March 31, 2011

CIMB - BLR hike 'positive' on CIMB margin

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

HwangDBS Vickers Research said an increase in base lending rate by CIMB Bank will have a positive impact on the bank's net interest margin (NIM), assuming competition does not intensify excessively.

"Based on our estimates, every 10 basis points increase in NIM will raise CIMB's 2011 financial year forecast by 4.8 per cent

"We think other banks would likely raise their BLR following CIMB's move," the research firm said in a research note today.

HwangDBS Vickers maintained its buy recommendation on CIMB with a target price of RM10.10.

CIMB Bank and CIMB Islamic Bank announced an increase in BLR and base financing rate from 6.30 per cent to 6.35 per cent.

The change in rates follows Bank Negara Malaysia's announcement to increase the statutory reserve ratio requirement by one per cent to two per cent effective April 1. -- BERNAMA

TAANN - Timber-related stocks extend losses

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

KUALA LUMPUR: Timber-related stocks extended their losses on Thursday, March 31 as stretched valuations and questions over the ability of the companies to meet the expected demand caused the recent rally in the share prices to halt.

At 10.35am, Subur Tiasa fell 14 sen to RM3.70, Jaya Tiasa and Ta Ann lost 10 sen each to RM6.24 and RM6.66, while WTK edged down one sen to RM1.98.

AmResearch Sdn Bhd had yesterday downgraded both JAYA TIASA HOLDINGS BHD [] and TA ANN HOLDINGS BHD [] to a Hold from Buy previously, but with raised fair values to RM7.11 (RM6 previously) and RM7 (RM6.30 previously), respectively.

The research said it now had a neutral stance on the sector, given the recent surge in their share prices, adding that the steep run-up in their share prices ' following its earlier upgrade on Ta Ann and its earnings ' had stretched valuations.

'Any further upgrade appears somewhat unlikely as the availability of logs supply may not keep up with the anticipated increase in demand stemming from the Japan disaster,' it said in a note March 30.

JTIASA - Timber-related stocks extend losses

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

KUALA LUMPUR: Timber-related stocks extended their losses on Thursday, March 31 as stretched valuations and questions over the ability of the companies to meet the expected demand caused the recent rally in the share prices to halt.

At 10.35am, Subur Tiasa fell 14 sen to RM3.70, Jaya Tiasa and Ta Ann lost 10 sen each to RM6.24 and RM6.66, while WTK edged down one sen to RM1.98.

AmResearch Sdn Bhd had yesterday downgraded both JAYA TIASA HOLDINGS BHD [] and TA ANN HOLDINGS BHD [] to a Hold from Buy previously, but with raised fair values to RM7.11 (RM6 previously) and RM7 (RM6.30 previously), respectively.

The research said it now had a neutral stance on the sector, given the recent surge in their share prices, adding that the steep run-up in their share prices ' following its earlier upgrade on Ta Ann and its earnings ' had stretched valuations.

'Any further upgrade appears somewhat unlikely as the availability of logs supply may not keep up with the anticipated increase in demand stemming from the Japan disaster,' it said in a note March 30.

PERISAI - RHB Research: Fair value for Perisai Petroleum RM1.25 to RM1.43 a share

Stock Name: PERISAI
Company Name: PERISAI PETROLEUM TEKNOLOGI
Research House: RHB

KUALA LUMPUR: RHB Research has cleared the air over its recent report on PERISAI PETROLEUM TEKNOLOGI [] Bhd and views the proposed acquisition of Garuda Energy (L) Ltd from a former founder, Nagendran Nadarajah for US$70 million (RM212 million) as a good deal for the company.

To recap, Perisai proposed the acquisition of Garuda Energy (L) Ltd from Nagendran for US$70 million (RM212 million) to be satisfied by way of US$50 million cash and the issuance of new Perisai shares at an issue price of 65 sen per share. Based on Perisai's estimated enlarged capital, Nagendran would own about 12% of Perisai should the deal go through.

Garuda Energy owns a jack-up rig, namely Rubicone, which is being converted into a mobile offshore production unit (MOPU) and the makeover works are expected to be completed by May.

Garuda Energy is poised to enter into a bareboat charter agreement with Gryphon Energy (M) Sdn Bhd (GEM), which has in turn been awarded a contract by a major oil and gas player to lease, operate and maintain a MOPU for'' two years with extension for another two years. A bareboat charter arrangement of the MOPU with GEM is expected to generate a revenue of about US$25 million per annum.

RHB Research said on Thursday, March 31 that after meeting with management on Wednesday, it realised that all its concerns as highlighted in its RHB Equity 360 report were factually inaccurate and the report has been withdrawn.

'In fact, the proposal appears to be a good deal for Perisai, given the availability of the asset coincides with the long-term charter contract which is expected to be net cashflow positive to Perisai,' it said.

The research house said'' Perisai will only pay the balance of US$66m purchase price (nett of the US$4 million deposit) upon delivery of the MOPU to the charter client as per the specifications of the client and Perisai.

'Therefore, we believe there is no corporate governance issue with the proposal, which has been negotiated to the benefit of Perisai shareholders, and is still subject to a due diligence exercise.

'In our view, despite net gearing of 0.7x end-2010, Perisai should have no problem raising funding for the RM150m cash portion of the purchase price given the ready long-term contract,' it said.

RHB Research said its back-of-the-envelope calculation suggests net profit contribution from the charter to be around RM40-50m, versus'' the FY10 reported net profit of RM10.3m and FY11 consensus net profit of RM30 million (which excludes the Intan acquisition as well as this proposal).

'As this proposal is only expected to be completed in the 4Q11, the full-year impact would be in FY12, lifting the current consensus FY12 net profit estimate to around RM70 million to RM80 million. Assuming 846 million enlarged share capital, this suggests an FY12 EPS of 8.3-9.5 sen or a PER of 10.6x. Tentatively assuming a target PER of 15x, i.e. in line with our target for the market, this implies a fair value estimate of RM1.25-1.43/share,' it said.

AIRASIA - AirAsia raised to 'buy' at UOB-Kay Hian

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

AirAsia Bhd had its stock rating raised to “buy” from “hold” at UOB-Kay Hian Holdings Ltd, which said the carrier’s joint venture with Expedia Inc will give it access to new markets and travel revenue with limited capital expenditure.

The share price estimate was increased to RM3.22 from RM2.91 ringgit, according to UOB-Kay Hian in a report in Kuala Lumpur today. -- Bloomberg

TRC - TRC Synergy climbs on 'outperform' call

Stock Name: TRC
Company Name: TRC SYNERGY BHD
Research House: RHB

TRC Synergy Bhd, a Malaysian builder, rose to a three-month high in Kuala Lumpur trading after RHB Research Institute Sdn Bhd newly rated the stock “outperform” with a RM1.80 fair value.

Its shares climbed 5.7 per cent to RM1.66 at 9:13 a.m. local time, set for their highest close since Jan. 10. -- Bloomberg

MEGB - OSK Research maintains Trading Buy on Masterskill, unch FV RM3.44

Stock Name: MEGB
Company Name: MASTERSKILL EDUCATION GROUP
Research House: OSK

KUALA LUMPUR: OSK Research is maintaining a Trading Buy on Masterskill Education Group Bhd (MEGB) at an unchanged FV of RM3.44 at 12x FY11 PER.

It said on Thursday, March 31 the stock is currently trading at an alluring FY11 PER of 6.4x, the cheapest in its coverage, with dividend yield of'' more than 7% p.a.

'With the stock's valuation at its trough, we believe that any further downside risks are unlikely and hence we see this as an opportune time to accumulate. Its key re-rating catalysts are more affirmative indications in relation to PTPTN's loan allocation and the potential approval of courses at its new Kuching campus,' it said.

HIAPTEK - OSK Research maintains Neutral on Hiap Teck, FV RM1.06

Stock Name: HIAPTEK
Company Name: HIAP TECK VENTURE BHD
Research House: OSK

KUALA LUMPUR: OSK Research said HIAP TECK VENTURE BHD []'s 2Q numbers rebounded slightly, with its bottomline supported by the recovery in its manufacturing division, returning it to the black on a q-o-q basis.

It said on Thursday, March 31 that it expects HTVB to benefit from strengthening steel prices going forward, particularly its trading division, which benefits from the time lag between cheap materials and higher average selling prices.

'We also continue to monitor the progress of its Blast Furnace (BF), which is still pending further approvals. Maintain Neutral with a FV of RM1.06,' it said.

BJCORP - CIMB Research keeps Hold on Berjaya Corp

Stock Name: BJCORP
Company Name: BERJAYA CORPORATION BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research is maintaining a Hold call on Berjaya Corp Bhd while its asset-based SOP target price is unchanged at RM1.25.

It said on Thursday, March 31 Berjaya Corp's 9MFY4/11 core net profit beat expectations as it accounted for 89% of our full-year forecast.

A lower-than-expected prize payout led to stronger interim results for its gaming division while the direct selling, retail and distribution businesses were helped by its aggressive expansion.

'We are raising our FY11-13 EPS forecasts by 0.3-5.5% to factor in 1) a lower payout for its gaming unit, 2) higher contribution from the direct selling business, and 3) stronger demand for its stockbroking and general insurance products.

'Our asset-based SOP target price, however, is unchanged at RM1.25, which imputes a 40% discount to its SOP to account for its holding company status, volatile earnings record and potential delays in the development of Berjaya City or the Berjaya Hills landbank. For big-cap exposure to conglomerates, investors should opt for Sime Darby (Trading Buy),' it said.

March 30, 2011

KENCANA - Kencana wins RM216m Petrofac contract

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

Kencana Petroleum Bhd
(March 30, RM2.61)
Maintain buy at RM2.58 with target price RM2.95
: Via its wholly owned subsidiary Kencana HL Sdn Bhd, Kencana Petroleum has secured an engineering, procurement and construction (EPC) contract from Petrofac Ltd. The total value of the contract is estimated at RM216 million.

The EPC contract entails the fabrication of two wellhead platforms for the Cendor Phase 2 development project. The Cendor oilfield is located off the coast of Terengganu. The EPC contract is expected to be completed by June 2012.

Inclusive of the EPC contract, Kencana has won more than RM900 million worth of contracts so far this year. Its total'' outstanding contract awards is estimated at RM2.2 billion.

The pace and the size of the recent contract awards achieved our expectations considering that Kencana has a quarterly work rate of circa RM400 million.

Our forward earnings projections assume that the present pace of contract replenishments will pick up in terms of size and consistency in terms of award.

We maintain 'buy' with a target price of RM2.95 based on full-year earnings per share of'' 22.4 times, 10% higher than its'' four-year average price-earnings ratio of 20.4 times. The premium rating is justifiable as we believe Kencana will continue to be one of the key beneficiaries of upcoming contract awards given its proven track record with Petronas and other oil majors and its status as a Petronas-licensee to fabricate offshore oil and gas structures. ' MIDF Research, March 30


This article appeared in The Edge Financial Daily, March 31, 2011.

TOPGLOV - Top Glove stretching valuations

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

Top Glove Corp Bhd
(March 30, RM5.30)
Maintain hold at RM5.28 with revised target price RM5.10 (from RM4.55)
: Latex cost has rebounded to the pre-Japan earthquake level of RM10.35 per kg. We reduce our FY11 earnings per share (EPS) forecast by 8% after we trim our sales volume assumption by 3%. Though Top Glove is trading at 15 times CY12 price-earnings ratio [PER] (above its five-year historical average of 13 times), we think short-term interest in the stock will sustain owing to expectations of falling latex costs in May.

We reiterate our 'hold' call and adjust our target price upwards to RM5.10 (from RM4.55) as we roll forward our discounted cash flow valuation.

The tumble in latex cost (-14% on the fourth day after the March 11 quake) proved to be a knee-jerk reaction to the catastrophe'' in Japan. Latex cost has rebounded strongly by 21% to RM10.35 per kg (from the earthquake low), slightly above the pre-earthquake level.

In our view, the rebound was due to: (i) Japan accounting for only 7% of global latex demand; (ii) latex supply is still in a deficit position on current low production season; and (iii) major producers' definitive actions in shoring up prices ' the Thai government has set a floor rate for rubber sheet (rubber in its original form, before processing to latex) at 120 baht (RM12) per kg.

At the current latex cost level, Top Glove's glove pricing quotation remains unfavourable to latex gloves (circa 80% of sales volume), relative to nitrile. Low-quality powdered latex glove is quoted at US$35 (RM106) per 1,000 pieces (on par to nitrile glove) and PF latex is at a 13% premium to nitrile.

We understand that the company did not see any sales recovery when latex cost tumbled as distributors were hoping for much lower latex prices. Though we expect orders to pick up strongly after May (post 'wintering' season), our previous assumption for sales volume to rebound 30% half-on-half in 2HFY11 was too bullish. We reduce our FY11 sales volume forecast by 3% leading to an 8% downgrade to FY11 EPS.

We make no change to our FY12/13 numbers. We maintain our 'hold' rating on Top Glove and adjust our target price (TP) upward to RM5.10 (from RM4.55) as we roll forward our discounted cash flow valuation. Our new TP implies 18.2 times CY11 PER valuations, close to its 18.7 times, one standard deviation above its historical mean. ' Maybank IB Research, March 30


This article appeared in The Edge Financial Daily, March 31, 2011.

TRC - TRC Synergy: From little acorns grow mighty oaks

Stock Name: TRC
Company Name: TRC SYNERGY BHD
Research House: HWANGDBS

TRC Synergy
(March 30, RM1.57)
Recommend buy at RM1.41 with target price raised to RM2.25
: TRC is the cheapest stock in our construction universe at ex-cash price-earnings ratio of one time, 0.8 times price-to-net-tangible-assets, and only 0.2 times market cap/order book, despite a strong balance sheet with RM1.05 net cash per share.

After a rocky 2010, earnings seem to be improving with three-year earnings per share (EPS) compound annual growth rate of 49% anchored by the RM950 million LRT extensions project for which TRC has secured vacant possession. TRC has a 25% dividend payout policy, but we understand FY10 gross dividend per share will be five sen (versus 2.2 sen if based on policy).

This would translate into decent 4% yields. And given its high retained earnings (56% of share capital), TRC can make a one-for-two bonus issue, but we think it may conserve some cash for future purposes. We raise our target price to RM2.25 based on 10.5 times FD FY12 EPS, which is at a 40% discount to the sector average due to its smaller market cap.

TRC is one of few West Malaysian-based contractors licensed to bid for state-funded projects in Sarawak. This is timely, with the state elections on April 16. It is in the final stages of clinching four packages in the Sarawak Corridor of Renewable Energy (Score) worth about RM500 million out of RM1.5 billion outstanding bids.

This will effectively see it almost meeting our FY11 order win assumption of RM600 million. We understand TRC has also bid for Phase 2 of the LRT extensions worth about RM2.2 billion, where it hopes to leverage on its lower mobilisation fees and machinery costs with the first phase already in hand. The tender has closed mid-March with possible award in June.

TRC's 26% stake in PetroBru (B) Sdn Bhd may bear fruit soon. We understand project approval is pending a revised blueprint for Pulau Muara Besar, Brunei, where the refinery will be built. Investor interest in the refinery is also rising, which should lend weight to an official approval by the Brunei government.

This will pave the way for about RM2 billion worth of infrastructure and reclamation works on the island and US$4.3 billion (RM13 billion) to construct the refinery. ' HwangDBS Vickers Research, March 30


This article appeared in The Edge Financial Daily, March 31, 2011.

AXIATA - Credit Suisse expects Malaysia to surprise on the upside in 2011

Stock Name: AXIATA
Company Name: AXIATA GROUP BERHAD
Research House: CREDIT SUISSE

KUALA LUMPUR: Malaysia is expected to surprise on the upside in 2011 but uncertainties still remain over the sustainability of growth beyond 2011, according to Credit Suisse Research.

In its Malaysia market strategy report issued on Tuesday, March 29 following a conference for Malaysian companies, it came out of the conference feeling more bullish about the prospects for Malaysia.

'We believe Malaysia will surprise on the upside in 2011, but uncertainties still remain over the sustainability of growth beyond 2011,' it said.

Credit Suisse Research said IJM Corp, Air Asia, Axiata and UEMLand were particularly interesting. IJM Corp. is a direct beneficiary of the Economic Transformation Programme (ETP). Air Asia and Axiata have gone beyond Malaysia shores and are riding on the region's strong growth. UEM Land is working on a different approach to take advantage of the strong Singapore-Malaysia ties.

However, Tenaga and YTL Power were the two companies with perhaps the most unknowns, as many factors are out of their hands (electricity tariffs, coal cost, power purchase agreements renegotiations) and the ball was now in the government's court.

AirAsia (RM2.68, Outperform, TP RM4.30). It has an Outperform on AirAsia at RM2.68 and a target price of RM4.30. It said AirAsia management was not keen to impose a fuel surcharge at the moment. Instead, AirAsia intends to focus on ancillary charges, as it is a natural hedge against fuel. An RM1 increase in ancillary fares will cover a US$1/bbl increase in jet fuel prices.

'AirAsia could be monetising 'other business' units,' it said, adding that management said it may sell its stake in AirAsia Academy (pilot and crew training centre) and the travel website AirAsiaGo. Management has indicated that AirAsia X is slated for an IPO in 2012.

As for Axiata, it has an Outperform at RM4.72'' and target price of RM6.10. Axiata management believes there is still room for cost re-engineering. Bangladesh 2G spectrum renewal fee issue is still a key risk factor. Share price is temporarily depressed by the conversion of Khazanah convertible bond.

As Genting Malaysia (RM3.60, Neutral, TP RM3.30), it said the opening of two new casinos in Singapore has had a smaller-than-expected impact on casino revenue in Malaysia.

'Management believes the 'novelty' factor has started to wear off. Revenue continues to be dominated by mass market, which accounted for 65% of 2010 revenue,' it said.

IJM Corp (RM6.11, Outperform, TP RM8.00). Management is very optimistic on CONSTRUCTION [] orderbook expansion prospects. The group is in the advanced stages of negotiations to clinch RM5 bn of new orders, which could double its existing RM4.1 billion order book. It will not be aggressive in bidding for overseas jobs in India and the Middle East, given the positive outlook for the Malaysia market.

'Management could make provisions in 4Q FY2011 for delayed claims and cost overruns in India and the Middle East. We expect construction PBT margins to normalise to 6% to 9% from FY2012,' it said.

KL Kepong (RM21.10, Neutral, TP RM21.70).'' KL Kepong is looking for FFB production to grow by 8'10% in FY11, though production has been poor for the first few months. This suggests that it expects FFB production to pick up strongly in 2H FY11. It said 17% of KLK's total planted oil palm acreage is immature.

'KLK says it is not keen to expand its rubber acreage because rubber (1) takes seven years to mature; (2) is more labour intensive,' said Credit Suisse Research.

Sunway REIT (RM1.03, Outperform, TP RM1.15).'' SunREIT has headroom of close to RM1 bn for acquisitions without going to unit holders for funds. Managements says that the REIT will look for large- and retail-focused assets in Johor Bahru, Penang and Klang Valley.

It is looking to refinance its floating interest rate borrowings to fixed-rate, in light of an impending rise in interest costs.

Tenaga (RM6.00, Neutral, TP RM7.20). Tenaga has received the Economic Council approval to increase electricity tariffs but timing of the tariff hike is uncertain.

"We believe that Tenaga's share price will not perform until after the general elections. Meanwhile, the rising coal cost should squeeze profit margins,' it said.

UEM Land (RM2.67, Outperform, TP RM3.80). The management indicated that it was seeing a lot of interest for Singaporean developers and were in talks with several, on-potential partnerships in Nusajaya.

The Khazanah-Temasek development in Singapore is on-track and management is hopeful that it will participate in the development. UEM Land is now the front-runner for some projects in prime locations in KL following the acquisition of Sunrise.

'Some investors are questioning when UEM Land will morph from being a 'concept' stock to one with a stronger earnings stream,' it said.

YTL Power (RM2.27, Underperform, TP RM1.82). The power purchase agreements (PPAs) for the first generation power plants, including YTL Power's plants, will start to expire beginning 2016. If talks to renew the first generation PPAs fail, the government would have to plant up 10, 000 MW of power in the next two to three years.

In partnership with Enefit, YTL Power estimates that it can produce power via oil shale 30% cheaper than electricity generated via imported oil and gas feedstock. YTL Power hopes the YES WiMax service will be profitable in the next five years.

AIRASIA - OSK upbeat on AirAsia-Expedia venture

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

OSK Research is fairly optimistic on AirAsia Bhd's new joint venture (JV) with Expedia, the world' largest online travel agency, as the companies leverage on each other's strengths to create synergy.

In a note today, OSK Research said the JV would give AirAsia a bigger distribution channel to market its route offering and its holiday packages in an attempt to boost ancillary income moving forward.

"This JV will boost AirAsia's ancillary income and improved margins over the longer term," it said. OSK Research has maintained its 'buy' recommendation on AirAsia at an unchanged target price of RM3.42.

"Although there is a lot of room for growth for the JV, we still think it is too early to make any upward revisions in our forecast as we have inputted a fairly reasonable ancillary income growth assumption going forward," it said. -- Bernama

MBSB - MBSB shares advance

Stock Name: MBSB
Company Name: MALAYSIA BUILDING SOCIETY BHD
Research House: AMMB

KUALA LUMPUR: MALAYSIA BUILDING SOCIETY BHD [] (MBSB) shares advanced on Wednesday, March 30 and was up 26 sen to RM2.30 at 11.30am.

AmResearch said MBSB, an exempt finance company involved mainly in lending activities, similar to finance companies, was in a a sweet spot to benefit from strong growth in the niche personal financing market.

'This is due to recent changes in the industry, whereby selected cooperatives which had been involved in providing personal financing to government civil servants are no longer allowed to carry on these activities,' it said on March 30.

AmResearch has initiated coverage on MBSB with a Buy rating and a fair value of RM3 cum rights (or RM2.20 ex-rights) basis.

It said this was based on its adjusted (for rights) FY11F ROE of 20.5% and fair P/BV of 2.6 times, adding its fair value provided an upside of 47% from the current share price.

AIRASIA - HDBSVR: AirAsia fully valued at RM2.65

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

KUALA LUMPUR: Hwang DBS Vickers Research said AirAsia is fully valued at RM2.65 and had a price target of RM2 for the low-cost carrier.

It was commenting on AirAsia's tie-up'' with Expedia Inc to set up an online travel agency that has three main brands -- AirAsiaGo, GoRooms and Expedia.

AirAsia announced on Tuesday, March 29 the JV would be equally owned by both parties and AirAsia's initial investment in the JV will be up to US$10 million (RM30 million) which will be funded by internal funds.

Expedia is the world's largest online travel company with Australia and Japan being their strongest markets in Asia.

KENCANA - OSK Research maintains Trading Buy on Kencana, unch TP RM3.05

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

KUALA LUMPUR: OSK Research is maintaining its Trading Buy on Kencana Petroleum while its target price remains unchanged at RM3.05, based on the existing PER of 23x FY12 EPS.

It said on Wednesday, March 30 that Kencana remains one of its top picks for the O&G sector with its impressive delivery track record.

Kencana's unit had secured a'' RM216 million contract from Petrofac Malaysia Ltd for the CONSTRUCTION [] of well head platforms for the Cendor oil field off the coast of Terengganu.

'Given that Kencana already has a tie-up with Petrofac on the Berantai field and also recently secured some jobs for the Sepat field, we are not surprised that Petrofac has again awarded to it the EPC job for the Cendor oil field, as long as Kencana has the capacity and manpower to undertake the job.

'We understand that Kencana's current utilisation rate is slightly above 60%. Also, we think Petrofac would prefer

Kencana over its other peers since the latter has worked on several projects with the multinational company and is well-versed with its requirements,' it said.

OSK Research said there was no change to its FY11-12 earnings as it had earlier assumed this orderbook replenishment for the company. This new contract will boost Kencana's orderbook to RM2.2bn, which should keep the company busy for the next 1.5 years.

March 29, 2011

JTINTER - JT International to hand cash to 'mum'

Stock Name: JTINTER
Company Name: JT INTERNATIONAL BHD
Research House: OSK

JT International Bhd
(March 29, RM6.78)
Maintain buy at RM6.69 with target price of RM7.30
: The Japan earthquake-tsunami has reportedly caused production disruptions to JT. According to media reports, JT's factories at Kita-Kanto, Koriyama and Tomobe have suspended operations owing to damage to their facilities, including the Tagajo factory of Nihon Filter, a JT group company. The extent of the damage is currently being assessed.

It is also reported that operations at JT's sales offices in Morioka, Sendai, Mito and Utsunomiya, including the Sendai order processing center and some distribution depots (in Aomori, Morioka, Sendai, Mito and Utsunomiya) belonging to another company in the group, TS Network, were disrupted due to non-production-related damages.

In addition, Japan's planned power cuts are also expected to disrupt operations at the company's production and sales offices.

Presently, JTI has yet to receive any indications from its parent in respect of what it can do to offer assistance to its Japanese parent. However, the production shortage arising from damage to JT's plant may require the Japanese parent to outsource part of its production to JTI in the short term.

Nevertheless, leaf composition and taste of the products is likely to be assessed before this happens since the blends for both the Japanese and Malaysian markets differ. The damage inflicted on JT's Japan plants will require funds for repairs and reestablishing distribution channels. Unlike Malaysia where the tobacco distribution lines are outsourced or leased, Japan's tobacco manufacturers directly own supply depots and distribution points.

This reinforces our earlier assumption that JTI may, in the near term, declare special dividends so that it can channel funds back to its parent JT, which owns 60.4% of JTI. Based on our earlier analysis, we see JTI potentially declaring gross and special dividends of up to 110 sen per share for FY11.

Previously, fund repatriation from companies in Malaysia with parents in Japan were double-taxed, whereby the dividends declared at the offshore company pay tax in the host country as well as home country (Japan).

To illustrate, should JTI declare gross dividends amounting to 100 sen per share, the cash to be paid to JT may only amount to 60 sen per share, after deducting'' Malaysian and Japanese taxes based on statutory tax rates of 25% and 20% respectively.

However, double-taxation was abolished since 2009, whereby 95% of earnings of offshore companies are no longer taxed in Japan and such offshore companies only have to pay tax once in their country of operation, while their parent company will be taxed only on their own income.

This essentially means that JTI would now be more at ease in declaring dividends compared with previously.

We maintain our 'buy' recommendation on JTI with its fair value intact at RM7.30. This offers a potential upside of 9.1% and a gross dividend yield of 4.5%.

Although we do not include a possible special dividend in our earnings estimates, we would like to bring attention to the company's growing cash pile, which could support a special dividend for this financial year or the next. ' OSK Research, March 29


This article appeared in The Edge Financial Daily, March 30, 2011.

SAPCRES - Marine turnaround adds sizzle to huge SapuraCrest order book

Stock Name: SAPCRES
Company Name: SAPURACREST PETROLEUM BHD
Research House: AMMB

SapuraCrest Petroleum Bhd
(March 29, RM3.64)
Maintain buy at RM3.55 with revised fair value of RM4.75 (from RM4.40)
: We reiterate our 'buy' call on SapuraCrest Petroleum Bhd (SapCrest) with a higher fair value of RM4.75 (versus RM4.40 previously) given our higher earnings estimates but based on an unchanged FY12F PER of 22 times.

SapCrest's FY11 net profit of RM231 million (+35% year-on-year) was above expectations, 7% above our earlier FY11F earnings of RM216 million and 8% above street estimate of RM215 million. Traditionally, 4Q tends to be the group's weakest quarter due to the monsoon season which disrupts SapCrest's installation of pipeline and facilities (IPF) and drilling divisions. However, the group's 4QFY11 net profit of RM73mil (+33% quarter-on-quarter and 77% y-o-y) turned out to be the strongest quarter for FY11.

The stronger-than-expected results stemmed from: (1) higher-than-expected earnings before interest and tax (Ebit) margins from the IPF division (23% for4QFY11 versus 12% for 3QFY11) despite a 60% contraction in revenue due to the monsoon season; (2) turnaround in the marine division, which registered a surprise Ebit profit of RM13 million for 4QFY11 (versus RM39 million loss for 3QFY11). This division had been suffering losses since 2QFY10; and (3) lower minority charge (-34% q-o-q), likely due to lower contributions from the IPF and drilling divisions.

The group declared a final single-tier dividend of 5.5 sen, to raise FY11 single-tier dividend per share to 8.5 sen (+21% y-o-y). This was above our nine sen projection, largely due to the stronger earnings and a higher payout ratio of 46% compared to our earlier projection of 40%.

We have raised FY12F to FY13F earnings by 11% largely due to: (1) a one percentage point increase in Ebit margins to 12% for the group's offshore installation division; (2) higher contributions from the marine services operations; and (3) maiden contributions of RM20 million for FY13F from the group's 25% equity stake in the Berantai marginal field, assuming a conservative projected internal rate of return of 12%.

The stock currently trades at an attractive CY11F PER of only 16 times vis-''-vis over 20 times for Dialog Group, MMHE and Kencana Petroleum. The turnaround in the group's marine division adds further sizzle to the stock's attractive valuations, a huge RM9 billion order book and improving earnings delivery. Given SapCrest's dominance in IPF services in Malaysia, we maintain our view that SapCrest is likely to secure additional offshore installation jobs from Petronas' prolific capex rollout, potentially up to RM40 billion this year. ' AmResearch, March 29


This article appeared in The Edge Financial Daily, March 30, 2011.

PBBANK - Consumer lending for Public Bank still resilient

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

Public Bank Bhd
(March 28, RM13.04)
Maintain hold at RM13.04 with target price of RM14.10
: The key take-away from a recent Public Bank visit is that lending momentum remains very much intact on the consumer front, but rate competition for both loans and deposits is unlikely to ease anytime soon. Our earnings forecasts are broadly maintained.

While we like the stock for its solid fundamentals, much is reflected in the current share price (prospective 2011 price-to-book value of three times, return on equity: 23.9%) we believe, and we see little catalyst in the near term. We maintain 'hold' with an unchanged discount dividend model-derived target price of RM14.10 (payout ratio: 52%, cost of equity: 10.6%, terminal growth rate: 5%).

Management earlier this year set a loan growth target of 14% to 15% for 2011 and believes that it is on track to meet this. The current pipeline places mortgages on cue to meet these growth rates, while hire purchase (HP) loans are expected to grow at a slower 9% to 10%. Picking up the slack would be SME financing, where loan growth is targeted to be a faster 17% to 18%.

Our loan growth forecast has erred on the conservative side; we are raising our estimates to 13.3% for 2011 and 12.2% for 2012, from 10.2% and 10.1% respectively.

Management continues to expect 10 to 15 basis points (bps) compression in net interest margins (NIM) this year, with pressure on both asset and liability rates. To this end, we are broadening our NIM compression expectation to nine bps from five bps for 2011, but continue to maintain a mild NIM recovery of about five bps in 2012, on expectations of some positive flow through from interest rate hikes in 2H11.

This essentially offsets the upgrade for our loan growth forecast and our forecasts are little changed.

Overseas operations should fare better this year, on the back of: (i) a pick-up in lending for Public Financial Group (from 8% to 9% growth in 2010); and (ii) improved liquidity for Cambodian Public Bank, which will allow for a pick-up in lending activities. Efforts will also be made to drive the group's commercial operations in Hong Kong (30 branches in the territory).

Overseas operations accounted for 7% of group pre-tax profit for 2010, and the aim is to raise this to 15% over the medium term. ' Maybank IB Research, March 28


This article appeared in The Edge Financial Daily, March 29, 2011.

HELP - HELP to have better 2Q results

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

HELP International Corp Bhd
(March 28, RM2.62)
Maintain buy at RM2.54 with revised fair value of RM2.82 (from RM2.59)
: HELP's 1QFY11 earnings were within our expectations, although accounting for only11.9% of our full-year forecast due to seasonal factors related to its twinning courses conducted with foreign institutions. Revenue grew marginally by 3.3% year-on-year while net profit was up by 12.7%, supported by improved margins.

We believe the better margins were largely attributed to prudent cost management and the increasing number of HELP University College's home-grown courses, which generally command higher margins as the company does not have to pay royalty for them, unlike twinning or foreign courses developed by other institutions. As a result, earnings before interest and taxes margin in 1QFY11 improved to 18.5% from 16% in 1QFY10.

As the company's revenue and net profit were significantly lower quarter-on-quarter (q-o-q) due to seasonality, given that fewer classes were conducted owing to the summer holidays associated with courses conducted in collaboration with institutions in the southern hemisphere, particularly Australia and New Zealand.

Q-o-q, revenue dropped by 11.1% while net profit plunged by 57.9% in 1QFY11. This is due to the nature of the business. The company continues to incur high fixed costs, thus causing a bigger contraction in profitability when revenue falls. Moving forward, we expect the 2QFY11 results to be significantly better q-o-q as more classes are conducted during this period as the new semester for its Australian and New Zealand courses commences.

We maintain our forecast and 'buy' recommendation at a higher fair value of RM2.82 from RM2.59 previously after rolling over our earnings per share from FY11 to FY12 at 14 times price-earnings ratio, plus its net cash of 32 sen per share as at end-FY10.

We believe the company's robust and clean books, as well as solid management will stand it in good stead in expanding comfortably without straining its balance sheet. ' OSK Research, March 28


This article appeared in The Edge Financial Daily, March 29, 2011.

PETGAS - Addressing energy needs

Stock Name: PETGAS
Company Name: PETRONAS GAS BHD
Research House: HWANGDBS

Power sector
The Malaysian government has announced plans to build two nuclear power plants with 1,000 MW capacity each, with the first plant ready for operation in 2021. The move has sparked off protests from various organisations, especially after the recent nuclear disaster in Japan. We believe the government's plan for nuclear plants will be delayed. The government is also unlikely to go ahead with unpopular programmes ahead of the upcoming election.

Given that power from the Bakun hydroelectric station in Sarawak would not come to Peninsular Malaysia, Tenaga is developing a new 1,000 MW coal-fired power plant on its existing power plant site in Manjung, Perak. Another1,000MW new coal plant will be awarded to either MMC or Jimah Power over the next two to three months.

We gather that two out of the five first-generation independent power producers (IPPs) ' YTLP, Sime Darby, Genting, MMC and Tanjong ' have agreed to the preliminary terms proposed by the government to extend power purchase agreements (PPAs). We believe deferment of nuclear plant development and commissioning of new gas facilities in Melaka will speed up the first-gen PPA negotiation given the increased gas supply.

PPA extension is a win-win situation for both Tenaga and IPPs, as Tenaga will secure reliable supply at the relatively low replacement cost, while IPPs will see upside in earnings from extension that is not reflected in their valuations.

Rising coal prices will be a drag on Tenaga's FY12F earnings, but we expect a base tariff hike to take effect in FY12F after the general election. Tenaga's current depressed valuation offers good entry point for stronger earnings ahead.

YTLP is a 'hold' for potential upside from PPA renegotiation. Assuming the returns are at 50% of the existing PPAs, the PPA extension will still enhance YTLP's FY16F earnings before interest and tax by about RM90 million a year (6% of FY11F net profit) with an assumed capex of RM100 million per annum. We have a 'hold' call for Petgas for upside from re-gasification project and 4% yield. ' HwangDBS Vickers Research, March 29


This article appeared in The Edge Financial Daily, March 30, 2011.

YTLPOWR - 'Hold' for YTL Power: Hwangdbs

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

HwangDBS Vickers Research has maintained its "buy" call on Tenaga Nasional Bhd (TNB) with a RM8.10 target price based on a stronger financial year 2012 forecast (FY12F) earnings.

In a research note today, the research firm expects TNB's base tariff hike to take effect by next year.

It added, TNB would also be getting an additional subsidised gas supply from the new Petronas Gas Liquefied Natural Gas (LNG) plant, which supports the case for a subsidy review and base tariff adjustment.

"We estimate that for every one per cent increase in base tariff, TNB’s FY12F net profit will rise by 8.7 per cent while every one per cent hike in average coal price reduces FY12F net profit by 4.1 per cent," it said.

Meanwhile, the research firm also maintained its "hold" call for YTL Power International Bhd (YTLP) for a sum-of-parts (SOP) derived target price of RM2.75 per share on concerns over its lower internal rate of return from the power purchase agreement (PPA) extension but still with an enhanced value.

"YTLP, which has a 21-year PPA with TNB until 2015, has a positive potential extension for its first generation PPA as a power plant in operation is better than an idle one," it said.

HwangDBS also maintained its "hold" call with a target price of RM11.40 on Petronas Gas Bhd (Petgas), as the owner and operator of the regasification plant in Melaka.

It said, Petgas had a good yield with an upside, from its regasification plant. --Bernama

TENAGA - 'Buy' call on Tenaga: Hwangdbs

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

HwangDBS Vickers Research has maintained its "buy" call on Tenaga Nasional Bhd (TNB) with a RM8.10 target price based on a stronger financial year 2012 forecast (FY12F) earnings.

In a research note today, the research firm expects TNB's base tariff hike to take effect by next year.

It added, TNB would also be getting an additional subsidised gas supply from the new Petronas Gas Liquefied Natural Gas (LNG) plant, which supports the case for a subsidy review and base tariff adjustment.

"We estimate that for every one per cent increase in base tariff, TNB’s FY12F net profit will rise by 8.7 per cent while every one per cent hike in average coal price reduces FY12F net profit by 4.1 per cent," it said.

Meanwhile, the research firm also maintained its "hold" call for YTL Power International Bhd (YTLP) for a sum-of-parts (SOP) derived target price of RM2.75 per share on concerns over its lower internal rate of return from the power purchase agreement (PPA) extension but still with an enhanced value.

"YTLP, which has a 21-year PPA with TNB until 2015, has a positive potential extension for its first generation PPA as a power plant in operation is better than an idle one," it said.

HwangDBS also maintained its "hold" call with a target price of RM11.40 on Petronas Gas Bhd (Petgas), as the owner and operator of the regasification plant in Melaka.

It said, Petgas had a good yield with an upside, from its regasification plant. --Bernama

POS - OSK maintains 'buy' call on Pos Malaysia

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

OSK Research Sdn Bhd has maintained its "buy" call, with a fair value of RM4.12, on Pos Malaysia Bhd based on a sum-of-parts valuation and existing earnings forecast.

In a research note today, it said Pos Malaysia has declared a one-off final and special dividend of 17.5 sen, which provided a dividend yield of 5.7 per cent.

Meanwhile, OSK said the unveiling of Pos Malaysia's strategic partnership remained a key catalyst as it may be timed to coincide with measures to unlock the value of its land bank.

"Although management has met the bidders to acquire its 32.2 per cent stake in the company, they will only present their proposals to Khazanah Nasional Bhd and Pos Malaysia's management would not know what these are at this juncture," it added .

In a recent announcement, Khazanah Nasional Bhd said it had shortlisted DRB-Hicom Bhd, Nationwide Express Courier Services and a Amanah REIT-Malaysia Pacific Corp joint venture, with offers ranging between RM3.38 and RM4.62 per share.

"Pos Malaysia's management expects the strategic partner to be announced by the Prime Minister during Invest Malaysia 2011 on April 12," it added. -- BERNAMA

JTIASA - Timber-related stocks extend rally

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

KUALA LUMPUR: Timber-related stocks continued their rally on Tuesday, March 29 and were among the top gainers in early trade on expectations of a rise in demand for timber-products.

At 9.35am, Subur Tiasa jumped 46 sen to RM3.90, Jaya Tiasa up 29 sen to RM6.45, Ta Ann 20 sen to RM6.69, WTK 10 sen to RM1.94 while Leweko edged up one sen to 22 sen.

Meanwhile, RHB Research in a note March 29 raised its fair value for Jaya Tiasa to RM7.20 from RM6.30 after the company posted RM92.4 million for 9MFY04/11.

The research house said the result was above its expectations.

'We believe key variances were higher log prices (+23% y-o-y) for 9M (versus our +18% projection for FY04/11) and higher FFB production growth (of 81% y-o-y for 9M versus our +71% projection for FY04/11).

'Due to the favourable outlook for the timber sector after the Japan earthquake, we upgrade our target PER for the timber division to 14 times CY11 earnings. In addition, despite the recent downgrade in our PLANTATION [] sector valuation targets, we are keeping our target PER of 13x CY11 earnings for the plantation division due to the significant growth in FFB production volume projected over the next few years,' it said.

HUAYANG - CIMB Research sees fair value for Hua Yang at RM2.76

Stock Name: HUAYANG
Company Name: HUA YANG BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research said although Hua Yang is a very small property stock in terms of market cap, it has big ambitions and plans to expand its profits several fold over the next three to five years.

It said on Tuesday, March 29 that should Hua Yang manage to deliver its targets of RM500 million to RM600 million in turnover and RM75 million to RM90 million net profit, P/E would plunge to below 2.0 times.

CIMB Equities Research said the high targets are not unrealistic as the group has landbank with RM2.23 billion GDV potential and is always on the lookout for more. Also, it has exceeded its FY3/11 sales target of RM300m and including bookings, has unbilled sales of over RM400 million, nearly 4x FY10's turnover.

'Using a blend of 40% discount to its RM4.30 RNAV in view of its small size and illiquid shares and a similar discount to our 14.5x FY12 target market P/E, we arrive at a value of RM2.76, which implies 100% upside,' it said.

SAPCRES - CIMB Research maintains Outperform on SapuraCrest Petroleum

Stock Name: SAPCRES
Company Name: SAPURACREST PETROLEUM BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research is maintaining an Outperform on SAPURACREST PETROLEUM BHD [] and raised the target price from RM4.90 to RM5.12.

It said on Tuesday, March 28 that the company's 4QFY1/11's record net profit of RM73 million took the full-year bottomline to an all-time high of RM231 million, 8% above its expectations though only 2% above consensus.

'The 4Q11 timing of the marine services turnaround was the main source of deviation. Another pleasant surprise was the final DPS of 5.5 sen which took full-year DPS to 8.5 sen versus our forecast of 8.0 sen,' it said.

CIMB Research said by imputing a higher pretax of RM30 million per annum instead of RM15 million for marine services, it raised its FY13-14 EPS forecasts by 4.3%, which increases its target price from RM4.90 to RM5.12.

'We continue to value the stock at a 40% premium over our 14.5 times target market P/E given its marginal field venture and superior growth. SapuraCrest remains an Outperform and our top pick in view of the potential catalysts of 1) more marginal field work, and 2) fleet expansion,' it said.

March 28, 2011

PCHEM - Petronas Chem rises on CIMB estimates

Stock Name: PCHEM
Company Name: PETRONAS CHEMICALS GROUP BHD
Research House: CIMB

Petronas Chemicals Group Bhd climbed to a record in Kuala Lumpur trading after CIMB Investment Bank Bhd raised its share estimate on its “superior” growth prospects, bolstered by higher margins.

The stock climbed 1.6 per cent to RM6.94 at 3:41 p.m. The stock has risen 26 per cent this quarter, set to be the second-biggest gainer on the benchmark stock index. The share estimate was raised to RM10 from RM7.25, Terence Wong, an analyst at CIMB, wrote in a report today. -- Bloomberg

MHB - MMHE facing tougher times ahead

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

Malaysia Marine and Heavy Engineering Holdings Bhd
(March 28, RM6.77)
Initiate coverage at RM6.89 with underperform rating and fair value of RM6.26
: Petroliam Nasional Bhd's (Petronas) capex commitment of RM250 billion over the next five years suggests a positive contract pipeline for the domestic oil and gas sector. We expect the spending to be focused on: (i) enhanced oil recovery (EOR);(ii) marginal and deepwater oilfield developments; (iii) brownfield works; and (iv) new oilfield discoveries. However, more importantly the focus will be on domestic spending.

For MMHE, we believe that order replenishment is relatively assured for 2011/13, but the major projects are already known and mostly factored into earnings assumptions. Margins could become more volatile as contracts move to 'fixed-cost' structure. The Turkmenistan yard provides Caspian exposure, but prospects hinge on discussions with the Turkmenistan government which remains undecided.

Risks including the over-dependence on Petronas heighten the concentration risk, but this is mitigated by major contract flows in the medium term. Keen competition in all market segments could limit its ability to penetrate new markets and a sharp rise in material costs could erode margins for 'fixed-cost' contracts. Cyclical risks of the crude oil price could lead to projects being shelved or delayed.

We highlight that we are still bullish about the sector and there are still significant projects to be executed. In this regard, we have assumed big contract wins of RM4.2 billion to RM4.9 billion per year for MMHE's engineering and construction division for FY11/13. However, we note the challenge for the company is not order book replenishment (which is assured through its Petronas link), but to translate contract wins into strong earnings growth. On this point, we are less confident and at worst, we believe MMHE's earnings growth will peak this year. This is reflected in our FY12/13 earnings growth estimates of 1.8% and 7.6% respectively.

We initiate coverage with an 'underperform' call. As for valuations, while we agree that MMHE's close link to Petronas deserves to be rewarded with a premium in the domestic context, we believe an eight to nine times premium over domestic peers is excessive in light of the pedestrian earnings growth forecasts. Moreover, in the longer term, we believe MMHE will come under increasing pressure to seek growth from overseas, thus placing it in direct competition with international peers who are trading at an average of 15'' to 16 times. For now, we continue to accord MMHE a valuation premium, but at a more realistic 21 times CY11, above Kencana at 20 times. This implies a fair value of RM6.26, or 8.7% below current levels. ' RHB Research, March 28


This article appeared in The Edge Financial Daily, March 29, 2011.

YTLLAND - YTL Land sets benchmark

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

YTL Land & Development Bhd
(March 28, RM1.83)
Maintain buy at RM1.87 with target price of RM2.70
: While we expected Capers' launch (gross development value about RM380 million) to be successful, the huge turnout last Friday to Sunday was a positive surprise. More than 90% of the 466 units (two blocks of high-rise and low-rise) were taken up at an average selling price (ASP) of RM600 psf (choice units as high as RM800 psf), doubling the last launch price of RM300 psf for Saffron in 2006.

Built-ups range from 695 to 1,965 sq ft, priced from RM689,000 a unit. An early-bird discount of 3% to 5% and 10:90 financing (interest absorption by developer during the 42-month construction period) were also thrown in. The strong sales are commendable in view of the 70% loan-to-value cap for the third house onwards (since November 2010), heightened market uncertainty (Middle East and North Africa crisis and Japan earthquake), and Sentul's reputation as an old, underdeveloped area (ripe for urban rejuvenation).

The stronger-than-expected pace of sales at a new price benchmark for Sentul indicates: (i) under-pricing for an emerging prime area sandwiched between high-end enclaves Kenny Hills and KLCC (Binjai On The Park which recently set a new price benchmark of RM3,000 psf for a penthouse); (ii) rising interest in properties near potential MRT interchanges (Sentul will be just three or four stops away from KLCC on the proposed Circle Line); and (iii) a strong following for reputable'' developers with a good track record, strong branding and innovative design.

At RM600 psf ASP, implied land value for Sentul works out to RM440 psf (assuming lower initial pre-tax margin of 20% margin, RM350 psf construction cost, RM20 psf interest absorption cost, four times plot ratio). Every 10% increase in ASP would boost implied land value by 44% (yet to factor in potential plot ratio expansion; YTLL aims to gradually increase Sentul ASP to RM1,000 psf). Capers is expected to drive up YTLL's unbilled sales to about RM450 million from about RM60 million previously.

Sentul East is set to see another three new launches ' D2 & D5 commercial and Fannell condos worth RM1.4 billion over the next two years. Along with margin expansion, this should boost YTLL's thee-year earnings compound annual growth rate to 47% (potential upside as any contribution from an asset injection exercise by YTL Corp, pending completion in mid-CY2011 has yet to be factored in).

YTLL has the biggest exposure to the potential MRT interchange at 66% of realisable net asset value via Sentul (119 acres), KL Sentral (five acres) and Bukit Bintang (5 acres). ' HwangDBS Vickers Research, March 28


This article appeared in The Edge Financial Daily, March 29, 2011.

CBIP - HDBSVR: CB Industrial Product valuations undemanding

Stock Name: CBIP
Company Name: CB INDUSTRIAL PRODUCT HOLDING
Research House: HWANGDBS

KUALA LUMPUR: Hwang DBS Vickers Research said CB Industrial Product's valuation is undemanding at 7.0 times FY11F PE, below its historical average of 7.4 times.

It said on Monday, March 28 CBIP remains a BUY given improving new order wins, better margin mix and a CPO play.

'We trimmed our SOP-derived TP to RM4.70 (from RM4.80) after adjusting for FY10 result and updating some parameters of DCF valuation for PLANTATION [] such as net debt and beta.

'Current RM360m unbilled orderbook should provide earnings stream for the engineering division until 3Q12. The stock also offers attractive dividend yield of 4.3% in FY11F,' it said.

AIRASIA - AirAsia cut to 'hold' at UOB-Kay Hian

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

AirAsia Bhd was cut to “hold” from “buy” at UOB-Kay Hian Holdings Ltd, which said it expects “just” a 10 per cent upside for the stock this year.

The share price estimate was raised to RM2.91 from RM2.83, UOB-Kay Hian wrote in a report today. -- Bloomberg

PBBANK - Maybank IB Research maintains Hold on Public Bank, TP RM14.10

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

KUALA LUMPUR: Maybank Investment Bank Research (Maybank IB Research) said it is maintaining a Hold on Public Bank with an unchanged DDM-derived TP of RM14.10 (payout ratio: 52%, cost of equity: 10.6%, terminal growth rate: 5%).

It said on Monday, March 28 the key takeaway from a recent Public Bank visit is that lending momentum remains very much intact on the consumer front, but that rate competition for both loans and deposits is unlikely to ease anytime soon.

'Our earnings forecasts are broadly maintained. While we like the stock for its solid fundamentals, much is reflected in the current share price (prospective 2011 P/BV of 3x, ROE: 23.9%) we believe, and we see little catalyst in the near term,' it said.

HELP - OSK Research: HELP earnings within expectations

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

KUALA LUMPUR: OSK Research said HELP International's the 1QFY11 earnings were within its expectations although HELP only recorded a net profit of RM2.73 million, or about 11.9% of its full-year forecast.

It said on Monday, March 28 this was due to seasonal factors whereby 1Q typically accounts for about 10%-15% of the company's full-year earnings.

On-year revenue ticked up by 3.3% while net profit rose by some 12.7% on better margins arising from an increase in its home-grown courses.

'We maintain our forecast and BUY call at a higher FV of RM2.82 from RM2.59 previously after rolling over our EPS from FY11 to FY12 at 14x PER, plus its net cash per share of RM0.32 as at end-FY10.

'HELP is a sustainable growth story in defensive sector driven by a strong and focused management team with a proven track record,' it said.