Tuesday, October 25, 2011

Stocks to watch 20111025: DiGi, IOI, Supermax, YTL

KUALA LUMPUR: Stocks on Bursa Malaysia could extend their gains in light trade on Tuesday, Oct 25, in line with the firmer markets as investors pinned their hopes for a resolution to the euro debt crisis.

However, with the Deepavali holidays on Wednesday, there could be some profit taking later in the day.

The markets would also be seeking more clarity from the summit on Wednesday as the EU meeting over the weekend yielded no firm decisions, although the structure of the policy response has now begun to take shape.

A report from The Royal Bank of Scotland research said EU Finance Ministers agreed over the weekend that European banks could need to find 108 billion euros in fresh capital over the next six to nine months with an announcement reportedly set for Wednesday.

“However, this falls somewhat short of the IMF's 200 billion euros estimate. It was also confirmed that the ECB will not be utilised to increase the fire-power of the Euro-zone bailout fund.

“Instead, a special fund may be set up to attract global investors, possibly including the IMF, which would then buy bonds of struggling Euro-zone countries. This could run in parallel with another fund insuring against losses of up to 20% by bondholders,” it said.

Among the stocks to watch are DIGI.COM BHD [], IOI Corp Bhd, Supermax Corp Bhd and YTL Group.

DiGi.com’s earnings rose just a marginal 1.08% to RM292.44 million in the third quarter ended Sept 30, 2011 from RM289.31 million a year ago. The telco said the flat earnings were due to higher depreciation and amortisation while average revenue per user (ARPU) dipped.

An increase in data revenue pushed turnover up by 12.6% to RM1.52 billion from RM1.35 billion. Earnings per share were 37.6 sen compared with 37.20 sen a year ago.

DiGi declared an interim single-tier tax exempt dividend of 37 sen per share for financial year ending Dec 31, 2011 on Dec 8. Depreciation and amortisation was RM306.08 million in 3QFY11 compared with RM196.69 million a year ago.

IOI Corp expects its financial performance for the current financial year ending June 30, 2012 (FY2012) to be better than FY2011. The optimism was based on the improved profitability in its resources based manufacturing division, underpinned by lower crude palm oil prices.

The PLANTATION [] giant also expected crude palm oil (CPO) prices to rise above RM3,000 per tonne in the next three months due to the drop in production amid increasing overseas demand.

IOI chairman Tan Sri Lee Shin Cheng said the rainy season coupled with a labour shortage is expected to derail production of fresh fruit bunches in the next six months, despite increasing demand from China, India and Pakistan.

Supermax’s net profit fell 18.9% to RM30.91 million in the third quarter ended Sept 30, 2011 from RM38.11 million a year ago, affected by the higher natural rubber and nitrile latex prices.

However, it said although profitability is lower than last year, it is seeing positive signs for a rebound after recording a second consecutive quarter of core profit growth. Supermax’s revenue was however higher at RM271.42 million, up 15.4% from RM235.10 million.

For the nine-month period, earnings fell 42.5% to RM77.86 million from RM135.44 million. Revenue rose 8.7% to RM750.71 million from RM690.58 million.

YTL Communications Sdn Bhd (YTL Comms) has submitted its business plan to Malaysian Communications and Multimedia Commission (MCMC) to secure spectrum licences to roll out its Yes 4G mobile internet-with-voice service in Sabah and Sarawak.

Its chief executive officer, Wing K. Lee, said the company was currently awaiting feedback from MCMC. "MCMC will review the plan and give us the feedback," he added.

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