TA Enterprise rated ‘buy’

17-12-2007: TA Enterprise rated ‘buy’

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TA Enterprise Bhd has been rated a “buy” by Citi Investment Research, with a target price of RM2.38 as it is underpinned by the company’s strong earnings growth prospects and the start of a prime property up-cycle.

“Our target price of RM2.38 implies a fiscal year 2009 (FY2009) price-to-earnings ratio (PER) of 15 times,” it said in a research note on Dec 13. It said that TA Enterprise had unique exposure to both the stockbroking and prime property markets in the country.

The company is expected to post an earnings growth of 45% over the next two years, while its prime property could see an earnings surprise on the upside, given the industry is in the early stages of an up-cycle.

However, the research house cautioned that TA Enterprise earnings could be affected by lower trading volume and external factors such as slow global markets and diminished investor sentiment towards Malaysian equities.

On a quarter on quarter basis, the stockbroking firm’s performance improved due to the recovery of financial receivables or writeback of past provisions of more than RM20 million and a 32% rise in property development profits, TA Enterprise said.

It said the increase in the property development contribution was due to higher recognition on profits on progress of Damansara Idaman Phase 3, Idaman Villas and Idaman Residence.

“Take-up rates for the group’s current projects have been good (average 70%) and given choice locations. We expect these projects to be fully sold by next year,” the research house added.

Nonetheless, it said the average daily volume for TA Enterprise’s stockbroking division for the third quarter ended Oct 31, 2007 (3Q08) fell to RM1.9 billion from RM2.3 billion in (2Q08) even though it more than doubled on year-on-year (YoY) basis.

“We estimate TA Enterprise’s market share improved to 5% for the quarter (2Q2008: 4.5%) due to higher retail participation in the overall market,” it said.

Stockbroking and related activities accounted for 66% of TA Enterprise’s earnings before income tax, according to Citi Research.

It said stock market volumes had also dwindled significantly — now averaging RM1.6 billion per day versus RM2.2 billion per day for the year.

“Nevertheless, we expect two major project launches next year — Bukit Bintang in mid-2008 and TA3 in KLCC by end-2008 — which we believe will drive better stock performance next year,” it said.

The research house said at RM1.27, TA Enterprise was currently trading below its book value of RM1.49 per share.


Source : http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_e6bea08a-cb73c03a-6d999a00-e6238d4e