Analyst call for Sept 21
KUALA LUMPUR, Sept 21 — This is a selection of morning calls by local research houses for the day.
From OSK
Proton
Proton announced that it is strengthening its collaboration with Mitsubishi Motors Corp (MMC) via the joint production of engines at Proton, contract assembly of Mitsubishi vehicles catering to the Asean market and the sharing of parts and components. We see this deal benefiting both parties, boosting Proton’s earnings on improved plant utilisation and allowing MMC to gain a firmer foothold in the Asean market. While the news is long term positive, we are still bearish on Proton’s near-term earnings outlook. Maintain SELL at an unchanged FV of RM2.00.
Alam Maritim
Yesterday, Alam announced that its 100 per cent-subsidiary Alam Maritim (M) SB has received a letter of award from a local oil and gas company for the provision of one straight vessel for RM22.1m. The contract, which commenced on 24 July 2011, is for a primary period of 28 months, but has no specific provision for extension.
Positive news, but no change in FY11-12 earnings. This is because we had earlier assumed that some of its vessel contracts would be renewed.
Maintain Neutral. Our fair value for Alam remains unchanged at RM0.85, based on the existing PER of 12x FY12 EPS.
Axiata
Axiata’s annual investor day last week was attended by more than 50 fund managers and analysts. The key messages gleaned from the event were: (i) the possibility of some of its OpCos surprising on the upside in 2HFY11 despite the challenging outlook in key markets; (ii) the preference for a progressive expansion of its dividends over time as opposed to lump sum payouts; and (iii) the group’s longer-term stance (5-7 years) on its investment in Idea Cellular.
We keep our core earnings forecast and our fair value of RM5.50 as the highlights from the event do not alter our view. Axiata remains a BUY following the recent share price de-rating, with valuations at compelling 13x FY12 EPS/5x EV/EBITDA.
From HwangDBS Vickers
Wah Seong Corp
• RM1.3bn order book to drive earnings; strong replenishment with RM5.2bn tender book
• Riding on increasing O&G activities in Malaysia
• Maintain Buy and RM3.10 TP
Wah Seong is in better shape to weather a downturn now than during 2008 (when oil prices plunged), given its strong order book to anchor earnings and a solid balance sheet with only 15 per cent net gearing. It is expected to ride on the Malaysian government’s efforts to fast-track gas field exploration to solve the critical gas shortage. Valuation is undemanding now at 11x FY12 EPS against its historical average of 17x. Reiterate Buy call for 57 per cent upside potential.
From Ambank
Tan Chong
We maintain our HOLD rating on Tan Chong Motor (TCM) with a lower sum-of-parts-derived fair value of RM4.10/share — following earnings downgrade in this report. Our valuation continues to peg TCM at 9x FY11F earnings.
TCM launched the Nissan Livina X-Gear last week. A crossover model, the Livina X-gear is introduced as a CKD (completely knocked-down model). The OTR price tag of RM82,800 is cheaper than the existing Grand Livina MPV’s RM89K (for the 1.6 Auto transmission variant).
While the Livina X-Gear is a refresher, it is ultimately a derivative of the same Grand Livina platform with cosmetic changes and a fewer seat capacity. As such, we would not expect the same kind of response as a full model change.
Note that the Grand Livina MPV has already been in the Malaysian market for over 3 years. Furthermore, the launch of the model coincides with increasing uncertainty in the external economies, which may be affecting consumer sentiment.
Sime Darby
We reiterate our BUY call on Sime Darby with an unchanged fair value of RM10.60/share, pegged at a 10 per cent discount to our sum-of-parts (SOP) value of RM11.77/share.
Our fair value implies a CY12F PE of 15x – a 12 per cent discount to the stock’s five-year average of 17x.
The Star reported that Sime Darby Industrial’s executive vice president Scott William Cameron as saying that the group was looking at buying the distribution assets of Bucyrus International Ltd.
This could involve the dealership rights for Bucyrus products in Sime’s regional sales network including Malaysia, Singapore, Brunei, China and Australasia. The deal may be announced at the end of the year.
Bucyrus, currently located in South Milwaukee, Wisconsin, designs, manufactures and markets surface and underground mining equipment. The current product line includes a range of material removal and material handling products used in both surface and underground mining.
Bucyrus owns the Bucyrus, Bucyrus-Erie, Marion, and Ransomes & Rapier brands and provides OEM parts and support services for machinery which bears those brands.
Even including the group’s recent acquisition of a 30 per cent equity stake in Eastern & Oriental for
RM766mil, Sime’s net gearing will increase from 0.1x to a still comfortable 0.2x. The stock currently trades at an attractive CY11F PE of 14x, below its three-year average of 17x.
* These recommendations are solely the opinion of the respective research firms and not endorsed by The Malaysian Insider. The Malaysian Insider shall not be liable for any loss arising from any investment based on any recommendation, forecast or other information contained here.
