8 January 2009 Newz Bits

January 12, 2009 at 6:47 am Leave a comment

TALKING POINT

Time to take profit on SP Setia
Since we initiated coverage on 21 Nov 2008, SP Setia has risen by 37% and is significantly above our target price of RM2.62. It has also outperformed the KLCI which rose by 7% over the same
period. At current share price, valuation is rich as it is trading at forward P/E of 17.1x as compared to the market and sector average P/E of 11.7x and 5.3x respectively. It is also trading above its historical P/E of 12.5x. We downgrade SP Setia to a sell as we recommend investors to take profit on this stock which has overrun its fundamental. We also recommend switching to Sunrise (SUN MK, Buy, TP: RM2.32) for laggard play. For more risk-averse investors, we recommend Sunway City (SCITY MK, Buy, TP: RM3.60) for its more resilient earnings from property investments.

HIGHLIGHTS
On Malaysia
• PLUS Expressway’s 10% toll hike is pending government’s approval
• Exports contract 4.9% in November 2008
• Government has another stimulus package in store
On The Global Front
• Obama expects US budget deficit to approach US$1trn
• German unemployment rises for the first time in 3 years
REPORTS
• SP Setia – Take profit (Sell; RM3.50; TP: RM2.62)

IJM Land Bhd, a subsidiary of IJM Corp Bhd (IJM MK, Buy, TP: RM6.10), has terminated the joint venture agreement with Warta Development Sdn Bhd and Yap Khay Cheong & Sons Realty Sdn Bhd for a proposed condominium project in the city. The termination was due to mutual recognition that their intended objective was “unlikely to materialise”. (Financial Daily)
Thoughts: The termination of the proposed joint venture will have no impact on our earnings estimate and valuation of IJM Corp as the contribution of the proposed condominium project has not been taken into account. Our buy call on IJM Corp is reiterated.
* * * * *
Genting International plc (GIL), a subsidiary of Genting Bhd (GENT MK, Buy, TP: RM8.00) has forked out S$2bn (RM4.75bn), which is the total equity portion, in the funding of the S$6bn Resorts World at Sentosa project in Singapore. The remaining sum for the project would be drawn down from a syndicated loan which was secured in April last year. So far GIL has spent S$3bn on the project, which means there is already a drawdown of some S$1bn from the syndicated loan.
Genting can apply for the casino license only when at least half of the committed investment had been expended, at least half of the proposed development area had been completed and at least half of the proposed gross floor area had been completed. (Financial Daily)
* * * * *
Wah Seong (WSC MK, Buy, TP: RM1.60) yesterday announced the finalised sale price for the disposal of Wasco Energy Australia Pty Ltd (Delco). So far, Wah Seong has received some AUD$12m (in August 2008) as the minimum value for the sale and the balance was agreed to be based on “EBITDA x 3.3” less the cash amount already paid. Hence with the revised payment at AUD$29m (RM72.5m), Wah Seong will be paid another AUD$17m before March 2009. This will involve the purchaser issuing Wah Seong a total of 7.5m Tranche 1 Purchaser shares at an issue price of AUD$2.25 per share or AUD$5.06m (RM12.65m). (Bursa)
* * * * *
WCT Bhd is determined to stay on and bid for more jobs in the Gulf States despite losing the job to build the Nad Al Sheba Dubai Racecourse in the United Arab Emirates (UAE). WCT executive director Loh Siew Choh allayed concerns of its other infrastructure and building projects in the Middle East. (BT)
* * * * *
PLUS Expressway Bhd’s 10% toll hike, scheduled to have taken effect Jan 1, is still pending Government approval, according to an industry source. Under the concession agreement between PLUS subsidiary Projek Lebuhraya Utara-Selatan Bhd and the Government, a 10% toll hike can only be made every 3 years. Although the toll hike schedule is stipulated in the contract, PLUS still needs the green light from the Government every time. PLUS last raised its toll rates in 2005, following which the next hike was supposed to be last year but due to inflationary pressures, the authorities decided to delay the increase. (Starbiz)
* * * * *
Shares of Parkson Holdings Bhd tumbled 70 sen or 16.3% to RM3.58 yesterday after its Hong Kong-listed 53.68%-owned subsidiary announced sales had slowed in 4Q08. The subsidiary, Parkson Retail Group Ltd, which operates over 40 department stores in China, said its 4Q sales might slow to between 7% and 8% from 12% to 13%. Parkson Retail attributed the slowdown “to the deferment of the new year holiday sale season for 2009 and the continuing deterioration of the trading environment in China.” In a statement to Bursa Malaysia on Tuesday, Parkson Holdings said Parkson Retail’s “same store sales” growth for 2008 would be “approximately 12%.” “Despite the lower ‘same store sales’ growth in 4Q08, the Parkson Retail Group’s overall profitability growth should remain healthy and Parkson Retail remains positive on (its) medium- to long-term growth prospect,” Parkson Holdings said in the statement. (StarBiz)
* * * * *
Malaysian exports contracted 4.9% in November 2008, the biggest fall in almost seven years, amid weakening demand from major markets. The International Trade and Industry Ministry (MITI) said total imports in November decreased by 8.6% to RM40.29bn from a year ago while trade surplus totalled RM11.49bn. Major products contributing to the decline in exports were electrical and electronic (E&E), refined petroleum products, palm oil, chemicals and chemical products, crude rubber as well as iron and steel products. Singapore, Japan, the US, China and South Korea were the top 5 export destinations, making up 52.3% of Malaysia’s total exports in November. (BT)
* * * * *
The short term capital outflows, which peaked in October, have shown signs of subsiding after declining a total of RM94bn in 2H08, said Bank Negara Malaysia (BNM). The central bank said the RM94bn decline in Malaysia’s international reserves had outpaced the RM75.2bn gain in the first half. For the whole year, the country’s international reserves moderated by RM18.9bn. BNM attributed the outflow in the second half to the reversal of the short-term portfolio capital flows as a result of the de-leveraging process by foreign investors following the global financial crisis. (Financial Daily)
* * * * *
The Government has another stimulus package in store in addition to the RM7bn package announced in November. “The Prime Minister has given the directive to begin preparing another package,” Second Finance Minister Tan Sri Nor Mohamad Yakcop said in a television interview yesterday. “We have the capacity to lend some more due to the fact that we have managed to reduce the budget deficit from 5.5% of GDP in 2000 to 3.2% in 2007,” he added. Nor Mohamed reiterated that projects under the RM7bn stimulus package would be under way at the various ministries within 1Q09. (StarBiz)
* * * * *
Malaysia’s international reserves stood at US$91.4bn (RM319.94bn) on Dec 31, compared with US$96bn (RM336bn) on Dec 15, central bank data showed yesterday. The reserves are enough to finance 7.4 months of retained imports and were 3.3 times the short-term external debt. “Malaysia’s international reserves, which are usable and unencumbered, are expected to remain at a comfortably high level in 2009,” Bank Negara said. (StarBiz)
* * * * *
CPO futures rose as much as 3.9% yesterday to hit a 3 month high of RM2,058 a tonne in technical rebound and speculative activities, said dealers. They also said that players are expecting CPO prices to be traded around the RM2,000- 2,200 level this quarter. However, it may not be sustainable beyond the quarter. Meanwhile, Bloomberg has reported that shipments from Malaysia rose 25% to 1.65m mt in December from November, the most seen in 3 months. (Financial Daily)
* * * * *
Stocks slumped Wednesday after weak labor market reports and dour forecasts from Alcoa and Intel gave investors reasons to retreat after the recent rally. The DJIA lost 245.4 points (-2.7%, close 8,769.7). The S&P 500 declined 3.0% (-28.1 pts, close 906.7) and the Nasdaq composite slumped 3.2% (-53.3 pts, close 1,599.1). In currency trading, the dollar tumbled versus the euro and the yen. US light crude oil for February delivery fell US$5.78 to settle at US$42.80 a barrel on the New York Mercantile Exchange. (CNNMoney)
* * * * *
Reports issued two days before the release of U.S. jobless data showed private employers cut payrolls at a faster pace in December, threatening to send the unemployment rate to levels unseen in a quarter century. Martin Feldstein, the former National Bureau of Economic Research president and Harvard University professor said unemployment may exceed 10%. Companies cut an estimated 693,000 jobs in December, the most since ADP Employer Services began its gauge based on payroll data in 2001. Chicago-based Challenger, Gray & Christmas Inc. said firings announced by U.S. employers rose 275% y-o-y last month to 166,348. (Bloomberg)
* * * * *
President-elect Barack Obama said on Tuesday he expects to inherit a US budget deficit approaching US$1trn (RM3.5trn) and his administration would have to make some tough budget choices. He added that it was possible that trilliondollar deficits could stretch into coming years and that he and his team want to instil a “sense of responsibility” about future budget choices. Congressional sources say the US$775bn spending and tax-cut package which Obama is pushing for will likely be ready in mid-February, which would add to already growing budget deficits. (Bloomberg)
* * * * *
German unemployment rose for the first time in almost three years and European factory-gate prices plunged the most since 1981, increasing pressure on the European Central Bank to cut interest rates next week. Joblessness in Europe’s largest economy rose by 18,000 in December as the economic slump prompted companies to cut jobs, the Nuremberg-based Federal Labor Agency said yesterday. European producer prices, an early indicator of price pressures in an economy, fell the most in 27 years, a separate report showed. (Bloomberg)
* * * * *
Taiwan’s central bank cut its benchmark interest rate for a sixth time since late September after an unprecedented decline in exports threatened to push the economy into recession. The Central Bank of the Republic of China (Taiwan) lowered the discount rate on 10-day loans to banks to 1.5% from 2%. The decision was made after an unscheduled central bank meeting yesterday. Taiwanese exports fell by a record last month, a report yesterday showed, hurting companies such as Nan Ya Plastics Corp., the world’s biggest processor of plastics for imitation leather and pipes. (Bloomberg)
* * * * *
Australia’s construction industry shrank in December for a 10th month as demand for new houses waned amid a slump in consumer confidence and banks cut lending. An index measuring construction fell 1.1 points to 30.9 from November, according to a report by the Australian Industry Group and Housing Industry Association released in Sydney today. A reading below 50 shows construction contracted. Signs the property market is contracting were among reasons central bank Governor Glenn Stevens cut the benchmark interest rate last year by three basis points to 4.25%, the biggest reduction since a recession in 1991. House prices dropped in 3Q08 by the most since 1978. (Bloomberg)
* * * * *
Indonesia’s central bank, Bank Indonesia cut its benchmark interest rate more than expected to 8.75%, in a bid to drive growth amid a global economic slowdown and as inflationary pressures ease. Other central banks in Asia have cut interest rates in a bid to boost economic growth in the region. Reserve Bank of India slashed its main interest rates by 1 percentage point on January 2, while the Bank of Korea is expected to follow suit with a half percentage point cut on January 9. (Financial Daily)
* * * * *
Oil futures tumbled 12%, the most in more than seven years, after a U.S. government report showed bigger-than-expected increases in supplies of crude oil, gasoline and distillate fuel as consumption dropped. Inventories of crude oil rose 6.68m barrels to 325.4m barrels last week, the highest since May, the Energy Department said yesterday in a weekly report. Supplies were forecast to increase by 800,000 barrels, according to the median of forecasts by 14 analysts in a Bloomberg News survey. (Bloomberg)
* * * * *

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Kuala Lumpur Kepong – Fully valued, but just for now SP Setia – Take profit

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