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 | 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)