HLIB Research 13 Feb 2012 (Plantations; Gamuda; CSC Steel, Traders Brief)

Stock Name: GAMUDA
Company Name: GAMUDA BHD

Research House: HLG

Price Call: BUY

Target Price: 4.41

Stock Name: CSCSTEL
Company Name: CSC STEEL HOLDINGS BERHAD

Research House: HLG

Price Call: HOLD

Target Price: 1.54

Plantation (Neutral)

Palm oil inventory declines in Jan 12

'''' Palm oil inventory in Jan 12 declined by 2.5% mom to 2.01m tonnes, mainly on the back of a 13.9% mom decline in production (Peninsular: -13.9%; East Malaysia: -13.8%) and 195.5% increase in domestic consumption, which more than offset a 13.2% decline in exports.

'''' Exports declined by 13.2% to 1.38m tonnes, led by a 31.2%, 31.9% and 20.5% mom decline from China, Pakistan and India.

'''' On a yoy basis, palm oil inventory rose by 41.5% to 2.01m tonnes mainly on: (1) Higher beginning inventory; (2) A 21.7% increase in production; and (3) A 36.5% decline in domestic consumption, which altogether more than offset a 13.4% increase in exports.

'''' While La Nina event will likely sustain near-term palm oil prices at above RM3,100/tonne, we are keeping our average CPO price assumption of RM3,000/tonne for 2012-13.

'''' Maintain our Neutral stance on the sector, top pick is Tradewinds Plantation.''

''

Gamuda (BUY)

Formalising PDP terms

'''' MMC-Gamuda JV has executed the PDP agreement with MRT Corp for the MRT Project-Sungai Buloh-Kajang line.

'''' The total fee for MMC-Gamuda works out to be 11.3% based on the aggregate of all the awarded work contracts, whereby 5.3% (~RM1.1bn) is fixed to cover the PDP overhead, while 6% (excluding the value of the underground portion should the PDP wins it) is the performance fee should the project be delivered within 15% of the total agreed target cost of the MRT project.

'''' Assuming that the MRT elevated portion works out to be RM10bn, the PDP role translates to ~11 sen/share for Gamuda (after adjusting for its 50% stake).

'''' Maintain our BUY call on Gamuda with a TP of RM4.41.

''

CSC Steel (Hold)

4Q performance improves operationally

'''' Below expectations. 2011 net profit of RM29.6m (-57.3%) came in below expectations at 84.3% of our forecast and 78.2% of the consensus.''

'''' Variance against our forecast due mainly to lower-than-expected margin stemming from lower-than-expected sales volume vis-''-vis our forecast despite achieving sales growth.

'''' FY12-13 net profit forecasts cut by 14.3% and 12.3% to RM47.7m and RM50.1m respectively, to reflect lower EBIT margins arising from lower selling price assumptions.''

'''' TP raised from RM1.03 to RM1.54 as we rationalize our valuation method for CSC Steel (as P/E alone is no longer suitable given CSC Steel's strong balance sheet, which allows CSC Steel to declare commendable dividends despite its weak earnings performance). Our TP for CSC Steel is now based on: (1) 7x 2013 EPS of 13.2 sen; and (2) 61.4 sen net cash as at 31 Dec 2011.''''

'''' Upgraded from Sell to Hold following the rationalisation in our valuation method.

''

KLCI: Mild profit taking expected this week

'''' Despite the emergence of a Doji candle last Friday, coupled with the overbought daily and weekly slow Stochastics indicators, positive daily and weekly RSI and MACDs are suggesting current KLCI could resume after a mild profit taking correction.

'''' Immediate resistance is 1570-1580 levels, followed by historical peak at 1597. Weekly support levels are 1550, 1541 (7-d SMA) and 1535 (10-d SMA).

ETITECH: Upside bias amid a positive breakout

'''' Technically, ETITECH broke out of its triangle pattern last Friday and is now charging towards the RM0.20 (61.8% FR) and RM0.23 (50% FR). A push above RM0.23 would be medium term positive as it also signals the return of the bulls towards RM0.26 (38.2%FR), RM0.29 (23.8% FR) and RM0.345 (18 Jan 11's day high).''

'''' Technical landscape is improving, reflected by rising momentum, trend and +DMI. Supports are RM0.165 (200-d SMA) and RM0.155 (lower Bollinger band). Cut loss below RM0.155

Another Challenging Year

Stock Name: CSCSTEL
Company Name: CSC STEEL HOLDINGS BERHAD

Research House: OSK

Price Call: TRADING BUY

Target Price: 1.60

RHBInvest Research Highlights 13th January 2012

Stock Name: CSCSTEL
Company Name: CSC STEEL HOLDINGS BERHAD

Research House: RHB

Price Call: BUY

Target Price: 1.41

Stock Name: MEDIAC
Company Name: MEDIA CHINESE INTERNATIONAL LT

Research House: RHB

Price Call: SELL

Target Price: 1.00

Stock Name: SAPCRES
Company Name: SAPURACREST PETROLEUM BHD

Research House: RHB

Price Call: BUY

Target Price: 4.50

13th January 2012

 

Top Story

CSC Steel ' Profitability remains a challenge, '                                                                    Trading Buy (Upgraded) Visit Note -          We estimate CSC Steel is likely to record a net loss of RM10-15m in the upcoming 4Q11 results due to narrowing margins as well as a write-down in inventory value. -          CSC Steel has a huge cash reserve of RM213.5m, or about 56sen/share (as at 30 Sep 2011). At RM1.41, it would only cost the controlling shareholder about RM295m to buy out all minority shareholders, and this amount could be substantially funded with CSC Steel's cash reserve.

Sector Update

Media ' Expect adex growth to moderate in 2012                                                                                                                          Underweight Sector Update -          As the pace of overall adex growth continues to moderate due to weak global economic conditions, we reiterate a slowdown in adex growth to 3.6% in 2012 from 9% projected for 2011.  -          Elections in 2012 will have a positive though not significant impact on adex. -          Due to its recent share price appreciation, we downgrade MCIL to Underperform, while maintaining a fair value of RM1.00. Maintain Underweight on the sector due to lack of catalysts. -          Related story : Media Sector Update ' Nov Sees Weakest Adex Growth So Far (22 Dec 2011)

 

Corporate Highlights

SapuraCrest ' New subsea construction contract                                                                                                                       Outperform News Update -          Yesterday, the company announced that it had entered into a contract with IHC Offshore and Marine B.V. for the construction of two 550-tonne-pipelay-support-vessels (PLSV) at an undisclosed fixed lump sum. The two vessels are expected to be completed and delivered by May and Aug of 2014 respectively and will be utilised specifically for the Petrobras contract, which it won in Nov-11. Maintain fair value of RM4.50/share and Outperform call on stock. -          Related story: News Update - Buying Two New Pipelay Barges (23 Sep 2011) & News Update- Taking Home A Brazilian Win (2 Nov 2011)

RHB Research has underperform on CSC Steel, FV 90c

Stock Name: CSCSTEL
Company Name: CSC STEEL HOLDINGS BERHAD

Research House: RHB

Price Call: SELL

Target Price: 0.90

KUALA LUMPUR (Nov 8): RHB Research Institute has an underperform call on CSC Steel after its nine-month FY2011 net profit came in below expectations.

'We believe the variance vs. our forecast largely came from worse-than-expected margin contraction in 3QFY11 as a result of lower selling prices of its steel products,' it said on Tuesday.

RHB Research said the 3QFY11 net profit plunged 80.8% mainly due lower selling prices amid weak demand for its steel products.

'We are cutting our FY11-13 net profit forecasts by 8% to 32% largely to reflect lower selling prices of its steel products. Indicative fair value is reduced to 90 sen (from 98 sen) based on 7.0 times revised FY12 EPS of 12.9 sen,' it said.

The research house said the saving grace for CSC Steel is its strong balance sheet with net cash position of RM213.5 million, translating to 56 sen a share.

OSK Research has Trading Buy on CSC Steel, FV RM1.78

Stock Name: CSCSTEL
Company Name: CSC STEEL HOLDINGS BERHAD

Research House: OSK

Price Call: TRADING BUY

Target Price: 1.78

KUALA LUMPUR: OSK Research has a trading buy call on CSC Steel with a fair value of RM1.78, which is 43 sen above the last closing price of RM1.35.

It said on Friday, Oct 14 CSC is experiencing a narrowing price spread between hot-rolled coils (HRC) and cold-rolled coils (CRC) which has tapered further to below US$100 a tonne.

Other than that, a prolonged inconsistent supply of HRC by a sole local producer also poses a challenge to its production planning.

The demand for and margin of galvanised iron (GI) and pre-painted GI held up better than CRC and the intensifying competition from new CRC lines entering the local market in past few years has prompt management decided to increase its exports of CRC to 20% recently from 5% in 2010 to optimise plant utilisation although the margin for exports is low.

'We maintain our Trading BUY recommendation with a fair value of RM1.78 on the back of its solid balance sheet, decent dividend yield and the possibility of CSC becoming a privatisation candidate,' it said.

HLIB Research 16 August 2011 (AMMB ; Affin ; MAS ; CSC Steel ; Traders Brief)

Stock Name: AMMB
Company Name: AMMB HOLDINGS BHD

Research House: HLG

Price Call: BUY

Target Price: 7.71

Stock Name: AFFIN
Company Name: AFFIN HOLDINGS BHD

Research House: HLG

Price Call: HOLD

Target Price: 3.54

Stock Name: MAS
Company Name: MALAYSIAN AIRLINE SYSTEM BHD

Research House: HLG

Price Call: SELL

Target Price: 1.65

Stock Name: CSCSTEL
Company Name: CSC STEEL HOLDINGS BERHAD

Research House: HLG

Price Call: HOLD

Target Price: 1.62

AMMB Holdings (BUY '')

Boosted By Trading gains & Lower Provision

'''' 1QFY12 net profit was 30% of HLIB and consensus forecasts mainly due to higher-than-expected gains from sale of securities and lower-than-expected provision.

'''' Management indicated unlikely repeat of the gains and higher credit charge for full year as well as expect ROE to normalize within its KPI range.

'''' Hence, we are maintaining our forecasts.

'''' The high gains and lower provision more than offset significantly lower NIM and higher overheads.''''

'''' In line with its focus on non-retail loans (to avoid irrational pricing), loans growth was decent but lower than industry average.'' However, deposits growth is higher than loans growth as well as industry average.

'''' Asset quality continued to improved and capital ratios well positioned for Basel III and dividend policy of 40%.

'''' Maintain Buy and target price of RM7.71 based on Gordon Growth (ROE of 14.2% and WACC of 9.5%).

''

Affin Holdings (HOLD '')

Provision Boon

'''' 1HFY11 results (excluding RM40m provision for mitigation loss reported in 1QFY11) were in line with HLIB and consensus forecasts.

'''' Strong loans and deposits growth as both were ahead of industry averages.

'''' NIM recovered qoq post OPR hike.

'''' Asset quality continued to improve for the second consecutive quarter post the temporary blip in 4QFY10.

'''' Capital ratios remained robust.

'''' Factor in the mitigation loss, FY11 cut by 5.7%.

'''' Consequently, target price cut from RM3.73 to RM3.54 based on Gordon Growth.

'''' Maintain Hold.

''

MAS (Sell '')

MAS Conference

'''' Focus on inventory and capacity management to improve overall yield (Revenue/ASK).

'''' Annual synergies of RM1.2bn identified, with MAS-AirAsia enjoying 50-50% basis.

'''' MAS existing ancillary services will be strengthened to generate higher profits and potentially being monetised through JVs.

'''' MAS and AirAsia to meet MAHB on potential deferment of higher aircraft landing and parking charges, as well as higher passenger tariff.

'''' More positive with MAS potential restructuring.

'''' Remained concern on MAS capability to compete with renowned regional FSC i.e. SIA and Cathay and emerging Emirates.

'''' Execution and end result remained as huge risks given MAS 'ill-fated' history.

'''' TP increase to RM1.65 on better optimism of its new management. However, as share price has ran ahead of our TP, downgrade to Sell.

''

CSC Steel (Neutral '')

Buys properties in Melaka

'''' CSC Steel acquired Constant Mode Sdn Bhd for RM750k. Constant Mode has 10 parcels of 3-bedroom apartments in Pangsapuri Taman Pelangi Ayer Keroh, Melaka, of which the apartments are currently rented to CSC Steel as living quarters for its foreign workers.

'''' CSC Steel is currently renting these apartments for RM5.5k per month.''

'''' While the latest transaction will result in cost savings for CSC Steel, we are keeping our net profit forecasts unchanged, as the latest transaction is immaterial (with <0.1% of our forecast 2011 net profit). TP maintained at RM1.62 based on unchanged 8x 2012 EPS of 20.3 sen.

''

FBM KLCI - 200-day SMA (1531) Next Major Hurdle

'''' Overall, we remain cautious and will only turn bullish if the KLCI is able to penetrate the 200-d SMA (1531 pts now) level on high volume. Relief rally targets are 1510 (50% FR), 1531 and 1535 (strong downtrend line resistance). Support levels are 1470, 1464 (76.4% FR) and 1450 pts. ''

''

Stock to watch - COASTAL: Relief rally targets at RM2.24-2.38

'''' Although there could be further consolidation ahead as share prices are still below RM2.17 (200-d SMA) and RM2.24 (50% FR), the risk-reward matrix favours the bulls, as indicators are showing signs of bottoming up. Target resistance levels are RM2.24-2.38. Cut loss below RM1.92.

''

HLIB Research 15 August 2011 (SP Setia; CSC Steel; Traders Brief)

Stock Name: CSCSTEL
Company Name: CSC STEEL HOLDINGS BERHAD

Research House: HLG

Price Call: HOLD

Target Price: 1.62

SP Setia (HOLD)

Acquires land in Beranang

'''' SP Setia plans to acquire 1,010.5 acres of freehold land in Beranang, Daerah Ulu Langat, Negeri Selangor for RM330m, or RM7.50 psf (compared to RM5.46 psf for Sunway City's land in Semenyih, acquired back in 1996).

'''' The land is situation between the towns of Semenyih, Bangi Old Town and Beranang, and is approximately 19km from the proposed Bandar Kajang MRT station on the Sungai Buloh-Kajang line.''

'''' The group plans to develop a mixed residential township with RM3.5bn of GDV.'' We see this as a positive move as it allows SP Setia to replicate their highly successful valued-added township concept in Setia Alam.''

'''' We do not expect any significant impact for FY11-13, as the group's focus will be on key projects including KL Eco City, Setia Alam / Eco Park, Setia Sky Residences and Fulton Lane in Melbourne during this period of time.

'''' Trades at industry-leading 23.7x P/E with limited upside; maintain HOLD.

''

CSC Steel (HOLD)

1H11 Results: Below expectations

'''' 1H11 reported net profit of RM30.4m came in below expectations, accounting for 41.4% of our full-year forecasts and 35.8% of the consensus full-year estimates.

'''' 2011-13 net profit forecasts cut by 7.1-27.9% to RM53.0m, RM77.1m and RM78.0m respectively, to reflect lower selling price and higher raw material cost.

'''' Following the cut in our 2011-13 net profit forecasts, we are cutting our TP for CSC Steel by 7.4% to RM1.62 based on 8x 2012 EPS of 20.3 sen.''

''

FBM KLCI - Signs of stability returns

'''' Despite the 4.2% rebound from last week's low of 1423 pts, we remain cautious on the market (especially ahead of the long holiday week ahead in end Aug) and will only turn bullish if the KLCI is able to penetrate the 200-d SMA (1530 pts) level on high volume. Relief rally targets are 1500, 1510 (50% FR) and 1530. Support levels are 1470, 1464 (76.4% FR) and 1450 pts.

Stock to watch - AIRASIA: Medium term uptrend remains intact

'''' Following the breakdown of its mid-Bollinger band (RM3.75), 10-d (RM3.86) and 30-d (RM3.67) SMAs supports, AIRASIA near term has turned negative. Nevertheless, we are relieved that the long term uptrend line (RM3.15) and lower Bollinger band (RM3.30) supports remain intact, and coupled with oversold indicators and an uptick in Money Flow Index, a technical rebound is in the pipeline this week.

'''' Resistance levels are RM3.67 and RM3.86 and supports are RM3.30 and RM3.15. Cut loss below RM3.15.

''

Disappointing 1H, Challenging 2H

Stock Name: CSCSTEL
Company Name: CSC STEEL HOLDINGS BERHAD

Research House: OSK

Price Call: TRADING BUY

Target Price: 1.78

CSCSTEL - OSK Research keeps CSC Steel fair value of RM1.97

Stock Name: CSCSTEL
Company Name: CSC STEEL HOLDINGS BERHAD
Research House: OSK

KUAL LUMPUR: OSK Research said on the back of encouraging numbers reported by CSC Steel for the first quarter, it expects the steel-based company to likely to generate reasonable profit for FY11 despite the sketchy outlook in the 2H.

'Therefore, we retain our estimates for now and keep our fair value of RM1.97 derived from 6x EPS plus net cash per share on FY11 numbers,' it said on Monday, May 16.

'We think CSC still justifies a Trading BUY with its strong balance sheet and generous dividend payout commitment,' it added.

OSK Research said the fact that CSC possesses an experienced and sound management team are other carrots for investors to add this stock to their portfolios, on top of a 13.2% upside based on its last close to its fair value.

CSCSTEL - CSC Steel raised to 'trading buy' at OSK

Stock Name: CSCSTEL
Company Name: CSC STEEL HOLDINGS BERHAD
Research House: OSK

CSC Steel Holdings Bhd, a Malaysian producer of steel pipes and cold-rolled coils, was raised to “trading buy” from “neutral” at OSK Research Sdn Bhd to reflect its improving earnings outlook, according to a report today.

The stock climbed 1.7 per cent to RM1.79 at 9:07 a.m. local time, set for its highest close since November 12. -- Bloomberg