Thursday, 30 August 2012

Wah Seong Corp - Leaky 2Q from margin pressure

Target RM2.42 (Short term: Trading Buy)

At only 25% of our forecast and 36% of consensus, Wah Seong’s 1H12 core earnings missed expectations, mostly because of the execution of lower-margin projects in 2Q. Though 2H is expected to be stronger, we believe that our full-year forecast is out of reach.


UEM Land Holdings - Weak 1H new sales

Target RM2.42 (Short term: Trading Buy)

UEM Land's results were broadly in line with expectations. Although 1H net profit was only 43% of our and 46% of consensus full-year forecasts, 2H should be stronger and make up for the shortfall. 1H new sales of RM795m amounted to only 27% of the full-year target.


Sime Darby Bhd - Budding optimism over FY13

Target RM11.00 (Short term: Trading Buy)

The fairly good performance of Sime’s businesses in July despite slower global growth is tempered by the FY13 profit target it revealed during the briefing, which was lower than our estimate.


Puncak Niaga Holdings - Flooded with water politics

Target RM1.39 (Long term: Neutral)

Puncak’s annualised 1H12 core net profit was 27% above consensus and 1% above our full-year numbers. We deem the results in line as 2H will be dragged down by higher operating cost. The main overhang on the stock is the stunted progress of water restructuring in Selangor.


Malaysian Pacific Industries - Earnings growth short-circuited by poor PC demand

Target RM2.46 (Long term: Neutral)

During MPI's 4QFY6/12 results briefing, management guided for a flat-to-lower qoq performance in 1Q13. It expects poor PC demand to be a drag on sales. However, it is upbeat on the group's prospects for the smartphone and tablet market..


Media Chinese Int'l - Neutral medium

Target RM1.59 (Long term: Neutral)

MCIL's 1QFY13 core net profit of RM49m was broadly in line with expectations, coming in at 28% of our full-year forecast. Adex in Malaysia was flat, while it was a seasonally-strong quarter for its travel business due to the summer holidays.


Lafarge Malayan Cement - Higher prices with a pinch of salt

Target RM8.25 (Long term: Neutral)

At 41% of our and consensus estimates, 1H results were broadly in line as we expect a stronger 2H due to down trending coal prices, and a cement price hike from 1 Aug. A rise in domestic demand and lower tax offset cost inflation, leading to an 18% yoy rise in 1H core net profit.


Kuala Lumpur Kepong - 3Q misses due to lower output

Target RM20.00  (Long term: Under Perform)

KLK's weak 3QFY9/12 results reflect the weaker-than-expected yield achieved by its estates and the tough operating environment faced by its downstream division. Property earnings were the only bright spot.


Hap Seng Plantations - A weaker harvest in 1H

Target RM3.45  (Short term: Trading Buy)

Like its peers, Hap Seng Plants turned in weaker plantation numbers in 1H due to lower production, weak selling prices and higher cost of production.


Guinness Anchor - Raising the bar for dividends

Target RM17.10  (Long term: Out Perform)

Guinness Anchor Bhd's (GAB) FY6/12 core net profit was broadly in line, at 97% of our and consensus estimates. Encouragingly, it raised its unofficial dividend policy from 85-90% of net profits to 90-95%.


Genting Malaysia - Luck swings back

Target RM3.52  (Long term: Neutral)

After a poor 1Q12, 2Q12 benefited from a favourable luck factor with 1H12 EBITDA and net profit now accounting for 50% of our full year forecast. The results are in line with expectations and consensus but the key question is whether it is sustainable going forward.


Genting Bhd - Strength in diversity

Target RM10.90  (Long term: Out Perform)

2Q12 came in below expectations mainly because of the poor results of Genting Plantations (GENP). 1H12 net profit accounts for 43% of our FY12 forecast. The results, however, show the relative stability of combined group earnings, thanks to diversity.


Carlsberg Brewery (M) - Premium beers raise the bar

Target RM13.60  (Long term: Out Perform)

Carlsberg said during its semi-annual analyst briefing that it is growing its premium beer portfolio and expects to garner 20% share of this segment by year-end. We shave our EPS estimates


AirAsia Bhd - Decent results, and to get better

Target RM4.00  (Long term: Out Perform)

AirAsia's 1H12 core net profits were slightly below expectations, accounting for 29% of our full-year forecast against a typical 35%. This was due to the delay in the incentive payments from Malaysia Airports, and higher start-up losses in the Philippines and Japan.


Ann Joo Resources - When falling prices are good

Target RM2.06  (Short term: Trading Buy)

1H's RM16m core net loss was disappointing against our full-year net profit forecast of RM122m and consensus' RM89m. This was due to blast furnace (BF) start-up costs and dumping by its Chinese peers. We cut our FY12-14 core EPS for lower construction steel product margins.


Sime Darby Bhd - A solid finish

Target RM11.00 (Short term: Trading Buy)

Sime clocked in a good set of 4QFY12 earnings to end the year on a high note thanks to a lower effective tax rate. A stronger final dividend of 25sen was also declared, in line with its record performance. Full-year core net profit was 3% above ours and 2% above consensus. The variance was mainly due to a lower effective tax rate in 4Q. We continue to value the stock at a 10% discount to SOP. It is a Trading Buy rather than an Outperform due to our positive near-term view on CPO price.


Telekom Malaysia - Unifi slows down

Target RM6.34 (Long term: Out Perform)

TM’s 1H12 core net profit was within our expectation at 49.5% of our full-year number, but ahead of consensus at 52%. The results were characterised by a robust order rate but slower net adds for Unifi, while overall margins were trending a little ahead of guidance. As expected, TM announced a 9.8sen single-tier DPS. We maintain our forecast and DCF-based target price of RM6.34 (WACC 9.2%, LTG 2.0%). TM remains our preferred Malaysian telco for its robust growth, with an earnings surprise as a likely catalyst. Our core net profit estimates are 5-22% above consensus.

CIMB Daybreak - 30 August 2012

What's on the Table...
  • Telekom Malaysia - Unifi slows down
  • Sime Darby Bhd - A solid finish
  • Ann Joo Resources - When falling prices are good
  • AirAsia Bhd - Decent results, and to get better
  • Carlsberg Brewery (M) - Premium beers raise the bar
  • Genting Bhd - Strength in diversity
  • Genting Malaysia - Luck swings back
  • Guinness Anchor - Raising the bar for dividends
  • Hap Seng Plantations - A weaker harvest in 1H
  • Kuala Lumpur Kepong - 3Q misses due to lower output
  • Lafarge Malayan Cement - Higher prices with a pinch of salt
  • Media Chinese Int'l - Neutral medium
  • Malaysian Pacific Industries - Earnings growth short-circuited by poor PC demand
  • Puncak Niaga Holdings - Flooded with water politics
  • Sime Darby Bhd - Budding optimism over FY13
  • UEM Land Holdings - Weak 1H new sales
  • Wah Seong Corp - Leaky 2Q from margin pressure

News of the Day...
  • Sime and Tenaga to conduct feasibility study together on potential biogas project
  • Sime aims to increase its plantation landbank to 1m hectares in the next three years
  • AirAsia may sign order of 100 Airbus SAS aircraft at next month's Berlin airshow
  • Litrak will receive over RM80m in compensation from the government
  • Ahmad Zak Resources has won a RM174.6m project from Mass Rapid Transit Corp
  • US economy expanded 1.7% annual rate in 2Q12, from estimate of 1.5%

Click here for the full PDF report

ECM GLOBAL NEWS 30 August 2012

US: 2Q2012 growth exceeds prior estimate 
The economy expanded more than previously estimated in 2Q2012, reflecting gains in consumer spending and exports that are being threatened by costlier gasoline and a global slowdown. GDP climbed at a 1.7% annual rate from April through June, up from an initial estimate of 1.5% and following a 2.0% gain in the first three months of the year, revised Commerce Department figures showed. The weakest gain in business investment in new equipment in almost three years restrained the pace of growth, which was the slowest since 3Q2011. (Bloomberg)

US: Pending sales of existing homes rebounded in July 
Americans signed more contracts to purchase previously owned homes in July, a sign housing will keep strengthening in 2H. The index of pending home resales climbed 2.4%, exceeding the 1.0% gain median forecast of 39 economists surveyed, figures from the National Association of Realtors showed. The gauge rose to 101.7, the highest since April 2010. Home buying is coming within reach for more Americans as less expensive properties and record-low borrowing costs combine to stabilize the industry that helped trigger the recession. (Bloomberg)

US: Fed Beige Book shows gradual economic growth 
The economy continued to grow gradually in July and early August, but manufacturing activity was softening in many areas of the country, the Federal Reserve said. In its Beige Book report of anecdotal information on business activity collected from contacts nationwide, the Fed said retail activity, including auto sales, had picked up since the last report. The economic snapshot was prepared for use by Fed officials at their upcoming policy meeting on September 12-13, when policymakers will debate whether further central bank bond purchases are warranted to spark a stronger recovery. (Reuters)

Europe: Greece makes late push on cuts 
Greece's political leaders said that despite disagreements over the targets of spending cuts, they are confident they can agree on an austerity plan in time for the arrival next week of a team of inspectors from international creditors. As Greece scrambles to identify EUR13.5bn (US$17bn) in cuts for 2013 and 2014?aequal to c.14% of government spending?athe coalition partners may have to retreat from some of their pre-election pledges. The harsh austerity measures are expected to further reduce already slashed public-sector wages and pensions, putting more pressure on the community promised protection, and drawing more fire against the coalition partners, especially those on the political left. (Wall Street Journal)

Brazil: Central bank cuts rate to record low of 7.5%
Brazil lowered its benchmark interest rate for the ninth straight time to boost sluggish growth in the world's second-biggest emerging market. Policy makers led by central bank President Alexandre Tombini reduced the Selic rate by a half-point from its previous record low to 7.5%, as forecast by all 60 economists surveyed. The vote was unanimous. (Bloomberg)

South Korea: Manufacturer confidence stays near post-crisis low
South Korean manufacturers' confidence stayed near the lowest level since the global financial crisis, maintaining pressure for an interest-rate cut to support growth. An index measuring expectations for September was at 75 from 70 the previous month, the Bank of Korea said. Those are the only readings below 80 since 2009, with any number below 100 indicating that pessimists outnumber optimists. (Bloomberg)

Thailand: Exports fall for a fifth month
Thai exports fell for a fifth month this year on cooling global demand and lower prices of rice and rubber, the nation's main agricultural products. Overseas sales dropped 4.5% y-o-y in July to $19.5bn, the Ministry of Commerce said. That compares with a revised 2.3% decline for June, and the median forecast for a 3.75% decline in a survey of 12 economists. Thai manufacturing fell more than expected in July, and Prime Minister Yingluck Shinawatra said this week exports may expand 8% to 9% this year, below an earlier target of 15% because of the European crisis. (Bloomberg)





Oil & Gas: Petronas, Tokyo Gas sign LNG deal Japan's top city gas supplier

Tokyo Gas said it has signed a basic agreement to buy 900,000 MT pa of liquefied natural gas (LNG) from Malaysia for 10 years from April 2015. The agreement was signed with Malaysia LNG Sdn Bhd, which is led by Petronas. The deal comes as a follow-up to an existing contract, due to expire at the end of March 2015, under which Tokyo Gas buys LNG from the Malaysia Dua LNG project. (StarBiz)


Oil & Gas: Petronas gets nod for Progress Energy buy

Petroliam Nasional Berhad's (Petronas) proposed acquisition of Canadian firm Progress Energy Resources Corp via its subsidiary Petronas Carigali Canada Ltd (Petronas Canada) has been approved by Petronas Energy's debenture holders. Petronas Energy said that under the arrangement, holders of 5.25% convertible unsecured debentures due 31 Oct 2014, and its 5.75% Series B convertible unsecured subordinated debentures due 30 Jun 2016 would receive CAD22 (RM69.46) in cash per common share held. (StarBiz) 


Ahmad Zaki: Wins RM174m MRT project

Ahmad Zaki Resources Bhd has won a RM174.6m project from Mass Rapid Transit Corp Bhd for the construction and completion of elevated stations and other associated works at Taman Suntex, Taman Cuepacs and Bandar Tun Hussein Onn. The date for the practical completion for the works shall be on 30 Jun 2016, while the date for line completion for the entire works will be on 31 Jul 2017. (Business Times) 


Litrak: Cannot confirm possible stake sale by Gamuda

Speculation that Lingkaran Trans Kota Holdings Bhd's (Litrak) major shareholder Gamuda Bhd (GAM MK, Hold, TP: RM3.53) may sell its stake in the highway operator cannot be confirmed by Litrak. Both CEO Sazaly Saidi and CFO Richard Lim said Gamuda have not given any indication of divesting its stake in Litrak. (StarBiz) 


Litrak: Gets RM80m from government for toll hike delay

Lingkaran Trans Kota Holdings Bhd (Litrak) will receive over RM80m in compensation from the government for postponing toll hikes. CFO Richard Lim Kim Ong said the company had received half of the cash payout in the middle of this year and the balance will come in the following year after an audit of the traffic has been conducted. According to Litrak's concession agreement, the toll rates for Lebuhraya Damansara Puchong (LDP) were scheduled for a rise on 1 Jan 2011, but the government had decided to defer until further notice. Lim said the cash payout from the federal government will help ease the company's top line as traffic along the LDP has been almost saturated. (Business Times) 


Media Chinese: Mulls M&A in radio, television

Media Chinese International Ltd (MCIL) is considering embarking on mergers and acquisitions (M&A) to expand the scope of its media portfolio to include radio and television operations. Group CEO Francis Tiong said MCIL, will capitalise on its strong balance sheet to undertake M&A involving Chinese language-based entities globally. He said venturing into radio and TV operations is a natural progression for media companies and MCIL is not discounting the possibility of jumping onto the bandwagon in the future. (Financial Daily) 


AirAsia: Indonesia regulators approve

AirAsia unit acquisition Indonesian regulators have approved the acquisition of Batavia Air by AirAsia Bhd's unit AirAsia Investment Ltd and its partner, PT Fersindo Nusaperkasa. According to a Dow Jones report, Indonesia's Air transportation director-general Herry Bhakti said that he signed the decision letter on Tuesday. The acquisition, which is subject to regulatory approvals in Indonesia and is expected to be completed by the second quarter of next year, will see AirAsia holding a 49% stake in PT Metro Batavia (the company which operates Batavia Air), and Fersindo Nusaperkasa owning the 51% majority stake. (StarBiz) 


AirAsia: May order 100 aircraft

Air Asia Bhd may sign an order for as many as 100 Airbus SAS aircraft at next month's Berlin airshow after reporting a 11-fold jump in quarterly profit. Negotiations with Airbus are going "quite well", and the carrier would like to sign the deal in Berlin, CEO Aireen Omar said. (StarBiz) 


Sime Darby: Aims for 1m hectares by 2015

Sime Darby Bhd (SIME MK, Hold, TP: RM9.71) aims to increase its plantation land bank to one million hectares in the next three years, eyeing land expansion in Indonesia and Africa, group CEO Datuk Mohd Bakke Salleh said. Presently, the group has 878,794ha in Malaysia, Indonesia and Liberia. Of this, 522,000ha is planted with oil palm and around 350,000ha is unplanted. (Financial Daily) 


UEM Land Holdings (Results Review) 2QFY12: Better performance

(Maintain BUY, TP: RM2.25) 

UEM Land turned in an improved 2QFY12 net profit of RM107.6m backed by higher contribution from associates and jointly-controlled entities. Although 2Q revenue growth was flat y-o-y, it grew 68% q-o-q to RM510.8m due to increased sales and construction progress from its property developments. Property development was the main revenue generator, with the bulk of contribution coming from non-Nusajaya projects. For 1HFY12, the Group achieved property sales of RM795m, which made up 27% of its full-year sales target of RM3bn, and 46% of our target of RM1.7bn. However, management is confident in achieving their target with most sales expected to come in between 3Q and 4Q. We maintain our estimates, Buy recommendation and target price of RM2.25.


Kuala Lumpur Kepong (Results Review): 3QFY12: Below expectations

(Maintain HOLD, TP: RM19.54) 

KL Kepong's 9MFY12 adjusted net profit declined 25% y-o-y to RM804m, accounting for only 67% of ECM and 59% of consensus estimates. 9MFY12 plantation segment operating profit declined 20% y-o-y as the group achieved lower CPO ASP, recorded a decline in FFB production and faced higher production costs. We are lowering our FY12-FY14 earnings estimates to reflect lower FFB production and higher production costs. Maintain HOLD with a revised TP of RM19.54.


Sime Darby (Results Review) 4QFY12: A record year

(Maintain HOLD, TP: RM9.71) 

Sime Darby’s FY12 reported net profit jumped 13% y-o-y to RM4.15bn, meeting ECM and consensus estimates. Sime also managed to achieve its FY12 profit target of RM3.3bn. While earnings from the plantation division were lower y-o-y, strong contributions from the industrial and motors division helped the group achieve a record net profit level. Maintain HOLD with TP of RM9.71.


Telekom Malaysia (Results Review): 2QFY12: Within house expectation

(Downgrade from HOLD to SELL, TP: RM4.48) 

Excluding 1HFY12 tax incentive of RM87.8m from TM’s normalised PATAMI of RM406.4m, 1H adjusted net profit of RM318.6m came in within house but below consensus full year estimates at 47% and 42%, respectively. We reduce our target price of RM4.78 to RM4.48 after stripping out the capital repayment of 30 sen that has been distributed to shareholders. Despite decent 1HFY12 results, we view that TM’s positive aspects have been fully reflected in the share price, with growing downside risk from intense competition particularly in the HSBB segment. Coupled with a capital downside of 25%, we downgrade our HOLD recommendation to SELL.


IGB REIT (IPO Note): Time for shopping!

(BUY, TP: RM1.37)  

IGB REIT’s initial portfolio comprises 2 properties, namely, Mid Valley Megamall and The Gardens Mall located at the Mid Valley City, which have a combined NLA of over 2.5m sq ft. These two malls are capturing multiple target customer segments due to their size and diversified tenant mix. At an indicative IPO price of RM1.25, IGB REIT will be the largest REIT in Malaysia by assets and market capitalisation upon listing. We recommend a BUY on IGB REIT with a target price of RM1.37, based on FY13F DPU of 6.71 sen and target distribution yield of 4.9%.

Source: ECM Newz Bits 30 August 2012, Full PDF Report

ECM Newz Bits 30 August 2012

Highlights of the day

§        IGB REIT (IPO Note): Time for shopping! (BUY, TP: RM1.37)   

§       Telekom Malaysia (Results Review): 2QFY12: Within house expectation (Downgrade from HOLD to SELL, TP: RM4.48) 



Other reports

§         Sime Darby (Results Review) 4QFY12: A record year (Maintain HOLD, TP: RM9.71) 

§         Kuala Lumpur Kepong (Results Review): 3QFY12: Below expectations (Maintain HOLD, TP: RM19.54) 

§         UEM Land Holdings (Results Review) 2QFY12: Better performance (Maintain BUY, TP: RM2.25) 



Other Malaysian news

§         Sime Darby: Aims for 1m hectares by 2015

§         AirAsia: May order 100 aircraft

§         AirAsia: Indonesia regulators approve AirAsia unit acquisition

§         Media Chinese: Mulls M&A in radio, television

§         Litrak: Gets RM80m from government for toll hike delay

§         Litrak: Cannot confirm possible stake sale by Gamuda

§         Ahmad Zaki: Wins RM174m MRT project

§         Oil & Gas: Petronas gets nod for Progress Energy buy

§         Oil & Gas: Petronas, Tokyo Gas sign LNG deal



Global news

§         US: 2Q2012 growth exceeds prior estimate

§         US: Pending sales of existing homes rebounded in July

§         US: Fed Beige Book shows gradual economic growth

§         Europe: Greece makes late push on cuts

§         Brazil: Central bank cuts rate to record low of 7.5%  

§         South Korea: Manufacturer confidence stays near post-crisis low

§         Thailand: Exports fall for a fifth month



Click here for the full PDF

Wednesday, 29 August 2012

Wellcall Holdings - Stretched valuations

Target RM2.01 (Long Term: Under Perform)

Annualised 9MFY9/12 net profit is 108% of our forecast, above our expectations mainly due to a shift in the sales mix to the higher profitmargin mandrel hose. Wellcall declared an interim DPS of 4sen, within expectations. So far, the company has declared 12sen DPS in FY12.


Sunway Bhd - Sunny side-up soon

Target RM2.79 (Short Term: Trading Buy)

Sunway’s annualised 1H12 core earnings made up 80% of our forecast and 85% of consensus numbers, which we consider in line as it should stage a recovery in 2H. There is value in the stock as concerns over the subdued property market and its lowered sales target are in the price.


Perdana Petroleum - No longer underwater

Target RM0.96 (Long Term: Out Perform)

After a string of quarterly losses, Perdana made a splash in 2Q12 with a convincing turnaround that narrowed 1H’s net loss to RM3m. Backed by an improving vessel utilisation, the company is on course for the profitable finish in FY12 that we and consensus are forecasting.


Pelikan International - Still singing the European blues

Target RM0.71 (Long Term: Under Perform)

Although annualised 1HFY12 core net profit is only 32% of our forecast, it is within expectations as 2H12 is likely to see better numbers as cost cutting measures translate into positive results.


Oriental Holdings - On a steady course

Target RM10.00 (Long Term: Out Perform)

2Q12 results were within expectations with 1H12 net profit accounting for 40% of our full-year forecast, the same relative performance as last year. The plantation and motorcycle businesses made up for the losses in the auto parts division and should carry FY12 earnings through.


Malaysian Pacific Industries – Still not out of the woods

Target RM2.49 (Long Term: Neutral)

MPI returned to profits in 4QFY6/12 after three quarters of losses. FY12 core net loss was 33% less than forecast, thanks to higher revenue and an improved leadframe business in Asia. It expects moderate industry growth amid poor sentiment.