KEY CORPORATE DEVELOPMENTS (OSK)

KPJ HEALTHCARE (BUY, FV: RM5.37)

• Ampang Specialists and Seremban Specialist Hospital are in the midst of getting JCI accreditation by end of this year, which will help them draw more medical tourists.
• Already submitted proposal for the construction of an international block in Ampang Specialist targeting catering for medical tourism
• Will be launching its Northern campus for its nursing college in Penang in Oct
• Will form a JV with Johor Land to set up an International Medical Hub in Iskandar
• On-going expansion plan is on track with openings in Klang in 4Q11 and Pasir Gudang & Muar in 2H12

Maintain BUY at FV of RM5.37

GAMUDA (BUY, FV: RM4.80) 

• Prequalification for the tunnelling portion of the KL MRT (SBK line) worth RM8bn closing at noon today. Tenders are expected to be called in 4Q11 and an award is expected by 1Q12.
• As for the 2nd and 3rd lines, the consultants have submitted their proposal to the Government and approval is expected to be by year-end. Works are expected to commence on a year lag to the SBK line. The total cost of the 2nd and 3rd lines is RM30bn, in which RM12bn is for tunnelling works.
• Property sales for the 9M period (FYE July) have surpassed the RM1bn full-year target, which has been revised to RM1.3bn.
• A soft launch for the Celadon City in Ho Chi Minh, Vietnam has received rather good response. Of the 150 clients that placed bookings, 70 have been contacted to make payments and 50 have done so.
• Over at Gamuda City in Hanoi, management guides that it is close to forming a JV with a reputable developer in Asia for the shopping mall. Negotiations are at an advanced stage and something concrete could materialise in the next 12 months.

Maintain BUY based on SOP with FV of RM4.80. This implies PER of 22x vs the average forward PER of 28x a year before the Double Track was awarded.

DAYANG (BUY, FV: RM2.80) 

• Dayang expects to secure more jobs from Brunei in the near term after penetrating the market last year.
• It is looking into new M&A opportunities and we gather that the potential partner would likely be close to its core business.
• Dayang has a strong orderbook of RM2.0bn, which can keep the company busy over the next 2-3 years.
• Dayang will be tendering for RM5.0-RM6.0bn jobs in 2012, including the RM1.2bn Sabah Sarawak Shell maintenance contract, RM3.0bn worth of Petronas Carigali maintenance jobs and RM2.0bn of ExxonMobil brownfield contracts.

Maintain Buy with a fair value of RM2.80 based on PER of 15x FY12 EPS.

SUPERMAX (BUY, FV: RM6.91)

• The company’s continued to be affected by high latex price since about 70% of its product mix is natural rubber gloves.
• However, it expects latex price to start to come down after the end of the wintering season, coupled with the easing of the floods in Thailand.
• Going forward, the company will continue to invest in production lines which can switch between natural rubber and nitrile gloves.
• Supermax will also continue to invest in new capacities in its Glove City so that it can benefit from the fall in latex price. The new capacity is expected to boost sales volume following the growth in hygiene awareness.
• Maintain Buy with a FV of RM6.91 based on PER of 13x FY12 EPS
• POS MALAYSIA (BUY, FV RM4.12)
• POSM plans to launch its Direct Mail business by 4Q, and is in the midst of completing data mining. Management is targeting FMCG companies for its direct mail services.
• Management said it will consolidate the remaining 29 Mail Processing Centres (MPCs) into 7-8 MPCs nationwide by 2015. There will be 2 MPCs in East Malaysia, With these automated MPCs, delivery standards are estimated to improved by 88% in the 1st Phase and 94% in the long run. (88% of the mails will reach on time).
• The shared banking services with Maybank and RHB are going smoothly, with both banks aiming to expand their SBS into 200-300 Pos Outlets (POs) nationwide, focusing on the rural areas especially in East Malaysia. Management indicated that the recent collaboration with Western Union to extend its services from 150 POs to 500 POs will bring in significant contributions. (Note that the previous collaboration generated roughly RM250-300m in revenue for POSM)
• The 5 plots of land directly owned by POSM are ready for redevelopment or sale, and the group is waiting for its upcoming new major shareholder’s plan.
• POSM has developed an Automatic Pricing Mechanism with which the group can now submit its proposal to the regulatory bodies to review its tariffs every two years, subject to parameters such as the CPI.
• Maintain BUY, FV at RM 4.12 based on our SOP valuation, which takes into account POSM’s cash position and the value of the 5 land plots. We believe DRB will eventually unlock the value of the 5 land plots through redevelopment. We maintain our earnings forecast at this juncture. The unveiling of its business plan from its new major shareholder which we expect to in the next few weeks remains, will be the key catalyst.

TSH RESOURCES (BUY, FV: RM3.83)

• Bought up to 95k ha of oil palm landbank in Indonesia from 2003-2006. Landbank will expand to above 100k ha this year once the company finalises a purchase in East Kalimantan.
• The company currently has five mills, with the next mill commencing operations in 2012 in Indonesia. With the company’s planted area expansion plans, it expects to build a mill every two years.
• The company plans to plant its Indonesia land with Wakuba clone seedlings, which has a FFB yield as high as 38 tonnes per ha, starting end-FY11. The rollout period is expected to be 1 to 2 years. As all current planted areas have been planted with traditional seedlings, the effect of higher yields arising from the Wakuba clone seedlings will only kick in earliest in FY14.
• TSH expects its Indonesian trees’ FFB yield to exceed that from its Sabah trees in the future because its Sabah plantations were previously planted with cocoa while its Indonesian plantation sits on virgin land.
• Its Indonesian landbank is primarily mineral soil with minimal peat areas. Capital expenditure is expected to be around RM100m-200m per year.

Maintain BUY at FV RM3.83 based on SOP valuation. The 13.5x FY11 EPS translates into RM3.50 and RM0.33 is derived from its estimated rubber plantation land value.

WCT (BUY, FV: RM3.69)

• Management maintains its RM2bn orderbook guidance this year. It has so far secured 2 smallish jobs (not announced): (i) Pinewood studios (RM28m) and (ii) earthworks extension at KLIA2 (RM30m).
• Guidance is that WCT has submitted one of the lowest bids (bottom 2) for the LRT extension Package B (~RM2.2bn).
• Other jobs domestically include the MITI Building (RM300m) and earthworks for the Vale project (RM200m).
• Over in Abu Dhabi, WCT is looking at a mall beside the F1 track (>RM2bn). We think they will most likely execute this job via a JV with Cebarco. The company has also been prequalified for a rail job in Abu Dhabi.
• Management remains positive on the prospects in Qatar, fuelled by the 2022 FIFA World Cup. They expect jobs to pour in within the next 2 years.
• Targeting for property investment and management to make up 1/3rd of earnings in the next few years. Additions would include KLIA2 IC, Paradigm, Medini Buisness District and Jelutong land on top of the current AEON Mall and Premiere Hotel.
• Property launches targeted at RM400m this year, at 75% take-up rate.

Maintain BUY, RM3.69 FV based on RM15x mid CY12 earnings, in line with our KLCI target.