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 170212

Flows; 

BUYS: Axiata, Armada, Kencana          

SELLS: UEMLand, TM

Technical Stock Alert;

MMC - Stock was sold down to a low of RM2.81 yesterday after touching a recent high of RM3.06. This selldown presents a buying opportunity ahead of key re-rating catalyst on the listing of Gas Malaysia and the awarding of MRT tunneling job worth RM8bn. Also a laggard in the stable of Syed Mokhtar companies. BUY

DRB - Share price has retraced more than 10% from it's recent high of RM3.26 to touch a recent low of RM2.83 yesterday. Stk seeing immediate support at RM2.88lvls backed by attractive valuations of FY13 P/Bk of 0.8x & PER of 10x. Group remains the best proxy to VW's ambition to become a key Asean player and share price should be well supported by it's massive RM7.5b defense contract & it is currently laying the foundation for potential strong future growth with the acquisition of Proton-trading buy.

Stk of the Day

TNB  (RM6.00)

- has pulled back and consolidated for last 1 wk after touching recent high of RM6.38 forming a double top. Stk is seeing accumulation at current 200 SMA lvls of RM5.98 which acts as strong support for stk.  

- Energy Commission, Petronas and EPU are in aggressive discussions for a final recommendation on gas price to be presented to Cabinet by March. Matter needs to be resolved soonest possible as @ Nov-Dec 2011 TNB has already incurred additional RM400-500m in extra charges for burning distillates due to shortage of gas supply. The earlier RM2bn advance compensation received will only be recognized in 2Q12 rslts. 

- Melaka's Lekas Regassification plant is on track to be operational by Sept 2012 will provide much needed 200mmscfd supply of gas. 

- Renewal in policy will be spearheaded by new incoming CEO replacing Che Khalib whose contract expires in June. Replacement should be made known next month or April. 

- Accum this GLC for impending resolution is gas price and supply shortage.  

Market Roundup 100212

FBM30 1561.66, -3.66 points (-0.23%), Volume 3,355mil, Value 2,812mil

1) KLCI finally clsd in the red as investors locked in profits ahead of wkend as European finance ministers held back its approval of rescue package for debt-laden Greece until it passes its latest austerity package into law and identify EUR325mil in further spending cuts. Selling pressure on select heavyweights: TENAGA-3%, GENTING, IJM -1.5%, IOI -2%, snapping its 5 days of consecutive gains. Rotational plays saw buying interest in steel sector led by ANNJOO+11.5%, LIONIND+9%, KINSTEEL+5% and o&g sector: Kencana +2%, Alam +4%, Perdana +1% as market breadth managed to stay positive with gainers leading losers 566:371. Futures closed 1553 (7.6 points discount)

2) Heavyweights: TENAGA-3.02% RM6.11, IOICORP-2.32% RM5.47, GENTING-1.53% RM10.30, YTL-2% RM1.48, MAYBANK+0.59% RM8.52, GENM+1.3% RM3.90, PBBANK+0.3% RM14.00, AXIATA+0.4% RM4.99

3) DBT: EXTOL 10.8mil @ RM0.19 (10.3% PUC, 24% discount), ASIABIO 9mil @ RM0.065 (2.3% PUC), OLDTOWN 3mil @ RM1.25 (3.8% PUC)

4) Situationals:

MAHJAYA+13.7% RM0.83: Company received a conditional takeover offer from its major shareholders to acquire the remaining 25.57% shares not own at 85sen each

XOX+3.85% RM0.27: Share price was firmer after Mara Inc Sdn Bhd raised its shareholding to 19mil shares or 6.29% after recent acquisitions from open mkt

5) Gamuda/MMC-announced the salient terms of PDP agreement for Sg Buloh-Kajang MRT proj. It states PDP's responsibilities:

The PDP shall be responsible for delivering to the Owner the Project as a fully functional and operating railway system within the agreed target cost and completion date.

The PDP is responsible for the design of the Railway in accordance with the Owner's Requirements and the approved Railway The main responsibilities of the Owner under the PDP Agreement are:

(a) to obtain the necessary approval for the Railway Scheme

(b) to obtain the EIA approval in respect of this Project;

(c) to deliver site possession to the PDP (in order for the PDP to deliver the same to the contractors) in accordance with the agreed schedule in the PDP Agreement; and

(d) to make payments for the works done by the contractors (in order for the PDP to make onwards payment to the contractors) in accordance with the terms of the PDP Agreement.

- PDP is not allowed to participate in any of the tender for the works comprised in the Project except for the underground works package.

Target Cost and Completion Date

The agreed target costs is the aggregate of all the awarded works packages, the amount of contingency allowed and the amount of reimbursables incurred by the PDP in performing its services.

The allowed contingency is agreed at 15% of the aggregate of the awarded works packages. Both the Owner and the PDP are allowed to utilize the contingency.

The reimbursables include the PDP's overheads, fees for engineering consultancy, quantity surveyors and system integration works and fees for site investigations and topographical survey. The amount of the reimbursables is fixed at RM2.85 Billion.

The target completion date for the entire Project is 31 July 2017.

The PDP shall be paid a fee which is equivalent to 6% ("Fee") of the aggregate of all the awarded works contracts (excluding the value of the underground works package if the PDP wins the Swiss Challenge).

If the Project exceeds the agreed target cost, the PDP shall be liable for the cost over-run by the reduction of the Fee based on an agreed formula.

Any liabilities arising from claims brought by or disputes with Contractors shall be fully borne by the PDP after the contingency has been exceeded and the PDP has no recourse to the Owner in respect of such excess.

In the event that the PDP fails to complete the Project by the agreed completion date, the PDP is liable to pay to the Owner agreed liquidated damages of RM500,000.00 per day.

Comments: Gamuda/MMC is the only pure local party to submit a bid for Phase 1 tunnel works (RM7-8bn). Four other contenders incl: Japan's Taisei, China's Sinohydro, China Railway and Hyundai-Gadang have been pre-qualified to tender (on a Swiss Challenge basis). Award of the project should take place by April 2012. Believe Gamuda-MMC has a huge competitive advantage given its superior knowledge of soil conditions and price preference granted to local bidders of up to 7.5%.

6) Mkt - all eyes this wkend on Greek Parliament's attempt to vote through austerity measures to enable them to obtain necessary rescue funds. Barring anything -ve, uptrend of mkt intact with stks at buy lvls: TNB, Genting, MRCB, TImecom, UEMLand.

Morning Call 310112

FLOWS;

BUYS : UEMLand, DRBHicom, GentingMsia, TM

SELLS : Axiata, MRCB, AirAsia

Technical Stock Alert;

Dayang - Volume build up seen in past two trading days as the stock continues to consolidate around the RM1.90 levels after trending up from RM1.80 in early Jan. Track for a breakout above RM2.00 for a possible RM2.20 mid term target.

Yinson - Stock was sold down to a low of RM1.90 yesterday after touching a recent high of RM2.14 ahead of its ex date on the 3/2/2012 for a 3 Rights : 2 Shares issue at RM1.00 (25sen to be capitalized from its share premium and retained earnings). BUY

Stock of the Day

MMC Corp - (RM2.75)

Name    30-Dec  latest  YTD Change

DRB     2.04      2.78      36.27%

POS     2.59      2.87      10.81%

TWSPLNT 4.34      4.88      12.44%

ZELAN   0.37      0.42      13.51%

MMC     2.77      2.80       1.08%

TWS    10.04     10.06       0.20%

BERNAS  3.12      3.10      -0.64%

- Major recent underperformer in the Syed Mokhtar stable.

- Possible short term catalyst to ignite excitement in the stock could come from the unlocking of value in the listing of Gas Malaysia and possibly Malakoff and Johor Port at a later stage. MMC's 41.8% stake in Gas Msia could potentially be worth at least RM1.3bn.

- The MMC/Gamuda JV is the leading contender to secure the KL MRT tunneling project, potentially worth RM8bn.

- Recently the group has also been linked to a bid for KTMB.

- Buy for a breakout above RM3.00 for an immediate target of RM3.50.

Morning Commentary 120112

Good morning,

1) Proton: Both Tan Chong Motors & UMW have denied that it was joining the race to bid for Khazanah's 42.7% stake in Proton Holdings. Tan Chong's announcement to Bursa was made in response to press reports that quoted a broking house on the matter. Yesterday Tan Chong announced to Bursa that it has neither received any formal invitation nor has any plan to bid for the stake in Proton. Meanwhile, UMW has reiterated that it will not be making a bid and that they are committed to their partner Toyota in enhancing it's business here in Malaysia and making Perodua self reliant pre & post National Automotive Policy (NAP); Expected.

2) BPuri: Bina Puri Holdings is close to securing the privatization concession for the Motorway 9 (M-9) highway in Pakistan, sources said. The M-9 links Hyderabad to Karachi. It is understood that BPuri has already received the LOI from the National Highway Authority of Pakistan but is still negotiating the finer points of the contract. According to the source, BPuri will have a 28-year concession to operate the highway, 3 years of which will entail BPuri upgrading the M-9 from 4 lanes to 6 lanes, at a cost of some RM600m. Pakistan is not unfamiliar to BPuri. In Sept last year, Co completed the construction of 174 villas in Lahore     for RM194m. In 2010, it completed construction of the Nippon Paint Factory    in Lahore for RM340m. If BPuri bags the Pakistan contract, it will be the second highway concession after the KL-Kuala Selangor Expressway (Latar) in which it has 50%. Watch this space.

3) MMC: Keretapi Tanah Melayu Bhd (KTMB) has been asked to assist MMC Corp to conduct due diligence on the national railway company starting this month, said it's president. The due diligence is important for MMC to decide if it wants to privatize KTMB. It was reported in Dec that MMC plans to pump in RM1b into KTMB & take over it's operations. Speculation has been rife that the govt is planning to put the plan on ice following protests by the Railwayman Union of Malaya (RUM). RUM argued that it won't be right for KTMB to hand over it's operations to a private party & worried that it would see many of it's 5,500 workers retrenched. The due diligence is likely to take 6 months to complete & estimates that it may take up to 18 months or more before the operations of KTMB can be handed over to MMC, given the complexity involved - Neutral.

4) Mkt: mixed trading with focus on situationals & lower liners.