MALAYSIAN RESOURCES CORP BHD
By AmResearch
Buy (Maintained)
Fair Value: RM2.30
AMRESEARCH has maintained a “buy” call on MRCB Corp Bhd (MRCB) due to its transformational moves to become a property-centric group and its deleveraging efforts further boosted by more asset injections into Quill Capita Trust (QCT).
MRCB would receive RM740mil for Platinum Sentral from QCT, of which RM476mil to be paid in cash and the balance RM274mil satisfied via new QCT shares, resulting in MRCB having a 30% stake in QCT.
The research house said MRCB could be keen on engaging in another similar deal to monetise its matured property assets such as Shell Tower and Ascott Residences, which are worth over RM900mil cumulatively.
“We believe that more asset injections into QCT will free up existing debt and increase cashflow streams via dividends from the trust (to be renamed MRCB-Quill REIT),” it said, adding that MRCB had also confirmed last month that it had submitted a bid to acquire the French Embassy land.
AmResearch believes that QCT would be an ideal vehicle for MRCB to house its prime commercial assets within KL Sentral, since QCT’s asset size has almost doubled to RM1.6bil via the injection of Platinum Sentral.
“With MRCB also taking up a 41% stake in Quill Capital Management, this suggests more headroom for net asset value upside and deleveraging benefits,” it said.
MISC BHD
By CIMB Research
Hold
Target Price: RM9.35
MISC Bhd’s first quarter 2015 (Q1) net profit of US$148mil (RM532mil) was flat against last year’s Q1, and accounted for just 20% of CIMB Research’s previous full year forecast.
CIMB Research viewed this as disappointing as weaker liquefied natural gas (LNG) earnings wiped out the better petroleum tanker earnings.
It said the LNG arm’s profits fell 22% year-on-year (y-o-y) on the back of the expiry of two long-term contracts for Puteri Intan and Puteri Delima in September 2014 and February this year, the expiry of one short-term charter for Seri Bakti in Q1, and an unanticipated hike in dry-docking days.
The research house said although chemical tanker losses narrowed down by 39% y-o-y on the back of lower fuel costs, the size of the absolute loss was much higher than expected as freight rates continued to slip on weak demand.
As a result, CIMB downgraded its core earnings per share forecast by 11% in financial year 2015 (FY15) and 3% in FY16 to FY17, but raised its sum-of-parts based target price on housekeeping adjustments.
It downgraded the stock from “add” to “hold” as the additional upside was negligible.
PARKSON HOLDINGS BHD
By MIDF Research
Neutral (Maintained)
Target price: RM2.44
MIDF Research is maintaining a “neutral” call on Parkson Holdings Bhd with a target price of RM2.44 based on sum-of-part valuation with a price-to-earnings ratio of 20 times and 15 times for Parkson Retail Asia and Parkson Retail Group respectively.
Recently, Parkson Corp Sdn Bhd, a wholly owned subsidiary of Parkson Retail Asia, has tied up with Studio Kingdoms Network Sdn Bhd to provide entertainment attractions worth RM11mil in Maju Junction Mall, Kuala Lumpur.
MIDF Research said the attractions would be in a form of theme parks, education centres, nurseries, food and beverage outlets and merchandising operations.
The research house added that Parkson Corp had entered into a 70:30 joint venture with Studio Kingdoms to set up Parkson Edutainment World Sdn Bhd, with Studio Kingdoms being the principal operator.
Meanwhile, it noted that the proposed project would face competition from more established peers like Berjaya Times Square Theme Park and Kidzania as it is not an easy market.
MIDF Research said both Parkson Corp and Studio Kingdoms might provide interest-free shareholder’s loans of up to RM7.8mil and RM2.2mil respectively.
“We expect any further needs to be funded through either additional shareholder’s loans or external bank borrowings,” it added.
Furthermore, it said there would be a neutral impact on the joint venture between both parties although it would be a new income stream for Parkson Retail Asia.
Moving forward, it expects the tie-up would have marginal or no impact to the earnings of Parkson Retail Asia as it sees contributions from the joint venture to be reflected after financial year 2015.
On this note, MIDF Research also believes that the joint venture would have no immediate impact on Parkson Holdings Bhd.
GLOVE SECTOR
By MIDF Research
Positive (Maintained)
MIDF Research is maintaining a “positive” call on the glove sector as it expects raw material prices to increase slightly in the near term, widening the opportunity for glove manufacturers to increase their average selling prices.
Year-to-date, the price of Malaysian rubber was up 6.8%, which would boost the low average selling prices of gloves, thus enhancing revenue for the glove makers.
“In addition to that, the price of rubber traded in regional markets such as Vietnam, Thailand and India has also shown positive improvements,” MIDF Research added.
Moving forward, the research house expects the price of rubber to increase gradually as signs of rubber supply tightening from Thailand is seen attributed by low rubber prices for the past three years.
The improving rubber price is also supported by the higher automobile demand from China for this year.
Hence, China has inked a deal with Thailand to buy 200,000 tonnes of Para rubber for a period of one year due to concerns over low raw material inventory.
The International Rubber Study Group also expects the world demand of rubber to be up 3.5% and the global production to outstrip demand by 43,000 tonnes in 2015.
Furthermore, the research house expects a rebound of crude oil prices to average around US$60 to US$70 this year, which would in turn nudge the prices of nitrile rubber, increasing the average selling price for nitrile rubber gloves.
On another note, the export value of rubber gloves in Feb 2015 jumped 18.2% year-on-year (y-o-y) to RM916mil due to the weakening of the ringgit against the US dollar earlier this year.
Until April 30, 2015, the average year-to-date exchange rate of the ringgit against US dollar increased 10.3% compared to a year ago.
However, MIDF Research said the export volume for rubber gloves fell 10.9% y-o-y to 47,395 tonnes due to increasing demand of thinner specification gloves from overseas customers.
“In 2014, Malaysia’s exports of rubber gloves increased by 7.1% y-o-y to 95,400 billion pieces, whereas its export volume decreased by 18.1% to 692,000 tonnes,” it added. – Thestar.com.my