Malaysia Business News

The FY08 results were within our expectations while the y-o-y earnings for the full
year went up as much as 11.4% to RM1.2bn from RM1bn. On a net basis, y-o-y net
profit gushed up 11.8% to RM125.8m from RM112m. Although no reasons were
attributed to the better performance, we reckon the improved industry volume and
higher selling price were the key reasons. Guinness has declared a final tax exempt
dividend of 14 sen and 17 sen gross dividend for the current quarter. This brings
the total dividend payout to 44 sen per share (FY07 – 45 sen). We are revising our
net earnings forecast upwards by 10.8% and 3.8% for FY09 and FY10 respectively.
Our target price has been raised to RM6.70 from RM6.60 previously. Maintain BUY.

KUALA LUMPUR: OSK Investment Research is revising upwards its earnings for Proton Holding Bhd substantially to RM179mil and RM184mil for the financial years ending March 30, 2009 (FY09) and FY10 respectively.

“The potential re-rating catalysts are its long term plan for a strategic partnership to tap the export market as well as set up manufacturing plants,” it said in a research note issued on Thursday.

“We are upgrading Proton to a BUY on its short term turnaround. Blending a valuation mix of both 8.0 times forward price-to-earnings (PE) and 0.5 times price/net tangible asset (P/NTA), we arrive at a revised target price of RM3.64 (from RM3.34),” it said.

OSK Research said it was applying a 0.5 time P/NTA until a solid strategic partnership for Proton materialised.

On Wednesday, Proton announced net profit of RM52.02mil for the 1Q from a net loss of RM46.75mil a year ago. Revenue rose to RM1.71bil from RM1.14bil. Earnings per share were 9.5 sen from a loss per share of 8.5 sen.

The improvement in profitability was mainly due to Proton’s domestic sales volume growth of 55% on-year, underpinned by new models, the Persona and Saga.

OSK Research said Proton’s annualised revenue came in 7% below its expectation but was 1% above street estimates on lower-than-expected volume.

“But to our surprise, 1QFY09 accounted 87% of our full year forecast and 62% above consensus,” it said.

Hence, it was trimming its cost component assumptions as Proton was reducing its distribution and administrative costs to enhance operating efficiency and reduce the size of its distributorship network.

OSK Research said the overall expansion in Proton’s margins might possibly be due to Proton cutting on its distribution expenses by slashing the number of distribution outlets from 303 to 250 by end-FY09, as well as overhead costs by reducing its dependence on vendors (from 200 to150 by end-FY09).

However, the research house said it remained concern over rising raw material prices. The higher prices would ultimately raise its core earnings assumption to RM179mil (from RM59mil) for FY09 and RM184mil (from RM66.7mil) for FY10.

OSK Research added it was reaffirming its key assumptions on the increase in raw material prices (specifically carbon steel) by 18% and 8% for FY09 and FY10 respectively.

UEM World violated a critical support of RM2.49 yesterday. If it was a clean violation, this breakdown means that the stock is expected to face strong selling pressure going forward. Yesterday’s breakdown caused significant technical damage to the daily chart and triggered a Sell signal. It is likely that the stock will retrace to the next support level of RM2.49 and strong support can only be seen at the RM2.10 level. From the current level, look for an immediate resistance at the 50-day MAV line which is now situated at the RM2.88 level, followed by the tougher RM3.00 level.

We did not expect the KLCI to fall close to 10 pts last Friday despite the poor performance of the US market last Thursday. However, what is important is that the KLCI was able to sustain a posture at above the key 1120 pt-level.

Last week, we saw the key index carve out two bullish candlestick patterns, which were the “Bullish Harami Cross” and the “Long Leg Doji”. Nonetheless, the market did not have the chance to stage a strong technical rebound to confirm the two bullish candlestick patterns. Anyhow, as long as the 1120 pt-level is not taken out, the odds are still high that the KLCI could march higher from the current level. Meanwhile, our bullish stance is maintained.

From the current level, look for an immediate resistance at the1148 pt-level followed by the 1165 pt-level. To the downside, the 1120 pt-level is now the immediate support followed by the 1100 pt-level.


GuocoLand made another step forward to test the 100-day MAV line, which is now situated at the RM1.52 level. It looks like the stock has formed a rather strong support at above the RM1.20 level. A successful crack above the 100-day MAV line would provide a buying opportunity for investors. We are eyeing the RM1.87 level as the upside target. Our cut-loss point is pegged at below the 100-day MAV line. From the current level, look for immediate support at the RM1.35 level.