Morning Call | 19 April 2013

FLOWS

Friday, 19 April, 2013

BUY

AFFIN, GAMUDA, PERDANA

SELL

DIALOG, IJM, KLK

STOCK ALERT

STOCK NAME

DATE

PRICE

BUY/SELL

TARGET PRICE

HSL(6238)

19/4/2013

RM1.54

ACCUMULATE

RM1.74

The interest in construction stocks has gained some momentum recently, as the market starts to discount GE risks. However, HSL has been somewhat of a laggard. Share price has consolidated around the RM1.50 level for the past 6 months. We suspect the subdued interest could be due to lack of major contract wins in 2013 thus far. Co has won RM113m worth of jobs YTD (RM313m in 2011, RM525m in 2012). Overall, it still has a healthy OB of RM1.05b & OB replenishment of RM500-600m is expected for 2013. Catalysts are aplenty going forward – remains main contender for jobs under SCORE initiative, high margins given limited competition from only a small pool of qualified Sarawak based contractors, strong B/S, strong earning visibility FY12-14 & growing property development contribution. Trading at PE of 8.5x FY12/13 - Accumulate. (AK)

TAANN(5012)

19/4/2013

RM3.52

BUY on weakness

RM4.10

The share price has fallen c30% over the last 9 months, largely on the back of losses suffered by the plywood division, weaker CPO prices, higher production cost of plantation division given its young age tree profile & rising labor costs. The Tasmanian plywood operation, which contributes 70% of plywood revenue, continues to drag on earnings, more than offsetting the Malaysian plywood operation which is still profitable. We believe these negatives have been factored in the share price, which has consolidated at current levels for the past 4 months. Moving forward, the outlook for CPO prices in 2H2013 is improving & Co’s FFB production numbers are expected to be better. Management has also guided that it targets to minimize losses in the Tasmanian outfit by cutting down on production, while focusing on its profitable local operations in Sarawak. Local media recently highlighted that reconstruction activities in Japan have also picked up (90% of Ta Ann’s plywood products are exported to Japan). Meanwhile, any positive news-flow regarding a peace deal for the Tasmanian forest may be an added catalyst. Trading at 10x for FY12/14 – BOW. (AK)

Calls for APRIL Week 2-3

STOCK

Initiation Dates

Initiation price

BUY/SELL

TARGET PRICE

LAST PRICE

% Change since Initiated

CMSB(2852)

12/4/2013

RM3.25

ACCUMULATE

RM3.53

RM3.24

-0.2%

TDM(2054)

12/4/2013

RM4.52

Trading SELL

RM3.90

RM4.44

-1.8%

AIRASIA(5099)

15/4/2013

RM2.84

Situational BUY

RM3.30

RM2.93

+3.1%

DIGI(6947)

15/4/2013

RM4.69

Technical BUY

RM5.08

RM4.67

-0.4%

TAGB(5158)

16/4/2013

RM0.245

ACCUMULATE

RM0.33

RM0.245

0.0%

IJM-WC (3336WC)

16/4/2013

RM1.36

BUY

RM1.80-RM2.00

RM1.42

+4.4%

AIRPORT(5014)

17/4/2013

RM5.70

BUY on weakness

RM6.40

RM5.75

+0.8%

PLENITU(5075)

17/4/2013

RM1.97

Strong BUY

RM2.52

RM1.99

+1.0%

WASEONG(5142)

18/4/2013

RM1.63

ACCUMULATE

RM1.84

RM1.63

0.0%

PANTECH(5125)

18/4/2013

RM0.755

BUY

RM0.85

RM0.755

0.0%