20051107 Hwang DBS Daily Focus

Highlights
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> Road to riches - Maintain Neutral
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> In our toll road universe, there are some companies generating stronger
> cash flow in the next two years that will lead to higher dividends. We
> find that the share prices of some major European toll road companies have
> trended up with consistently higher dividends. Also, the stronger cash
> flow will likely result in more investments partly because of the
> infrastructure boom in China, India, Thailand and Indonesia. Asian and
> European stocks have different accounting policies relating to toll assets
> and amortization/depreciation. We dedicate a section to implications of
> these policies. Lastly, we compare differences in key parameters (traffic
> growth, toll rate setting mechanisms, cost structures) and valuations for
> our toll road universe. Buy Hopewell Highway (737 HK), China Merchants
> (CMH SP) and Litrak (LTK MK).
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> Comments
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> Government under pressure to increase tariff next year - Maintain Buy
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> The Minister of Water, Energy and Communications Datuk Seri Dr Lim Keng
> Yaik was quoted in the local dailies as saying that the government only
> guarantees that there will not be a tariff increase this year. The
> government is aware of the problem faced by Tenaga with the rising cost of
> fuel to generate electricity. The article added that the pressure is on
> the government to increase the tariffs (next year).
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> This confirms our earlier belief that a tariff hike is envitable in early
> 2006. We also believe that the recent selldown of Tenaga has been
> unwarranted. Hence, we maintain our Buy recommendation with a DCF based
> RM12.00 price target.
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> Errant housing developers exposed - Maintain Neutral
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> The Housing and Local Government Ministry has taken a step further in
> making public the details of errant developers on its website. The website
> (http://www.kpkt.gov.my) contains postings on offences committed by errant
> developers and court charges brought against them under the Housing
> Development (Control and Licensing) Act 1966 (Amendment 2002) from January
> 2003 to September 2005. More than 500 housing developers were listed on
> the website booked under various offences. The fines varied from RM1,000
> to RM10,000 for each developer. And the most common offence relates to
> late filings of the developers' accounts to the ministry on the progress
> of the projects and various offences in relation to non-compliance of the
> advertisement regulations. Browsing through the list of offenders, we
> noted several subsidiaries of listed companies and government linked
> companies which included (but not limited to) IGB, Glomac, Talam,
> Boustead, Uda, Lebar Daun, Sunway, SP Setia, RB Land, Negara Properties,
> Guthrie, Gamuda and LBS Bina.
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> Given that most of the listed property developers are booked for various
> offences, it is therefore inconclusive as to whether any of these
> developers will be disadvantaged by this negative publicity. On their
> financial impacts, the "small" fines imposed by the ministry are not
> expected to cause any damage to the developer. We maintain our Neutral
> call on the sector. Our top pick remains Sunway City (Buy, SCITY MK,
> RM2.90 price target).