By: KAMEL BIN MOHD YUSOH
INSTITUTIONAL DEALER
KENANGA INVESTMENT BANK BHD
Tel : 03-21634549 / 03-21634550
H/P :013-6306544
WEBSITE : kamelresearch.blogspot.com
EMAIL : kamelmohdyusoh@ymail.com
THIRD QUARTER 2009 MALAYSIAN STOCK MARKET OUTLOOK.
Table of Contents: -
The Road to Global Economy Recovery.
1. Malaysia and Global Political, Economic and Stock Markets Outlook – P2-5.
- A. Fundamental Analysis – Page 3.
- B. Technical Analysis – Page 3.
- C. Stock Market Strategy – Page 3.
- D. Sectoral Recommendation – Page 3.
- E. Malaysian Economic Indicators – Page 4 to 5.
2. Prospect for the Global Economy – Page 6 to Page 13.
- A. Outlook – Page 6.
- B. Economic Forecast – Page 6 to Page 8.
- C. Policy Response to Banking Crisis – Page 9 to Page 10.
- D. Insight From Past Financial Crises – Page 11 to Page 13.
- Final Analysis / Conclusion – Page 13.
3. Post Crisis Monetary, Currency and Financial Architecture Reforms – P 14.
- a.Global Monetary and Currency Reform – Page 14.
- Analysis – Page 14.
- b.International Banking Sector Reform – Page 14.
- Analysis – Page 14.
-
4. Top 24 Stocks Recommendation – Page 15 to Page 74.
5. The Year 2009 KLCI Earnings Estimates, Net Assets, Prospective Dividend Yield, Prospective PER , Average PER and Dividend Yield for 2009. Conclusion and Final Analysis – Page 75 to Page 76.
WHAT’S IN STORE FOR THE THIRD QUARTER OF YEAR 2009.
TUESDAY JUNE 30, 2009.
KLCI CLOSED AT 1075.24.
DJIA CLOSED AT 8,529.38.
CRUDE OIL AT US$71.49.
SEPTEMBER FCPO AT RM2,230.
RINGGIT AT 3,5130.
BNM OVERNIGHT POLICY RATE AT 2.00%.
“ THE ROAD TO GLOBAL ECONOMY RECOVERY”
1.MALAYSIAN POLITICAL, ECONOMY AND STOCK MARKET OUTLOOK.
Based on the latest Malaysian and global GDP official forecast by the Malaysian Government and world leading economic agencies such as the World Bank, International Monetary Fund and the OECD, Malaysia and the rest of the world are still in a deep recession. The economy recovery can only be expected the latest by second half of next year onward and global economy expected to grow by 2.9% in 2010 and Malaysia GDP set to grow at 2.2% in 2010 and 5% in 2011.
The forecast for world economy growth had been revised upward with signs the rate of global output has moderated. However, the financial conditions still far from normal and the world economy still in recession.
While the latest data point to a slowing of the global contraction, there is still great uncertainty regarding the timing and pace of economy recovery.
However, signs are emerging that the rate of output decline has moderated, financial conditions have improved, confidence is recovering gradually and indicators of future production and demand firmed.
Malaysian economy and the banking can be expected to withstand the current economic malaise as the country have an ample of liquidity in the banking system and a very low interest rates even though exports remain the Achilles heel of the country as the global demand collapsed.
Continue current account surplus, high forex reserves, trade surplus, high savings rate, surprisingly low non performing loans in the banking system, low unemployment, low inflation level and recovery of the oil and commodities prices should augurs well for the country economy going forward. Leading Indicators Index pointing to an early recovery.
Concerted effort by governments all over the world and an Election in less than 4 years in Malaysia and in the U.S. will ensure an economy growth and upward movement for the stock markets is the order of the day until the election day in 2012.
A.FTSE BURSA KLCI 30 STOCKS INDEX - FUNDAMENTAL ANALISIS.
FTSE Bursa Malaysia KLCI 30 Stocks Index as of 25.6.2009 trading at a Prospective Price Earnings Ratio for 2009 of 21.7X and a Prospective Gross Dividend Yield for 2009 of 3.7% on Government forecast FY2009 GDP contraction of between 4% to 5% (1Q09 GDP at -6.2%).
Stocks Valuations for 2010 and 2011 should be lower based on the World Bank latest GDP growth forecast of 2.2% in 2010 and 5.5% in 2011 as the world economy expected to recover the latest by second half of next year.
The upcoming second quarter reporting season together with a new economic numbers coming out will provide further clues to the stock market strength.
B. FTSE BURSA KLCI 30 STOCKS INDEX - TECHNICAL OUTLOOK.
Support Level – 1050, 1000.
Resistance Level – 1100, 1200.
Year End 2009 Target Level 1200.
C. STOCK MARKET STRATEGY FOR THE THIRD QUARTER OF 2009.
Since we forecast the Composite Index to trade between 1000 to 1200 level for the rest of the year 2009, we continue to recommend investors to BUY and ACCUMULATE or Ringgit Cost Averaging on good quality stocks with solid management and balance sheet together with a good dividend yield especially of extreme market weakness of sell off below 1000 level for medium or long term investment at least until the country next general election.
D. SECTORAL RECOMMENDATION,
Plantation Sector – BUY rating due to higher CPO prices going forward .
Oil and Gas Sector – BUY rating due high capex spending by Petronas and oil majors.
Construction Sector – BUY rating due to fiscal stimulus spending.
Banking Sector – BUY rating on economy recovery.
Property Sector – BUY and ACCUMULATE rating on economy recovery.
Auto Sector – BUY and ACCUMULATE rating on economy recovery.
Telecommunication Sector – BUY and ACCUMULATE rating on economy recovery .
Energy and Power Sector – BUY and ACCUMULATE rating on economy recovery.
E. MALAYSIA ECONOMIC INDICATORS.
Source:- Department of Statistics, Malaysia.
LEADING. COINCIDENT AND LAGGING INDICES APRIL 2009.
The Coincident Index (CI), that measures the current economic activity, rose by 0.9% in April 2009 registered at 113.7 points. The increase of the index were contributed by real gross imports (0.7%), real sales in manufacturing sector (0.4%). Index of Industrial Production (0.2%) and real contribution in EPF (0.2%). The six month smooth growth rate of CI in April 2009 showed an improvement to -7.1% from -9.7% in March 2009.
The Leading Index (LI) which monitor economic performance in advance also increased in April 2009. The index grew by 2.0% to 162.5 points from 159.4 points recorded in the previous month. Main components that have contributed to the increase of index were real total trade of eight major trading partners (0.6%), real money supply, M1 (0.5%), Bursa Malaysia industrial index (0.3%). The six months smoothed growth rate improved 4.3% in April compared to 0.6% in the previous month.
The six months smoothed growth rate of LI continues improve since January 2009. Given the LI consistently grow up in the coming months ,the current economic slow down most likely to turn around in the third quarter of 2009.
GDP FIRST QUARTER 2009.
GDP Current Prices – RM155.458 billion.
GDP Constant 2000 Prices – RM121.162 billion.
GDP Growth Rate Constant 2000 Prices % – Negative 6.2%.
FORECAST GDP.
-4% to -5% for 2009 according to official government forecast.
-4.4% in 2009, 2.2% in 2010 and 5% in 2011 according to the World Bank latest June 2009 forecast.
BALANCE OF PAYMENTS – 2008.
Balance on Current Account at RM129.935 billion.
Balance on Capital and Financial Account at –RM123.011 billion.
Overall Balance at -RM18.250 billion.
EXTERNAL TRADE – JAN TO APRIL 2009.
Total Exports at RM162.519 billion.
Total Imports at RM122.444 billion.
Balance of Trade at surplus of RM40.075 billion.
INFLATION RATE (CPI).
January to March 2009 at 3.3%.
Year on Year May 2009 CPI at 2.4%.
Month on Month CPI up by 0.2% in May 2009.
PRODUCER PRICE INDEX (PPI 2000 = 100) – January to April 2009.
Domestic Economy at 129.9.
Local Production at 131.0.
Imports at 127.8.
UNEMPLOYMENT.
Total Labor Force – 11.208.1 million in 2008.
Unemployed – 368.5 thousand or 3.3% in 2008.
Forecast unemployment to increase between 4% to 5% in 2009.
INTEREST RATE - BNM OPR at 2.00%.
FOREIGN EXCHANGE RESERVE – As at 15 June 2009.
RM318.4 billion or US$87.1 billion.
SEPTEMBER FCPO – RM2,317 as of Friday 26.6.2009..
RINGGIT EXCHANGE RATE VS US$ – 3.5322 as of Friday 26.6.2009.
CRUDE OIL DEMAND – The International Energy Agency, an adviser to oil-consuming nations, cut five year forecasts for global crude demand because of the economic slump, predicting consumption wont’s regain 2008 levels until 2012. The IEA cut its oil demand for every year through 2013 by about 3 million barrels a day. Consumption will average 86.76 million barrels a day in 2012.
2. PROSPECTS FOR THE GLOBAL ECONOMY – Mixed Signals.
Source – World Bank.
A.OUTLOOK.
The financial crisis has provoked an unprecedented deep global recession. Growth should recover in 2010, but unemployment will remain high even in 2011.
The UK., which was among Europe’s first casualties in the financial crisis, also appears to be outperforming much of the region. The UK economy’s road to recovery could be bumpy based on the mixed economics numbers. UK manufacturing had two up months and falling home prices have put on the brakes but credit remains tight and wary consumers are socking away cash.
Conditions are fragile elsewhere in Europe as the latest European Union statistics agency Eurostat showed new industrial orders in the euro zone posted their sharpest year to year drop on record in April, a sign that the currency area’s recovery could be painfully slow.
B.ECONOMICS FORECAST.
Gross Domestic Products.
WORLD – Latest forecast for FY 2009 negative 2.9% revised from - 1.3% in April 2009 by World Bank in June 2009 and world trade is projected to fall by 10% accompanied by plummeting private capital flows from US$707b in 2008 to US$363b in 2009.
GDP growth in developing countries is expected to slow sharply, from 5.9% in 2008 to 1.2% in 2009. However, their performance surpasses rich countries, whose collective GDP is expected to fall 4.5% in 2009. Notably, when India and China are removed from the total, developing countries as a group will experience a contraction in GDP of 1.6%..
World GDP is likely to increase to 2.0 percent in 2010 and 3.2% by 2011 but unemployment will remain high even in 2011. In developing countries growth is expected to be higher, at 4.4% in 2010 and 5.7% in 2011, albeit subdued relative to the robust performance before the current crisis.
Two regions _ Europe and Central Asia and Latin America and the Caribbean – are likely to end 2009 with negative growth.
Malaysia – (-4.4%) in 2009, 2.2% in 2010 and 5% in 2011.
OECD Countries – (-4.2%) in 2009, 1.2% in 2010 and 2.3% in 2011.
USA – 2.8% in 2009 (OECD forecast). World Bank forecast – (-3.0%) in 2009, 1.8% in 2010 and 2.5% in 2011.
UK – 4.3% (OECD), 3.7% (UK based economist consensus).
Euro Area – (-4.5%) in 2009, 0.5% in 2010 and 1.9% in 2011.
Japan – (-6.8%) in 2009, 1.0% in 2010 and 2.0% in 2011.
Non-OECD countries – (-4.8%) in 2009, 2.2% in 2010 and 4.6% in 2011.
China – 6.5% in 2009, 7.5% in 2010 and 8.55 in 2011.
India – 5.1% in 2009, 8.0% in 2010 and 8.5% in 2011.
Indonesia – 3.5% in 2009, 5.0% in 2010 and 6.0% in 2011.
Interest rates.
MALAYSIA – 2%
USA – 0.25%.
UK – 0.5%.
$, 6 month (percent) for 2009 (1.5), 2010 (1.7) and 2011(2.0).
€, 6 month (percent) for 2009 (2.0), 2010 (2.2) and 2011 (2.3).
Inflation (CPI).
MALAYSIA – around 3%.
USA – 0.3% in 2009, 1,2% in 2010 and 2.0% in 2011.
UK – 2.2% in 2009.
G-7 countries – 0.5% in 2009, 0.8% in 2010 and 1.3% in 2011.
Unemployment.
MALAYSIA – between 4% to 5%.
USA – 9.4%.
U.K. – 7.3%.
Crisis Impacts.
Higher financing costs, a freezing of credit, and nervousness on the part of investors and consumers provoked worldwide collapse in industrial production and trade.
Global Growth.
The decline in output has be unprecedented in its speed and the number of countries affected.
Commodity Markets.
The financial crisis accelerated the decline of commodity prices that was already underway. Prices have stabilized now, but remain much higher than they were in the 1990s. lower food prices have helped to alleviate some of the poverty caused by the initial rise in food prices.
Inflation.
Falling commodity prices are pushing down inflation, but this effect should diminish over time and inflation is expected to stabilize.
Economic policies.
The strong intervention of monetary and fiscal authorities has helped restore stability to both financial and real-side markets. However, unwinding the monetary stimulus and dealing with growing debt are important medium-term challenges.
External Balances and Vulnerabilities.
Increased savings in the United States have served to reduce global imbalances and lower oil prices have helped cushion the current account impacts of reduced exports in many countries.
Risks.
Both stronger and weaker recovery are risks. In the case of a protracted recession, external and internal vulnerabilities could accumulate resulting in further crises in some countries.
Regional Outlooks.
All developing regions have been affected by the crisis, but the depth of the slowdown and the speed of recovery will depend importantly on initial conditions.
Prospects for mortgage defaults.
Mortgage arrears may generate for the major world banks. Economic theory suggests that a number of macroeconomic variables are important drivers of mortgage arrears. Unemployment, housing equity, level of debt and interest rates are all likely to influence the path of arrears. Given the severe economic downturn, it seems likely that mortgage arrears will rise going forward, though there is uncertainty about how much and the consequences of banks’ losses.
C. POLICY RESPONSE TO BANKING CRISIS.
Financial System Support Schemes since October 2008. Source:- Bank Of England.
a.Central Bank Liquidity Insurance.
Malaysia - .n.a. for comparison.
United Kingdom – 1.Extension of Discount Window Facility maturity. 2.Long-term repo operations and closure of Special liquidity Scheme with 185 billion pound utilization. 3.Central bank swap lines.
USA – 1.Central bank swap lines.
Euro area – 1.Longer term refinancing operations with a maturity of twelve months. 2. Centarl bank swap lines.
b.Market Liquidity.
Malaysia – n.a. for comparison.
UK – 1.Asset Purchase Facility purchases of commercial paper (21 billion pound) and corporate bonds (0.7 billion pound).
USA – 1.Purchases of commercial paper (US$138 billion).
Euro area – 1.Planned purchases of covered bonds (€60 billion).
c.Banks funding.
Malaysia – For comparison, BNM offered blanket protection for depositors until 2010.
UK – 1.Extension of HMT Credit Guarantee Scheme and introduction of Asset Backed Securities Guarantee Scheme.
USA – 1. Extension of wholesale funding guarantees by six months. 2. Extension to end 2013 of US$250,000 limit for deposit insurance. 3. Lending against Asset-Backed securities including Term Asset-Back Lending Facility (US$45 billion).
Euro area – 1. Wholesale funding guarantees. 2. Many countries have either announced blanket protection for retail deposits or increased limits.
d.Capital and assets.
Malaysia – n.a. for comparison.
UK – 1.Introduction of Asset Protection scheme. 2. Protection of 457 billion pound on risky assets for RBS and Lloyds Banking Group agreed in principle. 3. Provision of 13 billion pound capital for RBS.
USA – 1.Capital injections into eligible banks (US$198 billion) funded under the Troubled assets relief Program. 2.Introduction of PPIP to purchase legacy loans and securities.
Euro Area – A number of banks have received capital injections.
The Rise and Fall of Cross Border Flow.
The large global current account imbalances witnesses in the run up to the current crisis had their counterpart in large net capital flows from surplus to deficit countries. However, these net flows understate the increase in financial linkages among economies in recent years due to the huge build up of gross external asset and liability positions. Banking flows accounted for more than half of these gross flows.
Causes of the collapse in ctross border flows.
It could be due to a reduction in demand for international finance as the world economy has contracted. It could reflect a widespread increase in the perceived default probability of borrowers, making banks less willing to lend. Or it could be banks’ need to improve their liquidity and capital positions.
Implications of the collapse in cross border flows.
A further reduction in cross-border capital flows could affect a number of financial systems internationally. Countries most at risk are those reliant on short term external debt, particularly if this is in foreign currency, with limited liquid foreign assets for possible repatriation, and with large current account deficits.
Size of Financial System Support Measures.
Trillions (local currencies).
UK – 0.22 trillion pound or 15% of GDP.
USA – US$2.09 trillion or 15% of GDP.
Euro Area - €1.73 trillion or 19% 0f GDP.
D. INSIGHT FROM PAST FINANCIAL CRISES.
No two financial crisis are the same. But analysis of key influences on the depth and nature of past crises may provide insights into the dynamics and management of presen crisis. We reviews insights from financial crises in Japan (1992-2002), Sweden (1990-1993), Norway (1988-1993) and Finland (1990-1993).
a.Development of past crises.
The key distinguishing feature of the Japanese crisis was its duration: it lasted a decade and spanned a number of periods of recession and recovery. The Nordic crises were relatively short and involved a single, sharp period of recession followed by recovery. Estimates of the output losses in each crisis vary, as there are different methods to calculate the duration of a crisis and to estimate GDP growth in absence of crisis. One study estimates that output losses as a percentage of annual GDP were between 24.1% - 71.7% for Japan, 2.5% - 11.8% for Sweden, 9.8% -27.1% for Norway and 22.4% - 44.9% for Finland.
b. An extended credit boom.
The four crises had similar origins. Liberalisation of banking sectors led to greater and riskier lending by credit institutions, increasing leverage in the non financial sectors and among many banks, and asset price bubbles. In Japan, the corporate sector had a high borrowing ratio. Each of the Nordic saw a large rise in house prices and household indebtedness was high in Norway and Sweden.
c. A systemic financial crisis.
In each crisis a shock exposed balance sheet vulnerabilities and asset prices fell sharply. The fall in equity prices was typically larger but less prolonged than the fall in house prices, as has been the case in many other systemic financial crises. The speed and spread of financial sector problems differed between crises.
d. Authorities’ response to the crises.
Summary of measures used to deal with bad assets and burden sharing.
Japan Sweden Norway Finland
Nationalisation or
capital injection Mixed Mixed Mixed Mixed
Shareholders wiped Yes (but not Yes(but not Yes Yes (but not
out or diluted in every case) in every case) in every case)
Good bank/bad bank Yes (but not Yes No Yes
In every case)
Ownership of bad bank Public&Private Public n.a. Public
Sources: BIS and Norges bank.
Monetary and fiscal policies also differed substantially. The Nordic countries increased policy rates to maintain currency pegs to the ECU. Economy recovery began to gain momentum once they floated their currencies and were able to lower interest rates. In Norway, fiscal policy became expansionary when the banking crisis began. Procyclical fiscal policies in Finland and Sweden may have exacerbated the contraction in aggregate demand during the crisis. In Japan, the adoption of the zero interest rate policy in 1999 appears to have aided economy recovery that year, though its suspension in 2000 may have contributed to the subsequent slowdown. Government spending was a major contributor to a short recovery in growth in late 1990s, but a tightening of fiscal policy in 1997 contributed to recession in 1998.
e. Further shocks to the economy.
The dynamics of the crises were also influenced by shocks that hit the economies or banking sectors as the crisis developed. After its banking crisis began, the Japanese economy was buffeted by a sequence of adverse shocks – including the 1997 Asian crisis and dotcom crash – which dampened international demand for Japanese exports at times when economy was beginning to recover.
f. Economic recovery.
Two different transition paths are evident in these crises. The Nordic transition was characterised by a deep but short lived contraction in GDP and credit. Positive growth in real credit returned about six years after the start of the systemic banking problems. In Norway and Sweden corporate indebtedness fell during the crises and took around a decade to return to pre-crisis level. Banks began to record losses during the crises and took around three to seven years to return to profitability. Net exports as a share of GDP increased structurally in the aftermath of the crises, in Norway by an increase in oil prices and in Sweden and Finland by currency devaluation.
The Japanese crisis, saw a prolonged period of weak economic performance. Households did not reduce their debt significantly during the crisis and banks started to shrink their balance sheets only late in the crisis. The corporate sector was overstretched going into the crisis. Corporate bankruptcies rose and capital gearing fell during the crisis. Net exports as a share of GDP remained fairly stable. Bank profitability remained poor throughout the crisis, due to the disposal of large volumes of non performing loans. There was little or no growth in the supply of credit throughout the crisis.
g. Applying the insights to the present crisis.
The current crisis shares some similarities with this sample of past crises. The crisis has been partly driven by cheap credit, which created vulnerabilities in the economy and unsustainable rise in assets prices. The scale of imbalances within sectors appears similar of past crises.
But there are also substantial differences. Interlinkages bin the world economic and financial system have helped make this a global financial crisis. This lowers the potential contribution of export growth to economic recovery.
The response of international authorities has been unprecedented in speed and size, including through aggressive loosening of monetary and fiscal policy.
Past crises appear to indicate that the authorities management of systemic banking problems is key to returning the banking sector health. It is difficult to unwind the two main factors influencing credit growth in a crisis – household and corporate deleveraging reducing demand and the vulnerability of banks balance sheets reducing supply. But it is clear that, to facilitate a recovery in credit, it is important to remove impediments to bank lending.
FINAL ANALYSIS – CONCLUSION.
This time around, the banking crisis were mainly the American, British and the European problem as Malaysia and the rest of Asia were not affected by the crisis.
As the crisis deepen and the global economic contract with the exports collapsing, the Malaysian and Asian banking system will see a rise in non performing loans.
Next step after the successful completion of the current restructuring will be to reforms the world financial system.
3. POST CRISIS MONETARY AND FINANCIAL ARCHITECTURE REFORMS.
WHAT NEED TO BE DONE TO MAINTAIN THE MOMENTUM AND SUSTAINABLE RECOVERY.
a.Global Monetary and Currency Policy Reform.
For financial stability, China again called for reform of the international currency system to make it more diversified and reasonable, and reduce excessive reliance on the current reserve currencies.
China reiterated its call for the creation of a new international reserve currency based on Special drawing Rights, currently comprising US Dollar, Euro, Yen and Pound Sterling, a kind of synthetic currency created by the International Monetary Fund in the 1960s. Its value is determined by a basket of major currencies.
China said, the IMF should manage part of the reserves of its members and be reformed to increase the rights of emerging markets and developing countries.
A global reserve system is a critical step in addressing these problems to ensure that when the global economy recovers, it moves into strong growth without setting the stage for another crisis.
ANALYSIS – Any currency reform should be fair to all the country in the world. Meanwhile, the Islamic countries also calling for the use of Gold Dinar for trade settlement or currency. Please see my previous suggestion on global monetary reform.
b.International Banking Sector Reform.
While pressures on the major global banks have stabilized over the past few months, their balance sheet remain impaired. Banks’ leverage remains high, leverage of major UK banks at just over 30 times capital and the US commercial banks leverage around 60 times capital, with the possibility of further impairment of assets placing continued pressure on profitability and capital ratios. Future revenue generation will need to balance the desire to deleverage with the need to generate new business at profitable spreads.
Further measures could be required – 1. The public sector could extend the measures announced earlier in the year. 2. Alternative options could share costs between the public and private sectors more evenly. The US authorities, have proposed a Public-Private Investment Program, with joint contribution from private investors and the government to purchase loans and securities from banks. The success of this scheme will depend on whether a market price for assets can be found and on the ability and willingness of banks to recognize losses up front. 3. For the banks to restructure their liabilities – for example, through the conversion of subordinated debt to equity – or their whole balance sheets – for example, into good bank and bad bank. This has been a common way of dealing with banking sector problems in past financial crises. Under one option, a well capitalized good bank could be created using clean assets from the distressed bank. The good bank should then be able to provide credit to the economy.
ANALYSIS – Please see my previous suggestion on banking sector financial architecture reform such as one dollar equity for every single dollar of loan ( Equity = The Loans). Can be done by converting customers deposit into equity.
4. TOP 24 STOCKS RECOMMENDATION.
Based on the closing prices as of Monday, 15 June 2009.
1. BURSA MALAYSIA BHD RM7.20.
Year End Dec. 31 FY2009(F) 1Q FY2009
000 000
Revenue 294,532 64,152
Net Profit 80,740 15,500
EPS (sen) 15.20 2.90
Forecast PER 47.4X
Dividend (sen) 15.00 0.00
Net dividend yield 2.1% 0 %
Cash 286,727,000
Debt 219,000
Net Assets RM1.42
Number of shares 526,694,000
Market Capitalization RM3.79 billion.
Major Shareholders Capital Market Development Fund 19.52%.
Minister of Finance Incorporated 19.52%
LATEST CORPORATE DEVELOPMENT.
The KLCI will be known as the FTSE Bursa Malaysia KLCI comprising 30 largest stocks in term of market capitalization and the enhancements will take effect on Monday, 6 July 2009.
Bursa Malaysia to offer multi-currency trading to widen investment options.
New subsidiary Bursa Malaysia Islamic Services Sdn Bhd is established to house the operations and business activities of the Islamic Capital Market.
QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALSIS.
STRENGTHS ANALYSIS
BUSINESS MODEL – Revenue and profit depending on the securities and derivatives markets performance and trading volumes.
MANAGEMENT – Headed by a Chairman and a CEO Yusli Mohd Yusof.
BUSINESS OUTLOOK – Affected by the current global recession. The implementation of the government stimulus measures would, to some extent, mitigate the adverse impact of the global economic recession on the domestic economy.
CORPORATE GOVERNANCE – Need to be more transparent.
FINANCIAL – Strong with RM286.7 million in cash and almost debt free ( only RM219,000 of debt).
WEAKNESS ANALYSIS – Still trying to diversify the earnings base by offering more products and instruments.
OPPORTUNITIES ANALYSIS – Tie up with foreign bourses still have not materialize.
THREATS ANALYSIS - External threats such as a prolonged global recession and continued weaknesses in the world economy and bourses worldwide not seen since the Great Depression.
QUANTITATIVES ANALYSIS - VALUATIONS.
Forecast PER for FYE 2009 – 47.4X
Forecast Dividend Yield – 2.1%.
Net Assets – RM1.42.
Price to Book Value – 5.07X.
Net Tangible Assets – RM1.3375.
Price to Tangible Book Value – 5.383X.
Debt to Equity Ratio – 1.46X.
Net Profit Margin – 24.2% (1Q09) and 27.4% (Forecast FY09).
Annualized Return on Equity – 8.28 %.
TECHNICAL ANALYSIS - TRADING RANGE.
52 Weeks - High at RM7.80. Low at RM4.36.
3 Months – High at RM7.40 and Low at RM5.15.
STOCK RECOMMENDATION – UPGRADED BURSA FROM SELL TO BUY based on positive outlook on the stock market as the global economy beginning to stabilize and expected to recover next year. The recent smooth transition of the country’s leadership also augurs well for the Malaysian capital market.
Upgrade the fair value to RM4.50 from RM2.62 based on forecast FYE2009 PER of 30X, on an EPS of 15 sen, and a dividend of 15 sen, for a yield of 2.1% at RM7.20.
2. BOUSTEAD HOLDINGS BHD RM4.24.
FYE DEC 31 FYE 2009(F) 1Q FY 2009(U)
000 000
Revenue 4,878,000 1,215,584
Net Profit 400,000 60,818
EPS (sen) 61.44 9.34
Forecast PER 6.9X
Dividend (sen) 25.00 5.00
Dividend Yield 5.9% 1.2%
Net Assets (RM) RM4.56
Cash RM 584,974,000
Debt RM2,939,337,000. Short term RM622.967m.
Number of Shares 651,032,000
Market Capitalization RM2.76 billion.
Major Shareholder Lembaga Tabung Angkatan Tentera 64.03%.
LATEST CORPORATE DEVELOPMENT.
Together with Khazanah Nasional Bhd to build the indoor theme park, KIDZANIA, in Mutiara Damansara, Petaling Jaya. Kidzania is a family entertainment centre, typically comprising a child sized replica of a real city.
The city is managed by children and has buildings, shops, streets and vehicles. The park is to allow children to learn about the adult world by actually engaging themselves in various professions within the city.
Boustead Holdings Bhd (BHB) proposed renounceable rights issue of up to approximately 260.41 million new ordinary shares of RM0.50 each in BHB at RM2.80 on the basis of two (2) rights shares for every five (5) existing BHB shares held to raise RM729.155 million. The R.I. proceeds will be utilized for paring down borrowings which will result in interest savings and the reduction of the BHB Group’s gearing level and to meet the working capital requirement of BHB Group.
QUALITATIVES ANALYSIS.
STRENGTHS , WEAKNESS, OPPORTUNITIES AND THREATS ANALYSIS.
STRENGTHS ANALYSIS
BUSINESS MODEL – A well diversified conglomerate.
The Group revenue came from 1.Plantation 2.Heavy Industries – Listed BHIC Bhd 3.Property Development 4.Property Investment 5.Finance&Investment – Listed Affin Hldg Bhd 6.Trading and 7.Manufacturing and Services – Listed UAC Bhd.
MANAGEMENT - Strong. Headed by Board of Directors and a CEO.
BUSINESS OUTLOOK – Plantation’s earnings for the remainder of the year are expected to be better, in view of the improvement in palm oil prices. The Heavy Industries Division will continue to derive satisfactory earnings from vessel construction and other shipbuilding activities. The Property Division will be driven by the ongoing developments Mutiaria Damansara and Rini townships, while the investment properties and hotels which are in strategic locations are expected to turn in good profit.
CORPORATE GOVERNANCE - Plenty of room for further improvement. Need to be more transparent.
FINANCIAL STRENGTHS – Cash RM585million and Debt RM2.94billion.
WEAKNESS ANALYSIS – Highly leverage business model.
OPPORTUNITIES ANALYSIS – Opportunity to raise cheap fund through rights issue as the company seems to be undercapitalized and over leverage to undertake bigger business currently.
THREATS ANALYSIS - The prolonged weaknesses in the country and the global economy.
QUALITATIVES ANALYSIS - VALUATIONS.
Forecast FYE 2009 Price Earnings Ratio – 5.05X
Net Assets per Share – RM4.47.
Price to Book Value – 0.7X.
Net Tangible Assets – RM3.54.
Price to NTA – 0.88X.
Return on Equity – 22.53%.
Debt to Equity Ratio – 1.63X.
Net Profit Margin – 8.6% (4Q98), 9.5% (FY08) and 8.2% (Forecast 09).
Dividend Yield – 5.9 %.
TECHNICAL ANALYSIS - TRADING RANGE.
52 Weeks - High at RM5.65 and Low at RM2.18.
3 Months – High at RM4.52 and Low at RM3.34.
STOCK RECOMMENDATION – MAINTAINED BUY FOR BOUSTEAD HOLDINGS BHD as the rights issue will put the company in a much stronger financial footing. Fair value of RM6.15 at FYE 2009 PER of 10X based on an EPS of 61.4 sen before the R.I., on a net profit of RM400 million excluding extraordinary gains from assets sales plus a dividend yield of 5.9%. .
3.MISC BERHAD RM8.50.
FYE March 31 FY 2009(F) 4Q FY2009(A) FY2009(A) FY 2010(F)
000 000 000 000
Revenue. 17,017,093 3,999,001 11,784,465 15,996,004
Net Profit 1,873,449 181,858 1,313,472 1,761,033
Net EPS (sen) 50.36 sen 4.89 32.87 47.34
Forecast PER 16.6X 18X
Dividend (sen) 30.00 20.00 30.0
Dividend yield 3.53 %
Net Assets Per Share RM5.72
Cash RM 3,725,436,000
Debt RM11,851,970000.(RM10.53 in US$). Short term RM3.1b.
Number of shares 3,719,827,000
Market Capitalization RM31.618 billion.
Major shareholder Petronas (62.4 %)
LATEST CORPORATE DEVELOPMENT.
The proposed joint-venture to build and supply a Liquefied Natural Gas (LNG) vessel to transport LNG from Bintulu to Shanghai is still at the initial stage of discussion between MISC Bhd and China LNG Shipping (Holdings) Co. and would require prior approvals from relevant authorities.
MISC has entered into a shareholders agreement dated 30 April 2009 with Petronas International Corporation Limited and Mustang Engineering Limited to established a JV company for the purpose of providing Floating LNG solutions and services worldwide. The authorized share capital of the JV is USD10 million with Petronas International holding 60%, MISC 30% and Mustang Engineering 10%. The initial paid up capital is USD500,000.
MISC had on 15 May 2009, issued notice to its partners of the Grand Alliance, that pursuant to the MOU 2007 amongst the parties, MISC is withdrawing from the Grand Alliance. This withdrawal will take effect from 1 January 2010 and would effectively withdraw MISC’s participation from the European and Mediterranean trade lanes covered by the MOU and the Grand Alliance in general.
The present global economic downturn has severely impacted the global liner industry with many leading operators having to react radically to manage the downturn. The withdrawal of MISC’s Liner Division fro the Asia-Europe trade is part of a portfolio restructuring to reposition the business on a firmer footing that will drive future expansion. As a result of this portfolio restructuring, MISC’s Liner Division’s future focus will be to become one of the leading Intra-Asia liner operator, with the Middle-East/India Subcontinent to Asia trade being one of its core trade services.
QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS.
STRENGTHS ANALYSIS.
BUSINESS MODEL
Revenue came from 1.Energy related Shipping 2.Other Energy Businesses 3.Intergrated Liner Logistics and Non Shipping.
Energy related shipping represent 51.85% of revenue and 28.44% of operating profit margin; other energy businesses represent 16.84% of revenue and 28.45% of operating profit margin; integrated liner logistics represent 31.3% of revenue but the loss represent 24.4% of operating profit and non shipping represent 1.47% of operating profit.
MANAGEMENT – Headed by a new CEO.
BUSINESS OUTLOOK – The Group’s earnings arising from existing and new long term charters in the LNG and Offshore businesses will provide the Group with stable earnings. The global petroleum and container shipping rates are softening in line with weakening demand and oversupply of vessels.
CORPORATE GOVERNANCE – Need to be more transparent.
FINANCIAL STRENGTH – RM3.7b in cash and RM11.85b in debt.
WEAKNESS ANALYSIS – Losses in the Liner business compensate by long term Petronas LNG contract.
OPPORTUNITIES ANALYSIS – Opportunity to expand the energy shipping business as the world demand grow.
THREATS ANALYSIS.
Continue losses in the Liner business.
Pirates in the Straits of Eden remain as a threat for a shipping company worldwide.
High operating costs such as bunkering cost affecting the net profit margin.
New ship coming on stream will reduce demand and lower the shipping rates.
QUANTITATIVES ANALYSIS.
VALUATIONS.
Forecast PER FYE March 2009 – 18X.
Net Assets Per Share – RM5.72.
Price to Book Value – 1.5X.
Net Tangible Assets – RM5.2166.
Dividend Yield – 3.53 percent.
Debt to Equity Ratio – 1.73X.
Return on Equity – 6.7%.
Net Profit Margin – 4Q09 at 4.55%, Forecast FY10 at 11%.
TECHNICAL ANALYSIS
TRADING RANGE.
52 Weeks - High at RM9.50 and Low at RM7.80.
3 Months – High at RM8.75 and Low at RM8.30.
STOCK RECOMMENDATION – MAINTAINED BUY FOR MISC BHD even with losses in the Liner Division due to a possible surprise on the upside in MISC earnings on an increase in the shipment of LNG as shown in the trade figures and global economy recovery next year onward.
Based on forecast FY2011 EPS of 50.36 sen and at a PER of 16.6X, BUY MISC Bhd at the fair value of RM8.50 plus a dividend yield of 3.53 percent.
4. PETRONAS GAS BERHAD. RM9.75.
FYE March 31 FY 2009(F) 4Q FY 2009 FY 2009(A) FY 2010(F)
000 000 000 000
Revenue 3,120,516 935,871 3,415,141 3,743,484
Net Profit 1,304,687 261,815 928,692 1,047,259
Net EPS 65.94 13.23 46.93 52.92
Forecast PER 14.8X 20.8X 18.4X
Dividend (sen) 50.00 50.0
Dividend Yield 5.1% 5.1%
Net Assets RM4.0627.
Cash RM1,945,136,000
Debt RM 449,625,000
Number of shares 1,978,732,000
Market Capitalization RM19.29 billion.
Majority Shareholders PETRONAS ( 60.6 % )
LATEST CORPORATE DEVELOPMENT.
Pursuant to the Shareholders Agreement (SHA) entered into between Petronas Gas Bhd (PGB) and Yayasan Sabah (YS) on 24 November 2008, PGB and YS further executed a Deed of Novation (Novation) with NRG Consortium (Sabah) Sdn Bhd (NRG) to novate the SHA to NRG in accordance with the terms and conditions of the SHA.
QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.
STRENGTHS ANALYSIS.
BUSINESS MODEL – STRONG.
The Company’s principal business segments are services rendered for separating natural gas into its component and the storage, transportation and distribution of such components and sale of industrial utilities and operates only in Malaysia.
MANAGEMENT - Headed by Board of Directors, CEO and the management team.
BUSINESS OUTLOOK – While revenue prospects for gas processing and transmission business would be dependent on demand for gas as well as upstream gas production levels, the margin for the gas processing and transmission business would not be impacted as any variation in the cost of gas would be passed through.
Decrease in customer’s demand and increase in operating cost arising from revised fuel gas price would impact utilities business. To mitigate higher fuel gas price, revised pricing agreements have been negotiated and executed with utilities customers.
CORPORATE GOVERNANCE – Must be more transparent.
FINANCIAL STRENGTH – Cash RM1.945b and Debt RM450m.
WEAKNESS ANALYSIS – The operation is only in Malaysia, so the growth can only come from higher domestic consumption.
OPPORTUNITIES ANALYSIS – Still an opportunity for the company to make money even with the gas prices for power industry has been reduced from RM14.31 per mtbu to 10.70 per mtbu.
THREATS ANALYSIS - Gas as a depleting resources need to be replaced with a new finding. No domestic competitor.
QUANTITATIVES ANALYSIS.
VALUATIONS.
Forecast Price Earnings Ratio for FYE March 2009 – 18.4X.
Net Assets Per Share – RM4.06.
Price to Book Value – 2.4X.
Net Tangible Assets – RM4.06.
Dividend Yield – 5.1 percent.
Debt to Equity Ratio – 0.23X.
Return on Equity Ratio – 11.5 percent.
Net Profit Margin – 4Q09 at 28%, FY10 at 28%.
TECHNICAL ANALYSIS.
TRADING RANGE.
52 Weeks - High at RM10.20 and Low – RM9.20.
3 Months – High at RM9.90 and Low at RM9.40.
UPGRADED TO BUY FROM HOLD RECOMMENDATION FOR PETRONAS GAS BHD.
The earnings growth will come from an increase in sales as the economy recover, Gas Malaysia Sdn Bhd and later the building of 400 km gas pipeline from Sabah to Bintulu Port in Sarawak.
Based on FYE March 2011 forecast EPS of 65.94 sen and a PER of 14.8X, the fair value for Petronas Gas Bhd is RM9.75 plus a dividend yield of 5.1 percent.
5. TM BERHAD. RM2.70.
FYE DEC. 31 FY 2009(F) 1Q FY2009
000 000
Revenue 8,248,088 2,105,415
Net Profit 1,057,166 27,737
Net EPS (sen) 23.00 0.80
Forecast PE Ratio 11.7X
Dividend (sen) 17.5
Dividend yield 6.5%
Net Assets RM2.9199.
Cash RM3.968.3 billion.
Debt RM7.1744 billion (RM3.978b in US$).
Number of shares 3,577,402,000
Market Capitalization RM9.658 billion
Major shareholder Khazanah Nasional (40.9 % )
LATEST CORPORATE DEVELOPMENT.
TM signed a Sale and Purchase Agreement with AmMortgage One Sdn Bhd, a wholly owned subsidiary of AmBank (M) Sdn Bhd, for the acquisition of residential loans of TM employees by AmMortgage One.
Under the term of the agreement, the residential loans of TM employees will be sold to AmMortgage One with the first series of the sale having outstanding principal value of RM348.9 million. Following the signing of the agreement, AmMortgage One will issue medium term notes to raise sufficient proceeds to satisfy the purchase consideration of the first series of the mortgage assets from TM. .
QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESS, OPPORTUNITIES AND THREATS ANALYSIS.
STRENGTHS ANALYSIS.
BUSINESS MODEL – Fixed line telephone and broadband internet.
Revenue came from 1.Retail Business 2.Domestic Wholesale 3.TM Global and 4.Shared / Support Services.
For FY 2008, retail business represent 51.24% of to revenue from continuing operations, wholesale business represent 7.43% of revenue from c.o., global business represent 8.56% of revenue from c.o. and shared services & others represent 32.66% of revenue from the continuing operations.
BUSINESS OUTLOOK – Operationally, TM expects the decline in voice revenue to continue but at a slower pace with the Performance Improvement Programme (PIP 2.0) initiatives in place. Growth in broadband is expected to remain strong as the penetration rate had only surpassed 21.1% in 4Q08 (MCMC – 4Q08 report). The introduction of new wireless broadband technologies such as HSDPA and WiMax is expected to increase the demand for broadband. In anticipation of this, TM has embarked on various initiatives to improve its broadband customer service and service offerings such the introduction of Streamyx Combo Goes Mobile and Streamyx value added packages.
On High Speed Broadband Project (HSBB), TM is executing the project as planned. In April 2009, the wholesale service of HSBB (Transmission) was made available to access seekers via a published terms and conditions in the Company’s website. HSBB Retail service is expected to be launched in the 4Q 2009.
MANAGEMENT – Headed by the Board of Directors, CEO and the management team.
FINANCIAL POSITION - Cash RM4 billion. Debt RM7.170 billion.
CORPORATE GOVERNANCE – Can still improve further.
WEAKNESS ANALYSIS – High capital expenditures for the high speed broadband business.
OPPORTUNITIES ANALYSIS – Recently signed RM11 billion agreement with the government to provide high speed broadband services to the whole country.
THREATS ANALYSIS -The threat will come from the other broad band service provider.
QUANTITATIVES ANALYSIS - STOCK VALUATIONS.
FYE 2008 PER Ratio – 11.77X.
Net Assets Value – RM2.97.
Price to Book Value – 1.17X.
Dividend Yield – 6.5%
Net Profit Margin – 4Q08 7.3%, FY08 10.4% and Forecast 2009 12.8%.
TECHNICAL ANALYSIS.
52 Weeks - High at RM3.00 and Low at RM1.91. (Adjusted for demerger).
3 Months – High at RM3.98 and Low at RM2.60. (Not adjusted)
STOCK RECOMMENDATION – UPGRADED TM BHD TO BUY FROM HOLD on attractive valuations . Fair value of RM3.50 at FYE 2009 PER of 15.2X based on an EPS of 23.00 sen and dividend of 17.5 sen for 6.5% yield.
6. AXIATA (TM INTERNATIONAL BHD) RM2.39.
FYE Dec 2008 FY 2009(F) 1Q 2009(U)
000 000
Revenue 13,112,096 2,866,827
Net Profit 975,584 63,895
Net EPS 11.55 2.00
Forecast P.E. Ratio 20.7X
Dividend (sen) 7.50 0.0
Dividend Yield 3.14%
Net Assets RM3.0260.
Cash RM 3,851,811 before cash proceed from R.I.
Debt RM19,009,639,000 after TM repayment, ST debt RM1.4b.
Number of Shares 8,445,154,000
Market Capitalization RM20.18 billion
Major Shareholders. Khazanah Nasional
LATEST CORPORATE DEVELOPMENT.
FY2009 Headline KPIs. Targets.
Revenue Growth (%) 6% - 11%.
Earnings before Interest, Tax, Depreciation
and Amortisation (EBITDA) Growth % 4% - 6%.
Average Return on Equity (ROE) % 4%
QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.
BUSINESS MODEL – International and domestic cellular phone company.
Operating revenue came from operations in 1. Malaysia 2.Indonesia 3.Bangladesh 4. Sri Lanka and 5.Others such as Singapore,Thailand and India.
Malaysian operation represent 48.54% of operating revenue, Indonesia operation represent 32.58% of revenue, Bangladesh represent 6.68% of revenue, Sri Lanka represent 10.26% of revenue and others countries represent 1.93% of revenue.
CELCOM subscribers base – 8 million.
CELCOM average revenue per users – RM57.00.
MANAGEMENT – Headed by Board of Directors, Chairman and CEO.
BUSINESS OUTLOOK – The group adopt a prudent approach focusing on cost management whilst continue to lay the foundation towards achieving long term aspiration of becoming a regional champion.
Barring any unforeseen circumstances, the BOD’s expects the Group performance for the financial year ending Dec. 31 2009 would be in line with the announced KPI’s.
CORPORATE GOVERNANCE - Still plenty of room for improvement.
FINANCIAL – RM3.85b cash before cash proceed from rights issue and RM19b debt. Paid all the debt due to TM Bhd.
WEAKNESS ANALYSIS – Highly leverage balance sheet.
OPPORTUNITIES ANALYSIS – Further overseas expansion.
THREATS ANALYSIS - No more steady profit contribution from the fixed line business after demerger and exposed to foreign currency fluctuation.
QUANTITATIVES ANALYSIS
STOCK VALUATIONS.
Forecast Price Earnings Ratio for FYE 2009 – 10.2X.
Net Assets Per Share – RM2,99.
Price to Book Value – 0.82X.
Net Tangible Assets – RM1.09.
Dividend Yield – 3.14%.
Debt to Equity Ratio – 2.01967X.
Return on Equity Ratio – 9.9878%.
Net Profit Margin – FY08 at 4% and Forecast 2009 at 7.44%.
TECHNICAL ANALYSIS – 52 WEEKS TRADING RANGE.
52 Weeks - High at RM3.78 and Low at RM1.57.
3 Months –High at RM2.69 and Low at RM1.77.
STOCK RECOMMENDATION - MAINTAINED BUY FOR AXIATA BHD due to global economy recovery. The World Bank had forecast Malaysia GDP to grow at 2.2% in 2010 and 5% in 2011. Their foreign currencies debt can be service from TMI foreign operations. Fair value for FYE 2009 at RM2.50 based on PER of 21X, on an EPS of 11.55 sen and dividend yield of 3.14% and also based on excellent CELCOM and regional growth prospect and global economy recovery. The recently completed Rights Issue has strengthened the weak balance sheet.
7. TENAGA NASIONAL BERHAD. RM7.90.
FYE 31 AUGUST 2Q 2009(U) 6M 2009 FY 2009(F)
000 000 000
Revenue 6,906,600 14,321,200 28,356,000
Net Profit (Loss) 674,600 ( 269,500) 1,754,300
Net EPS (Loss) sen 15.56 (6.22) 40.46
Forecast PE Ratio . 19.5X
Dividend (sen) 4.70 20.0
Dividend Yield 0.6% 2.53
Net Assets RM5.7550
Cash RM 4,525,300,000
Debt RM23,429,500,000. S.T. RM1.23b. Yen 5.4b. US$6.1b.
Number of shares 4,334,770,000
Market Capitalization RM34.24 billion
Major shareholder Khazanah Nasional ( 39 % )
# Currently coal prices at US$75 per tons.
# Forecast based on flat growth of electricity demand.
LATEST CORPORATE DEVELOPMENT.
Malaysia can start small nuclear power plant programme says the Minister.
Malaysia has the expertise to build its own nuclear power plant and earlier than scheduled. Atomic Energy Licensing Board Chairman Prof. Datuk Dr. Noramly Muslim said the country had around 80 PHD holders with expertise in nuclear engineering technology. Only about 10 to 15 percent of this expertise was required to operate a nuclear plant, So, the country’s leader need to decide whether nuclear energy should be harnessed or not.
Professor Jong Hyun Kim from Korea Advanced Institute of Science and Technology believes that nuclear energy is the cheapest alternative energy available. Citing figures from the Korea Electric Power Company, 140 terrawatt hours (TWh) of nuclear generated electricity cost only RM1.77 billion while it cost coal fired plants RM106 billion and liquefied natural gas power plants RM1.3 trillion to produce the same amount of energy. One TWh is equal to one trillion watt hour. One watt hour is equal to 3,600 joules. Initial capital cost of building a nuclear power plant usually in the region of RM1.8 billion.
Nuclear scientist Jong claimed that nuclear reactors were so safe that if you wanted to make an aircraft as safe as nuclear reactor, it would never fly. If you run it (nuclear plant) for a million years, an accident happens only once., he said.
Malaysia’s Energy Situation (2007/2008) Estimates.
Production Consumption Reserves
Electricity 102.9 billion kWh 95.58 billion kWh -
Oil 753,700 bbl/day 501,100 bbl/day 4 billion bbl
Natural Gas 64.5 billion cu m 32.9 billion cu m 2.36 trillion cu m
World Energy Reserves.
Oil – 42 years.
Natural Gas – 60 years.
Coal – 133 years.
Uranium – 241 years.
# Uranium is distributed evenly around the world.
# 1 kg of uranium is equal to 9,000 barrels of oil or 3,000 tonnes of coal in terms of energy content.
The world currently produced 2,793 TWh of nuclear energy.
BUSINESS OUTLOOK.
Electricity demand in the Peninsula is the main driver of the Group’s earnings growth. The slowdown in economic activity and the declining exports which affected the industrial sector caused TNB to registered an unprecedented (3.2%) demand growth for the 6 month period ended 28 February 2009.
Operationally, higher fuel cost and IPP payments continue to impinge on the Group’s profitability wherein operating expenditure increased by RM2.9 billion or 30.7% compared to the previous period. Whilst the higher tariff approved earlier on 1 July 2008 mitigated the rising operating expenditure particularly fuel cost, the demand growth has also resulted in a lower dispatch from the coal fired power plants thereby improving profit margins. Further, the more stable coal price for the year will ease the financial burden although a weaker Ringgit will lessen the advantage. The BOD’s affirms the view that the Group’s financial performance for FY2009 will remain weak.
QUALITATIVES ANALYSIS.
STRENGTHS,WEAKNESS, OPPORTUNITIES AND THREATS ANALYSIS.
STRENGTHS ANALYSIS
BUSINESS MODEL.
The principal activities of the group are the generation, transmission, distribution and sale of electricity in Malaysia.
No segmental information.
MANAGEMENT – Still young and not quite proven yet. Relied too much on electricity tariff increase.
CORPORATE GOVERNANCE – Not transparent enough.
FINANCIAL –Weak. Cash RM4.5 billion, Debt RM23.4 billion.
BUSINESS OUTLOOK – In line with the economy growth.
WEAKNESS ANALYSIS – Highly leverage balance sheet and unfavorable payment terms to independent power producer.
OPPORTUNITY ANALYSIS - An opportunity for TNB to go for a NUCLEAR POWER PLANT as a cheaper, cleaner and safer alternative, with the latest technology available as a new source of power. Fuel and coal are unfriendly to the environment. Meanwhile, for the Bakun hydroelectric power plant, TNB have to deal with the execution risk and an astronomical cost to lay undersea cables to transmit power from Sarawak to Peninsular Malaysia.
THREATS ANALYSIS - High energy costs (coals, oil and gas), high capital expenditure and high debt level too. Urgent need to diversify the source of power into cheaper alternatives such as hydro electric and nuclear power plants.
QUANTITATIVES ANALYSIS - STOCK VALUATIONS.
Forecast Price Earnings Ratio for FYE August 2009 – 19.5X.
Net Assets Per Share – RM5.7550.
Price to Book Value – 1.37X.
Net Tangible Assets – RM5.7550..
Dividend Yield – 2.53%.
Debt to Equity Ratio – 1.84X
Return on Equity Ratio – 10.069 percent for FY09 and 0% for 1Q09..
Net Profit Margin – 10.07% for FY09.
TECHNICAL ANALYSIS - TRADING RANGE.
52 Weeks - High at RM8.55 and Low at RM5.60.
3 Months – High at RM8.15 and Low at RM6.05.
RECOMMENDATION FOR TNB BHD UPGRADED TO BUY FROM SELL ON STRENGTH AND BUY BACK ON WEAKNESS on better than expected 2Q FY09 results and expected global economy recovery next year onward. A fair value of RM5.75 for 2009 at PER of 14X plus a dividend of 20 sen for a yield of 2.53 percent or at 1X NTA of RM5.755. Lower cost of coals (a major cost component) currently at US$75 per tons should be the catalyst for upward re rating of the stock but downside risk remain if coals already hedged at higher prices.
8. KUMPULAN SIME DARBY BERHAD. RM7.05.
FYE JUNE 30 3Q 2009(U) 9M 2009(U) FY 2009(F)
000 000 000
Revenue 7,473,929 23,478,868 19,791,666
Pre Tax Profit 315,519 1,963,891 2,734,567
Net Profit 150,570 1,296,103 1,900,000
Net EPS 2.51 21.57 31.61
Forecast PE Ratio 22.3X
Dividend 5.00 25.00 sen
Dividend Yield 0.7% 3.5%
Net Assets (RM) 3.33.
Cash (RM) 2,964,2000,000.
Debt (RM) 5,717,6000,000.
Number of shares 6,009,464,000
Market Capitalization RM42.36 billion
Major shareholders ASB (50.01%)
* Management Assumption.
- Average Crude Palm Oil price of RM1,700 for FYE June 30, 2009.
LATEST CORPORATE DEVELOPMENT.
Sime Darby announced that the company has been invited by the Weifang People’s Government in China to participate in the development zone (EDZ) near Weifang city.
The company is in discussions regarding the planning and development of this EDZ which will focus on enhancing Malaysia-China economic cooperation. Amongst others, Sime Darby will assist the Weifang Government in identifying suitable Malaysian companies to invest in EDZ.
Sime Darby Engineering Sdn Bhd and Ramunia Holdings Bhd (RAHB) had agreed in writing to extend the signing of the definitive sale and purchase agreement from 4 June to 3 July 2009, to acquire the business and undertaking (including the assets and liabilities, whether in whole or in part, to be determined following a due diligence inquiry) of RAHB Group for a total provisional purchase consideration of RM232.0 million, subject to adjustment under the term of offer.
QUALITATIVES ANALYSIS.
STRENGTHS,WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.
STRENGTHS ANALYSIS.
BUSINESS MODEL - The largest integrated plantation company in the world with 600,000 hectares of plantation land (oil palm and rubber) and 2.5 million annual CPO productions.
Revenues came from 1.Plantation 2.Property 3.Industrial 4.Motors 5.Energy and Utilities and 6.General Trading, Services and Others.
MANAGEMENT - Headed by Tun Musa Hitam as the Chairman and Dato Zubir Murshid as the CEO and an experienced management team in their respective fields.
CORPORATE GOVERNANCE – Should strive to be a corporate leader in transparency.
FINANCIAL STRENGTH – Cash RM2.9b and Debt RM5.7b.
BUSINESS OUTLOOK – The current global economic slowdown which has resulted in lower world demand for all commodities has adversely affected all business segments of the Group.
The lower CPO and palm kernel prices, as compared to record high prices for the previous year, coupled with the expected lower FFB production on account of lower yield, will affect the Plantation performance whilst the uncertain market condition has undoubtedly affected the other businesses. The group has embarked on various cost reduction measures and is driving initiatives for cost efficiency and productivity enhancement.
WEAKNESS ANALYSIS – Still low yielding plantation assets.
OPPORTUNITIES ANALYSIS - To capitalize on lower assets prices for acquisitions or expansions plan.
THREATS ANALYSIS - Production costs still high after the merger at RM1,100. Should be able to bring the production costs down to around RM800 with lower fertilizer costs to improve net profit margin. Prolonged world recession, over supply of palm oil,weak demand and lower crude oil prices will add pressure to CPO prices.
QUANTITATIVES ANALYSIS - STOCK VALUATIONS.
Forecast PER for FYE June 2009 at 22.3X.
Dividend Yield FYE June 2009 at 3.5%.
Net Assets Per Share – RM3.14.
Price to Book Value – 2.25X.
Net Tangible Assets – RM3.128.
Debt To Equity Ratio – 0.675X.
Annualized Return On Equity – 3.01%.
Net Profit Margin – 3Q 09 at 2.01% and Forecast FY 09 at 9.6%.
TECHNICAL ANALYSIS – Trading Range.
52 Weeks - High at RM9.50 and Low at RM4.94.
3 Months – High at RM7.20 and Low at RM5.75.
UPGRADED TO BUY FROM HOLD RECOMMENDATION FOR SIME DARBY BHD on global economy recovery next year despite weak CPO prices outlook as demand softening on oversupply but the price expected to stabilize around RM2,000 to RM2,500 this year and around RM3,000 in 2010. OPEC decided not to cut oil production anymore as the oil price expected to stabilize and the recent upward revision in oil demand, higher premium on soybeans prices and the El Nino effect should augurs well for CPO prices.
Based on management forecast average selling price for the CPO of RM1,700 for FYE June 2009 and an EPS of 31.61 sen on a net profit of RM1.9 billion, the fair value for Sime Darby Bhd is RM7.05 plus a dividend yield of 3.5 percent at a PER of 22X.
9. SHELL REFINING COMPANY (FOM) BERHAD. RM10.30.
FYE 31 Dec. FY 2009(F) 1Q FY2009(U)
000 000
Revenue 8,856,000 1,830,221
Net Profit 177,120 112,690
Net EPS 0.5904 37.56
Forecast PE Ratio 17.4X
Dividend (sen) 30.00
Dividend Yield 2.9%
Net Assets RM6.7776.
Cash RM276,462,000
Debt RM510,594000 or US$140 million unsecured long term.
Number of shares 300,000,000
Market capitalization RM3.09 billion.
Major shareholder Shell Overseas Holdings Limited ( 70 % ).
* The company posted after tax earnings of RM113m for Q1 2009 as compared to a net loss of RM523m recorded in Q4 2008. The stockholding gain net of tax for Q1 2009 of RM67m as compared to stockholding loss net of tax for Q4 2008 of RM697m, was a results of the movements in oil prices in Q1 2009.
KEYS ASSUMPTION.
Sales of petroleum products at 41 million barrels.
Average selling price of USD60.00.
Average crude oil price of USD55.00
Average refining margin of USD5.00 or R18.00.
Exchange rate at RM3.60 to 1 USD.
Net profit margin of 2%.
LATEST CORPORATE DEVELOPMENT - No corporate proposal to report.
QUALITATIVES ANALYSIS.
STRENGTHS,WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.
STRENGTHS ANALYSIS.
BUSINESS MODEL.
The principal activities of the Company consist of refining and manufacturing of petroleum products. The Company operates with state-of-the-art technology and is the key petroleum products supplier to Shell’s downstream businesses in Malaysia.
The oil refinery at Port Dickson has a licensed production capacity of 156,000 barrels per day and produces a comprehensive range of petroleum products, over 90% of which are consumed within Malaysia.
No segmental information.
MANAGEMENT - Headed by the Shell Overseas Holdings Limited representative.
MANAGEMENT BUSINESS OUTLOOK – Refining margins are expected to be pressure in Q2 2009 due to reducing product demand. Any changes in oil prices will have an impact on the Company’s financial results, given the stock accounting practice adopted by the company.
CORPORATE GOVERNANCE – Not transparent enough.
FINANCIAL STRENGTHS – Cash RM276m and Debt RM510m.
WEAKNESS ANALYSIS – Refining margin subject to fluctuation of oil price.
OPPORTUNITIES ANALYSIS – Plenty of opportunity for the expansion of their refinery business at a lower costs to cater for future demand when the world economy recover from the recession.
THREATS ANALYSIS – Prolonged weakness in oil prices as a result of weak demand cause by the global recession.
QUANTITATIVES ANALYSIS - STOCK VALUATIONS.
Forecast PER for 2009 – 17.4X.
Net Assets Per Share – RM6.7776.
Price to Book Value – 1.43X.
Net Tangible Assets – RM6.7776.
Dividend Yield – 2.9 percent.
Debt to Equity Ratio – 0.67X.
Annualized Return on Equity Ratio – 22.2%.
Net Profit Margin – 6.16 percen (1Q09). 0.2% (FY09).
TECHNICAL ANALYSIS – TRADING RANGE.
52 Weeks - High at RM11.30 and Low at RM7.95.
3 Months – High at RM11.20 and Low at RM9.65.
UPGRADED RECOMMENDATION FOR SHELL (FOM) BHD TO BUY FROM SELL AND TAKE PROFIT - Shell is a company that thrive on an excellent refining margin that translate into high level of profitability and in turn a cheap valuation. FIFO accounting method benefit them in high crude oil prices environment. Based on FYE 2009 forecast EPS of RM0.59 and at PER of 18.6X, the fair value is RM11.00 plus a dividend yield of 4.2%.
10. PPB GROUP BERHAD. RM11.50.
FYE 31 DEC. FY 2009(F) 1Q FY2009 (U) 000 000
Revenue 2,127,659 772,505
Net Profit 500,000 271,835
Net EPS (sen) 42.18 22.93
Forecast PE Ratio 27.3X
Dividend (sen) 35.0
Dividend Yield 3.0%
Net Assets RM11.47.
Cash RM459,417,000.
Debt RM343,321,000. S.T. Debt RM270.2m.
Number of shares 1,185,500,000
Market capitalization RM13.63 billion.
Major shareholder Kuok ( B ) Sdn Bhd ( 42.38 % )
Assumption.
Based on average selling price for CPO of between RM1,600 to RM1,700 level.
LATEST CORPORATE DEVELOPMENT.
PPB wholly owned subsidiary Hexarich Sdn Bhd has on 29 April 2009 disposed of its entire holding of 32,424,853 ordinary shares, representing 8.39% of the issued and paid up capital of Redtone International Bhd at RM0.22 per share for a total cash consideration of RM7,133,468.
QUALITATIVES ANALYSIS.
STRENGTHS,WEAKNESSES, OPPORTUNITIES AND THREATS.
STRENGTHS ANALYSIS.
BUSINESS MODEL.
PPB Group the listed flagship of Kuok Group is a major conglomerate engaged in a wide spectrum of business. Owned 18.2% stake in an integrated oil palm producer Wilmar International listed in Singapore.
PPB’s core businesses are 1.Sugar refining and cane plantation; 2.Grains trading, flour and feed milling; edible oils refining and trading; oil palm plantations; and 3. Environmental engineering, utilities and waste management services, 4.Livestock farming; bulk and consumer packaging; 5.Film exhibition and distribution; 6.Pproperty ownership and development; consumer product distribution; 7.Chemicals manufacturing and commodity trading and other operations.
MANAGEMENT – Headed by a Board of Directors and Executive Chairman.
MANAGEMENT BUSINESS OUTLOOK – The global financial and economic crisis is expected to affect the Group’s performance for the rest of 2009 in respect of lower demand and margins for the goods and services offered by the Group. In addition, changes in prices of raw materials and ocean freight will be the key factors affecting the group’s profitability. However, Group performance for the year will remain satisfactory.
CORPORATE GOVERNANCE – Not transparent enough.
FINANCIAL STRENGTH – Cash RM459m and debt RM343m.
OPPORTUNITIES ANALYSIS – Through organic growth or through M&A.
WEAKNESSES ANALYSIS. - Weak CPO prices on ample of supply currently. Profit mainly came from 18.2% stake in Singapore listed Wilmar International.
THREATS ANALYSIS – Prolonged weakness in CPO prices and deepening global recession.
QUANTITATIVES ANALYSIS.
STOCK VALUATIONS.
Forecast PER for 2009 – 27.3X.
Net Assets Per Share – RM10.22.
Price to Book Value – 1.13X.
Net Tangible Assets – RM10.16.
Dividend Yield – 3.0%.
Debt to Equity Ratio – 0.05X.
Return on Equity Ratio – 7.98% (1Q09). 3.68 % for FY2009.
Net Profit Margin – 35.2% (1Q09). 23.5 percent (FY09).
TECHNICAL ANALYSIS – TRADING RANGE.
52 Weeks - High at RM11.70 and Low and RM6.85.
3 Months – High at RM11.50 and Low at RM9.80.
UPGRADED TO BUY FROM HOLD RECOMMENDATION FOR PPB GROUP BHD based on better than expected 1Q09 and good prospect of global recovery in 2010 onward. CPO outlook remain weak but expected to hover between RM2,000 to RM2,500 in 2009, around RM3,000 in 2010 and above RM3,000 in 2011. Maintained FY09 forecast earnings and will revise only after the 2Q 2009 results. Based on the PER for 2010 of 13X on forecast EPS of 88 sen, the fair value for PPB Group Bhd is RM11.50 plus a dividend yield of 3.0%.
11. PLUS EXPRESSWAYS BERHAD. RM3.18.
FYE 31 DEC. FY 2009(F) 1Q FY 2009
Revenue 2,868,612,000 737,762,000
Net Profit 967,024,000 278,541,000
Net EPS (sen) 19.36 5.57
Forecast PER 16.4X
Net Assets RM1.19.
Dividend (sen) 10.0
Dividend Yield 3.14%
Cash RM 2,631,142,000
Debt RM10,726,514,000. S.T. Debt RM651.3m.
Number of shares 5,000,000,000
Market capitalization RM15.9 billion.
Major shareholder UEM Group Bhd.
LATEST CORPORATE DEVELOPMENT.
No new corporate development.
QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.
STRENGTHS ANALYSIS.
BUSINESS MODEL.
Plus Expressways Berhad wholly owns Project Lebuhraya Utara-Selatan Berhad (“PLUS”), a toll concessionaire in Malaysia.
PLUS’s core business consists of the operation and maintenance of the following expressways and certain ancillary facilities along the expressways :
1.the North-South Expressway, a 772-km expressway from the border of Thailand in the north to the border of Singapore in the south.
2 .the New Klang Vally Expressway, a 35-km expressway running between Kuala Lumpur and the North Klang industrial and urban area.
3. the 16-km section of Federal Highway Route 2 connecting the industrial and urbanareas of Subang and Klang, and
4. the Seremban-Port Dickson Highway, an expressway of approximately 23-km connecting Seremban and Port Dickson.
PLUS Expressways also provides expressway operation services to the following three expressways :
1.North-South Expressway Central Link (ELITE), a 63-km expressway linking South and North of Kuala Lumpur to the KL International Airport.
2. LINKEDUA, the second bridge crossing between Tuas in Singapore and Tanjung Kupang in Johor, Malaysia and the toll road linking the second crossing to the North-South Expressway with total length of 44 km, and
3. Penang Bridge, linking Penang Island to Peninsular Malaysia with total length of 13.5 km (including an 8.5 km bridge).
MANAGEMENT – Headed by the Board of Directors and the CEO.
.
MANAGEMENT BUSINESS OUTLOOK – For the first quarter 2009, all expressways of the o group registered year on year traffic growth with PLUS at 3.1%, Elite at 2.15 and Linkedua at 9.9%, except for KLBK which saw a slight decline in traffic volume of 1.6%. The growth have exceeded the Group’s expectation in the midst of current weak economic condition.
On the Headline Key Performance Indicators (KPI) of 30% in lane-km by end of 2009, the Group have thus far achieved a growth 25.7% as at end March 2009. For KPI on revenue of 5% for 2009, a growth of 2.5% have been reported as of March 2009. The Group will continue to explore value-accretive investment opportunities to expand its operations.
On its operations, the group will intensify efforts to manage costs and enhance process efficiencies, which include prioritising implementation of major works as well as embarking on various cost reduction initiatives. The Board is confident that the Group will be able to weather the challenges ahead.
CORPORATE GOVERNANCE – Not transparent enough.
FINANCIAL STRENGTH – Cash RM2.6b and debt RM10.7b
WEAKNESS ANALYSIS – Highly leverage balance sheet.
OPPORTUNITIES ANALYSIS – Overseas expansion .
THREATS ANALYSIS -A toll concessionaire company with a concession period that will expire according to the respective agreement with the Government.
QUANTITATIVES ANALYSIS.
STOCK VALUATIONS.
Forecast FYE 2009 PER – 16.4X.
Net Assets Per Share – RM1.19.
Price to Book Value – 2.67X.
Net Tangible Assets – RM1.1897.
Dividend Yield – 3.14%.
Debt to Equity Ratio – 1.96X.
Annualized Return on Equity Ratio – 18.6%
Net Profit Margin – 1Q09 at 37.75% and FY09 at 33.7%.
TECHNICAL ANALYSIS - TRADING RANGE.
52 Weeks - High at RM3.38 and Low at RM2.49.
3 Months – High at RM3.36 and Low at RM2.95.
RECOMMENDATION FOR THE PLUS EXPRESSWAYS BHD UPGRADED TO BUY FROM SELL ON STRENGTHS on possible Federal government takeover of the toll operation at a premium. Based on FYE 2009 forecast EPS of 19.36 sen, the fair value for PLUS is RM2.52 at PER of 13X plus a dividend yield of 3.14 percent.
12. MAYBANK BERHAD. RM6.10. (Non Shariah Compliance).
FYE 30 JUNE 3Q 2009(U) 9M 2009(U) FY2009(F)
000 000 000
Revenue 4,265,120 12,727,468 15,011,336
Net Profit 503,282 1,810,015 842,692
Net EPS (sen) 7.11 25.57 11.91
Forecast PE Ratio 51.2X
Dividend (sen) 10.00
Dividend Yield 1.6%
Net Assets RM4.2166.
Net Tangible Assets RM2.95.
Cash RM 23,368,108,000
Customer deposit RM211,724,180,000
Net Loans RM185,938,688,000
Net NPL RM3,288,391,000 or 1.73%.
Core Capital Ratio 8.26%.
Risk Weighted Capital 12.10%.
Total Assets RM308,769,019,000
Shareholders fund RM 21,432,480,000
Number of shares 7,077,663,000.
Market capitalization RM43.17 billion
Major shareholder PNB, ASB
LATEST CORPORATE DEVELOPMENT.
Completed the Rights Issue of up to 2,212 million new RM1.00 shares on the basis of 9 for 20 at RM2.74 to raise RM6.0 billion.
QUALITATIVES ANALYSIS.
STRENGTHS,WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.
STRENGTHS ANALYSIS.
BUSINESS MODEL
The Bank is principally engaged in the business of banking and finance in all its aspects which also include Islamic Banking Scheme operations with overseas operations in Singapore, Indonesia, Pakistan, Vietnam.
The subsidiaries are principally engaged in the business of investment banking, general and life insurance, general and family takaful, stock broking, discount house, leasing and factoring, trustee and nominees services, unit trust management, asset management and venture capital.
MANAGEMENT – New CEO and not proven yet.
MANAGEMENT BUSINESS OUTLOOK – Highly competitive banking landscape together with lower interest rates environment and more challenging business and employment prospect s, could lead to pressure on margins and higher non performing loans.
Maybank is leveraging on its vast network franchise, trained sales force, superior branding and competitive products offering to grow market share in selected sectors so as to ensure an equitable risk reward balance in order to limit margin compression whilst preserving assets quality. Prudent risk management practices and stringent asset quality management should contain risk of deterioration in assets quality.
The Group will also focus in growing its international business and seek to derive synergies to enhance revenue generation from its oversea acquisitions. Particular emphasis will be place on growing the Indonesian business following the appointment of new senior management in March.
Given the tougher operating environment and with the recent acquisitions yet to be earnings accretive in addition to potential for impairment charges, the Group expect the net profit for FYE 30 June 2009 to be lower than the previous financial year.
CORPORATE GOVERNANCE – Still not transparent enough just like the rest of corporate’s Malaysia.
FINANCIAL STRENGTH – Cash RM23.3 billion. CCR 8.26% and RWCR 12.1%. NPL RM3.288b or 1.73%.
WEAKNESS ANALYSIS – The bank highly leverage business model make them vulnerable during an economic downturn.
OPPORTUNITIES ANALYSIS – Need to be more patient in their overseas acquisitions foray so not to overpay especially now during the world financial market meltdown. There will be plenty of opportunity to acquire banks at a cheap price especially distress banks around the world in the very near future.
THREATS ANALYSIS - Still weak in the investment banking area. Recently very aggressive in pursuing overseas or regional expansion or acquisition but at a very high price and through heavy borrowing which eventually will affect their bottom line.
QUANTITATIVES ANALYSIS.
STOCK VALUATIONS.
Forecast FYE June 2009 PER – 51.2X.
Net Assets Per Share – RM3.7391.
Price to Book Value – 1.63X.
Net Tangible Assets – RM2.64768.
Price to NTA – 2.3X.
Dividend Yield – 1.6%.
Debt to Equity Ratio – 13.4X.
Annualized Return on Equity Ratio – 9.78%
Net Profit Margin – 3Q09 at 11.8% and 9M 09 at 14.2%.
TECHNICAL ANALYSIS - TRADING RANGE.
52 Weeks - High at RM6.44 and Low at RM3.54.
3 Months – High at RM6.10 and Low at RM3.82.
UPGRADED TO BUY FROM HOLD RECOMMENDATION FOR MAYBANK BHD on economy recovery next year onward as Malaysia is expected to register a GDP growth of at least 2.2% in 2010 and 5% in 2011. Take profit on strength as the fair value for Maybank is RM2.65 based on 1X Price to Tangible Book Value (NTA) but RM6.10 based on a PER of 18.5X FYE June 2011 forecast earnings per share of 33 sen plus a dividend yield of 1.6%.
13. BUMIPUTRA COMMERCE HOLDINGS BERHAD. RM9.25. (Non Shariah).
FYE 31 DEC. FY 2009(F) 1Q FY09(U) 000 000
Revenue 6,732,868 2,513,578
Net Profit 1,791,844 613,943
Net EPS (sen) 50.07 17.16
Forecast PE Ratio 18.5X
Dividend 20.0
Dividend Yield 2.2%
NTA RM2.2614.
Net Assets RM4.1253.
Cash RM 19,519,244,000.
Customers Deposits RM167,394,357,000
Debt RM3,737,466,000 borrowings. Subordinated notes RM6b.
Net Loans and Advances RM128,662,796,000.
Net NPL RM3,431,926,000 or 2.62%.
Core Capital Ratio 10.92%.
Risk Weighted Capital 13.25%.
Cost to income ratio 53.4%
Total assets RM226,918,356,000
Shareholders fund RM 18,356,895,000
Return on equity 14.2%.
Number of shares 3,581,152,000
Market capitalization RM33.125 billion
Major shareholder Khazanah Nasional, EPF
# Forecast based on high level of non performing loans.
LATEST CORPORATE DEVELOPMENT.
BCHB propose to implement to implement a Cumulative Subordinated Fixed Rate Notes Programme with a nominal value of RM3 billion. The programme shall be available for 15 years from the date of issuance and the tenure is for 50 years. The proceeds to be utilized for its working capital and general corporate purposes.
QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.
STRENGTHS ANALYSIS.
BUSINESS MODEL - The Group banking business is organized into six major operating divisions. 1.Consumer Banking 2.Corporate and Investment Banking 3.Treasury and Investment 4.Asset Management & Insurance 5.Foreign Banking Operation 6.Support and Others 7.
MANAGEMENT – Government nominees.
MANAGEMENT BUSINESS OUTLOOK – The Group balance sheet is now well positioned and its consumer bank momentum in Malaysia and Indonesia is strong. However, the group remain cautious as economic indicators are still quite mixed and the group is not ready to revise its target for the year.
BCHB Group has set a 2009 ROE target of 12.5% (Actual 2008 12.3%) and a total loan growth target of 8% (Actual 2008 13.7%).
CORPORATE GOVERNANCE – Still not transparent enough and not doing enough on CSR.
FINANCIAL STRENGTH – Cash RM19.5b. CCR 10.92%, RWCR 13.25%. NPL RM3.4b or 2.62%.
WEAKNESS ANALYSIS – The banks highly leverage business model and assets quality are making them quite vulnerable in a recessionary environment.
OPPORTUNITIES ANALYSIS – Need to be patient and nimble enough to do M&A deal on a global scale during this financial crisis especially with the government backing.
THREATS ANALYSIS – Need further improvement in the commercial banking area to be the next earnings driver and to be as good as CIMB investment banking side. Assets quality, weak bond market and a slowing economy worldwide will affect the bank profitability.
QUANTITATIVES ANALYSIS - STOCK VALUATIONS.
Forecast FYE 2009 PER – 18.5X
Net Assets Per Share – RM3.688.
Price to Book Value – 2.51X.
Net Tangible Assets – RM2.022.
Price to NTA – 4.57X
Dividend Yield – 2.2%.
Debt to Equity Ratio – 11.36X.
Annualized Return on Equity Ratio – 14.48%.
Net Profit Margin – 1Q09 at 24.4% and FY09 at 26.6%.
TECHNICAL ANALYSIS – TRADING RANGE.
52 Weeks - High at RM9.50 and Low at RM5.55.
3 Months – High at RM9.25 and Low at RM7.00.
RECOMMENDATION FOR BCHB BHD UPGRADED TO BUY FROM SELL ON STRENGTH on better than expected 1Q 2009 results. An economy recovery next year onward will result in better assets quality and low NPL. Fair value at 1.0X net tangible book value of RM2.022 but based on FY 2010 forecast EPS of 68.64 sen and at PER of 15X plus a gross dividend yield of 2.2%, the fair value is RM10.30.
14. PUBLIC BANK BERHAD. RM8.95. (Non Shariah Compliance).
FYE 31 DEC. FY 2009(F) 1Q FY2009 000 000
Revenue 11,164,636 2,431,461
Net Profit 1,765,963 589,285
Net EPS 50.0 17.44
Forecast PE Ratio 17.9X
Dividend (sen) 30.0 0.0
Dividend yield 3.4 %
NTA RM2.2264.
Net Assets RM2.7839.
Total assets RM199,226,617,000
Cash RM 33,334,292,000
Debt RM 7,331,646,000
Customers Deposits RM168,133,405,000
Net Loans RM123,412,963,000
Net NPL RM1,046,681,000 or 0.83%.
Core Capital Ratio 7.6% after dividend.
Risk-Weighted Capital 13.3% after dividend.
Return on Equity 17.26%.
Total shareholders fund RM10,343,910,000
Number of shares 3,531,926,000
Market capitalization RM31.61 billion
Major shareholder Teh Hong Piow
# Forecast based on higher non performing loans, lower interest margin with lower interest rate and the effect of global recession.
LATEST CORPORATE DEVELOPMENT.
PBB and PBFin have on 5 June 2009 issued RM1.2 billion Non Innovative Tier 1 Stapled Securities Programme. The tenure of the Capital Securities is perpetual whilst the Subordinated Notes shall have a maturity of 50 years due on 5 June 2059 and the first optional redemption date is 5 June 2019. The distribution rate and interest rate payable for this issuance of the Capital Securities and the Subordinated Notes are both at a rate of 7.50% per annum, payable semi-annually. The Stapled Securities were issued at par.
The Capital Securities will qualify as Tier 1 capital of PBB under Bank Negara Malaysia capital adequacy regulations.
The proceeds raised from the issuance of the Capital Securities will be used by PBB to acquire the rights under the note assignment agreement for the Subordinated Notes.
The proceeds raised by PBFin from the issuance of the Subordinated Notes under the Programme shall be on lent to PBB pursuant to inter company subordinated loan based on the terms and conditions which are the same as that of the Subordinated Notes.
QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.
STRENGTHS ANALYSIS.
BUSINESS MODEL.
Strong in commercial banking in Malaysia. Regional banking expansion in Hong Kong, Cambodia and China contribute quite substantially to PBB botomline. A complete banking group in Malaysia with an operation in investment banking and Islamic Banking too.
Revenues came from 1.Retail operations 2. Corporate lending 3.Treasury and Capital market operations 4.Investment Banking 5.Fund Management 6.Others.
MANAGEMENT – Old hand in the banking industry, Teh Hong Piow..
MANAGEMENT BUSINESS OUTLOOK – Despite the slowing economy, the banking industry in Malaysia is expected to grow positively and remain resilient due to its strong capitalization, healthy assets quality and improved risk management practices. Amidst excess liquidity, the entry of new Islamic banks and liberal operating environment for incumbent foreign controlled banks, the banking industry will remain competitive, particularly in retail sector, and the pressure on net interest margins will remain. Banks are expected to introduce innovative and competitive products and services at a faster pace, pursue competitive pricing strategies and strengthen their customer relationship management and delivery standards to gain market share. The banking industry’s loan growth is expected to moderate as households and businesses turn more cautious. Factors that will continue to support loan growth include low financing costs, promotion of BNM funds to support SMEs and government ‘s fiscal stimulus to boost economic activity.
The Group will continue to focus on its core business of home mortgage, passenger vehicle hire purchase financing and SME loans, whilst sourcing its fund from retail and wholesale deposits, foreign currency deposits and structured deposit products.
The Group will continue to accelerate growth in its overseas operations, particularly in Hong Kong and the People’s Republic of China and Cambodia by focusing on financing, lending to SMEs and on the deposit taking business.
CORPORATE GOVERNANCE – Still not transparent enough and not doing enough on the CSR.
FINANCIAL STRENGTH – RM33.3 billion in cash and RM7.3 billion in debt. CCR at 7.6%, RWCR at 13.3%. NPL RM1.04 billion or 0.83%.
WEAKNESS ANALYSIS – The bank highly leverage business model are vulnerable to global recession.
OPPORTUNITIES ANALYSIS – Like the rest of Malaysian’s bank, during current world financial crisis, PBB should remains conservative and patient until the right M&A deal come along.
THREATS ANALYSIS - Still weak in the investment banking area. Slowing world economy will affect the bank loan expansion but good assets quality and a very low NPL will see the bank through the turbulence time ahead.
QUANTITATIVES ANALYSIS.
STOCK VALUATIONS.
Forecast FYE2009 PER – 17.9X.
Net Assets Per Share – RM2.424.
Price to Book Value – 3.69X.
Net Tangible Assets – RM1.923.
Price to NTA – 4.65X
Dividend Yield – 3.4%.
Debt to Equity Ratio – 18.26X.
Annualized Return on Equity Ratio FYE2009 – 24.53 percent.
Net Interest Income Margin – 39.4% for 1Q09.
Operating Profit Margin – 37% for 1Q09.
Net Profit Margin – 24.2% for 1Q09, 15.8% for FY09.
TECHNICAL ANALYSIS - TRADING RANGE.
52 Weeks - High at RM10.60 and Low at RM7.00.
3 Months – High at RM9.00 and Low at RM7.70.
RECOMMENDATION FOR PUBLIC BANK BHD UPGRADED TO BUY FROM SELL due to better than expected 1Q 2009 results and the expected global economy recovery. PB Bank is highly undercapitalized even under the current outdated system for bank equity capital.
We forecast a FYE 2009 EPS of 50 sen or a net profit of RM1.766 billion due to a global recession, rising NPL and lower net interest income with lower interest rate (OPR), the fair value for Public Bank Berhad is RM1.92 at 1X Price to Tangible Book Value plus a dividend yield of 3.4% due to a global depression outlook but on a global economic recovery outlook in 2010, PBB fair value is RM10.00 at a prospective FY2010 PER of 14X on an EPS of 71 sen.
15. KULIM ( M ) BERHAD. RM6.15.
FYE DEC. 31 FY 2009(F) 1Q FY2009
000 000
Revenue 2,000,000 1,316,445
Net Profit 200,000 24,407
Net EPS (sen) 64.85 8.07
Forecast PE Ratio 9.5X
Dividend (sen) 20.0 0.0
Dividend Yield 3.3%.
Net Assets Per Share RM10.45.
Cash RM 401,212,000
Debt RM1,602,339,000. Short Term RM343.316m.
Number of shares 314,293,000
Market capitalization RM1.9329 billion.
Major shareholder Johor Corp ( 52.18 % ).
LATEST CORPORATE DEVELOPMENT.
No new corporate development.
QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESS, OPPORTUNITIES AND THREATS ANALYSIS.
STRENGTHS ANALYSIS.
BUSINESS MODEL – The Group’s business segments are managed on a worldwide basis, they operate in four geographical areas:
1.Malaysia – mainly plantation (more than 40,000 hectares and in the middle of taking over Sindora Bhd with 6000 hectares of plantation land)), manufacturing, fast foods, bio diesel and investment activities.
2.Papua New Guinea – mainly plantation activities (more than 70,000 hectares and plan to double the total hectarage in the future is underway).
3.Solomon Island – rehabilitation of palm oil plantation land.
4.United Kingdom – mainly plantation activities.
Revenues came from 1.Plantation operations 2.Manufacturing (Oleochemical and Rubber Products) 3. Foods and Restaurants 4.Management Services and Other Businesses 5.Shipping Services 6.Investment Property and 7. Other Investment income.
MANAGEMENT – Manage by the State of Johor investment arm, Johor Corporation.
MANAGEMENT BUSINESS OUTLOOK –Palm product prices made significant recoveries from its 2008 year lows and currently CPO trading around RM2,300 level from a high of RM2,700. Should this price level stays for future months it would have a positive effect going forward for the group Oil Palm sector. FFB production from the NBPOL Group showed significant potential to surpass 2008’s level. RAMU’s palm are as a new edition will add further to FFB/CPO produced by NBPOL group.
The Oleochemicals sector may have been in its worst quarter. Anticipation for lower feedstock costs have so far not materialized. The division is bracing for a difficult operating environment for the rest of the year.
Sales at the Foods and Restaurants operations are encouraging despite worries on economic uncertainties still lingering. Measures are being introduced and operations are closely monitored for quick response when needed to encourage and entice continued patronage at all group’s stores.
Generally, business outlook and consumer confidence have turn for the better compared to the outlook during the final quarter 2008. The Group is more confident performing better for the remainder of the year than previously anticipated.
CORPORATE GOVERNANCE – Transparency is still lacking.
FINANCIAL STRENGTH – Cash RM401.2 million and Debt RM1.6 billion.
WEAKNESS ANALYSIS – Highly leverage balance sheet.
OPPORTUNITIES ANALYSIS – Time to nurture the business for organic growth.
THREATS ANALYSIS – Prolonged global recession will affect the CPO prices and the company bottom line even though costs of doing business expected to be lower.
QUANTITATIVES ANALYSIS - STOCK VALUATIONS.
Forecast 2009 PER – 9.5X.
Net Assets Per Share – RM2.745.
Price to Book Value – 2.24X.
Net Tangible Assets – RM2.36.
Price to NTA – 2.6X.
Dividend Yield FYE 2009 – 3.3%.
Debt to Equity Ratio – 0.59X.
Return on Equity Ratio – 0.30%.
Net Profit Margin – 1Q09 at 1.85%, and forecast FY09 at 10 percent.
TECHNICAL ANALYSIS – TRADING RANGE.
52 Weeks - High at RM10.40 and Low at RM3.44.
3 Months – High at RM6.55 and Low at RM4.98.
MAINTAINED BUY RECOMMENDATION FOR KULIM (M) BHD - A fair value of RM7.80 plus a dividend yield of 3.3 percent at PER of 12.0X on forecast 2009 EPS of 64.85 sen and 2.62X Price to Net Assets Value. We also based our forecast on CPO prices at between RM2,000 to RM2,500 level for the rest of the year, around RM3,000 in FY2010 and above RM3,000 in FY2011. Expected a higher contribution from the food division, increase plantation hectarages and a steady contribution from all the other divisions.
16. GAMUDA BERHAD RM2.78.
FYE JULY 31 3Q 2009(U) 9M 2009(U) FY 2009(F)
000 000 000
Revenue 579,336 1,785,061 3,404,916
Net Profit 46,303 104,092 280,812
Net EPS 2.31 7.50 14.00
Forecast PE Ratio 19.9X
Cash RM1,149,304,000
Debts RM1,641,743,000
Dividend (sen) 4.00 8.00 10.0
Dividend Yield 1.44% 2.88% 3.6%
Net Assets RM1.55
No. of shares 2,006,233,000
Market capitalization RM5.577 billion.
Major shareholder Generasi Setia Sdn Bhd 7.05%.
LATEST CORPORATE DEVELOPMENT.
Gamuda Bhd announced 40% subsidiary SPLASH had on 25 June 2009 received a Second Letter of Offer dated 25 June 2009 from the Selangor State Government (SSG) in respect of the takeover of the water assets and operation of SPLASH.
The key terms of the Offer are as follows:-
1.Offer Price.
i.Equity Value to be paid by SSG to SPLASH – RM1.579 billion.
ii.Value of Liabilities to be assumed by SSG and/or to be retained at SPLASH – RM1.396 billion.
Assets value inclusive of liabilities (assets and liabilities inclusive of bonds issued specifically for water related operation only) to be assumed by SSG – RM2.975 billion.
2. The Offer price to SPLASH comprises equity value, asset value and value of water related liabilities of SPLASH as at June 30 2009. SSG derived the value of SPLASH ‘s water related assets based von 1X Net Book Value.
3. Subject to due diligence by SSG.
SPLASH is given until 29 June 2009 to accept the offer. The Second Letter of Offer shall be deemed lapsed and of no force after the said date.
QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.
STRENGTHS ANALYSIS
BUSINESS MODEL – Construction, property development and toll concessionaires in Malaysia and overseas.
Revenues came from 1.Engineering and Construction 2.Property Development 3.Water related and Expressway Concessions.
Engineering and construction revenues represent 80% and pre tax profit represent 11%, property development revenues represent 16.56% and pre tax profit 30% and water related & expressway concessions revenues represent 4.14% and pre tax profit represent 59% because of higher contribution from associated companies.
MANAGEMENT – Headed by the Board of Directors and the Managing Director.
MANAGEMENT BUSINESS OUTLOOK – Relatively stable due to RM 16 billion order book.
a. Construction Division.
Electrified Double Tracking Railway Project.
Out of the total contract sum of RM12.5 billion, RM6.7 billion shall be paid by the Government of Malaysia (GOM) by way of a deferred payment loan from Bank Pembangunan Malaysia Bhd (where the loan shall eventually be repaid by GOM) . The deferred payment loan was finalized in April 2009 and progress claims for work done were paid from the drawdown of this loan from April 2009 onwards.
Yen So Park and Sewage Treatment Plant (Vietnam).
The works on Yen So Park and Sewage Treatment Plant are progressing well.
b. Property Division
There was a slight pick up in sales for the current quarter as compared to the previous quarter. Nevertheless, the demand in property markets remains weak and the profit contribution from the property division is expected to be weak for the remaining quarter of the year.
c. Water Related and Expressway Concessions.
The Federal government has set a target to complete the water restructuring in Selangor state by end of June 2009. SPLASH is currently in negotiation with the government in this matter.
Overall Prospects.
Overall, the Group’s performance is expected to remain satisfactory in the current financial year.
CORPORATE GOVERNANCE – Still not transparent enough.
FINANCIAL STRENGTH – Cash RM795,869,000 and Debt RM1,735,722,000.
WEAKNESS ANALYSIS – No single largest controlling shareholder making it a possible takeover play.
OPPORTUNITIES ANALYSIS – Will capitalize on their strengths when the opportunity arise.
THREAT ANALYSIS – Prolonged world economic slowdown that will reduce infrastructure spending. Currently still high construction and building materials costs despite the slowdown.
QUANTITATIVE ANALYSIS.
STOCK VALUATIONS.
Forecast FYE July 2009 PER – 19.9X.
Net Assets Per Share – RM1.55.
Price to Book Value – 1.8X.
Dividend Yield – 3.6%.
Debt to Equity Ratio – 0.76X.
Annualized Return on Equity Ratio – 6.32%
Net Profit Margin – 7.99% (3Q09), 5.83% (9M09).
TECHNICAL ANLYSIS - TRADING RANGE.
52 Weeks - High at RM3.02 and Low at RM1.25.
3 Months – High at RM2.80 and Low at RM2.04.
UPGRADED TO BUY FROM HOLD RECOMMENDATION FOR GAMUDA BHD on government fiscal stimulus spending – A revised fair value of RM2.52 at FY 2009 PER of 18X, on an EPS of 14.0 sen and a dividend yield of 3.6% but 2010 and 2011 earnings are expected to be higher and as a results the valuations will be lower..
17. MMC CORP BHD. RM2.13.
FYE 31 DEC. FY 2009(F) 1Q 2009(U)
000 000
Revenue 8,245,000 1,912,500
Net Profit 550,000 31,284
Net EPS (sen) 18.06 1.00
Forecast PE Ratio 11.8X
Dividend (sen) 5.0
Dividend yield 2.35%
Net Assets RM1.99.
Cash RM 3,924,301,000
Debt RM20,359,000,000. S.T. Debt RM2.040b.
No. of shares issue 3,045,059,000.
Market Capitalization RM6.4859 billion.
Major Shareholder Seaport Terminal 51.76%
LATEST CORPORATE DEVELOPMENT.
The agreement between Pelabuhan Tanjung Pelepas Sdn Bhd and CMA CGM will result in a contribution of approximately 500,000 twenty foot equivalent units to PTP ‘s total annual throughput.
QUALITATIVE ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.
STRENGTH ANALYSIS.
BUSINESS MODEL.
Transport and Logistics – 70% of Pelabuhan Tanjung Pelepas the container port and logistics hub, 100% of Johor Port the multipurpose port and logistics operations and 100% of Konsortium Lebuhraya Butterworth-Kulim the toll road operations.
Energy and Utilities – 51% of Malakoff Bhd, 41.8% of Gas Malaysia the natural gas distribution company and 51% of Recycle Energy the waste management & recycling and renewable energy company.
Oil & Gas – Through 99.9% stake in MMC Oil & Gas the design engineering services company, 69.9% of Tepat Teknik the steel fabrication works company, 51% of MMC-Transfield Services the asset management and maintenance services company and 51% of MMC-VME the natural gas separations works company.
Engineering & Construction – Through 39.2% of Zelan Bhd (RM2.11) the investment holding company which owned 100% of Zelan the power plant construction company and below 20% of IJM Bhd (RM5.15 Buy) the major infrastructure works company, and through 99.9% of MMC Engineering & Construction the engineering services company.
Others businesses – Through 30% stake in Malaysia Smelting Corporation (RM8.20) the tin mining and smelting company, 20.1% Integrated Rubber Corporation ( RM0.43) the manufacturing and trading of rubber gloves, 52.9% of Kramat Tin Dredging (RM5.90) which refocusing their business, 75.6% of Seginiaga Rubber Industries the weather strip manufacturer and MMC Metal Industries the foundry operations and precision engineering company.
Overseas business division – 50% stake in US$ 30 billion Jizan City project in Saudi Arabia.
Transport and logistics represent 14% of revenue and 17.7% of segmental profit. Energy and utilities represent 84.8% of revenue and 84% of segmental profit. Engineering and construction represent 46.8% of revenue and 0.26% of segmental profit. Others operation represent 0.7% of revenue.
MANAGEMENT – Headed by Board of Directors and CEO linked to Syed Mokhtar.
MANAGEMENT BUSINESS OUTLOOK – The Board expect FY2009 results to be less satisfactorily as compared to FY2008 due to adverse economics condition.
CORPORATE GOVERNANCE - They should be more transparent in the related parties transaction, financial reporting and should be more active in being a good corporate citizen too.
FINANCIAL STRENGTH.
Strong recurrence earnings from the IPP allowed them to take on huge amount of borrowing for project financing. As of 3Q FYE 2008, cash in hand stood at RM3.9 billion and debt level stood at RM20.3 billion.
WEAKNESS ANALYSIS – The market doesn’t view the recent related parties transaction between Syed Mokhtar and MMC Corp Bhd favourably. It is in their favour to terminate the said deal. Highly leverage balance sheet.
OPPORTUNITIES ANALYSIS – Good dealmaker in Syed Mokhtar Albukhary.
THREATS ANALYSIS -Large amount of borrowing is still a big worry even though most of them is project financing or tie up to future cash flow of the project. Still high construction costs such as cement and steel will affect the group profit margin.
Morever, the recent revisione in gas prices to IPP from RM14.31 per mmBTU to around RM10 per mmBTU will also help the group power division profitability going forward.
QUANTITATIVES ANALYSIS.
STOCK VALUATIONS.
Forecast FYE 2009 PER - 11.8X.
Net Assets Per Share – RM1.48.
Price to Book Value – 0.68X.
Dividend Yield FYE 2009 – 2.35%.
Debt to Equity Ratio – 2.77X
Annualized Return on Equity Ratio FYE 2009 – 2.06%.
Net Profit Margin FYE 2009 – 1Q09 at 1.63%, and forecast FY09 at 6.67%.
TECHNICAL ANALYSIS.
TRADING RANGE.
52 Weeks - High at RM2.91 and Low at RM0.95.
3 Months – High at RM2.13 and Low at RM1.45.
RECOMMENDATION FOR MMC CORP BHD UPGADED TO BUY FROM HOLD due to the global economy recovery. Based on the forecast earnings for FYE Dec 2010 of 20 sen per share on net profit of RM609 million, the upside potential is RM3.00 at FYE2010 PER of 15X and a dividend of 5 sen for 2.35% yield.
18. PETRONAS DAGANGAN BHD. RM8.15.
FYE MARCH 31 FY2009(F) 4Q FY2009(U) FY2009(U) FY2010(F)
000 000 000 000
Revenue 24,200,776 4,374,999 24,367,622 25,000,000
Net Profit 668,936 172,349 578,671 625,000
Net EPS 67.20 sen 17.30 58.20 62.9
Forecast PE Ratio 12.9X
Net Assets RM4.19.
Dividend (sen) 30.00 33.00 45.00 50.0
Dividend Yield 3.7% 4.0% 6.1%
Cash RM538,082,000.
Debt (RM) RM941,000.
No. of Shares Outstanding 993,454,000
Market Capitalization RM8.0966 billion
Major Shareholder PETRONAS 69.86%
LATEST CORPORATE DEVELOPMENT.
Announce new fuel marketed under the name of “Petronas Primax 95”. This fuel is under RON95 category.
QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.
STRENGTHS ANALYSIS.
BUSINESS MODEL - The Company is the principal domestic marketing arm of petroleum products for Petroliam Nasional Berhad (PETRONAS), the national oil company, which holds 69.86% of its equity and the operation of service stations. The company markets a wide range of high quality petroleum products including motor gasoline, aviation fuel, kerosene, diesel, fuel oil, bunker fuel, lubricants, liquefied petroleum gas (LPG) and asphalt in Malaysia.
The Company markets its product throughout the country, directly to customers as well as through network of service stations, LPG dealers and industrial dealers. Its marketing activities are well supported by a comprehensive logistics and distribution system consisting of bulk depots, bunkering facilities and LPG bottling plants, all strategically located to ensure a reliable supply of products at all time.
The Company is the largest petroleum products marketer in the country with an estimated 41% market share. In the retail business sector, the Company market share is 30%. The total number of stations in operation are around 855.
THE AUTOMATIC PRICING MECHANISM (APM).
COMPUTATION OF TAX EXEMPTION AND SUBSIDY WHEN RETAIL PRICE OF PETROL AND DIESEL IS FIXED.
Component Price as at Dec. 31, 2008
Ron97 (sen / litre) Diesel (sen / litre)
Average cost (MOPS) US$ / barrel. A 45.469 57.762
Exchange rate. B 3.5812 3.5812
Cost of product** (RM) 102.42 130.11
Alpha (RM) 5.00 4.00
Total cost of product (RM) 107.42 134.11
Operational cost (RM) 9.54 9.54
Oil company margin (RM) 5.00 2.25
Dealer margin (RM) 12.19 7.00
Actual price without tax (RM) 134.15 152.90
Sales tax (RM) 58.62 19.64
Actual price at pump with tax (RM). 192.77 172.54
Tax Exemption (RM). C 12.77 2.54
Subsidy (RM) D - -
Final retail price (RM) 180.00 170.00
** Cost of product is converted to RM sen / litre with the formula below.
(Average Cost MOPS X Exchange Rate) X 100 / 158.987.
The two main variable components are the cost of the product (A) which is subject to MOPS and the currency exchange rates (B), which directly impact the final retail price at the pump. To stabilize drastic retail price changes government sales tax exemption (C) and subsidies (D) are used.
This illustration for setting of retail price of petrol is used to explain how adjustments are made. The average cost US$45.469 / barrel for RON97 is converted to RM of 102.42 sen / litre. The Alpha of 5 sen / litre is added on to account for the markets fluctuations of MOPS buying price of petrol and diesel.
After adding operational costs and margins of oil companies and dealers the price without tax is RM134.15. In this case to maintain a pump price of RM1.80 / litre, the government exempts tax of 12.77 sen / litre without any subsidy.
Source :- Domestic Trade and Consumer Affairs Ministry.
MANAGEMENT - The company are manage by an experience team of capable people from PETRONAS.
MANAGEMENT BUSINESS OUTLOOK – Demand conditions are expected to be challenging but market leadership is projected to be maintained with continuous strategic marketing efforts and initiatives, However, profits for the next financial year will be impacted by fluctuations in petroleum product costs following uncertainties in the international oil prices and the world economy..
CORPORATE GOVERNANCE - Need to be more transparent and doing more on corporate social responsibility.
FINANCIAL STRENGTH - Strong backing from parent company PETRONAS. Cash in hand stood at RM538 million and borrowing at RM941,000 only.
OPPORTUNITIES ANALYSIS – Will capitalize on PETRONAS strengths when the opportunities present itself.
WEAKNESS ANALYSIS -Not aggressive enough in their overseas expansion program.
THREATS ANALYSIS – Prolonged global recession or Malaysian economy are affected by a recession.
QUANTITATIVE ANALYSIS.
STOCK VALUATIONS.
Forecast FYE March 2010 PER – 12.9X.
Net Assets Per Share – RM4.19.
Price to Book Value – 1.95X.
Dividend Yield – 6.1%.
Debt to Equity Ratio – 0.56X.
Return on Equity Ratio – 55.5%.
Net Profit Margin – 4Q 09 at 2.37%. FY10 at 2.5%.
TECHNICAL ANALYSIS.
TRADING RANGE.
52 Weeks - High at RM8.50 and Low at RM6.30.
3 Months – High at RM8.35 and Low at RM7.60.
MAINTAINED BUY RECOMMENDATION FOR PDB on growth prospect as more new petrol stations are being opened and plans coupled with better profits margin on lower costs. Based on forecast FYE March 2011 EPS of 67.20 sen, the upside potential for Petronas Dagangan Bhd is RM10.00 at PER of 15X plus a dividend yield of 6.1%.
19. UEM LAND HOLDINGS BHD.RM1.85.
FYE DEC. 31 FY2009(F) 1Q 2009(U)
000 000
Revenue 313,460 56,511
Net Profit 25,000 2,631
Net EPS (sen) 2.00 0.10
Forecast PE Ratio 92.5X
Dividend (sen) 1.00 0.0
Dividend yield 0.5 %
Cash RM 18,563,000
Debt RM610,675,000
Net Assets Per Share RM0.58.
No. of shares 2,428,177,000. Par value 50 sen.
Market capitalization RM4.49 billion.
Main shareholder UEM(M) Bhd 51%
LATEST CORPORATE DEVELOPMENT.
The Sales and Purchase Agreement dated 12 June 2008 for the proposed disposal of 43.54 acres of land in Puteri Harbour, Nusajaya by UEM Land Bhd, a wholly owned subsidiary of UEM Land Holdings Bhd, to Damac Properties (M) Sdn Bhd for a cash consideration of RM396,438,495 has lapsed and is of no further effect whatsoever.
QUALITATIVE ANALYSIS.
STRENGTHS,WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.
STRENGTHS ANALYSIS.
BUSINESS MODEL – UEM Land is a pure property play as the master developer of Bandar Nusajaya in Iskandar Malaysia.
MANAGEMENT - Led by the Board of Directors and the CEO.
BUSINESS OUTLOOK – In view of the challenges and risks arising from the continued global economic uncertainties and its dampening effects on the world economy, the Group’s performance was below the aspirational KPI. Moving forward, the Board acknowledges that it will be very challenging to achieve current year Headline KPI targets.
CORPORATE GOVERNANCE – UEM Land should be more transparent and be a more responsible corporate citizen.
FINANCIAL STRENGTH – Cash at RM18.5 million and debt at RM610.6 million.
WEAKNESS ANALYSIS – Potential lack of commitment from the Company and the Federal Government to develop Nusajaya and Iskandar Malaysia.
OPPORTUNITIES ANALYSIS - To capitalized on the development of Iskandar Malaysia.
THREATS ANALYSIS – Prolonged world economic slowdown or recession and a lack of commitment from the Federal Government together with the execution risks.
QUANTITATIVES ANALYSIS.
STOCK VALUATIONS.
Forecast FYE 2009 PER – 92.5X.
Net Assets Per Share – RM0.58.
Price to Book Value – 3.2X.
Dividend Yield – 0.5%
Debt to Equity Ratio – 0.67X.
Annualized Return on Equity Ratio FYE 2009 – 0.37 percent.
Net Profit Margin – 1Q09 at 4.66% and 7.98% for FY09.
TECHNICAL ANALYSIS – TRADING RANGE.
52 Weeks - High at RM2.01 and Low at RM0.50.
3 Months – High at RM1.97 and Low at RM0.72.
UPGRADED TO BUY FROM HOLD RECOMMENDATION FOR UEM LAND HLDGS BHD based on global and Malaysia economy recovery.
UEM Land Bhd is a good long term investment prospect as a master developer of Nusajaya in Iskandar Malaysia. Fair value for UEM Land based on the revised value of their land bank in Nusajaya easily worth around RM2.50 to RM3.00 if not higher.
20. TH PLANTATIONS BHD. RM1.63. (Non Composite Index Linked Stock).
FYE DEC. 31 FY 2009(U) 1Q FY2009(U)
000 000
Revenue 160,000 59,583
Net Profit 40,000 8,844
Net EPS 10.2 1.81
Forecast PE Ratio 16X
Cash RM32,187,000
Debt RM18,194,000
Dividend 5 sen
Dividend yield 3.1%
Net Assets RM0.84.
No. of shares 487,644,000
Market capitalization RM794.8 million
Major Shareholder LTH 70%
* Forecast based on average CPO price of RM1,700.
LATEST CORPORATE DEVELOPMENT.
FIC approved THP acquisitions of 100% equity interests in Ladang Sawit Bintulu Sdn Bhd and THP Agro Management Sdn Bhd.
Announced the first issuance of RM50 million in nominal value Murabahah Medium Term Notes (MMTN) under the MMTN programme of up to RM200 million on 4 May 2009.
The proceeds raised from MMTN will be utilized by THP to finance THP’s and/or its subsidiaries capital and/or development expenditure requirements and/or future plantation estates acquisition including reimbursement of any expenditure incurred by the Issuer and/or its subsidiaries.
QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPOPRTUNITIES AND THREATS ANALYSIS.
STRENGTHS ANALYSIS
BUSINESS MODEL - Principal activities for the Group are palm oil plantations with a total hectarage of 26,136 hectares with 15,746 hectares planted area.
MANAGEMENT - Headed by a Chairman of the Board of Director and CEO with his management team appointed by the Lembaga Tabung Haji.
MANAGEMENT BUSINESS OUTLOOK – Notwithstanding the volatility of commodity prices, based on current performance, the Group will continue to perform reasonably well.
CORPORATE GOVERNANCE – Still not transparent enough.
FINANCIAL STRENGTH - Strong backing from parent company, GLIC Lembaga Tabung Haji. Cash in hand of RM32.1 million and a debt of RM18.1 million.
OPPORTUNITIES ANALYSIS. - Should use the cash in hand to increase total plantation acreage.
WEAKNESS ANALYSIS - Small free float as Lembaga Tabung Haji owned 70 percent of the shares and also small size plantation company with a total hectarage of only 26,136 hectares.
THREATS ANALYSIS - Profitability going forward still dependent on sustainability of the crude palm oil prices even though CPO prices look like bottoming out despite weakness in crude oil prices amid improving demand from importing countries.
QUANTITATIVES ANLYSIS.
STOCK VALUATIONS.
Forecast FYE 2009 PER – 16X
Net Assets Per Share – RM0.84.
Price to Book Value – 1.94X.
Dividend Yield FYE 2009 – 3.1%.
Debt to Equity Ratio – 0.62X.
Return on Equity Ratio – 5.5 percent.
Net Profit Margin – 1Q09 at 14.84% and FY09 at 25%.
TECHNICAL ANALYSIS.
TRADING RANGE .
52 Weeks - High at RM1.78 and Low at RM0.94.
3 Months – High at RM1.72 and Low at RM1.47.
RECOMMENDATION FOR TH PLANT BHD UPGRADED TO BUY FROM HOLD based on the recovery of CPO prices, currently trading around RM2,300 level. Maintained earnings forecast based on CPO price of RM1,700 per tons. A fair value of RM1.50 based on the prospective FYE 2009 price earnings ratio of 19.6X on a forecast net profit of RM40m and a net EPS of 10.2 sen and a dividend yield of 3.1%. Based on current CPO prices, the FY09 earnings should be higher and valuations should be lower.
21. MALAYSIAN AIRLINES SYSTEM. RM3.18.
FYE DEC. 31 FY 2009(F) 1Q 2009(U)
000 000
Revenue 16,909,056 2,739,590
Net Profit/ (Loss) 50,000 (695,398)
Net EPS / (Loss) 2.99 (41.61)
Forecast PE Ratio 106X
Dividend (sen) 0.0
Dividend Yield 0.0% 0.00
Net Assets (0.27 sen).
Cash RM2,455,585,000
Debt RM1,614,162,000
Number of Shares 1,671,062.,000
Market Capitalization RM5.3 billion
Major Shareholder Khazanah Nasional & PMB ( 69.3% )
# MAS miss a chance to enjoy lower fuel costs as they fully hedged FY09 jet fuel price at RM95. RM500m net profit forecast were based on jet fuel price of USD100 per barrel during operating environment in 2008.
* Management forecast profit of between RM500 million loss to RM50 million profit for FY2009 based on tougher operating environment in 2009.
LATEST CORPORATE DEVELOPMENT.
In granting MAS the conditional waiver from PN17 until 31 December 2009, Bursa has set conditions :-
1. The conditional waiver is only on unrealized MTM losses for fuel hedging contracts arising from the adoption of FRS 139.
2. MAS must ensure full compliance with FRS 139 in recognizing and measuring all financial assets, financial liabilities and contracts to buy or sell non-financial as stipulated in FRS 139.
3. MAS to take all necessary measures to cease or avoid triggering the PN17 criteria by 31 December 2009.
4. MAS must disclose in its quarterly report pro forma balance sheets position.
QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.
STRENGTHS ANALYSIS.
BUSINESS MODEL - The Company is principally engaged in the business of air transportation – airlines operations and cargo services and the provision of related services.
Airline operations – operation of aircraft for passenger
Cargo services – operation of aircraft for cargo and mail services.
Other business segments include hotel operations, catering, engineering, computerized reservation services, coach transportation, trucking and warehousing services, retailing of goods, terminal charges and tour and related activities.
The Group has in operation 111 aircraft and 36 engines under operating leases.
Airline operation represent 90% of revenue and 96.77% of operating profit. Cargo services represent 17.23% of revenue and 7.33% of operating profit. Catering services represent 0.07% of revenue and 0.65% of operating profit. Others operation represent 0.63% of revenue and 2.18% of operating profit.
MANAGEMENT - Headed by the Chairman of the Board of Director and Dato Idris Jala as the CEO and his team of turnaround managers.
BUSINESS OUTLOOK – The International Air Transport Association has revised its forecast that the airline industry will lose more than USD9.0 billion from a loss of USD4.7 billion. Demand is projected to fall sharply with expected to contract by 8% and cargo demand expected to contract 17%. This is further compounded by the threat of outbreak of influenza A(H1N1) virus. The continued delivery of new aircraft also has caused heavy fare discounting.
For 2009, the Group’s targets are : RM499m loss to RM50m net income (on target) , RM51m to RM500m exceeding.
CORPORATE GOVERNANCE – Still not transparent enough.
FINANCIAL STRENGTH - Strong backing from the Government to the management to turn around the company. Currently cash in hand at RM2.45 billion and debt level of RM1.61 billion.
WEAKNESS ANALYSIS – Bottomline easily affected by the movement of jet fuel prices. Operating revenue cannot the cover operating expenses make it a PN17 now without a waiver from Bursa besides the jet fuel hedging losing position. Weak risk management in derivatives has resulted in substantial losses in what look like a speculation in oil market rather than for hedging purposes.
OPPORTUNITIES ANALYSIS - To capitalized on its strength especially strong backing from the Government especially during this high crude oil prices environment.
THREATS ANALYSIS – Deepening global recession will affect MAS long haul passengers, business travelers and cargoes business. Real threat of of being a PN17 (technically insolvent) company by year end.
QUANTITATIVES ANALYSIS .
STOCK VALUATIONS.
Forecast FYE 2009 PER – 106X
Net Assets Per Share – (0.27 sen).
Price to Book Value – n.a. X.
Dividend Yield – 0.0 percent.
Debt to Equity Ratio – n.a.X.
Return on Equity Ratio FYE 2009 – n.a. percent.
Net Profit Margin – n.a. % for 1Q09 and 0.3% for FY09.
TECHNICAL ANALYSIS
TRADING RANGE.
52 Weeks - High at RM4.00 and Low at RM2.37.
3 Months – High at RM3.38 and Low at RM2.73.
DOWNGRADED FROM HOLD TO SELL RECOMMENDATION FOR MAS BHD as MAS are in real danger of falling into PN17 company with a negative shareholders fund unless the business turn around vey fast together with the economy. Anyway, the Government is there to give them a helping hand.
Based on management guidance of RM50 million profit or EPS of 2.99 sen for FY2009. MAS currently trading at 106X prospective FY09 earnings and no dividend payment is expected in FY09.
22. SCOMI GROUP BERHAD. RM0.765. Non Composite Index Linked Stock).
FYE 31 DEC. FY 2009(F) 1Q 2009(U)
000 000
Revenue 2,017,216 528,177
Net Profit 77,328 9,510
Net EPS (sen) (FD) 7.68 0.94
Forecast PE Ratio 10X
Dividend 1.00 0.00
Dividend Yield 1.3%
Net Assets Per Share RM0.91.
Cash RM 3,718,000
Debt RM1,273,493,000. S.T. RM283,035,00.
Number of shares 1,023,519,000
Market capitalization RM783 million
Major shareholder Kaspadu ( 23.8% ), Onstream M ( 20.9%)
LATEST CORPORATE DEVELOPMENT.
The company has entered into Share Sell Agreement with GL Geotechnic Sdn Bhd to dispose 1,200,000 ordinary shares of RM1.00 each in Scomi OilServe Sdn Bhd representing 60% of the issued and paid up capital of Scomi OilServe for a total cash consideration of RM8.48 million.
QUALITATIVE ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.
STRENGTHS ANALYSIS.
BUSINESS MODEL – Strong in drilling fluid business.
Investment holding company with subsidiaries involved in the wide range of activities in the oil&gas service industry throughout the world in 55 locations and 30 countries :-
Drilling Fluids & drilling waste management solutions – KMC Oiltools.
Marine vessel transportation- Main Board listed Scomi Marine Bhd (RM0.97)
Manufacturing businesses – 2nd Board listed Scomi Engineering Bhd (RM2.38) and currently bidding for RM6 billion worth of contracts.
Oilfield & Production Enhancement Chemicals
Distribution – KMC Oiltools.
Oilfield services represent 72.85% of revenue and 53.2% of segmental profit. Energy and logistic engineering represent 20.3% of revenue and 14.48% of segmental profit. Production enhancement represent 0.04% of revenue and 6.85% of segmental profit. Energy logistics represent 2.42% of revenue and 6.85% of segmental profit. Investment holding represent 1.68% of revenue and 36.2% of segmental profit.
MANAGEMENT – Headed by Shah Hakim as the CEO.
MANAGEMENT BUSINESS OUTLOOK – The uncertainty surrounding global markets, weaker consumer demand and tightening credit will continue to impact the group performance in 2009.
The result of the Oilfield Services Division is cushioned by favorable contribution from Asia, mainly India and Malaysia due to continued drilling activities in the region.
The Energy & Logistics Engineering Division will also be operating under a similar challenging economic environment. The Division will continue to contribute positively to the Group in 2009 will fully operational new facilities in Saudi Arabia and Johor Bahru.
The Energy Logistic Division is leveraging on its strengths and strong fundamentals to face the challenges of reduced Exploration and Production activities for the offshore support vessel business (OSV) and the uncertainty of coal demand. The marine business has existing long term contracts that will be significant revenue earner. CH Offshore Ltd, an associated company is anticipated to deliver strong performance in the next few years with its fleet expansion in 2008of four new deepwater vessels and expected addition of another two deepwater vessels in 2010.
CORPORATE GOVERNANCE – Still not transparent enough.
FINANCIAL STRENGTH – Cash in hand RM3.7m. RM1.273 billion in debt.
WEAKNESS ANALYSIS – Highly leverage balance sheet.
OPPORTUNITIES ANALYSIS – Opportunity to strengthen the weak balance sheet through Rights Issue.
THREATS ANALYSIS – Oil majors cutting back expenditures on oil exploration due to a recession seems overblown as Petronas continue to invest RM35 billion this year besides the rest of oil majors. Strengthening ringgit will hurt the company profit.
QUANTITATIVES ANALYSIS
STOCK VALUATIONS.
Prospective FYE 2009 PER – 10X.
Net Assets Per Share – RM0.91.
Price to Book Value – 0.84X.
Dividend Yield – 1.3 percent.
Debt to Equity Ratio – 1.76X.
Return on Equity Ratio FYE 2009 – 4.01 percent.
Net Profit Margin – 1Q09 at 1.8% and FY09 at 3.8%.
TECHNICAL ANALYSIS.
TRADING RANGE.
52 Weeks - High at RM0.825 and Low at RM0.255.
3 Months – High at RM0.82 and Low at RM0.32.5.
MAINTAINED BUY RECOMMENDATION FOR SCOMI GROUP BHD on low valuation even though investors normally dislike rights issue but it is necessary to rectify the problem of weak balance sheet and the cheapest way to raise funds. A fair value for Scomi Group Bhd at RM1.00 on the prospective FYE 2009 PER of 13.0X on an EPS of 7.68 sen plus a dividend yield of 1.3%, There will be an earnings dilution after the completion of the proposed 1 for 2 rights issue at 30 sen.
23. AFFIN HOLDINGS BERHAD. RM1.79. (Non Shariah Compliance).
FYE 31 DEC. FY 2009(F) 1Q 2009(U)
000 000
Revenue 2,066,520 498,976
Net Profit 215,580 91,588
Net EPS 14.44 6.13 sen
Forecast PE Ratio 12.4X
Dividend 7.5 0.0
Dividend yield 4.2%
NTA RM2.3267.
Price / NTA X
Customers Deposit RM27,248,537,000
Total Net Loans RM20,477,303,000
Net Non Performing Loans RM703,212,000 or 3.38%.
Total Assets RM37,275,600,000
Net Assets Per Share RM3.02.
Cost to Income Ratio 66.88 %.
Shareholders Fund RM4,512,619,000
Cash RM7,720,079,000
Debt RM 200,000,000
Number of Shares 1,494,367,000
Warrants Outstanding 153,776,000
Core Capital Ratio 12.36% after dividend.
Risk Weighted Capital Ratio 14.70% after dividend.
Market capitalization RM2.675 billion
Major shareholder Lembaga Tabung Angkatan Tentera
LATEST CORPORATE DEVELOPMENT.
Abdul Hamidy bin Abdul Hafidz has resigned as the MD/CEO of Affin Bank Bhd and Bank Negara had approved the appointment of Zulkiflee Abbas bin Abdul Hamid as the new MD/CEO of Affin Bank Bhd.
QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.
STRENGTHS ANALYSIS.
BUSINESS MODEL - AFFIN Holdings Group is a financial services conglomerates. The Group’s primary activities focus on the provision of commercial and investment banking services, money broking, fund and unit trust management, underwriting of general and life insurance business and stock broking operations.
The Group’s revenue and earnings mainly come from 1.Commercial banking and Hire Purchase 2.Investment Banking 3.Stockbroking 4.Insurance 5.Others.
In the future, a strong earnings driver will come from the Islamic banking, Commercial banking and the Investment banking.
MANAGEMENT – Headed by the Chairman of the Board of Director. Dato Hamidy Hafidz has resigned and Zulkifli Abbas has replaced him as the new CEO.
MANAGEMENT BUSINESS OUTLOOK – The Board is of the view that the Group is on track to achieve the following announced headline Key Performance Indicators (KPI) for the FY2009.:-
Headline KPIs Targets for 2009 3 months 2009
1. After Tax Return on Equity 7.5% 2.1%
2. After Tax Returns on Assets 0.9% 0.2%
3. Net NPL Ratio 2.3% 3.4%
4. Earnings Per Share (EPS) 22.70 sen 6.13 sen.
CORPORATE GOVERNANCE – Still not transparent enough.
FINANCIAL STRENGTH - Strong backing from the ultimate parent company, Lembaga Tabung Angkatan Tentera. Cash in hand at RM7.72 billion and debt of RM200 million. NPL of RM703.2 million or 3.38%. CCR at 12.36%. RWCR at 14.7%.
WEAKNESS ANALYSIS – The bank highly leverage business model and assets quality are a major concern during a global recession now.
OPPORTUNITIES ANALYSIS - To leverage on their tie up with Bank of East Asia, Hong Kong to venture oversea especially in the fast growing economy of China.
THREATS ANALYSIS - Recession or depression in the United States, weak global growth, high inflation and a slowdown in the Malaysia economy will increase the NPL.
QUANTITATIVES ANALYSIS - STOCK VALUATIONS.
Forecast FYE 2009 PER – 12.4 X.
Net Assets Per Share – RM3.02.
Price to Book Value – 0.59X.
Net Tangible Assets – RM2.33.
Price to NTA –0.77X.
Dividend Yield – 4.2 percent.
Debt to Equity Ratio – 7.26X.
Annualized Return on Equity Ratio FYE 2009 – 8.12 percent.
Net Interest Income Margin – 37.0 percent.
Net Profit Margin FYE 2009 – 1Q09 at 18.4% and FY09 at 10.4.8%.
TECHNICAL ANALYSIS.
TRADING RANGE.
52 Weeks - High at RM1.90 and Low at RM1.14.
3 Months – High at RM1.84 and Low at RM1.34.
MAINTAINED BUY RECOMMENDATION on low valuations – The fair value for AFFIN Holdings Bhd is at RM2.26 or 1.0X Tangible Book Value (NTA) but based on a prospective FYE 2009 PER of 18X on a net profit of RM215,580,000 and an EPS of 14.4 sen plus a dividend yield of 4.2 percent the upside potential is RM2.60.
24. YTL CORPORATION BHD. RM6.90.
FYE 30 JUNE 3Q FY2009(U) 9M FY2009 FY 2009(F)
000 000 000
Revenue (RM) 1,985,145 5,348,974 7,553,524
Net Profit (RM) 484,361 787,150 947,843
Net EPS(sen) 31.80 51.72 58.00
Forecast P.E. Ratio 11.9X
Dividend (sen) 0.0 0.0 25.0
Dvidend Yield 3.6%
Net Assets Per Share RM5.2394.
Cash RM 7,872,713,000
Debt RM27,620,799,000
Shares Outstanding 1,736,385,000
Market Capitalization RM11.98 billion.
Major Shareholders. Yeoh Tiong Lay & Son Hldgs 53.29%.
LATEST CORPORATE RESULT.
The Company on 22.6.2009 entered into a Sub-Underwriting Agreement with DBS Bank Ltd , Merril Lynch (S) Pte Ltd and Credit Suisse (S) Limited to subscribe for up to 75% of the total rights issue to be issued pursuant to the proposed rights issue of Starhill Global REIT.
QUALITATIVES ANALYSIS
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.
STRENGTHS ANALYSIS
MANAGEMENT – Run by the Yeoh Tiong Lay family.
BUSINESS MODEL – Strong in construction, water, IPP, power generation, cement, property development in Malaysia and overseas.
Revenues came from 1.Construction 2.Information Technology & E-Commerce related business (Listed YTL-E Solution Bhd) 3.Cement Manufacturing & Trading (Listed YTL Cement Bhd) 4.Property Investment & Development (Listed YTL Land Bhd) 5.Management Services & Others 6.Hotels (Star REIT Bhd) and 7.Utilities.(YTL Power Bhd).
Construction represent 5.55% of revenue and 0.21% of operating profit. Information technology and e-commerce represent 0.46% of revenue and 0.4% of operating profit. Cement manufacturing and trading represent 31.4% of revenue and 21.2% of operating profit. Property represent 1.95% of revenue and 3.93% of operating profit. Management services and others represent 5.49% of revenue. Hotels represent 2.34% of revenue and 0.63% of operating profit. Utilities represent 52.8% of revenue and 74.8% of operating profit.
MANAGEMENT BUSINESS OUTLOOK – The group, after considering the current level of operations and the current market condition, is expected to achieve satisfactorily performance for FYE 2009.
CORPORATE GOVERNANCE - Need to be more transparent.
FINANCIAL STRENGTH - Cash RM7.87 billion. Debt RM27.6 billion.
WEAKNESS ANALYSIS– Highly leverage business model.
OPPORTUNITIES ANALYSIS – Made a few acquisitions in Singapore recently.
THREATS ANALYSIS - Family run business and RM23.4 billion debt level, rising cost of raw materials and uncertainties in the business outlook for the construction industries in Malaysia with the government emphasis on more people centric projects instead of mega projects after the recent general election.
QUANTITATIVES ANALYSIS - STOCK VALUATIONS.
Forecast FYE 2009 PER – 11.9X
Net Assets Per Share – RM5.24.
Price to Book Value – 1.3X.
Dividend Yield – 3.6 percent.
Debt to Equity Ratio – 2.75X.
Return on Equity Ratio FYE 2009 – 15.9%
Net Profit Margin – 3Q 09 at 24.4% an 9M09 at 14.7%.
TECHNICAL ANALYSIS - TRADING RANGE.
52 Weeks - High at RM7.45 and Low at RM5.20.
3 Months – High at RM7.30 and Low at RM6.65.
UPGRADED TO BUY FOR BOTH YTL CORP BHD AND YTL POWER BHD FROM TAKE PROFIT (SELL) RECOMMENDATION based on better than expected economics outlook and fiscal stimulus effort by the government that will benefit the Group.
Fair value of RM8.00 based on prospective PER for FY2009 of 13.8X on an EPS of 58 sen and 3.6% dividend yield.
So that’s my 2Q09 results update on the top stocks pick for the FYE 2009. Remember that a company with a strong fundamentals will always win the day. So, stick with the basic principle of investment.
5. FTSE BURSA MALAYSIA BERHAD
KUALA LUMPUR COMPOSITE INDEX (30 STOCKS)
As of June 24, 2009 and the Composite Index at 1057.85.
Name
PRICE
RM
EPS 09(F)
SEN
PER 09(F)
X
NET ASSETS
RM
DIV YIELD
%
AMMB
3.34
26.00
12.8
2.84
4.5
ASTRO
3.00
7.12
42.1
0.43
1.2
AXIATA
2.29
11.00
20.8
3.026
3.3
BAT (M)
43.50
280.00
15.5
2.15
4.6
BJ TOTO
5.05
26.00
19.4
0.38
4.0
COMMERZ
8.80
50.07
17.6
4.81
2.3
DIGI.COM
21.90
1.10
19.9
2.79
4.6
GENTING
5.70
29.7
19.2
3.49
3.5
HL BANK
5.75
50.0
11.5
3.89
5.2
IOI CORP
4.62
16.00
28.9
1.28
2.2
KLK KEPONG
12.00
56.2
21.4
4.82
3.3
MAS
3.10
2.99
103.7
-.27
0.0
MAYBANK
5.75
11.9
48.3
4.2166
1.74
MISC
8.60
47.3 (2010)
18.2
5.72
3.5
MMC
1.90
18.06
11.8
1.99
5.3
PARKSON
4.96
31.03
16.0
1.48
4.0
PB BANK
8.80
50.00
17.9
2.7839
3.4
PETDAG
8.20
62.90
13.0
4.19
6.1
PETGAS
9.75
52.92
14.8
4.0627
5.1
PLUS
3.20
19.36
16.4
1.19
3.1
PPB
11.10
42.18
27.3
11.47
3.2
GENTING ( M)
2.63
19.24
14.8
1.52
5.0
RHB CAPITAL
4.16
40.00
10.9
3.72
6.0
SIME DARBY
6.80
31.61
22.3
3.33
3.7
TANJONG
13.50
90.00
14.9
9.19
3.7
TENAGA
7.55
40.46
18.7
5.755
2.6
TM
2.84
23.00
12.3
2.9199
6.2
UMW
5.85
40.0
14.6
3.2948
4.3
YTL
6.70
58.00
11.6
5.2394
3.7
YTL POWER
2.17
12.0
18.1
0.98
3.5
CONCLUSION / FINAL ANALYSI S - FORECASTS FOR THE REST OF 2009.
1. FORECAST AVERAGE P.E.RATIO FOR FYE 2009 - 21.8X.
2. FORECAST AVERAGE GROSS DIVIDEND YIELD FOR FYE 2009 – 3.7%.
3. Forecast an average FYE 2009 earnings growth contraction of between 25% to 60% as compare to FYE 2008 earnings but earnings growth of between 15% to 30% in 2010.
4. Revised a forecast worst case scenario of downside risk on the Composite Index at below 1000 level by the end of FYE 2009, due to deteriorating fundamentals which is definitely an opportunity to BUY on the cheap sale to position for the next rally betting on economy recovery at the latest by second half of next year.
5. Forecast the CI for the 3Q 2009 to be between a trading range of 1000 to 1200 level.
6. The CI best case scenario for FYE 2009 is between 1200 to 1331 due to better than expected economic fundamentals and corporate earnings in the coming quarters.
7. The CI most likely scenario by the end of FYE 2009 is around 1200 due to better than expected (stablizing) economic fundamentals and quadruple inflows of funds in anticipation of Malaysia and global economy recovery next year. Forecast CI at 1331 in 2010, 1525 in 2011 and new high before the next general election on strong economy recovery.
8. I revised the forecast GDP growth for FYE 2009 to negative 5% from a possible contraction of 1% to 3% in line with the government forecast of a contraction between 4% to 5% due to a deepening recession in the world most develop economy especially in the United States, U.K., European Union and Japan that has severely affected our country exports. Asian countries such as China, Korea, India are also experiencing a sharp economic slowdown. For 2010, I forecast a GDP growth of between 3% to 3.5% and for 2011, I forecast a GDP growth of between 5.5% to 6%.
Meanwhile, the latest World Bank growth forecast for Malaysia in 2009 is a contraction of 4.4%, in 2010 a growth of 2.2% and in 2011 a growth of 5%. OECD has also revised upward the member countries growth prospects.
A VERY HAPPY AND PROSPEROUS INVESTING FOR THE REST OF 2009.
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