Business

Analyst calls for March 2

From HwangDBS

Continuing from where it left off yesterday, the key FBM KLCI could inch up further today. On the chart, the benchmark index may be eager to rise towards the immediate resistance hurdle of 1,580.

This comes as sentiment will likely get a lift following Wall Street’s overnight gains. Major US equity indices were up between 0.2 per cent and 0.7 per cent at the closing bell partly attributable to a decline in jobless claims.

Looking to ride on the market strength today are stocks like: (a) Genting Bhd, as its Singapore-listed subsidiary Genting Singapore said it would be pursuing new investment opportunities after raising S$1.8 billion worth of perpetual bonds; (b) MBSB, in response to its internal expectations of loans growth of between 20 per cent and 25 per cent for the personal financing business; and (c) Naim Holdings, amid news report saying that it would be bidding for RM1b worth of MRT-related construction jobs.

DRB Hicom; Buy; RM2.61

Price Target: RM3.45; DRB MK

3 Suitors for Proton’s Tanjung Malim plant

According to the media, DRB-HICOM is evaluating three rival plans for Proton made by 3 auto majors – VW, Mitsubishi and General Motors. This is to gain access to half of Proton’s production lines at its factory in Tanjung Malim, Prai. The plant has a capacity of 250,000 cars a year but can be expanded to 1m. According to a source, the deal is valued at RM800m with General Motors being the least preferred and VW the most preferred.

Highlights

Market Focus

Selective opportunities

Upgraded earnings by 3 per cent (2012) and 2 per cent (2013); positive surprises outweighed disappointments. Liquidity may provide near-term support for markets but we foresee limited upside for index with our year-end KLCI target of 1,590. We like stocks with specific catalysts, bottom-up picks, and selected defensive names. Key picks: Maybank, Gamuda, Alliance Financial Group, WCT.

MMC Corporation: On steady ground

•      Iskandar proxy – realizing land values

•      Malakoff listing post Gas Malaysia?

•      BUY, TP RM3.70 based on 20 per cent discount to SOP

Positioning for Iskandar rerating. MMC is a strong proxy to ride the Iskandar inflection point in 2012 with 67 per cent of SOP from Johor. For its 2,718 acres of land in Senai, it is in the midst of disposing 500 acres (total 900 acres in freezone) to a reputable developer. We think this will be between RM20 to 25 psf vs its cost of RM15.87 psf. At the lower end of our assumptions in our SOP (RM21 psf), this will raise RM457m (RM0.15/share). As for the 2,255 acres of Tanjong Bin land, MMC will likely exercise the option to take 20 per cent in Vitol Terminal (c.RM70 to 80m) giving it steady stream of income in the future. It is also in talks with other petrochemical companies with another potential one this year. In our view, the advantage of Tanjung Bin is its ready infrastructure available being a first mover, PTP and lower land cost of RM4 psf enabling it to be competitive.

Unlocking value.  Gas Malaysia will be the first subsidiary to be listed with indicative market cap of RM2.8 billion, in line with our SOP value. Its other cash cow Malakoff (RM0.92/share in SOP) may potentially be listed in 2013-14 where Tanjong Bin has secured RM6.5bn financing for the additional 1,000 MW. It will also be partnering Petronas Power and Mitsubishi to bid for the new Prai Plant. Although Tanjong’s power assets are for sale, MMC indicated it is more partial to green field investments where it has more leeway to negotiate fresh PPA, less need to pay a premium and new plants have better fuel efficiency.

Buy for exposure to M’sia economy. Its port business continues to flourish where PTP has internal targets to grow its TEU by 11 per cent yoy to 8.3m after an impressive 15.4 per cent yoy 2011. The full impact of Johor Port’s tariff increase will also be felt in FY12F. The stock is also an alternative proxy to the MRT and has been a laggard as compared to its JV partner Gamuda. We expect an award in April/May 2012 where there is also room to raise our SOP by RM0.09/share based on the PDP fees.

From OSK

Supermax (SUCB MK, BUY, FV:2.50, CL:RM1.99) Yesterday, Supermax held an analyst briefing to update investors on its strategy going forward. We gathered that management targets to increase its nitrile glove mix to 50 per cent by 2013 from 35 per cent now so that it would benefit from the change in demand between natural rubber and nitrile gloves. Also, management expects to unveil new glove products by 2QFY12 with earnings contribution coming in by 3QFY12. We remain positive on its strategy going forward. Maintain Buy.

Malaysian Strategy – 4Q2011 Results Report Card (NEUTRAL) While 4Q results came in as expected in terms of outperformers and underperformers, the number of upgrades exceeded our expectations as analysts are turning less bearish on the outlook. With the Upgrade to Downgrade ratio rebounding to 0.92x after 3 quarters where Downgrades exceeded Upgrades by around 2 to 1, we see some resilience in the market for now although a retracement could come in towards mid-year. Still, optimism on Infrastructure Investments should drive the Construction and O&G sectors back up towards year end. Maintain our NEUTRAL call on the market and our year end target of 1620 pts. Top sector choices remain Consumer, Telco, Construction, O&G and Banks.

From RHB

-          4Q2011’s earnings continued to miss expectations, but downgrade to upgrade ratio has improved further and businesses are turning more upbeat. We have adjusted some of our assumptions, translating to an upward revision in our 2012’s normalised net EPS growth for the FBM KLCI benchmark to +12.3 per cent (+8.8 per cent ex-TNB), from +10.3 per cent previously (+7.8 per cent ex-TNB).

-          As more signs of stabilisation and recovery in the global economy have emerged and the ECB has successfully defused a liquidity crisis in the Eurozone, we are turning more positive on the outlook for the Malaysian economy and the market.  The key risk is an oil shock, which appears manageable at this stage.  Consequently, we are revising our 2012’s economic growth forecast to +4.5 per cent, from +3.6 per cent previously.

-          Our end-2012 FBM KLCI target is also raised to 1,650 based on 14.5x 2013 EPS. We believe buy on dips is still the best strategy even though defensive stocks with high dividends will provide greater stability for the portfolio in the near term.

MBSB

MBSB targets to sustain its loan growth at above 20 per cent this year, driven by its personal financing (targeted disbursements of RM8-9bn this year vs. RM7bn in 2012) and corporate loan portfolios. Thus far, MBSB has yet to experience any slowdown, but its CEO said that this was a possibility in the middle of the year. (Starbiz)

This is largely consistent with earlier mentioned targets by management. We are not surprised that MBSB has yet to experience any slowdown as during a meeting earlier last month, management had said that PF-I disbursements have been strong. This partly reflects new products launched, which offers borrowers personal financing at even lower rates.

MP, FV = RM2.32

DRB-HICOM 2 Mar 2012

DRB-HICOM is currently evaluating three rival business plans for Proton involving General Motors (GM), Volkswagen (VW) and Mitsubishi Motors (MMC). GM is interested in taking up half the production capacity at Proton’s Tanjong Malim plant. MMC is keen to produce up to 200,000 engines annually. DRB reportedly favours a tie-up with VW to produce a small car in an arrangement similar to the VW-Skoda relationship. (Business Times)

Positive. We believe the GM and MMC proposals pre-date the proposal by DRB to acquire a controlling stake in Proton. More details are likely to emerge in the months ahead. DRB is believed to be on track to complete the acquisition of the 42.7 per cent block in Proton in Mar that will trigger the MGO that in turn should be completed by Apr.

OP, FV = RM3.45

Genting Singapore

Genting Singapore has announced the issuance of S$1.8bn of perpetual subordinated bonds at a coupon rate of 5.125 per cent.  (SGX)

Neutral. Management indicated during its recent conference call that these bonds are for future gaming expansions in other countries like Japan. 

MP, FV = S$1.80

Indonesia Banks

Indonesia’s inflation eased to the lowest level since Mar 2010 (+3.43 per cent) on account of lower food prices. According to Central Statistics Agency (BPS) data, the consumer price index rose 3.56 per cent yoy in February down from 3.65 per cent in Jan that was lower than consensus expectations. Core inflation (excluding food and fuel) nudged 2bps higher mom to 4.31 per cent. (Jakarta Globe)

Positive. Going forward, inflation is expected to trend higher given the government’s plans to lower fuel subsidies. The government is believed to be considering proposals to raise the price of subsidised fuel by about 33 per cent on 1 Apr. We believe the economy can absorb this quantum of price increase given higher incomes.

*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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