RHBInvest Research Highlights 29th August 2011

Stock Name: PETGAS
Company Name: PETRONAS GAS BHD

Research House: RHB

Price Call: BUY

Target Price: 14.47

Stock Name: CIMB
Company Name: CIMB GROUP HOLDINGS BERHAD

Research House: RHB

Price Call: HOLD

Target Price: 7.49

Stock Name: PBBANK
Company Name: PUBLIC BANK BHD

Research House: RHB

Price Call: HOLD

Target Price: 11.89

Stock Name: AFFIN
Company Name: AFFIN HOLDINGS BHD

Research House: RHB

Price Call: SELL

Target Price: 2.77

Stock Name: AMMB
Company Name: AMMB HOLDINGS BHD

Research House: RHB

Price Call: SELL

Target Price: 6.15

29th August 2011

 

Top Story: Banking ' History suggests potential sector derating ahead       Neutral (down from OW)

Sector Update

Maybank: Fair value and call downgraded to RM8.85                                       Market Perform (down from OP)

CIMB: Fair value at RM7.49 (from RM8.80)                                                         Market Perform

Public Bank: Fair value and call downgraded to RM14.10                               Market Perform (down from OP)

HL Bank: Fair value at RM11.89 (from RM12.50)                                               Market Perform

AMMB: Fair value and call downgraded to RM6.15                                            Underperform (down from OP)

AFG: Fair value at RM3.38 (from RM3.60)                                                           Market Perform

Affin: Fair value and call downgraded to RM2.77                                                Underperform (down from MP)

 

Macro View

 

Money Supply: Broad monetary aggregate and loan growth eased in July

Economic Highlights (published 26 Aug 2011)

''       The broader money supply, M3, eased to 11.6% yoy in July, off the 30-month high of +12.4% in Jun but higher than +11.5% in May, indicating that economic activities are cooling but remained resilient.

 

Sector Call

 

Banking: Jul '11 system data ' Loan growth and leading indicators softened            Neutral

Sector update

''       Jul '11 system-wide loan growth eased further to 12.9% yoy, as compared to +13.5% yoy in Jun '11 following lower disbursements during the month (vs. Jun).

 

Oil & Gas: Petronas 1QFY12/11 results               Overweight

Sector Update

Dialog: Fair value at RM3.90                                 Outperform

P Gas:  Fair value at RM14.47                               Outperform

RH Petrogas: Fair value at $1.36                         Outperform

Dayang: Fair value at RM2.33                               Outperform

Petra Perdana:  Fair value at RM1.15                  Outperform

Wah Seong:  Fair value at RM2.66                       Outperform

Petronas Chemicals: Fair value and call downgraded to RM6.37                Market Perform (down from OP)

Kencana: Fair value at RM2.99                             Market Perform

SapuraCrest:  Fair value at RM4.56                     Market Perform

KNM: Fair value at RM0.93                                    Underperform

MMHE: Fair value at RM5.62                                 Underperform

 

Corporate Highlights

 

Carlsberg: Premium segment growing stronger             Outperform

Briefing Note

''       Carlsberg's range of premium and super premium beers, which include Hoegaarden, Corona and Asahi, among others, grew by ~44% yoy in the 1HFY11. We understand that the strong growth resulted in Carlsberg's premium brands gaining approximately 4.9%-pts in market in share in the premium beer segment, which accounts for approximately 20% of the total beer market Malaysia .

 

CI Holdings: Disposal of Permanis by November          Trading Buy

Briefing Note

''       During the analysts' briefing on Friday, CI Holdings' (CIH) management highlighted that they are targeting to complete the disposal of Permanis to Asahi in 2QFY06/11. The deal is currently pending the approval from Bursa for CIH's circular to shareholders, MITI, and others. Management expects to hold the EGM concurrently with the AGM in late Oct, would be the final hurdle before Permanis is sold.

 

Kencana: Expanding its drilling fleet                                 Market Perform

News Update

''       Kencana announced that its subsidiary Kencana Marine Drilling will build two tender assisted drilling rigs (TADRs) at a cost of US$145m (RM435m) each. We are not surprised by this as we mentioned in a previous note that Kencana will resume the expansion of its drilling rig division within the year as it expects many opportunities to emerge for offshore drilling in 2014.

 

Corporate Results

 

PetChem: Down on lower production and methane gas supply            Market Perform (down from OP)

1QFY11 Results / Briefing Note

''       3MFY12/11 net profit of RM737m came below expectations accounting for 20.3% of our (RM3.6bn) and 16.8% of consensus estimates (RM4.4bn). Overall, net earnings were down on a qoq basis due lower utilisation and methane gas supply limitation.

 

Ann Joo: 2QFY12/11 net profit declines by 23% qoq                            Underperform

2QFY11 Results / Briefing Note

''       1HFY12/11 net profit came in within our expectations. 2QFY12/11 net profit declined by 23% mainly due to higher raw material cost amid relatively stable steel prices.

Masterskill skids on CIMB downgrade

KUALA LUMPUR: Masterskill Education Group Bhd (MEGB) shares fell on Monday, Aug 29 to a fresh 52-week low after its disappointing financial results saw CIMB Equities Research downgrading the stock from Outperform to Neutral, reducing its target price and also slashing its earnings per share (EPS) forecast.

At 11.45am, Masterskill lost 20 sen to RM1.33 with 5.48 million shares done.

Its second quarter results fell 48% to RM11.57 million from RM22,430 a year ago while its revenue declined 14.7% to RM65.78 million from RM77.11 million. For the first half, its earnings declined by 30.4% to RM34.16 million from RM49.11 million.

CIMB Reseach said Masterskill's annualised 1H11 core net profit was a letdown, coming in at 43% below its forecast and 40% below consensus because of poor student numbers and a 10.8 percentage points shortfall in EBITDA margin due to surprisingly high operating costs.

'The 44% year-on-year plunge in net student intake was a negative surprise and should be equally weak in 2H. In the medium term, student intake prospects are unexciting and margins will be under pressure,' it said.

CIMB Research also slashed its FY11-FY13 EPS forecasts by 43%-45% and dividends per share (DPS) forecasts by 53%-54%.

The research house also said it had cut the target price from RM3.48 to RM1.71 as it raised its discount to the 14.5 times market P/E from 30% to 40%, which lowered its target CY12 price-to-earnings from 10.2 times to 8.7 times.

'Our rating is downgraded from Outperform to NEUTRAL. The stock's sole attraction is its dividend yield of 5%-7%,' it said

Kulim edges up on solid 2Q results

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

Research House: MIDF

Price Call: HOLD

Target Price: 3.35

KUALA LUMPUR: KULIM (M) BHD [] shares advanced on Monday, Aug 29 after its net profit for 2Q ended June 30, 2011 surged nine-fold to RM146.29 million from RM14.66 million a year earlier, driven by mainly by higher revenue and profits from its PLANTATION [] division.

At 10.50am, Kulim added two sen to RM3.70 with 356,100 shares traded.

Revenue rose 32.4% to RM1.80 billion from RM1.36 billion, with higher contribution from all segments.

For the six months ended June 30, Kulim's net profit surged to RM273.39 million from RM76.55 million in 2010, on the back of a 33.3% jump in revenue to RM3.46 billion from RM2.59 billion.

MIDF Research in note Aug 29 said it had revised upwards its FY11 earnings forecast for Kulim while maintaining its FY12 numbers.

'We are maintaining our Neutral recommendation for Kulim with our target price maintained at RM3.35 using 10x PER based on FY12 EPS.

Petronas Chemicals active, up in early trade

Stock Name: PCHEM
Company Name: PETRONAS CHEMICALS GROUP BHD

Research House: MAYBANK

Price Call: BUY

Target Price: 8.15

KUALA LUMPUR: Petronas Chemicals Group Bhd shares rose in active trade on Monday, Aug 29 on some mild bargain hunting after the heavy selldown last week and despite that its earnings were below analysts' expectations.

At 9.20am, PetGas was up eight sen to RM6.11 with 1.12 million shares traded.

PetChem posted net profit RM737 million on the back revenue RM3.35 billion for the period ended June 30, 2011, due mainly to strong prices seen across most petrochemical products, partially offset by a stronger ringgit versus the US dollar. Earnings per share were nine sen and net assets per share was RM2.54.

Last Friday, Aug 26,'' PetChem said during the quarter, there was methane gas supply limitation for the fertiliser and methanol segment, which affected the production of fertiliser, methanol and ammonia.

Maybank Investment Bank Research said on Monday PetGas' 2Q11 result was negatively impacted by maintenance shutdowns that crimped product volumes substantially. It said the shutdown was a mandatory four-year cycle whereby the process catalyst is changed.

A nationwide natural gas curtailment had also impacted production rates of the fertiliser and MTBE division, it said.

'Management asserts that all the heavy maintenance work is complete for the year, and 2H's utilisation rates should be back to its normal more than 90% levels. Maintain Buy, with an unchanged TP of RM8.15 based on 13.5 times 2012 price-to-earnings ratio (PER),' it said.

Meanwhile, CIMB Equities Research said it was maintaining its Outperform on PetChem but reduced its target price from RM9.70 to RM7.90.

The research house explained it continued to rate PChem an Outperform as it could be catalysed by the recovery of utilisation and margins from 1H11's depressed levels.

CIMB Research maintains Underperform on Hong Leong Bank

Stock Name: HLBANK
Company Name: HONG LEONG BANK BHD

Research House: CIMB

Price Call: SELL

Target Price: 13.80

KUALA LUMPUR: CIMB Research is maintaining its Underperform on Hong Leong Bank as the banking group missed its FY6/11 forecast by 6% and was 8% short of consensus estimates.

The research house said on Monday, Aug 29 this was mainly because of lower-than-expected net interest margin and one-off merger costs.

However, the gross DPS of 24 sen (15 sen final) was within expectations, being on par with last year's.

'We tweak our FY12-13 EPS up by about 1%, which has minimal impact on our target price of RM13.80, based on a 10% premium over DDM value.

'Although we are positive on its prospects after its takeover of EON Bank, the integration exercise poses short-term earnings risks in the form of management distraction and possible attrition of key managers/customers,' it said.

CIMB Research said this could catalyse a de-rating. Other downside triggers that underlie its Underperform recommendation were its above-sector valuations and the 8%-13% EPS dilution from the rights issue. It added that it preferred Maybank.

CIMB Research downgrades Proton to Underperform

Stock Name: PROTON
Company Name: PROTON HOLDINGS BHD

Research House: CIMB

Price Call: SELL

Target Price: 3.25

KUALA LUMPUR: CIMB Equities Research has downgraded PROTON HOLDINGS BHD [] to an Underperform and reduced its target price from RM3.65 to RM3.25.

'Proton's 1QFY3/12 results were a huge disappointment as core net profit accounted for only 3% of our and consensus full-year forecast,' the research house said on Monday, Aug 29.

CIMB Research said Group Lotus was to blame as higher expenses were incurred under its five-year turnaround plan. No dividends were declared for the quarter, as expected.

'We are slashing our FY12-14 earnings by 35%-60% to reflect higher losses from Lotus. We are also widening the discount we tag to Proton's historical P/NTA of 0.5 times from 10% to 20% to reflect the heightened risk that Lotus's turnaround exercise poses to Proton's earnings.

'This pushes down our target price from RM3.65 to RM3.25. We downgrade Proton from Neutral to Underperform as this result could trigger a de-rating. Other catalysts are 1) weaker domestic earnings, and 2) liberalisation of the auto sector,' it said.

The research house said it liked Tan Chong, which it had an Outperform, for auto exposure.

Proton dips on dismal 1Q earnings

Stock Name: PROTON
Company Name: PROTON HOLDINGS BHD

Research House: MAYBANK

Price Call: SELL

Target Price: 2.64

KUALA LUMPUR: PROTON HOLDINGS BHD [] shares declined on Monday, Aug 29 after its net profit fell sharply by 94.6% to RM4.55 million in the first quarter ended June 30, 2011 from RM84.68 million a year ago largely due to the higher expenses incurred by Lotus Group International Bhd.

At 9.10am, Proton fell nine sen to RM2.19.

It said on Friday, Aug 26 that revenue fell 2.9% to RM2.23 billion from RM2.29 billion while earning per share were 0.8 sen compared with 15.4 sen.

Proton said its operating expenses were RM2.29 billion, higher than its revenue of RM2.23 billion in the first quarter. A year ago, its operating expenses were RM2.22 billion.

Maybank IB Research in a note Aug 29 said Proton's 1QFY12 earnings only made up 4% of its ''initial full-year forecast and 2% of consensus, as the Lotus project drained earnings and cash.

'We have cut FY12-13 forecasts by 90% as we reckon reviving Lotus will gravely hurt its earnings and balance sheet over the next few years.

'As such we have downgraded Proton to a Sell and cut our target price to RM2.64 (-22%) as we lower our target P/B to 0.3x, from 0.5x previously,' it said.

CIMB Research downgrades Masterskill to Neutral, slashes EPS

Stock Name: MEGB
Company Name: MASTERSKILL EDUCATION GROUP

Research House: CIMB

Price Call: HOLD

Target Price: 1.71

KUALA LUMPUR: CIMB Equities Research has downgraded Masterskill Education Group Bhd (MEGB) from Outperform to Neutral, reducing its target price and also slashing its earnings per share (EPS) forecast.

It said on Monday, Aug 29 Masterskill's annualised 1H11 core net profit was a letdown, coming in at 43% below its forecast and 40% below consensus because of poor student numbers and a 10.8 percentage points shortfall in EBITDA margin due to surprisingly high operating costs.

'The 44% year-on-year plunge in net student intake was a negative surprise and should be equally weak in 2H. In the medium term, student intake prospects are unexciting and margins will be under pressure,' it said.

CIMB Research also slashed its FY11-FY13 EPS forecasts by 43%-45% and dividends per share (DPS) forecasts by 53%-54%.

The research house also said it had cut the target price from RM3.48 to RM1.71 as it raised its discount to the 14.5 times market P/E from 30% to 40%, which lowered its target CY12 price-to-earnings from 10.2 times to 8.7 times.

'Our rating is downgraded from Outperform to NEUTRAL. The stock's sole attraction is its dividend yield of 5%-7%,' it said.

2QFY11 Results Update

Stock Name: TECNIC
Company Name: TECNIC GROUP BERHAD

Research House: NETRESEARCH

Price Call: BUY

Target Price: 3.80

2QFY11 Results Update

Stock Name: SOP
Company Name: SARAWAK OIL PALMS BHD

Research House: NETRESEARCH

Price Call: BUY

Target Price: 5.20