Morning Call | 3 May 2013

FLOWS

Friday, 3 May, 2013

BUY

MAXIS, IJM, MAS

SELL

GENM, TENAGA, KNM

STOCK ALERT

STOCK NAME

DATE

PRICE

BUY/SELL

TARGET PRICE

MISC(3816)

3/5/2013

RM4.30

BUY

RM4.97

Stock is trading just 10% off its decade low following the failed privatization exercise by Petronas which resulted in cut-loss selling from those who bought the shares to take advantage of the general offer. This can be seen from the sharp reduction in trading volume as compared to last week when the shares were initially returned to the shareholders. Before this cut-loss selling is completed, investors should take advantage of this opportunity to buy the stocks. From the recent exercise, we know that about 80% of the shareholding belonging to Petronas, EPF, PNB and KWAP will not sell at current levels. The fundamentals of MISC has also improved since the Q4 2012 post the selling of the container shipping division. Gemusut Kakap rig will commence from Q3 and increase contribution from the offshore division. Tank terminals saw increased earnings of 30% last quarter from the Tanjong Bin terminal and is expected to increase further when additional phases come into operation. Even the loss-making petroleum tanker division has seen some improvement with tanker rates 7% higher in Q1 2013 vs Q4 2012 . The LNG business alone is valued at RM5.00/share and is looking to add 9 new vessels with likely 20 years charter from Petronas from 2013. Further ahead, Petronas JV in the Australian Gladstone project and Canadian Progress Venture will mean more requirement for MISC’s LNG transportation. MISC currently trades at an attractive 0.91x P/Bk which is significantly lower than the 5-year average of 1.53x. Buy (PT)

PETDAG(5681)

3/5/2013

RM23.52

Trading SELL

RM20.00

Stock has held near its all-time high of RM23.86 despite potential earnings hiccup in the next few quarters as selling prices (hence gross margins) are impacted by lower Means Of Platts Singapore (MOPS) prices. MOPS prices are correlated to Brent Crude which has fallen by more than 15% since it peaked in early February, and looks to have more downside with the break of support at USD104.70/barrel and targeting a downside objective of USD90/barrel (an additional 10% downside). In addition, Petdag is trading at lofty valuations as measured by its PER and P/Bk - 25.0x historical PER and 23.3x forward PER versus its 5-year average 17.1x PER, and current P/Bk of 4.86x versus its 5-year average P/Bk of 2.70x. Petdag also does not look good technically as its price charts exhibit weekly negative divergences against its momentum & trend indicators. Trading sell with buy back target at RM20.00. (PT)

Calls for APRIL Week 4/ May Week 1

STOCK

Initiation Dates

Initiation price

BUY/SELL

TARGET PRICE

LAST PRICE

% Change since Initiated

BHIC(8133)

25/4/2013

RM2.20

ACCUMULATE

RM2.53

RM2.08

-5.7%

MRCB(1651)

25/4/2013

RM1.38

BUY on weakness

RM1.68

RM1.40

+1.4%

MUHIBAH(5703)

26/4/2013

RM1.12

ACCUMULATE

RM1.60

RM1.11

-0.9%

MAYBULK(5077)

26/4/2013

RM1.53

BUY on weakness

RM1.80

RM1.51

-1.3%

TENAGA(5347)

29/4/2013

RM7.83

TRIM

RM7.30

RM7.79

-0.5%

SPSETIA(8664)

29/4/2013

RM3.30

ACCUMULATE

RM4.40

RM3.48

+5.4%

PETGAS(6033)

30/4/2013

RM19.64

Sell into strength

RM18.50

RM20.00

+1.8%

PCHEM(5183)

30/4/2013

RM6.49

Sell into strength

RM6.00

RM6.50

+0.1%

WTK(4243)

02/5/2013

RM0.975

BUY

RM1.20

RM0.97

-0.5%

MPHB(3859)

02/5/2013

RM3.52

BUY

RM4.20

RM3.50

-0.5%