Maybank IB Views

SECTOR UPDATE
Media: Overweight
March 2011 adex: Strong recovery

Maintain Overweight. Mar 2011 total gross adex grew 14% YoY after easing 2% YoY in Feb 2011. Apr 2011 is likely to be flattish MoM as advertisers consolidate before adex friendly festivities in 3Q. YTD, total gross adex grew 13% YoY. Therefore, our 5% total gross adex growth forecast for 2011 is under review. Our top pick remains MCIL.

COMPANY UPDATE
Nestle (Malaysia) RM48.18: Sell
Fully priced in; downgrade to Sell Shariah-compliant

Downgrade to Sell. Nestle (Malaysia)'s share price has done well, up 11% year to date, outperforming the KLCI (+0.3%), and surpassing our RM45.00 DCF based target price. Last Friday's analyst briefing post 1Q11 results reporting offers no new developments; we maintain our forecasts. The stock currently trades at 25.5x 2011 earnings, which is at one standard deviation above its mean PER of 24.8x since 2000. We think that its near-term earnings growth potential is fully in the price, while dividend yield has also tapered off with the rise in its share price.

Technicals
The FBM KLCI rose 1.30 points to close at 1,524.05 yesterday. Its resistance areas of 1,524 and 1,541 will cap market gains, whilst the obvious support areas are located at 1,514 and 1,522.Due to the DJIA’s negative tone last night, we may see the FBM KLCI remain benign today.

Trading idea for today is a Short-Term Buy call on PADINI.

Other Local News
Sime Darby: Unit secures RM1.2b contract. Sime Darby Bhd’s wholly owned subsidiary, Sime Darby Engineering Sdn Bhd (SDE), has been awarded the contract to fabricate KBB Topsides for the Kebabangan Northern Hub Development Project (Contract) by Kebabangan Petroleum Operating Company Sdn Bhd worth RM1.2b. This would increase SDE's current orderbook to RM2.2b. (Source: Bursa Malaysia)

Integrax: Revived Integrax-Vale accord on the cards. Port operator Integrax Bhd is set to revive the terminated deal with Brazilian mining giant Vale International S.A. However, this depends on the outcome of an Integrax EGM next week to vote on resolutions to reconstitute its board of directors. (Source: The Star)

Bernas: Gets agreement extension for 10 more years. Padiberas Nasional Bhd (Bernas) has on April 22 received a letter from the Public Private Partnership Unit under the Prime Minister’s Department on the extension of the Bernas Agreement, which gives Bernas monopoly over the country’s rice imports, for a period of ten years. (Source: Bursa Malaysia)

EonCap: China bank eyes stake in EONCap. China Construction Bank Corp (CCB) has approached the Malaysian government about buying a stake in EON Capital (EONCap). (Source: Business Times)

Telco: M'sia taking steps to reduce broadband rates. A new consortium, Konsortium Rangkaian Serantau Sdn Bhd under the Entry Point Projects (EPPs), has been set up to buy international bandwidth for Internet traffic to lower the costs of Internet protocol (IP) transit. (Source: The Star)
Outside Malaysia
U.S: Sales of new homes rose in March to 300,000 annual rate as the weakest industry in the economy strained to recover. New-home sales, tabulated when contracts are signed, climbed 11.1% to a 300,000 annual pace. Housing prices fell from a year ago. (Source: Bloomberg)

China: Cheapest Big Macs suggest the CNY and the HKD are the most undervalued currencies in the world, trading at discounts of 40% or more versus the greenback. McDonald's Corp's signature burger cost the equivalent of USD 2.18 in China at the end of last year, USD 1.90 in Hong Kong and USD 3.71 in the U.S, according to The Economist's Big Mac Index. China's discount has narrowed to 40% from 41% since then owing to yuan gains, while Hong Kong's pegged currency has kept its gap at 49%, according to data compiled by Bloomberg. (Source: Bloomberg)

Taiwan: March industrial production increased more than estimated, bolstering the central bank's scope to raise borrowing costs again. Output rose 13.82% YoY, after gaining a revised 12.93% YoY in February, the Ministry of Economic Affairs said in Taipei. (Source: Bloomberg)

Singapore: Inflation held at 5% in March as housing and transportation costs surged, supporting the central bank's decision this month to allow further currency appreciation. Prices rose 0.1% MoM from February, without adjusting for seasonal factors. (Source: Bloomberg)

Vietnam: Inflation in April accelerates to fastest pace in 28 months, putting pressure on the government to tighten policy further after almost doubling a key interest rate in less than six months. Consumer prices climbed 17.51% YoY in April compared with the 13.89% YoY pace last month. Prices rose 3.32% MoM in April from March. (Source: Bloomberg)

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Maybank IB Views Stock Recommendation

This week, we have 4 recommendations of counter for your reading material.


1. Padiberas Nasional Berhad, the company that maintains national rice stockpile and manages the "guaranteed minimum price" of paddy on behalf of the Government.
( Target Price: RM3.50 )

2. Handal Resources Berhad, the only company in Malaysia to provide fully integrated offshore crane services to the oil and gas industry. ( Target Price: RM1.47 )

3. Eksons Corporation Berhad, one of the largest manufacturer of tropical thin plywood in the Asia Pacific region with over 90% of its products are earmarked for the export market.
( Target Price: RM1.36 )

4. Ramunia Holdings Berhad, the company that fabricates offshore oil and gas related structures with clients ranging from, among others, Petronas Carigali Sdn Bhd, Exxonmobil, Sarawak Shell Berhad, Sabah Shell Petroleum Co., Keppel FELS, Samsung Heavy Industries Co, Ltd etc.

( Target Price: RM0.79 )

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Maybank IB Views

INITIATING COVERAGE
Petronas Chemicals RM6.02: Buy
The new Big Show

Golden opportunity not to be missed. PCG is an opportunity to participate in: (i) the world's most consistently profitable petrochemical company; just after its earnings trough, with (ii) huge earnings growth prospects, (iii) low indebtedness profile and (iv) generates significant free cash flow. PCG is the world's 22nd largest chemical company by market value, and it will inevitably be included into major chemical indices - a strong pull factor to international investors. Valuations are attractive compared to global peers' forward PERs and EV/EBITDAs.


Technicals
The FBM KLCI rose 3.55 points to 1,566.49 yesterday. Its resistance areas of 1,569 and 1,576 may cap market gains, whilst its firmer support areas are located at 1,552 and 1,566.

Trading Idea for today is a Firm Buy call for BERNAS and a Short-Term Buy call for DELEUM.


Other Local News
TNB: Awards RM2.15b jobs for Ulu Jelai project. Tenaga Nasional Berhad (TNB) has awarded the Ulu Jelai Hydroelectric Project construction jobs worth RM2.15b to two consortiums. The Project will involve the construction of one dam and the installation of two hydro turbines and generators in an underground power station with a total installed capacity of 372MW. The Project is expected to be completed and operational by July 2016. (Source: Bursa Malaysia)

SP Setia: Leads race for PICC deal. SP Setia Bhd has emerged as the leading contender to build the Penang International Convention Centre (PICC) on the grounds of the Penang International Sports Arena (Pisa) that is likely to cost over RM200m. SP Setia is likely to get a 30-year concession to build and operate the convention centre, which will include other components like a hotel and retail outlets. (Source: Business Times)

CIMB: Not in talks with Affin. CIMB Group has clarified that it is not involved in any discussions relating to a possible acquisition or merger with Affin Bank or any of its related companies. (Source: Business Times)

Mah Sing: Sets 2011 sales target of over RM2b, PNB ceases to be major shareholder. Mah Sing Group Bhd has set an ambitious sales target of RM2b to RM2.5b for the current financial year ending Dec 31 (FY11), which will be a 70% increase over the RM1.5b recorded in FY10. Separately, Permodalan Nasional Bhd (PNB) has ceased to be a substantial shareholder after it disposed 1.5m shares in the company, reducing its interest to less than 5%. (Source: The Star)

Perodua: Allocates RM614m capex. Perodua has set aside RM614.2m for capital expenditure (capex) this year. An amount between RM250m and RM300m of the capex will be utilised for the development of a new model, which is expected to further boost overall sales. (Source: The Star)

Green Packet: Capex at RM250m this year. Green Packet Bhd expects to spend up to RM250m in capital expenditure (capex) this year to expand the number of sites to 1,600 from 1,000 at present. Consequently, coverage would be increased to 52% (from 45%) of Peninsular Malaysia's population by end of 2011. P1 will focus on expansion this year by providing wider coverage, enhancing capacity and quality. (Source: The Edge Financial Daily)

Plantation: Suppliers expect 4%-20% increase in fertiliser prices. Fertiliser, which represents about 40% of production cost for local oil palm planters, are likely to trend higher by 4 to 20% this year. For murate of potash (MOP), the most popular fertiliser among local planters, fertiliser companies are expecting a price increase of about 5.8% to RM1,500 per tonne this year from RM1,417 per tonne last year. (Source: The Star)

Market: 15-20 foreign will be listing on Bursa this year. 15-20 foreign companies are expected to be listed on Bursa Malaysia this year from three last year as an initiative to develop an international board to list foreign securities by Bursa Malaysia. The guidelines to facilitate the implementation of the separate board for listing international companies would be finalized soon. (Source: The Edge Financial Daily)

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