PP 7767/09/2010(025354)RHB Research Institute
RHB Equity 360
27 May 2010 (MPI, Ta Ann, KLK, RCE, Gent Plant, IJM Land, IJM Plant, IJM Corp, Proton, Tan Chong,Mah Sing, Allianz, MCIL; Technical: UEM Land)Top Story: MPI –
Stronger Growth Ahead
Briefing Note- MPI expects 4QFY06/10 revenue to register stronger qoq growth, given that 3QFY06/10 qoq growth of +2.0% which bucks the trend of a seasonally weaker quarter.- Also, MPI expects 4QFY06/10 net profit to grow sequentially on the back of: 1) higher utilisation rate; 2)stronger contribution from MLP and high-density packages; and 3) margin expansion stemming from higher contribution of high-density packages and cost-cutting measures.- We understand that overall utilisation rates have increased to 95% from 85% in 2QFY06/10. Note thatutilisation rates for Ipoh, Suzhou, and Dynacraft plants currently stands at 95%, 100%, and 90%respectively (vs. 90%, 100%, and 85% in 3QFY06/10).- Separately, with Ipoh and Suzhou plants currently running at full-capacity, we understand that MPI expectsto raise capacity for these plants by 25% and 30% by Sep-10. Note that MPI is targeting to increase itshigher-margin MLP capacity to 12m/day by end-FY10 (vs. 8m/day currently). In addition, management hadstated that it will be using the spare capacity from the Advance Packages (AP) line to expand its MLPpackages as well as high-density packages. Furthermore, given the capex of around RM3m for its newetch and strip plating capacity, MPI expects capacity for Dynacraft’ to increase by 20%.- Maintain
with a fair value of RM8.46/share.
Corporate HighlightsTa Ann:
1QFY10 results likely to be impacted by higher FFB cost
Results Preview- 1Q10 results (due out today) are likely to come in below our expectations. This is mainly due to the sharpincrease in FFB cost of >20% in 1Q10 vs. FY09 (from our initial assumption of a flattish FFB cost yoy). Theincrease in FFB cost was mainly due to higher fertilizer cost following higher fertilizer application on itsplants during the quarter.- Despite the more encouraging sales volume of Tasmanian plywood, the higher cash cost vs. averageselling prices continue to lead the entire plywood division into losses in 1Q10. Nevertheless, we note thataverage selling prices transacted in 2Q10 so far for Tasmania plywood is up (+10-15% qoq), which couldmean that Ta Ann’s plywood division could start to break even during the quarter.- We reduced our earnings forecasts by 11-15% for FY10-12 p.a.- Our SOP-based fair value is reduced to RM6.45 (from RM7.20) based on unchanged 14x FY10 timber division earnings and 14x FY10 plantation division earnings. Maintain Outperform.
FY03/10 EBIT Only Grows 3%
1QFY10 Results/Briefing Note- Normalised FY03/10 net profit of RM263.6m came in within our forecast but missed the market consensusby a whopping 15%.- IJM
s outstanding construction orderbook currently stands at about RM3.6bn and it is confident aboutsecuring RM2bn new contracts per annum.- While we gathered from our sources that IJM had won the two Murum access road work packages on
prices, IJM assured that it
knows the Sarawak market very well
and the job is not
- Maintain Market Perform. Fair value is RM4.88.