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  • Saturday, 05 Apr 2003

SP Setia Bhd                                                                       Consensus net profit estimate FY10/03: RM125.35 million 

THE company made a net profit of RM30.73 million on the back of a RM148.75 million turnover for the financial quarter ended January 2003, up from a net profit of RM29.08 million from a turnover of RM134.43 million the corresponding period the preceding year. 


K&N Kenanga Research 

Comment: The company's results were in line with expectations, with profits mainly coming from strong sales, from launches the previous year of the Setia Indah Johor project, and its maiden high-end Duta Nusantara project in Sri Hartamas. 

SP Setia has made only a few small launches in the current financial year to date, consisting primarily of the balance of 41 units of the last phase of bungalows and semi-detached houses of the Duta Nusantara project, and 172 units of link houses in Setia Indah Johor.  

The take up rate for SP Setia's projects has been good at above 70 per cent, despite a soft property market plagued by war concerns and global uncertainties. 


Outlook: The sale of development land at the company's new 4,000-acre Bandar Setia Alam is to start in the second quarter of the calendar year, while the residential launches are on course to kick off in the fourth quarter. 

In the last financial year, SP Setia had strong sales and launches with close to 3,100 units of property put up for sale. K&N Kenanga expects a lesser number of launches, some 2,900 units in the current financial year. 

The management is expected to boost the number of launches in the next half of the financial year, especially in Setia Indah Johor, the Bukit Indah Johor 2 project and in the Klang Valley. 

SP Setia's first exclusive high-end project, Duta Nusantara in Sri Hartamas, is about 60 per cent taken up, since its launch in October last year.  

With the completion of the show houses soon, more sales are expected in the next few months. K&N Kenanga forecasts sales of 80 per cent in the first year of launch and 20 per cent in the second. 

With the new Bandar Setia Alam in Shah Alam and the new Johor road construction contract worth about RM800 million, SP Setia has enough projects to sustain its growth even amid soft market conditions. 

K&N Kenanga has a buy call on SP Setia.GUINNESS ANCHOR BHD                                                                 Consensus net profit estimate FY06/03: RM70.2 million 

OCBC Research 

Comment: Guinness Anchor's financial year 2003 and 2004 price earnings ratios of 14.9 times and 14.3 times respectively are on par with competitor Carlsberg's, and comparable to the consumer sector average. The projected dividend yields of between five and six per cent are above the consumer sector's four to five per cent. 

Guinness Anchor's market share of 49.5 per cent in the malt liquor market was mainly contributed by Tiger beer (28 per cent market share). Tiger beer is expected to be the driver brand and continue to show encouraging performance levels. 

The sales volume of Heineken, on the other hand, was up some 40 per cent year-on-year in 2002, but is still accounting for a smaller proportion of total sales volume. 

Guinness Anchor still controls some 85 per cent of the stout market, translating into 17 per cent of the total malt liquor market.  

Given that stout offers higher profit margin, due to higher pricing by some 20 per cent and lower competition, Guinness Anchor will continue to invest in Guinness Stout. Guinness Stout presently contributes some 24 per cent to Guinness Anchor's sales volume.  

Outlook: Guinness Anchor is pursuing its brand-building strategy although intermittent price discounting activities may still be implemented to sustain brand awareness.  

Tiger beer will be Guinness Anchor's tool for price discounting with its targeted customer group, the younger beer drinkers, while Heineken will continue to be promoted as a premium product.  

Anchor beer, which has been perceived to be closely associated with stout, has become a niche brand that is for the mid-aged white collars looking for value for money products. 

Guinness Anchor is planning to launch the second phase of the Adam King stout marketing campaign by the end of this year, which should result in the stabilisation of the shrinking stout market. 

The company's management is pursuing the policy to return excess cash to shareholders.  

Given its debt-free balance, and projected free cash flow of between RM70 million and RM80 million a year, Guinness Anchor is expected to continue to offer high dividend payout ratio.  

As at end-December 2002, the company's cash reserves stood at RM80.8 million.  

At a projected pay out ratio of 83 per cent, Guinness Anchor's dividend yield is forecast to be 5.6 per cent and 5.8 per cent for the financial years in 2003 and 2004 respectively.  

Guinness Anchor's payout ratio averaged 110.2 per cent in financial years 1996 to 2002. 

The malt liquor industry may not show strong recovery in the near term, but the worst appears to be over as the price competition is easing. OCBC Research has upgraded Guinness Anchor from underperform to market perform. 

MALAYSIA INTERNATIONAL SHIPPING CORP BHD                                           Consensus net profit estimate FY03/03: RM1.21 billion 


IT signed long-term charter contracts for its five new liquefied natural gas (LNG) carriers. One vessel is tied-up with Malaysia Liquefied Natural Gas (MLNG), and the other four with MLNG3. 


Affin UOB 

Comment: The contracts put to rest concerns on the deployment of the shipping company's six new LNG tankers, four of which are currently being constructed in Japan. In June last year the first vessel was chartered out to MLNG3.  

The two vessels that have been delivered are currently being temporarily deployed to service Malaysia LNG contracts, while two of the company's older vessels are refurbished. The two new vessels start the MLNG 3 contracts in April and May this year. 


Outlook: The remaining four deliveries, which are stretched out between September this year and April 2005 will increase MISC's LNG fleet to 19, reinforcing the shipping company's position as the world's largest single owner and operator of LNG carriers. 

MISC took a US$820 million (RM3.12 billion) loan to part-finance the building of the six new vessels from Japan Bank of International Cooperation, and a consortium of mostly foreign banks. The US$ earnings from the LNG contracts naturally hedge the US$ financing.  

Affin UOB estimates each new vessel to rake in between US$30 million and US$35 million per year. MISC's current existing LNG carriage contracts with MLNG and MLNG2 give a net profit of approximately RM1.4 billion a year.  

By financial year 2006, when the MLNG3 contracts are in full service, Affin UOB expects MISC's LNG operations to give an earnings base of at least RM1.6 billion a year. 

Global LNG demand is expected to remain strong, growing at between seven and eight per cent annum for the next decade, making the longer-term prospects for MISC in securing more LNG charter contracts are bright. Affin UOB has a buy on MISC. 

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