KLK - KL Kepong buys land at reasonable price

Stock Name: KLK
Company Name: KUALA LUMPUR KEPONG BHD
Research House: ECMLIBRA



The acquisition of 7,177 hectares will add to the 133,114-hectare oil palm landbank of Kuala Lumpur Kepong Bhd (KLK) in Indonesia, according to ECM Libra Investment Research.

KLK announced yesterday its subsidiary KL-Kepong Plantation Holdings Sdn Bhd was buying 95 per cent of PT Bumi Makmur Sejahtera Jaya (PTBMS) from Tjong Hasan Agus Salim and Tjhang Ardy Fadrinata.

PTBMS holds two certificates of Izin Lokasi for land measuring 2,336.62 hectares in Desa Mentawak and Desa Air Kelik, Kecamatan Kepala Kampit, Belitung Timur, and another 4,840 hectares in Desa Lilangan, Desa Limbongan, Desa Jangkar Asam, and Desa Gantung, Kecamatan Gantung, Belitung Timur.

"In terms of purchase price for the Izin Lokasi (location permit) land, the purchase price comes up to roughly RM12,300 per hectare," ECM Libra Investment said in an equity note today.

"Generally, RM12,000 per hectare for green-field land is a reasonable price to pay, whether in Malaysia or in Indonesia," it said.

ECM Libra Investment said that KLK has a planting target of 15,000 hectares per annum.

"With its current unplanted landbank in Indonesia (including the acquisition) and assuming no new acquisitions, the group will take 4.2 more years to complete planting. Major maturities in Indonesia will kick in two to three years' time," it said.

ECM Libra Investment said it continued to have a "buy" on KLK with a target price of RM21.70. -- Bernama

LIONIND - OSK Research ups TP for Lion Industries Corp to RM2.32

Stock Name: LIONIND
Company Name: LION INDUSTRIES CORPORATION
Research House: OSK

OSK Research has maintained its trading buy call on Lion Industries Corp at RM1.96 and raised its target price for the stock to RM2.32 (from RM2.18) after the company's 73%-owned subsidiary Lion Forest Industries (LFI) announced that its 84.2%-owned Silverstone Corporation (SCB) has disposed of 100% equity interest in Silverstone Bhd for a cash consideration of RM462 million to Toyo Tire & Rubber Co Ltd.

The research house said the net disposal gain of RM140 million to LFI, and the RM102 million that would accrue to Lion Industries' P&L, should be classified as exceptional.

"Although a potential earnings dilution prompts us to slash our estimates by 6.4% for FY6/11 and 12.4% for FY6/12, we are hopeful of the negative implications being compensated by a potential special cash payout of as much as RM233.6 million to Lion Industries, and taking into account the 14 sen enhancement to the company's NTA.

"We are also tweaking our PER multiple to 6 times from 5 times but retain our NTA/share parameter at 0.6 times, after which our 12-month target price is revised upwards to RM2.32. Trading Buy," it said in a note on Friday, Oct 22.

AXIATA - Axiata may raise dividend payout next year

Stock Name: AXIATA
Company Name: AXIATA GROUP BERHAD
Research House: CIMB



Axiata Group Bhd, owner of Malaysia's second-biggest mobile-phone operator, may raise its dividend payout next year, according to CIMB Investment Bank Bhd after meeting its management.

"There is room to increase its payout from 30 per cent and still maintain a healthy balance sheet," Kelvin Goh, an analyst at CIMB said in a report today. Axiata's current payout is "conservative" given its strong free cashflow to equity of about RM4 billion per annum, he said.

Goh raised his share-price forecast to RM5.90 from RM5.30 and kept his "outperform" rating on the stock. -- Bloomberg

KLK - Kuala Lumpur Kepong a 'buy': Citigroup

Stock Name: KLK
Company Name: KUALA LUMPUR KEPONG BHD
Research House: CITI GROUP



Kuala Lumpur Kepong Bhd had its stock rating raised to "buy" from "hold" by Penny Yaw at Citigroup, who cited a higher palm oil price forecast and better prospects for manufacturing and retail.

The brokerage increased its share-price estimate by 20 per cent to RM21.50. -- Bloomberg

GENM - Genting Malaysia taking a breather

Stock Name: GENM
Company Name: GENTING MALAYSIA BERHAD
Research House: ECMLIBRA

Genting Malaysia Bhd
(Oct 20, RM3.51)
Revise to hold at RM3.56 with higher target price of RM3.52 (from RM3.45): Since we upgraded Genting Malaysia from 'hold' to 'buy' in our 2QFY10 results note dated Aug 27, it has appreciated by 19% with 2.7 sen net dividend per share (1% net dividend yield). This was largely attributable to its success in securing the Aqueduct project, resilient operations at Resorts World Genting and the possibility of rewarding its shareholders with its 1.4 billion shares (18% shareholding) in Genting Hong Kong.

We understand that Genting Malaysia's 3QFY10 results will still be relatively flat year-on-year (y-o-y). Recall that its 6MFY10 revenue and earnings before interest, tax, depreciation and amortisation would have been flat y-o-y had they experienced the normal luck factor. This is impressive given the intense competition from the Singaporean Integrated Resorts. Genting Malaysia has still managed to improve yield management and marketing efforts on non-Johor and Singapore patrons.

Daily win per machine at Empire City at Yonkers Raceway has recently hit as high as US$322 (RM1,006.76) on the gradually recovering American economy. Given Aqueduct's superior location within the New York City limits, its machines may just attain the US$400 daily win per machine that management guided (previous FY11 assumption: US$300). Aqueduct is due to open with 1,600 machines in April 2011.

We understand that rumours of Genting Malaysia's 1.4 billion shares in Genting Hong Kong being distributed to the former's shareholders in specie may not be entirely unfounded. This is to streamline Genting Malaysia's investments and soothe investors who are still jaded with the RM2.1 billion Genting UK acquisition. That said, we believe Genting Malaysia's last price already reflects the full value of its holdings in Genting Hong Kong.

Table games at Aqueduct require at least three years to materialise as changes to the state legislature need to be passed. Genting Malaysia is bidding for the Newham casino but regulators may frown on its already leading position in the UK (and it is not expected to contribute materially to earnings). Our revised ex-cash discounted cash flow-based target price of RM3.52 (RM3.45 previously) warrants our revised call on Genting Malaysia 'hold'. Even including cash, our target price rises to only RM4, or merely 12% upside potential. ' ECM Libra Investment Research, Oct 20


This article appeared in The Edge Financial Daily, October 21, 2010.

KFC - KFCH, from the hatchery to the table

Stock Name: KFC
Company Name: KFC HOLDINGS (M) BHD
Research House: OTHER

KFC Holdings (Malaysia) Bhd
(Oct 20, RM3.20)
Initiate coverage at RM3.24 with neutral call and target price of RM3.43: We are initiating coverage on KFC Holdings (Malaysia) Bhd (KFC) with a target price (TP) of RM3.43 and a 'neutral' call. We derive our TP by pegging a 20% premium to KFC's three-year average PER of 13 times to FY11 EPS of 22 sen.

Total return of 7.9% (including 2% dividend yield) is commendable thanks to: (i) KFC's strong expansion drive in terms of the number of restaurants, locally and regionally; (ii) new market penetration in India, which is expected to boost KFC's revenue growth; (iii) encouraging consumer sentiment outlook underpinned by higher disposable income thanks to tame inflation; and (iv) strong economic outlook for 2010 and 2011 (BIMB Securities 2010 GDP forecast: 6.7%; 2011: 5.7%).

KFC has a fully integrated business model with operations and market reach spanning the entire country. Its integrated business model includes: (i) poultry processing plant, (ii) feed mill, and (iii) chicken farm. KFC announced last March that it is going to invest about RM10 million in a farm in Sedenak, Johor. It will be used to supply chicken to its third processing plant located in Bandar Tenggara, Johor. In addition, its Bandar Tenggara processing plant will receive chicken supply from its 10 contract farmers in Johor.

KFC has received approval to open restaurants from YUM! Brands in Pune and Mumbai (both in India). Both cities are located in the third largest state in India with a combined population of'' 100 million. Note that KFC is currently running 79 restaurants in India, which include 37 restaurants by YUM! Brands (directly) and two by KFC Holdings. KFC is expecting to open eight new restaurants this year while looking to acquire two existing restaurants from other KFC franchisees. ' BIMB Securities Research, Oct 20


This article appeared in The Edge Financial Daily, October 21, 2010.

BURSA - Bursa still weak

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

Bursa Malaysia Bhd
(Oct 20, RM8.20)
Maintain neutral at RM8.35 with higher target price of RM8.64: Bursa eked out a mere 2.5% year-on-year (y-o-y) rise in September's net profit of RM83.3 million, which works out to just 60% of our full-year forecast and 65% of consensus. The main culprit was September's velocity which came in at only 31% against our projection of 35% for FY10. The absence of a dividend for 3Q was well expected and left the year-to-date net dividend per share at 9.5 sen. In view of these results, we cut our FY10 EPS forecast by 15.4% as we factor in a velocity of 31% for the full year. However, our rollover of the target price to CY11 pushes it from RM7.80 to RM8.64, still pegged to a PER of 27 times, or a 10% discount to its three-year average. We think a 10% discount is reasonable as the poor velocity in September reflects the weak underlying trend in the near term. Although we anticipate a pickup in velocity to 35% in 2011, it will still be 12.5% lower than the 40% registered in the past three years. On this score, the stock remains a 'neutral' in our book.

Equity trading revenue climbed 11% higher y-o-y to RM117.1 million in September, thanks to a 17% y-o-y rise in average daily trading volume to RM1.42 billion. The trading value was predominantly lifted by a 26% y-o-y expansion of market capitalisation to RM1.15 trillion following a rise in the KLCI from 1,202.1 a year ago to 1,463.5 as at end-September. Market velocity, however, dwindled from 36% a year ago to only 31% in September.

Conversely, derivative revenue fell 11% y-o-y to RM27.1 million in September as daily average contracts dropped 8% y-o-y to 23,831. The average daily contracts declined for both major derivative products ' by 6% y-o-y for FCPO to 15,351 and 10% y-o-y for FKLI (index futures) to 8,029.

We are lowering our FY10 EPS forecast by 15.4% for a slower velocity of 31% instead of 35%. Our earnings projections for FY11/12 are intact. Despite the earnings downgrade, our target price rises from RM7.80 to RM8.64 as we roll it a year forward to CY11. Our target price is based on an unchanged PER of 27 times, which is a 10% discount to the stock's three-year historical average PER. We apply the discount in view of Bursa's earnings underperformance for three consecutive quarters and its weak velocity despite the sustained performance of the KLCI. ' CIMB Research, Oct 20


This article appeared in The Edge Financial Daily, October 21, 2010.

PUNCAK - ECM keeps 'sell' call on Puncak Niaga

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



ECM Libra Investment Research has maintained the "sell" call on Puncak Niaga Holdings Bhd, amid cash flow problems due to a non-water tariff revision of 37 per cent, and a hazy outlook to a resolution of the protracted Selangor water restructuring exercise.

ECM Libra Investment said it made no changes to its estimates pending the outcome of the tender by Puncak Niaga for a water supply and treatment project in India.

Puncak Niaga yesterday entered into two separate joint venture agreements with P&C Constructions (P) Ltd in India to jointly bid for the water supply and flourosis mitigation project, called the Tamilnadu Water Supply and Drainage Board in India.

Puncak Niaga together with P&C would form a joint venture (JV) called PNHB-P&C Joint Venture (PPJV) to bid for Packages III and V of the Hogenakkal project for the Dharmapuri and Krishnagiri districts.

Puncak Niaga will lead the joint venture with a 60 per cent stake, with the remaining 40 per cent held by P&C.

The Hogenakkal Water Supply project is valued at RM1.4 billion, comprising five packages to be undertaken in two phases, with completion expected by December 2012.

The project also comes with a five-year operation and maintenance period.

"Based on our preliminary estimates, Package III and Package V, which are for the laying of pipelines for a total of 6,117km, could be worth approximately RM756 million.

"The five year operation and maintenance is estimated to be worth about RM124.9 million," ECM Libra Investment said.

It said the project is in line with Puncak Niaga's efforts to expand its presence in India.

Puncak Niaga had entered into joint venture agreement with P&C in August 2010 to jointly participate in an international competitive tender for a pipeline project in Mangalore, India. -- Bernama

WCT - More to come for WCT, says MIDF

Stock Name: WCT
Company Name: WCT BHD
Research House: MIDF

MIDF Research has maintained its buy recommendation on WCT BHD [] at RM3.11 and raised its target price for the stock to RM4.24, pegged at sectoral'' average of 14.5 times FY11 earnings versus previous valuation of RM3.87.

The research house said WCT's order book ballooned to RM4.4 billion and was still growing after the company landed a RM1.36 billion project in Doha and another RM127 million hospital project in Tuaran, Sabah.

MIDF Research said it was revising its forecast for WCT to take into account the income from the CONSTRUCTION [] of the new contracts, adding it was looking at a possibly higher replenishment target for 2011, as it expects more new domestic-based jobs to awarded in the near future.

"As outlined in the 2011 Budget and the ETP, potential awards include packaged for (i) Klang Valley LRT extension, (ii) Langat 2 water treatment plant, (iii) various highway projects.

"We are of the opinion that more news flow on potential awards could intensify in the next 12 months," it said in a note on Thursday, Oct 21.

GENTING - UBS raises Genting price estimate

Stock Name: GENTING
Company Name: GENTING BHD
Research House: UBS



Genting Bhd, Asia's third-biggest listed casino operator, climbed to a record in Kuala Lumpur trading after UBS AG raised its share-price estimate for the stock to reflect higher market revenue forecasts in Singapore.

The stock rose 1.3 per cent to RM10.66 at 9.16 am local time. Nicole Goh, an analyst at UBS, raised her share estimate for the stock to RM14.35 from RM12.90, according to a report today. She kept her "buy" rating.

Its Genting Malaysia Bhd affiliate added 0.9 per cent to RM3.54 ringgit after saying it will jointly bid for a London casino license and develop a leisure project with Apollo Resorts & Leisure Ltd. - Bloomberg