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Reports Malaysia

Malaysia stock market and companies daily report (March 18, 2014)

March 18, 2014, Tuesday, 06:07 GMT | 02:07 EST | 10:37 IST | 13:07 SGT
Contributed by Shares Investment

AZR Targets RM750m Revenue For FY14

- Ahmad Zaki Resources (AZR) is looking to reverse its fortunes from the year before and is expecting RM700 million to RM750 million in revenue this year, driven by its construction division. Its construction business occupies 90 percent of its topline, while the rest of its revenue is derived from oil and gas, property development and plantations divisions.

- AZR is eyeing two projects, one of which is the Langat 2 water treatment plant project in Selangor, in which it is in a consortium that is bidding for it, but no letter of award has been announced by the government yet. The other projects AZR hopes to clinch this year involve the Klang Valley mass rapid transit 2, the Tun Razak Exchange in Kuala Lumpur and Petronas’ RAPID project in Johor.

- The group said works for the RM1.6 billion East Klang Valley Expressway connecting the Silk Highway in Kajang to the Karak Expressway in Gombak, is expected to start in 3Q14. The project is scheduled to take three to four years to complete.

Significance: On its plantations, AZR is looking to double its total planted area in Kalimantan Barat, Indonesia over the next few years. It is also planning to build a 90-tonne mill in the plantation area. Five years down the road, the group hopes its plantations will be a significant contributor to the group’s revenue.

Kenanga Research Maintains “Outperform” Call On PPT, Target Price RM2.53

- Perisai Petroleum Teknologi (PPT) announced that its 51 percent owned subsidiary, Intan Offshore, had entered into a memorandum of agreement with Lewek Robin Shipping, a unit of Ezra Holdings, to acquire an anchor handling tug supply vessel (AHTS).

- The purchase price for the AHTS is US$7 million with external borrowings amounting to US$4.6 million. Management guided that the vessel will be leased back to Ezra on a bare boat charter basis at a daily charter rate of US$2,600 for the next seven years. This translates to an additional US$949,000 of revenue per annum.

- At a 40 percent margin, this yields a net profit of RM612,000 per annum going forward based on its 51 percent effective stake. PPT is also bidding for jack-up rig contracts ahead of its first jack-up delivery in May 2014. Given the buoyant jack-up rig demand, with at least 17 rig contracts expiring from mid-2013 to 2015, we foresee no issues for a contract win.

Significance: Kenanga Research maintains “Outperform” call on PPT with a target price of RM2.53 based on 16 times price-to-earnings ratio (PER) FY15 earnings per share. The 16 times PER is approximately at a 19 percent discount to its five year +1.5 standard deviation above its forward PER mean of 19.5 times, which is justified given the uncertainties with regard to job bids in its mobile offshore production unit.

HLIB Research Maintains “Hold” Recommendation On Glomac, Target Price RM1.09

- Glomac announced it is acquiring 25.3 hectares of leasehold land from Pertubuhan Peladang Kawasan Kuala Selangor for RM23 million. The proposed acquisition is expected to be completed in FY15 and Glomac does not expect any earnings impact in FY15.

- Hong Leong Investment Bank (HLIB) Research believes that Glomac may not commence development in FY16, given that is has RM800 million worth of pipeline launches for the extension phase of Bandar Saujana Utama (BSU) township.

- However, it was unable to estimate the impact to revised net asset value and earnings as Glomac did not provide the estimated gross development value from the new acquisition. It will seek more clarity on this issue in an upcoming analyst briefing. Nevertheless, HLIB Research is positive on this move as it allows Glomac to continue its highly successful RM1.7 billion gross development value BSU township.

Significance: HLIB Research maintains “Hold” recommendation on Glomac with a target price of RM1.16 based on a 40 percent discount to revised net asset value.