Maybank IB Views

COMPANY UPDATE
PLUS Expressways RM4.39: Hold
Inks 3rd Indian toll Shariah-compliant

Not new. The Jetpur-Somnath concession, inked yesterday, is not a new development; PLUS and its partner won the tender in Sept 2010. We expect mid-teens project IRR being a brownfield project, but no immediate impact on earnings. PLUS remains a Hold with just a 4.8% upside to UEM-EPF's RM4.60 take-over offer price.


RESULTS PREVIEW
Petronas Chemicals RM6.30: Buy
The right chemistry

Maiden quarterly result looking good. PCG is expected to release its 3QFY11 results in the third week of February. 3Q is expected to be highly profitable, buoyed by high utilisation rates, and strong product margins. No change to our forecast for a sizeable 47% expansion in FY11 net profit. Maintain Buy, with an unchanged target price of RM6.70 based on FY12 PER of 13x, in line with global peers.


RESULTS REVIEW
Fraser & Neave Holdings RM14.98: Hold
Strong volume growth

Priced in. Volume growth was much stronger than expected and we raise our FY11-12 earnings estimates by 3-5% p.a. 1QFY11 net profit made up 33% of our and consensus full-year forecast. Much, however, is priced in, with the stock trading at a prospective PER of 16.9x FY12 earnings. The immediate challenge would be in supplementing revenue loss from the Coca-Cola franchise from FY12. Net cash stays strong at RM639m or RM1.80/share. Maintain Hold with a raised target price of RM15.00, based on a prospective FY12 PER of 15x plus net cash.


Hartalega Holdings RM5.63: Buy
Playing the nitrile theme Shariah-compliant

Results support our nitrile pick. 9MFY11 net profit of RM138m (+43% YoY) was 73% of our full-year forecast and 79% of street's. We expect Hartalega's positive earnings growth momentum (3QFY11 net profit: +5% QoQ) to sustain on nitrile demand growth while the latex-focused incumbents could still post lackluster numbers in the coming quarter(s). We believe the stock will re-rate on more evidence of the ongoing structural demand shift from latex to nitrile gloves globally, due to cheaper ASP. Maintain Buy and DCF-derived TP of RM6.80.


Technicals
The FBM KLCI closed higher by 3.78 points at 1,535.60 yesterday. Its resistance areas of 1,541 and 1,558 will cap market gains, whilst the obvious support areas are located at 1,515 and 1,535.

Trading ideas for today are two BUY calls on CHHB and MITRA.


Other Local News
TNB: To source coal from all over the world. Tenaga Nasional Bhd is aggressively sourcing coal from South Africa and Indonesia to overcome a shortage from its traditional supplier Australia, which has been partly swamped with floods. TNB president and CEO Datuk Seri Che Khalib Mohamad Noh said the current situation is not expected to recover in the next 2 to 3 months. Che Khalib said TNB's net profit is likely to be hurt for its financial year ending August 2011 if coal prices remain over USD100 (RM304) a tonne. Consequentially, its bottom line will dip 16% every time coal prices rise by USD10 (RM30.4) per tonne. (Source: Business Times)

Ireka: Wins RM28m contract. Ireka Corp Bhd's wholly-owned subsidiary, Ireka Engineering and Construction Vietnam Co Ltd, has won a RM27.6m contract from Hoa Lam-Shangri-La Healthcare LLC for the structural works package at a general hospital in Ho Chi Minh City. This will bring Ireka's current order book to about RM800m, of which about RM430m remains outstanding. (Source: Business Times)

Economy: Malaysia among top outsourcing destinations. According to the Press Trust of India (PTI), the top three slots in AT Kearney's 2011 Global Services Location Index (GSLI) are occupied by three Asian countries: India, China and Malaysia. The 3 countries have enjoyed the top 3 rankings since the inception of the GLSI in 2003, demonstrating "remarkable staying power, thanks to their deep talent pools and cost advantages". India remains the favourite back-office of the world thanks to its "first-mover advantage" and deep skill base, as per global management consulting firm AT Kearney's ranking of the best outsourcing destinations. (Source: Business Times)

Economy: Cuepacs appeals for minimum wage policy in civil service. Cuepacs is appealing to the government to implement a minimum wage policy in the civil service, which it believes is a crucial move to assist civil servants cope with the rising cost of living. Its president Datuk Omar Osman said the current salary of the workers in the support group was below the poverty line of RM720 a month. Those in Grade 1 to Grade 16 in the Support Group II are starting at RM647per month, which is below the poverty line. The basic salary should be at least RM850 or RM920 a month. (Source: Bernama)