MARKET DEVELOPMENT
Sarawak Oil Palms 'Buy' Call Maintained
Sarawak Oil Palms 'Buy' Call Maintained
04/06/2014 (The Star) - Sarawak Oil Palms 'Buy' Call Maintained
SARAWAK OIL PALMS BHD
By RHB Research
Buy (maintained)
Target price: RM9.08
RHB Research maintained its “buy” call on Sarawak Oil Palms and raised its fair value to RM9.08 from RM7.04, rolling over the valuation horizon to calendar year 2015 (CY15) from CY14 before.
Deeming the company’s production outlook promising, it said its production grew by an impressive 21% in the first four months of the year with such growth expected to be sustained for the rest of the year.
It added that the company’s 100,000-tonne biodiesel plant, which would start operating in the third quarter, would help to absorb Sarawak state’s palm oil production.
Despite unexciting first-quarter earnings making up only 16.9% of its full-year forecast, RHB Research believed subsequent quarters would be stronger, with production having a tendency to skew heavily into the second half of the year.
It fine-tuned its earnings forecast to RM198mil from RM199mil previously, toning down its fresh fruit bunches production forecast for financial year ending Dec 31, 2014 (FY14) to 1.16 million tonnes from 1.17 million tonnes.
RHB Research said FY15 production growth was expected to be slower at 7.4%, bringing Sarawak Oil Palms’ tonnage to 1.24 million tonnes.
However, it added that profitability was expected to strengthen on higher palm oil price and stronger yield.
It expected the market to start looking at FY15 earnings soon, adding that based on FY15 numbers, Sarawak Oil Palms traded at a still-inexpensive valuation of 12.2 times and remained as one of the cheapest plantation exposures in Malaysia.
EASTERN & ORIENTAL BHD
By RHB Research
Buy (maintained)
Target price: RM3.52
RHB Research maintained its “buy” call on E&O with an upgraded fair value of RM3.52 from RM3.12, largely due to its new land value assumption of RM400 per sq ft for the 760-acre Seri Tanjung Pinang 2 (STP2) project.
It said three re-rating catalysts driving its upgrade were greater commitment from management after the recent 9.9% acquisition at RM2.90 per share, acceleration of the Penang State Government’s endorsement of STP2’s masterplan, and transacted price for Eco Macalister land, which bumped up its revalued net asset valuation.
It said the 9.9% stake, acquired at a 22% premium to the closing price on May 28 by Datuk Terry Tham, should indicate his greater commitment to the company over the longer term and signalled the minimum price he was willing to pay for the company.
It added that the price of RM2.90 plus a premium would be the price that Tham and other shareholders would accept if there was a future takeover offer.
It said Tham’s 9.9% stake could also have an important implication for the STP2 project, as the Penang Government might now draw greater comfort given the higher shareholding held by the managing director.
Adding in considerations that the two by-elections in Bukit Gelugor and Teluk Intan concluded recently, it said the endorsement by the state government could be accelerated.
On the Eco Macalister land transaction, RHB Research said it posed a good benchmark for land valuations on Penang island, with the 1.1-acre land in George Town posed to be injected into Eco World at RM1,002 psf.
It added this new assumption was still conservative, at a 60% discount to the latest transacted price.
PRESTARIANG BHD
By Philip Capital Management Sdn
Bhd
Buy/hold
PHILIP Capital Management said it expected Prestariang to register stronger results in the second half ending Dec 31 due to spillover earnings once delayed projects were finalised and approved.
It said its first-quarter revenue and net profit results registered declined growth of -17.4% year-on-year (to RM20.6mil) and -28.9% (to RM6.4mil), caused chiefly by project delays such as its IC Citizen extension, ProELT and SmartGreen projects.
It said Prestariang’s education farm, UniMy, continued to incur pre-tax loss of RM1.74mil and that management had identified an equity partner, believed to be one of the government bodies, which would be injected to grow student enrolment and minimise the losses.
It said further details of this new shareholder would be announced by the third quarter, adding that management was targeting to break even by year-end.
Philip Capital Management said Prestariang’s oil and gas training firm remained intact and was expected to train a total of 500 students with an internationally-recognised certificate.
It added that once it developed its in-house programme, subsequent profit to be made was lucrative. Besides that, it said management wastargeting to have this division to contribute 20% of the group revenue for the financial year ending Dec 31, 2015 (FY15).
It noted there was also huge potential for Prestariang to tap into Petronas-related jobs as all local and foreign workers were required to obtain the health, safety and environment certification.
It said Prestariang was apparently in the midst of bidding for a substantial concession-based project, which would provide the company recurring revenue and serve as a re-rating catalyst to the stock.
Overall, with all its projects approved and remaining intact, Philip Capital Management expected Prestariang to stage improving earnings growth in FY15
SARAWAK OIL PALMS BHD
By RHB Research
Buy (maintained)
Target price: RM9.08
RHB Research maintained its “buy” call on Sarawak Oil Palms and raised its fair value to RM9.08 from RM7.04, rolling over the valuation horizon to calendar year 2015 (CY15) from CY14 before.
Deeming the company’s production outlook promising, it said its production grew by an impressive 21% in the first four months of the year with such growth expected to be sustained for the rest of the year.
It added that the company’s 100,000-tonne biodiesel plant, which would start operating in the third quarter, would help to absorb Sarawak state’s palm oil production.
Despite unexciting first-quarter earnings making up only 16.9% of its full-year forecast, RHB Research believed subsequent quarters would be stronger, with production having a tendency to skew heavily into the second half of the year.
It fine-tuned its earnings forecast to RM198mil from RM199mil previously, toning down its fresh fruit bunches production forecast for financial year ending Dec 31, 2014 (FY14) to 1.16 million tonnes from 1.17 million tonnes.
RHB Research said FY15 production growth was expected to be slower at 7.4%, bringing Sarawak Oil Palms’ tonnage to 1.24 million tonnes.
However, it added that profitability was expected to strengthen on higher palm oil price and stronger yield.
It expected the market to start looking at FY15 earnings soon, adding that based on FY15 numbers, Sarawak Oil Palms traded at a still-inexpensive valuation of 12.2 times and remained as one of the cheapest plantation exposures in Malaysia.
EASTERN & ORIENTAL BHD
By RHB Research
Buy (maintained)
Target price: RM3.52
RHB Research maintained its “buy” call on E&O with an upgraded fair value of RM3.52 from RM3.12, largely due to its new land value assumption of RM400 per sq ft for the 760-acre Seri Tanjung Pinang 2 (STP2) project.
It said three re-rating catalysts driving its upgrade were greater commitment from management after the recent 9.9% acquisition at RM2.90 per share, acceleration of the Penang State Government’s endorsement of STP2’s masterplan, and transacted price for Eco Macalister land, which bumped up its revalued net asset valuation.
It said the 9.9% stake, acquired at a 22% premium to the closing price on May 28 by Datuk Terry Tham, should indicate his greater commitment to the company over the longer term and signalled the minimum price he was willing to pay for the company.
It added that the price of RM2.90 plus a premium would be the price that Tham and other shareholders would accept if there was a future takeover offer.
It said Tham’s 9.9% stake could also have an important implication for the STP2 project, as the Penang Government might now draw greater comfort given the higher shareholding held by the managing director.
Adding in considerations that the two by-elections in Bukit Gelugor and Teluk Intan concluded recently, it said the endorsement by the state government could be accelerated.
On the Eco Macalister land transaction, RHB Research said it posed a good benchmark for land valuations on Penang island, with the 1.1-acre land in George Town posed to be injected into Eco World at RM1,002 psf.
It added this new assumption was still conservative, at a 60% discount to the latest transacted price.
PRESTARIANG BHD
By Philip Capital Management Sdn
Bhd
Buy/hold
PHILIP Capital Management said it expected Prestariang to register stronger results in the second half ending Dec 31 due to spillover earnings once delayed projects were finalised and approved.
It said its first-quarter revenue and net profit results registered declined growth of -17.4% year-on-year (to RM20.6mil) and -28.9% (to RM6.4mil), caused chiefly by project delays such as its IC Citizen extension, ProELT and SmartGreen projects.
It said Prestariang’s education farm, UniMy, continued to incur pre-tax loss of RM1.74mil and that management had identified an equity partner, believed to be one of the government bodies, which would be injected to grow student enrolment and minimise the losses.
It said further details of this new shareholder would be announced by the third quarter, adding that management was targeting to break even by year-end.
Philip Capital Management said Prestariang’s oil and gas training firm remained intact and was expected to train a total of 500 students with an internationally-recognised certificate.
It added that once it developed its in-house programme, subsequent profit to be made was lucrative. Besides that, it said management wastargeting to have this division to contribute 20% of the group revenue for the financial year ending Dec 31, 2015 (FY15).
It noted there was also huge potential for Prestariang to tap into Petronas-related jobs as all local and foreign workers were required to obtain the health, safety and environment certification.
It said Prestariang was apparently in the midst of bidding for a substantial concession-based project, which would provide the company recurring revenue and serve as a re-rating catalyst to the stock.
Overall, with all its projects approved and remaining intact, Philip Capital Management expected Prestariang to stage improving earnings growth in FY15