Analyst calls for June 19
KUALA LUMPUR, June 19 — This is a selection of morning calls by local research houses for the day.
From HwangDBS Vickers
Outlook: Berjaya Sports Toto
Still leading. BST’s market share fell to 40 per cent in 1QCY12 (from 42 per cent) vs MPHB’s 37 per cent, as lotto sales (ex-4D Jackpot) contracted 37 per cent y-o-y and 35 per cent q-o-q. But 4D Jackpot improved 12 per cent q-o-q with market share rising to 45 per cent (from 39 per cent).
Spinning off crown jewel. The transfer of its RM6bn Malaysian NFO operations into STM-Trust (a new trust to be listed in Singapore by Nov) could unlock value, expand its shareholder base, provide access to cheap financing, and halve gearing to 0.6x (on enlarged asset base with RM1.1bn disposal gain). Shareholders may receive special dividends (possibly 50sen/share) from an offer for sale/placement of STM-Trust shares and later, possibly dividend-in-specie of STM-Trust shares (pending regulatory changes in Malaysia to allow for dual-listing of business trust). The key challenge is to obtain Malaysia’s MoF approval for the transfer.
Earnings dilution post restructuring. BST’s effective stake in its core business will drop from 100 per cent to 80 per cent, implying 15 per cent earnings dilution (partly compensated by RM20m annual management fee from STM-Trust). For exposure to Malaysian NFO, investors may either buy STM-Trust directly (potential 6 per cent yield) or MPHB (7-9x 2013F PE post-restructuring), bypassing BST which value may be dented by a holding company discount.
Recommendation
Maintain HOLD, SOP-based TP of RM4.30. We value its NFO business with DDM (8.4 per cent cost of equity, 1 per cent long-term growth) and apply 10 per cent holding company discount. No change to FY13-14F earnings.
From RHB Research
Sector Outlook: Property
Non-residential property loans grew 23 per cent yoy in Apr, faster than residential property loan growth of 13.7 per cent. This signals continued influx of liquidity into tangible assets.
The property market is adapting to tightening policies. While the credit financing based on net salary scheme is an effective broad-based measure, the measure of 70 per cent LTV cap may yield some grey areas. Developers are gradually diverting their high-rise residential sales to SOVO/SOFOs, as buyers are not subject to the 70 per cent LTV cap for commercial properties.
We are turning slightly positive. Some values have emerged as valuations of some stocks have almost reverted to the post global financial crisis level in mid-2009. However, due to the economic risk in the Eurozone as well as the uncertain outcome of the upcoming GE13 in Malaysia, the sector’s fundamentals are not supportive enough for a convincing re-rating.
Maintain Neutral. Our stock picks are IJM Land (upgraded to Outperform), KLCCP and Sunway.
From OSK Research
The AirAsia future growth story in the next decade would be an exciting one. From 1 July, regional head of corporate finance, Aireen Omar, will take over as CEO of Malaysia AirAsia while Tony Fernandes will move on as Group CEO in AirAsia's ASEAN office. These management changes will propel the AirAsia Group to the next node of regional expansion, which will entail taking the leap into 5 potential markets. As the stock is trading at a PE of 9.65x on FY12 earnings vs the peer average of 12x, we maintain our BUY call on AirAsia, with our FV unchanged at RM4.57. AirAsia is our top pick among Transport stocks under our coverage.
* 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.
