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Stocks In Focus MY (Amalgamated Industrial Steel, Inari Amertron, Uzma) – 19/01/15
Malaysia Daily Bulletin | 19 January 2015

AISB To Diversify In Property Development

  • Amalgamated Industrial Steel (AISB) wants to diversify its business to include property development to diversify its earnings base and to enhance its overall long term growth prospects, with the proposed diversification expected to be implemented this year.
  • The proposed diversification would reduce the group’s sole dependency on the existing core business and the expansion is part of its long term strategy to diversify into other industries with strong growth prospects.
  • AISB plans to undertake the development and construction of industrial buildings on its own property at Seksyen 15, Shah Alam with estimated gross development cost and value of RM146 million and RM161 million respectively.

Significance: While the manufacturing and selling of mild steel pipes and trading of construction related materials will continue to be the group’s core business, contribution from the property development business may potentially exceed 25 percent of its net profit in future.

Inari To Benefit From Outsourcing Opportunities

  • Affin Hwang Research has expressed its likes for Inari Amertron, given its position as a leading radio frequency test house in the region.
  • Backed by its strong technical expertise, cost efficiency, reliability and execution capability, Inari is likely to continue to benefit from greater outsourcing opportunities from Avago Technologies, according to the research house.
  •  Affin Hwang raised its FY15 to FY17 earnings per share forecasts by 2 percent to 11percent to account for the earlier-than-expected ramp-up in Inari’s P13 facility, also taking into account a new wafer processing service which has been recently agreed with Avago.

Significance: The group has guided that the wafer job could account for nearly 10 percent of its revenue and is likely to enhance margins as it project involves higher value add services. Affin Hwang has maintained its ‘Buy’ call on the company with a target price of RM4.07.

Uzma Inks RM50m Petronas Contract

  • Uzma’s unit, Uzma Engineering, has secured a Petronas Carigali contract to provide tubing downhole tools and services, which will last for two years starting from 1 January 2015, with an extension option of one year.
  • CIMB Equities Research notes that the contract will contribute positively to the group’s earnings in FY15 to FY16, with potential extension into FY17.
  • The value of the contract over the primary period is estimated at RM50million and the research house adds that the start of production at Tanjung Baram marginal field is a potential re-rating catalyst.

Significance: CIMB Research has retained its ‘Add’ call for Uzma, with an unchanged target price of RM2.65 based on 10.5 times CY16 price to earnings, an upside of 53.2 percent from its closing price on 16 January.

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