News Bits | 8 August 2012

Highlights of the day

§  Hong Leong Industries (Stock Idea): Minimum wage and infrastructure play (BUY, TP: RM5.50) [download report]

Hong Leong Industries (HLI)’s restructuring in 1H2011 has positioned its core businesses nicely in motorcycles and building materials.  It will also become the new cement player in town by the end of this year, and top management changes mark its new focus.  The stock trades on a PER of 9x, P/NTA of 1.1x with net dividend yield of 5.6% p.a.  Minimum wages which come into effect beginning 2013 could boost its motorcycle sales significantly, while its building materials will benefit from a pick-up in Government infrastructure spending from 2H2012 onwards, before its cement plant kicks in.  Given its bright growth prospects and investors’ search for yield, its net dividend yield could compress to 4.0% p.a. which is a potential 40% upside in share price to RM5.50.  BUY.

§  Hartalega Holdings (Results Review): 1QFY13 results within expectations (Maintain HOLD, TP: RM4.31) [download report]

Hartalega’s 1QFY2013 net profit of RM53m (-2.5% y-o-y; +6.6% q-o-q) was within expectations, making up 24% of our and consensus full-year net profit forecasts.    However, Hartalega’s growth trajectory is already reflected in its financials which appears fully valued.  The stock is currently trading at 13.6x CY12 and 12.2x CY13 EPS, compared to average net profit growth of 8%. Maintain Hold on Hartalega but raised TP by 11% from RM3.89 to RM4.31, as we roll forward our 12-month TP valuation from 13x CY12 EPS to 13x CY13 EPS. 

Other reports

§  Newz Bits [download report]

Other Malaysian news

§  Kossan: Eyes upstream move

§  AirAsia: Jakarta move won’t lead to migration of ops

§  F&N: Net profit slips 34% y-o-y

§  Malaysia Airports: June passenger traffic up 2.7% y-o-y

§  Gas Malaysia: Profit shrinks on margin compression

§  Padini: FJ Benjamin in Indonesian tie-up

§  Subur Tiasa: In JV with Sarawak

§  KYM: Ends MoA with Indonesian firm

§  Property: PHB shelves proposals for Bangsar land

§  Economy: Bank Negara reserves at RM429.6bn

Global news

§  US: Consumer credit in U.S. increased less than forecast in June

§  US: Job openings in U.S. rose in June to four-year high

§  Europe: German factory orders fall twice as much as forecast

§  Europe: Italian industrial output drops in June amid deepening recession

§  Europe: Greece rating outlook cut to negative by S&P as economy weakens

§  Asia: South Korea to weigh second straight cut

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