June 3, 2011

PENERGY - Affin Research maintains Buy on Petra Energy

Stock Name: PENERGY
Research House: AFFIN

KUALA LUMPUR: Affin Investment Bank Bhd Research has maintained its Buy call on PETRA ENERGY BHD [] after the company signed a MOU with Labuan Shipyard & Engineering Sdn Bhd to utilize Labuan Shipyard's facilities at Victoria Harbour, Labuan for its fabrication activities.

Under the MOU, the two parties may also explore areas for cooperation to collaborate on projects pertaining to leasing of fabrication yards, fabrication works and storage facilities.

Affin Research said in a note Friday, June 3 that it was neutral on the signing of the MOU as it was an ordinary business arrangement that allows Petra Energy to lease the required yard space to support its RM400m Petronas Carigali HUC work at a stable, pre-agreed rental rate.

'We maintain our Buy rating on Petra Energy with an unchanged TP of RM1.89, based on 12x CY12 PE.

'We continue to like Petra Energy given: (i) our expectation for more HUC, topside maintenance jobs to be awarded in FY11-12; (ii) Petra Energy's established track record in integrated brown field services give them a competitive advantage in contract bidding; and (iii) its RM900m unbilled sales provide visible contract billings for the next 2 years.

June 2, 2011

DELLOYD - Delloyd plantation division exceeds expectations

Stock Name: DELLOYD
Research House: ALLIANCE

Delloyd Ventures Bhd
(June 1, RM3.50)
Maintain buy at RM3.40 with revised target price of RM5.13 (from RM3.97)
: Delloyd registered a 43% year-on-year (y-o-y) increase but 9.7% reduction in revenue in the absence of delivery of 25 bus chassis this quarter.

However, the plantation division emerged as the star performer with more than five times y-o-y and 17.9% quarter-on-quarter pre-tax earnings growth on better production yield and higher crude palm oil (CPO) prices.

The results were slightly below our expectation, achieving 93% of our annualised net profit of RM54.9 million with higher stock writeoffs and provisions. Delloyd also declared a final dividend of 10 sen, bringing the full-year dividend to 18 sen or a dividend yield of 5.3%.

The contribution from the plantation division will continue to grow as fresh fruit bunches (FFB) production is envisaged to increase by 23.9% and yield by 5.5% in FY12. Hence, it will overtake the automotive division as the major earnings contributor with an estimated pre-tax contribution of 51% in FY12 ending March from the current 47.5%.

Outlook for the automotive division appears promising as Delloyd has secured contracts to supply parts to the Myvi and Proton Persona replacement models. The company is in the process of tendering to supply 48 buses in FY12 and 50 in FY13, so revenue growth may accelerate further.

Based on new plantation/automotive pre-tax contribution of 49:51 in FY12 (from our earlier assumption of 75:25 for FY11), we raise our target price from RM3.97 to RM5.13 with plantation and automotive business valued at six times and nine times.

We reiterate our 'buy' call for Delloyed with an upside potential of 56.8%. The risks to our recommendation include failure to secure new bus contracts, a sudden drop in demand for motor vehicles and a plunge in CPO prices to below RM3,000 per tonne. ' Alliance Research, June 1

This article appeared in The Edge Financial Daily, June 2, 2011.

SAPCRES - SapuraCrest stomping the yard in Labuan

Stock Name: SAPCRES
Research House: CIMB

SapuraCrest Petroleum Bhd
(June 2, RM4.05)
Maintain outperform at RM3.93 with target price of RM5.12
: On Wednesday, SapuraCrest announced that it has signed an agreement with Realmild Sdn Bhd and Labuan Shipyard & Engineering Sdn Bhd (LSE) to subscribe to a 50% stake in LSE. The yard is sited on 13ha of land within the port of Victoria Harbour in Labuan with deepwater access. Its annual capacity is 36,000 tonnes.

Although it is positive, the announcement did not come as a surprise. In an update on Oct 21, 2010, following our US roadshow with management, we wrote that mergers and acqusitions might be on the cards and that a venture into the oil and gas fabrication segment would make the most commercial sense, especially if the company plans to add new drilling rigs and/or pipelay barges to its fleet. All the existing rigs and barges were built by fabricators in Europe and Asia.

We take a favourable view of the acquisition as it could help expand SapuraCrest's local and regional presence and fast-track its bottom line growth. We are also encouraged that the new business is oil and gas-related and involves a promising segment that SapuraCrest does not have exposure to. The company currently operates in the drilling, installation of pipelines and facilities and marine services segments.

SapuraCrest paid RM25 million for the 50% stake in LSE, which we understand has broken even following a rough patch in recent years. The remaining 50% stake is held by Umno-linked Realmild, which had been leasing the yard from the Ministry of Finance (MoF) for a reported RM7 million per year. We believe SapuraCrest and Realmild will now jointly lease the yard from the MoF. We understand that LSE has a modest order book of around RM250 million, which SapuraCrest hopes to expand over the next 12 months. Already, Petra Energy Bhd has indicated its interest in using the yard's facility for minor fabrication works. Petra Energy and LSE were to sign the agreement yesterday at the 13th Asian Oil, Gas and Petrochemical Engineering Exhibition at the Kuala Lumpur Convention Centre. Petra Energy executive director and CEO Kamarul Baharin Albakri was quoted as saying that the yard was selected for its strategic location and proximity to oil production facilities in Sabah.

SapuraCrest's move into fabrication is not a threat to Kencana Petroleum Bhd, which operates a fully-equipped yard in Lumut. Given the low level of activities at the LSE yard in recent years, SapuraCrest's management expects the yard to be fully developed in three years. With its 13ha yard and RM250 million jobs in hand, LSE is currently not batting in the same league as Kencana, which has a yard sprawling 89ha and an order book of RM1.5 billion.

Pending substantial new orders at the LSE yard, we maintain our forecasts and target price of RM5.12. We continue to value SapuraCrest at a 40% premium over our 14.5 times target market price-earnings ratio given its marginal field venture and superior growth. The stock remains an 'outperform' and our top oil and gas pick in view of the potential catalysts of this new venture, more marginal field work and fleet expansion.

On Jan 31, a consortium comprising Petrofac (Malaysia) Sdn Bhd (50%), SapuraCrest (25%) and Kencana (25%) secured the nine-year, US$800 million (RM2.4 billion) Berantai marginal field contract. SapuraCrest's transport and installation works are being executed as scheduled, helped by its in-house pipelay barges. Results for 1HFY12 should include a maiden contribution from the project. ' CIMB Research, June 2

This article appeared in The Edge Financial Daily, June 3, 2011.

BENALEC - Benalec crystallising more value in Melaka

Stock Name: BENALEC
Research House: AMMB

Benalec Holdings Bhd
(June 2, RM1.47)
Maintain buy at RM1.45 with fair value of RM1.90
: We maintain a 'buy' on Benalec Holdings Bhd with an unchanged fair value of RM1.90 based on the sum-of-parts method. Benalec announced to Bursa Malaysia on Wednesday that the group has entered into an agreement with Vista Selesa Development Sdn Bhd for the proposed disposal of land in Klebang, Melaka.

The land measures 2,977,736 sq ft, with a 99-year leasehold period. It is strategically located within seven km west of Bandar Melaka and 15km southwest of Ayer Keroh town. In the future, it will also have direct access from the proposed Coastal Highway which links Duyong, Mahkota Parade, Kota Laksamana and Klebang.

Benalec will receive a total cash consideration of RM46 million for the first portion of the land measuring 1,627,405 sq ft (about 15ha).

For the remaining portion, Benalec has entered into a joint venture with Vista Selesa to develop 1,350,331 sq ft (12.5ha) of land into a mixed development project. Under the deal, Benalec would either receive a cash consideration of RM38 million or 25% of the project's estimated gross development value, whichever is higher, when it is completed in 2013.

Benalec also announced that it has proposed to undertake a private placement and a share buyback exercise of up to 10% each of its share capital.

Taken together with Benalec's net entitlement to the land sale on the first portion and estimated proceeds from any proposed private placement, based on the five-day volume-weighted average price at current values, we estimate that Benalec could potentially raise proceeds of about RM144 million.

We believe the latest move is part of Benalec's strategic positioning to raise capital ahead of more value-accretive deals in the future. To be sure, we gather that it intends to use part of any new monies raised to fund its upcoming Kota Laksamana project in Melaka.

We believe the 101ha Kota Laksamana land holds immediate development potential as it sits on prime seafront land within the Melaka city centre. We gather that Benalec is in the process of obtaining approvals from the authorities and the project could kick off by 4Q11. The group is also open to forging strategic partnerships with reputable developers to realise the deeply-embedded value of the land.

Based on land sales alone, we estimate that Benalec could reap a net gain of RM80 million or about RM27 million per year over a three-year period based on a conservative value of RM28 psf. ' AmResearch, June 2

This article appeared in The Edge Financial Daily, June 3, 2011.

DIALOG - Dialog's Pengerang project takes off, target price raised

Stock Name: DIALOG
Research House: MAYBANK

Dialog Group Bhd
(June 2, RM2.80)
Maintain buy at RM2.82 with revised target price of RM3.35 (from RM2.60)
: Securing the engineering, procurement, construction and commissioning (EPCC) job for the Pengerang centralised tankage facility (CTF) project denotes progress. We expect the Pengerang CTF project, on full-scale commercial operation by 2017, to be the main driver to Dialog's earnings with dividends to boot. Dialog is also highly tipped to bag the next few marginal field projects (Balai and Bentara), a positive to sentiment and price performance. We maintain our 'buy' call.

Dialog has clinched the EPCC contract from Pengerang Independent Terminals Sdn Bhd (PITSB) to construct the first phase of the independent deepwater petroleum terminal there. PITSB is a special purpose vehicle, 10% held by the State Secretary, Johor (Inc), and 90% owned by Pengerang Terminals Sdn Bhd (PTSB). Vopak Terminal Pengerang BV and Dialog are the joint owners of PTSB with a 49% and 51% stake.

The contract, valued at RM1.9 billion, will commence immediately and is expected to complete by 2014. The first phase of the project will have an initial storage capacity of 1.3 million cu m and six vessel berths. However, it can be expanded to 2.3 million'' cu m (+77%) in storage space should the need arise.

We are positive on the news, which tracks our expectation following the recent approval secured from the Department of Environment. EPCC job wins to date have surpassed the RM2 billion mark from three projects. Based on the contract value and time line, Dialog should recognise average revenue of RM543 million per year for this project. In total, we expect Dialog to make about RM95 million in net profit from the EPCC project, based on an estimated 5% net profit margin.

We are keeping our forecasts unchanged, as we have incorporated RM700 million to RM750 million revenue per year for the EPCC division. Our FY11 to FY13 earnings forecasts, which imply a 10% three-year compound annual growth rate, have ample room for upgrades, as we have not incorporated: (i) marginal fields impact, (ii) full earnings potential from Pengerang CTF, (iii) the Saudi Arabia supply base, and (iv) Phase 3 and beyond for the Tanjung Langsat CTF.

This lifts our target price to RM3.35, 19% upside. We have raised our sum-of-parts valuation by 29% as we have doubled the storage capacity estimate for Pengerang CTF to 2 million cu m. Other assumptions (Kertih, Tanjung Langsat CTF, other operations) remain unchanged. ' Maybank IB Research, June 2

This article appeared in The Edge Financial Daily, June 3, 2011.

CBIP - CBIP sells plantation subsidiaries, RM1.07 per share gain on sale

Stock Name: CBIP
Research House: RHB

CB Industrial Product Holding Bhd
(June 2, RM4.30)
Upgrade to outperform at RM4.26 with revised fair value of RM5.90 (from RM4.90)
: CBIP entered into two share sale agreements to dispose of its 100%-owned subsidiaries, Sachiew Plantations Sdn Bhd for RM108.12 million cash and Empresa (M) Sdn Bhd for RM159.94 million cash.

Apart from the consideration for Sachiew, the purchasers have also agreed to settle all amounts owed by Sachiew to CBIP totalling RM2.88 million, to take over two hydrogenated palm oil (HP) facilities amounting to RM1.48 million and to assume a RM60 million corporate guarantee granted by AmBank (M) Bhd.

For Empresa, the purchasers have also agreed to settle all amounts owed by Empresa to CBIP totalling RM6.44 million, to take over a RM300,000 HP facility and to assume a RM65.25 million corporate guarantee granted by OCBC Al-Amin Bank.

Sachiew is the holder of a provisional 60-year lease for 3,720ha of land in Suai, Miri, which also has a 30-tonne per hour'' crude palm oil mill. Empresa is the holder of a provisional 99-year lease for 5,936ha of land in Bok, Miri, which has a 45-tonne per hour CPO mill.

The Empresa land is the subject of a dispute concerning native customary land rights (NCR). The indigenous people are claiming 3,307ha of land. Besides this claim, the Empresa land is also the subject'' of two other ongoing NCR disputes.

The rationale for the disposal is for CBIP to unlock the value of its investments while enabling it to focus on its core business of manufacturing palm oil equipment. CBIP will record an estimated gain on disposal of RM140.8 million, or about RM1.07 per share. CBIP will use the sale proceeds for working capital and to defray the disposal expenses of RM3 million, to be utilised within two years. The disposal is to be completed by 3Q11. CBIP's net gearing will fall to 0.09 times (from 0.47 times) after this disposal.

Based on the total consideration (including liabilities to be assumed) and excluding a value of RM75 million for the two CPO mills, CBIP is receiving about RM21,140 per ha for the land, which is on the lower end of previous transactions ranging between RM20,000 and RM40,000 per ha for brownfield land in Sarawak. On a price-earnings ratio basis, however, the transaction is valued at about 16.6 times FY10 PER, on the high end of peer valuations of other plantation companies of 12'' to 17 times.

The main risks include: (i) a significant decline in oil mill engineering contracts due to slower than expected economic recovery and plantation investment in Indonesia as well as Malaysia; (ii) a stronger than expected rise in steel prices and weakening of the US dollar, resulting in weaker than expected margins for the oil mill engineering division; (iii) a fall in CPO and other global vegetable oil prices caused by weather abnormalities; and (iv) a reversal in crude oil prices and thus CPO prices.

This will reduce our forecasts by 3.4% in FY11, and by 9% to 14% for FY12/13. Despite our earnings reduction, we raise our sum-of-parts-based target price for CBIP to RM5.90 (from RM4.90), after updating for the cash to be received from the disposal.

We believe CBIP could put the cash to good use by either returning the money to shareholders or by investing in another asset which provides better returns. As such, we upgrade our recommendation on CBIP to 'outperform' (from 'market perform'). ' RHB Research, June 2

This article appeared in The Edge Financial Daily, June 3, 2011.

AXIATA - OSK trims forecast for Axiata by 5-6pc

Stock Name: AXIATA
Research House: OSK

OSK Research has trimmed its financial year 2011/2012 forecast for Axiata Group by five-six per cent, driven mainly by the lower earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin assumptions for Celcom.

"The revision entails a reduction in the EBITDA margin assumptions for Celcom to 41-43 per cent from 43-44 per cent previously on higher handset sunsidies, low group of income and associate contributions," OSK said in a research note today.

It said Axiata has targeted to progressively raise its dividend payout (currently 30 per cent) over time but did not offer further clarity on the timeline for a more definitive capital management initiative.

"Given that we do not expect the group to engage in a major merger and acquisition as the its coffers are rapidly building up, we do not rule out a return of surplus cash over the longer term," OSK said. -- Bernama

AIRASIA - AirAsia a 'neutral' at Goldman Sachs

Stock Name: AIRASIA
Company Name: AIRASIA BHD
Research House: GOLMAN SACHS

AirAsia Bhd was rated “neutral” in new coverage at Goldman Sachs Group Inc., which said returns will probably “remain flat due to unit cost inflationary pressure.”

The brokerage set the share-price estimate at RM3.20, according to a report by analysts Hino Lam and Ricky Tsang. –- Bloomberg

CBIP - CBIP rises on plantation land sales

Stock Name: CBIP
Research House: MAYBANK

KUALA LUMPUR: CB INDUSTRIAL PRODUCT HOLDING [] Bhd shares advanced in early trade on Thursday, June 2 after the company proposed to sell its entire equity interests in Sachiew PLANTATION []s Sdn Bhd and Empressa (M) Sdn Bhd for a total of RM268.06 million.

At 9.05am, CBIP rose 10 sen to RM4.36.

Sachiew is principally involved in the cultivation of oil palm and production of crude palm oil and palm kernel, while Empressa engages in the cultivation of oil palm and the operation of a palm oil mill.

CBIP said the gross proceeds of RM268.06 million from the disposal would be utilised for its working capital including for financing receivables, inventories, and repayment of bank borrowings.

Maybank Investment Bank Bhd Research said CBIP's proposed plantation disposal was positive as it unlocks value of its below-average plantation yielding estates; raising RM1.95 per share (RM268 million) in cash and making RM1.02 per share (RM141 million) in disposal gain.

'Post disposal, with potential net cash at 95sen per share, CBIP is looking for expansion opportunities, failing which it may return part of its cash as special dividends to shareholders.

'We maintain our earnings forecasts and target price of RM4.75 based on 7 times 2011 EPS for now,' it said.

SAPCRES - ECM Libra maintains Buy on SapuraCrest

Stock Name: SAPCRES
Research House: ECMLIBRA

KUALA LUMPUR: ECM Libra Research has maintained its Buy call on SapuraCrest Petroleum with a with view to upgrade its target price after the company announced on June 1 that it was taking a 50% interest in Labuan Shipyard that gives it foot into the fabrication industry.

'Pegging a 18x P/E multiple (based on +1 standard deviation to 1-year rolling forward average PE) to our CY11 EPS (23.4 sen) derives our TP of RM4.20.

'We continue to be positive on the group given their RM8.6 billion orderbook and as such, solid earnings visibility going until FY13.

'Other positive news for the group that has yet to be formally announced is the purchase of 2 more derrick pipe lay barges to add to their current fleet of 3. Also, they are participating in a Petrobras tender that (if they win) may require them to build an additional vessel in Brazil to carry out the long term contract,' it said in a note June 2.


June 1, 2011

UMLAND - UM Land: A good build-up in 1Q11

Stock Name: UMLAND
Research House: CIMB

United Malayan Land Bhd
(May 31, RM1.91)
Maintain buy at RM1.88 with revised target price of RM2.53 (from RM2.11)
: UM Land's 1Q11 net profit was broadly in line at 27% of our full-year forecast. Future quarters may not be as strong, depending on the timing of the Puteri Harbour launch and the response to it. We make no changes to our earnings forecasts or 'buy' recommendation but raise our target price from RM2.11 to RM2.53 after lowering the discount to its RM4.22 realisable net asset value from 50% to 40%. The lower discount factors in the likely improvement in liquidity after the proposed one-for-four bonus issue as well as the group's improving earnings prospects. Potential share price catalysts include: (i) the buoyant property market; (ii) more land acquisitions; and (iii) strong sales for new condo projects.

Annualised 1Q net profit made up 108% of our full-year forecast. Net profit for 1Q jumped 61% year-on-year (y-o-y) due to a marked improvement in sales for the Suasana Bukit Ceylon condo project. As expected, and in line with last year, UM Land did not propose a 1Q dividend. The proposed one-for-four bonus issue will go ex in August.

Sales in 1Q rose 6% quarter-on-quarter and 56% y-o-y to RM134 million, of which 28% came from townships and 72% from niche developments. The bulk of the sales came from the Suasana Bukit Ceylon condo where the take-up rate has improved from 17% worth RM47 million to 48% worth RM146 million. As at mid-May, the take-up had risen further to 56% worth RM166 million, excluding bookings for another 30 units worth RM46 million. Sales in 1Q exceeded UM Land's internal target by RM15 million.

The group is targeting to launch RM495 million worth of properties in 2011, including the RM189 million condo scheme Puteri Harbour in Johor. The retail component worth RM46 million was sold to Khazanah Nasional Bhd in February. The launch date for the condos, however, appears to have been pushed back yet again. Originally targeted for launch at end-2010, it was delayed to 1Q11, then to 2Q11 and now to 3Q11. Preliminary indications are that the pricing for the condos will average RM650 psf. ' CIMB Research, May 31

This article appeared in The Edge Financial Daily, June 1, 2011.

LITRAK - Litrak still not sprinting

Stock Name: LITRAK
Research House: MIDF

Lingkaran Trans Kota Holdings Bhd
(May 31, RM3.75)
Downgrade to neutral at RM3.72 with target price of RM4.07
: Litrak's FY11 net profit of RM98.4 million was below expectations, accounting for only 70.6% and 79.2% of our and'' consensus numbers. The big variance to the forecast was due to our assumption of a scheduled toll rate hike in 2011, which did not materialise. However, FY11 earnings still grew by 14.5% on higher revenue and other income. ''

Net profit dropped 41.2% quarter-on-quarter (q-o-q) to RM15.5 million, caused by a higher share of losses at Sprint, caused mainly by the higher amortisation of highway development expenditure based on the latest toll revenue projections prepared by independent consultants concluded at the end of 4QFY11, hence the entire adjustment has been accounted for in the quarter. ''

All is not lost with Litrak. Revenue was boosted in 4QFY11 to RM83.6 million (+5.1% year-on-year; +6.2% q-o-q), due to holiday traffic as well as the accruals made (based on the terms of the concession agreement) on the scheduled toll hike in January 2011 that the government decided to defer until further notice.

However, FY11 dividend per share was similar to FY10's at 17 sen, a yield of 4.6%. Based on our more than RM250 million'' free cash flow projection for the LDP in FY12, we expect Litrak to raise its FY12 DPS to 19.1 sen (5.14% yield).

We expect traffic loss in FY12 due to fuel price increases and toll rate hike in 2011. However, we do not expect traffic to'' decrease drastically as the LDP is an important commuter route, especially with the lack of'' efficient public transport. We also believe that the new toll rates should moderate any impact from traffic decrease.

Higher fuel prices, such as the recent 20 sen price increase for RON97 to RM2.90 per litre and possible increase for RON95'' (currently'' at RM1.90 per litre), may cause commuters to find alternative transport causing a 'loss' in traffic.'' ''

We are trimming our earnings forecast for FY12 by 30% to reflect escalating fuel prices as well as'' traffic leakage to the'' Duta-Ulu'' Klang'' Expressway (Duke). We also introduce our FY13 earnings forecast of RM127.8 million, assuming a 4%'' increase in traffic, underpinned by new housing developments in Petaling Jaya.

This is based on the dividend discount model, with a weighted average cost of capital of 6.33% and a risk free rate of 4%. We expect investors' interest in Litrak to be intact for its FY12 dividend yield potential of 5.14%, providing a 9.38% upside for its share price.

Litrak is a good defensive stock given that the LDP still enjoys support from its catchment area of'' Puchong, Kelana Jaya, and Bandar Sri Damansara. However, as the upside is capped in a rising market, we are downgrading our recommendation to 'neutral'. ' MIDF Research, May 31

This article appeared in The Edge Financial Daily, June 1, 2011.

MAXIS - ECM Libra Research maintains Hold rating on Maxis

Stock Name: MAXIS
Company Name: MAXIS BERHAD
Research House: ECMLIBRA

KUALA LUMPUR: ECM Libra Research has maintained its Hold rating on Maxis Bhd at RM5.42 with a target price of RM5.71, and said the company's 1QFY11 results came within its expectations.

'We believe Maxis is a good dividend play, with management once again re-iterating that it will maintain dividends at last year's levels of 40 sen, yielding 7.4%.

'It also revealed that it will soon be launching IPTV services riding on Astro's content soon. Maintain Hold,' it said in a note June 1.

PCHEM - Utility hikes dampener on PetChem's earnings

Stock Name: PCHEM
Research House: AMMB

Petronas Chemicals Group Bhd
(June 1, RM7.24)
Maintain buy at RM7.24 with fair value of RM8.43
: We maintain our 'buy' call on Petronas Chemicals Group (PetChem) but with a slightly lower fair value of RM8.43, pegged to an unchanged FY12F earned value-earnings before interest, tax, depreciation and amortisation (EV/Ebitda) ratio of 10 times, a 15% discount to the region's average of 12 times.

The government has announced the price of natural gas will be raised by RM3 per mmbtu every six months from yesterday to Dec 1, 2015. Tenaga Nasional Bhd is also raising its electricity tariff by an average 7.12% from yesterday, with industrial rates rising by an average of 8.3%.

We believe that PetChem's electricity and natural gas costs, which are affected by this hike, fall under the group's energy and utilities category which accounted for 12% of FY10 cost of revenue. PetChem's gas feedstock costs, which are separately contracted with Petroliam Nasional Bhd and accounted for 58% of FY10 cost of revenue, are not impacted by this change in gas price.

PetChem has announced that the volume of gas subject to the tariff adjustment for the seven-month period from June 1 to Dec 31, 2011 is estimated at seven million mmbtu. This means that its annual costs will gradually increase by RM54 million in FY12F, RM108mil in FY13F and by RM216 million in FY14F.

We estimate that electricity costs amount to RM250 million annually. Assuming that industrial electricity rates are raised by 8% every six months with the RM3 mmbtu increase in gas costs, we estimate that power costs will rise by RM20 million in FY12F, RM62mil in FY13F and by RM135 million in FY14F.

All in, we have reduced our earnings estimate by 1% for FY12F, 3% for FY13F and 5% for FY14F. Note that we will be adjusting our forecasts for the change in financial year-end from March to December 2011.

The electricity and gas rate hikes are a negative development for PetChem but the impact appears manageable over the next three years. As petrochemical prices have a high correlation to naphtha, a by-product of oil refining, we remain sanguine about PetChem's earnings outlook with crude oil prices currently at the US$100 (RM300) per barrel level.

The stock currently trades at an attractive CY11F EV/Ebitda of nine times, a 20% discount to the average regional valuation of 12 times. Additionally, CY11F dividend yield of 4% is on par with regional valuations. ' AmResearch, June 1

This article appeared in The Edge Financial Daily, June 2, 2011.

MAXIS - Margin pressure looms for Maxis

Stock Name: MAXIS
Company Name: MAXIS BERHAD
Research House: OSK

Maxis Bhd
(June 1, RM5.42)
Maintain neutral at RM5.42 with target price of RM5.20
: The habitual 1Q softness led to a contraction in mobile revenue at Maxis, which fell 5.3% quarter-on-quarter in 1QFY11 (+0.7% year-on-year) with weakness across both the voice (-6.3% q-o-q) and non-voice revenue (-4% q-o-q) segments. We note the larger than expected y-o-y erosion in voice revenue in recent quarters, although management said this is now behind the company.

Non-voice revenue contribution rose to 42.1% in 1QFY11. The group's earnings before interest, tax, depreciation and amortisation (Ebitda) margin of 51.6% in 1QFY11 appears to beat our forecast of 48.6% although this is not reflective of underlying trends due to the softer advertising and promotions spending in 1QFY11 and our expectations that margins will come under pressure from 2QFY11. Maxis is scaling back on the low margin hubbing business (less than 5% of revenue).

Positively, Maxis is pioneering stricter subscriber definitions to rightsize its customer registry based on activity. It now excludes postpaid/wireless broadband subscribers barred for more than 50 days (typically 60 days for the industry) and prepaid subscribers that are non-revenue generating beyond 50 days. This affected its prepaid, postpaid and web-based business subscribers base by 1.4%, 12% and 5.3% in 1QFY11, but resulted in a blended average revenue per user (ARPU) accretion of 6.5%. The revision is neutral to Maxis' revenue and Ebitda.

Although not a complete surprise, Maxis revealed an imminent partnership with sister company, Astro All Asia Networks, to offer IPTV. It indicated that more than 100 additional multi-dwelling units (MDUs) were fiberised in 1Q. This compares with the 60,000 MDUs passed by Timedotcom, which rolled out IPTV with Astro in early April.

Management has scaled back its target fibre-to-the-home (FTTH) subscribers from 65,000 to 42,000 to 45,000 by end-2011 due to the delayed handover from Telekom Malaysia Bhd and hopes to achieve positive cash flow when the subscriber base tops one million, likely by 2018.

We are keeping our FY11 and FY12 core net profit forecasts of RM2.40 billion and RM2.49 billion, premised on a core Ebitda margin of 46.8% to 49% for the two years, and revenue growth of 3% to 4% (guidance of 3% to 5% for FY11).

The key risks to our forecasts are: (i) stronger/lower than expected revenue and Ebitda margins; and (ii) capital expenditure (1QFY11: 20% of new FY11 capex guidance of RM1.3 billion, in line with our RM1.2 billion forecast). ' OSK Research, June 1

This article appeared in The Edge Financial Daily, June 2, 2011.

MMCCORP - MMC Corp operations still strong

Stock Name: MMCCORP
Research House: HWANGDBS

MMC Corp Bhd
(June 1, RM2.75)
Buy at RM2.81 with revised target price of RM3.70 (from RM4.05)
: MMC reported 1QFY11 headline net profit of RM43 million (-56% quarter-on-quarter; +25% year-on-year) which was below our and consensus estimates. Earnings were dragged down by larger losses at Zelan Bhd of RM53 million against RM30 million loss in 1QFY10.

Operationally, the key divisions did well, as reflected in the 7% y-o-y earnings before interest tax (Ebit) growth to RM627 million. 1QFY11 transport and logistics Ebit jumped 27% y-o-y driven by its port business.

Pelabuhan Tanjung Pelapas Bhd's (PTP) throughput rose 18% to 1.8 million TEU, while Johor Port's conventional cargo volume and container volume rose 15% and 3% y-o-y. For its energy and utilities division, the overall higher dispatch factor for Malakoff Corp Bhd of 51% in 1QFY11 (against 49% in 1QFY10) and 6% y-o-y higher volume for Gas Malaysia Sdn Bhd drove 1QFY11 Ebit up 22% y-o-y.

We reduce our FY11 to FY13F profit by between 11% and 17% to prudently reflect continued losses at Zelan, where we factor in liquidated ascertained damages or provisions for its projects in Indonesia and Abu Dhabi.

We also take into account the recent unfavourable price structure for Gas Malaysia, whose spreads will narrow to RM2.04 to RM2.08 per mmbtu against RM3.95 previously. However, the impact will be offset by higher volume growth and strong TEU growth for PTP.

We recommend a 'buy' with a lower target price of RM3.70. We drop our target price after factoring in lower discounted cash flow value for Gas Malaysia.

While the news on Gas Malaysia might throw off valuations for a potential listing, there are other catalysts to look forward to. These are: (i) the expansion of 2,100MW Tanjung Bin coal-fired plant by 1000MW, with MMC being one of two parties short-listed. A decision will be made in 3QCY11; (ii) the RM50 billion mass rapid transit project, we use conservative assumptions in our sum-of-parts valuation; and (iii) higher values for its land in Johor. ' HwangDBS Vickers Research, June 1

This article appeared in The Edge Financial Daily, June 2, 2011.

May 31, 2011

MEDIAC - On a solid footing

Stock Name: MEDIAC
Research House: AMMB

Media Chinese International Ltd
(May 31, RM1.31)
Maintain buy at RM1.30 with revised target price of RM1.60 (from RM1.45)
: We reiterate our 'buy' recommendation on Media Chinese International Ltd (MCIL) and raise our fair value from RM1.45 to RM1.60 (25% discount to our discounted cash flow-based fair value), post: (i) the rolling forward of our valuation base year to FY12F; and (ii) a 1% to 2% marginal upward adjustment to our earnings per share forecast on FY11 full-year results.

MCIL posted a net profit of RM166 million (year-on-year [y-o-y]: 33%) for the 12 months ended March 31, 2011, coming in well within both our forecast sof RM171 million and consensus estimates.

However, the group's earnings would have outperformed our forecast by 5%, if not for an impairment charge on the goodwill of a subsidiary amounting to RM12.5 million. We understand the impairment on the intangible asset was related to one of the group's local newspapers. We are not overly concerned as management has assured this would be a one-off.

As expected, 4QFY11 net profit was sequentially lower, down 46% quarter-on-quarter (q-o-q) to RM30 million owing to a seasonally quieter period as advertisers cut back advertising expenditure after major festivities, in line with the group's historical trend.

MCIL's commendable earnings for FY11 were attributable mainly to stronger publishing and printing revenues which rose 19% year-on-year (y-o-y) on the back of robust adex and stable circulation across the three markets, with y-o-y top line growth of 18% in Malaysia and Southeast Asia, 19% in North America and 6% in Hong Kong and mainland China.

The better performance was also driven by the travel division which swung back into the black with earnings before interest and tax (Ebit) of RM2 million, thanks to rising demand for tours to Europe and North America. Operations in Malaysia and Southeast Asia remained the main earnings driver, at circa 88% of group Ebit.

Management declared a second interim dividend of 1.153 US cents per share (approximately 3.48 sen per share). This brings total dividends to 5.91 sen per share for FY11, translating into a dividend payout ratio of 60%.

We continue to like MCIL for its monopolistic position within the Chinese-language newspaper segment in Malaysia (87% market share) and superior pricing power for lucrative ad rates ' second highest industry-wide. The main risks to our earnings forecast include: (i) bigger than expected surge in newsprint costs; and (ii) lower than expected adex growth. ' AmResearch, May 31

This article appeared in The Edge Financial Daily, June 1, 2011.

MEDIAC - Time for a tea break

Stock Name: MEDIAC
Research House: MAYBANK

Media Chinese International Ltd
(May 31, RM1.31)
Downgrade to 'hold' at RM1.30 with revised target price of RM1.40 (from RM1.35)
: MCIL's FY11 results were within expectation. Dividends surprised with 60% net dividend payout ratio (DPR) or 10 percentage points (pps) above expectation. We maintain our earnings estimates but raise our net DPR assumption to 60%, for a decent net dividend yield of 4.7% for FY12. The higher dividends for FY11 will shore up MCIL's share price after the June 1 hike in electricity prices. With only 8% upside potential to our new target price, MCIL is now a 'hold'.

Core net profit for 4QFY11 of RM42.1 million (+19% year-on-year [y-o-y], -23% quarter-on-quarter [q-o-q]) brought FY11 core net profit to RM178.4 million (+33% y-o-y), which was within expectations at 103% of our estimate and slightly above consensus at 106%. Revenue for FY11 of RM1.3 billion (+10% y-o-y) was also within expectation at 102% of our revenue estimate.

Higher advertising expenditure moderated higher newsprint prices. Core net profit growth for FY11 of 33% y-o-y was driven by Malaysian adex, which grew 11% y-o-y while the average newsprint price remained flattish at US$650 (RM1,956.50) per tonne. Core net profit growth of 19% y-o-y for 4QFY11 was driven by Malaysian adex which grew 10% y-o-y, tempered by higher average newsprint price of US$680 per tonne (4QFY10: US$590 per tonne). Q-o-q 4QFY11 core net profit was 23% lower due to seasonally lower adex.

A final net dividend per share (DPS) of 1.2 US cents (3.5 sen) was declared bringing FY11 net DPS to 2 US cents. This implied 60% net DPR or 10 pps above expectations. We maintain our FY12/13 earnings estimates but raise our net DPR assumption to 60%. This translates into decent net dividend yield of circa 5%. Earnings wise, our 5% adex growth assumption going forward will be moderated by higher average newsprint price assumption of US$750 per tonne.

We raise our target price but downgrade the stock to 'hold'. Our new target price is premised on 13.5 times CY12 (rolled forward) earnings per share forecast of 10.5 sen. Our downgrade is tactical as there is now only 8% upside potential and yesterday's 7% hike in electricity tariffs may dampen adex sentiment. We may review our call after observing adex trends post-electricity tariff hike. In the 3'' months since we initiated coverage with a 'buy', MCIL's share price has surged by 49%. ' Maybank IB Research, May 31

This article appeared in The Edge Financial Daily, June 1, 2011.

E&O - E&O building new growth drivers

Stock Name: E&O
Research House: CIMB

Eastern & Oriental Bhd
(May 31, RM1.49)
Maintain outperform at RM1.49 with revised target price of RM1.96 (from RM1.63)
: E&O's 3MFY11 net profit missed consensus by just 1% but was 10% above our forecast. However, this is nothing to shout about as it comes after two quarters of big shortfalls and significantly marked-down forecasts.

Still, we are encouraged by the pick-up in sales in Penang and the appointment of Eric Chan as deputy managing director. We now raise FY12/13 earnings per share by 2% to 45% for the stronger Penang sales and reduce the target discount to our RM2.80 revised fully-diluted realisable net asset value (previously RM2.72) from 40% to 30% given the likely positive news flow on Seri Tanjung Pinang (STP) Phase 2.

This raises our target price from RM1.63 to RM1.96. We maintain our 'outperform' rating as the share price could be catalysed by: (i) finalisation of approval for STP Phase 2; and (ii) newfound management dynamism and lofty targets.

E&O's 4Q results topped expectations and pushed FY11 net profit 10% past our forecast. Net profit for 4Q slumped 72% year-on-year but almost quadrupled quarter-on-quarter due to the pick-up in condo sales in Penang. Net profit for FY11 fell 56% on the back of a 23% decline in turnover.

The poorer full-year performance reflects significant pre-operating expenses for Lone Pine Hotel and Straits Quay Retail. The two sen final dividend was lower than last year's 3.8 sen but in line with our expectations.

The Quayside condos in Penang are finally selling fast and prices have appreciated significantly too. The first block, launched in early 2010, has achieved more than 80% take-up and more than 70% of the second and third blocks have been sold. Prices have risen from an average of RM740 psf for the first block to over RM900 psf.

The smaller units have seen faster price appreciation and have transacted at nearly RM1,200 psf. E&O will soon launch the fourth block at prices 5% to 10% higher than the third. So far, the group has sold RM700 million worth of condos and has RM1.3 billion more to go.

Chan was recently promoted from executive director to deputy managing director and will focus on the group's property development activities while major shareholder and managing director Datuk Terry Tham will focus on the hotel and leisure division.

We view Chan's appointment positively as he has set some ambitious earnings targets, 70% to 150% above our previous forecasts. The earnings growth will be driven both by organic growth and acquisitions or joint ventures. We also expect strategic tie-ups to materialise, particularly after approvals for STP 2 have been secured. ' CIMB Research, May 31

This article appeared in The Edge Financial Daily, June 1, 2011.

PELIKAN - Pelikan still waiting for synergies

Stock Name: PELIKAN
Research House: ECMLIBRA

Pelikan International Corp Bhd
(May 31, RM1.01)
Upgrade to 'hold' at RM1.02 with target price of RM1
: Pelikan International Corp's (PICB) 1QFY11 results were disappointing, with net profit of RM7.2 million making up a mere 11.2% of our FY11 forecast and 10.4% of consensus. Herlitz continued to register a loss and cost synergies from the merger are taking longer than expected to materialise.

Significant top line growth of 68.9% for 1QFY11 came largely from the consolidation of Herlitz (absent in 1QFY10). Excluding Herlitz, PICB's revenue would have dipped by circa 12% year-on-year, evidence of weaker eurozone demand due to concerns over high energy prices, weak economic recovery and Greece's debt crisis.

Core net profit declined by 29.4% due to: (i) a '3.7 million (RM16.04 million) net loss incurred by Herlitz; (ii) strengthening of the ringgit against the euro (the euro:ringgit exchange rate was 4.09 in 1QFY11 against 4.82 in 1QFY10) and 86% of group revenue came from Europe; (iii) steeper input costs particularly for petrol-based raw materials (resin, pigments); and (iv) slower-than-expected rationalisation of Herlitz and PICB's operations.

The consolidation of Herlitz operations with PICB's, and the resulting cost savings is taking more time than expected although we do expect mild earnings recovery, particularly in 3QFY11 due to a seasonal spike in sales from the start of the European school term.

We expect a slight improvement in FY11 profit margins to come from internal productivity initiatives such as the moving of inkjet cartridge refill lines from China and the Czech Republic, and manufacturing of certain inks from Germany and Switzerland to PICB's new production facility in Glenmarie, Selangor.

We cut our FY11/12 net profit forecast by 18% to 25% to take into account the sluggish sales growth in Europe, stronger ringgit and higher raw materials cost. We are lowering our assumptions for the average FY11 euro:ringgit exchange rate to 4.08 (from 4.09) and US dollar:ringgit rate to 2.99 (from 3.0). We also factor in a 9% increase in raw material prices (from 7% previously).

We maintain our FY11 dividend per share estimate of 2 sen, which translates into a 21.4% payout ratio and a 2% net yield.

Although the outlook is still negative, the share price has already fallen to trough price-to-book (P/B) valuation. We believe there is limited downside and upgrade from 'sell' to 'hold'.

Our target price of RM1 is retained as we change our valuation method to 0.5 times FY11 P/B (a historical low for PICB) from eight times FY11 price-earnings ratio previously. ' ECM Libra Research, May 31

This article appeared in The Edge Financial Daily, June 1, 2011.

TENAGA - Tenaga shares jump on tariff hike

Stock Name: TENAGA
Research House: KENANGA

Shares of Tenaga Nasional Bhd (TNB) jumped higher today after it officially received approval from the government to increased electricity tariffs, effective June 1.

At 10.20am, Tenaga increased 54 sen to RM7.06, after opening 50 sen higher at RM7.02.

The government had announced yesterday that average electricity tariffs will be raised by 2.23 sen per kilowatt hour (kWh) or 7.12 per cent to 33.54 sen kWh, from 31.31 sen kWh, effective Wednesday.

In a research note today, AmResearch Sdn Bhd maintain their "hold" call on Tenaga with a slightly higher fair value of RM6.60 per share due to the tariff adjustment.

"Given that Tenaga's financial year 2011 coal cost is likely to average US$110 per tonne and was not addressed in this current tariff adjustment, we view Tenaga's tariff visibility as still largely opaque at this juncture.

"We are only mildly positive about the tariff increase as the net tariff increase of two per cent has already been mostly accounted for in our financial year 2012 and 2013 forecast assumptions," it said.

Meanwhile, HwangDBS Vickers Research maintained its "buy" call on Tenaga and raised its target price to RM8.80, from RM7.50, previously.

"A seven per cent average hike is more than sufficient to offset the 28 per cent increase in gas price," it said.

Kenanga Research, which upgraded Tenaga to "outperform" with a higher target price of RM8.06, from RM6.09, previously, is positive of the tariff adjustments that act as a structural change to Tenaga given the introduction of the Fuel Cost Pass-Through mechanism, which finally addresses fuel risks. -- Bernama

TENAGA - Tenaga surges to 32-month high

Stock Name: TENAGA
Research House: OSK

Tenaga Nasional Bhd surged the most in 32 months in Kuala Lumpur trading after the national power distributor won Malaysian government approval to raise electricity prices for the first time in almost three years.

The stock jumped 8.9 per cent to RM7.10 at 9:51 a.m. local time, set for its steepest increase since September 19, 2008, outpacing the FTSE Bursa Malaysia KLCI Index’s 0.5 per cent gain. Tenaga has rallied 18 per cent this month, poised to be the best performer on the benchmark gauge in May.

“It’s good news for Tenaga,” Chris Eng, an analyst at OSK Research Sdn Bhd, wrote in a report today. “The government is finally taking the right steps towards making Tenaga a viable business concern going forward,” said Eng, who upgraded the stock to “buy” from “neutral” and increased its fair value to RM8.66 from RM7.03.

State-controlled Tenaga yesterday said it will raise prices by an average 7.1 per cent from tomorrow when the government cuts its gas subsidy to power producers. The Southeast Asian nation has been gradually reducing state assistance for essential goods like flour and fuel in a bid to rein in its budget deficit. It typically spends about RM73 billion (US$24 billion) a year on subsidies, Prime Minister Najib Razak said last April, calling this “not sustainable.”

The move prompted a wave of rating upgrades for the utility by brokerages including Citigroup Inc, Deutsche Bank AG and Nomura Holdings Inc.

Its stock rating was raised to “buy” from “sell” at Citi and its share price estimate increased to RM7.90 from RM6.10, Kuala Lumpur-based analyst Ng Yong Yin wrote in a report dated May 30. He raised his profit forecast for fiscal 2012 by 19 per cent and by 22 per cent for 2013.

The Losers

Some steelmakers and cement stocks fell on concern higher energy costs will crimp earnings. Lafarge Malayan Cement Bhd, Malaysia’s biggest cement maker, slid 1.2 per cent to RM7.40 ringgit and YTL Cement Bhd dropped 1.1 per cent to RM5.40. Ann Joo Resources Bhd, a steel-maker, lost 1.1 per cent to RM2.79, headed for the lowest close since March 8.

Other heavy electricity users include Southern Steel Bhd, Kinsteel Bhd, MMC Corp and rubber glove manufacturers Top Glove Corp and Kossan Rubber Industries Bhd, HwangDBS Vickers Research Sdn Bhd analyst Goh Yin Foo wrote in a report today.

“Apart from the direct impact on earnings, the electricity and gas tariff decision may also translate into higher inflationary pressures as the multiplier effects works its way through the economic chain, and a reassessment of the expected timing for a possible snap general election since it could take a while for the public to adjust to higher living expenses,” Goh said. -- Bloomberg

TENAGA - AmResearch keeps 'hold' call on Tenaga

Stock Name: TENAGA
Research House: AMMB

With the electricity tariffs increase having a minimal impact on Tenaga Nasional Bhd, AmResearch Sdn Bhd says it is recommending a "hold" call on the utility stock on Bursa Malaysia.

"We maintain our hold call on Tenaga with a slightly higher derived fair value of RM6.60/share (versus RM6.22/share earlier) due to the power tariffs adjustment which takes effect on June 1, 2011.

"We are only mildly positive about the tariff increase, as the net tariff increase of 2.0 per cent (excluding gas-pass through adjustment) has already been mostly accounted for in our FY12-FY13 forecast assumptions.

"As such, we have raised the FY12-FY13 forecast by only 2.0 per cent. But we have lowered Tenaga’s FY11 forecast earnings by 1.0 per cent due to a one-month mismatch between the effective date of the gas cost increase and electricity billing, which will only account for the higher revenue in July this year," the research house said.

Meanwhile, HwangDBS Vickers Research maintained its "buy" call on Tenaga and raised its target price to RM8.80, from RM7.50, previously.

"A seven per cent average hike is more than sufficient to offset the 28 per cent increase in gas price," it said.

Kenanga Research, which upgraded Tenaga to "outperform" with a higher target price of RM8.06, from RM6.09, previously, is positive of the tariff adjustments that act as a structural change to Tenaga given the introduction of the Fuel Cost Pass-Through mechanism, which finally addresses fuel risks.. -- Bernama

BREM - Brem a 'buy' at RM1.80, says HwangDBS

Stock Name: BREM
Research House: HWANGDBS

HwangDBS Vickers Research has set a trading "buy" call on property developer and investor Brem Holdings Bhd, with a target price of RM1.80, a potential 17.3 per cent upside from its current price of RM1.62.

This is after considering its smaller market capitalisation and relatively lower stock liquidity, and assumption of a 10 sen net dividend per share, which leads to a dividend yield of 6.2 per cent.

HwangDBS Vickers has also forecast the company's net profit to increase by 10 per cent to RM24.7 million in the financial year 2012 compared with financial year 2011.

It said Brem Holdings is backed by a steady stream of income from property development projects in Kuala Lumpur and stable inflow of cash from its water concessionaire arm, PNG Water Ltd.

HwangDBS Vickers in a research note today said the total land bank of approximately 258 hectares (639 acres) in the Klang Valley and Sungai Petani, Kedah, as well as a total Gross Development Value (GDV) of at least RM2.94 billion and an outstanding order book of RM540 million, provides the company
with steady earnings visibility for the property development units.

Meanwhile, its 51 per cent-owned PNG Water, which has been contributing a stable recurring income at an average of RM12 million annually, will continue to be a boon in bolstering its earning base.

Taking into consideration the water concession which is not due to expire until 2019, the research house said annual growth is steady but gradual, and foresees this trend continuing up till the concession expires. -- Bernama

MMCCORP - MMC downgraded to 'neutral'

Stock Name: MMCCORP
Research House: OSK

MMC Corp, a Malaysian ports, power and construction group, was downgraded to “neutral” from “trading buy” at OSK Research Sdn Bhd, cutting its fair value to RM3.08 from RM3.62.

Gas Malaysia Sdn. a 41.8 per cent-owned affiliate, will see narrower margins after the government yesterday announced changes to state subsidies and fuel prices, analyst Chris Eng said in a report today.

This should impact Gas Malaysia’s potential valuation if it proceeds with its initial public offering, he said. -- Bloomberg

BSTEAD - Boustead moving slow and steady

Stock Name: BSTEAD
Research House: CIMB

Boustead Holdings Bhd
(May 30, RM5.79)
Maintain hold at RM5.72 with higher target price of RM6.45 (from RM6.06)
: Although Boustead Holdings' 1Q11 net profit accounted for only 18% of our full-year forecast and 19% of consensus numbers, we regard it as being broadly in line as the remaining quarters should be stronger, buoyed by higher fresh fruit bunches (FFB) production and contribution from the newly-acquired Pharmaniaga Bhd.

A pleasant surprise was the interim single-tier dividend of eight sen which was higher than our forecast of five sen. We raise our FY11 to FY13 dividend forecasts from between 40 sen to 41.2 sen to 42 sen per year but trim our FY11/13 earnings per share (EPS) by between 1% and 4% to account for our recent 10% to 11% downgrade of'' Affin Bank Bhd's numbers. Our target price goes up from RM6.06 to RM6.45 as we update our revised net asset value for the current value of listed assets and include the Royale Chulan Hotel. We continue to rate Boustead a 'hold' as there are no immediate catalysts in sight.

Net profit in 1Q jumped 24% year-on-year to RM112.2 million, mainly because of higher contributions from all the key units with the exceptions of heavy industries and finance. Plantation earnings before interest and tax (Ebit) surged 41% as the 42% rise in crude palm oil price more than offset a 17% drop in FFB crop. Production was affected by seasonality and the prolonged wet weather. Property Ebit rose 42% due to higher progress billings while earnings from manufacturing and trading ticked up 7%, thanks to higher sales volume for petrol retailer, BH Petrol. Heavy industries Ebit fell 28% due to slower progress billings for heavy industries while the finance division was affected by higher interest expense.

In view of Affin's disappointing 1Q results, we cut our FY11/13 EPS for Boustead by between 1% to 4% to account for lower lending yields and the recent interest rate hike. However, we remain optimistic on the group's 2H earnings prospects, which are underpinned by higher FFB production, expansion of the hotel chain and contribution from Pharmaniaga from next quarter onwards. ' CIMB Research, May 30

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

TENAGA - Tenaga a 'buy' at Citi, stock surges

Stock Name: TENAGA
Research House: CITI GROUP

Tenaga Nasional Bhd was raised to “buy” from “sell” at Citigroup Inc after Malaysia’s biggest utility said it will raise electricity charges by an average 7.1 per cent.

The share price estimate was increased to RM7.90 from RM6.10, analyst Ng Yong Yin wrote in a report dated May 30.

The stock surged the most in 32 months in Kuala Lumpur trading, jumping 8.3 per cent to RM7.06 at 9:02 a.m. local time, set for its steepest increase since Sept. 19, 2008. -- Bloomberg

TENAGA - Tenaga jumps on tariff hike

Stock Name: TENAGA
Research House: HWANGDBS

KUALA LUMPUR: Shares of TENAGA NASIONAL BHD [] surged on resuming trade on Tuesday, May 31 after the utility company officially received the nod to increase tariff rates effective June 1.

At 9.05am, Tenaga was up 51 sen to RM7.03 with 5.19 million shares traded.

HwangDBS Vickers Research has maintained its buy call on Tenaga Nasional Bhd and raised its target price to RM8.80 from RM7.50 previously.

In a note Tuesday, May 31, HwangDBS Vickers said the 7% average tariff hike was more than sufficient to offset the 28% increase in gas price.

'Future hike in fuel cost will be passed-through to users under the 6-monthly tariff review

'Approval of cost pass-through mechanism will be a key re-rating catalyst; maintain Buy with higher TP of RM8.80 implying 35% upside,' it said.


PADINI - Padini up in early trade

Stock Name: PADINI
Research House: INTER PACIFIC

KUALA LUMPUR: PADINI HOLDINGS BHD [] shares rose ''in early trade on Tuesday, May 31 after it posted stronger earnings in the third quarter ended March 31, 2011.

At 9.15am, Padini was up five sen to RM1.13 with 45,000 shares traded.

Inter-Pacific Research Sdn Bhd upgraded Padini to Outperform with its target price raised to RM1.21 (previously RM1.06) as it brought its valuation forward to FY12's EPS of 12.1sen ascribed to a PER of 10 times.

'We like Padini as it was able to avoid margins compression despite unfavorable raw material prices,' it said in a note May 31.

TENAGA - HwangDBS Vickers maintains Buy on Tenaga, ups target price to RM8.80

Stock Name: TENAGA
Research House: HWANGDBS

KUALA LUMPUR: HwangDBS Vickers Research has maintained its buy call on TENAGA NASIONAL BHD [] and raised its target price to RM8.80 from RM7.50 previously after the utility company officially received approval to increase tariff rates effective June 1.

In a note Tuesday, May 31, HwangDBS Vickers said the 7% average tariff hike was more than sufficient to offset the 28% increase in gas price.

'Future hike in fuel cost will be passed-through to users under the 6-monthly tariff review

'Approval of cost pass-through mechanism will be a key re-rating catalyst; maintain Buy with higher TP of RM8.80 implying 35% upside,' it said.


May 30, 2011

TOPGLOV - Rubber glove makers to pay more for power

Stock Name: TOPGLOV
Research House: OSK

Rubber glove sector
Maintain overweight
: On May 30, the government approved an electricity tariff hike for Tenaga Nasional Bhd and a gas price hike across industries. Rubber glove manufacturers, which currently enjoy a low tariff of RM15 per mmBTU, will have to pay 7% more for gas at RM16.07 per mmBTU.

We understand that energy cost accounts for 8% to 10% of rubber glove manufacturers' total costs, with energy cost comprising both electricity and natural gas in almost equal proportions. Hence, the net impact would still be less than 1%. Glovemakers can easily pass on the extra electricity cost to their customers.

Moreover, given that the quantum and time line of the hikes of every six months has been set, even if it is implemented, the rubber glove manufacturers would be able to make adjustments to their selling prices in advance and pass on almost 100% of the cost increase to their customers.

With the continuously high latex price of above RM9 per kg (RM9.55 per kg at May 30's close), latex cost accounts for about 60% of rubber glove manufacturers' total costs. Hence, we believe that more emphasis should be placed on this cost element over others. We expect the rubber price to either continue to remain high or commence on a downtrend given that the wintering season for rubber trees is now over.

We maintain our 'overweight' call. Our top picks remain Top Glove Corp Bhd ('buy', fair value: RM6.50), Supermax Corp Bhd ('buy', FV: RM6.91) and Kossan Rubber Industries Bhd ('buy', FV: RM5) because these companies will be the main beneficiaries when the latex price eases since they have a higher natural rubber glove mix, and'' they would be the biggest gainers in the event the latex price falls as they have the largest production capacity for medical gloves. ' OSK Research, May 31

This article appeared in The Edge Financial Daily, June 1, 2011.

SIME - Sime remains a 'buy': HwangDBS

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

HwangDBS Vickers Research has reiterated its "buy" call on Sime Darby with a target price of RM9.13 in view of the better financial performance in the fourth quarter.

The research house said the improved outlook is underpinned by rising crude palm oil output, recovery in property, and continued strength in industrial and motor.

"We expect the outcome of a portfolio review to also result in a leaner and more focused Sime Darby, hence, improved long-term growth prospects, despite its size," it said in a research note today.

Sime Darby had earlier announced the signing of a memorandum of understanding (MoU) with Petronas Nasional Bhd and Marine and Heavy Engineering Holdings Bhd (MHB) to sell its Teluk Ramunia and Pasir Gudang yards for RM695 million -– above the combined book value of RM641 million.

HwangDBS said terms and conditions of the sale are to be worked out in two months' time.

The research house said Sime Darby is committed to completing the ongoing Oil and Natural Gas Corp Ltd (ONGC) and Kebabangan Northern Hub Development Project after this sale, by leasing back the yards from Petronas.

At lunch break Sime Darby's stock rose three sen to RM9.16 -- Bernama

SIME - Above expectation on industrial earnings

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

Sime Darby Bhd
(May 30, RM9.15)
Upgrade to hold at RM9.13 with revised target price of RM9.40 (from RM8)
: Sime Darby reported 3QFY11 net profit of RM820.1 million, a turnaround from being loss-making in 3QFY10 but down 6.5% quarter-on-quarter. Results were above expectation.

Surprises came from stronger than expected contributions from the industrial divisions, which were not affected by the flooding in Queensland, Australia.

There is a proposed disposal of two yards to Petroliam Nasional Bhd (Petronas) and Malaysia Marine & Heavy Engineering Holdings Bhd (MMHE) for a total cash consideration of RM695 million. We view this positively as it can reduce Sime's earnings volatility and enable management to focus on its key competent divisions, especially on the growth of its plantation division.

We upgrade the stock to 'hold' from 'sell' with a higher target price of RM9.40 as we roll over to 15 times FY13F price-earnings ratio (PER). We have adjusted up our FY11, FY12 and FY13 earnings forecasts by 7.6%, 6.3% and 10.2% to an earnings per share of 51.3 sen, 56.6 sen and 62.8 sen. The adjustment is made mainly to factor in better contribution from the motor and industrial divisions.

Sime has entered into two non-binding MoU to sell its two fabrication yards for a total case consideration of RM695 million. The MoU is only for the takeover of assets under the two yards, which means the recently won RM1.15 billion Petronas contract to fabricate KBB topsides for the Kebabangan Northern Hub Development Project will remain under Sime. Sime will continue with this by leasing the space from Pasir Gudang yard. Management is guiding for an operating margin of 8% to 12%. Based on our earlier estimation based on pre-tax profit margin of 10% and equally spread over the 29 months, the potential earnings enhancement is about 1% to 1.2% for FY12/14.

The disposal is not a surprise as there has been market talk that MMHE is keen on Sime's oil and gas assets. We are positive on the O&G exit as it will remove concerns over potential losses and earnings volatility from this division and allow the group to focus on its core businesses.

Apart from the O&G shipyard disposal, Sime still has some non-core small businesses up for disposal. Dunlopillo Holdings is in the process of being divested and so is the 30% stake in Continental Sime Tyre. Sime will keep its existing power business and continue exploring new opportunities in Malaysia and Singapore.

Sime has been granted 220,000ha under a 63-year concession by the Liberian government to develop oil palm and rubber plantations. Sime plans to invest US$3.1 billion (RM9.4 billion) over the next 15 years. Sime aims to complete the planting of oil palm by 2022 or 2023, ahead of the initial timeline target of 2030. There will be about 55 estates and around 20 palm oil mills built. Cost of production in Liberia is about 10% to 15% higher than Malaysia's average. The first crude palm oil (CPO) production is expected to commence in 2013.

Share price catalyst: CPO price surging more strongly than expected. ' UOB Kay Hian, May 30

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

SIME - Strategic refocusing but fairly valued

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

Sime Darby Bhd
(May 30, RM9.15)
Maintain sell at RM9.13 with higher target price of RM8.47 (from RM7.90)
: We are maintaining our 'sell' call on Sime Darby with fair value raised to RM8.47. Its strategic refocusing and our raising of earnings forecast notwithstanding, we believe Sime is at best fairly valued. While we readily admit that the company's fundamentals are the best in a long while, the stock is already trading at mid-teens forward price-earnings ratio. The company's growth for the next'' two to three years will also be driven by non-plantation cyclical segments such as industrial and motor, which are essentially trading and distribution businesses.

Sime's 9MFY11 core net profit of RM2.35 billion, when annualised, was within both our forecast but 5.5% below consensus. However, with the earnings momentum shown by its industrial and motor segments, we believe Sime's 4Q showing will be better.

Sime's plantation segment produced 7.4 million tonnes of fresh fruit bunches (FFB) and appears to be on track to hit our forecast of 9.7 million tonnes for FY11. Its Indonesian operation reported a 37.4% surge in March production while the Malaysian plantations suffered a 2.1% decline. Sime still has some 60,000ha of landbank in Indonesia, of which 24,000ha is ready for planting. The group also made progress in Liberia, where it planted its first oil palm tree on May 19. The company is targeting 5,000ha of new planting this year.

The motor segment continued to do well, with segment earnings before interest and tax (Ebit) surging 28.6% quarter-on-quarter. Year-to-date, Ebit is now up 89.8% from last year. The strong performance was mainly due to strong sales of BMW, which make up 63% of its Ebit. Sales were boosted by new launches such as the new generation X3 and 5-series plus 320i M Sport and Executive Edition. The new generation 3-series should hit the market in 2012. This will help to keep its momentum going, particularly in the China market, which now makes up 45% of the motor segment's revenue.

Sime Engineering has entered into a MoU with Petroliam Nasional Bhd (Petronas) and Malaysia Marine & Heavy Engineering Holdings Bhd (MMHE) to dispose of its Teluk Ramunia yard for RM296 million and Pasir Gudang yard for RM399 million for strategic reasons. Even if the sale goes through, Sime is still obliged to complete its existing Petronas jobs. We view the disposals positively as it is a clear sign of strategic refocusing (on oil palm downstream and power).

We have raised our earnings forecast for FY11 from RM3.04 billion to RM3.23 billion to factor in a still-strong motor segment performance while our FY12 forecast is pushed up to RM3.56 billion from RM3.29 billion previously. ' OSK Research, May 30

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

IJMLAND - IJM Land - right on target

Stock Name: IJMLAND
Research House: AMMB

IJM Land Bhd
(May 30, RM2.80)
Maintain buy at RM2.80 with fair value of RM4
: We reaffirm our 'buy' rating on IJM Land with our fair value unchanged at RM4, based on an unchanged 10% discount to our fully-diluted net asset value (NAV) estimate of RM4.46.

IJM Land's 4QFY11 net profit came in at RM44 million, bringing its full-year earnings to a record RM218 million (two times FY10), meeting our bullish estimate but way ahead of consensus' by 25%. This underscores our strong belief in management's delivery capabilities. The company announced a dividend of four sen per share (FY10: two sen per share).

Although earnings were against the preceding quarter, this was due to the lumpy recognition of the earlier sale of the Aeon Mall in Melaka.

Our earnings estimates for FY12F and FY13F remain largely unchanged at RM285 million and RM314 million. Earnings will be underpinned by strong unbilled sales of about RM1 billion and a new sales assumption of RM1.5 billion over RM1.5 billion to RM2 billion of planned launches for FY12F. We introduce our FY13F earnings at RM340 million, representing 8% year-on-year growth.

The group plans to launch RM1.5 billion to RM2 billion worth of properties ' including Light Collections 3, The Address. New sales remain solid, amounting to RM450 million in the first three months of CY11. We believe the group would be able to register stronger sales against last year's robust RM1.5 billion.

IJM Land is moving to capitalise on the maturity of its Seremban II township by divesting 15 to 20 acres of commercial land to Mydin hypermarket. This should accelerate the development potential of the remaining 300 acres of commercial land.

Infrastructure and earthworks for its 50%-owned Canal City (1,877 acres) are slated to start soon. Acquired for about RM50 psf, Canal City is scheduled for launch in 2012 to take advantage of the lack of affordable landed homes priced below RM350,000 in the suburbs.

IJM Land's valuations are very attractive ' trading on forward multiples of 11 to 13 times over FY12F to FY14F, and a 37% discount to fully-diluted NAV. Despite its deep value, IJM Land's share price needs to get a kick from a meaningful land deal to reinvigorate excitement over the stock. This may soon take place. ' AmResearch, May 30

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

MHB - Game-changing value accretion for MMHE from Sime Darby's yard

Stock Name: MHB
Research House: AMMB

Malaysia Marine and Heavy Engineering Holdings Bhd
(May 30, RM7.47)
Maintain buy at RM7.30 with higher fair value of RM8.25 (from RM8.10)
: We maintain our 'buy' on Malaysia Marine & Heavy Engineering Holdings Bhd (MMHE) but with a higher fair value of RM8.25 (against RM8.10 previously), based on an unchanged FY12F price-earnings ratio (PER) of 25 times.

We have raised MMHE's FY12F to FY14F earnings by 2% to 5% as we accelerate the recognition of the group's order book due to its expanding fabrication capacity.

We are excited by MMHE entering into a MoU with Sime Darby Engineering to acquire its 130-acre Pasir Gudang yard for RM399 million cash, as it will radically transform Malaysia's fabrication landscape.

Including Petroliam Nasional Bhd's (Petronas) Teluk Ramunia yard, MMHE will have access to the country's largest domestic fabrication yard of 672 acres, which is 3.5 times Kencana Petroleum Bhd's current 192 acres.

In comparison with MMHE's current market capitalisation of RM12 billion, its existing yard is being valued at RM720 psf ' 10 times the RM70 psf being paid for the Pasir Gudang yard.

While the Pasir Gudang yard will be partly utilised for its existing Oil and Natural Gas Corp and Kebabangan jobs, we believe the Pasir Gudang and Petronas' Ramunia yards offer ample additional fabrication capacity which will underpin MMHE's re-accelerating earnings momentum and growing deepwater expertise.

MMHE remains one of our top picks for the oil and gas sector due to:

(1) Capacity expansion stemming from Sime Darby Engineering's Pasir Gudang yard, which will accelerate order book recognition, drive margin efficiencies and enhance MMHE's deepwater capabilities.

(2) Further upgrades in consensus margin assumptions given the possibility of a quick turnaround from the reaping of 'low-hanging fruit' efficiencies under the new managing director/CEO from Technip's subsea division.

(3) Significant additions to the group's net order book of RM3 billion from the prolific wave of upcoming projects by 2H11 as half of MMHE's Pasir Gudang yard will be unutilised when the topside structure of the Gumusut-Kakap floating production storage semi-submersible is lifted onto its hull.

(4) New margin benchmarks for MMHE's tenders of over RM5 billion'' comprising more complex structures than the jobs undertaken by other domestic operators.

The stock currently trades at an attractive FY12F PER of 22 times, below SapuraCrest Petroleum Bhd's peak of 29 times in 2007. ' AmResearch, May 30

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

TAANN - Ta Ann's 1QFY11 within expectations, better quarters ahead

Stock Name: TAANN
Research House: RHB

Ta Ann Holdings Bhd
(May 30, RM6.61)
Maintain outperform at RM6.52 with fair value of RM6.52
: Ta Ann's 1QFY11 net profit of RM26.6 million came in at 15% to 19% of our full-year forecast and market consensus. This is within our expectations as we anticipate much stronger quarters ahead, underpinned by the surge in log and plywood prices after Japan's earthquake in March as well as increasing fresh fruit bunches (FFB) production volume at its plantation division.

Net profit for 1QFY11 more than tripled to RM26.6 million (from RM8 million a year ago) as a result of higher selling prices for logs (+39%), plywood (+39%), and crude palm oil [CPO] (+44%). FFB production volume was also higher by 36% due to an increase in mature hectarage, but sales volume for logs was down by 31% and plywood 30% due to lower log production volume.

Net profit for 1QFY11 decreased by 11.9% quarter-on-quarter (from RM30.2 million previously) mainly due to lower export log sales (-30%), plywood sales (-11%) and FFB production volume (-19%). The decline in sales volume was partially cushioned by higher selling prices for logs (+10%), plywood (+11%), and CPO (+17%).

The decline in sales volume of its timber division was largely due to the seasonally wet weather conditions that hampered log harvesting.

We are of the view that Ta Ann's prospects continue to be promising on the back of rising FFB production volume for the next few years.

Increasing mature oil palm hectarage will be the main driver for Ta Ann's earnings, contributing more than 60% of earnings for FY11 (from 36% for FY09). We expect earnings from its logging division to remain strong due to robust demand from India (its main export market) and China.

With rising plywood prices after the Japan earthquake in March, its previously loss-making plywood division (due to the high production cost of its Tasmanian operations) will likely be able to turn around in 2011.

Compared to a net loss last year (estimated at about RM15 million to RM20 million), we are now projecting Ta Ann's plywood division will record a net profit of about RM10 million to RM15 million in 2011.

We maintain our forecasts. The risks to our view include: (i) timber and CPO price falling; (ii) a slower-than-expected recovery in Japan's economy; and (iii) bad weather conditions that will hamper log production volume.

Our sum-of-parts-based fair value for Ta Ann is RM8.44 based on unchanged 12 times FY11 timber division earnings and 13 times FY11 plantation division earnings. We maintain our 'outperform' call on the stock. ' RHB Research, May 30

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

MASTEEL - Slow start to 2011 for Masteel after strong 4QFY10

Stock Name: MASTEEL
Research House: OSK

Malaysia Steel Works (KL) Bhd
(May 30, RM1.23)
Maintain neutral at RM1.29 with target price of RM1.34
: After beating its bigger peers in the preceding quarter, Masteel started 2011 with feeble earnings, posting a net profit of RM6.2 milllion, 53.4% lower quarter-on-quarter despite being almost flat year-on-year.

We suspect the low inventory level of less than two months as at end-December 2010 may have limited the benefits of the time lag of cheaper feed materials compared with its competitors, which keep more stocks as most of the raw material in 1Q was marked to the current market price, which has been surging since early 2011.

Therefore, earnings before interest, tax, depreciation and amortisation (Ebitda) margin slipped to only 5.3% despite escalating average selling prices (ASPs). Also, the Lunar New Year celebration in February resulted in 1Q revenue dropping by 4.6%.

Our observation suggests that activities in the local steel market remain lacklustre. Although steel demand usually picks up during the April to June period, we think this is a sign that the implementation of various mega projects introduced under the Economic Transformation Programme (ETP) remains slow.

Nonetheless, as Masteel's earnings record in the past may have showed a less consistent trend compared with its peers', we prefer to monitor the company's earnings for another quarter or two before altering our original projections. This is despite the 1Q numbers coming behind our and street estimates when annualised.

We also have some reservations on the company's recent announcement of a 60:40 joint-venture agreement to supply to and operate a 106.5km rail transit network in Iskandar Malaysia and Woodlands in Singapore.

While the Johor government and the co-chairman of Iskandar Regional Development Authority endorsed the proposal in April 2011, the company is still in the process of acquring approvals from various government agencies, which we think may take a while.

Hence we have not incorporated any earnings contribution for this project.

With the company's medium-term earnings visibility remaining poor, plus the unexciting 1Q figures, we maintain our 'neutral' rating on Masteel with a fair value of RM1.34. ' OSK Research, May 30

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

MHB - Earnings forecast upgrade for MMHE

Stock Name: MHB
Research House: OSK

OSK Research has upgraded Malaysia Marine and Heavy Engineering Holdings Bhd's(MMHE) financial year 2012 earnings forecast by 14 per cent.

This follows the company's announcement that it has entered into a memorandum of understanding (MoU) with Sime Darby Engineering for the acquisition of a fabrication yard in Pasir Gudang for RM399 million.

OSK Research said the acquisition enables MMHE to capitalise on the expanded yard capacity and hence, develop the flexibility to undertake a larger number of project bids, to enlarge its share of domestic and regional contracts.

"We view this acquisition positively as MMHE can now double its annual capacity to 129,700 tonnes," it said in a research note today.

The research house said the acquisition is timely as the company has strong orders but lacks sufficient yard space to perform its fabrication jobs due to an existing high utilisation rate of above 80 per cent.

Currently, MMHE possesses a RM3.1 billion orderbook and a tenderbook worth RM5 billion, a portion of which management expects to realise by the next quarter.

Following the earnings forecast upgrade, OSK has maintained a "buy" call on MMHE but upgraded the fair value of the company to RM8.23 from RM7.20 previously. --Bernama

PCHEM - Petronas Chem a 'buy' on product demand

Stock Name: PCHEM
Research House: OSK

Petronas Chemicals Group Bhd (PCG), the leading integrated petrochemicals producer in Malaysia, is expected to see continued demand for its products from China, India and the Asia Pacific.

PCG produces a diversified range of petrochemical products from its olefins and derivatives segment as well as fertilisers and methanol.

In a research note today, OSK Research said PCG's utilisation rate for both segments stood at 86 per cent and 82 per cent respectively, for the fourth quarter of financial year 2011.

Thus, it added, the PCG management is targeting for the utilisation rate of its plants to hit 90 per cent.

OSK said in addition, PCG also expects the feasibility study on its Refinery and Petrochemical Integrated Development Project to be completed by year-end.

The research house has maintained a "buy" call on PCG's stocks at RM9.28. -- Bernama

SIME - Sime Darby raised to 'hold' at UOB-Kay Hian

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

Sime Darby Bhd was raised to “hold” from “sell” at UOB Kay Hian Holdings Ltd after the world’s biggest listed palm oil producer reported better-than-expected earnings for the third quarter ended March 31.

The share price estimate for the Malaysian company was increased to RM9.40 from RM8, Vincent Khoo, a Kuala Lumpur-based analyst at UOB-Kay Hian, wrote in a report today. -- Bloomberg

ALAM - Alliance Research downgrades Alam Maritim to Sell, cuts TP to 89 sen

Stock Name: ALAM
Research House: ALLIANCE

KUALA LUMPUR: Alliance Research Sdn Bhd has downgraded ALAM MARITIM RESOURCES BHD [] to a Sell and slashed its target price to 89 sen from 98 sen, and said the company's earning visibility remained uncertain.

The research house also downgraded Alam's FY11 and FY12 net profit projection by 15% to 20% due to its lower than expected 1QFY11 results.

It said Alam registered a smaller net loss of RM6.7 million in 1QFY11 compared to a net loss of RM49 million in 4QFY10.

The worst-than-expected results were hit by losses suffered at its associates division, higher'than-expected operating expenses (demobilisation of vessels for repairs and maintenance) and lower vessels utilisation rate, it said in a note May 30.

'Correspondingly our target price is downgraded from 98 sen to 89 sen based on 13x revised FY11 EPS.

'Since the current share price of RM1.05 represent a downside of 15.2%, we downgrade our call from Hold to Sell,' it said.

IJM - Inter-Pacific maintains Outperform rating, RM3.23 TP for IJM Land

Stock Name: IJM
Research House: INTER PACIFIC

KUALA LUMPUR: Inter-Pacific Research Sdn Bhd has maintained its Outperform call on IJM Land Bhd at RM2.80 with a target price of RM3.23.

The research house said in a note May 30 that it favoured IJM Land for its (i) diversified land banks with exposure to major urban growth areas; (ii) projects worth RM2 billion to be launched in FY12, and (iii) healthy balance sheet with 0.2 times net cash.

GENM - Genting Malaysia raised to 'buy' at OSK

Stock Name: GENM
Research House: OSK

Genting Malaysia Bhd was raised to “buy” from “neutral” at OSK Research Sdn Bhd to reflect higher earnings estimates from its UK business.

The fair value for the stock was increased to RM4.10 from RM4.05, OSK wrote in a report today. -- Bloomberg