The Star Online: Business
The Star Online: Business |
- Property downgraded
- BMW’s sees opportunities as consumers turn to bikes for commuting
- Aeon Co may announce RM764.8mil Carrefour buy this week
| Posted: 29 Oct 2012 06:45 PM PDT PROPERTY SECTOR Neutral (downgraded) FOLLOWING a record jump in prices and transactions in 2010-2011, we believe that property sector sales were already headed for a slowdown. Therefore, we did not call for a hike in the real property gains tax (RPGT) in Budget 2013, given that we felt that there was no necessity to do so. Budget 2013 was not a friendly budget for property developers as the Government imposed a 5% hike across the board, contrary to our expectations. The only saving grace was the absence of the widelyanticipated stamp duty hike. With the hike in RPGT expected to exacerbate the slowdown, we are compelled to reduce our call on the property sector to neutral for 2013 despite our long term bullish outlook on the sector. For 2013, we expect transactions to slow down, but for prices to hold steady, given the resilience of the Malaysian physical property market. In response, we expect developers to cut back on launches, reduce absolute selling price by selling smaller units, and shift their focus from high-rise to landed offerings. At this point in the property cycle, it will be the developers with strongest branding power who can continue to attract increasingly cautious buyers. Catalysts for the sector include a pick-up in activity in Penang mainland and Johor. We think affordable homes will be in the spotlight. Developers will need to re-position themselves, and adapt their pricing strategies as buyers increasing focus on affordability. Will there be more landbanking to come? With the cool-down in the sector, we believe landowners will be more reasonable. The risks for the sector include rising non-performing loan ratios if Malaysian homebuyers lose their holding power, margin erosion due to raw material price spikes and a slowdown in sales or a cut-back in launches. On the positive side, asset reflation theme remains intact over the longer term; and there are increased opportunities within the affordable/mass market segment. On the negative side, we see a slowdown in demand for mid/high end segment and economic growth; and tighter lending polices by banks. Among developers under our coverage, we believe that Mah Sing Group Bhd and Glomac Bhd should be more adaptable to the shifting market conditions. Between the two, we prefer Glomac, as their landed townships which are currently selling for RM400,000 to RM450,000, which fits the affordable segment definition, and they now offer attractive dividend yield of 5%, and trades at a mere 5.5 times forecast earnings. DIJAYA CORP BHD By ECM Libra Investment Research Buy Target price: RM1.57 DIJAYA's shares have been sold down due to several concerns. Firstly is its high net debt which is probably about RM1bil now. Secondly, stripping out a RM100mil fair value adjustment of investment properties from its net profit in first half of financial year 2012, we estimate net profit to remain flat at RM48.3mil for FY12 compared to RM48.8mil (adjusted for exceptional items) in FY11 despite a 25% jump in revenue. Thirdly is the negative perception concerning the amalgamation exercise, where a mixed bag of property assets were injected at apparently high prices from the major shareholder. Fourthly, Malaysian property stocks have been laggards due to consolidation this year amidst fears that a property bubble has developed. The first two concerns were necessary to prepare for a quantum leap in earnings, which is Dijaya's new aggressive growth strategy since 2010. To acquire the landbank to provide the base for aggressive earnings growth within a short period of time requires gearing up. Besides the landbank, Dijaya would also need to increase its manpower to handle the quantum leap in scale of development activities, which necessitates higher overheads upfront which explains the lower profit margin in FY12. With all this in place now, we project EPS growth to surge 74% in FY13 and 48% in FY14. This is in line with Dijaya's scale up in targeted launches from just RM860mil in FY11 to RM1.6bil in FY12, RM2.3bil in FY13 and RM2.5bil in FY14. The assets injected consisted of 68 acres of land bank valued at RM720mil or RM243 psf, and 806,793 sq ft lettable area of investment properties valued at RM384mil or RM475 psf. While the average pricing may appear high, the properties are in various prime locations and could actually now fetch better prices, for example, with the landbank consisting of 49 parcels of mainly small pieces of land in multiple locations, management is intending to sell some at prices higher than what they were injected at. Dijaya is thus taking a leveraged bet on the Malaysian property market, which if it wins as we believe, will pay off. Conversely, if the property market is not there over the next two years, Dijaya could come under financial pressure. Dijaya is a buy as it could be rerated to RM1.57 in 12 months which represents 51% capital upside. In 12 months' time, the general election would have been done with, the property market should have come back, property stocks should have been re-rated upwards, Dijaya could be delivering on our earnings forecasts and investors would be looking forward to FY14. Based on our forecast FY14 basic EPS of 15.7 sen and assuming the small property stocks get re-rated from the current average price-to-earning ratio of 7 times to 10 times, we derive a target price of RM1.57 for Dijaya which is also reasonable when compared against our fully diluted net tangible asset per share of RM1.66. The redeemable convertible unsecured loan stocks (RCULS ) issued to Danny Tan have conversion prices ranging from RM1.30 to RM2.50 over the 10-year period. Dijaya also has listed warrants with an exercise price of RM1 maturing in December 2019, which offer a leveraged play on the mother share. By Maybank IB Research Hold (unchanged) Target price: RM2.45 TH Plantations (THP) has proposed to acquire 100%-equity interests in Bumi Suria Ventures Sdn Bhd (BSV) and Maju Warisanmas Sdn Bhd (MWM) from Weida and other shareholders for RM255mil cash. These companies collectively own 5,424 ha of planted oil palm estates (6,514 ha of gross land) in Sarawak located midway between Bintulu and Sibu, with an estimated average age profile of about two years. Some 600 ha entered into its 1st year of harvesting and produced 2,646 tonne of fresh fruit bunches (FFB) for January to September 2012. This translates to an annualised yield of six to seven tonne per ha, which is in tandem with normal FFB yield trends. Acquisition price reflects mature estate pricing. The acquisition price appears to be at a premium as we estimated its enterprise value/ planted ha at RM55,000 per ha (with no mill). Such premium pricing reflects estates that are typically eight years and above (ie prime mature). As a comparison, Sarawak Oil Palms bought estates with similar age profile for RM41,300 per ha in September. But we understand these estates have good road infrastructure in place, and on mineral soil. Plantation estates typically break even in the third to fourth year of harvesting given low FFB yields in the initial years. But, in this instance, THP breakeven could be delayed to the fourth to fifth year of harvesting (ie FY15 onwards) because of its relatively higher financing cost. At the group level, THP will need to expense RM13mil interest (which may not be capitalised) for its new debt of RM255mil (with an assumption of 5% per annum interest). With this acquisition, THP proforma net gearing will jump to 0.82 times from 0.31 times in the end of June, but lowered to 0.52 times once another ongoing asset acquisition which involves new THP share issuance is completed. Still, at 0.52 times net gearing level, THP ability to gear further for expansion is limited. We maintain our earnings forecasts and hold call with an unchanged target price of RM2.45mil based on 11 times 2013 price-to-earning ratio for now. By OSK Research Buy Target Price: RM8 WE view the recent sell-down in Syarikat Takaful Malaysia Bhd's (STMB) shares as merely a correction. Its still compelling valuations indicate a strong buying opportunity at the current price. We foresee better-than-expected third quarter results, which will likely be announced on 21-22 Nov. Maintain buy on STMB with its net profit forecasts raised, given the strong upside in Wakalah income following the full adoption of the Wakalah model. Our fair value of RM8.00 is pegged to 12 times financial year (FY) ended June 30, 2013 earnings per share (EPS), implying a 62.6% upside. With another 15 sen to 20 sen dividend expected to be announced, we arrive at an annualized dividend yield of 6% to 7% based on the current share price. Having spoken to the management recently, we reckon that STMB's valuations are still intact as claims experience is expected to remain healthy for the foreseeable financial quarters. The management also does not expect a hike in management expenses for FY12 and FY13, and the company does not expect additional extraordinary items save for the one-off release of unearned contribution reserves arising from the change in reserving estimates for the group's family takaful products, general takaful and expense reserve, which had a total profit impact of RM4.7mil at the shareholder level year to date. We expect the third quarter results to be announced around Nov 21. We believe results for the remaining quarters may exceed expectations on the back of wakalah income upside from general takaful fund, and anticipation of a favourable tax rate of about 20% for this financial year due to non-taxable underwriting surplus transfer from the family takaful fund. STMB's share price shed 30% of its value recently on lack of support due to the stake sell-downs by BIMB Holdings and the Employees Provident Fund. We understand that the selling pressure has since eased. Given that the company's valuations remain compelling, we advise investors to take advantage of the price correction, which had resulted in a 62.6% upside to our fair value. Conservative adjustments to forecasts. We have adjusted our net profit forecasts upwards by 9.4% and 2.6% for FY12 and FY13 respectively. However we remain conservative as the upside in wakalah fee income can be defrayed into commissions and management expenses, as well as upside risks in claims experience for general takaful segment for FY13. We believe the company may still exceed our forecasts. Maintain buy with favourable dividend yield. We reiterate our buy call with a fair value retained at RM8.00, pegged at 12 times FY13 EPS. |
| BMW’s sees opportunities as consumers turn to bikes for commuting Posted: 29 Oct 2012 06:27 PM PDT PETALING JAYA: BMW Group Malaysia is seeing opportunities in the automotive industry's two-wheeler segment following a global trend of consumers using motorbikes for commuting, said managing director Gerhad Pils. He said the group was quite confident of maintaining double-digit growth in sales this year while aiming to achieve another year of double-digit growth next year. Up until end-September, he said the group had sold 255 motorbikes under its Motorrad division, a 23% increase compared with the same period in 2011. "The company is seeing an increase in consumer demand for motorbikes, in line with international trend. "Normally, bikers just use bikes as a hobby but nowadays, in addition to that, there's a trend of consumers buying two wheelers for commuting. "It is an urban form of mobility, and our range of maxi scooters is the answer to that," Pils said at the launch of the company's BMW C600 Sport and BMW C650 GT range of maxi scooters. He said the introduction of the new scooters would be a positive boost to BMW Group Malaysia, with the group continuing to see more growth as it delivered 5,014 BMW, MINI and BMW Motorrad vehicles as at end-September, an increase of 19% in sales compared with the same period last year. Pils said the all-new BMW C600 Sport and BMW C 650 GT were the world's first premium maxi scooters. He said that of the 40 units allocated for this year, more than half has already been taken up. Pils, who was appointed in July to head BMW Group Malaysia, said that other than introducing new models, his strategy was to expand the company's dealership and service network in the country. The BMW C600 Sport retails at RM65,000 on the road, while the BMW C650 GT sells at RM68,800. Both prices are quoted without insurance. |
| Aeon Co may announce RM764.8mil Carrefour buy this week Posted: 29 Oct 2012 06:24 PM PDT PETALING JAYA: Japan-based Aeon Co will officially announce the purchase of France-based Carrefour SA's Malaysian business operations this week, a news report published in The Nikkei said. The deal is expected to be priced at around 20 billion yen (US$250mil or RM764.8mil), according to The Nikkei, as Carrefour has been struggling to come up with cash to cut debt and fund the revival of its struggling European hypermarkets. The Wall Street Journal reported that Aeon, which operates 29 stores in Malaysia, was in negotiations to buy Carrefour's 26 stores, which would bring the former close to the top spot among retailers. "We have no comments on this as it is not related to Aeon Malaysia at this stage," AEON Co (M) Bhd's (Aeon Malaysia) public relations executive personnel Ann Marie told StarBiz over the telephone. Analysts contacted by StarBiz said it was likely that Aeon Malaysia would sooner or later be involved in a likely merger situation to synergise and consolidate both their operations. RHB Research retail analyst Lee Wee Sieng said in his report that the deal, should it eventually materialise, would be positive for Aeon Malaysia as there would be "significant" operational synergies and "economies of scale". "Besides, the acquisition will reduce direct competition for Aeon's supermarket operations," Lee said, adding that there were risks for Aeon Malaysia due to intensifying competition in the local retail scene. OSK Research consumer sector analyst said the deal would make Aeon Malaysia the No. 1 supermarket operator and one of the largest retailers in Malaysia. "The business acquired is likely to be placed under the wings of Aeon Malaysia. "The acquisition will benefit the company as it will broaden the group's market since Aeon is a department store targeting the middle-income group while Carrefour is a hypermarket operator catering to the low-to-middle-income consumers," OSK said. However, OSK added that there could be a drawback due to possible cannibalisation with regard to Aeon Malaysia's four existing MaxValu stores, which are its value-for-money standalone stores. Aeon Malaysia would likely need to finance the buyout either with debt or equity financing should the acquisition be made at the Malaysian operations level, OSK said, adding that a possible debt financing would see its gearing levels at 35.3%. It is to be noted, however, that earlier reports stated that Carrefour, which operates the Malaysian stores under the company named Magnificient Diagraph Sdn Bhd, had also previously been brought to court by its former bumiputra partner and 30% shareholder Tan Sri Abdul Aziz Shamsuddin through Hartajaya Harmoni Sdn Bhd. Hartajaya Harmoni, in its petition filed by its solicitors, alleged that there had been an intention before by Magnificient Diagraph's foreign majority shareholders to forcibly take away the former's 30% stake in the latter for no valuable consideration and thereafter sell the company to potential bidders. Hartajaya Harmoni claimed the decision of these shareholders to invite bids for the 100% purchase of Magnificient Diagraph was done without the knowledge of and consultation of its 30% shareholder. Hartajaya Harmoni had earlier claimed in its petition there were about four bidders that had expressed interest in buying over Carrefour's business and operations in Malaysia, Singapore and Thailand. These bid prices had ranged from RM3.1bil to RM3.6bil, the company claimed. |
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