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Malaysia stock market and companies daily report (March 18, 2013)

Contributed by Shares Investment

Caring Pharmacy To Issue 35m Shares In IPO
Caring Pharmacy Group is issuing 35 million shares for its initial public offering (IPO) on the Main Market of Bursa Malaysia. According to its draft prospectus, the issuance represented 16.08 percent of its enlarged issued and paid-up share capital of 217.71 million shares. Of the amount, 10.88 million shares, or 5 percent would be allocated for the public, of which at least 50 percent was to be set aside strictly for Bumiputera individuals, companies, societies, co-operatives and institutions. It stated that some 14.19 million shares or 6.52 percent was reserved for private placement to selected investors. The company however has not provided the IPO price in its prospectus exposure or the tentative listing date of its IPO. The company said the IPO would enable it to gain recognition and market visibility, thus enhancing the company’s profile as well as augment its corporate reputation while expanding its customer base.
Significance: According to Caring Pharmacy Group, about 41.15 percent of the gross proceeds would be utilised for the expansion of new pharmacy outlets, including the purchase of property and equipment as well as inventories. It targets to set up 25 to 30 new community pharmacies in Peninsular Malaysia within a two-year period.

Analyst Recommends ‘Buy’ Call On Hartalega
Hong Leong Investment Bank Research (HLIB Research) has recommended a “buy” call on Hartalega Holdings with a target price of RM5.16. The brokerage said Hartalega has a dominant position in the nitrile glove market and has high return on equity (ROE) and net profit margins. “In the event of a price war, Hartalega’s earnings will be the least affected and the company is shielded by its high profit margins,” it said. Meanwhile, HwangDBS Vickers Research has maintained a “hold” call on the glove maker at a higher target price of RM4.80 from RM4.70 previously after the earnings revision. “The current valuation has priced in Hartalega’s strong fundamentals, highest ROE and operating margins in the sector,” said HwangDBS Vickers. The research house has raised Hartalega’s FY13 and FY14 earnings by five and two percent respectively, after factoring higher operating margins, which is 28 and 27 percent compared with 27 and 26 percent previously.
Significance: According to HLIB Research, the likely risks of Hartalega would be the delays in capacity expansion plan, surge in nitrile latex prices and shift in demand to natural latex gloves from nitrile gloves, if prices of natural latex were to fall significantly below nitrile latex.

SP Setia 1Q Results Within Analysts’ Expectations
SP Setia financial performance for the first quarter of FY13 is within market and analysts expectations. According to CIMB Research, SP Setia’s first quarter results were broadly in line with expectations, as annualised net profit made up 80 percent of their original forecast and consensus. The brokerage believes the potential re-rating catalysts could come from the decent set of results, a successful take-up rate at its Battersea property project in London, as well as the new sales and profit registered in its FY13. MIDF Research on the other hand, noted that its earnings grew at a slower pace due to lower profit margin and higher finance costs. “Lower margins were mainly due to a gradual change in product mix with a higher percentage of profit now contributed through sales of high-rise developments in the current quarter, as opposed to landed properties in the first quarter of FY12,” it said. Meanwhile, HLIB expects SP Setia to well on track to achieve its RM5.5 billion sales target for FY13, after the RM2 billion recorded in the first quarter.
Significance: MIDF believes that SP Setia’s prospects will be bright as earnings and revenue “will improve concurrently” with the construction progress of some of the high-rise projects which are still at the early stages of development. The research house is also positive on the company’s succession plan as its future president and deputy president have vast experience in the property business and have been in the management of the company since late 1997.