The Star Online: Business
The Star Online: Business |
- Malaysian ringgit near 3-week low despite strong GDP data
- KL Kepong falls on weaker earnings, shares go ex
- DRB-Hicom’s CTRM purchase viewed positively
| Malaysian ringgit near 3-week low despite strong GDP data Posted: 20 Feb 2013 06:58 PM PST SINGAPORE: The Malaysian ringgit fell to a near three-week low against the dollar on Thursday as interbank speculators shrugged off stong economic growth data and added dollar positions on expectations the U.S. Federal Reserve may stop buying bonds sooner than expected. The ringgit slid 0.2 percent to 3.1020 per dollar as of 0232 GMT, after hitting 3.1050, its weakest since Feb. 4. "It is an environment of a firm dollar after last night's Fed's minutes," said a senior Malaysian bank dealer in Kuala Lumpur. On Wednesday, minutes of the Fed's last policy meeting showed some policymakers thought the Fed may have to slow or stop buying bonds before seeing a pickup in employment. "In the short term, we are buying dollar, although in medium term, we will buy the ringgit," said the trader, adding he expected the ringgit to head to 3.1140 and 3.1200. Investors are also cautious over the upcoming Malaysian general election, which must be called by the end of April. The ringgit has lost 1.4 percent to the dollar so far this year and local stocks have fallen more than 4 percent as political uncertainty grows. Malaysia's financial markets were caught napping in 2008 when shock gains by the opposition redrew the country's political map and sparked a 10 percent one-day plunge in the main index. The scope for a surprise is very much alive five years later due to a lack of reliable opinion polls and signs that the three-party opposition led by former deputy prime minister Anwar Ibrahim is mounting a well-organised campaign. Still, some investors expected the ringgit to eventually benefit from the country's strong economic fundamentals. Malaysia's economy grew at its fastest pace in more than two years in the last quarter of 2012, data showed late on Wednesday. "We see the election uncertainty as transitory and expect continued portfolio inflows this year in the context of robust economic growth, a growing current account surplus and benign inflation," Barclays said in a note. - Reuters
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| KL Kepong falls on weaker earnings, shares go ex Posted: 20 Feb 2013 06:54 PM PST Published: Thursday February 21, 2013 MYT 10:55:00 AMKUALA LUMPUR: Shares of Kuala Lumpur Kepong (KLK) fell as much as 1.8% or 36 sen on Thursday after it earnings for the first quarter ended Dec 31, 2012 were below expectations and as its dividend of 50 sen a share went ex. At 10.31am, KLK was down 22 sen to RM20.60. There were 130,900 shares done at prices ranging from RM20.46 to RM20.66. Its share price rose 12 sen to RM21.32 on Wednesday ahead of the ex date for the dividend. The FBM KLCI fell 9.13 points to 1,604.20. Turnover was 279.14 million shares valued at RM222.48mil. There were 91 gainers, 302 losers and 223 counters unchanged. CIMB Equities Research said KLK's Q1 results fell short of expectations, being only 23% of its full-year forecast and 21% of consensus numbers. "The key culprit was a lower-than-expected crude palm oil (CPO) price achieved, which wiped out the impact of stronger output and better manufacturing contributions. "We cut our FY13 earnings forecast by 10% for the lower Q1 CPO price and reduce FY14-15 by 1-5% for higher production costs. This shaves 2% off our sum-of-parts based target price. The Q1 results letdown and KLK's rich valuations reinforce our Underperform rating on the stock," it said.
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| DRB-Hicom’s CTRM purchase viewed positively Posted: 20 Feb 2013 06:30 PM PST Outperform Target Price: RM3.27 DRB-Hicom's defence unit Deftech is paying RM298.3mil for a 96.9% stake in Composites Technology Research Malaysia Sdn Bhd (CTRM) that manufactures composite components for the aerospace and non-aerospace industries. The deal was done at favourable valuations and would strategically support DRB-Hicom's defence operations. There are no changes to our net tangible assets-based target price and earnings per share (EPS) forecasts. We believe the deal is positive and will complement DRB-Hicom's defence operations, which are one of the many non-automotive catalysts within the group. We maintain our "outperform" call. We understand that CTRM will be immediately earnings-accretive to DRB as the valuation of CRTM was done at a price-to-earnings ratio range of three times. Based on limited guidance from management, we believe CTRM could contribute RM50mil to RM70mil to the bottomline or 8% to10% of our financial year ending Mar 31, 2014/2015 EPS forecasts after taking into account net acquisition costs. Most of the purchase price of RM298.3mil will be used to settle outstanding debt in CTRM and we believe the Ministry of Finance's main motive for the disposal is to take debt off its balance sheet and transfer the future capital commitments of the company to the private sector. Apart from the earnings contribution, DRB-Hicom expects CTRM to be a key unit supporting its defence ambitions, especially in the design and production of composite frames for its AV8 armoured vehicle contracts, and to extend opportunities in aerospace where DRB-Hicom has an existing collaboration agreement with SAAB. We remain positive on DRB-Hicom as a compelling value play ready to be unlocked via restructuring. By Alliance Research Sell (Downgrade) Target price: RM1.60 PADINI is due to release its second quarter ending June 30, 2013 results on Feb 23, 2013, which we believe is likely to fall short of our and market's expectations as management flagged the risk of weakening retail sentiment, even a month before the Chinese New Year this year. As a result, Padini adopted more aggressive promotion and discounting activities over the past few months to boost its sales at the expense of profit margin, we believe. We are concerned that these discounting activities will persist and become a long-term phenomenon to the group, especially as consumers are getting increasingly sophisticated due to the influx of international brands. Furthermore, management reiterates that any contribution from its venture in Indonesia (Vincci) will be slow or insignificant to the group in the first two to three years, as it takes a conservative approach to penetrate the market (five new outlets per annum), which could only translate to 1% to 3% additional profit per annum to the group. As of today, its master franchisee in Indonesia, FJ Benjamin has already opened one Vincci store in Jakarta, which has been generating decent sales since its opening in December last year. On the positive front, Padini has started selling its Vincci shoes in the e-commerce space via Zalora.com, an Asia online fashion store, which was set up in late 2011. Nonetheless, the group has yet to formulate any plans to monetize its well-followed facebook fans page, which has 365k followers as of today. Management reveals that there is no immediate plan to penetrate the e-commerce space on its own. With regards to its brick and mortar business, there will be no new stores opening in financial year 2013. However, management has already identified five new outlets opening (three Brands outlets, two Padini concept stores) in financial year ending June 30, 2014, Gurney Paragon in Penang in mid-2013 and Imperial City Mall in Sarawak in second half of 2013 will have both Brands outlet and Padini concept store each while another Brands outlet will be opened in a mall in Seremban in the second half of this year. In view of intensifying price competition among fashion retailers and increasingly cautious retail sentiment, we cut Padini's financial year 2013 to 2015 earnings per share estimates by 14% to 17% per annum. The drop in earnings is mainly attributed to lower same-store sales growth assumption for Brands outlet in financial year 2013, from 20% year-on year (y-o-y) to +10% y-o-y, and margin compression due to stiff competition. Post our earnings cut, we anticipate Padini earnings in financial year 2013 to contract by 5.2% y-o-y, before growing 6.4% and 9.4% in financial year 2014 and 2015 respectively. In a nutshell, we are turning cautious on Padini as we anticipate the company's three-year earnings compound annual growth rate (CAGR) between financial year 2013 and 2015 to slow down from its five-year historical CAGR of 24.3% to 3.4%. As a result, we reduce our target price-earnings (P/E) ratio for Padini from 13 times 12-month forward P/E to 11 times, to reflect the slowing earnings growth over the next three years. Hence, we downgrade our call on Padini from buy to "sell" with a lower target price of RM1.60 (-31.6%), based on 11x times 12-month forward P/E. Our target price implies 13% capital downside.
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