PP 7767/09/2011(028730) RHB Research Institute
RHB Equity 360°
25 October 2010 (QL, Wah Seong, Hunza; Technical: TSH, LBS) Top Story : QL – Expansions to start contributing from FY12 onwards Outperform Visit Note - QL is in the midst of constructing its 13ha Breeder and 17ha Layer plant in Cianjur district, located approximately 2 hours from Jakarta. The plant is expected to contribute 12m day old chicks/year by end FY11 and 1m eggs/day by end FY12. - Similarly in Tay Ninh, Vietnam, QL started construction on its egg plant in May of this year. The plant is expected to produce 500k/eggs per day by end FY12, with similar margins as Malaysia i.e. 24-25 sen/egg selling price and about 7-8% in PBT margins. - For its MPM division, QL is expecting to complete Phase 1 of its new plant in Surabaya, Indonesia by Mar 2011. The Surimi and Fishmeal plant is situated on a 10ha land, and the overall cost would be around RM30-35m. With capacity of 5k mt of Surimi and 5k mt of fishmeal, the plant will increase QL’s current capacity by 20%. - QL has finished planted 8,500ha of land in Eastern Kalimantan around mid of this year. By FY13, the group aims to finish planting 15k ha. The 8,500ha that was planted is expected to mature in FY13, thus doubling its production from FY12. - After tweaking our ILF assumptions, our FY12-13 earnings are thus lifted by 2-6%. Our fair value is raised slightly to RM5.50 (RM5.41 previously) based on unchanged target 16x CY11 EPS. Maintain Outperform. Corporate Highlights Wah Seong : Gladstone/Curtis LNG projects gets environmental green light Market Perform (up from UP) Company Update - The Upstream online on 22 Oct mentioned that both the Gladstone LNG and Queensland Curtis LNG had won final environmental approvals. This clears the way for investment decisions (FID), expected by the end of 2010. Both projects are purported to be worth around A$30bn (RM91.7bn). - In our last update, Wah Seong’s management guided that they had limited visibility with regards to award timelines for the Australian coal seam gas (CSG) projects. As such, the turn of events is positive. If both projects are given the go ahead in Dec, likelihood of awards for the pipeline portion in FY11 is good. Recall, awards for the Gorgon project was received in Oct 09, just about a month (Sep 2010) after the FID. - Maintain forecasts at this juncture as the environmental approval does not have earnings impact as yet. - While FY10 looks to be a watershed year, we believe that the turn of events signal that prospects downunder are improving. As such, Wah Seong’s outlook is also beginning to look more positive. Notwithstanding our concern on the near-term contract flows, the longer term positive outlook will now likely provide support to the share price. Therefore we upgrade our call on the stock to a Market Perform while our fair value is raised to RM2.21 based on 16x FY11 EPS (vs. 13x previously). Hunza Properties : Headline net profit skewed by EIs Market Perform 1QFY11 Results - 1QFY11 estimated core net profit of RM12.5m came in slightly below our expectation but in line with consensus estimates. Headline net profit of RM34.7m was however skewed by exceptional items, mainly made up of revaluation surplus amounted to RM22.1m. Sequential turnover fell 12.4%, continued to be underpinned by progress billings from the 2 residential towers of Gurney Paragon. - Unbilled sales continued to decline to RM82m, while take-up rate for Mutiara Seputeh, Gurney Paragon and Infiniti improved slightly to 43%, 64% and 92%, from 34%, 63% and 87% previously. - No change to our FY10 normalised net profit forecast, but we incorporate the EIs into our headline net profit estimate. - Until we see better prospects and more property launches in the pipeline, we maintain our Market Perform call on the stock. Technical Highlights Daily Trading Strategy : Short-term outlook remains optimistic…
Last Friday’s negative candle confirmed the previous day’s “star” candle and suggested that the FBM KLCI may risk more profit-taking activities in the immediate term. However, immediate weakness could be limited given the firm immediate support level near the 10-day SMA of 1,489. In fact, investors should view this as an opportunity to collect value stocks for further positive push ahead. And as we reiteraited, as long as the benchmark index trades and stablises near the SMA, the short-term outlook remains optimistic and the FBM KLCI is expected to retest the 1,500 psychological level and the recent high of 1,503.82 soon. Beyond that, sentiment will turn even more bullish and it will lift the index towards the all-time high of 1,524.69 next. For a longer-term view, the index is well supported by the support near a technical gap of 1,472 - 1,476, followed by the 1,450 and the 40-day SMA of 1,462.
Daily Technical Watch: TSH Resources – Uptrend is likely to be maintained going forward… - 10-day SMA: RM2.295 - 40-day SMA: RM2.113 - Support: IS = RM2.17 S1 = RM1.99 S2 = RM1.80 - Resistance: IR = RM2.58 R1 = RM3.00 R2 = RM3.36 Weekly Trading Idea : LBS Bina – Removing the recent high will spell more rallies ahead… - Strategy: Bargain Buy for a breakout of RM0.64 soon. - Resistance: IR = RM0.64 R1 = RM0.75 R2 = RM0.86 - Support: IS = RM0.52 S1 = RM0.40 - Exit: Cut loss if it falls below the 10-day SMA near RM0.57. Bargain Buy
Commodities & Currencies – Yet another sign of a rebound on the greenback … - Light Sweet Crude Oil futures (Crude): We see limited downside ahead while foreseeing buyers to return. - Crude Palm Oil futures (CPO): A fresh penetration into the next target region of RM3,000–RM3,300. - Ringgit (RM)/US$: The pair could stay near to the 3.07 level in the near term. - Japanese Yen (JPY)/US$: The technical outlook on the yen remains bullish. - Euro Dollar (EUR)/US$: The pair could see yet another chance to stage a rebound this week. - US Dollar Index (DXY): The index to continue its consolidation this week near the 76-78 region. Bulletin Board
Co/Sector Oil and Gas News Petronas might appoint consultants Technip and Worleyparsons to conduct a front-end engineering and design (FEED) study for a three month period for the proposed re-gasification unit off the coast of Melaka, close to Port Dickson. Once the study is concluded Petronas may commence giving out engineering, procurement and construction contracts to build a jetty and onshore re-gasification facilities. This would be a material change from its earlier plans of building a 3.5mtpa floating storage and re-gasification unit (FSRU). Petronas is looking at the re-gasification unit to be ready and operating by mid 2012. (Financial Daily) The Malaysian Rubber Glove Manufacturers’ Association is urging its members to increase selling prices. This is amid strong headwind as latex price remains high, US$ continues to weaken against RM and overcapacity due to Impact Recom
Neutral. The news of a re-gasification unit to N cater to Petronas future plans is not new. We believe a change to initial plans of an onshore regasification plant instead of a FSRU would mainly be pertaining to the cost of the project. We await further details on the firmed up plans of Petronas. Beneficiaries of the project would be MMHE for the floating structures, while for the onshore structure beneficiaries would be companies like Dialog and Kencana.
As we highlighted earlier, the near-term outlook N for the rubber glove manufacturers remains challenging due to slowdown in orders for rubber gloves as latex prices remains high while the US$ remains soft against RM. We believe this
consistent capacity expansion in anticipation of will hamper some glove manufacturers from constant demand growth due to the outbreak of adjusting prices for the higher costs. In addition, customers are now fully aware that there is diseases in the past (Financial Daily). additional capacity in the market and have been less willing to absorb the higher prices and opted to run their inventory levels on the anticipation that the latex price would eventually come down. Hai-O Hai-O announced that its wholly owned subsidiary, Hai-O Properties (HOP) has entered into a share sale agreement with Sierra Equatorial Development (SED) in which SED purchases from HOP 40% of Hai-O Development for a total of RM1k. The purpose of the agreement is to enter into the business of property investment and development in Malaysia. (Bursa) Neutral, as the amount involved is small. We UP, FV = believe that Hai-O is looking towards expanding RM2.84 its revenue base further given that its MLM business is slowing down. However, it seems questionable that they are reviving their property arm and not focusing on re-growing its core business which is MLM.
Company New entitlements Hunza Properties Going “ex” on 27 Oct K-Star Sports Ltd Eng Kah Corporation Asia Poly Holdings Entitlement details Final single tier dividend of RM0.056 Ex-date 31-Dec-10 Payment date 17-Jan-11
Share split on the basis of 1-into-3 Second tax exempt interim dividend of 3.75 sen Tax exempt interim dividend of 2.5%
27-Oct-10 27-Oct-10 27-Oct-10
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