Wednesday, 7 March 2012

Stocks to watch: SapuraCrest, Dijaya, HSL, Kimlun

KUALA LUMPUR (March 7): Stocks on Bursa Malaysia may slip on Wednesday in line with the cautious global and regional markets as worries about slower growth cast a pall of gloom over investors’ sentiment.

Key regional markets posted losses of between 0.63% and 2.16% as riskier assets bore the brunt of fears that the global growth outlook is darkening and that Greece may not be able to complete a major debt restructuring deal.

Reuters reported China's lowering of its economic growth target and data pointing to Europe possibly slipping back into recession have slowly eroded the optimism on global markets generated by the European Central Bank's huge injection of loans to banks since December.

On Bursa Malaysia, late buying helped the FBM KLCI extend its gains but whether it can be sustained on Wednesday remains to be seen due to external worries.

On Tuesday, the KLCI closed 0.69 of a point higher to 1,589.91. Turnover was 1.29 billion shares valued at RM1.73 billion. The broader market reflected the cautious sentiment, with 519 decliners to 257 advancers while 315 stocks were unchanged.

Among the stocks to watch on Wednesday are SAPURACREST PETROLEUM BHD [], DIJAYA CORPORATION BHD [], HOCK SENG LEE BHD [], Kimlun Corp Bhd and Malaysia Airports Holdings Bhd (MAHB).

SapuraCrest Petroleum secured a US$54 million contract from Petronas Carigali Sdn Bhd to provide a tender rig including a mobilisation fee.

The contract was for 12 months starting April 1 with an option to extend for another 12 months.

Dijaya resumes trading after a two-day suspension for a corporate exercise. Dijaya is acquiring 40 PROPERTIES [] owned by its single-largest shareholder Tan Sri Danny Tan for RM948.7 million.

The purchase will be funded with a cash portion of RM250 million and the balance via the issuance of redeemable convertible unsecured loan stock (RCULS), with a staggered conversion price range of RM1.30 to RM2.50 over a 10-year period.

Upon completion of the proposed amalgamation exercise, the land bank will increase to 870 acres and the gross development value will increase to RM37 billion.

Hock Seng Lee Bhd plans to undertake a mixed commercial and residential property project in Bandar Samariang, Kuching with an estimated gross development value of RM700 million.

Hock Seng Lee said the project would be on 275.5 acres of land which it was acquiring from Projek Bandar Samariang Sdn Bhd for RM25.54 million.

RHB Research Institute said it was less enthusiastic on CONSTRUCTION [] stocks as it believed their share price performance is likely to be muted over the next six to 12 months as the market begins to price in a higher risk premium for construction stocks ahead of the nation’s general election that will have to be held by March 2013.

However, the research house said Hock Seng Lee would be buoyed by: (1) Projects under Sarawak Corridor of Renewable Energy (SCORE); (2) Sustained high margins given limited competition from only a small pool of Sarawak-based Unit Pendaftaran Kontraktor Negeri Sarawak (UPK) registered contractors for most public jobs in Sarawak; (3) An outstanding construction orderbook of RM1.1 billion; and (4) An added downside protection to its share price by virtue of a strong balance sheet with a net cash of RM183.7 million or 31.5sen a share as at Dec 31, 2011.

“Indicative fair value is RM1.90 based on 12 times FY12/12 EPS, in line with our one-year forward target PER for the construction sector of 10-14 times,” RHB Research.

Kimlun’s estimated outstanding book order has increased to about RM1.50 billion after it secured a RM68.29 million housing project in Johor Baru.

Its unit Kimlun Sdn Bhd had accepted a letter of award from UNITED MALAYAN LAND BHD []’s subsidiary Dynasty View Sdn Bhd to construct apartments and ancillary buildings in Johor Baru.

Meanwhile, MAHB’s franked dividend of up to 14.14 sen per ordinary share less income tax of 25% amounting to RM116.64 million will go ex on April 9 and the entitlement date is April 12.

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