MBSB - MBSB's 1Q way exceeds expectations

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

Malaysia Building Society Bhd
(May 12, RM1.48)
Maintain buy at RM1.44 with fair value of RM2.20 (ex-rights): We are maintaining 'buy' on Malaysia Building Society Bhd (MBSB) with an unchanged fair value of RM2.20 (ex-rights). This is based on our rights-adjusted FY11F return on equity (ROE) of 20.5% and fair price-to-book value (P/BV) of 2.6 times.

MBSB recorded super strong 1QFY11 net earnings of RM68.3 million. Annualised net earnings would be RM273 million, way exceeding our forecast of RM195 million by 40.3%.

Gross loans grew at a sizzling annualised pace of 40%, substantially above our projected overall loans growth of 18.3% for FY11F. There was no further breakdown of loans, but we believe the bulk of the growth came from the personal financing segment.

Net interest margin (NIM) is estimated to have registered a big spike upwards to 4.68% in 1QFY11 (+125 basis points quarter-on-quarter), again coming in above our estimated 2.91% for FY11F. We believe this was contributed by the higher-yielding personal loan segment.

Non-interest income is the next positive surprise, more than tripling q-o-q and 174% year-on-year to RM65 million in 1QFY11. We believe these were fees relating to its personal loans segment.

MBSB's share price had been affected by negative sentiment since its ex-date because the share price was adjusted assuming all warrants were fully converted. Therefore, instead of RM1.90, the reference opening price for MBSB was pegged at RM1.63 per share.

Since then, we believe there has been a negative perception of the company's inability to react to the unexpected ex-price adjustment.

Given that 1Q results are much stronger than expected, we will be reviewing our forecasts and fair value later with an upward bias.

Thus, the current poor sentiment on the stock represents an excellent opportunity to buy. The stock is now trading at P/BV of only 1.7 times, with a sustainable ROE of above 20% per year. Based on a dividend payout policy of 30%, the gross dividend per share yield is now at least 4.5% FY11F.

Rerating catalysts for the stock are: (i) higher-than-expected loans growth; (ii) better-than-expected NIM; (iii) continuing improvement in impaired loans; (iv) sustainably high ROE in excess of 20%; and (v) confirmation of dividend payout ratio of at least 30%. ' AmResearch, May 12


This article appeared in The Edge Financial Daily, May 13, 2011.

MEDIA - Media Prima down at mid-morning

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

KUALA LUMPUR: Shares of MEDIA PRIMA BHD [] declined at mid-morning on Friday, May 13 after its net profit for the first quarter ended March 31, 2011 fell 23.7% to RM34.79 million from RM45.57 million a year ago, in line with general seasonal advertising trends.

At 10.30am, Media Prima shed two sen to RM2.66 with 258,800 shares done.

Revenue for the quarter rose to RM354.19 million from RM323.67 million in 2010. Earnings per share werea 3.36 sen while net assets per share was RM1.27.

Reviewing its performance, Media Prima said on Thursday, May 12 that the first quarter of the year had always been the lowest in terms of advertising spending as compared to other quarters, when most advertisers start their promotional roll out.

MIDF Research has downgraded Media Prima to Neutral with a lower target price of RM2.70 (from RM2.80).

'We are maintaining our FY11 and FY12 top line estimates. However, to reflect the lower negative''goodwill, we are revising downwards our FY11 and FY12 net profit estimates by 26.6% and 20.0%.

'Although, we believe Media Prima will register growth operationally, we are downgrading''Media Prima to Neutral due to the recent run up of its share price. Our adjusted target price is based on PE/Growth ratio of 0.85 times, based on average PEG of its regional peers,' said MIDF Research in a note May 13.

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MAYBANK - Maybank remains a 'buy' at HwangDBS

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

Malayan Banking Bhd's (Maybank) overseas operations are expected to drive its growth in the future, says HwangDBS Research.

However, Maybank's net interest margin was likely to remain soft although overall asset quality was expected to generally improve, HwangDBS said in its research note today.

"There could be short-term pressure on PT Wahana Ottomitra Multiartha Tbk's (WOM Finance) motorcycle non-performing loans," it said.

WOM Finance is an entity under Bank International of Indonesia, which in turn is a Maybank subsidiary.

The research house said since the acquisition of Kim Eng Holdings was only completed in May this year, it expected marginal contribution to Maybank in financial year 2011.

"Based on Kim Eng's reported net profit of RM182 million for financial year 2010, we estimate it will contribute at least RM200 million profit to the group from financial year 2012 onwards," it said.

HwangDBS has maintained a "buy" call on the bank with a target price of RM10.80. -- Bernama

CENTURY - OSK maintains 'buy' on Century Logistics

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

OSK Research is maintaining Century Logistics Holdings Berhad's earnings forecast for now and recommended a "buy" call with a fair value unchanged at RM2.43.

The research firm was optimistic Century Logistics would continue to do well and that this segment would remain a key growth business in future.

The company forecast a turnover of RM338.2 million for the current financial year ending Dec 31, 2011 and RM405.6 million for the 2012 financial year.

Pre-tax profit for the current financial year was estimated at RM38.7 million and RM43.8 million for next year.

"Apart from its strong and steady growth in its oil logistics, we expect the contract logistics business to grow credibly and to secure more contracts from multinational companies, such as food and beverages players and some large electrical and electronic companies," said OSK.

The company's pre-tax profit for the first quarter ended March 31, 2011, increased 5.1 per cent to RM8 million, from RM7.6 million, registered in the same quarter last year.

Revenue rose to RM66.8 million versus RM59.8 million chalked up previously. - Bernama

NAIM - CIMB Research has a Buy on Naim Holdings at RM2.73

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

KUALA LUMPUR: CIMB Equities Research has a Buy on Naim Holdings at RM2.73 at which it is trading at a price-to-book value of 0.9 times.

It said on Friday, May 13 Naim is trapped in a downtrend channel. Yet, this correction phase is probably at its tail end. A temporary low may have formed at the RM2.58 level, which will likely be its base for weeks ahead.

'If we are right, the stock is poised for stronger rebound. Immediate resistance is at RM2.89, followed by RM3.08 and RM3.24 next. Traders may start to nibble now to ride on this recovery wave. However, be quick to cut loss if RM2.58 is violated.

'Technical landscape is improving. MACD has staged a positive crossover while RSI too has hooked upward,' it said.

JTINTER - JT International cut to 'neutral' at OSK

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

JT International Bhd, a Malaysian cigarette maker, had its stock rating cut to “neutral’ from ‘‘buy’’ at OSK Research Sdn Bhd, which said that the share price has rallied close to its estimated fair value.

The stock’s fair value was maintained at RM7.30, OSK said in a report in Kuala Lumpur today. -- Bloomberg

GENTING - Genting advances in early trade

Stock Name: GENTING
Company Name: GENTING BHD
Research House: MAYBANK

KUALA LUMPUR: GENTING BHD [] shares advanced in early on Friday, May 13 on the back of its 52%-owned Genting Singapore reporting positive 1Q2011 results.

At 9.10am, Genting was up 18c to RM11.38 with 216,200 shares traded.

Maybank Investment Bank Bhd Research said Genting Singapore's results exceeded expectations (house and street) on above theoretical VIP win rate of 3.8%.

'Genting Singapore should continue to take the lion's share of VIP volume thanks to its generous credit policy,' it said.

The research house maintained its buy recommendation with raised target price of RM12.76 (from RM12.58).

SOP - Sarawak Oil Palms rises on positive 1Q results

Stock Name: SOP
Company Name: SARAWAK OIL PALMS BHD
Research House: MIDF

KUALA LUMPUR: SARAWAK OIL PALMS BHD [] (SOP) shares rose on Friday, May 13 after it earnings jumped 134% to RM55.54 million in the first quarter ended March 31, 2011 from RM23.67 million a year ago as it benefited mainly from higher crude palm oil (CPO) and palm kernel (PK) prices.

At 9.15am, SOP was up 16 sen to RM3.64 with 15,500 shares traded.

It said on Thursday, May 12 revenue increased by 64.3% to RM238.48 million from RM145.10 million. Earnings per share were 12.84 sen versus 5.52 sen.

'The increase of RM93.4 million in revenue was mainly attributed to the higher average CPO and PK prices realised and sales volume during the period,' it said.

On the outlook, it said the performance of the group was largely dependent on developments in the world edible oil market, bio-diesel market, fossil oil market, movement of ringgit, world economic situation and their corresponding effect on CPO prices.

MIDF Research maintained its buy call on SOP with a revised target price of RM4.45 (from RM4.07).

'We revised our target price to RM4.45 (from RM4.07), based on 11.3 times EPS11, which is one standard deviation above its 5-year historical PE of 8.9 times.

'SOP is currently trading at 8.8x forward PE, which is a 23% discount to the weighted average market PE of 11.5 times,' MIDF Research said in a note May 13.

MAYBANK - Maybank gains on 3Q results, outlook

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

KUALA'' LUMPUR: MALAYAN BANKING BHD [] shares advanced on Friday, May 13 after the bank said it ''expects earnings for FY11 ending June 30 to surpass the record net profit it achieved in FY10.

Maybank's net profit for 3QFY11 rose 11%''to RM1.14 billion from RM1.03 billion.

At 9.35am, Maybank was up 16 sen to RM8.90 with 329,700 shares traded.

Maybank's revenue for the three months in review was 11.8% higher at RM5.13 billion compared with RM4.6 billion a year ago.

Maybank said on Thursday, May 12 that the results were boosted by strong loans growth, increased revenues across almost all business segments of the group and significantly lower allowance for losses on loans which declined by almost half.

OSK Research in a note May 13 maintained its buy call on Maybank with a target price of RM10.07.

'Its previously conservative provisioning coupled with continued improvement in asset quality are beginning to bear fruit, with loan loss provisions declining 49.8% q-o-q.

'The combination of continued improvement in domestic asset quality, loans growth traction and benefits from the rising interest rate environment will boost the group's earnings momentum in FY12,' said OSK Research.

AIRASIA - Little impact from AirAsia X IPO delay

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

AirAsia Bhd
(May 11, RM3.15)
Maintain buy at RM3.04 with fair value of RM3.60: We reaffirm our 'buy' rating on AirAsia Bhd (AA) with an unchanged fair value of RM3.60. Our valuation continues to peg AA at 11 times FY11F earnings, a 20% discount to its historical average price-earnings ratio of 14 times.

AirAsia X (a 16%-owned affiliate of AA) announced that its proposed IPO could be delayed to next year instead of the original 2H11. The appointment of advisers has not been finalised yet.

AA had earlier indicated the possibility of divesting its 16% stake in AirAsia X when it goes for listing, thereby potentially realising gains of up to RM230 million or close to 10 sen per share, on our estimates.

Although AirAsia X's IPO could be delayed, note that we have not factored in any potential gains from sale of AA's stake in AirAsia X into our valuation. As such, we do not expect a significant negative impact on the share price as a result of this development.

Also note that we have not yet factored in any incremental value from the listing of AA's 49%-owned associates, Thai AirAsia and Indonesia AirAsia. These associates are scheduled to be listed in 3Q11 and 4Q11, respectively.

We expect the listing of Thai AirAsia (TAA) and Indonesia AirAsia (IAA) to crystallise the value of AA's investments, which could add an additional 30 sen to 50 sen per share to our valuation. Currently, AA cannot equity account earnings from these associates until accumulated losses amounting to a total of RM252 million have been fully reversed.

AA remains our top sector pick. It is one of the cheapest low-cost carriers, trading at eight times FY11F earnings, a 20% discount to LCC peers and 30% discount to historical average.

Key re-rating catalysts include: (i) Listing of associates ' which will crystallise the value of AA's investments (potentially adds another 30 sen to 50 sen per share to our valuation) and create standalone aircraft financing for TAA and IAA, reducing the strain on AA's balance sheet; (ii) a stronger ringgit; and (iii) an upward trend in ancillary income and yield. ' AmResearch, May 11


This article appeared in The Edge Financial Daily, May 12, 2011.

NOTION - Notion VTec within expectations

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

Notion Vtec Bhd
(May 11, RM2.14)
Maintain neutral at RM2.07 with target price of RM2.12: Notion reported 1HFY11 revenue of RM113.9 million, up 0.8% year-on-year (y-o-y), with its camera division contributing over 47% of the total. Core earnings shed 26% y-o-y to RM19.5 million as margins took a hit from the continued appreciation of the ringgit against the US dollar (which averaged 3.08 against 3.39 in 1HFY10). On a sequential basis, turnover plunged by more than 10% to RM53.9 million on slower orders for its cam barrel segment, in line with what we had guided previously. Contribution from the division sunk 18.4% quarter-on-quarter while its HDD and auto segment held up relatively well against unfavourable forex staying flattish q-o-q at RM20.5 million and RM9 million respectively.

Western Digital posted lower 1QCY11 earnings on weak PC sales as the interest in tablet devices increased. It expects a flattish 2QCY11 after seeing HDD shipments fall 4% sequentially in 1QCY11 to 50 millon units. Japan's earthquake and tsunami in March could also have taken a toll on the HDD component supply chain with the effect likely to unveil by 3QCY11, should there be any delays in restoration to full production. We understand from sources that HDD prices have inched higher by 5% to 15% since April on fear of supply shortages, but the extra buffer is unlikely to flow to component manufacturers like Notion in our view.

We are maintaining our FY11 earnings per share (EPS) estimate of 26.5 sen for now pending more affirmative indications on Nikon's ongoing restoration work. Its affected plant and manufacturing subsidiaries have resumed operations since end-March, but the planned brownouts are a hurdle for the commencement of full production. A downgrade to our forecasts is likely should the electricity woes prolong. We also take the opportunity to introduce our FY12 EPS forecast of 31.0 sen.

Although potential setbacks in the HDD industry could dampen sentiment, we believe the new income stream from closer tie-ups with Nikon would help to mitigate the downside risk to earnings. Recall that Notion secured new production orders from Nikon for camera body mounts in late-March and its lens sub-assembly operation has also commenced last month. Hence, we reiterate our 'neutral' call at unchanged fair value of RM2.12 based on eight times FY11 price earnings ratio. ' OSK Research, May 11


This article appeared in The Edge Financial Daily, May 12, 2011.

AIRPORT - 1Q11 to showcase MAHB's resilience

Stock Name: AIRPORT
Company Name: MALAYSIA AIRPORT HOLDINGS BHD
Research House: MAYBANK

Malaysia Airports Holdings Bhd
(May 11, RM6.15)
Maintain buy at RM6.15 with target price of RM7.12: MAHB will release its 1QFY11 results on May 12. Seasonally, 1Q is a soft quarter. Based on the published operating statistics, we expect a core net income (net income less forex translation and all other non-cash items) of RM129 million (40.8% year-on-year, 24.8% quarter-on-quarter). MAHB is our top aviation pick, as it has the lowest risk profile coupled with impressive growth prospects. We maintain our 'buy' call with no change to our RM7.12 discounted cash flow-based target price.

Passenger numbers were better than expected with a better profile mix. Passenger growth in 1QFY11 was 11.9% y-o-y, higher than management's guidance of 8% growth for 2011. Cargo remained flat, in line with the global soft trend. International passengers made up 49%, a 0.7 percentage point rise y-o-y. This will translate into higher revenue as international passengers pay higher service charges.

MAHB's passenger traffic growth of 11.9% in 1QFY11 has significantly outpaced the Asia-Pacific average growth of 5% and world average growth of 4%. KLIA continues to outclass its regional peers with a growth rate of 12.4% in 1Q11 ' a 2.9 to 7.9 percentage point outperformance.

The Japan and the Middle East and North Africa (MENA) market collectively accounts for 6% of world air traffic capacity. But the impact on MAHB of civil unrest/natural disaster in those markets was negligible. We estimate that there are collectively 31 weekly flights to Japan and twice weekly flights to affected MENA regions from MAHB's airports; this is less than 2% of total capacity.

We maintain our earnings forecast for now pending management's input. We believe the current high utilisation of KLIA (approximately 85%) underpins strong profitability because there is high operational leverage for this infrastructure business. MAHB is highly attractive compared to global peers: 9.6 times price-to-cash flow ratio (58% discount to peers), 9.2% return on capital (28% higher) and it is lowly geared at 0.33 times against the peer group average of 0.69 times. ' Maybank IB Research, May 11


This article appeared in The Edge Financial Daily, May 12, 2011.

HARTA - Hartalega on track with its Plant 6

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

Hartalega Holdings Bhd
(May 11, RM5.77)
Maintain market perform at RM5.70 with revised fair value of RM6.19 (from RM6.14): Hartalega's 4QFY11 core net of profit of RM50.8 million (+9.4% year-on-year; +5.9% quarter-on-quarter) came in within our and consensus expectations with FY11 core net profit of RM185.8 million (+30.0% y-o-y) accounting for 101% to 103% of our and consensus estimates.

Q-o-q sales volume grew slightly thanks to the new line in Plant 5. Sales revenue rose 2.3% q-o-q. Core net profit in 4Q rose 5.9% q-o-q, as 4QFY11 earnings before interest and tax (Ebit) margin grew 1.1 percentage points q-o-q.

Hartalega declared a third interim single-tier dividend per share of six sen and a final single-tier DPS of six sen (4QFY10: 10 sen), bringing total year-to-date net DPS of 21 sen (FY10: 20 sen), slightly ahead of our projection of 20 sen.

Management said Plant 6 will house 12 lines (+3 billion pieces per annum), which will produce nitrile gloves. Construction of the new plant will start in June/July 2011, with two lines slated to start production in January 2012. Capital expenditure is around RM120 million, which will be spread over two years and funded by internally generated funds. The expansion will increase Hartalega's annual capacity from eight billion pieces to nine billion by FY12 and 13 billion in FY13.

The risks include higher than expected raw material prices, which may result in margin contraction, and the ringgit appreciating against the US dollar.

Post FY11 results, we have tweaked our FY12 earnings forecast by 0.2% but made no change to our FY13 projections. We introduce our FY14 numbers. We have raised our fair value'' to RM6.19 (from RM6.14), based on an unchanged target CY11 price-earnings ratio of 10.5 times. Hartalega is trading at 9.3 times FY12 PER, a premium to its closest related peer, Kossan Rubber Industries Bhd, on 7.1 times FY11 PER. As the potential upside to our fair value is still in line with our expected market return, we maintain our 'market perform' call on the company. ' RHB Research, May 11


This article appeared in The Edge Financial Daily, May 12, 2011.

PETGAS - PetGas to be multi-utility player: HwangDBS

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

Petronas Gas Bhd (PetGas) will be transformed into a multi-utility player upon completion of its Melaka regasification plant next year and the Kimanis power plant in 2013, says HwangDBS Vickers Research Sdn Bhd.

Peninsular Gas Utilisation (PGU) gas supply will increase by up to 20 per cent after completion of the Melaka regasification plant, it said in its research note today.

HwangDBS has maintained a "buy" call on PetGas. The key catalysts are the signing of a Regasification Service Agreement (RSA) and Power Purchase Agreement (PPA).

As expected, it said PetGas declared a final net dividend per share (DPS) of 35 per cent, bringing the financial year 2011 net DPS to 50 sen or a net yield of 4.5 per cent.

PetGas registered a strong financial year 2011 net cash of RM2.3 billion.

"We expect capex to rise from RM700 million in financial year 2011 to RM1.5 billion per annum over financial years 2012-2013 with new investments in regas and power plants," HwangDBS said.

Despite the rising capex, free cash flow will remain strong at less than RM600 million, due to improved profitability under the fourth Gas Processing and Transmission Agreement (GPTA), it added.

PetGas does not have a dividend policy.

The financial year 2011 net payout works out to be 69 per cent and HwangDBS has assumed a 66-68 per cent net payout for financial year 2011-12 with sustainable 4.5 per cent yield. - Bernama

MISC - MISC remains a 'hold' at HwangDBS

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

HwangDBS Vickers Research has maintained its "hold" call on MISC Bhd, with a target price of RM8.30 as the company declared a lower-than-expected fourth quarter financial year 2011 core earnings, which eased 93 per cent quarter-on-quarter.

In a research note today, HwangDBS said the quarter-on-quarter drop was partly attributed to lower revenue from heavy engineering due to the novation agreement for the Turkmenistan project and completion of some jobs.

"Apart from exceptional items, the quarter-on-quarter drop is also mainly due to larger losses in the petroleum shipping segment and improved container rates," it said.

Meanwhile, it is also anticipated that MISC's petroleum tanker rates are likely to be weaker in the financial year 2012, as stronger tonnage supply growth is expected to outstrip demand.

"However, stable contributions from liquefied natural gas, the offshore and heavy engineering divisions should continue to support earnings," it added. --Bernama

MISC - MISC dips after posting losses in 4Q

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

KUALA LUMPUR: MISC BHD [] shares fell on Thursday, May 12 after it posted net loss of RM307.88 million in the fourth quarter ended March 31, 2011 after it made impairment provisions totaling RM456.65 million.

At 11.30am, MISC fell six sen to RM7.25 with 231,200 shares traded.

The poor financial performance was a sharp contrast from the net profit of RM196.43 million a year ago when the provisions for impairments were sharply lower at RM49.58 million.

MISC said its revenue was lower at RM2.924 billion compared with RM3.31 billion a year ago. Loss per share was 6.9 sen compared with earnings per share of 5.10 sen.

PETRA - Petra Perdana active, up

Stock Name: PETRA
Company Name: PETRA PERDANA BHD
Research House: OSK

KUALA LUMPUR: PETRA PERDANA BHD [] shares rose on Thursday, May 12 after it secured RM73 million worth of new charter contracts for three mid-size anchor handling tug supply (AHTS) vessels.

At 10.35am, Petra Perdana rose 2.5 sen to RM1.02 with 2.69 million shares traded.

CIMB Equities Research has a Buy on Petra Perdana at 99.5 sen, at which it is trading at a price-to-book value of 0.9 times and FY12 price-to-earnings of 14.4 times.

It said on Thursday, May 12 Petra has been consolidating in a wedge pattern for the past few weeks. This consolidation phase appears to be at its tail end.

'As long as prices can hold steady above its recent swing low of RM0.925, we think stronger rebound is imminent,' it said.

CIMB Research said the technical landscape is improving. MACD histogram bars are falling at a slower pace while RSI has also turned upward. There is a minor hurdle at the 30-day SMA (now at RM1.02) while further upswing should push prices towards RM1.06 and RM1.15 next.

'Our strategy here is to buy on weakness. Prices must not fall below the 92.5 sen low to keep the bulls intact. Be quick to cut losses if prices violate the wedge support,' it said.

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WASEONG - Wah Seong up after 1Q net profit surge

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

KUALA LUMPUR: WAH SEONG CORPORATION BHD [] shares rose on Thursday, May 12 after its net profit for the first quarter ended March 31, 2011 surged to RM43.37 million from RM17.02 million a year ago, due to increasing activities recorded in all divisions of the group, especially in the pipeline services division.

At 11.40am, Wah Seong added four sen to RM2.22 with 1.47 million shares traded.

Its revenue for the quarter increased''by 19.8% to 490.89 million from RM409.62 million. Earnings per share were 5.83 sen while net asset per share was RM1.31.

CARLSBG - Carlsberg shares up after 1Q net profit rises 29%

Stock Name: CARLSBG
Company Name: CARLSBERG BREWERY MALAYSIA BHD
Research House: MAYBANK

KUALA LUMPUR: CARLSBERG BREWERY MALAYSIA BHD [] shares rose on Thursday, May 12 after its net profit for the first quarter ended March 31, 2011 rose 29.3% to RM48.94 million from RM37.85 million a year ago, due mainly to higher sales during the Chinese New Year.

At 11am, Carlsberg was up 17 sen to RM7.40 with 69,800 shares traded.

Revenue for the quarter rose to RM407.22 million from RM378.46 million. Earnings per share was 16.01 sen while net assets per share was RM2.07.

Maybank IB Research maintained its buy recommendation on Carlsberg and raised its target price to RM8 from RM7.20.

'Valuations are still decent, in our view, with the stock trading at the low-end of -1 standard deviation from its 10-year mean.

'We forecast a 26 sen dividend per shares for 2011, which implies a conservative 52% payout ratio (2-year historical payout: 69%-100%). We do not rule out a special dividend payout this FY, given its net cash of RM44 million as at March 2011,' Maybank IB Research said in a note May 12.

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MISC - HDBSVR maintains Hold on MISC, target price RM8.30

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

KUALA LUMPUR: Hwang DBS Vickers Research is maintaining a Hold on MISC BHD [] at RM7.31 and sum-of-parts target price of RM8.30.

It said on Thursday, May 12 MISC was hit by larger tanker losses where the 4QFY11 core earnings tumbled 93% on-quarter, taking FY11 core earnings to RM948 million (+35% on-year) - far below expectations.

'Larger-than-expected petroleum shipping losses and weak US dollar dragged down earnings. Maintain Hold and RM8.30 SOP-derived TP,' it said.

PETRA - CIMB Research has Buy on Petra Perdana at 99.5 sen

Stock Name: PETRA
Company Name: PETRA PERDANA BHD
Research House: CIMB

KUALA LUMPUR: ''CIMB Equities Research has a Buy on Petra Perdana at 99.5 sen, at which it is trading at a price-to-book value of 0.9 times and FY12 price-to-earnings of 14.4 times.

It said on Thursday, May 12 Petra has been consolidating in a wedge pattern for the past few weeks. This consolidation phase appears to be at its tail end.

'As long as prices can hold steady above its recent swing low of RM0.925, we think stronger rebound is imminent,' it said.

CIMB Research said the technical landscape is improving. MACD histogram bars are falling at a slower pace while RSI has also turned upward. There is a minor hurdle at the 30-day SMA (now at RM1.02) while further upswing should push prices towards RM1.06 and RM1.15 next.

'Our strategy here is to buy on weakness. Prices must not fall below the 92.5 sen low to keep the bulls intact. Be quick to cut losses if prices violate the wedge support,' it said.

MEGB - Masterskill riding on the healthcare wave

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

Masterskill Education Group Bhd
(May 12, RM2.22)
Initiating coverage with outperform call at RM2.27 with fair value of RM3.74: Masterskill has built its reputation in the provision of nursing and allied health education in Malaysia. It currently has 18,399 students enrolled in its diploma and degree programmes, expanding at a compound annual growth rate (CAGR) of 28.3% from 2004 to 2010.

Masterskill's growth in the next few years will be propelled by: (i) An increasing demand for nurses. The government is targeting a ratio of one registered nurse to 200 population by 2020 from the current ratio of 1:500. In 2008 (latest data available), there were 54,000 registered nurses, implying a deficit of 81,000 nurses (based on 27 million population).

With teaching facilities producing about 6,000 to 7,000 nurses per year, the shortage will mean that the demand for Masterskill's nursing courses will remain high for the foreseeable future;

(ii) New courses in the pipeline. Masterskill plans to introduce new programmes in the allied health and medical education disciplines. The group has lined up seven new programmes to be introduced in 2011, yielding high margins that will help to drive its margins moving forward; and
(iii) An increase in student enrolment. Masterskill has received approval to offer a Bachelor of Medicine and Surgery programme with a quota of 100 students at its Johor campus. In addition, it will be building a flagship campus (capacity of 20,000 students) in Bandar Baru Bangi. Phase 1 of the new campus is targeted for completion in 4QFY12 while Phase 2 is due to be ready in FY13.

Risks include: (i) changes in the requirements set by governing bodies; (ii) a change in policy by the government; and (iii) high foreign shareholding (approximately 56%).

We project FY10/13 revenue CAGR of 13.4%, driven primarily by the increase in student enrolment as well as a gradual increase in fees. Our FY10/13 net profit CAGR, however, is expected to grow 14.7% as a result of improved operating leverage on the back of facility integration and economies of scale.

We believe Masterskill's price-earnings ratios are attractive, trading at 7.6 times FY11, compared with peers HELP International Corp Bhd and SEG International Bhd, that trade at FY11 PERs of 15.6 times and 14.3 times. This is unjustified given its relatively larger market cap size and'' higher margins.

Concerns over the availability of National Higher Education Fund (PTPTN) loans are also overplayed in our opinion. Our fair value for the stock is RM3.74, based on target FY11 PER of 12.5 times, 15% discount to the sector average FY11 PER of 15 times. We initiate coverage with an 'outperform' call on the stock. ' RHB Research, May 12


This article appeared in The Edge Financial Daily, May 13, 2011.

MISC - MISC - On stranger tides

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

MISC Bhd
(May 12, RM7.22)
Maintain neutral at RM7.31 with reduced fair value of RM7.44 (from RM8.20): MISC reported FY11 core earnings of RM910 million (year-on-year: 21%, quarter-on-quarter: 216%) on the back of revenue of RM12.3 billion (y-o-y: -10.5%, q-o-q: -4%). Its bottom-line was 27% below our forecast but in line with consensus.

For the full year the shipping conglomerate recorded a total net exceptional gain of RM922 million. A big chunk of this was the gain on the disposal of its 33.5% stake in Malaysia Marine And Heavy Engineering Holdings Bhd (RM1.4 billion) after netting sizeable impairment losses totalling RM576.6 million. The market value of its vessels has significantly depreciated in value given the oversupply of vessels along with other provisions related to its loans and investments. MISC announced a final dividend of 10 sen per share with full year dividend coming in at 25 sen, which represents a payout ratio of over 100% of its core earnings.

MISC's revenue was relatively weaker, attributed to the lower contribution from the engineering division coupled with lower shipping rates seen on its tanker and liner division amid three catastrophic black swan events globally. Shipping rates continue to be depressed due to the oversupply of vessels, which is likely to persist over the immediate to medium term, in line with our bearish view on the overall shipping industry. Ailing rates coupled with higher bunker fuel costs continue to keep MISC's liner, petroleum and chemical divisions in loss-making territory over the past few quarters. Nonetheless, MISC's offshore, LNG and fabrication businesses remain in the black and will continue to cushion earnings.

MISC's deteriorating outlook and fundamentals enforce a further downgrade to our forecasts, which we slash by 34% on the back of a 13.6% cut in revenue premised on lower petroleum and chemical tanker rates which we have now trimmed by 4.2% to 6.3% over the next two years. We have also adjusted our forecasts to reflect the new financial year estimates in line with the entire Petroliam Nasional Bhd group.

Following the downgrade, we retain our 'hold' recommendation at a lower fair value of RM7.44 (from RM8.20) pegged at 1.5 times FY11 ending December book value of equity per share. ' OSK Research, May 12


This article appeared in The Edge Financial Daily, May 13, 2011.

CARLSBG - Carlsberg's margin expansion fuels growth

Stock Name: CARLSBG
Company Name: CARLSBERG BREWERY MALAYSIA BHD
Research House: MAYBANK

Carlsberg Brewery Malaysia Bhd
(May 12, RM7.40)
Maintain buy at RM7.23 with higher target price of RM8 (from RM7.20): Carlsberg's results came in above expectations. Net profit in 1Q11 of RM48.9 million (+29.3% year-on-year; +60.5% quarter-on-quarter) was 36.8% of our full-year forecast, on stronger margins and a seasonally strong 1Q.

We lift our 2011/12 forecasts by 4% to 15% on improved margin assumptions. Our discounted cash flow target price is correspondingly raised to RM8 (+11%). We do not rule out Carlsberg paying another special dividend this year akin to 2010's, which would be a positive.

While 1Q sales are typically higher due to Chinese New Year festivities, Carlsberg's 1Q11 sales were particularly strong, due in part to a more successful CNY sales campaign this year, which resulted in a 7.6% y-o-y increase in revenue. Geographically, domestic sales rose 7.1% y-o-y and by a higher 8.8% y-o-y for Singapore.

The strong sales filtered through to better-than-expected earnings before interest, tax, depreciation and amortisation (Ebitda) margin, which expanded to 16.6% in 1Q11 from 14% in 1Q10.

We reckon the improvement in margins was also driven by operational efficiencies and savings, reflective of industry trends. Overall net profit jumped 29% y-o-y and was above our expectations.

We have raised our net profit forecasts by 4% to 15% mainly on higher earnings before interest and tax (Ebit) assumptions (2011: +2 percentage points; 2012: +1pps), but offset by higher tax rates (2011: +3pps; 2012: +4pps to 24% each). Following this, we expect Carlsberg to deliver a two-year net profit compound annual growth rate of 5.7%.

We maintain our 'buy' call with a revised target price of RM8 following the revision of our forecasts and on rolling forward our valuations. Valuations are still decent, in our view, with the stock trading at the low end of -1 standard deviation from its 10-year mean.

We forecast a 26 sen dividend per share for 2011, which implies a conservative 52% payout ratio (two-year historical payout: 69% to 100%). We do not rule out a special dividend payout this FY, given its net cash of RM44 million as at March 2011. ' Maybank IB Research, May 12


This article appeared in The Edge Financial Daily, May 13, 2011.

HARTA - Hartalega up in early trade

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

KUALA LUMPUR: HARTALEGA HOLDINGS BHD [] shares rose on Wednesday, May 11 after its net profit for the fourth quarter ended March 31, 2011 rose 12.9% to RM52.39 million from RM46.41 million a year earlier, driven by continuous expansion in production capacity, increase in demand, effective cost control and improvement in production processes.

At 9.15am, Hartalega was up seven sen to RM5.77 with 7,300 shares traded.

Revenue for the quarter was up 17.8% to RM192.52 million from RM163.39 million. Earnings per share was 14.41 sen while net assets per share was RM1.36.

The company declared a third interim dividend of 6 sen per share single tier in respect of the financial year ended March 31, 2011 and payable on June 10.

For the financial year ended March 31, Hartalega's net profit rose 33% to RM190.16 million from RM142.91 million, on the back of a 28.5% increase in revenue to RM734.92 million from RM571.89 million

''

SIME - Sime a top pick among planters at CIMB Invt

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

Sime Darby Bhd, the world’s biggest oil palm planter, is CIMB Investment Bank Bhd’s top pick among Malaysian plantation stocks because of improving earnings prospects and efforts to boost shareholder value.

Sime is rated “trading buy” with a share price estimate of RM8.84, analyst Ivy Ng Lee Fang wrote in a report in Kuala Lumpur today.

The stock gained 3.6 per cent to RM9.16 at 10:37 a.m. local time, set for their biggest gain since Jan. 4.

TSH Resources Bhd added 1.1 per cent to RM2.78 and PLS Plantations Bhd rose 5.4 per cent to RM1.36. -- Bloomberg

EPMB - EP Manufacturing active, up after OSK Research raises TP to RM1.38

Stock Name: EPMB
Company Name: EP MANUFACTURING BHD
Research House: OSK

KUALA LUMPUR: Shares of EP MANUFACTURING BHD [] were actively traded on Wednesday, May 11 after OSK Research said it expects the company's dividends to be higher at 4 sen, yielding 4.7% for FY11.

The research house upgraded its fair value for the stock from 89 sen to RM1.38 premised on 7 times PE (from 6 times) and retained its Buy call.

At 9.40am, EPMB was up 5.5 sen to 91 sen with 1.14 million shares traded.

In a note May 11, OSK Research said that while supply disruptions were likely to impact Perodua in the near term, expectations of a sharp recovery as early as July reinforced its view that EPMB's production of parts for Perodua would continue to be at normalized levels in order to attain sufficient inventories for the carmaker.

'The 3% upward revision in revenue in view of the higher number of Perodua units supplied to coupled by the improved operating efficiencies achieved providing a boost to margins prompts us to increase our earnings by 28.4% for FY11,' it said.

''

''

HARISON - Harrisons up after CIMB Research says huge upside for stock

Stock Name: HARISON
Company Name: HARRISONS HOLDINGS (M) BHD
Research House: CIMB

KUALA LUMPUR: Harrisons Holdings Bhd shares rose on Wednesday, May 11 after CIMB Research said it sees huge upside for the company that distributes consumer goods and building materials, whose customers include Nestle, F&N and Kao.

At 9.30am, Harrisons was up 19 sen to RM3.98 with 110,500 shares traded.

CIMB Research said on Wednesday, May 11 the stock was not on the radar screens of institutional investors or even retail research houses, mainly because of its tight free float and an average 3-month daily trading volume of only 50,000 shares.

'It is, therefore, not surprising that the stock is undervalued, trading at a huge 60% discount to its RM9.27 SOP/share. A 30% discount to its SOP value to reflect its poor trading liquidity pegs the stock at RM6.49, which implies share price upside of 71%. At this price, P/E would still be an attractive 9.9x CY12,' it said.

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HLBANK - Hong Leong Bank raised to 'buy'

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

Hong Leong Bank Bhd rose to a record in Kuala Lumpur trading after reporting a 27 per cent leap in third-quarter earnings and analysts upgraded their forecasts to reflect higher future profits following its RM5.06 billion (US$1.7 billion) takeover EON Capital Bhd.

The stock climbed 3.8 per cent to RM11.94 at 10:53 a.m. local time, bringing its total gains for the week to 14 per cent since completing its EON takeover on May 6. Hong Leong Financial Group Bhd., its parent, has surged 11 per cent this week, adding 3.2 per cent today to RM11.50.

Hong Leong Bank’s net income climbed to RM289.7 million, or 19.95 sen per share, in the three months through March from RM228 million, or 15.73 sen a year ago, the Kuala Lumpur-based lender said in an exchange filing late yesterday. Earnings were bolstered by higher net interest income as Malaysia’s economy continues to expand, it said.

“The economic environment remains conducive to growth,” Chief Executive Officer Yvonne Chia said in the statement. “We fully expect Hong Leong Bank’s growth momentum to continue.”

The merged group will have combined assets of more than RM140 billion, with a branch network of about 300 branches and 1,200 self-service terminals. The takeover, 17 months in the making, will see Hong Leong Bank overtake rival AMMB Holdings Bhd and RHB Capital Bhd in terms of market capitalization, according to data compiled by Bloomberg.

ECM Libra Capital Sdn Bhd upgraded Hong Leong Bank to “buy” from “hold” today, increasing its share estimate to RM13.62 from RM10.92 to reflect future EON earnings contributions, analyst Bernard Ching said in a report today.

EON Impact

“While the results are within expectations, we will be upgrading our estimates to incorporate the effect of the completion of EON Capital’s assets and liabilities,” Ching said in the report.

RHB Research Institute Sdn Bhd raised its fair value to RM14 from RM12.70, analyst David Chong wrote in a separate report today. UOB Kay-Hian Holdings, HwangDBS Vickers Research Sdn Bhd and AmResearch Sdn Bhd raised their forecasts earlier in the week.

Hong Leong Financial yesterday provided a RM2.3 billion bridging loan to Hong Leong Bank to boost its capital adequacy ratio pending completion of a planned rights issue.

Hong Leong Bank said in a separate statement that it plans to increase the size the rights offer to as much as RM2.6 billion from RM1.6 billion to strengthen its capital base and fund working capital.

Malaysia’s economy is forecast by the government to grow as much as 6 per cent this year following a 7.2 per cent expansion last year, the most in a decade. The central bank raised its benchmark overnight policy rate by 0.25 percentage point to 3 per cent on May 5 to fight inflation. -- Bloomberg

PANTECH - OSK Research positive on Pantech steel pipes venture, Trading Buy at 79 sen

Stock Name: PANTECH
Company Name: PANTECH GROUP HOLDINGS BHD
Research House: OSK

KUALA LUMPUR: OSK Research said it recently witnessed the launch of Pantech Stainless & Alloy Industries, a subsidiary of Pantech producing stainless steel pipes and fittings.

'We remain positive on this venture, though some short term dampeners which include initial start up costs and the time lag impact from announcement to implementation of O&G projects prompts us to revise our earnings down for FY12 and FY13,' it said on Wednesday, May 11.

'Nonetheless, our FV of 79 sen is retained, as we rollover our valuation to CY12. Maintain Trading BUY,' it said.

HLBANK - HLB-EONCap merger to save RM400m

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

Hong Leong Bank Bhd’s takeover of EON Capital Bhd could result in potential merger synergies of RM400 million over the next three years, HwangDBS Vickers Research Sdn Bhd analysts Hon Seow Mee and Lim Sue Lin wrote in a report today.

They maintained their “buy” call on Hong Leong with a share estimate of RM15, according to the report.

Hong Leong Bank gained 2.3 per cent to RM11.46 at 9:46 a.m.

Hong Leong Financial Group Bhd, its parent, also rose to a record, climbing 2.8 per cent to RM11.08. -- Bloomberg

WASEONG - Wah Seong upgraded to 'hold'

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

Wah Seong Corp, a Malaysian pipe-coating company, rose the most in three weeks in Kuala Lumpur trading after AmResearch Sdn Bhd upgraded the stock to “hold” with a higher fair value of RM2.45.

The stock climbed 2.3 per cent to RM2.19 at 10:29 a.m. local time, set for its biggest gain since April 28. -- Bloomberg

WCT - WCT preparing for major wins

Stock Name: WCT
Company Name: WCT BHD
Research House: MAYBANK

WCT Bhd
(May 10, RM3)
Maintain buy at RM2.99 with target price of RM3.75: We maintain our 'buy' call on WCT as 1Q11 results, due on May 26, are likely to meet expectations. Job win potential remains positive on the domestic front, which could substantially lift its RM3.7 billion outstanding order book (as at end-2010). Strong property sales should provide for stronger quarters ahead. We make no change to our forecast for a 31% jump in 2011 net profit. Our target price pegs the stock to sum-of-parts valuation (15 times 2012 price-earnings ratio plus 20 sen value enhancement for KLIA 2 retail concession).

Net profit in 1Q11 should expand year-on-year (1Q10: RM35 million), driven by strong property sales while construction margins are expected to normalise towards the 8% level post final account recognition for the Abu Dhabi F1 contract. This'' resulted in a 14% to 15% higher earnings before interest and tax (Ebit) margin in 3Q10 and 4Q10. We estimate 1Q11 net profit to at least meet 20% of our full-year forecast of RM184 million.

There is potential for positive job wins. First, WCT has participated in the tender for Package B of the LRT extension which closed on March 14. We think WCT stands a high chance of securing the job based on its lean cost structure, hence, more competitive bid. We estimate the value to be RM1.9 billion for the entire 18.1km stretch, based on contract values for Package A, awarded last November (RM95.5 million per km), after including a 10% rise in material costs. Work awards are expected by mid-2011.

Second, WCT has participated in the contractors' pre-qualification exercise for the Klang Valley MRT (Sg Buloh-Kajang line) elevated structure works, which closed on April 13. We believe that it also stands a high chance of being pre-qualified. The elevated structure, spanning an estimated 41.5km, offers works value of RM10 billion, we estimate. The call for tender is expected in July, while work awards should be towards end-2011.

Property sales were strong in 1Q11 with about RM100 million locked in, almost half the RM220 million sales of 2010. Sales in 1Q11 came from the Klang township developments, while 1 Medini (condominium) and another 18.7ha in Klang (luxury homes) are slated for a maiden launch in 2H11. These new projects offer RM900 million in total gross development value (Medini: RM600 million, Klang: RM300 million). WCT's 2011 internal sales target stays at above RM400 million. ' Maybank IB Research, May 10


This article appeared in The Edge Financial Daily, May 11, 2011.

HLBANK - Hong Leong Bank: Upside from merger yet to be fully reflected

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

Hong Leong Bank Bhd
(May 10, RM11.50)
Maintain buy at RM11.20 with revised fair value of RM14.70 (from RM13.80): We maintain our 'buy' rating on Hong Leong Bank Bhd (HLBB), with a higher fair value of RM14.70 (from RM13.80). This reflects the full merger with EON Capital Bhd's (EONCap) assets and liabilities by FY12F based on our sensitivity analysis. This is based on price-to-book value of 2.4 times and 2012 return on equity (ROE) of 16.1% under the merged entity.

HLBB hosted an analysts' briefing on its takeover of EONCap's assets and liabilities, together with the management of EONCap. The takeover was deemed completed on May 6, 2011, with vesting date targeted for July 1, 2011.

Essentially, the merged entity will become the fourth largest domestic banking group in Malaysia, with estimated assets of RM141 billion, after third-placed Public Bank Bhd's RM226 billion. This places it slightly ahead of'' RHB Capital Bhd's RM129 billion.

HLBB has provided some estimates of the direct synergy costs, which would total RM400 million over the next three years based on its preliminary assessment.

These are split almost equally between revenue and cost synergies. The company expects most of the cost synergies to be realised up front, but also hinted that revenue synergies will likely be expanded once the merged entity is fully integrated.

More importantly, the company also provided an indication on return on equity estimates. Notably, HLBB's ROE estimate for Year 1 from merger is 17%, higher than our estimated 15.5% base in our sensitivity analysis that we had highlighted in our earlier reports.

On the timeline of further announcements on its proposed rights issue, HLBB has hinted that this will likely be within the next 60 to 90 days. We believe this will be targeted closer to the vesting date of July 1, 2011.

Given that the company has yet to provide further clarity on details of the rights issue, we are still assuming a RM1.6 billion rights issue, as per the company's indications more than a year ago.

Our fair value is based on our sensitivity analysis on the impact of the merger, assuming that HLBB will undertake a rights issue of RM1.6 billion, at a rights price of RM8.70 per share. We have now revised this to include conservatively merger synergies of RM120 million and integration costs of RM60 million in the first year. Our fair value is now upgraded to RM14.70 from RM13.80, based on higher ROE of 16.1% (from 15.5% previously). ' AmResearch, May 10


This article appeared in The Edge Financial Daily, May 11, 2011.

AIRASIA - AirAsia Indonesia and Thailand feeding to the growth

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

AirAsia Bhd
(May 10, RM3.04)
Maintain buy at RM3.10 with target price raised to RM3.67 (from'' RM2.80): We visited the Indonesia AirAsia (IAA) and Thailand'' AirAsia (TAA) management recently to learn of AirAsia's (AA) other subsidiaries and gauge their impact on AA. We were'' impressed at how well it is performing and pleasantly surprised at how AA's subsidiaries were fitting into the overall growth strategy for AA.

IAA is No 2 in carrying international passengers in Indonesia, which did not surprise us given IAA's strategy to leverage on the high traffic coming from Singapore and Malaysia, representing 33% and 29% contribution to total 2010 international markets respectively, by connecting five of its hubs. Australia and Hong Kong represent 9% and 6% respectively.

IAA turned profitable in FY10 as it registered 474.4 billion rupiah (RM166 million) net profit from a net loss of 189.3 billion rupiah in FY09. This came on the back of FY10 revenue growth of 37.1% year-on-year (y-o-y) to 2,764 billion rupiah, while total cost increased only by 8.8% y-o-y to 1,951 billion rupiah despite operating in a high fuel cost environment. ''

TAA began operations in 2004 with the first domestic flights, Bangkok to Chiang Mai and Hat Yai, and first international'' flight, Bangkok to Singapore. We were pleasantly surprised to find that TAA has a very strong presence in the Thailand aviation market in a comfortable No 2 spot. It had a 19.9% market share or 5.7 million total passengers in FY10. ''

TAA also saw a turnaround in its net profit in FY10, from a net loss of 808.9 million baht (RM80 million) to a net profit of 2.85 billion baht. Its revenue grew by 32.8% y-o-y to 12.4 billion baht, as it cemented its No 2 position in Thailand.

The most advantageous part of the relationship between AA, TAA and IAA is the sharing of air traffic rights. We believe this is advantageous for AA as IAA and TAA can be 'feeders' to destinations offered by AA as it can connect with travellers from such places as India and Australia without having'' to fly to those destinations.

Possible year-end listings of TAA and IAA will be positive for AirAsia as it should crystallise the value of its investment in its controlled entity and associate. We also like the fact that with the listing of both entities, AirAsia will not'' be burdened by any future capital expenditure requirements by TAA and IAA.'' ''

Maintain 'buy' with a revised target price of RM3.67 (from RM2.80). We remain upbeat on AirAsia's potential despite the'' current uncertain economic climate which is affected by the high oil prices. It has a natural hedge as it matches forward bookings with fuel requirements and it had recently introduced a fuel price surcharge. Hence, we are not revising our FY11 net earnings. However, we are assigning a higher price-earnings ratio of'' nine times, the mean PER of its regional peers, to AA's FY11 earnings per share. ' MIDF Research, May 10


This article appeared in The Edge Financial Daily, May 11, 2011.

MAYBANK - Maybank's 3Q results preview a non-event

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

Malayan Banking Bhd
(May 10, RM8.70)
Maintain buy at RM8.65 with target price of RM10.30: We expect Malayan Banking (Maybank) to report 3QFY11 net profit of RM1.15 billion to RM1.2 billion (2QFY11: RM1.13 billion; 3QFY10: RM1.03 billion), driven by its Indonesian subsidiary Bank Internasional Indonesia (BII) and fee income from investment and corporate banking.

We forecast another low single-digit quarter-on-quarter (q-o-q) and year-on-year (y-o-y) growth for net interest income (NII) in 3QFY11 on the back of a slower loan growth of 2% to 3% q-o-q (2QFY11: 5.7% q-o-q) due to the shorter number of working days. BII reported a loan growth of 40% y-o-y and 5.4% q-o-q in 1Q11 (FY ending: Dec 31).

NII growth is likely to be lower q-o-q due to rate competition, but should trend upwards in the subsequent two quarters following the recent 25 basis points (bps) hike in the overnight policy rate by Bank Negara Malaysia.

The buoyant and active domestic capital and debt markets will continue to drive its investment banking (IB) fees. Brokerage fees are expected to rise as total trading value in 3QFY11 jumped 6.3% q-o-q and 45.8% y-o-y. Total transacted value through Maybank Investment Bank rose 30% y-o-y in 3QFY11 (RM15.2 billion or 5.8% market share). A large portion of its non-interest income comes from its daily transactional fees and payment facilities from its largest Internet banking base.

After the 1QFY11 adjustment to the FRS 139 accounting standards resulting in higher provision, quarterly provisioning will trend down based on its current asset quality. This is due to the lower recognition of credit charge-off rate (about 40bps) under the FRS 139 accounting standard, versus 50bps to 60bps under the General Provision (GP) 3 method.

We make no change to our earnings forecasts and maintain 'buy' with a target price of RM10.30, pegged at 2.2 times FY12F price-to-book value (one standard deviation'' from its 10-year mean) or 15.4 times FY12F price-earnings ratio. Maybank has the largest national branch network, which gives it wide exposure to a revival in loan growth in the economy and makes it well-positioned to capture the rising domestic investment cycle.

Share price catalysts include better than expected loan growth domestically and overseas. ' UOB KayHian, May 10


This article appeared in The Edge Financial Daily, May 11, 2011.

MCLEAN - RHB Research accords Mclean Technologies FV of 57 sen

Stock Name: MCLEAN
Company Name: MCLEAN TECHNOLOGIES BERHAD
Research House: RHB

KUALA LUMPUR: RHB Research Institutes has accorded Mclean Technologies Bhd, which will make its debut on Bursa Malaysia on Tuesday, May 10 at 57 sen, based on 7.5 times FY11 earnings per share.

Its offer of 2.7 million new shares offered to the public under its listing exercise at 52 sen each was oversubscribed by'' 100.49 times.

Mclean is mainly involved in precision cleaning and washing solutions for various components as well as plastic injection moulding for the hard disk drives (HDD) and automotive industries.

RHB Research said on Monday,'' May 9 Mclean plans to increase its capacity in China in addition to upgrading its capabilities to high precision cleaning. This follows Seagate's relocation of its manufacturing operations (excluding its media and product development operations) out of Singapore to China which could translate into higher demand for third party precision cleaning.

'The company also plans to set up alternative cleaning technologies in order to cater to its customer's requirements. By using carbon dioxide gas (vs. de-ionised (DI) water currently), it is able to expand its precision cleaning services to a wider range of components with different characteristics such as magnets and motor based assembly,' said the research house.

It said Mclean will continue to position itself in Singapore as it remains a critical market for the HDD industry.

'Going forward, Singapore is expected to be a key producer of disk media substrates with approximately 50% of the world's total output. Therefore, the company will continue to focus on Singapore to serve this market in addition to venturing into other industries,' it said.

On the basis of its valuations, RHB Research said it derived a target PER of 7.5 times for MCT which implies 38.5% discount to regional peers valuations that are broadly similar to the hard disk drive industry.

'Therefore, we estimate a fair value of 57 sen based on 7.5 times FY11 EPS. Note that we have not diluted our EPS estimates for the 58.7 million free warrants as issued in the IPO as the warrants will only expire in 2016.

'However, if we assume the warrants are converted based on the exercise price of 52 sen for the warrants, our fully diluted EPS would imply 27.6% dilution,' it said.

MCLEAN - Mclean to surge to more than 77.5 sen on debut

Stock Name: MCLEAN
Company Name: MCLEAN TECHNOLOGIES BERHAD
Research House: RHB

KUALA LUMPUR: Mclean Technologies Bhd is expected to make a strong debut on Bursa Malaysia on Tuesday, May 10

Pre-market trades showed orders for the shares at 77.5 sen, which is 25.5 sen above its offer price of 52 sen at 8.35am

Its warrants are expected to open at 30.5 sen.

RHB Research accorded Mclean Technologies a fair value 57 sen, based on 7.5 times FY11 earnings per share.

Its offer of 2.7 million new shares offered to the public under its listing exercise at 52 sen each was oversubscribed by'' 100.49 times.

Mclean is mainly involved in precision cleaning and washing solutions for various components as well as plastic injection moulding for the hard disk drives (HDD) and automotive industries.

JCY - CIMB Research has Buy on JCY at 65 sen

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

KUALA LUMPUR: CIMB Equities Research has a technical Buy on JCY International at 65 sen at which it is trading at a FY12 price-to-earnings of 7.6 times and price-to-book value of 1.5 times.

It said on Tuesday, May 10 JCY broke out of its long term bullish wedge pattern in late March and prices hit a high of 83 sen.

CIMB Equities Research prices have since eased and it had retraced to its 61.8%FR levels while it formed a hammer-like candle on Monday.

'We do not expect prices to move too far from its 61.8%FR levels as its MACD and RSI are turning sideways now, possibly suggesting a slowdown in selling momentum.

'Aggressive traders may go long now with a stop placed below the recent swing low of 57.5 sen. A break above 68.5 sen would likely be a good signal to suggest that a new rally has begun. We expect prices to take out the old high of 83 sen in the short to medium term. Remain positive on the stock,' it said.

DIALOG - Dialog rises on possible marginal oilfield jobs

Stock Name: DIALOG
Company Name: DIALOG GROUP BHD
Research House: CIMB

KUALA LUMPUR: DIALOG GROUP BHD [] shares advanced on Tuesday, May 10 after The Edge FinancialDaily reported that the company and its Australian partner Roc Oil were on the verge of bagging the marginal oilfield projects from Petroliam Nasional Bhd (Petronas) for Balai and Bentara fields, located off the coast of Sarawak.

At 9.30am, Dialog was up three sen to RM2.55 with 330.600 shares traded.

CIMB Equities Research has maintained its sum-of-parts target price of RM2.67 for Dialog and also its earnings per share (EPS) forecasts.

It was commenting on the article that suggested that the JV between Dialog and Australia's Roc Oil was set to secure the risk sharing contract (RSC) for the development of the Balai and Bentara marginal fields.

'The RSC would mark new milestones for both companies ' upstream diversification for Dialog and a Malaysian debut for Roc,' it said.

CIMB Research said assuming that 1) Dialog has the minimum 30% stake in the JV, and 2) other terms are similar to those for the Berantai marginal field, Dialog's FY6/12-13 EPS could be boosted by 8-9%.

'The fees from oil production will be realised beyond our forecast period. Dialog remains an OUTPERFORM, with the potential re-rating triggers being 1) announcement of the marginal field development, and 2) new markets, i.e. Saudi Arabia,' it said

F&N - F&N at multi-year high of RM19.70 on earnings, dividends

Stock Name: F&N
Company Name: FRASER & NEAVE HOLDINGS BHD
Research House: MAYBANK

KUALA LUMPUR: Shares of Fraser & Neave Holdings Bhd (FNH) surged to multi-year high of RM19.70 in late afternoon trade on Monday, May 9, underpinned by its strong financial performance and its dividends.

At 3.24pm, it was up RM1 to RM19.70 with 128,300 shares done.

The FBM KLCI rose 2.2 points to 1,517.70. Turnover was 451.30 million shares valued at RM613.94 million. There were 274 gainers, 382 losers and 273 stocks unchanged.

Last Thursday, May 6, it posted net profit of RM131.98 million in the second quarter ended March 31, 2011 versus RM85.23 million a year ago, boosted by the sale of a college building.

Revenue was RM1 billion compared with RM872.09 million. Earnings per share were 36.80 sen versus 23.90 sen. It declared a special interim single tier dividend of 15 sen per share and an interim single tier dividend of 20 sen per share.

Last Friday, May 6 AmResearch reiterated its BUY recommendation on F&N and lifted its fair value from RM17.40/share to RM22.70/share, based on a PE of 18 times CY11F earnings.

'We believe a small premium is justified given F&N's strong earnings profile within the non-discretionary food industry against a backdrop of rising material costs, as underpinned by its market share leadership position and brand equity strength,' it said.

Maybank Investment Bank Research said on Monday the 1HFY11 net profit of RM239 million (+47% YoY) was 8% above its forecasts after stripping out a one-off gain from the sale of assets amounting to RM54m.

'Revenue, meanwhile, was in line at 50% of our full-year forecast. F&N's share price has done well with at YTD gain of 24.7%. Currently trading at a prospective FY12 PER of 20.4x, valuations are stretched in our view, thus the downgrade in our call to Sell from Hold,' it said.

Maybank IB Research raised the target price from RM15 to RM15.25.

F&N - F&N at multi-year high of RM19.70 on earnings, dividends

Stock Name: F&N
Company Name: FRASER & NEAVE HOLDINGS BHD
Research House: MAYBANK

KUALA LUMPUR: Shares of Fraser & Neave Holdings Bhd (FNH) surged to multi-year high of RM19.70 in late afternoon trade on Monday, May 9, underpinned by its strong financial performance and its dividends.

At 3.24pm, it was up RM1 to RM19.70 with 128,300 shares done.

The FBM KLCI rose 2.2 points to 1,517.70. Turnover was 451.30 million shares valued at RM613.94 million. There were 274 gainers, 382 losers and 273 stocks unchanged.

Last Thursday, May 6, it posted net profit of RM131.98 million in the second quarter ended March 31, 2011 versus RM85.23 million a year ago, boosted by the sale of a college building.

Revenue was RM1 billion compared with RM872.09 million. Earnings per share were 36.80 sen versus 23.90 sen. It declared a special interim single tier dividend of 15 sen per share and an interim single tier dividend of 20 sen per share.

Last Friday, May 6 AmResearch reiterated its BUY recommendation on F&N and lifted its fair value from RM17.40/share to RM22.70/share, based on a PE of 18 times CY11F earnings.

'We believe a small premium is justified given F&N's strong earnings profile within the non-discretionary food industry against a backdrop of rising material costs, as underpinned by its market share leadership position and brand equity strength,' it said.

Maybank Investment Bank Research said on Monday the 1HFY11 net profit of RM239 million (+47% YoY) was 8% above its forecasts after stripping out a one-off gain from the sale of assets amounting to RM54m.

'Revenue, meanwhile, was in line at 50% of our full-year forecast. F&N's share price has done well with at YTD gain of 24.7%. Currently trading at a prospective FY12 PER of 20.4x, valuations are stretched in our view, thus the downgrade in our call to Sell from Hold,' it said.

Maybank IB Research raised the target price from RM15 to RM15.25.

KSL - KSL has two jewels in hand

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

KSL Holdings Bhd
(May 9, RM1.74)
Maintain outperform at RM1.70 with fair value of RM2.40: Given a well-established foothold in the Johor property market as well as its new integrated commercial development ' KSL City located in the prime Johor Bahru city centre area ' KSL is a key beneficiary which can enjoy the robust development growth of Iskandar Malaysia and JB city centre almost immediately. Various efforts to boost the Iskandar corridor have been put in.

The key recent developments that we think are important and can benefit the JB city centre are the intra-city commuter train project, which will start operating by end-2012 and may eventually link up with the Singapore MRT at JB Central in 2018, as well as the opening of the coastal highway connecting JB city centre and Nusajaya (just 15 minutes drive) end-2011.

The commencement of the inner city commuter train and coastal highway will enhance the connectivity within Johor state. While population flow out of the city centre will be easier, people can also be brought in from other relatively remote areas in the state to the city centre, which is well-developed and primarily the business centre.

KSL City mall opened in December last year. We visited the mall recently, and were impressed with the concept, design and marketing of the project.
Currently, the mall is the only one that has an exhibition and convention centre facility, and competition from other malls is limited (only City Square) for now. Occupancy is now almost 100%, with 50,000 to 60,000 visitors on weekends.

Upon the opening of the anchor tenant Tesco in May, the management expects to pull in a greater crowd, with another wave coming after the opening of the service apartments and hotel early next year. D'Esplanade is now almost fully sold and seeking the release of bumiputera units.

The latest pricing was transacted at RM750 psf, 67% higher than the first launch price of RM450 psf at end-2009. Including the hotel, we expect recurring rental income to contribute about RM100 million per year. Assuming a decent rental growth rate of 8% per year, we estimate that the mall itself could be worth almost RM700 million.

Its Bandar Bestari Klang is also looking at higher pricing. As land values continued to rise, with the latest transaction price at RM36 psf (initial cost'' RM9 psf), KSL recently acquired another 6.7ha to have a better frontage for its project and management is planning to price its properties higher.

Note that we have only assumed RM23 psf for this piece of land in realisable net asset value and at RM30 psf, our RNAV will be boosted by 26 sen. Indicative pricing for its 32ft x 80ft clustered house is upped by another RM100,000 to almost RM600,000. The first phase is expected to be launched in July/August this year.

The risks include: (i) regulatory risk; (ii) delay in approvals and launches; (iii) competition from peers; and (iv) country risks.

Our forecasts remain unchanged and we reiterate our 'outperform' call. We believe the market has underestimated the potential of KSL's assets and landbank. The stock is currently trading at a deep 58% discount to RNAV. Based on 40% discount to RNAV, we maintain our fair value at RM2.40. ' RHB Research, May 9


This article appeared in The Edge Financial Daily, May 10, 2011.

IJM - IJM Corp acquires additional 49% in Indian tollway

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

IJM Corp Bhd
(May 9, RM6.20)
Maintain buy at RM6.20 with fair value of RM7.74: We maintain our 'buy' recommendation on IJM Corp Bhd with an unchanged sum-of-parts- (SOP) derived fair value of RM7.74.

Last Friday, IJM announced that its wholly-owned unit IJM Vijayawada (Mauritius) Ltd had entered into a share sale agreement to acquire 14 million shares representing a 48.9% stake in Vijayawada Tollway Pte Ltd.

Vijayawada Tollway is the concessionaire for the conversion of the existing four-lane Chilkaluripet-Vijayawada highway in Andhra Pradesh, India, into six lanes. The stretch measures 82.5km, from km355 to km434.15 of NH-5.

IJM has proposed to acquire the 48.9% stake in Vijayawada Tollway for RM28 million. This would lift its effective stake in the highway from 48.9% to 99.97%.
Vijayawada Tollway is just one of five highway concessions in IJM's stable in India.

Together with a 20% stake the Gautami power concession, IJM's infrastructure investments in India account for 96 sen per share or about 12% the group's SOP value.

Pending further information on the time line of the acquisition, we maintain our forecast for now ahead of IJM's upcoming FY11F results, due to be released on May 27. We estimate that the deal will lift IJM's SOP value by nine sen per share or about 1.2%.

We are increasingly positive about IJM's strategic positioning ahead of improving domestic contract flows in the coming months.

The group recently announced it could be at the forefront for capex works on two highways worth a combined RM5 billion ' the West Coast Expressway and the New Pantai Expressway extension.

Based on its track record, we reckon that IJM would also be a leading candidate for other big-ticket jobs (for example the Klang Valley LRT/MRT works, Seremban-Johor Bahru double-tracking railway project, Langat 2 WTP).

Backed by an outstanding order book of RM4 billion, IJM is well on track to achieve a record order book in FY12F, potentially surpassing the previous peak of RM6.7 billion in FY07.

IJM remains our top large-cap pick on the back of a re-acceleration of contract flows in Malaysia. We have assumed the group will achieve RM3.5 billion worth of new contracts in FY12F against an estimated RM2.2 billion in FY11F. ' AmResearch, May 9


This article appeared in The Edge Financial Daily, May 10, 2011.

MHB - MMHE results, ex-anomalies, in line

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

Malaysia Marine and Heavy Engineering Holdings Bhd
(May 9, RM6.77)
Maintain hold at RM6.83 with target price of RM6.50: Results (ex-anomalies) were in line. 12MFY11 net profit of RM451 million was up a strong 61% year-on-year (y-o-y). The Cendor Phase 2 floating production storage and offloading (FPSO) conversion job win has surpassed our expectation in terms of value, while upcoming potential sizeable job wins (RM2 billion to RM4 billion) should boost its order book. We believe, news flow could momentarily stretch price performance beyond 28 times 2012 price-earnings ratio (sector peak), above our fundamental target price of RM6.50 (22 times earnings per share). We maintain our 'hold' call.

Results in 4Q were skewed by anomalies. MMHE declared a final dividend per share (DPS) of five sen. Revenue of RM923 million (-30% quarter-on-quarter) in 4QFY11and RM129 million net profit (-4% q-o-q) took full-year net profit to RM451 million (+61% y-o-y), ahead of our and street forecasts of RM382 million and RM403 million respectively. The outperformance in 4Q was on: (i) RM39 million tax credit from Investment Tax Allowance (ITA); (ii) RM65 million variation orders (VO) at MMHE-TPGM; and (iii) unrelated order book contributions. Excluding these, results would be in line.

Group revenue fell 30% q-o-q on the de-consolidation of MMHE-TPGM results (for the Turkmenistan project) from Jan 1, 2011. The Gumusut-Kakap (RM191 million revenue contribution), Kinabalu (RM78 million) and Tangga-Barat projects were the drivers to E&C revenue, which accounted for 96% of the group's top line. Complementary division, marine repair and conversion revenue contracted (-16% q-o-q to RM39 million), reflecting the slowdown in the shipping sector.

MMHE has clinched the RM850 million FPSO conversion job for the Petrofac Cendor Phase 2. While the contract value is above our anticipated RM500 million to RM600 million, this is insufficient to offset its job run rate which was down to RM3.1 billion as at March 2011 (-13% q-o-q). Seventy-three per cent of three existing orders (Gumusut-Kakap, Turkmenistan, Kinabalu) will be exhausted by 2Q12, within a year. This is likely to be replaced with highly probable domestic contracts with combined values of RM2.2 billion to RM4.3 billion. This excludes potential new orders from Turkmenistan and Iraq projects. ' Maybank IB Research, May 9


This article appeared in The Edge Financial Daily, May 10, 2011.

FABER - Faber's property division to contribute more

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

Faber Group Bhd
(May 9, RM2.05)
Maintain buy at RM2.08 with revised target price of RM3 (from RM3.30): Faber's 1QFY11 net profit'' (-1.7% year-on-year [y-o-y] to'' RM14.2 million) accounted'' for about 16.6% of our and consensus full-year forecast. Below expectation performance was mainly due to lower earnings contribution from integrated facilities management (IFM) non-concession business in the UAE and slow new job replenishment rate. Taking this into account, but to be mitigated by higher contribution from property business in the next few quarters this year and some housekeeping activities (after the release'' of'' its FY10 annual report end-April 2011), we revise downwards our FY11 net earnings by 11% to RM75.9 million (3.7% lower than FY10's'' figure). We also introduce our FY12 numbers with an earnings per share growth of'' 9.5% y-o-y, expecting better performance for all divisions. ''

Given the fact that the UAE Western Region Municipality's total RM184 million contracts (expiring in 2QFY11) will not be'' renewed, we anticipate a slowdown of work orders from the UAE. Pre-tax profit contribution from IFM non-concession business declined 45% y-o-y in 1QFY11 but improved quarter-on-quarter as the division registered a loss in 4QFY10 on additional costs.

This was offset by higher contribution from the IFM concession and property segments. All in, Faber's pre-tax profit increased 7.4% y-o-y to RM25.6 million.
We reiterate our belief that the government'' hospital support'' services'' (HSS) concession, which will expire in October'' 2011, will be extended.

New launches of Villa Prima Phase 1A (gross development value of RM148 million) in February 2011 and Laman Rimbunan Phases 4 and 5 package 3 (estimated RM100 million) which is to be expected in 3Q11, will help to make up the loss of UAE contracts in FY11.'' ''

We have an unchanged 'buy' recommendation for Faber'' with revised target price of'' RM3 (previously'' RM3.30) based on sum-of-parts valuation with an implied price-earnings ratio (PER) of 14.3 times.'' ' MIDF Research, May 9


This article appeared in The Edge Financial Daily, May 10, 2011.

IJM - IJM Corp's valuations inexpensive

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

IJM Corp Bhd
May 6, RM6.20)
Buy at RM6.18 with revised target price from RM7.30 to RM8.70: We have switched our sector pick to IJM Corp from Gamuda given strong expectations of more assured and immediate order book replenishment. We raise our sum-of-parts derived target price for IJM Corp to RM8.70 after upgrading FY12/13F earnings per share by 9% to 14% to account for RM3 billion to RM5 billion of new wins now against RM2 billion previously, and taking into account a larger 68.1% stake in IJM Land against 61.6% previously, following the conversion of RM400 million worth of redeemable convertible unsecured loan stocks (RCULS) and lower target price for IJM Plantations. Valuations for IJM Corp at a price-earnings ratio of 14 times FY13 earnings and a price to net tangible assets ratio of 1.3 times are inexpensive.

The construction unit is going strong with some RM5 billion of new orders to be converted by CY11, boosting the group's order book to RM9 billion from RM4 billion now. These include the New Pantai Expressway (NPE) extension and West Coast Expressway (WCE).

In addition, the quality of its order wins will be better with some 90% being local government jobs against 50% overseas projects in 2007. IJM Corp is reasonably assured of these wins in the medium term. This is excluding the light rail transit (LRT), mass rapid transit (MRT) and government building jobs such as the KL Financial District and private sector jobs for which the builder is a strong contender. We also expect its manufacturing unit to be a key beneficiary.

IJM Land will continue to chalk up strong property sales of about RM1.35 billion in FY11, beating its FY10 peak of RM1.25 billion. We view the RCULS conversion by IJM Corp as an indication of expected strong earnings momentum in IJM Land in the coming years. In CY12, two key projects will be launched ' Canal City and Sebana Cove with a total gross development value of RM7.4 billion. The success of Canal City is important because it will give IJM Land a much needed flagship Klang Valley township development to leverage on for further expansion, possibly including the Rubber Research Institute Malaysia (RRIM) land.

For the NPE, we expect pretax margins of at least 8%, possibly beating margins for the RM600 million Besraya extension project, because it is being negotiated now when raw material costs are higher.

For the WCE, the cost of the project was initially RM3 billion, but we understand it will be substantially higher now given changes to the overall alignment and overall increase in raw material costs.

Other potential jobs in the pipeline are LRT extensions phase 2 worth RM2.2 billion, MRT non-tunnelling works for the Blue Line worth RM11 billion, and government building jobs such as the KL Financial District, RRIM land and Jalan Cochrane.

We believe IJM is a strong contender for all these projects given its track record, strong balance sheet, and niche in building jobs with experience in Grade A office, luxury condominiums and other commercial and residential projects.

IJM Corp is scheduled to release its 4QFY11 results in late May. We understand there could be some RM70 million in writedowns at its construction unit, largely related to legacy jobs in India and some outstanding jobs, where the management is expecting non-payment and delays in land acquisition.

Even without the writedowns, we do not expect substantial improvement in 4QFY11 construction margins. We only expect margins to normalise in 2HFY12, when key local projects are in full swing. Our current FY11 forecast excludes the likelihood of this provision. ' HwangDBS, May 6


This article appeared in The Edge Financial Daily, May 9, 2011.

TENAGA - Sustained high coal prices a challenge to TNB

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

Tenaga Nasional Bhd
(May 6, RM6.12)
Maintain buy at RM5.99 with target price of RM6.54: We maintain our 'hold' call for TNB as we believe the company could face challenges in the coming months in the form of sustained high coal prices. We also take into account Petronas' gas curtailment which means that TNB has to substitute gas with a higher usage of coal and distillate, and the lack of visibility with regards to timing of any tariff adjustments.

Our target price of RM6.54 for TNB is based on unchanged price-earnings ratio of 15 times FY11 earnings. This is the post-June 2006 average multiple of the company.

According to Bernama, TNB has earmarked four sites to set up geothermal power plants which will utilise steam generated from hot springs. The project is currently in the initial stages of Phase 2, in which geophysics and subsurface analysis are being carried out.

The next stage will include exploratory drilling, which is similar to oil drilling. Each geothermal plant will have the potential to generate more than two megawatts (MW) of electricity. A large hot spring can generate up to 20MW of power. The geothermal project is expected to be fully implemented by 2016.

This move into geothermal energy is part of TNB's long-term strategy to diversify into renewable energy sources, given the rising coal and gas prices.

The need to look at other viable renewable energy options is gaining importance, considering adverse public opinion on the use of nuclear power after the nuclear disaster in Japan.

The foray into geothermal power is in line with the government's plan to increase renewable energy contribution to Malaysia's power generation mix from less than 1% (41.5MW) currently to 5.5% (985MW) by 2015.

With the expected announcement on the operation and maintenance of an 84MW hydropower plant in Pakistan, we believe TNB is on track to achieve its key performance indicator of RM1.8 billion to RM1.9 billion worth of revenue from non-regulated businesses. We are also pleased to hear that political unrest in the Middle East is not holding TNB back from expanding its business into the region. ' ECM'' Libra, May 6


This article appeared in The Edge Financial Daily, May 9, 2011.

F&N - Fraser & Neave cut to 'sell' at Maybank Invt

Stock Name: F&N
Company Name: FRASER & NEAVE HOLDINGS BHD
Research House: MAYBANK

Fraser & Neave Holdings Bhd was cut to “sell” from “hold” at Maybank Investment Bank Bhd, saying valuations of the Malaysian beverage maker shares are “rich.”

The share price estimate was reduced to RM15 from RM15.25, Kang Chun Ee, an analyst at Maybank, wrote in a report today. -- Bloomberg