Analyst calls for July 10
KUALA LUMPUR, July 10 — This is a selection of morning calls by local research houses for the day.
From RHB Research
Sector Update: Transport
International Air Transport Association (IATA) projects only US$3bn profits from the global airline industry in 2012 vis-à-vis US$7.9bn in 2011 as “Eurozone sovereign debt crisis will intensify, weakening economic growth in the region further in the second half of this year”.
AirAsia’s near-term earnings growth prospects are less exciting as growth from its domestic operation is tapering off, coming from an enlarged base. Lingering losses from its new low-cost carrier start-ups in the Philippines and Japan, as well as an online travel agent JV with Expedia Inc remain a drag.
We are negative on MAS given the extent of its structural and operational problems that are not adequately addressed with a turnaround plan that we find shallow.
Having assumed lower FY12/12-14 jet fuel price assumptions of US$120-125/bbl (from US$125-130/bbl previously), AirAsia’s FY12/12-14 net profit forecasts are raised by 8-9 per cent while MAS’ FY12/12-13 net loss forecasts are reduced by 21 per cent and 53 per cent. We now project MAS to return to the black in FY12/14.
Maintain Market Perform for AirAsia (FV = RM3.87), Underperform for MAS (FV = RM1.00).
From AmResearch
We re-affirm our high conviction BUY on UMW (one of our top 2 sector picks) with a higher fair value of RM11/share (from RM10/share previously) following a recent meeting with management. Our SOP-derived valuation now pegs UMW autos at 14x FY12F earnings (13x previously) which is now at par to mid-cycle valuation. Valuations are due for a significant re-rating underpinned by strong auto recovery and the emergence of its O&G division as a key player in the sector.
We raise our projections by 1-2 per cent over FY12-14F to reflect higher projections for UMW Toyota, in particular. We sense increasing optimism about UMW’s auto business – driven by strong underlying demand and new launches. Our forecast now models in 96,695 unit Toyota sales (FY12F), which is currently higher than management’s target of 93K.
Underpinning our bullish view, however, management is guiding for an upward revision to its sales target for Toyota, which should in turn catalyse a full-blown consensus re-rating. Our projections are now 7 per cent-8 per cent above consensus over FY12-14F. A consensus upward revision looks imminent in the near-term.
From OSK Research
FKLI: Upward Bias Undiminished
The uptrend faced a setback yesterday as sellers returned, keeping the index below the 1,625-pt resistance level.
Nonetheless, this does not signal the end of the rally as yesterday’s move did not even cancel the upward bias of last Friday’s “Long White Day”. The index is now comfortably above the 50-day MAV line and the rising 200-day MAV line, supported by the longer-term positive “Golden Cross” that emerged in February.
Thus, the upward momentum of the index is expected to continue and a firm upward bias should not see the index closing below yesterday’s low of 1,617 pts, and certainly not below the support level of 1,614 pts. Resistance remains at last week’s high of 1,625 pts, followed by the round figure of 1,630 pts. Further selling can then be reasonably expected at every 10-pt interval. Again, a firm uptrend should see the index above the 1,614-pt support level, with the next support is at 5 July’s low of 1,610 pts. Stronger support is just above the 1,600-pt psychological level, at last week’s low of 1,602.50 pts.
* 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.
