Maybank IB Views

Tuesday, November 8, 2011

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.

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.

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.

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)


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