Investors and analysts were generally bullish on Petronas Chemicals Group Bhd’s (PCG) listing on Bursa Malaysia tomorrow, saying Southeast Asia’s largest initial public offering (IPO) to date will hold its ground although tension in the Korean peninsula continues to threaten sentiment.
Apart from the chemical company’s strong financial fundamentals, analysts say it enjoys strong leverage from its parent company, the national oil corporation, Petroliam Nasional Bhd (Petronas).
Investment houses giving early target or fair prices for PCG. Most of them generally targeted higher than IPO subscription prices. For comparison the IPO price is RM5.04 for individual and RM5.20 for institutional investors
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We are of the view that the LRT extension job could be awarded soon, possibly by year end. We have identified several locations where site clearing is now in progress. Our channel checks indicate that there will only be 2 main packages for civil works collectively worth RM2bn.
As such, we expect the momentum of positive news within the sector to accelerate in the coming months and rerate our valuations upwards. Maintain OVERWEIGHT on construction.
Below are the target price for construction sector.
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We believe that Bank Negara’s latest measures in capping the LTV ratio would have very limited impact on the real property sector. In continuing with our theme, we maintain our OVERWEIGHT call on the Malaysian property sector and advise investors to accumulate on midto high-end residential property developers, particularly those with primary focus on mid- to high-end landed properties in Malaysia. Any knee-jerk reaction on the latest measure will present an opportunity for investors to accumulate.
The table below are the target price for selected developers in property sector.
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Further Election Indications. With the Star reporting that the PM has called on UMNO party members to get ready for the general election, we believe our long held view of an early 2011 polls will indeed become reality. Given the history of pre-election rallies, we maintain our year-end KLCI target of 1496 pts and 2011 KLCI fair value of 1648 pts even as we caution on the 3Q results to be announced in November. We are particularly positive on the Construction, Property and O&G sectors as part of the election theme. With the Sarawakian state election possibly being held in 2010 and the general election before June 2011, any weakness in the local bourse in November is a cue to Buy.
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Budget 2011 appears to promote private consumption and investment given its notable PPP initiatives in infrastructure development. While fairly Neutral, there were slightly more positive than negative surprises, especially since the highly anticipated tightening measures on the property sector did not materialize. We see the Construction, Property and Consumer sectors as the biggest winners from this Budget although we do not see a major market reaction as most of the main budget items had been unveiled earlier.
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