RHBInvest Research

Corporate Highlights


KFC: India on track Market Perform

Visit Note

¨ KFCH currently has nine outlets in India , with 3-4 more outlets currently in the advanced stages of construction. It targets to have 17 outlets by the end of the year, which is broadly in line with our assumptions of 16 stores by end-FY11.

¨ KFCH College currently has two campuses, with the first campus in Puchong, while a new campus in Bandar Dato’ Onn, Johor, was launched in April. The Johor campus is only at its first phase, which has a total capacity of 2,000 students and currently has ~400 students enrolled. There will be two more phases of construction for its Johor campus, which are expected to be completed by 2015, which will bring total intake capacity to 12,000 students p.a..





Hiap Teck: Placement shares to Shougang fixed at RM1.00 Underperform

News Update

¨ Hiap Teck has proposed to place out 32.2m shares to Shougang International ( Singapore ) Pte Ltd at an issue price of RM1.00.

¨ Hiap Teck also announced that Shougang International will acquire a 40%-stake in Eastern Steel Sdn Bhd currently held by Dato’ Law Tien Seng, with an option to increase by another 30% to 70% once the blast furnace project reaches an annual capacity of 1.5m tonnes of slab and 0.7m tonnes of coke.



Quill Capita Trust: DPU on track to meet forecast Market Perform

2QFY11 Results

¨ Quill Capita’s (QC) 2Q11 realised net income of RM9.2m came in within our expectation but was 7.1% below consensus estimates. Sequential gross revenue growth was rather flattish at only +0.6%, but bottom-line improved significantly largely due to lower operating expenses incurred during the quarter. An interim DPU of 4 sen was declared, as compared to 3.85 sen last year. This is on track to meet our FY11 DPU forecast of 8.4 sen.

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RHBInvest Research

Top Story: TNB – Badly burned by massive oil and distillate fuel costs Market Perform (down from OP)

3QFY11 Results / Briefing Note

¨ Excluding forex gains of RM102m, TNB’s 9MFY11 results were below expectations with core net profit of RM801m (-62.4% yoy) accounting for 36% and 33% of our and consensus FY11 net profit estimates respectively. TNB recorded a RM460m loss in 3QFY11, due to significantly higher oil and distillate fuel costs arising from gas supply disruption.



Corporate Highlights



CI Holdings: Selling Permanis to Asahi for RM820m Trading Buy

News Update

¨ CIH announced that it has entered into a conditional share sale agreement for the disposal of its entire equity interest in Permanis to Asahi for RM820m in cash

¨ Post-disposal of Permanis, CIH would be left with only its tap-ware and sanitary ware business (under Doe Industries). As management has stated its intention to maintain CIH’s listing status, CIH would need to acquire a new core business and/or distribute some of the cash proceeds to shareholders to avoid becoming a PN16 (cash) company, given Doe’s small asset base and profit contribution



SEGi: INVITE-ing more foreign students Outperform

News Update

¨ SEGi has been appointed by the Government as Project Leader for a new initiative – SkillsMalaysia International Technical Education & Vocational Training Programme, which is expected to begin in 2012.

¨ The objective of SkillsMalaysia INVITE is to create and provide a new dimension of learning skills to non-academically inclined foreign school leavers and adult learners to pursue their training in Malaysia. Upon completion of the programme, the trainees will be awarded an internationally recognised qualification from UK or Australia, as well as certification from the Malaysian Government.



AirAsia: To set up a low-cost carrier in Japan Market Perform

News Update

¨ AirAsia is setting up a low-cost carrier in Japan via a 49:51 JV called AirAsia Japan Co Ltd with All Nippon Airways Co Ltd (ANA).

¨ The new airline is expected to take to the skies in Aug 2012, with a fleet of 3-4 A320 aircraft by the end of its first year of operations.



Hiap Teck: China Shougang roped in as contractor for blast furnace and shareholder Underperform

News Update

¨ Eastern Steel Sdn Bhd, a 55%-owned subsidiary of Hiap Teck, has entered into an EPC contract worth approximately RM650m with China Shougang International Trade and Engineering Corporation.

¨ A supplement agreement was also entered into where Hiap Teck will issue 32.2m new shares (9.8% of current share base) to China Shougang at an agreed price. China Shougang has the right to terminate the EPC contract if the shares are not issued by 30 November 2011.



VS Industry: Fully focus on EMS Overweight

Company Update

¨ VSI had announced on 19 Jul the disposal of its 53%-owned subsidiary, PT. GY Plantation Indonesia (PGP) for US$4.1m to PT Karya Manunggal Sawitindo. In addition, PGP will also sell a 6,450 ha piece of land (undeveloped) to PT Bumitama Gunajaya Agro for US$2.2m, which will flow to PGP’s existing shareholders (VSI’s portion amounts to US$1.2m). In total, VSI will receive US$5.3m (RM16.1m) from the abovementioned transactions, which management has earmarked for working capital.

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Maybank IB Views

Tenaga Nasional RM6.52: Hold
Still not out of the woods yet Shariah-compliant

Worst quarter ever. RM786m 9MFY11 core net profit (-68% YoY) was 53% of our full-year forecast and 38% of consensus. 3QFY11 was exceptionally weak due to shutdowns of natural gas facilities for repairs, high coal price and extra cost incurred by burning oil and distillates. We have lowered our FY11-13 earnings forecasts to take into account this quarter's results and changes to revenue and cost assumptions. Maintain Hold, with a lower TP of RM6.60 (from RM7.05) based on unchanged 13x FY12 PER.

British American Tobacco RM46.20: Sell
Gloom-soaked cigarette

Cautious mode persists. 1H11 net profit accounted for 48% and 50% of our and consensus full-year forecasts respectively. We maintain our Sell call on BAT (RM42.50 DCF-based target price) due to declining sales volume and exacerbated by weaker margins. Valuation, at 17.5x 2011 PER, appears pricey relative to its lackluster earnings growth (2.5% 3-year forward net profit CAGR).

TH Plantations RM2.10: Buy
Strong production recovery in 2Q Shariah-compliant

No earnings surprises. 1H11 net profit accounted for 49% of our full-year estimate, and are within consensus expectations. THP’s current valuation at 9.3x 2011 PER offers a good buying opportunity as it trades at a 41% discount to industry peers’ average of 15.8x. This is further supported by attractive net dividend yields of 5.5%. We reiterate our Buy call with an unchanged TP of RM2.50 (11x 2012 PER).

Technicals
The FBM KLCI rose 3.22 points to close at 1,565.81 yesterday. Its resistance areas of 1,569 and 1,580 will cap market gains, whilst the obvious support areas are located at 1,552 and 1,565.

Trading idea is TENAGA

Other Local News
MAS: Sees no need to raise cash. Malaysian Airline Systems Bhd (MAS) sees no need to raise capital against a backdrop of weakening travel demand. Poor quarterly results have raised concern over cash depletion at the national carrier, which is expecting at least four more aircraft to be delivered this year. (Source: The Edge Financial Daily)

AirAsia: Expands in Japan. AirAsia Bhd has tied up with All Nippon Airways Group (ANA) to form AirAsia Japan Co Ltd. AirAsia will hold 49% stake in AirAsia Japan, which will be the first low-cost carrier (LCC) to be based at the Narita International Airport. (Source: The Edge Financial Daily)

TM: The latest MVNO? Telekom Malaysia Bhd may be the latest player in the MVNO (mobile virtual network operator) space. It has signed a MoU with Celcom Axiata Bhd to cooperate strategically in providing complete fixed and mobile solutions. (Source: The Edge Financial Daily)

CI Holdings: Asahi buys Permanis for RM820m. CI Holdings Bhd (CIH) is selling its entire 70m shares in Permanis Sdn Bhd to Japan's Asahi Group Holdings Ltd for RM820m in cash. CIH is making a net gain of RM677.1m from the disposal based on its audited financial statements for the financial year ended June 30 2010. Permanis is PepsiCo Inc's bottler in the country. (Source: Business Times)

Hiap Teck: Unit in steel mill deal. Hiap Teck Ventures Bhd’s 55% owned subsidiary Eastern Steel Sdn Bhd has entered into an engineering and procurement contract and a construction contract with China Shougang International Trade and Engineering Corp for the design, procurement and construction of the first phase of an integrated steel mill in Teluk Kalung, Kemaman, Terengganu. The contract value for the engineering and procurement contract is RM417.83m, while the construction contract is RM232m. (Source: The Star)

Kurnia Asia: Gets nod to start acquisitions talk. Kurnia Asia Bhd (KAB) has received the green light from Bank Negara to commence preliminary negotiations with relevant interested parties for the acquisition of an equity stake in its wholly owned subsidiary, Kurnia Insurans (M) Bhd (KIMB). (Source: The Star)

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RHBInvest Research

Faber

Company Update

• Risk of losing concession is relatively small
• Fair value has been raised to RM2.79 (from RM2.22).
• Upgrade our recommendation on the stock to Outperform, from market perform previously.

Corporate Highlights

TRC

New Coverage (published 30 Mar 2011)

• Among the cream of the crop of small-cap builders
• Initiate coverage with an Outperform recommendation. Fair value is RM1.80.

VS Industry

1QFY11 Results

• Net profit up 172.1% yoy
• Maintain Outperform. Fair value is RM2.44 .

Hiap Teck

1QFY11 Results

• Slowdown hits 1HFY07/11 performance due lower sales and margins at its manufacturing division.
• Indicative fair value is reduced to RM1.00 (from RM1.18 previously)

Perisai Petroleum

Visit Note

• The proposal appears to be a good deal for Perisai, given the availability of the asset coincides with the long-term charter contract which is expected to be net cashflow positive to Perisai.
• Fair value estimate of RM1.25-1.43/share.

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RHBInvest Research

Banks:
Dec ’10 system data – Ending on a strong note.
No change to our Overweight rating on the sector.
For an exposure to large cap banking stocks, our top pick is CIMB while Affin is our top pick within the small-mid cap space.

Corporate Highlights

Digi:
Ends on a high.
Fair value raise to RM29.10 from RM26.35. Maintain Outperform.

SP Setia:
Buying more land in Johor.
Maintain Outperform and fair value of RM7.39

Hiap Teck:
Proposes rights issue and convertible bond issue.
Fair value is maintained at RM1.18. Underperform.

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RHBInvest Research

Top Story

VS Industry:

• Vibrant sales ahead
• Maintain forecasts and Outperform call with a fair value of RM2.24.

Sector Call


Telecom:

• Maxis to ride on TM’s HSBB network
• TM benefits from a higher utilisation rate of its HSBB network, which leads to more wholesale revenue.
• Expect Maxis to focus on providing content via bundling, instead of competing head-on with TM in offering high speed Internet access.
• No change to our Overweight call on the sector.

Corporate Highlights


KLK:
To subscribe for Yule Catto rights issue
Fair value is raised to RM24.75 (from RM24.50). Maintain Outperform.

KNM:

• Going to Sabah
• The company is establishing a JV with Petrosab Logistik for a total initial investment outlay of RM51k.
• Positive on the JV given that the tie-up will improve KNM’s success rate for any potential contracts in the state.
• Raised our FY11-12 core EPS by 15.1% and 12.5% respectively
• Maintain our Outperform call on the stock with an upgraded target price of RM3.09/share

WCT:

• A second property jv project in Iskandar
• Fair value is RM2.55. Maintain Underperform.

Hiap Teck:

• 1QFY07/11 in the red due to lower margins
• Fair value is maintained at RM1.18 based on 7x CY11 EPS of 16.9 sen.

Technical Highlights

Daily Trading Strategy:

• Our technical outlook on the FBM KLCI remains on a negative bias.
• Further supports are seen near the recent low of 1,474 and 1,450, while the overhead resistance is at 1,524 and 1,532.

Daily Technical Watch: AMMB

• Short-term upswing remains intact if it sustains at above RM6.50…
• Immediate Support = RM6.50
• Immediate Resistance = RM7.32

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Will Hiaptek Break the Longterm Downtrend Line?

Hiaptek share price false breakout on the 16th April 2010. See the chart below. The triangle pattern will be met again. Whether go down or will be up. We will see.... Currently Hiaptek was trading at RM1.29.

Hiaptek weekly chart

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