HwangDBS maintains 'buy' on Quill Capita

Stock Name: QCAPITA
Company Name: QUILL CAPITA TRUST

Research House: HWANGDBS

Price Call: BUY

Target Price: 1.45

HwangDBS Vickers Research has maintained its 'buy' call on Quill Capita Trust with a target price of RM1.45, as the company continues to perform.

This is despite a tenant's market in the office segment and Quill Capita Trust enjoys an evenly distributed lease expiry profile as well as diversified set of tenants.

In a note today, the research house said the near-term earnings growth for Quill Capita Trust will be soft, given the low rental reversion capacity, in lieu of the large incoming office supply to flood the market from 2013-2014.

"Though average rents have inched up marginally quarter-on-quarter for four consecutive quarters, as at the fourth quarter of 2012, the large supply overhang still places pressure on Quill's asset portfolio.

"But it will be mitigated by 44 per cent of its assets based in Cyberjaya where supply is not expected to increase as much as in Klang Valley," it added.-- Bernama

RHBInvest Research Highlights 19th January 2012

Stock Name: UNISEM
Company Name: UNISEM (M) BHD

Research House: RHB

Price Call: HOLD

Target Price: 1.22

Stock Name: MPI
Company Name: MALAYSIAN PACIFIC INDUSTRIES

Research House: RHB

Price Call: HOLD

Target Price: 2.79

Stock Name: NOTION
Company Name: NOTION VTEC BHD

Research House: RHB

Price Call: SELL

Target Price: 1.69

Stock Name: DAYANG
Company Name: DAYANG ENTERPRISE HOLDINGS BHD

Research House: RHB

Price Call: BUY

Target Price: 2.07

Stock Name: QCAPITA
Company Name: QUILL CAPITA TRUST

Research House: RHB

Price Call: HOLD

Target Price: 1.27

19th January 2012

 

Top Story

Semiconductor ' Seeing the first crack of dawn                                                Neutral (Upgraded) Sector Update Unisem ' Fair value raised to RM1.22                                                  Market Perform (Upgraded) MPI ' Fair value raised to RM2.79                                                        Market Perform (Upgraded) Notion ' Fair value raised to RM1.69                                                                         Underperform -          Yesterday, Linear Technology (US based IC design company) gave an upbeat outlook for the industry. This would be the third positive guidance after Broadcom and ChipMOS, and indicates a more positive tone for the industry after a parade of negative guidance last month. -          We have already factored in a weak 1Q12 for local packaging players, as there is still lack of order visibility, but we believe the industry may be on track for some recovery in 2Q12, and stronger recovery in 2H12. -          We believe the demand weakness for chips has already been priced in. Thus, we are raising our benchmark forward target P/BV from 0.6x to 0.8x for the semiconductor players. We upgrade Unisem and MPI to Market Perform (from underperform).

Corporate Highlights

Dayang ' Delivery of Dayang Topaz and extension to Dayang Zamrud's contract              Outperform News Update -          Dayang announced that it had it had taken delivery of its new workboat, Dayang Topaz yesterday. On another note the company also received a letter of award from Brunei Shell Petroleum Co on 16 Jan, extending its contract for another workboat Dayang Zamrud from 1 Mar 2012 to Oct 2016. -          We are positive on the new delivery as it bumps up the company's assets. The extension of the contract is also another positive, as it indicates that the company has performed well thus far. This will enhance its track record in Brunei and its chances for future contracts from the country. Maintain fair value of RM2.07/share and Outperform call on stock. -          Related story: Oil & Gas Sector Update - Resilient Despite Macroeconomic Uncertainties (12 Dec 2011)   Quill Capita ' Achieves a target DPU of 8.3 sen for FY11                                        Market Perform Results Note -          Quill Capita's 4QFY12/11 realised net income (-14.6%, -0.6%) came in within expectations. Net property income declined mainly due to higher property repair costs incurred in 4QFY12/11. On a full-year basis, however, QC's net profit grew by 5.4% yoy. A final DPU of 4.3 sen was declared bringing total DPU for the year to 8.3 sen (FY10: 8.03 sen), in line with our estimate. -          One of QC's tenants has already signed a letter for a two-year renewal on its lease contract in Jan 2012. As this tenant occupies about 37% of the total NLA due to expire in FY12, the total leases up for renewal in 2012 is now reduced to 24% of total NLA (from 39%). -          Overall, we lift our FY12-13 EPU estimates by 0.5-2.2%. Fair value unchanged at RM1.27. -          Related story: Property ' MREITs Sector Update: A Defensive Pick for Property Exposure (5 Jan 2012)

Macro

Inflation ' Slowed To 3.0% YoY In December, As Price Pressure Eased Economic Highlights (published 19 Jan 2012) -          The headline inflation rate slowed to 3.0% yoy in Dec, the lowest in eight months, after inching lower to +3.3% in Nov, mainly due to a moderation in the core inflation rate, on the back of easing price pressures, while food & non-alcoholic beverage prices held stable during the month. -          Going forward, we believe inflation has peaked but will likely remain sticky downward in the immediate term. As a result, we expect inflation to moderate to an average of 2.8% in 2012, from +3.2% in 2011. -          Although BNM has shifted its focus from inflation to growth, pressure for it to ease monetary policy has reduced significantly of late. However, we believe there is room for BNM to cut OPR by 25-50 basis points in 1H 2012, should global economic conditions take a turn for the worse.

Quill Capita Trust (Hold): Growing organically

Stock Name: QCAPITA
Company Name: QUILL CAPITA TRUST

Research House: MAYBANK

Price Call: HOLD

Target Price: 1.10

Defensive but not exciting yet. QCT's 2011 recurring net profit of RM34.3m (+5.4% YoY) was within our expectations. FY12 dividend yield forecast of 7.8% is above the industry average of 6.8%, but we see limited upside due to concerns on oversupply in the office market. Hold maintained, with an unchanged DCF-based TP of RM1.10.

Maybank research (19 January 2012)

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