By OSK Research
12th Feb 2013
Buy
Target MYR3.39
Previous MYR3.39
Price MYR2.66
We expect AirAsia’s 4Q earnings to soar on the back of strong RPK growth and load factor amid seasonally higher yields and flat jet fuel price. We maintain our BUY call on the stock, with our FV unchanged at RM3.39, premised on 11x FY13 earnings.
Incorporating the market caps of Asia Aviation and the group’s insurance arm, AirAsia is trading at a cheap 7.4x PE vs its historical and peers average of 10x and 12x respectively.
Encouraging numbers so far. In 4QFY12, Malaysia AirAsia (MAA), Thai AirAsia (TAA) and Indonesia AirAsia (IAA) reported that revenue passenger kilometres (RPK) grew by 7.8%/22.5%/10.9% respectively y-o-y. The encouraging numbers were due to seasonally stronger year-end air travel demand. Meanwhile, the full-year RPKs of MAA/TAA/IAA jumped 8.1%/16.6%/5.2% respectively, with load factors coming in at 79.5%/82.3%/77.1%.
Overall, the numbers from all three of the group’s country hubs came in well within our estimates. Following the introduction of five new routes in 4Q amid high seasonal demand, MAA’s load factor during that period hit 82.1%, its highest quarterly number since the 82.3% recorded in 4Q2011. The new routes are all international destinations – three to China (Kunming, Guangzhou and Nanning) and two to Indonesia (Solo and Lombok). We gather from management that the December 2012 load factor was also an all-time high.
We note that the q-o-q air travel momentum in 2012’s final quarter had remained resilient.
Robust 4Q results likely. We expect overall yields in 4Q, typically the strongest quarter, to jump 5%-6% y-o-y to 21.4-21.6 sen/RPK, propelled by seasonally higher airfares and take-up of ancillary services. We expect AirAsia to post revenue of RM1.48bn for 4Q (up by 16% y-o-y and 20% q-o-q), boosting its FY12 revenue to RM5.07bn (+12.7% y-o-y). With jet fuel price being relatively flat q-o-q and only up by 1.7% y-o-y in 4Q, the company’s 4Q core earnings, including those from non-equity accounted associates, may
touch RM334m (q-o-q: >100%, y-o-y: +7% y-o-y). For the full year, AirAsia’s core earnings could potentially meet our FY12 estimate for RM797.8m. AirAsia - together with Asia Aviation, the Thailand listed holding company of Thai AirAsia - are expected to report their 4Q earnings on 27 Feb. We do not expect any major upside in cost as the losses from its Philippines and Japan associates may be mitigated by higher earnings contributions from AirAsia Expedia, TAA and IAA.
MAINTAIN BUY. Threat from Malindo overblown. We maintain our BUY call on AirAsia
and our RM3.39 FV, premised on 11x FY13 EPS. The stock is currently trading at an 8.6x
FY13 PE, representing a 27% discount to its peers’ average multiple. Taking into account
the market caps of Asia Aviation and its insurance arm, AirAsia is trading at a cheap 7.4x
PE versus its historical and peer averages of 10x and 12x respectively. Elsewhere, we
expect the group’s upcoming IPOs (AirAsia X and IAA) to crystallize its valuations. That
being said, we feel that in view of the budget carrier’s strong network and fleet as well as
low cost structure, investor concerns over potential threat from new entrant Malindo
pressuring AirAsia’s yields and market share have been exaggerated.
[Source]
Personal archive only.
Showing posts with label OSK Research. Show all posts
Showing posts with label OSK Research. Show all posts
Tuesday, February 12, 2013
Friday, October 12, 2012
AirAsia - Crystallizing Valuations
By OSK Research
12 October 2012
The impending IPOs of AirAsia’s sister companies AirAsia X, Tune Insurance and associate Indonesia AirAsia will be positive for the group as this will crystallize RM806m into AirAsia’s valuations. Incorporating the IPOs’ pricing and the latest market cap of its Thai associate Asia Aviation, AirAsia is trading at an attractive 8.6x PE vs the sector average of 12x. The proposed Batavia acquisition has been called off, which we don’t find surprising given that it is debt-laden. We maintain our BUY call on AirAsia, while keeping our RM3.91 FV based on 12x FY13 EPS.
Wednesday, August 29, 2012
Hong Leong Bank - Solid Asset Quality
By OSK Research
29 Aug 2012
FY12 Results Review
The group reported FY12 results that were largely in line with both consensus and our full-year forecasts. The group is poised to capitalize on longer-term growth opportunities, thanks to its larger post-merger organizational footprint. However, the slowing economic environment in the medium term and HLBank’s relatively conservative culture could cap any immediate-term revenue upside synergies, which is already reflected in its lower-than-expected loans and transactional fee income growth. Rolling forward our valuation to FY13, we raise our FV from RM12.54 to RM14.57 (2.1x FY13 PBV, ROE: 15.8%).
29 Aug 2012
FY12 Results Review
The group reported FY12 results that were largely in line with both consensus and our full-year forecasts. The group is poised to capitalize on longer-term growth opportunities, thanks to its larger post-merger organizational footprint. However, the slowing economic environment in the medium term and HLBank’s relatively conservative culture could cap any immediate-term revenue upside synergies, which is already reflected in its lower-than-expected loans and transactional fee income growth. Rolling forward our valuation to FY13, we raise our FV from RM12.54 to RM14.57 (2.1x FY13 PBV, ROE: 15.8%).
Thursday, May 10, 2012
DIALOG (FV RM3.07- BUY) Company Update: All Progessing Well
By OSK Research Report
10 May 2012
All is Well
Recently, we met up with Dialog’s management, from which we gather that the
company is making good progress in its Pengerang deepwater terminal and Balai
marginal oilfields projects. Dialog has reclaimed more than 150 acres of land to
construct the terminal, which is more than sufficient for Phase 1. Meanwhile, the
Balai marginal oilfield’s pre-development stage is slated for completion by 2013, if
not this year. Overall, we see the company’s prime projects being well on track
and progressing as scheduled. Maintain Buy.
Recently, we met up with Dialog’s management, from which we gather that the company is making good progress in its Pengerang deepwater terminal and Balai marginal oilfields projects. Dialog has reclaimed more than 150 acres of land to construct the terminal, which is more than sufficient for Phase 1. Meanwhile, the Balai marginal oilfield’s pre-development stage is slated for completion by 2013, if not this year. Overall, we see the company’s prime projects being well on track and progressing as scheduled. Maintain Buy.
Good progress at Pengerang terminal. To recap, Dialog has to reclaim about 500 acres of land and has to date reclaimed more than 150 acres, which is sufficient to build its phase 1 centralized tankage facility (CTF). Phase 1 would have a storage capacity of 1.3m cubic meters out of a total planned 5.0m cu m for the entire CTF project. We also understand that with the portion of land reclaimed to date, the capacity of phase 1 can be extended by another 1.0m cu m if required. Otherwise, the existing capacity of 1.3m cu m for phase 1 is targeted to be ready by 2014, with construction slated to be completed by end-2013.
Balai marginal oilfield also on track. We understand that Dialog together with its partners, Roc Oil Malaysia and Petronas Carigali, expects to complete the predevelopment stage by 2013, if not this year. Dialog’s portion of the risk-sharing contract in the Balai marginal oilfield is 32%, while Roc Oil and Petronas Carigali hold 48% and 20% respectively. For this contract, which is for a period of 15 years, the 3 parties are expected to rent a drilling rig together with a work barge from a third party, rather than owing these assets This will create new job opportunities for the other O&G services providers.
Company with a balanced risk appetite. Despite starting off in a relatively prudent and slow pace, we believe the company has made steady progress throughout the years, largely owing to its solid management team. In comparison with its smaller peers, we have great confidence that Dialog would be able to deliver on its Pengerang CTF and Balai marginal oilfield projects, especially since management has conducted extensive studies even before kicking off preliminary works. Thanks to its good balance of recurring income and higher risk projects, Dialog would also have an attractive risk-return profile going forward.
Maintain Buy. Our fair value for Dialog remains unchanged at RM3.07, based on a sumof-the-parts valuation. It has been our favourite defensive O&G stock for some time in light of its steady business model, which provides a good cash flow.
Fair value: RM3.07
Price: RM2.22
[Source]
Sunway Berhad: Maintain HOLD - Bags MYR1.2b MRT Contract
By Maybank IB Research
10 May 2012
A major boost to orderbook. Sunway’s latest MYR1.17b win for the KVMRT Sg Buloh-Kajang viaduct works will boost its outstanding order book by 41% to MYR4b, and enhance earnings visibility over the
medium term. We maintain our earnings forecasts for now having imputed job win potential to the tune of MYR1.5b for this year. Our RNAV-based TP is unchanged at MYR2.62. Maintain HOLD.
MYR1.17b for Viaduct 4 works. Four new work packages – Viaduct 1, Viaduct 4, Viaduct 7 and Depot 1 (Sg Buloh Depot) (see Table 1) –awarded by MRT Corp yesterday are worth a total MYR3.2b. Sunway is the winner of the Viaduct 4 package (6.6km in length) worth MYR1.17b
and is awaiting for the official award. The scope of works comprises the construction of the viaduct guideway and other associated works from Section 17 to the Semantan portal. This win is not a total surprise to us as Sunway is the largest piling contractor in Malaysia.
Enhances earnings visibility. This job win will raise Sunway’s outstanding orderbook for construction by 41% to MYR4b, from MYR2.8b at end-Dec 2011, providing medium-term earnings visibility
and growth for its construction business. Assuming a net margin of 5-7%, we estimate this new contract will contribute MYR58m-MYR82m in net profit (EPS of MYR0.05-0.06), to be recognised into 2016.
A construction-led year. Sunway has won MYR1.46b in construction jobs YTD (including MYR42.4m in foundation works from Tropicana Golf & Country Resort, MYR250m Sunway Velocity Mall substructure works), nearing our MYR1.5b job win assumption for the full year. However, the positive in the construction business is somewhat offset by slowing demand in its property development business. As at endFeb 2012, Sunway recorded MYR100m in property sales meeting just7% of its effective sales target of MYR1.4b for 2012 and 8% of our MYR1.2b forecast for the full year.
Share price: MYR2.37
Target price: MYR2.62 (unchanged)
[Source]
Thursday, April 19, 2012
UOA Development Bhd - Possibility of Reversal Remains
By OSK Research
19 Apr 2012
The share price of UOA development has been trending lower since its debut in June 2011. However, the downward momentum has eased recently, possibly due to accumulation at these low levels. This may lead to a change in trend but more is still needed to confirm the end of the downward trend.
We featured UOA Development late last year in anticipation of a change in trend. An expected and apparent upward move did not happen but the sideways move since the low in Dec 2011 still keeps this possibility alive. To recap, accumulation is likely to have taken place during the bottom of Oct 2011, as seen from the heavy volume for the stock. Buying support is also seen from the series of higher lows, at RM1.15, RM1.30 and RM1.40. The stock has also responded well to the buying support at the latest bottom in early April, as it had closed at the highest level in more than 3 months.
However, the upward bias seen in the past six months remains unconfirmed as the stock has yet to make a higher high, despite the rising trend of the broader market in the past four months. Thus, the stock has to violate the RM1.60 resistance level – the high of Jan 2011 and also the low of Aug 2011 – to affirm the upward bias. This will also see the 200-day MAV line broken, which is usually interpreted as a longer-term positive indication. Positions can be initiated if this happens with a stop loss on close below RM1.40. An aggressive trader may even accumulate now in anticipation of a successful breakout.
Firm resistance is expected at RM1.70, the high of Oct 2011, and RM2.05 – the gap of early August. Both levels are coincidently the Fibonacci levels of the June-Oct 2011 decline. A close above RM2.05 will significantly increase its chances of reaching the price target of RM2.60, which is coincidentally the IPO price. The trade will not work out should the stop loss be triggered, after which we may see the stock returning to its current sideways move. Strong support is expected at the September-low of RM1.15, a violation of which will likely invite further selling.
Resistance- RM1.60
Support- RM1.40
Thursday, April 12, 2012
Myanmar Beneficiaries
By OSK Research
12 Apr 2012
Fortune Favors The Bold
While Malaysian companies are only just jumping on the Myanmar bandwagon, we believe
that opportunities abound although the risks remain. There appears to be opportunities in
the areas of agriculture, O&G, power, tourism and telecoms. Malaysian companies such
as AirAsia, Axiata, Felda, Cypark and Tan Chong which are exploring opportunities in
Myanmar would still have to tread cautiously in the coming months before their efforts
bear fruit. Nonetheless, given the keen interest in the country, investors should keep a
close eye on these companies as sanctions are lifted and the pace of reforms picks up.
12 Apr 2012
Fortune Favors The Bold
While Malaysian companies are only just jumping on the Myanmar bandwagon, we believe
that opportunities abound although the risks remain. There appears to be opportunities in
the areas of agriculture, O&G, power, tourism and telecoms. Malaysian companies such
as AirAsia, Axiata, Felda, Cypark and Tan Chong which are exploring opportunities in
Myanmar would still have to tread cautiously in the coming months before their efforts
bear fruit. Nonetheless, given the keen interest in the country, investors should keep a
close eye on these companies as sanctions are lifted and the pace of reforms picks up.
QL Resources
By OSK Research
12 Apr 2012
Mini Conglomerate in The Making
Following our recent meeting with management, we are optimistic that QL Resources will continue to deliver solid earnings growth in line with its on-track expansion in the ASEAN region. We are expecting the group’s Indonesia and Vietnam operations to start contributing in FY13. Maintain BUY with a FV of RM3.64, given its solid performance and resilient business nature.
Still rocks. QL Resources transformed from a livestock feed trading company (that was
complemented by its smaller fisheries and palm oil businesses) into a leading marine
and poultry egg producer (complete with a fast-growing palm oil business) over the
years. With exposure to three sustainable basic food industries, its strong business
model has enabled QL to deliver sterling results on a consistent basis. Over the years,
the company has expanded its operations through upstream/downstream integration,
innovation and acquisition.
Regional expansion bearing fruits. Going forward, we believe the earnings
excitement will largely come from its regional exposure in Indonesia and Vietnam. On
the marine side, QL is adding another 5k tonnes p.a. capacity to its current surimi and
fishmeal production facilities in Surabaya, increasing the overall production capacity to
10k tonnes p.a. by end-FY13. Also, we are expecting contributions from Indonesia and
Vietnam’s poultry operations to kick in from FY13 onwards, given that the expansions
are all on track. As for the palm oil division, the 20k ha plantation and new CPO mill in
Indonesia will undoubtedly bring the company to the next level.
Defensive in nature. As QL is involved in the basic food industry where demand is
resilient even during economic slowdowns, we are confident that the company’s outlook
remains promising. With QL venturing into Asean countries with growing populations
such as Indonesia and Vietnam, such regional expansions could open up new and
profitable markets that bode well for the company’s future growth.
Maintain BUY. Our FV of RM3.64 is based on 19x CY12 EPS. Given the recent share
price retracement (which was largely due to the market correction), we see this as a good
opportunity to BUY QL shares. This stock is one of our Top 2012 Buys in view of its highly
defensive nature and aggressive overseas expansion strategy.
DEVELOPING INTO A MINI CONGLOMERATE?
Fish is wealth. As a leading marine products player in Malaysia with four marine manufacturing plants
locally, QL has ventured into Indonesia by setting up a surimi and fishmeal plant, each with a 5k tonnes
capacity p.a. in Surabaya. Overall, fish landing in Indonesia is growing at a faster pace compared to Malaysia and the timely expansion in Surabaya will provide some relief to the supply-constrained marine business. Given the fatter margins arising from lower wages and bountiful marine supply in Indonesia, it is also adding new production capacity of 5k tonnes p.a. each for its surimi and fishmeal operations by 4QFY13, boosting the production capacity to 10k tonnes p.a.
Egg-citing ahead. Attempts at replicating the success of its integrated livestock farming in Vietnam and
Indonesia are bearing fruits as well. These two markets are relatively untapped as the egg consumption per
capita was low at 60 eggs compared to Malaysia’s 320 eggs per capita, indicating room for more upside. QL’s modern closed house poultry farms are fully enclosed, with tight bio-security facilities and minimal human contact to prevent the spread of diseases. The Vietnam poultry farm has ramped up its production from 80k to 200k eggs per day (epd) currently, aiming to achieve 500k epd by March 2013. Similarly, production in Indonesia increased to 300k epd from 110k previously, targeting to hit 1m epd by March 2013.
Palm oil. QL has 20k ha plantation under development in Indonesia and 1.2k ha of mature plantation in
Sabah. Besides the new CPO mill in Kalimantan which was commissioned in Feb 2012, it has another 2 CPO mills in Tawau, Sabah as well. In order to diversify its revenue, the palm oil mill effluent will be converted into renewable energy through its biogas plant (2MW) which will operate commercially by this month. Furthermore, the company is looking at converting palm waste into palm pellet for biomass energy. It is currently at the final stage of commissioning and commercial production testing, with the palm pellet plant slated to be fully completed by Dec 2012.
Price- RM3.15
Fair value- RM3.64
[Source]
12 Apr 2012
Mini Conglomerate in The Making
Following our recent meeting with management, we are optimistic that QL Resources will continue to deliver solid earnings growth in line with its on-track expansion in the ASEAN region. We are expecting the group’s Indonesia and Vietnam operations to start contributing in FY13. Maintain BUY with a FV of RM3.64, given its solid performance and resilient business nature.
Still rocks. QL Resources transformed from a livestock feed trading company (that was
complemented by its smaller fisheries and palm oil businesses) into a leading marine
and poultry egg producer (complete with a fast-growing palm oil business) over the
years. With exposure to three sustainable basic food industries, its strong business
model has enabled QL to deliver sterling results on a consistent basis. Over the years,
the company has expanded its operations through upstream/downstream integration,
innovation and acquisition.
Regional expansion bearing fruits. Going forward, we believe the earnings
excitement will largely come from its regional exposure in Indonesia and Vietnam. On
the marine side, QL is adding another 5k tonnes p.a. capacity to its current surimi and
fishmeal production facilities in Surabaya, increasing the overall production capacity to
10k tonnes p.a. by end-FY13. Also, we are expecting contributions from Indonesia and
Vietnam’s poultry operations to kick in from FY13 onwards, given that the expansions
are all on track. As for the palm oil division, the 20k ha plantation and new CPO mill in
Indonesia will undoubtedly bring the company to the next level.
Defensive in nature. As QL is involved in the basic food industry where demand is
resilient even during economic slowdowns, we are confident that the company’s outlook
remains promising. With QL venturing into Asean countries with growing populations
such as Indonesia and Vietnam, such regional expansions could open up new and
profitable markets that bode well for the company’s future growth.
Maintain BUY. Our FV of RM3.64 is based on 19x CY12 EPS. Given the recent share
price retracement (which was largely due to the market correction), we see this as a good
opportunity to BUY QL shares. This stock is one of our Top 2012 Buys in view of its highly
defensive nature and aggressive overseas expansion strategy.
DEVELOPING INTO A MINI CONGLOMERATE?
Fish is wealth. As a leading marine products player in Malaysia with four marine manufacturing plants
locally, QL has ventured into Indonesia by setting up a surimi and fishmeal plant, each with a 5k tonnes
capacity p.a. in Surabaya. Overall, fish landing in Indonesia is growing at a faster pace compared to Malaysia and the timely expansion in Surabaya will provide some relief to the supply-constrained marine business. Given the fatter margins arising from lower wages and bountiful marine supply in Indonesia, it is also adding new production capacity of 5k tonnes p.a. each for its surimi and fishmeal operations by 4QFY13, boosting the production capacity to 10k tonnes p.a.
Egg-citing ahead. Attempts at replicating the success of its integrated livestock farming in Vietnam and
Indonesia are bearing fruits as well. These two markets are relatively untapped as the egg consumption per
capita was low at 60 eggs compared to Malaysia’s 320 eggs per capita, indicating room for more upside. QL’s modern closed house poultry farms are fully enclosed, with tight bio-security facilities and minimal human contact to prevent the spread of diseases. The Vietnam poultry farm has ramped up its production from 80k to 200k eggs per day (epd) currently, aiming to achieve 500k epd by March 2013. Similarly, production in Indonesia increased to 300k epd from 110k previously, targeting to hit 1m epd by March 2013.
Palm oil. QL has 20k ha plantation under development in Indonesia and 1.2k ha of mature plantation in
Sabah. Besides the new CPO mill in Kalimantan which was commissioned in Feb 2012, it has another 2 CPO mills in Tawau, Sabah as well. In order to diversify its revenue, the palm oil mill effluent will be converted into renewable energy through its biogas plant (2MW) which will operate commercially by this month. Furthermore, the company is looking at converting palm waste into palm pellet for biomass energy. It is currently at the final stage of commissioning and commercial production testing, with the palm pellet plant slated to be fully completed by Dec 2012.
Price- RM3.15
Fair value- RM3.64
[Source]
Monday, April 9, 2012
GAMUDA, TM
GAMUDA- MRT Works Ready to Roll
By OSK Research
9 Apr 2012
BUY. All in, we are positive on the progress of the rollout and expect an acceleration in the award of contracts
in the coming months, with MMC-Gamuda perfecting its role as the caretaker of the elevated portion of the
SBK line. Hence, we maintain our BUY call on Gamuda with an unchanged FV of RM4.58, based on SOP
valuation. Moving forward, we expect more developments on the RM8bn Gemas-Johor Bahru Electrified
Double Tracking project to unfold, and which Gamuda is likely to bid for in partnership with China Railway
Construction Corp come 3Q12. At the same time, we believe the current positive sentiment on the whole
construction sector is set to continue, driven by rising news flow on the proposed Lines 2 and 3 of the KV
MRT project.
Price- RM3.59
Fair Value- RM4.58
[Source]
By OSK Research
9 Apr 2012
BUY. All in, we are positive on the progress of the rollout and expect an acceleration in the award of contracts
in the coming months, with MMC-Gamuda perfecting its role as the caretaker of the elevated portion of the
SBK line. Hence, we maintain our BUY call on Gamuda with an unchanged FV of RM4.58, based on SOP
valuation. Moving forward, we expect more developments on the RM8bn Gemas-Johor Bahru Electrified
Double Tracking project to unfold, and which Gamuda is likely to bid for in partnership with China Railway
Construction Corp come 3Q12. At the same time, we believe the current positive sentiment on the whole
construction sector is set to continue, driven by rising news flow on the proposed Lines 2 and 3 of the KV
MRT project.
Price- RM3.59
Fair Value- RM4.58
[Source]
Friday, April 6, 2012
TENAGA: CFO calls it a day
By OSK research
6 Apr 2012
In a Bursa announcement, Tenaga Nasional (TNB) announced that its Chief Financial
Officer (CFO), Mohamed Rafique Merican bin Mohd Wahiduddin Merican, 47, has
resigned to pursue better opportunities and career advancement.
A surprise. This piece of news took us by surprise as we had not heard any rumours of
En Rafique leaving. Meanwhile, a corporate day being organized by TNB for investors in
May could be affected by this development.
Appears to be an amicable parting of ways. As far as we understand, there are no
negative developments surrounding En Rafique’s departure. We also understand that
management has already begun the search for a replacement. During En Rafique’s
tenure, TNB continued to pare down its debts despite facing numerous headwinds. At
this juncture, we believe that there will be minimal disruption to TNB’s activities given
that all standard operating procedures should be in place at this long established
Government Linked Company (GLC).
Coal tax conundrum. Sentiment in the company has been slightly doused of late in
view of recent rumours that Indonesia may be slapping a 25% export tax on coal, which
stoked fears of a price hike in coal. While we do see some rationale for an export tax on
mining ores, we see no justification for a coal export tax as there is limited capacity for
local upgrading of coal or value adding in Indonesia prior to export. We believe that
various parties, including miners and importers, will lobby hard to have this tax reduced
or postponed. For now, we maintain our coal cost assumption of USD110 per tonne for
FY12 and FY13.
Maintain BUY. While some parties may choose to read more than is justified in the
resignation of the CFO, particularly given the upcoming departure of CEO Datuk Seri
Che Khalib - who has chosen not to renew his contract when it expires in June, we
believe that a leading GLC like TNB will keep its operations intact. As such, any short
term share price weakness should be viewed as an opportunity to accumulate the
shares. We maintain our earnings forecast and call, pending further clarification from
TNB’s upcoming results briefing on 12 April.
OSK valuation:
Fair value- RM7.68
Previous- RM7.68
Price- RM6.48
[Source]
By Maybank IB research
6 Apr 2012
Maintain Buy, business is good. Despite this negative surprise, we
maintain our positive stance as we believe Tenaga’s past gremlins
have been successfully eradicated. Natural gas supply has improved
since 2012, coal prices have been trending lower and the demand for
power is very strong at 4%-5% growth. Furthermore, we understand
that Tenaga has already received its RM2.0b of the cost sharing
agreement with the Government and PETRONAS in 2QFY12. Any
near-term stock price decline is a great opportunity to accumulate.
Maybank IB valuation:
Share price- RM6.48
Target price- RM6.90
[Source]
6 Apr 2012
In a Bursa announcement, Tenaga Nasional (TNB) announced that its Chief Financial
Officer (CFO), Mohamed Rafique Merican bin Mohd Wahiduddin Merican, 47, has
resigned to pursue better opportunities and career advancement.
A surprise. This piece of news took us by surprise as we had not heard any rumours of
En Rafique leaving. Meanwhile, a corporate day being organized by TNB for investors in
May could be affected by this development.
Appears to be an amicable parting of ways. As far as we understand, there are no
negative developments surrounding En Rafique’s departure. We also understand that
management has already begun the search for a replacement. During En Rafique’s
tenure, TNB continued to pare down its debts despite facing numerous headwinds. At
this juncture, we believe that there will be minimal disruption to TNB’s activities given
that all standard operating procedures should be in place at this long established
Government Linked Company (GLC).
Coal tax conundrum. Sentiment in the company has been slightly doused of late in
view of recent rumours that Indonesia may be slapping a 25% export tax on coal, which
stoked fears of a price hike in coal. While we do see some rationale for an export tax on
mining ores, we see no justification for a coal export tax as there is limited capacity for
local upgrading of coal or value adding in Indonesia prior to export. We believe that
various parties, including miners and importers, will lobby hard to have this tax reduced
or postponed. For now, we maintain our coal cost assumption of USD110 per tonne for
FY12 and FY13.
Maintain BUY. While some parties may choose to read more than is justified in the
resignation of the CFO, particularly given the upcoming departure of CEO Datuk Seri
Che Khalib - who has chosen not to renew his contract when it expires in June, we
believe that a leading GLC like TNB will keep its operations intact. As such, any short
term share price weakness should be viewed as an opportunity to accumulate the
shares. We maintain our earnings forecast and call, pending further clarification from
TNB’s upcoming results briefing on 12 April.
OSK valuation:
Fair value- RM7.68
Previous- RM7.68
Price- RM6.48
[Source]
By Maybank IB research
6 Apr 2012
Maintain Buy, business is good. Despite this negative surprise, we
maintain our positive stance as we believe Tenaga’s past gremlins
have been successfully eradicated. Natural gas supply has improved
since 2012, coal prices have been trending lower and the demand for
power is very strong at 4%-5% growth. Furthermore, we understand
that Tenaga has already received its RM2.0b of the cost sharing
agreement with the Government and PETRONAS in 2QFY12. Any
near-term stock price decline is a great opportunity to accumulate.
Maybank IB valuation:
Share price- RM6.48
Target price- RM6.90
[Source]
By HLIB Research
6 Apr 2012
TNB (HOLD)
Target price- RM6.54
2Q12 to Show Profits
- Improved natural gas supply to the sector, stable coal power generation as well as seasonally lower power demand in 2Q12, had reduced reliance on alternative fuels and lowered overall fuel cost to TNB.
- TNB had received total RM2bn fuel compensation from Government and Petronas in Feb 2012, and will be recognised as an EI item. Note that the amount is taxable at 25%.
- Additionally TNB will recognise another RM660m forex translation gain due to appreciation of MYR against US$ and JP¥.
- Expect TNB to report 2Q12 net profits of RM2.7bn and core profits of RM550m.
- However, we believe TNB will revert back to alternative fuels as power demand is expected to peak in Apr-Aug period, while being hit by seasonally lower hydropower generation.
- Maintain Hold on TNB with Target Price of RM6.54.
Thursday, April 5, 2012
MISC 3816
By OSK Research
4 Apr 2012
4 Apr 2012
Buy (maintained)
Target price: RM7.45
THE daily returns for very large crude carriers (VLCCs) in the benchmark Saudi Arabia-to-Asia route soared to a 13-month high of US$41,093 which was spurred by strong demands from China.
Apart from higher demand, some of the positive drivers were the return of the Libyan barrels. This has a positive impact on the Aframax and Suexmax markets. However. it built up tensions in Iran as oil was sourced elsewhere, thus lengthening voyages and adding cost savings to the tonne-mile balance.
We opine that the tanker market bottomed in the third quarter as forward freight agreement (FFA) rates have been inching up since the end of September last year. This increases the possibility of the tanker segment recovering faster than expected by early 2014.
Due to the high level of scrapping and slower newbuilding orders, there has been a decline in the order book to fleet ratio. The oil tanker segment’s ratio is now at its lowest at 13%-16% of the total fleet compared to other segments.
Although we think the recovery in freight rates could be short-lived, we opine that overall rates in the near future are highly likely to be better compared to 2011. We foresee that losses in the tanker division could be lower than projected.
However, if the current rate of US$41,093 per day were to stay at this level throughout the year, MISC’s petroleum tanker segment should report a net profit.
We feel that losses from its petroleum tanker segment could be higher as we anticipate that higher bunker prices will eat into earning. Projects that will be of advantage to MISC are Petroliam Nasional Bhd’s (Petronas) agreement with Canadian-based Progress Energy Resources Corporation to acquire 50% of the latter’s interest in shale gas assets worth RM3.32bil.
MISC’s Aframax tanker Eagle Seville. Better results are expected from the petroleum tanker segment.
From our latest liaison with the shipping conglomerate’s management, it was suggested that there will not be any major fleet development on the liquefied natural gas (LNG) side other than the floating storage units under conversion for regasification plant in Malacca, in the near future. We understand that MISC’s expansion of its LNG fleet depends on the timing and size of the potential exports.
We continue to have concerns over the petroleum segment and how much more losses it will incur in its liner division. Meanwhile, other listed shipping players are experiencing a myriad of changes in the overall industry landscape. Despite these concerns, we maintain our view on the company.
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