Analyst calls for July 19
KUALA LUMPUR, July 19 — This is a selection of morning calls by local research houses for the day.
From RHB Research
HELP International
HELP’s international school is due to open in September 2013. The fees are tentatively set at between RM12,000 and RM36,000 p.a. per student, which is relatively affordable compared to the fees of other established international schools. We believe that HELP’s strong brand name and established presence among the middle to upper-middle class population could be the swing factor to boost its success in these segments.
Management has yet to finalise their funding options for the Subang 2 campus. The total cost for the campus will be capped at RM180 million. Given its past track record of prudence in capital management, we believe that management is likely to be conservative in selecting the funding option for the campus.
HELP is not planning to shut down the current city campuses in Damansara and Fraser Business Park (FBP). Over the longer term, management is hoping to achieve a split of 40 per cent, 30 per cent and 30 per cent of the student population at its Subang 2, Damansara and FBP campuses respectively.
No changes to forecasts. Fair value is maintained at RM2.10. Maintain Market Perform.
MBSB
MBSB announced yesterday that it had entered into a conditional share sale agreement (SSA) with Ken Holdings (Ken) for the disposal of 100 per cent-owned Gadini Sdn Bhd for RM40.6m, cash. Ken will also settle advances (RM13.6 million) and other liabilities (RM2 million) owed by Gadini to MBSB, which will bring the total cash proceeds MBSB will receive from Ken for the sale of Gadini to RM56.2 million.
Gadini’s principal activity is property development and it owns four parcels of vacant leasehold land in Johor Baru totalling about 22.8 acres. The price for the disposal of the properties was based on a valuation done by Henry Butcher and thus, we think pricing is fair.
The disposal of Gadini is subject to the approval of Ken’s shareholders and is expected to be completed in 4Q12.
The proposed disposal is expected to result in a gain of RM6.75 million or +1.7 per cent to our 2012 net profit forecast. This is not significant and thus, we are keeping our 2012 numbers unchanged.
Fair value of RM2.46 (10x fully-diluted 2012 EPS) and Market Perform call maintained.
MBM Resources and UMW
Perodua expects to sell 95,100 units of cars in 2H12 and maintains its total sales projection for 2012 at 188,023 units, according to MD Datuk Aminar Rashid Salleh. Perodua also launched a new variant of the Alza, the Advanced Version priced between RM69,503 to RM70,003. All Perodua cars produced after 1 Jul will be equipped with dual front airbags and seatbelt pre-tensioners, in line with new safety regulations.
Neutral. MBM and UMW each have a 25 per cent and 38 per cent associate stake in Perodua. The sales projection is in line with our forecast of 188,000 units for 2012. Perodua expects to sell about 400 units per month of the new Alza Advanced Version. MBM’s wholly-owned subsidiary Hirotako will see volumes spike higher in 2H12 from the higher fitment rate of airbags and pre-tensioners. However, earnings are expected to grow at a relatively slower rate due to price reductions from cost down exercises. OP, FV = RM4.20 (MBM); OP, FV = RM10.50 (UMW)
From OSK Research
China Oriental
China Oriental issued a profit warning yesterday prompted by: i) overcapacity of steel in China, which has compressed prices, and margins, ii) stubbornly high iron ore price, and iii) falling steel demand as China’s economy slows.
However, we believe that the actual reason for the profit warning is the company’s high 1HFY11 earnings base, but actual earnings likely at RMB550 million - RMB600 million, which was in line with our expectation.
Relatively outstanding result is credit to its plant efficiency and large exposure to long steel products, which have held up better than the flat segment. We expect China’s weak economic data to prod the Chinese government into launching stronger stimulus measures.
As such, we maintain our BUY call on the stock but reduce our TP to HK$3.30 (from HK$3.62), based on a lower 1.08x against 1.2x FY12F P/B valuation but retain our 5x FY12F EPS. The counter is now trading at 0.43x FY12 P/B, close to its historical 5-year low of 0.38x.
From HwangDBS Vickers
Bursa Malaysia
2Q12 net profit of RM37.9 million (-7 per cent quarter-on-quarter) took 1H12 earnings to RM78.7m or 55 per cent of our FY12 estimate. 2Q12 profit was weaker quarter-on-quarter largely due to lower revenues; operating expenses were relatively stable despite lower marketing and development expenses.
Revenue from equities fell 16 per cent quarter-on-quarter due to softer trading activity in the securities market. 2Q12 average daily turnover volume and value fell to 1.14 billion (-41 per cent) and RM1.48 billion (-21 per cent), respectively, while velocity fell to 27 per cent from 34 per cent a quarter ago. Derivatives revenue improved (+33 per cent) led by higher trading volume (+30 per cent). Stable revenue, which largely tracks listing activity, was flat in the quarter.
We are keeping our FY12 assumptions: average daily turnover volume of 1.11 billion and daily turnover value of RM1.47 billion. The strong trading momentum in 1Q12 has fizzled out quickly in 2Q12 and current market sentiment remains volatile. Our key concern remains the sustainability of trading volumes and values. YTD-Jun average daily turnover volume and value were 1.53 billion and RM1.67 billion, respectively.
Maintain Fully Valued. Our RM6.00 TP is based on the Dividend Discount Model which assumes 90 per cent dividend payout, 7 per cent long term growth, and 11 per cent cost of equity. Our TP implies 22x FY12 EPS.
* 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.
