RHBInvest Research

Top Story: E&O

Company Update

• The recent in-principal approval for E&O’s STP2 project is a significant quantum leap for E&O, as it finally crystallises the value within the group
• E&O will become the largest land owner on the Penang island, set to enjoy the increasing property values on the island, fuelled by rising FDIs. Considering the scarcity of land on the island, this would make land a very valuable asset for developers.
• The upside potential is accentuated by the MOU that was entered yesterday between the state government and Chinese state-owned contractor Beijing Urban Construction Group (BUCG) to construct a 6.5 km tunnel to link the island and mainland that stretches from Gurney Drive to Butterworth. This latest development certainly bodes well for E&O’s project in STP, due to its close vicinity to the 3rd link, capturing rising population flow to the island while easing the traffic congestion issues.
• We think E&O should be worth more now given the green light from the state government which clears up the largest uncertainty, while also enjoy the state’s infrastructure investments. We hence raise our fair value to RM2.00 (from RM1.85 previously)

Corporate Highlights

Petronas Gas:

Company Update
Minimal impact from lower gas volume
Maintain Outperform call and our RM13.95/share fair value.

Paramount:

Company Update
We downgrade Paramount to Market Perform, as we believe the stock is now fully valued –Nevertheless, dividend angle of the stock is still rather attractive.
No change to forecasts. Although we downgrade the stock to Market Perform, our fair value is unchanged at RM5.92,.We believe the on-going (2-for-5) bonus issue and (1-into-2) share split exercise will continue to support the share price. An EGM will be held in early Jun for the approval of the proposed exercise.

HELP International

Briefing Note
On track with its Subang 2 campus
No change to forecasts. Our fair value is maintained at RM2.87,We reiterate our Market Perform call on the stock.

Unisem:

Briefing Note

• Unisem guided for 2Q11 revenue to grow at 5-6% qoq driven by strong demand for Quad Flat No Lead (QFN), higher-margin ball grid arrays (BGA) and micro-electro-mechanical-systems (MEMS). Furthermore, Unisem highlighted it is already seeing a pick-up in orders which suggests stronger growth in 2H2011.
• Our fair value is lowered slightly to RM1.99/share based on 11x FY11 FD EPS. Maintain Market Perform.

EON Capital:

News Update

• High Court dismisses Primus’ petition
• No change to forecasts and fair value of RM7.30 (based on HL Bank’s offer price). Maintain Underperform.

SEGi:

1QFY11 Results

• Stronger margins in 1Q11
• Our fair value has been raised to RM5.05 (from RM4.54).We believe SEGi’s current valuations are undemanding compared to HELP.The stock offers strong earnings prospects and decent dividend yield of 4.3% (ex-special dividend). Hence, we reiterate our Outperform call on the stock.

Axis REIT:

1QFY11 Results

• 1Q10 realised net profit of RM16.2m (+39.4% yoy; +0.2% qoq) missed our expectation and consensus estimates by about 10%. However, we expect earnings to pick up in upcoming quarters due to completion of acquisition of a new property recently.
• No change to forecasts. We maintain our Outperform recommendation on Axis REIT. Our indicative fair value is kept at RM2.71.