Maybank IB Views

MARKET STRATEGY
2H 2011 Outlook
External headwinds, domestic strength (mid-year check)

External headwinds. We expect global equities to remain volatile in second half 2011 on renewed concerns over US' economic recovery, Eurozone's sovereign debt crisis and China's monetary tightening measures. Waning confidence on the resolution of Eurozone's debt problems will prompt broad-based risk aversion in equities. In addition, the unrest at MENA has persisted; it is likely to extend for awhile.

ECONOMICS
Malaysia: Development & Outlook, 2H 2011
Reality Check

We revised downward our 2011 real GDP growth forecast to 5.1% (previous 5.5%), taking cue from continued softness in 2Q 2011 after the lower-than-expected 1Q 2011 growth amid signs of elevated global economic risks that weighs on external demand on the back of factors such as worsening Eurozone soveriegn debt crisis, US economy that is losing momentum as QE2 ended, slowing China's economy and continued inflationary presures in the emerging and developing countries. In addition, rising inflation and interest rates dampen domestic consumer spending. Critical to upholding the growth momentum this year is therefore investment, with ETP implementation a crucial factor, which should be supportive of the domestic economy in 2H 2011.

CPI, May 2011
See you at "4" next...?

Consumer price index (CPI) increased by 3.3% YoY in May '11 (Apr '11: +3.0% YoY; MaybankIB: +3.3% YoY; Consensus: +3.3% YoY), accelerating for the sixth month in a row to the fastest pace in 26 months. MoM, it gained +0.3%. 2011 YTD inflation rate was +3% YoY. CPI excluding Food & Non-Alcoholic Beverages and Transport picked up for the fourth consecutive months to +2% YoY (Apr '11: + 1.8% YoY), the highest in almost two years. Factoring in the impact of the hikes in the subsidized prices of sugar, diesel, gas and power in May-June, we see monthly inflation rate surging to 4% in June-July, and had earlier revised our annual inflation rate to 3.4% (3% previously) for 2011 and 3.3% (2.9% previously) for 2012.

INITIATING COVERAGE
BIMB Holdings RM1.97: Buy
A blast from the past Shariah-compliant

Ready to stamp its mark again. Once the largest Islamic bank in the country, BIMB Holdings (BIMB) lost its luster when it plunged into the red in 2005/2006. New management has spent the last couple of years cleaning up legacy financing problems at the commercial bank, which also saw two rounds of capital injection over the past five years. With much of the clean-up completed alongside a corporate rebranding of Bank Islam and Syarikat Takaful Malaysia (Takaful Malaysia), BIMB is poised once again to stamp its mark as one of the country's leading Islamic financial institutions. We initiate coverage on BIMB with a Buy call and a RM2.40 target price on a sum-of-parts (SOP) basis.

COMPANY UPDATE
RHB Capital RM8.75: Hold
Back to the drawing board

Downgrade to Hold. Our call on RHB Capital is lowered to a Hold from Buy, after restoring our valuations to levels prior to recent corporate exercises. On the back of a re-based target price of RM9.40 from RM10.40, upside to current share price is 7%. While valuations remain decent, various non-tangible issues are likely to weigh on sentiment in the near term, in our view.

RESULTS REVIEW
Kencana Petroleum RM2.79: Buy
On track, with upside potential Shariah-compliant

We remain Buyers of Kencana. 9MFY11 results track expectations. We expect earnings momentum to strengthen into FY12 as Kencana secures higher orders and consolidates AME's earnings. We do not rule out a 2nd RSC and a strategic partner to develop deepwater fabrication capabilities; a positive, in our view. Our RM3.10 target price, based on 20x CY12 EPS, has not incorporated these potentials.

Technicals
The FBM KLCI gained only 1.23-points and closed at 1,564.66 last Friday. The local market remained quite steady despite the Greek debt worries and bad US economic news (like the increased number of people seeking unemployment benefits). The obvious support areas for the FBM KLCI are located in the 1,536 to 1,563-zone. The firm resistance zone of 1,564 and 1,576 will see very heavy liquidation activities.

Trading Idea is a Short-Term Buy call on PANAMY.

Other Local News
Proton: Nears deal with foreign carmaker. Proton Holdings Bhd will be finalising a collaboration with a foreign car maker next month, which is expected to bring up to RM800m of investment into the country. The tie-up involves using the partner's transmission for Proton's new engine. (Source: Business Times)

IJM: Shortlisted for India highway project. IJM Corp Bhd is one of the 11 companies shortlisted for a mega inter-state highway project estimated to cost about RM4b. The 555km highway stretches from Kishangarh, near Jaipur, in Rajasthan to Ahmedabad, in Gujarat, via Udaipur. (Source: The Star)

Sime Darby: New pay scheme to attract Malaysians too. Sime Darby Plantation Sdn Bhd expects its new pay scheme for estate and mill workers to attract not only foreigners but Malaysians as well. (Source: The Edge Financial Daily)

Muhibbah: Gets RM338m job. Muhibbah Engineering (M) Bhd has been awarded a RM338m contract by Northport (M) Bhd for the development of a multi-purpose wharf and other facilities at Container Terminal 4. (Source: Bursa Malaysia)

Plantation: Minister concerned over Aussie palm oil Bill. Plantation Industries and Commodities minister Tan Sri Bernard Dompok expressed grave concern on the passing of the Food Standards Amendment (Truth in Labelling - Palm Oil) Bill 2010 by the Australian Senate on Thursday. The Bill which is now under consideration by the Lower House, Australian Parliament, seeks to mandate the labeling of palm oil for the purpose of ensuring ‘that consumers are provided with clear, accurate information about the inclusion of palm oil in foods’. (Source: The Star)