Bursa Malaysia Stock Price Target: 10/16/11

October 21, 2011

HLIB Research 21 October 2011 (TSH; Traders Brief)

Stock Name: TSH
Company Name: TSH RESOURCES BHD

Research House: HLG

Price Call: BUY

Target Price: 3.52

TSH Resources (BUY; NEW)

Strong FFB growth to underpin earnings

'''' TSH Resources is involved mainly in the oil palm plantation and milling business in Malaysia and Indonesia, which contributed approximately 83% and 96% of its revenue and operating profit in 2010 respectively.

'''' The bases of our investment case for TSH include:

1.'''' Its young tree profile, suggesting strong FFB growth and earnings ahead;

2.'''' The introduction of WAKUBA ramet (which would be used in TSH's new planting activities from 2012), will sustain TSH's high FFB output growth over the longer term; and

3.'''' The favourable long term prospects of the oil palm plantation sector.

'''' We are initiating coverage on TSH with a BUY recommendation and TP of RM3.52 (based on sum-of-parts valuation).

KLCI: Focus on EU Summit

'''' Markets are likely to remain volatile and confused in the immediate term, depending on the outcome from the upcoming EU discussions from 23-26 Oct and a later one by G20 on 3-4 Nov.

'''' Moreover, with the FBM KLCI broken below the uptrend line (formed since late Sep 11), we continue to advocate risk-averse investors to sell into strength or trim positions with resistance zones at 1470-1495 while supports for pullbacks are 1432 (10-d SMA), 1411 (30-d SMA) and 1400 psychological levels.

KURASIA: Poised for a technical rebound''

'''' Although trading could remain choppy in the near term, KURASIA has been consolidating well along the uptrend line support which is positive. Once the upper Bollinger band (now at RM0.505) is taken out, prices should re-rate towards RM0.57 (38.2% FR) and RM0.66 (23.6% FR). Further resistance targets are RM0.75-0.80. Supports are RM0.46 (lower Bollinger band) and RM0.42 (61.8% FR). Cut loss below RM0.42

BAT up on interim dividend payout

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

Research House: MAYBANK

Price Call: HOLD

Target Price: 45.10

KUALA LUMPUR: BRITISH AMERICAN TOBACCO (M) [] Bhd's shares rose in early trade on Friday, Oct 21 after it declared an interim dividend tax exempt of 60 sen a share compared with 64 sen a year ago, as its earnings rose 3.3% to RM176.27 million in the third quarter ended Sept 30 from RM179.65 million.

At 9.05am, BAT was 12 sen to RM43.72 with 5,600 shares traded.

Its revenue increased by to RM1.104 billion from RM993.59 million, earnings per share were 61.70 sen compared with 59.80 sen.

Maybank IB Research in a note Oct 21 said that BAT's 9M11 recurring net profit of RM551 million (+0.5% y-o-y), post stripping off a one-off restructuring charge of RM12 million, accounted for 73.9% and 77.5% of our and consensus full-year forecasts respectively.

'Post the tax hike relief, we lower our 2011 total industry volumes (TIV) decline forecast from -5% to -2.5%.

'We continue to like BAT for its resilient premium market share but industry environment remains challenging. Maintain Hold at a higher DCF-based TP of RM45.10 (from RM43.30),' it said.

WCT advances in early trade

Stock Name: WCT
Company Name: WCT BHD

Research House: MAYBANK

Price Call: BUY

Target Price: 3.08

KUALA LUMPUR: WCT BHD [] shares rose in early trade on Friday, Oct 21 after Maybank IB Research maintained its Buy rating on the stock and said WCT's recent acquisition of a 189.3 ha piece of land in Rawang would positively allow it to diversify its property development business away from Klang, to an upcoming and growing piece of real estate in northern Klang Valley.

At 9.30am, WCT rose 12 sen to RM2.45 with 360,200 shares traded.

In a note Oct 21, Maybank Research said there is no indicative GDV just yet for WCT's latest property development, adding that the research house's earnings forecasts for WCT were unchanged for now.

'WCT remains a Buy with an unchanged SOP-based target price of RM3.08 (13x 2012 PER plus 20sen value enhancement from the KLIA IC2 concession),' said Maybank Research.

Tenaga slips, worries mount on gas shortage

Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD

Research House: RHB

Price Call: SELL

Target Price: 4.74

KUALA LUMPUR: Shares of Tenaga Nasional fell on Friday, Oct 21 on worries about an early resolution to its gas supply shortage which could push it deeper into the red in the fourth quarter ended Aug 31, 2011.

Tenaga fell eight sen to RM5.47 with 445,400 shares done.'' The FBM KLCI lost 1.99 points to 1,439.19. Turnover was 542.78 million shares valued at Rm347.91 million.

RHB Research Institute maintained its Underperform recommendation with unchanged indicative fair value of RM4.74 based on unchanged target CY12 PER of 12 times.

'Due to ongoing gas shortage from maintenance at Petronas' LNG plants and delays for the Bekok C bypass, Tenaga will likely record a loss in 4Q, possibly close to that seen in 3Q (-RM460 million),' it said.

The research house said this was a result of Tenaga receiving only an average of 950 mmscfd of gas in 4Q, just marginally higher than the average 940 mmscfd received in 3Q.

'Whether Tenaga meets our FY11 earnings forecast of RM708 million (consensus: RM750 million), mainly depends on the full extent of unscheduled maintenance by Petronas in 4Q,' it said.

Tenaga reported a core net profit of RM801 million for 9MFY11. The initial guidance from Petronas was 17 days of scheduled maintenance.

'Recall in 3Q, Tenaga incurred an additional RM1.3 billion in fuel costs, due to 61 days of gas supply disruption (of which 51 days were due to unscheduled maintenance),' it said.

Maybank IB Research cuts Tenaga FV to RM5.90

Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD

Research House: MAYBANK

Price Call: HOLD

Target Price: 5.90

KUALA LUMPUR Maybank Investment Bank Research has reduced TENAGA NASIONAL BHD []'s target price from RM6.60 a share to RM5.90.

It said on Friday, Oct 21 that it believes the upcoming 4QFY11 results to be released on Oct 28, will be very weak.

Maybank Research said was due to insufficient gas supply, it had to use oil and distillates as a fuel source to generate power, which is a significantly more expensive and money losing proposition.

'We maintain our HOLD call, with a lower target price of RM5.90 a share (from RM6.60 a share) after imputing the impact of gas supply issue. We favour the PER methodology and continue to apply Tenaga's long term average of 13 times on FY2012 forecast earnings to derive our target price,' it said.

The research house estimated Tenaga will report a loss of RM230 million for 4QFY11, which is slightly better than RM478 million core net loss achieved in 3QFY11.

'Gas supply disruption will force Tenaga to burn oil and distillates, and we estimate this to add RM1.2 billion to cost,' it said.

Maybank Research said its new target price of RM5.90 is based on Tenaga's historical average PER of 13 times (the valuation basis is unchanged).

'We think this is a fair valuation given that our secondary valuation method of price-to-book is below 1.0 times. It is very rare for a monopolistic utility company to be trading below book, and therefore that's where we see supporting intrinsic value in Tenaga,' it said.

ECM Libra Research maintains Hold on BAT

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

Research House: ECMLIBRA

Price Call: HOLD

Target Price: 43.80

KUALA LUMPUR: ECM Libra Investment Research said BRITISH AMERICAN TOBACCO (M) [] Bhd's 3QFY11 results came in within expectations, with core net profit increased by 3.3% y-o-y to RM176.3 million mostly due to trade loading in anticipation of an excise duty hike which did not materialise.

BAT declared a third interim net dividend of 60.0 sen per share.

In a note Friday, Oct 21, ECM Libra Research said BAT was fully valued at current valuation.

'Nonetheless, CY12 dividend yield of 5.2% remains attractive. Maintain Hold call.

'RM43.80 target price is unchanged based on a DCF valuation (WACC of 7.8%, longterm growth rate of 1.5%),' it said.

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October 20, 2011

HLIB Research 20 October 2011 (Mah Sing; Tenaga; Traders Brief)

Stock Name: MAHSING
Company Name: MAH SING GROUP BHD

Research House: HLG

Price Call: BUY

Target Price: 2.16

Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD

Research House: HLG

Price Call: HOLD

Target Price: 5.10

Mah Sing (BUY)

2011 sales target achieved

'''' Mah Sing has sold out the retail portion of M City (RM117m GDV, 24 units) within two weeks of launching, and will now proceed to launch Block 2 of the residential portion, which we estimate to have GDV of ~RM494m.'' Pricing likely to be north of RM1,000 psf.''

'''' Assuming 30% takeup for Residential Tower 1 this year and 70% takeup by next year, this would lift our FY12-13 earnings by forecast by 3-10%.

'''' Mah Sing have now achieved their RM2bn sales target for 2011. We expect a high likelihood of more land acquisitions before year-end, in the Klang Valley outskirts with affordable housing concept similar to M Residence @ Rawang.

'''' We adjust our PT slightly from RM2.14 to RM2.16 (unchanged 20% discount to RNAV), as we tweak our numbers for M City.'' Maintain BUY.

Tenaga (HOLD)

TNB to report Loss in FY12?

'''' TNB CEO warned that TNB may report a loss in FY12 if the natural gas supply shortage situation is not resolved.

'''' Datuk Khalib also stressed "TNB is getting only 900mmscfd, lower than the agreed allocation of 1,350mmscfd from Petronas".

'''' TNB has to incur additional cost of RM400m a month for using alternative fuels (oils and distillate).

'''' Furthermore, there is high risk of government delaying the tariff review, which is scheduled on Dec 2011, as the government is set to ease the burden of Malaysian high living cost.

'''' However, we do expect natural gas supplies to improve in FY12 from the current level.

'''' Maintain Hold with target price of RM5.10 (based on DCFE). To be reviewed pending result announcement on 28 Oct 2011.

KLCI: Range bound trade ahead of EU Summit

'''' Global markets will remain volatile ahead of the crucial 23 Oct EU Summit as well as 3-4 Nov, when the G20 nations gather to consider additional steps to stabilize the global financial system.

'''' We continue to advocate risk-averse investors to sell into strength or trim positions.'' Stiff resistance zones are at 1470-1490 pts. Support levels are 1413-1434 levels.

ULICORP: Poised for a technical rebound''

'''' As technical readings are on the mend from its grossly oversold positions, ULICORP is poised to retest RM0.85 (50% FR) before heading further towards stiff resistance at RM0.90 (200-d SMA) with the next upside target is RM0.99 (50-d SMA).

'''' Immediate support levels are RM0.725 and crucial head & shoulder neckline near RM0.66. Cut loss below RM0.66.

UOA Devt at near 2-month high, very active

Stock Name: UOADEV
Company Name: UOA DEVELOPMENT BERHAD

Research House: AFFIN

Price Call: BUY

Target Price: 2.07

KUALA LUMPUR: Shares of UOA Development Bhd surged to a near two-month high on Thursday, Oct 20 and it was very actively traded with more than 11 million shares done in the morning session.

At 12.30pm, it was up 13 sen to RM1.64, the highest since Aug 23. There were 11.29 million shares done.

It bucked the cautious overall market, where the FBM KLCI fell 15.10 points to 1,435.15. Turnover was 762.27 million shares valued at RM459.98 million. There were 144 gainers versus 477 losers.

This is the second time in six trading days that the share price had surged.'' It jumped to RM1.45 on Oct 13, a day after it announced that it would acquire 10 acres of Kepong land for RM73 million.

UOA Development had entered into a conditional sale and purchase agreement with Tago (Malaysia) Sdn Bhd for the proposed acquisition of a freehold land in Kepong for a cash consideration of RM72.9 million (RM170 psf). The freehold land measures approximately 428,801 sf (9.8 acres).

Affin Investment Bank Research said it was Neutral on acquisition and maintained a BUY with an unchanged TP of RM2.07.

However, the share price is sharply below its offer price when it was listed in June.'' Its institutional price was fixed at RM2.60 and the final retail price at RM2.52. At RM2.52, this was below the indicative retail price of RM2.90.

APM falls on downbeat auto sector outlook

Stock Name: APM
Company Name: APM AUTOMOTIVE HOLDINGS BHD

Research House: RHB

Price Call: SELL

Target Price: 4.20

KUALA LUMPUR: Auto parts supplier APM fell 3.9% on Thursday, Oct 20 on the downbeat outlook for the domestic sector as analysts viewed the weak market sentiment may see consumers avoiding discretionary stocks.

At 3.12pm, APM was down 19 sen to RM4.60. There were 137,100 shares done.

The 30-stock FBM KLCI, of which APM is not a component, fared worse. It fell 16.12 points to 1,434.13. Turnover was 890.64 shares valued at RM630.69 million. There were 142 gainers, 531 losers and 206 stocks unchanged.

RHB Research Institute was negative on prospects for the motor sector in 2012 on the back of rising global macroeconomic uncertainties and escalating downside risks to equity valuations.

'Investor sentiment surrounding the motor sector going into 4Q11 is likely to remain weak, with the market's increasingly defensive posture not favouring consumer discretionary stocks,' it said.

RHB Research had an under perform rating on APM and fair value of RM4.20.

Affin Research maintains Buy on Bonia, TP RM2.50

Stock Name: BONIA
Company Name: BONIA CORPORATION BHD

Research House: AFFIN

Price Call: BUY

Target Price: 2.50

KUALA LUMPUR: Affin Investment Bank Research is maintaining its Buy call on Bonia Corp with an unchanged target price of RM2.50, pegged to a PE target of 10 times on CY12 EPS.

It said on Thursday, Oct20 Bonia will continue to benefit from: 1) its 2010 acquisition of the Singapore-based Jeco Group, and; 2) sturdy consumer spending from income growth and upcoming festive sales.

'Key risks to the stock are a slowdown in consumer spending and potentially higher food/fuel prices due to the government's agenda in rolling back subsidies,' it said.

Bursa's price estimate cut at Maybank

Stock Name: BURSA
Company Name: BURSA MALAYSIA BHD

Research House: MAYBANK

Price Call: HOLD

Target Price: 6.55

Bursa Malaysia Bhd, the nation's stock exchange manager, slid 1.1 percent to RM6.34.

The stock's share estimate was cut to RM6.55 from RM8.30 at Maybank Investment Bank Bhd, which said earnings may be hurt by the "weak" market. -- Bloomberg

October 19, 2011

1QFYMay2012 results review

Stock Name: TMCLIFE
Company Name: TMC LIFE SCIENCES BHD

Research House: NETRESEARCH

Price Call: HOLD

Target Price: 0.36

HLIB Research 19 October 2011 (Maxis; Mah Sing; Traders Brief)

Stock Name: MAXIS
Company Name: MAXIS BERHAD

Research House: HLG

Price Call: HOLD

Target Price: 5.51

Maxis (HOLD)

Maxis "Home" Run?

'''' Finally, Maxis has officially launched home fibre internet which only bundles high speed broadband (HSBB) and voice telephony. Partnership with FetchTV allows Maxis to include IPTV in future, completing its offering as a triple play product.

'''' We opined that Maxis has lost focused on their core mobile business over HSBB. This has resulted in poor 1H11 profitability due to depressing net adds and high churn rate as subscribers turn to cheaper alternatives (DiGi and Umobile).

'''' As for HSBB, Maxis' pricing is highest (RM4.27/GB) among all, not to mention that the current product offering is inferior (without IPTV) than peers. Thus, we do not think that Maxis is able to sustain premium pricing.

'''' We update our estimates to reflect contribution from "home" segment and tuning down in view of disappointing net adds and the economic slowdown. Post earnings revision DDM-derived TP cut to RM5.39 from RM5.51.

Mah Sing (BUY)

Site visit to M Residence @ Rawang

'''' We recently paid a site visit to Rawang to view the site for Mah Sing's newly-announced M Residence @Rawang, and also took the opportunity to view the nearby amenities and developments.

'''' We came away feeling more comfortable with the prospects of the project, given good connectivity and mature set of amenities nearby, including a new Jusco outlet.'' GDV for Phase 1 is ~RM400m.

'''' We have slightly raised earnings forecast by 5-10% for FY12-13, and TP from RM2.05 to RM2.14.'' Maintain BUY ''

KLCI: Headlines driven market

'''' We believe global markets will remain volatile for a while, taking cue from headlines mainly from the Euro-zones debt crisis development. Hence, we continue to advocate risk-averse investors to sell into strength or trim positions on weakening daily indicators. From the weekly chart, tough resistance levels are 1469 (15-w SMA) and 1494 (20-w SMA) while supports are 1433 (10-w SMA and uptrend line) and 1413 (30-d SMA ' daily chart).

Dow: Range bound trade''

'''' We reiterate that the Dow will continue to trade range-bound within the box. Major resistance levels are 11600-11800 while crucial supports are 10800-11000 pts. A break below 10800 will drive the index lower towards 10400-10600 levels.

RHBInvest Research Highlights 19th October 2011

Stock Name: MBMR
Company Name: MBM RESOURCES BHD

Research House: RHB

Price Call: SELL

Target Price: 2.65

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

Research House: RHB

Price Call: HOLD

Target Price: 4.50

Stock Name: DRBHCOM
Company Name: DRB-HICOM BHD

Research House: RHB

Price Call: HOLD

Target Price: 1.90

Stock Name: UMW
Company Name: UMW HOLDINGS BHD

Research House: RHB

Price Call: SELL

Target Price: 5.70

Stock Name: APM
Company Name: APM AUTOMOTIVE HOLDINGS BHD

Research House: RHB

Price Call: SELL

Target Price: 4.20

Stock Name: PROTON
Company Name: PROTON HOLDINGS BHD

Research House: RHB

Price Call: HOLD

Target Price: 2.90

19th October 2011

Top Story: Fitters ' "Green" ambition not derailed by "red" market Not Rated

Visit Note

'' Fitters remains committed to its green energy ventures but funding will now have to come predominantly from debt instead of equity on the back of a depressed stock market.

Sector Call

Motor: Seasonal hangover Underweight

Sector Update

MBM Resources: Fair value maintained at RM2.65 Underperform

Tan Chong: Fair value maintained at RM4.50 Market Perform

DRB-HICOM: Fair value maintained at RM1.90 Market Perform

UMW: Fair value maintained at RM5.70 Underperform

APM: Fair value maintained at RM4.20 Underperform

Proton: Fair value maintained at RM2.90 Market Perform

Corporate Highlights

Top Glove: Plans to diversify upstream Market Perform

Briefing Note

'' Management believes that the current oversupply situation is set to continue as glove manufacturers expanded too aggressively during the short-lived H1N1 epidemic in 2009. Management estimates it may take the industry may take about 1-3 years to absorb the excess capacity.

CI Holdings: Minimum dividend of RM4/share post-disposal of Permanis Trading Buy

Company Update

'' According to CIH's circular to shareholders pertaining to its disposal of Permanis to Asahi, we understand that CIH intends to distribute at least RM568m or RM4/share or 71% of its net proceeds in cash dividends to shareholders. The dividends would be paid out immediately upon the completion of the disposal.

Mah Sing: A road trip to Rawang Underperform

Company Update

'' We went on a road trip to Mah Sing's site in Rawang yesterday. It took about 40 minutes to arrive from Southgate @ Sg Besi by bus. Our visit reinforces our positive view on the acquisition, given the decent distance and the amenities nearby, which include the under-construction Jusco mall, government primary school, as well as the established neighbourhood and commercial shops. Over the longer term, M Residence @ Rawang will also be able to tap on the rising population flow in RRI Sungai Buloh land once the MRT line is completed.

Fajarbaru: Lands RM166.4m building job for Ampang 210 Medical Suite Outperform

News Update

'' Fajarbaru has secured a RM166.4m contract for the construction of Ampang 210 Medical Suite in KL.

Genting Malaysia : Resorts World New York to open on 28 Oct Outperform

News Update

'' Resorts World Casino New York City (RWNY) will open its doors at 1:00 p.m. ( New York time) on 28 October 2011. As the first phase, RWNY will open Times Square Casino on the first floor with 2,485 electronic slot machines (Video Lottery Terminals or VLTs) and Electronic Table Games (ETGs). In the next two months and as part of the second phase, RWNY will open the 5th Avenue Casino and Crockfords Casino on the second floor, as well as Central Park Events Center , which will have an additional 2,515 VLTs and ETGs.

Favourable near-term outlook for BAT, long term remains smoky

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

Research House: RHB

Price Call: SELL

Target Price: 42.40

British American Tobacco (M) Bhd
(Oct 18, RM44.80)
Maintain underperform at RM44.90 with fair value of RM42.40: British American Tobacco (BAT) is expected to release its 3QFY11 results tomorrow. We believe 9MFY11 earnings will be in line with our estimates and come in at RM890 million to RM900 million, which would account for 76% to 77% of our full-year forecasts.

We do not discount the possibility that BAT increased its market share by about 100 to 200 basis points to about 61.4% to 61.5%, driven by its its Dunhill Switch/Boost brands for the premium segment and Pall Mall Ice for the value for money (VFM) segment. The Dunhill Switch/Boost variants, which contain the innovative menthol capsule, were launched earlier this year and have grown Dunhill's market share by about 2.6% since they were launched in 1QFY11 to 44.6% (from 42.2% in January 2011). However, to be conservative, we are keeping to our assumptions of a flat market share of about 61.3% for now.

In October 2010, the industry went through a steep excise duty increase of three sen per stick which resulted in the total industry volume (TIV) declining by 16.7% year-on-year (y-o-y) in 4QFY10. However, as there was no excise duty hike for cigarettes in Budget 2012, we expect 4QFY11 TIV to decline at a slower rate of 4%-5% y-o-y, which would bring TIV for FY11 to a decline of 5%-6% y-o-y, in line with our estimates. Without the hike in excise duties, the price differential between legal and illegal cigarettes remains relatively small, which we expect will ease the growth of the illicit trade volume, currently accounting for about 37% of the overall market.

Despite being spared an excise duty hike, we believe that the long-term earnings outlook remains cloudy for the industry. We expect that excise duties for cigarettes will continue to rise in the future, given the health risks associated with the product. Our view is that the government did not raise the excise duties due to the current large volume of the illicit cigarette market. As such, we believe that once the government has the illicit trade under control, excise duties could be raised again, thus putting more downward pressure on TIV. Although we do not expect this to happen in FY11, we believe that in FY12, the risk of an earlier than expected hike in excise duty is high.

The key risks include: (i) more government campaigns to discourage smoking, like a potential ban on smoking in public which may turn potential new smokers away; and (ii) increasing illicit cigarettes market.

We make no change to our earnings forecasts. Our discounted cash flow-derived fair value remains unchanged at RM42.40 based on weighted average cost of capital of 7.6%. Although we believe that BAT's near-term outlook is positive, buoyed by the lack of an excise duty hike, we believe that its long-term outlook remains cloudy, underpinned by the risk of a steeper excise duty hike in the future. We reiterate our 'underperform' call on the stock. ' RHB Research, Oct 18

This article appeared in The Edge Financial Daily, Ocotber 19, 2011.

Genting Malaysia rises as it preps New York opening

Stock Name: GENM
Company Name: GENTING MALAYSIA BERHAD

Research House: RHB

Price Call: BUY

Target Price: 3.90

KUALA LUMPUR: Genting Malaysia Bhd and Genting shares advanced on Wednesday, Oct 19 as the gaming group prepares to open the Resorts World Casino New York City (RWNY) on Oct 28, October 2011.

At 11.11am, Genting Malaysia was up 18 sen to RM3.68 with Genting gained eight sen to RM10.06.

RHB Research in a note Oct 19 said it was positive that RWNY was opening on schedule, and said it expects RWNY to contribute positively to earnings in the medium term.

The research house however said that the project cost had risen to US$580 million (from US$500 million previously), as the size of the racino had increased to include a third floor where the Central Park Events Center was.

RHB Research highlighted that it had yet to impute earnings contributions from this racino into our forecasts, but said that based on its relatively conservative estimates, this racino was expected to add about 10% p.a. to Genting Malaysia's (GM) net profit.

'We believe that as its earnings potential become clearer to investors, this could result in earnings upgrades for the stock and valuations would therefore look more attractive.

'No change to our forecasts and our SOP-based fair value of RM3.90. Maintain Outperform,' it said.

Fajarbaru rises on RM166.4m medical suite job

Stock Name: FAJAR
Company Name: FAJARBARU BUILDER GRP BHD

Research House: RHB

Price Call: BUY

Target Price: 1.13

KUALA LUMPUR: Fajarbaru Builder Group Bhd shares rose on Wednesday, Oct 19 after it secured a RM166.4 million contract for the CONSTRUCTION [] of Ampang 210 Medical Suite in KL.

At 9.52am, Fajarbaru added four sen to 96 sen with 14,000 shares done.

The company said on Oct 18 that its unit Fajarbaru Builder Sdn Bhd would jointly undertake the project with Aztabina Sdn Bhd.

RHB Research in a note Oct 19 said that this was the first key contract Fajarbaru had secured in FY06/12, boosting its outstanding construction orderbook by 32% from RM524 million to RM690 million.

Assuming EBIT margin of 8-10%, the contract will fetch RM13.3 million-RM16.6 million EBIT over the construction period, said the research house.

'Forecasts maintained as we have assumed Fajarbaru to secure RM250 million worth of new jobs in FY06/12.

'Fair value is RM1.13.'' Maintain Outperform,' it said.

CIMB Research maintains Sell on Top Glove

Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD

Research House: CIMB

Price Call: SELL

Target Price: 3.29

KUALA LUMPUR: CIMB Equities Research maintains its Sell rating on Top Glove Corp, earnings outlook and RM3.29 target, based on a 13.05 times forward price-to-earnings.

It said on Wednesday, Oct 19 that capacity glut continues to overhang the glove sector and it could take two to three years to absorb the excess supply.

'Although Top Glove's earnings have probably bottomed, consensus numbers imply an unachievable 49% on-quarter rise in net profit,' it said.

CIMB Research said that consensus earnings downgrades will follow. Though a turnaround is near, the share price is still ahead of its fundamentals, it added.

'We do not concur with the upbeat view on natural rubber (NR) latex price that was voiced during the surprisingly well-attended briefing. Top Glove indicated that NR latex prices could fall to RM7 a kg in three to six'' months, which we view as unlikely since rubber trees are approaching the wintering period (February to April) when natural rubber production halves,' it sadid.

The research house said even though Top Glove is deferring capacity of 1.2 billion pieces per annum'' by seven months, overcapacity is still an issue. Top Glove thinks that industry supply exceeds demand by 10-20%. Assuming demand growth of 8%-10% per annum, it could take two to three years for demand to catch up with supply.

'Though a stronger ringgit is positive, we gathered that Top Glove probably booked a forex loss in September as receivables were locked in at the Augiust 2011 rate of RM2.95-RM3.10,' it said.

CIMB Research said despite Malaysia's gas shortage, Top Glove's capacity expansion of 6.3 billion pieces by May 2012 will not be affected. The company will use biomass as fuel, reducing its dependence on subsidised gas.

RHB Research fair value of Fitters at RM1.10

Stock Name: FITTERS
Company Name: FITTERS DIVERSIFIED BHD

Research House: RHB

Price Call: BUY

Target Price: 1.10

KUALA LUMPUR: RHB Research Institute said against a backdrop of a depressed stock market, realistically, funding for Fitters Diversified's green energy ventures will now have to come mainly from debt instead of equity.

It said on Wednesday, Oct 19 that Fitters had budgeted RM40 million capital expenditure for its green energy ventures in FY12/12 of which RM30 million would go to third-party green palm oil milling and the remaining RM10 million to biomass-based green energy projects.

'Apart from green palm oil milling, Fitters is currently evaluating a long list of greenfield/brownfield green energy ventures in the Philippines and Singapore to invest in for the long haul. These will be carried out on a build, operate and transfer (BOT) basis, based on biomass sources such as coconut shell, rice husk, garden/landscaping refuse and animal waste including chicken dressing,' it said.

RHB Research said for green palm oil milling, Fitters is closing in on deals with eight third-party palm oil mills.

It also said the company indicated that its previous FY12/11 net profit guidance of RM35 million will not be achievable due to the delay in the launching of Phase 3 of its ZetaPark project in Setapak, Kuala Lumpur, as well as lower palm oil milling profits.

'We are cutting FY12/11-13 net profit forecasts by 17%-28% to reflect these,' it said.

It accorded a fair value of RM1.10. This is having valued its fire prevention, CONSTRUCTION [] and palm oil milling businesses at 10 times one-year forward PER, property business by discounting back the potential profits from RM338 million GDV to NPV at 10% and green energy business by the DCF model with a discount rate that is equivalent to Fitters' WACC of 8.9%.

OSK Research maintains Sell on Eng Tek, FV RM1.24

Stock Name: ENG
Company Name: ENG TEKNOLOGI HOLDINGS BHD

Research House: OSK

Price Call: SELL

Target Price: 1.24

KUALA LUMPUR: OSK Research is maintaining its Sell call on Eng Teknologi at a revised fair value of RM1.24 based on 0.6 times FY12 price to net tangible asset, down from 0.7 times previously.

It said on Wednesday, Oct 19 that although the share price has retraced by some 15% since its last downgrade two days ago, it believes investors will turn even more cautious as the current flood in Thailand is not showing any signs of subsiding.

'We foresee further downside risks should the flood situation persist, which could compel the bankers of TYK Capital's privatisation offer to have second thoughts over the proposal,' it said.

On Tuesday, Engtek released an official statement on Bursa Malaysia regarding its Thailand operations amid existing floods in the Ayutthaya province.

The management has confirmed that operations in both its Rojana and Hi-Tech Industrial Park were suspended, while production in other facilities were also experiencing disruptions as their major customers in Thailand are situated in the flood-hit areas.

'The announcement did not come as a surprise as we highlighted previously that all five industrial estates in Ayutthaya have been confirmed to be inundated by water by the Thai army. Given the significant presence of most HDD component manufacturers within the flood-hit province, we continue to expect the negative developments to take its toll on the entire HDD component supply chain,' it said.

OSK Research said Thailand contributes 75% of Engtek's sales. With a total 400-500 CNCs installed, Engtek's two factories in the Ayutthaya province supply some 40% of its total production.

'While we believe management would attempt to mitigate any near-term production shortfall by increasing the production from its existing facilities in China, Philippines and Malaysia, we opine what is more of a concern here is that Thailand typically contributes 75% of its consolidated sales,' it said.

OSK Research said given the presence of almost all major HDD makers in the region, i.e. Western Digital, Seagate, Hitachi, and Toshiba.

The research house said due to the severity of the aftermath damage, the entire HDD supply chain is likely to be hit and we foresee downside risks not just on its Thai facilities but also its existing operations in the rest of the region. 'Restoration to pre-flood production level would depend largely on how fast all the HDD component manufacturers can shift their respective production out of Thailand in the immediate term and how soon the flood in Thailand would subside in the near term,' it pointed out.

OSK Research said due to the fluidity of the situation with all of the flood-hit industrial parks sealed off by the Thai army as a precaution, the magnitude of losses suffered remains unknown at this point of time.

'Although we make no changes to our forecasts for now, we foresee a difficult 4Q11 given the widespread aftermath impact. Should the monsoon rains subside by the end of this month, realignment or replacement of machineries will take at least another two to three months and hence, we expect production to normalise only by 2Q12 in our base case scenario,' it said.

Mah Sing's price estimate raised, stock up

Stock Name: MAHSING
Company Name: MAH SING GROUP BHD

Research House: HLG

Price Call: BUY

Target Price: 2.14

Mah Sing Group Bhd, a Malaysian property developer, rose in Kuala Lumpur trading after Hong Leong Financial Group Bhd increased its share estimate to RM2.14 from RM2.05.

The stock climbed 2.7 percent to RM1.94 at 9:15 a.m. local time. -- Bloomberg

October 18, 2011

Things are under control at Bernas

Stock Name: BERNAS
Company Name: PADIBERAS NASIONAL BHD

Research House: MAYBANK

Price Call: BUY

Target Price: 3.90

Padiberas Nasional Bhd
(Oct 17, RM3.23)
Maintain buy at RM3.22 with target price of RM3.90: Bernas has secured 800,000 tonnes of rice over the next 12 months via a memorandum of understanding (MoU) signed with the Vietnamese government. This consignment is more than enough to alleviate any supply disruptions due to the flooding in Thailand. Bernas should have no problems supplying rice at a reasonable price in the next'' six to 12 months. We maintain our 'buy' call and target price of RM3.90 based on 8.1 times 2011 price-earnings ratio.

This order is uncharacteristically large for a single supplier. In 2010 Bernas imported 932,000 tonnes of rice from six different countries. This showcases the high level of inventory in the world ' Vietnam and India have both had record harvests and have the highest inventory levels ever. Although we expect Thailand's rice exports will be severely impacted next year, the other rice exporting countries will be able to offset the shortage and serve the world's demand for rice.

Bernas' business strategy is more than able to manage the current global rice crisis with: (i) sufficient rice stockpile to last five to six months; (ii) secured and locked in prices for rice imports up till March 2012 for direct consumption and to replenish its depleted stockpiles; and (iii) supply transparency with the Vietnamese rice MoU.

Despite the negative outlook portrayed by the media, Bernas is thriving and is in no crisis whatsoever.

Bernas' chief problem of cheap rice smuggled from Thailand into Malaysia has been resolved naturally, as the floods render ground transport impossible. Furthermore, we expect the Thai government to stress restocking its national stockpile first and implement its policy of buying paddy from farmers direct at a fixed price. We believe there is no longer any financial incentive for Thai smugglers to market their product in Malaysia.

Bernas is due to release its 3QFY11 results in mid-November. We expect continued strong performance with net profit growth of +40% year-on-year to RM81 million. The drivers are volume growth of 3% y-o-y with stable average selling price and input cost. We believe there is potential upside to our earnings forecast as we have not imputed the benefit of no smuggling of Thai rice into Malaysia. ' Maybank IB Research, Oct 17

This article appeared in The Edge Financial Daily, Ocotber 18, 2011.

QL Resources progressing well

Stock Name: QL
Company Name: QL RESOURCES BHD

Research House: OSK

Price Call: BUY

Target Price: 3.62

QL Resources Bhd
(Oct 17, RM2.86)
Maintain buy at RM2.84 with revised fair value of RM3.62 (from RM3.81): In Surabaya, Indonesia, QL's surimi and fishmeal businesses started contributing to its bottom line in August this year, ahead of its forecast timeline of 1QFY13. The surimi plant started commercialisation in July and the fishmeal plant in August ' each with a production capacity of 5,000 tonnes per year ' and are expected to hit 4,000 tonnes per year each by 1QFY13. In Tay Ninh, Vietnam, QL targets to ramp up production capacity from 80,000 eggs per day currently to 500,000 by 3QFY13.

As for the new poultry project in Cianjur, Bandung, Indonesia, production is expected to hit one million eggs per day (100,000 currently) by 4QFY13, while its breeder farm nearby will produce 1.5 million day-old chicks (DOC) per month (1.2 million currently) by 4QFY12. Both the egg and DOC businesses have broken even at the operating level, and are expected to contribute to the bottom line in 1QFY13.

The new crude palm oil mill located in Indonesia is targeted to be completed before November this year, while its oil palm estate is planted at 10,000ha (as at August 2011) with planting expected to finish at 15,000ha by FY14. Its biogas plant was completed in August'' this year and is supplying power to its palm pellet plant (with a production capacity of 3,000 tonnes per month) which has commercialised at the same time.

QL is targeting to launch its palm pellet plant by end-November. With the palm pellet plant, QL could convert its in-house waste, empty fruit bunches (EFB) to palm pellets for generating biogas energy.

Given that QL is involved in the selling of basic and highly affordable food, demand will be resilient. In our conversation with the management, we also noted that the prices of its products, such as surimi, fishmeal and eggs, are expected to be relatively stable.

Furthermore, QL has large economies of scale which ensures that selling prices will be above cost most of the time.

We estimate that the new expansion will contribute about 3% and 12.4% to FY12 and FY13 net profit respectively. While QL's fundamentals remain unchanged, we trim our FY12 and FY13 earnings forecasts by 2.9% to 5.6%, following some historical number updates by management. ' OSK Research, Oct 17

This article appeared in The Edge Financial Daily, Ocotber 18, 2011.

RM1.10/share Buyout Offer

Stock Name: LEADER
Company Name: LEADER UNIVERSAL HOLDINGS BHD

Research House: TA

Price Call: BUY

Target Price: 1.10

HLIB Research 18 October 2011 (Public Bank; Traders Brief)

Stock Name: PBBANK
Company Name: PUBLIC BANK BHD

Research House: HLG

Price Call: HOLD

Target Price: 12.88

Public Bank (Hold)

Consistency

'''' 3QFY11 results in line with HLIB and consensus.

'''' Loan growth of 13.8% yoy slightly at lower end of Public's target of 14-15% but ahead of our assumption of 12%.''

'''' Deposits growth was slightly behind at 11%.

'''' Sequentially, 3QFY11 earnings boosted by higher recovery.

'''' 9MFY11 earnings growth driven by all line items.''''

'''' Overseas operations impacted by forex but still growing.''

'''' Asset quality continued to improve.

'''' Maintain Hold and target price of RM12.88 based on Gordon Growth with ROE of 23.9% and WACC of 10%.

KLCI: Wild swings ahead

'''' With the overnight plunge on Dow and negative remark by German's Finance Minister that there will not be a prompt solution to the euro-zone debt crisis, global markets are again susceptible to swift declines.

'''' Hence, we continue to advocate risk-averse investors to sell into strength or trim positions on Weekly resistances overbought Stochastic indicator and looming election risk. ''are 1470 (15-w SMA) and 1489 (38.2% FR) while supports are 1440 (uptrend line), 1422 (61.8% FR) and 1412 (10-d SMA).

Dow: Due for more pullback''

'''' With the overnight plunge on Dow and more key corporate earnings to be released this week, Wall St will be bracing for more volatility ahead. Major resistance levels are 11600-11800 while crucial supports are 10800-11000 pts.

RHB Research maintains Underperform on BAT

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

Research House: RHB

Price Call: SELL

Target Price: 42.40

KUALA LUMPUR: RHB Research Institute is maintaining its Underperform rating on BRITISH AMERICAN TOBACCO (M) [] Bhd with a discounted cashflow-derived fair value of RM42.40.

It said on Tuesday, Oct 18'' that BAT was expected to release its 3QFY11 results on Thursday. It believed the 9MFY11 earnings would be in line with its estimates and come in at RM890 million to RM900 million, which would account for 76%-77% of its full-year forecasts.

'We do not discount the possibility that BAT increased its market share by 100 basis points to 200 basis points to 61.4%-61.5% driven by its Dunhill Switch/Boost brands for the premium segment and Pall Mall Ice for the VFM segment,' it said.

RHB Research said as there was no excise duty hike for cigarettes in the 2012 Budget, it expected 4QFY11 total industry volume to decline at a slower rate of 4%-5% on-year, which would bring FY11 TIV to a decline of 5%-6% on-year, in line with its estimates.

'Despite being spared an excise duty hike, we believe that the long-term earnings outlook remains cloudy for the industry. We expect that excise duties for cigarettes will continue to rise in the future,' it said.

BAT fell 28 sen to RM44.62 at midday on Tuesday.

Delayed El Nino effect to support CPO prices

Stock Name: TSH
Company Name: TSH RESOURCES BHD

Research House: MIDF

Price Call: BUY

Target Price: 3.54

Plantation sector
Maintain neutral: In an analysis of palm oil production and the impact on prices for 2011/12, Ling Ah Hong, director of Ganling Sdn Bhd, said bad weather does not affect production immediately, and he is expecting delayed El Nino effects in 4Q11 and 1Q12.

The prolonged La Nina and El Nino can affect palm oil production for as long as 24 months after its occurrence.

Peninsular Malaysia experienced a prolonged drought from May to July 2009 and again in February to April 2010. Based on the physiological behavior of oil palm trees, the El Nino phenomenon will affect production in'' six to 12 months, which was in 1H10 and again after 22 to 24 months, which is 2H11.

The delayed El Nino effect is expected to provide short-term support for the crude palm oil (CPO) price, helping to realise our projected average price of RM3,200 per tonne for 2011. The projection now appears to be on the slightly conservative side. The year-to-date average is RM3,334 per tonne as at Monday. Based on our average price assumption, the implied CPO price average for the rest of 2011 is about RM2,700 per tonne. CPO price traded at RM2,864 per tonne on Monday and the RM2,700 level should be the short-term support.

The La Nina phenomenon in early 2011 helped to ease the moisture stress of palm oil trees caused by dry weather conditions in February to April 2010. Therefore, CPO production is expected to recover in 2011, having recovered sharply in 2Q11 and 3Q11. CPO production in 2Q11 jumped 40.8%quarter-on-quarter to 5.03 million tonnes; in 3Q11 it rose by 5.2% q-o-q to 5.29 million tonnes.

Plantation companies under our coverage are expected to enjoy an average of 34.4% earnings growth in FY11 mainly benefiting from higher forecast average CPO price and higher projected output.

According to the head of Commodity Derivatives Product Development of Bursa Malaysia, the bourse is planning to introduce RBD Palm Olein futures that can be used by refiners to lock in refining margins. Refiners are currently using CPO futures to hedge against CPO price volatility in the market. The product is expected to be on the market in 2012.

We remain 'neutral' on the sector given that output is expected to moderately recover and production is expected to resume its normal production cycle in 2012. We continue to like Sime Darby Bhd ('buy', target price: RM9.05) because of its huge landbank that will translate into 7.5% fresh fruit bunch (FFB) growth and 8.3% CPO growth in FY12. We are also maintaining our 'buy' recommendations on TH Plantations Bhd (TP: RM2.26) due to its stable dividend payout and TSH Resources Bhd (TP: RM3.54) due to its large immature areas that are expected to provide 23.6% FFB growth in FY12. ' MIDF Research, Oct 18

This article appeared in The Edge Financial Daily, Ocotber 19, 2011.

Delayed El Nino effect to support CPO prices

Stock Name: THPLANT
Company Name: TH PLANTATIONS BHD

Research House: MIDF

Price Call: BUY

Target Price: 2.26

Delayed El Nino effect to support CPO prices

Stock Name: SIME
Company Name: SIME DARBY BHD

Research House: MIDF

Price Call: BUY

Target Price: 9.05