KUALA LUMPUR (July 4): The FBM KLCI could rise for a fourth day on Wednesday, riding on the momentum it gained over the last three trading days as Asian equities advanced on hopes for a solution for the eurozone debt crisis.
European shares joined a global rally in stocks on Tuesday, as expectations rose that major central banks will take more policy action to support the world economy, after factory data showed the negative impact of the eurozone debt crisis, according to Reuters.
RHB Research Institute Sdn Bhd in a strategy note on Tuesday said that the equity market would likely be stuck in a range-bound trading pattern for now, but will likely trend up as global economic uncertainties clear out towards the later part of the year. It said that investors' key worries include: (i) worsening of the euro-debt crisis that remains unresolved; (ii) fears of China's and India's economies crashing down into a hard landing; and (iii) the risk of US falling off the "fiscal cliff". "On the home front, the major event to watch out for is the impending general election that could also create volatility to the local bourse," it said.
The research house said nevertheless, the market would eventually trend higher towards end-2012, premised on: (i) the European Central Bank making a more decisive move to mutualise the debts of eurozone governments; (ii) China policymakers ease policies substantially and its economic growth reaccelerates; (iii) US Congressional leaders cobble together some deals to mitigate the impact from the "fiscal cliff"; and (iv) domestically, the general election produces a result where the ruling coalition party remains in control of the government.
"Meanwhile, global financial markets are still likely to be awash with liquidity and we are maintaining our end-2012 FBM KLCI target at 1,650 based on 14.6x 2013 earnings. "We continue to recommend investors to hold some defensive stocks that have strong cash flows to pay sustainable dividends," it said.
RHB Research said nevertheless, investors would still need to accumulate fundamentally-robust stocks on weakness in order to outperform the market. "Our key overweights are telecommunications, consumer and banking sectors," it said.
Among the stocks that could be in focus are WAH SEONG CORPORATION BHD [], Eastern & Oriental Bhd (E&O) and MBM RESOURCES BHD [].
Wah Seong's wholly-owned subsidiary Wasco Energy Ltd (WEL) has agreed to acquire the 26.9% stake in PETRA ENERGY BHD [] (PEB) from Perdana Petroleum Bhd (PPB) for RM96.94 million. In a filing on Bursa Malaysia, the group announced that it had entered into a conditional share sale agreement with PPB to purchase 57.7 million shares, accounting for a 26.9% stake in PEB. "This acquisition will enable Wah Seong to diversify the product and services it provides to the oil and gas industry. Moreover, it will also allow both companies to pool their respective strengths and opportunities in several areas," the group said.
E&O has been selected by the Synod of the Diocese of West Malaysia (the Synod) — through an international tender process conducted by property consultants DTZ Nawawi Tie Leung — to operate one tower of serviced residences sited within the St Mary Residences development in the central business district of Kuala Lumpur.
The serviced residences — to be run as the E&O Residences Kuala Lumpur — occupy one of the three towers at the 4.1-acre St Mary Residences in Jalan Tengah. E&O and the Lion Group, the joint-venture partners for the development of St Mary Residences had returned this tower to the landowners, the Synod, as consideration for the land.
E&O also announced that its net profit for the fourth quarter ended April 30, 2012 jumped to RM42.37 million from RM13.73 million a year earlier on the bacl of revenue RM210.57 million. For the financial year ended April 30, E&O's net profit surged to RM123.46 million from RM32.21 million in 2011.
AmResearch Sdn Bhd on Tuesday reaffirmed its high conviction Buy on MBM Resources and raised its fair value to RM4.30 from RM3.60 previously. "Our sum-of-parts valuation now pegs Perodua at 12x FY12F earnings (vs 10x previously) to reflect its strong earnings traction, underpinned by a strong TIV rebound in the recently-announced May numbers," said the research house. MBM Resources rose 18 sen to RM3.19 on Tuesday.
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