infolinks

Thursday, January 28, 2010

Hartalega

Results within expectations
The glove-maker posted 9M10 net profit of RM97m, up 82% yoy and within market estimates. Key takeaways from the results: (1) Revenue increased 28% yoy on higher demand resulting from the recurrent flu outbreak. (2) Operating margins improved to 29.6% in 9M10 compared to 18.0% in 9M09 on improved production efficiency and lower raw material prices. Natural latex prices declined 18% yoy to RM4.62/kg during the period. (3) Net cash balance has turned positive to RM43.4m in 9M10 from -RM19.5m in 9M09. (4) A second interim dividend of 5sen/share has been declared, bringing the total dividend declared for FY10 to 10sen/share.

Hartalega trades at FY11E P/E of 11.8x and P/B of 3.6x, versus Top Glove’s P/E 12.5x and P/B 2.9x, and Supermax’s P/E 8.6x and P/B 1.8x.

Wednesday, January 27, 2010

AEON

AEON chart as at 27/1/2001. There was a very good opportunity for buying when a bullish divergence occured Febuary 2009. Currently it is trading within a channel. If you have the stock, it will be an opportunity to sell off when it reaches the upper channel or when RSI >70.
Just my suggestion.

Sunday, January 24, 2010

Counters to pay attention

Current price (closing price on 22.1.10)
Atrium REIT - 0.915
TSM Global - 2.29
Paramount - 3.08
Zhulian - 1.87
Kurnia Asia - 0.755
Faber - 1.67
Wellcall - 1.39
Sapura Crest - 2.43

Tuesday, January 19, 2010

Genting Plantations

Genting Plantations

Plans to develop Johor landbank

Genting Group revealed yesterday it plans to develop a premium shopping mall via Genting Plantations in Johor’s Iskandar Malaysia region. The development will be in a form of JV with U.S.’s Simon Property Group and Genting Plantation’s contribution is expected to be around RM200m. The mall will be part of the Group’s plan to develop a recreation hub, which will consists of not only the mall, but also hotels and a theme park, to draw visitors to its casino resorts in Malaysia and Singapore.

We are positive on the plan as: (1) The development of the hub will enable the company to unlock the value of its 10,000 acres landbank in Kulai, Johor. (2) The expected development cost of RM200m is within its financing ability as it is sitting on a net cash pile of RM183m as of 30 Sep 2009.

Genting Plantations is currently trading at 16x FY11E PE, a 15% premium to peers.

Sunday, January 17, 2010

Genting as at 18th Jan 2010

Better odds than competition

Genting Berhad (GENT) has risen 3.4% YTD this year in anticipation of Genting Singapore’s opening on Jan 20th and the opening of its Universal Studio Theme Park and casino shortly afterward. Despite the rise, GENT is still the cheapest gaming stock compared to regional peers, trading at 2010E EV/EBITDA of 7.7x and P/BV of 1.9x, versus Wynn Macau (16.2x and 7.3x), and SJM (7.6x and 2.6x). Due to the expensive valuation of Genting Singapore (GENS (currently trading at 2010E EV/EBITDA of 22.7x and P/BV of 3.5x), investors might switch to GENT as a cheaper to the Singapore gaming market. GENT's stakes in GENS and GENM at current prices are worth RM27bn, almost equivalent to its market cap of RM28bn. At this price, investors are getting the plantations, power generation, and other businesses for close to zero. Pegging it at lower range of peers’ FY10E P/BV of 2.6x, we see GENT trading at RM10.40.

Wednesday, January 13, 2010

Leader Universal (current price = 0.93 sen Target =RM1.16

In a Bursa announcement yesterday, Sarawak Energy Bhd said it has awarded a LoA to Naim Holdings for the construction of Package B Part I and II of the 275KV Overhead Transmission Line Projects for Bakun-Similajau Transmission System.
Since Leader is likely to be the lead supplier of wires and cables to this project, the company is poised to gain both directly and indirectly. Hence, given improving earnings visibility, we ascribe a higher PER of 8x against 6x previously to the company’s cable and wire division in our Sum-of-Parts valuation. This results in an upgrade on Leader’s target price to RM1.16 from RM0.93 previously. BUY call maintained.
Project in hand? Our checks with sources indicate that this transmission line is part of the second phase of the Bakun-Similajau Transmission System (BSTS). In fact, Leader had previously supplied cables and wires for the first phase of the BSTS, which was awarded by the same party. As such, we believe the cable and wires supply contract for the second phase could well land on Leader’s lap.
Direct and indirect exposure. Besides directly supplying to the BSTS, Leader’s associate company, Universal Cable Sarawak (UCS), would also be Leader’s indirect exposure to the BSTS. UCS is also principally involved in the manufacture of electrical wires and cables as well as sub-contract power and transmission related works. (see page 2 for more details) Optimistic earnings forecast reinforced. We see Leader’s FY10 revenue growing 9.2% y-o-y. Coupled with recovering copper and aluminium prices, the resulting higher margin should well lift its net profit by 21.4% y-o-y over the same period. We see increasing orders from the SCORE region as more transmission lines are installed in the future. Nonetheless, we deem our estimates for Leader reasonably “bullish”, and hence our unchanged earnings forecast. A potential upside catalyst would be higher than expected orders from the SCORE region.
Compelling valuations. Leader’s share price has surged by 17.7% in the past two days following news of a JV between State Grid Corp of China and 1Malaysia Development Berhad to invest in projects in SCORE. As the prospects are improving for Leader’s operations in Sarawak going forward, we are now ascribing a higher PE of 8x against a conservative 6x previously to the company’s cable and wire division in our sum-of-parts valuation. This prompts us to revise upwards our TP for the stock to RM1.16 from RM0.93 previously. Leader remains a BUY.

Tuesday, January 12, 2010

3 jan 2010 Market Strategy "Year of the Tiger".... CLSA

2010 strategy
To outperform in 2010, investors have to buy on dips. Buying opportunities will arise from concerns on inflation, monetary tightening and double dip recession. We expect fundamental and liquidity factors to drive the FBM KLCI up to 1460 pts by year-end. For the Year of the Tiger, we will focus on domestic consumption plays, and top picks in the big cap space are CIMB, Maybank and Genting.

The three bears

* 2010 will be a year of tug-a-war between liquidity versus fundamental factors for equity investors which will result in choppier markets.
* To ensure outperformance, investors have to buy on dips.
* Buying opportunities will arise from concerns on inflation, monetary tightening and double dip recession.


Three re-rating catalysts

* Despite our expectations of choppier markets, the uptrend remains intact.
* The persistent weakness in the USD will continue to fuel the dollar carry trade and the liquidity party.
* Fundamental re-rating catalysts include a new investment cycle, revitalisation of the equity market and sustainable economic recovery.


FBM KLCI year-end target 1460pts

* Fundamental factors are not the most appealing with forward PE trading at 14.4x, which is close to 10-year mean.
* However recall the most recent liquidity party driven by the yen carry trade, ended with PE multiples peaking at 22x in January 2008.
* Taking into account fundamental and liquidity factors, we derive a year-end index target of 1460 pts or 15% upside.


Top picks

* In 2009 we told investors to hedge against inflation with positions in the property and commodity sectors.
* For 2010, we will focus on domestic consumption plays, given the economic recovery, stronger inter-regional trade, high savings rate and low unemployment.
* Top picks in the big cap space are CIMB, Maybank and Genting, whilst mid-caps are AMMB, Tanjong, Astro and UEM Land.

KFC - Crossing the regional roads

KFC Holdings UPGRADE TO BUY
Price/Target: RM7.86/ RM9.40 Mkt Cap:
US$0.5b Daily: Vol 0.2m 1-Yr Hi/Lo: RM8.00/6.51

Poised to expand regional presence beyond involvement in India, backed by impressive resume with Yum! and strong balance sheet. 2009 earnings could throw up a pleasant surprise. Upgrade to BUY and raise target to RM9.40.


Corporate Event

QSR/KFC Bhd Group is likely to have more opportunities to expand its KFC franchise operations in the greater Asian region, having clinched in recent years franchises in Singapore, Cambodia and India.

Meanwhile, we expect KFC Holdings (KFC) to deliver a strong set of results for 2009, perhaps above consensus, led by margin expansion on the back of easing raw material costs, rising average selling prices (ASP) and ongoing store expansion.

Stock Impact

Yum! returns with larger regional bites. In the intermediate term, KFC is in a strong position to secure more lucrative KFC franchises in the greater Asia region from Yum! Brands (Yum!), in recognition of its impressive
Malaysian operations (consistently a top-performing KFC franchisee in the region) and steady store expansion (thus feeding Yum!'s growth in royalty payments). To recap, the Group clinched the Singapore franchise, followed by QSR clinching the sole KFC Cambodian franchise (which started its first
store in 1Q08), and most recently, KFC was appointed a key KFC restaurant franchise operator in Pune and Mumbai, India, where it intends to open 10-12 outlets in 2010.

As such, KFC could be in a good position to secure a concessionary foothold in more developed countries in the intermediate term. This implies a much larger outlay but also swifter translation to the bottom line. From time to time, KFC could be invited to bid for such opportunities which could lift its earnings by at least 10%.

Meanwhile, the existing overseas franchises should deliver attractive returns over the long term, beyond the expected start-up losses in the first 1-2 years of operations. For example, KFC Singapore, which was
bought for S$55m in 2002, turned around in 2005 and today delivers about RM10m in pre-tax profit. KFC Cambodia, which has seven outlets, made a modest loss in 2009.

Earnings Revision

Upgrade outlook for 2010-11. We maintain 2009's net profit estimate, but raise 2010-11 forecasts by 4.9% each to RM146m and RM154.2m respectively after lowering raw material cost assumptions. Our 2010-11 forecasts
conservatively assume rising raw material costs in 2H10 and start-up losses in the region.

Valuation/Recommendation

Upgrade KFC to BUY (from HOLD) with a revised target price of RM9.40. KFC is expected to enjoy the strongest earnings momentum among the consumer stocks under our coverage on the back of improving consumer sentiment. It is still trading at cheap valuations of 10.0-10.7x PE for 2010-11. Our
target price is based on a lower discount rate of 35% to our RNAV of RM14.50/share in recognition of a rising likelihood of further expansion in Asia, indicating an effective use of its surplus cash. The revised target
price implies 12.8x 2010F PE and 12x 2011F PE. There could still be upside to our target price should the company realign its use of surplus cash and provide a more generous dividend policy, noting that established
multi-national F&B companies like Nestle and F&N trade at over 20x PE.

Analyst: Vincent Khoo, CFA/ Malaysia Research Team

Friday, January 8, 2010

DAIBOCHI PLASTIC & PACKAGING... GROWTH STOCK

Current Price RM2.33 (as at 8th January 2010)
New Target Price RM2.96

Acquisition of new key account to spur growth
Daibochi’s investment proposition is at first glance,
driven by a surge in margins at the plastic packaging
materials segment, which buoyed group results up
218%YoY in 3Q-09. The steady share price gain is
also on promising prospects for a sustained 8%
medium term dividend 5.2% yield that puts the stock in
the running to be added as a medium-term holding.
But more encouraging is the recent acquisition of the
BAT (British American Tobacco) account that may pan
out to be a key regional supply contract in the longer
term. BAT is looking to source domestically to
substitute for more expensive imported metallized
polyester and aluminum foil and the initial orders are
aimed at qualifying Daibochi as a long term regional
supplier for the bulk of its needs. As the share price
continues to notch up 52-week highs, investors may
finally recognize its potential as a growth stock. We
have placed our initial price target at RM2.96, with a
BUY recommendation.
A Quick Take on 3Q09 Results
3Q-08 quarter is a seasonally weak quarter. Revenues
fell just 0.6%YoY but were down 7.0% QoQ on
seasonally lower sales volume after the ramp-up ahead
the Eidul-Fitr season. 3Q’s low 16.3% effective tax rate
also helped. Sales were flat as this is a function of the
lower cost of plastics being passed on to customers.
But the lag and incomplete passing on of cost savings
benefits margins. Consequently, 3Q-09 gross margins
at 13.2% is at a record high. Our forecast is for FY09
as a whole, revenue growth will continue at 5.9%,
driven by a marginal 4% volume gain and gains on
better mix of packaging materials. The price of
PE/PP/polyester resin and film fell sharply in 2008.
Film and resin of these 3 raw materials make up 65%
of material cost by value.
Recommendation
Our forecast is for FY2010 earnings to rise to
RM23.5m, representing +16.5% growth. This does not
include any assumption of a significant margin gain in
the event BAT ramps up orders. Even so, valuation
remains undemanding at 7.5X forward PER. The
company’s financial strength has strenthene4d sharply
in the past year and may swing into a net cash position
by this year. The rapid paring down of debts despite
payment of a bumper 15 sen dividend in 2009 is a
testimony of this trend. The strong growth prospect is
backed by a trend towards flexible packaging materials
rapidly replacing metal and rigid plastic containers for
an array of consumer goods. The share price has risen
372% in the YTD period, but the promised yield is still
at least 5.2%, or above our recommended threshold
yield for income stocks, giving the stock an anticipated
12-month total return of 33%. BUY

(By JUPITER SECURITIES RESEARCH)