Maybank IB Views

Friday, July 22, 2011

Tenaga Nasional RM6.52: Hold
Still not out of the woods yet Shariah-compliant

Worst quarter ever. RM786m 9MFY11 core net profit (-68% YoY) was 53% of our full-year forecast and 38% of consensus. 3QFY11 was exceptionally weak due to shutdowns of natural gas facilities for repairs, high coal price and extra cost incurred by burning oil and distillates. We have lowered our FY11-13 earnings forecasts to take into account this quarter's results and changes to revenue and cost assumptions. Maintain Hold, with a lower TP of RM6.60 (from RM7.05) based on unchanged 13x FY12 PER.

British American Tobacco RM46.20: Sell
Gloom-soaked cigarette

Cautious mode persists. 1H11 net profit accounted for 48% and 50% of our and consensus full-year forecasts respectively. We maintain our Sell call on BAT (RM42.50 DCF-based target price) due to declining sales volume and exacerbated by weaker margins. Valuation, at 17.5x 2011 PER, appears pricey relative to its lackluster earnings growth (2.5% 3-year forward net profit CAGR).

TH Plantations RM2.10: Buy
Strong production recovery in 2Q Shariah-compliant

No earnings surprises. 1H11 net profit accounted for 49% of our full-year estimate, and are within consensus expectations. THP’s current valuation at 9.3x 2011 PER offers a good buying opportunity as it trades at a 41% discount to industry peers’ average of 15.8x. This is further supported by attractive net dividend yields of 5.5%. We reiterate our Buy call with an unchanged TP of RM2.50 (11x 2012 PER).

The FBM KLCI rose 3.22 points to close at 1,565.81 yesterday. Its resistance areas of 1,569 and 1,580 will cap market gains, whilst the obvious support areas are located at 1,552 and 1,565.

Trading idea is TENAGA

Other Local News
MAS: Sees no need to raise cash. Malaysian Airline Systems Bhd (MAS) sees no need to raise capital against a backdrop of weakening travel demand. Poor quarterly results have raised concern over cash depletion at the national carrier, which is expecting at least four more aircraft to be delivered this year. (Source: The Edge Financial Daily)

AirAsia: Expands in Japan. AirAsia Bhd has tied up with All Nippon Airways Group (ANA) to form AirAsia Japan Co Ltd. AirAsia will hold 49% stake in AirAsia Japan, which will be the first low-cost carrier (LCC) to be based at the Narita International Airport. (Source: The Edge Financial Daily)

TM: The latest MVNO? Telekom Malaysia Bhd may be the latest player in the MVNO (mobile virtual network operator) space. It has signed a MoU with Celcom Axiata Bhd to cooperate strategically in providing complete fixed and mobile solutions. (Source: The Edge Financial Daily)

CI Holdings: Asahi buys Permanis for RM820m. CI Holdings Bhd (CIH) is selling its entire 70m shares in Permanis Sdn Bhd to Japan's Asahi Group Holdings Ltd for RM820m in cash. CIH is making a net gain of RM677.1m from the disposal based on its audited financial statements for the financial year ended June 30 2010. Permanis is PepsiCo Inc's bottler in the country. (Source: Business Times)

Hiap Teck: Unit in steel mill deal. Hiap Teck Ventures Bhd’s 55% owned subsidiary Eastern Steel Sdn Bhd has entered into an engineering and procurement contract and a construction contract with China Shougang International Trade and Engineering Corp for the design, procurement and construction of the first phase of an integrated steel mill in Teluk Kalung, Kemaman, Terengganu. The contract value for the engineering and procurement contract is RM417.83m, while the construction contract is RM232m. (Source: The Star)

Kurnia Asia: Gets nod to start acquisitions talk. Kurnia Asia Bhd (KAB) has received the green light from Bank Negara to commence preliminary negotiations with relevant interested parties for the acquisition of an equity stake in its wholly owned subsidiary, Kurnia Insurans (M) Bhd (KIMB). (Source: The Star)


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