Company Name: MALAYSIAN RESOURCES CORP
| Research House: HLG | Price Call: BUY | Target Price: 2.50 |
MRCB (BUY)
KL Sentral to support growth
'''' Following yesterday's briefing, we walked away reassured that the company's fundamentals are still strong underpinned by the maturing KL Sentral development.
'''' VOs as much as RM20m should be recognised by FY12, hence an earnings boost for the construction division. However, the division is expected to post EBIT margins of 3-4% going forward as opposed to 7-9% achieved previously. This is due to the intense bidding for the RM1.4bn LRT Ampang Line Package B project. Overall, outstanding order book remains strong at ~RM2.2bn, translating to 3.3x FY11 construction/environmental revenue.
'''' Lot G offices, Aloft Hotel, QSentral (70% take-up) and Sentral Residences (50% take-up/bookings) will continue to drive the property division's earnings. Overall, unbilled property sales stood at ~RM1.68bn, translating to 3.5x FY11 property revenue.
'''' We estimate that FY12 earnings will be impacted by higher financing charges arising from the EDL highway. Hence, we slash our FY12 forecast, while introducing FY14 earnings estimates. That said, it should not impact our valuations as MRCB is valued based on SOP method.
'''' We maintain our BUY call on MRCB for the unique qualities of KL Sentral to support earnings growth, but with a lower TP of RM2.50.
''
''
Performance of IPI (Dec 2011)
'''' IPI growth picked up to 3.0% yoy in Dec (Nov:'' +2.4% yoy), higher than consensus estimate of +1.7%, driven by improvement in electricity and mining segment.
'''' E&E production declined further by 7.4% yoy (Nov: -2.8%) driven by weakness in all product segments, with severe output drop in printed circuit board segment.
'''' Contraction in mining output narrowed to only -0.8% yoy in Dec, reducing its drag on the overall IPI performance.
'''' Maintain our full year 2011 GDP estimate at 5.1%, factoring in 4Q estimate of 5.0%. Also maintain our 2012 GDP growth forecast at 4.5% as we expect resilient domestic demand to cushion the softer industrial sector.
'''' We expect BNM to hold the OPR steady at 3.00% until end-2012 given the resilient economic growth with sticky inflation.
''
Softening in December Export Growth
'''' Export growth moderated further to 6.1% yoy in Dec (Nov: +8.0% yoy), the slowest since June 2011, while import growth bucked the trend, picking up for the second consecutive month to 10.4% yoy (Nov: +8.4% yoy).''
'''' Trade surplus narrowed to RM8.3bn (Nov: RM9.5bn), as import growth significantly outpaced export expansion.
'''' Contribution of palm oil diminished drastically, with export growth slowing sharply to 8.4% yoy in Dec, a sharp slowdown compared to an average growth of 43.2% during Jan-Oct 2011.
'''' Further pick-up in import growth with intermediate imports rising by 7.7% yoy suggests that manufactured exports could remain stable in the coming months.
'''' We expect January's export growth to show temporary contraction due to festivity and seasonality.
'''' MITI announced its official export growth forecast of 5-6% for 2012. Our export growth projection is slightly lower at 4.5%, which is in line our overall GDP outlook.
'''' Maintain our 2012 GDP growth forecast at 4.5% as we expect resilient domestic demand to cushion the softer industrial sector.
''
KLCI: Momentum to remain strong to retest 1570-1580 zones''''''
'''' Despite surging 3.9% from YTD low of 1509 (6 Jan) to 1565 yesterday, technical indicators are bullish and overall market momentum (with the rotational plays on bigcaps, 2nd & lower liners and penny stocks) remains positive to climb higher towards the resistance targets at 1570-1580 territory.
'''' In our view, any profit taking activities are likely to be well-absorbed near supports at 1551 (upper Bollinger band) and 1531 (10-d SMA).''
''
Dow Jones: Dow ekes out 7 pts gain in a choppy trade''''''
'''' Overall, after surging from Oct 11's low at 10404, investors were cautious after months of continuous gains as the market is approaching an overbought position amid rising RSI.
'''' However, we are encouraged by the continuous improvement in US economic news which show that the country is not as handicapped to what's going on in Europe as in the past.'' In our view, any pullback will attract investors who missed the rally, limiting the decline near supports of 10-d SMA (12695) and 20-d SMA (12582).
No comments:
Post a Comment