Breakfast Brief: IJM, Ann Joo, Kulim (29 May 2009)

Good morning
IJM (HOLD, PT RM5.00)’s 4Q09 net profit of RM53m (-7% qoq, -24% yoy) was in-line with our forecasts and consensus. Construction margins have not improved due to high interest cost in India. However, we tweak our FY10E EPS upward by 5% on higher property sales.

We maintain IJM at a HOLD:
(1) Share price rebounded 135% from its low in Nov08 following normalization of newsflow and sentiment on project awards.
(2) Earnings is expected to receive a boost from a number of big-ticket construction awards currently in the pipeline.
(3) However, intrinsic valuations look unattractive, with current share price trading at 16x FY10E PE (>60% premium to small-mid cap construction stocks). We think market has priced-in future wins.
(4) Foreign shareholding remains high at ~33%.

Newsbreak
IJM’s FY09 net profit back in the black at RM290m
Kulim posts 1Q09 net profit of RM24m, a drop of 75% yoy
Primus Pacific subscribes RM30m worth of EON Cap.’s warrants
Ann Joo posts 1Q09 loss of RM39m on margin compression
E&O proposes RM245m rights issue to raise funds for investment opportunities
Latitude Tree expects to raise SGD8m from Singapore listing of subsidiary
Dutch Lady’s 1Q09 net profit jumps 39% to RM9m on lower raw material costs
MMC to focus on engineering division to counter slowdown in other divisions
TA acquires 79 acres of land in Serendah, Selangor for RM45m

Economics
MA: BNM left OPR unchanged at 2.00%, citing that the accumulated monetary policy initiatives and measures to enhance access to financing are sufficient to provide support to domestic demand.
US: SP Shiller home prices declined 18.7% in Mar, on rising foreclosure and threatening to extend the property market slump.
US: Consumer confidence surged to 54.9 in May, the most in six years, fuelling speculation the economy will recover later this year.
Singapore: IPI surprisingly contracted 0.5% yoy in Apr, the least in seven months, indicating that the nation may have hit the bottom of its deepest recession since independence in 1965.
HK: Exports value fell 18.2% yoy in Apr, after falling 21.1% in Mar, while trade deficit stood at HKD16.4bn, narrowing from HKD18.2bn deficit in Mar.