Maybank IB Views

Friday, August 26, 2011

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.

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).

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.

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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