KUALA LUMPUR, July 19 — This is a selection of morning calls by local research houses for the day.
From OSK Research
AirAsia
AirAsia’s RPK and passenger carriage for 1HFY11 remained consistently strong, growing by 16% and 23.2% YTD. As a result, passenger traffic and RPK exceeded our estimates by 3% and 9% respectively after seasonal adjustments, thanks to its consistently high load factor on the back of improved aircraft utilisation. With the numbers coming in better, we upgrade our passenger carriage and RPK by 2% for FY11 on raising our load factor by 1.5ppts. This buoys our revenue forecast by 1.7% for FY11 and earnings for FY11, FY12 and FY13 by 11.7%, 1.2% and 0.68% respectively. Premised on 12x FY11 EPS, we upgrade our FV on AirAsia from RM3.89 to RM4.34. Maintain BUY.
Eng Teknologi
Eng Teknologi (Engtek) announced that it had been notified by certain existing major shareholders that they are currently in discussions on a corporate scheme that may lead to the company’s privatisation. The details are scant at this juncture but we expect to see increasing news flow on the potential privatization offer, which may lift trading sentiment on the stock. Upgrade to TRADING BUY at a revised Fair Value of RM2.30 based on FY11 PER of 6.8x.
Perwaja
Last week, we visited Perwaja’s existing steel and iron-making plants, and a private iron ore mine in Terengganu. We also witnessed the progress of clearing works at the company’s new iron ore concentration and pelletisation plant, which is scheduled for commissioning in 1HFY12. Although we only expect this plant to pull Perwaja out of the red, with our conservative assumptions indicating a fair value of RM1.05, we are now optimistic that bagging an iron ore mining concession would lift our blue-sky DCF FV by a further RM4.15. However, as we expect this valuation improvement to be progressive, we are keeping our Trading BUY pending an official announcement
From HwangDBS Vickers
UMW Holdings
We maintain Buy rating with SOP-based TP raised to RM8.55 (from RM7.95) as we roll over our valuation window to FY12F. Listing of the Oil & Gas division remains on the cards, which we believe could be as soon as 1Q12 once it turns profitable this year.
Petronas Gas
Petgas offers resilient earnings with no fuel risk, and attractive earnings growth from Melaka regas plant in 2012 and Kimanis power plant in 2013. Wildcard is the Johor regas plant. We raised our DCF-based target price to RM15.50/share after the earnings upgrade.
TNB
Maintain Buy for TNB with TP of RM8.80 based on historical three-year average forward 14xPE. The key re-rating catalyst for TNB will come from the greater clarity and certainty in terms of the timing and mechanism of future tariff adjustment.
