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Investors’ Corner
Malaysia Investors' Corner | 09 November 2011
By: Gerald Teo
Articles (40) Profile

Fibon
Price – $0.54
Target – $0.61

Year-on-year net profit reduced by 38.1% to RM0.9 million from RM1.5 million as a result of decrease in manufacturing sales orders as well as decrease in operating margin. We are maintaining our earnings forecasts at this juncture due to two main reasons: contribution from new products (switchboard) will begin to flow in 2H12, and delay in contribution from a new customer in Ireland, which the management guided will flow in 2Q12. We believe Fibon will continue to add more foreign customer, especially from the European region, to its existing customer base that will further increase its overseas presence and reduce its reliance on local market. With the ongoing effort placed by the company to produced new products as well as patenting them, we expect the company to reduce its dependency on certain products, thus, diversifying its income stream. Given the potential capital upside of 13.3%, we reiterate our HOLD call on Fibon. – TA Securities (01 Nov)

Malaysia Building Society
Price – $1.79
Target – $2.24

In tandem with domestic GDP growth, we expect that MBS’s revenues from financing activities would grow. We note that net loans (and advances and financing) are growing faster than deposits. Previously, the group’s average loan-deposit ratio was quite high, but MBS’s management has managed to bring it to around the 107% level. MBS’s high loan impairment ratio (due to legacy accounts) has dwindled down in recent years, and we are not overly concerned about it at the moment. Group management is also actively dealing in restructuring and recovering a few major legacy corporate accounts. MBS’s business also faces possible routine risk factors such as a slower rate of economic growth, weak financing demand, rising loan impairments, rising cost of funds and stiff competition from other existing banks/financial institutions. Maintain BUY. – Mercury Securities (01 Nov)

Asia Media Group
Price – $0.27
Target – $0.32

Asia Media Group Berhad announced its 3Q11 results of RM3.4 million in earnings, which represents a sequential decline of 18.8% but grew a superb 63% year-on-year. The sale of airtime decreased slightly in 3Q but revenue from the sponsorship programme and creative production increased 95% and 25% year-on-year. Overall earnings margin in 3Q registered a year-on-year expansion of 7.8% to 40.4%. The company’s result has no impact on our earnings forecasts. The group plans to launch a terrestrial digital TV station by as early as the first quarter of next year and recruit as many as 100 people (newscasters, talk show hosts, and technical support people) and plan to rent a studio in Damansara for the live TV version. The group is still on track in its plan to submit its listing application to Bursa Malaysia for its migration to the Main Board. We maintain our target price at RM0.32 per share using a FY12 target PE ratio of only 4 times. Maintain BUY. – TA Securities (24 Oct)

Zhulian Corporation
Price – $1.73
Target – $2.18

Zhulian’s 9M11 net profit of RM67.3 million was in line with our expectations, having reached
74% of our full-year estimate of RM91.3 million. While 9M11 net profit margin did decline by 1.5%, it is still healthy at 24.9%. We expect the Group to continue its consistent earnings performance in 4Q11, supported by planned new product rollouts (i.e. new cosmetic products) and ongoing incentive campaigns. We remain sanguine on Zhulian’s prospects and like its focus on growing market share in the ASEAN region. We continue to like Zhulian for its earnings growth prospects, solid balance sheet, higher-than-peers net profit margin, and undemanding valuation at prospective FY11 PE ratio of 8.7 times supported by an attractive net yield of 6.9%. In our opinion, Zhulian offers a cheaper exposure into the MLM business by comparison to market leader, Amway Holdings, which is trading at a forward PE ratio of 16 times. Maintain BUY. – ZJ Research (21 Oct)


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