AirAsia Bhd
On the back of a 23% passenger growth and 77% load factor, analysts are expecting AirAsia Bhd’s quarterly results next month to surprise on the upside. “Ancillary income will offset fuel price increase. It acts as the best defence against fuel price increase as every RM1 per pax increase will offset US$1 per barrel increase in fuel price,” says an analyst from ECM Libra. He adds that ancillary income has doubled to RM29 per pax within the last two years and management targets to double it again to RM60 per pax by introducing more value-added services.Meanwhile, AirAsia plans to defer the delivery of 15 A320 aircraft as it expects the construction of the new LCCT to be further delayed. Hence, capital requirement will be reduced by RM2.3bil while gearing will also be lowered.
“We reiterate our buy call on AirAsia with a target price of RM1.90. AirAsia is poised to outperform on consensus earnings upgrade in anticipation of strong second quarter results, sustained low fuel price and potential dual listing (or merger),” he says
The analyst forecasts an 8.89% increase in revenue to RM2.87bil while net profit is expected to jump 211.13% to RM598.3mil for its year ending Dec 31, 2009.
SP Setia Bhd
The recent abolishment of bumiputra equity requirement for mergers and acquisitions and Foreign Investment Committee approvals to improve the investability of Malaysian properties is likely to benefit the property sector. The best proxy to a sector re-rating would be sector leader, SP Setia Bhd. It is the largest developer by market cap and sales and is also a clear favourite among institutional investors.In the first eight months of its financial year ending October 2009, the company hit a record RM1bil in sales. Unbilled sales rose to RM1.9bil, which is among the highest in the sector.
It is also expected to bring forward its RM5bil mixed development project near Midvalley in KL to 2010 (from 2013), which could mean upside to earnings.
“It has no plans for new launches in the next few months to concentrate on delivery. It will also not extend its 5/95 financing scheme beyond July, which could lead to margin expansion,” says HwangDBS Vickers analyst Yee Mee Hui.
Yee has raised her target price to RM5 from RM4.50 based on narrower 10% discount to its revised net asset value of RM5.54. For FY09, she is forecasting net profit of RM189mil on the back of RM1.2bil in revenue.
UEM Land Holdings Bhd
UEM Land is the largest land owner in Nusajaya, a key development area in Iskandar Malaysia, Johor. Its township development is set to benefit from closer ties between the Malaysian and Singapore governments.
CLSA Asia-Pacific Markets analyst Chee Wei Loong says that price differential remains wide with land in Singapore at least 40 times more expensive than in Johor.It is also expected to bring forward its RM5bil mixed development project near Midvalley in KL to 2010 (from 2013), which could mean upside to earnings.
“It has no plans for new launches in the next few months to concentrate on delivery. It will also not extend its 5/95 financing scheme beyond July, which could lead to margin expansion,” says HwangDBS Vickers analyst Yee Mee Hui.
Yee has raised her target price to RM5 from RM4.50 based on narrower 10% discount to its revised net asset value of RM5.54. For FY09, she is forecasting net profit of RM189mil on the back of RM1.2bil in revenue.
UEM Land Holdings Bhd
UEM Land is the largest land owner in Nusajaya, a key development area in Iskandar Malaysia, Johor. Its township development is set to benefit from closer ties between the Malaysian and Singapore governments.“There have been talks to improve the economic linkages between Singapore and Malaysia, which will be a catalyst to improve property values in Johor,” he says.
The proposals include potential investments by the Singapore government in two iconic projects: building of a third link between the two countries and expansion of Singapore’s Mass Rapid Transit system to Johor Baru.Khazanah Nasional has planned investments of about RM7bil, including the building of a RM1.1bil coastal highway linking Johor Baru to Nusajaya. It is spearheading the development of a new financial district, education hub, international resorts and theme parks on 4,500 acres of land acquired from UEM Land in 2007.
“UEM’s share price is trading at a steep discount to an estimated RNAV/share of RM4. We believe newsflow of potential investors in Nusajaya, rather than immediate-term earnings prospects, will be a re-rating catalyst says Chee.
MISC Bhd
The outlook for the container sector is bleak but management initiatives to reshape the value-destroying division are positive, and losses could diminish.
“We like the stock for its defensive energy-shipping business, bright oil & gas sector outlook and good execution of strategies,” says Nik Hadi from CLSA Asia Pacific.
MISC Bhd
The outlook for the container sector is bleak but management initiatives to reshape the value-destroying division are positive, and losses could diminish.“We like the stock for its defensive energy-shipping business, bright oil & gas sector outlook and good execution of strategies,” says Nik Hadi from CLSA Asia Pacific.
MISC is withdrawing from Grand Alliance, effective Jan 1, 2010. This will effectively end its participation in the Mediterranean or Asia-Europe trade lanes. The focus will then be on the intra-Asia routes, the subcontinent India/Middle East to Asia trade. CLSA is projecting losses at the division to decline from RM877mil in FY09 to RM525mil in FY10.
MISC’s parent, Petronas has said recently that it will continue to spend on upstream exploration and production activities.
In FY09, Petronas increased upstream capital expenditure to RM22.3bil, up 3.6%. The uptrend is likely to extend further and this bodes well for MISC’s offshore and heavy-engineering divisions.
At MISC’s price to book of 1.5 times (x), Nik Hadi does not expect the stock to retest its all-time low of 1x given a more resilient business model.
MISC’s parent, Petronas has said recently that it will continue to spend on upstream exploration and production activities.
In FY09, Petronas increased upstream capital expenditure to RM22.3bil, up 3.6%. The uptrend is likely to extend further and this bodes well for MISC’s offshore and heavy-engineering divisions.
At MISC’s price to book of 1.5 times (x), Nik Hadi does not expect the stock to retest its all-time low of 1x given a more resilient business model.
“At current levels, investors are getting the heavy-engineering division for free. Our sum-of-parts-derived target price of RM9.60 implies a total return of 12% and hence our ‘buy’ rating,” he says.
Downside risks are sharper than expected decline in shipping rates and cutbacks in Petronas’ capital expenditure.
Downside risks are sharper than expected decline in shipping rates and cutbacks in Petronas’ capital expenditure.
QSR Brands Bhd, the parent company 
of KFC Holdings Bhd and the owner of Pizza Hut, is aggressively expanding its quick service restaurant business in Malaysia and Cambodia. India is the group’s latest target market, with new outlets planned in Mumbai and Pune.
of KFC Holdings Bhd and the owner of Pizza Hut, is aggressively expanding its quick service restaurant business in Malaysia and Cambodia. India is the group’s latest target market, with new outlets planned in Mumbai and Pune.CIMB Research views QSR’s current share price as undervalued. Based on the latest closing prices, QSR’s 50.3% stake in KFCH is worth RM728mil, while the group’s current market value is just shy of RM800mil.
This indicates that the market assigned a small value to the growing Pizza Hut operation. Meanwhile, the management had been buying back shares in QSR, but not in KFCH over the past months.
QSR is 60% owned by Kulim (M) Bhd. Lembaga Tabung Haji has a 9.9% stake, while the Employees Provident Fund holds 5.8% share in the company.
CIMB Research, in a report dated July 10, has reduced QSR’s earnings forecast to account for higher start-up cost on its overseas operations, but sees QSR’s growth story as “attractive,” supported by compounded annual growth rate (CAGR) of 11.9% over the next three years.
It also noted that QSR’s share price valuation is cheaper compared to KFCH, while dividend yield is higher at 4.5%.
This indicates that the market assigned a small value to the growing Pizza Hut operation. Meanwhile, the management had been buying back shares in QSR, but not in KFCH over the past months.QSR is 60% owned by Kulim (M) Bhd. Lembaga Tabung Haji has a 9.9% stake, while the Employees Provident Fund holds 5.8% share in the company.
CIMB Research, in a report dated July 10, has reduced QSR’s earnings forecast to account for higher start-up cost on its overseas operations, but sees QSR’s growth story as “attractive,” supported by compounded annual growth rate (CAGR) of 11.9% over the next three years.
It also noted that QSR’s share price valuation is cheaper compared to KFCH, while dividend yield is higher at 4.5%.
Fajarbaru Builder Group Bhd 
Fajarbaru Builder Group’s order book stood at RM500mil as at end-March, which is a respectable size for a small second board-listed contractor with a market value of just RM140mil.
With no debts, cash in hand of RM87.5mil and a good execution track record in recent years, analysts say Fajarbaru will be a strong contender for upcoming public infrastructure works to be rolled out in the coming months.
Analysts predict that the firm would be able to meet market expectation of adding RM400mil worth of new jobs for this year. It had already secured a RM138mil job to build a hospital in Tampin, Negri Sembilan earlier this year. Five brokerages gave their profit forecast for the builder, with the mean prediction of 12.2 sen per share expected for year ended June 30, 2009.
Fajarbaru Builder Group’s order book stood at RM500mil as at end-March, which is a respectable size for a small second board-listed contractor with a market value of just RM140mil.
With no debts, cash in hand of RM87.5mil and a good execution track record in recent years, analysts say Fajarbaru will be a strong contender for upcoming public infrastructure works to be rolled out in the coming months.
Analysts predict that the firm would be able to meet market expectation of adding RM400mil worth of new jobs for this year. It had already secured a RM138mil job to build a hospital in Tampin, Negri Sembilan earlier this year. Five brokerages gave their profit forecast for the builder, with the mean prediction of 12.2 sen per share expected for year ended June 30, 2009.
Kencana Petroleum Bhd
Kencana Petroleum Bhd has proposed to sell new shares to raise as much as RM160mil. This will add to its existing cash pile of RM84mil.
Analysts say Kencana is looking to expand into the offshore support vessel business, and the fund raising exercise would help pay for the capital expenditure needed for the new venture.
Such vessels are the missing link in Kencana’s offshore operations.
The group’s current orderbook stands at RM1.9bil, made up mostly of oil and gas related fabrication works.
Chief executive officer Datuk Mokhzani Mahathir said last month that the group’s order book would remain healthy at least over the next three years with expected contract wins at home and abroad.
From October onwards, Kencana will start seeing recurring income from a 25% stake in a drilling rig contracted to Petronas.Consensus estimates showed Kencana’s earnings would reach 13.6 sen for the year ending July 31. A steady crude oil price at above US$60 per barrel would keep sentiment on the oil and gas player intact.
Malayan Banking Bhd
An overwhelming 87% of analysts tracked by Bloomberg rated Malayan Banking Bhd (Maybank) as a “hold” at best.
Of the total 24 analysts, only three see the bank as a buy, saying that the country’s biggest bank is worth more than what the majority is willing to pay for it.
The market’s appetite for Maybank’s shares may have slowed after its share price surged 80% from a low in March. At RM6.40 on Thursday, the stock was well below where it was in early 2008 – before Maybank made what now looked like an ill-timed expansion into Indonesia and Pakistan.
Kencana Petroleum Bhd has proposed to sell new shares to raise as much as RM160mil. This will add to its existing cash pile of RM84mil.Analysts say Kencana is looking to expand into the offshore support vessel business, and the fund raising exercise would help pay for the capital expenditure needed for the new venture.
Such vessels are the missing link in Kencana’s offshore operations.
The group’s current orderbook stands at RM1.9bil, made up mostly of oil and gas related fabrication works.
Chief executive officer Datuk Mokhzani Mahathir said last month that the group’s order book would remain healthy at least over the next three years with expected contract wins at home and abroad.
From October onwards, Kencana will start seeing recurring income from a 25% stake in a drilling rig contracted to Petronas.Consensus estimates showed Kencana’s earnings would reach 13.6 sen for the year ending July 31. A steady crude oil price at above US$60 per barrel would keep sentiment on the oil and gas player intact.
Malayan Banking Bhd
An overwhelming 87% of analysts tracked by Bloomberg rated Malayan Banking Bhd (Maybank) as a “hold” at best.
Of the total 24 analysts, only three see the bank as a buy, saying that the country’s biggest bank is worth more than what the majority is willing to pay for it.
The market’s appetite for Maybank’s shares may have slowed after its share price surged 80% from a low in March. At RM6.40 on Thursday, the stock was well below where it was in early 2008 – before Maybank made what now looked like an ill-timed expansion into Indonesia and Pakistan.
Maybank’s current price-to-book value of around 1.6 times is at a discount to the industry’s average, but overrriding concerns about potential damaging impairment charges on overseas investment and loan loss provision are major turn-offs for investors.
Post a RM6bil rights issue announced earlier this year, Maybank’s key capital ratios will at “very healthy” levels.
Analysts expects the group’s solid local operations to keep the bank in the black for the current year ended June 30. The bank’s last quarter results are expected to be out by end of next month.
Post a RM6bil rights issue announced earlier this year, Maybank’s key capital ratios will at “very healthy” levels.Analysts expects the group’s solid local operations to keep the bank in the black for the current year ended June 30. The bank’s last quarter results are expected to be out by end of next month.
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