Maybank IB Views

COMPANY UPDATE
KNM Group RM2.40: Buy
Job wins on the rise Shariah-compliant

Orders are coming in. KNM's latest RM693m new orders account for 35% of our RM2b forecast for 2011. While the company does need to prove its ability to deliver on earnings given volatility in recent results, we do believe that these new orders, which are high margin in nature, bode well for the build-up in KNM's orderbook and signal margin recovery ahead as well. Meanwhile, current high oil prices would support O&G activity and demand for process equipment, of which KNM is a major global supplier, via Borsig. Our Buy call is maintained.


Tan Chong Motor Holdings RM4.74: Buy
Same genetics, different look Shariah-compliant

Maintain Buy; RM5.75 TP. The Proton-Nissan tie-up will not affect TCM's franchise as the collaboration is on specific areas with zero product cannibalization. TCM is taking a strategic stand not to compete in the A-segment but aims to make headway in the B-segment. TCM's domestic presence is sound but its growth prospects, in our view, lie in the regional market. Growth will be solid if it successfully capitalizes on the Indo-China market, which is still in its infancy.


Petronas Chemicals RM6.21: Buy
Sector re-rating imminent Shariah-compliant

Upgrade on industry re-rating. We believe the fundamentals for the petrochemical industry have never been better, buoyed by recovery in demand, strong product margins and an increasing price divergence between natural products and synthetic alternatives. Furthermore, high oil prices are beneficial as PCG’s products generally track oil price increases. We raise our target price to RM8.00 (from RM6.70) based on 14.4x 2011 – which is the long-term industry mean PER.


Technicals
The FBM KLCI closed higher by 7.60 points at 1,506.88. Its resistance areas of 1,507 and 1,527 will cap market gains, whilst the obvious support areas are located at 1,490 and 1,505.
Trading idea for today is a Take Profit call on GENP.


Other Local News
RHB Cap: EPF can't own more than 45% of RHB Cap. Bank Negara has not allowed the Employees Provident Fund (EPF) board to hold more than 45% of the paid-up share capital of RHB Capital Bhd. As at Feb 25, EPF had 45.68% interest in RHBCap. (Source: Bursa Malaysia)

Tanjung Offshore: Bursa reprimands Tanjung Offshore. Tanjung Offshore Bhd received a public reprimand from Bursa Malaysia after reporting a 37% deviation between its audited and unaudited account for 4QFY09. Tanjung Offshore is also required to carry out limited review on its quarterly report submissions, to be performed by its external auditors for four quarterly reports. (Source: The Edge Financial Daily)

PPB: Plans to expand flour mills and cinema. PPB Group Bhd plans to spend RM140m to expand its flour mills in Indonesia and Vietnam over the next two years. The group plans to double its Indonesian mill capacity to 2,000t daily with an investment of USD30m (RM91.5m). As for its Vietnam plant, the group plans to double capacity to 800t a day with an investment of RM50m. PPB has also allocated about RM190m to expand and upgrade its cinema business, among others, of which about 60% will be utilised this year. (Source: Business Times)

Q&G: Johor to announce big multi-billion O&G investment soon. Johor's plan to transform into a new regional oil and gas (O&G) hub will get another shot in the arm with the announcement of a new multi-billion ringgit investment soon. The project will be led by a local company that has been all over the world and is now coming back to Malaysia. The government will help fund the development of infrastructure for the project. (Source: The Star)

Property: Prasarana to get part of RRIM land for development. Syarikat Prasarana Negara Bhd will be allocated a parcel of land in the proposed Sungai Buloh Rubber Research Institute Malaysia (RRIM) development project for commercial development as part of the "rail plus property" model being used to offset the cost of building the mass rapid transit (MRT). The parcel of land will be used to build the MRT's main depot but it will also include commercial development above and possibly around the depot, in the form of retail and office space. (Source: The Star)

E&U: Renewable Energy Bill goes for 3rd reading. The Renewable Energy Bill will go for its 2nd and 3rd reading at the end of the month. The Energy, Water, and Green Technology Minister said that while electricity rates may not increase with the new Act, a revision on energy tariffs cannot be ruled out. The feed-in tariff mechanism is expected to be implemented in mid-2011. (Source: The Edge Financial Daily)