Maybank IB Views

MARKET STRATEGY
2H 2011 Outlook
External headwinds, domestic strength (mid-year check)

External headwinds. We expect global equities to remain volatile in second half 2011 on renewed concerns over US' economic recovery, Eurozone's sovereign debt crisis and China's monetary tightening measures. Waning confidence on the resolution of Eurozone's debt problems will prompt broad-based risk aversion in equities. In addition, the unrest at MENA has persisted; it is likely to extend for awhile.

ECONOMICS
Malaysia: Development & Outlook, 2H 2011
Reality Check

We revised downward our 2011 real GDP growth forecast to 5.1% (previous 5.5%), taking cue from continued softness in 2Q 2011 after the lower-than-expected 1Q 2011 growth amid signs of elevated global economic risks that weighs on external demand on the back of factors such as worsening Eurozone soveriegn debt crisis, US economy that is losing momentum as QE2 ended, slowing China's economy and continued inflationary presures in the emerging and developing countries. In addition, rising inflation and interest rates dampen domestic consumer spending. Critical to upholding the growth momentum this year is therefore investment, with ETP implementation a crucial factor, which should be supportive of the domestic economy in 2H 2011.

CPI, May 2011
See you at "4" next...?

Consumer price index (CPI) increased by 3.3% YoY in May '11 (Apr '11: +3.0% YoY; MaybankIB: +3.3% YoY; Consensus: +3.3% YoY), accelerating for the sixth month in a row to the fastest pace in 26 months. MoM, it gained +0.3%. 2011 YTD inflation rate was +3% YoY. CPI excluding Food & Non-Alcoholic Beverages and Transport picked up for the fourth consecutive months to +2% YoY (Apr '11: + 1.8% YoY), the highest in almost two years. Factoring in the impact of the hikes in the subsidized prices of sugar, diesel, gas and power in May-June, we see monthly inflation rate surging to 4% in June-July, and had earlier revised our annual inflation rate to 3.4% (3% previously) for 2011 and 3.3% (2.9% previously) for 2012.

INITIATING COVERAGE
BIMB Holdings RM1.97: Buy
A blast from the past Shariah-compliant

Ready to stamp its mark again. Once the largest Islamic bank in the country, BIMB Holdings (BIMB) lost its luster when it plunged into the red in 2005/2006. New management has spent the last couple of years cleaning up legacy financing problems at the commercial bank, which also saw two rounds of capital injection over the past five years. With much of the clean-up completed alongside a corporate rebranding of Bank Islam and Syarikat Takaful Malaysia (Takaful Malaysia), BIMB is poised once again to stamp its mark as one of the country's leading Islamic financial institutions. We initiate coverage on BIMB with a Buy call and a RM2.40 target price on a sum-of-parts (SOP) basis.

COMPANY UPDATE
RHB Capital RM8.75: Hold
Back to the drawing board

Downgrade to Hold. Our call on RHB Capital is lowered to a Hold from Buy, after restoring our valuations to levels prior to recent corporate exercises. On the back of a re-based target price of RM9.40 from RM10.40, upside to current share price is 7%. While valuations remain decent, various non-tangible issues are likely to weigh on sentiment in the near term, in our view.

RESULTS REVIEW
Kencana Petroleum RM2.79: Buy
On track, with upside potential Shariah-compliant

We remain Buyers of Kencana. 9MFY11 results track expectations. We expect earnings momentum to strengthen into FY12 as Kencana secures higher orders and consolidates AME's earnings. We do not rule out a 2nd RSC and a strategic partner to develop deepwater fabrication capabilities; a positive, in our view. Our RM3.10 target price, based on 20x CY12 EPS, has not incorporated these potentials.

Technicals
The FBM KLCI gained only 1.23-points and closed at 1,564.66 last Friday. The local market remained quite steady despite the Greek debt worries and bad US economic news (like the increased number of people seeking unemployment benefits). The obvious support areas for the FBM KLCI are located in the 1,536 to 1,563-zone. The firm resistance zone of 1,564 and 1,576 will see very heavy liquidation activities.

Trading Idea is a Short-Term Buy call on PANAMY.

Other Local News
Proton: Nears deal with foreign carmaker. Proton Holdings Bhd will be finalising a collaboration with a foreign car maker next month, which is expected to bring up to RM800m of investment into the country. The tie-up involves using the partner's transmission for Proton's new engine. (Source: Business Times)

IJM: Shortlisted for India highway project. IJM Corp Bhd is one of the 11 companies shortlisted for a mega inter-state highway project estimated to cost about RM4b. The 555km highway stretches from Kishangarh, near Jaipur, in Rajasthan to Ahmedabad, in Gujarat, via Udaipur. (Source: The Star)

Sime Darby: New pay scheme to attract Malaysians too. Sime Darby Plantation Sdn Bhd expects its new pay scheme for estate and mill workers to attract not only foreigners but Malaysians as well. (Source: The Edge Financial Daily)

Muhibbah: Gets RM338m job. Muhibbah Engineering (M) Bhd has been awarded a RM338m contract by Northport (M) Bhd for the development of a multi-purpose wharf and other facilities at Container Terminal 4. (Source: Bursa Malaysia)

Plantation: Minister concerned over Aussie palm oil Bill. Plantation Industries and Commodities minister Tan Sri Bernard Dompok expressed grave concern on the passing of the Food Standards Amendment (Truth in Labelling - Palm Oil) Bill 2010 by the Australian Senate on Thursday. The Bill which is now under consideration by the Lower House, Australian Parliament, seeks to mandate the labeling of palm oil for the purpose of ensuring ‘that consumers are provided with clear, accurate information about the inclusion of palm oil in foods’. (Source: The Star)

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Stocks to watch: Kencana, Muhibbah, Tambun Indah, Subur

KUALA LUMPUR: Worries about the Greek debt issue and the slide on Wall Street will weigh on investors’ sentiment in the week ahead, starting Monday, June 27, and maybe investors may give up the hope of window dressing as the first half draws to an end.

On Wall Street, Reuters reported the Dow industrials and the S&P 500 fell for their seventh week in the last eight. The benchmark S&P 500 is down 7% from its 2011 closing high at the end of April.

Investors are fearful Greece's government may fail to pass an austerity plan next week, which could force a default on its debt repayments. The government faces an electorate vehemently opposed to the austerity measures.

The Dow Jones industrial average dropped 115.42 points, or 0.96%, to 11,934.58 at the close. The Standard & Poor's 500 Index fell 15.05 points, or 1.17%, to 1,268.45. The Nasdaq Composite Index lost 33.86 points, or 1.26%, to 2,652.89.

For the week, the Dow fell 0.58% and the S&P 500 shed 0.24%, while the Nasdaq gained 1.39%.

At Bursa Malaysia, stocks to watch include KENCANA PETROLEUM BHD [], MUHIBBAH ENGINEERING (M) BHD [], Tambun Indah Land Bhd and SUBUR TIASA HOLDINGS BHD [].

Kencana’s earnings rose 81% to RM56.42 million in the third quarter ended April 30, 2011 from RM31.17 million a year ago underpinned by the progress achieved for the contracts. Revenue rose 34.7% to RM377.83 million from RM280.37 million. Earnings per share were 3.08 sen versus 1.92 sen a year ago.

When compared with a year ago, where revenue and pre-tax profit came in at RM280.37 million and RM36.5 million, this was an improvement of 35% and 91% respectively in the current quarter.

Muhibbah was awarded a RM338 million contract from Northport (Malaysia) Bhd to build a multipurpose wharf and the associated facilities. Hopefully, this could inject some positive news into the stock which was battered by its exposure to the Asian petroleum hub debacle.

Muhibbah said the wharf would be an extension to the existing wharf eight and upgrading of wharf 16. The contract is scheduled to start in July and completed in March 2014.

Some upbeat news from Tambun Indah Land Bhd. The Penang-based developer, with projects totaling gross development value (GDV) of RM1.6 billion, expects to record strong revenue growth in the financial year ending Dec 31, underpinned by the sustained property boom in Penang.

Growth would be driven by strong interest in its ongoing projects due to the rapid industrial expansion in Seberang Perai. It would also benefit from the spillover effect from the strong demand for residential PROPERTIES [] on Penang island.

Tambun Indah has several ongoing projects on mainland Penang with total GDV of RM1.6 billion, which is enough to last until 2016.

On a downbeat note, Subur Tiasa’s net profit in the third quarter ended April

30, 2011 fell 19.5% to RM8.40 million from RM10.44 million a year ago but it expects the outlook to be positive on firm demand overseas.

“The market outlook for timber and timber products in the coming quarter remain positive with the continued firm demand for timber in India and China,” it said.

The company’s financial performance was impacted by higher operational costs due to the increase in raw material, fuel and adhesive costs.

Revenue declined 11.8% to RM144.66m from RM164.12 million. Earnings per share were 4.62 sen compared with 5.55 sen.

Subur Tiasa said for the nine-month period, net profit was flat at RM23.838 million while revenue declined 4.8% to RM486.22 million from RM510.79 million.

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Stocks to watch: BToto, Time Engineering, TimeCom, AirAsia

UALA LUMPUR: Berjaya Sports Toto will be in focus on Tuesday, June 21 following the announcement of its full year financial year results, which were lower than the previous year.

Other counters which could see trading interest are TIME ENGINEERING BHD, TIME DOTCOM BHD, AIRASIA BHD and Muhibbah Engineering Bhd.

BERJAYA SPORTS TOTO BHD’s net profit rose 28.8% to RM104.18 million in the fourth quarter ended April 30, 2011 from RM80.89 million a year ago, boosted by strong record sales.

Revenue rose 5% to RM901.30 million from RM858.29 million while earnings per share were 7.79 sen versus 6.05 sen. It declared tax exempt dividend of three sen per share compared with eight sen a year ago.

For the financial year ended April 30, 2011, the net profit declined by 9.2% to 348,098 from the previous financial year’s RM383.50 million. Revenue inched up 1.28% to RM3.433 billion from RM3.392 billion. The total dividends were 21 sen compared with 57.5 sen a year ago.

Time Engineering fixed the renounceable offer for sale of up 626.18 million shares of Time dotCom Bhd at 53 sen.

Time Engineering said the offer price of 53 sen was 33.75% below the five-day volume weighted average market price up to June 17. Based on Monday’s closing price of 79 sen, this was a discount of 26 sen or 29%.

AirAsia Bhd is teaming up with CAE International Holdings Ltd to set up an aviation academy to provide training services for pilots, cabin crew, engineers, ramp handlers, guest services and aviation management.

The JV company to run the academy will have a paid-up capital of RM165.56 million of which AirAsia’s 50% share, being its capital and investment outlay in the JV shall be satisfied through its assets contribution.

RAM Rating Services Bhd says MUHIBBAH ENGINEERING (M) BHD’s RM130 million Islamic bonds are not affected on the recent news about the receivership status of the owner of the Tanjung Bin petroleum hub project.

It said the group’s stand-alone credit profile was affected by its weaker-than-expected profit performance, balance sheet and debt coverage ratios, as well as its tight liquidity profile.

RAM Ratings said Muhibbah’s outstanding order book of RM2.9 billion as at May19 will sustain the group over the next two years.

It added Muhibbah also derives earnings diversity, from its involvement in the CONSTRUCTION , cranes and shipyard segments. It also enjoys recurring dividend income from its associate stakes in the concessionaire for road-maintenance work in Malaysia and an operator and concession holder for three international airports in Cambodia.

SAAG CONSOLIDATED (M) BHD fixed the issue price for the sixth tranche of the placement of 15 million new shares of 10 sen each under the proposed private placement at an issue price of 10 sen each.

The placement price of 10 sen is 40.85% above the five-day weighted average market price of SAAG shares up to and including June 17 of 7.1 sen per share.

Meanwhile, at Tradewinds PLANTATION Bhd’s AGM, the Minority Shareholders Watchdog Group (MSWG) wants to raise a question about the proposed acquisition of Mardec Bhd which was reduced from RM150 million to RM140 million taking into account Ernst & Young appraisal of the fair value of Mardec group using the hybrid methodology.

MSWG will also query the company about the five-year financial performance of Mardec, including latest results.

At Ho Hup Construction Co Bhd’s AGM, the MSWG will ask the board to explain the implication of the auditors’ continued disclaimer of opinion.

The MSWG also wants to know how confident is the board that the proposed PN17 regularisation plan would eliminate the accumulated losses and turn around the group.UALA LUMPUR: Berjaya Sports Toto will be in focus on Tuesday, June 21 following the announcement of its full year financial year results, which were lower than the previous year.

Other counters which could see trading interest are TIME ENGINEERING BHD, TIME DOTCOM BHD , AIRASIA BHD and Muhibbah Engineering Bhd.

BERJAYA SPORTS TOTO BHD []’s net profit rose 28.8% to RM104.18 million in the fourth quarter ended April 30, 2011 from RM80.89 million a year ago, boosted by strong record sales.

Revenue rose 5% to RM901.30 million from RM858.29 million while earnings per share were 7.79 sen versus 6.05 sen. It declared tax exempt dividend of three sen per share compared with eight sen a year ago.

For the financial year ended April 30, 2011, the net profit declined by 9.2% to 348,098 from the previous financial year’s RM383.50 million. Revenue inched up 1.28% to RM3.433 billion from RM3.392 billion. The total dividends were 21 sen compared with 57.5 sen a year ago.

Time Engineering fixed the renounceable offer for sale of up 626.18 million shares of Time dotCom Bhd at 53 sen.

Time Engineering said the offer price of 53 sen was 33.75% below the five-day volume weighted average market price up to June 17. Based on Monday’s closing price of 79 sen, this was a discount of 26 sen or 29%.

AirAsia Bhd is teaming up with CAE International Holdings Ltd to set up an aviation academy to provide training services for pilots, cabin crew, engineers, ramp handlers, guest services and aviation management.

The JV company to run the academy will have a paid-up capital of RM165.56 million of which AirAsia’s 50% share, being its capital and investment outlay in the JV shall be satisfied through its assets contribution.

RAM Rating Services Bhd says MUHIBBAH ENGINEERING (M) BHD ’s RM130 million Islamic bonds are not affected on the recent news about the receivership status of the owner of the Tanjung Bin petroleum hub project.

It said the group’s stand-alone credit profile was affected by its weaker-than-expected profit performance, balance sheet and debt coverage ratios, as well as its tight liquidity profile.

RAM Ratings said Muhibbah’s outstanding order book of RM2.9 billion as at May19 will sustain the group over the next two years.

It added Muhibbah also derives earnings diversity, from its involvement in the CONSTRUCTION, cranes and shipyard segments. It also enjoys recurring dividend income from its associate stakes in the concessionaire for road-maintenance work in Malaysia and an operator and concession holder for three international airports in Cambodia.

SAAG CONSOLIDATED (M) BHD fixed the issue price for the sixth tranche of the placement of 15 million new shares of 10 sen each under the proposed private placement at an issue price of 10 sen each.

The placement price of 10 sen is 40.85% above the five-day weighted average market price of SAAG shares up to and including June 17 of 7.1 sen per share.

Meanwhile, at Tradewinds PLANTATION Bhd’s AGM, the Minority Shareholders Watchdog Group (MSWG) wants to raise a question about the proposed acquisition of Mardec Bhd which was reduced from RM150 million to RM140 million taking into account Ernst & Young appraisal of the fair value of Mardec group using the hybrid methodology.

MSWG will also query the company about the five-year financial performance of Mardec, including latest results.

At Ho Hup Construction Co Bhd’s AGM, the MSWG will ask the board to explain the implication of the auditors’ continued disclaimer of opinion.

The MSWG also wants to know how confident is the board that the proposed PN17 regularisation plan would eliminate the accumulated losses and turn around the group.

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Maybank IB Views

Star Publications (Malaysia) RM3.39: Hold
Diversifying media assets Shariah-compliant

Near-term catalysts yet to emerge; maintain Hold. On the positive side, indications thus far are that the recent electricity tariff hike has had little impact on ad spend. Furthermore, circulation appears to be leveling off after five years of slippage. Nevertheless, current valuations are reflective of its near-term outlook on tapering single digit earnings growth after a strong rebound last year. We maintain our earnings estimates and RM3.69 SOP TP which implies 12.6x 2012 PER.

Technicals
The FBM KLCI lost 1.95 points and ended at 1,554.24 yesterday. Its resistance areas of 1,555 and 1,576 will cap market gains, whilst the obvious support areas are located at 1,533 and 1,553. Due to the US markets’ mixed tone last night, we will see some initial low volume buying activities in the local bourse today.

Trading idea is a Take Profit call on MUHIBAH.

Other Local News
Perodua: 10,000 orders for new Myvi so far, New Myvi to make Indonesian debut. Perodua has received about 10,000 orders for the new Myvi since booking was opened on June 4 and it expects between 8,000 and 8,500 units to be sold monthly. Separately, the new Perodua Myvi will soon make its debut in the Indonesian market, marking Perodua's first foray there. 500 units of the new Myvi will be shipped to Indonesia this month, while the official launch there will take place next month. (Source: Business Times)

MAS: May boost fleet to tap Oneworld network. Malaysia Airlines' entry into the Oneworld airline alliance may see it ordering more planes. MAS will be attending the Paris Air Show next week, and an announcement on new orders is largely expected. (Source: Business Times)

AirAsia: To announce aircraft orders at Paris Air Show. AirAsia is aiming to conclude negotiations soon so that it can make a landmark aircraft order to double its fleet at the Paris Air Show. (Source: The Star)

UEM Land: Targets RM5b GDV in 2011. UEM Land Holdings Bhd is planning to launch projects with a total gross development value (GDV) of RM5b this year, as it aspires to see its revenue grow by 50%. (Source: The Edge Financial Daily)

KPJ: To build specialist centre in Iskandar. KPJ Healthcare Bhd has received approval for zoning from the Health Ministry to set up a new specialist hospital at Bandar Dato Onn in a collaboration with Johor Land Bhd. (Source: The Star)

Plantation: Malaysia wins case against Aussie palm oil labeling Bill, Malaysia is largest producer of certified, sustainable palm oil. Malaysia has won its case against Australia's proposed Truth in Labelling - Palm Oil Bill. The Community Affairs Legislative Committee of the Australian Senate in Canberra has recommended that the Bill not be passed. Separately, Malaysia is now the world's largest producer of certified and sustainable palm oil, accounting for half of the 4.2m tonnes of globally certified and sustainable palm oil to date carried out by the Roundtable on Sustainable Palm Oil (RSPO). (Source: Business Times)

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Muhibbah gets RM101m contract in Australia

KUALA LUMPUR: Muhibbah Engineering Bhd has secured a contract worth RM101 million in Australia for the Gorgon liquefied natural gas (LNG) jetty and marine structure project.

It said on Wednesday, May 25 it was given a letter of commitment by Leighton Contractors Pty. Ltd. for pre-assembly of heavy lifting facility and tug pen breakwater caissons and preparation of shipping barges.

“The contract is expected to commence in mid-2011 with a target date of completion in early 2012,” it said.

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Muhibbah Trading Buy TP RM2

Muhibbah Nov 2010 Daily Chart

CIMB Equities Research make a call trading buy with TP RM2 for Muhibbah Engineering. As the research house, the Muhibbah stock price still has 20% discount to its RNAV.

As we can see, the downtrend line for Muhibbah share price already broken at RM1.20. The next resistant level is at RM1.67.

With the oil price increased globally, I believe that the Muhibbah share price also will increase as they are involved in oil and gas industry.

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Bursa Malaysia Stock Market News

AirAsia: Flies 4.03m passengers in M'sia in 3Q. AirAsia Bhd saw a 12.4% increase in passengers carried in Malaysia to 4.03m in 3Q2010 compared with 3.59m in the same period last year. Its capacity also jumped 8.3% to 5.16m from 4.76m. Its' load factor improved as well by 3% to 78%. The available seat kilometers (ASK) rose 11% from 5,499m to 6,056m and revenue passenger kilometers (RPK) surged 26.6% to 4,733m from 3,769m in the same period last year. Operations in Thailand and Indonesia also displayed improved performance with favorable statistics. (Source: The Edge Financial Daily)

IPO: SC gets 6 IPO applications in 3Q with potential market cap of RM500m each. The Securities Commission (SC) saw strong pipelines of initial public offerings (IPO) on Bursa Malaysia . SC said it had received a total of 10 new listing applications, including two foreign-based IPOs, for the Main Market during the third quarter ended Sept 30 (3Q). This was an increase from eight listing applications received in the previous quarter. Six of the applications received were companies with a potential market capitalization of at least RM500m each. (Source: The Edge Financial Daily)

Muhibbah Engineering: Gets RM206m deal. Muhibbah Engineering (M) Bhd has received a RM205.8m contract from Putrajaya Holdings Sdn Bhd for the design, construction and completion of government office building and external works at the federal government administrative centre in Putrajaya. The project is expected to start this year and to be completed in 2013. (Source: Business Times)

TA Global: Clinches RM1.8b property JV in Australia . TA Global Bhd is expanding its presence in Australia via a "development sponsorship arrangement" with Charter Hall Group for the AUD600m (RM1.84b) Little Bay residential development project in Sydney . TA Global said its subsidiary TA Global Development Ltd had entered into a 50:50 development sponsorship arrangement with Charter Hall. It is learnt that the agreement was termed as "development sponsorship" instead of a joint venture because TA Global is providing part of the funds and also the project had taken off earlier. The project will take about 4 to 5 years and is expected to be completed in late 2014. (Source: The Edge Financial Daily)

Economics: MIER Maintains GDP Forecast For 2010 and 2011 at 6.5% and 5.2%. The Malaysian Institute of Economic Research (MIER) is maintaining its economic growth forecast for 2010 and 2011 at 6.5% and 5.2%. Business Conditions Index (BCI) fell sharply to 104.9 points in 3Q10 (2Q10: 119.6points), which more than offsets the surge in the Consumer Sentiment Index (CSI) to 115.8 points in 3Q10 (2Q10: 110.4 points). MIER forecast average RM/USD of 3.20 in 2010 before strengthening further to 3.10 in 2011. ?In terms of interest rates, MIER anticipates the overnight policy rate (OPR) to be kept at 2.75% until end-2010. "The OPR will trend higher to 3.25% in 2011, in tandem with a higher overall CPI forecast of 2.5% yoy (2.2% in 2010)," MIER said. (Source: The Edge Financial Daily)

Gloves: Association tells glove makers to up prices. The Malaysian Rubber Glove Manufacturers' Association (Margma), whose members collectively supply 60% of the global rubber latex glove consumption, advised its members to raise glove prices in line with high raw material costs and continued weakening of the US dollar. This may well explain the share price surge among the rubber glove makers on Bursa Malaysia yesterday. Magma president KM Lee said most rubber glove manufacturers had started raising selling prices of their products to reflect the rising raw material costs and the weakening of the US dollar. (Source: The Edge Financial Daily)

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