HLIB Research 13 Jan 2012 (Telecommunication; MBMR; Traders Brief)

Stock Name: TIMECOM
Company Name: TIME DOTCOM BHD

Research House: HLG

Price Call: BUY

Target Price: 0.85

Stock Name: MBMR
Company Name: MBM RESOURCES BHD

Research House: HLG

Price Call: HOLD

Target Price: 3.38

Telco (NEUTRAL)

2012 Outlook: Monetizing the data

''  The industry as a whole will undergo moderate growth (forecasted to be mid-single digit) in 2012 supported by resilient domestic consumerism as a result from ETP and "rakyat" friendly budget.

''  Voice revenue will continue to trend downward in 2012 while data revenue taking the limelight, expecting its contribution towards 50% of overall revenue.

''  As both Huawei and ZTE have successfully secured a very extensive footprint in Malaysian telcos, we opine that they will have a stronger bargaining power and going forward, will minimize their reliance on pricing strategy to win bids. Hence, we believe that telcos might be facing more difficulties in their cost saving initiatives.

''  Continuing the momentum in 2011, we believe "co-opetition" will be the order for the year in the telco industry as players seek strategic partnerships to reduce infrastructure cost, strengthening margins and cross-selling of products.

''  Telcos are constantly under the increasing threat of over-the-top (OTT) players substituting their products and services including voice, messaging, video streaming, gaming and mobile payment. Moving forward, telcos are expected to actively exploring partnership opportunities with OTT players harnessing a win-win business model rather than being a dumb pipe.

''  Prefer fixed-line players over mobile operators for their high operating leverage, new sources of revenue stemming from agreements with mobile operators and increasing demand for wholesale which could help to buffer the new challenges. We re-iterate our BUY call on TIME dotCom (Buy, TP: RM0.85).

''  We also take this opportunity to downgrade DiGi to SELL as the current share price has overshot its fair value for more than 10%.

MBM Resources (Hold)

More Wheels

''  MBMR's 78% owned Oriental Metal Industries (OMI) will invest RM103m for a new alloy wheel manufacturing plant in Rawang.

''  The plant is expected to complete by 3Q2015 with targeted capacity of producing 1m units of alloy wheels for the regional market. The 1st phase is scheduled for completion by 4Q2012. Upon completion, MBMR expects OMI to generate ~RM150m revenue.

''  We are positive on the new investment plan, as MBMR will be able to leverage on the expected vehicle sales growth of the regional market.

''  However, we remain skeptical on its ability to find a strong foreign automotive partner, since it does not have track record on vehicle assembling (vs peers) and most foreign automotive cars have already established regional hubs in Thailand and Indonesia.

''  No changes to FY12-13 earnings, as we expect marginal earnings contribution during startup of 1st phase in 2013. Maintain HOLD with TP of RM3.38.

KLCI: Heading towards the 1529-1546 pts gap

''  Technically, trend and momentum indicators remain supportive for further upside as KLCI continues to leverage on its strong supports near 10-d SMA (now at 1517) and 200-day SMA (1502), in an attempt to slowly fill the huge gap between 1529-1546 recorded on 5 Aug 11. 

''  Immediate supports are 10-d SMA and 200-d SMA, followed by the uptrend line near 1490 pts.

 

STI: Short term positive after recent breakout

''  With the recent breakout (from downtrend) and as long as prices stay above the uptrend line support at 2600 pts, the odds favor further upward movement to retest the 30-w SMA (now at 2830) and weekly upper Bollinger band (2887) in the coming weeks. A more formidable resistance is 200-d SMA at 2917.

''  Immediate supports are 30-d SMA (2696), daily mid Bollinger band (2678) and 2608 (lower Bollinger band).