Stocks to watch: IOI Corp, UOA REIT, MAHB, SP Setia

Sunday, July 17, 2011

KUALA LUMPUR: Stocks on Bursa Malaysia may see more downside pressure in the week ahead, starting July 18 due to external headwinds, mainly from the US.

On Wall Street, US stocks ended the week lower. For the week, the S&P 500 ended down 2.1%, while the Dow lost 1.4% and the Nasdaq fell 2.5%.

Mounting uncertainty about the government's ability to reach a debt-reduction deal may keep investors at bay in the coming week, Reuters reported.

Next week's U.S. data including the Philadelphia Fed survey would provide a crucial update on the state of the world's biggest economy after a disappointing set of data in recent weeks, especially last week's monthly jobs report, it said.

At Bursa Malaysia, the FBM KLCI fell 17.49 points to 1,577.25 from the week before while the marker capitalisation was reduced by RM14.07 billion to RM1.342 trillion.

Year-to-date, the KLCI is up 3.84%, making it the fifth best performing market in the key regional markets. At 1,577, the KLCI is trading at a trailing price-to-earnings of 16.82 times.

Two companies which are due to be listed in the week ahead are Inarai Bhd and Catcha Media Bhd.

Inari Bhd posted net profit RM2.6 million for the third quarter ended March 31, 2011 on the back of revenue RM35.8 million. For the nine months ended March 31, the company’s net profit was RM14.7 million on the back of revenue RM77 million.

Catcha Media reported that in the first quarter ended March 31, 2011, it recorded revenue and pre-tax profit of about RM5.728 million and about RM12,000 respectively.

It said the pre-tax profit was mainly due to the lower revenue achieved in the current quarter as a result of the seasonality associated with media business, significant increase in headcounts and associated payroll expenses in both publishing and online media business in anticipation of the growth of revenue in the future as well as the listing expenses incurred in the current quarter under review.

Stocks to watch on Monday include IOI Corp Bhd. UOA Real Estate Investment Trust (UOA REIT), Malaysia Airports Holdings Bhd (MAHB) and SP SETIA BHD [].

The Edge weekly reports executive chairman Tan Sri Lee Shin Cheng as saying that going by its present growth rate, the company's property business could grow to three times its present size and become a distinct and substantial core business for the group.

UOA REIT’s net profit rose 62% to RM10.68 million in the second quarter ended June 30, 2011, from RM6.59 million a year ago.

Its revenue increased by 88% to RM20.28 million from RM10.78 million. Earnings per share were 2.53 sen compared with 2.68 sen.

MAHB’s decision not to install aerobridges at the new Low Cost Carrier Terminal, or KLIA 2, will save the company up to RM104 million.

Its chairman Tan Sri Aris Othman said the amount was for 80 aerobridges, costing RM1.3 million each. Although aerobridges could provide convenience, it would be a waste if airlines would not use it.

SP Setia share price closed 12 sen lower to RM3.89 on Friday after hitting an intra-day low of RM3.84 the lowest since early March as analysts downgraded it to underperform.

CLSA Asia-Pacific Research had downgraded SP Setia to Underperform from Outperform with a revised target price of RM4.30, based on a 10% discount to RNAV of RM4.80. It said this was in line with the discount applied to other property names under its coverage.

“Given that SP Setia is a pure property developer play, we believe that the 10% discount is justified from zero discount previously. We do not see any compelling reason for SP Setia to be valued at a premium compared to the rest of the property companies given that the visibility of the physical property market has been reduced by the mixed signals,” it said.

However, CLSA said it did not change its earnings estimates for FY11 and FY12 as these will continue to be supported by the strong unbilled sales recorded at RM1.8billion as at FY10, which had subsequently increased to RM3billion as at H111.

“For FY13 earnings estimates, we see potential downside risk if the mixed signals above tilted towards more negative outlook. Another potential headwind could be the change in government policy in tightening the lending requirement, which at this stage, still unclear as it remains at the proposal stage,” it said.


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