News Bites · The joint venture between IJM Corp Bhd and Kumpulan Europlus Bhd has been awarded the contract costing no more than RM5bn to undertake construction works for the West Coast Expressway. · Malaysia Airports Holdings Bhd has won a QAR209.5mn or RM192.2mn contract for the repair and maintenance services of the airport special systems at Hamad International Airport in Doha, Qatar. · Petroliam Nasional Bhd has signed agreements with three partners for the extension of the production sharing contract for Block PM8, which is located offshore off Peninsular Malaysia. · Eco World Development Group Bhd shareholders had approved proposals including the acquisition of development rights from Eco World Development Sdn Bhd for RM3.79bn; and a renounceable rights issue of new Eco World shares, with new free detachable warrants. · Kossan Rubber Industries Bhds subsidiary, Ideal Quality Sdn Bhd, has signed a sale and purchase agreement with Himpun Menang Sdn Bhd to acquire a piece of industrial land in Klang, Selangor for RM39mn. · Malayan United Industries Bhd is selling its 69.2% equity stake in Pan Malaysia Holdings Bhd to Datuk Dr Yu Kuan Chon for RM77.1mn cash or 12 sen per share, in a move to divest its non-core assets and reduce its bank borrowings. · Protasco Bhd had today called off its proposed private placement and 1-for-10 bonus issue of warrants, which the board proposed a year ago. · Alliance Bank Malaysia Bhd has appointed Joel Kornreich as its group chief executive officer, effective Jan 1, 2015. · MISC Bhd has appointed Datuk Ab Halim Mohyiddin its new chairman effective Monday and Yee Yang Chien its new president and chief executive officer with effect from Jan 1, 2015. · Talam Transform Bhd posted a net profit of RM3.6mn in the 3QFY15, compared with a net loss of RM13.1mn a year ago due to higher finance income of RM11.9mn in the current quarter under review. · Red Sena Bhd, the first food and beverage special purpose acquisition company in Malaysia, is looking to raise RM400mn from its initial public offering. · Chinas economy slowed in November as factory shutdowns exacerbated weaker demand, raising pressure on the central bank to add further stimulus. Factory production rose 7.2%YoY and retail sales gained 11.7% YoY. · The Thomson Reuters/University of Michigan preliminary December index of consumer sentiment increased to 93.8, the highest since January 2007, from 88.8 last month. Company Update Alliance Financial Group Target Price : RM4.35 (Sell) Last Friday, AFG announced the appointment of Mr. Joel Kornreich as its Group Chief Executive Officer (CEO). His appointment will take effect on 1 January 2015. According to the press release, Mr Kornreich has over 23 years of experience in the financial services industry. Mr Kornreichs last position was as the Country Business Manager of Citibank Global Consumer Group, South Korea. We are excited about this new appointment for AFG. We believe the new CEO could revive AFG’s consumer banking operations and imbue the bank with his wealth of global experience. This is given that Mr Kornreich has also managed Citis consumer businesses in Indonesia, Russia, Spain, Belgium and Greece. The press release also notes that he had served as Citis Retail Banking Head in Singapore, as well as its Asia Pacific Marketing Director. No change to our earnings estimates. We maintain our TP for AFG at RM4.35/share. Remain SELL on AFG premised on the stock’s lofty valuations. Kossan Rubber Industries Berhad Target Price : RM5.40 (Buy) Kossan had entered into a SPA for the acquisition of a freehold industrial land measuring 5.3ha for RM39.0mn. Located in Klang, the acquisition translates into a purchase price of RM68/sqft – which we deem as reasonable. Current plans are to utilise the above land to build either an additional two plants or one plant with a central warehouse facility. Considering its track record, each plant is expected to provide an additional capacity of 1.8-2.0bn gloves/annum. However, plans will only proceed once the acquisition is complete and it has gathered the relevant regulatory approvals. Make no changes to our earnings estimates. Our TP for Kossan remains unchanged at RM5.40/share. This is based on a PER of 18.2x against CY15 EPS of 29.6sen. Overall, we are positive on the move. The land acquisition helps supports the group’s future expansion activities. Indirectly, it also reaffirms management’s view that prospects remain bright in the glove manufacturing industry. Maintain our BUY recommendation on the company. IJM Corporation Berhad Target Price : 6.61 (Sell) A JV between IJMC and Kumpulan Europlus Berhad (on a 70:30 basis) has accepted the letter of award from the concessionaire West Coast Expressway Sdn Bhd, to appoint the JV as the turnkey contractor for the construction of West Coast Expressway. The contract amount is capped at RM5.0bn and the construction period is 5 years. Pursuant to the letter of award, IJMC will be awarded the construction works for packages 3, 4, 5, 8 and 9 of the project for an amount not exceeding RM2.8bn. This announcement came in very much within our expectation as highlighted in our results note dated 26 November 2014. No change to our earnings forecasts as we had imputed the earnings contribution of this project given IJM’s role as the turnkey contractor as well as contractor for the 5 works packages. Maintain SELL call on IJM with unchanged target price of RM6.61/share as we think the current share price has reflected its fair value. Malaysia Airports Holdings Berhad Target Price : RM6.87 (Sell) MAHB, via its 49%-owned Malaysia airports Consultancy Services Middle East LLC, received a letter of award and notice to proceed from the New Doha International Airport (NDIA) Steering Committee for the provision of Repair & Maintenance services at Hamad International Airport for QAR209.5mn (or RM192.2mn). The contract duration is 3 years with an option to extend for additional 2 years. Assuming an operating margin of 15%, the contribution from this repair and maintenance contract is insignificant at only RM4.7mn per year for the next three year. Separately, MAHB reported that total passenger movement in Nov-14 declined 2.6% YoY (+5.8% MoM) to 7mn (see Chart 1). This was led by 2.7% drop (-1.1% MoM) in international passenger movement and 2.6% drop (+5.6% MoM) in domestic passenger movement. Looking forward, passenger traffic at KLIA is expected to be affected by MAS restructuring plan, which the airline is expected to reduce its frequencies to loss-making routes. We cut our FY14 earnings by 3.6% as the cumulative YTD passenger movement was weaker than our expectation. However, we raise FY15-16 earnings higher by 1-2% to account for contribution from the repair & maintenance contract. We now roll forward our DCF-valuation base year to 2015. The valuation is downgraded to RM6.87/share, based on unchanged discount rate of 8.6%. TA Research
Posted on: Mon, 15 Dec 2014 04:17:53 +0000
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