Six shortlisted for RM1.5bil school Internet contract

PETALING JAYA: Six companies are in the running for the RM1.5bil five-year contract to provide Internet access and a virtual learning module (VLM) platform for the 9,924 schools in the country under the 1Bestarinet project, sources said.

The six are said to be Celcom Axiata Bhd, Jaring Communications, Maxis Bhd, YTL Communications, Multimedia Synergy Corp and both Telekom Malaysia Bhd/Time dotCom Bhd, which submitted a joint bid.

The access job comes with an option to extend the contract period for another five plus five years, totalling 15 years, and this would include installation, maintenance and provision of a VLM.

Though the Government is looking at RM4.5bil as the absolute sum for the 15-year contract, those in the know claim the bids received thus far ranged from RM2bil to RM6bil. At RM4.5bil, it works out to RM1.5bil for every 5 years or RM300mil for each year.

A decision on the winner is expected sometime in the middle of next month, sources said, adding that the Government should insist on proof of concept before deployment to avoid issues and problems arising later. The plan is to roll out access to at least 7,000 schools by Jan 1, 2012.

The poser now is which company should win the 15-year contract.

“Even before 1Bestarinet came about, some of the parties vying for the contract have been lobbying for it. Whatever the decision, it should be based on merits and the focus should be on deliverables as we cannot afford a repeat of the Schoolnet episode. Choose those that can deliver, those that have the financial muscle, the capacity and capabilities and not those that compromise on quality for profits,” said a source.

“The last thing we want is our future generation being deprived of basic Internet access because of some companies which can't have enough profits from the project and the Government is committed because the contract would be binding for 15 years,'' added the source.

IBestarinet came about as a result of the Pemandu national key economic area lab series as there is a need to provide Internet access to all schools in the country since the earlier project to wire up schools, Schoolnet, did not meet the objectives set.

To recap, Schoolnet was born in 2004 to wire up schools using wireless or fibre technology but it had major constraints and did not live up to expectations in terms of speed and capacity, and also due to lack of specifications and integration.

Hence, in May this year, the Education Ministry called for a tender bid for the wiring up of all schools under the 1Bestarinet project and in the tender's posting it was clearly stipulated that the tender was open to all local companies with preference given to bumiputra tender bids registered with the Finance Ministry under some codes stipulated.

This tender bid which opened on May 5 saw over 80 companies collecting the tender documents. At its closing on May 31, it is said that only 19 companies submitted their bids. The six shortlisted are from the 19 that submitted bids.

Given its past experiences with Schoolnet, the ministry had spelt out certain conditions for 1Bestarinet. It wants the future network to be scalable to cater for growth and to evolve with technological evolution. It should have a VLM which will allow teachers and students, among others, to have a platform to write plans and share ideas. The Internet speed has to be constant and cannot be based on “best effort.'' For urban areas, the access speed is 2Mbps to 10Mbps, and for rural and remote schools 1Mbps to 4Mbps. All sorts of technologies can be used, be it fibre or wireless technologies including Vsat, wireless, WiFi, but the link to the school should be via fibre.

“The Education Ministry will also have an inbuilt checking mechanism to ensure that the vendor delivers as per specifications,'' said a source.

source: thestar

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RHBInvest Research

Top Story: Media – Riding on TV3 and Malay adex growth Underweight

Sector Update

¨ According to Nielsen Media Research (NMR), Jul’s gross advertising expenditure (adex) for TV and print media combined rose 11.8% yoy (+8.3% mom), led by the print media (+17.8% yoy), while the TV segment saw improvement (+5% yoy) after experiencing a 3% yoy contraction in Jun.



Corporate Highlights



Fajarbaru: Slow LRT billings to weigh down on FY06/12 performance Outperform

Company Update (published 25 Aug)

¨ The weak FY06/11 result announced yesterday was partly due to the recognition of additional costs from existing projects, pending the approval of variation orders. If the variation orders are granted, there will be substantial writebacks in FY06/12.



Affin: Growing amid a challenging environment Market Perform

Briefing Note

¨ Given concerns over macro economic conditions and stiff competition the group remains selective with respect to loan growth. Loan growth thus far has not been at the expense of quality with management pointing to the improving gross impaired loan ratio trend. As for deposits, the growth has been helped by deposit campaigns but with a LD ratio of 78.9%, the group’s balance sheet remains liquid.



MMHE: Going ahead with Pasir Gudang yard acquisition Underperform

News Update

¨ MMHE announced yesterday that it had entered into a definite sale and purchase agreement with Sime Darby Engineering (SDE) for the Pasir Gudang yard but at a slightly lower purchase consideration of RM393.5m (vs. RM399m previously).



Corporate Results



Maxis: Steady performance Market Perform

2QFY11 Results / Briefing Note

¨ 1HFY11 net profit was within expectations as we expect a seasonally stronger 2H as well as potential earnings boost from the 6% service tax that we believe will be passed on to prepaid subscribers in 4Q.

Sime Darby: Ending the year with a bang Outperform

4QFY11 Results / Briefing Note

¨ FY06/11 core net profit was above our and consensus expectations, at 112-114% of FY06/11 forecasts. Main variances were the higher than expected revenue and EBIT for the heavy equipment and motor divisions. Sime declared a final single tier dividend of 22 sen, bringing FY11 DPS to 30 sen, which is higher than our projected 27 sen. This translates to net payout of 49%, and net yield of 3.4%.



UEM Land: Earnings continued to miss expectations Underperform (down from MP)

2QFY11 Results / Briefing note

¨ 2Q11 net profit missed expectations by 20-30%. The strong sequential growth of 171% in turnover was due to higher revenue from property development projects (+125%) and developed land sales (to RM122.1m from RM7.3m in 1Q11). This 2Q11 results also reflected the full quarter contribution from Sunrise.

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Maybank IB Views

US Economy
Blast from the (distant & recent) past

Waiting for Bernanke's speech at the Federal Reserve Annual Symposium...Low expectations of an announcement or hint of a third round of asset purchase programme (QE3) with a more likely outcome to be a complement to the FOMC announcement on 9 August to keep the 0%-0.25% federal fund rate until mid-2013 with the same commitment to maintain the current size of Fed's balance sheet.

Malaysia
2Q 2011 Balance of Payments

FDI net inflows in 1H 2011 after four consecutive years of net outflows. Portfolio investment net inflows surged to RM48.055b in 2Q 2011 (1Q 2011: RM8.375b) and to RM56.430b in 1H 2011 (1H 2010: RM26.684b). Sustained current account surplus of RM23.397b in 2Q 2011 (1Q 2011: RM25.894b) and RM49.292b in 1H 2011 (1H 2010: RM44.082b).

RESULTS REVIEW
Maxis RM5.40: Hold
A defensive proposition Shariah-compliant

Hold maintained. 1H11 results were decent but marginally below expectations at 45% of our full-year forecast and consensus, the miss primarily being slower-than-expected voice revenue growth, though this is expected to pick up in the 2H. Positively, margins were preserved. Maxis provides for defensive yields but the extent of margin erosion from the launch of its home broadband services remains an uncertainty to earnings. Our DCF-derived TP of RM5.50 is maintained on WACC of 7.5% and 1% terminal growth assumptions.


Sunway Bhd RM2.29: Buy
One-off costs hit earnings

Below expectations. Sunway's 1H11 RM132m core net profit accounted for 40% of our and consensus full-year estimates. We lower our 2011-13 earnings forecasts by 9-15% and RNAV-based TP to RM3.78 (-7sen). Sunway continues to trade at a steep 40% discount to our RNAV. Buy. Positive re-rating catalysts include potential MRT job wins. During times of uncertainties, stable rental/dividend/manager fees from investment properties would provide the cushion to its earnings.

AEON Co. (M) RM6.95: Buy
The Bandar Utama impact

Weaker 1H within expectation. 1H11 recurring net profit of RM64.5m, after excluding the fire insurance proceeds of RM10.9m received in 1Q11, was 36% of our full-year forecast and consensus. We look to a stronger 2H with renewed contributions from renovated Jusco Bandar Utama (JBU). Our Buy call and RM7.90 TP are maintained.

BIMB Holdings RM2.00: Buy
Still as liquid as ever

Buy maintained. What BIMB continues to offer is a turnaround story of what is now a well-capitalized commercial bank (15.6% core capital ratio) with a very liquid balance sheet (net financing/deposit ratio of just 54%), a well-managed and profitable composite insurance outfit as well as a potential M&A story, given the possibility of shareholding changes. Our Buy call is maintained with a SOP-derived target price of RM2.40.

Carlsberg Brewery (M) RM6.85: Buy
The desired taste

16.5% YoY growth in 1H11 net profit to RM80m, which was 52% of our and consensus full-year forecasts. Results were within our expectation and we maintain our Buy call on the stock while our RM8.00 TP is unchanged. Valuations are decent at current levels, with the stock trading at a prospective 2012 PER of 12.9x against a historical mean of 16.7x, with gross yields of 4.9%. Near term, however, we expect sentiment toward the stock be cautious ahead of Budget 2012 with uncertainties over possibly higher duties.

Media Chinese International Limited RM1.14: Hold
Paper cuts from higher newsprint prices Shariah-compliant

Higher newsprint prices and slower adex growth looms. Media Chinese International Limited's (MCIL) 1QFY12 results were within expectations. That said, higher newsprint prices have had an adverse impact on earnings. Furthermore, we understand that adex growth will decelerate further into 2HFY12. We trim our FY12-14 earnings estimates by 2%-6% and TP from RM1.40 to RM1.14 (-19%).

Sarawak Oil Palms RM4.20: Buy
Too good to ignore Shariah-compliant

Explosive 2Q. SOP's RM69m 2Q11 net profit (+132% YoY; +24% QoQ) exceeded our and market expectations, boosted by high FFB production and low all-in cost of production. We raised our 2011 earnings by 6% and reiterate our Buy call with unchanged RM6.80 TP (13x 2012 PER). With 42.5% of estates still immature, SOP offers robust 16% 3-year CAGR in FFB production, 21% 3-year CAGR EPS, and yet trades at 8x 2012 PER. Its traded EV/planted ha of RM32,000 is cheap relative to recently transacted prices exceeding RM50,000/ha.

Wah Seong Corporation RM2.14: Buy
In line; orders set to kick-in Shariah-compliant

Maintain Buy. 1H11 results tracked expectations despite a weaker QoQ performance. We retain our forecasts and anticipate more new contracts in 2H. WSC remains a Buy with a RM3.10 target price (14x 2012 EPS). The stock now trades at just 10x one-year forward PER, one standard deviation below mean, which we think, underscores its near-term job wins and earnings potential. Meanwhile, the board has decided to delay Wasco’s listing exercise, citing weak market condition.

Hock Seng Lee RM1.48: Buy
Constructive growth Shariah-compliant

On track for 23% full-year growth. 1H11 net profit of RM38.6m (+22% YoY) met 43% of our full-year forecast and 42% of consensus. We expect a stronger 2H, leading to a sizeable 23% expansion in core net profit for 2011. We remain positive on HSL benefiting from the expected strong work flows in Sarawak. We reiterate our Buy call with a RM2.30 target price based on 12x multiple on 2012 earnings.

CB Industrial Product RM3.84:Buy
Catalyst from cash Shariah-compliant

Maintain Buy. CBIP's RM24m 2Q11 net profit (+86% YoY; 9.7% QoQ) brings 1H11 net profit to RM46m (+84% YoY), within our expectation but ahead of consensus. Its recent strategic proposed disposal of two plantation subsidiaries for RM268m cash could add 9.5% to our present TP. Future plans to utilize disposal proceeds also act as a catalyst to share price. We maintain our forecasts and TP of RM4.75 based on 7x 2011 EPS pending further clarity on cash utilisation. Still a Buy.

Eastern Pacific Industrial Corp RM3.05: Accept Offer
Inline; just awaiting GO completion Shariah-compliant

1H earnings inline; GO determines the price now. 1H11 net profit of RM27m was in-line at 49% of our full year forecast. In-light of the impending Mandatory General Offer (MGO), no dividend was declared. We maintain our Hold call and leave our RM3.10 TP unchanged, pegged at the RM3.10 offer price, implying 1.6% upside.

Technicals
The FBM KLCI fell 4.41 points to close at the 1,464.74 yesterday. Its resistance areas of 1,464 and 1,488 will cap market gains, whilst the weaker support areas are located at 1,423 and 1,454. Due to the US markets’ weaker tone last night; we will see a softer for the local bourse today. Some pre-Hari Raya holiday liquidation activities may persist to depress the markets’ rebound from its recent 1,423.47 low.

Trading idea is a Take Profit call on Axiata.

Other Local News
MAS: New managing director found? It is learned that the executive committee decided on the new MD after a meeting yesterday. Ahmad Jauhari Yahya, the former CEO of power producer Malakoff Bhd, has been offered the job to lead the embattled national airline. (Source: Business Times)

Megasteel: Dissapointed with Miti’s decision. Megasteel Sdn Bhd says its disappointed that the Ministry of International Trade and Industry (Miti) has decided against implementing the 35% safeguard duty on the import of hot-rolled coil (HRC) the steel giant had petitioned for in June. (Source: The Edge Financial Daily)

SDB: To launch RM1b projects in next 12 months. Selangor Dredging Bhd (SDB) has in its pipeline property launches worth almost RM1b in GDV in Malaysia and Singapore by the end of 2012. The group expects contribution from Singapore to be at par with Malaysia’s in two years. (Source: The Edge Financial Daily)

LTKM: Counts on it recession proof sector. LTKM Bhd is planning to maintain its current level of egg production, as it looked to capitalise on the recession-proof nature its business. LTKM currently produces an average of 1.4m eggs per day. (Source: The Edge Financial Daily)

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Stocks to watch: Sime, Dijaya, UEM Land, Tradewinds

KUALA LUMPUR: The stronger corporate earnings should underpin the market sentiment on Friday, Aug 26 after the sell-off in the afternoon session on Thursday, dragged by banks including CIMB and RHB Capital as funds trimmed their exposure.

Worries about a debt crisis in the US and Europe would impact global economic growth and reduce demand for commodities had battered equities markets.

Despite the cautious markets, including Malaysia, where banks were impacted by worries about a slowing economy also, commodities could be the stocks to watch.

Reuters quoted PLANTATION [] Industries and Commodities Minister Tan Sri Bernard Dompok as saying Maysian commodities such as palm oil, tin and rubber play such a central role in the global economy that their prices are likely to hold up even in a global slowdown.

He was also quoted saying Chinese imports of palm oil are set to rise next month as buyers stock up.

"There will be some impact, but Malaysian commodities are key to this global market. Without rubber the auto industry cannot move, and the same be said with palm oil for the food sector and tin for manufacturing," Dompok told Reuters.

Stocks to watch are SIME DARBY BHD [], DIJAYA CORPORATION BHD [], UEM Land Bhd and Tradewinds (M) Bhd.

Sime Darby Bhd posted a record net profit of RM1.312 billion in the fourth quarter ended June 30, 2011, a stark contrast to the net loss of RM77.35 million a year ago primarily to the sterling results of the plantation, industrial and motors divisions.

Its revenue increased by 42.4% to RM13 billion from RM9.13 billion while earnings per share were 21.84 sen compared with loss per share of 1.29 sen.

Sime Darby proposed a final dividend of 22 sen per share. For the full financial year ended June 30, 2011, its earnings jumped three-fold to RM3.664 billion from RM726.85 million. Its revenue increased by 28.7% to RM41.858 billion from RM32.51 billion.

Dijaya Corp Bhd’s earnings jumped 687% to RM20.75 million in the second quarter ended June 30, 2011 from RM2.63 million a year ago due to net gain of fair value adjustment and better margins for its projects.

The property developer’s revenue rose 1.3% to RM70.66 million from RM69.72 million. Its earnings per share were 4.56 sen versus 0.6 sen.

In the first half, the net profit surged 1,154% or 100 fold to RM38.89 million from only RM3.10 million. Its net profit edged up 0.2% to RM128.34 million from RM128.09 million.

UEM Land's net profit for the second quarter ended June 30, 2011 more than doubled to RM88.93 million from RM40.35 million a year earlier due mainly to an increase in its revenue. Its revenue surged to RM509.40 million from RM88 million in 2010. Earnings per share were 2.17 sen compared to 1.23 in 2010, while net assets per share was RM1.03.

For the six months ended June 30, UEM Land’s net profit surged to RM106.54 million from RM43.49 million in 2010, on the back of a more than five-fold increase in revenue to RM697.09 million.

Tradewinds saw its earnings increase by 42% to RM124.42 million in the second quarter ended June 30, 2011 from RM87.49 million a year ago, boosted by the favourable performances of the rice, plantation and sugar divisions.

Its revenue rose 23.9% to 1.593 billion from RM1.285 billion. Earnings per share were 41.97 sen compared with 29.51 sen. It declared dividend of 20 sen per share from 5.0 sen a year ago.

For the first half, its net profit increased by 30% to RM214.33 million from RM164.75 million.

WAH SEONG CORPORATION BHD [] posted net profit of RM16.19 million in the second quarter ended June 30, 2011, compared with RM1.70 million a year ago boosted by pipeline services, engineering divisions.

It said on Thursday, Aug 25 it revenue rose 9.5% to RM405.16 million from RM369.74 million. Earnings per share were 3.38 sen compared with 0.22 sen. It declared an interim dividend of 3.0 sen..

YTL CORPORATION BHD []’s earnings increased 23.6% to RM1.059 billion (US$355.4 million) in the financial year ended June 30, 2011 from RM856.8 million (US$287.5 million) a year ago.

Its revenue rose 12.5% to RM18.570 billion in FY ended June 2011 compared with RM16.50 billion a year ago.

Maxis Bhd’s net profit rose 3.5% to RM551 million in the second quarter ended June 30, 2011 from RM532 million a year ago, underpinned by its internet and data services segments.

Revenue dipped 1.5% to RM2.158 billion from RM2.191 billion. Earnings per share were 7.30 sen versus 7.1 sen.

Maxis declared a second interim singe-tier tax exempt dividend of 8.0 sen per share amounting to RM600 million to be paid on Sept 30. The entitlement date is Sept 15.

Bumi Armada Bhd’s earnings fell 18% to RM60.26 million in the second quarter ended June 30, 2011 from RM73.65 million a year ago due to higher finance costs and taxation. Revenue rose 40.9% to RM392.96 million from RM278.85 million. Earnings per share were 2.64 sen compared with 3.69 sen.

For the first half, its net profit was marginally higher by 1.4% to RM142.33 million from RM140.30 million a year ago. Its revenue increased by 42% to RM769.12 million from RM541.31 million.

DRB-HICOM BHD []’s net profit for the first quarter ended June 30, 2011 fell 42% to RM91.07 million from RM157.78 million a year earlier on lower share of results of associated companies namely Honda Malaysia Sdn Bhd due to shortages of CKD packs following the Japan earthquake/tsunami in March 2011. Its revenue for the quarter rose 1.93% to RM1.58 billion from RM1.55 billion in 2010. Earnings per share declined to 4.71 sen from 8.16 sen in 2010, while net assets per share was RM2.63.

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Maybank IB Views

Padiberas Nasional RM2.80: Buy
Rice + dividends = staple + stable Shariah-compliant

Underappreciated and misunderstood. Padiberas Nasional (Bernas) is Malaysia's custodian of rice and paddy with a 50% market share. Its business model is simple yet low risk: it buys paddy from local farmers, mills it and distributes it across the country. The deficit of local supply is supplemented by imports - of which Bernas has a monopoly. Profit growth are secured due to Malaysia’s insatiable demand for rice and cost reductions from on-going plant modernization. We initiate with a BUY, with a target price of RM3.90/share based on 8.1x 2011 PER.

COMPANY UPDATE
Eastern Pacific Industrial Corp RM2.93: Accept Offer
GO @ RM3.10, accept Shariah-compliant

Raya comes early, MGO at RM3.10/shr. Investors who were shareholders on 10 Dec 2010 but sold their EPIC shares between then and 23 Aug 2011 at below the Offer Price of RM3.10 are entitled to a cash compensation for the price difference. We advise current shareholders to accept the Offer, which is above our earlier target price and offers a 6% upside to yesterday’s closing price of RM2.93.

RESULTS REVIEW
IOI Corporation RM4.67: Buy
Good trading opportunity; upgrade to Buy Shariah-compliant

No surprises to earnings. FY11 net profit of RM2.22b (+9% YoY) met consensus expectations. Stripping off forex and fair valuation gains totalling RM215m, core net profit of RM2.0b (+27% YoY) met our expectation. We tweak our FY12 EPS forecast by -3.5% and revise TP to RM5.27 (-4%) based on unchanged 16x FY12 PER target. Current share price reflects just 13.6x one-year forward PER. We raise IOI to a tactical Buy as we view the recent selldown as overdone and IOI’s fundamentals remain intact.

RHB Capital RM8.90: Hold
Strong loan growth todate

Hold maintained. Earnings were slightly short of expectations due to higher provision costs and elevated administrative costs, for which we are now factoring in. Coupled with expectations of ongoing margin pressure, we have lowered our 2011 and 2012 net profit forecasts by 2.5% and 5.5% respectively. Our TP is unchanged at RM9.40, pegged to a 2012 P/BV of 1.6x (ROE: 14.3%).

Telekom Malaysia RM4.00: Buy
Fast growth in data revenue Shariah-compliant

Maintain Buy. 1H11 results were broadly within expectations and what is positive is that non-voice revenue (NVR) continues to grow at a faster-than-expected pace and now accounts for 60% of total revenue. We maintain our earnings forecasts and Buy call on TM for its stable cashflows, defensive yields of 6.3% and look to potentially higher dividend payouts in the future. Our DCF-based TP is raised to RM4.60.

IJM Corporation RM5.81: Hold
Profit normalises Shariah-compliant

Maintain Hold. Results were in line with RM115m 1QFY12 net profit making up 24.6% of our full-year forecast. Profit normalises post major kitchen-sinking in 4QFY11. Core net profit rose 34% YoY and 9% QoQ with plantation being the "star" contributor to both the YoY and QoQ profit expansion. We retain our earnings forecasts, and RM6.50 RNAV-based target price, which implies 17.7x calendar year 2012 PER.

Lafarge Malayan Cement RM7.01: Buy
Local demand rebounding Shariah-compliant

Below expectations. 1H11 topline was largely inline with our forecast but net profit of RM129m (+4% YoY) was just 34% of our full-year forecast and 36% of consensus. We lower our 2011 net profit forecast by 20% and 2012-13 by 3-6%. Subsequently, our TP is reduced to RM7.85 (from RM8.50; -8%) based on unchanged 17x 2012 PER. The stock currently trades at 15.2x 2012 PER and we see upside potential as LMC had traded up to 17x in the 2007 peak cycle. Maintain Buy.

Genting Plantations RM7.04: Hold
A good quarter Shariah-compliant

Ahead of expectations. 2Q11 recurring net profit of RM140m (+48% QoQ, +127% YoY) brings 1H11 recurring net profit to RM234m (+79% YoY), meeting 57% and 53% of our and consensus full-year forecasts respectively. We tweaked our 2011-13 EPS by -1% to 3% incorporating marginally higher FFB production outlook and labour cost increase. We change our valuation methodology to PER (from SOP) pegging the stock at last 4-year's forward rolling PER of 14.5x (on FY12 earnings). Maintain Hold at a lower TP of RM7.48 (-13%).

Multi-Purpose Holdings RM2.75: Buy
The best is yet to come

Reaffirm Buy call. Multi-Purpose Holdings (MPHB) recorded results that were above expectations due to lower than theoretical prize payout ratios. We expect MPHB to record core net profit of some RM100m per quarter going forward on 100% ownership of Magnum Holdings effective 10 Jun 2011. MPHB also declared an interim DPS of 5 sen less tax or 25% higher than expected.

KFC Holdings (Malaysia) RM3.86: Hold
Domestic growth still strong Shariah-compliant

1H11 on track. 1H11 net profit of RM72.5m was within our expectations at 42% and 43% of our full-year forecast and consensus respectively. Revenue growth was seen across all 3 segments in the group but only the restaurant segment was profitable. Maintain Hold, We expect a seasonally stronger 2H to make up our full-year forecast of RM172m. Our TP of RM3.97 is unchanged and tags on a prospective 2012 PER of 16.2x.

Media Prima RM2.76: Hold
Expenses and risks ahead of revenues

Expenses and risks rising. Media Prima (MPR) reported 1H11 results which were below expectations on higher than expected expenses. In addition, adex growth, especially TV, slowed sharply and is expected to decelerate further into 4Q11. We trim our earnings estimates by 11%-12% on higher operating expenses. We also downgrade our TP from RM3.25 to RM2.90 and call from Buy to Hold.
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Kossan Rubber Industries RM2.78: Buy
Earnings bottomed; time to relook Shariah-compliant

Expect stronger 2H11. 1H11 net profit of RM44m (-27% YoY) made up 36% of our full-year forecast and consensus, within our expectation. Current share price is low-risk entry level: (i) stock fell 35% since a year ago, fully reflecting weaker earnings in the corresponding period; (ii) earnings should rebound in the sequential quarters on expansion into the high-margin nitrile and surgical glove segments; and (iii) glove sector is a safer haven amid a global recession fear. Maintain Buy and DCF-derived TP of RM3.60 (9x 2012 PER).

Kinsteel RM0.585: Hold
Losses widened Shariah-compliant

Staying sideline. 1H11 net loss of RM10m (1H10: RM31m net profit) is significantly below our full-year net profit expectation of RM10m and consensus' RM32m. Though share price is at its 2-year low, we would only Hold Kinsteel as: (i) the stock is of high-beta; and (ii) near-term earnings are unlikely to turnaround sharply due to the high imported iron ore cost. Maintain Hold with lower TP of RM0.61 (from RM0.65), valuing Kinsteel based on 1x P/NTA (from 8x 2012 PER).

Tanjung Offshore RM0.85: Hold
Turnaround but concerns remain Shariah-compliant

Maintain Hold. TOFF's 2Q results were a positive surprise, which led us to raise our 2011-13 forecasts. While operating momentum appears to have recovered in 2Q, further earnings visibility is required, for cost management remains a concern at this juncture. Moreover, its stretched balance sheet is an impediment to growth, in our view. Until then, we rate TOFF a Hold with a lower target price of RM0.98, based on 0.8x book for 2011 after rolling over valuations from 2010.
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Technicals
The FBM KLCI tumbled 13.22 points to close at the 1,469.15 yesterday. Its resistance areas of 1,469 and 1,492 will cap market gains, whilst the weaker support areas are located at 1,423 and 1,454.Due to the US markets’ rebound tone last night; we may see a “gap-up move for the local bourse today.

Trading Idea is CIMB

Other Local News
SapuraCrest-Kencana: Merger on track. The merger of SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd is expected to take place by the first quarter of next year and the recent approval by the SapuraCrest and Kencana boards had set in motion the establishment of an integration committee. (Source: The Star)

Perodua: Receives 31,000 orders for new Myvis. Perodua has received 31,000 orders for its newly-launched Myvi. 14,000 units have been delivered and the remaining will be delivered in phases. About 8,000 new Myvis are delivered to the owners every month. (Source: Bernama.com)

Nadayu: To launch projects worth RM1.5b. Nadayu Properties Bhd aims to launch three projects worth a combined RM1.5b in the Klang Valley and Penang from next month. Nadayu intends to return dividends to shareholders and believe overtime, it will have local and foreign funds investing in the company. (Source: Business Times)

Plantation: Aussie govt to oppose palm oil labelling Bill. The Australian Government will oppose a Liberal-National Party coalition-supported anti-trade Private Member's Bill on compulsory palm oil labelling as it would breach Australia's obligations under the World Trade Organisation (WTO). (Source: Business Times)

Property: Freeze on Klang River land deals. The government has ordered a freeze on all transactions of government-owned land near the Klang River in the city centre pending efforts to clean up the river. The move is to enable the government to extract better value from its land by doing deals only after it can factor in proximity to a beautiful riverfront as a value enhancer. (Source: The Edge Financial Daily)

Building materials: MISIF says Govt move to stop probe into imports of HRC is good. The Malaysian Iron and Steel Industry Federation (MISIF) has lauded the Government's decision to terminate investigations into the import of hot rolled coils (HRC). The decision was good for the healthy growth of the entire iron and steel industry instead of benefiting one company. (Source: The Star)

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Stocks to watch: CIMB, Mudajaya, AirAsia, MAS

KUALA LUMPUR: CIMB Group Holdings Bhd will be among the heavyweights stocks to watch on Wednesday, Aug 24 following the release of its second quarter results which was a record.

Other stocks which could be in focus are MUDAJAYA GROUP BHD [], Axiata Group Bhd and also airlines AIRASIA BHD [] and MALAYSIAN AIRLINE SYSTEM BHD [], which reported a sharp difference in results.

Oil and gas companies would continue to see interest, including pipe manufacturers Wah Seong Corp Bhd following plans for a 200km pipeline off Terengganu.

CIMB’s earnings rose 9.1% to a record RM970 million in the 2Q ended June 30 from RM889 million a year ago, underpinned by the local consumer banking operations and continued high growth at CIMB Niaga. Its earnings rose 5.8% from 1Q.

For the first half, its net profit rose 9.3% to RM1.887 billion which was equivalent to net earnings per share (EPS) of 25.4 sen.

Mudajaya could see strong trading interest after a 11.2% increase in earnings of RM60.29 million in 2Q from RM54.22 million a year ago, mainly due to more activities. Revenue increased by 70.6% to RM356.11 million from RM208.63 million.

Mudajaya declared a second interim single tier dividend of 12.5% or 2.5 sen per share of 20 sen each.

Axiata's net profit rose 14.94% to RM663.05 million in 2Q from RM576.82 million a year ago, mainly due to higher contribution from XL, Idea and Multinet, as well as lower depreciation, amortisation and impairment charges.

Revenue rose to RM4.05 billion from RM3.85 billion. Earnings per share were 8.0 sen compared with 7.0 sen. It declared an interim tax exempt dividend of 4.0 sen per share for FY ending Dec 31, 2011.

However, net profit fell 19% to RM1.21 billion in the first half from RM1.49 billion a year ago. Revenue increased by 4.2% to RM7.99 billion from RM7.66 billion.

AirAsia reported earnings of RM104.25 million in the second quarter ended June 30, 2011 as its operations were affected by higher fuel costs, which rose 31%.

Earnings fell 47.5% from the RM298.93 million a year ago. It declared its maiden dividend of 3.0 sen a share. The low-cost carrier said fuel costs increased by 31% to an average US$140 per barrel from US$106 a year ago.

MAS’ net loss for the second quarter ended June 30, 2011 narrowed to RM526.68 million compared with net loss of RM534.73 million a year ago as it continued to be impacted by the high fuel prices.

Its revenue was RM3.485 billion compared with RM3.213 billion a year ago. Loss per share was 15.76 sen compared with 16 sen. Its derivatives loss was lower at RM56.08 million, a sharp decline from the RM217.16 million a year ago.

However, for the six months ended June 30, MAS’ net loss widened substantially to RM769.02 million from net loss RM224.68 million in 2010.

Petroliam Nasional Bhd and its production sharing partners are embarking on a RM15 billion project to extract gas from fields off Peninsular Malaysia which includes a new 200km pipeline.

Petronas said the project comprises nine discovered gas fields within Blocks PM301 and PM302 and in the Bergading contract area, about 300km off the coast of the peninsula. “It will also involve the development of a new 200km pipeline to transport gas from the fields to Kerteh, Terengganu. The project is estimated to cost RM15 billion,” it said.

IJM Land Bhd expects local property market to remain resilient this year, underpinned by stronger demand as younger people were also buying property.

IJM Land's current unbilled sales is just over RM1 billion which would last the group two years. It plans to launch RM2 billion worth of projects in FY2012.

DIGISTAR CORPORATION BHD []’s net proft surged 425% to RM6 million from RM1.14 million a year ago and expected the momentum to continue into the next quarter as it expands its customer base in the provision of IPTV services to hospitals. Revenue slipped 30.9% to RM24.85 million from RM35.98 million. Earnings per share were 2.88 sen compared with 0.62 sen.

For the first half ended June 30, Digistar's net profit jumped 616% to RM15.02 million from RM2.09 million while revenue increased 15.5% to RM75.99 million from RM65.75 million.

Al-'Aqar KPJ REIT reported earnings of RM11.03 million in the second quarter ended June 30, 2011, which was just 0.8% higher that the RM10.94 million a year ago. Revenue rose 14.1% to RM19.82 million from RM17.21 million while earnings per share were 1.90 sen compared with 1.89 sen.

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Maybank IB Views

KNM Group RM1.48: Sell
Poor delivery, Sell Shariah-compliant

Downgrade to Sell, target price cut to RM1.19 (-41%). 1H results were a letdown, prompting us to cut 2011-13 earnings by up to 64% p.a.. While KNM delivered on topline, bottomline was a disappointment, felled by cost overruns and high operating expenses. While the share price has underperformed by 48% YTD, we expect performance to be further suppressed. There is no sign of an operating recovery and cost control is absent. Further, valuations are expensive now.

Alam Maritim Resources RM0.78: Hold
Results improve but recovery lingers Shariah-compliant

Pacing but not running. Alam returned to profitability in 2Q but overall, 1H results still missed expectations. Operationally, Alam is showing signs of a turnaround but the catalyst to warrant an upgrade remains elusive. Its stretched balance remains a concern, debilitating its ability to grow. Maintain Hold with a lower target price of RM0.85, based on a reduced 9x 2012 EPS (versus 12x previously).

QL Resources RM2.98: Buy
Margin erosion Shariah-compliant

Below expectations. 1QFY12 results were below consensus and our full-year numbers, with margin contraction seen in the 2 main divisions. Total net profit of RM27.8m (+3.7% YoY, -11.9% QoQ) made up 17% and 19% of our forecast and consensus for FY12. We do expect stronger earnings in the coming quarters and QL remains a Buy. Our forecasts are nevertheless revised down on lower margin expectations and our target price is lowered to RM3.39.

Technicals
The FBM KLCI fell 11.82 points to close at the 1,472.16 yesterday in persistent selling activities. Its resistance areas of 1,472 and 1,500 will cap market gains, whilst the weaker support areas are located at 1,423 and 1,467.


Other Local News
Aeon: Upbeat on 'new' Jusco at 1Utama. Aeon Co (M) Bhd expects the newly renovated and relocated Jusco store in 1Utama Shopping Centre to ring in more sales than previously. The Japan-based retailer is optimistic that it will make RM300m within a year from yesterday. It had made over RM200m in a year previously. (Source: Business Times)

CIMB: Among banks hired for planned MU listing. English football club Manchester United has hired a slew of banks including Malaysia's CIMB Group for its planned listing on the Singapore stock exchange. The US-based Glazer family hired Hong Kong-based BOC International, Malaysia's CIMB, Singapore's DBS and pan-Asian investment bank CLSA as joint lead managers, in a move that suggested the owners are keen to get a well-diversified regional spread of investors. (Source: Business Times)

Maxis: In cloud computing connection with MDeC. Maxis Bhd aims to work closely with the Multimedia Development Corp (MDeC) to establish joint programmes to promote adoption of cloud computing services for independent software vendors. The collaboration will accelerate the adoption of cloud technology by software vendors and businesses. It will also pave the way for an array of enterprise-grade cloud solutions to become available to Malaysian businesses. (Source: Business Times)

IJMP: To invest over RM1b to double up Indonesian venture. IJM Plantations Bhd is investing more than RM1b to double its total planted area in Indonesia to 40,000ha and expects to see substantial earnings contribution from the venture from 2014 onwards. IJM Plantations expects Indonesia to contribute one third of its earnings when planting is completed in Indonesia by 2014 and eventually its contribution is expected to be bigger than the earnings from its Malaysian plantation. (Source: The Malaysian Reserve)

Transportation: Prasarana to manage MRT issues till handover. Syarikat Prasarana Negara Berhad (Prasarana) will continue to manage all issues related to the My Rapid Transit (MRT) project until the establishment of MRT Co. Prasarana would carry on with all works and programmes that has been decided before it officially hands it over to the new MRT Co. (Source: The Edge Financial Daily)

Read more...

Stocks to watch: Mudajaya, Fitters, Maybank, Supermax

KUALA LUMPUR: The markets may see some tentative recovery on Tuesday, Aug 23 after the selling on Monday, as investors scout for fundamentally strong companies despite the current uncertainties globally.

The fresh batch of results in the quarter ended June 30 should provide the data investors need to make their decisions, for instance companies like QL RESOURCES BHD [] and smaller cap stock like FITTERS DIVERSIFIED BHD [] which are beginning to reaping the benefits of their palm oil and renewable energy ventures.

MALAYAN BANKING BHD [] did not disappoint as its earnings rose 26.5% to RM1.15 billion in the fourth quarter ended June 30, 2011 from RM912.47 million a year ago.

However, glove maker Supermax Corp Bhd reported a decline in earnings due to continuously high volatility in latex prices and unfavourable exchange rates.

Stocks to watch are Mudajaya Corp Bhd, Fitters, Maybank and Supermax. Other companies with fresh corporate news are Prestariang Bhd, KNM GROUP BHD [] and Guocoland Bhd while JCY International continued to disappoint investors.

Mudajaya clinched a RM720 million contract for the design and civil works for part of the Manjung power plant.

Its unit had signed a subcontract with CMC Machipex Sdn Bhd for the detailed design and CONSTRUCTION [] of all civil works associated with the balance of plant component of Manjung No. 4 power plant project.

Fitters’s earnings were given a boost by its renewable energy and palm oil business in the second quarter ended June 30, with net profit at RM4.58 million, up 100.8% from RM2.28 million a year ago.

Its revenue surged 233.7% to RM116.70 million from RM34.96 million a year ago while earnings per share were 2.12 sen compared with 1.13 sen.

QL Resources Bhd’s earnings edged up 3.7% to RM27.79 million in the first quarter ended June 30, 2011 from RM26.79 million a year ago.

Its revenue increased 18.2% to RM454.56 million from RM384.51 million. Earnings per share were 3.34 sen compared with 3.43 sen.

It said the higher revenue was due to the marine product manufacturing at RM104.66 million, palm oil activities RM114.85 million and integrated livestock farming RM235.05 million.

Maybank's earnings rose 26.5% to RM1.15 billion in the fourth quarter ended June 30, 2011 from RM912.47 million a year ago.

It said the financial performance was boosted by income from its Islamic banking and also its insurance business also also lower allowance for losses on loans, advances and financing

Maybank’s revenue increased by 20.9% to RM5.72 billion from RM4.73 billion. Earnings per share were 15.54 sen versus 12.89 sen a year ago. Its board of directors proposed dividend of 32 sen per share compared with 44 sen a year ago.

Prestariang secured a RM28 million contract from the Ministry of Higher Education to implement the 1Citizen Certification provide “IC Citizen” training and certification in all public and selected private higher learning institutions.

The programme was expected to run for 24 months from its official start date and would cater to 80,000 students from 20 identified public institutes of higher learning including universities, polytechnics and community colleges in Malaysia, as well as selected private institutes of higher learning.

Supermax saw its earnings slip 50.6% to RM22.64 million in the second quarter ended June 30 from RM45.85 million a year ago as profit margins were eroded owing to continuously high volatility in latex prices and unfavourable exchange rates

Revenue dipped 1.3% to RM237.92 million from RM234.82 million while earnings per share were 6.66 sen compared with 13.51 sen. It did not declare any dividends unlike a year ago when it paid out 2.5 sen a share.

For the first half, its net profit slumped 51.7% to RM46.96 million from RM97.33 million in the previous corresponding period but its revenue was 5.2% higher at RM479.29 million compared with RM455.47 million.

KNM’s net profit for the second quarter ended June 30, 2011 fell 23.2% to RM10.86 million from RM14.14 million a year earlier, due to slower improvement in capacity utilisation in certain operating units. Revenue for the quarter rose to RM544.30 million from RM383.21 million in 2010 due to higher revenue recognition. Earnings per share was 1.11 sen while net assets per share was RM1.83.

For the six months ended June 30, KNM’s net profit fell 45.1% to RM29.87 million from RM54.48 million in 2010, on the back of revenue RM957.30 million.

Guocoland’s fourth quarter earnings rose 94.6% to RM22.34 million from RM11.47 million, boosted by higher share of results from associates and improved profit from its property development division.

Revenue increased by nearly 95% to RM58.48 million from RM30.02 million while earnings per share were 3.33 sen versus 1.71 sen. It proposed dividend payment of 2.0 sen a share.

For the financial year ended June 30, 2011, its net profit rose 42.9% to RM19.96 million from RM13.96 million while revenue declined 11% to RM142.77 million from RM160.52 million.

Hard-disk drive manufacturer JCY posted net loss RM31.86 million in the third quarter ended June 30, 2011 compared to net profit RM55.59 million a year earlier due mainly to higher raw material prices, inventory provision from depreciating US dollar and slow moving stocks.

Revenue for the quarter fell 17.8% to RM395.17 million from RM480.79 million a year ago. Loss per share was 1.56 sen compared with earnings per share of 2.72 sen.

For the six months ended June 30, JCY posted net loss RM11.89 million compared with net profit of RM198.94 million in 2010. Its revenue was RM1.23 billion compared with RM1.56 billion a year ago.

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Maybank IB Views

MISC RM7.10: Sell
Brace for further impact Shariah-compliant

Poor visibility. We cut our 2012 EPS forecast by a further 19% post analyst briefing for Apr-Jun 2011 results. Visibility continues to be poor, extending up to 2013. We do not see a recovery in the liner, chemical and petroleum divisions, hit by supply overhang and depressed rates. This offsets positives from the other divisions: heavy engineering, offshore, and LNG shipping. Our TP of RM6.44 remains unchanged, based on a 15% discount to our SOP valuation.

Malaysia Airports Holdings RM6.45: Buy
Higher charges, finally

Positive surprise. MAHB has confirmed that it has been granted the approval to impose higher charges on: (1) international passengers (passenger service charge or PSC); (2) landing for aircraft; and (3) parking for aircraft. This will take effect on 15 September 2011 and will positively impact future earnings. MAHB is our top aviation pick as it is well placed to enjoy the longer term growth in air travel. Maintain Buy, with an unchanged target price of RM7.55/share DCF-based.

Hock Seng Lee RM1.46: Buy
A new water job Shariah-compliant

Small replenishment; maintain Buy. HSL's RM45.7m job win will lift its outstanding order book to RM1.15b, and contribute RM5.5m in net profit into 2012, we estimate. We maintain our earnings forecasts having imputed job win assumptions earlier. We are still positive on HSL for an exposure to Sarawak construction. Our target price is unchanged at RM2.30 based on 12x 2012 PER. Share price has fallen back to single digit valuations alongside the weak broader market; the stock is looking more attractive at current levels.

RESULTS PREVIEW
AirAsia RM3.64: Hold
Challenging 2Q11 Shariah-compliant

Yields, fuel and Firefly. We expect AirAsia's 2Q11 to show a marginal YoY profit growth buoyed exclusively by its Thai associate. We expect the Malaysian and Indonesian operations to exhibit profit drop due to 28% rise in fuel prices and soft yield environment, consistent to the industry and further exacerbated by Firefly’s jet operations services to East Malaysia. We maintain our Hold call at RM3.36 target price, based on 9.0x 2011 PER which is 10% discount to global LCCs’ PER.

Malaysian Airline System RM1.66: Buy
2Q11: Expect losses

Yields, fuel and Japan. MAS will release its 2Q11 results on 23 Aug. 2Q11 is expected to be loss-making due to the impact of 28% higher fuel price YoY and some impact from the MENA civil unrest and Japanese natural disasters. Despite this negative environment, we advice investors to overlook this quarter as the Company’s future is much better now with stabilizing fuel price, new aircraft benefits and the tie-up with AirAsia. We maintain our Buy recommendation with a target price of RM2.70, pegged to 9.0x 2012 PER - on par with global peers.
Click here for full report »
RESULTS REVIEW
UMW Holdings RM7.22: Hold
O&G sees red, auto loses traction Shariah-compliant

Challenging mid-term prospects. UMW's 2Q underperformance validates our contrarian view and concerns over its O&G and auto operations. Issues like the supply chain from Japan's March earthquake and tsunami and anti-dumping effect will persist in 2H. Maintain Hold with a RM7.20 target price, based on 12x 2011 EPS.

TSH Resources RM3.15: Buy
Windfall harvest Shariah-compliant

Outperformed. TSH's 1H11 net profit of RM60m (+165% YoY) accounted for 59% and 54% of our and consensus full year estimates respectively. TSH outperformed expectations backed by higher than expected FFB production. We raise our 2011 earnings forecast by 7.1% but trimmed 2012-13 forecasts by 0.6-0.7% on higher wages assumption by RM200 per month for Malaysian plantation workers. We maintain our Buy call with an adjusted TP of RM3.81 (15x 2012 PER; previously RM3.84) on the lowered earnings.
Click here for full report »
Eversendai Corporation RM1.68: Buy
Buy ahead of job-flows Shariah-compliant

Results show strong growth. 1H11 net profit of RM57m was 46% of our full-year forecast and 49% of consensus. We initiate coverage on Eversendai with a Buy and TP of RM2.17 (based on 12x CY12 PER). Key attributes: (i) job-flow prospects are bright and we expect major wins in the next 6 months; (ii) Eversendai has built itself an above-industry margin business franchise yet valuation of 9x 2012 PER is at a 30% discount to big-cap peers; (iii) our belief that pump-priming is an obvious and politically easy tool in addressing macro-economic slump.

ACQUISITIONS / DISPOSAL
Star Publications (Malaysia) RM3.39: Hold
Revises terms of disposal for Section 13 land Shariah-compliant

More favourable terms. Star's new agreement with JAKS Island Circle (JIC) to raise the consideration for its Section 13 land sale by RM24m to RM135m is positive. The land disposal will add 14 sen/sh in value by end-2014. We however maintain our earnings estimates as the timing for the gain recognition is beyond our estimates horizon. We also maintain our Hold call and RM3.54 DCF-based TP.

Technicals
The FBM KLCI added a meagre 0.31-points and closed at 1,483.98 last Friday. The weaker support areas for the FBM KLCI are located in the 1,423 to 1,477-zone. The next resistance levels of 1,483 and 1,597 will see heavy selling and liquidation activities.

Trading Idea is Tenaga

Other Local News
SunCity and Sunway: To be delisted. The shares of Sunway City Bhd (SunCity) and Sunway Holdings Bhd would be delisted from the Main Market of Bursa Malaysia on Aug 23. The new entity would be known as Sunway Bhd. (Source: Bursa Malaysia)

MMHE: Secures RM952m contracts. Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) has secured two contracts worth RM952m from MISC Bhd for topsides fabrication, marine repair and conversion of two energy vessels. (Source: Bursa Malaysia)

Crescendo: Plans RM2.5b township. Crescendo Corp Bhd (CCB) is set to launch its new mixed development property project, Bandar Cemerlang township in Mukim Tebrau, Johor Baru with a gross development value (GDV) of RM2.5b by year-end. The completion of the Johor Baru-Kota Tinggi highway in June this year has improved accessibility and connectivity to its project. (Source: The Star)

Green technology: Green loans. Commercial banks, which are currently shying away from lending to green companies, may have to set aside an allocation to finance green technology projects. Malaysian Green Technology Corp (MGTC) CEO Dr Nazily Mohd Noor said this was one of the suggestions made during a discussion at the Green Technology and Climate Change Council, chaired by the Prime Minister Datuk Seri Najib Razak, two weeks ago. (Source: Business Times)

Property: Foreigners not shying away from prices. Malaysia property products are currently hot on the radar of international investors and property buyers, in view of the domestic real estate market potential to see a steady growth in prices. (Source: The Malaysian Reserve)

EPF: Confirms buying London office block for RM740m. The Employees' Provident Fund (EPF) has confirmed that it has purchased an office block in St James's Square, London, where one of the tenants has one of London's highest rents, for RM740m. This marks EPF's fourth property investment in London since announcing an allocation of RM1b for British property purchases about a year ago. Including this latest purchase, it has spent RM634m. (Source: The Star)

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Stocks to watch: Maybank, MMHE, Tenaga, TSH

KUALA LUMPUR: Regional markets including Bursa Malaysia will continue to see downside pressure in the week ahead, starting Monday, Aug 22, tracking losses on European and US markets.

The FBM KLCI closed down 1.29% on Friday, or 19.32 points to 1,483.98, weighed by losses including at Genting and CIMB.

For the month, the KLCI is down 78 points while RM132.76 billion has been erased from the market capitalisation. A major concern is that another week of selldown could trigger margin calls on assets pledged with equities.

On Wall Street, stocks fell for the fourth week of losses amid mounting fears of another U.S. recession while Europe's financial system faces destabilisation, Reuters reported.

The Dow Jones industrial average fell 172.93 points, or 1.57%, to end at 10,817.65. The Standard & Poor's 500 Index dropped 17.12 points, or 1.50%, to 1,123.53. The Nasdaq Composite Index slid 38.59 points, or 1.62%, to close at 2,341.84.

For the week, the Dow ended down 4%, the S&P 500 dropped 4.7% and the Nasdaq lost 6.6%.

Stocks to watch on Monday include MALAYAN BANKING BHD [] (Maybank), Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE), TENAGA NASIONAL BHD [] and TSH RESOURCES BHD [].

Other counters which could see trading interest are PLUS Expressway Bhd, UMW HOLDINGS BHD [] and TAN CHONG MOTOR HOLDINGS BHD [].

Maybank will announce its fourth quarter results and expectations are that it could announce attractive dividends, as reflected that its share price was holding much steadier over the week compared with other heavyweights over the past week.

MMHE has secured two contracts worth RM952 million from MISC BHD [] for topsides fabrication, marine repair and conversion of two energy vessels.

Tenaga may continue to see more selling pressure after falling to a new 52-week low of RM5.55 on Friday. Hefty fuel costs which could reach an additional RM400 million a month would continue to weigh on the power giant while analysts had also downgraded the stock.

TSH posted a record pre-tax profit of RM51.63 million, which was 192% above the RM17.69 million a year ago in the second quarter, boosted by its PLANTATION []s business, especially from its Indonesian operations.

Its net profit increased by 217% to RM35.96 million from RM11.32 million a year ago. Its revenue rose 59% to RM329.95 million from RM207.47 million. Earnings per share were 8.77 sen compared with 2.77 a year ago.

PLUS, which is being taken private, reported second quarter earnings rose 28.7% to RM383.49 million from RM297.86 million a year ago, boosted by an increase in toll collection by RM41.10 million.

UMW earnings fell 38% to RM131.18 million from RM211.69 million a year ago, due mainly to lower contributions from its automotive and manufacturing & engineering segments. Revenue dipped 3.6% to RM3.16 billion from RM3.28 billion. Earnings per share were 11.26 sen while net asset per share was RM3.66.

The Edge weekly reported that production at Tan Chong Motor Holdings' assembly plant in Segambut is being ramped up to meet the rising volume of brands owned by its sister companies. Thus, the group has decided to defer its property development plan for the tract on which the assembly plant is located.

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Maybank IB Views

Construction: Overweight
LRT final packages go to Sunway, MRCB

Maintain Overweight. Sunway's RM569m win is a pleasant surprise after press reports of the Kelana Jaya Line Package B going to TRC Synergy. MRCB's RM1.33b win is also above the RM800m-RM900m estimates for the Ampang Line Package B. The LRT chapter, in terms of awards for the civil works portion, is coming to an end, with all eyes now to focus on the MRT which will enter the tendering stage for the elevated works portion – to be called in stages over Sept-Dec 2011. Our fair value for Sunway is RM3.85 while we are Not Rated on MRCB.

COMPANY UPDATE
Dialog Group RM2.67: Buy
New leg, new growth, new perspective Shariah-compliant

Bagging the Balai RSC is sentiment positive. Dialog is in good hands. RoC Oil and PCSB are reputable partners. Funding is not an issue. While Balai is expected to be more challenging than the Berantai project, the risk is mitigated as capex is fully recoverable under the RSC. We opine that the consortium will likely bag the next RSC (i.e. Belantara) to make it a more economical investment. Maintain Buy with an unchanged RM3.35 target price, based on sum-of-part valuations.

RESULTS REVIEW
Kuala Lumpur Kepong RM21.10: Hold
Big boost from FFB output recovery Shariah-compliant

Downgrade to Hold. 3QFY11 RM420m recurring net profit (+72% YoY,+85% QoQ) brings 9MFY11 recurring net profit to RM1,047m (+49% YoY), which met 78% and 74% of our and consensus full-year forecasts. The results were marginally above our forecast on a lower tax rate. We tweak up our 2011 forecast. The stock has outperformed the KLCI since we first upgraded our call on 24 Jun 2010, chalking up 29% in capital gain. We change our valuation methodology to PER (from SOP) pegging the stock to 16x FY12 based on an unchanged 2012 RM3,000/t CPO ASP assumption for the sector. Given limited upside to our new TP of RM21.60, we downgrade the stock to a Hold.

WCT RM2.87: Buy
Impacted by forex Shariah-compliant

Below forecasts. RM75m 1H11 net profit (+9% YoY) made up 41% of our full-year forecast of RM184m due to an unexpected RM13m forex loss from the stronger Ringgit. We have lowered our 2011-12 forecasts by 8-9%. Our new target price is RM3.50 based on SOP (unchanged 15x 2012 PER + 20sen value increment from KLIA2 retail concession). Share price has consolidated along the broader market with the stock trading at 12.9x one-year forward earnings. Maintain Buy.

JT International RM6.90: Buy
Momentarily weaker

Below expectations. JTI's 1H11 net profit of RM65m (-8.9% YoY) accounts for 45% and 47% of our and consensus full-year forecasts. The shortfall in earnings was due to higher than expected marketing costs and lower sales volumes, implying downside risk to our 2011 estimates. We maintain our earnings forecasts pending an analyst briefing today. Valuations are still low with the stock trading at 11.1x 2012 PER. Our DCF-based TP implies 13x 2012 PER.

Technicals
The FBM KLCI inched down by 1.50 points to close at 1,498.24 yesterday. Its resistance areas of 1,498 and 1,515 will cap market gains, whilst the weaker support areas are located at 1,454 and 1,486.Due to the US markets’ fall last night; we will see some volatile trading activities in the local bourse today. Some heavy profit-taking and liquidation activities will persist to depress the markets’ rebound from its recent 1,423.47 low. We see a longer-term decline for the local and foreign indices.

Trading Idea is a Take Profit call on TENAGA.

Other Local News
MPHB: Confirms talks to dispose of Menara Multi-Purpose. Multi-Purpose Holdings Bhd (MPHB) said it is in talks with various parties to dispose off its non-core assets including Menara Multi-Purpose. (Source: The Edge Financial Daily)

MAHB: Revises charges for airlines, passengers. Malaysia Airports Holdings Bhd (MAHB) would be implementing new international passenger service charges (PSC) as well as aircraft landing and parking charges at airports operated by the group on September 15. The government has given its approval and that it was in line with the Operating Agreement signed between the government and MAHB in February 2009. (Source: Business Times)

O&G: Gas Malaysia listing slated for 4Q. MMC Corp Bhd plans to list Gas Malaysia Sdn Bhd on the Main Board of Bursa Malaysia by the fourth quarter of this year. The company has appointed Maybank Investment to advise on the initial public offer exercise. (Source: Business Times)

Bina Puri: Wins RM470.3m contract. Bina Puri Holdings Bhd, via its wholly-owned unit Bina Puri Construction Sdn Bhd, has been awarded a contract worth RM470.3m for the proposed development of a tourist recreational and commercial development at KK Times Square (Phase II) in Kota Kinabalu, Sabah. (Source: Bursa Malaysia)

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RHBInvest Research

Top Story: MNRB – Slower premium growth, claims ratio to remain stable Outperform

Briefing Note

¨ We expect gross premiums for MNRB’s main subsidiary, Malaysian Re, to continue growing underpinned by our gross premium growth estimate for the general insurance industry of 7-8% p.a.. However, due to the weaker global economic outlook, we have trimmed our FY03/12-14 gross premium growth estimates for Malaysian Re to 13% p.a. (from 15% previously).



Corporate Highlights



MAS: Underlying assumptions may be too simplistic Market Perform

Briefing Note

¨ MAS struggled to defend its decision to put an end to its low-cost jet operation under Firefly and we feel that it has failed to dispel the perception that the decision was a “concession” made to AirAsia/Tune Air.



Amway: Weaker consumer sentiment expected in 2HFY11 Outperform

Briefing Note

¨ We understand that Amway plans to convert a few more Regional Distribution Centres (RDC) to shops by the end of FY11, although they did not reveal any targets as to how many shops will be converted.



AMMB: Good start but management cautious of outlook ahead Outperform

1QFY12 Results / Briefing Note

¨ AMMB reported a strong set of 1QFY03/12 results, with net profit of RM441.5m (+19.9% yoy; +39.6% qoq) accounting for about 28.5% of our and consensus full-year estimates. The results were helped by gains from the disposal of AFS securities and low loan impairment allowances, both of which more than offset the sharp NIM contraction, but should “normalise” ahead.



Affin: Loan growth picked up pace Market Perform

2QFY11 Results

¨ 2Q11 net profit of RM134m (+20% yoy, +26.5% qoq) brought 1H11 net profit to RM240m (-2.7% yoy), in line with our and consensus expectations.



ILB: Start-up losses weigh down on 1HFY12/11 performance Outperform

2QFY11 Results

1HFY12/11 net profit came in below our expectations at only 10% of our full-year forecast largely due to start-up losses from its new operations in Chongqing and Xiamen, China.

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Maybank IB Views

Multi-Purpose Holdings RM2.77: Buy
Buy now or forever hold your piece

Great long term play. We initiate coverage on Multi-Purpose Holdings (MPHB) with a Buy call and RM3.60 TP (10% discount to RM4.00 SOP/sh). Its current share price reflects only Magnum Corporation's value without any value ascribed to its other businesses. We expect 14% 3-year forward earnings CAGR with 100% ownership of Magnum Corporation. A major re-rating catalyst is the gradual disposal of non-core assets which could enable it to pay up to 44 sen in special DPS and 20 sen in recurring net DPS, offering a whopping 7% net yield.

RESULTS REVIEW
AMMB Holdings RM6.48: Buy
Treasury gains support momentum

Maintain Buy. While 1QFY12 results were slightly above expectations our forecasts are lowered marginally. AMMB remains a Buy for: (i) its decent valuations, (ii) its ongoing portfolio rebalancing, (iii) ongoing investment in business line expansion under ANZ, and (iv) its position as a beneficiary of the Economic Transformation Programme. Our target price is trimmed to RM7.40 (-10sen) on an unchanged FY13 P/B target of 1.8x (ROE: 14.3%), which we believe is reflective of fundamentals.

Technicals
The FBM KLCI rose 16.07 points to close at 1,499.74 yesterday. Its resistance areas of 1,501 and 1,530 will cap market gains, whilst the obvious support areas are located at 1,454 and 1,499.Due to the US markets’ rebound last night; we will see some volatile trading activities in the local bourse today. Some heavy profit-taking and liquidation activities will emerge later to depress the markets’ rebound from its opening “gap up” move.

Trading idea is a Short-Term Buy call on BRDB

Other Local News
Sunway: No plans to postpone listing. The listing of Sunway Bhd, the merged entity of Sunway Holdings Bhd and Sunway City Bhd, will proceed as planned despite recent turbulence in the stock market. The shares of Sunway Bhd are scheduled to be floated on Bursa Malaysia on August 23 and expected to have a market capitalisation of over RM3.5b. (Source: Business Times)

AirAsia: New AirAsia Philippines vows to be 'substantially' cheaper. AirAsia launched a new affiliate in the Philippines yesterday, promising to undercut its rivals on regional and domestic routes. To minimise costs and avoid Manila's crowded terminals, AirAsia Philippines will fly out of a former US air base that had been turned into an industrial zone in Clark about 90 minutes' drive north of the country's capital. (Source: The Star)

MAHB: In talks with BA and Qantas on using KLIA. Malaysia Airports Holdings Bhd (MAHB) is still in talks with British Airways and Qantas Airways on the possibility of both airlines mounting flights to KL International Airport (KLIA), a decade after these airlines suspended flights to KLIA owing to a lack of network connectivity here. Both airlines were considering the possibility of flying into KLIA, following Malaysia Airlines (MAS) joining the Oneworld alliance. (Source: The Star)

Parkson: Hires HSBC for Singapore listing. Parkson Holdings is spinning its retail operations in Malaysia, Indonesia, Vietnam and Cambodia in a separate listing in Singapore soon. HSBC has been hired to apply for the corporate exercise and the Singapore's listing. (Source: The Sun)

Dijaya: JV plans property development with GDV RM2.8b. Dijaya Corp Bhd’s joint venture with Iskandar Waterfront Sdn Bhd, Magical Heights Sdn Bhd (MHSB), plans to undertake property projects near Johor Baru with a gross development value (GDV) of RM2.8b. The projects would be built on two pieces of land which MHSB has proposed to acquire from Trident World Sdn Bhd for RM220m. Dijaya and Iskandar Waterfront Sdn Bhd each has a 50% stake in MHSB. (Source: Bursa Malaysia)

Iskandar: Gets RM95b pledges. Iskandar Malaysia attracted about RM95b in committed investments from January to June 2011. This was more than double the cumulative RM47b target for the five years up to 2010. From 2011 to 2015, Iskandar Malaysia is targeted to achieve RM73b in investments. (Source: The Star)

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Stocks to watch: Wing Tai, Dijaya, AMMB, Affin

KUALA LUMPUR: Stocks which could see trading interest on Tuesday, Aug 16 following fresh corporate developments include property players Wing Tai Malaysia Bhd, Dijaya Corp Bhd and banking stocks AMMB HOLDINGS BHD and AFFIN HOLDINGS BHD .

Another company which could see some mild positive interest include HOVID BHD as it tries to extricate itself from the Practice Note 17 status by proposing a dividend-in-specie of CAROTECH BHD shares .

On the downside, GREEN PACKET BHD continue to stay in the red.

Wing Tai Malaysia Bhd’s earnings nearly doubled to RM100.41 million in the financial year ended June 30 from RM53.24 million.

Its revenue rose 4.4% to RM369.81 million from RM354.25 million, mainly due to higher revenue from the trading and property development divisions.

For the fourth quarter, its net profit surged 185% to RM53.28 million in the fourth quarter ended June 30, 2011 from RM18.65 million a year ago.

The property developer expected its apparel and lifestyle divisions to boost its earnings in the new financial year.

Another niche property player, Dijaya Corp Bhd announced its joint venture Magical Heights Sdn Bhd (MHSB) plans to undertake property projects near Johor Baru with a gross development value (GDV) of RM2.8 billion.

The projects would be built on two pieces of land which MHSB was acquiring from Trident World Sdn Bhd for RM220 million.

Dijaya and Iskandar Waterfront Sdn Bhd each has a 50% stake in MHSB.

MHSB had entered into a conditional sale and purchase agreement with Trident World Sdn Bhd to acquire 125 acres of land for RM165 million and 15 acres from RM55 million.

AMMB Holdings Bhd net profit for the first quarter ended June 30, 2011 rose 19.9% to RM441.52 million from RM368.28 million a year earlier, underpinned by higher income growth as well as improved asset quality with lower charge offs and allowances.

Revenue for the quarter rose to RM1.95 billion from RM1.70 billion in 2010. Earnings per share was 14.75 sen, while net assets per share was RM3.54

Meanwhile, Affin Holdings Bhd’s net profit for the second quarter ended June 30, 2011 rose 20.1% to RM134.19 million, due mainly to increase in both net interest income and Islamic banking income.

Revenue for the quarter rose to RM642.77 million from RM534.61 million in 2010. Earnings per share was 8.98 sen while net assets per share was RM3.64.

For the six months ended June 30, Affin’s net profit slipped to RM240.25 million from RM247.04 million in 2010, on the back of a 20% increase in revenue to RM1.26 billion.

Hovid Bhd plans a distribute a portion of its shareholding interest in Carotech Bhd on the basis of one Carotech share for every four Hovid shares to rectify Hovid’s status as a PN17 company.

Hovid said the Carotech shares to be distributed under the minimum scenario was 190.52 million shares while the maximum scenario was 285.78 million shares.

As at July 31, Hovid held 38.45% of Carotech shares (which would be reduced by 20.88% following the dividend-in-specie to 17.57% under the minimum scenario. Under the maximum scenario, it would be reduced by 31.32% to 7.13%.

Green Packet Bhd posted net loss of RM15.24 million in the second quarter ended June 30, 2011 compared with losses of RM18.68 million a year ago, due to higher depreciation of plant and equipment. Revenue rose 42% to RM127.80 million from RM90.01 million while loss per share was 2,3 sen versus 2,8 sen a year ago.

“The 2Q11 loss after tax was higher than 2Q10 mainly attributed by higher depreciation of plant and equipment in accordance with the planned rollout of the broadband infrastructure even with higher revenue from software and broadband business,” it said.

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RHBInvest Research

Top Story: Top Glove – Latex prices set to ease further Underperform

Visit Note

¨ Latex prices have corrected sharply, in tandem with other commodity prices (excluding precious metals) amid concerns of weaker-than-expected economic growth. As such, we have reduced our latex price assumption to RM8.59/kg for FY11 (from RM8.69/kg earlier). Our latex price assumptions of RM7.75-7.90/kg for FY12-13 remain intact.



Sector Call



Property: Vietnam – Good prospect but not an easy market Neutral

Sector Update

¨ Vietnam has been a tough market. This is well known to many investors. The high inflation and lending rate imply that the required rate of return/IRR of any development projects must be at least 30% to make it profitable. The unfavourable economic indicators and the under-developed mortgage market have largely explained why many Malaysian developers have not been aggressive in pushing their launches in Vietnam during the recent property upcycle, when regional property markets are booming.



Corporate Highlights


no
Gamuda: Give me your best shot, comrades! Outperform

Visit Note

¨ MMC-Gamuda JV may have to settle for a low price for the tunnelling works if they have to match the ultra low winning bid from one of the two Chinese contractors, but we believe Gamuda could still optimise to improve profitability.



Notion Vtec: Shifting focus to camera and auto Underperform

Briefing Note

¨ Management appeared to have a more cautious tone on the industry outlook given the weaker-than-expected global economic growth. We understand although management has not witnessed any cut back in orders yet, the current environment poses a risk which could lead to slower-than-expected orders from customers. The HDD industry is not only facing weaker-than-expected IT spending for desktop PCs, it is also facing stiffer competition from tablets. Hence, we understand Notion will focus on the camera and automotive segments going forward.



SP Setia: Beranang? It’s far, but they will make it nearer Market Perform

News Update

¨ SP Setia entered into a SPA for the proposed purchase of a piece of 1,011-acre freehold land in Beranang for RM330m, or RM7.50 psf. The site is estimated to yield a GDV of RM3.5bn.The land is located midway between Semenyih, Bangi Old Town and Beranang. Travelling time is said to be about 40min to KL.



Evergreen Fibreboard: Going upstream into rubber plantation Underperform

News Update

¨ Evergreen has entered into a Mou with four individuals to purchase a 4,410-acre of land for RM37.8m. The land consists of tropical timber and approximately 1,730 acres of the area has been logged.



Dialog: On the mark Outperform

4QFY11 Results

¨ FY11 net earnings of RM152.4m were in line with expectations, rising 29% due to increased contribution from associate earnings (+23%) and better margins from core divisions of 13.4% (vs. 10.2% in FY10).



CSC Steel: 2QFY11 results dragged down by higher raw material costs Underperform

2QFY11 Results

¨ 1HFY11 net profit came in below expectations. We believe the variance against our forecast largely came from worse-than-expected margin contraction in 2QFY11 as a result of weak demand and significantly higher raw material costs.

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Maybank IB Views

S P Setia RM3.85: Buy
"Setia Alam" in the making Shariah-compliant

Leading the new trend. SPSB is spearheading a new relatively untapped trend i.e. affordable housing via its latest sizeable land acquisition in Semenyih (south of KL CBD). The 1,011-acre land, which has been earmarked for affordable housing, would provide steady bread-and-butter sales and support SPSB’s long-term growth. The land could turn out to be another highly successful "Setia Alam" given SPSB's expertise and track record in township development. No change to our earnings forecasts and RM5.00 TP (10% premium to RM4.53 RNAV). Reiterate Buy.

Dialog Group RM2.52: Buy
Above par performance, optimism remains Shariah-compliant

Buy for earnings and dividends potential. Results were ahead of our expectation, on the back of a strong 4Q. We have raised our FY12-13 earnings forecasts by up to 28% (with further upside potential) and we remain optimistic on its long term growth prospect. Dialog remains among our preferred Buys in O&G with an unchanged RM3.35 target price (sum-of-part valuations). We continue to like its business model, focused management and steady dividend payments.

Technicals
The FBM KLCI tumbled 40.76-points and closed at 1,483.67 last Friday. The local market remained very weak due to the global equity indices’ malaise. The volatile global equity rout last week also adversely affected the local market. The weaker support areas for the FBM KLCI are located in the 1,423 to 1,480-zone. The next resistance levels of 1,483 and 1,597 will see heavy selling and liquidation activities.

Trading Idea is a Take Profit call on BURSA.

Other Local News
Aviation: Airlines to pay higher landing, parking charges. Malaysia Airports Holdings Bhd is looking at a possible 30% hike in landing and a 64% increase in parking charges. MAHB is still holding discussions with airlines on whether the increase should be done on a staggered basis or at one go. In a dialogue with foreign airlines last Wednesday, MAHB said it had received the go ahead to raise airport tax for passengers as well as parking and landing charges for airlines. Minister of Transport Datuk Seri Kong Cho Ha has since confirmed the hike in passenger service charge. (Source: Business Times)

HLB: May sell MIMB Investment Bank licence. Hong Leong Bank Bhd (HLB) may sell MIMB Investment Bank Bhd's investment licence which it got following the acquisition of EON Capital's assets and liabilities. HLB has a choice of selling it to Hong Leong Investment Bank or other suitors who might be interested. (Source: The Star)

MISC: May bid for Maersk's LNG vessels. MISC Bhd may put in a bid for a fleet of eight liquefied natural gas (LNG) ships owned by AP Moller Maersk. The bids are understood to be due by end-August, with initial estimates valuing the fleet at USD1.3b (RM3.9b) to USD1.7b. (Source: The Edge Financial Daily)

MPHB: MCA in talks to buy Menara Multi-Purpose. The Malaysian Chinese Association (MCA) is said to be keen on buying Multi-Purpose Holdings Bhd's (MPHB) Menara Multi-Purpose, located near Dang Wangi in Kuala Lumpur. The price tag could in the range of RM350m to RM400m. (Source: The Edge Financial Weekly)

Biotech: ECER gets RM2b boost. South Korea's CJ CheilJedang Corp and France's Arkema SA have announced a RM2b joint venture (JV) to build the world's first bio-methionine plant to produce animal feed in Malaysia. Both companies would commit the amount to be invested over a 10-year period. The plant together with Asia's first thiochemical platform would be located in Terengganu's Kertih Polymer Park in the East Coast Economic Region's (ECER) special economic zone. (Source: The Star)

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Stocks to watch: SP Setia, Dialog, BHIC, Dataprep

KUALA LUMPUR: Markets would continue to be cautious in the week ahead, starting Monday, Aug 15, after the volatile week which saw RM42.18 billion erased from the local market.

The FBM KLCI is down 40.78 points or 2.67% from 1,524.43 on Aug 5 to close at 1,483.67 on Friday, Aug 12. However, the FBM 100 sustained greater losses, declining 304.17 points or 2.96% from 10,267.75 to 9,963.58.

Selling pressure on Bursa Malaysia eased on Friday but buying was still cautious due to external worries from the US and Europe. Analysts said investors were not ready to go on bargain hunting for battered stocks, but there was some evidence of local fund support for the 30-stock KLCI.

On Wall Street, the Dow Jones Industrial Average had on Friday closed 125.71 points, or 1.13% higher, to 11,269.02. The Standard & Poor's 500 Index added 6.17 points, or 0.53%, to 1,178.81. The Nasdaq Composite Index rose 15.30 points, or 0.61%, to 2,507.98.

According to Reuters, it was the first two-day rally on the broader S&P 500 since July 21-22. For the week, the Dow fell 1.5% and the Nasdaq lost 1%. The S&P 500 fell on 11 of the past 15 days, dropping 12.4% in three weeks.

At Bursa Malaysia, stocks to watch include SP SETIA BHD [], DIALOG GROUP BHD [], BOUSTEAD HEAVY INDUSTRIES CORP []oration Bhd (BHIC), DATAPREP HOLDINGS BHD [] and Sarawak Cable Bhd.

SP Setia Bhd plans to undertake a mixed residential township development project in Ulu Langat with an estimated gross development value of RM3.5 billion.

It said the project would be carried out on 1,010.5 acres of freehold land which it is purchasing from Ban Guan Hin Realty Sdn Bhd for RM330.13 million or RM7.50 per square foot.

Dialog Group Bhd’s earnings rose 45.2% to RM44.87 million in the fourth quarter ended June 30 from RM30.89 million a year ago, boosted by its engineering and CONSTRUCTION [] and also plant maintenance services.

Revenue increased by 37.8% to RM374.88million from RM271.95 million. Earnings per share were 2.28 sen compared with 1.56 sen. It proposed a final single tier dividend of 18% or 1.8 sen per 10 sen share.

For the FY ended June 30, its earnings rose 24.2% to RM152.29 million from RM118.29 million while revenue increased by 6% to RM1.208 billion from RM1.139 billion. Its cash pile increased to RM274.32 million as at June 30 fromRM258.07 million a year ago.

BHIC’s net profit for the second quarter ended June 30, 2011 fell to RM1.39 million from RM15.8 million earlier due to escalation in costs to complete its current projects.

Its revenue for the quarter rose to RM120.76 million from RM104.47 million. Earnings per share were 0.56 sen while net assets per share was RM1.71.

For the six months ended June 30, BHIC’s net profit fell to RM11.47 million from RM31.47 million, on the back of revenue RM237.45 million.

The Edge weekly highlights Dataprep which is reinventing its business model. Newly-appointed CEO Ahmad Rizan Ibrahim fully expects the company to be back in the black this year, premised on its healthy order book of over RM100 million in projects from government-linked entities and the fact that it has paid off most of its debts and has some RM31 million in cash

The weekly also reported that electricity jobs are expected to boost Sarawak Cable Bhd.

The power cable maker's shares could be worth watching, considering its improving earnings prospects with the Sarawak government spending more on infrastructure projects, including electricity transmission.

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RHBInvest Research

Top Story: QL Resources – Earnings to remain resilient, but valuations pricey Underperform

Visit Note

¨ QL’s new marine plant in Surabaya, which was completed in Mar 11, has begun commercial production of surimi and fishmeal in July and Aug 11 respectively with a total annual capacity of 5k mt p.a. each



Sector Call



Construction – 28 companies shortlisted for MRT jobs Overweight

Sector News Update

¨ Prasarana has shortlisted 28 companies for the bidding of 18 work packages comprising elevated civil works (8), stations (8) and depots (2), divided into categories of “open” (11) and “bumiputera” (7).

¨ It will call for the tenders for these packages in stages starting from Sep 2011 to Dec 2012, with the first two being the 5.4km Taman Bukit Ria – Plaza Phoenix stretch and the 5.2km Taman Suntex – Bandar Hussein Onn stretch.



Banks: Risk to earnings has increased Overweight (Under Review)

Sector Update

¨ Given heightened external risks and a weaker-than-expected global economic recovery, we had revised our real GDP growth forecasts to +4.3% for 2011 (from +4.8%) and +4.5% for 2012 (from +5.5%). Below is an extract from our recent strategy report “Rising Fears Of A Double Dip” dated 11 Aug.



Media: Adex growth to be weaker Underweight (down from N)

Sector Update

¨ Following our market strategy report yesterday (entitled Rising Fears Of A Double Dip), we are lowering our projected adex growth for 2011 to 9% (previously 10%) and 2012 to 9.5% (previously 11.5%).

¨ Accordingly, we have trimmed our FY11-13 earnings estimates for the media stocks by 2-10%, which have led to lower fair values for the media stocks under our coverage.



Corporate Highlights



MRCB: 1HFY12/11 net profit grows 84% yoy Trading Buy

2QFY11 Results / Briefing Note

¨ 1HFY12/11 net profit came in within expectations.

¨ To strengthen its case for the redevelopment of the 2,680-acre RRI land in Sungai Buloh, MRCB intends to soon secure a RM500m credit line/debt as well as a JV partner with a proven track record in building “award-winning townships”.



Sunway REIT: Dragged down by litigation costs Market Perform

4QFY11 Results

¨ 4QFY11 realised net profit of RM41.1m (-4.8% qoq) missed our estimate by 7.5%. Higher sequential revenue was offset by higher finance cost and legal expenses arising from the litigation of Sunway Putra Place of RM4.7m. A 1.62 sen DPU was declared during the quarter. Full year FY11 DPU amounted to 6.58 sen, slightly below our forecast of 6.8 sen.



MBM: Lacklustre 2Q11 Market Perform (down from OP)

2QFY11 Results

¨ MBM’s 2Q11 results were below our and street expectations. Net profit for the quarter of RM21.1m (-45.0% qoq and -45.3% yoy) brought cumulative 1H11 earnings to RM59.5m (-24.4% yoy) that reached just 42.3% of our previous 2011 estimate.

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Maybank IB Views

Construction: Overweight
MRT: Pro-gressing

Positive developments. Prasanara's release of the names of 28 companies shortlisted for the mass rapid transit (MRT), Sg Buloh-Kajang line elevated works portion is a positive move in buidling investors' confidence on the government's commitment in moving the project forward. The names are not totally new to us, except perhaps for the not listed ones. First works are expected in early-2012, we estimate. We maintain our Overweight call on the sector.

RESULTS REVIEW
Sunway REIT RM1.07: Buy
Short-term pain, long-term gain

Maintain Buy. SunREIT's RM167.3m FY11 core net profit came in within expectations. 6.6sen FY11 DPU was also in line. We do not expect significant contributions from the newly-acquired Sunway Putra Place (SPP) over the short-term as it would likely take 1-2 years for renovation works. We maintain our FY12-13 earnings forecasts and introduce FY14 estimates. Target price is RM1.18 (+3 sen) as we roll over our base year to 2012.

MBM Resources RM2.97: Hold
Less sanguine over outlook Shariah-compliant

The effect of the global supply chain disruption kicks in. 1H results are tracking expectation (47% of full-year forecast) on the back of a softer QoQ performance. Vehicle sales and earnings in 2Q, as forewarned, were affected by the global supply chain disruption post the Japan’s 11 March earthquake and tsunami. Going forward, we opine that this issue will continue to have an adverse effect on MBM's 2H performance. Maintain Hold with a RM3.10 target price.

Notion VTEC RM1.95: Buy
Earnings on track Shariah-compliant

Results in line. 9MFY11 net profit of RM34m (+17% YoY) made up 71% and 76% of our and consensus full-year forecast. We maintain our Buy call as valuation is inexpensive at 4.1x CY12 PER, backed by a solid growth trend (38% 2-year net profit CAGR). Our RM2.40 TP pegs NVB on 4.5x FY11 EV/EBITDA, reflecting regional peers' (ex-Japan) valuations. Our TP also indicates an undemanding forward PER of 5.1x, significantly below the 8x average for our small-cap universe.

Technicals
The FBM KLCI fell 4.06 points to close at 1,476.46 yesterday. Its resistance areas of 1,479 and 1,530 will cap market gains, whilst the obvious support areas are located at 1,423 and 1,475.

Trading Idea is YTLCMT

Other Local News
Construction: 28 firms shortlisted for MRT jobs. Syarikat Prasarana Negara Bhd has shortlisted 28 individual and joint-venture (JV) companies that are eligible to bid for various elevated civil works, stations and depot packages for its My Rapid Transit (MRT) project. Among the companies in the list are larger local players like IJM Construction Sdn Bhd, Ahmad Zaki Sdn Bhd, Sunway Construction Sdn Bhd and WCT Bhd. (Source: The Malaysian Reserve)

Aviation: Up to RM1.2b cost savings for MAS and AirAsia. The collaboration forged between Malaysia Airlines (MAS) and AirAsia Bhd on Tuesday can turn in up to RM1.2b in cost savings for both the airlines, said MAS newly appointed executive director Mohammed Rashdan Mohd Yusof. (Source: The Star)

MAHB: Board revamp at MAHB? A revamp of the boardroom of Malaysia Airports Holdings Bhd (MAHB) is next after the airline industry in Malaysia. Changes are afoot at MAHB but it would be more gradual than the wholesale changes seen at MAS. The idea behind the move to make changes to the board of MAHB is to infuse new blood and realign the interest of the shareholders by bringing people from diverse backgrounds and disciplines. (Source: The Star)

Bumi Armada: Signs FPSO contract. Bumi Armada Berhad’s jointly-controlled entity, Forbes Bumi Armada Offshore Limited (FBAOL) has signed a Floating Production, Storage and Offloading (FPSO) contract with Oil and Natural Gas Corporation Limited (ONGC) following the letter of award secured from ONGC referred to in the Prospectus of Bumi Armada. (Source: Bursa Malaysia)

Alam Maritim: Bags RM20m jobs. Alam Maritim Resources Berhad has clinched two offshore vessel leasing contracts from Petronas Carigali Sdn Bhd worth RM20m. The contract is for a duration of 138 days, with a maximum extension option of 30 days. (Source: Bursa Malaysia)

Catcha: Amends terms with Microsoft. Catcha Media Bhd announced substantial amendments to its strategic collaboration with US-based Microsoft. Changes in terms of the collaboration had prompted the company to reduce its four-year commercial target of up to RM90m for its online media operations by some 28% or RM25m. (Source: The Edge Financial Daily)

Sarawak Cable targets RM1b projects. Sarawak Cable Bhd (SCB) is pursuing potential projects worth more than RM1b and is looking to expand overseas, starting with Brunei and Kalimantan this year, followed by the Philippines. (Source: The Edge Financial Daily)

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Stocks to watch: Catcha Media, MRCB, Daiman, Sunway REIT

KUALA LUMPUR: Catcha Media Bhd, which bucked the weak market sentiment in recently, could see strong trading interest on Friday, Aug 12 after it announced a RM25 million reduction in its target.

Other companies with fresh corporate developments were MALAYSIAN RESOURCES CORP oration Bhd (MRCB), cash-rich DAIMAN DEVELOPMENT BHD , Sunway Real Estate Investment Trust (REIT) and KKB ENGINEERING BHD.

Investors would likely view Catcha Media’s announcement negatively after it said late Thursday its forecasts for outstanding commercial targets of the online media business from 2011 to 2014 in its prospectus would be reduced by about RM25 million.

Catcha Media said this followed amendments to the strategic alliances made on Wednesday between the company, its subsidiaries, its holding company Catcha Group Singapore and Microsoft.

On a brighter note, MRCB said it was on track to achieve revenue of RM1.3 billion for the year after its turnover for the six months ended June 30, 2011 rose to RM456.34 million from RM363.55 a year earlier. For the six months ended June 30, MRCB’s net profit rose to RM40.63 million from RM22.09 million.

Its net profit for the second quarter ended June 30, 2011 jumped 55.5% to RM19.03 million from RM12.24 million a year earlier. Revenue for the quarter rose to RM234.84 million from RM173.87 million.

Sunway REIT recorded net income of RM154.05 million in the fourth quarter ended June 30, 2011, mainly arising from fair value gain on portfolio of assets.

Of the RM154.05 million, of which RM41.07 million was realised and the remaining RM112.98 million unrealised. In the previous corresponding period, the realised net income was RM44.13 million.

Daiman Development Bhd has succeeded in its bid to buy the Menara Landmark in Johor for RM55 million. It said on Thursday, Aug 11 its unit Daiman PROPERTIES Sdn Bhd had put in the bid to acquire the property in a public auction at a reserve price of RM55 million.

The acquisition would be financed from its own funds. As at March 31, 2011, it had RM105.90 million in cash and retained earnings of RM625.81 million.

KKB Engineering Bhd’s subsidiary Harum Bidang Sdn. Bhd has secured a project from Kumpulan Bina Emas Sdn Bhd for a rural water supply project. The contract was to supply water pipes and pipe fittings.

It said the duration of the supply contract was about nine months, starting from the fourth quarter of 2011 and the contract sum was RM19.4 million.

ASTRAL SUPREME BHD’s additional 39.85 million new shares issued under its corporate exercise involving a rights issue with warrants, will be listed and quoted on Friday, Aug 12.

It said 39.85 million warrants issued pursuant to the rights shares and 120 million 10-year 3% irredeemable convertible unsecured loan stocks would be listed also.

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Maybank IB Views

Plantation: Neutral
Short term fundamentals improved

Maintain Neutral, for now. Amidst the financial chaos in the past week which led to a 6% correction in CPO price to below RM3,000/t (3M Futures), we expect some short term relief as fundamentals improved on lower July inventory, rising exports over 1-10 Aug period, and lower production productivity during the fasting month. US' pledge to maintain interest rate at near-zero through mid-2013 would help to support commodity prices, CPO price inclusive. But do expect short term price volatility. Maintain Neutral on the sector. Our top Buys are SOP and TSH which offer single-digit valuations (for SOP) and strong +16 to +20% 3-year forward production CAGR.

RESULTS PREVIEW
Petronas Chemicals RM6.19: Buy
Maintenance shutdowns dampener Shariah-compliant

2Q11 will be beset by maintenance shutdowns. PCHEM is expected to release its 2Q11 results on 24 August. 2Q will be bogged down by major maintenance shutdowns and nationwide gas curtailment during the period. Product volumes will be lower but fortunately the higher product margin will help to offset this. Maintain Buy, with an unchanged TP of RM8.15 based on 13.5x 2012 PER, in line with global peers.

ECONOMICS
Industrial Production Index (IPI), Jun '11
Rebound after two months of declines

Industrial production index (IPI) rebounded in June '11 after two months of declines i.e. +1.0% YoY (revised May '11: -5.6% YoY) and +3.5% MoM (revised May '11: -1.4% MoM). Manufacturing output growth gained momentum as the Japan supply-chain effect diminished, but mining production - especially crude oil - remained a drag. Industrial output however shrank -1.6% YoY in 2Q 2011 (1Q 2011: +2.4% YoY) and -1.6% QoQ (1Q 2011: -0.3% QoQ), implying further deceleration in GDP growth. Our 2011-year real GDP growth forecast was revised downward to +5.1% at the start of 2H 2011 versus +5.5% at the start of the year. Our imputed 2Q 2011 growth was correspondingly trimmed to +3.9% YoY from +4.7% YoY. 2Q01 real GDP data will be out on 17 Aug.

Technicals
The FBM KLCI rose 8.38 points to close at 1,480.52 yesterday. Its resistance areas of 1,480 and 1,530 will cap market gains, whilst the weaker support areas are located at 1,423 and 1,472.Due to the US markets’ plunge last night; we will see some volatile trading activities in the local bourse today. Some heavy profit-taking and liquidation activities on any rebound.

Trading idea is AIRASIA.

Other Local News
Mah Sing: To buy potential lands yielding RM7b GDV. Mah Sing Group Bhd is targeting land acquisitions which could potentially yield RM5b to RM7b in gross development value (GDV) compared to 10 landbanking transactions in 2010 with combined GDV of approximately RM4b. (Source: The Malaysian Reserve)

AirAsia: AirAsia X picks IPO adviser. AirAsia X has chosen Morgan Stanley as its adviser for its proposed initial public offering (IPO) for which listing plans, targeted for next year, were underway. Khazanah Nasional Bhd's proposed plan to take up a 10% stake in AirAsia X would be executed "very quickly" with issuance of new shares in AirAsia X. (Source: The Star)

Maxis: Partners Alcatel-Lucent to deploy first 100G core transmission network in Asia Pacific. Maxis Bhd, with Alcatel-Lucent as a strategic supplier, will be deploying the first 100G single carrier with optical coherent energy network solution commercially deployed in the Asia Pacific. With that, Maxis will be able to address growing bandwidth requirements and data usage driven by smartphones, tablets, modems and fiber-to-the-premises services. (Source: Bernama.com)

Aviation: Airport tax hike. Malaysian Airports Holdings Bhd (MAHB) is raising tax to cover rising operating costs and finance airport expansion. The airport operator has proposed that the tax at the country's 39 airports it manages, excluding low cost carrier terminals (LCCT), be raised by RM14 for international travelers from Sept 15. The travelers will have to pay RM65 from RM51 (RM45 for airport tax and RM6 for security charge) now. (Source: The Sun)

Plantation: Planters see minimal impact by pay rise. The cost of production (COP) and profit margins among oil palm plantation companies will be minimally affected by the Malayan Agricultural Producers Association's (MAPA) decision to increase the wages of some 157,270 general plantation workers nationwide. (Source: The Star)

Construction: RM2b cable car link. The country's first proposed mainland-to-island cable car will be built in Port Dickson as part of the RM2b PD Waterfront project. The cable car project, spanning 750m, will link the new PD Waterfront township with Pulau Arang, an uninhabited island to boost tourism. (Source: The Star)

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