Technical | Fundamental Analysis Discussion Stocks Listed In Bursa

Tuesday, April 6, 2010

Kinsteel, Tenaga, KLCI, UMW

DJ MARKET TALK: Maybank Raises Kinsteel To Buy; Ups Target 19.4%

0228 GMT [Dow Jones] STOCK CALL: Maybank upgrades Kinsteel (5060.KU) to Buy from Hold, raises target price to MYR1.23 from MYR1.03 after raising FY10 EPS forecast by 13% and on higher target P/E of 8X 2011 earnings vs previous 6X. Says has turned positive following margin expansion in 1H FY10, with April-May billets sold forward at $550/ton vs inventory procured at $110/ton; analyst Lee Yen Ling says with sufficient iron ore inventory to last 3 months, company yet to commit to 2Q FY10 iron ore contracts, seeking more favorable pricing from domestic reserves. "We think the shares offer a better risk-reward ratio now, given higher steel prices, positive global steel fundamentals, and low foreign shareholding (less than 10%)," Lee says. Kinsteel +1.9% at MYR1.05

DJ MARKET TALK: Tenaga +3.8% On Better Power Demand Outlook

0407 GMT [Dow Jones] Tenaga Nasional (5347.KU) +3.8% at MYR8.41, may test psychological MYR8.50 later, on better power demand outlook, says dealer with local brokerage. "The improved economic conditions have led to higher demand for power and that will translate to higher earnings," says dealer. AmResearch's analyst Alex Goh, who has Buy call, MYR10.00 target, says Tenaga's valuations are "highly attractive" at 2010 forecast P/E of 11X vs 5-year average of 14X. Cites rising power demand (+5% in FY10 vs +4% earlier), strengthening MYR, which reduces fuel, interest costs, improving economies of scale on declining power reserve margin and revival of foreign interest (shareholding which has fallen to 8.6% from 28.4% in May 2007) as catalysts that will fuel share prices.

DJ MARKET TALK: KLCI +0.2% Midday; Oil & Gas Stocks Lead

0448 GMT [Dow Jones] KLCI +0.2% at 1344.56 midday, led by oil & gas-related stocks, select index heavyweights; "The external environment has been positive and domestically, newsflow has been generally favorable as well. There is room for further upside, at least, in the near-term," dealer says. Benchmark index tipped to rise to 1354 resistance in near-term, with support at 1338. OSK Research technical analyst Shin Kao Jack says market "far from being overbought". "The trend is obviously up and we are maintaining our bullish bias view," he adds. Among gainers, Tenaga (5347.KU) +3.5% at MYR8.38 on bullish power demand outlook, Petra Perdana (7108.KU) +10% at MYR1.76 after CIMB Research raised target price to MYR2.00; oil industry support services stocks among most active, with Kencana (5122.KU) +2.5% at MYR1.76, Dialog (7277.KU) +2.7% at MYR1.15. Among decliners, CIMB (1023.KU) down 0.4% at MYR14.68.

DJ MARKET TALK: Affin Keeps UMW As Add, Ups Target To MYR7.00

0531 GMT [Dow Jones] STOCK CALL: Affin Research keeps UMW Holdings (4588.KU) as Add, ups target to MYR7.00 from MYR6.40 earlier; this, after according a higher P/E multiple for UMW's oil and assets (from 10X to 15X P/E). Analyst Chong Lee Len says key re-rating catalysts for stock include product pipeline visibility for 51%-owned UMW Toyota Motor Sdn Bhd, potential listing of oil and gas unit and active capital management. The "initial overhanging fear, at least on our part, of sharp decline in domestic Toyota car sales given the massive global Toyota car recalls have been proven unfounded," says Chong; adds UMW is house's top pick in automotive sector as earnings may surprise on upside given aggressive oil and gas expansion, bright prospects and management prowess. Stock +0.2% at MYR6.34.
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