KUALA LUMPUR, May 24 — This is a selection of morning calls by local research houses for the day.

From RHB Research

MPHB

MPHB is proposing to demerge its gaming and other businesses to create two separate and independent listed entities, i.e. MPHB, which will hold the gaming business, and an SPV which will hold the financial services businesses and other investments of the group.

We are positive on these proposals, as we have always pegged MPHB as a restructuring story - whose value would be unlocked upon sale or disposal of its non-core assets. Our positive view is based on three main factors:

1) the fact that MPHB’s gaming business is severely undervalued. Although we are unable to gauge the exact valuation of the gaming-centric listed entity (Magnum) as the valuation of the SPV businesses have yet to be determined, based on our estimates, post-debt restructuring of Magnum’s debts and after stripping out all the SPV assets, the gaming business is currently being valued at only 10x C12 PE, versus BToto’s 14x;

2) Magnum will become a high dividend yield company, with a net payout policy of 80 per cent, translating to net yields of 6.1 per cent p.a. (from 3.8 per cent currently), better than BToto’s 5.8 per cent; and

3) There will be no more restructuring/holding company discount for MPHB’s shares.

Forecasts are unchanged. We are revising our SOP-based fair value upwards to RM3.60 (from RM3.10) after reducing the restructuring discount to 10 per cent (from 20 per cent). We believe these proposals would be a strong catalyst for the share to outperform in the near term.

WCT

Since Feb 2012, WCT has added two new local projects to its tenderbook (that now stands at RM5 billion) comprising: (1) PLUS highway widening (RM400-500 million); and (2) A build-operate-transfer (BOT) privatised hospital project in Sabah (RM800-900 million).

WCT maintained its guidance of record property sales of RM700 million in FY12/12.  YTD, it already locked in RM315 million (or 45 per cent of target) with about two-thirds coming from 1Medini and the balance one-third from its flagship township projects in Klang.

The recent maiden launches of 1Medini condominiums comprising “Tower A” (GDV of RM150m) and “Tower B” (GDV of RM170m) were very well received.  Priced at RM450 psf, units in “Tower A” have been fully sold while units in “Tower B” that are priced at a higher rate of RM550 psf, have thus far registered a take-up rate of 40 per cent.

Fair value is RM2.33.  Maintain Market Perform.

AirAsia

Start-up losses, predominantly from its new low-cost aircraft start-ups in the Philippines and Japan, as well as an online travel agent JV with Expedia Inc of USA (Expedia JV), are likely to remain a permanent feature in AirAsia’s numbers for a while.   

AirAsia has hedged forward about 40 per cent of its group fuel requirement for 2QFY12 at US$122/bbl Jet, 12 per cent for July at US$125/bbl Jet and 27 per cent for 2HFY12 at US$116/bbl Brent.

The listing of Thai AirAsia is not quite a direct listing of Thai AirAsia, but a listing of the holding company of AirAsia’s local partner called Asia Aviation Pcl.. AirAsia’s stake in Thai AirAsia will thus remain unquoted (i.e. without an actual “live” market value) and as such, the anticipated re-rating of AirAsia’s valuations post the “listing” of Thai AirAsia may not quite ensue.

Fair value is RM3.72.  Maintain Market Perform.

KLCCP

Stronger results were due to more material contribution from Menara 3 Petronas, as well as better efficiency of the property assets which led to an improvement in operating margin. We raise our FY12-14 earnings forecasts by 18-23 per cent, in view of the stronger-than-expected operating margin as well as lower refinancing cost. Outperform, with fair value at RM3.59

AFG

4QFY03/12 net profit fell 11 per cent quarter-on-quarter mainly due to weaker net interest income due to 13bps NIM compression, higher overheads and higher credit cost (10bps vs. 3QFY12: 4bps). FY13-14 net profit projections tweaked up by 0.8-1 per cent while fair value upped to RM4.30 from RM4.25, based on 10 per cent premium to target CY12 PER of 12x. Market Perform, fair value RM4.30

Petronas Chemicals

Petronas Chemicals will spend about RM2 billion on plant building and maintenance for its FY12, according to chairman Datuk Wan Zulkiflee Wan Ariffin. This will include RM600-800 million on maintenance capex, and US$1.5 billion (RM4.7 billion) over three years for the Sabah Ammonia Urea (SAMUR) project. (Starbiz)

This appears to be higher than our current estimate of RM1.3 billion. We will adjust our forecast assumptions after the announcement of the 1QFY12 results by the end of the month. However, we tentatively estimate the impact on our FY12 EPS would be around -1.4 per cent. Outperform,  fair value RM7.73

* 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.