Maybank IB Research

ECONOMICS
3Q10 Real GDP
Further slowdown in growth...

3Q10 real GDP growth slowed to a lower than expected +5.3% YoY (Maybank IB estimate: +6.1% YoY; consensus estimate: +5.9% YoY). Growth was supported by continued growth in consumer and business spending as fiscal stimulus faded and external demand softened. We are placing our current full-year forecasts of 7.5% for 2010 and 6.1% for 2011 under review. Indications are that this year's growth will come in in between our and official forecast (+7%) and next year's growth to likely be in the 5.5% to 6% range.


SECTOR UPDATE
Plantation Sector: Neutral
A re-look at small caps

Hidden gems. Contrary to market expectations, plantation small caps (RM5b) by 14% YTD but underperformed mid caps (RM1b–RM5b) by 11% YTD. While the overall valuation discount of small caps to mid and big caps have narrowed, there are still attractively valued stocks. We identify four names, MHC Plantations, Kurnia Setia, NPC Resources and TDM.


Automotive: Overweight
Sales rebound in Oct

Oct vehicle sales were stronger than expected with preference for smaller vehicles. We expect 2010's TIV to reach 580,000 units, which implies soft Nov-Dec periods. Nonetheless, new launches will dominate headlines as distributors will build orders for 2011's delivery. Stock-wise, all the companies have performed well this year, up 8.3 - 80.1% YTD, driven by recovery in spending and stronger RM. We are placing our strategy and calls on hold for now pending the Nov results season.


RESULTS PREVIEW
AirAsia RM2.48: Buy
3Q to surprise on strong yields Shariah-compliant

Looking great. AirAsia will release its 3Q10 results on 25th November. 3Q10 is expected to be highly profitable, buoyed by strong passenger growth, high load factors, and positive outlook on yields. We raise our earnings forecasts to account for higher yields, off-setting higher fuel costs. Maintain Buy, with a raised target price of RM2.94 (+23% from previous) based on 10.1x 2011 PER - 10% discount to peers.


RESULTS REVIEW
CIMB Group Holdings RM8.41: Buy
Regional aspirations on track; upgrade to Buy

RM1b special dividend surprise. An unexpected 13.45sen/sh single-tier dividend totaling RM986m will be paid by 31 Dec 2010 (ex-date: 3 Dec). This suggests that future regulatory capital requirements may be well within CIMB's existing capacity. 9M10 net profit is in line, but we upgrade our 2011-12 earnings forecasts by 7% p.a. after raising our expectations for investment banking and Niaga. 2011 will continue to be a strong year. Upgrade to Buy with a new RM9.50 (+12%) TP.


UMW Holdings RM6.80: Hold
Auto drifts; O&G still drags Shariah-compliant

Auto's positive priced in; concern remains at O&G. Stronger 9M results, largely from auto and Ringgit, led us to lift 2010-12 forecasts by 15% p.a. Correspondingly, our target price is raised by 9% to RM7.20, based on unchanged 12x 2011 PER, in tandem with peers. Our Hold call remains. We are still unconvinced by its O&G's operations - impairment risk for Naga 3, continued losses at WSP. At the same time, we feel that its auto division growth prospect is already priced in.


QL Resources RM5.85: Buy
Scarcity premium now on the agenda? Shariah-compliant

Earnings delivered. As expected, QL chalked up another quarter of more than 20% YoY net profit growth as supply factors turned favourable for the Marine and Livestock divisions. Whilst we retain our earnings forecasts, we raise our TP to RM6.50 (+10%) as we normalise post-FY13 semi-explicit tax rates to FY13’s 15% instead of 20% as QL continues enjoying tax incentives from its expansion.


Dialog Group RM1.44: Buy
Strong visibility; target price raised Shariah-compliant

A fluid start. 1QFY11 earnings account for 26% of our full year forecast. We remain positive on Dialog's business model and direction as it seeks to grow its oil storage operations via the Tj. Langsat and Pengerang bases over the next 10 years. The CTF operations, backed by major oil traders (i.e. Vopak, Trafigura) and PETRONAS (i.e. MISC) should provide sustainable long term earnings, strong cashflows and consistent dividends. Buy with a higher RM1.75 SOP TP (+40%).


Technicals
The FBM KLCI fell 2.85 points to 1,503.20 yesterday.Due to the weaker tone in the USA last night, we may see the FBM KLCI in a "range trading" mode today. Its resistance areas at 1,503 and 1,520 will cap market gains, whilst its weaker support areas are located at 1,487 and 1,500.

Our trading idea for today is an ACCUMULATE call on HAPSENG.


Other Local News
IJM Land, MRCB: Shares suspended. Market talk of a potential merger involving IJM Land Bhd and Malaysian Resources Corp Bhd (MRCB) has intensified with the suspension of the shares of IJM Land, its parent IJM Corp Bhd and MRCB since 9am yesterday pending a material announcement on a potential corporate exercise. The companies are expected to announce details of the corporate exercise later today. (Source: The Star)

Salcon: Sells stake in unit for RM112m, aims to list unit in HKEx. Integrated water and wastewater engineering company Salcon Bhd has sold a 40% stake in Salcon Water (Asia) Ltd (SalconAsia) to Challenger Emerging Market Infrastructure Fund Pte Ltd (EMIF). SalconAsia holds the company’s water assets in China. Salcon also plans to list SalconAsia on the Hong Kong Stock Exchange (HKEx) in the next two to three years. (Source: The Edge Financial Daily)

Plantation: Introducing higher oil yielding seed. Agricultural Resources Sdn Bhd (AAR) introduced its' higher oil yielding semi-clonal hybrid called "AA Hybrida 1". Compared to Dolly Parton (Dura X Pisifera) which is the standard planting material, AA Hybrida I produces more, but smaller fruit bunches with 20% higher oil yields. (Source: Business Times)

Healthcare: Malaysia to review fees of doctors, private hospitals. The government will review the fees of doctors and private hospitals. The ministry will also set up six more ambulatory (out-patient) care centres under the Tenth Malaysian Plan, from 15 currently. (Source: Business Times)