Views & News, Maybank IB (2010-11-10)
Wednesday, November 10, 2010
SECTOR UPDATE
Plantations: Neutral
The final leg
Pricing in RM3,000/t. We believe plantation big caps could trend higher in the coming months, as: 1) the US Dollar is expected to stay weak throughout 1H 2011 and, 2) commodity and equity prices continue to rally due to increased liquidity. Plantation big caps could potentially price in a long-term CPO average of RM3,000/t, in our view. We raise our 2011-12 average CPO price forecast to RM3,000/t from RM2,600/t and upgrade Sime Darby to a Buy.
ACQUISITIONS / DISPOSAL
PLUS Expressways RM4.40: Accept offer
Shareholders to vote Shariah-compliant
Accept the offer. PLUS' board of directors have accepted UEM-EPF's offer at an unchanged RM23b offer price. We reiterate that it is fair offer price, at 2% below our RM4.70 DCF-based target price. In a revised offer letter yesterday, UEM-EPF allows PLUS to evaluate competing offers, if any. The next milestone is PLUS' shareholders go-ahead. Nonetheless, the timeline for deal completion, which could take up to a year, could be daunting. Amid a liquidity driven market, shareholders could derive better returns by selling the shares now, than to wait.
COMPANY UPDATE
IJM Corporation RM5.54: Buy
New job win Shariah-compliant
Target price under review. IJM's outstanding order book is sustained at RM3.6b with the new National Cancer Institute job win. We estimate a 1sen EPS contribution over three years into FY14. No change to our earnings forecasts. Share price has performed well exceeding our RM5.50 RNAV-based target price on expectations of rising news flow in construction and runaway CPO prices. Our target price is under review.
RESULTS REVIEW
Hartalega Holdings RM5.53: Hold
Testifying to nitrile gloves prospects Shariah-compliant
Results in line. 6MFY11 net profit of RM89m (+49% YoY) made up 51% of our and consensus full-year forecasts. 2QFY11 net profit (+14% QoQ) was impressive considering its latex-focused peers (Top Glove and Supermax) posted QoQ contractions of 17-30% in their respective Aug/Sept-ended quarter. However, we are maintaining our Hold rating (TP: RM5.40) as the sector lacks re-rating catalysts and Hartalega's share price has outperformed its peers by 25% since Jul '10.
Technicals
The FBM KLCI rose climbed 6.69 points to 1,526.53 yesterday. Due to the lower tone in the USA last night, we may see the FBM KLCI in a mixed mode today. Its resistance area at 1,526 may cap market gains, whilst its support areas are located at 1,507 and 1,525.
Trading idea for today is a SHORT TERM BUY call on OSK.
Other Local News
KFC Holdings: MD not aware of any plans to privatise KFCH. KFC Holdings Bhd's (KFCH) top official has brushed off talks that the firm is a takeover target by a substantial shareholder, as the stock surged to a fresh high yesterday. The counter had risen 130% over the past six months while shares in QSR surged 80% and Kulim rose 76% over the same period. (Source: The Star)
Autos: Consolidation of auto sector could be done soon. The Malaysian Automotive Institute (MAI) is understood to have submitted its proposals and recommendations pertaining to the consolidation of the automotive sector to the government for a final decision of the merger between the players. The proposed consolidation is expected to entail a merger between two national automakers, Proton Holdings Bhd and Perusahaan Otomobil Sdn Bhd (Perodua). (Source: The Edge Financial Daily)
Banking: RM150mil banking talent boost. The Institute of Bankers Malaysia plans to use the RM150mil staff training fund for various capacity development initiatives in the financial services sector over the next five years. They included collaborations with local and foreign universities to churn out more learning programmes to help reduce the shortage of talent in the banking and financial services sector. (Source: The Star)
Plantation: RSPO unveils "Sustainable Palm Oil" Trademark. The Roundtable on Sustainable Palm Oil (RSPO) Tuesday unveiled a trademark that will enable consumers to identify consumer products containing sustainable palm ingredients. (Source: Bernama)
Plantations: Neutral
The final leg
Pricing in RM3,000/t. We believe plantation big caps could trend higher in the coming months, as: 1) the US Dollar is expected to stay weak throughout 1H 2011 and, 2) commodity and equity prices continue to rally due to increased liquidity. Plantation big caps could potentially price in a long-term CPO average of RM3,000/t, in our view. We raise our 2011-12 average CPO price forecast to RM3,000/t from RM2,600/t and upgrade Sime Darby to a Buy.
ACQUISITIONS / DISPOSAL
PLUS Expressways RM4.40: Accept offer
Shareholders to vote Shariah-compliant
Accept the offer. PLUS' board of directors have accepted UEM-EPF's offer at an unchanged RM23b offer price. We reiterate that it is fair offer price, at 2% below our RM4.70 DCF-based target price. In a revised offer letter yesterday, UEM-EPF allows PLUS to evaluate competing offers, if any. The next milestone is PLUS' shareholders go-ahead. Nonetheless, the timeline for deal completion, which could take up to a year, could be daunting. Amid a liquidity driven market, shareholders could derive better returns by selling the shares now, than to wait.
COMPANY UPDATE
IJM Corporation RM5.54: Buy
New job win Shariah-compliant
Target price under review. IJM's outstanding order book is sustained at RM3.6b with the new National Cancer Institute job win. We estimate a 1sen EPS contribution over three years into FY14. No change to our earnings forecasts. Share price has performed well exceeding our RM5.50 RNAV-based target price on expectations of rising news flow in construction and runaway CPO prices. Our target price is under review.
RESULTS REVIEW
Hartalega Holdings RM5.53: Hold
Testifying to nitrile gloves prospects Shariah-compliant
Results in line. 6MFY11 net profit of RM89m (+49% YoY) made up 51% of our and consensus full-year forecasts. 2QFY11 net profit (+14% QoQ) was impressive considering its latex-focused peers (Top Glove and Supermax) posted QoQ contractions of 17-30% in their respective Aug/Sept-ended quarter. However, we are maintaining our Hold rating (TP: RM5.40) as the sector lacks re-rating catalysts and Hartalega's share price has outperformed its peers by 25% since Jul '10.
Technicals
The FBM KLCI rose climbed 6.69 points to 1,526.53 yesterday. Due to the lower tone in the USA last night, we may see the FBM KLCI in a mixed mode today. Its resistance area at 1,526 may cap market gains, whilst its support areas are located at 1,507 and 1,525.
Trading idea for today is a SHORT TERM BUY call on OSK.
Other Local News
KFC Holdings: MD not aware of any plans to privatise KFCH. KFC Holdings Bhd's (KFCH) top official has brushed off talks that the firm is a takeover target by a substantial shareholder, as the stock surged to a fresh high yesterday. The counter had risen 130% over the past six months while shares in QSR surged 80% and Kulim rose 76% over the same period. (Source: The Star)
Autos: Consolidation of auto sector could be done soon. The Malaysian Automotive Institute (MAI) is understood to have submitted its proposals and recommendations pertaining to the consolidation of the automotive sector to the government for a final decision of the merger between the players. The proposed consolidation is expected to entail a merger between two national automakers, Proton Holdings Bhd and Perusahaan Otomobil Sdn Bhd (Perodua). (Source: The Edge Financial Daily)
Banking: RM150mil banking talent boost. The Institute of Bankers Malaysia plans to use the RM150mil staff training fund for various capacity development initiatives in the financial services sector over the next five years. They included collaborations with local and foreign universities to churn out more learning programmes to help reduce the shortage of talent in the banking and financial services sector. (Source: The Star)
Plantation: RSPO unveils "Sustainable Palm Oil" Trademark. The Roundtable on Sustainable Palm Oil (RSPO) Tuesday unveiled a trademark that will enable consumers to identify consumer products containing sustainable palm ingredients. (Source: Bernama)
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