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Malayan Banking RM5.20: Not Rated
– 9M results in line
In line. 9MFY09 net profit of RM1.81b (-19% YoY) met street’s FY09 forecast of RM2.38b. Excluding one-offs relating to Bank InternasionaI Indonesia (BII) acquisition and impairment loss on MCB Bank, core net profit was a similar RM1.8b. Contributions from the new acquisitions stayed small with BII contributing RM25m in net profit (6 months), and MCB contributing RM74m (8 months). No dividend was declared.
Telekom Malaysia RM3.80: Buy
– Firm fundamentals ; Buy with upgraded TP
Earnings clarity improves, on track to outperform. TM surprised with considerably lesser one-off items, that indicated sufficiently solid earnings potential to both meet its generous dividend policy, as well as seek an expansion in the direction of its triple-play aspirations. Maintain Buy as we upgrade our DDM-based TP to RM4.64 after equalizing our in-house assumptions.
Petronas Gas RM9.50: Sell
– GPTA review a risk poser; Maintain Sell
Downside risks increasing as GPTA review draws nearer. The Gas Processing Transmission Agreement (GPTA) with parent company Petronas is up for renewal in Apr 2010. With capex and interest costs expected to be lower over FY11-15, there is downside risk to PGas’ revenues should Petronas drive a hard bargain. Sell with a RM8.80 DCF-based target price.
Kossan Rubber Industries RM3.60: Buy
– 1Q09 in line. Buy
Results were in line. The sequentially weaker earnings due to losses at its Technical Rubber Product (TRP) division were expected. We retain our earnings forecasts on expectations of a stronger 2H09 driven by new capacity and TRP demand recovery. Maintain Buy.
KFC Holdings (M) RM6.90: Buy
– India beckons. Buy.
Indian potential not priced in. 1Q09 net profit was in line with our and consensus forecasts. The second half of the year is seasonally much stronger. KFC boasts expected high FCF yields estimated at 14-17% over 2009-11, and we think the low-key announcement that it has secured franchise rights for 15 stores in India has been missed by many.
WCT RM1.98: Buy
– Lower 1Q09 net profit expected
Orderbook to strengthen. 1Q09 results returned to the black (profit reversals in 4Q08), although net profit was lower YoY. Looking ahead, WCT is actively pursuing job wins; East Malaysia offers good upside to its existing RM2.2b outstanding orderbook. We have raised our target price to RM2.20, noting sunnier prospects with greater intensity of construction jobs rolled out in recent weeks. Maintain Buy.
Lingkaran Trans Kota Hldgs (LITRAK) RM2.30: Buy
– Buy for 8-9% dividends
Expect a steady cash flow stream. While we are looking at flat traffic volume growth in FY10, we believe Litrak is able to generate operating cash flows of at least RM200m p.a., sufficient to maintain a DPS equivalent to an average 8% p.a. yield at the current share price. Buy Litrak, with a target price of RM2.88.
Other Local News
CGC: Aims to guarantee RM3.5b loans this year
UEM Land: BiotechCorp to set up Biotech Hub
Loh & Loh: Unit bags RM142m job in Iskandar Malaysia
Salcon: Clinches RM94m Medini job
DiGi: Enters MVNO with Baraka
YTL Corp: Q3 net more than doubles
TSH Resources: To expand oil palm land
Outside Malaysia
US: Leading economic indicators rebounded in Apr 09
US: The Philadelphia Fed’s general economic index improved this month
US: Initial jobless claims fell by 12,000 to 631,000 last week
Eurozone: Decline in services and manufacturing sectors eased in May 09
Japan: Service demand fell the most in 12 years in Mar 09
UK: Retail sales rose for a second month in Apr 09
Taiwan: Economy shrank by 10.24% YoY in 1Q09
Singapore: Real GDP declined by slower than previously estimated in 1Q09
Crude oil: Price rose USD1.94 or 3.2% to settle at USD62.04 a barrel
Technicals
The market closed in negative territory yesterday as regional markets fell on the US Federal Reserve prediction the recession will deepen.
– 9M results in line
In line. 9MFY09 net profit of RM1.81b (-19% YoY) met street’s FY09 forecast of RM2.38b. Excluding one-offs relating to Bank InternasionaI Indonesia (BII) acquisition and impairment loss on MCB Bank, core net profit was a similar RM1.8b. Contributions from the new acquisitions stayed small with BII contributing RM25m in net profit (6 months), and MCB contributing RM74m (8 months). No dividend was declared.
Telekom Malaysia RM3.80: Buy
– Firm fundamentals ; Buy with upgraded TP
Earnings clarity improves, on track to outperform. TM surprised with considerably lesser one-off items, that indicated sufficiently solid earnings potential to both meet its generous dividend policy, as well as seek an expansion in the direction of its triple-play aspirations. Maintain Buy as we upgrade our DDM-based TP to RM4.64 after equalizing our in-house assumptions.
Petronas Gas RM9.50: Sell
– GPTA review a risk poser; Maintain Sell
Downside risks increasing as GPTA review draws nearer. The Gas Processing Transmission Agreement (GPTA) with parent company Petronas is up for renewal in Apr 2010. With capex and interest costs expected to be lower over FY11-15, there is downside risk to PGas’ revenues should Petronas drive a hard bargain. Sell with a RM8.80 DCF-based target price.
Kossan Rubber Industries RM3.60: Buy
– 1Q09 in line. Buy
Results were in line. The sequentially weaker earnings due to losses at its Technical Rubber Product (TRP) division were expected. We retain our earnings forecasts on expectations of a stronger 2H09 driven by new capacity and TRP demand recovery. Maintain Buy.
KFC Holdings (M) RM6.90: Buy
– India beckons. Buy.
Indian potential not priced in. 1Q09 net profit was in line with our and consensus forecasts. The second half of the year is seasonally much stronger. KFC boasts expected high FCF yields estimated at 14-17% over 2009-11, and we think the low-key announcement that it has secured franchise rights for 15 stores in India has been missed by many.
WCT RM1.98: Buy
– Lower 1Q09 net profit expected
Orderbook to strengthen. 1Q09 results returned to the black (profit reversals in 4Q08), although net profit was lower YoY. Looking ahead, WCT is actively pursuing job wins; East Malaysia offers good upside to its existing RM2.2b outstanding orderbook. We have raised our target price to RM2.20, noting sunnier prospects with greater intensity of construction jobs rolled out in recent weeks. Maintain Buy.
Lingkaran Trans Kota Hldgs (LITRAK) RM2.30: Buy
– Buy for 8-9% dividends
Expect a steady cash flow stream. While we are looking at flat traffic volume growth in FY10, we believe Litrak is able to generate operating cash flows of at least RM200m p.a., sufficient to maintain a DPS equivalent to an average 8% p.a. yield at the current share price. Buy Litrak, with a target price of RM2.88.
Other Local News
CGC: Aims to guarantee RM3.5b loans this year
UEM Land: BiotechCorp to set up Biotech Hub
Loh & Loh: Unit bags RM142m job in Iskandar Malaysia
Salcon: Clinches RM94m Medini job
DiGi: Enters MVNO with Baraka
YTL Corp: Q3 net more than doubles
TSH Resources: To expand oil palm land
Outside Malaysia
US: Leading economic indicators rebounded in Apr 09
US: The Philadelphia Fed’s general economic index improved this month
US: Initial jobless claims fell by 12,000 to 631,000 last week
Eurozone: Decline in services and manufacturing sectors eased in May 09
Japan: Service demand fell the most in 12 years in Mar 09
UK: Retail sales rose for a second month in Apr 09
Taiwan: Economy shrank by 10.24% YoY in 1Q09
Singapore: Real GDP declined by slower than previously estimated in 1Q09
Crude oil: Price rose USD1.94 or 3.2% to settle at USD62.04 a barrel
Technicals
The market closed in negative territory yesterday as regional markets fell on the US Federal Reserve prediction the recession will deepen.
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