Axiata; Fully Valued; RM6.91
Price Target: RM5.75 (Prev RM5.80); AXIATA MK
More near-term pressure

XL acquiring Axis for US$865m for spectrum and capex/opex savings. Expect near-term EPS dilution, targeted turn-around in 2-3 years. Maintain FULLY VALUED; trimmed TP to RM5.75.

Gamuda; Buy; RM4.59
Price Target: RM5.40; GAM MK
Awaiting key catalysts

Strong results to spill into FY14F. Record property sales in FY13. Key catalysts: MRT Line 2 and sale of Splash. BUY, TP RM5.40.

Regional Plantation Companies
Bottom of the cycle

Global palm oil stockpile is at one-year low on stronger-than-expected demand, despite global slowdown. Near-term weakness in CPO prices may not drag planters much, given output, earnings recovery. CY13F/14F/15F CPO prices adjusted -4%/-10%/-11% in USD, 0%/+1%/+-1% in MYR. Beware of upside risks from FY16F, as supply growth decelerates. Multi-year CPO price gain from here. Top BUYs: AALI, BAL, IFAR (upgraded), FR, TSH (upgraded), IOI.

IOI Corp; Buy; RM5.40
Price Target: RM6.15 (Prev RM5.95); IOI MK
Weaker earnings fully price-in

FY14F-16F earnings revised by -16% to +11%, to reflect CPO price revisions and weaker ringgit. Expect translational FX losses arising from c.US$2.1bn debts. Post-demerger with IOIP, IOIC’s growth driver will mainly come from Indonesia. BUY for 14% upside. We believe lower 14F earnings are fully priced-in.

TSH Resources; Buy; RM2.36
Price Target: RM3.00 (Prev RM2.40); TSH MK
Up the ante

Stronger balance sheet to allow TSH to undertake more aggressive expansion. Impressive 3-year FFB CAGR of 18% to drive earnings growth. Rating upgraded to BUY with RM3.00 TP.

Sime Darby; Hold; RM9.50
Price Target: RM10.35 (Prev RM9.65); SIME MK
Long-term value

FY14F-16F earnings revised by -1% to +1% to account for CPO price revisions and weaker ringgit. Expect more contribution from Plantations; but impact is offset by higher USD borrowing costs. FY13-16F earnings CAGR of 6% could be further boosted through corporate actions. HOLD for 9% upside to revised TP of RM10.35 (based on SOP).

KL Kepong; Fully Valued; RM22.78
Price Target: RM18.70 (Prev RM18.20); KLK MK
Richly valued

FY13F/14F/15F eanings lowered by 2%/4%/6%. Lower plantation profit to be slightly offset by better oleochemical and property earnings. FULLY VALUED rating is reiterated with revised TP of RM18.70.

IJM Plantations; Hold; RM2.99
Price Target: RM3.30; IJMP MK
Hold for long-term growth

Expect 2QFY14 earnings recovery on higher FFB output. New planting to slow down; but output is ramping up in Indonesian maturing estates. HOLD rating maintained with RM3.34 TP.

Genting Plantations; Hold; RM9.84
Price Target: RM10.10 (Prev RM9.70); GENP MK
Stable long-term prospects

3Q13 earnings to rebound on seasonally high production. A 3-year FFB volume CAGR of 13% should underpin long-term earnings growth. Maintain HOLD with RM10.10 TP.

Felda Global Ventures; Hold; RM4.29
Price Target: RM4.60 (Prev RM4.30); FGV MK
More M&A needed

FY13F-15F earnings revised by 3%/2%/-3% on stronger sugar profits, offset by higher plantation costs. Expect muted growth from unfavourable tree age profile. HOLD rating reiterated with RM4.60 TP.

Source: HwangDBS Research - 27 Sep 2013