KNM - Tenaga powers KLCI higher, KNM slumps

Stock Name: KNM
Company Name: KNM GROUP BHD
Research House: MAYBANK

KUALA LUMPUR: Tenaga Nasional helped power the FBM KLCI to a higher close at midday on Friday, May 27 on hopes of revised tariff by government during the National Economic Council meeting scheduled for Friday.

Key regional markets were also higher in the morning session, with Reuters reporting that investors were on a bargain hunting after the recent falls while the euro advanced.

At 12.30pm, the FBM KLCI was up 7.49 points to 1,548.43. Turnover was 447.13 million shares valued at RM692.33 million. There broader market was weaker with losers beating gainers 395 to 246 while 279 stocks were unchanged.

Tenaga up 22c to RM6.52 midday, on hopes of revised tariff by government.'' Among PLANTATION []s, KLK rose 30 sen to RM22.18, PPB 18 sen to RM17.70 and Batu Kawan 18 sen also to RM16.44.

Genting's strong set of earnings saw the shares climb 12 sen to RM11.22 while among the banks, HLFG rose 20 sen to RM11.70 and HL Bank 18 sen to RM12.08.

Among the losers, KNM fell 30 sen to RM2.23, the biggest one day loss in recent months after a poor set of first quarter earnings as investors ignored news of its RM217 million Uzbek contract.

MIDF Research maintained a Buy on KNM with a target price of RM3.20 while Maybank Investment Bank Research was more optimistic, keeping NMN as Buy with an unchanged target price of RM3.20.

Perstima was the top loser, down 47 sen to RM4.70 after its fourth quarter net profit fell sharply to RM6.49 million from RM26.62 million a year ago.

Other decliners were F&N, down 22 sen to RM19.28 in thin trade, Cypark shed 14 sen to RM2.06 and MSC 10 sen to RM5.39.

KNM - Tenaga powers KLCI higher, KNM slumps

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

KUALA LUMPUR: Tenaga Nasional helped power the FBM KLCI to a higher close at midday on Friday, May 27 on hopes of revised tariff by government during the National Economic Council meeting scheduled for Friday.

Key regional markets were also higher in the morning session, with Reuters reporting that investors were on a bargain hunting after the recent falls while the euro advanced.

At 12.30pm, the FBM KLCI was up 7.49 points to 1,548.43. Turnover was 447.13 million shares valued at RM692.33 million. There broader market was weaker with losers beating gainers 395 to 246 while 279 stocks were unchanged.

Tenaga up 22c to RM6.52 midday, on hopes of revised tariff by government.'' Among PLANTATION []s, KLK rose 30 sen to RM22.18, PPB 18 sen to RM17.70 and Batu Kawan 18 sen also to RM16.44.

Genting's strong set of earnings saw the shares climb 12 sen to RM11.22 while among the banks, HLFG rose 20 sen to RM11.70 and HL Bank 18 sen to RM12.08.

Among the losers, KNM fell 30 sen to RM2.23, the biggest one day loss in recent months after a poor set of first quarter earnings as investors ignored news of its RM217 million Uzbek contract.

MIDF Research maintained a Buy on KNM with a target price of RM3.20 while Maybank Investment Bank Research was more optimistic, keeping NMN as Buy with an unchanged target price of RM3.20.

Perstima was the top loser, down 47 sen to RM4.70 after its fourth quarter net profit fell sharply to RM6.49 million from RM26.62 million a year ago.

Other decliners were F&N, down 22 sen to RM19.28 in thin trade, Cypark shed 14 sen to RM2.06 and MSC 10 sen to RM5.39.

GENM - OSK maintains 'neutral' call on Genting

Stock Name: GENM
Company Name: GENTING MALAYSIA BERHAD
Research House: OSK

OSK Research is maintaining a "neutral" stance on Genting Malaysia (GENM) despite the group reporting improved results in the first quarter of the year.

"The group's first quarter earnings represented 27.7 per cent and 28.8 per cent of consensus and our full year forecasts.

"We deem the results to be in line with estimates as the first quarter is seasonally the strongest quarter, with the UK gaming operation benefitting from an above average luck factor, but still remains volatile and could normalise in the ensuing quarters," OSK Research said in a research note today.

It still preferred parent company, Genting Bhd, which is trading at a similar price to earnings ratio, but had a better growth rate on top of its exposure to the entire group's global casino operations, and value unlocking potential of its non-core gaming assets.

Meanwhile, MIMB Investment Bank is recommending a "Buy" with a new target price of RM4.26 for GENM, following continued resilient local earnings coupled with impressive numbers contributed by its UK casino operation.

"On the back of New York new site to be operational coupled with improving UK operations, we are now turning bullish on GENM," it added. -- Bernama

MRCB - MRCB could get RRIM land job: OSK

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

Malaysian Resources Corporation Bhd (MRCB) could be selected to undertake the development of the Rubber Research Institute
(RRIM) land in Sungai Buloh, Selangor.

"We believe this will be an upside catalyst for MRCB," OSK Research Sdn Bhd said in a research note today.

It maintained a trading "buy" recommendation on MRCB at an unchanged fair value of RM2.58. -- Bernama

GENM - Genting downgraded to 'hold' at Maybank

Stock Name: GENM
Company Name: GENTING MALAYSIA BERHAD
Research House: MAYBANK

Genting Malaysia Bhd, a gaming group, was downgraded to “hold” from “buy” at Maybank Investment Bank Bhd. The stock is now close to Maybank’s share estimate of RM3.52, analyst Yin Shao Yang wrote in a report today. -- Bloomberg

GENTING - Genting cut to 'hold' at ECM Libra

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

Genting Bhd, a Malaysian gaming and plantations group, was downgraded to “hold” from “buy” at ECM Libra Capital Sdn Bhd.

“Strong” growth at its Singapore casino resort has already been priced in, ECM Libra analyst Bernard Ching wrote in a report today. -- Bloomberg

NAIM - Naim at 18-month low, its fair value cut

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

Naim Holdings Bhd, a Malaysian construction company, fell to an 18-month low in Kuala Lumpur trading after reporting lower first-quarter earnings and AmResearch Sdn Bhd cut its fair value for the stock to RM4.46.

Its shares fell 1.2 per cent to RM2.48 at 9:25 a.m. local time, set for its lowest close since December 2009. -- Bloomberg

PCHEM - Petronas Chem earnings forecast raised

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

OSK is upgrading Petronas Chemicals Group's 2012 financial year earnings forecast by 28 per cent based on expectations that current oil prices will sustain, which will, in turn, buoy the prices of chemicals products.

"Financial year 2011 were above expectations. We are upgrading our financial 2012 earnings forecast in line with the better outlook for the company.

"We continue to like the company's strong backing from Petronas group, especially in keeping its feedstock prices low, as well as, attractive dividend payout ratio of 50 per cent, which is the highest among its closest peers," it said in a research note today.

OSK maintained a "buy" on the company.

However, it said the company is still subject to uncontrollable factors which included fluctuations in the international price of petrochemical products, global economic conditions and utilisation of its production facilities based on demand.

Meanwhile, AmResearch, which maintained a "buy" on Petronas Chemicals, said the current Middle East political turmoil had pushed crude oil prices back to the US$100 per barrel threshold.

"As petrochemical prices have a high correlation to naphtha, which is a by-product of oil refining, we are sanguine about the company's earnings outlook," it said. -- Bernama

GENTING - Genting advances, boost from strong earnings

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

KUALA LUMPUR: Shares of GENTING BHD [] advanced in early trade on Friday, May 27 after it reported a strong set of earnings in the quarter ended March 31, 2011.

At 9.14am, it was up 14 sen to RM11.24 with 173,600 shares done.

The FBM KLCI was up 5.26 points to 1,546.20. Turnover was 52 million shares valued at RM52.31 million. There were 113 gainers, 94 losers and 127 stocks unchanged.

Genting Bhd's net profit surged 254% to RM824.17 million in the first quarter ended March 31 from RM232.43 million a year ago when the net profit then was affected by net impairment losses.

Revenue rose 57.2% to RM4.89 billion from RM3.11 billion while earnings per share were 22.25 sen compared with 6.29 sen. The group's profit before tax in 1QFY11 was RM1.9 billion compared with RM200.0 million in 1QFY10.

CIMB Equities Research said Genting Bhd's 1Q11 core net profit accounted for 27% of its full-year forecast and 29% of consensus numbers.

'We regard it as being largely in line with our expectations as earnings should normalise after the seasonally strong 1Q. However, the 1Q results beat consensus estimates, courtesy of Resorts World Sentosa's (RWS) stronger-than-expected win rate.

'We are keeping our FY11-13 core EPS forecasts and SOP-based target price of RM15.40. The stock remains an OUTPERFORM and our top pick in our gaming universe,' it said.

PCHEM - OSK Research upgrades FV for PetChem

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

KUALA LUMPUR: OSK Research has upgraded its fair value for Petronas Chemicals Group Bhd to RM9.28 (previously RM7.26) based on the existing PER of 18x FY12 EPS following its FY12 earnings upgrade.

'We like the company's strong backing from Petronas Group, especially in keeping its feedstock prices low, as well as attractive dividend payout ratio of 50%, which is the highest among its closest peers,' it said on Friday, May 27.

OSK Research said PetChem's FY11 results were above expectations owing to the higher sales and better prices for its petrochemical products.

SEAL - CIMB Research has Sell on Seal Inc

Stock Name: SEAL
Company Name: SEAL INCORPORATED BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research has a technical Sell on Seal Incorporated at 51.5 sen at which it is trading at a price-to-book value of 0.9 times.

It said on Friday, May 27 that Seal violated the flag support early this week. The pullback also dragged prices below its 50-day SMA.

'We think that the stock is due for deeper correction and the 200-day SMA is also a magnet for prices,' it said.

CIMB Research said the MACD has slipped into the red while RSI is slowly losing pace. The deteriorating technical landscape suggests that the trend is now down.

'Use any rebound towards the RM0.525-0.535 levels to sell into strength. On the downside, support is seen at RM0.495, RM0.475 and RM0.445. Always put a buy stop at RM0.565, just in case,' it said.

BIPORT - CIMB Research maintains Neutral on Bintulu Port

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

KUALA LUMPUR: CIMB Equities Research said Bintulu Port's 1Q11 core net profit came in within expectations, at 26% of its full-year estimate and 27% of consensus.

It said on Friday, May 27 that the interim single-tier dividend of 7.5 sen declared for the quarter was expected.

'In the absence of earnings surprises, we are retaining our FY11-13 earnings projections and DCF-based target price of RM7.00. We maintain our NEUTRAL rating as Bintulu Port's lack of earnings catalysts should be compensated by its high gross dividend yields of 8%.

'However, we prefer Malaysia Airports for exposure to the transport infrastructure sector,' it said.

ANNJOO - CIMB Research maintains Trading Buy on Ann Joo

Stock Name: ANNJOO
Company Name: ANN JOO RESOURCES BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research said although ANN JOO RESOURCES BHD []'s annualised 1Q11 net profit came in at 109% of its forecast, it was largely in line.

The research house said on Friday, May 27 that it expected the 2H to be slower due to start-up costs when Ann Joo's blast furnace is fully operational.

'But at 89.6% of consensus estimates, it will disappoint the market. As expected, no dividends were declared. Billet-scrap spreads have edging up gradually from US$160/mt in Jan 2011 to US$186/mt in May, which bodes well for 2Q.

'We maintain our estimates and RM3.74 target price, still based on 13.05x CY12 P/E, a 10% discount to our target market P/E of 14.5x. Ann Joo remains a TRADING BUY and could be catalysed by higher selling prices and improved local demand due to more CONSTRUCTION [] starts. CY11 gross yields are now 6.0%, the highest in the building materials sector,' CIMB Research said.

CIMB - A quiet start to FY11 for CIMB Group

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

CIMB Group Holdings Bhd
(May 26: RM 8.28)
Maintain buy with an unchanged fair value of RM9.70 a share: Our call for CIMB Group is based on an unchanged return on equity (ROE) of 18% in FY11F, leading to a fair price-to-book value of 2.8 times.

CIMB reported net earnings of RM917 million (-4.2% quarter-on-quarter, +9.3% year-on-year) for 1QFY11. Annualised net earnings came in 16% below our estimate and 13% below consensus.

The main shortfall was in non-interest income, which came in 22.7% below our forecast. This was due mainly to the absence of fees related to large mandates as well as less redemption activity on its securities portfolio. However, the company remains optimistic in terms of the pipeline ahead for the capital markets.

Overall loans rose 12% on an annualised basis. We estimate overall net interest margin (NIM) to have declined by 34 basis points (bps) q-o-q in 1QFY11.

The decline in NIM was attributed largely to CIMB Niaga (-95bps q-o-q), as well as CIMB Thai due to an expansion in its corporate loan book. In terms of NIM for Malaysia, the company hinted that the drop was marginal.

The group expects NIM to be aided by the recent rate hike in Malaysia. Overall, the group hinted that NIM will likely compress at about 10bps overall in FY11F, in line with its previous guidance.

Gross impaired loans were lowered by 0.8% q-o-q in 1QFY11, the fourth consecutive quarter of improvement since 1QFY10. The gross impaired loans ratio declined to 5.9% as at end-March 2011 from 6.1% as at end-December 2010. Loan loss cover is stable, at 80.6% as at end-March 2011 against 81.1% at end-December 2010.

Overall loan loss provision came in much lower than expected at only RM6 million in 1QFY11, compared with 4QFY10's RM168 million and 1QFY10's RM150 million.

This was attributed to the reversal of delinquencies that spiked upwards in 4QFY10. Credit costs amounted to only 1bps in 1QFY11, compared with 41bps in 4QFY10 and 40bps in 1QFY10. We are maintaining our overall credit cost assumption of 40bps for FY11F.

CIMB's annualised net earnings in 1QFY11 were lower than our estimate, but this was mainly due to its non-interest income segment. This was offset by low loan loss provisions. However, we expect non-interest income to pick up with realisation of the government's Economic Transformation Programme.

Key re-rating catalysts are: (i) the ability to achieve its high loans growth target of 18%; (ii) continuing improvement in current account, savings account deposit; (iii) stronger than expected non-interest income; and (iv) achievement of ROE target of 18% for FY11F. ' AmResearch, May 26


This article appeared in The Edge Financial Daily, May 27, 2011.

MAS - MAS: Is the pot of gold just an illusion?

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

Malaysian Airline System Bhd
(May 26, RM1.55)
Downgrade to underperform, reduce target price to RM1.52 (from RM2.30): MAS significantly undershot our expectations with a 1QFY11 core net loss of RM415 million. We had forecast RM247 million core net profit for the full year and were too optimistic in our projections.

The variance arose from lower than expected international passenger yield and weaker than expected domestic loads, which we have now adjusted in our model.

We now forecast a core net loss of RM560 million for this year and slash core net profit for FY12/FY13 by between 39% to 94%.

MAS' poor results will shock the market and we expect significant downgrades by analysts, which may be the key de-rating catalyst. We downgrade MAS from 'outperform' to 'underperform' and reduce the target price from RM2.30, based on seven times core price-earnings ratio, to RM1.52, pegged to two times price-to-book value.

The shift to book valuation is necessary given the sharp reduction in our profit forecasts. We recommend a switch to AirAsia Bhd.

MAS' passenger business is suffering from strategic mistakes. We were taken aback by the performance of the international passenger segment which saw a 5% year-on-year fall in yields, reversing three consecutive quarters of y-o-y improvement. In contrast, Singapore Airlines improved its yield by 9% y-o-y.

MAS over-expanded capacity by 12.5% y-o-y, forcing it to cut fares to stimulate demand. Although the passenger load factor rose 1.9 percentage points to 77.8%, it was not enough to prevent a 2.8% decline in revenue per available seat per kilometre (ASK), which was disastrous when high fuel costs pushed cost per ASK up 4.6%.

On the domestic sector, capacity expansion was modest at only 1% but MAS tried to push up fares too aggressively, leading to a 13.7% y-o-y rise in domestic yield.

Consequently, demand collapsed 8.8% and the domestic passenger load factor dropped 6.4 percentage points to 60.3%, the lowest ever in memory.

As a result, domestic revenue per ASK rose a mere 2.8% y-o-y, which implied a squeeze in profitability of the domestic business since cost per ASK rose 4.6%.

The cargo business also suffered a 19% y-o-y reduction in operating profit as demand fell 8.2% y-o-y. MAS failed to adjust cargo capacity which rose 4% y-o-y, causing loads to drop nine percentage points to 68.5%.

In contrast, SIA Cargo's demand rose 5% y-o-y and it was more pro-active in keeping capacity in line with demand. MAS' group core net loss of RM415 million in 1QFY11 was 56% more than the RM267 million core net loss of last year's 1Q. ' CIMB Equities Research, May 26


This article appeared in The Edge Financial Daily, May 27, 2011.

PARKSON - Parkson Holdings books stronger than expected SSS growth in Malaysia

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

Parkson Holdings Bhd
(May 26, RM5.79)
Maintain market perform but with higher fair value of RM6.10 (from RM5.90): Parkson's 9MFY11 core net profit of RM275.2 million (+10.2% year-on-year) was above our expectations but within consensus estimates, accounting for 85% of our and 79% of consensus full-year forecasts.

The key variance to our forecasts was the lower than expected minority interest portion of RM197.8 million, 69% of our full-year forecast. We have therefore adjusted our minority interest assumption downwards for FY11 to FY13.

Another variance was a stronger than expected same store sales (SSS) growth for 9MFY11 of'' 9% (against our forecast of 5%) in Malaysia, which we believe was a result of the stronger economic conditions compared with the previous corresponding period, coupled with successful promotional activities.

SSS growth for China and Vietnam of 12% and 22% was in line with our estimates of 11% and 20%.

Due to the stronger than expected SSS growth in Malaysia, we are increasing our SSS growth for FY11 to 9%, to be in line with the 9MFY11 results.

To remain conservative however, we are leaving our SSS growth assumption for FY12 and FY13 unchanged at 5% per year as guided by management previously.

Parkson will continue its aggressive store expansions of eight to 10 stores in China, and two stores each in Malaysia and Vietnam in the coming years, which is in line with our estimates.

Assuming its Centro deal goes through by July this year, we expect contribution from Indonesia to come onstream in FY12, although we believe it would only add 3% to 4% to Parkson's overall bottom line.

Nonetheless, we believe that Parkson's entry into Indonesia would further strengthen its position as a regional department store player.

Note that we have not imputed contribution from Indonesia given that the deal is still not completed yet.

Our FY11 to FY13 earnings forecasts are adjusted upwards by between 7.9% and 9.6% after: (i) adjusting our minority interests assumption downwards; and (ii) increasing Malaysia's SSS growth assumption to 9% for 6MFY11 (from 5% previously).

The risk is a contraction in consumer spending in China, Malaysia and Vietnam.

Our sum-of-parts-derived fair value has been increased to RM6.10 (from RM5.90 previously) after our earnings upgrade and after imputing Parkson's latest net cash position of RM1 billion. ' RHB Research Institute, May 26


This article appeared in The Edge Financial Daily, May 27, 2011.

PROTON - Proton parked for the time being

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

Proton Holdings Bhd
(May 26, RM3.45)
Maintain trading buy with lower fair value of RM3.89 (from RM4.78): Proton's earnings for FY11 ended March 31 were below our and consensus numbers despite a stronger 4Q.

The national carmaker may be in for an unexciting FY12 given the lack of a significant product line-up. Proton is targeting to launch the Persona replacement sometime early next year but we do not discount the possibility of a further delay as it seeks cheaper alternative sources of parts to reduce the overall bill for materials.

We cut our export numbers by 50% as management has guided for flat growth at best, which effectively trims our revenue by 18% and earnings by 21%.

We maintain our 'trading buy' call with fair value cut to RM3.89 (from RM4.78), premised on the sector multiple of 10 times.

Proton posted a FY11 net profit of RM152.1 million on the back of RM8.98 billion revenue, which grew by 9.2% year-on-year on the back of higher vehicle sales on the domestic side while export volume was flat. Its earnings, however, fell short of our and consensus estimates due to the losses incurred by Lotus, largely from its kitchen sinking exercise.

Although Proton did not disclose the amount of impairment, we think its core net profit could have been pretty much in line.

This year's model pipeline could be limited to facelifts of the Exora and Saga.

Revenue will be boosted by the after sales and spare parts markets while earnings will be enhanced by its ongoing cost efficiency initiatives.

We understand that an MoU with Nissan on cooperating on the use of Nissan's platform and power train remains ongoing and an announcement is expected sometime in June as the two have yet to finalise the commercial agreement.

We do not see any excitement for FY12 given the absence of a significant product line-up. Proton's exports are likely to remain flattish at best as it is a cost burden to Proton given the high bill of materials cost.

We downgrade our earnings forecast for FY12 by 21% on the 50% cut in export volume and and 18% in revenue.

Despite the downward revision in fair value to RM3.89 from RM4.78 (premised on the sector multiple of 10 times), there is still sufficient upside, hence we are maintaining our 'trading buy' call. ' OSK Research, May 26


This article appeared in The Edge Financial Daily, May 27, 2011.

MAS - MAS a 'sell', says MIDF Research

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

MIDF Research has downgraded Malaysia Airlines to a "sell" and reduced its target price to RM1.24, from RM2.40 previously, as its expects the airlines' second quarter to be impinged.

Factors affecting the downgrade are the limited implied upside potential, pressure from escalating fuel prices, impact from the Middle East and North Africa civil unrest and the natural disaster in Japan, MIDF said in a note today.

The research firm has also decreased its earnings forecast for financial year 2011 and 2012, between 31 and 58 per cent, to reflect the lower-than-expected first quarter earnings and rising fuel prices.

"On top of that, the management is planning new revenue management system to be rolled out in the third quarter to improve pricing methodology and revenue.

"Hence, we remain upbeat on its long-term prospects," it added. -- Bernama

KLK - 'Neutral' rating on KL Kepong stays: OSK

Stock Name: KLK
Company Name: KUALA LUMPUR KEPONG BHD
Research House: OSK

OSK Research has maintained its "neutral" call on Kuala Lumpur Kepong (KLK).

It also maintained the earnings forecast of KLK on expectations that the softer price of palm oil in the remaining two quarters will be cushioned by its production growth.

"We continue to like the company, which we view, as the best managed big cap plantation company in Malaysia," it said in a research note today.

"However, valuation continues to be unattractive and hence, we are maintaining our neutral call on the stock," OSK added. -- Bernama

MAYBULK - Malaysian Bulk cut to 'neutral'

Stock Name: MAYBULK
Company Name: MALAYSIAN BULK CARRIERS BHD
Research House: OSK

Malaysian Bulk Carriers Bhd was cut to “neutral” from “buy” at OSK Research Sdn Bhd to reflect “depressed” shipping rates.

The stock’s fair value was reduced to RM2.21 from RM3.10, OSK said in a report in Kuala Lumpur today. -- Bloomberg

CIMB - OSK trims CIMB's earnings estimate

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

KUALA LUMPUR: OSK Research is trimming CIMB Group's financial year 2011 and 2012 earnings estimates by 4.8 per cent and 5.1 per cent respectively, after factoring in the exceptionally weak forex income in the first quarter performance.

In a note today, the research firm said the slight downward adjustment in earnings amid the first quarter annualised numbers coming in below estimates, centers on expectations of a stronger second half driven by domestic net interest margins stabilisation.

"It is likely to take effect from May onwards from the recent interest rate hike and further strengthening in the second half on the back of further probable rate hikes.

"This includes the expected flow through of the government's various economic transformation projects financing in the form of higher margin bridging loans and fee income from bond origination as well as a pick-up in mandated initial public offerings (IPOs) such as the recently announced flotation of
Bumi Armada," it added.

The group posted a higher pre-tax profit of RM1.23 billion in the first quarter ended March 31, 2011, compared to RM1.13 billion in the same period last year.

However, revenue decreased to RM2.75 billion from RM2.79 billion previously due to lower non-interest income, CIMB Group said an announcement to Bursa Malaysia today.

Its earning per share rose to 12.33 sen from 11.86 sen. - Bernama

HSL - Hock Seng Lee fair value raised

Stock Name: HSL
Company Name: HOCK SENG LEE BHD
Research House: OSK

Hock Seng Lee Bhd, a Malaysian builder, rose in Kuala Lumpur trading after OSK Research Sdn Bhd raised the stock’s “fair value” to RM2.50 from RM2.32 to reflect its earnings growth prospects.

The stock added 1.2 per cent to RM1.72 at 9:40 a.m. local time. -- Bloomberg

UMW - UMW inches up on firmer earnings but caution ahead on O&G

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

KUALA LUMPUR: Shares of UMW HOLDINGS BHD [] rose to a high of RM7.20 in the morning session on Thursday, May 26 after reporting a set of firmer financial results but analysts were cautious about the outlook for its oil and gas (O&G) business.

At 11.08am, it was up three sen to RM7.18. There were 626,100 shares done at prices ranging from RM7.17 to RM7.20.

OSK Research said UMW's 1Q revenue and net profit of RM3.2 billion and RM151.8 million respectively were in line with its and consensus.

'While the group saw revenue growth across all segments and a margin boost from the strengthening RM, the profitability of its O&G division continues to disappoint.

'Although production is expected to normalise by end of this month, and earlier than expected too, we are cautious of making any substantial revision in earnings owing to the potential of a power shortage during the summer in Japan slowing down production. We maintain our SELL call on UMW with our FV unchanged at RM6.41,' it said.

TENAGA - Tenaga downgraded to 'neutral' at OSK

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

Tenaga Nasional Bhd, Malaysia’s biggest power utility, had its stock rating downgraded at OSK Research Sdn Bhd after the government held off raising electricity prices.

The stock was cut to “neutral” from “buy,” analyst Chris Eng wrote in a report today.

The stock’s fair value was kept at RM7.03. -- Bloomberg

PBA - PBA posts stronger earnings on higher tariff rates

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

PBA Holdings Bhd
(May 24, RM 1.03)
Maintain buy at RM1 with higher revised fair value of RM1.35 (from RM1.22): PBA's 1QFY11 earnings beat our estimates with profit accounting for a third of our full-year forecast. ''

Higher earnings in this case are driven mainly by higher water tariffs chargeable to trade consumers coupled with the increase of registered trade consumers on a year-on-year (y-o-y) basis.

We are raising our profit estimates to account for the higher earnings base and we also raise our fair value for the stock to RM1.35 from RM1.22 previously.

PBA's profit in 1QFY11 accounted for 34% of our full-year forecast, on the back of higher water tariff rates chargeable to trade consumers (+27% since last November) and a water conservation surcharge (24 sen per cu m for consumption exceeding 35 cu m per month) to households.

Revenue in 1QFY11 reached a record high at RM56.3 million (+15.3% y-o-y; +11.8% quarter-on-quarter) with net profit at RM11.1m (+105% y-o-y; +26% q-o-q). Keeping its operating costs at bay, the higher tariff rates also translated into direct bottom line gains which lifted its net profit margins to 19.7% versus a year ago at 11%.

With a water tariff hike increase of 27% chargeable to trade consumers, better earnings are expected to flow in for PBA this year. On a y-o-y comparison, registered trade consumers (for water services) increased by 11% from 2010 to 2009.

Since Penang has been lauded as the state with the highest foreign direct investment (FDI) at 36% of total national FDI in 2010, we reckon the state's outperformance will continue to attract more businesses and further increase the number of registered trade consumers for PBA.

While household consumers in the long run should cut their water consumption, we believe the increase in trade consumption revenue will far offset the household decline given higher tariff rates. We expect trade consumption to be inelastic despite higher tariff charges as water costs often account for less than 5% of the operating cost structure of the typical business operation in Penang.

As at 2010, trade consumption and domestic household water consumption were at a 50:50 ratio.

We increase our profit estimates for PBA by 38% upon raising our consumption forecast from a decline of 4% to an increase of 2%.

We also project revenue to increase by 19% y-o-y from an increase of 9.2% previously. Premised on higher profit, we reckon PBA could be more generous in its dividend payout and hence raise our forecast to five sen per share for FY11 from four sen per share.

Our dividend estimate is premised on a payout ratio of 36.7%, ranging close to its previous year's 38%. On higher earnings forecast, we raise our discounted cash flow fair value for PBA to RM1.35 from RM1.22 previously. We reiterate our 'buy' recommendation for the little followed stock. ' OSK Research, May 24


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

RHBCAP - RHBCap a 'buy', say research houses

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

Several research houses have maintained their "buy" call on RHB Capital Bhd.

OSK Research said the group's near term operational outlook remained intact and the stock's valuation remained relatively attractive.

"Following a slight two per cent upward adjustment to our book value following the completion of the group's dividend re-investment scheme, which saw an impressive 84 per cent take-up rate and a downward adjustment to cost of equity from 9.5 per cent to 9.2 per cent, we derive a higher fair value of
RM10.16 against RM9.56 previously," the research house said in its Malaysia Equity Investment Research Daily.

Meanwhile, HwangDBS Vickers Research set its target price at RM10.00, assuming five per cent long term growth, 10.5 per cent cost of equity and 16 per cent return on equity.

"Newsflow on the bidder for Abu Dhabi Commercial Bank's 25 per cent stake in RHB Capital is a near-term catalyst for the stock.

"We reiterate our merger and acquisition stance for RHB Capital whcih is angled towards a value-enhancing acquirer," the research house said in its Company Focus. -- Bernama

KFC - OSK maintains KFC's earnings forecast

Stock Name: KFC
Company Name: KFC HOLDINGS (M) BHD
Research House: OSK

OSK Research Sdn Bhd has maintained its forecast on KFC Holdings (Malaysia) Bhd's earnings at RM164.6 million and RM181.5 million for the financial year 2011 and 2012, respectively.

This is because KFC's first quarter financial year 2011 revenue and net profit of RM644.2 million and RM36.1 million respectively, was within its estimates, OSK said in a research note today.

The positive performance was mainly due to better sales from KFC restaurants and integrated poultry segment, which grew 9.4 per cent to RM489.5 million and 4.8 per cent to RM130.9 million, respectively.

"We see the earnings before income and tax (EBIT) margin hovering at the current level, as the recent stabilisation in raw material prices and stronger ringgit against the US dollar, compensates for the high start-up costs in India," OSK Research said.

KFC's first quarter financial year 2011 EBIT margin stood at 8.4 per cent versus 8.5 per cent in the preceding year.

OSK Research also said KFC's earnings for financial year 2011 and 2012 was maintained, due to its plans for more new outlets to beef up sales.

KFC has targeted to achieve 543 outlets in Malaysia, 81 in Singapore and 17 in India by year-end. For 2012, it plans to open 25 outlets in Malaysia, three in Singapore and 13 in India, it said.

KFC has 519 outlets in Malaysia, 79 in Singapore and eight in India at present. -- Bernama

LIONIND - OSK keeps 'neutral' call on Lion Industries

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

OSK Research has reiterated its "neutral" stance on Lion Industries Corporation with a cautious view on the group's medium term outlook.

"After adjustments to various exceptional items, mainly in the past quarters, Lion Industries' core net profit for the third quarter came in at RM62.1 million while the nine-month core number stood at RM80.5 million," OSK Research said in a statement today. - Bernama

PETDAG - 'Hold' call on Petronas Dagangan

Stock Name: PETDAG
Company Name: PETRONAS DAGANGAN BHD
Research House: HWANGDBS

Petronas Dagangan Bhd (PDB), which had RM1 billion in net cash as at end March 2011, is expected to remain generous in its dividend payout for the upcoming financial year.

HwangDBS Vickers Research said it was keeping the dividend payout assumption at 70 per cent which translates into 61.5 sen net dividend per share (DPS).

Yesterday, PDB declared a gross final and special DPS of 60 sen, which was above expectation, said the research house in a statement here, today.

For the financial year ended March 31, 2011, the firm''s pre-tax profit jumped RM1.21 billion compared with the RM1.05 billion registered in 2010. Revenue was up at RM23.27 billion from RM20.69 billion previously.

In a filing to Bursa, PDB said it expects profits for the current financial period to be lower.

This is due to a nine-month financial period, arising from the change in its financial year end from March 31 previously to December 31, beginning 2011.

However, HwangDBS told Bernama that the 70 per cent dividend payout outlook, is still based on the financial year ended March 31, 2012.

For now, HwangDBS is making a "hold" call for PDB shares with a target price of RM12.75. At 11.33 am, PDB shares price stood 40 sen higher at RM15.70. -- Bernama

AIRASIA - AirAsia falls to early low of RM2.98 on weaker 1Q earnings

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

KUALA LUMPUR: AIRASIA BHD [] fell to an early low of RM2.98 on Wednesday, May 25 after its net profit fell 23.2% to RM171.93 million for the first quarter ended March 31, 2011.

At 10.07am, it was down one sen to RM3.05. There were 1.13 million shares done at prices ranging from RM2.98 to RM3.06.

The low cost carrier reported on Tuesday that its earnings fell from RM224.11 million a year ago as it was affected by rising operational costs. Revenue rose 20.3% to RM1.048 billion from RM870.60 million while earnings per share slipped to 6.2 sen from 9.1 sen.

CIMB Equities Research said 1Q core net profit was 17% of its full-year forecast, which is broadly in line after accounting for seasonality.

It said the airline experienced strong demand, which pushed up load factors, and good ancillary income growth. It also benefited from the weaker-than-expected US dollar.

'Our FY11 reported EPS forecast is largely unchanged but our FY12-13 numbers are reduced by 4%-7% for higher staff costs.

'However, because of the potential listing of two associates which are becoming profitable, we have redefined core EPS to include share of associate profits even though AirAsia does not equity-account them.

'This leads to 17-33% core EPS upgrades, which lift our target price from RM3.40 to RM4.20, still pegged to 9x CY12 P/E. Potential re-rating catalysts include successful 4Q associate IPOs, reduction in gearing and relative resilience to higher fuel prices,' it said.

PETRA - OSK Research maintains Buy on Petra Perdana, lower FV of RM1.50

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

KUALA LUMPUR: OSK Research said PETRA PERDANA BHD []'s 1QFY11 results fell short of expectations.

It said on Wednesday, May 25 this was mainly due to the low utilisation rate of its vessels as a result of the monsoon season.

'We are downgrading our FY11-12 earnings by 43%-44%. However, we are of the view that the worst is over for the company. At the very least, Petra is showing some signs of recovery, as can be seen from its lower losses. Maintain Buy but with a lower fair value of RM1.50 (previously RM1.57),' it said.

HSL - Bakun to supercharge HSL's order book

Stock Name: HSL
Company Name: HOCK SENG LEE BHD
Research House: AMMB

Hock Seng Lee Bhd
(May 24, RM1.72)
Re-initiating coverage with a buy call with sum-of-parts-derived fair value of RM2.30: Our fair value pegs HSL's mainstay construction operations at 10 times FY11F/12F average earnings. Earnings are expected to retain their strong trajectory.

The bulk of HSL's billings for the RM452 million Kuching sewerage project and the high-end The Leaf property sales should start accruing from this year, along with FY10's RM532 million new contracts.

Even as we impute lower margins from higher material costs for certain road and building works, FY11's net profit is forecast to grow 28% year-on-year on the back of a 36% y-o-y revenue expansion.

Year-to-date, its order book replenishment stands at RM108 million, representing nearly a quarter of our FY11F new contract assumptions and nearly twice that of the same period last year.

The group is targeting RM550 million (our assumption is RM500 million) new contracts this year; with a particular focus on the Sarawak Corridor of Renewable Energy's (Score) agro-based growth node of Tanjung Manis.

Projects earmarked by HSL in Tanjung Manis this year include the RM350 million deepsea port extension, more than 100km of access roads and various high-margin marine civil works.

Also expected this year is the announcement of the remaining packages of RM2 billion worth of road jobs linking Score's energy sites involving 21 open tenders that were closed last year. HSL has tendered for seven of these.

Each package is valued at RM50 million to RM150 million. IJM Corp, Cahya Mata Sarawak Bhd (CMSB) and Loh & Loh Bhd Corp Bhd secured the early packages last year.

Our checks with management revealed that the group should soon conclude a RM200 million sub-contract for a building job in Score's administrative centre in Mukah.

Also being planned are additions to its landbank with a view to participate in the federal government's low-cost housing schemes.

The Kuching sewerage project's (Phase 1, Package 1) main shafts have been 70% tunnelled ' freeing the project of its tunnel boring machines (TBM) which would then lead to the start of the balance of phase 1 (RM1.7 billion).

As the incumbent contractor and sole owner of Borneo's only TBM, we believe HSL is the most eligible for the remaining packages. We anticipate this to happen next year.

More importantly, with the Bakun Dam now expected to be commissioned by 1HFY11, we gather that the investments pledged under Score are all but under way; just awaiting the crucial energy tariff agreement between Bakun's owner Sarawak Hidro Sdn Bhd and Sarawak Energy Bhd.

At that juncture, we expect a re-acceleration of building and infrastructure works along Score's growth nodes.

Currently trading at a 10% to 20% discount (FY11F/12F) against its long-term price-earnings ratio of 12 times, HSL allows investors a direct exposure in SCORE's immense prospects. ' AmResearch, May 24


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

COCOLND - Cocoaland not so sweet as further rise in raw material costs expected

Stock Name: COCOLND
Company Name: COCOALAND HOLDINGS BHD
Research House: CIMB

Cocoaland Holdings Bhd
(May 24, RM 2.09)
Maintain underperform at RM2.10, target price of RM1.88: Despite coming in at only 81% of our forecast when annualised, Cocoaland's 1QFY11 results met market and our expectations as earnings should be stronger in the remaining quarters. No interim dividend was declared, which was within our expectations.

We maintain our earnings per share forecasts and our target price of RM1.88, which is based on 13.1 times price-earnings ratio, a 10% discount to our target market PER of 14.5 times.

The stock remains an underperform given the potential downside triggers of a further rise in raw material and packaging costs; larger than expected losses for its bottling operations and delays in construction of its new factory.

For exposure to the mid-cap food and beverage sector, we prefer CI Holdings Bhd.

Cocoaland's 1QFY11 earnings before interest, tax, depreciation and amortisation (Ebitda) margin was 14.6%, a strong recovery from 4QFY10's 7%.

This was mainly due to the company's ability to pass on the cost of raw materials through a 10% increase in average selling price. The polyethylene terephthalate (PET) hot bottle operations probably recorded a small loss in 1QFY11 but volume should improve later this year when it secures more orders.

However, we do not expect any profit from the operations this year as it will take time to raise its utilisation above the 55% to 60% break even level. The annual capacity is 240 million PET bottles after the capacity expansion in 1QFY11.

However, raw material prices are on the rise. We estimate that sugar accounts for 30% to 40% of total raw material costs, which, in turn, make up 25% of Cocoaland's production costs.

The commercial sugar price has soared 60% year-on-year to RM2.62 per kg. Although Cocoaland is not one of the 13 beverage producers that lost their entitlement to sugar subsidies in January 2011, the company started paying RM2.30 per kg for sugar this month following an increase in the price of subsidised sugar.

The subsidised price is currently only 13% lower than the commercial selling price. We think that it is only a matter of time before the subsidy is scrapped altogether.

At end-2010, Fraser & Neave Holdings acquired 39.6 million new Cocoaland shares or a 23.1% stake at RM1.38 a share. The RM54.6 million cash raised will be used for Cocoaland's capital expenditure this year.

In March, Cocoaland acquired land for its expansion programme. The new factory, which is expected to be completed by year-end, will boost the company's annual production capacity by 50% to 6,700 tonnes for fruit gummies and double its coco-pie capacity to 6,000 tonnes. ' CIMB Equities Research, May 24


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

QL - QL Resources: Good start for second decade of listing

Stock Name: QL
Company Name: QL RESOURCES BHD
Research House: MAYBANK

QL Resources Bhd
(May 24, RM3.30)
Maintain buy, target price RM3.75: QL's 4QFY11 net profit of RM31.6 million (-4.8% year-on-year; +19.3% quarter-on-quarter [q-o-q]) took its FY11 net profit to RM124.5 million (+16.5% y-o-y), which was within our forecast and consensus. FY11 marks the 10th straight year of double-digit net profit growth since its listing in FY00.

We expect another year of strong earnings growth (+30%) premised on the new surimi lines in Surabaya, maturing plantation in Eastern Kalimantan and its palm pellet project.

Livestock farming was the consistent performer. QL's 4Q revenue from livestock farming jumped 16.5% y-o-y and 26.2% q-o-q. Full-year revenue rose 17.3% y-o-y but pretax profit jumped 26.9%. Livestock farming remained the largest contributor to group pretax profit in FY11 at 57%, followed by marine products (39%) and palm oil (3%).

The marine products division suffered a margin decline in 4QFY11 (-5.8 percentage points y-o-y; -4.7 pps q-o-q) due to lower fish meal margins, offsetting higher sales volume of surimi-based products and fish meal.

The palm oil division's FY11 revenue was lifted by higher crude palm oil (CPO) prices of RM2,969 a tonne on average, compared with the average of RM2,355 in FY10. Margins, however contracted 1.3 pps y-o-y, resulting in a 33.9% y-o-y drop in pretax profit due to the La Nina weather phenomenon which affected QL's own fresh fruit bunches production.

The proposed dividend per share of 4.25 sen (FY10: 3.75 sen) is slightly above our forecast of four sen, which represents a dividend payout of 29.8%.

We maintain our 'buy' call on QL, seeing a natural hedge within its integrated basic food divisions which give the group a better position in a competitive environment.

On the back of its steadily growing livestock farming business, QL offers growth on better margins from its marine products manufacturing, CPO milling, and its renewable technology project.

We maintain our above consensus forecasts for FY12 while our discounted cash flow-based target price implies 20.2 times FY12 price-earnings ratio. ' Maybank Investment Bank Research, May 24


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

MSPORTS - OSK maintains 'buy' call on Multi Sports

Stock Name: MSPORTS
Company Name: MULTI SPORTS HOLDINGS LTD
Research House: OSK

OSK Research has maintained a "buy" call on Multi Sports Holdings with a lower fair value of 65 sen from 87 sen previously.

This is after factoring in the lower sales volume due to capacity
constraints, higher raw material costs and a stronger renminbi against the ringgit.

Its first quarter 2011 revenue and net profit at RM325.6 million and RM11.4 million respectively, came in below the full year earnings forecast of OSK.

"Given the below than expected results, we trim our fiscal year 2011/2012 earnings forecast by 14.8 per cent and 16.6 per cent to RM60.7 million and RM73.5 million respectively," it said in a research note today.

The research house also said although the group's results came in below its forecast, the stock is currently trading at an attractive 3.5 times price to earnings ratio.

OSK said the group's new production centre commenced operations in February this year. It expects the group to address its capacity constraint issue progressively. -- Bernama

PUNCAK - OSK holds trading 'buy' on Puncak Niaga

Stock Name: PUNCAK
Company Name: PUNCAK NIAGA HOLDINGS BHD
Research House: OSK

OSK Research is holding a trading "buy" recommendation for Puncak Niaga Holdings, although it secured a Sarawak contract
that lifts earnings estimates slightly.

Puncak Niaga announced that via a 40:60 joint venture with Quality Concrete Holdings, it had secured a contract worth RM667.32 from the Ministry of Rural and Regional Development.

The contract is for the supply, construction and commission of water supplies facilities for the rural areas in Sarawak for a period of 28 months.

"Though the addition has lifted our earnings estimates for Puncak slightly, we hold our trading buy recommendation for Puncak with its fair value at RM3.65 per share unchanged, based on historical book value," OSK said in a research note today.

OSK conservatively reckons the project commencement to be in June without any backdated revenue recognition.

The research house said although the project benefits the company as it has not secured a construction contract for some time, the marginal earnings increment to its bottom line, does not significantly raise its valuation. -- Bernama

QL - OSK maintains 'buy' call on QL Resources

Stock Name: QL
Company Name: QL RESOURCES BHD
Research House: OSK

OSK Research has maintained a "buy" call on QL Resources with a lower fair value of RM3.81 per share from RM4, following
results that was within its expectations.

OSK Research in a research note today said the lower fair value is in line with management guidance of stronger growth to be realised only in fiscal year 2013, due to the timing of its expansion in Vietnam and Indonesia.

It also cut its earnings forecast by 3.3 per cent to eight per cent to RM144.3 million and RM174.6 million in fiscal year 2012 and 2013 respectively.

"QL's fiscal year 2011 results came in within our and consensus' estimates. Revenue and net profit grew 20.3 per cent to RM1.776 billion and 16.4 per cent to RM124.5 million respectively," it said.

It added all its divisions, namely sales of marine products (MPM), integrated livestock division (ILF) and palm oil activities performed well with growth ranging from 17.3 per cent to 26.5 per cent year-on-year. -- Bernama

KURASIA - Kurnia 2011 earnings set to hit RM43m

Stock Name: KURASIA
Company Name: KURNIA ASIA BHD
Research House: OSK

The earnings of Malaysia's largest general insurance firm, Kurnia Asia Bhd, is set to jump to RM42.7 million in 2011 and RM61 million in 2012 on a better outlook for the sector, OSK Research said.

A lower claims ratio and stable investment income is expected to be reflected in Kurnia's first quarter results for 2011, to be announced tomorrow.

The firm is also expected to benefit from the motor premium hike which will take place from 2012 to 2015, said OSK in its research report today.

"Thus, we are upgrading our 2011 earnings outlook for Kurnia to RM42.7 million, up by 14.8 per cent from RM37.2 million previously, and the 2012 earnings to RM61 million, up by 33.8 per cent, from an earlier estimated RM45.6 million," it added.

OSK said its sensitive analysis showed that every 10 per cent increase in gross premium will bump up 2012's net profit by 0.6 per cent.

For 2011, it said, the gross premium will likely record a high single digit to low double digit growth,coming mainly from the non-motor segment in accordance with Kurnia's strategy to grow its more lucrative non-motor business.

Kurnia's management is aiming for a 30 per cent contribution from the non-motor to the gross premium portfolio in medium term as compared with 19 per cent in 2010, said OSK.

It also said the claims ratio is expected to normalise and hover around the 70 per cent level as compared with 76 per cent in 2010, after clearing up some of the old bodily injury claims filed last year.

"We expect management expenses to improve as well, due to better cost management practice. Investment income will likely remain stable with an annualised investment yield of between 5.5-6.6 per cent," it added.

OSK has put a fair value for Kurnia Asia's share price at 42 sen based on an industry average of 15 times price earning ratio. -- Bernama

AIRASIA - AirAsia Q1 earnings seen hitting RM243m

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

AmResearch Sdn Bhd expects AirAsia's first quarter 2011 earnings to test a record high at RM243 million, including gains from the US dollar debt translation.

The research house has reiterated a "buy" rating on AirAsia and estimates the airline to register a core net profit of RM145 million with results expected to gradually improve in the coming quarters.

"Bear in mind that the five per cent base fare increase in February will only flow into the numbers from the second quarter 2011 onwards, accompanied by an up to 75 per cent ancillary service price hike," it said in a research note
today.

AmResearch said every 10 sen strengthening of the ringgit should improve AirAsia's bottomline by four percent. Hence, the strengthening ringgit is a boon for the budget airline.

Meanwhile, AmResearch estimates a gain of RM419 million from foreign debt translation for financial year 2011 and up to RM98 million to be recognised in the first quarter 2011.

AirAsia's aircraft debt of 90 per cent is denominated in the US dollar.

"A yield upward trend should follow through into the third quarter when the fuel surcharge starts to be reflected in earnings," it said.

AmResearch said that the drop in jet fuel price of late would act as a positive earnings catalyst for AirAsia.

The research house said AirAsia remained the top pick in the aviation sector. -- Bernama

PBA - 'Buy' call on PBA Hldgs reiterated

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

OSK Research has reiterated its "buy" call on PBA Holdings Bhd with a higher future value of RM1.35 with a positive outlook, going forward, as a result of increased earnings accruing from higher tariff rates chargeable to trade consumers.

PBA's first quarter financial year earnings beat OSK's estimates with profits accounting for a third of the research house's full year forecast.

OSK increased its profit estimates for the company by 38 per cent, upon raising the research house's consumption forecast, from a drop of four per cent to an increase of two per cent.

The research house foresees a 19 per cent increase in revenue, year-over-year, from an increase of 9.2 per cent, previously. -- Bernama

EVERGRN - HwangDBS downgrades Evergreen to 'neutral'

Stock Name: EVERGRN
Company Name: EVERGREEN FIBREBOARD BHD
Research House: HWANGDBS

OSK Research has downgraded Evergreen Fibreboard (EVF) to "neutral" following profits that has dissapointed estimates
due to higher-than-expected rubber log prices and weakening US Dollar.

"Revenue came in line with our expectations, declining marginally by 2.2 per cent, on slightly weaker volume sales.

"However, with a drastic rise in rubber log prices and weakening US Dollar, bottom line profits came below our and consensus expectations, accounting for only 5.8 per cent and 6.7 per cent of our and consensus full year forecast," OSK Research said in a statement today.

Meanwhile, HwangDBS Vickers Research has also cut the group's earnings for fiscal year 2011 to 2013 between 19 per cent and 27 per cent on higher wood cost assumptions.

It said EVF's operations remained severely disrupted by floods in Johor and Thailand, coupled with slow orders during Chinese New Year holidays and major maintenance works on most of its plants.

"Fiscal year 2011 will be a challenging year for EVF given that demand is unlikely to be strong enough to offset the impact of a weaker US Dollar and raw material costs," it said.

It maintained its "hold" stance for EVF with a reduced target price of RM1.15, from RM1.55, previously. -- Bernama

EVERGRN - Evergreen falls on weaker earnings, downgrade

Stock Name: EVERGRN
Company Name: EVERGREEN FIBREBOARD BHD
Research House: OSK

KUALA LUMPUR: Shares of EVERGREEN FIBREBOARD BHD [] fell in early trade on Tuesday, May 24 after its first quarter earnings slumped to RM5.75 million from RM33.08 million a year ago

At 9.01am, it was down five sen to RM1.17 with 192,500 shares done.

The FBM KLCI rose 2.21 points to 1,531.19. Turnover was 12.28 million shares valued at RM11.44 million. There were 53 gainers, 61 losers and 72 stocks unchanged.

OSK Research said while Evergreen's revenues were in-line with its estimates, profits disappointed both its and consensus estimates due to higher than expected rubber logs prices and weakening US dollar.

'This prompts us to lower our earnings estimates and we lower our FV for the stock to RM1.22 from RM1.70 previously. We downgrade Evergreen to a NEUTRAL from BUY previously,' it said.

TM - CIMB Research upgrades Telekom Malaysia to Outperform

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

KUALA LUMPUR: CIMB Equities Research has upgraded TELEKOM MALAYSIA BHD [] from Neutral to Outperform and raised the target price from RM4.04 to RM5.10.

It said on Tuesday, May 24 that the take-up of TM's high-speed broadband (HSBB) offering, Unifi is taking off, prompting it to upgrade its call from Neutral to Outperform.

'Unifi's strong take-up, a rebound in Streamyx net adds, and wholesale revenue from Maxis and eventually Celcom underpin our 5-21% core EPS upgrades and increase in our SOP-based target price from RM4.04 to RM5.10,' it said.

CIMB Research said TM's capex is peaking this year, resulting in free cashflow yields of 9-12% for FY12-13 and gross dividend yield of 6-10%.

'Likely stock catalysts are Unifi's strong take-up, the inking of an agreement to wholesale HSBB to Celcom and the sale of Axiata shares. We view TM as an excellent play on fixed broadband and data, which is one of the fastest-growing telco segments in Malaysia. TM is now our top Malaysian telco pick, followed by Axiata,' it said.

PBA - OSK Research ups PBA from RM1.22 to RM1.35

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

KUALA LUMPUR: OSK Research said PBA HOLDINGS BHD []'s 1QFY11 earnings beat its estimates with profits accounting for a third of its full year forecast.

'Higher earnings in this case is driven mainly on higher tariff rates chargeable to trade consumers coupled with the increase of registered trade consumers on a y-o-y basis,' it said.

OSK Research said on Tuesday, May 24 it raised its profit estimates to account for the higher earnings base.

'We also raise our FV for the stock to RM1.35 from RM1.22 previously. We re-iterate our BUY recommendation for the stock. We also raise our dividend estimate for PBA to five sen per share from four sen per share,' it said.

PUNCAK - Puncak Niaga raised to 'trading buy'

Stock Name: PUNCAK
Company Name: PUNCAK NIAGA HOLDINGS BHD
Research House: CIMB

Puncak Niaga Holdings Bhd was raised to “trading buy” from “neutral” at CIMB Investment Bank Bhd after the Malaysian company announced plans to venture into the oil and gas industry and it won a water supply contract in Sarawak state.

The share estimate was increased to RM3.03 from RM2.72, Sharizan Rosely, an analyst at Kuala Lumpur-based CIMB, wrote in a report today. -- Bloomberg

TM - Telekom Malaysia upgraded at CIMB

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

Telekom Malaysia Bhd was raised to “outperform” from “neutral” at CIMB Investment Bank Bhd, which cited strong demand for the company’s high-speed broadband business.

The share price estimate was increased to RM5.10 from RM4.04, Kelvin Goh, a Kuala Lumpur-based analyst at CIMB, wrote in a report today. -- Bloomberg

SPSETIA - Property sector entering uncharted territory

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

Property sector
Gaining traction: We sense an improved appetite for Malaysia after meeting 26 funds in six cities over five days during DBS Vickers' roadshow in the US.

Few have heard of Malaysia's Economic Transformation Programme (ETP), although most have yet to invest in Malaysia.

Most of the funds found our mass rapid transit (MRT) property story fresh and agreed that the RM48 billion MRT will be a huge structural catalyst for Kuala Lumpur real estate given the large multiplier effect (RM210 billion over 10 years) and 12 years of under-investment in KL.

They concur that the major winners will be owners of large landbank near interchanges with potential for high density mixed developments (benefit from plot ratio expansion).

While contractors and banks will also benefit, existing landowners will be direct winners and reap better margins. Malaysia is also seen as a safe haven with lower policy risk, a young population, strong commodity-led economy, and strengthening ringgit.

Key concerns include execution risks, political support and funding, which we have addressed as non-show-stoppers.

We understand the MRT Circle Line study is in the final stages and will likely be presented to the Cabinet next month. Land grab for MRT sites has started, including a possible legal tussle for Johor Corp's commercial blocks at Pusat Bandar Damansara (interchange for MRT Blue Line and Circle Line ' largest landowners in the area are Selangor Properties with 13.7ha and Guocoland 3.4ha).

We expect more news flow on the redevelopment of government land along MRT lines.

The sector is seeing new benchmarks for price and volume: (i) Binjai On The Park@KLCC luxury condominiums were recently transacted at RM3,000 psf (+15% y-o-y), while Mansions@Desa Park City link houses achieved 86% take-up at RM2.7 million to RM7.5 million a unit; and (ii) S P Setia launched KL Eco-City condos last weekend to priority registrants at RM1,200 psf (10% above the RM1,100 psf initial target), with 70% to 75% booked (loft units almost fully sold at RM1,400 to RM1,500 psf). The public launch will be sometime this week.

The average selling price is more than 40% above the prices of adjacent properties ' demonstrating S P Setia's pricing power. At 708 units, this is one of the biggest launches at-one-go since the 1990s property heyday, following YTL Land's Capers@Sentul East's 466 units launched in April this year, which was sold out in a week.

The attractiveness of KL Eco-City's location ' opposite Mid Valley ' is further boosted by an MRT station (Circle Line) and S P Setia's strong branding. ' Hwang DBS Vickers Research, May 23


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

MBSB - MBSB's intrinsic value remains intact

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

Malaysia Building Society Bhd
(May 23, RM1.49)
Maintain buy at RM1.52 with higher revised fair value of RM2.90 (from RM2.20): We have raised MBSB's fair value based on a higher adjusted (for rights) FY11F return on equity (ROE) of 24.4% (20.5% previously), leading to an upgraded fair price-to-book ratio of 3.3 times (from 2.6 times).

We have lifted our net earnings for FY11F to FY13F by 33%, 26% and 13% on the back of our more robust loans growth assumptions for the personal loans segment as well as better non-interest income.

With the upgrade, we now forecast a much stronger earnings growth of 63% for FY11F, 18% FY12F and 17% for FY13F.

We believe MBSB is under-appreciated for its earnings potential, which is similar to that of the mainstream banking institutions. Although MBSB benefits from the vacuum left behind by cooperatives, which are no longer allowed to offer personal financing to civil servants, we believe what is often overlooked is the fact that the financiers to these cooperatives are the mainstream banking institutions.

Thus, in a way, MBSB is now capturing some market share in this segment from the mainstream banking institutions.

To get a gauge on how undervalued MBSB is, we have estimated that its share of sector (including all the domestic banks under our coverage) net earnings now stands at 1.4%. Yet, MBSB's share of the sector's market capitalisation is vastly lower at only 0.6%.

At our upgraded fair value of RM2.90, we estimate that MBSB's share of sector market capitalisation would be 1.4% which is a fairer reflection of its share of sector net earnings.

Given that our net earnings have been raised, we are also upgrading our dividend forecasts as the company has put in place a formal dividend payout policy of 30%. This means that gross dividend per share (GDPS) yield is now highly attractive at close to 6% for FY11F.

With a strong GDPS yield of 6%, we believe there is little downside to MBSB. If we are to base value on net DPS yield of 3.3%, similar to current one-year fixed deposit rates, we estimate MBSB's share price to be at least RM1.93 a share, with potential for further dividend increases ahead as earnings rise.

We believe MBSB remains deeply undervalued. Notably price-earnings ratios are at single digit levels. Rerating catalysts for the stock are: (i) higher than expected loans growth; (ii) better than expected net interest margins; (iii) continuing improvement in impaired loans; (iv) sustainably high ROE in excess of 20%; and (v) actual dividend payout ratio of at least 30%. ' AmResearch, May 23


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

TM - Weaker quarter anticipated for TM

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

Telekom Malaysia Bhd
(May 23, RM4.15)
Maintain neutral with unchanged fair value of RM3.78: Telekom Malaysia Bhd (TM)'' is scheduled to announce its 1QFY11 ended March 31 results tomorrow.

We expect revenue to contract by 4% to 8% q-o-q, due to the high base in 4QFY10 and the shorter working quarter, but show an increase of 3% to 5% y-o-y, supported by improved traction from its high-speed broadband service and sustained fixed broadband (ADSL) additions, partially offsetting the weakness in its fixed line voice (40% of revenue).

TM's core Ebitda could come in weaker sequentially (4QFY10: 33.5% Ebitda margin) from higher Unifi operating expenditure as the company recruited more installers to meet demand and expanded its footprint to 800,000 homes.

TM's capital expenditure is also typically the lowest in 1Q. The continued drag from its fixed line business remains a concern despite some headway made over the past 18 months to compel more users to upgrade to its bundled Homeline package.

We expect TM to reaffirm its key performance indicators on revenue growth and Ebitda margin of 2.5% and 32% for FY11 and 3.5% and 4.5% and mid-30s for FY13.

At the EGM on May 10, TM's shareholders gave the nod for the RM1.03 billion capital distribution exercise (19 sen a share) which will be paid out alongside its final dividend of 13.1 sen a share on June 15. TM's net debt/Ebitda will rise slightly to 1.2 times from 0.7 times following the payout, while net gearing will remain manageable at 0.4 times.

We expect TM to throw more light on the preliminary MoU signed with Celcom Axiata Bhd for the joint development of converged solutions. This includes the launch of its own mobile virtual network operator brand, targeted for 4Q10/1Q12 and the fiberisation of Celcom's backhaul.

The MoU was inked on Feb 22, with both parties extending the time line for the signing of a formal accord to end-May.

We are likely to maintain our recently revised forecast post results. Our 'neutral' recommendation is based on unchanged fair value of RM3.78 which is tagged to 5.5 times FY12 EV/Ebitda.

TM's share price continues to be supported by the upcoming capital distribution, albeit at an adjusted 21.2 times FY12 earnings per share. The valuation is not undemanding and has priced in the upside from the capital repayment. ' OSK Research, May 23


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

KPJ - KPJ Healthcare: No surprises

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

KPJ Healthcare Bhd
(May 23, RM4.20)
Maintain outperform with fair value of RM4.94: Although KPJ Healthcare Bhd's 1QFY11 ended March 31 earnings of RM27.5 million (flat y-o-y; up 13.1% q-o-q) accounts for 20% of our and consensus full-year forecasts, we consider this in line.

We expect stronger earnings ahead following the contribution from the Sibu Medical Centre by 2HFY11 as well as the opening of its new 60-bed hospital in Bandar Baru Klang by 4QFY11.

Revenue in 1Q remained flat during the quarter. However, core earnings before interest and tax (Ebit) margin in 1Q saw an improvement of 1.1 percentage points q-o-q, which we believe was due to higher utilisation rate per patient.

Coupled with higher finance cost (+20.9% q-o-q), lower associate loss (-12.9% q-o-q) and higher minority interest (+5.5% q-o-q), partly offset by the lower effective tax rate of 23.9% (against 4QFY10's effective tax rate of 26.1%), 1QFY11 net profit grew 13.1% q-o-q.

KPJ declared a first interim gross dividend per share of 0.4 sen and a single-tier DPS of two sen (1QFY10: nil). This represents a net payout and net yield of 47% and 0.6%.

We project that KPJ will declare a total full-year gross DPS of 16 sen, which translates to a net payout and net yield of 46% and 2.9%.

We make no change to our FY11/13 earnings forecasts for now, which assume: (i) the opening of at least two new hospitals per year; (ii) 6% to 9% out-patient and in-patient growth per year; and (iii) three-year earnings per share compounded annual growth rate of 14.6%.

The risks to KPJ's earnings include lower than expected patient numbers, which could be due to slower than expected economic recovery and serious disease outbreaks (such as SARS or swine flu) in Malaysia as well as slower than expected turnaround in loss-making hospitals.

We maintain our fair value of RM4.94 per share, based on unchanged FY11 price-earnings ratio of 19 times (10% discount to regional peers average of 21.5 times to reflect the stock's relatively lower market capitalisation).

Given KPJ's leading position and expansion plans in Malaysia's growing healthcare market, we believe the stock's valuation discount to regional peers should continue to narrow. We maintain our 'outperform' call on the stock. ' RHB Research Institute, May 23


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

THETA - CIMB Research has Buy on Theta Edge at RM1.06

Stock Name: THETA
Company Name: THETA EDGE BERHAD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research has a technical Buy on Theta Edge Bhd at RM1.06 at which it is trading at a price-to-book value of 1.3 times.

It said on Monday, May 23 the stock is consolidating in a triangle pattern and a base could have been formed at the RM1.04 level.

'We think a breakout is imminent and this should lift prices above its 200-day SMA,' it said.

CIMB Research said while technical landscape appears subdued but it is not overly concerned. The odds continue to favour the bulls as long as prices stay above the 1.04 level. Only a break below this level would cause it to review its call.

'Only risk takers should look at this stock while others should wait for a push above the RM1.14 level (its 200-day SMA) before taking any position. The next upleg should lift prices towards RM1.18 and RM1.25 next,' it said.

Theta Edge offers information and communications TECHNOLOGY [] services. The company sets up and runs wireless networks for telemetry, remote meter reading, and telecommunications; and offers systems integration and managed telecommunications services.

KPJ - OSK Research maintains Buy on KPJ, ups TP to RM5.37

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

KUALA LUMPUR: OSK Research said although KPJ Healthcare's 1QFY11 net profit only accounted for 21% and 20% of its and consensus FY11 forecast, it viewed the results as inline with its expectation as the 1Q is typically the weakest quarter due to seasonal factors.

'We maintain our forecast but take into account KPJ's enlarged share base of 566.3m from 528.9m previously due to warrants that have been exercised,' it said on Monday, May 23.

OSK Research said in tandem with the upward rerating for the sector's regional PER multiples, it now values KPJ at 19.6x PER on FY12 EPS and arrive at a higher FV of RM5.37 from RM4.62 (18.5x PER on FY11 EPS) previously.

'We maintain our BUY recommendation and reiterate our view that KPJ is an excellent choice for long term investment and portfolio balancing offering growth potential in a defensive sector,' it said.

NAIM - OSK Research sees downside risks to Naim Holdings' earnrings

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

KUALA LUMPUR: OSK Research believes there are downside risks to NAIM HOLDINGS BHD []'s earnings this year due to low levels of unbilled property sales, reduction in its stake of the SOGT from 30% to 10% and potentially disappointing job wins.

It said on Monday, May 23 that as a result, it cut its FY11-12 earnings by 24%, putting its estimates 22-25% below consensus.

'Our FV is cut to RM3.04 from RM5.10 and we downgrade Naim to a NEUTRAL. Although its share price has fallen 28% since its peak, we expect its performance to be pedestal given the less than optimistic outlook,' it said.

PWORTH - CIMB Research has Buy on Priceworth at 65 sen

Stock Name: PWORTH
Company Name: PRICEWORTH INTERNATIONAL BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research has a technical Buy on Priceworth International Bhd at 60.5 sen, at which it is trading at a price-to-book value of 0.4 times.

It said on Monday, May 23 that Priceworth is gyrating in a bullish wedge pattern. Recent consolidation may have found its bottom at the 57 sen level and it thinks a stronger rebound is imminent.

'Prices need to push above its 30-day and 50-day SMAs to convince the bulls,' it said.

CIMB Research MACD is poised for a positive crossover while RSI has hooked upward. The moving averages at 62.5 sen and 64 sen are the first targets followed by 68 sen.

'Prices must not fall below the 57 sen level to keep the bulls intact. Be quick to cut loss if this level is breached,' it said.

Priceworth manufactures and sells processed wood products, distributes and trades log timber, provides wood processing services and timber extraction, and rents kiln dry machinery. It also provides CONSTRUCTION [] and land development contract services.

MAS - Malaysia airline stocks downgraded

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

Maybank Investment Bank Bhd lowered its view on Malaysian airline stocks ahead of their quarterly earnings, cutting AirAsia Bhd to “hold” from “buy” and reducing its share estimate for Malaysian Airline System Bhd to RM1.80 from RM2.55.

Malaysian Air may report a first-quarter loss due to higher fuel prices and reduced travel following Japan’s earthquake and unrest in the Middle East and North Africa, Maybank analyst Wong Chew Hann said in a report today.

While AirAsia’s first-quarter profit may be “very strong,” Wong expressed concern over oil price volatility and potential over-supply in the airline industry, according to the report. -- Bloomberg