Maybank IB Views

ECONOMICS
4Q10 Real GDP
Within expectations...

4Q10 real GDP growth slowed for the third consecutive quarter to +4.8% YoY. QoQ, the economy expanded by +1.5% (2Q10: +2.5%). Real GDP growth for the whole of 2010 was +7.2% (2009: -1.7%). Domestic demand -especially consumer spending and gross fixed capital formation - provided the lift to the economy as external trade eased further. Forward-looking indicators like global PMI and Malaysia's index of leading economic indicators point to steady global and domestic growth momentum in the early part of 2011. Therefore, we expect growth to stabilise at around 5% in 1H 2011 (2H 2010: +5.1%) before accelerating to 6% in 2H 2011, thus maintaining our full-year 2011 forecast of 5.5% growth.


SECTOR UPDATE
Banking: Overweight
As interest rates rise...

Minimal impact expected from base case scenario. Regional rate hike concerns are unlikely to dissipate anytime soon, in our view, and Malaysian banks are unlikely to be spared the volatility. Analysis of our base case monetary policy scenario, however, suggests that the overall impact to bank earnings is minimal, with a positive bias to most banks within our coverage with possibly the exception of AMMB, should interest rates rise. Our top picks are CIMB and RHB Capital.


RESULTS REVIEW
AMMB Holdings RM6.32: Hold
An issue of sentiment

Downgrade to Hold. While we do not expect a significant impact to bank earnings under our monetary policy response assumptions, it is our view that AMMB is unlikely to outperform its peers in this current environment of rising interest rates, by virtue of its less favorable asset-liability mix. Valuations at current levels are fair vis-a-vis its peers, while dividend yields lag. 3QFY11 results, meanwhile, were uninspiring. Our DDM-derived target price is lowered to RM6.80 from RM7.10 on rolling forward valuations and earnings downgrades.

Technicals
The FBM KLCI rebounded 23.04-points and closed at 1,517.56 last week, as a locally-led rebound rally emerged after the previous week’s foreign sell-down. The obvious support areas for the FBM KLCI are located in the 1,474 to 1,517-zon and resistance at 1,519 and 1,576 will.

Trading idea for today is a ACCUMULATE call on SCIENTX.

Other Local News
UMW: Toyota targets 90,000 units sales. Automobile giant UMW Toyota Motor is anticipating nationwide sales to exceed 90,000 units this year to maintain its market share at 15% this year. UMW Toyota's strategy was to launch a series of new models this year, such as the new Lexus CT200h hatchback next week. (Source: The Star)

Pos: Khazanah starts restricted tender for Pos. Khazanah Nasional Bhd has entered into the second stage of the divestment process of its 32.2% stake in Pos Malaysia Bhd, starting with the restricted tender process for bidders. Bidding would be on a level playing field whereby the emphasis would be on bidders who would be able to introduce sound strategies and business plans sustainable to bring the postal entity to the next level of growth. (Source: The Edge Financial Daily)

Ramunia: In talks with Coral Alliance. Ramunia Holdings Bhd is in talks with oil and gas outfit Coral Alliance Sdn Bhd-believed to be linked to Tengku Datuk Ibrahim Petra and Robert Lee, former directors of Petra Energy Bhd- for a possible synergistic tie-up or even an acquisition of the latter. In any case, a joint venture or an acquisition of Coral Alliance by Ramunia will benefit the latter as Coral Alliance is said to be the frontrunner for a hook-up and topside maintenance contract from Petronas. (Source: The Edge Financial Weekly)

Ivory: Secures major tenants for Penang Times Square. Penang-based Ivory Properties Group Bhd has signed up several tenants that will take up sizeable areas in Times Square, along Jalan Datuk Keramat. The shopping centre’s total tenancy will increase from about 50% now to about 80% by April or May. The new tenants are reputable restaurateurs such as Tao, Ming Garden and Coffee Island. (Source: The Edge Financial Weekly)

Manufacturing: Solutia to invest RM305m on sulfur factory. US-based Solutia Inc is set to invest RM305m to build a new high-tech facility to manufacture insoluble sulfur, a vulcanising agent for critical application in tire industry. It is part of an expansion plan to the current plant operating in Gebeng industrial area here and by doing so, Solutia will double the capacity, making it the world’s largest manufacturing site for insoluble sulfur. (Source: The Star)

EPF: Declares 5.8% dividend for 2010. The Employees Provident Fund (EPF) announced a 5.8% dividend for the year ended Dec 31, 2010, slightly higher than the 5.65% given out in 2009. The RM21.6b dividend payout is the highest in the history and a 11.55% increase compared with the RM19.37b paid out in 2009. (Source: The Edge Financial Daily)