Maybank IB Views

Wednesday, April 27, 2011

Tanjung Offshore RM1.39: Sell
Caution ahead; flashing red flags Shariah-compliant

Maintain Sell. 1Q 2011 earnings will likely miss street expectations again. Cost management strategies and operating prospects remain the key concerns. An equity cash-call could ensue should the cash situation worsen. TOFF will also suffer an RM8m penalty cost for early bonds redemption. Valuations are expensive and consensus forecasts are aggressive. Nonetheless, Ekuinas’ next move remains a wild card.

Kencana Petroleum RM2.68: Buy
Gets KPOC's Kebabangan gig Shariah-compliant

We remain Buyers on Kencana. The RM208m KPOC EPC gig takes its outstanding orders to 89% of its targeted RM1b job wins for FY11. Our forecast, which implies a 3-year net profit CAGR of 26%, excludes earnings contribution from the Berantai RSC project. We do not rule out potential strategic tie-ups and assets expansion (i.e. rigs) as it explores deepwater opportunities. 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.

The FBM KLCI rose 3.29 points to close at 1,527.34 yesterday. Its resistance areas of 1,527 and 1,541 will cap market gains, whilst the obvious support areas are located at 1,514 and 1,525. Due to the DJIA’s positive tone last night, we may see the FBM KLCI remain stronger today. There could be an initial gap-up move, followed by latter day profit-taking.

Trading Idea for today is Take Profit call on NAIM

Other Local News
Construction: Chinese companies may bid for MRT job. Chinese Premier Wen Jiabao’s visit is expected to pave the way for them to participate in the RM40b MRT project as they have the financial muscle to go up against the Gamuda/MMC Corp joint venture and China is home to some of the most advanced railway systems in the world. (Source: The Edge Financial Daily)

Infrastructure: Sarawak to build 500km roads by end-2012. Under the National Key Result Area (NKRA) for a three-year period beginning last year, Infrastructure Development and Communication Minister, Datuk Seri Michael Manyin said Sarawak was allocated RM2b to build roads. Sarawak managed to complete 240km of new roads last year. (Source: The Edge)

Proton: Banks on Saga and Persona. Proton Holdings Bhd is banking on Saga and Persona to drive up sales this year as it seeks to topple rival Perusahaan Otomobil Kedua Sdn Bhd (Perodua) as the biggest carmaker in the country. Proton hopes to sell 85,000 units of Saga and 40,000 units of Persona while the total sales was targeted at close to 170,000 units this year. (Source: The Sun)

YHS: To consolidate plants. Yeo Hiap Seng (M) Bhd (YHS) will consolidate its factories in Shah Alam and Petaling Jaya to improve efficiencies and partially mitigate the effects of rising raw material prices. YHS also wants to introduce a new and less sweetened range of beverages to response to sugar price spikes. (Source: The Edge Financial Daily)


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