RHBInvest Research

Top Story: E&O

Company Update

• The recent in-principal approval for E&O’s STP2 project is a significant quantum leap for E&O, as it finally crystallises the value within the group
• E&O will become the largest land owner on the Penang island, set to enjoy the increasing property values on the island, fuelled by rising FDIs. Considering the scarcity of land on the island, this would make land a very valuable asset for developers.
• The upside potential is accentuated by the MOU that was entered yesterday between the state government and Chinese state-owned contractor Beijing Urban Construction Group (BUCG) to construct a 6.5 km tunnel to link the island and mainland that stretches from Gurney Drive to Butterworth. This latest development certainly bodes well for E&O’s project in STP, due to its close vicinity to the 3rd link, capturing rising population flow to the island while easing the traffic congestion issues.
• We think E&O should be worth more now given the green light from the state government which clears up the largest uncertainty, while also enjoy the state’s infrastructure investments. We hence raise our fair value to RM2.00 (from RM1.85 previously)

Corporate Highlights

Petronas Gas:

Company Update
Minimal impact from lower gas volume
Maintain Outperform call and our RM13.95/share fair value.

Paramount:

Company Update
We downgrade Paramount to Market Perform, as we believe the stock is now fully valued –Nevertheless, dividend angle of the stock is still rather attractive.
No change to forecasts. Although we downgrade the stock to Market Perform, our fair value is unchanged at RM5.92,.We believe the on-going (2-for-5) bonus issue and (1-into-2) share split exercise will continue to support the share price. An EGM will be held in early Jun for the approval of the proposed exercise.

HELP International

Briefing Note
On track with its Subang 2 campus
No change to forecasts. Our fair value is maintained at RM2.87,We reiterate our Market Perform call on the stock.

Unisem:

Briefing Note

• Unisem guided for 2Q11 revenue to grow at 5-6% qoq driven by strong demand for Quad Flat No Lead (QFN), higher-margin ball grid arrays (BGA) and micro-electro-mechanical-systems (MEMS). Furthermore, Unisem highlighted it is already seeing a pick-up in orders which suggests stronger growth in 2H2011.
• Our fair value is lowered slightly to RM1.99/share based on 11x FY11 FD EPS. Maintain Market Perform.

EON Capital:

News Update

• High Court dismisses Primus’ petition
• No change to forecasts and fair value of RM7.30 (based on HL Bank’s offer price). Maintain Underperform.

SEGi:

1QFY11 Results

• Stronger margins in 1Q11
• Our fair value has been raised to RM5.05 (from RM4.54).We believe SEGi’s current valuations are undemanding compared to HELP.The stock offers strong earnings prospects and decent dividend yield of 4.3% (ex-special dividend). Hence, we reiterate our Outperform call on the stock.

Axis REIT:

1QFY11 Results

• 1Q10 realised net profit of RM16.2m (+39.4% yoy; +0.2% qoq) missed our expectation and consensus estimates by about 10%. However, we expect earnings to pick up in upcoming quarters due to completion of acquisition of a new property recently.
• No change to forecasts. We maintain our Outperform recommendation on Axis REIT. Our indicative fair value is kept at RM2.71.

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Stocks to watch: SEGi, Cepco, EON Cap, Priceworth

KUALA LUMPUR: Stocks which could see trading interest on Friday, April 29 following the fresh corporate developments are SEG INTERNATIONAL BHD, CONCRETE ENGINEERING PRODUCTS Bhd (CEPCO), EON CAPITAL BHD and Priceworth International Bhd.

SEGi net profit for the first quarter ended March 31, 2011 surged 90.5% to RM18.12 million from RM9.51 million a year ago due to the increase in student enrolments at its institutions.

Revenue for the quarter rose to RM68.47 million from RM52.29 million in 2010. Earnings per share were 7.35 sen, while net asset per share was 77.2 sen.

It recorded marked improvement in student numbers and profitability in the previous year and the current quarter.

“This trend is expected to continue in 2011 and the foreseeable future as the group has put in place a firm foundation and strategy for sustainable growth,” it said.

CEPCO swung into the red with net losses of RM5.95 million in the second quarter ended Feb 28, 2011.

Revenue slipped 16% to RM24.69 million from RM29.38 million while its loss per share was 13.31 sen compared with earnings per share of 4.37 sen.

For the first half, it reported net loss of RM205,000 compared with net profit of RM7.74 million in the previous corresponding period. Revenue shrank to RM45.26 million from RM66.95 million.

The High Court has dismissed with costs the suit filed by Primus (M) Sdn Bhd against certain shareholders and directors of EON Capital Bhd EONCap) over the proposed sale of the latter to HONG LEONG BANK BHD [].

The decision was made by Judge Varghese George Varughese on Thursday, April 28.

Priceworth International Bhd’s 86.85 million warrants at an issue price of 5.0 sen per warrant will be listed and quoted on Friday, April 29.

A Bursa Malaysia circular said on Thursday the warrants were issued on the basis of one warrant for every two shares of 50 sen each.

Malaysia Airports Holdings Bhd (MAHB) is revising its passenger traffic volume target to 72 million for 2014, from 60 million earlier under its five-year plan.

Managing director Tan Sri Bashir Ahmad Abdul Majid said passenger growth at KLIA has been very promising and it should be able to hit its initial 60 million passengers target by 2011.

“The growth so far as been good as indicated by the traffic in the first three months of the year. We are definitely on track,” he said.

Under the five-year plan, MAHB is also targeting to achieve an earnings before interest, tax, depreciation and amortisation and returns on equity of RM1 billion and 10% respectively under its five-year plan that expires in 2014.

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RHBInvest Research

Top Story: Shifting Trends – Currency plays

Market Update

In RHBRI’s Economic Highlights yesterday, we highlighted our view that the RM/USD exchange rate could strengthen further in the near term to RM2.90. We now look at the impact on sectors and companies.

Sector Call

Motor: Beneficiary of a Stronger RM Neutral

Sector Update

MBM Resources: Fair value raised to RM3.45 (from RM3.25) Market Perform

Tan Chong: Fair value raised to RM5.40 (from RM5.20) Market Perform

UMW: Fair value raised to RM7.60 (from RM7.50) Market Perform

APM: Fair value raised to RM5.60 (from RM5.50) Market Perform

Proton: Fair value lowered to RM3.55 (from RM4.00) Underperform

Corporate Highlights

TH Plantations: Weathering the storm Outperform

Visit Note

As with most of the other plantation companies with significant landbank in Sabah, THP’s FFB production suffered in 1QFY11, due to the excessive La Nina induced rainfall, which made harvesting activities difficult. So far, the rain has been less heavy in Apr, and management is hopeful that the weather will improve. Despite this, we are wary of a delayed impact of the wet weather on FFB yields, which could potentially come 5-6 months and 10-12 months later,



MPI: To pick-up in the long term Market Perform

Briefing Note

Management guided for 4QFY11 revenue to remain flat qoq as sales volume for its legacy packages remain tepid but offset by strong demand for its newer chip packages. We note that utilisation for micro-leadframe-packages (MLP), module packages and test is fully utilised around 90% but its overall utilisation rates was dragged down to around 85% due to slower demand for legacy packages i.e. PDIP



Unisem: Weaker than expected 1Q Outperform

1QFY11 Results

1QFY11 net profit of RM5m was below expectations. The key variance was mainly due to: 1) lower-than-expected EBITDA margins of 14.3% due to lower contribution from SiP, MEMS and BGA packages; 2) strengthening of RM against the US$ and 3) losses in Batam and Wales.

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Maybank IB Views

COMPANY UPDATE
Media Prima RM2.61: Buy
The going is still good Shariah-compliant

Still a believer. After seeing a respectable 1Q11 industry gross adex growth of 13% YoY and speaking to media buyers, we opine that we have been too conservative with our adex growth assumptions. We raise our earnings estimates for Media Prima (MPR) by 13% to 23% p.a., after revisiting our assumptions. In our view, concerns on the impact of digitalisation are premature. Maintain Buy. Target price is raised to RM3.06 on an unchanged 17x 1-year forward PER post-earnings upgrade.

ECONOMICS
US Economy: FOMC
Fussing Over Many Considerations...

Staying on course... for now. US Federal Reserve's policymakers unanimously voted to keep the federal funds rate (FFR) at the record low of 0%-0.25% and maintained its commitment to complete the USD600b second quantitative easing (QE2) which started in Nov '10 and will end in June '11.

Technicals
The FBM KLCI rose 2.57 points higher at 1,529.91 yesterday. Its resistance areas of 1,532 and 1,542 will cap market gains, whilst the obvious support areas are located at 1,515 and 1,529.

Trading idea for today is a Buy call on MPHB.

Other Local News
RHBCap: Chinese banks interested in ADCB's stake. Amid speculation that China Construction Bank is seeking BNM approval to acquire a stake in EON Capital, Chinese were also among those invited to tender for the block of shares in RHBCap that is to be put on the market by Abu Dhabi Commercial Bank (ADCB) . (Source: The Edge Financial Daily)

Tanjung Offshore: Bags RM15m contract from Murphy Sarawak. Tanjung Offshore Bhd won an RM15m contract by Murphy Sarawak Oil Co Ltd. for valve repair and maintenance services. The contract is to last till March 2014 with the option to renew for another two years. (Source: Bursa)

KFC Holdings: To invest RM45m in 25 new outlets this year. KFCH MD Jamaludin Md Ali said this after yesterday’s AGM adding that 10 of the outlets will be 'drive-thrus'. On its overseas expansion, nine outlets have been planned for India. Overseas top line contribution from Brunei and Singapore will come up to 15%. (Source: Business Times)

TH Plantations: Higher FFB output expected this year. The company is targeting 504,901mt of palm bunches from 463,949mt in 2010. The company aims to expand its land bank to 50,000 ha from 39,113 ha by 2010 and is looking at Sabah, Sarawak, Sumatra and Kalimantan. (Source: TheStar)

Rubber: Malaysian production may rise 6.5%. Higher prices may encourage farmers to boost production tapping and output may increase to 1m metric tonnes this year from 939,000 in 2010. Thai production may decline if rains persist across the country’s main southern growing region (Source: The Malaysian Reserve)

Timber: Sarawak's log production falls. Total production in 1Q 2011 was down 28% YoY due to a combination of bad weather and flooding and impoundment of the Rejang River basin. Log prices are however expected to be higher this year due to tighter supply bigger demand. (Source: Business Times)

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RHBInvest Research

Top Story : KFC

Visit Note
Toning down Malaysia ’s store openings
Fair value is reduced slightly to RM3.78 (from RM3.85).We downgrade our call on the stock to Underperform.

Corporate Highlights

Kencana:

News Update
Securing Kebabangan’s substructure EPC works. The contract is expected to be delivered to KPOC within the 3QCY12.
Our fair value of RM3.50 is unchanged and implies an upside of 30.6% to the current share price. Maintain Outperform.

Wah Seong:

News Update
The company has entered into JVs with companies controlled by Insituform Technologies for a consideration of US$1k (RM3k).
We are positive on the turn of events as it has been Wah Seong’s long-standing aim to enter the “Deepwater Golden Triangle” (i.e. Gulf of Mexico , Brazil and West Africa ). There was no guidance on capex for this venture, but we note that the previous deepwater facility cost around US$20m (RM61m).
Maintain Underperform and fair value of RM2.02/share until the company starts to secure actual wins.

CIMB:

Company Update
CIMB Niaga’s 1QFY11 net profit rises 39% yoy
No change to forecasts. Fair value of RM9.80and Outperform call maintained.

MPI:

3QFY11 Results
Hurt by stronger RM and higher costs
Our fair value is reduced to RM4.95/share. We downgrade our call on the stock to Underperform (from market perform).

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Maybank IB Views

COMPANY UPDATE
Tanjung Offshore RM1.39: Sell
Caution ahead; flashing red flags Shariah-compliant

Maintain Sell. 1Q 2011 earnings will likely miss street expectations again. Cost management strategies and operating prospects remain the key concerns. An equity cash-call could ensue should the cash situation worsen. TOFF will also suffer an RM8m penalty cost for early bonds redemption. Valuations are expensive and consensus forecasts are aggressive. Nonetheless, Ekuinas’ next move remains a wild card.

Kencana Petroleum RM2.68: Buy
Gets KPOC's Kebabangan gig Shariah-compliant

We remain Buyers on Kencana. The RM208m KPOC EPC gig takes its outstanding orders to 89% of its targeted RM1b job wins for FY11. Our forecast, which implies a 3-year net profit CAGR of 26%, excludes earnings contribution from the Berantai RSC project. We do not rule out potential strategic tie-ups and assets expansion (i.e. rigs) as it explores deepwater opportunities. We value Kencana at RM3.10, based on 20x CY12 EPS. Our 20x PER target is validated in a capex-fueled, order book-driven upcycle.

Technicals
The FBM KLCI rose 3.29 points to close at 1,527.34 yesterday. Its resistance areas of 1,527 and 1,541 will cap market gains, whilst the obvious support areas are located at 1,514 and 1,525. Due to the DJIA’s positive tone last night, we may see the FBM KLCI remain stronger today. There could be an initial gap-up move, followed by latter day profit-taking.

Trading Idea for today is Take Profit call on NAIM

Other Local News
Construction: Chinese companies may bid for MRT job. Chinese Premier Wen Jiabao’s visit is expected to pave the way for them to participate in the RM40b MRT project as they have the financial muscle to go up against the Gamuda/MMC Corp joint venture and China is home to some of the most advanced railway systems in the world. (Source: The Edge Financial Daily)

Infrastructure: Sarawak to build 500km roads by end-2012. Under the National Key Result Area (NKRA) for a three-year period beginning last year, Infrastructure Development and Communication Minister, Datuk Seri Michael Manyin said Sarawak was allocated RM2b to build roads. Sarawak managed to complete 240km of new roads last year. (Source: The Edge)

Proton: Banks on Saga and Persona. Proton Holdings Bhd is banking on Saga and Persona to drive up sales this year as it seeks to topple rival Perusahaan Otomobil Kedua Sdn Bhd (Perodua) as the biggest carmaker in the country. Proton hopes to sell 85,000 units of Saga and 40,000 units of Persona while the total sales was targeted at close to 170,000 units this year. (Source: The Sun)

YHS: To consolidate plants. Yeo Hiap Seng (M) Bhd (YHS) will consolidate its factories in Shah Alam and Petaling Jaya to improve efficiencies and partially mitigate the effects of rising raw material prices. YHS also wants to introduce a new and less sweetened range of beverages to response to sugar price spikes. (Source: The Edge Financial Daily)

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Maybank IB Views

SECTOR UPDATE
Media: Overweight
March 2011 adex: Strong recovery

Maintain Overweight. Mar 2011 total gross adex grew 14% YoY after easing 2% YoY in Feb 2011. Apr 2011 is likely to be flattish MoM as advertisers consolidate before adex friendly festivities in 3Q. YTD, total gross adex grew 13% YoY. Therefore, our 5% total gross adex growth forecast for 2011 is under review. Our top pick remains MCIL.

COMPANY UPDATE
Nestle (Malaysia) RM48.18: Sell
Fully priced in; downgrade to Sell Shariah-compliant

Downgrade to Sell. Nestle (Malaysia)'s share price has done well, up 11% year to date, outperforming the KLCI (+0.3%), and surpassing our RM45.00 DCF based target price. Last Friday's analyst briefing post 1Q11 results reporting offers no new developments; we maintain our forecasts. The stock currently trades at 25.5x 2011 earnings, which is at one standard deviation above its mean PER of 24.8x since 2000. We think that its near-term earnings growth potential is fully in the price, while dividend yield has also tapered off with the rise in its share price.

Technicals
The FBM KLCI rose 1.30 points to close at 1,524.05 yesterday. Its resistance areas of 1,524 and 1,541 will cap market gains, whilst the obvious support areas are located at 1,514 and 1,522.Due to the DJIA’s negative tone last night, we may see the FBM KLCI remain benign today.

Trading idea for today is a Short-Term Buy call on PADINI.

Other Local News
Sime Darby: Unit secures RM1.2b contract. Sime Darby Bhd’s wholly owned subsidiary, Sime Darby Engineering Sdn Bhd (SDE), has been awarded the contract to fabricate KBB Topsides for the Kebabangan Northern Hub Development Project (Contract) by Kebabangan Petroleum Operating Company Sdn Bhd worth RM1.2b. This would increase SDE's current orderbook to RM2.2b. (Source: Bursa Malaysia)

Integrax: Revived Integrax-Vale accord on the cards. Port operator Integrax Bhd is set to revive the terminated deal with Brazilian mining giant Vale International S.A. However, this depends on the outcome of an Integrax EGM next week to vote on resolutions to reconstitute its board of directors. (Source: The Star)

Bernas: Gets agreement extension for 10 more years. Padiberas Nasional Bhd (Bernas) has on April 22 received a letter from the Public Private Partnership Unit under the Prime Minister’s Department on the extension of the Bernas Agreement, which gives Bernas monopoly over the country’s rice imports, for a period of ten years. (Source: Bursa Malaysia)

EonCap: China bank eyes stake in EONCap. China Construction Bank Corp (CCB) has approached the Malaysian government about buying a stake in EON Capital (EONCap). (Source: Business Times)

Telco: M'sia taking steps to reduce broadband rates. A new consortium, Konsortium Rangkaian Serantau Sdn Bhd under the Entry Point Projects (EPPs), has been set up to buy international bandwidth for Internet traffic to lower the costs of Internet protocol (IP) transit. (Source: The Star)
Outside Malaysia
U.S: Sales of new homes rose in March to 300,000 annual rate as the weakest industry in the economy strained to recover. New-home sales, tabulated when contracts are signed, climbed 11.1% to a 300,000 annual pace. Housing prices fell from a year ago. (Source: Bloomberg)

China: Cheapest Big Macs suggest the CNY and the HKD are the most undervalued currencies in the world, trading at discounts of 40% or more versus the greenback. McDonald's Corp's signature burger cost the equivalent of USD 2.18 in China at the end of last year, USD 1.90 in Hong Kong and USD 3.71 in the U.S, according to The Economist's Big Mac Index. China's discount has narrowed to 40% from 41% since then owing to yuan gains, while Hong Kong's pegged currency has kept its gap at 49%, according to data compiled by Bloomberg. (Source: Bloomberg)

Taiwan: March industrial production increased more than estimated, bolstering the central bank's scope to raise borrowing costs again. Output rose 13.82% YoY, after gaining a revised 12.93% YoY in February, the Ministry of Economic Affairs said in Taipei. (Source: Bloomberg)

Singapore: Inflation held at 5% in March as housing and transportation costs surged, supporting the central bank's decision this month to allow further currency appreciation. Prices rose 0.1% MoM from February, without adjusting for seasonal factors. (Source: Bloomberg)

Vietnam: Inflation in April accelerates to fastest pace in 28 months, putting pressure on the government to tighten policy further after almost doubling a key interest rate in less than six months. Consumer prices climbed 17.51% YoY in April compared with the 13.89% YoY pace last month. Prices rose 3.32% MoM in April from March. (Source: Bloomberg)

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RHBInvest Research

Sector Call

Telecom:

Sector Update

• Cheaper broadband on the horizon?
• We like Axiata (OP, FV = RM5.75) for strong growth prospects albeit moderating this year. Our main concern is the uncertainty of the 2G spectrum renewal fee in Bangladesh.
• While we favour DiGi (OP, FV = RM29.10) for decent growth prospects and dividend yields, we believe valuations may no longer look very attractive and are reviewing our call pending its results on 29 Apr.

Corporate Highlights

Sime Darby :
News Update

• Awarded RM1.15bn contract
• With this award, we uphold our view that there is a greater chance of Sime being able to dispose its O&G division at a more reasonable price, given the vote of confidence from Petronas.
• Given the minimal impact, we are leaving our forecasts unchanged for now, pending further details on the contract. We maintain our Outperform call with RM10.70 fair value.

CBIP:

News Update

• Awarded RM38.35m contract from Ministry of Health
• Our target price is maintained at RM4.65.Maintain Market Perform.

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Alam Maritim unit gets RM24.75m charter party contacts

KUALA LUMPUR: ALAM MARITIM RESOURCES BHD []’s unit has entered into two charter party agreements for a total sum of RM24.75 million.

In a statement Monday, April 25, Alam Maritim said its unit Alam Maritim (M) Sdn Bhd had entered into the agreements with two oil and gas services companies for the provision of one unit Workboat and one unit 4 Point Mooring System Workboat.

It said the 4 Point Mooring System Workboat contract worth RM6.75 million was for sixty days from April 17, with an extension option for another 30 days.

Meanwhile, the Workboat contract worth RM18 million was for a period of 12 months from April 18, with an extension option on a monthly basis.

It said the contracts were expected to positively contribute to its earnings for the financial year ending Dec 31, 2011.

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TNB’s recurring dilemma

KUALA LUMPUR: The rising fuel cost is back to haunt Tenaga Nasional Bhd (TNB) again, highlighting the growing need for the utility group to raise electricity tariff in order to pass on the costs to end users as coal and gas get more expensive, said analysts.

However, investment analysts generally do not foresee a tariff hike to happen soon, at least not in TNB’s current financial year ending Aug 31, although they have been told the group is in discussions with the government on a revision on electricity rate.

“There appears to be no near-term relief from the higher fuel costs as the government is unlikely to raise tariffs in an election year,” said CIMB Research in its review on TNB’s 2Q earnings.

CIMB has a “neutral” call on the big-cap counter and instead recommends independent power producer, YTL Power International Bhd. “We prefer YTL Power for exposure to the power sector,” it said in a research note.

RHB Research and Maybank IB Research have “underperform” and “sell” calls on TNB shares respectively.

“TNB lacks catalysts due to slowing electricity demand growth of 4%-5% for FY11 (FY10: 8.8%) and no clear timeline for a formal fuel cost pass-through formula to help address the issue of fluctuating fuel prices,” said RHB Research when reviewing TNB’s earnings figures.

Meanwhile, Maybank IB commented that its cautious outlook was due to the input cost pressure, outcome of the natural gas maintenance shutdown and extremely tight reserve margins.

“Should there be more gas outage problems, TNB has no choice but to burn oil and distillates; this is a loss-making proposition,” it noted.

TNB’s net profit fell 37% to RM630.3 million in 2QFY11 from RM1 billion a year ago, despite higher revenue of RM7.5 billion versus RM7.4 billion in the previous corresponding period. Earnings per share dropped to 14.2 sen from 23.05 sen previously.

The reduced profit was due mainly to the sharp rise in fuel costs following the spiralling coal prices. The group paid an average price of US$80 (RM241) per tonne during 1QFY11, but the price went up to US$103.80 in 2Q.

Compounding the problem is the shortage of gas due to maintenance works at Petronas platforms. Consequently, TNB has had to burn more coal, which is not subsidised by the government, to generate power.

The eighth largest stock on Bursa Malaysia in terms of market capitalisation, TNB’s share price has been on a downhill trend since last September, a big contrast to its upward trajectory on the FBM KLCI.

The counter tumbled to RM6-level in recent weeks — the lowest level since June 2009 — from the high of RM7.36 in last September. It closed at RM6.03 last Friday.

The previous tariff hike was in June 2008. Some quarters said the government-linked company (GLC) was unlikely to get out of the tough scenario so long as there wasn’t a cost pass-on formula for the utility group.

In fact, some analysts had earlier recommended the utility stock on the grounds that an electricity tariff hike would be granted when the federal government started talking about trimming subsidies gradually, including the hefty gas subsidy borne by Petroliam Nasional Bhd (Petronas) since last year.

The Performance Management and Delivery Unit (Pemandu) had proposed a subsidy rationalisation in the power sector. Under the subsidy reduction scheme, the first cut in gas subsidy and the corresponding increase in electricity tariff should have been implemented last July.

Subsequently, there was to be a gradual trim on the gas subsidy every six months.

As of now, the plan has yet to kick off although the gas subsidy is ballooning at a faster rate since the existing gas reserve is depleting and Petronas has to fork out hard cash to import gas from Thailand and Vietnam.

The national oil firm is bearing an annual gas subsidy of RM19 billion.

Industry observers said it might be even harder to see the revision on gas subsidy soon given the jump in coal prices although the need was rising as any increase in cost of utilities would be an unpopular move among the people.

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Khazanah sells Pos Malaysia stake to DRB-HICOM

KUALA LUMPUR: Government investment arm, Khazanah Nasional Bhd will divest its strategic stake of 32.21% in Pos Malaysia Bhd to DRB-Hicom Bhd at RM3.60 per share or RM622.79mil.

The transaction is deemed as a landmark divestment as it is Khazanah's first divestment of its entire stake in a major government-linked company (GLC).

The decision was made after an extensive two-stage process as well as rigorous selection to ensure that the new shareholder was able to bring Pos to the next level of growth.

Khazanah managing director, Tan Sri Azman Mokhtar said DRB-HICOM was chosen based on their overall bid, which offered not only a defined strategy but also an executable business plan and an acceptable offer price.
Stage one of the divestment process saw the resolution relating to the salary of postmen and the revision of postal tariffs.

“Their proposed strategy and business plan in turn provides an effective platform for Pos' growth, if adopted by the board of Pos as a whole,” he said in a statement yesterday.

The offer price of RM3.60 per share is subject to the modification of the special rights redeemable preference share in Pos (special share) held by Minister of Finance Inc. (MoF).

This modification inter alia includes the reservation to appoint up to two board members in Pos; and the removal of rights to appoint the chairman and managing director of Pos and fix their respective remunerations.

This condition precedent is not within Khazanah's control, as it is the sole prerogative of MoF to make any modification on the special share.

The conditional offer price is also subject to the variation in the use of 16 plots of identified lands owned by the Federal Lands Commissioner and leased to Pos. The current terms of the lease only allows for postal services use, while the variation provides for the inclusion of commercial use, over and above the mandatory postal use. In the event the variation does not happen by Dec 31, DRB-HICOM will be refunded 10 sen per share or RM17.30mil.

Khazanah adopted a robust strategic divestment process which involved an open bidding process and a merit-based and transparent selection process. Conducted in two stages the first stage involved addressing key aspects of Pos' macro business and regulatory environments, while the second stage revolved around the restricted tender process.

Stage one saw the resolution of the long-running issue relating to the salary of postmen and the revision of postal tariffs. The postal rate revision took effect in July 1, last year and subsequently, Pos also resolved a long outstanding pay revision for postmen in the same month.

Stage two started with the pre-qualification phase, where Khazanah appointed CIMB Investment Bank Bhd and McKinsey & Company as advisors for the transaction. A total of 48 parties were approached to submit their respective proposals, of which 10 parties expressed their interest to participate and were pre-qualified.

Khazanah then proceeded to the indicative bid phase where all 10 parties were invited to submit their bids. Of these, five reverted with their respective bids where they were all given detailed and equal opportunities to meet Khazanah's advisors and explain their respective strategy and business plan submission.

Of the five bidders, four parties submitted their binding bids.

An independent evaluation panel comprising five senior professionals from the public and private sector with extensive postal and corporate experience had evaluated all the bidders' proposal on the basis of anonymity, where the bidders' names were coded.

The panel, with the assistance of Khazanah's advisors, evaluated the strategy and business plans first. Based on this, the bidders were shortlisted to a final two. Subsequently, the offer price envelopes were opened and evaluated compositely. Both shortlisted bidders were given the opportunity to present to the panel. The panel's evaluation was based on a composite score between strategy and pricing, whereby strategy accounted for 60% and pricing 40%. Based on the composite score, the panel unanimously recommended DRB-HICOM.

Azman said there was a fit and proper test of the new majority shareholder which includes promoting the sustainable development of the universal service obligations (USO), as well as the commitment to retain existing staff in their business plan.

“The commitment to fulfil the social obligations under the USO (as required under the Postal Services Act, 1991) is crucial as postal services have an impact on the rakyat, especially for those residing in remote or rural areas,” he said.

Khazanah's emphasis on strategy and business plans within the evaluation process does not in itself make any assumption of control or otherwise. The process required bidders having to state, in their own opinion, whether a general offer (GO) would be necessary or not.

Khazanah's executive director of investments, who was the project director for this strategic divestment, Mohammed Rashdan Mohd Yusof said it was the buyer's prerogative, and not of the seller, to determine whether a GO was necessary, as only the buyer can ascertain the extent of control they exert over Pos after they acquired the 32% stake.

“Furthermore, the divestment process did not reveal any information to the bidders beyond readily available market information” he said.

Azman concluded: “As a responsible seller to stakeholders including minorities and the rakyat, our emphasis was to ensure that the successful bidder had a robust business plan to both deliver their USO and unlock value and for them to discuss at the Pos board.

The divestment of Khazanah stake in POS was first announced in March 2010 by Prime Minister Datuk Seri Najib Razak at Invest Malaysia 2010 conference.

Since then, many prominent names were speculated to be the buyer of the stake. It was reported that besides DRB-HICOM, Nationwide Express Courier Services Bhd and Scomi Group Bhd were among the shortlisted bidders.

source:thestar

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Wall St Week Ahead: It's blue-chip growth, but not as we know it

NEW YORK: Large blue chips, including some consumer-oriented companies, will have to show they can counter sluggish developed economies by leveraging growth in emerging markets and TECHNOLOGY [] -- if Wall Street is to maintain earnings momentum next week,starting Monday, April 25.

Companies like Microsoft (MSFT.O), PepsiCo (PEP.N), and Coca-Cola (KO.N), unloved on Wall Street, could turn out to be good buys if they can show they justify higher valuations then investors are now willing to give them.

Investors will also want to see at least stable performance in developed markets as they gear up for a press conference by U.S. Federal Reserve Chairman Ben Bernanke next week. Tough questions will be asked about what monetary policy will look like after their easy money policies come to a close at the end of June.

"If you see these Cokes and Pepsis and these kinds of multinational consumer names post good results, I think it is going to give the perception that the equity market can overcome a lot of these domestic issues," said Nick Kalivas, an analyst at MF Global in Chicago.

Before the recession, consumer and financial sectors benefited from huge credit expansion. Not so any more.

Growth is now concentrated in industrial, materials and energy stocks that benefit from strong demand in emerging markets, as well as a technology sector boosted by robust demand from businesses.

Average earnings growth across those sectors amounts to almost 33 percent in the first quarter over a year ago, according to Thomson Reuters data. That is more than double the estimated growth for the S&P 500 and towers over the 5 percent growth in a financial sector burdened by a weak housing market.

WHEN LESS IS MORE

Growth is scarce and it is driving up valuations in sectors where it is concentrated.

During the week, investors chased a host of relatively expensive technology names like Apple (AAPL.O) and VMware (VMW.N). Some valuations look extreme: cloud computing company Saleforce.com (CRM.N) is priced at nearly 300 times current earnings.

The trailing price-to-earnings ratio in the S&P's materials sector is more than 20 times current earnings compared with 16.3 for the whole market, according to data from Thomson Reuters' StarMine.

For investors like Whitney Tilson, a hedge fund manager at T2 Partners in New York, that is creating opportunities in unloved blue chips where he is focusing his attention instead.

"There are a lot of big-cap blue-chip companies that are trading at moderate prices," he said.

"At a time when everyone is getting enamored with high- growth darlings and commodities, that is precisely the time when we look to play defense and own boring companies that we think have a lot of growth."

One of those less favored companies set to report next week is Microsoft. The company suffers from a reputation for slow growth and its price at nearly 11 times current earnings clearly reflects that.

Comparing Microsoft to Apple, Tilson says that the former is an inherently better business as it is focused on software with marginal incremental production costs compared to Apple's consumer hardware business.

Apple is "a fabulous business, but I'm simply pointing out that you can own a better business, albeit one that is not growing as quickly -- but still growing nicely -- for half the price in terms of price-to-earnings multiple," Tilson said.

EARNINGS BLITZ, TALKING FED

Next week, 180 of the S&P 500 companies are set to report earnings. Of the companies that have reported to date, 75 percent have beaten analysts' expectations. That is just above the average over the last four quarters but above the average of 62 percent since 1994, according to Thomson Reuters data.

"As people are lowering GDP (estimated) numbers seemingly weekly, the companies are still maintaining some pretty solid revenue growth and margins are staying intact," said Jerome Heppelmann, portfolio manager and chief investment officer of Old Mutual Focused Fund in Berwyn, Pennsylvania.

"I see it more as a broad-based continuation of the economic recovery," he said. "In some cases, the technology names are going to be more exposed and more levered to it."

While earnings are driving ahead at full force, investors will also focus on Wednesday on the first of the Federal Reserve's press conferences. The press briefing is scheduled for after the rate-setting Federal Open Market Committee wraps up its two-day meeting. Bernanke, the Fed chairman, intends to give four press briefings a year.

There will likely be questions raised about the type of monetary policy the Fed will pursue when its $600 billion bond-buying program, known as quantitative easing, or QE2 on Wall Street, draws to a close at the end of the June.

One school of thought says that QE2 drove the rally in stocks and commodities by underwriting the government's budget deficit and forcing money that would have gone into Treasury bonds into equity and commodity markets instead.

"What happens when QE2 ends and the government starts to withdraw some of that liquidity?" Tilson asked. "How much of this is just artificial, deficit-driven, money-printing stimulus? And how much of it is really genuine? I don't know the answer to that, but I worry." - Reuters

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Lasko 20" Cyclone Fan 3520

Nowadays likely a dry season and the environment temperature quite high until 34++ degree C. I am planning to purchase one cyclone fan and put in my house. After surf internet, I found this:

The Lasko 20" Cyclone Power Circulator Fan 3520 features aerodynamic fan blades and a special grill design to maximize its performance. This air circulator fan is a great addition to your air conditioning, or can be directed at you for immediate heat relief. Its adjustable fan head pivots 90 degrees and locks in place for precision and comfort. Ideal for large rooms, the easy to use top-mounted controls and easy-carry handle make this a great fan for any room in the house as well.

Product Specifications:

* Style: Floor
* Speeds: 3
* Dimensions: 23 1/2" W x 6 3/4" D x 23 3/16" H
* Weight: 10 lbs
* Color: White/Gray

Features and Benefits:

* Powerful 20" aerodynamic fan blades
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* Adjustable fan head pivots and locks in place for precision and comfort
* Lightweight with easy-carry handle for convenient portability
* Energy-efficient operation
* Patented fused safety plug
* Fully Assembled
* 1 year limited warranty

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Stocks to watch: DRB-Hicom, Pos Malaysia, Iris, KLK

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Stocks to watch: DRB-Hicom, Pos Malaysia, Iris, KLK PDF Print

Tags: DRB-Hicom Bhd | HPI Resources Bhd | IRIS Corp Bhd | Kuala Lumpur Kepong Bhd | Pos Malaysia Bhd | PPB Group Bhd | Ranhill Bhd
Written by Joseph Chin of theedgemalaysia.com
Saturday, 23 April 2011 11:10
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KUALA LUMPUR: Sentiment on Bursa Malaysia should see some improvement in the week ahead on Monday, April 25 following the fresh corporate newsflow.

However, worries about the impact of the continuing high oil price, inflationary pressures and weakening consumer demand could sap some of the enthusiasm. Oil and gas related counters and also infrastructure stocks could provide some support.

The FBM KLCI index closed 3.58 points down to 1,522.75 on Friday, weighed by losses including at Genting, IOI Corp and Genting PLANTATION []s.

At Bursa Malaysia, stocks which could see trading activity are DRB-HICOM BHD [], POS MALAYSIA BHD, Iris Corp Bhd and KUALA LUMPUR KEPONG BHD . Also in focus could be PPB GROUP BHD, HPI RESOURCES BHD and RANHILL BHD.

Khazanah Nasional Bhd has divested its strategic 32.21% stake in Pos Malaysia to DRB-Hicom Bhd at RM3.60 per share or RM622.79 million, deemed a landmark divestment by the government’s investment arm of its entire stake in a major government-linked company.

On Friday, Pos Malaysia’s share price closed two sen higher at RM3.37 with 595,000 shares done while DRB-Hicom fell two sen to RM2.30 with 2.32 million units transacted.

Pos Malaysia said based on the audited results for the financial year ended Dec 31, 2010, its audited consolidated net profit was RM67.11 million and audited consolidated net assets RM828.59 million.

Iris Corp has secured a US$149.96 million(RM451.61 million) contract from the government of Tanzania to supply 25 million identification cards based on the Smartcard TECHNOLOGY [].

Iris Corp said the contract was for five years, comprising 36 months for implementation and 24 months for maintenance and support. The scope of work and deliverables were 25 million smart cards which shall be used as the National ID cards of Tanzania

Kuala Lumpur Kepong Bhd said its unit KL-Kepong Industrial Holdings Sdn Bhd sold its remaining 40% stake in Barry Callebaut Malaysia Sdn Bhd to Luijckx BV for RM117.68 million cash.

HPI Resources’ net profit for the third quarter ended Feb 28, 2011 soared 121.5% to RM6.94 million from RM3.13 million a year earlier, driven by higher demand. Revenue for the quarter rose by 11.6% to RM105.43 million from RM94.46 million in 2010, while earnings per share was 12.43 sen.

HPI said the strong performance was primarily the result of both its paper milling and corrugated packaging divisions demonstrating double-digit expansion in revenues and operating profits.

Malaysian palm oil trader -- Pacific Inter-Link Sdn Bhd – has filed a suit against PPB Group Bhd’s 18.3% owned Wilmar International Ltd, seeking US$444 million in damages.

Wilmar said its unit Wilmar Trading Pte Ltd (WTPL), was served with a writ of summons on Thursday issued by the High Court of Malaya at Shah Alam.

Pacific Inter-Link had alleged defamation and unlawful interference with its economic interests and business with regard to WTPL's contracts of sale of palm oil products with other parties.

Ranhill Bhd’s unit Ranhill Power Sdn Bhd has received the Securities Commission’s approval to issue up to RM800 million of debt notes which will have a tenure up to 15 years.

The proceeds from the issue will be on-lent to Ranhill to finance in full the redemption of the US$220 million guaranteed notes issued by Ranhill (L) Ltd.

The funds would also be to finance the service reserve account requirement, the first guarantee fees payable and the expenses/ costs incurred in relation to the establishment of the Sukuk, and to on-lend to Ranhill to reimburse advances made by Ranhill to Ranhill Engineers and Constructors Sdn Bhd to complete the CONSTRUCTION of Senai-Desaru Expressway.

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Ranhill gets SC nod to issue up to RM800m sukuk

Ranhill daily chart

KUALA LUMPUR: RANHILL BHD’s unit has received the Securities Commission’s approval to issue up to RM800 million of debt notes which will have a tenure up to 15 years.

Rahnhill said on Friday, April 22 Ranhill Power Sdn Bhd secured the approval to issue the Sukuk Musharakah of up to RM800 million in nominal value which would be in two tranches.

Tranche 1 Sukuk of up to RM300 million will be guaranteed by Maybank Islamic Bhd and Tranche 2 Sukuk of up to RM500 million will be guaranteed by Danajamin Nasional Bhd.

Both tranches of the Sukuk have been assigned with rating of AAAIS(bg) and AAAIS(fg) respectively by Malaysian Rating Corporation Bhd.

“The proceeds from the issue will be on-lent to Ranhill to finance in full the redemption of the US$220 million guaranteed notes issued by Ranhill (L) Ltd,” it said.

It added the funds would also be to finance the service reserve account requirement, the first guarantee fees payable and the expenses/ costs incurred in relation to the establishment of the Sukuk, and to on-lend to Ranhill to reimburse advances made by Ranhill to Ranhill Engineers and Constructors Sdn Bhd to complete the CONSTRUCTION of Senai-Desaru Expressway.

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RHBInvest Research

TNB Holdings: Squeezed by rising coal price and consumption Underperform (down from MP)

• 2QFY11 Results/Briefing Note
• Although 2Q core net profit was down 12% qoq, TNB’s 1HFY11 results were within our and consensus expectations. However, persistently high coal prices (US$120/tonne in Mar and Apr) and higher coal usage going forward due to scheduled maintenance for three Petronas gas facilities will result in a weaker 2H.

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Maybank IB Views

RESULTS REVIEW
Tenaga Nasional RM6.03: Sell
Hot gas and coal sweat Shariah-compliant

"Oh my God" scenario. RM1,299m 1HFY11 core net income (-18.8% YoY) was 61% of our full-year forecast and 49% of consensus. 1H was very tough, but business conditions will be even more challenging in 2H due to higher coal prices, a shortage of natural gas supply and possibility of a tariff hike. Maintain Sell with a lower price target of RM5.40, based on 4.6x FY12 EV/EBITDA – a 20% discount to its long-term average to reflect the challenging operating environment.

Maintain Sell. RM179m 1Q11 net profit (-7% YoY, -2% QoQ) is in line, at 23.6% of our forecasts and 24% of consensus. We think BAT is pricey at 18x 2011 PER given its lackluster growth in earnings (2.5% 3-year forward net profit CAGR) and unattractive dividend yield (5%). Maintain Sell with a target price of RM42.50 based on DCF valuation. Our earnings forecasts are unchanged.

TH Plantations RM2.18: Buy
1Q11: Strengthening ASPs Shariah-compliant

Results within expectation. 1Q11 results accounted for 19% of our full-year net profit, in line with its seasonal trend of a slower 1Q. Our target price is marginally adjusted upwards by 2% to RM2.50 after tweaking our assumptions on mature areas and FFB yields. We maintain our Buy call on THP for its undemanding valuation of 9.6x 2011 PER, below its 2-year mean of 11x.

Technicals
The FBM KLCI fell 4.69 points to close at 1,526.33 yesterday. Its resistance areas of 1,526 and 1,541 will cap market gains, whilst the obvious support areas are located at 1,514 and 1,524. Due to the DJIA’s positive tone last night, we may see the FBM KLCI remain steady today.

Trading idea for today is a Buy call on GUANCHG.

Other Local News
JTI: Will consider paying special dividend this year. Chairman Datuk Seri Mohd Nadzmi Mohd Salleh said that JTI is exploring the possibility of investments but if it doesn't need the money, it will look into what are the best ways to give back in terms of dividends. This is in response to intense speculation that JTI may declare a special dividend this year to help out its Japanese parent. (Source: Business Times)

IPO: Quake delays IPO of world's largest syariah REIT. The listing of Malaysia's Axis Global Industrial real estate investment trust (REIT), has been pushed back by about a month after 2 of its Japanese assets were damaged by the March earthquake. The 2 assets have been removed from its initial asset composition and the size of the REIT has been slightly reduced. (Source: The Edge Daily)

Oil & Gas: Petronas signs unitization agreement with Malaysia-Thailand Joint Authority for the gas field straddling across Block PM 301 in the northeast coast of Peninsular Malaysia and Block A-18 in the Malaysia-Thailand Joint Development Area. The unitisation agreement gives Petronas rights to the reserves in the unitised area, which has an estimated ultimate recovery of 1.25t standard cubic feet of gas. (Source: The Edge)

Oil & Gas: RM7.2b helicopter deals inked. Weststar Aviation will provide 9 helicopters in a deal worth RM4.2b to Petronas Carigali Sdn Bhd, ExxonMobil Exploration and Production Malaysia Inc, Newfield (Malaysia) Incorporated, Petrofac (Malaysia-PM304) Ltd and Talisman (Malaysia) Ltd. MHS Aviation Bhd, meanwhile, sealed the remaining RM3b contract to provide 5 choppers to Petronas Carigali, ExxonMobil Exploration and Newfield. (Source: Business Times)

Transocean: BP sues for $40b over oil spill in Gulf of Mexico. BP Plc sued Transocean, seeking at least $40b (RM120.3b) in damages and other costs from the owner of the Deepwater Horizon rig. BP said on 20 April 2010, every single safety system and device and well control procedure on the Deepwater Horizon failed, resulting in the casualty. (Source: The Sun)

Jerneh Asia: Eyes Sabah developer. After hiving off its core insurance business in Malaysia, Jerneh Asia Bhd has now set its sights on acquiring Sabah based property developer Sagajuta (Sabah) Sdn Bhd, whose flagship project is the massive RM1.2b 1Borneo mixed development in Kota Kinabalu. (Source: The Edge Daily)

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PLUS dividend may come early

PETALING JAYA: PLUS Expressways Bhd is considering paying out dividends earlier than the norm and may announce this at its upcoming AGM, sources said.

According to the sources, the move is possibly aimed at pacifying investors who have had a relatively long wait for returns from the pending sale of the company's assets to the Employees Provident Fund (EPF) and Khazanah Nasional Bhd.

The amount paid for this year's dividends will be deducted from the final price that both EPF and Khazanah will pay PLUS for buying the latter's assets.

The RM23bil sale, which works out to RM4.60 per PLUS share, received shareholders' nod in February, about four months after it was announced.
A file photo shows a section of the North-South Expressway near Gopeng, Perak. PLUS generated cash from operating activities totalling RM2.24bil last year.

Proceeds from the sale would be paid to shareholders in early September, and PLUS, which operates the North-South Expressway, is likely to be de-listed by the end of the same month.

PLUS normally paid its interim dividends in the third quarter of every year and it was likely that this year's interim dividends would be paid out sooner as the company had the cash to do so, the sources said.

For the 12 months to Dec 31, 2010, the company generated cash from operating activities totalling RM2.24bil, with cash and cash equivalents balance stood at RM3.48bil.

PLUS has dividend yields of 4% to 6% and a 75% dividend payout ratio policy.

The deal to sell PLUS to EPF and Khazanah received overwhelming response from minority shareholders at an EGM in February.

PLUS' major shareholders, who are also the offerors in the deal UEM Group, its parent Khazanah, and EPF abstained from voting for the deal at the EGM.

EPF holds a 12.3% stake in PLUS while UEM Group, together with its parent Khazanah, has 55.4%.

The takeover of assets and liabilities of listed companies has been a particularly popular route used for privatisation proposals by major shareholders in the past six months.

Apart from PLUS, other companies which took this route include Sunway Holdings Bhd and Sunway City Bhd, Emivest Bhd, Leong Hup Holdings Bhd and Asia Pacific Land Bhd.

PLUS shares closed 1 sen lower yesterday at RM4.46. The company declined comment for this article.

source:thestar

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Stocks to watch: Jerneh Asia, Tenaga, BAT, Star, VisDynamics

KUALA LUMPUR: Stocks which could be in focus following fresh corporate developments on Friday, April 22 include JERNEH ASIA BHD, TENAGA NASIONAL BHD (TNB), British American Tobacco (Malaysia) Bhd, STAR PUBLICATIONS (M) BHD and VISDYNAMICS HOLDINGS BHD.

The Edge FinancialDaily reports that after hiving off its core insurance business in Malaysia, the cash-rich Jerneh Asia has now set its sights on acquiring Sabah-based property developer Sagajuta (Sabah) Sdn Bhd, whose flagship project is the massive 1Borneo mixed development in Kota Kinabalu.

TNB’s earnings fell 36.9% to RM630.30 million in the second quarter ended Feb 28, 2011 from RM1 billion a year ago as it was impacted by higher coal prices.

Forecasting a challenging year ahead, TNB said its revenue was a marginal 1.5% higher at RM7.503 billion from RM7.389 billion a year ago.

Its earnings per share were 14.2 sen compared with 23.05 sen while it declared a lower dividend of 4.5 sen per share.

British American Tobacco’s net profit for the first quarter ended March 31, 2011 fell 6.95% to RM178.56 million from RM191.89 million a year earlier, on the back of lower volumes and a decline in profit from operations.

Revenue for the quarter declined to RM992.15 million from RM1.02 billion in 2010. Earnings per share was 62.50 sen while net assets per share was RM1.72. BAT declared a first interim dividend of 60 sen per share, tax exempt under the single-tier tax system amounting to RM171.32 million for the financial year ending Dec 31, 2011.

RAM Rating Services Bhd is cautious about Star Publications’ new new investments may pose new risks to the group.

The ratings agency said in the near term, the group “may invest some RM60 million in new media assets”, that is television channels, radio stations, online media and event organising.

“The group is expected to incur losses from some of these investments during their respective gestation periods given that they are fairly new businesses.

“In addition, Star lacks experience in the TV segment, which is viewed to be more competitive than its mainstay newspaper business,” it said.

Shares of VisDynamics fell sharply on Thursday despite its chairman’s positive view of a strong and satisfactory financial performance in 2011.

Chairman Datuk Azzat Kamaludin said the semiconductor equipment solution provider is poised to ride on the momentum of growth that the semiconductor industry is expected to sustain this year after recording the strongest rebound in 2010 following the worst ever year of 2009.

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Tenaga 2Q earnings dn 37% to RM630m, sees challenging year

Tenaga Daily Chart

KUALA LUMPUR: TENAGA NASIONAL BHD’s (TNB) earnings fell 36.9% to RM630.30 million in the second quarter ended Feb 28, 2011 from RM1 billion a year ago as it was impacted by higher coal prices.

Forecasting the current financial to be challenging, TNB said on Thursday, April 21 that its revenue was a marginal 1.5% higher at RM7.503 billion from RM7.389 billion a year ago.

Its earnings per share were 14.2 sen compared with 23.05 sen while it declared a lower dividend of 4.5 sen per share.

The power giant said the improvement was mainly from sales of electricity in Peninsular Malaysia and Sabah Electricity Sdn Bhd (SESB) which recorded an increase of 2.4% and 5.2% respectively.

The units also registered a growth of 2.0% in the peninsula and 4.7% in SESB on-year.

“There was a significant decrease in earnings of 36.9% contributed by higher generation costs from utilisation of coal where the average contracted coal price consumed was US$103.8 per tonne as compared to US$80.7 per tonne a year ago.

“Operationally, it said that TNB is now facing a very challenging period with the rising coal prices, insufficient gas supply and comparatively more expensive alternative fuels,” it said.

TNB said coal prices had surpassed US$120 per tonne and the price was expected to increase further due to the current global situation.

It said the higher costs were inevitable due to the deferment of the fuel cost pass-through mechanism.

“Given the foregoing scenario, the board of directors expects the group’s prospects for the year ending Aug 31, 2011 to be very challenging and that the financial results for the full finance year to e lower compared to the previous year,” it said.

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Maybank IB Views

SECTOR UPDATE
Rubber Gloves: Neutral
Long-term value in nitrile

Keeping a cool head. Aggressive expansion plans at the nitrile segment could lead to ASP weakness in the short term before demand from emerging markets catches up. However, the long-term prospects for nitrile remain promising as the pricing disparity favoring nitrile gloves will remain for the longer term. No changes are made to our forecasts, ratings and DCF-derived TPs for Hartalega (Buy, TP RM6.80), Kossan (Buy, TP RM3.60) and Top Glove (Hold, TP RM5.10). Hartalega remains our top pick in the sector.

COMMENTS ON NEWS
Sunway REIT RM1.07: Buy
Foreign bidder tried to nullify acquisition

Summons filed by foreign bidder. SunREIT has received a summons from two individuals to nullify its purchase of the RM514m Putra Place (PP). However, SunREIT management is confident of taking over PP and announced yesterday the completion of the PP acquisition. There is no change to our earnings forecasts as we have not factored PP into our estimates. Our DCF-based target price is maintained at RM1.15.

COMPANY UPDATE
Malaysia Airports Holdings RM6.15: Buy
Holding steady

Momentum remains strong. MAHB's Feb 2011 traffic statistics reveal a steady 9.7% YoY passenger growth (2M 2011: +11.5% YoY). This is above the region and world's averages, and also above its own 2011 guidance of 8%. Cargo volumes shrunk marginally by 3.2% YoY due to the seasonal impact of Chinese New Year. Maintain Buy; no change to our earnings forecasts and RM7.12/share DCF-based target price.

ECONOMICS
CPI, Mar 2011
In line with expectations...

Inflation rate in Mar '11 rose by +3.0% YoY (Feb '11: +2.9% YoY; Maybank-IB: +3.0% YoY; Consensus: +3.1% YoY). It increased MoM for the 11th straight month by 0.1%. Core inflation rate - measured as CPI excluding the prices of Food & Non-Alcoholic Beverages and Transport - gained by +1.6% YoY (Feb '11: +1.5% YoY). YTD, inflation rate was 2.8% in 1Q 2011 vs 2.0% in 4Q10 and 1.3% in 1Q10. Our inflation forecasts for this year and next year are +3.0% and +2.9% respectively.

RESULTS REVIEW
Nestle (Malaysia) RM48: Hold
Strong start, as usual Shariah-compliant

Strong 1Q not a suprise. Nestle recorded a strong RM152.7m net profit (+10% YoY) which makes up 35% of our and consensus full-year forecast. This is not unusual for Nestle with 1Q being a seasonally stronger quarter. We are maintaining our forecasts and DCF-based target price of RM45.

Technicals
The FBM KLCI rose 9.49 points to close at 1,531.02 yesterday. Its resistance areas of 1,541 and 1,565 will cap market gains, whilst the obvious support areas are located at 1,514 and 1,531.

Trading idea for today is a Buy call on COASTAL.

Other Local News
Sime Darby: Insider trading probe. The Securities Commission (SC) is carrying out insider trading investigations surrounding the mega-merger that created Synergy Drive, the group that's now known as Sime Darby Bhd. The capital market watchdog had called in some people for questioning and the probe appears to be looking at information that may have been leaked out before the first announcement on November 27, 2006. (Source: Business Times)

IGB: Work on Mid Valley City Phase 3 to begin. IGB Bhd will commence the building of Mid Valley City's third phase in the next few months, while two other development projects are also set to take off. Phase 3 is planned as a commercial development with an office and a retail building with estimated gross built-up area of more than 1m sq ft. (Source: The Edge Financial Daily)

Telco: Spore, Msia mobile roaming rates down from May 1. Singapore and Malaysia mobile phone subscribers will see price reduction of up to 30% for voice calls and 50% for SMS and mobile roaming services from all mobile operators in the two countries from May 1. (Source: The Edge Financial Daily)

Autos: Toyota market share drops, rivals maintain. Toyota passenger car market share in Malaysia fell in the 1Q11 while Honda managed to maintain its market share and the Nissan grew its share by about 1ppt. (Source: The Star)

Islamic Banking: Khazanah sounds out Bank Islam on Muamalat stake. Khazanah Nasional Bhd plans to sell its 30% stake in Bank Muamalat Malaysia Bhd, a move which could pave way for a merger between the Islamic lender and its bigger rival Bank Islam Malaysia Bhd. (Source: Business Times)

Banking: Zeti reappointed as Bank Negara governor. Bank Negara's governor Tan Sri Dr Zeti Akhtar Aziz has been reappointed for a five-year term, effective May 1. (Source: The Star)

Construction: E-tender system to take off soon. Construction Industry Development Board (CIDB) is making preparations to implement National e-Tendering Initiative (NeTi) that will be the platform to process online job tenders under the Works Ministry. (Source: The Star)

Property: Inflation and demand to lift property prices. Malaysian property prices are expected to increase at an average of between 10% and 20% this year, in light of rising inflation and increase in demand for local properties by foreigners. (Source: The Star)

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RHBInvest Research

TRC:

News Update
Lands RM43.8m public housing job in Putrajaya
Maintain Outperform. Fair value is RM1.94.


CI Holdings:

1QFY11 Results
9MFY06/11 earnings in line with estimates
Our fair value remains unchanged at RM3.88 .We are keeping our Market Perform call on the stock for now, pending clarification by management on the flattish topline growth at the analysts briefing later today.

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BMW sees higher growth for premium segment

KUALA LUMPUR: BMW Group Malaysia expects the BMW brand to exceed the projected growth rate for the premium automotive segment in Malaysia this year.

Managing director Geoffrey Briscoe said based on the 2011 first-quarter results, the company had already surpassed the sales achieved in the same period last year by over 20% with 1,305 vehicles sold to date.

“I am confident, especially with the introduction of new models, we will once again achieve a record number of vehicle this year,” he said in a statement.

Meanwhile, based on Frost & Sullivan’s projections for this year, vehicle sales are expected to continue to increase, with the premium automotive segment, in particular, likely to rise by 5%. – Bernama

Briscoe said last year was another record year in terms of growth for BMW as it saw accelerated recovery from the global economic downturn across the globe and especially in Malaysia.

Last year, it managed record numbers, with a grand total of 4,509 vehicle sales in the country, comprising 4,006 BMWs, 222 Minis and 281 Motorrads.

– Bernama

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RHBInvest Research

Top Story: Education

Sector Update

SEGi: Initiate with a fair value of RM4.54 Outperform (New Coverage)

Help: Initiate with a fair value of RM2.87 Outperform (New Coverage)
Well poised for growth

Sector Call

Motor :
Sector Update
Unsustainable bounce
The spike in March sales is unlikely to be sustainable. No change to our Neutral sector stance.

Read more...

Maybank IB Views

ECONOMICS
Economic Transformation Programme (ETP)
Update #5...

12 more projects, initiatives and enablers with RM11.16b investment commitments under eight Entry Point Projects (EPPs) in seven National Key Economic Areas (NKEAs). They are to generate RM16.62b in gross national income (GNI) and 74,457 new jobs. The biggest project in this round of announcement is the Karambunai Integrated Resort City (KIRC) under Tourism NKEA with investment value of RM9.6b (86% of total) generating RM9.319b GNI (56% of total) and 11,002 jobs (14.8% of total) by 2020. To date, 41.2% of EPPs, 13.4% of the total EPP investments, 14.3% of the targeted incremental GNI and 9.1% of expected new jobs creations have been confirmed.

RESULTS REVIEW
Bursa Malaysia RM7.93: Sell
Boosted by robust market

Above house forecast. RM40.5m 1Q11 net profit (+44% YoY, +36% QoQ) made up 30% of our full year forecast, and 26% of consensus. No change to our earnings forecasts, expecting market activities to taper off in 2Q11. Maintain Sell; the stock remains overvalued trading on 31x current year earnings, significantly above its larger sized peers and recent M&A valuations. Our target price is based on sum-of-parts, with 25x PER target on 2011 earnings plus surplus cash.

SECTOR UPDATE
Automotive: Neutral
Marvelous March; anxiety ahead

From content to concern. Mar 2011 auto sales was abnormally strong, a one-off event, in our view. Looking ahead, Malaysia's car production is expected to soften in the months ahead, affected by the supply chain disruption in Japan. The auto sector remains a Neutral. The longer term operating landscape lacks catalyst and remains close-ended, deterring foreign automakers from making Malaysia a regional hub. Stock-wise, share price is expected to trade sideways. MBM and Tan Chong remains a Buy while Proton and UMW are Holds.

Technicals
The FBM KLCI declined 6.39 points to close at 1,521.53 yesterday. Its resistance areas of 1,521 and 1,540 will cap market gains, whilst the weaker support areas are located at 1,500 and 1,514.
Trading idea for today is a Buy call on SBCCORP.

Other Local News
MAHB: North Korea's Air Koryo makes maiden landing at KLIA. North Korea national airline Air Koryo made its maiden landing at KL International Airport (KLIA) on Monday and will start a twice-weekly service to Kuala Lumpur from Pyongyang on April 18. (Source: The Star)

BAT: Expects to double exports this year. British American Tobacco (Malaysia) Bhd (BAT) expects to double exports this year, a move that will give it a small revenue boost amid tougher sales at home. It may also sell some machinery it no longer needs, valued at between RM18m and RM20m. (Source: Business times)

Berjaya: Confirms Kim Eng approach. Berjaya Corp Bhd confirmed that Kim Eng Holdings Ltd has approached it about the possibility of buying all of Inter-Pacific Securities Sdn Bhd. (Source: Bursa Malaysia)

Smartag: Gets role in Customs project. Smartag Solutions Bhd said it was named to be part of a government project to provide security and trade facilitation system for the Royal Malaysian Customs at its checkpoints throughout the country. (Source: Business times)

E&U: SEB to buy 30% of Bakun Dam for RM1.3b? Sarawak Energy Bhd (SEB), the state utility company, is believed to have proposed to acquire a 30% stake in the Bakun Hydroelectric Power project for RM1.3b cash. SEB is valuing Bakun Dam project at RM6b which is below the RM8b expected by Sarawak Hidro Sdn Bhd. (Source: The Star)

O&G: Petronas exits Cairn India. Petroliam Nasional Bhd (Petronas) has sold its entire 14.9% in Cairn India Ltd for USD2.1b (RM6.4b). (Source: Business times)

Steel: Starshine plans to list on Ace Market by Q3. Steel products player Starshine Holdings Bhd (SHB) is planning a listing on Bursa Malaysia's Ace Market by the third quarter of the year. It will invest RM32m in a new plant in Klang and new machinery to broaden its product offering. (Source: The Star)

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RHBInvest Research

SP Setia:

Company Update

• More strategic landbank to come
• We maintain our Outperform call on SP Setia. Our fair value is adjusted to RM4.88.

Public Bank:

• 1QFY11 Results
• Starting off strongly
• No change to forecasts. Fair value of RM15.40 and Outperform call maintained.

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Maybank IB Views

RESULTS REVIEW
Public Bank RM13.06: Hold
Slight forex impact on loans

No surprises. 1Q11 results accounted for 25% of our full-year forecast and consensus. Fundamentals remain very much intact with healthy loan growth, improving asset quality and robust ROEs. We nevertheless maintain our view that consumer demand is likely to taper off in 2H11 on the back of measures instituted recently coupled with inflationary pressure. To this end, we see little catalyst in the near term, while Public Bank's pricing is fair in our view (prospective 2011 P/BV of 3x, ROE: 23.9%). We maintain our Hold call with an unchanged DDM-derived TP of RM14.10 (payout ratio: 52%, cost of equity: 10.6%, terminal growth rate: 5%).

CapitaMalls Malaysia Trust RM1.12: Buy
On track; completed Gurney Plaza Extension acquisition

Maintain Buy. CMMT's RM25.8m 3M11 realised net profit (+13% QoQ) came in within expectations. CMMT has completed the RM215m Gurney Plaza Extension (GPE) acquisition which has further strengthened its position in the local retail industry. We raise our earnings forecasts by 10-13% to factor in GPE and the 144.9m new unit placement (RM1.06 issue price). Our DDM-based target price is raised to RM1.27 (+7 sen).

COMPANY UPDATE
Malaysia Marine and Heavy Engineering Holdings RM6.88: Hold
IM 2011: Pasir Gudang yard site visit Shariah-compliant

Better days ahead but prospects largely priced in. We are encouraged by the brisk activity at MMHE's Pasir Gudang yard in southern Johor. We expect job replenishment momentum to kick-off earnestly from May and foresee MMHE clinching RM4-5b new jobs over the next 12 months. These positives could momentarily stretch share price performance beyond the 26x 2012 PER of the sector's historical peak, above our fundamental TP of RM6.50 (22x EPS).

Technicals
The FBM KLCI advanced 5.98 points to close at 1,527.92 yesterday. Its resistance areas of 1,527 and 1,549 will cap market gains, whilst the weaker support areas are located at 1,517 and 1,525. The FBM KLCI has stalled at its new all-time and major high of 1,576.95 on 6 January 2011. The next key low sighted was at 1,474.38 (28 February 2011) and the next swing high was seen at 1,565.04 (4 April 2011).

Trading idea for today is a technical sell call on IOICORP.

Other Local News
Maybank: Gets approval to raise USD2b, Bio-Xcell gets funding from Maybank. Malayan Banking Berhad (Maybank) has obtained approval from the Securities Commission (SC) to establish a multi currency medium-term notes (MTN) programme of up to USD2b. Separately, Maybank and Malaysian Bio-Xcell Sdn Bhd (Bio-XCell) has signed an agreement for a RM250m Commodity Murabahah Term Financing - Islamic Facility (CMTF-i). (Source: Bursa Malaysia, The Star)

Axiata: Celcom signs fiberisation deal with Sacofa. Celcom Axiata Bhd signed a RM168m fiberisation leasing agreement with Sarawak-based Sacofa Sdn Bhd. With the completion of this project, Sarawakians will be able to enjoy enhanced services such as high-definition voice and video plus high-speed browsing with Celcom. (Source: The Star)

Affin: To convert Indonesia's Bank Ina into Islamic lender. Indonesia's conventional bank PT Bank Ina Perdana, which is being acquired by Affin Holdings Bhd will be converted into an Islamic bank - a process that will likely take two years. (Source: Business Times)

Construction: CMC, UK partner may win RM700m LRT job. CMC Engineering Sdn Bhd and UK's Colas (CMC-Colas) may win a contract worth some RM700m for electro-mechanical (E&M) system for the Kelana Jaya light rail transit (LRT) extension line. Tenders closed recently and Prasarana may award the contract by early May. (Source: Business Times)

Autos: Vehicle sales up 12.7% in March. Total vehicle sales surged 12.7% to 63,265 units in March 2011 from 56,139 units a year earlier due to a rush for deliveries and invoicing by companies that have their financial year ending in March. (Source: The Star)

Mining: Indonesian tin miner to list on Bursa Malaysia. Malaysia Smelting Corp Bhd (MSC) is proposing to list its Indonesian unit, involved in tin mining, on Bursa Malaysia's Ace Market. (Source: The Star)
Outside Malaysia

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RHBInvest Research

Top Story: Shifting Trends

• Market Update
• BN’s win means that the Government will most likely continue its agenda for development of Sarawak under the SCORE economic corridor.
• BN’s win in Sarawak will likely be viewed positively by the market, which will also raise speculation about the timing of the next general election. . Our long-term positive view on the equity market is unchanged and we reiterate our year-end FBM KLCI target of 1,700.

Corporate Highlights

Axiata:

• Visit Note
• Growth to moderate
• We still like Axiata, which offers growth prospects albeit moderating this year. Maintain our SOP fair value of RM5.75, but upgrade to Outperform due to recent share price weakness.

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Stocks to watchSarawak counters, Proton, Press Metal, Masteel, KUB

KUALA LUMPUR: Investors’ sentiment in the week ahead, starting Monday, April 18 would partly hinge on the outcome of the Sarawak state elections due late Saturday, April 16.

Sarawak-based companies had run up ahead of the dissolution of the state assembly in late March before easing off.Since then, market sentiment had been generallyl cautious on political concerns about the Sarawak polls, which are the most hotly contested in recent years.

Meanwhile, Bernama reported that as at midday on Saturday, a total of 233,134 voters or 21.72% of the electorate in Sarawak have voted in the state polls, according the Election Commission. There were no untoward incidents.

At Bursa, over the past week, the 30-stock FBM KLCI had lost 22.06 points or 1.42% to end at 1,521.94 while RM14.83 billion had been erased from the market capitalisation, which mirrored the declines also in key regional markets. External concerns include the European debt crisis, sustained high oil prices and worries about the Japan's ability to recover from the earthquake which impacted its manufacturing sector.

Among the stocks which would be in focus include CAHYA MATA SARAWAK BHD (CMSB), NAIM HOLDINGS BHD, TA ANN HOLDINGS BHD, ZECON BHD [], ENCORP BHD and HOCK SENG LEE BHD (HSL).

Stocks with recent corporate developments are PROTON HOLDINGS BHD, PRESS METAL BHD, KUB MALAYSIA BHD and Malaysia Steel Works (KL) Bhd.

The Edge weekly reports that FUTUTECH BHD, which was a loss-making, former associate company of Eastern & Oriental Bhd, was poised to transform itself into a CONSTRUCTION [] firm. It had been awarded RM332.4 million worth of design, road and construction works by E&O Property Development Sdn Bhd.

Proton’s unit Lotus Cars Ltd secured £270m million (RM1.33 billion) in loans from six financial institutions over a six-year period to turn around the loss-making company.

Proton group managing director Datuk Seri Syed Zainal Abidin Syed Mohamed Tahir said he expected Lotus to break even by 2014.

Press Metal proposed a rights issue to raise between RM316.7 million and RM323.7 million to finance the Samalaju aluminium smelting project in Sarawak.

The rights issue involved RM323.73 million nominal value of redeemable convertible secured loan stocks (RCSLS) at 100% of its nominal value with up to 147.15 million warrants.

Johor Menteri Besar Datuk Abdul Ghani Othman has approved the proposed RM1.23 billion intra-city commuter train service in Iskandar Malaysia which would involve a100km rail network.

The project would be undertaken by Metropolitan Commuter Network Sdn Bhd - a joint venture between KUB Malaysia Bhd and Malaysia Steel Works (KL) Bhd.

SUCCESS TRANSFORMER CORP BHD has proposed to distribute 100 treasury shares for every 4,000 shares of 50 sen held for the financial year ending Dec 31, 2011. It also announced a tax exempt interim dividend of 2pct for FY ending 2011.

FAR EAST HOLDINGS BHD is recommending a final single tier dividend of 20 sen for the financial year ended Dec 31, 2010.

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South Beach acquisition to boost IOI’s reputation

NEWS that IOI Corp Bhd was acquiring a 49.9% stake in Singapore's South Beach project didn't come as a surprise to the market, particularly since the group had previously mentioned its intentions to further expand into Singapore's property market.

This acquisition will add to IOI Corp's property portfolio in Singapore which now includes its joint venture with Singapore's Ho Bee Group for two condominium developments in Sentosa Cove and the development of a condo project in Balestier Road.

Most analysts are generally neutral on this move, more so from the earnings perspective. They, however, see synergies for IOI Corp to further entrench its reputation as a sound property developer in Singapore.

Analysts see IOI Corp gaining valuable experience through its joint venture with its other 51.1% shareholder, City Developments Ltd, which is a reputable property developer in Singapore.

The deal

Over the week, IOI Corp announced that it has acquired a 49.9% interest in the South Beach project in Singapore through a restructuring exercise. The 51.1% shareholder of South Beach is City Developments.

IOI Corp had bought a 33.3% stake in the project from Elad Group Singapore Pte Ltd for S$173.8mil (RM417mil).

Subsequently, IOI Corp had injected the 33.3% stake into Scottsdale Properties Pte Ltd. Scottsdale Properties now wholly owns South Beach.

IOI Corp then paid S$115mil (RM276mil) for a 49.9% stake in Scottsdale and will advance S$28mil in the form of a shareholder's loan.

IOI Corp paid around S$316.3mil (RM759.1mil) for the stake (including Elad Group's 33.33% stake in South Beach Consortium) and expects to contribute further equity of around S$500mil in Scottsdale.

“IOI and City Developments may be required to further contribute equity of S$500mil each to redeem existing mezzanine notes of the project, working capital and part-finance the construction of South Beach,” says AmResearch analyst Gan Huey Ling.

The group indicated that in total, it will invest up to S$816.8mil (RM1.96bil) in the project. In total, analysts estimate that IOI paid S$317mil (RM761mil) for a 49.9% stake in the South Beach project.

The group's net gearing stood at 11.2% as at end Dec 2010. Net debt was RM1.28bil while its cash position was RM3.6bil.

While AmResearch's Gan is neutral over IOI's investment in South Beach, she says that risk of the project is mitigated by the group's partner, which has an established track record in the property development sector in Singapore.

“The good location of the project should encourage demand. South Beach is located between Raffles Hotel and Suntec City and next to the mass rapid transit station,” says Gan.

She points out that based on an operating margin of 20% and assuming that the project's total earnings is recognised over six years, the project could increase IOI's bottomline by 3%-5%. Gan continues to like IOI for its low-cost plantation operations.

Iconic development

“We also believe that there is potential for the group to restructure. A listing of the manufacturing or property division would transform the group into a pure plantation company,” she adds.

CIMB Research analyst Ivy Ng says that the acquisition represents an opportunity for IOI Corp to be involved in an iconic development in downtown Singapore with sizeable office, hotel, residential and retail components.

“The substantial size and location of the development, which is in close proximity to landmarks such as the Suntec City Convention Centre and Raffles Hotel, will make this development one of the most popular and prominent mixed-use developments in downtown Singapore,” says Ng.

Ng says IOI Corp will gain in stature as a player in the Singapore property market and could see earnings enhancement given the relatively attractive acquisition cost. This is however partially offset by concerns over the group's increasing exposure to the property sector, which may dilute the price earnings rating accorded to the group.

Despite the strategic location and the fact that South Beach is likely the last major iconic site in the Civic District, Hong Leong Research remains neutral on the latest development, given the huge investment cost involved.

“The Singaporean government's measure to cool its property sector may in turn affect demand and hence the pricing of this development,” it added.

Subdued view

Other analysts are somewhat concerned over the subdued view of the Singapore property market and the group's mixed track record in Singapore property investment.

Meanwhile, the S$173.8mil price tag for the 33.33% stake in South Beach Consortium is attractive as it represents a 23.5% discount to South Beach Consortium's net asset value of S$681.8mil as at 31 Dec 2010.

“Although the price is 12% higher than what CityDev paid for a similar 33.3% stake bought from another party, we believe that the acquisition price is fair,” says Ng.

According to management, its effective land cost for this project is quite close to the initial bid price of S$1,069psf for potential gross floor area in 2007 due to the accumulated interests on the loan.

Hong Leong Research also believes that IOI would not have issue funding the acquisition, given its healthy balance sheet.

The South Beach project is a mixed use development on Singapore's Beach Road. The land is strategically located between Raffles Hotel and Suntec City and is next to the Esplanade MRT station. The total land area is 376,295 sq ft and has a leasehold tenure of 99 years.

Based on reports, the South Beach development will have 171 apartments, 560 hotel rooms, 632,164 sq ft of office space and 158,014 sq ft of retail space.

In Singapore, City Development has an impressive track record, having built more than 22,000 luxurious and quality homes. As one of the biggest landlords in Singapore, it owns over 6mil sq ft of lettable office, industrial, retail and residential space.

It also boasts one of the largest landbanks among property developers, with over 3.5mil sq ft that has the potential of being developed into over 7mil sq. ft of gross floor area.

source:thestar

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YTL Corp biggest gainer in early trade

YTL daily chart

PETALING JAYA: Conglomerate YTL Corp Bhd was the biggest gainer of the day in Friday's early trade, its shares rising 22 sen to RM7.68 at 10am, on news that it had RM12bil in cash solely for acquisition purposes.

Following the company's EGM yesterday, managing director Tan Sri Francis Yeoh Sock Ping said YTL Corp was eyeing “sizeable acquisitions” in infrastructure-related businesses, namely in the water, electricity and transportation industries.
At the YTL Corp EGM press conference, Tan Sri Francis Yeoh.

He also said YTL Corp is expecting as much as RM1bil in dividends from its subsidiaries for its current financial year ending June 30, 2011.

source:thestar

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RHBInvest Research

Top Story: DRB Hicom

• New Coverage
• Slumbering Giant
• DRB has solid financials with significant balance sheet capacity to fund new businesses.
• We initiate coverage on DRB with an Outperform recommendation.
• Our sum-of-parts derived valuation of its various businesses amounts to RM4.20/share. After ascribing a 25% holding company discount, we arrive at our fair value for the stock of RM3.15/share.

Corporate Highlights
Lafarge:

• Visit Note
• Increase in domestic sales to drive earnings growth in 2011
• Rising cost of production remains a key concern. Nevertheless, we believe Lafarge will be able to pass on the higher costs given that domestic cement demand is expected to be robust.
• No changes to our earnings forecasts. Indicative fair value is RM7.87

SP Setia: Outperform

• News update
• Making its foray to Singapore
• Our fair value is raised to RM7.20, Maintain Outperform.

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Maybank IB Views

COMPANY UPDATE
RHB Capital RM8.62: Buy
Robust loan growth targets

Valuations still justify a BUY. RHB Capital continues to offer value in terms of valuations, with the stock trading at a prospective 2012 PER of just 10.3x or a 16% discount to the average for the other four large banks of 12.3x. On a P/BV basis, it trades at a prospective 2011 P/BV of 1.64x versus a peer average of 2.3x and 1.7x for AMMB Holdings (Hold, TP:RM6.80), despite a higher prospective ROE of 15.1% vs 13.1% for AMMB. Our RM9.50 target price is maintained.

COMMENTS ON NEWS
S P Setia RM6.50: Buy
First foray into the "lion city" carries an important role Shariah-compliant

Maintain Buy. We are positive on SPSB's latest acquisition of Leong Bee Court in Singapore given its strategic location and fair pricing. Despite minimal impact to earnings and RNAV, this project is important as it will strengthen SPSB's brandname in Singapore and showcase its development capabities and this in turn, will boost demand for SPSB's properties in Malaysia by Singaporeans. We fine-tune our FY11-13 forecasts for the acquisition and raise RNAV by 1 sen. Our new TP is RM7.13 (10% premium to RM6.48 RNAV; ex-bonus TP is RM4.75).

Technicals
The FBM KLCI gave up Wednesday’s rebound gains as it lost 9.79 points to close at 1,525.80 yesterday. Its resistance areas of 1,525 and 1,550 will cap market gains, whilst the weaker support areas are located at 1,500 and 1,517.

Trading Idea for today is a Take profit call on CMSB.

Other Local News
KL Kepong: Is world's No. 1 nitrile latex supplier. Kuala Lumpur Kepong Bhd (KLK) is now the world's biggest synthetic latex producer, via its 19% British unit Yule Catto & Co plc. The business is also growing and it plans to build another plant at a yet-to-be decided location in Asia. (Source: The Star)

MAS: Eyes 15% fall in costs from fleet renewal. Malaysia Airlines (MAS) expects its costs to fall by 15% by 2015 from its fleet renewal programme that reduces fuel usage and maintenance cost. (Source: Bernama.com)

SEGi: In nurse training deal with S. Korea varsity. SEG International Bhd is partnering South Korea's Chung Cheong University to set up a nursing faculty at its Kota Damansara campus in Selangor. The academic collaboration is expected to contribute an increase in FY11 earnings of approximately 4% to the Group. (Source: Bursa Malaysia)

YTL: On the M&A trail. YTL Corp is looking for sizeable merger and acquisition (M&A) opportunities as highly geared companies may soon find themselves in hot water as the economic recovery brings inflationary pressures. (Source: The Edge Financial Daily)

Transportation: Final project on railway project to be ready. The East Coast Economic Region Development Council (ECERDC) is in the process of completing its final report on the proposed east coast railway project linking Kuala Lumpur-Tumpat, a distance of 550km. The route includes five districts- Bentong, Bera, Temerloh, Maran and Kuantan. (Source: The Edge Financial Daily)

Plantation: Boilermech expects revenue to jump by a fifth. Boilermech Holdings Bhd, soon to be listed on the ACE Market boiler maker for biomass power plants, expects profit after tax and revenue to rise by as much as a fifth this year, driven by existing contracts. (Source: The Star)

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Eeastern and Oriental Berhad aims to begin reclamation work for RM12bil Penang project

E&O daily chart

PETALING JAYA: Eastern & Oriental Bhd (E&O) is targeting to commence reclamation work next year for 740 acres of land in Tanjong Tokong in the north-east coast of Penang for its RM12bil Seri Tanjung Pinang phase two (STP2) development.

Executive director Eric Chan said the group's subsidiary, Tanjung Pinang Development Sdn Bhd, had received the approval in principle for the masterplan of STP2 from the Jabatan Perancangan Bandar dan Desa Pulau Pinang via a letter dated April 11.

“It should take two years from the start of the land reclamation before the first project launch can be embarked upon.

“Phase two will be a mixed integrated development comprising two islands of approximately 740 acres in size. At three times the size of phase one, phase two is expected to generate RM12bil in gross development value,” Chan told StarBiz.
Aerial view of Seri Tanjung Pinang phase one, showing Straits Quay festive retail mall.The upcoming Quayside Seafront Condominiums is superimposed on this actual site photo.

As in phase one, he said residential property would be the key component in STP2, besides commercial and public spaces.

“In totality, Seri Tanjung Pinang phases one and two will embrace a range of residential, commercial, recreational and leisure properties within an integrated masterplanned development.

“We expect this iconic development to ultimately redefine Penang island on the world map as a vibrant new seafront resort destination to reside, holiday, work and invest,” he added.

Chan said STP2 would take the E&O brand to the next level and support the group's aspiration to extend the brand regionally and globally.

“The development will also be a symbol of pride and progress, gaining worldwide publicity and prestige; and attract capital inflows and investment, employment and business opportunities, especially for Penang's tourism. It will complement other major projects to turn the state into a world class city and an international property destination,” he added.

In 1992, TPD was granted the exclusive right to reclaim and develop approximately 980 acres of land in Tanjong Tokong.

It has to date reclaimed and is continuing to develop phase one of the project comprising about 240 acres of land.

The total GDV for phase one of Seri Tanjung Pinang is approximately RM4bil.

The E&O group, through TPD, had sought the state's approval to reclaim the balance concession area of about 740 acres.

In a filing with Bursa Malaysia on Tuesday, E&O said while the in-principle approval was a vital step towards being able to reclaim the balance concession area, there were other steps still to be undertaken and approvals to be obtained before reclamation works could actually commence.

It said while it was too early to outline the detailed effects of the approval in respect of the masterplan or its implementation timetable, “the board of directors of E&O is of the view that in the longer term, the group will derive substantial benefits with a successful implementation of the in-principle approval.”

On the progress of Seri Tanjung Pinang phase one, Chan said more than 600 landed residential units and 217 serviced suites had already been completed and sold to date. There will also be seven condominium towers.

The landed properties include the Ariza range of courtyard and seafronting terraced houses, Avalon and Acacia semi-detached homes, and the Martinique, Skye and Abrezza villas by-the-sea.

Last February, the first tower of the 21-acre Quayside Seafront Resort Condominiums was launched and another two towers were launched in the last 12 months. The overall take-up of the launched condominiums is about 75%.

Meanwhile, the commercial area includes the Straits Quay festive seafront mall which has 270,000 sq ft of net lettable area; a 7-acre parcel of TESCO hypermarket development and a few other smaller plots.

Chan said since its soft opening last November, the Straits Quay mall had recorded a tenancy occupancy of close to 60%, comprising a myriad of marina-fronting food and beverage outlets, fashion, and lifestyle stores.

source:thestar

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