Maybank IB Views

ECONOMICS
Economic Transformation Programme (ETP)
From "message" to "passage"...

On the progress of Economic Transformation Programme (ETP), 37 EPPs and at least RM80.6b of investment has been announced so far, accounting for 28.2% of the total 131 EPPs identified in ETP and 10.1% of the targeted investment value of RM794.5b. These confirmed EPPs are also "active" as they are in various implementation stages, and benefited from fast-tracking of approvals as well as targeted and specific tax and non-tax incentives. The progress in ETP jives with our view on Malaysia's 2011 economic outlook where business spendig upcycle is the key story.


RESULTS REVIEW
CapitaMalls Malaysia Trust
Rides on strong retail growth

Maintain Buy. CapitaMalls Malaysia Trust's (CMMT) RM45.9m 2010 distributable income (which reflected 5½ months of earnings since listing on 16 July) was within expectations. We expect a stronger 2011 supported by better rental and occupancy rates driven by strong retail growth. The recent proposed acquisition of Gurney Plaza Extension (GPE) could boost DPU by another 3-5% (post-placement). Currently, CMMT offers 7.1% yield compared to 7.8% for M-REIT and 6.7% for SunREIT. Maintain forecasts and RM1.20 DDM-based TP.


Quill Capita Trust
Challenging outlook

No surprises. Quill Capita (QCT) RM32.6m 2010 normalised net profit was within expectations. In our view, QCT needs a appealing story to regain investors' interest given its below average 7.1% yield (vs. 7.8% average M-REIT) on a back of over-supply outlook for the industry. We fine-tune our forecasts by +0.1-0.2% for a higher 95% payout (previously 92%) and change in balance sheet assumptions. Our DCF-based TP is raised to RM1.20 (+2 sen).


SECTOR UPDATE
Automotive
Caught in Neutral

No near-term catalyst. We expect 2011 TIV growth to slow to 2-3% as domestic demand drives towards saturation. Corporate earnings growth remains challenging. Margins will come under pressure on rising A&P expenses. The currency impact which aided 2010 earnings is unlikely to repeat. We are Neutral on the sector with Buys on Proton and MBM on undemanding valuations. We upgrade Tan Chong to Hold following a 15% correction in the share price since our Sell call on 23 Sept 2010. UMW remains a Hold.


Technicals
The FBM KLCI plunged 22.46-points and closed at 1,547.43 last week as some heavy profit-taking and liquidation activities caused the market’s large fall after the Thaipusam holiday on 20 January. The weaker support areas for the FBM KLCI are located in the 1,497 to 1,537-zone. The key resistance zone of 1,547 and 1,576 will offer major selling and liquidation activities.


Other Local News
Axiata: M1 gains traction. M1 recently announced a special dividend payout of 3.5cents per share, brings the total dividend per share for FY10 to 17.5 cents per share which translates into a dividend income of SGD46.6m (RM110.9m) to the Malaysian telco. (Source: The Edge Financial Daily)

F&N: Sells Fraser Business Park Phase II development project. F&NHB has accepted the call option notice from Tenggara Muhibbah Sdn Bhd to acquire the entire interest in Brampton for a total cash consideration of RM63m and realising a gain of RM29.6m in the process. (Source: Bursa Malaysia).

GUH: Seeks more land for property projects. While GUH Holdings Bhd continues to look at its printed circuit board (PCB) division as the primary driver of growth this year and in years to come, the firm continues to expand its landbank for other activities. GUH's Taman Bukit Kepayang development in Seremban, has so far seen development of 120 ha and there was a balance of about 108 ha left to be developed over the next six to seven years. (Source: Business Times)

MISC: Bidding for Brass LNG job. MISC Bhd is believed to have submitted a technical bid early this month to provide up to 14 vessels for Brass Liquefied Natural Gas (LNG) in West Africa. The vessels are required to have a carrying capacity of about 145,000 cu m each. However, details of the tender, which has attracted nine bids, have yet to surface. (Source: The Edge Weekly)

Malaysia Smelting: Singapore IPO shares priced at SGD1.75. Malaysia Smelting Corp Bhd's (MSC) public offering shares for a secondary listing on the Singapore Exchange Securities Trading Ltd (SGX) has been fixed at SGD1.75 or RM4.17 a share. MSC said it expected to raise about SGD40.1m (RM96m) from the public offer, with about SGD8.3m (RM20m) to be used for the expansion of mining and smelting operations through the acquisitions of plant and machinery. (Source: The Star)

Utilities: No change in Selangor water consolidation matrix. The consolidation of the water sector in Selangor seems unlikely to take place even with the latest offer from the state government to acquire all the four concessionaires- Puncak Niaga (M) Sdn Bhd (PNSB), Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), Konsortium Abass Sdn Bhd and Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (SPLASH) for RM9b. (Source: The Edge Weekly)