Thursday, November 3, 2011

Kencana Petroleum BUY Target Price RM3.17 by OSK


Bernama reported that there is no change in Petroliam Nasional Bhd's (Petronas) licensing policy related to companies engaged in Malaysia's upstream oil and gas (O&G) industry. The report said that under the Petroleum Regulation 1974, both local and foreign companies wishing to commence or even carry out any business or services related to Malaysia's O&G upstream operations must apply for a licence from Petronas.

The clarification was made following The Edge report last week that such a licence may not be required going forward in bidding for local O&G jobs.

First, we note that Petronas has embarked on a long-term plan to nurture the local O&G service providers, with the first few being Kencana Petroleum Bhd, SapuraCrest Petroleum Bhd and Dialog Group Bhd, which have been awarded marginal oilfields to expose these companies to upstream O&G activities.

Second, we understand that most of the local O&G service providers currently have spare capacity as O&G activities have slowed compared with before the global economic recession in 2008 when their capacity was mostly tailored to local needs.

Noting this spare capacity, it may not make economic sense for Petronas to get resources from the non-local O&G services providers whose capacity is mostly built to meet the requirements of their own countries or regions of operation.

Finally, this licensing requirement does not prevent foreign companies from participating in Malaysia's O&G sector as what is required is a partnership with a local licence holder. In fact, such participation facilitates the transfer of technology and helps enhance the competence of the local companies while at the same time allowing the foreign companies to benefit from the development of the country's resources.

Our top picks are Kencana ('buy', fair value (FV): RM3.17) and Dialog ('buy', FV: RM3.66). With an improving global economic outlook and the crude oil price having gone back to around US$90 (RM277)/barrel, we believe that O&G activities will gradually pick up, which would then benefit all O&G service providers through better utilisation rates and higher sales/unit or services/hour rates.

On the local front, we expect the industry to be in for more marginal oilfield developments and the increasing need for brownfield services to boost O&G production while waiting for the commencement of deepwater activities on a large scale after pre-development preparations are completed.

We gather that the ratio between shallow water and deepwater O&G production is still at 70:30 but over time, the deepwater portion will pick up after all the easy O&G finds deplete.

Hence, we think Petronas is now preparing the local O&G supporting services providers for marginal oilfield (shallow water) developments first before embarking into the more challenging terrain (deepwater). ' OSK Research, Oct 31

Rio Tinto BUY Target Price AUD100 by UBS

 UBS has maintained its “buy” rating and $100 price target for Rio Tinto following the company’s investor review, where management reiterated that it remains bullish on “end user” demand and sees no material signs of slowing.

Wednesday, July 27, 2011

Malaysia Airports BUY Target Price RM7.55 by Maybank IB Research

Maintain buy at RM6.50 with revised target price of RM7.55 (from RM7.12): MAHB will release its 2Q11 results tomorrow. The second quarter is seasonally the weakest for the year. Based on the operating statistics published, we expect a core net profit (less foreign exchange translation and all other non-cash items) of RM110.5 million (+24.5% year-on-year [y-o-y], -1.4% quarter-on-quarter [q-o-q]). We maintain our 'buy' call with a higher discounted cash flow-based target price of RM7.55, after imputing for a higher passenger growth of 10% in 2011 (previously 8%). Our new target price offers undemanding 15.2 times 2012 earnings.

For the first five months of 2011, passenger numbers were higher than expected, with a better mix profile. Growth was 13.3% y-o-y, substantially above management's guidance of 8% growth in 2011. Cargo was down by 2.6% y-o-y, which is in line with the global soft trend. International passengers make up 48.5% of total passengers, a 0.3 percentage point rise y-o-y. These factors will underpin strong profit growth as international passengers pay higher service charges.

KLIA continues to surprise positively by delivering an impressive 15.7% y-o-y passenger growth (5M 2010: +13.8% y-o-y). If KLIA can maintain this growth momentum for the remainder of the year, it will probably register traffic of 38 to 39 million passengers; thus making it the 25th to 27th busiest airport in the world ' up from 31st in 2010.

KLIA 2 may face another delay and we think it will be completed in 2013 as opposed to the guided 3Q11. This is not major and is expected for a project of this scale. The cash flow impact is small, but the depreciation charge of KLIA 2 will only commence in 2013 and thus impact our 2012/13 earnings.

We have tweaked numbers by +0.7%, +14% and -4.3% for 2011 to 2013 after imputing a higher passenger traffic growth and the new estimated KLIA 2 completion date. MAHB is trading at attractive levels compared with global peers: 10.1 times price-to-cash flow ratio (11% discount to peers), 8.9% return on capital (26% higher) and it is lowly geared at 0.39 times against a peer group average of 0.66 times. '

Royal Plaza on Scotts Hotel Singapore Promotion 2011


Royal Plaza On Scotts Hotel, Singapore
 Royal Plaza on Scotts is a 5-minute walk from Orchard MRT Station. Shopping malls like ION Orchard, Takashimaya and Paragon are a 10-minute walk away.

Modern rooms at the hotel are equipped with air conditioning and a private bathroom with a rainshower and hairdryer. A flat-screen TV and Nespresso coffee machine are included. Room service is available 24 hours.

BToto BUY Target Price RM4.98 by Hong Leong IB

Berjaya Sports Toto Target Price RM4.98 with a BUY Rating by Hong Leong Investment Banking.

Highlights
 Since BToto launched its new game variant known as 4D Jackpot on 9 June 2011, its sales per draw have been growing rapidly. It recorded a sales of RM982k on its first draw, 35% higher compared to Magnum’s first sales per draw of RM725k. Average is now RM1.6m per draw
 Our regression study and analysis suggest that there will be cannibalization on lotto and existing 4D games (but no impact on Magnum 4D Jackpot). However, the impact is marginal (circa RM200k per draw on lotto games).
 Hence, we believe that 4D Jackpot has created a “new” market segment on its own and will result in elevated sales level.
 With assumption of RM1.3m sales per draw under 4D Jackpot, revenue will increase by an additional RM224.9m or equivalent to 6.1% extra growth.
 Drawing from Magnum 4D Jackpot experience, BToto 4D Jackpot sales per draw is expected to stabilize after 6 months and expand at faster rate than existing games.
 The above expected change in overall sales mix (or reduction in 4D contribution) is expected to reduce group theoretical prize payout ratio given 4D Jackpot fixed payout of 55% vs. 4D’s variable 64.5%. This will result in elevated but more stabilized profitability and dividend payout.

KNM BUY Target Price RM2.80 by OSK Research

OSK Research is maintaining its trading buy on KNM Group with the fair value remaining unchanged at RM2.80.

KNM is undertaking the refinery/polypropylene and storage projects at Teluk Ramunia, Johor, and the research house said this could be a potentially positive contribution to the existing orderbook.

"Currently, we believe KNM Group's orderbook is still above RM5 billion while the tenderbook is over RM17 billion," OSK Research said.

KNM announced yesterday that it and Zecon Bhd have entered into two agreements with Gulf Asian Petroleum SB (GAP)for the refinery/polypropylene and storage projects at Teluk Ramunia, Johor.

The company said it would form a consortium with Zecon Bhd and Korean/Chinese contractors to undertake the engineering, procurement and construction (EPC) of the projects.

But more information is needed to gauge the financial impact on KNM, according to OSK Research.

"KNM will need to arrange a sukuk issuance of up to RM1.5 billion to cover the project financing during construction, while GAP will arrange a financial guarantee from a local investment fund of up to RM1.5 billion during the construction period, to be converted into a long-term loan thereafter and a facilitation fund of up to RM300 million," OSK Research said.

OSK Research believes KNM would have the financial muscle to take up the preliminary investment of RM240 million as its net gearing is still below 1x.

"Based on its 1QFY11 results, it had net debts of RM534.6 million with total debts of RM1 billion and cash equivalents of RM479.5 million. Hence, this also led to a net gearing of 0.3 times," OSK Research said.

Although these projects could potentially contribute positively to its FY12-15 earnings, OSK Research said it is keeping the FY12 forecast unchanged for now, pending more financial guidance from management.

"Also, due to past events, we harbour some doubts on whether the project will take off," it added.

Other than that, OSK Research believes that securing the project financing itself has some uncertainty given the huge sum needed.

Monday, July 25, 2011

AirAsia BUY Target Price RM4.34 by OSK Research

OSK Research Sdn Bhd has upgraded its fair value on AirAsia Bhd to RM4.34 from RM3.89 while maintaining its 'buy' call.

In a research note today, OSK said AirAsia's revenue passenger kilometres (RPK) and passenger carriage for first half of financial year 2011 (1HFY11) remained consistently strong, growing by 16 per cent and 23.2 per cent year-to-date.

"Considering that 1H is typically the weaker half of the year, AirAsia's numbers nevertheless remained consistently strong despite the fuel surcharge having taking full effect in May," it said.

It said AirAsia's second quarter earnings were expected to rise further quarter-on-quarter on the back of improving yields due to the fuel surcharge, loan factor and RPK.

Monday, July 4, 2011

SPH BUY Target Price $4.32 by OCBC Research

 Singapore Press Holdings (SPH) recently bid S$917m for a 99-year white site beside Jurong East MRT station and came just 5.4% below the top bid. We think management is committed to expanding their retail landlord business and could be interested in three GLS sites in 2H11, or TripleOne and 313@Somerset which are likely to come onto the market. We visited Clementi Mall and found that it has opened for operations smoothly with good foot traffic. Our S$4.32 fair value indicates an upside of 13.4% against the current price of S$3.81. Also, we think the downside is limited by an attractive dividend yield of 7.1%, which is underpinned by a core newspaper segment yielding solid recurrent cash. Upgrade SPH to BUY with a fair value estimate of S$4.32.

Wednesday, June 29, 2011

Olam BUY Target Price $3.38 by Kim Eng Research

Olam announced earlier this month that it was raising $740 million through a placement of new shares with an eye on future acquisitions.

Kim Eng said it views the equity-raising exercise negatively because of the high discount offered, which could be dilutive to minority shareholders.

However, the brokerage said the share price correction was overdone and it sees a good entry opportunity. Olam management is likely to have identified attractive investment targets and is building up a huge warchest, Kim Eng said.

Kossan BUY Target Price RM3.71 by AmResearch

Maintain hold at RM3.14 with revised fair value RM3.71: We are maintaining our 'hold' rating on Kossan with a lower fair value of RM3.71, post a downward earnings adjustment and the rolling forward of our valuation base year from FY11F to FY12F. We continue to peg our valuation to a price-earnings ratio of 10 times FY12F earnings ' at a 30% discount to its 10-year mean.

Following a recent company visit, we have trimmed our FY11F/13F earnings per share by -7% to -9% after incorporating lower margin assumptions due to further normalisation in margins (1QFY11: -1 percentage point quarter-on-quarter [q-o-q]). We now forecast an earnings before interest, tax, depreciation and amortisation (Ebitda) margin of 16% for FY11F, against 18% previously.

Thursday, June 23, 2011

AirAsia Outperform Target Price RM4.10 by CIMB Equities Research

CIMB Equities Research said AirAsia announced a widely-expected order for 200 A320neo aircraft at the Paris Air Show on Thursday, June 23 for delivery starting 2016.

“The orders are a positive development as the aircraft will be 15% more fuel efficient than the existing A320,” it said on Friday.

CIMB Research said AirAsia will not overstretch its balance sheet as its Thai and Indonesian associates should be able to take these planes in their own names post listing and AirAsia has the option to dispose of the older model.

The new planes are also needed to grow its Philippines and future Vietnam operations.

“We maintain our forecasts, RM4.20 target price (9x P/E) and OUTPERFORM rating as AirAsia’s low operating costs and strong demand put it in the best position to ride out high oil prices and global overcapacity. A potential catalyst is the listing of its two associates,” it said.

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Hamilton Hotel, Seoul, South Korea - Republic of Korea Hamilton Hotel Seoul in the middle of Itaewon

Keppel Corp BUY Target Price $14.60 by Credit Suisse

Credit Suisse has raised its target price on Singapore’s Keppel Corp (KPLM.SI), the world’s largest oil rig builder, to $14.60 from $14.18 and maintained its outperform rating.

Keppel has secured $7.1 billion of orders year-to-date and has options for additional rigs worth $2.5 billion, Credit Suisse said, adding that it has raised its 2011 order forecast to S$10 billion from $8 billion.

Credit Suisse said that it believes there will be a high conversion rate of jack-up rig options into firm contracts, driven by a shift towards more complex wells as well as a need for established drillers to regain market share.

The brokerage added that Keppel is well-positioned to win orders from Brazilian oil company Petrobras’ tender for 21 rigs due to the Singapore firm’s established operations in Brazil, strong execution capabilities and relationship with Petrobras.

Berjaya Toto BUY Target Price RM5.10 by RHB

Upgraded to outperform at RM4.28 with revised fair value of RM5.10 (from RM4.50): In a surprise move, BToto last Saturday launched a new game called 4D Jackpot, which is a combination of a 4D game and a jackpot game, a very similar game to Magnum's 4D Jackpot, which has been performing extremely well since its launch in September 2009. This brings the total number of games BToto has to seven from six. BToto's 4D Jackpot game has five prize categories, with a minimum win of RM2 million for the first prize and RM100,000 for the second prize. The theoretical prize payout ratio (PPR) is 55%, same as its other lotto games.

Of the 55% prize pool, 55% (plus the upfront RM2 million and any snowballed amount) goes to the first prize, while 10% (plus any snowballed amount) goes to the second prize. As such, the actual payout for the first prize would be 30.25% and for the second prize 5.5%. We estimate the odds for the first prize are one in 16.67 million and for the second prize, one in 1.67 million, which is the same as Magnum's 4D Jackpot game. This game also has a cascading feature where if the Jackpot 1 prize is not won and the jackpot amount is RM30 million and above, then the Jackpot 1 prize money of any amount exceeding RM20 million shall cascade and be added to the Jackpot 2 prize money for the particular draw.

We believe this is a positive development for BToto given its languishing sales ever since Magnum's new 4D jackpot game was launched. We believe this game could give Magnum a run for its money and boost BToto's sales and profit quite substantially, particularly since this is not a replacement game for any existing games but a new game entirely. As a guide, Magnum's gaming revenue rose by 9.3% year-on-year (or RM281.5 million), while gaming profit before tax (PBT) rose by 55.3% (or RM135.8 million) in FY12/10, which was largely attributed to its new 4D jackpot game. As the market is already used to the mechanics of this type of game, it should take off quite easily while any cannibalisation of its existing 4D sales is not expected to be significant, as was the case with Magnum.

As for implications on the industry, this could mean that the government is now more open to liberalising the industry, and we would not be surprised if Pan Malaysian Pools (PMP) also gets to launch a similar game soon. This would then be a game changer for whoever the new buyers of PMP are (said to be a consortium of companies including the Genting group), as valuations would have to take this possibility into account.

Risks: 1) Poor luck factor; 2) Regulatory changes for the numbers forecast operator (NFO) industry to discourage gambling in the country or to allow competitors more outlets and more game variations; and 3) Hike in gaming taxes.

Our FY04/12-13 forecasts have been raised by 2.2% to 4.9%, but FY04/11 is unchanged. Post-earnings revision, our discounted cash flow-based fair value is raised to RM5.10 (from RM4.50). We raise our recommendation on the stock to 'outperform' (from market perform), as we believe this could be a catalyst for BToto, given the exciting potential and earnings prospects of this new game. ' RHB Research, June 13

Monday, June 6, 2011

Capitaland BUY Target Price $4.14 by Kim Eng Research

Kim Eng Research in a June 3 research report says: "A consortium comprising CapitaMalls Asia (CMA), CapitaMall Trust (CMT) and CapitaLand has secured a White Site at Boon Lay Way for $969 million, or $1,012 psf ppr.

"CapitaLand will lend its expertise on the office component while CMA will lead the design for the retail portion. With this acquisition, the CapitaLand group of companies will have a strong foothold in Jurong Gateway, right in the commercial heart of the Jurong Lake District.

"While the targeted 6% yield on cost for the JG site is attractive, the actual impact on CapitaLand's RNAV is minimal. The asset, when completed, is likely to be eventually monetised and sold to CMT and CCT. We have trimmed our target price to $4.14, pegged at par to RNAV after adjusting for the share prices of the listed subsidiaries. MAINTAIN BUY."

Global Logistic Properties BUY Target Price $2.71 by UBS

UBS Investment Research in a May 31 research report says: "Global Logistic Properties (GLP) reported Q4FY11 earnings of US$49.2 million. Stripping out US$11 million revaluation loss, headline profit was 13.5% higher y-o-y at US$59.8 million, in line with consensus but below UBS estimates.

"The shortfall was due primarily to higher withholding taxes in Japan, 2.4% weakening of the Yen against the US$ in Q4FY11, and a US$6.4 million foreign exchange loss on Yen-denominated loans. We fine-tune our model to reflect the higher lease ratios in China and update our forex assumptions.

"On average, we raise our FY2012-2014 earnings estimates by 5.5%. Valuations remain attractive at 1.1x P/B. Price target of $2.71 based on 1x our sum-of-the-parts RNAV estimates. BUY".

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Banyan Tree, Hangzhou
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Sunday, June 5, 2011

MMCCorp BUY Target Price RM3.70 by HwangDBS

Buy at RM2.81 with revised target price of RM3.70 (from RM4.05): MMC reported 1QFY11 headline net profit of RM43 million (-56% quarter-on-quarter; +25% year-on-year) which was below our and consensus estimates. Earnings were dragged down by larger losses at Zelan Bhd of RM53 million against RM30 million loss in 1QFY10.

Operationally, the key divisions did well, as reflected in the 7% y-o-y earnings before interest tax (Ebit) growth to RM627 million. 1QFY11 transport and logistics Ebit jumped 27% y-o-y driven by its port business.

Pelabuhan Tanjung Pelapas Bhd's (PTP) throughput rose 18% to 1.8 million TEU, while Johor Port's conventional cargo volume and container volume rose 15% and 3% y-o-y. For its energy and utilities division, the overall higher dispatch factor for Malakoff Corp Bhd of 51% in 1QFY11 (against 49% in 1QFY10) and 6% y-o-y higher volume for Gas Malaysia Sdn Bhd drove 1QFY11 Ebit up 22% y-o-y.

We reduce our FY11 to FY13F profit by between 11% and 17% to prudently reflect continued losses at Zelan, where we factor in liquidated ascertained damages or provisions for its projects in Indonesia and Abu Dhabi.

We also take into account the recent unfavourable price structure for Gas Malaysia, whose spreads will narrow to RM2.04 to RM2.08 per mmbtu against RM3.95 previously. However, the impact will be offset by higher volume growth and strong TEU growth for PTP.

We recommend a 'buy' with a lower target price of RM3.70. We drop our target price after factoring in lower discounted cash flow value for Gas Malaysia.

While the news on Gas Malaysia might throw off valuations for a potential listing, there are other catalysts to look forward to. These are: (i) the expansion of 2,100MW Tanjung Bin coal-fired plant by 1000MW, with MMC being one of two parties short-listed. A decision will be made in 3QCY11; (ii) the RM50 billion mass rapid transit project, we use conservative assumptions in our sum-of-parts valuation; and (iii) higher values for its land in Johor. '

Tuesday, May 31, 2011

OSIM Target Price $2.11 BUY by OCBC Research

OCBC has cut its target price for Singapore lifestyle products firm Osim International (OSIL.SI), which is best known for its massage chairs, to $2.11 from $2.34 and kept its buy rating.

OCBC Investment Research cut its target price for Osim to account for a larger share base resulting from the recent exercise of its warrants.

However, OCBC remains bullish on Osim's growth prospects as its product range should benefit from research and development efforts to boost product innovation.

"While current economic uncertainty surrounding the EU and U.S. could dampen investor sentiment, we believe that the fundamentals of Osim remain strong and ample growth opportunities exist," said OCBC in a report.
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Saturday, May 28, 2011

Petronas Chemicals BUY Target Price RM9.28 by OSK Research

OSK is upgrading Petronas Chemicals Group's 2012 financial year earnings forecast by 28 per cent based on expectations that current oil prices will sustain, which will, in turn, buoy the prices of chemicals products.

"Financial year 2011 were above expectations. We are upgrading our financial 2012 earnings forecast in line with the better outlook for the company.

"We continue to like the company's strong backing from Petronas group, especially in keeping its feedstock prices low, as well as, attractive dividend payout ratio of 50 per cent, which is the highest among its closest peers," it said in a research note today.

However, it said the company is still subject to uncontrollable factors which included fluctuations in the international price of petrochemical products, global economic conditions and utilisation of its production facilities based on demand.OSK is upgrading Petronas Chemicals Group's 2012 financial year earnings forecast by 28 per cent based on expectations that current oil prices will sustain, which will, in turn, buoy the prices of chemicals products.

"Financial year 2011 were above expectations. We are upgrading our financial 2012 earnings forecast in line with the better outlook for the company.

"We continue to like the company's strong backing from Petronas group, especially in keeping its feedstock prices low, as well as, attractive dividend payout ratio of 50 per cent, which is the highest among its closest peers," it said in a research note today.

OSK maintained a "buy" on the company.

However, it said the company is still subject to uncontrollable factors which included fluctuations in the international price of petrochemical products, global economic conditions and utilisation of its production facilities based on demand.

KNM BUY Target Price RM3.20 by Maybank IB Research

KNM Target Price :
RM3.20 by Maybank Investment Banking Research
RM3.43 by ECMLibra
RM3.34 by OSK Research.

Thursday, May 26, 2011

Hock Seng Lee HSL Target Price RM2.50 by OSK Research

Last year, HSL managed to secure RM532 million worth of jobs, which marginally surpassed our RM500 million target. This year, management is confident of bagging another RM500 million in new wins, with an upside potential of RM600 million, versus our assumption of a conservative RM400 million. In the near term, HSL may bag two road packages collectively worth RM150 million. It is also eyeing the Tg Manis port extension (RM300 million), Mukah airport extension (RM300 million), an education facility (RM260 million) and a flyover job (RM100 million).

We understand that the government intends to implement a mass affordable housing project across Sarawak worth RM1 billion. Another RM1 billion has also been allocated for rural infrastructure and utilities. While these jobs are sizeable, they will be broken up into packages worth RM20 million to RM30 million each, and we expect HSL to win some.

The management indicated that Phase 2 of the Kuching Wastewater Project is now 30% complete and on track for the 2Q2014 deadline. HSL has submitted its proposal for Phase 2 (RM500 million), with the results possibly made known after the state elections. The entire job over 4 phases is worth RM2.2 billion.

Given HSL's experience with Phase 1 and possession of the necessary equipment, we think it stands a good chance with the subsequent phases. We also gather that HSL is in discussions on a concession to maintain the wastewater system once it is completed.

The bulk of HSL's billings for the RM452 million Kuching sewerage project and the high-end The Leaf property sales should start accruing from this year, along with FY10's RM532 million new contracts.

Year-to-date, its order book replenishment stands at RM108 million, representing nearly a quarter of our FY11F new contract assumptions and nearly twice that of the same period last year.

The group is targeting RM550 million (our assumption is RM500 million) new contracts this year; with a particular focus on the Sarawak Corridor of Renewable Energy's (Score) agro-based growth node of Tanjung Manis.

Projects earmarked by HSL in Tanjung Manis this year include the RM350 million deepsea port extension, more than 100km of access roads and various high-margin marine civil works.

Also expected this year is the announcement of the remaining packages of RM2 billion worth of road jobs linking Score's energy sites involving 21 open tenders that were closed last year. HSL has tendered for seven of these.

Each package is valued at RM50 million to RM150 million. IJM Corp, Cahya Mata Sarawak Bhd (CMSB) and Loh & Loh Bhd Corp Bhd secured the early packages last year.

Wednesday, May 25, 2011

Keppel Land BUY Target Price $5.36 by CIMB Equities Research

CIMB Research has raised its target price for Singapore property developer Keppel Land (KLAN.SI) to $5.36 from $5.29 and kept its outperform rating.

CIMB Research said it expects Keppel Land to weather China’s property cooling measures relatively unscathed, as its township portfolio in Tianjin Eco-City, a China-Singapore government venture development, has seen strong initial residental sales and will produce sustainable growth in the next decade.

“Its stock underperformance serves to reinforce our positive view. We continue to expect price catalysts from rising China township prices and Singapore office rents,” said CIMB in a report.

The brokerage said it expects Keppel Land’s China business to increasingly become an important growth driver for the company’s value.

Tuesday, May 24, 2011

UOB BUY Target Price $25 by Credit Suisse

Credit Suisse has upgraded Singapore’s United Overseas Bank (UOBH.SI) to outperform from neutral and raised its target price for to $25.00 from $22.50.

Credit Suisse has raised its earnings per share estimates for UOB from 2011-2013 by 5-7% due to higher loan growth, fee income and an improvement in net interest margins in the second half of 2011.

“UOB is set to show the best loan growth in 2011 with a significant lead over DBS (DBSM.SI) and OCBC (OCBC.SI) already in the first quarter. Banks expect overseas loan growth to be the main driver in 2011, with UOB seeing the highest overseas loan growth,” said Credit Suisse in a report.

The brokerage also added that UOB is its new sector top pick, given its attractive return-on-equity of 13.7% versus 11.2% for DBS (DBSM.SI) and 12.8% for Oversea Chinese Banking Corp (OCBC.SI).
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Golden Agri BUY Target Price $0.83 by Phillips Securities

Phillip Securities has upgraded its rating for Singapore-listed palm oil firm Golden Agri-Resources (GAGR.SI) to buy from hold and raised its target price to $0.83 from $0.74.

Phillip upgraded Golden Agri after the firm reported a better-than-expected 134% increase in its first quarter revenue to US$1.4 billion ($1.75 billion), due to better performance from its China operations and higher average selling prices.

The brokerage also noted that Golden Agri is expanding its downstream business, which will benefit from the growing affluence of emerging markets and rising popularity of edible oils.

We see the importance of Golden Agri’s need to improve their downstream business because diversification of their source of revenue will help them reduce their business risk.

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Monday, May 23, 2011

Tiger Airways Target Price SELL $1.43 by CIMB Research

During its analysts' briefing, management discussed the tough operating conditions in Australia but remained bullish on Asian demand. Tiger will no longer expand its Australian capacity, but instead focus on Asia.

In response to this, we lower our cost estimates and adjust our operating assumptions. Our FY2012 estimate drops by 10.1% but FY2013-2014 forecasts rise by 4.8-10.3%. Our target price also climbs to $1.43 (from $1.39) following our adjustments, still based on 8X CY12 P/E.

Execution of Tiger's plans remains uncertain in the near term, providing potential de-rating catalysts, though given time, Tiger's business model could mature. MAINTAIN UNDERPERFORM.

Mudajaya Target Price RM7.94 BUY CIMB Research

• Maintain BUY; upside to forecasts and target price. Our meeting with Mudajaya left us feeling even more upbeat on the group’s prospects. The slight delay in the Indian IPP should be overshadowed by the even more favourable outlook for project flows, both locally and abroad. The award of the Manjung EPCC contract to Alstom reinforces Mudajaya’s chances of bagging the civil works and should be a precursor to more project awards in the next few months. We expect positive developments in the group’s bid for BOT highways and a new power plant in India to add to the momentum of positive newsflow. The RM1bn target for new contracts in 2011 is likely to be exceeded. We maintain our EPS forecasts, BUY call and target price of RM7.94, pegged to an unchanged 20% RNAV discount. The award of projects holds the key to share price re-rating.
• Janamanjung a significant milestone. We expect the Janamanjung civil works to be the group’s first contract award for 2011, adding to the group’s portfolio of power plant construction projects after many years. The award would be the first civil works to be undertaken for the supercritical category and the first coal-fired power plant project to be implemented under the 10MP.
• Better things to come. The Janamanjung plant extension is likely to be a precursor to a slew of new projects for Mudajaya. We also do not discount the possibility of the group’s participation in the WCE and one of the remaining six highways.
• On course for contract wins in 2011. Mudajaya’s outstanding order book stands at RM4.8bn. We remain optimistic about the group’s chances of beating its RM1bn target for new projects in 2011. Success in clinching an estimated RM3.1bn worth
of orders this year would bump up the group’s order book to almost RM8bn, higher than IJM’s RM4bn and Gamuda’s RM5.5bn.

Outlook

Award is a matter of time. Mudajaya is likely to take up the role as a committed subcontractor for the civil works, estimated to be worth between RM700m and RM1bn. Civil works for coal-fired power plants typically account for 20% of total development cost and kick off the building of a power plant. Civil works for the Janamanjung extension are expected to start soon, which suggests that the civil works portion could be awarded in a matter of weeks. The civil works portion should come from the RM1.8bn portion of the total RM5.1bn development cost. We understand that the RM1.8bn is mainly for local content. Negotiations on pricing and project scope are at the final stages.

Janamanjung civil works a sign of better things to come. We continue to expect the award of the civil works for the Manjung power plant extension to be a precursor to a slew of contracts, mainly local, for Mudajaya. We also do not discount the possibility of the group’s participation in the WCE and one of the remaining six highways as these projects are likely to be dished out in packages and are part of the Klang Valley Outer Ring road that will link KLKS, WCE and SKVE among others. Construction of the Kuala Lumpur-Kuala Selangor (KLKS) Highway will be completed by Jun 11, which suggests that the group has ample capacity to take on new infrastructure/highway projects.

Potential Projects

Janamanjung plant extension
Value: RM700mil
Verdict: Good chance against other local players

Tanjung Bin plant extension
Value: RM700mil
Verdict: Good chance against other local players

West Coast Expressway (WCE)
Value: RM1000mil
Verdict: Has the capacity to take on another highway job

MRT civil works
Value: RM500mil
Verdict: Fits prequalification criteria

LRT phase 2
Value: RM200mil
Verdict: Potential stations work and precast segment

Good chance of clinching Tanjung Bin extension too. Tenders for the 1000MW extension of the Tanjung Bin coal-fired power plant closed on 30 Mar 11. Compared to the Janamanjung project which is a Tenaga project, the Tanjung Bin power plant comes under Malakoff which is an IPP. Alstom is also among the bidders for the EPCC scope. However, for this job, Mudajaya is part of the consortium. The contract is expected to be awarded in Sep 11 and the potential size of the civil works is similar to the Janamanjung extension. Management remains optimistic about its chances as a civil contractor.

Vying for a piece of WCE. The recent approval of the West Coast Highway (WCE) is positive for the implementation of the seven new highways planned under 10MP. We gather that although the work scope will go largely to the main contractor, about 30% of the total project value of RM5bn-6bn will be dished out to other contractors. As the contractor for the KL-Kuala Selangor highway located near the proposed alignment of the WCE, Mudajaya is targeting c.RM500m worth of works from WCE. Project details are still scanty at this point. We expect more details of the WCE to be released in the months ahead.

Contender for Ampang elevated highway 2. We gather that the Ampang elevated highway 2 will be an extension of the current Ampang elevated highway and is also one of the key urban highways planned under the 10MP. The fully elevated highway project will be undertaken by Prolintas and is valued at RM2bn-3bn based on a cost/km of RM80m-100m. Mudajaya’s expertise in elevated highway jobs should give it an advantage in the tenders. An example would be the elevated portion of the Shah Alam-Kemuning Highway (LKSA) which was built by Mudajaya. LKSA is owned by Prolintas too.

Temporary setback for Indian power plant. Over the past six months, the Indian IPP project has been plagued by slight holdups caused by land compensation demands by villagers and bad weather conditions. The compensation issues relate to pricing issues among the villagers who demanded better prices for their land. This was a negative surprise but should not be a big concern as alternative measures have been taken such as the building of additional basic infrastructure around the area.

This, however, affected the delivery schedule for the power plant equipment. This also explains the small revenue contribution from the EP works over the past two quarters. Management clarified that these issues have been largely resolved. On the positive side, management is in negotiations to secure the last power purchase agreement (PPA) for the last unit of the 1,440MW Chhattisgarh power plant. Indications are that the tariff would be as high as Rs4.59/kwh, three times the rate in Malaysia.

Bidding for highways in India and a potential new power plant. In a 70:30 JV with a local partner, the group has submitted a bid for a 93km BOT highway project worth around RM900m in India. The scope of works includes the extension and widening of the highway to six lanes. The highway is part of the Chennai-Bangalore trunk road and will be a 12-18 year concession. 80% of the land will be provided by the government. Another potential highway is the 100km Bangalore-Bombay stretch for which the group has submitted its prequalification bid. On the power plant side, Mudajaya’s associate RKM Powergen has been invited to participate in the development of a 2100MW coal-fired power plant to be located near Chhattisgarh. This project is still at the stage of preliminary studies.

Saturday, May 21, 2011

AirAsia BUY Target Price RM3.57 OSK Research


OSK Research maintains a "buy" call on AirAsia following the strong load factor and the potential set up of Singapore AirAsia.

By optimising its fleet via longer utilisation hours and short-haul routes, the budget airline continued to succeed in sustaining above 80 per cent load factor in April, exceeding the forecast, OSK said.

On the potential set up of Singapore AirAsia, the company would be night stopping its aircraft at the Changi International Airport in the near term, in accommodating early morning flights departing from Singapore.

In a research note today, OSK said the recruitment of cabin crew was already ongoing and this could be a prelude to the setup which would be a boost to earnings for AirAsia given that Changi was an international transit point and a sweet spot in luring passengers.

Meanwhile, OSK viewed the airline's move to shift its regional headquarters to Jakarta sometime this year as to gain more recognition from the Indonesian government.

Indonesia AirAsia is the only airline operating in the country within a clean safety track record.

"This would lead to securing more new routes given the buoyant demand for air travel," it added.

Friday, May 20, 2011

Cheung Kong Target Price HK$144 Goldman Sachs BUY

Goldman Sachs resumed coverage on Cheung Kong (Hong Kong stock code 0001) with a “neutral” rating and a target price of HK$144, up from HK$138 previously. It updated CKH’s property schedule and incorporated its recent land acquisitions, leading to revisions of 2010-2013 EPS by -12% to +64%. Since introducing new campaigns in late-February (e.g. cash rebate for buyers who opt to complete the transactions early, do not take secondary mortgages), CKH has been able to speed up its property sales for Festival City Phase 2 and has cumulatively sold 1,100 out of the total 1,368 units, Goldman said. The house estimated the group has secured HK$8.1bn in contracted sales and 66% of development property profit in Hong Kong for this year. Pending government approval, CKH targets launching three more projects in 2011, including the Hung Shui Kui site, Lohas Park Ph 3 and Festival City Ph 3. But Goldman is also concerned about the abundant supply in these districts which may affect CKH’s ability to lift ASP. It believes value accretion from a potential spin-off of its China rental property assets into an Rmb REIT is unlikely to be significant, as China rental projects only account for 4% of CKH’s NAV.

Cathay Pacific Target Price HK$17.50 Sell by CLSA

CLSA keeps Cathay Pacific (Hong Kong stock code 0293) at Sell with a target price of HK$17.50; it says Cathay’s March operating data confirmed its expectations that both the passenger and cargo markets are in decline as capacity is increasing. With load factors in decline after a record year in 2010 combined with higher fuel costs, the house forecasts the airline’s EBIT margins to decline to 7.7% in 2011 from 12.8% in 2010; it adds that to achieve these forecasts, it needs traffic to accelerate in 2H, so risk is “still to the downside” and the house’s forecasts are below consensus.

Thursday, May 19, 2011

China Unicom Target Price HK$20 by UBS

UBS says that as the only WCDMA network operator in China, Unicom “is best positioned to benefit from the data service boom in China;” it adds that China’s 3G subscriber growth “is approaching the tipping point” as both 3G and smartphone penetration rate has reached about 10% in China. UBS keeps Unicom at Buy with a target price of HK$20 (ADR $25.73).

Hang Seng Bank Target Price HK$130 by Nomura

Nomura resumed coverage of Hang Seng Bank (Hong Kong stock code 0011) with a “neutral” rating and price target of HK$130, up from HK$126 previously. The research house said earnings progression is likely to be challenging in 2011 owing to compressing margins and slow asset growth, which could cap Hang Seng’s upside potential. However, Nomura sees downside support as the stock is offering a 4.4% dividend yield.

Wednesday, May 18, 2011

IOI Corp Target Price RM4.39 by OSK Research


OSK Research has maintained a "sell" call on IOI Corporation and lowered the target price to RM4.39 from RM4.41 due to aging trees despite the higher crude palm oil (CPO) and palm kernel oil (PKO) prices.

OSK Research in a research note today said the aging trees combined with the adverse weather had reduced the palm oil fresh fruit bunch production for the nine-month period by 10.4 per cent.

"IOI will continue to struggle with its production due to aging trees, which caused its production to decline for the past two consecutive years," it said.

However, the weaker production was offset by the higher CPO and PKO prices, resulting in the plantation segment, recording a 21.8 per cent earnings before interest and taxes growth, it added.

Tuesday, May 17, 2011

Genting Malaysia Target Price RM4.05 by OSK Research

OSK Research is maintaining its "neutral" call on Genting Malaysia Bhd with an upgrade fair value (FV) of RM4.05 from RM3.24.

In its research note today, OSK said it was also maintaining the earnings forecast for Genting, which incorporates the earnings lift from the group's US casino operation scheduled for completion in the second half of this year.

"Our FV implies a relatively high 17.1 times financial year 2011 price earnings ratio (PER) versus the group's historical PER multiple of 14.9 times, suggesting, the growth potential from its US operation has been included in our valuation," it said.

Dialog Target Price RM3.27 by CIMB

CIMB Equities Research keeps DIALOG GROUP BHD [] an Outperform with the potential share price catalysts being an announcement of marginal field development, and new markets including Saudi Arabia.

The research house said on Monday, May 16 Dialog's CONSTRUCTION [] of the RM5bn independent deepwater petroleum terminal in Pengerang, south Johor is set to start in mid-CY11 as scheduled.

'Having received approval from the Department of Environment (DOE) last month, the company inked on Friday a JV that marks the start of land reclamation works. We expect the construction portion to start contributing in 1QFY6/12.

Monday, May 16, 2011

Golden Agri Target Price $0.96 by OCBC Research

OCBC Investment Research has raised its target price for Singapore-listed palm oil firm Golden Agri-Resources (GAGR.SI) to $0.96 from $0.88 and kept its buy rating.

OCBC said it raised its earnings forecast for Golden Agri by 22.7% for this year to reflect improving margins and after it reported strong quarterly results.

Golden Agri said on Friday its first quarter net profit rose 161% from a year earlier to US$230.7 million ($287.4 million), lifted by higher sales volumes and crude palm oil prices.

However, OCBC only raised its 2011 revenue estimate for Golden Agri by 3.3% as it lowered its expectations for crude palm oil prices in the second half of the year due to increased supplies.

Supermax Target Price RM6.91 BUY by OSK Research

OSK Research has maintained its "buy" call on Supermax Corporation although its first quarter financial year 2011 results were below expectations.

The research house believes the earnings of Supermax stand a strong chance to re-rate within a six-12 month horizon.

"Within this period and provided the latex price does not break its recent high of about RM11 per kg and continues the uptrend of late, we think the earnings of Supermax stand a strong chance to re-rate.

"It can then pass on the latex cost increase to its customers in a more accurate and timely manner," it said in a research note today.

The results of Supermax were lower owing to the higher latex price, forex losses and slower-than-expected demand for examination gloves from certain countries.

OSK Research said Supermax Corp Bhd's FY10 results were within expectations and as anticipated, the results were lower on-quarter owing to spiralling latex price and no improvement in forex.

The research house said on Wednesday, Feb 16 although the company is the closest to Top Glove in terms of product mix, it has managed to differentiate itself by having a higher OBM mix as well as distribution income to smoothen its manufacturing profits.

'Our target price for Supermax remains unchanged at RM7.84, based on the existing PER of 13x FY11 EPS. Supermax remains one of our top two picks for the sector besides Kossan. Although we maintain Neutral on the sector, Supermax's valuation still stands out over some of its peers given its single-digit valuation.

'Going forward, we believe the stock would come in for a re-rating when latex price gets toppish, which we think would be sometime in May 2011 when the wintering season of rubber trees is over,' it said.

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Sunday, May 15, 2011

Kencana Petroleum Target Price RM3.17 BUY by OSK Research


OSK Research has upgraded KENCANA PETROLEUM BHD to Buy with revised fair value of RM3.17.

The research house said on Monday, May 16, it viewed positively Kencana’s plan to acquire Allied Marine & Equipment Sdn Bhd for RM400m from Worldclass Inspiration Sdn Bhd and Allied Asset Holdings Sdn Bhd.

OSK Research said the purchase would be satisfied by the issuance of 149.3m new shares of Kencana at RM2.68 a share.

“This acquisition also comes with a profit guarantee of RM40m. The entire exercise is expected to be completed by 3QCY11.

“We view this acquisition positively as it would help Kencana to expand vertically. Upgrade to Buy with revised fair value of RM3.17,” it said.

Saturday, May 14, 2011

Angang Steel Target Price HK$12.40 ICBC Equity Research

We believe Angang Steel Co Ltd's (ANGANG) weak 4QFY2010 results are behind us and expect quarterly improvement given steel price increase month-on-month for 3 consecutive months.

Profit growth is expected at 125% y-o-y for FY2011.
Net profit grew 175% y-o-y to RMB 2.05 billion thanks for margin recovery, while turnover increased 32% y-o-y to RMB 92.2 billion on higher unit price and sales volume expansion. Net gearing ratio is at 52.6% at end 2010. A Final Dividend per share of RMB 0.15 was declared.

Bangkok Bank Target Price THB187 Kim Eng Research

Bangkok Bank's quarterly loan growth 14% year-on-year and 4% quarter-on-quarter was supported by demand for working capital loans and retail loans. Starting in 1Q, the banking sector is now booking dividend income as other income and fees and non-interest income net of expenses. Target price is THB187 which is based on a P/BV of 1.43 times FY2001F ending 31 Dec.

AirAsia Target Price RM3.65 by ECM Libra BUY Rating

AirAsia Bhd's units in Indonesia and Thailand are gaining substantial market share and a strong foothold in the respective countries, says ECM Libra Capital Sdn Bhd.

Despite higher jet fuel costs, demand is looking up for Indonesia AirAsia (IAA) and Thailand AirAsia (TAA), it said in a research note today.

In the first quarter 2011, IAA's passenger traffic rose 33.1 per cent year-on-year to 1.5 billion, with the load factor up 2.5 percentage points year-on-year to 80 per cent.

Likewise, TAA's traffic grew 23.5 per cent year-on-year to 1.9 billion as the first quarter is usually the peak season for tourism. The load factor was up by 4.6 percentage points year-on-year to 84 per cent.

ECM Libra maintained a "buy" call on AirAsia.

According to AirAsia, both IAA and TAA will focus on improving their market share for international routes and identify, create and interconnect new uncharted routes through existing hubs.

ECM Libra said AirAsia's affiliates are currently preparing for their upcoming initial public offerings and listings, which are expected to take place in the fourth quarter of this year.

TAA is looking to raise US$150 million from the exercise while IAA plans to raise between US$150-US$200 million in proceeds. This is to finance future growth plans, including capacity expansion and acquisition of aircraft.

"As part of the listing exercise, accumulated debts may be cleared, which means AirAsia may start recognising earnings from IAA and TAA through its 49 per cent stake in the units.

"Based on the 49 per cent stake, AirAsia would be able to gain an additional RM224 million in earnings," ECM Libra said.

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Friday, May 13, 2011

The Sentosa Spa Resort Singapore

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Genting Singapore BUY Target Price $2.74 by Phillips Securities

Phillip Securities Research in a 14th Jan 2011 research report says: "Genting Singapore is an investment holding company for Resorts World Singapore (RWS). Genting principal activities include casino operations, operation and management of integrated resort, international sales and marketing services as well as IT application related services.

"With the recent divestment of Genting UK, Genting Singapore derives 98% of its revenue from RWS. We believe revenue growth to be strong in 2011 and this is likely to translate to higher earnings. Given our estimated EBITDA of $2.3 billion in 2011, the enterprise value is estimated to be $34.9 billion base on 15x EV/EBITDA.

"Our market value of equity is worth $33.5 billion thus giving rise to fair value estimate of $2.74 base on 12.2 billion shares. Fair value estimate of $2.74. BUY (initiating coverage of Genting Singapore stock). "

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Kencana Petroleum BUY Target Price RM3.05 by OSK Research

Kencana Petroleum Bhd remains a top pick for OSK Research in the oil and gas sector due to its delivery track record.

The research house has maintained a trading "buy" for Kencana with the target unchanged at RM3.05.

"We believe another re-rating of its share price will happen
sometime in the fourth quarter of this year, when there is more guidance from management on the potential contribution from the Berantai marginal field," said OSK Research said in its research note today.

Yesterday, the company announced that its 100 per cent owned subsidiary, Kencana HL SB, has secured a contract from Kebabangan Petroleum Operating Company SB for the fabrication of Kebabangan substructure for Kebabangan Northern Hub Development Project.

"We had expected Kencana to win at least a portion of it given the company’s delivery track record and available yard space.

"We understand that Kencana’s utilisation rate had recently
increased to about 60 per cent but there is still ample room to take on more jobs," OSK Research added.

OSK Research said Kencana's order book should increase to about RM2.4 billion and this is expected to keep the company busy for the next two years. Meanwhile, Kencana’s tender book was about RM5.0 billion.

Hotels near Petroleum Hub are essentially utlised by oil and gas company executives, engineers, and has helped provide a boom for once quiet little towns such as Bintulu, Pekan Baru, Pengerang.

Maybank BUY Target Price RM10.07 by OSK Research

MALAYAN BANKING BHD shares advanced on Friday, May 13 after the bank said it ''expects earnings for FY11 ending June 30 to surpass the record net profit it achieved in FY10.

Maybank's net profit for 3QFY11 rose 11%''to RM1.14 billion from RM1.03 billion.

At 9.35am, Maybank was up 16 sen to RM8.90 with 329,700 shares traded.

Maybank's revenue for the three months in review was 11.8% higher at RM5.13 billion compared with RM4.6 billion a year ago.

Maybank said on Thursday, May 12 that the results were boosted by strong loans growth, increased revenues across almost all business segments of the group and significantly lower allowance for losses on loans which declined by almost half.

OSK Research in a note May 13 maintained its buy call on Maybank with a target price of RM10.07.

'Its previously conservative provisioning coupled with continued improvement in asset quality are beginning to bear fruit, with loan loss provisions declining 49.8% q-o-q.

'The combination of continued improvement in domestic asset quality, loans growth traction and benefits from the rising interest rate environment will boost the group's earnings momentum in FY12,' said OSK Research.


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Global Logistic Properties BUY Target Price $2.90 by JP Chase Morgan

JP Morgan Research in a Feb 25 research report says: "GLP announced a joint venture with the Suzhou municipal government to develop a modern logistics park with a total land area of 1 million sqm. Phase 1 will comprise 200,000sqm GFA of modern logistics facilities with GLP’s investment cost at US$90 million (90% stake in the JV).

"Evidence of the underlying momentum in new leasing activity, development starts and land acquisition are the main share price drivers for this stock in our view. The recent announcements on new leasing and new development sites we believe are some of positive catalysts for the stock.

"Our December 2011 price target of $2.90 is based on our December 2011 sum-of-the-parts valuation for GLP. The net asset value for GLP assets on our estimate is $9.5 billion, or $2.03 per share. MAINTAIN OVERWEIGHT."


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SIA BUY Target Price $18.50 by Credit Suisse

Singapore Airlines, the world’s second-largest carrier by market value, rose the most in a month on the city’s stock exchange after pledging to pay S$1.20 a share in special and final dividends.

The airline climbed 2.8% to $14.66, the biggest gain since April 13. The benchmark Straits Times Index advanced 1.1%.

Singapore Air announced the dividends yesterday after rebounding travel demand following the end of the global recession helped boost annual profit fivefold. Net income in the fourth quarter declined a worse-than-expected 38% because of higher fuel costs.

“The key positive surprise is the big special and final dividend,” Credit Suisse Group AG analyst Sam Lee said in a research note today. “SIA’s valuation is not excessive, but we do not see short-term company-specific catalyst after the big cash dividend.”

Credit Suisse has an “outperform” rating and $18.50 target price for the carrier. Its forecasts are under review pending an analyst briefing today, Lee said.

The carrier’s 40 cent final dividend compares with 12 cents a year earlier. The special dividend totals 80 cents. The carrier had net cash, including investments, of $5.6 billion or about $4.70 a share, as of the end of March, Citigroup Inc. analysts led by Robert P. Kong said in a May 12 note.


PROFIT JUMP
The airline reported net income of $1.1 billion for the year ended March, compared with $216 million a year earlier. Fourth-quarter profit fell to $171 million, missing the $244 million average of four analyst estimates compiled by Bloomberg in the preceding 28 days.

The airline has hedged about 20% of this year’s fuel need at about US$130 per barrel, Chief Executive Officer Goh Choon Phong said at a press briefing in Singapore today.

In the three months ended March, the carrier filled 75.5% of total available seats, down from 80% a year earlier as capacity expansion outpaced demand, it said in a statement yesterday. Passenger numbers were little changed at 4.1 million. Yield, the average price a traveler pays to fly one kilometer, was 12.1 Singapore cents, compared with 11.1 cents a year earlier.

AIRBUS A380s
The airline intends to boost capacity 6% in the fiscal year started April 1. It expects to add eight Airbus SAS A380s, while retiring five Boeing Co. 777s and all seven of its 747-400s.

Singapore Air’s fuel bill, its biggest expense, jumped 24% to $1.24 billion in the quarter ended March 31. Jet- fuel prices averaged US$121.2 per barrel in the quarter in Singapore trading, 42% higher than a year earlier.

“The twin challenges of near-term weakness in load factors and high fuel prices will adversely affect operating performance,” Singapore Air said. “While there has been some respite in the past week, jet-fuel prices are likely to remain high and volatile in the near term.”

Thursday, May 12, 2011

Sembcorp Marine BUY Target Price $6.60 by Phillips Securities

Phillip Securities Research in a May 10 research report says: "Sembcorp Marine reported 1Q11 turnover at $829 million (-39% y-o-y, -16% q-o-q) and 1Q11 net profit at $152 million (+ 0.1 y-o-y, -41% q-o-q).

"The results were well in line with expectations with turnover and net profit constituting 23% and 19% of FY2011 forecast respectively. Although revenue fell 39% y-o-y, which was well flagged earlier due to the rig order drought in 2009, gross profits remain relatively unchanged due to a sharper drop in cost of sales.

"Our SOTP based target price of $6.60 implies a valuation of 18x FY11E earnings, which we feel is undemanding given that the company has impressive margin growth and we have not factor in potential contract wins from Petrobras. With an upside of 21.2% to its last trading price, we maintain our Buy call on SMM at an unchanged target price of $6.60. MAINTAIN BUY."

Sembcorp Marine BUY Target Price $6.60 by Credit Suisse

Credit Suisse has raised its target price on Singapore’s Sembcorp Marine (SCMN.SI), the world’s second-largest oil rig builder, to $6.60 from $6.30 and maintained its outperform rating.

Sembcorp Marine said on Monday first quarter net profit rose 1.2% though revenue fell, while margins improved due to greater operational.
Credit Suisse said Sembcorp Marine’s margin performance has surprised on the upside over the past 24 months primarily due to increased efficiency and better pricing of orders. The brokerage lifted its 2011 margin forecast to 17% from 15%.
It also raised its order intake estimate for 2011 to $5 billion from $4 billion. Year to date, Sembcorp Marine has won $1.5 billion of orders and has another $2 billion of options in hand, Credit Suisse said.
The brokerage said it believes orders are likely to pick up in the second half of 2011 due to a combination of strong oil prices, the resumption of drilling in the Gulf of Mexico and positive commentary from offshore drillers.

Monday, May 9, 2011

AirAsia BUY Target Price RM4.80 by Credit Suisse


Credit Suisse Group AG raised its share-price estimate to 4.80 ringgit from 4.30 ringgit after the carrier introduced fuel surcharges. The stock rating was maintained at “outperform,” Annuar Aziz, an analyst at Credit Suisse, wrote in a report 9 May 2011.

The 5 year chart on the left shows recent gains by AirAsia and a significant demand by institutional investors and funds.

Averaging RM1.80 for the first two years, then RM1.50 the next two years, and finally breaking both the RM2.50 and RM3.00 barrier, AirAsia has finally cemented its position as the largest South East Asian (ASEAN) carrier and overshadowing national carrier Malaysia Airlines in terms of fleet, capacity, profits, routes and overall staff satisfaction.

Several other researchers have further upped the target price of AirAsia to above RM4.00. The recently announced fuel surcharge was even greeted with a mature acceptance and signals a positive method to stem the increase in jet fuel prices.

And it is easy to see that branding spread and viral-marketing effects AirAsia has on travellers. Travellers will tell their friends, families. Championing their low cost airfare to a dream destination. And anticipating for the next round of zero fares, or super low promotional fares. Stop ten people on their tracks and likely 9 out of 10 will have heard, flown, thought about, curious about, AirAsia. Much like Coca Cola. It is everywhere (now). Perhaps even Coke would have coined the term now everyone could have a fizzy drink.

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Yangzijiang BUY Target Price $2.42 by OCBC

OCBC Investment Research has raised its target price on Singapore-listed Chinese shipbuilder Yangzijiang (YAZG.SI) to $2.42 from $2.36 and maintained its buy rating.

Singapore-listed Chinese shipbuilder Yangzijiang (YAZG.SI) said on Thursday its first quarter net profit rose 63% from a year ago to 954.9 million yuan ($179.9 million).

OCBC said Yangzijiang's net profit was higher than expected, boosted by better gross profit margins. The firm said about 55% of its total order book comprises high-margin vessels and it is confident about sustaining margins in 2011-2012.

Yangzijiang also confirmed that it intends to continue to invest in held-to-maturity financial products. OCBC said this is currently a lucrative business, but a sudden dip in the Chinese stock market may affect the value of the collateral.

Japanese Asia Hotel Deals 2011

Sunday, May 8, 2011

DBS BUY Target Price $18.00 by RBS

RBS has raised its target price on Singapore’s DBS (DBSM.SI), Southeast Asia’s largest bank, to $18.00 from $16.50 and maintained its buy rating.

DBS posted a record quarterly profit, thanks to falling bad-debt charges and a surge in trading income, and signalled that an erosion in interest rate margins in its core markets may be coming to an end.

RBS said it had revised its earnings estimates for DBS’ 2011-2013 financial years by 9.4% given the bank’s solid first quarter results.
DBS remains its top Singapore bank pick, reflecting the strong revenue trends, improving margins and attractive valuation relative to other lenders under its coverage, RBS said.

QL Resources BUY Target Price RM4.00 by OSK

OSK Research has reduced its 2011/12 forecast earnings for QL Resources by one per cent to 5.3 per cent, saying that heavy rainfall in Indonesia and the stake dilution of 40.5 per cent to 35 per cent in Boilermech had delayed the company from achieving its target fresh fruit bunch production volume in Vietnam.

The research house however raised its Future Value (FV) from RM3.51 to RM4, pegging at a higher price earnings (PE) of 19 times earnings per share in 2012, taking into account the potential catalyst from its venture into renewable energy and higher share liquidity post share placement exercise.

QL Resources is a regional integrated livestock farming player
and has diversified into the fisheries sector through the development of a marine-based manufacturing chain.

QL’s expansion plan in Indonesia is on track for completion (500,000 eggs per day by 1QFY13 and one million day-old chicks (DOC) by 2QFY12). Cianjur, Indonesia, has low egg/broiler consumption per capita and is situated between Jakarta and Bandung, which have the highest consumption of poultry products.

The production volume of poultry products in Cianjur is also relatively low compared with other areas. Upon the completion of the farms, QL will become a significant poultry player in the industry. While the DOC market is dominated by other major players, QL will be the largest layer farmer in Indonesia after the farm is up and running given that Charoen Pokhpand and Japfa Comfeed (major Indonesian poultry players) are not involved in egg farming. QL estimates that its average cost of production could be 5% lower than the industry average.

Our checks with management reveal that its expansion in Tay Ninh, Vietnam, to achieve a production volume of 500,000 eggs per day by 1QFY13 initially, will be delayed to 3QFY13 due to some local issues. Nonetheless, we believe there is much more room to grow in the country given that the poultry industry in Vietnam is still dominated by traditional small players while egg consumption is still low.

We think that concerns over rising radiation at Japan’s nuclear plant would actually benefit QL’s marine products manufacturing segment, albeit minimally. Malaysian scientists have reaffirmed that the radiation will not reach Malaysia due to its distance from Japan and this means that QL’s fish, caught in Southeast Asian waters, is safe for consumption.

AirAsia BUY Target Price RM3.80 by HLIB

Maintain buy at RM2.87 with an upward revision of target price to RM3.80 from RM3.50: We revise up FY11 earnings by 9.7% after imputing higher passenger load factor, fares, and ancillary income as well as the implementation of a fuel surcharge to offset higher jet fuel prices. We have also increased our FY12/13 earnings forecast by 15% to 20%.

We also upgrade our target price for AirAsia to RM3.80 from RM3.50 per share previously after estimating higher net income for FY11/13. We use the sum-of-parts valuation method to better reflect AirAsia's valuation post listing of AirAsia X, Thai AirAsia and Indonesia AirAsia, and re-rating catalysts from the planned listing.

AirAsia has re-introduced a fuel surcharge for bookings from yesterday due to escalating jet fuel costs which have touched some US$140 (RM415.80) a barrel. To recap, AirAsia abolished its fuel surcharge on Nov 11, 2008, when jet fuel prices dropped to US$80 a barrel. The fuel surcharge will vary between RM10 and RM30, depending on the flight hours.

With this exercise, overall demand for AirAsia flights may be affected, as consumers may switch to competitors. However, we opine that the fuel surcharge is minimal as AirAsia's'' total fare is still one of the lowest and the airline will be able to sustain its market share due to its strong brand name, connectivity, frequency, and the continued strong growth of regional air travel.

The appreciation of the ringgit against the greenback has been providing some cushion against the impact of escalating jet fuel costs, as the fuel is denominated in US dollars.

On April 27 this year, AirAsia announced its maiden gross dividend payout of three sen a share, translating into a net dividend payout of 2.77 sen a share (0.97% net dividend yield). This was in line with our expectations of a possible low dividend payout. Nevertheless, we are positive on the move as it will widen the stock's appeal to investors who are looking for dividend yields (especially pension funds), apart from capital gains. ' Hong Leong Investment Bank.

Thursday, April 21, 2011

CityDev BUY Target Price $14.31 by CLSA

ALTHOUGH THE SINGAPORE residential market has been dampened by several policy measures with the most recent announced on Jan 13, CLSA has upgraded City Developments to a buy in a 100-page property report dated Apr 7. According to property analyst Pang Chin Hong, despite 44% of its revalued Gross Asset Value (GAV) coming from Singapore residential properties, “a substantial portion is pre-sold,” he says. Another 25% and 12% of GAV come from the office space and hospitality sector respectively.

The strongest driver for City Developments is likely to come from the divestment of its commercial property portfolio, Pang says. Last year, the company divested several older commercial properties such as The Corporate Building, The Corporate Office and Chinatown Point. In 2005, the company had planned to sell 11 properties to Suntec REIT for $788 million but the deal fell through. “We believe that CDL will continue asset divestment this year as the group is shifting its focus toward a higher-quality portfolio as evidenced by the South Beach development, 9 Tampines Grande and 11 Tampines Concourse,” Pang writes.

What could City Developments sell? At this stage, it’s unlikely to be Republic Plaza which Pang has revalued at $2.2 billion. Instead, lower-grade properties such as City House, Fuji Xerox Towers, Central Mall, Katong Shopping Mall, some strata units in Tanglin Shopping Centre, The Arcade, Palais Renaissance, Delfi Orchard, units in GB Building, Fortune Centre, Sunshine Plaza and Plaza by the Park are possible candidates for divestment. Pang reckons these properties are worth a further $2.2 billion. Tanglin Shopping Centre, worth $105 million, has been put up for a collective sale but market observers note there are so far no takers. Sunshine Plaza is also believed to have been up for sale for a while.


Nonetheless, Pang is optimistic that City Developments can realise good gains if it manages to sell these assets. The developer does not revalue properties unlike other companies. Investment properties are carried at historical cost plus accumulated depreciation. Pang reasons that the carrying book values of these properties are likely to be much lower than their true value and City Developments could rake in a capital gain of $1 billion if it can find buyers for such a diverse portfolio.

“This presents a key catalyst for City Developments’ share price in 2011. With interest in commercial properties on the rise, we would not be surprised to hear of aggressive offers,” Pang writes. He has a target of $14.31 for the stock against his RNAV (Revised Net Asset Value) estimate of $16.84.

Back on the residential front, City Developments’ mass-market project, H2O Residences, which saw a takeup rate of 27% during the first weekend launch on March 5, is to have drawn mediocre response so far. Also, only 21 of the 56 units released in the 226-unit The Residences at W on Sentosa Cove have been sold. City Developments says it doesn’t plan to launch any more units in the near term. At a results briefing in Feb, chairman Kwek Leng Beng says he can afford to hang on to the units because he has holding power.

Axiata BUY Target Price RM5.83 by OSK Research

OSK Research is maintaining its NEUTRAL recommendations for SINGTEL (FV: S$3.00) and STARHUB (FV: S$2.85) whilst keeping its BUY rating on M1 (FV: S$2.85), its'' top pick for the Singapore telecoms sector.

For the Malaysian mobile telcos, it is retaining its BUY recommendation on AXIATA (BUY, FV: RM5.83) and NEUTRAL call on MAXIS (FV: RM5.20).

'We are downgrading our recommendation on DIGI to NEUTRAL from BUY previously as its share price has rallied 15% since our upgrade in late January and has surpassed our DCF fair value of RM27.90,' it said.

Wednesday, April 20, 2011

Cosco BUY Target Price $3.00 by Citigroup

Citi has raised its target price on Cosco Corporation (COSC.SI), a Singapore-listed Chinese shipbuilder, to $3.00 from $2.55 and maintained its buy rating.

Cosco said last month its subsidiary had signed a letter of intent to build two rigs worth US$1.05 billion ($1.32 billion) for Norway’s Sevan Group (SEVAN.OL). Sevan also has the option to order two more rigs at the same price.

Cosco is likely to make a full transition from a shipmaker to a rigbuilder in 2011, Citi said, adding that it sees accelerating wins in floating, production, storage and offloading (FPSO) vessels and rigs.

The brokerage said the shift in business mix will result in better margin resilience compared with shipbuilding, since offshore and marine wins should account for more than 80% of new orders in 2011, versus around 20% in 2007.

Cosco is also likely to benefit from order spill-overs and grow market share as Singapore and South Korean yards are getting more filled, Citi said, adding that the contract value may rise with the expansion from fabrication to full turnkey projects.

Golden Agri BUY Target Price $0.88 by OCBC Research

OCBC Investment Research in a 13th April research report says: "Golden Agri-Resources (GAR) has provided more details on its Forest Conservation Policy (FCP). Meanwhile, in the nearer term, we note that CPO prices continue to hold up pretty well, no doubt buoyed by the rising crude oil prices, as well as lessened demand concerns following the Japan twin disaster in early March.

"And with the MENA (Middle East North Africa) region still looking slightly uncertain, we believe that it may continue to drive demand for alternative sources of fuel, especially bio-diesel. The world's second largest CPO producer Malaysia plans to implement the use of B5 bio-diesel this year; it has also allocated MYR200 million for the establishment of blending facilities. Fair value of 88 cents (17x FY11F core EPS). MAINTAIN BUY."

Keppel Land BUY Target Price $5.09 by OCBC Research

Singapore property developer Keppel Land said its first-quarter net profit rose 46% year-on-year to $92.1 million, lifted by higher contributions from property trading and its unit K-REIT Asia, as well as gains from selling its stake in Keppel Digihub.

OCBC said future earnings for Keppel Land are likely to be lumpier as the firm will have to comply with accounting standards and recognize profits on its overseas projects only on full completion.

The brokerage added that it expects slower Chinese sales this year, noting that prices remain at healthy levels of 60,000-80,000 yuan ($11,405-$15,206) per square metre for unsold units but foot traffic has dipped since the purchasing curbs.

However, OCBC said the pre-commitment levels at the firm’s Ocean Financial Center in Singapore’s office district have edged up to 82.3% from 80% in the fourth quarter, and is fairly confident of robust occupancy when it is completed.

Axiata BUY Target Price RM5.75 by RHB Research

Having achieved 8% revenue growth for FY10, we expect Celcom's revenue growth to moderate towards mid-single digits for FY11. Growth will come from data and expanding its range of device offerings. So far, we gather from management that competition has been rational. Despite YTL Communications' new product and pricing launches, we gather from management that the impact is not yet significant.

Similar to Celcom, XL's revenue growth for FY11 will moderate, and will likely be in line or above the industry (which management estimates at 8%), compared with the 27% increase achieved for FY10. Nonetheless, management is confident of at least 50% earnings before interest, tax, depreciation and amortisation (Ebitda) margin for FY11. Looking ahead, management believes competition in Indonesia would remain relatively stable, as mobile penetration is now relatively high at 86%. Hence, management believes a potential price war is unlikely.

We gather from management that Axiata does not rule out increasing its stake in Idea (currently 19%) at the appropriate price. Management opines that media reports of the Aditya Birla Group looking to sell its 47% stake in Idea are quite likely speculative, as the Aditya Birla Group has denied it was in talks to sell the stake.

We gather from management that Idea does not hold excess 2G spectrum. This should relieve regulatory risks in relation to the proposed excess spectrum fees.

Dialog completed a significant turnaround in FY10 on the back of 14% revenue growth which, however, will moderate to mid-single digitd in FY11. Management expects Ebitda margins to be sustainable while the competitive environment should remain stable.

The issue of spectrum renewal fee for Robi and the rest of the mobile operators continues to overhang. The exact fees have not yet been determined, though at present it could be about US$400 million (RM1.2 billion). Hence, management does not rule out a cash call from Robi. Nonetheless, management hopes to see a resolution in June, given that the licences expire in November.

We maintain our earnings forecasts with the following risks: (i) weaker-than-expected performance by Celcom as well as by regional telcos due to competition as well as macroeconomic factors (inflation and so on); and (ii) over-priced acquisitions.

We still like Axiata, which offers growth prospects albeit moderating this year. We see highest regulatory risks in Bangladesh, which could shave off 16 sen from our fair value. Nonetheless, we maintain our sum-of-parts fair value of RM5.75 for now, but upgrade to 'outperform' due to recent share price weakness. ' RHB Research.

MAS SELL Target Price RM1.60 by OSK Research

Malaysian Airline System Bhd (MAS) was cut to “sell” from “neutral” at OSK Research Sdn Bhd, which said higher oil prices will hurt the Malaysia national carrier’s earnings.

The stock’s fair value was reduced to RM1.60 from RM1.76.

Friday, April 8, 2011

YTL Power BUY Target Price RM2.57 by RHB Research

YTL Communications finally unveiled two new Yes devices early this month ' the Samsung Buzz mobile phone and the Zoom router. Our initial impressions of the Buzz are less than favourable mainly due to: 1) smaller than-average screen size; 2) lack of applications; 3) keypad being too small; and 4) a not-so-friendly user interface. We welcome the news that YTL Comms plans to launch Android smartphones in June, given their rising popularity.

The new Valuepacks offer competitive rates for heavy data users, as not only do they enjoy bigger savings, they also receive free voice calls and SMS to any mobile number.

However, for mobility, we believe the fact that a user must use the Samsung Buzz to enjoy the free voice minutes and SMS is a serious dampener. Otherwise, you need to login using a Yes ID to a non-handset device (such as a desktop or laptop) to utilise the freebies. However, this means a lack of convenience and/or mobility.

We are somewhat concerned with YTL Power's lower-than-expected second interim single tier dividend per share (DPS) of 1.875 sen (we had forecast 3.75 sen).

After further discussions with its management, we were still unable to get a clear sense of the level of future dividend payouts.

Preferring to remain conservative, we have cut our FY11 DPS forecast from 13.1 sen to 9.4 sen. Thus, we only expect YTL Power to subsequently declare a third interim and final dividend of only 1.875 sen/share each. We believe management is looking to conserve cash, as YTL Comms plans to spend more to boost coverage.

The risks include: 1) unfavourable forex movements, which will adversely affect the translation of foreign earnings; 2) potential change in competitive landscape under the National Energy Plan; and 3) execution risk and poor subscriber numbers for WiMAX.

We have left our earnings forecasts unchanged.

We have maintained our sum-of-parts-derived fair value on YLT Power at RM2.57. Without the management's assurance regarding future dividends, we believe YTL Power may lose a bit of shine since the key investment thesis for the stock has historically been high dividend yields. For FY11, we now expect YTL Power to only offer a relatively mediocre gross dividend yield of 5.5% (FY10: 7.6%).

Tenaga SELL Target Price RM5.73 by Maybank Investment Bank Research

Maybank Investment Bank Research had maintained Tenaga as a Sell due to the challenging business outlook stemming from high coal prices, a shortage of natural gas supply and remote possibility of a tariff hike.

'We now use the EV/EBITDA valuation metric (previously DCF) as we think it captures more accurately the true health of utility companies given their high gearing.

'Our new target price of RM5.73 is based on 5.8x FY12 EV/EBITDA ' consistent with its long-term average. This implies 12.0x FY12 earnings, which we think is fair for its multiple challenges,' it said.

Mudajaya BUY Target Price RM7.44 by OSK Research

Tenaga Nasional Bhd recently signed an engineering, procurement, construction and commissioning (EPCC) agreement with the Consortium of Alstom Power System SA for the expansion of the 1000MW Janamanjung coal-fired power plant. The portions of the contract are valued at US$810 million (RM2.5 billion), '180 million'' (RM771 million) and RM1.8 billion. The plant is expected to be fully commissioned by March 2015.

This recent award to the Alstom consortium is positive for Mudajaya. In our previous reports, we had highlighted that Mudajaya is likely to participate in the civil works for Janamanjung should the Alstom consortium win the EPCC job. We expect the consortium to subcontract the civil works to Mudajaya. Generally, the civil works for a coal-fired power plant make up 15% to 20% of the overall EPCC value.

Hence, based on the RM5 billion EPCC value for Janamanjung, the civil works portion would work out to RM750 million to RM1 billion. This should represent a healthy replenishment for Mudajaya's order book as one of its major projects, the KL-Kuala Selangor Expressway (RM958 million), is nearing completion. Management guides that the subcontract award could be out as soon as within a month.

Earlier this year, the Energy Commission had issued a request for proposal to Tanjung'' Bin and Jimah for another 1000MW expansion. Both parties have until mid-April to submit their proposals.

We understand that Mudajaya has been in talks with an EPCC contractor to participate in the civil works for this 1000MW expansion.

The actual award of the Janamanjung civil works to Mudajaya is expected to provide the upside to our earnings estimates, mainly from FY12 onwards, as we have only imputed a conservative RM200 million in annual order book replenishment.

For now, we are leaving our forecasts and RM7.44 fair value unchanged, which is based on a 20% discount to our sum-of-parts value based on 12 times FY11 earnings and a free cash flow to equity valuation of its Chhattisgarh IPP at 16% equity cost.

Genting Singapore BUY Target Price $2.30 by UBS

UBS upgrades Genting Singapore (G13.SG) to Buy from Neutral, noting the counter has underperformed the weighted performance of the 5 listed Macau operators by around 25% and the STI by around 7.0% YTD.

“We think Genting Singapore is turning into a bona-fide China (wealth creation) play, with strong growth in VIP from North Asia (especially China) expected to continue into 2011-2012E.”

It tips VIP volumes of US$18 billion ($22.8 billion)-US$20 billion per quarter at RWS in 2011 (putting RWS in the same league as the top-performing Macau properties). It expects HK/China to account for as much as 50% of RWS' total gross gaming revenue by 2012, when its VIP-targeted expansion will be rolled out.

Overall, the house says China VIP growth, capacity expansion in 2012, a net cash position and potential for new projects together make Genting an attractive stock at this valuation. It lowers its target to $2.30 from $2.39, based on 15X 2011E EV/EBITDA (vs 16X previously).

Biosensors BUY Target Price $1.36 by OCBC IR

OCBC Investment Research in a Mar 28 research report says: "Biosensors International Group (BIG) announced that it has obtained approval in-principle from SGX for the private placement of 216,325,800 new ordinary shares to Atlantis Investment Management Hong Kong Ltd and Ever Union Capital Ltd.

"The total placement represents approximately 19.55% of BIG's issued and paid-up share capital. The dilution factor works out to be 16.4%, which seems quite substantial, in our view. Nevertheless, we are confident that management would be able to efficiently utilise the proceeds to generate value for their shareholders.

"We adjust our DCF estimates to incorporate higher growth in its mid- to long-term profitability but also tweak our USD/SGD assumptions downwards due to persistent weakness in the U.S. dollar. Fair value revised to $1.32 (previously $1.36). MAINTAIN BUY."

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