December 23, 2011

UMW Holdings (Hold): Reduced losses from WSP in 3Q11

Stock Name: UMW
Company Name: UMW HOLDINGS BHD
Research House: MAYBANKPrice Call: HOLDTarget Price: 6.10



WSP continues to hurt. WSP, a 23% China-based associate of UMW, continues to be loss making for the last 9 consecutive quarters with net loss of USD17m in 3Q11 and USD50m for 9M11. Against this backdrop, we have trimmed UMW's 2011-12 earnings by 1-3% with a higher net loss assumption at WSP (see Table 1). Coupled with headwinds at the auto division, there are minimal catalysts to re-rate UMW, which is a Hold with an unchanged RM6.10 target price, pegged at 11x 2012 EPS.

Maybank research (23 December 2011)

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JCY International up after upgrade by OSK Research

Stock Name: JCY
Company Name: JCY INTERNATIONAL BERHAD
Research House: OSKPrice Call: TRADING BUYTarget Price: 1.30



KUALA LUMPUR (Dec 23): JCY International Bhd shares rose on Friday after OSK Investment Research raised its recommendation on JCY Trading Buy from Sell.

At 9.35am, JCY added half a sen'' to 91.5 sen with 844,400 shares traded.

OSK Research on Thursday upgraded the TECHNOLOGY [] sector to Neutral and said that better HDD pricing could help mitigate losses from the Thailand flood.

It said that against the backdrop of the massive works in progress to restore operations following Thailand's crippling floods, the worst could well be over.

The research said it had become less bearish on the hard-hit HDD components sector given the ongoing accelerated restoration as well as potential price hike over the immediate term, which could mitigate the earnings pressure from forgone capacity in the short term.

'As for JCY, we are raising our earnings forecast by more than 100% as their equipment was unscathed. Valuation switched from 0.9x PBV to 8x FY12 PER.

'Call upgraded to Trading Buy with Fair Value of RM1.30. Understand that there are rumours of a strong price push over the next 1 month,' it said.

December 22, 2011

Bouncing Back After 8 Dismal Quarters

Stock Name: HAIO
Company Name: HAI-O ENTERPRISE BHD
Research House: OSKPrice Call: HOLDTarget Price: 1.70



KFC Holdings (Hold) Boards accepted offer

Stock Name: KFC
Company Name: KFC HOLDINGS (M) BHD
Research House: MAYBANKPrice Call: HOLDTarget Price: 4.00



Accepts offer. KFC's board has accepted MESB's offer to take over KFC's assets and liabilities, and it does not intend to seek alternative bids. We maintain that the offer price of RM4.00 per KFC share is fair to minorities because it values KFC at a 2012 PER of 19.4x and 2.6x P/B, based on our forecasts. The high prospective PER is fair for an M&A involving an entire business - our previous fair value for KFC shares was RM3.12 based on DCF which implies 15x 2012 PER.

Maybank research (22 December 2011)

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AEON Co. (Buy): Land acquisition in Kulai, Johor

Stock Name: AEON
Company Name: AEON CO. (M) BHD
Research House: MAYBANKPrice Call: BUYTarget Price: 7.90



Positive, for continuous organic growth. AEON Co.'s recent land transaction at Kulai, Johor, which should be near the newly opened Johor Premium Outlet (JPO), is positive for its provides an organic growth to the group which already has a good reach in the Klang Valley. We maintain our forecasts and PER based RM7.90 target price (14x 2012) as earnings contribution will be beyond 2013. AEON Co. is our top pick for consumer sector. Maintain Buy.

Maybank research (22 December 2011)

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Berjaya Land Berhad - 2QFY12 Results - Realty check

Stock Name: BJLAND
Company Name: BERJAYA LAND BHD
Research House: CIMBPrice Call: SELLTarget Price: 0.78



OSK Research maintains Neutral on Lion Industries, FV RM1.50

Stock Name: LIONIND
Company Name: LION INDUSTRIES CORPORATION
Research House: OSKPrice Call: HOLDTarget Price: 1.50



Larger Smaller Reset KUALA LUMPUR (Dec 22): OSK Investment Research has maintained its Neutral call on Lion Industries Corp Bhd with a fair value of RM1.50 and said it welcomed that the group was ''actively seeking mining assets, although the details were scarce.

The research house however added that the steel market was still fraught with challenges considering the slow execution of domestic projects and the impending consolidation of China's steel industry, which may hurt global sentiment.

'Talks with potential investors on the sale of its steel units are still ongoing but we see an indefinite delay in the outcome.

'Thus, we keep our NEUTRAL call with a Fair Value of RM1.50 in the absence of immediate catalysts,' it said on Thursday.

December 21, 2011

Hong Leong Bank in for the long haul

Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD
Research House: OSKPrice Call: BUYTarget Price: 12.33



Larger Smaller Reset Hong Leong Bank Bhd
(Dec 21, RM 10.54)
Maintain buy with fair value of RM12.33 from RM12.15: The group is well positioned post merger to capitalise on growth opportunities but we believe that the market may not have fully appreciated the revenue synergies that the larger organisational platform can potentially attain.

Maintain 'buy' with a higher fair value of RM12.23, or 1.95 times FY12 price to book value (P/BV), based on the Gordon Growth model. This valuation is supported by 14.8% return on equity (ROE), 9.2% cost of capital (COE) and 4% long-term growth rate.

The key catalysts are: (i) a bigger-than-expected upside in revenue and operational synergy, (ii) more resilient-than-expected asset quality and (iii) stronger-than-expected growth from 20% associate Bank of Chengdu in China. The stock's 1.6 times (P/BV) is compelling against ROE of 14% to 15%.

Management is now guiding for FY12 loan growth to come in at the lower end of its earlier 10% to 15% loan growth targets as macroeconomic uncertainties persist. The group's recent 1Q12 quarter-on-quarter (q-o-q) loan growth grew by a relatively subdued 1.3%, or an annualised rate of just 5.2% partially weighed down by lumpy loan repayments.

As such, its earlier 10% to 15% loan growth guidance does look optimistic. We have correspondingly lowered our FY12 and FY13 loan growth targets from 13.6% and 14.1% to 9.7% and 13.1% respectively.

Current loan growth trajectory is largely driven by secured mortgage and non-residential properties but HLB intends to enhance its community SME business banking portfolio.

This is because its much larger branch network now allows the realignment of some of its branches to expand its reach to this market segment more aggressively which is also positive for longer-term lending yields.

EON Capital's loan portfolio has been holding up stronger than expected with the merged entity's absolute impaired loans declining 5% q-o-q in the recent quarter.

In fact, the actual additional impairment on EON Capital's loans book as a consequence of harmonising with HLB's more stringent impaired loan criteria only led to a RM30.9 million increase in impaired loans for EON Capital, which is small in relation to the RM673 million excess loan loss cover the group is currently sitting on.

We have consequently lowered our credit cost assumption for the group in FY12 and FY13 from 51 basis points (bps) and 42bps to 41bps and 35bps respectively. ' OSK Research, Dec 21


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

AMMB in cautious mode

Stock Name: AMMB
Company Name: AMMB HOLDINGS BHD
Research House: HWANGDBSPrice Call: HOLDTarget Price: 5.80



Larger Smaller Reset AMMB Holdings Bhd
(Dec 21, RM5.90)
Maintain hold with target price RM5.80 from RM6.70: Competition for deposits remains intense, and we expect further pressure in funding costs.

AMMB's portfolio re-balancing appears to be biased towards a rate hike ' variable rate loans were 53% of total loans as at September compared with 47% a year ago. However, this strategy to better position itself for a rising interest rate environment could work against AMMB, as we expect Bank Negara to shift to an easing mode and cut overnight policy rate by 50 basis points to 2.5% (from 3%) by end of 1Q12 to pre-empt any slowdown in the economy.

Management relayed a cautious tone post 2Q12 results. We raised operating expenses as AMMB invests and improves its core banking platform and FY12-14F cost-to-income ratio assumptions were adjusted to 42%/42%/41% (from 40%/40%/39%), in line with management's guidance.

We also raised provisions in FY12 in anticipation of a more proactive provisioning stance in 2HFY12. Other growth levers were unchanged ' FY12F loan and deposit growth targets were maintained at 8%. AMMB's non-interest income will remain susceptible to capital market flows as more than half (52%) stem from market-related activities.

We expect fund raising activities in the small-to mid-market segment (AMMB's captive market) to remain weak in the near term, given the cautious market outlook.

Maintain 'hold', target price cut to RM5.80 based on the Gordon Growth Model, after earnings revisions and assuming 14.5% return on equity (from 15.5%), 6% growth and 11.5% cost of equity. Our RM5.80 implies 1.4 times CY12 book value, which is equivalent to +1 standard deviation from mean. ' HwangDBS Vickers Research, Dec 21


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

Easy to take YTL Cement private

Stock Name: YTL
Company Name: YTL CORPORATION BHD
Research House: AFFINPrice Call: BUYTarget Price: 1.65



Larger Smaller Reset KUALA LUMPUR: YTL Corp Bhd may be able to take YTL Cement Bhd private without a single EGM, leaving little room for minority shareholders of the latter to voice their issues.

YTL Corp is seeking a waiver from the 'requirement to seek shareholder approval' from Bursa Malaysia on grounds that it has obtained authorisation from its shareholders at its AGM on Nov 29 to issue up to 10% of its current issued shares without the need for shareholder approval.

Likewise, YTL Cement may not have an EGM either as its company secretary Ho Say Keng told The Edge Financial Daily in an email reply. 'This is a voluntary offer and no EGM is required of YTL Cement,' he said.

To recap, YTL Cement shareholders have been offered 3.17 YTL Corp shares for each YTL Cement share at an offer price of RM4.50, and 1.56 YTL Corp shares for each RM1 in irredeemable convertible unsecured loan stocks (Iculs) at an offer price of RM2.21.

YTL Corp only has to issue 747.19 million shares or 5.3% of its current issued shares for the 47.8% of YTL Cement's shares that aren't already owned or held by any parties acting in concert, according to estimates by The Edge Financial Daily.

The Minority Shareholder Watchdog Group (MSWG) told The Edge Financial Daily that while the offer looks good for YTL Corp, it has some concerns for YTL Cement's minority shareholders and may not get a chance to raise them if neither company has an EGM.

When YTL Cement shareholders exchange their shares for YTL Corp shares, they will face a drop in dividend yield, an increase in price-to-book (P/B) and increased gearing, said MSWG.

YTL Corp says YTL Cement's privatisation is a voluntary offer and no EGM is required. The company is seeking a waiver from 'requirement to seek shareholder approval' from Bursa Malaysia. A report by Affin Investment Bank Bhd believes the valuation appears fair and explained, 'The proposed offer is not an exit offer but rather a merger of two companies and thus no premium was offered.'

Affin's report reiterated Tan Sri Francis Yeoh's justification: it will provide trading liquidity to minority shareholders.

However, YTL Cement shareholders will experience a drop in dividend yield, said MSWG, based on YTL Cement's price of RM4.50 and historical dividend payouts of 13 sen and YTL Corp shares at RM1.42 and a historical dividend payout of two sen.

The offer will also create many odd-lots due to the odd conversion ratio, said MSWG, and hopes the odd-lots will be eliminated by distributing a dividend.

A separate report by RHB Research Institute Bhd released yesterday noted, 'The lack of acquisition premium above the existing share price suggests that YTL Corp is not going all-out to privatise YTL Cement.'

A more ideal time to privatise YTL Cement would have been after November 2012, when the existing Iculs, which are 97% held by YTL Corp and related parties, can be converted into YTL Cement shares at a better conversion rate, said RHB.

RHB believes that the offer will go unconditional since the current stake held by YTL Corp and related parties of 52.8% already exceeds the 50% threshold rate.

A market observer said the crucial shareholding level to watch will be whether YTL Corp receives a minimum acceptance of 90%, to guarantee a full acquisition and the delisting of YTL Cement.

Any acceptance above that level would result in a mandatory acquisition of YTL Cement, including the shares of dissenting minority shareholders.

It is worth noting that the top 30 shareholders of YTL Cement already own 86.5% of the company, as at Sept 30.

RHB maintained its 'market perform' recommendation for YTL Cement shares, which it gave a fair value of RM4.75.

According to Affin's report, the acquisition will boost YTL Corp's earnings per share for FY13 by 6% from 11.9 sen to 12.6 sen.

Accounting for a 15% holding company discount, Affin raised its target price from RM1.55 to RM1.65 and maintains an 'add' call, and noted, 'The acquisition will be value enhancing given the lower price-to-earnings ratio acquisition price tag.'

On a separate note, MSWG told The Edge Financial Daily that it had voiced concerns about the disparity between YTL Cement's strong earnings growth and flat dividend payout at the company's AGM on Nov 29.

'YTL Cement had explained that the cash will be conserved in view that the global economy will be bad next year,' said a MSWG spokesperson.

YTL Cement's earnings have been growing at an average rate of 21% per annum for the past four years, compared to dividends which have been relatively flat and averaged 16.2 sen in the same period. This has led to a build-up to RM1.2 billion in YTL Cement's cash pile, compared to RM866 million in debt.

YTL Cement yesterday closed 14 sen lower or by 3.04% to RM4.46 from RM4.60, while YTL Corp remained unchanged at RM1.54.


This article appeared in The Edge Financial Daily, December 21, 2011.

Streamlining its Assets

Stock Name: BSTEAD
Company Name: BOUSTEAD HOLDINGS BHD
Research House: TAPrice Call: BUYTarget Price: 6.21



Felda Eyeing KFC, QSR Too?

Stock Name: KFC
Company Name: KFC HOLDINGS (M) BHD
Research House: OSKPrice Call: HOLDTarget Price: 3.97



Gets Nod to Renew Lease

Stock Name: NCB
Company Name: NCB HOLDINGS BHD
Research House: OSKPrice Call: SELLTarget Price: 3.12



Tanjung Offshore (Sell): Disappointment ahead

Stock Name: TGOFFS
Company Name: TANJUNG OFFSHORE BHD
Research House: MAYBANKPrice Call: SELLTarget Price: 0.70



Downgrade to Sell, TP cut to RM0.70 (-14%, to 0.6x PBV), ahead of a disappointing 4Q results, hit by a confluence of issues at its engineering equipment division. For this, we forecast TOFF to end 2011 with a higher net loss of RM14m, making consensus and our initial estimates untenable. The stock is unlikely to re-rate until the company shows tangible signs of managing costs effectively.


Maybank research (21 December 2011)

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Aeon Credit gains on firm 3Q earnings

Stock Name: AEONCR
Company Name: AEON CREDIT SERVICE (M) BHD
Research House: OSKPrice Call: BUYTarget Price: 7.20



Larger Smaller Reset KUALA LUMPUR (Dec 21): Aeon Credit Services (M) Bhd shares advanced on Wednesday after its net profit for the third quarter ended Nov 20, 2011 rose 57.4% to RM25.25 million from RM16.04 million a year earlier, due mainly to growth in revenue.

At 9.40am, Aeon Credit was up three sen to RM6.60 with 34,500 shares traded.

The company said on Tuesday that its revenue for the quarter was up 31.7% to RM89.81 million from RM68.18 million.

Earnings per share for the quarter was 21.05 sen compared to 13.37 sen in 2010, while net assets per share was RM2.53.

For the nine months ended Nov 20, Aeon Credit's net profit increased to RM67.89 million from RM44.03 million in 2010, while revenue jumped to RM249.99 million from RM195.88 million.

Reviewing its performance, Aeon Credit said the increase in revenue was due mainly to growth in business and receivabled based on increased financing transaction volume as a result of marketing and promotion activities during the festive periods.

OSK Research in a note Dec 21 said Aeon Credit's 9MFY12 earnings were above consensus and its full-year forecasts.

Revenue and net profit expanded by 27.6% and 54.3% year-on-year due to better performance from personal financing, credit card and other income in conjunction with Hari Raya festival, it sid.

'However, credit card base growth slowed down due to BNM regulation on credit card which will take effect next year. ''NPL trended up to 1.93% which is still well below the industry average. CAR stood at 20.8%.

'Maintain Buy with a higher fair value of RM7.20 as we roll forward our valuation to FY13 EPS pegged to 2-year PE band of 9 times,' it said.



December 20, 2011

HLIB Research 20 December 2011 (Sunway; Traders Brief)

Stock Name: SUNWAY
Company Name: SUNWAY BERHAD
Research House: HLGPrice Call: BUYTarget Price: 3.12



Sunway (BUY)

The sun shines in Medini

'''' Sunway announced a JV with Khazanah to acquire 2 parcels of leased land measuring 691 acres in Medini Iskandar (see Figure #1) worth RM745.3m (RM25.73/sq ft) with an estimated GDV of RM12bn over 10 years. The deal is expected to be concluded by May-12.

'''' We are positive on this development as it will boost Sunway's total land bank by 30% to 2,798 acres, while its effective GDV will also rise by 48% to RM20.7bn.

'''' We maintain our BUY call on Sunway with a TP of RM3.12.

''

''KLCI: Holding well above 1450''

'''' Technical readings have turned better following yesterday 11.6 pts gain to stage a strong breakout above the downtrend line. However, given the persistent negative headlines from Europe and thin volume ahead of the year-end holidays, we expect the local bourse to remain volatile albeit with an upward bias due to the window dressing activities. Crucial support is the 50-d SMA or uptrend line near 1458 whilst resistance zones are 1487-1502.

''

DJIA: Crucial 11500 support levels''''

'''' Following the breakdown of 200-d SMA (11936), mid Bollinger band (11831) and 50-d SMA (11821) supports coupled with the negative technical readings, the Dow may retest lower uptrend line and 100-d SMA supports near 11500. A violation of 11500 will push index lower towards a more solid support of lower Bollinger band at 11250. Immediate resistance levels are 11936-12284 levels.

''

Margin recovery for rubber gloves in 2012

Stock Name: KOSSAN
Company Name: KOSSAN RUBBER INDUSTRIES BHD
Research House: HWANGDBSPrice Call: HOLDTarget Price: 2.70



Larger Smaller Reset Rubber gloves
Latex is trading below RM7 per kg mainly due to softer demand from tyre manufacturers and traders in China affected by tighter credit. Assuming raw material prices remain low and cost savings are retained (instead of passing them on to customers), we expect glovemakers' earnings and margins will recover substantially.

We believe they will certainly try to retain as much of the savings as possible, after having absorbed higher raw material costs previously. Our sensitivity analysis shows that every 1% drop in raw material cost could lift earnings by'' about 3% (assuming all cost savings are retained).

The US dollar has strengthened against the ringgit to 3.15 (+7% from August 2011's low of 2.97) and this will translate to higher export revenue. Our sensitivity analysis shows that every 1% increase in the greenback against the ringgit could lift earnings by about 5%.

Glovemakers are likely to hedge their US dollar exposures, and given the volatile currency trend this could give rise to wide fluctuations in translation gains or losses upon maturity or marking-to-market.

We remain cautious on the sustainability of current raw material prices. As such, we are maintaining our 2012 latex and nitrile price assumptions (average of RM8.30 per kg for latex and RM5.20 per kg for nitrile) for now. The start of the wintering season from February to May, when latex production is usually lower, coupled with potential pent up demand from car manufacturers could drive up latex and synthetic rubber prices again.

At this juncture, it is still early to impute a strong earnings rebound for Kossan Rubber Industries Bhd and Hartalega Holdings Bhd, while our earnings forecast for Top Glove Corp Bhd is at the higher end of consensus estimates. We like Hartalega ('buy', target price: RM6.50) for its superior operating margins (27% against 16% industry average) and return on equity (36% against 22% industry average).

We maintain 'hold' for Top Glove (TP: RM4.05) and Kossan (TP: RM2.70). The key to margin recovery is sustainability of raw material prices, which could trigger upgrades. ' HwangDBS Vickers Research, Dec 20


This article appeared in The Edge Financial Daily, December 21, 2011.

Margin recovery for rubber gloves in 2012

Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD
Research House: HWANGDBSPrice Call: HOLDTarget Price: 4.05



Larger Smaller Reset Rubber gloves
Latex is trading below RM7 per kg mainly due to softer demand from tyre manufacturers and traders in China affected by tighter credit. Assuming raw material prices remain low and cost savings are retained (instead of passing them on to customers), we expect glovemakers' earnings and margins will recover substantially.

We believe they will certainly try to retain as much of the savings as possible, after having absorbed higher raw material costs previously. Our sensitivity analysis shows that every 1% drop in raw material cost could lift earnings by'' about 3% (assuming all cost savings are retained).

The US dollar has strengthened against the ringgit to 3.15 (+7% from August 2011's low of 2.97) and this will translate to higher export revenue. Our sensitivity analysis shows that every 1% increase in the greenback against the ringgit could lift earnings by about 5%.

Glovemakers are likely to hedge their US dollar exposures, and given the volatile currency trend this could give rise to wide fluctuations in translation gains or losses upon maturity or marking-to-market.

We remain cautious on the sustainability of current raw material prices. As such, we are maintaining our 2012 latex and nitrile price assumptions (average of RM8.30 per kg for latex and RM5.20 per kg for nitrile) for now. The start of the wintering season from February to May, when latex production is usually lower, coupled with potential pent up demand from car manufacturers could drive up latex and synthetic rubber prices again.

At this juncture, it is still early to impute a strong earnings rebound for Kossan Rubber Industries Bhd and Hartalega Holdings Bhd, while our earnings forecast for Top Glove Corp Bhd is at the higher end of consensus estimates. We like Hartalega ('buy', target price: RM6.50) for its superior operating margins (27% against 16% industry average) and return on equity (36% against 22% industry average).

We maintain 'hold' for Top Glove (TP: RM4.05) and Kossan (TP: RM2.70). The key to margin recovery is sustainability of raw material prices, which could trigger upgrades. ' HwangDBS Vickers Research, Dec 20


This article appeared in The Edge Financial Daily, December 21, 2011.

Margin recovery for rubber gloves in 2012

Stock Name: HARTA
Company Name: HARTALEGA HOLDINGS BHD
Research House: HWANGDBSPrice Call: BUYTarget Price: 6.50



Larger Smaller Reset Rubber gloves
Latex is trading below RM7 per kg mainly due to softer demand from tyre manufacturers and traders in China affected by tighter credit. Assuming raw material prices remain low and cost savings are retained (instead of passing them on to customers), we expect glovemakers' earnings and margins will recover substantially.

We believe they will certainly try to retain as much of the savings as possible, after having absorbed higher raw material costs previously. Our sensitivity analysis shows that every 1% drop in raw material cost could lift earnings by'' about 3% (assuming all cost savings are retained).

The US dollar has strengthened against the ringgit to 3.15 (+7% from August 2011's low of 2.97) and this will translate to higher export revenue. Our sensitivity analysis shows that every 1% increase in the greenback against the ringgit could lift earnings by about 5%.

Glovemakers are likely to hedge their US dollar exposures, and given the volatile currency trend this could give rise to wide fluctuations in translation gains or losses upon maturity or marking-to-market.

We remain cautious on the sustainability of current raw material prices. As such, we are maintaining our 2012 latex and nitrile price assumptions (average of RM8.30 per kg for latex and RM5.20 per kg for nitrile) for now. The start of the wintering season from February to May, when latex production is usually lower, coupled with potential pent up demand from car manufacturers could drive up latex and synthetic rubber prices again.

At this juncture, it is still early to impute a strong earnings rebound for Kossan Rubber Industries Bhd and Hartalega Holdings Bhd, while our earnings forecast for Top Glove Corp Bhd is at the higher end of consensus estimates. We like Hartalega ('buy', target price: RM6.50) for its superior operating margins (27% against 16% industry average) and return on equity (36% against 22% industry average).

We maintain 'hold' for Top Glove (TP: RM4.05) and Kossan (TP: RM2.70). The key to margin recovery is sustainability of raw material prices, which could trigger upgrades. ' HwangDBS Vickers Research, Dec 20


This article appeared in The Edge Financial Daily, December 21, 2011.

AMMB-Kurnia deal likely earnings neutral for bank

Stock Name: AMMB
Company Name: AMMB HOLDINGS BHD
Research House: CIMBPrice Call: HOLDTarget Price: 6.26



Larger Smaller Reset AmBank Group
(Dec 20, RM5.70)
Maintain neutral with target price RM6.26: We do not view AMMB's proposed acquisition of Kurnia Insurans (M) Bhd as a re-rating catalyst as it is unlikely to boost its earnings in the near term. Based on our estimate, the deal is expected to be largely earnings neutral for AMMB.

Given AMMB's keen interest in expanding its insurance business, we are not surprised by its proposal to acquire Kurnia. We continue to value AMMB at a 10% discount to its discounted dividend model (DDM) value and rate the stock a 'neutral'. We prefer Malayan Banking Bhd.

AmG Insurance, AMMB's 51%-owned general insurance unit, has submitted an application to Bank Negara to enter into an agreement to acquire 100% of Kurnia Insurans from Kurnia Asia. No details on the pricing were given by the company but it was reported that Kurnia is likely to sell at 2.5 to three times book value, valuing it at RM1.8 billion to RM2.2 billion.

Kurnia is one of the major general insurers in Malaysia, with total gross premiums of RM814.6 million in 9MFY11. It recorded a net profit of RM36.8 million in the nine-month period.

AmG will emerge as the second largest general insurer in Malaysia following the acquisition of Kurnia. It was the fifth largest in 2010. However, this will have minimal impact on earnings in the near term.

We estimate the impact on the bottom line to be between -RM4 million and +RM3 million (or 0.2% of FY13 net profit) based on the assumptions of: (i) a purchase consideration of RM1.8 billion to RM2.2 billion; (ii) financing cost of 5%; and (iii) an FY12 net profit of RM73.7 million for Kurnia based on consensus estimates.

However, this is in line with its plan to increase exposure to motor insurance. The reported valuation range of 2.5 to three times price-to-book value is on the high side compared with previous transactions ' 1.6 times for Pacific Insurance Bhd and 2.2 times for Jerneh Insurance Bhd.

We do not advise investors to buy AMMB given the poorer prospects for the investment banking business and loan growth, which overwhelm the benefits from the continuous group revamp. Also, the proposed acquisition of Kurnia will not act as a catalyst in the near term. ' CIMB IB Research, Dec 20


This article appeared in The Edge Financial Daily, December 21, 2011.

Sunway in JV with Khazanah in RM12b development

Stock Name: SUNWAY
Company Name: SUNWAY BERHAD
Research House: MIDFPrice Call: HOLDTarget Price: 2.55



Larger Smaller Reset Sunway Berhad
(Dec 20, RM2.43)
Maintain neutral with target price of RM2.55 from RM2.28: Sunway Bhd's wholly-owned subsidiary Sunway City Sdn Bhd (Suncity) has entered into an agreement with Dayang Bunting Sdn Bhd, a wholly-owned subsidiary of Khazanah Nasional Bhd to establish a JV company, Semerah Cahaya Sdn Bhd (SCSB).

SCSB will acquire two parcels of land in Zone F, Medini Iskandar, measuring 276.4ha from Global Capital and Development Sdn Bhd for a total purchase consideration of up to RM745.3 million.

A 99-year lease interest will be granted by Iskandar Investment Bhd commencing in 2012. The lease will be extended for a further 30 years with the extension premium estimated to be 10% of the final purchase consideration.

SCSB will conceptualise, manage, implement and develop the land into an integrated township development. Sunway will manage the overall operations of SCSB, with a management team lead by a CEO and COO appointed by Sunway.

SCSB will also apply for approved developer status to enjoy various incentives such as exemption on income tax, bumiputera quota, low-cost housing requirement and minimum threshold of foreign purchase.

The purchase consideration of RM745.3 million will be funded by equity investment of RM360 million and borrowings of RM385 million. Additional equity of RM198 million and borrowings of RM215 million will be invested to finance the lease extension premium of the land and working capital of the project.

Sunway's initial equity investment is RM136.8 million or 38% of the total shareholdings of the JV. Nevertheless, Sunway will subscribe to additional shares worth RM198 million in four annual tranches of RM49.5 million, commencing on the 18th month anniversary of the date of the lease purchase agreement. With the additional subscription, Sunway will eventually own 60% of SCSB.

The purchase consideration of RM745.3 million translates into RM24.70 psf. The land price in Zone F is significantly lower than the RM65 psf average land price of UEM Land's Lifestyle Retail Mall and Residence@ Medini North in a more established location.

UEM's project is directly connected to Legoland, hence should command a premium over Sunway's land. The land price in Zone F is also lower than Eastern & Oriental Bhd's Medini Central Wellness Township. Average land price for the Wellness Township was RM38 psf.

Zone F's purchase price could go slightly lower as there will be a further discount on the purchase price if the transaction is completed before May 2012. ' MIDF Research, Dec 20


This article appeared in The Edge Financial Daily, December 21, 2011.

Dawn of a golden era for BHIC

Stock Name: BHIC
Company Name: BOUSTEAD HEAVY INDUSTRIES CORP
Research House: HWANGDBSPrice Call: BUYTarget Price: 4.00



Boustead Heavy Industries Corp Bhd
(Dec 19, RM3.16)
Maintain buy at RM3.15 with target price of RM4: BHIC announced last Friday that its 21%-owned associate, Boustead Naval Shipyard (BN Shipyard), has received a letter of award from the Ministry of Defence to design, construct and deliver six units of second generation patrol vessels littoral combat ships (frigate class) with a ceiling price of RM9 billion. The delivery of the first vessel is estimated in 2017 with the other vessels to be delivered every six months thereafter. Each vessel weighs 2,400 tonnes and can transport one EC275 helicopter made by Eurocopter, a subsidiary of EADS.

We had expected the contract to come by end-2011. The major surprise was the higher than expected contract value of RM9 billion as opposed to our initial forecast of RM7 billion. We believe the earnings impact on BHIC will not be confined to its associate company level given its leading role in weaponry, combat systems, vessel design, naval electronics and so on, which could be undertaken on a sub-contract basis from BN Shipyard. With the massive contract, it has expunged concerns over BHIC earnings visibility.

We maintain our earnings forecast and target price for now pending details on the contract's implementation schedule and higher than expected ceiling. BHIC is a clear bargain, trading at only 9.5 times FY12 earnings per share despite its enviable monopolistic position in naval vessel construction and maintenance for the Royal Malaysian Navy. We expect BHIC to be re-rated following this news, which has been long overdue. ' HwangDBS Vickers Research, Dec 19


This article appeared in The Edge Financial Daily, December 20, 2011.

Tomei Cons a 'buy', says OSK Retail

Stock Name: TOMEI
Company Name: TOMEI CONSOLIDATED BHD
Research House: OSKPrice Call: BUYTarget Price: 0.95



OSK Retail Research has made a "buy" call on Tomei Consolidated Bhd with a target price of 95 sen in view of the company's stable earnings growth over the years.

In a research note today, OSK said Tomei also has attractive projected financial year (FY) 2012 dividend yield of 7.1 per cent and undemanding valuation of less than three times FY2012 earnings forecast.

"The company has strong collaboration with Parkson in the local market and will be tapping Parkson's regional presence in Vietnam and China," it said.

To date, the gold and jewellery retailer has 17 retail kiosks in Vietnam and China, which were mainly located in Parkson shopping complexes, it said.

It said the group planned to open two outlets each in these countries.

"There are 11 new stores in Tomei's outlet pipeline for the local market, while it is expected to close down about three or four non-performing outlets," OSK said.

At mid-day today, the stock was flat at 77 sen. -- Bernama

AMMB Holdings (Hold): To review proposal on Kurnia Insurans

Stock Name: AMMB
Company Name: AMMB HOLDINGS BHD
Research House: MAYBANKPrice Call: HOLDTarget Price: 6.30



Still early days. That AMMB could potentially acquire Kurnia Insurans Malaysia Bhd (KIMB) is a very preliminary consideration. Much depends on how negotiations develop and depending on pricing. Our scenario below points to little impact (+1%) on AMMB's earnings. We maintain our Hold call on AMMB with an unchanged TP of RM6.30 (1.6x CY12 P/BV, ROAE: 13.5%)

Maybank research (20 December 2011)

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Perdana Petroleum (Hold): A cleaner house

Stock Name: PERDANA
Company Name: PERDANA PETROLEUM BERHAD
Research House: MAYBANKPrice Call: HOLDTarget Price: 0.70



Tidying up has begun, but the outlook is still challenging. Cashflows have eased following the refinancing of its RM130m debt, originally due in 2012-13. While this is a positive, the operating outlook remains a challenge. Old vessels continue to drag on earnings, while the direction over its 27% stake in Petra Energy remains unclear. Perdana remains a Hold with an unchanged RM0.70 TP (0.7x P/BV).

Maybank research (20 December 2011)

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HDBSVR keeps Buy call on Sunway, TP of RM3.30

Stock Name: SUNWAY
Company Name: SUNWAY BERHAD
Research House: HWANGDBSPrice Call: BUYTarget Price: 3.30



KUALA LUMPUR (Dec 20): Hwang DBS Vickers Research said Sunway Bhd's valuations remain cheap at 8.0 times FY12F price-to-earnings and 1.0 times price-to-book value on the back of three-year EPS CAGR of 9%.

'We maintain our BUY rating and TP of RM3.30 based on a 10% discount to SOP valuation,' it said on Tuesday.

On Monday, Sunway announced a joint venture with Khazanah Nasional to acquire a 691-acre land lease in Zone F Medini Iskandar for RM745 million (or RM25 per sq ft).

'This appears cheap versus recent land deals of RM38-RM65 psf. It will initially own 38% in the JV, rising to 60% in 54 months via additional equity subscriptions,' it said.

HDBSVR said while there will be no immediate impact on Sunway's balance sheet (net gearing of 0.5 times) and profit will be equity accounted (38%), impact will be more significant upon reaching 60% stake.

'We do not discount the possibility of a rights issue later given the magnitude of the deal. The total GDV for this 10-year project is RM12 billion with an implied pricing for the residential portion at RM400 psf and commercial at 15%-20% higher. We think this is conservative given its prime location at Medini Living, the southern most tip of Medini Node, existing infrastructure in place and just five minutes drive from the second link,' it said.

AMMB, KAB Submits Application to Commence M&A Talks

Stock Name: KURASIA
Company Name: KURNIA ASIA BHD
Research House: TAPrice Call: SELLTarget Price: 0.65



Making significant inroads into Johor property market

Stock Name: SUNWAY
Company Name: SUNWAY BERHAD
Research House: TAPrice Call: BUYTarget Price: 3.16



Landbanking Down Under

Stock Name: TRC
Company Name: TRC SYNERGY BHD
Research House: OSKPrice Call: TRADING BUYTarget Price: 0.76



Finally, It's Here!

Stock Name: KURASIA
Company Name: KURNIA ASIA BHD
Research House: OSKPrice Call: BUYTarget Price: 0.68



YTL Cement falls below YTL Corp offer price in privatisation move

Stock Name: YTLCMT
Company Name: YTL CEMENT BHD
Research House: RHBPrice Call: HOLDTarget Price: 4.75



Larger Smaller Reset KUALA LUMPUR (Dec 20): Shares of YTL CEMENT BHD [] fell on Tuesday to below the offer price of RM4.50 made by YTL CORPORATION BHD [] in its privatisation exercise while sentiment was also dented by the overall cautious market.

At 3.37pm, YTL Cement was down 14 sen to RM4.46 while YTL Corp lost 8.0 sen to RM1.46 at 3.37pm.

The FBM KLCI fell 12.27 points to 1,465.51. Turnover was 1.20 billion shares valued at RM818.41 million. Declining stocks led advancers 440 to 285 while 267 counters were unchanged.

On Monday, YTL Corp extended a voluntary share exchange offer to YTL Cement shareholders on the basis of RM4.50 for each YTL Cement share, or 3.17 shares of 10 sen each in YTL Corp for every one ordinary share of 50 sen each held in YTL Cement.

RHB Research Institute said as at Nov 30, YTL Corp and its related parties owned a combined 52.8% in YTL Cement.

The research house said based on current stake held by YTLCorp and its related parties, the share exchange offer would likely go unconditional as the hurdle rate is just to achieve a more than 50% stake in YTL Cement.

'We believe some minority shareholders might take this opportunity to exit due to the low liquidity issues of YTL Cement shares. At the reference price of RM4.50, YTL Cement is valued at about 6.0 times EV/EBITDA on a fully-diluted basis, lower than Lafarge current valuation of about 8.5 times EV/EBITDA.

'We do note that minority shareholders will receive the more liquid YTL Corp shares, which then provides the more attractive exit route,' it said.

RHB Research said its indicative fair value remained at RM4.75 based on 10 times fully-diluted CY2012 EPS of 47.5sen, at 4.0 times multiple discount to its one-year forward target PER for the cement sub-sector to reflect YTL Cement's relatively low share liquidity.

'Due to the recent run-up in share price and limited upside to our fair value, we hence downgrade our recommendation on YTL Cement to Market Perform. In the near term, we believe share price of YTL Cement is more likely to track YTL Corp's share price due to this proposed share exchange offer. At current YTL Corp's share price of RM1.54, YTL Cement is effectively valued at RM4.88 based on the terms of the proposed share exchange offer,' it said.



December 19, 2011

High Costs Dampen Margins

Stock Name: NTPM
Company Name: NTPM HOLDINGS BHD
Research House: OSKPrice Call: HOLDTarget Price: 0.48



Planes, Trains and Automobiles

Stock Name: MMCCORP
Company Name: MMC CORPORATION BHD
Research House: OSKPrice Call: BUYTarget Price: 3.65



Back in the Game!

Stock Name: BSTEAD
Company Name: BOUSTEAD HOLDINGS BHD
Research House: TAPrice Call: BUYTarget Price: 6.21



Stellar 1Q/FY12 results above expectations. Maintain Buy Call, with higher Target Price.

Stock Name: POHKONG
Company Name: POH KONG HOLDINGS BHD
Research House: MERCURYPrice Call: BUYTarget Price: 0.58



Top Glove improves q-o-q

Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD
Research House: BIMBPrice Call: BUYTarget Price: 5.26



Top Glove Corp Bhd
(Dec 19, RM4.48)
Maintain buy at RM4.44 and target price of RM5.26: Year-on-year earnings were 12.8% lower. Earnings before interest and tax (Ebit) margin was also lower from 8.4% to 6.8%. The lower earnings were not a surprise because the latex price averaged RM8.34 per kg compared with RM7.19 per kg in the same period the previous year.

With the slightly lower latex prices in the current quarter, quarter-on-quarter (q-o-q) Ebit has shown improvement of 45% over the previous quarter. Ebit margin has also improved to 6.8% from 4.8%.

The latex price peaked in early 2011 at RM10.90 per kg. It has since moved south and stabilised in the range of RM6.60 to RM6.80 per kg.

Despite the 1QFY12 figures coming in lower than our forecast, we are maintaining our FY12 earnings estimates at RM159.5 million as we expect earnings to improve in the next quarter given the lower latex price. Our FY13 earnings estimate is also unchanged at RM169.7 million. The company's financial position has improved with net cash per share of 34 sen compared with the previous quarter's 24 sen.

Target price is unchanged at RM5.26 based on an average five-year price-earnings ratio band of 20 times over CY12 earnings per share of 26.3 sen. In our previous sector update dated Nov 15, we upgraded the rubber glove sector to 'overweight' and Top Glove to 'buy' following the sharp decrease in latex price. Maintain 'buy'. ' BIMB Research, Dec 19


This article appeared in The Edge Financial Daily, December 20, 2011.

RHB Research maintains market perform on Kurnia Asia, FV 51c

Stock Name: KURASIA
Company Name: KURNIA ASIA BHD
Research House: RHBPrice Call: HOLDTarget Price: 0.51



KUALA LUMPUR (Dec 20): RHB Research Institute is maintaining its market peform on Kurnia Asia with a fair value of 51 sen, based on an unchanged FY12 target PER of 10 times.

The research house said on Tuesday that Kurnia Asia had submitted an application to Bank Negara Malaysia (BNM) to review a proposal to enter into an agreement with AmG Insurance for the possible disposal of its 100% equity interest in Kurnia Insurance Malaysia (KIMB).

'We believe the valuation of KIMB would range around 2.0 times to 2.5 times price-to-book value based on the recent mergers and acquisitions in the general insurance sector.

'Assuming a full cash transaction, this implies that KIMB could be sold at RM1.4 billion to RM1.7 billion based on FY2010 book value,' it said.

RHB Research said until BNM approves the deal, it is maintaining its fair value for Kurnia at 51 sen, based on an unchanged FY12 target PER of 10 times and is reiterating our Market Perform call on the stock.

Gamuda (Buy): Strong start to FY12

Stock Name: GAMUDA
Company Name: GAMUDA BHD
Research House: MAYBANKPrice Call: BUYTarget Price: 4.10



Overshot expectations. 1QFY12 net profit of RM132m (+50% YoY) was 28% of both our and consensus full-year forecast. Construction margin, at 11.2% gross, surprised on the upside, and management expects this to sustain. We maintain our earnings forecasts and RNAV-based TP of RM4.10 for now. Gamuda is our top pick in construction, as we remain confident of a major order book win over the near-term.


Maybank research (19 December 2011)

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Top Glove Corporation (Sell) Overcapacity far from over

Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD
Research House: MAYBANKPrice Call: SELLTarget Price: 3.40



Results in line. 1QFY12 net profit of RM31m (+21% QoQ, -13% YoY) was 23% of our full-year forecast and 20% of consensus. After the recent share price run-up, we think the market will refocus on earnings deliveries. We see downside risk to street's earnings estimates as we expect higher latex cost ahead, exacerbated with overcapacity which may take another 1-3 years to be absorbed. 16x CY13 PER is pricey. Our RM3.40 DCF-derived TP implies 12x CY13 PER.

Maybank research (19 December 2011)

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HLIB Research 19 Dec 2011 (Boustead; Gamuda; Traders Brief) (Part 1/2)

Stock Name: GAMUDA
Company Name: GAMUDA BHD
Research House: HLGPrice Call: BUYTarget Price: 3.81



Boustead Holdings (BUY)

RM9bn PV Contract Finalized

'''' Received LoA from Ministry of Defense to deliver 6 patrol vessels (PV) with the first PV in 2017 and at 6 months interval thereafter.'' Contract value has a ceiling of RM9bn.

'''' Positive surprise vs. our RM7bn assumption but keeping our forecasts, pending further details from management.

'''' Our envisaged catalyst has materialized and vindicated our positive view on the stock.

'''' The contract would keep its heavy industry division busy over the next 9 years.''

'''' It will also help BHIC to mitigate losses suffered from the vacuum in jobs and cost escalation.

'''' Maintain Buy with unchanged target price of RM6.50 based on 10% holding company discount to estimated SOP of RM7.23.

''

Gamuda (BUY)

1Q results, a strong start

'''' 1QFY12 earnings grew by 49% YoY (+5% QoQ) to RM132m (6.41 sen/share), beating consensus numbers by 13% but within our expectation. Strong earnings performance was driven by margins expansion in both the construction and property division.

'''' Overall, construction order book dwindled to ~RM2bn (~RM1.9bn from EDTP), translating to ~1.1x FY11 construction revenue, while unbilled sales stood at ~RM1.2bn, translating to ~1.7x FY11 property revenue.

'''' We continue to feel confident that Gamuda has the edge in winning the MRT project given their tunnelling expertise in karstic limestone formation, project is funded by GoM hence preference for local contractors, and a pricing advantage of up to 7.5% over the closest rival bid.

'''' We maintain our BUY call on Gamuda with a TP of RM3.81 as we believe that negatives have been fully priced in and more upside to gain going forward.

''

KLCI: Window dressing activities to cushion external swings''

For the next two weeks, Bursa Malaysia's trading volume is expected to be low, with many market players taking time off ahead of the holidays, as low trading volume tends to exaggerate swings in the market. Immediate crucial support is the 50-d SMA or uptrend line (1456), followed by last week's low at 1448. A breakdown of 1448 would mean thatthe rally from 1311 low (Sep 26) is likely exhausted and will head toward lower Bollinger band (1425) and 61.8% FR (1420) supports. Resistance levels are 10-d SMA (1471), 38.2% FR (1487) and 200-d SMA (1502).

GAMUDA: Buy on weakness for medium term upside''''

'''' Despite near-term downside bias due to the violation of triangle support, investors should capitalize any weakness to accumulate as the fall is likely to be well-supported by its 6sen interim dividend and overall more bullish view on construction sector in 2012. Strong support is near lower Bollinger band at RM2.90. Immediate resistance levels are RM3.11-3.35, followed by the 200-d SMA near RM3.46. Cut loss below RM2.88.

Strong but turning cautious

Stock Name: GAMUDA
Company Name: GAMUDA BHD
Research House: ECMLIBRAPrice Call: SELLTarget Price: 2.94



Industrial properties to sustain property sales

Stock Name: CRESNDO
Company Name: CRESCENDO CORPORATION BHD
Research House: TAPrice Call: BUYTarget Price: 1.60



RHBInvest Research Highlights 17th December 2011

Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD
Research House: RHBPrice Call: SELLTarget Price: 3.63



17th December 2011
 
Malaysia Equities
Top Story
Market Outlook & Strategy 2012 ' Global headwinds & general election; another challenging year ahead
Strategy Update (published 16 Dec 2011)
-                  With slowing economic growth, general election and multiple headwinds from the external sector, we believe investors will be in for another challenging year ahead. Our end-2012 FBM KLCI target is set at a conservative level of 1,480, based on unchanged 13x 2013 EPS.  We expect a volatile 1H with sentiment gradually improving in the 2H as clarity on the global economy improves and investors begin to look forward to an economic rebound in 2013.
-                  As global headwinds remain strong and situations could get worse, we continue to advocate a defensive investment strategy, focusing on high dividend yielding stocks with reasonably good growth potential.  Nevertheless, after a period of volatility, a recovery will undoubtedly follow and as such, we believe it pays for investors to accumulate fundamentally-robust stocks on weakness for tactical plays. Sector-wise, our key overweight calls are telecommunications, gaming, plantation, oil & gas and consumer.
-                  Related story: Earnings Review ' Subdued Earnings; Market Volatile And Uncertain (2 Dec 2011)
 
Corporate Highlights
Gamuda ' 1QFY07/12 net profit grows 49% yoy                                                     Market Perform
Results/Briefing Note
-          We consider the results to be within our expectations but below consensus as we expect weaker quarters ahead on: 1) A depleting construction orderbook; and 2) Lower property profits.
-          Gamuda guided that by Apr 2012, cumulatively, 28 work packages (including the RM7-8bn tunnelling package) of the Sg Buloh ' Kajang (SBK) Line of the Klang Valley MRT project worth a total of RM9bn (45% of total estimated cost) will have been awarded. The market is likely to take this with a pinch of salt, in our view.
-          Given the very noticeable slowdown in the local property market of late, we feel that Gamuda's property sales target this year may not be achievable.
-          Maintain Market Perform.  Fair value is RM3.02.
-          Related story: Gamuda Results Preview ' 1QFY07/12 Results To Trail Consensus (12 Dec 2011)
 
Top Glove ' Below expectations                                                       Underperform (downgraded)
Results Note
-          1QFY08/12 results came in below expectations. Key variance was lower-than-expected 1Q EBITDA margin of 10.5% vs. our full-year FY12 EBIT margin assumption of 12.5%.
-          FY12-14 EPS forecasts cut by 12.4-17.2% as we had overestimated Top Glove's ability to retain savings from lower latex prices. Our target CY12 PER was raised to 14x (from 13x), to bring it in line with our target FBM KLCI PER. However, the earnings revision means our fair value has been lowered to RM3.63 (from RM3.92). Downgrade to Underperform (from market perform).
-          Related story: Rubber Gloves Sector Update ' Falling latex prices = Improving sentiment towards glove manufacturers (18 Nov 2011)
 


Gamuda advances on upbeat outlook

Stock Name: GAMUDA
Company Name: GAMUDA BHD
Research House: MIDFPrice Call: BUYTarget Price: 3.62



KUALA LUMPUR (Dec 19): GAMUDA BHD [] shares advanced on Monday after the company said it was ''upbeat about the outlook for its prospects for the remaining financial year after its earnings climbed 49.5% to RM132.32 million in the first quarter ended Oct 31, 2011, from RM88.53 million a year ago due to higher contributions from all divisions.

At 9.30am, Gamuda rose six sen to RM3.06 with 479,200 shares done.

Gamuda expected a stronger performance this year supported by its ongoing CONSTRUCTION [] projects, continued strong property sales and steady earnings from the water and expressway divisions.

MIDF Research in a note Dec 19 said despite the potential erosion in Gamuda's stock interest after its removal from FBM KLCI Index today, Gamuda's fundamentals still remain intact.

The research house said should Gamuda-MMC secure the KVMRT tunnelling portion, its ''construction order book will reach up to RM RM6 billion-RM7 billion.

Also, the management mentioned that they are now eyeing several projects such as Selangor Langat 2 Water Treatment Plant and Gemas-Johor double tracking project (in participation with the existing contractor), it said.

'We upgrade our recommendation to BUY from Neutral previously with a new target price of RM3.62 (previously RM3.20).

'We derive our target price based on a PER of 14x (FY12 EPS of 22.7sen), which is 0.75 standard deviation below its 10-year average PER,' it said.

OSK Research maintains Neutral on Top Glove, FV RM4.52

Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD
Research House: OSKPrice Call: HOLDTarget Price: 4.52



KUALA LUMPUR (Dec 19): OSK Research is maintaining its Neutral outlook on Top Glove Corp Bhd.

The research house said on Monday that despite a number of near-term setbacks, it had increased its Fair Value for Top Glove to RM4.52 (from RM4.00 previously), based on the existing price-to-earnings ratio of 17 times as it rolled forward to FY13 earnings.

OSK Research said Top Glove's 1QFY12 results met its expectations, but fell short of those of consensus.

'Its 1QFY12 net profit was higher q-o-q, owing to the time lag in passing that quarter's lower latex costs to its customers. However, on a y-o-y comparison, its 1Q net profit was still lower in view of the weaker demand and hence, only about 70% of costs were being passed onto customers.

'Nevertheless, we believe the worst is over for Top Glove as it is expected to benefit from the decline in the price of natural rubber latex, which is used in about 80% of its product mix. Maintain NEUTRAL,' it said.

HDBSVR has Buy on Boustead Holdings, TP RM6.80

Stock Name: BSTEAD
Company Name: BOUSTEAD HOLDINGS BHD
Research House: HWANGDBSPrice Call: BUYTarget Price: 6.80

Stock Name: BHIC
Company Name: BOUSTEAD HEAVY INDUSTRIES CORP
Research House: HWANGDBSPrice Call: BUYTarget Price: 4.00



KUALA LUMPUR (Dec 19): Hwang DBS Vickers Research has a Buy call on Boustead Holdings with a target price of RM6.80.

It said on Monday that BOUSTEAD HOLDINGS BHD []'s 69% owned Boustead Naval Shipyard Sdn. Bhd had secured a major win after securing a Ministry of Defence (Mindef) contract to supply six patrol vessels with a contract ceiling of RM9 billion.

Boustead Holdings Bhd said its subsidiary Boustead Naval Shipyard had received the letter on Friday to design, construct and deliver six second generation patrol vessels.

The contract carries a ceiling of RM9.0 billion, to be implemented over three Malaysia Plans, 10, 11 and 12. The delivery of the first of class ship is estimated in 2017 with follow-on ships every six months thereafter.

HDBSVR said this was a major win for Boustead as well as for its listed subsidiary BOUSTEAD HEAVY INDUSTRIES CORP [] HIC (BUY, TP RM4).

'We may look to raise our FY12-FY13F EPS pending clarification with management as we had only expected a contract sum of RM7 billion,' it said.

Boustead, BHIC top gainers in early trade

Stock Name: BSTEAD
Company Name: BOUSTEAD HOLDINGS BHD
Research House: HLGPrice Call: BUYTarget Price: 6.50



KUAL A LUMPUR (Dec 19): BOUSTEAD HOLDINGS BHD [] and BOUSTEAD HEAVY INDUSTRIES CORP []oration Bhd shares rose in early trade after Boustead Naval Shipyard Sdn. Bhd received the letter of award from the Ministry of Defence to supply six patrol vessels with a contract ceiling of RM9 billion.

At 9.05am, Boustead was up 19 sen to RM5.55 while BHIC added 18 sen to RM3.33.

Hong Leong Investment Bank Bhd Research in a note Monday maintained its Buy call on Boustead with a target price of RM6.50 based on 10% holding company discount to estimated SOP of RM7.23.

The research house said the letter of award was a positive surprise versus its RM7 billion assumption, and kept its forecasts, pending further details from management.

'Our envisaged catalyst has materialized and vindicated our positive view on the stock. The contract would keep its heavy industry division busy over the next 9 years.

'It will also help BHIC to mitigate losses suffered from the vacuum in jobs and cost escalation,' it said.

RHB Research: Gamuda results within expectations, FV RM3.02

Stock Name: GAMUDA
Company Name: GAMUDA BHD
Research House: RHBPrice Call: HOLDTarget Price: 3.02



KUALA LUMPUR (Dec 19): RHB Research Institute considered GAMUDA BHD []'s first quarter results to be within its expectations but below consensus as it expects weaker quarters ahead.

The research house said on Monday that Gamuda could face a depleting CONSTRUCTION [] orderbook and lower property profits.

RHB Research said Gamuda guided that by April 2012, cumulatively, 28 work packages (including the RM7 billion to RM8 billion tunnelling package) of the Sg Buloh ' Kajang (SBK) Line of the Klang Valley MRT project worth a total of RM9 billion (45% of total estimated cost) wouldl have been awarded.

'The market is likely to take this with a pinch of salt, in our view. Given the very noticeable slowdown in the local property market of late, we feel that Gamuda's property sales target this year may not be achievable,' it said.

RHB Research maintained its Market Perform on Gamuda with fair value of RM3.02.