Selasa, 1 April 2014

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The Star Online: Business

Bumi Armada forecast stays despite Angola oilfield project

Posted: 01 Apr 2014 09:00 AM PDT


By HwangDBS Vickers Research


Target Price: RM4.50

HWANGDBS Vickers Research said it had not revised its forecasts for now, following Bumi Armada's announcement that it has received a letter of intent (LoI) from Italian oil major Eni SpA for a deepwater oilfield offshore Angola,

It said the Angola floating production, storage and offloading vessel (FPSO) project was likely to be classified as a finance lease, which would mean lower profit contribution over the conversion period of 31 months.

The FPSO job is for the chartering, operation and maintenance of a FPSO for deployment at Block 15/06, East Hub offshore Angola for an indicative value of US$2.9bil (RM9.5bil).

It said the final contract was likely to be for a 12-year period with eight one-year extension options, implying US$660,000 (RM2.15mil) daily charter rate. This will lift Bumi Armada's order book by 72% to RM22.7bil.

The total capital expenditure required is estimated at US$1.5bil, which could lift Bumi Armada's net gearing to 1.6 times by financial year 2016 (FY16), still lower than management's threshold of 2 times, it added.

The research house noted Bumi Armada's strong execution track record in the FPSO business which would suggest more contracts in the pipeline with its 10 ongoing FPSO tenders, especially the 10-year Madura FPSO job in Indonesia, of which the group was a clear frontrunner.

HwangDBS said valuation remains undemanding at 17 times FY14 price-earnings ratio, the lowest since its initial public offering in July 2011.

It has maintained its Buy call on Bumi Armada with a target price of RM4.50 based on 20 times FY14 forecast earnings per share.


By RHB Research Institute

Buy (maintained)

Target Price: RM12.20

Cahya Mata Sarawak (CMS) has proposed a one-into-two share split followed by a two-for-one bonus share issue to raise the number of shares to 1,087 million.

According to RHB Research, this exercise is timely to improve the stock's liquidity as its average trading volume stood at barely 700,000 shares per day over the past six months.

On completion of the exercises, the share price will likely be adjusted to RM3.26 from the RM9.80 level, thus making it more affordable to retail investors, it added.

Meanwhile, the research house said CMS was set to benefit from attractive power tariffs under the Sarawak Corridor of Renewable Energy and the economic multiplier effects in other industries.

It also sees progress in its Malaysian Phosphate Additives Sdn Bhd project while there is potential upside to 51%-owned Samalaju Property Development Sdn Bhd.

StarBiz reported that CMS was looking at taking over state-controlled Sacofa Sdn Bhd, an infrastructure and multimedia service provider in the telecoms sector.

However, RHB said while this acquisition was likely to be value-accretive, it needed more information for further evaluation.

It reiterated a "buy" call on CMS and raised its fair value to RM12.20 from RM10.37 previously, as it rolled over its valuation to financial year 2015, raising the price-earnings ratio multiple for CMS construction material division to 12-times (from 10-times), and included discounted cash flow of OM Materials (Sarawak) for the first time.


By Kenanga Research

Market Perform

Target Price: RM3.14

Kenanga Research said Astro's fourth quarter 2014 net profit of RM111.4mil, taking its financial year 2014 (FY14) net profit to RM448mil were within expectations.

It said post-result announcement, it had fine-tuned its FY15 net profit forecasts by +1% for house-keeping purposes.

The research house said it had maintained its conservative stance in view of the ongoing subsidy rationalisation plan that could slow down consumer spending, and therefore potentially translate into slower subscription rate and higher churn as well as sluggish IPTV subscription (the group had only garnered 10,000 subscribers with 26,000 in total since the launch of Maxis-Astro IPTV services).

It expects Astro's FY15 net profit to rebound by 35% driven by higher earnings before interest and tax margin assumption of 18.2% on the back of lower set-top box (STB) expenses given the lower STB swap-out.

The penetration of customers with B.yond STB is already at 84%, and Kenanga believes Astro is unlikely to push aggressively for conversion.

It maintained "market perform" call on Astro and marginally increased its target price to RM3.14 from RM3.10 based on a 10-year explicit discounted cash flow valuation with the following assumptions weighted average cost of capital of 8.9%, beta of 1.0, and terminal growth of 1%. The target price also implies a FY15 price earnings ratio of 26.6 times.

Another Japan nuclear operator turns to govt for aid

Posted: 01 Apr 2014 07:17 PM PDT

TOKYO: Japan's Kyushu Electric Power Co has become the second nuclear generator to seek state support this week as reactors across the country remain idle and industry losses mount three years after the Fukushima nuclear disaster.

Kyushu Electric, a regional monopoly that supplies power in southern Japan, said on Wednesday it was in talks with state-owned Development Bank of Japan for financial backing.

On Tuesday, a source said Hokkaido Electric Power Co, which supplies Japan's northernmost island, had asked the same bank for financial assistance.

All of Japan's 48 nuclear reactors have been shut down, pending stringent safety checks, since a massive earthquake and 13-metre-high (43-feet-high) tsunami smashed into the Fukushima nuclear complex in March 2011, triggering a meltdown in the world's worst nuclear crisis since the 1986 Chernobyl disaster.

With no schedule for nuclear restarts, utilities have been forced to burn expensive fossil fuels for power generation. They are set to report a third year of annual losses.

"We are in consultations with the Development Bank of Japan about receiving capital support, but since nothing has been decided I am unable to comment further," said Kyushu spokesman Yuki Hirano.

Kyushu Electric is asking the bank to buy 100 billion yen (US$965.5 million) of preferred stock in the company, a source said. The lender is considering the request, which was reported earlier by the Nikkei business newspaper.

If both Kyushu Electric and Hokkaido Electric get the aid, they would join the stricken Fukushima plant's operator, Tokyo Electric Power Co (Tepco), in receiving government bailouts. Other nuclear operators may be forced to turn to the government, the Nikkei said on Tuesday.

In 2012, the government took a controlling stake in Tepco. The company still relies on constant taxpayer handouts to pay compensation to those affected by the nuclear disaster, which forced 160,000 people from their homes.

Shares in Kyushu Electric were down 4.6 percent in mid-morning trade, after falling as much as 6.5%, versus a 1.1% rise in the benchmark Nikkei 225.

Kyushu Electric has estimated a net loss of 125 billion yen for the year ended March 31.

Japanese banking practices make it difficult for lenders to extend credit, including refinancing existing loans, to companies that post three consecutive years of losses.

Six of nine regional monopolies that operate reactors in Japan have raised prices in the wake of the Fukushima crisis, while one, Chubu Electric Power Co, has a request to lift rates under review.

Price increases for residential customers must be approved by the government.

Japan's nuclear regulator has placed two of Kyushu Electric's reactors on a shortlist for a final round of safety checks, leading to speculation these units may be the first to be restarted.

Prime Minister Shinzo Abe is moving to revive nuclear power as a core part of Japan's energy mix, but many of those idled reactors will never be restarted. – Reuters 

Asian shares build on gains, yen hits 10-week trough

Posted: 01 Apr 2014 07:11 PM PDT

SYDNEY: Asian share markets added to their recent rally on Wednesday as investors chose to accentuate the positive in a mixed bag of global economic data, pressuring the safe haven yen to a 10-week trough.

Even sluggishness in China is now considered favourably since it adds to the case for stimulus, and there are signs Beijing is hastening infrastructure spending in response.

Trading was cautious, however, ahead of Thursday's meeting of the European Central Bank and Friday's U.S. jobs numbers, both of which could move markets in major ways.

MSCI's broadest index of Asia-Pacific shares outside Japan crept up 0.3 percent to a fresh four-month high, while Australia's market added 0.2 percent.

The Nikkei outperformed thanks to the drop in the yen and climbed 1.3 percent.

On Wall Street, the S&P 500 ended Tuesday up 0.70 percent and just off a record intraday high. The Dow rose 0.46 percent, while the Nasdaq bounced 1.64 percent.

The U.S. economic news was generally supportive of risk appetite. The manufacturing ISM climbed to 53.7 in March, from 53.2, with production showing a marked expansion from weather-induced weakness in February.

Likewise, new vehicles sales rose to a surprisingly brisk 16.4 million annualised in March, ending three months of softness and supporting the view that demand is recovering now that the worst of the winter weather has passed.

The arrival of Spring is also why the market is wagering the U.S. payrolls report on Friday will show employment picked up to 200,000 in March.

The brighter tone in the data pressured the long-end of the U.S. Treasury curve, where yields on 10-year paper rose 2 basis points to the highest in a week at 2.77 percent.

Shorter-dated debt fared better in the wake of Federal Reserve Chair Janet Yellen's comment that extraordinary stimulus would be needed for some time to come.


Investors have also been speculating that the European Central Bank would soon take further steps to loosen policy, though officials are blowing hot and cold on the issue.

On Tuesday, ECB vice-president Vitor Constancio told a news conference that low inflation was a concern and could drag on economic growth. Euro zone inflation slowed to an annual 0.5 percent in March, its lowest since November 2009.

But Constancio then went on to deny any risk of deflation, saying inflation was set to pick up. That was taken as diminishing the chance of an easing at the ECB's policy meeting on Thursday and gave the euro a modest lift.

A Reuters poll of 22 euro money market traders found 18 expected no change in the 0.25 percent main refinancing rate.

The single currency was steady at $1.3799, having edged up for a third straight session on Tuesday. It also gained on a broadly softer yen to reach 143.30, while the dollar scored a 10-week top at 103.86 yen.

Among commodities, Brent crude was quoted 16 cents lower at $105.46 a barrel having shed over 2 percent overnight on the possibility of a jump in supplies from Libya after rebels blocking eastern oil ports hinted at a deal with Tripoli.

U.S. crude was off 7 cents at $99.67 a barrel in early trade, after also losing around 2 percent to expectations for a build in domestic inventories.

Spot gold was sulking at $1,282.16 an ounce, having touched a seven-week low of $1,277.29 on Tuesday. - Reuters


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