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Investors’ Corner (Berjaya Corp, TA Enterprise, Eastern & Oriental)
Malaysia Investors' Corner | 09 January 2012
By: Gerald Teo
Articles (40) Profile

Berjaya Corp
Price – RM0.955
Target – RM1.00

Berjaya Corp’s 1H12 core net profit of RM39m, which excludes RM254.4m one-offs, came in at only 28% of our full-year forecast. The variance stemmed mainly from weak property earnings, our overly optimistic projection for its hotel division, and higher head office expenses. However, gaming in 2Q12 notched up a 30% y-o-y rise in EBIT, thanks to a lower prize payout from Berjaya Sports Toto. Consumer EBIT also rose 8% due to aggressive expansion by Cosway. Although the local numbers forecast operators market will remain resilient even in the face of global uncertainties, macro headwinds, Bank Negara’s tightening policy and weaker economic growth will hurt demand for big-ticket items like properties and cars. We are cutting our FY12-14 EPS by 7-13% to reflect our 13-56% EPS cuts for Berjaya Land and higher corporate expenses. In view of its volatile earnings and the macro headwinds, we widen our sum-of-parts discount from 45% to 50%. Maintain HOLD. – CIMB (30 Dec)

TA Enterprise
Price – RM0.58
Target – RM0.60

3Q12 and 9M12 revenue were within our expectations but profits at the pre-tax and net levels were lower than our earlier projections due to foreign exchange translation losses totalling RM15m in 3Q12, on translation of foreign currency denominated loans. We expect FY13F revenue and profit to be supported by the broking operations, property development (mixed developments in Sri Damansara and Dutamas, as well as some projects in Canada and Australia), as well as the hotels operations. Our target PE ratio is at a slight discount to the financial services and property sectors. The stock’s PB ratio went to as low as 0.4x during the last financial crisis in 2008 but we believe that the group’s asset base is relatively stronger now with a larger portion of its assets now anchored by real estate and hotel assets as opposed to broking. Maintain HOLD. – Netresearch-Asia (30 Dec)

Eastern & Oriental
Price – RM1.36
Target – RM1.60

We expect earnings to rise three-fold y-o-y in FY12 to RM102.1m on higher contributions from its existing property projects and fair value gain on investment property. Operations are supported by a healthy balance sheet with net gearing of 0.35x and book value per share of RM1.25. Current orderbook of RM850m provides earnings visibility for the next 12-18 months. Earnings growth catalysts in the near term include its ongoing projects, namely the Quayside condominium project in Seri Tanjung Pinang (STP) Phase 1 in Penang and St Mary Residences in Klang Valley, while new launches in the pipeline are serviced apartments in Jalan Yap Kwan Seng and luxury condominiums in Jalan Conlay. In the longer term, the 740-acre STP Phase 2 would keep EOB very busy over the next 10 years. We like EOB for its prospective long term earnings growths and sustainability; clear growth strategy; and experienced management team. Initiate BUY. – ZJ Research (29 Dec)

Scientex
Price – RM2.51
Target – RM2.90

Scientex has already installed its new stretch film line which has raised its capacity to 120,000 metric tonne per annum putting the company at the fifth largest in the world. Note that stretch film alone contributes 50% of group’s manufacturing revenue. Scientex purchased a piece of land nearby its current plant and will start constructing a new factory soon. We estimate Scientex will spend approximately RM50m on the new factory and one production line. The new factory will have the same space capacity as its current factory; hence, Scientex is able to double its production in 3-5 years. 80% of its products are exported whilst 65% of its purchases are denominated in US$. We expect the correction of US$ to improve margin FY12 onwards. We continue to like Scientex due to its diversified business operations coupled with secured mid-term to long term growth plans in hand. We remain positive on its property business and expect Scientex to offer 12-15 new launches per annum. Maintain BUY. – TA Securities (28 Dec)


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