Maybank IB Views

Wednesday, October 5, 2011

Top Glove RM4.26: Sell
Short term rally, but fundamentals weak Shariah-compliant

Maintain Sell. Upcoming 4QFY11 results is likely to disappoint by 33%. Though share price has rebounded on the weaker Ringgit vis-à-vis US dollar (still down 30% from its low in Aug '11), we would continue to avoid Top Glove as the negative impact of lower demand for its latex glove (70% of capacity) outweighs the positive impact of a stronger US dollar, and do not foresee latex cost to come off significantly. Additionally, its CY12 PER valuation is expensive at 19x. We cut FY11-13 EPS forecasts by 9-19% and lower DCF-derived TP to RM3.40 (-23%), indicating 15x CY12 PER.

The FBM KLCI fell 6.14-points to close at 1,361.38 yesterday. Its resistance areas of 1,361 and 1,403 will cap market gains, whilst the weaker support areas are located at 1,310 and 1,339. Despite the US markets’ rebound tone last night, we may see a volatile tone for the index today. Some persistent foreign liquidation activities will depress the markets’ today.

Trading Idea is a Take Profit call on AIRPORT.

Other Local News
SP Setia: MSWG disagrees with SP Setia. SP Setia Bhd will need to get approval from shareholder for its recent proposed Semenyih land purchase in line with the current takeover and merger ruling. This is because the land transaction coincides with a conditional takeover offer. (Source: The Edge Financial Daily)

YTLP: Yusli appointed to YTL Power board. Former Bursa Malaysia Bhd CEO Datuk Yusli Mohamed Yusoff has been appointed to the BOD of YTL Power International Bhd. He was appointed to the boards of Mulpha International Bhd and listed associate Mudajaya Group Bhd in mid-July. (Source: The Star)

DiGi: Teams up with McAfee to offer security software. DiGi Telecommunications Sdn Bhd has collaborated with software security company, McAfee, to offer McAfee Internet Security and McAfee® Family Protection software. Currently, DiGi has over 5.5m mobile Internet users, of which 300k uses mobile broadband. Digi expect a double-digit growth in our mobile Internet users by year-end. (Source: The Star)

Rubber: Thailand to cut rubber supply. Thailand, the world's biggest rubber producer and exporter, plans to cut annual rubber supply by 120,000 tonnes and would ask other major producers to take action to prop up prices, senior government and industry officials said. Thailand aim to cut rubber supply to push up prices by encouraging farmers to cut down and replant rubber trees on 400,000 rai (64,000ha), starting from now, and would ask for cooperation from Indonesia and Malaysia to take similar action. (Source: The Star)

E&E: Japanese investments in E&E sector keep flowing in. There has been no let-up in interest among Japanese investors in Malaysia's electrical and electronics (E&E) sector. There continues to be interest either by way of reinvestments or interest by those companies which intends to relocate their businesses here. (Source: Business Times)


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