HARTA - OSK Research raises Hartalega target price to RM9.89

Stock Name: HARTA
Company Name: HARTALEGA HOLDINGS BHD
Research House: OSK

KUALA LUMPUR: OSK Investment Research has maintained its buy call on Hartalega Holdings at RM7.79 with a higher target price of RM9.89 (from RM8.92), and said the company's 4QFY10 results scheduled to be announced Tuesday, May 11 would be in line with its own and consensus expectations.

"We see a better quarter-on-quarter performance, mainly contributed by 1) its timeliness in passing on the cost of higher latex price; 2) higher sales as a result of bigger production capacity, and 3) growing demand for nitrile gloves as the price difference with natural rubber gloves narrows due to the increase in natural rubber price.

"There is also the possibility of a bonus issue, following in the steps taken by its peers," it said in a note on Tuesday.

AIRPORT - OSK Research reiterates trading buy call on MAHB

Stock Name: AIRPORT
Company Name: MALAYSIA AIRPORT HOLDINGS BHD
Research House: OSK

KUALA LUMPUR: OSK Research reiterated its trading buy call on Malaysia Airports Holdings Bhd (MAHB) at RM4.95 with target price RM5.50, and said 1Q traffic statistics released by MAHB showed the robust trend in passenger and cargo figures in the past few quarters continued into 1Q.

Despite being lower quarter-on-quarter, this was purely due to seasonal weakness after 4Q's heavy holiday season, it said.

"We see a similar trend for the retail division, which has made headway since introducing its Retail Optimisation Plan (ROP).

"These factors, together with potential excitement from MAHB's fund raising via a new share placement, lead us to reiterate our trading buy call with a target price of RM5.50, derived from 16 times FY10 EPS," it said.

CIMB - CIMB downgraded to 'Hold'

Stock Name: CIMB
Company Name: CIMB GROUP HOLDINGS BERHAD
Research House: AMMB

CIMB Group Holdings Bhd. had its stock rating downgraded to "hold" from "buy" at AmResearch Sdn Bhd following recent gains in the company's share price.

AmResearch said it maintained the stock's fair value at RM15.10, based on its estimated return on equity ratio of 15.9 per cent for the full year. - Bloomberg

JOBST - Surprising rise in job postings on JobStreet

Stock Name: JOBST
Company Name: JOBSTREET CORPORATION BHD
Research House: HWANGDBS

JobStreet Corporation Bhd
(May 10, RM2)
Maintain buy at RM1.98 with target price of RM3.20: The number of job postings on the Malaysian portal surged to 17,000 at end-March, the highest in JobStreet's history, and compares to about 13,000 at end-February and a low of 7,000 in January 2009.

This was a surprise as 1Q is typically a quiet period. Hence, 1QFY10F earnings should show improvement year-on-year and quarter-on-quarter. There could be upside to our FY10F earnings as we assumed about 14,000 jobs per month for Malaysia. Also, DBS economist recently upgraded 2010 GDP forecast to 8% versus our current assumption of 5.7%. Historically, 1% GDP growth would increase JobStreet's revenue by 3%-5%.

JobStreet is in a win-win situation. It is operating in the right growing online industry while capitalising on strong job creation in the Asean market. The government's National Broadband Initiative is creating stronger awareness in the SME market, which JobStreet is trying to penetrate.

This could be a strong catalyst for the stock. In our view, this will create a sustainable structural shift from print to online advertising. In fact, classified sales for appointments had been declining in 2007-2009. Our sensitivity analysis indicates that every 10% migration of classified sales from The Star to JobStreet would enhance JobStreet's earnings by 3%. Furthermore, the growing adoption of gadgets such as the iPhone and iPad will boost accessibility to JobStreet's services.

The swift improvement in the job market supports our view that JobStreet is one of the best proxy to economic recovery in the Asean markets. With SEEK raising its stake to 22.4% now, we can expect more tangible synergies such as marketing ideas, new user interfaces, analytics and also new markets. Meanwhile, major shareholders SEEK Ltd and Fidelity remain firm with their investments in JobStreet, with Fidelity raising its stake from 11.5% to 11.7% on April 10.

Given JobStreet's strong cash flow generation ability, it is well-positioned to reap further acquisition and investment opportunities. We estimate it will generate RM23 million-RM41 million free cash flow (FCF) over FY10-FY12F, while its balance sheet is in net cash position of RM50 million (16 sen per share).

However, as JobStreet has met its target of 20% stake in 104 Corp this year, it is unlikely to raise its stake further for now. Hence, with the excess cash in hand, we do not discount the possibility of a higher dividend payout (currently 35%, implies 1.5% net yield).

We are retaining our buy rating, and RM3.20 price target based on one time price earnings-to-growth (PEG) (FY09-FY12 net profit compound annual growth rate of 25%). This implies 19.9 times fully diluted FY12F PE. - HwangDBS Vickers Research, May 10


This article appeared in The Edge Financial Daily, May 11, 2010.

GAB - GAB riding on Tiger's success

Stock Name: GAB
Company Name: GUINNESS ANCHOR BHD
Research House: MAYBANK

Guinness Anchor Bhd (GAB)
(May 10, RM7)
Maintain hold at RM6.91 with unchanged target price of RM7: Appropriately led by its Tiger brand, GAB continued to gain market share in the malt liquor market (MLM) in 3QFY10. The seasonality factor also translated into a strong net profit growth of 43% year-on-year (y-o-y) to RM47 million.

There are no changes to our forecasts as we expect a slower sequential quarter after the seasonality factor wears off. Maintain hold.

As expected, 3QFY10 turned out to be solid quarter. GAB's RM47 million 3QFY10 net profit (+43% y-o-y; +6% quarter-on-quarter) was within our and market expectations, making up 31% of our and consensus forecasts. The brewer's strong 3Q performance is not comparable y-o-y due to the earlier timing of Chinese New Year (CNY) in 2009, which resulted in some of the CNY festive sales captured in 2QFY09 instead of 3QFY09.

GAB's 12-month cumulative moving average (MA) turnover and pre-tax profit up to 3QFY10 reached new highs of RM1.33 billion (+5% y-o-y) and RM195 million (+9% y-o-y) respectively.

These are better indications of the continuing strong momentum GAB has built up, which suggests that it is likely to improve on its performance to date with the upcoming World Cup football tournament beginning June 11. We expect GAB's products - lager and stout - to continue gaining market share in the next 6-12 months.

With 39 sen per share net cash at end-3QFY10 and forecast to grow to 72 sen per share by end-FY12, we continue to like GAB for its deep dividend potential. GAB also offers steady growth potential with its ability to grow market share, whilst competing in an industry that has a high defensive quality of earnings.

We maintain our hold call and RM7 discounted cash flow-based (DCF) target price, which translates into a near 7% net dividend yield. - Maybank IB, May 10


This article appeared in The Edge Financial Daily, May 11, 2010.

F&N - F&N dampened by dairy, property

Stock Name: F&N
Company Name: FRASER & NEAVE HOLDINGS BHD
Research House: CIMB

Fraser & Neave Holdings Bhd (F&N)
(May 10, RM10.82)
Maintain underperform at RM10.72 with target price RM8.65: F&N 2QFY9/10 net profit of RM85 million took 1H bottom line to RM163 million, which works out to 58% of our full-year forecast and 60% of consensus estimate. It is broadly in line with expectations as we anticipate a less robust 3Q in the absence of major festivities.

The interim dividend per share (DPS) of 18 sen gross and three sen tax-exempt was also not surprising. We maintain our forecasts, discounted cash flow-based target price of RM8.65 (weighted average cost of capital unchanged at 8.4%) and underperform recommendation.

The potential derating catalysts are further declines in the dairy and property businesses, and margin pressure from trade discounting. F&N is undoubtedly a venerable company, and trails behind QSR Brands, Cocoaland and CI Holdings, whose valuations are more attractive. QSR is our top food and beverage pick.

F&N's 2Q sales surged to a record RM1 billion, helped by strong festive soft drinks sales, which improved 15% year-on-year (y-o-y). All main products registered growth, with Coca-Cola and 100Plus again outshining the rest. Furthermore, the glass business sprang a nice surprise, chalking up a 14% y-o-y jump in sales volume in Vietnam and Thailand after a string of disappointing quarters.

However, the exciting growth recorded by the soft drinks and glass businesses was offset by the slowdown of dairy and property activities. Revenue for the dairy business stagnated as higher sales in Malaysia and Thailand/Indochina were offset by lower exports. The property business is expected to remain sluggish as no significant new projects are in the offing.

F&N has sealed an exclusive five-year agreement effective April 1 to distribute Red Bull energy drinks in Malaysia. The deal will expand F&N's product portfolio and help fill the sales void that Coca Cola and Sprite will leave behind when its transitional bottler's and distributor's agreements expire on Sept 30, 2011. - CIMB Research, May 7


This article appeared in The Edge Financial Daily, May 11, 2010.

CSCSTEL - A little more lustre for CSC Steel

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

CSC Steel Holdings Bhd
(May 10, RM1.88)
Maintain buy at RM1.85 with target price of RM2.22: CSC Steel's 1Q numbers were above our and consensus estimates. 1Q earnings were down 17.6% from the previous corresponding quarter, mainly due to lower average selling prices as well as higher taxes paid. Nonetheless, we are positive on the upcoming one or two quarters as we see higher selling prices boosting the company's top line.

As such, we maintain our FY10 and FY11 numbers, which keep our target price unchanged at RM2.22. Maintain buy.

CSC Steel's 1Q numbers were 8% above our expectation and also beat consensus estimates. Quarter-on-quarter top line was flat but net profit fell 17.6%.

Although there was small growth in sales, the average selling prices of its finished goods were lower at US$680 (RM2,176) to US$780 per tonne (based on Steel Business Briefing's East Asia prices) during the quarter. This was partly due to Chinese New Year celebrations falling in mid-February 2010, during which steel demand was somewhat quiet. The decline was also partly due to the higher tax paid of RM8.6 million, which was 45% higher than that paid in 1Q.

On a year-on-year basis, net profit and revenue surged 435.9% and 62.6% respectively as stockists had held back on purchases last year as well as the higher inventory then.

We see higher CRC (cold rolled coils) prices as we believe the higher priced iron ore may have exerted cost pressure on prices. With the momentum set to gain pace, we think the company is poised to reap higher revenue over the next one or two quarters as downstream steel traders begin to stock up on inventory in anticipation of a further price hike in the CRC market.

However, we remain cautious for 2H as the improved sentiment may reverse, as there is an over-production of flat steel products. We maintain our forecasts for FY10 and FY11 and arrive at a target price of RM2.22 on adding our projected net cash per share forecast for FY10 to our six times FY10 EPS (earnings per share) valuation.

We are impressed with its strong balance sheet as the company pared down its debt during the quarter by RM4.5 million, which translated into net cash of RM288.3 million as at March 31, 2010. - OSK Research, May 10


This article appeared in The Edge Financial Daily, May 11, 2010.

GAB - World Cup 2010 to give Guinness Anchor a lift, says OSK Research

Stock Name: GAB
Company Name: GUINNESS ANCHOR BHD
Research House: OSK

KUALA LUMPUR: OSK Investment Research has maintained its buy call on GUINNESS ANCHOR BHD [] (GAB) at RM6.91 with target price RM7.35, and said the company's earnings were within expectations, with the bottom line figures to date accounting for 76.5% and 78.3% of OSK Research's and consensus estimates.

Moving into 4Q10 (April-June), it said sales would remain firm on intensified promotion activities in view of the 2010 World Cup Soccer season.

Since the Malaysian brewery industry rides on seasonal and event factors, the World Cup has been a positive factor for the industry every four years, it said.

The research house expects GAB to see robust numbers in the next quarter, although strong competition from its closest competitor means the risk of downside to earnings will persist.

"We see the stronger earnings on the 2010 World Cup soccer season lifting earnings in 4Q and meeting our earnings forecast.

"As we are making no changes to our earnings estimates or valuation parameters, we maintain our discounted cash flow-derived target price for GAB at RM7.35, with our buy recommendation intact," it said.

SUNCITY - Suncity jumps after ECM Libra ups target price

Stock Name: SUNCITY
Company Name: SUNWAY CITY BHD
Research House: ECMLIBRA

KUALA LUMPUR: SUNWAY CITY BHD [] rose in morning trade Monday, May 10 after ECM Libra Investment Research maintained its buy call and raised its target price for the stock to RM5 (from RM4.33 previously).

The research house said Suncity was one of its top picks for the sector.

"At current market capitalisation, investors are not only paying 21% discount for the net cash proceeds and 38.25% in Sunway REIT valued at RM2.2 billion but also get all its property development landbank for free.

"We raise our target price from RM4.33 to RM5 based on 14 times P/E which is one standard deviation higher than average forward P/E of 9.9 times," it said.

ECM Libra said this was justified given the 18.7% EPS CAGR over next three years, unlocking hidden value in investment PROPERTIES [] and potential upside from further expansion.

KNM - KNM's valuation 'attractive', a 'buy'

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

KNM Group Bhd, a Malaysian oil and gas services provider, was upgraded at Maybank Investment Bank Bhd because the stock's valuation is "attractive" and its operations are improving.

The company's rating was raised to "buy" from "sell," Maybank Investment said in a report today.

Its share price estimate was unchanged at 68 sen. -- Bloomberg