Hong Leong Bank upgraded to Buy -By RHB Research

by **Cals** Wed 16 Oct 2013, 01:56

Published: Tuesday October 15, 2013 MYT 12:00:00 AM
Updated: Tuesday October 15, 2013 MYT 11:56:03 AM
Hong Leong Bank upgraded to Buy
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The financing of SME's is a key driver of HLB’s loan growth and recent data suggests that its branch strategy is starting to bear fruit.
HONG LEONG BANK BHD
By RHB Research
Rating: Buy
Price Target: RM16.60

HONG Leong Bank’s (HLB) share price performance has lagged behind its peers this year.
RHB believes this is due to a combination of factors, such as below industry loan growth in the past two financial years, tepid financial year 2013 (FY13) earnings per share growth, and the overly bullish FY13 return on equity expectations by consensus (15.5%-16% forecasted vs 15% actual).
However, following a recent meeting with its management, RHB is turning more positive on the outlook for the group; at current valuations, the market is under appreciating its prospects.
The small and medium-scale enterprises (SMEs) financing is a key driver for loan growth and recent data suggests that its branch strategy is starting to bear fruit.
RHB estimates HLB’s SMEs loan market share has risen to 7.3% at end-second quarter 2013 from 6% at end-third quarter 2012.
Secondly, after the disappointment in FY13, consensus now projects FY14F ROE (return on equity) of 14.7%, which is below the 15%-17% guidance for FY14. RHB sees upside to consensus estimates, which should lead to a re-rating of the stock.
RHB raised its FY14 forecast - FY15 forecast net profit projections by 3%-7% to reflect a more positive outlook for the group.
The research house is also also raising its fair value to RM16.60 (13.5 times 2014 earnings per share) from RM15.20 (13 times 2013 EPS) while upgrading its call to a buy.
UZMA BHD
By PIVB Research
Rating: Neutral
Target Price: RM4.06

UZMA announced last Friday that its subsidiary Uzma Engineering Sdn Bhd had received a Letter of Award (LOA) last Thursday from Petronas Carigali Sdn Bhd for the provision of a drilling project management team for Petroleum Management Unit (PMU) wells.
Although the contract value is not known, PIVB believes the project value is relatively substantial given the intense efforts being made by Petronas in the upstream oil and gas (O&G) segment.
Meanwhile, the increasing support from Petronas indicates further strengthening to its earnings growth potential going forward for a relatively young company of 13 years which has grown based on its merits and capabilities.
PIVB has a neutral call with a revised target price of RM4.06, based on 13 times multiple (previously 12 times) to its FY14 earnings per share of 31.2 sen.
We believe Uzma deserves a higher price to earnings due to its strong orderbook of approximately RM1.3bil (to last until 2017) and continuous contract wins given the positive outlook for the upstream O&G segment.
We also tweak our FY14/15 forecasts upwards by about 8% and 18% respectively to account for potential and multiple small contracts that are not disclosed.
AHMAD ZAKI RESOURCES BHD
By ALLIANCE RESEARCH
Rating: Buy
Target Price: RM1.20

AHMAD Zaki Resources Bhd (AZRB) announced that it was awarded a RM163mil contract to build the new Air Police Base in Jalan Lapangan Terbang Subang, Shah Alam.
With this recent award, AZRB’s year to date (YTD) job wins stand at RM1.89bil vis-à-vis Alliance’s full year assumption of RM1.8bil.
We estimate AZRB’s orderbook balance to now stand at RM3.76bil, implying a very strong orderbook to construction revenue ratio of 6.3 times.
Contracts in the pipeline include the Langat 2 water treatment plan where the SalconMMC-AZRB joint venture is understood to have submitted a RM1bil bid.
Alliance expects the outcome to be known in the first quarter of 2014.
This is when the Selangor water consolidation exercise is expected to be resolved.
Year to date job wins of RM1.89bil has marginally surpassed Alliance’s full year target by 4.8%.
As this research house does not expect any of AZRB’s outstanding tenders to materialise for the remainder of the year, we deem our ssumption to be in line.
Alliance’s earnings forecast are unchanged.
“Buy” call is maintained with an unchanged target price of RM1.20 based on the sum of parts valuation which comprises 10 times FY14 earnings (RM0.86/share) and RM20,000 per hectare for its 4,750 ha of planted plantation land (RM0.34).

The winning of SK316 EPCIC project has significantly lifted Malaysia Marine And Heavy Engineering Holdings Berhad’s (MMHE) earnings visibility.
While the SK316 contract alone is not sufficient to re-rate MMHE’s share price, Affin has turned less negative on MMHE.

by **peanut** Wed 16 Oct 2013, 13:20

chart as at 12:30pm
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Hong Leong Bank upgraded to Buy -By RHB Research

Hong Leong Bank upgraded to Buy -By RHB Research

Re: Hong Leong Bank upgraded to Buy -By RHB Research