Stocks In Focus MY (CIMB Grp Hldgs, Kimlun Corp, Tenaga Nasional) – 13/01/15
Mega Bank Merger Off,Announcement Expected This Week
The proposed mega merger of CIMB Group Holdings, RHB Capital (RHBCap) and Malaysia Building Society (MBSB) is off and an announcement is expected before the end of the week.
There was a strong possibility the merger was called off due to several factors, including the tougher economic landscape and the fact that RHBCap was seeking a revision of the terms after the substantial fall in CIMB’s share price. Sources said that RHBCap now wanted a cash portion to be included instead of an all-share deal in the merger, thus making the deal potentially more expensive for CIMB.
The share prices of CIMB and RHBCap have underperformed due to uncertainties and concerns arising from the protracted negotiations as well as the tougher operating landscape. CIMB’s stock has shed 25.8 percent since the structure of the mega merger was first announced on 9 October 2014, closing at RM5.18 on 12 January while RHBCap’s share price has declined by 11.1 percent, closing at RM7.73 on the same day.
Significance: Some fund managers said news that the deal is off will be positive for CIMB and RHBCap because they felt that a merger of this size, at this time, could turn out negative for the parties if they had gone ahead with it.
Kimlun Clinches Two Contracts Worth RM111m
Kimlun Corporation (Kimlun) announced last week that it had secured two projects with a collective contract value of RM110.6 million. The first project, worth RM63.6 million, involves main building works for 89 factories in Johor Baru. The second project, worth RM47 million, includes infrastructure works for Phase 3 of the southern industrial and logistics cluster in Nusajaya, Johor.
Kenanga Research believes that the company will be able to achieve RM500 million worth of new contracts in FY15 if it continues to win new contracts for the rest of the year. These jobs would increase its net profit by RM2.5 million if a 6 percent profit before tax margin on average is assumed and bring its current outstanding order book to RM1.6 billion, thus providing earnings visibility for the next two years.
However, Kenanga is wary of the firm’s ability to fetch healthy margins for these jobs after seeing its construction margins stay below its three-year historical average of 8.5 percent for the past four quarters, thus its near-term outlook remains lacklustre despite the strong outstanding order book. It believes that the firm is also facing earnings risks in view of its persistently disappointing earnings and its un-compelling valuation at this juncture.
Significance: Kenanga Research maintains ‘Underperform’ on Kimlun with a target price of RM1.25. Risks to its call include better-than-expected margins, faster construction works and higher-than-expected order book replenishments.
Integrax Acquisition To Give TNB Huge Future Cost Saving
Tenaga Nasional (TNB) is putting a lot of money upfront to acquire Integrax, the Lumut Port operator in Perak, but the utility firm could be looking at a huge cost saving in the future ahead of the commissioning of its new power plants in nearby Manjung. Analysts said the takeover was a “tactical move” by the firm to secure its coal supply logistics.
AllianceDBS Research said the takeover price of RM2.75 for each Integrax share is not attractive for the group while another firm, Kenanga Research, believed that the group may have overpaid to acquire Integrax since the port operator has been valued at 23.5 times its earnings and at about its book value. Kenanga feels that the offer price is favourable to Integrax’s shareholders as its peers have more diversified client portfolio and larger port-handling capacity as compared to Integrax.
Shares of Integrax rose to its highest since 2001 at RM2.73 after the company’s board of directors said it was not seeking an alternative offer. On 12 January, TNB’s share prices rose 0.3 percent or 4 sen to close at RM14.20, with 6.4 million shares traded.
Significance: RHB Research feels that the move made ‘’perfect sense’’ by reducing jetty usage rates, which had been subjected to long-drawn negotiations in the past since it gives TNB full control over Integrax’s operations and future direction.
http://www.sharesinv.com/
Mega Bank Merger Off,Announcement Expected This Week
The proposed mega merger of CIMB Group Holdings, RHB Capital (RHBCap) and Malaysia Building Society (MBSB) is off and an announcement is expected before the end of the week.
There was a strong possibility the merger was called off due to several factors, including the tougher economic landscape and the fact that RHBCap was seeking a revision of the terms after the substantial fall in CIMB’s share price. Sources said that RHBCap now wanted a cash portion to be included instead of an all-share deal in the merger, thus making the deal potentially more expensive for CIMB.
The share prices of CIMB and RHBCap have underperformed due to uncertainties and concerns arising from the protracted negotiations as well as the tougher operating landscape. CIMB’s stock has shed 25.8 percent since the structure of the mega merger was first announced on 9 October 2014, closing at RM5.18 on 12 January while RHBCap’s share price has declined by 11.1 percent, closing at RM7.73 on the same day.
Significance: Some fund managers said news that the deal is off will be positive for CIMB and RHBCap because they felt that a merger of this size, at this time, could turn out negative for the parties if they had gone ahead with it.
Kimlun Clinches Two Contracts Worth RM111m
Kimlun Corporation (Kimlun) announced last week that it had secured two projects with a collective contract value of RM110.6 million. The first project, worth RM63.6 million, involves main building works for 89 factories in Johor Baru. The second project, worth RM47 million, includes infrastructure works for Phase 3 of the southern industrial and logistics cluster in Nusajaya, Johor.
Kenanga Research believes that the company will be able to achieve RM500 million worth of new contracts in FY15 if it continues to win new contracts for the rest of the year. These jobs would increase its net profit by RM2.5 million if a 6 percent profit before tax margin on average is assumed and bring its current outstanding order book to RM1.6 billion, thus providing earnings visibility for the next two years.
However, Kenanga is wary of the firm’s ability to fetch healthy margins for these jobs after seeing its construction margins stay below its three-year historical average of 8.5 percent for the past four quarters, thus its near-term outlook remains lacklustre despite the strong outstanding order book. It believes that the firm is also facing earnings risks in view of its persistently disappointing earnings and its un-compelling valuation at this juncture.
Significance: Kenanga Research maintains ‘Underperform’ on Kimlun with a target price of RM1.25. Risks to its call include better-than-expected margins, faster construction works and higher-than-expected order book replenishments.
Integrax Acquisition To Give TNB Huge Future Cost Saving
Tenaga Nasional (TNB) is putting a lot of money upfront to acquire Integrax, the Lumut Port operator in Perak, but the utility firm could be looking at a huge cost saving in the future ahead of the commissioning of its new power plants in nearby Manjung. Analysts said the takeover was a “tactical move” by the firm to secure its coal supply logistics.
AllianceDBS Research said the takeover price of RM2.75 for each Integrax share is not attractive for the group while another firm, Kenanga Research, believed that the group may have overpaid to acquire Integrax since the port operator has been valued at 23.5 times its earnings and at about its book value. Kenanga feels that the offer price is favourable to Integrax’s shareholders as its peers have more diversified client portfolio and larger port-handling capacity as compared to Integrax.
Shares of Integrax rose to its highest since 2001 at RM2.73 after the company’s board of directors said it was not seeking an alternative offer. On 12 January, TNB’s share prices rose 0.3 percent or 4 sen to close at RM14.20, with 6.4 million shares traded.
Significance: RHB Research feels that the move made ‘’perfect sense’’ by reducing jetty usage rates, which had been subjected to long-drawn negotiations in the past since it gives TNB full control over Integrax’s operations and future direction.
http://www.sharesinv.com/
