RHBInvest Research

Tuesday, May 3, 2011

Top Story: Fajarbaru

Visit Note
Upbeat on new contract wins
The new contract wins could potentially come from: (1) Package B of the Ampang and Kelana Jaya LRT line extension project; (2) Building jobs for schools, colleges and university campuses; and (3) Infrastructure works in the East Coast.
FY06/11 net profit forecast is reduced by 10% as we now assume the RM150m contract for the five new LRT stations to only start contributing in FY06/12 (vis-à-vis FY06/11 we assumed previously).
Fair value is trimmed from RM1.65 to RM1.57 but maintain Outperform.

Sector Call

Banks: Mar ‘11 system data

Sector Update
Leading indicators charting new heights
No change to our Overweight stance on the sector. CIMB, AMMB and Affin are our top picks for the sector.

Semicon: March chip sales still up yoy Neutral

Sector Update

Unisem: Fair value at RM1.99 Market Perform

MPI: Fair value at RM4.95 Underperform

Notion: Fair value RM2.25 Market Perform

JCY: Fair value at RM0.74 Underperform (down from MP)

Corporate Highlights


Visit Note

  • Labour issues to affect margins in FY11
  • Also, management highlighted there could be potential component shortages mainly for the motor controller chips that could affect the global supply chain of the HDD industry.
  • We are reducing our FY11 net profit by 11.3% mainly to input higher operating expenses. However, we are raising our FY13 net profit by 7.6% to reflect margin improvement on the back of its expansion to China .
  • Thus, we downgrade our call to Underperform (from market perform) and a lower fair value of RM0.74/share based on unchanged 10x CY11 EPS.


Briefing Note
  • Growth story and IPO of overseas units not without caveat
  • Fair value is RM2.10. Maintain Underperform.


1QFY11 Results/Briefing Note
  • 1 Network modernisation will not affect dividends
  • We have fine-tuned our earnings forecasts by 0.2-0.7% for FY11-13 due to marginally lower depreciation charges from lower capex assumptions.
  • Fair value raised to RM30.00 from RM29.10 due to lower capex assumptions of RM650m p.a. (previously RM720-750m). Although we like the stock as a decent dividend yield play with data-led revenue growth, we believe the stock is almost fully valued at this juncture. Downgrade to Market Perform.


Company Update
  • A fairly strong start to 2011 for XL
  • The strong 1QFY11 growth in XL reinforces our Outperform call on Axiata, which offers good growth prospects albeit moderating this year. Maintain our SOP fair value of RM5.75.


News Update
  • Acquiring land in Klang. Total cash consideration is RM110m, to be funded by internal funds and/or borrowings.
  • We are positive on this acquisition, as Klang is the 2nd largest city in Klang Valley after KL, with a population of close to 750k. A well-planned commercial development is hence marketable.
  • No change in our earnings estimates pending guidance from the management on GDV of the project.
  • Maintain Market Perform with an unchanged fair value of RM5.92.

EON Capital:

News Update
  • Eon Cap announced last Friday that the Board had accepted HL Bank’s offer, subject to and conditional upon: 1) the payment of an interim net dividend amounting to RM311.9m by Eon Bank (Proposed Interim Dividend); 2) the Proposed Interim Dividend received by Eon Cap shall not form part of the assets of Eon Cap to be disposed to HL Bank; and 3) the offer price of RM5.06bn remains unchanged and shall not be adjusted for the payment of the Proposed Interim Dividend. HL Bank has since confirmed that it is agreeable to the above conditions.
  • The Proposed Interim Dividend is subject to the approval from BNM. In addition, an application will be made to the SC for the proposed change in control of MIMB Investment Bank. Once BNM’s and SC’s approvals are obtained, both parties shall proceed and complete the transaction.
  • No change to our fair value of RM7.30 (based on HL Bank’s offer price) and Underperform call.


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