Stocks to watch: Hai-O, Sunway Holdings, IJM, semicon

KUALA LUMPUR: Stocks on Bursa Malaysia are expected to start off on a cautious note on Monday, March 22 after the FBM KLCI was unable to hold on to the key 1,300 level over the past week while trading volume has shrunk.

Concerns among investors would be the rising inflationary trend after the consumer price index for February showed a 1.2% increase on-year while it was unchanged from January.

However, over the longer term, Nomura Securities Research is positive about the outlook for Malaysia, as it sees the economy rebounding and still sees upside to the current earnings upgrade cycle.

On Wall Street, stocks slipped, weighed down by energy shares as crude oil prices tumbled under pressure from a rising U.S. dollar.

Renewed worries about Greece's debt problems sent the euro to a more than two-week low against the greenback and pressured oil and other commodity prices, according to Reuters.

The Dow Jones industrial average dropped 26.60 points, or 0.25 percent, to 10,752.57. The Standard & Poor's 500 Index fell 4.78 points, or 0.41 percent, to 1,161.05. The Nasdaq Composite Index lost 15.13 points, or 0.63 percent, to 2,376.15.

Meanwhile, Nomura Securities Research, in a recent report, said after contracting 2.1% in 2009, Malaysia’s real GDP growth is expected to rebound to 5.5% in 2010 and level off to 5.2% in 2011.

A strong 4Q recovery of up 4.5% year-on-year saw Bank Negara Malaysia raising its rates by 25bps on March in its Monetary Policy Committee meeting.

“The latest move by the central bank supports our view that the recovery is firmly on track,” it said.

In its research note, it said the most common feedback about Malaysia is that the market is not cheap. Owing to the huge accumulated current account surpluses and the large pool of liquidity that’s largely trapped in the system, the market will remain expensive, in its view.

“We remain positive on the market supported by a favourable earnings revision cycle. Consensus started to turn positive in May 2009. After the 1997-98 crisis, the earnings upgrade cycle lasted about 18 months. The earnings upgrades post the 2001 tech-led recession went on for 13 months. Judging from the previous upgrade cycles, we still see upside to the current earnings upgrade cycle.

“This is it! From a positive macro-economic recovery story to earnings upgrade cycles at the company level, all factors are pointing to a favourable outlook for the Malaysian stock market. Additional catalysts could come from positive surprises in the soon-to-be announced New Economic Model. We are overweighting the banks, contractors, media and the healthcare sectors. However, we continue to underweight the planters,” it said.

Stocks to watch are IJM Corp Bhd, HAI-O ENTERPRISE BHD [], SUNWAY HOLDINGS BHD [] and semiconductor-related counters including MPI and Unisem.

IJM Corp Bhd's unit Road Builder (M) Sdn Bhd has secured an RM600 million project to expand the Sungai Besi highway. It accepted the letter of award from Besraya (M) Sdn Bhd for the project on a fixed price lump sum of RM600 million. The CONSTRUCTION [] period is 36 months. Besraya is also a unit of IJM Corp.

Hai-O’s net profit rose 46% to RM18 million for the third quarter ended Jan 31, 2010 from RM12 million a year ago as it earnings were boosted by its multilevel marketing (MLM) division and higher group rental income. Hai-O plans more advertising and promotion activities such as incentive trip sales campaign and to recruit new members. The thrust for the company will be the wholesale and retail divisions, which will focus on health awareness campaign to a wider range of consumers. On the cards are the plan for its retail division to open more outlets across Malaysia especially in Sabah and Sarawak while it also focuses on developing more of its house brand products.

Sunway Holdings expects record profits in fiscal 2010 as it plans to tender for jobs worth up to 16 billion ringgit (US$4.84 billion) globally. It expects its construction orderbook to grow by one-third to RM4 billion this year, partly boosted by the government's roll-out of public sector contracts.

North America-based manufacturers of semiconductor equipment recorded orders totalling US$1.23 billion in February 2010, based on a three-month average basis. The Semiconductor Equipment Industry reported on Friday, March 19 the book-to-bill ratio was 1.22, based on its February 2010 Book-to-Bill Report. A book-to-bill of 1.22 means that US$122 worth of orders was received for every US$100 of product billed for the month.

Text written by Joseph Chin
Saturday, 20 March 2010 11:42