed operations but the group says production volumes are likely to be limited for the time being due to various constraints. We understand that SDK is discussing shipment schedules with individual customers, and the potential production shortfall at its plants in Japan would be mitigated by capacity expansion at its Singapore facilities (monthly output to increase 13.6% to 25 million disks).

We do not see significant earnings risks for HDD component manufacturers under our coverage given that major HDD makers such as WD, Seagate and Hitachi (with a combined global market share of 80%) rely mostly on their respective in-house hard disk media production, with each producing approximately 80% to 90% of their own requirements.

Eng Teknologi Sdn Bhd ('neutral', fair value: RM1.73), JCY HDD Technology Sdn Bhd ('neutral', FV: 58 sen) and Notion VTec Bhd ('neutral', FV: RM1.85) all have minimal exposure at less than 7% contribution of their revenue from smaller manufacturers such as Toshiba and Samsung, which typically outsource more than 70% of their hard disk media production to third-party component makers like SDK and Fuji Electric.

Nonetheless, we do not discount the potential downgrade to our earnings forecasts should the disruption prolong as we opine that the top three HDD makers would not have instantly available capacity to absorb the potential shortfall in SDK's hard disk drive media production over the long run.

But disruption at Furukawa Denko and Kobe Steel could prove costly. Furukawa Denko and Kobe Steel together dominate the entire HDD-use aluminum substrate market with a more than 95% global market share. Their substrate plants are located in Tochigi, Japan with Kobe Steel capable of producing 30 million and Furukawa Denko at 20 million units a month. Operations at Kobe Steel's Monka substrate plant have resumed, with management confirming that its facilities sustained no damage although it conceded that production is likely to be affected due to limited electricity supply. Meanwhile, restoration is progressing at Furukawa's plant as damaged equipment is replaced and production facilities repaired.

Given the de facto duopoly posed by these 2 HDD-use substrate manufacturers, we opine that a protracted disruption in production would likely spark an industry-wide substrate shortage, which would lead to lower output for most HDD makers.

The restoration timeline to resume full production remains uncertain at this juncture, but early indications are that the going is more negative end as power supply remains a major concern.

On a relative basis, JCY has the highest earnings downside exposure given its full-fledged HDD component production while its peers Notion Vtec and Engtek have more diversified earnings, with the camera division contributing more than 45% to the former's revenue while the latter's presence in industrial products and original design and contract manufacturing may provide a buffer to any earnings shortfall from its HDD division.

Nonetheless, we maintain our earnings forecasts and valuation basis for now, pending more affirmative indications from'' Japanese manufacturers. Downgrades to our recommendations are likely if operating conditions deteriorate further on a less conducive production environment.

We believe that any potential earnings disappointments in the coming quarters as well as moderating industry growth would continue to dampen sentiment. Manufacturers involved in the semiconductor and HDD industries would have difficulty matching their sales performance in 1Q10, during which they performed remarkably well in a traditionally weak period riding on the economic rebound in 2H09.

Hence, given the lack of a re-rating catalyst over the near term with valuations nowhere near their trough, we reiterate our 'underweight' call on the sector. ' OSK Research, March 24


This article appeared in The Edge Financial Daily, March 25, 2011.

BHIC - BHIC no longer a diamond in the rough

Stock Name: BHIC
Company Name: BOUSTEAD HEAVY INDUSTRIES CORP
Research House: HWANGDBS

Boustead Heavy Industries Corp Bhd
(March 24, RM3.94)
Initiating coverage at RM3.80 with buy rating and target price of RM6.55: BHIC specialises in the construction of naval vessels, defence services, and oil and gas fabrication. It completed a major restructuring in 2007 and is now on a strong footing to bag major contracts, given its track record in delivering government and private sector jobs. We expect a significant re-rating from its bargain basement valuation of seven times FY12 earnings per share and 1.5 times price-to-book value, on the back of two-year EPS compound annual growth rate of 39%. Its balance sheet is also healthy with 0.24 times net gearing.

BHIC enjoys strong government patronage, especially from the Royal Malaysian Navy (RMN). Its current RM1.7 billion order book could more than double upon conversion of the letter of intent for the next next offshore patrol vessels (OPV), assuming 30% of the work is subcontracted to BHIC. This will provide strong earnings visibility for the next seven years. The company entrenched its execution record after delivering the first batch of six OPVs in December 2010. We also expect more contract wins from its current RM1 billion tender book. BHIC can also leverage on its global defence partners ' DCNS, Rheinmetall and MTU Friedrichshafen ' via joint ventures to penetrate other military segments. It is possible in the medium term for BHIC to increase its stake in BN Shipyard given the role of BHIC as the listed heavy engineering proxy of Boustead Holdings and the complementary roles played by both BN Shipyard and BP Shipyard operationally. Our new order win assumptions are conservative at RM600 million per year for FY11/13F while the six OPV contract assumption is tagged at RM7 billion.

As one of seven Petronas licensed fabricators, BHIC is poised to benefit from the booming oil and gas industry. With Petronas emphasising the local front, and strong news flow on marginal oil field and brownfield services and deepwater development, fabricators will be the first beneficiary of the cycle. ' Hwang-DBS Vickers Research, March 24


This article appeared in The Edge Financial Daily, March 25, 2011.

SIME - Sime Darby: Writeback of RM100m for MOQ project

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

Sime Darby Bhd
(March 24, RM9.15)
Maintain outperform at RM9.15 with fair value of RM10.60: Sime Darby has signed a close-out agreement on March 17 for the completion of its Maersk Oil Qatar (MOQ) project which stipulates that: (i) In full and final settlement of all claims (including back charges and other claims), Sime paid a net close-out sum of US$41.9 million (RM127 million) to MOQ on March 21; (ii) Sime will be relieved of all remaining works under the contract save for providing outstanding final documentation and warranty obligations, the warranty period will be reduced to 18 months (from 24 months); and (iii) the performance bond amount for the warranty period is reduced to 2.5% of the contract price (US$16 million), from 10% (US$63 million) previously.

Despite having to pay the net close-out sum of US$41.9 million, the terms of this agreement will result in a positive profit and loss impact for Sime of RM100 million. This is in view of the fact that Sime had already provided a total of RM300 million for this project, RM159 million of which was in 3QFY10.

Assuming this is a taxable gain, we estimate the writeback will have a +2.4% impact on our FY11 forecasts. We expect the writeback to be done in 3QFY11ending June.

Risks include: (i) a convincing reversal in crude oil price trend resulting in reversal of crude palm oil and other vegetable oil price trends; (ii) weather abnormalities resulting in an over- or under-supply of vegetable oils; (iii) increased emphasis on implementing global biofuel mandates and trans-fat policies; and (iv) a slower than expected global economic recovery, resulting in lower than expected demand for vegetable oils.

As we consider this to be an exceptional item, we have not made any changes to our core net profit forecasts for Sime.

We maintain our 'outperform' recommendation with RM10.60 fair value. ' RHB Research, March 24


This article appeared in The Edge Financial Daily, March 25, 2011.

NOTION - Notion to benefit from relocation

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

Notion VTec Bhd
(March 24, RM2.02)
Maintain buy at RM1.98 with target price of RM2.40: A new outsourcing order from Japan could generate a net profit of RM4 million to RM6 million and lift earnings per share (EPS) by three to four sen. We maintain our forecasts for now.

We do not rule out higher outsourcing contracts from Nikon as it reorganises its operations in Japan after the March 11 earthquake and tsunami. Notion Vtec's MSC tax status remains a work in progress but would add another six sen to EPS once approved.

The company remains a small-cap 'buy', with a RM2.40 target price, based on 4.5 times FY11 enterprise value/earnings before interest, taxes, depreciation and amortisation, reflecting regional peers' (ex-Japan) valuations.

There was only one casualty at the Sendai Nikon plant while the safety of three employees remains uncertain. One manufacturing facility, Tochigi Nikon Corp, resumed operations on March 18.

Five more plants (Mito plant ' Nikon Corp, Zao factory ' Nikon-Trimble Co, Tochigo Nikon Precision, Kurobane Nikon and Nasu Nikon) restarted on Wednesday. The Sendai Nikon and Miyagi Nikon Precision facilities, which are the most severely affected, will be operational by end-March.

There has been no immediate cancellation of orders in the camera segment from Notion Vtec's existing Japanese customers, Nikon, Sony and Canon. While Nikon's operations in Japan will fully resume operations from April, Nikon cautioned that its Japan-based production is unlikely to return to pre-crisis levels, as it anticipates intermittent electric supply post the nuclear power plant crisis.

We think Notion Vtec's cam-barrel sales will be affected in the mid-term. However, this setback will be offset by a new business, which Nikon has contracted out to Notion Vtec with immediate effect.

The company has been tasked with the manufacture the body mount (previously produced at the Sendai Nikon factory, Miyagi) at its Klang plant. Nikon will supply the raw materials in the interim period.

The body mount business could generate revenue of RM36 million to RM60 million per year, based on the production of 360,000 to 600,000 pieces a month. We think this could turn into a long-term arrangement for Notion Vtec, if it executes this job well.

Looking at the bigger picture, we think Nikon could relocate its manufacturing facilities to earthquake-free zones (Malaysia, Thailand) later to mitigate value chain disruption. Notion Vtec could be the prime beneficiary. ' Maybank IB Research, March 24

BHIC - HwangDBS places 'buy' call on BHIC

Stock Name: BHIC
Company Name: BOUSTEAD HEAVY INDUSTRIES CORP
Research House: HWANGDBS

HWANGDBS Vickers Research has placed a "Buy" call and a target price of RM6.55 per share on Boustead Heavy Industries Corporation (BHIC) which specialises in construction of naval vessels, defence services, and oil and gas fabrication.

"BHIC completed a major restructuring in 2007 and is now on strong footing to bag major contracts given its track record in delivering government and private sector jobs," HwangDBS said in a research note Thursday.

Initiating its coverage of the company today, it said BHIC enjoyed strong government patronage, especially from the Royal Malaysian Navy.

"Its current RM1.7 billion order book could more than double upon conversion of the Letter of Intent for the next six offshore patrol vessels, assuming 30 per cent of the work is subcontracted to BHIC."

As one of seven Petronas licensed fabricators, BHIC is also poised to benefit from the booming oil and gas industry, it added. - BERNAMA

TENAGA - Tenaga mulls fuel options for Sabah plant

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

Tenaga Nasional Bhd
(March 23, RM6.18)
Maintain buy at RM6.23 with reduced fair value RM7.54 (from RM7.74): Tenaga Nasional (TNB) CEO Datuk Seri Che Khalib says TNB is considering using piped natural gas or liquefied natural gas (LNG) for a proposed 300MW gas-fired power plant in Sabah. With the producing gas fields all offshore the West Coast, a gas pipeline would have to follow the path of the East-West interconnection stretching over 200km of mountainous terrain and costing a fair bit.

The alternative, an LNG importation terminal, will also not be cheap. Gas would have to be imported at the market price of some RM40 per mmBTU (million British thermal units) to make economic sense, while importation at the current peninsula power gas price of RM10.70 per mmBTU would result in a loss.

The Sendai earthquake will have turned public opinion negatively towards nuclear power plants in Malaysia and we believe the news flow on this will be quiet for a while.

Meanwhile, there will be more emphasis on renewable energy (RE), with companies such as Cypark already completing its solar plant even before the RE Act is passed. While there is a possibility of the Act being passed in the current parliament sitting, the implementation of an overall 1% tariff hike to allow for TNB to implement feed-in tariffs is unlikely to materialise until after the general election.

Immediately after the Sendai earthquake, we were uncertain on the coal price outlook as we were unsure if power plant outage or demand drop would be the bigger driver.

It has now emerged that damage to the coal handling ports in Northeast Japan is limiting imports of coal, which could lead to a 10% drop in coal imports over the next six months. Over the longer term, however, a re-evaluation of nuclear power could lead to higher coal demand.

We reduce our fair value to RM7.54. While we keep our FY11 coal price forecast unchanged, the potential longer-term coal demand leads us to tweak up coal prices past FY11 to US$112 (RM340) per tonne, cutting our profit forecast by 7% as well as our fair value.

Nonetheless, we believe the Japan disasters will put greater emphasis on industry transparency, including the RE Act, the renegotiation of power purchase agreements and ultimately the fuel pass-through tariff formula. We maintain our 'buy' call. ' OSK Research, March 23


This article appeared in The Edge Financial Daily, March 24, 2011.

AIRASIA - OSK cuts AirAsia fair value to RM3.42

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

OSK Research has reduced the fair value of low-cost carrier AirAsia Bhd's share to RM3.42 from RM3.86 previously, with a "buy" call, following higher jet fuel price assumption.

The research house has also revised downward, AirAsia's earnings by 3-11 per cent for the current financial year, it said in its note today.

"However, we remain fairly optimistic on AirAsia and its associates, which are slated for listing sometimes in the fourth quarter of this year, as demand for air travel continues to remain resilient," it added.

The AirAsia associates are Indonesia AirAsia (IAA) and Thai AirAsia (TAA).

AirAsia's current fuel hedging stands at 18 per cent for the first quarter of 2011 jet fuel requirements at an average of US$100 per barrel.

For the second quarter of 2011, it has hedged at 21 per cent at an average price of US$92.31 per barrel.

OSK said AirAsia continues to pro-actively manage its hedging requirements based on near-term forward bookings. -- Bernama

GAMUDA - AmResearch maintains Buy on Gamuda, FV RM4.25

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

KUALA LUMPUR: AmResearch is maintaining its Buy recommendation on GAMUDA BHD [], with the fair value raised to RM4.25 a share from RM4.20,'' based on a 5% discount to its sum-of-parts value.

In a research note on Thursday, March 24, the research house said this was to account for maiden contributions from the Sg. Buloh-Kajang mas rapid transit (MRT) line as well as the Madge Mansion development, but partly mitigated by the likelihood of further delays to the double-tracking project.

'The increasing newsflow on the Klang Valley MRT project would likely regalvanise investor interest in Gamuda, in our view,' it said.

The 51km-Sg. Buloh-Kajang route, which is the first major line for the new MRT system, appears set to take off.

AmResearch said pre-qualification tenders may be out next month ahead of the target date for the commencement of CONSTRUCTION [] by July 2011.

'There are strong indications that the overall cost for the Sg. Buloh-Kajang line could be higher than expected at RM20 billion (our earlier estimates were around RM12 billion). By extension, this may imply more scope of works for Gamuda for the entire system ' which will reportedly cost over RM50 billion against the initial estimate of RM36 billion,' it said.

AmResearch said balance sheet risk has been substantially reduced as this massive project would likely now be funded via a Ministry of Finance-appointed special purpose vehicle.

Gamuda's exposure to the region is only about RM200 million or less than 5% of its outstanding orderbook of RM5.5 billion.

BHIC - Boustead Heavy a bargain: HwangDBS

Stock Name: BHIC
Company Name: BOUSTEAD HEAVY INDUSTRIES CORP
Research House: HWANGDBS

Boustead Heavy Industries Corp, a Malaysian shipbuilder, rose to a six-week high in Kuala Lumpur trading after HwangDBS Vickers Research Sdn Bhd said the stock is a “bargain” with strong earnings growth prospects.

The stock climbed 8.2 per cent to RM4.10 at 10:03 a.m. in Kuala Lumpur trading, set for its highest close since Feb. 9.

The company was rated new “buy” with a share estimate of RM6.55, HwangDBS said in a report today. -- Bloomberg

SIME - MIDF reaffirms 'buy' call on Sime

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

MIDF Research today reaffirmed its "buy" call on Sime Darby Bhd, on the possibility that more write-back will be made with respect to three other projects, namely the Qatar, Marine and Bakun projects.

The target price was unchanged at RM11.86.

"We believe the management has been conservative and undertook a kitchen sinking exercise in FY10," the research house said.

MIDF said it likes Sime Darby as its earnings growth will continue to be underpinned by an increase in mature hectarage, higher palm oil production as well as improving performance of its energy and utilities division.

Meanwhile, HwangDBS Vickers Research expects Sime Darby to book stronger 2HFY11 earnings on the back of property launches and recovering fresh fruit bunch yields.

It also reiterated a "buy" recommendation for Sime Darby and nudged up the FY11 earnings forecast by three per cent to reflect the impact of the Close Out Agreement signed by its wholly-owned subsidiary with Maersk Oil Qatar (MOQ) on March 17.

The agreement would also result in a RM100 million net positive impact on the group's FY11E profit and loss statement, it added.
-- Bernama

HAIO - Hai-O slides on weaker earnings

Stock Name: HAIO
Company Name: HAI-O ENTERPRISE BHD
Research House: RHB

KUALA LUMPUR: HAI-O ENTERPRISE BHD [] shares fell in early trade on Thursday, March 24 after its earnings fell 65% to RM6.34 million for the third quarter ended Jan 31, 2011 from RM18 million a year ago as revenue shrank following lower sales from its multi-level marketing (MLM) division.

At 9.10am, Hai-O fell nine sen to RM2.18 with 115,600 shares traded.

Hai-O's revenue fell to RM57.60 million from RM131.28 million a year ago due mainly due the poorer performance of the MLM division, which is its principal subsidiary.

RHB Research in a note March 24 said it was cautious on Hai-O's MLM division as the effect of the internal restructuring for the division due to the ammendment in the Direct Selling Act (DSA) may continue to impact its membership recruitment drive and slow the growth momentum of its membership base.

'In view of the current skittish and volatile market environment, we believe investors are looking for more earnings stability and reliable returns, which Hai-O would not be able to offer at this juncture, in our opinion.

'We are thus ceasing coverage on the stock, with our last recommendation being an Underperform with an unchanged fair value of RM1.35,' it said.

HAIO - OSK Research maintains Sell on Hai-O, but ups TP to RM1.93

Stock Name: HAIO
Company Name: HAI-O ENTERPRISE BHD
Research House: OSK

KUALA LUMPUR: OSK Research said Hai-O's nine-month results for the period ended Jan 31, 2011 were within its full year forecast of RM27.2m.

The research house said on Thursday, March 24 that due to its poor multi-level marketing results, revenue plunged 60% to RM165m while net profit fell by an even wider 64.2% to RM20.3m.

'In tandem with the poorer results, YTD EBIT came in at 17.5% versus 19.5% in 9MFY10. Despite the weaker numbers, management says MLM sales have started to pick up.

'We raise our FY12 earnings forecast by 1.7% to RM32.6m to factor in a stronger RM against USD. Our TP is raised to RM1.93 from RM1.61 previously (based on 12x PE) as we roll over our valuation to FY12. Maintain SELL,' OSK Research said.

SIME - CIMB Research maintains Buy on Sime, TP RM10.90

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

KUALA LUMPUR: CIMB Equities Research is maintaining a TRADING BUY and RM10.90 target on SIME DARBY BHD [].

On Wednesday, March 24, Sime Darby announced that it and Maersk Oil Qatar (MOQ) have reached an amicable settlement of the MOQ project.

CIMB Research said on Thursday, this latest development was good news as it (1) will help put to ease investors' concerns over potential provisioning for this project, (2) will enhance the group's FY11 EPS by 2%, and (3) shows that Sime is trying actively to recover some of the losses from its problematic oil & gas projects.

'We are raising our FY11 EPS by 2% for the write-back of around RM100m. As the impact on our SOP value is just 1 sen, we retain our SOP-based target price of RM10.90. Also unchanged is our TRADING BUY call, which is premised on the potential re-rating catalysts of newsflow on plans to enhance shareholder value and stronger-than-expected results,' it said.

KOSSAN - CIMB Research maintains Outperform on Kossan

Stock Name: KOSSAN
Company Name: KOSSAN RUBBER INDUSTRIES BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research is maintaining its Outperform recommendation on Kossan following its RM9.3 million acquisition of 51% of Cleanera HK while its target price remains RM5.41.

CIMB Research said on Thursday, March 24 this was a nice surprise as it will enable the company to diversify beyond medical examination gloves into the cleanroom segment.

Also, Cleanera's distribution network in Asean will give Kossan an opportunity to expand its operations in Asean. If the acquisition materialised, it would be transacted at a lower P/BV multiple of 2.0x than the 2.7x average that the listed glovemakers currently fetch.

'We make no changes to our earnings numbers as no details have been released and the purchase agreement is outstanding.

'Our target price remains RM5.41, still based on a forward P/E of 10.2x or a 30% discount to Top Glove's target P/E of 14.5x. Kossan remains an OUTPERFORM, with the re-rating catalysts being 1) contract wins, 2) cost savings from upstream M&A and 3) higher nitrile sales,' it said.

KUB - CIMB Research sees KUB Malaysia shares in recovery mode

Stock Name: KUB
Company Name: KUB MALAYSIA BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research has a Buy call on KUB Malaysia at 78 sen as the share price is in a recovery mode.

In its technical outlook on Thursday, March 24 it said KUB reached a low of 60.5 sen on March 15 and the bulls have since made a comeback.

'Currently, prices are in recovery mode. Yesterday, the candles also swung past all its key moving averages. This would likely push prices towards 82.5 sen and 88.5 sen next.

'MACD histogram bars are gaining strength while RSI is also rising. Risk takers may start to accumulate now. Only a fall below 72 sen would trigger our stop,' it said.

CIMB - CIMB managing volatility

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

CIMB Group Holdings Bhd
(March 22, RM8.08)
Maintain buy at RM8.03 with target price RM9.77: The group's return on equity (ROE) has in the past been relatively volatile, hitting a peak of 20.2% in 2007 when CIMB registered record trading profits largely from its bond division, and plunging to 11.9% the following year due to significant mark-to-market losses from the same division. Although CIMB will continue to build on its market-leading domestic and regional investment banking franchise, we believe that the fast-growing regional consumer banking business and the associated transactional fee based income from the domestic and cross-border regional angle will be crucial to achieving a more sustainable and stable ROE growth. The group has set a five-year target of expanding its consumer banking contribution from 17% currently to 60%.

The growth of its more stable transactional fee income and forex-driven base income from CIMB Niaga has certainly provided more stability to the group's non-interest income base. For example, despite the group's record high investment banking and treasury income of RM1.8 billion in 2007, owing to a surge in treasury trading profits, its total non-interest income in that year was still 17% lower than the group's total non-interest income in 2010, when investment banking and treasury profits were 23% lower than the 2007 levels.

The group has managed to expand the more stable components of its non-interest income stream, which has helped to reduce its exposure to the more volatile investment banking and treasury trading income streams from 17% of its total income to just 12% over the past five years.

Despite the group having formulated a higher dividend payout ratio of 40% to 60%, we see further upside potential in its dividend payout as CIMB Bank remains well capitalised at 14.5% capital adequacy ratio and 15.4% risk-weighted capital ratio. This, coupled with the group's ability to expand the more stable components of its fee income business, provides a strong foundation to pave a sustainable and stable ROE growth path, which in our view provides the next longer-term re-rating catalyst for the stock.

The group's market-leading domestic debt capital market franchise is poised to be among the key beneficiaries of increasingly robust debt capital market fundraising in 2011/12, largely related to projects under the Economic Transformation Programme, the main one being the RM40 billion mass rapid transit (MRT) project. Although the fundraising will only be executed in stages, it will still provide a significant lift to the primary bond market as the RM40 billion MRT project, whose cost is now expected to escalate to over RM50 billion, is equivalent to the entire primary private bond market issuance in 2010.

The group's cost to income ratio remains among the highest among the domestic banks under our coverage, partially attributed to its regional expansion and investment banking element, which typically exhibits a higher cost structure. However, the group's ability to extract some form of cross-border cost synergy from its expanding regional operations, the enhanced efficiency arising from a more integrated IT system and, most importantly, its ability to successfully execute its core KPI of managing costs in 2011, should result in an improvement in the group's cost to income ratio in 2011.

We are maintaining our 'buy' recommendation and Gordon Growth-derived target price of RM9.77, underpinned by CIMB's sustainable ROE of 17.4% for FY11. The traction in overall deposit and current account, saving account growth momentum has surprised on the upside. Despite the higher base, the group has set even more aggressive loans and deposit growth targets for 2011 at 18% and 20% respectively. The key risks to our valuation are: (i) a sudden collapse in the capital market; (ii) a spike in loan loss provisions in Indonesia due to spiralling inflation and interest rate hikes; and (iii) a selldown of its high foreign shareholding, which currently stands at 41.7%. ' OSK Research, March 22


This article appeared in The Edge Financial Daily, March 23, 2011.

AXIATA - Axiata shows solid growth

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

Axiata Group Bhd
(March 22, RM4.77)
Maintain buy at RM4.79 with target price RM5.60: Axiata has a dividend policy of a minimum 30% payout, translating to about 2% yield. As its balance sheet strengthens (project Axiata to turn net cash in FY12) and operating cash flow improves, higher dividends could surprise the market. We project a 35% payout ratio as we believe that the group would be able to pay more dividends given the expected more than sufficient free cash flows over the next two to three years.

In 2011, Axiata is looking at Robi, Bangladesh, to grow (its revenue) in high teens to low 20s, Dialog, Sri Lanka, in the mid-teens, XL, Indonesia, high single-digit to low teens and Celcom, Malaysia, mid-single digits. Except for Dialog, other subsidiaries are targeted to perform ahead of the industry.
Celcom and XL will continue to grow mobile data services while remaining cost efficient. Robi will continue to improve service quality and offerings, while Dialog will continue to focus on growing its data services revenue and while managing cost efficiencies.

On the back of these, we expect FY11F revenue to grow by 10% while earnings before interest, tax, depreciation and amortisation (Ebitda) margin should remain stable at 49%.

Trading at only 13.5 times FY11F earnings per share, Axiata is the cheapest Malaysian telco in our coverage. The market has yet to recognise the full potential of Axiata as the fastest growing major telco in Malaysia. Maintain 'buy' with a sum of parts-derived target price of RM5.60. ' HwangDBS Vickers Research, March 22


This article appeared in The Edge Financial Daily, March 23, 2011.

GAMUDA - Gamuda's earnings to be on track

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

Gamuda Bhd
(March 22, RM3.70)
Maintain buy at RM3.66 with target price RM4.68: We are projecting 7.5% growth in construction's contribution for 2011'' gross domestic product (GDP) which could exceed the average yearly construction turnover of RM60 billion. The construction sector grew 5.7% in 2009 and 7% in 2010.

Profit in FY11 is forecast to grow by 19% year-on-year (y-o-y), but there is ample room for it to exceed our target as more job rollouts are expected in the future. In terms of margins, we are looking an improvement in gross margins y-o-y to12% from'' 9% in 1Q10. We expect this scenario to prevail for the remainder of FY11. ''

The'' RM5.5 billion includes'' RM1.8 billion for the Nam Theun I project which is yet to be finalised. The double tracking'' project is reportedly at'' 54% (as at December 2010) with a completion target at end-2013 (after a one-year extension).

Property division sales are improving by 20% y-o-y and things are looking up with the group on track to achieve its target'' of'' RM1 billion in sales. On the downside, the maiden launch of the Yen So park project in Hanoi has been deferred to July 2011 from April with a RM400 million launch value target.'' ''

Work on the mass rapid transit system (MRT) is targeted to start in July 2011, if everything goes as planned and all approvals are obtained from the authorities. The Gamuda-MMV JV has been appointed the project delivery partner (PDP) for the MRT project with the pre-qualification process beginning this month.

Its only exposure in the Middle East is in Qatar, the New Doha International Airport, which is nearing completion. Another notable project was the Sitra Bridge in Bahrain that has since been completed.

The long overdue Selangor water saga is still in stalemate. We believe no decision will be made anytime soon, at least after the general election.

Steel prices are on the rise (6% year-to-date), in tandem with the rise in global metal prices that could pose a threat to margins going'' forward. As for Gamuda, we expect impact to be minimal. As for the Vetnam dong'' (-7.4% YTD against the'' ringgit), the devaluation will impact contributions from its Vietnam ventures.

We maintain our'' target price of RM4.68 but overall optimism'' is supported by: (i) improvements in earnings and margins;'' (ii) the high likelihood of secure the tunnelling portion of the MRT project; and (iii) contributions from property ventures. The pullback on construction stocks should open up trading opportunities in the near-term. ' MIDF Research, March 22


This article appeared in The Edge Financial Daily, March 23, 2011.

SPSETIA - HwangDBS positive on SP Setia

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

SP Setia Bhd investors should look forward to its upcoming one-for-two bonus issue, following its 15 per cent placement, said HwangDBS Vickers Research.

"The placement was five times covered at a strike price of RM5.78 following a book-building exercise. This is within the 10 per cent discount from the five-day volume weighted average market price guided earlier," it said in a research note today.

HwangDBS described the bonus issue as positive as it removed share overhang concerns with the placement of 153 million new shares which would raise RM885 million for the group.

It currently stands at a temporary net cash position of RM195 million.

Proceeds of RM762 million or 86 per cent will be used to fund capital expenditure and working capital while the remaining RM113 million would be used for land bank acquisitions.

"Even with three land acquisitions year-to-date, we believe SP Setia still has room for more given a record RM2.2 billion in unbilled sales and a RM3 billion sales target for financial year 2011," it said.

HwangDBS reiterated its "Buy" call on the group with a target price of RM7.90. -- Bernama

TENAGA - Tenaga's fair value reduced to RM7.54

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

Tenaga Nasional Bhd is still a "Buy" despite negative news generated from the calamities in Japan and a higher-than-expected long-term coal prices.

OSK Research, in a research note, today said the disaster in Japan has turned negative public opinion towards nuclear power plants in Malaysia.

"We believe the news flows on this would be quiet for awhile. Meanwhile, there will be more emphasis on renewable energy," it said.

However, it said the possibility of the Renewable Energy Act being passed in the current Parliament sitting was highly unlikely until after the general election.

The implementation of the Act would allow TNB an overall one per cent hike in Feed-in Tariffs.

The research house was also uncertain of the outlook for coal prices as damage to coal handling ports in North East Japan was limiting imports.

"It could lead to a 10 per cent drop in local imports over the next six month, but over the longer-term, a re-evaluation of nuclear power could lead to higher coal demand," it said.

The research house maintained a "Buy" call on the power giant with a reduced fair value of RM7.54.

"While we keep our financial year 2011 coal price forecast unchanged, the potential longer term coal demand leads us to tweak up coal prices to US$112 per tonne, cutting our profit forecast by seven per cent as well as our fair value," it added.
-- Bernama

CENTURY - Century Logistics riding on improving trade

Stock Name: CENTURY
Company Name: CENTURY LOGISTICS HOLDINGS BHD
Research House: RHB

Century Logistics Holdings Bhd
(March 23, RM1.90)
Initiate coverage at RM1.85 with outperform call and fair value RM2.70: Leading integrated solutions provider Century Logistics Holdings (CL) provides a wide range of services through its subsidiaries, including international freight forwarding (sea, land and air), warehousing, inventory management, procurement and assembly services. The company also provides ship-to-ship (STS) transfer for the oil and gas industry.

Malaysia's external trade is expected to remain healthy going forward. RHB Research's economics team expects exports and imports to grow 10% and 11.6% respectively in 2011, underpinned by resilient economic growth. Given that 85% to 90% of CL's business caters for the domestic market, rising import activity could translate into higher demand for distribution services. Hence, we believe rising trade will be positive for the company.

CL stands out from its peers by providing STS transfer for both fuel and crude oil, which are carried out mid-sea. CL operates floating storage units (FSU) which are converted from very large crude carriers (VLCC) with an average of 280,000 deadweight tonnes. These FSU are used for blending, storage and offloading of oil to various sized vessels (ranging from VLCCs to barges) off the Port of Tanjung Pelepas and Pasir Gudang, Johor.

Risks include the non renewal of its STS operating licence and a weaker than expected economic recovery.

We forecast FY11/13 net profit compound annual growth rate of 19.3%, driven mainly by: (i) resilient demand for freight forwarding, distribution and warehousing services on the back of rising trade activity; (ii) higher value-added services from assembly business as it gains traction in new markets and products; and (iii) stronger contribution from STS services driven by strong demand for fuel and crude oil, especially from emerging markets such as China and Vietnam.

We like CL given its: (i) attractive business model of total integrated logistics solutions that continues to attract more outsourcing of logistics services; and (ii) diversified earnings base which should provide earnings growth. We have pegged a target price-earnings ratio of 10 times to the stock as we believe CL deserves a premium to its peers' weighted average given its stronger earnings growth, diversified business model, higher net profit margins and higher return on equity. We estimate a fair value of RM2.70 per share (based on FY11 FD earnings per share). We initiate coverage on CL with an 'outperform' recommendation. ' RHB Research, March 23


This article appeared in The Edge Financial Daily, March 24, 2011.

HLBANK - Hong Leong Bank: Building blocks in place

Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD
Research House: AMMB

Hong Leong Bank Bhd
(March 23, RM9.39)
Maintain buy at RM9.34 with fair value RM11.20: Hong Leong Bank (HLBB) was decidedly more cautious in our recent company visit, citing external uncertainties. Its recent loan utilisation in January-February 2011 was weaker compared with November-December 2010.

This may be due to seasonal effects arising from the Chinese New Year holidays, but with the latest uncertainties arising from the Middle East and Japan, it has not seen a significant pick-up in utilisation of working capital loans in recent weeks. Nevertheless, the company concedes that any possible slowdown is likely in terms of growth rather than risk in higher impaired loans.

HLBB has not seen a major impact on the mortgage segment arising from Bank Negara Malaysia limiting the loan-to-value (LTV) for third mortgages and above to 70%, which was implemented in November 2010. The company has now initiated a new sales channel, roping in its related company's insurance sales force for mortgage sales. We understand the response so far has been positive.

As for non-interest income, HLBB has recruited a new head of treasury to replace the loss of key personnel in the treasury department. It has also recruited new heads of transactional banking and private banking as part of its key strategy to build non-interest income.

We understand HLBB's 20%-owned associate Bank of Chengdu Co Ltd is on track for strong earnings growth for FY11F. Asset quality has remained top-notch while return on equity is estimated to have exceeded 15%, for its FY10E. Bank of Chengdu's contribution has now risen to 12.4% of the group's overall pre-tax profit in 2QFY11, from 11.6% in 1QFY11. Bank of Chengdu has now expanded to three cities out of the immediate Chengdu province, Chongging, Xian and Kunming.

The group has identified several key strategic priorities in the next 12 months: (i) Re-assert its liquidity franchise to build volume for scale and future-proof its business lines; (ii) Focus on the efficiency of delivery, productivity and IT effectiveness; (iii) Re-invent the branch banking strategy and deepen customer relationships; (iv) Build new segments and fee income; (v) Support expansion, transformation and growth of its regional platforms to secure future options by building new banks in new regional markets.

HLBB's aspiration is now to build a strong regional business. We remain positive ' maintain 'buy'. ' AmResearch, March 23


This article appeared in The Edge Financial Daily, March 24, 2011.

SPSETIA - A golden opportunity to buy S P Setia

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

S P Setia Bhd
(March 23, RM6.18)
Maintain buy at RM6.15 with lower target price RM7.10 (from RM7.20): The recent selldown of S P Setia shares represents a golden opportunity to buy the stock given the company's excellent sales performance and earnings growth prospects.

S P Setia will very likely exceed its RM3 billion sales target for FY11, a new record, given strong bookings and responses to its KL Eco City offices and residential tower. We fine-tune our earnings forecasts and tweak down our target price to RM7.10 (-1%) based on an unchanged 10% premium to our new RM6.47 realisable net asset value (RNAV) post-placement. S P Setia ramains our top buy for the sector.

Recent strong bookings for KL Eco City's strata and boutique offices did not surprise us given the prime location and the excellent connectivity offered by the MRT-LRT-Kommuter hub. We are heartened by the record RM1,100 to RM1,200 psf average selling price (ASP), which surpasses KL Sentral's RM850 to RM1,100 psf. S P Setia now plans to launch the residential tower Phase 1 by early April (RM1,100 psf ASP).

In view of the high number of registrants (3,500) for the 711 units, we expect RT1 to be another sell-out, bringing in sales of RM650 million.

However, our RM3.7 billion sales assumption is 23% above S P Setia's. We believe it is attainable given: (i) stunning ex-KL Eco City sales of RM953 million in 4MFY11; (ii) RM1 billion in recent bookings for KL Eco City's strata and boutique offices; (iii) the upcoming RM650 million RT1 launch; and (iv) estimated RM1 billion to RM1.2 billion sales from the ongoing local townships and Melbourne, Australia, projects.

The current scenario is different from the 2002 placement of new shares, where the proceeds were used to fund the greenfield Shah Alam land. S P Setia is now moving into high-catchment urban developments which are further supported by the Greater KL/Klang Valley's new integrated transport system.

This would provide greater upside potential with lower take-up risks compared with its 2002 venture. Also, we see lower risks due to lower upfront costs.

We fine-tune our net profit forecasts by circa 1% post-placement. Earnings per share dilution is about 20% to 21%, while the impact on RNAV is minimal (-1.2%). We expect S P Setia to scale record profits this year with a strong 36% growth over FY10.

Our RM6.47 RNAV has upside potential from: (i) further land banking exercises; (ii) an upward revision in gross development value for existing developments; and (iii) circa RM600 million en bloc sales for the KL Eco City corporate towers. ' Maybank IB Research, March 23


This article appeared in The Edge Financial Daily, March 24, 2011.

MAYBANK - Stricter credit card rules pre-emptive

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

Banking sector
Maintain overweight: Bank Negara Malaysia (BNM) has announced three major new credit card measures which essentially raise the eligibility requirements.

First, the minimum income eligibility for new credit cardholders is now set at RM24,000 per annum from RM18,000 previously.

Second, card holders earning RM36,000 per annum and below can now only hold credit cards from a maximum of two issuers, while previously there was no limit in terms of the number of credit cards that may be held. Third, the maximum credit limit extended to a cardholder shall not exceed two times their monthly income per issuer.

Credit cards' contribution has increased from 1% of overall loans as at end-1996 to 3.4% of overall loans as at end-January 2011. We estimate credit cards made up 5.3% of overall retail loans (representative of household debt) as at end-January 2011, up from about 2.4% of overall retail loans as at end-1996.

In terms of overdue amounts (beyond the current payment period), we estimate them to make up about 8.1% of overall credit card payments outstanding as at end-January 2011. This has improved from an estimated 9.1% as at end-2009. This means that more than 90% of the outstanding amount is settled within the month.

Overall, credit card non-performing loans were RM553.4 million as at end-January 2011, translating into gross impaired loans ratio of 1.8% for this segment, below industry's 3.3%.

Gross impaired credit card loans have also declined by 2.8% from RM569.4 million at end-2009 (gross impaired loans ratio of 2.2%).

Overall, we would therefore consider credit cards debts to be small and at manageable levels. Thus, we believe the latest ruling is more pre-emptive in nature.

In terms of exposure to credit cards, Hong Leong Bank Bhd (HLBB) has the highest contribution to loans from credit cards at 5.8%, followed by EON Capital Bhd at 4.4% and CIMB Group Holdings Bhd at 3.9%. The ones with the least contribution from credit cards are Affin Holdings Bhd (0.4%), Public Bank Bhd (0.9%) and RHB Capital Bhd (2%).

We would be tweaking our loans growth forecasts for the banks to take into account the latest credit card ruling. However, we do not anticipate a major drop in overall loans for the banks arising from the latest measure on credit cards. We maintain our overweight stance on the banking sector. Our buys are still CIMB, HLBB, Maybank and RHB Cap. ' AmResearch, March 21


This article appeared in The Edge Financial Daily, March 22, 2011.

NOTION - OSK Research maintains Neutral on Notion VTec, unch FV RM1.85

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

KUALA LUMPUR: OSK Research is maintaining its NEUTRAL recommendation on'' Notion VTec with at an unchanged Fair Value of RM1.85.

It said on Wednesday, March 23 that Notion announced that it has secured new production orders from Nikon for camera body mounts with immediate effect.

'The new business is expected to contribute between RM36m-RM60m in revenue p.a. Nonetheless, we are maintaining our forecasts for now as we expect the new income stream to be mitigated by an expected slowdown in orders for Notion's core cam barrel operation also for Nikon which have been impacted by the Sendai earthquake.

'Maintain NEUTRAL at an unchanged Fair Value of RM1.85,' it said.

YTLLAND - HDBSVR maintains Buy on YTL Land, TP RM2.70

Stock Name: YTLLAND
Company Name: YTL LAND & DEVELOPMENT BHD
Research House: HWANGDBS

KUALA LUMPUR: Hwang DBS Vickers Research is maintaining its Buy recommendation on YTL Land Bhd and RM2.70 target price.

It said on Wednesday, March 23 that YTL Land is the biggest beneficiary of MRT (66% of RNAV exposed to interchanges i.e. Sentul, KL Sentral, Bukit Bintang).

'Capers first block launching this weekend at RM600psf, expect sellout following five-year pent-up demand. Asset injection by YTL Corp expected to be completed by mid-11; potential earnings upside from Sentosa Cove contribution,' it said.

UMW - OSK Research maintains Overweight on auto sector, UMW top pick

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

KUALA LUMPUR: OSK Research is maintaining its Overweight recommendation on the auto sector with UMW as a Buy with a fair value of RM8.92.

It said on Wednesday, March 23 that UMW is its top pick for 1HFY11 given the stock's laggard performance and in view of the turnaround of its oil and gas unit.

OSK Research said while it expects industry margins to decline on inflationary pressures as the prices of raw materials and components rise, it nonetheless 'sees the earnings growth momentum remaining respectable given the higher demand amid the strengthening ringgit in the immediate term'.

SALCON - Salcon advances on China project, OSK ups FV to 72 sen

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

KUALA LUMPUR: Shares of SALCON BHD [] rose in active trade on Tuesday, March 22, as sentiment perked up in the counter after its subsidiary secured an industrial wastewater treatment plant (IWTP) project in China.

At 9.42am, it was up four sen to 64 sen with 2.02 million shares done.

OSK Research is maintaining its fair value for Salcon at 72 sen pending its disclosure of more details of the IWTP in China.

Salcon's subsidiary Salcon Changzhou (HK) Ltd secured a 30 million litres per day IWTP concession in Jiangsu Province, China. The concession period is for 30 years upon the signing of the agreement with Jiangsu Province and will be acquired via a transfer-operate-transfer (T-O-T) basis.

The acquisition is priced at 60 million renminbi, or about RM27.7 million (as of March 9, 2011 based on RM1 vs 2.1659 renminbi).

'Pending the disclosure of more salient terms (especially on the cost structure) on the IWTP, we maintain our FV for Salcon at 72 sen. Riding on the company's growing portfolio of water concessions in China, we also maintain our BUY recommendation on the stock. Securing the latest concession enhances the stock's FV,' it said.

LIONIND - LICB discloses details of blast furnace project

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

Lion Industries Corp Bhd (LICB)
(March 22, 2011, RM1.68)
Maintain 'sell' at RM1.64 with target prices of RM1.61: LICB management has revealed details of its proposed RM3.2 billion blast furnace project, including the rationale for the proposed joint investment, projected internal rate of return (IRR) and expected payback period of the project.

The management believes the project would allow both Amsteel Mills and Megasteel to substitute a portion of their raw materials with hot metal produced from the proposed blast furnace, which would in turn result in better production efficiency and better product quality. The project would also allow Lion Blast Furnace (LBF) to market slabs to both domestic and Asean steel producers. According to LICB's announcement on March 3, LBF aims to convert about 75% of the liquid hot metal from the blast furnace into slabs and sell them in the open market domestically and overseas.

We understand that slabs production is currently under-invested in Asean; the region imported roughly 3.5 million tonnes of slabs, which are equivalent to almost half of the region's total slabs consumption in 2009.

Bright demand prospects aside, LBF would also be able to take advantage of the preferential tariffs within the Asean region such as the zero import duty for steel products with a minimum 40% local content.

The management also revealed that the completion of the blast furnace would allow the group to compete head on with the regional large-scale integrated steel players by selling the by-products such as slags, crude tar, ammonia, benzene, sulphur and carbon credit.

Based on management's estimates, the sale of by-products as well as electricity cost savings arising from the generation of power from blast furnace and coke oven gas would result in a total cost savings of RM295 million a year,'' assuming the blast furnace is operating at full utilisation rate.

Management expects the blast furnace to contribute positively to the group in its first year of operation, produce an IRR of 17% and have a payback period of six years, assuming the current market condition will be sustained with 100% utilisation rate.

While we have no doubt on the longer-term feasibility of the project, which can eventually yield positive results to the group, we are keeping our negative view on the proposed investment project for now.

This is due to the volatile iron ore and coking coal prices, which will affect the economic viability of the blast furnace project.

On top of that, the potential corporate governance issue given that this is a related-party transaction and the huge investment outlay involved in the project may affect LICB's near-term working capital, in particular, its steel operations are factors for concern. ' Hong Leong Investment Bank Research, March 22


This article appeared in The Edge Financial Daily, March 23, 2011.

AXIATA - HwangDBS keeps 'buy' call on Axiata

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

Axiata Group Bhd's revenue for financial year 2011 is likely to grow by 10 per cent while the earnings before interest, taxes, depreciation and amortisation (EBITDA) margin will remain stable at 49 per cent, says HwangDBS Vickers Research Sdn Bhd.

The target was based on Axiata's 2011 plan to grow its revenue from Robi in Bangladesh, Dialog in Sri Lanka, XL in Indonesia and Celcom in Malaysia, it said in a research note today.

Except for Dialog, HwangDBS said the other subsidiaries are targeted to perform ahead of the industry.

"Celcom and XL will continue to grow mobile data services while remaining cost efficient.

"Robi will work to improve service quality and offerings,while Dialog focuses on growing its data services revenue and managing cost efficiencies," it said.

HwangDBS is also projecting a 35 per cent payout ratio as it believes Axiata will be able to pay more dividends, given an expected more than sufficient free cash flows over the next two to three years.

Axiata has a dividend policy of a minimum 30 per cent payout ratio, translating to about a two per cent yield.

HwangDBS has maintained a "buy" call on Axiata with a sum-of-parts (SOP) derived target price of RM5.60. -- Bernama

CIMB - Buy CIMB Group shares: OSK

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

OSK Research is maintaining the "buy" recommendation on CIMB Group with the trading price at RM9.77, underpinned by its sustainable return on equity (ROE) of 17.4 per cent for this year.

In a note today, OSK said the group's ROE had in the past been relatively volatile, hitting a peak of 20.2 per cent in 2007, when it registered record trading profits largely from its bond division.

But it plunged to 11.9 per cent the following year due to significant mark-to-market losses from the same division.

Although CIMB will continue to build on its market leading domestic and regional investment banking franchise, OSK believes that the fast growing regional consumer banking business and the associated transactional fee base income from the domestic and cross border regional angle, will be crucial towards achieving a more sustainable and stable ROE growth.

The research firm said the group has set a five-year target of expanding its consumer banking contribution from 17 per cent currently to 60 per cent. -- Bernama

BENALEC - AmResearch keeps 'buy' call on Benalec

Stock Name: BENALEC
Company Name: BENALEC HOLDINGS BERHAD
Research House: AMMB

AmResearch has reiterated the "buy" recommendation on Benalec Holdings Bhd with a fair value of RM1.90 per share, as the company is estimated to have clinched new contracts worth RM608 million for the financial year-to-date, compared to RM77 million in 2010.

The research house said it also estimates new orders of RM650 million for Benalec for the financial year ending June 30, 2011.

AmResearch said the newly secured RM37 million reclamation contract in Selangor would undoubtedly put Benalec on a stronger footing to clinch more such contracts, both at home as well in the region.

The contract is the second, the group has secured within this week, following the Kota Laksamana project in Melaka.-- BERNAMA

GAMUDA - Buy Gamuda shares: MIDF

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

MIDF Research sees ample room for Gamuda Bhd's financial year 2011's profit to exceed its 19 per cent growth target year-on-year on more jobs rollouts in the future.

In a note today, MIDF said the optimism was supported by Gamuda's earnings and margins improvements, the high likelihood of getting the tunnelling portion of the mass rapid transit project and contributions from property ventures.

MIDF said Gamuda's gross margins year-on-year were expected to improve to 12 per cent from nine per cent in the first quarter of 2010.

It said it would maintain its 'buy' recommendation on Gamuda with an unchanged target price at RM4.68. -- Bernama

GWPLAST - RHB Research: Fair value for Great Wall Plastics at 96 sen

Stock Name: GWPLAST
Company Name: GW PLASTICS HLDG BHD
Research House: RHB

KUALA LUMPUR: RHB Research Institute has an indicative fair value for Great Wall Plastics at 96 sen, based on target FY11 PER of 8.0 times, which is a 10% premium over its peers weighted average FY11 PER.

'We believe the premium is fair given GWP's clarity in terms of its topline growth projections, and to a certain extent its earnings visibility,' it said on Tuesday, March 22.

GWP produces cast films and blown films. Cast films are low margin, low value-added, high volume products, while blown films are the opposite with high margins, high value-added, low volume products.

Blown films accounted for 68.1% (RM210m) of GWP's revenues, and about 75% (RM18.2m) of PBT translating into a PBT margin of 8.7%.

Cast film accounted for 32.2% (RM99.3m) and about 25% (RM6m) of GWP's FY10 revenues and PBT respectively, translating to a PBT margin of 6%.

'We understand that by end-FY11, GWP would have a total estimated combined production capacity of 62,000 tonnes (2010: about 47,100 tonnes).

'Based on our estimates, after accounting for the RM21m planned capex, and an extra RM10m in capex (assuming GWP does decide to increase its production capacity more than planned), we believe GWP could pay dividends in the range of 30%-40% of net profit in FY11, without having to increase its net gearing level from 0.1 times currently. This translates to a yield of 5%-7% based on its current share prices.

'We believe GWP's current valuations are attractive as it is only trading at 6 times FY11 PER, as compared its peers weighted average FY11 PER of 7.3 times. Furthermore, its current share price of 73 sen is lower than its listing price of 76 sen,' it said.

SALCON - OSK Research maintains Buy on Salcon, FV 72 sen

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

KUALA LUMPUR: OSK Research is maintaining its fair value for Salcon at 72 sen pending its disclosure of more details of the industrial wastewater treatment plant (IWTP) in China.

OSK Research said on Tuesday, March 22 Salcon's subsidiary Salcon Changzhou (HK) Ltd secured a 30 million litres per day IWTP concession in Jiangsu Province, China. The concession period is for 30 years upon the signing of the agreement with Jiangsu Province and will be acquired via a transfer-operate-transfer (T-O-T) basis.

The acquisition is priced at 60 million renminbi, or about RM27.7 million (as of March 9, 2011 based on RM1 vs 2.1659 renminbi).

'Pending the disclosure of more salient terms (especially on the cost structure) on the IWTP, we maintain our FV for Salcon at 72 sen. Riding on the company's growing portfolio of water concessions in China, we also maintain our BUY recommendation on the stock. Securing the latest concession enhances the stock's FV,' it said.

MUDAJYA - Mudajaya powering up with project flows

Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD
Research House: CIMB

Mudajaya Group Bhd
(March 21, RM4.80)
Maintain 'buy' at RM4.60 with target price of RM7.94: We continue to be optimistic about Mudajaya's prospects for 2011, which are now underpinned by more certainty in the rollout of power plant extension jobs and implementation of the Sungai Buloh-Kajang mass rapid transit (MRT) line and light rail transit extensions. A bonus would be success in clinching regional power plant ventures which would be long-term positive for the group.

The stock is trading at a hefty discount of 54% to its RNAV compared with 33%-47% discounts for other construction stocks under our coverage. On P/E basis, it is also cheap at CY11-12 P/Es of 6-7 times compared with the construction sector average of 16-20 times.

We maintain our EPS forecasts, 'buy' call and target price of RM7.94, pegged to an unchanged 20% RNAV discount. The award of projects holds the key to share price re-rating.

Mudajaya has teamed up with Alstom to bid for the Janamanjung power plant extension which is targeted to be awarded by the end of the month.

We continue to believe that Mudajaya has an advantage over other local contenders, having been the big beneficiary of Tenaga Nasional Bhd's power plant capex in the past. Its strong balance sheet and track record add to its credibility as a contender.

The civil works for the Sungai Buloh-Kajang MRT Line will be dished out in packages. Award is expected in May and work targeted to start in July. Mudajaya meets the prequalification criteria, having built the KLIA spurline. Even at the subcontracting level, the group is open to opportunities in the precast segment.

We are looking at up to RM3.1 billion worth of potential jobs for the group, which would raise its order book to almost RM8 billion.

Mudajaya recently announced a 1-for-3 bonus issue, which is expected to be completed in 3QCY11. This is positive for shareholders as it will improve liquidity. Also, share prices typically do not adjust fully after they go ex of bonus issues. The group also announced its maiden employee share option scheme. ' CIMB Research, March 21


This article appeared in The Edge Financial Daily, March 22, 2011.

MUDAJYA - CIMB Research reaffirms Buy on Mudajaya, TP RM7.94

Stock Name: MUDAJYA
Company Name: MUDAJAYA GROUP BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research continues to be optimistic about Mudajaya's prospects for 2011, which are now underpinned by more certainty in the rollout of power plant extension jobs and implementation of the MRT SBK line and LRT extensions.

It said on Monday, March 21 a bonus would be success in clinching regional power plant ventures which would be long-term positive for the group.

'The stock is trading at a hefty discount of 54% to its RNAV compared to 33-47% discounts for other CONSTRUCTION [] stocks under our coverage. On P/E basis, it is also cheap at CY11-12 P/Es of 6-7x compared to the construction sector average of 16-20x.

'We maintain our EPS forecasts, BUY call and target price of RM7.94, pegged to an unchanged 20% RNAV discount. The award of projects holds the key to share price re-rating,' it said.

RHBCAP - OSK Research maintains Buy on banking sector

Stock Name: RHBCAP
Company Name: RHB CAPITAL BHD
Research House: OSK

KUALA LUMPUR: OSK Research is maintaining its Buy on the banking sector as loans growth remains largely intact at a forecast at 9% to 10%.

It said on Monday, March 21 the boost from the Economic Transformation Programme related loans and fixed income securities has yet to be imputed into its loans and non-interests income growth assumptions.

'Loans loss provisions are expected to continue on a downtrend on the back of improving asset quality. The key risk lies in larger than expected margin pressure, sustained weakness in the capital markets and sudden surge in foreign hot money outflow from Malaysian government securities, which will affect banks' bond trading profits as a result of a spike in bond yields,' it said.

The report was issued after Bank Negara Malaysia announced a number new credit card to encourage more prudent financial management among credit card users and also additional measures that encourage more responsible business practices among credit card issuers.

''

OSK Research said its large cap banking top picks are CIMB (Buy, TP: RM9.77) and Maybank (Buy, TP: RM10.07), while the midcap pick is RHBCap (Buy, TP: RM9.56).

MAYBANK - OSK Research maintains Buy on banking sector

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

KUALA LUMPUR: OSK Research is maintaining its Buy on the banking sector as loans growth remains largely intact at a forecast at 9% to 10%.

It said on Monday, March 21 the boost from the Economic Transformation Programme related loans and fixed income securities has yet to be imputed into its loans and non-interests income growth assumptions.

'Loans loss provisions are expected to continue on a downtrend on the back of improving asset quality. The key risk lies in larger than expected margin pressure, sustained weakness in the capital markets and sudden surge in foreign hot money outflow from Malaysian government securities, which will affect banks' bond trading profits as a result of a spike in bond yields,' it said.

The report was issued after Bank Negara Malaysia announced a number new credit card to encourage more prudent financial management among credit card users and also additional measures that encourage more responsible business practices among credit card issuers.

''

OSK Research said its large cap banking top picks are CIMB (Buy, TP: RM9.77) and Maybank (Buy, TP: RM10.07), while the midcap pick is RHBCap (Buy, TP: RM9.56).

CIMB - OSK Research maintains Buy on banking sector

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

KUALA LUMPUR: OSK Research is maintaining its Buy on the banking sector as loans growth remains largely intact at a forecast at 9% to 10%.

It said on Monday, March 21 the boost from the Economic Transformation Programme related loans and fixed income securities has yet to be imputed into its loans and non-interests income growth assumptions.

'Loans loss provisions are expected to continue on a downtrend on the back of improving asset quality. The key risk lies in larger than expected margin pressure, sustained weakness in the capital markets and sudden surge in foreign hot money outflow from Malaysian government securities, which will affect banks' bond trading profits as a result of a spike in bond yields,' it said.

The report was issued after Bank Negara Malaysia announced a number new credit card to encourage more prudent financial management among credit card users and also additional measures that encourage more responsible business practices among credit card issuers.

''

OSK Research said its large cap banking top picks are CIMB (Buy, TP: RM9.77) and Maybank (Buy, TP: RM10.07), while the midcap pick is RHBCap (Buy, TP: RM9.56).

YTLPOWR - YTL Power's high dividends in doubt

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

YTL Power International Bhd
(March 21, RM2.29)
Maintain market perform at RM2.31 with fair value at RM2.57: YTL Communications finally unveiled two new Yes devices early this month ' the Samsung Buzz mobile phone and the Zoom router. Our initial impressions of the Buzz are less than favourable mainly due to: 1) smaller than-average screen size; 2) lack of applications; 3) keypad being too small; and 4) a not-so-friendly user interface. We welcome the news that YTL Comms plans to launch Android smartphones in June, given their rising popularity.

The new Valuepacks offer competitive rates for heavy data users, as not only do they enjoy bigger savings, they also receive free voice calls and SMS to any mobile number.

However, for mobility, we believe the fact that a user must use the Samsung Buzz to enjoy the free voice minutes and SMS is a serious dampener. Otherwise, you need to login using a Yes ID to a non-handset device (such as a desktop or laptop) to utilise the freebies. However, this means a lack of convenience and/or mobility.

We are somewhat concerned with YTL Power's lower-than-expected second interim single tier dividend per share (DPS) of 1.875 sen (we had forecast 3.75 sen).

After further discussions with its management, we were still unable to get a clear sense of the level of future dividend payouts.

Preferring to remain conservative, we have cut our FY11 DPS forecast from 13.1 sen to 9.4 sen. Thus, we only expect YTL Power to subsequently declare a third interim and final dividend of only 1.875 sen/share each. We believe management is looking to conserve cash, as YTL Comms plans to spend more to boost coverage.

The risks include: 1) unfavourable forex movements, which will adversely affect the translation of foreign earnings; 2) potential change in competitive landscape under the National Energy Plan; and 3) execution risk and poor subscriber numbers for WiMAX.

We have left our earnings forecasts unchanged.

We have maintained our sum-of-parts-derived fair value on YLT Power at RM2.57. Without the management's assurance regarding future dividends, we believe YTL Power may lose a bit of shine since the key investment thesis for the stock has historically been high dividend yields. For FY11, we now expect YTL Power to only offer a relatively mediocre gross dividend yield of 5.5% (FY10: 7.6%). ' RHB Research, March 21


This article appeared in The Edge Financial Daily, March 22, 2011.

SPSETIA - Bullish outlook on S P Setia's RM3b sales target

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

S P Setia Bhd
(March 21, RM6.12)
Maintain 'trading buy' at RM6.07 with target price of RM6.07: S P Setia Bhd posted strong results for 1QFY11. Over the period, net profit and revenue were up by 62% and 43% year-on-year respectively. In total, its three months' earnings account for about 25% and 23% of ours and consensus estimates.

The strong result was mainly driven by higher sales from its matured property projects such as Setia Alam and Setia Eco-Park as well as from its other ongoing projects such as Setia Sky Residence, Setia Walk, Bukit Indah, Setia Indah, Setia Tropika, Setia Eco Gardens, Setia Pearl Island and Setia Vista.

Sequentially, the group's 1Q net profit dipped slightly on the back of 7% drop in the group's revenue. In addition, the lower quarterly revenue was partly attributed by the gain in disposal of investment property which was done in the previous corresponding period.

Meanwhile, pre-tax margin for the quarter expanded from 14% to 17% due to higher margin recognition from high-end property and commercial property segment.
The group managed to secure an impressive RM737 million worth of unbilled sales during the quarter and RM953 million as at Feb 28, 2011.

This year, the group is targeting to achieve RM3 billion worth of new sales, which will be supported by the upcoming new launch of KL EcoCity plus all its maturing projects such as Setia Alam and Setia Eco-Park as well as its ongoing projects in Johor and Penang. Based on this quarter's strong and favourable economic condition, we remain optimistic that the group will be able to achieve its RM3 billion sales target for this financial year.

Backed by buoyant property market sentiment and underpinned by the bullish outlook on the group's ambitious unbilled sales target, we are maintaining our 'trading buy' call on the stock with an unchanged target price of RM6.07. ' BIMB Securities Research, March 21


This article appeared in The Edge Financial Daily, March 22, 2011.

NOTION - ECM maintains 'buy' call on Notion VTEC

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

ECMLibra Investment Research is maintaining its "buy" call for metal processor and tools maker, Notion VTEC Bhd's shares, as the company will start camera body mount production for Nikon.

The research house has put a target price of RM2.50 for Notion VTEC shares based on the historical five-year average price earnings ratio of 8.7 times.

"The contribution from the new business, both in the body mount and sub-assembly of lens, will more than compensate for the expected reduction in orders for cam barrels," said ECMLibra in its research note here, today.

Notion VTEC recently announced that its third factory in Klang will be supplied with raw materials from Nikon for the body mount production with immediate effect.

The company expect the new business to contribute between RM36 million to RM60 million in sales annually, which would add between 12.9 per cent - 21.5 per cent to ECMLibra's revenue forecast for Notion VTEC. -- Bernama

BIPORT - Bintulu Port gets 'neutral' call at OSK

Stock Name: BIPORT
Company Name: BINTULU PORT HOLDINGS BHD
Research House: OSK

OSK Research has a "neutral" call for MISC Bhd and Bintulu Port Sdn Bhd with RM8.20 and RM6.86 forecast value each.

The research house said it saw Petronas liaising with its Japanese counterparts to supply immediate additional liquefied natural gas (LNG) to Japan.

"While additional revenue could be reaped from the slightly longer route taken to ship the LNG volume, the overall impact would be negligible in nudging MISC's earnings significantly, and no impact on Bintulu Port.

"As such, we see muted impact from this move although trading on the spot market could be a boon for Petronas given that 10 per cent of its volume are sold on a spot basis," it said in a research note today.

Petronas had said recently it was working with buyer nations in the Far East on possible cargo swaps to cater for increased LNG requirements. -- Bernama

TM - OSK stays neutral on Telekom

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

OSK Research has maintained its "neutral" call on Telekom Malaysia Bhd, based on a target price of RM3.50.

In a note today, OSK said although TM's mobile virtual network operator (MNVO) arrangement with Celcom Axiata would transform it into a quad play operator, the contribution to revenue is expected to not be significant.

This is given the saturating mobile landscape and extremely competitive market condition.

It also said the telecommunications company faces rising competitive risk from Time dotCom, which also vying to expand its share of the wholesale space. -- Bernama

PARKSON - Buy Parkson shares: HwangDBS

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

Research firms, HwangDBS Vickers Research and OSK Research, are maintaining their "buy" call on Parkson Holdings Bhd.

In a research note today, OSK said PT Tozy Bintang Sentosa Group (TBS), Parkson’s partner in its foray into Indonesia, has targeted the mid-end market segment where there is less competition.

TBS has vast experience in the Indonesian retail market and good connections with key industry players.

"Thus, in view of TBS’strong brand names,Parkson is confident of setting up between 20 to 25 outlets in the next three to four years," it said.

"Given that the details on the collaboration remain sketchy, we maintain our earnings forecast at between RM361.4 million and RM439.7 million and a target price of RM6.31," OSK said.

Meanwhile, HwangDBS Vickers Research said it believes, Parkson will hold a controlling stake and its local partner taking up the balance.

Long-term prospects remain favourable given Parkson's strategic presence in Malaysia, China, Vietnam and next year in Cambodia, with a strong domestic consumption growth story.

The company is maintaining a "buy" rating on Parkson and a revised net asset value (RNAV)-based target price of RM6.00. -- Bernama