MORNING CALL 7 JUNE 2012
FLOWS;
BUYS: Dialog,
Maybank, JCY
SELLS: TNB,
UEMLand, YTLC
Technical Stock Alert;
OSK (RM1.40): Its
price has fallen from RM1.74 (-20%) to a low of RM1.38 and consolidated for pass 3 days at RM1.40 levels
since we first highlighted the counter on the eve of its merger announcement.
The sell off was primarily due to the low cash value in the transaction despite valuation being in line with our guidance. Downside seems limited as OSK will be getting 245mil shares of RHB and RM174.3mil
in cash.
Assuming full distribution, 1 osk share would be entitled
to 0.25 RHB shares plus 18sen in cash. This adds up to RM2.00 per OSK share
(assuming RHB at RM7.27). Another clause in the deal entitles OSK to
compensation if RHB shares falls below RM6.75 providing OSK a floor valuation
in the deal of RM1.87. We believe
current share price is due for technical rebound to RM1.60 levels.
(TYK/DN)
Coastal Contracts (RM1.79) : RSI has begun to turn from
its low of 20 to currently 38 and MACD is just beginning to cut upwards. Its 100 acre Sabah shipyard is strategically located in
Sandakan and could possibly be converted into a O&G fabrication yard to
cater for the offshore drilling operations in the state. The company is also
looking at new O&G ventures in Indonesia. Trades at an undemanding PE of 5x
current year, immediate upside seen at RM2.00. BUY