CRESCENDO CORPORATION BHD,OKA CORPORATION BHD,HOVID BHD

CRESCENDO CORPORATION BHD

By Kenanga Research

Rating: Outperform

Target Price: RM3.15

KENANGA had met up with Crescendo management recently for an update on its prospects, which has further reinforced the research house’s positive view on the stock.

In the near term, Kenanga sees the company’s earnings catching up in the second quarter of 2015 and the following third quarter as it expects Crescendo to be able to recognise the sale of its inventories and also commercial properties in the first quarter.

In the longer term, the research house expects Crescendo to continue with launches in Bandar Cemerlang, Taman Dato Chellam, Desa Cemerlang and Tg Senibong and, at the same time, building up its recurring income stream.

It said it liked Crescendo for its low land cost advantage in Johor, which allows for more flexible planning of development projects.

Hence, the reaserch house is reiterating its “outperform” call on Crescendo with an unchanged target price of RM3.15 based on 45% discount to its fully diluted revised net asset values (FD RNAV) of RM5.72.

Kenanga said it understood that the group had achieved around RM20mil sales in the first part of the second quarter of 2015, implying a good chance that first-half sales will be close to about 50% of the research house’s full-year target.

Kenanga said the management had not guided it on updated gross development value (GDV) of its new projects, namely BC and Tj Senibong. The research houses’s current FD RNAV of RM5.72 assumes that BC and Tj Senibong have GDV of RM3.8bil-RM0.7bil, respectively.

Although the stock is heavily exposed to Johor, the applied discount reflects average historical levels because of the company’s product positioning as an industrial and mass housing player with large exposure to landed residentials, which should see resilient demand.

OKA CORPORATION BHD

By RHB Retail Research

Rating: Buy

Target Price: RM1.25

OKA has proposed a one-for-four bonus issue to reward its shareholders. The proposed bonus issue will be capitalising on OKA’s retained profits. According to its unaudited FY14 financial statement, its retained profit amounted to RM48.8mil.

It will be reduced to RM33.5mil after capitalising RM15.3mil for the proposed bonus issue. On completion of the bonus issue, OKA’s issued and paid-up share capital will increase to RM76.1mil.

In addition, it has proposed an employees’ share option scheme of up to 15% of its issued and paid-up capital to directors and employees.

RHB Retail Research said its recent discussion with the management reaffirmed its positive view on the company, with its business activities remaining encouraging, especially in the central and southern regions of Peninsular Malaysia.

The research house expects earnings to be strong in FY15, supported by growing sales and better margins. Hence, it is revising its FY15 forecasts upwards, with revenue and net profit adjusted higher by 5% and 12%, respectively. It is also maintaining its “buy” call on OKA with a higher fair value of RM1.25 (from RM1.12 previously), pegged to an unchanged FY15 forward price/earnings (P/E) ratio of 10 times, still below the stock’s 10-year average P/E of 15.6 times.

The proposed bonus issue would be able to improve OKA’s liquidity. Nevertheless, RHB Retail Research expects FY15f earnings per share to be diluted to 9.6 sen from 12 sen on the completion of the bonus issue.

Overall, the research house still likes OKA for its strong presence in Peninsular Malaysia and solid earnings visibility as it can ride on rising infrastructure developments in Malaysia.

HOVID BHD

By RHB Research

Rating: Buy

Target Price: 46 sen

RHB Research is initiating coverage on Hovid with a “buy” call and a fair value of 46 sen. The company offers investors exposure to both the pharmaceutical and healthcare industries, with non-cyclical earnings and a global market reach.

Hovid is a generic drug maker based in Ipoh, Perak, where it produces more than 400 kinds of drugs under one roof.

Its revenue has been growing at a compounded annual growth rate (CAGR) of 11.8% in 2009-2013 and its export sales contributed 52.5%, or RM90.5mil, to its FY13 top line.

Hovid is currently looking to export to emerging markets and the Middle East, which it has yet to tap into.

The research house estimates that export contributions may increase to 56% in FY16 should this expansion prove successful.

Hovid was set for a good FY15, given abundant opportunities in both domestic and global pharmaceutical markets, it said.

RHB Research anticipates that the company’s net profit may grow at a CAGR of 18.5% in FY14-16, or RM20.7mil-RM32.7mil, on the back of growing affluence, health awareness and healthcare expenditure in the markets Hovid operates in.

It also stands to benefit from the “patent cliff”, a wider export reach and capacity expansion, going forward.

RHB Research values Hovid at 46 sen by ascribing a 17 times fully-diluted calendar year forecast earnings per share, at a discount to the 18.9 times multiple of its global peers and offering a 14% upside from its current price.

The research house has also taken into account the company’s recent disposal of a 51% stake in Indian pharmaceutical company Biodeal Pharmaceutical and the 381 million warrants issued in 2013.