Company Name: DRB-HICOM BHD
| Research House: HLG | Price Call: BUY | Target Price: 2.90 |
Stock Name: TCHONG
Company Name: TAN CHONG MOTOR HOLDINGS BHD
| Research House: HLG | Price Call: BUY | Target Price: 5.10 |
Stock Name: IOICORP
Company Name: IOI CORPORATION BHD
| Research House: HLG | Price Call: HOLD | Target Price: 4.85 |
Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD
| Research House: HLG | Price Call: HOLD | Target Price: 6.00 |
Automotive (Overweight)
Affected by Thailand Flood
'''' MAA released Dec 11 data showing TIV suffered from a significant drop of 12.9% yoy, leading to 2011 TIV dropping by 0.9% yoy vs. our forecast of 0.3% yoy decline.
'''' We expect 2012 TIV to grow 6% yoy, mainly due to sustainable GDP growth (underpinned by the 2012 Budget and ETP implementation) and supply chain recovery.
'''' For 2011, Perodua (UMW and MBM), Nissan (TCM) and Honda (DRB) sales was within our expectations, while Toyota (UMW) and Proton was below our expectations.
'''' Other marques (i.e. Hyundai, Kia, Peugeot, Chevrolet, VW etc) had been gaining market share, with records of double digit growth since beginning 2011, indicating growing competitive environments going forward.
'''' We expect continued strong demand for hybrid cars in 2012, due to lowered price (tax free) as well as its fuel economy advantage.
'''' TOP Picks: BUY on DRB (TP: RM2.90) and TCM (TP: RM5.10).
''
IOI Corporation (Hold; TP: RM4.85)
More details on Singapore land deal
'''' IOI's 99.8% subsidiary Multi Wealth (Singapore) Pte Ltd won its bid for a parcel of 99-year leasehold land in Jalan Lempeng, off Clementi Avenue 6, Singapore for S$408m.
'''' Assuming land cost to account for 40% of the total GDV and EBIT margin of 20%, IOI will incur a total development cost of S$647.6m or RM1,567.2m, which would in turn raise IOI's net debt and net gearing from RM2.3bn and 0.2x (as at 30 Sep 2011) to RM3.98bn and 0.3x respectively.
'''' Based on our estimates, the project will enhance IOI's earnings by RM79.7m p.a. from FY13 onwards (or 3.4% of our projected FY13 net profit), assuming: (1) Land cost to account for 40% of the total GDV; (2) 20% setback; (3) EBIT margin of 20%; (4) Earnings from this project to contribute equally over 3 years starting from FY06/13; (5) Borrowing cost of 6% p.a.; and (6) Tax rate of 17%.''
'''' We are neutral on the latest development, as the Singapore government's measures will cool demand for property market there, hence IOI's returns on its investments.
'''' Net profit forecasts, SOP-derived TP of RM4.85 as well as Hold recommendation maintained for now.
''
Tenaga (Hold)
1Q12 Earnings Return to Black
'''' Within estimates - Reported 1Q12 core earnings of RM184m, as compared to HLIB's core earnings RM1.9bn (have included RM1.0bn compensation for FY08/12 higher fuel cost), but lower than consensus.
'''' 1Q12 earnings return to black on the back of lower power demand QoQ, higher hydropower generation and improved supply of gas.
'''' TNB is expected to continue incur high fuel cost expenses (estimated ~RM2.5bn), and submit claims for compensation for the period of Nov 11 - Sep 12.
'''' Gas supply issue will only be resolved with the commencement of Melaka regassification plant in Sep 2012. However, the issue of pricing the gas to TNB is another concern as TNB may need to absorb the higher gas prices and unable to pass through to consumers.
'''' Maintain HOLD on TNB with unchanged TP of RM6.00.
''
KLCI: To consolidate above the crucial 200-d SMA
'''' Ahead of the CNY holidays next week, investors should keep an eye on the 200-day SMA. A significant close below 1502 on rising volume would likely signal the resumption of the longer term bear market. Breaking the key 200-d SMA will drag index lower to 30-d SMA (1495), 50-d SMA (1482) and lower Bollinger band (1476) levels. Resistance zones are 1529-1546.
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