Tuesday, January 4, 2011

AmBank issues CWs on SP Setia, IJM Corp, PetChem, Genting

KUALA LUMPUR: AmBank (M) Bhd is issuing eight new European style cash-settled call warrants (CW) and they will be listed on Wednesday, Jan 5.

AmBank said on Tuesday, Jan 4 the CWs will be issued on the shares of SP SETIA BHD [], IJM CORPORATION BHD [], Petronas Chemicals Group Bhd, GENTING BHD [], DRB-HICOM BHD [], CIMB Group Holdings Bhd, AIRASIA BHD [] and POS MALAYSIA BHD [].

It said the tenure was about 11 months and issue size of up to 100 million each.

'These CWs launched under AmBank's warrant programme aims to provide leveraged yet affordable equity investment alternatives to Malaysian investors,' it said.

AmBank said the launch of the CWs were on the back of a rallying Malaysian stock market and expected robust investor appetite for Malaysian equities this year.

AmInvestment Bank Bhd director/head, equity derivatives, Ng Ee Fang said the FBM KLCI recorded a sterling performance last year, closing out 2010 with a year-to-date return of nearly 20%.

'With local volumes picking up, foreign trading participation following suit (foreign ownership of Malaysian equities is about 21.7%, the highest level since September 2008), the upcoming seasonality effect and general global equities appetite for risk returning, we expect a continuation of this trend as we start the new year,' she said.

Ng said the bank launched a tranche of eight warrants of Malaysia's industry heavyweights which would provide leveraged market exposure to cater for different investor profiles.

AmBank said for this issuance, there is a focus on Malaysian companies that are industry leaders.

For instance, leading property developer SP Setia has an excellent track record and solid execution capabilities. For the coming year, SP Setia is expected to achieve a record high pre-sales of RM3 billion with sales driven by its upcoming two integrated commercial projects, KL Eco City and Setia City. AmBank's CW on SP Setia is priced at 15 sen with a gearing of 4.69 times.

As for CIMB stock, according to AmResearch, it stock remains undervalued considering its regional potential as it steadily improves its market rankings in the regional bourses of Singapore, Indonesia and Thailand.

Some of the potential re-rating catalysts for the stock are better than expected non-interest income, reaffirmation of a higher ROE target of 18% for FY11 and confirmation of higher dividend payouts. AmBank's CW on CIMB is 15 sen with a gearing of 4.77 times.

AmBank is also launching a CW on Genting which was being transformed into a purer gaming play.

It currently operates casinos in Singapore, Britain and the United Sates with potential expansion further abroad via its subsidiaries and related companies.

'The disposal of non-core non-gaming assets would also bode well for Genting as it would turn the group into a purer gaming company and realise the value of the non-gaming assets.

'Being a purer gaming play would help narrow the valuation gap between Genting and its larger international peers in the gaming industry such as Las Vegas Sands and Wynn Resorts,' it said.

AmBank's CW on Genting is priced at 15 sen with a gearing of 4.75 times.

As for Petronas Chemicals, AmBank's CW is priced at 15 sen with a gearing of 3.70 times.

AmBank also highlighted low-cost carrier AirAsia which has been expanding its business model around the region with the latest addition being the Philippines as it recently announced that it will be setting up a low cost carrier in the country under a JV named AirAsia Inc.

Other associate companies in neighboring countries such as Thai AirAsia and Indonesia AirAsia have turned in profits for the recent quarter with Thai AirAsia earning RM53 million for 3Q10 while Indonesia AirAsia earned RM67 million.

'The listing of associate companies is also likely to happen over the next 12 months. Financially, AirAsia is on track to achieve its target of RM1 billion cash by year end. AmBank's CW on AirAsia is priced at 15.0 sen with a gearing of 4.42 times,' it said.

AmBank said infrastructure and property player, IJM, is expected to emerge as the front-runner for several major EPF-led projects on the back of the proposed IJM Land-MRCB merger.

'However, the proposed merger was recently aborted but that does not necessarily mean IJM will be disadvantaged as EPF is still the largest shareholder in IJM with a 16% stake.

'Overall, IJM is expected to benefit in the coming years from the RM43 bil Klang Valley LRT/MRT system due to its strong track record as one of the main civil subcontractors for the existing Ampang/Kelana Jaya lines, via subsidiary RoadBuilder, and other rail-based projects,' it said.

AmBank said the recent price weakness on the aborted merger may present a good entry point for investors. AmBank's CW on IJM is 15 sen with a gearing of 7.19 times.

AmBank's CWs on DRB-Hicom and Pos Malaysia are priced at 15 sen each while the gearing of the CWs are 4.27 and 5.55 times respectively.

It said this offer was for sophisticated traders bullish on SP Setia, IJM, Petronas Chemicals, Genting, DRB-Hicom, CIMB, AirAsia and Pos Malaysia.

The new CWs have gearings ranging between 3.70 and 7.19 and are targeted at investors who want leveraged exposure to the underlying shares.

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