RHB Research Summary - 24 Nov 2014

Genting Malaysia (GENM MK, NEUTRAL, TP: MYR4.21)
Blame It On The Luck Factor
9MFY14 Results Review
Genting Malaysia’s 9M14 core earnings of MYR950.5m fell below expectations due to subpar VIP holds in Malaysia, while its US segment continued to face headwinds from Bimini losses. Maintain NEUTRAL with our SOP-based TP reduced to MYR4.21 (3% upside). We lower our FY14 EPS by 5.6% and reduce our FY15-16 EPS forecasts by 7.1- 9.2% to factor in the impact from the GST implementation come Apr 2015.

IOI Properties Group (IOIPG MK, BUY, TP: MYR3.10)
Earnings On Track
Results Review
IOIPG’s 1QFY15 (Jun) results came in below expectations. Maintain BUY and MYR3.10 TP (26.5% upside). We expect 2H earnings to come in stronger as new projects are progressively rolled out in the coming months. New sales in 1QFY15 reached MYR370m, of which 85% were contributed by projects in Malaysia. Meanwhile, we expect IOI City Mall, which had a soft launch last weekend, to boost FY16 earnings.
Coastal Contracts (COCO MK, BUY, TP: MYR4.80)
Increased Sales of Premium OSVs
Results Review
9M14 MYR153m core profit was in line (met 79% of our/street estimates), buoyed by 14 vessel deliveries (9M13: 13 vessels). We retain our earnings forecast and BUY call, with our new TP at MYR4.80 (implied 13x P/E, 39% upside) after adjusting its shipbuilding valuations. Its MYR2.5bn orderbook is underpinned by vessel deliveries up to 2015 and GCSU long-term contract, while it expects JU rig delivery by 1H15.
Allianz Malaysia (ALLZ MK, BUY, TP: MYR13.50) (Upgraded)
Consistent Track Record
Results Review
Allianz’s 9M14 earnings of MYR225m was in line and met 76% of our FY14F forecasts, buoyed by AGIC’s double digit earned premium growth and underwriting margin of 16% (above industry’s 13%), ALIM’s strong investment performance and higher renewal premium. We upgrade to BUY with an unchanged SOP TP of MYR13.50 (13% upside). Valuations appear attractive again due to the recent retracement.

Genting (GENT MK, NEUTRAL, TP: MYR9.67) (Downgraded)
Lifted By Non-Gaming Divisions
9MFY14 Results Review
Genting’s 9MFY14 core earnings of MYR1.66bn were within our expectations as weakness in its gaming segments was offset by an improved showing from its plantation and O&G divisions. That said, we downgrade our TP to MYR9.67 (from MYR10.96) (a 2.8% upside) following our valuation revision on its listed subsidiaries in view of potential earnings headwinds ahead. Downgrade our call to NEUTRAL.

SKP Resources (SKP MK, BUY, TP: MYR0.85)
A Stronger 2HFY15 Awaits
Results Review
We deem SKP’s 1HFY15 (Mar) earnings of MYR20.2m in line despite reaching only 42.1% of our full-year estimate. Maintain BUY and MYR0.85 TP, a 17.2% upside. We expect 2HFY15 earnings to accelerate on the production of two new Dyson models, which started in early Nov 2014. No dividend was declared for the quarter under review. We make no changes to our earnings forecasts.

Petra Energy (PENB MK, NEUTRAL, TP:MYR2.08)
Results Review
Keeping Up The Pace
Petra Energy’s 9MFY14 core earnings of MYR17.4m came in above our expectations at 85% but missed consensus at only 50%. We maintain our NEUTRAL with a lower SOP-based TP of MYR2.08 (from MYR3.02). We raise our FY14 estimates by 10% on the back of higher work orders from its marine services segment but keep our FY15
numbers unchanged.

7-Eleven Malaysia (SEM MK, BUY, TP: MYR2.00)
Stronger Performance
Results Review
7-Eleven’s 3Q14 results were broadly in line, with net profit improving 109% YoY to MYR17.1m, partly contributed by an increase in ASP and stronger other operating income. We maintain our BUY call and MYR2.00 TP, derived from 28x FY15F P/E, offering a 21.2% upside. Its 9M14 net profit makes up 70% of consensus’ FY14 net profit. We are confident that its business expansion plans are progressing well.

Pintaras Jaya (PINT MK, BUY, TP: MYR4.92)
1QFY15 Net Profit Grows 9% YoY
Results Review
Pintaras Jaya’s 1QFY15 (Jun) results met our forecast. We maintain our BUY call, earnings forecasts and TP of MYR4.92 (implying a 13% upside). Being a dominant player, Pintaras Jaya is well-positioned to capitalise on the strong prospects of the piling segment, backed by the Klang Valley MRT project, a proliferation of high-rise developments and capacity shortage – which should boost piling rates.
Southern Steel (SSB MK, NEUTRAL, TP: MYR1.46)
In Red At The Start Of FY15
Results Review
Southern Steel’s 1QFY15 (Jun) results (MYR21.7m net loss) were below consensus and our estimates due to stiff competition from imported steel, a drop in steel prices and deeper losses from its associates. We maintain our NEUTRAL call, but cut our earnings forecasts for the next two years. Therefore, our book-based TP of 0.7x FY15F P/BV (-1 SD) is trimmed accordingly to MYR1.46 (from MYR1.49) (4.2% upside).

Sarawak Oil Palms (SOP MK, BUY, TP: MYR6.60)
Decent 3Q Earnings
Results Review
We continue to like SOP for its better production growth outlook and as the sole biodiesel supplier in Sarawak. Maintain BUY and MYR6.60 TP (11.9% upside). SOP’s production should benefit from drier conditions in Sarawak compared to its typically excessive rainfall. We trim our FY14 earnings forecast slightly although SOP’s 9M14 core earnings were in line, making up only 72% of our full-year forecast.

Economic Highlights - Inflation Inched Higher In October, BNM Could Revisit Raising Rates In March 2015
(Published 24 Nov 2014)
The headline inflation rate inched higher to 2.8% YoY in October (Sep: +2.6%). The fuel price hike on 2 Oct exerted some pressure on inflation but was mitigated by the higher base effect when the fuel prices were raised in Sep 2013. This was reflected in a faster increase in the core inflation rate, largely due to a sharp pick-up in transportation cost. In contrast, the prices of food & non-alcoholic beverages inched lower in September.

Kenanga - 24 Nov 2014

IDEAS OF THE DAY

l  Results Note: COASTAL, GENM, GENTING, IOIPG, PHARMA

l  Company Update: STAR

l  On Our Portfolio: Higher Downside Risk 

l  Economic Viewpoint: Malaysia Consumer Price Index, Fuel Subsidy To be Removed

NEWS HIGHLIGHTS

l  End of RON95, diesel subsidies

l  Willowglen bags RM14.2m contract

l  Gunaria, KL Kepong unit in share deal

l  Bina Darulaman to acquire land worth RM202.0m

l  Protasco sues PT Goldchild

FOREIGN NEWS HIGHLIGHTS

l  Tesla says in talks with BMW over car batteries, parts

l  BHP targets further spending cuts as iron prices tumble

l  Visa sees Visa Europe option now costing more than USD10.0b

l  Australia's Medibank IPO prices at AUD2.15 a share, raising AUD5.7b

 

ECONOMIC NEWS HIGHLIGHTS (MACRO BITS) 

Malaysia

l  Malaysia Scraps Fuel Subsidies As Najib Ends Decades-Old Policy

l  Inflation Rate In October Rose To 2.8%

l  Malaysia Jumps To No. 5 In The Latest World Talent Ranking

Asia

l  Central Bank Seen Fueling Old China As Banks Hold Key To Policy Success

l  Chinese Premier Urges 'New Growth Engines' Amid Slowing Economy: Xinhua

l  Thailand Stepping Up Infrastructure Spending

Americas

l  Brazil Government Slashes 2014 Budget Surplus Goal

l  Mexico Cuts 2014 Growth Forecast After Surprisingly Weak Third-Quarter

Europe

l  Draghi Throws ECB Door Open To Money Printing As Global Prospects Dim

Currencies

l  Dollar Index Ends Week At Four-Year High

Commodities

l  Oil Up First Time In 8 Weeks On China Rate Cut, OPEC Expectations

l  Gold Rallies To 3-Week High After Surprise China Rate Cut

HLIB Research Summary - 24 Nov 2014

Lafarge (BUY é)

3Q14 Analyst Briefing

• Disappointing 3QFY14 performance. To recap, Lafarge’s 3QFY14 net profit declined due to higher input cost and pricing pressure from the market arising from Lafarge’s stance to regain and reposition itself as the market leader.
• Mitigating higher electricity and fuel costs via efficiency. Energy and fuel costs now consist of 50% of total cost and the only strategy to mitigate the rising price of electricity and fuel is by being more efficient.
• Coal prices for FY15. The company recently finalised the terms for the supply of coal for next year and has hinted that the prices for next year is marginally lower compared to FY14.
• Outlook for 2015. Price volatility is expected to continue and industry cement demand will continue to sustain into next year, with a projected mid-single digit demand growth of 3-5% in 2015, similar pace for 2014.
• We slashed FY14 by 6.1% to impute the weak 9MFY14 results. However, we have revised upwards our FY15-FY16 earnings by 7.4% and 11.6% due to (1) lower coal price; and (2) higher domestic net selling prices.
• Despite the disappointing 3QFY14, our TP is raised to RM10.72 based on 22.5x 2016 EPS of 47.7 sen. We have raised our P/E on the stock to 22.5x, one standard deviation above its 1-year forward average P/E of the last 3 years.  We upgrade our rating from Hold to BUY.

Star Publications (BUY é)

A sweet dividend for the ride

• We attended Star’s 9MFY14 briefing, chaired by its Managing Director/CEO, Datuk Seri Wong Chun Wai and the management team.
• A pretty good cost management… Star will continue to keep its costs well controlled. Will also benefit from low newsprint prices which have been on a downtrend (see Figure #1).
• Appealing dividends… It is likely to retain the dividend payment of 15 – 18 sen/share, translating to a dividend yield of 6.6% - 7.9%.
• FY14, FY15 and FY16 earnings trimmed by 1%-3%, as we assume weaker macro environment which contributes to a poorer consumer and business sentiment.
• Despite the soft adex environment, we see better prospect for Star based on their prudent cost management, strong balance sheet with net cash position and attractive dividend yield. Also, its share price has, since the beginning of November, declined by 12%. Thus, we upgrade Star to a BUY call, TP revised upwards by 7% to RM2.73 based on an unchanged dividend yield of 5.5% as we increase our dividend forecasts from 14.0 to 15.0 sen/share. 

ViTrox (BUY çè)

Deliver as Promised

• Again, achieved new highs in revenue and profit merely with 9 months results. FY14 top line is forecasted grow 55.7% yoy reaching ~RM165m.
• MVS-S: resilient 3Q14 order despite seasonality weakness. 4Q14 revenue is forecasted to be ranging RM9-10m. Demand is expected to pick up from 2Q15 onwards.
• MVS-T: YTD 9M14 sales more than doubled (+173.7%) yoy and 4Q14 sales expected to be between RM6-8m.
• ABI: 3Q14 fell dragged by disappointment in PCB. 4Q14 revenue forecast is estimated to be RM20m while carry forward backlog into 1Q15 will be higher than in 2H14.
• By summing the mid-points of those guidance, 4Q14 sales could potentially grow 30.4% yoy to RM36.5m.
• Confident to extend its pioneer status / tax exemptions which will end in 1Q15.
• Reiterate BUY with unchanged TP of RM3.17, pegged to 1SD above 5-year historical average P/E multiple of 16.2x.

Genting Bhd (BUY çè)

9MFY14: Below Expectations

• Reported 9MFY14 core PATAMI of RM1.3bn came in below expectations due to weaker-than-expected performance from Genting Singapore .
• We imputed the latest earnings revision from GenS and GenM and as such, FY14-16 EPS are cut by 12.7%, 2.6% and 4.9% respectively.
• Post-earnings revisions, TP is cut slightly to RM10.64 (from RM10.81) based on SOP valuations. Maintain BUY.

Genting Malaysia (HOLD çè)

9MFY14 Slightly Below Expectations

• GenM reported 9MFY14 core PATAMI of RM949.8m came in below expectations from higher-than-expected tax rate.
• Following the higher-than-expected effective tax rate in 3Q, we increase FY14’s tax rate assumptions. As such, FY14-16 earnings are reduced marginally by 0.4-3.9%.
• Given that the downgrade in forecasts is for FY14, our TP of RM4.16 is unchanged based on FY15’s SOP valuations. Maintain HOLD.

IOIPG (HOLD ê)

Disappointing 1QFY15

• Reported 1QFY15 PATAMI of RM101.0m came in below expectations, mainly due to higher-than-expected expenses and effective tax rate.
• YTD unbilled sales stood at RM1.43bn, representing 0.95x of IOIPG’s FY14 revenue.
• We trimmed our FY15-17 EPS by approximately 22-25% as we turn more conservative on the group’s prospects.
• TP is lowered to RM2.65 (from RM3.94) after taking into account earnings revision and higher discount to RNAV of 30% (vs. 20% previously). Our TP of RM2.65 valued IOIPG at 18.5x FY15 P/E, vs. 18.7x FY15 P/E which UEM Sunrise is currently trading at.
• We also downgraded our recommendation to HOLD in view of persistent earnings disappointment.

Scomi Energy (BUY çè)

2Q Analyst Briefing…

• Despite declining oil price, drilling campaign from Petronas has picked up with rig count increased from 4 rigs in Jun 14 to 6 rigs in Sep 14 and further increase to 12 rigs in Nov 14.
• Given this, it expects gross margin for oilfield services to gradually improve from 24% in 2QFY15 to 26% in subsequent quarters.
• Marine business swung from profit to losses mainly due to lower coal tonnage carried arising from new tax rules imposed by Indonesian government which resulted in production halt of a customer. After the election, it expects the operation to improve.
• We also understand that national oil companies (NOCs) comprise around 65% of SES’ revenue. NOCs have traditionally been able to better withstand the impact of declining oil price with long term capex plan.
• We maintained our BUY call with TP reduced from RM1.07 to RM0.93.

Pharmaniaga (BUY çè)

9M14 Results – In Line

• 9M14 core net profit of RM71.9m, came in within our expectations but slightly ahead of consensus’ estimates, accounting for 77% and 83% of HLIB and consensus full year estimates, respectively.
• Declared 3^rd single tier dividend of 8.0 sen per share (3Q13: 3.0 sen) with ex-date on 5^th Dec.
• 3Q14 revenue gained 13.9% yoy to RM502.1m contributed by the entire core business operations. However, qoq sales contracted 4.4% due to seasonally lower demand.
• Logistics and Distribution Division posted more than three-fold increase in PBT qoq, boosted by higher ASP coupled with higher sales volume. Manufacturing Division’s PBT slipped due to lower off-take for in-house products from government hospitals as well as higher R&D expenses.
• Moving forward, Pharmaniaga remains positive as the pharmaceutical sector in Malaysia is showing improved prospects.
• Reiterate BUY with unchanged fair value of RM5.30 based on FY15 P/E multiple of 14.5x, 10% discount to US peers.

CSC (HOLD çè)

3Q Losses Again

• Another disappointing quarter. 9MFY14 performance came in weaker than our expectation, with a reported net loss of RM12.3m vs. our full-year net profit forecast of RM5.1m. 
• YoY. 3QFY14 revenue decreased by 1.2% to RM254.4m and turned into a net loss of RM3.1m from a net profit of RM2.9m, a staggering declining of 206.4%. This is due to lower selling prices.
• QoQ. 3QFY14 net loss narrowed to RM3.1m (from RM8.8m in the previous quarter) mainly on the back of lower raw material costs.
• We belief that 4QFY14 looks bleak, thus, we have cut our FY14 forecast to a net loss of RM15.2m. For FY15, we have slashed our earnings by 2.2% and for FY16, we cut by 17.5%.
• SOP-derived TP lowered by 5.1% to RM1.06 to reflect the roll forward of our base year from FY14 to FY15 (for valuation purpose) and lower earnings forecasts. Maintain HOLD recommendation.

Economics

Managed Float for RON95 & Diesel Report

• Retail price of RON95 and diesel will be fixed according to a managed float system starting 1 Dec.
• We are positively surprised as the floating of fuel price will entirely eliminate the government ' s fuel subsidy bill in 2015. Fuel subsidies rose to as high as RM28.9bn in 2013 (13.7% of operating expenditure).
• The move is favourable to help the government achieving its target fiscal deficit of 3.0% GDP. We see slim chance of the proposed multi-tiered fuel subsidy scheme being implemented. We believe that the government may instead give special BR1M payouts should global crude oil price spikes up sharply in an unexpected manner.
• We estimate that RON95 and diesel would be retailed at RM2.30/litre and RM2.20/litre respectively in Dec 2014. We maintain our 2014 full-year inflation forecast at 3.2%.
• Based on our crude oil forecast of US$90/bbl for 2015, we expect RON95 retail price to average RM2.50/litre in 2015. Consequently, our CPI growth forecast for 2015 is raised to 4.3% (previously: 4.0% with multi-tiered fuel subsidy).
• The managed float fuel scheme is expected to bring greater uncertainty to consumer spending in 2015, which we had already factored in in our projection. We reiterate our projection that GDP growth will moderate to 5.0% in 2015 (2014f: +6.0%).
• We do not expect the switch to a managed float system for fuel price will alter the thinking of BNM. We maintain our view that BNM will leave its OPR unchanged at 3.25% throughout 2015.

Economics

October Inflation Report

• Malaysia ' s CPI growth climbed up to 2.8% yoy in October after recording a 12-month low of 2.6% in September, lower than our and market expectations (+3.0%).
• 20 sen fuel price hike was the sole reason behind the spike in October CPI growth. Price inflation of other components broadly held stable. Food & alcoholic beverages and tobacco witnessed slower price increases.
• Headline inflation is projected to creep up further in Nov-Dec 14 and 2015, driven by domestic cost factors. We maintain our full-year inflation estimate of 3.2% for 2014 but raise our 2015 forecast to 4.3% (previously: +4.0%) given the commencement of managed float system for fuel prices.
• We expect BNM to keep the OPR steady at 3.25% throughout 2015, backed by moderate domestic demand, softer global outlook, contained inflation risks and slower property speculative activities.

Traders Brief

Likely to consolidate sideway

• Last Friday’s black candlestick removed the reversal signal of “Bullish Engulfing” pattern on daily chart, turning KLCI into consolidation mode.
• The psychological level of 1800 would be a critical support zone after 50% Fibonacci level was penetrated last Friday. Next supports are at 1778 and 1760 if 1800 is broken.
• However, KLCI could stage a technical rebound during this week, which might be shortlived. Resistances are 1823 (38.2% FR), 1836 (23.6% FR) and 1850 (downtrend line and 200-d SMA).
• Took profit on ESCERAM last Friday as it hit beyond R1.

HLIB Research Summary - 11 Nov 2014

Plantations (NEUTRAL  çè)

Inventory rises for the 4^th month

• Inventory increased for the 4^th consecutive month, by 3.7% mom to 2.17m tonnes mainly on weaker exports, which more than offset a 0.2% mom decline in output.
• While production has already reached its peak (and will start trending down from Nov, in our view), we believe CPO stockpile will likely remain high in Nov, as lower CPO output will likely be offset by the absence of seasonal restocking activities, CPO’s narrow discount against the soy oil, and the economic viability of voluntary biodiesel demand amidst current low crude oil price.
• Maintain NEUTRAL stance on the sector.

KLK (HOLD çè)

 Teams up with Astra Agro Lestari

§       KLK entered into a JV agreement with PT Astra Agro Lestari Tbk (AALI), which AALI will acquire a 50% stake in PT Kreasijaya Adhikarya (which is involved in the business of refinery and trading of refined palm oil products) for RM81.2m.

§       Positive, as the latest move (by teaming up with AALI) will ensure the supply of quality feedstock for its refinery. This is particularly important for KLK as its own oil palm estates in Indonesia could only supply up to 60% of the CPO feedstock required for its refineries in Indonesia .

§       Maintain earnings forecasts, TP of RM20.41, as well as HOLD recommendation on the stock

MAHB (BUY çè)

Funding for the Remaining 40% ISGA

• MAHB announced rights issue exercise of 274.8m rights shares on the basis of 1 for 5 existing MAHB shares.
• Based on illustrative price of RM4.80, MAHB will raise RM1.3bn funds, which RM1.2bn will be used to fund the acquisition of the remaining 40% stake in ISGA from Limak.
• Net EPS dilution impact for FY15 and FY16 are -10.5% and -8.9% respectively.
• Remained positive on MAHB’s long-term earnings growth. Maintained BUY with unchanged TP of RM8.90 (RM8.10 post the completion of ISGA acquisition).

MAHB (BUY çè)

An Improvement in Oct 2014

• MAHB’s reported turnaround in pax growth at +0.1% yoy in Oct, after negative growth in the past 2 months.
• Growth mainly driven by international segment – Australia , New Zealand and India sectors.
• The seat capacity offered by airlines in Nov and Dec are +6.7% yoy, promising continued positive passenger growth for the remainder of the year.
• Remained positive on MAHB’s long-term earnings growth. Maintained BUY with unchanged TP of RM8.90 (RM8.10 post the completion of ISGA acquisition).

IOIPG (BUY çè)

Proposed Rights Issue

• IOIPG proposed renounceable rights issue of 539,835,787 new shares at RM1.90 on the basis of one right for every 6 IOIPG shares.
• Based on the issue price of RM1.90, IOIPG would raise RM1,025.7m. We understand that bulk of the raised fund will be used for for its townships in both Bangi and Sepang, as well as for the integrated development in Putrajaya.
• Basic dilution of the proposed exercise is about 14% and will reduce our TP from RM3.94 to RM3.38. However, we believe the dilution will be mitigated by incremental earnings from IOIPG’s future investment opportunities. Gross gearing will be slightly reduced from 0.18x to 0.17x post the rights issue exercise.
• We are positively surprised on the proposed exercise as it strengthens the balance sheet and provides shareholders to participate at a 30% discount to market price.
• To note, the proposed rights will be fully underwritten by its major shareholders. The proposed exercise is expected to be completed by 1QCY15.
• Maintain TP at RM3.94 (10% discount to RNAV, 17.3x CY15 P/E). Our TP will be adjusted to RM3.38 post the rights issue exercise. Maintain BUY.

DRB (BUY çè)

One More Step Towards Integrated Logistics

• DRB proposed to acquire 100% Gading Sari for RM72m or RM4.80/share.
• Gading Sari is a private air transportation company providing services to Poslaju. The acquisition is line with DRB to develop integrated logistic services via KLAS.
• Relatively negative on the expensive valuation at 10x P/NTA (2013) and 32.7x P/E (2013). DRB may need to pay premium for the company’s Air Operator Certificate (AOC).
• Maintained BUY with unchanged TP of RM3.00 (Based on SOP).

CBIP (HOLD çè)

Good fundamentals priced-in

• We continue to see bright earnings visibility at the oil mill engineering division offsetting the higher tax expense. This is underpinned by its all-time-high order book, the increasing harvesting areas of oil palm plantations as well as management’s ongoing efforts in expanding the division’s capacity.
• While management remains confident in securing sizeable contracts to replenish order book for the SPV division, we believe 2015 will be a relatively quiet year for this division. In our opinion, potential new contracts may not arrive in time to replenish its depleting order book given the lumpy and irregular nature of this division’s contract flow.
• Management highlighted that planting development works will continue (albeit at slower pace of ~3,000 ha p.a. vs. 6,000 ha p.a. previously), although there are still uncertainties on foreign shareholding cap in Indonesia .
• We reduced our FY12/15-16 net profit forecasts by 18.4-25.9%, largely to reflect: (i) higher tax expense; and (ii) lower earnings at the SPV, which more than offset slightly higher contract wins and EBIT assumptions at the palm oil mill engineering division.
• SOP-derived TP on the stock is lowered by 6.2% (from RM2.27) to RM2.13, post adjustments made in our valuation methodology for its plantation assets in Malaysia and net profit forecasts. Maintain HOLD recommendation.

Economics

Oct-14 PMI: Mixed Bag of Results

• Global PMI in October continued to show weak global growth momentum with greater growth differentials across regions. Manufacturing PMI was stable at low level of 52.2 (Sep: 52.2) while services PMI fell to a six-month low of 53.7 (Sep: 55.2).
• Fears of growing dimness in the Euro zone and China that would weigh on the US-led recovery continued to mount. Downside risks to global growth persisted during the month, with recent financial market volatility, falling energy prices and US braving a rate hike next year. Meanwhile, we expect the world economy to grow by 3.6% next year (2014f: +3.3%).
• Mixed bag of PMI results across Malaysia ’s top trading partners in October suggested an uneven and less-favourable growth outlook for exports and IPI in the months ahead. Together with softer domestic financial activities and lower commodity prices, we expect GDP growth to slow to 5.6% in 2H14 (1H: +6.3%) and 5.0% in 2015 (2014f: +6.0%).
• A more dovish tone in November’s MPS also lends support to our expectations of OPR pause throughout 2015.  

Traders Brief

Must break above 10-d SMA for resumption of uptrend

• For a resumption of an upward momentum towards 1850, KLCI must rebound quickly to surpass 10-d SMA (now at 1838) levels. Otherwise, a crack of the lower 1818 (20-d SMA) and 1824 zones will trigger more selldown towards 1800 zones.
• Closed positions: We had closed our SELL positions on BORNOIL and YGL after hitting our R1/R2 targets on 10 Nov.
• Today’s recommendation: Trading BUY on SKPETRO

Trading idea - SKPETRO

SKPETRO: Double Positive Divergence

• Share price is expected to go higher mainly because share price made lower low while all indicators (MACD & RSI) made higher low on hourly as well as daily chart, triggering double Positive Divergences which indicate weakness in the downtrend momentum and selling pressures are exhausted.
• Further upside targets are at RM3.28 and RM3.41, with a long-term objective of RM3.62. Critical supports are pegged at RM3.06 and RM3.00. Cut loss at RM2.94.

RHB Research Summary - 31 Oct 2014

Kuala Lumpur Kepong (KLK MK, NEUTRAL, TP: MYR21.30) (Upgraded)

Blue-Chip Plantation Proxy

Company Update

With the seasonal peak for FFB production almost over, CPO prices have a window of opportunity to strengthen between now and 1Q15. This would bode well for a company like KLK, where we estimate every MYR100/tonne change in CPO prices could affect its net earnings by 4-6% per annum. We raise our SOP-based TP to MYR21.30 (7.3% downside) from MYR19.80 and upgrade the stock to NEUTRAL. 

 

Press Metal (PRESS MK, BUY, TP: MYR9.45)

3Q Profit Steps Up

Result Review

Press Metal posted 3Q14 earnings of MYR82.7m from a loss in 3Q13 on higher aluminium prices. Maintain BUY, with a higher MYR9.45 DCF TP (38% upside). We continue to like the company, as it is a world-class low-cost aluminium smelter that can leverage on the bottoming out of aluminium prices. We lift our FY15F earnings by 11.3% after accounting for a lower effective tax rate and higher value-added sales. 

 

IOI Properties Group (IOIPG MK, BUY, TP: MYR3.38)

Potential Key Beneficiary of MRT Line 2

Company Update

IOIPG remains our Top Pick for the sector. Since the proposed stops for the MRT Line 2 are still not firmed up – given that the railway will end at Putrajaya – it emerges as the key beneficiary of the project. It has >500 acres of landbank there, and the IOI City Mall will likely be a valuable asset. With this MRT line, the GDV for its landbank in Putrajaya will likely rise further. Maintain BUY, with our TP at MYR3.38 (23% upside). 

 

Unisem (UNI MK, BUY, TP: MYR2.16)

Within Expectations

3QFY14 Results Review

Unisem’s 9M14 core profit of MYR37.8m came in within our expectations. 3Q14 core earnings of MYR27.1m marked a 150.2% QoQ jump on improvement in its overall utilisation rate to 70% from 65%. Management declared an interim DPS of 2.0 sen. Maintain BUY, with our TP still at MYR2.16 (P/NTA of 1.4x, 28.6% upside).

 

 

Pavilion REIT (PREIT MK, NEUTRAL, TP: MYR1.48)

Lower Cost Base Buoys Earnings Growth

Results Review

Pavilion REIT’s 9M14 results came in line with expectations at 76%/77% of our/consensus estimates. Net property income (NPI) margins saw an improvement to 70.4% in 9MFY14 (1HFY14: 68.4%) due to 3Q14’s lower cost base. Earnings will continue to be driven by its organic growth through more asset enhancement exercises. Maintain NEUTRAL, with an unchanged DDM-based TP of MYR1.48 (0% upside).