Maybank IB Views

COMPANY UPDATE
Axiata RM4.75: Buy
Secular growth trends to continue Shariah-compliant

Raising earnings and target price. We revisit our assumptions following Axiata's stellar 3Q10 results and tweak our earnings higher to reflect latest operating trends. We still like Axiata for its high-growth pan-Asian footprint, and believe Axiata would continue to benefit from a liquidity-induced market rally. Reiterate Buy with a higher RM5.45 TP.


KNM Group RM2.33: Buy
Sabah cross-over brings ample opportunity; target price raised Shariah-compliant

Target price lifted to RM3.10. We are positive over KNM's JV with Petrosab as East Malaysia fabrication opportunities are huge, riding on PETRONAS' rising domestic capex spend. The SOGT and Sipitang CTF projects are some of the JV's targeted projects. KNM remains a Buy with a raised 12-month target price of RM3.10 (+41%) as we foresee a sustained recovery outlook, locally and globally. Our new target PER is 10x (previously 9x) and we roll-over valuations to 2012 earnings.


ECONOMICS
US Economy
Stimulus begets stimulus...

FOMC meeting yesterday ended with the fed fund rate (FFR) retained at 0%-0.25% and more importantly, the Fed reiterating its commitment to the USD600b QE2, which has started with the purchases of USD114.1b US Treasuries since 12 Nov. In addition, there is a third fiscal stimulus package in the works in the form of USD858b tax incentives pending Congress approval. While these monetary and fiscal stimulus may be positive for the US and global economy in the short term, the risks are amplified over the long term.


Technicals
The FBM KLCI advanced 0.79 points to 1,510.58 yesterday. Its resistance areas at 1,512 and 1,531 may cap market gains, whilst its firm support areas are located at 1,495 and 1,510.
Trading idea for today is a SHORT TERM BUY call on TONGHER.


Other Local News
KLK: Subscribes to RM209.8m rights issue entitlement. Kuala Lumpur Kepong Bhd (KLK) and its unit will subscribe to their rights issue entitlement in London-listed Yule Catto & Co Plc amounting to GBP42.4m, or RM209.8. The subscription will be financed with cash reserves and bank borrowings.KLK and its unit hold 27.4m shares, or 18.8%, in the specialty chemical manufacturer. The funds raised from the rights issue is for Yule Catto's acquisition of PolymerLatex Group, an European emulsion polymer products manufacturer with assets in Europe and Asia worth GBP376m (RM1.85b). (Source: The Star)

MAS: Firefly airline plans four new hubs. Firefly plans to set up at least four new hubs for its jet operations within the next two years. This excludes KL International Airport (KLIA) where it would begin its jet services from Jan 15 next year. The four new hubs will be established at Kota Kinabalu (KK), Kuching, Senai and Penang. (Source: The Star)

DiGi, Time dotCom: Ties up in RM139m deal. Digi.Com Bhd has entered into a 10-year wavelength purchase agreement and a maintenance and support deal collectively worth RM139m with Time dotCom Bhd (TdC) as a follow-up to the bandwidth service agreement signed between the two companies in April 2008. TdC would fiberise, maintain and support parts of Digi's backhaul links between its aggregation wireless towers and mobile switching centres. (Source: The Star)

Maxis, TM: Ink 10-year deal. Telekom Malaysia Bhd (TM) and Maxis Broadband Sdn Bhd have signed a 10-year agreement for TM to provide high speed access connectivity, via its high speed broadband access (HSBB Access) service, to Maxis. The deal would enable Maxis to offer bundled services, including Internet Protocol (IP)-based offerings, to 700,000 homes at present and 1.3m households by the end of 2012. (Source: The Star)

Starhill REIT: YTL disposes properties to Starhill REIT. YTL Corp Bhd, via its units, will dispose nine of its hospitality-related properties to Starhill Real Estate Investment Trust (Starhill REIT) for RM1b. The properties disposed are Cameron Highlands Resort, Hilton Niseko, Vistana Penang, Vistana Kuala Lumpur, Vistana Kuantan, The Residences at The Ritz-Carlton, Kuala lumpur, The Ritz Carlton Hotel, Kuala Lumpur, Pangkor Laut Resort and Tanjong Jara Resort. Starhill would lease the properties to the respective vendors/leases for 15 years, with an option to renew for a further term of 15 years. The lease payments for the properties are fixed and include a 5% step-up rate every five years. (Source: Bernama)

YTL: Powers into Jordan. YTL Power International Bhd would invest USD5b to acquire 30% stake in Eesti Energia's Jordanian oil shale projects. The oil plant with output of 38,000 barrels per day will be jointly developed by the partnership between Eesti Energia (60%), YTL Power (30%) and Near East Investment (5%). (Source: The Star)

Autos: BMW unveils another locally assembled model. BMW Malaysia Sdn Bhd has added the contemporary sport-centric BMW X1 to its stable of locally assembled cars. The model would be assembled in Kulim, along with BMW 3 Series and BMW 5 Series that are currently assembled there. (Source: The Star)