Maybank IB Research

COMPANY UPDATE
SapuraCrest Petroleum RM4.58: Buy
Orders 2 pipelay vessels Shariah-compliant

Maintain Buy with a RM5.60 TP. SapCrest's rapid expansion of its marine fleet to capitalise on the boom in the installation of pipelines and facilities (IPF) markets is positive, in keeping with its aspiration to be a regional player. This strategy will be rewarding, if executed well. However, contributions will only be realised from FY15. We remain positive on its strong ability to grow and pursue new jobs for medium term growth, and continue to rate SapCrest a Buy.


KNM Group RM0.96: Sell
Riding through a transition phase Shariah-compliant

Target price cut to RM0.88 (-19%) following a 10-19% downgrade in FY12-13F earnings forecasts on lower revenue recognition. While margin pressure has abated on improving order flows, we are cautious of KNM's cost management abilities and so retain a conservative stance on our estimates. KNM needs to deliver a consistent set of quarterly results to warrant a re-rating. Sell maintained.


Technicals
The FBM KLCI closed 3.27 points higher at 1,525.56 yesterday. Its resistance areas of 1,530 and 1,545 may cap market gains, whilst obvious support areas may be located at 1,505 and 1,525.

Trading idea is an ACCUMULATE call for UNISEM.

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Maybank IB Views

COMPANY UPDATE
Lafarge Malayan Cement RM6.85: Buy
A strong proxy to construction sector

Maintain Buy. As the largest cement producer in the country, LMC is undoubtedly a proxy to, and a major beneficiary of, the high growth construction sector, which in itself, should see robust activity, once projects under Economic Transformation Programme (ETP) take off. Additionally, we expect its share price to be supported by its decent net dividend yield of 5%. Maintain Buy with a marginally lower TP of RM7.60 (RM7.85 previously) on 17x 2013 PER as we roll forward valuations after trimming earnings forecasts by 11% p.a..

UMW Holdings RM6.60: Hold
Bareboat charters Hakuryu-5 to PCSB

Maintain Hold. UMW's USD72m bareboat charter contract of Hakuryu-5 to PCSB, which yields low margin, is earnings neutral to Group earnings (<1%). As such, we are keeping our forecasts and RM6.60 target price unchanged, based on 11x 2012 EPS.

ECONOMICS
ETP Update
One year after

The latest ETP briefing (1 Nov 2011) by PEMANDU provided three key updates. First, of the 70 EPPs and 27 initiatives announced so far, 31% are fully operational, 50% have commenced implementation, and 17% are still work-in-progress. Second, of the RM171b investment announced to date, 9% or RM15b is implemented in 2011, including RM10b actualised in 1H 2011. Third, private investment in 1H 2011 was RM51.2b, meaning 19.5% of it came from ETP.

ETP Progress Updates 1-7
Implementation Update

Provided by PEMANDU on the official website.

RESULTS REVIEW
Sunway REIT RM1.14: Buy
Sequentially stronger

On track. SunREIT's RM44.2m 1QFY12 net profit tracked our and market expectations. Longer-term view is positive supported by Sunway Putra Place's (SPP) attractive est. 9% property yield. We maintain our earnings forecasts, RM1.18 DCF-based TP and Buy call, the latter premised on a 12-month total return of 10% based on our target price and forecast dividends.

Technicals
The FBM KLCI fell 16.25-points to close at 1,475.64 yesterday. Its resistance areas of 1,475 and 1,494 will cap market gains, whilst the weaker support areas may be located at 1,446 and 1,470. Due to the US markets’ much lower tone last night; we may see an initial drop for the index. Some later miniscule local bargain hunting activities cushion the local markets’ plungein the afternoon session. We expect a very volatile trading day.

Trading Idea is a take profit call on CBIP.

Other Local News
SapuraCrest: Wins RM4.4b Brazilian oil and gas job. SapuraCrest gas clinched a contract from Petroleo Brasileiro SA worth about USD1.4b (RM4.4b) to charter and operate three deepwater flexible pipe-laying supports vessels (PLSVs).Revenue from the award was expected to be generated by the fourth quarter of 2014. (Source: Bursa Malaysia)

Supermax: Declares 1 for 1 bonus. Supermax Corp has proposed a one-for-one bonus issue involving 340.1m new shares and a share buyback of up to 10% of its issued share capital. Both proposals are expected to be completed by the first quarter of 2012. (Source:Bursa Malaysia)

DiGi: Capital Management Initiative. DiGi is expected to distribute about RM509m to its shareholders by the first half of 2012 under the proposed capital distribution upon its redemption of the redeemable preference shares of about RM509m. (Source: Bursa Malaysia)

TNB: Gas shortage for 2-3 months more. TNB will have to deal with losses caused by having to substitute costly fuel oil for power generation as the government decides that electricity prices will remain unchanged. TNB has been buying fuel oil to replace natural gas for electricity generation, which will cost the company an additional RM2.1b for the second half of 2011. (Source: Business Times)

Telekom: Tough procurement policy saves RM1b. The massive RM11.3b high-speed broadband (HSBB) project may eventually cost Telekom Malaysia Bhd (TM) at least RM1b less in expenditure than its original costing because it has implemented a tough procurement policy. (Source: The Star)

Aviation: SIA targets mid-2012 Scoot takeoff. SIA new long-haul budget carrier will be renamed “Scoot” with takeoff set for mid-2012. The new carrier will fly to cities in China and Australia, operating a fleet of 200 second-hand Boeing 777 jets and charging up to 40% less than full-service airlines. (Source:The Edge Financial Daily)

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Maybank IB Views

CIMB Group Holdings RM8.30: Buy
CIMB Niaga's 2Q operationally in-line

Buy maintained, but uncertainty a drag. CIMB Niaga's 1H11 results were higher than expected due to lower provisions. We maintain our Buy call on CIMB with an unchanged target price of RM9.60 (2.6x 2012 P/BV, 17.4% ROE), pending the release of its 1H11 results. Uncertainty over Indonesian shareholding regulations, however, will remain a drag in the near term, as will CIMB's high foreign shareholding of 42.9% (end-June). CIMB's current share price largely reflects the possibility of lower shareholdings of c.40% in CIMB Niaga, we believe.

Technicals
The FBM KLCI tumbled 27.44 points to close at 1,496.99 yesterday. Its resistance areas of 1,496 and 1,530 will cap market gains, whilst the weaker support areas are located at 1,450 and 1,474. The FBM KLCI’s previous key swing levels were: 1,576.95 (high), 1,474.38 (low), 1,565.04 (high), 1,507.64 (low) and 1,597.08 (high).

Trading idea is a Take profit call on E&O

Other Local News
SapCrest: Buys Australian marine outfit for RM400m. SapuraCrest Petroluem Bhd (SapCrest) is acquiring Australian-based Clough Ltd’s marine construction and offshore operations spanning Australia, UK and US for a total of AUD127m (RM400m) to be settled in cash. (Source: The Edge Financial Daily)

MMHE: Oilfield job renewal? The replenishment of Malaysia Marine and Heavy Engineering Holdings Bhd's (MMHE) order book has become uncertain as the project operators of the Malikai deepwater field are contemplating whether to maintain it as the preferred fabricator. It is learnt that Shell and other partners of Malikai, namely Petronas Carigali and Conoco Phillips, have yet to make a decision on the issue. (Source: The Star)

O&G: New lease of life for Asia Petroleum Hub. Asia Petroluem Hub Sdn Bhd (APH) and its bankers have reached an understanding, resulting in Datuk Gan Ah Tee of BDO-Binder being discharged as receiver and manager amid talks of new investors emerging to revive the company. (Source: The Edge Financial Daily)

Transportation: KTMB keen on Saudi high-speed rail project. Keretapi Tanah Melayu Bhd (KTMB) aims to work on the Haramain high-speed rail project in Saudi Arabia to gain expertise so it could undertake a similar project here. The USD6b (RM18b) Haramain project involves a 450km rail link between Makkah (Mecca) and Madinah. The project has commenced and is expected to be completed by end-2012. KTMB has sent several staff to the project site to lobby for contracts. (Source: Business Times)

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RHBInvest Research

Top Story: WTK – Lower plywood production to weigh on 1H11 results Outperform

¨ WTK’s log production volume in 2Q11 was higher by +33% qoq and +28% yoy respectively due to normalised weather conditions. WTK has guided that its current realised price is US$220/m3 for meranti SQ up, which is lower than our expectation of US$260/m3 for FY11.

¨ We revised our fair value to RM2.55 based on unchanged target PER of 12x revised FY12 EPS of 21.2 sen. Maintain Outperform.



Corporate Highlights



Sunway Bhd: A single stock that gives all real estate exposure Outperform (Initiating coverage)

¨ Upon listing, Sunway Bhd will potentially become the 3rd/4th largest property player in Malaysia . The company will offer investors full fledge offerings of the real estate sector, ranging from property development to various property assets as well as construction arm. The key strength of Sunway Bhd after merger will be the leaner organisation and operating structure that will ultimately yield cost savings.

¨ We estimate an FY12-13 earnings growth of 7% and 11%, underpinned by RM1.6bn worth of unbilled sales, RM2bn worth of construction orderbook, as well as RM75-80m recurring income from property assets and Sunway REIT.



CIMB: CIMB Niaga 2Q11 results – Coming along nicely Outperform

¨ CIMB Niaga reported 2Q11 net profit of IDR818.6bn (+35.4% yoy; +12.5% qoq), bringing 1H11 net profit to IDR1,546.1bn (+37% yoy).

¨ Management guided for NIM to average around 5.4-5.5% for this year, roughly around current levels. Meanwhile, management now expects CIMB Niaga to post loan growth in excess of 20%, as compared to around 20% previously (1H1: 22.5% annualised). However, CASA growth ahead would be more challenging given that depositors are now seeking higher yields.

¨ No change to forecasts. Fair value of RM9.80 (15x CY12 EPS) and Outperform call maintained.



SapuraCrest: Buying Clough’s marine construction division Outperform

News Update

¨ Sapuracrest announced a proposal to acquire Clough’s “Marine Construction” business for AUD127m (RM400.5m) cash. Completion is expected by 4QCY11.

¨ The acquisition will: 1) Strengthen Sapuracrest’s international foothold (especially Australia ); 2) Increase its asset base; and 3) Spearhead an entry to the subsea market.

¨ Maintain Outperform and fair value of RM5.04/share (based on 21x FY13 EPS).

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Stocks to watch: Magna Prima, Wing Tai, SapuraCrest, Kencana

KUALA LUMPUR: Key regional Asian markets are expected to remain jittery in the week ahead, starting Monday, Aug 8, in the absence of any clear indicators about the US economy and Europe’s deepening crisis.

Overnight on Wall Street, stocks closed out their worst week in more than two years on Friday, Aug 5 in a volatile session. For the week, the Dow fell 5.8%, the S&P 500 was down 7.2% and the Nasdaq was off 8.1%.

At Bursa Malaysia, there could be some bargain hunting for battered stocks which still had strong underlying fundamentals. But the buying could be restrained.

On Friday, the FBM KLCI closed down 1.45% or 22.46 points to 1,524.43 while week-on-week, the index lost 24.38 points.

A total of RM26.89 billion was wiped out from the Bursa Malaysia market capitalisation where 21 stocks hit fresh 52-week lows. Market capitalisattion was reduced to RM1.312 trillion last Friday.

For among the 30 components of the FBM KLCI, six of them hit a fresh 52-week low. They were IOI Corp Bhd, YTL Power International and YTL Corp Bhd, MISC BHD [], TENAGA NASIONAL BHD [] RM5.94 and PPB GROUP BHD [].There could be mild bargain hunting for some of these stocks which possess strong fundamentals.

Positive corporate news which could help lift sentiment are MAGNA PRIMA BHD [], Wing Tai Malaysia Bhd, SAPURACREST PETROLEUM BHD [], KENCANA PETROLEUM BHD [] and SCOMI ENGINEERING BHD [].

Magna Prima is making its foray into Australia to undertake a mixed residential and commercial project in Melbourne with an indicative gross development cost of A$148 million (RM482.18 million). The company expects to record a profit of A$62 million (RM200.32 million) from the project.

Wing Tai Malaysia expects to record a gain of RM27.63 million from the sale of two pieces of land in Seberang Perai, Penang to Aeon Co. Bhd for RM50.12 million cash consideration.

It said the two pieces of land, about 7.29 ha and 4,625 sq metres, were currently vacant and Aeon planned to build a shopping complex with car park facilities

The Edge weekly reports the River of Life project has seen two significant developments over the last two weeks, leading to renewed interest in it as well as Datuk Lim Kang Hoo's EKOVEST BHD [].

It also reported that Flonic Hi-Tec is banking on critical cleaning business. The company will now provide its customers with critical cleaning systems capable of filtering particles that are up to 10 microns in size, compared with 100 microns in precision cleaning systems.

The boards of SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd have agreed to their merger to become one of the world’s largest oil and gas service providers in terms of market capitalisation and assets.

They had accepted Integral Key Sdn Bhd’s (IKSB) RM11.85-billion offer to acquire all their assets and liabilities in a share swap. The offer shall remain open for acceptance until 5pm on Aug 15.

Fraser & Neave’s net profit for the third quarter ended June 30, 2011 rose 11.2% to RM77.85 million from RM70 million a year earlier due to strong contribution from its property and soft drinks divisions.

Its revenue for the quarter dipped to RM882.47 million from RM892.77 million due mainly to lower volume of dairy products sold in Malaysia.

It said under its soft drinks division, sales activities for Coca-Cola products will cease effective Oct 1, 2011 and, as such, the division’s revenue and profit thereafter will see an inevitable immediate reduction, it said.

Coca-Cola business makes up about 30% of the revenue of the soft drinks division for the current financial year, it said.

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SapuraCrest, Kencana boards agree to RM11.85b merger

KUALA LUMPUR: The boards of SAPURACREST PETROLEUM BHD and KENCANA PETROLEUM BHD have agreed to their merger to become one of the world’s largest oil and gas service providers in terms of market capitalisation and assets.

The companies said on Friday, Aug 5 that they accepted Integral Key Sdn Bhd’s (IKSB) RM11.85-billion offer to acquire all their assets and liabilities in a share swap. The merger under IKSB, a special purpose vehicle, would position them stronger to bid for upstream jobs.

SapuraCrest said the board had resolved to accept IKSB’s offer to acquire its business for a total consideration of RM5.87 billion subject to the terms and conditions of the letter of offer dated July 11 from IKSB.

“The board is not seeking other alternative bids to make an offer to acquire the SapuraCrest business,” it said.

Meanwhile, Kencana said the board had resolved to accept IKSB’s offer to acquire its business for RM5.98 billion.

The offer shall remain open for acceptance until 5pm on Aug 15.

IKSB offered to acquire SapuraCrest for RM5.87 billion equivalent to RM4.60 per share of 20 sen each multiplied by 1.276 billion SapuraCrest shares.

The merger would be satisfied by the issuance of 2.498 billion new RM1 shares each in IKSB at an issue price of RM2 per new IKSB share and a cash payment of RM875.06 million. This translates into cash payment of approximately 68.5 sen and RM3.915 of IKSB shares per SapuraCrest share.

As for Kencana, IKSB was offering RM5.98 billion or RM3 per 10 sen share in Kencana multiplied by the enlarged paid-up of Kencana’s 1.99 billion shares.

The merger consideration shall be satisfied by 2.505 billion new shares of RM1 each in IKSB at an issue price of RM2 per new IKSB share and a cash payment of RM968.689 million. This translated into cash payment of 48.6 sen and RM2.514 of IKSB shares per Kencana share.

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Maybank IB Views

Mah Sing Group RM2.44: Buy
Starts small, aims big Shariah-compliant

Attractive land deal. We are excited over MSGB’s latest involvement in DBKL’s privatized urban regeneration project along Jln Tun Razak. More importantly, MSGB could be invited for the development of the remaining 54 acres land (worth RM8b GDV). We maintain our earnings forecasts and Buy call. While the deal would enhance our RNAV by about 7 sen, our RNAV is lowered by 11 sen to RM3.16, factoring the potential dilutive impact from its RM325m convertible bond issuance.

CB Industrial Product Holding RM4.16: Buy
New RM171m contract win Shariah-compliant

Potential upside to earnings. CBIP has clinched a RM171m contract to assemble special purpose vehicle from the government. We estimate the contract to lift our 2011-13 net profit forecasts by 3-8%, with a potential 14 sen upside (+3%) to our target price. Our earnings forecasts are maintained for now pending further updates from recent proposed estates disposal. Maintain Buy with an unchanged TP of RM4.75 (7x 2011 PER).

Technicals
The FBM KLCI rose 3.16 points to close at 1,554.85 yesterday. Its resistance areas of 1,554 and 1,574 will cap market gains, whilst the obvious support areas are located at 1,544 and 1,552.Due to the US markets’ major fall last night; we will see some initial selling activities in the local bourse today.

Trading idea is a Take profit call on PMETAL.

Other Local News
SapuraCrest: Wins new jobs in Australia. SapuraCrest Petroleum Bhd's flagship vessel Sapura 3000 has won jobs worth up to USD260m (RM780m) for the Gorgon natural gas project offshore Western Australia. The Gorgon project is one of the world’s largest natural gas projects and is a joint venture between Chevron's Australia subsidiaries and ExxonMobil Corp. (Source: The Edge Financial Daily)

CIMB: Ventures into Indian market. CIMB Group has entered the Indian market with the opening of its Mumbai office and the signing of a Business Cooperation Arrangement with Kotak Mahindra Bank Ltd. The cooperation is expected to cover areas of mutual interest, including merger and acquisition, advisory, trade finance and remittance. (Source: The Edge Financial Daily)

Catcha Media: Leong emerges as substantial shareholder. Justin Leong, grandson of the late Tan Sri Lim Goh Tong, has emerged as a substantial shareholder of Catcha Media Bhd with 6.7m shares or a 5.01% stake. (Source: The Edge Financial Daily)

Tech: BlackBerry maker mulls procurement hub in Penang. Research In Motion (RIM), the company which makes BlackBerry smartphones, is looking at establishing an international procurement centre (IPC) in Penang. The application to set up the centre has been submitted to the Malaysian Industrial Development Authority. (Source: The Star)

Property: KL among top three retail investment destinations in Asia. Pacific Star Group, one of Asia's leading real estate investment houses says commercial properties in Asia will continue to do well in the 2H11. Within the commercial sector, its top pick is retail real estate, whilst the top three destinations in the region for retail property investment are Hong Kong, Singapore and Kuala Lumpur. (Source: The Malaysian Reserve)

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Maybank IB Views

Star Publications (Malaysia) RM3.41: Hold
Seeking inspiration in Life Inspired Shariah-compliant

Another lukewarm investment. Star will invest RM35m for 51% of Li TV Holdings Limited. Li TV owns and operates Li, Life Inspired, a pan-Asian lifestyle TV channel. It is loss making but is not expected to materially impact Star's earnings. While we are encouraged that Star is continuing to diversify its media assets, it remains to be seen if Li TV can contribute meaningfully going forward. Maintain Hold.

Technicals
The FBM KLCI fell 6.94 points to close at 1,555.64 yesterday. Its resistance areas of 1,555 and 1,574 will cap market gains, whilst the much weaker support areas are located at 1,540 and 1,552. The FBM KLCI stalled at its previous all-time high of 1,576.95 on 6 Jan 2011.

Trading idea today is Dialog

Other Local News
Maybank: Islamic signs MoU with Bank Syariah Mandiri. Maybank Islamic has signed a MoU with Bank Syariah Mandiri (BSM), Indonesia, to establish cross-border collaboration in all Islamic treasury and trade finance matters. The collaboration would enhance cross-border liquidity flows and increase and diversify the application of Islamic financial solutions. (Source: The Edge Financial Daily)

Inari: Gains 6.5 sen on debut. Inari Bhd made its debut on the ACE Market of Bursa Malaysia yesterday, closing 6.5 sen higher than its issue price of 38 sen. Inari expects its fourth new plant, costing RM25m in the Free Industrial Zone in Bayan Lepas, Penang, to increase its revenue by 25% to 30% when the plant is operational by March next year. (Source: The Star)

Iskandar: Another British varsity. Britain's University of Reading Business School is setting up a branch campus in EduCity in Iskandar Malaysia, Johor, for between RM150m and RM200m. To be known as University of Reading Iskandar, construction is due to start next year. (Source: Business Times)

Property: Sagajuta eyes year-end listing. Sagajuta (Sabah) Sdn Bhd hopes to complete its backdoor listing by year-end, to turn the company into a bigger real estate firm. Sagajuta is behind the RM1.2b 1Borneo project in Kota Kinabalu. Sagajuta is planning to buy more land in Sabah, Klang Valley, Penang and Johor to enable it to undertake development projects worth more than RM3b at any one time. (Source: Business Times)

Property: Sapura Resources in KLCC development. Sapura Resources Bhd has proposed a joint venture with KLCC (Holdings) Sdn Bhd (KLCCH), a wholly owned subsidiary of Petronas, to establish a commercial development on a piece of land in KL. The land measuring 7,605sqm will comprise an office tower, convention centre and retail podium. (Source: The Edge Financial Daily)

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Maybank IB Views

Plantation: Neutral
June's inventory surpassed 2m tonnes

Inventory at 18 month high. Malaysia's palm oil inventory rose 41.1% YoY to 2.05m tonnes (6.8% MoM) on yet another record June's production (1.75m tonnes; +0.7% MoM, +23.5% YoY). However, the higher production was offset by growth in exports at 1.58m tonnes (+12.4% MoM, +9.5% YoY). June’s inventory level is within market's expectation. Maintain Neutral on the sector. KL Kepong (Buy) and TSH Resources (Buy) are currently our top picks among the large caps and mid caps in the sector.

ECONOMICS
Industrial Production Index (IPI), May '11
Temporary Decline...

Industrial production (IP) growth in May '11 fell deeper into the red as it contracted by -5.1% YoY (revised Apr '11: -1.7% YoY; Maybank IB: -3.3% YoY; Consensus: -2.7% YoY). MoM, overall production dipped by -1.3% following a revised -7.2% drop in the preceding month. YTD, production was up marginally at +0.2% YoY (2010: +7.3% YoY). Mining output was the main culprit. For the second month in a row, mining output was the biggest drag on IP.

Technicals
The FBM KLCI fell 6.16 points to close at 1,588.58 yesterday. Its resistance areas of 1,588 and 1,597 will cap market gains, whilst the weaker support areas are located at 1,576 and 1,584. Due to the US markets’ weaker tone last night; we will see some profit taking and liquidation activities in the local bourse today.

Trading idea is a Short-Term Buy on MUDA.

Other Local News
SapuraCrest, Kencana: Proposal to merge. Integral Key Sdn Bhd (IKSB), a special purpose vehicle, has made an RM11.85b offer to acquire SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd. Received on Monday, July 11 offer letters from IKSB to acquire all their assets and liabilities in a share swap. IKSB offered to acquire SapuraCrest for RM5.87b equivalent to RM4.60 per share and Kencana was offered RM5.98b or RM3 per share. The offer shall remain open for acceptance until 5pm on Aug 15. (Source: Bursa Malaysia)

Tenaga: To implement new tariff in Sabah from July 15. The new tariff structure is also to promote efficient utilisation of electricity by the consumers. In this restructuring also, the tariff for Federal Territory of Labuan will be realigned to mainland Sabah since Federal Territory of Labuan is supplied from the Sabah network system, and more appropriate to be subjected to Sabah's cost of supply structure rather than that of Peninsular Malaysia. (Source: Bursa Malaysia)

KPJ: Inks JV to set up specialist hospital in Perlis. KPJ Healthcare Bhd has inked a joint venture agreement with Yayasan Islam Perlis (YIP) to set up and operate a new hospital to be known as KPJ Perlis Specialist Hospital. It said the JV would operate under the name Perlis Specialist Hospital Sdn Bhd, of which KPJSB would hold 60% equity interest while YIP would hold the remaining 40%. (Source: Bursa Malaysia)

E&O: Sells building, land on Penang island for RM134m. Eastern and Oriental Bhd (E&O) is expected record about RM66m in profit from the sale of a building and freehold land in Tanjong Tokong on Penang island for RM134m cash, if based on the building and land costs totalling RM67.7m. its unit had entered into a sale and purchase agreement Soaring Profit Sdn Bhd to sell the 27,743.7 sq m of land and building with 269,418 sq ft of gross floor area and 1,042 car park bays. (Source: Bursa Malaysia)

Silk Holdings: secured four long term contracts worth RM39.75m from Petronas Carigali Sdn Bhd for the provision four units of anchor handling tug supply vessel (AHTS). The contracts for the four units of AHTSV were for the primary period of one year, with various effective commencement dates in July 2011 respectively, with options to extend for a further period of one year each. (Source: Bursa Malaysia)

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RHBInvest Research

Top Story: Plantation – CPO stocks cross the 2m tonne mark Neutral

Sector Update

¨ Malaysia’s CPO production was relatively flat on a mom basis in June, rising just 0.7% mom, while exports rose by a larger 12.4% mom. On a yoy basis however, the recovery was very much stronger, as production rose by 23.5% yoy, while exports rose by 9.5% yoy. Despite the smaller mom increase in production vis-à-vis exports, closing CPO stock levels rose 6.8% mom to 2.05m tonnes in Jun (from 1.92m tonnes in May)s



Sector Call



Oil & Gas: A merger of two giants Overweight

Sector Update

¨ Sapuracrest and Kencana announced yesterday that Integral Key Sdn Bhd (IKSB), a special purpose company, has made an offer to merge the two companies via an acquisition of their entire businesses and undertakings for RM5.9bn and RM6.0bn respectively. The proposal involves: 1) share swap of Sapuracrest and Kencana shares into new IKSB shares; and 2) cash payments. The offer is open until 15 Aug.



Utilities: No immediate catalysts Neutral

Sector Update

¨ Despite a volatile political landscape, the Government has pressed ahead with two out of three industry reforms: 1) reduction of subsidies for natural gas; and 2) a formal fuel cost pass-through (FCPT) formula.

¨ With these factors already largely priced into TNB’s stock price, we believe the market is watching closely the trend of coal prices and the implementation of the FCPT formula.



Corporate Highlights



KFC Holdings: Buying land in Bandar Dato’ Onn for RM9.1m Market Perform

News Update

¨ KFCH announced that it has entered into a SPA with JLand for the purchase of a piece of freehold vacant commercial land measuring 135k sf located within Bandar Dato’ Onn, Johor, for RM9.17m which translates to RM68 psf.

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Stocks to watch: SapuraCrest, Kencana, E&O, SILK, KPJ, AFG

KUALA LUMPUR: All eyes would be on SAPURACREST PETROLEUM BHD and KENCANA PETROLEUM BHD when they resume trading on Tuesday, July 12 following a proposed merger which would position them stronger to bid for upstream jobs.

Other stocks to watch are Eastern and Oriental Bhd (E&O),SILK Holdings Bhd, KPJ HEALTHCARE BHD and ALLIANCE FINANCIAL GROUP BHD (AFG).

SapuraCrest and Kenanca announced Integral Key Sdn Bhd (IKSB), a special purpose vehicle, had made a RM11.85-billion offer to acquire all their assets and liabilities in a share swap.

The merged entity would become one of the world’s largest oil and gas service providers in terms of market capitalisation and assets.

Meanwhile, E&O is expected record about RM66 million in profit from the sale of a building and freehold land in Tanjong Tokong on Penang island for RM134 million cash.

The E&O group’s original cost of investment in the land made in May 2004 was RM13.57 million while the CONSTRUCTION [] cost of the building incurred from March 2009 to May 2011 was RM54.17 million.

SILK secured four long term contracts worth a total of RM39.75 million from Petronas Carigali Sdn Bhd for the provision four units of anchor handling tug supply vessel (AHTSV).

Its subsidiary Jasa Merin (Malaysia) Sdn Bhd had been the awarded the four contracts. It said the long term contracts for the four units of AHTSV were for the primary period of one year, with various effective commencement dates in July 2011 respectively, with options to extend for a further period of one year each.

KPJ is teaming up with Yayasan Islam Perlis (YIP) to set up and operate a new hospital to be known as KPJ Perlis Specialist Hospital. KPJ’s unit Kumpulan Perubatan (Johor) Sdn Bhd (KPJSB) had signed the agreement with YIP on Monday, July 11.

It said the JV would operate under the name Perlis Specialist Hospital Sdn Bhd, of which KPJSB would hold 60% equity interest while YIP would hold the remaining 40%.

Meanwhile in AFG, the Employees Provident Fund (EPF) Board had disposed of 5.2798 million shares from July 5 and 6, reducing its shareholding to 12.53% or 193.96 million shares.

The shares had run up early last week on market talk that Temasek Holdings Pte Ltd and Langkah Bahagia Sdn Bhd might dispose of their combined 30% stake in AFG.

Market talk was that Temasek might want to dispose of its stake in AFG after selling its stakes in two of China’s biggest banks.

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RHBInvest Research

Corporate Highlights

SapuraCrest: Tying up with Clough in Australia? Outperform

News Update (published 6 July 2011)

¨ The company announced yesterday that it is in discussions with Clough Ltd for a business acquisition or cooperation for its marine construction business. Clough is an Australian integrated oil and gas company with a market cap of AU$561m.

¨ Clough’s “Marine Construction” business provides solutions to the subsea construction and platforms and pipelines market in the Australasia region. We note from its latest investor presentations that the division suffered significant earnings slowdown in 2HFY10 and a loss in 1HFY11 mainly due to sluggish contract wins which were compounded by start-up costs for its JV with Peritus International (a subsea and floating systems engineering and project management services company) in Jan-10.

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Maybank IB Views

RESULTS PREVIEW
WCT RM3.12: Buy
Awaiting the roll-outs Shariah-compliant

Maintain Buy. 2011 job win target remains at RM2b riding on a sizeable RM10b tender book; this will provide the lift to its RM3.4b outstanding order book. We retain our forecast for a 31% growth in 2011 net profit supported by strong property sales, completion of the 1Medini earthworks and good progress at the Qatar government building works. Our target price pegs the stock to sum-of-parts (15x 2012 PER plus 20sen value enhancement for KLIA2 retail concession).

Technicals
The FBM KLCI gained 9.49 points to close at 1,591.34 yesterday. Its resistance area of 1,591 may cap market gains, whilst the firm support areas are located at 1,577 and 1,590.

Trading idea is Short-term Buy on TCHONG

Other Local News
AirAsia: Order for A320neos to hit 300? Less than a month after AirAsia Bhd made a record-breaking order of 200 A320neo jets at the Paris Air Show, it has now reportedly increased this order by 100 jets. However, founder Tan Sri Tony Fernandes has declined to comment on the report. (Source: Business Times)

SapuraCrest: May buy Aussie business. SapuraCrest Petroleum Bhd may be acquiring Australia-listed Clough Ltd's marine construction business. The deal would allow it to grow its regional presence, expand its activities in the subsea and deepwater segments. (Source: Bursa Malaysia)

Dialog: Ink pact to develop terminal. Dialog Group Bhd's 51% owned subsidiary Pengerang Terminals Sdn Bhd (PTSB) has inked a shareholders' agreement with State Secretary, Johor to undertake the first phase portion of designing and developing of an independent deepwater petroleum terminal in Pengerang, Johor. (Source: Bursa Malaysia)

Tan Chong: To assemble Subaru vehicles here. Tan Chong Group has signed a MoU with Fuji Heavy Industries Ltd (FHI) for a consignment production contract for the assembly of Subaru vehicles in Malaysia. The contract for local assembly will begin in Oct 2012 with production capacity of 5,000 units per year. (Source: The Edge Financial Daily)

Boustead: Unlocks value of its unit. Boustead Holdings Bhd has proposed to distribute part of its stake in Pharmaniaga Bhd to its minority shareholders to help meet the required 25% free-float to stay listed and cut borrowings at the same time. To boost trading liquidity of its own share, Boustead also proposed a one-for-10 bonus issue after paring down its holding in Pharmaniaga. (Source: Bursa Malaysia)

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Maybank IB Views

Oil & Gas: Overweight
PETRONAS FY11 report card: Quest and request

Balancing aspiration and obligation. We laud PETRONAS' request for a fairer dividend distribution in its quest for growth while keeping its financial discipline. O&G is a capital intensive business and much of the retained earnings is to be essentially set out for new hydrocarbon resources. Higher capex simply translates into higher growth opportunities for the local O&G players. We continue to Overweight the sector. Dialog, Kencana, PGas and SapCrest are our choiced picks.

Technicals
The FBM KLCI closed marginally lower by 0.10 points and ended at 1,551.79 yesterday. Its resistance areas of 1,554 and 1,568 will cap market gains, whilst the obvious support areas are located at 1,537 and 1,551. We expect the FBM KLCI to remain quiet today, as it there may be a spill over of the boring US and regional markets.

Daily trading idea is a Short-Term BUY call on YINSON

Other Local News
TNB: Buys power from Singapore to ensure supply security. Tenaga Nasional Bhd (TNB) is buying power from Singapore-based PowerSeraya Ltd, a unit of YTL Power International Bhd, due to a shutdown of Petroliam Nasional Bhd-owned gas production platforms for maintenance and dwindling gas supply. (Source: The Star)

BJTOTO: May roll out new game on this weekend. Berjaya Sports Toto Berhad is expected to introduce a new game which is believed to be something similar to the 4D Jackpot introduced by Magnum 4D in September 2009. It is likely to help the company to grow its sales and expand its market share. (Source: Business Times)

Latexx: Accepts revised offer from YTY. Rubber gloves maker Latexx Partners Bhd's board has accepted a revised offer of RM1.25b (initially RM1.35b) on its proposed merger with YTY Industry Sdn Bhd. (Source: Bursa Malaysia)

Dijaya: Buys land for RM385m. Dijaya Corp Bhd has acquired 88.5 acres of freehold land in Pekan Country Heights, Selangor, from Chunghwa Picture Tubes (Malaysia) Sdn Bhd for RM385.5m. The land would be transformed into a mixed development comprising residential and commercial elements with an expected gross development value (GDV) of RM2.5b. (Source: The Edge Financial Daily)

MYEG: Set for Kazakh e-services venture. MY E.G. Services Bhd (MYEG) is set to collaborate with Kazakhstan company National Information Technologies JSC (NIT) to introduce e-government services to the republic this year in its first overseas venture. (Source: The Star)

AmFirst: To buy 2 Cyberjaya buildings. AmFirst Real Estate Investment Trust is expected to sign a deal to buy two commercial buildings in Cyberjaya with a combined estimated value of over RM130m. It currently has 6 assets worth RM1.02b. The properties, which are a couple of years old, were identified as Prima 9 and Prima 10. They are both located within the Prima Avenue II development in Cyberjaya. (Source: Business Times)

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Maybank IB Views

1Q11 report card
Growth momentum tapering off

Fewer positive surprises. 1Q11 earnings reporting season saw fewer positive surprises (13:65:22 in earnings above:within:below expectations vs. 4Q10's 21:59:20). 1Q11 combined recurring net profit of our research universe contracted 5.3% QoQ but maintained its YoY climb (+8.4%). The YoY uptrend momentum is slowing down however, vis-a-vis double-digit growth in the past 5 consecutive quarters. This is not unexpected as we have forecasted slower corporate earnings growth in 2011, after a high base in 2010.

COMPANY UPDATE
Dialog Group RM2.82: Buy
Pengerang project takes off, target price raised Shariah-compliant

Two is better than one. Securing the EPCC job for the Pengerang CTF project denotes progress. We expect the Pengerang CTF project on a full-scale commercial operation by 2017 to be the main driver to Dialog's earnings with dividends to boot. Notwithstanding that, Dialog is also highly tipped to bag the next few marginal field projects (i.e. Balai and Bentara), a positive to sentiment and price performance. Buy.

CB Industrial Product Holding RM4.26: Buy
Unlocking value Shariah-compliant

A re-rating catalyst. CBIP's proposed plantation disposal is positive as it unlocks value of its below-average plantation yielding estates; raising RM1.95/sh (RM268m) in cash and making RM1.02/sh (RM141m) in disposal gain. Post disposal, with potential net cash at 95sen/sh, CBIP is looking for expansion opportunities, failing which it may return part of its cash as special dividends to shareholders. We maintain our earnings forecasts and TP of RM4.75 based on 7x 2011 EPS for now.

Technicals
The FBM KLCI closed lower by 1.87 points to close at 1,556.42 yesterday. Its resistance areas of 1,559 and 1,576 will cap market gains, whilst the support areas are located at 1,539 and 1,556. Due to the world markets’ very poor tone last night; we will see some great volatility in the local bourse today. We expect the FBM KLCI to remain volatile today, as it may be adversely affected by the US and regional markets.

Other Local News
EonCap: Primus to pay RM1.9m in court costs following dismissal. Following the dismissal of Primus (M) Sdn Bhd's petition against the sale of EON Capital Bhd (EON Cap) to Hong Leong Bank Bhd (HLB), Primus now has to pay RM1.9m in court costs. (Source: The Star)

SapCrest: Acquires shipyard stake. SapuraCrest Petroleum Bhd (SapCrest) has signed an agreement with Real Mild Sdn Bhd and Labuan Shipyard and Engineering Sdn Bhd (LSE) for the subscription of 25m new shares in LSE, representing 50% stake in LSE. (Source: Bursa Malaysia)

Benalec: Monetises reclaimed land in Melaka. Benalec Holdings Bhd entered into two separate deals, one on land disposal while another on a JV property development with Melaka based developer Vista Selesa Development Sdn Bhd. (Source: The Edge Financial Daily)

Paramount: Has ambitious RM4b projects in pipeline. Paramount Corp Bhd will embark on several projects with a total GDV of RM4b over the next 12 years and will invest RM250m to set up its new university campus in Glenmarie, Shah Alam. (Source: The Malaysian Reserve)

Energy: Sarawak to pay 6.25 sen per kWh for Bakun power. Sarawak will pay federal government 6.25 sen kWh for the purchase of electricity generated by the Bakun hydro power plant under a power purchase agreement (PPA). The basic tariff of 6.25 sen comes with an annual increase of 1.5%. (Source: The Edge Financial Daily)

Autos: Honda Malaysia to resume full production in August. Honda Malaysia Sdn Bhd’s Alor Gajah plant will resume full production on Aug 1, and will try to increase production by operating additional hours to catch up with shortage of supply from April through July. (Source: The Edge Financial Daily)

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RHBInvest Research

Top Story: Benchmarking – Tracking the benchmark

• Market Update
• Equal weighting all FBM KLCI stocks would have resulted in YTD gain of 3.4% (vs. the index of +2.3%) but this would still have underperformed vs. FBM100 which rose by 4.7%.
• This implies that investors had to take an active risk position. We note that FBM KLCI followers had to get seven stocks right (Maybank, Sime, PetChem, Digi, Genting Malaysia, TM and PetDag), or underweight six others (TNB, MISC, KLK, YTL Corp, YTL Power and MAS). Big gainers outside of the FBM KLCI sectors and stocks included Dialog, SapuraCrest, Mah Sing, MCIL, UEM Land, DRB Hicom, and MPHB, highlighting the merits of bottom-up stock picking under current market conditions.

Sector Call

Insurance:

• Sector Update
• Gradual liberalisation of motor insurance
• We believe that the move to detariff the motor insurance segment is positive for the industry in the long run. In the short to medium term, we believe the gradual premium increase would do little to cover losses stemming from the TPBID policies although we believe that it is in the right direction.

Corporate Highlights

IOI:

• News Update
• RSPO suspends certification process
• We believe this suspension has more to do with the NCR land dispute in Baram, Sarawak, than any other issue.
• Maintain Underperform with fair value of RM5.90.

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Maybank IB Views

SECTOR UPDATE
Oil & Gas: Overweight
ODS-Petrodata's perspective

Broad-based views. ODS-Petrodata expects an improved outlook for the offshore fabricators and shipyard operators in 2011. The vessel market remains in an overbuilt state but charter rates have hit rock bottom. Management believes the overall recovery is progressing but the volatile oil price is a concern. We are of the same opinion. We remain Buyers of Dialog, KNM, Kencana, PGas, SapCrest and Wah Seong. We are placing Alam, Petra Perdana and TOFF (all presently Sell calls) under review as we re-assess the vessel market outlook.

ECONOMICS
External Trade, February 2011
Exports beat street but "Japan factor" looms on the road ahead...

Exports growth in Feb' 11 surprised on the upside as it grew by +10.7% YoY (revised Jan ‘11: +4.6 YoY; Maybank IB: +1.8%) while imports sustained double-digit growth as it rose by +11.5% YoY (Jan ’11: +13.5% YoY; Maybank IB: +13.7% YoY). MoM, exports and imports contracted by -5.5% and -12.6% respectively as the short working month effect was amplified by Chinese New Year holidays. For the first two months of 2011, exports and imports gained by +7.5% YoY and +12.6% YoY respectively vs. 27.6% YoY and 29.5% YoY in Jan-Feb 2010. No change in our full-year forecasts i.e. 8.3% export growth, 8.9% import growth and RM122.6b trade surplus.

Technicals
The FBM KLCI closed lower by 2.41 points to 1,553.07 yesterday. Its resistance areas of 1,556 and 1,576 will cap market gains, whilst the obvious support areas are located at 1,529 and 1,554.

Trading idea for today is a Buy call on MHC.

Other Local News
Maxis: To raise non-voice revenue to 50% by 2012. Maxis Bhd aims to raise its non-voice revenue to 50% next year from 41.5% currently boosted by the launch of the Maxis Integrated Partner in Education (MIPE) programme. (Source: The Edge Financial Daily)

TM: Gets SC nod to raise up to RM2b. Telekom Malaysia Bhd (TM) has received approval from the SC to raise up to RM2b via commercial papers and medium term note programmes to meet capital expenditure requirements. (Source: Bursa Malaysia)

Pos: Khazanah board to meet this week on Pos. Khazanah Nasional Bhd's nine-member board is scheduled to meet this week to finalise bids made for Pos Malaysia. (Source: Business Times)

Press Metal: Plans expansion. Press Metal Bhd proposed the phase-2 expansion of its aluminium smelting operation that would be located at the new Samalaju Industrial Park, Bintulu, Sarawak. (Source: Bursa Malaysia)

Iskandar: Two probes into Iskandar Investment last year. There were two separate probes done within Iskandar Investment Bhd (IIB) last year following complaints of how contracts were awarded. The investigations found cases of mismanagement, criminal breach of trust, procedures that were not followed and leaks of confidential information. (Source: Business Times)

Banking: Market to dictate number of banks. The market will determine the number of banks in the country, which are currently well-capitalised. Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz said banks have reached a "minimum size and are well-capitalised with quality capital that has enabled them to take advantage of economies of scale". (Source: The Star)

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RHBInvest Research

Top Story: Utilities

• Sector Update
• TNB lacks catalysts going forward.
• YTL Power may lose a bit of shine since the key investment thesis for the stock has historically been high dividend yields.
• The restructuring of the water sector in Selangor is expected to remain in a deadlock situation.
• We maintain our Underweight stance on the sector due to lack of catalysts.

Sector Call

Oil & Gas:

• Sector Update
• Improvement seen for vessel market
• Petra Perdana (OP, FV = RM1.39) thus reflects the expected rise in valuation for the company’s vessel assets.
• We maintain our Overweight call on the sector in light of the positive bias on the sector’s outlook. Our top picks are Petronas Chemicals (OP, FV = RM9.02) and SapuraCrest (OP, FV = RM4.37).

Timber:

• Sector Update
• It’s a “sellers” market now for plywood given the anticipated increase in demand from Japan, low inventory level, limited increase in supply, and disruption in Japan domestic plywood production.
• We downgrade our call on WTKH to Market Perform (from outperform previously) due to the limited upside to our fair value. WTK share price has rallied by 65% since the Japan earthquake on 11 Mar.
• We reiterate our Overweight call on the sector. Top picks are Jaya Tiasa (OP, FV = RM7.84) and Ta Ann (OP, FV = RM7.99).

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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 IB Views

ACQUISITIONS / DISPOSAL
Glomac RM1.72: Buy
Deep value, strong upside potential Shariah-compliant

Growth intact on strong sales. We expect 9MFY11 results, due on 31 Mar, to be in line (+70% YoY). Glomac will very likely beat its RM500m FY11 sales target thanks to strong take-up at Glomac Damansara (GD), lifting total unbilled sales above the RM1b mark this year. This excludes potential enbloc sales worth up to RM445m, some of which are at the advanced stage of negotiations. We raise earnings forecasts by 6-11% and RNAV by 11%. Our TP is upgraded to RM2.38 (20% discount to RM2.97 RNAV). Glomac is our top small-cap property pick.

ECONOMICS
Industrial Production Index (IPI), Jan '11
No surprise in the slow start to 2011...

Jan '11 industrial production growth decelerated further to +1.0% YoY (vs revised Dec '10: +4.5% YoY; Maybank IB: +1.7% YoY; Consensus: +1.2% YoY). Manufacturing and electricity output continued to post growth albeit at slower paces while mining output contracted for a fourth consecutive month. MoM, overall production grew by +0.4% from Dec '10.


Technicals
The FBM KLCI fell 6.78 points yesterday to close at 1,516.91. Its resistance areas of 1,516 and 1,530 will cap market gains, whilst the obvious support areas are located at 1,500 and 1,514.

Trading idea for today is a Buy call on SAPCRES.

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