Maybank IB Views

Thursday, June 16, 2011

IOI Corporation RM5.30: Hold
"Planting" investment properties Shariah-compliant

On accelerated property capex. The recent foray into South Beach and IOI Resort City's development plans are set to accelerate IOI Corp's property capex spending by ~RM2.3b over the next 3 years, with 78% of these channeled to build its property investment portfolio. Investors looking for greater exposure to plantation have been slowly shying away from IOI. IOI lacks immediate re-rating catalyst, especially with limited earnings upside from its matured plantation while the new property ventures do not bring in immediate earnings; they are largely for investments. Our revised TP of RM5.50 on 16x FY12 EPS is based on 1-SD below its 5-year historical mean PER. Maintain Hold.

Top Glove Corporation RM5.26: Hold
Needs more visibility on latex glove demand Shariah-compliant

Valuations not cheap. The upcoming 3QFY11 results (expect to be flat QoQ) could mark the long-awaited inflexion point for the company's earnings, as contributions from new capacity kick in, and as distributors start to replenish stockpiles. We nevertheless feel that valuations do not justify a buy on the stock at current levels, with Top Glove trading at a CY12 PER of 16x versus its peer average of 7x. We cut our FY11 earnings by 14% and 3-4% for FY12-13. Maintain Hold and DCF-derived TP of RM5.10.

The FBM KLCI gained 7.68 points and ended at 1,556.19 yesterday. Its resistance areas of 1,558 and 1,576 will cap market gains, whilst the obvious support areas are located at 1,533 and 1,556.Due to the US markets’ weaker tone last night; we will see some initial low volume selling activities in the local bourse today.

Traiding idea is a Short-Term Buy call on AEONCR.

Other Local News
RHBCap: Aabar to buy ADCB's stake. Aabar Investments, the investment arm of Abu Dhabi government, intends to buy a 25% equity stake in RHB Capital Bhd from Abu Dhabi Commercial Bank at RM10.80 per share. (Source: The Edge Financial Daily)

Sunway-Suncity: Merger gets nod. Shareholders of Sunway Holdings Bhd and Sunway City Bhd have approved the proposed disposal of the two companies' assets and liabilities to Sunway Bhd at their EGMs. A new Sunway entity is expected to be listed on the Main Market of Bursa Malaysia in the third quarter of this year. (Source: The Edge Financial Daily)

TNB: Buys big supply of fuel oil. Tenaga Nasional Bhd (TNB) has bought more than 200,000 tonnes of fuel oil, for delivery between April and August, in addition to buying electricity from Singapore utility PowerSeraya. The fuel oil volumes were the largest TNB has purchased in at least five years. (Source: The Star)

Alam Maritim: Bids for RM400m to RM500m jobs. Alam Maritim Resources Bhd is bidding for RM400m to RM500m worth of contracts in offshore installation and construction (OIC) as well as offshore support vessel (OSV) services sector. (Source: The Star)

Construction: Eversendai to bid for RM1b-RM1.5b projects. Soon-to-be-listed structural steel construction and engineering company Eversendai Corp Bhd aims to bid for an additional RM1b to RM1.5b worth of projects for the rest of the year, after having secured almost RM350m so far this year. (Source: The Edge Financial Daily)

Property: 1MDB inks deal to kickstart Bandar Malaysia. 1MDB Bhd has signed several agreements that will pave way for the development of Bandar Malaysia, a mixed property project, on the site of the old Sungai Besi airport land. (Source: The Edge Financial Daily)


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