27 May 2012
Weekly Stock Picks Commentary Report (21-25 May 2012)
Malaysia Stock Picks
Week 21 (21-25 May) Stock Picks Commentary
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We have the Weekly Stock Picks Commentary archive section if you would like to view our previous commentary
Here is the stock picks commentary for Week 21 (21-25 May).
Stock Pick #1
Multi Purpose Holdings (MPHB)
Week high : RM 3.27 (Up 39 sen – 11.9%)
To recap last week- “On 8 May, MPHB's finance executives (who are involved in the corporate plan) told TheEdge that Datuk Lim Tiong Chin is negotiating for a management buyout for MPHB's stockbroking firm AA Anthony which analysts estimates to worth around RM 170 million.
On 9 May, Kenanga Research initiated coverage on MPHB and estimated its non-gaming assets to worth RM 1.44 billion (equivalent to RM 1.77 per share).
Their analysis showed that if the entire non-gaming assets are disposed under their asset rationalisation exercise, the proceeds is enough to repay their entire debts and borrowings to a net cash position of RM 805 million. This position gives them the ability to pay a special dividend of up to 56 sen per share.
Kenanga Research favours MPHB’s move to become a pure NFO play citing that this will trigger the market to re-assess MPHB’s valuation to be up to par with current favourite Berjaya Sports Toto Bhd’s valuation.
MPHB is currently traded 23% discount in terms of valuations against Berjaya Sports Toto. Market reacted positively on MPHB’s ongoing asset rationalisation exercise where non-gaming assets are planned for disposal to enable MPHB fully focus on its Number Forecast gaming business and proceeds from sale of assets will enable MPHB to pare down its borrowings or to be repaid to its shareholders.
It currently has a 100% stake in Magnum, which is one of the largest Number Forecast Operator (NFO) in Malaysia. MPHB stock rose 4.9% (14 sen) since 8 May to week’s highest RM 3.02 on the same day and closed at RM 2.91 at the end of this week.”
Subsequently this week, Multi-Purpose Holdings (MPHB) announced a proposal to list its non-gaming business on Bursa Malaysia stock exchange. Managing director Datuk Surin Upatkoon said that the demerger will allow MPHB to position itself as a "gaming-dividend" stock with a sustainable dividend payment policy of at least 80 per cent of its profit annually.
Market took this news as positive as the listing of MPHB non-gaming assets may potentially realise the value of its assets.
Take note that even though Kenanga Research estimated its non-gaming assets to worth RM 1.44 billion, the exact valuation of the assets and how much each shareholder will get from the deal are not finalised and known yet and the demerger is subject to shareholders approval.
MPHB stock price had a total surge of 11.9% from 8 May to three week high of RM 3.27 on 25 May and closed at RM 3.19 for the week.
Stock Picks #2
AirAsia Berhad (AIRASIA)
Week high : RM 3.60 (Up 21 sen – 6.2%)
On 24 May, TheStar reported that Thai AirAsia will go for an initial public offering (IPO) exercise to list on the Thailand Stock Exchange. The listing is expected to complete by end of May.
AirAsia currently owns a 49% stake in Thai Airasia and its stake will reduce to 45% after the IPO. The IPO will raise RM 450 million, offering 1.2 billion shares valued at 3.7 baht (37 sen) a share, out of which 462.5 million shares are from existing shareholders.
Market is positive on this because if the listing goes through, AirAsia has the opportunity to cash out part of its stake in Thai AirAsia. The additional funds raised in the IPO for Thai AirAsia itself is encouraging.
AIRASIA stock price rose 6.2% since 24 May to week high of RM 3.60 on 25 May and closed at RM 3.60 for the week.
Stock Picks #3
JT International Berhad (JTINTER)
Week high : RM 7.34 (Up 52 sen – 7.6%)
On 24 May, JT International announced a special dividend totaling 62 sen (24 sen per share less 25 per cent tax and 38 sen per share, tax exempt)
Market took this news as positive on anticipation of the windfall cash payout to JT International shareholders. The ability to payout cash dividends goes a long way in demonstrating robust cash flow management of JT International.
JTINTER stock price surged 7.6% since 24 May to week high RM 7.34 on 25 May and closed at RM 7.27 for the week.
On Other stocks:
“To recap, on last week commentary, we wrote that On 17 May, JCY International quarterly earnings surged 1,209% to RM 163 million on better HDD component selling prices and higher sales volume due to shortages in supply from Thailand floods
Take note that even though JCY net profit recovered strongly compared to previous year, current quarter’s net profit (RM 163 million) is rather flattish if compared with its preceding Q4 2011’s net profit (RM 162 million).
Surge in net profit from Thailand floods had started since Q4 of 2011. Market talk has it that the benefit from this event could have peaked and whether or not such robust results can be sustained and replicated for the next quarters ahead is questionable.
JCY stock price dropped 2.6% since 17 May to a week low of RM 1.47 on 18 May. Nonetheless, JCY stock price had surged by 268% since Oct 2011 when Thailand’s flood took effect from around 40 sen in Oct 2011 to RM 1.47 closing on 18 May.”
Subsequently, this week on 21 May, CIMB reports that JCY's competitors revealed that their capacity in Thailand will be back in full swing by the end of the third or fourth quarter 2012.
Market took this news negatively as they earlier questioned whether the benefit from the Thailand flood event could have peaked and whether or not such robust results can be sustained and replicated for the next quarters.
As a result, JCY stock price dropped further this week to a total drop of 18% since they announced their quarter results on 17 May to RM 1.33 closing and week low on 25 May.