KLCI Stock - BSTEAD / 2771 - 2010 Quarter 3

Company Info

Market Capital (Capital Size)	5,217,901,869 (Very Large)
Par Value	RM 0.50

My Analysis

Forecast P/E now	(5.55-0.37)/0.44 = 11.77 (Moderate)
Target Price	6.16+0.37 = 6.53 (PE 14.0, EPS 0.44, DPS 0.37)
Decision	BUY
Comment	Revenue increased and higher than preceding year corresponding quarter, eps increased but still lower than preceding year corresponding quarter, free cash flow increasing but still negative net cash flow, weak liquidity ratio, high gearing ratio, all accounting period as usual, CPO price largely increasing but production decreasing, venture into aviation business, working on to involve in the land development
First Support Price	5.4
Second Support Price	5.0
Risk Rating	HIGH

Research House

HLG Target Price	6.82 (2010-11-12)
HwangDBS Target Price	10.35 (2010-11-30)
S&P Target Price	6 (2010-11-30)
ECM Target Price	5.96 (2010-12-23)
TA Target Price	6.94 (2010-12-23)

Accounting Ratio

Return on Equity	10.68%
Dividend Yield	6.67%
Profit Margin	10.15%
Tax Rate	18.93%
Asset Turnover	0.6626
Net Asset Value Per Share	4.38
Net Tangible Asset per share	3.29
Price/Net Tangible Asset Per Share	1.6
Cash Per Share	0.45
Liquidity Current Ratio	0.4991
Liquidity Quick Ratio	0.4156
Liquidity Cash Ratio	0.1044
Gearing Debt to Equity Ratio	1.0904
Gearing Debt to Asset Ratio	0.495
Working capital per thousand Ringgit sale	-34.0%
Days to sell the inventory	23
Days to collect the receivables	77
Days to pay the payables	77

My notes based on 2010 quarter 3 report (number in '000):-
- For the 3rd quarter, the Group posted an unaudited profit before tax of RM153.7 million. Compared with the profit of RM125.5 million posted for the 3rd quarter of FY2009, this is 22% or RM28.2 million higher

- Notable increase in revenue from both the Plantation and Trading Divisions was attributable to the stronger palm product prices and higher sales volume respectively

- During the period, the Plantation Division achieved an average palm oil price of RM2,514 per MT, an increase of RM342 or 16% against last year corresponding period's average of RM2,172 per MT. The cumulative FFB crop totalling 837,197 MT was 1% better

- The Heavy Industries Division's naval vessels maintenance contracts are beginning to generate income during the current period, which had helped to cushion to some extent, the effect of cost escalations

- Property Division's lower contribution due to the decline in contribution from property development activity. Retail mall operations had performed better on some increase in revenue and cost savings

- Interest savings at Boustead Holdings level and better earnings from the Affin Group had also enhanced the Division’s performance

- During the period, all the operating units in the Division had performed well, with notable increase from BH Petrol operations which enjoyed an increase in sales volumes

- The preceding quarter’s pre-tax profit of RM185.9 million had included the gain on disposal of BH Insurance (M) Bhd of RM75 million. Excluding the effect of this gain, the current quarter’s profit of RM153.7 million was 39% better

- Plantation profit for the current quarter of RM40.0 million was 33% better than the preceding quarter. CPO price for the current quarter was higher at RM2,565 (Previous quarter: RM2,491) per MT, while FFB Crop had also improved by 12% from the last quarter. Property Division’s pre-tax profit was lower than the previous quarter, on lower gain from the sale of a corporate lot during the current quarter. The Heavy Industries Division’s profit for the current quarter was 94% higher than the preceding quarter mainly due to an increase in revenue

- The Finance & Investment Division’s profit for the preceding quarter was significantly higher, mainly helped by the gain from disposal of BH Insurance. The Manufacturing Division’s profit for the current quarter of RM19 million was well above the preceding quarter’s profit of RM4.6 million, mainly on stronger profit contribution from the pharmaceutical manufacturing activity under subsidiary Idaman Pharma Manufacturing which had enjoyed stronger volumes and margins

- Estimate next 4Q eps after 2010 Q3 result announced = 0.1*4*1.1 = 0.44, estimate PE on current price 5.55 = 11.77(DPS 0.37)
- Estimate next 4Q eps after 2010 Q2 result announced = 0.08*4*1.05 = 0.336(0.08 is eps exclude non-repeatable income), estimate highest/lowest PE = 17.04/11.59 (DPS 0.325)
- Estimate next 4Q eps after 2010 Q1 result announced = 0.4699*1.05 = 0.4934(5% increase), estimate highest/lowest PE = 8.3/6.58 (DPS 0.275)
- Estimate next 4Q eps after 2009 Q4 result announced = 0.4934, estimate highest/lowest PE = 7.1/6.31 (DPS 0.275)
- Estimate next 4Q eps after 2009 Q3 result announced = 0.1241*4 = 0.4964, estimate highest/lowest PE = 6.89/6.06 (DPS 0.25)
- Estimate next 4Q eps after 2009 Q2 result announced = 0.0721*4 = 0.2884, estimate highest/lowest PE = 12.17/10.92 (DPS 0.2)
- Estimate next 4Q eps after 2009 Q1 result announced = 0.0934*4 = 0.3736, estimate highest/lowest PE = 11.78/8.94 (DPS 0.2)
- Estimate next 4Q eps after 2008 Q4 result announced = 0.1699*4 = 0.6796, estimate highest/lowest PE = 5.15/3.97 (DPS 0.3)

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