Khamis, 13 Mac 2014

The Star Online: Business

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The Star Online: Business

Construction, infrastructure outlook seen excellent

Posted: 13 Mar 2014 09:00 AM PDT



By Affin Investment Bank

Overweight (maintained)

WITH over RM130bil in economic transformation programme (ETP) jobs left to be awarded, Affin Investment Bank said prospects in the construction and infrastructure sector still looked excellent for significant order book enhancement for key contractors.

This is despite the ongoing government review to address the public sector budget deficit.

It recommended that a strategy of focusing on contractors with excellent track record, strong balance sheets and good order book visibility would prove to be the most fruitful.

Along with good order book and earnings visibility, the prospects of key contractors should be enhanced by growing property gross development values (GDV) and recurring income assets, said Affin Investment Bank.

Amongst them, it added, were Gamuda, IJM Corp, WCT and MRCB.

In addition to strong operating profits from core activities, it said these key contractors offered prospects for the monetisation of concession and property investment assets through disposals or listings and that shareholders may be rewarded with special dividends and preferential issuances.

At this stage of a market upcycle that started in late-2008, Affin Investment Bank thought it was fair to say that the easy money had been made.

However, it believed that key construction stocks still had room for more gains.

This is because their strong earnings prospects did not seem to have been fully priced in, while many ETP projects have yet to be tendered, the research house reckoned.

It maintained an "overweight" on the sector and "buy" calls on all but Gabungen AQRS, which is an "add".

Affin Investment Bank's top picks for exposure to the sector are Gamuda and IJM Corp.


By RHB Research Institute

Overweight (maintained)

RHB Research Institute said it was upbeat on the glove sector given the favourable operating environment from resilient demand for gloves overall, increased health awareness in developing countries, softening latex and nitrile prices, and the appreciation of the US dollar vs the ringgit.

It said its sector top pick was Kossan, given its expected robust earnings growth over the next two years backed by capacity expansion.

The research house expected overall demand for gloves to remain healthy and grow at an annual rate of 8%-10% over the next few years.

It said this would be backed by natural organic growth in larger markets like the United States and European Union as well as the boost from rising healthcare awareness in developing nations where natural rubber glove penetration was still as high as 90%.

Based on nitrile capacity expansion plans by the big four glove makers, it estimated that the new incoming nitrile supply stream would total 14.1 billion pieces for this year.

This, the research house added, would be absorbed by an estimated new global demand of 13.8 billion pieces this year. Assuming a 20% year-on-year growth for nitrile gloves up to 2016, it believed that an oversupply scenario would not occur as the upcoming nitrile capacity would be soaked up by growing global demand for such gloves.

Yinson slips after rally

Posted: 13 Mar 2014 06:50 PM PDT

KUALA LUMPUR: Shares of Yinson Holdings fell to a low of RM9.03 early Friday after its recent rally as the weaker broader market prompted investors to lock in their profits.

At 9.44am, it was down 13 sen to RM9.03. There were 104,600 shares done.

The FBM KLCI fell 9.98 points to 1,808.88. Turnover was 249.78 million shares valued at RM233.44mil. There were 89 gainers, 347 losers and 196 counters unchanged.

However, AmResearch is maintaining its Buy call on Yinson with an unchanged fair value of RM10.30 a share, based on sum-of-parts (SOP) valuation.

It said this implies a FY15F PE of 23 times and EV/EBITD (enterprise value/earnings before interest, tax & depreciation) of 14 times - comparable with its current valuations for Bumi Armada.

AmResearch said Yinson has raised its rights proposal by 20% from RM500mil to RM600mil due to its recent share price appreciation. 

KLCI slides, sees support at 1,800

Posted: 13 Mar 2014 06:20 PM PDT

KUALA LUMPUR: Key Asian markets and Malaysia's blue chips fell in volatile trade early Friday after the overnight tumble on Wall Street, with the FBM KLCI falling more than 12 points.

At 9.10am, the KLCI was down 12.08 points to 1,806.78. Turnover was 115.01 million shares valued at RM75.42mil. Declining stocks beat advancers 236 to 58 while 159 counters were unchanged.

BIMB Securities Research expects local market to remain volatile with the slight downside bias due to heavy selling around the world and continuous outflowing of foreign institutions investors.

"Expect to see immediate support at 1,815/20 while resistance at 1,825/30," it said.

Plantations were among the losers, with KL Kepong down 42 sen to RM23.52 and PPB Group lost 20 sen to RM16 but United Plantations rose 60 sen to RM25.40.

However, RHB Research maintains its Overweight outlook on plantations and it expects better quarters ahead on the back of rising crude palm oil (CPO) prices and lower production costs. 

Public Bank fell 14 sen to RM18.0 and RHB Cap 13 sen to RM7.85 while AmBank shed nine sen to RM7.02 and CIMB eight sen lower at RM7.01.

Tenaga gave up 10 sen to RM11.84 and Petronas Gas eight sen to RM22.92.

However, Takaful rose 38 sen to RM10.82 while IJM Land gained five sen to RM2.76 and Time dotCom four sen higher at RM3.79. 


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