Kenanga: 19 Nov 2014

IDEAS OF THE DAY

l  Sector Update: Media

l  Results Note: BENALEC, CIMB, DIALOG, HARTA, LAFMSIA, MBMR, MRCB, SEG, SUNWAY, SURIA, TSH

l  Company Update: MATRIX, MUHIBAH

l  Quick Bites: TM

l  On Our Technical Watch: CANONE, GTRONIC

NEWS HIGHLIGHTS

l  MBSB eyes second structured covered sukuk

l  Maybank eyes RM1.0b remittances

l  Time dotCom buys land

l  FGV unit set to ride on rising biodiesel demand

l  Kronologi Asia seals underwriting agreement with Bank Islam for IPO

FOREIGN NEWS HIGHLIGHTS

l  Blackstone in USD2.3b deal to sell tower to Ivanhoe

l  KKR, CD&R prepare joint bid for PetSmart

 

ECONOMIC NEWS HIGHLIGHTS (MACRO BITS) 

Malaysia

l  Malaysia's October Vehicles Sales Slip To 54,187 Units On-Year

l  Zeti: 3pc Surplus ‘Good Sign’

Asia

l  Japan PM To Seek Fresh Mandate For 'Abenomics' With Snap Poll

l  Japan's Aso Signals Tax Hike Delay, Says Must Not Happen Again

l  China Home Price Fall Deepens Despite Policy Support

l  China's FDI Slows Again In October, Services Sector In Favour

l  Bank Indonesia Raises Key Interest Rate As Fuel Prices Increase

USA

l  U.S. Producer Inflation Up, But Underlying Trend Muted

l  U.S. Has Record Inflow Of Portfolio Investments In September

l  Homebuilder Confidence Rebounds As U.S. Buyers More Enthusiastic

Europe

l  German Investor Confidence Rebounds As Recession Averted

l  UK Inflation Rate Rises To 1.3% In October

Currencies

l  Dollar Recovers Against Yen On Abe’s Election Plans

Commodities

l  Brent Slips Below $79 As Rhetoric Heats Up Before OPEC Meeting

l  Gold Rises, Briefly Breaks $1,200/Oz As Dollar Drops

MIB Research Summary - 19 Nov 2014

CIMB Group Holdings: Maintain Hold Poor showing as expected

9M14 core net profit down 7% YoY mainly due to drag from CIMB Niaga and weak capital markets. Forecasts maintained but near term risk is to the downside with guidance for higher provisions out of Indonesia in 4Q14. Maintain HOLD on CIMB; BUY RHB for exposure to the merged entity. Dialog Group: Maintain Buy RAPID & Pengerang to fuel growth  Shariah-compliant 1QFY6/15 results within our expectation, below consensus. A steady stock with sound business model and management. Reiterate BUY and MYR1.90 TP (SOP-based) with upside bias. Lafarge Malaysia: Maintain Buy Waiting to raise ASPs  Shariah-compliant 3Q results were below ours and market’s expectations. Cut FY14 EPS by 25% to impute the weak results. TP unchanged at MYR10.75 (21x mid-2016 PER). Downgrade to HOLD on limited upside. Dividend yield of 4% is decent. Hartalega: Downgrade to Hold Near-term weakness  Shariah-compliant 2Q below expectations due to high start-up cost of its next generation glove manufacturing complex (NGC). Expect weakness in near-term earnings on start-up costs. Cut FY3/15-16 EPS by 7-8%; TP lowered to MYR7.00 (19x mid-2016 PER) and downgrade to HOLD (from BUY). TSH Resources: Maintain Buy 3Q14: In line  Shariah-compliant Results within our expectation but above consensus. Young tree age profile would drive strong production growth. BUY with an unchanged TP of MYR2.45 on 19x 2015 PER. MBM Resources: Maintain Buy Stronger ahead  Shariah-compliant 9M14 earnings within our forecast but below consensus. Cheapest exposure to our preferred small car segment, in light of higher cost of living, via 22.6%-owned Perodua. Our FY14/15/16 forecasts are raised by 2% p.a.. New TP of MYR3.50 (+2%) is based on unchanged 9x FY15 PER. BUY. Sunway: Maintain Hold Earnings on track  Shariah-compliant 9M14 core net profit of MYR386m (+19% YoY) is in line. Property sales on track to meet target, but construction job wins lagging behind. Maintain earnings forecasts, HOLD rating and MYR3.05 TP (on 0.59x P/RNAV target). Padini Holdings: Maintain Buy Stable growth, attractive yields Looking at moderate 6-7% YoY revenue growth in 1QFY6/15, but this should pick up as new stores are opened. Trimmed FY15-FY17 net profits by 2% per annum on lower sales growth and margin assumptions. BUY - TP unchanged at MYR2.20 on 14.8x FY15 PER, dividend yield attractive at 5.7%, providing support to share price. TECHNICAL: Index’s decline was arrested at 1,805 The FBMKLCI rose 11.90 points to 1,818.38 yesterday, while the FBMEMAS and FBM100 also closed higher by 72.10 points and 69.72 points, respectively. We recommend a “Range Trading” stance for the index. Trading idea is a Take profit call on PCHEM with downside target areas at MYR5.29 and MYR4.80.   NEWS KSK Group: KSK Land's 8 Conlay to offer branded residences. KSK Group, via property unit KSK Land Sdn Bhd, is set to fulfill the growing demand for branded residences with its MYR4b mixed development project in Jalan Conlay. The project on 1.60ha next to Prince Hotel & Residence will have two residence towers and one tower comprising a five-star hotel and serviced residence by Europe’s oldest luxury group, Kempinski Hotels S.A. (Source: The New Straits Times) Telekom: TM to provide DTT services worth MYR1b to MTVB. Telekom Malaysia (TM) has signed a framework agreement with MYTV Broadcasting Sdn Bhd (MTVB) to provide digital terrestrial television (DTT) infrastructure, network facilities and related services in Malaysia. The DTT service will be accorded to MTVB for a period of 15 years, with an annual contract value of MYR70.47m. (Source: The Edge Financial Daily) RON97 petrol down 20 sen per litre to MYR2.55 per litre from MYR2.75 per litre effective today. RON97 price is on managed float and thus is ultimately influenced by the global crude oil prices - which has fallen by around 30% from the recent high in June 2014 - on a lagged basis as the Government reset its price monthly. Meanwhile, the subsidies on RON95 and diesel prices has also been shrinking as a result of the 20 sen per litre price hikes in Oct 2014 and compounded by the falling crude oil prices. To note, the subsidy per litre on RON95 and diesel dropped from MYR0.47 per litre and MYR0.59 per litre in Sep 2014 to MYR0.28 per litre and MYR0.32 per litre in Oct 2014, and further to MYR0.13 per litre and MYR0.12 per litre this month. (Sources: TheSun, Maybank KE) U.S: Homebuilder confidence in November rebounds as buyers more enthusiastic as low interest rates and a strengthening job market helped boost sales. The National Association of Home Builders/Wells Fargo builder sentiment gauge advanced to 58, matching the second-highest level since 2005, from 54 in October, figures from the Washington-based group showed. (Source: Bloomberg) Germany: Investor confidence rose for the first time in 11 months after Europe's largest economy avoided relapsing into a recession. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, increased to 11.5 in November from minus 3.6 in October. (Source: Bloomberg) U.K: Inflation unexpectedly accelerated last month as transport prices fell less than a year earlier and the cost of toys rose in the run-up to Christmas. The rate of consumer-price growth increased to 1.3% YoY from 1.2% YoY in September, the Office for National Statistics said. (Source: Bloomberg) Indonesia: Bank Indonesia raises key interest rate as fuel prices increase. Indonesia's central bank raised its policy interest rate for the first time this year to guard against inflation after President Joko Widodo increased subsidized fuel prices. Bank Indonesia Governor Agus Martowardojo and his board raised the reference rate to 7.75% from 7.5%, the central bank said after an unscheduled meeting in Jakarta. The authority kept unchanged the rate it pays lenders on overnight deposits, known as the Fasbi, at 5.75%. (Source: Bloomberg)

CIMB Research Summary - 19 Nov 2014

DiGi.com - Offering fair risk-reward
Among Malaysian telcos, DiGi is the biggest beneficiary of GST when it is rolled out in Apr 2015. But we think that more intense rivalry is likely to shave off part of its service revenue growth in FY15. DiGi’s capex may also stay high as peers are looking to accelerate 4G rollouts. We lower our FY15-16 EBITDA by 2.6-3.8% to factor in slower service revenue growth and lower margins due to more intense competition. At the core net profit level, we cut our forecasts by 3.5-5.2%. Coupled with higher capex in FY14-15, we lower our target price by 7.9% to RM5.80, which is based on the fair valuation of its potential business trust and return of excess cash. We downgrade DiGi from an Add to a Hold. For Malaysian telcos, we prefer Axiata Group.


Hartalega Holdings - Impacted by high operating cost
Hartalega’s 1HFY3/15 core earnings were below our (45.4% of our FY15 forecast) and consensus expectations (44%). Revenue was flat yoy due to lower selling prices, while the drop in net profit was due to higher operating costs. Given the earnings miss, we cut our FY15-17 EPS forecast by 5-11%. However, our target price (pegged at 17.7x, unchanged 10% premium to the target market P/E of 16.3x) goes up as we roll over our valuation to CY16. Maintain Hold. It declared an interim 3 sen DPS, lower than our expectation which we believe was due to the weaker earnings outlook. We prefer Kossan.


Sunway Bhd - Steady margin growth
Sunway's annualised 9M14 core net profit was 3% above our full-year forecast and 6% above consensus. We consider the results to be broadly in line as tax rates should normalise to a higher level in 4Q. Operationally, segmental performance shows steady growth in construction margins while property development benefited from a higher-margin sales mix despite weaker billings. We continue to expect strong order book growth in the medium term, with Sunway potentially winning a sizeable building project. We maintain our EPS forecasts, but our target price (still based on a 20% RNAV discount) increases as we roll it over to end-2015. Positive news on contract wins and potential special dividends from the listing of SunCon support our Add call.

Benalec Holdings - 1Q15 boosted by land sale gains

Dialog Group - Coming up(stream) roses

Lafarge Malaysia Bhd - Stiffer competition in 3Q

Malaysian Resources Corp - Brighter job prospects

Tune Ins Holdings Bhd - Travelling past the headwinds

RHB Research Summary - 19 Nov 2014

Berjaya Food (BFD MK, BUY, TP: MYR4.00)

From Grande To Venti

Initiation

We initiate coverage on Berjaya Food with a BUY recommendation and MYR4.00 TP, implying a 24.6x FY16 (Apr) P/E and offering a 30.7% upside. Its recently-completed acquisition of the remaining 50% stake in BStarbucks could propel its 3-year-earnings CAGR to 47.7%. Starbucks Coffee, Malaysia’s largest coffee chain with 175 outlets YTD, is set to aggressively expand its number of outlets over the next few years.

 

 

Hartalega (HART MK, BUY, TP: MYR7.50)

Consolidation Phase

Results Review

1HFY15 (Mar) earnings came in broadly within expectations. We maintain our BUY recommendation on Hartalega with a lower TP of MYR7.50 (21x CY15 P/E, 10.3% upside). Declining ASPs, heightened operating expenses and intensified competition have offset its higher sales volume. Nonetheless, we remain positive on its outlook in view of new capacity from the NGC and resilient demand.

 

 

Tasco (TASCO MK, BUY, TP: MYR3.90)

Within Expectations

Results Review

We maintain our BUY call on Tasco with an unchanged TP of MYR3.90 (11.3x FY15F P/E, 27.5% upside). 1HFY15 (Mar) results came in within expectations, with both international business solutions (IBS) and domestic business solutions (DBS) divisions contributing positively to the group. Contract logistics unit reported the strongest growth and we believe this could be the main earnings growth driver moving forward.

 

 

 

TSH Resources (TSH MK, NEUTRAL, TP: MYR2.28)

Poor Downstream Drag Earnings

Results Review

TSH Resources’ 9M14 results were below expectations due to continuing losses at its 50%-owned refinery, although losses narrowed due to higher utilisation. Maintain NEUTRAL on fair valuations at current levels but our SOP-derived TP is reduced to MYR2.28 (from MYR2.47) a 1.3% upside. We also reduce our FY14/FY15 earnings forecast by 11%/8% to account for weaker refining performance. 

 

 

 

Suria Capital (SURIA MK, BUY, TP: MYR3.50)

Results Largely In Line

Results Review

Suria Capital’s 9M14 numbers came in largely within expectations and we believe 4Q14 may be better. We keep our BUY recommendation with an unchanged DCF-based MYR3.50 TP, a 35.7% upside. Heightened operating expenses have offset the growth in revenue and the Jesselton Quay project may need more time to realised. However, we understand that it is still in progress. 

 

 

 

MBM Resources (MBM MK, BUY, TP: MYR3.55) (Upgraded)

On The Rebound

Results Review

MBMR’s 9M14 results were broadly in line. Upgrade to BUY with a new MYR3.55 TP (25.9% upside) as we expect recurring net profit to rebound 39.2% in 2015 from the alloy wheel business breaking even in 2015 and associates Perodua and Hino enjoying more favourable JPY exchange rates. The stock’s undemanding valuations suggest that the recovery is not yet priced in by the market.

 

 

 

Apex Healthcare (APEX MK, NEUTRAL, TP: MYR3.75)

Anchored By Stronger Exports

Results Review

Apex’s 9M14 results were slightly below our expectation, as its core net profit of MYR24m (+14% YoY) accounted for about 71% of our FY14 full-year target.  As such, we maintain NEUTRAL with our TP still at MYR3.75 (1.4% upside), pegged to an unchanged target 12x FY15F P/E. We also pare our FY14F revenue and net profit by 2% and 6% respectively but are maintaining our FY15F and FY16F numbers.

 

 

 

Wing Tai Malaysia (WING MK, SELL, TP: MYR1.76)

Double Whammy

Results Review

1QFY15 results were below our expectations. Downgrade to SELL (from Neutral) with a lower SOP-based MYR1.76 TP (from MYR2.10, a 12.9% downside). Its MYR11m core net profit – accounting for around 15% of our full-year target – fell 29% YoY on lower contribution from property development and apparel retailing. We are lowering our FY15 revenue and net profit forecasts by 12% and 19% respectively.

 

 

 

Malaysian Resources Corp (MRC MK, BUY, TP: MYR2.05)

Coming Along Nicely

Results Review

MRCB’s 3Q14 earnings came in above expectations, driven by earlier-than-expected contributions from one of its projects. We maintain our BUY call and RNAV-derived TP of MYR2.05 (37.7% upside). We raise our FY14/FY15 net profit estimates by 50%/8% after revising our revenue assumptions. MRCB’s near-term prospects remain positive, underpinned by total unbilled property sales of MYR2.9bn.

 

 

 

Lafarge Malayan Cement (LMC MK, BUY, TP: MYR11.27)                                                                                        

Stiff Competition May Dampen Short-Term Outlook

Result Review

As Lafarge’s 9M14 profit of MYR206.1m represented only 47.9/52.5% of our/street’s full-year estimates, we downgrade the stock to NEUTRAL and pare our TP to MYR10.00 (1.4% downside) from MYR11.27. We cut our FY14F/FY15F earnings by 29.1%/11.1% respectively, but keep our target P/E at +2SD from its historical trading range or at 21.6x FY15 EPS as it is still the best proxy to government infrastructure spending. 

 

 

 

CIMB (CIMB MK, NR)

Dampened By Higher Loan Impairment Allowances

Results Review

CIMB’s 3Q14 net profit of MYR890m (-16% YoY, -6% QoQ) missed consensus expectations, with the QoQ and YoY drop in net profit mainly due to higher loan impairment allowances (+119% YoY, +62% QoQ) that CIMB Niaga booked in. 9M14 annualised ROE was 11.6% (vs underlying 9M13 ROE of 14.4%) and CIMB said it would not be able to meet its 13.5-14% ROE target for 2014.

 

 

 

Dialog Group (DLG MK, BUY,  TP: MYR2.00)

Results Review

Dialog’s 1QFY15 core profit of MYR49m was deemed in line (but below consensus estimates), as a boost from Malaysian upstream and downstream activities offsets temporary slowdown in some of its international activities. Further phases of PIDT project is on schedule. Maintain BUY and TP MYR2.00 (33% upside), as we like Dialog’s continued growth in both offshore and onshore businesses.

 

 

 

Tune Ins Holdings (TIH MK, BUY,  TP: MYR3.00)

Rejuvenating Its Take-Up Rate

Company Update

The share price correction yesterday was likely due to temporary setbacks in 3Q results and a cancellation of agreement with Al Hai LLC, which management said to be non-material as it is still on the lookout for MENA and Indonesia partnerships. Maintain BUY and its MYR3.00 TP (24x FY15F P/E, 45% upside). We envision long-term value from its associates, potential partnerships and a recovery in travel demand.

 

 

 

OCK Group (OCK MK, BUY, TP : MYR1.59)

Rising Up The Ranks

Company Update

We believe OCK’s transfer to the Main Market (20 Nov) and the 1-for-2 bonus issue (ex-date: 24 Nov) would catalyse a re-rating of the stock. Maintain BUY with a revised TP of MYR1.59 (ex-bonus TP of MYR1.06) (12.8% upside). We lower our FY14 earnings forecast by 28% due to the delay in the USP contract award and recognition of PMT in 4Q14. The stock’s FY14-16 EPS CAGR remains a compelling 32%. 

 

 

 

Tambun Indah (TILB MK, BUY, TP: MYR2.50)

Unbilled Sales Underpin Resilient Earnings

Results Review

Tambun’s 3Q14 results were within expectations. Maintain BUY with a MYR2.50 TP (18.5% upside). Due to a lack of new launches in 3Q, new sales fell to MYR74m, from MYR149m in 2Q. We expect Tambun to end the year with MYR430m in sales (vs MYR500m in FY13). Although the recent land deal was called off, we remain confident of management’s ability and expect some new land parcels to be secured next year. 

 

 

 

Sunway (SWB MK, BUY, TP: MYR3.90)

Attractive Dividend Angle

Results Review

Sunway’s 3Q14 results came in within our expectation but below market consensus. New sales fell slightly to MYR393m from MYR459m in 2Q. The dividend angle for the stock may have been underappreciated by the market. With the listing of SCG, shareholders could potentially receive a cash dividend of 25-30 sen, on top of the normal dividend payout of 10 sen. Maintain BUY with MYR3.90 TP (20.7% upside).

 

HLIB Research Summary - 19 Nov 2014

TM Berhad (HOLD çè)

DTTB Deal

• TM announced the agreement with MYTV Broadcasting SB for the provision of Digital Terrestrial Television (DTT) infrastructure, network facilities and related services.
• The pack is for a period of 15 years with an annual contract value of RM70.5m.
• A much anticipated positive development as TM continues to monetize its widely distributed fibre backhaul network.
• Besides that, this one-stop solution covers 50 transmission sites as well as data warehousing located in Cyberjaya data centre.
• Reiterate HOLD after raising our DDM-derived fair value by 13.6% from RM6.05 to RM6.87 as we roll forward our valuation to FY16.

Matrix (BUY çè)

• BSS: Hijayu 1B completed, launched Hijayu 3A (phase 3) with take up rate of over 30% and will be launching phase 4 in 4QFY14.
• STV: Land sales target of RM100m is likely to be surpassed should the deal for 55acres of land is succeeded. FY15 land sales target remained at RM100m.
• STP: Developed on the newly acquired land of 164 acres. 80 acres have been carved out for an automobile investor currently in negotiation.
• TSI: Launched Impiana Height (phase 1) with GDV of RM63.5m and take up of 37.8%.
• FY15: Remained positive despite challenging outlook ahead given its advantage of low land costs and upcoming launched are skewed more to mid- to high-end property developments.
• We maintain our TP at RM3.74 (20% discount to RNAV), which implies FY15E P/E of 7.2x. Maintain BUY.

CIMB Group (TRADING BUY çè)

CIMB Niaga – From Hero To Zero

• 3QFY14 results below HLIB and consensus expectations mainly due to sharp rise in Niaga NPLs and provision.
• Besides Niaga, IB also suffered from lower volume and deal flows.  Ex Niaga, 9MFY14 profit grew 6% yoy.
• 4QFY14 – Singapore strong growth but corporate banking and Indonesia still under pressure.  Others will be stable.
• Indonesia asset quality May deteriorate further but it expect to bottom out by 4Q14/1Q15.  Recent fuel price hike not expected to have significant impact. 
• Deal pipeline in 1H15 better.
• FY14 forecast cut by 13% while FY15-16 lowered by 2-3%.
• Target price lowered to RM6.91 based on Gordon Growth with ROE of 12.4% and WACC of 10.1%.  
• Despite concerns about merger dilution and duplication as well as uncertainties in Indonesia , we believe the selldown to 1.4x FY14 P/B has been over exaggerated.  Maintain TRADING BUY as values emerged amid uncertainties. 

Lafarge (HOLD çè)

Well below Expectations

• 9MFY14 net profit of RM206.1m (-19.5%) accounted for 57.9% and 52.5% of our and consensus full-year forecasts.
• Declared 3^rd interim single-tier DPS of 8 sen. YTD, Lafarge has declared NDPS of 26 sen.
• YoY. Intense competition, lower cement sales volume, higher electricity tariff as well as the removal of fuel subsidy have resulted in 3QFY14 net profit declining by 54.4% to RM54.8m.
• QoQ. 3QFY14 revenue decreased by 7.3% mainly due to lower selling prices and lower volumes due to the impact of the festive season. In line with lower revenue and higher operating costs arising from the fuel subsidy removal, net profit declined by 29.1%.
• Maintain TP of RM9.74. (based on unchanged 19.5x, in line with the regional forward P/E for cement stocks and 2015 EPS of 49.9 sen) Maintain HOLD for now. We will review our forecast pending the analyst briefing on 21 November. 

Hartalega (HOLD çè)

1H15 Results In Line

• 1H15 core net profit of RM107m (-23% yoy) came in within our expectations but below consensus.
• Declared 1^st interim dividend of 3.0 sen per share (1HFY14: 3.5 sen).
• 2Q15 revenue weakened (-2% yoy) despite volume growth, indicating ASP decline.
• EBITDA margin fell (5.8ppt yoy) due to high NGC start-up costs and higher electricity and natural gas cost.
• Hartalega views that the incoming NGC capacity (first two lines set to commission by 4QCY14) will be able to sustain earnings and mitigate concern of lower ASP.
• Although there is an 11.3% upside to our TP, we remain conservative and maintain our HOLD call due to the declining ASP trend and competitive environment.
• Reiterate HOLD with unchanged TP of RM7.34, pegged to an unchanged multiple of 16.2x of CY16 EPS, based on 1SD above 5-year historical average P/E.

Sunway (BUY é)

9MFY14 Results Above Expectations

• 9MFY14 core PATAMI came above expectations due to wider-than-expected margins from property development.
• 9MFY14 revenue of RM3.4bn showed a growth of 5% yoy mainly coming from the stronger sales in property development, construction, quarry and healthcare segments.
• No material updates on SunCon to date, apart from the recent announcement on the changes in numbers of shares offered in the proposed listing of SunCon following the exercise of warrants and ESOS (ratio of 1 SunCon for every 10 Sunway shares remained unchanged).
• We tweaked our margins higher hence FY14-15 is up by 7.1-7.2%. Post earnings revision, our TP is upgraded to RM3.65 from RM3.55, based on SOP valuation. We upgraded our recommendation to BUY as we remain optimistic with the group, especially with its proposed listing of SunCon as it would further enhance shareholders’ value.

TSH Resources (HOLD çè)

Within expectations

• 9MFY14 core net profit of RM111.9m (+29.8%) accounted for 79.8-80.5% of consensus and our full-year forecasts. we consider the results within expectations as we anticipate CPO prices to remain low.
• Maintain earnings forecasts, TP of RM2.09, as well as our HOLD recommendation on the stock.  

MRCB (BUY çè)

3Q results: Staging a comeback  

• 9M core earnings at RM56m vs loss of RM111m in previous year, surpasses our expectations.
• Secures RM141m resort job in Desaru, vying for incinerator job in Kepong.
• Property sees contribution from 9 Seputeh and PJ Sentral.
• Maintain BUY (TP: RM1.91), turnaround signs are insight.

MBM (BUY çè)

In Line – Expect Strong 4Q14

• Reported 3Q14 core earnings of RM25.3m and 9M14 of RM80.3m, in-line with HLIB’s forecast (73.3%) and consensus (68.3%).
• Weak result in 3Q14, due to lower group sales volume (stopped production of Viva in 3Q14, prior to new launch Axia in Sep) and lower TIP (affecting components manufacturing).
• Expect strong earnings in 4Q14, mainly due to maiden deliveries of highly demanded Perodua Axia, increasing production of OMI Alloy wheel and increasing TIP (especially Perodua and Proton).
• Maintained BUY with unchanged Target Price of RM4.00, based on SOP.

Tambun Indah (HOLD çè)

9MFY14 Results Within Expectations

• TILB’s 9MFY14 reported PATAMI of RM76.3m came in within expectations.
• Declared first single tier interim dividend of 3 sen/share.
• 3Q14 revenue grew 20.3% yoy driven by increased progress billings, higher take-up rates as well as introduction of new development projects.
• Gross margin in 3QFY14 improved by 7.7-ppts, returning to its usual >30%.
• TP remained unchanged at RM2.14 (based on unchanged 10% discount to RNAV). Maintain HOLD.

Traders Brief

Relief rally will spur KLCI to retest 1836-1850 resistance zones

• Technically, the strong rebound yesterday had injected some positive momentum to the market, supported by expectations of traditional year-end end Nov/Dec window dressing activities and bottom-up technical oscillators. Further upside targets are 1823 (38.2% FR) and 1836 (23.6% FR). Stiff resistance is situated at 1850 (downtrend line and 200- SMA).
• Short term supports are 1812 (50% FR) and 1800
• Today’s recommendation (FIG5): Trading BUY on PENTA.          

Trading Idea - PENTA

PENTA-Poised to surpass 52-wk high

• Valuation wise, at RM0.41, PENTA is trading at 0.91x P/B, about 68% lower against its peers’ average P/B of 2.8x. As a result, we believe laggard equipment manufacturer like PENTA is likely play catch up against its peers, given improving fundamentals.
• Technically, a decisive breakout above RM0.44 will spur prices to retest RM0.47-0.485 zones. In the wake of a positive breakout above the key support-turned-resistance at RM0.40, and supported by the Tweezer bottoms formation and improving technical oscillators coupled with the higher lows, PENTA is likely to advance further to a cluster of immediate resistances at RM0.42 (10-d SMA) to RM0.44 (50% FR). A decisive breakout above RM0.44 will spur prices higher towards RM0.47-0.485 levels. Key supports are RM0.385-0.40. Cut loss at RM0.37

RHB Research Summary - 6 Nov 2014

Hartalega (HART MK, BUY, FV: MYR7.70)
Site Visit To The Next Generation Complex
Company Update
We visited Hartalega’s NGC site recently and gathered that all expansions are on track. Maintain BUY and a MYR7.70 TP (21x 2015 P/E, 11.8% upside).The first two lines will commence operations by end-November and December respectively. The NGC is designed to achieve high efficiency and productivity. Despite a potential short-term earnings impact, this expansion is crucial to retaining its market leadership.

British American Tobacco (ROTH MK, SELL, TP: MYR59.60)
Corporate News Flash
A MYR1.50 Excise-Led Price Hike
BAT announced that the prices of all its branded cigarettes were raised by MYR1.50 per pack effective yesterday, citing the 3-sen increase per stick in excise duty as the reason. Maintain SELL, with a higher DCF-based TP of MYR59.60 (from MYR57.80), suggesting a downside of 12.2%. We expect a significant drop in sales volume following the price hike but believe the higher ASP would more than offset the decline.

Malaysia Marine and Heavy Engineering (MMHE MK, SELL, TP: MYR2.01)
Results Review
Slow Orderbook Replenishment
Malaysia Marine and Heavy Engineering (MMHE)’s 9MFY14 net profit of MYR113.4m were within our estimate, at 71.4% of full-year numbers but fell below consensus at 69.4%. We maintain our earnings estimate for FY14 but lower our FY15F net profit by 22%. Maintain SELL, with a lower TP of MYR2.01 based on 15.5x P/E, which is at a 15% discount to mid-cap oil & gas counters under our coverage.

Perisai Petroleum Teknologi (PPT MK, SELL, TP: MYR0.88)
Results Review
Further Disappointment
Perisai posted a disappointing 9MFY14 core profit of MYR0.33m, well below our and consensus estimates. The disappointing numbers were due to the underutilisation of two of its marine assets as well higher finance costs from its borrowings. As we remain wary over its future earnings, we slash our FY14F/FY15F numbers by 95%/38% respectively. We downgrade our recommendation to SELL, with a lower TP of MYR0.88 based on 14.6x FY15F P/E.