MEDIA - Media Prima showing you the money

Stock Name: MEDIA
Company Name: MEDIA PRIMA BHD
Research House: ECMLIBRA

Media Prima Bhd
(Nov 18, RM2.24)
Maintain buy at RM2.22 with target price RM2.72: Media Prima (MPR) recorded 3QFY10 core net profit of RM51.3 million (+65% year-on-year, +64% quarter-on-quarter) bringing 9MFY10 core net profit to RM110.5 million (+183% y-o-y) or 72% of our earnings estimate. 9MFY10 revenue of RM1.1 billion (+116% y-o-y) and earnings before interest, tax, depreciation and amortisation (Ebitda) of RM267.3 million (+150% y-o-y) was above expectations at 78% and 79% of our 2010 estimate. 9MFY10 core net profit would have been higher by RM12.4 million if not for an ex-exceptional items tax rate of 32%

Unlike Star's 3QFY10 core net profit, MPR's 3QFY10 core net profit was sequentially driven higher by TV adex which expanded 51% q-o-q. We understand that MPR reduced its discounting rate by three percentage points (ppts) q-o-q to 64% to take advantage of improving consumer and thus, adex sentiment. This also explained Ebitda margins improving by three ppt q-o-q to 25%.

3QFY10 core net profit was higher y-o-y, not only due to adex growth but maiden contributions from NSTP and Kurnia Outdoor. New media losses expanded six fold y-o-y likely due to the launch of TonTon but was more than made up for by TV, radio and outdoor which all recorded y-o-y growth. 9MFY10 core net profit was of course higher y-o-y for the same reasons.

MPR also announced that it is revising its dividend policy from 25% to 50% net dividend payout ratio (DPR) to 25% to 75% net DPR effective this year. Going forward, dividends will be paid twice a year. To this end, it announced a single-tier interim dividend of four sen and another is expected to be announced at year-end. Assuming 75% net DPR, investors can expect another six sen net dividend per share or 3% net dividend yield at year-end.

We leave our earnings estimate unchanged. 4QFY10 will likely be a slightly weaker quarter due to the lack of adex friendly events. The last major adex friendly event was Hari Raya Aidifiltri in September or end 3QFY10. Our RM2.72 target price is based on 18 times one-year forward PER, the historical average. We continue to like MPR for its earnings outperformance and now its potential to pay more dividends. ' ECM Libra Investment Research, Nov 18


This article appeared in The Edge Financial Daily, November 19, 2010.

FABER - It just gets better for Faber Group

Stock Name: FABER
Company Name: FABER GROUP BHD
Research House: OSK

Faber Group Bhd
(Nov 18, RM2.72)
Maintain buy at RM2.75 with target price RM4: For 9MFY10, Faber reported revenue and net profit of RM684.9 million and RM75.9 million respectively, which were largely within our expectations, accounting for around 77% of our net profit forecasts for FY10. Revenue jumped 34.5% year-on-year (y-o-y) while net profit surged more than 89% y-o-y. The strong revenue growth y-o-y was attributed to higher contribution from its integrated facilities management (IFM) business concession and non-concession divisions.

Growth in the concession division was attributed to higher variation orders, higher bed occupancy rates and new facilities at the government hospitals under Faber's concession. Meanwhile, the significant increase in its non-concession division was driven by revenue contribution from the IFM contracts it secured in'' UAE last year. However, due to seasonal factors related to the summer season and Ramadan month, revenue and net profit were lower quarter-on-quarter on lower work billings from its IFM contracts in Abu Dhabi.

While revenue for 9MFY10 was up by 34.5% y-o-y, earnings before interest and tax (Ebit) rose 44.6% y-o-y on wider margins from its non-concession division, particularly from its IFM contracts in Abu Dhabi. Other than the higher revenue and improved margins, a lower effective tax also lent support to net profit, which jumped by more than 89% y-o-y. We gather that the lower effective tax was largely attributed to Faber LLC, which operates in a tax-free UAE.

As we expect Faber to register similar performance in 4QFY10, we have revised upwards our earnings forecast for FY10 and FY11 by 7.9% and 4.7% respectively, after adjusting our margins and effective tax rate assumptions. We maintain our 'buy' recommendation at an unchanged target price of RM4 based on sum-of-parts valuation. Our fair value is premised on the assumption that Faber's concession will be renewed on existing terms. We still think that Faber should get its existing concession renewed in view of its track record and excellent execution of the concession. ' OSK Investment Research, Nov 18


This article appeared in The Edge Financial Daily, November 19, 2010.

TSH - 'Buy' call on TSH Resources maintained

Stock Name: TSH
Company Name: TSH RESOURCES BHD
Research House: MIDF



MIDF Research has maintained its 2010 and 2011 forecasts for TSH Resources Bhd as it believed the company will benefit from higher crude palm oil (CPO) price and the improving production for the current financial year and onwards.

In its research note today, MIDF said TSH's revenue was expected to increase to RM1.01 billion in 2010 and RM1.51 billion in 2011.

MIDF Research said with the positive outlook on the CPO prices and more palm trees growing to the prime maturity age, it has maintained its "buy" call on TSH at target price of RM3.50.

It said the valuation was based on its historical average price earning of 14 times forward earnings.

TSH's third quarter 2010's net profit of RM18.2 million represented only 53.5 per cent (54 per cent of consensus) of its full-year estimates.

Its revenue in the third quarter 2010 actually increased by 5.25 per cent year-on-year to RM214.3 million.

However, this was offset by a 25 per cent jump in operating expenses of RM37.4 million, it said. -- Bernama

KOSSAN - Kossan to focus on higher-end exam gloves

Stock Name: KOSSAN
Company Name: KOSSAN RUBBER INDUSTRIES BHD
Research House: OSK



Kossan Rubber Industries Bhd will continue to focus on higher-end examination gloves, said OSK Research.

In its research note today, OSK said Kossan, in comparison with some of its peers, had gotten the head start by having the intention and putting the efforts to focus on the higher-end examination gloves such as the powder-free nitrile and surgical gloves.

"We understand the company will continue with efforts to upgrade its Chemax glove launched a few years ago, which yields higher product margin as well as look to producing surgical gloves starting from next year to further strengthen its presence in the higher-end examination glove market," it said.

OSK said Kossan has delivered a good set of results for the third quarter ended Sept 30, 2010.

"Its net profit was only down by 4.8 per cent quarter-on-quarter unlike some of its peers where their net profits were down between 17 per cent and 30 per cent during the corresponding period following the high latex prices and unfavorable exchange rate," it said.

For the third quarter ended Sept 30, 2010, Kossan's pre-tax increased to RM38 million from RM21 million in same quarter of 2009.

Revenue increased to RM276 million from RM210 million previously.
OSK said it would maintain its "buy" call on Kossan with the target price unchanged at RM5.25. -- Bernama

KOSSAN - MIDF raises Kossan's EPS estimates

Stock Name: KOSSAN
Company Name: KOSSAN RUBBER INDUSTRIES BHD
Research House: MIDF



MIDF Research has revised upwards Kossan Rubber Industries Bhd financial year 2010 earnings per share estimates by 9.4 per cent due to better-than-expected glove and technical rubber products sales.

Kossan's third quarter financial year 2010 net profit grew 21 per cent year-on-year to RM28.6 million on a comparable basis excluding forex losses incurred in the third quarter of last year.

Its third quarter revenue this year grew by 31.2 per cent year-on-year to RM275.6 million, underpinned by favourable performance of the glove manufacturing and technical rubber products divisions.

Actual quantity of gloves sold in the third quarter of this year was 2.30 billion pieces compared with 2.28 billion in the second quarter, totalling 6.9 billion pieces in the cumulative nine months, said the research house today.

Gloves utilisation rate has hit an all-time high of 92 per cent. -- Bernama

SUNREIT - OSK Research Neutral on Sunway REIT, TP 98c

Stock Name: SUNREIT
Company Name: SUNWAY REAL ESTATE INVT TRUST
Research House: OSK

KUALA LUMPUR: OSK Research has initiated coverage of Sunway Real Estate Investment Trust (Sunway REIT), which is the largest Malaysian REIT (M-REIT) with an asset size of RM3.7bn and a free float of about RM1.6bn.

It said on Friday, Nov 19 that it has accorded a Neutral call on Sunway REIT at 98 sen based on 1.0 times P/NAV with a Neutral call.

OSK Research said Sunway REIT provided investors with exposure to the retail, hospitality and office sub-sectors, Sunway REIT is a defensive REIT that offers unit holders a longer-term growth catalyst.

'Given its low dividend yield of 6.7% (vs the sector's 8.0%) and the fact that it will be trading at 1.0x P/NAV, Sunway REIT may likely to appeal to only certain classes of investors, especially those with a defensive investment strategy,' it said.

KNM - OSK Research upgrades KNM to Trading Buy

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

KUALA LUMPUR: OSK Research has upgraded KNM GROUP BHD [] to a Trading Buy with a Target Price of 56 sen after securing a US$216 million (RM680 million) bid to develop gas condensate fields in Uzbekistan from Lukoil Uzbekistan Operating Company.

The research house said on Friday, Nov 19 KNM's current share price has an upside of about 29% to its target price of 56 sen which it derived based on a PER of 9x FY11 earnings.

'We are upgrading our call to Trading Buy from Neutral previously,' it said. 'We believe its share price would react positively to this big one-off contract in the short term.'

OSK Research said for KNM's share price sustainability in the longer term, investors would need assurance on the

continuous contract flows which it still doubted as the global O&G industry had not fully reached its recovery stage in the past 12 months although crude oil price had stabilised between US$70 to US$80 a barrel over the period.

It said as more countries raise interest rates, this may suppress the global economic growth, which then result in lower demand for energy (O&G) and this again may delay the oil majors and national oil companies from spending further capex.

'Do note that KNM is a global O&G process equipment company and hence its business is dependent on the health of the global economy rather than Malaysia alone. Therefore, we have a Trading Buy call on the stock rather than a Buy,' it said.

PROTON - Proton downgraded to 'hold' at UOB

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



Proton Holdings Bhd, a state-controlled carmaker, was downgraded at UOB Kay Hian (Malaysia) Holdings Sdn Bhd on concerns over future research and development grants and possible earnings dilution from becoming a potential Formula One title sponsor.

The stock was cut to "hold" from "buy" and its share price estimate reduced to RM5.20 from RM5.60, UOB said in a report today. -- Bloomberg

AXIATA - Stable outlook for Axiata

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

Axiata Group Bhd
(Nov 16, RM4.44)
Maintain outperform at RM4.46, fair value RM5.52: We think Celcom may offer iPhones in the future, judging by the change in management's tone. After making good progress in the big-screen business, management appears to be turning its attention to the small-screen.

The iPhone commands strong visibility and brand affinity, and should significantly enhance its smartphone portfolio. Apart from that, Celcom is adopting a wait-and-see approach on YTL Communications' impending entry into the market.

Looking ahead, management believes competition in Indonesia will remain relatively stable, with the major mobile operators focused on maximising revenue from their subscriber base.'' Earnings before interest, taxation, depreciation and amortisation (Ebitda) margins should remain stable at 50% as mobile penetration is now at about 80%, giving operators little incentive to engage in painful price wars to win over subscribers.

Further growth is expected to come from expanding its prepaid subscriber base, as well as boosting small-screen broadband usage.

As for India, the outlook is still challenging, despite the worst of the price war being over.

Earnings growth has been lacking, as margins have been trending marginally downward due to higher costs and losses from new service areas. The introduction of mobile number portability this month will only increase the intensity of the competition.

In Sri Lanka, Dialog's recent 3QFY2010 results help reaffirm its return to profitability on the back of sequential revenue growth and narrowing losses in the broadband and TV businesses. The outlook looks quite positive, thanks to the floor pricing regime introduced on July 15 and should benefit Dialog the most as the market leader with 57% revenue market share.

Management is upbeat on Robi in Bangladesh, given that mobile penetration is low at 40% in a country with a population of 160 million. Hence, management is keen on generating rapid subscriber growth but earnings and margins may continue to fluctuate in FY2011 due to the SIM tax subsidy. We maintain our earnings forecasts but risks include: (i) weaker than expected performance by Celcom as well as from regional cellcos due to competition and macroeconomic factors such as inflation and so on; and (ii) over-priced acquisitions.

We maintian our sum-of-parts derived fair value at RM5.52 and 'outperform' recommendation on the stock. We continue to like Axiata for its strong growth prospects from regional exposure and cheaper valuations against domestic peers. ' RHB Research, Nov 16


This article appeared in The Edge Financial Daily, November 18, 2010.

YTLPOWR - YTL Power subsidiary ties up with Primeworks, RTM for WiMAX content

Stock Name: YTLPOWR
Company Name: YTL POWER INTERNATIONAL BHD
Research House: AMMB

YTL Power International Bhd
(Nov 16, RM2.51)
Fair value under review, RM2.53: YTL Power International Bhd's (YTL Power) 60%-owned YTL Communications Sdn Bhd signed a memorandum of understanding on Monday with RTM and Media Prima Group's Primeworks Studio to provide internet television content for its 4G WiMAX services.

While the 4G WiMAX service is expected to be launched this Friday, the content for YTL Communications' Internet television services are due to be launched only at end-2011.

Recall that the group plans to invest up to RM2 billion to deploy hybrid television services in Malaysia and the Asia-Pacific region to spur interest in its WiMAX wireless broadband services. This will combine WiMax wireless broadband, under the Yes brand, with the terrestrial digital broadcast television system platform for the new hybrid TV service. The group claims to be able to combine traditional TV, on-demand movies and Internet content for delivery to all screens including a mobile hand-held device, a personal computer or a TV set.

Newspapers cited Tan Sri Francis Yeoh, managing director of YTL Power, as saying that the agreements would effectively make Malaysian content available to the region and 'propel Malaysia towards becoming a regional, digital broadcast hub'.

He also indicated the possibility of undertaking joint bidding for local and international content as well as joint productions for regional broadcast.

YTL Power's shares have surged recently on news that the pre-launch response to its WiMAX service has been above management's internal targets. But note that this is not confirmed registration or fee-paying subscribers as the current internet bookings allow potential customers to choose their own numbers.

We have not assigned any value for the WiMAX investment to our sum-of-parts valuation of RM2.15 per share. Assuming a one time book value, our sum-of-parts will rise to RM2.33 per share.

YTL Power's fair value remains under review pending greater clarity on the pricing structure, technical capabilities and customer response to the WiMAX service. The stock currently trades at a fully diluted CY11F PER of 18 times ' above its three-year diluted PER band of 10 to 16 times.

It is still offering a decent dividend yield of 5%, which we understand is unlikely to be adversely affected by the RM2.5 billion WiMAX capital expenditure programme. ' AmResearch, Nov 16


This article appeared in The Edge Financial Daily, November 18, 2010.