World economic concerns weigh on KLCI

KUALA LUMPUR (April 17) : The Malaysian equities barometer rose on Tuesday morning against a backdrop of mixed global economic updates. These include news on European sovereign debt woes which offset the effects of improved retail sales in the US.

Analysts said the FBM KLCI could take the cue from the mixed overnight performance of US equity benchmarks against concerns on the impact of Europe’s debt crisis on world financial markets.

“In the absence of fresh market leads, our Malaysian bourse will probably continue to be range-bound for the time being,” HwangDBS Vickers Research Sdn Bhd wrote in a note.

At 10am, the FBM KLCI added 2.19 points to 1,599.7. Across the exchange, some 476 million shares worth RM183 million were traded, leading to 93 gainers versus 139 decliners.

Among top gainers, PETRONAS GAS BHD [] added 10 sen to RM16.88 while GUAN CHONG BHD [] was up eight sen to RM2.95.

Decliners include NESTLE (M) BHD [] which fell 18 sen to RM55.82 while SARAWAK OIL PALMS BHD [] was down 14 sen to RM6.80.

Among Asian bourses, Japan’s Nikkei 225 climbed 0.38% to 9,506.47 points while Australia’s S&P/ ASX 200 rose 0.32% to 4,315.9. South Korea’s Kospi was up 0.2% to 1,996.6.



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Bumi Armada up on Lukoil deal

KUALA LUMPUR (April 17): Bumi Armada Bhd shares rose on Tuesday after the company said it would offer oil and gas support services to Russia-based OAO Lukoil in deal worth an estimated U$200 million (RM614 million).

At 9.25am, Bumi Armada was up seven sen to RM452 with 311,300 shares traded.

CIMB Research has maintained it Outperform rating on Bumi Armada Bhd at RM4.45 with a target price of RM4.80 and said things were going swimmingly for Bumi in Russia where it has clinched a US$200m pipe installation contract from Lukoil.

In a note April 17, the research house said the contract would maximise the utilisation of its Armada Installer derrick pipelay barge, which is servicing a Petronas contract, also in the Caspian Sea.

“We continue to value the stock at 18.2x CY13 P/E, 40% premium over our target market P/E.

“Bumi’s RM7.6 billion order book and four anticipated FPSO contract wins support our forecast of record net profits in FY12-14 and 31.7% 3-year EPS CAGR. Maintain Outperform.



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Alliance Research upgrades Affin to Strong Buy, raises TP to RM3.84

KUALA LUMPUR (April 17): Alliance Research has upgraded AFFIN HOLDINGS BHD [] (AHB) to a Strong Buy from Trading Buy previously, and raised its target price to RM3.84 from RM3.50 earlier.

In a note Tuesday, Alliance Research maintained that the group’s transformation story was persistently overlooked by the investment community.

The research house said that given the remarkable turnaround of AHB’s operations, current valuation was compelling, trading at a forward PER of 8.2x and about 28.0% discount against its 2012 book value.

“We believe that the potential for Bank of East Asia (BEA) to increase its stake in AHB is imminent, in view of further liberalisation in the domestic banking sector by BNM in Dec last year with the unveiling of Financial Sector Blue Print.

“Therefore, we maintain that the near term key re-rating catalyst for the group remains BEA potentially increasing its stake in AHB,” it said.



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MIDF Research maintains Negative on shipping sector

KUALALUMPUR (April 17): MIDF Research has maintained Negative on the shipping sector and said the Baltic Dry Index (BDI) had slumped to a 3-year low of 647 points on Feb 3, 2012.

In a note April 17, the research houses said that nonetheless, the benchmark for dry commodities freight rate had since gradually ascended to 976 points, and is trending upward towards 1,000 points.

“Despite its recent recovery, the BDI is still about -37% below its last year average of 1,549 points. The average capesize TCE/day rate improved +23.8% mom to USD 7,080, hitting the breakeven range of USD7,000 – 8,000.

“However, we opine that further major rebound in freight rate is unlikely to occur in the near term hence we maintain our negative view on the shipping sector,” said MIDF Research.



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The FBMKLCI holds steady at open, blue chips lift

KUALA LUMPUR (April 17): The FBM KLCI held steady at the opening on Tuesday and edged up 0.62 of a point to 1,598.13 at 9am.

Meanwhile, global stocks faltered on Monday despite stronger-than-expected U.S. retail sales, while government debt prices rose as worries about Spain's fiscal problems and a resurgent euro zone crisis weighed on investor sentiment, according to Reuters.

Market breadth at Bursa Malaysia was generally positive in early trade with 69 gainers, 27 decliners and 76 counters trading unchanged.

Among the early gainers were Tradewinds PLANTATION []s, Petronas Gas, KLK, Genting, Hong Leong Bank, Parkon, MBSB and IOI Corp.



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CIMB Research maintains Outperform on Bumi Armada

KUALALUMPUR (April 17): CIMB Research has maintained it Outperform rating on Bumi Armada Bhd at RM4.45 with a target price of RM4.80 and said things were going swimmingly for Bumi in Russia where it has clinched a US$200m pipe installation contract from Lukoil.

In a note April 17, the research house said the contract would maximise the utilisation of its Armada Installer derrick pipelay barge, which is servicing a Petronas contract, also in the Caspian Sea.

“We continue to value the stock at 18.2x CY13 P/E, 40% premium over our target market P/E.

“Bumi’s RM7.6 billion order book and four anticipated FPSO contract wins support our forecast of record net profits in FY12-14 and 31.7% 3-year EPS CAGR. Maintain Outperform.



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RHB Research maintains Outperform on Carlsberg, ups fair value to RM11.60

KUALA LUMPUR (April 17): RHB Research Institute Sdn Bhd has maintained its Outperform rating on CARLSBERG BREWERY MALAYSIA BHD [] at RM10.82 with a higher far value of RM11.60, and said that the first batch of Asahi draft, which Carlsberg started brewing in Dec 2011, sold out much faster than the company’s initial expectations.

"Asahi’s strong take-up in the market is positive for Carlsberg, although we note that it is still too early to gauge its long-term success."

“Similar to Asahi, Carlsberg will start producing Kronenburg’s draft first followed by bottles later. However, unlike Asahi, we understand the locally-produced Kronenburg will still be priced at a fairly high price point, we believe due to Kronenburg’s premium branding,” the research house said in a note Tuesday.

Carlsberg intends to raise its selling prices by ~3-4% on average, which will take effect in early May 2012. We are positive on this move as we believe it would help cover Carlsberg’s higher raw material costs to a certain extent.

“We have raised our fair value estimate to RM11.60, based on WACC of 8.4% (8.7% previously). Although this implies 20x FY12 PER, we note that Carlsberg has previously traded as high as 24x forward PER. Maintain Outperform,” it said.



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Stocks to Watch Axis REIT, Chin Well, Bumi Armada, CIMB, Hartalega

KUALA LUMPUR (April 16): Malaysia's stock market benchmark could take the cue from external factors on Tuesday as global economic headwinds take centre stage in a still-fragile macro landscape.

Analysts said dynamics across the US, China and European countries will be closely watched as investors assess the impact from these major importing nations on world financial markets.

In Malaysia, it will be interesting to see whether domestic funds could offer adequate support to the FBM KLCI against a still-volatile global backdrop which have thrown most Asian indices into the red.

The FBM KLCI of 30 stocks fell 5.61 points to close at 1,597.51 on Monday.

Stocks to watch on Tuesday include Axis Real Estate Investment Trust (Axis REIT), Bumi Armada Bhd, CHIN WELL HOLDINGS BHD [], CIMB Group Holdings Bhd, and HARTALEGA HOLDINGS BHD [].

Axis REIT's first quarter net profit rose 27% from a year earlier, as a higher top line and a revaluation surplus mitigated the impact of higher expenses. In a statement to the exchange on Monday, Axis REIT said its net profit came to RM20.96 million in the quarter ended March 31, 2012 versus RM16.49 million previously while revenue was up 18% to RM32.29 million from RM27.25 million.

Bumi Armada will offer oil and gas support services to Russia-based OAO Lukoil in a deal worth an estimated U$200 million (RM614 million). In a statement to Bursa Malaysia on Monday, Bumi Armada said the job includes engineering, procurement, installation and pre-commissioning of subsea in-field and inter-field pipelines for the Filanovsky field in the Caspian Sea.

Chin Well, a screw and bolt manufacturer, plans to pay a tax-exempt interim dividend of 2% for the financial year ending June 30, 2012.

Reuters reported that CIMB will enter into an agreement to acquire a controlling 60% stake in the Philippines-based conglomerate San Miguel Corp's unlisted banking arm "soon", quoting a senior board member. The deal will allow San Miguel — the Philippines's most diverse conglomerate — to keep a minority stake in the unlisted bank while focusing on its new ventures such as power, mining, telecoms, infrastructure, and more recently, airlines.

RHB Research Institute Sdn Bhd has slashed its net profit forecast for Hartalega, a nitrile glove manufacturer, by between 6.1% and 18.5% for financial years 2012 till 2014. The research house said it has taken into account the glove manufacturer's lower capacity utilisation, and average selling prices apart for costlier raw material and higher net interest expenses.



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