Stocks to watch: CIMB, Mudajaya, AirAsia, MAS

KUALA LUMPUR: CIMB Group Holdings Bhd will be among the heavyweights stocks to watch on Wednesday, Aug 24 following the release of its second quarter results which was a record.

Other stocks which could be in focus are MUDAJAYA GROUP BHD [], Axiata Group Bhd and also airlines AIRASIA BHD [] and MALAYSIAN AIRLINE SYSTEM BHD [], which reported a sharp difference in results.

Oil and gas companies would continue to see interest, including pipe manufacturers Wah Seong Corp Bhd following plans for a 200km pipeline off Terengganu.

CIMB’s earnings rose 9.1% to a record RM970 million in the 2Q ended June 30 from RM889 million a year ago, underpinned by the local consumer banking operations and continued high growth at CIMB Niaga. Its earnings rose 5.8% from 1Q.

For the first half, its net profit rose 9.3% to RM1.887 billion which was equivalent to net earnings per share (EPS) of 25.4 sen.

Mudajaya could see strong trading interest after a 11.2% increase in earnings of RM60.29 million in 2Q from RM54.22 million a year ago, mainly due to more activities. Revenue increased by 70.6% to RM356.11 million from RM208.63 million.

Mudajaya declared a second interim single tier dividend of 12.5% or 2.5 sen per share of 20 sen each.

Axiata's net profit rose 14.94% to RM663.05 million in 2Q from RM576.82 million a year ago, mainly due to higher contribution from XL, Idea and Multinet, as well as lower depreciation, amortisation and impairment charges.

Revenue rose to RM4.05 billion from RM3.85 billion. Earnings per share were 8.0 sen compared with 7.0 sen. It declared an interim tax exempt dividend of 4.0 sen per share for FY ending Dec 31, 2011.

However, net profit fell 19% to RM1.21 billion in the first half from RM1.49 billion a year ago. Revenue increased by 4.2% to RM7.99 billion from RM7.66 billion.

AirAsia reported earnings of RM104.25 million in the second quarter ended June 30, 2011 as its operations were affected by higher fuel costs, which rose 31%.

Earnings fell 47.5% from the RM298.93 million a year ago. It declared its maiden dividend of 3.0 sen a share. The low-cost carrier said fuel costs increased by 31% to an average US$140 per barrel from US$106 a year ago.

MAS’ net loss for the second quarter ended June 30, 2011 narrowed to RM526.68 million compared with net loss of RM534.73 million a year ago as it continued to be impacted by the high fuel prices.

Its revenue was RM3.485 billion compared with RM3.213 billion a year ago. Loss per share was 15.76 sen compared with 16 sen. Its derivatives loss was lower at RM56.08 million, a sharp decline from the RM217.16 million a year ago.

However, for the six months ended June 30, MAS’ net loss widened substantially to RM769.02 million from net loss RM224.68 million in 2010.

Petroliam Nasional Bhd and its production sharing partners are embarking on a RM15 billion project to extract gas from fields off Peninsular Malaysia which includes a new 200km pipeline.

Petronas said the project comprises nine discovered gas fields within Blocks PM301 and PM302 and in the Bergading contract area, about 300km off the coast of the peninsula. “It will also involve the development of a new 200km pipeline to transport gas from the fields to Kerteh, Terengganu. The project is estimated to cost RM15 billion,” it said.

IJM Land Bhd expects local property market to remain resilient this year, underpinned by stronger demand as younger people were also buying property.

IJM Land's current unbilled sales is just over RM1 billion which would last the group two years. It plans to launch RM2 billion worth of projects in FY2012.

DIGISTAR CORPORATION BHD []’s net proft surged 425% to RM6 million from RM1.14 million a year ago and expected the momentum to continue into the next quarter as it expands its customer base in the provision of IPTV services to hospitals. Revenue slipped 30.9% to RM24.85 million from RM35.98 million. Earnings per share were 2.88 sen compared with 0.62 sen.

For the first half ended June 30, Digistar's net profit jumped 616% to RM15.02 million from RM2.09 million while revenue increased 15.5% to RM75.99 million from RM65.75 million.

Al-'Aqar KPJ REIT reported earnings of RM11.03 million in the second quarter ended June 30, 2011, which was just 0.8% higher that the RM10.94 million a year ago. Revenue rose 14.1% to RM19.82 million from RM17.21 million while earnings per share were 1.90 sen compared with 1.89 sen.

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RHBInvest Research

Top Story: Penang Property Update

• Sector Update
• Property sector is the key beneficiary of all the infra developments and strong capital investment flow in Penang.
• IJM Land and E&O, which are the prime beneficiaries of the upcoming major infra developments and strong capital investment flows into the Penang state.
• Our estimated fair value for E&O is RM1.91,we maintain our Overweight stance on the sector. Our top picks are IJM Land and Mah Sing.

Sector Call

Banking:

Sector Update

1QCY11 report card
Low loan impairment allowances provides relief to slow start
No change to our Overweight stance on the sector.

Media:

Sector Update 1Q11

1. Apr Adex For TV and Print Grew 17.8% YoY
2. Media Prima remains our preferred pick given its position as the largest integrated media player in Malaysia. In addition, we believe there is still scope for further synergies to be unlocked across its different platforms.
3. No change to our Overweight call on the sector.

Building Material:

Sector Update

• Impact of electricity and natural gas tariff review
• Maintain Underweight for the sector.

Corporate Highlights

TNB:

Briefing Note

• TNB’s outlook received a boost after receiving an average tariff hike of 7.12% effective 1 Jun and the formalisation of a fuel cost pass-through (FCPT) formula.
• Fair value raised to RM8.00 (previously RM5.60). Upgrade to Outperform from Underperform.

CBIP:

Results / Visit Note

• Benefitting from plantation arm
• Raise target price to RM4.90 (from RM4.65), after updating for CBIP’s latest net debt figure.
• No change to our Market Perform recommendation on CBIP.

MCIL:

Results Note

• FY11 Ends On A High Note
• Fair value is raised to RM1.43 (from RM1.38), which is based on unchanged target CY11 PER of 13x.
• We reiterate our Outperform call on the stock.

Petronas Gas:

News Update

• Minimal Impact From Government’s Gas Price Hike
• We maintain our RM13.95/share fair value and Outperform call on the stock.

Petronas Chemicals:

News Update

• Minimal Impact From Government’s Gas Price Hike
• Fair value for the stock decreases slightly to RM8.92/share (from RM9.02/share previously). We maintain our Outperform call on the stock.

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RHBInvest Research

Top Story: Benchmarking –

Market Update (published 27 May 2011)

• The review of the FBM indices will be based on 31 May share prices.
• YTD, the FBM KLCI has risen by just 1.4%. Looking ahead, notwithstanding concerns about the strength of US and EU economic growth, we believe the market will be driven by M&A, corporate restructuring and to some extent the follow-through from earlier-announced ETP projects. This is further supported by decent market earnings growth of 11.3% and 12.0% for 2011-2012.

Corporate Highlights

WCT :

Briefing Note

• Still Confident About RM2bn New Jobs In FY12/11
• Maintain Underperform. Fair value is RM2.37.

Petronas Chemicals :

Briefing Note

• Product Prices, Fertilisers And Methanol Division Capacity Utilisation Keep Earning Intact
• We maintain our Outperform call and RM9.02/share fair value.

MMHE :

News Update
Signing MOU For Sime Darby’s Pasir Gudang Yard Acquisition

Sime Darby :
3QFY11 Results/Briefing Note

• In 3QFY11, Sime recorded a net EI loss of RM7.9, comprising forex gain RM0.5m, the RM98.5m writeback for the Maersk Oil project, a RM73.9m impairment on biodiesel and bioganic assets and a RM33m impairment loss on a property project, bringing total EI for 9MFY11 to a loss of RM11m.

Fair value has been reduced slightly to RM10.60 (from RM10.70). Now that the sale of the O&G division has been announced, we believe Sime would need to gain further ground by being more focused on its other divisions to improve operational efficiencies, to improve its market value and standings in the different industries it operates in.

We maintain our Outperform recommendation on the stock.



IJM Land :

Results / briefing note
The value has yet to be fully appreciated
We maintain our Outperform call with an unchanged FV of RM3.28, IJMLD continues to be our top pick for the sector.



IJM:
FY03/11 Performance Weighed Down By Construction Losses In 4Q
Maintain Underperform. Fair value is RM6.12.Sime Darby :

3QFY11 Results/Briefing Note

• In 3QFY11, Sime recorded a net EI loss of RM7.9, comprising forex gain RM0.5m, the RM98.5m writeback for the Maersk Oil project, a RM73.9m impairment on biodiesel and bioganic assets and a RM33m impairment loss on a property project, bringing total EI for 9MFY11 to a loss of RM11m.
• Fair value has been reduced slightly to RM10.60 (from RM10.70). Now that the sale of the O&G division has been announced, we believe Sime would need to gain further ground by being more focused on its other divisions to improve operational efficiencies, to improve its market value and standings in the different industries it operates in.
• We maintain our Outperform recommendation on the stock.

IJM Land :

Results / briefing note

• The value has yet to be fully appreciated
• We maintain our Outperform call with an unchanged FV of RM3.28, IJMLD continues to be our top pick for the sector.

IJM:

• FY03/11 Performance Weighed Down By Construction Losses In 4Q
• Maintain Underperform. Fair value is RM6.12.

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Stocks to watch: SP Setia, YTL Corp, Proton, SEGi

KUALA LUMPUR: Stocks on Bursa Malaysia may consolidate on Friday, April 15 following the mixed overnight performance on Wall Street while on the local front, the pullback on Thursday and political concerns over Sunday’s polls in Sarawak could see investors staying on the sidelines.

On Wall Street, stocks that outperform in a weak economy helped the Dow and S&P 500 eke out gains on Thursday as concerns about faltering growth and inflation prompted investors to seek out less volatile names.

The Dow industrials' top percentage gainers were Coca-Cola Co, up 1.5 percent, Kraft Foods Inc, up 1.7 percent and Merck & Co, up 1.2 percent. Energy shares also rallied as U.S. crude oil futures gained more than 1 percent to trade above $108 a barrel.

The Dow Jones industrial average rose 14.16 points, or 0.12 percent, to end at 12,285.15. The Standard & Poor's 500 gained 0.11 of a point, or 0.01 percent, to 1,314.52. The Nasdaq Composite dropped 1.30 points, or 0.05 percent, to 2,760.22.

At Bursa, stocks to watch out for are SP SETIA BHD, YTL Corp, PROTON HOLDINGS BHD and SEG INTERNATIONAL BHD.

The Edge FinancialDaily reports that SP Setia Bhd is making its maiden venture into Singapore. The developer has proposed the purchase of 27 strata units in Leong Bee Court for S$65 million (RM159 million) with the plan to redevelop the property, currently comprising flats, into residential apartments.

Having missed the opportunity to pick up assets at basement prices during the global financial crisis, YTL Corp Bhd's Tan Sri Francis Yeoh Sock Ping believes a second chance at a shopping spree could be knocking on YTL's door.

Proton Holdings Bhd’s unit Lotus Cars Ltd will sign an agreement on syndicated financing with CIMB Bank, Maybank, OCBC, EON Bank, Exim Bank and Affin on Friday.

SEG International Bhd is teaming up with Chung Cheong University in South Korea to train and place nurses and allied health professionals in the US, Canada and Europe.

SEGi said the academic collaboration was expected to contribute an increase in earnings of approximately 4% to the group for FY ending Dec 31, 2011.

IJM Land Bhd’s additional 229.88 million new shares will be granted listing and quotation with effect from 9am on Monday, April 18. The new shares arose from the conversion of RM400 million nominal value of 10 year 3% coupon redeemable convertible unsecured loan stocks (RCULS)by IJM Corp Bhd.

NAIM HOLDINGS BHD disposed of two million shares in DAYANG ENTERPRISE HOLDINGS BHD on April 13, reducing its stake to 34.17% or 187.94 million shares.

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RHBInvest Research

Top Story: IJM Land

• Company Update
• IJMLD shares’ performance was flattish (YTD -2%) vs. Mah Sing’s 41% and SP Setia’s 11%.
• We believe the current valuations on IJMLD are decent, given the unchanged solid fundamentals, strategic landbank exposure and >50% FY12 net earnings growth.
• The value of the 2000-acre Canal City land will be unlocked next year. The project will be a bread-and-butter township development.
• IJMLD is our top pick besides Mah Sing. Maintain Outperform with a higher FV of RM3.28 (from RM3.18).

Corporate Highlights

UEM Land:

• News Update
• Secured maintenance contract
• Minimal impact on net profit. We expect the contract to yield a gross margin of 20%.
• No change to forecasts, Market Perform call and fair value of RM2.80.

Parkson: Market Perform

• News Update
• Clarity on the Centro deal
• For the time being, given that there is no cash involved in the deal, the cost to Parkson is a 9.9% earnings dilution in its Malaysian and Vietnamese operations earnings, which is to be transferred into Parkson Asia.
• As highlighted, the deal also involves Parkson granting MS a put option which, if exercised by June 2014, would require Parkson to purchase MS’ 9.9% stake in Parkson Asia at a total value of RM112.6m.
• Our SOP-derived fair value is maintained at RM5.90. Maintain Market Perform for the stock.

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RHBInvest Research

Property: – Outlook and concerns

UEM Land , SP Setia, IJM Land and KSL are confident in their property sales this year with more new launches scheduled in the pipeline.

Rising building material costs such as steel bar, cement as well as the shortage of labours are key concern.

UEM Land: Correlation between ULHB’s foreign shareholding and share price is 0.94. Hence, any short-term capital reversal would result in relatively strong profit taking activities on the stock. However, continuous news flow on IDR will keep investors’ interested on the stock. If we include the contribution from potential development of Singapore land parcels, RNAV/share is estimated at RM3.05.

IJM Land: A total of about RM2bn worth of new launches is scheduled for this year. Unbilled sales have risen from about RM800m to almost RM1bn. While management has conservatively estimated a GDV of only RM4bn for Canal City , we believe the actual GDV could amount to RM9-10bn.

SP Setia: Closed about RM1bn sales from KL EcoCity project – 10 blocks of boutique offices and over 90% of strata office units were booked. In addition to the unbilled sales of RM2.4bn, given the RM7-8bn worth of new projects in the pipeline, RM3bn sales target seems to be rather modest. Meanwhile, continued news flow on landbanking will provide some support to the share price.

KSL – Estimate that total value of all assets could amount to RM700-800m – similar to its current market cap. Although the delay in obtaining approval for Bandar Bestari could yield some earnings risk, the stock’s underlying asset are still under-estimated by the market

IRDA – Following the bilateral agreement between Malaysia and Singapore governments, increased interest from China is particularly strong on hotels and resorts business. Total investment from Singapore is now about S$2bn. Note that for Temasek and other developers from Singapore to enter, this suggests that the Singaporeans are confident on the potential of IDR, which will then lead to value appreciation for the real estate and properties in Johor.

Maintain Overweight. Top picks are SP Setia, IJMLD, Mah Sing (fair value is upgraded to RM3.03) and KSL. Considering the current valuations of the sector, we see better values in the small-mid cap property stocks such as Mah Sing and KSL which are trading at 15.7x and 8x FY11 PE, respectively.



Sime Darby:

• Lawsuit from Emirates International Energy Services (EMAS) asking for nearly US$200m in damages, stemming from a dispute over tender bids.
• No change to forecasts, target price of RM11.10 and our Outperform call.

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RHBInvest Research

Top Story

• Time to take some bold steps?
• Target price of RM11.10, upgrade to Outperform (from market perform).

Sector Call


Property:

• The “re-pricing” wave is coming to Johor.
• Maintain Overweight on the sector. Our picks are: SP Setia (OP, FV = RM6.95), 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. For Johor exposure, KSL is our fundamental pick.

Corporate Highlights

Faber:

• Non-renewal for two of its UAE contracts
• Fair value has been cut to RM2.35/share (from RM3.77 previously).
• We downgrade our call on the stock to Underperform, from outperform.

CIMB: Outperform

• CIMB Niaga loan growth to stay healthy
• No change to forecasts. Fair value of RM9.80 and Outperform call maintained.

IOI: Outperform

• Exchange of land
• The reason for the land exchange is that IOI has embarked on a redevelopment of a portion of the golf course land owned by Resort Villa into a shopping complex as part of its IOI Resort City development.
• Forecasts are unchanged.
  
• We maintain our target price of RM7.65 and our Outperform call on the stock

TNB: Market Perform

• TNB yesterday signed two agreements for the Ulu Jelai Hydroelectric project.
• We maintain our indicative fair value of RM7.50.

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Maybank IB Views

ACQUISITIONS / DISPOSAL
PLUS Expressways RM4.61: Buy
MMC to bid for PLUS? Shariah-compliant

More details end of today. MMC Corporation is expected to throw in a bid for PLUS end of today, thus emerging as the third bidder. Today will be an interesting day for PLUS for any other offer for its businesses plus a RM50m cash deposit must be effected by the end of today. Our Buy call on PLUS, premised on RM4.70-DCF derived TP, has been put on review since PLUS' share price surged to the UEM-EPF offer price.


COMPANY UPDATE
Notion VTEC RM2.00: Buy
Secures new orders from Nikon; target price lifted Shariah-compliant

Target price raised to RM2.40 (+23%) following a 7-19% upgrade to FY11-12 EPS for Nikon's new sub-assembly of DSLR camera lens, and after raising our EV/EBITDA target. A further 7% rise in EPS and target price is possible should NVB secure the MSC tax break. NVB remains a Buy, offering an improving business condition and earnings prospect.


ECONOMICS
US Economy
"Jobless Recovery" no more...?

Dec 2010 labour market data was mixed amid lower than expected rise in non-farm payrolls (Dec 2010: +103,000; Nov 2010: +39,000; consensus: +150,000) and bigger than expected decline in unemployment rate( Dec 2010: 9.4%; Nov 2010: 9.8%; consensus: 9.7%) . However, there are plenty of structural issues in the job market (e.g. high labour underutilisation rate and long-term unemployment) that resulted in Fed's cautious outlook with the central bank expecting jobless rate to fall only to 8% two years from now and the labour market to normalise only in four to five years. Therefore, jobless recovery remains a risk to the US economy and a challenge to policymakers.


Technicals
The FBM KLCI gained 53.30-points and closed at 1,572.21 last week as some very firm new year broad-based buying activities caused the market’s superb surge.The firm support areas for the FBM KLCI are located in the 1,531 to 1,572-zone. The key resistance level of 1,576 may offer some token selling only. We anticipate further bullishness for this week.

Our weekly trading Idea is a technical Strong Buy call on KENCANA.


Other Local News
MRCB-Ecovest: Poised to bag river clean-up job. A joint venture between Ekovest Bhd and Malaysian Resources Corp Bhd (MRCB) is on the verge of receiving a letter of award from the government for a portion of the Klang Valley river beautification project that is worth RM8b. The Klang River clean-up project is part of a RM15b rehabilitation and development plan for the river, under the ETP. Another company eyeing the project is YTL Corp Bhd’s Wessex Water Ltd, which bided for the project with I-Bhd. (Source: The Edge Financial Weekly)

MRCB, IJM Land: Reconsider merger plans. Malaysian Resources Corp Bhd (MRCB) and IJM land Bhd could be taking another look at the merger plan. Meanwhile, IJM Land does not rule out the possibility of working with MRCB in a joint venture capacity rather than a merger of the two companies. (Source: The Edge Financial Weekly)

Boustead: In talks to buy army base land for RM8b project. Boustead Holdings Bhd is in talks with the government to buy the 98ha Batu Cantonment army base at Jalan Ipoh, Kuala Lumpur for a mixed commercial and residential properties project worth more than RM8b. The Batu Cantonment army base, which has been there for over 40 years, will be relocated. (Source: Business Times)

Hap Seng: Raise funds via rights issue, placement. Hap Seng Consolidated Bhd is proposing a private placement of up to 124.5m new shares (representing 20% of existing share capital), followed by a two-for-one bonus issue, and a renounceable rights issue on the basis of one rights share and one warrant for five shares (post bonus). The funds raised would be utilised for capital expenditure requirements, corporate purposes and additional working capital purposes. (Source: Bursa Malaysia)

Conglo: JCorp may sell land, property to pare down debts. Johor Corp (JCorp) is considering selling various assets including land, properties and plantation assets to partly repay its current RM3.6b debt which is due for repayment in July next year. The state investment arm plans to bring down the debt level of RM3.6b to a “sustainable level” of between RM1b and RM1.5b. (Source: The Star)

Infrastructure: MRT line from Sg Buloh to Kajang to be finalised between April and May. The locations of the 35 stations of the first mass rapid transit (MRT) line from Sg Buloh to Kajang are expected to be finalised between April and May. The line, with about 9.5km underground will run through Sg Buloh, Kota Damansara, Kuala Lumpur, Cheras to Kajang. (Source: Bernama)

Aviation: Inaugural Riau Air Flight to Melaka. The inaugural Boeing 737-500 Riau Air flight from Riau to Melaka International Airport (LTAM) in Batu Berendam is expected to give the airport a boost. Riau Air would begin its thrice-weekly Pekan Baru-Melaka flights next week. Meanwhile, Riau Air is also eyeing air connections between Pekan Baru and Johor Bahru via Senai airport. (Source: Bernama)

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RHBInvest Research

Top Story: Property

• Changing industry dynamics point to interesting times ahead
• We maintain our Overweight stance on the sector.
• Our picks for the year are: SP Setia (OP, FV = RM6.95 (from RM6.50 previously), 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.

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RHBInvest Research

Banks:

• Nov ‘10 System Data – YoY Loan Growth Surges
• Overweight stance on the sector maintained.
• CIMB is our top pick for large-cap banks while Affin is our pick for the mid-small sized banks.

Corporate Highlights

IJM Land:

• Still good on its own.
• Revise our fair value to RM3.50 (from RM3.65)
• Maintain Outperform.

MRCB:

• Merger With IJM Land Aborted
• We remain positive on MRCB
• Fair value is reverted to RM2.48 from RM2.30 previously
• Maintain Trading Buy.

Dialog:

• Won a new contract worth RM64.6m for the EPCC works of a new cooling tower at Bintulu
• Fair value for the stock is RM2.11/share (versus RM1.94/share previously)
• Outperform call on the stock.

Axis REIT:

• Acquiring a piece of freehold land in Cyberjaya from FSBM Holdings Bhd.
• Total purchase consideration is RM51.25m.
• Our fair value is revised up to RM2.78 from RM2.67.
• Maintain Outperform.

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Stocks to watch: IJM Land, MRCB, Dialog, Talam

MRCB weekly chart

KUALA LUMPUR: Shares of IJM Land and MALAYSIAN RESOURCES CORP Bhd (MRCB) will be the stocks to watch on Monday, Jan 3 after their shares slid ahead of the negative news that the proposed merger had fallen through.

However, AmResearch said it was maintaining its BUY rating on both IJM Corp Bhd and IJM Land Bhd with unchanged fair values of RM7.52 a share and RM3.88 a share, respectively.

IJM Land weekly chart

“IJM Land was sold down (pre-suspension share price of RM2.86) this morning (Jan 30) prior to the announcement that the proposed merger with MRCB had been aborted. We are unfazed. The issue now is the relative investment merits of IJM Corp and IJM Land. We believe they have enough strong catalysts for them to move forward on their own,” AmResearch said in a research note after the announcement.

Other stocks which could be in focus on Monday include DIALOG GROUP BHD, Berjaya Corp Bhd, Talam Corp Bhd, RANHILL BHD and SilverBird Group Bhd.

Dialog’s subsidiary Dialog E&C Sdn Bhd has secured a RM64.6 million contract from Asean Bintulu Fertilizer Sdn Bhd (ABF) to build a cooling tower in Bintulu, Sarawak.

Dialog weekly chart

The scope of work would involve the engineering, procurement, CONSTRUCTION, commissioning and associated works of the new tower.

Berjaya Corp net profit for the second quarter ended Oct 31, 2010 jumped 66.9% to RM86.54 million from RM51.83 million a year ago.

The better performance was due mainly to write-back of impairment in value of investment in associated companies and gain on disposal/partial disposal of subsidiary companies as well as gain arising on accretion of interest in an associated company and lower finance costs.

BJCorp’s revenue for the quarter rose 6.2% to RM1.72 billion from RM1.62 billion in 2009. Earnings per share were 1.97 sen while net asset per share was RM1.39.

Talam posted net loss of RM83.29 million in the third quarter ended Oct 31, 2010 compared with net profit of RM118,000 a year ago, mainly due to losses on disposal of two parcels of development PROPERTIES totaling RM43.85 million and foresees a challenging remaining financial year for the group.

Talam weekly chart

Standard & Poor's Ratings Services has placed its “B” long-term corporate credit rating of Ranhill Bhd on CreditWatch with negative implications. It also placed its B- issue rating on US$220 million 12.5% senior unsecured notes due October 2011 issued by Ranhill (L) Ltd on CreditWatch with negative implications.

SilverBird’s net profit for the fourth quarter ended Oct 31, 2010 rose 36.66% to RM835,000 from RM611,000 a year ago mainly due to the sales growth in its core business of consumer food division.

Revenue for the quarter rose 6.75% to RM153.92 million from RM144.19 million in 2009. Earnings per share were 0.22 sen while net assets per share were 53 sen.

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Maybank IB Views

RESULTS REVIEW
Top Glove Corporation RM5.45: Sell
Weathering the perfect storm Shariah-compliant

Below expectations. 1QFY11 net profit of RM36m (-45% YoY, -20% QoQ) made up 15% of our and street's full-year estimates. We cut our FY11 forecast by 13%, expecting high latex prices to persist into 1HCY11. The stock is bereft of catalysts and M&A targets may not be attractively priced presently. Maintain Sell with a lower DCF-derived TP of RM4.70 (-4%), implying 12x CY12 PER.


Technicals
The FBM KLCI declined 1.48 points to 1,509.10 yesterday. Its resistance areas at 1,510 and 1,531 may cap market gains, whilst its firm support areas are located at 1,495 and 1,508.

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


Other Local News
DiGi, Axiata: Celcom & Digi may ink tie-up next month. DiGi.Com Bhd's CEO Henrik Clausen believes the company will be able to ink a definitive agreement on network collaboration with Celcom Axiata Bhd next month and this tie-up will help each company save over RM150m annually. (Source: The Star)

MRCB, IJM Land: Extend validity of MoU. Malaysian Resources Corp Bhd (MRCB) and IJM Land Bhd have extended the validity of their memorandum of understanding from Dec 14 previously to Dec 29. Both parties are still in the midst of finalising the terms and conditions for the proposed merger. (Source: The Star)

RHB: Inks MoU with Sumitomo Mitsui. RHB Capital's subsidiary, RHB Bank has signed a memorandum of understanding (MoU) with Japan's Sumitomo Mitsui Banking Corp (SMBC) to establish the basic framework for future cooperation. (Source: The Edge Financial Daily)

TNB's capital expenditure may rise to RM6.5b. Tenaga Nasional Bhd's (TNB) capital expenditure (capex) for fiscal years ending Aug 31, 2011 and 2012 will remain between RM4.2b and RM4.5b but could rise to RM6.5b in 2013 as additional funds will be needed to complete its three new power plants. The plants include the Manjung coal-fired plant and two hydro plants in Hulu Terengganu and Ulu Jelai in Pahang. (Source: The Star)

AmBank: AmIslamic Bank to expand into two Asian countries. AmIslamic Bank Bhd plans to set up operations in two Asian countries next year as part of its overseas business expansion plan. The bank aims to increase its customer base by an additional 200,000. (Source: Bernama)

Proton: Two more concept cars to hit production line. Another two of Proton Holdings Bhd's five "Pahlawan" concept and customised cars could turn into production models and enter the market next year. They are the Tuah (to replace the existing Persona) and the Lekiu crossover (a mini SUV).
Currently, two of the Pahlawan series are already existing production models namely Kasturi (facelifted Saga) and Jebat (Inspira). (Source: Business Times)

Renewable Energy: Tariff system mooted. A special tariff system to speed up the generation of renewable energy will be implemented under the Renewable Energy Bill 2010. Also, a feed-in tariff system that supplies line connection points for the distribution of renewable energy would be established. (Source: The Star)

Autos: Plan on electric vehicles to go to Cabinet. A completed study on the rollout plan for the Electric Vehicle Infrastructure Roadmap will be sent to the Cabinet for approval by end of January. This is to make Malaysia an attractive destination for electric vehicle makers. (Source: The Star)

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Maybank IB View

ACQUISITIONS / DISPOSAL
IJM Land / MRCB RM2.97 / RM2.12: Not Rated
A merger of equals

A win-win proposal. The IJML-MRCB merger will result in the largest property group with a potential market value of RM8.9b, a combined landbank of c.7,039 acres, and a combined GDV of RM36b, surpassing UEML-Sunrise's and SP Setia's. The merged entity will have a sizeable 39.8% public spread, hence raising liquidity. An enlarged balance sheet also improves its chances of taking part in the development of government land. IJML's shareholders gain better upside based on the share exchange prices of RM3.65 for IJML and RM2.30 for MRCB.


RESULTS REVIEW
IJM Corporation RM5.69: Buy
Property merger unlocks value Shariah-compliant

Upgrading target price. RM178m 1HFY11 core net profit (+29% YoY) before RM31m forex translation gain was in line, at 47% of our full-year forecast. No change to our core earnings forecast but we incorporate the RM31m forex gain, raising FY11 bottomline forecast by 6%. We lift our RNAV-based target price to RM6.40 (+16%) after incorporating new IJM Land's (IJML) implied value for its merger with MRCB and higher valuations for the construction business. IJM Corp stays a Buy.


Notion VTEC RM1.63: Buy
Fortune changes, risk abates Shariah-compliant

Upgrade to Buy. 4Q results were better than expected, with 4Q net profit rising 2.8-fold QoQ and EBITDA margin expanding by 10.2-ppt QoQ. We upgrade NVB to a Buy (non-consensus) with an unchanged RM1.95 TP. On balance we believe the negatives have been priced in after a 37% fall in share price following the disastrous 3Q results. Valuations are inexpensive, with a 4-6x FY11-12 PER and improving business outlook.


COMPANY UPDATE
Mah Sing RM1.79: Buy
Further expand its foothold in Penang Shariah-compliant

Buys land on Penang island. We are positive on the recent land acquisition in Penang island due to its attractive pricing and strategic location. The land is expected to enhance our RNAV by 4.8%. We continue to like Mah Sing given its undemanding valuation, 30% 3-year EPS CAGR and fast turnaround strategy. We lower our forecasts by 0.6-2.3%, but raise RNAV-based TP to RM2.60. Reiterate Buy.


IPO: Careplus Group RM0.23
Small glove-maker turns ambitious Shariah-compliant

Making debut on ACE Market. Careplus, a small latex glove-maker, is scheduled for listing on 6 Dec '10. The company expects capacity-driven earnings growth from FY12 onwards, but we see limited upside to its retail IPO price owing to: (i) fair valuation at its IPO price relative to small sized peers; and (ii) the presence of industry headwinds (i.e. persistently high latex prices, appreciating Ringgit).


Technicals
The FBM KLCI fell 15.67 points to 1,487.53 yesterday. Due to the significantly weaker tone in the USA last night, we may see the FBM KLCI in a bearish mode today too. Its resistance areas at 1,487 and 1,510 will cap market gains, whilst its weaker support areas are located at 1,465 and 1,480.

Our trading idea for today is a TAKE PROFIT call on LIONIND.


Other Local News
Sunway, SunCity: Shares suspended on merger talks. Shares of Sunway Holdings Bhd and Sunway City Bhd (SunCity) have been suspended from trading for two days since yesterday amid speculation that they may be merged. Both companies are expected to make an announcement today. (Source: Business Times)

Tan Chong: Teana to boost Nissan’s local market share. Edaran Tan Chong Motor Sdn Bhd (ETCM) expects the launch of its new Nissan Teana luxury sedan to boost the company's local market share. The company had already received over 1,000 bookings for the Teana. For the Malaysian market, the Teana will be sold with three engine options 136bhp, 2-litre and 182bhp V6, 2.5-litre which are assembled in Tan Chong Motor's Serendah factory, and the 252bhp V6, 3.5-litre which is fully imported from Japan. (Source: The Star)

Parkson Holdings: Acquires Shantou Parkson for RM37m. Parkson Holdings Bhd, via Hong Kong-listed unit Parkson Retail Group, has acquired 100% interest in Shantou Parkson Commercial Co Ltd for RMB80m (RM37.3m). Shantou Parkson was the owner and operator of the Parkson branded department store at South City Shopping Mall, Shantou City, Guangdong Province, China. (Source: The Star)

YTL, YTL Land: YTL Corp plans revamp of property division. Conglomerate YTL Corp Bhd plans to house all its property development assets and projects under YTL Land & Development Bhd (YTL Land). It would dispose its property assets and projects in Malaysia and Singapore to YTL Land net of outstanding intercompany balances for RM476.1m. (Source: The Star)

Gadang: Bids for more than RM2b jobs. Gadang Holdings Bhd is bidding for several engineering and construction projects totaling more than RM2b. Among the tenders are the proposed development of the Women and Children Hospital in Kuala Lumpur announced under the budget 2011, the 300MW Kimanis power plant in Sabah, 1,000MW Manjung power plant in Perak and the Shah Alam Hospital. (Source: The Edge Financial Daily)

Property: M'sian city apartment prices second lowest in region. The average price of city apartments in Malaysia is the second lowest compared with other countries in the region. Global Property Guide (GPG) said according to its research, only Indonesia offered city apartments that were priced lower than Malaysia. In comparison, the average price of city apartments in Singapore is almost eight times more than in Malaysia, beating even Australian prices, which are almost five times higher than Malaysian city apartments. (Source: The Star)

Market: Bursa plans to attract more SRI funds with ESG index. Bursa Malaysia Bhd plans to attract more Socially Responsible Investment (SRI) funds into Malaysia by constructing the Environment, Social and Governance (ESG) Index in 2012. Bursa Malaysia CEO Datuk Yusli Mohd Yusoff said the exchange is working with various relevant authorities of similar global-based listed indices. (Source: The Malaysian Reserve)

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RHBInvest Research Highlights

Top Story

Benchmarking:
Major changes ahead.
Stock picking is still important with news flow remaining one of the key catalysts.


Sector Call


Media:
Oct print and TV adex up by 9.0% YoY
No change to our Overweight call on the sector.

Corporate Highlights


MRCB:
To merge with IJM Land.
Maintain Trading Buy. Fair value is RM2.30.


IJM Land:
Thumbs up.
Maintain Outperform and revised fair value of RM3.65.


EON Capital:
Underlying operations coming along nicely.
Fair value is RM7.30. Underperform call.

Mah Sing:
Stocking up landbank.
Fair value is raised to RM2.43 (from RM2.40). Maintain Outperform.

Parkson:
Injection of Shantou Parkson into PRG.
Fair value is maintained at RM7.36. Maintain Outperform.

Technical Highlights


Daily Trading Strategy:

• Tuning into a “sell” mode.
• Selling pressure triggered by the strong selldown in the regional markets yesterday.
• Investors Opted to trim down their holdings on the core bluechips, hence triggering the renewed selling pressure on counters like the banks in late trading yesterday.
• The FBM KLCI must recover to above the 40-day SMA today to avoid further selldown on the local bourse, technically.
• However, in view of the fresh political tension in Korea peninsula, plus the nervousness on the possibility of further tightening measures from Beijing, sentiment is likely to turn into a “sell” mode temporarily.
• On the upside, the immediate key level is at the 40-day SMA of 1,493, while downside is seen at 1,450.

Daily Technical Watch: Maybank

• Will turn short-term bearish if it dips below the 10-day SMA
• Immediate Support at RM8.15
• Immediate Resistance at RM8.89

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Maybank IB Research

ECONOMICS
3Q10 Real GDP
Further slowdown in growth...

3Q10 real GDP growth slowed to a lower than expected +5.3% YoY (Maybank IB estimate: +6.1% YoY; consensus estimate: +5.9% YoY). Growth was supported by continued growth in consumer and business spending as fiscal stimulus faded and external demand softened. We are placing our current full-year forecasts of 7.5% for 2010 and 6.1% for 2011 under review. Indications are that this year's growth will come in in between our and official forecast (+7%) and next year's growth to likely be in the 5.5% to 6% range.


SECTOR UPDATE
Plantation Sector: Neutral
A re-look at small caps

Hidden gems. Contrary to market expectations, plantation small caps (RM5b) by 14% YTD but underperformed mid caps (RM1b–RM5b) by 11% YTD. While the overall valuation discount of small caps to mid and big caps have narrowed, there are still attractively valued stocks. We identify four names, MHC Plantations, Kurnia Setia, NPC Resources and TDM.


Automotive: Overweight
Sales rebound in Oct

Oct vehicle sales were stronger than expected with preference for smaller vehicles. We expect 2010's TIV to reach 580,000 units, which implies soft Nov-Dec periods. Nonetheless, new launches will dominate headlines as distributors will build orders for 2011's delivery. Stock-wise, all the companies have performed well this year, up 8.3 - 80.1% YTD, driven by recovery in spending and stronger RM. We are placing our strategy and calls on hold for now pending the Nov results season.


RESULTS PREVIEW
AirAsia RM2.48: Buy
3Q to surprise on strong yields Shariah-compliant

Looking great. AirAsia will release its 3Q10 results on 25th November. 3Q10 is expected to be highly profitable, buoyed by strong passenger growth, high load factors, and positive outlook on yields. We raise our earnings forecasts to account for higher yields, off-setting higher fuel costs. Maintain Buy, with a raised target price of RM2.94 (+23% from previous) based on 10.1x 2011 PER - 10% discount to peers.


RESULTS REVIEW
CIMB Group Holdings RM8.41: Buy
Regional aspirations on track; upgrade to Buy

RM1b special dividend surprise. An unexpected 13.45sen/sh single-tier dividend totaling RM986m will be paid by 31 Dec 2010 (ex-date: 3 Dec). This suggests that future regulatory capital requirements may be well within CIMB's existing capacity. 9M10 net profit is in line, but we upgrade our 2011-12 earnings forecasts by 7% p.a. after raising our expectations for investment banking and Niaga. 2011 will continue to be a strong year. Upgrade to Buy with a new RM9.50 (+12%) TP.


UMW Holdings RM6.80: Hold
Auto drifts; O&G still drags Shariah-compliant

Auto's positive priced in; concern remains at O&G. Stronger 9M results, largely from auto and Ringgit, led us to lift 2010-12 forecasts by 15% p.a. Correspondingly, our target price is raised by 9% to RM7.20, based on unchanged 12x 2011 PER, in tandem with peers. Our Hold call remains. We are still unconvinced by its O&G's operations - impairment risk for Naga 3, continued losses at WSP. At the same time, we feel that its auto division growth prospect is already priced in.


QL Resources RM5.85: Buy
Scarcity premium now on the agenda? Shariah-compliant

Earnings delivered. As expected, QL chalked up another quarter of more than 20% YoY net profit growth as supply factors turned favourable for the Marine and Livestock divisions. Whilst we retain our earnings forecasts, we raise our TP to RM6.50 (+10%) as we normalise post-FY13 semi-explicit tax rates to FY13’s 15% instead of 20% as QL continues enjoying tax incentives from its expansion.


Dialog Group RM1.44: Buy
Strong visibility; target price raised Shariah-compliant

A fluid start. 1QFY11 earnings account for 26% of our full year forecast. We remain positive on Dialog's business model and direction as it seeks to grow its oil storage operations via the Tj. Langsat and Pengerang bases over the next 10 years. The CTF operations, backed by major oil traders (i.e. Vopak, Trafigura) and PETRONAS (i.e. MISC) should provide sustainable long term earnings, strong cashflows and consistent dividends. Buy with a higher RM1.75 SOP TP (+40%).


Technicals
The FBM KLCI fell 2.85 points to 1,503.20 yesterday.Due to the weaker tone in the USA last night, we may see the FBM KLCI in a "range trading" mode today. Its resistance areas at 1,503 and 1,520 will cap market gains, whilst its weaker support areas are located at 1,487 and 1,500.

Our trading idea for today is an ACCUMULATE call on HAPSENG.


Other Local News
IJM Land, MRCB: Shares suspended. Market talk of a potential merger involving IJM Land Bhd and Malaysian Resources Corp Bhd (MRCB) has intensified with the suspension of the shares of IJM Land, its parent IJM Corp Bhd and MRCB since 9am yesterday pending a material announcement on a potential corporate exercise. The companies are expected to announce details of the corporate exercise later today. (Source: The Star)

Salcon: Sells stake in unit for RM112m, aims to list unit in HKEx. Integrated water and wastewater engineering company Salcon Bhd has sold a 40% stake in Salcon Water (Asia) Ltd (SalconAsia) to Challenger Emerging Market Infrastructure Fund Pte Ltd (EMIF). SalconAsia holds the company’s water assets in China. Salcon also plans to list SalconAsia on the Hong Kong Stock Exchange (HKEx) in the next two to three years. (Source: The Edge Financial Daily)

Plantation: Introducing higher oil yielding seed. Agricultural Resources Sdn Bhd (AAR) introduced its' higher oil yielding semi-clonal hybrid called "AA Hybrida 1". Compared to Dolly Parton (Dura X Pisifera) which is the standard planting material, AA Hybrida I produces more, but smaller fruit bunches with 20% higher oil yields. (Source: Business Times)

Healthcare: Malaysia to review fees of doctors, private hospitals. The government will review the fees of doctors and private hospitals. The ministry will also set up six more ambulatory (out-patient) care centres under the Tenth Malaysian Plan, from 15 currently. (Source: Business Times)

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