Analyst calls for Aug 7
KUALA LUMPUR, Aug 7 — This is a selection of morning calls by local research houses for the day.
Today’s Market Preview
Wall Street extended its gains when key US equity indices ended up between 0.2 per cent and 0.7 per cent last night. Essentially, investors felt upbeat amid talks that Germany would support the European Central Bank’s bond purchase plan while sentiment was also lifted by better corporate results.
This could set the stage for our Malaysian bourse to climb a bit more today after posting a modest rise of 4.4-point yesterday. On the chart, the benchmark FBM KLCI may pull away further from 1,635 to head towards the next resistance barrier of 1,650.
Among the stocks that will likely be in the limelight today include: (a) Pavilion REIT following its better-than-forecast financial results that were released last evening; (b) Uzma, which has been awarded a contract for the supply of chemical and related services worth RM62m; and (c) Willowglen, as it has clinched a contract for the upgrading of security and operation surveillance system infrastructure valued at RM10m.
Jaya Tiasa: Strong Log Volumes Offset Weaker Log Prices
Key highlights: (1) Log prices on downtrend last quarter, but volumes are picking up strongly; (2) Plywood prices are better than competitors due to different product mix and different geographical markets; and (3) Good traction for FFB growth but new planting is a bit slow.
In the quarter ended April 2012 (4QFY06/12), Jaya Tiasa’s average log prices fell 6.3 per cent qoq and 32.5 per cent yoy due to the continued depreciation of the Indian rupee, which led to Indian buyers only buying the absolute necessity in terms of volume, and preferring to buy the high quality logs instead of the lower quality logs. As such, some of JT’s lower quality logs had to be sold at a discount. It did not help that log volumes increased substantially in the quarter (+18.5 per cent qoq and +45.1 per cent yoy) during the period. Going forward, management has highlighted that log prices have improved from May and is now back at the US$220-250/cum level.
For 14MFY06/12, FFB production came in at <2 per cent below our projections. Going forward, management maintains its FFB growth expectations of 30-40 per cent p.a. for FY06/13-14, which is higher than our projections of 25-30 per cent p.a.. However, we maintain our projections to be conservative. We highlight that despite the large FFB production growth, CPO production growth is likely to be slower due to weaker OER, caused by the young age of the palms.
Forecasts have been tweaked up by 1.6-4.1 per cent for FY06/12-13 and down by 2.4 per cent for FY06/14. We have also adjusted our forecasts for JT’s 2-for-1 bonus issue which went ex on 3 Aug. Our target price has been revised to RM2.95 (from RM9.05), based on unchanged target PER of 9x CY13 earnings for the timber division and 14x CY13 earnings for the plantation division. We maintain our Market Perform recommendation on the stock
FLKI – Staying supportive
Buying stayed firm after the index closed higher yesterday. The index responded positively to the white candles of last week and as it gapped higher and held on to gains, continuing the upward bias since the hint of buying was sparked from 27 July’s candle. This kept the selling activity, which took over since the failed test of the 1,650-pt resistance level two weeks ago, in the back seat. The index is comfortably above both the 50-day MAV line and the rising 200-day MAV line, supported by the longer-term positive “Golden Cross” that emerged in February.
Thus, the upward bias is expected to continue today and firm buying support should not see it closing below yesterday’s gap of 1,638 pts. Immediate resistance remains at 23 July’s high of 1,645 pts and a close above will erase the negative bias of 26 July’s “Long Black Day”. Again, a break of the psychological 1,650 pts (twice-tested two weeks ago) is required to cancel late July’s negative bias. However, a failure to hold above 1,638 pts may suggest a return in selling. Supports are at 1,630 pts and last week’s low of 1,623 pts, and a violation of both levels should confirm the return of selling. Further support is at 1,614 pts, followed by 5 July’s low of 1,610 pts. Stronger support remains just above the 1,600-pt psychological level, at the three-week low of 1,602.50 pts.
*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.