KUALA LUMPUR, Feb 9 — This is a selection of morning calls by local research houses for the day.
From HwangDBS Vickers
Boustead Holdings
FY11 results should be in line driven by plantations at c.42 per cent of group EBIT with average CPO prices of RM3,300/tonne (vs RM2,622/tonne in FY10). 2012 earnings may appear conservative largely due to our more moderate CPO price assumptions of RM2,740/tonne vs Boustead’s expectations of RM2,900-RM3,300/tonne.
There may also be upside in 2H12 when the sale of its Indonesian plantations is completed, boosting blended FFB yields to 21MT/ha from 17MT/ha currently. With ongoing replanting of clonal seedlings (15 per cent of planted area now), improving tree density, expectations are for yields to improve to 23-24MT/ha in two years and 27-28MT/ha in six years. The group is also open to M&A.
Works have started at the 60-70 acre Jalan Cochrane site pending final land transfer within 1 to 2 months. This development will replicate the success of Mutiara Damansara where 75-80 per cent of tenants there have committed to tenancies at this future 1.2 million sf mall (anchor tenant is Ikea). We estimate Jalan Cochrane could add RM0.93/share to SOP based on ASP of RM900 psf (with room to increase with the MRT) and plot ratio of 8x. Besides Batu Cantonment (to add RM0.65/share), there is a 30 acre site in Jalan Ampang where land cost could be partly financed by the likely sale of 183 Jalan Ampang low rise strata units (RM0.07/share in current SOP).
2011 should be the trough for this division. Its current orderbook is RM10.5 billion, with projects expected to deliver attractive margins of at least 15 per cent. There may be potential upside if these batches of 6 OPVs are given tax free status. BHIC is also looking to leverage on its valuable Petronas fabrication license for marginal oil field projects where it is in talks with Norwegian parties.
BUY, raising TP to RM7.30, factoring in MHS Aviation (DCF value of its RM3 billion orderbook) and higher land values at Mutiara Rini with approval to convert land bank to higher end development.
WCT
WCT announced it has won a RM300.5 million contract for the construction of a Ministry of International Trade & Industry (MITI) building by Putrajaya Management. The scope of works includes the design and build of GBI Gold rating 31-sotrey office, tower, a two-storey car park and a three-storey podium with completion in February 2015.
This is an important win for WCT after a long lull in 2011 (order wins of RM187m). This contract win represents 15 per cent of our FY12F new win assumption of RM2 billion. We expect margins to be c.5 per cent but may trend higher given WCT’s reputation of being cost competitive. Total tenderbook now stands at RM5 billion, which is still skewed towards the Middle East. We maintain our Buy rating and SOP-derived TP of RM3.70.
From OSK Research
JCY International
JCY’s 1QFY12 results were stronger than expected, beating ours and consensus forecasts while representing 43 per cent and 70 per cent of the full year estimates respectively. This quarter alone saw core earnings of RM162.5 million (+515 per cent quarter-on-quarter, +2,063 per cent year-on-year) marking its best quarter since listing, mainly attributed to:
(i) the increase in ASP by 20 per cent-50 per cent
(ii) the appreciation of US$ against MYR by 4.2 per cent quarter-on-quarter (+1.2 per cent year-on-year),
(iii) effective product mix concentrating on base plates and actuators production which command higher margins and
(iv) efficient cost management. In sum, we revised our earnings forecast upwards by 21 per cent and 34 per cent for FY12 and FY13 correspondingly while raising our FV to RM1.80 based on an unchanged 8x FY12 PER.
MBSB
MBSB organised an analyst briefing yesterday in conjunction with the review of its 4QFY11 results during which management shared its view on the future outlook of the group’s business. We were impressed with the management’s confidence to continue growing their loans book in FY12 while keeping its asset quality intact.
The management is also channelling more efforts into generating more fee-based income via bancassurance and other products. We maintain our earnings estimates for now in anticipation of a feeble 2012 and value MBSB at an unchanged 2.6x FY12 PBV. Maintain BUY with a fair value (FV) of RM2.70.
QL Resources
Together with a group of fund managers and analysts, we recently visited QL’s modern marine plant in Kota Kinabalu, Sabah, which produces surimi, frozen fish and fishmeal. The plant is well-equipped with automated machines, and complies with stringent EURO and HACCP standards. We continue to like QL in the consumer space, given its solid earnings track record and on-track expansions in Vietnam and Indonesia.
Maintain BUY call with a FV of RM3.62 (based on 19x CY12 EPS).
CIMB
It was reported that CIMB Group is one of the two remaining bidders for Royal Bank of Scotland Group PLC’s (RBS) cash equities, corporate broking, equity capital markets and merger-and-acquisition (M&A) businesses in Asia. The sale of these units may fetch up to US$50 million (RM150 million) and could happen ahead of RBS’s full-year financial results announcement on February 23, the report said, citing sources familiar with the situation.
With RBS’s Asian equities and M&A business being concentrated in highly competitive markets like Hong Kong, China and, to a certain extent India, we think that CIMB would only consider such an acquisition at basement bargain prices. In addition, these are markets beyond the group’s core ASEAN focus, while RBS’ M&A and cash equities businesses in the region remain loss making.
Unlike CIMB’s GK Goh acquisition, which was instrumental in cementing the group’s ASEAN-regional M&A and equities platform, RBS does not have a similarly th strong M&A and equities franchise business in the region as it is being ranked 24 in the M&A league table rankings in 2011. Note that there is another bidder for the assets in the form of China International Capital Corp (CICC) which could very well outbid CIMB for the assets.
We are retaining our NEUTRAL recommendation and Fair Value of RM7.62 on CIMB, as its valuation is still relatively high at 1.93x FY12 P/BV vs its 6- year historical mean P/BV of 1.85x. We prefer Maybank, which is trading at a cheaper 1.7x P/BV and backed by a higher gross dividend yield of 7.6 per cent.
From RHB Research
Gamuda
April 2012 remains the most critical for Gamuda as it is when the RM7-8 billion tunnelling package of the Sg Buloh–Kajang (SBK) Line of the Klang Valley MRT project is expected to be awarded.
We believe there is more than half a chance that MMC-Gamuda JV will emerge the winner given its tremendous edge over its rivals by virtue of its right to match the lowest bid under a “Swiss challenge”, sweetened by a 7.5 per cent “price preference”.
Gamuda hopes to become a JV partner (instead of just a subcontractor) to China Railway Construction Co (CRCC) with regards to the RM8 billion Gemas– ohor Baru double tracking project of which CRCC is reported to be the frontrunner. Maintain fair value of RM3.25.
MBSB
Management attributed the 22 per cent quarter-on-quarter drop in 4Q11 pre-tax profit to:
1) higher funding cost from loan securitisation;
2) lower processing fee from slower PF-i disbursements; and
3) higher loan impairment allowances due to higher collective allowances for PF-i.
Management said that 4Q11 gross loans were flattish quarter-on-quarter mainly due to slower PF-i disbursements during the quarter as MBSB had already met the full-year disbursement target in early-4Q11.
For 2012, MBSB targets PF-i disbursements of RM8 billion (2011: RM6.6 billion) and 1Q12 disbursements have been strong. Management’s guidance for NIM of at least 4 per cent and CIR to rise to 25 per cent (2011: 21 per cent) were unchanged. Finally, management expects asset quality to improve further with the net impaired loan ratio declining to 5 per cent as at end-2012, from 7.6 per cent a year ago.
We think 1Q12 key income indicators such as loan growth, NIM and non-interest income could trend positively. Nevertheless, the impact on the bottom-line will depend on how rapidly overheads start to rise and whether any asset quality issues crop up.
We raised our FY12-13 EPS projections by 4-4.8 per cent largely after we lowered our FY12-13 credit cost projections to 91-99bps (104-116bps). Fair value raised to RM1.95 (from RM1.88) based on 8x fully-diluted 2012 EPS but Market Perform call is unchanged.
Pavilion REIT
4Q11 net profit was in line with expectations. A DPU of 0.44 sen was declared for FY11.
PavREIT’s main income contributor, the Pavilion Mall, achieved about 31 million visitors in FY11, comparable to FY10. However, the Manager stated that the reported sales for the mall increased to RM1.8 billion in FY11 from RM1.6 billion in FY10, indicating an improvement in shopper quality.
Occupancy rates remained steady for the portfolio, with current occupancy of around 99 per cent for Pavilion Mall and 69 per cent for Pavilion Tower.
Management is still on track with the conversion of around 68,000 sq-ft of space presently occupied by one of its key anchors, TANGS, into a new precinct to be known as “Fashion Avenue”. Capex for this refurbishment works is expected to be about RM13.5m.
No changes to earnings forecasts. Fair value is maintained at RM1.18.
* 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.
