Stocks to watch: Hartalega, Sanichi, Cypark, GuocoLand

KUALA LUMPUR (Nov 8): Stocks which could see trading interest on Wednesday, Oct 9 include Harlatega Holdings Bhd, SANICHI TECHNOLOGY [] BHD [], CypARK RESOURCES BHD [] and GUOCOLAND (MALAYSIA) BHD [] (GLM).

Harlatega reported its earnings fell 2% to RM46.13 million in the second quarter ended Sept 30, 2011 from RM47.01 million a year ago as it was impacted by high raw material prices.

However, it is cautious about the outlook following the sharp increase in nitrile material price and recent high volatility of US dollar.

Its revenue rose 24.5% to RM229.54 million from RM184.31 million. At the profit before tax level, it dipped 2.4% to RM59.55 million from RM61.02 million. Earnings per share were 12.68 sen compared with 12.96 sen. It declared an interim dividend of 6.0 sen per share.

Sanichi resumes trading on Wednesday after it announced that German-based Projektarbelt Technische Beratung Venretung International (Protev) has completed its first phase of due diligence of the company and the second phase in early 2012.

However, as there were no significant updates, interest could decline in the company. The company was earlier queried by Bursa Malaysia Securities over the unusual market activity in the trading of its shares.

In Cypark, executive vice chairman Siow Kwang Khee disposed of 3.97 million shares on Nov 3.

Following the disposal of the shares, his direct stake was reduced to 10.50 million shares or 7.24%.

GuocoLand has proposed to acquire PJ City Development Sdn Bhd for a cash consideration of RM29.78 million from GuoLine Asset Sdn Bhd.

PJ City’s core business is property development and property investment activities. Based on its audited financial statements for FY ended June 30, 2011, PJ City recorded profit after tax of RM4.75 million while its net assets were RM38.61 million.

PJ City also owns two parcels of land in Section 32 in Petaling, Selangor. GLM said after the completion of the proposed acquisition, it intends to develop commercial office buildings and corporate factories on the land.

COMPLETE LOGISTIC SERVICES BHD [] (CLSB) has proposed to acquire the remaining 40% stake in its subsidiary Guper Integrated Logistics Sdn Bhd for RM13.60 million cash.

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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)

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RHBInvest Research

Top Story: Hartalega – Expansion Plans Key To Capture Europe Market Market Perform (down from OP)

Visit Note

¨ Management targets FY12 revenue growth of 20-30%, driven by growing demand from markets in Europe and steady demand from the US.

¨ We believe the rapid growth in demand for nitrile gloves there is mainly due to customers shifting purchases from natural rubber gloves to nitrile gloves due to the higher volatility in latex prices (as compared to nitrile prices), leading to uncertainty and fluctuations in natural rubber glove ASPs.



Macro View



Trade: Exports moderated in July, on the back of slowing global demand

Economic Highlights (published 8 Sep 2011)

¨ Exports moderated to 7.1% yoy in Jul, after picking up to +9.6% in Jun, but higher than +5.4% in May. The slowdown was mainly due to a sharper decline in the exports of electronic & electrical (E&E) products, on the back of a slowing global demand as well as a moderation in the exports of non-electronic & electrical (E&E) manufactured goods.



Interest rates: Bank Negara kept the OPR unchanged at 3.0%

Economic Highlights (published 8 Sep 2011)

¨ This was the second time in a row that BNM held its OPR stable, suggesting that it has shifted its focus from containing inflation to sustain growth. Indeed, BNM highlighted that global growth has moderated in recent months as growth in advanced economies slowed by more than expected following the greater policy uncertainties, worsening of confidence and heightened financial market volatilities, amidst continued weaknesses in labour market conditions.



Corporate Highlights



DiGi: Fulfilling dividend promise Outperform (up from TB)

Briefing Note

¨ We are positive that DiGi intends to distribute excess cash of about RM509m (65 sen/share) to shareholders by 1HCY12. This would be done after utilising the share premium at its wholly-owned subsidiary, DiGiTel (DiGi Telecommunications Sdn Bhd). The entitlement date will be announced later.

¨ DiGi should be paying more dividends for FY11 (vs. FY10: RM1.63/share) totalling RM1.6bn (RM2.05/share) comprising: 1) FY11 DPS forecast of RM1.40 based on 100% payout of FY11 EPS; and 2) RM509m capital distribution (65/share). Based on core FY11 earnings (after stripping out accelerated depreciation), this implies a payout ratio of 114%.



Telecoms: 6% service tax no longer absorbed from 15 sep Overweight

Sector Update

¨ As anticipated, the telcos are passing on the 6% service tax to prepaid users effective 15 Sep. The move is positive given the positive earnings impact (already imputed into our earnings forecasts) as the telcos would no longer absorb the tax.

¨ We believe the telcos may want to preempt any further potential increase in the service tax, as Budget 2012 is due to be tabled by the Prime Minister on 7 Oct.

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RHBInvest Research

APM Automotive:

Visit Note

¨ Near Term Headwinds To Cap Share Price

¨ We are downgrading our call to Market Perform (from Outperform) and trim our fair value to RM5.50 (from RM6.10).



Sector Call



Rubber Glove: Improvement In Sentiment On The Back Of Falling Latex Prices

Sector Update

Top Glove Market Perform (FV: RM5.38)

Kossan Outperform (FV= RM5.12)

Adventa Outperform (FV=RM3.63)

Hartalega Market Perform (FV=RM6.14)



¨ Maintain neutral stance on the sector. Kossan remains our top pick thanks to its cheap valuation and for its well-regarded management.



Corporate Highlights



Top Glove:

Results Note

¨ Margin Boost From Latex Price Could Lift 2HFY11 Earnings

¨ Our fair value has been raised to RM5.38 (from RM4.10) and as such, we upgrade our call on the stock to Market Perform from Underperform.

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RHBInvest Research

Top Story: Property – Overweight

Sector Update
The rising FDI into Penang should continue to hold up property values in the state.
Our picks for the sector remain the same: SP Setia (OP, FV = RM7.39) and IJMLD (OP, FV = RM3.50) for big caps; and KSL (OP, FV = RM2.78) and Mah Sing (OP, FV = RM2.50) for small-mid caps. Although we currently do not cover E&O and Benalec, we have an indicative fair value of RM1.85 and RM1.93 respectively for the two stocks.

Corporate Highlights

QL Resources:

• Company Update
• Highlights from RHB’s Food and Agri Day.
• The shares go ex for the 1-into-2 share split today. Our fair value is raised to RM3.44 (from RM3.25 adjusted for the share split)
• We maintain our Outperform call on the stock.

Hartalega: Market Perform

• 3QFY11 Results
• Demand for nitrile gloves still healthy
• We have raised our fair value for Hartalega to RM6.14 (from RM5.64), we maintain our Market Perform call on the company.

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Maybank IB Views

COMPANY UPDATE
PLUS Expressways RM4.39: Hold
Inks 3rd Indian toll Shariah-compliant

Not new. The Jetpur-Somnath concession, inked yesterday, is not a new development; PLUS and its partner won the tender in Sept 2010. We expect mid-teens project IRR being a brownfield project, but no immediate impact on earnings. PLUS remains a Hold with just a 4.8% upside to UEM-EPF's RM4.60 take-over offer price.


RESULTS PREVIEW
Petronas Chemicals RM6.30: Buy
The right chemistry

Maiden quarterly result looking good. PCG is expected to release its 3QFY11 results in the third week of February. 3Q is expected to be highly profitable, buoyed by high utilisation rates, and strong product margins. No change to our forecast for a sizeable 47% expansion in FY11 net profit. Maintain Buy, with an unchanged target price of RM6.70 based on FY12 PER of 13x, in line with global peers.


RESULTS REVIEW
Fraser & Neave Holdings RM14.98: Hold
Strong volume growth

Priced in. Volume growth was much stronger than expected and we raise our FY11-12 earnings estimates by 3-5% p.a. 1QFY11 net profit made up 33% of our and consensus full-year forecast. Much, however, is priced in, with the stock trading at a prospective PER of 16.9x FY12 earnings. The immediate challenge would be in supplementing revenue loss from the Coca-Cola franchise from FY12. Net cash stays strong at RM639m or RM1.80/share. Maintain Hold with a raised target price of RM15.00, based on a prospective FY12 PER of 15x plus net cash.


Hartalega Holdings RM5.63: Buy
Playing the nitrile theme Shariah-compliant

Results support our nitrile pick. 9MFY11 net profit of RM138m (+43% YoY) was 73% of our full-year forecast and 79% of street's. We expect Hartalega's positive earnings growth momentum (3QFY11 net profit: +5% QoQ) to sustain on nitrile demand growth while the latex-focused incumbents could still post lackluster numbers in the coming quarter(s). We believe the stock will re-rate on more evidence of the ongoing structural demand shift from latex to nitrile gloves globally, due to cheaper ASP. Maintain Buy and DCF-derived TP of RM6.80.


Technicals
The FBM KLCI closed higher by 3.78 points at 1,535.60 yesterday. Its resistance areas of 1,541 and 1,558 will cap market gains, whilst the obvious support areas are located at 1,515 and 1,535.

Trading ideas for today are two BUY calls on CHHB and MITRA.


Other Local News
TNB: To source coal from all over the world. Tenaga Nasional Bhd is aggressively sourcing coal from South Africa and Indonesia to overcome a shortage from its traditional supplier Australia, which has been partly swamped with floods. TNB president and CEO Datuk Seri Che Khalib Mohamad Noh said the current situation is not expected to recover in the next 2 to 3 months. Che Khalib said TNB's net profit is likely to be hurt for its financial year ending August 2011 if coal prices remain over USD100 (RM304) a tonne. Consequentially, its bottom line will dip 16% every time coal prices rise by USD10 (RM30.4) per tonne. (Source: Business Times)

Ireka: Wins RM28m contract. Ireka Corp Bhd's wholly-owned subsidiary, Ireka Engineering and Construction Vietnam Co Ltd, has won a RM27.6m contract from Hoa Lam-Shangri-La Healthcare LLC for the structural works package at a general hospital in Ho Chi Minh City. This will bring Ireka's current order book to about RM800m, of which about RM430m remains outstanding. (Source: Business Times)

Economy: Malaysia among top outsourcing destinations. According to the Press Trust of India (PTI), the top three slots in AT Kearney's 2011 Global Services Location Index (GSLI) are occupied by three Asian countries: India, China and Malaysia. The 3 countries have enjoyed the top 3 rankings since the inception of the GLSI in 2003, demonstrating "remarkable staying power, thanks to their deep talent pools and cost advantages". India remains the favourite back-office of the world thanks to its "first-mover advantage" and deep skill base, as per global management consulting firm AT Kearney's ranking of the best outsourcing destinations. (Source: Business Times)

Economy: Cuepacs appeals for minimum wage policy in civil service. Cuepacs is appealing to the government to implement a minimum wage policy in the civil service, which it believes is a crucial move to assist civil servants cope with the rising cost of living. Its president Datuk Omar Osman said the current salary of the workers in the support group was below the poverty line of RM720 a month. Those in Grade 1 to Grade 16 in the Support Group II are starting at RM647per month, which is below the poverty line. The basic salary should be at least RM850 or RM920 a month. (Source: Bernama)

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Maybank IB Views

COMPANY UPDATE
Hartalega Holdings RM5.44: Buy
The nitrile wave keeps rolling Shariah-compliant

Upgrade to Buy with a RM6.80 DCF-based TP. Hartalega is set to profit from the structural demand switch to nitrile gloves, at the expense of latex gloves. Demand for nitrile gloves will continue to encroach into the latex gloves market as nitrile gloves ASP discount to latex widens (atypical in the past). Top Glove's M&A search for nitrile glove-makers and latex gloves' declining earnings are some of the recent developments that support our Buy call for Hartalega.


Technicals
The FBM KLCI closed lower by 4.45 points at 1,570.04 yesterday. Its resistance areas of 1,570 & 1,576 may cap market gains, whilst its firmer support areas are located at 1,558 and 1,568.

Trading idea for today is a SHORT TERM BUY call on TM.


Other Local News
Axiata, DiGi: To save RM2.2b with network deal. Celcom Axiata Bhd and DiGi Telecommunication Sdn Bhd have signed a Network Collaboration Agreement. The scope of the tie-up will initially focus on the sharing of telecommunication sites, access transmission (microwave links), aggregation transmission and trunk fibre transmission. Full realization of cash savings is estimated to be about RM2.2b over 10 years. They expect to see incremental savings as early as 2012 and gradually ramping up to an average annual savings of RM150m to RM250m after 2015. (Source: Bursa Malaysia)

Pos: Khazanah to invite bids for Pos stake. Khazanah Nasional Bhd will invite bids this week through its advisor CIMB Investment Bank Bhd for the divestment of its 32.2% stake in Pos Malaysia Bhd. Pos Malaysia's stake divestment would be a two-stage process, with the first stage addressing regulatory aspects such as the increase in postage tariff rates and rise in salaries and allowances for most of Pos Malaysia's staff. While stage one has not been fully completed as other regulatory aspects such as the Postal Bill have yet to be addressed, Khazanah will proceed with stage two, where it will draw up a bidding and evaluation process to select a new shareholder for Pos Malaysia. (Source: The Star)

Proton: Seeks RM2.35b funding to revive Lotus. Proton Holdings Bhd is in talks with CIMB Bank and several others to secure loans and investments totaling GBP480m (RM2.35b) needed to turn around Group Lotus. The funds will mainly come from loans and the rest will be from Proton's additional investments and revenue from Group Lotus. (Source: The Star)

KPJ: To acquire two medical centres. KPJ Healthcare Bhd’s wholly owned subsidiary, Kumpulan Perubatan (Johor) Sdn Bhd (KPJSB) is buying a 100% stake in Sibu Medical Centre Corp Sdn Bhd (SMCC) and Sibu Geriatric Health & Nursing Centre Sdn Bhd (SGHNC). KPJSB will pay RM26.9m for SMCC and RM1.24m for SGHNC. (Source: Bursa Malaysia)

Jetson: Buys lands in Penang for Rm14m. Kumpulan Jetson Berhad's 51% owned subsidiary, Jetson Development Sdn Bhd has acquired 48,290 sq ft of lands in Penang for RM14m from Malaysian Building Society Bhd (MBSB). The three pieces of land are located in Georgetown. (Source: Bursa Malaysia)

Property: Transactions may hit RM100b. A total of 342,179 property transactions worth RM96.8b were recorded between January and November last year, which means the full year's transactions could reach the RM100b mark. This is the first time transactions value has reached this figure. (Source: The Star)

Manufacturing: To attract over RM50b. Malaysia expects investments in the manufacturing sector to surge to more than RM50b this year. The manufacturing sector, which was the fastest growing sector last year, attracted RM47.2b in approved investments in 910 projects, a 44.8% jump compared with RM32.6b received in 2009. The US was the largest source with investments totaling RM11.7b, mainly in electrical and electronics (E&E), machinery and equipment and scientific and measuring equipment. Other top investors were Japan, Hong Kong, Singapore and Germany. (Source: Business Times)

Khazanah: Portfolio at record RM75b. Khazanah Nasional Bhd saw the net worth of its portfolio rise 39.4%, or RM21.2b, to a record RM75b as at Dec 31, 2010 from RM53.8b in 2009. Total shareholders' return on Khazanah's portfolio of listed companies in 2010 stood at 33.4%, outperforming the FTSE Bursa Malaysia KL Composite Index's total return of 23.3% over the same period. (Source: The Star)

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Maybank IB Views

Wah Seong: Disposal of shares in Drilbits and Driltools. Wah Seong disposed its 60% equity stakes in Drilbits International Private Limited (DrilBits) and Driltools International FZCO (Driltools) for USD2.7m (RM8.4m) and USD4.8m (RM14.9m) cash respectively. This Proposed Disposals of DrilBits and DrilTools are part of the WSC Group's strategy to streamline and rationalise its core businesses and to divest non-core business. DrilBits is principally involved in manufacturing and trading of oilfield tools and equipment while Driltools is in marketing and provision of oilfield and water well supplies and services related to the oil and gas industry. (Source: Bursa Malaysia)

CIMB: Completes restructuring of Thai unit’s NPL. CIMB Group Holdings Bhd. has completed the restructuring of non-performing loans (NPLs) under the 93.15%-owned subsidiary CIMB Thai Bank plc. The restructuring involved the transfer of CIMB Thai's 2.5m shares held in Sathorn Asset Management Co Ltd for RM23.5m to a wholly-owned subsidiary of CIMB Group, Mutiara Makmur Ventures Sdn. Bhd. as well as the transfer of NPL portfolio of RM297.9m from CIMB Thai to Sathorn for RM297.9m cash. (Source: Bursa Malaysia)

Hartalega: Allegations cost company millions. Hartalega Holdings Bhd, said allegations against the company had caused damages running into "millions of ringgit". The allegations that were related to environmental concerns over its operations in Bestari Jaya, Ijok had come despite its total compliance with all regulations. (Source: The Edge Financial Daily)

PLUS: Jelas Ulung not planning to seek extension for concession. Jelas Ulung Sdn Bhd is not planning on asking the Government for an extension of PLUS Expressways Bhd's tolled-highway concessions post-2038 in its proposal to take over the company. Jelas Ulung believed that its business model works well within the concession period until 2038, as it would have realized its investment by then. (Source: The Star)

Sime Darby: To build bioethanol demo plant in S'gor. Sime Darby Plantation Sdn Bhd will construct and operate a bioethanol demonstration plant in collaboration with Mitsui Engineering Shipbuilding Co Ltd. The plant that would be built at Bestari Jaya, Selangor, will be able to convert oil palm empty fruit bunches (EFB) into bioethanol. (Source: The Edge Financial Daily)

MSC: Secondary listing approved. Shareholders of Malaysia Smelting Corp Bhd (MSC) has approved the secondary listing of the company on the main board of the Singapore Exchange Securities Trading Ltd (SGX-ST). MSC plans to list on the Singapore stock exchange by end of January 2011. (Source: The Edge Financial Daily)

Construction: Benalec targets regional growth. Integrated marine construction firm Benalec Holdings Bhd, en route to list on the local bourse on Jan 17 next year, is gearing up for regional expansion while looking to increase its strength in Malaysia. Benalec will focus on larger-scale marine construction projects and plans to diversify the geographical locations of its projects to Penang. Benalec is eyeing the land-reclamation work for the 24-km long Penang Second Bridge project. (Source: The Edge Financial Daily).

O&G: Petronas gets invite from Bangladesh. Bangladesh has invited some of the world's leading state-owned gas giants to help explore its Chittagong hill tracts region. The companies invited encompass Petronas, Gazprom of Russia, CNOOC of China, PTTEP of Thailand and ONGC of India. (Source: Business Times)

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Maybank IB Views

SECTOR UPDATE
Property: Overweight
Playing the M&A game

Size is the word. We saw 3 sizeable mergers in less than a month. While SunCity-SunHoldings offers the highest upside to their merged RNAV from current levels, we are more excited on UEML-Sunrise due to its potential participation in Khazanah-Temasek's property project in prime Singapore land, followed by MRCB-IJML, whereby a merger will raise their chances of participating in the RM10b GDV Sg Buloh land development. These potentials are however not quantifiable for now.


COMPANY UPDATE
AirAsia RM2.72: Buy
AirAsia Philippines: Tony meets Tony Shariah-compliant

Long time waiting. AirAsia will set up a JV and begin operations by 1Q11. The Philippines will be AirAsia's 4th country of operations after Malaysia, Thailand and Indonesia. We are positive on the longer-term prospects of this JV, but are neutral on its shorter-term impact as it will incur start-up losses and take time to achieve success. Maintain Buy with a RM3.36 TP based on 9.0x 2011 PER, 20% discount to peers.


Media Prima Berhad RM2.33: Buy
Access is valuable

Strong momentum. The 4Q is shaping up well as advertisers clear out their budgets. Consensus is catching up with our FY10 earnings forecast. Next year is looking good too. More active yield management of its wide audience reach will result in effective double-digit rate hikes at TV3 and Harian Metro in particular. Separately, the proliferation of carriers will boost demand for content. Buy for yield and growth.


Technicals
The FBM KLCI advanced by 8.32 points to 1,510.06 yesterday. Its resistance areas at 1,513 and 1,528 may cap market gains, whilst its firm support areas are located at 1,495 and 1,510.
Trading idea for today is a TAKE PROFIT call on PBB.


Other Local News
TNB: In power cooperation with Yemen company. Tenaga Nasional (TNB) is collaborating with National Trading Company (Natco) of Yemen to explore joint cooperation in the development of the power industry in Yemen. The initial scope encompasses power generation and distribution, training, system planning, design, project management and development, system operation and system maintenance. (Source: The Star)

Gamuda-MMC: Double track railway job ‘will meet deadline’. Work on MMC-Gamuda Joint Venture Sdn Bhd’s electrified double track project from Ipoh to Padang Besar has been delayed but the Transport Minister is confident that the project will be completed on schedule. 64% of the project has been completed as at the end of last month. The delay was due to problems related to land acquisition which the ministry would resolve before year end. (Source: News Straits Times)

Proton: Group Lotus buys equity in Renault F1 team. Proton Holdings Bhd’s subsidiary Group Lotus plc has bought a major equity stake in the Renault F1 team from Genii Capital and the team will be renamed Lotus Renault F1 team. With the acquisition, Group Lotus will become the title sponsor until the end of the 2017 season. (Source: The Edge Financial Daily)

Hartalega: No order to close factory. Hartalega Holdings Bhd has clarified that its factory in Ijok, Kuala Selangor, has never been ordered to close, suspended, nor issued serious warnings of any kind. Hartalega assured that it has complied with all standards enforced by the Environmental Department. (Source: Business Times)

DRB-HICOM: Syed Mokhtar mulls DRB-HICOM buyout. Tan Sri Syed Mokhtar Al Bukhary could be privatizing DRB-HICOM Bhd soon. Maybank Investment Bank Bhd is believed to be the advisor for the RM2b plan. The offer would be comparable to DRB-HICOM's net tangible asset (NTA) value. (Source: Business Times)

Bina Puri: Secured jobs in Saudi Arabia & Thailand. Bina Puri Holding Bhd’s has secured a stormwater pipeline project worth SAR24 (RM19.9m) in Saudi Arabia, and a warehouse project in Bangkok worth THB175.0m (RM18.3m). The awards bring the Group’s outstanding order book to RM3.16 b. (Source: Bursa Announcements)

Titan: Honam extends closing date for takeover offer. Honam Petrochemical Corp Bhd has extended the closing date for the takeover offer of Titan Chemicals Corp Bhd to Dec 24, 5pm. (Source: The Star)

Hospitality: RM1b investment to transform Teluk Datai. Khazanah Nasional Bhd, through its investee company, Teluk Datai Sdn Bhd (TDR), and partners are investing RM1b in the Teluk Datai master development plan that will be completed by 2014. The five-year plan includes the expansion and upgrading of TDR’s hotel and golf course and construction of new hotels. The plan encompasses a five-star resort which will be jointly developed with Shangri-La Hotels, a six-star hotel and villas. (Source: News Straits Times)

Utilities: Cabinet agrees to electricity tariff hike. The federal Cabinet has agreed to a revision of electricity tariff but has not decided when it should take place. (Source: The Star)

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RHB Invest Research

Top Story


Jaya Setia:

• Still a plantation company in the making
• Indicative value is RM4.83. Maintain Outperform

Corporate Highlights



Pos Malaysia:

• Maiden boost from postal tariff hike.
• We cut FY10-12 net profit forecasts by 30-41% largely to reflect the lower-than-expected bottom line impact from the tariff hike.
• We value POSM at RM3.17.

KNM:

• Moving Forward Confidently.
• 
  
• The company looks to grow its technology and plant services division and also offer total project solutions
• This is as it believes such projects have lesser competitors and can fetch fatter margins.
• The company currently has an order backlog of RM2.4bn and tender book of RM16bn
• It expects to win at least RM3bn worth of contracts in FY11.
• We maintain our Outperform call on the stock with a fair value of RM2.33.

Hartalega:

• Stop-Work Order From Prime Minister Department due to chemicals discharged from its factories
• Three government agencies to conduct investigations on the complaints and declared that the factory did not pose any health risks to residents.
• It is still business as usual as Hartalega has not received any stop-work order from MDKS.
• Our indicative fair value is maintained at RM5.64.
• Market Perform call on the stock reiterated.

Technical Highlights


Daily Trading Strategy:

• Although the index managed to close the day at above the critical psychological level at 1,500 yesterday, there is a high risk of losing the 10-day and 40-day SMAs near 1,494 and 1,499, before heading towards the recent low of 1,474.02 and the critical level at 1,450 soon.
• Given the poor volume performance on the trading floor, and the volatile regional markets performances, investors are likely to continue their selling mode in the near term, in our opinion.
• Though the looming election plays and the speculation of more corporate M&A activities ahead may fuel further speculative interests in the short-term.
• The broader and regional economic concerns may prompt the longer-term investors to continue locking in more profits going forward.
• As a result, we prefer to stay biasly negative for the near-term technical outlook.

Daily Technical Watch: DRB-Hicom

• A surge towards the all-time high level possible if it removes RM2.34 today.
  
• Immediate support at RM2.23
• Immediate Resistance at RM2.34

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Views & News, Maybank IB (2010-11-10)

SECTOR UPDATE
Plantations: Neutral
The final leg

Pricing in RM3,000/t. We believe plantation big caps could trend higher in the coming months, as: 1) the US Dollar is expected to stay weak throughout 1H 2011 and, 2) commodity and equity prices continue to rally due to increased liquidity. Plantation big caps could potentially price in a long-term CPO average of RM3,000/t, in our view. We raise our 2011-12 average CPO price forecast to RM3,000/t from RM2,600/t and upgrade Sime Darby to a Buy.


ACQUISITIONS / DISPOSAL
PLUS Expressways RM4.40: Accept offer
Shareholders to vote Shariah-compliant

Accept the offer. PLUS' board of directors have accepted UEM-EPF's offer at an unchanged RM23b offer price. We reiterate that it is fair offer price, at 2% below our RM4.70 DCF-based target price. In a revised offer letter yesterday, UEM-EPF allows PLUS to evaluate competing offers, if any. The next milestone is PLUS' shareholders go-ahead. Nonetheless, the timeline for deal completion, which could take up to a year, could be daunting. Amid a liquidity driven market, shareholders could derive better returns by selling the shares now, than to wait.


COMPANY UPDATE
IJM Corporation RM5.54: Buy
New job win Shariah-compliant

Target price under review. IJM's outstanding order book is sustained at RM3.6b with the new National Cancer Institute job win. We estimate a 1sen EPS contribution over three years into FY14. No change to our earnings forecasts. Share price has performed well exceeding our RM5.50 RNAV-based target price on expectations of rising news flow in construction and runaway CPO prices. Our target price is under review.


RESULTS REVIEW
Hartalega Holdings RM5.53: Hold
Testifying to nitrile gloves prospects Shariah-compliant

Results in line. 6MFY11 net profit of RM89m (+49% YoY) made up 51% of our and consensus full-year forecasts. 2QFY11 net profit (+14% QoQ) was impressive considering its latex-focused peers (Top Glove and Supermax) posted QoQ contractions of 17-30% in their respective Aug/Sept-ended quarter. However, we are maintaining our Hold rating (TP: RM5.40) as the sector lacks re-rating catalysts and Hartalega's share price has outperformed its peers by 25% since Jul '10.


Technicals
The FBM KLCI rose climbed 6.69 points to 1,526.53 yesterday. Due to the lower tone in the USA last night, we may see the FBM KLCI in a mixed mode today. Its resistance area at 1,526 may cap market gains, whilst its support areas are located at 1,507 and 1,525.

Trading idea for today is a SHORT TERM BUY call on OSK.


Other Local News
KFC Holdings: MD not aware of any plans to privatise KFCH. KFC Holdings Bhd's (KFCH) top official has brushed off talks that the firm is a takeover target by a substantial shareholder, as the stock surged to a fresh high yesterday. The counter had risen 130% over the past six months while shares in QSR surged 80% and Kulim rose 76% over the same period. (Source: The Star)

Autos: Consolidation of auto sector could be done soon. The Malaysian Automotive Institute (MAI) is understood to have submitted its proposals and recommendations pertaining to the consolidation of the automotive sector to the government for a final decision of the merger between the players. The proposed consolidation is expected to entail a merger between two national automakers, Proton Holdings Bhd and Perusahaan Otomobil Sdn Bhd (Perodua). (Source: The Edge Financial Daily)

Banking: RM150mil banking talent boost. The Institute of Bankers Malaysia plans to use the RM150mil staff training fund for various capacity development initiatives in the financial services sector over the next five years. They included collaborations with local and foreign universities to churn out more learning programmes to help reduce the shortage of talent in the banking and financial services sector. (Source: The Star)

Plantation: RSPO unveils "Sustainable Palm Oil" Trademark. The Roundtable on Sustainable Palm Oil (RSPO) Tuesday unveiled a trademark that will enable consumers to identify consumer products containing sustainable palm ingredients. (Source: Bernama)

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RHBInvest Research Highlights 21st October 2010

Top Story

Media:

• 9M10 print and tv adex up by 18.2% yoy
• Our Top pick is Media Prima (FV=RM2.75)
• We maintain Outperform call on Media Chinese (FV=RM1.21)
• Trading Buy call on Star (FV=RM4.34).
• Maintain Overweight for the sector.

Macro View

Economy:

• Leading index bounced back in Aug
• Pointing to resilient economic activities ahead.

Sector Call

Rubber Gloves:

• Still cautious on near-term outlook.
• Maintain Underperform call on Top Glove (FV=RM5.40)
• Market Perform call on Adventa (FV=RM2.47).
• As for Hartalega (FV=RM5.64), we downgrade our call to Market Perform.
• No change to our Neutral call on the sector.

Corporate Highlights

Puncak Niaga:

• Eyeing Hogenakkal water project in India .
• Fair value is RM3.01. Maintain Market Perform.

WCT:

• Secures RM1.36bn building job in Qatar and RM128m hospital project in Sabah .Fair value is raised to RM2.56 from RM2.30. Maintain Underperform.

Axis REIT:

• Quattro West started to contribute.
• Maintain Outperform call on Axis REIT with fair value of RM2.67.

BAT:

• Impact of less than 20’s ban cushioned by relaunch of Peter Stuyvesant.
• Fair value is thus raised to RM42.92 (from RM42.90 previously). Underperform.

Technical Highlights

Daily Trading Strategy:

• Recapturing the 10-day sma will renew upbeat sentiment.
• Further recovery to above the 10-day SMA today will attract further follow-through buying support in the near term.
• And once the recent high of 1,503.82 can be cleared, the short-term technical scenario will return to positive.
• On the downside, the solid medium-term support at 1,450 level and the 40-day SMA of 1,458 are expected to keep sellers at bay.

Daily Technical Watch: Alliance Financial Group

• Medium- to long-term uptrend remains largely intact.
• Immediate Support at RM3.10
• Immediate Resistance at RM3.30

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