Maybank IB Views

ECONOMICS
US FOMC Preview
Expecting something...

The latest round FOMC meeting was originally scheduled for a day (20 Sep) but was extended to two days (20-21 Sep) to allow a fuller discussion on the economic development and outlook, as well as the Fed's policy responses. No QE3 is expected amid the lack of consensus at Fed on such policy. Instead, we are looking at the formal announcement of the "Operation Twist" where Fed will lengthen the average maturity of its securities holdings to extend the commitment to very low interest rate on the short end of the interest rate spectrum to the long end. Recall that Fed pledged to keep the fed fund rate at 0%-0.25% until at least mid-2013 at the previous FOMC meeting (9 Aug).

SECTOR UPDATE
Power: Neutral
Projek Lekas, what it means to us

Get ready for higher tariff. This report aims to quantify the impact of importing liquefied natural gas (LNG) when PETRONAS' re-gasification plant (LEKAS) is ready (expected July 2012). The imported LNG will be costlier than Tenaga's current gas supply - which is subsidized - hence, power tariff must rise to reflect this. On the flip side, Tenaga will have greater certainty of supply and avoid further incidence of having to burn costly oil and distillates, like the episode experienced in 3QFY11.

Technicals
The FBM KLCI tumbled 17.81-points to close at 1,413.12 yesterday. Its resistance areas of 1,413 and 1,440 will cap market gains, whilst the weaker support areas are located at 1,382 and 1,400. Due to the US markets’ weaker tone last night; we may see a volatile tone for the index today. Some persistent foreign liquidation activities may depress the markets’ today.

Trading Idea is a Take Profit call for SIME, PCHEM and IJM.

Other Local News
Sime Darby: In talks to buy Bucyrus’ distribution assets. Sime Darby Industrial Sdn Bhd (SDI) is in talks to buy the distribution assets of Bucyrus International Inc. Sime Darby might announce the deal by end of the year, adding that the acquisition would enable Sime to extend the range of its products to cover both surface and underground mining equipment. SDI expects to remain busy for the next three years with an order book of RM3b. (Source: The Edge Financial Daily)

AirAsia: Thai AirAsia puts off IPO to 1Q11. The Thai unit of Malaysia's AirAsia Bhd has delayed the initial public offering (IPO) of its shares to the 1Q12 from 4Q11. The delay is because it needs more time to restructure its organisation and conduct due diligence. (Source: Business Times)

Hartalega: MD to buy Budi Tenggara. Hartalega Holdings Bhd’s MD Kuan Kam Hon plans to buy 100% of Budi Tenggara Sdn Bhd, which has a direct 4.99% stake in Hartalega and a 13.9% stake in Hartalega Industries Sdn Bhd, which in turn has a 50.6% in Hartalega. If the deal goes through, Kuan will control 51.5% of Hartalega and Securities Commission has granted a waiver from making a mandatory general offer. (Source: Business Times)

BRDB: To sell four assets for RM914m. Bandar Raya Development Bhd (BRDB) has decided to part with four investment properties including Bangsar Shopping Centre , Menara BRDB, CapSquare Retail Centre and Permas Jusco Mall for a cash consideration of RM430m with net liabilities of RM484m to be assumed by the buyer, valuing the entire transaction at RM914m. Following the disposal, BRDB will distribute part of the proceeds to its shareholders via a net cash dividend of 80 sen per share. (Source: Bursa Malaysia)

Plantation: Another vote against Aussie palm oil Bill. The Food Standards Amendment (Truth in Labelling - Palm Oil) Bill 2010 was rejected by Australia's House of Representatives Economics Committee in Canberra yesterday, the second committee to do so since it was tabled in Parliament. Malaysia is awaiting the final vote from the Parliament. (Source: Business Times)

Read more...

Maybank IB Views

Banking: Neutral
Earnings growth cut

Neutral. We maintain our Neutral stance on the banking sector on the premise that valuations are fair for most of the stocks within our coverage, particularly amid a competitive operating environment and slower earnings growth projections. Top picks in the sector continue to be AMMB Holdings, BIMB Holdings and CIMB Holdings.

Technicals
The FBM KLCI rebounded 29.28-points and closed at 1,474.09 last Friday. The local market remained somewhat firm on low volume buying on blue chip stocks as the bourse played catch-up with global markets over the 3-day holiday break. The weaker support areas for the FBM KLCI are located in the 1,423 to 1,470-zone. The next resistance levels of 1,474 and 1,511 will see very heavy liquidation activities.

Trading Idea is a technical Take Profit call on GAMUDA.

Other Local News
AirAsia: EPF buys 10m more shares. The Employees Provident Fund (EPF) had bought 4.27m shares on Aug 25 and 5.72m shares the following day. With the acquisition, EPF increased its equity interest to 12.5%. (Source: Bursa Malaysia)

RHB: Withdraws MD application to Bank Negara. RHB Banking Group has withdrawn its application to Bank Negara Malaysia to seek the appointment of Renzo Viegas as MD of RHB Bank Bhd. The reason for the withdrawal is its current internal reorganization. (Source: The Edge Financial Weekly)

BRDB: To reward shareholders, divest BSC. Bandar Raya Developments Bhd (BDRB) is looking to pay a bumper dividend to its shareholders in a complex corporate exercise that may see it dispose its Bangsar Shopping Centre (BSC). (Source: The Edge Financial Weekly)

Plantation: Oil palm seeds to cost 30% more. The price of oil palm seeds, now at RM1.85 each, will be raised by 30% to RM2.35 starting January next year. The increase is due to the recent hike in labour wages and foreign worker levy, fertiliser cost, electricity tariff and packaging material cost. (Source: Business Times)

Read more...

Maybank IB Views

Multi-Purpose Holdings RM2.77: Buy
Buy now or forever hold your piece

Great long term play. We initiate coverage on Multi-Purpose Holdings (MPHB) with a Buy call and RM3.60 TP (10% discount to RM4.00 SOP/sh). Its current share price reflects only Magnum Corporation's value without any value ascribed to its other businesses. We expect 14% 3-year forward earnings CAGR with 100% ownership of Magnum Corporation. A major re-rating catalyst is the gradual disposal of non-core assets which could enable it to pay up to 44 sen in special DPS and 20 sen in recurring net DPS, offering a whopping 7% net yield.

RESULTS REVIEW
AMMB Holdings RM6.48: Buy
Treasury gains support momentum

Maintain Buy. While 1QFY12 results were slightly above expectations our forecasts are lowered marginally. AMMB remains a Buy for: (i) its decent valuations, (ii) its ongoing portfolio rebalancing, (iii) ongoing investment in business line expansion under ANZ, and (iv) its position as a beneficiary of the Economic Transformation Programme. Our target price is trimmed to RM7.40 (-10sen) on an unchanged FY13 P/B target of 1.8x (ROE: 14.3%), which we believe is reflective of fundamentals.

Technicals
The FBM KLCI rose 16.07 points to close at 1,499.74 yesterday. Its resistance areas of 1,501 and 1,530 will cap market gains, whilst the obvious support areas are located at 1,454 and 1,499.Due to the US markets’ rebound last night; we will see some volatile trading activities in the local bourse today. Some heavy profit-taking and liquidation activities will emerge later to depress the markets’ rebound from its opening “gap up” move.

Trading idea is a Short-Term Buy call on BRDB

Other Local News
Sunway: No plans to postpone listing. The listing of Sunway Bhd, the merged entity of Sunway Holdings Bhd and Sunway City Bhd, will proceed as planned despite recent turbulence in the stock market. The shares of Sunway Bhd are scheduled to be floated on Bursa Malaysia on August 23 and expected to have a market capitalisation of over RM3.5b. (Source: Business Times)

AirAsia: New AirAsia Philippines vows to be 'substantially' cheaper. AirAsia launched a new affiliate in the Philippines yesterday, promising to undercut its rivals on regional and domestic routes. To minimise costs and avoid Manila's crowded terminals, AirAsia Philippines will fly out of a former US air base that had been turned into an industrial zone in Clark about 90 minutes' drive north of the country's capital. (Source: The Star)

MAHB: In talks with BA and Qantas on using KLIA. Malaysia Airports Holdings Bhd (MAHB) is still in talks with British Airways and Qantas Airways on the possibility of both airlines mounting flights to KL International Airport (KLIA), a decade after these airlines suspended flights to KLIA owing to a lack of network connectivity here. Both airlines were considering the possibility of flying into KLIA, following Malaysia Airlines (MAS) joining the Oneworld alliance. (Source: The Star)

Parkson: Hires HSBC for Singapore listing. Parkson Holdings is spinning its retail operations in Malaysia, Indonesia, Vietnam and Cambodia in a separate listing in Singapore soon. HSBC has been hired to apply for the corporate exercise and the Singapore's listing. (Source: The Sun)

Dijaya: JV plans property development with GDV RM2.8b. Dijaya Corp Bhd’s joint venture with Iskandar Waterfront Sdn Bhd, Magical Heights Sdn Bhd (MHSB), plans to undertake property projects near Johor Baru with a gross development value (GDV) of RM2.8b. The projects would be built on two pieces of land which MHSB has proposed to acquire from Trident World Sdn Bhd for RM220m. Dijaya and Iskandar Waterfront Sdn Bhd each has a 50% stake in MHSB. (Source: Bursa Malaysia)

Iskandar: Gets RM95b pledges. Iskandar Malaysia attracted about RM95b in committed investments from January to June 2011. This was more than double the cumulative RM47b target for the five years up to 2010. From 2011 to 2015, Iskandar Malaysia is targeted to achieve RM73b in investments. (Source: The Star)

Read more...

Stocks to watch: Sunway, Fajarbaru, oil and gas, Allianz

KUALA LUMPUR: Stocks on Bursa Malaysia are expected to trade in a tight range with some downside pressure on Monday, March 7 as investors worry about the impact of record oil prices on the economy while consumers cope with the rising costs of food.

The revolt in Libya continues as Muammar Gaddafi's forces captured part of a town in western Libya on Friday, but rebels said they had taken the coastal oil town of Ras Lanuf, extending the territory they control in the east of the country.

The fighting appeared to confirm the division of the oil-producing desert state into a western area round the capital Tripoli held by forces loyal to Gaddafi and an eastern region held by those rebelling against his four-decade rule.

CIMB Economics Research had recently estimated the federal government’s fuel-related subsidies could reach RM14 billion based on the current oil price of US$90 to US$100 per barrel.

“If the oil price rises to US$130 to US$140 per barrel, the amount of subsidies could balloon to at least RM18 billion to RM20 billion,” it said in a recent report.

Under the Budget 2011, the federal government earmarked 6.3% of the total operating expenditure (opex) or RM10.3bn as subsidies for LPG, diesel and petroleum, based on an average oil price of US$85 per barrel. In 2008, subsidies for fuel and petroleum-related products amounted to RM17.6 billion or 11.4% of opex.

Meanwhile, Wall Street erased most of its weekly gains on Friday as fears of more geopolitical turmoil and higher oil prices threaten to stifle rallies in coming weeks.

The worries overshadowed strong labour market news. U.S. unemployment fell below 9% for the first time in nearly two years, but investors quickly turned to focus on intensified fighting in Libya and simmering unrest throughout the region. Brent crude prices rose above SUS$116 a barrel and the CBOE Volatility Index VIX, Wall Street's so-called fear gauge, rose 2.7% to 19.11.

Stocks to watch on Monday include SUNWAY HOLDINGS BHD, Fajarbaru Builder Group Bhd, oil and gas-related companies, UEM Group Bhd and ALLIANZ MALAYSIA BHD.

Sunway’s unit Sunway CONSTRUCTION Sdn Bhd Holdings Bhd has secured a RM257.96 million contract for the proposed construction of part of the Legoland Malaysia Theme Park in Johor. Sunway Construction had accepted the letter of award from IDR Assets Sdn Bhd to build package four of the theme park.

Fajarbaru’s unit has received the letter of acceptance from the BINA PURI HOLDINGS BHD []-TIM Sekata joint venture for part of the light rail transit (LRT) extension project valued at RM62.66 million.

Its unit Fajarbaru Builder Sdn Bhd was appointed by Syarikat Prasarana Negara Bhd as the nominated sub-contractor to the joint venture.

Oil and gas related companies will continue to trading interest, underpinned by the high oil prices and Petroliam Nasional Bhd’s RM250 billion plan in the next five years in exploration and asset replacement to maintain the exploration levels.

Other companies in the news are BANDAR RAYA DEVELOPMENTS BHD, whose unit BR Property Holdings Sdn Bhd has secured a RM450 million term loan to repay inter-company loans, payment of dividend and working capital purposes.

MUTIARA GOODYEAR DEVELOPMENT Bhd has launched its new phase of its lifestyle homes in Nadayu 92, Kajang with a gross development value (GDV) of over RM40 million.

UEM Group Bhd is looking into investing more in India’s infrastructure development projects particularly expressways, which presents tremendous growth potential. The projects would be undertaken by PLUS EXPRESSWAYS BHD and UEM BUILDERS BHD.

OSK Research has initiated coverage of Allianz Malaysia with a BUY, at a target price of RM5.68, derived from a sum of parts valuation.

Riding on potentially strong growth in the life insurance industry and a re-rating of motor insurance, Allianz as the biggest general insurance player is poised to benefit from the encouraging industry outlook.

“The company is also seeking to establish a foothold in the fast growing takaful industry to diversify its business,” the research house said.

OSK Research said apart from being the No. 1 one player in Malaysia’s general insurance industry with gross written premiums (GWP) totaling RM1.3bn in FY10, Allianz’s life insurance business is no less a consistent performer, chalking up RM1bn in GWP on the back of a robust double digit growth of 18.5% in FY10.

Read more...

Stock to watch BRDB, Tan Chong, P&O

Stocks to watch on Monday are companies with fresh corporate news including BANDAR RAYA DEVELOPMENTS BHD (BDRB), TAN CHONG MOTOR HOLDINGS BHD , Pacific & Orient Bhd and MALAYAN BANKING BHD.

BDRB is teaming up with Country Heights Land Sdn Bhd (CHLSB) to undertake a housing project costing RM481 million in Pekan Baru Sungai Besi, Selangor.

Its projected gross development value (GDV) would be RM652 million and the projected gross development profit at RM170 million.

Meanwhile, Tan Chong Motor will invest RM285.0 million to manufacture and assemble luxury passenger cars at the Kota Kinabalu Industrial Park in Sabah.

It had received a government approval to manufacture and assemble luxury passenger vehicles and commercial vehicles. The approval is for luxury passenger cars with engine capacities of 1,800cc and above, at on the road price of not less than RM150,000.

Meanwhile, Pacific & Orient called off the preliminary negotiations for the proposed divestment of an equity interest in Pacific & Orient Insurance Co. Bhd to Prudential Holdings Ltd. It had informed Bank Negara Malaysia the proposed divestment discussions had been discontinued.



Maybank earnings were RM1.028 billion in the first quarter ended Sept 30, 2010, up 16.6% from RM881.80 million a year ago, underpinned by improvements in all the divisions, including its Indonesian operations.

Its revenue rose to RM5 billion from RM4.56 billion. Earnings per share were 14.53 sen versus 12.46 sen.

Maybank’s net interest income increased by 9% or 146.9 million in the first quarter ended Sept 30, due to improvements in the group’s operations from higher net interest income margins in Malaysia arising from increases in the overnight policy rate and expansion of market in Indonesia.

Income from Islamic Banking operations decreased by RM43.3 million or 11.3% to RM338.2 million due to higher provision for profit equalisation reserves in the Islamic business but mitigated by increase in growth in assets which increased gross income in Islamic business.

Maybank expects its performance for the financial year ending June 30, 2011 to be better than the last financial year and on track to meet the targeted 14% return on equity.

theedgedaily.com

Read more...