FAJAR - CIMB Research has Sell on Fajarbaru Builder

Stock Name: FAJAR
Company Name: FAJARBARU BUILDER GRP BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research has a SELL on Fajarbaru Builder Group at RM1.16 and the share price is trading at a price-to-book value of 1.3 times.

It said on Monday, April 25 Fajarbaru is gyrating in a bearish flag pattern, which is usually perceived as a downward reversal pattern. Although prices could still bounce a tad higher from here, sustainability is a key concern as momentum should turn weaker near the resistance level.

MACD is flat while RSI is beginning to dwindle. Near term gains are likely capped at RM1.20-RM1.25.

'Traders may want to unload some position near the stipulated resistance zone. Others should sell when prices break below its 200-day SMA at RM1.08. Next downside targets are RM1.02 and 95 sen,' it said.

RHBCAP - HDBSVR has Buy on RHB Cap with a RM10 TP

Stock Name: RHBCAP
Company Name: RHB CAPITAL BHD
Research House: HWANGDBS

KUALA LUMPUR: Hwang DBS Vickers Research said RHB Cap remains one of the cheapest large cap banks in Malaysia at 1.7x FY11 book value against sector (weighted) average of 2.3x.

'At ROE levels of 15-16% and trading at only 1.7x FY11 BV, RHB Cap makes for an attractive M&A target. We have a Buy recommendation on RHB Cap with a RM10 TP,' it said on Friday, April 22.

HDBSVR cited The Edge Financial Daily that there are three potential parties vying for a stake in RHB Cap. Abu Dhabi Commercial Bank (ADCB) has engaged advisors Goldman Sachs and Bank of America-Merrill Lynch to run the auction for the sale of its 25% stake in RHB Cap.

Carlyle Group and TPG Capital (private equity firms) are in talks to launch a joint bid for RHB Cap for US$1.5bn.

Another two parties potentially looking at the stake (as mentioned in The Edge Financial Daily) are Australia and New Zealand Group Ltd (ANZ) and DBS Group Holdings (DBS).

These permutations suggest that there could possibly be further M&As within the domestic banks.

The Edge Financial Daily mentioned that it is unclear how Malaysian authorities would react to DBS' possible bid on RHB Cap given that Singapore's Temasek owns a 14.8% stake in Alliance Financial Group (AFG). It is understood that a foreign strategic investor cannot have more than one stake in domestic banks.

'If ANZ were to acquire a stake in RHB Cap, it would need to merge AMMB with RHB Cap. This would allow ANZ to have a stake in a larger piece of the Malaysian banking landscape,' said HDBSVR.

It was reported earlier that ANZ was keen to increase its stake in AMMB. ANZ currently owns 24% of AMMB. Even though the threshold for foreign shareholding remains capped at 30%, total returns as a shareholder would be larger for ANZ in an enlarged AMMB-RHB Cap scenario.

Carlyle Group and TPG Capital are private equity firms. TPG has an Indonesia arm, TPG Nusantara, which currently owns 59.7% of Bank Tabungan Pensiun Nasional (BTPN) and actively plays a role in management of the bank and has seen the bank doing well since its acquisition in 2008.

'We are not just implying temporary value enhancement in banks for the sake of taking advantage of potential general offer valuations. Our M&A theme for the Malaysian banks include potential foreign strategic tie-ups that could enhance value and boost competitiveness of the banks.

'The target banks will benefit from input the potential stakeholders could bring to the table to improve stand-alone value propositions, e.g. AMMB-ANZ,' it said.

WTK - CIMB Research: Indicators improving for WTK

Stock Name: WTK
Company Name: WTK HOLDINGS BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research said since it featured WTK Holdings Bhd [] as a technical sell stock on April 12, prices fell to as low as RM1.72, almost hitting the 30-day SMA.

It said on Friday, April 22 that since then, a base is formed near this moving average. Yesterday, buying momentum started to set in, pushing prices above the flag resistance.

'Looking at the chart, prices could bounce back to test RM2.08 and possibly even the RM2.20 level. Hence, aggressive traders may start to accumulate now. Always put a stop at RM1.88.

'Indicators are improving. MACD is poised for a positive crossover while RSI has hooked upward,' it said.

TENAGA - CIMB Research remains Neutral on Tenaga

Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research said TENAGA NASIONAL BHD []'s core net profit at the halfway stage accounted for only 47% of its and consensus full-year forecasts.

'We consider it to be below expectations as 2H earnings are expected to remain weak due to higher fuel costs. However, the 4.5 sen interim dividend was within our estimate. We now cut our FY8/11-12 core EPS by 7-8% for slower demand growth as well as higher coal price and usage,' it said on Friday, April 22.

CIMB Research said as a result, its end-CY11 target price, which is based on a forward P/BV of 1.2x, falls by 7 sen to RM6.82.

It remained NEUTRAL on Tenaga given the lack of near-term catalysts and cost pressures. There appears to be no near-term relief from the higher fuel costs as the government is unlikely to raise tariffs in an election year, it said.

''

'We prefer YTL Power for exposure to the power sector,' it said.

CIHLDG - CIMB Research rates CI Holdings a Buy, TP RM4.78

Stock Name: CIHLDG
Company Name: C.I. HOLDINGS BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research said sugar was the main topic of discussion at the Thursday, April 21 post-3QFY6/11 briefing by CI Holdings Bhd.

It said on Friday, April 22 CIH has no plans to raise selling prices yet even though it is now paying a market price of around RM2.62/kg for sugar, 38% higher than the last subsidised price of RM1.90/kg.

'Other highlights are 1) a continued rise in sales of non-carbonated drinks, and 2) improvement of infrastructure through a new PET line. Our EPS forecasts are intact, which, together with an unchanged valuation basis of parity with our 14.5x CY12 target market P/E, keeps our target price at RM4.78.

'We continue to rate CIH a BUY and our top F&B pick given the potential catalysts of 1) an increasingly marketable product line, and 2) M&A. Thanks to its recent price weakness, the stock is now an attractive investment proposition, offering single-digit FY12-13 P/Es and 4.1% dividend yield,' CIMB Equities Research said.

TENAGA - Tenaga downgraded at RHB, ECM Libra

Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD
Research House: ECMLIBRA

Tenaga Nasional Bhd was cut to “hold” from “buy” at ECM Libra Capital Sdn Bhd, which said the Malaysian power producer faces “challenging headwinds” from higher coal prices.

The share price estimate was kept at RM6.54, Bernard Ching, an analyst at ECM, wrote in a report today.

Tenaga Nasional Bhd was cut to “underperform” from “market perform” at RHB Research Institute Sdn Bhd, which said the Malaysian power producer “lacks catalysts” due to rising coal prices and slowing demand.

The fair value was reduced to RM5.60 from RM6.90, Lim Tee Yang, an analyst at RHB, wrote in a report today. -- Bloomberg

SAPCRES - SapuraCrest ramping up asset expansion

Stock Name: SAPCRES
Company Name: SAPURACREST PETROLEUM BHD
Research House: AMMB

SapuraCrest Petroleum Bhd
(April 21, RM3.70)
Maintain buy at RM3.67 with fair value of RM4.75: We reiterate our 'buy' call on SapuraCrest Petroleum Bhd (SapCrest) with an unchanged fair value of RM4.75 based on an unchanged FY12F price-earnings ratio (PER) of 22 times.

We recently met with Sapura group's executive director for group treasury and corporate finance, Chow Mei Mei, and SapCrest's new chief financial officer, Aliza Ashari.

The key highlights of our meeting with management are: (i) No firm time line for an equity raising exercise at this stage, likely awaiting the announcement of the results of SapCrest's tenders which will provide greater clarity for its proposed US$900 million (RM2.7 billion) capital expenditure requirements.

(ii) Besides additional marginal oilfield projects, the group may be looking at acquiring at least two additional derrick lay barges (DLB) for SapCrest's installation of pipeline and facilities (IPF) division for domestic and overseas jobs. Each DLB could cost US$200 million (RM600 million) to US$250 million, depending on the vessel specifications.

(iii) As the group's acquisitions and capital raising exercise are still at the planning stage, we maintain FY12F/14F earnings. Our FY12F earnings of RM281 million is 4% below consensus earnings of RM293million, which we understand may be aggressive given that the group's IPF segment may be weaker this year.

(iv) As guided earlier, the pipe-laying and installation segment, which accounted for 36% of SapCrest's FY11 earnings before interest and tax (Ebit), is likely to register slightly lower contributions in FY12F due to higher one-off jobs in FY11;

(v) Its marine division, which registered a surprise Ebit of RM13 million in 4QFY11 (against a RM39 million loss in 3QFY11 and RM44 million loss in 4QFY11), is expected to remain in the black this year. The turnaround stemmed from improved charter rates and utilisation of its seven marine support vessels,'' and additional work for this segment's 14 ROVs and two SDS.

(vi) The drilling division, which contributed 47% of the group's FY11 Ebit, will be flat in FY12F as the five tender rig charter contracts will need to be renewed only after January 2012.

(vii) SapCrest's outstanding orders are currently worth RM8.6 billion, which will last another three years.

But the group's Pan-Malaysian transport and installation project has the option for two annual renewals.
Hence, the group could add another RM3 billion to RM12 billion to its net order book, which remains by far the largest order book in Malaysia's oil and gas industry.

The stock currently trades at an attractive CY11F PER of only 17 times vis-''-vis over 20 times for Dialog Group Bhd, Malaysia Marine and Heavy Engineering Sdn Bhd and Kencana Petroleum Bhd. ' AmResearch, April 21


This article appeared in The Edge Financial Daily, April 22, 2011.

IGB - AmResearch keeps 'hold' call on IGB

Stock Name: IGB
Company Name: IGB CORPORATION BHD
Research House: AMMB

AmResearch expects a decent take-up rate for two of IGB Corp's upcoming residential projects this year, given that it has strong followers, despite the soft condo market within the Kuala
Lumpur City Centre and Golden Triangle area.

One of the projects is G Residence in Desa Pandan. It comprises 475 service apartment units with a retail podium, said to be priced around RM800 per square feet, given that the site is facing the upmarket Jalan U-Thant.

In a note today, AmResearch reaffirmed its "hold" rating on IGB, given that the group has not taken advantage of the robust residential property market with the lack of new launches over the past two years.

"However, its income would be supported by its investment properties mostly located within the mature Mid Valley City, accounting for 55 per cent of our financial year 2011 forecast earnings estimate," it said. -- Bernama

TENAGA - Affin Research maintains Buy on Tenaga, unch FV RM7.20

Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD
Research House: AFFIN

KUALA LUMPUR: Affin Investment Research is maintaining its Buy on TENAGA NASIONAL BHD [] (TNB) with an unchanged fair value of RM7.20 target price, based on a 10% discount to DCF of RM8 a share (discount rate 7%; growth rate 3%.

It said on Thursday, April 21 that TNB's recent RM107 million investment for a 22% stake in Integrax was purely to facilitate the operational efficiency of the group's wholly-owned Manjung coal-fired power plant.

Integrax owns Lumut port ' which comprises of two terminals, that is the Lekir Bulk Terminal (LBT) and Lumut Maritime Terminal (LMT). LBT contributes more than 90% of Integrax's earnings and provides coal handling and coal delivery services to TNB's Manjung power plant.

Affin Research said to ensure Manjung's power plant reliability, coal procurement, shipment and storage chain process will have to be seamlessly integrated.

It said for example, Manjung pays LBT a fixed and variable rate (spelled out in the 25-year 'concession like' Jetty Terminal Usage Agreement) amounting to about RM85 million per annum. This amount is small ' just 6% of the actual annual coal cost of about RM1.5 billion (based on five million tonnes of coal usage per annum x US$100 per tonne.

Despite the small cost involved in unloading the coal, any disruption in the chain process will ultimately affect the power plant's availability and reliability. In essence, LBT is Manjung's only viable mean of unloading the coal to meet its plant requirements.

'Thus, the above investment is seen to enhance fuel security for the Manjung power plant, especially crucial now that it undergoes a further 1 x 1,00MW capacity expansion ' scheduled to come on-stream by March 2015,' it said.

Affin Research said whilst Manjung is Integrax's single largest customer, TNB has no legal right to use the Lumut jetty. The jetty's legal owner lies with LBT. Thus, hypothetically speaking, Manjung's coal-handling process could potentially face capacity constraint and risk being de-prioritised should LBT have gone ahead with Vale's iron ore transhipment proposal (apparently terminated in 4QFY10).

The research house said whilst it does not believe that the Integrax investment was dearly required, it obviously can help ensure that Manjung remains a key priority to LBT and Integrax.

AXIATA - OSK Research maintains Neutral on telcos

Stock Name: AXIATA
Company Name: AXIATA GROUP BERHAD
Research House: OSK

KUALA LUMPUR: OSK Research is maintaining its Neutral call on telcos but downgraded DiGi from Buy to Neutral.

It said on Thursday, April 21 Malaysia and Singapore have agreed to cut roaming rates by 20% for voice calls and 30% for SMS with effect from May 1. The mobile operators that have signed reciprocal agreements to cut roaming tariffs are SingTel, StarHub, M1, Celcom Axiata, Maxis, Digi and U Mobile.

'While lower roaming rates are typically negative for the telcos in the short term given the inelastic nature of roaming calls, it is expected to stimulate usage in the longer term to offset the revenue dilution,' it said.

OSK Research is maintaining its NEUTRAL recommendations for SINGTEL (FV: S$3.00) and STARHUB (FV: S$2.85) whilst keeping its BUY rating on M1 (FV: S$2.85), its'' top pick for the Singapore telecoms sector.

For the Malaysian mobile telcos, it is retaining its BUY recommendation on AXIATA (BUY, FV: RM5.83) and NEUTRAL call on MAXIS (FV: RM5.20).

'We are downgrading our recommendation on DIGI to NEUTRAL from BUY previously as its share price has rallied 15% since our upgrade in late January and has surpassed our DCF fair value of RM27.90,' it said.