Analyst calls for April 27
KUALA LUMPUR, April 27 — This is a selection of morning calls by local research houses for the day.
HwangDBS Vickers Research
Malaysia Airports
— Earnings within expectation. 1Q12 revenue grew six per cent y-o-y to RM657.7 million, with net profit also improving seven per cent to RM102.1 million, driven by higher PSC charges and airport landing and parking rates. 1Q12 profit accounts for 27 per cent of our FY12F earnings, but is below street estimates. Revenue from airport services grew five per cent y-o-y, mainly due to the seven per cent improvement in passenger traffic at KLIA.
— Expect weaker 2H. Despite a strong first quarter, we are keeping our forecast for FY12 as we expect MAHB to post weaker earnings in the 2H. This is premised on higher staff costs as MAHB will add 500 to 800 personnel for KLIA2, with training slated to start in 3Q12 or 4Q12. We understand KLIA2 is currently 50 per cent complete and on schedule to start operations in April 2013. Also, MAHB is currently evaluating tenders for retail space at KLIA2. Preliminary observations suggest rents may be better than expected, but it has not disclosed any figures.
— Maintain Hold, SOP-based TP intact at RM6.05 (adjusted for 10 per cent private placement exercise). Although MAHB is set to benefit from higher airport rates, its earnings will likely be dragged by high depreciation charge and interest payments for KLIA2 in the initial years of operation.
CIMB Group
Hold; RM7.42
Price Target: RM7.60; CIMB MK
CIMB Niaga’s 1Q12 net profit was within expectations. NIM improved benefiting from lower cost of funds and accelerated higher yielding loans. Earnings was driven by higher non-interest income from treasury (gains from bond sale in February and build up of FX business in March) but mitigated by higher provisions. Provisions almost doubled q-o-q on the basis of conservatism but the trend should not remain high the rest of the year as there are recoveries to be expected.
Bumi Armada
Buy; RM4.22
Price Target: RM5.20; BAB MK
The Financial Daily (FD) reported that Ananda Krishnan and his bumiputera partners will sell c.15 per cent (440 million shares) of their stakes in Bumi Armada to local and foreign funds via private placements. The article reported that the shares would be placed out at between three to six per cent discount to closing price of RM4.22. Placement will be finalised in coming days.
CB Industrial Product
Buy; RM2.85
Price Target: RM3.00; CBP MK
CBIP has declared an interim tax-exempt DPS of 30 sen (RM82.5 million) which represents 79.4 per cent of FY11’s net profit and a 10.5 per cent yield. We had earlier highlighted possibility of a “special” dividend payment arising from its RM235.6 million net cash position by end-FY11 upon the disposal of its Sachiew and Empresa plantations. Excluding the “special”, we expect a 30 per cent payout of FY12F’s net profit which translates into net DPS of 9.2 sen (3.2 per cent yield). Total forecasted dividend payment for FY12F is RM107.8 million (30 sen + 9.2 sen DPS). Still based on its net cash position, we believe the Group has capacity for even higher payouts. Maintain Buy at RM3.00 TP pegged to 10x FY12F EPF of 30 sen.
RHB Equity Focus
Genting Malaysia
— Management upbeat on casino prospects in New York, but seven new casinos are a surprise; 2) RWNY operations have been improving since Feb, with expectations of better margins in 2012, given the absence of pre-operating expenses; 3) Potential state-wide referendum to take place in Miami?; 4) In UK, focus is on VIP market, with the help of new hotel acquisition; and 5) Malaysian operations remain a stable backbone.
— FY12-14 forecasts have been tweaked by 1-2-3.6 per cent, after adjustments to capex assumptions based on management guidance as well as raising our EBITDA margins assumptions for RWNY to 22-23 per cent (from 21-22 per cent). Nevertheless, we have reduced our SOP-based fair value to RM4.20 (from RM4.35), after updating our DCF parameters for Malaysia and UK.
— We downgrade our call on Genting Malaysia to Market Perform (from outperform) as we believe the slower progress of legalisation and hitches encountered in GM’s expansion plans into new geographical areas would cap share price movement at this juncture. Potential catalysts which could help to re-rate the stock would be progress on the legalisation of gaming in New York and Miami, better-than-expected sustainable EBITDA margins in RWNY as well as better-than-expected and sustainable improvements in Genting UK’s operations.
Genting Bhd
— Malaysian IPP extension still in limbo; 2) Coal price hike for Meizhouwan obtained in 2012?; 3) Associate loss due to Indian power operations; and 4) Last remaining O&G asset is Kasuri block, which has a negative book value in its books.
— We have cut our forecasts by 4.7 per cent for FY12 and by 12-13 per cent for FY13-14, after: 1) imputing operating losses for O&G; 2) imputing our recent earnings downgrade for GS to take into account the impact of the perpetual securities issued; and 3) imputing our earnings upgrade for GM.
— Our SOP-based fair value has been revised to RM12.15 (from RM12.25), after taking into account our revised fair value for GM of RM4.20 (from RM4.35); imputing zero value for Genting’s remaining O&G asset; and updating the market values of its investment in Landmarks. We continue to rate Genting an Outperform, being one of cheapest gaming stocks in the region which gives investors exposure to both the stable Malaysian, flourishing Singaporean market and new segment of the US markets.
MAHB
— Core 1QFY12/12 net profit came in at only 21.6 per cent and 20.6 per cent of our and consensus full-year estimates. However, we consider the results within expectations due to an expected bumper quarter in 4Q during the peak period for air travel.
— MAHB stated that KLIA2 is now 50 per cent completed and reiterated that the project is on track to be fully operational by Apr 2013. MAHB highlighted that it does not expect more cost overruns related to KLIA2 save for additional staff costs.
— MAHB still expects total passenger growth of six to seven per cent for 2012. This will be weaker vis-a-vis 10.7 per cent in 2011, mainly due to a 10-15 per cent reduction in MAS’ capacity. However, we understand the capacity void left by the carrier was mitigated as it was quickly filled up by foreign carriers.
— Maintain forecasts. Fair value is RM6.79.
Mah Sing
— The MOU entered between Central Pattana and Mah Sing to jointly develop a shopping mall in Icon City has been mutually terminated.
— Although management explained that the cessation will now allow Mah Sing to pursue discussion with other interested parties, we think in the intermediate term, the project has lost one of its strong selling points that enable Mah Sing to draw buyers amidst the property sector slowdown.
— The Icon City project has a GDV of RM3.2 billion, about 20 per cent of Mah Sing’s total outstanding GDV.
— We reduce our sales forecast for this project as we expect slower take-up going forward, but earnings are expected to be affected only beyond FY14. We also note that, apart from Icon City, another project that will have challenge in sales is Icon Mont’ Kiara.
— Our fair value is thus cut to RM2.20 (from RM2.31). Maintain Market Perform.
OSK Research
AirAsia 1Q Operating Stats
AirAsia’s 1Q operating stats came in line with ours as both ASK and RPK (of which both grew by 12 per cent) accounted 24 per cent of our full year forecast with load factor sustaining well at 80 per cent. We reckon AirAsia has benefited strongly from the capacity cuts by MAS in the 1Q as yields will continue to be stronger y-o-y. Meanwhile, there are strong rumours that the AirAsia MAS share swap will be unravelled. In our opinion, with or without the share swap, we continue to see AirAsia benefiting, as capacity cuts by MAS are unlikely to be deployed back due to its ailing financial condition. Maintain BUY with an unchanged fair value of RM4.57. AirAsia is trading at a discount of 20 per cent to its average LCC peers on FY12 earnings. We see AirAsia is reporting better earnings y-o-y at RM290 million albeit lower q-o-q.
Malaysian Pacific Industries
MPI reported a weaker than expected set of results, posting a YTD loss of RM33.3 million as fixed costs remained high while assets were under-utilised. Nonetheless, a second interim dividend of RM0.05/share was declared. We anticipate a turn of event in 2HCY12 as we gathered a slew of positive demand drivers. We are maintaining our TRADING BUY recommendation on the stock but we are revising our FV from RM3.70 to RM3.64 as we rollover our valuation to FY13, pegged to 1.1x P/NTA. We advise investors to accumulate the stock in the event of a pull back in share price today.
CIMB Group Holdings
The group’s 97.9 per cent-owned subsidiary CIMB Niaga reported full-year earnings that were in line with estimates. 1QFY12 earnings rose 29 per cent y-o-y and 18 per cent q-o-q largely due to lumpy trading gains, improvement in NIMs, but this was partially offset by higher provisions. The key takeaways include a positive stabilisation in NIM but a negative deposit growth lag that could slightly dampen the loan growth outlook. Maintain BUY at an unchanged FV of RM8.53 (2.3x P/BV, 16.7% ROE).
* 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.
