Classic Scenic Bhd - Picture perfect
Classic Scenic (CSB) is a typical Warren Buffett-type company. It operates in a profitable niche industry with minimal capex and strong free cashflow. Berkshire Hathaway’s Larson Juhl is CSB’s third- largest customer. CSB offers investors dividend yields of almost 10%. Warren Buffett bought the US picture framing giant, Larson Juhl in 2002, citing superior economics as his reason. Investors have the same chance today in CSB. CSB has paid total dividends of 47 sen over the past five years, representing 40% of its current market cap. Combined with its net cash of 13 sen/share, this solid dividend-yielder could be worth RM1.53-2.06, based on SOP, offering investors 31-76% upside.
Public Bank Bhd - Banking on active asset-liability management
Public Bank’s (PBB) 9MFY14 net profit was in line with our expectation (at 74% of full-year forecast) but ahead of consensus (76%). We retain our EPS forecasts but our DDM-based target price (cost of equity of 10.3%; long-term growth of 4%) rises marginally as the valuation rollover to end-2015 was partly offset by the cut in the assumed growth rate for the interim phase from 7% to 6%, given the slowdown in loan growth. We still rate PBB a Reduce, premised on the expected (1) upturn in credit costs, (2) margin compression, and (3) weaker loan momentum. We prefer Maybank.
Malaysia Airports Holdings - Vying for full ownership of ISG
As we had expected, MAHB announced yesterday that it will exercise its ROFR to purchase another 40% of ISG, but the method of funding the RM1.2bn cost has not been decided. We keep our Hold call and DCF-based target price unchanged. Downside risk to the share price is limited, but weak traffic growth and KLIA2-related costs are likely to lead to uninspiring results in the coming quarters.
Daibochi Plastic & Packaging - Signs of recovery
At its 3Q14 briefing, Daibochi voiced its optimism over its topline growth prospects, which will be fuelled by export markets, particularly Australia. Another positive is raw material prices which have been falling since Sep. We maintain our EPS forecasts and target price, which is based on an unchanged 2016 P/E of 13x, on par with the sector. The stock remains an Add, with potential catalysts being major export orders and a further decline in raw material prices
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