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Reports Malaysia

Malaysia stock market and companies daily report (January 27, 2014)

January 27, 2014, Monday, 05:21 GMT | 00:21 EST | 10:51 IST | 13:21 SGT
Contributed by Shares Investment

Bumi Armada Wins RM52.6m Angolan Contract
- Bumi Armada’s wholly-owned subsidiaries were awarded contracts worth RM52.6 million from Interoil Angola for the charter of two platform supply vessels. The one-year contract came with four extension options of six months each with total value of RM105.2 million if fully exercised.
- JF Apex Securities is neutral on the award as the size of the contract is relatively small, thus it would not contribute significantly to the group’s earnings. The Angolan contract came after a slew of projects were announced in 4Q13, which lifted its order book to RM17 billion.
- In addition, the group is currently bidding for 10 floating production, storage and offloading (FPSO) projects worth around US$12 billion or RM40 billion. To cope with the expansion plan, Bumi Armada is planning a capital expenditure of RM6.6 billion for its FPSO business segment in 2014, to be funded by bonds and rights issue in mid-2014.
Significance: JF Apex Securities maintains their “Buy” call with a target price of RM5.11 based on forecast FY14 earnings per share of RM0.235 and industry forward price-to-earnings ratio of 21.8 times. The research house maintains its positive view for the oil and gas industry with oil price steady at around US$100 per barrel, low steel price for shipbuilding and long-term demand for the FPSOs in line with more oil exploration and production activities.
MRC Prepares REIT Launch
- Talks of Malaysian Resources Corporation (MRC) launching a real estate investment trust (REIT) has been circulating for months, as sources noted that the company could look to announce the planned proposal as early as this week.
- Management is exploring options to rationalise its asset base and ease its debt load. This includes the creation of a REIT to house its property assets as well as the disposal of its 30 percent interest in the Duta-Ulu Kelang Expressway concession.
- As at 30 September 2013, MRC’s net debt stood at RM2.9 billion, translating into a net gearing of 1.7 times. For 9M13, its finance cost stood at RM126 million, accounting for 20 percent of revenue. MRC has taken steps to monetise its assets to address its debt position, as it divested its information technology business under GTC Global to Telekom Malaysia for RM45 million in early January.
Significance: In the nearer term, Nu Sentral Mall at KL Sentral, in which MRC has a 51 percent stake, is set to open by March. It is understood from AmResearch that pre-tenancy rates are at about 80 percent filled. The mall has a net lettable area of 650,000 square feet, with average rental ranging between RM9 and RM10 per square feet.
UOB KayHian Maintains “Buy” Rating On Gadang 
- For 2Q14, Gadang Holdings reported revenue of RM141.2 million, up 13.9 percent year-on-year (yoy), while core net profit came of RM8.3 million was down 30.2% yoy. The firm’s core net profit of RM15.4 million for 1H14 was about 45 percent of UOB KayHian’s full-year forecast.
- The research house expects earnings to catch up in the second half of the year, especially when progress billings of its property division kick in. Gadang’s construction order book stood at a healthy level of RM1.2 billion, with most of its projects coming to a tail end when the MRT project is completed in 2016 to 2017.
- The next key driver will be its project in Tampoi, Johor. Gadang will act merely as a land owner in this joint venture deal with Capital City Property, in exchange it will receive RM57.5 million for the proposed land, which will be redeveloped. It will also receive additional gross development value (GDV) proceeds of up to RM324 million (16.7 percent of final GDV), which translates to a net gain of about RM219.7 million.
Significance: UOB KayHian maintains their “Buy” rating with a target price of RM1.50 based on eight times fully diluted forecast FY15 price-to-earnings ratio (PER), on a par with its FY12 and FY13 average forward PER. It is optimistic Gadang has the potential to rerate upwards, driven by strong earnings growth visibility and lucrative concessions, and believes in a best case scenario the company could be worth RM1.90 per share.