MAGNA - Price Target News

Stock Name: MAGNA
Company Name: MAGNA PRIMA BHD
Research House: HWANGDBS

KUALA LUMPUR: Hwang DBS Vickers Research has a Target Price of RM1.30 for Magna Prima which is a niche property developer with RM1 billion worth of launches in Klang Valley over next two years. The research house said on Wednesday, March 24 it sees strong earnings growth for Magna Prima, but cash flow management and cost control will be crucial. "The RM1.30 TP is based on small-cap 40% discount to RNAV of RM2.17 (RM1.52 excluding Lai Meng high-end condominiums)," it said. Hwang DBS Vickers Research said Magna Prima was recently re-classified under "Property" on Bursa Malaysia, in line with its repositioning as a niche developer that focuses on high-value, small pockets of land in the Klang Valley. Following a change in top management in 2009, it went on an acquisition spree to boost its landbank. Magna Prima plans to launch six projects worth RM1 billion by 2011, comprising gated landed residential and commercial developments in the Klang Valley. Its high-end condo project near KLCC is expected to come on stream after 2013 (post-relocation of Lai Meng school pending approval from Education Ministry). A potential JV partner may be required given the massive size (GDV of RM1b) and target market. "We expect Magna Prima's net gearing to balloon to 171% from 10% currently, due to recent land acquisitions and working capital requirements. "This could decline to 130% by 2012 with improved operating cashflows. With an internal CONSTRUCTION [] arm, there should be better management of cost, quality and execution. Land replenishment may be a concern given the aggressive launch plans and tight cashflow," it said. Hwang DBS Vickers Research said the stock was currently trading at 55% discount to RNAV, in line with small- cap developers.

GAMUDA - Price Target News

Stock Name: GAMUDA
Company Name: GAMUDA BHD
Research House: HWANGDBS

Gamuda Bhd
(March 23, RM2.83)
Maintain buy at RM2.74, with target price of RM4.20: Gamuda's results for 2QFY10 are due tomorrow. We expect 5%-10% growth in net profit quarter-on-quarter underpinned by gradual improvement in construction margin and higher recognition of property billings.

1QFY10 construction margin of 4% should show continuous improvement for the next eight quarters before stabilising at 10%-11% in FY11. 2QFY10 property earnings should remain robust driven by unbilled sales of about RM700 million. We understand 1HFY10 property sales have already reached RM490 million with full-year sales likely to reach RM800 million (versus FY09 of RM500 million and FY10 earlier target of RM600 million).

The stock may become an eventual Malaysian-Vietnam proxy. In our view, Gamuda is making the right move in entrenching its exposure in Vietnam, diversifying country and sector exposure out of construction.

With RM16 billion in gross development value and 12% of sum-of-parts (SOP) valuation (including Tan Thang) coming from Vietnam, Gamuda will be re-rated with improving incremental news flow in Vietnam. Next catalyst is a land sale in Yenso Park to a reputable foreign developer.

The company's large order book provides buffer. Gamuda's near-term prospects for new jobs may prove challenging if there are further delays in the rollout of mega projects, its main focus for now.

Gamuda's CY11 price-to-earnings ratio (PER) of 12.3 times and price-to-book value ratio of 1.6 times are below its 10-year average mean of 17.7 times and 1.8 times, implying limited downside. While construction jobs may be slow, we think incremental news flow on Vietnam and expectations of more transportation-related contracts (Gamuda's forte) during the 10th Malaysia Plan will be key catalysts to watch for. Buy with an SOP-derived target price of RM4.20.

We think the recent arbitration by Bahrain Asphalt Establishment (BAE), one of its asphalt subcontractors for the completed Durkan Highway project done jointly with WCT Bhd is a non-event. The total subcontract amount was RM200 million while BAE is claiming for RM101 million. - HwangDBS Vickers Research, March 23


This article appeared in The Edge Financial Daily, March 24, 2010.

HSL - Price Target News

Stock Name: HSL
Company Name: HOCK SENG LEE BHD
Research House: AMMB

Sarawak construction sector
Overweight; top picks are Naim Holdings Bhd at fair value of RM4.60 and Hock Seng Lee Bhd (HSL) at fair value RM2: We highlight Sarawak's deep development potential as a cornerstone theme for the construction sector.

Recent corporate manoeuvres have sparked interest in Sarawak plays. 1Malaysia Development Bhd recently signed a landmark deal with State Grid Corp of China to jointly invest US$11 billion (RM36.5 billion) in Sarawak. Such a move may be a prelude to stronger contract flows in Sarawak ahead of its state elections. This move would likely spin off job opportunities for top Sarawakian contractors - Naim, HSL and Cahya Mata Sarawak Bhd, as well as select steel fabricators such as KKB Engineering Bhd.

The Sarawak Corridor of Renewable Energy (Score) is one of Malaysia's five growth corridors with total targeted investments of RM334 billion. More importantly, allocation for basic infrastructure is crucial to support these huge investments - with RM65 billion being budgeted under Phase 1 of Score's implementation (2008-2015). Tenders for the Murum access roads (five packages) will be dished out simultaneously. Key areas of spending are: 1. At least RM4 billion-RM5 billion worth of road jobs up for grabs. These include two major access roads under Score - Murum (RM800 million) and Nanga-Merit (RM1.4 billion).

2. Water infrastructure. Naim is working hard to convert letters of intent for the remaining packages of the Kuching flood mitigation project (RM1.1 billion) into actual awards. Likewise, HSL is a leading candidate for balance of works worth RM2 billion under the Kuching sewerage project where it is already involved in initial works for Phase 1 with Nishimatsu of Japan.

3. Other notable jobs. We expect more concrete news flow on the status of the Mukah Airport extension worth RM600 million in the coming months. Also on the cards is a proposed Tg Manis port expansion worth RM350 million with HSL a potential beneficiary due to its prior track record of completed projects in the area (the RM300 million Tg Manis deepsea fishing port). Naim is in advanced negotiations for a proposed RM167 million Bengoh dam resettlement. A decision could be made by 2Q10.

A major draw card of Score is the ability to provide cheap power to heavy industries with a portion to be supplied to Peninsular Malaysia. So far, only two hydro dams are being built - Bakun: 2400MW, Murum: 944MW - against a total hydro potential of 20,000MW (2020 target: 10,000MW).

However with Sarawak's own rising future requirements, this may prod the state to ramp up rollout of five new hydro dams worth RM13 billion to plug the gap.

We do not discount a consortium being formed between foreign and local contractors - possibly Loh & Loh Corp Bhd - in bidding for these jobs. - AmResearch, March 23


This article appeared in The Edge Financial Daily, March 24, 2010.

GLOMAC - Price Target News

Stock Name: GLOMAC
Company Name: GLOMAC BHD
Research House: ECMLIBRA

KUALA LUMPUR: ECM Libra Research maintains its Buy call on Glomac with unchanged target price (TP) of RM1.80 based on P/E of 12x on CY10 earnings which is supported by Glomac's three-year earnings CAGR of 16.6% with an undemanding implied PEG ratio of just 0.5x. It is also supported by RNAV of RM2.17 per share, it said in a research note on Wednesday, March 24 there. Over the next few months, ECM Libra Research said could be several positive news flow. They are the (1) en bloc sale of a 15-storey tower in Glomac Cyberjaya (RM100 million) and Phase 4 of Plaza Kelana Jaya (RM267 million), (2) launching of 378 units serviced apartments in Glomac Damansara which already has 3,000 registrants, and (3) acquisition of a major mixed development landbank in KL with potential GDV of RM4 billion to RM5 billion. "Glomac reported its best quarter in over two years with 3QFY10 net profit of RM10.6 million. 9MFY10 net profit of RM28.3 million was within expectations as it achieved 71% and 72% of house and consensus full-year estimates respectively," it said. Glomac's three sen net interim dividend as compared to 2.5 sen in 3QFY09 is a pleasant surprise. "We now expect FY10 net DPS to be at least 6 sen (previously 5 sen). Besides this, we also expect 4QFY10 results to be even better as management has guided that savings from lower CONSTRUCTION [] costs and higher floor space for Glomac Tower will be recognised from 4QFY10 onwards," it said.

PLUS - Price Target News

Stock Name: PLUS
Company Name: PLUS EXPRESSWAYS BHD
Research House: MIDF

PLUS Expressways Bhd
(March 23, RM3.41)
Upgrade to buy at RM3.37, target price raised to RM3.85: PLUS is eyeing more highway concessions in the Asia-Pacific region as part of its expansion plan. We believe that India and Vietnam are the target markets.

The greatest potential would be in India. While PLUS is already managing and collecting toll for the 21.5km Bhiwandi-Kalyan-Shil Phata Highway in the state of Maharashtra, and is proposing to acquire 74% stake in Indu Navatuga Infra Project Private Ltd, a concessionaire of the 95% completed 38.6km Padalur-Trichy Highway in the state of Tamil Nadu, south of Chennai, we believe there are rooms for further expansion into the country.

India currently has 66,590km of highway called the National Highway, with 200km designated as expressway and 10,000km have four lanes or more. Although the highways constitute only approximately 2% of total road network, it carries nearly 40% of the total traffic.

PLUS had experienced delay in the completion of the highway and toll collection, due to issues pertaining to land acquisition process from the Indian authorities. However, the Indian Road Transport Ministry has asked the National Highway Authority of India to set up 150 land acquisition units to speed up the process and it plans to acquire at least 20km of land a day, which is incidentally the same length of road it targets to construct in a day.

With its experience and commitment by the Indian government to speed up land acquisition process, we expect that PLUS would be bidding to play some part in upgrading the 14,811km yet to be awarded.

We upgrade our recommendation to a buy with a higher target price of RM3.85 based of discounted-cash flow valuation of 10%. We believe the Indian government is fully committed to ensure the completion of the National Highway Development Project. We are revising our net profit forecast for financial year ending Dec 31, 2011 by 3% and onwards by an average of 8% to better reflect the growing overseas contribution. - MIDF Research, March 23


This article appeared in The Edge Financial Daily, March 24, 2010.

NAIM - Price Target News

Stock Name: NAIM
Company Name: NAIM HOLDINGS BHD
Research House: AMMB

Sarawak construction sector
Overweight; top picks are Naim Holdings Bhd at fair value of RM4.60 and Hock Seng Lee Bhd (HSL) at fair value RM2: We highlight Sarawak's deep development potential as a cornerstone theme for the construction sector.

Recent corporate manoeuvres have sparked interest in Sarawak plays. 1Malaysia Development Bhd recently signed a landmark deal with State Grid Corp of China to jointly invest US$11 billion (RM36.5 billion) in Sarawak. Such a move may be a prelude to stronger contract flows in Sarawak ahead of its state elections. This move would likely spin off job opportunities for top Sarawakian contractors - Naim, HSL and Cahya Mata Sarawak Bhd, as well as select steel fabricators such as KKB Engineering Bhd.

The Sarawak Corridor of Renewable Energy (Score) is one of Malaysia's five growth corridors with total targeted investments of RM334 billion. More importantly, allocation for basic infrastructure is crucial to support these huge investments - with RM65 billion being budgeted under Phase 1 of Score's implementation (2008-2015). Tenders for the Murum access roads (five packages) will be dished out simultaneously. Key areas of spending are: 1. At least RM4 billion-RM5 billion worth of road jobs up for grabs. These include two major access roads under Score - Murum (RM800 million) and Nanga-Merit (RM1.4 billion).

2. Water infrastructure. Naim is working hard to convert letters of intent for the remaining packages of the Kuching flood mitigation project (RM1.1 billion) into actual awards. Likewise, HSL is a leading candidate for balance of works worth RM2 billion under the Kuching sewerage project where it is already involved in initial works for Phase 1 with Nishimatsu of Japan.

3. Other notable jobs. We expect more concrete news flow on the status of the Mukah Airport extension worth RM600 million in the coming months. Also on the cards is a proposed Tg Manis port expansion worth RM350 million with HSL a potential beneficiary due to its prior track record of completed projects in the area (the RM300 million Tg Manis deepsea fishing port). Naim is in advanced negotiations for a proposed RM167 million Bengoh dam resettlement. A decision could be made by 2Q10.

A major draw card of Score is the ability to provide cheap power to heavy industries with a portion to be supplied to Peninsular Malaysia. So far, only two hydro dams are being built - Bakun: 2400MW, Murum: 944MW - against a total hydro potential of 20,000MW (2020 target: 10,000MW).

However with Sarawak's own rising future requirements, this may prod the state to ramp up rollout of five new hydro dams worth RM13 billion to plug the gap.

We do not discount a consortium being formed between foreign and local contractors - possibly Loh & Loh Corp Bhd - in bidding for these jobs. - AmResearch, March 23


This article appeared in The Edge Financial Daily, March 24, 2010.

TMCLIFE - Price Target News

Stock Name: TMCLIFE
Company Name: TMC LIFE SCIENCES BHD
Research House: OSK

KUALA LUMPUR: OSK Research is maintaining its Neutral call on TMC Life Sciences at 34 sen and maintains the RM5.8 million net profit forecast for FY10. In terms of recommendation, the research house said on Wednesday, March 24 it was still Neutral on the stock because of its unattractive FY10 PER. "Management reiterates that TMC will continue to pay dividends despite the Tropicana Medical Centre is going through a gestation period," it said. OSK Research said the management gave a detailed presentation on TMC's traditional fertility business and the new Tropicana Medical Center. Key highlight was that the new medical centre is expected to turn around this year. All the key operating statistics of the Tropicana Medical Centre such as number of admissions, average revenue / in-patient, number of new beds opened and number of in-patients have improved over the last three quarters. As a result, TMC had recorded positive EBITDA and reduced net losses. The research house said TMC had undertaken various initiatives to create greater awareness for the new hospital. Majority of its clientele thus far came from the surrounding communities and the company will continue to promote its services. In FY09, TMC derived 59% of its revenue from fertility services and another 29% from hospital services. Two other services namely the wellness program and the stem cell which contributed 9% and 3% respectively to FY09 revenue are expected to remain relatively stable in FY10. For the wellness program, marketing agency which has committed to bring in RM42 million sales over the 5 years period would provide stable revenue to TMC though not very significant. As for the stem cell business, because of pricing competition and limited stem cell therapies, OSK Research says it is not expecting this division to contribute significantly to TMC at least for the next two years.

PUNCAK - Price Target News

Stock Name: PUNCAK
Company Name: PUNCAK NIAGA HOLDINGS BHD
Research House: TA

Puncak Niaga Holdings Bhd
(March 22, RM2.50)
Maintain hold at RM2.43, target price of RM3: We continue to believe assets monetisation is the ideal exit point for shareholders, given the attractive potential upside - RM5.40 discounted cash flow valuation for Puncak Niaga and its 70%-subsidiary Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) versus the current market price of RM2.43. Uncertainty over the timing of the conclusion in negotiations however remains a key concern at this juncture. Hence, although potential upside to the stock price is now higher than 15% which warrants a buy, we retain our hold recommendation until we can get a clearer picture on the timeline on completion of the assets takeover exercise.

Water assets takeover talks between the state government and federal government presumably via Ministry of Finance-controlled Pengurusan Aset Air Bhd (PAAB) is still in the negotiation stage. We understand that the federal government is taking a more holistic approach in the restructuring of the Selangor state water assets by also addressing other outstanding issues, particularly the interstate water transfer project. This may be one of the causes the talks missed a few deadlines set by the ministry.

However, on a positive note, PAAB has completed the due diligence exercise on Puncak, leaving only the pricing issue outstanding. Our channel check indicates key stakeholders are targeting to complete the takeover talks by mid-2010, although we would not discount the possibility of negotiation dragging into 3Q10 given the complexity of the issues involved.

The management confirmed that Syabas has issued a letter of demand to the state government in respect of the tariff compensation in 2009. However, so far, we understand that the state government has yet to make any formal response. At this juncture, the management indicated that they prefer to wait for a reply before beginning to contemplate the next move, which naturally means proceeding to file a legal suit in court. We feel that the broader issue of a tariff hike would likely remain status quo until the water assets takeover talks are concluded, and based on the state's government public statements so far, nor could Syabas expect any compensation arising from the delay in tariff adjustment.

Without a tariff hike or conclusion to the assets takeover talks, Syabas is likely to sink further into the red. According to the management, Syabas loses about 10 sen to 20 sen per cu m water sold. Capital expenditure spending has been put on hold, except for emergency cases and must receive prior approval from SPAN (National Water Services Commission) and the state government. Cash flow management too is being prioritised with critical items such as financing cost and salaries taking precedents. - TA Securities, March 22


This article appeared in The Edge Financial Daily, March 23, 2010.

KNM - Price Target News

Stock Name: KNM
Company Name: KNM GROUP BHD
Research House: KENANGA

KUALA LUMPUR: Kenanga Investment Research recommends Hold on KNM GROUP BHD [] with a target price of 89 sen. It said on Tuesday, March 23 its recommendation was based on FY10 EPS of 5.9 sen and PER of 15 times. "We maintain our PER assumptions as share price should hold close to 90 sen until the exercise is firmed up. Our previous contention with the stock holds, contracts flows are expected to continue on slow in the near term, with potential improvement beyond 2010," it said. On Monday, KNM said it was not extending the exclusivity period for due diligence granted earlier to BlueFire Capital Group Ltd, a company controlled by KNM group managing director Lee Swee Eng. BlueFire, together with GS Capital Partners VI Fund LP and Mettiz Capital Ltd had proposed to take over KNM for RM3.5 billion. However, they target to conclude talks by April 16, 2010. Kenanga Research said speculation was rife on Monday that the due diligence exercise would not be fully completed by the committed March 22 deadline, and post that, a lower offer price could ensue. "We viewed KNM's first offer price of 90 sen as unfavourable to long term investors as it does not 1) reflect their previous earnings capacity; 2) their historical average PER trading ranges of c.15x; and 3) current global peers average FY10 PER of 15x-19x. With such reasons to prove as potential roadblocks, an even lower offer price is highly improbable," it said.

KNM - Price Target News

Stock Name: KNM
Company Name: KNM GROUP BHD
Research House: RHB

KUALA LUMPUR: RHB Research says the delay in BlueFire Capital Group Ltd's acquisition of KNM GROUP BHD [] would highlight the risk of the buyer looking at withdrawing its offer or lowering the offer price. It said on Tuesday, March 23 the buyer might look at withdrawing its offer or lowering the offer price given KNM's poor 4QFY09 results. It has a market perform with a fair value of 90 sen. On Monday, KNM said it was not extending the exclusivity period for due diligence granted earlier to BlueFire Capital Group Ltd, a company controlled by KNM group managing director Lee Swee Eng. BlueFire, together with GS Capital Partners VI Fund LP and Mettiz Capital Ltd had proposed to take over KNM for RM3.5 billion. However, they target to conclude talks by April 16, 2010.