Morning Call | 30 December 2014

DELEUM (RM1.70) - Company’s RM4bn orderbook is expected to last up to 2023 backed by major contract wins such as the 5-year Pan Malaysia slickline equipment and services contracts and 7+3 year Long-Term Service Agreements for the provision of Turbomachinery maintenance services of gas turbines.Tenderbook remains healthy with current bidding for RM1.1b-1.2b contracts, of which 70-80% are for new contracts in its oilfield services division. Growth is expected from company’s regional expansion plans, and intentions to grow its Asset Integrated Solutions. Earnings are projected to grow at CAGR of 18% over next 2 years with PE only at 10xFY15. Company is also in a net cash position minimising risk of interest rate hikes and forecasted to pay an attractive dividend yield of 5% in 2015. Accumulate with TP: RM2.05. (TYK)

CHINWELL (RM1.41) - Chin Well is one of the world’s largest manufacturers and suppliers of carbon steel fasteners (i.e. screws, nuts and bolts). Chin Well manufactures and supplies fasteners that are primarily utilized in highway guard rails, power transmission towers, furniture and other applications. The bulk of the group's products are exported (Malaysia 24%, Vietnam and others 11%, Europe 57%). Recent acquisition of the remaining 40% in its Vietnam production for RM47.6mil via issuance of 27mil new shares at RM1.45 plus RM8.31m is earnings accretive. Eps per share for JuneFYE14 would have risen to 14.83sen (9.5xPE) from 13.15sen. 1QFY15 reported net profit of RM13.5m which equates to annualised EPS of 18sen (7.8xPER). Chinwell has a minimum dividend policy of 40% equating to 5.1% dividend yield.  Prospect for company is positive as it benefits from translation gains from weaker RM, while 6% GST tax is lower than existing sale tax of 10%. New orders from Germany and France for Do-It-Yourself (DIY) products are expected to expand its margins further. Currently trades at strong support level of RM1.40 after falling 20% from its peak of RM1.74 following announcement of Vietnam acquisition. Accumulate ahead of completion of acquisition with TP: RM1.80. (TYK)

Morning Call | 29 December 2014

HSL (RM1.67) – Stability in earnings guaranteed for the next two years with its secured order book of RM1.1bn. 2015 could see its order book improve significantly with a few high profile contracts in Sarawak expected to be awarded beginning with the Phase 2 Kuching waste water project where HSL is a front runner. Other major contract the group is linked to include the RM27bn Pan-Borneo highway and SCORE relate infrastructure projects. Sitting on a net cash position of RM122m and a forward PE 9.5x, we rate it a buy as its RSI is looking to cut up with an immediate target of RM1.85. (DN)

NCB (RN2.25) – the entrance of MMC as a major shareholder could see fortunes improve for the ailing port operator as it undergoes an overall revamp in trying to improve port and logistics utilization. Currently utilization is only 75% but with the new measures implemented, management is hoping to improve this to 90% and return the company to profitability. Trading at the low end of its P/Bk valuation band of 0.76x vs historical average of 1x, we rate it a buy with most negatives already factored into its price. Short term target of RM3.00 (the price MMC paid for its 15.7% stake). (DN)

Morning Call | 26 December 2014

OCK (RM0.72) – share price has fallen 32.7% from its high achieved in August. Current technical indicator oversold with weekly RSI @ 35 and MACD on verge of cutting up, presenting an opportunity to Accumulate a growth stock. The recent LOA from MCMC for Phase 1 of the USP Timeline 3 project further strengthen OCK’s chances of being awarded a further 600 sites under Phase2 & 3 of the USP project. There is also a possibility of Co undertaking additional works on a sub-contract basis for other USP recipients given its good reputation. Trading at an undemanding FY15 PER of 12x vs industry average of 20x, we rate OCK an Accumulate for its strong earnings growth prospects, focus on recurring revenue base and ventures into high growth emerging markets. (SPK)

GHLSYS (RM0.715) – is an excellent proxy to capitalize on growing ASEAN e-commerce and e-payment industry. We see both stability and growth in its business model emerging from its acquisition of e-Pay with annuity revenue forming 92.8% of total revenue. The Payment Card Reform Framework by Bank Negara and its target of 800k point-of-sales (POS) terminals from current 230k and 1bn issues of debit card by 2020 is a major boost for GHL’s growth prospects. Furthermore, recent agreement with Omnipay (Philippines) bodes well for Co’s expansion and expects to start deploying its point-of-sales (POS) terminals in 1Q’15. Emergence of private equity firm Creador as 2^nd largest shareholder and appointment of its two directors will potentially fast track any M&A activities with an expected announcement in CY15. Balance sheet remains healthy with net cash of RM8.8m. Currently trading at FY15 PER of 28.4x vs MYEG @ 33.3x, we recommend an Accumulate on weakness. (SPK)

Morning Call | 24 December 2014

BENALEC RM0.59 - The share price has fallen c30% over the last 2 months. This translates to attractive multiples of 8.9x & 7.7x for FY6/15 & 16 ( vs mid cap construction industry PER average of 10-13x). The group recently disposed off 9 pieces of land in Malacca amounting to 58.6 acres for cash consideration of RM107m. The sale will help provide earnings visibility for at least the next 2 years. Group still has about 341 acres of land in Malacca and Pulau Indah which are held for sale, which could be worth cRM595m. Benalec’s near term earnings visibility has improved, but key re-rating catalyst remains it’s Johor project and the signing of the SPA with 1MY Strategic Terminal Oil for 1000 acres of land in Tanjung Piai. A detailed EIA has been submitted to the Dept of Environment. MACD has just cut up with RSI @ 35 - Trading Buy ( TP RM0.78 based on 10x FY16). (AK) 

MAYBULK RM1.14 - Following the poor Q3 results, the share price has eased c20% . Group is now trading at P/Bk of 0.63x ( vs 4 year historical average of 1.3x), translating to a PER of 16x for FY12/15. At current levels, we reckon most of the negatives have been reflected in the price. Earnings risks such as lower anticipated dry bulk charter rates and lower contribution from its 20% SGX-listed associate, POSH Group, have been more than reflected in price. Ahead, the weaker Ringgit against the US Dollar and lower bunker fuel prices could lend support to Maybulk’s earnings. The Seaborne Chinese iron ore imports are projected to rise, mainly driven by strong expansion of Australian iron ore production capacity, will also auger well for demand of Maybulk’s vessels. POSH’s headwind in it’s Mexican JV due to non payment by clients, is also being managed. Technically, MACD has just cut upwards with RSI @ 38 - Opportunity to accumulate. (AK)

Morning Call | 23 December 2014

TUNEINS (RM1.60): Since retracing from its recent high of RM2.20 share price has consolidated well at the RM1.60 level after touching a low of RM1.53 with RSI at 33%. TuneIns main growth business segment in travel insurance (TI) is shielded because of improving regional growth, especially in core countries of Thailand & Indonesia as well as falling oil prices. Currently trades at 13.5xFY15 PER with CAGR exceeding 20% for next 2 years. Accumulate with TP: RM2.00. (TYK)

MMCCORP (RM2.36): Share price closed above its double bottom neckline of RM2.34 offering a short term upside potential of RM2.52 (16sen). MMC is also a potential beneficiary of year end closing next week. We believe current levels offers limited downside as it trades near its 5 year key support level of RM2.20 level. Key catalyst will be the listing of Malakoff in 2Q2015 while recent acquisition of NCB could see MMC leveraging on NCB as a vehicle to list both MMC’s port businesses i.e. PTP and Johor Port. MMC is also a major beneficiary of Malaysia’s infra play with 2014 orderbook replenishment hitting RM1.4bn bringing outstanding orderbook to RM3.4bn. MMC (in a consortium with Sumitomo) is also tipped for the HSR contract. Accumulate with TP: RM3.21 (20% discount to SOP). (TYK)

Morning Call | 22 December 2014

POS (RM4.45) – Recent selldown from weaker results due to higher staff and transportation cost presents a buying opportunity as valuations is compelling compared to industry peers. Transportation cost which account for 13% of overall cost will naturally be lower with current sharp dip in oil prices. Earnings growth is still mainly driven by its courier services with its 5 yr transformation plan in place to ensure earnings stability. Trading at only 14.8x forward PE vs SingPos 22.8x and global average 20x, we rate it a buy with an immediate target of RM5.00.(DN)

YTLPower (RM1.51) – Current weakness attributable to its expiry of its domestic PPAs in Sept 2015. However there is a strong likelihood of an extension with the reserve margin falling below acceptable levels with the immediate shutdown. Major shareholders have also been adding to their holdings to currently 49.9%. The stock is trading off its low of RM1.43 with an immediate upside of RM1.80. Buy with a current attractive yield of 6.6%. (DN)

Market Roundup | 15 December 2014

 

 

 

FBMKLCI   1697.31pts      - 35.68pts     (-2.06%)     Volume  2.064b   Value 2.318b

 

 

1) The KLCI contracted another 2% today breaking thru the 1700 psychological level today following the weaker U.S market as the Oil prices continue to decline. In the regional scene, bourses were generally weaker in tandem with the global markets as NIKKEI - 1.57% despite a land slide win by Abe in the recent snap elections, HSI also closed lower following the PBOC's minutes which indicated that the mainland's growth could decrease to 7.1% next year on slowing property investment, the SHCOMP however, saw gains amongst construction companies as investors bet on the government's intervention going forward. In the local scene, INDUSTRIAL index lost the most grounds amongst the sector losing 4.9% weighed by PCHEM -8.21%, CMSB -13.88%, PETGAS -1.20%, SUPERMX -16.49%. Market breadth was negative as loser thumped gainers by 1010 : 66. Futures closed 1704.50 (5 pts premium).

 

 

2) Heavyweights : PCHEM -8.21% RM4.69, TENAGA -2.47% RM13.40, MAYBANK -2.49% RM8.60, PBBANK -1.67% RM17.66, KLK -5.72% RM20.10, CIMB -2.15% RM5.45, SIME -2.06% RM9.01, TM -3.20% MR6.65.

 

 

3) DBT : ARMADA 35.059mil @ RM1.01, XINGHE 15.433mil @ RM0.08, EDUSPEC 9.2mil @ RM0.22.

 

 

4) Situational:-

 

AIRPORT -0.75% RM6.61 - Malaysia Airports Holdings Bhd's unit has bagged a project worth 209.5m Qatar riyals (RM192.2m) for the repair and maintenance servicesof the airport special systems at Hamad International Airport in Doha, Qatar. The airport management company said its subsidiary of Malaysia Airports Consultancy Services Sdn Bhd (MACS) had on Wednesdayreceived the letter of award and notice to proceed for the project from the New Doha International Airport Steering Committee.

 

 

SUPERMX -16.49% RM1.62 - Supermax Corporation Bhd's executive chairman and group managing director Datuk Seri Stanley Thai and his wife Datin Seri Cheryl Tan were charged by the Securities Commission with insider trading involving the shares of APL Industries Bhd in 2007. Supermax, which makes gloves, issued a statement on Monday that Thai and his wife, who is an executive director of the company, were charged under Section 188 3(a) of the Capital Markets and Services Act 2007 involving APLI shares in 2007.

 

 

5) DAYANG : announce that its wholly-owned subsidiary Dayang Enterprise Sdn Bhd  has been awarded by Petronas Carigali Sdn Bhd, a contract for the Provision of Brownfield Major Modification Work for Bardegg-2 and Baronia EOR Development Project on 26 November 2014. Job comprises major modification work for Bardegg-2 and Baronia EOR development offshore Sarawak. The Contract is valued at cRM280m & is for approx 36 months effective from 12/2014 until 2017 or completion of works; +ve, contract is expected to contribute positively to the earnings of the group. We like Dayang as earnings are assured for the next 4-5 years with an orderbook of RM4.5b. About 80% of the orderbook consist of 5-year hook up & commissioning (HUC) contracts which commenced in 2014, while the balance are for topside maintenance activities. Dayang is also bidding for close to RM700m of EPCC contracts which is a potential near-term catalyst. Valuation is attractive with forward FY15 PER of 8.6x. Dayang is also one of the few remaining big cap syariah compliant stock with Div 3.5%

 

6) Market : is expected to remain cautious with sentiment weak, on the back of depressed commodity prices. Market direction to largely hinge on oil prices and potential year end window dressing activities.

Market Roundup | 12 December 2014

FBMKLCI   1732.99pts      - 11.58pts     (-0.66%)     Volume  1.451b   Value 1.784b

 

1) The KLCI continue to face selling pressure after oil prices slide below the $60 level overnight, the U.S market rose decisively in the earlier session on robust consumer spending but retraced to close just marginally above the overnight level. In the regional scene, SHCOMP +0.42% gained after slowing growth in the industrial production numbers boosted speculation of more policy easing in the near term, NIKKEI +0.21% and STI +0.45% gained inline with optimism of the region. In the local scene, PROPERTY-1.46% names took a beating as the sector index was weighed down by E&O -7.45%, UEMS -2.63%, SPB -6.25%, MRCB -4.00%, MATRIX -7.19%. Market breadth was negative today as loser tower over gainers. Futures closed at 1725 (8pts discount).

 

2) Heavyweights : SKPETRO -7.17% RM2.20, SIME -2.12% RM9.20, ASTRO -7.80% RM3.07, MISC -3.45% RM6.89, PETGAS -1.91% RM21.50, FGV -5.45% RM2.60, MAXIS -1.50% RM6.55, CIMB +1.27% RM5.59

 

3) DBT : IGBREIT 10mil @ RM1.28, ARK 5.056mil @ RM0.516, ZECON 3mil @ RM0.90 (2.51% PUC)

 

4) Situational:-

ARMADA -0.97% RM1.02 - PT Armada Gema Nusantara, a consortium led by a Bumi Armada subsidiary, has signed a contract worth RM4.0b to supply a Jakarta based oil-and-gas company with one floating, production, storage and offloading (FPSO) vessel. The signing follows several announcements made by Bumi Armada beginning in Aug 19, 2014 on the Letter of Intent issued by Husky-CNOOC Madura Ltd (HCML) for the award of the contract to PT AGN. PT AGN is an Indonesian joint venture comprising Bumi Armada Offshore Holdings Ltd and PT Armada Gema Marine Services. According to Bumi Armada, the contract is for a period of 10 years, with options for five annual extensions.

 

5) KOSSAN

 

Ideal Quality Sdn. Bhd, a wholly-owned subsidiary of the Company, has on even date entered into a  Sale and Purchase Agreement with  Himpun Menang Sdn. Bhd (Vendor) for the acquisition of  a piece of vacant  freehold industrial land  measuring in area approximately 5.3292 hectares held under Geran 52935 Lot 6103, Mukim Kapar, Daerah Klang, Selangor for a total cash consideration of Ringgit Malaysia 39,007,631.00.

 

The acquisition is in line with the Group’s strategy to replenish its land bank to generate long term sustainable income and viability. The Proposed Acquisition will be funded through internally generated funds and/or bank borrowings.

 

Barring any unforeseen circumstances, the Proposed Acquisition of the  Property is expected to be completed by the 1st quarter of financial  year 2015. +ve

 

6) Market: Market sentiment remain weak as commodity prices continue to trend lower. However indices expected to see support from year end window dressing activities.

Morning Call | 12 December 2014

FLOWS		Friday, 12 December, 2014
BUY		GENTING, YTL, TM
SELL		AXIATA, UMW, FGV
STOCK ALERT
STOCK NAME	DATE			PRICE		BUY/SELL			TARGET PRICE
KPJ (5878)	12/12/2014			RM3.75		TRIM			-
Co is expected to face earnings drag and margin compression on three main fronts (1) new hospital openings which require a gestation period of 2-3 years to break even, (2) higher operating cost from additional staff and (3) GST implementation where Co is expected to pass on costs to customers. This is expected to drive patient traffic to the cheaper alternative of heavily subsidized government hospitals. As such, we expect  FY15 EPS to decrease to 11cents/share (vs 0.13cents EPS FY14) implying an FY15 PER of 34x which we think is overvalued vs its 3 years average of 28x PER, unattractive dividend yield of 1.8% FY15 and momentum indicators turning negative, we suggest a Switch to AHEALTH. (SPK)
AHEALTH(7090)	12/12/2014			RM3.53		ACCUMULATE			RM4.00
With market volatility not likely to abate soon, we see good value in the defensive natured AHEALTH. Group has undergone a transformation into a healthcare group from a pharmaceutical-based company, venturing into direct-to-consumer healthcare products, diagnostics and contract manufacturing of orthopaedic devices providing growth whilst supported by a steady pharmaceutical division. Co’s venture into the orthopaedic market is timely and prime to capitalize on a market that is expected to record CAGR of 5% due to an ageing population globally, especially developed markets. Additional catalysts moving forward include a major upgrade for its manufacturing plant, increasing exports and widening reach into generic drugs, prescription drugs for cardiovascular, cholesterol management and antibiotics. Stock is fundamentally attractive with net cash of RM43m, dividend yield of 3.4% and 10.1x PER FY15. Accumulate. (SPK)
Calls for DEC WEEK 1/ WEEK 2 2014
STOCK	Initiation Dates		Initiation price		BUY/SELL		TARGET PRICE	LAST PRICE		% Change since Initiated
AFG (2488)	04/12/2014		RM4.77		TRIM		BB – RM4.20	RM4.69		-1.7%
IHH (5225)	04/12/2014		RM4.78		TRIM		BB –RM4.20	RM4.80		+0.4%
WPRTS (5246)	08/12/2014		RM3.30		SELL INTO STRENGTH		BB – RM2.90	RM3.34		+1.2%
IJM (3336)	08/12/2014		RM6.57		ACCUMULATE		RM7.20	RM6.49 (ex 4 sens)		-1.3%
UNISEM(5005)	09/12/2014		RM1.95		TAKE PROFIT		BB – RM1.45	RM1.94		-0.6%
PADINI (7052)	09/12/2014		RM1.63		BUY ON WEAKNESS		RM1.85	RM1.61		-1.3%
CIMB(1023)	10/12/2014		RM5.41		ACCUMULATE		RM6.15	RM5.50		+1.6%
PETDAG(5681)	10/12/2014		RM17.62		TRADING BUY		RM20.86	RM16.70		-5.3%
TITIJYA (5239)	11/12/2014		RM1.76		BUY		RM2.50	RM1.79		+1.7%
TMCLIFE (0101)	11/12/2014		RM0.48		TRADING BUY		RM0.55	RM0.465		-3.2%

 

 

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