Look at WCT - one with sell call and one with buy call
How come so different?????
From RHB Research
Transportation
- The share price performance of the transport sector raked in an average total return (incl. dividends) of 14.8 per cent vs the flattish FBMKLCI return of only 0.6 per cent YTD. Shipping generated the highest return with ports being a laggard performer.
- Looking ahead in 2Q, all eyes are on 1Q earnings which we think could disappoint for shipping and ports, while the aviation side could spring a surprise in view of the strong passenger numbers.
- Maintain NEUTRAL on the Transportation sector with Aviation and Logistics as our OVERWEIGHTS in the sub segments with top picks being AirAsia (BUY, FV: RM3.39) and Pos Malaysia (BUY, FV: RM5.00) respectively.
Old Town
- Yesterday, OldTown (OTB) announced that Old Town (M) SB, its wholly-owned subsidiary acquired 70 per cent equity interest in Advance City Ltd (ACL), Hong Kong.
- OTB will buy up 1.4 million shares, representing 70 per cent of the issued and paid up share capital of ACL for a cash consideration of HKD67 million (~MYR26.8 million), arrived at a ‘willing buyer willing seller’. The acquisition will be funded by the proceeds raised from the private placement of OTB which was completed on December 21, 2012.
- ACL is mainly involved in trading and distribution of coffee products in Hong Kong, Macau and Guangdong. Upon completion of the deal, OTB will be able to take control of the current distribution network in China to maximise sales potential.
- The acquisition is likely to be completed around June 2013. The additional earnings contribution from ACL will bump up our FY14 numbers by 3.7 per cent. FV is revised to RM2.82 as we roll over our valuation to 15x FY14 EPS. Maintain BUY.
LPI Capital
- LPI Capital’s 1QFY13 earnings of RM42.1 million were within expectations at 23.4 per cent of ours and 21.5 per cent of consensus FY13 estimates.
- Earnings surged 33.8 per cent from 1QFY12 despite a flattish 4.8 per cent growth in gross premiums. This was on the back of i) healthier claims ratio in comparison to 1QFY12, which was a period where the company’s business suffered from exposure to Thai-flood events, and ii) unusually low net commission ratio of 5.4 per cent.
- Motor premiums had continued to be pared down in the company’s premiums portfolio, on a cumulative quarterly trend. Note that the fire premiums continue to be a profitable segment, contributing approximately 36.2 per cent of total premiums portfolio but as high as 52.1 per cent of underwriting income before management expenses.
- We are maintaining our earnings forecast for now as we did not observe major surprises from 1Q results. We retain our BUY call, pegging our RM15.75 FV to a 3-year PE band of 19.4x FY13 EPS.
Alam Maritim
- Alam Maritim (Alam) announced two contract wins on Bursa Malaysia yesterday. Both contracts are worth RM85.2 million in total and will help offset the potential losses from its offshore, installation and construction (OIC) division
- This brings year-to-date (YTD) contract wins to RM814.7 million.
- Despite this positive news, we are leaving our earnings estimate unchanged as it has already been factored into our earnings forecast previously
- While its OIC division will likely register losses of RM4 million-6 million per quarter this year, near term contract wins in its OSV and subsea division will likely offset the losses. Hence we believe our projected earnings growth of 28.3 per cent in FY13 could be achievable in our view.
- All in, we retain our BUY recommendation on Alam Maritim, with its FV unchanged at RM1.25, pegged to 13x FY13 EPS.
WCT
- WCT said that the Omani government had decided “not to proceed with” the RM1 billion Package 2 of Batinah Expressway awarded back in August 2012 to an 80:20 JV between WCT and local partner Oman Roads Engineering Company LLC.
- It also said that it would “respect and adhere to the decision”. The cancellation has effectively eroded WCT’s current outstanding construction orderbook by RM781 million or 20 per cent to RM3.2 billion from RM4 billion.
- We are downgrading FY13-14 net profit forecasts by 6-7 per cent, having removed the project from our forecasts.
- Fair value is reduced by 6 per cent to RM1.65 from RM1.76. Maintain Sell.
Pestech
We recommend a Buy on Pestech, with a FV of RM2.33, pegged to 10x its projected FY13 P/E. The company is involved in the provision of power transmission systems engineering and solutions for high voltage and extra-high voltage substations, transmission lines and underground cables. It has a total orderbook of RM235 million as at end January 2013. TNB is its main client for power transmission system services nationwide. Pestech is also tapping into the fast growing demand for power in Sarawak, having sealed two contracts within SCORE. It has also made a foray into other South-east Asian countries such as Cambodia and Laos, where there are tremendous opportunities due to the scarcity of and growing demand for electricity.
From HwangDBS Vickers
Today’s market preview
The key FBM KLCI will probably continue to range-bound today after oscillating inside a 8.5-point band yesterday. From a technical perspective, its immediate support and resistance levels are currently pegged at 1,680 and 1,700, respectively.
Over on Wall Street, major US equity bellwethers were up between 0.3 per cent and 0.6 per cent last night lifted by expectations that the upcoming corporate earnings season would fuel buying interest.
Back home, a handful of corporate developments could stir investors’ interest today: (a) DRB-Hicom, which plans to dispose of 623 acres of land in Johor and Kuala Lumpur for RM605 million; (b) MMC, as the Saudi Arabian government has terminated the rights of its 50 per cent joint venture vehicle as the developer of Jazan Economic City; (c) WCT, after the Oman government has decided not to proceed with its RM1 billion construction job for an expressway in Oman that was previously awarded to its 80:20 joint venture company; (d) Alam Maritime, following the award of oil & gas support services contracts worth RM85m; and (e) LPI Capital, in response to its 34 per cent net profit jump in the latest quarterly result.
WCT
Construction laggard. WCT is a laggard YTD relative to larger peers such as IJM and Gamuda. This is not justified given its strong and diversified c.RM3 billion orderbook, improving property franchise, and overall lower perceived political risk. Its strength lies in its ability to execute and extract value from projects, with its superior cost structure making it a strong bet to capitalise on contract flows irrespective of the election outcome. Its contract pipeline looks healthy with possibility of winning Kwasa Damansara Land civil works, Tun Razak Exchange, and RAPID phase 2 civil works to make up for the recent cancellation of Batinah Expressway Package 2.
Credible Iskandar proxy. WCT’s growing exposure to Iskandar with 51 acres of land bank and RM4.5 billion GDV (9 per cent of SOP) make it an ideal proxy to ride on growing interest towards the area. Its franchise there is gaining traction with the first two phases of Medini Iskandar sold out with improving pricing power. Its most recent launch — Medini Signature (GDV of RM430 million) which is targeted at the Singapore market is priced at RM630-700psf (vs maiden launch of RM450psf); it is expected to do well with >90 per cent registrants for the first tower.
Growing retail exposure a right move. Over the years, WCT has painstakingly tried to address its weak recurring income base by growing property investment income. This strategy may be a winning ticket in the longer term with the retail industry in a sweet spot currently. The addition of Gateway@KLIA2 which is slated to open in 2Q13 will raise total NLA to 2.1m sq ft (from 1.7m sq ft) and property investment pretax profit by 27 per cent in FY14F (10 per cent of pretax profit) compared to FY12.
Maintain BUY, raised TP. We raised our SOP-derived TP to RM3.35 after factoring in other land bank from Medini Iskandar, OUG and Rawang which will be developed more aggressively over the next two years, but balanced off by higher net debt.
DRB Hicom
DRB has announced the sale of two freehold parcels of land: i) 613.79 acres in Tebrau, Johor for RM534.73 million or RM20 psf and ii) 9.6 acres in Jalan Kuching, KL for RM69.92 million or RM167 psf. The Johor land is not converted to mixed residential and commercial status and is currently designated as agriculture. The net book value is a combined RM112.92 million or RM4psf. The Johor land is part of the c.1,500 acres (GDV RM8 billion) called Glenmarie Heights which DRB tentatively will launch in 2014. Hence, with the sale, DRB will own 902.8 acres. The proceeds from the sale are staggered with the full payment only completing in three years from the unconditional date.
MMC Corp
MMC Corporation Berhad (MMC) announced that it has been informed by Jazan Economic City Land Co. Limited (JECL), a 50 per cent joint venture with the Saudi Binladin Group (SBG) that the rights of MMC and SBG as the developer of Jazan Economic City in the Jizan Province, Kingdom of Saudi Arabia had been terminated with immediate effect. This was supposed to be a US$30 billion development to also nurture non-oil based industries.
According to the announcement, the termination was as a result of circumstances which gave rise to several difficulties that interrupted the progress of the Project.
* These recommendations are solely the opinion of the respective research firms and not endorsed by The Malaysian Insider. The Malaysian Insider shall not be liable for any loss arising from any investment based on any recommendation, forecast or other information contained here.