Maybank IB Views

SECTOR UPDATE
Media: Neutral
May 2011 adex: Growth momentum slows

Slowing down. While May 2011 total gross adex was up 10% YoY, it was below expectations as it was only up 4% MoM when we expected it to be 10% to 15% higher MoM. This was likely due to weakening consumer sentiment dealt by inflation which will only be aggravated going forward by the recent 7% electricity tariff hike. Furthermore, total gross adex growth YoY will decelerate in 2H11 due to the high base effect of 2H10. Only Media Prima remains a Buy.

COMPANY UPDATE
Petronas Chemicals Group RM7.08: Buy
Retracement, but largely expected Shariah-compliant

Beset by headwinds. PCHEM's product margin in May 2011 was USD1,222/ton (+42.1% YoY, -1.7% MoM), we estimate. The year-to-date product margin of USD1,157/ton is 25.8% higher YoY. Product prices are retracing from a super run over the past three months. This is largely expected, and we are unperturbed as our 2011 earnings forecast is based on a realistic USD1,027/ton. Maintain BUY with an unchanged target price of RM8.15/share.

Technicals
The FBM KLCI closed higher by 1.60 points at 1,560.79 yesterday. Its resistance areas of 1,562 and 1,576 will cap market gains, whilst the obvious support areas are located at 1,540 and 1,560. Due to the US markets’ rebound tone last night, we will see some initial low volume buying activities in the local bourse today.

Trading idea for today is a Take Profit call on TIMECOM.

Other Local News

MAHB: Secures Eurocopter as anchor tenant of Subang airport. Eurocopter Malaysia Sdn Bhd has signed the 30-year lease with an option for an additional 30years. Eurocopter is looking to build a maintenance, repair and overhaul (MRO) services facility on a 7,000 sq m plot of land in the MAHB helicopter centre in Subang. (Source: The Edge Daily)

MAS: Orders 10 more 737-800s. Malaysia Airlines (MAS) has exercised an option to buy 10 Boeing 737-800s valued at some USD800m (RM2.4b) at curret list prices. MAS still has purchase rights for an additional 10 737-800s remaining from its initial 2008 contract. (Source: The Sun)

Auto: Car sales impacted by amended Act. Stakeholders in the automotive sector say the recent amendments to the Hire-Purchase Act 1967 (HPA) will hurt the car retail trade. Some said the amended Act is confusing and overly protected consumers to the detriment of car retailers. (Source: The Star)

Mining: Vale turns focus to Malaysia. Vale SA has forgone plans to build a distribution centre in China and will focus on making Malaysia its main hub for Asian sales. Vale is investing USD1.37b (RM4.16b) to set up a maritime terminal in Malaysia with capacity to dock its Valemax vessels and handle up to 30m tonnes of iron ore a year starting in the first half of 2014. (Source: Business Times)