RHBInvest Research

Top Story: Top Glove – Latex prices set to ease further Underperform

Visit Note

¨ Latex prices have corrected sharply, in tandem with other commodity prices (excluding precious metals) amid concerns of weaker-than-expected economic growth. As such, we have reduced our latex price assumption to RM8.59/kg for FY11 (from RM8.69/kg earlier). Our latex price assumptions of RM7.75-7.90/kg for FY12-13 remain intact.



Sector Call



Property: Vietnam – Good prospect but not an easy market Neutral

Sector Update

¨ Vietnam has been a tough market. This is well known to many investors. The high inflation and lending rate imply that the required rate of return/IRR of any development projects must be at least 30% to make it profitable. The unfavourable economic indicators and the under-developed mortgage market have largely explained why many Malaysian developers have not been aggressive in pushing their launches in Vietnam during the recent property upcycle, when regional property markets are booming.



Corporate Highlights


no
Gamuda: Give me your best shot, comrades! Outperform

Visit Note

¨ MMC-Gamuda JV may have to settle for a low price for the tunnelling works if they have to match the ultra low winning bid from one of the two Chinese contractors, but we believe Gamuda could still optimise to improve profitability.



Notion Vtec: Shifting focus to camera and auto Underperform

Briefing Note

¨ Management appeared to have a more cautious tone on the industry outlook given the weaker-than-expected global economic growth. We understand although management has not witnessed any cut back in orders yet, the current environment poses a risk which could lead to slower-than-expected orders from customers. The HDD industry is not only facing weaker-than-expected IT spending for desktop PCs, it is also facing stiffer competition from tablets. Hence, we understand Notion will focus on the camera and automotive segments going forward.



SP Setia: Beranang? It’s far, but they will make it nearer Market Perform

News Update

¨ SP Setia entered into a SPA for the proposed purchase of a piece of 1,011-acre freehold land in Beranang for RM330m, or RM7.50 psf. The site is estimated to yield a GDV of RM3.5bn.The land is located midway between Semenyih, Bangi Old Town and Beranang. Travelling time is said to be about 40min to KL.



Evergreen Fibreboard: Going upstream into rubber plantation Underperform

News Update

¨ Evergreen has entered into a Mou with four individuals to purchase a 4,410-acre of land for RM37.8m. The land consists of tropical timber and approximately 1,730 acres of the area has been logged.



Dialog: On the mark Outperform

4QFY11 Results

¨ FY11 net earnings of RM152.4m were in line with expectations, rising 29% due to increased contribution from associate earnings (+23%) and better margins from core divisions of 13.4% (vs. 10.2% in FY10).



CSC Steel: 2QFY11 results dragged down by higher raw material costs Underperform

2QFY11 Results

¨ 1HFY11 net profit came in below expectations. We believe the variance against our forecast largely came from worse-than-expected margin contraction in 2QFY11 as a result of weak demand and significantly higher raw material costs.

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Maybank IB Views

Construction: Overweight
MRT: Pro-gressing

Positive developments. Prasanara's release of the names of 28 companies shortlisted for the mass rapid transit (MRT), Sg Buloh-Kajang line elevated works portion is a positive move in buidling investors' confidence on the government's commitment in moving the project forward. The names are not totally new to us, except perhaps for the not listed ones. First works are expected in early-2012, we estimate. We maintain our Overweight call on the sector.

RESULTS REVIEW
Sunway REIT RM1.07: Buy
Short-term pain, long-term gain

Maintain Buy. SunREIT's RM167.3m FY11 core net profit came in within expectations. 6.6sen FY11 DPU was also in line. We do not expect significant contributions from the newly-acquired Sunway Putra Place (SPP) over the short-term as it would likely take 1-2 years for renovation works. We maintain our FY12-13 earnings forecasts and introduce FY14 estimates. Target price is RM1.18 (+3 sen) as we roll over our base year to 2012.

MBM Resources RM2.97: Hold
Less sanguine over outlook Shariah-compliant

The effect of the global supply chain disruption kicks in. 1H results are tracking expectation (47% of full-year forecast) on the back of a softer QoQ performance. Vehicle sales and earnings in 2Q, as forewarned, were affected by the global supply chain disruption post the Japan’s 11 March earthquake and tsunami. Going forward, we opine that this issue will continue to have an adverse effect on MBM's 2H performance. Maintain Hold with a RM3.10 target price.

Notion VTEC RM1.95: Buy
Earnings on track Shariah-compliant

Results in line. 9MFY11 net profit of RM34m (+17% YoY) made up 71% and 76% of our and consensus full-year forecast. We maintain our Buy call as valuation is inexpensive at 4.1x CY12 PER, backed by a solid growth trend (38% 2-year net profit CAGR). Our RM2.40 TP pegs NVB on 4.5x FY11 EV/EBITDA, reflecting regional peers' (ex-Japan) valuations. Our TP also indicates an undemanding forward PER of 5.1x, significantly below the 8x average for our small-cap universe.

Technicals
The FBM KLCI fell 4.06 points to close at 1,476.46 yesterday. Its resistance areas of 1,479 and 1,530 will cap market gains, whilst the obvious support areas are located at 1,423 and 1,475.

Trading Idea is YTLCMT

Other Local News
Construction: 28 firms shortlisted for MRT jobs. Syarikat Prasarana Negara Bhd has shortlisted 28 individual and joint-venture (JV) companies that are eligible to bid for various elevated civil works, stations and depot packages for its My Rapid Transit (MRT) project. Among the companies in the list are larger local players like IJM Construction Sdn Bhd, Ahmad Zaki Sdn Bhd, Sunway Construction Sdn Bhd and WCT Bhd. (Source: The Malaysian Reserve)

Aviation: Up to RM1.2b cost savings for MAS and AirAsia. The collaboration forged between Malaysia Airlines (MAS) and AirAsia Bhd on Tuesday can turn in up to RM1.2b in cost savings for both the airlines, said MAS newly appointed executive director Mohammed Rashdan Mohd Yusof. (Source: The Star)

MAHB: Board revamp at MAHB? A revamp of the boardroom of Malaysia Airports Holdings Bhd (MAHB) is next after the airline industry in Malaysia. Changes are afoot at MAHB but it would be more gradual than the wholesale changes seen at MAS. The idea behind the move to make changes to the board of MAHB is to infuse new blood and realign the interest of the shareholders by bringing people from diverse backgrounds and disciplines. (Source: The Star)

Bumi Armada: Signs FPSO contract. Bumi Armada Berhad’s jointly-controlled entity, Forbes Bumi Armada Offshore Limited (FBAOL) has signed a Floating Production, Storage and Offloading (FPSO) contract with Oil and Natural Gas Corporation Limited (ONGC) following the letter of award secured from ONGC referred to in the Prospectus of Bumi Armada. (Source: Bursa Malaysia)

Alam Maritim: Bags RM20m jobs. Alam Maritim Resources Berhad has clinched two offshore vessel leasing contracts from Petronas Carigali Sdn Bhd worth RM20m. The contract is for a duration of 138 days, with a maximum extension option of 30 days. (Source: Bursa Malaysia)

Catcha: Amends terms with Microsoft. Catcha Media Bhd announced substantial amendments to its strategic collaboration with US-based Microsoft. Changes in terms of the collaboration had prompted the company to reduce its four-year commercial target of up to RM90m for its online media operations by some 28% or RM25m. (Source: The Edge Financial Daily)

Sarawak Cable targets RM1b projects. Sarawak Cable Bhd (SCB) is pursuing potential projects worth more than RM1b and is looking to expand overseas, starting with Brunei and Kalimantan this year, followed by the Philippines. (Source: The Edge Financial Daily)

Read more...

RHBInvest Research - Sector Call

Sector Call



Timber: Temporary build-up in plywood inventory in Japan Overweight

Sector Update

¨ According to the latest Japan Lumber Report, there has been a build-up of imported plywood inventory in Japan (mainly in thick panel) due to the arrivals of orders placed after the March earthquake disaster. As a result, prices for CP and SP reported by timber companies have weakened recently from its peak of US $620/m3 in May/June to about US$540-560/m3 by July/August.



Semiconductor: No signs of a turning point yet Neutral

Unisem: Fair value RM1.76 Market Perform

Notion: Fair value RM2.10 Market Perform

JCY: Fair value RM0.53 Underperform

MPI: Fair value RM4.18 Underperform

¨ Jun 11 chips sales of US$24.7bn posted the first drop on yoy basis by -0.5% after chalking yoy growth since the Oct 09 when it dropped 2.4%. The weaker chip sales suggests that chip demand in certain segments remains weaker than expected but could not be fully offset by strong demand for mobile devices as well as corporate IT spending. On mom basis, chips sales fell by 1.4% after gaining 1.8% in May.

Read more...

RHBInvest Research

Top Story: Fajarbaru

Visit Note
Upbeat on new contract wins
The new contract wins could potentially come from: (1) Package B of the Ampang and Kelana Jaya LRT line extension project; (2) Building jobs for schools, colleges and university campuses; and (3) Infrastructure works in the East Coast.
FY06/11 net profit forecast is reduced by 10% as we now assume the RM150m contract for the five new LRT stations to only start contributing in FY06/12 (vis-à-vis FY06/11 we assumed previously).
Fair value is trimmed from RM1.65 to RM1.57 but maintain Outperform.

Sector Call

Banks: Mar ‘11 system data

Sector Update
Leading indicators charting new heights
No change to our Overweight stance on the sector. CIMB, AMMB and Affin are our top picks for the sector.

Semicon: March chip sales still up yoy Neutral

Sector Update

Unisem: Fair value at RM1.99 Market Perform

MPI: Fair value at RM4.95 Underperform

Notion: Fair value RM2.25 Market Perform

JCY: Fair value at RM0.74 Underperform (down from MP)


Corporate Highlights

JCY:

Visit Note

• Labour issues to affect margins in FY11
• Also, management highlighted there could be potential component shortages mainly for the motor controller chips that could affect the global supply chain of the HDD industry.
• We are reducing our FY11 net profit by 11.3% mainly to input higher operating expenses. However, we are raising our FY13 net profit by 7.6% to reflect margin improvement on the back of its expansion to China .
• Thus, we downgrade our call to Underperform (from market perform) and a lower fair value of RM0.74/share based on unchanged 10x CY11 EPS.

AirAsia:

Briefing Note

• Growth story and IPO of overseas units not without caveat
• Fair value is RM2.10. Maintain Underperform.

Digi:

1QFY11 Results/Briefing Note

• 1 Network modernisation will not affect dividends
• We have fine-tuned our earnings forecasts by 0.2-0.7% for FY11-13 due to marginally lower depreciation charges from lower capex assumptions.
• Fair value raised to RM30.00 from RM29.10 due to lower capex assumptions of RM650m p.a. (previously RM720-750m). Although we like the stock as a decent dividend yield play with data-led revenue growth, we believe the stock is almost fully valued at this juncture. Downgrade to Market Perform.

Axiata:

Company Update

• A fairly strong start to 2011 for XL
• The strong 1QFY11 growth in XL reinforces our Outperform call on Axiata, which offers good growth prospects albeit moderating this year. Maintain our SOP fair value of RM5.75.

Paramount:

News Update

• Acquiring land in Klang. Total cash consideration is RM110m, to be funded by internal funds and/or borrowings.
• We are positive on this acquisition, as Klang is the 2nd largest city in Klang Valley after KL, with a population of close to 750k. A well-planned commercial development is hence marketable.
• No change in our earnings estimates pending guidance from the management on GDV of the project.
• Maintain Market Perform with an unchanged fair value of RM5.92.

EON Capital:

News Update

• Eon Cap announced last Friday that the Board had accepted HL Bank’s offer, subject to and conditional upon: 1) the payment of an interim net dividend amounting to RM311.9m by Eon Bank (Proposed Interim Dividend); 2) the Proposed Interim Dividend received by Eon Cap shall not form part of the assets of Eon Cap to be disposed to HL Bank; and 3) the offer price of RM5.06bn remains unchanged and shall not be adjusted for the payment of the Proposed Interim Dividend. HL Bank has since confirmed that it is agreeable to the above conditions.
• The Proposed Interim Dividend is subject to the approval from BNM. In addition, an application will be made to the SC for the proposed change in control of MIMB Investment Bank. Once BNM’s and SC’s approvals are obtained, both parties shall proceed and complete the transaction.
• No change to our fair value of RM7.30 (based on HL Bank’s offer price) and Underperform call.

Read more...

RHBInvest Research

Top Story: Plantation – Production getting back on track
Neutral

Sector Update
Malaysia’s CPO production recovered in Mar, rising 29.4% mom, while exports rose by 10.8% mom, resulting in a 9.1% mom increase in closing stock levels to 1.61m tonnes (from 1.48m tonnes in Feb). While part of the mom increase could be attributed to the shorter month in Feb, we believe the bulk of the increase was due to recovering FFB yields in the country as the La Niña effect started wearing off and weather started normalising.

Macro View

IPI: Bounced back to 5.0% yoy in February

Economic Highlights (published 11 Apr 2011)
Industrial production bounced back to +5.0% yoy in Feb, after softening to +0.5% in Jan and compared with +4.5% in Dec, due to a rebound in manufacturing production and stronger electricity output as well as a smaller fall in mining output during the month.
The rebound in Feb’s industrial and manufacturing production will likely be temporary and it will likely weaken back in the months ahead. As a result, we expect real GDP growth to moderate to 4.6% yoy in the 1Q, from +4.8% in the 4Q of last year.

Sector Call


Semicon: More consolidation for the industry? Neutral

Sector Update

Unisem: Fair value at RM2.65 implies 32.5% upside Outperform

MPI: Fair value at RM5.96 Market Perform

Notion: Fair value maintained at RM2.25 Market Perform

JCY: Fair value unchanged at RM0.81 Market Perform

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Maybank IB Views

ECONOMICS
Economic Development & Outlook, 2Q11
Revolving and Evolving Risks

The risks, issues and challenges facing the global economy have not changed but have morphed into "4S" from "3S" to now include "(Black) Swans". This is on top of the "Sustainability" (US recovery), "Solvency" (Eurozone sovereign financial crisis) and "Stability" (Emerging Markets's "bubblenomy"). Given the fluid external environment, Malaysia needs to strike a balance between 1) sustaining growth, 2) maintaining macroeconomic and financial stability, and 3) dealing with inflation. The vital elements are 1) executing the Economic Transformation Programme (ETP), 2) gradual monetary policy normalization, fiscal consolidation and subsidy rationalisation, and 3) prudential measures within the financial system to address the asset bubble and household debt risks, thus ensuring the economy stays on track. Our key macroeconomic forecasts are largely unchanged, except for the upward revisions in inflation rate and crude oil price.

COMPANY UPDATE
IOI Corporation RM5.65: Hold
Raises stake in Singapore's South Beach Shariah-compliant

Maintain Hold. IOI Corporation has raised its interest in the Singapore South Beach development to 49.9% from 33.3% when it was initially proposed in Nov 2010. IOI has subscribed for a 49.9% equity interest in Scottsdale which will control 100% of the development. IOI will invest up to SGD816.8m (RM1.96b). Development details are not available, hence, we are unable to estimate the impact on IOI. Nonetheless, we draw comfort that the balance 50.1% holding in Scottsdale is held by Singapore's property pioneer, City Developments Ltd, who should be able to drive values for the South Beach development.

Technicals
The FBM KLCI rose 2.11-points and closed at 1,557.49 last Friday. The obvious support areas for the FBM KLCI are located in the 1,500 to 1,556-zone. The firm resistance zone of 1,558 and 1,576 will see heavy liquidation activities.

Trading idea for today is a Buy call on BENALEC.

Other Local News
MAHB: Passenger traffic to cross 60m mark. Airports Holdings Bhd (MAHB) is confident that total passenger traffic volume across the country’s airports will breach the 60-million mark this year. In 2010, all 39 airports nationwide handled a total of 57.8m passengers. (Source: Malaysian Reserve)

Notion: Eyed by private equity firm again? Market talk of possible corporate exercises has resurfaced at Notion Vtec Bhd, including the potential entry of a major US-based private equity firm and Nikon Corp considering upping its stake in the company. (Source: The Edge Malaysia)

Mamee: Shareholders propose to privatise company. Major shareholders of Mamee-Double Decker (M) Bhd have proposed to privatise the company by undergoing a capital reduction and repayment exercise under Section 64 of the Companies Act, 1965. Under the plan, major shareholders of Mamee who control the company would repay RM179.8m or RM4.39 a share to minority shareholders. (Source: Bursa Malaysia)

O&G: Shell shortlists five potential bidders for sale of LPG business. Royal Dutch Shell plc (Shell) has shortlisted five potential bidders for its downstream liquefied petroleum gas (LPG) business in Peninsular Malaysia. The shortlisted companies are Boustead Petroluem Marketing Sdn Bhd, KUB Malaysia Bhd, KKB Engineering Bhd, Lembaga Tabung Haji and Integrated Petroluem Services Sdn Bhd. (Source: The Edge Weekly)

Property: Projects galore in Penang. Some RM2.94b worth of residential and commercial properties from six developers, based in Kuala Lumpur and Penang, will be launched on the island this year. The south and south-west of the island will see some 1,275 units of residential and commercial properties launched with an estimated gross sales value (GSV) of RM1.45b, while the north-east district will see the development of about 1,166 units of properties valued at RM1.49b. (Source: The Star)

Transportation: Score railway link still pending study. The Sarawak government is still waiting for the completion of a feasibility study on a railway link beginning form the Samalajau Industrial Park in Bintulu to Tanjung Manis. (Source: The Edge Financial Daily)

Read more...

Maybank IB Views

ECONOMICS
BNM Annual Report 2010
No Change in official 2011 GDP forecast

Official real GDP growth forecast remains at 5%-6% (2010: +7.2%) although the growth rates of GDP components were tweaked, while inflation is expected to accelerate to 2.5%-3.5% (2010: +1.7%). We maintained our growth forecast of 5.5% for now but raised our inflation rate (to +3% from +2.a5%) and crude oil price (to USD100/barrel from USD90/barrel). Risks, issues and challenges in 2011 include sustaining growth momentum, ensuring financial stability and dealing with rising inflationary pressures. In this regards, we expect OPR to be raised in Sep and Nov by a total of 50bps to 3.25% but sticking to our contrarion call of no further SRR hike after the 100bps increase to 2% on 11 Mar. We also see further prudential measures to deal with the specific issue of household debt.

SECTOR UPDATE
Banking: Overweight
Upbeat challenges

Maintain Overweight. The banking system remains in the pink of health with profits up a strong 34% last year, supported by strong asset ratios. Yesterday's analyst briefing, in conjunction with BNM's release of its 2010 Annual Report and Financial Stability and Payment Systems Report, sent a positive vibe on the domestic banking sector outlook, with key agenda in 2011 being to manage household sector resilience. There is no change to our earnings forecasts and calls for the banks.

COMPANY UPDATE
Sime Darby RM9.15: Buy
Moving on

Positive kicker to sentiments. Sime Darby has agreed on an out-of-court settlement with Maersk Oil Qatar (MOQ), which results in a RM100m write back of provisions (1.6sen/sh). The write back has no impact on our core earnings forecasts but is positive on sentiment. Going forward, the stock will gain further momentum from perpetual positive news flow. We are sideline on the ongoing lawsuits. Reiterate Buy with a RM10.60 sum-of-parts target price.

Notion VTEC RM1.98: Buy
To benefit from relocation exercise Shariah-compliant

New 'body mount' project from Nikon is a kicker. This new order could generate a net profit of RM4-6m and lift EPS by 3-4 sen. We maintain our forecasts for now. We do not rule out higher outsourcing contracts from Nikon as it reorganizes its operations in Japan. NVB's MSC tax status remains a work-in-progress but would add another 6 sen to EPS once approved. NVB remains a small-cap Buy, with a RM2.40 target price, based on 4.5x FY11 EV/EBITDA, reflecting regional peers' (ex-Japan) valuations.

ACQUISITIONS / DISPOSAL
Tenaga Nasional RM6.18: Sell
Buys 22.1% of Integrax Shariah-compliant

A hand in port operations. We are positive on Tenaga's acquisition of 22.1% Integrax, due to its strategic benefits and attractive valuation. The earnings increment is small - we estimate RM3-4m p.a. initially, based on a 22.1% share in Integrax's earnings (RM48m net profit in 2010), which will be offset by the acquisition cost. That aside, we are concerned about the current high coal prices and lack of clarity on a tariff hike that is undermining Tenaga's earning potential. No change to our earnings forecasts and DCF-based target price for now. Sell.

Technicals
The FBM KLCI inched up 2.87 points yesterday to close at 1,511.97. Its resistance areas of 1,513 and 1,529 will cap market gains, whilst the obvious support areas are located at 1,495 and 1,511.

Trading idea for today is a Buy call on SAPCRES.

Other Local News
RHBCap: ADCB meets investment bankers. RHB Capital Bhd's (RHBCap) single largest foreign shareholder Abu Dhabi Commercial Bank (ADCB) had called for a meeting among investment banks last week to pitch for an advisory role on the sale of its 25% stake in the local banking group. (Source: The Edge Financial Daily)

Malaysia Airlines: May raise surcharge. Malaysia Airlines (MAS) has warned that it would raise its fuel surcharges as the conflict in the Middle East was accelerating the pace of crude oil price hikes which in turn, threatens airline margins. (Source: The Star)

TM: UniFi subscribers almost doubled to 60,000 last year. Telekom Malaysia Bhd (TM) has almost doubled the number of customers for its high speed broadband service called UniFi, to 60,000 from 33,000 at the end of last year, beating its own estimates. (Source: Business Times)

Axiata: Suspends all dealings with Alcatel for 12 months. Axiata Group Bhd has imposed a 12-month suspension on Alcatel-Lucent group (ALU), including its Malaysian operations, which would bar it from any new bids for contracts, although it would continue all existing contracts. (Source: The Edge Financial Daily)

EON Bank: New CEO soon? Eon Bank Bhd may be one step closer to appointing a new group CEO to replace Datuk Michael Lor, with its board looking to submit a name to the central bank for approval soon. (Source: The Edge Financial Daily)

Property: Demand rebound lifts residential property market. The residential property market has been experiencing an upturn since the fourth quarter of 2009 as demand rebounded by 7.1% (2009: -2.3%) following improved consumer sentiments. Meanwhile, the increase in housing stock moderated in 2010 as housing started a declining trend. (Source: The Star)

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Maybank Invest Recommended Counters

This week, we highlight for you 4 counters.

1. Dialog Group Berhad (Dialog)

Dialog Group Berhad through its subsidiaries provides engineering, procurement, construction and commissioning services and plant maintenance services. It also retails petroleum to oil, gas and petrochemical industries, as well as markets specialty chemical and equipments.

Dialog is chosen to be on of the highlights this week based on two factors i.e. it is one of the top picks & buy for the market (specially in the O&G sector) and one of the key drivers of the Malaysia ETP.

Price: RM2.20
52 week high: RM2.29
52 week low: RM1.00
Mkt Cap: RM4.4b
P/E: 33.4x
ROE: 25.8%
Target Price: RM2.73

2. Scientex Berhad (Scientx)

Scientex Berhad through its subsidiaries manufactures polyvinyl chloride (PVC), polyurethane leather sheetings, packaging materials, bricks and automotive parts. It also operates in property investment, development and leasing, as well as deals in securities.

Low PE is a criteria in highlighting Scientx this week as well as being one of the larger and unique packaging material companies on Bursa .

Price: RM2.53
52 week high: RM2.59
52 week low: RM1.32
Mkt Cap: RM0.6b
P/E: 8.4x
ROE: 15.3%
Target Price: RM3.38

3. Notion VTEC Berhad (Notion)

Notion VTEC Berhad is a metal processing company that provides products and services that include designing and developing high precision cutting tools, provides machining and services.

This stock is highlighted this week as it is an oversold stock. In addition, there is a recovery in disk drive makers for cameras which will benefit the Company as a result.

Price: RM2.12
52 week high: RM3.50
52 week low: RM1.50
Mkt Cap: RM0.3b
P/E: 8.4x
ROE: 18.9%
Target Price: RM2.35

4. Sozo Global Limited (Sozo) - not Shariah compliant as it is yet to get Halal certification.

Sozo Global Limited is a one-stop gourmet convenient food specialist that offers RTS food, frozen vegetables, canned food and other foods such as VF snacks and asparagus tea products.

Basically, Sozo is highlighted in this week's flyer as it is a new Chinese food company listed on Bursa with a positive share price momentum on the stock.

Price: RM0.91
52 week high: RM0.93
52 week low: RM0.64
Mkt Cap: RM0.4b
P/E: 4.7x
ROE: 71.1%
Target Price : RM1.18

Regards and Happy reading!

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Maybank IB Views

RESULTS PREVIEW
Notion VTEC RM2.01: Buy
Jumping for joy Shariah-compliant

A strong headstart. NVB's 1QFY11 core results are expected to be robust, likely ahead of consensus forecasts, but within ours. Our current FY11 net profit forecast is 14% above consensus. The camera segment (from new sub-assembly orders) will drive FY11 growth while the HDD section will take a back seat. We maintain our 2-year net profit CAGR forecast of 38% and introduce FY13 forecast. Clinching MSC tax status could further lift EPS by 6 sen. NVB stays a Buy with a RM2.40 TP, on improving business conditions and earnings prospects.


Technicals
The FBM KLCI closed lower by 3.48 points at 1,536.07 yesterday. Its resistance areas of 1,536 and 1,558 will cap market gains, whilst the obvious support areas are located at 1,515 and 1,533. The FBM KLCI has temporarily stalled at its new all-time high of 1,576.95 on 6 January 2011. A short-term trading low was then seen at 1,558.64 on 11 January 2011.

Trading Idea for today is an Accumulate call on CBSTECH.


Other Local News
MPHB: Signs MoU to buy balance 49% of Magnum. MPHB has proposed to acquire the remaining 49% stake in Magnum Holdings Sdn Bhd and other securities in Magnum. The total purchase consideration for the acquisitions is RM1.64b and shall be satisfied by way of issuance of new MPHB shares at an issue price of RM2.30 per MPHB share and RM809m in cash. (Source: Bursa Malaysia)

Axis REIT: Proposes income reinvestment plan. Axis Real Estate Investment Trust (Axis REIT) has proposed a plan that enables unit holders to reinvest their cash distribution received into new units. Also, the property manager to issue up to 75.18m new units, representing up to 20% of the existing approved fund size. (Source: Bursa Malaysia)

DRB-HICOM: To assemble Passat in November. DRB-HICOM and Volkswagen AG will start production in November with the assembly of Volkswagen Passat sedan 1.8 litre at the automotive complex in Pekan. The Pekan plant is expected to manufacture between 40,000 to 50,000 Volkswagen cars annually. (Source: The Star)

UMW: Consolidation under way. UMW Holdings Bhd plans to consolidate and rationalise some of its core businesses to become leaner and meaner. Consolidation is under way for its manufacturing and engineering and equipment divisions as UMW looks to leverage on its vast range of products and services. The oil and gas (O&G) division may also be restructured, while UMW Oil & Gas Bhd's listing plan remains on the cards once it returns to profitability. (Source: Business Times)

GPacket: Signs pact with Time Warner. Green Packet Bhd has signed an agreement with Time Warner Cable, the second largest cable operator in the United States, to provide its next generation connection management solutions. Time Warner Cable will use customised versions of Green Packet's Intouch connection manager, Intouch reporting server and Intouch update server for its Windows and Mac platforms. (Source: The Star)

Coastal: Sells vessels for RM268m. Coastal Contracts Bhd's wholly-owned subsidiaries have collectively secured contracts for the sale of seven offshore support vessels, three tugboats and two oil barges for an aggregate value of about RM268m. Including the new contracts, Coastal Group has about RM760m worth of vessel sales orders awaiting delivery to customers up to 2012. (Source: The Star)

Property: BTS expected to be mandatory by 2015. The Build-Then-Sell (BTS) 10:90 mode of house ownership is expected to be made mandatory by 2015. The drafting of the amendments to the Housing Developers Act will include a clause calling for the gradual implementation of the BTS system. (Source: The Sun)

Read more...

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

Adventa:
Core FY10 Earnings Expected To Be Flat YoY
Upgrade to Outperform from Market Perform previously.
Fair value is RM2.47.

Sector Call


Semiconductor:

Oct chip sales flat mom

• Unisem: Fair Value RM2.31 OP
• JCY: Fair Value RM0.64 UP
• MPI: Fair Value RM5.17 UP
• Notion: Fair Value RM1.68 UP
• Maintain our Neutral call on the sector.

Corporate Highlights


Dayang:
Disposing Of Borcos For RM135m Cash
Fair value is reduced from RM3.86 to RM3.36.
Maintain Outperform.


Technical Highlights

Daily Trading Strategy:

• Sell Into Strength…
• Yesterday’s surprise jump on the bargain-hunting activities has led the FBM KLCI to close more positive.
• The buying momentum, if it continues, is likely to spur more buying, hence leading the index to retest the key resistance at 1,525 and the record level of 1,531.99 soon.
• However, on the regional markets sentiment that we think could still dampen the local trading behavior should the regional markets fall rapidly in the near term.
• Market sentiment will turn positive only if it moves into a higher trading zone from 1,531.99.

Daily Technical Watch: Petra Perdana

• Further rally possible if it removes the RM0.925 level soon.
• Immediate Support = RM0.74
• Immediate Resistance = RM0.925

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RHB Invest Highlights

Top Story

Public Bank:

• A bank for volatile times.
• Fair value is RM15.40 from RM14.70. Outperform call reiterated.

Corporate Highlights

AFG:

• Key growth areas and targets unchanged.
• Maintain forecasts, fair value of RM3.60 and Market Perform call.

Notion Vtec:

• Camera focus.
• Fair value is raised slightly to RM1.68 from RM1.54. Maintain Underperform.

Technical Highlights

Daily Trading Strategy:

• Tough resistance near the 10-day SMA.
• FBM KLCI has to remove both the 10-day and 40-day SMAs before it can return the robust sentiment, amid continuous speculation on more M&A activities in the near term, and optimism ahead of the listing of PetroChem on Friday.
• On a negative point, a prolonged weakness at below the 40-day SMA near 1,493 will dampen the FBM KLCI’s near-term outlook.
• Nevertheless, we expect tough resistance at the 10-day SMA near 1,503 in the immediate term

Daily Technical Watch: K. Europlus

• Follow-through buying momentum likely if it sustains above RM1.08
• Immediate Support at RM1.08
• Immediate Resistance at RM1.25

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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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