RHB Research upgrades aviation sector to Overweight, top pick AirAsia

KUALA LUMPUR (Dec 16): RHB Research has upgraded the aviation sector to “Overweight” from Neutral and said the slump in oil prices would benefit the aviation sector.

In a note Tuesday, the research house said while it does not see demand growing strongly, sector earnings will be underpinned by yield recovery, with an additional positive impact from lower jet fuel prices.
“As such, we upgrade the sector to Overweight from Neutral.

“AirAsia Bhd is our Top Pick for the Malaysian aviation sector. AirAsia X Bhd remains a Sell as losses will continue into FY15,” it said.

At 10am, AirAsia rose 0.36% or one sent to RM2.81 with 1.37 million shares done while AirAsia X fell 0.73% or half a sen to 68 sen with 969,300 shares traded.

CIMB Research maintains Hold on KLCC Property, target price RM6.90

KUALA LUMPUR (Dec 16): CIMB Research has maintained its “Hold” rating on KLCC Property Holdings Bhd at RM6.50 with an unchanged target price of RM6.90 and said that in the current market conditions, REITs could provide a safe haven for capital preservation given its stable dividend yields.

In a note Tuesday, the research house said during its recent tour of some of KLCCP's assets, it was pleasantly surprised that Menara ExxonMobil still looked relatively new despite being almost 18 years old.

“This gives us confidence that it will not face issues extending its tenancy when it expires in 2017. We were also impressed by Menara 3, which was more recently built (in 2011) and houses Petronas's offices and other O&G companies.

“While the offices were impressive, we understand that KLCCP's acquisition pipeline remain scarce in the next 1-2 years.

“We maintain our Hold call and DDM-based target price of RM6.90. For exposure to M-REITs, we prefer Axis REIT,” it said.

The edge: Hibiscus’ shareholders raised interest, says MD

KUALA LUMPUR: Key shareholders of junior oil and gas exploration company Hibiscus Petroleum Bhd have increased their shareholding since its initial public offering (IPO) in 2011, said managing director Dr Kenneth Pereira.

Pereira, in a written response to a story published by The Edge this week, noted that Hibiscus’ top nine shareholders have been raising their interest in the company since its listing to 67% currently.

According to data presented by Pereira and collected from Bloomberg, as of yesterday, through Hibiscus Upstream Sdn Bhd, the company’s management team held an 18.75% interest in Hibiscus. Its shareholdings rose from an initial 83.61 million shares post-IPO to 167.22 million shares currently.

Several other shareholders in the private oilfield services sector and an investor in technology companies have also accumulated their shareholdings in Hibiscus after its listing in 2011. According to Bloomberg, current substantial shareholders of Hibiscus include Mercury Pacific Marine Pte Ltd (8.17%), Littleton Holdings Pte Lte (5.99%) and Chye Tek Lee (5.06%), among others. Note that Chye is the group chief executive officer and managing director of Singapore-listed Ezra Holdings Limited and also non-executive chairman of EMAS Offshore Limited.

Yesterday, Hibiscus announced to Bursa Malaysia that Datuk Sri Muhammad Syafiq Baljit Abdullah increased his shareholding to 12.78% by acquiring 4.12 million shares from three transactions between Dec 8 and 12, making him the company’s second-largest shareholder. Hibiscus shares shed 6.32% yesterday to close at 89 sen a share, translating into a market capitalisation of RM793.6 million. Year-to-date, the stock has fallen 49.17%.

The story in The Edge highlighted accumulating losses at Hibiscus which may have contributed to the stock’s recent poor performance.

“It is well known and widely reported that the share prices of oil and gas companies have been adversely affected by the slide in oil prices, both in Malaysia and worldwide. We do not understand the grounds for stating that the share price decline is due to accumulating losses when other oil and gas companies are also suffering from price declines,” said Pereira.

He also noted that Hibiscus’ share price has been resilient, substantiated by the fact that even with a 99.6% warrant conversion rate in July 2014, the company’s market capitalisation has been reasonably stable.
Meanwhile, Pereira also emphasised that Hibiscus had drilled two wells from November 2013 to February 2014, culminating in the first offshore discovery in the east of Oman after almost 40 years of exploration in the region by several other companies.

“Our 50% success rate in exploration drilling is significantly higher than the global average, where approximately one out of seven wells are successful,” said Pereira.

This article first appeared in The Edge Financial Daily, on December 16, 2014.

AffinHwang Capital downgrades Unisem to Sell, target price RM1.54

KUALA LUMPUR (Dec 16): AffinHwang Capital Research has downgraded Unisem (M) Bhd to “Sell” (from Reduce) at RM1.83 with an unchanged target price of RM1.54 and said Unisem's stock price has continued to gain positive traction on accumulation by a major shareholder.

In a note Tuesday, the research house said this could be attributed to: 1) its strong 3Q14 results and the possibility of strong earnings delivery in the subsequent quarters; 2) its exposure to the robust RF business; and 3) the potential for a strong DPS in 4Q14.

“However, trading at 17.3x 2015 EPS, and a premium to peers, we believe that good news is already in the price. On a risk adjusted basis, Unisem is the most expensive semiconductor stock under our coverage.
“With good news priced in and limited re-rating catalyst from this point, we turn anti-consensus on the stock, downgrading Unisem to Sell with an unchanged target price of RM1.54,” it said.

BIMB Securities maintains Buy on Dayang, raises target price to RM3.37

KUALA LUMPUR (Dec 16): BIMB Securities Research has maintained its “Buy” rating on Dayang Enterprise Holdings Bhd at RM2.36 with a higher target price of RM3.37 (from RM3.14) after Dayang’s subsidiary, Dayang Enterprise SB has been awarded a contract by Petronas Carigali SB for the provision of brownfield major modification work for Bardegg-2 and Baronia Enhanced Oil Recovery (EOR) development project.

In a note Tuesday, the research house said with this, it had revised its  available FY15/16 forecast higher by 7% respectively.

BIMB Securities said inclusive of this contract, Dayang’s current outstanding orderbook would stand at circa RM4.5 billion, with the HUC contracts portion to provide earnings visibility until 2018.

“Maintain a Buy call with a revised target price of RM3.37 from RM3.14 previously based on higher FY15 EPS of 30.6sen on PER of 11x,” it said.

AirAsia X places largest Airbus order

KUALA LUMPUR (Dec 15): AirAsia X Bhd has placed a US$15.2 bilion firm order for 55 Airbus A330neo aircrafts, which is the single largest order for the Airbus family.

In a statement this evening, the loss making low cost carrier said the deliveries of the newly-ordered aircraft will begin in 2018.

“This latest deal with Airbus will enable AirAsia X to consolidate its growth rate in 2015-2017 before ramping up deliveries from 2018 onwards,” said its co-founder and director of AirAsia X Tan Sri Tony Fernandes.

“The A330 has proven itself to be exactly the right aircraft for our business model, combining low operating costs, long range flying capability and high levels of comfort," he added.

The A330neo aircraft reduces fuel consumption by about 14% per seat and increases flight range up to 400 nautical miles. The range capability enables possible direct flights from Kuala Lumpur to Europe.

The purchase consideration for the 55 A330neo aircraft is approximately US$15.2 billion, and will be funded by a combination of borrowings, the company's internal reserves and cash generated by its operations.

"The company expects to use operating leases for all of its 2015 aircraft deliveries, to reduce up-front cash requirements and maintain its target of achieving positive free cash flow," said AirAsia X in a Bursa Malaysia filing.

By 2026, the company's total fleet size is expected to reach 82 aircraft.

AirAsia X share price ended unchanged at 68.5 sen with a market cap of RM1.62 billion.

Supermax executive chairman, wife charged with insider trading

Market Preview- KLCI likely to stay below 1,700 level as global markets stumble

KUALA LUMPUR (Dec 16): The FBM KLCI is likely to hover around the psychologically crucial 1,700-point level today as global markets stumbled on Monday, roiled by falling crude prices.

At the global markets, oil prices slumped to 5-1/2-year lows on Monday, pulling down emerging market assets and boosting demand for the safe-haven yen, while global equity markets fell further after last week's rout amid nagging worries about worldwide growth, according to Reuters.

Stocks retreated as crude oil prices gave up early gains after the Organization of the Petroleum Exporting Countries restated its determination not to cut output despite a global energy glut, it said.

Meanwhile, U.S. stocks ended lower in a volatile session on Monday as oil prices extended their selloff, adding to worries about weak global demand.

The losses follow the S&P 500's worst weekly performance since May 2012. The index is now down 3.4 percent since Dec. 8 but is still up 7.6 percent for the year so far, said Reuters.
AllianceDBS Research in ite evening edition Monday said the FBM KLCI had on Dec 15 gapped down after the opening the bell to break the 1,730 support.

It said the benchmark index subsequently reached the lowest low of 1,695.60 since May 6, 2013 as market participants continued to play on the selling side in anticipation of a lower market.

The research house said that under the sustained selling activity, the benchmark index was in the red throughout the trading sessions before settling near the day’s low at 1,697.31 (- 35.68 , - 2.06%).

“In the broader market, losers outnumbered gainers with 1,010 stocks ending lower and 66 stocks finishing higher. That gave a market breadth of 0.06 indicating the bears were in control,” it said.

AllianceDBS Research said the downside gap created on Dec 15 indicated an imbalance of demand and supply.

It said there was an urgency to unload stock positions due to the looming fear of a further decline.

The research house said the selling pressure on Dec 15 was overwhelming and this could be seen from the concentrated trading activity near the low end of the market range and the downside penetration of the 1,700 psychological level.

It said following the weak down close on Dec 15, the benchmark index was expected to trade lower again with the immediate support seen at 1,670.

It said the overhead resistance zone was pegged between 1,700 and 1,730.

Indicator wise, the MACD is below the 9-day moving average line, it said.

“The analysis of overall market action on Dec 15 revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,695.60 level on Dec 16,” said AllianceDBS Research.

Original article: http://www.theedgemarkets.com/my/article/klci-likely-stay-below-1700-level-global-markets-stumble