20051007 Hwang DBS Daily Focus

Highlights
>
> Axis REIT - Next catalyst: Acquisition - Maintain Buy
>
> Since listing, Axis REIT (A-REIT) has enjoyed a 41% capital gain. But
> there is further upside for A-REIT arising from acquisitive growth with
> property size of around RM60m over the next 6 months; raising DPU by 6% or
> 0.7sens per unit. We maintain our Buy recommendation and raise our target
> price to RM2.01 based on DCF valuation (incorporating new acquisitions of
> RM60m with assumed 8% gross yield), supported by its defensive earnings
> quality and dividend yields of above 6.0%.
>
> 
>
> Comments
>
> British American Tobacco - Clarifies launch of limited edition Pall Mall
> 23's - Maintain Buy
>
> BAT clarifies some reports generated on the recent release Pall Mall 23s.
> As in other past limited edition packets, The Pall Mall 23s are are not
> meant to replace the existing range. This series is in line with Pall
> Mall's brand essence "Genuinely More", giving its consumers more value at
> an affordable price. The limited edition packets were released in selected
> outlets nationwide as of the week of 3 October and will end 30 October. It
> is available in three variants - full flavour, lights and menthol.
>
> The brand is not expected to reignite price competition. From our surveys,
> we reckon that the limited edition is only available to 50% or less of its
> nationwide outlets. This limited offer is a savvy strategy to promote Pall
> Mall's brand equity during the fasting season (when demand typically
> falls) while addressing the portion of smokers who are price sensitive.
> The financial impact may even be less significant, as providing 3 sticks
> free for a RM5.50 20-stick pack does not tantamount to a 15% price
> discount, i.e. margin per pack would be much better than offering a 15%
> price discount, and some smokers may also increase consumption (habit of
> smoking everything in the pack).
>
> Meanwhile, there could be upside to earnings with a potential reversal of
> a prior machine impairment charge (of small pack machines). Recall that
> BAT recognized an impairment charge of RM29m in 2Q05. 
>
> Overall, maintaining Buy call. Although the shares have risen 6% since our
> upgrade in Sept, BAT remains attractive for its prospective capital
> appreciation to our DCF-based RM41 target price plus dividends.
>
> Ranhill Berhad - Enters into concession agreement for water projects in
> Thailand - Maintain Fully Valued
>
> AnuRAK Water Treatment Facilities Co. Ltd., a wholly-owned subisidiary of
> Ranhill KWI Sdn Bhd - which is 70% owned by Ranhill Utilities, has entered
> into a concession agreement for three projects in the Amata Industrial
> Park. The initial project cost is RM21.2m. The projects involve 20-year
> Build-Operate-Transfer projects in water and wastewater.
>
> The contribution from this project is unlikely to be significant in the
> near term given the project's relatively small capacity. However, it is
> positive in that it will be the Group's first project in wastewater. We
> maintain our Fully Valued recommendation on Ranhill with a RM1.25 price
> target, based on 9x CY06 EPS.