Morning Call | 14 August 2013

FLOWS

Wednesday, 14 August, 2013

BUY

MAYBANK, PERISAI

SELL

ARMADA, MRCB

STOCK ALERT

STOCK NAME

DATE

PRICE

BUY/SELL

TARGET PRICE

SKPETRO(5218)

14/8/2013

RM3.71

BUY

-

The current correction of SKPetro by foreign funds is an opportunity to buy one of the world’s top 5 integrated O&S service providers and the world’s largest tender rig operator (56% market share). Despite being the favourite stock in the most favoured sector in Malaysia, SKPetro has retraced >10%  versus the KLCI’s <1% drop from both their 30-day highs. On a technical basis, the stock has never been so oversold since the merged entity of Sapura Crest & Kencana Petroleum was listed in May 2012 (RSI 27%). It is also backed by solid fundamentals with an order book of RM26.5b (3.8x FY13 revenue), 3-year EPS CAGR of 35.8% vs industry average of 19.7% and a Q2FY14 profit performance which will see a significant jump due to the consolidation of Seadrill’s tender-rig earnings.  In addition, there are potential positive news flow from further contracts wins such as the RM3b Pan Malaysian subsea installation job of which SKPetro is the front runner in view of its execution track record & its array of relevant vessels for the job,  or the USD 1.7b bid for US-based Newfield Exploration Co’s Malaysian offshore production blocks which Newfield has indicated that they are disposing. Buy (PT)

RHBCAP(1066)

14/8/2013

RM8.05

BUY

-

The banking stocks were the worst hit following the Fitch downgrade of Malaysia’s credit outlook last month. However, since then, many banking stocks have recovered a significant % of their losses with the exception of RHBCap which is still trading near its low, in sort of a base-building pattern. On the average, the banking stocks are down 2.7% versus RHBCap’s 7.3% drop from their last month highs. Now is the time to buy as the volume seems to have dropped off substantially.  RHBCap is also trading at the lowest PER vis-a-vis its peers for the next 2 FYs of 10.8x & 9.6x versus the sector’s 13.0x & 11.9x, and p/bk of 1.29x versus the sector’s 1.95x. In addition, RHBCap, together with Affin, has the lowest % of their bonds portfolio in the Held-For-Trading category where the mark-to-market losses will have to be provided for in the P&L a/c. RHBCap’s loan portfolio is also geared towards commercial loans, hence a clear beneficiary for the expected ETP-related fund raising exercise in 2H13. RHBCap is also expected to reap the gains from increased IB market share & synergies in the 2H13 from its merger with OSK Investment Bank. The targeted Seprember’13 acquisition of 40% stake in PT Bank Mustika will be the next catalyst for earnings growth & stock performance. Downside is likely to be limited because of its valuation & the often-talked about privatization put. Technically, it is also oversold and trading at an RSI of 30% - the lowest level ytd. Buy (PT)

Calls for  AUGUST Week 1/Week 2

STOCK

Initiation Dates

Initiation price

BUY/SELL

TARGET PRICE

LAST PRICE

% Change since Initiated

UEMS (5148)

2/8/2013

RM2.70

BUY

RM3.15

RM2.81

+4.0%

MISC(3816)

2/8/2013

RM5.37

BUY

RM5.80

RM5.15

-4.1%

KPJ(5878)

5/8/2013

RM6.67

ACCUMULATE on weakness

RM7.25

RM6.84

+2.5%

MYEG(0138)

5/8/2013

RM1.88

ACCUMULATE

RM2.20

RM1.94

+3.1%

PANTECH(5125)

6/8/2013

RM1.04

BUY

RM1.40

RM1.11

+6.7%

SKPETRO(5218)

6/8/2013

RM3.84

ACCUMULATE on weakness

RM4.60

RM3.71

-3.4%

MUHIBAH(5703)

12/8/2013

RM2.48

ACCUMULATE

-

RM2.50

+0.8%

SUNREIT(5176)

12/8/2013

RM1.36

ACCUMULATE

-

RM1.36

0.0%

WCT(9679)

13/8/2013

RM2.52

BUY

RM3.08

RM2.52

0.0%

CENSOF (5195)

13/8/2013

RM0.525

BUY

RM0.69

RM0.525

0.0%

 

We’ve added an extra feature (first column from right) to indicate our recommendation for our call.

HOLD
CONT SELL	SELL/ TAKE PROFIT
CONT BUY	STRONG BUY

 

 

 

FLOWS

Wednesday, 14 August, 2013

BUY

MAYBANK, PERISAI

SELL

ARMADA, MRCB

STOCK ALERT

STOCK NAME

DATE

PRICE

BUY/SELL

TARGET PRICE

SKPETRO(5218)

14/8/2013

RM3.71

BUY

-

The current correction of SKPetro by foreign funds is an opportunity to buy one of the world’s top 5 integrated O&S service providers and the world’s largest tender rig operator (56% market share). Despite being the favourite stock in the most favoured sector in Malaysia, SKPetro has retraced >10%  versus the KLCI’s <1% drop from both their 30-day highs. On a technical basis, the stock has never been so oversold since the merged entity of Sapura Crest & Kencana Petroleum was listed in May 2012 (RSI 27%). It is also backed by solid fundamentals with an order book of RM26.5b (3.8x FY13 revenue), 3-year EPS CAGR of 35.8% vs industry average of 19.7% and a Q2FY14 profit performance which will see a significant jump due to the consolidation of Seadrill’s tender-rig earnings.  In addition, there are potential positive news flow from further contracts wins such as the RM3b Pan Malaysian subsea installation job of which SKPetro is the front runner in view of its execution track record & its array of relevant vessels for the job,  or the USD 1.7b bid for US-based Newfield Exploration Co’s Malaysian offshore production blocks which Newfield has indicated that they are disposing. Buy (PT)

RHBCAP(1066)

14/8/2013

RM8.05

BUY

-

The banking stocks were the worst hit following the Fitch downgrade of Malaysia’s credit outlook last month. However, since then, many banking stocks have recovered a significant % of their losses with the exception of RHBCap which is still trading near its low, in sort of a base-building pattern. On the average, the banking stocks are down 2.7% versus RHBCap’s 7.3% drop from their last month highs. Now is the time to buy as the volume seems to have dropped off substantially.  RHBCap is also trading at the lowest PER vis-a-vis its peers for the next 2 FYs of 10.8x & 9.6x versus the sector’s 13.0x & 11.9x, and p/bk of 1.29x versus the sector’s 1.95x. In addition, RHBCap, together with Affin, has the lowest % of their bonds portfolio in the Held-For-Trading category where the mark-to-market losses will have to be provided for in the P&L a/c. RHBCap’s loan portfolio is also geared towards commercial loans, hence a clear beneficiary for the expected ETP-related fund raising exercise in 2H13. RHBCap is also expected to reap the gains from increased IB market share & synergies in the 2H13 from its merger with OSK Investment Bank. The targeted Seprember’13 acquisition of 40% stake in PT Bank Mustika will be the next catalyst for earnings growth & stock performance. Downside is likely to be limited because of its valuation & the often-talked about privatization put. Technically, it is also oversold and trading at an RSI of 30% - the lowest level ytd. Buy (PT)

Calls for  AUGUST Week 1/Week 2

STOCK

Initiation Dates

Initiation price

BUY/SELL

TARGET PRICE

LAST PRICE

% Change since Initiated

UEMS (5148)

2/8/2013

RM2.70

BUY

RM3.15

RM2.81

+4.0%

MISC(3816)

2/8/2013

RM5.37

BUY

RM5.80

RM5.15

-4.1%

KPJ(5878)

5/8/2013

RM6.67

ACCUMULATE on weakness

RM7.25

RM6.84

+2.5%

MYEG(0138)

5/8/2013

RM1.88

ACCUMULATE

RM2.20

RM1.94

+3.1%

PANTECH(5125)

6/8/2013

RM1.04

BUY

RM1.40

RM1.11

+6.7%

SKPETRO(5218)

6/8/2013

RM3.84

ACCUMULATE on weakness

RM4.60

RM3.71

-3.4%

MUHIBAH(5703)

12/8/2013

RM2.48

ACCUMULATE

-

RM2.50

+0.8%

SUNREIT(5176)

12/8/2013

RM1.36

ACCUMULATE

-

RM1.36

0.0%

WCT(9679)

13/8/2013

RM2.52

BUY

RM3.08

RM2.52

0.0%

CENSOF (5195)

13/8/2013

RM0.525

BUY

RM0.69

RM0.525

0.0%

 

We’ve added an extra feature (first column from right) to indicate our recommendation for our call.

HOLD
CONT SELL	SELL/ TAKE PROFIT
CONT BUY	STRONG BUY