MONEY MASTER

SKB Shutters Corp Bhd (-ve) Shares in SKB Shutters Corp Bhd (fundamental: 0.75/3, valuation: 0.9/3) triggered our momentum algorithm last Friday for the first time. It saw a total of 4,000 shares  traded that day, versus its 200-day average volume of 823.5 shares. The counter closed up 2.5 sen or 3.85% at 67.5 sen. In April, SKB secured a US$10.8 million contract for the supply of racking solutions and automated storage and retrieval system (ASRS) for Hund Vuong Corp Ltd, one of the largest seafood processing and  export groups in Vietnam. The company also indicated it was expecting more business from the racking solutions and ASRS segment, going forward. For the financial year ended June 30, 2016, the company reported a narrower net loss of RM423,000, compared with RM515,000 in the previous year, after a 9% increase in revenue to RM55.77 million. SKB is trading at 0.34 times its net asset value. It did not pay dividends for the financial year ended June 30, 2...

RGB International Bhd (-ve) Shares in RGB International Bhd (fundamental: 2.5/3, valuation: 1.8/3) saw some 54.6 million shares done last Friday, compared to its 200-day average volume of 6.91 million shares. It closed up 1 sen or 5% at 21 sen. Since early October, RGB’s share price has been trending upward, gaining 4 sen or 23% since its close at 17 sen on Oct 4. In its second quarter ended June 30, 2016, RGB reported a net profit of RM6.98 million, up 6% from RM6.56 million in the previous year’s corresponding quarter. Revenue gained 16% to RM58 million, from RM49.88 million. Cumulatively, net profit for the first half of its financial year was 19% higher at RM12.91 million, compared with RM10.89 million in the previous year, while revenue climbed 29% year-on-year to RM114.09 million. RGB’s price-to-net-asset-value stood at 1.51 times. It paid 1 sen per share in dividends for its financial year ended Dec 31, 2015. Source:  http://www.theedgemarkets.com/my/article...

Bio Osmo Bhd (+ve) LAST Friday, shares in Bio Osmo Bhd (fundamental: 1.85/3, valuation: 0.3/3) triggered our momentum algorithm for the first time. The counter closed 1 sen or 20% higher at 6 sen, with a total volume of 5.1 million shares. Its 200-day average volume was 409,516. The loss-making bottled water manufacturer recently completed its placement exercise to fund its diversification into hotel management business, via a subscription of a 75% stake in Intra Magnum Sdn Bhd (IMSB) for RM18.75 million. The balance 25% will be held by Impiana Sdn Bhd. IMSB is developing the Impiana Resort & Residences Cherating in Kuantan, and has entered into three hospitality management agreements with Impiana Cherating Sdn Bhd, Impiana Hotel Ipoh Sdn Bhd and Impiana Tioman Sdn Bhd. Bio Osmo’s stock currently trades at 1.5 times its net book value. Bio Osmo did not pay dividends for the financial year ended Dec 31, 2014. Source:  http://www.theedgemarkets.com/my/article/stock-m...

Jerasia Capital Bhd (+ve) SHARES in Jerasia Capital Bhd (fundamental: 0.35/3, valuation: 1.1/3), which gained one sen or 1.49% to close at 68 sen yesterday, triggered our momentum algorithm for the first time this month. One million shares were exchanged, compared with the stock’s 200-day average volume of 89,621. The company’s share price has risen significantly since last week, jumping 16.5 sen or 32% to close at 67.5 sen on Oct 19, from its closing of 51 sen on Oct 18. The jump triggered an unusual market activity query from the bourse regulator, though Jerasia said it wasn’t aware of the reason behind the sudden gain. For the second quarter ended Sept 30, 2015 (2QFY16), the company’s net profit rose 32% y-o-y to RM1.28 million, as revenue rose 18% to RM94.92 million. Jerasia is trading at 0.39 times its net book value. Source:  http://www.theedgemarkets.com/my/article/stock-momentum-jerasia-capital-1

Cepatwawasan Group Bhd (-ve) SHARES in Cepatwawasan Group Bhd (fundamental: 0.7/3, valuation: 2/3), which triggered our momentum algorithm yesterday for the second time this year, closed up two sen or 2.55% at 80.5 sen. It saw 1.28 million shares traded, versus its 200-day average volume of 120,745. The oil palm planter’s share price spiked recently, after it announced a 187% jump in net profit to RM10.4 million for the third quarter ended Sept 30, 2016 (3QFY16), from RM3.62 million a year earlier, on higher sales volume and better crude palm oil and palm kernel prices. Revenue rose 8% year-on-year to RM79.08 million. Subsequently, its shares gained 9.5 sen or 14% to close at 78.5 sen on Oct 21, from 69 sen on Oct 20. Cepatwawasan is trading at 0.52 times its net book value. Source: http://www.theedgemarkets.com/my/article/stock-momentum-cepatwawasan-group

Versatile Creative Bhd (-ve) SHARES in Versatile Creative Bhd (fundamental: 0/3, valuation: 0.55/3), which triggered our momentum algorithm yesterday, slipped one sen or 0.76% to RM1.31 after 2.61 million shares were done; in contrast, its 200-day average volume was only 445,508.5 shares. In May, the loss-making company secured a contract to build a halal vaccine plant along with a pharmaceutical plant and research centre in Bandar Enstek Industrial Park, Negeri Sembilan, for US$69.3 million. The contract was awarded by Oriental Mace Sdn Bhd, which is part of Oriental Mace Group that is led by Professor Dr Wong Kong Yew as chief executive officer. On Aug 29, it was revealed that Wong had inked an agreement with Versatile executive chairman Datuk Lee Kwee Hiang to buy the latter’s 18.33% stake in Versatile at RM17.21 million or 80 sen per share. Versatile is trading at 3.72 times its net book value. No dividends were paid out for the financial year ended March 31, 201...

Malaysian Prime Minister Najib Razak has targeted budget spending at his coalition’s most loyal voters, seeking to limit any damage from more than a year of political turmoil as talk turns to a potential early election. Najib Razak chases 'ultimate' win as supporters get budget goodies The premier allocated more funds for his cash handout program to the poorest 40 percent of Malaysians, promised civil servants a bonus and introduced extra assistance for farmers. He pledged more roads, bridges and better electricity and water supply for rural regions, and sought to woo younger voters with discounts on outstanding student loans and access to cheap housing in urban areas. After weathering funding scandals and attempts to topple him for a good part of his second term as premier, Najib must balance a slowing economy with keeping voters happy ahead of an election that could come as soon as March. While the opposition is fractured, it has sought to lure ethnic Malays from Na...

Malaysia's budget 2017 has been successfully tabled by Prime Minister Datuk Seri Najib Razak on last Friday. In the midst of a low oil price and weak external environment, economists have said that the Budget 2017 was one that hits the right note while maintaining fiscal discipline.  The theme of the budget 2017: Accelerating growth, ensuring fiscal prudence, enhancing well-being of the Rakyat. Prime Minister Najib presenting Budget 2017 last Friday Here's a quick look on what Budget 2017 has to offer: Operating Expenditure: RM214.8bil, Development Expenditure: RM46 bil RM260.8 billion has been allocated for expenditure, representing an increase of 3.4% from previous year. According to some economists, the higher allocation for expenditure will help to drive the economy in 2017. From the breakdown, we could see that RM214.8 billion is for operating expenditure (82%) as compared to only RM46 billion for development expenditure (18%). This continu...

SELL CALL with unchanged target price (TP) of RM1.55 Comments As anticipated, revenue of BFood’s Starbucks Malaysia operations is growing steadily. However, Starbucks’ EBIT margin has been depressed due to the weakening of the MYR against the USD. This is due to BFood purchasing certain raw materials from Starbucks Corp (USA) such as coffee beans, frappuccino mix and syrup which are denominated in USD. These materials account for between 40-50% of Starbucks Malaysia’s COGS. Therefore, given the recent renewed MYR weakness to ~RM4.20/US$, Starbucks Malaysia’s margins will remain depressed. This effect is illustrated over the previous six quarters (Figure 1). In FY17, BFood has closed one unprofitable KRR Indonesia restaurant and plans to continue to close loss-making outlets. Further closures of will reduce BFood’s effective tax rate as currently losses overseas cannot be offset back home in Malaysia, resulting in an inflated effective tax rate. Ready to Drink (RTD) S...

Retain outperform recommendation with target price (TP) of RM1.08 The Group announced overnight that it has entered into a sales and purchase agreement with Reuters International Holding S.A.R.L. and Systex Capital Group Inc. for the acquisition of the entire equity interest in AFE Solutions Limited (AFE) for an initial purchase consideration of USD20.6m (RM85.3m), to be paid in sh. We are positive on the acquisition, and see the transaction as a value accretive and synergistic one, enabling the Group to fast track its regional expansion plans. We make no changes to our earnings estimates at this juncture until more milestones with regard to the conditions precedent are met (completion expected 1Q2017), though we would like to highlight a potential 30%-40% jump in forward earnings based on an average RM6.5m consolidation of AFE’s numbers. Our  Outperform  call is reaffirmed with a PE derived  target price  of  RM1.08  premised on a 30x multiple to FY...

Retain Neutral call with lower target price (TP) of RM4.62 Top Glove’s FY16 results missed our and consensus estimates, making up only 93.0% and 95.9% full-year numbers respectively. FY16 revenue me in at RM2.9bn (+15.1% YoY), with earnings at RM361.1m (+28.9% YoY), mainly helped by the exceptionally high earnings in 1HFY16 on the back of a stronger USD and lower raw material prices. We are cautious on the group’s near term outlook owing to the absence of a USD-driven catalyst, mounting st pressures and persistent price competition. Our earnings estimates are lowered by 14.3% to 34.7% for FY17 onwards, accounting for adjustments to capacity projection, lower ASP assumption and higher operating costs. We maintain our Neutral call with a lower TP of RM4.62 based on a DCF valuation methodology. An 8.5 sen dividend was proposed this quarter, which translates into full year dividend yield of 2.9%. Flattish QoQ.  4QFY16 revenue was RM722.1m (+7.4% QoQ, +1.8% YoY), with ear...

Retain neutral call with target price (TP) of RM7.15 Sime Darby (Sime) has entered into an implementation agreement with Japan Residential Asset Manager, the manager of Saizen REIT to acquire at least 25% of the enlarged Saizen REIT through a reverse takeover (RTO) after the expiry of framework agreement last week. There are some slight changes with regards to the shareholding and agreed prices compared to the previous agreement. The estimated market capitalization of Saizen REIT also revised up from RM900m to RM1.1bn. At this juncture, we maintain our  Neutral  call and  TP (RM 7.15)  pending the completion of recent proposed private placement and more guidance from management on the outlook of its plantation and industrial arms. Salient details of the RTO.  Under the new agreement, Sime indirect wholly-owned subsidiaries, Hasting Deering (Aus) Limited and Austchrome will dispose 20 industrial properties located in Queensland and the Northern Terri...

Dagang NeXchange valued at RM0.35 a share Dagang NeXchange (DNeX) , formerly known as Time Engineering, was primarily an information technology (IT) software solutions provider. In recent years, the group has however diversified into the energy sector with the acquisitions of companies involving in the oil & gas segment. Going forward, DNeX is expected to derive 50% of its earnings from IT & e-services and the remaining from energy-related businesses. For FY17F, bottomline is anticipated to grow by about 19%, excluding potential capex and maintenance jobs from the Vehicle Entry Permit (VEP) project. The key conncern for DNeX is the expiry of the exclusive agreement to operate the National Single Window (NSW) but management has made effort to widen its e-commerce services with the introduction of new initiatives that offer Business-to-Business software system. This should help to provide some mitigating effect from the loss of exclusivity beyond FY18F. Our base case sc...

Maintain outperform recommendation with unchanged target price (TP) of RM7.33 AIRPORT’s Malaysian passenger traffic growth of 4.4% YoYYTD came in above our 3.0% target while its Turkey passenger growth of 5.9% YoY-YTD was below our 10.0% target. Total September passenger number (including ISG) registered growth of 8.6% YoY mainly driven by its Malaysian operation. No changes to our FY16-17E core earnings for now as we look to review our growth estimates after the October passenger traffic stats. Maintain OUTPERFORM with unchanged TP of RM7.33. YTD passenger traffic growth.  Total passenger growth for Malaysian airports and ISG (Turkey) was up 4.4% and 5.9% YoY-YTD,  respectively. While Malaysian passenger growth came in above our 3.0% target, ISG was below our 10.0% target. AIRPORT’s total  September  passenger numbers (including ISG) registered growth of 8.6%  YoY  mainly driven by its Malaysian operation due to an improved average load fa...

Retain outperform recommendation with unchanged target price (TP) of RM15.55 We visited Kapar Energy Ventures (KEV) recently to have a better understanding on its overall operations, technical issues that are affecting the financial performance of the power plant and its recovery programmes. The only power plant in Malaysia with triple fuel capability . KEV is located in Kapar, Selangor. 60% shareholding of this second generation Independent Power Producer (IPP) is held by Tenaga Nasional (TNB), while the balance 40% is held by Malakoff. KEV has a generating capacity of 2,420MW and is the only power plant in Malaysia with triple fuel capability, i.e. coal, gas and oil. The power plant was officially opened on 14 March 1987 and converted into an independent power producer (IPP) on 9 July 2004. It has four generating facilities (GF). Power Purchase Agreement (PPA) for GF1 to GF3 will expire in July 2029, while PPA for GF4 will end in July 2019. Operational performances...

Maintain Neutral call with target price (TP) of RM7.15 Sime Darby  has proposed an asset disposal and acquisition with I&P Group S/B after finalizing the recent private placement at RM7.45/share, raising RM2.3bn. The first proposal is a disposal of 325.7ha freehold oil palm plantation land in Semenyih for RM428m followed by an acquisition of 768ha freehold oil palm plantation land in Kluang and Batu Pahat as well as a 70mt/hour mill for a combined amount of RM106m. We see good opportunities in unlocking the potential value in both deals, which is a collective effort from the company and its major shareholder. We maintain our  Neutral  call and  TP  of  RM7.15. Salient details of the transactions . Firstly, Sime Darby plans to divest 325ha (805 acres) in Semenyih to Petaling Garden for RM428m or RM12.20 psf. The acquirer is a wholly-owned subsidiary of I&P Group S/B, which in turn is a 54.99%-owned subsidiary of Permodalan Nasional Mal...

Maintain BUY call with target price (TP) of RM9.50 Highlights MISC announced that it has filed a Notice of Adjudication dated 23 Sep 2016 against Sabah Shell Petroleum Company Limited (“SSPC”) seeking resolution on contractual disputes covering claims for outstanding additional lease rates, payment for completed variation works and other associated costs amounting to approximately US$245m. The above litigation would not post any negative impact to its earnings as the current lease contract terms for Gemusut-Kakap Semi-Floating Production Ltd (GKL) is maintained. In contrast, potential upside could be reaped by the group in the event of successful claim from the legal suit. The group has also just taken delivery of Seri Camelia, LNG vessel built by Hyundai Heavy Industries, 1st of the 5 LNG vessels to be chartered to Petronas for the next 15 years. This is in line with our assumption of LNG vessel delivery in 3Q16 and 4Q16. In the coming years, the group’s core...