MRCB - CIMB Research has Buy on MRCB at RM2.20

Stock Name: MRCB
Company Name: MALAYSIAN RESOURCES CORP
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research has a technical Buy call on MALAYSIAN RESOURCES CORP [] Bhd at RM2.20 at which it is trading at FY12 price-to-earnings of 30.6 times and price-to-book value of 2.4 times.

It said on Wednesday, May 18 that MRCB appears to be trapped in a sideways consolidation triangle, similar to the one forming on the FBMKLCI. The triangle could potentially be on its final leg lower to complete this pattern.

'If we are right, the stock is poised for strong rally once this pattern ends. Prices could pull back towards RM2.12-2.17 and traders would likely do well getting in long at those levels. Cut losses if prices fall below RM2.09.

'Technical landscape is flat, supporting the sideways triangle view. A breakout above RM2.30 would mean that prices are heading towards RM2.41 and RM2.47 next, where the latter is its 78.6%FR of its 2007-2008 drop,' it said.

CENTURY - Century Logistics' top up, bottom down

Stock Name: CENTURY
Company Name: CENTURY LOGISTICS HOLDINGS BHD
Research House: OSK

Century Logistics Holdings Bhd
(May 13, RM1.96)
Maintain buy at RM1.99 with target price of RM2.43: Century Logistics (CLH) posted earnings of RM6.4 million (year-on-year [y-o-y]: - 2.5%, quarter-on-quarter [q-o-q]: -23.4%) on the back of RM66.8 million in revenue. Revenue accounted for 19% of our full-year estimates, given the seasonally weaker quarter due to the low number of working days.

We consider these commendable results, noting that the remaining three quarters will be strong on new contracts.

CLH has just started another two major logistics contracts last month, which according to management have contributed substantial revenue to the group for this segment.

CLH's oil and gas logistics segment also continues to see buoyant growth and demand for its bunkering services remains solid and resilient despite the hike in oil prices.

CLH's bottom line was down by 23.4% q-o-q and 2.5% y-o-y falling short of our and consensus views by 20% and 16% if annualised. Earnings before interest and tax (Ebit) margin was down by 2.5 percentage points q-o-q.

We consider this in line due to the seasonally lower 1Q net profit owing to lower number of working days.

Furthermore, the much lower bottom line is also due to the higher tax charges for the quarter given that its Incentive Tax Allowance tenure has ended. Note that CLH's tax rate for the previous quarter was much lower owing to the non-taxable gain from the group's sale of property.

We continue to like CLH and expect numbers to remain strong going forward. Apart from its strong and steady growth in its oil logistics, we expect its contract logistics business to grow credibly and to secure more contracts from multinational companies such as F&B players and some large electrical and electronic companies. We are optimistic that CLH will continue to do well. Management has also guided that this segment will remain one of the company's key growth areas in the future.

We maintain our earnings forecast for now and reiterate our 'buy' call on CLH with fair value at RM2.43 based on 5.1 times FY11 earnings per share. CLH has also guided that it will declare a dividend payout ratio of 20% to 25% for the full-year. ' OSK Research, May 13


This article appeared in The Edge Financial Daily, May 16, 2011.

MAYBANK - Maybank driven by regional expansion

Stock Name: MAYBANK
Company Name: MALAYAN BANKING BHD
Research House: HWANGDBS

Malayan Banking Bhd
(May 13, RM8.85)
Maintain buy at RM8.74 with target price of RM10.80: Net profit of RM1.1 billion in 3QFY11 (+2% quarter-on-quarter; +11% year-on-year) takes 9M11 earnings to RM3.3 billion (76% of our full year FY11F). Net interest income edged down 2% q-o-q due to net interest margin (NIM) compression (2.16% against 2.31% in 2QFY11) that was prevalent in all regions. Loans surged 7% q-o-q led by Singapore and Indonesia. Provisions fell sharply (-45% q-o-q) due to an improving loan portfolio, absence of some non-recurring allowances, and higher recoveries. Tier-1 and risk-weighted capital asset ratio stood at 11.6% and 14.1%, respectively (incorporating dividend reinvestment plan reinvestment rate of 91%).

Maybank has completed the acquisition of Kim Eng Holdings (KEH), it now owns 50.2%, and launched a mandatory general offer for the remaining shares. It also offered to buy out Kim Eng Securities (Thailand), currently 55.3%-owned by KEH, at 16 baht per share. We expect the privatisation to be successful. Strong revenue and loan traction at Bank Internasional Indonesia, MCB Bank Ltd and its Singapore operations should drive growth going forward. However, NIM is likely to remain soft, although overall asset quality should generally improve. There could be short-term pressure on PT Wahana Ottomitra Multiartha Tbk's (WOM Finance) motorcycle non-performing loans.

We raise FY11/13F loan growth to 15% to 18% (from 13% to 14%), reduce FY11 credit charge to 40 basis points (from 47bps), and imputed potential income (circa RM200 million) from Kim Eng in FY12/13F.

Maintain 'buy' and RM10.80 target price based on the Gordon Growth Model with the following assumptions: 16.5% return on equity, 7% growth and 10.8% cost of equity. ' HwangDBS Vickers Research, May 13


This article appeared in The Edge Financial Daily, May 16, 2011.

GNEALY - OSK rates Glenealy a 'buy'

Stock Name: GNEALY
Company Name: GLENEALY PLANTATIONS (M) BHD
Research House: OSK

Glenealy Plantations (Malaya) Bhd is bound to see strong production growth at least for the next few years, in view of its young age profile and further expansion plans in Indonesia, says OSK Research.

"We are initiating coverage on Glenealy with a 'buy' rating and a 12 months fair value of RM6.05," the research firm said in note today.

Glenealy has a planted area of 28,537 hectares in Sabah and Sarawak and its trees are largely young, with 51 per cent at or younger than five years, based on June 30, 2010 figures.

The research firm said 60 per cent of the company's trees are below peak production age, so there is ample room for fresh fruit bunch (FFB) production growth moving forward.

Glenealy currently has about 11,000 hectares of plantable area in Kalimantan Timur, of which about 2,000-3,000 hectares will be planted annually.

Together with another 2,000-3,000 hectares annual planting in Sarawak, it will bring the company's planted area expansion to about 4,000-6,000 hectares per annum.

This,OSK said, will fuel planted area growth by 15-22 per cent for this financial year and by 13-18 per cent for the next.

"We estimate Glenealy to register double-digit FFB production growth of between 11-15 per cent in financial year 2012-2013," it added.

OSK said should the company plant at a more aggressive 6,000 hectares annual rate, it expects the financial year 2014-2016 FFB production CAGR to be 10 per cent.

It said production will remain stagnant starting in 2014 if the company chooses not to expand its existing planted area (zero new planting).

Glenealy has recorded steady production growth for the past decade, rising from 207,334 tonnes in 2001 to 316,667 tonnes in 2010, which represents a five per cent CAGR. -- Bernama

PARKSON - Parkson fair value lifted, stock climbs

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

Parkson Holdings Bhd, a Malaysian department store operator, rose the most in almost two weeks after OSK Research Sdn Bhd raised the stock’s fair value to RM7.42 from RM6.31 to reflect its growth prospects.

The stock climbed 1.2 per cent to RM5.74 at 9:35 a.m. local time in Kuala Lumpur trading, set for its steepest increase since May 4. -- Bloomberg

SUPERMX - OSK keeps 'buy' call on Supermax

Stock Name: SUPERMX
Company Name: SUPERMAX CORPORATION BHD
Research House: OSK

OSK Research has maintained its "buy" call on Supermax Corporation although its first quarter financial year 2011 results were below expectations.

The research house believes the earnings of Supermax stand a strong chance to re-rate within a six-12 month horizon.

"Within this period and provided the latex price does not break its recent high of about RM11 per kg and continues the uptrend of late, we think the earnings of Supermax stand a strong chance to re-rate.

"It can then pass on the latex cost increase to its customers in a more accurate and timely manner," it said in a research note today.

The results of Supermax were lower owing to the higher latex price, forex losses and slower-than-expected demand for examination gloves from certain countries. -- Bernama

TOPGLOV - CIMB Research cuts Top Glove's earnings estimates, lowers TP to RM5.57

Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research has reduced its FY11-13 net profit numbers for Top Glove Corp Bhd by 4%- 27%, having overestimated the glove maker's cost pass-through ability and it had been too optimistic about the recovery of glove demand.

'We also cut our FY11-12 capacity assumptions by 3-7% to reflect management's latest expansion plans. The adjustments of our cost and capacity assumptions lead to a fall in our target price from RM5.98 to RM5.57. We continue to value the stock at our target market P/E of 14.5 times,' it said on Monday, May 16.

CIMB Research said despite the lower target price, it reiterated its NEUTRAL rating as Top Glove's share price has fallen 3% since its last update.

The research house said it does not deny that within the sector, Top Glove is most leveraged to lower rubber prices. 'But its 1-year forward P/E of 19.3x is two standard deviations above its 6-month average,' it said.

CIMB Research said since March 2009, Top Glove's share price has rarely traded at such a premium for long and we expect its valuation multiple to revert to the mean in the quarters ahead.

'Also, our revised FY11 forecasts are 31% below consensus. We believe that over the next few weeks, there could be profit downgrades by the market as Top Glove's 3Q reporting period comes to a close at the end of May,' it said.

DIALOG - CIMB Research: Dialog remains Outperform, TP RM3.27

Stock Name: DIALOG
Company Name: DIALOG GROUP BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research keeps DIALOG GROUP BHD [] an Outperform with the potential share price catalysts being an announcement of marginal field development, and new markets including Saudi Arabia.

The research house said on Monday, May 16 Dialog's CONSTRUCTION [] of the RM5bn independent deepwater petroleum terminal in Pengerang, south Johor is set to start in mid-CY11 as scheduled.

'Having received approval from the Department of Environment (DOE) last month, the company inked on Friday a JV that marks the start of land reclamation works. We expect the construction portion to start contributing in 1QFY6/12.

'We maintain our forecasts and SOP-based target price of RM3.27,' it said.

CSCSTEL - OSK Research keeps CSC Steel fair value of RM1.97

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

KUAL LUMPUR: OSK Research said on the back of encouraging numbers reported by CSC Steel for the first quarter, it expects the steel-based company to likely to generate reasonable profit for FY11 despite the sketchy outlook in the 2H.

'Therefore, we retain our estimates for now and keep our fair value of RM1.97 derived from 6x EPS plus net cash per share on FY11 numbers,' it said on Monday, May 16.

'We think CSC still justifies a Trading BUY with its strong balance sheet and generous dividend payout commitment,' it added.

OSK Research said the fact that CSC possesses an experienced and sound management team are other carrots for investors to add this stock to their portfolios, on top of a 13.2% upside based on its last close to its fair value.

KENCANA - OSK Research ups Kencana TP to RM3.17

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

KUALA LUMPUR: OSK Research has upgraded KENCANA PETROLEUM BHD [] to Buy with revised fair value of RM3.17.

The research house said on Monday, May 16, it viewed positively Kencana's plan to acquire Allied Marine & Equipment Sdn Bhd for RM400m from Worldclass Inspiration Sdn Bhd and Allied Asset Holdings Sdn Bhd.

OSK Research said the purchase would be satisfied by the issuance of 149.3m new shares of Kencana at RM2.68 a share.

'This acquisition also comes with a profit guarantee of RM40m. The entire exercise is expected to be completed by 3QCY11.

'We view this acquisition positively as it would help Kencana to expand vertically. Upgrade to Buy with revised fair value of RM3.17,' it said.