By Kenanga Research
Target price: RM2.31
HOCK Seng Lee (HSL) announced that it had clinched an infrastructure project at the Samalaju Industrial Park in Bintulu, valued at RM73.7mil and due for completion by the first quarter of 2016. This is the first major contract for HSL in 2014.
The contract sum is on track with the research house’s financial year ending Dec 31, 2014’s (FY14) total new order book assumption of RM600mil. In fact, according to management, in the year-to-date basis, inclusive of this contract, HSL has already secured RM129mil worth of contracts as during the past four months, some smallish jobs were also secured.
Hence, it is estimated, by now, that its outstanding order book would have reached RM1.22bil from RM1.10bil previously. The order book will last two years.
Given its status as the market leader, coupled with the vibrant Sarawak’s growth story, it is reaffirmed that HSL would be one of the major beneficiaries of the sustained development of infrastructure projects in Sarawak. This is evidenced from it consistently securing more than RM500mil worth of jobs per annum since 2012.
It is believed that HSL’s offered potential total return would be 24% (including dividend yield 2.6%).
HSL is one of the biggest contractors in Sarawak majoring in marine engineering and it possesses bright earnings visibility.
The target price of RM2.31 is based on a forward price to earnings ratio of 11 times FY15 earnings.
By RHB Research
Target price: RM4.77
MPI’s nine-month ended March 31 core earnings of RM43.3mil were within estimates but they beat consensus at 73.8% and 80.5% of the full-year forecasts respectively.
This marks the company’s fourth consecutive quarter of profits and the current uptrend in earnings is expected to continue in the fourth quarter, riding on improved demand from Asia and the US region.
The “buy” call is maintained with our fair values unchanged at RM4.77. The robust profit in the third quarter was due to its high utilisation rate, successful shift to high-yielding product segment, and favourable exchange rate with the US dollar.
Of note, management had declared a second interim dividend per share (DPS) of 10 sen. Its year-to-date dividends per share of 15 sen implies a generous payout ratio of 77.9% and it trumped our previous financial year ending June 30, 2014 (FY14) forecast DPS of 12.5 sen.
The FY14-FY15 earnings estimates have been revised by 4.7%-5.1%.
RHB also maintains its “buy” call on MPI. Despite the earnings revision, the fair value is left unchanged at RM4.77 at calendar year 2014 price-to-net tangible multiples of 1.3 times.
By HLIB Research
Target price: RM4.49
HLIB Research is maintaining its “hold” rating on Genting Malaysia, as it is now confirmed that its unit, Genting Americas, is bidding for the casino licence in upstate New York. It opined that this could be slightly advantageous to Genting Malaysia if the licence was awarded, given the better access to the crowd in downstate New York.
The “Sterling Forest Resort” project is proposed on the site of the Tuxedo Ridge Ski Centre that will include a casino, two hotels, restaurants and facilities for year-round outdoor recreation, including skiing.
Geographically, among the other four locations in the county, Tuxedo Ridge is the nearest to Manhattan.
However, no price tag was announced on the proposed development but HLIB Research believed it would not vary much from the price tag revealed by other bidders which ranged between US$400mil and US$750mil (RM1.3bil and RM2.5bil).
Given Genting Malaysia’s large war chest, strong cash flow and strong credibility, the research house said financing of the project would not be a problem.
HLIB Research said it liked Genting Malaysia for its defensive stock, monopoly in the industry and potential sources of earnings from international markets to drive earnings growth.
Therefore, it said it was keeping a “hold” on Genting Malaysia with a target price of RM4.49 based on sum-of-parts evaluation.