March 9, 2012

OSK retains 'buy' call on MBSB

OSK Research Sdn Bhd is positive on Malaysia Building Society Bhd (MBSB) following the government's salary adjustments based on its position as one of the few players in the niche civil servants personal loan space.

In a note today, OSK Research said assuming a conservative five per cent growth in the federal government's emoluments for this year, the potential size of the civil servant personal financing market would theoretically expand by RM4.6 billion.

"This means that MBSB can easily expand its civil servants personal loan base by another RM204.8 million, assuming that the company maintains its current market share at 4.5 per cent," it said.

It, however, said the positive effects could only be measured from the second quarter this year onwards as the adjusted salaries would only be paid out this month or the next.

The government yesterday scrapped the Public Service New Remuneration Scheme for civil servants and opted to continue with the Malaysian Remuneration System with improvements.

OSK said it has retained its 'buy' call on MBSB at RM2.70.

It said it liked the company's diversification strategy and innovativeness in expanding its business. -- Bernama

Update Report

Stock Name: GWPLAST
Research House: NETRESEARCHPrice Call: BUYTarget Price: 0.84

Maybank (Buy) - CFS Briefing Reaffirms Our Positive View

Stock Name: MAYBANK
Research House: HLGPrice Call: BUYTarget Price: 10.12

Maybank (Buy)
CFS Briefing Reaffirms Our Positive View
  • Analyst briefing yesterday on its Community Financial Services (CFS 'which handles the retail, SME and business segments).   
  • The briefing reaffirms our positive view about thecompany prospects as well as the positive impact on earnings (which has alreadyshown results) from its transformation.  
  • Despite expectations of slower growth in2012 (vs. 2011), it is optimistic that momentum from the transformation wouldenable the group to outpace the industry.  
  • New responsible lending guideline ' inline with internal practice and merely resulted in recalibrating the DSR fromgross to net pay basis.  Although Jan 12 numbers dropped by circa 20%, itcould be due to seasonal and Feb numbers have stabilized.
  • Branch transformation (over three years)will not have significant impact on CIR given its aim of widening products andservices while some branches will be right-sized.
  • Maintain Buy.
  • Target price maintained RM10.12 based on Gordon Growthwith ROE of 15.6% and WACC of 9.9%.

Source: HLIB Research 9 March 2012

SP Setia eyes govt land redevelopment jobs

SP Setia Bhd is eyeing government land redevelopment projects as well as Permodalan Nasional Bhd's (PNB) prime landbank in the Klang Valley and Johor.

In a note today, HwangDBS Vickers Research Sdn Bhd said with PNB's backing,
SP Setia could enhance bids for government land and large overseas projects.

It said SP Setia may also consider expanding in Vietnam, Australia and

"SP Setia has room to landbank further with a net cash of RM83 million and
RM2.8 billion record unbilled sales," it said.

HwangDBS Vickers said given the improved clarity on management continuity
and strong growth potential, it would maintain its "hold" call on SP Setia at a
target price of RM4.50. -- Bernama

MBSB (FV RM2.70- BUY) Corporate News Flash: Govt Scraps New Salary Scheme

Stock Name: MBSB
Research House: OSKPrice Call: BUYTarget Price: 2.70

Prime Minister Datuk Seri Najib Tun Razak announcedyesterday that the Government is scrapping the New Remuneration Scheme forcivil servants (SBPA) and the existing Malaysian Remuneration System (SSM) willbe reintroduced with some enhancements. The PM added that a commission will beset up to conduct a comprehensive study of the civil servant remunerationsystem.

A more structured,transparent approach. The previous SBPA was met with criticism from thecivil servants union which claims that the scheme awards unequitable salary increasesthat favour those in the higher ranks of the civil service. We gather that the salaryadjustments announced yesterday, as shown in Figure 1, will be backdated from 1Jan this year and will be paid from this month (or the next) onwards. The PMalso announced that the Cost of Living Allowance (Cola) had been increased fromRM200 to RM250 for those in the B category while those in the C category willreceive RM150 compared with RM100 before. Given that the election is justaround the corner, the move appears to be an attempt to appease thelower-ranked government servants who make up the majority of the 1.4m civilservice force.

Already factored intoMBSB's earnings. We believe the overall effect from the pay hike showed inFigure 1 is equivalent to the upward salary adjustments under the SBPA, whichwe have incorporated into our forecasts. As depicted in Figure 2, assuming a conservative5% growth (average historical growth: ~8%) in Federal Government emolumentsfor  2012, the potential  size of the civil servant personal financing market will theoretically expand byRM4.6bn. This means that MBSB can easily expand its civil servants personalloan base by another RM204.8m, assuming that the company maintains its currentmarket share at 4.5%. However, we believe that the positive effects could onlybe measured from 2Q12 onwards as the adjusted salaries would only be paid outthis month or the next.

Maintain BUY.  Apart from the benefits arising from thecivil servant salary hike, we remain positive on MBSB's prospects as wecontinue to like the company's diversification strategy and innovativeness inexpanding its business. Thereby, we are retaining our BUY recommendation on thecounter, as well as its fair value of RM2.70, premised on 2.6x FY12 P/BV.

Source: OSK188

GUANCHG - Updates from FY11 results briefing

Stock Name: GUANCHG
Company Name: GUAN CHONG BHD
Research House: HWANGDBSPrice Call: BUYTarget Price: 2.80

Guan Chong; Buy; RM2.60
Price Target: RM2.80; GUAN MK

At its post-results analyst briefing held yesterday, Guan Chong provided more information on the FY11 financial performance as well as an insight into its business outlook.

For the whole of last year, total production tonnage was 126.6 MT (+57.5% y-o-y) while sales tonnage stood at 108.9 MT (+37.5% y-o-y), led by higher output from its new plant in Batam. This lifted FY11 revenue to RM1,382.8m (+19.2%) with net profit coming in at RM123.0m (+21.6%), which was within our expectations.

This year, Guan Chong expects to grind 170k MT of beans (versus our assumption of 175k MT). We  gather that the Group has already secured orders for 140k MT of its existing capacity (80k MT in Pasir Gudang and 60k MT in Batam). It is in the midst of increasing its annual grinding capacity by another 60k MT in Batam (commissioning is targeted around April/May this year), which will also widen the product range to include cocoa powder and deodorized butter.

When the Batam plant Phase 2 expansion is completed (at a cost of RM90m, in addition to the RM60m investment already spent in Phase 1), Guan Chong would rank as the fifth largest cocoa processor in the world based on total production capacity of 200k MT. Leveraging on its growing size, it has secured three new clients (Transmar Commodity Group Ltd, ADM International Sarl and Euromar Commodities GMBH) last year and is currently in advance negotiations with two MNCs for new sales orders.

The Group has ventured downstream as part of its expansion plan, which will benefit from higher in-house consumption of cocoa ingredients too. It has recently purchased a factory near Port of Tanjung Pelepas in Johor for industrial chocolate production. After investing RM12m in the factory and with a further capex requirement of RM30m, the industrial chocolate plant capacity is expected to rise from 2.4k MT/year currently to 10.4k MT/year by 1Q13. Nevertheless, profit contributions from this venture (which barely broke even last year) will likely be negligible in the initial years.

Meanwhile, the recent weakening of the USD against the Ringgit ' from RM3.17 per USD end-Dec to RM3.01 currently ' could lift the Group's 1Q12 earnings. This is attributable to a lumpy forex translation gain arising from its USD loans (amounting to USD324.4m as at 31 Dec 11, translating to an estimated paper profit of RM52m based on the exchange rate differentials). Assuming the USD remains weak vis-''vis the Ringgit, the reverse effects would be felt over time as Guan Chong is a net loser of a falling USD since nearly all receivables (exports account for c.95% of sales) and payables (mainly for bean purchases, c.80% of revenue) are denominated in USD.

We maintain our net profit forecasts at RM131.8m (7.2% y-o-y) in FY12 and RM149.6m (13.5% y-o-y) in FY13 (please refer to our Company Focus report dated 2 February 2012 for more details). Reiterate our  Buy rating with RM2.80 TP (pegged to 8x FY12F FD EPS of 35 sen). Together with an expected dividend yield of 5.5% ' based on our FY12F DPS of 12.4 sen and a final tax-exempt DPS of 2.0 sen declared in 4Q11 ' this translates to a total potential return of 13.2%.

Source: HwangDBS Research - 9 March 2012

AIRPORT - Private placement of 110m shares fixed at RM5.60

Stock Name: AIRPORT
Research House: HWANGDBSPrice Call: HOLDTarget Price: 6.70

Malaysia Airports; Hold; RM5.62
Price Target: RM6.70; MAHB MK

Malaysia Airports (MAHB) is set to raise RM616m after it announced that it has fixed its private placement shares at the price of RM5.60 per share, representing a 2.4% discount to its past 5-day VWAMP of RM5.74. This is slightly higher than our previous assumption of RM550m proceeds from the private placement, which will be used to partly fund the higher development costs of the new klia2 (estimated to range between RM3.6bn to RM3.9bn). No further financing options will be needed after this exercise as the full costs of the new klia2 would be fully covered by its current RM3.1bn sukuk funding and the private placement proceeds.

After the private placement exercise, MAHB's share base will be enlarged to 1.21bn shares from 1.1bn shares previously. This could dilute our earnings for FY12F and FY13F by 9.1%. We maintain our Hold call and  SOP-based RM6.70 TP for the time being. Longer term, we are positive on the prospects of MAHB due to future land development projects around the KLIA and the opening of the new klia2 in April 2013.

SPSETIA - Keeping the faith

Stock Name: SPSETIA
Company Name: SP SETIA BHD
Research House: HWANGDBSPrice Call: HOLDTarget Price: 3.93

SP Setia; Hold; RM3.93
Price Target: RM4.50; SPSB MK

Improved visibility on management continuity, targeting strong sales and landbank growth. PNB backing could enhance bids for government land and large overseas projects. Maintain Hold and RM4.50 TP (10% discount to RNAV).

Source: HwangDBS Research 9 March 2012

PANTECH (FV RM0.595 - TRADING BUY) Corporate News Flash: A Fitting Acquisition

Stock Name: PANTECH
Research House: ECMLIBRAPrice Call: BUYTarget Price: 0.595

Pantech Holdings Group Bhd (Pantech) announced  yesterday that it entered into a SharePurchase Agreement (SPA) on 7 March 2012 to acquire 100% equity of UK-based nichemanufacturer and supplier of pipes, fittings, and flanges (PFF) Nautic Group,for a total consideration of GBP9.5m, or approximately RM45.5m.

Positive move.  We are positive on the acquisition in generalas it will widen the company's product range and client network. With thisacquisition, Pantech is expected to strengthen its  expertise in exotic products such  as  pipefittings and  flanges for sea watersystems and acidic environments which  are designed to operateunder highly corrosive conditions and extreme temperature. The acquisition willalso enable Pantech to  acquire the  technical knowhow  to manufacture  niche productsto  complement  itsexisting capability in  producing carbon steel fittings, andstainless steel pipes and fittings.

Opportunitiesabound  for  high value-added products. Over the past34 years, the Nautic Group has established a reputation as a reliablespecialist manufacturer of niche steel products comprising duplex and super duplex stainless steel, coppernickel and alloys.  The Group has  also attained  product certificationfrom different international bodies and enjoys strong  relationships with oilmajors like Qatar Petroleum, Kuwait Oil Company, Petronas, BP, Esso, Shell andthe Brazilian Navy. As such, Pantech will be able to leverage on the NauticGroup's network to market its existing products directly to the large oilplayers.

Founder stays onduring transition period. Pantech signed the SPA with the founder of NauticGroup, who  will be  required to stay on for a year to ensure a smooth post acquisition transition as part of the  agreement. Such  a condition  will help  shorten  the learning curve as well as thetime-to-market for Pantech's thrust into the stainless steel, copper nickel andalloy PFF markets.

Profit sharingand  EBITDA earnings guarantee. Apartfrom retaining the founder in the company for a  year, the agreement also  includes a clause stipulating  that under certain conditions, Pantech willshare a pre-determined amount of profit with the founder while the latter willprovide an earnings guarantee of GBP950,000 at the EBITDA level to Pantech. Wesee this as a win-win arrangement for both parties as Pantech can avoid thehassle of re-establishing the Nautic Group's operations, while the founder willensure that the transition is smooth and that the company continues to beprofitable.

Source: OSK188

Top Glove: Eyes acquisition this year

Stock Name: TOPGLOV
Research House: ECMLIBRAPrice Call: SELLTarget Price: 4.00

Top Glove Corp Bhd (TOPG MK, Sell, TP: RM4.00) aims to buy at least one other glove producer this year as part of its strategy to gain market share and drive earnings, said chairman and founder Tan Sri Lim Wee-Chai. The company is in talks with a number of rubber glove manufacturers, Lim told Reuters in an interview. "We are mainly talking to companies from Malaysia. When the pricing and everything is right, we can see something by the end of this year," he said. Lim said Top Glove is well placed to make acquisitions on its strong net cash position. The company had some RM300m net cash as of 29 Feb this year. (Financial Daily)

Comments: This news is not new to us as it was already highlighted in the company's analyst briefing in early January 2012. We have yet to factor in any earnings contribution from the potential acquisition to Top Glove's bottomline. Top Glove's current utilization rate is at 70%. In terms of capacity utilization breakdown, powder-free and nitrile are running at 80% while powdered is at 60%. In anticipation of higher demand for powder-free and nitrile gloves, Top Glove's planned production capacity is expected to gradually increase by 5.7bn gloves to 43bn by August 2012. However, with lower 1QFY12 (-5% y-o-y) sales volume, the additional capacity could lead to excess capacity. Since our downgrade in January 2012, the stock is down 10%. Maintain Sell on Top Glove with TP of RM4.00 based on 18x CY12 EPS, in line with its historical average. Top Glove is trading at 21x FY12 EPS (28% above its historical average of 18x) vis-a-vis earnings growth averaging 13% in FY12-14 implying a rich PE valuation. (Raymond Choo)

CIMB: Khazanah sold company shares to Credit Suisse buyer

Stock Name: CIMB
Research House: ECMLIBRAPrice Call: HOLDTarget Price: 7.00

According to sources, Khazanah Nasional Bhd sold some 67.5m shares of CIMB Group Holdings Bhd (CIMB MK, Hold, TP: RM7.00) at RM7.31 to a buyer from Credit Suisse Securities (M) Sdn Bhd each in an off-market trade. The identity of the end buyer from Credit Suisse is still unknown, but a source said it was likely to be a foreign party. At RM7.31, the off-market trade was valued at RM493.6m. Khazanah is the largest shareholder of CIMB with a shareholding of 28.99% or 2.16bn shares as of 16 Jan 2012. With this transaction, Khazanah's stake would be marginally reduced to 28% or 2.09bn shares. (StarBiz)

Malayan Banking Bhd - The tiger continues to prowl for loans

Stock Name: MAYBANK
Research House: CIMBPrice Call: BUYTarget Price: 11.10

Previous Target RM11.10

This year's economic slowdown will not deter Maybank from its quest for market share. During yesterday's Investor Day, management reiterated its target of 13.6% loan growth in Malaysia, coming partly from inroads into other banks' market shares.

Source: CIMB Day Break 08 March 2012, Full PDF Report

Stock Overview - CBSA- 9 Mac 2012

Stock Name: CBSA
Company Name: CBSA BERHAD
Research House: JUPITERPrice Call: BUYTarget Price: 0.60

CBSA ( 0041 : 0.445 ) : Targeting 0.60

IT services

Resistance : 0.49 0.60
Support : 0.43

RSI of 60
RSI is on the rise

It is riding on an upswing

The consolidation breakout yesterday, needs to overcome the immediate resistance at 0.49, for it to target 0.60

Trading Strategy
Buy. Stop loss is at 0.43

Source:Jupiter Securities Research 9 March 2012

Stock Overview - VERSATL - 9 MAc 2012

Stock Name: VERSATL
Research House: JUPITERPrice Call: BUYTarget Price: 0.48

VERSATL ( 4995 : 0.42 ) : Targeting 0.48

Containers and packaging

Resistance : 0.48 0.51
Support : 0.39

RSI of 56
RSI is on the rise

It is riding on an upswing


The current upward push is likely to test 0.48

Trading Strategy
Buy. Stop loss is at 0.39

Source:Jupiter Securities Research 9 March 2012

MBM Resources: Maintain Hold - Planning for the future

Stock Name: MBMR
Research House: MAYBANKPrice Call: HOLDTarget Price: 4.60

Maintain Hold. MBM's long-term strategic plan looks promising. We however maintain our earnings forecasts and believe that most of the positives have been priced in, with the share price up 41.5% year-to-date and the stock trading at 7x current year PER. Further, we expect a weak 1Q outlook. Its potential venture into vehicle assembly is a re-rating catalyst, but nothing has been formalised. Until then, MBM is a Hold with an unchanged TP of RM4.60 (7x 2013 PER).

Maybank Research 9 March 2012

Click here for full report

Malaysia Airports Holdings: Maintain Buy - January traffic off to a 'O.K.' start

Stock Name: AIRPORT
Research House: MAYBANKPrice Call: BUYTarget Price: 7.10

Maintain BUY. MAHB's January 2012 passenger traffic grew 11.0% YoY, above the management's guidance for 6%-7% growth in 2012. We retain our forecast for 6.7% passenger traffic growth in 2012. We however shave our EPS estimates by 3.5% and 4.9% for 2013 after imputing higher staff cost. Maintain BUY on MAHB with an unchanged RM7.10/share DCF-based target price.

Maybank Research 9 March 2012

Click here for full report

Sime Darby - Premium car sales in China to moderate but still decent growth

Stock Name: SIME
Company Name: SIME DARBY BHD
Research House: AMMBPrice Call: BUYTarget Price: 10.60

We reaffirm our BUY rating on Sime Darby but with our fairvalue of RM10.60/share is currently placed under review but with an upward biaspending a meeting with the management.

It was reported that Audi's February car sales in China andHong Kong was up 66% YoY or 31,252 units sold, signalling demand for luxuryvehicles in China has been largely unscathed by the weak economy outlook. Thisis also the first time that Audi sales in China had reached 30,000 units in asingle month. 

Similarly, BMW's February sales echoed Audi's strongperformance with 40% YoY growth to 22,916 units. But BMW expects its vehiclesales in China to show moderate growth in 2012, although still in the region of20% YoY, unlike prior years' growth of 40%-50%.

China Association of Automobile Manufacturers (CAAM) ' theequivalent to Malaysia's AAM - is looking at 10% YoY growth to 20mil units inauto sales this year. 

To recap, Audi has a market share of close to 30% - from40%-50% in the previous years - in the luxury sedan segment with BMW fastcatching up with about 25% market share, followed by Mercedes at 22%.  The premium car segment accounts for about 5%of the China's yearly sales or 800k to 900k units a year and is expected togrow by 20% to 30% every year.

This bodes well for Sime given its exposure - being one ofthe dealers - to the premium segment in the biggest auto market in the world.Sime sells about 20,000 BMW units annually with 10 dealerships in major citiesincluding Shenzen, Guangzhou, Shantou, Haikou, Kunming, Chengdu and Changsha.There are plans afoot to gradually increase its presence towards the northerncities. 

We forecast motors division to contribute about 13% and 15%to Sime's operating profit for FY12F and FY13F respectively, to be mostlydriven by China sales but Malaysia and Singapore markets will show thestrongest growth underpinned by the launch of new 3-series model in2Q2012. 

We continue to like Sime as the company is the most liquidproxy to the plantation sector, which accounts for 61% of its FY11's EBIT.Valuations are also attractive, currently trading at CY12F PE of 16x which isbelow its 3-year average of 17x and below its peers of 18x.  

Malayan Banking - Revitalised community segment on stronger footing

Stock Name: MAYBANK
Research House: AMMBPrice Call: BUYTarget Price: 9.80

We are maintaining our BUY rating on Malayan Banking Bhd(Maybank), with unchanged fair value of RM9.80/share. This is based on an ROEfor FY12F of 14.7%, which translates into a fair P/BV of 2.1x.  

Maybank held an Investor Day Briefing for its CommunityFinancial Services (CFS) division yesterday. The CFS division is the new housefor essentially the retail and SME segment which services the Group's Consumer,SME and commercial/business banking clients. 

The transformation process which was started four years agoin 2008, led the CFS to move to a more customer-centric driven model. Underthis new model, the business banking and small-medium enterprise (SME) segmentswere now included in the CFS division from 2010. In 2011. The customer modelsin both segments were redefined to enhance the quality and relevance of itsproducts and service delivery.  

Its main accomplishments to-date: (a) With the branches nowrequired to service the business segments as well, Maybank has seen a surge ingrowth of its business banking deposits by 70% in the last 18 months; (2) significantincrease in affluent customer base, by 14.6%. In addition, total financialassets related to this segment has expanded by a robust 24.2%, over the last 18months; (3) reduction in gross impaired loans ratio in this segment to 3.5%from 4.8%, over the last 18 months. This was attributed to proactive earlyrecovery efforts and restructurings, under its newly rolled out NationwideEarly Care Centre. 

It expects 2012 to be tougher but is still generally positive.Growth in the business banking and SME divisions is expected to be drivenpartly by government's Economic Transformation Programme (ETP). For the retailsegment, Maybank remains positive on the mass affluent market and sees goodprospects for the auto, mortgage and credit card segments. Whilst overall loansapprovals and applications had seen moderation similar to the industry's inJanuary 2012, the February 2012's trend is now back to normal.

We remain positive on Maybank following this briefing. Webelieve the new house for its retail and SME segments is now on a much strongerfooting following the transformation process three years ago. We expect Maybank'skey rerating catalysts from here to be:- (a) improvement in asset quality,which will provide comfort that an up-cycle in loan loss provisioning willlikely be short-lived; (b) better-than-expected ROE; (c) betterthan-expecteddividend.  

Source: AmeSecurities 

MBM Resources - The Rise of an Auto Titan

Stock Name: MBMR
Research House: AMMBPrice Call: BUYTarget Price: 5.80

We initiate coverage of MBM Resources (MBM) with a BUY call anda fair value of RM5.80/share. Our sum-of-parts derived valuation implies 9xFY12F earnings, a conservative 10% discount to sector PE of 10x. Our highconviction BUY on MBM is premised on several factors: (1) A strategic businessmodel re-engineering; (2) A close to quadrupling of core earnings base by FY13F;(3) A deeply undervalued stake in Perodua.

A structural valuation re-rating is imminent from thecurrent low base PE of 7x (sector average: 10x) as MBM breaks out of the investmentco stigma tagged to it (given that 70% of earnings is currently derived viaassociates). MBM is on the verge of a major business model transformation, froma mere investment company into one with a complete vehicle assembly, distributionand parts making capacity, akin to that of DRBHicom, UMW and Tan Chong. Theseauto manufacturing incumbents are currently trading at 40%-90% premium to MBM'sdepressed valuation (See Table 4).

The building blocks of such an infrastructure are in place:(1) Comprehensive vehicle manufacturing license via the acquisition of KMASBand LMSB in 2010; (2) A ready distribution network via 40 strong outletsnationwide, which are easily expandable; (3) Part making capacity in SRSproducts and wheels which can attract 2%-3% localization rate, on top of 10%-15%localisation derived from local assembly. 

Post recapitalization, MBM will be on a stronger footing togear up for massive expansion. An estimated RM105mil proceeds from the rightsissue will lower MBM's net gearing to 12% (from 20% FY12F) and expand equity by8%. We estimate MBM has the capacity to raise RM1.1bil to finance construction/acquisitionof assembly plants and expand distribution capacity. Potential assemblycapacity of 60K-70K/annum (our estimates) can position MBM at par to DRBHicomand Naza (See Table 5). We believe MBM is next to be thrusted into thelocal-foreign partnership spotlight after NazaPeugeot and DRB-VW.

In the near-to-mid term, a close to quadrupling of coreoperating profits - from RM42mil in FY11 to RM155mil in FY13F should catalyzestrong re-rating of the stock. The 23% FY11-13F core earnings CAGR will bedriven by the (1) Expansion of auto parts manufacturing division; (2) Expansionof VW dealership network to ride on the principal's massive expansion withinthe next 3 years; (3) MBM's maiden expansion into alloy wheel manufacturing. 

Finally, we think MBM's effective 23.5% stake in Perodua is deeplyundervalued. At current market cap, MBM's stake in Perodua is valued at just 6xFY12F earnings (net of MBM's direct 20% stake), half of UMW's (the other localshareholder of Perodua with a 38% stake) valuation of 12x. Notably, Proton is beingprivatised by DRB at 28x forward earnings.

Stock Overview - ECM - 9 Mac 2012

Stock Name: ECM
Research House: JUPITERPrice Call: BUYTarget Price: 1.00

ECM ( 2143 : 0.88 ) : Targeting 1.00


Resistance : 1.00 1.13
Support : 0.85

RSI of 68
RSI is on the rise

It is riding on an upswing


The consolidation breakout yesterday, is heading for a retest on the 1.00 level

Trading Strategy
Buy. Stop loss is at 0.85

Source:Jupiter Securities Research 9 March 2012

March 8, 2012

Petronas Chemicals - MARKET PERFORM - 7 Mar 2012

Stock Name: PCHEM
Research House: KENANGAPrice Call: BUYTarget Price: 7.02

Petronashas teamed up with BASF to invest an additional RM4.0b in two separatefacilities in Malaysia. This however has no immediate earnings impact to PCHEMgiven that the execution of the investment would be in 2015-2018.  We believe PCHEM will take charge of RAPID,although Petronas did not specific any details, given the business nature ofthe facility. Our PCHEM rating is maintained at MARKET PERFORM with anunchanged TP of RM7.02/share. 

RM4.0b investment. Yesterday, Petronas announced its has enteredinto agreements with BASF to expand their partnership in Malaysia involving RM4.0bworth of projects at their existing venture in Kuantan and at the new site of the proposed Refinery andPetrochemical Integrated Development (RAPID) complex in Pengerang, Johor. Theseprojects are to be implemented between 2015 and 2018. 

Forming a 40:60 JV for RAPID. Under the Heads of Agreements, both parties have agreed to form a newentity (Petronas  40%; BASF 60%) to jointlyown, develop, construct and operate production facilities for specialtychemicals and plants for precursor materials. This will become an integral partof the RAPID project. Although Petronas did not specifically mention thatPetronas Chemicals Group Bhd (PCHEM) will be taking charge of this project, webelieve that it is likely that  thisproject will be placed under PCHEM given the business nature of thefacilities. 

To expand the current plant in Kuantan. PCHEM's 40% owned BASF Petronas Chemicals Sdn Bhd (BASF owns theremaining 60%) is planning to expand its C3 value chain with a new plant forsuperabsorbent polymers as well as to expand the production capacity of itsexisting glacial acrylic acid unit. Currently, this associate company operatesan integrated complex with acrylic monomers, oxo products and butanediolproduction facilities at the Gebeng Industrial Zone. In the recent quarterlyresults, this unit reported disappointed earnings due to lacklustre demandand  lower prices. As a result, PCHEM's4Q11 associate income plunged 48% QoQ to RM54m from RM104m. 

No immediate earnings impact. The two projects above will not have any near term material impact onPCHEM's earnings as the projects will only be implemented 3-5 years from now.Besides, its RM4.5b Sabah Ammonia Urea (SAMUR) project, which had itsgroundbreaking last month, is expected to come on-stream only by 2015. Hence,the immediate earning drivers will only be petrochemicals prices and itsplants' utilisation. Give the strong petrochemicals prices YTD, 1Q12 is likelyto be a strong quarter for PCHEM. 

Still a MARKET PERFORM. We have recently downgraded ourrating on PCHEM given the strong rally in its share price (refer to ourreported dated 28 Feb 2012) although we continue to like the company for itsearnings quality, which is backed by its cost advantage. For now, we continueto rate the stock a MARKET PERFORM at an unchanged target price of RM7.02/sharebased on an unchanged 16.5x PER of CY12 earnings. 

Source: Kenanga 

Stock Overview - PUNCAK - 8 Mar 2012

Stock Name: PUNCAK
Research House: JUPITERPrice Call: BUYTarget Price: 1.64

PUNCAK ( 6807 : 1.43 ) : Stop loss 1.39


Resistance : 1.49 1.64
Support : 1.39

RSI of 51
RSI is on the rise

It riding on an upswing


While the upside target of 1.64 remains intact due to positive technicals, a tight stop loss should be placed at yesterday's low of 1.39, which marks the 61.8% pullback level

Trading Strategy
Buy. Stop loss is at 1.39

Source: Jupiter Securities Research 8 March 2012

Stock Overview - HWGB - 8 Mar 2012

Stock Name: HWGB
Research House: JUPITERPrice Call: BUYTarget Price: 0.54

HWGB ( 9601 : 0.46 ) : Targeting 0.54


Resistance : 0.54 0.63
Support : 0.43

RSI of 67
RSI is on the rise

It riding on an upswing


While the upside target of 0.54 remains intact due to rising volume and positive technicals, a tight stop loss should be placed at 0.43

Trading Strategy
Buy. Stop loss is at 0.43

Source: Jupiter Securities Research 8 March 2012

BIMB - Managing expectations

Stock Name: BIMB
Research House: HWANGDBSPrice Call: HOLDTarget Price: 2.20

BIMB Holdings; Hold; RM2.32
Price Target: RM2.20; BIMB MK

Expect 2012 loan growth to moderate and NIM to weaken as competition sets in. Asset quality remains stable; gross NPL ratio (2.6% in FY11) should continue to improve. Downgrade to Hold on more challenging outlook; maintain RM2.20 TP.

Source: HwangDBS Research 8 March 2012

Kimlun Corporation - OUTPERFORM - 7 Mar 2012

Stock Name: KIMLUN
Research House: KENANGAPrice Call: BUYTarget Price: 1.93

Kimlun hasbeen awarded a contract for the construction of apartments and ancillarybuildings in Johor Bahru. The project is owned by Dynasty View SB, which ispart of United Malayan Land. We are keeping our earnings forecasts unchanged asthe contract is part of its RM550m annual order book replenishment, which wehave already factored into our forecast. Given the potential upside of 26% andthe likelihood of it securing a supply contract for the TLS, we are maintainingour Outperform rating on Kimlun with an unchanged target price of RM1.93. Thisis based on 8.0x PER on its FY12 forecast EPS. 

Award forthe construction of apartments and ancillary buildings in Johor.  It was announced yesterday that Kimlun hasbeen awarded the construction of apartments and ancillary buildings in JohorBahru for a total contract sum of RM68.3m, which it expects to complete byDecember 2014. The project is by Dynasty View SB, which is a subsidiary ofUnited Malayan Land. The contract value is part of the company's RM550m annualorder book replenishment, which has already been imputed in our estimates.  As at year to date, the company's currentoutstanding order book is RM1.5b.

No changeto our FY12-13E earnings forecasts of RM55.4m-RM61.0m. We have already factoredin a RM550m annual order book replenishment in our estimates and we aremaintaining our FY12 and Y13 earnings forecasts at this juncture. 

MaintainOutperform. Looking at 26% potential upside from the current price, wereiterate our Outperform recommendation with unchanged target price at RM1.93, basedon 8x PER of its FY12 EPS of 24.2 sen.

Source: Kenanga

Stock Overview - SILVER - 8 Mar 2012

Stock Name: SILVER
Research House: JUPITERPrice Call: BUYTarget Price: 0.28

SILVER ( 7136 : 0.22 ) : Targeting 0.28


Resistance : 0.28 0.33
Support : 0.19

RSI of 28
RSI is oversold, and rebounding

It has started to recover, from its oversold level


The sharp upkick yesterday, is heading for 0.28. A tight stop loss should be placed at 0.19

Trading Strategy
Buy. Stop loss is at 0.19

Source: Jupiter Securities Research 8 March 2012

Stock Overview - KEYWEST - 8 Mar 2012

Stock Name: KEYWEST
Research House: JUPITERPrice Call: BUYTarget Price: 0.25

KEYWEST ( 0095 : 0.20 ) : Targeting 0.25

Telecommunications services provider

Resistance : 0.25 0.34
Support : 0.175

RSI of 61
RSI is on the rise

It riding on an upswing


Upside target is at 0.25

Trading Strategy
Buy. Stop loss is at 0.165

Source: Jupiter Securities Research 8 March 2012

Perisai Petroleum - A well-oiled machine takes to the road

Stock Name: PERISAI
Research House: CIMBPrice Call: BUYTarget Price: 1.50

Target RM1.50

Asset acquisitions, contract renewals and funding were among the issues raised by clients during our recent roadshow with Perisai's MD. There is definitely upside to our forecasts if the company expands its fleet further via an acquisition. Watch this space for M&A news.

MSM Malaysia Holdings - Serving a final dividend sweetener soon

Stock Name: MSM
Research House: CIMBPrice Call: HOLDTarget Price: 4.65

Target RM4.65

We gathered from yesterday's briefing that MSM is committed to its 50% dividend payout policy and will announce its final dividend soon. We expect an 11 sen final dividend, which works out to a yield of 2.2% (full-year yield of 3.8%) and could support near-term share prices.

Sime Darby: Makes cash advance to Bakun dam JV

Stock Name: SIME
Company Name: SIME DARBY BHD
Research House: ECMLIBRAPrice Call: HOLDTarget Price: 9.82

Sime Darby (SIME MK, Hold, TP: RM9.82) announced that its indirect wholly-owned subsidiary, Sime Engineering Sdn Bhd, intends to provide about RM30m to the Malaysia-China Hydro Joint Venture (MCH JV) for the Bakun Hydroelectric project in Sarawak. In a filing with Bursa Malaysia it said Sime Engineering, which has an effective interest of 35.7% in the MCH JV, intends to fund about RM30m progressively based on a projected monthly requirement. (Financial Daily)

Tenaga Nasional - Valuation kicker ' gas supply, tariffs & PPA drivers BUY

Stock Name: TENAGA
Research House: AMMBPrice Call: BUYTarget Price: 7.35

Wereiterate our BUY call on Tenaga Nasional (Tenaga), with a higher DCF-derivedfair value of RM7.35/share (vs. an earlier RM6.95/share), which implies a CY12FPE of 13x and a P/BV of 1.3x. 

We haveraised Tenaga's FY13F-FY14F earnings by 4% with a slight 0.5% increase inaverage electricity  price, which weconservatively expect as the net tariff arising from the cost pass-throughadjustment in tandem with the new gas price arising from the 200mmscfd supplyfrom the Malacca regassification plant in August this year.  Our FY12F-FY14F earnings, which also assumethe continuation of fuel cost sharing ' arising from natural gas shortfalls 'with Petronas and the government, are 11%-30% above general consensus'estimates.

Assuming a20% premium (for added gas processing and transport costs by Petronas Gas) toJapan's LNG current import price of US$17/mmbtu from Qatar, we estimate Tenaga'sblended gas costs to rise by 50% from RM13.70/mmbtu to RM20/mmbtu. 

This couldbe offset by an 11% increase in average electricity tariffs, given that gascost currently accounts for 23% of Tenaga's electricity revenue in Peninsular Malaysia.We believe that this may be palatable given the 7% hike in the last tariffreview in May last year and a 24% jump back in July 2008.

We remainpositive on Tenaga given multiple valuation kickers from:- (1) Re-pricing ofelectricity and fuel tariffs has  usuallyyielded a net margin upside for Tenaga in the past. The power-gas priceadjustment in May last year provided a 2% net tariff increase. If the powertariff structure adjusts the embedded coal price of US$85/tonne currently toour assumption of US$110/tonne, net electricity prices will rise by 1.6%,translating to a 32% increase in FY13F net profit. (2) Improving gas supplyfrom an additional 70mmscfd from the Joint-Development Area with Thailand andthe Malacca regassification plant in August this year. (3) Positive policymoves by the government and Energy Commission to encourage first generationindependent power producers to accept lower capacity payments for extension oftheir power purchase agreements. We estimate that a 10% reduction in thecapacity charge of the first generation's 4,115MW could translate to an 11% increaseto Tenaga's FY13F net profit. 

Since weraised our recommendation from HOLD to BUY back on 13 September last year, theshare price has risen by 20%, outperforming the FGBMKLCI by 10%. The stock stilltrades at a P/BV of 1.1x, at the lower range of 1x-2.6x over the past 5 years.Earnings-wise, Tenaga offers an attractive CY12F PE of 11x compared with thestock's three-year average band of 10x-16x.

MSM Malaysia - Beneficiary of weak US$ HOLD

Stock Name: MSM
Research House: AMMBPrice Call: HOLDTarget Price: 5.40

MSM is aHOLD for its decent FY12F dividend yield of 4%. Our fair value of RM5.40/sharefor MSM is based on a PE of 14x on FY12F EPS.  

MSM held ananalyst briefing yesterday. We understand that the group would be announcingits final gross DPS for FY11 soon. 

AlthoughMSM did not disclose the amount of the final gross DPS for FY11, the group saidthat it would adhere to its official policy of a net payout of 50% of netprofit. We estimate this at 19 sen, which translates into a final gross DPS of11 sen for FY11.

The boardmeeting will be held at the end of March 2012. This will be followed by theannual general meeting in June 2012. The final gross DPS will most likely bepaid in July 2012.  

The cost ofraw sugar locked-in under the long-term contract (LTC) was US$0.26/pound. Theprice was higher than the spot prices of US$0.2236/pound to US$0.2375/poundrecorded in December 2011 due to the inclusion of freight cost. The freightcost of US$0.02/pound translates into US$44/tonne roughly. 

We alsounderstand that the 'government did not shortchange' MSM with the increase of54 sen/kg in the sugar subsidy. We take this to imply that the subsidy of 54 sen/kgis more or less enough to offset the higher cost of raw sugar locked-in underthe new LTC. The cost of raw sugar locked-in under the old LTC (from FY09-FY11)was US$0.175/pound.

We gatherthat MSM had already concluded negotiations on the terms and conditions of thenew LTC with its suppliers. However, the LTC is not signed yet due to the difficultyin legal documentation. This is because the suppliers are from differentcountries.  

MSM is abeneficiary of the weak US$ as raw sugar is purchased in US$. We understandthat MSM's operating margins would improve if the US$ were to continue to depreciate. 

Sincereaching a high of US$1.00:RM3.2048 on 3 October 2011, the US$ has depreciated5.5% against the RM to US$1.00:RM3.029 currently.

There havenot been any updates on the new sugar refinery in Sarawak since it was reportedin the media last year. We understand that East Malaysia only accounts for 10%of MSM's domestic sales volume.

JOHOTIN (FV RM1.51 - BUY) Company Update: More Room For Upside

Stock Name: JOHOTIN
Company Name: JOHORE TIN BHD
Research House: OSKPrice Call: BUYTarget Price: 1.51

 Since we initiated coveragein Oct 2011, Johore Tin Bhd's (JTB) share price has rallied by some 38.5%,propelled by its stronger-than-expected 4Q11 earnings. Its strong earnings werelargely due to contributions from its newly acquired dairy product businesswhose future prospects remain bright. Despite the strong rally, the stock isstill trading at an attractive 5.4x FY12 earnings compared to an average of7.5x FY12 earnings for its peers. Given its attractive fundamentals and valuation,we reckon JTB could be a potential M&A target. We reiterate our BUY callwith an unchanged FV of RM1.51 based on our SOP valuation.

Charging like a bull. JTB's share price has rallied by some 38.5% since we initiated coverageon the stock in Oct last year. The rally was largely due to itsstronger-thanexpected earnings in 4Q11, buoyed by strong earnings from itsnewly acquired business, a dairy product manufacturing firm  called Able Dairies (ADSB).  The acquisition came with a net profitguarantee of RM7m in FY11 and RM10m in FY12, and given the strong demand forcondensed milk in third-world countries as a substitute for milk, we remainpositive on the prospects of this business going forward.

Balance sheet intact. Incorporating ADSB's balance sheetinto the picture, JTB's net gearing ratio stood at 0.12x as of 4QFY11, whileits debt-to-equity ratio stood at 0.42x. We think that the group is poised tobe in a net cash position in FY12, given its robust near-term profitability and ability to pare down its debt.

Valuation still attractive. Despite the strong rally, JTB ismerely trading at 5.4x FY12 earnings compared to its peers (such as Can-One andKian Joo) which are trading at an average of 7.5x FY12 earnings. With our FV atRM1.51, JTB offers a potential upside of 39.8% based on its last traded priceof RM1.08.

Maintain BUY. Given its attractive valuation and low marketcap of RM75.6m, we think that the company could likely be a potential M&Atarget. Nonetheless, even if there is a lack of any corporate exercise in thenear term, the stock remains a strong BUY purely from a fundamental standpoint.We are reiterating our BUY recommendation on JTB with a FV of RM1.51, premisedon: (i) 6.5x FY12 earnings for its tin can manufacturing business, and (ii)8.0x FY12 earnings for its dairy product manufacturing business.

Source: OSK188

March 7, 2012

4QFY11 results broadly within expectations

Stock Name: KSL
Research House: ZJPrice Call: BUYTarget Price: 2.12

3QFY12 results within expectations

Stock Name: E&O
Research House: ZJPrice Call: BUYTarget Price: 1.92

Inventory write-down pushed 4QFY11 into losses

Stock Name: K1
Research House: ZJPrice Call: HOLDTarget Price: 0.27

Stock Overview - TECFAST - 7 Mar 2012

Stock Name: TECFAST
Research House: JUPITERPrice Call: BUYTarget Price: 0.16

TECFAST ( 0084 : 0.145 ) : Targeting 0.16


Resistance : 0.16 0.19
Support : 0.12

RSI of 69
RSI is on the rise

It riding on an upswing


Following the consolidation breakout, it is heading for 0.16, and possibly 0.19

Trading Strategy
Buy. Stop loss is at 0.12

Source: Jupiter Securities Research 7 March 2012

Stock Overview - PADINI - 7 Mar 2012

Stock Name: PADINI
Research House: JUPITERPrice Call: BUYTarget Price: 1.35

PADINI ( 7052 : 1.48 ) : Stop loss 1.35


Resistance : 1.83
Support : 1.35

RSI of 78
RSI is overbought

It riding on an upswing


The current uptrend has an upside of 1.83. A tight stop loss should be placed at 1.35

Trading Strategy
Buy. Stop loss is at 1.35

Source: Jupiter Securities Research 7 March 2012

Stock Overview - MUDAJYA - 7 Mar 2012

Stock Name: MUDAJYA
Research House: JUPITERPrice Call: BUYTarget Price: 3.22

MUDAJYA ( 5085 : 2.94 ) : Targeting 3.22


Resistance : 3.22
Support : 2.79

RSI of 63
RSI is on the rise

It riding on an upswing


The current resumption off the low of 2.79, is heading for 3.22. Downside is limited to a pullback support of  2.86

Trading Strategy
Buy. Stop loss is at 2.79

Source: Jupiter Securities Research 7 March 2012

Stock Overview - GOCEAN - 7 Mar 2012

Stock Name: GOCEAN
Research House: JUPITERPrice Call: BUYTarget Price: 0.42

GOCEAN ( 0074 : 0.305 ) : Targeting 0.42


Resistance : 0.42
Support : 0.17 0.25

RSI of 68
RSI is on the rise

It riding on an upswing


It has bottomed at the 0.25 low, a 61.8% retracement, indicating a likely push up to 0.42. A tight stop loss should be placed at 0.25

Trading Strategy
Buy. Stop loss is at 0.25

Source: Jupiter Securities Research 7 March 2012

'Hock Seng Lee land acquisition to do well'

Hong Leong Investment Bank (HLIB) sees Hock Seng Lee (HSL) Bhd's land acquisition move at Bandar Samariang in Sarawak as being positive following the company's successful project previously.

The land is nearby its award-winning residential project, Samariang Aman.

"We believe it will do well due to the positive spill over effects from Samariang Aman," it said in a research note.

The project involves 1,500 houses -- semi-detached, quadruplex, terraced, 2,000 affordable units and 40 shophouses, it said.

The bank said the RM2.10 per square feet acquisition price looked attractive from the RM5 per sq ft market price for the area.

The research house is recommending a "buy" call on Hong Seng Lee,
maintaining its RM2.20 target price. -- Bernama

Tan Chong Motor Holdings - Another brand under its belt

Stock Name: TCHONG
Research House: CIMBPrice Call: HOLDTarget Price: 4.60

Target RM4.60

Tan Chong's appointment as a contract assembler for Subaru is a good low-risk strategy to help optimise its production facilities. An assumption of RM30m in total assembly and localisation charges from this deal would push up our FY13 net profit projection by c.5%.

Source: CIMB Day Break 07 March 2012, Full PDF Report

HSL (BUY) - Samariang land bank coup

Stock Name: HSL
Research House: HLGPrice Call: BUYTarget Price: 2.21

Samariang land bank coup
Entered into a S&P Agreement with Projek Bandar Samariang for thepurchase of a 275.5 acre land in Kuching's northern township of Samariangfor a total cash consideration of RM25.5m, equivalent to ~RM2.10/sq ft. Thelatest acquisition will enlarge HSL's existing land bank to a total of 890acres.
We belief that it will do well due to the positive spill over effectfrom Samariang Aman. The latest land deal will ensure continuity in HSL'sproperty launches in Samariang area.
GDV is estimated to be worth ~RM700m and the development is expected tocommence in 2013 and will span over a development period of 6 to 8 years.
The acquisition price of ~RM2.10/sq ft looks attractive compared to themarket price of ~RM5/sq ft for the area. Overall, land cost-to-GDV ratio is~3.6%, hence increasing the development's feasibility and success rate as wellas profitability.
By assuming a 10% discount rate over 7-years and 25% net profit margin,Samariang Aman 3 will translate to 16 sen/share for HSL.
Forecasts remain unchanged, hence maintain TP of RM2.21 based on12x average FY12 and FY12 earnings.

Source: HLIB Research 7 March 2012