RCE Climbs 14 Percent On Civil-Service Pay Hike
The sudden surge in demand lifted RCE Capital shares as much as 14 percent yesterday. Analysts say that the financial services provider stood to gain from the announced salary increase for civil servants. According to HwangDBS Vickers Research in a note, the pay hike may increase government employees’ ability to take more loans for their purchases, which in turn benefits consumer financing service providers like RCE. The research house note also indicated RCE’s attractive valuations and positive technical signals may trigger higher demand for the shares. Based on the company’s latest financials, the stock trades at a price-to-earnings multiple of 5.9 times. Against its book value, the stock trades at a ratio of 0.4 times. Prime Minister Datuk Seri Najib Razak announced last Monday (11 March) that the nation’s 1.4 million civil servants will be entitled to a salary increase on 1 July this year. Najib said government employees will get a pay hike of between RM80 and RM360.
Significance: According to the analyst who has a “trading buy” call for RCE, the stock may rise to HwangDBS Vickers’ initial resistance forecast of 31 sen for the stock before reaching 36 sen. Support levels for RCE are seen at 24.5 sen and 23 sen.
Magni-Tech industries Announced Dividend Amid Strong Third Quarter Results
Magni-Tech Industries posted a net profit of RM9.86 million for the third quarter ended 31 January 2013 (3QFY13), an increase of 24.3 percent from last year’s RM7.93 million due to higher revenue and lower material cost. Third quarter revenue meanwhile increased to RM162.2 million, up 21.1 percent from RM133.9 million for the same quarter last year. For the nine months ended 31 January 2013, the company’s net profit stood at RM28.5 million, up from RM24.2 million. Its revenue also increased to RM429.1 million from RM416.5 million for the same period. The group said it maintains a cautiously positive outlook for the remaining quarter of the financial year ending 30 April 2013 amidst the global economic uncertainty. The board has declared an interim dividend of 5 sen per share, less 25 percent tax for the financial year ending 30 April 2013 and payable on 26 April 2013.
Significance: The company attributed the good profits to the increase in sales orders received from both the garment and packaging businesses by 24.3 percent and 7.5 percent, respectively.
Power Sector Remains Overweight
CIMB Research has maintained its overweight rating on the local power sector, with catalysts anticipated from the Economic Transformation Programme (ETP)-backed electricity demand and power plant tenders. The Energy Commission (EC) has received seven submissions for Project-3B, a greenfield coal-fired power plant project that it tendered out last December. All major players in this industry such as Tenaga National, 1Malaysia Development (1MDB), Malakoff Corporation, and YTL Corporation have made submissions accordingly; said the research house. CIMB Research expects Tenaga and 1MDB to present the most competitive bids, based on the Prai gas fired power plant tender results in October 2012. The brokerage believes that both companies possess sovereign capital and lower hurdle rates to meet the bid requirements. “As Tenaga monopolises transmission in Malaysia, we believe its bid would be aggressive, based on its industry expertise and knowledge,” it said.
Significance: Gas Malaysia remains the research house’s top pick for its defensive earnings, debt-free balance sheet and strong cash flows. As the future tender awards would catalyse the energy stock, the research house believes investors should accumulate Tenaga at the back of this announcement. Nonetheless, Tenaga is not an outperform due to election risks, it said.
