Stocks to watch: S P Setia, TPC, Huat Lai, Wijaya Baru

KUALA LUMPUR: The Malaysian stock market was battered on the first trading day in October, sending the FBM KLCI down 1.41% or 19.61 points to close at 1,367.52.

All key regional markets and European bourses fell after Greece's admission that it will miss its deficit targets for this year. Hong Kong’s Hang Seng Index tumbled 4.38%, Thailand’s SET Index down 5.12% and Jakarta’s Composite 5.64%.

OSK Research said “there is downside to the KLCI although with non-GLICs supposedly close to maximum cash levels and GLICs supposedly not aggressively supporting the market up till now, further downside maybe somewhat less than our recession market bottom of 1,086”.

The research house said it did not see any clear market moving catalyst from the Budget 2012 proposals, which would be announced on Friday.

Instead, it would focus on the 1,300 level, beyond which it would recommend more aggressive bottom fishing.

“Sticking to defensives for now and our September Top Buys which have outperformed the KLCI. Bottom fishing stocks such as Genting, Parkson and Dialog which will be attractive if the KLCI falls below 1,300,” it said.

Among the stocks to watch on Tuesday, Oct 4 following the fresh corporate developments are S P Setia Bhd, TPC PLUS BHD [], HUAT LAI RESOURCES BHD [] and WIJAYA BARU GLOBAL BHD [].

S P Setia Bhd plans to undertake a mixed township project with a gross development value of RM4 billion in Semenyih, Selangor.

Tthe development would be carried out on 673 acres of land which it is acquiring from Spektrum Megah (M) Sdn Bhd.

S P Setia said it had entered into a sale and purchase agreement with Spektrum Megah to acquire the 673.27 acres of freehold land out of the 737.87 acres in Semenyih, Ulu Langat, for RM381.259 million or RM13 per square foot.

Huat Lai Resources Bhd plans to launch a takeover offer of poultry company TPC Plus Bhd after it acquires a 33.65% stake in TPC from London Biscuit Bhd.

Huat Lai had signed a sale and purchase agreement with London Biscuit to acquire the stake, comprising 26.91 million TPC shares, for RM8.075 million or an average 30 sen a share. The share price rose 2.5 sen to close at 27 sen.

Wijaya Baru is making its foray into Indonesia’s logging sector with the proposed acquisition of two companies for US$80 million or RM255.2 million which have logging rights in Papua, which it planned to later venture into oil palm cultivation.

OCTAGON CONSOLIDATED BHD [] has awarded a US$22 million (RM70.18 million) contract to KNM GROUP BHD [] to build an advanced thermal gasification reactor.

Octagon said its unit Green Energy and TECHNOLOGY [] Sdn Bhd (GreenTech) had sealed a contract with KNM Process Systems Sdn Bhd for the reactor. The contractor would undertake the manufacturing, engineering, installation and pre-commission of the reactor.

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Stocks to watch: Bumi Armada, Tanjung, Muhibbah, Kim Loong

KUALA LUMPUR: After a horrendous September, which saw the FBM KLCI closing down 5.89% and RM88.76 billion wiped out from the market capitalisation in that month, investors will be bracing for another difficult October in the absence of fresh positive external news from Europe and the US.

For September, the KLCI fell 86.96 points to end at 1,387.13 on Sept 30 while the market capitalisation was reduced to RM1.172 trillion. Year-to-date the KLCI has lost 8.68%.

The outlook is gloomier for Europe and the US. As RHB Research Institute aptly puts it: “The US economic recovery has slowed to a crawl, while Europe is not just lurching from one crisis to another, it is lurching into a new one before the previous one is solved.”

The research house added there is a growing risk that sustained weak confidence could exert downward pressure on demand and business activity worldwide.

On Wall Street, stocks ended their worst quarter since the depths of the 2008 credit crisis, crippled by Europe's debt debacle, a U.S. credit downgrade and a sputtering global economy.

Reuters reported a steep slide on Friday, Sept 30 closed out a fifth month of losses as weak economic data from China sparked fears of a global economic slowdown while investment bank Morgan Stanley plummeted on concerns about its exposure to European banks.

The S&P 500 index has lost more than 14% in 3Q and over 7% in September alone. As of Thursday, Wall Street's deep downturn in the third quarter wiped out US$2.2 trillion of the Wiltshire 5000 index -- the broadest measure of U.S. stocks.

The weaker US and Europe economies would continue to impact Malaysia, especially its exporters.

RHB Research pointed out with a still cloudy global economic outlook, it believed it was "still too early to 'bottom fish' at this stage".

“As global headwinds remain strong and situations could get worse, we will continue to advocate a defensive investment strategy for investors. Under such circumstances, we believe that high dividend yielding stocks with reasonably good growth potential would be more resilient and likely outperform the overall market,” it added.

Meanwhile, on the home front, investors would focus on the Budget 2012 proposals to be unveiled by Prime Minister Datuk Seri Najib Tun Razak on Friday, Oct 7.

Economists expect Budget 2012 will be mildly expansionary. However, a mounting domestic pressures and market aversion to a heftier public debt load would curb any increase in expenditure without a concomitant rise in revenue.

Stocks to watch on Monday are companies with fresh corporate news include Bumi Armada Bhd, TANJUNG OFFSHORE BHD [], Muhibbah Engineering Bhd and KIM LOONG RESOURCES BHD [].

Bumi Armada’s order backlog has increased to more than RM7 billion after it sealed a RM1.46 billion contract to supply and operate a floating production, storage and offloading (FPSO) system in Australia.

Bumi Armada had signed the contract with Apache Energy Ltd, a major Australian oil and gas producer, for the FPSO to be located in block WA-49-L of the Balnaves Field, north-west Australia. The contract was for an initial four-year fixed term time charter with an option of a further four year annual extension period thereafter.

Tanjung Offshore awarded two contracts with a total value of RM200 million for the CONSTRUCTION [] of two platform supply vessels (PSV). It awarded a contract to MUHIBBAH ENGINEERING (M) BHD [] and to Labuan Shipyard & Engineering Sdn Bhd. The PSVs would be used to supply and support deepwater operations of oil majors in operational waters of Southeast Asia region on long term basis.

Kim Loong’s net profit for the second quarter ended July 31, 2011 surged 178% to RM33.29 million from RM11.94 million, due mainly to higher production of crude palm oil (CPO) and palm kernel oil (PKO). Its revenue for the quarter rose to RM227.53 million from RM139.02 million in 2010. The company also announced a single tier interim dividend of 6% in respect of the year ending Jan 31, 2012.

For the six months ended July 31, Kim Loong’s net profit rose to RM53.19 million from RM25.3 million in 2010, on the back of an increase in revenue to RM402.68 million from RM266.02 million.

UOA Development Bhd is to collaborate with Vietnam-based construction firm Hoa Binh Construction and Real Estate Corporation to develop its proposed Sri Petaling residential project with a gross development value of RM400 million.

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