Stocks to watch: Coastal Contracts , Sanichi, Dialog, JCY

KUALA LUMPUR (Dec 16): Regional markets including Bursa Malaysia could trade on a cautious note on Friday as investors’ risk appetite for equities would be restrained by worries about the global economy and Europe's debt crisis.

Reuters reported major Southeast Asian stock markets fell on Thursday, extending the decline for the third day, led by banks and commodities as a decline in Chinese factory output added to worries about the global economy and Europe's debt crisis.

Concern over the situation in the euro zone rose after Fitch Ratings downgraded five big European banks on Wednesday.

At Bursa Malaysia, stocks which could see trading interest include COASTAL CONTRACTS BHD [], SANICHI TECHNOLOGY [] BHD [], DIALOG GROUP BHD [] and hard-disk drive manufacturer JCY International Bhd.

Coastal Contracts’s year-to-date order wins rose to RM690 million after the company secured new contracts worth RM233 million for the sale of three offshore support vessels, two landing crafts and two barges.

“With this latest batch of contracts, the value of Coastal Group’s secured vessel sales orders currently stood at about RM610 million, with deliveries through 2012,” it said.

Sanichi, whose shares inched up in very active trade on Thursday, could see continued trading action. It received a letter of intent from China’s Guangxi Huayin to purchase 150,000 tonnes of steam coal per month, totaling 1.80 million tonnes for a one-year period.

Sanichi said Guangxi Huayin is one of the largest and most advanced aluminium producers in China and the shareholders include the Aluminium Corporation of China with a 33% stake.

Meanwhile Dialog Group Bhd, which is undertaking a cash call to raise funds for more investments in the upstream oil and gas opportunities, has fixed the rights shares at RM1.20 each and the exercise price of the warrants at RM2.40 each.

The issue price would be a discount of about 46% to the theoretical ex-rights price of RM2.23 per share, based on the five-day volume-weighted average market price (VWAMP)up to Dec 14 of RM2.43.

As for the warrants, it said the exercise price was 8% above the theoretical ex-rights price of RM2.23 per share, based on the five-day VWAMP up to Dec 14 of RM2.43.

JCY could see continued trading interest as it was not impacted by the severe floods in Thailand unlike other hard-disk drive manufacturers which had major operations in Thailand.

CIMB Equities Research said believed a full restoration to pre-flood production was at least six to nine months away, but suppliers with strong balance sheets to invest could benefit from greater allocations in the near term.

“Improvements in average selling prices (ASP) for drive makers should also be positive for the industry,” it said. It advised investors to be selective as it believed volume would remain hindered by component shortages.

“Buy JCY as we expect strong near-term earnings on higher ASPs and allocations,” it said.

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Stocks to watch: EONCap, Coastal Contracts, Hap Seng, Fitters, MMHE

KUALA LUMPUR: Stocks on Bursa Malaysia could continue to see lacklustre trade in the week ahead, starting Monday, May 9 in the absence of strong fresh positive external news to spur buying interest.

The FBM KLCI had fallen the past week to below the key 1,530 level while volume has been declining due to the lack of strong institutional leads.

However, on the macro economic front, the strong March exports could help underpin sentiment. Exports reached a new high of RM64.06 billion in March 2011, up 7.8% from March 2010 while on a month-on-month basis, exports in March 2011 increased by 23.7%.

On Wall Street, an unexpectedly strong report on U.S. payrolls helped equities bounce back on Friday from four days of losses, tempering worries that stocks could suffer the sharp declines seen this week in commodities.

The Dow Jones industrial average gained 54.64 points, or 0.43 percent, to 12,638.81. The Standard & Poor's 500 added 5.10 points, or 0.38 percent, to 1,340.20. The Nasdaq Composite rose 12.84 points, or 0.46 percent, to 2,827.56.

For the week the Dow lost 1.3 percent, the S&P fell 1.7 percent and the Nasdaq Composite dropped 1.6 percent.

At Bursa, some stocks which could see trading interest include EON CAPITAL BHD, COASTAL CONTRACTS BHD, HAP SENG CONSOLIDATED BHD, FITTERS DIVERSIFIED BHD and Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE).

EON Capital will distribute the RM312 million, or 44.9 sen per share, which it will receive as special dividend from its unit EON Bank Bhd to all its entitled shareholders.

The dividend was proposed by EONCap on April 29 and agreed by HONG LEONG BANK BHD as a last-minute extra condition to the latter’s acquisition of EONCap’s assets and liabilities for RM5.06 billion.

Coastal Contracts proposed a corporate exercise involving a bonus issue and free warrants to its shareholders and also to purchase up to 10% of its paid-up capital.

It said on Friday, May 6 said it proposed a one-for-three bonus issue and one free warrant for every eight shares held after the proposed bonus issue.

Hap Seng Consolidated posted a strong set of earnings in the first quarter ended March 31, 2011, with net profit surging 108% to RM82.17 million in the first quarter ended March 31, 2011 from RM39.48 million a year ago.

Revenue rose 28% to RM751.34 million from RM587.18 million while earnings per share doubled to 14.58 sen from 7.01 sen.

Meanwhile, Fitters Diversified Bhd does not expect to be suspended on Tuesday after it submitted its outstanding annual audited financial statements for financial year ended Dec 31,2010 to Bursa Malaysia Securities Bhd on Friday, May 6.

“There will be no suspension of trading in the above company's securities on May 10,” it said.

Fitters Diversified was due to submit the statements to Bursa Securities for public release on or before April 30. However, due to the delay, it had initially faced suspension on May 10.

Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) posted pre-tax profit of RM114.08 million in the four quarter ended March 31, 2011, down 35.7% from RM177.45 million a year ago.

The decrease was mainly due to lower revenue in engineering and CONSTRUCTION and marine repair and conversion segments.

However, its net profit was up 11.7% at RM128.64 million compared with RM115.15 million a year ago. There was a tax writeback of RM14.43 million compared with tax paid of RM60.03 million a year ago.

Its revenue fell 41.9% to RM923.29 million from RM1.59 billion a year ago. Earnings per share were 8.0 sen versus 8.6 sen.

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Maybank IB Views

SECTOR UPDATE
Rubber Gloves: Neutral
Long-term value in nitrile

Keeping a cool head. Aggressive expansion plans at the nitrile segment could lead to ASP weakness in the short term before demand from emerging markets catches up. However, the long-term prospects for nitrile remain promising as the pricing disparity favoring nitrile gloves will remain for the longer term. No changes are made to our forecasts, ratings and DCF-derived TPs for Hartalega (Buy, TP RM6.80), Kossan (Buy, TP RM3.60) and Top Glove (Hold, TP RM5.10). Hartalega remains our top pick in the sector.

COMMENTS ON NEWS
Sunway REIT RM1.07: Buy
Foreign bidder tried to nullify acquisition

Summons filed by foreign bidder. SunREIT has received a summons from two individuals to nullify its purchase of the RM514m Putra Place (PP). However, SunREIT management is confident of taking over PP and announced yesterday the completion of the PP acquisition. There is no change to our earnings forecasts as we have not factored PP into our estimates. Our DCF-based target price is maintained at RM1.15.

COMPANY UPDATE
Malaysia Airports Holdings RM6.15: Buy
Holding steady

Momentum remains strong. MAHB's Feb 2011 traffic statistics reveal a steady 9.7% YoY passenger growth (2M 2011: +11.5% YoY). This is above the region and world's averages, and also above its own 2011 guidance of 8%. Cargo volumes shrunk marginally by 3.2% YoY due to the seasonal impact of Chinese New Year. Maintain Buy; no change to our earnings forecasts and RM7.12/share DCF-based target price.

ECONOMICS
CPI, Mar 2011
In line with expectations...

Inflation rate in Mar '11 rose by +3.0% YoY (Feb '11: +2.9% YoY; Maybank-IB: +3.0% YoY; Consensus: +3.1% YoY). It increased MoM for the 11th straight month by 0.1%. Core inflation rate - measured as CPI excluding the prices of Food & Non-Alcoholic Beverages and Transport - gained by +1.6% YoY (Feb '11: +1.5% YoY). YTD, inflation rate was 2.8% in 1Q 2011 vs 2.0% in 4Q10 and 1.3% in 1Q10. Our inflation forecasts for this year and next year are +3.0% and +2.9% respectively.

RESULTS REVIEW
Nestle (Malaysia) RM48: Hold
Strong start, as usual Shariah-compliant

Strong 1Q not a suprise. Nestle recorded a strong RM152.7m net profit (+10% YoY) which makes up 35% of our and consensus full-year forecast. This is not unusual for Nestle with 1Q being a seasonally stronger quarter. We are maintaining our forecasts and DCF-based target price of RM45.

Technicals
The FBM KLCI rose 9.49 points to close at 1,531.02 yesterday. Its resistance areas of 1,541 and 1,565 will cap market gains, whilst the obvious support areas are located at 1,514 and 1,531.

Trading idea for today is a Buy call on COASTAL.

Other Local News
Sime Darby: Insider trading probe. The Securities Commission (SC) is carrying out insider trading investigations surrounding the mega-merger that created Synergy Drive, the group that's now known as Sime Darby Bhd. The capital market watchdog had called in some people for questioning and the probe appears to be looking at information that may have been leaked out before the first announcement on November 27, 2006. (Source: Business Times)

IGB: Work on Mid Valley City Phase 3 to begin. IGB Bhd will commence the building of Mid Valley City's third phase in the next few months, while two other development projects are also set to take off. Phase 3 is planned as a commercial development with an office and a retail building with estimated gross built-up area of more than 1m sq ft. (Source: The Edge Financial Daily)

Telco: Spore, Msia mobile roaming rates down from May 1. Singapore and Malaysia mobile phone subscribers will see price reduction of up to 30% for voice calls and 50% for SMS and mobile roaming services from all mobile operators in the two countries from May 1. (Source: The Edge Financial Daily)

Autos: Toyota market share drops, rivals maintain. Toyota passenger car market share in Malaysia fell in the 1Q11 while Honda managed to maintain its market share and the Nissan grew its share by about 1ppt. (Source: The Star)

Islamic Banking: Khazanah sounds out Bank Islam on Muamalat stake. Khazanah Nasional Bhd plans to sell its 30% stake in Bank Muamalat Malaysia Bhd, a move which could pave way for a merger between the Islamic lender and its bigger rival Bank Islam Malaysia Bhd. (Source: Business Times)

Banking: Zeti reappointed as Bank Negara governor. Bank Negara's governor Tan Sri Dr Zeti Akhtar Aziz has been reappointed for a five-year term, effective May 1. (Source: The Star)

Construction: E-tender system to take off soon. Construction Industry Development Board (CIDB) is making preparations to implement National e-Tendering Initiative (NeTi) that will be the platform to process online job tenders under the Works Ministry. (Source: The Star)

Property: Inflation and demand to lift property prices. Malaysian property prices are expected to increase at an average of between 10% and 20% this year, in light of rising inflation and increase in demand for local properties by foreigners. (Source: The Star)

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Maybank IB Views

MARKET COMMENTS
INVEST MALAYSIA 2011
From message to passage of transformation

Giant leap towards Malaysia's 2020 high-income economy aspiration. The New Economic Model (NEM) unveiled by Prime Minister Dato' Sri Mohd Najib bin Tun Abdul Razak in Invest Malaysia 2010 (31 March 2010) has swung into full action with the Government Transformation Programme (GTP) entering its second year and the rollout of the Economic Transformation Programme (ETP) barely 6 months after its launch.

ECONOMICS
Industrial Production Index (IPI), Feb '11
YoY growth stays volatile

Industrial production growth picked up in Feb '11 to +5.0% YoY (revised Jan '11: +0.5% YoY; Maybank IB: +4.9% YoY; Consensus: +5.4% YoY). MoM, output shrank 7.2% as Chinese New Year holidays compounded a short working month. For Jan-Feb 2011, production rose +2.6% YoY (4Q10: +4.1% YoY; Jan-Feb 2010: +9.4% YoY), suggesting quarterly real GDP growth likely to have remained moderate in 1Q 2011 after the slowdowns during 2H 2010.

Technicals
The FBM KLCI closed lower by 13.49 points at 1,544.00 yesterday. Its resistance areas of 1,544 and 1,565 will cap market gains, whilst the obvious support areas are located at 1,529 and 1,540. Due to the DJIA’s marginally weaker tone last night, we will see the FBM KLCI in a further profit-taking mode today.

Trading Idea for today is a Take Profit call for TENAGA.

Other Local News
UMW: Expects oil & gas unit to be back in the black. UMW Holdings Bhd is confident that its oil and gas division will be back in the black this year, helped by several jobs it has secured. The company is banking on the performance of associate company WSP Holdings Ltd in China, its success in securing a drilling job from Petronas Carigali and expectations of a bigger revenue contribution from its foreign joint ventures, especially those in India and China. (Source: Business Times)

Westports: Container handling Up 20% In 1Q. Westports Malaysia Sdn Bhd posted a 20% growth in container handling for the first quarter this year compared with the same period last year. Westports container throughput was 1.5m twenty-foot equivalent unit (TEU), the highest ever quarterly achievement compared with 1.2m TEUs in the same period last year. (Source: Bernama)

Sagajuta: To unveil RM2b projects. Sagajuta (Sabah) Sdn Bhd, a pioneer developer in Sabah is launching four commercial projects worth almost RM2b this year, as demand for the properties increases, its chief said. They include the abandoned commercial project in Selangor, called 1Gateway Klang, which its unit, Lagenda Erajuta Sdn Bhd, has taken over and is reviving this month. The three new projects are located in Kota Kinabalu, Bukit Mertajam in Penang and Johor Baru, launching in phases from the end of this year. The projects will comprise modern shoplots, office towers, street mall and leisure facilities. (Source: Business Times)

Coastal: Secures deal to sell 11 tugboats. Coastal Contracts Bhd won contracts for the sale of 11 tugboats to a company based in Central America for about RM61m. Including the new contracts, the group to date has about RM665m worth of vessel sales orders awaiting delivery to customers up to 2012. (Source: Business Times)

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Maybank IB flyers

1. Mah Sing Group Berhad (MAHSING, Stock Code: 8583)

Mah Sing Group Berhad manufactures plastic molded products, operates in property development and investment, trades plastic and other related products and provides construction services

Currently, the Group has 33 projects spread throughout Malaysia 's economic nexus and property hotspots, namely KL and the Klang Valley , Johor Bahru (Iskandar Malaysia ) and Penang Island (North Corridor Economic Region). The Group's principal activity is in property development. Apart from the core business, the Group is also involved in plastic manufacturing and trading in Malaysia and Indonesia .


2. Coastal Contracts Berhad (COASTAL, Stock Code: 5071)

Coastal Contracts Berhad provides fabrication and sale of marine transportation vessels, property letting, ship repairs and maintenance, sub contract services, vessel chartering, tugboat and barge transportation, equipment hiring as well as barge hiring and leasing services.

With the Libya oil crisis, Brent Crude oil has now risen above USD120/barrel. Coupled with Petronas' re-gassification projects, Coastal is expected to gain from these 2 factors.

3. Masterskill Education Group Berhad (MEGB, Stock Code: 5166)

Masterskill Education Group Berhad is an investment holding company. Its subsidiaries provide higher education and training in nursing and allied health sciences.

It intends to open a campus in Indonesia soon in a move to diversify geographically, sources said. It will form a joint venture with Indonesia-based hospital owner PT Sejahteraraya Anugrahjaya (PTSA) for the venture. Having touched a low of RM1.67, its share price seems to have risen due to this news.

4. Mitrajaya Holdings Berhad (Mitra, Stock Code: 9571)

Mitrajaya Holdings Berhad is an investment holding company. Through its subsidiaries, it constructs buildings and roads, provides civil engineering services, supplies construction materials, and manufactures and sells ready-mix concrete. It also invests, manages and leases plant and machinery.

Its PE (of 5.9x) is still attractive since our recommendation to buy this stock at RM1.25 a few months back. Having successfully done KLIA & the Cyberjaya Flagship Zone, it may look to gain further as it may possibly be given a role in the coming Sg Buloh-Kajang MRT project. It performed a successful role in KL LRT project before.

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Maybank IB Views

Kencana Petroleum RM2.58: Buy
Bags Petrofac's Cendor Phase 2 gig Shariah-compliant

Maintain Buy; 20% upside. Kencana is on course to meet its job win targets for FY11. The RM216m Petrofac EPCC gig takes its outstanding orders to 69%, with 4 months to go. Our forecasts are unchanged, which implies a 3-year net profit CAGR of 26%. We value Kencana at RM3.10, based on 20x CY12 EPS. Our 20x PER target is validated in a capex-fueled, order book-driven upcycle.

Top Glove Corporation RM5.28: Hold
Stretching valuations Shariah-compliant

Sentiment driven. Latex cost has rebounded to the pre-Japan earthquake level of RM10.35/kg. We reduce our FY11 EPS forecast by 8% after we trim our sales volume assumption by 3%. Though Top Glove is trading at 15x CY12 PER (above its 5-year historical average of 13x), we think short-term interest on the stock will sustain owing to expectation of a falling latex cost in May. Reiterate Hold, TP is adjusted upward to RM5.10 (from RM4.55) as we roll forward our DCF valuation.

Technicals
The FBM KLCI rose higher by 5.84 points to 1,520.09 yesterday. Its resistance areas of 1,521 and 1,538 will cap market gains, whilst the obvious support areas are located at 1,505 and 1,520.

Trading idea for today is a Buy call on COASTAL.

Other Local News
MISC: To gain from sale and charterback of vessels. MISC Bhd's subsidiary, AET Inc. Ltd., entered into the sale and charterback of four tankers, namely two Aframaxes and two Very Large Crude Carriers (VLCCs). The total net cash proceeds from the transaction is USD167m for a gain on disposal of USD33m. (Source: Bursa Malaysia)

MRCB: Inks deal with Ekovest. Malaysian Resources Corporation Berhad has entered into a joint venture with Ekovest Berhad and KL Bund Sdn Bhd in relation to the River of Life Project. MRCB would have 40% equity in JV company while Ekovest would hold 60% stake. (Source: Bursa Malaysia)

DRB-HICOM: VW to make Pekan regional hub, plans to make 30,000 vehicles by 2018. DRB-HICOM Bhd's tie-up with German automotive giant Volkswagen AG (VW) to manufacture VW cars at the former's plant in Pekan, Pahang is expected to produce more than 30,000 (VW) vehicles at the plant by 2018. Pekan will become the regional automotive hub for VW. (Source: The Star)

Perisai: To buy Garuda Energy for RM210m. Perisai Petroleum Teknologi Bhd plans to buy all of Garuda Energy (L) Ltd, an oil and gas concern, for RM210m. Garuda Energy currently owns a jack-up rig that is being converted into a Mobile Offshore Production Unit (MOPU) at Jurong Shipyard, Singapore, by May 2011. (Source: Bursa Malaysia)

Metro Kajang: To beef up plantation, property units. Metro Kajang Holdings Bhd is buying more land in Kalimantan, Indonesia and in the Klang Valley to beef up its core plantation and property development divisions to drive earnings. Metro Kajang was looking to buy 20,000ha of plantation land from a local landowner in east Kalimantan. (Source: Business Times)

Petrolchemical: Petronas and BASF mull RM4b joint investment to set up petrochemical plant in Malaysia. Petroliam Nasional Bhd (Petronas) and BASF SE are considering a potential joint investment sum of RM4b to set up a plant to produce petrochemical products in Malaysia. (Source: The Malaysian Reserve)

Property: Malaysia to allocate land for affordable homes. The government will allocate a portion of its landbank for the construction of affordable housing, especially for Malaysians eligible for the My First Home Scheme. The affordable housing project, which will likely be stratified properties or apartments, will either be built by the government or through joint ventures with the private sector. (Source: Business Times)

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Maybank IB Views

RESULTS PREVIEW
Notion VTEC RM2.01: Buy
Jumping for joy Shariah-compliant

A strong headstart. NVB's 1QFY11 core results are expected to be robust, likely ahead of consensus forecasts, but within ours. Our current FY11 net profit forecast is 14% above consensus. The camera segment (from new sub-assembly orders) will drive FY11 growth while the HDD section will take a back seat. We maintain our 2-year net profit CAGR forecast of 38% and introduce FY13 forecast. Clinching MSC tax status could further lift EPS by 6 sen. NVB stays a Buy with a RM2.40 TP, on improving business conditions and earnings prospects.


Technicals
The FBM KLCI closed lower by 3.48 points at 1,536.07 yesterday. Its resistance areas of 1,536 and 1,558 will cap market gains, whilst the obvious support areas are located at 1,515 and 1,533. The FBM KLCI has temporarily stalled at its new all-time high of 1,576.95 on 6 January 2011. A short-term trading low was then seen at 1,558.64 on 11 January 2011.

Trading Idea for today is an Accumulate call on CBSTECH.


Other Local News
MPHB: Signs MoU to buy balance 49% of Magnum. MPHB has proposed to acquire the remaining 49% stake in Magnum Holdings Sdn Bhd and other securities in Magnum. The total purchase consideration for the acquisitions is RM1.64b and shall be satisfied by way of issuance of new MPHB shares at an issue price of RM2.30 per MPHB share and RM809m in cash. (Source: Bursa Malaysia)

Axis REIT: Proposes income reinvestment plan. Axis Real Estate Investment Trust (Axis REIT) has proposed a plan that enables unit holders to reinvest their cash distribution received into new units. Also, the property manager to issue up to 75.18m new units, representing up to 20% of the existing approved fund size. (Source: Bursa Malaysia)

DRB-HICOM: To assemble Passat in November. DRB-HICOM and Volkswagen AG will start production in November with the assembly of Volkswagen Passat sedan 1.8 litre at the automotive complex in Pekan. The Pekan plant is expected to manufacture between 40,000 to 50,000 Volkswagen cars annually. (Source: The Star)

UMW: Consolidation under way. UMW Holdings Bhd plans to consolidate and rationalise some of its core businesses to become leaner and meaner. Consolidation is under way for its manufacturing and engineering and equipment divisions as UMW looks to leverage on its vast range of products and services. The oil and gas (O&G) division may also be restructured, while UMW Oil & Gas Bhd's listing plan remains on the cards once it returns to profitability. (Source: Business Times)

GPacket: Signs pact with Time Warner. Green Packet Bhd has signed an agreement with Time Warner Cable, the second largest cable operator in the United States, to provide its next generation connection management solutions. Time Warner Cable will use customised versions of Green Packet's Intouch connection manager, Intouch reporting server and Intouch update server for its Windows and Mac platforms. (Source: The Star)

Coastal: Sells vessels for RM268m. Coastal Contracts Bhd's wholly-owned subsidiaries have collectively secured contracts for the sale of seven offshore support vessels, three tugboats and two oil barges for an aggregate value of about RM268m. Including the new contracts, Coastal Group has about RM760m worth of vessel sales orders awaiting delivery to customers up to 2012. (Source: The Star)

Property: BTS expected to be mandatory by 2015. The Build-Then-Sell (BTS) 10:90 mode of house ownership is expected to be made mandatory by 2015. The drafting of the amendments to the Housing Developers Act will include a clause calling for the gradual implementation of the BTS system. (Source: The Sun)

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