TENAGA - Tenaga slips, analysts see challenging outlook

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

KUALA LUMPUR: Shares of TENAGA NASIONAL BHD [] fell in late afternoon on Friday, April 8 as analysts maintained a Sell on the power giant due to the challenging business outlook.

At 3.07pm, Tenaga was down eight sen to RM6.11 with 699,000 shares done.

The FBM KLCI lost one point to 1,560.93. Turnover was 993.07 million shares done valued at RM1.17 billion. There were 375 gainers, 362 losers and 315 stocks unchanged.

Maybank Investment'' Bank Research had maintained Tenaga as a Sell due to the challenging business outlook stemming from high coal prices, a shortage of natural gas supply and remote possibility of a tariff hike.

'We now use the EV/EBITDA valuation metric (previously DCF) as we think it captures more accurately the true health of utility companies given their high gearing.

'Our new target price of RM5.73 is based on 5.8x FY12 EV/EBITDA ' consistent with its long-term average. This implies 12.0x FY12 earnings, which we think is fair for its multiple challenges,' it said.

MRCB - MRCB inches up on RM110m land acquisition deal

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

KUALA LUMPUR: Shares of MALAYSIAN RESOURCES CORP [] Bhd (MRCB) inched up in late morning trade on Friday, April 8 following its RM110 million land acquisition deal.

At 11.37am, it was up one sen to RM2.33 with 1.44 million shares done.

Amresearch reaffirmed its HOLD rating on MRCB with its fair value unchanged at RM2.40'' a share based on a 15% discount to its sum-of-parts-derived value of RM2.80 a share.

MRCB had proposed to acquire a company, 59 iNC Sdn Bhd, which has the rights to develop 27.41 acres of land in Setapak.

MRCB planned a mixed development project, comprising commercial and residential PROPERTIES [], with a gross development value (GDV) of RM1.5 billion.

At a total development cost of approximately RM1.2 billion, the expected profits to be derived from the development would be RM300 million representing 20% of the GDV.

Amresearch said it came to understand that 59 Inc has been granted conditional approval to be rightful owner of the said parcels of land provided that the Land Office is paid RM60.8 million for the release of the land.

'We understand the land is located in Setapak Jaya and sits very close to the Duta Ulu Kelang Highway (DUKE) exit,' it said.

The research house said MRCB was looking at developing a mixed commercial/residential project on those parcels of land with an estimated GDV of RM1.5bil with CONSTRUCTION [] to start in FY12F.

'Nonetheless, details are sketchy at this juncture especially on the development mix although we suspect the target market would be a medium to medium-high segment,' it said.

Amresearch said this was positive given its landbank in KL Sentral was depleting with only about 12 acres left for development with a remaining GDV of close to RM6 billion.

'We estimate the new Setapak development would only add about 4% to our SOP ' assuming a profit margin of 23%-25% to be developed over eight years. We expect earnings to jump by about 5%-8% for FY12F-FY13F. Nonetheless, we have not factored in anything given the land deal has not been completed,' it said.

On the flipside, it said MRCB was targeting RM1 billion in order book replenishment in FY11F. MRCB has submitted its bid for civil works on the expansion of LRT lines for package A and B worth some RM1.6 billion in total. It is also expecting renewal on on-going environmental projects in Kuala Sg Pahang and Perai worth about RM1 billion.

MRCB - MRCB still a 'buy' says HwangDBS

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

Malaysian Resources Corporation Bhd (MRCB) is still a "Buy" with a target price of RM3.15 per share following its proposed acquisition of the entire equity of 59iNC for RM110 million, said HwangDBS Vickers Research.

"We are positive of this development as it will further entrench the company's property presence in the Klang Valley with just 4.8 hectares of land bank remaining in KL Sentral," said the research house in a note today.

The company to be acquired owns 10.96 hectares of government leasehold land in Setapak, which is slated for mixed development comprising high-rise residential, commercial and retail development.

"The estimated total gross development value is RM1.5 billion while expected profits to be derived is RM300 million, implying margins of 20 per cent.

"The project is expected to be launched in 2012 and will have a duration of eight years," it said. It said the total GDV outstanding for MRCB would rise to RM15.1 billion, from RM13.6 billion. -- Bernama

KPJ - KPJ Healthcare's share estimate raised

Stock Name: KPJ
Company Name: KPJ HEALTHCARE BHD
Research House: RHB

KPJ Healthcare Bhd, a Malaysian hospital operator, rose to a record in Kuala Lumpur trading after RHB Research Institute Sdn Bhd raised its share estimate to RM4.94.

The stock gained 2.4 per cent to RM4.30 at 9:11 a.m. local time. -- Bloomberg

AJIYA - OSK Research maintains Buy on Ajiya, FV RM2.25

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

KUALA LUMPUR: OSK Research said although Ajiya's management is of the view that higher operating costs and competition will erode the company's earnings performance this year, the macro fundamentals suggest otherwise.

It said on Friday, April 8 with the Government's Economic Transformation Plan adding some spark to the building materials sector, and hence benefiting the company.

'Slightly lowering our estimates on conservatism, we maintain our BUY recommendation on the stock with a revised FV of RM2.25,' it said.

EKSONS - CIMB Research maintains Outperform on Eksons, TP RM1.87

Stock Name: EKSONS
Company Name: EKSONS CORPORATION BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research said Eksons Corp Bhd is bullish on the timber industry after the recent Japan earthquake.

It said on Friday, April 8 that although it currently does not export plywood to Japan, it is likely to do so in the not-too-distant future given the tight supply situation, especially with reCONSTRUCTION [] works in the offing in Japan.

'We are raising our FY3/12-13 EPS and DPS by 20-24% for higher plywood prices. We are also switching our valuation basis from an asset-based 3-year average P/BV of 0.6x to an earnings-based CY12 P/E of 7.2x, which is a 40% discount to our 12x target P/E for the timber sector.

'The large discount reflects its small market cap and lack of timber concessions. Our target price rises from RM1.32 to RM1.87, reinforcing our OUTPERFORM call. Potential share price triggers include the strong plywood price recovery and a further sales pick-up for its property project,' it said.

TENAGA - Some headwinds ahead for Tenaga

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

Tenaga Nasional Bhd
(April 7, RM6.19)
Maintain sell at RM6.18 with reduced target price RM5.73 (from RM6): We maintain Tenaga as a 'sell' due to the challenging business outlook stemming from high coal prices, a shortage of natural gas and the remote possibility of a tariff hike. We now use the earned value/earnings before interest, taxes, depreciation and amortisation (EV/Ebitda) valuation metric (previously discounted cash flow) as we think it captures more accurately the true health of utility companies given their high gearing.

Our new target price of RM5.73 is based on 5.8 times FY12 EV/Ebitda ' consistent with its long-term average. This implies 12 times FY12 earnings, which we think is fair for its multiple challenges.

We have revised our power demand growth from +3.9% to +5% per year for the FY11/13, as per management's guidance of +5% to 6%, and to be in line with our GDP growth forecasts. This helps to boost utilisation rates and optimise fixed costs. But it also leaves Tenaga with a low reserve margin of 22% by end-2011 we estimate, compared with its historical norm of approximately 40%. Put into perspective, if two major power plants break down simultaneously, it would be disastrous for the country, and Tenaga too.

Raising FY11 coal estimates to an average US$115 (RM348.50) per tonne, previously US$110 per tonne, in light of higher market prices. The FY11-to-date price (Newcastle benchmark) is US$114 per tonne (+36.7% y-o-y), and the spot price is US$122 per tonne. We estimate this adds RM232 million in costs to FY11.

Tenaga receives approximately 1,000 mmscfd of gas, roughly 20% lower than its quota, due to supply chain problems. Petronas Gas Bhd will conduct a maintenance shutdown for 26 days in April and May; this is alarming as it is a peak electricity demand period. Gas supply will reduce (we think by 10% to 30%) and Tenaga will offset this by burning more coal and distillates. We estimate this will add RM175 million over the shutdown period, assuming a 30% gas supply shortfall.

We have raised our earnings forecasts by 6.3% for FY11, 60.3% for FY12 to account for higher power demand growth which more than offset the revised coal price average of US$115 per tonne in FY11 (unchanged US$100 per tonne in FY12). We assume no tariff hike. We caution that 2QFY11 results will be weak, which may allude to some downside in share price. ' Maybank IB Research, April 7


This article appeared in The Edge Financial Daily, April 8, 2011.

UNISEM - Strong growth in semiconductors continues in February

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

Semiconductor sector
Maintain positive: Global semiconductor sales continued their strong growth in February 2011, with an increase of 13.6% year-on-year to US$25.2 billion (RM76.1 billion) as reported by the Semiconductor Industry Association (SIA). The double-digit improvement came on the back of strong growth in the Americas, with 26.6% y-o-y growth. We were pleasantly surprised that Europe came in second in terms of growth, with an increase of 13.3% y-o-y. Asia-Pacific registered an 11.8%y-o-y growth while Japan grew by 6.1% y-o-y.

Asia-Pacific remains the biggest contributor with 53.9% or US$13.6 billion, followed by the Americas, Japan and Europe, with a contribution of 18.6%, 14.6% and 12.9% respectively.

In terms of month-on-month (m-o-m) growth, February saw a marginal decline of 1.1% m-o-m as Japan registered a higher decline of 3.9% m-o-m compared with 3.5% in January. Other regions also registered a decline, but only marginally for the Americas and Japan, with a decline of 0.3% m-o-m and 0.5% m-o-m respectively. ''

Europe posted a decline of 1.4% m-o-m. However, we are not worried by the slight decline in February as it is in line with historical trends. We expect a pickup in m-o-m growth in March for all regions except Japan.

We expect Japan will continue to see a decline in March due to the tsunami and earthquake.

We understand that SIA is maintaining its forecast for 2011/12, with worldwide chip sales estimated at US$318.7 billion and US$329.7 billion respectively. This represents a 6.8% and 3.5% y-o-y growth for CY11 and CY12. We are maintaining our growth estimates of 5% y-o-y in global sales in 2011.

We remain positive on the sector given its firm growth supported by the recent influx and popularity of smart gadgets, with the tablet being the key driver for CY11. Book-to-bill (BTB) ratio improved to 0.87 in February from 0.85 in January, which we believe signals expectations by semiconductor producers of a ramp-up in 2Q11 onwards.

The BTB ratio represents bookings and billings of semiconductor manufacturing equipment. We believe Japan will continue to see a decline in 2Q11, given the impact of the March 11 natural disaster, and will moderate the overall growth in global sales.

We continue to like Unisem (M) Bhd ('buy'; target price: RM2.80) as we believe it will benefit the most from the growth in tablets due to its securing of a Tier 1 customer, which is a supplier to Apple. We expect that this will bring in better earnings before interest and taxes margin improvement in addition to improvement in margins due to better utilisation of its plants. ' MIDF Research, April 6


This article appeared in The Edge Financial Daily, April 7, 2011.

IOICORP - IOI Corp recoups part of losses, RHB keeps underperform, FV RM5.90

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

KUALA LUMPUR: Shares of IOI Corp Bhd rose on Thursday, April 7, recouping nearly half of its losses from the previous day on concerns about the impact of the suspension of its current and ongoing certification process.

At 3.50pm, IOI Corp was up seven sen to RM5.62 with 24.04 million shares done. It fell 17 sen to RM5.55 the previous day.

The Roundatable on Sustainable Palm Oil (RSPO) had suspended the current and ongoing certification process of all IOI Corp's estates with immediate effect in response to grievances brought about by NGOs.

The grievances were regarding: 1) land dispute over native customary land leased by IOI for palm oil production in Sarawak; 2) drained peat land on endangered wildlife habitat and clearing of forest area; and 3) illegal deforestation and non compliance to RSPO Principles & Criteria.

IOI Corp was given 28 days until May 2 to revert with an acceptable solution.

RHB Research said it believed this suspension has more to do with the NCR land dispute in Baram, Sarawak, than any other issue.

Although the Miri High Court ruled last year that the land was rightfully NCR land, the court also said that the land rights can be extinguished by paying compensation to the natives.

IOI Corp has since been waiting for the natives to provide information to the court on the details of their claims, but the natives have yet to do so.

If the NGO grievances are mainly concerning this land dispute, we believe the impact to IOIC would not be as significant as in Golden Agri's case, and should not result in the big consumer MNC's boycotting IOIC's products.

'We believe this land dispute is resolvable, as it is just a matter of how much compensation is to be paid to the natives for the land.

'While we do not expect any significant impact to IOI Corp's earnings, there could be a knee-jerk reaction to this news, particularly from foreign investors, who are more sensitive to such news.

'IOI Corp's foreign shareholding was about 18% as at end-Dec 2010. Maintain Underperform with fair value of RM5.90,' it said.

MRCB - UOB Kay Hian upgrades MRCB to Buy from Hold

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

KUALA LUMPUR: UOB Kay Hian has upgraded its call for MALAYSIAN RESOURCES CORP [] Bhd (MRCB) call to BUY from HOLD, and RNAV-based target price to RM2.86 from RM2.30.

It said on Thursday, April 7 the new target price was after incorporating the present value of ongoing and future developmental enhancements at its KL Sentral flagship development (the previous RNAV conservatively used only the market value of land prices), plus an option value (RM151m or 4% of RNAV) of securing the highly-coveted parcels of the federal government's Sungai Buloh landbank.

'A recent visit to the company reinforced our optimism of MRCB's chances of securing at least one of the nine land parcels in Sungai Buloh.

'Other catalysts include: a) its JV with Ekovest Berhad securing a parcel of the Klang river cleaning project estimated to be worth RM500m, b) clinching part of other mega projects like the MRT (elevated portion),' it said.

On the negative side, UOB Kay Hian said it was disappointed that MRCB lost its bid to develop the federal government's land in Jalan Cochrane.

IJM - IJM's order book to surge by 70pc: OSK

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

OSK Research has estimated that IJM Corporation Bhd's order book will surge by up to 70 per cent from RM4.1 billion currently, boosted by the approval of two highway jobs from the government.

In a research note today, OSK said the highway jobs, the New Pantai Expressway extension and West Coast Expressway (WCE) construction, is expected to contribute up to RM2.9 billion to the order book value.

Given that the WCE contact was given to Kumpulan Europlus Bhd, a 22.7 per cent associate of IJM, the construction company has a decent chance of bagging some of the packages, it added.

Aside from highway jobs, it said IJM has also tendered for the light rail transit extension, and is expected to bid for some portion of the Sungai Buloh-Kajang mass rapid transit which could also boost the order book value.

However, despite all the positive news, OSK has reduced IJM's financial year 2011 forecast earnings by 15.5 per cent to RM380.8 million, due to the possibility of a RM70 million provision for its construction division in the fourth quarter of the financial year.

The provision was related to overdue claims from its Middle East and India jobs, it said. - Bernama

MEDIA - Media Prima rises on Macquarie upgrade

Stock Name: MEDIA
Company Name: MEDIA PRIMA BHD
Research House: MACQUARIE GROUP

Media Prima Bhd, a Malaysian newspaper publisher and broadcaster, rose to an 11-week high after its share price estimate was raised to RM3.35 from RM2.78 at Macquarie Group Ltd to reflect its earnings growth prospects.

The climbed 0.8 per cent to RM2.61 at 9.47 am local time in Kuala Lumpur trading, headed for the highest close since January 21. - Bloomberg

MRCB - Malaysian Resources raised to 'buy'

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

Malaysian Resources Corp was raised to “buy” from “hold” at UOB-Kay Hian Holdings Ltd to reflect the higher value of its Kuala Lumpur Sentral development and the possibility of the company securing a parcel of government land.

The share price estimate was increased to RM2.86 from RM2.30, Vincent Khoo, an analyst at UOB-Kay Hian, wrote in a report today in Kuala Lumpur. -- Bloomberg

JOBST - CIMB Research keeps Jobstreet TP at RM3.77

Stock Name: JOBST
Company Name: JOBSTREET CORPORATION BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research said Jobstreet's job posting volumes have been rising, thanks to its marketing campaign.

It said on Thursday, April 7 that Jobstreet was also riding on the tailwinds of a recovery in regional economies, the tight labour market and the resumption of hiring activities.

'On the negative side, there is a rise in competition in Jobstreet's core markets. Also, there is no immediate plan to merge SEEK's Asian investments despite its strategic merits,' it said.

CIMB Research said it was retaining its EPS estimates. Its target price of RM3.77 remains unchanged as it now pegs Jobstreet at parity with its peers instead of a 20% discount as the average CY12 P/E of its global peers has corrected to 22.6 times, largely because of Monster.

It added that it valued Monster at parity as Jobstreet has been executing well and volumes have been rising.

'Jobstreet remains a BUY, with the potential catalysts being market share gains and lower-than-expected competition,' it said.

IOICORP - CIMB Research maintains Underperform on IOI Corp

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

KUALA LUMPUR: CIMB Equities Research said the Roundtable on Sustainable Palm Oil's (RSPO) suspension is a negative surprise and is maintaining an Underperform on the stock.

It said on Thursday, April 7 that the RPSO has suspended its certification process for all of IOI group's activities with immediate effect, following land dispute complaints and charges of deforestation.

'This is a negative surprise and may tarnish the group's image as a sustainable palm oil producer as well as its sales of sustainable palm oil to Europe. For now, we do not expect the suspension to affect the group's operations as it will merely delay the certification of new estates,' it said.

CIMB Research said given the group's willingness to work with RSPO, it believes this issue will be resolved amicably in due course.

'We retain our earnings forecasts and target price of RM5.95 (16x CY12 P/E). Also intact is our UNDERPERFORM rating in view of its below-peers FFB output growth and our view that the CPO price is close to peaking. For exposure to the sector, we prefer Sime,' it said.

CENSOF - Century Software is small in size, but big in potential

Stock Name: CENSOF
Company Name: CENTURY SOFTWARE HOLDINGS BHD
Research House: OSK

Century Software Holdings Bhd
(April 6, RM1.41)
Initiate coverage with buy call at RM1.38 with fair value RM1.53: Century Software Holdings (CSHB) is a provider of financial management software and solutions with a near-monopoly on providing these solutions to federal statutory bodies (FSB). CSHB looks set to benefit from the government's push for a standard accounting system for government agencies (Saga) which will utilise compliant financial management software solutions (FMSS). Some 42% or 49 FSBs have yet to instal the Saga system, which potentially represents a market valued of RM50 million per year for CSHB to tap into. The government has so far recognised only two FMSS, namely CSHB's Saga Century and Konsortium Jaya's Saga 3 solutions.

CSHB could also look to penetrate the local councils, state statutory bodies, and government-linked companies. Although the government has yet to mandate Saga-compliance here, we opine that uniformity across accounting systems makes more sense over the long run. CSHB is still largely non-existent in these agencies and we believe this represents a potential market worth RM60 million per year.

Demand for payment aggregation software is likely to swell with increasing Internet banking. According to Bank Negara Malaysia, the volume of Internet transactions in Malaysia grew 40% to 60% per year over the last three years. The subscriber base has also jumped approximately 30% per year over the last five years, with 9.4 million registered for Internet banking facilities as at 2010. As payment aggregation software is able to simplify and increase the speed of making payments and receiving collection, CSHB should benefit from the gradual migration to e-payments.

T-Melmax Sdn Bhd (TMX) recently launched its e-Bayaran portal, a one-stop business-to-government website for businesses to make payments to government bodies. Malaysia had over 550,000 small- and medium-sized enterprises as at 2009, with over four million companies registered with the Companies Commission of Malaysia. Assuming a conservative 20% take-up rate, this could translate into annual revenues of RM15 million from monthly payments to the Employees Provident Fund, the Social Security Organisation and the Inland Revenue Department. Imputing a margin of 30%, this could boost CSHB's profit-after-tax by RM4.5 million a year. ' OSK Research, April 6


This article appeared in The Edge Financial Daily, April 7, 2011.

COASTAL - Coastal Contracts riding high on merger speculation

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

Coastal Contracts Bhd
(April 6, RM3.50)
Downgrade to hold at RM3.41 with fair value RM3.35: We downgrade our call on Coastal Contracts Bhd from 'buy' to 'hold' as the surge in share price has reached our unchanged fair value of RM3.35, pegged to an FY11F price-earnings ratio (PER) of six times, based on the group's seven-year average forward PER.

Coastal's share price surged 33 sen or 11% yesterday, following a news report that the group is planning to sell a major stake to a strategic partner as part of its plan to diversify into the fabrication business.

These market rumours are not a surprise, given that our report on Feb 10 this year had already highlighted the potential M&A exercise.

In a reply to Bursa Malaysia, Coastal highlighted that the proposed collaboration with Ramunia Fabricators Sdn Bhd is still under discussion and does not involve the selling of a major stake in Coastal.

The company also emphasised that if the proposed collaboration with Ramunia Fabricators fails to materialise, Coastal would be open to other options with alternative strategic partners to diversify into the offshore structure fabrication business.

Coastal also noted that the board has not formed a firm intention to sell a major stake to any identified party. Our channel checks reveal that the collaboration and M&A negotiations are with various parties and are still at a preliminary stage.

On fundamentals, the group's current order book of RM760 million will last until mid-2012 and it would face an earnings contraction in the absence of fresh vessel sales in FY12F.

Given the huge incoming global delivery of anchor handling tug supply vessels, Coastal's prospects would not appear exciting if a merger fails to materialise.

We have projected flat earnings growth over FY11F/13F, which incorporate fresh orders of RM700 million to RM800 million in FY12F/13F. In our oil and gas sector report on April 5, we highlight that charter rates for anchor handling tug supply vessels are only expected to improve towards end-2012 and platform supply vessels by end-2013.

Hence, we are of the view that the stock is currently fairly valued given that its current PER of six times is at its seven-year average. ' AmResearch, April 5


This article appeared in The Edge Financial Daily, April 7, 2011.

COASTAL - Coastal downgraded to 'hold'

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

Coastal Contracts Bhd was cut to “hold” from “buy” at AmResearch Sdn Bhd as the recent surge in the Malaysian shipbuilder’s share price has reached the brokerage’s fair value of RM3.35 for the stock.

The stock slid 2 per cent to RM3.46 at 10:32 a.m. in Kuala Lumpur trading, set for its biggest decline since March 15, snapping an eight-day rally. -- Bloomberg

CENSOF - Century Software a 'buy': OSK

Stock Name: CENSOF
Company Name: CENTURY SOFTWARE HOLDINGS BHD
Research House: OSK

Century Software Holdings Bhd, a Malaysian software company, rose to a one-week high after OSK Research Sdn Bhd rated the stock new “buy” to reflect its earnings growth potential.

The stock advanced 1.5 per cent to RM1.40 at 9:44 a.m. in Kuala Lumpur trading, set for its highest close since March 30.

The “fair value” for the stock is RM1.53, Kong Heng Siong, a Kuala Lumpur-based analyst at OSK, wrote in a report today. -- Bloomberg

MEDIA - RHB Research sees more upside for media sector

Stock Name: MEDIA
Company Name: MEDIA PRIMA BHD
Research House: RHB

KUALA LUMPUR: RHB Research said while year-to-date (Jan-Feb) gross adex for TV and print media was up 8.6% on-year, for full-year 2011, it projects adex could grow by 10.5% on-year.

'This is based on our projected 2011 GDP growth of 5% and the average GDP multiplier of 2.1 times. Notwithstanding the lack of ad-friendly events this year, adex growth should remain healthy, supported by resilient consumer spending,' it said on Wednesday, April 6.

Telecom companies have been the biggest spenders in terms of adex last year and RHB Research believes this would likely continue in FY11 as telco operators compete to defend and/or grow market share and revenues.

Over at the cost side, newsprint prices have been hovering around US$720-780/tonne up from US$650/tonne seven months ago, although the weakening of the US dollar (-1.2% YTD) has helped cushion the higher US dollar-denominated cost.

RHB Research said Media Prima (Outperform, FV=RM3.20) remains its top pick given its position as the largest integrated media player in Malaysia.

'We view the sector as defensive and coupled with decent valuations and attractive dividend yields, these could help shield investors from the volatile market. Thus, we maintain our Overweight stance on the sector,' it said.

GENM - Genting Malaysia rated 'buy' at Macquarie

Stock Name: GENM
Company Name: GENTING MALAYSIA BERHAD
Research House: MACQUARIE GROUP

Genting Bhd was cut to “neutral” from “outperform” at Macquarie Group Ltd because of minimal upside to its share price and prefers the Malaysian casino group’s Genting Malaysia Bhd unit.

The share price estimate was cut to RM11.60 from RM13, according to the report.

Genting Malaysia was rated new “outperform” with a target price of RM4.25. -- Bloomberg

GENTING - Genting cut to 'neutral' at Macquarie

Stock Name: GENTING
Company Name: GENTING BHD
Research House: MACQUARIE GROUP

Genting Bhd was cut to “neutral” from “outperform” at Macquarie Group Ltd because of minimal upside to its share price and prefers the Malaysian casino group’s Genting Malaysia Bhd unit.

The share price estimate was cut to RM11.60 from RM13, according to the report.

Genting Malaysia was rated new “outperform” with a target price of RM4.25. -- Bloomberg

COASTAL - Coastal a potential M&A target

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

Coastal Contracts Bhd
(April 4, RM3.41)
Maintain buy at RM3.08 with target price RM4.85: We maintain our 'buy' call on Coastal contracts for three reasons: (i) its current share price is very attractive at a price-earnings ratio of'' five times against the oil and gas industry's 12 to 14 times, which makes it an attractive takeover target; (ii) it has a strategic asset in its 40.47ha shipbuilding yard, which can be converted into an O&G facility for fabrication or even repair and maintenance jobs; and (iii) the location of the yard in Sandakan, Sabah, where most of the deepwater activities will be centred in the future.

Of course, this was considered at the end of 2008, when oil prices dropped and new orders slowed to a trickle. We see this ambition to diversify as value-adding for the company and its share price as we believe such a move would allow the stock to trade above its historical average price-earnings ratio (PER) of four to five times. Management has even made tentative moves, signing an MoU with Ramunia Holdings Bhd as well as reportedly holding talks recently with Alam Maritim Resources Bhd.

Our historical analysis shows that Coastal's performance has been consistent since the crash in crude oil price as it has been delivering quarterly results that either met or exceeded investors' expectations over the last 10 quarters.

This is in contrast to other O&G companies, whose earnings had been flat or lower quarter-on-quarter during this recovery period. We believe this gives Coastal a strong advantage in positioning the company ahead of its peers as many of them have disappointed investors in one quarter or another.

If our expectations materialise, Coastal's share price could touch our fair value of RM4.85 anytime soon, since this is based on an undemanding PER valuation of eight times FY11 earnings.

Given its impeccable track record, we do not believe Coastal's shareholders would be willing to sell its shares at the current price, which is based on a PER of five times. Hence we think this would provide further upside to its share price. ' OSK Research, April 4


This article appeared in The Edge Financial Daily, April 5, 2011.

IJM - IJM Corp gets two new toll concessions

Stock Name: IJM
Company Name: IJM CORPORATION BHD
Research House: MAYBANK

IJM Corp Bhd
(April 4, RM6.45)
Maintain hold at 6.35 with target price RM6.50: Last Friday, the government gave the go-ahead to two toll concessions, which should positively boost IJM Corp's construction order book, which stands at approximately RM4.1 billion now. We estimate the order book could easily double. The impact on valuations cannot, however, be assessed in the absence of further information. We maintain our 'hold' call on IJM for now, with an unchanged RM6.50 realisable net asset value target price, which implies a 21 times 2011 earnings multiple.

Kumpulan Europlus Bhd's (K Euro) 64.2% subsidiary West Coast Expressway Sdn Bhd received a letter on April 1 from the Public Private Partnership (PPP) Unit of the Prime Minister's Department approving in principle the construction of the West Coast Expressway (Taiping-Banting) on a build-operate-transfer basis. The final approval is subject to further negotiations on the technical and financial terms, expected to be completed within six months. K Euro is a 25% associate of IJM Corp.

New Pantai Expressway Sdn Bhd (NPE) also received a letter from the PPP Unit on April 1, approving in principle the New Pantai Elevated Highway extension to Ampang.

The project will be privatised via a supplemental agreement to the original concession agreement dated March 26, 1996, and is subject to further negotiations on the technical and financial terms, to be concluded within six months. NPE is a 100%-subsidiary of IJM Corp.

The original construction value of the West Coast Expressway, when it was conceived at least a decade ago, was RM3 billion. The value should have risen substantially by now, considering the rise in construction material costs over the years. While the concession will be parked under K Euro, IJM Corp's construction unit is expected to secure the whole construction works.

The New Pantai Elevated Highway extension to Ampang could easily cost above RM1 billion, based on very preliminary assessments. Total construction value from the two projects is likely to be above RM4 billion.

The length of the construction period and when work on the two projects will start, which would impact near-term construction earnings forecasts, are unknown at this juncture.

Also, unknown is the internal rate of return for both concessions, which we believe is in the region of 12% to 15%. We are also unsure on traffic risk, and the potential sharing of such risk with the government, since infrastructure projects will be under taken via the PPP method as highlighted under the 10th Malaysia Plan. ' Maybank IB Research, April 4


This article appeared in The Edge Financial Daily, April 5, 2011.

MUDAJYA - Mudajaya close to securing Janamanjung works

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

Mudajaya Group Bhd
(April 5, RM5.00)
Maintain buy at RM4.90 with target price RM7.44: Tenaga Nasional Bhd recently signed an engineering, procurement, construction and commissioning (EPCC) agreement with the Consortium of Alstom Power System SA for the expansion of the 1000MW Janamanjung coal-fired power plant. The portions of the contract are valued at US$810 million (RM2.5 billion), '180 million'' (RM771 million) and RM1.8 billion. The plant is expected to be fully commissioned by March 2015.

This recent award to the Alstom consortium is positive for Mudajaya. In our previous reports, we had highlighted that Mudajaya is likely to participate in the civil works for Janamanjung should the Alstom consortium win the EPCC job. We expect the consortium to subcontract the civil works to Mudajaya. Generally, the civil works for a coal-fired power plant make up 15% to 20% of the overall EPCC value.

Hence, based on the RM5 billion EPCC value for Janamanjung, the civil works portion would work out to RM750 million to RM1 billion. This should represent a healthy replenishment for Mudajaya's order book as one of its major projects, the KL-Kuala Selangor Expressway (RM958 million), is nearing completion. Management guides that the subcontract award could be out as soon as within a month.

Earlier this year, the Energy Commission had issued a request for proposal to Tanjung'' Bin and Jimah for another 1000MW expansion. Both parties have until mid-April to submit their proposals.

We understand that Mudajaya has been in talks with an EPCC contractor to participate in the civil works for this 1000MW expansion.

The actual award of the Janamanjung civil works to Mudajaya is expected to provide the upside to our earnings estimates, mainly from FY12 onwards, as we have only imputed a conservative RM200 million in annual order book replenishment.

For now, we are leaving our forecasts and RM7.44 fair value unchanged, which is based on a 20% discount to our sum-of-parts value based on 12 times FY11 earnings and a free cash flow to equity valuation of its Chhattisgarh IPP at 16% equity cost. ' OSK Research, April 5


This article appeared in The Edge Financial Daily, April 6, 2011.

TAANN - It's a sellers' market in timber

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

Timber sector
Maintain overweight: Sentiment for the timber sector has improved considerably since the earthquake and tsunami in Japan on March 11. The current situation has a more significant impact on the timber market than the 1995 Kobe earthquake. In 1995, inventory was high, the log supply was consistent, Indonesia was still a fairly dominant supplier to Japan and Japan still had ample domestic production capacity.

We believe tropical log prices will remain firm at above US$200 (RM606) per cu m (currently estimated at US$245 per cu m), even when log production starts to pick up, largely thanks to the robust demand from India and China. Due to the current favourable outlook for plywood demand and prices, there is a possibility that the Sarawak Forestry Department may not extend the 50% log export quota once it expires in June.

We believe it is a sellers' market now for plywood, given the anticipated increase in demand from Japan, low inventory level, limited increase in supply, and disruption in Japan's domestic plywood production. In our view, the favourable outlook for plywood will finally see plywood sales contribute more positively to timber players' earnings, unlike previous years when they incurred losses or only made a small profit from their plywood divisions.

We have revised our FY11/13 earnings forecasts for the timber companies under our coverage, having updated for: (i) higher log prices; (ii) higher plywood prices and utilisation rate; and (iii) higher cost of production for logs and plywood.

The risks include: (i) lower than expected improvement in Japan's housing starts; and (ii) price discounting from neighbouring countries with lower cost of production, resulting in lower exports from Malaysia to its major export markets.

We downgrade our call on WTK Holdings Bhd to 'market perform' (from 'outperform' previously) due to the limited upside to our fair value. WTK's share price has rallied by 65% since the Japan earthquake.

Top picks are Jaya Tiasa Holdings Bhd and Ta Ann Holdings Bhd. All in all, we reiterate our 'overweight' call on the timber sector. Top picks are Jaya Tiasa ('outperform'; fair value: RM7.84) and Ta Ann ('outperform'; FV: RM7.99) as there will be a significant boost to their earnings from the plantation division going forward due to increasing fresh fruit bunches production, apart from strong earnings contributions from the timber division. ' RHB Research, April 5


This article appeared in The Edge Financial Daily, April 6, 2011.

TAANN - It's a sellers' market in timber

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

Timber sector
Maintain overweight: Sentiment for the timber sector has improved considerably since the earthquake and tsunami in Japan on March 11. The current situation has a more significant impact on the timber market than the 1995 Kobe earthquake. In 1995, inventory was high, the log supply was consistent, Indonesia was still a fairly dominant supplier to Japan and Japan still had ample domestic production capacity.

We believe tropical log prices will remain firm at above US$200 (RM606) per cu m (currently estimated at US$245 per cu m), even when log production starts to pick up, largely thanks to the robust demand from India and China. Due to the current favourable outlook for plywood demand and prices, there is a possibility that the Sarawak Forestry Department may not extend the 50% log export quota once it expires in June.

We believe it is a sellers' market now for plywood, given the anticipated increase in demand from Japan, low inventory level, limited increase in supply, and disruption in Japan's domestic plywood production. In our view, the favourable outlook for plywood will finally see plywood sales contribute more positively to timber players' earnings, unlike previous years when they incurred losses or only made a small profit from their plywood divisions.

We have revised our FY11/13 earnings forecasts for the timber companies under our coverage, having updated for: (i) higher log prices; (ii) higher plywood prices and utilisation rate; and (iii) higher cost of production for logs and plywood.

The risks include: (i) lower than expected improvement in Japan's housing starts; and (ii) price discounting from neighbouring countries with lower cost of production, resulting in lower exports from Malaysia to its major export markets.

We downgrade our call on WTK Holdings Bhd to 'market perform' (from 'outperform' previously) due to the limited upside to our fair value. WTK's share price has rallied by 65% since the Japan earthquake.

Top picks are Jaya Tiasa Holdings Bhd and Ta Ann Holdings Bhd. All in all, we reiterate our 'overweight' call on the timber sector. Top picks are Jaya Tiasa ('outperform'; fair value: RM7.84) and Ta Ann ('outperform'; FV: RM7.99) as there will be a significant boost to their earnings from the plantation division going forward due to increasing fresh fruit bunches production, apart from strong earnings contributions from the timber division. ' RHB Research, April 5


This article appeared in The Edge Financial Daily, April 6, 2011.

JTIASA - It's a sellers' market in timber

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

Timber sector
Maintain overweight: Sentiment for the timber sector has improved considerably since the earthquake and tsunami in Japan on March 11. The current situation has a more significant impact on the timber market than the 1995 Kobe earthquake. In 1995, inventory was high, the log supply was consistent, Indonesia was still a fairly dominant supplier to Japan and Japan still had ample domestic production capacity.

We believe tropical log prices will remain firm at above US$200 (RM606) per cu m (currently estimated at US$245 per cu m), even when log production starts to pick up, largely thanks to the robust demand from India and China. Due to the current favourable outlook for plywood demand and prices, there is a possibility that the Sarawak Forestry Department may not extend the 50% log export quota once it expires in June.

We believe it is a sellers' market now for plywood, given the anticipated increase in demand from Japan, low inventory level, limited increase in supply, and disruption in Japan's domestic plywood production. In our view, the favourable outlook for plywood will finally see plywood sales contribute more positively to timber players' earnings, unlike previous years when they incurred losses or only made a small profit from their plywood divisions.

We have revised our FY11/13 earnings forecasts for the timber companies under our coverage, having updated for: (i) higher log prices; (ii) higher plywood prices and utilisation rate; and (iii) higher cost of production for logs and plywood.

The risks include: (i) lower than expected improvement in Japan's housing starts; and (ii) price discounting from neighbouring countries with lower cost of production, resulting in lower exports from Malaysia to its major export markets.

We downgrade our call on WTK Holdings Bhd to 'market perform' (from 'outperform' previously) due to the limited upside to our fair value. WTK's share price has rallied by 65% since the Japan earthquake.

Top picks are Jaya Tiasa Holdings Bhd and Ta Ann Holdings Bhd. All in all, we reiterate our 'overweight' call on the timber sector. Top picks are Jaya Tiasa ('outperform'; fair value: RM7.84) and Ta Ann ('outperform'; FV: RM7.99) as there will be a significant boost to their earnings from the plantation division going forward due to increasing fresh fruit bunches production, apart from strong earnings contributions from the timber division. ' RHB Research, April 5


This article appeared in The Edge Financial Daily, April 6, 2011.

HARTA - Rubber glove prices to bounce back

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

Rubber gloves
Maintain overweight: Taking our cue from higher latex prices, we raise our CY11/13 price assumptions by 5% to 7% for nitrile and 9% to 10% for rubber latex. This reduces our FY11/12 sector net profit by 8% to 9%. Despite the earnings cut and the disappointing results season, we continue to rate the sector an 'overweight' as the headwinds have left the sector's CY12 price-earnings ratio (PER) at 8.5 times or about 30% below the KLCI's 12.7 times PER.

This is despite a three-year earnings per share (EPS) compound annual growth rate of 11%, which is supported by 8% to 15% annual demand growth. Kossan Rubber Industries Bhd replaces Hartalega Sdn Bhd as our top pick, given Hartalega's margin compression and better upside for Kossan.

Potential re-rating catalysts for the sector include higher outsourcing and lower input costs.

Annualised net profit for the companies under coverage missed expectations, coming in at just 78% of our estimates and 82% of consensus. Results were weighed down by a 64% year-on-year (y-o-y) slump in Top Glove Corp Bhd's 2QFY11 net profit due to higher input cost and weak demand.

Sector revenue for the quarter fell 2% quarter-on-quarter (q-o-q) because of higher sales of nitrile gloves which have lower selling prices. On a y-o-y basis, revenue rose 16% due to capacity expansion. But rising costs pulled the sector net profit down 24% q-o-q and 220% y-o-y.

After peaking at RM10.89 per kg on Feb 22, rubber latex price fell 21% in two weeks to RM8.56 per kg on the back of growth concerns. The fall was accentuated by disruptions to global supply chains after Japan's earthquake. But the rubber price fall was short-lived as prices bounced back with a vengeance, rising 24% in just over a week to RM10.65 per kg as at April 4.

Nitrile latex producers raised prices around the same time (by about 10% in March) as midstream refiners battled with a Brent price of above US$100 per barrel. Even so, the volatility of rubber has renewed interest in glove stocks, which have been out of favour lately.

Glovemakers can mitigate the cost volatility by diversifying their product mix. While customers in regulated markets such as the US and EU are unlikely to change buying behaviour, emerging market end-users are more fickle. Glovemakers with a balanced product mix such as Kossan (40:60 nitrile:rubber mix) are best positioned to meet demand from growth markets in emerging Asia and Latin America.

We like Kossan and Hartalega. Kossan is the most balanced glovemaker, has consistently met expectations and offers more upside than Hartalega. Despite offering 21% EPS growth for FY12, the stock trades at only 6.5 times forward PER. While it is true that Hartalega will continue to benefit from the switch to synthetics, we expect its margin to contract in FY12 as refiners start raising prices. ' CIMB Research, April 5


This article appeared in The Edge Financial Daily, April 6, 2011.

WTK - WTK slides after RHB downgrade

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

WTK Holdings Bhd, a Malaysian timber producer, fell in Kuala Lumpur trading as RHB Research Institute Sdn Bhd cut its rating on the stock because of its limited upside after rallying 65 per cent since the Japan earthquake on March 11.

The shares slid 1.9 per cent to RM2.04 at 9:22 a.m. local time, set for their steepest decline since March 31.

The stock rating was reduced to “market perform” from “outperform,” RHB said in a report today. -- Bloomberg

PCHEM - Petronas Chems price estimate raised

Stock Name: PCHEM
Company Name: PETRONAS CHEMICALS GROUP BHD
Research House: CREDIT SUISSE

Petronas Chemicals Group Bhd’s share-price estimate was raised to RM8.50 from RM7.50 at Credit Suisse Group AG to reflect higher earnings forecasts, bolstered by higher oil prices.

The company’s 2012 earnings estimate was raised 21 per cent while its forecast for 2013 was increased 8 per cent, Paworamon Suvamatemee, an analyst at Credit Suisse, wrote in a report today.

The stock was maintained as “outperform.” The shares have gained 36 per cent this year, the second-best performer on the Kuala Lumpur benchmark stock index. -- Bloomberg

FAJAR - Big time for small-cap construction outfits

Stock Name: FAJAR
Company Name: FAJARBARU BUILDER GRP BHD
Research House: RHB

Construction sector
Maintain neutral: While large construction companies are conventionally good proxy plays to the new wave of infrastructure spending in Malaysia, it appears that the little guys, small-cap construction players, have thus far dominated the winners' lists of the key work packages of the Kuala Lumpur International Airport 2 (KLIA2) and the Ampang and Kelana Jaya LRT line extension project.

The smaller players stand a much better chance of winning new contracts thanks to lean setups that enable them to profitably execute smaller public jobs that larger players shy away from, as well as subcontracts of key large-scale projects that will soon flood the local construction market.

Based on the last traded prices, small-cap construction stocks Fajarbaru Builder Group Bhd and TRC Synergy Bhd now trade at 7.9 to 10 times and 7.5 to 8.6 times FY11/12 earnings, at a fairly substantial discount to 16.4 to 20.6 times and 16 to 19.1 times earnings for large-cap construction companies Gamuda Bhd, IJM Corp Bhd and WCT Bhd. We believe the large discount is unjustified and untenable.

Risks to our view include: (i) the government reverting to an austerity drive to rein in the budget deficit; (ii) the potential of hiccups in the rollout of the public projects; and (iii) less than robust overseas construction markets, particularly, the Gulf states.

We are neutral on the construction sector, but bullish on small-caps. Over the immediate term, we expect construction stocks in general to perform only in line with the broader market due to 'news flow fatigue'. However, we do see a bright spot in small-cap builders due to their ability to win key work packages of large-scale projects, their better chances of winning smaller contracts and subcontracts of large-scale projects, and their attractive valuations.

Our top small-cap picks are Fajarbaru (fair value: RM1.65) and TRC (FV: RM1.94). An added downside cushion to their share prices is their strong balance sheets with a net cash of RM118.8 million or 69 sen per share for Fajarbaru, and net cash of RM200.3 million or RM1.05 per share for TRC as at Dec 31. ' RHB Research, April 4


This article appeared in The Edge Financial Daily, April 5, 2011.

TENAGA - Tenaga signs deal for Manjung coal-fired power plant project

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

Tenaga Nasional Bhd
(April 4, RM6.18)
Maintain buy at RM6.18 with target price RM7.98: Tenaga announced to Bursa Malaysia that its wholly owned subsidiary TNB Janamanjung Sdn Bhd (TNBJ) has signed an engineering, procurement and construction (EPC) agreement with the Consortium of Alstom Power System SA for the development of the 1,000MW Manjung coal-fired power plant.

This contract is for the construction of building structures and installation of one steam turbine, one super-critical boiler, coal and ash handling equipment, water treatment system, air quality control system as well as a waste water treatment system.

The consortium comprises: (i) Alstom Power System SA; (ii) Alstom (Wuhan) Engineering & Technology Co Ltd; (iii) Alstom Services Sdn'' Bhd; (iv) China National Machinery Import & Export Corp; and (v) CMC Machipex Sdn Bhd.

The contract price is US$810 million (RM2.45 billion), '180 million (RM772.2 million) and RM1.8 billion, or about RM5 billion in total. The project is expected to be completed and come into operation by March 2015. The development of the 1,000MW Manjung coal-fired power plant project is for a period of four years, and payments will be made in accordance with the progress of the project.

In view of the fact that'' the power plant is scheduled to start operations in 2015, we have made no changes to our'' forecasts. We have factored in a cost of'' US$1.5 million per MW of capacity for the 1,000MW plant in our balance sheet forecasts.

We expect construction to begin in FY11. We expect'' the project to be funded on a 70:30 to 80:20 debt-equity ratio, with the debt portion to be satisfied via a long-term bond issuance. Tenaga will need to cough up about RM800 million to RM900 million in equity, which seems manageable given that its cash balance has increased to RM9.2 billion as at end-November 2010.

We reiterate our 'buy' recommendation with the target price maintained at RM7.98, based on discounted cash flow valuation (weighted average cost of capital: 10.99%, terminal growth: 3%). The stock currently trades at a fair FY11 price-earnings ratio of 10 times, lower than its three-year average of 14 times. ' MIDF Research, April 4


This article appeared in The Edge Financial Daily, April 5, 2011.

AXIATA - India 3G heating up

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

Telecommunication sector
Maintain neutral: With the investment in 3G entering its third year, companies are beginning to see a significant financial impact on their revenues. Broadly, the latest quarterly reports of the major players witnessed a more than 25% year-on-year growth in revenue. Much of that was due to the intensity in 3G services take-up.

India boasts one of the largest mobile markets in the world with over 800 million subscribers, and growth is still strong given that penetration lags behind other countries with large populations. According to consultant Frost and Sullivan, the mobile market is expected show a compound annual growth rate in the range of 11.4% over the 2011/16 period.

Out of this total subscriber base, more than 70% use voice solely. They have not 'discovered' the full potential of mobile connectivity. By a rough calculation, fewer than 200 million (less than 14% of the total population) use data services at least once a month. Because of this, the impact of 3G services will become greater in the next two to three years.

Not even 2% of the country has proper Internet connections of any type. If you consider the broadband connections the figures are even more dismal. Thus, the untapped potential of Internet access demand is great. And that is why the next Internet revolution is said to take place on phones ' which offer a more flexible access to users.

This is also the reason the mobile handset market, especially the smartphone segment, expects revenue to rise from US$255 billion (RM772.6 billion) to US$350 billion. The smartphone market is expected to grow tenfold to 30 million units by 2016 from just about 2.9 million units currently.

Axiata Group Bhd stands to benefit as Indians use more and more 3G services. We foresee a heated price war in the near term. This would in turn suppress unit prices of 3G data packages. Despite this, given the tremendous size of the population, in the medium term, the financial impact would still be healthy for Idea Cellular Ltd.

We prefer to see Axiata increase its stake in Idea from the current 19%, leading to equity accounting of the stake in Axiata's books which would allow for a consolidated accounting. There is a need for Idea to raise more money to finance its capex for 3G business, which may be contributed by Axiata in the form of more equity.

We maintain our recently downgraded view of'' 'neutral' on the telecommunication sector. We propose a switch of focus to our top pick in the sector, Axiata ('buy'; fair value: RM6.24), from Telekom Malaysia Bhd ('hold'; FV: RM4), which we downgraded recently. Our view on DiGi.Com Bhd ('hold'; FV: RM27.35) and Maxis Bhd ('hold', FV: RM5.49) remains. We believe the sector's performance would be sustained by the lack of decent yielding big-cap stocks on Bursa Malaysia, following the privatisation of PLUS Expressways Bhd. ' AmResearch, April 4


This article appeared in The Edge Financial Daily, April 6, 2011.

SUNWAY - ECM Libra maintains 'buy' call on Sunway

Stock Name: SUNWAY
Company Name: SUNWAY HOLDINGS BHD
Research House: ECMLIBRA

KUALA LUMPUR: ECM Libra Investment Research has maintained a "buy" call on Sunway Holdings Bhd with its target price remaining at RM2.60.

The recommendation was premised on strong earnings growth of 20.7 per cent in the financial year 2011, plans for more landbank acquisitions, strength in securing overseas construction contracts and re-rating from the merger with Sunway City Bhd, ECM Libra Investment said in a research note today.

"With a strong brand name, we think the group is poised to benefit from the impending roll out of contracts in 2011 both from the Ninth Malaysia Plan as well as the Mass Rail Transit (MRT) project."

Apart from the tunneling portion, civil works for the MRT project would only be open to local contractors, it said.

It added that the completion of the merger exercise with Sunway City in mid this year could assist the group participate in larger scale projects. - BERNAMA

COASTAL - Coastal advances at mid-morning

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

KUALA LUMPUR: COASTAL CONTRACTS BHD [] shares advanced on Monday, April after the Edge Weekly reported that Coastal was eyeing a strategic shareholder to diversify into the fabrication business.

At 10.30am, Coastal was up 13 sen to RM3.21 with 1.91 million shares done.

OSK Research maintained its Buy call on Coastal with a fair value of RM4.85, and said the news was not only within its expectation, but in fact it had envisaged something even bigger for the company.

'We believe Coastal could be a potential merger and acquisition target since its share price valuation is appealing and it owns a strategic asset in its 100-acre yard which sits tight in a strategic area, and which is currently being coveted by many O&G operators for conversion to facilitate fabrication or repair and maintenance jobs,' it said on April 4.

BSTEAD - ECM Libra keeps 'buy' call on Boustead

Stock Name: BSTEAD
Company Name: BOUSTEAD HOLDINGS BHD
Research House: ECMLIBRA

ECM Libra Investment Research is maintaining a trading "buy" call on Boustead Holdings with a target price of RM5.96 per share.

Boustead Holdings is in the news following speculation that the group and its parent, Lembaga Tabung Angkatan Tentera, may acquire ExxonMobil International Holdings Inc's 65 per cent stake in Esso Malaysia Bhd.

"We are neutral on the news as we feel Boustead should stay focused on key cash cows, like their plantation and heavy engineering segments, and also newly acquired Pharmaniaga," said ECM Libra Investment Research in a research note today.

Meanwhile, HwangDBS Vickers Research is also maintaining its "buy" call on the group with a target price of RM7.90 per share.

It said the proposed acquisition could increase the group's scale in the business significantly.

"Assuming a 100 per cent acquisition and 70 per cent funded by debt, it could see a net profit enhancement of RM200 million, based on Esso's financial year 2010 net profit of RM268 million," it added. -- Bernama

IJM - Maybank IB Research maintains Hold call on IJM Corp

Stock Name: IJM
Company Name: IJM CORPORATION BHD
Research House: MAYBANK

KUALA LUMPUR: Maybank Investment Bank Bhd Research has maintained its Hold recommendation on IJM CORPORATION BHD [] at RM6.35 with unchanged target price of RM6.50.

It said the two toll concessions, given the go-ahead by the government last Friday, should positively boost IJM Corporation's CONSTRUCTION [] order book, which stands at approximately RM4.1 billion now.

'We estimate order book could easily double.

''The impact on valuations cannot however be assessed in the absence of further information,' it said in a note Monday, April 4.

IJM - IJM up in early trade

Stock Name: IJM
Company Name: IJM CORPORATION BHD
Research House: MAYBANK

KUALA LUMPUR: IJM CORPORATION BHD [] shares advanced in early trade on Monday, April after its unit New Pantai Expressway Sdn Bhd (NPE) received the go-ahead from the Public Private Partnership Unit of the Prime Minister's Department for the proposed New Pantai elevated highway extension to Ampang-Kuala Lumpur.

At 9.45am, IJM Corp was up 10 sen to RM6.45.

Maybank Investment Bank Bhd Research has maintained its Hold recommendation on IJM Corp at RM6.35 with unchanged target price of RM6.50.

It said the two toll concessions, given the go-ahead by the government last Friday, should positively boost IJM Corp's CONSTRUCTION [] order book, which stands at approximately RM4.1 billion now.

'We estimate order book could easily double.

''The impact on valuations cannot however be assessed in the absence of further information,' it said in a note Monday, April 4.

TAANN - AmResearch 'neutral' on timber sector

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

AmResearch has maintained a "neutral" call on the timber sector and "hold" on Jaya Tiasa Holdings Bhd as well as Ta Ann Holdings Bhd with a fair value of RM7.11 per share and RM7.10 per share
respectively.

AmResearch in a research note today said a further sector earnings upgrade appears to be unlikely due to the tight supply of logs despite an expected increase in demand from Japan.

It said the supply of logs may not be able to keep up with the
anticipated increase in demand from Japan, as individual company's were limited by the concession hectarage.

For Ta Ann Holdings, it said the company's net profit for the financial year 2011 was projected to rise by 56 per cent to RM120 million from RM77.2 million in the financial year 2010.

Its domestic log production is expected to increase by 13 per cent to 500,000 cubic meters in the current financial year from 442,334 cubic meters previously, AmResearch said.

Meanwhile, it said Jaya Tiasa's financial year 2011 net profit was forecast to surge to RM127 million from RM24.4 million previously.

Earnings per share is projected at 46.7 sen for Ta Ann Holdings and 47.4 sen for Jaya Tiasa with gross dividend yield per share offered at 2.2 per cent by Ta Ann Holdings and at least 0.5 per cent by Jaya Tiasa. --Bernama

TENAGA - Tenaga remains a long term buy, says OSK Research

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

KUALA LUMPUR: OSK Research has maintained its buy recommendation on TENAGA NASIONAL BHD [] with a fair value of RM7.54 after Tenaga awarded the Janamanjung 1x1000MW coal-fired power plant extension to a consortium led by Alstom for a total of RM5.02 billion.

It said this was largely within its expectations and that it saw some subcontracts coming the way of local CONSTRUCTION [] companies such as Mudajaya.

'We estimate that Tenaga will enjoy some RM2 billion in savings over the lifetime of the plant but make no changes to our estimates as this has been built in.

'Without clarity on tariff hikes, Tenaga remains a Long Term Buy. The company will be announcing a biogas JV with Sime Darby today,' it said in a note Monday, April 4.