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TOP
PICKS 2014
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We
will be ceasing our morning stock calls from next week as the holiday season
and year end is upon us. Stock picking will be of utmost importance as
FBMKLCI has outperformed the region; locking in gains of 9.5% ytd! To greet
the new year, we leave you with our top 10 stock picks for 2014:
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STOCK
NAME
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DATE
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PRICE
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BUY/SELL
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DRBHCOM (1619)
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20/12/2013
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RM2.60
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BUY
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DRBHCOM – after completion of its
restructuring and M&A, co is poised to reap the benefits from its 3 core
business divisions:
(i)
Automotive -
turnaround expected from Proton on the back of well-received launches of the
competitively priced Saga SV & hatchback Suprima S v Perodua models.
Assembly volumes for Volkswagen vehicles should also gather pace in FY14 as
evidenced from the launch CKD Polo Sedan recently. Government’s plan to
replace Perdana as official car may be another key catalyst for the industry.
(ii)
Property - has
over RM13.3b in the pipeline with strategic land in JalanTunRazak, Glenmarie,
Shah Alam, Puchong, Proton City TanjongMalim, HicomPegoh Park in Melaka, and
IDR, Johor.
(iii)
Defense - will
also see a significant jump in contributions for FY14 & FY15 from the
newly acquired CTRM & the production of armoured trucks worth RM7.5bn
with possibility of further land defense contracts in the future.
(iv)
POS – may receive
a special dividend from its 32.2% stake in Pos which has to utilize its
RM70.8m under s108 tax credits by end 2013 (translates to an attractive 13c).
Diversification of earnings stream into pawn broking and possibility of
property development of its Brickields land are catalysts in future-Buy
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GAMUDA (5398)
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20/12/2013
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RM4.65
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ACCUMULATE
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GAMUDA - Stocks retraced sharply from its Oct’13 high on the back
of disappointment over the inconclusive Selangor state offer for SPLASH
and the delay of expectations of a special dividend of 32c. We are of the
opinion deal will pan out in matter of time due to critical water supply
shortages expected in KL & Selangor. In addition, Gamuda is considered
the front runner for the RM25bn MRT2 project whereby the tunneling portion is
an attractive RM10bn as it is the sole contractor with the expertise &
machinery for MRT tunneling. Cabinet approval is expected to be in early
2014 which will be the main catalyst for the stock. Gamuda is also in a
consortium that is tipped to win the RM8b Gemas-JB electrified double
tracking job, likely to be awarded in 2014. It is trading at attractive
valuations relative to historical PER of 21.6x with FY14 & FY15 PER of
14.8x & 13.0x respectively –Accumulate
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MUHIBBAH (5703)
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20/12/2013
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RM2.28
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ACCUMULATE
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MUHIBBAH - Stock has pulled back from its high of RM2.72 to
current levels as they await for contracts following the award of Petronas
licence to Muhibah, who was also the approved supplier of major onshore
fabrication & construction works. Given its good track record with
Petronas, Muhibah is tipped to be one of the front runners for the RM60b
RAPID project Pengerang project. Trades at attractive PER’14 of 10.4x – at
the lower end of small & mid-cap O&G players PER band in Malaysia.
Accumulate
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YINSON (7293)
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19/12/2013
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RM6.21
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BUY
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YINSON -
has fantastic earnings profile for the next 2 financial years ending Jan’14
& Jan’15, with earnings growth of >50%, and yet it trades at a PER of
9.7x for FY01/15. Its organic growth is backed by high margin contracts for
its FSO & FPSO that will kick start in FY14 & FY15. Also, the growth
from its recently completed acquisition of Norwegian-based FPSOs operator,
Fred Olsen Production, will increase its floating production fleet size
to 5 units (from current 2 units). The added x-factor is the tie- up with
Kencana Capital (via the proposed placement of 14.6% of the enlarged share
capital)which will facilitate their bids for Malaysian contracts expected in
2014. Buy
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JTIASA (4383)
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20/12/2013
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RM2.24
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BUY
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JTIASA - is play on rising CPO prices with
its recent results showing the much reduced role of its original timber
business, and the plantation segment taking over as the main activity,
contributing 74% to group PBT. The main attraction of JTiasa is its average
palm age profile of 5.6 years, the lowest amongst the bigger plantation
players. Only 12% of its planted area are considered as mature and this will
increase to 40% in 2 years. This means the company has very strong FFB
production growth prospects which are a significant advantage when the big
cap plantation players are experiencing lower production yield from tree
stress. The timber division is also seeing volume growth from global heightening
economic activities, especially in its main export market, Japan. These
positive parameters explain the sharp drop in PER of 19.3x in FY June’14 to
PER of 11.3x for FY June’15, significantly cheaper than the Malaysian
plantation average of 19.1x & regional plantation average of 16.1x. Buy
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EKOVEST (8877)
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20/12/2013
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RM2.94
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ACCUMULATE
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EKOVEST –construction OB has ballooned to RM2.2bn on the back of Duke2
~RM1.18bn and RM800m from EcoCheras property development proj. This compares
favourably against its mkt cap of RM800m and can last co another 3 yrs. In
addition, co is sitting on choice 34ac land bank along Gombak River (which
coincidentally is undergoing River of Life cleaning and beautification
process). BV is at mere RM6m v MV RM360m. Co also owns 25ac land in
Danga Bay, JB which is carried at RM6psf v recently transacted RM200-300psf.
Buy to position for 2014 as will see spillover benefit from IDR related
listings and more contribution from construction OB with Duke 2 and other
property development projects. Another rerating catalyst possibly in Jan,
when co is expecting a 50sen toll hike to the current RM2 toll rate.
Compensation will be paid by Govt if no toll hike is allowed. –Accumulate
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CRESBLD (8591)
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20/12/2013
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RM1.52
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BUY
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CRESBLD - Undervalued small
cap construction/property player (Mkt Cap: RM250mil) despite share price
approaching near its all time high of RM1.55. Cresbuild is expected to launch
Dang Wangi Project in 2Q2014 with GDV of RM1bn while its affordable homes
project Alam Sanjung has seen good take up rate of 70%. Company is expected
to achieve RM400mil sales from Dang Wangi (RM1bn), Batu Tiga-Phase 2
(RM165m). Company is also a proxy to further JV with Prasarana. Upon
completion of UniTapah, company’s recurring revenue is expected to exceed
RM50mil from Tierra Crest, UniTapah and 3 Two Square office. Current
construction orderbook excluding property development stands at RM700mil and
trades at 7xFY14PE with P/B 0.64x. Buy TP: RM1.73 based on SOP valuation.
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E&O (3417)
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20/12/2013
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RM1.92
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BUY
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E&O - Share price is trading at the trough of its 6 months trading range,
partly due to the subdued property sector sentiment after Budget 2014, as
well as the below market 1H FY14 performance ( 34% street, although it can be
said to be in line as 2HFY14 should be stronger). Although Co will be
negatively affected by the cooling measures, we believe that the company
specific factors should drive the stock’s valuations. Co’s share price is
positioned to get a significant kick from the crystalisation of Seri Tanjung
Pinang 2 ( STP2) given the almost tripling in NAV. The Detailed Environmental
Impavt Assessment ( DEIA) is expected to materialise after the CNY. The
potential approval of the STP2 project remains the stock’s key catalyst.
Also, given the shareholding structure, a potential takeover by Sime is a
wild card possibility. BUY.
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MRCB (1651)
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20/12/2013
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RM1.25
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BUY
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MRCB - Since its 3Q results share price has been
bashed down 13% from RM1.42 following an unexpected kitchen sinking exercise.
Current level appears attractive for a trading buy as it is only 4sen off its
YTD low of RM1.20 with RSI only at 20%. YTD MRCB is down 20% which could see
possible year end closing. Key catalyst are 1) Govt approval of toll
for EDL 2) High Court decision on PJ Sentral slated for 13 Jan 2014 3)
further sale of non core asset such as 30% owned DUKE and MRCB Tech. MRCB has
also started reaping benefits of land injection from Gapurna with 1st
phase launch of 9 Seputeh (GDV: MR2.5bn) with takeup rate of over 60%.
Currently trades at 47% discount to RNAV of RM2.37. Buy with TP: RM1.70
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DIALOG (7277)
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20/12/2013
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RM3.10
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BUY
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DIALOG – has continued to execute on its core business with
its 3rd tank terminal project at Pengerang, dubbed the Rotterdam
of the East, where its Phase 1A is substantially completed & well on
track to start operations in 1QCY14. This deep-water petroleum
terminal is capable of handling very large crude carriers, storing blending
& distribution of crude oil & petroleum products which will underpin
Dialog’s long-term profitability. Dialog’s management has reiterated that the
Pengerang terminal project is independent of Petronas’ RAPID project and was
planned 1 year before the conception of RAPID, and it will proceed regardless
of Petronas’ decision on RAPID which is expected to be by1QCY14. However, we
are of the opinion that RAPID, being an important part of the government’s 12
National Key Economic Areas, and the daily advertisements taken by Petronas
citing RAPID as one of their landmark projects over the CNBC news network,
are giveaways that the project will be approved and be a huge catalyst for
Dialog. In addition, Dialog has recently signed a MOU with Concord Energy to
conduct a feasibility study (which will take approximately 1 year) for a
proposed dedicated crude oil and petroleum product storage terminal In
Pengerang. These are all potential sizeable jobs for its EPCC division which
will add to the secured jobs on subsequent phases of Pengerang terminal and
provide earnings feasibility for easily the next 5 years. Over a mid-time
frame of 2-3 years, Dialog has a potential x-factor & a major re-rating
catalyst which analysts have not build into their forecasts currently. These
are their ventures in the upstream O&G development, i.e. the 50:50 EOR JV
with Halliburton Energy Services Inc. to redevelop the matured Bayan oilfield
off-Sarawak and its Balai marginal field Risk Sharing Contract (RSC) with
Petronas which has already hit first-oil & is awaiting final investment
decision. Buy
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HOLD
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CONT SELL
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SELL/ TAKE PROFIT
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CONT BUY
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STRONG BUY
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