KLCI bucks the trend as Asian markets dip on N.Korean leader’s demise

KUALA LUMPUR (Dec 19): The FBM KLCI bucked the trend among regional markets and clawed back to close higher on Monday, after the death of North Korean leader Kim Jong-il and a warning from Fitch about possible credit downgrades kept investors on edge.

The FBM KLCI closed 11.56 points higher at 1,477.78, lifted by gains including at blue chips including Genting and Axiata.

Gainers trailed losers by 315 to 445, while 283 counters traded unchanged. Volume was 1.6 billion shares valued at RM1.03 billion.

Key regional markets pared down their losses, after having fallen sharply earlier in the day on news that North Korean leader Kim Jong-il had died.

Japan’s Nikkei 225 closed 1.26% lower at 8,296.12, Hong Kong’s Hang Seng Index fell 1.18% to 18,070.21, the Shanghai Composite Index was down 0.31% to 2,217.95, South Korea’s Kospi fell 3.43% to 1,776.93, Taiwan’s Taiex lost 2.24% to 6,633.33 and Singapore’s Straits Times Index shed 1.55% to 2,618.09.

On Bursa Malaysia, PPB was the top gainer and rose 44 sen to RM17.20; Nestle added 36 sen to RM56.36, BAT 30 sen to RM49.40, Perak Corporation 19 sen to RM1.34, HLFG and Genting 16 sen each to RM11.70 and RM10.54, Amway 15 sen to RM9.20 while Tasek and Axiata added 14 sen each to RM8 and RM5.

Among the decliners, Dutch Lady fell RM1.14 to RM23.30, United PLANTATION []s down 28 sen to RM18.22, Jaya Tiasa 27 sen to RM6.79, F&N and GAB 26 sen each to RM18.10 and RM13.14, Harvest Court, Carlsberg and Rapid lost 19 sen each to RM1.09, RM8.47 and RM1.82 respectively, while JobStreet fell 17 sen to RM2.33.

Utopia was the most actively trade counter with 125.9 million shares done. The stock added half a sen to 10.5 sen.

Other actives included JCY, Astral Supreme, Versatile, Sanichi, Flonic and Dataprep.



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Dialog fuelling its ETP projects with a rights issue

Dialog Group Bhd (Dec 16, RM2.54)
Maintain outperform at RM2.44 with target price of RM3.64: Though the cash call and full warrant exercise could dilute our earnings per share (EPS) forecasts by up to 18% to 21% and knock 13% off our target price, it would not change our “outperform” call. We continue to value the stock at its sum-of-parts value.

Dialog has fixed the issue price for its one-for-five rights issue at RM1.20. The rights issue comes with free warrants on the basis of one-for-10 rights shares. The exercise price of the warrants has been set at RM2.40.

We were not surprised by the development as Dialog had announced the rights issue proposal on Aug 18 following the award of the Balai marginal field project on Aug 16. As at end-September this year, Dialog had RM92 million (4.6 sen per share) net cash. The cash call is expected to raise up to RM957 million (RM478 million from rights issue + RM478 million from full exercise of warrants). The proceeds will be used to fund the Balai project and the Pengerang tank terminal, which come under the Economic Transformation Programme (ETP).


We advise shareholders to subscribe to the rights given the steeply discounted rights price of RM1.20. The issue price represents a 46% discount to the theoretical ex-rights price of RM2.23, based on the five-day average of RM2.43. This fundraising exercise could enlarge Dialog’s share base by up to 30% from two billion (as at circular date of Oct 28) to 2.6 billion. We expect to reduce our FY12 ending June to FY14 EPS forecasts by 13% to 16% following the expected completion of the rights issue in February 2012. The warrants will expire in five years. Imputing RM957 million proceeds and a fully enlarged share base of 2.6 billion, we arrive at a fully diluted target price of RM3.18 compared with RM3.64 currently. — CIMB Research, Dec 16


This article appeared in The Edge Financial Daily, December 19, 2011.

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Coastal: More wind in its sails

Coastal Contracts Bhd (Dec 16, RM1.92)

Maintain buy at RM1.79 with target price of RM3.25: Coastal scored RM233 million worth of vessel construction contracts — two offshore support vessels (OSV) for longtime client Tidewater Group, one OSV and two landing craft to customers from Nigeria and Malaysia (both new), and two barges from an Indonesian return customer. This brings its outstanding order book to RM610 million as at last Friday, with year-to-date order wins at RM690 million.

Though these contracts were certainly a welcome surprise to end the current year, earnings impact will only be felt in 2012, as Coastal has a policy of recognising revenue upon vessel delivery. Thus we absorb the above contracts into our FY12 order book assumption of RM710 million wins (33%). We retain our cautiously optimistic outlook for FY12 as margins shrink from continued excess OSV supply (especially in the less than 8,000 BHP range) while oil and gas activity could slow due to possible liquidity issues in Europe and the cascading effect on global markets.


We maintain our “buy” call on Coastal with RM3.25 target price, pegged to eight times FY12 earnings per share (EPS) of 40.5 sen. We like Coastal for its cheap valuations (4.4 times FY12F EPS against 12 times peer average and trading at slightly above -1 standard deviation of 3.2 times), consistency in delivering stellar results (43% compound annual growth rate for FY07 to FY10A earnings), net cash position with solid operating cash flows (RM196.7 million cash pile) and cost efficient business structure (circa 30% net margin). The stock price should be supported by persistently high oil prices (US$94per barrel as at last Thursday). — HwangDBS Vickers Research, Dec 16


This article appeared in The Edge Financial Daily, December 19, 2011.



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HELP expecting a better quarter

HELP International Corp Bhd (Dec 16, RM1.71)

Maintain market perform at RM1.71 with a fair value of RM1.80: HELP is due to release 4QFY11 ended October results on Thursday. We are expecting 4Q11 net profit of RM2 million, a sequential improvement given: (i) historical trends (HELP’s 4Q results tend to be stronger than 3Q); and (ii) 3Q11 earnings were affected by low student numbers and a material one-off relocation cost from Klang to Fraser Business Park (FBP), resulting in net profit declining to only RM245,000 for the period (2Q11:RM6.5 million, 3Q10:RM3.2 million). Earnings before interest, tax, depreciation and amortisation (Ebitda) margin for 4Q11 is likely to improve to around 20% to 25%, after declining to a dismal 4.6% in 3Q11. Full-year dividend is anticipated to be minimal, as HELP is conserving its cash for the construction of its Subang 2 campus.

Although HELP’s revenue has grown marginally year-on-year, this increase has been offset by the higher operating expenses incurred during the year, hence HELP’s FY11 net earnings will likely be lower than FY10 net earnings of RM19.1 million. However, we believe that net earnings will improve in FY12 as HELP will no longer be incurring exceptional costs in relation to the FBP branch.

The key earnings driver for HELP in FY12 will be the contribution from its FBP facility. The full contribution from the branch will be seen in FY12, after the setbacks experienced in FY11. The management is guiding for up to 1,000 new students for the facility in FY12, an almost 10% increase on HELP’s current total student numbers. We expect earnings to pick up from 2QFY12 onwards, as HELP’s major intakes will be from January to March 2012.


The risks include: (i) further regulatory changes; (ii) lower than expected student numbers; and (iii) decline in the demand for private higher education.

We are maintaining our earnings forecasts pending the release of the 4QFY11 results.

We maintain our “market perform” call on HELP (after upgrading the stock from “underperform” on Dec 1), with an unchanged fair value of RM1.80. We value HELP at 12 times FY12 earnings, after imputing a two times discount to the market’s estimated price-earnings ratio of 14 times due to the stock’s thin trading volume (12-month average traded volume of 26,000, against SEG International Bhd’s 958,000 and Masterskill Education Group Bhd’s 2.4 million). — RHB Research, Dec 16


This article appeared in The Edge Financial Daily, December 19, 2011.



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Sunway-Khazanah JV acquires lease in Medini Iskandar for RM745.3m

KUALA LUMPUR (Dec 19): Sunway Bhd has acquired the leases of two parcels of land for RM745.3 million with a gross development value (GDV) of RM12 billion in Medini Iskandar via a joint venture (JV) with Khazanah Nasional Bhd.

In a statement on Monday, the company said that the two parcels of land adjacent to each other totaled 691 acres, adding that the leases acquired were for a period of 99 years.

Sunway said the newly acquired land known as Zone F Medini would boost its landbank by 30% from the previous 2,145 acres, while the proposed development will increase the company’s current GDV to RM 32 billion.

“With the acquisition, Sunway will have 755 acres of development land in Johor, in addition to the existing land at Bukit Lenang, with estimated total GDV of RM 13 billion,” it said.

The company also announced its JV with Dayang Bunting Ventures Sdn Bhd, a wholly-owned subsidiary of Khazanah to form Semerah Cahaya Sdn Bhd which would principally be involved in conceptualising, managing, implementing and developing the said land.

Sunway currently holds 38% in the JV but will increase its holdings to 60% within 54 months from the date of the lease purchase agreement, it said.



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MIDF upgrades Gamuda to 'buy'

MIDF Research has upgraded its call from 'neutral' to 'buy' on Gamuda Bhd, citing the latter's earnings growth potential.

It has also set a new target price of RM3.62 against RM3.20 previously.

In a research note today, MIDF said Gamuda's net profit of RM132.3 million in the first quarter of financial year 2012 was above its expectation.

"We are raising our net profit forecast for 2012 and 2013 financial years by 15 per cent and 14 per cent respectively, as the first quarter (2012) results were above our expectation," it said.

Although Gamuda's revenue for the quarter declined by 21 per cent quarter-on-quarter, its pre-tax profit jumped by 52 per cent year-on-year and 11 per cent from the preceding quarter to RM167.2 million with strong contribution from the construction and property divisions, said MIDF.

MIDF also believed that sales recognition from the Double Tracking Project (Ipoh-Padang Besar) and domestic property sales would likely drive Gamuda's earnings in the upcoming quarters. --Bernama



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MIDF raises Top Glove earnings forecast

MIDF Research has revised upwards Top Glove Corp Bhd's earnings forecast for financial year 2012 by 9.8 per cent to RM159.6 million from RM145.3 million.

MIDF Research said the adjustments were basically to reflect lower assumption on average latex price, higher utilisation rate and stronger greenback against the ringgit.

"Despite softening in latex price and strengthening of dollar, we believe that demand for gloves plays a major role in sustaining good performance for the glove players including Top Glove," it said today.

Meanwhile, HwangDBS Vickers Research expects Top Glove to record better earnings in the second quarter onwards after the company posted a within-expectation performance in the first quarter of RM31.4 million, accounting for 21.6 per cent and 20.2 per cent of the research house and consensus full year estimates respectively.

"Key to our forecast is higher cost savings passed to ustomers," it said.

Therefore, HwangDBS Vickers maintains a "hold" call on Top Glove with a target price of RM4.05 while MIDF Research maintained its "sell" recommendation on a higher target price of RM3.61 from RM3.29. -- Bernama



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KL shares lower at midafternoon

KUALA LUMPUR -- Share prices on Bursa Malaysia were mixed at midafternoon today, tracking mild gains in selected bluechips, dealers said.

At 3pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 1.94 points or 0.132 per cent to 1,468.16.

The Finance Index fell 25.33 points to 13,133.26 but the Plantation Index rose 14.09 points to 7,878.20 and the Industrial Index rose 2.03 points to 2,651.55.

The FBM Emas Index increased 9.14 points to 10,063.63, the FBM Mid 70 Index added 0.2 of a point to 11,060.78 and the FBM ACE Index declined 49.17 points to 4,084.08.

Losers led gainers by 430 to 208, while 272 counters were unchanged.

Turnover stood at 1.012 billion shares worth RM554.36 million.

Among actives, 1 Utopia rose 1.5 sen to 11.5 sen, Wijaya-Wa fell 3.5 sen to 41 sen and Astral Supreme gained one sen to 22 sen.

Among heavyweights, Maybank and CIMB declined one sen each to RM8.20 and RM6.99 respectively while Sime Darby rose one sen to 8.97. -- Bernama



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