KUALA LUMPUR, March 21 — This is a selection of morning calls by local research houses for the day.
We maintain our BUY ratings on Gamuda and MMC. We raise our SOP-derived TPs for Gamuda and MMC to RM4.95 and RM3.80 respectively assuming RM8.2bn contract value but leaving margins at c.9 per cent and imputing a 25 per cent discount to factor potential execution risks given the magnitude of the contract. For Gamuda, at mean PE and P/NTA and 24per cent discount to SOP, we think only part of the MRT project has been priced in and nothing so far for the potential Gemas-JB project. It rerated pre and post award (> +2SD) of the RM12.5bn double tracking project in late-2007. If the Gemas-JB job comes to fruition, Gamuda’s orderbook may reach RM10bn by mid-2012.
Post-FY12 result, we adjusted average daily trading value and margin assumptions for broking, and reduced property development earnings contribution. Consequently, FY13-14F net profits were trimmed by 6-7per cent. Our RM1.10 SOP-based TP is based on 45per cent discount to RNAV for property and 0.8x P/BV for broking. TAG’s future property launches in Malaysia and overseas could be earnings and rerating catalysts. Its current project in Malaysia is Damansara Avenue with c.RM1.3bn GDV, while its projects in Canada and Australia are expected to rake in RM400m and RM900m, respectively. Its recent second Canada project is expected to add RM750m (+11per cent) to its total RM7bn GDV. Future developments, including the 2.3 acre land at prime KLCC area and 3 acres at Bukit Bintang, will further unlock its land values. Its broking business may be valued higher, as Singapore’s UOB recently offered to buy Innosabah Securities at 1.4x P/BV.
Newsflow is rife on the possibility that the share swap agreement between MAS and AirAsia could be scuttled following demands by the former’s strong unionised workforce, with speculation that a SPV could be setup by the government to acquire shares from MAS’ main shareholders. As such a politically-motivated move could draw even more criticism from the public, we view this as unlikely to materialize and foresee MAS’ union to eventually realign its interests with management in turning around the airline. We maintain our OVERWEIGHT call on the aviation sector, with AirAsia as our top pick at a FV of RM4.57 and MAS staying a SELL at an unchanged FV of RM0.90.
Fajarbaru has secured a RM72.9m contract for the redevelopment of Shaw Parade Complex, KL.
This is the fourth key contract Fajarbaru has secured in FY06/12, boosting its YTD new contracts secured to RM368m and outstanding construction orderbook by 11per cent from RM657m to RM730m.
Assuming an EBIT margin of 8-10per cent, the contract will fetch RM5.8-7.3m over the construction period ending Jul 2014. FY06/13-14 net profit forecasts raised by 3-7per cent, having reflected RM368m new jobs in FY06/12 vs. RM295m previously. Fair value raised from RM1.11 to RM1.13. Maintain Market Perform.
KLK has agreed to sell its entire stake in Crabtree & Evelyn Holdings (CEH) for US$155m (RM465m). Completion is expected within 3 months, with a gain on disposal of around US$41m (RM123m) or 11.5 sen/share for FY09/12.
We are positive on this disposal, as it will allow KLK to concentrate on its more profitable plantations-related businesses. The disposal price of RM465m implies a FY09/11 PE of approximately 27x and a P/NTA of about 1.47x, and is reasonable, in our view, similar to HK-listed L’Occitane, which is trading at 27.4x FY11 EPS and 22.4x 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.