STANDARD & Poor’s Equity Research Services and Kim Eng Research have initiated coverage on three Bursa Malaysialisted companies as part of efforts by Bursa Malaysia to provide equity research under the Capital Market Development Fund Bursa Research Scheme. Today we feature excerpts from the three reports.
YNH posted a 51% surge in pre-tax profit to RM77.1mil for the financial year ended Dec 31, 2005, on the back of a 44% increase in revenue to RM176.1mil compared with year 2004.
Earnings per share experienced a 12% slower growth last year mainly because of a larger share base of 329.5 million as a result of the issuance of 85 million new shares. The company had a share base of 256.7 million in 2004.
The company's property projects in Perak and Kuala Lumpur were key profit contributors in 2005. It has proposed a final gross dividend of 5 sen, bringing the total gross dividend to 11 sen, representing a 50% payout.
Kim Eng Research Sdn Bhd has kept its buy call on YNH, based on the property developer's good price/earnings ratio and strong dividend yield. Kim Eng expects 2006 to be another good year for YNH, projecting pre-tax profit to grow another 18%. This would be strengthened by unbilled sales of RM300mil as at December 2005 and new property project launches. The company's projects in Perak are also expected to deliver RM30mil pre-tax profit in 2006.
Asiatic Development Bhd
The plantation firm recorded a 1.6% fall in net profit to RM171.8mil for the year ended Dec 31, 2005, due to lower profitability from its plantation business.
However, Asiatic gained a surplus of RM25.8mil from additional compensation by selling a piece of freehold land to the government.
Higher progressive billings from its property division of RM25.7mil in the fourth quarter, up from RM9.2mil in the corresponding quarter of 2004, mitigated the RM15.5mil drop in plantation revenue to RM128mil.
Plantation revenue for 2005 was down 5.4% to RM441.9mil, due to the lower crude palm oil (CPO) selling price of RM1,395 per tonne. Higher fresh fruit bunches production of 1.1 million tonnes, however, offset the impact of the drop. Standard & Poor’s (S&P) has downgraded its “buy” call to a “hold”, following the recent strength in Asiatic’s share price. S&P also forecast a 5.6% decline for Asiatic in financial year 2006, as government compensation on land acquisition is unlikely.
Risks to S&P’s recommendation include lower-than-expected CPO prices due to external factors such as supply-demand dynamics or an appreciating ringgit.
Singapore’s Infocomm Development Authority has suspended mTouche’s SMS licence for six months in the republic and is conducting investigations on two possible violations of Singapore’s Telecoms Competition Code.
S&P is concerned that such a move and careless internal control could jeopardise the company's reputation and affect its business in Malaysia and Singapore. mTouche, with Singapore contributing 10% of its net profits, has since announced to Bursa Malaysia that the alleged licensing breach was an isolated case.
S&P has downgraded its “hold” call to a “sell”, based on a 12-month target price of RM2.74, reflecting an 8.6% downside. Risks on the call include investigations concluded in favour of mTouche and its business generating higher-than-expected profits.
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