Maybank IB Views

SECTOR UPDATE
Property: Overweight
No shortage of catalysts

Maintain Overweight. We expect interest on property stocks to sustain at higher levels in 2011 due to: (i) strong pro-property measures by the government under the Economic Transformation Programme (ETP) comprising government land developments and major infrastructure spending under the Greater Kuala Lumpur (KL) initiative, and (ii) another round of consolidation of property players to create the size for larger domestic participation and overseas expansion.


COMPANY UPDATE
SP Setia RM6.30: Buy
A goliath with a proven track record

Continues to glow. We like SPSB for its proven track record and hands-on management. We expect a strong 36% EPS CAGR over the next 3 years, riding on the current positive property demand and overseas expansion. Also, we are increasingly positive, expecting SPSB to gain further traction in government land development. With size being significant, it could turn acquisitive soon. Reiterate Buy with unchanged RM6.90 TP (10% premium to RM6.28 RNAV).


Technicals
The FBM KLCI surged 18.47 points to 1,551.89 yesterday. Its resistance area of 1,551 may cap market gains, whilst its firm support areas are located at 1,531 and 1,550.Despite the mixed US markets last night, we may see the FBM KLCI in a solid trading mode today.

Trading idea for today is a SHORT-TERM BUY call on DIALOG & SPSETIA.


Other Local News
MAS: Firefly eyes one million passengers at KLIA. Fly Firefly Sdn Bhd, a unit of Malaysia Airlines, which will begin its operations at KL International Airport (KLIA) on Jan 15, aims to fly 1m passengers in and out of the airport this year. Its newly launched airport ticketing counter at the main terminal building of KLIA will help to reach the growth target and offer greater convenience to passengers. Meanwhile, passenger growth at the Skypark Terminal in Subang is expected to surpass 2m this year after growing to 1.5 m last year. (Source: The Star)

Proton: To finalise talks with OEM to set up assembly line in India. Proton Holdings Bhd intends to finalise discussions with a global original equipment manufacturer (OEM) for contract assembly operations in India within this quarter. (Source: The Star)

TNB: Aussie coal supply woes may affect power tariffs. Tenaga Nasional Bhd (TNB) is likely to be affected by higher coal prices following massive floods in Australia and this may strengthen its case for higher power prices. Coal prices for delivery in March have already risen to USD130 (RM398) per tonne from USD100 at the start of December last year. TNB purchases about 17% of its coal from Australia. Currently, about 40% of Malaysia's generation capacity comes from coal-fired plants. (Source: Business Times)

Consumer: RON97 and Kerosene up 10 sen per litre. The prices of RON97 petrol and kerosene will each be increased by 10 sen from today. With the increase, RON97 petrol will cost RM2.40 per litre (previous RM2.30) while kerosene will be sold at RM2.50 per litre. (Source: Bernama)

Construction: Ageing construction workers. The construction industry could face a shortage of local workers by 2017 given that 35.1% of industry personnel will be above 50 in seven years' time. The problem is further compounded by a declining number of people entering the sector as there are vast opportunities in other fields. (Source: The Sun)

E&U:

Sarawak Hidro negotiating to sell power from Bakun dam to SEB. Sarawak Hidro Sdn Bhd is in advanced talks with Sarawak Energy Bhd (SEB) to sell power from the Bakun dam to the state utility firm. Negotiations would resume around Jan 20, and agreement on the sale and purchase of Bakun power is expected to be inked in May or July. (Source: The Star)

Plantation: RM4.4b allocation for oil palm replanting. Malaysia's oil palm industry will spend RM4.4b to replant approximately 365,000 hectares from 2011 to 2013. The government will pay RM1b to independent smallholders with 40 ha or less (this accounts for some 600,000ha of land throughout the country) to compensate for the loss of income from replanting. They are entitled to a one-off replanting payment of more than RM6,000 per ha and monthly payments of RM500 per household for two years. Private and government-linked plantation companies are expected to spend RM3.4b in replanting in the next three years. (Source: Business Times)

Market: Net foreign buy rebounds in Dec. Net foreign buying on Malaysian equities picked up in December after a slowdown since October. Net foreign buying increased to RM2.6b in December from RM0.9b in November. (Source: Bursa Malaysia)