Facing Slowdown in the Industrial and Consumer Segments

Stock Name: MPI
Company Name: MALAYSIAN PACIFIC INDUSTRIES

Research House: TA

Price Call: BUY

Target Price: 6.70

MPI - Suzhou Plant to Fuel Growth

Stock Name: MPI
Company Name: MALAYSIAN PACIFIC INDUSTRIES

Research House: TA

Price Call: BUY

Target Price: 5.80

MPI - Strong Growth Momentum Continued in 1QFY14

Stock Name: MPI
Company Name: MALAYSIAN PACIFIC INDUSTRIES

Research House: TA

Price Call: BUY

Target Price: 3.36

Double-digit growth in 4QFY13 Revenue

Stock Name: MPI
Company Name: MALAYSIAN PACIFIC INDUSTRIES

Research House: TA

Price Call: HOLD

Target Price: 2.87

In Line With Management Guidance

Stock Name: MPI
Company Name: MALAYSIAN PACIFIC INDUSTRIES

Research House: TA

Price Call: SELL

Target Price: 2.54

Tough Environment Is Here To Stay

Stock Name: MPI
Company Name: MALAYSIAN PACIFIC INDUSTRIES

Research House: TA

Price Call: SELL

Target Price: 2.38

Fair value of semiconductor firms raised

Stock Name: UNISEM
Company Name: UNISEM (M) BHD

Research House: RHB

Price Call: BUY

Target Price: 1.90

Stock Name: MPI
Company Name: MALAYSIAN PACIFIC INDUSTRIES

Research House: RHB

Price Call: BUY

Target Price: 4.21

Stock Name: NOTION
Company Name: NOTION VTEC BHD

Research House: RHB

Price Call: BUY

Target Price: 1.51

RHB Research kept its call on the Malaysian semiconductor industry at "overweight" due to the third consecutive month of rising global chip sales and forecasts of stronger demand in the second half of 2012.

RHB said it saw a gradual semiconductor sector recovery, driven by strong consumer and corporate information technology spending.

The research house raised the fair value of companies such as Unisem M Bhd, Malaysian Pacific Industries Bhd (MPI), and Notion Vtec Bhd.

RHB raised Unisem's fair value to RM1.90 per share from RM1.84 previously, MPI to RM4.12 per share from RM4.09 and Notion Vtec to RM1.51 per share from RM1.31.

All three semiconductor stocks are all rated as "outperform"
by the research house. -- Reuters

RHB Sector Update - Semiconductor

Stock Name: UNISEM
Company Name: UNISEM (M) BHD

Research House: RHB

Price Call: HOLD

Target Price: 1.53

Stock Name: MPI
Company Name: MALAYSIAN PACIFIC INDUSTRIES

Research House: RHB

Price Call: HOLD

Target Price: 3.40

Stock Name: NOTION
Company Name: NOTION VTEC BHD

Research House: RHB

Price Call: HOLD

Target Price: 2.14

Sector Update

Semiconductor ' Feb chip sales fell but gaining momentum                                                 Neutral

Sector Update

Unisem ' Fair value is RM1.53 based on 1x forward FY12 P/BV                               Market Perform

MPI ' Fair value is RM3.40 based on 1x forward CY12 P/BV                                     Market Perform

Notion Vtec ' Fair value is RM2.14 based on 8x CY12 FD EPS                               Market Perform

-          Feb global chip sales of US$22.9bn were down 7.3% yoy, although this was slightly better than Jan's decline of 8.8% yoy. Similarly, the mom sales decline of 1.3% was narrower vs. Jan's decline of 2.7%, suggesting that the decline in chip demand has bottomed on the back of inventory replenishment and stronger wafer sales.

-          While there is still a lack of earnings visibility in the near term, we believe that the sector has reached the bottom in the current downturn. We thus reiterate our Neutral stance on the sector with a positive bias on the longer-term outlook.

Source: RHB Reserach - 4 April 2012

Tech: Semiconductor (Neutral; NEW) - Cautiously Optimistic

Stock Name: MPI
Company Name: MALAYSIAN PACIFIC INDUSTRIES

Research House: HLG

Price Call: HOLD

Target Price: 3.57

Stock Name: UNISEM
Company Name: UNISEM (M) BHD

Research House: HLG

Price Call: HOLD

Target Price: 1.48

Tech: Semiconductor (Neutral; NEW)

Cautiously Optimistic

• Worldwide sales remain lackluster: recorded seventh consecutive yoy growth contraction with -8.8% reachingUSD23.18bn (3 months moving averages) in January 2012.
• Slightly optimistic outlook: WSTS foresees the market to grow only at 2.6% and 5.8% in 2012 and 2013respectively, vis-''-vis to the double-digit growth experienced in 2007 and2009.
• Highly correlated: MPI and Unisem's 2012and 2013 revenue growth will be dictated by the underlying worldwidesemiconductor growth trend.
• Electronics demand: subdued demand inIT/PC markets due to depressed consumer confident as the result of Europeandebt crisis will be offset by better outlook in both telecommunication andautomotive industries.
• Telco market: main catalyst to therecovery of the industry as cellcos leapfrog into 4G/LTE standard andproliferation of smartphones (especially low-cost models) and tablets.
• Auto market: Higher production ofhybrid and electric cars will spur the industry as more IC components arerequired.
• We believe that Moore'sLaw will continue to spur growth coupled with potential growth in theelectronics market. Hence, we expect Malaysian semiconductor packagers toexperience moderate growth in 2012.
• However, the growth would be dwarfed by intense competition fromTaiwanese peers, higher input costs and appreciation of MYR against USD alongwith challenging economic outlook which will eventually hampers consumerconfident.
• While the sector is not expected to revisit the glory days ofdouble-digit growth as in 2007 and 2009, we initiate coverage on the sectorwith a Neutral rating:
• MPI (Hold; TP: RM3.57)
• Unisem (Hold; TP: RM1.48)

Source: HLIB Research - 28 March 2012

RHBInvest Research Highlights 08th February 2012

Stock Name: UNISEM
Company Name: UNISEM (M) BHD

Research House: RHB

Price Call: HOLD

Target Price: 1.53

Stock Name: MPI
Company Name: MALAYSIAN PACIFIC INDUSTRIES

Research House: RHB

Price Call: HOLD

Target Price: 3.47

08th February 2012

 

Top Story

Indonesia Banks ' All Set For Lift Off                                                        Overweight (Upgraded) Sector Update Bank Rakyat ' Fair value IDR8,200                                                            Outperform (Upgraded) Bank Mandiri ' Fair value IDR7,900                                                           Outperform (Upgraded) BCA ' Fair value IDR7,500                                                                   Market Perform (Upgraded) Bank Danamon ' Fair value IDR5,500                                                        Outperform (Upgraded)

Sector Update

Semiconductor ' Dec chip sales slips, but more upbeat outlook                                           Neutral Sector Update Unisem ' Fair value raised to RM1.53 based on 1x forward FY12 P/BV                     Market Perform MPI ' Fair value maintained at RM3.47 based on 1x forward CY12 P/BV                    Market Perform

Corporate Highlights

CIMB ' 2011 ROE to end up between 16-17%                                                            Underperform Company Update -          CIMB held a small group meeting for analysts last Friday. -          For APH, the main focus was to find investors to complete the project. No further provision required at this juncture and although the loan has not been fully provided for, the balance required is not much while the upside from recoveries could be quite decent.    Genting Malaysia ' Hitch In Miami Casino Gaming Law Approval                                   Outperform Company Update -          Genting Malaysia's plans to build a US$3.8bn 5,200-room resort overlooking Miami's Biscayne Bay has stalled, as a Florida House of Representatives committee postponed a vote on a bill to expand casino gambling.   Wah Seong ' Transforming The Renewable Energy Division                                     Market Perform News Update -          The company announced that its wholly-owned subsidiary has entered an agreement to purchase 51% of Atama Resources for US$25m (approximately RM76.3m). Atama Plantation has a 30-year concession agreement to develop an oil palm plantation and industrial complexes on 470,000 hectares of federal land in Congo .

RHBInvest Research Highlights 02nd February 2012

Stock Name: MPI
Company Name: MALAYSIAN PACIFIC INDUSTRIES

Research House: RHB

Price Call: HOLD

Target Price: 3.47

02nd February 2012

 

Top Story

Hiap Teck ' Waiting for earnings contribution from blast furnace            Market Perform (Upgraded) Visit Note -          We believe Hiap Teck's manufacturing division will continue to be weak due to lacklustre domestic demand in the absence of significant water-related projects. This is evidenced by its low capacity utilisation rate of 50%. -          Demand for steel slabs produced by Eastern Steel is not likely to be an issue as there is a ready buyer. We estimate that Phase 1 of the blast furnace project could contribute roughly RM35-46m to Hiap Teck's FY07/14 net profit.

Corporate Highlights

MPI ' Seeing some signs of bottoming?                                                                  Market Perform Briefing Note -          MPI expects 3QFY06/12 revenue to be flat or at best record modest growth on qoq basis. This is contrary to some of its peers that 1QCY12 revenue would decline 5-10% qoq. -          In addition, the company highlighted that key customers Texas Instruments, Freescale have indicated that the industry is on the verge of bottoming-out in 1QCY12. -          Thus, this supports our view that the sector may have passed (or is close to) its worst and poised for a recovery in the 2H2012. Fair value of RM3.47 and forecasts maintained.

Regional Equities

PT Adaro : Coal production volume increased by 13% yoy                                              Outperform News Update -          For full year 2011, Adaro managed to increase its coal production volume by 13% yoy to 47.7m tonnes (vs. 42.2m tonnes in 2010) mainly due to better weather conditions. This is within our forecast of 47.0m tonnes for Adaro's coal production in 2011. -          Overburden removal increased by 32% yoy to 299.3m bank cubic metre (vs. 225.9m bcm in 2010). Based on production volume of 47.7m, we estimate that the blended strip ratio of Adaro's mines has increased to 6.3x in 2011 (vs. 5.5x in 2010). Adaro guided for a blended strip ratio of 6.4x for 2012, higher than our estimate of 6.1x. We suspect this could be due to higher-than-expected strip ratio at Tutupan mine. -          Forecasts maintained, pending the release of its 4Q11 results. Indicative fair value remains unchanged at IDR2,350 based on target PER of 12x FY12 EPS. -          Related story: Indonesia Coal Sector Initiation ' Resilient In Times of Uncertainty (18 Nov 2011)

Macro

Money Supply - Broad Monetary Aggregate Picked Up And Loan Growth Strengthened In Dec Economic Highlights (published 2 Feb 2012) -          The broader money supply, M3, picked up to 14.4% yoy in December, after bouncing back to grow by +12.4% in November, while loans growth strengthened to a three-month high of 13.6% yoy in December, following a moderation to +12.8% in November and compared with +13.1% in October.  This suggests that the economy is still in expansion. -          Going forward, we expect the banking system's loans to expand at a slower pace of 8-9% in 2012, after strengthening to 13.6% in 2011, in line with a slowdown in economic growth and policy tightening implemented by the Central Bank.    Interest Rates ' Bank Negara Maintained The OPR At 3.0% Economic Highlights (published 2 Feb 2012) -          The Central Bank kept the Overnight Policy Rate (OPR) unchanged at 3.0% for the fourth consecutive meeting on 31 January, as the urgency to ease monetary policy has been reduced significantly of late given that global economic activities held up relatively well and monetary policy remains accommodative in the country. -          Still, there is room for BNM to cut OPR by 25-50 basis points in 1H 2012, if global economic conditions were to worsen.

Another Bad Quarter

Stock Name: MPI
Company Name: MALAYSIAN PACIFIC INDUSTRIES

Research House: OSK

Price Call: SELL

Target Price: 2.00

RHBInvest Research Highlights 19th January 2012

Stock Name: UNISEM
Company Name: UNISEM (M) BHD

Research House: RHB

Price Call: HOLD

Target Price: 1.22

Stock Name: MPI
Company Name: MALAYSIAN PACIFIC INDUSTRIES

Research House: RHB

Price Call: HOLD

Target Price: 2.79

Stock Name: NOTION
Company Name: NOTION VTEC BHD

Research House: RHB

Price Call: SELL

Target Price: 1.69

Stock Name: DAYANG
Company Name: DAYANG ENTERPRISE HOLDINGS BHD

Research House: RHB

Price Call: BUY

Target Price: 2.07

Stock Name: QCAPITA
Company Name: QUILL CAPITA TRUST

Research House: RHB

Price Call: HOLD

Target Price: 1.27

19th January 2012

 

Top Story

Semiconductor ' Seeing the first crack of dawn                                                Neutral (Upgraded) Sector Update Unisem ' Fair value raised to RM1.22                                                  Market Perform (Upgraded) MPI ' Fair value raised to RM2.79                                                        Market Perform (Upgraded) Notion ' Fair value raised to RM1.69                                                                         Underperform -          Yesterday, Linear Technology (US based IC design company) gave an upbeat outlook for the industry. This would be the third positive guidance after Broadcom and ChipMOS, and indicates a more positive tone for the industry after a parade of negative guidance last month. -          We have already factored in a weak 1Q12 for local packaging players, as there is still lack of order visibility, but we believe the industry may be on track for some recovery in 2Q12, and stronger recovery in 2H12. -          We believe the demand weakness for chips has already been priced in. Thus, we are raising our benchmark forward target P/BV from 0.6x to 0.8x for the semiconductor players. We upgrade Unisem and MPI to Market Perform (from underperform).

Corporate Highlights

Dayang ' Delivery of Dayang Topaz and extension to Dayang Zamrud's contract              Outperform News Update -          Dayang announced that it had it had taken delivery of its new workboat, Dayang Topaz yesterday. On another note the company also received a letter of award from Brunei Shell Petroleum Co on 16 Jan, extending its contract for another workboat Dayang Zamrud from 1 Mar 2012 to Oct 2016. -          We are positive on the new delivery as it bumps up the company's assets. The extension of the contract is also another positive, as it indicates that the company has performed well thus far. This will enhance its track record in Brunei and its chances for future contracts from the country. Maintain fair value of RM2.07/share and Outperform call on stock. -          Related story: Oil & Gas Sector Update - Resilient Despite Macroeconomic Uncertainties (12 Dec 2011)   Quill Capita ' Achieves a target DPU of 8.3 sen for FY11                                        Market Perform Results Note -          Quill Capita's 4QFY12/11 realised net income (-14.6%, -0.6%) came in within expectations. Net property income declined mainly due to higher property repair costs incurred in 4QFY12/11. On a full-year basis, however, QC's net profit grew by 5.4% yoy. A final DPU of 4.3 sen was declared bringing total DPU for the year to 8.3 sen (FY10: 8.03 sen), in line with our estimate. -          One of QC's tenants has already signed a letter for a two-year renewal on its lease contract in Jan 2012. As this tenant occupies about 37% of the total NLA due to expire in FY12, the total leases up for renewal in 2012 is now reduced to 24% of total NLA (from 39%). -          Overall, we lift our FY12-13 EPU estimates by 0.5-2.2%. Fair value unchanged at RM1.27. -          Related story: Property ' MREITs Sector Update: A Defensive Pick for Property Exposure (5 Jan 2012)

Macro

Inflation ' Slowed To 3.0% YoY In December, As Price Pressure Eased Economic Highlights (published 19 Jan 2012) -          The headline inflation rate slowed to 3.0% yoy in Dec, the lowest in eight months, after inching lower to +3.3% in Nov, mainly due to a moderation in the core inflation rate, on the back of easing price pressures, while food & non-alcoholic beverage prices held stable during the month. -          Going forward, we believe inflation has peaked but will likely remain sticky downward in the immediate term. As a result, we expect inflation to moderate to an average of 2.8% in 2012, from +3.2% in 2011. -          Although BNM has shifted its focus from inflation to growth, pressure for it to ease monetary policy has reduced significantly of late. However, we believe there is room for BNM to cut OPR by 25-50 basis points in 1H 2012, should global economic conditions take a turn for the worse.

RHB Research maintains Underweight on semicon sector

Stock Name: MPI
Company Name: MALAYSIAN PACIFIC INDUSTRIES

Research House: RHB

Price Call: SELL

Target Price: 2.10

Stock Name: UNISEM
Company Name: UNISEM (M) BHD

Research House: RHB

Price Call: SELL

Target Price: 0.92

Stock Name: NOTION
Company Name: NOTION VTEC BHD

Research House: RHB

Price Call: SELL

Target Price: 1.21

KUALA LUMPUR (Jan 4): RHB Research Institute is maintaining its Underweight call on the semiconductor sector as it has yet to see any strong indications that the industry is poised for a stronger recovery.

It said on Wednesday the EU debt crisis has already taken its toll on the chips demand in the region as reflected by a sharper decline of 11.5% on-year in November (versus October: 7.7%).

'Although sales of smartphones with the latest wireless chips remained the bright spot for the industry, this was not able to offset the weak demand from the broader market.

'We believe that chip sales (especially from the US and Europe regions) will be a better indicator as to whether a sustainable recovery is in sight,' it said.

On the outlook for MPI, it said although MPI was focusing on new segments such as the automotive and mobile devices (i.e. X3-MLP and MEMS), it believes the slowing consumer spending on the broader market such as PCs and consumer electronics would have bigger knock-on effects on MPI's medium-term earnings.

'This is mainly because revenue contributions from these segments are the highest. Hence, we maintain our Underperform call on the stock and a fair value estimate of RM2.10/share based on 0.6 times forward P/BV,' it said.

RHB Research also said Unisem was not spared too despite qualifying for new customers. Unisem's earnings visibility remains poor given weak order visibility and customers' lower order rate despite commencing volume loading for newly acquired customers.

'We believe medium-term chips demand would remain uninspiring given weakness in end-market demand for consumer electronics and corporate IT equipment. Therefore, we reiterate our Underperform call and fair value estimate of RM0.92/share based on 0.6 times forward P/BV,' it said.

As for Notion Vtec, the research house said while it remains positive on Notion's camera segment on the back of rising adoption of SLR cameras amongst consumers, it is wary of its renewed focus on the HDD business.

'Recall that the company incurred substantial cost increase following its capacity ramp-up of its 2.5'' HDD in FY09/10. Furthermore, we believe demand for HDDs could be hampered in the longer term by demand for alternative storage mechanisms i.e. cloud computing and hybrid storage. Thus, we maintain our Underperform call on the stock with a fair value estimate of RM1.21/share based on 6x FY09/12 EPS,' it said.

Malaysian Pacific Industries missing the mark

Stock Name: MPI
Company Name: MALAYSIAN PACIFIC INDUSTRIES

Research House: CIMB

Price Call: SELL

Target Price: 2.57

Malaysian Pacific Industries Bhd
(Nov 9, RM3.22)
Maintain underperform with revised target price of RM2.57 from RM2.75: A shortfall in revenue and margins was behind MPI's 1QFY12 ending June results miss. This cannot be fully offset by the dividend, which was below expectations. The market is likely to react negatively to the poor demand and low utilisation that these results denote.

MPI turned in a 1QFY12 loss as opposed to our and consensus forecast of a full-year profit. We slash our earnings and dividends as a result. This reduces our target price, based on a 60% discount to its five-year historical adjusted average price-to-book value. We reiterate our 'underperform' call.

MPI's revenue fell by 8% quarter-on-quarter (q-o-q) and 15%'' year-on-year (y-o-y), thanks to lower revenue for all business segments and a more challenging external environment which crimped demand and order flows. We believe that MPI did not resort to price cutting to fill up capacity as it had in 4QFY11. This probably led to lower utilisation rates on a q-o-q basis. Earnings before interest, tax, depreciation and amortisation (Ebitda) margins fell by a sharp 3.6 percentage pts q-o-q due to lower capacity utilisation and pricier inputs.

Despite the loss-making quarter, MPI declared a dividend per share (DPS) of five sen, which, though positive, is below our previous forecast of 23 sen net DPS for FY12 and is only half of last year's rate. It does not, we believe, make up fully for the 1QFY12 earnings letdown.

MPI expects a challenging FY12 given the softening demand and uncertain macro outlook, much like its customers which forecast 4Q top line declines of 9% to 13% q-o-q in the case of Intersil, 3% to 9% for Maxim and 8% for ST Micro. For MPI, we now forecast narrower profits for FY12 to reflect this. Note that there is downside risk to our forecast.'' ' CIMB IB Research, Nov 9


This article appeared in The Edge Financial Daily, November 10, 2011.

RHBInvest Research Highlights 4th November 2011

Stock Name: UNISEM
Company Name: UNISEM (M) BHD

Research House: RHB

Price Call: SELL

Target Price: 0.92

Stock Name: MPI
Company Name: MALAYSIAN PACIFIC INDUSTRIES

Research House: RHB

Price Call: SELL

Target Price: 2.19

4th November 2011

 

Top Story: Genting Malaysia ' The Big Apple buzz                             Outperform

Visit Note

''       Resorts World New York (RWNY) opened on 28 Oct with much fanfare. The initial response to the racino was largely positive with 20k eager patrons waiting in line to get into the casino. All in, GM would spend a total of US$830m (US$380m for the licence and US$450 for capex), including the US$250m government grant. Applying RWNY's closest competitor, Empire City 's net win per day of US$330/VLT to its 5,000 machines, RWNY's gaming revenue could be c. US$600m p.a.. Management believes it should be able to make a similar EBITDA as Empire City of about US$80-100m once it is fully operational. We have now imputed earnings for RWNY into our forecasts.

 

Sector Call

 

Semiconductor: Moving to P/BV valuation methodology                      Underweight

Sector Update

Unisem: New fair value of RM0.92                        Underperform

MPI: New fair value of RM2.19                               Underperform

''       With the poor earnings visibility on the back of weak guidance by major players in the industry, the outlook for 2012 remains in doubt amidst the bearish outlook in the global economy. Furthermore, post Unisem's analyst briefing recently, there was lack of conviction as to whether the guided 4Q2011 revenue decline would be short-term, with a quick a recovery in 2012, although management appeared optimistic on such a scenario.

 

Corporate Highlights

 

Parkson: Positive earnings and valuation impact after PRA listing      Outperform (up from MP)

Company Update

''       Parkson Retail Asia's (PRA) listing on the SGX yesterday effectively resulted in Parkson Holdings (PHB) becoming a full holding company with a 51.5% ownership of HK-listed Parkson Retail Group (PRG) and 70.5% ownership of PRA.

''       Our earnings model has been changed to impute PRA's earnings as a group, with the same assumptions as we had in our IPO note dated 3 Nov.     

 

MMHE: Tapis EOR project finally in; but downside risks persist            Underperform

News Update

''       Yesterday, MMHE announced that it had won the Exxonmobil Tapis EOR fabrication project worth RM1.4bn. The project is expected to be completed by end-2013.

''       We are not surprised by the news. We understand that revenue recognition will begin in FY12. Based on our 9.5% EBIT margin assumption, the project will contribute around RM66.5m over its 2 year period.

''       Now that it has acquired the Sime Engineering yard, MMHE has put its yard optimisation plans on hold. As such, tax credits for the year will be minimal and the company's effective tax rate will rise on a yoy basis.

 

Lingui: Core net profit fell by 56% qoq                 Underperform (down from MP)

1QFY12 Results

''       1QFY06/12 core net profit of RM24.2m came in within expectations at 23% of our full-year forecasts and 22% of the full-year market consensus.