Maybank IB Views

Monday, September 12, 2011

Construction: Overweight
Offers shelter from external turmoils

Maintain Overweight. Construction awards should pick up after a slow 1H 2011, to provide the multiplier impact to the domestic economy in anticipation of a slowdown at the global front. During the previous major downturns, government development spending continued to rise. Over the near-term, this will include the new public-private partnership (PPP) projects. We expect major awards only in 2012 relating to the MRT and SCORE. Our top buys are still Gamuda and Hock Seng Lee (HSL).

Gamuda RM3.03: Buy
Record profits, Vietnam's conundrum Shariah-compliant

Record profits, Vietnam's conundrum. Gamuda's final results, due on 29 Sept, should meet expectations for record profits in FY11. We forecast FY12 to be another record year, on strong domestic property sales locked in. Nonetheless, we have tweaked our FY12-13 net profit forecasts by -1% after factoring lower sales forecast for the Vietnam property projects. We also reduce our RNAV-based TP to RM4.10 (-8%) after adjusting for lowered GDVs for the Vietnam projects and other house-keepings. The stock remains our top pick in construction.

Industrial Production Index (IPI), Jul '11
On slippery pole...

Volatile monthly industrial production trend… Industrial production in Jul '11 slipped back into the red as it contracted by -0.6% YoY (revised Jun'11: +1.3% YoY; Maybank-IB: +1.7% YoY; consensus: +2.4% YoY), dragged primarily by mining output and not helped by slower manufacturing production. MoM, the overall index fell by -0.6% (Jun: +1.3% MoM). For the first seven months of 2011, total output expanded by a mere +0.2% YoY (2010: + 7.2% YoY). Excluding mining, the adjusted industrial production grew by +1.8% YoY (June '11: +4.8% YoY).

The FBM KLCI fell 4.97-points and closed at 1,469.12 last Friday. The local market remained somewhat quiet in lack luster and low volume trading. The weaker support areas for the FBM KLCI are located in the 1,423 to 1,455-zone. The next resistance levels of 1,469 and 1,511 will see very heavy liquidation activities.

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

Other Local News
Sime: Open to GO for E&O. Sime Darby Bhd is open to increase its stake and make a general offer (GO) for Eastern & Oriental Bhd (E&O) shares at the right time, having recently purchased a 30% stake in the latter at RM2.30 per share, said its president and group CEO Datuk Mohd Bakke Salleh. (Source: The Star)

CIMB: Nazir reorganizes CIMB. CIMB Group Holdings Bhd has embarked on its biggest reorganization since a restructuring in 2005 gave birth to the second largest banking group in the country. After the exercise, CIMB’s group management committee will be trimmed to 15 people from 21. Datuk Seri Nazir Razak will hold dual functions as group CEO and head of Malaysian consumer bank. Meanwhile, Datuk Charon Wardini Mokhzani will be designated as CEO of CIMB Investment Bank Bhd. (Source: The Edge Financial Weekly)

UEM Land: 5 biotech proposals. Malaysian Biotechnology Corp says five more foreign biotech companies are planning to invest millions of ringgit at BioXCell@Nusajaya. One of them is India’s Biotech giant, Biocon Ltd that will be setting up a RM500m plant in BioXCell. UEM Land holds 40% equity in Malaysian BioXCell with remaining 60% held by Biotech Corp. (Source: The Star)

O&G: Gas Malaysia guarantees dividends in first two years, IPO set at RM2.20/sh. Gas Malaysia Bhd will pay a guaranteed dividend of 100% and 75% in the first two years, respectively, after floating its shares on Bursa Malaysia in December this year. Separately, Gas Malaysia shares will be sold at an indicative offer price of RM2.20 a share to prospective investors. (Source: The Star, The Malaysian Reserve)

Construction: Works Ministry to discuss Bumi contracts with Prasarana. The Works Ministry will hold discussions with Syarikat Prasarana Negara Bhd to identify job scope and contracts worth RM8b to be distributed to Bumiputera contractors via the implementation of the Sg-Buloh-Kajang stretch of the Mass Rapid Transit (MRT) system. (Source: Bernama)


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