GMT [Dow Jones] STOCK CALL: SapuraCrest Petroleum (8575.KU) likely to post record net profit of MYR166 million in FY10, +43% on-year, says CIMB Research analyst Norziana Mohd Inon; cites higher drilling charter rates, turnaround of SapuraAcergy JV as reasons for improved earnings. "The company's 4Q results are expected to meet expectations, with a net profit of at around MYR34 million (+29% on-year and down 36% on-quarter)," says Norziana. adds 1Q, 4Q typically weaker quarters for SapuraCrest due to the monsoon season. Company expected to announce 4Q results after 0900 GMT March 25. Stock last down 0.8% at MYR2.43. Keeps Outperform call with unchanged MYR3.02 target.
Wednesday, March 10, 2010
0544 GMT [Dow Jones] STOCK CALL: UOB-KayHian cuts SP Setia (8664.KU) to Hold from Buy as stock has risen 17% since December, but raises fair price to MYR4.66 (implies 22X FY10 P/E, slightly lower than FY07's 24X peak valuation) from MYR4.20 after strong 1Q10 sales lead to management increasing full-year sales target to MYR2 billion from MYR1.6 billion. "While we remain positive on its new sales momentum and earnings growth potential, we believe these have been priced into the stock," says UOB; says property firm's 1Q10 net profit could have increased 74% on-year, mainly due to an across-the-board higher sales in Klang Valley, Johor and Penang. Company posted 1Q09 net profit of MYR31.2 million; results due March 18 after 0900 GMT. Stock last +1.9% at MYR4.28.
Sunday, March 7, 2010
1st – 7th Mar: OPR hike is positive
· A buoyant week for the banking sector
The banking sector had a buoyant week following Bank Negara
Malaysia’s decision to raise the Overnight Policy Rate (OPR) by 25 bps
to 2.25% last Thursday. The KL Finance Index gained 3.6% for the week,
outperforming the benchmark FBMKLCI’s gain of 2.3%. All banking
stocks posted gains, except for AMMB which shed 2.0% due to its
proportionately larger exposure to fixed rate loan which is a drag when
interest rate rises.
· OPR hike expected to be earnings accretive
The 25 bps hike in OPR is generally earnings accretive to banks as we
expect the re-pricing of loans to outpace that of deposits. This can be
observed from past increases in OPR from Nov 2005 to Apr 2006. During
the period, OPR was raised 3 times from 2.70% to 3.50%. Over the same
period, the spread of average lending rate over fixed deposit rate has
widened by about 50 bps. However, risk to this expectation is the intense
competition in the domestic banking sector which has driven ALR-FD
spread down since early 2007.
Among banking stocks, Alliance will have the greatest potential for
earnings accretion due to its high proportion of variable rate loans at 84%
as well as high proportion of current accounts and saving accounts
(CASA) at 37%. At the end of the other spectrum, AMMB, EONCap and
Affin will benefit the least from the OPR hike due to their high proportion
of fixed rate loans (> 40%) and low proportion of CASA (<20%).
· Other notable bankings news
Public Bank stated that it has no plans to raise capital in 2010 in
anticipation of the Basel 3 framework. Hong Leong Bank’s 49% joint
venture in a Chinese consumer finance operation has received regulator’s
operation approval. CIMB Group also obtained approval for subscription
of equity interest in Vietnam’s Vinashin Shipbuilding Finance Co
Securities LLC which will see the group subscribing for an initial 10%
stake at RM6.7m. Last but not least, RHB has entered into a
memorandum of understanding with TM Asia Life Malaysia to negotiate
the terms for forming a mutually exclusive 10-year bancassurance
alliance in Malaysia which may see RHB receiving an exclusivity fee of
RM100m.
· Maintain OVERWEIGHT
The sustained growth of non-interest income and slide in credit costs will
drive earnings growth in 2010. The added excitement of potential M&A
activities within the sector should keep interest buoyant for a while. We
like CIMB Group Holdings for its regional as well as its strong non-
interest income growth going forward. Public Bank continues to be an
investment for its superior earnings, ROE and asset quality, while we
believe Maybank will finally allay sceptics’ concerns when it continues
reporting strong quarterly profits going forward.
Market snapshot
The banking sector had a buoyant week following Bank Negara Malaysia’s decision to raise
the Overnight Policy Rate (OPR) by 25 bps to 2.25% last Thursday. The KL Finance Index
gained 3.6% for the week, outperforming the benchmark FBMKLCI’s gain of 2.3%. All
banking stocks posted gains, except for AMMB which shed 2.0% due to its proportionately
larger exposure to fixed rate loan which is a drag when interest rate rises. On major
shareholding changes, Employees Provident Fund were seen accumulating CIMB (+9.3m
shares) and Hong Leong (+1.9m shares) while selling Maybank (-0.6m shares) and Public
Bank (-0.4m shares). Others changes include PNB disposing 7.9m shares in Maybank and
Mitsubishi UFJ Financial Group accumulating 1.4m shares in CIMB.
· A buoyant week for the banking sector
The banking sector had a buoyant week following Bank Negara
Malaysia’s decision to raise the Overnight Policy Rate (OPR) by 25 bps
to 2.25% last Thursday. The KL Finance Index gained 3.6% for the week,
outperforming the benchmark FBMKLCI’s gain of 2.3%. All banking
stocks posted gains, except for AMMB which shed 2.0% due to its
proportionately larger exposure to fixed rate loan which is a drag when
interest rate rises.
· OPR hike expected to be earnings accretive
The 25 bps hike in OPR is generally earnings accretive to banks as we
expect the re-pricing of loans to outpace that of deposits. This can be
observed from past increases in OPR from Nov 2005 to Apr 2006. During
the period, OPR was raised 3 times from 2.70% to 3.50%. Over the same
period, the spread of average lending rate over fixed deposit rate has
widened by about 50 bps. However, risk to this expectation is the intense
competition in the domestic banking sector which has driven ALR-FD
spread down since early 2007.
Among banking stocks, Alliance will have the greatest potential for
earnings accretion due to its high proportion of variable rate loans at 84%
as well as high proportion of current accounts and saving accounts
(CASA) at 37%. At the end of the other spectrum, AMMB, EONCap and
Affin will benefit the least from the OPR hike due to their high proportion
of fixed rate loans (> 40%) and low proportion of CASA (<20%).
· Other notable bankings news
Public Bank stated that it has no plans to raise capital in 2010 in
anticipation of the Basel 3 framework. Hong Leong Bank’s 49% joint
venture in a Chinese consumer finance operation has received regulator’s
operation approval. CIMB Group also obtained approval for subscription
of equity interest in Vietnam’s Vinashin Shipbuilding Finance Co
Securities LLC which will see the group subscribing for an initial 10%
stake at RM6.7m. Last but not least, RHB has entered into a
memorandum of understanding with TM Asia Life Malaysia to negotiate
the terms for forming a mutually exclusive 10-year bancassurance
alliance in Malaysia which may see RHB receiving an exclusivity fee of
RM100m.
· Maintain OVERWEIGHT
The sustained growth of non-interest income and slide in credit costs will
drive earnings growth in 2010. The added excitement of potential M&A
activities within the sector should keep interest buoyant for a while. We
like CIMB Group Holdings for its regional as well as its strong non-
interest income growth going forward. Public Bank continues to be an
investment for its superior earnings, ROE and asset quality, while we
believe Maybank will finally allay sceptics’ concerns when it continues
reporting strong quarterly profits going forward.
Market snapshot
The banking sector had a buoyant week following Bank Negara Malaysia’s decision to raise
the Overnight Policy Rate (OPR) by 25 bps to 2.25% last Thursday. The KL Finance Index
gained 3.6% for the week, outperforming the benchmark FBMKLCI’s gain of 2.3%. All
banking stocks posted gains, except for AMMB which shed 2.0% due to its proportionately
larger exposure to fixed rate loan which is a drag when interest rate rises. On major
shareholding changes, Employees Provident Fund were seen accumulating CIMB (+9.3m
shares) and Hong Leong (+1.9m shares) while selling Maybank (-0.6m shares) and Public
Bank (-0.4m shares). Others changes include PNB disposing 7.9m shares in Maybank and
Mitsubishi UFJ Financial Group accumulating 1.4m shares in CIMB.
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