Business

Analyst calls for February 8

February 08, 2013

KUALA LUMPUR, Feb 8 ― This is a selection of morning calls by local research houses for the day.

From OSK Research

TM

UniFi take-up just marginally off the mark. UniFi’s momentum is slowing down, but remain sanguine as we believe this is largely a reflection of rising fibre penetration, instead of lower competitiveness by TM. We gather that UniFi growth for 2012 was marginally below its guidance, coming in at 484k as at end-December vs. its 500k target. Nonetheless, TM achieved this target in January 2013.

We believe the moderation in UniFi’s growth momentum is largely a reflection of early maturity as fibre penetration has reached 36 per cent based on 1.37m premises passed, instead of competitive pressure.

We maintain our Buy call on TM with an unchanged fair value of RM6.60 based on DCF with WACC of 7.4 per cent. While we expect TM’s growth in the fibre retail market to moderate, TM should benefit from higher wholesale HSBB revenue if the Maxis-Astro partnership proves successful. MCMC’s decision not to regulate wholesale HSBB rates is a positive development for TM, given concerns over potentially lower margins if otherwise. With a healthy cash balance (RM2.7 billion) and management indicating it has a bit of room to gear up, we think there could be more dividends in store for FY12.

Perisai

Perisai’s operating expenses in the 4QFY12 included impairment costs for its investment in associates and cold stacked vessels amounting to RM17 million and RM7.9 million respectively. Stripping out these impairments, Perisai’s operating costs would have been normalised at RM3-4 million per quarter. We do not expect any more impairments in the future, given that Perisai’s investment in associates has now been reduced to RM0.3 million, while the book value of the cold stacked vessels has been reduced to RM1.

The impairment of the legacy assets during the quarter was mitigated by the bargain purchase recognised in its other income. The bargain purchase amount of RM18.4 million came about from its acquisition of the MOPU which was purchased below the asset’s book value. Perisai also recognised a reversal of deferred tax amounting to approximately RM28-29 million, as it transferred its Offshore Support Vessels (OSV) under Intan Offshore to a Labuan based entity.

Our fair value has been reduced to RM1.34 (from RM1.47), based on unchanged 13x FY13 EPS. Current valuations of 9-10x FY13 EPS remains undemanding relative to the sector average of 14-15x forward EPS. We continue to be positive on Perisai’s earnings outlook moving forward, underpinned by the incremental earnings arising from the E3- FPSO asset switch for FY13. While for FY14, we expect the delivery of its first jack-up rig, Perisai Pacific 101, to provide another step-up in earnings. We maintain our Buy call on the stock.

From RHB Research

TM

UniFi’s momentum is slowing down, but remains sanguine as we believe this is largely a reflection of rising fibre penetration, instead of lower competitiveness by TM. We estimate fibre penetration has reached 36 per cent based on 1.37 million premises passed.

In early January, TM expanded its Streamyx broadband service by introducing an 8Mbps package at RM160/month strictly for selected areas outside its HSBB coverage. This is positive as awareness for fast broadband has grown significantly and will cater to areas not served by UniFi.

It is uncertain if management will declare another capital distribution upon announcing its 4Q results, as actual capex spending by TM will effectively be higher in FY12 as the government co-investment on HSBB capex had ended in Jul 2012.

Nonetheless, we believe TM is still capable of another RM1 billion (30 sen/share) capital distribution given its healthy cash balance. Cash as at end-3Q stood at RM2.7 billion (75 sen/share).

We maintain our Buy call on TM with an unchanged fair value of RM6.60 based on DCF with WACC of 7.4 per cent. While we expect TM’s growth in the fibre retail market to moderate, TM should benefit from higher wholesale HSBB revenue if the Maxis-Astro partnership proves successful. With a healthy cash balance, we think there could be more dividends in store for FY12.

Parkson

Parkson Retail Asia’s (PRA) 1HFY06/13 results were within expectations, with net profit of S$24.8 million (-7.8 per cent year-on-year) which accounted for 50 per cent and 47 per cent of our and market consensus full-year forecasts respectively.

The commencement of the Chinese New Year and Tet 18 days later in FY13 as compared to FY12 will push festive-related shopping into 3QFY13 from 2QFY13. The shift in the lunar calendar was a drag on same store sales (SSS) growth in 2QFY13 in Malaysia and Vietnam.

PRA’s Indonesia and Malaysia operations reported 1HFY13 PBT of S$4.0m (+15.4 per cent year-on-year) and S$32.4m (-2.9 per cent year-on-year) with SSS growth of 6.7 per cent and 4.2 per cent respectively. Its Vietnam operations continued to struggle with 1HFY13 PBT of S$2.1m (-52.5 per cent year-on-year) and SSS declining 7.4 per cent year-on-year due to economic slowdown.

We maintain our Neutral call on PHB with an unchanged fair value of RM4.87 using sum-of-parts valuation. Although PHB is trading at a relatively attractive valuation of 12.6x of CY13 EPS as compared to its 3-year historical traded PER of 15x, we remain neutral on the group as we believe its share performance would continue to be affected by Parkson Retail Group’s weak performance in China.

From HwangDBS Vickers

Perisai

Earnings came in at RM24 million (+12 per cent quarter-on-quarter, +114 per cent year-on-year), taking FY12 net profit to RM92m (+223 per cent year-on-year), driven by strong profitability for its MOPU (profit guarantee of RM50m p.a. for two years). It incurred RM25 million total impairment charges for an associate and cold-stacked vessels, but the impact was mitigated by RM29 million reversal of deferred tax liability. Excluding the exceptional items, 4Q12 core profit was RM19.8 million.

Perisai had recently concluded a private placement (10 per cent of shares at RM1.03/share) to raise cash to buy the 2nd jack-up rig (20 per cent upfront payment). The rig costs US$210 million. The first rig, Perisai Pacific 101, will be delivered by Jul14, and KCA DEUTAG has been appointed rig contractor although it has yet to secure a drilling contract. The rig will provide 14 per cent earnings growth in FY14 with maiden contribution in 4Q14; it could lift FY15 earnings by up to 32 per cent with full-year contribution. Balance sheet should remain healthy though net gearing will rise to 1.2x by end FY13 (from 0.7x as at Dec12) due to project cost for its FPSO, but it is expected moderate to 0.8x by FY14 given its strong operating cash flow.  

We adjusted our TP to RM1.25, pegged to 14x FY13 EPS, after accounting for the dilution impact from the placement. We remain confident of Perisai’s long-term prospects given clear earnings visibility (contract-backed marine asset) and strong growth pipeline (driven by jack-up rigs). Recent share price weakness is an opportunity to accumulate the stock, which is offering 29 per cent upside potential to our TP.

SP Setia

SP Setia has requested for trading suspension to facilitate the book building for its 15 per cent placement by Maybank Investment Bank. Pricing will likely be at ~5 per cent discount to current share price, as seen from previous placement in 2011.

The much awaited exercise will remove the share price overhang and help improve liquidity (PNB which has 71 per cent stake in SPSB will not be participating). Proceeds from the placement (estimated ~RM900 million) should come in handy for working capital (land acquisitions, built-then-sell projects in Australia & UK).

Separately, SP Setia announced the acquisition of 195 acres of leasehold land in Rawang (current golf club in Templer Park Resort). The landowner will be entitled to 13-16 per cent of GDV or minimum RM140-200 million @RM17-24psf depending whether there will be any requirement for affordable housing. We see this as fair as land cost typically constitutes 10-20 per cent of GDV.

Assuming RM1.24b GDV, 25 per cent PBT margin and 6 years development period, we estimate the project will boost RNAV by 1 per cent or 5sen/share. Funding will not be an issue given SP Setia’s record RM4.4 billion unbilled sales (2x FY12 property development revenue) and placement proceeds which should reduce net gearing to 35 per cent.

Maintain Buy on SP Setia with TP of RM4.10, based on 25 per cent discount to RNAV of RM5.46.

* 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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