KLCI in the red in early trade, PetChem, Tenaga weigh

KUALA LUMPUR (Feb 28): Blue chips slipped in early trade on Tuesday, weighed down by losses in Petronas Chemicals (PetChem) and TENAGA NASIONAL BHD [].

At 9.31am, the FBM KLCI was down 0.08 of a point to 1,558.96. Turnover was 187.10 million shares valued at RM140 million. Losers led gainers 164 to 171 with 218 counters unchanged.

Reuters reported that regional markets consolidated on Tuesday as investors remained wary of the impact from high oil prices on growth and hoped the European Central Bank's upcoming second liquidity injection will support sentiment and revive risk appetite.

CIMB Equities Research said in its technical outlook for the market said while prices edged up on Monday, t the buying momentum could not be sustained.

“Market breath continued to be weak as it has been for the whole of last week. The 1,566 high still stands and so is our bearish outlook. The 1,550 key support levels is still a level to keep watch as it would eliminate all bullish potential if it is breached.

“The wedge support is now at 1,542 and a break below would be detrimental for the medium and long term outlook. The upside is likely capped around the next resistance at 1,570-1,575 even if the 1,566 is taken out. The scale is tipping towards the bears,” said CIMB Research.

Among the decliners were JT International, down 21 sen to RM6.95, F&N 16 sen to RM17.80, Oriental Holdings 14 sen to RM6.10 and WCT six sen to RM2.65. PetChem fell nine sen to RM6.81 and Tenaga six sen lower at RM6.19.



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HDBSVR maintains hold on E&O, ups TP to RM1.80

KUALA LUMPUR (Feb 28): HwangDBS Vickers Research said Eastern & Oriental Bhd’s 3QFY12 net profit came in at RM15.4 million (up 106% on-year excluding exceptionals, up 11% on-quarter), bringing 9MFY12 core earnings to 60-86% of its and consensus expectations.

It said on Tuesday that E&O could still meet management’s profit target (RM250 million to RM300 million over FY11-12 RM150 million to RM200 million per annum thereafter).

HDBSVR said the factors would be on the back of record RM930 million unbilled sales and new launches.

The research house said E&O and Sime Darby have held their second monthly collaboration meeting and we expect more detailed plans to be unveiled by 1H12.

“Cut FY12-13F earnings by 6%-8% to push forward profit recognition for Andaman condos. Maintain Hold, raise TP to RM1.80 (from RM1.50) based on a lower 40% discount (from 50%) to RNAV of RM3.05 as STP continues to see strong demand amid a softer property market.

“We have assumed RM265psf for STP’s remaining landbank (including Phase 2), 10% premium to RM240psf Ivory PROPERTIES [] paid for Bayan Mutiara given STP’s more prime location (sea-facing),” said HDBSVR.



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HDBSVR maintains Hold call on CIMB, target price of RM7.60

KUALA LUMPUR (Feb 28): HwangDBS Vickers Research said CIMB Group Holdings Bhd’s 4Q11 earnings were in line.

It said on Tuesday the higher provisions on-quarter were offset by one-off recoveries (RM100 million from CIMB Thai) and gain from de-consolidation of CIMB Aviva (RM250 million).

HDBSVR said the RM250 million gain was fully offset by additional provisions, including a change in default probability for its Malaysian retail business under FRS 139.

“Corporate investment banking profits fell in the absence of mega deals in 2011, but the pipeline is expected to be strong this year. NIM was stable on-quarter but weakened on-year because of higher funding costs,” it said.

HDBSVR said loans grew 4% on-quarter to take full year loan growth to 14%, but that was below management’s 18% target.

Deposits grew 11% largely driven by Malaysian and Singapore operations, while CASA to total deposits inched up to 35% (FY10: 33%). Costs were stable with reductions largely in establishment, marketing and general expenses. Asset quality continued to improve with absolute NPLs dropping by 5%, while gross NPL ratio fell to 5.1%. Capital ratios (group level) under Basel III would be as follows: 8.4% core Tier-1 CAR, 9% Tier-1 CAR, and 15% RWCAR.

“Lingering external headwinds dictates a still cautious outlook for CIMB. It has guided for 16% loan growth for 2012, led by Malaysian and Indonesian operations (high-teens growth). Corporate loans should be the main growth driver as key ETP projects kick-off. A rights issue at CIMB Thai is on the cards to fund growth, but there are no details.

“Maintain Hold and RM7.60 TP based on the Gordon Growth Model and 16.5% ROE, 6.5% growth, and 11% cost of equity. FY12/13F earnings are revised by 3%-4% after adjusting for FY11 result,” it said.



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CIMB Research has technical buy on BIMB at RM2.16

KUALA LUMPUR (Feb 28): CIMB Equities Research has a technical buy on BIMB Holdings at RM2.16 at which it is trading at a price-to-book value of 1.3 times.

It said on Tuesday that prices have broken out of its long term triangle pattern in January and have stayed above the triangle support.

“It appears to be forming a bullish flag pattern just above its moving averages. With its indicators in consolidation mode, the bullish flag pattern could continue for a while longer. Nevertheless, it provides traders time to get in,” it said.

CIMB Research said the stock was a buy with a stop loss placed below RM2.07. A breakout above the RM2.22 flag resistance would mean that prices are headed back to retest RM2.43 high.



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CIMB Research maintains technical sell on Sarawak Oil Palms at RM6.17

KUALA LUMPUR (Feb 28): CIMB Equities Research is maintaining its technical sell call on Sarawak Oil Palms at RM6.17 at which it is trading at a price-to-book value of 2.2 times.

It said on Tuesday that Sarawak Oil Palms did indeed form a bearish wedge pattern as suggested earlier on Jan 20 but the wedge pattern extended on the upside and ticked off its buy stop at RM6.16.

“We believe that another selling opportunity is at hand here. The bearish divergence on its MACD and RSI show that buying momentum has waned. RSI has also moved down from its overbought territory.

“A close below the key support at RM6.15 would confirm the reversal and prices could soon fall towards RM5.34-RM5.55 next. Put a buy stop at above RM6.45, just in case,” CIMB Research said.



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CIMB Research maintains technical sell on Masterskill Education Group at RM1.04

KUALA LUMPUR (Feb 28): CIMB Equities Research is maintaining its technical sell call on Masterskill Education Group Bhd (MEGB) at RM1.04 at which it is trading at a FY13 price-to-earnings of 6.9 times and price-to-book value of 0.8 times.

It said on Tuesday that since its Sell call on Feb 10, prices have now fallen below the RM1.08 support. The breakdown of its triangle last week suggests that the next leg of selling is already underway.

“There is no change in its technical outlook for the near term as the near term trend remains down. Both its indicators also support the bearish near term trend. Nevertheless, there is potential for a bullish divergence forming but we will write on these pages if the longer term trend has changed,” it said.

CIMB Research said for now, the stock remains a sell targeting 90 sen to 95 sen, where a cluster of Fibonacci targets lie. A break above the apex of the triangle at RM1.15 would likely suggest that the longer term trend is about to change.



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CIMB Research maintains Hold on Boustead Holdings, lower TP of RM5.24

KUALA LUMPUR (Feb 28): CIMB Equities Research said BOUSTEAD HOLDINGS BHD []’s FY11 core net profit, which excluded RM247 million one-offs, was below expectations at only 87% of its forecast and 85% of consensus numbers.

It said on Tuesday that a weaker-than-expected heavy industries division weighed down group earnings.

“Despite factoring in higher CPO prices and a lower tax rate, we reduce our ex-bonus FY12-13 core EPS by 6.4%-6.6% due to slower progress billings for heavy industries and a lower contribution from Pharmaniaga which is now 67.2% owned instead of 98%m,” it said.

CIMB Research said it made several key changes to its RNAV computation 1) update for the current value of listed assets, 2) raise its PLANTATION [] valuation and 3) update Boustead’s stake in Pharmaniaga.

“The net effect is a rise in our RNAV value. But we pare down our RNAV-based target price from RM5.47 to RM5.24 as we now apply a 10% RNAV discount in view of its volatile earnings. We continue to rate Boustead a Hold as there are no immediate catalysts,” it said.



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Stocks to watch: CIMB, Cocoaland, TDM, Kimlun

KUALA LUMPUR (Feb 27): Market sentiment is expected to stay cautious on Tuesday as global equities pull back on concerns of strong oil prices’ weighing down already fragile economies in Europe.

At Bursa Malaysia, the corporate results should provide leads for investors as the reporting season draws almost to a close.

Among the stocks to watch are CIMB Group Holdings Bhd, COCOALAND HOLDINGS BHD [], TDM BHD [], Kimlun Corporation Bhd, Eastern & Oriental Bhd (E&O), Petronas Chemicals Bhd, HONG LEONG BANK BHD [], DRB-HICOM BHD [] and BOUSTEAD HOLDINGS BHD [].

CIMB posted net profit of RM1.132 billion in the fourth quarter ended Dec 31, 2011, up 29.8% from RM872.61 million a year ago. Its revenue was 6.1% higher at RM3.381 billion compared with RM3.185 billion. It announced a second interim dividend of 10.0 sen amounting to a net payment of RM743 million.

For FY11, it posted a record net profit of RM4.031 billion for 2011, or up 15.1% when compared with RM3.500 billion in FY10. The FY11 net return on equity (ROE) was also a record high 16.4%, but below the group’s full-year target of 17%.

Cocoaland’s earnings soared 103.2% to RM8.72 million for the fourth quarter ended Dec 31, 2011, from RM4.29 million a year ago, due to an increased selling price and higher trading volume of its products. It announced a second interim dividend of 6% per share.

TDM's earnings jumped 44.5% to RM44.34 million in the fourth quarter ended Dec 31, 2011, from RM30.68 million a year ago, on the back of higher crude palm oil (CPO) production and CPO prices.

Kimlun’s order book has increased to RM1.45 billion with the latest contract to build an extension to a shopping mall in Johor Baru for RM71.99 million. Its unit accepted the letter of award from Taman Sutera Development Sdn Bhd for the project.

E&O posted a strong set of results for the third quarter ended Dec 31, 2011 with earnings up 385% to RM15.36 million from RM3.16 million a year ago boosted by stronger property’s sales. Its revenue jumped 221% to RM123.12 million from RM41.08 million.

Petronas Chemicals Bhd posted total comprehensive income of RM735 million in the third quarter ended Dec 31, 2011, down 17.4% from RM890 million a year ago. Profit for the quarter was lower by RM172 million or 17% at RM826 million.

For the nine-month period, its net profit was RM2.62 billion while revenue was RM11.88 billion due to higher prices for olefins and derivatives and fertilisers and methanol.

Hong Leong Bank Bhd’s earnings rose 30.8% to RM381.37 million in the second quarter ended Dec 31, 2011 from RM291.43 million. Its revenue surged 66.1% to RM1.003 billion from RM603.96 million. Its earnings per share were 24.22 sen compared with 20.07 sen. It declared an interim dividend of 11 sen compared with nine sen.

Malaysian Rating Corp Bhd (MARC)has has revised the outlook on DRB-HICOM Bhd's (DRB-Hicom) AA-IS sukuk rating on its RM1.8 billion Islamic Medium Term Notes (IMTN) programme to negative from stable.

It said on Monday the outlook revision recognises the potential weakening of DRB-Hicom's near-to-intermediate term financial profile due to its debt-funded acquisition of PROTON HOLDINGS BHD [] (Proton).

Boustead Holdings Bhd’s net profit fell 8.6% to RM192.30 million in the fourth quarter ended Dec 31, 2011 from RM208.90 million a year ago.

Its revenue jumped 51% to RM2.554 billion from RM1.689 billion. Earnings per share were 18.59 sen compared with 20.20 sen. It proposed dividend of 9.0 sen.

For FY11, its earnings rose 13.6% to RM610.60 million from RM537.50 million in FY10. Its revenue increased 38.4% to RM8.55 billion from RM6.18 billion.



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