Feb 8, 2012

Accumulate TDM - Maybank

TDM Stock Code :2054 Price: RM4.72

Our featured stock this week is TDM Berhad (TDM). The company is an upstream oil palm plantation player as well as the operator of  three specialist medical centers  in Malaysia. Currently, the company owns 25,000 hectares of land in Indonesia and 37,000 hectares of land in Terengganu. This brings the total land bank TDM owns and manages to 62,000 hectares. The company is  in the process of acquiring a hospital in the Klang Valley, and plans to build two more new hospitals on the East Coast over the next three years. 

tdm financial data above: click to enlarge

Maybank IB research recently released a Non-Rated report on TDM where we highlighted the fair value of the stock to be at MYR5.50, significantly higher than the current share price of MYR4.72. We feel that TDM is deeply undervalued due to  a  lack of analyst coverage, its relatively thin trading volumes and shareholding structure which  lacks  institutional ownership apart  from  the Terengganu government’s 63%  stake. However, over the past five years, TDM has successfully divested all of its non-core businesses, raised FFB yields and turned most of its hospitals profitable.

TDM Berhad (TDM),  through its subsidiaries,  manages oil palm plantations, trades palm oil and related products. The company also provides consultancy and management services to specialist medical centers.

tdm technical anlaysisabove: TDM Daily chart (click to enlarge)

TDM  reached a significant weekly Wave 4 low at MYR2.60 in early October 2011 with grossly oversold and bullish chart signals. Due to all its positive indicators, it is likely to surge to its obvious weekly upside Wave 5 targets (of MYR5.27, MYR5.42 and MYR5.90) and resistance levels above. ACCUMULATE (TECHNICAL) on dips for TDM, with stop-loss at MYR3.93

The weekly indicators (such as the CCI, DMI, MACD, Oscillator and Stochastic) are positive and now depict fine indications of TDM’s prolonged price strength. We expect TDM to remain firm on any dips to its support levels of MYR3.95 and RM4.72. It will attract some major buying at those levels. The only resistance level (and all-time high) of MYR4.84 will offer token selling activities. Our  technical upside targets for TDM are
MYR5.27, MYR5.42 and MYR5.90. Stop-loss is at MYR3.93.

tdm quarterly earning above: TDM Quarterly Earnings (click to enlarge)

by Maybank Investment Bank