RHBInvest Research

Top Story: MNRB – Slower premium growth, claims ratio to remain stable Outperform

Briefing Note

¨ We expect gross premiums for MNRB’s main subsidiary, Malaysian Re, to continue growing underpinned by our gross premium growth estimate for the general insurance industry of 7-8% p.a.. However, due to the weaker global economic outlook, we have trimmed our FY03/12-14 gross premium growth estimates for Malaysian Re to 13% p.a. (from 15% previously).



Corporate Highlights



MAS: Underlying assumptions may be too simplistic Market Perform

Briefing Note

¨ MAS struggled to defend its decision to put an end to its low-cost jet operation under Firefly and we feel that it has failed to dispel the perception that the decision was a “concession” made to AirAsia/Tune Air.



Amway: Weaker consumer sentiment expected in 2HFY11 Outperform

Briefing Note

¨ We understand that Amway plans to convert a few more Regional Distribution Centres (RDC) to shops by the end of FY11, although they did not reveal any targets as to how many shops will be converted.



AMMB: Good start but management cautious of outlook ahead Outperform

1QFY12 Results / Briefing Note

¨ AMMB reported a strong set of 1QFY03/12 results, with net profit of RM441.5m (+19.9% yoy; +39.6% qoq) accounting for about 28.5% of our and consensus full-year estimates. The results were helped by gains from the disposal of AFS securities and low loan impairment allowances, both of which more than offset the sharp NIM contraction, but should “normalise” ahead.



Affin: Loan growth picked up pace Market Perform

2QFY11 Results

¨ 2Q11 net profit of RM134m (+20% yoy, +26.5% qoq) brought 1H11 net profit to RM240m (-2.7% yoy), in line with our and consensus expectations.



ILB: Start-up losses weigh down on 1HFY12/11 performance Outperform

2QFY11 Results

1HFY12/11 net profit came in below our expectations at only 10% of our full-year forecast largely due to start-up losses from its new operations in Chongqing and Xiamen, China.

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RHBInvest Research

Top Story: Strategy – Rising fears of a “double dip”

Strategy Update

¨ While the massive sell-off in global equities was triggered by an unconvincing debt deal in the US, escalating debt issues in Italy and Spain, and the continued sharp downtrend in the Jul Purchasing Managers Index (PMI) numbers worldwide, a deterioration in consumer and business confidence could potentially result in a protracted economic slowdown or at worst, tilt the global economy into a “double-dip” recession. This is despite softening commodity prices and the normalisation of global supply chains that should provide a boost to economic activities in the months ahead.



Sector Call



Plantation: Valuation targets trimmed on higher market risk Neutral

Sector Update

¨ Malaysia’s CPO production was relatively flat on a mom basis in Jul, falling by a slight 0.1% mom, while exports rose by 9.1% mom. Closing CPO stock levels fell for the first time in six months, by 2.8% mom to just below the 2m tonne mark at 1.996m tonnes in Jul (from 2.05m tonnes in Jun). Stock/usage ratio in Jul fell to 10.8% (from 11.6% in Jun), still significantly above the 9-year average of 9.1%.



Corporate Highlights



AirAsia - Tony: “My job is AirAsia” Market Perform

Briefing Note

¨ There is a concern on the reduction in Tune Air’s stake in AirAsia from 23% to 13% pursuant to the deal with Khazanah Nasional.

¨ Tan Sri Tony Fernandes said that Khazanah had decided to source a 10% block from Tune Air as it was difficult for it to accumulate such a large stake from the open market. Also, a private placement of new AirAsia shares was not considered as AirAsia did not need any fresh capital.



Amway: Expecting a stronger 2H11 Outperform

2QFY11 Results

¨ Amway’s 1HFY12/11 net profit of RM39.3m (+2.2% yoy) was below ours but above consensus estimates, accounting for 38% and 44% of our and consensus earnings forecast respectively. The main variance to our forecasts was the weaker-than-expected revenue growth in the 2Q.

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RHBInvest Research

Mutiara Goodyear:

• Visit Note
• A turnaround story
• New projects to be launched in 2011-2012 amounted to RM1.9bn. We expect earnings to leap frog with a growth of 67% in FY11 from FY10 annualised net profit of RM20.3m.
• Our fair value on the stock is RM1.60. At the current price, the stock is trading at 9x PE, which is reasonable for a small cap developer.

Macro View

Inflation:

• Economic Highlights (published 22 Feb 2011)
• Rising inflationary pressure and policy options
• We expect inflation to rise at a much faster pace of an average rate of 2.8% in 2011, compared with +1.7% in 2010.
• OPR to be raised by 50-75 basis points in 2H to bring it to a more neutral level of 3.25-3.50%.

Sector Call

Telecom: Overweight

Sector Update

• Celcom Axiata and TM have entered into MOU for strategic collaboration to provide fixed/mobile solutions.
• Another step towards convergence We maintain our earnings forecasts for now. Maintain Overweight. The sector is defensive against the growing unrest in the Middle East which may hurt market sentiment in the short term.
• Building Materials: Higher cement price effective 1st Mar
• Neutral

Sector Update

• YTL Cement: Fair value is raised to RM5.85
• Outperform
• Lafarge: Fair value is raised to RM7.87
• Market Perform (up from UP)

Corporate Highlights


MBM:

• Briefing Note
• Daihatsu winds back commercial vehicle franchise
• We maintain our Outperform call on valuation grounds. Our fair value of RM3.95 is unchanged.

Daibochi:

• Outperform (up from MP)
• Briefing Note
• Raw material prices stabilised
• Our fair value is raised to RM3.50 (from RM2.95). Upgrade to Outperform.

Amway:

• Briefing Note
• Forex to boost earnings
• Fair value is revised to RM9.35. We maintain our Outperform call on the stock.

Genting Plantation: Market Perform

• 4QFY10 Results/Briefing Note
• Optimistic management outlook on prices and production prospects .
• Fair value has been reduced to RM9.20 (from RM9.65), based.
• Maintain Market Perform.

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