Morning Call | 9 January 2014

FLOWS

Thursday, 9 January, 2014

BUY

TENAGA, SKPETRO, AIRASIA

SELL

MAYBANK,CIMB, GAMUDA

STOCK ALERT

STOCK NAME

DATE

PRICE

BUY/SELL

TARGET PRICE

SPSETIA (8664)

9/1/2013

RM2.89

Trading BUY

RM3.30

SPSetia (RM2.89) – the depressed valuations that SPSetia is trading at should have substantially discounted the impending departure of CEO Tan Sri Liew and the fear of an exodus of key management staff with him. The company has in a way mitigated this fear by putting in place a long-term incentive scheme for its senior management and other key staff. SPSetia currently trades at a steep discount to its historical valuations, with FY14 PER & p/bk of 13.0x & 1.2x versus historical PER & P/bk of 19.1x & 2.0x. It is also trading at an attractive 47% discount to RNAV, with an unbilled sales of RM9.6b which is equivalent to 3.4x FY13 property development revenue. The sales is expected to be sustainable as company has said that they will focus on launching more township developments in 2014 which have continued to see resilient demand vis-à-vis the high end segment of the market. For example, the recent Setia EcoHill in Semenyih was sold out within days of the launch. Management has also guided that the shariah compliant status will be restored in the next review as its non-shariah debt level has fallen to < 33% of total debts. This will leave a significant overhang of potential Islamic fund liquidations that would have capped any price rally. In addition, SPSetia has an exciting potential M&A catalyst in that it is frequently touted as the vehicle for the injections of PNB’s other property development assets acquired in the privatizations of I&P and Petaling Garden. With the property sector showing some signs of life, SPSetia is a decent trade at current levels. Trading buy (PT/LJN)

KKB (9466)

9/1/2013

RM2.60

ACCUMULATE

RM2.90

KKB (RM2.60) – has been consolidating for more than 2 months since it hit its high of RM2.81 at the end of Oct’13 in a descending triangle pattern, of which it is now sitting on the base of this said triangle, a level that is appropriate for accumulation. KKB is one of the prime beneficiaries of the Sarawak Corridor of Renewable Energy (SCORE), where it has a proven track record of having successfully completed many fast-tracked SCORE-related projects. This is seen recently when they won a larger-than-expected RM227m pipe supply order. The company is bidding for RM430m worth of jobs and has a historical contract win rate of 30%. A bigger portion of the current tenders are said to be fabrication jobs which carry higher profit margin. In addition, KKB is expected to clinch RM100m – RM150m worth of O&G-related contracts in FY14 after its 43% associate, OceanMight SB, became a licensed Petronas supplier. Upstream reported that KKB is part of a consortium (together with Hyundai Heavy Industries & Norway’s Aker Solutions) pre-qualified for the development of the offshore facilities for the Bergading field under the first phase of the North Malay Basin field. This turnkey contract has a potentially value of USD1bil. KKB trades at FY14 & FY15 PER of 10.8x & 9.3x respectively. Accumulate (PT/LJN)

Calls for  DEC week 3/ JAN week 1 2014

STOCK

Initiation Dates

Initiation price

BUY/SELL

TARGET PRICE

LAST PRICE

% Change since Initiated

TIMECOM (5031)

2/1/2013

RM3.55

BUY

RM4.00

RM3.65

+2.8%

JTIASA (4383)

2/1/2013

RM2.04

BUY

RM2.30

RM2.28

+11.7%

MUHIBBAH (5703)

3/1/2013

RM2.31

BUY

RM3.00

RM2.38

+3.0%

GADANG (9261)

3/1/2013

RM1.02

BUY

RM1.60

RM1.15

+12.7%

SENDAI (5205)

6/1/2013

RM1.03

BUY

RM1.29

RM1.02

-1.0%

ALAM(5115)

6/1/2013

RM1.53

BUY

RM1.80

RM1.56

+1.9%

MALTON (6181)

7/1/2013

RM0.845

Trading BUY

RM1.45

RM0.845

0.0%

NAIM (5073)

7/1/2013

RM3.80

ACCUMULATE

RM5.16

RM3.84

+1.0%

HUAYANG (5062)

8/1/2013

RM2.06

BUY

RM2.62

RM2.08

+0.9%

PARKSON (5657)

8/1/2013

RM2.86

ACCUMULATE

RM3.45

RM2.83

-1.1%

 

HOLD
CONT SELL	SELL/ TAKE PROFIT
CONT BUY	STRONG BUY