News Bites · Ranhill Energy will delay its planned July 31 IPO after Petronas suspended the license of an affiliate company earlier this month. · AirAsia could enter into a new venture in Japan, its chief executive Tan Sri Tony Fernandes said. · Bursa Malaysia Bhd expects trade value for Regulated Short Selling to grow as the exchange introduces plans to attract greater market participation in Securities Borrowing and Lending. · Pantech’s 1QFY14 net profit of RM13.8mn (+9% QoQ, +10% YoY) was in-line with our expectations and consensus’, accounting for 21% of full-year estimates respectively. · Tenders for the High Speed Rail linking Kuala Lumpur and Singapore are only likely to be out late next year, said Land Public Transport Commission chief executive officer Mohd Nur Kamal. · Ramelle Ashram Ramli, son of former Perak Menteri Besar Ramli Ngah Talib surfaced as a substantial shareholder in Leweko Resources Bhd, controlling 19mn shares or almost 8% of the company. · Perak Corporation Bhd has refuted speculation that the property developer and port operator will be privatized, or acquired in a reverse takeover. · Genting Plantations Bhd’s unit plans to issue RM1.5bn 15-year Sukuk programme and RAM Rating Services Bhd has assigned an enhanced long-term rating of AA2(s). · Malaysian Rating Corporation has lowered its debt ratings on KNM Capital Sdn Bhd’s RM300mn Murabahah debt notes. The rating action affected RM50mn of the outstanding notes. · Ipmuda Bhd is acquiring 24 units of office lots from Maju Holdings Sdn Bhd worth RM25.7mn as a debt settlement. · Zen Courts Sdn Bhd will likely appeal the High Court’s decision to allow Ho Hup Construction Bhd to buy out its 30% stake in Bukit Jalil Development Sdn Bhd. · According to the Nielsen global survey of consumer confidence and spending intentions, Malaysia’s consumer confidence index fell four points to 103 in the second quarter of 2013. · China’s manufacturing weakened further in July, with the HSBC Holdings Plc and Markit Economics reporting a reading of 47.7 and the government has announced measures to boost the economy. · Sales of new U.S. homes in June climbed 8.3% to an annualized pace of 497,000 homes (vs. consensus estimate: 484,000), the highest level since May 2008. Results Update Unisem (M) Berhad Target Price : RM0.85 (Sell) Unisem’s 2Q13 performance came in below expectations. 2Q13 losses were reduced by 44.7% YoY (56.9% QoQ) despite a 12.7% YoY (1.1% QoQ) drop in revenue. This was mainly due to the series of cost cutting measures the company implemented in prior quarters. EBITDA was positive at RM44.3mn, up from RM35.7mn in 1Q13 and RM39.6mn in 2Q12. The increase was due to the cost cutting measures explained above. Meanwhile, the company spent only RM11.9mn capex in 2Q13. This was a sharp decline as compared to RM33.1mn in 2Q12 We cut our FY13 earnings from a profit of RM6.8mn to a loss of RM10mn by adjusting our revenue projections downward by 3.6%. No change to our target price of RM0.85, based on unchanged 12x FY14 EPS, which is reflective of the current normal production cycle. Pantech Group Berhad Target Price : RM1.42 (Buy) Pantech’s 1QFY14 net profit of RM13.8mn (+9% QoQ, +10% YoY) was in-line with our expectations and consensus’, accounting for 21% of full-year estimates respectively. Pantech managed to achieve higher revenue (+12% YoY) despite softer product prices in 1QFY14. We understand that prices were lower in 1QFY14 as a result of customers holding back purchases and inventory restocking prior to the General Election. Nevertheless, higher capacity utilisation had managed to cushion the effect of depressed product prices. Management provided guidance that product prices have since normalised in 2QFY14, thus alluding to stronger sales in 9MFY14. Pantech’s YoY expansion in 1QFY14 bottomline was underpinned by: 1) stronger revenue on the back of maximum capacity utilisation which managed to offset higher costs, and, 2) breakeven of operations at Pasir Gudang stainless steel plant, and 3) increased sales of higher margin niche carbon steel products. Pantech declared a first interim single tier dividend of 1.2 sen (1QFY13: 1.0 sen), which translates to a higher payout ratio of 44% (1QFY13: 36%). Maintain Buy on Pantech with TP of RM1.42 based on 12x fully-diluted P/E. Company Update Boustead Holdings Berhad Target Price : RM6.82 (Buy) We maintain Boustead as Buy with revised target price of RM6.82, after updating the market price of Pharmaniaga in our Sum-of-Parts table. On Boustead REIT, a key reason for its privatisation is to enable the enlarged plantation group to expand its land bank. Plantation earnings have been stagnating, partly due to aging estates. Land acquisitions, potentially in East Malaysia, could help address this issue. On the other hand, a potential listing of the property assets, or property REIT, is also on the table, although it may not materialise soon. The heavy industries segment is projected to turnaround strongly this year, underpinned by revenue contribution from the RM9bn patrol vessels contract and non-recurring provisions incurred by the commercial shipbuilding projects in FY12. On top of that, Management is mindful of rising gearing and assured that its debts servicing ability remains intact. Economic Update Leading Index Gains Traction to +4.2% The Leading Index (LI) which monitors the economic performance in strengthened further in May. The Index rose 0.9% to 117.9 points from 116.9 points in the previous month. This was attributed to the increase in the Number of Housing Units Approved (0.6%), Bursa Malaysia Industrial Index (0.4%) and Real Imports of Semi Conductors (0.3%). The annual change of the index, meanwhile, gained traction to 4.2% from 3.5% previously. The LI supports our view that the economy is expected to expand with a steady growth in the forthcoming months. We are maintaining our forecast of 5.0% for this year, with slow growth momentum of 4.5% in 1H before gaining strength to 5.5% in 2H. Growth in 2H will be supported by capital spending supported by ETP projects while consumer spending stays resilient on the back of still favourable labour market as well as income growth. The minimum wage policy as well as the hike in civil servants pay will benefit low to lower-medium households which have higher MPCs. The downside risks will be from the external sector, mainly due to threats of a slowdown in the Chinese economy, impact from the tapering of asset purchases in the U.S. not to mention still weak exports markets, plagued by still weak global demand for semi-conductors as well as low commodity prices. China Unveils Measures to Boost the Economy China has unveiled measures to boost its sluggish economy, in the strongest indication yet of the leadership’s concern about the slowdown and one that also underscores a shift in Beijing’s approach to managing its economy. The “mini stimulus”, though limited in size, could herald more policy moves to prop up growth. In short, the government will eliminate taxes on small businesses, reduce costs for exporters and line up funds for the construction of railways. The State Council, China’s cabinet, said that it hoped to “arouse the energy of the market”. The three-pronged approach announced was: · First, it has temporarily scrapped all value-added and operating taxes on businesses with monthly sales of less than 20,000 yuan. It said the tax cuts, which go into effect at the start of August, would help more than 6m enterprises which employ tens of millions of people · The government pledged to simplify approval procedures and reduce administrative costs for exporting companies. Among the various moves, it said it would temporarily cancel inspection fees for commodities exports and streamline customs inspections of manufactured goods. · It would create more financing channels to ensure that the country can fulfil its ambitious railway development plans. More private investors will be encouraged to participate and new bond products will be issued. The measures, we believe, not only reflect the growing concerns on the state of the economy but is also a sign of how the government is trying to direct public money towards more productive ends as growth slows, especially the small and medium enterprises TA RESEARCH
Posted on: Thu, 25 Jul 2013 10:48:51 +0000
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