Analyst calls for June 28
KUALA LUMPUR, June 28 — This is a selection of morning calls by local research houses for the day.
From RHB Research
Sector update — Media
The sector is finally finding its footing amid a still cautious mood among advertisers. While Nielsen reported YTD May 2012 adex growth is still in negative territory (-4.5 per cent), we expect adex to maintain its momentum in 2H due to Hari Raya festival and a seasonally robust 4Q.
While the sector appears to have bottomed, macro concerns continue to weigh down on advertisers’ sentiment and there is still a lack of real optimism among the media players. Therefore, we maintain a Neutral stance on the sector.
We prefer MCIL for relatively resilient adex growth from exposure to the less vulnerable print media segment (in particular the Chinese dailies) and high dividend yields.
Four key takeaways: (1) Unbilled sales is at RM356 million as at end-1Q12, while negotiating for another RM700 million; (2) Moving towards higher value and higher margin contracts; (3) New planting in Indonesia to pick up pace; and (4) capex assumptions adjusted.
We have tweaked our forecasts to take into account changes in capex assumptions. FY12-13 forecasts were revised by -1.7-2.6 per cent, while FY14 forecasts were revised by +1.1 per cent.
Post-earnings revision and after rolling forward our valuation period to CY13 (from CY12), our fair value has been reduced to RM3.30 (from RM3.55), based on unchanged PE targets of 9x for the oil mill engineering division and 7x for the plantation division. Maintain Outperform.
MMHE announced that it has secured a fabrication contract from Sarawak Shell for a total combined value of RM278 million.
Although we are positive on the news, we highlight that it only accounts for 10 per cent of MMHE’s current orderbook of RM3.3 billion, implying that it would have to secure significantly more contracts in the 2HFY12 to address its depleting orderbook.
Our fair value remains unchanged at RM3.64 based on 15x CY13 EPS. Reiterate
The government has “decided not to proceed with” IJM’s proposed extension to its New Pantai Expressway (NPE). IJM intends to “appeal with a revised alignment” that probably explains the Government’s reason for the rejection of the project.
We estimate that the NPE extension would have generated RM1-2 billion internal construction job to IJM. We expect the market to take the latest development negatively.
Forecasts are maintained as we have yet to explicitly reflect potential works from NPE extension. However, we do not discount the possibility of the market downgrading IJM forecasts on the back of the latest news. Maintain Underperform. Fair value is RM4.97.
Maxis is set to launch its Internet Protocol Television (IPTV) offering next month. Maxis joint chief operating officer Mark Dioguardi declined to elaborate on the IPTV but said the monthly subscription fee would be competitive and “we will offer good value and it will be well under RM200”. Maxis yesterday inked agreements with 14 companies for content that will be offered to customers on its IPTV platform. (Starbiz)
While having more content will increase the appeal of its upcoming IPTV service, we believe short-term earnings growth will remain weak in the coming quarters as margins will be slightly squeezed due to gestation costs for its home services and higher A&P expenses due to Euro 2012 sponsorship. However, this will not have a material impact on Maxis’ ability to sustain its dividend payout.
From OSK Research
We hosted Starhub at our recent Asean Conference in Singapore, for which the telco recorded a good number of meeting requests. Discussions centred on the upcoming bid for the 2013-2016 broadcasting rights to the BPL, capital management and data monetization efforts.
There were no major surprises with management reiterating the need to maintain sufficient cash buffer in view of the uncertain industry dynamics. Starhub’s share price has re-rated on yield attraction but we think further upside may be capped by concerns over margin dilution from the BPL and steep device subsidies.
We remain NEUTRAL on the stock but up our FV to S$3.10 from S$2.80 after lowering our WACC.
In an announcement to Bursa Malaysia, IJM revealed that the Public Private Partnership (PPP) unit of the Prime Minister’s Department has decided not to proceed with IJM’s proposal for the extension of the New Pantai Expressway (NPE).
Recall, IJM had last April received an approval-in-principle from the federal government to embark on this project that entails a 10km-long extension of the existing NPE. The contract was initially estimated at ~RM1 billion.
We expect this latest development to be a slight negative newsflow-wise, although it does not come as a complete surprise to us. Furthermore, IJM has said that it would appeal against the decision – with a revised alignment.
We make no changes to our earnings assumptions, as we had previously not included the NPE extension project into our new order book assumptions for FY13F. Backed by a healthy order book of ~RM4 billion, IJM is still lining up a few more project bids, including the RM7bil West Coast Expressway.
We believe the bulk of the negative newsflow has already been priced-in at current levels (ytd: -8 per cent). A near-term catalyst could come from the upcoming launch of its Rimbayu development near Kota Kemuning slated for August (Phase 1: 250 units).
Maintain BUY on IJM Corp, with an unchanged fair value of RM6.84/share, based on the sum-of-parts methodology.
* 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.