Bursa Malaysia Stock Price Target: 09/11/11

September 15, 2011

Maybank Research maintains Sell on Proton, unch TP RM2.64

Stock Name: PROTON
Company Name: PROTON HOLDINGS BHD

Research House: MAYBANK

Price Call: SELL

Target Price: 2.64

KUALA LUMPUR: Maybank Investment Bank Research said PROTON HOLDINGS BHD []'s consolidating partnership with Mitsubishi could see both parties collaborating on Proton's compact car and Mitsubishi using Proton's Tanjung Malim plant manufacturing for its export market for ASEAN region.

'Our forecasts are maintained for now in the absence of details. While this development in sentiment positive, our views are unchanged at this stage,' it said on Thursday, Sept 15.

'We reckon reviving Lotus will gravely hurt Proton's earnings and balance sheet over the next few years. Maintain Sell with an unchanged RM2.64 target price, based on 0.3x book,' it said.

Utd Malayan climbs on on 'buy' call

Stock Name: UMLAND
Company Name: UNITED MALAYAN LAND BHD

Research House: HLG

Price Call: BUY

Target Price: 2.30

United Malayan Land Bhd, a Malaysian developer, has "strong" earnings upside as profits from some projects haven't been factored into its share price, Hong Leong Financial Group Bhd analyst Sean Lim said in a report today.

Hong Leong has a "buy" call on the stock with a RM2.30 share estimate, the report said.

United Malayan was unchanged at RM1.30 at 9:42 a.m. in Kuala Lumpur trading. -- Bloomberg

MIDF Research keeps Buy on Wah Seong Corp

Stock Name: WASEONG
Company Name: WAH SEONG CORPORATION BHD

Research House: MIDF

Price Call: BUY

Target Price: 2.73

KUALA LUMPUR: MIDF Amanah Investment Bank Bhd research is keeping its BUY recommendation for Wah Seong Corporation with an unchanged Target Price of RM2.73.

It said on Thursday, Sept 15, this is based on unchanged 15.7 times price-to-earnings for FY11, which is within its three-year historical average of 12.9 times to 24.6 times.

'We like Wah Seong Corp'' given its exposure to Australia LNG industry. On the local front, we expect recently announced gas project known as North Malay Basin, of which a new 200km pipeline to transport gas from the fields to Kerteh will be develop, to be the near-term catalyst to Wah Seong Corp,' it said.

September 14, 2011

TNB building in all the bad news

Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD

Research House: OSK

Price Call: BUY

Target Price: 6.24

Tenaga Nasional Bhd
(Sept 14, RM5.12)
Maintain buy at RM5.21 with revised fair value of RM6.24 (from RM7.53): Tenaga Nasional Bhd's (TNB) share price has been bashed down over the past two months as a result of poor 3QFY11 results, continued gas supply issues, outages at coal-fired power plants and a lack of clarity on potential tariff hikes. The sell-off has seen its share price fall by 23% since July 8 compared with the FBM KLCI's 9%.

Despite the weak fundamentals, the valuations of TNB shares are too cheap to ignore. We therefore incorporate all the bad news surrounding the company into our forecasts and identify a new fair value as well as the strong support for the share price in these uncertain times.

The two main factors we are building in are a cut in our demand growth forecast for FY12 from 2.8% to 2% to include uncertainties in the global economy and continued gas supply disruptions. Gas supply was disrupted by planned outages which will last until January 2012 and delayed partial restoration of gas supply from the Bekok gas platform which we believe was only restored this month (100mmscfd) compared with the earlier scheduled June 2011 deadline. These, together with planned maintenance of coal plants, may result in TNB incurring a loss in 4QFY11'' similar to that in 3QFY11.

All in all, our FY11 net profit forecast is cut by 55.5% while our FY12 forecast is cut by 15.6%. Our discounted cash flow-based fair value is cut from RM7.53 to RM6.24. Nonetheless, there is still some 20% upside to our fair value. More importantly, despite the forecast losses in 4QFY11 and 1QFY12, the stock's book value per share should not drop below RM5.18, a level that provides strong support for the share price. As such, with the current share price so close to the forecast minimum book value, we maintain our 'buy' call on TNB. ' OSK Research, Sept 14

This article appeared in The Edge Financial Daily, September 15, 2011.

Axiata lacks catalysts in the short term

Stock Name: AXIATA
Company Name: AXIATA GROUP BERHAD

Research House: MAYBANK

Price Call: HOLD

Target Price: 5.10

Axiata Group Bhd
(Sept 14, RM4.79)
Maintain hold at RM4.81 with revised target price of RM5.10 (from RM5.50): Axiata's Analyst Day was an opportunity to catch up on'' developments at the'' subsidiaries. We see little share price catalyst for the group in the near term in a challenging environment, with stiff competition particularly in Indonesia, Cambodia and locally. We raise our cost of equity to 11.8% from 11.1% and sum-of-parts target price is cut to RM5.10 from RM5.50.

XL is taking steps to mitigate the downtrend in subscribers caused by heightened competition and is seeing some positive results. The aggressive rollout of its data network will enable it to sustain strong long-term growth from this segment. Prospects for Dialog are bright, given its market dominance and expected strong economic growth of at least 8% for Sri Lanka.

Axiata expects to inject US$75 million (RM232 million) to US$125 million into Robi in Bangladesh to partly fund the spectrum renewal fees, which are expected to settle at about US$250 million. In Cambodia, competition remains stiff. Amid aggressive pricing, Hello is just breaking even at the earnings before interest, tax, depreciation and amortisation (Ebitda) level. The market is likely to see consolidation and Axiata will have to decide over the next year or two how it intends to participate in this process.

The third quarter should see a decent performance, with indications of better year-on-year pre and post Hari Raya Aidilfitri sales. Management hopes to conclude negotiations soon on HSBB collaboration with Telekom Malaysia Bhd . This is unlikely to improve group margins but it provides for sustainable data revenue streams.

Management said it continues to be on the lookout for mergers and acquisitions in its main markets. It would appear that group capital expenditure is likely to trend lower from next year, thus providing room for better payouts. ' Maybank IB Research, Sept 14

This article appeared in The Edge Financial Daily, September 15, 2011.

Fraser & Neave begins a new era

Stock Name: F&N
Company Name: FRASER & NEAVE HOLDINGS BHD

Research House: AMMB

Price Call: BUY

Target Price: 20.40

Fraser & Neave Holdings Bhd
(Sept 14, RM16.30)
Maintain buy at RM16.50 with revised fair value of RM20.40 (from RM20.70): We re-affirm our 'buy' rating on Fraser & Neave (F&N), but have lowered our fair value from RM22.70 to RM20.40, after rolling forward our valuation base year to CY12F. We continue to peg revised earnings to a fair price-earnings ratio of 18 times ' at the top end of the stock's PER trading band, but at parity to the stock's historical discount to peer Nestle Malaysia Bhd (non-rated). Our fair value is further backed by our discounted cash flow value of RM20.88 (weighted average cost of capital: 9.6%, long-term growth: 2%).

End-September 2011 will mark a new era for F&N, as the transitional agreement with The Coca-Cola Co (TCCC) comes to an end. The expiry will effectively lift R&D and sales restrictions on cola and lemon-lime carbonated soft drinks for F&N; and isotonic and fruit-flavoured soft drinks for TCCC.

We remain positive about F&N's long-term earnings growth potential, driven by the core soft drinks and dairy divisions. Performance of the soft drinks division, which has seen new product line expansion and double-digit volume growth over the last 18 months, has been encouraging.

We understand sales volume of certain variants of tea (Seasons) and juice beverages (FruitTree) has outperformed internal management targets. To be sure, strong volume growth has been credited with partially offsetting the effects of the surge in sugar costs.

Additionally, dairy which contributes about 34% to group earnings before interest and tax (9MFY11) is expected to see higher earnings on the back of: (i) rising production volume at Rojana dairy plant on the back of higher exports to IndoChina countries; (ii) capacity boost from the upcoming Pulau Indah dairy manufacturing hub which should alleviate current local market supply constraints; and (iii) potential margin reprieve from softening skim milk powder (SMP) and whey prices ' major input costs for condensed milk and evaporated milk. As it is, NZ wholesale milk prices recently slumped 35% to a 13-month low on increased global supply from northern hemisphere producers.

We expect a stronger 4QFY11F, spurred by the Hari Raya Aidilfitri celebration to meet our full-year forecast. For FY12F, our revised earnings model indicates a marginal earnings contraction (-14% year-on-year) due to the absence of contribution from its property arm and partial earnings vacuum from the loss of the Coca-Cola contract. However, we view this as more of a transitory period, rather than terminal. We continue to like the stock for its strong earnings profile, market share leadership positioning and strong brand equity strength. ' AmResearch, Sept 14

This article appeared in The Edge Financial Daily, September 15, 2011.

Sector on stronger footing than 2008

Stock Name: WCT
Company Name: WCT BHD

Research House: HWANGDBS

Price Call: BUY

Target Price: 4.15

Construction sector
We compare the sector now with during the 2008 credit crunch, looking at new orders, earnings visibility, geographical exposure, balance sheet strength and valuations. Overall, we feel this domestic-oriented sector fuelled by the Economic Transformation Programme (ETP) will be less affected by a US recession or Europe debt woes.

Earnings visibility is better now with the RM50 billion MRT project anchoring growth against 2008/09 when the two stimulus packages benefited unlisted smaller contractors more. Margin recovery is stronger with the bulk of legacy order book depleted and quality improved with less exposure to riskier Middle East and India contracts (less than 20% for IJM Corp Bhd and Gamuda Bhd against 40% to 50% in 2009). Average net gearing has fallen to 0.2 times (against 0.4 times in 2009) with stronger operating cash flows.

The RM50 billion MRT project will anchor the construction sector in the next decade. We see minimal risk of delays given the slowing local economy and impending general election. Construction is often used to lift GDP growth because of the large multiplier effect. The MRT is expected to contribute RM8 billion to RM10 billion a year to GNI based on 2.5 to 3.5 times multiplier. Some 28 contractors have pre-qualified for the elevated portion comprising civil works, stations and depots. The stronger contenders appear to be IJM, TRC Synergies Bhd and Sunway Group which have been pre-qualified for all portions.

During 2008/09, the KL Construction Index tested two standard deviations below mean against 15 times price-earnings ratio (PER) and 1.3 times price-to-net tangible assets currently (mean levels). It is unlikely to test those again given support from the ETP and lower foreign ownership. A better comparison would be sum-of-parts valuation; our bear case for Gamuda is RM3.30 per share (No MRT and Vietnam) and IJM RM6.70 per share (lower order wins and PER), which still offer 14% and 17% upside. Key risks would be the ruling coalition losing more ground in the general election, which could stall the MRT, and still high average foreign shareholding of 20% (but below 2007 peak of 41%). Our top pick remains IJM as a strong diversified proxy whose order book will peak at RM9 billion by end-2011. Gamuda (at 2008 recession low), WCT Bhd and Malaysian Resources Corp Bhd are also large laggards. ' HwangDBS Vickers Research, Sept 14

This article appeared in The Edge Financial Daily, September 15, 2011.

Sector on stronger footing than 2008

Stock Name: IJM
Company Name: IJM CORPORATION BHD

Research House: HWANGDBS

Price Call: BUY

Target Price: 8.70

AmResearch maintains Buy on Tenaga

Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD

Research House: AMMB

Price Call: BUY

Target Price: 6.40

KUALA LUMPUR: AmResearch is maintaining its Buy call on Tenaga Nasional with an unchanged discounted cashflow-derived fair value of RM6.40 per share.

The research house said on Wednesday, Sept 14 Tenaga president and chief executive officer Datuk Seri Che Khalib was quoted saying the power company will have to raise money from the banks for the first time to pay for its operational expenses due to the ongoing natural gas shortage.

He was quoted saying Tenaga had spent close to RM2.1 billion from January 2010 to August 2011 to substitute gas with distillates as a temporary measure to continue generating power given the natural gas shortfalls.

'Tenaga expects the additional cost for distillates, which is five times more expensive than natural gas, to reach an estimated RM3bil by the end of this year,' it said.

Tenaga's net gearing is currently comfortable at 45% as at 31 May 2011 compared with 194% in FY04 when Khalib first joined the group as its CEO. Its net debt has likewise fallen from RM29 billion'' as at end-FY04 to RM13 billion currently.

HLIB Research 14 September 2011 (MAHB; Traders Brief)

Stock Name: AIRPORT
Company Name: MALAYSIA AIRPORT HOLDINGS BHD

Research House: HLG

Price Call: HOLD

Target Price: 6.08

MAHB (Hold)

Airport Hikes Facing Stumbling Block

'''' MAHB's previously approved new airport charges was put on hold indefinitely pending further review by Transport Ministry.

'''' Currently MAHB is in the midst of negotiation with the government for potential compensation under Marginal Cost Support (MARCS).

'''' However, we are uncertain on the timing and the amount of restitution to be agreed between MAHB and the government. There is high chance of potential delay on the restitution, largely due to political risks.

'''' Maintain Hold at lower TP of RM6.08. (Previously RM6.70)

KLCI:

Range bound within the mid and lower Bollinger band

'''' Against external uncertainty, Bursa Malaysia will probably carry on bouncing back and forth amid light trading activity. Upside catalysts include combinations of pump-priming and accelerating ETP momentum in 4Q11 and an election Budget 2012.''

STOCK TO WATCH: MRCB

Potential rebound targets at RM2.10-2.23

'''' MRCB's medium to long term uptrend remains intact as prices continue to stay above the weekly 100-d SMA (RM1.84) and daily lower Bollinger band (RM1.87) supports. Any price weakness is a good opportunity to accumulate as MRCB will be a beneficiary of various public projects to pump prime the economy. ''

September 13, 2011

RHBInvest Research Highlights 13th September 2011

13th September 2011

Top Story: Plantation ' Weather risks emerging? Neutral

Sector Update

'' Malaysia's CPO production fell 4.8% mom in Aug while exports fell by 2.7% mom. As a result of the larger mom decrease in production vis-''-vis exports, closing CPO stock levels fell by 5.6% mom to 1.88m tonnes in Aug (from 1.99m tonnes in Jul). Stock/usage ratio in Aug thus fell to 9.95% (from 10.8% in Jul), which is still above the 9-year average of 9.1%. Production could remain slightly weak in Sep due to the Hari Raya festivities, when the Indonesian plantation workers go for a break. This trend could reverse, however, in Oct/Nov, being the last few months of the traditional peak season, assuming no weather risks emerge.

Sector Call

Telecom: 6% service tax deferred Neutral (down from OW)

Sector Update

Axiata: Fair value lowered to RM5.35 (from RM5.60) Market Perform

DiGi: Fair value lowered to RM31.50 (from RM34.00) Market Perform (down from OP)

Maxis: Fair value lowered to RM5.65 (from RM6.00) Market Perform

TM: Fair value maintained at RM4.68 Trading Buy

Corporate Highlights

Uzma: Poised to impress Not Rated

Visit Note

'' We believe Uzma warrants a second look as: 1) Long-term contracts underpin consistent future earnings; 2) The company has intimate knowledge of the fields and has first-hand knowledge of any upcoming projects/opportunities; and 3) MECAS purchase could lead to potential chemical enhanced oil recovery (CEOR) project wins.

Axiata: Highlights from Analyst & Investor Day 2011 Market Perform

News Update

'' On M&A, management's focus remains primarily on in-country consolidation. In the short term, management hinted M&A in the overcrowded Cambodian mobile market.

RHB Research downgrades telco sector to Neutral

Stock Name: DIGI
Company Name: DIGI.COM BHD

Research House: RHB

Price Call: SELL

Target Price: 31.50

Stock Name: MAXIS
Company Name: MAXIS BERHAD

Research House: RHB

Price Call: HOLD

Target Price: 5.65

Stock Name: AXIATA
Company Name: AXIATA GROUP BERHAD

Research House: RHB

Price Call: HOLD

Target Price: 5.35

KUALA LUMPUR: RHB Research has downgrade the telecommunications sector from Overweight to Neutral following the uncertainty of the 6% service tax issue.

The research house said on Tuesday, Sept 13 that it believes the setback may be temporary, and it is a matter of time before the telcos pass on the service tax.

It said the Malaysian Communications and Multimedia Commission's approval was not required to pass on the tax while the tax -- essentially a consumption tax to be borne by the final consumer - should be paid by the final consumer.

'However, the uncertainty on the how long the deferment would be is the key issue. After cutting our earnings forecasts, we downgrade DiGi from Outperform to Market Perform with a revised fair value of RM31.50.

'We revised our fair values for Maxis to RM5.65 (previously RM6.00) and Axiata to RM5.35 (previously RM5.60). We prefer TM as our top pick for its capital management potential as we expect another 29 sen/share capital distribution in 2011,' it said.

Uzma Group waiting to impress

Stock Name: UZMA
Company Name: UZMA BHD

Research House: RHB

Price Call: BUY

Target Price: 2.74

Uzma Group Bhd
(Sept 13, RM1.79)
Not rated at RM1.79 with fair value of RM2.74: Founded in May 2000, Uzma started off as a manpower and consultancy provider. It was listed on the then Second Board of the KL Stock Exchange on July 2008. The company's services are provided in five broad categories: (i) geoscience and reservoir engineering; (ii) drilling services; (iii) production services; (iv) oilfield chemical; and (iv) placement and recruitment.

Long term, UzmaPRES and UzmaWireline contracts will lead to more consistent future earnings. Uzma's roots in geoscience and reservoir engineering and its previous involvement in field studies for Petronas Carigali Sdn Bhd mean that the company has intimate knowledge of the fields and has first-hand knowledge of any upcoming projects/opportunities. The purchase of Malaysian Energy Chemical and Services Sdn Bhd could lead to potential new income stream as it enables Uzma to be a direct participant in any chemical enhanced oil recovery (CEOR) projects.

The key risks include: (i) competition from more established and international players could delay growth; (ii) crude oil price volatility could lead to delay or cancellation of projects; and (iii) signficant dependence on Petronas Carigali heightens income concentration risk.

For FY12/FY13, we forecast net profit of RM24.3 million and RM28.3 million respectively as: (i) the UzmaPRES units grow to eight by FY12 and 10 by FY13; and (ii) the UzmaWireline division benefits from full-year earnings of the RM170 million long-term contract.

At its current price of RM1.79, Uzma trades at prospective FY12/FY13 price-earnings ratio (PER) of 5.9 times and 5 times which are at a significant discount to its oil and gas peers. Assuming nine times FY12 PER, we estimate the stock would be worth RM2.74 per share which implies an attractive 52.9% upside to its current share price. Our nine times PER assumption implies a: (i) discount to our target FY12 PER range of 12 to19 times for the oil and gas stocks under our coverage; (ii) 25% discount to the current sector average FY12 PER of 12 times; and (iii) around 15% discount to the global peers' average FY12 PER of 10.5 times. While our lower target PER against local and global peers is due to the illiquidity of the stock, we believe there is significant upside to our fair value estimate if the earnings growth materialises as projected. We are positive on the company's forward prospects and believe that it warrants a second look given that it is in an industry sweet spot with EOR being on the forefront of Petronas' mind. ' RHB Research

This article appeared in The Edge Financial Daily, September 14, 2011.

KKB Engineering has more contracts in the pipeline

Stock Name: KKB
Company Name: KKB ENGINEERING BHD

Research House: OSK

Price Call: BUY

Target Price: 2.83

KKB Engineering Bhd
(Sept 13, RM1.65)
Maintain buy at RM1.64 with fair value of RM2.83: KKB Engineering (KKB) announced yesterday that it has secured RM30.7 million worth of contracts. Its subsidiary, Harum Bidang Sdn Bhd, has secured a contract worth RM14.2 million from YWP Builders Sdn Bhd to manufacture and supply MSCL Water Pipes and Pipe Specials for the Bekalan Air Luar Bandar (BALB) project in Sarawak. KKB was also awarded the fabrication, supply and delivery contract for LPG cylinders by Petronas Dagangan Bhd for one year, commencing September with an option to extend for another year. For the first 12 months, the'' estimated contract sum is RM16.5 million.

We were expecting more projects to be announced soon so this is within our expectation. We are positive on KKB's 3Q numbers as the further uptick in construction and engineering activities within Sarawak Corridor of Renewable Energy (Score) will benefit KKB.

Although the supply of water pipes and LPG cylinders fetch narrower margins than fabrication, and KKB posted weaker results for 2QFY11, we are still bullish on this counter because we believe that more projects are expected to kick in within Score, which will benefit KKB.

KKB's healthy earnings before interest and tax (Ebit) margins from its engineering and construction division, strong balance sheet with net cash and undemanding valuation, continue to justify our 'buy' call on the company, with a fair value of RM2.83 based on 10 times FY12 earnings per share. ' OSK Research

This article appeared in The Edge Financial Daily, September 14, 2011.

PetGas: Listing of Gas Malaysia

Stock Name: PETGAS
Company Name: PETRONAS GAS BHD

Research House: MIDF

Price Call: BUY

Target Price: 14.40

Petronas Gas Bhd
(Sept 13, RM13.50)
Maintain buy at RM13.50 with target price of RM14.40: Gas Malaysia (GM) has published its draft prospectus on the Securities Commission website for 15 working days. It is expected that GM will be listed on Bursa this December. The biggest shareholders, MMC Corp Bhd and Shapadu Group, own 55% of GM while Tokyo Gas-Mitsui Co Sdn Bhd owns 25% and Petronas Gas (PetGas) holds the remaining 20%. Note that 26% of GM's shares are offered for sale and there is no issuance of new shares. We estimate that post-listing,
PetGas' equity interest in GM will be reduced to about 14.8%.

MMC managing director Datuk Hasni Harun indicated that GM could have a market capitalisation of about RM5 billion, equivalent to about 16 times price-earnings ratio (PER) based on our estimate (at RM5 billion, the IPO price would be RM3.90). Therefore, PetGas' 20% stake in GM is valued at about RM1 billion, which is close to 10 times higher than its initial investment cost of only RM103 million. We reckon PetGas' equity value will then be lifted by about 10% to RM4.92 per share (2QCY11: RM4.47).

As a result of the 26% offer for sale, PetGas is expected to recognise about RM230 million disposal gains in its income statement, boosting CY11 bottom line by 14.6%. (Our estimate is subject to the IPO price.)

GM's contribution to PetGas' total net profit has averaged 5% or RM54 million for the past three years. Given that PetGas' ownership in GM will dilute to below 20% post-listing (14.8%), contribution from GM starting CY12 onwards will then be recognised as investment income instead of associate contribution. It was reported that GM is committed to pay a guaranteed dividend of 100% and 75% payout in the first two years after listing. We estimated that PetGas' CY12 net profit will be only marginally affected by about -1%.

We maintain our 'buy' recommendation for PetGas with unchanged target price of RM14.40, derived from 16.5 times PER plus net cash of RM1.27 per share. We continue to like PetGas as we expect the company to outperform the market during the uncertain period moving forward. This is supported by PetGas' strong fundamentals, the defensive nature of its business with good earnings quality, net cash position and consistent dividend payout. Furthermore, we believe PetGas is a proxy play to the rising gas demand and LNG imports. All considered, the listing of GM is postive to PetGas. ' MIDF Research

This article appeared in The Edge Financial Daily, September 14, 2011.

September 12, 2011

MAHB: The airline lobby trumps the airport lobby

Stock Name: AIRPORT
Company Name: MALAYSIA AIRPORT HOLDINGS BHD

Research House: CIMB

Price Call: BUY

Target Price: 7.80

Malaysia Airports Holdings Bhd
(Sept 12, RM6.30)
Maintain outperform at RM6.29 with revised target price of RM7.80: MAHB announced last Friday that it has been advised by the Ministry of Transport to put on hold the approved increases on the passenger service charge (PSC) as well as the aircraft landing and parking charges until further review by the government.

To recap, MAHB announced last month an increase in the international PSC from RM51 to RM65 per person (+RM14) for all airports and from RM25 to RM32 per person (+RM7) for the low-cost carrier terminal from Sept 15. It also announced a 30% increase in landing charges and a 64% rise in parking charges to be implemented in stages in 2012 to 2014.

This is an unwelcome surprise to us as last month's aeronautical charge hikes were officially announced by Transport Minister Datuk Seri Kong Cho Ha, following which we raised our earnings forecasts for MAHB.

After last Friday's announcement, MAHB may have to continue with the current arrangement indefinitely, wherein all international departing passengers from all non-LCCT airports will be charged the existing RM51 per person PSC and the government compensates MAHB for RM14 per person, thereby allowing MAHB to earn RM65 per person PSC for these international departures. For international departing passengers originating from the LCCT airports, MAHB will not be able to implement the RM7 per person hike, which means that the existing RM25 per person PSC remains in force beyond Sept 15.

In addition, the current landing and parking charges will be unchanged and the proposed staggered 30% hike in landing charges and 64% rise in parking charges may be abandoned.

The government will continue to pay MAHB RM14 per person compensation for each international passenger departing from the non-LCCT airports. However, we are unclear if'' it will compensate MAHB for the proposed RM7 per person hike for each international departure from LCCT airports. We note that the 2009 restructuring agreement had allowed for a PSC hike only in 2014, rather than in 2011, and we are uncertain if MAHB will receive any compensation for the RM7 per person PSC hike deferment.

For the landing and parking charges, MAHB is entitled under the 2009 restructuring agreement to increase the charges up to the lowest of the four regional peers, which is currently Indonesia. However, even back in 2009 when MAHB had the opportunity to increase these charges by 30%, it did not do so as air travel was expected to be weak in the wake of the global financial crisis. Given that landing and parking charges are not covered by the marginal cost support mechanism, the odds are MAHB will not get any compensation for the deferred parking and landing fee hikes.

This U-turn shows the strength of the airline lobby at the moment, with both MAS and AirAsia under the stewardship of Tan Sri Tony Fernandes. The hikes came at a time when MAS is racking up huge losses, which may have made the lobbying easier. MAS needs every bit of help it can get and aeronautical charge hikes fly in the face of the government's priority of turning MAS' fortunes around. MAHB is currently earning decent profit with the existing tariffs. Furthermore, MAHB cannot discriminate between the airlines by charging different fees.

We have reflected the tariff hike deferrals by removing them from our earnings model. We now reduce our earnings per share forecasts by 6.6% for FY12 and 7.9% for FY13. This would have reduced our end-2011 target price from RM8 to RM7.50 but we are taking the opportunity to roll forward the time horizon of our target price from end-2011 to end-2012. Our new discounted cash flow-derived target price is RM7.80.

We emphasise that MAHB has not been asked to reduce its charges, but merely to give up its proposed rate increases. Its business model remains robust.

We continue to rate MAHB an 'outperform' and recommend investors accumulate on weakness. We believe this tourism play will piggyback on AirAsia's strong growth without the excess baggage of oil price volatility. We view it as a consumer play through rising retail spending within its outlets, especially with the upcoming KLIA2 and joint-venture mall. The strong passenger traffic growth of 12.7% year-to-date will support earnings. MAS' oneworld alliance membership could bring new airlines into KLIA 'British Airways and Qantas. Their return to KLIA after more than a decade's absence would be positive for MAHB and for the development of KLIA. ' CIMB Research, Sept 12

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

LM Cement's demand augers well for next year

Stock Name: LMCEMNT
Company Name: LAFARGE MALAYAN CEMENT BHD

Research House: MIDF

Price Call: HOLD

Target Price: 6.80

Lafarge Malayan Cement Bhd
(Sept 12, RM6.91)
Initiate coverage at RM6.91 with neutral rating and target price of RM6.80: LMC is the country's largest cement producer with 46% market share in terms of capacity. LMC's annual rated capacity clinker production currently stands at 8.2 million tonnes against the total industry's clinker of 17.8 million tonnes.
LMC is also the largest listed cement company on Bursa Malaysia with RM5.6 billion in market capitalisation, ahead of YTL Cement Bhd (RM2.3 billion) and Tasek Corp Bhd (RM993 million).

As the largest cement player in Malaysia with more than 40% market share, we believe LMC's cement demand augurs well next year driven by mega projects under the Economic Transformation Programme ETP, namely MyRapid Transit and KL Financial District in Greater Kuala Lumpur and Iskandar Malaysia, Johor, infrastructure projects and other big projects. Apart from that, the ongoing projects under the 10th Malaysia Plan are expected to continue to drive the overall cement demand.

As a multinational company, LMC has a wide distribution network around the world and it is well connected with its parent company, Lafarge SA of France. We see this as an advantage against its peers as the group can take advantage of any pickup in construction activities in other countries.

Thanks to its current strong operating cash flow, LMC's financials are very clean with a net cash balance of RM127 million in FY10. We believe LMC will continue to be in a net cash position since the group keeps maintaining its working capital requirement through improvement in production efficiency and minimal capital expenditure.

The group has been able to dish out dividends to shareholders of 70% to 99% of net profit in FY08 to FY10 or at 34 sen to 38 sen per share per year, resulting in a gross dividend yield of 5.6% to 5.07%. We expect LMC to continue to pay at least 80% of its net profit as dividend throughout FY11E to FY13F or an average of 30 sen to 43 sen per share per year, resulting in a gross dividend yield of 4% to 6%.

We are initiating coverage on LMC with a target price of RM6.80 pegged to its five-year historical average price-earnings multiple of 16 times to FY12F earnings per share of 42.4 sen. ' MIDF Research , Sept 12

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

TSH Resources is ripe for the picking

Stock Name: TSH
Company Name: TSH RESOURCES BHD

Research House: HWANGDBS

Price Call: BUY

Target Price: 4.35

TSH Resources Bhd
(Sept 12, RM3.12)
Maintain buy at RM3.21 with target price of RM4.35: We hosted TSH on a two-day non-deal road show in Singapore recently. TSH highlighted that its large immature estates in Indonesia will be its key earnings driver. In June 2011, 39% of its total planted areas were immature against 53% as at end-December 2010. As these mature progressively over the next five years, we expect fresh fruit bunches (FFB) volume to grow at a three-year compounded annual growth rate (CAGR) of 27%. To accommodate output from its 8,000ha maturing estates in East Kalimantan next year, a new 60 tonne per hour mill will be commissioned there by 1H12.

New plantings in Indonesia were slow due to uncertainty over the deforestation moratorium in 1H11 (only 630ha planted as at June 2011), but we expect its expansion to pick up next year to 3,000ha. TSH continues to acquire greenfields to ensure it has enough landbank for expansion. We understand the group has also implemented the SAP system to ensure effective operations in Indonesia.

TSH recently won approval to plant Malaysian Palm Oil Board (MPOB)-franchised Wakuba ramet (high quality clones) at its Indonesian estates. Initial harvest (as early as year two from planting) from its Sabah trials looks promising. It is planning large-scale planting of Wakuba ramet at its Indonesian estates next year. Under ideal conditions, this clone can achieve oil extraction rate (OER) of up to 26% (versus 21% for conventional seeds), according to MPOB. We estimate a 5% increase in OER could result in additional RM150 million to our FY18 earnings forecast (not imputed, pending actual results).

Within our regional coverage, TSH has the second highest three-year CAGR for FFB output, after JA Wattie. It is a top pick, offering 36% upside to target price. The company bought back 2.4 million shares (0.6% of issued shares) during May and June 2011, signifying the management's confidence in TSH's prospects. ' Hwang DBS Vickers Research, Sept 12

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

Gamuda: Record profit, Vietnam dilemma

Stock Name: GAMUDA
Company Name: GAMUDA BHD

Research House: MAYBANK

Price Call: BUY

Target Price: 4.10

Gamuda Bhd
(Sept 12, RM2.90)
Maintain buy at RM3.03 with revised target price of RM4.10 (from RM4.45): Gamuda's final results, due on Sept 29, should meet expectation for record profit in FY11. We forecast FY12 to be another record year, on strong domestic property sales locked in. Nonetheless, we have tweaked our FY12/FY13 net profit forecasts by 1% after factoring in a lower sales forecast for the Vietnam property projects. We also reduce our realisable net asset value (RNAV)-based target price to RM4.10 (- 8%) after adjusting for lowered gross development values (GDVs) for the Vietnam projects and other housekeeping. The stock remains our top pick in construction.

Profit for FY11 should grow a strong 47% to 48% year-on-year (y-o-y) based on the house estimate of RM416 million and street's RM414 million (9MFY11A: RM299 million net profit, +27% y-o-y. For 4Q net profit is likely in the RM115 million to RM117 million region, flattish quarter-on-quarter (3Q: RM117 million) but up over 50% y-o-y. Key drivers would be construction margin expansion on further advancement of Yen So Park infrastructure in Hanoi, Vietnam, and double-tracking rail works. Property rode on strong RM820 million sales in FY10 (+64% y-o-y) and a record RM1.32 billion sales in FY11 (+61% y-o-y).

The target for property sales in Vietnam has been halved to RM650 million from RM1.5 billion for FY12, and to RM1.1 billion from RM2.12 billion for FY13. Celadon City's soft launch in June saw just 20% take-up to date (for 250 apartment units). Gamuda City (Hanoi) is targeting a soft launch in October. Projected GDVs have also been lowered due to the devalued dong ' to RM9 billion from RM10 billion for Gamuda City, and to RM5 billion from RM6 billion for Celadon City.

Gamuda was not spared the August market selldown with the share price down 19% month-on-month (-20% year-to-date). The stock has fallen below its mean valuation ' at three times below its mean of 16.5 times on forward earnings. It is looking attractive again, trading at 13.4 times one-year forward earnings, a 17% discount to our revised RNAV estimate of RM3.65 before imputing the MRT project and 26% below our target price of RM4.10 cum-MRT. We remain confident of sizeable job wins to lift its order book beyond the outstanding RM2.7 billion (ex-Nam Theun 1). ' Maybank IB Research, Sept 12

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

K Euro inching closer towards priced WCE catch?

Stock Name: IJM
Company Name: IJM CORPORATION BHD

Research House: AMMB

Price Call: BUY

Target Price: 7.71

Not takeover target, but may partner 1MDB for IWK

Stock Name: PUNCAK
Company Name: PUNCAK NIAGA HOLDINGS BHD

Research House: AMMB

Price Call: HOLD

Target Price: 1.60

Gamuda down after Maybank IB cuts FY12-13 net profit forecast

KUALA LUMPUR: GAMUDA BHD [] shares declined in the afternoon session on Monday, Sept 12 after Maybank IB Research tweaked its FY12-13 net profit forecasts for Gamuda by 1% after factoring lower sales forecast for the Vietnam property projects.

The research house also reduced its RNAV-based target price for Gamuda to RM4.10 (-8%) after adjusting for lowered GDVs for the Vietnam projects and other house-keepings.

At 2.45pm, Gamuda fell nine sen to RM2.94 with 3.77 million shares done.

Maybank however maintained its Buy call on the stock and said Gamuda's final results, due on Sept 29, should meet expectations for record profits in FY11.

'We forecast FY12 to be another record year, on strong domestic property sales locked in.

'The stock remains our top pick in CONSTRUCTION [],' it said.

''

Glove makers slip as Top Glove gets downgraded

Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD

Research House: OSK

Price Call: SELL

Target Price: 4.00

KUALA LUMPUR: Glove manufacturers declined in the morning trade session on Monday, Sept 12 after OSK Research said the world's largest rubber glove maker, TOP GLOVE CORPORATION BHD [], continued to be affected by external factors.

OSK Research had pointed to the still high latex prices and supply catching up with demand as the external factors.

At 12.30pm, Top Glove fell nine sen to RM4.50, Latexx and Supermax down eight sen each to RM1.42 and RM2.70, Hartalega four sen to RM5.56, Kossan three sen to RM2.77 and Careplus half a sen to 33.5 sen.

OSK Research on Sept 12 had downgraded Top Glove to Sell from Neutral and cut its target price to RM4 from RM5 previously.

OSK Research said the factors affecting Top Glove included latex prices that were still at a high RM8-RM9/kg, but that the company was able to pass on 70%-80% of the cost increase.

The research house also said supply had caught up with demand, which reduced Top Glove's bargaining power.

'This leads us to downgrade our FY11-12 forecast by 6%-20%,' it said.

4QFY11 results exceeds expectations but outlook remains challenging

Stock Name: AWC
Company Name: AWC BERHAD

Research House: ZJ

Price Call: HOLD

Target Price: 0.27

2QFY11 results within expectations

Stock Name: UNIMECH
Company Name: UNIMECH GROUP BHD

Research House: ZJ

Price Call: BUY

Target Price: 1.05

Gamuda fair value reduced, stock slides

Stock Name: GAMUDA
Company Name: GAMUDA BHD

Research House: MAYBANK

Price Call: BUY

Target Price: 4.10

Gamuda Bhd, a builder and property group, slid 1 per cent to RM3 in Kuala Lumpur trading at 9.25 am after its fair value was reduced to RM4.10 from RM4.45 at Malayan Banking Bhd. -- Bloomberg

CIMB Research maintains Neutral on Puncak Niaga

Stock Name: PUNCAK
Company Name: PUNCAK NIAGA HOLDINGS BHD

Research House: CIMB

Price Call: HOLD

Target Price: 1.42

KUALA LUMPUR: CIMB Equities Research said it is maintaining its Neutral call or RM1.42 target price, which it continues to peg to a 70% discount to its sum-of-parts value.

'Prospects for Puncak remain anchored to the takeover of water assets in Selangor, which shows no signs of progress,' it said on Monday, Sept 12.

The research house said though the government's move to privatise Indah Water Konsortium may benefit Puncak as it would give the group another concession, it is not excited about it as negotiations could be protracted and politics could get in the way.

'Puncak's share price, which shot up 12.3% last Friday on speculation that 1MDB is looking to acquire the company, may come under pressure following a denial by Puncak's management.

OSK Research lowers MAHB valuation to RM7.36

Stock Name: AIRPORT
Company Name: MALAYSIA AIRPORT HOLDINGS BHD

Research House: OSK

Price Call: BUY

Target Price: 7.36

KUALA LUMPUR: OSK Research has reduced its valuation for Malaysia Airports Holdings Bhd (MAHB) to RM7.36 from RM8.10 but it is maintaining its BUY call.

It said on Monday, Sept 12 it continues to view MAHB as a defensive aviation play which will do well in both good and bad times, thanks to resilient air travel demand and its large base of low cost carrier passengers.

On the move to lower the valuation, it said this was based on the government's move to put on hold the recently approved increases in airport charges for an indefinite period. MAHB announced the decision to put off the hike last Friday.

OSK Research said the decision did not come as a surprise given the intense lobbying from AirAsia and MAS following the sealing of their collaboration agreement early last month. 'While the freeze on raising tariff is negative to MAHB, the turn of events demonstrates the Government's (Khazanah) commitment to the recently signed collaboration between AirAsia and MAS,' it said.

MAHB had earlier announced that travellers going overseas via Kuala Lumpur International Airport (KLIA) would have to pay RM65 (up from the current RM51) while the charge for those departing from the Low-Cost Carrier Terminal (LCCT) would be RM32 (up from RM25). The aircraft landing and parking charges were to be gradually raised by 30% and 64% respectively. MAHB, which has lobbied for a long time for a review of airport taxes, submitted the application for the upward revision on charges two years ago.

Under the Operating Agreement signed in 2009, the hike in passenger service charge'' will be determined via an inflation pass-through formula (compounded) every five years.

'As long as the actual PSC is below the benchmark rate (as is the current situation now), MAHB will receive restitution from the Government. Currently MAHB receives a RM14 subsidy for each international non LCCT passenger since the RM51 being charged is below the RM65 benchmark,' it said.