Maybank IB Views

Monday, May 16, 2011

Kencana Petroleum RM2.75: Buy
Buys AME for RM400m; a positive Shariah-compliant

A strategic acquisition. We are upbeat on Kencana's purchase of AME, on financial and operational aspects. Valuations are decent, in our view, and the deal, secured with profit guarantees (RM40m p.a. for FY11-12) is mildly EPS accretive (+1 sen to EPS). The acquisition will provide Kencana a foothold into the subsea markets and ownership of 4 vessels. This 'all-share transaction' will turn vendors of AME into the 2nd largest shareholder of the Group with a 7.6% stake. Our forecasts and target price are under review pending further details. Buy.

QL Resources RM3.40: Buy
A regional player in the making Shariah-compliant

Regional expansion on track. QL is replicating its success formula regionally for each of its main divisions, and the ongoing expansion will fund its growth in the coming years. Although share price has risen 16.4% YTD, outperforming the KLCI, we believe there is still upside potential, banking on its expansion especially into Indonesia, which has yet to contribute significantly to group earnings. We lift our TP to RM3.75 after rolling over our valuation period. We continue to be positive on QL.

The FBM KLCI rebounded 25.24-points and closed at 1,540.74 last Friday. The local market remained quite steady to firmer despite the global markets’ gyrations. Local funds pushed the market up especially last Thursday and Friday on firm bargain hunting activities.The obvious support areas for the FBM KLCI are located in the 1,507 to 1,540-zone. The firm resistance zone of 1,545 and 1,576 will see very heavy liquidation activities.

Weekly trading idea is a Firm Buy call on MEDIAC.

Other Local News
Sunway: To secure site of Jalan Duta complex. Sunway Group is said to have won a competitive bid to acquire the site of the Jalan Duta government complex. Sunway could be paying more than RM500m for the site and construct new offices for the IRB and Customs Department elsewhere. (Source: The Edge Financial Weekly)

MAS: Firefly takes delivery of 3rd 737 for KK ops. Firefly, subsidiary of MAS, took delivery of a third Boeing 737-800 aircraft to be stationed in Kota Kinabalu, officially marking the start of the city as its eastern hub. (Source: Malaysian Reserve)

IOI: Allegations against IOI 'just not true'. IOI Corp Bhd re-iterated that in October 2010, an RSPO-certified auditor SGS investigated the allegations and concluded the deforestation complaints were baseless. (Source: Business Times)

ECM, Kenanga: Close to sealing deal. ECM Libra Financial Group Bhd, whose substantial shareholders are long known to be looking to divest their equity stakes, is close to sealing a merger deal with K&N Kenanga Holdings Bhd. (Source: The Edge Financial Daily)

Masterskill: Seeks RM100m from STMB. Masterskill Education Group Bhd (MEGB), which has won its defamation suit against Sistem Televisyen Malaysia Bhd (STMB) for a total of RM250,000, is appealing to the High Court for the damages to be raised to RM100m. (Source: The Star)

FDI: Good response to Invest Malaysia NY. A total of 56 US fund managers have confirmed participation at the inaugural Invest Malaysia New York 2011 (IMNY 2011), which will be held tomorrow. (Source: Business Times)

Property: Demand for condos in KL. Condominium living is relatively new to KL and well designed projects are seeing strong sales performance, said Christopher Boyd, executive chairman of CB Richard Ellis Malaysia. The take up rate of condos in 1Q11 was between 65% and 88% in prime areas. (Source: Malaysian Reserve)


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