Friday, 28 September 2012

Petronas Gas - Clarity after confusion

Target RM21.32 (Long Term: Out Perform)

PetGas said at the 4th national energy forum that it will own the LNG regasification plant in Pengerang, ending rumours that a Dialog consortium could take over the project. This is positive as it removes uncertainty and reaffirms the long term growth outlook for PetGas. PetGas remains an Outperform and our top utility pick. We maintain our earnings estimates and our DCF based (WACC: 7.7%) target price. This formal confirmation by PetGas that the company will own and operate the Pengerang regasification plant could catalyse the stock.


Tenaga Nasional - Missing person's report

Target RM7.98 (Short Term: Trading Buy)

We understand that Petronas was absent from an economic council meeting on Mon where the details of a stabilisation fund for Tenaga were discussed. This is a setback as a second meeting may be required to get all stakeholders on board to implement and execute the fund. Tenaga remains a Trading Buy but not an outperform due to election uncertainty. Our earnings estimates remain unchanged, as does our target price, still based on 1.3x P/BV or 35% below to Tenaga's long-run average. Energy reforms, lower coal prices and strong electricity demand would catalyse the stock.


Gamuda - Strength in numbers

Target RM4.20 (Short Term: Trading Buy)

Gamuda's FY12 core net profit made up 100% of our forecast and was 3% above consensus. The results were in line, with 29% growth in earnings lifting numbers to a new record. MRT profits should filter through strongly from FY13, coupled with strong job win prospects. We roll-over our valuation horizon to end 2013 and introduce FY15. However, our target price is trimmed as we update for balance sheet items, still pegged to 10% RNAV discount. Maintain Trading Buy and not Outperform due to election risks. Stronger fundamentals plus the launch of MRT 2, likely by end 2012 could catalyse the stock.

CIMB Daybreak - 28 September 2012

What's on the Table...
  • Gamuda - Strength in numbers
  • Tenaga Nasional - Missing person's report
  • Petronas Gas - Clarity after confusion
News of the Day...
  • Results for Prai's 1st generation PPAs out next month
  • FGVH targeting more M&As
  • Tune Insurance to be listed
  • E&O to roll out RM2.5bn worth of properties
  • Malaysia improves corporate governance ranking
  • RMB trade settlement expected to grow
  • Maybank Kim Eng aims to be top player in Vietnam by 2015



Click here for the full PDF report

ECM GLOBAL NEWS 28 September 2012

US: Economy expanded less than forecast in 2Q2012
The economy in the U.S. grew less than previously forecast in 2Q, reflecting slower gains in consumer spending and farm inventories. The world’s largest economy expanded at a 1.3% pace from April through June after growing at a 2% rate in 1Q. The revision compared with a prior estimate of 1.7% and the Bloomberg survey’s 1.7% median forecast. Household purchases, which account for about 70% of the economy, rose at a 1.5% annual pace last quarter, the slowest in a year after a previously reported 1.7% gain. Purchases advanced at a 2.4% rate in the prior 3- month period. (Bloomberg)

US: Plunge in goods orders may restrain expansion
Demand for U.S. durable goods other than transportation equipment unexpectedly dropped in August for a third consecutive month, signaling that slowdowns in business investment and exports will restrain the economic expansion. Orders for goods meant to last at least three years, excluding volatile demand for airplanes and automobiles, fell 1.6% last month after decreasing 1.3% in July, the Commerce Department reported. Total bookings plunged 13.2%, the most since January 2009, as demand for civilian aircraft collapsed. (Bloomberg)

US: Pending sales of existing homes fell 2.6% in August
Americans signed fewer contracts than forecast to purchase previously owned homes in August, showing the recovery in the housing market will be uneven. The index of pending home re-sales dropped 2.6% after a revised 2.6% gain in July that was more than initially reported, figures from the National Association of Realtors showed. The reading compared with a median forecast of a 0.3% gain in a survey of 40 economists. (Bloomberg)

US: Claims for jobless benefits fall more than forecast
Fewer Americans than forecast filed first-time claims for unemployment insurance payments last week, a sign the labor market is getting back on track. Applications for jobless benefits decreased 26,000 to 359,000 in the week ended Sept. 22, the lowest since July, Labor Department figures showed. Economists forecast 375,000 claims, according to the median estimate in a survey. (Bloomberg)

Europe: UK economy shrinks less than estimated, incomes rise
The UK economy shrank less than previously estimated in 2Q and disposable incomes rose the most since 2009, boding well for the prospects of a recovery. GDP fell 0.4% instead of the 0.5% drop estimated last month, thanks to upward revisions to construction and industrial production, the Office for National Statistics said. Real household disposable income rose 1.9%, the biggest jump for three years. Personal incomes were boosted by higher net social benefits and property income. The bill for wages and salaries climbed 2.1%, reflecting the strength of the labor market in the face of the recession. The savings ratio rose to 6.7% from 6%. (Reuters)

Europe: Spain presents austere budget plans
The Spanish government presented EUR13bn (US$16.7bn) of spending cuts and tax increases for 2013 and said it will place new limits on early retirements as political turmoil heightens investor concerns over Prime Minister Mariano Rajoy's ability to slash a towering budget deficit and stabilize one of Europe's largest ailing economies. The government's budget plan for next year includes a share of the spending cuts and tax increases it presented in July designed to cut the deficit by EUR65bn through the year 2014. It also forecasts an increase of more than 30% in debt-servicing costs next year. (Wall Street Journal)

South Korea: Output falls for third month
South Korea’s industrial production fell more than expected in August, declining for a third month as slowing global growth cuts demand for exports of cars and electronics. Output fell 0.7% last month from July when it dropped a revised 1.9%. The median estimate of 13 economists in a survey was for a 0.4% decline. Production rose 0.3% y-o-y. (Bloomberg)


IPO: Tune Group eyes listing of Tune Insurance

Tune Insurance Malaysia Bhd will be the first entity under the Tune Group to go public. Tune Group co-founder and AirAsia Bhd group CEO Tan Sri Tony Fernandes said announcement will be made when the idea has been finalised. (Financial Daily)


Property: Emkay plans Cyberjaya affordable housing project

Property developer Emkay Group expects to launch an affordable housing project in Cyberjaya by 2Q2013 in an effort to enhance the middle-income group's accessibility to their own house. "This is an ongoing effort by us in providing affordable housing to the people, in line with the government's desire to see more of the middle income group owning homes," said chairman Tan Sri Mustapha Kamal Abu Bakar. He said although the project is still in the planning stage, the company expects it to include the development of about 3,000 units of medium cost houses with a selling price of below RM200,000 a unit. (Business Times) 


Weida: Plans luxury condos

Weida (M) Bhd will embark on two high-rise residential condominium projects - in Mont Kiara and Subang - with combined GDV of more than RM600m. Group MD Datuk Lee Choon Chin said the two upmarket projects were expected to have a total of some 660 units. "The projects are expected to simultaneously get off the ground in 2H2013, and will take three years to complete," he said. Lee said the two projects would be the first to be undertaken by Weida as it diversified into property development to broaden group revenue and earning base. (StarBiz) 


George Kent-Lion Pac: JV qualified for LRT job

George Kent-Lion Pacific JV (GKLP JV) is qualified to be awarded the light rail transit (LRT) Ampang line extension project as they complied with technical, finance, legal and contract conditions, Prime Minister Datuk Seri Najib Razak said. He said the second lowest price bidder is a local JV company that has the financial capacity and is listed on Bursa Malaysia. It also passed technical evaluations and offered the second lowest price of the eight companies that bid for the project, he said. (Financial Daily) 


TRC Synergy: Confident its units can manage

MRT jobs TRC Synergy Bhd is confident of the ability of its wholly-owned unit Trans Resources Corp Sdn Bhd to undertake the three mass rapid transit (MRT) station packages awarded to it by MRT Corp Sdn Bhd, says executive chairman Datuk Seri Sufri Mohd Zain. The project announced by MRT Corp on Aug 15, includes the construction of elevated stations at Sungai Buloh, Kampung Baru Sungai Buloh, and Kota Damansara. It is worth RM283.7m. (Financial Daily) 


E&O: MD not leaving Eastern and Oriental Bhd (E&O)

MD Datuk Terry Tham Ka Hon will not let go of the reins anytime soon, quashing market talk that he is cashing out of the niche property developer. "Datuk Tham has no plans to retire. However, we are one of the very few listed companies that have a deputy MD," E&O said in response to questions posed by the Minority Shareholders Watchdog Group at its AGM yesterday. "That provides assurance to all shareholders that the company is well prepared in the event the circumstances on succession arise." (StarBiz) 


DRB-Hicom: Government allocating RM120m for hybrid model to Proton

The government is considering to allocate RM120m next year to Proton Holdings Bhd, a subsidiary of DRB-Hicom (DRB MK, Buy, TP: RM3.45) to undertake research and development (R&D) for a hybrid model before it can be commercialised mid-2014. International Trade and Industry Minister Datuk Seri Mustapha Muhammad said the allocation to develop a hybrid model was justified and relevant as the automotive industry was moving towards this positive direction. "The government allocated RM100m this year for Proton to develop a hybrid and electric model and will consider an allocation of RM120m next year for R&D," he said. (Financial Daily) 


Felda Global: More M&As

Felda Global Ventures Holdings Bhd (FGV MK, Hold, TP: RM4.85) is targeting more mergers and acquisitions (M&A) in the ASEAN region, especially in the upstream operations, partly to counter its old age oil palm profile in Malaysia. GP and CEO Datuk Sabri Ahmad said the group's upstream expansion would involve acquisitions of prospective small and mid-tiered plantation companies in Malaysia as well as green and brown fields for oil palm in Indonesia and sugar plantation in Myanmar. (StarBiz)


Gamuda (Results Review): 4QFY12: Within expectations

(Maintain HOLD, TP: RM3.47)

Gamuda’s FY12 net profit of RM547.3m was in line with expectations. Given the potential headwinds faced by the Malaysian and Vietnam real estate markets in coming quarters, we cut our FY13 property sales forecast in line with management, which results in our sum-of-parts target price reduced slightly to RM3.47 from RM3.53 previously. Maintain HOLD. 

ECM Newz Bits 28 September 2012


Highlights of the day
§         Gamuda (Results Review): 4QFY12: Within expectations (Maintain HOLD, TP: RM3.47)

Other Malaysian news
§         Felda Global: More M&As
§         DRB-Hicom: Government allocating RM120m for hybrid model to Proton
§         E&O: MD not leaving
§         TRC Synergy: Confident its units can manage MRT jobs
§         George Kent-Lion Pac: JV qualified for LRT job
§         Weida: Plans luxury condos
§         Property: Emkay plans Cyberjaya affordable housing project
§         IPO: Tune Group eyes listing of Tune Insurance

Global news
§         US: Economy expanded less than forecast in 2Q2012
§         US: Plunge in goods orders may restrain expansion
§         US: Pending sales of existing homes fell 2.6% in August
§         US: Claims for jobless benefits fall more than forecast
§         Europe: UK economy shrinks less than estimated, incomes rise
§         Europe: Spain presents austere budget plans
§         South Korea: Output falls for third month

Click here for the full PDF

Thursday, 27 September 2012

HELP International Corp - Doing much better next term

Target RM2.52 (Long term: Out Perform)

HELP has yet to decide on whether to borrow or sell its two buildings in KL to fund its RM160m new university campus located next to the RRIM land. A decision is expected before the end of the year.


Axiata Group - Dialog bounces back

Target RM6.66 (Long term: Out Perform)

Our checks with Dialog Axiata reveal that there have not been any new developments that would have caused the surge in its share price. We think the price rally is due to the stabilising LKR, which has fallen 15% YTD, and the cheap valuations of the company after its long de-rating. Mobile revenues should inch up despite the high inflation in Sri Lanka but opex will also be under upside pressure. Axiata remains an Outperform (SOP-based target price) and one of our top regional telco picks with likely re-rating catalysts being earnings surprises.


IJM Corp Bhd - Shedding light on the Scomi deal

Target RM5.30 (Short term: Trading Buy)

IJM's surprise move to take a stake in Scomi may prove to be timely but it may take a while to garner buy-ins from investors given Scomi's perceived poor execution and profitability. Yesterday's briefing shed some reassurance but we are more lukewarm on this for now. Although we impute the surplus value of the 10% Scomi stake, we cut target price as we now apply a higher RNAV discount of 20% from 10% to reflect uncertainties on Scomi's turnaround and delays in the signing of WCE's CA. Maintain Trading Buy as the stock is oversold. It is not an Outperform due to election risks. A near-term catalyst is the overdue signing of the WCE CA.

CIMB Daybreak - 27 September 2012

What's on the Table...
  • IJM Corp Bhd - Shedding light on the Scomi deal
  • Axiata Group - Dialog bounces back
  • HELP International Corp - Doing much better next term
News of the Day...
  • AirAsia to discuss potential areas of collaboration with Malindo Airways?
  • Glomac plans to launch new projects RM1.13bn GDV this financial year
  • Value of new construction jobs in country target to reach at least RM90bn this year?
  • Silk Holdings buys two vessels for RM240.6m from Muhibbah Engineering
  • US new home sales annual pace of 373,000 units in Aug, just 1,000 below the Jul pace
  • Germany clear the last legal hurdle to ratifying the euro zone's new bailout fund

Click here for the full PDF report

ECM GLOBAL NEWS 27 September 2012

US: Sales of new homes stay close to two-year high
Purchases of new homes in August held close to a 2-year high, further evidence of recovery in the housing market that will help sustain the economic expansion. Sales fell 0.3% to a 373,000 annual pace following a revised 374,000 rate in July that was higher than previously estimated and the strongest since April 2010, figures from the Commerce Department showed. The median estimate of 71 economists surveyed forecast a rise to 380,000. Record-low borrowing costs continue to attract buyers, lifting demand for homebuilders, while a drop in the supply of foreclosed homes is easing downward pressure on prices. Federal Reserve policy makers have targeted the housing market with further accommodation measures in order to spur growth and reduce unemployment. (Bloomberg)

US: MBA Mortgage Applications Index climbed 2.8% last week
Mortgage applications increased last week as record-low borrowing costs spurred purchases and home refinancing. The Mortgage Bankers Association’s index climbed 2.8% in the period ended 21 Sep from the prior week, the Washington-based group. Purchase applications rose 0.7% and refinancing increased 3.3%. The average rate on a 30-year fixed loan fell to 3.63%, an all-time low in the series dating back to 1990, from 3.72% the prior week. Borrowing costs on a 15-year fixed mortgage decreased to 2.98% from 3.03%. The share of applicants seeking to refinance a loan rose to 81.2% from 80.7% the previous week. (Bloomberg)

Europe: IMF, EU clash over Greece's bailout prospects
Greece's international official lenders are at loggerheads over how to solve Athens' debt crisis, threatening more trouble for the euro. Officials from Greece and the "troika" of European Union, European Central Bank and International Monetary Fund have said tensions have risen in recent weeks as negotiators wrangle over further budget cuts, with the IMF adamant that Greece reduce its debt further. European officials say the IMF is also pushing them to restructure debts Athens owes them, an uncomfortable prospect for some of Europe's leaders who find the idea of their governments taking losses on the debt politically unpalatable. (Reuters)

Singapore: Production unexpectedly falls
Singapore’s industrial production unexpectedly declined for the first time in 4 months in August as companies reduced output of electronics, pushing the local dollar to the weakest level in 2 weeks. Manufacturing fell 2.2% from a year earlier after a revised 2.5% gain in July, the Economic Development Board. The median of 16 economists surveyed was for a 1% increase. (Bloomberg)


Tricubes: To be delisted on Monday

Tricubes Bhd will be delisted on Monday after Bursa Malaysia disallowed the IT outfit’s appeal against the rejection of the company proposed regularization plan. “Upon delisting, the company will continue to exist but as an unlisted entity. The company is still able to continue its operations and business and proceed with its corporate restructuring and its shareholders can still be rewarded by the company’s performance. However, the shareholders will be holding shares which are no longer quoted and traded on Bursa Securities,” the company said. (Financial Daily)


Majuperak: Unit in groundwater project with South Korean firm

Perak state-owned Majuperak Holdings Bhd has teamed up with a unit of South Korea's Da Joo Construction Co Ltd to help develop a River Bank Filteration project in the state. The venture, if successful, could help supply 500m litres per day (mld) groundwater resources for commercial production in Kota Lama Kiri in Kuala Kangsar, Perak. (Business Times) 


Ireka Corp: Eyeing new MRT jobs

Ireka Corp Bhd is eyeing for more civil engineering jobs from the MRT project, while also stepping up its property development business with projects worth RM1.9bn in GDV planned. “We are currently in a couple of negotiations and we hope to announce these very soon. Currently, about 90% of our revenue is derived from the construction business,” said Ireka ED Lai Voon Hon. (StarBiz) 


SILK Holdings: Buys 2 AHTS vessels for RM241m

SILK Holdings Bhd, via its 70%-owned subsidiary Jasa Merin Sdn Bhd, has inked a sale and purchase agreement to acquire 2 anchor handling tug supply (AHTS) vessels for RM240.6m. The company said the purchase was funded by internally generated funds and bank borrowings with Jasa Merin having partly settled a total of RM16m of the purchase price for the vessels. IDS Darul Ehsan and IDS Darussalam are 70m 120-tonne bollard pull AHTS vessels with an engine rating of 10,800 brake horsepower, and were acquired from their previous owners. (Financial Daily) 


Muhibbah: Unit secure RM241m contracts

Muhibbah Engineering (M) Bhd and its unit CB International Engineering Sdn Bhd have collectively secured contracts for the sale of 2 anchor-handling tug supply vessels, which were completed last year for RM240.6m. In an announcement to Bursa Malaysia, the company said the contracts are expected to contribute positively to the earnings and net assets for the current financial year. (Financial Daily) 


BRDB: Shares suspended from 4 October

Bandar Raya Development Bhd (BRDB) shares will be suspended from trading effective next Thursday following the takeover offer by Ambang Sehati Sdn Bhd. In a statement to Bursa Malaysia, BRDB said Ambang Sehati currently controls more than 90% shareholding in the property development firm. (Financial Daily) 


Crest Builder: Eyes Langat 2 project

Crest Builder Holdings Bhd has its eyes set on the RM3.7bn Langat 2 water treatment plant and is currently negotiating with potential partners to submit a bid for the project. “We bought the tender documents as well and we’re currently in discussions with some potential partners to see how we can put in a competitive bid,” Crest Builder ED Eric Yong said. Yong said no memorandum of understanding (MoU) has been signed yet but Crest is looking at forming a JV with at least 2 or 3 international and local players. (Financial Daily) 


AirAsia: To seek collaboration with Malindo Airways

AirAsia Bhd is seeking collaboration with the newly set up no-frills airline, Malindo Airways, said its regional group CEO Tan Sri Tony Fernandes. “We can collaborate with Malindo Airways. I am not here to make enemies. I will meet [PT Lion Grup president director] Rusdi [Kirana] over dinner soon,” Fernandes was quoted by Bernama as saying. “There are many things that we can collaborate on. Personally, I respect Rusdi who has done a fantastic job in Indonesia,” he added. Nonetheless, Fernandes also pointed out that AirAsia had a “very strong foothold” in the regional aviation industry to face the competition. “Without doubt, we will compete against each other. I know what it takes for an airline to win,” said Fernandes. (Financial Daily)  


KSK: Completes sale of Kurnia Insurans for RM1.63bn

KSK Group Bhd, formerly known as Kurnia Asia Bhd, completed the deal to dispose of its 100% equity interest in Kurnia Insurans (M) Bhd to AmG Insurance Bhd for a final cash consideration of RM1.63bn. Upon disposal of Kurnia Insurans, KSK still has a presence in the general insurance business in Thailand and Indonesia through KSK Insurance (Thailand) Co Ltd and PT KSK Insurance Indonesia. (Financial Daily)  


AMMB: Completes Kurnia Insurans purchase

AMMB Holdings Bhd (AMM MK, Sell, TP: RM6.25) has completed the acquisition of Kurnia Insurans (M) Bhd and the latter is now a unit of AMMB’s 51% subsidiary AmG Insurance Bhd. AMMB said that the final cash purchase price paid by AmG was RM1.627bn, comprising the base price of RM1.55bn plus RM77m for the increase in net assets (NA) of Kurnia from RM759m (adjusted) as of 30 June 2011, to RM836m as at the completion accounts date of 30 June 2012. (StarBiz) 


Maybank: Ayudhya stake not sold to

Maybank Malayan Banking Bhd (MAY MK, Hold, TP: RM9.25) is not the buyer of the 7.6% stake in the Bank Ayudhya, quelling speculation that Maybank has made inroads into a Thai bank. A Maybank spokesman confirmed that the local bank is not the party that purchased the stake in the Thai bank from the largest shareholder GE Capital, with a 33% shareholding, including the 7.6% stake. According to GE Capital’s regional spokesman, the 7.6% stake was sold to institutional investors comprising different parties. (Financial Daily)

Comment: From GE’s perspective, it is faster and easier to place out the 7.6% stake first to take advantage of the bullish Thai market and high share price of Bank of Ayudhya. As its remaining 25% stake will not trigger a general offer, it can then attract more potential bidders to get the best price. We believe Maybank would still want to bid for the 25% stake if it were offered for sale. (Hon Sze) 


IJM Corporation (Company Update): Drilling into the Scomi stake deal

(Maintain BUY, TP: RM5.32)

We attended a briefing by IJM Corp on the rationale behind its proposed RM149m acquisition of up to 25% equity stake in oil and gas services provider Scomi Group Bhd (SGB). While IJM Corp remains a BUY, we downgrade our sum-of-parts target price to RM5.32 from RM6.36 previously assuming a worse-case scenario write-off of its SGB investment cost and introduce a 15% holding company discount to reflect the negative investor perception towards IJM Corp’s entry into SGB. (refer to report for details)


Boustead Holdings (Initiating Coverage): Mixed prospects, saving grace is 6.2% dividend yield

(HOLD, TP: RM4.65)

Boustead Holdings is a GLC-linked conglomerate with a well-diversified portfolio which includes businesses in plantations, property, finance & investment, trading & manufacturing, heavy industries and pharmaceutical. We believe prospects are bound to be mixed due to the different business models employed its diverse segments. However, its saving grace is the Group’s current dividend yield of 6.2%. We initiate coverage on Boustead Holdings with a Hold recommendation and RNAV-based target price of RM4.65. (refer to report for details)

ECM Newz Bits 27 September 2012

Highlights of the day
  • Boustead Holdings (Initiating Coverage): Mixed prospects, saving grace is 6.2% dividend yield (HOLD, TP: RM4.65)
  • IJM Corporation (Company Update): Drilling into the Scomi stake deal (Maintain BUY, TP: RM5.32)
Other Malaysian news
  • Maybank: Ayudhya stake not sold to Maybank
  • AMMB: Completes Kurnia Insurans purchase
  • KSK: Completes sale of Kurnia Insurans for RM1.63bn
  • AirAsia: To seek collaboration with Malindo Airways
  • Crest Builder: Eyes Langat 2 project
  • BRDB: Shares suspended from 4 October
  • Muhibbah: Unit secure RM241m contracts
  • SILK Holdings: Buys 2 AHTS vessels for RM241m
  • Ireka Corp: Eyeing new MRT jobs
  • Majuperak: Unit in groundwater project with South Korean firm
  • Tricubes: To be delisted on Monday

Global news
  • US: Sales of new homes stay close to two-year high
  • US: MBA Mortgage Applications Index climbed 2.8% last week
  • Europe: IMF, EU clash over Greece's bailout prospects
  • Singapore: Production unexpectedly falls

Click here for the full PDF