April 20, 2012

Stock Overview - KEURO - 20 Apr 2012

Stock Name: KEURO
Research House: JUPITERPrice Call: BUYTarget Price: 1.50

KEURO ( 3565 : 1.24 ) : Target 1.50/Stop loss 1.20

Infrastructure construction

Resistance : 1.38 1.50
Support : 1.20

RSI of 49
RSI is neutral

It is neutral


Currently, it is hovering at the 1.21 support line, indicating an upmove to 1.38, 1.50

Trading Strategy
Buy. Stop loss is at 1.20

Source:Jupiter Securities Research 20 April 2012

Stock Overview - GOLSTA - 20 Apr 2012

Stock Name: GOLSTA
Research House: JUPITERPrice Call: BUYTarget Price: 0.80

GOLSTA ( 7105 : 0.67 ) : Target 0.80/Stop loss 0.62

Industrial machinery

Resistance : 0.80-0.85
Support : 0.62

RSI of 76
RSI to stay overbought for a while

It is on an upswing


The current upmove is heading for 0.80-0.85

Trading Strategy
Buy. Stop loss is at 0.62

Source:Jupiter Securities Research 20 April 2012

Stock Overview - CENSOF - 20 Apr 2012

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

CENSOF ( 5195 : 0.445 ) : Target raised to 0.52

Application softwares

Resistance : 0.52 0.54
Support : 0.425

RSI of 50
RSI is recovering

It has started to swing upwards


On the 18/4/2012 buy recommendation, the upside target has been raised to 0.52, from 0.47. Technicals are on an early buy signal, indicating further upward push

Trading Strategy
Buy. Stop loss is at 0.425

Source:Jupiter Securities Research 20 April 2012

Stock Overview - BINTAI - 20 Apr 2012

Stock Name: BINTAI
Research House: JUPITERPrice Call: BUYTarget Price: 0.50

BINTAI ( 6998 : 0.38 ) : Target 0.50/Stop loss 0.34

Engineering services

Resistance : 0.53
Support : 0.34

RSI of 63
RSI is on the rise

It is on an upswing


The current upmove is heading for 0.50-0.53

Trading Strategy
Buy. Stop loss is at 0.34

Source:Jupiter Securities Research 20 April 2012

Affin upgrades Ireka to 'buy'

Stock Name: IREKA
Research House: AFFINPrice Call: BUYTarget Price: 1.06

Affin Research upgraded property developer Ireka Corp Bhd to "buy" with a higher target price of RM1.06 per share as it expected the stock to be re-rated once the company's property projects were launched.

"We see a significant boost to the bottomline of Ireka in the fiscal year ending March 31, 2013 (FY2013) to FY2015 when the four property development projects (with a total gross development value of 1.4 billion ringgit) are launched as scheduled," the broker said in a research note on Friday.

Affin said the impact on the earning per share and net asset value would be significant given the small issued share capital of the company. Ireka's four development projects, mostly located in the Klang Valley, were scheduled for launch between September 2012 and mid-2013, the broker added. -- Reuters

Kenanga ups Bursa Malaysia to outperform

Stock Name: BURSA
Research House: KENANGAPrice Call: BUYTarget Price: 8.00

Kenanga Research upgraded Bursa Malaysia Bhd to outperform from market perform previously after the stock exchange operator's first quarter ended March 31, 2012 results came in above its expectations.

"The upgrade is in line with our earnings revisions and higher potential total return of more than 15 percent from here even though we maintain our target price of RM8.00 a share," the broker said in a research note today.

Kenange revised up Bursa's fiscal year ending Dec 31, 2012 (FY2012) and FY13 net profit estimates to RM159.3 million and RM195.2 million on the back of higher Malaysia's benchmark stock index target of 1,650 points from 1,570 previously.

As at 0126 GMT, Bursa's shares shed 0.29 per cent, underperforming the benchmark stock index that dropped 0.09 per cent. -- Reuters

HwangDBS lifts Aeon Credit's target price

HwangDBS Vickers Research raised Aeon Credit Service's target price to RM9.20 per share from RM7.00 previously following the better-than-expected results posted by the credit provider on Thursday.

"Aeon Credit's fourth quarter ended Feb 20, 2012 net profit jumped 43 percent year-on-year and 10 percent quarter-on-quarter to RM27.7 million, taking full-year earnings to RM95.6 million or 7 percent above our estimate," the broker said in a research note on Friday.

Maintaining "hold" on the counter, HwangDBS also raised Aeon Credit's fiscal year ending Feb 20, 2013 loan and funding growth assumption to 23 percent from 19 percent previously.

"Growth for personal financing and credit card loans should remain robust, while Aeon's easy payment (general and vehicle) will grow at a moderate pace due to a larger base," it added. -- Reuters

CIMB Group - Lingering effects from Thailand's floods BUY

Stock Name: CIMB
Research House: AMMBPrice Call: BUYTarget Price: 8.00

- CIMB Group Holdings Bhd's (CIMB) 93.15%-owned Thailandsubsidiary CIMB Thai Bank plc (CIMB Thai) recorded net earnings of THB344mil in1QFY12 ' an 18% QoQ drop from 4QFY11's THB417mil. 

- However, 4QFY11 included a couple of one-off items. Firstwas the gain of THB1,101mil from the share of gain of NPL sale from thegovernment-owned Thai Asset Management Corporation (TAMC), which was set up in2001 to deal with non-performing loans (NPL) of the Thai banking industryarising from the 1997-1998 crisis. Secondly, CIMB Thai also raised loan loss provisionsubstantially to THB790mil in 4QFY11, from THB124mil in 3QFY11, partly due toclean-up provisioning (circa THB500mil) and partly to raise its generalprovision rate from below 1% to 1.2%, in line with the industry average. 

- Thus, the 1QFY12 earnings reflect a more normalised trendif compared to 4QFY11. We estimate net earnings in Ringgit terms at RM35mil,which would mean a contribution of 2.9% at the pre-tax level and 3.5% at thenet earnings level if based on our group pro-rated forecasts for 1QFY12F.Overall, CIMB Thai's earnings are in line with our estimates.   

- Loans posted a decline of 0.7% QoQ, which we believe wasdue to a time lag in dealing with the flood situation in Thailand. However, weunderstand that loans have picked up recently. Deposit grew 7.8% QoQ. LDR(including bills of exchange) eased to 88.0% in 1QFY12 from 88.8% in4QFY11. 

- Gross non-performing loans (NPL) increased slightly QoQ toTHB4.3bil in 1QFY12 from THB4.1bil, attributed to deterioration in creditquality of certain sizable corporate accounts. We believe this was related tothe floods. The NPL is also distorted by certain borrowers who took up the loanrepayment moratorium that was granted due to the flood situation, but who, webelieve, would now need to resume repayments. CIMB Thai's loan loss provisionis now more normalised at THB140mil in 1QFY12, leading to estimated creditcosts of 46bps (4QFY11: 267bps).  

- Based on 1QFY12 results, we believe that CIMB Thai'soperations remain soft, with a likely ongoing impact from the floods. However,CIMB Thai's contribution to overall group remains small. Thus, we do not expectmuch of an impact on CIMB's share price. We maintain BUY on CIMB with fairvalue of RM8.00.

Source: AmeSecurities 

PPB Group - Massimo bread rolling out nationwide steadily HOLD

Stock Name: PPB
Company Name: PPB GROUP BHD
Research House: AMMBPrice Call: HOLDTarget Price: 17.45

- Maintain HOLD on PPB Group Bhd, with an unchanged fair valueof RM17.45/share, which is based on a PE of 19.5x on FY12F EPS. 

- In the past five years, PPB's historical PE band ranged froma low of 19.0x to a high 22.1x. Average PE was 20.6x. PPB's 18%-ownedassociate, Wilmar International, is currently trading at 15x FY12F fullydiluted EPS and 13.5x FY13F fully diluted EPS.

- We visited PPB's Massimo bread factory yesterday. We foundthe plant to be clean and modern. Most of the processes are automated and theonly labour-intensive segment is the packing section. 

- The bread factory cost RM120mil to build. We reckon that thebulk of the cost was attributed to the heavy machinery and equipment, some ofwhich were brought in from the US. 

- There are no plans yet to increase the selling price of Massimo'swheat germ bread. We reckon that PPB's strategy is to improve its market sharefirst even though it may result in the erosion of operating margins. Theselling price of Massimo wheat germ is RM2.50 for a 400gm loaf. This is just 10sen more expensive than the white bread.

- PPB has started selling Massimo bread to other markets suchas Ipoh, Penang, Malacca and Seremban. This would allow the group to expand itsmarket penetration beyond the Klang Valley. 

- The group also plans to increase the number of its products.Currently, PPB sells the wheat germ loaf, white bread loaf and cream rolls.There are two types of single cream rolls and two types of double creamrolls. 

- We understand that consumers have responded well to PPB'sbread products. Word of mouth has been instrumental in the acceptance of thebread. PPB has also advertised in newspapers and television to promote the bread.  

- There is no expansion plan yet. Presently, the bread factoryhas the capacity to produce 10,000 loaves per hour and 24,000 cream rolls everyhour. The bread factory encompasses an area of 22,000 sq metres, which is the sizeof two football fields.  

Capitamall M'sia Trust - Results largely in-line with positive rental reversion on newly acquired malls BUY

Stock Name: CMMT
Research House: AMMBPrice Call: BUYTarget Price: 1.68

- We re-affirm our BUY rating on CapitaMall Malaysia  Trust (CMMT) and raise our fair value toRM1.68/unit (vs.RM1.15/unit previously), based on a 10% discount to our DCF valueof RM1.86/unit. We have raised our earnings assumption by 5% from FY15F onwardsaccounting for organic growth. Taken together with the DPU estimate of 7.9 senfor FY12F, our fair value implies a total return of 17% over the currentprice. 

- CMMT's 1QFY12 net income came in at RM35mil, which is largelyin line with our and street's estimates, making up 22% and 24%, respectively.

- CMMT recorded an increase of RM19mil (+35.3%) of gross rentalincome over 1QFY11, which was mainly contributed by its recent acquisition ofthe East Coast Mall and Gurney Plaza Extension as well as the completion of theasset enhancement works at Gurney Plaza last year. Additionally, higher rentalrates were achieved from new and renewed leases.

- During 1QFY12, the portfolio incurred higher property expensesattributed to higher utility and marketing expenses, and reimbursable staffcost. Hence, net property income grew by 11.4% QoQ and 32.4% YoY.

- Portfolio occupancy remains strong at nearly 100%. Occupancyat The Mines saw a marginal drop this quarter from 98.8% to 97.3% because ofrenovation works and reshuffling of trade mix. However, management is confidentthat the occupancy rate will revert to nearly 99% as they are in the midst ofclosing a deal.

- The proposed plan to convert the huge car park space (NLA:100,000sf or +23%) into retail space at East Coast  Mall is currently pending planningapproval. 

- Meanwhile, shopper's traffic was rather stable with12.9mil visitors registered during the quarter, accounting  for an increase of 17% YoY. 

- The portfolio also showed a positive rental reversion of5.6%, mostly contributed by East Coast Mall with a rental reversion of +12.1%,followed by Gurney Plaza at +10.4%. Further to that, 1QFY12 DPU of 2.1 senexceeds 1QFY11 DPU of 1.90 sen by 10%. 

- At projected dividend yields of 5.6% and 5.9% for FY12Fand FY13F, respectively, valuation is not cheap. Nevertheless, we believe CMMThas a solid strategy to grow DPU. It has consistently outperformed marketexpectations, given its quality retail portfolio, strong parentage and more importantly,ready access to a large pool of established retailers. We believe CMMT offers alow risk exposure to the retail REIT sector. 

Pavilion Reit - Exceptional FY13F, with upcoming Fashion Avenue and tenancy renewal BUY

Stock Name: PAVREIT
Research House: AMMBPrice Call: BUYTarget Price: 1.33

- We upgrade our rating on Pavilion REIT (PavREIT) from aHOLD to a BUY and raise our fair value to RM1.33/unit (vs. RM1.15/unit previously)based on a 5% discount to our DCF value of RM1.40/unit.

- Following a meeting with the management, we raise our earningsestimates for FY12F and FY13F by 1% and 2%, respectively, translating into amarginally higher DPU of 6.2 sen and 7.3 sen, underpinned by organic growth andacquisition. We assume a 99% payout ratio. 

- The Fashion Avenue (NLA: 68,000sf) is targeted to beopened by early September 2012. So far, there is a circa 90%  of precommitted tenants. The full impact ofthe Fashion Avenue and an estimated average rental rate of RM16psf, comparedwith under-RM10psf previously, would be seen in FY13F.

- Additionally, at least 67% of tenants are due for renewalin FY13F. We expect a 12%-15% rental reversion because tenants are committed toa 3-year tenancy during the infant stage of the mall. In our model, we forecasta higher weighted average rental rate of RM19psf for FY13F, vs. RM17psf forFY12F. 

- In order for Pavilion Mall to sustain its attractiveness,circa 5% of the tenants are changed on a yearly basis to provide a fresher appealand a newer look to the mall. Tenants are also required to refurbish theirspace every 6 years.

- Elsewhere, management expects Farenheit 88 to stabiliseits tenancy within 3 years by FY13F. PavREIT would acquire the mall if theowner decides to sell. As such, this may be PavREIT's first asset injectionthat could take place by FY14, given that the mall is deemed fit.

- Pavilion extension (NLA:250,000sf, GFA:4,000sf), whichconsists of up to 8 levels,  will beadjoining the existing mall at levels 1, 2 and 3. Additionally, the mall'sappeal would be enhanced by a proposed glass-covered structure running from LaBodega towards the fountain. The extension is currently in the soil testingstage. Construction is to begin in 3QFY12. Management intends to acquire theextension immediately upon completion in FY16. 

- As Pavilion mall took a year to stabilise the tenancy, theextension is expected to take 6 months, given the maturity of the mall.Management expects full tenancy for the extension, underpinned by a longwaiting list of over 400 applicants. 

- Management targets a distribution growth of 5%organically. However, FY13F will be an exceptional year, and as such, we are shiftingour valuation basis to FY13F. Given this, PavREIT is attractive and we expectmore news flow to excite the market. At current level, PavREIT has a dividendyield of 5.4% and 6.4% (vs CMMT: 5.6% and 5.9%) for FY12F and FY13F,respectively, and DPU growth of 18% in FY13F; hence, our BUY rating.

Source: AmeSecurities 

Three-A Resources - All ready to feast in China BUY

Stock Name: 3A
Research House: AMMBPrice Call: BUYTarget Price: 1.70

- We re-iterate our BUY recommendation on Three-A Resources(3A) but clip our fair value from RM1.70/share to RM1.50/share, based on atarget PE of 20x FY13F revised earnings as we impute in a more conservative utilisationrates based on progressive earnings contributions from 3A's maiden China plant.Our target PE is close to China consumer peers' average of 18x. 

- Following a recent meeting with management, our longtermconviction in 3A is reinforced ' its structural transformational growth isfirmly on track. We understand commercial production of its 'blueprint'manufacturing hub in Qinhuangdao, China, is scheduled to kick-off this June. 

- The group is in the midst of fine-tuning its machineriesat the state-of-art facility which boasts 13,600m'' total floor area. Aspresent, installed HVP production line with a capacity of 6,000MT p.a. isalready more than 3x the size for equivalent produce in Malaysia. To underlineour growing confidence, expansion plans for an additional 6,000MT (+100%) hasalready been targeted for completion by end-FY13F.   

- More importantly, produce in China is expected to yield highermargins due to:- 
1) A strong focus on higher value products such as HVPpowder (hydrolysed vegetable protein) vs. HVP liquid and; 
2) Absence of quality competition within the local market. 

- Contrary to perception, most local producers operate on amuch smaller scale, while a few bigger ones lack international accreditation.In contrast, 3A adheres to European standards, and hence, is expected to enjoy betterpricing power.

- We estimate earnings contributions from the China plant torise from 5% in FY12F to 23% next year, with FY13F being the inflexion point.Earnings near term will remain predominantly Malaysia-driven, given enlargedcapacities from the 2nd  caramel colour plant (+4,000MT or 100%) and anaverage utilisation rate of ~70%. 

- Valuation is attractive and the current weakness in share priceis an excellent opportunity to accumulate the stock. As it is, 3A's forward PERof 15x is at a deep 20% discount to the stock's 5-year mean of 19x. Further, wesee material upside to our earnings forecast from the potential expansion toother geographical locations in China

Source: AmeSecurites 

Genting Malaysia - RWNY ' Chugging along nicely BUY

Stock Name: GENM
Research House: AMMBPrice Call: BUYTarget Price: 4.30

- Genting Malaysia Bhd (GenM) remains a BUY with an unchangedRNAV-based fair value of RM4.30/share. We continue to like the group for itsgrowing overseas exposure, which would underpin profit growth and undemanding valuations. 

- GenM is currently trading at FY12F PE of 13.9x and FY13FPE of 12.6x. In comparison, according to Bloomberg, the simple average FY12F PEof the Macau casino companies is 15.4x and 12.6x for FY13F (ex-Nagacorp).Genting Bhd is presently trading at 13.1x FY12F EPS and 12.1x FY13F EPS whilesister company, Genting Singapore PLC's FY12F and FY13F PEs are at 15.8x and13.6x, respectively. 

- We visited GenM's 'Resorts World New York (RWNY)' recently. Based on numbers released byNew York Lottery, RWNY is the market leader in the racino industry in New York,accounting for 45% of the share of credits played in the first three months ofthe year. Empire City had a market share of 27%.

- We forecast RWNY to record net revenue of RM646mil and EBITDAof RM129mil for FY12F. We are now assuming an average daily win ofUS$350/machine for FY12F, versus US$330/machine previously but lower non-gamingrevenue. RWNY is estimated to account for 5% of GenM's FY12FEBITDA.   

- Compared to Empire City Casino at Yonkers Raceway, we findRWNY's location to be better as it is closer to the city. From the city centre,it takes about 20 minutes to drive to RWNY, which is in Queens. In comparison,it would take more than half an hour to go to Empire City. 

- RWNY's name recognition is still weak. Most taxi drivers recogniseRWNY as its old name, 'Aqueduct'. We understand that RWNY would be stepping upon its advertising and promotional initiatives to improve its branding. 

- RWNY's clientele are mainly locals. During the day, mostof the players consist of retirees or senior citizens. Asians comprise 25% to30% of customers. The younger crowd comes in later at night.  

- Going forward, casino patronage at RWNY is expected to improvedue to the warmer weather. We understand that the weakest season is winter dueto the cold weather and shift in consumer spending towards retail. The bestperiod is in summer, i.e from July to August. 

- The seasonal trend has already been reflected in the improvingweekly revenue numbers reported to the New York Lottery Association. Creditsplayed at RWNY rose 4.6% in the week ended 1 April 2012 from the previous week,while average daily wins climbed 12.9% to US$395/machine. 

Source: AmeSecurities 

BURSA - Still cautious

Stock Name: BURSA
Research House: HWANGDBSPrice Call: SELLTarget Price: 6.00

Bursa Malaysia; Fully Valued; RM7.03
Price Target: RM6.00; BURSA MK

1Q12 result was within our and consensus' estimates. No dividend declared in the quarter. Maintain Fully Valued and RM6.00 TP.

Source: HwangDBS Research - 20 April 2012

Ta Ann Holdings: Maintain Buy - Bonus issue to improve liquidity

Stock Name: TAANN
Research House: MAYBANKPrice Call: BUYTarget Price: 9.00

Positive for sentiment. Ta Ann's proposed 1-for-5 bonus issue not only helps to improve liquidity but it will 'recapitalize' its share base as its seeks to achieve sustainable growth in the long run. The stock continues to trade at an attractive 10.9x 2013 PER, with low EV/planted ha of ~MYR42,600 (43% discount to industry average). It is also poised to deliver a 15% 3-year net profit CAGR. Maintain Buy and MYR9.00 TP on 15x 2013 PER. Ta Ann is our top pick among the plantation stocks.

Click here for full report

Source: Maybank Research - 20 April 2012

KPJ Healthcare: Naim Holdings expands into healthcare

Stock Name: KPJ
Research House: ECMLIBRAPrice Call: HOLDTarget Price: 4.96

Naim Holdings's wholly-owned unit, Naim Land Sdn Bhd (NLSB), had signed a JV agreement with KPJ Healthcare unit Kumpulan Perubatan (Johor) Sdn Bhd (KPJSB) for a hospital project in Miri, Sarawak. The JV company (JV Co) will have an initial authorized share capital of RM25m and an initial paid-up capital of RM19.67m. KPJSB will hold 70% of the JV Co and NLSB the balance. KPJSB will be allotted 13.77m shares or RM13.67m via a cash injection, to be financed via internally generated funds. NLSB will subscribe to 5.9m shares of JV Co or RM5.9m via an injection of a four-acre (1.6ha) land. The land on which the hospital will be built is under NLSB. Under the agreement, Naim Engineering Sdn Bhd will be engaged as the contractor to build and complete the hospital. KPJSB will be the master planner and project manager to advise on the design and technical requirements of the building. (Financial Daily)

Comment: This latest corporate development is in line with KPJ's objective to increase 1-2 new hospitals every year. Currently, there are 2 hospitals owned by KPJ in Sarawak. As the new hospital is expected to be completed only in 2-3 years, we maintain our FY12 and FY13 earnings forecast. KPJ's RM13.8m portion of the paid-up capital is a small dent to KPJ's net gearing of 0.2x as at 31 Dec 2011. Maintain a HOLD with TP of RM4.96 based on 22x FD FY12 EPS, in line with peers' average. (Raymond Choo)

Kelington Group Berhad (BUY) - An undiscovered gem

Stock Name: KGB
Research House: JF APEXPrice Call: BUYTarget Price: 1.18

Investment Highlights
An undiscovered gem with growth potential. We like Kelington because it is a leading provider of Ultra High Purity (UPH) gas and chemical delivery solutions in the region with its niche business model that is not well represented in any of the companies listed in Bursa Malaysia. Its impressive future earnings growth and aggressive overseas expansion also deserve investors' attention.

UHP industry benefiting from shorter tech life cycles, which necessitate reinvestments in key sectors like wafer fabrication (planting circuit) and FPD fabrication (glass substrates). Rapid changes in manufacturing technologies and unabated demand for innovative consumer electronics, i.e. widespread use and continuous innovation of wireless and portable communication devices, and increased demand in LCD TV continue to render more projects for the Group.

Commendable earnings growth. Kelington has successfully achieved revenue and net earnings CAGR of 40.4% and 31.7% respectively over the past 7 years. Moving forward, we forecast the Group will chalk up RM11.1m net profit in 2012 (up 28% yoy) on the back of RM170m revenue (consisting of outstanding orderbook of RM54m, contributions from newly acquired Singaporean company named Puritec and new job secure worth RM100m p.a.) and continue its strong earnings momentum with net profit of RM13.3m (up 19% yoy) in 2013 on the back of RM195m revenue. The company is currently tendering for contracts worth RM400m including Infineon's second fabrication facility in Kulim and a solar project in China. Historically, Kelington has a success rate of 25%.

Margin expected to stabilised. The Group's historical gross margin shown a downtrend from the peak of 25% in 2009 to 14.9% in 2011 as a result of stiff competition in China and Taiwan whereby margin sacrificed to capture the market share. However, the Group believes that gross margin is able to sustain at current level of 15% in 2012-13.

Established firm foothold in Singapore. Kelington started a small office two years ago in Singapore to penetrate a range of clientele from high-tech industries such as solar cell to the wafer fabrication. Lat year, the Group successfully secured a RM23m project in bioscience segment to install a process mechanical system for International Flavours & Fragrances (IFF), a leading creator and manufacturer of flavours and fragrance. Going forward, we believe that Singapore market could land the Group for more projects as Singapore is currently having 16 wafer fabrication plants as compared to only 4 wafer fabrication plants in Malaysia.

Expansion into other scope of services in existing and new countries. The Group intends to broaden scope beyond UHP gas and chemical into other utilities such as water, exhaust and vacuum. Furthermore, it plans to penetrate deeper into new and existing sectors in Taiwan, China (particularly in northern and southern areas) as there is huge potential in emerging markets in areas such as solar energy, LED and bioscience. On new markets, the company has started its first project in Vietnam and is eyeing opportunities in India, Indonesia, the Philippines and Middle East

More M&A in the pipeline. We understand that the Group is also exploring M&A for synergistic opportunities to expand range of services and client base. To recap, the Group successfully acquired a Singaporean company named Puritec last year which started to contribute to its earnings this year.

Bonus issue to enhance stock's liquidity? Kelington is a small cap stock that having RM73m market cap with relatively low public float of 27%. The management has hinted a possible bonus issue to improve the market liquidity in future with its healthy reserves position of RM42.5m as of Dec 2011.

Strategic shareholders. Among Kelington's major shareholders are Lembaga Tabung Angkatan Tentera (LTAT) with 12.6% and Sky Walker Group Ltd (12.2%), which is a consortium of key global semiconductor players.

Dividend policy. The Group introduced a dividend policy of 25% payout or 2.75 sen in 2011, which is equivalent to dividend yield of 3%, to attract more institutional investors' interests in future. We estimate that the Group will propose a decent dividend yield of 4-5% for 2012-13.

Attractive valuation with 34% potential upside. Kelington is currently trades at 6.3x 2012F PER and 5.2x 2013F PER, which is based on our 2012 EPS of 14.0. sen/share and 2013 EPS of 16.8 sen/share. Our target price for the stock is at RM1.18, pegged at 7x 2013F PE, in line with small cap valuation.

Source: JF Apex Research - 20 April 2012

AEONCR - Positive momentum

Stock Name: AEONCR
Research House: HWANGDBSPrice Call: HOLDTarget Price: 9.20

AEON Credit Service; Hold; RM8.74
Price Target: RM9.20 (Prev: RM7.00); ACSM MK
FY12 profit better than expected; declared 16.8 sen net DPS; FY12 total DPS is 30 sen. Robust loan growth driven by personal financing and credit cards. Maintain Hold, TP raised to RM9.20 (pegged to 8x CY13  EPS), offering 9% total return (including 4% net dividend yield).

Source: HwangDBS Research - 20 April 2012

FITTERS - Buy for quantum leap ahead

Stock Name: FITTERS
Research House: HWANGDBSPrice Call: BUYTarget Price: 1.25

Fitters Diversified; Buy; RM0.76
Price Target: RM1.25; FIT MK

Proxy to renewable energy with promising growth prospects. Riding on booming theme parks in Asia; Shanghai Disneyland is the wild card. Initiate with BUY and RM1.25 TP (66% upside).

Source: HwangDBS Research - 20 April 2012

Bursa Malaysia - Not a good start to 2012

Stock Name: BURSA
Research House: CIMBPrice Call: HOLDTarget Price: 7.28

Target RM7.28

Trading activity is likely to weaken, which is why we regard Bursa's 1Q12 net profit as being in line even though it came in at 27% of our full-year forecast and consensus numbers. 1Q equity and derivative income was already down yoy.

Source: CIMB Daybreak - 20 April 2012, Full PDF Report

Ann Joo Resources - Turning up the heat in 2H

Stock Name: ANNJOO
Research House: CIMBPrice Call: TRADING BUYTarget Price: 2.39

Target RM2.39

We left our meeting with Ann Joo's MD feeling more positive about its 2H12 prospects as construction of mega projects should gain traction then. A minimum wage policy will have limited direct impact on EPS and management is making good progress in its Petronas steel tender. A contract with Petronas to supply high-grade steel for its oil and gas projects could boost our FY12 pretax profit estimate by up to 30%. We maintain our Trading Buy call and target price basis of 11.3x CY13 P/E. Uncertainty about its blast furnace is why Ann Joo is not an outperform.

Source: CIMB Daybreak - 20 April 2012, Full PDF Report

CapitaMalls Malaysia Trust - East Coast Mall delivers the goods in its 1st full quarter

Stock Name: CMMT
Research House: CIMBPrice Call: BUYTarget Price: 1.65

Target RM1.65

At 25% of our full-year estimate, CMMT's 1Q12 results were within expectations, helped by the first full quarter of contribution from East Coast Mall, asset enhancement initiatives for Gurney Plaza and higher rental rates for renewed leases. We continue to use DDM to value CMMT. The stock remains an Outperform as it is well-supported by attractive yields of >6%. CMMT is our top pick among the REITs. Rerating catalysts are 1) a potential >23% increase in NLA for East Coast Mall, and 2) asset enhancement initiatives.

Source: CIMB Daybreak - 20 April 2012, Full PDF Report

Media: New ruling could end Astro's monopoly on sporting events

Stock Name: MEDIA
Research House: ECMLIBRAPrice Call: HOLDTarget Price: 2.35

The new ruling that mandates sharing of broadcasting rights with free-to-air (FTA) TV stations could end pay TV operator Astro Holdings Sdn Bhd's monopoly on certain sporting events. It will benefit FTA operators like Media Prima Bhd (MPR MK, Hold, RM2.35), said industry players. However, they said implementation of the ruling is key to ensure commercial viability. It will also allow FTA and pay TV players to jointly bid for expensive broadcasting licences. (StarBiz)

Comment: The new ruling marks the end of Astro's monopoly of broadcasting rights for popular sporting events. We view the news positively for FTA TV players as the joint bidding of acquiring these rights would enable them to bid with lower cost. (Desmond Chong)

AEON Credit (ACSM MK, Maintain BUY, FV RM9.98, Last Close RM8.74)

Stock Name: AEONCR
Research House: OSKPrice Call: BUYTarget Price: 9.98

AEON Credit's (ACSM) FY12 earnings beat consensus and ourfull-year forecasts by 17.5% and 10.1% respectively. Revenue and net profitsurged 27.7% and 50.7% y-o-y on better showing in  all its businesssegments.  Asset quality was  largely preserved although the CAR declinedto 21.8%  from 24.0% in the previous year'but still well above the required 16.0% - while NPLs dipped 14 bps to 1.80%. The company has proposed a 16.8 sensingle tier final dividend, bringing the FY12 dividends to 30.0 sen. MaintainBUY, with a higher fair value of RM9.98, pegged to 10x FY13 EPS vs  9x previously,  on ACSM's consistent growth and bright prospects ahead.

Better than expected.ACSM's FY12 revenue and net profit surged 27.7% and 50.7% y-o-y  respectively, largely due to: i) strongerrevenue growth in its credit card segment (+68.7% y-o-y), ii) stable revenuegrowth from general easy payment (+12.6% y-o-y) and vehicle easy paymentsegment (+14.2% y-o-y), iii) a solid 83.6% y-o-y growth in revenue from itspersonal financing business, and iv) stronger other income (+44.5% yo-y)spurred by transaction fee income relating to a higher financing transactionvolume (+40.8% y-o-y). Financing receivables climbed 34.5% y-o-y supported bystrong growth in the personal financing (+102.9% y-o-y) and credit card (+52.2%y-o-y) segments, while total financing receivables stood at RM1.52bn vsRM1.13bn in the preceding year.

Solid sequentialperformance. On a q-o-q comparison, ACSM's 4QFY12 revenue and earnings grew5.0% and 9.7% respectively, underpinned by a robust 19.2% q-o-q growth in personalfinancing and 11.7% q-o-q growth in other income. Revenue from the credit cardsegment, however, grew at a slower 1.0% q-o-q due to the lower number of creditcards issued in tandem with new Bank Negara's new regulations on credit cards.

Asset quality intact.NPL ratio edged down by 14 bps to 1.80% compared with 1.94% in the previousquarter,  slightly above below the  1.9% industry average. However, the company's  capital adequacy ratio dropped to 21.8% from24.0% in the previous year, although still well above the requirement for16.0%.

Maintain BUY.  We are taking the opportunity to bump up ourFY13 revenue and earnings forecasts by 14.5% and 24.5% respectively, largelydue to robust growth in its consumer durable financing and personal loanbusiness. This also raises our fair value from RM7.20 to RM9.98, pegged to  a  10xFY13 EPS  vs  9x previously. We  deem the higher valuations  vis-''-vis current levels justified, as the scope for further domestic market share gains is likely due to themanagement's focused strategies, marketing and branding efforts, and thestock's attractive dividend yield of 4.2% and 5.4% for FY13 and FY14respectively.

Source: OSK188

HAI-O update (HAIO MK, Maintain NEUTRAL, FV RM2.03, Last price RM2.18)

Stock Name: HAIO
Research House: OSKPrice Call: HOLDTarget Price: 2.03

We recently visited Hai-O, which seems to be slowlyregaining its earnings momentum. Its strategy of focusing on repeat consumerproducts instead of bigticket items is working as the MLM division is showingimprovement. We believe Hai-O would be able to deliver decent results given: i)the recent collaboration with KAEAM Corp on the global distributorship ofbamboo salt, and ii) its bird's nest export business. Maintain NEUTRAL, with FVof RM2.03.

The worst may beover. Hai-O managed to improve on its revenue and earnings in the last twoquarters after eight consecutive quarters of dismal performance, whichindicates that the company might be on the road to  recovery. The coreMLM  business bounced back  with a decent 4.9% y-o-y revenue growth last quarter. Going forward, the managementis confident that Hai-O will be able to deliver satisfactory results.

MLM  bounces back.  The MLM division hasaround 140k registered members and  is adding  2.5k new members  monthly. The number of new members has  risen steadily from 2k/month to 2.5k/month y-o-y, with management now aimingfor new additions of 3k/month in the  near term.  Learning from the past, the company  has shifted its focus from big-ticket items such as water filters toconsumer-centric products such as beauty and health products, for which  sales are  consistent and  are repeated. We believe the growth momentum in the MLM division issustainable given the company's improved marketing strategy and  more balanced product mix.  Meanwhile, its  Indonesia MLM operation is still relatively small and not making much progress dueto fierce competition and strict regulations. Hai-O is trying to penetrate therelatively untapped 2nd tier cities such as Batam, Medan and PekanBaru for new markets.

Bamboo  salt the new star.  In early April, Hai-O Marketing signed aglobal distributorship agreement with South Korea's KAEAM Food Corp, the  pioneer manufacturer of 'bamboo salt' (garambuloh). Hai-O brought in KAEAM  bamboosalt three years ago via an exclusive collaboration, which proved to be timelybecause this product  is  gaining a strong  following,  which allows  the company to expand  into new markets. Elsewhere, Hai-O's new subsidiary ' Yan Ou Holdings SB (YanOu) ' will be sourcing for and processing, trading and distributing bird'snest. Once it obtains the licence  toexport  bird's nest,  this will represent another good revenuestream for the company since the consumption of the product in Asia, especiallyChina, is huge.

Maintain NEUTRAL.Assuming stronger sales for the MLM division, we are marginally revisingupwards our FY13 forecast by 1.7%. Maintain NEUTRAL, with a higher FV of RM2.03,based on 12x FY13 EPS.

Source: OSK188

KPJ (FV RM5.84 - BUY) Corporate News Flash: Heading For Miri

Stock Name: KPJ
Research House: OSKPrice Call: BUYTarget Price: 5.84

Yesterday, KPJ announced on Bursa Malaysia that it has entered into a Joint Venture Agreement(JVA) with Naim Land SB (NLSB)  todesign, develop, build, complete and own a purpose-built hospital building in Miri, Sarawak  as well asoperate this new hospital subsequently.

More on the JV. Under the JVA, KPJ will hold  a 70%  stake, with  NLSB holding the remaining 30% stake.Pursuant to the JVA, NLSB will  disposeof a piece of land measuring 4 acres in Kuala Baram Land District in Miriwith   vacant  possession given for  the  building of  the  proposed hospital,   while  KPJSB will  provide  the technical  and management servicesfor the construction of the hospital building as well as assist the JV companyin matters relating to the construction and completion of the  building. The name  of the  proposed hospital  will be  mutually agreed on  by   both parties in the future. We gather that the hospital will have a capacityof about 120 beds. While the total cost of setting up the proposed hospital wasnot disclosed, we believe that based on its bed capacity, the cost could  range from  RM80m to RM100m.  Based on KPJ's standard practice,  the proposed hospital will  most likely commence operation with an initial capacity of between 60 and 90 beds.

Bigger footprint inEast Malaysia.  Upon completion, thehospital will be KPJ's 3rd hospital in Sarawak and its fifth in EastMalaysia. We view the proposed JV positively as this move is in line with KPJ'sstrategy to increase its presence in East Malaysia in light of this region'sunderserved  market  and untapped potential for  private hospitals.  We gather there are currently several privatehospitals in Miri but most of them are small in size. We think there is strongdemand for private healthcare in Miri, which has a population of about 300,000 and a vibrant economy that isunderpinned by the oil and gas industry. That said, given Miri's  proximityto Brunei, there is  also  potential for the proposed hospital to treatpatients from that country.

Maintain Buy.  We maintain our Buy recommendation on KPJ, atan unchanged  fair value  of RM5.84, based on  a FY12 PER of 23.1x. This  multiple is derivedfrom the market cap-weighted average regional sector PER. We have always  viewed KPJ as a stock with a compellinggrowth story which is further reinforced by the fact that it is in a relatively  defensive sector.  As such, we reiterate our view that  the stock makes an excellent long-term investment.

Source: OSK188

April 19, 2012

3QFY12 results review

Stock Name: TMCLIFE
Research House: NETRESEARCHPrice Call: BUYTarget Price: 0.37

MIDF starts Eversendai with a 'buy'

Stock Name: SENDAI
Research House: MIDFPrice Call: BUYTarget Price: 2.10

MIDF Research initiated coverage on Eversendai Corp with a "buy" and a target price of RM2.10 per share, seeing the construction firm in a good position to ride on the robust construction outlook especially in the Middle East.

"Eversendai has an impressive track record and we believe Eversendai will be able to achieve or even exceed its RM1.5 billion (US$489.44 million) order book target for this year," the broker said in a research note on Thursday.

Eversendai, which had already clinched RM759 million worth of project year to date, had been achieving double-digit net margin in the last three fiscal years, the highest among Malaysian construction players.

"We expect this trend to continue in the future as Eversendai will only bid high margin jobs, which are mostly from the Middle East," said MIDF. -- Reuters

DRB-Hicom - Building its defences

Stock Name: DRBHCOM
Company Name: DRB-HICOM BHD
Research House: CIMBPrice Call: BUYTarget Price: 4.60

Target RM4.60

Deftech's tie-up with Tata Motors to develop and market the latter's military vehicles to the Malaysian government is a feather in DRB-Hicom's cap. Support should be forthcoming from the government as it beefs up the nation's defence capabilities.

Public Bank Bhd - Clawback time

Stock Name: PBBANK
Research House: CIMBPrice Call: BUYTarget Price: 15.60

Target RM15.60

Expected topline expansion is the reason why we view Public Bank's 1Q net profit as being in line even though it came in at 23% of our full-year forecast (26% of consensus). The earnings driver in FY12 will be lower credit costs due to the cut in the collective assessment ratio. Our earnings forecasts are tweaked downwards as the cut in credit costs is offset by lower margin assumptions. We retain our target basis of parity with DDM value and Outperform rating on Public given its defensive qualities and the anticipated drop in credit costs.

Ta Ann Holdings - Oil palm earnings forecast raised, partly offset by lower plywood prices BUY

Stock Name: TAANN
Research House: AMMBPrice Call: BUYTarget Price: 7.86

- We maintain BUY on Ta Ann Holdings Bhd, with a higher fairvalue of RM7.86/share (vs. RM7.60/share previously), based on a PE of 13xpegged to a raised FY12F EPS of 60.5 sen (vs. 58.5 sen previously).

- We have tweaked upwards our FY12F-FY13F earnings forecastsby 3% and 6% respectively, pursuant to the raising of our annual average CPOprice assumption  to RM3,400/tonne fromRM3,300/tonne previously.

- Additionally, this is after factoring in muchslower-thanexpected reconstruction activity in Japan, which has affectedplywood prices. Log prices could hold up stemming from demand in India, subjectto the rupee not weakening further.

- We now expect Ta Ann's oil palm division to fetch profit aftertax of RM154mil (+26% YoY) and RM188mil (+22%YoY) for FY12F and FY13F,respectively.

- We expect FFB production to grow by 24% and 16% annuallyto 570,000 tonnes and 663,000 tonnes for FY12F and FY13F, respectively. Weexpect the oil palm division to account for over 80% of earnings for FY12F andFY13F vs. about 77% in FY11.

- While its oil palm division continues to grow strongly, weremain concerned about its wood manufacturing division, particularly itsplywood operations.

- Plywood prices have in recent weeks been affected by weakdemand from Japan, with the average blended price falling below US$500/cu m inMarch, vs. US$622/cu m in January and US$566/cu m in February. The averageprice was at a high of US$621/cu m in FY11. 

- We now forecast an average blended price of about US$530/cum (US$550/cu m previously) each for FY12F and FY13F ' leading to pre-tax lossesof RM16mil each annually vs. an estimated RM14mil (including impairment ofnearly RM10mil) loss in FY11.

- Nonetheless, we expect the timber division to continue to besupported by the log operations, for which current prices are staying at aboutUS$220/cu m.

- The risks include:- 1) Further delays in thereconstruction of Japan's tsunami-hit north-eastern region; 2) further weakeningof the rupee, and 3) widening losses at its Tasmania veneer manufacturingoperations.   

Public Bank - Accounting adjustments way above expectations BUY

Stock Name: PBBANK
Research House: AMMBPrice Call: BUYTarget Price: 16.70

- We are maintaining our BUY rating on Public Bank Bhd (PBB),with an unchanged fair value of RM16.70/share. This is based on a revised ROEfor FY12F of 22.9% (vs. 23.2% previously), but a higher book value atRM5.00/share (vs. RM4.94/share previously). This leads to a fair P/BV of 3.3x.    

- PBB' 1Q if annualised are in line with our estimates, but about1.1% above consensus forecast. However, taking into account that PBB's 1Q isusually the slowest quarter (due to a shorter February working month), we wouldconsider 1Q to be ahead for expectations. 

- In terms of full adoption of FRS139 accounting standard, theadjustment has been much more positive than what we had earlier anticipated.Collective assessment, as  a percentageof gross loans less individual assessment balance carried forward, has now beenadjusted down to 0.8% from 1.5%. This is lower than our forecast of 1%. 

- Consequently, the write-back to book value (shareholders' funds)came up to RM859mil or RM0.24/share, above our expected RM700mil. This enhancedbook value by 5.8%. This essentially means that part of PBB's previous accumulatedconservative loan loss provisioning (which in our view is arbitrary, and notrequired given its excellent asset quality) is now reversed toshareholders. 

- There was no requirement to classify the amount written backinto a new regulatory reserve account (which we had expected to be classifiedas Tier 2 capital), under the shareholders' funds. Instead, the entirewrite-back is allowed to be posted to retained earnings, and therefore to Tier1 capital and core equity capital. 

- PBB said the write-back has enhanced its Core Equity Ratioby 0.5%. On a QoQ basis, core Equity Ratio rose to 7.8% in March 2012, from7.5% in Dec 2011. The boost to core equity ratio is way above our expectation,as we had expected the write-back to be classified as Tier 2 capital. 

- More importantly, we can confirm that there is no restrictionin the amount written back into retained earnings in the sense that this is distributableas dividend in future. This affirms our view that dividend should remain firmlyon an upward trend. We are projectingdividend to rise by 10% YoY for FY12F, 13%FY13F, and 13% for FY14F. 

- We believe rerating catalysts from here onwards are :- (a)better-than-expected top line growth for both loans and non-interest income;(b) steady rise in absolute dividend; (c) confirmation of benign impaired loansand credit costs.  

Source: AmeSecurites

Public Bank (Hold) - In Line, Despite Full Adoption Of FRS139

Stock Name: PBBANK
Research House: HLGPrice Call: HOLDTarget Price: 14.09

Public Bank (Hold)
In Line, Despite Full Adoption Of FRS139
  • 1QFY12 results in line with HLIB and consensus.
  • Full adoption of FRS139 resulted in write-back of excess CA whichboosted book by RM859m and Tier-1 capital.
  • Loans growth of 12.6% yoy in line with its target of 12-13% but slightlyahead of our 11% assumption. 
  • Earnings growth driven by its retail business while Public Mutual NAVcontinued to expand. 
  • Asset quality improved while LLC remained above the 100% mark, despitenegative impact from FRS139 adjustment.
  • Capital ratios stable.
  • FY12-14 forecasts fine-tuned by circa +1%.
  • Target price raised to RM14.09 following forecasts revision and higherbook value due. 

Source: Hong Leong Investment Bank Research - 19 April 2012

Eversendai (BUY) - 2nd deal for Qatar National Museum

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

Eversendai (BUY)
2nd deal for Qatar National Museum
  • Awarded QAR160m (~RM134m) structural steel project from HyundaiEngineering & Construction for Package 2 of the Qatar National Museum. The project isanticipated to be completed in 2013.
  • The latest order brings Eversendai's outstanding order book to ~RM2.1bn,translating to ~2.1x FY11's revenue and ~1.6x order book-to-market cap ratio.Assuming a PAT margin of 10%, the latest order translates to ~1.2 sen/share forthe company (after adjusting for its 70% stake).
  • Maintain BUY with TP of RM2.00 based on 12x averageFY12-13 earnings.

Source: Hong Leong Investment Bank Research - 19 April 2012

Mudajaya (BUY) - Over reaction on coal issue?

Stock Name: MUDAJYA
Research House: HLGPrice Call: BUYTarget Price: 4.27

Mudajaya (BUY)
Over reaction on coal issue?
  • News report that Coal India (CIL) has agreed to sign a revised FuelSupply Agreement (FSA) with power producers. This is positive for Mudajaya's(MDJ) Letter of Assurance (LoA) for coal supply which will now be convertedinto FSA, indicating assured supply.
  • We believe that the India Government will prioritise distribution ofcoal supply for power producers as electricity is a basic necessity afterwater, food and shelter and also for the country's development.
  • We feel that the kneejerk reaction on MDJ's share price has overshot onthe downside. Our base case valuation for the company works out to RM2.87.
  • With the company's local operations still fundamentally sound, wemaintain our BUY call on MDJ but with a lower revised TP of RM4.27.

Source: Hong Leong Investment Bank Research - 19 April 2012

RHB Research - Automotive Sector Update (19 April 2012)

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

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

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

Sector Update
Motor ' A Gradual Recovery                                                                                               Neutral

Sector Update
MBM Resources ' Fair value RM5.05                                                                           Outperform
Tan Chong ' Fair value RM4.60                                                                             Market Perform
DRB-HICOM ' Fair value RM3.45                                                                                  Outperform
  • Auto sales for Mar of 53,583 units were 21.7% higher mom (-15.3% yoy) that marks the second consecutive mom gain. TIV for 1Q12 reached 138,544 units, down 12.5% yoy and 7.6% qoq.
  • The MAA attributed the improved sales to positive consumer sentiment, the introduction of new models and a longer working month and expects the sales trend for Apr to be similar.
  • Combined with the lingering effects of the stricter financing guidelines, nearly all marques continue to show yoy sales contraction with the exception of Toyota .