Khamis, 15 Ogos 2013

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The Star Online: Business


KLCI falls lower, KLK and Petronas weigh

Posted:

KUALA LUMPUR: The FBM KLCI fell almost four points lower on Friday morning weighed by selected blue chips, in tandem with the weaker regional market as debate on US Fed's stimulus cutback picked up.

At 9.04am, the KLCI fell 3.45 points to 1,788.76. Turnover was 73.36mil valued at RM30.62mil. Losers outpaced gainers 184 to 64 while 124 counters were unchanged.

HwangDBS Vickers Research said the KLCI could face downward bias today after showing resilience lately. On the chart, the benchmark index may test the immediate support level of 1,785.

"In terms of local corporate developments, of probable interest today are stocks like Astral Supreme, DRB-Hicom, as its 51%-owned subsidiary has proposed to divest the entire stake in Uni.Asia Life Assurance for RM518mil cash and AmBank, in response to an announcement of its latest quarterly financial results during lunch hours," it said.

 Reuters reported Asian stocks were weaker, gold was at two-month highs, the dollar was nursing losses and Treasury yields were at two-year highs as traders debated what differing signals meant for the timing of any tapering of the US Federal Reserve's stimulus.

Upbeat US jobs claims data and rising consumer prices suggesting a winding back of the Fed's US$85 billion a month bond buying could start as soon as next month were countered by weak results and outlooks from Wal-Mart the world's largest retailer, and Cisco.

At Bursa Malaysia, CIMB fell five sen to RM8.10, PetDag 14 sen to RM28.20 and PPB eight sen to RM14.70.

Bourstead fell eight sen to RM5.22, AFG six sen to RM5.33 and iBhd 34 sen to RM2.51.

Gainers were KL Kepong, up 10 sen to RM21.28, HLFG 10 sen to RM14.68 and Kossan four sen to RM6.04.

Khind rose seven sen to RM1.67 after it posted a 110% jump in net profit to RM6.43mil from RM3.06mil a year ago.

TPPA: Malaysia says no to fixed timeframe

Posted:

KUALA LUMPUR: Malaysia's participation in the proposed Trans-Pacific Partnership Agreement (TPPA) should not be bound by any fixed timeline, as many issues remain unresolved.

In a special Cabinet meeting convened yesterday, the Prime Minister and Cabinet directed Malaysian negotiators to continue ensuring that Malaysia's sovereignty was defended in the course of the TPPA negotiations.

"As a number of major issues – including state-owned enterprises, and labour and intellectual property rights (IPR) – remain unresolved, the Cabinet is of the view that Malaysia should not be bound by any fixed timeline with regard to the TPPA.

"They are unanimous in reinforcing Malaysia's position that we will only agree to the TPPA with terms that are most favourable to our country," read a statement issued by the International Trade and Industry Ministry (Miti).

Critics of the TPPA fear that negotiations would be wrapped up in October.

The special Cabinet meeting was held as part of the ongoing process to update and seek fresh mandate from the Cabinet on the TPPA.

All lead negotiators from the various ministries presented their respective progress of negotiations and challenges ahead.

According to sources, during the three-hour meeting, several ministers asked questions and sought clarification on several issues.

"This was the first time we had a dedicated Cabinet briefing, so there were a lot of questions, including the investor-state dispute settlement system, market access and government procurement," a source said.

It is understood that another full briefing on the TPPA for the Cabinet would be held soon.

During yesterday's session, the Cabinet also agreed to two more Cost Benefit Analyses or CBAs, focusing on interests of small and medium-scale enterprises and the bumiputra business community as well as a comprehensive analysis of national interests.

On the issue of IPR, the statement said the Cabinet was unanimous that Malaysia would not agree to any proposal that would deny access to affordable medicine and healthcare.

"The Cabinet is firm in ensuring access to affordable medicine remains its utmost priority which will not be compromised in the ongoing TPPA negotiations. The Cabinet also took note of the request to exclude tobacco and tobacco products from the TPPA."

Miti has also informed the Cabinet that engagement with all stakeholders would be intensified prior to concluding the TPPA negotiations.

Miti is currently discussing with various stakeholders the format and framework of further engagement.

The statement also said the Cabinet was very supportive of more transparency in the negotiation process.

Related Story:

Group wants tobacco excluded from trade pact

Stronger MMHE second-half results seen

Posted:

MMHE HOLDINGS BHD

By Kenanga Research

Underperform (maintained)

Target price: RM3.39

MMHE Holdings Bhd recorded a second-quarter ended June 30 core net profit of RM47.6mil which brought its core net profit for the first half to RM98.1mil.

The results were broadly within our expectations, accounting for approximately 41.2% of our full-year forecast of RM237.9mil.

However, it was below market expectations, accounting for only 36.8% of the consensus full-year ending Dec 31 (FY13) forecast of RM266.8mil.

Nevertheless, the first-half results were still within our expectations as we are expecting a stronger second-half performance on the back of variation orders for some previously completed projects such as Gumusut-Kakap and Telok Gas.

No dividend was declared in the second quarter.

Quarter-on-quarter, the sequential net profit was down by 6.0% against first quarter due mainly to lower offshore works executed within the quarter, resulting in lower revenue.

Management guides that both the Gumusut-Kakap floating production system and Telok-B topsides have been successfully delivered.

Year-on-year, the core net profit was down by 26.5% largely due to lower margins recognised in the first half due to higher costs recognised at the Tapis EOR (enhanced oil recovery) project; and the lack of earnings before interest and tax recognised at the Malikai project which has yet to achieve profit recognition status (25% completion) for the year.

Overall, we are not surprised by the weaker results as contract wins have been sluggish since mid-2012, resulting in a shrinking order book; and margins are still flat as MMHE has just kick-started its cost rationalisation and efficiency enhancement exercise.

Order book currently stands at approximately RM1.8bil from RM2.5bil in the first quarter with the Malikai project being the largest with a contract value of RM1bil.

Tender book stands at RM4.5bil with the majority (approximately 50% to 75%) comprising domestic contracts.

Management admitted that the contract flows had been pretty slow lately and hinted that some light could be seen by year-end.

We suspect competition will intensify with additional fabrication licences being dished out (i.e. Muhibbah and KKB Engineering) but MMHE is likely to maintain its edge in heavy-tonnage and complex projects given its track record and tie-up with global heavyweight Technip.

The group currently targets to win an additional RM1.5bil contracts vis-à-vis its previous RM3bil target for FY13.

There are no changes to our FY13 forecasts given that the earnings are largely within expectations.

We maintain "underperform" and target price of RM3.39 based on an unchanged 18 times price-earning ratio on earning per share in calendar year 2014.

Some risks involved are higher-than-expected project wins, better-than-expected margins and an acceleration in its project executions.

EASTERN & ORIENTAL BHD

By RHB Research Institute

Trading buy (maintained)

Target price: RM2.60

EASTERN & Oriental Bhd (E&O) has announced that a dialogue regarding a detailed environmental impact assessment (DEIA) study on Seri Tanjung Pinang 2 (STP2) will be held on Aug 24.

This public forum is part of the requirements under the DEIA that E&O is conducting. It will need to incorporate those comments into its final environmental impact assessment (EIA) report and submit for approval. We expect this will take another 2-3 months.

Land is valuable in Penang due to its scarcity.

The public forum is a major hurdle before the State Government gives the 760-acre development the nod.

More importantly, by requirement, 110 acres (net) of STP2 land will be surrendered to the state as payment in-kind to fund infrastructure projects on the island.

Assuming a blended average price of RM1,100 per sq ft (psf) (versus RM765 psf for STP1) for the mix of landed and high-rise developments, STP2's gross development value (GDV) could amount to a massive RM18bil to RM20bil.

Our assumptions are reasonable, as STP1's super-link and Andaman 2 units are now selling at RM770 psf and RM1,400 psf respectively.

Since initiating coverage on the stock, we have always seen E&O as a potential takeover target, whether the acquirer is major shareholder Sime Darby or another party.

Apart from Sime, E&O's valuable brand is a good fit for other developers that do not have a niche in the high-end luxury segment.

A general offer could be on the cards, as Sime has gradually raised its shareholding to 32% (as at July 31).

If the 33% threshold is triggered, Sime will have to make a general offer.

We note that Sime has been mulling the listing of its property division, and could pool all its property assets together, including its stake in E&O and Battersea, in the listed company.

We maintain our "trading buy" rating with an unchanged fair value of RM2.60, a 35% discount to revised net asset value.

TAN CHONG MOTOR HOLDINGS

By CIMB Investment Bank

Outperform (maintained)

Target price: RM8.00

NO change to our earning per share (EPS) or revised net asset value (RNAV) based target price for now, which is pegged to the sector's 11 times 2014's price-earning average.

Catalysts are expected from a depreciation of the yen and the launch of new models.

We maintain "outperform."

According to an earlier report, Mitsubishi Motors Corp has formed a joint venture (JV) with Tan Chong Motor (TCM) to assemble cars for the Japanese automotive giant after terminating its collaborative agreement with Proton.

Mitsubishi Malaysia has confirmed the agreement but production may not start so soon and the cars would only be meant for the domestic market.

The JV is in line with management's intentions to broaden TCM's assembly footprint and produce 100,000 units a year group-wide.

We believe the JV will have a marginal impact in the immediate term as TCM would have to prove itself on small volumes first before getting access to Mitsubishi's key segments.

The JV could also require some capital commitments as it could be taking over a few production lines in Proton's Shah Alam plant if DRB-Hicom relocates all of Proton's manufacturing to Tanjung Malim.

We are more excited about TCM's other future potential JVs which could involve a budget A-segment car. This will have the biggest impact in reaching 100,000 units a year target.

TCM should remain your top pick in the auto sector.

We expect positive news flow throughout 2013 and its Asean positioning to stand out further.

It is the only local player to have made material progress outside Malaysia which is increasingly becoming saturated.

TCM's exclusive rights to Indochina and Myanmar are well supported by its sister company, APM Automotive, which is one of the top three carpart companies in Asean.

KL KEPONG

By Affin Investment Bank

Reduce (maintained)

Target price: 19.46

WEAKER crude palm oil (CPO) average selling price and fresh fruit branches (FFB) production are expected to cap third-quarter ended June 30 performance of KLK's plantation division.

CPO futures is rebounding after the USDA cut 2013-14 soybean production and closing stocks estimates but have averaged only RM2,280 per tonne in the first six weeks of the fourth quarter.

Nevertheless, group profit should improve quarter-on-quarter in the fourth quarter as FFB production is expected to increase by approximately 18% on yield recovery.

While the profit outlook remains subdued until CPO price recovers, KLK offers a number of key positives for longer-term investors.

Its FFB production growth is likely to exceed those of its larger peers for many years due mainly to consistent replanting and new planting programmes as well as more immature and young areas (45.4% of total planted area) moving into prime age.

It has land bank of nearly 300,000 ha, with large plantable reserves of approximately 60,000 ha.

The acquisition of a 51% stake in Collingwood Plantations Pte Ltd, which holds 44,342 ha of oil palm plantation land in Papua New Guinea, has also boosted the group's total land bank to 295,463 ha and plantable reserves to approximately 60,000 ha.

The group currently has 11 resource-based manufacturing plants located in Malaysia, China and Europe with an expanded total capacity of 1.8 million tonnes per annum, up from 1.6 million tonnes per annum in the financial year ended Sept 30, 2012 (FY12).

To further boost synergies and profit contributions, capex has been budgeted to further expand capacity to 2.5 million tonnes per annum in FY14.

Buoyed by strong sales in its 1,000-acre, RM4.2bil Bandar Seri Coalfields development, profit contribution from property development is rising.

The division can also leverage on another 6,000 acres of valuable land in Sungai Buloh which the group has earmarked for property development.

While we continue to regard KLK highly for its good management and operational strengths, still weak CPO average selling price raises the risk of profit performance in the second half of FY13 falling below our expectations. Pending the release of its third-quarter results on Aug 20, 2013, we maintain our FY13 to FY15 forecasts as well as price target of RM19.46 based on 16 times calendar year 2014 earning per share and "reduce" rating.

Kredit: www.thestar.com.my

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