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Investors’ Corner (Salcon, Berjaya Corporation, Poh Kong Holdings, United Malacca)
Malaysia Investors' Corner | 18 October 2011
By: Choo Hao Xiang
Articles (151) Profile

Price – RM0.42
Target – RM0.75
Salcon, through the Hydrotek-Salcon Consortium, was awarded a RM22 million deal for the construction of reservoirs for Phet Kasem and Rat Burana distribution pumping stations and related works, from Metropolitan Waterworks Authority. This represents Salcon’s 4th project in Thailand. With this, Salcon’s outstanding orderbook stood at RM1.3 billion. Following a slow first half, the pace of securing new projects has picked up in 2H11, with a maiden project in India and a deal for related works of Sg. Chukai, Kemaman, Terengganu. In addition to the strong orderbook, the promising long-term prospects of its growing concession-based business in China and the doubling in design capacity of its China concession by end-FY11 are not reflected in the firm’s share price. Maintain BUY. – Netresearch-Asia (3 Oct)

Berjaya Corporation
Price – RM0.96
Target – RM1.13
Weak property earnings and wider losses from other non-core divisions dragged Berjaya Corp’s 1Q12 results down as performances fell way short of expectations, with core net profit of RM19.2 million (12% of our full-year forecast). Also contributing to the downslide were the hotel segment which suffered from lower occupancy rates as well as the financial services division which was weighed down by decreased investment income and lower market trading value. Partly cushioning the fall were higher contribution from B-Toto while aggressive expansion by Cosway boosted consumer segment. Meanwhile, Berjaya Corp further cut its interests in Berjaya Sompo to 30%, getting RM496 million in return. We are cutting our FY12-14 EPS by 14-20% to reflect our 35-46% EPS cuts for B-Land. We also assume a higher loss from its non-core divisions in FY12. These changes, together with lost income from the partial disposal of Berjaya Sompo, result in a 17% decline in our FY12 core net profit forecast. Maintain HOLD. – CIMB (30 Sep)

Poh Kong Holdings
Price – RM0.40
Target – RM0.53
Poh Kong managed to achieve record performances for FY11. Posting turnover and earnings of RM692.5 million and RM41.6 million respectively, the firm reaped benefits from its promotional activities on top of increased gold prices as sales in existing stores rose. Dividend of RM0.014 had been proposed. According to the firm, it intends to continue focusing on the local market and build market share by enhancing and differentiating its product offerings to its targeted market segments. With its price near to its 52-week low, and also in light of its improved results, we upgrade Poh Kong to a BUY rating. Valuations are based on our forecast of Poh Kong’s FY12 EPS and an estimated P/E of 4.5 times. Nevertheless, the firm faces business risks such as future economic downturn, consumer pessimism, fluctuating raw material prices and foreign exchange rates and strong competition from its peers. – Mercury Securities (30 Sep)

United Malacca
Price – RM6.42
Target – RM6.94
In line with expectations, higher Crude Palm Oil (CPO) and Palm Kernel prices as well as higher Fresh Fruit Bunches (FFB) production boosted United Malacca’s 1Q12 core net profit to RM27.4 million (+20.3% quarter-on-quarter, + 68.3% year-on-year). Revenue for the quarter surged 63.1% to RM70.5 million from 1Q11’s RM43.2 million. There has been no change to our earnings forecast. We believe the earnings expansion will be driven by FFB harvest growth of 17%, thanks to normalising weather condition as well as higher yield from the newly matured acres. Still, in the near term, share price outlook remains subdued as the company’s earnings are highly correlated to CPO price, which risks further decline on the back of softening economy and peaking production. As such, we maintained our SELL call on the company and priced the company based on FY12 EPS of RM0.555. – TA Securities (30 Sep)

Haoxiang manages and oversees the portfolio of stocks in the consumer goods and hospitality sectors at Shares Investment.

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