200503 Hwang DBS Daily Focus

Highlights
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> Plantation - Overheated - Maintain Neutral
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> We re-iterate our Neutral call on the sector. We maintain our forecast for
> 2005 but revised our average CPO price target for 2006 slightly by
> RM30/tonne to RM1,480/tonne because of the expected increase in domestic
> consumption arising from biofuel blending. We raised the PE multiple of
> the plantation companies by 1x to reflect the structural change in terms
> of higher CPO floor price. Hence, our new price targets for IOI Corp and
> KLK are RM11.50 and RM7.60 respectively. Despite the upward adjustments,
> limited price appreciation is expected from the current level and hence,
> we think the recent run-ups present good opportunities to take profit. We
> are positive on the long term prospects of palm oil prices but the current
> valuations are not expected to be sustainable in the short run.
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> BSL Corporation - Initial Public Offering
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> Second Board bound BSL Corporation is principally involved in the
> production of components catering mainly for the consumer electrical and
> electronics sector in Malaysia. Its range of products can be segmented
> into: (1) stamped parts and components; (2) forged components; and (3) PCB
> and module assembly. The Group derives the bulk of its revenue from
> domestic sales (99.2% of turnover in the 7-month period ended 31 Mar 05),
> a proportion of which, is re-exported by its customers. Going forward, it
> aims to capitalise on the rising outsourcing trend and capture the
> increased production output amongst its MNC customers, as well as plans to
> venture into forging of steel products for the automotive industry. At its
> IPO offer price of RM0.68, BSL Corp shares are valued at a P/E multiple of
> 6.4x on its prospectus Aug 06 earnings.
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> Comments
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> MAS - Parent planning US$1bn bonds to help finance A380 aircraft
> acquisitions - Maintain Fully Valued on MAS
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> The New Straits Times reported that Penerbangan Malaysia Bhd (PMB), the
> major shareholder in Malaysian Airline System Bhd (MAS), plans to issue a
> US$1bn (RM3.8bn) bond. The proceeds of the bond will help PMB finance the
> purchase of six A380 from Airbus. Standard & Poor's Ratings Services has
> assigned a 'A-' long-term senior unsecured foreign currency debt rating to
> the bond. A Standard & Poor's analyst was quoted as saying that the 'A-'
> rating reflects the direct, irrevocable and unconditional guarantee by the
> government of Malaysia.
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> PMB is expected to start marketing the 10-year bond in Singapore today.
> PMB is planning presentations in Hong Kong, London and Boston. The debt is
> expected to be carried on PMB's balance sheet while MAS is expected to pay
> PMB a lease payment for the aircrafts. We maintain our Fully Valued
> recommendation and RM3.00 price target.