Stock Name: EPMB
Company Name: EP MANUFACTURING BHD
Company Name: EP MANUFACTURING BHD
| Research House: TA | Price Call: BUY | Target Price: 1.16 |
July 29, 2011
Axiata - looking for higher dividends
Stock Name: AXIATA
Company Name: AXIATA GROUP BERHAD
Axiata Group Bhd
(July 28, RM5.12)
Maintain buy at RM5.14 with revised target price of RM5.80 (from RM5.60): With strong cash flow generating capabilities from its domestic and overseas operations, Axiata's balance sheet continues to strengthen. From 4.6 times at end-2008, we expect its gross debt/earnings before interest, tax, depreciation and amortisation (Ebitda) ratio to decline to 1.3 times by end-2012. We also expect Axiata to be net cash from next year onwards. With no major acquisitions apparent in the near horizon, prospects for positive surprises on the dividend front are high, in our view.
Our sum-of-parts-based target price is marginally raised to RM5.80 from RM5.60 as our cost of equity assumption is lowered to 11.1% from 11.5%, on rolling forward our valuation parameters.
Sustaining revenue growth remains a challenge in the face of declining voice revenue, but the management believes it has a strong chance of sustaining Celcom's margins through collaborative programmes, such as the ones with Digi.Com Bhd and Telekom Malaysia Bhd, and other cost saving schemes. We do expect this to be the case and our forecasts currently assume stable Ebitda margins of about 34% at Celcom, and at the group of about 45%.
Mobile penetration is already about 85% for Indonesia but data revenue has been expanding rapidly at more than 30% year-on-year to support growth. We project revenue growth of 11% in 2011 and expect XL's Ebitda margins to be sustainable at about 52% in 2011/12. Captial expenditure is estimated at US$550 million (RM1.6 billion) per year over the next two years against US$410 million in 2010.
Bangladesh-based Robi expects to grow revenue at above industry rate. The strategy may be to sacrifice some margins for faster growth. Revenue growth for 2011 is projected to be in the mid to high teens and we expect Ebitda margins to decline to about 29% from 32% in 2010.
The current penetration rate in Sri Lanka is about 75% and as the incumbent amid relatively benign competition, Dialog is expected to grow revenue at industry rate. We project mid single-digit revenue growth of about 4% in 2011 and expect Ebitda margins for the company to hold up at 36% to 37%. ' Maybank IB Research, July 28
This article appeared in The Edge Financial Daily, July 29, 2011.
Company Name: AXIATA GROUP BERHAD
| Research House: MAYBANK | Price Call: BUY | Target Price: 5.80 |
Axiata Group Bhd
(July 28, RM5.12)
Maintain buy at RM5.14 with revised target price of RM5.80 (from RM5.60): With strong cash flow generating capabilities from its domestic and overseas operations, Axiata's balance sheet continues to strengthen. From 4.6 times at end-2008, we expect its gross debt/earnings before interest, tax, depreciation and amortisation (Ebitda) ratio to decline to 1.3 times by end-2012. We also expect Axiata to be net cash from next year onwards. With no major acquisitions apparent in the near horizon, prospects for positive surprises on the dividend front are high, in our view.
Our sum-of-parts-based target price is marginally raised to RM5.80 from RM5.60 as our cost of equity assumption is lowered to 11.1% from 11.5%, on rolling forward our valuation parameters.
Sustaining revenue growth remains a challenge in the face of declining voice revenue, but the management believes it has a strong chance of sustaining Celcom's margins through collaborative programmes, such as the ones with Digi.Com Bhd and Telekom Malaysia Bhd, and other cost saving schemes. We do expect this to be the case and our forecasts currently assume stable Ebitda margins of about 34% at Celcom, and at the group of about 45%.
Mobile penetration is already about 85% for Indonesia but data revenue has been expanding rapidly at more than 30% year-on-year to support growth. We project revenue growth of 11% in 2011 and expect XL's Ebitda margins to be sustainable at about 52% in 2011/12. Captial expenditure is estimated at US$550 million (RM1.6 billion) per year over the next two years against US$410 million in 2010.
Bangladesh-based Robi expects to grow revenue at above industry rate. The strategy may be to sacrifice some margins for faster growth. Revenue growth for 2011 is projected to be in the mid to high teens and we expect Ebitda margins to decline to about 29% from 32% in 2010.
The current penetration rate in Sri Lanka is about 75% and as the incumbent amid relatively benign competition, Dialog is expected to grow revenue at industry rate. We project mid single-digit revenue growth of about 4% in 2011 and expect Ebitda margins for the company to hold up at 36% to 37%. ' Maybank IB Research, July 28
This article appeared in The Edge Financial Daily, July 29, 2011.
Unisem dips in early trade; MIDF Research cuts TP to RM1.60
Stock Name: UNISEM
Company Name: UNISEM (M) BHD
KUALA LUMPUR: UNISEM (M) BHD [] shares retreated in early trade on Friday, July 29 after its net profit for the second quarter ended June 30l, 2011 fell 75% to RM12.03 million from RM48.05 million a year earlier due mainly to a decline in revenue.
At 9.25am, Unisem shed two sen to RM1.38 with 168,100 shares done.
It said on Thursday, July 28 that its revenue fell 14.5% to RM307.52 million from RM359.50 million in 2010.
MIDF Research maintained its Buy call on Unisem and said that as expected, Unisem posted a disappointing 1H11 net profit of RM17.4 million, a 80.6% year-on-year decline.
'This made up only 11.3% and 18.4% ours and consensus' full year forecasts respectively
'We are revising downwards our FY11 and FY12 forecasts by 59.9% and 30.9% taking into account the lower orders, stronger ringgit and higher cost. Rolling our valuation to FY12, we arrive at a revised target price of RM1.60 by pegging FY12 EPS to 8.5 times PER which is its 5 year average PER,' it said.
Company Name: UNISEM (M) BHD
| Research House: MIDF | Price Call: BUY | Target Price: 1.60 |
KUALA LUMPUR: UNISEM (M) BHD [] shares retreated in early trade on Friday, July 29 after its net profit for the second quarter ended June 30l, 2011 fell 75% to RM12.03 million from RM48.05 million a year earlier due mainly to a decline in revenue.
At 9.25am, Unisem shed two sen to RM1.38 with 168,100 shares done.
It said on Thursday, July 28 that its revenue fell 14.5% to RM307.52 million from RM359.50 million in 2010.
MIDF Research maintained its Buy call on Unisem and said that as expected, Unisem posted a disappointing 1H11 net profit of RM17.4 million, a 80.6% year-on-year decline.
'This made up only 11.3% and 18.4% ours and consensus' full year forecasts respectively
'We are revising downwards our FY11 and FY12 forecasts by 59.9% and 30.9% taking into account the lower orders, stronger ringgit and higher cost. Rolling our valuation to FY12, we arrive at a revised target price of RM1.60 by pegging FY12 EPS to 8.5 times PER which is its 5 year average PER,' it said.
Maybank IB maintains Buy on MAHB
Stock Name: AIRPORT
Company Name: MALAYSIA AIRPORT HOLDINGS BHD
KUALA LUMPUR: Maybank IB Research has maintained its Buy call on Malaysia Airports Holdings Bhd and said the company's 1H2011 core net income of RM205 million was within expectation, adding it 43% of its full-year forecast and 53% of consensus.
The research house in a note Friday, July 29 said 2H is typically much stronger than 1H.
'These are impressive results driven by strong traffic numbers, high utilization rates and buoyant retail business.
'MAHB is our top aviation pick as it is well placed to enjoy the current air travel up-cycle. Maintain Buy, with an unchanged target price of RM7.55 per share DCF-based,' it said.
Company Name: MALAYSIA AIRPORT HOLDINGS BHD
| Research House: MAYBANK | Price Call: BUY | Target Price: 7.55 |
KUALA LUMPUR: Maybank IB Research has maintained its Buy call on Malaysia Airports Holdings Bhd and said the company's 1H2011 core net income of RM205 million was within expectation, adding it 43% of its full-year forecast and 53% of consensus.
The research house in a note Friday, July 29 said 2H is typically much stronger than 1H.
'These are impressive results driven by strong traffic numbers, high utilization rates and buoyant retail business.
'MAHB is our top aviation pick as it is well placed to enjoy the current air travel up-cycle. Maintain Buy, with an unchanged target price of RM7.55 per share DCF-based,' it said.
AmResearch maintains Buy on WCT
Stock Name: WCT
Company Name: WCT BHD
KUALA LUMPUR: AmResearch has maintained its Buy call on WCT BHD [] with an unchanged fair value of RM3.85 after the company's wholly-owned subsidiary WCT CONSTRUCTION [] Sdn Bhd secured an earthwork contract with Vale Malaysia Manufacturing Sdn Bhd.
In a note Friday, July 29, AmResearch said that this was the first major contract that WCT has secured this year.
The award is for Phase 1A (Stage 1) of Vale's iron ore distribution centre and pelletisation plant project in Teluk Rubiah, Perak.
The total contract value is estimated at RM115mil ' and is to be completed in April 2013.'' Scope of works includes earthwork, drainage, roads & pavement, slope protection works as well as temporary sedimentation ponds at Vale's.
'We have maintained our earnings forecast for FY11F ' as this new job forms part of our new orderbook assumptions of RM2 billion.
'Most importantly, we believe WCT's early success would provide the impetus for the group to be in a competitive position to secure more jobs for Vale's massive project,' it said.
Company Name: WCT BHD
| Research House: AMMB | Price Call: BUY | Target Price: 3.85 |
KUALA LUMPUR: AmResearch has maintained its Buy call on WCT BHD [] with an unchanged fair value of RM3.85 after the company's wholly-owned subsidiary WCT CONSTRUCTION [] Sdn Bhd secured an earthwork contract with Vale Malaysia Manufacturing Sdn Bhd.
In a note Friday, July 29, AmResearch said that this was the first major contract that WCT has secured this year.
The award is for Phase 1A (Stage 1) of Vale's iron ore distribution centre and pelletisation plant project in Teluk Rubiah, Perak.
The total contract value is estimated at RM115mil ' and is to be completed in April 2013.'' Scope of works includes earthwork, drainage, roads & pavement, slope protection works as well as temporary sedimentation ponds at Vale's.
'We have maintained our earnings forecast for FY11F ' as this new job forms part of our new orderbook assumptions of RM2 billion.
'Most importantly, we believe WCT's early success would provide the impetus for the group to be in a competitive position to secure more jobs for Vale's massive project,' it said.
ECM Libra upgrades IOI Corp to Trading Buy, ups TP to RM6.11
Stock Name: IOICORP
Company Name: IOI CORPORATION BHD
KUALA LUMPUR: ECM Libra Research has upgrading IOI Corporation from Hold to Trading Buy as the research house is positive on the group's initiative to boost hectarage.
IOI Corp on July 28 proposed the acquisition of 11,977ha of oil palm PLANTATION [] land for a total cash consideration of RM830 million (RM69,294/ha) from a wholly owned subsidiary of DUTALAND BHD [].
The acquisition comprises of all assets including buildings, fixtures & fittings and motor vehicles.
ECM Libra in a note Friday, July 29 said that furthermore, there could be positive news from the property segment from land banking activities like the recent purchase into South Beach PROPERTIES [] in Singapore.
'Our target price adjusts to RM6.11 from RM5.96 previously following the upgrade in earnings and also from rolling over valuations to FY12 from CY11 previously.
'We peg EPS to IOI's historical average forward PE of 20 times,' it said.
''
Company Name: IOI CORPORATION BHD
| Research House: ECMLIBRA | Price Call: TRADING BUY | Target Price: 6.11 |
KUALA LUMPUR: ECM Libra Research has upgrading IOI Corporation from Hold to Trading Buy as the research house is positive on the group's initiative to boost hectarage.
IOI Corp on July 28 proposed the acquisition of 11,977ha of oil palm PLANTATION [] land for a total cash consideration of RM830 million (RM69,294/ha) from a wholly owned subsidiary of DUTALAND BHD [].
The acquisition comprises of all assets including buildings, fixtures & fittings and motor vehicles.
ECM Libra in a note Friday, July 29 said that furthermore, there could be positive news from the property segment from land banking activities like the recent purchase into South Beach PROPERTIES [] in Singapore.
'Our target price adjusts to RM6.11 from RM5.96 previously following the upgrade in earnings and also from rolling over valuations to FY12 from CY11 previously.
'We peg EPS to IOI's historical average forward PE of 20 times,' it said.
''
July 28, 2011
3QFY11 results - below expectations, affected by reduced gas supply
Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD
Company Name: TENAGA NASIONAL BHD
| Research House: ZJ | Price Call: HOLD | Target Price: 6.40 |
Alam Maritim secures short-term charter
Stock Name: ALAM
Company Name: ALAM MARITIM RESOURCES BHD
Alam Maritim Resources Bhd
(July 27, 93 sen)
Maintain buy at 91 sen with target price of RM1.31: Alam Maritim announced on July 26 that it had secured a short-term charter contract from Petronas Carigali Sdn Bhd for the provision of one AHTS (anchor handling tug supply vessel) for a total sum of RM10.6 million. The contract commenced on July 13, 2011 for a primary period of 150 days with two extension options of 45 days each.
The vessel is not Alam Maritim's own but one'' managed by the group for a third party. The size of the vessel is 10,000 brake horsepower (bhp) and the rate comes up to RM65,000 per day. In terms of bhp per day, we estimate that rates are slightly above US$2 per bhp per day. Given that the vessel is not Alam's own, margins should be lower at'' 5% to 8% at earnings before interest and tax (Ebit) level.
Since April, the group has secured some RM190 million in new contracts. This includes the RM52 million contract for supply of single buoy mooring systems to the Sabah Oil and Gas Terminal (SOGT).
We believe there is more to come from Alam. We understand the group is close to securing the near shore pipe laying job for the SOGT. We believe that there have been other contenders for the job which could be SapuraCrest Petroleum Bhd. That said, Alam's joint venture with Yayasan Sabah is meant to help it gain traction in the Sabah oil and gas (O&G) arena and it may be favoured to win the job.
With new contracts trickling through only in April onwards, 2QFY11 results are expected to be sequentially better (from a loss of RM6.8 million in 1QFY10). We expect'' Alam to at least be able to break even in 2Q. That said, our full-year earnings per share (EPS) of 9.2 sen may need another look, we will issue a report on earnings.
We see Alam in a positive light as the group is turning the corner in terms of earnings. With the jobs already secured this year, we would be hard pressed to see the group making losses for FY11. Vessel demand in the offshore O&G industry is indeed making a slow comeback. A drop off in new vessel deliveries in 2010 onwards will help to tighten the supply of vessels in the market, we believe, and eventually bring charter rates higher next year.
We maintain our 'buy' call and target price (TP) of RM1.31 on Alam Maritim at this juncture. Our TP is premised on a 14 times price-earnings multiple pegging FY11F EPS. ' ECM Libra Research, July 27
This article appeared in The Edge Financial Daily, July 28, 2011.
Company Name: ALAM MARITIM RESOURCES BHD
| Research House: ECMLIBRA | Price Call: BUY | Target Price: 1.31 |
Alam Maritim Resources Bhd
(July 27, 93 sen)
Maintain buy at 91 sen with target price of RM1.31: Alam Maritim announced on July 26 that it had secured a short-term charter contract from Petronas Carigali Sdn Bhd for the provision of one AHTS (anchor handling tug supply vessel) for a total sum of RM10.6 million. The contract commenced on July 13, 2011 for a primary period of 150 days with two extension options of 45 days each.
The vessel is not Alam Maritim's own but one'' managed by the group for a third party. The size of the vessel is 10,000 brake horsepower (bhp) and the rate comes up to RM65,000 per day. In terms of bhp per day, we estimate that rates are slightly above US$2 per bhp per day. Given that the vessel is not Alam's own, margins should be lower at'' 5% to 8% at earnings before interest and tax (Ebit) level.
Since April, the group has secured some RM190 million in new contracts. This includes the RM52 million contract for supply of single buoy mooring systems to the Sabah Oil and Gas Terminal (SOGT).
We believe there is more to come from Alam. We understand the group is close to securing the near shore pipe laying job for the SOGT. We believe that there have been other contenders for the job which could be SapuraCrest Petroleum Bhd. That said, Alam's joint venture with Yayasan Sabah is meant to help it gain traction in the Sabah oil and gas (O&G) arena and it may be favoured to win the job.
With new contracts trickling through only in April onwards, 2QFY11 results are expected to be sequentially better (from a loss of RM6.8 million in 1QFY10). We expect'' Alam to at least be able to break even in 2Q. That said, our full-year earnings per share (EPS) of 9.2 sen may need another look, we will issue a report on earnings.
We see Alam in a positive light as the group is turning the corner in terms of earnings. With the jobs already secured this year, we would be hard pressed to see the group making losses for FY11. Vessel demand in the offshore O&G industry is indeed making a slow comeback. A drop off in new vessel deliveries in 2010 onwards will help to tighten the supply of vessels in the market, we believe, and eventually bring charter rates higher next year.
We maintain our 'buy' call and target price (TP) of RM1.31 on Alam Maritim at this juncture. Our TP is premised on a 14 times price-earnings multiple pegging FY11F EPS. ' ECM Libra Research, July 27
This article appeared in The Edge Financial Daily, July 28, 2011.
2Q/FY11 results. Within expectations. Maintain Hold Call.
Stock Name: YUNKONG
Company Name: YUNG KONG GALVANISING IND
Company Name: YUNG KONG GALVANISING IND
| Research House: MERCURY | Price Call: HOLD | Target Price: 0.49 |
Strategic Tier1 Vendor
Stock Name: EPMB
Company Name: EP MANUFACTURING BHD
Company Name: EP MANUFACTURING BHD
| Research House: TA | Price Call: BUY | Target Price: 1.16 |
Ta Ann strong on Japan reconstruction
Stock Name: TAANN
Company Name: TA ANN HOLDINGS BHD
Ta Ann Holdings Bhd
(July 28, RM5.60)
Maintain hold at RM5.59 with fair value of RM5.83: We are maintaining a 'hold' on Ta Ann Holdings with a fair value of RM5.83 per share (post one-for-five bonus issue that was completed on June 17, 2011). We continue to peg the stock at a price-earnings ratio (PER) of 15 times its FY11F earnings per share (EPS) of 38.9 sen (adjusted for the bonus issue) on the back of sustaining wood and crude palm oil prices.
The company is on track to meet our expectations, with a 1QFY11 net profit of RM26.6 million (-12% quarter-on-quarter; +233% year-on-year) which accounted for 22% of our FY11F earnings of RM120 million and 19% of consensus' RM141.5 million. Ta Ann is scheduled to release its 2Q results by the end of next month.
Ta Ann is one of the major beneficiaries of the'' reconstruction in Japan following the earthquake and tsunami in March. It exports over 90% of its plywood to Japan.
Japan's housing and construction development have improved. Housing starts in Japan rose 6.4% y-o-y in May (March 2011: -2.4% y-o-y; April 2011: 0.3% y-o-y), against the consensus forecast of +3.3%.
A Reuters poll suggests Japan's economy will grow by 1.1% in the July to September quarter, after contracting for three straight quarters. This will partly be due to the ongoing reconstruction that will be spread out over the next few years.
In May, Japan's legislators passed a fiscal 2011 supplementary budget of US$48.8 billion (RM144 billion) to finance the initial phase of rebuilding, including clearing the overwhelming debris and the building of temporary housing. Legislators recently passed the second supplementary budget of US$25.5 billion. It has been reported that about half of that would go towards recovery, including building temporary housing. All these are seen as stopgap packages.
An initial estimate of at least US$150 billion will be required over the next five years to rebuild the ruined northeastern region. Given the slow pace of the budgetary process and the overwhelming amount of debris still left to be cleared, we expect the reconstruction to only gather meaningful pace at the earliest by end-2011.
Ta Ann is trading at a PER of 14 times FY11 and FY12F EPS. Our target PER of 15 times is still two notches below the stock's five-year average PER of 17 times. Our fair value of RM5.83 per share provides an FY11F return-on-equity of over 13% and gross dividend yield of 2.7% at current price. ' AmResearch, July 28
This article appeared in The Edge Financial Daily, July 29, 2011.
Company Name: TA ANN HOLDINGS BHD
| Research House: AMMB | Price Call: HOLD | Target Price: 5.83 |
Ta Ann Holdings Bhd
(July 28, RM5.60)
Maintain hold at RM5.59 with fair value of RM5.83: We are maintaining a 'hold' on Ta Ann Holdings with a fair value of RM5.83 per share (post one-for-five bonus issue that was completed on June 17, 2011). We continue to peg the stock at a price-earnings ratio (PER) of 15 times its FY11F earnings per share (EPS) of 38.9 sen (adjusted for the bonus issue) on the back of sustaining wood and crude palm oil prices.
The company is on track to meet our expectations, with a 1QFY11 net profit of RM26.6 million (-12% quarter-on-quarter; +233% year-on-year) which accounted for 22% of our FY11F earnings of RM120 million and 19% of consensus' RM141.5 million. Ta Ann is scheduled to release its 2Q results by the end of next month.
Ta Ann is one of the major beneficiaries of the'' reconstruction in Japan following the earthquake and tsunami in March. It exports over 90% of its plywood to Japan.
Japan's housing and construction development have improved. Housing starts in Japan rose 6.4% y-o-y in May (March 2011: -2.4% y-o-y; April 2011: 0.3% y-o-y), against the consensus forecast of +3.3%.
A Reuters poll suggests Japan's economy will grow by 1.1% in the July to September quarter, after contracting for three straight quarters. This will partly be due to the ongoing reconstruction that will be spread out over the next few years.
In May, Japan's legislators passed a fiscal 2011 supplementary budget of US$48.8 billion (RM144 billion) to finance the initial phase of rebuilding, including clearing the overwhelming debris and the building of temporary housing. Legislators recently passed the second supplementary budget of US$25.5 billion. It has been reported that about half of that would go towards recovery, including building temporary housing. All these are seen as stopgap packages.
An initial estimate of at least US$150 billion will be required over the next five years to rebuild the ruined northeastern region. Given the slow pace of the budgetary process and the overwhelming amount of debris still left to be cleared, we expect the reconstruction to only gather meaningful pace at the earliest by end-2011.
Ta Ann is trading at a PER of 14 times FY11 and FY12F EPS. Our target PER of 15 times is still two notches below the stock's five-year average PER of 17 times. Our fair value of RM5.83 per share provides an FY11F return-on-equity of over 13% and gross dividend yield of 2.7% at current price. ' AmResearch, July 28
This article appeared in The Edge Financial Daily, July 29, 2011.
Genting: No premium for retail venture
Stock Name: GENP
Company Name: GENTING PLANTATIONS BERHAD
Genting Plantations Bhd
(July 28, RM7.85)
Maintain neutral at RM7.85 with target price of RM9.06: Two key positives emerged from our recent visit. First, the group's 1H11 palm oil output was ahead of our estimates and second, the new Johor Premium outlets will help boost the long-term development values of its Indahpura project.
We fine-tune our earnings forecasts (FY11 +1%, FY12 -2%) but maintain our target price at RM9.06,'' based on a 10% discount to sum-of-parts. Our 'neutral' call remains as the stock lacks near-term catalysts and trades in line with its historical price-earnings valuations.
The group's fresh fruit bunches (FFB) output in 1H11 expanded by 13% year-on-year, above our 6% growth forecast for the full year. We are also positive on its investment in Johor Premium Outlets as the retail venture that is due to open in November will help boost the value of the group's surrounding land in the longer-term as well as property sales at its Indahpura project.
Higher labour costs may kick in the later part of the year if the group decides to raise the salaries of its estate workers. The planned RM200 per month increase could crimp our FY12 net profit forecast by up to 3.6% if not offset by productivity gains. Also, year-to-date new plantings of 1,500ha are behind schedule. The group's full year target of 10,000 to 15,000ha is unlikely to be met. ' CIMB Research, July 28
This article appeared in The Edge Financial Daily, July 29, 2011.
Company Name: GENTING PLANTATIONS BERHAD
| Research House: CIMB | Price Call: HOLD | Target Price: 9.06 |
Genting Plantations Bhd
(July 28, RM7.85)
Maintain neutral at RM7.85 with target price of RM9.06: Two key positives emerged from our recent visit. First, the group's 1H11 palm oil output was ahead of our estimates and second, the new Johor Premium outlets will help boost the long-term development values of its Indahpura project.
We fine-tune our earnings forecasts (FY11 +1%, FY12 -2%) but maintain our target price at RM9.06,'' based on a 10% discount to sum-of-parts. Our 'neutral' call remains as the stock lacks near-term catalysts and trades in line with its historical price-earnings valuations.
The group's fresh fruit bunches (FFB) output in 1H11 expanded by 13% year-on-year, above our 6% growth forecast for the full year. We are also positive on its investment in Johor Premium Outlets as the retail venture that is due to open in November will help boost the value of the group's surrounding land in the longer-term as well as property sales at its Indahpura project.
Higher labour costs may kick in the later part of the year if the group decides to raise the salaries of its estate workers. The planned RM200 per month increase could crimp our FY12 net profit forecast by up to 3.6% if not offset by productivity gains. Also, year-to-date new plantings of 1,500ha are behind schedule. The group's full year target of 10,000 to 15,000ha is unlikely to be met. ' CIMB Research, July 28
This article appeared in The Edge Financial Daily, July 29, 2011.
AmResearch maintains Buy on Jaya Tiasa
Stock Name: JTIASA
Company Name: JAYA TIASA HOLDINGS BHD
KUALA LUMPUR: AmResearch has maintained its BUY call on JAYA TIASA HOLDINGS BHD [], with an unchanged fair value of RM8.51 based on a PE of 15 times FY12F EPS of 56.7 sen per share.
It said in a note July 28 that Jaya Tiasa recently announced a better-than-expected net profit of RM147 million for FY11 (+503% versus FY10), which was 16% and 12% above our and consensus estimates, respectively.
'Post-FY11 results, we had upgraded the stock to a BUY (from hold previously). The oil palm division, whose pre-tax profit surged 460% to RM105 million in FY11, will continue to be the star performer in the next two to three years.
'We expect FFB production to grow significantly by 45% to 520,000 tonnes in FY12F and by another 50% to 750,000 tonnes in FY13F,' it said.
AmResearch said Jaya Tiasa's mature hectarage was expected to rise 50% to over 37,000ha in FY12F and by another 30% to about 50,000ha by FY13F, after adding 70% to 25,058ha as at end-FY11.
The research house said its CPO assumption for each of FY12F-FY14F was RM3,300/tonne.
Apart from sustained demand from India for its logs, rising demand for plywood products from Japan for its reCONSTRUCTION [] efforts will also lend support to the company's performance, it said.
'Jaya Tiasa's well diversified markets put it in a good position to benefit from the strong timber market.
'Our fair PE of 15 times is well within the stock's historical five-year forward PE of between 6x and 36x, and below the average of 16 times. Jaya Tiasa is now trading at an attractive PE of 12 times,' it said.
Company Name: JAYA TIASA HOLDINGS BHD
| Research House: AMMB | Price Call: BUY | Target Price: 8.51 |
KUALA LUMPUR: AmResearch has maintained its BUY call on JAYA TIASA HOLDINGS BHD [], with an unchanged fair value of RM8.51 based on a PE of 15 times FY12F EPS of 56.7 sen per share.
It said in a note July 28 that Jaya Tiasa recently announced a better-than-expected net profit of RM147 million for FY11 (+503% versus FY10), which was 16% and 12% above our and consensus estimates, respectively.
'Post-FY11 results, we had upgraded the stock to a BUY (from hold previously). The oil palm division, whose pre-tax profit surged 460% to RM105 million in FY11, will continue to be the star performer in the next two to three years.
'We expect FFB production to grow significantly by 45% to 520,000 tonnes in FY12F and by another 50% to 750,000 tonnes in FY13F,' it said.
AmResearch said Jaya Tiasa's mature hectarage was expected to rise 50% to over 37,000ha in FY12F and by another 30% to about 50,000ha by FY13F, after adding 70% to 25,058ha as at end-FY11.
The research house said its CPO assumption for each of FY12F-FY14F was RM3,300/tonne.
Apart from sustained demand from India for its logs, rising demand for plywood products from Japan for its reCONSTRUCTION [] efforts will also lend support to the company's performance, it said.
'Jaya Tiasa's well diversified markets put it in a good position to benefit from the strong timber market.
'Our fair PE of 15 times is well within the stock's historical five-year forward PE of between 6x and 36x, and below the average of 16 times. Jaya Tiasa is now trading at an attractive PE of 12 times,' it said.
Axiata to be net cash from next year, says Maybank IB
Stock Name: AXIATA
Company Name: AXIATA GROUP BERHAD
KUALA LUMPUR: Maybank IB Research has raised its sum-of-parts based target price for Axiata Group Bhd to RM5.80 from RM5.60 while maintaining its Buy call on the stock, and said it expects Axiata to be net cash from next year onwards.
With strong cash flow generating capabilities from its domestic and overseas operations, Axiata's balance sheet continues to strengthen, it said in a note Thursday, July 28.
The research house said it expects Axiata's debt/EBITDA ratio to decline to 1.3 times by end-2012 from 4.6 times in end-2008.
'With no major acquisitions apparent in the near horizon, prospects for positive surprises on the dividend front are high, in our view.
'Our SOP-based target price is marginally raised to RM5.80 from RM5.60 as our cost of equity assumption is lowered to 11.1% from 11.5%, on rolling forward our valuation parameters,' it said.
Company Name: AXIATA GROUP BERHAD
| Research House: MAYBANK | Price Call: BUY | Target Price: 5.80 |
KUALA LUMPUR: Maybank IB Research has raised its sum-of-parts based target price for Axiata Group Bhd to RM5.80 from RM5.60 while maintaining its Buy call on the stock, and said it expects Axiata to be net cash from next year onwards.
With strong cash flow generating capabilities from its domestic and overseas operations, Axiata's balance sheet continues to strengthen, it said in a note Thursday, July 28.
The research house said it expects Axiata's debt/EBITDA ratio to decline to 1.3 times by end-2012 from 4.6 times in end-2008.
'With no major acquisitions apparent in the near horizon, prospects for positive surprises on the dividend front are high, in our view.
'Our SOP-based target price is marginally raised to RM5.80 from RM5.60 as our cost of equity assumption is lowered to 11.1% from 11.5%, on rolling forward our valuation parameters,' it said.
Unisem fair value cut on 'gloomier' outlook
Stock Name: UNISEM
Company Name: UNISEM (M) BHD
Unisem Bhd, a Malaysian semiconductor company, fell to its lowest level in almost 19 months after its "fair value" was cut at OSK Research Sdn Bhd to reflect a "gloomier" outlook for the second half of the year.
The stock dropped 1.4 per cent to RM1.38, bound for its lowest close since Jan. 5, 2010.
The company's fair value was reduced to RM1.31 from RM1.48, OSK said in a report today. -- Bloomberg
Company Name: UNISEM (M) BHD
| Research House: OSK | Price Call: HOLD | Target Price: 1.31 |
Unisem Bhd, a Malaysian semiconductor company, fell to its lowest level in almost 19 months after its "fair value" was cut at OSK Research Sdn Bhd to reflect a "gloomier" outlook for the second half of the year.
The stock dropped 1.4 per cent to RM1.38, bound for its lowest close since Jan. 5, 2010.
The company's fair value was reduced to RM1.31 from RM1.48, OSK said in a report today. -- Bloomberg
July 27, 2011
Unisem's prospects look good in uncertain times
Stock Name: UNISEM
Company Name: UNISEM (M) BHD
Unisem (M) Bhd
(July 27, RM1.40)
Maintain buy at RM1.40 with target price of RM1.90: Unisem is expected to release its 2Q11 results today. We expect its 2Q11 revenue to improve sequentially with a 12.4% quarter-on-quarter growth to RM328.2 million or 23% of our full-year estimates. However, this translates to a decline of 8.7% year-on-year (y-o-y) compared with 2Q10 revenue due to the impact of the weaker US dollar. Average US dollar to ringgit for the quarter was 3.02 (against 3.24 in 2Q10).
For 2Q11, we expect earnings before interest and tax (Ebit) margin to decline by three percentage points to 12.8% due to higher raw material prices. The price of gold continues its climb in current uncertain economic climate. Average gold prices increased by 26.1% y-o-y in 2Q11 to US$1,509 (RM4,436.46) per ounce. However, we understand that Unisem is aggressively developing copper wire capabilities as a substitute for gold. Additionally, the triple disaster in Japan may have caused a supply disruption in bismaleimide triazine (BT) resin, which is used in chip package substrates. About 90% of the world's supply of BT comes from Japan, and the shortage may have caused a price increase.
As with revenue, we believe Unisem's net profit should pick up in 2Q11. We estimate 2Q11 net profit at RM35.3 million, 22.9% of our full-year forecast. However, on a y-o-y basis, our estimated net profit represents a 26.5% decline as impact from lower revenue and margin erosion takes its toll.
We are expecting the semiconductor sector to rebound in 2H11, specifically in 3Q, as the sector enters a traditionally peak quarter in anticipation of a surge in demand for consumer electronics during the holiday period in 4Q11. We are encouraged by the upward forecast revision by World Semiconductor Trade Statistics of CY11 global sales to +5.4%y-o-y from +4.5% y-o-y previously. Other industry indicators, such as the Semiconductor Industry Association's (SIA) global sales and book-to-bill (BTB) ratio, are also supporting the view of a continuing growth in the industry. SIA's global sales grew 1.3% y-o-y in May 2011, while the BTB ratio remained close to parity at 0.94 in June 2011.
Pending the release of the 2Q11 results, we are maintaining our forecast for now. We maintain our 'buy' call for Unisem as we are positive on its long-term prospects as a supplier for a tier-one customer, which is a supplier of Apple. Issues such as the BT shortage will be temporary as Japan rebuilds, while we understand that 70% of Unisem's costs are in US dollars which provide it with a natural hedge against the weaker US dollar against the ringgit. Our target price remains unchanged at RM1.90 derived by pegging FY11 earnings per share to 8.5 times price-earnings ratio, which is its five-year average PER. ' MIDF Research, July 27
This article appeared in The Edge Financial Daily, July 28, 2011.
Company Name: UNISEM (M) BHD
| Research House: MIDF | Price Call: BUY | Target Price: 1.90 |
Unisem (M) Bhd
(July 27, RM1.40)
Maintain buy at RM1.40 with target price of RM1.90: Unisem is expected to release its 2Q11 results today. We expect its 2Q11 revenue to improve sequentially with a 12.4% quarter-on-quarter growth to RM328.2 million or 23% of our full-year estimates. However, this translates to a decline of 8.7% year-on-year (y-o-y) compared with 2Q10 revenue due to the impact of the weaker US dollar. Average US dollar to ringgit for the quarter was 3.02 (against 3.24 in 2Q10).
For 2Q11, we expect earnings before interest and tax (Ebit) margin to decline by three percentage points to 12.8% due to higher raw material prices. The price of gold continues its climb in current uncertain economic climate. Average gold prices increased by 26.1% y-o-y in 2Q11 to US$1,509 (RM4,436.46) per ounce. However, we understand that Unisem is aggressively developing copper wire capabilities as a substitute for gold. Additionally, the triple disaster in Japan may have caused a supply disruption in bismaleimide triazine (BT) resin, which is used in chip package substrates. About 90% of the world's supply of BT comes from Japan, and the shortage may have caused a price increase.
As with revenue, we believe Unisem's net profit should pick up in 2Q11. We estimate 2Q11 net profit at RM35.3 million, 22.9% of our full-year forecast. However, on a y-o-y basis, our estimated net profit represents a 26.5% decline as impact from lower revenue and margin erosion takes its toll.
We are expecting the semiconductor sector to rebound in 2H11, specifically in 3Q, as the sector enters a traditionally peak quarter in anticipation of a surge in demand for consumer electronics during the holiday period in 4Q11. We are encouraged by the upward forecast revision by World Semiconductor Trade Statistics of CY11 global sales to +5.4%y-o-y from +4.5% y-o-y previously. Other industry indicators, such as the Semiconductor Industry Association's (SIA) global sales and book-to-bill (BTB) ratio, are also supporting the view of a continuing growth in the industry. SIA's global sales grew 1.3% y-o-y in May 2011, while the BTB ratio remained close to parity at 0.94 in June 2011.
Pending the release of the 2Q11 results, we are maintaining our forecast for now. We maintain our 'buy' call for Unisem as we are positive on its long-term prospects as a supplier for a tier-one customer, which is a supplier of Apple. Issues such as the BT shortage will be temporary as Japan rebuilds, while we understand that 70% of Unisem's costs are in US dollars which provide it with a natural hedge against the weaker US dollar against the ringgit. Our target price remains unchanged at RM1.90 derived by pegging FY11 earnings per share to 8.5 times price-earnings ratio, which is its five-year average PER. ' MIDF Research, July 27
This article appeared in The Edge Financial Daily, July 28, 2011.
Axis REIT plans acquisitions, enhancements in 4Q
Stock Name: AXREIT
Company Name: AXIS REITS
Axis REIT
(July 27, RM2.61)
Maintain market perform at RM2.56 with fair value of RM2.55: Unit holders approved the placement of an additional 20% of new units on Tuesday. As usual, upcoming asset acquisitions will be funded via placement as well as borrowings so overall gearing will be reduced to below 35%. Gearing stood at 38% as at 2Q11, above the REIT's internal target of 35%. In the pipeline, there is one potential asset from the promoter, Axis Techpoint 1 PJ (office warehouse), as well as five logistics warehouses in Bayan Lepas and Seberang Perai, Penang, Shah Alam, Selangor, and Port of Tanjung Pelepas and Pasir Gudang, Johor, from third parties that can be injected. These assets are worth about RM260 million in total, of which RM170 million can be satisfied from the upcoming placement proceeds. The placement would also provide greater capacity for the REIT to take on borrowings that will be sufficient to make up the shortfall.
In 2Q11, Axis REIT has renegotiated 460,000 sq ft of space. This represents 10.36% of the total net lettable area of the portfolio, which is close to the total 12.56% of NLA that will expire this year. Rental reversion is relatively flattish at 2% to 3% on average. Lease expiry for the next two years will be 13.75% and 22.18% of NLA, hence lease renewal risk is higher in 2013.
A total of RM10 million per year has been budgeted for capital expenditure for asset refurbishment over the next two years. Properties which have been planned for enhancement include: (i) Menara Axis Penthouse: 6,700 sq ft of unused area to be converted to Grade A office space; (ii) Crystal Plaza; (iii) Subang Hi-Tech; (iv) Infinite Centre; (v) Wisma Bintang; and (vi) Kayangan Depot. The asset enhancement plans are expected to enhance the yield of the properties as well as occupancy. Overall occupancy of Axis REIT's portfolio stood at 95.98% as at June 2011, a slight growth from 95.73% in Dec 2010.
The risks include: (i) unfavourable economic conditions; and (ii) country risks. We maintain our 'market perform' recommendation on Axis REIT. Based on an unchanged 7.4% target yield for industrial MREITs, our indicative fair value is kept at RM2.55. ' RHB Research, July 27
This article appeared in The Edge Financial Daily, July 28, 2011.
Company Name: AXIS REITS
| Research House: RHB | Price Call: HOLD | Target Price: 2.55 |
Axis REIT
(July 27, RM2.61)
Maintain market perform at RM2.56 with fair value of RM2.55: Unit holders approved the placement of an additional 20% of new units on Tuesday. As usual, upcoming asset acquisitions will be funded via placement as well as borrowings so overall gearing will be reduced to below 35%. Gearing stood at 38% as at 2Q11, above the REIT's internal target of 35%. In the pipeline, there is one potential asset from the promoter, Axis Techpoint 1 PJ (office warehouse), as well as five logistics warehouses in Bayan Lepas and Seberang Perai, Penang, Shah Alam, Selangor, and Port of Tanjung Pelepas and Pasir Gudang, Johor, from third parties that can be injected. These assets are worth about RM260 million in total, of which RM170 million can be satisfied from the upcoming placement proceeds. The placement would also provide greater capacity for the REIT to take on borrowings that will be sufficient to make up the shortfall.
In 2Q11, Axis REIT has renegotiated 460,000 sq ft of space. This represents 10.36% of the total net lettable area of the portfolio, which is close to the total 12.56% of NLA that will expire this year. Rental reversion is relatively flattish at 2% to 3% on average. Lease expiry for the next two years will be 13.75% and 22.18% of NLA, hence lease renewal risk is higher in 2013.
A total of RM10 million per year has been budgeted for capital expenditure for asset refurbishment over the next two years. Properties which have been planned for enhancement include: (i) Menara Axis Penthouse: 6,700 sq ft of unused area to be converted to Grade A office space; (ii) Crystal Plaza; (iii) Subang Hi-Tech; (iv) Infinite Centre; (v) Wisma Bintang; and (vi) Kayangan Depot. The asset enhancement plans are expected to enhance the yield of the properties as well as occupancy. Overall occupancy of Axis REIT's portfolio stood at 95.98% as at June 2011, a slight growth from 95.73% in Dec 2010.
The risks include: (i) unfavourable economic conditions; and (ii) country risks. We maintain our 'market perform' recommendation on Axis REIT. Based on an unchanged 7.4% target yield for industrial MREITs, our indicative fair value is kept at RM2.55. ' RHB Research, July 27
This article appeared in The Edge Financial Daily, July 28, 2011.
HR solutions specialist - turnaround story.
Stock Name: SMRTECH
Company Name: SMR TECHNOLOGIES BHD
Company Name: SMR TECHNOLOGIES BHD
| Research House: ZJ | Price Call: BUY | Target Price: 0.21 |
Demand for TM's UniFi to continue: OSK
Stock Name: TM
Company Name: TELEKOM MALAYSIA BHD
Demand for Telekom Malaysia's high speed broadband, TM UniFi, is expected to continue strong on the back of its extended footprint, which has exceeded 900,000 premises.
OSK Research said the number of Unifi subscribers has exceeded the earlier target set by TM at over 120,000 currently and is closing in the research firm's projection of 150,000 subscribers.
"TM disposal of 92.4 million Axiata shares via a book-building exercise to foreign institutional investors yesterday was also timely, as the share price has risen to record highs.
"The disposal was expected, as management had previously hinted that it would sell the remaining shares at the right time," OSK said in a note today.
The blocks, placed out at RM5.07 per share, raised gross proceeds of RM468.3 million, or 13 sen per TM share.
"The remaining 807 shares will be sold in the open market," said OSK, which at the same time, maintained the "neutral" call on TM, based on fair value of RM4.25. -- Bernama
Company Name: TELEKOM MALAYSIA BHD
| Research House: OSK | Price Call: HOLD | Target Price: 4.25 |
Demand for Telekom Malaysia's high speed broadband, TM UniFi, is expected to continue strong on the back of its extended footprint, which has exceeded 900,000 premises.
OSK Research said the number of Unifi subscribers has exceeded the earlier target set by TM at over 120,000 currently and is closing in the research firm's projection of 150,000 subscribers.
"TM disposal of 92.4 million Axiata shares via a book-building exercise to foreign institutional investors yesterday was also timely, as the share price has risen to record highs.
"The disposal was expected, as management had previously hinted that it would sell the remaining shares at the right time," OSK said in a note today.
The blocks, placed out at RM5.07 per share, raised gross proceeds of RM468.3 million, or 13 sen per TM share.
"The remaining 807 shares will be sold in the open market," said OSK, which at the same time, maintained the "neutral" call on TM, based on fair value of RM4.25. -- Bernama
Alam Maritim edges up in early trade
Stock Name: ALAM
Company Name: ALAM MARITIM RESOURCES BHD
KUALA LUMPUR: ALAM MARITIM RESOURCES BHD [] shares edged up in early trade on Wednesday, July 27 after its unit received a letter of award from Petronas Carigali Sdn Bhd to provide one anchor handling tug supply vessel for RM10.6 million.
At 9.35am, Alam Maritim was up one sen to 92 sen with 195,900 shares traded.
Commenting on the company's latest contract, ECM Libra Research said Alam Maritim should be back to black by 3QFY11, after likely breaking even in 2QFY11.
The research house in a note July 27 maintained its BUY call and target price (TP) of RM1.31 on Alam Maritim, and said its TP is premised on a 14x P/E multiple pegging FY11F EPS.
Alam Maritim on July 26 had announced a new short term charter contract from Petronas Carigali ''bringing total new contracts secured this year to some RM190 million.
'We continue to see Alam in a positive light as the group is just turning the corner in terms of earnings. With the jobs already secured this year, we will be hard pressed to see the group making losses for FY11.
'Vessel demand in the offshore O&G industry is indeed making a slow comeback. A drop off in new vessel deliveries in 2010 onwards will help to tighten the supply of vessels in the market, we believe, and eventually bring charter rates higher next year,' it said.
''
Company Name: ALAM MARITIM RESOURCES BHD
| Research House: ECMLIBRA | Price Call: BUY | Target Price: 1.31 |
KUALA LUMPUR: ALAM MARITIM RESOURCES BHD [] shares edged up in early trade on Wednesday, July 27 after its unit received a letter of award from Petronas Carigali Sdn Bhd to provide one anchor handling tug supply vessel for RM10.6 million.
At 9.35am, Alam Maritim was up one sen to 92 sen with 195,900 shares traded.
Commenting on the company's latest contract, ECM Libra Research said Alam Maritim should be back to black by 3QFY11, after likely breaking even in 2QFY11.
The research house in a note July 27 maintained its BUY call and target price (TP) of RM1.31 on Alam Maritim, and said its TP is premised on a 14x P/E multiple pegging FY11F EPS.
Alam Maritim on July 26 had announced a new short term charter contract from Petronas Carigali ''bringing total new contracts secured this year to some RM190 million.
'We continue to see Alam in a positive light as the group is just turning the corner in terms of earnings. With the jobs already secured this year, we will be hard pressed to see the group making losses for FY11.
'Vessel demand in the offshore O&G industry is indeed making a slow comeback. A drop off in new vessel deliveries in 2010 onwards will help to tighten the supply of vessels in the market, we believe, and eventually bring charter rates higher next year,' it said.
''
TM, Axiata buck cautious market
Stock Name: TM
Company Name: TELEKOM MALAYSIA BHD
KUALA LUMPUR: Shares of TELEKOM MALAYSIA BHD [] and Axiata Group Bhd bucked the weaker market on Wednesday, July 27 on investors' expectations of dividends from TM after it disposed on its remaining Axiata shares.
At 9.43am, TM was up 15 sen to RM4.14 with 2.44 million shares done. Axiata added nine sen to RM5.22 with 1.68 million units done.
The FBM KLCI shed 0.54 point to 1,561.23. Turnover was 168.5 million shares done valued at RM188.44 million. There were 152 gainers, 156 stocks unchanged and 193 unchanged.
TM's unit has placed out 92.36 million Axiata shares at RM5.07 a share and raised gross proceeds of RM468.3 million. It said the shares were placed out to successful third-party foreign institutional investors. Following the placement, it only owned 807 shares.
CIMB Equities Research retained its Outperform call on TM'' with a sum-of-parts based target price of RM4.92 and is its top Malaysian telco pick.
It said the likely price catalysts include the strong take-up of Unifi, expectations of a special dividend and positive earnings surprises.
'We think TM will pay a special dividend this year with the proceeds from the sale,' it said.
Company Name: TELEKOM MALAYSIA BHD
| Research House: CIMB | Price Call: BUY | Target Price: 4.92 |
KUALA LUMPUR: Shares of TELEKOM MALAYSIA BHD [] and Axiata Group Bhd bucked the weaker market on Wednesday, July 27 on investors' expectations of dividends from TM after it disposed on its remaining Axiata shares.
At 9.43am, TM was up 15 sen to RM4.14 with 2.44 million shares done. Axiata added nine sen to RM5.22 with 1.68 million units done.
The FBM KLCI shed 0.54 point to 1,561.23. Turnover was 168.5 million shares done valued at RM188.44 million. There were 152 gainers, 156 stocks unchanged and 193 unchanged.
TM's unit has placed out 92.36 million Axiata shares at RM5.07 a share and raised gross proceeds of RM468.3 million. It said the shares were placed out to successful third-party foreign institutional investors. Following the placement, it only owned 807 shares.
CIMB Equities Research retained its Outperform call on TM'' with a sum-of-parts based target price of RM4.92 and is its top Malaysian telco pick.
It said the likely price catalysts include the strong take-up of Unifi, expectations of a special dividend and positive earnings surprises.
'We think TM will pay a special dividend this year with the proceeds from the sale,' it said.
July 26, 2011
'Mah Sing capable of exceeding RM2b target'
Stock Name: MAHSING
Company Name: MAH SING GROUP BHD
Property developer Mah Sing Group Bhd has a bright potential of exceeding its sales target of RM2 billion this year with
the positive responses to its recently-launched launched projects, says OSK Research.
Last year, Mah Sing broke the RM1 billion sales mark with total sales of RM1.5 billion sales, beating its initial internal target for the second consecutive year by 50 per cent
"Sales soared 113 per cent year-on-year from RM727 million in 2009. "The fact that it has achieved total sales of RM975 million as at mid-May, or almost 49 per cent of its sales target for the whole this year is very encouraging," the research firm said, in its first coverage statement on Mah Sing, today.
This year, Mah Sing is expected to launch some RM2.5 billion worth of projects with the Klang Valley to account for 83 per cent of the total gross development value (GDV).
"In view of strong demand for residential properties, around 73 per cent of the GDV of this year's launches will consist of residential properties while the remaining 25 per cent and two per cent will comprise commercial and industrial properties respectively," OSK Research added.
OSK has placed a 'buy' call on Mah Sing with a fair value of
RM3.01. -- Bernama
Company Name: MAH SING GROUP BHD
| Research House: OSK | Price Call: BUY | Target Price: 3.01 |
Property developer Mah Sing Group Bhd has a bright potential of exceeding its sales target of RM2 billion this year with
the positive responses to its recently-launched launched projects, says OSK Research.
Last year, Mah Sing broke the RM1 billion sales mark with total sales of RM1.5 billion sales, beating its initial internal target for the second consecutive year by 50 per cent
"Sales soared 113 per cent year-on-year from RM727 million in 2009. "The fact that it has achieved total sales of RM975 million as at mid-May, or almost 49 per cent of its sales target for the whole this year is very encouraging," the research firm said, in its first coverage statement on Mah Sing, today.
This year, Mah Sing is expected to launch some RM2.5 billion worth of projects with the Klang Valley to account for 83 per cent of the total gross development value (GDV).
"In view of strong demand for residential properties, around 73 per cent of the GDV of this year's launches will consist of residential properties while the remaining 25 per cent and two per cent will comprise commercial and industrial properties respectively," OSK Research added.
OSK has placed a 'buy' call on Mah Sing with a fair value of
RM3.01. -- Bernama
'Perwaja loan stocks sale a good move'
Stock Name: PERWAJA
Company Name: PERWAJA HOLDINGS BERHAD
Perwaja Holdings Bhd's move to raise RM280 million via restricted issues is a good avenue to address working capital
needs, especially now that its financing needs are expected to escalate.
"As Perwaja has put into motion plans to reduce costs via a concentration and pelletising plant costing RM200 million, the company's financing needs are expected to escalate," said OSK Research today.
It said the implementation of various mega projects under the government's Economic Transformation Programme soon is also expected to spur demand for steel products, which will in turn increase the group's working capital requirement.
Yesterday, Perwaja, a leading manufacturer of primary steel products, in a filing to Bursa proposed to raise funds for its working capital through a proposed restricted issue of RM280 million nominal value of 7-year seven per cent redeemable convertible unsecured loan stocks (RCULS) to Kinsteel Bhd at 100
per cent of its nominal value.
"We welcome Perwaja's move to raise funds via RCULS as it will minimise the immediate dilution effect given that the instrument can only be converted after five years from the date of issue and the fixed coupon rate would enable the company to secure its cost of funds during the tenure of the RCULS, especially with interest rates looking to inch higher," said OSK.
Meanwhile, Perwaja's gearing is expected to stay below 1x upon full exercise of the RCULS compared with OSK's previous projection of 1.4x and 1.5x in this year and next year, respectively. OSK has put Perwaja's fair value at RM1.40. -- Bernama
Company Name: PERWAJA HOLDINGS BERHAD
| Research House: OSK | Price Call: BUY | Target Price: 1.40 |
Perwaja Holdings Bhd's move to raise RM280 million via restricted issues is a good avenue to address working capital
needs, especially now that its financing needs are expected to escalate.
"As Perwaja has put into motion plans to reduce costs via a concentration and pelletising plant costing RM200 million, the company's financing needs are expected to escalate," said OSK Research today.
It said the implementation of various mega projects under the government's Economic Transformation Programme soon is also expected to spur demand for steel products, which will in turn increase the group's working capital requirement.
Yesterday, Perwaja, a leading manufacturer of primary steel products, in a filing to Bursa proposed to raise funds for its working capital through a proposed restricted issue of RM280 million nominal value of 7-year seven per cent redeemable convertible unsecured loan stocks (RCULS) to Kinsteel Bhd at 100
per cent of its nominal value.
"We welcome Perwaja's move to raise funds via RCULS as it will minimise the immediate dilution effect given that the instrument can only be converted after five years from the date of issue and the fixed coupon rate would enable the company to secure its cost of funds during the tenure of the RCULS, especially with interest rates looking to inch higher," said OSK.
Meanwhile, Perwaja's gearing is expected to stay below 1x upon full exercise of the RCULS compared with OSK's previous projection of 1.4x and 1.5x in this year and next year, respectively. OSK has put Perwaja's fair value at RM1.40. -- Bernama
Remains on solid ground
Stock Name: PBBANK
Company Name: PUBLIC BANK BHD
Company Name: PUBLIC BANK BHD
| Research House: ECMLIBRA | Price Call: HOLD | Target Price: 14.20 |
Is KNM securing jobs for a RAPID-like project?
Stock Name: KNM
Company Name: KNM GROUP BHD
KNM Group Bhd
(July 26, RM1.90)
Maintain buy at RM1.75 with target price RM3.20: KNM Group announced yesterday that it and Zecon Bhd have entered into heads of agreement (HoAs) with Gulf Asian Petroleum Sdn Bhd (GAP) to undertake the engineering, procurement, construction and commissioning (EPCC) works for: (i) a petroleum refinery and a polypropylene plant (with a capacity of 150,000 to 200,000 barrels crude oil per day and 400,000 to 525,000 tonnes per year of polypropylene) worth RM15 billion; and (ii) a petroleum product storage terminal facility comprising four terminals (with total storage capacity of 2.328 million cu m) and supporting infrastructure and auxiliaries worth RM2 billion.
The refinery and polypropylene plant and the storage facility are GAP's plan for its integrated petroleum complex (IPC) located at Teluk Ramunia, Johor. The refinery and polypropylene plant is expected to be completed in 40 months and the storage facility in 18. KNM's management indicated that the Johor government has approved a 263ha parcel of land in Teluk Ramunia for the project, and GAP is in discussion with the state government for its equity participation.
We are wary of the viability and execution risks of this IPC development given GAP's unknown track record plus huge investment costs. Given the sizeable project value of RM17 billion and the fact that Asia Petroleum Hub, which is involved in a multibillion-dollar oil terminal in Johor has been placed under receivership recently, we are especially concerned over the funding. GAP might be too ambitious to build another refinery and petrochemicals integrated development (RAPID)-like project, which in contrast is backed by a financially strong Petroleum Nasional Bhd. We are also sceptical that the contract terms and project financials can be finalised and fulfilled within three months. Note that the RAPID project is still at the detailed feasibility study stage and the final decision will only be known end-2011 or early-2012.
Given that the HoAs are basically non-binding, we are taking a more conservative stance of keeping our earnings forecast unchanged at the moment until any letters of award are secured by KNM and pending further details from the management.
We maintain 'buy' with unchanged target price of RM3.20 based on unchanged 14 times FY12 price-earnings ratio, which is within its historical band. KNM's total outstanding order book remains healthy at about RM5.5 billion as at May 2011. Re-rating catalysts include the potential recognition of a RM2.2 billion contract awarded by Peterborough Renewable Energy Ltd starting July 2011, which was delayed from the initially targeted April/May. ' MIDF Research, July 26
This article appeared in The Edge Financial Daily, July 27, 2011.
Company Name: KNM GROUP BHD
| Research House: MIDF | Price Call: BUY | Target Price: 3.20 |
KNM Group Bhd
(July 26, RM1.90)
Maintain buy at RM1.75 with target price RM3.20: KNM Group announced yesterday that it and Zecon Bhd have entered into heads of agreement (HoAs) with Gulf Asian Petroleum Sdn Bhd (GAP) to undertake the engineering, procurement, construction and commissioning (EPCC) works for: (i) a petroleum refinery and a polypropylene plant (with a capacity of 150,000 to 200,000 barrels crude oil per day and 400,000 to 525,000 tonnes per year of polypropylene) worth RM15 billion; and (ii) a petroleum product storage terminal facility comprising four terminals (with total storage capacity of 2.328 million cu m) and supporting infrastructure and auxiliaries worth RM2 billion.
The refinery and polypropylene plant and the storage facility are GAP's plan for its integrated petroleum complex (IPC) located at Teluk Ramunia, Johor. The refinery and polypropylene plant is expected to be completed in 40 months and the storage facility in 18. KNM's management indicated that the Johor government has approved a 263ha parcel of land in Teluk Ramunia for the project, and GAP is in discussion with the state government for its equity participation.
We are wary of the viability and execution risks of this IPC development given GAP's unknown track record plus huge investment costs. Given the sizeable project value of RM17 billion and the fact that Asia Petroleum Hub, which is involved in a multibillion-dollar oil terminal in Johor has been placed under receivership recently, we are especially concerned over the funding. GAP might be too ambitious to build another refinery and petrochemicals integrated development (RAPID)-like project, which in contrast is backed by a financially strong Petroleum Nasional Bhd. We are also sceptical that the contract terms and project financials can be finalised and fulfilled within three months. Note that the RAPID project is still at the detailed feasibility study stage and the final decision will only be known end-2011 or early-2012.
Given that the HoAs are basically non-binding, we are taking a more conservative stance of keeping our earnings forecast unchanged at the moment until any letters of award are secured by KNM and pending further details from the management.
We maintain 'buy' with unchanged target price of RM3.20 based on unchanged 14 times FY12 price-earnings ratio, which is within its historical band. KNM's total outstanding order book remains healthy at about RM5.5 billion as at May 2011. Re-rating catalysts include the potential recognition of a RM2.2 billion contract awarded by Peterborough Renewable Energy Ltd starting July 2011, which was delayed from the initially targeted April/May. ' MIDF Research, July 26
This article appeared in The Edge Financial Daily, July 27, 2011.
Public Bank's 2Q11 results show no surprises
Stock Name: PBBANK
Company Name: PUBLIC BANK BHD
Public Bank Bhd
(July 26, RM13.48)
Maintain outperform at RM13.36 with fair value of RM16: Public Bank's 2Q11 results were within our and consensus expectations with 1H net profit of RM1.7 billion (+20% year-on-year [y-o-y]) accounting for 50% of our and consensus full-year estimates. Public Bank declared a single-tier dividend per share of 20 sen (2Q10: 25 sen, gross).
Net interest income for 2Q11 rose 5% quarter-on-quarter and 10% y-o-y on the back of continued loan growth (+3.4% q-o-q; +13.2% y-o-y) and net interest margin expansion (+9 q-o-q; +11 basis points [bps] y-o-y). Non-interest income remained healthy (+9.3% q-o-q; +16.2% y-o-y) and increased to 21.7% of total operating income, thanks to the mutual fund operations and stronger dividend income. Overheads were under control, resulting in CIR improving to 29.4% from 30.4% in 1Q11 (2Q10: 31.6%). Credit cost was stable at 10 bps against 1Q11: nine bps (2Q10: 12 bps). Generally, the results were solid, albeit without any major surprises.
Loan growth for 2Q stood at 13.2% y-o-y (+3.4% q-o-q) with the main growth drivers'' residential (+16.8% y-o-y) and non-residential (+22.6% y-o-y) mortgages as well as hire purchase (+10% y-o-y). Annualised group loan growth stood at 13.6%, driven by the domestic segment (14.5% annualised) while loan growth from overseas (3.2% annualised) was partly impacted by adverse foreign exchange translation. Although annualised loan growth was slightly below the 14% to 15% growth target set, we expect the target to be met with stronger growth in the quarters ahead. Customer deposits grew 4.4% q-o-q (+7.9% y-o-y) due to higher fixed (+3.2% q-o-q), demand (+5% q-o-q) and money market (+13.8% q-o-q) deposits and with that, group loans-deposit ratio improved to 87.3% as at end-June 2011 from 88.1% as at end-March 2011.
Asset quality remained intact with new impaired loan formation (annualised) improving slightly to 27 bps, compared with 29 bps in 1Q11 (2Q10: 79 bps). Absolute impaired loans fell 5% q-o-q and the gross impaired loans ratio improved to 0.96% as at end-2Q11 from 1.05% as at end-1Q11. Tier-1 and risk-weighted capital ratios rose by 70 bps each to 10.2% and 13.7% respectively.
We have retained our fair value of RM16 (based on target FY12 price-earnings ratio of 15 times) and 'outperform' call on the stock. We continue to like the stock for its above-industry growth and asset quality. Public Bank'' is the best proxy to the domestic economy in terms of loan growth. ' RHB Research, July 26
This article appeared in The Edge Financial Daily, July 27, 2011.
Company Name: PUBLIC BANK BHD
| Research House: RHB | Price Call: BUY | Target Price: 16.00 |
Public Bank Bhd
(July 26, RM13.48)
Maintain outperform at RM13.36 with fair value of RM16: Public Bank's 2Q11 results were within our and consensus expectations with 1H net profit of RM1.7 billion (+20% year-on-year [y-o-y]) accounting for 50% of our and consensus full-year estimates. Public Bank declared a single-tier dividend per share of 20 sen (2Q10: 25 sen, gross).
Net interest income for 2Q11 rose 5% quarter-on-quarter and 10% y-o-y on the back of continued loan growth (+3.4% q-o-q; +13.2% y-o-y) and net interest margin expansion (+9 q-o-q; +11 basis points [bps] y-o-y). Non-interest income remained healthy (+9.3% q-o-q; +16.2% y-o-y) and increased to 21.7% of total operating income, thanks to the mutual fund operations and stronger dividend income. Overheads were under control, resulting in CIR improving to 29.4% from 30.4% in 1Q11 (2Q10: 31.6%). Credit cost was stable at 10 bps against 1Q11: nine bps (2Q10: 12 bps). Generally, the results were solid, albeit without any major surprises.
Loan growth for 2Q stood at 13.2% y-o-y (+3.4% q-o-q) with the main growth drivers'' residential (+16.8% y-o-y) and non-residential (+22.6% y-o-y) mortgages as well as hire purchase (+10% y-o-y). Annualised group loan growth stood at 13.6%, driven by the domestic segment (14.5% annualised) while loan growth from overseas (3.2% annualised) was partly impacted by adverse foreign exchange translation. Although annualised loan growth was slightly below the 14% to 15% growth target set, we expect the target to be met with stronger growth in the quarters ahead. Customer deposits grew 4.4% q-o-q (+7.9% y-o-y) due to higher fixed (+3.2% q-o-q), demand (+5% q-o-q) and money market (+13.8% q-o-q) deposits and with that, group loans-deposit ratio improved to 87.3% as at end-June 2011 from 88.1% as at end-March 2011.
Asset quality remained intact with new impaired loan formation (annualised) improving slightly to 27 bps, compared with 29 bps in 1Q11 (2Q10: 79 bps). Absolute impaired loans fell 5% q-o-q and the gross impaired loans ratio improved to 0.96% as at end-2Q11 from 1.05% as at end-1Q11. Tier-1 and risk-weighted capital ratios rose by 70 bps each to 10.2% and 13.7% respectively.
We have retained our fair value of RM16 (based on target FY12 price-earnings ratio of 15 times) and 'outperform' call on the stock. We continue to like the stock for its above-industry growth and asset quality. Public Bank'' is the best proxy to the domestic economy in terms of loan growth. ' RHB Research, July 26
This article appeared in The Edge Financial Daily, July 27, 2011.
Expect good 2Q11 results for MAHB
Stock Name: AIRPORT
Company Name: MALAYSIA AIRPORT HOLDINGS BHD
Malaysia Airports Holdings Bhd
(July 26, RM6.50)
Maintain buy at RM6.50 with revised target price of RM7.55 (from RM7.12): MAHB will release its 2Q11 results tomorrow. The second quarter is seasonally the weakest for the year. Based on the operating statistics published, we expect a core net profit (less foreign exchange translation and all other non-cash items) of RM110.5 million (+24.5% year-on-year [y-o-y], -1.4% quarter-on-quarter [q-o-q]). We maintain our 'buy' call with a higher discounted cash flow-based target price of RM7.55, after imputing for a higher passenger growth of 10% in 2011 (previously 8%). Our new target price offers undemanding 15.2 times 2012 earnings.
For the first five months of 2011, passenger numbers were higher than expected, with a better mix profile. Growth was 13.3% y-o-y, substantially above management's guidance of 8% growth in 2011. Cargo was down by 2.6% y-o-y, which is in line with the global soft trend. International passengers make up 48.5% of total passengers, a 0.3 percentage point rise y-o-y. These factors will underpin strong profit growth as international passengers pay higher service charges.
KLIA continues to surprise positively by delivering an impressive 15.7% y-o-y passenger growth (5M 2010: +13.8% y-o-y). If KLIA can maintain this growth momentum for the remainder of the year, it will probably register traffic of 38 to 39 million passengers; thus making it the 25th to 27th busiest airport in the world ' up from 31st in 2010.
KLIA 2 may face another delay and we think it will be completed in 2013 as opposed to the guided 3Q11. This is not major and is expected for a project of this scale. The cash flow impact is small, but the depreciation charge of KLIA 2 will only commence in 2013 and thus impact our 2012/13 earnings.
We have tweaked numbers by +0.7%, +14% and -4.3% for 2011 to 2013 after imputing a higher passenger traffic growth and the new estimated KLIA 2 completion date. MAHB is trading at attractive levels compared with global peers: 10.1 times price-to-cash flow ratio (11% discount to peers), 8.9% return on capital (26% higher) and it is lowly geared at 0.39 times against a peer group average of 0.66 times. ' Maybank IB Research, July 26
This article appeared in The Edge Financial Daily, July 27, 2011.
Company Name: MALAYSIA AIRPORT HOLDINGS BHD
| Research House: MAYBANK | Price Call: BUY | Target Price: 7.55 |
Malaysia Airports Holdings Bhd
(July 26, RM6.50)
Maintain buy at RM6.50 with revised target price of RM7.55 (from RM7.12): MAHB will release its 2Q11 results tomorrow. The second quarter is seasonally the weakest for the year. Based on the operating statistics published, we expect a core net profit (less foreign exchange translation and all other non-cash items) of RM110.5 million (+24.5% year-on-year [y-o-y], -1.4% quarter-on-quarter [q-o-q]). We maintain our 'buy' call with a higher discounted cash flow-based target price of RM7.55, after imputing for a higher passenger growth of 10% in 2011 (previously 8%). Our new target price offers undemanding 15.2 times 2012 earnings.
For the first five months of 2011, passenger numbers were higher than expected, with a better mix profile. Growth was 13.3% y-o-y, substantially above management's guidance of 8% growth in 2011. Cargo was down by 2.6% y-o-y, which is in line with the global soft trend. International passengers make up 48.5% of total passengers, a 0.3 percentage point rise y-o-y. These factors will underpin strong profit growth as international passengers pay higher service charges.
KLIA continues to surprise positively by delivering an impressive 15.7% y-o-y passenger growth (5M 2010: +13.8% y-o-y). If KLIA can maintain this growth momentum for the remainder of the year, it will probably register traffic of 38 to 39 million passengers; thus making it the 25th to 27th busiest airport in the world ' up from 31st in 2010.
KLIA 2 may face another delay and we think it will be completed in 2013 as opposed to the guided 3Q11. This is not major and is expected for a project of this scale. The cash flow impact is small, but the depreciation charge of KLIA 2 will only commence in 2013 and thus impact our 2012/13 earnings.
We have tweaked numbers by +0.7%, +14% and -4.3% for 2011 to 2013 after imputing a higher passenger traffic growth and the new estimated KLIA 2 completion date. MAHB is trading at attractive levels compared with global peers: 10.1 times price-to-cash flow ratio (11% discount to peers), 8.9% return on capital (26% higher) and it is lowly geared at 0.39 times against a peer group average of 0.66 times. ' Maybank IB Research, July 26
This article appeared in The Edge Financial Daily, July 27, 2011.
OSK keeps 'trading buy' on KNM Group
Stock Name: KNM
Company Name: KNM GROUP BHD
OSK Research is maintaining its trading buy on KNM Group with the fair value remaining unchanged at RM2.80.
KNM is undertaking the refinery/polypropylene and storage projects at Teluk Ramunia, Johor, and the research house said this could be a potentially positive contribution to the existing orderbook.
"Currently, we believe KNM Group's orderbook is still above RM5 billion while the tenderbook is over RM17 billion," OSK Research said.
KNM announced yesterday that it and Zecon Bhd have entered into two agreements with Gulf Asian Petroleum SB (GAP)for the refinery/polypropylene and storage projects at Teluk Ramunia, Johor.
The company said it would form a consortium with Zecon Bhd and Korean/Chinese contractors to undertake the engineering, procurement and construction (EPC) of the projects.
But more information is needed to gauge the financial impact on KNM, according to OSK Research.
"KNM will need to arrange a sukuk issuance of up to RM1.5 billion to cover the project financing during construction, while GAP will arrange a financial guarantee from a local investment fund of up to RM1.5 billion during the construction period, to be converted into a long-term loan thereafter and a facilitation fund of up to RM300 million," OSK Research said.
OSK Research believes KNM would have the financial muscle to take up the preliminary investment of RM240 million as its net gearing is still below 1x.
"Based on its 1QFY11 results, it had net debts of RM534.6 million with total debts of RM1 billion and cash equivalents of RM479.5 million. Hence, this also led to a net gearing of 0.3 times," OSK Research said.
Although these projects could potentially contribute positively to its FY12-15 earnings, OSK Research said it is keeping the FY12 forecast unchanged for now, pending more financial guidance from management.
"Also, due to past events, we harbour some doubts on whether the project will take off," it added.
Other than that, OSK Research believes that securing the project financing itself has some uncertainty given the huge sum needed. -- Bernama
Company Name: KNM GROUP BHD
| Research House: OSK | Price Call: TRADING BUY | Target Price: 2.80 |
OSK Research is maintaining its trading buy on KNM Group with the fair value remaining unchanged at RM2.80.
KNM is undertaking the refinery/polypropylene and storage projects at Teluk Ramunia, Johor, and the research house said this could be a potentially positive contribution to the existing orderbook.
"Currently, we believe KNM Group's orderbook is still above RM5 billion while the tenderbook is over RM17 billion," OSK Research said.
KNM announced yesterday that it and Zecon Bhd have entered into two agreements with Gulf Asian Petroleum SB (GAP)for the refinery/polypropylene and storage projects at Teluk Ramunia, Johor.
The company said it would form a consortium with Zecon Bhd and Korean/Chinese contractors to undertake the engineering, procurement and construction (EPC) of the projects.
But more information is needed to gauge the financial impact on KNM, according to OSK Research.
"KNM will need to arrange a sukuk issuance of up to RM1.5 billion to cover the project financing during construction, while GAP will arrange a financial guarantee from a local investment fund of up to RM1.5 billion during the construction period, to be converted into a long-term loan thereafter and a facilitation fund of up to RM300 million," OSK Research said.
OSK Research believes KNM would have the financial muscle to take up the preliminary investment of RM240 million as its net gearing is still below 1x.
"Based on its 1QFY11 results, it had net debts of RM534.6 million with total debts of RM1 billion and cash equivalents of RM479.5 million. Hence, this also led to a net gearing of 0.3 times," OSK Research said.
Although these projects could potentially contribute positively to its FY12-15 earnings, OSK Research said it is keeping the FY12 forecast unchanged for now, pending more financial guidance from management.
"Also, due to past events, we harbour some doubts on whether the project will take off," it added.
Other than that, OSK Research believes that securing the project financing itself has some uncertainty given the huge sum needed. -- Bernama
Ivory Properties up on nod for Bayan Mutiara development
Stock Name: IVORY
Company Name: IVORY PROPERTIES GROUP BERHAD
KUALA LUMPUR: Ivory PROPERTIES [] Bhd shares advanced on Tuesday, July 26 after it received the approval to undertake a mixed development over 102.56 acres on Penang island, which would make it the largest developer on the island.
At 10.35am, Ivory added two sen to RM1.20 with 1.64 million shares done.
The Penang Development Corporation (PDC) on Monday had approved the purchase and development of the land in Bayan Mutiara, near the Penang Bridge.
Of the 102.56 acres, it said 67.56 acres are existing land and 35 acres are to be reclaimed for a proposed mixed development
AmResearch in a note July 26 maintained its BUY rating on Ivory Properties and raised its fair value from RM1.70/share to RM2.40/share ' based on an unchanged 40% discount to our revised NAV estimate of RM4.00/share.
'We raised our NAV estimate from RM2.50/share to RM4.00/share to account for a significant accretion to its assets value from the successful tender for the sea-fronting Bayan Mutiara land (102.7acres) in Penang,' it said.
Company Name: IVORY PROPERTIES GROUP BERHAD
| Research House: AMMB | Price Call: BUY | Target Price: 2.40 |
KUALA LUMPUR: Ivory PROPERTIES [] Bhd shares advanced on Tuesday, July 26 after it received the approval to undertake a mixed development over 102.56 acres on Penang island, which would make it the largest developer on the island.
At 10.35am, Ivory added two sen to RM1.20 with 1.64 million shares done.
The Penang Development Corporation (PDC) on Monday had approved the purchase and development of the land in Bayan Mutiara, near the Penang Bridge.
Of the 102.56 acres, it said 67.56 acres are existing land and 35 acres are to be reclaimed for a proposed mixed development
AmResearch in a note July 26 maintained its BUY rating on Ivory Properties and raised its fair value from RM1.70/share to RM2.40/share ' based on an unchanged 40% discount to our revised NAV estimate of RM4.00/share.
'We raised our NAV estimate from RM2.50/share to RM4.00/share to account for a significant accretion to its assets value from the successful tender for the sea-fronting Bayan Mutiara land (102.7acres) in Penang,' it said.
KNM, Zecon rise on RM17b refinery, storage facility job
KUALA LUMPUR: KNM and Zecon shares advanced on Tuesday, July 26 after they inked heads of agreements with Gulf Asian Petroleum Sdn Bhd to undertake the projects worth RM17 billion at Teluk Ramunia.
At 10.25am, KNM added 10 sen to RM1.85 while Zecon rose 10.5 sen to 58.5 sen.
The agreements were to build a 150,000/200,000 bpd petroleum refinery and 400,000/525,000 mtpa polypropylene unit for GAP with a total project value of US$5 billion (RM15 billion).
The other project is to construct a petroleum product storage terminal facility comprising four terminals with a total storage capacity of 2.328 million cubic metres, with supporting infrastructure and auxiliaries worth RM2 billion.
For the refinery project, KNM said it would together with Zecon and/or a Korea or Chinese contractor set up a consortium to undertake the refinery project.
ECM Libra Research has upgraded KNM to Trading Buy from Hold with higher target price of RM2.25 from RM1.68 previously.
However, it cautioned that KNM has an existing orderbook of RM5.4 billion that had yet to yield steady profits.
July 25, 2011
KFCH: India expansion on track
Stock Name: KFC
Company Name: KFC HOLDINGS (M) BHD
KFC Holdings (M) Bhd
(July 25, RM3.87)
Maintain market perform at RM3.94 with fair value of RM4.25: KFCH currently has nine outlets in India, with three or four more in the advanced stages of construction. It targets to have 17 outlets by year-end, which is broadly in line with our assumptions of 16 stores by end-FY11. Based on the current progress of store openings, we believe KFCH should be able to achieve this target, although we do highlight that for 2012, KFCH would need to almost double its number of stores in India to 30 from 17, as per its agreement with Yum! As we have previously noted, KFCH's store openings in India have been challenging given the various issues with the renovation of the location, and also various approvals that caused some hiccups in its store openings.
KFCH in January 2010 bought Paramount International College for RM6.5 million and renamed it KFCH International College. KFCH College currently has two campuses, the first campus is in Puchong and a new campus in Bandar Dato' Onn, Johor, was launched in April. Its Johor campus is expected to be completed by 2015 and will bring total intake capacity to 12,000 students per year. The college's main courses include restaurant management, culinary arts and hotel management. KFCH is expecting to spend about RM25 million for refurbishment of the Puchong campus and initial renovations for the Johor campus. We expect contribution from KFCH College to the group's revenue and bottom line to be negligible in the near term. We believe KFCH's venture into the education business will help generate a skilled workforce for its restaurant operations.
KFCH plans to offer delivery service sometime in 2012, with a trial run in a few selected outlets in 3QFY11. Delivery service has been successful in Singapore, accounting for 14% to 15% of total revenues of its Singapore operations. But we believe that the delivery logistics will be different in Malaysia, given the smaller geographical size. Other than the delivery service, KFCH will continue to introduce three or four new products per annum, such as its Ole Pocketful and egg tarts.
Risks include: (i) bird/swine flu escalation; (ii) escalation of corn and soyabean prices, which would eat into margins; and (iii) deteriorating consumer spending power, resulting in lower same-store sales (SSS) growth.
We make no change to our earnings forecasts. We are positive that KFCH is continuing to offer new products and packages to drive its sales growth. But, we believe current valuations for KFCH imply limited upside to its share price, while we continue to be cautious on its shares, given the various repeated related party transactions with parent company Johor Corp. Our fair value is maintained at RM4.25, based on 17 times FY12 earnings per share. We reiterate our 'market perform' call on the stock. ' RHB Research, July 25
This article appeared in The Edge Financial Daily, July 26, 2011.
Company Name: KFC HOLDINGS (M) BHD
| Research House: RHB | Price Call: HOLD | Target Price: 4.25 |
KFC Holdings (M) Bhd
(July 25, RM3.87)
Maintain market perform at RM3.94 with fair value of RM4.25: KFCH currently has nine outlets in India, with three or four more in the advanced stages of construction. It targets to have 17 outlets by year-end, which is broadly in line with our assumptions of 16 stores by end-FY11. Based on the current progress of store openings, we believe KFCH should be able to achieve this target, although we do highlight that for 2012, KFCH would need to almost double its number of stores in India to 30 from 17, as per its agreement with Yum! As we have previously noted, KFCH's store openings in India have been challenging given the various issues with the renovation of the location, and also various approvals that caused some hiccups in its store openings.
KFCH in January 2010 bought Paramount International College for RM6.5 million and renamed it KFCH International College. KFCH College currently has two campuses, the first campus is in Puchong and a new campus in Bandar Dato' Onn, Johor, was launched in April. Its Johor campus is expected to be completed by 2015 and will bring total intake capacity to 12,000 students per year. The college's main courses include restaurant management, culinary arts and hotel management. KFCH is expecting to spend about RM25 million for refurbishment of the Puchong campus and initial renovations for the Johor campus. We expect contribution from KFCH College to the group's revenue and bottom line to be negligible in the near term. We believe KFCH's venture into the education business will help generate a skilled workforce for its restaurant operations.
KFCH plans to offer delivery service sometime in 2012, with a trial run in a few selected outlets in 3QFY11. Delivery service has been successful in Singapore, accounting for 14% to 15% of total revenues of its Singapore operations. But we believe that the delivery logistics will be different in Malaysia, given the smaller geographical size. Other than the delivery service, KFCH will continue to introduce three or four new products per annum, such as its Ole Pocketful and egg tarts.
Risks include: (i) bird/swine flu escalation; (ii) escalation of corn and soyabean prices, which would eat into margins; and (iii) deteriorating consumer spending power, resulting in lower same-store sales (SSS) growth.
We make no change to our earnings forecasts. We are positive that KFCH is continuing to offer new products and packages to drive its sales growth. But, we believe current valuations for KFCH imply limited upside to its share price, while we continue to be cautious on its shares, given the various repeated related party transactions with parent company Johor Corp. Our fair value is maintained at RM4.25, based on 17 times FY12 earnings per share. We reiterate our 'market perform' call on the stock. ' RHB Research, July 25
This article appeared in The Edge Financial Daily, July 26, 2011.
Rubber gloves: YTY still single, available
Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD
Rubber gloves sector
Maintain neutral: YTY Industry Holdings Sdn Bhd has rejected Latexx Partners Bhd's offer to merge their businesses. Given its strong nitrile capacity, YTY continues to appeal to the bigger glove producers (Top Glove Corp Bhd, Hartalega Holdings Bhd) and private equity funds. With the Latexx-YTY deal off, we believe the bigger glovemakers will take another look at YTY for the overnight capacity/earnings enhancement and longer-term value creation potential. While pricing can be the deterrent, it is still earnings accretive. We believe mergers and acquisitions in the sector are not over yet.
On July 21 (a day before the deadline for Latexx to execute the sales and purchase agreement), Latexx went back to YTY and indicated its intention to make a revised offer (from the original RM1.25 billion), based on its findings from the 45-day due diligence. YTY rejected the offer on the very next day (July 22). We are puzzled about the rejection as, at the indicative revised offer price, we understand that Latexx is still the highest bidder for YTY among the glovemakers and private equity funds.
In our view, YTY shareholders are still keen to sell the business but the sale could be hampered by the fact that it could still be much cheaper for the other glovemakers to build new production lines from scratch rather than to pay an estimated nine times forward price-earnings ratio (PER) at a RM1.25 billion price tag. We also do not see any technology value-add to the acquirers as YTY's technology is similar to the industry with semi-auto stripping and packaging systems (except for Hartalega, which has the most advanced technology).
However, to build YTY's capacity overnight (11% of global nitrile glove market share) will create a huge supply glut in the industry. Given that the other glovemakers are all vying for bigger market shares, they may relook at YTY. Acquisition of YTY should result in an overnight capacity enhancement, enlarged earnings base and longer-term value creation via economies of scale and pricing power.
Potential buyers are Top Glove and Hartalega, given their respective valuations, ambitions and businesses. Based on our estimation, at a RM1.25 billion price tag for YTY, Top Glove could still see a huge earnings per share enhancement of 45% (YTY's profitability is almost on par with the former) while Hartalega may see a moderate 8% accretion. Nevertheless, we maintain our calls on Top Glove (sell, target price: RM4.40) and Hartalega (buy, TP: RM6.80), as the possibility of an acquisition may be premature. ' Maybank IB Research, July 25
This article appeared in The Edge Financial Daily, July 26, 2011.
Company Name: TOP GLOVE CORPORATION BHD
| Research House: MAYBANK | Price Call: SELL | Target Price: 4.40 |
Rubber gloves sector
Maintain neutral: YTY Industry Holdings Sdn Bhd has rejected Latexx Partners Bhd's offer to merge their businesses. Given its strong nitrile capacity, YTY continues to appeal to the bigger glove producers (Top Glove Corp Bhd, Hartalega Holdings Bhd) and private equity funds. With the Latexx-YTY deal off, we believe the bigger glovemakers will take another look at YTY for the overnight capacity/earnings enhancement and longer-term value creation potential. While pricing can be the deterrent, it is still earnings accretive. We believe mergers and acquisitions in the sector are not over yet.
On July 21 (a day before the deadline for Latexx to execute the sales and purchase agreement), Latexx went back to YTY and indicated its intention to make a revised offer (from the original RM1.25 billion), based on its findings from the 45-day due diligence. YTY rejected the offer on the very next day (July 22). We are puzzled about the rejection as, at the indicative revised offer price, we understand that Latexx is still the highest bidder for YTY among the glovemakers and private equity funds.
In our view, YTY shareholders are still keen to sell the business but the sale could be hampered by the fact that it could still be much cheaper for the other glovemakers to build new production lines from scratch rather than to pay an estimated nine times forward price-earnings ratio (PER) at a RM1.25 billion price tag. We also do not see any technology value-add to the acquirers as YTY's technology is similar to the industry with semi-auto stripping and packaging systems (except for Hartalega, which has the most advanced technology).
However, to build YTY's capacity overnight (11% of global nitrile glove market share) will create a huge supply glut in the industry. Given that the other glovemakers are all vying for bigger market shares, they may relook at YTY. Acquisition of YTY should result in an overnight capacity enhancement, enlarged earnings base and longer-term value creation via economies of scale and pricing power.
Potential buyers are Top Glove and Hartalega, given their respective valuations, ambitions and businesses. Based on our estimation, at a RM1.25 billion price tag for YTY, Top Glove could still see a huge earnings per share enhancement of 45% (YTY's profitability is almost on par with the former) while Hartalega may see a moderate 8% accretion. Nevertheless, we maintain our calls on Top Glove (sell, target price: RM4.40) and Hartalega (buy, TP: RM6.80), as the possibility of an acquisition may be premature. ' Maybank IB Research, July 25
This article appeared in The Edge Financial Daily, July 26, 2011.
Rubber gloves: YTY still single, available
Stock Name: HARTA
Company Name: HARTALEGA HOLDINGS BHD
Rubber gloves sector
Maintain neutral: YTY Industry Holdings Sdn Bhd has rejected Latexx Partners Bhd's offer to merge their businesses. Given its strong nitrile capacity, YTY continues to appeal to the bigger glove producers (Top Glove Corp Bhd, Hartalega Holdings Bhd) and private equity funds. With the Latexx-YTY deal off, we believe the bigger glovemakers will take another look at YTY for the overnight capacity/earnings enhancement and longer-term value creation potential. While pricing can be the deterrent, it is still earnings accretive. We believe mergers and acquisitions in the sector are not over yet.
On July 21 (a day before the deadline for Latexx to execute the sales and purchase agreement), Latexx went back to YTY and indicated its intention to make a revised offer (from the original RM1.25 billion), based on its findings from the 45-day due diligence. YTY rejected the offer on the very next day (July 22). We are puzzled about the rejection as, at the indicative revised offer price, we understand that Latexx is still the highest bidder for YTY among the glovemakers and private equity funds.
In our view, YTY shareholders are still keen to sell the business but the sale could be hampered by the fact that it could still be much cheaper for the other glovemakers to build new production lines from scratch rather than to pay an estimated nine times forward price-earnings ratio (PER) at a RM1.25 billion price tag. We also do not see any technology value-add to the acquirers as YTY's technology is similar to the industry with semi-auto stripping and packaging systems (except for Hartalega, which has the most advanced technology).
However, to build YTY's capacity overnight (11% of global nitrile glove market share) will create a huge supply glut in the industry. Given that the other glovemakers are all vying for bigger market shares, they may relook at YTY. Acquisition of YTY should result in an overnight capacity enhancement, enlarged earnings base and longer-term value creation via economies of scale and pricing power.
Potential buyers are Top Glove and Hartalega, given their respective valuations, ambitions and businesses. Based on our estimation, at a RM1.25 billion price tag for YTY, Top Glove could still see a huge earnings per share enhancement of 45% (YTY's profitability is almost on par with the former) while Hartalega may see a moderate 8% accretion. Nevertheless, we maintain our calls on Top Glove (sell, target price: RM4.40) and Hartalega (buy, TP: RM6.80), as the possibility of an acquisition may be premature. ' Maybank IB Research, July 25
This article appeared in The Edge Financial Daily, July 26, 2011.
Company Name: HARTALEGA HOLDINGS BHD
| Research House: MAYBANK | Price Call: BUY | Target Price: 6.80 |
Rubber gloves sector
Maintain neutral: YTY Industry Holdings Sdn Bhd has rejected Latexx Partners Bhd's offer to merge their businesses. Given its strong nitrile capacity, YTY continues to appeal to the bigger glove producers (Top Glove Corp Bhd, Hartalega Holdings Bhd) and private equity funds. With the Latexx-YTY deal off, we believe the bigger glovemakers will take another look at YTY for the overnight capacity/earnings enhancement and longer-term value creation potential. While pricing can be the deterrent, it is still earnings accretive. We believe mergers and acquisitions in the sector are not over yet.
On July 21 (a day before the deadline for Latexx to execute the sales and purchase agreement), Latexx went back to YTY and indicated its intention to make a revised offer (from the original RM1.25 billion), based on its findings from the 45-day due diligence. YTY rejected the offer on the very next day (July 22). We are puzzled about the rejection as, at the indicative revised offer price, we understand that Latexx is still the highest bidder for YTY among the glovemakers and private equity funds.
In our view, YTY shareholders are still keen to sell the business but the sale could be hampered by the fact that it could still be much cheaper for the other glovemakers to build new production lines from scratch rather than to pay an estimated nine times forward price-earnings ratio (PER) at a RM1.25 billion price tag. We also do not see any technology value-add to the acquirers as YTY's technology is similar to the industry with semi-auto stripping and packaging systems (except for Hartalega, which has the most advanced technology).
However, to build YTY's capacity overnight (11% of global nitrile glove market share) will create a huge supply glut in the industry. Given that the other glovemakers are all vying for bigger market shares, they may relook at YTY. Acquisition of YTY should result in an overnight capacity enhancement, enlarged earnings base and longer-term value creation via economies of scale and pricing power.
Potential buyers are Top Glove and Hartalega, given their respective valuations, ambitions and businesses. Based on our estimation, at a RM1.25 billion price tag for YTY, Top Glove could still see a huge earnings per share enhancement of 45% (YTY's profitability is almost on par with the former) while Hartalega may see a moderate 8% accretion. Nevertheless, we maintain our calls on Top Glove (sell, target price: RM4.40) and Hartalega (buy, TP: RM6.80), as the possibility of an acquisition may be premature. ' Maybank IB Research, July 25
This article appeared in The Edge Financial Daily, July 26, 2011.
Eng Tek climbs after getting TYK offer
Stock Name: ENG
Company Name: ENG TEKNOLOGI HOLDINGS BHD
Eng Teknologi Holdings Bhd, a Malaysian electronic components maker, rose to its highest level in almost a year in Kuala Lumpur trading after receiving a buyout offer from TYK Capital Sdn Bhd at RM2.50 a share.
The stock climbed 1.8 per cent to RM2.32 at 9:06 a.m. local time, set for its highest close since July 28, 2010. -- Bloomberg
Company Name: ENG TEKNOLOGI HOLDINGS BHD
| Research House: OSK | Price Call: HOLD | Target Price: 2.50 |
Eng Teknologi Holdings Bhd, a Malaysian electronic components maker, rose to its highest level in almost a year in Kuala Lumpur trading after receiving a buyout offer from TYK Capital Sdn Bhd at RM2.50 a share.
The stock climbed 1.8 per cent to RM2.32 at 9:06 a.m. local time, set for its highest close since July 28, 2010. -- Bloomberg
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