Maybank IB Views

Monday, October 17, 2011

RHB Capital RM7.48: Hold
Merger talks begin

Hold maintained. While we see possible synergistic benefits to a merger with OSK, the success and financial impact of the deal will depend on the structure and pricing of the merger itself, in our view. Our Hold call on RHB Cap is maintained, with an unchanged RM7.60 TP (2012 P/BV target of 1.3x, ROE: 13.3%). At this juncture, we do not foresee an immediate upward re-rating of the enlarged RHB Cap if the merger goes through, with potential dilution in EPS and ROE, we estimate.

Padiberas Nasional RM3.22: Buy
Things are under control

No shortage of rice. Bernas has secured 800,000 tons of rice over the next 12-months via a MOU signed with the Vietnamese government. This consignment is more than enough to allay any supply disruptions due to the current Thai floods. Bernas should have no problems to supply rice at reasonable price in the next 6-12 months. We maintain our Buy call and target price of RM3.90/shr based on 8.1x 2011 PER.

Property (M-REITs): Overweight
Defensive in nature

Overweight maintained. M-REITs undoubtedly provide some level of comfort in a time of volatility and we remain positive on the sector primarily for its solid fundamentals and defensive yields, which average 8.1% (gross) across the board. Our preference is for REITs in industrial properties and strategically-located malls. A re-rating catalyst could be the upcoming large-cap Pavilion REIT listing which would improve the breadth and depth of the M-REIT market. Our top pick is Axis REIT.

The FBM KLCI rose 42.38-points and closed at 1,442.43 last Friday. The obvious support areas for the FBM KLCI are in the 1,392 to 1,442-zone. The next resistance levels of 1,453 and 1,500 will see heavy liquidation activities.

Trading Idea is MALTON.

Other Local News
Bintulu Port Holdings: Set to benefit from construction of Samalaju Port. Company will be the sole logistics play to support the Samalaju Industrial Park and is set to benefit from the soon to be constructed RM1.2b Samalaju Port. It is estimated that beginning 2013, once the port is ready, there could be at least 5m tones of raw material to be required by 10 out of the 17 confirmed investors in the Samalaju Industrial Park. (Source: Malaysian Reserve)

Nestle: Price-rise report not verified. News that Nestle is considering a price hike for certain dairy products may have sent chills down local households but the company has clarified that the reported information is not verified. (Source: The Star)

F&N: PJ plant to raise dairy product output to cover Thai shortfall. F&N confirms that it would increase dairy product production at its Petaling Jaya plant by 20% in the interim to help cater to demand in Thailand. (Source: The Star)

Uzma Bhd: Fuels growth through technological upper hand. The Intergrated oil and gas provides is confident of winning more jobs as it is the only local firm with the technology and equipment to carry out enhanced oil recovery (EOR). (Source: Business Times)

Semiconductor: Manufacturer says a recession has hit the semiconductor industry. The inventory of global chip suppliers and a low book-to-bill ratio have reached an alarming level that will have severe worldwide repercussions and impact on chip producers and semiconductor equipment manufacturers in Malaysia. (Source: The Star)

Sunway REIT: Gets SC nod for RM3b debt note issuance. Sunway Real Estate Investment Trust (Sunway REIT) has received the Securities Commission's approval for the proposed medium term note programme of RM3.0b in nominal value. (The Edge Financial Daily)

Nagamas: To develop 2,500ha in Nanning. Nagamas International Bhd has been allocated about 2,500ha near Nanning, China, to be developed as a green residential and industrial park. Energy, Green Technology and Water Minister Datuk Seri Peter Chin said Nagamas would undertake the development of the park on a long-term basis under a RM300b contract. (Source: The Star)


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