Maybank IB Views
Saturday, January 8, 2011
Kencana Petroleum RM2.52: Buy
Marginal marvels Shariah-compliant
Initiating coverage with a Buy call and RM3.10 target price. We foresee that Kencana will be a prominent feature in PETRONAS' domestic agenda. Enhanced oil recovery (EOR) and marginal field development under the government's Economic Transformation Programme (ETP) are areas of growth for Kencana. We see Kencana: (i) expanding its yard space, (ii) growing its offshore units and (iii) seeking strategic tie-ups to grow its income base whilst remodeling its business model to capture new opportunities. Evidently, Kencana has the balance sheet and management drive to gain from all this.
Technicals
TM: UniFi service reaches more than 750,000 premises. The rollout of Telekom Malaysia Bhd's High Speed Broadband (HSBB) service or UniFi, continues to be on track with service availability now expanded to an additional 48 areas nationwide, bringing the total premises to over 750,000 at the end of 2010. TM recently passed the 30,000 service subscription mark, and now averages 2,500 new subscribers per week. (Source: Bernama)
F&N: In USD4m deal with US co. PML Dairies, a wholly owned subsidiary of F&N Holdings Bhd has signed a USD4m (RM12.3m) contract with Chicago-based JBT Corp's food technology division, JBT FoodTech. Under the agreement, JBT FoodTech will supply the filling, closing and sterilization technologies for PML's new milk processing plant at Pulau Indah. (Source: The Edge Financial Daily)
Hap Seng: Sets 50% dividend payout policy. Hap Seng Consolidated Bhd is set to distribute 50% of its group net profit in the form of dividends, after its board approved the dividend policy. (Source: The Edge Financial Daily)
YTL Comms: 4G network in all local universities by this year. YTL aims to make its Yes 4G network available to all public universities and selected private institutions of higher learning in Malaysia this year. The network has been successfully activated at University Sains Malaysia (USM), Penang, and covers virtually all parts of the 240 ha USM main campus. (Source: Bernama)
Cocoaland: Bags another F&N contract. Cocoaland Holdings Berhad's wholly owned subsidiary, Cocoaland Industry Sdn Bhd (CISB) was appointed by F&N Beverages Manufacturing Sdn Bhd (F&NBM) as its non-exclusive contract packer to prepare, package, pack and deliver F&NBM's products. Cocoaland will prepare, package and deliver the products of F&NBM for a period of one year with an option to extend for another one year. (Source: Bursa Malaysia)
Plantation: Firms rap medical insurance ruling. Oil palm and rubber plantation firms, which are already footing the medical bills of their foreign workers, will now have to fork out another RM50m to insurance companies. Effective January 1 this year, the Health Ministry requires all employers to pay for foreign workers' medical insurance. Meanwhile, under the Workers Minimum Housing Standard & Amenities Act 1990 (WMHSA), all estate owners are also required to provide healthcare facilities and services for their staff (including foreign workers). The number of plantation workers seeking treatment in government hospitals is in fact very small because only serious cases are referred to the healthcare centres outside the estate. (Source: Business Times)
Plantation: Indonesia forest moratorium postponed. Indonesia's forest moratorium was postponed as its government is still undecided on the details of a two-year moratorium on forest clearing under the USD1b (RM3.07b) climate deal with Norway, leading to continued uncertainty for plantation firms. The planned commencement date for the moratorium was initially Jan 1st. (Source: The Edge Financial Daily)
Outside Malaysia
U.S: Services expand by most since 2006 in December. The Institute for Supply Management's non-factory index, which covers about 90 percent of the economy, rose to 57.1. A reading greater than 50 signals growth. (Source: Bloomberg)
U.S: Companies in December add 297,000 jobs, ADP says. Companies in the U.S. boosted payrolls in December by the most since records began in 2001, showing a stronger labor-market recovery at the end of last year, data from a private report showed. (Source: Bloomberg)
E.U: Services, manufacturing growth in December remains steady led by the fastest growth in more than four years in Germany. A composite index based on a survey of euro-area purchasing managers in both industries held at 55.5. That compares with Dec. 16 reading of 55. A figure above 50 indicates expansion. (Source: Bloomberg)
Spain: Industrial production expanded in November for the first time in three months as the recovery from an almost two-year recession accelerated. Output at factories, refineries and mines rose 2.3% YoY, adjusting for the number of working days, after contracting 1.9% YoY in October. (Source: Bloomberg)
Taiwan: Consumer price growth unexpectedly slowed in December for the first time in four months as the gain in food prices moderated. The consumer price index increased 1.25% YoY, compared with a revised 1.52% YoY climb in November, the statistics bureau said in Taipei. (Source: Bloomberg)
Indonesia: Kept its benchmark interest rate at a record low even after consumer prices rose at the fastest pace in 20 months, betting measures such as higher bank reserve requirements will keep inflation in check. The central bank maintained its reference rate at 6.5% for a 17th meeting, it said in Jakarta. (Source: Bloomberg)
Philippines: Inflation held steady in December as the peso's gains helped counter the effect of rising crude oil prices. Consumer prices rose 3% YoY, the National Statistics Office said in Manila. Average inflation for the year was 3.8%, within the bank's 3.5% to 5.5% target. (Source: Bloomberg)
Marginal marvels Shariah-compliant
Initiating coverage with a Buy call and RM3.10 target price. We foresee that Kencana will be a prominent feature in PETRONAS' domestic agenda. Enhanced oil recovery (EOR) and marginal field development under the government's Economic Transformation Programme (ETP) are areas of growth for Kencana. We see Kencana: (i) expanding its yard space, (ii) growing its offshore units and (iii) seeking strategic tie-ups to grow its income base whilst remodeling its business model to capture new opportunities. Evidently, Kencana has the balance sheet and management drive to gain from all this.
Technicals
- The FBM KLCI surged 14.28 points to 1,566.17 yesterday. Its resistance area of 1,571 may cap market gains, whilst its firm support areas are located at 1,543 and 1,566.
- Trading ideas for today are four BUY calls on CBIP, DRBHCOM, AIRASIA and RSAWIT.
TM: UniFi service reaches more than 750,000 premises. The rollout of Telekom Malaysia Bhd's High Speed Broadband (HSBB) service or UniFi, continues to be on track with service availability now expanded to an additional 48 areas nationwide, bringing the total premises to over 750,000 at the end of 2010. TM recently passed the 30,000 service subscription mark, and now averages 2,500 new subscribers per week. (Source: Bernama)
F&N: In USD4m deal with US co. PML Dairies, a wholly owned subsidiary of F&N Holdings Bhd has signed a USD4m (RM12.3m) contract with Chicago-based JBT Corp's food technology division, JBT FoodTech. Under the agreement, JBT FoodTech will supply the filling, closing and sterilization technologies for PML's new milk processing plant at Pulau Indah. (Source: The Edge Financial Daily)
Hap Seng: Sets 50% dividend payout policy. Hap Seng Consolidated Bhd is set to distribute 50% of its group net profit in the form of dividends, after its board approved the dividend policy. (Source: The Edge Financial Daily)
YTL Comms: 4G network in all local universities by this year. YTL aims to make its Yes 4G network available to all public universities and selected private institutions of higher learning in Malaysia this year. The network has been successfully activated at University Sains Malaysia (USM), Penang, and covers virtually all parts of the 240 ha USM main campus. (Source: Bernama)
Cocoaland: Bags another F&N contract. Cocoaland Holdings Berhad's wholly owned subsidiary, Cocoaland Industry Sdn Bhd (CISB) was appointed by F&N Beverages Manufacturing Sdn Bhd (F&NBM) as its non-exclusive contract packer to prepare, package, pack and deliver F&NBM's products. Cocoaland will prepare, package and deliver the products of F&NBM for a period of one year with an option to extend for another one year. (Source: Bursa Malaysia)
Plantation: Firms rap medical insurance ruling. Oil palm and rubber plantation firms, which are already footing the medical bills of their foreign workers, will now have to fork out another RM50m to insurance companies. Effective January 1 this year, the Health Ministry requires all employers to pay for foreign workers' medical insurance. Meanwhile, under the Workers Minimum Housing Standard & Amenities Act 1990 (WMHSA), all estate owners are also required to provide healthcare facilities and services for their staff (including foreign workers). The number of plantation workers seeking treatment in government hospitals is in fact very small because only serious cases are referred to the healthcare centres outside the estate. (Source: Business Times)
Plantation: Indonesia forest moratorium postponed. Indonesia's forest moratorium was postponed as its government is still undecided on the details of a two-year moratorium on forest clearing under the USD1b (RM3.07b) climate deal with Norway, leading to continued uncertainty for plantation firms. The planned commencement date for the moratorium was initially Jan 1st. (Source: The Edge Financial Daily)
Outside Malaysia
U.S: Services expand by most since 2006 in December. The Institute for Supply Management's non-factory index, which covers about 90 percent of the economy, rose to 57.1. A reading greater than 50 signals growth. (Source: Bloomberg)
U.S: Companies in December add 297,000 jobs, ADP says. Companies in the U.S. boosted payrolls in December by the most since records began in 2001, showing a stronger labor-market recovery at the end of last year, data from a private report showed. (Source: Bloomberg)
E.U: Services, manufacturing growth in December remains steady led by the fastest growth in more than four years in Germany. A composite index based on a survey of euro-area purchasing managers in both industries held at 55.5. That compares with Dec. 16 reading of 55. A figure above 50 indicates expansion. (Source: Bloomberg)
Spain: Industrial production expanded in November for the first time in three months as the recovery from an almost two-year recession accelerated. Output at factories, refineries and mines rose 2.3% YoY, adjusting for the number of working days, after contracting 1.9% YoY in October. (Source: Bloomberg)
Taiwan: Consumer price growth unexpectedly slowed in December for the first time in four months as the gain in food prices moderated. The consumer price index increased 1.25% YoY, compared with a revised 1.52% YoY climb in November, the statistics bureau said in Taipei. (Source: Bloomberg)
Indonesia: Kept its benchmark interest rate at a record low even after consumer prices rose at the fastest pace in 20 months, betting measures such as higher bank reserve requirements will keep inflation in check. The central bank maintained its reference rate at 6.5% for a 17th meeting, it said in Jakarta. (Source: Bloomberg)
Philippines: Inflation held steady in December as the peso's gains helped counter the effect of rising crude oil prices. Consumer prices rose 3% YoY, the National Statistics Office said in Manila. Average inflation for the year was 3.8%, within the bank's 3.5% to 5.5% target. (Source: Bloomberg)
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