Published: Tuesday October 29, 2013 MYT 12:00:00 AM
Updated: Tuesday October 29, 2013 MYT 12:43:50 PM
Malaysia Airports Holdings Bhd
By RHB Research
Target price: RM10.13
Buy (maintain)
IN Budget 2014, the Government announced that it would allocate a total RM1bil for the upgrading of infrastructure and facilities at some airports in the country.
RHB Research sees Malaysia Airports Holdings Bhd (MAHB) as a major beneficiary of this initiative in the long run.
The research house’s checks with the MAHB management indicates that the Budget 2014 allocation for infrastructure upgrades would unlikely translate to a higher proportion of user fees as the assets that the Government is spending on will not be revenue-generating.
In past airport upgrades in Ipoh, Kota Baru, Kuala Terengganu and Malacca, as well as the ongoing Kota Kinabalu airport upgrade, the Government’s higher capital expenditure allocation did not translate to a higher revenue for MAHB.
RHB Research has upgraded its earnings for financial year ending Dec 31, 2014 (FY14) and FY15 by 6% and 10% respectively, attributed to higher passenger assumptions. with its FY13 and FY14 growth assumptions raised to 14% and 12% and
Meanwhile, its discounted cash flow-based fair value (FV) is raised to RM10.13 from RM8.47, based on a weighted average cost of capital of 7% from 7.5% on the assumption of lower returns on market.
It said the RM10.13 FV implies FY14 enterprise value per earnings before interest, tax, depreciation and amortisation of 15 times.
Censof Holdings Bhd
By Kenanga Research
Target price: 61 sen
Outperform (maintain)
ACCORDING to Budget 2014, the Government is targeting three ministries – health international trade and industry and finance – to undergo performance evaluation based on the outcome-based budgeting (OBB) system to improve budget management.
Budget 2014 also proposed a goods and services tax (GST) of 6% that will take effect on April 1, 2015.
Kenanga Research believes that this will bode well for Censof Holdings Bhd as the Government emphasises on the importance of OBB to improve budget management in the ministries.
Censof has already secured the OBB project from the Finance Ministry worth RM25.47mil (including the extension contract) to install and implement the online budget system in June 2011 and April 2012.
Kenanga Research is positive on Censof, based on its previous track record in securing government projects.
It is also positive on Censof’s long-term outlook, underpinned by the potential influx of GST-compliance accounting system upgrade and training services demand from its existing 80-plus government agencies before the official implementation of GST in April 2015, and continued projects/contracts flow from various government agencies for its financial management software solutions project, as well as potential massive synergistic benefits that could be created for Censof and Time Engineering Bhd post the acquisition of the latter.
Kenanga Research’s estimates for Censof’s financial year ending Dec 31, 2013 (FY13) and FY14 remain unchanged.
MSM MALAYSIA HOLDINGS BHD
By AmResearch
Fair value: RM5.45
Hold (maintain)
AMRESEARCH is maintaining its “hold” rating on MSM Malaysia Holdings Bhd with an unchanged fair value (FV) of RM5.45 per share.
Its FV implies FY14 forecast price/earnings (PE) of roughly 15.2 times.
Under Budget 2014, the Government has proposed to abolish sugar subsidy of 34 sen effective last Friday.To mitigate this, AmResearch understands that domestic refined sugar price will increase by 34 sen (or 13.6%) to about RM2.84 per kg.
Due to the huge rise in refined sugar price, it believes that sales volume of sugar in Malaysia may be affected.
The selling price of sugar rose by 20 sen or 8.7% in September 2012. Subsequently, domestic sales volume edged down by 5.1% year-on-year to 340,000 tonnes in the first half of financial year 2013.
AmResearch assumes that the sales volume of refined sugar in Malaysia will fall by 10% in FY14. Thus, it has raised MSM’s FY14 forecast earnings by 2%.
The research house reckons that MSM will have to intensify its sugar exports in FY14 to offset declining sales volume in Malaysia.
AmResearch estimates the selling price of exported refined sugar to be almost 25% lower than the prices in Malaysia in the first half of financial year 2013, with export markets accounting for 22% of total sales volume versus 10% in the same half 2012.
As for the raw sugar price, it has been inching up since bottoming at US$0.1676 per pound on July 16, 2013.
Currently, the price is hovering at US$0.1885 per pound.
HOCK SENG LEE BHD
BY MIDF Research
Target price: RM2.01
Neutral (maintain)
HOCK Seng Lee Bhd (HSL) has received a letter of acceptance from Sibu Water Board for the construction of a raw water pumping station at the Tanjung Manis project in Sarawak worth RM86.7mil.
Assuming a net margin of 14%, the contract will add an estimated RM600,000 and RM7.3mil to the bottom line in financial year 2013 (FY13) and FY14, respectively.
With this new project, HSL’s outstanding order-book will rise by 7.2% to RM1.34bil from RM1.25bil.
MIDF Research said that to-date, HSL had replenished RM521.3mil worth of contracts this year, accounting for 95% of its RM550mil new jobs assumption in 2013.
It also maintains job assumption of RM550mil for calender year 2014.
MIDF Research is positive on the Budget 2014 announcement for more funding for the Sarawak economic corridor.
Continuous investment in Sarawak’s development will open job opportunities for HSL.
In addition to Sarawak Corridor of Renewable Energy, MIDF Research expects HSL to clinch some of the projects it has bid for, such as Phase 2 of the Kuching Central Wastewater project with an estimated contract value of RM800mil; the RM1bil water supply and treatment plant project between Sibu and Tanjung Manis; and civil works of approximately RM300mil of the RM2bil Balingian power plant.
MIDF Research said contribution from the Sibu water pumping station job had already been captured in its job replenishment assumption for the current year and next. Hence, it has made no changes to its forecast earnings.
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