Reports » Malaysia
Malaysia stock market and companies daily report (February 25, 2014)
Sarawak Energy Targets RM10b Spending On Hydroelectric Dams
- State-owned Sarawak Energy plans to build five hydroelectric dams with a total of 3,110-megawatt (MW) capacity in central and northern Sarawak and invest up to RM10 billion next year.
- Sarawak Energy has called for companies to submit prequalification applications to develop the dams so that when it calls for tenders, it will have a list of qualified contractors. Sources speculate tenders may be called later this year but that would depend on many factors.
- Sarawak Energy wants companies that have either completed similar packages for at least one major hydroelectric project worth more than RM1 billion or are undertaking one that is worth more than RM2 billion.
Significance: Sarawak Energy, which was delisted from Bursa Malaysia in 2010 after it was taken private by the Sarawak government, aims to increase its installed hydropower capacity to 6,000MW by next year. The company at present has only one hydroelectric project – Murum dam.
Maybank Research Says Hold On To MBM Resources Shares
- In a note released, Maybank Research noted that operations outlook for MBM Resources is unexciting until next year as new start-ups deliver. The research house continues to be positive on MBM’s long-term prospects as it undergoes a transition period to grow and diversify its earnings base.
- MBM’s unutilised greenfield manufacturing license remains a wild card, which could warrant a re-rating. In addition, MBM is currently in talks with SAIC Motor Corporation for the reintroduction of the MG marque vehicles in Malaysia. Management has indicated its aim to be a franchise holder and is looking to secure a distributorship by end-2014.
- Management has guided for a more cautious FY14 as it continues to expand its businesses in a challenging environment. Maybank Research now expects FY14 earnings to flatten out due to start-up losses at Oriental Metal Industries’ alloy wheel plant as well as weaker associate contribution seen from start-up losses at both Perodua’s and Hino’s new assembly plants.
Significance: Maybank Research maintains its “Hold” rating on MBM, with a marginally adjusted target price of RM3.75 as it rolls forward valuations to FY15, on lower price-to-earnings ratio of nine times to account for the company’s less sanguine outlook.
CIMB Maintains “Buy” On Karex, Target Price RM5.07
- Karex reported a strong 47 percent increase in 1H14 net profit, which was in line with CIMB Research’s expectation at 48 percent of its FY14 forecast, but above consensus at 55 percent.
- The strong growth was driven by the increase in orders and greater economies of scale resulting from the higher condom capacity, Karex’s utilisation rate remains at a high 81 percent to 82 percent, indicating strong demand.
- CIMB Research expects Karex to deliver strong results in 3Q14 driven by the six production lines which it has added in the past few months as well as lower latex price and a stronger domestic currency against the US dollar.
Significance: CIMB Research maintains Karex’s FY14 to FY16 net profit forecasts but increases its target price to RM5.07, now pegged to a higher 19 times forecast FY15 price-to-earnings ratio (PER) and at a 20 percent premium over the rubber glove sector’s average PER.
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