Maybank IB Views

Tuesday, June 14, 2011

KNM Group RM1.90: Hold
Brace for further headwinds Shariah-compliant

Cut forecasts, downgrade to Hold. Our initial forecasts are too optimistic and management is guiding for lower profits as earnings could remain weak over the next few quarters. This is disappointing for we had expected earnings to rebound on the new orders secured in the past 12 months. The financing for the Peterborough project is still unresolved. We lower our target price to RM2.00 based on reduced PE multiple target of 10x (previously 14x) as we also cut earnings forecasts.

Petronas Chemicals RM7.06: Buy
Missed the first party, but there is another one coming Shariah-compliant

Power tariff hike impact negligible. We have imputed the impact of the electricity tariff hike by Tenaga Nasional which is rather negligible at only ±RM20m p.a. This does not change the Company fundamentals at all and we remain bullish with the high product prices and strong demand. Our concern lies with the uncertainty of gas supply due to the on-going maintenance work from its supplier. We rollover valuations to 2012 earnings and maintain BUY with a higher TP of RM8.15 (+2%), based on 13.5x PER - in line with industry's historical average PER.

Economic Transformation Programme (ETP)
Update #6…

PM announced additional 15 projects, initiatives and enablers in the sixth ETP update, involving RM63.38b investments under 11 Entry Point Projects (EPPs) in seven National Key Economic Areas (NKEAs) that will generate RM66.31b in gross national income (GNI) and create 63,531 new jobs. The biggest project is the RM60b Refinery And Petrochemical Integrated Development (RAPID) in Pengerang, Johor. So far, execution of ETP has seen confirmation of 65 EPPs (49.6% of the targeted 131) under 11 NKEAs with investment value of RM169.78b (21.4% of the targeted RM794.5b EPP investments) that are expected to raise RM220.15b in GNI (49.6% of the targeted RM1.1tr) and create 362,396 jobs (11% of the targeted 3.3m). ETP rollout is having visible positive impact on actual investment as per the data on business loans growth, PDS issuance and FDI int he first three to four months of 2011.

The FBM KLCI fell 10.31 points and ended at 1,545.88 yesterday. Its resistance areas of 1,545 and 1,565 will cap market gains, whilst the weaker support areas are located at 1,527 and 1,540. Due to the world markets' quiet tone last night, we will see some boring and low volume-trading activities in the local bourse today. We expect the FBM KLCI to remain benign today, as the local market could remain lacklustre.

Trading Idea for today is a Take Profit call on MPHB

Other Local News
Banking: Maybank's proposal for RHB stake soon. Malayan Banking Bhd (Maybank) will be making a proposal to acquire RHB Capital Bhd before the end of this month, according to Maybank's chairman Tan Sri Megat Zaharuddin Megat Mohd Nor. (Source: The Star)

RHBCap: ADCB in need of cash. Abu Dhabi Commercial Bank's (ADCB) plans to hive off its 25% stake in RHBCap to Aabar Investments could be due to need of cash to settle some of its debts that will be due soon. (Source: The Star)

Alam Maritim: Wins RM52m job. Alam Maritim Resources Bhd (AMRB) has been awarded a contract valued at RM52m from Samsung Engineering Malaysia Sdn Bhd to supply engineering work, supply of materials, fabrication, load-out and commissioning of two units of single point mooring buoy for Sabah Oil and Gas Terminal project. (Source: Bursa Malaysia)

KFC: RM23m for 25 new outlets in the country. KFC Holdings (Malaysia) Bhd will spend around RM23m to open 25 new outlets in Malaysia by year-end. Around 10 outlets will be in the form of "drive-thru", and the balance will be normal outlets. (Source: Business Times)

Sime: To invest RM280m in two new hospitals. Sime Darby Bhd's healthcare unit will invest RM280m in two new hospitals in the Klang Valley under the government's Economic Transformation Programme (ETP). The segment is expected to contribute about 20% of the company's revenue in next three to five years. (Source: Business Times)

MMC: Malakoff Clinches 1,000MW tender. Malakoff Corp Bhd which is 51% owned by MMC has won the tender to build a 1,000MW coal-fired facility at its existing site in Tanjung Bin, Johor. (Source: Bursa Malaysia)


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