Maybank IB Views

Thursday, August 25, 2011


Padiberas Nasional RM2.80: Buy
Rice + dividends = staple + stable Shariah-compliant

Underappreciated and misunderstood. Padiberas Nasional (Bernas) is Malaysia's custodian of rice and paddy with a 50% market share. Its business model is simple yet low risk: it buys paddy from local farmers, mills it and distributes it across the country. The deficit of local supply is supplemented by imports - of which Bernas has a monopoly. Profit growth are secured due to Malaysia’s insatiable demand for rice and cost reductions from on-going plant modernization. We initiate with a BUY, with a target price of RM3.90/share based on 8.1x 2011 PER.

COMPANY UPDATE
Eastern Pacific Industrial Corp RM2.93: Accept Offer
GO @ RM3.10, accept Shariah-compliant

Raya comes early, MGO at RM3.10/shr. Investors who were shareholders on 10 Dec 2010 but sold their EPIC shares between then and 23 Aug 2011 at below the Offer Price of RM3.10 are entitled to a cash compensation for the price difference. We advise current shareholders to accept the Offer, which is above our earlier target price and offers a 6% upside to yesterday’s closing price of RM2.93.

RESULTS REVIEW
IOI Corporation RM4.67: Buy
Good trading opportunity; upgrade to Buy Shariah-compliant

No surprises to earnings. FY11 net profit of RM2.22b (+9% YoY) met consensus expectations. Stripping off forex and fair valuation gains totalling RM215m, core net profit of RM2.0b (+27% YoY) met our expectation. We tweak our FY12 EPS forecast by -3.5% and revise TP to RM5.27 (-4%) based on unchanged 16x FY12 PER target. Current share price reflects just 13.6x one-year forward PER. We raise IOI to a tactical Buy as we view the recent selldown as overdone and IOI’s fundamentals remain intact.

RHB Capital RM8.90: Hold
Strong loan growth todate

Hold maintained. Earnings were slightly short of expectations due to higher provision costs and elevated administrative costs, for which we are now factoring in. Coupled with expectations of ongoing margin pressure, we have lowered our 2011 and 2012 net profit forecasts by 2.5% and 5.5% respectively. Our TP is unchanged at RM9.40, pegged to a 2012 P/BV of 1.6x (ROE: 14.3%).

Telekom Malaysia RM4.00: Buy
Fast growth in data revenue Shariah-compliant

Maintain Buy. 1H11 results were broadly within expectations and what is positive is that non-voice revenue (NVR) continues to grow at a faster-than-expected pace and now accounts for 60% of total revenue. We maintain our earnings forecasts and Buy call on TM for its stable cashflows, defensive yields of 6.3% and look to potentially higher dividend payouts in the future. Our DCF-based TP is raised to RM4.60.

IJM Corporation RM5.81: Hold
Profit normalises Shariah-compliant

Maintain Hold. Results were in line with RM115m 1QFY12 net profit making up 24.6% of our full-year forecast. Profit normalises post major kitchen-sinking in 4QFY11. Core net profit rose 34% YoY and 9% QoQ with plantation being the "star" contributor to both the YoY and QoQ profit expansion. We retain our earnings forecasts, and RM6.50 RNAV-based target price, which implies 17.7x calendar year 2012 PER.

Lafarge Malayan Cement RM7.01: Buy
Local demand rebounding Shariah-compliant

Below expectations. 1H11 topline was largely inline with our forecast but net profit of RM129m (+4% YoY) was just 34% of our full-year forecast and 36% of consensus. We lower our 2011 net profit forecast by 20% and 2012-13 by 3-6%. Subsequently, our TP is reduced to RM7.85 (from RM8.50; -8%) based on unchanged 17x 2012 PER. The stock currently trades at 15.2x 2012 PER and we see upside potential as LMC had traded up to 17x in the 2007 peak cycle. Maintain Buy.

Genting Plantations RM7.04: Hold
A good quarter Shariah-compliant

Ahead of expectations. 2Q11 recurring net profit of RM140m (+48% QoQ, +127% YoY) brings 1H11 recurring net profit to RM234m (+79% YoY), meeting 57% and 53% of our and consensus full-year forecasts respectively. We tweaked our 2011-13 EPS by -1% to 3% incorporating marginally higher FFB production outlook and labour cost increase. We change our valuation methodology to PER (from SOP) pegging the stock at last 4-year's forward rolling PER of 14.5x (on FY12 earnings). Maintain Hold at a lower TP of RM7.48 (-13%).

Multi-Purpose Holdings RM2.75: Buy
The best is yet to come

Reaffirm Buy call. Multi-Purpose Holdings (MPHB) recorded results that were above expectations due to lower than theoretical prize payout ratios. We expect MPHB to record core net profit of some RM100m per quarter going forward on 100% ownership of Magnum Holdings effective 10 Jun 2011. MPHB also declared an interim DPS of 5 sen less tax or 25% higher than expected.

KFC Holdings (Malaysia) RM3.86: Hold
Domestic growth still strong Shariah-compliant

1H11 on track. 1H11 net profit of RM72.5m was within our expectations at 42% and 43% of our full-year forecast and consensus respectively. Revenue growth was seen across all 3 segments in the group but only the restaurant segment was profitable. Maintain Hold, We expect a seasonally stronger 2H to make up our full-year forecast of RM172m. Our TP of RM3.97 is unchanged and tags on a prospective 2012 PER of 16.2x.

Media Prima RM2.76: Hold
Expenses and risks ahead of revenues

Expenses and risks rising. Media Prima (MPR) reported 1H11 results which were below expectations on higher than expected expenses. In addition, adex growth, especially TV, slowed sharply and is expected to decelerate further into 4Q11. We trim our earnings estimates by 11%-12% on higher operating expenses. We also downgrade our TP from RM3.25 to RM2.90 and call from Buy to Hold.
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Kossan Rubber Industries RM2.78: Buy
Earnings bottomed; time to relook Shariah-compliant

Expect stronger 2H11. 1H11 net profit of RM44m (-27% YoY) made up 36% of our full-year forecast and consensus, within our expectation. Current share price is low-risk entry level: (i) stock fell 35% since a year ago, fully reflecting weaker earnings in the corresponding period; (ii) earnings should rebound in the sequential quarters on expansion into the high-margin nitrile and surgical glove segments; and (iii) glove sector is a safer haven amid a global recession fear. Maintain Buy and DCF-derived TP of RM3.60 (9x 2012 PER).

Kinsteel RM0.585: Hold
Losses widened Shariah-compliant

Staying sideline. 1H11 net loss of RM10m (1H10: RM31m net profit) is significantly below our full-year net profit expectation of RM10m and consensus' RM32m. Though share price is at its 2-year low, we would only Hold Kinsteel as: (i) the stock is of high-beta; and (ii) near-term earnings are unlikely to turnaround sharply due to the high imported iron ore cost. Maintain Hold with lower TP of RM0.61 (from RM0.65), valuing Kinsteel based on 1x P/NTA (from 8x 2012 PER).

Tanjung Offshore RM0.85: Hold
Turnaround but concerns remain Shariah-compliant

Maintain Hold. TOFF's 2Q results were a positive surprise, which led us to raise our 2011-13 forecasts. While operating momentum appears to have recovered in 2Q, further earnings visibility is required, for cost management remains a concern at this juncture. Moreover, its stretched balance sheet is an impediment to growth, in our view. Until then, we rate TOFF a Hold with a lower target price of RM0.98, based on 0.8x book for 2011 after rolling over valuations from 2010.
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Technicals
The FBM KLCI tumbled 13.22 points to close at the 1,469.15 yesterday. Its resistance areas of 1,469 and 1,492 will cap market gains, whilst the weaker support areas are located at 1,423 and 1,454.Due to the US markets’ rebound tone last night; we may see a “gap-up move for the local bourse today.

Trading Idea is CIMB

Other Local News
SapuraCrest-Kencana: Merger on track. The merger of SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd is expected to take place by the first quarter of next year and the recent approval by the SapuraCrest and Kencana boards had set in motion the establishment of an integration committee. (Source: The Star)

Perodua: Receives 31,000 orders for new Myvis. Perodua has received 31,000 orders for its newly-launched Myvi. 14,000 units have been delivered and the remaining will be delivered in phases. About 8,000 new Myvis are delivered to the owners every month. (Source: Bernama.com)

Nadayu: To launch projects worth RM1.5b. Nadayu Properties Bhd aims to launch three projects worth a combined RM1.5b in the Klang Valley and Penang from next month. Nadayu intends to return dividends to shareholders and believe overtime, it will have local and foreign funds investing in the company. (Source: Business Times)

Plantation: Aussie govt to oppose palm oil labelling Bill. The Australian Government will oppose a Liberal-National Party coalition-supported anti-trade Private Member's Bill on compulsory palm oil labelling as it would breach Australia's obligations under the World Trade Organisation (WTO). (Source: Business Times)

Property: Freeze on Klang River land deals. The government has ordered a freeze on all transactions of government-owned land near the Klang River in the city centre pending efforts to clean up the river. The move is to enable the government to extract better value from its land by doing deals only after it can factor in proximity to a beautiful riverfront as a value enhancer. (Source: The Edge Financial Daily)

Building materials: MISIF says Govt move to stop probe into imports of HRC is good. The Malaysian Iron and Steel Industry Federation (MISIF) has lauded the Government's decision to terminate investigations into the import of hot rolled coils (HRC). The decision was good for the healthy growth of the entire iron and steel industry instead of benefiting one company. (Source: The Star)

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