1Q13 core operating income of MYR119.5m (+23.6% YoY) was ahead of the consensus. Outperformance stems from higher traffic growth of 8.7% versus 7%-8% growth assumption.
Things are expected to perform better as many airlines have commenced new services in 2Q13, and KLIA is the second fastest growing airport in Asia for 1Q13 with a growth of 11.1% YoY.
No change to target price and BUY recommendation. KLIA2 is likely to be delayed, causing a temporary overhang on the stock. Management reassures that they will guise the market soonest possible.
Eversendai
Eversendai acquisition of Singapore Technics O&G Limited is seen as a positive move from the analysts, paving the way for more O&G contract. This is in line with the management’s plan to expand into interrelated sectors. There is also a “synergy” between both of them as Technics specializes in the design and fabrication of complex and highly customised process modules and equipment. This also includes gas compression packages, which are integrated to form the operating system for production operations and storage applications in oil and gas exploration and production activities (onshore and offshore).
Eversendai will leverage on Technics’ existing O&G business and fullyutilize its expertise in structural steel works to bid for any O&G fabrication projects in the foreseeable future. The management did also indicate in a previous briefing that it may organically increase the stake in Technics.
More job in flows to Eversendai in coming weeks, the bid of of a multi-billion structure steel work in Saudi is progressing well ahead of management expectations.The group has put in bids for RM12bn worth of projects in the Middle East, India and Malaysia. The focus will still be on the Gulf region though opportunities on the local scene have emerged in the form of power plant and oil & gas projects. There is also scope for project awards in India where new airports are being planned. Eversendai should not have a problem clinching RM1bn-1.5bn worth of new jobs p.a. and hitting its RM2bn revenue target by 2017. The current order book is RM1.4bn.
Reiterate outperformance for an undervalued stock with huge potential of growth in the O&G industry going forward. Eversendai is seen as the cheapest stock in the construction universe.
OTHERS
FGV: Mulls Papua New Guinea foray. FELDA Global Ventures Holdings Bhd (FGV) may venture into Papua New Guinea to increase its plantation land. It is conducting feasibility studies and technical due diligence and if it decides to enter PNG, FGV can easily start with an initial 10,000ha. (Source: Business Times)
MAS: Oneworld factor lifts MAS passenger load 3.5% in Q1. Malaysia Airlines' (MAS) entry into the Oneworld alliance, among other factors, has lifted loads, although not drastically. The airline saw a 3.5% rise in passenger loads for the first three months of 2013 to 76.6% from the 73% recorded a year ago. (Source: The Star)
WCT: To build two more shopping complexes. WCT Bhd is going big on malls with the addition of another two malls in Overseas Union Garden (OUG), Kuala Lumpur, and Kemayan City, Johor to its portfolio in a bid for growth. (Source: The Star)
Building Material: Local steel mills poised for turnaround in 4Q13. Industry players
note that the government's recent move to curb the import of cheap steel and increase the rollout of projects under the Economic Transformation Programme (ETP) will spur domestic steel demand. The industry is already beginning to see some positive signs in 1Q13. Once the issue of cheap steel imports is addressed, industry turnaround is more certain and likely to be in 4Q13 or 1Q14. (Source: The Edge Weekly)
Some Firm Price Action Ahead Of GE13
The FBM KLCI rose 5.01 points on a WoW basis to close at 1,711.29 last Friday. The index closed up on low market interest and volume ahead of GE13 on 5 May. The obvious support areas for the FBM KLCI are in the 1,664 to 1,711 zone. The key resistance levels of 1,713 and 1,718 will see some heavy liquidation activities.
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