RESULTS REVIEW
Petronas Gas RM11.22: Buy
No surprises; retain Buy Shariah-compliant
In line. We see PGas as a major beneficiary as Malaysia liberalises its gas supply and prices. We expect sustained earnings growth as PGas reaps transportation income from 3rd party gas injected into the PGU network pipeline by 2014 or earlier. PGas remains in our Buy list with a RM14.10 DCF-target price, which offers a 26% upside.
RHB Capital RM8.17: Buy
Underlying business growth still firm
Maintain Buy. 2010 results were within our expectations and consensus. Our 2011 and 2012 forecasts are raised by 6% and 10% respectively on higher loan growth and lower charge off assumptions, while our DDM-derived target price is raised to RM9.40 from RM9.10 as a result. Underlying business growth remains firm while valuations are undemanding with the stock trading at a prospective 2011 PER of 11x versus a peer average of 13.4x. RHB's prospective P/BV of 1.6x compares favorably against a peer average of 1.8x (ex-Public Bank) despite a higher ROAE of 15% for 2011 versus the latter's 14.6%.
British American Tobacco RM46.32: Sell
Puff-ing away, challenging outlook
Boosted by one-off. RM731m 2010 net profit (-2% YoY) included RM15.5m gain from sale of Shah Alam property in 4Q10. RM716m 2010 core net profit (-4% YoY) fell short of expectations at 97% of our (RM741m) and 98% of consensus. 4Q10 was operationally weak, with sales volume down 10% QoQ, post a 3sen per stick excise hike in Oct 2010. Industry outlook is challenging, while BAT's blended margins are also expected to come off with more export volume targeted for 2011. Maintain Sell with a lower RM42.50 target price (-50sen).
Malaysia Marine and Heavy Engineering Holdings RM6.40: Hold
Results as expected; downgrade to Hold Shariah-compliant
In line, inching in to target price. Results tracked expectations but we downgrade MMHE to Hold following a sterling share price performace since its initial public offering (IPO) in Oct 2010 (+77% from RM3.61 retail IPO price). MMHE should see several sizeable job wins in 2QCY11 (i.e. Tapis CPP, Malikai TLP) but these have been priced in, we believe. Upside potential to our RM6.50 22x CY12 PER based target price are narrowing.
Genting Plantations RM7.97: Hold
Cautious outlook Shariah-compliant
In line. RM320m 2010 net profit was stronger (+36% YoY) on higher CPO ASPs despite weaker production. The results were in line with our forecast. Going forward, we see minimal upside to Genting Plantations' share price as we expect CPO spot to normalise during 2H11. Genting Plantations is most leveraged to CPO prices among the large cap plantation stocks. Our revised earning and valuation estimates resulted in a lower RM8.60 target price (-5%). Maintain Hold.
Sunway City RM4.12: Buy
Beats the market; targets RM1.5b sales Shariah-compliant
Maintain Buy. SunCity's 2010 RM191m normalised net profit came in above expectations. This year, SunCity targets RM1.5b sales (+22% YoY). In our view, a bigger entity with RM3.6b market capitalisation and an enlarged balance sheet post-SunCity-SunHoldings merger will improve shares trading liquidity and enable the merged entity to take on larger projects. We raise our forecasts by 3-9% but maintain the RM5.10 target price (offer price). We advise shareholders to accept the merger offer. SunHoldings warrants provide a cheaper entry to the new Sunway group.
Technicals
The FBM KLCI tumbled by 12.22 points to 1,513.63 yesterday. Its resistance areas of 1,513 and 1,533 will cap market gains, whilst the obvious support areas are located at 1,490 and 1,510.
Trading idea for today is a TAKE PROFIT call on IOICORP.
Other Local News
Auto: Total vehicle sales up 8% in January. Total vehicle sales in January increased 8% to 54,696 units from 50,622 units recorded a year ago, as car makers ramped up production by about 20% to meet the Chinese New Year deleveries. Malaysian Automotive Association (MAA) said sales volume for February is expected to be lower than that of January 2011. (Source: The Edge Daily)
Economic: BNM reserves at RM338b. Bank Negera Malaysia's (BNM) international reserves amounted to RM338b (USD109.6b) as at Feb 14. The reserves position was sufficient to finance 8.1 months of retained imports and was 4.3 times the short-term external debt. (Source: Bernama)
MAHB: ventures into China with Nagamas JV. Malaysia Airports Holdings Bhd (MAHB) marked its maiden venture into China yesterday with the signing of a joint cooperation agreement with Nagamas International Bhd (NIB). It facilitates the joint provision of airport operation, management and technical consultancy services for the Yongzhou Lingling Airport in China. (Source: Bernama)
Petra Perdana: Banks on deep-water finds. Petra Perdana Bhd could be a major beneficiary of jobs stemming from Petronas recent deep-water finds at Sarawak's NC3 and Spaoh-1 deep-water wells. Petra Perdana has a mixed fleet of 25 vessels, of which 14 are larger vessels above 9,000bhp which are ideal for deep-water. (Source: The Edge Daily)
TM, Axiata: Back together in fixed and mobile business. Demerged Telekom Malaysia Bhd (TM) and Celcom Axiata Bhd entered into wide collaboration from high speed broadband (HSBB) services and wholesale Internet access to infrastructure sharing. This will result in substantial savings for both firms, although the figures are only expected to be quantified after the deal is sealed. (Source: The Sun)
TNB: Country’s first solar power plant. TNB will soon call for tenders for the project in Putrajaya that is estimated to cost RM60m. It marks a major step forward in the country's drive to harness renewable energy sources to wean itself from an over-reliance on fossil fuels and TNB will have a head-start in terms of knowledge. (Source: The Star)
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