Maybank IB Views

Tuesday, April 5, 2011

2Q 2011 Outlook
External headwinds, domestic resilience

Strong headwinds in 1Q 2011. Malaysian equities went on a wild ride in 1Q with the KLCI hitting a 1,574 pt high on 17 January, encouraged by domestic developments. It however succumbed to selling pressure, touching a low of 1,484 pts on 15 March following the political unrest in MENA which led to concerns on crude oil prices and inflation. Japan's double disaster on 11 March and a consequent nuclear threat did not help. At its close on 31 March, the KLCI gained just 26 pts (+1.7%) year to date. Nonetheless, it navigated the headwinds better than its regional peers which recorded losses of up to 5.9%.

Star Publications (Malaysia) RM3.48: Hold
The RM750m question Shariah-compliant

Proposes major debt raising exercise. Star proposes to raise up to RM750m via a 7- and 15-year debt programme. It is unlikely to pay more special dividends or develop its Section 13 land by itself but rather, embark on M&As with the proceeds, we think. We leave our earnings estimates unchanged for now. We also maintain our Hold call and RM3.71 target price pending a major earnings accretive M&A.

The FBM KLCI closed marginally higher by 0.10 points to 1,555.48 yesterday. Its resistance areas of 1,556 and 1,576 will cap market gains, whilst the obvious support areas are located at 1,529 and 1,554.

Trading idea for today is a Buy call on KENCANA.

Other Local News
Sime Darby, TNB: Sign pact for biogas study with Mitsui. Sime Darby Plantation has roped in Tenaga Nasional Bhd (TNB) and Japan's Mitsui & Co for a joint feasibility study on the viability of setting up biogas plants at all of its 62 oil palm mills. The study will take two years and will involve eight of its mills before being extended to cover all of its 62 mills, of which 40 are in Malaysia and 22 are in Indonesia. (Source: Business Times)

Bursa: In collaboration talks with LSE. Bursa Malaysia is believed to be in preliminary talks with the London Stock Exchange to collaborate on the trading of each other's shares. The partnership would likely involve coming up with products and a platform for the trading of these shares. (Source: The Star)

MRCB: Among Pudu Jail site redevelopment bidders. Malaysian Resources Corp Bhd (MRCB) is bidding for the redevelopment of Pudu Jail site. (Source: The Star)

Iskandar: Lodges police report. Iskandar Investment Bhd (IIB) filed a police report against its former senior managers after a probe revealed fiduciary lapses. The board of IIB did not reveal their identities but it is understood that at least 40 people from the vice-president level and above quit after the previous CEO Arlida Ariff finished her contract at end-2010. (Source: Business Times)

O&G: Petronas says gas exploration project on. Petroliam Nasional Bhd (Petronas) is still considering potential joint venture partners for the exploration of gas off the Kepodang field in Indonesia. It issued a statement to counter claims by the chairman of Indonesia's oil and gas regulator, BPMigas that it will pull out from developing the Kepodang field. (Source: The Star)

E&U: Supercritical plant in Manjung is SEA's first. The new 1,000MW supercritical coal-fired power plant in Manjung, Perak will be the first in Southeast Asia. The unit will the single largest one in Southeast Asia and will produce enough electricity to power nearly two million households in Malaysia. (Source: The Edge Financial Daily)


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