Maybank IB Views

Tuesday, May 31, 2011

ECONOMICS
Malaysia: Subsidy Rationalisation
"Gas-powered: rationalisation...

The Government announced 17.3%-28% increase in gas prices and an average 7.12% hike in electricity tariffs effective 1 June. Together with the earlier announcement on 15 May of the removal of super-subsidy on diesel to nine categories of commercial vehicles that is also effective 1 June which will raise the logistic costs, we revised upwards our inflation rate forecasts to 3.4% for 2011 (3% previously) and 3.3% for 2012 (2.9% previously). Maintained our view that the Overnight Policy Rate (OPR) will be raised further by 25bps each in Jul and Sep after the 25bps increase to 3% on 5 May.

MARKET STRATEGY
Gas & electricity tariff hikes
Finally, after much anticipation

Long awaited, but manageable. The simultaneous rise in gas price and electricity tariff is long awaited, but the impact is manageable on industries and end-consumers. Unlike July 2008 when natural gas price jumped 111-135% and electricity tariff rose 24%, the increase this time round is more "subdued". Also, a gradual RM3/mmbtu rise in gas price every 6 months allows for planning. Tenaga will gain with a positive on earnings from higher tariffs which more than offset a higher gas bill. Gloves, steel and cement will see a mildly negative impact. The net effect is a 0.82-ppt rise in our 2011 market earnings growth forecast.

COMPANY UPDATE
Tenaga Nasional RM6.52: Hold
Dark clouds have subsided Shariah-compliant

Finally. The energy minister, Dato' Sri Peter Lim through the blessing of the Cabinet announced the much awaited gas and electricity tariff hike. In a nutshell, Tenaga's base tariff will increase by 2% which equals roughly RM600m of additional revenue per annum and there will be a fuel cost pass-through mechanism, which is reviewed every six months beginning Dec 2011. With the overhang noose off, Tenaga is now an investable company and we have upgraded it to a Hold from a Sell, with a TP of RM7.05/share based on 13x FY12 PER.

RESULTS REVIEW
Lingkaran Trans Kota Holdings RM3.75: Buy
Cash flows intact Shariah-compliant

Below expectations. RM98m FY11 net profit made up 92% of our RM106m estimate on higher losses at associate, SPRINT. This loss is accounting in nature, affecting only the P&L but not cash flows. We tweak our FY12-13 earnings forecasts, and raise DCF-based target price slightly (+5sen) as we roll forward our valuations. Maintain Buy.
Click here for full report »
Media Chinese International Limited RM1.30: Hold
Time for a tea break Shariah-compliant

Tactical downgrade to Hold. MCIL recorded FY11 results which were within expectations. Dividends surprised with 60% net DPR or 10 ppt above expectations. We maintain our earnings estimates but raise our net DPR assumption to 60%, yielding decent net dividend yield of 4.7% for FY12. The higher dividends for FY11 will shore up MCIL's share price after tomorrow's hike in electricity prices. With only 8% upside potential to our new target price, MCIL is now a Hold.

CB Industrial Product Holding RM4.30: Buy
Beats consensus Shariah-compliant

Maintain Buy. CBIP's RM22m 1Q11 net profit (+81% YoY; -1% QoQ) was within our expectations but beat consensus. We maintain our earnings forecasts and TP of RM4.75 based on 7x 2011 EPS. Potential upside surprises could come from: 1) a better-than-expected CPO ASP of RM3,100/t, 2) a higher-than-expected new order book of RM180m, and 3) the disposal of non-performing Sarawak plantations, which could result in a windfall gain.
Click here for full report »
Technicals
The FBM KLCI fell 5.85 points to close at 1,542.84 on Friday. Its resistance areas of 1,542 and 1,555 will cap market gains, whilst the obvious support areas are located at 1,524 and 1,540. Market breadth was again negative, with a poor gainer-to-loser ratio of 242 to 518 while 272 counters were unchanged.

Daily trading idea is Short-Term Buy call on RSAWIT.

Other Local News
Telecommunication: To pass service tax to prepaid users. Prepaid mobile phone users may have to pay more for airtime from July as telecommunication companies (telcos) work out a plan to pass down to consumers the 6% service tax imposed by the government. Most telcos are currently absorbing the tax, which had been increased from 5% to 6% from 1 Jan 2011 due to competitive reasons. (Source: The Sun)

Boustead Heavy Industries Corp: In a propellant plant deal with Prokhas. BHIC will set up a RM58m plant in Bentong to make propellants for the country's armed forces sector as well as the Asean market in future. BHIC's subsidiary Boustead Defence Technologies Sdn Bhd wil own 49% of the joint venture while Pyrotechnical Ordnance Malaysia Bhd, a Finance Minister Incorporated company, will own the 51%. (Source: Business Times)

Broadband: Measat In broadband deal with Thaicom. Measat Global Berhad has signed a 10-year deal with Thailand's sole private satellite operator, Thiacom Public Company Ltd, to provide bandwidth capacity and related broadband services in Malaysia, to be called Measat 5. This project will allow Measat to expand its support to local telecommunication companies in providing connectivity to all areas of Malaysia. (Source: The Star)

IPO: Old Town to be listed with a market cap of RM413m. Coffee shop chain operator Old Town Bhd, which has seen substantial growth in recent years, is seeking to list on Bursa Malaysia's Main Market on July 11 at an offer price of RM1.25 per share. (Source: The Edge Financial Daily)

Read more...

RHBInvest Research

Top Story: Penang Property Update

  • Sector Update
  • Property sector is the key beneficiary of all the infra developments and strong capital investment flow in Penang.
  • IJM Land and E&O, which are the prime beneficiaries of the upcoming major infra developments and strong capital investment flows into the Penang state.
  • Our estimated fair value for E&O is RM1.91,we maintain our Overweight stance on the sector. Our top picks are IJM Land and Mah Sing.

Sector Call

Banking:

Sector Update

1QCY11 report card
Low loan impairment allowances provides relief to slow start
No change to our Overweight stance on the sector.

Media:

Sector Update 1Q11
  1. Apr Adex For TV and Print Grew 17.8% YoY
  2. Media Prima remains our preferred pick given its position as the largest integrated media player in Malaysia. In addition, we believe there is still scope for further synergies to be unlocked across its different platforms.
  3. No change to our Overweight call on the sector.

Building Material:

Sector Update
  • Impact of electricity and natural gas tariff review
  • Maintain Underweight for the sector.

Corporate Highlights

TNB:

Briefing Note
  • TNB’s outlook received a boost after receiving an average tariff hike of 7.12% effective 1 Jun and the formalisation of a fuel cost pass-through (FCPT) formula.
  • Fair value raised to RM8.00 (previously RM5.60). Upgrade to Outperform from Underperform.



CBIP:

Results / Visit Note
  • Benefitting from plantation arm
  • Raise target price to RM4.90 (from RM4.65), after updating for CBIP’s latest net debt figure.
  • No change to our Market Perform recommendation on CBIP.

MCIL:

Results Note
  • FY11 Ends On A High Note
  • Fair value is raised to RM1.43 (from RM1.38), which is based on unchanged target CY11 PER of 13x.
  • We reiterate our Outperform call on the stock.

Petronas Gas:

News Update
  • Minimal Impact From Government’s Gas Price Hike
  • We maintain our RM13.95/share fair value and Outperform call on the stock.

Petronas Chemicals:

News Update
  • Minimal Impact From Government’s Gas Price Hike
  • Fair value for the stock decreases slightly to RM8.92/share (from RM9.02/share previously). We maintain our Outperform call on the stock.

Read more...

Maybank IB Views

Monday, May 30, 2011

IJM Corporation RM6.20: Hold
Kitchen sinking, losses in 4Q Shariah-compliant

Maintain Hold. 4QFY11 fell into a loss due to provisions and project losses at the construction business. Totalling RM124m, the amount was much larger than the anticipated RM70m. Nonetheless, we retain our FY12-13 earnings forecasts, expecting these to be one-off. Share price has stay flat (-0.1%) since we downgraded the stock on 24 Feb. It could remain there for a while as the market digests the poor 4Q results, while upcoming RM5b potential contract flows from the WCE and NPE extension have been partially priced in. No change to our RM6.50 RNAV-based TP for now, which implies 20x CY2012 PER.

Alam Maritim Resources RM1.05: Sell
Still a struggle Shariah-compliant

Results were below expectations. Alam suffered its third consecutive quarterly loss, with a RM7m net loss in 1Q11. We cut 2011 forecast by 18% but place our recommendation and RM0.79 (1x book) target price under review pending an update with management. We think the worst is over for the domestic vessel charter industry, which would trigger a re-rating for the vessel operators.

Amanah Raya REIT RM0.95: Buy
On track; new assets boosted earnings

Maintain Buy. AAREIT's RM10.9m 1Q11 net profit (+29% YoY) came in within expectations. 1Q DPU of 1.8 sen (95% payout) was also in line. We like AAREIT for its good 8.7% 2012 yield (compared to 8.1% M-REIT sector). In our view, the yield is sustainable as the majority of AAREIT's leases are long-term with step-up features. We maintain our earnings forecasts and RM1.12 DCF-based TP.

Technicals
The FBM KLCI gained 7.75 points to close at 1,548.69 on Friday. Its resistance areas of 1,550 and 1,565 will cap market gains, whilst the obvious support areas are located at 1,527 and 1,548. We expect the FBM KLCI to remain range bound today.

Weekly trading idea is a Short-Term Buy on ESSO.

Other Local News
MAHB: Strong interest to jointly develop 50 acres near KLIA2. Twenty companies have collected request for proposal (RFP) documents to partner Malaysia Airports Holdings Bhd (MAHB) to develop 50 acres near KLIA2 in Sepang. The RFP is for the privatisation of the 50-acre commercial development that would comprise premium factory outlets centre, a food and beverage centre and an auto city. (Source: The Star)

Bina Puri: Bids for RM400m Negri job. Bina Puri Holdings Bhd has bid for a contract worth over RM400m for associated civil works to extend a 1,000MW power plant in Negri Sembilan with Japan's Mitsui & Co. (Source: Business Times)

Property: UOA's final retail price fixed at RM2.52. UOA Development Bhd’s institutional price has been fixed at RM2.60 per share while the retail price is RM2.52 per share, which was below the indicative retail price of RM2.90. (Source: The Edge Financial Weekly)

Stockbroking: More licences for foreign stockbroker. Securities Commission Malaysia is offering two new licences to foreign stockbroking houses, specifically for the retail side of the business. Singapore based Phillip Securities Pte Ltd is one of the investment firms eyeing the licence. (Source: The Edge Financial Weekly)

Read more...

RHBInvest Research

Top Story: Benchmarking –

Market Update (published 27 May 2011)

  • The review of the FBM indices will be based on 31 May share prices.
  • YTD, the FBM KLCI has risen by just 1.4%. Looking ahead, notwithstanding concerns about the strength of US and EU economic growth, we believe the market will be driven by M&A, corporate restructuring and to some extent the follow-through from earlier-announced ETP projects. This is further supported by decent market earnings growth of 11.3% and 12.0% for 2011-2012.

Corporate Highlights

WCT :

Briefing Note
  • Still Confident About RM2bn New Jobs In FY12/11
  • Maintain Underperform. Fair value is RM2.37.

Petronas Chemicals :

Briefing Note
  • Product Prices, Fertilisers And Methanol Division Capacity Utilisation Keep Earning Intact
  • We maintain our Outperform call and RM9.02/share fair value.

MMHE :

News Update
Signing MOU For Sime Darby’s Pasir Gudang Yard Acquisition

Sime Darby :
3QFY11 Results/Briefing Note
  • In 3QFY11, Sime recorded a net EI loss of RM7.9, comprising forex gain RM0.5m, the RM98.5m writeback for the Maersk Oil project, a RM73.9m impairment on biodiesel and bioganic assets and a RM33m impairment loss on a property project, bringing total EI for 9MFY11 to a loss of RM11m.

Fair value has been reduced slightly to RM10.60 (from RM10.70). Now that the sale of the O&G division has been announced, we believe Sime would need to gain further ground by being more focused on its other divisions to improve operational efficiencies, to improve its market value and standings in the different industries it operates in.

We maintain our Outperform recommendation on the stock.



IJM Land :

Results / briefing note
The value has yet to be fully appreciated
We maintain our Outperform call with an unchanged FV of RM3.28, IJMLD continues to be our top pick for the sector.



IJM:
FY03/11 Performance Weighed Down By Construction Losses In 4Q
Maintain Underperform. Fair value is RM6.12.Sime Darby :

3QFY11 Results/Briefing Note
  • In 3QFY11, Sime recorded a net EI loss of RM7.9, comprising forex gain RM0.5m, the RM98.5m writeback for the Maersk Oil project, a RM73.9m impairment on biodiesel and bioganic assets and a RM33m impairment loss on a property project, bringing total EI for 9MFY11 to a loss of RM11m.
  • Fair value has been reduced slightly to RM10.60 (from RM10.70). Now that the sale of the O&G division has been announced, we believe Sime would need to gain further ground by being more focused on its other divisions to improve operational efficiencies, to improve its market value and standings in the different industries it operates in.
  • We maintain our Outperform recommendation on the stock.

IJM Land :

Results / briefing note
  • The value has yet to be fully appreciated
  • We maintain our Outperform call with an unchanged FV of RM3.28, IJMLD continues to be our top pick for the sector.


IJM:
  • FY03/11 Performance Weighed Down By Construction Losses In 4Q
  • Maintain Underperform. Fair value is RM6.12.

Read more...

Stocks to watch: Sime, IJM, Alam Maritim, Ta Ann, Kulim

Sunday, May 29, 2011

KUALA LUMPUR: The market could trade sideways on Monday, May 30 due to the lack of impressive earnings growth late last week, analysts said.

With the corporate season coming to an end on May 31, with Maxis Bhd and Axiata Group Bhd among the remaining heavyweights to announce the results, the market would need more stimuli to spur buying interest.

Stocks which could see trading interest would be SIME DARBY BHD, IJM Corp, ALAM MARITIM RESOURCES BHD, TA ANN HOLDINGS BHD and Kulim (Malaysia) Bhd. All the companies reported their results on Friday.

Sime Darby posted net profit of RM820.12 million in the third quarter ended March 31, 2011 compared with net loss of RM308.63 million a year ago. Revenue increased by 39.8pct to RM10.59 billion compared with RM7.57 billion. Earnings per share were 13.66 sen.

IJM Corp swung into the red in the fourth quarter ended March 31, 2011 with net loss of RM20.19 million versus a net profit of RM111.04 million a year ago due to its overseas operations. The losses were expected by the market as it would have to make provisions and losses in its international operations.

Its operating profit before tax fell by 53.9% to RM75 million compared to RM163 million a year ago “following the provision made against contractual claims, recovery of receivables and project losses in some of the group’s overseas projects”.

Its revenue rose 20.9% to RM1.047 billion from RM866.46 million mainly due to the CONSTRUCTION, property, industry and infrastructure divisions. It announced an interim dividend of 7.0 sen a share

Land & General posted losses of RM3.22 million in the fourth quarter ended March 31, 2011 compared with net profit of RM12.91 million a year ago mainly due to losses in quoted investments.

“The loss for the current quarter arose mainly due to fair value loss of RM3.5 million recognised on its quoted investments, net interest expenses of RM1.1 million recognised from FRS 139 implementation, and share of losses from its jointly controlled entities of RM1.7 million,” it said.

Alam Maritim posted net losses of RM7.38 million on weaker performance by it offshore support vessels segment. Net loss for 1Q ended March 31, 2011 was a stark contrast of RM20.51 million a year ago.

Revenue fell 48% to RM34.68 million from RM66.87 million. Loss per share was 0.9 sen compared with earnings per share of 4.0 sen.

On a more upbeat note, Ta Ann said higher overall selling prices for timber products and better performance for the PLANTATION []s business pushed Ta Ann Holdings Bhd’s first quarter earnings up by 232% to RM26.56 million from RM7.89 million a year ago.

Revenue rose 10.3% to RM181.44 million from RM179.93 million while earnings per share were 10.32 sen compared with 3.10 sen.

Kulim’s earnings jumped 105% to RM127.10 million in the first quarter ended March 31, 2011 (1QFY11) from RM61.89 million a year ago.

Its revenue climbed 34% to RM1.657 billion from RM1.234 billion while earnings per share were 10.12 sen compared with 16.40 sen a year ago.

Read more...

Transmile mandates Kenanga IB to search for investors

Saturday, May 28, 2011

SUBANG JAYA: TRANSMILE GROUP BHD, which was recently delisted, has mandated Kenanga Investment Bank Bhd to look for potential investors to inject funds into the ailing cargo airline, said its managing director Liu Tai Shin.

The group is hopes the entry of new investors would help in its turnaround, as it has been recording losses since 2007. It made some progress on its debt restructuring by disposing four of its wide-body aircraft to Federal Express Corp for US$66.99 million or RM200.06 million.

However, Liu said on Friday, May 27 the debt revamp was stalled by the lawsuits faced by the group.

The group risked being wound up by Malaysian Trustees Bhd which represents the interest of five medium-tern note (MTN) holders who are collectively owed RM105 million. In April last year, Malaysian Trustees filed a petition to wind up Transmile after it failed to honour its obligations.

“If they had agreed to allow us to continue, it would have allowed the company to invite potential new investors to come in to participate in the redevelopment of Transmile. But because the banks are falling with us, one particular group, so we are a little bit stalled,” he said after the shareholders meeting.

Liu said business is usual at Transmile group after it has been de-listed. The group will continue operational and serve its customers with the board of directors and the management team at its front wheel, while Kenanga Investment Bank would be looking for the new investors to turn around the company.

“The delisting has nothing to do with our business operation. This is just like previously we’re on the premier league, but now we’re on the second division. But the football team is here, we’ve got our work to do,” he said.

Liu added the group was approached by quite a number of interested parties, but declined to elaborate.

He said the potential new investors would have to be interested in the business and have the financial capabilities to take it to the next level.

“We have not identified any particular institution, we have already worked out the process how we want to tackle the invitation. The merchant banker has been appointed to handle this, so they will be dealing with queries,” he explained.

Liu also rejected the rumors for a management buy-out to occur, and insist that is not the priority of the board of directors.

On the positive note, the group’s chief operating officer Robert John Hyslop said that outlook for the industry is positive, as survey done by aviation association such as the International Air Transport Association (IATA) and aircraft makers Boeing Co. and Airbus SAS suggest the air cargo movements in Asia Pacific to be the fastest growing geographical segment in the aviation industry.

The group has a fairly good mix of revenue streams as most of its business segments are profitable such as flight chartering, leasing and selling cargo capacities to freight-forwarders agents.

However, according to Hyslop, the cargo capacity business was fluctuating in line with the movement of the fuel price, which makes a very major part of the business. Last year, the cargo capacity business charted a high growth rate of more than 60%, he said.

“I think we got a good mix of revenue streams where we are not that type of airline that will go out and prospect for new business without thoroughly researching and understanding the market and our customers,” he said, adding that the airline industry in Asia Pacific is poised for a good growth rate of between 5% and 6%, and acknowledging that Transmile will be benefitting from such growth.

Read more...

Update KLCI closes at 6-week high, nudged up by Tenaga

Friday, May 27, 2011

KUALA LUMPUR: The FBM KLCI closed at a six-week high on Friday, May 27, with Tenaga Nasional as the main factor as investors expected positive news for the power giant in getting a tariff increase.

Prime Minister Datuk Seri Mohd Najib Tun Razak said the government will study first the report submitted by the National Economic Council (NEC) on the electricity tariff.

"Whatever it is, we will see first. We cannot say anything. That is their report," he told a press conference after chairing the Umno Supreme Council meeting.

At 5pm, the FBM KLCI was up 7.75 points or 0.5% to 1,548.69, the highest since April 11. Turnover was 947.81 million shares valued at RM1.69 billion. The broader market was cautious with declining stocks beating advancers 464 to 314 while 300 stocks were unchanged.

The KLCI’s historic closing was 1,574.49 on Jan 17.

Crude palm oil futures rose RM22 to RM3,438, making it the third weekly gains as buyers in Europe increased their imports to replenish their stockpiles.

Light crude oil added 34 cents to US$100.57. The ringgit was at 3.0315 to the US dollar, compared with the previous close of 3.0457.

Among the regional markets, Japan’s Nikkei 225 fell 0.42% to 9,521.94, Shanghai’s Composite Index lost 0.97% to 2,709.95. Hong Kong’s Hang Seng Index added 0.95% to 23,118.07 and Taiwan’s Taiex 0.25% higher to 8,810 and Singapore’s Straits Times Index added 0.38% to 3,135.52.

At Bursa Malaysia, Tenaga rose 28 sen to RM6.58, pushing up the 30-stock KLCI up by 3.57 points while genting added 12 sen, nudging the index by another 1.05 points. Genting Malaysia’s 10 sen gain to RM3.62 gave the index another 0.92 point push.

PLANTATION []s were also among the gainers on the bullish outlook for CPO, with KLK rosomg 22 sen to RM22.10 and Batu Kawan 12 sen. Sime Darby added two sen to RM9.13 and IOI Corp four sen to RM5.34.

Hong Leong Bank rose 30 sen to RM12.20, Nestle 28 sen to RM47.98 while Yinson climbed 13 sen to RM1.44.

KNM was the most active with 103.44 million shares done, falling 38 sen to close at RM2.15 on the weaker first quarter earnings.

Perstima fell 57 sen to RM4.60 and it was the top loser of the day. Profit taking saw F&N giving up 30 sen to RM19.20. Other decliners were MSC, Sindora, Ta Ann, Parkson and Tradewinds.

Read more...

Tenaga powers KLCI higher, KNM slumps

KUALA LUMPUR: Tenaga Nasional helped power the FBM KLCI to a higher close at midday on Friday, May 27 on hopes of revised tariff by government during the National Economic Council meeting scheduled for Friday.

Key regional markets were also higher in the morning session, with Reuters reporting that investors were on a bargain hunting after the recent falls while the euro advanced.

At 12.30pm, the FBM KLCI was up 7.49 points to 1,548.43. Turnover was 447.13 million shares valued at RM692.33 million. There broader market was weaker with losers beating gainers 395 to 246 while 279 stocks were unchanged.

Tenaga up 22c to RM6.52 midday, on hopes of revised tariff by government. Among PLANTATION []s, KLK rose 30 sen to RM22.18, PPB 18 sen to RM17.70 and Batu Kawan 18 sen also to RM16.44.

Genting’s strong set of earnings saw the shares climb 12 sen to RM11.22 while among the banks, HLFG rose 20 sen to RM11.70 and HL Bank 18 sen to RM12.08.

Among the losers, KNM fell 30 sen to RM2.23, the biggest one day loss in recent months after a poor set of first quarter earnings as investors ignored news of its RM217 million Uzbek contract.

MIDF Research maintained a Buy on KNM with a target price of RM3.20 while Maybank Investment Bank Research was more optimistic, keeping NMN as Buy with an unchanged target price of RM3.20.

Perstima was the top loser, down 47 sen to RM4.70 after its fourth quarter net profit fell sharply to RM6.49 million from RM26.62 million a year ago.

Other decliners were F&N, down 22 sen to RM19.28 in thin trade, Cypark shed 14 sen to RM2.06 and MSC 10 sen to RM5.39.

Read more...

Maybank IB Views

YTL Power International RM2.22: Buy
Great results tempered by poor dividends Shariah-compliant

Mixed signals. We are impressed that YTLP recorded earnings growth YoY despite start up losses at YES but disappointed that third interim net DPS remain subdued at 1.875 sen. We believe that this maybe due to it conserving cash ahead of its joint bid for the 2,000MW Pemalang IPP in Central Java. Maintain Buy call and RM2.70 DCF based target price pending a meeting with management.

KNM Group RM2.53: Buy
Soft 1Q, expects stronger quarters ahead Shariah-compliant

Weak results but hopes stay afloat. 1Q11 results were sub-par, underlying the margin compression effect from the low-yielding projects secured in the past. We maintain our forecasts for now. Top line recovery is visible but KNM needs to deliver its normalised margins and on bottom line to rerate. KNM remains a prospective long-term Buy.

Star Publications (Malaysia) RM3.35: Hold
Catalyst in M&As Shariah-compliant

Results delivered, M&As next. Star's 1Q11 results were within expectations. Our earnings estimates are marginally tweaked for higher adex growth assumption, offset by creeping staff costs. Maintain Hold with a marginally lower SOP-based target price of RM3.69 (-1%). The focus is now on further M&A activities enabled by the RM200m it recently drew down from its CP/MTN facility.

WCT RM3.04: Buy
No surprises Shariah-compliant

Reiterate Buy. 1Q11 net profit of RM37m made up 20% of our full-year forecast. The results were in line with house and street expectations. We maintain our earnings forecasts, expecting stronger quarters ahead to meet our 31% net profit growth projection for 2011. Target price is unchanged at RM3.75 based on sum-of-parts (15x 2012 PER plus 20sen value enhancement for KLIA2 retail concession).

Sunway City RM5.05: Hold
On track; expect stronger 2H Shariah-compliant

Accept offer. RM35m 1Q11 core net profit was in line. We maintain our earnings forecasts and RM5.10 TP (offer price for merger with Sunway Holdings). However, we downgrade SunCity to a Hold since its share price is approaching the offer price. We advocate shareholders to accept the SunCity-SunHoldings merger offer, which would result in a bigger entity with an e.RM3.6b market capitalisation and better liquidity. We estimate RNAV for the merged entity to be around RM3.70.

AEON Co RM6.45: Buy
2H has to catch up Shariah-compliant

Results in line. 1Q11 core net profit of RM35.7m (-13.3% YoY, -18.9% QoQ) was 20% of our and street estimates, after stripping off RM10.9m of insurance claims on its shopping centre in Melaka for a fire in 2009. We maintain our forecasts for now, expecting a stronger 2H to make up our full-year forecasts. 2H should strengthen with the reopening of the 1 Utama store, in time for the Raya and year-end festive seasons

Ann Joo Resources RM2.90: Buy
Seeing domestic cyclical growth Shariah-compliant

Back in the black. 1Q11 ex-forex net profit of RM34m (4Q10: RM3m net loss, 1Q10: RM42m net profit) was inline with expectations, making up 19% of our full-year forecast and 18% of consensus. Earnings growth momentum is likely to sustain on the commencement of big-ticket construction jobs (i.e. LRT Package A). Maintain Buy with a target price of RM3.30 (11x FD 2012 PER).

Technicals
The FBM KLCI gained 7.37 points to close at 1,540.94 yesterday. Its resistance areas of 1,542 and 1,555 will cap market gains, whilst the obvious support areas are located at 1,525 and 1,540.Due to the DJIA’s marginally firmer tone last night, we will see some benign trading activities today.

Daily trading idea is a Short-Term Buy call on DKSH.

Other Local News
RHB Cap: Abu Dhabi bank to meet over stake sale. A decision on the sale of the 25% stake held by Abu Dhabi Commercial Bank (ADCB) in RHB Capital Bhd is expected after ADCB board meeting on May 31. (Source: The Star)

Ann Joo: Plans expansion. Steel maker Ann Joo Resources Bhd is looking at expanding its operations across South-East Asia via joint ventures (JVs) or mergers and acquisitions (M&As) in greenfields and small regional steel millers. (Source: The Star)

Wah Seong: Tipped for LNG pipe coating job. Wah Seong Corp Bhd is close to bagging a pipe coating job relating to the Australia Pacific liquefied natural gas (APLNG) project, valued at about RM122m (USD40m). The project is expected to be given out in the next one to two months. (Source: The Edge Financial Daily)

Property: Tycoon Li Kashing firm buying malls in Malaysia. Singapore-based ARA Asset Management Ltd, which is linked to Hong Kong tycoon Li Kashing, is in different stages of negotiation to buy between five and 10 malls throughout Malaysia. Its second Asia Dragon Fund has a fund size of USD1b to buy Asian assets. (Source: The Star)

Consumer: Govt to review subsidy if oil price hits USD110-120 per barrel. The government has decided to maintain the prices of RON95 petrol , diesel, and liquefied petroleum gas (LPG), but will review the fuel subsidy if oil price reaches between USD 110-120 per barrel. (Source: The Edge Financial Daily)

Read more...

RHBInvest Research

AFG: Building the business for longer term

Market Perform

v AFG held a briefing yesterday in relation to its 4QFY11 results.

v The group’s medium term (3-5 years) targets were unchanged, which are:

1) gross impaired loans ratio that is in line with industry

2) CIR of 45-48% (currently 48%)

3) ROE of 14-16%

4) Dividend policy that pays “as much as we can afford, whenever we can”.

Corporate Highlights

Ann Joo: Turns around in 1QFY12/11 on margin expansion

Underperform

1QFY12/11 net profit came in within expectations. Ann Joo recorded a net profit of RM42.3m in 1QFY12/11 (from a net loss of RM2.7m in the previous quarter) as the impact of the steel market recovery finally kicked in and margins expanded.

Read more...

Southeast Asian stocks climb on commodities recovery

BANGKOK: Southeast Asian stock markets climbed higher on Thursday, May 26 as a recovery in commodity markets lured buyers back to resource-related stocks and bargain-hunters picked up blue chips.

Trading volume remained weak, however, suggesting a lack of conviction. Market turnover in Thailand, Indonesia and Singapore fell below the 30-day average.

Thailand's benchmark SET index , where energy stocks have a weighting of more than 20 percent, gained almost 1 percent, hitting its highest in a week at one point. Malaysia ended up 0.5 percent.

Stocks in Indonesia and the Philippines both finished up almost 1 percent. Vietnam shot up 3 percent, after a 20 percent plunge in the past two weeks. Singapore's main index was flat.

Thailand rose despite tiny outflows of $3 million, adding to a combined $283 million in the previous four sessions.

"The positive story was mainly from commodities markets. But I still think the gains will quickly be lost if the threats from euro zone debt are not over," said Warut Siwasariyanon, head of research at broker Finansia Syrus Securities.

Flows in other markets were mixed. Indonesia reported outflows for a fourth session and the Philippines lost $7 million after two days of inflows, according to Thomson Reuters data.

The MSCI index for Southeast Asia was up 1.1 percent by 0947 GMT, while the MSCI index of Asia Pacific stocks outside Japan was up 1.6 percent , the biggest gain since April 20, after closing at a two-month low on Wednesday.

The risks surrounding the euro have not eased much, with Greece fighting to avoid a debt restructuring that could have a huge ripple effect across other high-risk European countries struggling with gaping fiscal deficits.

Palm oil shares were among outperformers as Malaysian palm oil futures hit a seven-week high. Singapore-listed Olam International surged 2.5 percent and Astra Agro Lestari, Indonesia's largest listed PLANTATION firm, climbed 1.3 percent.

Read more...

Stocks to watch: MRCB, DRB-Hicom, Genting, PetChem

KUALA LUMPUR: The big capitalised stocks, especially GENTING BHD and Petronas Chemicals Group Bhd would be in focus on Friday, May 27 following their sharply improved earnings in the quarter ended March 31, 2011.

Other companies which would also see trading interest would be MALAYSIAN RESOURCES CORPoration Bhd (MRCB), DRB-HICOM BHD and MyEG Services Bhd.

SIME DARBY BHD is also scheduled to announce its third quarter results for the period ended March 31.

Genting Bhd’s net profit surged 254% to RM824.17 million in the first quarter ended March 31 from RM232.43 million a year ago when the net profit then was affected by net impairment losses. Revenue rose 57.2% to RM4.89 billion from RM3.11 billion while earnings per share were 22.25 sen compared with 6.29 sen.

The group’s profit before tax in 1QFY11 was RM1.9 billion compared with RM200.0 million in 1QFY10.

Petronas Chemicals Group Bhd reported net profit of RM932 million in the fourth quarter ended March 31, 2011, an increase of 5.7% from the RM881 million a year ago.

Its revenue rose 8.9% to RM4.353 billion from RM3.996 billion while earnings per share were 12 sen. It proposed dividend of 19 sen per share totaling RM1.52 billion.

For the financial year ended March 31, its net profit increased by 36.1% to RM2.994 billion from RM2.199 billion. Revenue rose 19.5% to RM14.586 billion from RM12.203 billion supported by higher prices and volume addition.

MRCB posted a 120% increase in its earnings to RM21.60 million in the first quarter ended March 31, from RM9.84 million a year ago, boosted by its on-going property development projects.

MRCB was upbeat on its outlook for the next two years where it expected progressive completion of the on-going CONSTRUCTION projects and property development within KL Sentral which works had commenced since 2009.

“Two major developments planned on strata sales at Kuala Lumpur Sentral comprising Q Sentral office block at Lot B and condominium residences at Lot D with combined gross development value in excess of RM2 billion will commence construction works in 2011,” it said.

DRB-Hicom’s earnings were 72% lower at RM72.39 million from RM259.36 million a year ago due to the absence of exceptional gains of RM211.43 million from the disposal of estates.

Its revenue rose 25.1% to RM1.99 billion from RM1.59 billion a year ago. It proposed a final dividend of four sen per share.

MyEG recorded its best-performing quarter in 3Q11, boosted by the public’s growing adoption of e-Government services via its MyEG portal.

Its revenue rose 20% on the back of an increased Highway Code test-tasking, increased online, increased online payment of traffic summonses an encouraging growth for online renewal of road tax and automobile insurance.

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Muhibbah gets RM101m contract in Australia

Thursday, May 26, 2011

KUALA LUMPUR: Muhibbah Engineering Bhd has secured a contract worth RM101 million in Australia for the Gorgon liquefied natural gas (LNG) jetty and marine structure project.

It said on Wednesday, May 25 it was given a letter of commitment by Leighton Contractors Pty. Ltd. for pre-assembly of heavy lifting facility and tug pen breakwater caissons and preparation of shipping barges.

“The contract is expected to commence in mid-2011 with a target date of completion in early 2012,” it said.

Read more...

Maybank IB Views

Wednesday, May 25, 2011

Market Focus
IM New York: On the passage of transformation

Positive note. Prime Minister (PM) Najib sent a strong message on the government's determination for a high income economy by 2020 in his address to fund managers and investors at Invest Malaysia (IM) New York last week (17 May). The event, held for the first time at the New York Stock Exchange, saw a turnout of about 350 people. Present as well were 10 top Malaysian corporates comprising Maybank, AirAsia, Axiata, Bursa Malaysia, CIMB, Genting, Kencana Petroleum, Petronas Chemicals, SapuraCrest Petroleum and Sime Darby.

RESULTS REVIEW
RHB Capital RM9.24: Buy
Looking for a strategic partner Shariah-compliant

Buy maintained. For much of the uncertainty earlier this year caused by management changes, the new team appears to be settling in quite well and business is as usual at RHB Capital. Our forecasts are maintained and valuations are still decent, in our view, with the stock trading at a prospective 2011 P/BV of 1.8x and 2012 PER of just 10.9x.

Lafarge Malayan Cement RM7.47: Buy
Looking forward to demand rebound Shariah-compliant

Below expectations. 1Q11 net profit of RM52m (+8% YoY, -36% QoQ) was just 14% of our full-year forecast and 13% of consensus. However, we maintain our forecasts as we expect earnings in the sequential quarters to improve substantially on higher cement ASP (raised on 1 Apr) and a pickup in demand. Currently trading at 15x 2012 PER, there is still upside potential as LMC had traded up to 17x in the 2007 peak cycle. Maintain Buy and TP of RM8.50 (17x 2012 PER).

KFC Holdings RM3.85: Hold
On track Shariah-compliant

Results in line. KFC's RM36m 1Q11 net profit (+5.5% YoY; -25.8% QoQ) is in line, accounting for 21% of our and consensus full-year forecasts. We maintain our 2011 net profit forecast of RM172m given the fact that 1Q is seasonally weaker. Non-restaurant divisions again did not perform as expected, with its ancillary division making a pretax loss. We maintain our Hold call and target price of RM3.97.

MBM Resources RM2.97: Hold
Weakness ahead; downgrade to Hold Shariah-compliant

In line but weakness ahead. 1Q11 net profit of RM38m (+36% QoQ; -4% YoY) is within expectations, accounting for 25% of our initial full-year forecast of RM151m. With the next 9-month earnings poised to soften owing to the supply chain disruption from the Japan earthquake and tsunami, we have cut our 2011 earnings forecast by 17% and tactically lowered our target price to RM3.10. Share price is unlikely to perform until the supply chain flow returns to normalcy.

Technicals
The FBM KLCI rebounded 3.14 points to close at 1,532.12 yesterday. Its resistance areas of 1,532 and 1,550 will cap market gains, whilst the obvious support areas are located at 1,511 and 1,530.Due to the DJIA’s weaker tone last night, we will see some benign trading activities today.

Trading idea is a Take Profit call on MISC.

Other Local News
Aeon: To ink 9-year deal with 1Utama owner. Aeon Co (M) Bhd, which has managed the old wing of the 1Utama Shopping Complex for 15 years, is expected to sign a fixed nine-year lease agreement with mall's landlord, See Hoy Chan Holdings (SHC). (Source: Business Times)

Integrax: Forms committee. Port operator Integrax Bhd has formed a governance committee consisting of the company’s board of directors to oversee all current impending legal matters. (Source: The Star)

MFM: Plans RM140m expansion. Malayan Flour Mills (MFM) Bhd plans to invest about RM140m this year to increase its flour milling and raw material storage capacity in its Malaysia and Vietnam plants. (Source: The Edge Financial Daily)

Utilities: Acqua SPV makes ‘fair value’ bid for Selangor water bonds. Acqua SPV Bhd, a special-purpose vehicle set up by Pengurusan Aset Air Bhd (PAAB), has made a firm offer to take over Selangor water bonds. (Source: The Star)

Construction: RM30b worth of PPP projects to be developed this year. A total of RM30b worth of projects under the Public Private Partnership (PPP) are expected to be implemented this year from RM18b recorded last year. Among the projects to be implemented are the construction of new toll highways, hospitals and universities' campus branches. (Source: Business Times)

Read more...

RHBInvest Research

Top Story: Axiata

Results Preview

  • Expecting a stable 1Q qoq
  • Maintain Outperform and fair value of RM5.75, on good growth prospects albeit moderating this year.

Read more...

Maybank IB Views

Tuesday, May 24, 2011

QL Resources RM3.34: Buy
Good start for the 2nd decade of listing Shariah-compliant

Another good year. 4QFY11 net profit of RM31.6m (-4.8% YoY; +19.3% QoQ) took QL's FY11 net profit to RM124.5m (+16.5% YoY), which was within our forecast and consensus. FY11 marks the 10th straight year of double-digit net profit growth since its listing in FY00. We expect another year of strong earnings growth (+30%) premised on the new surimi lines in Surabaya, maturing plantation in Eastern Kalimantan and its palm pellet project. We maintain our Buy call and target price of RM3.75.

Technicals
The FBM KLCI tumbled 12.05 points to close at 1,528.98 yesterday. Its resistance areas of 1,528 and 1,550 will cap market gains, whilst the weaker support areas are located at 1,510 and 1,526.Due to the DJIA’s much weaker tone last night, we will see some heavy liquidation activities today. We expect the FBM KLCI to remain under heavy selling today, as the global market malaise takes hold.

Trading idea is a Take profit call on HAPSENG.

Other Local News
AirAsia: To go bigger and may place big order for Airbus. Datuk Seri Tony Fernandes signalled ambitious plans for AirAsia as he closed in on a potentially massive deal to buy Airbus aircraft, which could rival a recent USD16b, 180-plane deal as one of the world's largest. (Source: The Star)

TM: VADS partners Cisco in telepresence service. VADS Bhd, a subsidiary of Telekom Malaysia Bhd (TM), is hopeful of double-digit growth over the next few years for its upcoming telepresence service. (Source: Business Times)

Puncak Niaga: Forays into oil and gas, secure water supply project. Puncak Niaga Holdings Bhd has acquired 40% equity in Global Offshore (Malaysia) Sdn Bhd (GOM) and KGL Ltd (KGL) respectively for a cash consideration of USD8.4m (RM25.2m) and USD15.2m (RM5.6m) respectively. Separately, a consortium consisting of a 40:60 unincorporated JV between Quality Concrete and Puncak Niaga has secured a RM667.3m contract for a rural water supply project in Sarawak. (Source: Bursa Malaysia)

TNB: Cabinet to decide on Wednesday on tariff increase for TNB. The Cabinet is expected to decide on Wednesday, May 25 if there should be a tariff increase for Tenaga Nasional Bhd. (Source: The Edge Financial Daily)

E&U: First block of Kimanis 100MW Plant to be completed in 2013. The first generation block of 100 MW of the proposed 300MW Combined Cycle Gas Turbine Power Plant in Kimanis is expected to be completed in Dec 2013. The power plant and its related projects, costing about RM1.6b is expected to supplement Sabah’s increasing demand for electricity. (Source: Bernama News)

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Maybank IB Views

Monday, May 23, 2011

Property: Overweight
Unfazed by rate hikes; strong property sales continued

Strong property sales momentum continues. Property demand is unfazed by the recent 25bps rate hike by the BNM. This is evident in the strong take-ups/bookings recorded in two recent high-profile property launches i.e. S P Setia's (SPSB) KL Eco City (KLEC) Residential Tower 1 (RT1) and the Mansions@ParkCity Heights linked homes of Desa Park City. We are keeping our Overweight call on the property sector. SPSB (RM4.75 TP) remains as our top buy for the property sector.

RESULTS PREVIEW
AirAsia RM3.13: Hold
As good as it gets Shariah-compliant

Turbulence overshadowing strong 1Q. We expect AirAsia's 1Q11 to be very strong, but we are concerned with the surge in oil price volatility and the increasing evidence that there is an oversupply of capacity in the industry. We downgrade to a Hold from a Buy, as our target price is at close proximity. At our target price of RM3.36/share, we think the risk-reward fully captures the stock at fair value.

Malaysian Airline System RM1.69: Hold
1Q11: Wake turbulence ahead Shariah-compliant

The tide has turned. MAS will release its 1Q11 results on 25 May. 1Q11 is expected to be loss-making due to the impact of 35% higher fuel price and some impact from the MENA civil unrest and Japanese natural disasters. We are concerned with the volatility of fuel and the increasing evidence that there is an oversupply of capacity in the industry. We downgrade our recommendation to a Hold from a Buy, and revise our target price to RM1.82/share, based on 14.4 2011 PER – on par with global peer average.

Technicals
The FBM KLCI rose 0.29-points and closed at 1,541.03 last Friday. The local market remained quite steady in very boring trading activities. World markets remained similarly lack-lustre and boring too. The possible Greek debt default caused the global market malaise.The obvious support areas for the FBM KLCI are located in the 1,507 to 1,536-zone. The firm resistance zone of 1,541 and 1,576 will see very heavy liquidation activities.

Trading idea is a Firm Buy call on EPMB.

Other Local News
Sime: Invests in Liberia. Sime Darby Bhd is planning to invest USD3.1b in its oil palm and rubber plantation ventures in Liberia over the next 15 years, to date it had invested RM50m (USD17m) in the West African country. In 2009, an amended and restated concession agreement between Sime Darby Plantation and the Liberian government gave the company a 63-year concession of 220,000ha in Liberia to be developed into oil palm and rubber plantations. (Source: The Star)

MPHB: To focus on gaming after completing stake buy. Multi-Purpose Holdings Bhd's (MPHB) acquisition of the remaining 47% stake it does not own in Magnum Holdings Sdn Bhd for a collective price of RM1.63b will be completed by June 11. MD Surin Upatkoon said It would also focus on cutting its borrowings by raising RM1b through non-core gaming assets sale. (Source: The Star)

MSC: Eyes new tin mines. Malaysia Smelting Corporation is currently looking to acquire concessions for three or four tin mines in Malaysia and Indonesia to tap into strong demand from China's booming electronics industry. CEO Datuk Mohd Ajib Anuar said the company might invest up to RM200m to increase its mining assets in the near term. (Source: The Star)

Ramunia: Targets RM903m offshore job in Mumbai. Ramunia Holdings Bhd is eyeing a USD300m (about RM903m) fabrication job in the oil and gas industry offshore Mumbai with its Indian partner. The said bid is for work at India's state-owned Oil and Natural Gas Corp Ltd’s (ONGC) wellhead platform with pipeline facilities for oil-field cluster 7 and 16. The firm is also tendering for about RM500m worth of local job. (Source: Malaysian Reserve)

Kimlun: Targets RM600m new jobs. Kimlun Corp Bhd is confident of securing RM600m new jobs to add into its current outstanding order book of about RM900m. and also exploring prospects in Klang Valley. In another news, Kimlun hopes to become an integrated player, in which property development forms the upstream business to complement its core construction business. Then there is the downstream manufacturing business via subsidiary SPC Industires Sdn Bhd, which specializes in precast concrete products for the infrastructure and building sectors. (Source: The Edge Financial Daily, The Sun)

Three-A: China JV plant with Wilmar on track. The construction of the multi-storey manufacturing plant in China, which is easily three times the size of Three-A's operations in Malaysia, is on track for completion as early as the third quarter this year. (Source: The Edge Financial Daily)

TSH Resources: Plans RM470m investment in Indonesia. TSH Resources Bhd is stepping up its Indonesia operations with investments totaling RM470m in the next 4 years which is expected to result in a compounded growth of 43% in fresh fruit brunches production by 2014. (Source: Malaysian Reserve)

Read more...

RHBInvest Research

Top Story: Faber

Visit Note
Timing remains the issue
Fair value is raised to RM2.77 from RM2.59. We reiterate our Outperform call on the stock.

Sector Call


Utilities:

Sector Update
Federal government yet to buy out water bonds
Puncak would be a potential beneficiary, given our view that the company has been holding out for the federal government (with deeper pockets) to make a better offer.
Unless the federal government subsequently makes a good offer, the water sector restructuring may drag on with no clear outcome in sight.

Corporate Highlights

KPJ:
1QFY11 Results
Although KPJ’s 1Q11 net profit of RM27.5m (flat yoy; +13.1% qoq) accounted for 20% of our and consensus full-year forecasts respectivel.y
We maintain our fair value of RM4.94/share. We reiterate our Outperform call on the stock.

ILB:

1QFY11 Results
Weak 1QFY12/11, but stronger 2H ahead
Fair value is RM1.55. Maintain Outperform.

Read more...

Stocks to watch: Melati Ehsan, TSH, KPJ, MK Land

Sunday, May 22, 2011

KUALA LUMPUR: Market sentiment is likely to cautious in the week ahead, starting Monday, May 23 following the weaker closing on Wall Street and worries about the contagion effect from Europe’s debt crisis.

In the latest development, credit ratings agency Standard & Poors cut its outlook for Italy to "negative" from "stable", citing weak outlook for growth and reduced prospects for slashing its debt mountain.

The downward revision, which raises the risk of a downgrade of Italy's sovereign rating, may heighten fears that contagion from Greece's and other European countries' debt crisis could be spreading to the euro zone's third-largest economy.

On Wall Street, US stocks fell on Friday, May 20 on euro-zone debt worries that could spill over into next week's trading with a bearish note, while retailers lost ground after a weak profit outlook from Gap.

The Dow Jones industrial average was down 93.28 points, or 0.74%, to end at 12,512.04. The Standard & Poor's 500 Index was down 10.33 points, or 0.77%, at 1,333.27. The Nasdaq Composite Index was down 19.99 points, or 0.71%, to close at 2,803.32.

For the week, the Dow was down 0.7%, the S&P 500 was down 0.3% and the Nasdaq was down 0.9%.

At Bursa Malaysia, stocks to watch include MELATI EHSAN HOLDINGS BHD [], TSH RESOURCES BHD [], KPJ HEALTHCARE BHD [], MK LAND HOLDINGS BHD [], CAN-ONE BHD [] and Kiaqn Joo Can Factory Bhd.

Melati Ehsan was awarded a RM148.63 million project from the Public Works Department to build a road stretching from Gua Musang in Kelantanf to Kampung Relong in Pahang.

Melati’s unit Pembinaan Kery Sdn Bhd accepted a letter of award from the PWD for the road CONSTRUCTION [] project which starts on June 15 this year until Dec 10, 2013.

TSH Resources has allocated RM100 million or more per year as PLANTATION [] development capital expenditure (capex) for new planting of oil palm trees, the bulk of which will in Kalimantan, Indonesia.

Bulk of the RM100 million capex would be for new planting in Kalimantan where it has about 58,000 ha of land which is still unplanted. The Indonesian operations, with the trees maturing by next year, would underpin TSH’s fresh fruit bunches output, productivity and revenue.

KPJ Healthcare reported a set of unimpressive earnings at RM27.51 million in the first quarter ended March 31, 2011 (1QFY2011) compared with RM27.24 million a year ago.

Revenue rose 16.4% to RM437.75 million from RM376.04 million a year ago while earnings per share were 5.09 sen compared with 5.19 sen. It declared 2.4 sen dividend per share.

However, KPJ expected the group’s performance would continue to improve in line with increasing demand, hospital capacity and activities.

MK Land Holdings Bhd’s net profit rose more than two-fold to RM7.22 million in the third quarter ended March 31 versus RM2.02 million a year ago, underpinned by its strong property performance. Revenue rose to RM165.15 million from RM94.74 million. Net asset per share was 87 sen.

Can-One Bhd has taken court action KIAN JOO CAN FACTORY BHD [] over the latter’s proposed one-for-two bonus issue and the proposed renounceable rights issue of 166.56 million 2five-year warrants 2011/2016 on the basis of one warrant for every four KJCF shares held after the proposed bonus.

Can-One claimed the proposals breached the rights of Can-One under the shares sales agreement dated March 13, 2009 and in breach of the Order of the Court of Appeal dated Aug 25, 2010 and the order of the Federal Court dated Feb 21, 2011.

The Edge weekly reports that crane manufacturer Handal Resources has been on an expansion trail since it was listed two years ago, and the strategy has borne fruit.

Meanwhile, hardware and building materials trading Chuan Huat said the group's recent strategic investment in Amalgamated Steel Industrial Steel Bhd is seen as an attempt to get its foot in the door of the steel pipe manufacturer.

Read more...

AmResearch has Sell on Tanjung Offshore, cuts fair value to RM1

Friday, May 20, 2011

KUALA LUMPUR: AmResearch reaffirms its Sell rating on Tanjung Offshore and cut its fair value to RM1 a share from RM1.33 a share previously) – pegging its FY11F earnings to a PE of 20 times – following another set of weak numbers.

“We are cutting our estimates for FY11F-FY13F by 45%-54% to RM16mil-RM18mil following lower margin assumptions from 8%-9% to 7%-7.5% and cuts in revenue assumptions by 20%-30%,” it said on Friday, May 20.

AmResearch said Tanjung was in the red for the second consecutive quarter, with a larger magnitude of RM3mil for 1QFY11.

The losses are attributable to about RM3mil in losses from its UK-subsidiary Citech Ltd. Currently the unit has only about US$15mil in orderbook for the next 18 months and this is not sufficient to cover its sizeable operating costs.

Another factor is the weaker earnings from vessel chartering division. Three vessels were lying idle during 1QFY11, translating into a utilisation rate of about 80%. Nonetheless, it has since been operating at full capacity although six of the vessels are currently under spot contracts.

AmResearch said the losses for the quarter was also contributed by a net loss of RM4.7mil incurred from the disposal of its stake in Hercules Tanjung Asia s/b, a rigs provider.

Read more...

Maybank IB Views

Media: Overweight
Apr 2011 adex: Growth momentum continues

Overweight stance under review. Apr 2011 total gross adex grew 17% YoY, the strongest this year. May 2011 is likely to be 10% to 15% higher MoM as advertisers ramp up ad spend ahead of adex-friendly festivities in 3Q11. 4M11 total gross adex grew 14% YoY, ahead of our 8.3% forecast. Top picks MCIL and Media Prima performed well in the past month, possibly reflecting the still positive adex sentiment.

RESULTS REVIEW
KLCC Property Holdings RM3.28: Hold
Results in line; new contribution from Lot C Shariah-compliant

Maintain Hold. KLCCP's RM574m FY03/11 realised pretax profit was in line, but 12 sen total DPS for FY03/11 was above expectations. In our view, KLCCP's annualised 3.4% net dividend yield for 2012 is less attractive compared to large cap REITs (6-6.5%). We lower our 9M11-2013 estimates by 1.6-16% to factor in the change in FYE. Maintain Hold with a new RM3.50 TP (15% discount to RM4.10 RNAV (+50 sen)).

Tanjung Offshore RM1.11: Sell
Grey visibility still Shariah-compliant

Reiterate Sell. Losses extended into 1Q, within our forecasts but below consensus expectation. Forward earnings will remain a challenge. Cost management strategies and operating prospects remain the key concerns. An equity cash-call could ensue should the cash situation worsen. TOFF will suffer an RM8m penalty cost for early bonds redemption. Valuations are expensive and consensus forecasts are aggressive. Ekuinas’ next move remains a wild card.

COMPANY UPDATE
Star Publications (M) RM3.38: Hold
Fuzzy signals from this frequency Shariah-compliant

Maintain Hold call and DCF-based target price of RM3.71. We are mildly negative on Star's plan to acquire 80% of Capital FM for RM15m as it is loss-making and may cannibalise Star's three incumbent radio stations. Acquiring an outdoor company would have been wiser. We leave our earnings estimates unchanged pending further details.

CB Industrial Product Holding RM4.30: Buy
Variation to order book Shariah-compliant

Positive, but factored in. CBIP received a request from a customer to vary its order book, awarded back in Jan 2011. Consequently, the contract value was revised upwards by about RM31m and the expected incremental profit from the revision could be approximately RM4m. Although positive, we maintain our earnings forecasts as we have assumed RM180m of contract wins for FY2011. Maintain Buy with an unchanged TP of RM4.75 based on 7x 2011 PER.

Technicals
The FBM KLCI rose marginally by 2.75 points to close at 1,544.02 yesterday. Its resistance areas of 1,548 and 1,565 will cap market gains, whilst the obvious support areas are located at 1,523 and 1,544. Due to the DJIA’s firmer tone last night, we will see some bargain hunting activities today.

Daily trading idea is a Short-Term Buy for TDM.

Other Local News
RHB: Sumitomo, Carlyle eye RM4.8bb RHB stake. Japan's Sumitomo Mitsui Financial Group and US private equity firm Carlyle are among leading contenders to place first round bids for a stake in RHB, after bigger rival CIMB said it is not keen to buy a stake. (Source: The Edge Financial Daily)

PPB: Eyes Indonesia's flour market. PPB Group Bhd is eyeing at least 10% of Indonesia’s flour market that currently dominated by his former business partner, Salim Group’s Liem Sioe Liong. This sets the stage for a professional rivalry between the two powerhouses as both groups allocate more resources to capture a larger slice of the burgeoning consumer business at the populous islands. (Source: The Edge Financial Daily)

UOA: RM10b projects in the pipeline. UOA Development Berhad, which is scheduled to list on the Main Market of Bursa Malaysia on June 8, has property projects worth RM10b in total gross development value (GDV) over the next 10 years. Moving forward, the company plans to retain its focus in the Klang Valley, especially its Bangsar South development poject, before considering other geographical locations. (Source: The Edge Financial Daily)

TDM: To invest RM120m in Indonesia. TDM will inject RM120m into its Indonesian operations at Kalimantan within the next eight to 10 years to build four oil palm mills in the area. They expect to see contributions from the Kalimantan operations by 2013 after they had initially invested RM44m in Kalimantan. (Source: The Edge Financial Daily)

Ramunia, Coastal: Agree to abort MoU. Ramunia Holdings Bhd and Coastal Contracts Bhd have aborted a memorandum of understanding (MoU) for the proposed collaboration, bidding and fabrication in relation to structures for the oil and gas industry. The MoU was entered into between both companies in January 2010, but had lapsed on May 18 this year as both parties have mutually agreed not to proceed with it. (Source: The Edge Financial Daily)


AirAsia: AirAsia X inks USD600m deal to buy General Electric engines. AirAsia X has signed a contract worth RM1.8b with General Electric to purchase jet engines for its new aircraft. Under the agreement, the long-haul low fare affiliate of AirAsia Group will purchase CF6-80E1 engines to power its three new A330-200s (with the option of two additional aircraft). (Source: The Edge Financial Daily)

Read more...

RHBInvest Research

Top Story: KLK – Strong monthly production recovery… but can it last? Market Perform

Visit Note
Seven key points: 1) Improving productivity, but still down yoy in 7MFY09/11; 2) Some forward CPO sales locked in; 3) Fertiliser purchases no longer done every half-year; 4) Rubber yields reduced slightly to account for replanting activities; 5) Commencement of new manufacturing capacity pushed back; 6) Strong takeup rates at new property launches; and 7) Sale of cocoa associate to yield good gains.



Corporate Highlights



Allianz: Improvement in claims and management expenses to stay Underperform

Briefing Note
Moving forward, Allianz expects the claims ratio to be sustainable at 59-60%, while we are keeping our projection of 60.5% claims ratio for 2011 to be conservative. Its management expense ratio improved due to better operating efficiencies coupled with tighter management control of the costs.



TNB: Talks of tariff hike resurfaces Underperform

Company Update
Nanyang Online quoted undisclosed sources yesterday that the Government may announce a hike in electricity tariffs next week, as an alternative to raising petrol prices.



Parkson: PRG 1QCY12/11 results in line with expectations Market Perform

Company Update
Parkson’s 51.6% subsidiary, Parkson Retail Group (PRG)’s 1QCY12/11 core net profit of RMB328.4m (+21.6% yoy) was within expectations, accounting for 26% and 27% of our and consensus earnings forecasts, respectively. No dividends were declared during the quarter, as is the norm.



Top Glove: Bracing for another weak quarter Underperform (down from MP)

Company Update
We recently spoke with management and understand that customers continue to hold back their orders in view of the high latex prices. Consequently, this suggests that 3Q revenue could remain flat qoq. Bottomline, however, could be adversely impacted given that latex prices remain high and US$ continues to weaken against RM.

Read more...

Stocks to watch: EON Capital, United Plantations, MMC, IOI Corp, Faber

Tuesday, May 17, 2011

KUALA LUMPUR: The market will continue to see strong newsflow especially from the oil and gas companies’ positive earnings, economic data, while EON Capital Bhd will see a price surge after a hefty dividend plan when Bursa Malaysia resumes trading on Wednesday, May 18

Bank Negara Malaysia will release its first quarter GDP data after market close and economists expect 5% growth. The economy grew 4.8% in 4Q of 2010.

Also on tap is the consumer price index in April. The CPI for rose 3% year-on-year in March from 99.4 to 102.4 and when compared with the previous month, the CPI increased by 0.1%.

EON CAPITAL BHD [] has declared a special tax exempt dividend of RM5.16 per share. The dividend will go ex on June 9 while the entitlement date is June 13.

United PLANTATION []s Bhd posted net profit of RM86.09 million in the first quarter ended March 31, 2011, up 76% from RM48.90 million a year ago and it expects the current financial year results to be better, boosted by more replanting.

It declared a final dividend of 20% per share or 15 sen net per share and a special dividend of 35% per share or 26.25 sen net per share. The dividends will go ex on June 30.

Investors can expect more upside from United Plantations after its comments that palm oil production in Malaysia and Indonesia was expected to recover in 2011 based on the recovery in the biological yield cycle after a pronounced setback in 2010.

MMC CORPORATION BHD [] plans to list its subsidiaries -- Gas Malaysia Sdn Bhd and Malakoff Bhd -- and also its unit Johor Port.

MMC group managing director Datuk Hasni Harun said the first company to be likely listed would be its 51% owned Gas Malaysia.

Hasni said Malakoff is worth about RM7 billion currently while Gas Malaysia and Johor Port are worth RM5 billion and RM1.5 billion respectively.

IOI CORPORATION BHD [] reported net profit of RM656.71 million in the third quarter ended March 31, 2011, up 19.6% from the RM549.02 million a year ago, boosted by the better overall performance of the group, especially plantations.

Its 3QFY11 pre-tax profit of RM780.86 million was 10% higher than the RM709.27 million a year ago. Revenue rose 37.7% to RM4.34 billion from RM3.15 billion while earnings per share were 10.25 sen versus 8.6 sen.

For the nine-months ended March 31, 2011 (9MFY11), it said net profit was RM1.74 billion compared with RM1.52 billion a year ago. Revenue was higher at RM11.83 billion versus RM9.48 billion.

Digistar Corp Bhd’s earnings surged to RM4.57 million in its second quarter ended March 31, 2011 from only RM457,000 a year ago underpinned by better profit margins from its system integration and broadcast engineering projects.

Its revenue jumped 91.5% to RM23.57 million from RM12.31 million a year ago while earnings per share were 2.31 sen compared with 0.26 sen.

FABER GROUP BHD []’s subsidiary and the joint venture partner have been unable to secure any of the business in the building maintenance services and clinical waste management in Brunei.

Its 70% owned Faber Medi-Serve Sdn Bhd and its joint venture agreement (JVA) with Brufors Technical Services had acknowledged the JVA had lapsed as they had failed to sure any business.

ESSO MALAYSIA BHD []’s earnings surged 154% to RM154.82 million in the first quarter ended March 31, 2011 from RM60.94 million a year ago, boosted by inventory holding gains.

Revenue rose 30% to RM2.6 billion from RM2 billion reflecting higher average product prices and increased retail volume. Earnings per share were 57.30 sen compared with 22.60 sen.

Read more...

Green Packet subsidiary Packet One to raise RM151.24m, seeks new investor

KUALA LUMPUR: GREEN PACKET BHD’s 55% owned loss-making Packet One (P1) has proposed to raise up to RM151.12 million from the issuance of preference shares and with the injection of funds from a new investor to finance its nationwide fourth generation (4G) rollout.

Green Packet said on Monday, May 16 that substantial shareholder South Korean Telekom Co. Ltd was asked to subscribe for 153,276 class C Islamic irredeemable convertible preference shares (ICPS-i) for RM50.53 million.

Green Packet has also proposed that Intel Capital Corp -- which currently holds RM50 million nominal value of guaranteed redeemable convertible exchangeable bonds -- to subscribe for Class B Irredeemable Convertible Preference Shares (ICPS) valued at RM10.12 million.

It said that it would also seek a new investor to provide a loan of at least RM50 million to P1, which may be converted into equity in P1 with rights.

As for Green Packet, it said that it had already invested RM91 million in P1 to fund the latter’s operating expenses including subscribers acquisition costs including purchases of customer premise equipment, marketing and promotional expenses, and administrative.

“If either the new investor and/or the bondholder does not invest at least RM50 million and approximately RM10.12 million respectively in P1, Green Packet undertakes to make up for any shortfall in the investment amounts by investing an amount equal to such part of those amounts that was not invested by the new investor and/or the bondholder respectively,” it said.

The gross proceeds of at least RM110.65 million would be utilised by P1 for its deployment of WiMAX network and services in Malaysia.

Of the RM110.65 million, Green Packet said RM50 million would be used as capital expenditure for wireless internet broadband equipment and deployment costs while RM60.44 million would be for operating expenses and working capital.

“The proposed issuance will help expedite P1’s nationwide fourth generation (4G) rollout to reach 65% population coverage by 2012 and also contribute to P1’s key priorities of optimising its network and customer satisfaction, further enabling it to deliver high quality broadband to everyone in Malaysia,” it said.

Read more...

Maybank IB Views

Monday, May 16, 2011

Kencana Petroleum RM2.75: Buy
Buys AME for RM400m; a positive Shariah-compliant

A strategic acquisition. We are upbeat on Kencana's purchase of AME, on financial and operational aspects. Valuations are decent, in our view, and the deal, secured with profit guarantees (RM40m p.a. for FY11-12) is mildly EPS accretive (+1 sen to EPS). The acquisition will provide Kencana a foothold into the subsea markets and ownership of 4 vessels. This 'all-share transaction' will turn vendors of AME into the 2nd largest shareholder of the Group with a 7.6% stake. Our forecasts and target price are under review pending further details. Buy.

QL Resources RM3.40: Buy
A regional player in the making Shariah-compliant

Regional expansion on track. QL is replicating its success formula regionally for each of its main divisions, and the ongoing expansion will fund its growth in the coming years. Although share price has risen 16.4% YTD, outperforming the KLCI, we believe there is still upside potential, banking on its expansion especially into Indonesia, which has yet to contribute significantly to group earnings. We lift our TP to RM3.75 after rolling over our valuation period. We continue to be positive on QL.

Technicals
The FBM KLCI rebounded 25.24-points and closed at 1,540.74 last Friday. The local market remained quite steady to firmer despite the global markets’ gyrations. Local funds pushed the market up especially last Thursday and Friday on firm bargain hunting activities.The obvious support areas for the FBM KLCI are located in the 1,507 to 1,540-zone. The firm resistance zone of 1,545 and 1,576 will see very heavy liquidation activities.

Weekly trading idea is a Firm Buy call on MEDIAC.

Other Local News
Sunway: To secure site of Jalan Duta complex. Sunway Group is said to have won a competitive bid to acquire the site of the Jalan Duta government complex. Sunway could be paying more than RM500m for the site and construct new offices for the IRB and Customs Department elsewhere. (Source: The Edge Financial Weekly)

MAS: Firefly takes delivery of 3rd 737 for KK ops. Firefly, subsidiary of MAS, took delivery of a third Boeing 737-800 aircraft to be stationed in Kota Kinabalu, officially marking the start of the city as its eastern hub. (Source: Malaysian Reserve)

IOI: Allegations against IOI 'just not true'. IOI Corp Bhd re-iterated that in October 2010, an RSPO-certified auditor SGS investigated the allegations and concluded the deforestation complaints were baseless. (Source: Business Times)

ECM, Kenanga: Close to sealing deal. ECM Libra Financial Group Bhd, whose substantial shareholders are long known to be looking to divest their equity stakes, is close to sealing a merger deal with K&N Kenanga Holdings Bhd. (Source: The Edge Financial Daily)

Masterskill: Seeks RM100m from STMB. Masterskill Education Group Bhd (MEGB), which has won its defamation suit against Sistem Televisyen Malaysia Bhd (STMB) for a total of RM250,000, is appealing to the High Court for the damages to be raised to RM100m. (Source: The Star)

FDI: Good response to Invest Malaysia NY. A total of 56 US fund managers have confirmed participation at the inaugural Invest Malaysia New York 2011 (IMNY 2011), which will be held tomorrow. (Source: Business Times)

Property: Demand for condos in KL. Condominium living is relatively new to KL and well designed projects are seeing strong sales performance, said Christopher Boyd, executive chairman of CB Richard Ellis Malaysia. The take up rate of condos in 1Q11 was between 65% and 88% in prime areas. (Source: Malaysian Reserve)

Read more...

RHBInvest Research

Top Story: IJM Plantation – Short-term pain for long-term gain Market Perform

Visit Note
Key takeaways from our visit to IJMP’s estates and operations in Sandakan: 1) Heavy rainfall affected FFB production and OER; 2) Sold part of FY03/12 production forward; 3) Locked in 80% of fertiliser requirement for FY03/12; 4) Labour shortage of 10% currently; 5) Planted close to 9,000ha in FY03/11; and 6) Efficient facility, impressive long-term planning.



MMHE: Fair value unchanged at RM5.75 Underperform

Petronas unveiled plans for a US$20bn (RM61bn) refinery and petrochemicals complex in Pengerang, Johor last week.



Corporate Highlights

Dialog: Starting up the “Pengerang” engine Outperform

News Update
Dialog announced last week that the Johor state government had given the go ahead for the company to begin reclamation work for the proposed independent deepwater terminal in Pengerang. The total investment for the project is estimated at RM5bn over a 7-year period.

Kencana: Proposed acquisition to enter the subsea market Outperform

News Update
Kencana announced last week that it is looking to acquire Allied Marine & Equipment (AME), a company that specialises in subsea services for the oil and gas industry. The acquisition will cost RM400m, to be satisfied via the issue of 149.3m new shares at RM2.68 each.



DRB-Hicom: Keen to explore Bank Muamalat – Bank Islam merger Outperform

News Update
DRB-HICOM (DRB) issued a press release in a response to media reports that BIMB Holdings (BIMBH) had been approached to consider buying Bank Muamalat (BM).


CSC Steel: 1QFY11 net profit more than doubled qoq to RM24.0m Outperform

1QFY11 Results
1QFY11 net profit came in at 31% of our full-year forecast and 30% of the full-year market consensus. However, we consider the results within expectations as we expect lower margins in the next few quarters due to higher raw material cost.

Read more...

Stocks to watch: O&G, Kencana, Dialog, Sealink, Supermax, DRB-Hicom

Saturday, May 14, 2011

KUALA LUMPUR: Stocks on Bursa Malaysia, especially oil and gas (O&G) counters and related industries are expected to continue see strong trading interest in the week ahead, starting on Monday, May 16.

The interest would be underpinned by Petroliam Nasional Bhd’s RM60 billion investments in the refinery and petrochemicals integrated development (RAPID) project in Pengerang, south Johor.

However, overall marketing trading could be slower due to the holiday-shortened week and the cautious overnight close on Wall Street.

US stocks ended a second week of losses on a down note Friday, May 13 reflecting growing worries that stocks are on the precipice of a pullback.

Concern about slowed growth worldwide, the coming end of a supportive Federal Reserve policy and the fear of a worsening euro-zone debt crisis are undermining the stock market's ability to maintain an upward direction.

The Dow Jones industrial average ended down 100.17 points, or 0.79 percent, at 12,595.75. The Standard & Poor's 500 Index finished down 10.88 points, or 0.81 percent, at 1,337.77. The Nasdaq Composite Index fell 34.57 points, or 1.21 percent, at 2,828.47.

For the week, the Dow was down 0.3 percent, the S&P 500 was off 0.2 percent and the Nasdaq was barely up at 0.03 percent.

Meanwhile, Petronas’ refinery and petrochemicals integrated development (RAPID) project will comprise a crude oil refinery with capacity of 300,000 barrels per day, a naptha cracker that will produce about three million tonnes of ethylene, propylene, C4 and C5 olefins annually, and a petrochemicals and polymer complex that will produce differentiated and highly specialised chemicals. The capacity of the project will be bigger than the current combined production in Kertih and Gebeng.

Stocks in focus would include DIALOG GROUP BHD [] which had received the Johor government’s approval to reclaim and use the site in Pengarang for the proposed RM5-billion independent deepwater petroleum terminal. It said the combined investment in the project is estimated at RM5 billion over a seven-year period.

KENCANA PETROLEUM BHD is buying Allied Marine & Equipment Sdn Bhd (AME) for RM400 million in its move to become a fully integrated offshore services player.

The company said the purchase of AME would be a share swap, where it would issue 149.25 million new Kencana shares at RM2.68 a share. The vendors of AME are Worldclass Inspiration Sdn Bhd and Allied Asset Holdings Sdn Bhd.

Kencana’s total order book increased to RM2.44 billion after it was recently awarded a RM250 million contract from Sarawak Shell Bhd

The Edge weekly reports that offshore vessel builder and charterer SEALINK INTERNATIONAL BHD is looking to raise at least RM30 million from a placement exercise as it plans to expand its chartering vessel fleet and increase shipbuilding activities.

Glove maker Supermax Corp Bhd’s earnings fell 52.6% to RM24.40 million in the first quarter ended March 31, 2011 from RM51.47 million a year ago as its margins were eroded by high latex prices and the weaker US dollar. Revenue rose 9.4% to RM241.37 million from RM220.65 million a year ago while earnings per share declined to 7.18 sen from 18.97 sen.

DRB-HICOM BHD is exploring a potential merger of its 70%-owned Bank Muamalat Malaysia Bhd and Bank Islam Malaysia Bhd but there are no plans to sell its Bank Muamalat stake.

The company submitted a letter of expression of interest to BIMB HOLDINGS BHD (BIMB) to explore a potential merger of the two banks and “has yet to commence any exploratory discussions with BIMB”.

Read more...

RHBInvest Research

Top Story: Tan Chong

Results Preview

  • Robust 1Q Earnings Expected
  • While supply constraints are still a sector worry, Tan Chong’s high inventory levels of over RM1bn at end-2010 (2009: RM673m) will enable it to better weather possible component shortages in the coming months
  • We believe the share price already reflects potential supply concerns and is close to being fairly valued.
  • We lower our fair value to RM4.95 (from RM5.40) to reflect lower peer valuations but reiterate our Market Perform call on the stock.

Corporate Highlights

Maybank:

Results / Briefing note
  • Low loan impairment losses boosts net profit
  • Fair value has been raised to RM10.50 from RM10.20. Maintain Outperform.

YTL Power:

Company Update
  • YTL Comms yesterday launched the Yes Life app (free to download) for Apple products running iOS 4, which allows iPad and iPod Touch users to add full mobile functionally into their devices, while iPhone users can have a 2nd mobile phone number.
  • Maintained SOP-derived fair value at RM2.57. Without management’s assurance on future dividends, we believe YTLP may lose a bit of shine since the key investment thesis for the stock has historically been high dividend yields.

TRC:

News Update
  • TRC has proposed a 1-into-2 share split, followed by a 1-for-5 bonus issues, and a 1-for-5 free warrant issue (WB).
  • Maintain Outperform. Fair value is RM1.94.

MISC:

Briefing Note
  • MISC guided for a FY12/11 that will be “every much like what you saw in FY03/11” but a better FY12/12 ahead with “step-up” earnings from LNG and offshore segments.
  • Fair value is RM7.53. Maintain Underperform.

AirAsia:

Results Preview
  • 1QFY12/11 Results Should Please Market, But Greater Earnings Volatility Ahead
  • We expect AirAsia’s 1QFY12/11 results to beat our forecast but trail market expectations slightly.
  • We expect AirAsia’s 1QFY12/11 core PBT to come in at RM160-165m, down 51-53% sequentially vis-à-vis RM340m recorded in 4QFY12/10 due to the seasonally lower traffic and yields and higher fuel cost.
  • We are raising our FY12/11-13 net profit forecasts by 27-30% as we now assume AirAsia’s yields to only ease -6.1% in FY12/11 vis-à-vis -7.7% previously.
  • Fair value is raised by 27% from RM2.10 to RM2.66. Maintain Underperform.

Century Logistics:

Results/Briefing Note
  • Seasonally weak 1QFY12/11, Stronger Quarters Ahead
  • Century expects to secure a contract from a new customer for its integrated logistic segment to provide storage and distribution services.
  • Century is looking for further opportunities to export in high growing developing countries. Already successful in exporting to Argentina, the company expects to enter Brazil as its next export destination.
  • Fair value of RM2.70/share. Maintain Outperform.


Media Prima:

Results Note
  • 1Q11 Core Net Profit Up 19.1% YoY
  • We maintain our fair value of RM3.20. We reiterate our Outperform call on the stock.



RH Petrogas:

Results Note
  • RHP’s 1QFY11 net earnings of S$1.5m were largely in-line with our earnings estimates accounting for about 19.5% of our net profit expectations (S$7.6m). However, it only accounted for 14% of consensus full year estimates of S$10.95m.
  • Forecasts. No change to earnings estimates at this juncture as earnings are relatively in line.
  • Maintain our Outperform call on the stock and our fair value of S$1.81/share.

Read more...

Maybank IB Views

Malayan Banking: Not Rated
On track; to surpass internal targets

Within expectations. Maybank's results were within expectations, with 9MFY11 net profit of RM3.3b (+13.4% YoY) at 76% of consensus. 3QFY11 net profit growth of 10.9% YoY was largely the product of lower provisions (-68% YoY), as operating profit was flat (+0.3% YoY). FY11 should close above management's targeted ROE of 14% based on 9M's annualized ROE of 15%.

Genting RM11.20: Buy
Another royal flush from Singapore subsidiary

Large positive swing in GENS' earnings. We expect Genting's share price to perform well today after 52%-owned Genting Singapore's (GENS SP) 1Q11 results exceeded expectations (house and street) on above theoretical VIP win rate of 3.8%. GENS should continue to take the lion's share of VIP volume thanks to its generous credit policy. Maintain Buy on Genting with a fine-tuned SOP-based TP of RM12.76.

Media Prima RM2.68: Buy
A flawless quarter

Still recording YoY growth. Despite a relatively high base in the preceding quarter, Media Prima (MPR) still managed to record 1Q11 core net profit growth of 25% YoY. QoQ net profit contracted by 43% on seasonally lower ad spend but we expect ad spend to pick up as the year progresses. We maintain our Buy call and RM3.06 target price on 17x 1-year forward PER.

JT International RM7.16: Buy
Special dividend "coming soon"

Maintain Buy. JTI's 1Q11 net profit of RM34.5m (-8.6% YoY, +26.2% QoQ) formed 24% of our and 25% of consensus full-year forecasts. We see a further upside in the share price, to be boosted by a potential special dividend payout. Maintain Buy with an unchanged DCF-based target price of RM8.10 which implies 13x 2012 PER.

Technicals
The FBM KLCI fell 3.74 points to close at 1,532.29 yesterday. Its resistance areas of 1,534 and 1,550 will cap market gains, whilst the obvious support areas are located at 1,516 and 1,532. Due to the DJIA’s rebound tone last night, we will see the FBM KLCI with steady price action today.

Daily trading idea is a Short-Term Buy call on MHC.

Other Local News
MAS: Escalating fuel costs may affect target. Higher fuel costs will make it harder for Malaysia Airlines (MAS) to achieve its profit target this year but is unlikely to make a downward revision. (Source: Business Times)

Digi: Mulls higher dividend payout to offset lower net profit. DiGi.com Bhd is planning to increase dividend payout ratio to offset the expected lower net profit in future of its network modernizing plan. (Source: Bernama.com)

IGB: Allocates RM3b for overseas assets. IGB Corp Bhd has allocated up to RM3b for various assets acquisitions overseas this year, comprising mixed developments and hotels in Europe and the United States. (Source: The Star)

BIMB: May buy Bank Mualamat. BIMB Holdings Bhd has confirmed that both Khazanah Nasional Bhd and DRB-Hicom Bhd have offered to sell Bank Mualamat Malaysia Bhd to it. (Source: The Edge Financial Daily)

E&U: Main terms agreed for Bakun dam power purchase agreement. Sarawak Energy Bhd (SEB) and Sarawak Hidro Sdn Bhd have reached an agreement on the main terms of the power purchase agreement (PPA) for electricity produced by Bakun hydro dam, including the tariff that SEB would have to pay to Sarawak Hidro. (Source: The Star)

FDI: Tokuyama Corp to invest a further RM3.72b in Sarawak. Tokuyama Corp of Japan will invest a further JPY100b (RM3.72b) to build a second polycrystalline silicon plant in the Samalaju Industrial Park in Bintulu, Sarawak. The second-phase plant will produce polycrystalline silicon for solar cells, with an annual production capacity of 13,800 t. (Source: The Star)

Read more...

Stocks to watch: EONCap, Coastal Contracts, Hap Seng, Fitters, MMHE

Sunday, May 8, 2011

KUALA LUMPUR: Stocks on Bursa Malaysia could continue to see lacklustre trade in the week ahead, starting Monday, May 9 in the absence of strong fresh positive external news to spur buying interest.

The FBM KLCI had fallen the past week to below the key 1,530 level while volume has been declining due to the lack of strong institutional leads.

However, on the macro economic front, the strong March exports could help underpin sentiment. Exports reached a new high of RM64.06 billion in March 2011, up 7.8% from March 2010 while on a month-on-month basis, exports in March 2011 increased by 23.7%.

On Wall Street, an unexpectedly strong report on U.S. payrolls helped equities bounce back on Friday from four days of losses, tempering worries that stocks could suffer the sharp declines seen this week in commodities.

The Dow Jones industrial average gained 54.64 points, or 0.43 percent, to 12,638.81. The Standard & Poor's 500 added 5.10 points, or 0.38 percent, to 1,340.20. The Nasdaq Composite rose 12.84 points, or 0.46 percent, to 2,827.56.

For the week the Dow lost 1.3 percent, the S&P fell 1.7 percent and the Nasdaq Composite dropped 1.6 percent.

At Bursa, some stocks which could see trading interest include EON CAPITAL BHD, COASTAL CONTRACTS BHD, HAP SENG CONSOLIDATED BHD, FITTERS DIVERSIFIED BHD and Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE).

EON Capital will distribute the RM312 million, or 44.9 sen per share, which it will receive as special dividend from its unit EON Bank Bhd to all its entitled shareholders.

The dividend was proposed by EONCap on April 29 and agreed by HONG LEONG BANK BHD as a last-minute extra condition to the latter’s acquisition of EONCap’s assets and liabilities for RM5.06 billion.

Coastal Contracts proposed a corporate exercise involving a bonus issue and free warrants to its shareholders and also to purchase up to 10% of its paid-up capital.

It said on Friday, May 6 said it proposed a one-for-three bonus issue and one free warrant for every eight shares held after the proposed bonus issue.

Hap Seng Consolidated posted a strong set of earnings in the first quarter ended March 31, 2011, with net profit surging 108% to RM82.17 million in the first quarter ended March 31, 2011 from RM39.48 million a year ago.

Revenue rose 28% to RM751.34 million from RM587.18 million while earnings per share doubled to 14.58 sen from 7.01 sen.

Meanwhile, Fitters Diversified Bhd does not expect to be suspended on Tuesday after it submitted its outstanding annual audited financial statements for financial year ended Dec 31,2010 to Bursa Malaysia Securities Bhd on Friday, May 6.

“There will be no suspension of trading in the above company's securities on May 10,” it said.

Fitters Diversified was due to submit the statements to Bursa Securities for public release on or before April 30. However, due to the delay, it had initially faced suspension on May 10.

Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) posted pre-tax profit of RM114.08 million in the four quarter ended March 31, 2011, down 35.7% from RM177.45 million a year ago.

The decrease was mainly due to lower revenue in engineering and CONSTRUCTION and marine repair and conversion segments.

However, its net profit was up 11.7% at RM128.64 million compared with RM115.15 million a year ago. There was a tax writeback of RM14.43 million compared with tax paid of RM60.03 million a year ago.

Its revenue fell 41.9% to RM923.29 million from RM1.59 billion a year ago. Earnings per share were 8.0 sen versus 8.6 sen.

Read more...

RHBInvest Research

Wednesday, May 4, 2011

Top Story: Selangor Properties

Visit Note

  • Selangor Properties (SPB) has about 35 acres of prime land in Damansara Heights for development. Based on the compulsory acquisition price of RM538 psf for a strip of land in Semantan (to give way for the access road to the new palace) in mid 2010, SPB’s 35 acres of land is in deep value given an average book cost of only RM240 psf.
  • The development on the land will benefit from the proposed MRT line that will have a station at Pusat Bandar Damansara as well as Semantan.
  • Deep in value, but timing is key. We value SPB at RM5.34.

Corporate Highlights

TRC Synergy:

News Update
  • To build submarine facilities worth RM45m for Royal Malaysian Navy
  • This is the second key contract TRC has secured so far this year.
  • Maintain Outperform. Fair value is RM1.94.

Sunway REIT:

3QFY11 Results
  • Slightly hit by external disturbances
  • There were some hiccups in the acquisition of Putra Place after the REIT announced its successful bid for the property in Apr. In view of potential earnings upside from Putra Place , we maintain our Market Perform call for now, with an unchanged fair value of RM1.05.

Read more...

Maybank IB Views

Banking: Overweight
Bouncing back in March

Loan growth stronger than expected. System loan growth in March was stronger than expected and on an annualized basis, is up 12.9% YTD (13.2% YoY). On a YTD basis, non-household loan growth was higher at 13.6% versus 12.3% YTD for consumer loan growth. We raise our system loan growth forecast, and maintain our Overweight stance on the banking sector, with Buys on RHB Capital and CIMB.

COMPANY UPDATE
Petronas Chemicals Group RM7.22: Buy
April high to take a breather Shariah-compliant

Supply disruption boost. PCHEM's product margin in April 2011 was USD1,243/ton (+44.7% YoY, +3.2% MoM), we estimate. The year-to-date product margin of USD1,138/ton is 32.2% higher YoY, and above our 2011 estimate of USD1,027/ton. The advance of chemical prices has stagnated in certain segments but overall it has been a mixed bag with gainers and losers almost neutralizing each other. Maintain Buy; there is no change to our earnings forecasts and RM8.00 target price.

RESULTS REVIEW
Sunway REIT RM1.09: Buy
On track Shariah-compliant

Maintain Buy. SunREIT's RM126.2m 9MFY11 realised net profit was within expectations. Its proposed 1.7 sen DPU for 3QFY11 was also in line. We continue to like SunREIT as we believe it will benefit from the 5-6% p.a. growth in the local retail market and rising consumerism. We see a potential upside from its recently-acquired Putra Place, though a major makeover may be required for the building before it starts contributing to the trust. We maintain our earnings forecasts with an unchanged RM1.15 DCF-based target price.

Eastern Pacific Industrial Corp RM2.40: Hold
No surprises, no catalyst Shariah-compliant

No catalyst in sight. 1Q11 results were in line, on stronger YoY performance. EPIC remains a Hold. We see no immediate catalyst to warrant a re-rating. Moreover, the development of Tanjong Agas in Pahang will pose a challenge to its competitiveness in the long term. Our RM2.55 target price remains unchanged, based on 8x 2011 PER.

Technicals
The FBM KLCI closed 3.48 points lower at 1,531.47 yesterday. Its resistance areas of 1,531 and 1,548 will cap market gains, whilst the obvious support areas are located at 1,514 and 1,529. We expect further range trading for the FBM KLCI. As such, invest with a short-term time horizon.

Trading idea for today is a Buy call on E&O.

Other Local News
Axiata: Dialog, Firstsource in JV. Sri Lanka-based Dialog Axiata, a subsidiary of Axiata, announced a business process outsourcing (BPO) joint venture with India's Firstsource Solutions. Firstsource Solutions and Dialog will hold a 74% and a 26% stake respectively in Dialog Business Services (DBS). The JV will manage Dialog's customer contact management operations across its mobile, fixed line, pay television and broadband businesses. (Source: Business Times)

RHBCap: ADCB eyes 2 times book value for RHB stake. Abu Dhabi Commercial Bank is looking at two times book value, or about RM10 per share, for its 25% stake in RHB Capital Bhd. (Source: The Star)

EonCap: Restraining order unlikely by Primus as such move may result in legal suit by HLB. Primus Pacific Partners Ltd, which last week lost its legal case against EON Capital Bhd's (EON Cap) directors and shareholders, is unlikely to file a restraining order or injunction to stop the sale of EON Cap's assets to Hong Leong Bank Bhd (HLB) for fear of opening itself up to a legal suit. (Source: The Star)

KPJ: To raise RM500m for projects. KPJ Healthcare Bhd has launched its Islamic commercial papers/Islamic medium-term notes (ICP/IMTN) programme to raise RM500m to finance hospital and healthcare projects. (Source: The Star)

Ramunia: Unveils plan to bring the group out of PN17 status. Ramunia Holdings Bhd has unveiled a regularisation plan to address its PN17 status that involved a proposed capital reconstruction, rights issue and business rejuvenation plan. (Source: The Star)

TRC Synergy: Bags RM45m contract. TRC Synergy Bhd's unit, Trans Resources Corp Sdn Bhd has won a RM45m job from Boustead Penang Shipyard Sdn Bhd to build submarine safety conditioning facilities. (Source: Business Times)

Read more...

Maybank IB Views

Tuesday, May 3, 2011

RESULTS REVIEW
Digi.Com RM29.08: Hold
Positioning for the future Shariah-compliant

Positive surprise. 1Q11 RM331m net profit (+19% YoY, -0.3% QoQ) made up 26.4% of our previous full-year forecast of RM1.25b and 25.5% of consensus. We however cut our 2011-12 earnings forecasts by 20% and 22% respectively on accelerated depreciation charges, while our 2013 net profit is raised by 4% to incorporate higher margin assumptions. Our Hold call is maintained, with a raised EV/EBITDA target price of RM30.00 (RM26.70 previously).

Technicals
The FBM KLCI inched up 12.20-points and closed at 1,534.95 last Friday. The local market again remained lacklustre in quiet trading despite the DJIA’s firm upward performance. The obvious support areas for the FBM KLCI are located in the 1,498 to 1,534-zone. The firm resistance zone of 1,540 and 1,576 will see heavy liquidation activities.

Trading Idea is a Short-Term Buy call on F&N

Other Local News
AirAsia: To re-impose fuel surcharge. AirAsia Bhd has finally succumbed to the pressure of persisting high fuel prices and will re-introduce fuel surcharge ranging from RM10 to RM30 per flight after having abolished its fuel surcharge policy in late 2008. (Source: The Star)

Sime Darby: Motors to expand further in China. Sime Darby Motors is planning to expand the number of its vehicle outlets from 14 to 20 in the short term within both first and second-tier cities in China this year. (Source: The Star)

EonCap: Closure of deal. The board of EON Capital Bhd (EON Cap) has accepted the RM5.1b takeover bid by Hong Leong Bank Bhd (HLB), capping a 16-month battle to create the country's fourth-largest bank by assets. It also proposed a surprise net interim dividend of RM312m, or 45 sen per share, in addition to the offer price. (Source: The Star)

Utilities: Selangor confident of solving water issue. The Selangor government is confident that it will be able to solve issues pertaining the restructuring of the state's water industry through discussions with the Federal government as stipulated under the Water Services Industry Act 2006. (Source: The Star)

Iskandar: To attract RM73b new investment, Italian firm Galperti to set up plant. Iskandar Malaysia aims to attract RM73b new investments to the country's first economic growth corridor starting from January 2011 until December 2015. Separately, an Italian-based group is set to open a manufacturing plant in the Setia Business Park (SBP) in Iskandar Malaysia as part of the company's expansion plan into Asia. Galperti Manufacturing Malaysia Sdn Bhd is a subsidiary of the Galperti Group Italy, a market leader in the manufacturing of forged components for the oil and gas industries, in addition to chemical and petrochemical plants. (Source: The Star, Business Times)

Property: Residential property boom in Johor Baru. The prices of residential properties have risen by an average of 40% since 2006, in a city which used to suffer from an overhang of properties. Property owners and buyers can expect property prices in Johor Baru to rise by a further 10-20% by end of 2011, on increased costs alone. (Source: Business Times)

Construction: Three names submitted for Gemas-JB rail job. The Chinese government is understood to have nominated three companies to partner local outfits in bidding for the RM7b Gemas-Johor Baru double-tracking project. The companies include China Railway Engineering Corp (CREC) and China Raiway Construction Corp Ltd. The 3rd company is understood to be partnering Tan Sri Tan Kay Hock, who controls Johan Holdings Bhd and George Kent (M) Bhd. (Source: The Edge Financial Weekly)

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