Morning Call | 30 December 2014

DELEUM (RM1.70) - Company’s RM4bn orderbook is expected to last up to 2023 backed by major contract wins such as the 5-year Pan Malaysia slickline equipment and services contracts and 7+3 year Long-Term Service Agreements for the provision of Turbomachinery maintenance services of gas turbines.Tenderbook remains healthy with current bidding for RM1.1b-1.2b contracts, of which 70-80% are for new contracts in its oilfield services division. Growth is expected from company’s regional expansion plans, and intentions to grow its Asset Integrated Solutions. Earnings are projected to grow at CAGR of 18% over next 2 years with PE only at 10xFY15. Company is also in a net cash position minimising risk of interest rate hikes and forecasted to pay an attractive dividend yield of 5% in 2015. Accumulate with TP: RM2.05. (TYK)

CHINWELL (RM1.41) - Chin Well is one of the world’s largest manufacturers and suppliers of carbon steel fasteners (i.e. screws, nuts and bolts). Chin Well manufactures and supplies fasteners that are primarily utilized in highway guard rails, power transmission towers, furniture and other applications. The bulk of the group's products are exported (Malaysia 24%, Vietnam and others 11%, Europe 57%). Recent acquisition of the remaining 40% in its Vietnam production for RM47.6mil via issuance of 27mil new shares at RM1.45 plus RM8.31m is earnings accretive. Eps per share for JuneFYE14 would have risen to 14.83sen (9.5xPE) from 13.15sen. 1QFY15 reported net profit of RM13.5m which equates to annualised EPS of 18sen (7.8xPER). Chinwell has a minimum dividend policy of 40% equating to 5.1% dividend yield.  Prospect for company is positive as it benefits from translation gains from weaker RM, while 6% GST tax is lower than existing sale tax of 10%. New orders from Germany and France for Do-It-Yourself (DIY) products are expected to expand its margins further. Currently trades at strong support level of RM1.40 after falling 20% from its peak of RM1.74 following announcement of Vietnam acquisition. Accumulate ahead of completion of acquisition with TP: RM1.80. (TYK)

Morning Call | 29 December 2014

HSL (RM1.67) – Stability in earnings guaranteed for the next two years with its secured order book of RM1.1bn. 2015 could see its order book improve significantly with a few high profile contracts in Sarawak expected to be awarded beginning with the Phase 2 Kuching waste water project where HSL is a front runner. Other major contract the group is linked to include the RM27bn Pan-Borneo highway and SCORE relate infrastructure projects. Sitting on a net cash position of RM122m and a forward PE 9.5x, we rate it a buy as its RSI is looking to cut up with an immediate target of RM1.85. (DN)

NCB (RN2.25) – the entrance of MMC as a major shareholder could see fortunes improve for the ailing port operator as it undergoes an overall revamp in trying to improve port and logistics utilization. Currently utilization is only 75% but with the new measures implemented, management is hoping to improve this to 90% and return the company to profitability. Trading at the low end of its P/Bk valuation band of 0.76x vs historical average of 1x, we rate it a buy with most negatives already factored into its price. Short term target of RM3.00 (the price MMC paid for its 15.7% stake). (DN)

Morning Call | 26 December 2014

OCK (RM0.72) – share price has fallen 32.7% from its high achieved in August. Current technical indicator oversold with weekly RSI @ 35 and MACD on verge of cutting up, presenting an opportunity to Accumulate a growth stock. The recent LOA from MCMC for Phase 1 of the USP Timeline 3 project further strengthen OCK’s chances of being awarded a further 600 sites under Phase2 & 3 of the USP project. There is also a possibility of Co undertaking additional works on a sub-contract basis for other USP recipients given its good reputation. Trading at an undemanding FY15 PER of 12x vs industry average of 20x, we rate OCK an Accumulate for its strong earnings growth prospects, focus on recurring revenue base and ventures into high growth emerging markets. (SPK)

GHLSYS (RM0.715) – is an excellent proxy to capitalize on growing ASEAN e-commerce and e-payment industry. We see both stability and growth in its business model emerging from its acquisition of e-Pay with annuity revenue forming 92.8% of total revenue. The Payment Card Reform Framework by Bank Negara and its target of 800k point-of-sales (POS) terminals from current 230k and 1bn issues of debit card by 2020 is a major boost for GHL’s growth prospects. Furthermore, recent agreement with Omnipay (Philippines) bodes well for Co’s expansion and expects to start deploying its point-of-sales (POS) terminals in 1Q’15. Emergence of private equity firm Creador as 2^nd largest shareholder and appointment of its two directors will potentially fast track any M&A activities with an expected announcement in CY15. Balance sheet remains healthy with net cash of RM8.8m. Currently trading at FY15 PER of 28.4x vs MYEG @ 33.3x, we recommend an Accumulate on weakness. (SPK)

Morning Call | 24 December 2014

BENALEC RM0.59 - The share price has fallen c30% over the last 2 months. This translates to attractive multiples of 8.9x & 7.7x for FY6/15 & 16 ( vs mid cap construction industry PER average of 10-13x). The group recently disposed off 9 pieces of land in Malacca amounting to 58.6 acres for cash consideration of RM107m. The sale will help provide earnings visibility for at least the next 2 years. Group still has about 341 acres of land in Malacca and Pulau Indah which are held for sale, which could be worth cRM595m. Benalec’s near term earnings visibility has improved, but key re-rating catalyst remains it’s Johor project and the signing of the SPA with 1MY Strategic Terminal Oil for 1000 acres of land in Tanjung Piai. A detailed EIA has been submitted to the Dept of Environment. MACD has just cut up with RSI @ 35 - Trading Buy ( TP RM0.78 based on 10x FY16). (AK) 

MAYBULK RM1.14 - Following the poor Q3 results, the share price has eased c20% . Group is now trading at P/Bk of 0.63x ( vs 4 year historical average of 1.3x), translating to a PER of 16x for FY12/15. At current levels, we reckon most of the negatives have been reflected in the price. Earnings risks such as lower anticipated dry bulk charter rates and lower contribution from its 20% SGX-listed associate, POSH Group, have been more than reflected in price. Ahead, the weaker Ringgit against the US Dollar and lower bunker fuel prices could lend support to Maybulk’s earnings. The Seaborne Chinese iron ore imports are projected to rise, mainly driven by strong expansion of Australian iron ore production capacity, will also auger well for demand of Maybulk’s vessels. POSH’s headwind in it’s Mexican JV due to non payment by clients, is also being managed. Technically, MACD has just cut upwards with RSI @ 38 - Opportunity to accumulate. (AK)

Morning Call | 23 December 2014

TUNEINS (RM1.60): Since retracing from its recent high of RM2.20 share price has consolidated well at the RM1.60 level after touching a low of RM1.53 with RSI at 33%. TuneIns main growth business segment in travel insurance (TI) is shielded because of improving regional growth, especially in core countries of Thailand & Indonesia as well as falling oil prices. Currently trades at 13.5xFY15 PER with CAGR exceeding 20% for next 2 years. Accumulate with TP: RM2.00. (TYK)

MMCCORP (RM2.36): Share price closed above its double bottom neckline of RM2.34 offering a short term upside potential of RM2.52 (16sen). MMC is also a potential beneficiary of year end closing next week. We believe current levels offers limited downside as it trades near its 5 year key support level of RM2.20 level. Key catalyst will be the listing of Malakoff in 2Q2015 while recent acquisition of NCB could see MMC leveraging on NCB as a vehicle to list both MMC’s port businesses i.e. PTP and Johor Port. MMC is also a major beneficiary of Malaysia’s infra play with 2014 orderbook replenishment hitting RM1.4bn bringing outstanding orderbook to RM3.4bn. MMC (in a consortium with Sumitomo) is also tipped for the HSR contract. Accumulate with TP: RM3.21 (20% discount to SOP). (TYK)

Morning Call | 22 December 2014

POS (RM4.45) – Recent selldown from weaker results due to higher staff and transportation cost presents a buying opportunity as valuations is compelling compared to industry peers. Transportation cost which account for 13% of overall cost will naturally be lower with current sharp dip in oil prices. Earnings growth is still mainly driven by its courier services with its 5 yr transformation plan in place to ensure earnings stability. Trading at only 14.8x forward PE vs SingPos 22.8x and global average 20x, we rate it a buy with an immediate target of RM5.00.(DN)

YTLPower (RM1.51) – Current weakness attributable to its expiry of its domestic PPAs in Sept 2015. However there is a strong likelihood of an extension with the reserve margin falling below acceptable levels with the immediate shutdown. Major shareholders have also been adding to their holdings to currently 49.9%. The stock is trading off its low of RM1.43 with an immediate upside of RM1.80. Buy with a current attractive yield of 6.6%. (DN)