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Sunday, August 28, 2011

Stocks to watch: Hong Leong Bank, Kulim, Petronas Chemicals, Proton (Edge)

The volatility in the local market, especially due to external headwinds from the US and Europe, is expected to continue in the week ahead, starting Aug 29 and analysts advise investors to stick to defensive companies.

However, the volatility and selling could likely be contained in the short trading week, where Bursa Malaysia is expected to close for three days for Hari Raya Aidilfitri and Merdeka Day.

They said foreign funds were behind the selling of big capitalised and fundamentally strong companies and especially banks over the last week.

“Banks are being sold down, in line with regional banks whose valuations had come off due to foreign selling in the region,” said a banking analyst, pointing out Malaysian banks’ premium was recently relatively higher than their regional peers earlier.

As for corporate earnings, he said the results for the period ended June 30 were generally lacklustre. The final batch of results are due on Monday, 29.

Meanwhile, OSK Research expects its 2012 FBM KLCI earnings growth forecast of 12.8% to be cut in the coming days and maintained its NEUTRAL call on the Malaysian market. Investors are advised to continue focusing on defensive stocks.

Stocks to watch are HONG LEONG BANK BHD [], KULIM (M) BHD [], Petronas Chemicals Group Bhd and PROTON HOLDINGS BHD []. Also in focus would be Muhibbah Engineering Bhd, PARKSON HOLDINGS BHD [] and Lion Industries Bhd.

Hong Leong Bank’s net profit for 4Q ended June 30, 2011 slipped 2.09% to RM296.60 million from RM302.94 million a year, due mainly to higher operating expenses and allowance for impaired loans.

Revenue for 4Q rose 57.7% to RM820.79 million from RM520.25 million in 2010. HLBank proposed a final gross dividend of 15 sen per share.

For FY ended June 30, HLBank’s net profit rose 12.5% to RM1.13 billion from RM1.01 billion in 2010, on the back of a 21.9% increase in revenue to RM2.54 billion from RM2.08 billion.

Kulim’s net profit for 2Q ended June 30, 2011 surged nine-fold to RM146.29 million from RM14.66 million a year earlier, driven by mainly by higher revenue and profits from its PLANTATION [] division.

Revenue rose 32.4% to RM1.80 billion from RM1.36 billion, with higher contribution from all segments. For the six months ended June 30, Kulim’s net profit surged to RM273.39 million from RM76.55 million in 2010, on the back of a 33.3% jump in revenue to RM3.46 billion from RM2.59 billion.

Petronas Chemicals Group Bhd posted net profit RM737 million on the back revenue RM3.35 billion for the period ended June 30, 2011, due mainly to strong prices seen across most petrochemical products, partially offset by a stronger ringgit versus the US Dollar.

Muhibbah’s secured order book totalled RM3.08 billion as at Aug 19, 2011 which was sufficient to take the company into 2014.

Of the RM3.08 billion, the infrastructure CONSTRUCTION [] division’s order book was RM2.21 billion, cranes division (RM675 million) and the shipyard division (RM194 million).

In the 2Q ended June 30, 2011, it said net profit rose 28.1% to RM13.82 million from RM10.78 million. Revenue increased by 10.7% to RM513.10 million from RM463.28 million.

Muhibbah said in 1H, net profit doubled to RM32.02 million from RM16.08 million but revenue increased by 3.8% to RM907.44 million from RM873.85 million.

In Parkson, the Government of Singapore Investment Corporation Pte Ltd has acquired a 5.03%. It had purchased the 55.028 million shares from the open market as at Aug 24.

RHB Research Institute is maintaining its Outperform recommendation on Parkson.

Lion Industries’ net profit for 4Q ended June 30, 2011 fell 62.3% to RM45.01 million from RM119.59 million a year earlier, due mainly to higher raw material costs. Revenue for 4Q rose 32.85% to RM1.48 billion from RM1.11 billion in 2010.

For FY ended June 30, net profit fell 35.7% to RM232.11 million from RM361.47 million, despite a 10.6% increase in revenue to RM4.95 billion from RM4.47 billion.

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