Company Name: GAMUDA BHD
| Research House: HLG | Price Call: BUY | Target Price: 4.41 |
Stock Name: CSCSTEL
Company Name: CSC STEEL HOLDINGS BERHAD
| Research House: HLG | Price Call: HOLD | Target Price: 1.54 |
Plantation (Neutral)
Palm oil inventory declines in Jan 12
'''' Palm oil inventory in Jan 12 declined by 2.5% mom to 2.01m tonnes, mainly on the back of a 13.9% mom decline in production (Peninsular: -13.9%; East Malaysia: -13.8%) and 195.5% increase in domestic consumption, which more than offset a 13.2% decline in exports.
'''' Exports declined by 13.2% to 1.38m tonnes, led by a 31.2%, 31.9% and 20.5% mom decline from China, Pakistan and India.
'''' On a yoy basis, palm oil inventory rose by 41.5% to 2.01m tonnes mainly on: (1) Higher beginning inventory; (2) A 21.7% increase in production; and (3) A 36.5% decline in domestic consumption, which altogether more than offset a 13.4% increase in exports.
'''' While La Nina event will likely sustain near-term palm oil prices at above RM3,100/tonne, we are keeping our average CPO price assumption of RM3,000/tonne for 2012-13.
'''' Maintain our Neutral stance on the sector, top pick is Tradewinds Plantation.''
''
Gamuda (BUY)
Formalising PDP terms
'''' MMC-Gamuda JV has executed the PDP agreement with MRT Corp for the MRT Project-Sungai Buloh-Kajang line.
'''' The total fee for MMC-Gamuda works out to be 11.3% based on the aggregate of all the awarded work contracts, whereby 5.3% (~RM1.1bn) is fixed to cover the PDP overhead, while 6% (excluding the value of the underground portion should the PDP wins it) is the performance fee should the project be delivered within 15% of the total agreed target cost of the MRT project.
'''' Assuming that the MRT elevated portion works out to be RM10bn, the PDP role translates to ~11 sen/share for Gamuda (after adjusting for its 50% stake).
'''' Maintain our BUY call on Gamuda with a TP of RM4.41.
''
CSC Steel (Hold)
4Q performance improves operationally
'''' Below expectations. 2011 net profit of RM29.6m (-57.3%) came in below expectations at 84.3% of our forecast and 78.2% of the consensus.''
'''' Variance against our forecast due mainly to lower-than-expected margin stemming from lower-than-expected sales volume vis-''-vis our forecast despite achieving sales growth.
'''' FY12-13 net profit forecasts cut by 14.3% and 12.3% to RM47.7m and RM50.1m respectively, to reflect lower EBIT margins arising from lower selling price assumptions.''
'''' TP raised from RM1.03 to RM1.54 as we rationalize our valuation method for CSC Steel (as P/E alone is no longer suitable given CSC Steel's strong balance sheet, which allows CSC Steel to declare commendable dividends despite its weak earnings performance). Our TP for CSC Steel is now based on: (1) 7x 2013 EPS of 13.2 sen; and (2) 61.4 sen net cash as at 31 Dec 2011.''''
'''' Upgraded from Sell to Hold following the rationalisation in our valuation method.
''
KLCI: Mild profit taking expected this week
'''' Despite the emergence of a Doji candle last Friday, coupled with the overbought daily and weekly slow Stochastics indicators, positive daily and weekly RSI and MACDs are suggesting current KLCI could resume after a mild profit taking correction.
'''' Immediate resistance is 1570-1580 levels, followed by historical peak at 1597. Weekly support levels are 1550, 1541 (7-d SMA) and 1535 (10-d SMA).
ETITECH: Upside bias amid a positive breakout
'''' Technically, ETITECH broke out of its triangle pattern last Friday and is now charging towards the RM0.20 (61.8% FR) and RM0.23 (50% FR). A push above RM0.23 would be medium term positive as it also signals the return of the bulls towards RM0.26 (38.2%FR), RM0.29 (23.8% FR) and RM0.345 (18 Jan 11's day high).''
'''' Technical landscape is improving, reflected by rising momentum, trend and +DMI. Supports are RM0.165 (200-d SMA) and RM0.155 (lower Bollinger band). Cut loss below RM0.155
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