Stocks to watch: PacMas, Leader, Public Bank, LFE Corp

KUALA LUMPUR: The fresh flow of corporate news on Bursa Malaysia, with a proposed takeover of LEADER UNIVERSAL HOLDINGS BHD [], the windfall for PACIFICMAS BHD [] shareholders and strong earnings from PUBLIC BANK BHD [] will underpin market sentiment.

Other stocks to watch are LFE Corp Bhd, TENAGA NASIONAL BHD [], GADANG HOLDINGS BHD [], Malayan Flour Mills and Nadayu PROPERTIES [] Bhd,.

OCBC Capital (Malaysia) Sdn Bhd (OCSB) has made offer to acquire all of PacificMas’s stakes in five companies for RM450 million of which RM164.23 million be in cash and RM285.76 million due and owing by OCSB to PacificMas.

After the completion of the corporate exercise, PacificMas’ assets would comprise mainly cash, available-for-sale/trading securities and the deferred amount. PacificMas will promptly distribute its remaining cash via the declaration of special dividend(s) and/or the implementation of a capital repayment exercise.

Leader Universal’s top officials, via HNG Capital Sdn Bhd, have made a takeover offer for the company for RM480.10 million or RM1.10 per share. This is 26 sen above the last traded price of 84 sen. Leader said the purchase consideration would be RM410.94 million in cash and RM69.16 million as an amount remaining due and owing by HNGC as a debt due to Leader.

Public Bank Bhd’s earnings rose 14.8% to RM898.79 million in the third quarter ended Sept 30, 2011 from RM782.7 million a year ago. Revenue increased by 13.7% to RM3.27 billion from RM2.87 billion. Earnings per share were 25.66 sen compared with 22.35 sen a year ago.

For the nine-months ended Sept 30, 2011, its earnings rose 18.3% to RM2.606 billion from RM2.202 billion. Revenue increased 16.9% to RM9.434 billion from RM8.064 billion. Pre-tax profit grew by 16.6% to RM3.447 billion from RM2.955 billion.

LFE CORPORATION BHD [] has been awarded RM26.35 million in its suit against its major shareholder and former director, Alan Rajendram A/L Jeya Rajendram.

LFE said the Kuala Lumpur Regional Centre for Arbitration had awarded RM26.35 million, interest at the rate of 8% per annum from Dec 21, 2008, legal costs of RM200,000 and costs of the arbitration of RM104,352.

Tenaga Nasional’s share price rallied 37 sen to RM5.57 on expectations of a resolution over its gas supply issue. Market talk was that Tenaga might get a writeback from Petronas.

Gadang said Messrs Ernst & Young was not seeking reappointment as auditors of the company for the financial year ending May 13, 2012 at its AGM.

It said Meloria Sdn Bhd, a substantial shareholder, had in its Oct 3 letter, nominated Messrs PKF as auditors in place of Ernst & Young and to hold office until the conclusion of the next AGM.

Malayan Flour Mills’ proposed EGM fixed for Wednesday, Oct 19 will go ahead after the application for an injunction to restrain or prevent the meeting had been dismissed.

Nadayu Properties Bhd, a medium sized property developer, aims to hit a sales target of at least some RM300 million next year.

Its executive chairman Hamidon Abdullah said on Monday, Oct 17 the sales target was based on its upcoming property launches.

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Maybank IB Views

RHB Capital RM7.48: Hold
Merger talks begin

Hold maintained. While we see possible synergistic benefits to a merger with OSK, the success and financial impact of the deal will depend on the structure and pricing of the merger itself, in our view. Our Hold call on RHB Cap is maintained, with an unchanged RM7.60 TP (2012 P/BV target of 1.3x, ROE: 13.3%). At this juncture, we do not foresee an immediate upward re-rating of the enlarged RHB Cap if the merger goes through, with potential dilution in EPS and ROE, we estimate.

Padiberas Nasional RM3.22: Buy
Things are under control

No shortage of rice. Bernas has secured 800,000 tons of rice over the next 12-months via a MOU signed with the Vietnamese government. This consignment is more than enough to allay any supply disruptions due to the current Thai floods. Bernas should have no problems to supply rice at reasonable price in the next 6-12 months. We maintain our Buy call and target price of RM3.90/shr based on 8.1x 2011 PER.

SECTOR UPDATE
Property (M-REITs): Overweight
Defensive in nature

Overweight maintained. M-REITs undoubtedly provide some level of comfort in a time of volatility and we remain positive on the sector primarily for its solid fundamentals and defensive yields, which average 8.1% (gross) across the board. Our preference is for REITs in industrial properties and strategically-located malls. A re-rating catalyst could be the upcoming large-cap Pavilion REIT listing which would improve the breadth and depth of the M-REIT market. Our top pick is Axis REIT.

Technicals
The FBM KLCI rose 42.38-points and closed at 1,442.43 last Friday. The obvious support areas for the FBM KLCI are in the 1,392 to 1,442-zone. The next resistance levels of 1,453 and 1,500 will see heavy liquidation activities.

Trading Idea is MALTON.

Other Local News
Bintulu Port Holdings: Set to benefit from construction of Samalaju Port. Company will be the sole logistics play to support the Samalaju Industrial Park and is set to benefit from the soon to be constructed RM1.2b Samalaju Port. It is estimated that beginning 2013, once the port is ready, there could be at least 5m tones of raw material to be required by 10 out of the 17 confirmed investors in the Samalaju Industrial Park. (Source: Malaysian Reserve)

Nestle: Price-rise report not verified. News that Nestle is considering a price hike for certain dairy products may have sent chills down local households but the company has clarified that the reported information is not verified. (Source: The Star)

F&N: PJ plant to raise dairy product output to cover Thai shortfall. F&N confirms that it would increase dairy product production at its Petaling Jaya plant by 20% in the interim to help cater to demand in Thailand. (Source: The Star)

Uzma Bhd: Fuels growth through technological upper hand. The Intergrated oil and gas provides is confident of winning more jobs as it is the only local firm with the technology and equipment to carry out enhanced oil recovery (EOR). (Source: Business Times)

Semiconductor: Manufacturer says a recession has hit the semiconductor industry. The inventory of global chip suppliers and a low book-to-bill ratio have reached an alarming level that will have severe worldwide repercussions and impact on chip producers and semiconductor equipment manufacturers in Malaysia. (Source: The Star)

Sunway REIT: Gets SC nod for RM3b debt note issuance. Sunway Real Estate Investment Trust (Sunway REIT) has received the Securities Commission's approval for the proposed medium term note programme of RM3.0b in nominal value. (The Edge Financial Daily)

Nagamas: To develop 2,500ha in Nanning. Nagamas International Bhd has been allocated about 2,500ha near Nanning, China, to be developed as a green residential and industrial park. Energy, Green Technology and Water Minister Datuk Seri Peter Chin said Nagamas would undertake the development of the park on a long-term basis under a RM300b contract. (Source: The Star)

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