Maybank IB Views

SECTOR UPDATE
Automotive: Neutral
On course, no pick-up ...

Maintain Neutral; in search of catalysts. Tepid sales in the Jan-Feb period concurs with our and market's assessment of Malaysia's auto growth trend for 2011. We remain Neutral on the sector, anticipating a mere 2-3% TIV growth as market reaches saturation. Stock-wise, we have upgraded Proton to a Hold following a 15% fall in share price post-our Sell call downgrade in Feb. MBM and TCM remain a Buy on inexpensive valuations whilst UMW is still a Hold.

COMPANY UPDATE
Petronas Chemicals Group RM6.74: Buy
Strong February Shariah-compliant

It only gets better. PCHEM's product margin in Feb 2011 was USD1,122/ton (+27.8% YoY, +10.5% MoM), we estimate. The year-to-date product margin of USD1,062/ton is 23.1% higher YoY and above our 2011 estimate of USD1,027/ton. Things are looking very positive for PCHEM to deliver record profits in 2011. Maintain Buy; there is no change to our earnings forecasts and target price of RM8.00.

S P Setia RM6.15: Buy
A golden opportunity to buy Shariah-compliant

FY11 to be a record year. The recent sell down on S P Setia (SPSB) shares represents a golden opportunity to buy the stock given SPSB's excellent sales performance and earnings growth prospects. SPSB will very likely exceed its RM3b sales target for FY11, a new record, given strong bookings and responses to its KL Eco City (KLEC) offices and residential tower. We fine-tune our earnings forecasts and tweak down our TP to RM7.10 (-1%) based on unchanged 10% premium to our new RM6.47 RNAV post-placement. SPSB stays our top buy for the sector.

ECONOMICS
Japan: Aftermath of 3/11
Hope vs Fear...

The casualties and damages of the Tohoku quake-tsunami on 11 Mar make it teh worst in Japan's modern history. Still, the hope is that of a localised and transitory effect, affecting growth in 1Q and/or 1H before recovery in 2H on rebuilding and resumption of business and industrial activities. The fear is that of a broader and prolonged impact due to the additional dimension of the disaster arising from the damaged nuclear power plant, risking radtioan leaks and contamination. Japan is Malaysia key trading partner and major source of FDI. Most immediate and visible impact is likely on commodities such as natural gas, timber and oil, and on manufacturing industries such as automotive and E&E.

Technicals
The FBM KLCI was marginally higher by 0.22 points to 1,509.10 yesterday. Its resistance areas of 1,510 and 1,529 will cap market gains, whilst the obvious support areas are located at 1,490 and 1,508. Due to the DJIA’s softer tone last night, we will see the FBM KLCI in lack lustre mode today.

Trading Idea for today is a Short-Term Buy call on PETDAG

Other Local News
TNB: To build gas-fired power plant in Sabah. Tenaga Nasional Bhd (TNB) plans to build a 300MW gas-fired power plant in Sabah. TNB has received in-principle approval to build the plant. The plan to build a gas-based plant comes after Malaysia's federal and Sabah state governments scrapped a plan to build a coal-fired power plant. (Source: Business Times)

Genting Plantations: ACGT Aims to Reduce Oil Palm Breeding cycle by 50%. ACGT Sdn Bhd, a unit of Genting Plantations Bhd, aims to reduce oil palm long breeding cycle by 50% to six years from 12 years via its genomics-based marker-assisted selection technology. The breakthrough would accelerate development and commercial release of oil palm seeds without any genetic modification. (Source: Bernama.com)

MAHB: Penang airport upgrade going smoothly. The RM250m upgrade of the Penang International Airport is 15.7% complete, while the target date for the whole project to be completed remains June next year. (Source: Business Times)

Benalec: Beachfront land for sale. Benalec Holdings Bhd is shaping up to be a major landowner and developer, as it will receive some 177.3 acres of land in Melaka in exchange for reclamation works. (Source: The Edge Financial Daily)

Ta Ann, Jaya Tiasa: To increase plywood output. Ta Ann Holdings Bhd and Jaya Tiasa Holdings Bhd, will increase plywood production by 15% and 50% respectively after winning orders from Japan to help with the country's reconstruction following its earthquake and tsunami. (Source: Business Times)

Utilities: Syabas invests in new pipe network. Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) has invested around RM115m in the alternative pipe network system to cope with rising demand for water supply. The new network would connect the water distribution system to the Sungai Semenyih and Sungai Langat water treatment plants and the first, second and third phases of the Selangor water distribution plant. (Source: The Star)