Maybank IB Views
Tuesday, January 4, 2011
SECTOR UPDATE
Aviation: Overweight
Profits Galore, enter While You Can
Overweight. We are optimistic on the aviation sector because: (1) it is entering the fourth year of the industry cycle - a period renowned for strong profit growth and margin expansion; (2) healthy supply and demand relationship with the industry set to grow by 4-6%; (3) airlines have become more efficient, and there are fewer cases of irrational competition; (4) jet fuel prices are relatively stable; and (5) strong GDP growth in the region underpins strong demand for air travel.
INITIATING COVERAGE
Malaysia Marine and Heavy Engineering Holdings RM5.90: Buy
At the cusp of a super-cycle boom Shariah-compliant
Initiating coverage with a Buy and RM6.50 target price. Malaysia Marine and Heavy Engineering Holdings Berhad (MHB) is Malaysia's most prominent offshore fabrication operator directly benefiting from PETRONAS' development programmes. MHB offers strong earnings visibility, sustainable order book and tender pipeline. Its market leadership and PETRONAS' pedigree parentage put it on a higher perch in securing the major jobs. We expect MHB to be a strong beneficiary of sizeable E&C and marine conversion jobs soon.
COMPANY UPDATE
Sunway Holdings RM2.24: Buy
Ending 2010 with two new jobs Shariah-compliant
Maintain Buy. Two new construction contracts on 30 Dec lifted 2010 job wins to RM889m and outstanding order book to RM2.5b. Sunway remains a Buy with a price target of RM2.85 (11x 2011 PER) as it stays on course for record profits in 2010, and rising news flow in 2011. Among construction stock, Sunway is the cheapest. Its merger with SunCity at RM2.60 per Sunway share is positive in raising market values, trading liquidity and balance sheet to take on larger projects.
ECONOMICS
External Trade November, 2010
In the realm of single-digit growth...
Nov '10 export growth picked up for the first time in seven months to +5.3% YoY (Oct '10: +1.3 YoY; Maybank IB: +5.9% YoY; Consensus: +5.9% YoY) but imports slowed to +6.1% YoY (Oct '10: +12.5% YoY; Maybank IB: +11.7% YoY; Consensus: +11.0% YoY). From the previous month, both exports and imports fell by 4.1% and 9.2%. YTD, exports and imports are up 16.8% YoY and 22.8% YoY respectively versus our 2010 estimates of +15.0% and +19.5%. For 2011, we expect exports and imports to expand by 8.3% and 8.9% respectively. For 2012, we assume exports and imports growth to increase at roughly the same pace of 8.1% and 8.8% respectively. These forecasts are essentially based on the underlying assumptions that growth in global real GDP, trade and semiconductor sales in 2011-2012 will be slower than 2010, amid gradual appreciation of the Ringgit and continued firm prices of major export commodities.
SPECIAL TECHNICAL PERSPECTIVE
"Bull" on liquidity steroids
A slower paced "bull-run". Caution is wise
USA's persistent quantitative easing (QE) program moved into its 2nd phase in November 2010. As the American QE2 program commenced, the world is awash in liquidity. Given the large currency reserves in the Asia-Pacific countries, the monies from QE1 had flowed into this region and fuelled a strong run here for the past 2 years at least.
Technicals
The FBM KLCI surged 14.51 points to 1,533.42 yesterday. Its resistance area of 1,535 may cap market gains, whilst its firm support areas are located at 1,518 and 1,533. Due to the firm US markets last night, we may see the FBM KLCI in a solid trading mode today too.
Trading idea for today is a SHORT-TERM BUY call on HSPLANT
Other Local News
TM, Axiata: To probe alleged payments. Telekom Malaysia's Board (TM) has approved the formation of a Board Sub-Committee of the Board Audit Committee (BAC) to conduct an independent and comprehensive internal investigation into the alleged payments received by TM employees from Alcatel-Lucent SA. As the period under investigation concerns the previous integrated TM Group, TM is working closely with Axiata Group Berhad (Axiata) to extend all necessary cooperation with the relevant parties and authorities. TM and Axiata have jointly appointed KPMG Corporate Services Sdn Bhd and Shearn Delamore & Co as forensic accountant and legal adviser respectively to assist in the internal investigation. (Source: Bursa Malaysia)
MK Land: Plans to sell leasehold land for RM130m. MK Land Holdings Bhd's wholly-owned subsidiary, Saujana Triangle Sdn Bhd (STSB), is selling two plots of leasehold land in Sungai Buloh, Selangor to Foster Estate Sdn Bhd for RM130m cash. The disposal would unlock the value of the land which has not been earmarked for any immediate development. (Source: Bursa Malaysia)
Petra Energy: To bag RM100m Murphy Oil job. Petra Energy Bhd is close to winning a RM100m contract from Murphy Oil for hook up and commissioning works. The job from Murphy is said to be at the same rates offered by Petronas Carigali. In early December 2010, Petra Energy was awarded a RM400m job from Petronas Carigali Sdn Bhd. (Source: The Edge Financial Daily)
Parkson: Receives license to operate in Cambodia. Parkson Holding Bhd has received regulatory approval to operate department stores in Cambodia. (Source: Bursa Malaysia)
Media: Asia Media IPO oversubscribed by 21.5x. Asia Media Group Bhd, a digital out-of-home Transit TV company, saw the public portion of its initial public offering (IPO) oversubscribed by 21.46 times. At the close of the public offer on Dec 29, 2010, a total of 5,119 applications for 179.6m shares were received for the 8.0m made available to the Malaysian public. Asia Media's IPO involves an issuance of 98m new shares at 23 sen each, and the company is en-route to being listed on the Ace Market of Bursa Malaysia on Jan 11. (Source: The Star)
SME: Additional RM3b allocation for SMEs to be disbursed immediately. Disbursement of the additional RM3b Working Capital Guarantee Scheme (WCGS) allocation under 10th Malaysia Plan (10MP) will commence immediately. The scheme was first introduced in the second stimulus package in March 2009. It was fully utilised by year-end, despite being increased from RM5b to RM7b. In view of the encouraging response to the scheme, the Government provided an additional RM3b under the 10MP, bringing the total disbursement to RM10b. (Source: The Star)
