Morning Call | 7 February 2014

FLOWS

Friday, 7 February, 2014

BUY

DIGI, TENAGA, MAYBANK

SELL

GENM, AXIATA, IOICORP

STOCK ALERT

STOCK NAME

DATE

PRICE

BUY/SELL

TARGET PRICE

SPSETIA (8664)

7/2/2014

RM2.74

Trading BUY

RM3.30

SPSetia (RM2.74) – currently trades at a steep discount to its historical valuations, with FY14 PER & p/bk of 12.8x & 1.15x versus historical PER & P/bk of 19.1x & 2.3x. It is also trading at an attractive 50% discount to RNAV, with an unbilled sales of RM9.6b which is equivalent to 3.4x FY13 property development revenue. The sales is also sustainable as company is focusing on township developments in 2014 which have continued to see resilient demand vis-à-vis the high end segment of the market. A recent example is Setia EcoHill in Semenyih which was sold out within days of the launch. With the current depressed valuations & back by solid fundamentals, SPSetia is a trade for an exciting potential M&A play – the injection of PNB’s other property development assets acquired in the privatizations of I&P and Petaling Garden. The stock will easily spike to RM3.30 on any hint of a potential deal. 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. With the market in a technical bounce, SPSetia is attractive based on its current risk: reward parameters. Trading buy (PT/LJN)

NAIM (5073)

7/2/2014

RM3.41

ACCUMULATE

RM3.80

Naim (RM3.41) – has dropped sharply by 13% in less than a month due to speculation of a potential stepping down of the Sarawak’s  chief minister. We are of the opinion that with its years of operations in both Sarawak & West Malaysia, Naim has established the necessary track record in the construction & property development industry to secure contracts on its own merits. The stock is attractively priced currently, trading at prospective FY14 & FY15 PER of 6.7x & 6.2x respectively. It has an order book of RM1.3b and an outstanding GDV of RM3.0b that will drive earnings for the next 3-5 years. During the current period of rumours & fear, it is an opportunity to accumulate Naim as it is a proxy to one of the favourite investment themes in Malaysia - the Sarawak Corridor of Renewable Energy (SCORE). Naim’s sustained high construction margins is due to limited competition from only a small pool of Sarawak-state-registered contractors for most public jobs in Sarawak. Its property division is also buoyed by the property boom in Bintulu (a beneficiary of the buoyant O&G sector) & the massive industrial development in Samalaju. Naim is also a cheap proxy to the O&G services sector through its 30.91%-owned associate, Dayang Enterprise Holdings of which Naim is sitting on an unrealised gain of more than RM800m. Accumulate (PT/LJN)

Calls for  JAN Week 4/ FEB Week 1 2014

STOCK

Initiation Dates

Initiation price

BUY/SELL

TARGET PRICE

LAST PRICE

% Change since Initiated

SURIA (6521)

28/1/2014

RM2.25

ACCUMULATE

RM2.94

RM2.37

+5.3%

PADINI (7052)

28/1/2014

RM1.61

ACCUMULATE

RM1.90

RM1.59

-1.3%

SKPETRO (5218)

29/1/2014

RM4.31

ACCUMULATE

RM4.90

RM4.48

+3.9%

ARMADA (5210)

29/1/2014

RM4.05

ACCUMULATE

RM4.50

RM4.05

0.0%

CYPARK (5184)

4/2/2014

RM2.16

ACCUMULATE on weakness

RM2.50

RM2.25

+4.1%

ALAM (5115)

4/2/2014

RM1.44

ACCUMULATE

RM1.60

RM1.48

+6.2%

CRESBLD(8591)

5/2/2014

RM1.44

BUY

RM1.73

RM1.49

+2.7%

DIGI (6947)

5/2/2014

RM4.68

ACCUMULATE

RM5.20

RM4.85

+3.6%

UOADEV (5200)

6/2/2014

RM1.83

Trading BUY

RM2.20

RM1.82

-0.6%

AEON (6599)

6/2/2014

RM11.86

ACCUMULATE

RM13.30

RM12.04

+1.5%

 

HOLD
CONT SELL	SELL/ TAKE PROFIT
CONT BUY	STRONG BUY