RHBInvest Research

Tuesday, August 16, 2011


Top Story: Top Glove – Latex prices set to ease further Underperform

Visit Note

¨ Latex prices have corrected sharply, in tandem with other commodity prices (excluding precious metals) amid concerns of weaker-than-expected economic growth. As such, we have reduced our latex price assumption to RM8.59/kg for FY11 (from RM8.69/kg earlier). Our latex price assumptions of RM7.75-7.90/kg for FY12-13 remain intact.



Sector Call



Property: Vietnam – Good prospect but not an easy market Neutral

Sector Update

¨ Vietnam has been a tough market. This is well known to many investors. The high inflation and lending rate imply that the required rate of return/IRR of any development projects must be at least 30% to make it profitable. The unfavourable economic indicators and the under-developed mortgage market have largely explained why many Malaysian developers have not been aggressive in pushing their launches in Vietnam during the recent property upcycle, when regional property markets are booming.



Corporate Highlights


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Gamuda: Give me your best shot, comrades! Outperform

Visit Note

¨ MMC-Gamuda JV may have to settle for a low price for the tunnelling works if they have to match the ultra low winning bid from one of the two Chinese contractors, but we believe Gamuda could still optimise to improve profitability.



Notion Vtec: Shifting focus to camera and auto Underperform

Briefing Note

¨ Management appeared to have a more cautious tone on the industry outlook given the weaker-than-expected global economic growth. We understand although management has not witnessed any cut back in orders yet, the current environment poses a risk which could lead to slower-than-expected orders from customers. The HDD industry is not only facing weaker-than-expected IT spending for desktop PCs, it is also facing stiffer competition from tablets. Hence, we understand Notion will focus on the camera and automotive segments going forward.



SP Setia: Beranang? It’s far, but they will make it nearer Market Perform

News Update

¨ SP Setia entered into a SPA for the proposed purchase of a piece of 1,011-acre freehold land in Beranang for RM330m, or RM7.50 psf. The site is estimated to yield a GDV of RM3.5bn.The land is located midway between Semenyih, Bangi Old Town and Beranang. Travelling time is said to be about 40min to KL.



Evergreen Fibreboard: Going upstream into rubber plantation Underperform

News Update

¨ Evergreen has entered into a Mou with four individuals to purchase a 4,410-acre of land for RM37.8m. The land consists of tropical timber and approximately 1,730 acres of the area has been logged.



Dialog: On the mark Outperform

4QFY11 Results

¨ FY11 net earnings of RM152.4m were in line with expectations, rising 29% due to increased contribution from associate earnings (+23%) and better margins from core divisions of 13.4% (vs. 10.2% in FY10).



CSC Steel: 2QFY11 results dragged down by higher raw material costs Underperform

2QFY11 Results

¨ 1HFY11 net profit came in below expectations. We believe the variance against our forecast largely came from worse-than-expected margin contraction in 2QFY11 as a result of weak demand and significantly higher raw material costs.


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