ZHULIAN (TP RM3.77– BUY); current price RM2.5

ZHULIAN (TP RM3.77– BUY) Initiating Coverage: Strong but Undervalued Jewel

Riding on its reputation as a costume and fine jewelry producer, the group has grown into a regional MLM company with a broad product range. Targeting the Bumiputra market in multiracial and multilingual Malaysia, the group is poised to tap the potential in Malaysia, Singapore, Thailand and Indonesia. We are forecasting a 2-year revenue and earnings CAGR of 19.8% and 27.8% for the next 2 years and initiate coverage on the stock with a BUY call at a TP of RM3.77 (based on 12x FY10 EPS). Despite its strong fundamentals, the stock is trading at some 30% discount to the industry’s forward PE. Zhulian is the highest dividend yield stock in the industry.   

By OSK Research

GLOMAC (TP RM1.83– TRADING BUY) as at 29th April 2010

GLOMAC (TP RM1.83– TRADING BUY) Initiating Coverage by OSK Research : A Rerating in the Horizon

We initiate coverage on Glomac with a Trading Buy call and a CY10 Target Price of RM1.83 based on 0.94x CY10 P/NTA, which is the average valuation for its closest comparable peers. Its cheap valuation, estimated at 0.7x CY10 P/NTA coupled with potentially strong earnings recovery in the immediate term, could well spur a re-rating on the stock. As our expected broad sector rebound starting from late 2010/early 2011 pans out, the investment community will gradually be drawn to fundamentally sound and still-undervalued property stocks like Glomac

How Greece Can Impact YOU! by Bryan Rich

The economic problems in Greece have made front page news for the better part of the past three months. And I've written several columns here in Money and Markets on the ongoing drama and its influence on the global currency markets.
But with all of this incessant talk about Greece, what does it have to do with you?
That's a common question. And the answer: Potentially, a lot.
You see, Greece represents the growing mound of looming landmines in a global economy that has been damaged by the worst economic crisis in more than 80 years. And if there's anything that should have been clear from the collapse in global financial markets in 2008, it's that the world is a highly interconnected place, and so are its financial markets. So problems in Greece will likely mean problems for you and me.
Here's why ...
In a fragile economic recovery, investor and consumer confidence plays an important role in repairing economies ... and likewise, restoring investment values and opportunities.
So a hiccup in investor optimism can be a huge blow to a fragile economy. It can make businesses more defensive and consumers stingier, thus sending stock prices lower and risk premiums higher.
In short, a lack of participant confidence can mean round two of a bear market in global stocks, and potentially a double dip recession for the global economy. And that's highly possible because ...
A Sovereign Debt Crisis Is Underway
ECB Executive Board member Juergen Stark said this week that the global economy may be entering a new "sovereign debt crisis."
Last November, Dubai sent tremors through financial markets by announcing it would be "restructuring" its debt. The government later offered its bondholders just 60 cents on the dollar for their investment.
Now, Greece's shaky finances represent a threat to the lifespan of the euro, the second most widely held currency in the world. And it stands on wobbly footing as the second domino in an unraveling global sovereign debt crisis. The other potential candidates include Portugal, Italy, Ireland, Spain ... even the UK, Japan and the U.S.
That's a lineup of suspects that, if under the gun of global investor scrutiny for their respective burgeoning debt problems, could mean a lot to you and me — and to the outlook of the global economy.
But the euro zone and the IMF stepped up last weekend and provided details of aggressive financial aid as a lifeline to Greece. And given the initial bounce in the euro and decline in market interest rates for Greek government debt, the hope was that Greece's default threat had finally been put to bed.
Not so. In fact ...
The Greece Problem
Is Far from Over
Those initial favorable responses to the aid plan are already being reversed as Greece's bond yields and the euro are back to pre-rescue announcement levels.

For the near term, the rescue plan could plug the gap for Greece. It has 11.6 billion euros of government debt to refinance over the next month — and another 20 billion euros by the end of the year. 
For the near term, the rescue plan could plug the gap for Greece. It has 11.6 billion euros of government debt to refinance over the next month — and another 20 billion euros by the end of the year. 
Greece ... a Big Deal
With the U.S. stock market climbing, almost daily, to new post-crisis highs and the U.S. economic data showing solid recovery, Greece sounds like a distant problem.
But as you can see, the drama in Greece is a big deal! Not just for Europe, but for the world economy — and for institutional and individual investors alike.
Unfortunately, the euro zone is in a no-win situation. The European monetary union countries, with damaged balance sheets and a bleak outlook for growth, are stuck. And with a one-size fits all monetary policy and currency, they lack critical tools, such as devaluation, to work their way out.

So expect the sovereign debt crisis to continue to build. And be cautious of a quick downturn in global risk appetite, which can send stock markets and global demand heading south, and global capital heading for safety.

Tanjong still good for long term investment.

 TANJONG plc (RM18.82) is looking to new power projects to drive growth for the company for the foreseeable future.
The company has had a good start in terms of overseas expansion, successfully acquiring power plants with effective installed capacity totalling some 2,461MW over the past few years.

Its biggest investments are currently in generating plants in Egypt and Bangladesh with smaller interests in Pakistan, Sri Lanka and the United Arab Emirates. Having already established a track record in these countries, Tanjong is upbeat on its ability to secure new power projects, especially in the Middle East and North Africa (MENA) region.

Focus on MENA power projects
The MENA region has vast reserves of petroleum and natural gas with a population equivalent to that of the European Union. Electricity demand growth expectations and investment requirements in the power and power/water sector in the region is one of the highest in the world, particularly for members of the Gulf Cooperation Council.

Against this background, Tanjong has aspirations to add some 4,000MW to its power-generating portfolio over the next five years. The company has a relatively strong balance sheet to leverage upon. Its existing power plants generates a cumulative RM1 billion in cashflow annually while the company has over RM1.5 billion in gross cash, some RM1.3 billion of which lies with the power business.

The power arm accounted for over three-quarters of Tanjong's pre-tax profit of RM953.3 million in its latest financial year ended January 2010. Not taking into account any new acquisitions, we expect the business to record steady earnings in FY11 — save for some RM50 million budgeted for major overhaul expenses for two of its power plants.

In short, power will continue to be the largest earnings contributor and key driver for future growth.

Sustained performances from property and leisure
Elsewhere, the property and leisure businesses are expected to sustain earnings in FY11.

The property arm, mainly rental income from Menara Maxis, contributed some RM48 million in FY10, excluding RM22 million in revaluation gains. The building is fully occupied and few surprises are expected on the earnings front.

Similarly, TGV Cinemas is expected to maintain its performance this year. The unit reported operating profit of RM14.8 million in FY10.

Tropical Islands will probably stay in the red but with slightly narrower losses. The resort theme park recorded RM22.7 million in operating losses in FY10, down from losses totalling RM33.9 million in the previous financial year.

Nonetheless, any significant turnaround is likely only possible once more on-site accommodations are available. Tanjong's venture partner has completed 21 villas so far and aims to have another 25 units available by mid-2010. The company targets some 400 units by the end of 2012. On-site accommodation is key to attracting a greater number of visitors from a wider geographical range. Currently, most visitors are day-trippers. Longer stay would also boost the average visitor spending in the resort.

Working to resolve RTO losses
Less positively, operating losses at the racing totalisator (RTO) business widened in FY10, to RM65.8 million from a loss of RM26.9 million in the previous year. Losses may increase further in the current financial year as the company works to resolve issues plaguing the business.

Sales per draw at the numbers forecast business (NFO) too have contracted in FY10. We believe this was due, in part, to the higher number and timing of special draws as well as competition from new games recently introduced by its peers.

Given that another 20 special draws are slated for the current year, the same as that in FY10, sales would probably stay flattish. Operating profit will be dependent on the luck factor and prize payout, which tends to average out at around 65%-66%.

In all, we forecast earnings from the gaming business to decline in FY11, weighed down by bigger losses — estimated at about RM80 million — for the RTO unit.

Still good investment for the longer term
Thus, in the absence for any extraordinary gains/losses, we expect lower profits in the current financial year for Tanjong. Net profit is estimated at roughly RM636.4 million or 157.8 sen per share, down from RM676.8 million in FY10.

Despite the expected earnings contraction this year, we believe the stock is still a good longer-term investment — priced at just about 11.9 times price-to-earnings (P/E) — with better than fair prospects for growth. A new power project would result in a step increase in its earnings base, which would then be sustainable over the period of the power purchase agreement.

Furthermore, Tanjong should be able to sustain its dividend payments, at least, supported by steady cashflow from the NFO business. Assuming gross dividends remain at RM1 per share, shareholders will earn a fairly decent yield of 5.3% at the current share price.

Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.