Analyst call May 25
UPDATED @ 12:23:16 PM 25-05-2012
KUALA LUMPUR, May 25 — This is a selection of morning calls by local research houses for the day.
Our Malaysian bourse could struggle to sustain its recovery momentum. The benchmark index — after rebounding 15.8-point or 1.0 per cent this week on thin trading volume — will probably show a downward bias as it faces resistance at the 1,555-level.
There was no visible lead coming in from Wall Street last night. Major US equity indices ended between -0.4 per cent and +0.3 per cent amid mixed views on whether Greece would remain or exit the euro bloc.
Against a fairly quiet market back drop, counters that may see added trading interest on our local stock exchange today include: (a) SapuraKencana Petroleum, after getting an extension for a PETRONAS contract to transport and install offshore facilities worth RM1.3b; (b) independent power producers (IPPs) under YTL Power and MMC as only half of the power purchase agreements from the first generation IPPs would be extended upon expiry according to Tenaga; and (c) Kossan Rubber and Coastal Contracts, given their below par profit announcements released yesterday evening.Sapura Kencana Petroleum
Initiate coverage with BUY rating and RM2.70 TP. Integrated O&G giant; RM14bn order book is largest in Malaysia. Monopoly in Malaysia deepwater pipe-laying and drilling services with unrivalled quality vessels; prime beneficiary of Petronas’ capex. Lucrative marginal field contract a wildcard.
1Q12 net profit below expectations. Slashed FY12-14F earnings by 21-28 per cent after reducing pretax margins. Downgrade to HOLD; cut TP to RM1.90.
CIMB Group Holdings
1Q12 profit is 24 per cent of our/consensus’ estimates; lifted by non-interest income and lower provisions. NIM only weakened slightly, but loan growth disappointed; full year target remains 16 per cent. Bond market deals drove fee income in 1Q12; equity mandates will dominate next few quarters. Maintain HOLD rating and RM7.60 TP.
Annualised 1Q12 net profit is 4 per cent/7 per cent ahead of our/consensus’ estimates because of larger FX gain. Weaker NIM offset impact of lower provisions. Maintain BUY and RM10.60 TP; no dividends were declared this quarter.
2QFY12 result was below expectations due to lower plantation profits and weak oleochemical margins. Cut FY12-14 earnings by 8-11 per cent. Declared interim single tier 15 sen DPS. Maintain HOLD rating; TP cut to RM22.30.
1Q12 result was below expectations due to weak Wilmar earnings. Cut FY12-FY14F EPS by 11-18 per cent. Maintain FULLY VALUED rating, but lowered TP of RM12.90.
1Q12 net profit grew 6.8 per cent y-o-y to RM41m, within expectation. Revenue surged 33 per cent on higher vehicle unit sales and maiden contribution from Hirotako. Overall improvement in operating margin, mainly contributed by autoparts segment. Maintain BUY rating and RM3.80 TP.
Kossan Rubber Industries
1Q12 net profit of RM21.9m was below our and consensus’ estimates. Cut FY12-13 EPS by 9 per cent after revising down revenues and margins. Maintain HOLD rating; nudged down TP to RM3.00, pegged to 9x revised FY12F EPS.
1Q12 turned in RM16.5m net profit, within our and consensus’ expectations. Still no clarity on renewal of MOH concession. Maintain FULLY VALUED with revised RM1.30 TP.
The group’s annualized 1QFY12 earnings were below our estimates but given the fact that its strong equity deals pipeline has yet to be reflected in 1Q12 earnings, we believe that growth will pick up in 2H2012 as most of the mega equity deals would only be realized from 2Q12 onwards. Management is retaining its FY12 key KPI targets of 16.4 per cent ROE and 16 per cent loans growth. Maintain BUY, at an unchanged FV of RM8.53 (2.3x P/BV, 16.7 per cent ROE).
AEON’s 1QFY12 earnings were below consensus but in line with our estimates. Revenue and core net profit grew by 8.2 per cent and 5.3 per cent respectively on improved performance from the retail business and property management segments. The opening of new stores, launch of a new shopping centre as well as higher rental rates lifted the quarter’s earnings. EBIT margin, however, narrowed by 60bps to 6.9 per cent due to higher operating expenses as a result of higher initial cost for new its stores. Maintain NEUTRAL, with a FV of RM8.53.
Kossan’s 1QFY12 results were below expectations and this was mainly due to the volatility in the latex price, resulting in some time lag in passing on the cost increase to its customers. Also, the 1QFY12 results were affected by the new product development cost from the clean-room division. Hence, we are tweaking down our FY12-FY13 earnings by 12 per cent-13 per cent respectively. Maintain Buy with a lower FV of RM4.00 (previously RM4.60) based on existing PER of 13x FY12 EPS.
MBM’s decent results were in line with our estimates but beat consensus’ as margins widened, boosted by airbag maker Hirotako, which achieved economies of scale following new safety rules requiring all national cars to be fitted with at least 2 frontal airbags. We expect the ensuing quarters to be stronger driven by: i) improved sales of Perodua, and ii) higher sales from Volkswagen after the launch of the new Polo sedan. We maintain our BUY call and earnings estimates but cut our SOP fair value to RM4.58 from RM5.34 to reflect risk of weaker Perodua sales. With a 62 per cent upside, our FV implies a PE of 9x vs the sector average of 10x.
KLK’s 1HFY09/12 core net profit was below our and consensus expectations, comprising 38-40 per cent of our and consensus’ FY09/12 forecasts. The main variance was due to higher-than-expected production costs in the plantation division caused by the lower refinery contributions as well as higher labour costs.
We have revised down our forecasts by 6.7-7.9 per cent p.a. for FY09/12-14, after taking into account the hike in production cost estimates. After adjusting for KLK’s latest net debt position and updating for the market price of KLK’s investment in Yule Catto Plc, we reduce our SOP-based fair value to RM21.10 (from RM23.20). We maintain our Underperform recommendation.
Ta Ann’s 1QFY12/12 core net profit of RM11.4m was below expectations, coming in at 8 per cent of our FY12 forecast and 6 per cent of consensus FY12 forecast. The lower-than-expected earnings was due to: (1) lower selling price of logs (-20 per cent yoy versus our expectation of -8 per cent yoy for FY12); and (2) lower sales volumes of plywood (-16 per cent yoy) owing to the still weak Japanese market which was also affected by the euro-debt crisis.
Forecasts were revised downward by 5.2-7.2 per cent for FY12-14 to take into account lower log prices of US$210-230/cum (from US$230-250/cum). Post-earnings revision, our fair value for Ta Ann is reduced to RM5.50 (from RM5.90), based on target PER of 9x CY12 for the timber division and 13x CY12 for the plantation division. Maintain Market perform.
1QFY12 net profit (+20 per cent yoy) was above expectations, accounting for 33 per cent and 35 per cent of our and consensus full-year forecasts respectively. The main variance was the stronger-than-expected gross premium growth for both general and life insurance of 14.5 per cent and 12.7 per cent respectively (vs. our estimates of 7 per cent and 10 per cent respectively).
We are maintaining our forecasts for now, pending any new information from the analysts’ briefing later today.
Despite Allianz’s positive 1QFY12 results, we remain cautious as: 1) the MMIP losses could still result in weaker earnings for the full year; and 2) the slower domestic economic growth outlook, which could hamper general insurance gross premium growth in the coming quarters. We reiterate our Market Perform call on the stock, with an unchanged fair value of RM5.00.
Kossan Rubber Ind
Kossan’s 1QFY12/12 net profit of RM22.0m (-4.4 per cent yoy; 7.9 per cent qoq) accounted for 19 per cent of our and consensus expectations. We consider this to be in line with expectations as we expect production to pick up in the 2HFY12 on the back of 9 new single-former lines with a total production capacity of 1.25bn pcs coming onstream in 2H12. As expected, no dividend was declared during the quarter.
No change to our earnings forecasts. We maintain our indicative fair value of RM3.33, which is based on a target CY12 PER of 9x. We continue to like Kossan for its well-regarded management as well as for its prudent capacity expansion plans. We thus maintain our Market Perform call on the stock.
* 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.