Analyst calls for November 21

KUALA LUMPUR, Nov 21 — This is a selection of morning calls by local research houses for the day.

Hwang DBS Vickers

Given our Malaysian stock market’s muted response yesterday to Wall Street’s overnight jump, we reckon our local bourse will probably remain in a consolidation mode for the time being.

From a technical perspective, the key FBM KLCI is expected to swing sideways with the benchmark index struggling to overcome the immediate resistance threshold of 1,635 at the moment. On the downside, its crucial support level is currently seen at the psychological mark of 1,600.

Meanwhile, news flows on the corporate front were relatively light yesterday. Among the stack of financial result announcements that came in last evening, CIMB and MRCB surprised on the upside but TSH Resources fell short of expectations. This could trigger corresponding share price reactions when trading resumes today.

OSK Research

COMEX Gold Futures

The US$1,640 resistance level continues to cap the commodity’s rebound off the US$1,675 (RM5,127) support level. Buyers again failed the resistance test, despite Monday’s full-bodied white candle. This could lead to a return of selling that started after the failed test of the US$1,800 resistance level in early October. The one-year sideways consolidation is still ongoing, while a series of higher lows charted since 2008 remain intact, supporting the longer-term uptrend. In addition, the commodity remains above the 200-day MAV line.

Dialog Group

All Intact

Dialog’s 1QFY13 earnings came in within both our and consensus’ expectations.  While earnings were weaker sequentially, both revenue and net profit grew y-o-y by 17.4 per cent and 5.0 per cent respectively. We continue to like Dialog as it is one of the most defensive oil and gas stocks with a steady business model. We thereby reiterate our BUY recommendation with an unchanged fair value (FV) of RM3.45.

Within expectations. Dialog’s 1QFY13 earnings came in within our and consensus’ expectations, accounting for 21.2 per cent of our and 21.8 per cent of consensus’ full-year forecast respectively. Overall, the 1QFY13 net profit of RM46.8m was marginally lower q-o-q, by 5.7 per cent, but 5.5 per cent higher y-o-y. Revenue dipped 16.6 per cent q-o-q due to lower contribution from its plant maintenance activities in Malaysia and Singapore. On a y-o-y basis, revenue grew 17.4 per cent, underpinned by increased sales from its specialist products and services to overseas customers as well as its Engineering, Procurement, Construction and Commissioning (EPCC) works at the Pengerang Independent Deepwater Terminal project in Malaysia.

Catalysts for 2013. The company’s potential catalysts next year may be in the form of new customers, a higher take-up rate for Phase 2 of its Pengerang deepwater terminal and the possibility of other new upstream ventures as there are more mature fields up for redevelopment and more marginal fields set for development. Although most of the catalysts mentioned here may not contribute to the company’s FY13 earnings, they can potentially contribute to revenue generated in the next three to five years.

Maintain BUY. We continue to like Dialog’s prospects and its strategy of expanding its sustainable and recurring income to reinforce its position as a leading integrated technical services provider. We are thereby reiterating our BUY recommendation on Dialog, with an unchanged FV of RM3.45 based on our sum-of-parts valuation pegged to FYE14 earnings. Dialog remains our favourite stock in OSK’s oil and gas universe, alongside SapuraKencana Petroleum (BUY, FV: RM3.00) and Dayang (BUY, FV:


TSH Resources

A Triple Whammy

TSH’s 9MFY12 earnings of RM51.3m (-41.3 per cent y-o-y) were substantially poorer than expected as weak output, lacklustre palm oil price and pricier fertilizers weighed on profitability. We believe 4Q will remain weak but expect a meaningful recovery in 2013 as: i) FFB production normalizes after an especially weak 2012, and ii) fertilizer cost will ease when the company locks in its 2013 fertilizer purchases. We are slashing our FY12 and FY13 earnings forecasts but maintain our BUY call in anticipation of a significantly better year ahead.

Disappointing. TSH’s 3Q fell to RM260.5m (-4.6 per cent y-o-y) as weaker-than-expected FFB production (-7.2 per cent y-o-y) and softer realized palm oil prices (-8.7 per cent y-o-y) dragged down sales. Consequently, the 3Q core profit of RM15.3m was 59.8 per cent lower y-o-y, with EBITDA margins shrinking 8.5ppt to 14.3 per cent. Earnings also contracted sequentially on weaker prices despite seasonally stronger production. TSH’s 9MFY12 profits clocked in at RM51.3m (down 41.3 per cent y-o-y) as weak FFB output, lethargic selling prices and higher fertilizer prices dealt a triple whammy to profits. The company’s 9M earnings represented 50.6 per cent and 53.2 per cent of our and consensus’ full year estimates respectively.

Less fruitful. 3Q FFB production from TSH’s Sabah estates recovered 17.2 per cent q-o-q but remains subpar compared with the stellar output in 2011 when production grew 20.1 per cent y-o-y although 99.5 per cent of its trees have reached peak production age. Its 3Q and 9M Sabah production represented 25.3 per cent and 70.7 per cent of our FY12 forecasts respectively. In contrast, the company’s much younger trees in Indonesia produced 203.0k tonnes of FFBs during the past nine months, 5.1 per cent higher than that seen over the same period last year.  Expectations were much higher, however, given its Indonesian trees’ young age profile (just 13.7 per cent are at their peak) and the 59.4 per cent surge in production last year.

A muted 4Q seen. We expect TSH’s 4Q earnings to match 3Q’s bottomline, at best.  MPOB prices so far this quarter have averaged RM2,266 per tonne (-20.5 per cent q-o-q, -23.2 per cent y-o-y). With its 4Q production growth likely to be flat sequentially, 4Q’s profits may well decline q-o-q. However, since fertilizer prices have been declining from the beginning of the year, planters’ fertilizer cost should be lower in 2013 compared to that in 2012 when they lock in their contracts at the end of the year. TSH’s Indonesian production should also return to a more normalized growth pace, which suggests a brighter 2013 ahead.

Chopping estimates. We trim our FY12 and FY13 earnings forecasts by 34.3 per cent and 16.7 per cent respectively as we have lowered our production expectations. We now expect FFB production to dip by 2.1 per cent in FY12 (previous forecast: +8.1 per cent) before bouncing back by 16.2 per cent next year. Our FV is now lower at RM2.46, based on a 15.0x FY13 PE and RM0.16 per share for its immature rubber estates. Still a BUY.

RHB Equity Focus


CIMB’s 3Q12 results were in line with our and consensus estimates.

Gross loan growth moderated (3Q12: +8.6 per cent yoy; +0.4 per cent qoq vs. 2Q12: +13.1 per cent yoy; +5 per cent qoq) with the slowdown was partly due to adverse foreign translation impact but asset quality was intact with the gross impaired loan ratio improving to 4.2 per cent from 4.4 per cent at end-2Q12.

CIMB maintained their 2012 targets, which includes ROE of 16.4 per cent and group loans and deposit growth of 16 per cent. Despite the pickup in asset growth expected in 4Q12 from the strong deal pipeline, we think the loans and deposit growth targets will likely be missed. Nevertheless, overall profitability has been supported by NIM management, healthy non-interest income and low credit cost, factors that will likely help support 4Q12 earnings as well.

No change to our earnings forecasts. Fair value of RM8.70 (13x CY13 EPS) and Trading Buy call maintained.


Vehicles sales in Oct rose to 55,158 units, up 20.2 per cent mom and 2.8 per cent yoy. Cumulative vehicle sales for the year to Oct reached 513,605 units up 1.9 per cent yoy.

The rebound in Oct sales was attributed by the MAA to positive consumer sentiment, the introduction of new models and a longer working month. There was also an element of pent up demand after the low sales in the preceding two months, following the absence of any changes in the duty structure in Budget 2013 and clarification from Ministry of International Trade and Industry (MITI) officials that there were no plans to revise the automotive duty structure.

TIV in the remaining two months of 2012 only needs to average 49,000 units for our TIV forecast of 612,000 units to be met.

Toyota sales for Oct staged a strong recovery rising 32.2 per cent mom, ahead of Nissan (+18.4 per cent mom) and Honda (+5.0 per cent mom). We expect TIV in the remaining two months of 2012 for the non-national majors to show strong yoy gains due to the low base arising from the floods in Thailand.

Neutral. While there are few near-term re-rating catalysts for the stocks under our coverage, we reiterate our Outperform calls on UMW Holdings and DRB-HICOM.

* 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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