Maybank IB Views

Wednesday, May 25, 2011

Market Focus
IM New York: On the passage of transformation

Positive note. Prime Minister (PM) Najib sent a strong message on the government's determination for a high income economy by 2020 in his address to fund managers and investors at Invest Malaysia (IM) New York last week (17 May). The event, held for the first time at the New York Stock Exchange, saw a turnout of about 350 people. Present as well were 10 top Malaysian corporates comprising Maybank, AirAsia, Axiata, Bursa Malaysia, CIMB, Genting, Kencana Petroleum, Petronas Chemicals, SapuraCrest Petroleum and Sime Darby.

RHB Capital RM9.24: Buy
Looking for a strategic partner Shariah-compliant

Buy maintained. For much of the uncertainty earlier this year caused by management changes, the new team appears to be settling in quite well and business is as usual at RHB Capital. Our forecasts are maintained and valuations are still decent, in our view, with the stock trading at a prospective 2011 P/BV of 1.8x and 2012 PER of just 10.9x.

Lafarge Malayan Cement RM7.47: Buy
Looking forward to demand rebound Shariah-compliant

Below expectations. 1Q11 net profit of RM52m (+8% YoY, -36% QoQ) was just 14% of our full-year forecast and 13% of consensus. However, we maintain our forecasts as we expect earnings in the sequential quarters to improve substantially on higher cement ASP (raised on 1 Apr) and a pickup in demand. Currently trading at 15x 2012 PER, there is still upside potential as LMC had traded up to 17x in the 2007 peak cycle. Maintain Buy and TP of RM8.50 (17x 2012 PER).

KFC Holdings RM3.85: Hold
On track Shariah-compliant

Results in line. KFC's RM36m 1Q11 net profit (+5.5% YoY; -25.8% QoQ) is in line, accounting for 21% of our and consensus full-year forecasts. We maintain our 2011 net profit forecast of RM172m given the fact that 1Q is seasonally weaker. Non-restaurant divisions again did not perform as expected, with its ancillary division making a pretax loss. We maintain our Hold call and target price of RM3.97.

MBM Resources RM2.97: Hold
Weakness ahead; downgrade to Hold Shariah-compliant

In line but weakness ahead. 1Q11 net profit of RM38m (+36% QoQ; -4% YoY) is within expectations, accounting for 25% of our initial full-year forecast of RM151m. With the next 9-month earnings poised to soften owing to the supply chain disruption from the Japan earthquake and tsunami, we have cut our 2011 earnings forecast by 17% and tactically lowered our target price to RM3.10. Share price is unlikely to perform until the supply chain flow returns to normalcy.

The FBM KLCI rebounded 3.14 points to close at 1,532.12 yesterday. Its resistance areas of 1,532 and 1,550 will cap market gains, whilst the obvious support areas are located at 1,511 and 1,530.Due to the DJIA’s weaker tone last night, we will see some benign trading activities today.

Trading idea is a Take Profit call on MISC.

Other Local News
Aeon: To ink 9-year deal with 1Utama owner. Aeon Co (M) Bhd, which has managed the old wing of the 1Utama Shopping Complex for 15 years, is expected to sign a fixed nine-year lease agreement with mall's landlord, See Hoy Chan Holdings (SHC). (Source: Business Times)

Integrax: Forms committee. Port operator Integrax Bhd has formed a governance committee consisting of the company’s board of directors to oversee all current impending legal matters. (Source: The Star)

MFM: Plans RM140m expansion. Malayan Flour Mills (MFM) Bhd plans to invest about RM140m this year to increase its flour milling and raw material storage capacity in its Malaysia and Vietnam plants. (Source: The Edge Financial Daily)

Utilities: Acqua SPV makes ‘fair value’ bid for Selangor water bonds. Acqua SPV Bhd, a special-purpose vehicle set up by Pengurusan Aset Air Bhd (PAAB), has made a firm offer to take over Selangor water bonds. (Source: The Star)

Construction: RM30b worth of PPP projects to be developed this year. A total of RM30b worth of projects under the Public Private Partnership (PPP) are expected to be implemented this year from RM18b recorded last year. Among the projects to be implemented are the construction of new toll highways, hospitals and universities' campus branches. (Source: Business Times)


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