Maybank IB Research

COMPANY UPDATE
IJM Corporation RM5.45; Buy
Major wins

Upgrade to Buy. Two major pieces of news today - MRT job win and WCE concession win by Kumpulan Europlus - are positive for IJM, in terms of order book enhancement. However, we retain our earnings forecasts and RNAV-based target price pending details. Share price has come off since our last update and at current levels, the stock offers a 14% upside to our target. We upgrade our call to a Buy.

Alam Maritim Resources RM0.74; Hold
RM115m contract win to start 2012 Shariah-compliant

Positive but not yet a re-rating prospect. Securing Samsung's RM115m contract is newsflow-positive, and should contribute about 17.4% to 2012 earnings (which we have already factored in). While the contract flow momentum brought on by PETRONAS' capex plans is building up, Alam's stretched balance sheet will continue to curtail its growth potential (i.e. expansion of fleet size). Until this is addressed, Alam remains a Hold with a RM0.85 target price (9x 2012 EPS).

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Maybank IB Views

Alam Maritim Resources RM0.73: Hold
Stepping up contract wins Shariah-compliant

Bags RM220m of OSV contracts, a positive. OSV hiring is gaining momentum, reflecting the improving prospects for local-flagged vessels in tandem with the intensification of PETRONAS' capex programs. However, Alam’s fleet growth remains constrained by its stretched balance sheet, impeding its earnings potential. Maintain Hold with a RM0.85 target price, pegged to 9x 2012 EPS.

Technicals
The FBM KLCI tumbled 8.75 points to close at 1,454.37 yesterday. Its resistance areas of 1,454 and 1,474 will cap market gains, whilst the weaker support areas are located at 1,423 and 1,450.Due to the US markets’ weaker tone last night; we will see a softer mode for the local bourse today.

Trading Idea is a Take Profit call on RHBCAP

Other Local News
RHBCap: Looks for new chief by year-end, Delays application to buy Bank Mestika. RHB Bank Bhd is on the lookout for a new MD now since Renzo Viegas, its principal officer that was supposed to be MD, intends to take time off. A potential candidate is likely to be finalised soon, possibly in the next two to three weeks, and will likely be appointed before the year-end if the central bank has no objections to the candidate. RHBCap has put on hold its application to acquire Indonesia's PT Bank Mestika Dharma pending a review by Indonesia’s central bank to impose a limit on single-party ownership in commercial banks there. (Source: Business Times)

MAS: US firm sues for USD80m. Malaysian Airline System Bhd has been sued by GIRO — Warranty House International Inc, which is seeking damages of up to USD80m (RM239m). MAS is reviewing the complaint with the assistance of external counsel. (Source; Bursa Malaysia)

Sime Darby: E&O deal under scrutiny. The securities commission (SC) is examining the circumstances of the transaction involving Sime Darby buying 30% stake in Eastern & Oriental Bhd. The premium paid by Sime Darby is one, among several factors which the SC will take into consideration in deciding whether an acquirer has obtained control of a company. (Source: The Star)

Mining: Perak passes EIA reports for Brazil's Vale to set up maritime terminal. The Perak state government has passed the Environmental Impact Assessment (EIA) reports for Brazilian mining giant Vale SA to set up a maritime terminal in Teluk Rubiah near Lumut. Vale is investing an initial USD1.4b, or RM4.1b, to develop the first phase of an iron ore complex with capacity to dock vessels and handle as much as 30m tonnes of iron ore a year, starting 1H14. (Source: Business Times)

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Stocks to watch: Plantations, Taliworks, Alam Maritim, MAS

KUALA LUMPUR: After two days of straight losses, the market may just edge up on Wednesday, Sept 7, aiding by some selected buying of index-linked stocks by local funds following the more positive Asian and European markets.

However, the overnight fall on Wall Street could rein in interest. Wall Street fell for a third day on Tuesday on fears Europe still has failed to tackle its debt crisis, prompting worries the market is headed to new lows for the year.

The Dow Jones industrial average dropped 100.96 points, or 0.90 percent, to 11,139.30. The Standard & Poor's 500 Index fell 8.73 points, or 0.74 percent, to 1,165.24. The Nasdaq Composite Index lost 6.50 points, or 0.26 percent, to 2,473.83.

Among the stocks which could see trading interest are PLANTATION []s which are currently affected by the decline in crude palm oil (CPO) prices.

CPO for third-month delivery fell RM33 to RM2,985 per tonne on concerns that Europe’s debt crisis was getting worse, impacting demand for commodities.

Meanwhile, as expected, foreign investors were net sellers on Bursa Malaysia, selling RM3.8 billion of Malaysian equities in August.

Maybank Investment Research said it believed that there could still be some near-term downside potential as August’s net activities reversed out just 58% of the total net foreign buying in April to July.

“We remain defensive at the core, expecting a rebound towards year-end to lift KLCI closer to our recently revised 1,520 target,” it said.

The research house said the last time that Malaysian equities saw such a magnitude of foreign outflow from equities was in February this year (-RM3.4b). Domestic funds, which had been net sellers since 2H 2010, were the net buyers in August.

TALIWORKS CORPORATION BHD [] was awarded a RM339.39 million sub-contract for the Mengkuang Dam expansion project. The sub-contract involved earthworks for CONSTRUCTION [] of dam, draw-off tunnel and others over a 60-month period. The completion date is July 31, 2016.

ALAM MARITIM RESOURCES BHD [] has inked a charter party agreement with ExxonMobil Exploration and Production Malaysia Inc (EMEPMI) worth up to RM220.83 million.

Its unit Alam Maritim (M) Sdn Bhd had received the letter of award from EMEPMI to provide one unit accommodation vessel and of one unit anchor handling tug. It said the contract was for a primary period of three years with an extension option exercisable by EMEPMI for another two years.

“The contract is for a value of up to RM220.83 million (if EMEPMI engages the vessel and tug for the full duration - inclusive of optional period),” it said.

US-based GIRO-Warranty House International, Inc. is seeking US$80 million (RM238.4 million) in damages from MALAYSIAN AIRLINE SYSTEM BHD [] (MAS).

MAS was served with a complaint in the US District Court for the Northern District of Oklahoma on Aug 22. “GIRO – Warranty House International, Inc. alleges breach of contract and fraudulent misrepresentation and seeks damages of up to US$80 million,” it said.

CME GROUP BHD [] secured a RM14.25 million contract to supply four fire-fighting vehicles with the associated equipment and services for the Sabah Oil & Gas Terminal (SOGT) project.

Its unit CME Edaran Sdn Bhd had accepted the letter of award dated Aug 22 from Petronas Carigali Sdn Bhd.

The contract was from Aug 19 until Aug 21, 2012.ACE Market-listed Ariantec Global Bhd’s unit secured a RM19.76 million sub-contract for bandwidth management equipment for TELEKOM MALAYSIA BHD [].

Ariantec Sdn Bhd secured the contract from Niagara Technologies International Sdn Bhd, a systems integrator to supply, install and maintain TM’s bandwidth equipment.

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Maybank IB Views

KNM Group RM1.48: Sell
Poor delivery, Sell Shariah-compliant

Downgrade to Sell, target price cut to RM1.19 (-41%). 1H results were a letdown, prompting us to cut 2011-13 earnings by up to 64% p.a.. While KNM delivered on topline, bottomline was a disappointment, felled by cost overruns and high operating expenses. While the share price has underperformed by 48% YTD, we expect performance to be further suppressed. There is no sign of an operating recovery and cost control is absent. Further, valuations are expensive now.

Alam Maritim Resources RM0.78: Hold
Results improve but recovery lingers Shariah-compliant

Pacing but not running. Alam returned to profitability in 2Q but overall, 1H results still missed expectations. Operationally, Alam is showing signs of a turnaround but the catalyst to warrant an upgrade remains elusive. Its stretched balance remains a concern, debilitating its ability to grow. Maintain Hold with a lower target price of RM0.85, based on a reduced 9x 2012 EPS (versus 12x previously).

QL Resources RM2.98: Buy
Margin erosion Shariah-compliant

Below expectations. 1QFY12 results were below consensus and our full-year numbers, with margin contraction seen in the 2 main divisions. Total net profit of RM27.8m (+3.7% YoY, -11.9% QoQ) made up 17% and 19% of our forecast and consensus for FY12. We do expect stronger earnings in the coming quarters and QL remains a Buy. Our forecasts are nevertheless revised down on lower margin expectations and our target price is lowered to RM3.39.

Technicals
The FBM KLCI fell 11.82 points to close at the 1,472.16 yesterday in persistent selling activities. Its resistance areas of 1,472 and 1,500 will cap market gains, whilst the weaker support areas are located at 1,423 and 1,467.


Other Local News
Aeon: Upbeat on 'new' Jusco at 1Utama. Aeon Co (M) Bhd expects the newly renovated and relocated Jusco store in 1Utama Shopping Centre to ring in more sales than previously. The Japan-based retailer is optimistic that it will make RM300m within a year from yesterday. It had made over RM200m in a year previously. (Source: Business Times)

CIMB: Among banks hired for planned MU listing. English football club Manchester United has hired a slew of banks including Malaysia's CIMB Group for its planned listing on the Singapore stock exchange. The US-based Glazer family hired Hong Kong-based BOC International, Malaysia's CIMB, Singapore's DBS and pan-Asian investment bank CLSA as joint lead managers, in a move that suggested the owners are keen to get a well-diversified regional spread of investors. (Source: Business Times)

Maxis: In cloud computing connection with MDeC. Maxis Bhd aims to work closely with the Multimedia Development Corp (MDeC) to establish joint programmes to promote adoption of cloud computing services for independent software vendors. The collaboration will accelerate the adoption of cloud technology by software vendors and businesses. It will also pave the way for an array of enterprise-grade cloud solutions to become available to Malaysian businesses. (Source: Business Times)

IJMP: To invest over RM1b to double up Indonesian venture. IJM Plantations Bhd is investing more than RM1b to double its total planted area in Indonesia to 40,000ha and expects to see substantial earnings contribution from the venture from 2014 onwards. IJM Plantations expects Indonesia to contribute one third of its earnings when planting is completed in Indonesia by 2014 and eventually its contribution is expected to be bigger than the earnings from its Malaysian plantation. (Source: The Malaysian Reserve)

Transportation: Prasarana to manage MRT issues till handover. Syarikat Prasarana Negara Berhad (Prasarana) will continue to manage all issues related to the My Rapid Transit (MRT) project until the establishment of MRT Co. Prasarana would carry on with all works and programmes that has been decided before it officially hands it over to the new MRT Co. (Source: The Edge Financial Daily)

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Maybank IB Views

Construction: Overweight
MRT: Pro-gressing

Positive developments. Prasanara's release of the names of 28 companies shortlisted for the mass rapid transit (MRT), Sg Buloh-Kajang line elevated works portion is a positive move in buidling investors' confidence on the government's commitment in moving the project forward. The names are not totally new to us, except perhaps for the not listed ones. First works are expected in early-2012, we estimate. We maintain our Overweight call on the sector.

RESULTS REVIEW
Sunway REIT RM1.07: Buy
Short-term pain, long-term gain

Maintain Buy. SunREIT's RM167.3m FY11 core net profit came in within expectations. 6.6sen FY11 DPU was also in line. We do not expect significant contributions from the newly-acquired Sunway Putra Place (SPP) over the short-term as it would likely take 1-2 years for renovation works. We maintain our FY12-13 earnings forecasts and introduce FY14 estimates. Target price is RM1.18 (+3 sen) as we roll over our base year to 2012.

MBM Resources RM2.97: Hold
Less sanguine over outlook Shariah-compliant

The effect of the global supply chain disruption kicks in. 1H results are tracking expectation (47% of full-year forecast) on the back of a softer QoQ performance. Vehicle sales and earnings in 2Q, as forewarned, were affected by the global supply chain disruption post the Japan’s 11 March earthquake and tsunami. Going forward, we opine that this issue will continue to have an adverse effect on MBM's 2H performance. Maintain Hold with a RM3.10 target price.

Notion VTEC RM1.95: Buy
Earnings on track Shariah-compliant

Results in line. 9MFY11 net profit of RM34m (+17% YoY) made up 71% and 76% of our and consensus full-year forecast. We maintain our Buy call as valuation is inexpensive at 4.1x CY12 PER, backed by a solid growth trend (38% 2-year net profit CAGR). Our RM2.40 TP pegs NVB on 4.5x FY11 EV/EBITDA, reflecting regional peers' (ex-Japan) valuations. Our TP also indicates an undemanding forward PER of 5.1x, significantly below the 8x average for our small-cap universe.

Technicals
The FBM KLCI fell 4.06 points to close at 1,476.46 yesterday. Its resistance areas of 1,479 and 1,530 will cap market gains, whilst the obvious support areas are located at 1,423 and 1,475.

Trading Idea is YTLCMT

Other Local News
Construction: 28 firms shortlisted for MRT jobs. Syarikat Prasarana Negara Bhd has shortlisted 28 individual and joint-venture (JV) companies that are eligible to bid for various elevated civil works, stations and depot packages for its My Rapid Transit (MRT) project. Among the companies in the list are larger local players like IJM Construction Sdn Bhd, Ahmad Zaki Sdn Bhd, Sunway Construction Sdn Bhd and WCT Bhd. (Source: The Malaysian Reserve)

Aviation: Up to RM1.2b cost savings for MAS and AirAsia. The collaboration forged between Malaysia Airlines (MAS) and AirAsia Bhd on Tuesday can turn in up to RM1.2b in cost savings for both the airlines, said MAS newly appointed executive director Mohammed Rashdan Mohd Yusof. (Source: The Star)

MAHB: Board revamp at MAHB? A revamp of the boardroom of Malaysia Airports Holdings Bhd (MAHB) is next after the airline industry in Malaysia. Changes are afoot at MAHB but it would be more gradual than the wholesale changes seen at MAS. The idea behind the move to make changes to the board of MAHB is to infuse new blood and realign the interest of the shareholders by bringing people from diverse backgrounds and disciplines. (Source: The Star)

Bumi Armada: Signs FPSO contract. Bumi Armada Berhad’s jointly-controlled entity, Forbes Bumi Armada Offshore Limited (FBAOL) has signed a Floating Production, Storage and Offloading (FPSO) contract with Oil and Natural Gas Corporation Limited (ONGC) following the letter of award secured from ONGC referred to in the Prospectus of Bumi Armada. (Source: Bursa Malaysia)

Alam Maritim: Bags RM20m jobs. Alam Maritim Resources Berhad has clinched two offshore vessel leasing contracts from Petronas Carigali Sdn Bhd worth RM20m. The contract is for a duration of 138 days, with a maximum extension option of 30 days. (Source: Bursa Malaysia)

Catcha: Amends terms with Microsoft. Catcha Media Bhd announced substantial amendments to its strategic collaboration with US-based Microsoft. Changes in terms of the collaboration had prompted the company to reduce its four-year commercial target of up to RM90m for its online media operations by some 28% or RM25m. (Source: The Edge Financial Daily)

Sarawak Cable targets RM1b projects. Sarawak Cable Bhd (SCB) is pursuing potential projects worth more than RM1b and is looking to expand overseas, starting with Brunei and Kalimantan this year, followed by the Philippines. (Source: The Edge Financial Daily)

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Stocks to watch: Prestariang, Axiata, Uzma, Alam

KUALA LUMPUR: Stocks which could see trading interest on Wednesday, July 27 include ICT service provider Prestariang Bhd which will make its debut on the Main Market.

Other stocks to watch include Axiata Group Bhd, UZMA BHD, ALAM MARITIM RESOURCES BHD and Berjaya Food Bhd.

On the eve of its listing, Prestariang announced it had secured an RM80 million contract with the Ministry of Higher Education for an industry based certification scheme.

The programme would be undertaken by its unit Prestariang Systems Sdn Bhd under a contract over four years at RM20 million a year.

The offer price of the shares is 90 sen. Hwang DBS Vickers Research has a fair value of RM1.09 based on sum-of-parts.

According to the research house, Prestariang intends to gradually reduce its dependency on government contracts going forward.

The company plans to expand its product offerings to include more in-house certification programmes, set up sales offices and training centres in three new locations within Malaysia in 2H11, widen clientele base from the Middle East region via partnership arrangements, and develop its own proprietary test and assessment centres with in-house proprietary procedures and systems in 2012.

Meanwhile, Axiata should see trading interest as share overhang has been finally cleared.

TELEKOM MALAYSIA BHD’s unit has placed out 92.36 million Axiata Group Bhd at RM5.07 a share. The exercise raised gross proceeds of RM468.3 million for TM.

Uzma Bhd has secured a RM170 million contract from Petronas Carigali Sdn Bhd to provide integrated equipment and services for idle well reactivation project.

its subsidiary Uzma Engineering Sdn Bhd (UESB) had received the three year contact which would be effective from July 25, 2011 to July 24, 2014.

On project delays, Uzma said the execution of the contract was depending on work orders to be issued by Petronas from time to time.

Alam Maritim’s unit has received a letter of award from Petronas Carigali Sdn Bhd to provide one anchor handling tug supply vessel for RM10.6 million.

The contract started on July 13 and the duration is for a primary period of 150 days with two extension options of 45 days each.

Berjaya Food Bhd is expanding its Kenny Rogers Roasters (KRR) brand into Indonesia after it inked a joint venture (JV) agreement with three Indonesian companies to develop and operate the franchise.

It had entered into a conditional JV agreement with PT Mitra Samaya (MS), PT Harapan Swasti Sentosa (HSS) and PT Boga Lestari Sentosa (PT Boga) to operate the franchise in Java island and Bali, Indonesia under PT Boga.

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Maybank IB Views

COMPANY UPDATE
IOI Corporation RM5.30: Hold
"Planting" investment properties Shariah-compliant

On accelerated property capex. The recent foray into South Beach and IOI Resort City's development plans are set to accelerate IOI Corp's property capex spending by ~RM2.3b over the next 3 years, with 78% of these channeled to build its property investment portfolio. Investors looking for greater exposure to plantation have been slowly shying away from IOI. IOI lacks immediate re-rating catalyst, especially with limited earnings upside from its matured plantation while the new property ventures do not bring in immediate earnings; they are largely for investments. Our revised TP of RM5.50 on 16x FY12 EPS is based on 1-SD below its 5-year historical mean PER. Maintain Hold.

Top Glove Corporation RM5.26: Hold
Needs more visibility on latex glove demand Shariah-compliant

Valuations not cheap. The upcoming 3QFY11 results (expect to be flat QoQ) could mark the long-awaited inflexion point for the company's earnings, as contributions from new capacity kick in, and as distributors start to replenish stockpiles. We nevertheless feel that valuations do not justify a buy on the stock at current levels, with Top Glove trading at a CY12 PER of 16x versus its peer average of 7x. We cut our FY11 earnings by 14% and 3-4% for FY12-13. Maintain Hold and DCF-derived TP of RM5.10.

Technicals
The FBM KLCI gained 7.68 points and ended at 1,556.19 yesterday. Its resistance areas of 1,558 and 1,576 will cap market gains, whilst the obvious support areas are located at 1,533 and 1,556.Due to the US markets’ weaker tone last night; we will see some initial low volume selling activities in the local bourse today.

Traiding idea is a Short-Term Buy call on AEONCR.

Other Local News
RHBCap: Aabar to buy ADCB's stake. Aabar Investments, the investment arm of Abu Dhabi government, intends to buy a 25% equity stake in RHB Capital Bhd from Abu Dhabi Commercial Bank at RM10.80 per share. (Source: The Edge Financial Daily)

Sunway-Suncity: Merger gets nod. Shareholders of Sunway Holdings Bhd and Sunway City Bhd have approved the proposed disposal of the two companies' assets and liabilities to Sunway Bhd at their EGMs. A new Sunway entity is expected to be listed on the Main Market of Bursa Malaysia in the third quarter of this year. (Source: The Edge Financial Daily)

TNB: Buys big supply of fuel oil. Tenaga Nasional Bhd (TNB) has bought more than 200,000 tonnes of fuel oil, for delivery between April and August, in addition to buying electricity from Singapore utility PowerSeraya. The fuel oil volumes were the largest TNB has purchased in at least five years. (Source: The Star)

Alam Maritim: Bids for RM400m to RM500m jobs. Alam Maritim Resources Bhd is bidding for RM400m to RM500m worth of contracts in offshore installation and construction (OIC) as well as offshore support vessel (OSV) services sector. (Source: The Star)

Construction: Eversendai to bid for RM1b-RM1.5b projects. Soon-to-be-listed structural steel construction and engineering company Eversendai Corp Bhd aims to bid for an additional RM1b to RM1.5b worth of projects for the rest of the year, after having secured almost RM350m so far this year. (Source: The Edge Financial Daily)

Property: 1MDB inks deal to kickstart Bandar Malaysia. 1MDB Bhd has signed several agreements that will pave way for the development of Bandar Malaysia, a mixed property project, on the site of the old Sungai Besi airport land. (Source: The Edge Financial Daily)

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Maybank IB Views

COMPANY UPDATE
KNM Group RM1.90: Hold
Brace for further headwinds Shariah-compliant

Cut forecasts, downgrade to Hold. Our initial forecasts are too optimistic and management is guiding for lower profits as earnings could remain weak over the next few quarters. This is disappointing for we had expected earnings to rebound on the new orders secured in the past 12 months. The financing for the Peterborough project is still unresolved. We lower our target price to RM2.00 based on reduced PE multiple target of 10x (previously 14x) as we also cut earnings forecasts.

Petronas Chemicals RM7.06: Buy
Missed the first party, but there is another one coming Shariah-compliant

Power tariff hike impact negligible. We have imputed the impact of the electricity tariff hike by Tenaga Nasional which is rather negligible at only ±RM20m p.a. This does not change the Company fundamentals at all and we remain bullish with the high product prices and strong demand. Our concern lies with the uncertainty of gas supply due to the on-going maintenance work from its supplier. We rollover valuations to 2012 earnings and maintain BUY with a higher TP of RM8.15 (+2%), based on 13.5x PER - in line with industry's historical average PER.

ECONOMICS
Economic Transformation Programme (ETP)
Update #6…

PM announced additional 15 projects, initiatives and enablers in the sixth ETP update, involving RM63.38b investments under 11 Entry Point Projects (EPPs) in seven National Key Economic Areas (NKEAs) that will generate RM66.31b in gross national income (GNI) and create 63,531 new jobs. The biggest project is the RM60b Refinery And Petrochemical Integrated Development (RAPID) in Pengerang, Johor. So far, execution of ETP has seen confirmation of 65 EPPs (49.6% of the targeted 131) under 11 NKEAs with investment value of RM169.78b (21.4% of the targeted RM794.5b EPP investments) that are expected to raise RM220.15b in GNI (49.6% of the targeted RM1.1tr) and create 362,396 jobs (11% of the targeted 3.3m). ETP rollout is having visible positive impact on actual investment as per the data on business loans growth, PDS issuance and FDI int he first three to four months of 2011.

Technicals
The FBM KLCI fell 10.31 points and ended at 1,545.88 yesterday. Its resistance areas of 1,545 and 1,565 will cap market gains, whilst the weaker support areas are located at 1,527 and 1,540. Due to the world markets' quiet tone last night, we will see some boring and low volume-trading activities in the local bourse today. We expect the FBM KLCI to remain benign today, as the local market could remain lacklustre.

Trading Idea for today is a Take Profit call on MPHB

Other Local News
Banking: Maybank's proposal for RHB stake soon. Malayan Banking Bhd (Maybank) will be making a proposal to acquire RHB Capital Bhd before the end of this month, according to Maybank's chairman Tan Sri Megat Zaharuddin Megat Mohd Nor. (Source: The Star)

RHBCap: ADCB in need of cash. Abu Dhabi Commercial Bank's (ADCB) plans to hive off its 25% stake in RHBCap to Aabar Investments could be due to need of cash to settle some of its debts that will be due soon. (Source: The Star)

Alam Maritim: Wins RM52m job. Alam Maritim Resources Bhd (AMRB) has been awarded a contract valued at RM52m from Samsung Engineering Malaysia Sdn Bhd to supply engineering work, supply of materials, fabrication, load-out and commissioning of two units of single point mooring buoy for Sabah Oil and Gas Terminal project. (Source: Bursa Malaysia)

KFC: RM23m for 25 new outlets in the country. KFC Holdings (Malaysia) Bhd will spend around RM23m to open 25 new outlets in Malaysia by year-end. Around 10 outlets will be in the form of "drive-thru", and the balance will be normal outlets. (Source: Business Times)

Sime: To invest RM280m in two new hospitals. Sime Darby Bhd's healthcare unit will invest RM280m in two new hospitals in the Klang Valley under the government's Economic Transformation Programme (ETP). The segment is expected to contribute about 20% of the company's revenue in next three to five years. (Source: Business Times)

MMC: Malakoff Clinches 1,000MW tender. Malakoff Corp Bhd which is 51% owned by MMC has won the tender to build a 1,000MW coal-fired facility at its existing site in Tanjung Bin, Johor. (Source: Bursa Malaysia)

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Maybank IB Views

IJM Corporation RM6.20: Hold
Kitchen sinking, losses in 4Q Shariah-compliant

Maintain Hold. 4QFY11 fell into a loss due to provisions and project losses at the construction business. Totalling RM124m, the amount was much larger than the anticipated RM70m. Nonetheless, we retain our FY12-13 earnings forecasts, expecting these to be one-off. Share price has stay flat (-0.1%) since we downgraded the stock on 24 Feb. It could remain there for a while as the market digests the poor 4Q results, while upcoming RM5b potential contract flows from the WCE and NPE extension have been partially priced in. No change to our RM6.50 RNAV-based TP for now, which implies 20x CY2012 PER.

Alam Maritim Resources RM1.05: Sell
Still a struggle Shariah-compliant

Results were below expectations. Alam suffered its third consecutive quarterly loss, with a RM7m net loss in 1Q11. We cut 2011 forecast by 18% but place our recommendation and RM0.79 (1x book) target price under review pending an update with management. We think the worst is over for the domestic vessel charter industry, which would trigger a re-rating for the vessel operators.

Amanah Raya REIT RM0.95: Buy
On track; new assets boosted earnings

Maintain Buy. AAREIT's RM10.9m 1Q11 net profit (+29% YoY) came in within expectations. 1Q DPU of 1.8 sen (95% payout) was also in line. We like AAREIT for its good 8.7% 2012 yield (compared to 8.1% M-REIT sector). In our view, the yield is sustainable as the majority of AAREIT's leases are long-term with step-up features. We maintain our earnings forecasts and RM1.12 DCF-based TP.

Technicals
The FBM KLCI gained 7.75 points to close at 1,548.69 on Friday. Its resistance areas of 1,550 and 1,565 will cap market gains, whilst the obvious support areas are located at 1,527 and 1,548. We expect the FBM KLCI to remain range bound today.

Weekly trading idea is a Short-Term Buy on ESSO.

Other Local News
MAHB: Strong interest to jointly develop 50 acres near KLIA2. Twenty companies have collected request for proposal (RFP) documents to partner Malaysia Airports Holdings Bhd (MAHB) to develop 50 acres near KLIA2 in Sepang. The RFP is for the privatisation of the 50-acre commercial development that would comprise premium factory outlets centre, a food and beverage centre and an auto city. (Source: The Star)

Bina Puri: Bids for RM400m Negri job. Bina Puri Holdings Bhd has bid for a contract worth over RM400m for associated civil works to extend a 1,000MW power plant in Negri Sembilan with Japan's Mitsui & Co. (Source: Business Times)

Property: UOA's final retail price fixed at RM2.52. UOA Development Bhd’s institutional price has been fixed at RM2.60 per share while the retail price is RM2.52 per share, which was below the indicative retail price of RM2.90. (Source: The Edge Financial Weekly)

Stockbroking: More licences for foreign stockbroker. Securities Commission Malaysia is offering two new licences to foreign stockbroking houses, specifically for the retail side of the business. Singapore based Phillip Securities Pte Ltd is one of the investment firms eyeing the licence. (Source: The Edge Financial Weekly)

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Stocks to watch: Sime, IJM, Alam Maritim, Ta Ann, Kulim

KUALA LUMPUR: The market could trade sideways on Monday, May 30 due to the lack of impressive earnings growth late last week, analysts said.

With the corporate season coming to an end on May 31, with Maxis Bhd and Axiata Group Bhd among the remaining heavyweights to announce the results, the market would need more stimuli to spur buying interest.

Stocks which could see trading interest would be SIME DARBY BHD, IJM Corp, ALAM MARITIM RESOURCES BHD, TA ANN HOLDINGS BHD and Kulim (Malaysia) Bhd. All the companies reported their results on Friday.

Sime Darby posted net profit of RM820.12 million in the third quarter ended March 31, 2011 compared with net loss of RM308.63 million a year ago. Revenue increased by 39.8pct to RM10.59 billion compared with RM7.57 billion. Earnings per share were 13.66 sen.

IJM Corp swung into the red in the fourth quarter ended March 31, 2011 with net loss of RM20.19 million versus a net profit of RM111.04 million a year ago due to its overseas operations. The losses were expected by the market as it would have to make provisions and losses in its international operations.

Its operating profit before tax fell by 53.9% to RM75 million compared to RM163 million a year ago “following the provision made against contractual claims, recovery of receivables and project losses in some of the group’s overseas projects”.

Its revenue rose 20.9% to RM1.047 billion from RM866.46 million mainly due to the CONSTRUCTION, property, industry and infrastructure divisions. It announced an interim dividend of 7.0 sen a share

Land & General posted losses of RM3.22 million in the fourth quarter ended March 31, 2011 compared with net profit of RM12.91 million a year ago mainly due to losses in quoted investments.

“The loss for the current quarter arose mainly due to fair value loss of RM3.5 million recognised on its quoted investments, net interest expenses of RM1.1 million recognised from FRS 139 implementation, and share of losses from its jointly controlled entities of RM1.7 million,” it said.

Alam Maritim posted net losses of RM7.38 million on weaker performance by it offshore support vessels segment. Net loss for 1Q ended March 31, 2011 was a stark contrast of RM20.51 million a year ago.

Revenue fell 48% to RM34.68 million from RM66.87 million. Loss per share was 0.9 sen compared with earnings per share of 4.0 sen.

On a more upbeat note, Ta Ann said higher overall selling prices for timber products and better performance for the PLANTATION []s business pushed Ta Ann Holdings Bhd’s first quarter earnings up by 232% to RM26.56 million from RM7.89 million a year ago.

Revenue rose 10.3% to RM181.44 million from RM179.93 million while earnings per share were 10.32 sen compared with 3.10 sen.

Kulim’s earnings jumped 105% to RM127.10 million in the first quarter ended March 31, 2011 (1QFY11) from RM61.89 million a year ago.

Its revenue climbed 34% to RM1.657 billion from RM1.234 billion while earnings per share were 10.12 sen compared with 16.40 sen a year ago.

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Alam Maritim unit gets RM24.75m charter party contacts

KUALA LUMPUR: ALAM MARITIM RESOURCES BHD []’s unit has entered into two charter party agreements for a total sum of RM24.75 million.

In a statement Monday, April 25, Alam Maritim said its unit Alam Maritim (M) Sdn Bhd had entered into the agreements with two oil and gas services companies for the provision of one unit Workboat and one unit 4 Point Mooring System Workboat.

It said the 4 Point Mooring System Workboat contract worth RM6.75 million was for sixty days from April 17, with an extension option for another 30 days.

Meanwhile, the Workboat contract worth RM18 million was for a period of 12 months from April 18, with an extension option on a monthly basis.

It said the contracts were expected to positively contribute to its earnings for the financial year ending Dec 31, 2011.

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Alam Maritim wins RM24m job

Alam Maritim Daily Chart

KUALA LUMPUR: Alam Maritim Resources Bhd’s (AMRB) wholly owned subsidiary Alam Maritim (M) Sdn Bhd has secured a RM24.24mil contract to supply two vessels from an independent oil and gas exploration and production company.

AMRB told Bursa Malaysia that its subsidiary received a letter of award to supply one unit anchor handling tug supply vessel and one unit of fast multipurpose supply vessel.

It said the contracts had commenced on April 1 and the duration of the contracts were for a primary period of six months with two extension options of one month each.

“The contracts are expected to positively contribute to the earnings and net assets of AMRB for the financial year ending 31 December,” AMRB said.

source:thestar

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Maybank IB Views

ECONOMICS
Market & Economy
Embarking on the passage of transformation

Strengthening the roadmap. Khazanah Nasional's Plenary Session at Day 2 of the Invest Malaysia conference showcased government linked companies (GLC) transformation successes as the programme enters the final phase which is also a critical period of national transformation, under the government's resolve to transform Malaysia into a high-income economy by 2020. As the GLC transformation programme enters the 7th year of its 10-year passage, the transformation programme, in aggregate, is "well on track and on schedule".

Technicals
The FBM KLCI rose by 9.67 points at 1,535.59 yesterday. Its resistance areas of 1,535 and 1,560 will cap market gains, whilst the weaker support areas are located at 1,517 and 1,533.

Trading idea for today is a TAKE PROFIT call on HAPSENG.

Other Local News
Alam Maritim: Unit bags RM24.2m deal. Alam Maritim Resources Bhd’s unit has bagged a RM24.2m contract from an independent oil & gas exploration and production company to provide a unit anchor handling tug supply vessel and a fast multipurpose supply vessel. (Source: Bursa Malaysia)

Masterskill: Signs MoU on training. Masterskill (M) Sdn Bhd has signed a memorandum of understanding (MoU) to establish and develop academic exchange as well as co-operation in teaching and training of Masterskill’s student at the Mayapada Hospital, in Indonesia. (Source: Bursa Malaysia)

Tech: Penang gets new RM1b Japanese investment. Penang received a shot in the arm with a RM1b investment by Japan's Ibiden Co Ltd, the world's largest printed circuit board (PCB) maker. The amount would be pumped into its second facility in the Penang science park in Bukit Minyak. (Source: The Star)

Utilities: Govt may buy water bonds. The Federal Government is believed to be planning a special purpose vehicle or getting Pengurusan Asset Air Bhd (PAAB) to buy over the bonds for which some are running into an event of default. (Source: The Star)

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Maybank IB Views

Other Local News
KL Kepong: Drops plans to issue RM912m bonds. Kuala Lumpur Kepong Berhad (KLK) has dropped plans to issue USD300m (RM912m) bonds based on the company's current financial condition. KLK feels it no longer requires the planned RM912m, five-year unsecured guaranteed exchangeable bonds with an over-allotment option to increase the issue by RM304m. (Source: Bursa Malaysia)

Alam Maritim: Unit bags RM11m deal. Alam Maritim Resources Berhad's unit has accepted an extension of a spot charter contract to supply one straight supply vessel for RM10.9m. The one-year contract will contribute positively to its financial year ending December 31.(Source: Bursa Malaysia)

Hong Leong Bank: Gets nod for RM912m bonds. Hong Leong Bank Berhad has been given approval by the Securities Commission to issue up to USD300m (RM912m) Senior Unsecured Bonds. The proceeds from the bond issuance will be used for working capital and general banking purposes. (Source: Bursa Malaysia)

Ahmad Zaki Resources: Wins RM145m job. Ahmad Zaki Resources Berhad has won a RM145.4m job to complete the remaining works of Lebuhraya Pantai Timur, Phase 2, in Terengganu. The job is expected to contribute positively to AZRB Group's earnings and the net tangible assets for the financial years ending 2011 to 2012 (Source: Bursa Malaysia)

BLand Berhad: To sell BVC India for RM15m. Berjaya Land Berhad is disposing of its 100% stake in Berjaya Vacation Club India Pte Ltd (BVC India) for RM15.1m cash. The proposed disposal would result in an exceptional gain of about RM11.1m for the current financial year ending April 30, Bland said, adding that the cash proceeds of RM15.1m would be used by the group for working capital (Source: Bursa Malaysia)

MAS: Hedge down on unclear economy. Malaysia Airlines drastically reduced its fuel hedging levels this year to 25% from 60% last year due to uncertainty in the economic recovery and higher fuel hedging entry cost. Malaysia Airlines fuel hedge levels are said to be in line with its benchmarked peers, with current hedge levels ranging from 17% to 35%. (Source: The Star)

Outside Malaysia

U.S: 4Q10 household worth rises by USD 2.1tr, Fed says as share prices rose and families rebuilt finances tattered by the recession. Net worth for households and non-profit groups increased at a 16.6% annual pace to USD 56.8tr after rising at a 9.1% rate in the previous three months. American households also cut debt for an 11th consecutive quarter. (Source: Bloomberg)

U.S: Jobless claims rose by 26,000 last week to 397,000, highlighting the uneven nature of the improvement in the U.S. labor market. The total number of people receiving benefits in the prior week fell to the lowest since October 2008. (Source: Bloomberg)

U.S: Trade deficit widened more than forecast in January as a surge in imports led by costlier crude oil overshadowed record exports. The gap in goods and services increased 15% MoM to USD 46.3b, from USD 40.3b in December. Imports jumped 5.2% MoM, the most since March 1993, while exports grew 2.7% MoM. (Source: Bloomberg)

U.K: BOE keeps stimulus as recovery concerns outweigh inflation. The Monetary Policy Committee, led by Governor Mervyn King, set the key rate at 0.5% for a 25th month. They also left their bond program at GBP 200b (USD 324b. (Source: Bloomberg)

U.K: Manufacturing production jumped in January by the most in 10 months, a sign the economy is resuming growth after a winter freeze dented the recovery. Factory output rose 1% MoM from December, when it shrank 0.1% MoM. The index of manufacturing rose to 92.9, the highest since October 2008. (Source: Bloomberg)

Spain: Government bond ratings were downgraded by Moody's Investors Service by one notch to Aa2 from Aa1. The outlook on the Aa2 ratings is negative, Moody's said. The main triggers for the downgrade include Moody's expectation that "the eventual cost of bank restructuring will exceed the government's current assumptions, leading to a further increase in the public debt ratio. (Source: Bloomberg)

China: Reported an unexpected USD7.3b trade deficit, the biggest in seven years, buttressing the government's case against U.S. arguments for faster gains in the Yuan. Exports rose 2.4% YoY in February, the least since 2009 as Lunar New Year holidays disrupted shipments, and imports climbed 19.4% YoY, customs bureau data showed. (Source: Bloomberg)

Japan: Economy contracted more than the government initially estimated in the fourth quarter because of a downward revision to capital investment and consumer spending. GDP shrank at an annualized 1.3% rate in the three months ended Dec. 31, more than the 1.1% contraction reported last month, the Cabinet Office said. (Source: Bloomberg)

India: Exports rose at a faster pace last month, figures released by trade secretary Rahul Khullar showed, supporting economic growth and providing scope for the central bank to raise interest rates. Merchandise shipments surged 49.8% YoY to USD23.6b in February, Khullar, secretary in the Ministry of Commerce, told reporters in New Delhi. (Source: Bloomberg)

S. Korea: Bank of Korea raised interest rates for the second time this year after inflation exceeded its target ceiling for two consecutive months. Governor Kim Choong Soo boosted the benchmark seven-day repurchase rate to 3% from 2.75%, the central bank said in a statement in Seoul. (Source: Bloomberg)

Thailand: Consumer confidence fell for the first time in three months in February after oil and food prices surged. An index measuring sentiment dropped to 72.2 from 72.6 in January, the University of the Thai Chamber of Commerce said in a statement in Bangkok. (Source: Bloomberg)

Philippines: Export growth eased in January as electronics sales rose at a slower pace. Shipments abroad grew 11.8% YoY to USD4b after rising a revised 26.5% YoY in December, the National Statistics Office said in Manila. (Source: Bloomberg)

Australia: Employers unexpectedly cut workers in February for the first time in 18 months as floods and a cyclone disrupted hiring in the nation's northeast. The number of people employed fell by 10,100 from January, led by a drop in part-time jobs, the statistics bureau said in Sydney. The jobless rate held at 5%. (Source: Bloomberg)

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Maybank IB Views

COMPANY UPDATE
Gamuda RM3.83: Buy
NO to Selangor's water offer Shariah-compliant

As expected. SPLASH's rejection of the Selangor Government's latest offer was expected, for the offer values SPLASH at just 0.63x book, we estimate. We had anticipated the action by SPLASH's shareholders, including Gamuda which holds a 40% stake. We foresee the water consolidation exercise in Selangor to be another long drawn affair. No change to our earnings forecasts and target price for Gamuda.


S P Setia RM6.42: Buy
Strengthening its foothold in JB Shariah-compliant

New Tebrau land boosts EPS by 2.4%. We are positive on the recent land purchase in Tebrau given its fair pricing. The land is expected to enhance our FY13 earnings by 2.4%, whilst leaving negligible impact to our RM6.50 RNAV. We continue to like SP Setia (SPSB) and see the recent correction in the share price as an excellent opportunity to accumulate the shares. No change to earnings forecasts and RM7.15 TP (10% premium to RNAV). Reiterate Buy.


RESULTS REVIEW
CIMB Group Holdings RM8.45: Buy
Pipeline remains healthy

Pipeline healthy, regional operations contributing well. CIMB's pre-results briefing last Friday (2010 results will be announced 23rd Feb) largely steered clear of specifics. The overall tone nevertheless remains upbeat into 2011, for CIMB enters the year with a healthy business pipeline and strong growth in regional operations. No change to our earnings forecasts. Buy maintained with an unchanged DDM-based target price of RM10.30.


Digi.Com RM25.30: Hold
Results above, dividends below Shariah-compliant

Mixed surprises. RM1.18b 2010 net profit (+18% YoY) was above our expectation at 108% as ongoing operational efficiency initiatives continue to bring results. We upgrade our 2011-12 earnings forecasts by 6-7% p.a., and DCF based target price to RM26.70 (+7%), which implies 16.6x 2011 PER. A fourth 43sen single-tier DPS brings 2010 DPS to 163sen, representing 107% net profit payout (2009: 138%), below our 130% forecast. No change to our 105% payout forecast for 2011 which implies 6.7% net yield at current levels. Maintain Hold.


Guinness Anchor RM9.63: Hold
The second part of a perfect pint pour

Above expectations. RM103m 1HFY11 net profit (+46.5% YoY) made up 61% of our full-year forecast due to unexpected cost write-back. We maintain our earnings forecasts, pending details on the write-back which should be a one-off. No change to our RM10.60 DCF-based target price which implies 16x 2011 PER. Guinness remains a Hold.


SECTOR UPDATE
Banking: Overweight
Dec '10 statistics: Loans Up 12.8% YoY

2011 loan growth of 10-11%. The positive of 2010 is that household and corporate loan demand kept pace to support economic momentum, with growth rates of 13.2% and 12.3% respectively. Overall system loans ended the year up 12.8% YoY, marginally above our full-year forecast of 12%. We look to lending momentum of 10%-11% for 2011 and maintain an Overweight on the banking sector.


Technicals
The FBM KLCI plunged 25.54-points and closed at 1,521.89 last week as some further heavy profit-taking and liquidation activities caused the market’s large fall for the second consecutive week. The weaker support areas for the FBM KLCI are located in the 1,474 to 1,505-zone. The key resistance zone of 1,521 and 1,576 will offer major selling and liquidation activities.

Weekly trading idea is an ACCUMUALTE call on SAPCRES


Other Local News
Alam Maritim: Bidding for RM400m jobs. Alam Maritim Resources Bhd is bidding for RM400m worth of jobs this year to ride on the recovering sector which was subdued last year due to the global economic crisis. The offshore marine transportation service provider will submit bids in Indonesia, Brunei and Sabah as part of the group's long-term growth plan. (Source: Business Times)

Gaming: Genting said to be keen on Pan Malaysian Pools. The Genting group is making a bid for Pan Malaysian Pools Sdn Bhd (PMP), the number forecast operator (NFO) owned by Tanjong plc. Its bid is in the higher end among bids that have been submitted. The other bids are believed to be between RM1.8b to RM2.5b. (Source: The Edge Financial Daily)

Infrastructure: No rates hike on two highways. The Prime Minister announced that the toll rates for the Kuala Lumpur-Karak Expressway and East Coast Expressway Phase One would not be increased for the next five years. The decision was made following a review of transportation costs, including restructuring of the toll charges and to ease the people's burden. Furthermore, no compensation would be paid to the concessionaires of the two highways. (Source: The Star)

Infrastructure: All eyes and ears on second MRT line. The second mass rapid transit (MRT) line, which circles the Kuala Lumpur city centre (KLCC) orbital and known as the "circle line", is already in the final planning stage. The details are expected to be announced in March. The circle line is expected to cover the hotspots surrounding the KLCC, Jalan Bukit Bintang, the new Kuala Lumpur International Financial District in Dataran Perdana, KL Ecocity, Pusat Bandar Damansara and Sentul, among others. (Source: The Star)

Regulations: Changes in takeover rules. The Securities Commission (SC) and Bursa Malaysia raised the minimum shareholder approval threshold for takeovers via asset and liabilities route to 75% from the previous simple majority minimum. Other significant changes include the need for companies undergoing privatisation to obtain independent advice to ascertain if the offer is fair and reasonable and to ensure high net-worth investors are well informed of any structured products being offered to them. (Source: The Star)

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