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Reports Malaysia

Malaysia stock market and companies daily report (January 20, 2014)

January 20, 2014, Monday, 05:57 GMT | 00:57 EST | 10:27 IST | 12:57 SGT
Contributed by Shares Investment


AirAsia Close To Restarting Japan Operations; 2014 Focus On India Market
 
- AirAsia looks set to restart plans for a Japanese unit after a partnership with ANA Holdings broke down in June last year. The Malaysia-based airline remains bullish on the Japanese market and has lined up local partner and plans to commence service in 2015. The new Japan enterprise will avoid Tokyo’s Narita airport to achieve lower costs which was the cause for the failure of the partnership with ANA.
 
- AirAsia will focus on establishing its India unit in 2014. Tony Fernandes, AirAsia’s chief executive officer said, “Indian government approval to have a low cost airline in a once closed market of 1.2 billion people is imminent with flights slated for as soon as March.”
 
- The budget airline will initially use 10 Airbus A320 single-aisle jets. It will focus on secondary markets in India in order to minimise airport fees and other costs. Tony added, “Acting as a trailblazer will give AirAsia a first-mover advantage, though it could ease the way for rivals as it works with government to establish the steps needed for an overseas carrier to win operating approval.”
 
Significance: AirAsia will apply a cost efficiency focus to the entire airline as it targets to reduce at least 7 percent operating cost across the group this year on top of a 5 percent cut last year. Similarly, ancilliary sales should grow 25 percent, with the plans added to the fleet.
 
 
Pavilion REIT Offers Upside Potential, Says Alliance IB Research
 
- In a research note, Alliance IB Research said that Pavilion Real Estate Investment Trust’s (REIT) FY13 results came in within expectation, with core profit making up 98 percent to 100 percent of house and consensus full-year forecasts.
 
- The research house said the REIT presents upside potential as the share had corrected by almost 20 percent since its peak in March 2013, while they acknowledged the share price weakness was mainly due to three factors, namely 1) market concerns on bond yield expansion, 2) potential slowdown in consumer spending, and 3) higher operating cost. However, it opines that at current price, market has largely priced in these risks.
 
- At 17 January closing price of RM1.32, Pavilion REIT offers net yield of 5.4 percent and 5.5 percent for FY14 and FY15 respectively, implying a 1 percent premium to the research house’s revised risk free rate assumption of 4.5 percent.
 
Significance: Alliance IB Research upgrades Pavilion REIT to a “Buy” rating from “Neutral” with a higher target price of RM1.47 from RM1.46, following their update on earnings projection and several key assumptions in the dividend discount valuation model.
 
 
Protasco Aims To Strengthen Order Book In Libya
 
- Protasco is banking on new jobs in Libya to improve overseas earnings despite losing over RM40 million from its operation there due to a revolution. The group is eyeing for more road and bridge repair works, as well as highway maintenance jobs.
 
- Protasco favours Libya due to its good contract prices as they are based on direct negotiations, meaning there is no competitive bidding that will result in a margin squeeze.
 
- The company had previously won two road projects several years ago worth a combined RM250 million and it had completed 60 percent of the works before fleeing the revolution in 2011. The job balance is worth about RM110 million and it has resumed works there.
 
Significance: Protasco aims to cash-in on the situation in Libya and to get more jobs upon completion of the two roads as Libya is expected to invest US$140 million (RM462 million) in projects over the next decade. The country is looking to build a sustainable future with developments across infrastructure, energy, utilities and such.