Thursday, 31 May 2012

MMC Corporation - OUTPERFORM - 31 May 2012

Period    1Q12

Actual vs.  Expectations
 Below consensus estimate and that of ours.

 1Q12 net profit of RM29.2m came in only at 7% of ours and the consensus’ forecasts of RM437.4m. 

Dividends   No dividend was declared during the quarter. 

Key Result Highlights
 QoQ, the net profit dropped by 89% due to a drop in construction earnings. To recap, Zelan recorded write-backs of LAD in 4Q11. 

 YoY, the revenue increased by 4% and net profit dropped by 30%. This was mainly due to the impact of a lower margin by 13% for Gas Malaysia due to the revision of gas tariffs in June2011. 

 Nonetheless, the 1Q12 construction earnings were much better (YoY) as compared to the RM25m pre-tax loss recorded in 1Q11. 

Outlook   We believe that MMC’s feasibility study on the privatisation of KTMB will partly cover the utilisation of KTMB’s landbanks for commercial developments.  

 We expect MMC-Gamuda to be the frontrunner   for MRT circle line works, which are to be announced by mid-2013.   

Change to Forecasts
 Lowered our FY12 and FY13 estimates by 21% and 13%, respectively, as we imputed in the dilution of Gas Malaysia’s contribution and delayed the PDP recognition to 2H12 as MRT works are still at their preliminary stage.   


Valuation    We have lowered our Target price to RM3.11 from RM3.20 previously as we imputed in MMC’s shareholding dilution from 41.8% to 30.9% in Gas Malaysia.

Risks   Delays in MRT works and late deliveries of TBMs (Tunnel Boring Machine).   

Source: Kenanga

Genting Bhd - OUTPERFORM - 31 May 2012

Period    1Q12

Actual vs.  Expectations
 Ex-EI, 1Q12 results came in within expectations, with core profit of RM374.9m making up 24% of our FY12 full year estimate and 23% that of the street’s forecast. 

 The variance between core earnings and our estimate was due to unfavourable luck factor at its high-roller segment. 

Dividends   No dividend was declared as expected.

Key highlights
 1Q12 headline net profit contracted 23% QoQ and 35% YoY, led mainly by the poor luck factor at RWG, cost overrun at RWNYC and bad debts at the London casinos. 

 Despite overall higher business volume, poor luck factor hit the Malaysia operation where its 1Q12 EBITDA dipped 14% QoQ and 13% YoY to RM462.0m. 

 Business volume at UK casinos were encouraging, but a GBP8m bad debts write-off for the London casinos sent its EBITDA lower by 38% QoQ and 55% YoY to RM34.5m.

 RWNYC’s full quarter results (launched in Oct 2011) helped USA operations to register an EBITDA positive of RM1.2m, although the results included a RM48.2m cost overrun at RWNYC and a combined RM25.1m pre-operating expenses for RWNYC and RW Miami. 

Outlook   FY12 would be a stronger year than FY11 as RWG’s earnings continue to be resilient, a recovery of its UK operations are on hand as well as a full year earnings contribution from RWNYC.

Change to Forecasts
 We have tweaked FY12-FY13 estimates by 4%-5% as we lowered the EBITDA margin assumption for RWG casino operations to 42% from 44% previously.

 We have introduced our new FY14 forecast, where we expect net profit to grow at 5% p.a.


Valuation    We are rolling over our valuation base to CY13 from CY12, thus our new price target is RM4.18/SOP share from RM4.40/SOP share previously.

Risks   Continued unfavourable luck factor.

Source: Kenanga 

Alam Maritim Resources - OUTPERFORM - 31 May 2012

News    Yesterday, Alam Maritim Resources Bhd (“AMRB”) announced that its wholly-owned subsidiary, Alam Maritim (M) S/B (“ALAM”) had been awarded a contract worth RM121.54m from PETRONAS Carigali S/B (PETRONAS Carigali), which would be its second contract win this week. The contract is to supply two workboats for the primary period of 1 year with an extension option of 1 year, for each workboat. 

 These workboats are required to support PETRONAS Carigali Peninsular Malaysia Operation’s painting activities, which are to commence immediately.

Comments   Positive on news as it backs up the group’s 2012 turnaround story via its ability to secure long term charter contracts and increase orderbook. 

 We have assumed that ALAM will charter out its Setia Ulung and Setia Aman (5,150 bhp each) in order to fulfil the contracted activities during the primary period. Assuming a charter rate of USD85k per day and vessels utilisation rate of 80%, this will support the bottom line growth with a 20% net margin. However, there is no earnings impact as it forms part of our FY12E orderbook replenishment assumptions. 

Outlook   We remain positive on the company and anticipate another RM190m new orderbook assumptions out of our FY12E orderbook replenishment of RM440m. 

Forecast   Maintaining FY12-14E earnings of RM62.1mRM94.9m, as we maintain our FY12-14E orderbook replenishment assumptions. 

 There is possibility of ALAM securing higher than our FY12E expected orderbook replenishments and/or higher margin ones which implies further earnings upsides.


 We expect a stronger 2H12 on the back of improving contracts replenishment flows and a sustainable healthy vessels utilisation rate of 80%. Also, ALAM is aggressively bidding for more long-term contracts. 

Valuation    Maintaining our TP of RM1.14 based on 10x Fwd PER (-0.5SD) on our FY13E EPS estimate of 11.4 sen.

Risks   Overall profitability in OSV being hit by other  loss-making business units within the group.  

Source: Kenanga

Benalec - OUTPERFORM - 31 May 2012

Period    3Q12/9M12

Actual vs.  Expectations
 3Q12 results are deemed to be within our expectations despite it being slightly higher than our numbers as we expect a weaker 4Q12 due to likely one-off expenses.

 The 9M12 net profit currently made up 84% and 73% of ours and the consensus’ full year FY12 forecasts. 

Dividends  No dividend was declared during the quarter.

Key Result Highlights
 QoQ, 3Q12 net profit fell by 51% despite an 8% increase in revenue. The lower net profit was mainly due to a one-off gain recognised in 3Q11 in relation to the acquisition of a new subsidiary. 

 YoY, the revenue and net profit drop by 12% and 2% respectively. This was mainly due to higher reclamation cost spent in the period for the DMDI project in Melaka. There will be no revenue and profit being recognised until the disposal of the land to the buyer. That said, the completion of the land sale is expected in 2HCY12. 

 Management has guided that there will be additional cost to be incurred in the 4Q12 results due to ESOS exercise costs.  

Outlook   Management is actively looking for more reclamation works in Sarawak and Peninsular Malaysia. As the development in Samalaju Industrial Area is quite encouraging, we believe that there will be a lot more marine construction and vessel chartering contracts available for Benalec. 

 The recent TNB contract will provide about RM4m to RM5m to Benalec’s pre-tax profit per annum starting from May 2012 to April 2015, which we have already imputed for in our estimates. 

Forecasts   No changes in our FY12 and FY13 forecasts. 

 Maintain OUTPERFORM given the ample upside potential to our Target Price from the current share price.

Valuation    There is no change to our Target Price of RM2.37 based on SOP valuation. 

Risks   A slowdown in land sale (reclaimed land).  

Source: Kenanga

Kawan Food - UNDERPERFORM - 31 May 2012

Period   1Q12

Actual vs.  Expectations
The 1Q12 net profit of RM2.1m came in below our expectations, making up just 16% of our FY12E net profit of RM12.8m. 

The lower earnings surprise was largely attributed to lower sales registered from the North America and Europe regions.

Dividends  An interim dividend of 2.4 sen (gross) was declared in early May.

Key Result Highlights
YoY, the 1Q12 revenue decreased 8.9% on the back of lower sales registered from the North America (-29% YoY) and Europe (-16% YoY) regions. Revenue for the quarter trailed our estimates and accounted for 24% of our FY12E estimate of RM98m.

YoY, the earnings (-30%) were bogged down by higher advertisement and promotion expenses from the Malaysian market, where there was just a meagre 3% rise in revenue from the domestic segment.

On a QoQ basis, the PBT declined by 55% to RM2.7m predominantly due to the high benchmark set in 4Q11 as well as lower sales and unfavourable MYR/USD exchange rate in 1Q12, which caused a dent in the group’s export sales and margins.

Outlook  The outlook for Kawan Food is likely to remain uncertain due to wild swings in the foreign exchange rate as well as renewed concerns on the European debt crisis. 

Going into 2Q12, the group is likely to have a more favourable USD/MYR rate, having risen to RM3.16 at the time of writing. On a medium term horizon however, our in-house estimate continues to have a downward bias view of the USD, which could dampen Kawan Food’s future revenue and NP. 

Change to Forecasts
No changes to our FY12-13E revenue and NP as we expect the group’s revenue and advertising expenses to normalise going into the remainder of the year.

We are maintaining our Underperform rating on Kawan Food in light of  the potential headwinds highlighted above.

Valuation  Maintaining our TP for the stock at RM 0.86 based on a 5-year average PER of 8.9x over its FY12 Diluted EPS of 9.7 sen. Risks   Volatility in the currency markets.

Source: Kenanga 

Sime Darby - OUTPERFORM - 31 May 2012

Period   3Q12 and 9M12

Actual vs.  Expectations
SIME 9M12 core earnings spot-on with consensus expectations and broadly within our expectation. The 9M12 core net profit of RM3.05b made up 75% of the consensus’ forecast of RM4.09b and 68% of our forecast of RM4.50b. 

FFB production growth turned out to be smaller than expected while the downstream segment loss was deeper than anticipated.

Dividends   No dividend was announced as expected.

Key highlights
YoY, the 9M12 core earnings surged 34% due to better CPO prices at RM2,881 per mt (+2% YoY and a better OER achieved at 21.8%.

However, 9M12 FFB growth is below expectation at 1% YoY. Although Malaysia estates register healthy FFB growth of 5% YoY, Indonesia estates FFB production has declined 7% YoY. This  is due to laggard effect of dry season in Jun-Sep 2011 and May-Sep 2012.

QoQ, the 3Q12 core earnings dropped by 19% due to a seasonally lower FFB production in 3Q12 of 2.06m mt (-22% QoQ).

Outlook  Management is now looking at FY12E FFB growth of 1%-2% (from 6% previously). For FY13E, FFB growth should normalized back to 7%.

The downstream segment loss is expected to persist throughout FY12-13E and we have assumed losses of RM65m-RM32m.

Change to Forecasts
We have revised down our FY12-13E net profits by 5%-4% to RM4.26b-RM4.47b. We have assumed a lower FFB yield of 17.0mt/ha (from 20.0mt/ha) for Indonesian estates in FY12E, in addition to the downstream losses. 

Rating  Maintain OUTPERFORM

The valuation of 13.0x FY13E PER is attractive as compared to IOI (15.8x) and KLK (16.8x). We think the current discount above is unjustified given its status as the biggest market cap planter with superior liquidity.

Valuation   We have lowered our target price by 7% to RM10.80 (previously RM11.60). Our valuation is based on Sum-Of-Parts  with the Plantation division  valued  at  17.5x  Fwd  PER.  We  have rollover our valuation to FY13E numbers.

Risks  A sustained decline in CPO prices.  

Source: Kenanga

AMWAY (M) Holdings - OUTPERFORM - 31 May 2012

Period    1Q12

Actual vs.  Expectations
 The 1Q12 net profit (NP) of RM21.6m was broadly in line with the street’s estimate and our forecast of RM93.8m (23%) and RM100m (22%) respectively.  

Dividends   Single tier dividend of 10 sen per share has been declared. This payout is 11% higher than normal as the company previously had been paying a consistent interim dividend of 9 sen for all the quarters in the past two years. 

 As such, we are adjusting our payout forecast higher to a total of 70 sen for the full year (66 sen previously), which translates into a high dividend yield of 7.2%. We believe this 10 sen dividend is sustainable for the remaining quarters on the back of its payout track records as well as its strong net cash position of RM143m.

Key Result Highlights
 Revenue YoY improved slightly by 4% on the back of higher demand of its products driven by the success of its sales and marketing programs.

 NP YoY increased 6% due to better sales and operating efficiency (the operating expenses-tosales ratio dropped 0.8ppt to 16.3%). 

 On a QoQ basis, the revenue declined marginally by 2%. This is because there was absent of sales and marketing program in 1Q12. Such program in 4Q11 had resulted in higher distributor productivity.

 NP meanwhile dropped by 13% QoQ due to lower sales and higher promotional expenses. 

Outlook   Better earnings prospect is expected on the back of an increase in the number of distributors (we are anticipating a 5.1% and 5.0% YoY growth rate for FY12 and FY13) and a continued rise in its revenue per distributor driven by the rise in private spending.

Change to Forecasts
 We are maintaining our earnings estimates of RM100.0m and RM106.4m for FY12-13E for Amway as we foresee better earnings in 2H12 due to seasonal factors. 


Valuation   We believe Amway deserves our TP of RM10.94, based on 18.0X forward PER over its FY12 EPS of RM0.608. This is due to its strong track records in growing its sales consistently, as well as its attractive net dividend yield of 7.2%.

Risks   A slowdown in the global economy, which would cut the purchasing power of consumers.
 Low liquidity of the stock may limit its capital appreciation prospect.   

Source: Kenanga

Genting Malaysia - OUTPERFORM - 31 May 2012

Period    1Q12

Actual vs.  Expectations
 Ex-EI, 1Q12 results came in within expectations, with core profit of RM374.9m making up 24% of our FY12 full year estimate and 23% that of the street’s forecast. 

 The variance between core earnings and our estimate was due to unfavourable luck factor at its high-roller segment. 

Dividends   No dividend was declared as expected.

Key highlights
 1Q12 headline net profit contracted 23% QoQ and 35% YoY, led mainly by the poor luck factor at RWG, cost overrun at RWNYC and bad debts at the London casinos. 

 Despite overall higher business volume, poor luck factor hit the Malaysia operation where its 1Q12 EBITDA dipped 14% QoQ and 13% YoY to RM462.0m. 

 Business volume at UK casinos were encouraging, but a GBP8m bad debts write-off for the London casinos sent its EBITDA lower by 38% QoQ and 55% YoY to RM34.5m.

 RWNYC’s full quarter results (launched in Oct 2011) helped USA operations to register an EBITDA positive of RM1.2m, although the results included a RM48.2m cost overrun at RWNYC and a combined RM25.1m pre-operating expenses for RWNYC and RW Miami. 

Outlook   FY12 would be a stronger year than FY11 as RWG’s earnings continue to be resilient, a recovery of its UK operations are on hand as well as a full year earnings contribution from RWNYC.

Change to Forecasts
 We have tweaked FY12-FY13 estimates by 4%-5% as we lowered the EBITDA margin assumption for RWG casino operations to 42% from 44% previously.

 We have introduced our new FY14 forecast, where we expect net profit to grow at 5% p.a.


Valuation    We are rolling over our valuation base to CY13 from CY12, thus our new price target is RM4.18/SOP share from RM4.40/SOP share previously.

Risks   Continued unfavourable luck factor.  

Source: Kenanga

Media Chinese Intl -OUTPERFORM- 31 May 2012

Period   4Q12

Actual vs.  Expectations

FY12 net profit of RM194m (or USD63m) came in 9.6% above our expectation but in line with the consensus’ estimate. The main culprits between ours and the actual number were 1) lower than expected distribution and administration costs and 2) difference between our in-house USD to RM assumption against the company (RM3.05 vs. RM3.0645).      

Dividends  Declared US1.448 cents (or RM0.04575 sen) second interim dividend, bringing the full-year dividends to US2.65 cents (or RM0.083 sen) and translating into a dividend payout ratio of 70.7%.

Note that the group’s FY12 dividend payout ratio was higher than its dividend policy, which is set to distribute 30%-60% PAT to shareholders.  

Key Result Highlights
YoY, revenue rose by 6% to RM1.45b due mainly to the increase in advertising revenue and travel segment’s turnover. Despite recording a moderate growth in its  turnover, the group’s NP has grown by 15% to RM194m as a result of lower fixed and operating costs. 

QoQ, revenue was reduced by 15% to RM318m, no  thanks  to  the  drop  in  tour  revenue  as  well  as a seasonally slow period for advertising. Thus, leading its NP to drop 19% QoQ. 

Outlook  Cautiously optimistic. We are expecting the adex sentiment to improve from 2Q12 onwards driven by scheduled major sport events and a potential General Election.

Change to Forecasts
We have increased our FY13 NP forecast by 6.5% to RM188m after lowering the distribution and administration costs.  Our FY14 NP forecast, however, remains unchanged. 

Rating  Maintain OUTPERFORM

Valuation   We have raised our TP to RM1.36 (from RM1.30 previously) after rolling over our base year to FY13 with a targeted PER of 12.5x (-1 SD below its mean). 

Risks  CY12 gross adex growth coming in below our expectation of RM11.9b (+11.1% YoY).  

Source: Kenanga

CARLSBERG (FV RM10.52 - NEUTRAL) 1QFY12 Results Review: Fully Valued

Carlsberg’s 1QFY12 earnings of RM52.4m were higher y-o-y and q-o-q in tandem with  strong sales  boosted by its Chinese New Year promotions and  its growing hold on  the premium beer segment. The group has dedicated a lot of marketing efforts towards building up the Asahi brand as a rival to GAB’s Heineken. We are raising our FV slightly to RM10.52 but are nonetheless downgrading Carlsberg to NEUTRAL given the meagre 0.2% potential upside.

Within estimates.  Carlsberg posted 1QFY12 revenue of RM454.0m (+11.5% y-o-y, +35.5% q-o-q) and earnings of RM52.4m (+7.0% y-o-y, +40.2% q-o-q) on the back of stronger sales volume and continued growth in the premium beer segment. However, higher raw material prices, coupled with the company’s  visibly  aggressive marketing initiatives, shaved 0.8 ppt off its EBIT margin on a y-o-y basis. The quarter’s earnings represent 30.6% and 29.7% of our and consensus forecasts, which was in line as the group’s 1Q earnings have historically averaged 29.9% of full-year earnings over the past 6 years. That said, its 1Q profits have traditionally been lifted by higher sales during the Chinese New Year festive season.

Chinese New Year and Asahi boost.  Carlsberg’s revenue from its Malaysian operations  jumped  12.9% y-o-y  on its  successful Chinese New Year promotions but revenue from Singapore only inched up by 2.7% y-o-y. The lower growth in Singapore arose from the timing of CNY sales, as most Singaporeans had completed their festive shopping in December 2011 ahead of the celebrations in  January 2012. The company made market share gains in the premium beer segment, buoyed by  the launch of  the locally-brewed Asahi, as well as strong sales from Kronenbourg. Carlsberg has definitely increased  the visibility of the Asahi brand via  aggressive and creative marketing activities at not only at the bars and coffee shops but also on the streets (have you met Mr Asahi?  Take a look  at  our picture below). Having that said, the premium beer segment is currently still dominated by GAB’s Heineken.

Downgrade to NEUTRAL. We are raising our FV slightly to RM10.52 on the back of the company’s  higher net cash position of RM80.2m but are maintaining our earnings forecast  since the results were in line with estimates. Our FV is  based on FCFF valuation (WACC: 9.0%, terminal growth: 2.0%). But given the miserable 0.2% potential price upside, we are downgrading Carlsberg to NEUTRAL.

Source: OSK 

GENTING (FV RM11.62 - BUY) 1QFY12 Results Review: Facing Mild Headwinds

The group reported earnings which were below both consensus and our full-year estimates, owing largely to weaker hold percentages for both its Malaysian and Singaporean gaming operations. We have toned down our earnings forecast while revising downwards our SOP FV for Genting Bhd from RM12.30 to RM11.62 after nudging down our  FVs for Genting Singapore, Genting Malaysia and Genting Plantation. Maintain BUY with a revised FV of RM11.62.

Slightly below. Genting Bhd’s annualized 1QFY12 core earnings made up 21.9% and 21.5% of consensus and our full-year forecasts respectively. Core EBITDA and earnings declined 25.3% and 37.2% y-o-y respectively.

All segments report lower performance. Given that gaming contributes to a significant 86% of the group’s operating earnings, its performance was naturally dragged down by its two key operating units – Genting Malaysia and Genting Singapore. The group’s lower-than-expected core earnings were essentially a reflection of:  (i) Genting Singapore’s 33.2% decline in 1Q12 core earnings as a result of a 14% drop in VIP volume and a lower VIP hold percentage of 3.4% vs 3.8% in 1Q11, and  (ii)  a  19.8% decline in Genting Malaysia’s core earnings as a result of lower hold percentages from the Malaysian gaming business, lumpy RM39.6m gaming bad debt provisions from  its UK casino operations and higher promotional expenses from Resorts World at New York. That said, the 28% y-o-y decline in Genting Plantations’ 1QFY12 earnings on the back of higher than expected fertilizer and labor costs also contributed to the drag in overall group earnings. The power division was  also not spared, reporting a 40% y-o-y decline in earnings as a result of lower power dispatch by its Meizhou Wan power plant in China which  could be partially attributed to the high base effect of 1QFY11  that incorporated a lumpy fuel pass-through compensation.

Medium-term notes explained. The group had recently announced the establishment of a 10-year  medium-term  notes  (MTN)  with an aggregate nominal value of up to RM2.0bn. Management indicated that  this was intended  to lock in relatively attractive long-term financing costs without really  allocating the funds to any immediate-term investments, apart from utilizing a portion of the  amount raised to redeem part of its existing USD314m bonds expiring in 2014. We believe that the group will ultimately allocate a large portion of the funds raised to support future gaming ventures of its subsidiaries, which are expected to be significant given the scale of the CAPEX required for integrated resorts. We note that its CAPEX-intensive power business could be largely project financed against the long-term contractual cash flows of the IPP agreements. More importantly, with the group’s net gearing remaining relatively healthy at 10.3% even after raising the RM2bn MTN, it can well afford to digest higher gearing levels while optimizing its balance sheet to drive a more aggressive growth plan.

Source: OSK 

GENM (FV RM4.21 - BUY) 1QFY12 Results Review: Squeezed by Weaker Hold Rates

The group’s annualised 1QFY12 results were below both consensus and our fullyear estimates, weighed down by lumpy bad debt provisions  at  its UK gaming operations and  a  lower luck factor  at  its domestic gaming business.  Its  core gaming volume in Malaysia, which remained relatively resilient, expanded by  an average high single-digit. RWNY, which only began operation in 4Q11, contributed 9% to the group’s 1Q12 EBITDA.  Maintain BUY with a fair value of RM4.21.

Below expectations. Adjusting for exceptional items which included pre-operating expenses (RM17.7m) and construction cost overruns (RM48.2m) from Resorts World at New York (RWNY),  the group’s  annualized 1QFY12 net profit was 22.8% and 23.3% below consensus and our full-year  estimates. The  weaker than expected results were attributable to three key factors:  i)  a  lower VIP win rate from  the group’s  domestic gaming business,  ii)  lumpy bad debt provisions of RM39.6m from its UK casino VIP operations, and iii) ramp up in promotion and marketing expenses at RWNY. If we were to normalize the lumpy bad debts provisions from its UK gaming operations, the group’s annualised earnings underperformance would have been a less  pronounced  -14.1%,and largely owing  to a lower VIP luck factor at its domestic VIP gaming operation.

Malaysian casino op resilient. Normalising the lower win rates, the group’s Malaysian casino operation, which comprises the bulk of group earnings (at 90%), reported high double-digit gaming volume  growth  but  low single-digit mass market gaming volume growth. However, due to lower win percentages, revenue declined 1% y-o-y and 5% q-oq. Meanwhile, overall visitor growth  rose  2% y-o-y while  its foreign visitor growth was driven by Singapore (+4% y-o-y) and Indonesia (+11% y-o-y) as it faced competition from the Singapore integrated resorts. Overall domestic day tripper continues to contribute  the bulk of the total visitor arrivals at a  steady 74%, while  hotel occupancy remained relatively robust at 91%.

Lowering FY12 earnings forecast. Factoring in the lower domestic gaming win percentages and lumpy bad debt provision  in relation to  its UK gaming operations in 1Q12, we are revising downwards our FY12 earnings estimates by 6.5% but retain our FY13 estimates. Our fair value is hence nudged down to RM4.21. 

Source: OSK

Telekom Malaysia -OUTPERFORM- 31 May 2012

Period    1Q12

Actual vs.  Expectations
 1Q12 core NP of RM183m came in slightly above the street and our estimate due mainly to a lower direct cost and a lower effective tax rate. 

 The NP effectively made up 27.3% and 25.3% of ours and the street’s full year estimates respectively.

Dividends   No dividend was announced during the quarter.

Key Result Highlights
 YoY, revenue rose by 11% to RM2.38b, driven by higher contribution from all its segments, i.e. Voice (+3%), Data (+11%), Internet (+24%) and other telco related services (17%). Reported EBITDA grew by 7% to RM783m although the margin dipped by 1.2pp to 32.4% mainly due to the higher direct and maintenance costs.   

 QoQ, turnover was lower by 3% due to lower revenue from Data (-6%) and other telco related services (-19%) but this was partially cushioned by the increase in the Voice (+3%) and Internet (+4%) divisions. Despite the moderate drop in revenue, the core NP, however, fell 58% due mainly to the absence of deferred tax income. 

 Unifi subscribers grew by 34% QoQ to 316k in end-1Q12 with a blended ARPU of RM182 (-RM2 QoQ). To date, Unifi’s subscribers have reached 365k on the back of 1.22m premises covered in 81 exchange areas. This translates into a take-up rate of 30%. Streamyx subscribership, on the other hand, dropped by 1.7% to 1.66m with a slightly higher ARPU of RM79 (+RM1 QoQ).      

Outlook   No change in its FY12 headline KPIs target (aiming 5.0% revenue growth and 32% in its EBITDA margin).

Change to Forecasts
 We have raised FY12-FY14E core NP by 6%-8% to RM722m-RM849m after lowering 1) the direct cost (from 19.5% to 18.5% as a % of sales) and 2) the effective tax rate (from 23% to 15%).

Rating  Maintain OUTPERFORM

Valuation    In tandem with the earnings upgrade, we have raised our TP to RM5.65 (from RM5.52 previously) based on a higher FY12 targeted EV/forward EBITDA of 7.2x (+2 SD) from 7.0x previously.   

Risks   A potential slowdown in broadband subscribers  
 Persisting margin pressure.  

Source: Kenanga

Media Chinese - A record breaking year BUY

- We re-affirm our BUY rating on Media Chinese International Ltd (MCIL), with an unchanged fair value of RM1.37/share following the release of its 4QFY12 results.  

- Pending an analyst briefing to be held this morning, we maintain our earnings forecasts at and we have introduced FY15F earnings at RM220mil.

- MCIL’s FY12 earnings were way above expectation. MCIL reported a net profit of RM197mil for FY12, which was 6% and 222% ahead of our forecast and consensus, respectively.

- Earnings rose by 17% YoY, stemming from its core business – printing and publishing.  This segment continues to maintain a healthy growth momentum, growing by 6% driven by advertising revenue.

- Compared to the same quarter in previous year, turnover fell by 3% due to a change in “revenue presentation” in the travel segment’s ticketing sales. Growth would have been 4% if that was excluded.

- On a sequential basis, turnover dropped by 18% due to a change in “revenue presentation” for the tour segment and 4Q being a seasonally slower period as most advertisers adopt a cautious approach. The travel segment hit a record pre-tax profit of RM214mil, backed by its long-haul tour business, which is operated via Charming Holidays and Delta Group. 

- Management declared a tax-exempt second interim dividend of 4.6 sen/share. In total, MCIL paid a dividend of 8.3 sen/share for FY12. As FY12 turned out to be a record-breaking year, FY12 dividend payout represents a 38% increase compared to FY11.

- With major sporting events and general election just around the corner, amid uncertainties in the global economic environment, management expects local business and consumer spending to be prudent.

- MCIL’s balance sheet remains healthy with net cash position growing 8% QoQ to RM413mil as at end-FY12 from RM384mil in 3QFY12. We continue to like MCIL for its dominance in the Chinese newspaper segment in Malaysia (87% of market share) and superior pricing power ad rates – the second highest industry-wide.  

Source: AmeSecurities

Banking Sector - A soft 1Q12 OVERWEIGHT

- HLBB and Maybank came in above expectations.  Among the local banks that we track closely, the two main ones which managed to come in above expectations were HLBB and Maybank. 

- Sector net earnings growth was stronger. Sector net earnings growth reaccelerated on QoQ basis by 3.6% in 1Q12 following a flat performance of +1.4% QoQ in 4Q11.  The stronger net earnings came largely from much lower-thanexpected loan loss provision.  

- Lending revenue slower. Gross loans for the banks under our coverage registered flat growth of 0.9% QoQ in 1Q12, compared to 3.0% QoQ in 4Q11. This was partly due to the new Responsible Lending Guideline which was implemented from 1 January 2012 and which has since affected consumer-related loans. 

- NIM declined in 1Q12.  The sector’s net interest margin (NIM) recorded a decline of 13bps on QoQ basis in 1Q12. However, we would remind that 1Q is a historically slower quarter for NIM, given that this is the shortest working quarter in a calendar year. As a gauge, NIM dropped by 18bps in the previous year’s 1Q11 while two years ago in 1Q10, NIM decline was -9bps (1Q09: -6bps QoQ, 1Q08: -8bps QoQ).

- New impaired loans has continued to decline for second consecutive quarter. In terms of new impaired loans, this has continued to improve for the second quarter with a -3.2% QoQ drop in 1Q12 (4Q11: -15.9% QoQ). This is positive considering an uptick of 19.2% QoQ in 3Q11. Absolute level impaired loans for the banks that we track  closely has improved further, recording a decline of 6.9% QoQ in 1Q12, (4Q11: -5.7% QoQ), which is reassuring. Gross impaired loans ratio for average of the banks that we track has now been reduced further to 2.7% in 1Q12 from 2.9% in 4Q11.

- Maintain overweight. The 1Q12 net earnings is generally soft, but in line with historical trend. Loans growth was slow, below earlier indicated internal budgets by banks, but in line with our estimates. The weak spot in 1Q12 was net interest margin. However, this was offset by much lower credit costs. Impaired loans has turned out to be better than we expected given continuing improvement, while sector credit costs is also much lower at 20bps, compared to our forecast of 54bps for 2012. Our sector calendarised sector earnings growth is now 4.6% for 2012. Consensus has slightly higher growth rate of 6.3% YoY for calendarised 2012. We maintain overweight with our buys being AFG, HLBB, Maybank, PBB and RHB Cap.   

Source: AmeSecurities

Yeo Hiap Seng - To be privatised at RM3.60/share HOLD

- Yeo Hiap Seng (M) Bhd (YHSM) announced that it had yesterday received a privatisation offer via a selective capital reduction and repayment exercise from parent company Yeo Hiap Seng Pte Ltd (YHSPL).

- YHSPL owns a 61.15% equity stake in YHSM. The proposed corporate exercise will result in a total capital repayment of RM213.6mil. 

- This translates into a cash of RM3.60/YHSM share.

- At the offer price of RM3.60/share, this values the group at an FY12F PE of 20x based on our forecast, and an implied P/B of 2x based on its NTA of RM1.80/share as at 1QFY12.

- The offer price is 7.6% below our fair value of RM3.90/share. But, this represents a premium of 18%based on its 5-day VWAP of RM3.04/share, after adjusting for a final dividend of 9 sen/share (less 25% tax) payable on 9 July 2012. 

- Given the small discount to our fair value, we deem the proposed offer price to be fair. Based on recent M&A deals, YHSM’s implied valuation appears to be more attractive than its consumer peers. 

- YHSM’s trailing PE of 25.7x (based on FY11’s core EPS of 14 sen/share) is higher than the proposed privatisation of KFC Holdings Bhd at 22x PER, as well as the disposal of bottler Permanis Sdn Bhd by CI Holdings Bhd to Asahi Group Holdings Ltd at 24.7x back in July 2011.  

- Management is concerned about sustaining its dividend track record (historical payout: 50%), citing substantial capex investments and rising cost of raw materials  and A&P expenses. 

- We believe its expansion into Indonesia, where plans are in place for the setting up of a bottling plant, could be a key factor. Capex is at an estimated RM200mil (FY12F-14F).

- The completion of the proposed corporate exercise is expected to be in 2H 2012, pending the necessary approvals from both the authorities and shareholders. Institutional shareholdings is <5%.

- We are downgrading YHSM to a HOLD with a fair value of RM3.60/share in lieu of the proposed privatisation. We expect the share price to gap up once trading resumes today.  

Source: AmeSecurities

CB Industrial - Manufacturing division still holding up well HOLD

- We maintain a HOLD on CBIP with an unchanged fair value of RM2.85/share, which is based on FY13F PE of 13.5x. We have raised the group’s FY13F EPS by 10.5% to account for a stronger construction order book. 

- CB Industrial Product Holding Bhd’s (CBIP) FY11 results were within consensus estimates and our expectations. 

- CBIP’s PE band ranged from a low of 4x to a high of 21x in the past seven years. The group’s average PE was 10x. 

- CBIP classified its plantation earnings as profits from discontinued operations in 1QFY12. We reckon that the disposal of the plantation subsidiaries would be completed by 2HFY12. The plantation division recorded a net profit of RM6mil in 1QFY12. 

- CBIP’s turnover (excluding plantation) expanded 82.4% YoY to RM113.3mil in 1QFY12, driven by an increase in the mill construction order book and higher contribution from the retro-fitting vehicles division.  

- Mill construction turnover expanded 36% from RM57.1mil in FY11 to RM77.7mil in FY12. As at end-FY11, the value of CBIP’s projects in-hand (including boilers) amounted to RM932.1mil. 

- Unbilled sales stood at RM371.1mil as at end-FY11, which was 1.2x of FY11’s mill construction turnover. 

- Pre-tax profit of the mill construction division also improved, by 133% YoY to RM17.7mil in 1QFY12, underpinned by enhancements in margins. We believe that CBIP benefited from higher-margin contracts and the fall in steel prices.

- Pre-tax profit margin of the mill construction division inched up from 13% in 1QFY11 to 23% in 1QFY12. 

- Turnover of the retro-fitting vehicles division surged from RM5mil in 1QFY11 to RM35.7mil in 1QFY12, aided by an increase in the number of contracts. 

- The division had won contracts valued at RM171mil and RM38mil, respectively, from the Fire and Rescue Department of Malaysia and Ministry of Health to deliver and commission fire transport vehicles and ambulances last year.

- As a result, the retro-fitting vehicles division swung from a loss of RM0.1mil in 1QFY11 to a small pre-tax profit of RM2.7mil in 1QFY12.

Source: AmeSecurities 

Alam Maritim - Secures two replacement workboat charter BUY

- We maintain BUY on Alam Maritim Resources (Alam), with an unchanged fair value of RM0.85/share, pegged to an unchanged FY12F PE of 12x – at a 25% discount to the oil & gas sector’s 16x. 

- Alam has secured a contract to provide two accommodation workboats out of a letter of award to provide four such vessels to support Petronas Carigali’s painting activities off Peninsular Malaysia. 

- The contract, which commenced on 25 May 2012, requires two of Alam’s accommodation workboats for a primary one-year period with an option to extend for another year.

- As Alam currently has only three accommodation workboats, with the other vessel currently chartered to ExxonMobil, we understand that the group is planning to secure a third-party vessel to provide one more accommodation workboat to Petronas Carigali.

- Including the option extension, the contract value  of RM122mil translates into a charter rate of RM83,247/day, much higher compared to RM55,000-RM75,000 last year.

- We note that this is still lower compared to Alam’s charter of an accommodation workboat by ExxonMobil Exploration and Production Malaysia Inc in the past three days for RM137,268/day. But we understand that the Petronas Carigali’s estimated contract value does not include food catering charges for the crew.

- We maintain FY12F-FY14F net profits, which have already assumed replenishment for the expiry of vessel charters at higher rates.

- We estimate that fleet vessel utilisation rate has improved to over 80% with the vessels under the joint-ventures with CIMB and Tabung Haji having been fully chartered out. 

- We continue to expect Alam to be awarded fresh charters for its idling and spot-chartered vessels as global utilisation has tightened. We note that day rates have been slowly rising on tightening global vessel utilisation.

- As such, we maintain our view that the company’s earnings recovery is intact with an undemanding valuation of FY13F PE of 7x – at the lower end of its historical PE band.   

Source: AmeSecurities

Telekom Malaysia - Strong transmission BUY

- We re-affirm our BUY call on Telekom Malaysia (TM), with a higher DCF-derived fair value of RM5.90/share (vs. RM5.50/share previously), following the release of strong 1Q12 results.

- TM reported core earnings of RM183mil (excluding net forex gains amounting to RM67mil). This accounted for 27% of our FY12F estimates (slightly ahead of expectations) and 25% of consensus. Normalised EBITDA of RM785mil made up 24% of our full-year estimate.

- Core earnings grew by 50% YoY, though this was partly driven by a lower effective tax rate given recognition of last mile tax incentives. Normalised EBITDA growth (+8% YoY) lagged behind revenue (+11% YoY) given slight margin pressure (-1pp) on higher maintenance cost.

- Nonetheless, a positive surprise was the strong revenue growth (+11% YoY), which far exceeded FY12 KPI (+5%). Voice revenue surprisingly rebounded (+3.4% QoQ, +2.6% YoY) as subscribers migrate back to telcos from diminishing VoiP networks. Management guides for this trend to sustain in the near term.

- Unifi growth remains very strong (subs growth: +34% QoQ,). Net addition grew from 24K/month (4Q11) to 26K/month (1Q12). Maxis’ aggressive price strategy in its fibre broadband offering suggests increased competition ahead. TM does not intend to compete on pricing, but rather on bandwidth offering. 

- Capex post-Public-Private Partnership (PPP) phase may be reduced, given lower access capex which makes up 46% of HSBB capex (FY11) and 26% of group capex. The PPP ends in FY12 after hitting 1.3mil premises (1.2mil currently). 

- We raise FY12-14F earnings by 6%-7% to reflect stronger- than-expected Unifi subscriber growth. We now assume an average 22K/month net add, which still looks conservative – 1Q12 net add averaged 26K/month. There is further upside if TM is able to sustain ARPU at the current level of RM182.

- TM had earlier proposed a 30 sen capital repayment, due to be paid out in 3Q12. This amounts to an attractive dividend yield of 5.6% on top of the normal dividend payout which yields another 3.7%. Low net debt-to-EBITDA (0.7x) and falling HSBB capex moving forward suggest room for a further increase in dividend payout.   

Source: AmeSecurities

Sime Darby - Good numbers yet again BUY

- We reaffirm our BUY rating on Sime Darby Bhd, with our fair value unchanged at RM12.30/share, assigning a 10% discount to our sum-of-parts value of RM13.70/share.

- Sime reported a 9MFY12 net profit of RM3.1bil (+34% YoY) – 2% and 3% above our, and street, estimates respectively – on the back of a 16% growth in revenue. While plantation business continued to be the main contributor – accounting for 58% of group’s EBIT – property (+50% YoY), energy & utilities (+65% YoY) and industrial (+41% YoY) showed stronger growth.

- The average CPO price realised was RM2,881/tonne for the period (versus RM2,828/tonne last year). Meanwhile, FFB production growth was more than decent at 5% although this was offset by a 7% decline in Indonesia FFB output. This can be explained by tree stress, delayed impact of El Nino in 2009 and a prolonged dry period in 2011 (June to September) on its trees in Kalimantan, although Sumatera trees fared better. 

- However, Sime’s earnings were weak QoQ (-24%) despite revenue declining by just 3%. The main culprit was due to:- (1)  the plantation division (EBIT -38% QoQ) on lower-than- expected FFB production of 2.05mil tonnes for 3QFY12 (-21% QoQ) because of weak Indonesia FFB output as mentioned above. However, there have been improvements at Kalimantan with a +9% MoM growth in yield and Indonesia as a whole at +6% MoM.

- (2) Weaker contribution from Energy & Utilities division due to recognition of the deferred revenue of RM99.4mil for the domestic power business in the previous quarter and lower throughput at Weifang Port in China due to the winter season.

- There was also a maiden contribution from Bucyrus to the tune of RM6.1mil during the quarter and the acquisition has boosted Sime’s industrial order book to RM4.6bil (+18% QoQ) – Bucyrus’ portion at RM2.6bil. 

- While our BUY call mainly centres on its plantation business – (1) 60%-65% of its earnings coming from plantation division, and (2) Sime Darby is the most liquid proxy to the plantation sector with a sizeable weighting in the FBM KLCI of about 8.8% – Sime’s industrial division offers the strongest EBIT growth of about 10% p.a., which could be attributed to the recent acquisition of Bucyrus.

- On a valuation standpoint, Sime is currently trading at 12x CY12F versus its conglomerate peers of 18x. The counter also has deep value, trading at 30% discount to its SOP value.   

Source: AmeSecurities

Padini Holdings - Stronger-than-expected performance BUY

- We maintain our BUY recommendation on Padini, with an unchanged fair value of RM2.15/share based on a 10% discount to our DCF value of RM2.39/share. Taken together with an implied PE of 14x, our fair value provides  a potential upside of 20% at its current share price.

- Padini registered a core net profit of RM24mil (-15% QoQ) for its 3QFY12, which brought 9MFY12 earnings to RM80mil (+39% YoY). This is stronger than expected, accounting for 96% of our forecast and 91% of consensus estimates. 

- The stronger-than-expected 9MFY12 result was contributed by an additional 98,000sf of gross floor area, resulting in an acceleration of RM28mil (+19% YoY)  in revenue.

- Pre-tax profit did not rise in tandem with revenue, but dropped by RM1.4mil (-4%) YoY. This was due to an 8ppt- decline YoY in gross margin. Gross margin for 9MFY11 was at an exceptionally high 60% (vs. 52% 9MFY12) due to better-than-usual sell-through rates for merchandises offered for sale.  

- Comparing to the preceding quarter, 3QFY12 revenue was down by RM26mil (-13% QoQ) due to the early ChineseNew Year in January. This had led to an earlier shopping period that took place in December, resulting in sturdy sales in 2QFY12. On top of this, 3QFY12 endured a longer period of subdued retail activity before promotional activities kicked off in mid-March. 

- Our earnings forecasts remain unchanged for a three-year CAGR of 12% over FY12F-FY14F. Padini’s growth remains intact underpinned by:-  (1) Ten additional stores – 4 Concept Stores, and 6 Brands Outlet – opening during FY12, adding 130,000sf to its overall gross floor area under retail; and  (2) Upcoming nationwide sales. 

- Padini declared a second interim dividend of 2.0 sen/share, amounting to RM13mil during the quarter. Given Padini’s encouraging performance, a third interim dividend of 2.0/share was declared yesterday. As such, a total  of 6 sen/share have been declared for FY12. 

- Our BUY recommendation is premised on:- (1) Solid balance sheet with net cash of RM144mil as at end-9MFY12; (2) Acclaimed brands under its portfolio; (3) Penetration of Brands Outlet into the middle- to lower-end market, given its encouraging sales performance; and (4) Potential growth opportunities in the domestic market especially in urban areas

Source: AmeSecurities 

Carlsberg Brewery - Cheering premium beer BUY

- We maintain BUY on Carlsberg Brewery (Carlsberg), with an unchanged DCF-based fair value of RM11.50/share (WACC: 9.2%).

- Carlsberg brewed a traditionally strong 1Q on the back of the Chinese New Year-driven sales, which met both our, and market, expectations. Annualised net profit accounted for 29% and 30% of our forecast and street estimates, respectively.

- The group posted a solid turnover for 1Q (QoQ: 36%, YoY: 12%) on the back of higher beer volumes as led by growth in the premium beer segment, notably the locally-brewed ‘Asahi Super Dry’. On a YoY basis, revenue from Carlsberg Malaysia and Singapore grew 13% and 3%, respectively. 

- However, the positive benefit was partially negated by a slight margin compression (YoY: -0.8ppt to 15.7%) due to higher raw material costs. Consequently, 1Q net profit was up only 7% compared to the same quarter in the preceding year.  

- Moving forward, we expect rising contributions from its portfolio of premium labels. For now, mainstream Carlsberg Green label remains the group’s backbone,making up an estimated 85%-90% of group earnings. 

- To recap, domestic production of premium labels, notably ‘Asahi Super Dry’ which kicked off last December, has so far registered double-digit volume growth. We expect similarly encouraging response when the local production of ‘Kronenbourg’ commences in 2-4 months’ time. This aside, the group would also be introducing one or two new European-based beers to further strengthen its market share of the premium segment (1QFY12: 16%-17%).

- Group EBITDA margin is expected to remain flattish on the back of largely stable raw material prices such as those of hops and malting barley. For FY12F, margin will be well cushioned by: -1) Increased beer volume as buoyed by the status quo of alcohol excise duty; 2) a 3% hike in average selling price from May 2012 onwards; and 3) Operating efficiencies from better economies of scale from local production of Asahi and Kronenbourg. 

- Similar to 1Q last year, no dividend was declared for this quarter. Our dividend forecast with a gross yield of 6% per annum (p.a.) is premised on a dividend payout of 70% – in line with management guidance of 50%-70% p.a.   

Source: AmeSecurities

Hong Leong Bank - MARKET PERFORM - 30 May 2012

News    Hong Leong Bank (“HLBANK”) is considering to raise its shareholding in its China subsidiary, Bank of Chengdu Co Ltd (“BOC”), through an initial public offering (IPO), said its CEO, Datuk Yvonne Chia.

 BOC, a Sichuan-based city commercial bank, is planning an IPO on the Shanghai Stock Exchange A-share market as it moves to replenish its capital to boost future growth.  The IPO aims to issue 800m shares. The cash proceeds will help raise BOC's capitaladequacy ratio (CAR), which has declined on the back of its strong growth in 2010.

Comments   We understand from management that HLBANK would like maintain its 20% stake in BOC post IPO.  CBRC has a policy that caps single foreign bank ownership at below 20% (19.99%). Hence, any rise in the stake will probably need CBRC approval and hence, is an unlikely move for HLBANK at this juncture.

 The listing application has been sent to the regulatory authorities. However, the timeline of the listing is unknown as it may take a year or two for final approvals. 

 We believe HLBANK has the financial capabilities with an excess capital of RM2.0b-4.4b, and hence has the extra funds for further investment in BOC. 

 We believe BOC will offer a long term growth story for HLBANK given that Chengdu is located at the centre of Sichuan.  

 Sichuan is the powerhouse of China’s southwest and has gained increased attention since the implementation of the “Go West” policy back in 2000.

Sichuan (including Chongqing) has a total market of some 120m people, the same size as France and 4.2x bigger than that of Malaysia.  

 The province has benefited from lower operating costs compared to the eastern and central regions, with the added attraction of a massive population. 

Outlook   Outlook for BOC is positive.  At this juncture, BOC has contributed 10-12% to HLBANK’s PBT.  

Forecast   No earnings impact at this juncture.


Valuation    We are maintaining our TP at RM10.90 with an unchanged valuation of 1.7x FY13 BV of RM6.42.

Risks   An unexpected higher dividend payout could drive up the valuation.

Source: Kenanga 

Benalec - OUTPERFORM - 30 May 2012

News    Benalec announced that it had been awarded a 3+2 years Contract of Affreightment for bulk coal from TNB Fuel Sdn Bhd, a wholly-owned subsidiary of Tenaga Nasional Berhad (TNB).

The contract is worth RM67.5m and the contribution to Benalec’s revenue will be about RM22.7m per annum. The contract will commence from 1st May 2012 to 30th April 2015. 

Comments   We are positive with the new contract secured as it will mean more stable earnings for Benalec going forward. We also understand that Benalec is eyeing for more contracts from TNB following this contract award. 

 We expect Benalec to reap 40% and 20% gross and pre-tax profit margins respectively from this contract.

 The contract award above is deemed to be in line with our assumption of new contract replenishments for its vessel and chartering business. 

Outlook   Management has indicated that they are experiencing some delays in wrapping up the recent land sale due to timing issues. The delay will potentially push the earnings recognition to FY13. 

 It is however likely that the transaction will be finalised in 3 to 6 months time from now.

Forecast   We have trimmed our FY12 earnings lower by 27% ahead of its 3Q12 results announcement tomorrow as we have factored in the fact that earnings from the land sale will now be booked in only in FY13 (from the earlier expected FY12).  


 There is still a huge potential upside for the stock to our Target Price.  

Valuation    We have reduced our TP to RM2.37 from RM2.70 previously due to delay in recognising the recent Melaka land sale. Our Target Price is derived from SOP valuation.   

Risks   Further delays in land sales (reclamation land)

Source: Kenanga 

Kimlun Corporation - OUTPERFORM - 30 May 2012

Period   1Q12/3M12

Actual vs. Expectations
3M12 net profit of RM10.6m came in below expectations, accounting for just 17% of our FY12E net profit of RM59.2m but in line with the street’s estimate at 22% of RM49.5m.

Dividends  No dividend was declared during this quarter.

Key Results Highlights
YoY, 3M12 revenue improved substantially by 47% from RM134.6m to RM198.3m due to higher contribution from construction and manufacturing by 49% and 39% respectively. This was also supported by increased sales of TLS and jacking pipes in Singapore.

QoQ, the 3Q12 net profit fell by 9% from RM11.7m to RM10.6m as the gross margin for construction came down by 2.3ppt from 10.9% to 8.6%. This was due to a big proportion of the current order book being relatively lower margin projects.

Outlook  Its current order book stands at RM1.7b, which provides earnings visibility for the group up until FY14.

We believe that Kimlun would be able to secure more contracts for the year mainly due to MRT contract flows and also potential new building contracts in Johor and Klang Valley.

Change to Forecasts
We  have  cut  our  FY12E  earnings  by  20%  from RM59.2m to RM47.3m as we have lowered our margin assumption for its construction division from 13% to 11%.


A potential upside of 20% to our Target Price of RM1.77.

Valuation   Inline with our earnings cut, we have lowered our Target Price from RM2.05 to RM1.77 based on an unchanged 8x PER on its FY13E EPS of 24.7 sen.

Risks  Higher than expected building material costs.
Stiff market competition which could further lower its margins.   

Source: Kenanga

IJM Corporation - MARKET PERFORM - 30 May 2012

Period   4Q12/FY12

Actual vs.  Expectations
Full  year  FY12  results  came  in  within  our expectations but slightly below that of the consensus. 

FY12 core net profit of RM429.9 came in at 96% and 88% of ours and the consensus’ forecasts respectively.

Dividends  Second interim dividend of 8 sen (single tier)

Key Result Highlights
QoQ, the core net profit of RM104.8m dropped by 22% despite a marginally higher revenue (+4%).  This  was  partly  due  to  an  80%  drop  in the plantation pre-tax profit from RM71.6m to RM14.4m (-80%) as a result of higher operating cost i.e. fertilizer cost and impairment of its bio plant at c.RM11m. Infrastructure division’s pretax profit also fell by 12% due to a forex loss of RM15.3m and the write-off of revenue recognition from one of the highway projects in India Vijay Toll highway.  

YoY, core net profit was commendably better than last year’s loss of RM20.2m despite a 7% drop in revenue, mainly due to a higher margin recorded by the construction and property divisions. Construction turned up a profit in 4Q12 as compared to it being loss making last year. 

Property margin has increased from 9% to 23% with more sales coming along from its property launches.

Total one-off loss for FY12 was at RM20.8m, which was not included in our core net profit.

Outlook  The NPE highway project will get the approval from the government in the next few months. 

Construction of MRT will be busier by end of this year to early next year. 

The details of the WCE concession will be out in the near term and management reiterated that most of the initial structure will be maintained. 

Change to Forecasts
We lowered our FY13 and FY14 estimates slightly by 4% as we lowered our plantation earnings by 6.1% and 5.8% respectively  


Maintain our MARKET PERFORM rating as the expected total return is below 10%.

Valuation   We lowered our Target Price to RM5.56 from RM5.64 previously as we have cut the in-house valuation for IJM Plantation by 6%. 

Risks  Delays in contract award i.e. on ETP based projects.   

Source: Kenanga

Puncak Niaga - OUTPERFORM - 30 May 2012

Period   1Q12

Actual vs.  Expectations
1Q12 results above expectations due to margin improvement across the division and contribution of its new income stream ie: oil and gas.

1Q12 net profit of RM68.4m made up 38% and 55% of our full year FY12 and consensus’ forecasts, respectively.  

Dividends  No dividend declared during the quarter.

Key Result Highlights
QoQ net profit improved significantly from RM8.7m to RM68.4m on the back of 20% drop in revenue. This is mainly due the negative impact to its P&L when Puncak adopted IC12 in FY11. However, the margin in 1Q12 has improved throughout all divisions coupled with progressing earning recognition for its construction contract ie: rural water supply project. 

YoY revenue grew by 36% backed by 32% increase in water distribution division due to increase in water tariff and short of oil and gas contribution in 1Q11. The KGL and GOM acquisition was fully completed in 2H11. The net profit has also improved significantly from loss of RM8.1m in 1Q11. 

We expect the achievement in 1Q12 results is sustainable throughout FY12. 

Outlook  The Oil and Gas division remained as the key rerating catalyst for Puncak which could surprise on the upside in terms of the size of order book replenishment in FY12 ie: >RM550m.

We expect more meaningful negotiation between SSG and Puncak on water assets consolidation post-election. 

Change to Forecasts
We tweaked our FY12E and FY13E net profit higher by 29% and 25%, respectively. We fine tuned our assumption on oil and gas order book assumption higher from RM300m to RM550m for the next 2 years. 


Maintain OUTPEFORM recommendation with higher Target Price of RM3.01 (RM2.70 previously) based on SOP valuation.

Valuation   We raise our target price higher to RM3.01 based on SOP valuation.

Risks  Prolonged water consolidation issues  

Source: Kenanga

Genting Plantations Bhd - OUTPERFORM - 30 May 2012

Period    1Q12.

Actual vs.  Expectations
 The results were below expectations due to a higher-than-expected fertilizer cost and a lowerthan-anticipated palm kernel prices. The 1Q12 core net profit of RM69m* made up only 15% of the consensus’ forecast of RM466m and 14% of our forecast of RM495m.

 Fertiliser cost surged in 1Q12 while palm kernel prices tumbled 36% YoY to RM1,941 per mt. GENP also applied a higher usage of fertiliser in 1Q12 due to the wet weather.

Dividends  No dividend was announced as expected. 

Key highlights
 YoY, the earnings declined 16% due to a higher fertiliser cost and usage coupled with significantly lower palm kernel prices at RM1,941 per mt (-36% YoY).

 QoQ, the earnings dropped by 16% due to a seasonally lower FFB production in 4Q12 of 275k mt (-25% QoQ).

Outlook   The fertiliser cost should normalise in 2H12 in line with the lower crude oil prices so far in 2Q12. However, on a YoY basis, the fertiliser cost in FY12E will still be higher by 20%.

 2H12 results should improve as an additional 10k-12k mt of FFB will come in after completion of the JV with Global Agrindo Investment (GAI) in end-2Q12.

 Indonesian estates FFB should grew 6% YoY. This should cushion the increase in cost and the lower palm kernel prices.

Change to Forecasts
 We have revised down our FY12-13E net profits by 8%-9% to RM455m-RM491m as we have assumed a higher fertiliser cost growth (YoY) of 20% (against 10% previously).

 After accounting for the lower palm kernel prices, our overall cost of production for CPO in FY12-13E has been increased by 17%-19% to RM1,160-RM1,150 per mt.

Rating  Maintain OUTPERFORM
 Long term growth prospect remain intact. Post JV with GAI, GENP will be able to speed up their planting by additional 10k ha per year.

Valuation   We have lowered our target price by 7% to RM9.90 (previously RM10.70). Our valuation is based on an unchanged 16.5x Fwd. PER on the lower FY12E EPS of 60.0 sen (from 65.3 sen).

Risks   A sustained decline in CPO prices.  

Source: Kenanga

IJM Plantations Bhd - OUTPERFORM - 30 May 2012

Period    4Q12/12M12.

Actual vs.  Expectations
 At RM175.5m* or 93% of the consensus’ FY12E forecast of RM188m, IJMP result was broadly within the consensus expectations. However, it was lower than our expectation as it made up only 88% of our FY12E forecast of RM199m. We think that fertiliser cost has been higher than expected.

Dividends   Net dividend of 10.0 sen was announced. This was higher than our expectation of 8.0 sen as the payout ratio of 51% was higher than our anticipation of 40%.

Key highlights
 YoY, FY12 core earnings surged 21% due to higher CPO prices realised of RM3,049 per mt (+10% YoY) and higher FFB production of 649k mt (+13% YoY)

 YoY, 4Q12 core earnings declined 37%, possibly due to higher fertiliser prices and wage costs.

 QoQ, the earnings dropped by 69% due to a seasonally lower FFB production in 4Q12 of 119k mt (-30% QoQ).

Outlook   Fertiliser cost should normalise in 2H12 in line with lower crude oil prices so far in 2Q12. However, on a YoY basis, the fertiliser cost in FY12E will still be higher by 20%.

Change to Forecasts
 We have revised down our FY13-14E net profits each by 6% to RM199m-RM219m as we have assumed a higher fertilizer cost growth YoY of 20% (against 10% previously).

Rating  Maintain OUTPERFORM
 The long term growth prospect remains intact. Maturing Indonesia plantation will support a 5-year FFB CAGR of 7%-9% up to FY16E.

Valuation    We have lowered our target price by 6% to RM4.00 (previously RM4.25). Our valuation is based on an unchanged 16.0x Fwd. PER on the lower FY13E EPS of 24.9 sen (previously 26.6 sen).

Risks   Sustained decline in CPO prices.  

Source: Kenanga