Given the success of recent bonus issues in fuelling a rally in share prices and the potential abolishment of ‘par value’ in the Malaysian capital market, we take a look at who else might be declaring bonus issues soon.
Based purely on the share premium to share capital ratio, where the higher the ratio the easier it is to issue bonus shares.
The table below are the list of higher potential bonus issuers among the top 75 companies by market capitalization.
While the fundamental outlook remains pretty much unchanged, we do note that the positive news flow surrounding the sector has been accelerating of late. We believe this will help further re-rate valuations of contractors upwards. Implementation of the mega projects under the ETP should serve to maintain the momentum of positive news flow. In short, we think there is potential for some irrational exuberance to set in. News flow aside, the 59.4% increase in domestic contact awards will serve to drive earnings growth over the next few years. With the KLCON now trading at its long term average of 15x, we see further room for rerating, potentially up to one standard deviation above mean (μ+1σ) level of 19.3x.
We are upgrading our sector call from Neutral back to OVERWEIGHT as we expect the positive news flow in the coming months to rerate valuations upwards. Our top picks are Mudajaya (BUY, TP: RM7.22) and Sunway (BUY, TP: RM2.52). Both our top picks are backed by strong earnings growth with a 3 year CAGRf of 33-37%. For the small caps, we like Ahmad Zaki (BUY, TP: RM1.27) which has witnessed very strong orderbook wins over the past 12 months. We also like Gamuda (TRADING BUY, TP: RM4.31) for the euphoric MRT play. In our view, investors should position themselves for the thematic Sarawak play fuelled by the upcoming state elections; pick Naim Holdings (BUY, TP: RM5.10).
Below are the target price for construction sector.
Not Hot Enough. Recent news of steel prices and demand recovering globally prompt us to make a review on our sector rating. Our fundamental review tells us that the outlook for 4Q has improved as selling prices are recovering and there is potential restocking towards year-end, but the upside is limited. Although there is no earnings revision as the overall impact is well within our estimates, we are turning a bit positive by raising our PER multiple one notch up but continue to keep our P/NTA valuation at +1 standard deviation of the historical band. As this marginal fair value increase offers limited upside, we maintain NEUTRAL.
TERRACE HOUSES SOLD FOR RM1M! BUYERS CAMP FOR 10 NIGHTS TO BUY A NEW HOUSE! HOMES BECOMING TOO COSTLY FOR THE AVERAGE MALAYSIAN! These are just some of the headlines that in no small way reflect a recent real estate phenomenon characterised by spiraling property prices and Malaysians’ thirst for newly launched houses. The aim of this report is to help investors understand the real estate environment we are living in, what is likely to happen in the future and how to profit from this ever-dynamic real estate sector.
In the 2Q2010 period, RM5.4bn worth of construction jobs was awarded, with domestic contracts totaling RM3.4bn (+80% q-o-q, +26% y-o-y) and foreign ones at RM2bn (+103% qo-q, +47% y-o-y). The increase in domestic jobs was driven by more awards, PFI jobs and higher private sector projects. Sarawak-based jobs also surged strongly by 74%. We believe the positive news flow is likely to be tempered by implementation delays, tight Govt coffers and a lower physical portion under the 10MP. Maintain NEUTRAL.
The KLCON is trading at 15x forward earnings, which is equal to its long term mean. We do not see a significant rerating occurring anytime soon. We believe that the bulls of more positive news flow will overwhelmed by the bears in the form of implementation delays, tightening Govt coffers and lower physical portion of development expenditure under the 10MP. Nonetheless, we continue to see value in some mid cap names such as Mudajaya (BUY,TP: RM7.33) and Sunway (BUY, TP: RM2.22). For small cap plays, we like Ahmad Zaki (BUY,TP: RM1.33).
Below are the target price for construction sector.