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Monday, December 24, 2007

Stockwatch shares show their prowess

The shares of most companies highlighted as stocks to look out for in StarBiz's Stockwatch column, which appears every Monday, have done quite well. The companies have generally shown a marked improvement in their financial performance and have received global recognition, thus pushing up their share prices further. Below is a run down of some of the players across sectors, why they were chosen and how they had progressed this year locally and globally.

A scale model of the Resorts World displayed at the ground breaking ceremony of Genting International's second casino and entertainment resort on Sentosa Island in Singapore. – AFP


Proton Holdings Bhd was highlighted due to the possibility of the national car manufacturer obtaining a foreign partner. However, its shares were sold down after investors' were disappointed when the Government decided to call off negotiations with Volkswagen on Nov 20.

YTD Proton shares fell RM2.90 (43.9%) to close at RM3.70 last Friday.

Nevertheless, Proton's financials have been steadily improving – it reported its first profit - RM3.51mil in the second quarter ended September 30, 2007 - after five consecutive quarters of net losses, citing improved sales especially since the launch of the Persona and better cost management.

Another stock selected in the sector was MBM Resources Bhd mainly due to the strong contribution from associate Perodua. Net profit has been on the up-trend rising 33.6% to RM38.5mil in the third quarter ended September 30, 2007.

Building materials

The building materials sector has bright prospects going forward boosted by a rise in construction activities from the implementation of the Ninth Malaysia Plan (9MP) projects.

Cement players Lafarge Malayan Cement Bhd and Cement Industries of Malaysia Bhd were two of our stocks to watch as potential beneficiaries of the 9MP.

The sector also received a boost when the Government adjusted the ceiling price of cement last December. In addition, the automated pricing mechanism to take effect from Jan 1 is expected to provide further upside to cement prices.


We selected UEM World Bhd due to the huge potential it provided as the master developer for Nusajaya, a 9,712 hectares future metropolis in the Iskandar Development Region launched early this year.

Land prices in Nusajaya may double in the next two years, making UEM World a direct beneficiary.

It is also involved in the construction of the RM3bil second Penang Bridge to be completed by 2010.

WCT Engineering Bhd proved our confidence in it was not unfounded as it continues to clinch contracts locally and abroad. It secured some of the largest contracts from the Middle East this year including the Meydan Racecourse Dubai valued at RM4.6bil with partner Arabtec Construction. It is also in a joint venture to construct the RM1.3bil Abu Dhabi F1 Circuit.


Shangri-La Hotels (Malaysia) Bhd was chosen as it is well positioned to take advantage of increasing tourist arrivals Visit Malaysia 2007 due to its strategic location in these geographical areas.

Recently, Standard Chartered Private Equity Ltd bought a 19.55% stake in the hotel group. As an equity investor, the fund's involvement could be a catalyst for faster growth or strategic acquisitions.

Information Technology

We looked at VADS Bhd an excellent small-cap IT due to its exemplary earnings and solid execution.

VADS' share price has been rising sharply, outperforming the benchmark KL Composite Index over the past year. In addition to securing local contracts, VADS has begun to receive global recognition by securing two offshore contracts this year.


Malaysian Bulk Carriers Bhd was one of our stocks to watch among transport companies.

The company has been benefiting from surging dry bulk rates this year. It has also been paying decent dividends.

This coupled with the higher average shipping rates expected for 2008 has made the company an ideal stock to look at during volatile periods.


The RHB group has seen its fair share of action in terms of mergers and acquisitions this year. The latest news in the RHB saga is Abu Dhabi Commercial Bank's interest to buy a 25% stake in RHB Capital Bhd from the Employees Provident Fund.

This will help RHB Capital's aim to turn subsidiary RHB Bank into one of the top three banking groups in South-East Asia and expand its presence to China and the Middle East.


Malaysia Airlines was selected as a good turnaround story. It achieved its business turnaround plan a year ahead of schedule and plans to introduce its business transformation plan next month.

It posted a record net profit of RM363.94mil for the third quarter ended Sept 30, its fifth consecutive profitable quarter and best ever earnings.

However, MAS' earnings is expected to be affected by the limited opening of the Kuala Lumpur-Singapore route to AirAsia Bhd.

It has been a phenomenal year for AirAsia Bhd, which has been reaping good profits as business continues to boom. It also launched its long-haul budget carrier AirAsia X this year and gain approval to have two flights plying the lucrative Kuala Lumpur-Singapore route recently.


Crude palm oil prices hit new highs this year with palm oil futures on Bursa Derivatives reaching a record RM3,068 on Nov 26. As a result, major palm oil firms such as IOI Corp recorded substantial profits.

IOI Corp Bhd is currently the best and one of the biggest of the breed. In the palm oil sector, it is the most profitable company, with one of the highest yields and lowest costs. High crude palm oil prices have caused net profit to surge 76.6% to RM451.5mil for the first quarter ended September 30, 2007.

The IOI is a favourite plantation stock among investors due to its consistent earnings delivery and liquidity in the trading of the stock especially after its share split earlier in the year.


Genting Bhd has seen its fair share of action this year.

Early this year, it announced that it had bought a 75% stake in a casino project to be operated by Macau magnate Stanley Ho for RM1.57bil.

More recently, it appears that it has set its sights on the British gaming industry when its subsidiary Genting International plc bought a 9.38% stake in Rank Group plc – the second biggest casino operator in Britain.

Genting International is also in the midst of building its S$5.75bil Sentosa integrated resort in Singapore.

DiGi.Com Bhd was selected because it is one of the most successful growth stories in the telecommunications industry. Its share price has grown by leaps and bounds. Moreover, DiGi declared RM1.685 per share in gross dividends to date.

DiGi is cash rich and its balance sheet is stronger, it has RM1bil in its coffers and debts of only RM300mil.

The third-generation spectrum (3G), which DiGi is in the process of acquiring, is expected to boost the telecommunication company's average revenue per user (ARPU).

Government-linked companies

Tenaga Nasional Bhd is said to be one of the cheapest utility stocks in the region. Its share price fell in the past few months which analysts attributed mainly to the recent pullback by foreign investors due to concerns over electricity demand growth, rising fuel costs, and contracting global liquidity.

However, hope that Tenaga could revise electricity tariff in the event of a cut in gas subsidy propelled its share price upwards to RM10 earlier this month. The counter closed at RM9.55 on Friday.

Malayan Banking Bhd is one of the more defensive stocks in the banking sector, which boasts superior dividend yields.

Maybank made a positive move when despite its usual slower first quarter results (financial year-end June 30, 2008), it surprised most people with a quarter dividend trend going forward plus a one-for-four bonus issue.

Moreover, it has been granted approval-in-principle to start an Islamic subsidiary recently.

But there were some negative news about its insurance business though - a possible joint venture partnership with PT Panin Life Tbk has hit a snag due to Indonesia's banking regulations.

Oil and gas

As studies indicate robust demand for oil from Asia, local oil and gasrelated companies have been busy stepping up their brown field and marine services locally and abroad.

Many oil and gas stocks were highlighted this year. One of the more exceptional ones was Muhibbah Engineering (M) Bhd. The construction and engineering group has been in the limelight this year securing contract after contract totalling a whopping RM1.8bil so far. Its outstanding order book is at a record high of RM4.45bil, which will boost future earnings.

Another gem in the industry was KNM Group Bhd. In just two years, the share price of KNM Group rose tremendously to reach RM7.20 last Friday, from 58.3 sen seen on December 21, 2005. This means investors who put their funds into the stock would have made huge gains.

By The Star Newspaper (by Elaine Ang)

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