Maybank IB Views

Monday, May 23, 2011

Property: Overweight
Unfazed by rate hikes; strong property sales continued

Strong property sales momentum continues. Property demand is unfazed by the recent 25bps rate hike by the BNM. This is evident in the strong take-ups/bookings recorded in two recent high-profile property launches i.e. S P Setia's (SPSB) KL Eco City (KLEC) Residential Tower 1 (RT1) and the Mansions@ParkCity Heights linked homes of Desa Park City. We are keeping our Overweight call on the property sector. SPSB (RM4.75 TP) remains as our top buy for the property sector.

AirAsia RM3.13: Hold
As good as it gets Shariah-compliant

Turbulence overshadowing strong 1Q. We expect AirAsia's 1Q11 to be very strong, but we are concerned with the surge in oil price volatility and the increasing evidence that there is an oversupply of capacity in the industry. We downgrade to a Hold from a Buy, as our target price is at close proximity. At our target price of RM3.36/share, we think the risk-reward fully captures the stock at fair value.

Malaysian Airline System RM1.69: Hold
1Q11: Wake turbulence ahead Shariah-compliant

The tide has turned. MAS will release its 1Q11 results on 25 May. 1Q11 is expected to be loss-making due to the impact of 35% higher fuel price and some impact from the MENA civil unrest and Japanese natural disasters. We are concerned with the volatility of fuel and the increasing evidence that there is an oversupply of capacity in the industry. We downgrade our recommendation to a Hold from a Buy, and revise our target price to RM1.82/share, based on 14.4 2011 PER – on par with global peer average.

The FBM KLCI rose 0.29-points and closed at 1,541.03 last Friday. The local market remained quite steady in very boring trading activities. World markets remained similarly lack-lustre and boring too. The possible Greek debt default caused the global market malaise.The obvious support areas for the FBM KLCI are located in the 1,507 to 1,536-zone. The firm resistance zone of 1,541 and 1,576 will see very heavy liquidation activities.

Trading idea is a Firm Buy call on EPMB.

Other Local News
Sime: Invests in Liberia. Sime Darby Bhd is planning to invest USD3.1b in its oil palm and rubber plantation ventures in Liberia over the next 15 years, to date it had invested RM50m (USD17m) in the West African country. In 2009, an amended and restated concession agreement between Sime Darby Plantation and the Liberian government gave the company a 63-year concession of 220,000ha in Liberia to be developed into oil palm and rubber plantations. (Source: The Star)

MPHB: To focus on gaming after completing stake buy. Multi-Purpose Holdings Bhd's (MPHB) acquisition of the remaining 47% stake it does not own in Magnum Holdings Sdn Bhd for a collective price of RM1.63b will be completed by June 11. MD Surin Upatkoon said It would also focus on cutting its borrowings by raising RM1b through non-core gaming assets sale. (Source: The Star)

MSC: Eyes new tin mines. Malaysia Smelting Corporation is currently looking to acquire concessions for three or four tin mines in Malaysia and Indonesia to tap into strong demand from China's booming electronics industry. CEO Datuk Mohd Ajib Anuar said the company might invest up to RM200m to increase its mining assets in the near term. (Source: The Star)

Ramunia: Targets RM903m offshore job in Mumbai. Ramunia Holdings Bhd is eyeing a USD300m (about RM903m) fabrication job in the oil and gas industry offshore Mumbai with its Indian partner. The said bid is for work at India's state-owned Oil and Natural Gas Corp Ltd’s (ONGC) wellhead platform with pipeline facilities for oil-field cluster 7 and 16. The firm is also tendering for about RM500m worth of local job. (Source: Malaysian Reserve)

Kimlun: Targets RM600m new jobs. Kimlun Corp Bhd is confident of securing RM600m new jobs to add into its current outstanding order book of about RM900m. and also exploring prospects in Klang Valley. In another news, Kimlun hopes to become an integrated player, in which property development forms the upstream business to complement its core construction business. Then there is the downstream manufacturing business via subsidiary SPC Industires Sdn Bhd, which specializes in precast concrete products for the infrastructure and building sectors. (Source: The Edge Financial Daily, The Sun)

Three-A: China JV plant with Wilmar on track. The construction of the multi-storey manufacturing plant in China, which is easily three times the size of Three-A's operations in Malaysia, is on track for completion as early as the third quarter this year. (Source: The Edge Financial Daily)

TSH Resources: Plans RM470m investment in Indonesia. TSH Resources Bhd is stepping up its Indonesia operations with investments totaling RM470m in the next 4 years which is expected to result in a compounded growth of 43% in fresh fruit brunches production by 2014. (Source: Malaysian Reserve)


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