Friday, 30 November 2012

UEM Land Holdings - Subdued 9M new sales

Target RM2.46 (Short Term: Trading Buy)

UEM Land’s results were in line as 9M net profit made up 66% of our full-year forecast and 70% of consensus forecasts. 9M new sales of RM1.24bn accounted for only 41% of its original full-year target, forcing UEM Land to cut its sales target from RM3bn to RM2bn.


Petronas Dagangan - On the fast lane to a record year

Target RM26.00 (Long Term: Out Perform)

Higher gasoline, diesel and fuel oil sales drove PetDag to its second-best quarter ever. Though 9M net profit made up 60% of our full-year forecast and 65% of consensus, we deem it broadly in line as we expect a much stronger 4Q and ultimately, a new record year.


Pelikan International - Europe blues continue

Target RM0.68 (Long Term: Under Perform)

Pelikan continued to disappoint in 3QFY12 on deteriorating sales and further restructuring costs. Its annualised 9MFY12 net loss of RM17.7m is way below our earlier expectations of a full-year net profit of RM18.8m. We now expect a full-year loss, just like in FY11.


Muhibbah Engineering - APH still a thorny issue

Target RM0.90 (Long Term: Neutral)

Muhibbah's annualised 9M12 core net profit made up 100% of our full-year number but was 8% above consensus. The results were in line as we expect the weakness in shipyard earnings to flow through in 4Q. The prolonged non-resolution of the APH issue remains a key risk.


Media Chinese Int'l - The story gets better

Target RM1.18 (Long Term: Neutral)

1H13 core EPS was in line with our expectations at 45% of our full-year number, but fell short of consensus at 41%. We expect a stronger 2H due to Christmas spend and election coverage. Adex remains cautious as businesses take a wait-and-see approach before elections are called.


JT International - Smoke on the horizon

Target RM7.00 (Long Term: Neutral)

JTI's 3Q12 briefing was short on stock catalysts. The company reaffirmed that the 20 sen/pack price hike is positive for margins as it more than covers the hike in ad valorem and sales tax payable. But this could also be negated by a moderate volume decline.


Hap Seng Plantations - A victim of lower yields in Sabah

Target RM2.98 (Long Term: Neutral)

Hap Seng Plantations turned in weaker plantation numbers for 9M12, dragged down mainly by lower production, weak selling prices and higher production costs.


Genting Malaysia - Still a Malaysian story

Target RM3.98 (Long Term: Neutral)

With 9M12 core net profit making up 75% of our FY12 forecast, 3Q12 is in line but 10% below consensus. Our numbers were 8% below consensus before the results as we chose to remain prudent on its UK operations which did indeed swing to losses in 3Q12.


Post titleGenting Bhd - Showing strength in diversity, yet again

Target RM14.50 (Long Term: Out Perform)

Although 9M12 core profit accounts for 76% of our FY12 forecast (4Q is seasonally stronger), we consider the results to be in line as there will be no contributions from its Malaysian power operations in 4Q12. We believe management took the opportunity to kitchen-sink in 3Q.


Carlsberg Brewery (M) - Brewing higher margins

Target RM14.50 (Long Term: Out Perform)

Carlsberg's 9M12 net profit of RM145m was above expectations, making up 81% and 82% of our and consensus estimates respectively. We expect 4Q to be strong, driven by more wedding dinners as the Dragon Lunar Year draws to a close.


BIMB Holdings - An all-round “A” rating

Target RM4.00 (Long Term: Out Perform)

Better-than-expected loan growth and surprisingly low credit costs pushed BIMB's 9M12 earnings to 82% of our full-year forecast and 83% of consensus, beating expectations. The 55% surge in 9M net profit was driven mainly by brisk topline growth.


Axiata Group - Cash piling up

Target RM7.15 (Long Term: Out Perform)

Annualised 9M12 core net profit was 4% below CIMB’s number due to weaker-than-expected profits at XL. But it was 8% above consensus. Celcom, Dialog and Robi had commendable quarters. XL Axiata raised its FY12 capex by ~25% by bringing forward its spending from FY13. Despite XL’s higher capex, we think Axiata could spring a positive dividend surprise given its strong cash generation, with 3Q net debt/ EBITDA falling qoq to 0.64x from 0.68x. We cut our FY12-14 EPS estimates by 2-3% and SOP-based target price from RM7.49 to RM7.15 on lower estimates for XL and the rupiah. Axiata remains an Outperform and our top telco pick.


Plantations - A balancing act in 2013

Long Term: Neutral

We are downgrading our regional call to NEUTRAL from Trading Buy as El Nino weather risks have subsided. With supply risks being less of a concern, the focus will be back on demand growth which may be capped by shaky global growth and lower biodiesel mandates. We are lowering our average CPO price forecasts by 7-9% for 2012 -14 to reflect waning El Nino risks. Coupled with higher labour cost assumptions, we downgrade sector earnings by up to 20% and stock target prices by up to 15%. We upgrade Wilmar to our list of top picks as we expect it to benefit from current high inventories and switch our preference to Singapore-listed planters.

CIMB Daybreak - 30 November 2012

What's on the Table...
  • Plantations - A balancing act in 2013
  • Axiata Group - Cash piling up
  • BIMB Holdings - An all-round “A” rating
  • Carlsberg Brewery (M) - Brewing higher margins
  • Genting Bhd - Showing strength in diversity, yet again
  • Genting Malaysia - Still a Malaysian story
  • Hap Seng Plantations - A victim of lower yields in Sabah
  • JT International - Smoke on the horizon
  • Media Chinese Int'l - The story gets better
  • Muhibbah Engineering - APH still a thorny issue
  • Pelikan International - Europe blues continue
  • Petronas Dagangan - On the fast lane to a record year
  • UEM Land Holdings - Subdued 9M new sales

News of the Day...
  • SP Setia concludes RM845m deal with government.
  • IJM may exit Scomi if it is not issued convertible debt.
  • Malaysia to announce details of CPO tax cut.
  • European Commission approves scheme to certify palm oil as biodiesel.
  • CIMB not eyeing GE's stake in Bank of Ayudhya.
  • Malaysia Airlines targeting 10% higher RASK and 3% lower CASK.
  • MAHB may bid for facilities in China and Indonesia.
  • DRB-Hicom to soon announce Proton's turnaround plan.




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ECM GLOBAL NEWS 30 November 2012

US: Economy grew at 2.7% rate, more than first estimated
The economy expanded more than previously estimated in 3Q2012 as a narrower trade deficit and gains in inventory overshadowed a smaller gain in consumer spending. Gross domestic product grew at a 2.7% annual rate, up from a 2% prior estimate, revised figures from the Commerce Department showed. The median forecast of 82 economists surveyed called for a 2.8% gain. Household purchases climbed at a 1.4% rate, the least in more than a year and down from a previously reported 2% rate, and income gains were also cut. (Bloomberg)

US: Consumer spending grows less than forecast
Consumer spending grew less than forecast in 3Q2012, underscoring why Federal Reserve policy makers are zeroing in on fighting unemployment to spur the world's largest economy. Household purchases climbed at a 1.4% rate, the smallest gain in more than a year and down from a previously reported 2% advance, revised figures from the Commerce Department showed. Gains in inventories and a smaller trade deficit more than offset the slowdown to propel gross domestic product to a 2.7% rate, exceeding the 2% pace previously reported. (Bloomberg)

US: Pending sales of existing homes rose 5.2% in October
Americans signed more contracts in October to purchase previously owned homes, another sign the recovery in the housing market is being sustained. The index of pending home resales climbed 5.2%, exceeding the highest estimate in a survey of economists, to 104.8 after a revised 0.4% gain in September, figures from the National Association of Realtors showed. The median forecast in the survey called for a 1% gain. (Bloomberg)

US: CBO says US won't reach debt limit before mid-February
The Treasury Department is estimated to have enough authority to continue borrowing through at least mid-February 2013, the Congressional Budget Office said in a report that will affect the negotiations over the fiscal cliff. The US, with US$16.3trn in debt, is nearing the US$16.4trn debt ceiling and Congress must act to raise it. CBO's estimate assumes that Treasury will use a series of "extraordinary" steps, as it has done in the past. The estimate, CBO said, is subject to adjustment based on actual revenue collections and payments. (Bloomberg)

Europe: Euro-area economic sentiment unexpectedly rises in November
Economic confidence in the euro area unexpectedly rose in November even as the single-currency bloc was mired in its second recession in four years and leaders worked to contain the debt crisis. An index of executive and consumer sentiment in the 17- nation euro area increased to 85.7 from a revised 84.3 in October, the European Commission in Brussels said. Economists had forecast no change from an initial October reading of 84.5, the median of 33 economists' estimates in a survey showed. (Bloomberg) 

Europe: Greek debt-buyback operation may address holdouts, Troika says
Greece's debt-buyback operation may extend to holders of almost EUR4bn (US$5.2bn) of government bonds who opted not to participate in the country's debt restructuring earlier this year, the biggest in history. The buyback will address the holders of bonds governed by non-Greek law who refused to tender them in the EUR200bn debt swap in March, hoping to get paid in full, according to an updated draft of Greece's debt-sustainability assessment from the troika comprising the European Commission, the European Central Bank and the International Monetary Fund. The Greek buyback is part of a package of measures approved by euro-area finance ministers this week to cut the nation's debt. The buyback, which Finance Minister Yannis Stournaras said will be unveiled next week, will target EUR62bn of new bonds issued after the debt swap. Greek banks hold EUR15bn of the new bonds, while the country's pension funds hold EUR8bn. (Bloomberg)

Japan: Retail sales fall in October as car sales drop
Japan's retail sales fell in October by the most in 11 months as consumers purchased fewer cars and televisions, adding pressure on the government to stimulate an economy that may be entering a recession. Sales fell 1.2% y-o-y, the Trade Ministry said, after a 0.4% advance in September. The median estimate of 10 economists surveyed was for a 0.8% decline. From a month earlier, sales increased 0.7%. (Bloomberg)


Economy: World Bank expects 5% GDP growth next year

Malaysia's GDP is expected to grow by 5.1% this year, and will marginally moderate to 5% next year provided there are no significant disruptions to the world economy, said a visiting World Bank economist. "The bigger risk is of something disruptive happening. What's happening in Europe and the US will eventually be resolved but both need to address structural reforms. In short, we don't expect another Lehman Brothers scenario moving forward," said Frederico Gil Sander. (Financial Daily)


Telco: MCMC issues revised SRSP for 4G services in 2600 MHz spectrum

The Malaysian Communications and Multimedia Commission (MCMC) has released a revised standard radio system plan (SKMM SRSP-523) to pave way for potential service providers to launch 4th generation (4G) mobile services. The document details the requirements for a globally harmonised spectrum band plan to implement the international mobile telecommunications (IMT) systems (or 4G) operating in the 2600MHz spectrum band to ensure efficient use of this scarce spectrum resource and to minimise interference among spectrum users. This band has been harmonised globally to facilitate international roaming, allowing the consumer to make use of the same device when travelling in different countries. (Financial Daily) 


Manufacturing: Malaysian manufacturers see weaker prospects

Malaysian manufacturers are less optimistic on their domestic and global business prospects in the next six months amid expectation that a volatile global economy would curb sales. Federation of Malaysian Manufacturers (FMM) president Tan Sri Yong Poh Kon said weak economic conditions in major importing nations, namely Europe, the US, the China and India, would affect demand. “We face uncertain times given looming developments in the global financial, economic and trading environment. Overall manufacturing sector sales could decline going forward,” said Yong. (Financial Daily) 


Scomi Group: Shah Hakim fortifies hold on Scomi

Scomi Group CEO Shah Hakim @ Shahzanim Zain purchased an additional 40.35 million warrants yesterday after snapping up 21.65m warrants a day earlier. With the latest purchase, Shah Hakim’s stake increases to 30.68% of the company’s outstanding warrants, which will expire on 14 December. (Financial Daily) 


S P Setia: Inks Bangsar land swap deal with government

S P Setia Bhd (SPSB MK, Hold, TP: RM3.70) has inked a land swap agreement with the government to build a new integrated health and research institute (1NIH complex) in Setia Alam, Selangor, in exchange for 21.2ha of land in Bangsar. As part of the swap deal, SP Setia will build the 1NIH complex on a 16.6ha land in Setia Alam and 24 apartments units as well as polyclinic and dental clinic in Bangsar. The total contract value for the 1NIH project is RM845m. In addition to carrying out the 1NIH project, SP Setia will pay the government RM217.1m as minimum guaranteed profit (MGP) for the planned mixed development at the Bangsar land. (Business Times) 


IJM: Likely to exit Scomi if bond deal falls through

Construction giant IJM Corp Bhd may sell down its 9% stake in Scomi Group Bhd if the latter is not able to vote through the issuance of convertible debt papers to the former, according to sources. The issuance of the debt paper is being opposed by other major shareholders of Scomi Group, namely Datuk Philip Siew Mun Chuang and Tan Sri Abdul Sahid Mohamed who collectively own about 13%. (StarBiz) 


CIMB: Bidding for stake in Thai bank

Malaysia’s second largest lender CIMB Group (CIMB MK, Hold, TP: RM7.80) is not bidding for General Electric’s (GE) stake in Bank of Ayudhya (BAY), sources said, putting an end to market speculation that it was zeroing in on the Thai bank. “We did not put in a bid,” a source from CIMB, who declined to be named, told Business Times. (Business Times)

Meanwhile, Japan’s biggest bank, Mitsubishi UFJ Financial Group, is among the first round bidders for General Electric’s (GE) US$1.5bil stake in Thailand’s fifth largest lender, Bank of Ayudhya, sources told Reuters. One source familiar with the process but not directly involved said CIMB Group had also lodged a bid. MUFG and CIMB declined to comment. Meanwhile, a CIMB source told StarBiz CIMB had not put in a bid for the Bank of Ayudhya. (StarBiz) 


KPJ Healthcare (Results Review): 9MFY12: Within our but below market's

(Maintain HOLD, TP: RM5.63)

9MFY12 net profit of RM102m (+10% y-o-y) came in within our expectation at 70% of our full-year forecast. However, the result is only 66% of consensus full-year net profit forecast. The stock growth trajectory is already reflected in its financials which appears fully valued. Maintain HOLD and target price of RM5.63 based on 22x FD FY13 EPS. Based on our forecast, the stock is trading at 25x FD FY12 and 22x FY13 FD EPS which appears rich compared to an average net profit growth of 11% pa over the next two years.


Axiata (Results Review): 3QFY12: Within house expectation

(Maintain HOLD, TP: RM5.22) 

Axiata’s 9MFY12 adjusted net profit of RM2.1bn came in within house expectations at 74% thanks to a stellar revenue growth in Voice (+5% y-o-y), SMS (+10% y-o-y) and Data (+11% y-o-y) despite a lower EBITDA margin which was mainly dragged down by higher data investment costs in XL and change in revenue mix. All in all, Axiata is on track to achieve its headline KPIs. Maintain HOLD and sum-of-parts-based target price of RM5.22.


Lafarge Malayan Cement (Company Update): Watch out for margins pressure

(Maintain HOLD, TP: RM9.36) 

We attended Lafarge’s analyst briefing yesterday, coming out feeling cautious on its margins going forward as more and more supply will come into the market gradually. The potential capital repayment exercise, which the market is eagerly awaiting, is still far from materialization. While we believe that Lafarge will benefit from the growth in demand for cement, we see limited upside for the stock considering its rich valuation. Lafarge is currently trading near its peak forward PE of about 22x. Maintain HOLD with unchanged target price of RM9.36.


DRB-Hicom Bhd (Results Review): 2QFY13: Below expectations

(Maintain BUY, TP: RM3.45)

2QFY13 revenue grew more than double contributed mainly by the automotive followed by the services division. Revenue from automotive was up more than three-fold largely due to the inclusion of Proton sales. However, 2QFY13 net profit fell 23% y-o-y to RM81m as additional finance costs from new borrowings, lower contribution from associates and JVs, and higher effective tax rate derailed earnings. This brings 6M13 net profit to RM113m, which fell below our and market’s expectation, forming only 29% and 26% of house and consensus’ full-year earnings forecast. As we see high growth potential in its automotive division from strong sales contributed by Proton and Honda, its assembling collaboration with Volkswagen as well as its future collaboration with Honda Motor, we leave our numbers unchanged and maintain our Buy recommendation and target price of RM3.45. 

ECM Newz Bits - 30 November 2012

Highlights of the day
§         DRB-Hicom Bhd (Results Review): 2QFY13: Below expectations (Maintain BUY, TP: RM3.45)
§         Lafarge Malayan Cement (Company Update): Watch out for margins pressure (Maintain HOLD, TP: RM9.36)  

Other reports
§         Axiata (Results Review): 3QFY12: Within house expectation (Maintain HOLD, TP: RM5.22) 
§         KPJ Healthcare (Results Review): 9MFY12: Within our but below market's (Maintain HOLD, TP: RM5.63)

Other Malaysian news
§         CIMB: Bidding for stake in Thai bank
§         IJM: Likely to exit Scomi if bond deal falls through
§         S P Setia: Launches Setia Investment Centre
§         S P Setia: Inks Bangsar land swap deal with government
§         Scomi Group: Shah Hakim fortifies hold on Scomi
§         Manufacturing: Malaysian manufacturers see weaker prospects
§         Telco: MCMC issues revised SRSP for 4G services in 2600 MHz spectrum
§         Economy: World Bank expects 5% GDP growth next year

Global news
§         US: Economy grew at 2.7% rate, more than first estimated
§         US: Consumer spending grows less than forecast
§         US: Pending sales of existing homes rose 5.2% in October
§         US: CBO says US won’t reach debt limit before mid-February
§         Europe: Euro-area economic sentiment unexpectedly rises in November
§         Europe: Greek debt-buyback operation may address holdouts, Troika says
§         Japan: Retail sales fall in October as car sales drop



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Thursday, 29 November 2012

Tan Chong Motor Holdings - All hopes on the Almera

Target RM3.94 (Long Term: Under Perform)

9M12 core EPS accounted for 60% of our full-year forecast and our FY12 EPS estimate was 11% below consensus before the results. 3Q12 results are weak but the performance is in line as the recent launch of the Nissan Almera is "expected to boost quarter 4".



Supermax Corp - Staying put in Malaysia

Target RM2.64 (Long Term: Out Perform)

The 3Q12 briefing left us feeling positive about Supermax's prospects. We like its pre-emptive move to further automate manufacturing to neutralise the impact of wage inflation. The company isn't going anywhere and still prefers Malaysia as its manufacturing base.



Sunway Bhd - Property investment boost

Target RM2.70 (Short Term: Trading Buy)

Sunway's annualised 9M12 core net profit made up 90% of our full-year forecast and 93% of consensus. The results were in line as 4Q should be a better quarter. Construction earnings should improve, driven by stronger progress billings.



Petronas Chemical Group - Still weak outlook

Target RM6.50 (Long Term: Neutral)

PChem's earnings outlook in 4Q12 and 1H13 remains tough due to weak product prices and margins. Also, a feedstock supply shortage still persists for both olefins and fertiliser groups. The positive impact from its cheap gas feedstock is unlikely to offset the weak earnings.



MY E.GServices - Normal services to resume after slow 1Q

Target RM1.27 (Long Term: Out Perform)

Although MyEG's annualised 1QFY6/13 net profit came in at 77% of our forecast, we view it as broadly in line as 1Q is seasonally a weak quarter. Earnings growth over the next 1-2 years will be driven by the commercial launch of two new services from early 2013 onwards.



Malaysia Airports Holdings - Trouble in the Maldives

Target RM6.60 (Long Term: Out Perform)

The government of Maldives has reportedly cancelled GMR-MAHB's contract to develop and operate Male airport. It is uncertain if MAHB can recoup its investment. It may have to provide for up to RM62.7m of impairments in the worst case scenario.



KLCC Property Holdings - Towering dividend payout

Target RM6.64 (Long Term: Out Perform)

9M12 core net profit was slightly above our expectations, making up 78% of our full-year forecast, due to better margins. The company also announced that it will form Malaysia?ˉs first-ever stapled security structure, which will commit to a >90% dividend payout policy.



JT International - Under fire from the illegals

Target RM7.00 (Long Term: Neutral)

JTI's 9M12 core net profit of RM99m was within expectations, coming in at 76% of our and consensus full-year estimates. Illegal cigarettes remain prevalent in the country, constituting 34.9% of all the cigarettes smoked in Malaysia.



IJM Corp Bhd - Construction makes a comeback

Target RM5.60 (Short Term: Trading Buy)

IJM's annualised 1H13 core net profit missed the mark, being 78% of our estimate and 86% of consensus numbers. Though it falls short of expectations as plantations and industries are likely to be weak in 2H, we are encouraged by construction’s sustainable margin recovery.



Genting Plantations - Stronger output lies ahead

Target RM9.30 (Long Term: Neutral)

Genting Plants' 3Q would have been below expectations if not for the lower effective tax rate. We expect the group to deliver a stronger4Q earnings as higher seasonal production and guidance of lower fertiliser inputs will offset the lower selling prices.



MISC Bhd - Staying afloat

Target RM4.32 (Long Term: Neutral)

Although 9M12 core earnings only made up 57% of our full-year estimate, results were just slightly below our expectations as we foresee a better 4Q driven by contributions from its FSUs and improved earnings from its heavy engineering (MMHE) division. We cut our 2012-14 EPS estimates by 4-6% to account for lower MMHE earnings, higher liner losses, and other additional expense items. We stay Neutral. Our target price, still based on a 30% discount to SOP, is reduced slightly. A discount is warranted as the petroleum and chemical divisions are expected to remain loss-making for the next few years.



Maxis Berhad - Depressed earnings to stay

Target RM6.90 (Long Term: Neutral)

Annualised 9M12 core net profit missed CIMB.s estimate by 8% and consensus numbers by 13% due to revenue and margin disappointments and higher tax. Maxis's near-term earnings will be depressed by subscriber acquisition costs, in our view. It declared a DPS of 8 sen, as expected. We cut our FY12-14 EPS numbers for the weaker earnings outlook and lower our DCF-based (WACC 8.7%) target price from RM7.04 to RM6.90. We maintain our Neutral call. Axiata remains our top Malaysian telco pick for its rising FCF and higher dividends going forward.


CIMB Daybreak - 29 November 2012

What's on the Table...
  • Maxis Berhad - Depressed earnings to stay
  • MISC Bhd - Staying afloat
  • Genting Plantations - Stronger output lies ahead
  • IJM Corp Bhd - Construction makes a comeback
  • JT International - Under fire from the illegals
  • KLCC Property Holdings - Towering dividend payout
  • Malaysia Airports Holdings - Trouble in the Maldives
  • MY E.GServices - Normal services to resume after slow 1Q
  • Petronas Chemical Group - Still weak outlook
  • Sunway Bhd - Property investment boost
  • Supermax Corp - Staying put in Malaysia
  • Tan Chong Motor Holdings - All hopes on the Almera

News of the Day...
  • Maldivian government terminates agreement with GMR-MAHB.
  • SP Setial achieves sales of RM2.5bn for its KL Eco City project.
  • Anti-dumping duty for cheap steel imports to be introduced .
  • Supermax expects to double nitrile glove production.
  • DRB-Hicom not selling Lotus.
  • Media Prima to undertake up to RM500m in CP/MTN.
  • Scomi CEO acquires 21.65m warrants in the company.
  • Time Engineering CEO resigns.

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