20050916 HDBS Daily Review
> Highlights
>
>
>
> Eng Teknologi - Of growth and dividend yields - Maintain Buy
>
>
>
> Eng is expected to generate 32% earnings growth next year riding on
> recovery in the hard disk drive sector and a ramp-up at its industrial
> products division. We have fine-tuned our FY05 forecast pursuant to an
> update on Eng's latest performance. As our earlier revenue and profit
> margin assumptions were too conservative, we raised our FY06-07 earnings
> by 16%-18%. Our price target of RM2.60, which is based on 1.5x FY06 BV (c.
> 25% discount to mid-cycle average multiple) remain unchanged. Trading at
> 6.2x FY06 PE and 1.3x BV, Eng shares provide 9% and 11% gross dividend
> yields for FY05 and FY06 respectively. We reiterate our Buy call.
>
>
>
> Comments
>
>
>
> TNB - Minister reiterates deferment of tariff hike - Maintain Buy
>
>
>
> Energy, Water and Communication Minister Datuk Seri Dr Lim Keng Yaik was
> again quoted as having said that the electricity tariff would not be
> increased for the time being. (Recall that the minister made a similar
> statement on 9 Sept 2005.)
>
>
>
> Again, this comment did not come as a surprise to us given that last week
> the government announced plans to freeze fuel and toll hikes till end-05
> and end-06 respectively, and inflation figures released on Wednesday added
> more concerns as inflation rate was highest since 1998 at 3.7%. We believe
> the reason for the government's decision to defer tariff hike is mainly to
> keep a check on inflationary pressure and one that is politically
> motivated. Hence, investors should not construe the statement made by the
> minister as no tariff hike for Tenaga. Instead, we believe this is merely
> a temporary measure (till end-05).
>
>
>
> Unfortunately, we could potentially see some weakness in Tenaga's share
> price in the near term as frequent repetition of the minister's comment in
> the press on tariff deferment will inevitably create a negative image of
> the entire situation and dampen investors' sentiment towards this stock.
> And to add more pressure to the share price, foreign shareholding of
> Tenaga at 12.5% (as of 31 August 2005) is at least three times higher than
> that of last year (at 3.4%).
>
>
>
> Nevertheless, we maintain our earlier belief that the tariff hike will
> still come through in early 2006. Any weakness in Tenaga's share price is
> an opportunity to accumulate. And on a brighter note, investors could be
> in for a pleasant surprise with Tenaga's final quarter results scheduled
> to be released sometime end-October. We understand that Tenaga is
> under-pressure from its auditor to recognise the SESB subsidy from the
> federal government amounting to between RM250m to RM270m (or +17% to +18%
> of Tenaga's FY05F core earnings), which has not been factored into our
> earnings forecast. We believe that the market has not factored this as
> well.
>
>
>
> We maintain our Buy recommendation with RM12.00 price target, based on its
> RNAV. Our forecast has incorporated an 8% hike effective 1 March 2006 with
> a corresponding 56% hike in gas prices.
>
>
>
> Eng Teknologi - Of growth and dividend yields - Maintain Buy
>
>
>
> Eng is expected to generate 32% earnings growth next year riding on
> recovery in the hard disk drive sector and a ramp-up at its industrial
> products division. We have fine-tuned our FY05 forecast pursuant to an
> update on Eng's latest performance. As our earlier revenue and profit
> margin assumptions were too conservative, we raised our FY06-07 earnings
> by 16%-18%. Our price target of RM2.60, which is based on 1.5x FY06 BV (c.
> 25% discount to mid-cycle average multiple) remain unchanged. Trading at
> 6.2x FY06 PE and 1.3x BV, Eng shares provide 9% and 11% gross dividend
> yields for FY05 and FY06 respectively. We reiterate our Buy call.
>
>
>
> Comments
>
>
>
> TNB - Minister reiterates deferment of tariff hike - Maintain Buy
>
>
>
> Energy, Water and Communication Minister Datuk Seri Dr Lim Keng Yaik was
> again quoted as having said that the electricity tariff would not be
> increased for the time being. (Recall that the minister made a similar
> statement on 9 Sept 2005.)
>
>
>
> Again, this comment did not come as a surprise to us given that last week
> the government announced plans to freeze fuel and toll hikes till end-05
> and end-06 respectively, and inflation figures released on Wednesday added
> more concerns as inflation rate was highest since 1998 at 3.7%. We believe
> the reason for the government's decision to defer tariff hike is mainly to
> keep a check on inflationary pressure and one that is politically
> motivated. Hence, investors should not construe the statement made by the
> minister as no tariff hike for Tenaga. Instead, we believe this is merely
> a temporary measure (till end-05).
>
>
>
> Unfortunately, we could potentially see some weakness in Tenaga's share
> price in the near term as frequent repetition of the minister's comment in
> the press on tariff deferment will inevitably create a negative image of
> the entire situation and dampen investors' sentiment towards this stock.
> And to add more pressure to the share price, foreign shareholding of
> Tenaga at 12.5% (as of 31 August 2005) is at least three times higher than
> that of last year (at 3.4%).
>
>
>
> Nevertheless, we maintain our earlier belief that the tariff hike will
> still come through in early 2006. Any weakness in Tenaga's share price is
> an opportunity to accumulate. And on a brighter note, investors could be
> in for a pleasant surprise with Tenaga's final quarter results scheduled
> to be released sometime end-October. We understand that Tenaga is
> under-pressure from its auditor to recognise the SESB subsidy from the
> federal government amounting to between RM250m to RM270m (or +17% to +18%
> of Tenaga's FY05F core earnings), which has not been factored into our
> earnings forecast. We believe that the market has not factored this as
> well.
>
>
>
> We maintain our Buy recommendation with RM12.00 price target, based on its
> RNAV. Our forecast has incorporated an 8% hike effective 1 March 2006 with
> a corresponding 56% hike in gas prices.
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