RHBInvest Research

Friday, November 25, 2011

Notion Vtec: Hopes for quick recovery Underperform

Briefing Note

¨ Notion guided that 1Q12 revenue will decline 40-45% qoq and may fall into the red. This is mainly due to: 1) declining sales as the floods have affected two of its major customers and orders have stopped since Oct; and 2) provisioning of around RM5m for finished goods that were damaged and insurance shortfall for equipment in its Thailand plant.



TM: Pleasant uplift surprise in margins Trading Buy

3QFY11 Results / Briefing Note

¨ 3QFY11 core net profit of RM137m (+8.8% yoy; +1.6% qoq) was above our but below consensus expectations. The key variance in 3Q was better-than-expected ETBIDA margin due to lower other operating costs, as well as lower effective tax rates.

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Stocks to watch: IOI Corp, MEGB, Affin, Benalec, Texchem

Sunday, November 20, 2011

KUALA LUMPUR (Nov 19): Sentiment is expected to stay cautious in the week ahead as investors worry about whether the governments in Europe and the US could resolve the growing debt problems.

Reuters said a major question has been whether the European Central Bank will find a way to act as a lender of last resort in the manner of the U.S. Federal Reserve. Speculation has grown the ECB could lend money to the International Monetary Fund to bail out some euro zone members.

The Dow Jones industrial average gained 25.43 points, or 0.22%, to 11,796.16. The S&P 500 dipped 0.48 point, or 0.04%, to 1,215.65. The Nasdaq Composite lost 15.49 points, or 0.60%, to 2,572.50. However, for the week, the Dow fell 2.9%, the S&P dropped 3.8% and the Nasdaq lost 4%.

As for Malaysia, while third quarter GDP expanded at a stronger pace of 5.8% on-year from a revised 4.3% in the second quarter, there were gnawing concerns about the headwinds in the fourth quarter and 2012.

RHB Research Institute said it tweaked its real GDP growth estimate for 2011 upwards to 5% from 4.5%.

“However, we are keeping our 2012 forecast unchanged and expect the economic growth to weaken to 3.6%, given that Eurozone’s sovereign debt crisis is still lingering and risk of it worsening remains high, and on the back of a slow US economic growth,” it said.

Stocks to watch on Monday include IOI CORPORATION BHD [], Masterskill Education Group Bhd (MEGB), AFFIN HOLDINGS BHD [], Benalec Holdings Bhd and TEXCHEM RESOURCES BHD [].

IOI’s net profit for the first quarter ended Sept 30, 2011 fell 48.2% to RM258.09 million from RM498.13 million a year ago, due mainly to unrealised translation loss on foreign currency denominated borrowings of RM271.7million. The loss was higher than analysts’ estimates. The PLANTATION [] company’s revenue for the quarter rose 17.9% to RM4.15 billion from RM3.52 billion a year ago.

Meanwhile, MEGB’s net profit for the third quarter ended Sept 30, 2011 fell 78.8% to RM5.55 million from RM26.18 million a year ago. It attributed the poorer financial performance mainly to lower student enrolment and higher overheads. MEGB’s revenue for the quarter fell to RM61.19 million from RM80.68 million in 2010.

For the nine months ended Sept 30, MEGB’s net profit fell 47.2% to RM39.72 million from RM75.29 million in 2010, while its revenue fell 14.5% to RM200.67 million from RM234.83 million.

However, Affin reported an improvement in its earnings, which rose 17.5% to RM135.19 million in the third quarter ended Sept 30, 2011 from RM115.01 million a year ago, boosted by higher write-backs and higher Islamic banking income.

Its revenue increased 13.7% to RM680.12 million from RM597.82 million a year ago while earnings per share were 9.05 sen compared with 7.70 sen. It declared an interim dividend of 12 sen a share.

The Edge weekly reported that Benalec’s recent foray into land reclamation works at the oil and gas hub in Johor has raised some eyebrows. But if all goes well, the project will boost the total outstanding gross development value of its projects from about RM1.5 billion to over RM15 billion, said the report.

Another company to watch is Texchem on expectations it may unlocking value of some of its assets.

RAM Rating Services Bhd said the corporate exercise by Texchem would generate significant net cash inflows that will help to considerably strengthen its balance sheet and liquidity position.

However, the ratings agency was also concerned about its financial health. It downgraded the long-term rating of Texchem’s RM100 million debt notes from A3 to BBB1 with a negative outlook on rising concerns about the company's weakening financial performance.

RAM Ratings said the downgrading of Texchem’s long-term rating was based on its weakened business and financial performance.

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RHBInvest Research

Friday, November 18, 2011

Sector Call



Rubber Gloves: Falling Latex Prices = Improving Sentiment Towards Glove Manufacturers Neutral

Sector Update:

¨ Since hitting a peak of RM10.93/kg back in Apr ’11, latex prices have broadly been on a down trend and more recently, saw a significant decline from RM7.55/kg to around RM6.77/kg currently in over two weeks which we believe was due to: 1) concerns over slower global economic growth ahead, which could hamper demand for commodities; 2) the flooding in Thailand could lead to potential disruptions to automotive manufacturers’ operations there, leading to lower demand for rubber; and 3) easing concerns on latex supply issues over in Thailand given that the major tract of the country’s rubber plantation is located in the south.



Malaysia Corporate Highlights



Tan Chong Motor: A Disaster Hit 2011 Market Perform

3Q11 Results

¨ Tan Chong’s 3Q11 results were below our and consensus estimates.

¨ Net profit for the quarter of RM54.6m (-3.4% qoq and +10.6% yoy) brought cumulative 9M11 earnings to RM185.1m (+4.2% yoy) that reached 70.3% of our previous 2011 forecast.

¨ The main reasons for the weaker-than-expected earnings include start-up costs at Nissan Vietnam and othe costs incurred for regional expansion and upgrade of existing facilities.

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Stocks to watch: Dialog, Malton, Tanjung Offshore, AMMB

Thursday, November 17, 2011

KUALA LUMPUR (Nov 17): Stocks which could see trading interest on Thursday include DIALOG GROUP BHD [], MALTON BHD [], TANJUNG OFFSHORE BHD [], AMMB HOLDINGS BHD [], Amway (Malaysia) Holdings Bhd and ALLIANCE FINANCIAL GROUP BHD [] (AFG) following the release of their financial results for the quarter ended Sept 30.

Dialog posted net profit of RM44.54 million in the first quarter ended Sept 30, 2011, an increase of 34.6% from the RM33.09 million a year, underpinned by a strong increase in revenue, mainly from its New Zealand operations. Its revenue rose 35% to RM355.24 million from RM263.81 million while earnings per share were 2.26 sen compared with 1.69 sen.

Malton’s earnings jumped 118% to RM12.11 million in the first quarter ended Sept 30 from RM5.54 million a year ago, boosted by an improvement in the property development division from a year ago.

Revenue rose 44.3% to RM99.27 million from RM68.78 million while earnings per share were 2.90 sen versus 1.59 sen. Malton said pre-tax profit improved by 111.4% to RM16.7 million from RM7.9 million.

However, Malton's financial performance was slightly weaker compared with the immediate preceding quarter. Revenue declined from the preceding quarter’s RM167.9 million.

Tanjung Offshore Bhd swung into the red with net losses of RM429,000 in the third quarter ended Sept 30, 2011 compared with net profit of RM807,000 a year ago. Its revenue fell 14.3% to RM117.64 million from RM137.25 million a year ago. Loss per share was 0.15 sen compared with earnings per share of 0.29 sen.

For the nine months ended Sept 30, its net profit fell 51.9% to RM3.42 million from RM7.12 million a year ago while revenue was marginally lower at RM401.33 million compared with RM401.95 million. Tanjung Offshore had borrowings totaling RM560.53 million.

AMMB Holdings Bhd’s earnings rose 10.9% to RM369.47 million in the second quarter ended Sept 30,2011 from RM332.87 million a year ago, boosted by the group’s retail banking operations. Its revenue increased by 20.5% to RM2.138 billion from RM1.773 billion while earnings per share were 12.35 sen versus 11.08 sen. It declared a single tier dividend of 6.6% per share.

For the first half, its earnings increased by 15.6% to RM810.99 million while its revenue increased 17.6% to RM4.092 billion from RM3.477 billion.

Amway’s net profit rose 19.8% to RM25.77 million in the third quarter ended Sept 30, 2011 from RM21.51 million a year ago as it benefited from higher sales and improved gross margins due to the favourable foreign exchange impact. Its revenue rose at a slower pace of 5.4% to RM211.52 million from RM191.50 million while earnings per share were 15.68 sen compared with 13.08 sen.

Amway declared a third interim single tier dividend of 9.0 sen net per share and special interim single tier dividend of 30.0 sen net per share for the financial year ending Dec 31, 2011.

AFG reported a strong set of financial results for the second quarter ended Sept 30, 2011, with earnings up 18.2% to RM120.95 million from RM102.27 million a year ago. Revenue increased by 5.9% to RM314.60 million from RM296.98 million. Earnings per share were 7.9 sen compared with 6.7 sen.

For the first half, AFG's earnings rose 8.2% to RM250.51 million from RM213 million while its revenue increased 8.9% to RM624.37 million from RM573.20 million.

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Stocks to watch: Harvest Court, CIMB, BHIC, Wah Seong

Wednesday, November 16, 2011

KUALA LUMPUR (Nov 15): HARVEST COURT INDUSTRIES BHD [] could be in focus on Wednesday, Nov 16 when it resumes trading after Bursa Malaysia Securities declared the securities as designated counters until further notice.

This was the sternest warning to speculators who had chased up the stock in recent weeks as the regulator also issued unusual market activity queries to other penny stocks.

Bursa Securities’ decision to designate the securities of Harvest and the warrants due to excessive speculation observed in the trading of both securities and has been taken in the interest of ensuring a fair and orderly market.

In a separate statement, Harvest Court told Bursa Malaysia that its unit will enter into a related party transaction with 1Green Enviro Sdn Bhd for a RM70 million contract to build a pulp and paper plant in Jempol, Negeri Sembilan.

Other stocks to watch are CIMB Group Holdings Bhd, BOUSTEAD HEAVY INDUSTRIES CORP []oration Bhd (BHIC), WAH SEONG CORPORATION BHD [], Prestariang Bhd, Dutch Lady Milk Industries Bhd, OSK HOLDINGS BHD [] and SOUTHERN STEEL BHD [].

CIMB Group’s net profit rose 10.5pct year-on-year to RM1.012 billion in the third quarter ended Sept 30 from RM916 million a year ago. The net profit for the nine months ended Sept 30, 2011 rose 9.6% year-on-year to a record RM2.898 billion.

Its group chief executive Datuk Seri Nazir Razak said the 3Q earnings were underpinned by the continued improvement at its Malaysian consumer banking operations and rebound in treasury and investments.

Wah Seong Corporation Bhd net profit for the third quarter ended Sept 30, 2011 surged to RM21.29 million from RM12.49 million a year earlier, due mainly to a higher contribution from the oil and gas division.

Its revenue for the quarter rose to RM478.84 million from RM346.76 million in 2010. Earnings per share rose to 2.80 sen from 1.64 sen, while net assets per share was RM1.31.

For the nine months ended Sept 30, Wah Seong’s net profit jumped to RM90.85 million from RM31.21 million in 2010, on the back of revenue RM1.37 billion.

Boustead Heavy Industries Corporation Bhd posted net loss RM2.43 million for the third quarter ended Sept 30, 2011 compared to net profit RM26.9 million a year earlier, due mainly to cost overruns in certain commercial shipbuilding projects.

Its revenue for the quarter fell to RM150.02 million from RM227.71 million in 2010. Loss per share was 0.98 sen compared to earnings per share 10.83 sen a year ago.

For the nine months ended Sept 30, BHIC’s net profit fell to RM9.04 million from RM58.37 million, on the back of revenue RM387.47 million.

Prestariang Bhd posted net profit of RM10.07 million in the third quarter ended Sept 30, 2011, underpinned by its information and communications TECHNOLOGY [] (ICT) training and certification schemes.

Its revenue was RM33.13 million and earnings per share 4.69 sen. It declared an interim single-tier dividend of 4.0 sen per share

Dutch Lady Milk Industries Bhd’s earnings rose 77% to RM23.60 million from RM13.32 million a year ago boosted by lower operating costs, higher sales and favourable sales mix.

It said on Tuesday revenue increased by 9.85% to RM201.71 million from RM183.62 million while earnings per share were 36.87 sen compared with 20.82 sen. It declared a dividend of 35 sen per share.

OSK Holdings Bhd reported a 14.2% decline in net profit to RM28.81 million for the third quarter ended Sept 30, 2011 from RM33.60 million a year ago as it included RM5.63 million allowance for impairment losses on investments.

Its revenue rose 13.1% to RM288.78 million from RM255.35 million and earnings per share were 3.07 sen compared with 3.58 sen.

Southern Steel Bhd posted net profit of RM16.05 million for the first quarter ended Sept 30, 2011 on the back of RM734 million in revenue and expected a satisfactory performance in the current financial year.

Pre-tax profit was RM17.30 million while earnings per share were 3.8 sen and it declared an interim dividend of 5.0 sen per share

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Stocks to watch: Maybank, Malton, SYF, DPS, Flonic

Tuesday, November 15, 2011

KUALA LUMPUR (Nov 15): The FBM KLCI may come under some pressure to sustain its gains on Tuesday as the uncertainties in Europe pulled European shares lower in early trade.

The appointments of technocratic leaders in euro zone debt hot spots Italy and Greece failed to assuage fears about the euro zone crisis on Monday, sending stocks and the euro lower, according to Reuters.

Strategists at The Royal Bank of Scotland in a note Monday, Nov 14 said the outlook for the Euro-zone still remained bleak, amid increased signs that periphery troubles were spreading to the core, as evidenced by rising French yields.

“Little progress has also been made in implementing the measures announced at the recent EU summit, while the growth outlook continues to deteriorate. French, Austrian and Belgian sovereign yields are likely to begin to warrant increased attention,” they said.

On Bursa Malaysia, stocks with fresh corporate developments and could be in focus include MALAYAN BANKING BHD [], MALTON BHD [] and SYF Resources.

Maybank’s net profit for the three months ended Sept 30, 2011 rose 25.1% to RM1.286 billion from RM1.028 billion a year earlier, while its revenue for the quarter rose to RM6.07 billion from RM5 billion in 2010. Earnings per share were 17.20 sen compared to 14.53 sen in 2010, while net asset per share was RM4.41.

On its outlook, Maybank said the loans growth in Malaysia was expected to be mainly driven by the rollout of the Economic Transformation Programme projects and domestic consumption.

Meanwhile, Malton is acquiring 56.05 acres in Ulu Kelang for RM105 million for a residential project with an estimated gross development value of RM500 million.

Malton’s unit Gapadu Harta Sdn Bhd had entered into a sale and purchase agreement with Ukay Spring Development Sdn Bhd to acquire the land. The proposed development would comprise residential bungalows, semi-detached houses, medium cost apartments, low medium cost apartments and low cost apartments.

SYF Resources is in the final stage of negotiation to develop PROPERTIES [] on a joint venture (JV) basis, which it said may have accounted for the unusual market activity (UMA) involving its securities on Monday. The company had in a reply to an UMA query from Bursa Malaysia Securities Bhd said the landowners it was in talks with were mainly related parties.

It said on Nov 14 that details of the JV would be released immediately upon conclusion of the negotiations and the execution of the JV agreement.

Other stocks that could be in focus include DPS RESOURCES BHD [] and FLONIC HI-TEC BHD [] that were also queried by Bursa Malaysia over the sharp price increase in the companies’ respective shares and high trading volume.

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Stocks to watch Dijaya, Ivory, Kimlun, KPJ, oil and gas-related counters

Saturday, November 12, 2011

KUALA LUMPUR (Nov 12): The FBM KLCI is expected to trend moderately higher on Monday, Nov 14 in line with the positive close at Wall Street last Friday.

Also, the statement by Prime Minister Datuk Seri Najib Tun Razak on Nov 11 that the general election would not be held this year put an end to weeks of speculation, and created what some analysts have described as offering some clarity to a nervy local market.

US stocks rose on Friday, ending higher for the week after the Italian Senate's approval of economic reforms gave investors some relief from worries about the euro zone's debt crisis.

The Dow Jones industrial average was up 2.19% to 12,153.68; the Standard & Poor's 500 Index rose 1.95% to 1,263.85, while the Nasdaq Composite Index added 2.04% to 2,678.75.

Affin Investment Bank Bhd head of retail research Dr Mohd Nazri Khan said Najib’s statement was to be taken as positive for the market, as it provides for more clarity and less volatility.

“Sometimes election can heighten market fluctuation as was seen in the run-up to the Sarawak state election in April this year,” he said.

Meanwhile, MIDF Research head Zulkifli Hamzah said the market was expected to remain edgy next week, on developments in Europe, especially pertaining to the Italian government’s bond auction on Monday.

Volatility had spiked up recently and the consensus was that global equity markets remain vulnerable to sharp selloff, he said.

He said Malaysia’s 3Q11 GDP growth, which was slated to be unveiled on Nov 18 was not expected to be a game-changing announcement.

“Our house view is that growth may hit 5% year-on-year, which would be keeping pace with regional economies,” he said.

Zulkifli said the local equity market was currently in a period of uneasy equilibrium, but added that foreign investors appear to be keeping faith in the Malaysian market and had been gradually accumulating since early October.

“There were net buyers again this week. Yet, local investors are circumspect of the fact that remains a large overhang of foreign liquidity in the system that can decide to eject overnight,” he said.

Among the stocks that could be in focus on Monday are DIJAYA CORPORATION BHD [], Ivory PROPERTIES [] Group Bhd, Kimlun Corporation Bhd, KPJ HEALTHCARE BHD [] and oil and gas-related counters.

Dijaya and Ivory inked a joint venture agreement to develop mixed residential and commercial properties in Penang with a gross development value of RM10 billion.

The two companies said the development will be completed over the next eight years and would comprise of residential, shopping mall, hotel, office suites, office towers, retail spaces and an open mall with a boulevard.

CONSTRUCTION [] of the first phase is scheduled to begin next year, they said last Friday.

Kimlun secured a contract worth RM68 million to build a service apartment in Iskandar Malaysia in Johor.

It said last week that its wholly-owned subsidiary Kimlun Sdn Bhd had accepted the letter of award for the contract from Grand Action Sdn Bhd.

KPJ is buying four plots of land in the district of Klang, Selangor for RM23.76 million cash as part of its plans to build a specialist hospital.

KPJ on Friday said the four plots of land were situated within a mixed development undertaken by Sazean known as “Sazean Business Park”, and that Sazean would make an application to convert the category of the lands it was buying from agricultural to building/commercial.

Meanwhile, Petroliam Nasional Bhd and Shell Malaysia last week inked heads of agreement (HOA) for new enhanced oil recovery projects offshore Sabah and Sarawak, a development which may boost the oil and gas support services-related counters.

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RHBInvest Research

Wednesday, November 9, 2011

Top Story: Kencana – No signs of slowing down Market Perform

Visit Note

¨ For the EPCC division, the company is actively looking to beef up its fabrication capacity by increasing its overseas revenue contribution from countries like India and Australia as it is currently only operating at 50% utilisation. For its drilling division, the KM-2 and KM-3 rigs, which cost a cumulative US$290m (around RM870m), are expected to be completed by Mar 2013, and Jun/Jul 2013 respectively. The AME acquisition is also likely to exceed the RM40m profit guarantee.



Corporate Highlights



MBSB: Diversifying the loan book but high NIMs sustainable Outperform

Briefing Note

¨ MBSB plans to diversify the loan book mix to roughly equal contribution from personal finance, mortgage and corporate/wholesale segments over the next 12-18 months.



Hartalega: Core net profit up 1.7% qoq Market Perform

2QFY12 Results

¨ 2QFY03/12 core net profit of RM54.8m (+24.8% yoy; +1.7% qoq) came in within expectations with 6M net profit of RM107.9m (+24.0% yoy) accounting for 49.3% of our and consensus estimates respectively.



MPI: 1QFY06/12 falls into losses Underperform

1QFY12 Results

¨ MPI’s reported a 1Q net loss of RM9.6m, way below our full-year net profit forecasts of RM39.8m and consensus full-year net profit of RM54.5m. We believe this was mainly due to lower EBITDA margins as a result of lower utilisation rates and lower contribution from higher margin packages.

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Stocks to watch: Hartalega, Sanichi, Cypark, GuocoLand

KUALA LUMPUR (Nov 8): Stocks which could see trading interest on Wednesday, Oct 9 include Harlatega Holdings Bhd, SANICHI TECHNOLOGY [] BHD [], CypARK RESOURCES BHD [] and GUOCOLAND (MALAYSIA) BHD [] (GLM).

Harlatega reported its earnings fell 2% to RM46.13 million in the second quarter ended Sept 30, 2011 from RM47.01 million a year ago as it was impacted by high raw material prices.

However, it is cautious about the outlook following the sharp increase in nitrile material price and recent high volatility of US dollar.

Its revenue rose 24.5% to RM229.54 million from RM184.31 million. At the profit before tax level, it dipped 2.4% to RM59.55 million from RM61.02 million. Earnings per share were 12.68 sen compared with 12.96 sen. It declared an interim dividend of 6.0 sen per share.

Sanichi resumes trading on Wednesday after it announced that German-based Projektarbelt Technische Beratung Venretung International (Protev) has completed its first phase of due diligence of the company and the second phase in early 2012.

However, as there were no significant updates, interest could decline in the company. The company was earlier queried by Bursa Malaysia Securities over the unusual market activity in the trading of its shares.

In Cypark, executive vice chairman Siow Kwang Khee disposed of 3.97 million shares on Nov 3.

Following the disposal of the shares, his direct stake was reduced to 10.50 million shares or 7.24%.

GuocoLand has proposed to acquire PJ City Development Sdn Bhd for a cash consideration of RM29.78 million from GuoLine Asset Sdn Bhd.

PJ City’s core business is property development and property investment activities. Based on its audited financial statements for FY ended June 30, 2011, PJ City recorded profit after tax of RM4.75 million while its net assets were RM38.61 million.

PJ City also owns two parcels of land in Section 32 in Petaling, Selangor. GLM said after the completion of the proposed acquisition, it intends to develop commercial office buildings and corporate factories on the land.

COMPLETE LOGISTIC SERVICES BHD [] (CLSB) has proposed to acquire the remaining 40% stake in its subsidiary Guper Integrated Logistics Sdn Bhd for RM13.60 million cash.

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Maybank IB Views

Tuesday, November 8, 2011

RESULTS PREVIEW
Hartalega Holdings RM5.41: Buy
A potent combination Shariah-compliant

Earnings outperformance to continue. 2QFY12 results (due this evening) are likely to meet expectations with commendable operating numbers, though likely partially mitigated by some mark-to-market forex loss. We see long-term value in the stock on the nitrile glove growth story and its compelling CY12 PER valuation of just 8.6x. Moreover, the stock offers a potent combination of both growth (3-year net profit CAGR of 15%) and yield (2012 net dividend yield of 5.3%). Hartalega remains our top pick in the glove sector with a TP of RM6.80.

RESULTS REVIEW
Fraser & Neave Holdings RM17.14: Sell
A challenging year ahead

FY11 results within expectation. F&N’s full-year recurring net profit of RM337m (+10% YoY) was within our forecast of RM341m. We retain our Sell call on F&N, expecting a step-down in FY12 profit on expiry of the Coca-Cola contract and the disruption to its dairy business due to massive floods in Thailand and other parts of Indochina. Valuations are pricey at 19.2 x 2012 PER. We roll forward valuations (16x FY13 PER plus cash of RM0.39 as at end-FY11) to derive our new TP of RM16.00

Nestle (Malaysia) RM50.00: Sell
Decent revenue growth as expected

Results in line. 9M11 net profit of RM369m (+4.9% YoY) was within our expectation, made up 83% and 81% of our and consensus estimates. We are maintaining our forecasts of RM441m and expecting a lower 4Q. In the last 4 years, 4Q in average contributed 17% to its full year net profit. Maintain Sell on expensive valuations.

ECONOMICS
External Trade, September 2011
"Base jumping"

Both export and import growth quickened YoY in Sep '11 to +16.6% (Aug '11: +10.9% YoY) and +12.9% (Aug '11: +6.9% YoY). Trade surplus widened to RM9.6b (Aug '11: +RM10.9b). MoM, exports was up marginally by +0.2% (Aug '11: -1.2%) while imports gained by +3.1% (Aug '11: -4.4%). YTD, exports and imports rose by +8.3% (Jan-Sep 2011:+20.2%) and +8.9% (Jan-Sep 2011: +26.2%) respectively with RM89.2b trade surplus (Jan-Sep 2011: +RM84.5b). In 3Q11, exports picked up to +11.4% YoY (2Q11: +8.8% YoY) while imports were steady at +7.4% YoY (2Q11: +7.4% YoY), giving a larger trade surplus of RM30.1b (2Q11: +RM27.4b). Our full-year export growth, import growth and trade surplus forecasts are +6.5%, +9.1% and RM103.9b for 2011 and +5.9%, +6.4% and RM99.1b for 2012.

Technicals
The FBM KLCI fell 4.31-points and closed at 1,477.51 last Friday. The local market remained benign as news flow from Europe was fickle as the EURO leaders endorsed an enlarged EFSF only to be thwarted by the Greek PM calling for a referendum on the said fund.The obvious support areas for the FBM KLCI are in the 1,429 to 1,477-zone. The next resistance levels of 1,480 and 1,515 will see heavy liquidation activities.

Trading Idea is a Take Profit call on CIMB.

Other Local News
Genting Bhd: Indonesia approves Genting Oil’s NW Natuna project. Indonesia has approved an USD800m (RM2.49b) oil and gas development project on Northwest Natuna block run by Genting Oil Natuna, a subsidiary of Genting Bhd. The company plans to start production at the Ande-Ande Lumut field by the end of 2014 at a production rate of 5,000bpd. (Source: The Edge Financial Daily)

Kossan: Expands into non-rubber products. Kossan Rubber is embarking on a multi-pronged strategy for its next phase of growth which involves the expansion of its glove manufacturing business to a 17b piece-capacity in two years and diversification into non-rubber products via M&A to create synergy. (Source: The Edge Financial Daily)

Power: Rapid complex may include power plant. Petronas planned RM60b refinery and petrochemical integrated development (Rapid) petrochemical complex in Pengerang, southern Johor, will likely include a power plant that will support the petrochemical industry there on its own or through a joint venture. (Source: The Star)

Melati Ehsan: Back in the news after winning RM297m housing contract. Low profile turnkey contractor Melati Ehsan Holdings Bhd is in the limelight again for bagging a RM297m contract to design and build residential flats for the Housing and Local Government Ministry's People's Housing Programme (PPR). (Source: The Star)

Plantation: FGV looking for joint ventures with multinational companies. Felda Global Ventures (FGV) en route to a listing on Bursa Malaysia Main Board by mid-2012 was looking to forge joint ventures with leading multinationals in the downstream business as a long-term strategy. (Source: The Star)

Rubber: Exports poised to jump 30% this year. Malaysia's rubber exports are set to jump 30% to RM32b this year on relatively bouyant pricings of natural latex and the synthetic variant. In the first 8 months of this year, total rubber export already amounted to RM21.6b, increased 28% compared to the first 8 months of last year. (Source: Business Times)

Read more...

RHBInvest Research

Hektar REIT: No surprises Outperform

3QFY11 Results

¨ 3Q11 realised net profit (-1.2% yoy; +2.3% qoq) came within our and consensus estimates. Gross revenue grew 5.9% yoy and 3.3% qoq due to the improved rental contribution from its assets arising from the opening of earnings-accretive new retail space as well as the rental increase after asset refurbishment works. However, the higher interest expense incurred during the period has offset the higher revenue, causing the realised net profit margin in 3Q11 to contract slightly. A DPU of 2.5 sen was declared during the period, bringing total 9M11 DPU to 7.5 sen, on track to meet our forecast.



CSC Steel: 9MFY12/11 net profit declines by 49% yoy Underperform

3QFY11 Results

¨ 9MFY11 net profit came in below expectations. We believe the variance vs. our forecast largely came from worse-than-expected margin contraction in 3QFY11 as a result of lower selling prices of its steel products.

Read more...

Stocks to watch: Melati Ehsan , F&N, MSC, Nestle

KUALA LUMPUR (Nov 6): Malaysian stocks will have to take their cue from regional and Wall Street when trading resumes on Tuesday, Oct 8.

Investors will have to prepare for the crisis as the chaos in Europe is far from over. Greek Prime Minister George Papandreou won a parliamentary confidence vote early Saturday, which helped the cash-strapped country avoid snap elections that would have destroyed its bailout deal and turned up the flames on the euro zone's economic crisis.

Stocks to watch on Tuesday include MELATI EHSAN HOLDINGS BHD [], Fraser & Neave Holdings Bhd (FNHB), MALAYSIA SMELTING CORPORATION [] Bhd and Nestle (Malaysia) Bhd following the corporate results last Friday.

Melati Ehsan unit Pembinaan Kery Sdn Bhd has accepted two contracts from the Housing and Local Government to undertake two housing projects worth RM298 million in Kuala Lumpur.

Fraser & Neave posted net profit of RM66.21 million in the fourth quarter ended Sept 30, 2011, down 85.7% from the RM462.31 million a year ago where there was a gain of RM382.03 million after selling its glass container business.

It proposed a final single tier dividend of 47 sen per share together with a special single tier dividend of 15 sen.

For the financial year ended Sept 30, its net profit was RM383.13 million, down 44.8% from RM695.29 million a year ago including the RM382 million gain on divestment of the glass business. Its revenue rose 7.6% to RM3.915 billion from RM3.637 billion.

MSC posted net profit of RM41.81 million in the third quarter ended Sept 30, 2011 compared with net loss of RM37.05 million a year ago where there was an impairment provision for goodwill of RM73.63 million.

Revenue increased by 25.9% to RM907.04 million from RM719.96 million. Earnings per share were 41.80 sen compared with loss per share of 49.40 sen.

Nestle posted net profit of RM110 million in the third quarter ended Sept 30, 2011 marginally lower from the RM113.18 million a year ago as profit margins were affected by higher prices of key raw materials.

Its operating profit was RM143.16 million, up 3.8% from RM137.83 million. Revenue rose 18.2% to RM1.171 billion from RM991.07 million, boosted by strong domestic and exports sales.

For the nine-month period, its earnings rose 4.8% to RM369.23 million from RM352.14 million. Its revenue increased by 14.6% to RM3.51 billion from RM3.06 billion driven by both domestic and export sales.

Meanwhile, The Edge weekly said there is little to indicate how Proton Holdings' recent MoU with Hawtai Motor Group will impact the national carmaker, especially since the outcome of its 2007 tie-up with Youngman Automobile Group remains uncertain.

As for GHL SYSTEMS BHD [], the group is looking to turn around its fortunes by banking on its strategic solutions business to drive future growth.

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RHBInvest Research

Friday, November 4, 2011

Sector Call



Semiconductor: Moving to P/BV valuation methodology Underweight

Sector Update

Unisem: New fair value of RM0.92 Underperform

MPI: New fair value of RM2.19 Underperform

¨ With the poor earnings visibility on the back of weak guidance by major players in the industry, the outlook for 2012 remains in doubt amidst the bearish outlook in the global economy. Furthermore, post Unisem’s analyst briefing recently, there was lack of conviction as to whether the guided 4Q2011 revenue decline would be short-term, with a quick a recovery in 2012, although management appeared optimistic on such a scenario.

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RHBInvest Research

Top Story : AirAsia – 9MFY12/11 results to trail consensus Underperform (down from MP)

Results Preview

- We expect AirAsia's 9MFY12/11 results to meet our forecast but trail the market expectations.





Corporate Highlights



Unisem : Weak 4Q ahead Underperform

Briefing Note

- Unisem expects revenue to decline 8-10% amidst the softening demand for electronics stemming from the slowdown in global economy. Nevertheless, despite the anticipation of a drop in revenue, Unisem still expects 4Q earnings to improve from the previous quarter on the back of cost-cutting measures.





Mah Sing : Adding a “Thai” flavour into Icon City Market Perform (up from UP)

News Update

- Mah Sing entered into a MOU with Central Pattana Public Company Ltd to study the potential investment of developing and managing a shopping mall in Icon City through a JV and/or partnership. The MOU takes effect on 2 Nov and is valid until formal agreements are entered into within six months time with an automatic extension of three months.

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Maybank IB Views

Wednesday, November 2, 2011

COMPANY UPDATE
Lafarge Malayan Cement RM6.85: Buy
A strong proxy to construction sector

Maintain Buy. As the largest cement producer in the country, LMC is undoubtedly a proxy to, and a major beneficiary of, the high growth construction sector, which in itself, should see robust activity, once projects under Economic Transformation Programme (ETP) take off. Additionally, we expect its share price to be supported by its decent net dividend yield of 5%. Maintain Buy with a marginally lower TP of RM7.60 (RM7.85 previously) on 17x 2013 PER as we roll forward valuations after trimming earnings forecasts by 11% p.a..

UMW Holdings RM6.60: Hold
Bareboat charters Hakuryu-5 to PCSB

Maintain Hold. UMW's USD72m bareboat charter contract of Hakuryu-5 to PCSB, which yields low margin, is earnings neutral to Group earnings (<1%). As such, we are keeping our forecasts and RM6.60 target price unchanged, based on 11x 2012 EPS.

ECONOMICS
ETP Update
One year after

The latest ETP briefing (1 Nov 2011) by PEMANDU provided three key updates. First, of the 70 EPPs and 27 initiatives announced so far, 31% are fully operational, 50% have commenced implementation, and 17% are still work-in-progress. Second, of the RM171b investment announced to date, 9% or RM15b is implemented in 2011, including RM10b actualised in 1H 2011. Third, private investment in 1H 2011 was RM51.2b, meaning 19.5% of it came from ETP.

ETP Progress Updates 1-7
Implementation Update

Provided by PEMANDU on the official website.

RESULTS REVIEW
Sunway REIT RM1.14: Buy
Sequentially stronger

On track. SunREIT's RM44.2m 1QFY12 net profit tracked our and market expectations. Longer-term view is positive supported by Sunway Putra Place's (SPP) attractive est. 9% property yield. We maintain our earnings forecasts, RM1.18 DCF-based TP and Buy call, the latter premised on a 12-month total return of 10% based on our target price and forecast dividends.

Technicals
The FBM KLCI fell 16.25-points to close at 1,475.64 yesterday. Its resistance areas of 1,475 and 1,494 will cap market gains, whilst the weaker support areas may be located at 1,446 and 1,470. Due to the US markets’ much lower tone last night; we may see an initial drop for the index. Some later miniscule local bargain hunting activities cushion the local markets’ plungein the afternoon session. We expect a very volatile trading day.

Trading Idea is a take profit call on CBIP.

Other Local News
SapuraCrest: Wins RM4.4b Brazilian oil and gas job. SapuraCrest gas clinched a contract from Petroleo Brasileiro SA worth about USD1.4b (RM4.4b) to charter and operate three deepwater flexible pipe-laying supports vessels (PLSVs).Revenue from the award was expected to be generated by the fourth quarter of 2014. (Source: Bursa Malaysia)

Supermax: Declares 1 for 1 bonus. Supermax Corp has proposed a one-for-one bonus issue involving 340.1m new shares and a share buyback of up to 10% of its issued share capital. Both proposals are expected to be completed by the first quarter of 2012. (Source:Bursa Malaysia)

DiGi: Capital Management Initiative. DiGi is expected to distribute about RM509m to its shareholders by the first half of 2012 under the proposed capital distribution upon its redemption of the redeemable preference shares of about RM509m. (Source: Bursa Malaysia)

TNB: Gas shortage for 2-3 months more. TNB will have to deal with losses caused by having to substitute costly fuel oil for power generation as the government decides that electricity prices will remain unchanged. TNB has been buying fuel oil to replace natural gas for electricity generation, which will cost the company an additional RM2.1b for the second half of 2011. (Source: Business Times)

Telekom: Tough procurement policy saves RM1b. The massive RM11.3b high-speed broadband (HSBB) project may eventually cost Telekom Malaysia Bhd (TM) at least RM1b less in expenditure than its original costing because it has implemented a tough procurement policy. (Source: The Star)

Aviation: SIA targets mid-2012 Scoot takeoff. SIA new long-haul budget carrier will be renamed “Scoot” with takeoff set for mid-2012. The new carrier will fly to cities in China and Australia, operating a fleet of 200 second-hand Boeing 777 jets and charging up to 40% less than full-service airlines. (Source:The Edge Financial Daily)

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Stocks to watch: MBSB, Ireka, Maybank, Chin Teck, Jerneh Asia

Tuesday, November 1, 2011

KUALA LUMPUR (Oct 31): The string of positive corporate news is expected to underpin market sentiment on Tuesday, Nov 1 after the FBM KLCI ended October on a strong note.

Among the stocks to watch are MALAYSIA BUILDING SOCIETY BHD [] (MBSB), IREKA CORPORATION BHD [], CHIN TECK PLANTATION []S BHD [], MALAYAN BANKING BHD [], JERNEH ASIA BHD [] and AutoV Corporation Bhd

MBSB posted a 134% increase in its earnings to RM95.08 million for the third quarter ended Sept 30, 2011 from RM40.51 million a year ago.

Its revenue increased by 72% to RM372.67 million from RM215.77 million while earnings per share were 10.88 sen compared with 5.79 sen.

Ireka’s unit has secured a RM85.14 million contract for the proposed City International Hospital project in Ho Chi Minh City, Vietnam from Hoa Lam-Shangri-La 1 Ltd Liability Company.

Chin Teck Plantations Bhd’s earnings surged 90.8% to RM21.84 million in the fourth quarter ended Aug 31, 2011 from RM11.45 million a year ago, boosted by the increase in average selling prices of fresh fruit bunches (FFB), crude palm (CPO) and palm kernel despite lower production.

Its revenue rose 31.4% to RM38.37 million from RM29.20 million a year ago while earnings per share were 23.91 sen compared with 12.53 sen.

For the financial year ended Aug 31, its earnings rose 62.1% to RM76.01 million from RM46.88 million. Revenue rose at a slower pace of 28.6% to RM143.34 million from RM111.44 million.

Malayan Banking Bhd’s PT Bank Internasional Indonesia Tbk (BII) reported consolidated net profit of Rp555 billion (RM193.04 million) for the January-September period, up 34% from Rp415 billion a year ago.

BII said “the increase was achieved on the back of solid growth across the Bank’s core businesses as well as from its overall operational improvements”.

It recorded a 22% consolidated loan growth from Rp50.8 trillion in September 2010 to Rp61.9 trillion in September 2011, underpinned by small and medium enterprises (SME) and commercial loans.

Jerneh Asia Bhd has received a notice of voluntary conditional take-over offer from Kuok Brothers Sdn Bhd to acquire the remaining 58.19% stake which it does not own for cash consideration of RM1.45 per share and 45 sen per warrant.

Kuok Brothers and the parties acting in concert directly hold 102.02 million shares or 41.81% of Jerneh Asia.

At RM1.45, this is nine sen above Monday’s close of RM1.36 while the warrants ended at 40 sen.

Automotive components manufacturer AutoV Corporation expects its turnover to increase by 60% next year with the acquisition of Proreka (M) Sdn Bhd.

Bernama reported executive chairman Bernard Kong as saying the company was also in the midst of merging with two other listed companies to form a bigger group. “Financially we will be much stronger to support our businesses. We also can support our clients better," he said.

Kong said the merger with AIC CORPORATION BHD [] and Jotech Holdings, expected to be completed "sometime in March next year", would transform the company into an integrated manufacturing group dealing in automotive as well as electronics products.

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1) Hupseng
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