Analyst calls for March 8
KUALA LUMPUR, March 8 ― This is a selection of morning calls by local research houses for the day.
From RHB Research
KPJ
KPJ intends to transform three existing hospitals into reference centers for oncology treatment. These hospitals would be upgraded to include new facilities in oncology and radiotherapy treatment, while a nuclear medicine facility would be introduced at the KPJ Johor Specialist hospital by 1Q13.
Construction of a new flagship 390-bed hospital in Bandar Datuk Onn is slated to begin in early-2014, in order to meet the targeted opening by end-2014. Services would be priced competitively in order to tap into the more price-sensitive foreign community from Singapore.
Management intends to extract value from its recent acquisition of a 23.4 per cent stake in the 263-bed Vejthani Hospital through mutual patient referrals with the hospital, while over the longer-term, attempt to replicate Vejthani’s successful medical tourism strategy in Malaysia.
We expect KPJ to deliver a stronger set of results in CY13 with the additional beds arising from the scheduled opening of 2 new hospitals as well as the new Sabah Medical Centre. We reiterate our Buy call on the stock with an unchanged fair value of RM6.45 (CY13 PER of 23.5x)
CMMT
It was announced that CMMT has entered into an agreement with CapitaLand Retail Malaysia S/B (CRMSB) for the appointment of CRMSB as project manager for the asset enhancement initiative (AEI) works to the East Coast Mall. The estimated amount for the AEI works is RM43.3 million.
The works include: 1) reconfiguration of space to improve trade mix and sightlines; 2) conversion of some car park bays into retail space; and 3) extension of the alfresco area on the Ground Floor. The AEI will commence in mid-March 2013 and is expected to be completed by the fourth quarter of 2014. (Bursa)
Neutral. We believe that the market has already anticipated CMMT to announce its extensive AEI plans for the East Coast Mall (ECM), given that there has been no major refurbishment works for ECM since its injection into the REIT back in Nov 2011.
The RM43.3 million is reasonable and we have already accounted for the positive impact in our rental reversion and organic growth assumption for FY15. CMMT’s gearing currently stands at 28 per cent, and assuming that the AEI works are fully funded by debt, this will only increase CMMT’s gearing by about 1 per cent to 29 per cent, still below the SC’s gearing cap of 50 per cent.
From HwangDBS Vickers
DRB-Hicom
Impressive tour of KLAS’ operations. Small contributor but abundance of synergies. BUY with RM3.60 TP (20 per cent discount to SOP).
From AmResearch
Sector update — Oil and gas
Petroliam Nasional’s (Petronas) FY12 net profit decreased 17 per cent year-on-year to RM49 billion despite relatively flat revenues due to higher operating costs and impairment losses on property, plant & equipment largely in Egypt. Excluding the RM1.5 billion gains on the listing of Gas Malaysia, the disposal of equity stakes in Centrica Plc and APA Group,
Petronas’ FY12 core net profit still contracted 16 per cent year-on-year to RM48 billion. Petronas’ 4Q2012 capital expenditures rose by 18 per cent to RM14 billion, which caused 2012 capex to rise 11 per cent year-on-year to RM46 billion.
But this was still far short of the expected average RM60 million annually for 2011-2015, for Petronas were to remain on track of its projected spending of RM300 billion within the next 3 years.
For the group to achieve its earlier capex targets, Petronas would need to ramp up its spending by 56 per cent this year to RM71 billion annually over the next 3 years. Hence, we expect the pace of contract rollouts to reignite this year, underpinned by the affirmation from Petronas’ president and chief executive officer Tan Sri Shamsul Azhar Abbas that the group will focus on ramping up domestic production this year.
Since the beginning of the year, the total contracts awarded to industry players have already reached RM4.2 billion, a 4.4x rebound from RM972 million in 4Q2012. These include the RM2.4 billion Malikai tension leg platform production facility for the joint-venture between Malaysia Marine & Heavy Engineering Holdings and Technip and over RM1 billion of marine charter contracts awarded to Alam Maritim Resources and Perdana Petroleum.
In 1H2013, we expect the award of the 3 blocks of RM8 billion-RM10 billion umbrella tender for hook-up, construction and commissioning works, delayed from 4Q2012.
In 2H2013, the rollout of the second phase of the North Malay basin gas cluster project, which will involve a large central processing platform at the Bergading field and multiple satellite well-head platforms, should sustain the re-rating momentum.
In view of the multiple flows of contracts this year, we maintain our OVERWEIGHT call on the sector with BUY calls for SapuraKencana Petroleum, Bumi Armada, Dialog Group and Alam Maritim.
* 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.
