Analyst call Nov 30

KUALA LUMPUR, Nov 30 — This is a selection of morning calls by local research houses for the day.

From HwangDBS Vickers

Today's Market Preview

 After rebounding from a trough of 1,590.67 on Wednesday, the key FBM KLCI could continue to ride on its technical strength by swinging sideways with a marginal positive bias today.

However, the benchmark index’s immediate upside potential will likely be capped by the 160-day moving average line, which currently stands at 1,617.

Meanwhile, leading equity barometers on Wall Street extended their gains when they rose between 0.3 per cent and 0.7 per cent last night. Essentially, sentiment got a lift following news that the fiscal cliff talks were progressing, with the US president pushing for a resolution as soon as possible.

Back home, more earnings disappointments came in last evening. Genting Bhd, KPJ Health and Media Chinese all reported below-par financial results, which may force their respective share prices to come under pressure today. Separately, there could be added interest in IJM Corporation and Scomi Group shares after one local press reported that IJM Corporation may sell down its 9 per cent stake in Scomi Group if the proposal for the latter to issue convertible debt to the former falls through.

SP Setia
Removal from MSCI could put pressure on upcoming placement. New projects taking off, property sales on track. Maintain BUY with TP of RM4.10, based on wider 25 per cent discount to RNAV.

KPJ Healthcare

3Q12 earnings of RM33.4m was below our and consensus expectations. Dragged by two start-up hospitals — Bandar Baru Klang Specialist Hospital and Rumah Sakit Serpong Damai.

Maintain Fully Valued rating, but nudged down TP to RM4.65 after cutting FY12F-14F earnings

Petronas Dagangan

3Q12 profit grew 42 per cent q-o-q to RM243m, driven by lagged margin gains from rising oil prices. Declared 3rd interim gross DPS of 17.5 sen, taking 9M12 gross DPS to 52.5 sen.

Maintain Fully Valued and RM16.15 TP.

Media Chinese

2Q FY13 earnings were below expectations due to higher staff costs and weaker currency.

Cut FY13-14F earnings by 3-4 per cent after imputing higher staff costs and new forex rates; declared 2.1 sen interim single-tier DPS.

Maintain HOLD rating, but nudged down TP to RM1.10.

Axiata Group

9MFY12 core net profit in line; strong data-led growth dampened by higher costs at XL. Raised capex guidance to RM5bn due to accelerated network improvements at XL.

Maintain HOLD rating and SOP-based RM5.80 TP.

BIMB Holdings

3Q12 result beat our and consensus expectations. Net profit was lifted by stronger NIM and robust financing growth. No dividend was declared in the quarter.

Maintain HOLD rating and RM2.80 TP.

Genting Malaysia

Hit by impairment and bad luck in UK. Core earnings within expectations. Look forward to seasonally stronger 4Q12-1Q13.

Maintain HOLD and SOP-based TP of RM3.50.

Genting Berhad

Results within our expectations but below consensus. Look forward to seasonally stronger 4Q12-1Q13, disposal of Malaysia power plant to 1MDB completed.

Maintain HOLD & SOP-based TP of RM9.70.

WTK Holdings

Stronger 3Q12 earnings driven by all segments. Raised FY12–14F earnings after imputing higher sales volume and lower costs.

Maintain HOLD rating with revised RM1.00 TP.

From RHB Research

Lafarge (M) Cement

Lafarge expects 4QFY12/12 to be volatile due to industry players’ “over-reaction” to new capacity coming onstream, coupled with the rainy season that dampens construction activities, temporarily capping demand for cement.

Lafarge remains positive for 2013 that domestic cement demand will grow by 4-5 per cent in 2013 underpinned predominantly by key public infrastructure projects.
Lafarge sees rising demand for composite cement (at the expense of ordinary Portland cement or OPC).

Net profit forecasts for FY12/12-14 are cut by 3-4 per cent after having lowered our net selling price assumption to RM285-300 per tonne from RM290-305 per tonne.

Fair value is cut to RM10.45 (from RM10.80). Maintain Outperform.     


Axiata’s 3QFY12 core net profit of RM729.9m was above our and consensus expectations, with 9MFY12 core net profit of RM2,133.2m (+9.2 per cent yoy) accounting for 80 per cent and 79 per cent of our and consensus full-year estimates respectively.

The key variance was Axiata’s lower-than-expected tax rate due to Celcom’s tax incentives (RM40m) as well as some tax write-backs in Dialog (RM51m).

Celcom still has some tax incentives left which will reduce Axiata’s effective tax rate. In 3Q, Celcom booked in RM40m in last mile tax incentives, and is expected to book in another RM40m in 4Q. For 2013, Celcom expects to book in RM70-80m in last mile tax incentives.

Management has assessed the telco market in Myanmar, but does not appear too keen due to huge interest from other mobile operators.

We maintain our Outperform call and SOP fair value of RM7.15 after increasing our earnings incrementally by 4-5 per cent due to the negligible change in Celcom’s valuation.

SP Setia

SP Setia has entered into a privatisation agreement with the Malaysian Government to undertake the development and construction of a new 1NIH Complex on a piece of 41.1-acre land at Setia Alam, in exchange for a piece of 52.4-acre leasehold land along Jalan Bangsar.

The construction cost and the minimum profit guarantee of RM1.062bn translates into a land cost of RM473 psf, which is reasonable based on our checks. The Bangsar land will be develop into luxury residential apartments and boutique and strata offices mainly targeting the upmarket buyers. The GDV is estimated at RM8bn.

No change to our forecasts. We revise our RNAV estimate down slightly in view of the profit sharing terms. Our fair value is lowered to RM3.64 based on a wider discount to RNAV of 15 per cent. Despite minimal downside risk, catalysts are lacking over the immediate term. Maintain Market Perform.

Genting Malaysia

Genting Malaysia’s (GM) 9MFY12 core net profit was in line with our and consensus expectations, making up 75-77 per cent of our and consensus FY12 projections.
In 3Q12, GM recorded a net EI loss of RM202.9m mainly caused by impairment losses of RM178.9m (RM87m for Miami operations, RM64m for UK provincial assets and RM27m for Egypt casino concession), bringing total EI loss for 9M12 to RM275.9m.

We highlight that the test on asset impairments are done annually in the 3Q, and we do not expect to see any more major impairments in 4Q12.

Three key takeaways: (1) Stable volumes in Malaysia, with growing VIP business; (2) UK operations back to a loss in 3Q12; and (3) Improving win/unit at RWNY.
Forecasts are unchanged. After adjusting for GM’s 3Q12 net cash balance, our SOP-based fair value is largely unchanged at RM3.70.

We acknowledge that GM’s earnings are more defensive, while the turnaround of its UK operations and ramping up of its US operations would provide it with some earnings leverage.

However, as the perceived risk of the impending General Election draws near, we believe share price performance would be capped in the near term. We therefore maintain our Market Perform recommendation.


Genting’s 9MFY12 normalised net profit was in line with our expectations, coming in at 79 per cent of our original FY12 forecast, but below consensus expectations, coming in at 68 per cent of consensus estimate.

Genting recorded a net EI loss of RM418.6m in 3Q12, comprising mainly impairment costs of RM394.5m (RM87m for Miami, RM102m for UK provincial assets, RM27m for Egypt casino concession and RM179m for associate Landmarks).

We have tweaked our forecasts down by 1.7-3.7 per cent for FY12-14, after taking into account the recent changes made to our Genting Singapore and Genting Plantations earnings.

We have lowered our SOP-based valuation to RM8.90 (from RM9.20), after taking into account our recently revised fair values of Genting Singapore of S$1.15 (from S$1.20) and Genting Plantations of RM7.30 (from RM8.65); and after updating for Genting’s latest net cash as at end-3Q12.

Note that our SOP value excludes earnings from Genting’s Kuala Langat plant and includes the cash proceeds to be received from the sale.

We maintain our Market Perform recommendation on Genting as we believe its dependency on the volatile Singapore market, which is currently facing some headwinds with the ever-changing government regulations, would be an obstacle to its share price performance in the medium term.


Higher-than-expected PBT from its manufacturing division and lower-than-expected effective tax rate.

We have revised our forecasts upward by 20 per cent yoy for FY12 and by 1.4-1.6 per cent for FY13-14.

Market perform. No change to our fair value of RM1.05.

Carlsberg Brewery

3Q12 net profit of RM61.1m (+25.0 per cent yoy, +61.8 per cent qoq), bringing its 9M12 net profit to RM151.2m (+17.4 per cent yoy) which accounted for 83 per cent of our and consensus full-year forecasts.

It was above expectations due to EBIT margin improvement.

Market perform. We raise our FY12-14 earnings by 1.6-5.8 per cent and fair value increased to RM12.54 (previously RM12.40).            

2Q revenue was marginally lower by 5 per cent qoq mainly due to lower print ad revenue. Poor margins led to earnings falling by 18.1 per cent. Market perform. No change to earnings forecast as we expect 2H to be seasonally stronger.            


Cumulative net profit for 1HFY13 declined 42 per cent yoy to RM113.3m that reached just 26 per cent of our previous FY13 core net profit forecast.

The main variance to our estimates was the weaker performance at the automotive division and higher-than-expected effective tax rates.

Outperform. We lower our FY13-15 estimates by 7.5 per cent, 5 per cent and 4.4 per cent respectively after imputing lower Proton sales and higher effective tax rate.


Masterskill widened its cumulative net loss to RM15.4m for 9M12, dragged down by lower student numbers as well as a one-off debt write-off of RM5.3m. We have revised our FY12 net loss figure to RM20.8m (from RM0.7m).

Our FY13 and FY14 EPU have also been revised downwards by 14 per cent and 15 per cent respectively.

Maintain performance. Fair value RM0.75.


3Q12 net profit of RM51.4m (+5.3 per cent yoy, +34.3 per cent qoq), bringing its 9M12 core net profit to RM127.2m (+12.3 per cent yoy) which accounted for 63 per cent and 61 per cent of our and consensus full-year estimates. It was slightly below expectations due to weaker retailing margin.

We cut our FY12-14 earnings by 2.3-4.3 per cent. We lower our call to Underperform and fair value to RM11.47 (previously RM11.74).


3Q12 core net profit of RM33.4m (-4.1 per cent qoq) missed expectations due to the start-up cost of two new hospitals and the lower proportion of tertiary procedures rendered during the quarter.

FY12-14 earnings lowered by 2.9-6.8 per cent p.a. after adjusting for higher administrative expenses.

Outperform. Fair value lowered to RM6.77 (from RM6.97), based on an unchanged CY13 PER of 23.5x.

* 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.


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