Maybank IB Views

Wednesday, March 30, 2011

Kencana Petroleum RM2.58: Buy
Bags Petrofac's Cendor Phase 2 gig Shariah-compliant

Maintain Buy; 20% upside. Kencana is on course to meet its job win targets for FY11. The RM216m Petrofac EPCC gig takes its outstanding orders to 69%, with 4 months to go. Our forecasts are unchanged, which implies a 3-year net profit CAGR of 26%. We value Kencana at RM3.10, based on 20x CY12 EPS. Our 20x PER target is validated in a capex-fueled, order book-driven upcycle.

Top Glove Corporation RM5.28: Hold
Stretching valuations Shariah-compliant

Sentiment driven. Latex cost has rebounded to the pre-Japan earthquake level of RM10.35/kg. We reduce our FY11 EPS forecast by 8% after we trim our sales volume assumption by 3%. Though Top Glove is trading at 15x CY12 PER (above its 5-year historical average of 13x), we think short-term interest on the stock will sustain owing to expectation of a falling latex cost in May. Reiterate Hold, TP is adjusted upward to RM5.10 (from RM4.55) as we roll forward our DCF valuation.

The FBM KLCI rose higher by 5.84 points to 1,520.09 yesterday. Its resistance areas of 1,521 and 1,538 will cap market gains, whilst the obvious support areas are located at 1,505 and 1,520.

Trading idea for today is a Buy call on COASTAL.

Other Local News
MISC: To gain from sale and charterback of vessels. MISC Bhd's subsidiary, AET Inc. Ltd., entered into the sale and charterback of four tankers, namely two Aframaxes and two Very Large Crude Carriers (VLCCs). The total net cash proceeds from the transaction is USD167m for a gain on disposal of USD33m. (Source: Bursa Malaysia)

MRCB: Inks deal with Ekovest. Malaysian Resources Corporation Berhad has entered into a joint venture with Ekovest Berhad and KL Bund Sdn Bhd in relation to the River of Life Project. MRCB would have 40% equity in JV company while Ekovest would hold 60% stake. (Source: Bursa Malaysia)

DRB-HICOM: VW to make Pekan regional hub, plans to make 30,000 vehicles by 2018. DRB-HICOM Bhd's tie-up with German automotive giant Volkswagen AG (VW) to manufacture VW cars at the former's plant in Pekan, Pahang is expected to produce more than 30,000 (VW) vehicles at the plant by 2018. Pekan will become the regional automotive hub for VW. (Source: The Star)

Perisai: To buy Garuda Energy for RM210m. Perisai Petroleum Teknologi Bhd plans to buy all of Garuda Energy (L) Ltd, an oil and gas concern, for RM210m. Garuda Energy currently owns a jack-up rig that is being converted into a Mobile Offshore Production Unit (MOPU) at Jurong Shipyard, Singapore, by May 2011. (Source: Bursa Malaysia)

Metro Kajang: To beef up plantation, property units. Metro Kajang Holdings Bhd is buying more land in Kalimantan, Indonesia and in the Klang Valley to beef up its core plantation and property development divisions to drive earnings. Metro Kajang was looking to buy 20,000ha of plantation land from a local landowner in east Kalimantan. (Source: Business Times)

Petrolchemical: Petronas and BASF mull RM4b joint investment to set up petrochemical plant in Malaysia. Petroliam Nasional Bhd (Petronas) and BASF SE are considering a potential joint investment sum of RM4b to set up a plant to produce petrochemical products in Malaysia. (Source: The Malaysian Reserve)

Property: Malaysia to allocate land for affordable homes. The government will allocate a portion of its landbank for the construction of affordable housing, especially for Malaysians eligible for the My First Home Scheme. The affordable housing project, which will likely be stratified properties or apartments, will either be built by the government or through joint ventures with the private sector. (Source: Business Times)


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