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Equity Focus
Toll concessions: Overweight
Seven highways get toll increase
The government has given smaller-than-scheduled toll rate increases to seven out of nine expressways, due for upward revisions this year.
Government compensation is still given for shortfalls in scheduled toll hikes, and we estimate that combined compensation to PLUS and SPRINT alone could total almost RM100m in 2009.
We stay Overweight on toll concessionaires for their steady income stream, with Buy on PLUS (TP: RM3.20) and Litrak (TP: RM2.88).
Genting (RM3.54): Hold
Mixed results
Genting recorded a 4Q08 net loss of RM120.8m due to an impairment loss of RM781.5m on Star Cruises. 2008 core net profit before MI (-10% YoY) was marginally below expectations.
Save for Resorts World, the outlook is uncertain for its other subsidiaries/segments due to the global economic slowdown.
We maintain our Hold call but downgrade our TP to RM4.00 based on an unchanged 20% discount on a revised RNAV/sh of RM5.00.
Malaysian Airlines System (RM2.70):
2008’s achievement clouded by hedges
Sequentially weaker net profit (-24%) was in line, dragged down by lower auto and associates earnings. However, dividends pleasantly surprised.
Cutting 2009-10 earnings forecasts by 10% on lower earnings from the auto division. FY09’s EPS is projected to fall by 30%.
Downgrade call to Hold and TP to RM5.45 (1.5x BV), acknowledging that there are no near term catalysts in sight.
Nestle (M) (RM27.50): Hold
4Q08 results: Who’s afraid of a recession?
4Q08’s net profit of RM77.3m (+128.4% YoY) boosted 2008’s net profit to RM341m (+16.8% YoY), above expectations, on a 19% YoY surge in exports.
A proposed final DPS of 80sen (single-tier), which lifted 2008’s DPS to RM1.91 trounced our and market expectations.
Upgrade to Hold. Placing our forecasts under review with upwards bias pending today’s analyst briefing, but maintaining our DCF-based RM29.50 TP for now.
The New Straits Times Press (RM1.06): Sell
Printing in red ink soon
2008 core pretax profit of RM46.1m outperformed our forecasts by 35% on lower finance cost and higher contributions from MNI but ex-contributions from MNI, NSTP merely broke-even in 4Q08.
We take the view that adex will grow timidly if not contract in 2009 and that NSTP will likely record a loss making 1H09.
We now utilise 12% WACC (9% previously) on our DDM to account for higher risk premium and cut our TP from RM1.22 to RM0.82. Therefore, we downgrade our call from Hold to Sell.
Petra Perdana (RM1.35): Buy
Misfiring in FY08
Petra Petra’s RM60m core net profit missed our 75m estimate due to a substantially weak 4Q08 performance (-73% QoQ).
Cutting 2009 forecast by 11%, in anticipation of slowdown in brownfield activities.
Maintain Buy but cutting TP to RM1.63. Petra Perdana is potentially a privatisation candidate.
Sime Darby (Sime) (RM5.75): Fully Valued
Poor 2QFY09 results
Sime reported a 2QFY09 net profit of RM279m (-65% YoY, -68% QoQ), below our and market expectations.
Short term earnings outlook remains bleak as regional economies continue to weaken and CPO price remains uninspiring in 2HFY09.
Maintain Fully Valued but trimmed our TP to RM5.10 based on 15x CY10 PER (previously RM5.20 on 15x FY10 PER) on lowered earnings.
Wah Seong Corporation (RM1.12): Fully Valued
No surprises; expecting greyer outlook
WSC’s core net profit of RM111m for 2008 met our RM109m forecast, on substantially stronger 4Q08 (+184% QoQ).
Maintaining FY09-10 forecasts, which implies a two-year net profit CAGR of -20%, in anticipation of slowing O&G and industrial service activities.
Downgrade to Fully Valued, as price discount to our RM1.20 TP (1x NTA) has narrowed to <10% but could see improved some short term strength; a perceived beneficiary from the upcoming UMNO election.
Mega First Corporation (RM0.71): Hold
Look beyond 2009
2008 net profit of RM40.5m (-20% YoY) was within our expectations, but final gross DPS of 3.5sen (4.9% yield) surprised on the upside.
China power demand has stabilized and coal costs are declining. While other divisions remain weak, the worst of quarters may be over.
We conservatively cut our 2009-10 net profit forecasts by 16-22%, mainly on lower contributions from non-power divisions. Maintain Hold; TP lowered to RM0.82 following earnings downgrades, unchanged 7x CY10 EPS.
Result Analyser
Bintulu Port (RM5.30): Buy
Final results above expectations
Hock Seng Lee (RM0.46): Hold
Final results within expectations
Kinsteel (RM0.405): Fully Valued
4Q08 loss on inventory writedowns
KLCC Property (RM2.90)): Buy
Beats expectations; RM505m gross revaluation surplus to boost 4QFY09
Loh & Loh (RM4.28): Hold
Final results stronger than expected
PLUS Expressways (RM2.95): Buy
4Q08 in line; raised dividend payouts
Sunway Holdings (RM0.67): Hold
Oct–Dec ’08 net profit in line
Unisem (RM0.60): Fully Valued
4Q08 net loss of RM55m on impairment loss
WCT (RM1.07): Fully Valued
Losses in 4Q08 due to profit reversals
Other Local News
Water: RM5b offer for water assets.
Tolls: Higher Toll.
MAS: Capacity, cost cuts.
Scomi Marine: Aiming for more balanced revenue base.
Latexx: To raise glove output.
Outside Malaysia
U.S: Obama seeks USD 1tr tax increase in budget plan
U.S: Fannie to draw USD 15.2b from Treasury after loss
U.S: Companies slashing jobs, orders at faster pace as recession deepens
U.S: Obama's budget proposes up to USD 750b in new financial industry aid
U.S: New-home sales plunge to record-low 309,000
E.U: Confidence at record low as recession deepens
Germany: Unemployment rises for fourth straight month
Germany: Signs USD 10b worth of trade deals with China
Singapore: Industrial output falls the most since at Least 1996
Singapore: Economy shrinks most in at least 33 years
Ukraine: Ratings cut to CCC+ by S&P on IMF loan risk
Technicals
The market closed lower in cautious trading, as investors were concerned on the lower corporate earnings of several heavyweight counters in the past few days.
Toll concessions: Overweight
Seven highways get toll increase
The government has given smaller-than-scheduled toll rate increases to seven out of nine expressways, due for upward revisions this year.
Government compensation is still given for shortfalls in scheduled toll hikes, and we estimate that combined compensation to PLUS and SPRINT alone could total almost RM100m in 2009.
We stay Overweight on toll concessionaires for their steady income stream, with Buy on PLUS (TP: RM3.20) and Litrak (TP: RM2.88).
Genting (RM3.54): Hold
Mixed results
Genting recorded a 4Q08 net loss of RM120.8m due to an impairment loss of RM781.5m on Star Cruises. 2008 core net profit before MI (-10% YoY) was marginally below expectations.
Save for Resorts World, the outlook is uncertain for its other subsidiaries/segments due to the global economic slowdown.
We maintain our Hold call but downgrade our TP to RM4.00 based on an unchanged 20% discount on a revised RNAV/sh of RM5.00.
Malaysian Airlines System (RM2.70):
2008’s achievement clouded by hedges
Sequentially weaker net profit (-24%) was in line, dragged down by lower auto and associates earnings. However, dividends pleasantly surprised.
Cutting 2009-10 earnings forecasts by 10% on lower earnings from the auto division. FY09’s EPS is projected to fall by 30%.
Downgrade call to Hold and TP to RM5.45 (1.5x BV), acknowledging that there are no near term catalysts in sight.
Nestle (M) (RM27.50): Hold
4Q08 results: Who’s afraid of a recession?
4Q08’s net profit of RM77.3m (+128.4% YoY) boosted 2008’s net profit to RM341m (+16.8% YoY), above expectations, on a 19% YoY surge in exports.
A proposed final DPS of 80sen (single-tier), which lifted 2008’s DPS to RM1.91 trounced our and market expectations.
Upgrade to Hold. Placing our forecasts under review with upwards bias pending today’s analyst briefing, but maintaining our DCF-based RM29.50 TP for now.
The New Straits Times Press (RM1.06): Sell
Printing in red ink soon
2008 core pretax profit of RM46.1m outperformed our forecasts by 35% on lower finance cost and higher contributions from MNI but ex-contributions from MNI, NSTP merely broke-even in 4Q08.
We take the view that adex will grow timidly if not contract in 2009 and that NSTP will likely record a loss making 1H09.
We now utilise 12% WACC (9% previously) on our DDM to account for higher risk premium and cut our TP from RM1.22 to RM0.82. Therefore, we downgrade our call from Hold to Sell.
Petra Perdana (RM1.35): Buy
Misfiring in FY08
Petra Petra’s RM60m core net profit missed our 75m estimate due to a substantially weak 4Q08 performance (-73% QoQ).
Cutting 2009 forecast by 11%, in anticipation of slowdown in brownfield activities.
Maintain Buy but cutting TP to RM1.63. Petra Perdana is potentially a privatisation candidate.
Sime Darby (Sime) (RM5.75): Fully Valued
Poor 2QFY09 results
Sime reported a 2QFY09 net profit of RM279m (-65% YoY, -68% QoQ), below our and market expectations.
Short term earnings outlook remains bleak as regional economies continue to weaken and CPO price remains uninspiring in 2HFY09.
Maintain Fully Valued but trimmed our TP to RM5.10 based on 15x CY10 PER (previously RM5.20 on 15x FY10 PER) on lowered earnings.
Wah Seong Corporation (RM1.12): Fully Valued
No surprises; expecting greyer outlook
WSC’s core net profit of RM111m for 2008 met our RM109m forecast, on substantially stronger 4Q08 (+184% QoQ).
Maintaining FY09-10 forecasts, which implies a two-year net profit CAGR of -20%, in anticipation of slowing O&G and industrial service activities.
Downgrade to Fully Valued, as price discount to our RM1.20 TP (1x NTA) has narrowed to <10% but could see improved some short term strength; a perceived beneficiary from the upcoming UMNO election.
Mega First Corporation (RM0.71): Hold
Look beyond 2009
2008 net profit of RM40.5m (-20% YoY) was within our expectations, but final gross DPS of 3.5sen (4.9% yield) surprised on the upside.
China power demand has stabilized and coal costs are declining. While other divisions remain weak, the worst of quarters may be over.
We conservatively cut our 2009-10 net profit forecasts by 16-22%, mainly on lower contributions from non-power divisions. Maintain Hold; TP lowered to RM0.82 following earnings downgrades, unchanged 7x CY10 EPS.
Result Analyser
Bintulu Port (RM5.30): Buy
Final results above expectations
Hock Seng Lee (RM0.46): Hold
Final results within expectations
Kinsteel (RM0.405): Fully Valued
4Q08 loss on inventory writedowns
KLCC Property (RM2.90)): Buy
Beats expectations; RM505m gross revaluation surplus to boost 4QFY09
Loh & Loh (RM4.28): Hold
Final results stronger than expected
PLUS Expressways (RM2.95): Buy
4Q08 in line; raised dividend payouts
Sunway Holdings (RM0.67): Hold
Oct–Dec ’08 net profit in line
Unisem (RM0.60): Fully Valued
4Q08 net loss of RM55m on impairment loss
WCT (RM1.07): Fully Valued
Losses in 4Q08 due to profit reversals
Other Local News
Water: RM5b offer for water assets.
Tolls: Higher Toll.
MAS: Capacity, cost cuts.
Scomi Marine: Aiming for more balanced revenue base.
Latexx: To raise glove output.
Outside Malaysia
U.S: Obama seeks USD 1tr tax increase in budget plan
U.S: Fannie to draw USD 15.2b from Treasury after loss
U.S: Companies slashing jobs, orders at faster pace as recession deepens
U.S: Obama's budget proposes up to USD 750b in new financial industry aid
U.S: New-home sales plunge to record-low 309,000
E.U: Confidence at record low as recession deepens
Germany: Unemployment rises for fourth straight month
Germany: Signs USD 10b worth of trade deals with China
Singapore: Industrial output falls the most since at Least 1996
Singapore: Economy shrinks most in at least 33 years
Ukraine: Ratings cut to CCC+ by S&P on IMF loan risk
Technicals
The market closed lower in cautious trading, as investors were concerned on the lower corporate earnings of several heavyweight counters in the past few days.
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