RHBInvest Research Highlights 05th January 2012

05th January 2012

 

Top Story

Property – Bad news priced in but outlook remains challenging                           Neutral (Upgraded) Sector Update -          Fundamentals are still wobbly as property sales are largely driven by GDP growth. Given our GDP growth forecast of 3.6% for 2012, we expect property sales to slow to 5% after a 20% growth in 2011 (annualised). -          We prefer larger caps with sufficient liquidity such as UEM Land , Sunway and Mah Sing for trading opportunities if their share price weakens.   MREIT – A defensive pick for property exposure                                                                    Neutral Sector Update -          We remain positive on retail REITs. A strategic combination of asset acquisitions, AEIs and creative events to drive shopper footfalls is crucial to deliver DPU growth. Despite lower average yields compared to other sub-segments, these efforts are more evident in the retail segment. -          We prefer Hektar. Due to liquidity concern, investors may consider CMMT and Sunway REIT.

Corporate Highlights

Proton – Ball in Khazanah's court                                                                               Trading Buy Company Update -          Given national interest considerations, Khazanah will be obliged to conduct a thorough evaluation exercise to determine the suitor best positioned to add value to Proton. For sustainable long-term value to emerge, we believe a suitor will need to eventually involve a global OEM that can offer access to technologies, new platforms, engines and transmissions. -          In our opinion, DRB is the front runner although Naza could also put up a strong case, with both parties well positioned to involve a large global OEM, VW (DRB) and Kia or Peugeot (Naza). -          Our Trading Buy call on the stock imputes speculative premium by valuing the stock at 0.5x P/B (30% premium to 0.39x) suggesting a potential value of RM5.00   KFC – Due diligence expected to be completed by February                                          Trading Buy Company Update   -          We understand that Massive Equity, the SPV involved in the exercise, is now in the process of due diligence for both KFCH and QSR. The process is expected to take a few more weeks and is slated to be completed by early Feb, barring any unforeseen circumstances. -          Our fair value remains unchanged at RM4/share, based on JCorp's offer for the assets and liabilities of KFCH, and we reiterate our Trading Buy call on the stock.