RHBInvest Research

Top Story: Education – The bigger picture Overweight

Sector Update

¨ More students are choosing to pursue degree programmes vs. diploma programmes as degrees become more affordable and due to the increased employability of degree holders. Hence, around 41.5% of total tertiary students in Malaysia during 2010 were pursuing degrees (vs. 35.1% pursuing diplomas). SEGi and HELP will benefit from the shift in demand from diploma to degree programmes. However, we are cautious on Masterskill’s performance as it is mainly dependent on its diploma courses, with less than 10% of students enrolled in its degree courses.

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RHBInvest Research

Top Story: TNB – Badly burned by massive oil and distillate fuel costs Market Perform (down from OP)

3QFY11 Results / Briefing Note

¨ Excluding forex gains of RM102m, TNB’s 9MFY11 results were below expectations with core net profit of RM801m (-62.4% yoy) accounting for 36% and 33% of our and consensus FY11 net profit estimates respectively. TNB recorded a RM460m loss in 3QFY11, due to significantly higher oil and distillate fuel costs arising from gas supply disruption.



Corporate Highlights



CI Holdings: Selling Permanis to Asahi for RM820m Trading Buy

News Update

¨ CIH announced that it has entered into a conditional share sale agreement for the disposal of its entire equity interest in Permanis to Asahi for RM820m in cash

¨ Post-disposal of Permanis, CIH would be left with only its tap-ware and sanitary ware business (under Doe Industries). As management has stated its intention to maintain CIH’s listing status, CIH would need to acquire a new core business and/or distribute some of the cash proceeds to shareholders to avoid becoming a PN16 (cash) company, given Doe’s small asset base and profit contribution



SEGi: INVITE-ing more foreign students Outperform

News Update

¨ SEGi has been appointed by the Government as Project Leader for a new initiative – SkillsMalaysia International Technical Education & Vocational Training Programme, which is expected to begin in 2012.

¨ The objective of SkillsMalaysia INVITE is to create and provide a new dimension of learning skills to non-academically inclined foreign school leavers and adult learners to pursue their training in Malaysia. Upon completion of the programme, the trainees will be awarded an internationally recognised qualification from UK or Australia, as well as certification from the Malaysian Government.



AirAsia: To set up a low-cost carrier in Japan Market Perform

News Update

¨ AirAsia is setting up a low-cost carrier in Japan via a 49:51 JV called AirAsia Japan Co Ltd with All Nippon Airways Co Ltd (ANA).

¨ The new airline is expected to take to the skies in Aug 2012, with a fleet of 3-4 A320 aircraft by the end of its first year of operations.



Hiap Teck: China Shougang roped in as contractor for blast furnace and shareholder Underperform

News Update

¨ Eastern Steel Sdn Bhd, a 55%-owned subsidiary of Hiap Teck, has entered into an EPC contract worth approximately RM650m with China Shougang International Trade and Engineering Corporation.

¨ A supplement agreement was also entered into where Hiap Teck will issue 32.2m new shares (9.8% of current share base) to China Shougang at an agreed price. China Shougang has the right to terminate the EPC contract if the shares are not issued by 30 November 2011.



VS Industry: Fully focus on EMS Overweight

Company Update

¨ VSI had announced on 19 Jul the disposal of its 53%-owned subsidiary, PT. GY Plantation Indonesia (PGP) for US$4.1m to PT Karya Manunggal Sawitindo. In addition, PGP will also sell a 6,450 ha piece of land (undeveloped) to PT Bumitama Gunajaya Agro for US$2.2m, which will flow to PGP’s existing shareholders (VSI’s portion amounts to US$1.2m). In total, VSI will receive US$5.3m (RM16.1m) from the abovementioned transactions, which management has earmarked for working capital.

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RHBInvest Research

Top Story: SEGi

Visit Note

• SEGi has entered into an agreement with a private developer, Oakfine Development S/B, to build a RM300m – RM500m campus in Perak, with SEGi leasing the campus from the developer upon completion. As SEGi will not be bearing any of the construction costs, there is no direct impact to SEGi’s financials in the immediate term. The campus is expected to be completed in late 2013 or early 2014.
• We revise our fair value to RM4.60 (from RM5.05).Maintain Outperform.

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RHBInvest Research

Top Story: E&O

Company Update

• The recent in-principal approval for E&O’s STP2 project is a significant quantum leap for E&O, as it finally crystallises the value within the group
• E&O will become the largest land owner on the Penang island, set to enjoy the increasing property values on the island, fuelled by rising FDIs. Considering the scarcity of land on the island, this would make land a very valuable asset for developers.
• The upside potential is accentuated by the MOU that was entered yesterday between the state government and Chinese state-owned contractor Beijing Urban Construction Group (BUCG) to construct a 6.5 km tunnel to link the island and mainland that stretches from Gurney Drive to Butterworth. This latest development certainly bodes well for E&O’s project in STP, due to its close vicinity to the 3rd link, capturing rising population flow to the island while easing the traffic congestion issues.
• We think E&O should be worth more now given the green light from the state government which clears up the largest uncertainty, while also enjoy the state’s infrastructure investments. We hence raise our fair value to RM2.00 (from RM1.85 previously)

Corporate Highlights

Petronas Gas:

Company Update
Minimal impact from lower gas volume
Maintain Outperform call and our RM13.95/share fair value.

Paramount:

Company Update
We downgrade Paramount to Market Perform, as we believe the stock is now fully valued –Nevertheless, dividend angle of the stock is still rather attractive.
No change to forecasts. Although we downgrade the stock to Market Perform, our fair value is unchanged at RM5.92,.We believe the on-going (2-for-5) bonus issue and (1-into-2) share split exercise will continue to support the share price. An EGM will be held in early Jun for the approval of the proposed exercise.

HELP International

Briefing Note
On track with its Subang 2 campus
No change to forecasts. Our fair value is maintained at RM2.87,We reiterate our Market Perform call on the stock.

Unisem:

Briefing Note

• Unisem guided for 2Q11 revenue to grow at 5-6% qoq driven by strong demand for Quad Flat No Lead (QFN), higher-margin ball grid arrays (BGA) and micro-electro-mechanical-systems (MEMS). Furthermore, Unisem highlighted it is already seeing a pick-up in orders which suggests stronger growth in 2H2011.
• Our fair value is lowered slightly to RM1.99/share based on 11x FY11 FD EPS. Maintain Market Perform.

EON Capital:

News Update

• High Court dismisses Primus’ petition
• No change to forecasts and fair value of RM7.30 (based on HL Bank’s offer price). Maintain Underperform.

SEGi:

1QFY11 Results

• Stronger margins in 1Q11
• Our fair value has been raised to RM5.05 (from RM4.54).We believe SEGi’s current valuations are undemanding compared to HELP.The stock offers strong earnings prospects and decent dividend yield of 4.3% (ex-special dividend). Hence, we reiterate our Outperform call on the stock.

Axis REIT:

1QFY11 Results

• 1Q10 realised net profit of RM16.2m (+39.4% yoy; +0.2% qoq) missed our expectation and consensus estimates by about 10%. However, we expect earnings to pick up in upcoming quarters due to completion of acquisition of a new property recently.
• No change to forecasts. We maintain our Outperform recommendation on Axis REIT. Our indicative fair value is kept at RM2.71.

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