Wednesday January 23, 2013

Some stocks have been beaten down to attractive levels and StarBiz presents five stock picks

With the sudden market selldown, some counters have been beaten down to attractive levels. StarBiz presents five stock picks, compiled by YVONNE TAN.


PERHAPS the most disappointing initial public offering (IPO) in recent times, Astro, however, should still be on the radar of investors looking to buy on weakness.

While the aggressive selling that began from the day it was listed pushed its share price to below its IPO level of RM3, the stock has been on a general uptrend after the integrated cross-media group posted some decent earnings in its third quarter, even declaring a small dividend.

But over the last two days, Astro has shed 3.45%, which should place it on the “buy on weakness” list.

Aside from its weak price, another solid reason to at least give Astro shares a thought is this with sister company Maxis Bhd's 4G on the way, Astro is poised to tap into this wireless solution to deliver its content to Malaysian households, some of whom have apparently held off their decoder upgrade because of the messy wiring that is required.

Kenanga Research has joined the bandwagon of research houses having a “buy” call on Astro, noting in particular its strong cash-generating profile and its premium leadership position in the pay-TV market.

Analysts have also repeatedly held the view that Malaysia has ample room for a higher household penetration rate, which stands at 50% as compared with South Korea (122%), Taiwan (97%), Hong Kong (93%) and Singapore (70%).


FGVH, one of the world's biggest listings last year, had already fallen below its IPO price of RM4.55 prior to the recent market selldown and has dipped a further 1.5% in the last two days.

Noteworthy is the fact that this company still has a whopping RM5.6bil in cash and cash equivalents and is poised for more corporate exercises.

Although lower CPO prices are expected to pressure FY2012 earnings, analysts are positive on FGVH's replanting initiatives that should augur well for its long-term prospects.

FGVH's revenue for the third quarter doubled from RM1.88bil in 2011 to RM3.77bil in 2012, although net profit fell 40% to RM245mil this year. It has also declared a five-sen dividend per share. The lower profits were mainly due to the accounting treatment of some of its assets in particular, the fair value changes in its land lease agreement liabilities.

Still, as BIMB Securities pointed out, the results were largely in line with market expectations. The research house has a target price of RM5.46 which is based on a price earnings multiple of 17 times forecast earnings of FY2013.

It also has a huge local institutional following and probably ranks high on the “buy on weakness” list of local funds.

Perhaps, most significantly, analysts reckon that the stock would be given extra attention or support by local funds just before the general election is called, as it has a large number of shareholders who are Felda settlers.


THE best reason to look at this stock, probably, is that technically, it is in oversold territory. The stock has lost 4.47% since Monday.

Its outlook for this year includes expectations that revenue would grow by 5% to 7%, while margins for earnings before interest, taxes, depreciation and amortisation are expected to remain stable.

Telco counters are also known for their generous dividend yields.

Based on its third-quarter numbers, DiGi's dividend yield is running at 4.5%, or 23.8 sen net per share. Its growth story remains intact, according to analysts.

As at the third quarter of 2012, DiGi's revenue market share expanded to 28%, up from 27.5% from end- 2011, largely driven by its above peer average net adds over the past two years, which was also accompanied

by a fairly stable, if not higher, average revenue per user or ARPU, said Affin Research.

It believes that its month-onmonth growth momentum will persist as it consolidates its market share in the youth and Malay ethnic group segments, two key growth areas.

With its revenue and growth trajectory intact, the research house is forecasting core dividend per share (DPS) to improve in the current financial year (FY13).

Although its FY13 DPS assumption is based on a 100% dividend payout, it suspects there is potential for upside to its DPS forecast of 22.6 sen for FY13.


KLCCP owns a diverse property portfolio, mostly within the KLCC Development, comprisin g office buildings, the Suria KLCC shopping mall and the Mandarin Oriental Hotel. The stock was one of the counters hurt the most in the past two days, shedding close to 5% since Monday.

The company recently announced the formation of Malaysia's first-ever stapled securities structure.

The structure, the KLCCP Stapled Group, has RM15.4bil in assets, 3.1 times the biggest real estate investment trust (REIT), and is committed to paying more than 90% of total distributable income as dividends, according to CIMB Research.

Under the plan, KLCCP will inject three properties into the REIT vehicle called the KLCC REIT.

The three properties are the Twin Towers, Menara ExxonMobile and Menara 3 Petronas.

Upon completion of the exercise, shareholders of KLCPP will own shares and units in both KLCCP as well as KLCC REIT.

CIMB Research noted that KLCCP adopted a low-risk developmental model that was nonspeculative in nature and it was not its business practice to develop any new assets without first securing the right tenants.

This eliminated the common development risk found in a typical developer, it said, adding that in any case, immature assets made up less than 10% of its RM15.4bil asset portfolio, as the majority of assets were stabilised assets with little capital requirements.


SEEING that the oil and gas (O&G) sector is looking forward to an exciting year, Dialog, a specialist service provider for the industry, is expected to be a prominent beneficiary based on its expertise and track record.

CLSA had estimated that there would be RM19.6bil worth of O&G services jobs in 2012 in Malaysia, but due to delays, only RM11bil worth of contracts have been announced thus far.

Hence, CLSA reckons 2013 will pick up where 2012 had left off, foreseeing a two times increase in industry contracts to RM24.5bil.

Incidentally, Petroliam Nasional Bhd's (Petronas) capital expenditure for the next five years is some RM186bil.

Among its projects, Dialog is redeveloping the ageing Bayan oil field and the tank terminal project in Pengerang, Johor, with revenue contributions set to stream in from 2014.

According to CIMB Research, investors should stay invested in Dialog, as things can only get more exciting with more marginal oil fields set for development.

CIMB expects Dialog to scale new net profit highs in FY12 to FY14, giving a three-year earnings per share compounded annual growth rate of 20.5%.

Dialog shares had shed 2.08% since Monday.

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