RHBInvest Research

Friday, August 5, 2011

Top Story: MMHE – Looking to scale up capabilities Underperform

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¨ MMHE’s initial plan was to take over the Pasir Gudang yard after Sime Darby had concluded its two outstanding oil and gas projects. However, we understand that it is now contemplating taking over the Kebabangan contract from Sime Darby to expedite the transfer of control of the yard, and has extended the due diligence exercise to assess the viability of such decision. In our view, assuming work already done by Sime Darby meets the required specifications, MMHE is likely to opt for earlier control of the yard (by end-2012 instead of end-2013) as it would enable better control in future contract phasing.



Corporate Highlights



CIMB: Keeps ROE target but loan growth target lowered Outperform

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¨ Management now targets loan growth of low-mid teens vs. 18% previously. For Malaysia, mortgages are not particularly attractive due to the steep competition while corporate loan growth could turn out to be weaker-than-expected if demand from the bond market remains strong. As for Indonesia, growth remains strong but CIMB Niaga would need to strike a balance between growth and managing NIMs.



TSH: Banking on its Indonesian plantations Not Rated

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¨ Despite having three core divisions (plantations, cocoa and wood manufacturing), the bulk of TSH’s revenue and profit comes from plantation (83.3% of revenue and 104.3% of operating profit in FY10). In FY10, the wood product manufacturing division was loss-making, while there were some inventory write-downs for the cocoa division, resulting in weaker margins. Going forward, we expect contributions from plantation to continue to grow, while the company intends to eventually dispose off the other two divisions.





TSH: Banking on its Indonesian plantations Not Rated

Visit Note

¨ Despite having three core divisions (plantations, cocoa and wood manufacturing), the bulk of TSH’s revenue and profit comes from plantation (83.3% of revenue and 104.3% of operating profit in FY10). In FY10, the wood product manufacturing division was loss-making, while there were some inventory write-downs for the cocoa division, resulting in weaker margins. Going forward, we expect contributions from plantation to continue to grow, while the company intends to eventually dispose off the other two divisions.

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