KUALA LUMPUR, March 20 — This is a selection of morning calls by local research houses for the day.
Outlook for robust earnings. Unbilled sales stood at RM371m as of end-FY11 with strong prospects for more order wins. Demand for Modipalm mills has improved steadily with the mill capable of producing at higher Oil Extraction Rates (OER) for clients. The group is also expanding capacity to 20-24 mills by end-2013 (current capacity at 12-14 mills/year) via its factory in Klang. There is upside to engineering margins resulting from increasing focus on mechanical projects that yield higher margins and outsourcing of lower margin civil works of the mill. Earnings growth from its engineering division should partially offset lower plantation profits in FY12 after the sale of Sachiew and Empresa estates.
TASCO (TASCO MK, BUY, FV: RM2.33, Close: RM2.01). Since we pick TASCO as our top buy within our small cap logistics sector under our coverage on 18 Oct 2011, share price had rallied strongly by 38 per cent reaching its all time intra-day high of RM2.05 yesterday. As macroeconomic conditions seems to be more positive now couple with the group’s resilient performance in its 3rd party logistics business, (3PL) we are upgrading our revenue assumptions on its 3PL, and volume growth for its sea and air freight business. As such, we are tweaking up our revenue and earnings forecast by 7 per cent for FY12 and 4-8 per cent for FY13 respectively. Following, the earnings revision, our FV will now stand at RM2.33 (previously RM2.18) based on an unchanged 6.5x FY12 PER. We maintained our BUY rating and view TASCO as a solid buy given its low PE, which is currently trading at 4.2x vs the industry average PE of 7x.
YTL may rise further if it can stay above the broken resistance level. We highlighted this stock late last month in view of its potential to scale higher, and it has moved favourably since. It appears to have hit a new resistance after breaking above the 5- year high of RM1.75 as it has been moving sideways for the past 3 weeks. Nonetheless, the uptrend is still alive as the stock closed back above RM1.75, ignoring the weak bias from the “Black Candle” of last Friday. Therefore, the uptrend is likely to continue and a purchase can be made above RM1.75.
From RHB Research
We are positive on KPJ’s expansion plans to add 980 beds over the next three years as the total number of hospital beds in Malaysia remains inadequate at 19.3 beds per 10,000 population as compared to the WHO and global recommended standards of 33 and 30 beds.
No change to forecasts. Maintain Outperform on KPJ with a revised fair value of RM5.59 (from RM5.09) to be in line with the increase in regional peers’ valuation of CY12 PER of 22.5x (from CY12 PER of 20.5x). Although we are positive on healthcare services, our Neutral call on the sector is unchanged reflecting our more neutral view of the rubber glove companies.
* 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.