RHB Research maintains underperform on Affin, FV RM2.05

KUALA LUMPUR (Dec 2): RHB Research Institute is maintaining its fair value of RM2.05 and Underperform call on AFFIN HOLDINGS BHD [].

It said on Friday that Affin’s management guided for loan growth of 13% to 14% this year, in line with its annualised loan growth of 12.9%.

“For 2012, focus is on preserving asset quality and capital and as such, loan growth is expected to slow down further to 9%-10%,” it said.

RHB Research said that the net interest margins (NIM) remain under pressure due to competition on both lending and deposit gathering, but Affin’s management thinks 3Q11 NIM could have reached bottom. Management hopes to hold NIMs stable ahead.

“While recoveries were strong in 3Q, this was helped by recoveries from some large corporate accounts. Going forward, such recovery levels are unlikely to be sustainable,” the research house said.



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Tenaga up on Petronas, government plan to share fuel cost burden

KUALA LUMPUR (Dec 2): TENAGA NASIONAL BHD [] shares rose in early trade on Friday after the utility company received a letter from the government on that provides a fuel cost sharing mechanism to address the utility’s increased cost due to the gas shortage.

At 9.05am, Tenaga was up 12 sen to RM5.80 with 339,800 shares done.

Tenaga said on Dec 1 that the letter provided that Tenaga, Petronas and the government would each equally share the differential cost incurred by Tenaga due to dispatching on alternative fuels and also imports, from Jan 1, 2010 until Oct 31, 2011 amounting to approximately RM3.07 billion.

MIDF Research in a note Dec 2 said it viewed this development as positive for Tenaga with compensation of an estimated RM2.0b or 36.6 sen per share between the government and Petronas as well as all future costs related to any gas curtailment.

The research house said that with the fuel cost sharing mechanism in place, Tenaga was now eased from the burden of high fuel costs.

MIDF Research said it therefore had adjusted upwards its FY12f earnings by 10% to account for the fuel compensation.

“Based on our post FY12f earnings adjustment, we are revising our target price to RM6.70 (previously RM6.00) based on DCF valuation with WACC maintain at 8.8%.

“Hence, we upgrade our recommendation from Neutral to Buy,” it said.



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CIMB Research maintains Hold on Tenaga, TP RM6.47

KUALA LUMPUR (Dec 2): CIMB Equities Research cautioned that investors should be cautious over TENAGA NASIONAL BHD [] (TNB) over the compensation for gas shortage.

It said on Friday that compensation for the gas shortage was good news as Tenaga’s financial position has deteriorated substantially.

“But being an ad hoc payment rather than the proper cost pass-through mechanism that Tenaga needs, it leaves Tenaga vulnerable to future gas supply shocks.

We maintain HOLD and our target price of RM6.47, based on 1.1 times price-to-book value,” said CIMB Research.



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CIMB Research has technical sell on Tan Chong at RM4.24

KUALA LUMPUR (Dec 2): CIMB Equities Research has a technical sell on Tan Chong Motor Holdings at RM4.24 at which it is trading at a FY13 price-to-earnings of 8.2 times and price-to-book value of 1.5 times.

It said on Friday the recent countertrend rebound hit a snag near the 38.2% FR level. It appears that the stock is still trapped in a downtrend channel. With the candles also trading below all its key moving averages, we doubt any short term rebound would be strong.

“Unload on strength looks like a good option here, especially near the RM4.37 to RM4.40 resistances. Selling pressure should accelerate once the RM4.15 low is breached. Support is at RM4.00 and RM3.76.

“Technical landscape remains lethargic. MACD is still hovering in the negative territory while RSI is below the 50pts mark,” CIMB Research said.



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CIMB Research has technical buy on Alliance Financial Group at RM3.65

KUALA LUMPUR (Dec 2): CIMB Equities Research has a technical buy on Alliance Financial Group (AFG) at RM3.65 at which it is trading at a FY13 price-to-earnings of 10.7 times and price-to-book value of 1.6 times.

It said on Friday that AFG broke out of its consolidation triangle pattern on Thursday on rising volume.

“We anticipate the next up leg to lift prices towards the RM3.80 and RM4.00 resistances.

“Technical landscape is improving. MACD signal line has staged a positive crossover while RSI has also hooked upward,” it said.

CIMB Research said that aggressive traders may start to nibble now. However, always place a stop at below the resistance-turned-support channel (now at RM3.57).



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CIMB Research has technical buy on 1 Utopia at 9 sen

KUALA LUMPUR (Dec 2): CIMB Equities Research has a technical buy on 1 Utopia at 9.0 sen at which it is trading at a price-to-book value of 0.7 times.

It said on Friday 1 Utopia is trying to penetrate the triangle resistance. If it succeeds, there is a good chance that prices may re-rate towards 11 sen and 14 sen.

“However, only risk takers should look at this stock due to its penny-nature. Expect great volatility,” it said.

CIMB Research said the MACD is poised for a positive crossover, suggesting that the bulls are slowly making a comeback. RSI too has hooked upward. These positive readings further reinforce our short term positive view on the stock.

“As long as prices stay above the 7.5 sen levels, we will continue to stick with the bull’s camp. However, traders may want to put a stop at between 8.0 sen and 7.5 sen depending on one’s risk appetite,” it said.



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HDBSVR sees Tenaga giving KLCI a boost amid cautious mkt

KUALA LUMPUR (Dec 2): Hwang DBS Vickers Research expects power giant TENAGA NASIONAL BHD [] (TNB) to give the FBM KLCI a boost on Thursday amid a more cautious market after the weaker overnight close on Wall Street.

The research house said TNB would benefit from the fuel cost sharing mechanism with Petronas and the government, which would translate to substantial cost savings.

As for the broader market, HDBSVR said the KLCI after posting cumulative gains of 53.7 points or 3.8% over three straight days, the benchmark FBM KLCI could swing sideways with a marginal downward bias ahead.

“The immediate support and resistance levels are currently seen at 1,475 and 1,500, respectively,” it said.

As for Wall Street, the research house said the US market gave a mixed performance last night in the absence of more market-stimulating news.

Key U.S. equity indices ended between -0.2% and +0.2% following a three-day winning streak.

As for Bursa Malaysia, it said TPC Plus shares may see action after a local newspaper speculated Huat Lai Resources could announce by the end of next month a mandatory general offer for TPC Plus at not less than 30 sen per share.



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Stocks to watch: Tenaga, O&G, DRB-Hicom, LonBisc

KUALA LUMPUR (Dec 2): Investors should brace for some profit taking on Friday after two straight days of gains, propelled by liquidity move by major central banks that raised hopes policymakers would take more steps to tackle the crisis.

However, the surge in share prices of some of the companies might not reflect the cautious outlook for the October-December quarter especially after the less than impressive financial results in the earlier quarter.

Nevertheless, a sentiment-driven rally could also see another trading surge in penny stocks, which had been moderately reined in after Bursa Malaysia Securities clamped down on the trading in the securities of Harvest Court Industries.

Among the stocks to watch would be Tenaga Nasional, oil and gas-related companies, DRB-HICOM BHD [] and LONDON BISCUITS BHD [].

Tenaga has received a letter from the government that provides a fuel cost sharing mechanism to address the utility’s increased cost due to the gas shortage. This could see a rerating of the stock which had been impacted by high fuel costs.

The letter provided that Tenaga, Petronas and the government would each equally share the differential cost incurred by Tenaga due to dispatching on alternative fuels and also imports, from Jan 1, 2010 until Oct 31, 2011 amounting to approximately RM3.07 billion.

Oil and gas related companies could see trading interest after Petronas president and CEO Datuk Shamsul Azhar Abbas said on Thursday the RM300 billion as capital expenditure (capex) over five years was intact.

He had also said the national oil corporation’s growth agenda remains intact to meet rising long term demand for oil and gas. This could spur interests in the oil and gas companies.

Heavy users of electricity would have to take note of Shamsul’s statement that the era of subsidised gas was over.

“Growing reliance on cheap gas discourages end-users from pursuing energy efficiency,” he said, warning that the bulk of tomorrow’s gas requirements would be derived from imports at market prices. “The days of abundant subsidised gas are effectively over,” he said.

DRB-Hicom has issued RM500 million in nominal value of Sukuk in two tranches which would be used for working capital, projects and capital expenditure. The sukuk had been accorded a final rating of AA-IS by Malaysian Rating Corporation Bhd with a stable outlook.

London Biscuits Bhd’s private placement of 10.25 million new shares of RM1 each has been fixed at RM1 per share -- or 22% above the five-days volume weighted average market price up to and including Nov 30 of 82 sen per share. The placement shares represented 10% of its paid-up share capital.

FAVELLE FAVCO BHD [] is mulling plans to manufacture cranes in China following its acquisition of a 60% stake in a Shanghai Favco Engineering Machinery Manufacturing Co Ltd for 10.8 million renminbi or RM5.33 million.

It had subscribed for 10.80 million shares of 1.0 renminbi each in Shanghai Favco.



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