Analyst calls for August 6
KUALA LUMPUR, Aug 6 — This is a selection of morning calls by local research houses for the day.
HwangDBS Vickers
There is a chance for the benchmark FBM KLCI to cross over the immediate resistance level of 1,635 and make its way towards the next resistance target of 1,650 today.
This comes as sentiment is expected to get a lift following last Friday’s surge on Wall Street. Leading US equity indices jumped between 1.7 per cent and 2.0 per cent at the closing bell on account of better-than-projected job data report.
Hoping to ride on the positive external vibes on our domestic bourse today are selective index-linked laggards such as RHB Capital, UEM Land and YTL Corporation. Separately, YTL Power will likely attract added attention after a local business report said the company may be privatised by its major shareholder while IJM Land’s proposed venture into the U.K. property market could stir interest too.
RHB Research
Parkson Holdings Bhd
We believe that the subdued overall economic performance in China will continue to affect PRG’s China stores’ SSS growth over the short term. Given the uncertain economic outlook, management is now guiding for an overall mid- to high-single digit SSS growth for CY12 (from low- to mid-teens growth).
The weakening Vietnamese economy over the recent months continues to affect consumer spending. With no signs of an economic turnaround over the short term, management is not discounting the possibility that the SSS growth in 4QFY12 will remain flat or even contract marginally. Earnings could also be in the red for 4QFY06/12 due to the softening consumer spending. Management is aiming for an overall SSS growth of 8-10% for FY12.
Our FY06/12-14 earnings forecasts for PHB are reduced by 0.6-5.0 per cent, after updating our numbers and growth assumptions.
Our fair value is reduced slightly to RM4.95 (from RM5.00). Maintain Market Perform.
IJM Land
A JV between IJMLD and LIte Bell on the basis of 51:49 has been formed to undertake a property development project at Central London. We think exploring a new market is not a bad idea as this is done at a reasonable risk and reward consideration. IJMLD is expected to incur a cash outflow of not more than ₤50m (RM248 million) for the project over a period of 5 years. Funding will be largely satisfied by internal funds and some borrowings. We believe IJMLD will be able to handle the cash flow, in view of its balance sheet strength. The project will yield a GDV of RM1.4 billion, comprises hotel cum residential apartments. Gross profit margin is expected to be 25-30 per cent.
No change to our earnings forecasts. Fair value is raised to RM2.80, as we impute the RNAV contribution from this London project, and update its latest landbank and GDV data. Maintain Outperform.
OSK Research
Singapore Airlines
SIA announced that its wholly-owned subsidiary and regional wing SilkAir has signed a Letter of Intent (LOI) to purchase up to 68 new aircraft from Boeing. The order, which will be the largest in SilkAir's history, is subject to a final purchase agreement. Valued at US$4.9 billion (RM14.5 billion) based on Boeing’s list price, the purchase will comprise a firm order for 54 aircraft and purchase rights for 14 more. The firm order is for 23 Boeing 737-800s and 31 Boeing 737 MAX 8s. SilkAir will have the flexibility to switch to other variants within the B737 range.
SilkAir’s sizeable order is a reflection of how much the level playing field in the premium passenger segment has changed. The segment is faced with increasing competition from low cost carriers, which have dominated the skies in the past few years, amid the aggressive expansion of Middle Eastern airlines. The change in strategy would further erode passenger yields, which are already under immense pressure. Management had in the past stated that once an airline starts to offer discounts on air fares, it would be hard to re-adjust yields to their previous levels. This said, we may see this becoming the case for SIA in the longer term.
Silk Air’s current 21-strong fleet comprises A319s and A320s, with three new A320s due to be delivered in 2013. The average age of SilkAir's fleet is six years and three months, while SIA operates 100 aircraft averaging 6 years and two months of age. After the completion of the new orders, SilkAir’s fleet as a proportion of SIA group’s overall passenger fleet will potentially go up from 17 per cent to 30 per cent, assuming that more than half of SIA's existing order for 66 aircraft will be designated to replace older aircraft as part of the latter’s fleet renewal programme.
While SIA will continue to be a significant player in the premium market, its role in the group’s overall strategy will clearly diminish as SilkAir embarks on an aggressive strategy to double its fleet over the next five years. Moving forward, we do not discount the possibly of SIA seeing its route network of less than four hours’ flight radius in Asia eventually being dominated by Silk Air, save for some frequencies allocated to SIA on key sectors that overlap with SilkAir. This will enable SIA to remain relevant in the mid to long haul segment.
We maintain our NEUTRAL call on SIA, with our FV unchanged at S$11.17, premised on a 1x FY13 book value.
*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.
