ALAM - Price Target News

Stock Name: ALAM
Company Name: ALAM MARITIM RESOURCES BHD
Research House: OSK

KUALA LUMPUR: OSK Research maintains a Buy on Alam Maritim at RM1.80 with a target price of RM2.900 based on a PER of 12x FY10 earnings.

It said on Monday, March 29 it believes more vessel contract awards would be coming up in 2H10 to support the installation of pipelines and facilities work in Malaysia.

"With regard to this, we believe Alam would be a preferred candidate as it owns an all-Malaysian flagged fleet of vessels that are mostly new (at less than five years old) and which have a lower possibility of breaking down.

"Finally, the bulk of its fleet size is 5,000 brake horse power, which is not only easier and cheaper to operate but also suitable for use in Malaysian waters," it said.

Last Friday, Alam announced that its 100%-subsidiary, Alam Maritim (M) Sdn Bhd was awarded two long-term vessel contracts by established oil majors to provide; 1) one accommodation vessel for RM40 million, and 2) one accommodation workbarge for RM43.2 million.

Both contracts are expected to start work immediately. The first contract is for a primary period of three years, with 2 extension options of 1 year each, while the second is for a primary period of 13 months, with two extension options of one year each.

PROTON - Price Target News

Stock Name: PROTON
Company Name: PROTON HOLDINGS BHD
Research House: OSK

KUALA LUMPUR: OSK Research keeps Buy call on PROTON HOLDINGS BHD [] with target price of RM5.90 following fresh corporate developments with Volkswagen.

It said on Monday, March 29 that with Proton and DRB-Hicom's share prices on the uptrend last week, Proton CEO's confirmation that the company was in discussions with Volkswagen rekindled the speculation that a tie-up was imminent.

"With Volkswagen likely to set up its sedan CKD assembly plant in Malaysia, Proton's Shah Alam plant is a good site for that facility.

"Aside from this speculation, we continue to view Proton favourably from the fundamental angle with our fair value of RM5.90 based on a combination of 10x PER and 0.8x P/NTA," it said.

TM - Price Target News

Stock Name: TM
Company Name: TELEKOM MALAYSIA BHD
Research House: MAYBANK

Telekom Malaysia Bhd, the state-controlled phone company, was upgraded to "buy" from "hold" at Maybank Investment Bank Bhd on higher long-term growth expectations.

Its share price forecast was raised to RM3.86 from RM3.50, Maybank said in a report today. - Bloomberg

RHBCAP - Price Target News

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

KUALA LUMPUR: AmResearch is maintaining its Buy rating on RHB Capital with a revised fair value of RM7.20/share (from RM7.10/share previously) on higher returns on equity (ROE) expected.

"Our new fair value is based on higher fair P/BV of 1.8x (from 1.7x), as our ROE has now been tweaked upwards to 14.9% (from 14.8%) FY10F following our company visit," it said.

AmResearch said it believed RHB Cap was underestimated in the momentum in its loan growth. Loan growth had picked up significantly since its reorganisation exercise in early 2007 - whereby its banking, investment banking, Islamic and insurance divisions are now regrouped under a more customer-centric -- Retail, Corporate and Investment Bank (CIB), Islamic and International divisions.

It said RHB Cap's loan growth was not about only new lending to the public sector. Market share of loans have risen all round in key areas in FY09 versus FY08. They are: (a) Mortgage loan is up 7.4% from 7.1%; (b) Non-residential mortgages up 5.3% from 4.3%; (c) Credit cards to 8.5% from 8.4%; (d) Auto loans to 6.7% from 6.5%, (e) Working capital loans to 11.3% from 10.0%; (f) SME loans to 9.5% from 8.5%; and (g) Overall market share of 8.5% versus 8.2%.

"Besides this, there is room for non-interest income to come in stronger-than-expected, particularly on the forex side, given a pick-up in trade activities. Should forex profits reach FY07 and FY08's levels of say RM250mil (our current forecast: RM223.2mil), we estimate a 1.4% upgrade in net earnings for FY10F, taking ROE to 15.1% - our fair value would be upgraded further to RM7.40/share," it said.

BURSA - Price Target News

Stock Name: BURSA
Company Name: BURSA MALAYSIA BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research is maintaining its Trading Buy call on Bursa Malaysia with a target price of RM10.70.

It said on Monday, March 29 there was was potential upside from retail participation if certain regulatory constraints are removed to help improve retail participation.

"Overall, we remain bullish on the stockmarket and maintain a KLCI target of 1,450 for end-2010. Our projected core EPS growth of 33.6% for FY10 is underpinned by an expected pick-up in velocity from 34% in 2008-09 to 40%.

"We retain our earnings forecasts and target price of RM10.70, pegged to an unchanged P/E of 33x," it said.

CIMB Research also maintained its Trading Buy call due to potential re-rating catalysts of (1) an expected rise in trading value, (2) sustained market sentiment, (3) a rebound in the effective clearing fee rate, and (4) stronger growth of the derivative business.

SAPCRES - Price Target News

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

SapuraCrest Petroleum Bhd (SapCrest)
(March 25, RM2.49)
Maintain market perform at RM2.36, with fair value of RM2.66: SapCrest's core net profit for the financial year ended Jan 31, 2010 was largely in line, accounting for 103% and 95% of our full-year forecast and market consensus respectively.

Revenue for 4Q was down 53% quarter-on-quarter (q-o-q), mainly due to lower revenue from marine division (-47% q-o-q) on account of declining charter rates and lower utilisation rates as well as lower contribution from installation of pipeline and facilities (IPF) division (-71% q-o-q) due to seasonal factors.

Despite higher margins for IPF (+20.8 percentage points q-o-q), overall margins were dragged down by an operating loss of RM43.7 million for the marine division (versus 3Q operating loss of RM20.8 million) as well as declining drilling margin (-3.4 percentage points q-o-q) stemming from lower utilisation rates.

Stronger FY11, including the latest production sharing contractors' (PSCs) IPF contract worth RM1.5 billion, SapuraCrest's current effective order book now stands at RM7.4 billion. We note that the PSCs' IPF contract is for 2010 with additional contract sums to be awarded for 2011-12. Furthermore, we expect FY11-FY13 IPF operating margin to increase to 11.9%-12.2% respectively (versus 11.1% in FY10) given the higher contribution from higher-margin deepwater jobs as well as higher utilisation rates for its IPF vessels.

The company declared a final dividend of four sen per share. Coupled with its interim of three sen, total dividends for FY10 are seven sen implying a yield of 3%.

There are no changes to our forecasts for now. We have introduced our FY01/FY13 earnings projection.

As an investment case, we believe medium-term earnings visibility remains bright on the back of: RM7.4 billion order book and stronger order book replenishment from overseas (such as India and Australia) for its IPF division; better cost control given ownership of its own IPF vessels as well as cost pass-through contracts; and stronger growth in rates for its drilling division.

Potentially, as we see more contracts secured, there may be upside to our fair value of RM2.66 per share, which is based on 16 times FY11 earnings per share (EPS). Hence, we maintain our market perform call on the stock. - RHB Research Institute, March 25
This article appeared in The Edge Financial Daily, March 26, 2010.

KENCANA - Price Target News

Stock Name: KENCANA
Company Name: KENCANA PETROLEUM BHD
Research House: MIDF

Kencana Petroleum Bhd
(March 26, RM1.57)
Reiterate trading buy at RM1.59, target price raised to RM1.86: Earnings for the first half (1H) of the financial year ending July 31, 2010 (FY10) fell short of estimates, accounting for only 36.4% and 43% of ours and consensus' full-year estimate respectively. However, the second quarter (2Q) tends to be Kencana's weakest quarter.

Despite lower contract realisation, Ebit (earnings before interest and tax) margins were buoyed by favourable fabrication margins (on average higher than 15%) as most of the raw material costs, mobilisation expenses are passed down to its clients.

We believe management had implemented cost control measures as early as 1Q of calendar year 2009 to preserve earnings. Moving forward, we expect Kencana to lock in higher margin revenue derived from its marine segment which delivers high yields and constant income stream.

Order book replenishments were rather slow in 2H09. Nonetheless, we understand that the group is anticipating to be awarded several substantial projects in "smaller packets" in the near future. We believe the group will be in line with its annual targeted replenishment rates of at least RM1 billion per annum. The present order book is about RM1.7 billion comprising RM800 million from marine engineering, RM27.6 million from project management and RM827.2 million from Kencana Petroleum Ventures (KPV), the group's marine services division.

However, the current spare capacity may prove to be an advantage for Kencana as it is able to take on immediate new jobs.

There are possible immediate re-rating catalysts for Kencana. We understand that the group is in a solid position to win further fabrication contracts awarded by domestic PSC (production contract sharing) clients, which will warrant an earnings revision. This is also supported by the construction of anchor handling tug supply (AHTS) vessels and workbarges to provide steady income stream for its KPV segment and Petronas potentially awarding an estimated RM4 billion of new fabrication jobs. Kencana's spare capacity at its fabrication yard and solid track performance would be its biggest value propositions in bidding for jobs.

We reiterate our trading buy recommendation with an increased target price of RM1.86 (previously RM1.55 post-rights issue) based on 18 times price-to-earnings ratio (PER) of FY10, which is a 20% discount to its four-year PE average at 23 times.

We retain our FY11 numbers as we await the award of the forthcoming fabrication contracts which will have accretive effect on future earnings. Kencana is currently trading at 15.4 times earnings per share (EPS) 2010, within its four-year average PE of 13.9 times to 42.3 times. - MIDF Research, March 26


This article appeared in The Edge Financial Daily, March 29, 2010.

KENCANA - Price Target News

Stock Name: KENCANA
Company Name: KENCANA PETROLEUM BHD
Research House: OSK

KUALA LUMPUR: OSK Research maintains its Buy call on Kencana Petroleum and it has upgraded its target price to RM2.04 based on higher PER valuation of 16x CY11 EPS (previously RM1.46 based on a PER of 14x FY11 EPS). It said on Friday, March 26 that historically, Kencana share price has even traded above 25x and it believes giving a slightly higher PER valuation of 16x is fair given the expected better prospects of the company. "Among the other listed O&G companies, we believe Kencana stands a better chance in securing new contracts soon given the nature of its business coupled with its international presence, delivery track record and availability of yard space," it said. OSK Research said to date, it still has a strong orderbook of about RM2 billion, which should last it for the next 12 months. Finally, Kencana is also one of the few O&G companies that had a net cash position of RM332.8 million as at 2QFY10 (versus RM93.0 million as at 1QFY10). To recap, the research house said Kencana's 2QFY10 results were within expectations. Again, this quarter had minimal new fabrication contracts from Petronas and its PSC contractors, resulting in Kencana's yard only 50% utilised. Also, there was delay in the commencement of KM1 to June 2010. It downgraded its FY10 forecast by 7% to factor in the lower 1H10 numbers but it upgraded the FY11 forecast by 9% to reflect the brighter prospect of the company.

IJMLAND - Price Target News

Stock Name: IJMLAND
Company Name: IJM LAND BERHAD
Research House: CITI GROUP

IJM Land Bhd
(March 26, RM2.30)
Initiation of coverage with buy/medium-risk, target price of RM2.95: IJM Land currently trades at a steep 39% discount to our fully diluted revised net asset value (RNAV) of RM3.69 per share. We expect the upside to RNAV will come from rising value of The Light, its flagship waterfront development, and potential Canal City land acquisition. Our RM2.95 target price is based on a 20% discount to RNAV, in line with peer S P Setia Bhd.

We recommend investors to switch to IJM Land and sell S P Setia. S P Setia has a calendar year 2010 (CY10) price-to-earnings ratio (PER) of 24 times and is trading almost inline with its RNAV.

IJM Land has stronger earnings growth (verssus S P Setia's three-year compound annual growth rate or CAGR of 10%), more compelling valuations, and larger landbank of 5,740 acres (versus S P Setia's 3,588 acres), making IJM Land a more compelling option for those seeking exposure to Malaysian developers.

We expect a three-year net profit CAGR of 59% in FY10 to FY12. The uplift in earnings from financial year ending March 31, 2011 (FY11) onwards should be driven by The Light project in Penang and projects in the Klang Valley. Sales from Penang make up close to 35% of our forecast property development earnings before interest and tax (Ebit). We also forecast expansion in property development margins from 15% in FY10 to 19% in FY11 due to higher margin products being launched.

There is an expected earnings upside from sale of land and property. IJM Land is currently in talks for the sale of its AEON mall in Melaka, and we have projected an RM50 million gain, although there could be upside risk to our estimate. The key focus development in Johor is Sebana Cove, hence there is a likelihood that land in other parts of Johor, such as Mount Austin (250 acres), could be sold at a profit.

Malaysia lacks large and liquid property developers to attract foreign investors. S P Setia has always been a firm favorite due to its size, strong management and liquidity. In our view, IJM Land could be a close rival to S P Setia with sales likely to hit close to RM1 billion in FY10 and forecast to increase to RM1.37 billion in FY11. S P Setia recorded RM1.65 billion sales in FY09. - Citi Investment Research, March 25


This article appeared in The Edge Financial Daily, March 29, 2010.

GAMUDA - Price Target News

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

KUALA LUMPUR: OSK Research says GAMUDA BHD []'s 1HFY10 earnings of RM131 million (+25.9%) made up 44% of its FY10 estimates. It said on Friday, March 26 Gamuda's orderbook was RM7 billion and jobs are on track. Prospective jobs have however either been delayed or tenders lost. "We see orderbook replenishment risk for FY10. On property sales, management expects a marginally weaker 2H. We are skeptical on the proposed water asset acquisition by SPLASH as many uncertainties remain," it said. OSK Research said valuations remain unattractive at 10x CY10 earnings vs its peers average of 14.5x. It maintained a Neutral call on Gamuda with a target price of RM2.75. To recap, Gamuda posted 2QFY10 revenue of RM603 million (+1.9% y-o-y, -3.3% q-o-q) and earnings of RM68 million (+38.6% y-o-y, +7.9% q-o-q). On a cumulative basis, revenue stood at RM1227 million m (+1.8% y-o-y) and earnings at RM131 million m (+25.9% y-o-y). From a y-o-y comparison, 1H margins were higher with EBIT and net amounts at 9.4% and 10.7% (FY09 comparatives at 7.6% and 8.6%). "Overall, 1H earnings made up 43.6% of our full year projections (42.7%% of consensus). We deem this to be marginally below expectations," it said.