Bursa Malaysia Stock Price Target: 09/18/11

September 23, 2011

OSK keeps 'buy' call on Malaysia Airports

Stock Name: AIRPORT
Company Name: MALAYSIA AIRPORT HOLDINGS BHD

Research House: OSK

Price Call: BUY

Target Price: 7.36

OSK Research has maintained its "BUY" call on Malaysia Airports Holdings Berhad (MAHB) with its fair value of shares unchanged at RM7.36.

MAHB announced yesterday that it had entered into a concession agreement with WCT Bhd and Segi Astana SB (SASB) for privatisation of the construction, development and financing of the integrated complex at KLIA2 in Sepang.

It was on a build-operate-transfer model for a 20-year concession period, with an option to extend for another 10 years, it said in a research note.

Under the agreement, SASB will undertake construction of the integrated complex which will comprise a transportation hub, a commercial complex consisting of a shopping mall with a net lettable area of about 350,000 sq ft; and car parks with 6,000 parking bays.

OSK Research said the announcement did not come as a surprise as WCT had said last year that they have secured the concession agreement from MAHB for the complex.

The concession will provide MAHB three-way income -- recurring income from retail royalty, equity account from SASB's earnings given its 30 per cent equity ownership in SASB and dividend cashflow. -- Bernama

Faber dips, RHB Research cuts FV to RM1.63

Stock Name: FABER
Company Name: FABER GROUP BHD

Research House: RHB

Price Call: HOLD

Target Price: 1.63

KUALA LUMPUR: FABER GROUP BHD []'s shares fell at the midday break on Friday, Sept 23, in line with the weak broader market, while RHB Research Institute reduced its fair value to RM1.63 from RM2.19.

At 12.30pm, Faber was down five sen to RM1.43. There were 110,500 shares done at prices ranging from RM1.41 to RM1.46.

The FBM KLCI fell 15.35 points to 1,372.46. Turnover was 531.92 million shares valued at RM838.78 million. Losers beat gainers 620 to 118.

RHB Research said it heard three concessionaires, including Faber Medi-Serve, Pantai Medivest and Radicare, were asked to submit a request for proposal (RFP) for renewal of their concessions.

'This is good news as there have been concerns that the concessions, which expire on Oct 28, would not be renewed.

'However, based on Pharmaniaga's experience last year, we believe the concession may only be renewed for 10 years, rather than our assumption of 15 years,' it said.

The research house said this may however, be partly mitigated by the likelihood that the concessionaires may be able to charge higher service fees for more technical services such as maintenance of diagnostic equipment, although this could be offset by lower fees for more general cleaning and laundry services.

'We are concerned that speculation of Faber losing Sabah and Sarawak service areas has resurfaced. If we assume new parties are brought in as 49% JV partners for the two states, and Faber continues to do the work as a subcontractor, this would reduce our FY12-13 earning per share (EPS) forecasts by 7.3%-8.6%,' it said.

RHB Research lowered its sum-of-parts fair value estimate to RM1.63 (from 2.19) to impute: 1) a shorter renewal period; and 2) risk of losing some Sabah/Sarawak earnings.

'Although the concession renewal is positive, we believe the market may continue to focus on the negative aspects, especially in light of the uncertain global economic environment. Therefore, although Faber's share price has dropped by 17.7% over the last month, we believe there could be further weakness ahead. We thus downgrade our call on the stock to Market Perform, from outperform,' it said.

Tenaga downgraded to 'hold' at ECM

Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD

Research House: ECMLIBRA

Price Call: HOLD

Target Price: 5.41

Tenaga Nasional Bhd's shares have been downgraded to "hold" with a new target price of RM5.41, reflecting heightened risk following the prolonged gas curtailment issue, ECMLibra Investment Research said today.

The research house said it viewed negatively a news report on Tenaga buying 105,000 tonnes of fuel for October delivery and expected to continue purchasing steady volumes until next year.

"This is definitely negative as it could signal that the much-awaited recovery of gas from Bekok C field has been delayed yet again," said ECMLibra.

Tenaga had estimated that for every 100 mmscfd of gas shortage that is met by burning oil and distillates, which is six times more expensive, the negative impact to the bottom line is about RM7 million to RM7.5 million a day.

TNB chief executive officer Datuk Seri Che Khalib Mohd Noh was quoted in the media as saying TNB was incurring an additional RM400 million a month in fuel costs to replace the gas shortfall.

On a separate issue, the utility giant has realised its 11-month electricity sales figures, which showed a year-on-year unit demand growth of three per cent.

"This is within our full-year estimate of 2.2 per cent. August's demand is expected to be weak due to the Hari Raya festive season. -- Bernama

HLIB Research 23 September 2011 (Market View; WCT; SP Setia; Glomac; Traders Brief)

Stock Name: WCT
Company Name: WCT BHD

Research House: HLG

Price Call: BUY

Target Price: 2.98

What If MYR Weaken Further?

'''' Fight to safety resulted in appreciation of the USD Index against regional currencies, including MYR.''

'''' Greater ST MYR volatility which could decline to RM3.22/USD (3%/yr avg appreciation since MYR de-peg and within lower range of the 3-5%/yr appreciation guided by the Chinese authority).

'''' Flight to safety would likely see foreign funds exiting equity, debt and currency concurrently.

'''' Linear regression study between MYR and FBM KLCI yielded relatively high R² of 0.81 and high F-Stat reading.

'''' For every RM0.10 depreciation against the US dollar, the FBM KLCI will drop by 86pts.''

'''' At RM3.22/USD the FBM KLCI could hit 1328, equivalent to 11.7x 2012 earnings or 1.2SD below five-year average.

'''' Linear regression of FBM KLCI component stocks - Axiata, CIMB, DiGi, KLK, Public and RHB Cap has high R² ' 0.80.''

'''' AMMB, Genting, Maxis, Pet Dagang, Pet Gas and UMW have R² of between 0.70-0.80.

'''' Among the 12, only Pet Dagang and Pet Gas have foreign/free float of ~20%, others ranged from 38%-66%.

'''' Gent Malaysia, Pet Chem, BAT and YTL have R² < 0.70 but > 60% foreign/free float.

WCT (Buy)

KLIA2 IC becomes official

'''' WCT has finally inked the concession agreement for the Integrated Complex (IC) at KLIA2 (see Figure #1). The concession spans for 25 years with an option of additional 10 years, which commences on 1 Aug '11.

'''' The IC is expected to cost RM530.3m and comprises of a transportation hub; commercial NLA of 350k sq ft; and 6,000 car parks.

'''' Following yesterday's briefing, we walked away reassured on the IC's viability and will provide recurring income to WCT by FY13. Based on our estimated IRR of 15.5%, this concession works out to be 12.8 sen/share of WCT's valuation.

'''' Maintain BUY on positive outlook for the sector as we expect more orders to materialise under the ETP given the urgency to mitigate the slowdown in economy.

'''' However, we cut our TP by 16.8% to RM2.98 from RM3.59 based on 14x reduced average FY11 and FY12 earnings.

SP Setia (HOLD)

Strong set of Q3 results

'''' 9M FY11 net profit rose 38.5% yoy to RM244.7m, making up 84.7% and 87.0% of HLIB and consensus forecasts.

'''' We attribute the deviation from forecast to our overly conservative margin assumptions for their projects, and have raised our net profit forecast for FY11-13 by 3-12%.

'''' YTD, 10 months' sales clocked in at RM2.3bn, or RM2.8bn on an annualised basis, suggesting that SP Setia could fall slightly short of their stated RM3bn sales target for FY11.

'''' Unbilled sales rose slightly to RM2.3bn (2Q: RM2.2bn), or 1.5x FY10 revenue.

'''' Despite 22% decline in share price during the current sell-down, we see more near-term volatility on share price given its relatively high foreign shareholding amidst flight to the safety of US$. Hence, we are maintaining our HOLD rating on the stock for now.

Glomac (Buy)

Analyst briefing notes

'''' From yesterday's briefing, we gather that management's outlook on the property market remains optimistic, as they believe that the Malaysian property market remains domestically driven, and will remain resilient despite the worsening global and domestic economic outlook.

'''' Management has no intention of deferring or delaying any of their scheduled launches, which amount to RM1.2bn over the next 12 months; the most high-profile projects include Mutiara Damansara and the Cyberjaya projects.

'''' We remain positive on Glomac's earnings, and maintain our RM2.57 target price, based on 20% discount to RNAV.'' Maintain BUY.

FBM KLCI: Fasten your seatbelts for roller coaster ride ahead

'''' Expectations of persistent selling activities to depress the market in the short term, reflected by the rotational fierce selldown on key blue chips and flight to safety of U.S. Treasurys and US$. Further technical supports are 1367 (61.8%) and 1312 (76.4%). Any technical rebound is likely to face tough hurdles near 1400-1433 (10-D SMA) pts. ''

Dow Jones ' Downside risks intensify''

'''' The breach of the uptrend line support and a possible violation of the neckline support near 10600 are likely to trigger further selldown towards 10383 (76.4% FR) and 10000 psychological supports. Immediate resistance levels are 11000 and 11287 (mid Bollinger band).

CIMB Research retains Outperform on WCT

Stock Name: WCT
Company Name: WCT BHD

Research House: CIMB

Price Call: BUY

Target Price: 3.99

KUALA LUMPUR: CIMB Equities Research said the 25 years plus 10 years concession agreement between WCT BHD [] and MAHB for the KLIA2 integrated complex was a big milestone for WCT.

It said on Friday, Sept 23 this was WCT's first concession in Malaysia and would give it both CONSTRUCTION [] and recurring income.

'A positive surprise is the estimated RM100 million to RM200 million upside to the RM530.3 million construction cost,' it said.

CIMB Research said it made no changes to its FY11-13 EPS forecasts or RM4.44 RNAV, which already factored in WCT's 70% share of the integrated complex's NPV(13% WACC).

'We retain our OUTPERFORM call and RM3.99 target price, which is pegged to an unchanged 10% RNAV discount. This announcement and other project awards including a potential sizeable contract from the Middle East could catalyse the stock. The group's end-11 target of RM2 billion new contracts remains intact,' it said.

September 22, 2011

1QFY12: Sales momentum still intact

Stock Name: GLOMAC
Company Name: GLOMAC BHD

Research House: ECMLIBRA

Price Call: BUY

Target Price: 1.68

1QFY12: Sales momentum still intact

Stock Name: GLOMAC
Company Name: GLOMAC BHD

Research House: ECMLIBRA

Price Call: BUY

Target Price: 1.68

HLIB Research 22 September 2011 (BToto; Glomac; Econ; Traders Brief)

Stock Name: BJTOTO
Company Name: BERJAYA SPORTS TOTO BHD

Research House: HLG

Price Call: BUY

Target Price: 4.98

Stock Name: GLOMAC
Company Name: GLOMAC BHD

Research House: HLG

Price Call: BUY

Target Price: 2.57

BToto (BUY)

4D Jackpot ' The lucky charm

'''' Reported 1QFY12 net profit of RM93.8m came in within expectation, accounting for 23.1% of HLIB's estimate and 24.2% of consensus full year estimates. Historically, 1Q results normally contributed 22-24% of full year earnings.

'''' Declared first interim single tier exempt dividend of 8 sen.

'''' Net profit for 1QFY12 increased 43.7% yoy due to the contribution from the new 4D Jackpot game that was introduced in June 2011. Net profit decline qoq due to seasonal factor as 4Q records higher sales on the back of Chinese New Year festival.

'''' 4D Jackpot's sales remains exciting as its sales was stable at an average of RM1.6m meanwhile for the jackpot games as a whole, total sales has been above Magnum's jackpot sales since the launch of 4D Jackpot.

'''' Maintain BUY with unchanged TP of RM4.98.

Glomac (BUY)

Q1 results: A decent start to FY12

'''' 1QFY12 net profit of RM17.9m was 22% of HLIB and 24% of consensus full-year forecast respectively, driven by 18% rise in PBT qoq arising from lower operating expenditure for the quarter.

'''' We consider this to be in-line given that 1HFY12 is expected to be a slow period, as this year's projects (total GDV of RM900m) have yet to be launched.''

'''' Unbilled sales remain at RM550m (0.9x FY11 property development revenue).

'''' No change to our earnings forecast and TP of RM2.57 (20% discount to RNAV). Maintain BUY.''

August Inflation Report

'''' CPI growth slowed marginally to 3.3% yoy in Aug 2011 (Jul: +3.4% yoy), the second consecutive month of moderation and matching the consensus estimate. MOM basis, the increase in CPI remained stable at 0.2%

'''' August CPI data confirmed that inflation has already peaked in June at 3.5% yoy. The pass-through effect from June electricity hike continued to be visible in August, as reflected in the higher inflation rate in the services sector.

'''' We expect the next round of subsidy rationalisation to be implemented in December. All-in-all, we retain our forecast that the CPI growth will average 3.2% in 2011.

'''' Given that risks to growth have increased while inflation appeared to have peaked, we continue to see BNM holding the OPR steady until end-2011.

''

FBM KLCI - Renewed downside risks as Fed disappoints

'''' In the wake of the overnight sharp falls in U.S. and Europe markets, the technical rebound momentum from yesterday is likely to be under threat. Critical level to watch is the 1400 psychological support as a break below will trigger further pressures towards 1367 pts (61.8% FR from peak 1597 and low 1224). Any technical rebound is likely to face tough hurdles near 1441 (10-D SMA) and 1453 (mid Bollinger band) pts.

Dow Jones ' Downside risks increase''

'''' The short term uptrend line support near 11000 is likely to be tested soon due to weakening technical indicators. Immediate resistance levels are 11316 (mid Bollinger band) and 11610 (50-d SMA) whilst supports fall on 11000 and 12 Sep pivot low of 10824 pts.

Expect good 4Q numbers from Kencana Petroleum

Stock Name: KENCANA
Company Name: KENCANA PETROLEUM BHD

Research House: MIDF

Price Call: BUY

Target Price: 3.00

Kencana Petroleum Bhd
(Sept 22, RM 2.57)
Recommendation under review, currently buy with target price of RM3: Kencana was to release its 4QFY11 results yesterday. Prior to the release, we expect FY11 to be a record breaking year for Kencana as its net profit may exceed RM200 million for the first time (9MFY11: RM159.4 million). For 4QFY11, earnings growth is anticipated in mid single-digits. Full year performance is expected to be better than management guidance of at least 50% growth. In FY12, we expect Kencana's earnings growth to remain strong at an estimated +26.7% year-on-year. This is mainly supported by a sustained order book and RM40 million profit guarantee from the acquisition of Allied Marine and Equipment Sdn Bhd (AME).

Kencana announced that it is building two tender assisted drilling rigs (TADRs) worth US$145 million ((RM452) each. Construction is expected to be completed by 1QCY13. As we have assumed new job replenishment of RM1.2 billion per year for Kencana, we are making no change at the moment to our FY12 numbers on this new fabrication work secured. Kencana's current outstanding order book is estimated at about RM2.8 billion or equivalent to two times book-to-bill ratio. We believe this provides good earnings visibility to Kencana for the next two years.

Two new drilling rigs will boost future earnings. According to Rigzone data, the monthly average tender rig charter rate per day in August 2011 was US$131,000 (RM408,720) (+5.9% year-to-date). Recall, the charter rate for Kencana's first rig, KM-1, is about US$126,000 per day. Should drilling contracts be secured at the same rate in the future, we reckon each of the aforesaid rigs can contribute about RM150 million revenue and RM45 million pre-tax profit per year to Kencana. We have yet to factor in any potential earnings contribution into our forecast as no drilling contracts have been won yet.

We are keeping our target price of RM3 for Kencana, which is on par with the offer price for its merger deal. The target price implies 21 times 2012 price-earnings ratio, equivalent to 10% higher than its four-year historical average of 20.4 times. Expected total return is now more than 15% due mainly to the recent share price retracement.

We are reviewing our recommendation, taking into account that weaker market sentiment might: (i) drag down Kencana's valuation, pegged at the high-end of its historical average; and (ii) cap potential capital gains (as per our earlier expectation) from the future listing of Integral Key Sdn Bhd post-merger. This is despite Kencana's fundamental and earnings prospects still being intact. ' MIDF Research, Sept 22

This article appeared in The Edge Financial Daily, September 22, 2011.

Oil & gas is insulated, news flow driven

Stock Name: DIALOG
Company Name: DIALOG GROUP BHD

Research House: MAYBANK

Price Call: BUY

Target Price: 3.35

Oil and gas sector
(Sept 22)
Maintain overweight: We expect a confluence of news flow and corporate activities to excite the oil and gas industry over the next 12 months. Domestic service providers in various parts of the value chain will continue to gain but external risk could upset the fundamental equilibrium.

We see fabricators like Malaysia Marine and Heavy Engineering Bhd (MMHE) and other service providers like Bumi Armada Bhd seizing the spotlight in 2H11 with Uzma Bhd and Petra Energy Bhd enjoying a fair amount of the spillover.

The three major themes that we anticipate for 2011 ' (i) rising order book visibility; (ii) tactical tie-ups and strategic assets; and (iii) increased corporate activities ' have been playing out.

Marginal field risk services contracts (RSC), marine vessels contract extensions, mergers, consolidation, takeovers, and capital raising activities have shaped the sector, leading to a majority of stocks outperforming the market.

We expect the momentum to extend into 2012, driven by Petroliam Nasional Bhd's capital expenditure plans.'' Focus will be on a deep water project and multiple enhanced oil recovery (EOR)/rejuvenation fields with jobs for fabrication works and floating solutions in the pipeline. MMHE and Bumi Armada are among the key beneficiaries with Uzma and Petra Energy reaping a decent share of the gains.

Global economic volatility could clip the fundamental positives and derail the values of companies under coverage. However, with the majority of the local companies on a stronger operational and financial standing, trough valuations akin to 2008 are unlikely. Our stress test suggests'' KNM Group Bhd, Alam Maritim Resources Bhd, Tanjung Offshore Bhd and Perdana Petroleum Bhd are more prone to downside risks. High foreign shareholding stocks like Wah Seong Corp Bhd, Dialog Group Bhd, KNM and MMHE are susceptible to selling pressure should the market turn further south.

Overall, we opine that Malaysia's oil and gas industry is better insulated than its regional peers in terms of new project flows. Domestic projects are driven by national oil company Petronas, which will likely adopt a 'strategic capex approach' as opposed to 'cyclical spending strategy' on energy security concerns.

Against this backdrop, we reiterate our 'buy' calls on Dialog, MMHE, Petronas Gas Bhd (pGas) and Wah Seong, tangibly outperformers in 2011. Our top pick in the sector is MMHE, followed by Dialog, PGas and Wah Seong. ' Maybank Research, Sept 22

This article appeared in The Edge Financial Daily, September 22, 2011.

Oil & gas is insulated, news flow driven

Stock Name: MHB
Company Name: MALAYSIA MARINE AND HEAVY ENG

Research House: MAYBANK

Price Call: BUY

Target Price: 8.00

Tan Chong: X-Gear target weaker, Proton-Nissan off

Stock Name: TCHONG
Company Name: TAN CHONG MOTOR HOLDINGS BHD

Research House: AMMB

Price Call: HOLD

Target Price: 4.10

Tan Chong Motor Holding Bhd
(Sept 22, RM 4.69)
Maintain hold at RM4.10 with target price of RM4.66: We maintain our 'hold' call on Tan Chong Motor Bhd (TCM) with a lower sum-of-parts-derived fair value of RM4.10 per share following an earnings downgrade. Our valuation continues to peg TCM at nine times FY11F earnings.

TCM launched the Nissan Livina X-Gear last week. A crossover model, the Livina X-Gear is introduced as a completely knocked-down model (CKD).

The on the road (OTR) price tag of RM82,800 is cheaper than the existing Grand Livina MPV's RM89,000 (for the 1.6 Auto transmission variant).

While the Livina X-Gear is a refresher, it is ultimately a derivative of the same Grand Livina platform with cosmetic changes and a lower seat capacity. As such, we would not expect the same kind of response as a full model change.

Note that the Grand Livina MPV has already been in the Malaysian market for over three years. Furthermore, the launch of the model coincides with increasing uncertainty in external economies which may be affecting consumer sentiment.

Although the Grand Livina garnered circa 1,200 unit sales per month, management has guided that it expects the Livina X-Gear to generate only 400 to 500 units per month in the first two months before stabilising at 200 to 300. So far, the Livina X-Gear has generated 400 to 500 bookings, but TCM is still facing a shortage of CKD supply for this model; hence, the waiting list is two to three months.

We believe the Livina X-Gear is positioned to steal sales in the light SUV segment (Toyota Rush, Honda CRV) and the hatchback B-segment (Suzuki Swift, Ford Fiesta, Mazda 2, Honda Jazz). However, we note that existing crossovers such as the Suzuki SX4 and VW Cross Polo, which though priced at 9% to 36% premium to the X-Gear only generate a sales volume of 70 to 80 units per month.

While we believe the X-Gear can sell better than competing completely built-up (CBU) crossovers given much lower pricing and Nissan's better after sales service, we conservatively trim our FY11F to 14F projections by 2% to 4% in view of the lower than expected sales target against our prior projection of 1,700 Livina X-Gear sales by year-end. This is exacerbated by the CKD shortage for the model, while annualised 7M11 Nissan total industry volume (TIV) of 34,006 is still 3% short of our ex-Livina X-Gear FY11F projection of 35,220.

Separately, the platform sharing deal between Proton and Nissan is off. This means TCM will not benefit from lower CKD cost for the Nissan B-segment model due for launch at end-FY12F. Proton had originally agreed to underwrite up to 100,000 units of Nissan March's platform, which would have lowered unit costs. The earlier plan also included sharing common parts whereby TCM would have played a role in body stamping and engine parts supply. ' AmResearch, Sept 22

This article appeared in The Edge Financial Daily, September 22, 2011.

Proton reuniting with an old flame

Stock Name: PROTON
Company Name: PROTON HOLDINGS BHD

Research House: OSK

Price Call: SELL

Target Price: 2.00

Proton Holdings Bhd
(Sept 22, RM 2.62)
Maintain sell with unchanged fair value of RM2: Proton announced that it is strengthening its collaboration with Mitsubishi Motors Corp (MMC) via the joint production of engines at Proton, contract assembly of Mitsubishi vehicles for the Asean market and the sharing of parts and components.

We see this deal benefiting both parties, boosting Proton's earnings on improved plant utilisation and allowing MMC to gain a firmer foothold in the Asean market. While the news is long-term positive, we are still bearish on Proton's near-term earnings outlook. Maintain 'sell' at an unchanged fair value of RM2.

Proton said it is strengthening its collaboration with MMC through: (i) the joint production of engines (likely at the under-utilised Tanjung Malim plant); (ii) contract assembly of Mitsubishi vehicles for the Asean market; (iii) sharing of parts and components between MMC's global small compact car due to be launched in March 2012 and Proton's upcoming compact car (likely to be sometime in 2013/14); and (iv) the provision of MMC's future technologies such as electric, plug-in hybrid and hybrid vehicle technology.

This strategic collaboration follows a previous collaboration with MMC in December 2008 in the form of a development agreement on a new vehicle model for Proton and a licence agreement (to rebadge the Lancer).

MMC has had difficulty penetrating the Asean market as its imported sedans are completely built-up, which make them relatively expensive when hefty excise duties are included. The tie-up, however, may give rise to some risk for Proton as it may lead to cannibalisation of its own products, as consumers may prefer the MMC brand (judging from the poor response to the Inspira).

On a more positive note, Proton would earn income from engine contract manufacturing and at the same time increase its plant utilisation. We see this deal as a win-win for both parties, unlike the earlier Inspira rebadging deal, which benefited MMC more. We wish to highlight that there is still risk that certain aspects of the tie-up may not materialise, although the chances of this happening are fairly slim given that the previous collaboration went smoothly. But then again, delays could still be likely.

Earlier this year, Proton said it had entered into a memorandum of understanding with Nissan to conduct feasibility studies on a possible cooperation on the use of Nissan's platform and power train. As management has not updated on the status of this potential tie-up, and in view of the latest MMC tie-up, we assume that the deal with Nissan may have hit a snag. ' OSK Research, Sept 22

This article appeared in The Edge Financial Daily, September 22, 2011.

FY11 Results Preview: Stronger Property Contribution

Stock Name: SCIENTX
Company Name: SCIENTEX INCORPORATED BHD

Research House: TA

Price Call: BUY

Target Price: 2.90

2QFY12: Sailing through the year

Stock Name: SAPCRES
Company Name: SAPURACREST PETROLEUM BHD

Research House: ECMLIBRA

Price Call: TRADING BUY

Target Price: 4.60

AEON Credit up on solid earnings

Stock Name: AEON
Company Name: AEON CO. (M) BHD

Research House: OSK

Price Call: BUY

Target Price: 5.95

KUALA LUMPUR: AEON CREDIT SERVICE (M) BHD [] shares rose on Thursday, Sept 22 after OSK Research maintained its Buy call on the stock at RM4.55 and raised its fair value to RM5.95 from RM5.40.

At 10.40am, AEON Credit rose 15 sen to RM4.70 with 32,800 shares traded.

OSK Research said on Thursday, Sept 22 that AEON Credit's 1HFY12 earnings were above consensus and its full-year forecasts, representing 54.8% and 59.1% of consensus and its full-year forecasts.

Revenue and net profit increased by 25.5% and 52.1% respectively y-o-y, mainly underpinned by higher growth in personal financing (+81%), credit card (+65%) and easy payment schemes (+12.9%) in conjunction with an early Hari Raya festival.

'Asset quality remained strong, with non-performing loans (MPL) improving to 1.64% (1Q12: 1.77%) and CAR stood at 22.2%. A 13.2 sen interim single tier dividend was proposed this quarter. Maintain BUY call on AEON Credit, with a revised fair value of RM5.95,' it said.

SapuraCrest edges up on higher 2Q earnings

Stock Name: SAPCRES
Company Name: SAPURACREST PETROLEUM BHD

Research House: MIDF

Price Call: BUY

Target Price: 4.60

KUALA LUMPUR: SAPURACREST PETROLEUM BHD []'s shares rose on Thursday, Sept 22 after its earnings rose 46.9% to RM78.23 million in the second quarter ended July 31 from RM53.24 million a year.

At 9.15am, SapuraCrest gained three sen to RM3.95 with 1,900 shares traded.

Revenue, however, fell 22.1% to RM699.39 million from RM898.11 million.

For the first half, net profit rose 44.8% to RM150.57 million from RM103.93 million but revenue declined 20.2% to RM1.25 billion from RM1.568 billion.

MIDF Research upgraded SapuraCrest to a Buy from Neutral previously with an unchanged target price of RM4.60, and said the expected total return was now more than 15% after recent share price retracement.

'Our Buy call is premised on SapCrest's intact fundamentals and long-term prospects, strong FY12 estimated earnings growth of +21.2% supported by sizeable order book and Petronas' commitment on its capex despite the fact that short-term jittery market outlook might retain buying interest,' it said in a note Sept 22.

Macquarie cuts AirAsia's price estimate

Stock Name: AIRASIA
Company Name: AIRASIA BHD

Research House: MACQUARIE GROUP

Price Call: BUY

Target Price: 4.15

AirAsia Bhd, Asia's biggest budget carrier, fell to its lowest level in more than three months after Macquarie Group Ltd cut its share price estimate to RM4.15 from RM4.44.

The stock slid 3.8 percent to RM3.04 at 9:51 a.m. local time in Kuala Lumpur trading, set for its lowest close since June 6. -- Bloomberg

Tobacco sector: Huff and puff

Stock Name: JTINTER
Company Name: JT INTERNATIONAL BHD

Research House: AMMB

Price Call: HOLD

Target Price: 7.20

Tobacco sector
Maintain neutral: With Budget 2012 fast approaching, we are of the view that tobacco manufacturers are unlikely to get a reprieve from a hike in tobacco excise duty. Our view is underpinned by the government's long-standing stance against smoking and its intention to reduce the budget deficit.

Similar to last year, we expect the industry to be subject to a moderate hike of one or two sen per stick in excise duty, on par with its historical average. This represents an increase of 4.5% to 9% from the current excise duty of 22 sen per stick. Note that tobacco excise duty has been raised in the past six consecutive years. The government reverted to a punitive hike of three sen per stick last year, after a symbolic increase of'' one sen in 2009.

Based on past record, manufacturers typically take the opportunity to nudge up their margins by passing down a quantum higher than the additional excise duty-led costs to compensate for shrinking sales volume. However, we reckon manufacturers are most likely to opt for a minimal mark-up in profit this time around, given the current psychological retail selling price of RM10 per pack (premium 20s). In the last off-budget price hike, only 14% of total increase was excise duty-related (2009: 33%).

We maintain our total industry volume (TIV) growth forecast at -4% for 2011 and -3% for 2012. Legitimate TIV is negatively correlated to excise duty. This is evident in the downward trend in TIV since 2003. Based on our sensitivity analysis, a 10 sen per pack hike on top of an excise-duty led increase of 20 sen per pack (one sen per stick) could trim our FY12F earnings forecasts by 0.5% to 0.8%, assuming a 5% decline in TIV per year. However, earnings cut will be a higher 2% to 6% if excise duty is raised by'' two sen per stick.

We maintain 'neutral' on the tobacco sector, with 'holds' on both British American Tobacco (M) Bhd (BAT, fair value: RM45.90 per share) and JT International Trading Sdn Bhd (JTI, FV: RM7.20). While the industry has always been flexible enough to adapt to regulatory changes, the operating environment remains challenging and lacks positive catalysts.

Firstly, the high levels of illicits at circa 33% continue to hamper legitimate TIV growth. This perennial issue is estimated to cost the government RM2 billion in corporate taxes per year. Surely, any cutbacks in ease of access to illicits would boost the legitimate TIV pie.

Secondly, the proliferation of sub-VFM (value-for-money) or ELPC (exceptionally low-priced cigarettes) also contributes to depressed TIV growth. This, coupled with the illegal sales of cigarettes below the minimum price of RM7 per pack, would accentuate the loss of market share by the Big Three manufacturers (BAT, JTI and Philip Morris International). This invariably exerts a downward pressure on earnings growth of BAT and JTI.

Notwithstanding the benign industry outlook, tobacco stocks are still widely held for their decent dividend yields and defensive attributes. The share price performance tends to outperform the market index during times of uncertainty. The share prices of BAT and JTI rose 21% and 36% against the FBM KLCI's -42% during the 2008 global financial crisis. At current prices, both BAT and JTI offer investors dividend yields of 5.5% and 5.3%, respectively. Our dividend per share forecast is premised on a dividend payout of 93% for BAT and 70% for JTI. ' AmReseach, Sept 22

This article appeared in The Edge Financial Daily, September 23, 2011.

Tobacco sector: Huff and puff

Stock Name: BAT
Company Name: BRITISH AMERICAN TOBACCO (M)

Research House: AMMB

Price Call: HOLD

Target Price: 45.90

AEON Credit Service shows sustainable growth momentum

Stock Name: AEONCR
Company Name: AEON CREDIT SERVICE (M) BHD

Research House: HWANGDBS

Price Call: BUY

Target Price: 5.70

AEON Credit Service (M) Bhd
(Sept 22, RM 4.70)
Upgrade to buy with target price raised to RM5.70 (based on CY12 price-earnings ratio of seven times): AEON Credit's 2QFY12 net profit surged 59% year-on-year (y-o-y) to RM23.5 million, representing 52% of our initial full-year forecast of RM82.5 million. This was on the back of 28% growth in revenue to RM83 million, mainly driven by credit card (CC: +74% to RM15.2 million) and personal financing (PF: +85% to RM10.3 million).

General easy payment (GEP) and motorcycle easy payment (MEP) remain the breadwinners, contributing 69% to group revenue. Earnings before interest and tax (Ebit) margin improved eight percentage points y-o-y and five pps quarter-on-quarter (q-o-q) to 50.6% (against 2QFY11: 42.5%; 1QFY12: 45.5%) lifted by better operating efficiencies. AEON Credit declared a first interim net dividend per share of 13.2 sen (54% of our full-year expectation of 24.3 sen), which implies a 2.9% yield.

We have tweaked our FY12F to FY14F earnings up by 1% to 7% to factor in stronger loan growth. AEON Credit's 1HFY12 new loans grew 60% y-o-y to RM805 million against our previous assumption of +9.4% y-o-y. Stronger lending momentum was seen in three key segments: MEP (+41.2% y-o-y to RM186 million), CC (+93% y-o-y to RM363 million) and PF (+132% y-o-y to RM83 million). However, given the growing uncertainties on global credit issues, in our revised forecasts, we have factored in 28% y-o-y growth in new loans to RM1.5 billion in FY12F as we expect loan growth to be slower in 2HFY12.

AEON Credit is a defensive play backed by its 5% to 6% net dividend yield in FY12F/FY13F with undemanding price-earnings ratio of less than seven times and low foreign shareholding (about 10%) which should help to limit share price downside risk. We upgrade AEON Credit to 'buy' (from 'hold') with a higher target price of RM5.70 based on seven times CY12 (from FY12) earnings per share as we roll over our valuation window. We like AEON Credit for its niche in micro credit consumer financing, riding on rising domestic credit demand. ' Hwang DBS Vickers Research, Sept 22

This article appeared in The Edge Financial Daily, September 23, 2011.

1QFY12: Sales momentum still intact

Stock Name: SPSETIA
Company Name: SP SETIA BHD

Research House: ECMLIBRA

Price Call: BUY

Target Price: 1.68

1QFY12: Within expectation

Stock Name: BJTOTO
Company Name: BERJAYA SPORTS TOTO BHD

Research House: ECMLIBRA

Price Call: BUY

Target Price: 5.20

OSK Research maintains Buy on AirAsia

Stock Name: AIRASIA
Company Name: AIRASIA BHD

Research House: OSK

Price Call: BUY

Target Price: 5.18

KUALA LUMPUR: OSK Research is maintaining its Buy call on AIRASIA BHD [] at RM3.16 and has a fair value of RM5.18.

It said on Thursday, Sept 22 that AirAsia and its Indonesia associates (IAA) saw its load factor notching downwards by 8.0 percentage points and 13.5 percentage points on-month on low demand for air travel during the fasting Ramadhan period.

'Considering now that its year-to-date August figures already constitutes 63.4% of our full year forecast (versus 62.1% in the previous year), we consider the stats recorded thus far to be in line our full year estimates.

'We reiterate our BUY call with an unchanged FV of RM5.18 premised on 12 times rolling months,' it said.

OSK Research maintains Sell on MAS

Stock Name: MAS
Company Name: MALAYSIAN AIRLINE SYSTEM BHD

Research House: OSK

Price Call: SELL

Target Price: 1.35

KUALA LUMPUR: OSK Research is maintaining its Sell call on MALAYSIAN AIRLINE SYSTEM BHD [] (MAS) at RM1.40 and has a fair value of RM1.35.

It said on Thursday, Sept 22 that MAS's board of directors had last week appointed Ahmad Jauhari Yahya as it new managing director.

'We believe that he has the right leadership and skill set to navigate through MAS transformation process although we note that the timeline for this change to become fruitful would not be immediate.

'Reiterate SELL call with FV unchanged at RM1.35,' it said.

OSK Research maintains Buy on AEON Credit

Stock Name: AEONCR
Company Name: AEON CREDIT SERVICE (M) BHD

Research House: OSK

Price Call: BUY

Target Price: 5.95

KUALA LUMPUR: OSK Research is maintaining its Buy call on AEON Credit at RM4.55 with fair value at RM5.95.

It said on Thursday, Sept 22 that AEON Credit's 1HFY12 earnings were above consensus and its full-year forecasts, representing 54.8% and 59.1% of consensus and its full-year forecasts.

Revenue and net profit increased by 25.5% and 52.1% respectively y-o-y, mainly underpinned by higher growth in personal financing (+81%), credit card (+65%) and easy payment schemes (+12.9%) in conjunction with an early Hari Raya festival.

'Asset quality remained strong, with non-performing loans (MPL) improving to 1.64% (1Q12: 1.77%) and CAR stood at 22.2%. A 13.2 sen interim single tier dividend was proposed this quarter. Maintain BUY call on AEON Credit, with a revised fair value of RM5.95,' it said.

September 21, 2011

RHBInvest Research Highlights 21st September 2011

Stock Name: MBMR
Company Name: MBM RESOURCES BHD

Research House: RHB

Price Call: HOLD

Target Price: 3.25

Stock Name: TCHONG
Company Name: TAN CHONG MOTOR HOLDINGS BHD

Research House: RHB

Price Call: BUY

Target Price: 5.50

Stock Name: DRBHCOM
Company Name: DRB-HICOM BHD

Research House: RHB

Price Call: BUY

Target Price: 2.95

Stock Name: UMW
Company Name: UMW HOLDINGS BHD

Research House: RHB

Price Call: HOLD

Target Price: 7.35

Stock Name: APM
Company Name: APM AUTOMOTIVE HOLDINGS BHD

Research House: RHB

Price Call: HOLD

Target Price: 5.10

Stock Name: PROTON
Company Name: PROTON HOLDINGS BHD

Research House: RHB

Price Call: SELL

Target Price: 2.50

21st September 2011

Top Story: Petronas Gas ' Dividend payout assured despite cash outflow Market Perform

Visit Note

'' Management echoed market expectations that gas supply should return to normal once the bypass from the damaged Bekok-C platform is completed by end-Sep.

Sector Call

Motor: On the rebound Neutral

Sector Update

MBM Resources: Fair value maintained at RM3.25 Market Perform

Tan Chong: Fair value maintained at RM5.50 Outperform

DRB-HICOM: Fair value maintained at RM2.95 Outperform

UMW: Fair value maintained at RM7.35 Market Perform

APM: Fair value maintained at RM5.10 Market Perform

Proton: Fair value maintained at RM2.50 Underperform

Corporate Highlights

Evergreen Fibreboard: Diversifying into solid timber Underperform

News Update

'' Evergreen has entered into a share subscription agreement with Craft Master Timber Products S/B (CMTP), Lau Yng Yng and Lim Sock Ling to subscribe for 7,012,500 new ordinary shares in CMTP (equivalent to 51% stake) for RM7m cash. CMTP is a newly-incorporated company to carry out the business in manufacturing of solid wooden furniture parts and finger jointing.

HLIB Research 21 September 2011 (AirAsia; Traders Brief)

Stock Name: AIRASIA
Company Name: AIRASIA BHD

Research House: HLG

Price Call: BUY

Target Price: 4.50

AirAsia (BUY)

Additional Income Stream from New JV

'''' AirAsia will set up a new JV with Tune Money in association with launching of customer loyalty program and pre-paid card services under the brand 'BIG' in Malaysia.

'''' 'BIG' loyalty program is expected to build-up customer brand loyalty for AirAsia and further boost the demand for low cost travelling.

'''' AirAsia reduces its overall risk (instead of setting up the program by itself) and does not incur any upfront cash.

'''' AirAsia earns upfront revenue from the sales of 'Loyalty Points' and equity account the JV's earnings.

'''' We believe the program will be gradually introduced in other countries, where AirAsia Group operates.

'''' The term of the Commercial Agreement is for a period of 2 years and the estimated transaction value is RM30.4m.

'''' Relating to Thai AirAsia IPO, AirAsia clarified that the exercise is on schedule for 4Q11 listing.

'''' Maintain BUY with unchanged TP of 4.50.

FBM KLCI - Crucial 1400 support with potential technical rebound

'''' Critical level to watch is the 1400 psychological support as a break below will trigger further pressures towards 1367 pts (61.8% FR from peak 1597 and low 1224). However, some technical indicators are suggesting potential technical rebound with immediate resistance areas at 1444 (10-d SMA) and 1457 (mid Bollinger band).''

IJM: Potential relief rally amid heavy oversold positions''

'''' Current FY12 P/E of 14x is undemanding vs. 10-eyar average P/E of 15x. Technical indicators are grossly oversold after recent selldown, implying potential relief rally soon. Upside targets are RM5.30 (lower Bollinger band), RM5.46 (5-d SMA) and RM5.64 (10-d SMA). Immediate supports are RM4.87 (38.2% FR) and RM4.71 (150-d SMA ' monthly chart). Cut loss below RM4.85.

Sime Darby stages mild rebound, selling overdone

Stock Name: SIME
Company Name: SIME DARBY BHD

Research House: UOB

Price Call: BUY

Target Price: 10.40

KUALA LUMPUR: SIME DARBY BHD []'s share price stage a mild rebound on Wednesday, Sept 21, after analysts said the recent battering of the stock -- sparked by concerns about the acquisition of the Eastern & Oriental Bhd (E&O) stake -- was overdone.

At 11.48am, it was up 20 sen to RM8.11 with 3.94 million shares done.

The FBM KLCI rose 6.91 points to 1,417.55. Turnover was 287.28 million shares valued at RM406.69 million. There were 229 gainers, 218 losers and 247 stocks unchanged.

UOB Kay Hian Malaysia Research said on Wednesday, that Sime's share price fell 11% from RM8.70 on Sept 13 to RM7.70 on Sept 19'' due to concerns over the E&O acquisition, causing its market capitalisation to shrink by RM6 billion.

'Notwithstanding concerns over premium pricing and the potential general offer (GO), acquiring E&O will allow Sime to leverage on E&O's stronger branding in the higher-end property market, the development exposure in Penang and the prestige of developing wellness township with Singapore's Temasek in the Iskandar region,' it said.

UOB Kay Hian Research said the experienced and aggressive existing management team of E&O would enhance Sime's property development business through knowledge sharing and leveraging on E&O strength.

'We agree that the price paid for the 30% stake in E&O is pricey but this could be due to management's optimism on property and eagerness to turnaround its property arm by leveraging on E&O's stronger branding and management to beef up its current property team.

'We do not view this as a corporate governance issue and the RM6 billion drop in market capitalisation is overdone, even assuming a full GO of E&O of RM2.55 billion,' it said.

UOB Kay Hian Research said given the unclear scenario on the GO issue, investors prefer to stay out of the stock in the current volatile market. Management's view is that the deal does not trigger any unlawful misconduct.

'Based on E&O's RNAV valuation excluding Sri Tanjung Pinang 2 of RM1.51/share estimated by our property analyst, Sime is paying about 52.3% premium to E&O RNAV/share of RM1.51. This represents a

potential value erosion of only approximately 4sen/share assuming no GO. In the worst case scenario, ie a GO for E&O, the potential value erosion is estimated at 15 sen/share,' it said.

UOB Kay Hian Research said it was maintaining a BUY with target price of RM10.40 based on sum-of-the-parts.

'Maintain BUY for Sime's defensive PLANTATION [] business, decent dividend yield of 4.1% and good earnings growth visibility. Sime's below market FY13F PE of 12 times and low foreign ownership suggest limited downside. Sime's target price will fall only modestly from RM10.40 to RM10.25 even in the worst case scenario of a value erosion of RM0.15/share, assuming a potential GO,' it said.

Proton, MMC to benefit from tie-up : OSK

Stock Name: PROTON
Company Name: PROTON HOLDINGS BHD

Research House: OSK

Price Call: SELL

Target Price: 2.00

KUALA LUMPUR: OSK Research Sdn Bhd said Proton Holdings
Bhd would earn income from engine contract manufacturing and increase its plant utilisation after announcing the collaboration with Mitsubishi Motors Corp (MMC).

"We see this deal as a win-win situation for both parties, unlike the earlier Inspira rebadging deal, which benefited MMC more," OSK Research said.

The research house also highlighted that there is still risk that certain aspects of the tie-up may not materialise, but the chances are fairly slim, given that the previous collaboration went smoothly.

Proton Holdings Bhd and Mitsubishi Motors Corp (MMC) are strengthening their collaboration via the joint production of engines at Proton, the contract assembly of Mitsubishi vehicles catering to the ASEAN market, and the sharing of parts and components.

OSK Research also assumed that the deal with Nissan may have hit a snag, as the management had not provided any update on the status of the potential tie-up.

Earlier this year, Proton said it had entered a Memorandum of Understanding (MoU) with Nissan to conduct feasibility studies on a possible cooperation on the use of the latters platform and power train. --Bernama