20051018 Hwang DBS Daily Focus

Highlights
>
> REDtone International - Disappointing 2QFY06 results - Fully Valued
> (Downgrade from Hold)
>
> RIB's share price had fallen 8% since our profit warning three weeks ago.
> Its 2QFY06 results announced yesterday were below both our and market
> expectations. Net income of RM6m eased 3% q-o-q after absorbing one-off
> items. Its Malaysian unit disappointed, coming in c.7% below our earlier
> estimates. Fortunately, its Pakistani unit remained on track to record PBT
> of RM5m in FY2/06. We have factored RIB's lower Malaysian contribution for
> FY2/06 and continuing earnings deterioration. As such, we have cut our
> FY2/06-08 earnings by 18%-21%, and lowered our price target to RM2.00
> (based on 13.8x FY07 earnings). We downgrade RIB to Fully Valued. Also, we
> have eliminated net dividend of 10 sen for this FY.
>
> Comments
>
> Proton Holdings - Dr M: Proton might as well close shop - Maintain Sell
>
> Stung by criticisms over Proton's competitiveness its adviser Dr. Mahathir
> Mohamad said that the national car industry might as well close shop. He
> was responding to readers' comments in a newspaper that it was best to
> close down Proton. (The Star)
>
> While the comments were impromptu, we take the view that the government
> will eventually allow potential suitors like VolksWagon AG to possibly
> take a controlling stake in Proton. However, we remain skeptical of any
> potential white knight's ability to reverse Proton's sliding market share,
> especially when market liberalization is just a few years away. Meanwhile,
> we remain wary of potential write-offs of capitalized R&D expenses and
> past investments, as well as continuing losses at subsidiary MV Augusta.
> Maintain our Sell call and RM7.50 target price (based on 0.6x P/NTA).
>
> KFC Holdings - Four QSR minorities asking for higher General Offer -
> Maintain Fully Valued
>
> Four QSR Brands minority shareholders, who hold less than a 1% stake, are
> seeking a higher price of RM3.40-3.60/share after another party had in
> January triggered a mandatory general offer (MGO) when the said party got
> hold of more than 33% of QSR shares. On Oct 16, the minority shareholders
> - Sim Chee Kuan, Yap Chee Ching, Ong King Kok and Hazman Ahmad - formed an
> ad hoc action committee to fight for their rights and benefits. (The
> Edgedaily)
>
> Separately, the Securities Commission (SC) stated that there were no
> issues arising from the QSR Brands Bhd voting shares acquired or deemed to
> be acquired by Kulim (Malaysia) Bhd for the purpose of determining the
> level of acceptances of the takeover offer.
>
> While we continue to take the view that QSR will ultimately be taken over
> by Kulim, which is deemed a positive by minority shareholders, the
> takeover could still be long-drawn. Until then, we maintain our Fully
> Valued call on KFC with RM3.10 target price, based on a 25% discount to
> RNAV.