RHB Equity 360°

3 August 2009 (Banks, Construction, Sunway, Gamuda, WCT, Texchem)

Top Story : Banks – June 09 System Data – Asset Quality Improved Overweight Sector Note - Jun 09 loan growth moderated to +8.3% yoy (May 08: +8.9% yoy) but expanded strongly with a +1.3% mom growth. - Leading loan indicators improved mom. Simple extrapolation suggests that loan growth may exceed our 2009 projection of +3-4%. - ALR increased but spread decreased. - LD ratio eased slightly. Deposits growth accelerated for the first time in seven months. - Asset quality surprisingly improved, our conservative assumption on gross NPL ratio under review, upside bias to our earnings forecasts. - Maintain Overweight. Top picks are AMMB, BCHB and Public Bank. EON Cap and RCE Cap are also rated Outperform.

Corporate Highlights Construction : Packages Of New Permanent LCCT At KLIA To Be Awarded By Oct 09? Underweight Sector News Update - The Edge reported that building and runway works worth RM1bn of the new permanent LCCT at KLIA are expected to be awarded in Sep/Oct 09, and construction works should start by year-end to meet the 3Q2011 completion deadline. - Generally, the report is largely consistent with what we gathered from our sources, although certain details are jumbled up. - Our sources feel that early-2010 will be a more realistic target for the commencement of physical works. Also, our sources will not be surprised if the completion deadline is eventually rescheduled to beyond the original Jul 11. - We strongly believe that amongst all mega projects, the new permanent LCCT at KLIA is the one that is most likely to get off the ground (or least likely to be deferred or shelved). This is because it is a demand-driven, commercially viable and hence highly “bankable” private sector initiative. We believe the best bet is Fajarbaru. - Maintain Underweight.

Corporate Highlights Sunway : Bidding For RM20bn Worth Of New Jobs Outperform News Update - MD Yau Kok Seng was quoted by The Edge as saying that Sunway is looking to bid for RM19bn worth of new jobs over the next six months, comprising local public jobs (RM7bn), local private sector jobs (RM7.5bn) and projects in the Gulf states (RM4.5bn). Sunway has also submitted bids for three highway jobs in Hyderabad, India, worth a total of RM1bn. - Yau is hopeful about securing RM1.5bn new contracts over the next 6-12 months. - In our earnings forecasts, we assume Sunway to secure about RM700m worth of new contracts between now and the end of the year, and another RM1bn worth of new jobs in 2010. This is fairly consistent with Sunway’s target of RM1.5bn over the next 6-12 months. - Fair value is RM1.68. Maintain Outperform. Gamuda : Secures Additional Works At New Doha International Airport Underperform News Update - The Sinohydro-Gamuda-WCT JV has won QAR760m (RM740m) additional works and settlement in respect of all variation orders (VOs) under its construction contract for airfield paving, tunnel & detention ponds for the New Doha International Airport (NDIA), first secured back in Jul 05. - Gamuda’s effective share is 51% or RM377m. It has increased Gamuda’s outstanding construction orderbook by about 5% from RM8.1bn to RM8.5bn. - Based on the guided PBT margin of 5%, these additional works will fetch RM18.9m PBT over the construction period of 18 months ending Jan 11. - We are raising Gamuda’s FY07/10-11 net profit forecasts by 2% each to reflect earnings enhancement from these additional works. - Fair value is raised by 2% to RM1.87. Maintain Underperform. WCT : Secures Additional Works At New Doha International Airport Underperform News Update - The Sinohydro-Gamuda-WCT JV has won QAR760m (RM740m) additional works and settlement in respect of all variation orders (VOs) under its construction contract for airfield paving, tunnel & detention ponds for the New Doha International Airport (NDIA), first secured back in Jul 05. - WCT’s effective share is 49% or RM363m. It has increased boosted WCT’s YTD new contracts secured to RM1.1bn and outstanding construction orderbook by about 10% from RM3.7bn to RM4.1bn. - Based on the guided PBT margin of 5%, these additional works will fetch RM18.1m PBT over the construction period of 18 months ending Jan 11. - We are raising FY12/10-11 net profit forecasts by 12-13% as we now assume WCT to secure RM1.5bn worth of new contracts annually in FY12/09-10 vis-à-vis RM1bn we assumed previously. - Fair value is raised from RM1.26 to RM1.74. Maintain Underperform. Texchem : 6M Net Loss Of RM9.2M Underperform 2QFY09 Results - Texchem’s 2QFY12/09 result was below our expectations with the 1H net loss of RM9.2m. The key variance was lower-than-expected operating margins due to operating leverage effects from the lower sales volumes from reported by the industrial and packaging segments. Texchem declared a 1st interim gross DPS of 3 sen (2Q08: 6 sen), which was lower than projected gross DPS of 6 sen. This translates to a gross yield of 3.1%. - Qoq, revenue jumped 26.4% largely due to higher revenue from all business segments and especially, the packaging division. Texchem reported 2Q operating profit of RM6.4m as compared to an operating loss of RM5.1m in 1Q. Consequently, Texchem managed to breakeven for the quarter. - We have cut our FY09 operating margin assumption to 1.9% from 2.6% previously but maintained our FY10 operating margin assumption of 3.4% on the back of an expected recovery in the global economy. We are now projecting a net loss of RM2.6M for FY09. We have also cut our FY09 total gross DPS to 7 sen from 10 sen previously but maintained our FY10 total gross DPS of 10 sen. We introduced our FY11 numbers. - We are maintaining our fair value of RM0.69 which is based on target CY10 PER of 11x, and our Underperform call on the stock. Texchem : 6M Net Loss Of RM9.2M Underperform 2QFY09 Results - Texchem’s 2QFY12/09 result was below our expectations with the 1H net loss of RM9.2m. The key variance was lower-than-expected operating margins due to operating leverage effects from the lower sales volumes from reported by the industrial and packaging segments. Texchem declared a 1st interim gross DPS of 3 sen (2Q08: 6 sen), which was lower than projected gross DPS of 6 sen. This translates to a gross yield of 3.1%.