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Malaysia approved under QDII scheme
In a press release, the Securities Commission (SC) said that Malaysia is recognised by China as an approved investment destination under China's Qualified Domestic Institutional Investor (QDII) scheme administered by the China Banking Regulatory Commission (CBRC).
Also, the China Securities Regulatory Commission (CSRC) confirmed that based on its existing Memorandum of Understanding (MOU) with the Securities Commission (SC), Malaysia is an approved investment destination under the QDII programme.
The QDII programme allows Chinese nationals to invest in overseas markets through approved institutions. With the recognition, approved institutions regulated by CBRC and CSRC may now invest funds pooled from their clients into Malaysian securities, including equities and fixed income products.
This is positive, as it could result in additional inflow of funds into the country. Given that China is the top palm oil export destination for Malaysia, the plantation sector could be a beneficiary. Our picks in the Malaysia plantation sector are KL Kepong (Buy; RM17.95 TP) and TSH Resources (Buy; RM2.10 TP).
Berjaya Sports Toto (RM4.43; Buy; Price Target RM4.80; BST MK)
Raising debt = bumper dividends?
Berjaya Sports Toto (BST) has received the approval from Securities Commission to undertake a medium-term note (MTN) programme of up to RM800m (tenure may range between >1 to 10 years). The initial drawdown will likely be around RM500m, which proceeds will be used to refinance its remaining RM450m debt and for working capital.
BST’s net gearing has improved from 174% in 1QFY10 to 43% in 4QFY10. Its last debt raising exercise was mainly to finance bumper dividends declared in 4QFY09 (final dividend of 11 sen + advance FY10 interim dividend of 19 sen), in preparation for potential exercise of a put option for early redemption by parent Berjaya Land’s bondholders.
BST has just declared a 8 sen second interim dividend in 4QFY10, which works out to ~RM107m. We do not discount the possibility of surprise bumper dividends as Berjaya Land’s RM711m convertible bonds will be due in Aug 2011.
On a worst case scenario, the initial RM500m MTN drawdown will increase net gearing to 155% and interest expense by RM25m (assuming 5% interest rate) or 5% of FY11 net profit. But the actual impact should be much lower as some existing debt will be refinanced, while repayment should be fairly quick given BST’s strong operating cashflows of RM400-500m p.a.
Maintain Buy on BST, and our TP of RM4.80, based on dividend discount model.
Highlights
Notion VTec (RM3.03; Buy; Price Target: RM4.50; NVB MK)
By leaps and bounds
• Aggressive capex in 2.5” HDD to cater to strong industry demand as channel inventories remain lean
• Superior track record and earnings growth vs peers, but valuation is still cheap
• Initiate with BUY and RM4.50 TP, based on 9.5x FY11 EPS
Strategy
Malaysia approved under QDII scheme
In a press release, the Securities Commission (SC) said that Malaysia is recognised by China as an approved investment destination under China's Qualified Domestic Institutional Investor (QDII) scheme administered by the China Banking Regulatory Commission (CBRC).Also, the China Securities Regulatory Commission (CSRC) confirmed that based on its existing Memorandum of Understanding (MOU) with the Securities Commission (SC), Malaysia is an approved investment destination under the QDII programme.
The QDII programme allows Chinese nationals to invest in overseas markets through approved institutions. With the recognition, approved institutions regulated by CBRC and CSRC may now invest funds pooled from their clients into Malaysian securities, including equities and fixed income products.
This is positive, as it could result in additional inflow of funds into the country. Given that China is the top palm oil export destination for Malaysia, the plantation sector could be a beneficiary. Our picks in the Malaysia plantation sector are KL Kepong (Buy; RM17.95 TP) and TSH Resources (Buy; RM2.10 TP).
Berjaya Sports Toto (RM4.43; Buy; Price Target RM4.80; BST MK)
Raising debt = bumper dividends?
Berjaya Sports Toto (BST) has received the approval from Securities Commission to undertake a medium-term note (MTN) programme of up to RM800m (tenure may range between >1 to 10 years). The initial drawdown will likely be around RM500m, which proceeds will be used to refinance its remaining RM450m debt and for working capital.
BST’s net gearing has improved from 174% in 1QFY10 to 43% in 4QFY10. Its last debt raising exercise was mainly to finance bumper dividends declared in 4QFY09 (final dividend of 11 sen + advance FY10 interim dividend of 19 sen), in preparation for potential exercise of a put option for early redemption by parent Berjaya Land’s bondholders.
BST has just declared a 8 sen second interim dividend in 4QFY10, which works out to ~RM107m. We do not discount the possibility of surprise bumper dividends as Berjaya Land’s RM711m convertible bonds will be due in Aug 2011.
On a worst case scenario, the initial RM500m MTN drawdown will increase net gearing to 155% and interest expense by RM25m (assuming 5% interest rate) or 5% of FY11 net profit. But the actual impact should be much lower as some existing debt will be refinanced, while repayment should be fairly quick given BST’s strong operating cashflows of RM400-500m p.a.
Maintain Buy on BST, and our TP of RM4.80, based on dividend discount model.
Highlights
Notion VTec (RM3.03; Buy; Price Target: RM4.50; NVB MK)
By leaps and bounds
• Aggressive capex in 2.5” HDD to cater to strong industry demand as channel inventories remain lean
• Superior track record and earnings growth vs peers, but valuation is still cheap
• Initiate with BUY and RM4.50 TP, based on 9.5x FY11 EPS
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