Bursa Malaysia Stock Price Target: 04/17/11

April 22, 2011

RHBCAP - HDBSVR has Buy on RHB Cap with a RM10 TP

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

KUALA LUMPUR: Hwang DBS Vickers Research said RHB Cap remains one of the cheapest large cap banks in Malaysia at 1.7x FY11 book value against sector (weighted) average of 2.3x.

'At ROE levels of 15-16% and trading at only 1.7x FY11 BV, RHB Cap makes for an attractive M&A target. We have a Buy recommendation on RHB Cap with a RM10 TP,' it said on Friday, April 22.

HDBSVR cited The Edge Financial Daily that there are three potential parties vying for a stake in RHB Cap. Abu Dhabi Commercial Bank (ADCB) has engaged advisors Goldman Sachs and Bank of America-Merrill Lynch to run the auction for the sale of its 25% stake in RHB Cap.

Carlyle Group and TPG Capital (private equity firms) are in talks to launch a joint bid for RHB Cap for US$1.5bn.

Another two parties potentially looking at the stake (as mentioned in The Edge Financial Daily) are Australia and New Zealand Group Ltd (ANZ) and DBS Group Holdings (DBS).

These permutations suggest that there could possibly be further M&As within the domestic banks.

The Edge Financial Daily mentioned that it is unclear how Malaysian authorities would react to DBS' possible bid on RHB Cap given that Singapore's Temasek owns a 14.8% stake in Alliance Financial Group (AFG). It is understood that a foreign strategic investor cannot have more than one stake in domestic banks.

'If ANZ were to acquire a stake in RHB Cap, it would need to merge AMMB with RHB Cap. This would allow ANZ to have a stake in a larger piece of the Malaysian banking landscape,' said HDBSVR.

It was reported earlier that ANZ was keen to increase its stake in AMMB. ANZ currently owns 24% of AMMB. Even though the threshold for foreign shareholding remains capped at 30%, total returns as a shareholder would be larger for ANZ in an enlarged AMMB-RHB Cap scenario.

Carlyle Group and TPG Capital are private equity firms. TPG has an Indonesia arm, TPG Nusantara, which currently owns 59.7% of Bank Tabungan Pensiun Nasional (BTPN) and actively plays a role in management of the bank and has seen the bank doing well since its acquisition in 2008.

'We are not just implying temporary value enhancement in banks for the sake of taking advantage of potential general offer valuations. Our M&A theme for the Malaysian banks include potential foreign strategic tie-ups that could enhance value and boost competitiveness of the banks.

'The target banks will benefit from input the potential stakeholders could bring to the table to improve stand-alone value propositions, e.g. AMMB-ANZ,' it said.

WTK - CIMB Research: Indicators improving for WTK

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

KUALA LUMPUR: CIMB Equities Research said since it featured WTK Holdings Bhd [] as a technical sell stock on April 12, prices fell to as low as RM1.72, almost hitting the 30-day SMA.

It said on Friday, April 22 that since then, a base is formed near this moving average. Yesterday, buying momentum started to set in, pushing prices above the flag resistance.

'Looking at the chart, prices could bounce back to test RM2.08 and possibly even the RM2.20 level. Hence, aggressive traders may start to accumulate now. Always put a stop at RM1.88.

'Indicators are improving. MACD is poised for a positive crossover while RSI has hooked upward,' it said.

TENAGA - CIMB Research remains Neutral on Tenaga

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

KUALA LUMPUR: CIMB Equities Research said TENAGA NASIONAL BHD []'s core net profit at the halfway stage accounted for only 47% of its and consensus full-year forecasts.

'We consider it to be below expectations as 2H earnings are expected to remain weak due to higher fuel costs. However, the 4.5 sen interim dividend was within our estimate. We now cut our FY8/11-12 core EPS by 7-8% for slower demand growth as well as higher coal price and usage,' it said on Friday, April 22.

CIMB Research said as a result, its end-CY11 target price, which is based on a forward P/BV of 1.2x, falls by 7 sen to RM6.82.

It remained NEUTRAL on Tenaga given the lack of near-term catalysts and cost pressures. There appears to be no near-term relief from the higher fuel costs as the government is unlikely to raise tariffs in an election year, it said.

''

'We prefer YTL Power for exposure to the power sector,' it said.

CIHLDG - CIMB Research rates CI Holdings a Buy, TP RM4.78

Stock Name: CIHLDG
Company Name: C.I. HOLDINGS BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research said sugar was the main topic of discussion at the Thursday, April 21 post-3QFY6/11 briefing by CI Holdings Bhd.

It said on Friday, April 22 CIH has no plans to raise selling prices yet even though it is now paying a market price of around RM2.62/kg for sugar, 38% higher than the last subsidised price of RM1.90/kg.

'Other highlights are 1) a continued rise in sales of non-carbonated drinks, and 2) improvement of infrastructure through a new PET line. Our EPS forecasts are intact, which, together with an unchanged valuation basis of parity with our 14.5x CY12 target market P/E, keeps our target price at RM4.78.

'We continue to rate CIH a BUY and our top F&B pick given the potential catalysts of 1) an increasingly marketable product line, and 2) M&A. Thanks to its recent price weakness, the stock is now an attractive investment proposition, offering single-digit FY12-13 P/Es and 4.1% dividend yield,' CIMB Equities Research said.

TENAGA - Tenaga downgraded at RHB, ECM Libra

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

Tenaga Nasional Bhd was cut to “hold” from “buy” at ECM Libra Capital Sdn Bhd, which said the Malaysian power producer faces “challenging headwinds” from higher coal prices.

The share price estimate was kept at RM6.54, Bernard Ching, an analyst at ECM, wrote in a report today.

Tenaga Nasional Bhd was cut to “underperform” from “market perform” at RHB Research Institute Sdn Bhd, which said the Malaysian power producer “lacks catalysts” due to rising coal prices and slowing demand.

The fair value was reduced to RM5.60 from RM6.90, Lim Tee Yang, an analyst at RHB, wrote in a report today. -- Bloomberg

April 21, 2011

SAPCRES - SapuraCrest ramping up asset expansion

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

SapuraCrest Petroleum Bhd
(April 21, RM3.70)
Maintain buy at RM3.67 with fair value of RM4.75: We reiterate our 'buy' call on SapuraCrest Petroleum Bhd (SapCrest) with an unchanged fair value of RM4.75 based on an unchanged FY12F price-earnings ratio (PER) of 22 times.

We recently met with Sapura group's executive director for group treasury and corporate finance, Chow Mei Mei, and SapCrest's new chief financial officer, Aliza Ashari.

The key highlights of our meeting with management are: (i) No firm time line for an equity raising exercise at this stage, likely awaiting the announcement of the results of SapCrest's tenders which will provide greater clarity for its proposed US$900 million (RM2.7 billion) capital expenditure requirements.

(ii) Besides additional marginal oilfield projects, the group may be looking at acquiring at least two additional derrick lay barges (DLB) for SapCrest's installation of pipeline and facilities (IPF) division for domestic and overseas jobs. Each DLB could cost US$200 million (RM600 million) to US$250 million, depending on the vessel specifications.

(iii) As the group's acquisitions and capital raising exercise are still at the planning stage, we maintain FY12F/14F earnings. Our FY12F earnings of RM281 million is 4% below consensus earnings of RM293million, which we understand may be aggressive given that the group's IPF segment may be weaker this year.

(iv) As guided earlier, the pipe-laying and installation segment, which accounted for 36% of SapCrest's FY11 earnings before interest and tax (Ebit), is likely to register slightly lower contributions in FY12F due to higher one-off jobs in FY11;

(v) Its marine division, which registered a surprise Ebit of RM13 million in 4QFY11 (against a RM39 million loss in 3QFY11 and RM44 million loss in 4QFY11), is expected to remain in the black this year. The turnaround stemmed from improved charter rates and utilisation of its seven marine support vessels,'' and additional work for this segment's 14 ROVs and two SDS.

(vi) The drilling division, which contributed 47% of the group's FY11 Ebit, will be flat in FY12F as the five tender rig charter contracts will need to be renewed only after January 2012.

(vii) SapCrest's outstanding orders are currently worth RM8.6 billion, which will last another three years.

But the group's Pan-Malaysian transport and installation project has the option for two annual renewals.
Hence, the group could add another RM3 billion to RM12 billion to its net order book, which remains by far the largest order book in Malaysia's oil and gas industry.

The stock currently trades at an attractive CY11F PER of only 17 times vis-''-vis over 20 times for Dialog Group Bhd, Malaysia Marine and Heavy Engineering Sdn Bhd and Kencana Petroleum Bhd. ' AmResearch, April 21

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

IGB - AmResearch keeps 'hold' call on IGB

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

AmResearch expects a decent take-up rate for two of IGB Corp's upcoming residential projects this year, given that it has strong followers, despite the soft condo market within the Kuala
Lumpur City Centre and Golden Triangle area.

One of the projects is G Residence in Desa Pandan. It comprises 475 service apartment units with a retail podium, said to be priced around RM800 per square feet, given that the site is facing the upmarket Jalan U-Thant.

In a note today, AmResearch reaffirmed its "hold" rating on IGB, given that the group has not taken advantage of the robust residential property market with the lack of new launches over the past two years.

"However, its income would be supported by its investment properties mostly located within the mature Mid Valley City, accounting for 55 per cent of our financial year 2011 forecast earnings estimate," it said. -- Bernama

TENAGA - Affin Research maintains Buy on Tenaga, unch FV RM7.20

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

KUALA LUMPUR: Affin Investment Research is maintaining its Buy on TENAGA NASIONAL BHD [] (TNB) with an unchanged fair value of RM7.20 target price, based on a 10% discount to DCF of RM8 a share (discount rate 7%; growth rate 3%.

It said on Thursday, April 21 that TNB's recent RM107 million investment for a 22% stake in Integrax was purely to facilitate the operational efficiency of the group's wholly-owned Manjung coal-fired power plant.

Integrax owns Lumut port ' which comprises of two terminals, that is the Lekir Bulk Terminal (LBT) and Lumut Maritime Terminal (LMT). LBT contributes more than 90% of Integrax's earnings and provides coal handling and coal delivery services to TNB's Manjung power plant.

Affin Research said to ensure Manjung's power plant reliability, coal procurement, shipment and storage chain process will have to be seamlessly integrated.

It said for example, Manjung pays LBT a fixed and variable rate (spelled out in the 25-year 'concession like' Jetty Terminal Usage Agreement) amounting to about RM85 million per annum. This amount is small ' just 6% of the actual annual coal cost of about RM1.5 billion (based on five million tonnes of coal usage per annum x US$100 per tonne.

Despite the small cost involved in unloading the coal, any disruption in the chain process will ultimately affect the power plant's availability and reliability. In essence, LBT is Manjung's only viable mean of unloading the coal to meet its plant requirements.

'Thus, the above investment is seen to enhance fuel security for the Manjung power plant, especially crucial now that it undergoes a further 1 x 1,00MW capacity expansion ' scheduled to come on-stream by March 2015,' it said.

Affin Research said whilst Manjung is Integrax's single largest customer, TNB has no legal right to use the Lumut jetty. The jetty's legal owner lies with LBT. Thus, hypothetically speaking, Manjung's coal-handling process could potentially face capacity constraint and risk being de-prioritised should LBT have gone ahead with Vale's iron ore transhipment proposal (apparently terminated in 4QFY10).

The research house said whilst it does not believe that the Integrax investment was dearly required, it obviously can help ensure that Manjung remains a key priority to LBT and Integrax.

AXIATA - OSK Research maintains Neutral on telcos

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

KUALA LUMPUR: OSK Research is maintaining its Neutral call on telcos but downgraded DiGi from Buy to Neutral.

It said on Thursday, April 21 Malaysia and Singapore have agreed to cut roaming rates by 20% for voice calls and 30% for SMS with effect from May 1. The mobile operators that have signed reciprocal agreements to cut roaming tariffs are SingTel, StarHub, M1, Celcom Axiata, Maxis, Digi and U Mobile.

'While lower roaming rates are typically negative for the telcos in the short term given the inelastic nature of roaming calls, it is expected to stimulate usage in the longer term to offset the revenue dilution,' it said.

OSK Research is maintaining its NEUTRAL recommendations for SINGTEL (FV: S$3.00) and STARHUB (FV: S$2.85) whilst keeping its BUY rating on M1 (FV: S$2.85), its'' top pick for the Singapore telecoms sector.

For the Malaysian mobile telcos, it is retaining its BUY recommendation on AXIATA (BUY, FV: RM5.83) and NEUTRAL call on MAXIS (FV: RM5.20).

'We are downgrading our recommendation on DIGI to NEUTRAL from BUY previously as its share price has rallied 15% since our upgrade in late January and has surpassed our DCF fair value of RM27.90,' it said.

TENAGA - Tenaga slips ahead of results

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

KUALA LUMPUR: TENAGA NASIONAL BHD [] shares slipped in early trade on Thursday, April 21 ahead of the release of its financial results for the second quarter ended Feb 28, 2011 after market close.

At 9.15am, Tenaga was down two sen to RM6.09 with 36,600 shares traded.

In the first quarter, Tenaga posted net profit of RM712.90 million.

AmResearch reiterated its Hold call on Tenaga but with a lower discounted-cashflow derived fair value of RM6.90 a share on lower earnings expectations for FY11 ending Aug 30, 2011.

AmResearch had downgraded FY11F earnings by 17% to RM2.4 billion as it raised its coal assumption by US$10 a tonne to US$110 a tonne in the absence of any off-setting tariff rate increase.

April 20, 2011

PETGAS - PetGas transforms

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

Petronas Gas Bhd
(April 20, RM11.22)
Upgrade to buy from hold with revised target price RM13.50 (from RM11.40): PetGas will turn into a multi-utility player with the completion of its Melaka regasification plant in July 2012 and Kimanis power plant in 2013.

We expect the regasification services agreement (RSA) between PetGas and Petroliam Nasional Bhd (Petronas) to be finalised soon.

There will be no fuel cost risk under the RSA as gas supply will be procured by Petronas. Assuming RM1.5 billion investment and 9% internal rate of return (IRR), the plant will add 18% to net profit from FY13 onwards.

We estimate IRR at 9% for the Kimanis power plant, and PetGas' 60% stake will entitle it to about RM130 million annual contribution from FY14 onwards.

PetGas registered strong net cash of RM2.1 billion (RM1.06 per share) for 9M11. We expect capital expenditure to rise to RM1.5 billion per year over FY12/13 with the new investments, but free cash flow will remain strong at more than RM600 million due to improved profitability under the fourth gas processing and transmission agreement (GPTA).

PetGas does not have a dividend policy. We assume a 66% to 68% net payout for FY11/12F with sustainable 50 sen dividend per share.

We expect higher revenue for PetGas' PGU gas volume upon completion of the Melaka regasification plant, as the fourth GPTA allows the use of third-party gas. We raise FY13/14F net profit by 3% to 18% after imputing additional 200mmscfd of gas volume that will be transported by PGU, and maiden contribution from the regasification plant.

Consequently, our discounted cash flow-derived target price is raised to RM13.50. ' HwangDBS Vickers Research, April 20

This article appeared in The Edge Financial Daily, April 21, 2011.

HELP - Education sector poised for growth

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

Education sector
Initiating coverage with overweight rating: The Malaysian government recognises the importance of education as a critical asset of the nation. It was identified as one of the services sub-sectors for further growth and development during the 2006-2020 Industrial Master Plan 3 (IMP3).

Between 2007 and 2011, operating expenditure for education grew at a compound annual growth rate (CAGR) of 5.6%. In the 2011 budget, education accounts for 24.5% and 21.1% of the federal government's operating and development expenditure respectively. The education sector contributed approximately RM27 billion or 4% of gross national income in 2009, with RM23 billion from government-funded education services alone.

Over the years, the enrolment of students in private institutions has outpaced public institutions, with a CAGR of 7% (from 2002 to 2010) against 5.6% for public institutions. In 2010, private tertiary institutions enjoyed a 48% share (versus 41% in public institutions and 11% in polytechnics, community colleges and KTAR respectively) of student enrolments.

Factors that contributed to the growth of private institutions include: (i) Quota system ' while there is no quota system to enter Form Six, under the matriculation system only 10% of the places are open to non-bumiputera students; (ii) Language ' almost all private institutions use English as the principal medium of instruction; (iii) Foreign students ' foreign students are an important element of total enrolment. From 2003 to 2010, the foreign student population rose at a 42% CAGR and 72% of foreign students are in private institutions; (iv) Lack of capacity in public institutions; and (iv) Rising affluence.

Risks include: (i) Change in regulations set by the governing bodies; and (ii) A change in policy by the government might impact the eligibility criteria for students to obtain the loans/scholarships.

We believe the education sector is well poised for growth and remains a critical driver for Malaysia's transformation into a high-income nation due to its impact on productivity and human capital development.

Key growth drivers include: (i) Increasing in number of students in both public and private institutions; (ii) Strong partnerships with leading universities from all over the world; and (iii) Increasing number of foreign students.

We initiate coverage on SEG International Bhd (fair value: RM4.54) and HELP International Corp Bhd (FV: RM2.87). ' RHB Research, April 20

This article appeared in The Edge Financial Daily, April 21, 2011.

BURSA - Bursa Malaysia boosted by robust market

Stock Name: BURSA
Company Name: BURSA MALAYSIA BHD
Research House: MAYBANK

Bursa Malaysia Bhd
(April 20, RM8.11)
Maintain sell at RM7.93 with target price RM7.30: Net profit of RM40.5 million in 1Q11 (+44% year-on-year, +36% quarter-on-quarter) made up 30% of our full-year forecast and 26% of consensus. We make no change to our earnings forecasts as we expect market activities to taper off in 2Q11.

We maintain our 'sell' call as the stock remains overvalued, trading on 31 times current year earnings, significantly above its larger-sized peers and recent M&A valuations. Our target price is based on sum-of-parts, with 25 times price earnings ratio target on 2011 earnings plus surplus cash.

Equities average daily value (ADV) rose 46% y-o-y and 12% q-o-q to RM2.23 billion (1Q10: RM1.53 billion, 4Q10: RM2 billion) with velocity rising a sharp seven percentage points (ppts) y-o-y and five ppts q-o-q to 42%. Equities ADV and velocity in 1Q11 was the highest since 3Q07 (RM2.56 billion, 50%).
Derivative contracts traded expanded 54% y-o-y and 26% q-o-q to 2.17 million, a record quarter.

Consequently, trading revenue from equities and derivatives rose to 54% and 12% of total revenue (1Q10: 49%, 10%). Earnings before interest and tax margin rose 5.1ppts y-o-y and 4.2ppts q-o-q.

Expect a slower 2Q. Equities ADV was the highest in January 2011 (RM2.67 billion), but has been tapering off (February: RM2.26 billion, March: RM1.84 billion) to RM1.92 billion in the first 13 trading days of April. Foreign selling has been prevalent in the emerging markets, while regional interest rate hikes also contributed to the weakness in equities.

The situation is expected to persist into 2Q with equities volume tapering off. Our house view is for a stronger Malaysian equities market in 2H11 supported by domestic economic strength, the Economic Transformation Programme implementation, and renewed expectations for a general election.

We make no change to our forecasts. Our earnings model incorporates an equities ADV forecast of RM1.84 billion for 2011 (2010: RM1.57 billion), rising to RM2.11 billion in 2012, which would be supported by rising trading liquidity from GLIC/Fs' PLC share divestment programmes and new listings.

Longer-term earnings upside potential could come from the derivatives business although the impact could be muted in the near term. We forecast a 19% growth in net profit for 2011 and another 19% in 2012. ' Maybank IB Research, April 20

This article appeared in The Edge Financial Daily, April 21, 2011.

MAS - MAS joining the big league

Stock Name: MAS
Company Name: MALAYSIAN AIRLINE SYSTEM BHD
Research House: OSK

Malaysian Airline System Bhd
(April 20, RM1.81)
Downgrade to sell at RM1.18 with revised target price RM1.60 (from RM1.76): MAS took investors and sell-side analysts on a one-hour joyride on its newly delivered, latest generation A330-300. The aircraft's cabin, equipped with the best in-flight entertainment and seat comfort, is a sight to behold.

This may be the game changer for MAS as it will put the national carrier on par with the likes of Singapore Airlines, Emirates and Cathay Pacific. With the latest generation A330s joining its ageing fleet, MAS will be on par with the leading full-service carriers in terms of passenger comfort and cabin ambiance, which it lacked previously despite having one of the world's best ratings for cabin crew hospitality.

Overall, the enhancement in customer experience from the new aircraft looks set to lure passengers loyal to other carriers to give MAS a try, notably business travellers. The new A330s will be deployed to serve the Middle East, Australia, China and India routes.

MAS will take delivery of five A330-300s this year and 10 more up to 2015. The airline also has the option of taking up an additional 10 A330- 300s.

With another four 737-800s, including the five A330-300s, to be delivered this year (either as replacement or as new additions), this would be MAS' key earnings kicker for a turnaround as the new aircraft offer far superior fuel burn (on better aerodynamics and engineering enhancements coupled with the higher number of seats and tonnage load), lower maintenance costs and more reliability and flying hours compared with its old aircraft.

Our assumption is premised on a 6% available seat kilometre (ASK) growth. MAS aims to possess the youngest fleet among the world's airlines by 2015. This will allow it to cut unit costs by 15% over the next few years, which we think is achievable, judging from the mileage recorded by AirAsia's associates (up 3% to 6% y-o-y) after their fleet renewal.

For MAS, we see improvement in the quantum of savings given that the A330-300s are for long-haul flights, which effectively yield better mileage compared with short-haul routes as a significant amount of fuel is consumed during take-off.

We have lowered our FY11/12 earnings by 18% after including a higher jet fuel price assumption of US$124.5 (RM376) per barrel for FY11, which would effectively nudge up the effective jet fuel barrel price the airline consumes to US$115 per barrel from US$111 per barrel (given that it has hedged 25% of its FY11 fuel requirement at an average price of US$88 per barrel world trade index).

Our sensitivity analysis found that every US$1 increase in jet fuel price per barrel from our base case assumption (of US$115 per barrel) will nudge up earnings by 5.63% for MAS.

We expect MAS to be profitable this year and reiterate that the carrier is on track for a turnaround in FY13. However, we think that high oil prices will weigh on sentiment and dampen earnings for the time being. Following the lower earnings forecast we downgrade MAS to 'sell' from 'neutral'.

Our new fair value on MAS is RM1.60 (previously RM1.76), premised on 8.5 times earned value/earnings before interest, taxes, depreciation and amortisation, its average long-term historical valuation, and after taking off its FY11 net debt totalling RM1.8 billion (net gearing of 62%). ' OSK Research, April 20

This article appeared in The Edge Financial Daily, April 21, 2011.

TENAGA - MIDF reiterates 'buy' call on Tenaga

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

MIDF Research has reiterated its "buy" call on Tenaga Nasional Bhd (TNB) and maintained the target price of RM7.98, driven by favourable power demand and gains from foreign exchange (forex) activities.

MIDF in a research note today said power demand is expected to grow by 4.8 per cent this year supported by commercial and industrial activities on the back of sustained economic growth.

Meanwhile, the strengthening ringgit against the US dollar and Japanese yen, will see more forex gains by the national electricity company.

"Based on the current levels of exchange rate, TNB could capture more than RM200 million in forex gains," it said, adding, every one per cent gain in exchange activities against US dollar and Japanese yen, is estimated to raise the company's net earnings by 1.2 per cent and 1.4 per cent respectively.

For financial performance, it said TNB's first half financial year 2011 result, is likely to be within its expectation of RM1.2 billion.

The results are expected to be released tomorrow.

However, the second quarter financial year 2011 results is estimated to be lower by 40 per cent year-on-year and 45 per cent quarter-over-quarter, due to higher operating costs reflected by an increase in coal prices, MIDF said. -- Bernama

SEG - SEG International up after RHB Research initiates coverage

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

KUALA LUMPUR: SEG INTERNATIONAL BHD [] (SEGi) shares advanced on Wednesday, April 20 after RHB Research initiated coverage on the stock with an outperform rating and fair value RM4.54.

At 10.45am, SEGi rose 14 sen to RM3.83.

RHB Research said its indicative fair value for SEG was pegged at a target FY11 PER of 18 times, a 10% premium over our target FY11 PER for HELP of 16.5 times and the consumer sector average FY11 PER of 16.5 times.

'We believe the premium is justified given the: 1) SEGi's superior net profit margin; 2) the wider array of courses offered as well as the number of students; and 3) larger market capitalisation,' it said on April 20.

BURSA - AmResearch maintains Buy on Bursa Malaysia, unch FV RM9.60

Stock Name: BURSA
Company Name: BURSA MALAYSIA BHD
Research House: AMMB

KUALA LUMPUR: AmResearch said Bursa Malaysia's earnings in the first quarter ended March 31, 2011 was boosted by strong volume and high velocity.

'We maintain our BUY rating on BURSA MALAYSIA BHD [] with an unchanged fair value of RM9.60. Our fair value is still pegged to fair P/E of 30x,' it said on Wednesday, April 20.

Bursa reported strong net earnings of RM40.5mil in 1QFY11, chalking up a robust 35.9% QoQ and 41.9% YoY growth.

'Annualised net earnings came in -4.2% below our estimate but was +2.5% above consensus forecast of RM157mil. The top line surpassed the RM100mil-mark, registering overall revenue of RM107.8mil in 1QFY11.

'This is the first time the quarterly revenue has surpassed the RM100mil level since almost three years ago in 3QFY07's RM111.3mil,' it said.

ALAM - Alam advances in early trade

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

KUALA LUMPUR: ALAM MARITIM RESOURCES BHD [] shares rose on Wednesday, April 20 as CIMB Research said the company's plan to venture into pipe installation was coming to fruition, and upgraded the stock to Buy from Sell previously.

At 9.15am, Alam was up nine sen to RM1.14 with 3.99 million shares done.

The research house said that Alam's 50:50 JV with Swiber was set to clinch a US$50 million to US$60 million contract relating to Petronas's Sabah oil & gas terminal (SOGT) and was teaming up with the Sabah state agency Yayasan Sabah on O&G related works.

CIMB Research said imputing the contract in its FY11 forecasts and assuming the award of similar-sized contracts in FY12-13, it raised its EPS by 16.9% for FY11, 13.3% for FY12 and 11.1% for FY13.

'Given Alam's improving prospects, we now value it at a 20% discount to our 14.5x target market P/E instead of 30%, which, together with our earnings upgrades, increases our target price from RM1.03 to RM1.40.

'We upgrade Alam from Sell to Buy, with the potential catalysts being 1) the announcement of the SOGT contract, and 2) more pipe installation ventures,' it said.

ALAM - Alam advances in early trade

ALAM - Alam Maritim lifted to 'buy' at CIMB

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

Alam Maritim Resources Bhd was raised to “buy” from “sell” at CIMB Investment Bank Bhd, which said the Malaysian oil and gas company’s joint venture may win a pipe-installation contract worth as much as US$60 million.

The share estimate was increased to RM1.40 from RM1.03, Norziana Mohd Inon, an analyst at CIMB, wrote in a report today.

The stock rose the most in three months in Kuala Lumpur trading, climbing 5.7 per cent to RM1.11 at 9:11 a.m. local time, set for its biggest gain since Jan. 12. -- Bloomberg

MAS - MAS downgraded to 'sell' at OSK Res

Stock Name: MAS
Company Name: MALAYSIAN AIRLINE SYSTEM BHD
Research House: OSK

Malaysian Airline System Bhd was cut to “sell” from “neutral” at OSK Research Sdn Bhd, which said higher oil prices will hurt the national carrier’s earnings.

The stock’s fair value was reduced to RM1.60 from RM1.76, OSK analysts led by Chris Eng wrote in a report today. -- Bloomberg

April 19, 2011

SIGN - Signature International riding on robust property mart

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

Signature International Bhd
(April 18, 75 sen)
Maintain buy at 75 sen with target price of RM1.18: SIB's unbilled order book currently stands at RM70 million. Given the short-term nature of the kitchen maker's contracts of three to six months, we think SIB may be able to recognise half of this amount for this financial year and the remainder the following fiscal year.

As stated in our previous report, SIB estimates that it could secure projects worth RM200 million to RM300 million going forward, as its market space rebounds following the rebound in the general property market.

Upon ascribing a 50% success rate, we believe SIB could book in new orders amounting to RM100 million to RM150 million for FY12. Taking an average assumption, this means SIB could well chalk up RM160 million in revenue for FY12, which is close to our forecast of RM170.3 million.

During its presentation, SIB highlighted its involvement with reputable property developers such as Bandar Raya Developments Bhd, S P Setia Bhd, Mah Sing Group Bhd and MK Land Holdings Bhd. This reinforces our view on the sustainability of SIB's ability to secure future projects within Malaysia even in the event of a property downcycle, as house buyers will always tend to prefer renowned developers, thus providing a base for recurring projects that SIB can tender for.

SIB serves all market segments via its brands Kubiq (value brand), Signature Kitchen (high-end), Binova and Nobilia (super high-end). The company's earnings are expected to still be predominantly contributed by its Signature Kitchen (SK) brand, which accounted for more than 90% of its revenue as at FY10.

Going by the large number of high-end apartments in the Klang Valley (ranging from RM450psf and above) that are nearing completion by end-this year, SIB's SK brand looks poised to cash in on this segment. As for projects where kitchen systems are not pre-installed, we understand that SIB has tie-ups with some of the above developers to promote SIB's services to house buyers. ' OSK Research, April 18

This article appeared in The Edge Financial Daily, April 19, 2011.

AXIATA - Axiata's revenue growth to moderate

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

Axiata Group Bhd
(April 18, RM4.74)
Upgrade to outperform at RM4.76 with fair value of RM5.75: Having achieved 8% revenue growth for FY10, we expect Celcom's revenue growth to moderate towards mid-single digits for FY11. Growth will come from data and expanding its range of device offerings. So far, we gather from management that competition has been rational. Despite YTL Communications' new product and pricing launches, we gather from management that the impact is not yet significant.

Similar to Celcom, XL's revenue growth for FY11 will moderate, and will likely be in line or above the industry (which management estimates at 8%), compared with the 27% increase achieved for FY10. Nonetheless, management is confident of at least 50% earnings before interest, tax, depreciation and amortisation (Ebitda) margin for FY11. Looking ahead, management believes competition in Indonesia would remain relatively stable, as mobile penetration is now relatively high at 86%. Hence, management believes a potential price war is unlikely.

We gather from management that Axiata does not rule out increasing its stake in Idea (currently 19%) at the appropriate price. Management opines that media reports of the Aditya Birla Group looking to sell its 47% stake in Idea are quite likely speculative, as the Aditya Birla Group has denied it was in talks to sell the stake.

We gather from management that Idea does not hold excess 2G spectrum. This should relieve regulatory risks in relation to the proposed excess spectrum fees.

Dialog completed a significant turnaround in FY10 on the back of 14% revenue growth which, however, will moderate to mid-single digitd in FY11. Management expects Ebitda margins to be sustainable while the competitive environment should remain stable.

The issue of spectrum renewal fee for Robi and the rest of the mobile operators continues to overhang. The exact fees have not yet been determined, though at present it could be about US$400 million (RM1.2 billion). Hence, management does not rule out a cash call from Robi. Nonetheless, management hopes to see a resolution in June, given that the licences expire in November.

We maintain our earnings forecasts with the following risks: (i) weaker-than-expected performance by Celcom as well as by regional telcos due to competition as well as macroeconomic factors (inflation and so on); and (ii) over-priced acquisitions.

We still like Axiata, which offers growth prospects albeit moderating this year. We see highest regulatory risks in Bangladesh, which could shave off 16 sen from our fair value. Nonetheless, we maintain our sum-of-parts fair value of RM5.75 for now, but upgrade to 'outperform' due to recent share price weakness. ' RHB Research, April 18

This article appeared in The Edge Financial Daily, April 19, 2011.

DAYANG - Solid strides ahead for Dayang

Stock Name: DAYANG
Company Name: DAYANG ENTERPRISE HOLDINGS BHD
Research House: HWANGDBS

Dayang Enterprise Holdings Bhd
(April 19, RM1.99)
Maintain buy at RM2.02 with target price RM2.70: After securing a RM802 million topside maintenance contract in February 2011, Dayang currently has its hands full with a RM1.5 billion outstanding order book (six times book-to-bill). Execution will be the key priority for the company. It will take delivery of its fifth work boat, Dayang Topaz (cost RM64 million), by end-2011 and second supply boat, Dayang Cempaka (cost RM9 million), by mid-2011, which will be used for the RM802 million contract. We understand that there are potential maintenance and hook-up and commissioning jobs worth RM400 million to RM500 million to be awarded this year. However, given Dayang's record order book, it will focus on execution and likely target new high-margin jobs.

Dayang will now have a RM320 million cash pile after the Borcos Shipping Sdn Bhd disposal, which was completed yesterday. This is likely to prompt M&A, including vessel and brownfield services companies, although we understand that there is nothing specific at the moment. Sequentially, we lower our FY11/13F earnings by 17% to 19% to remove Borcos contributions from our forecast. Dayang's margins have consistently outperformed the sector and its closest competitors ' Petra Energy Bhd and Vastalux Energy Bhd. In FY10, Dayang's operating margin was 33.4% against Petra Energy's 3.2%. Vastalux recorded an operating loss that year.

We maintain our RM2.70 target price after rolling forward our valuation base to FY12F, pegged to 15.5 times price-earnings ratio. We project Dayang to register two-year earnings compound annual growth rate of 19%, underpinned by its record order book and superior margins. Dayang is currently trading at attractive ex-cash (after Borcos disposal) FY11F PER of 10 times against the sector's 17 times. ' HwangDBS Vickers Research, April 19

This article appeared in The Edge Financial Daily, April 20, 2011.

WASEONG - Wah Seong - show me the contracts

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

Wah Seong Corp Bhd
(April 19, RM2.10)
Maintain neutral at RM2.13 with target price RM2.35: The Gorgon gas fields pipe-coating project in Western Australia finally delivered its first contribution to Wah Seong Corp (WSC) in 4QFY10, after a six-month delay. We understand that about 17% of the works were completed by end-1Q11, compared with 9% at end-2010.

This RM550 million project is expected to be fully completed in 1Q12. WSC's order book stood at RM1.4 billion as at end-2010, with the pipe-coating segment'' accounting for 46% or RM644 million (a big portion is from the Gorgon project), followed by engineering 32%, trading 10%,'' renewable energy 9% and pipe manufacturing 3%.

Assuming a job burning rate of RM450 million per quarter, the current'' order book will only last WSC until 3QFY11. More significant contracts are required to meet our and consensus' FY12 sales estimates of about'' RM1.8 billion and RM1.9 billion respectively. ''

WSC's present tender book is at circa RM5.3 billion with the bulk believed to be pipe-coating-related jobs, including a potential RM450 million to RM550 million each for Australia Pacific LNG and Gladstone LNG projects.

The outcome of'' the bids for both projects is expected to be known soon (by end-1HCY11). We have factored into our forecast either one of these two projects, which will contribute positively to WSC starting 1QFY12.

In addition, WSC has already been prequalified for the Wheatstone LNG and Ichtys projects in Western Australia, the submission of which will only start at the end of this year pending the completion of the environmental assessment. On a positive note, the planned Wheatstone LNG project will be developed by Chevron, the project operator of'' the Gorgon project. WSC's track record at Gorgon will be handy. ''

Tenders for the Malikai project off Sabah have been postponed till the end of this year due to some technical issues. We'' also learn from management'' that WSC has already put in its bid for the Kebabangan pipe-coating project off Sabah, which'' is initially planned to come after Malikai.

Petroliam Nasional Bhd will award the contract'' by June/July 2011. We believe WSC stands a'' good chance to win the job, given its deepwater coating capabilities and track record in Gemusut-Kakap off Sabah and Turkmenistan. The Kebabangan and Malikai pipe-coating works are estimated to be worth about RM200 million each.

In FY09, the pipe manufacturing division contributed 32.2% of WSC's pre-tax profit'' thanks to higher profit margins commanded from the Sabah Sarawak Gas Pipeline project (SSGP). Following completion of the project, contribution from the pipe manufacturing division declined significantly, accounting for only 1.2% of total pre-tax profit in FY10, a fall of -98.7% year-on-year.

Management indicated it is planning to downsize the pipe manufacturing division given its lacklustre outlook going forward. On the other hand, management is positive over the renewable energy business which has emerged as the second largest pre-tax profit contributor in FY10, overtaking the pipe manufacturing division. We expect'' growing renewable energy business to offset potential losses of the pipe manufacturing segment. ''

We are keeping our FY11 and FY12 numbers unchanged, for which we have factored in WSC's current RM1.4 billion order book and RM1.6 billion annual job replenishment assumption. Key risks include delays in contracts awarded and lower than expected job replenishment.

Given the limited competition in the deepwater pipe-coating business, we believe WSC will benefit from the ongoing'' development of deepwater oilfields. However, WSC's new contract flow remains slow and FY12/FY13 earnings still lack visibility at the current juncture.

As such, we are maintaining our 'neutral' stance unless the company secures more sizeable contracts. By ascribing a FY11 price-earnings ratio of 15.7 times, which is at a discount to its historical PER average of'' 20.4 times, we derive our target price of RM2.35 per share. ' MIDF Research, April 19

This article appeared in The Edge Financial Daily, April 20, 2011.

UEMLAND - UEM Land: A giant stirs

Stock Name: UEMLAND
Company Name: UEM LAND HOLDINGS BHD
Research House: OSK

UEM Land Holdings Bhd
(April 19, RM2.69)
Initiate coverage at RM2.72 with buy call, fair value RM3.52: As UEM Land Holdings Bhd (ULHB) is now the largest property stock on Bursa Malaysia by market capitalisation and landbank size, it is a strong candidate for inclusion as an index component of the FBM KLCI, which is due for review in June. With its inclusion, ULHB would be the only pure property stock in the index, which we believe will raise its profile and visibility, which would then clearly justify its premium valuation given that the FBM KLCI's top 30 stocks are typically used as a benchmark portfolio.

Previously, due to the company's lack of experience in niche/lifestyle integrated residential and commercial developments, the key concern of investors had been the execution risk. However, we believe the group's underlying execution risk has been reduced after its acquisition of Sunrise Bhd. Armed with its vast experience and track record in this area, coupled with the involvement of its major shareholder Datuk Tong Kooi Ong, Sunrise will be the key driving force in the development of ULHB's future projects.

Following a bilateral agreement signed in May 2010, the governments of Malaysia and Singapore agreed to move the KTM terminal station from Tanjung Pagar to Woodlands in exchange for six parcels of land in Marina South and Ophir-Rochor, which will be jointly developed by a 60:40 JV between the two countries' sovereign wealth funds Khazanah Nasional and Temasek Holdings. As Khazanah's property arm, we believe it is very likely ULHB will be appointed the key developer to undertake the project on behalf of Khazanah. This will be a significant earnings catalyst for the developer.

Our fair value of RM3.52 is based on one times realisable net asset value on a fully-diluted basis, assuming the full conversion of the company's redeemable convertible preference shares. With a more than 20% upside we initiate coverage on ULHB with a 'buy'. Despite its premium valuation over its peers, we believe that the stock's potential inclusion in the FBM KLCI and positive news from Iskandar Malaysia will be its upward re-rating catalysts. Due to its size and promising growth prospects, ULHB's liquidity is among the highest of all listed property stocks as foreign and local institutional interest has picked up, especially following its acquisition of Sunrise. ' OSK Research, April 19

This article appeared in The Edge Financial Daily, April 20, 2011.

CMMT - CMMT results in line with estimates

Stock Name: CMMT
Company Name: CAPITAMALLS MALAYSIA TRUST
Research House: AMMB

CapitaMalls Malaysia Trust
(April 19, RM1.13)
Maintain buy at RM1.12 with revised fair value RM1.26 (from RM1.22): We reaffirm our 'buy' rating on CapitaMalls Malaysia Trust (CMMT) with our fair value raised to RM1.26 from RM1.22 previously. We arrive at our fair value after tagging a 10% discount to our revised discounted cash flow value of RM1.40 ' to incorporate the Gurney Plaza extension.

At our fair value, the REIT offers an attractive yield of 6.7% and a 260-basis point spread over the 10-year Malaysian Government Securities (MGS) yield of 4.1%.

CMMT's 1QFY11 net income came in at RM31.4 million, largely in line with our and street estimates, covering 29% and 22%, respectively. CMMT'' declared a dividend of 1.7 sen per share for 1QFY11.

There is no year-on-year (y-o-y) comparison as CMMT was only listed in June 2010. But on a sequential basis, net income grew by 11% due to lower management costs.

We have raised our earnings for FY11F/12F by 14% to 15% to RM123 million and RM131 million respectively, as we incorporate an additional 140,000 sq ft (or +8%) into the portfolio following the recent injection of the Gurney Plaza extension. We are also introducing FY13F earnings at RM138 million, representing 5% y-o-y growth.

CMMT's portfolio remains healthy with the occupancy rate at almost 100%. We understand shopper traffic remains strong at 11.9 million in 1Q11, although this was a slight dip compared with 1Q10's 12.1 million ' possibly due to festive holidays during the period.

The portfolio also showed a positive rental reversion of 7.6%, mostly contributed by Gurney Plaza with rental reversion of +9.5%. Risks to dividend per unit are muted as circa 64% to 70% of its gross rental income for FY11F/13F has already been secured.

We remain a buyer of CMMT with our investment thesis centring around CMMT as a pure shopping mall play. This provides the best exposure to Malaysia's rising consumer affluence via an attractive portfolio of retail assets in the Klang Valley and Penang. Retail sales are expected to grow 3% to 5% over the next three years, supported by Malaysia's expected GDP growth of 4.5% to 5.5%.

CMMT is also backed by a reputable sponsor, CapitaMalls Asia (CMA), a specialist in mall REITs with a solid track record. CMA's extensive network, managing malls in India, China, Japan and Singapore, provides key knowledge and understanding of tenants' requirements. ' AmResearch, April 19

This article appeared in The Edge Financial Daily, April 20, 2011.

SEG - Kenanga lifts SEGi's earnings forecast

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

SEG International Bhd's (SEGi) earnings forecast for the financial year 2011 has been increased further by 11.5 per cent to RM66.8 million and by nine per cent to RM85 million for next year on additional income, following the establishment of a nursing faculty at its Kota Damansara campus, says Kenanga Research.

"We are positive over the developments at Segi as it will bring additional income for the company," the research firm said in a note today.

Kenanga said SEGi and South Korea’s Chung Cheong University will jointly establish the SEGi–Chung Cheong International Nursing Faculty in Malaysia.

It said the management expects to get about 300 students from Chung Cheong and this will result in almost RM7 million in extra revenue for SEGi in the first year and more in the following year.

Following the earnings revision, Kenanga is also revising the target price to RM3.83 from RM3.40 previously while maintaining a "buy" recommendation on SEGi. - BERNAMA

TENAGA - OSK maintains 'hold' call on Tenaga

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

Higher coal costs and weak electricity sales in the first half of Tenaga Nasional Bhd''s (TNB) 2011 financial year are likely to weaken the company''s second quarter results to be announced on Thursday.

"Supported by high crude oil prices, coal costs remain persistently high with Newcastle coal at over US$120 per tonne despite a temporary weaker demand due to Japan''s natural calamities," OSK Research said in a research note today.

It expected TNB''s first half electricity sales growth to be weak given that sales for the five-month period from Sept 1, 2010 to Jan 31, 2010 in Peninsular Malaysia grew by only 3.8 per cent year-on-year.

Hence, OSK maintained a hold call on TNB.

"We have downgraded financial year 2011 earnings by 17 per cent to RM2.4 billion due to the raising of our coal assumption by US$10 per tonne to US$110 per tonne in the absence of any off-setting tariff rate increase," OSK Research said.

Currently, the research house said, the greater risk to TNB''s earnings stemmed from the rise in fuel costs and the timing of an electricity tariff hike to offset the higher costs.

Echoing the view that second quarter results would experience a decline, Kenanga Research said further erosions to earnings would eat into TNB''s RM9.2 billion cash pile which is dedicated for several reasons, including repayment of debts and future power plant projects. - BERNAMA

PBBANK - Analysts bullish on Public Bank

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

Public Bank Bhd remains well-positioned to meet the challenges of rising interest rates, backed by a low duration bond portfolio and lower asset risks, says Kenanga Research.

In fact, a rate hike will increase the bank's net interest income given the higher growth rates of loans and low-cost deposits, it said in a research note today.

"Moreover, management has started managing its interest rate risk with the aim of growing the fee-based income by 30 per cent year-on-year for financial year 2011, via stronger contributions from bancassurance and fund management," it added.

Kenanga Research has rated Public Bank an "outperform" with a target price of RM14.80.

Another research firm, HwangDBS Vickers Research expects Public Bank to continue to steer towards growing non-interest income, particularly bancassurance, supported by forex income.

The research firm believed the bank's unit trusts sales would remain the main driver of non-interest income for now.

HwangDBS Vickers has maintained its "hold" recommendation on the bank with target price of RM13.10.

AmResearch also maintained its "hold" recommendation on Public Bank with an unchanged fair value of RM14.30 per share.

For the first quarter ended March 31, 2011, Public Bank Bhd's pre-tax profit rose 19 per cent to RM1.097 billion from RM922.57 million in the same quarter 2010.

Its revenue jumped to RM2.99 billion from RM2.507 billion previously. -- Bernama

UNISEM - RHB Research maintains Outperform on Unisem, fair value RM2.65

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

KUALA LUMPUR: RHB Research Institute said Unisem has reiterated its guidance of 10%-12% sequential revenue decline in 1Q11 due to seasonal factors.

It said on Tuesday, April 19 that Unisem believes the impact to the potential supply chain disruption from Japan is minimal. At worse, it could see a single digit or flat revenue growth in 2Q11 should delays in the supply chain drag volume loading to the 3Q11.

'Nonetheless, Unisem is optimistic of a substantial pick-up in the 2H11 mainly driven by: 1) higher volume loading from its Tier-1 customer; 2) strong demand for WLCSP and QFN; and 3) the pick-up in consumer spending in the US and EU,' it said.

RHB Research said going forward, Unisem sees stronger demand for outsourcing as there could be a change in the landscape of the global semiconductor industry. As Japan's semiconductor manufacturers look to rebuild, it is likely the emphasis would be put on infrastructure and R&D while reducing the dependence on in-house packaging capability, thereby benefitting third-party packaging, assembly and test companies.

It said that following news reports on concerns of a potential supply shortage of a key raw material, Unisem reiterated that it is not directly impacted as it mainly sources its raw materials locally as well as Taiwan and Korea.

Nonetheless, while Unisem highlighted that concern of supply shortages are mitigated, longer-than-expected plant closures of semiconductor vendors i.e. Sony and Toshiba could impact earnings as this could result in lower production of electronic devices.

'Fair value of RM2.65/share is unchanged based on 11x FY11 FD EPS. Maintain Outperform,' it said.

April 18, 2011

AXIATA - Axiata slips on spectrum renewal fee concerns

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

KUALA LUMPUR: Shares of Axiata Group Bhd fell in active trade in late afternoon on Monday, April 18 on worries about the issue of spectrum renewal fee for Robi Axiata Ltd in Bangladesh.

At 3.27pm, it was down four sen to RM3.27 with 11 million shares done.

The FBM KLCI rose 6.84 points to 1,528. Turnover was 740.73 million shares valued at RM966.88 million. There were 450 gainers, 233 losers and 254 stocks unchanged.

RHB Research said the issue of spectrum renewal fee for Robi and the rest of the mobile operators continued to overhang. The exact amounts for the fees have not yet been determined, though at present it could be about US$400 million.

Hence, it said that Axiata did not rule out a cash call from Robi. 'Nonetheless, management hopes to see a resolution in June, given that the licences expire in November,' it said.

On Axiata's operations, RHB Research said it expected Celcom's revenue growth to moderate towards mid-single digit in FY11.

'So far, we gather from management that competition has been rational despite YTL Communications' aggressive marketing,' it said.

RHB Research said it still liked Axiata, which offers growth prospects albeit moderating this year.

'We see highest regulatory risks in Bangladesh, which could shave off 16 sen from our fair value. Maintain our SOP fair value of RM5.75, but upgrade to Outperform due to recent share price weakness,' it said.

AXIATA - Axiata slips on spectrum renewal fee concerns

UMW - CIMB Research downgrades auto sector to Neutral

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

KUALA LUMPUR: CIMB Equities Research has downgraded the auto sector from Overweight to Neutral as supply risks are emerging.

'Emerging supply risks trigger our downgrade of the auto sector from Overweight to NEUTRAL as we have underestimated the seriousness of the supply situation in Japan,' it said ion its research note on Monday, April 18

CIMB Research cautioned that the protracted delay in resumption of full operations at the auto plants in Japan and the resulting lack of visibility in the supply chain for auto assemblers in Malaysia 2-3 months down the road have raised concerns over their short- to medium-term outlook.

'While demand should stay strong due to firm economic fundamentals and consumer sentiment, supply constraints are likely to put the brakes on domestic sales and throw a damper over the Malaysian auto sector. In addition to cutting earnings numbers for all the stocks by 1-5%, we are downgrading UMW from Buy to Hold as we lower its target price from RM8.80 to RM8.00. Tan Chong remains our top pick,' it said.

SIGN - Signature may pay dividends this year: OSK

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

Signature International Bhd is expected pay a net dividend of three sen per share this year and five sen in 2012 compared to zero dividends previously, OSK Research says.

"This means, Signature International will provide net yields of 4.0 per cent and 6.7 percent for the 2011 and 2012 financial years respectively," the research house said in its Malaysia Equity Investment Research Daily today.

It maintained a "buy" call on Signature International shares with a target value of RM1.18.

Signature International is involved in design, manufacture and retail of kitchen and wardrobe systems; marketing and distribution of white goods; and glass and aluminum products.
-- Bernama

PBBANK - Public Bank's 2011 loans growth on track

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

Public Bank Bhd's annualised growth momentum remains largely on track to meet its 14-15 per cent loans growth target for the financial year ending Dec 31, 2011.

OSK Research said the group's provisions also remain well capped as asset quality continues to improve.

Supporting the outlook is the group's mortgage application trend, which remains steady and has showed no sign of decline, unlike the industry's.

It said the industry's mortgage application trend has been on a decline over the past three months, since the 70 per cent loan to value ratio (LTV) cap on third property financing was imposed.

"In fact, management has indicated that the group's latest mortgage application trend for March was surprisingly strong, while that from November 2010 to January 2011 was stable despite a three per cent to 10 per cent month on month dip in the industry trend," said OSK in its research note.

Hence, it expect little surprise from Public Bank, which is expected to release its first quarter financial results later today. - Bernama

CIMB - CIMB a 'buy', says Goldman Sachs

Stock Name: CIMB
Company Name: CIMB GROUP HOLDINGS BERHAD
Research House: GOLMAN SACHS

CIMB Group Holdings Bhd, Malaysia’s second-biggest bank, rose to its highest level in more than a week after the stock was rated “buy” in a new coverage at Goldman Sachs Group Inc, which cited the company’s “high-growth regional footprint.”

The stock climbed 1.1 per cent to RM8.32 at 10:37 a.m. local time in Kuala Lumpur trading, set for its highest close since April 7.

The brokerage has a share-price forecast of RM10 for CIMB, analysts led by David Ng wrote in a report today. -- Bloomberg

SPSETIA - SP Setia gains on fair value upgrade

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

SP Setia Bhd, Malaysia’s biggest property developer, rose to a three-month high in Kuala Lumpur trading after AmResearch Sdn Bhd raised the stock’s fair value to reflect higher real estate prices and earnings growth prospects.

The stock gained 2.3 per cent to RM6.67 at 10.18 am local time, set for its highest close since January 17.

The fair value for SP Setia was increased to RM8.10 from RM7.38, Benny Chew, an analyst at AmResearch, wrote in a report today. - Bloomberg

PROTON - Proton a 'buy' on securing RM1.3b loan: MIDF

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

Proton Holdings Bhd is still a "buy" after the automotive manufacturer secured a RM1.3 billion syndicated loan deal from six lenders, said MIDF Research.

"The amount of financing secured by Group Lotus is within our expected debt-to-equity ratio of 0.3 times level.

"However, we understand its capital expenditure total commitment for the five-year turnaround plan is 480 million pounds (RM2.4 billion), which the secured funding, captured about 56 per cent of its total commitment," MIDF Research said in a research note today.

It did not rule out the possibility of a further fund raising exercise via a rights issue to meet the group''s total capital expenditure commitment. - Bloomberg

MAS - MAS' new A330-300, quality par excellence

Stock Name: MAS
Company Name: MALAYSIAN AIRLINE SYSTEM BHD
Research House: MAYBANK

Malaysian Airline System Bhd
(April 18, RM1.83)
Maintain buy at RM1.82 with target price of RM2.55: The unveiling of the latest A330-300 livery was striking; the cabin is a quantum leap improvement and on par with industry bests such as SIA and Qatar Airways. This is the exact medicine needed to bring MAS back to the top, and we think the benefits will start to show immediately.

No impact to our earnings forecasts and we maintain our 'buy' recommendation with a target price of RM2.55, implying 4.4 times 2012 earned value/earnings before interest, taxes, depreciation, amortisation, and restructuring or rent (Ebitdar), 10% premium to global peers for its significantly higher growth prospects.

MAS spared no expense to ensure everything looks classy. The seats are from Recaro ' reputed to be the Rolls-Royce of seats ' and the in-flight entertainment system is by Panasonic, winner of best in-flight entertainment system award in 2009.

It is very difficult to find fault with this aircraft as everything looks immaculate. We hope our next business flight will be in this aircraft, as did the majority of the crowd at the launch based on our eavesdropping.

MAS has a firm order for 15 A330-330 with options to acquire a further 10. It will receive five aircraft in 2011 and the remainder will be staggered up till 2015. The maiden route is Brisbane (Australia) followed by several routes to North Asia, then South Asia and Middle East. The A330-300 aircraft provides superior cost economics for medium-haul flights up to eight hours.

We estimate this new aircraft will provide 8% to 12% unit cost savings over the older aircraft it replaces stemming from its superior fuel efficiency and higher payload capabilities.

Furthermore, we think passengers won't mind paying a little more for what is a significantly much better product.

The outlook for MAS remains challenging but the transformation is intact. The industry is suffering from higher fuel prices and the markets have been quick to penalise the share price.

We think that the share price plunge (down 11% year-to-date) is exaggerated and does not value the benefits of new aircraft and the ability MAS has to absorb higher fuel prices. Our forecasts assume average US$115 per bbl for 2011. ' Maybank IB Research, April 18

This article appeared in The Edge Financial Daily, April 19, 2011.

IJMLAND - Pricing trends, land deals drive NAV growth

Stock Name: IJMLAND
Company Name: IJM LAND BERHAD
Research House: AMMB

Property sector
Maintain overweight: We reaffirm our 'overweight' stance on the property sector, with S P Setia and IJM Land as our deep conviction 'buys'. We are raising our net asset value (NAV) estimates to reflect an expected reacceleration of residential pricing growth of 10% this year against our previous forecast of +5%, given the rebound in transaction volume and higher replacement costs. We expect NAV upgrades to lead the next wave of rerating for property equities.

We have lifted our fair value for S P Setia from RM7.38 to RM8.10 ' at parity with our revised fully-diluted (FD) NAV of RM8.10 per share. For IJM Land, we raise our fair value from RM3.88 to RM4 ' based on an unchanged 10% discount to our FD NAV of RM4.45. On a relative basis, we continue to expect news flow momentum centring on presales and acquisitions to be more significant for S P Setia than IJM Land.

Replacement costs are on the rise due to escalating land cost as well as rising prices of building materials from timber, aluminium and cement to steel. The recent aggressive bids for land surrounding mature neighbourhoods would solidify the strong pricing trends as land traditionally accounts for between 25% and 30% of residential prices.

In addition, cement makers including Lafarge have just lifted average selling prices by some 6% in March 2011. Steel companies including Ann Joo and Lion Group are also guiding for higher selling prices this year.

The expected reacceleration in residential prices would also be preceded by a sustained expansion in transaction volume, which is already underway now. Our discussions with developers revealed that demand has rebounded strongly in the past month, as evident in the strong response to recent launches.

Buyers appear to have adjusted to the 70% loan-to-value restriction on third property, paving the way for a meaningful inventory liquidation cycle to kick in.

Against this backdrop, we expect developers to aggressively step up presales ' the primary valuation driver of property equities. There are several presales in the coming months in select prime neighbourhoods that may establish new pricing benchmarks, with an associated uplift to the broader residential pricing trends. Desa ParkCity is set to launch 127 units of 'terrace' houses, The Mansions, priced from an unprecedented RM650psf (+8%) on built-up area. At KL Eco City, S P Setia will be launching some 750 condominium units priced from RM900psf.

Registration of interest has been very strong for both projects despite the premium pricing. This implies that the imminent successful launches of The Mansions and KL Eco City would establish new market clearing prices, leading to a repricing of future presales as well as secondary units in the suburbs. This was the case when the Casaman was launched in Desa ParkCity at the then unprecedented price of RM600psf in 2010.

There may also be potential liberalisation of residential plot ratios, particularly in established urban areas where there is an acute shortage of land available for development, coupled with strong effective demand.

As it is, we are already seeing generous plot ratios at select sites to defray the high land cost. Such a move, if it materialises, would accentuate NAV expansion from higher gross development value. We have yet to factor this into our NAV models.

Tactically, we also expect news flow centring on the redevelopment of some 3,300 acres of prime land in Sungai Buloh to sustain buying interest in property equities. The said land has high immediate development potential. The accretion to NAVs should be significant for developers. Kwasa Land, the property arm of the Employees Provident Fund, is the master developer which will establish joint ventures with select developers for several parcels.

On township track record, S P Setia would be the leading candidate with its Eco Park brand. It also boasts a comprehensive management team. Sam Ling's Desa ParkCity and Gamuda Land are other good partners, given their strong niche in developing premium residential projects that serve as industry benchmarks.

IJM Land and Sime Darby Property may also play a role, while malaysian Resources Corp Bhd may be eyeing the commercial precinct. We believe that the tender for the JV parcels may take place after the award of the MRT construction packages this year. ' AmResearch, April 18

This article appeared in The Edge Financial Daily, April 19, 2011.

SMARTAG - Smarttag to make debut on Monday, FV 36c

Stock Name: SMARTAG
Company Name: SMARTAG SOLUTIONS BERHAD
Research House: ECMLIBRA

KUALA LUMPUR: Radio frequency identification (RFID) solutions provider Smartag Solutions Bhd will make its debut on Bursa Malaysia on Monday, April 18.

Its public tranche of two million shares at 31 sen each was oversubscribed by 268 times.

ECM Libra Research had recently accorded fair value of 36 sen, based on 8.0 times price-to-earnings multiple, which was a 20% discount to peer average P/E multiple of 10 times.

AXIATA - Axiata upgraded to 'outperform' at RHB

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

Axiata Group Bhd was raised to “outperform” from “market perform” at RHB Research Institute Sdn Bhd due to the recent share price weakness.

The stock’s fair value was maintained at RM5.75, Lim Tee Yang, an analyst at RHB, wrote in a report today. -- Bloomberg