Analyst call June 15
UPDATED @ 10:44:39 AM 15-06-2012
KUALA LUMPUR, June 15 — This is a selection of morning calls by local research houses for the day.
From HwangDBS Vickers
Market Preview
Boosted by expectations that US and European policy makers would step in with additional economic stimulus measures, key indices on Wall Street climbed between 0.6 per cent and 1.2 per cent last night. This could provide buying support for Asian equities ahead.
Still, in the run-up to Greece’s election this Sunday, some investors are expected to stay on the sideline until there is better clarity on Greece’s political implications on the eurozone’s financial system. Back home, riding on technical rebound, the benchmark FBM KLCI may rise towards the immediate resistance barrier of 1,580.
Amid the quiet market backdrop, of added interest on our local bourse today are stocks like: (a) Sime Darby, which plans to invest RM1.4b over the next three years to grow its port operations in Weifang, China; (b) Ramunia, after being awarded fabrication contracts from Shell worth RM178m; and (c) EP Manufacturing, as its proposed acquisition of Maju Expressway for RM1.7b has apparently hit a snag following delays in getting government approval.
Top Glove
Strong demand growth continued to boost margins and earnings. Speeding up automation to contain higher staff costs arising from minimum wage (wef Jan-13). Maintain Hold rating; raised TP to RM5.00 after upgrading FY12/13F earnings by 8 per cent/1 per cent.
Axis REIT
Acquiring two properties for RM85m with combined 8.2 per cent NPI yield. Placement likely in 4Q12 but minimal dilution expected. Maintain Buy and DCF-based RM3.05 TP.
From RHB Research
Top Glove
3Q12 net profit of RM53.8m came in within our but above consensus expectations. Qoq, revenue rose 9.9 per cent on the back of a 9 per cent increase in sales volume and higher ASPs.
Nevertheless, 3Q EBiTDA margin contracted by 2.2 per cent-pt due to higher average latex prices of RM7.52/kg in 3Q (vs. RM6.81/kg in 2Q), resulting in a marginal increase of 0.7 per cent in net profit qoq.
Moving forward, we expect Top Glove to benefit from the recent softening in latex prices and strengthening in US$/RM rate. While we are optimistic on Top Glove’s earnings outlook in the coming quarters, we believe that the good news has largely been reflected in the stock’s price.
We thus maintain our fair value of RM4.95 and Market Perform call on the stock.
Axis REIT
Axis REIT has proposed to acquire two properties in Petaling Jaya (the Wisma Academy Parcel and the Annex) for RM85m, and a placement of up to 90.8m new units, or about 20 per cent of its existing 453.8m units.
Net yields for the assets are at 8.5 per cent (Wisma Academy) and 6.7 per cent (Annex), which are reasonable, as they are still above the REIT’s estimated gross yield of 6.6 per cent. Furthermore, the Annex represents less than 1 per cent of Axis’ total NLA, hence any dilutive impact would be negligible.
We expect the assets to only contribute from 1QFY13 onwards. Although our FY12-14 net profit estimates have increased, our EPU forecasts are reduced by 2.4-3.7 per cent p.a. as we assume that about 45m new units (50 per cent of the 90m under the proposed placement), will be issued as part-funding for acquisitions this year (including Nilai property of RM26.5m), hence leading to a larger unit base.
We expect to incorporate the remaining half of the placement units next year when more acquisitions are executed.
Despite the adjustments in EPU and DPU, our DDM-based fair value is raised to RM2.82 (from RM2.76) as we also fine-tune our cost of equity assumptions. Maintain Market Perform.
From OSK Research
Petra Energy
Petra Energy has finally violated the RM1.30 level, which has capped its price upside for about 7 months, yesterday. The breakout was also accompanied by strong volume that lends credibility to the strength of the violation. We advise traders to accumulate its shares at above the RM1.30 level, following the crucial breakout.
We are eyeing the RM1.63 tough resistance as the upside target. Trades should consider cutting losses if the share price retraces back below the RM1.30 level.
* 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.
