MRT Line 2 Is Good To Go
Corporate News Flash
Gamuda has finally obtained the green light from the Government to embark on the MYR25bn Line 2 of the Klang Valley MRT project. With this, we believe it is on track to start work by mid-2016. Gamuda is the best proxy to the buoyant construction sector, given its dominant role in Malaysia’s largest public infrastructure project. We maintain our BUY call, forecasts and SOP-based TP of MYR5.61, implying a 12.4% upside.
CIMB (CIMB MK, NR)
CIMB Niaga 3Q14 Results: Credit Cost Dampener
Company Update
CIMB Niaga’s (Niaga) 3Q14 net profit fell 68% YoY and 60% QoQ to IDR343bn due to a combination of weaker non-interest income (-48% YoY/-28% QoQ) and a spike in credit cost (3Q14: +137bps QoQ/+128bps YoY to 229bps) as its coal-related portfolio deteriorated. However, NIM held up well. Looking ahead, Niaga thinks its impaired loan levels could be close to the peak but expects credit cost to remain elevated in 4Q.
IGB REIT (IGBREIT MK, NEUTRAL, TP: MYR1.35)
Positive Earnings Assessment
Results Review
IGB REIT’s 9M14 earnings were above expectations, at 81/80% of our/consensus estimates, and mainly attributed to the writebacks in assessment expenses. The Gardens Mall will likely continue to be the main growth driver going forward. We revise up our FY14/15 earnings by about 7%, given the higher numbers. Maintain NEUTRAL, as we lift our DDM-based TP to MYR1.35 (3.5% upside) from MYR1.27).
Caring Pharmacy (CARING MK, SELL, TP: MYR1.27) (Downgraded)
In Need Of Stronger Dosage
Results Review
Caring’s 1QFY15 core earnings missed estimates for the second consecutive quarter as margins fell to their lowest level since its listing. We downgrade to SELL (from Neutral) and trim TP to MYR1.27 (from MYR1.70), a 17.5% downside, pegged to 16x FY15F P/E as we cut our FY15F/FY16F earnings further by 13.5%/17.4% respectively. This is in view of the increasingly challenging operating environment.
WCT (WCTHG MK, NEUTRAL, TP: MYR2.31)
Bags MYR652m Ikano Cochrane Job
Corporate News Flash
WCT has bagged a MYR652m building job for a new Ikano mall in KL. Nonetheless, we still think WCT is not an ideal proxy to the buoyant construction sector as it is not involved in the Klang Valley MRT project. Also, its property business is facing headwinds on the back of the various sector cooling measures. We maintain our NEUTRAL call, forecasts and TP of MYR2.31 (16x FY15F EPS, 10% upside).
Karex (KAREX MK, BUY, TP: MYR3.43)
Poised For The Next Growth Phase
Company Update
We maintain our BUY recommendation on Karex, with a slightly-raised TP of MYR3.43 (20x CY15 P/E, 19.5% upside). The company’s expansion plans remain intact and it is operating in a favourable environment. Its capacity expansion could drive organic growth while its acquisition of Global Protection may elevate group earnings higher via the own brand manufacturing (OBM) segment.
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