KUALA LUMPUR, July 26 — This is a selection of morning calls by local research houses for the day.
From RHB Research
Genting Malaysia
Key takeaways from our recent visit: (1) New 700-room hotel coming up in Genting Highlands – to address the high occupancy rates; (2) Update on VIP growth drivers for Malaysia – banking on this segment to drive 5-7 per cent topline growth for Malaysia; (3) Strategy for Bahamas casino – as a showcase for larger US market; (4) Change of VLT mix for RWNY – more ETG’s, higher margins; and (5) Still targeting to meet EBITDA projection in UK.
Forecasts are unchanged. However, we have reduced our SOP-based fair value to RM3.80 (from RM3.85), after adjusting some valuation parameters and taking into account the cash outlay required for the Bahamas casino. In view of the lack of catalysts to drive this company forward in the near term, we maintain our Market Perform recommendation on the stock.
Genting Berhad
Three main takeaways: (1) Rationale on Echo investment – just a portfolio investment for now; (2) View on visitor curbs in Singapore – difficult to estimate impact as it depends on how it is to be implemented; and (3) Plans to unlock value for its power division.
With the recent announcement of its plans to build a 660MW coal-fired plant in Indonesia and news that it is one of the shortlisted bidders for the new Prai combined cycle gas turbine power plant, it would seem that rumours of Genting looking to hive off its power business no longer applies. Management’s strategy for the power division is now to build up its assets for an eventual IPO.
We have tweaked our forecasts by +0.2-0.3 per cent for FY12-14, after updating our assumptions.
Our SOP-based fair value has been reduced to RM10.75 (from RM10.80). Maintain Outperform as we believe Genting continues to be a great value play, trading at 5.2x FY13 EV/EBITDA, compared to its regional peers of 9-10x, while offering investors many engines of growth from a diversified global arena, with a strong track record and an admirable balance sheet.
APM Automotive
APM reports increasingly aggressive cost-down initiatives from its OEM customers and was relatively bearish on the impact of the pricing pressure on profit margins that could take effect from late 2012 onwards.
With the assemblers demanding for efficiency gains to be passed back, component manufacturers like APM can only overcome margin pressure by growing volumes. APM will continue to leverage on its relationship with sister company Tan Chong Motor. Potential new investments into the domestic automotive from the forthcoming revision to the National Automotive Policy will only be achieved in the longer term.
We lower our fair value estimate to RM4.90 (from RM5.00) after rolling over our base year to 2013 and applying an unchanged target PER of 7.5x. Given acute underlying margin pressure, we see few re-rating catalysts at this juncture and reiterate our Market Perform recommendation.
From HwangDBS Vickers
Media Chinese
Entrenched dominance, reaping merger benefits. Strong balance sheet, seeking M&A. Initiate coverage with BUY rating and RM1.60 TP pegged to 12x FY14F EPS
Sunway REIT
Dominant portfolio of assets in Bandar Sunway. Putra Place is a key medium-term earnings driver; large block of leases expiring in FY14 for retail assets. Initiate with Buy and DCF-based RM1.60 TP.
Sector update ― Banks
M&A spotlight is on Affin. The bigger picture: Guoco, BEA, HLB, Affin. HLB (Buy, TP RM16.00) is one of our top picks. We value Affin at RM4.00.
From OSK Research
Sector update ― Consumer
Amid the market volatility and fresh fears of Europe’s debt crisis deepening, investors are taking shelter in defensive counters. We view the recent share price retracement of some consumer stocks as a good time for investors to buy. The murky global economic outlook might dampen consumer sentiment but Malaysia’s low unemployment rate and rising incomes will spur consumer spending. Maintain OVERWEIGHT on the consumer sector, with QL (BUY, FV RM3.46) and Padini (BUY, FV RM2.22) as our top picks.
* 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.