Reports » Malaysia

Malaysia stock market and companies daily report (October 24, 2012)

Contributed by Shares Investment

Analyst Optimistic About Plantation Stocks
With crude palm oil (CPO) prices down by some 50 percent since early 2011, plantation analysts are sensing potential growth in the value of plantation stocks and have begun recommending clients to accumulate on dips. This comes after demand for the commodity is expected to exceed supply next year as production peaks in November, before stabilising to regular levels. At low CPO prices, analyst feel that the downside for plantation stocks would be increasingly limited however in the longer term, if CPO prices remained below RM3,000, it would negatively affect earnings of plantation stocks and eventually result in a series of downgrades by analysts. Nonetheless, for companies like Genting Plantation, IJM and TSH in which half of their plantations are matured; production is expected to double over the next few years and this will help buffer against volatility in CPO prices. This is according to one analyst.
Significance: Despite the fall in CPO prices, most plantation stocks have not been severely affected. Currently, there is a concern that plantation stock prices may eventually reflect this fall. According to one local research house, plantation stock prices have remained the same even when CPO prices were at the RM3,000 to RM3,500 level.

AirAsia Aims To Keep Costs Down
AirAsia, is determined to keep operational costs low in order to continue offering low travel fares. The low-cost carrier’s CEO, Aireen Omar stated operational cost in the third quarter will remain around the same figure as the last two quarters, however she hinted that the expected results will be good. AirAsia’s operating expenses in its first quarter and second quarter were at RM943.83 million and RM964.67 million respectively, due mainly to higher fuel costs. Net operating profit on the other hand was RM240.07 million and RM130.94 million for the respective quarters. Air Asia had recently launched a new route to Kunming, China. Based on the Centre for Asia Pacific Aviation (CAPA), AirAsia is the largest foreign airline by capacity into China at the moment. The carrier flies to 13 destinations in China from its Malaysia, Thailand and the Philippines hubs.
Significance: According to the CEO, China has always been AirAsia’s biggest market and the carrier will continue its expansion plans going forward. On a further note, AirAsia Group targets to carry 35 million passengers this year and 40 million passengers by 2013. In the meantime, AirAsia Malaysia targets to increase its passengers to 20 million this year from 17 million last year.

Top Glove Rises On Cheaper Latex And A Stable Forex
Top Glove shares jumped two percent as better earnings in the near term is expected based on lower natural rubber latex prices and stabilising of foreign exchange rate. Top Glove is seen to benefit from the stabilising rubber latex price at between RM 6 to RM 7 a kg which is the main cost component of its natural rubber gloves production. At midday yesterday, stocks of the rubber manufacturer closed at RM5.40 after rising as much as nine sen to RM5.43 earlier. Furthermore, stabilising of foreign exchange rates will support its bottom line given that the Ringgit has been strengthening against the US dollar in the past six months. According to Top Glove chairman Tan Sri Lim Wee Chai, the company had laid RM200 million aside for capital expenditure during the year, which is 42 percent higher than the previous year to finance the development of rubber plantation and acquisition of potential opponents.
Significance: The Company expects the expansion of its three factories in Selangor and Perak to boost its annual capacity by 12 percent to 44.8 billion pieces of gloves. Coupled with cheaper natural rubber and weaker Ringgit versus the US Dollar, the bottom line is expected to achieve significant results.