Saturday, December 18, 2010

#Stocks to watch:* Kulim, KPJ, Gamuda, water stocks

KUALA LUMPUR: Stocks could see some upside in the coming week, starting Monday, Dec 20, with mild window dressing activities on selected key stocks and at least enable it to stay comfortably above the key 1,500 level.

Exporters which benefit from the stronger US dollar could see trading interest while impact of the weaker ringgit could weigh down corporations with high exposure to US dollar denominated loans.

Reuters, in its outlook for the week ahead, expects investors will be taking advantage of the some of the last remaining trading days of the year to place their bets on what will be the winners of 2011.

Even as investors reposition themselves, the broad market is likely to drift until year-end with next week shortened by the Christmas holiday.

Indeed, Wall Street's fear gauge, the CBOE Volatility index, or VIX, on Friday, Dec 17 fell to its lowest level since April, according to the Reuters report.

Meanwhile, CIMB Equities Research said it expected 2011 is likely to turn out to be a good trading year for the market.

'Although risks remain relatively high, returns should be high and quick too. We expect continued volatility but with an upward bias as liquidity fuels the market.

'Our preferred sectors are those in the cyclical space including banking, CONSTRUCTION [], property, oil & gas and auto which stand to benefit from renewed investor confidence and higher risk appetite. GLCs (government-linked companies) should also gain prominence as investors speculate on those that will gain from pre-election government largesse,' CIMB Equities Research said.

Stocks to watch on Monday include Kulim (Malaysia) Bhd and KPJ HEALTHCARE BHD [], GAMUDA BHD [] and water related companies in Selangor.

KENCANA PETROLEUM BHD [] could see trading interest after The Edge weekly in its latest edition said Kencana and Petrofac JV have emerged as the front runners to bag the exploration of the Berantai oil and gas field at PM309, off the coast of Peninsular Malaysia.

Johor Corporation and Johor Ventures Sdn Bhd are seeking the removal of Tan Sri Muhammad Ali Hashim as a director of Kulim (Malaysia) Bhd and KPJ Healthcare Bhd with immediate effect. They own 16.61% of Kulim and 42.86% of KPJ.

Muhammad Ali resigned as JCorp's chief executive officer in July. JCorp has been in the news after three bids to acquire Kulim's subsidiary QSR BRANDS BHD [] were rejected.

Gamuda Bhd could see trading interest after its net profit rose 19.6% to RM88.53 million for the first quarter ended Oct 31, 2010 from RM74.02 million a year ago, underpinned by higher contributions from the construction and property divisions.

A news report says the federal government is considering bondholders proposals to take over the bonds issued by the water operators in Selangor. Another proposal could be to offer loans the operators.

Minister of Energy, Green TECHNOLOGY [] and Water Datuk Seri Peter Chin was quoted saying the government would have to look into the viability of these bonds. This would be seen as necessary to avert an adverse impact on the overall bond market.

Malaysian Rating Corp had downgraded about RM7 billion of bonds issued by seven water-related companies in September due to concerns about regulatory and operational uncertainty.

Shares of Supermax Corp Bhd and Top Glove Corp Bhd were among the top 10 losers on Friday as investors worried about the outlook for the glove makers after the disappointing financial results from Top Glove recently. Top Glove closed down 13 sen to RM4.99 while Supermax fell 12 sen to RM4.21.

Meanwhile, RAM Rating Services Bhd placed the BBB3/P3 ratings of RGB International Bhd's RM97 million debt notes on Rating Watch, with a negative outlook.

The rating agency said on Friday, Dec 17 the debt notes involved its commercial papers/medium-term notes programme (2007/2014) (CP/MTN).

RGB International, formerly Dreamgate Corp Bhd, is involved in the sales and marketing, provision of technical support, as well as maintenance and management services for gaming and amusement equipment.

'The Rating Watch reflects our concerns about the Group's business prospects in the Philippines, which are expected to have negative implications on RGB International's credit profile,' it said.

RAM Ratings said for the first nine months of FYE Dec 31, 2010 (FY Dec 2010), the Philippines contributed about 40% to the group's technical support and management services (TSM) division's revenue.

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