Maybank IB Views

SECTOR UPDATE
Property: Overweight
Buoyant outlook

Maintain Overweight. The Malaysian Property Summit 2011 on 18 January reinforced our bullish stance on the sector. We reiterate that the upcoming MRT project is a catalyst for a structural change in the Greater KL / Klang Valley property scene, resulting in a positive re-rating of property/land values. Glomac and Mah Sing offer higher upside to our target prices after strong share price performance by SP Setia, our top pick for 2011. For REITs exposure, we like SunREIT.


RESULTS REVIEW
Tenaga RM6.49: Sell
Still waiting for the silver bullet Shariah-compliant

Strong topline underpinned by commercial and domestic users. 1QFY11 revenue of RM7.7b (5.3% YoY, -1.8% QoQ) was better than our expectation driven by strong power demand. Reduced excess capacity payment of RM200m partially offsets the impact of higher coal price (+RM168.8m YoY). However, Tenaga is facing severe headwinds from rising coal prices, dwindling gas supply and its silver bullet solution (tariff increase) is opaque at best. No change to our earnings forecasts and DCF-based target price for now. Maintain Sell.


ECONOMICS
CPI, Dec 2010
Inflation rate creeping up...

Consumer price index (CPI) rose by 2.2% YoY in Dec '10 (Nov '10: +2.0% YoY), the fastest pace in 18 months, mainly reflecting the impact of another round of fuel and food (sugar) subsidy reduction. MoM, it gained for the third consecutive month (Dec '10: +0.4%; Nov '10: +0.3%; Oct '10 +0.3%). For the whole of 2010, inflation rate was 1.7%. No change to our 2011 inflation rate forecast of 2.5%, and we still expect the Overnight Policy Rate (OPR) to be hiked by 50bps to 3.25% in 2H2011.


Technicals
The FBM KLCI closed lower by 3.53 points at 1,566.51 yesterday. Its resistance areas of 1,566 and 1,576 may cap market gains, whilst the obvious support areas are located at 1,545 and 1,561.
Trading idea for today is a TAKE PROFIT call on FABER.


Other Local News
AirAsia: Weighs listing in US or HK, spurred by demand for its shares from foreign investors. Earlier reports stated the low-cost carrier was looking at Thailand as an option for a secondary listing, in an effort to become a full-fledged Asean airline. Now, however, the company has set its sights on more mature markets, considering the strong buying interest in AirAsia's shares from investors in the US and Europe. (Source: Business Times)

Auto: TIV to hit record high this year. New motor vehicle sales are expected to grow by a modest 2.1% this year as car ownership in the country is already high even by developed-country standards, said the Malaysian Automotive Association (MAA). (Source: The Sun)

Aviation: Algae have potential as biofuel for aviation industry. Professor Dr Nor Aieni Mokhtar, the national oceanography directorate at the Ministry of Science, Technology and Innovation said unlike other biofuels such as bioethanol from corn and biodiesel from soyabean, the lipids from micro-algae can be transformed into jet fuel. (Source: Business Times)

EPF: Buys RM720m building on London's Fleet Street. The Employees Provident Fund (EPF) acquired a third office building of 225,000 sq ft on Fleet Street for £148m (RM717.8m). The building has housed law firm Freshfields Bruckhaus Deringer since 1989 and has over 10 years left on its lease. (Source: The Edge Financial Daily)

F&N: Targets Brunei, Thailand expansion. Fraser & Neave Holdings Bhd (F&N) is seeking to become a regional food and beverage (F&B) giant and has secured rights to market, distribute and sell its products in Thailand and Brunei. (Source: Malaysian Reserve, Business Times)

MTD: Road blocks in privatization. The bid by joint offerors (holding a stake of more than 50% in MTD Capital Bhd) to take over the remaining shares in the group at RM9.50 per share may not materialize now that the stock has closed above the offer price. (Source: The Edge Financial Daily)

Pasdec: To launch RM252m projects. Kuantan-based property developer Pasdec Holdings Bhd plans to launch at least RM252m worth of properties in Pahang this year. These include integrated developments Pasdec Persona, Pasdec Perdana and Pasdec Idaman as well as upscale mixed commercial developments Pasdec Mahkota and Pasdec Avenue. (Source: The Edge Financial Daily)

Steel: Vale project may cost up to RM14b. Brazilian mining giant Vale International SA's construction costs in its iron-ore transshipment project will be between RM9b and RM14b over a five-year period, and the project will likely start in July or August this year. Perak government has no equity participation in the project while local companies will be subcontracted to participate in the trickle-down activities. They will include Malaysian companies involved in iron ore, steel, fabrication, shipbuilding, canning and tin. (Source: The Star)