Maybank IB Views

ECONOMICS
Economic Development & Outlook, 2Q11
Revolving and Evolving Risks

The risks, issues and challenges facing the global economy have not changed but have morphed into "4S" from "3S" to now include "(Black) Swans". This is on top of the "Sustainability" (US recovery), "Solvency" (Eurozone sovereign financial crisis) and "Stability" (Emerging Markets's "bubblenomy"). Given the fluid external environment, Malaysia needs to strike a balance between 1) sustaining growth, 2) maintaining macroeconomic and financial stability, and 3) dealing with inflation. The vital elements are 1) executing the Economic Transformation Programme (ETP), 2) gradual monetary policy normalization, fiscal consolidation and subsidy rationalisation, and 3) prudential measures within the financial system to address the asset bubble and household debt risks, thus ensuring the economy stays on track. Our key macroeconomic forecasts are largely unchanged, except for the upward revisions in inflation rate and crude oil price.

COMPANY UPDATE
IOI Corporation RM5.65: Hold
Raises stake in Singapore's South Beach Shariah-compliant

Maintain Hold. IOI Corporation has raised its interest in the Singapore South Beach development to 49.9% from 33.3% when it was initially proposed in Nov 2010. IOI has subscribed for a 49.9% equity interest in Scottsdale which will control 100% of the development. IOI will invest up to SGD816.8m (RM1.96b). Development details are not available, hence, we are unable to estimate the impact on IOI. Nonetheless, we draw comfort that the balance 50.1% holding in Scottsdale is held by Singapore's property pioneer, City Developments Ltd, who should be able to drive values for the South Beach development.

Technicals
The FBM KLCI rose 2.11-points and closed at 1,557.49 last Friday. The obvious support areas for the FBM KLCI are located in the 1,500 to 1,556-zone. The firm resistance zone of 1,558 and 1,576 will see heavy liquidation activities.

Trading idea for today is a Buy call on BENALEC.

Other Local News
MAHB: Passenger traffic to cross 60m mark. Airports Holdings Bhd (MAHB) is confident that total passenger traffic volume across the country’s airports will breach the 60-million mark this year. In 2010, all 39 airports nationwide handled a total of 57.8m passengers. (Source: Malaysian Reserve)

Notion: Eyed by private equity firm again? Market talk of possible corporate exercises has resurfaced at Notion Vtec Bhd, including the potential entry of a major US-based private equity firm and Nikon Corp considering upping its stake in the company. (Source: The Edge Malaysia)

Mamee: Shareholders propose to privatise company. Major shareholders of Mamee-Double Decker (M) Bhd have proposed to privatise the company by undergoing a capital reduction and repayment exercise under Section 64 of the Companies Act, 1965. Under the plan, major shareholders of Mamee who control the company would repay RM179.8m or RM4.39 a share to minority shareholders. (Source: Bursa Malaysia)

O&G: Shell shortlists five potential bidders for sale of LPG business. Royal Dutch Shell plc (Shell) has shortlisted five potential bidders for its downstream liquefied petroleum gas (LPG) business in Peninsular Malaysia. The shortlisted companies are Boustead Petroluem Marketing Sdn Bhd, KUB Malaysia Bhd, KKB Engineering Bhd, Lembaga Tabung Haji and Integrated Petroluem Services Sdn Bhd. (Source: The Edge Weekly)

Property: Projects galore in Penang. Some RM2.94b worth of residential and commercial properties from six developers, based in Kuala Lumpur and Penang, will be launched on the island this year. The south and south-west of the island will see some 1,275 units of residential and commercial properties launched with an estimated gross sales value (GSV) of RM1.45b, while the north-east district will see the development of about 1,166 units of properties valued at RM1.49b. (Source: The Star)

Transportation: Score railway link still pending study. The Sarawak government is still waiting for the completion of a feasibility study on a railway link beginning form the Samalajau Industrial Park in Bintulu to Tanjung Manis. (Source: The Edge Financial Daily)