KUALA LUMPUR, July 18 — This is a selection of morning calls by local research houses for the day.
From OSK Research
Pos Malaysia
We are bullish on POSM’s efforts and the development in its Transformation Master Plan, under which the group has set out 39 initiatives (POSM has implemented six initiatives so far and is in the midst of implementing the other 33) to revamp its postal services and improve the quality of the country’s postal services to be in line with the international best practices adopted by such as Deutsche Post and Japan Post. With Datuk Seri Kamil Jamil from DRB-HICOM being appointed the group chairman effective last Friday, we expect POSM to unveil its new business plan and detail how it plans to strengthen the group. Maintain Buy at FV RM4.12 based on our SOP valuation.
Century Software
We are becoming increasingly upbeat on CSHB’s prospects given its diversification of earnings away from its conventional stronghold in accounting solutions and e-payment gateway services as well as from a demographic perspective. Keeping our forecasts intact, we reiterate our BUY recommendation at an unchanged Fair Value of RM0.98 based on 15x FY11 PER.
Kurnia Asia
We are upgrading Kurnia (FV: RM0.68) to a Trading Buy as the RM0.68 potential book value of KAB after a possible sale of KIMB represents a short-term target for the share price. Do note that this is a Trading call as we have no certainty on the Price to Book multiple KIMB will trade at or what a potential sale of KIMB would entail in terms of cash or shares. Finally, if indeed the entire KIMB is sold, we are not certain if KAB would return the entire cash proceeds as it would more likely invest the proceeds in a new business.
From HwangDBS Vickers
KLCC Property
We like KLCCP for its prime commercial properties, strong balance sheet and cash flows, and attractive valuation. However, we are reluctant to upgrade our call given its low dividend yield (fully diluted 3.8 per cent vs REITs’ 8 per cent) and potential share overhang from RCULS conversion (way in-the-money with RM1.98 conversion price, mandatory conversion by 2014 which would see Petronas’ stake increase to 66 per cent from 51 per cent). Potential re-rating catalysts: a) One-off conversion cum placement of RCULS-shares; b) Conversion into REIT to improve tax efficiency; and c) Gearing up of balance sheet (more efficient capital structure) for asset expansion (acquisition of parent’s assets however may come later rather than sooner).
From Amresearch
We maintain our BUY recommendation on Petronas Gas (PGas), with a higher sum-of-parts (SOP) fair value of RM15.30/share versus RM13.60/share previously.
Our higher SOP value stems from a 12 per cent increase in PGas’ FY13F-FY14F earnings, with the additional transportation revenue of an estimated 450mmscfd of natural gas from the Malacca liquefied natural gas (LNG) regassification facility to the country’s pipeline network. Hence, our FY13F earnings are 8 per cent above street estimate.
