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Reports Malaysia

Malaysia stock market and companies daily report (December 19, 2013)

December 19, 2013, Thursday, 06:37 GMT | 01:37 EST | 11:07 IST | 13:37 SGT
Contributed by Shares Investment

Genting Malaysia Splashes Cash To Rejuvenate RWG

- Genting Malaysia has entered into a memorandum of understanding with the East Coast Economic Region Development Council to embark on a major 10-year master plan for the redevelopment of Resorts World Genting (RWG).

- The RM5 billion Genting Integrated Tourism Plan (GITP) is expected to be implemented in phases. Under the GITP, the group will raise its investment in the proposed Twentieth Century Fox World theme park to RM1 billion, compared to RM400 million mentioned earlier. The construction of the new theme park is scheduled for completion in 2016.

- The group will also allocate RM3 billion to refurbish and modernise its current hotel properties and undertake the development of a new hotel with an additional 1,300 rooms adjacent to the First World Hotel; add a new cable system and improve current logistics infrastructure to enhance its accessibility and increase its collaboration with Simon Property Group to build the second premium outlet, to be known as the Genting Premium Outlet, in Genting Highlands by 2015.

Significance: Alliance IB Research maintains a “Neutral” call with a target price of RM4.55 based on sum-of-parts valuation, underpinned by expected increase in visitations to Genting Highlands, high average occupancy rate exceeding 90 percent and constraints in the supply of hotel rooms in Genting Highlands in the near future.

AirAsia X Purchases 25 New Aircrafts

- AirAsiaX placed a $6 billion (RM19.5 billion) order for 25 Airbus A330-300 aircraft yesterday in a bid to challenge network carriers by tapping on the success of Asia’s largest low-cost airline, AirAsia. AirAsiaX plans to build long-haul bases on the back AirAsia’s short-haul networks, focusing initially on a corridor of demand from North Asia to Australia via Southeast Asia.

- AirAsiaX would have 57 new owned or leased wide-body jets by 2019. Tony Fernandes said AirAsiaX would restart flights to Europe using the two-engine A330s in 2016, or earlier if it can improve the economics of four-engine A340 jets in its fleet.

- AirAsia plans to return to the Japanese market after Air Nippon Airways agreed this year to buy AirAsia out of a budget airline venture, dissolving a loss-making alliance.

Significance:Strong Asian demand for budget carrier travel is expected in continue into the future given that low cost airlines had not penetrated the market in this part of the world as much as in Europe or the US.

Top Glove Posts Strong 1Q14 Results

- Top Glove’s 1Q14 revenue dropped 1.8 percent year-on-year (y-o-y) due to lower average selling price (from US$26 to US$27 per 1,000 pieces to US$22.50 per 1,000 pieces), which was in line with the lower raw material costs.

- Core net profit grew 17.7 percent y-o-y boosted by higher nitrile glove sales and increased automation that led to better operating efficiency and higher sales contribution from nitrile gloves which command higher margins. Sales volume rose by 10 percent y-o-y, mainly driven by the 35 percent increase in nitrile sales volume.

- While higher nitrile sales contribution will help boost margins, its high latex gloves installed capacity will partially offset the positive effect. Given Top Glove’s intention to keep its latex capacity running at decent utilisation rates, the company is likely to offer a higher discount to prevent its natural rubber glove customers from switching to nitrile gloves. Hence, CIMB Research is concerned that it will not be able to pass on the higher electricity tariff to its natural rubber glove customers.

Significance: CIMB Research maintains a “Hold” rating with a revised target price of RM5.94 from RM5.87 previously. Top Glove continues to face tough competition with the vinyl glove segment in China, thus, the research house prefers Kossan Rubber Industries.