Stocks to watch: Banks, Sunway Holdings, KNM, KFCH


Written by Melody Song
Wednesday, 26 May 2010 06:23


KUALA LUMPUR: Key regional markets, which were hammered down in recent days with the FBM KLCI notching losses for eight straight days, are expected to stage a mild rebound on Wednesday, May 26 after Wall Street managed to stage a late-day rally.

Major US indices fell more than 3% in early trade as investors worried about the stability of the European banking system after a small Spanish bank failed over the weekend.

The Dow Jones industrial average dropped 22.82 points, or 0.23 percent, to 10,043.75. But the Standard & Poor's 500 Index gained just 0.38 point, or 0.04 percent, to end at 1,074.03. The Nasdaq Composite Index shed 2.60 points, or 0.12 percent, to 2,210.95.

The International Monetary Fund warned a sovereign debt crisis in Europe is the biggest threat to global economic recovery, despite the nearly US$1 trillion lifeline for heavily-indebted nations such as Greece, Portugal and Spain.

At Bursa Malaysia, where the market capitalisation has fallen below RM1 trillion after the heavy selling, could see a mild rebound especially for strong fundamental stocks including banks.

Stocks to watch include banks, SUNWAY HOLDINGS BHD [], KNM GROUP BHD [], KFC Holdings Bhd, ANN JOO RESOURCES BHD [], DRB-HICOM BHD [], LFE Corp Bhd and Pelikan International Corp Bhd.

Banks, which are the proxy to the economy and also investors’ perception of the stock markets going forward, could rise on some mild buying interest. Malaysian banks have displayed strong growth in corporate earnings and strong fundamentals.

Sunway Holdings continued to deliver a strong financial performance with a net profit of RM40 million for the first quarter ended March 31, 2010 (1QFY10), which represented a 60% jump from the last preceding quarter ended Dec 31, 2009. Earnings per share rose 62% to 6.92 sen from 4.28 sen.

Points which investors should look at are that 80% profit contribution in current financial year is expected from overseas. Its unbilled property development sales of RM515 mil from local and Singapore projects while it has existing outstanding CONSTRUCTION [] order book of about RM2.8 billion.

Meanwhile, KNM’s 1Q net profit fell almost 60% to RM40.33 million from RM98.45 million in the same period a year earlier on the back of revenues falling nearly 30% to RM373.30 million, which resulted in a drop in performance due to “lower utilisation of capacity”.

KFCH’s net profit in the first quarter rose 19% to RM34.24 million from RM28.69 million while revenue gained 14% to RM600.67 million from RM526.63 million.

The higher revenue was due to improved primarily from its continuing strategy of network expansion and its effective KFC marketing programmes.

Steel manufacturer and trader Ann Joo Resources Bhd remains bullish on the steel industry this year and 2011 on the back of higher demand for construction steel and stronger prices, driven by pump-priming measures worldwide.

Master Builders Association Malaysia (MBAM) expect 2010 to be a healthy year for the construction industry with support expected in the next two quarters from projects awarded under the RM60 billion second stimulus package,.

US-based SmallCap World Fund Inc has acquired a 5.93% stake in Masterskill Education Group Bhd through the open market, according to a filing with Bursa Malaysia.

DRB-Hicom announced its 4Q10 results yesterday, posting a net profit of RM259.36 million from a net loss of RM60.74 million a year earlier.

Its full year net profit was 28.5% lower at RM472.30 million from RM660.51 million previously. However, it said the stronger results were partially due to the realization of gains in the current quarter.

Beleaguered LFE has commence arbitration proceedings against its former director and major shareholder, Alan Ranjendram, who allegedly owes the company some RM26.36 million.

Pelikan, it posted strong earnings with net profit surging to RM111.4 million in 1QFY10 from RM8.02 million a year ago. The increased mainly benefited from a reduction in finance costs and improvement in the profit of an associate.