April 6, 2012

Gamuda - RM360m suit does not shake our conviction

Stock Name: GAMUDA
Company Name: GAMUDA BHD
Research House: CIMBPrice Call: BUYTarget Price: 4.55

Target RM4.55

Malaysiakini's report on a suit triggered by the alleged breach of agreement by the MMC-Gamuda JV on the double tracking project is a negative surprise. But we are not too alarmed at this juncture as the trial is still at the early stages. The worst-case scenario is a 29% dent on FY13 EPS and a 2% dip in RNAV. But we retain our forecasts and target price (10% RNAV discount) pending an outcome from the trial. Gamuda remains a Trading Buy and one of our top sector picks.

UOA Development - Unjustified depressed valuations

Stock Name: UOADEV
Research House: CIMBPrice Call: TRADING BUYTarget Price: 1.84

Target RM1.84

Our visit and showroom tour with several investors reaffirmed our positive view on UOA Dev. Its 1Q new sales of over RM300m put the company firmly on the path to meet, if not exceed, its full-year target of RM1bn. Due to the depressed share price, UOA Dev's valuations are among the cheapest in our property coverage. Its P/Es are the lowest while its dividend yields are the highest. We maintain our Trading Buy call and target basis of 30% discount to RNAV.

TNB (HOLD) - 2Q12 to Show Profits

Stock Name: TENAGA
Research House: HLGPrice Call: HOLDTarget Price: 6.54

2Q12 to Show Profits
  • Improved natural gas supply to the sector, stable coal power generationas well as seasonally lower power demand in 2Q12, had reduced reliance onalternative fuels and lowered overall fuel cost to TNB.
  • TNB had received total RM2bn fuel compensation from Government andPetronas in Feb 2012, and will be recognised as an EI item. Note that theamount is taxable at 25%.
  • Additionally TNB will recognise another RM660m forex translation gaindue to appreciation of MYR against US$ and JP''.
  • Expect TNB to report 2Q12 net profits of RM2.7bn and core profits ofRM550m.
  • However, we believe TNB will revert back to alternative fuels as powerdemand is expected to peak in Apr-Aug period, while being hit by seasonallylower hydropower generation.
  • Maintain Hold on TNB with Target Price of RM6.54.

Source: HLIB Research - 6 April 2012

MBM Resources - Assembly newsflows to pick up, Proton Preve boost BUY

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

- We re-affirm our BUY rating on MBM Resources (MBM) with anunchanged fair value of RM5.80/share, following a meeting with management yesterday. Several areas of key focus duringthe discussions were:- (1) Expansion into vehicle assembly; (2) Hirotakoprospects; (3) Relevance of MBM's stake in Perodua.

- In the near-term, we anticipate a pick-up in newsflows onits expansion into vehicle assembly to drive MBM's structural re-rating.Management indicated that it prefers a greenfield setup (a 12 month-timeframe)to better manage capacity outlay. A successful execution could see MBMpartnering multiple OEMs, akin to DRB-Hicom's business model.

- We would conservatively expect initial volumes to range around10K-20K/annum via initial exposure to the lower risk commercial vehiclesegment, before a massive expansion into higher volume passenger cars. MBM'sbalance sheet capacity should be able to accommodate up to 70K/annum assemblycapacity in the longer run.

- Additionally, MBM has ready land to house its plant and plansto allow principals/partners to control its manufacturing operations, astructure successfully adopted by Perodua and UMW Toyota. This should reduceinitial capital outlay, eliminate quality issues and significantly reduce MBM'sbreak-even risk on investment. We anticipate newsflows on the assembly front tokick start within the next 3-6 months. 

- On the auto parts front (Hirotako), we were positively surprisedto find that revenue/car set for supply to Proton Preve is circa RM1,100, atthe higher end of a typical range of between RM700-1,200. Proton Preve isprojected to garner 54,000 unit sales annually, which we estimate would accountfor up to 30% of Proton's TIV and is expected to achieve 100% airbag fitmentrate. The Preve is scheduled to be launched this month. 

- MBM's stake in Perodua continues to be deeply undervalued atan implied 6x FY12F earnings. UMW (which holds 38% of Perodua) currently tradesat 12x FY12F earnings, at a whopping 100% premium vis-''-vis MBM. MBM provides acheaperaccess into Perodua and more importantly, such valuation disparity raises thepossibility of a consolidation of local shareholdings in Perodua. 

- As MBM breaks out of its investment company stigma (70% ofearnings is currently derived from 'non-cash flow enhancing' associates) viaexponential growth of its core earnings in the mid-term (via expansion intovehicle assembly & distribution and growth at its auto parts division),valuations should re-rate closer to sector PE of 10x from the current depressedvaluation of 7x.   

Sime Darby - Stronger Sime due to stronger CPO price BUY

Stock Name: SIME
Company Name: SIME DARBY BHD
Research House: AMMBPrice Call: BUYTarget Price: 12.30

- We reaffirm our BUY recommendation on Sime Darby, with ourfair value raised to RM12.30/share (from RM11.80/share previously), pegging a10% discount to our revised sumof-parts value of RM13.70/share (vs.RM13.10/share previously). 

- The higher SOP is the result of a stronger average CPO priceassumption of RM3,400/tonne (vs. RM3,300/tonne previously), in line with ourhouse CPO price. 

- The RM100/tonne increase in our assumption has boosted SimeDarby's plantation EBIT for FY13F- FY14F by 6.4%-6.6% and net profits by 3.9%to 4.1% for the same period, translating into EPS of 77.0 sen-82.1 sen.  

- CPO prices will continue to be robust, to be supported by positivedemand and slower supply growth. 

- Sime Darby has guided for a rather flat FFB production growthof 3%-5%, in line with the expected flat production growth for Malaysian andIndonesian planters in FY12F. 

- Oil palm trees could be facing stress after a bumper harvestin 2011 and there may be a lag impact from the drought which took place 2Q2010.

- On top of that, industry experts are expecting lower soybeanoil production in South America, whereby Oil World  had recently forecastworld soybean output to decline 8.1% to 243 million tonnes in 2012F due toadverse weather in South America.

- There is further upside to our earnings estimate as we assumecosts of production of RM1,100/tonneRM1,200/tonne versus management's guidanceof RM1,000/tonne. Our sensitivity analysis indicates a 10% upside to ourplantation EBIT for FY13F-FY14F.

- While our BUY call mainly centres on its plantation business' (1) 60%-65% of its earnings coming from plantation division, and (2) SimeDarby is the most liquid proxy to the plantation sector with a sizeableweighting in the FBM KLCI of about 8.8% ' Sime's industrial division offers thestrongest EBIT growth of about 10% p.a., which could be attributed to therecent acquisition of Bucyrus.

- Sime Darby is attractive, being the cheapest amongst the biggerplantation stocks ' trading at CY13F PE of 12x '  vis-a-vis KL Kepong (16.5x CY13F) and IOICorp (13xCY13F).  Likewise, Sime Darby istrading at a 27% discount to its conglomerate peers' average of 16.5x.

Tan Chong Motor: Upgrade to Buy - Time to rev up

Stock Name: TCHONG
Research House: MAYBANKPrice Call: BUYTarget Price: 5.38

Upgrade to Buy with a higher TP of RM5.38, ahead of an anticipated sector recovery in 2H 2012. This follows a 17-18% rise in 2012-13 net profit forecasts, on higher vehicle sales assumptions (+9-21%). We reckon the disruption to the regional parts supply chain, margin weakness and poor Jan-Mar 2012 performance have all been priced in. Our TP (+35%), premised on 10x 2013 PER (previously 8x), offers 20% upside. Our re-rated PER target reflects improved optimism ahead.

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Source: Maybank Research - 6 April 2012

Tenaga Nasional: Maintain Buy - Tenage CFO resigns

Stock Name: TENAGA
Research House: MAYBANKPrice Call: BUYTarget Price: 6.90

Negative surprise. We are surprised with this development given that there is no pre-emptive from the Company; this is something they been practiced very well in the past. Given the planned resignation of its CEO, Dato Sri' Che Mohd. Khalib in June 2012, there will be a fresh set of top management at Tenaga Nasional. We await further clarifications. 2QFY12 results release is just around the corner (12 April), of which we believe the results will be exceptionally good. Maintain Buy.

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Source: Maybank Research - 6 April 2012

Genting Plantations (GENP MK, BUY, FV RM10.13, Last Close: RM9.53)

Stock Name: GENP
Research House: OSKPrice Call: BUYTarget Price: 10.13

We are maintaining our Buy call on Genting Plant with  our  FVunchanged at RM10.13. Genting Plant is a core Malaysian plantation holding andone of the biggest, best managed and most  highly focused. While  its  PEvaluation looks stretched, this is due to the stock pricing in the value of itslandbank in Iskandar Region, which we estimate to be  worth between RM1.71  and RM2.13 per share. Knocking off the Iskandar land, Genting Plant  is trading at 14.7x CY12 and 13.6x CY13 earnings.

Highly leveraged toCPO price. Being an upstream plantation player in Malaysia and by virtue ofthe group  being a spot seller, GentingPlant's profitability is highly leveraged to crude palm oil price. We estimatethat for  every  RM100 increase in CPO price, Genting Plant'snet profit will increase by RM17.1m.

Slow and steady.Genting Plant has been steadily growing its oil palm hectarage in the last 20years. Since 1991, it has increased its planted area every single year withoutfail, bringing it from 20,401 ha to 93,503 ha within a span of 20 years. Thisgives the company a long term hectarage CAGR of 7.9%.

Growth focused onKalimantan. Since 2007, and armed with a net cash balance sheet, GentingPlant started its expansion in Kalimantan as land in Malaysia became scarce andtoo expensive. As of end-2011, Genting Plant had 33,922 ha of oil palm plantedareas in Kalimantan.

Production growth.Its estates in Malaysia and Indonesia are both supportive of further productiongrowth although the bulk the growth will come from its Kalimantan estates. Assumingthat Malaysia plantation's production stays flattish going forward, GentingPlant's FFB production will increase to 2.086m tonnes by 2021 based on itsexisting planted area and conservative peak FFB yield of 24 tonnes per ha. Thisimplies a 5.1% CAGR over the next 10 years.

Owner of valuableland in Johor. To our knowledge, Genting Plant is the second largest landownerin Johor's Iskandar Region after UEM Land. Other than 96 ha of development landat its Indahpura property project, Genting Plant also owns some 2,600 ha of oilpalm plantations adjacent to its Indahpura project.

Source: OSK188

SEG (FV RM2.17- BUY) Corporate News Flash: Imminent GO for SEGi?

Stock Name: SEG
Research House: OSKPrice Call: BUYTarget Price: 2.17

The Star reported that a general offer (GO) for SEGInternational (SEGi) may be announced as early as  the end of next week by Navis Capital, its second largest shareholder with a26.5% stake. The latter could potentially partner with SEGi's existing singlelargest shareholder, Datuk Seri Clement Hii, who holds a 28.4% stake.

Joint offer likely.  From the daily's interview with Datuk SeriClement Hii and reading between the lines, we opine that SEGi's existing majorshareholder-cum-MD is likely to partner with Navis Capital to launch a GO.Although our previous assumption that a GO might not take place at thisjuncture could turn out to be wrong, the latest speculation still matches ourview that Datuk Seri Hii is unlikely to cash out on his 28.4% stake (or 31.4%upon full conversion of his interest in warrants) in SEGi at this juncture,based on the understanding that this is his core business focus for now.

Potential pricing.To entice the minority shareholders, we believe the potential GO has to bepriced at a minimum of RM2.10/share (as opposed to Navis Capital's existingcost of RM1.71/share), which would then translate into FY12 and FY13 PERs of16.6x and 15.0x respectively. We would deem  such a pricing  fair considering SEGi's sizeable studentbase, which justifies the premium that  it should command over itspeers. At RM2.10/share, SEGi's valuation would be at some 25% premium over HELP(NEUTRAL, FV: RM1.55) and a 80% premium over Masterskill (SELL, FV: RM0.84).

Combined 54.9% stakenow. Taking a brief look at SEGi's existing shareholding spread, the twoparties hold a combined 54.9% stake in SEGi, or an effective stake of 59.4%  upon the  full conversion of theirrespective warrants.  To take the companyprivate, the pair would have to fork out some RM600m to buy out the minoritiesbased on RM2.10/share, which  we  see as not much of an issue given Navis Capital's huge assets under management ofsome USD3bn.

BUY. We expectto  see more developments on this  unfold in the next 2 weeks and hence, maintain our BUY call on SEGi, at anunchanged FV of RM2.17, based on 18x FY12 PER and a fully enlarged share baseof 748.4m. A re-rating on the sector as a whole is possible but not likely,given the specific factors  underlying  each of the education counters under our coverage.

Source: OSK188

TNB (FV RM7.68 - BUY) Corporate News Flash: CFO Calls it a Day

Stock Name: TENAGA
Research House: OSKPrice Call: BUYTarget Price: 7.68

In a Bursa announcement, Tenaga Nasional (TNB) announcedthat its Chief Financial Officer (CFO), Mohamed Rafique Merican bin Mohd Wahiduddin Merican, 47, has resigned topursue better opportunities and career advancement.

A surprise. Thispiece of news took us by surprise as we had not heard any rumours of En Rafiqueleaving. Meanwhile, a corporate day being organized by TNB for investors in Maycould be affected by this development. Appears to be an amicable parting of ways.As far as we understand, there are no negative developments surrounding EnRafique's departure. We  also  understand that management has  already begun the search for a replacement. During  En Rafique's tenure, TNBcontinued to pare down its debts despite facing numerous headwinds. At thisjuncture, we believe  that there will beminimal disruption to TNB's activities given that  all standard operating procedures should be in place  at  this long  established GovernmentLinked Company (GLC).

Coal  tax conundrum. Sentiment  in the company  has been slightly  doused of late in view of recent rumours thatIndonesia may be slapping a 25% export tax on coal, which stoked fears of aprice hike in coal. While we do see some rationale for an export tax on miningores, we see no justification for a coal export tax as there is limitedcapacity for local upgrading  ofcoal  or value adding in Indonesia priorto export. We believe  that variousparties, including miners and importers, will lobby hard to have this taxreduced or postponed. For now, we maintain our coal cost assumption of USD110per tonne for FY12 and FY13.

Maintain BUY.While some  parties  may choose to read more than is justified inthe resignation of the CFO, particularly given the  upcoming departure of CEO Datuk Seri CheKhalib  - who has chosen not to renew hiscontract when it expires in June, we believe that  a leading GLC like TNB will keep itsoperations intact. As such, any short term share price weakness should be viewedas an opportunity to accumulate the shares. We maintain our earnings forecastand call, pending further clarification from TNB's upcoming results briefing on 12 April.

Source: OSK188

Sapura-Kencana: Merger seen ready by June

Stock Name: KENCANA
Research House: ECMLIBRAPrice Call: HOLDTarget Price: 3.40

Stock Name: SAPCRES
Research House: ECMLIBRAPrice Call: HOLDTarget Price: 5.23

SapuraCrest Petroleum Bhd's (SCRES MK, Hold, TP: RM5.23) merger with Kencana Petroleum Bhd (KEPB MK, Hold, TP: RM3.40) is expected to be completed by June. SapuraCrest and Kencana yesterday said they had mutually agreed with Sapura-Kencana Petroleum Bhd to extend the deadline to 31 May in order to meet all merger conditions. They told Bursa Malaysia that the proposed disposal, capital reduction and repayment and share issue in relation to the merger are expected to be completed by June. (Business Times)

Value Investor Research on KLSE Market

Stock Name: MAS
Research House: ECMLIBRAPrice Call: TRADING BUYTarget Price: 1.00

Target Price: RM1.00

Malaysian Airline System (MAS)'s Redeemable Cumulative Preference Shares (RCPS) have been sold down on heavy volume since February 2012. The RCPS are to be redeemed at RM1.00 in November 2012 which would give an annualized return of 18%. Uncertainty over whether the RCPS will be fully redeemed is to be addressed by a formal announcement by MAS towards the end of this month. With the ordinary shares trading way above NAV/share, and the RCPS trading at a discount to redemption value when the RCPS have priority over the ordinary shares in receiving payment, the RCPS look like a better bet than the ordinary shares. Trading Buy. (refer to report for details)

April 5, 2012

AMMB Holdings: Maintain Hold - To acquire Kurnia Insurans

Awaiting details. AMMB's proposed acquisition of Kurnia Insurans Malaysia Bhd (KIMB) has received approval from the Minister of Finance (MOF) and we await details. Meanwhile, our initial assessment based on preliminary assumptions points to little impact (+1%) on AMMB's earnings and fundamentals. Positively, its general insurance division could leapfrog from about 5th position to among the Top 3 in terms of total premiums, after this acquisition. We maintain our Hold call with an unchanged TP of RM6.30 (1.6x CY12 P/BV, ROAE: 13.5%)

Maybank Research - 5 April 2012

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Ta Ann Holdings: Buy - Out of the woods, into the golden crop

Stock Name: TAANN
Research House: MAYBANKPrice Call: BUYTarget Price: 8.00

Due for a re-rating. Three key catalysts will propel earnings: (i) an explosive 18% 3-year forward CAGR in FFB output, (ii) Japan's reconstruction, (iii) a maiden contribution from its forest plantation in 2015. Ta Ann's earnings quality was boosted by its transformation into a producer of palm oil, which contributed 77% of PBT in 2011. The stock trades at 11.7x 2013 PER, with low EV/planted ha of ~RM39,600, and is poised to deliver an 11% 3-year net profit CAGR. We initiate coverage with a Buy and RM8.00 TP on 15x 2013 PER (+29% upside).

Maybank Research - 5 April 2012

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Stock Overview - KURASIA - 5 Apr 2012

Stock Name: KURASIA
Research House: JUPITERPrice Call: BUYTarget Price: 0.69

KURASIA ( 5097 : 0.63 ) : Targeting 0.69


Resistance : 0.69
Support : 0.56

RSI of 64
RSI is on the rise

It is on an upswing


The current rebound is targeting 0.69

Trading Strategy
Buy. Stop loss is at 0.56

Source:Jupiter Securities Research 05 April 2012

Stock Overview - KPSCB - 5 Apr 2012

Stock Name: KPSCB
Research House: JUPITERPrice Call: BUYTarget Price: 0.52

KPSCB ( 9121 : 0.40 ) : Targeting 0.52

Wood building materials

Resistance : 0.46 0.52
Support : 0.37

RSI of 69
RSI is slightly overbought

It is on an upswing


The current rebound is heading for 0.52

Trading Strategy
Buy. Stop loss is at 0.37

Source:Jupiter Securities Research 05 April 2012

Source:Jupiter Securities Research 05 April 2012

Stock Name: WIJAYA
Research House: JUPITERPrice Call: BUYTarget Price: 0.84

WIJAYA ( 4022 : 0.76 ) : Targeting 0.84


Resistance : 0.84-0.86
Support : 0.69

RSI of 54
RSI is on the rise

It is on an upswing


The current rebound is expected to overcome the overhead resistance at 0.77, to target 0.84-0.86

Trading Strategy
Buy. Stop loss is at 0.69

Source:Jupiter Securities Research 05 April 2012

Eversendai - Steel Class Of Its Own

Eversendai (BUY; NEW)
Steel Class Of Its Own
  • Eversendai has crafted a niche as a specialist in the steel structureconstruction works which has several advantages over traditional RCconstruction method. The company has four strategically located fabricationfacilities with an annual capacity of 119,000MT pa which provides economies ofscales for a competitive quote during the tendering stage.
  • Moreover, Eversendai is involved in the early design and consultancystages of a proposal down to the fabrication and construction phase, henceproviding the company with a technical advantage over its other competitors todeliver the project on time.
  • The company has played an important role in many international landmarkprojects and have also fostered close working relationships with reputable andinternationally established contractors.
  • Eversendai has an outstanding order book of ~RM1.37bn, translating to~1.3x FY11's revenue and ~1.06x order book-to-market cap ratio. The company istendering for ~RM12bn worth of contracts and based on its historically hit rateof 20%, the company has a good chance of securing an additional RM2.4bn worthof new projects.
  • We forecast a modest FY12-FY14 earnings CAGR of 4% and order bookreplenishment rate of RM1bn-1.5bn. Initiate with a BUY call with TP of RM2.00as we favour Eversendai's niche as a steel specialist contractor and decentorder book size, but trading at undemanding valuation.

Source: HLIB Research - 5 April 2012

RHB Sector Update - Motor

Stock Name: MBMR
Research House: RHBPrice Call: BUYTarget Price: 5.05

Stock Name: TCHONG
Research House: RHBPrice Call: HOLDTarget Price: 4.20

Stock Name: UMW
Research House: RHBPrice Call: HOLDTarget Price: 7.30

Stock Name: APM
Research House: RHBPrice Call: HOLDTarget Price: 4.50

Stock Name: PROTON
Research House: RHBPrice Call: HOLDTarget Price: 5.50

Stock Name: DRBHCOM
Company Name: DRB-HICOM BHD
Research House: RHBPrice Call: BUYTarget Price: 3.45

Motor ' Awaiting NAP v3.0                                                                                                 Neutral
Sector Update
MBM Resources ' Fair value RM5.05                                                                           Outperform
Tan Chong ' Fair value RM4.20                                                                             Market Perform
UMW ' Fair value RM7.30                                                                                      Market Perform
APM ' Fair value RM4.50                                                                                       Market Perform
Proton ' Fair value RM5.50                                                                                      Market Perform
DRB-HICOM ' Fair value RM3.45                                                                                    Outperform
-          The auto industry made a shaky start to 2012 with total industry volume (TIV) in Jan declining 14.7% and 25.2% mom and yoy respectively. The softer sales were attributed to seasonal factors given the earlier than usual Lunar New Year holidays, the more stringent financing guidelines implemented by Bank Negara Malaysia (BNM) and the lingering effects of component supply disruption arising from the floods in Thailand .

Source: RHB Research - 5 April 2012

PROTON - Proton Preve (P3-21A) to be launched on April 16

Stock Name: PROTON
Research House: HWANGDBSPrice Call: HOLDTarget Price: 5.50

Proton; Hold; RM5.48
Price Target: RM5.50; PROH MK

According to the local media, managing director Datuk Seri Syed Zainal Abidin has revealed details on the newly anticipated model, P3-21A (officially named as Proton Preve) yesterday. Proton Preve will be launched on April 16 at a price tag of between RM62k (for an entry level model with manual transmission) and RM75k (for its high specifications model). There is also a medium line unit which may be sold for less than RM70k.

According to Proton's managing director, the new model ' which costs RM540m to be developed ' is expected to rake in monthly sales of 4k-5k units.

The company's sales projections are above our conservative total sales forecast of 8k-10k units of Proton Preve this year, as demand could be held back by a possible production capacity constraint. Based on an ASP of RM68.5k, we estimate the 8k-10k unit sales will translate to a revenue contribution of RM548m- RM685m (or 5.3%-6.6%) of our FY13F's topline earnings of RM10.4bn.

Meanwhile, in an announcement made to Bursa yesterday, the unconditional takeover offer by DRBHICOM to acquire all the remaining shares in Proton at RM5.50 per share will close on April 25.

We maintain our Hold rating for Proton with RM5.50 TP (which is pegged to the offer price).

Source: HwangDBS Research - 5 April 2012

Eversendai a 'buy', says Hong Leong Invt

Stock Name: SENDAI
Research House: HLGPrice Call: BUYTarget Price: 2.00

Hong Leong Investment Bank Research started coverage on Malaysian construction company Eversendai Corporation with a buy call and target price of RM2.00, citing a positive outlook after its contract wins in India and the Middle East.

"We like Eversendai for its technical expertise as a structural steel player, benefitting from involvement in the initial stages of engineering and design works to the final installation phase," said Low Yee Huap in a research note today.

"This avoids technical disputes and at the same time provide competitive advantage," the broker added.

Hong Leong said Eversendai is tendering for RM12 billion (US$3.92 billion) worth of contracts and is seeking accreditation to undertake oil and gas structural steel works. -- Reuters

Maybank keeps 'hold' call on AMMB

Stock Name: AMMB
Research House: MAYBANKPrice Call: HOLDTarget Price: 6.30

Maybank Research kept its hold call on AMMB Holding Berhad after the government gave it's unit the green light to acquire a 100 per cent stake in Kurnia Insurance, a wholly-owned subsidiary of Malaysian insurer Kurnia Asia.

AMMB holds a 51 per cent stake in AmG Insurance Bhd, which is spearheading the deal. Insurance Australia Group owns the rest.

"Our initial assessment points to little impact on AMMB's earnings and fundamentals," said the broker in a research note today.

Maybank maintained its target price unchanged at RM6.30 (US$2.06) per share.

Maybank said that AMMB's general insurance division could jump from its current fifth position to among the top three in terms of total premiums following the acquisition.

As of 9.49am in Kuala Lumpur trading, AMMB's shares fell 0.16 per cent, compared to the Malaysian benchmark stock index KLCI which dropped 0.41 per cent. -- Reuters

Genting Malaysia - Keeping tabs on its overseas ventures

Stock Name: GENM
Research House: CIMBPrice Call: HOLDTarget Price: 4.10

Target RM4.10

We see no dearth in news flow on Genting Malaysia's overseas operations. While there have been some positive developments in its US ventures recently, it will take a while before these developments translate into meaningful earnings contribution for the company. We see few meaningful near-term earnings catalysts that could drive a further share price rerating. We remain Neutral with an unchanged SOP-based target price. Genting Bhd, which offers more near-term growth catalysts, is our preferred pick in the Malaysian casino gaming space.

Perisai Petroleum - MD makes a slick call on option

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

Target RM1.50

Perisai's MD Izzet Ishak's exercise of a call option on 66m shares at RM0.485 apiece demonstrates his commitment to the company and makes him Perisai's fourth largest shareholder. We take a positive view of this compensation and means of motivation. We continue to value the stock at our CY13 target market P/E of 13x. Perisai remains an Outperform and our top small-cap oil & gas pick.

KURASIA (FV RM0.77- TRADING BUY) Corporate News Flash: BNM Approves KIMB Sale

Stock Name: KURASIA
Research House: OSKPrice Call: TRADING BUYTarget Price: 0.77

Kurnia Asia Bhd  (KAB)announced on Bursa Malaysia yesterday that it has received Bank Negara Malaysia(BNM) approval  to sell  its wholly-owned subsidiary, Kurnia Insurans(Malaysia) Bhd (KIMB), to AmG Insurance Bhd (AmG).

Way paved  for AmG toexpand insurance business. If the negotiations on the sale work out, the deal will allow AmAssurance Bhd  to leverage on  the expertise of  its business partner Insurance AustraliaGroup Limited (IAG), which owns 49% of AmG, to grow its  general insurance business in Malaysia. Whiledetails on the acquisition will only be announced after the signing  of the definite agreement, we are maintainingour view that the sale would be fully paid in cash at 2.0x PBV.

More about IAG.  IAG has a portfolio of general insurancebusinesses with leading brands across its  home markets of Australia andNew Zealand  and other specialist underwritingoperations. With a presence in Asia that it intends to expand, the group is focusingon accelerating its expansion to ensure that its Asian division delivers 10% ofgross written premiums by 2016. Having IAG on board has been positive for AmGas it gave the company  access to  the former's direct regional expertise,  asexemplified by IAG's innovative online general insurance portal launched inAustralia ' Buzz Insurance ' which won the 'Australian Business Award forInnovation' in 2010.

2.0x PBV  valuation fair.  From recentM&As  in the insurance industry,we  noted the following: i) MAA Holdingssold its insurance business for 1.36x PBV, ii) PacificMas Bhd sold itsinsurance business for 1.71x PBV, iii) Jerneh Asia sold its insurance businessfor 2.25x PBV, while iv) Berjaya Corp hived off its 40% stake in Berjaya SompoInsurance at 3.35x PBV. Benchmarking the deal to our findings, we deem the 2.0xPBV fair. Based on KIMB's latest book value of RM757.5m as at end-June 2011,the potential cash to be raised from the disposal based on 2.0x PBV will  amount to RM1.51bn. After the  sale, KAB's book value will increase toRM1.15bn after paying off debts of RM360m, translating into an equivalent bookvalue per share of RM0.77.

What's next for KAB?  After selling off KIMB, KAB will be left withits insurance business in Indonesia via PT Kurnia Insurance Indonesia andThailand via Kurnia Insurance Thailand Ltd. Given the company's cash pile ofRM1.15bn after the sale, we do not discount the possibility of  it making a capital repayment to its shareholders, although we think that the groupwould  keep some of its cash proceeds toexpand its businesses in Indonesia and Thailand.

Maintain TRADING BUY,lifting FV. Assuming that the deal will be completed at 2.0x PBV, weare  retaining our TRADING BUY recommendationon KAB. Incorporating KIMB's latest book value into our calculation, our fairvalue (FV) for KAB is increased from RM0.68 to RM0.77. Our valuations are basedon the latest book value disclosed by KIMB as at end-Jun 2011. Should the dealbe completed, we believe that the valuation will be based on KIMB's book valueas at end-Dec 2011. Hence we think that there is still some potential upside toour valuation, premised on a higher book value for KIMB.

Source: OSK188

AMMB: Gets nod to buy Kurnia

Stock Name: AMMB
Research House: ECMLIBRAPrice Call: HOLDTarget Price: 5.70

The proposed sale of Kurnia Insurans (M) Bhd to AmG Insurans Bhd takes another step forward. AMMB Holdings Bhd (AMM MK, Hold, TP: RM5.70) announced yesterday that it had received the Finance Ministry's approval, through Bank Negara, for the acquisition of a 100% equity interest in Kurnia Insurans by AmG. AMMB has 51% stake in AmG, while Kurnia Insurans is wholly owned by Kurnia Asia Bhd. (StarBiz)

Comment: Although the details have yet to be revealed, we ran through some preliminary estimates to gauge the impact on AMMB. Kurnia Asia's current market cap is RM952m on a P/BV of 2.4x and consensus PE of 15x. AMMB's share of the acquisition is 51% or RM485m which is just 2.6% of AMMB's market cap of RM19bn, so there should be no significant impact on AMMB. Furthermore, AMMB is only acquiring Kurnia's Malaysia general insurance subsidiary, and we think unlikely to pay more than 2x P/BV, so AMMB's share of the acquisition cost is likely to be less than RM485m. At 2x P/BV, the acquisition will be on a PE of 12.5x which is in line with AMMB's PE and hence neutral on its valuations. (Hon Sze)

April 4, 2012

Stock Overview -RSAWIT- 4 April 2012

Stock Name: RSAWIT
Research House: JUPITERPrice Call: BUYTarget Price: 1.13

RSAWIT ( 5113 : 1.04 ) : Targeting 1.13-1.16


Resistance : 1.13 1.16
Support : 0.99

RSI of 44
RSI is stabilising

It has started to turn upwards


The recent correction has bottomed at 0.995, which is a support level. It is in for a technical rebound to target 1.13. A tight stop loss should be placed at 0.99

Trading Strategy
Buy. Stop loss is at 0.99

Source:Jupiter Securities Research 04 April 2012