Business

Analyst calls for January 2

January 02, 2013

KUALA LUMPUR, Jan 2 – This is a selection of morning calls by local research houses for the day.

HwangDBS Vickers

Major US equity indices gained between 1.3 per cent - 2.0 per cent on New Year’s Eve as markets were expecting a deal to be wrapped up to avoid the “fiscal cliff”, which would steer the US economy away from recession. Eventually, a deal was struck during the early hours of New Year’s Day and is subject to approval by the House of Representatives.

With major stock markets around the world closed yesterday due to the New Year’s Day holiday, we expect our local bourse to start 2013 with a bang following the resolution of the “fiscal cliff” issue in the US. As such, we expect the FBM KLCI Index to continue its upward momentum to extend its gains.

On the backdrop of limited corporate news flow, the following stocks should garner some interest today: (a) SEG International, as media reports stated that Navis Capital has been aggressively increasing its interest in the company; (b) DiGi.Com, after major shareholder Telenor said it may further increase its stake in the company once there is more clarity on the Government’s plan to further liberalise the local telecommunications sector; and (c) Sentoria Group, as it announced a joint venture with Seriemas Development to develop a RM1.8bn integrated resort city in Morib,Selangor.

The benchmark FBM KLCI ended 2012 at a fresh record high of 1,688.95 for a decent yearly return of 10.3 per cent. In contrast, the mid- and small-cap space underperformed, with the FBM 70 Index (+6.6 per cent), the FBM Small Cap Index (-1.6 per cent) and the FBM ACE Index (+3.6 per cent) posting weaker performances.

As Malaysian equities face greater volatility in 2013, superior trading skills will be required to beat the stock market. Technically speaking, the FBM KLCI still has legs to run further (probably peaking somewhere between 1,750 and 1,800) but there is a risk it could pull back subsequently (to a downside range of 1,450 – 1,500) this year.

QL Resources;

Price target: RM4.00; QLG MK

Poised for regional expansion

Leading food-based company which focuses on protein staples including eggs, fish products and poultry meat. Rising China demand for protein-food and maturing plantations to drive next leg of growth. Initiate coverage with BUY rating, RM4.00 TP.

Traders Spectrum – From the Chartroom

The benchmark FBM KLCI ended 2012 at a fresh record high of 1,688.95 for a decent yearly return of 10.3 per cent. In contrast, the mid- and small-cap space underperformed, with the FBM 70 Index (+6.6 per cent), the FBM Small Cap Index (-1.6 per cent) and the FBM ACE Index (+3.6 per cent) posting weaker performances.

As Malaysian equities face greater volatility in 2013, superior trading skills will be required to beat the stock market. Technically speaking, the FBM KLCI still has legs to run further (probably peaking somewhere between 1,750 and 1,800) but there is a risk it could pull back subsequently (to a downside range of 1,450 – 1,500) this year.

RHB Equity Focus

Healthcare

Demand for private healthcare remained resilient as a larger proportion of the working population (aged 15-64, which made up 65.4 per cent of the total population in 2012 vs. 62.8 per cent in 2000) helped fuel better affordability and awareness of healthcare standards.

Going into 2013, IHH’s earnings would be underpinned by the progressive ramp-up in operations of the new Mount Novena Hospital.

Beyond that, the next phase of growth is expected to come via capacity expansion in existing hospitals and construction of new hospitals, which would add an additional 976 beds and 726 beds in Malaysia and Turkey respectively.

As for KPJ, the company is expected to be on the lookout for more acquisition targets beyond Malaysia in order to grow its medical tourism business to a targeted revenue contribution of 25 per cent by 2020.

No change to our earnings forecasts.

We rate KPJ as our top pick among the private healthcare service providers given its relatively cheap valuations of 20.1x CY13 PER as compared to regional peers’ valuation of 27.0x CY13 PER. While we like IHH for its wide network of hospitals and strong earnings visibility, the stock’s price has performed relatively well as compared to the KLCI, rising 9.8 per cent since its listing (vs. 3.6 per cent for the KLCI). Given the limited upside to our fair value of RM3.53, we are downgrading our call on the stock to Market Perform (from Outperform). Maintain Overweight.

OSK Retail Research

GTRONIC (FV RM1.91 – BUY) Stock Idea: Buoyed by Smartphone, Tablet Boom

To steer away from the technology industry’s strong headwinds, Globetronics has opted to ride on the fast-growing smartphone and tablet wave. The company’s fundamentals are underpinned by its: (i) prudent management throughout the industry’s up- and down-cycles, (ii) strong balance sheet, (iii) consistently high dividend payout, and (iv) ability to capitalise on the smartphone and tablet boom. We are recommending a BUY on Globetronics, with RM1.91 FV, pegged to a 5-year average PE of 11.6x on its projected FY13 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.

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