Stock Idea #3 Coastal Contracts
RHB has
maintained its Buy rating on the company with a target price of MYR 2.40.
The optimism and good outlook displayed by the management is a sign of good growth for the company.
“Management is optimistic on possible extensions for contracts due to expire in 2024. The firm period for the jackup gas compression service unit (JUGCSU) is until Feb 2024.
The group is looking to seal a first extension of up to three years and possible subsequent extensions of up to 5-7 years on the basis of the JUGCSU being a key asset for Pemex’s oil enhancement recovery process.
The contract for the Perdiz plant is also expected to extend at a minimum of three years following the Ixachi field’s forecasted gas production peak level (c.1,100mmscfd), which is projected to be in 2026-2028.
Meanwhile, the Teras Conquest 7 vessel recently obtained an extension for a firm period of two years with two years annual extension options. ”
>> Read more about the company here.
Stock Idea #4 Evergreen Fibreboard
Hong Leong has maintained its
Buy rating on the company with a target price of MYR 0.82.
The geo-political situation between China and USA will surprisingly provide an upside to the company.
“Elevated US-China tensions continue to play to Evergreen’s favour as more US furniture buyers continue to move away from China and purchase instead from furniture makers in SEA, including Malaysia.
This has resulted in many Chinese furniture makers moving out of China to setup their factories in SEA, which is a positive for Evergreen as these are potential new customers for the group to supply panel boards to given their proximity to Malaysia.
Likewise, the group’s RTA segment should continue to benefit from the trade diversion as well. On top of this, the Middle East economy remains strong driven by elevated oil revenue, resulting in continued high demand for furniture.
Moreover, talks of easing sanctions in Iran would be a major positive catalyst to boost panel board demand should it materialize.
On the cost side, we understand that the cost of glue has come off from its peak level which should augur well for the group’s overall margin.
Finally, the strong USD should continue to benefit the group with 3QTD RM4.46/USD (vs. RM4.27/USD in 1H22)”
>> Read more about the company here.
Stock Idea #5 Telekom Malaysia
RHB has
maintained its Buy rating on the stock and with its target price at MYR 7.40.
The upside to guidance reflects the success in turnaround plan of the company.
“Things may be finally looking up for TM One (enterprise and public sector arm). TM is confident the turnaround in TM One revenue (+7.7% QoQ/+4.1% YoY) can be sustained on the back of recurring connectivity revenue and enterprise digitalisation efforts with a good funnel of projects.
It expects the newly set-up digital and cloud services outfit (Credence) to contribute in the medium term, having added 10 customers (across various industries) in a short span of time with a headcount support of 146.
TM said the 39% jump in account receivables (c. MYR800m) over the past six months is mostly related to government projects undertaken at TM One for which it expects payment to be made in 2H22. ”
>> Read more about the company here.
Stock Idea #6 CTOS Digital
Hong Leong has maintained
its Buy rating on the company with a target price of MYR 1.70.
The positive acquisition is bound to help the company on its profits.
“CTOS proposed to buy the 15.7% and 0.8% RAM stakes belonging to Dragonline Solutions and Deutsche Bank for cash consideration of RM44.6m and RM2.3m respectively.
Overall, no surprises and we are positive on the deal since it is attractively priced and accretive in nature. Moreover, RAM fits nicely into CTOS’ broader business plan (see report dated 22 Jun-22, titled ‘Eyeing a bigger stake in RAM’).
Our forecasts were kept unchanged, pending deal completion. We still like CTOS for its market leadership, strong economic moat, and highly scalable business model. Thus, we view the YTD price pullback as a good opportunity to accumulate the stock. ”
>> Read more about the company here.
