RHBInvest Research

Thursday, August 11, 2011

Top Story: Strategy – Rising fears of a “double dip”

Strategy Update

¨ While the massive sell-off in global equities was triggered by an unconvincing debt deal in the US, escalating debt issues in Italy and Spain, and the continued sharp downtrend in the Jul Purchasing Managers Index (PMI) numbers worldwide, a deterioration in consumer and business confidence could potentially result in a protracted economic slowdown or at worst, tilt the global economy into a “double-dip” recession. This is despite softening commodity prices and the normalisation of global supply chains that should provide a boost to economic activities in the months ahead.

Sector Call

Plantation: Valuation targets trimmed on higher market risk Neutral

Sector Update

¨ Malaysia’s CPO production was relatively flat on a mom basis in Jul, falling by a slight 0.1% mom, while exports rose by 9.1% mom. Closing CPO stock levels fell for the first time in six months, by 2.8% mom to just below the 2m tonne mark at 1.996m tonnes in Jul (from 2.05m tonnes in Jun). Stock/usage ratio in Jul fell to 10.8% (from 11.6% in Jun), still significantly above the 9-year average of 9.1%.

Corporate Highlights

AirAsia - Tony: “My job is AirAsia” Market Perform

Briefing Note

¨ There is a concern on the reduction in Tune Air’s stake in AirAsia from 23% to 13% pursuant to the deal with Khazanah Nasional.

¨ Tan Sri Tony Fernandes said that Khazanah had decided to source a 10% block from Tune Air as it was difficult for it to accumulate such a large stake from the open market. Also, a private placement of new AirAsia shares was not considered as AirAsia did not need any fresh capital.

Amway: Expecting a stronger 2H11 Outperform

2QFY11 Results

¨ Amway’s 1HFY12/11 net profit of RM39.3m (+2.2% yoy) was below ours but above consensus estimates, accounting for 38% and 44% of our and consensus earnings forecast respectively. The main variance to our forecasts was the weaker-than-expected revenue growth in the 2Q.


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