Highlights of the day
Lion Industries started off its fiscal year in the red, reporting a net loss of RM26m. Its steel division continued to face challenges in the form of margins pressure. In view of the challenges faced by Lion Industries, especially in its steel segment, we trim our FY13F EPS by 35% to 9.2 sen. Nevertheless, we expect the company’s steel business to fare better from demand spillover from the uptick in local construction activities. Therefore, we maintain our STRONG BUY rating on Lion Industries, with reduced sum-of-parts target price of RM1.66 (previous: RM1.90).
§ Petronas Chemicals Group (Results Review): 9MFY12 results came in below expectations (Downgrade from BUY to HOLD, TP: RM6.58) [download report]
Petronas Chemicals’s (PChem) 9MFY12 net profit which fell 12% y-o-y to RM2.6bn came in below expectations at 64-68% of both house and street’s full-year estimates. The variance from our forecast is due to higher-than-expected operating cost and lower-than-expected associates’ contribution. Sequentially 3QFY12 came in below expectations as margins crimped due to sustained high feedstock cost which did not adjust down as quickly as falling ASP of end product. Due to the poor set of results, we downgrade our FY12-13F net profit accounting for the higher-than-expected operating cost and lower-than-expected associate contribution. Correspondingly, our target price is downgraded to RM6.58 based on 13x FY13 EPS. Downgrade from Buy to Hold.
§ Sime Darby (Results Review): 1QFY13: Within expectations (Maintain HOLD, TP: RM9.22) [download report]
Sime Darby’s 1QFY13 adjusted net profit decreased by 5% y-o-y to RM990m to meet house and market expectations. The decrease was caused by an operating profit drop in the plantation segment. Improved operating profit of the other segments, particularly the industrial segment, cushioned the performance of plantation. We maintain HOLD recommendation with TP of RM9.22.
Other reports
Other Malaysian news
§ Sime Darby: Cash advance settled
§ KLCC Property: Proposes stapled REIT
§ MAS: Rights issue after returning to the black
§ Brahim’s Holdings: Wins tender for klia2 food court
§ Zelan: Challenges job termination
§ Investments: ETP realises RM20bn in investments
§ O&G: Shell Malaysia signs new exploration contract with Petronas
Global news
§ US: Home prices in 20 US cities rose 3% in year to September
§ US: Demand for capital goods rises in sign of spending gain
§ US: November consumer confidence hits more than four-year high
§ US: Consumer debt eases in 3Q, student loans up
§ Europe: Greece gets rescue boost
§ China: Industrial-company profit gains accelerated in October
