KUALA LUMPUR, April 6 — This is a selection of morning calls by local research houses for the day.
From RHB Research
MPHB recently sold the Flamingo Downtown hotel (the old Plaza Magnum) for RM54 million. Going forward, MPHB continues to be on the lookout to sell its remaining hospitality assets, including the Flamingo By The Lake hotel in Ampang. Between the general insurance and stockbroking businesses, we believe AA Anthony (stockbroking) will more likely be sold first. As for insurance, MPHB expects this to only be ready for disposal by end-2012.
Forecasts revised by -1.3 per cent for FY12 and by +3.2-3.7 per cent for FY13-14. We continue to believe MPHB is a deep value stock. Even at our fair value of RM3.10, this implies a PE of only 13.9x CY12, which is still at a discount to BToto’s current PE of 14.8x.
At current price, the implied value for MPHB’s gaming business is only 8.5x CY12. We believe one of the main re-rating catalysts for the stock would be the disposal of more non-core assets, which will put MPHB on a more even footing with BToto. Outperform maintained.
Various dailies reported today that MBSB’s CEO has lowered the group’s loan growth target to 15-20 per cent (absolute growth of about RM3bn) from 20-25 per cent due to market conditions and also “domestic operating parameters”.
While the downward revision has aligned management’s target with our assumptions, the timing of the downgrade was a surprise given that MBSB appeared rather optimistic in terms of its outlook just last month during a briefing. We would not be surprise if the change in target followed on the back of discussions with the regulators.
Separately, MBSB expects to realise more than RM200 million from the sale of land in Sungai Buloh and Johor. This could result in an estimated one-off gain of over RM100 million and lead to an additional net yield of one per cent, based on our 30 per cent dividend payout assumption.
Fair value of RM2.46 and Market Perform call maintained.
SapuraCrest and Kencana announced that they have mutually agreed to extend the period for the fulfilment of the conditions in relation to the offer to 31 May. (Bursa)
We believe there is little risk that the merger will not happen, and we recall the delays that PLUS faced also during its privatisation exercise. We reiterate our positive long-term view that the merger will create a formidable regional O&G player. In the near term, the two stocks will likely face selling pressure, but we believe the weakness may be an opportunity to accumulate. In our view, the two companies are highly regarded, even on their own, and proven capable of winning contracts in their respective businesses.
Navis is reportedly set to raise its stake in SEGi from 28.4 per cent to above the 33 per cent in order to trigger a general offer. It was also reported that Datuk Seri Clement Hii, SEGi’s Group MD and largest shareholder with a 29.8 per cent stake, is unlikely to sell off his stake to Navis, and will remain as SEGi’s MD. (Financial Daily)
Neutral, as we have earlier highlighted the potential GO by Navis. SEGi currently trades at 14x FY12 fully-diluted EPS based on yesterday’s closing price of RM1.73 with an estimated 3-year CAGR of 21.2 per cent, which underpins our fair value for the stock of RM2.00/share. We reiterate our view that a private equity firm like Navis would normally prefer to enhance the value of private companies with the future intention of listing as an exit plan.
TNB’s CFO Mohd Rafique Merican resigned yesterday “to pursue better opportunity and career advancement”. (Bursa)
The news comes as a surprise given that TNB has yet to fully sort out the succession plans for its outgoing CEO, Datuk Seri Che Khalib Mohamad Noh whose contract expires in Jun. The successor to Che Khalib is expected to be announced sometime this month.
From HwangDBS Vickers
Sector Update — MRT
MMC hosted a briefing at the site of the MRT Sg. Buloh-Kajang (SBK) line. They also took us to see the alignment from Sg. Buloh (RRIM Land) to Semantan (ground works have started at the later). To recap, the project will span 51 km including 9.5km underground.
It will be completed in two phases — December 2016 (Sg. Buloh-Semantan) and July 2017 (full completion). The tunneling portion will run from KL Sentral to Maluri. It will employ a total of 10 tunnel boring machines (TBMs) — two will be delivered by year-end to start boring by March 2013. The TBMs will be boring at five tunnel drives (Semantan portal, Pudu, Bukit Bintang, Merdeka and Cochrane).
Expect awards sooner. There are 86 packages in total, with 27 worth RM10.5bn awarded so far. 13 are in progress — 5 elevated viaduct packages (V1-V4, V7), 1 depot (Sg, Buloh), 6 systems, and 1 multi-storey car park. The listed beneficiaries of the elevated works remain Sunway (BUY, TP RM3.30), TRC (BUY, TP RM0.80), Muhibbah (Not rated) and IJM (BUY, TP RM8.10), with all prequalified for all civil, station and depot works. It will award 2 viaduct and 1 depot package this month, and could hit 85 per cent award months ahead of its October target.
Gamuda is still the top pick. Gamuda is still trading at mean PE and P/NTA valuation despite winning the tunneling project and delivering sterling results. We expect the stock to rerate once election jitters clear. It rerated (>+2SD) pre- and post-award of the RM12.5 billion double-tracking project in late-2007. Our alternative MRT pick is MMC Corp.
From OSK Research
In a Bursa announcement, Tenaga Nasional (TNB) announced that its chief financial officer (CFO), Mohamed Rafique Merican bin Mohd Wahiduddin Merican, 47, has resigned to pursue better opportunities and career advancement.
This piece of news took us by surprise as we had not heard any rumours of En Rafique leaving. Meanwhile, a corporate day being organized by TNB for investors in May could be affected by this development.
While some parties may choose to read more than is justified in the resignation of the CFO, particularly given the upcoming departure of CEO Datuk Seri Che Khalib, who has chosen not to renew his contract when it expires in June, we believe that a leading GLC like TNB will keep its operations intact.
As such, any short term share price weakness should be viewed as an opportunity to accumulate the shares. We maintain our earnings forecast and call, pending further clarification from TNB’s upcoming results briefing on April 12.
We are maintaining our Buy call on Genting Plant with our FV unchanged at RM10.13. Genting Plant is a core Malaysian plantation holding and one of the biggest, best managed and most highly focused. While its PE valuation looks stretched, this is due to the stock pricing in the value of its landbank in Iskandar Region, which we estimate to be worth between RM1.71 and RM2.13 per share. Knocking off the Iskandar land, Genting Plant is trading at 14.7x CY12 and 13.6x CY13 earnings.
* 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.