May 16, 2017

UMW Oil & Gas - TP: RM0.80

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UMW gas forcast

The News
●UMW Oil & Gas Corporation Bhd (UMWOG) has been awarded two new contracts from Petronas Carigali for the provision of drilling services as part of Petronas Carigali’s drilling programme.
● NAGA 3 will be contracted for 5 firm wells with the option to drill additional 1+1+1+1+1+1 wells (total: 6) whereas NAGA 4 is contracted to drill 2 firm wells with optional 1+1+1 wells (total: 3).
● The combined contract value for firm and optional wells amounted to USD34.81mn (RM151.1mn).

Our View
● The contract wins are a huge positive for UMWOG as the Group finally has all its rigcontracted. Note that the main reason for its huge core losses in FY16 was the Group’s idling fleet. It registered average utilisation rate of 21% in FY16.
● Assuming one month per well, NAGA 3 & 4 will have contract tenure of 5- 11 months and 2-5 months respectively. Given the contract value of USD34.81mn, we estimate DCRs of USD70-75K/day which is cashflow positive and within expectations.
● We had mentioned in our previous report that Petronas would prioritise local rig players. Thus, the contract wins are within expectations. Assuming no delays and only firm wells are drilled, UMWOG’s average utilisation rate in FY17 will be 51% which is slightly lower than our forecasts of 52%.
● To recap, management revealed that it is bidding for 15 contracts in Malaysia. We expect UMWOG to secure the lion’s share of these contracts given its  position as the only local jackup rig player with available rigs for hire.
● All in, we are rather positive on the news as UMWOG’s earnings visibility is clearer. Furthermore, with all rigs contracted, idling costs will be significantly reduced.

umw gas dataImpact
● Maintain our earnings forecast as the contract wins are within expectations.

Valuation
Maintain Buy on G with unchanged TP of RM0.80 based 0.9x FY18 P/B. We believe UMWOG is staged for a turnaround given 1) relieve of short-term liquidity risk and 2) increase in rig utilisation rates. Risks to our call include 1) failure to sure

source: TA Securities Research – 16/5/2017

May 11, 2017

Construction: Still A Big Question Mark Over Bandar Malaysia

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■ Over the weekend, local press reports laid out potential new names that could co-implement Bandar Malaysia’s masterplan.
■ Starbiz source did not rule out the possibility of the EPF coming in as a partner.
■ We highlight the stocks under our coverage that may still directly/indirectly benefit from Bandar Malaysia, despite failed IWH-CREC deal – Gamuda, MRCB and WCT.

No big leads but many names thrown out
● Over the weekend, local newspapers covered several “what if” scenarios following the termination of the share sale agreement (SSA) of the 60% stake in Bandar Malaysia to IWH-CREC consortium – valued at c.RM7.4bn. Developer TRX City recently said that a new tender for the Bandar Malaysia masterplan will be launched. On the surface, this may turn out similarly to the parceled tenders by Kwasa Land for the RRI land in Sungai Buloh. We expect more news from TRX City in coming weeks.

EPF to come in with Wanda and Tan Sri Desmond Lim?
● StarBiz reported that there was talk of Dalian Wanda Group of China bidding for the Bandar Malaysia project together with Malton Group, headed by Tan Sri Desmond Lim, who is also the new major shareholder and Executive Chairman of WCT. According to sources in Starbiz, there is also the possibility that the Employees Provident Fund (EPF) would take part in the group/consortium.
● We note that Tan Sri Desmond Lim was one of the major contenders for the Bandar Malaysia deal. It was reported in 2015 that Tan Sri Desmond Lim together with a Qatari state-backed consortium and IWH-CREC were the two frontrunners for the Bandar Malaysia deal.

bandar malaysia

Transport hub MOU for MRCB still valid
● We understand from management that MRCB’s MOU with Wondrous Vista, signed in Jun 2016, to explore opportunities to develop an integrated transport hub in Bandar Malaysia remains valid. In late Jan 2017, MRCB announced that it intended to form a strategic alliance with Wondrous Vista and Bandar Malaysia Sdn Bhd to acquire, construct, develop and operate the transport hub.
● Of the total 483 acres, 60 acres (12.4%) were allocated to the hub, where the high-speed rail (HSR) project’s KL terminus would be located. The MOU is valid for six months from Jan. While we acknowledge that an MOU is still preliminary, MRCB’s experience in transport hubs (KL Sentral) and transit-oriented developments lends this option some credibility, in our view.

Not all doom and gloom but delays possible
● At this juncture, we view the failed IWH-CREC deal as negative for the progress of Bandar Malaysia. We understood earlier that the forgone RM7.4bn injection of funds (from sale of the 60% stake) would fast-track the execution of phase 1. Phase 1, primarily consisting of the transport hub (and the KL terminus of the HSR project) was initially slated for launch this year. On the infra side, the latest news from MyHSR highlighted 1Q18 as the new timeline for HSR’s civil works tenders.

bandar malaysia project
Other China-backed jobs intact; Sector Overweight retained
● Despite the fallout from Bandar Malaysia and the implications for China-driven contracts, we remain optimistic about the job awards from the RM50bn East Coast Rail Line (ECRL) and the RM9bn Gemas-Johor Bahru double-tracking project that are long overdue. Gamuda remains our top big-cap pick for the rail theme. Downside risks to our sector call are major delays in job rollout, including China-driven ones.

source: CIMB Research – 11/5/2017

May 9, 2017

Alpha Stock Picks For May

Alpha Picks: To Also Outperform In A Defensive Market

Four out of our six alpha picks outperformed the market in Apr 17 (FBMKLCI: 1.6%). For our May picks, we replace stellar performer Ann Joo with Globetronics, and retain Ekovest, Kerjaya Prospek, VS Industry and YTL Power, while RHB Bank is our sole SELL call. BUY Ekovest on weakness, given that it is widely expected to fall today in tandem with its sister company IWC’s fall.

WHAT’S NEW
■ Review of April picks. Most of our BUY picks gained in April (see RHS), delivering a simple average return of 11.5% for the month. At the front of the line is Ann Joo, which closed 27% mom higher, followed by VS Industry and Kerjaya Prospek which gained 16.3% and 15.6% respectively. During the month, we raised the target prices for Ekovest, VS and Kerjaya Prospek.
 ■ We have temporarily turned cautious following TRX City’s shocking announcement that the sale of Bandar Malaysia to the IWH-CREC JV has lapsed on 3 May, the same day that the Prime Minister abruptly pulled out from an official site visit to Bandar Malaysia. Given the hazy circumstances surrounding the announcement, which is being contested by IWC-CREC, plus the uncertainties of events that could unfold, we reckon that the market would continue to temporarily retrace from its earlier upward trend.
 ■ Nevertheless, the market pullback should be temporary, as upcoming events such as Malaysia’s upcoming participation in China’s ‘One Belt One Road’ summit should partially reignite some of the lost momentum in the China FDI investment theme. Hence, we expect Ekovest, the sister company of IWC, to retrace some of its 16.8% fall following the fateful TRX announcement (which caused Ekovest to open limit down last Thursday, before clawing back some of the losses).

ACTION
 ■ Our alpha list for May: BUYs are Ekovest, Globetronics, Kerjaya Prospek, VS Industry, YTL Power, while RHB Bank is a SELL. BUY Ekovest on weakness, which is expected to fall in sympathy with IWC’s anticipated fall (post its two-day trading suspension) today.
   ■ Ann Joo removed due to its stellar performance, but Ann Joo and selected steel companies should still deliver spurts. Although Ann Joo is no longer featured as a top Alpha pick, we acknowledge that the share price could still be positively swayed by strong 1Q17 results. Likewise, we expect many steel manufacturers to post strong 1Q17 results which would lift valuations.
 ■ Globetronics a new addition. We expect Globetronics to maintain its uptrend through to 3Q17, in anticipation to strong demand response to smart phone launches, which include the expected launch of iPhone8 in Sep 17

ANALYSTS’ TOP ALPHA* PICKS

malaysia alpha stocks

 

Ekovest (Ridhwan Effendy)
 ■ All-time high construction orderbook of RM13b would sustain its earnings delivery for the next 5-6 years. Also, the potential IPO of DUKE 1 & 2 (which could be as soon as 2018) could re-rate the stock, given the significant value (RM1.9b) vs to its market cap of RM2.5b.

Share Price Catalyst
 ■ Further contract wins.
 ■ Signing of the concession agreement for DUKE2A, its third highway concession.

Globetronics (Yeoh Bit Kun)
 ■ We expect meaningful qoq earnings growth in 2Q17 and much stronger hoh performance in 2H17, driven by the maiden contribution from new light sensor (expected in May) and production ramp-up of its gesture sensor. With the contribution of these two sensors, net profit is estimated to grow 142% yoy in 2017 and reach an all-time high in 2018 (+62% yoy). Effective execution in terms of both delivery and product quality of these two sensors could be a near-term catalyst.

Share Price Catalyst
 ■ Commercialising one or two new sensors in 2018-19, which are currently under co- development with its client.
 ■ Appreciation of US dollar against the ringgit.

Kerjaya Prospek (Ridhwan Effendy)
 ■ Kerjaya expects to clinch at least about RM800m worth of new construction jobs in 2017,
which we think is easily achievable given its historical orderbook win track record. Presently, its tenderbook stands at RM2b, which comprise mainly of high-rise residential buildings and commercial property jobs.

Share Price Catalyst
 ■ New contract wins, expected from end-2Q17 onwards.
 ■ Valuation laggard to comparable peers like Suncon.

RHB Bank (Keith Wee)
 ■ The group has the lowest loans-loss coverage ratio inclusive of regulatory reserve in the industry at 75% (industry: 129%), which when coupled with: a) relatively low loans-loss coverage ratio of 30% for its O&G gross impaired loans portfolio, and b) RM2.6b in O&G loans under the watch list category (46% of total O&G loans portfolio) does place a significant upside risk to management’s rather benign net credit cost guidance of 25-30bp for FY17. As such, we see significant downside risk to management’s targeted ROE of 9% to 10% and in turn consensus earnings.

Share Price Catalyst
 ■ Significant upside risk to management’s guided net credit cost of 25-30bp for FY17. Note
that Maybank and CIMB, with similar O&G exposure and higher provision coverage ratios, are guiding for net credit cost of 50-60bp and 60-70bp respectively.
 ■ O&G provisions and impairment may have yet to bottom out
 ■ Asset quality woes will place pressure on overall loans growth.

VS Industry (Fong Kah Yan)
 ■ In addition to the three assembly lines for the vacuum cleaner box-built contract which are
slated to commence in FY17, we expect VS Industry to secure more contracts from their key customers in FY18 on increasing demand for existing products as well as new product launches notably in the beauty care segment.

Share Price Catalyst
 ■ Securing new contracts from existing or new customers.
 ■ Sharp appreciation of US dollar against the ringgit.

YTL Power (Chong Lee Len)
 ■ YTLP provides a 6.5% sustainable dividend yield anchored by defensive cash flow from Wessex Water. Key re-rating catalysts include new power plant projects between 2020- 21, which are: a) 554MW Jordanian power plant, and b) 80% equity stake in 1,320MW coal-fired Indonesian power plant.

Share Price Catalyst
 ■ Positive newsflow on the financial close achieved at PT Jati.

stocks valuation

source: UOBKayHian Research  – 8/5/2017

Apr 11, 2017

Accumulate SEAL (Technical Analysis)

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SEAL INCORPORATED BHD Stock Code: 4286

seal technical analysis

buy seal

Despite recent consolidation, SEAL has been able to hold on above its critical supports of 60-day & 200-day EMA lines as well as the “Ichimoku Cloud”. Banking on improving momentum,
we expect SEAL to form another up-leg in the near-term. Upper resistance is pegged at MYR0.54 and MYR0.635.

source: Maybank IB Research – 10/04/2017

SEAL INCORPORATED BERHAD
The principal activities of the Company are property investment and contractor of buildings and project manager for property development. The principal activities of the subsidiaries are the extraction of timber trading of log and sawmilling and letting of properties.

Apr 6, 2017

Turn Of The Month Effect: Analysis Of Top 5 Picks For Mar/Apr 2017 Cycle

Turn of the Month effect. Referring to our report dated 28 March 2017, we have duly analysed the performance of our top 5 picks based on the Turn of the Month Effect for March/April 2017 cycle. Our findings show that 2 out of the 5 top picks experienced an increase in their respective stock price on absolute basis during the turn of the month strategic days. The gainers, both on absolute and relative basis, were Public Bank and Hong Leong Bank. On the other hand, Westports, IOI and Astro lagged.

ANALYSIS OF THE TOP 5 PICKS
Top 5 picks. We list below our top 5 stocks recommendation together with the review analysis for the March/April 2017 cycle of the turn of the month strategic days:

• Westports (BUY; TP: RM5.00; EPR: 23.5%)
westport

On absolute basis, Westport’s stock price decreased by -0.7% from RM4.08 at the beginning to RM4.05 at the end of the March/April 2017 cycle of the turn of the month strategic days. The share price of Westports reached its monthly high of RM4.08 on 28 March 2016, the first day of the cycle. This was accompanied by a higher than average trading volume of 2.7m of the strategic days. The average trading volume for the cycle was 2.3m. The share price of Westports then declined thereafter to RM4.05 until the end of the cycle.

• Astro (BUY; TP: RM3.78; EPR: 37.0%)

astro

On absolute basis, Astro’s stock price decreased by -3.8% from RM2.87 at the start to RM2.76 at the end of the March/April 2017 cycle of the turn of the month strategic days. Astro’s share price peaked at RM2.87 on cycle’s first day (28 March 2017), the same day the fourth quarter ended 31 January 2017 financial results were released. Based on the Astro’s results, the Average Revenue Per User (ARPU) increased from RM1.10 to RM100.4 despite the drop in subscription revenue. In addition, Astro will give priority to its pay customers by not over investing in subsidies for (set-top) boxes in a soft consumer year as there is no point seeing new customers if Astro cannot sustain the subscription. On relative basis, Astro underperformed the FBM KLCI from the start until the end of cycle.

• Public Bank (BUY; TP: RM22.60; EPR: 13.2%)

public bank

On absolute basis, Public Bank’s stock price increased by merely 0.2% from the beginning to the end of the March/April 2017 cycle of the turn of the month strategic days. Aside from that, Public Bank’s stock price outperformed the FBM KLCI during the whole cycle. Observing the trend in trading volume and share price, we reckon that the turn of the month effect may have
kicked off way earlier prior to the cycle for Public Bank. This is evident through high stock prices accompanied with higher than average trading volumes which occurred before the cycle began. For instance, on 17 March 2017 which was 11 days before the cycle started, volumes surged to 16.4 million while stock prices reached its monthly high of RM20.18 for the month of March.

• IOI Corp (BUY; RM5.30; EPR: 14.7%)

ioicorp

On absolute basis, IOI Corp’s stock price decreased by -1.9% from the start to the end of the March/April 2017 cycle. On relative basis, IOI Corp underperformed the FBM KLCI from the start until the end of the cycle

• Hong Leong Bank (BUY; RM15.50; EPR: 12.6%)

hong leong bank

Hong Leong Bank’s stock price experienced an increase of 0.7% on an absolute basis during the turn of the month cycle and also outperformed the FBM KLCI throughout the cycle. The share price of Hong Leong Bank peaked at RM13.76 during the fourth day of the cycle (31 March 2017), coinciding with a higher than average volume of RM0.8m.

SUMMARY OF TOP PICKS PERFORMANCE:bursa malaysia top five

FBM KLCI year-end target. We reiterate our FBM KLCI 2017 year-end target at 1,830 points

source: MIDF Research – 04/04/2017

Apr 3, 2017

Alpha Picks: Slimmer Pickings

While only four of our alpha picks outperformed the market in Mar 17, the picks collectively still delivered a respectable simple average return of 4.6% for the month (FBMKLCI: 2.7%). We shorten the line-up for Apr 17 as many of the picks have outperformed. We retain Ann Joo, Ekovest, VS Industry and YTL Power, while we add Kerjaya Prospek and RHB Bank (SELL).

malaysia stocks recomendation
WHAT’S NEW
 Review of March picks. Our alpha picks delivered a respectable 4.6% simple average return in March, although only four stocks outperformed the FBMKLCI’s 2.7% mom return (see RHS table). The outperformers continue to come from mainly our promoted infra-related and E&E investment themes, with the exception of Axiata.
 China FDI, infrastructure and E&E investment themes will continue to deliver positive momentum. In particular, we look forward to Chinese President Xi Jinping’s planned visit to Malaysia in 2Q17, which could raise interest in the China FDI theme. Implicit in our stock-picking strategy is our expectations for market returns to moderate, having risen 6.0% ytd, driven initially both domestic flows, and recently amplified by foreign investment inflows.

ACTION
 Our alpha list for April. BUYs are Ann Joo, Ekovest, Kerjaya Prospek, VS Industry, YTL Power, while RHB Bank is a SELL.
 New conviction picks. We add Kerjaya Prospek into our list. Kerjaya should clinch at least RM800m worth of new construction jobs in 2017, allowing valuations to catch up with its comparable peers. We also included RHB Bank as a conviction SELL, as NPL provisions have yet to peak. Meanwhile, we retain Ekovest in the alpha list, and its present deep 29% discount to our RNAV of RM2.02/share should allow valuation to stretch as the China FDI theme fully unfolds.
 Out of the list are outperformers Axiata (14.2%) and Inari (7.8%). Also off the list are stocks which have less compelling near-term investment theses – BIMB (no near-term catalyst anticipated post the 4Q16 results season), Top Glove (earnings momentum priced in), and Yinson (some contract termination risks counter-balance potential of securing a new sizeable FPSO contract).

bursa malaysia alpha stock picks

Ann Joo Resources (Abdul Hadi)
 Following its return to profitability in 2016, Ann Joo is set to see another year of earnings recovery in 2017 with steel prices on a rising trend, coupled with favourable raw material prices. We reckon Ann Joo's share price will continue to trend up ahead of its 1Q17 results as steel prices and sales volume rise qoq, and raw material costs peak.

Share Price Catalyst
 Improved steel ASP on the back of rising local demand from infra projects.
 Industry consolidation in China will curtail cheap steel imports.
 Prudent capital management with dividend policy of 60%; subject to capital requirement.

Ekovest (Ridhwan Effendy)
 All-time high construction orderbook of RM13b would sustain its earnings delivery for the
next 5-6 years. Also, the potential IPO of DUKE 1 & 2 (which could be as soon as 2018) could re-rate the stock, given the significant value (RM1.9b) vs to its market cap of RM3.1b.

Share Price Catalyst
 Planned visit by China President Xi Jinping should elevate interest in China FDI beneficiaries.
 Signing of the concession agreement for DUKE2A, its third highway concession.
 Further contract wins.

Kerjaya Prospek (Ridhwan Effendy)
 Kerjaya expects to clinch at least about RM800m worth of new construction jobs in 2017, which we think is easily achievable given its historical orderbook win track record. Presently, its tenderbook stands at RM1.4b, which comprise of mainly high-rise residential buildings and commercial property jobs.

Share Price Catalyst
 New contract wins, expected from end-2Q17 onwards.
 Valuation laggard to comparable peers like Suncon.

RHB Bank (Keith Wee)
 The group has the lowest loans-loss coverage ratio inclusive of regulatory reserve in the industry at 75% (industry: 129%). This coupled with: a) relatively low loans-loss coverage ratio of 30% for its O&G gross impaired loans portfolio, and b) RM2.6b in O&G loans under the watch list category (46% of total O&G loans portfolio) does place a significant upside risk to management’s rather benign net credit cost guidance of 25-30bp for FY17.
As such, we see significant downside risk to management’s targeted ROE of 9% to 10% and in turn consensus earnings.

Share Price Catalyst
 Significant upside risk to management’s guided net credit cost of 25-30bp for FY17. Note
that Maybank and CIMB, with similar O&G exposure and higher provision coverage ratios, are guiding for net credit cost of 50-60bp and 60-70bp respectively.
 O&G provisions and impairment may have yet to bottom out
 Asset quality woes will place pressure on overall loans growth.


VS Industry (Fong Kah Yan)

 In addition to the three assembly lines for the vacuum cleaner box-built contract which are slated to commence in FY17, we expect VS Industry to secure more contracts from their key customers in FY18 on increasing demand for existing products as well as new product launches notably in the beauty care segment.

Share Price Catalyst
 Securing new contracts from existing or new customers.
 Sharp appreciation of US dollar against the ringgit.


YTL Power (Chong Lee Len)

 YTLP provides a 6.5% sustainable dividend yield anchored by defensive cash flow from Wessex Water. Key re-rating catalysts include new power plant projects between 2020-2021, which are: a) 554MW Jordanian power plant, and b) 80% equity stake in 1,320MW coal-fired Indonesian power plant.

Share Price Catalyst
 Positive newsflow on: a) Jordanian power plant construction, and b) financial close achieved at PT Jati.

stocks valuation

source: UOBKayHian – 03/04/2017

Mar 29, 2017

TECHFAST – Bullish Flag Pattern

 

techfast analysis

TECFAST has been consolidating over the past week after a prior strong two-week rally. Yesterday, the share price surged 6.5 sen (19.4%) to close at RM0.40 to confirm a bullish ‘Flag’ chart pattern with a long white ‘ Marubozu’ candlestick. The MACD line is poised to form a higher high on the back of strong uptick in RSI and Stochastic, laying a hand on the bullish bias. In tandem with the strong trading volume observed, we view that follow-through buying interest could rally the stock further up towards RM0.40 (R1) and possibly RM0.50 (R2) in the near-to-mid term, based on the flagpole measurement objective. On a side note, we do not discount the possibility of the share price taking a breather soon before resuming its uptrend given the overbought condition displayed by the RSI and Stochastic. That said, we note key support levels are found at RM0.335 (S1) followed by RM0.295 (S2).

Source: Kenanga Research – 29/3/2017

TECHFAST HOLDINGS BERHAD
The Company is a leading specialized manufacturer and distributor of High Precision Computer's Components (self-clinching fasteners)