Maybank IB Views

ECONOMICS
US FOMC Preview
Expecting something...

The latest round FOMC meeting was originally scheduled for a day (20 Sep) but was extended to two days (20-21 Sep) to allow a fuller discussion on the economic development and outlook, as well as the Fed's policy responses. No QE3 is expected amid the lack of consensus at Fed on such policy. Instead, we are looking at the formal announcement of the "Operation Twist" where Fed will lengthen the average maturity of its securities holdings to extend the commitment to very low interest rate on the short end of the interest rate spectrum to the long end. Recall that Fed pledged to keep the fed fund rate at 0%-0.25% until at least mid-2013 at the previous FOMC meeting (9 Aug).

SECTOR UPDATE
Power: Neutral
Projek Lekas, what it means to us

Get ready for higher tariff. This report aims to quantify the impact of importing liquefied natural gas (LNG) when PETRONAS' re-gasification plant (LEKAS) is ready (expected July 2012). The imported LNG will be costlier than Tenaga's current gas supply - which is subsidized - hence, power tariff must rise to reflect this. On the flip side, Tenaga will have greater certainty of supply and avoid further incidence of having to burn costly oil and distillates, like the episode experienced in 3QFY11.

Technicals
The FBM KLCI tumbled 17.81-points to close at 1,413.12 yesterday. Its resistance areas of 1,413 and 1,440 will cap market gains, whilst the weaker support areas are located at 1,382 and 1,400. Due to the US markets’ weaker tone last night; we may see a volatile tone for the index today. Some persistent foreign liquidation activities may depress the markets’ today.

Trading Idea is a Take Profit call for SIME, PCHEM and IJM.

Other Local News
Sime Darby: In talks to buy Bucyrus’ distribution assets. Sime Darby Industrial Sdn Bhd (SDI) is in talks to buy the distribution assets of Bucyrus International Inc. Sime Darby might announce the deal by end of the year, adding that the acquisition would enable Sime to extend the range of its products to cover both surface and underground mining equipment. SDI expects to remain busy for the next three years with an order book of RM3b. (Source: The Edge Financial Daily)

AirAsia: Thai AirAsia puts off IPO to 1Q11. The Thai unit of Malaysia's AirAsia Bhd has delayed the initial public offering (IPO) of its shares to the 1Q12 from 4Q11. The delay is because it needs more time to restructure its organisation and conduct due diligence. (Source: Business Times)

Hartalega: MD to buy Budi Tenggara. Hartalega Holdings Bhd’s MD Kuan Kam Hon plans to buy 100% of Budi Tenggara Sdn Bhd, which has a direct 4.99% stake in Hartalega and a 13.9% stake in Hartalega Industries Sdn Bhd, which in turn has a 50.6% in Hartalega. If the deal goes through, Kuan will control 51.5% of Hartalega and Securities Commission has granted a waiver from making a mandatory general offer. (Source: Business Times)

BRDB: To sell four assets for RM914m. Bandar Raya Development Bhd (BRDB) has decided to part with four investment properties including Bangsar Shopping Centre , Menara BRDB, CapSquare Retail Centre and Permas Jusco Mall for a cash consideration of RM430m with net liabilities of RM484m to be assumed by the buyer, valuing the entire transaction at RM914m. Following the disposal, BRDB will distribute part of the proceeds to its shareholders via a net cash dividend of 80 sen per share. (Source: Bursa Malaysia)

Plantation: Another vote against Aussie palm oil Bill. The Food Standards Amendment (Truth in Labelling - Palm Oil) Bill 2010 was rejected by Australia's House of Representatives Economics Committee in Canberra yesterday, the second committee to do so since it was tabled in Parliament. Malaysia is awaiting the final vote from the Parliament. (Source: Business Times)

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Maybank IB Views

Construction: Overweight
Offers shelter from external turmoils

Maintain Overweight. Construction awards should pick up after a slow 1H 2011, to provide the multiplier impact to the domestic economy in anticipation of a slowdown at the global front. During the previous major downturns, government development spending continued to rise. Over the near-term, this will include the new public-private partnership (PPP) projects. We expect major awards only in 2012 relating to the MRT and SCORE. Our top buys are still Gamuda and Hock Seng Lee (HSL).

COMPANY UPDATE
Gamuda RM3.03: Buy
Record profits, Vietnam's conundrum Shariah-compliant

Record profits, Vietnam's conundrum. Gamuda's final results, due on 29 Sept, should meet expectations for record profits in FY11. We forecast FY12 to be another record year, on strong domestic property sales locked in. Nonetheless, we have tweaked our FY12-13 net profit forecasts by -1% after factoring lower sales forecast for the Vietnam property projects. We also reduce our RNAV-based TP to RM4.10 (-8%) after adjusting for lowered GDVs for the Vietnam projects and other house-keepings. The stock remains our top pick in construction.

ECONOMICS
Industrial Production Index (IPI), Jul '11
On slippery pole...

Volatile monthly industrial production trend… Industrial production in Jul '11 slipped back into the red as it contracted by -0.6% YoY (revised Jun'11: +1.3% YoY; Maybank-IB: +1.7% YoY; consensus: +2.4% YoY), dragged primarily by mining output and not helped by slower manufacturing production. MoM, the overall index fell by -0.6% (Jun: +1.3% MoM). For the first seven months of 2011, total output expanded by a mere +0.2% YoY (2010: + 7.2% YoY). Excluding mining, the adjusted industrial production grew by +1.8% YoY (June '11: +4.8% YoY).

Technicals
The FBM KLCI fell 4.97-points and closed at 1,469.12 last Friday. The local market remained somewhat quiet in lack luster and low volume trading. The weaker support areas for the FBM KLCI are located in the 1,423 to 1,455-zone. The next resistance levels of 1,469 and 1,511 will see very heavy liquidation activities.

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

Other Local News
Sime: Open to GO for E&O. Sime Darby Bhd is open to increase its stake and make a general offer (GO) for Eastern & Oriental Bhd (E&O) shares at the right time, having recently purchased a 30% stake in the latter at RM2.30 per share, said its president and group CEO Datuk Mohd Bakke Salleh. (Source: The Star)

CIMB: Nazir reorganizes CIMB. CIMB Group Holdings Bhd has embarked on its biggest reorganization since a restructuring in 2005 gave birth to the second largest banking group in the country. After the exercise, CIMB’s group management committee will be trimmed to 15 people from 21. Datuk Seri Nazir Razak will hold dual functions as group CEO and head of Malaysian consumer bank. Meanwhile, Datuk Charon Wardini Mokhzani will be designated as CEO of CIMB Investment Bank Bhd. (Source: The Edge Financial Weekly)

UEM Land: 5 biotech proposals. Malaysian Biotechnology Corp says five more foreign biotech companies are planning to invest millions of ringgit at BioXCell@Nusajaya. One of them is India’s Biotech giant, Biocon Ltd that will be setting up a RM500m plant in BioXCell. UEM Land holds 40% equity in Malaysian BioXCell with remaining 60% held by Biotech Corp. (Source: The Star)

O&G: Gas Malaysia guarantees dividends in first two years, IPO set at RM2.20/sh. Gas Malaysia Bhd will pay a guaranteed dividend of 100% and 75% in the first two years, respectively, after floating its shares on Bursa Malaysia in December this year. Separately, Gas Malaysia shares will be sold at an indicative offer price of RM2.20 a share to prospective investors. (Source: The Star, The Malaysian Reserve)

Construction: Works Ministry to discuss Bumi contracts with Prasarana. The Works Ministry will hold discussions with Syarikat Prasarana Negara Bhd to identify job scope and contracts worth RM8b to be distributed to Bumiputera contractors via the implementation of the Sg-Buloh-Kajang stretch of the Mass Rapid Transit (MRT) system. (Source: Bernama)

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Maybank IB Views

Alam Maritim Resources RM0.73: Hold
Stepping up contract wins Shariah-compliant

Bags RM220m of OSV contracts, a positive. OSV hiring is gaining momentum, reflecting the improving prospects for local-flagged vessels in tandem with the intensification of PETRONAS' capex programs. However, Alam’s fleet growth remains constrained by its stretched balance sheet, impeding its earnings potential. Maintain Hold with a RM0.85 target price, pegged to 9x 2012 EPS.

Technicals
The FBM KLCI tumbled 8.75 points to close at 1,454.37 yesterday. Its resistance areas of 1,454 and 1,474 will cap market gains, whilst the weaker support areas are located at 1,423 and 1,450.Due to the US markets’ weaker tone last night; we will see a softer mode for the local bourse today.

Trading Idea is a Take Profit call on RHBCAP

Other Local News
RHBCap: Looks for new chief by year-end, Delays application to buy Bank Mestika. RHB Bank Bhd is on the lookout for a new MD now since Renzo Viegas, its principal officer that was supposed to be MD, intends to take time off. A potential candidate is likely to be finalised soon, possibly in the next two to three weeks, and will likely be appointed before the year-end if the central bank has no objections to the candidate. RHBCap has put on hold its application to acquire Indonesia's PT Bank Mestika Dharma pending a review by Indonesia’s central bank to impose a limit on single-party ownership in commercial banks there. (Source: Business Times)

MAS: US firm sues for USD80m. Malaysian Airline System Bhd has been sued by GIRO — Warranty House International Inc, which is seeking damages of up to USD80m (RM239m). MAS is reviewing the complaint with the assistance of external counsel. (Source; Bursa Malaysia)

Sime Darby: E&O deal under scrutiny. The securities commission (SC) is examining the circumstances of the transaction involving Sime Darby buying 30% stake in Eastern & Oriental Bhd. The premium paid by Sime Darby is one, among several factors which the SC will take into consideration in deciding whether an acquirer has obtained control of a company. (Source: The Star)

Mining: Perak passes EIA reports for Brazil's Vale to set up maritime terminal. The Perak state government has passed the Environmental Impact Assessment (EIA) reports for Brazilian mining giant Vale SA to set up a maritime terminal in Teluk Rubiah near Lumut. Vale is investing an initial USD1.4b, or RM4.1b, to develop the first phase of an iron ore complex with capacity to dock vessels and handle as much as 30m tonnes of iron ore a year, starting 1H14. (Source: Business Times)

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RHBInvest Research

Top Story: Media – Riding on TV3 and Malay adex growth Underweight

Sector Update

¨ According to Nielsen Media Research (NMR), Jul’s gross advertising expenditure (adex) for TV and print media combined rose 11.8% yoy (+8.3% mom), led by the print media (+17.8% yoy), while the TV segment saw improvement (+5% yoy) after experiencing a 3% yoy contraction in Jun.



Corporate Highlights



Fajarbaru: Slow LRT billings to weigh down on FY06/12 performance Outperform

Company Update (published 25 Aug)

¨ The weak FY06/11 result announced yesterday was partly due to the recognition of additional costs from existing projects, pending the approval of variation orders. If the variation orders are granted, there will be substantial writebacks in FY06/12.



Affin: Growing amid a challenging environment Market Perform

Briefing Note

¨ Given concerns over macro economic conditions and stiff competition the group remains selective with respect to loan growth. Loan growth thus far has not been at the expense of quality with management pointing to the improving gross impaired loan ratio trend. As for deposits, the growth has been helped by deposit campaigns but with a LD ratio of 78.9%, the group’s balance sheet remains liquid.



MMHE: Going ahead with Pasir Gudang yard acquisition Underperform

News Update

¨ MMHE announced yesterday that it had entered into a definite sale and purchase agreement with Sime Darby Engineering (SDE) for the Pasir Gudang yard but at a slightly lower purchase consideration of RM393.5m (vs. RM399m previously).



Corporate Results



Maxis: Steady performance Market Perform

2QFY11 Results / Briefing Note

¨ 1HFY11 net profit was within expectations as we expect a seasonally stronger 2H as well as potential earnings boost from the 6% service tax that we believe will be passed on to prepaid subscribers in 4Q.

Sime Darby: Ending the year with a bang Outperform

4QFY11 Results / Briefing Note

¨ FY06/11 core net profit was above our and consensus expectations, at 112-114% of FY06/11 forecasts. Main variances were the higher than expected revenue and EBIT for the heavy equipment and motor divisions. Sime declared a final single tier dividend of 22 sen, bringing FY11 DPS to 30 sen, which is higher than our projected 27 sen. This translates to net payout of 49%, and net yield of 3.4%.



UEM Land: Earnings continued to miss expectations Underperform (down from MP)

2QFY11 Results / Briefing note

¨ 2Q11 net profit missed expectations by 20-30%. The strong sequential growth of 171% in turnover was due to higher revenue from property development projects (+125%) and developed land sales (to RM122.1m from RM7.3m in 1Q11). This 2Q11 results also reflected the full quarter contribution from Sunrise.

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RHBInvest Research

Top Story: MRCB – A little patience for RRI land Trading Buy

Visit Note

¨ MRCB expects Kwasa Land Sdn Bhd to make some decisions with regards to the RRI land re-development project by the end of the year, with physical works only expected to commence in 2012.

¨ The flow of new construction jobs should improve in 2H2011 and into 2012, underpinned by potential jobs from the LRT line extension project, Penang Sentral and the River of Life project.



Corporate Highlights



TH Plantation: Planting for posterity Outperform

Briefing Note

¨ An interesting point to note from the briefing is that THP achieved an admirable FFB yield at its newly-matured Sarawak estates. Where most other oil palm plantations only achieve an FFB yield of 8-9t/ha in its first full year of maturity, THP managed an FFB yield of 7.6t/ha in just half a year in one of its Sarawak estates. Annualised, this estate could yield about 16t/ha, double that of other oil palm estates in its first year of maturity. This is in line with management’s own targets of achieving an FFB yield of at least 15t/ha for its plantations in the first year of maturity.



Sime Darby: RM43.4m writeback for marine project Outperform

News Update

¨ Sime Darby’s subsidiary has, on 20 Jul, entered into a yard settlement agreement and release agreement with its JV partners for the refund of a cash amount of US$21.63m (RM63.6m) in return for the release of its claims, rights and interests over the Marine Project (involving the construction of two tug boats and a derrick lay barge for the Maersk Oil Qatar (MOQ) project). Of this amount, US$16.63m (RM48.9m) has been received, with the balance US$5m (RM14.7m) payable on 17 Nov, if there are no further claims made. Based on Sime’s announcement, of the refund total of US$21.6m, it will receive up to US$14.75m (RM43.4m), based on its stake.



SP Setia: Full equity interest in KL EcoCity Market Perform

News Update

¨ SP Setia announced that its proposed acquisition of the remaining 40% equity interest in KL Eco City S/B (KLEC) from Yayasan Gerakbakti Kebangsaan (YGK) for a total consideration of RM75m is to be satisfied through the issue of 19.38m new SP Setia shares at RM3.87 per share. KLEC was previously the JV company for the RM6bn KL EcoCity project.



KNM: HOA with GAP for petrochemical facility in Teluk Ramunia Underperform

News Update

¨ KNM announced yesterday that it, together with Zecon has entered into a Heads Of Agreement (HOA) with Gulf Asian Petroleum to undertake EPCC contracts for projects worth around USD5.7bn (RM17bn) in Teluk Ramunia, Johor. The two projects involve a petroleum refinery, a polypropylene unit and petroleum product storage terminal facility with capacity of 2.3m cubic meters).

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RHBInvest Research

Healthcare:

Sector Update

• Sime Darby Healthcare Group is set to establish two new specialist hospitals in Ara Damansara and ParkCity respectively.
• We believe the opening of two new hospitals will not have a significant impact on KPJ. KPJ’s Damansara Specialist is well established and currently operating at full capacity.
• We reiterate our Outperform call on KPJ (FV=RM4.94) given its stable growth profile and relatively inexpensive valuations compared to regional peers. We remain positive on Malaysia’s healthcare industry as healthcare remains an integral part of the Government’s initiative to develop Malaysia as a high income nation by 2020. However, given our more cautious view on the rubber glove players, we maintain our Neutral call for the sector.

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Maybank IB Views

COMPANY UPDATE
KNM Group RM1.90: Hold
Brace for further headwinds Shariah-compliant

Cut forecasts, downgrade to Hold. Our initial forecasts are too optimistic and management is guiding for lower profits as earnings could remain weak over the next few quarters. This is disappointing for we had expected earnings to rebound on the new orders secured in the past 12 months. The financing for the Peterborough project is still unresolved. We lower our target price to RM2.00 based on reduced PE multiple target of 10x (previously 14x) as we also cut earnings forecasts.

Petronas Chemicals RM7.06: Buy
Missed the first party, but there is another one coming Shariah-compliant

Power tariff hike impact negligible. We have imputed the impact of the electricity tariff hike by Tenaga Nasional which is rather negligible at only ±RM20m p.a. This does not change the Company fundamentals at all and we remain bullish with the high product prices and strong demand. Our concern lies with the uncertainty of gas supply due to the on-going maintenance work from its supplier. We rollover valuations to 2012 earnings and maintain BUY with a higher TP of RM8.15 (+2%), based on 13.5x PER - in line with industry's historical average PER.

ECONOMICS
Economic Transformation Programme (ETP)
Update #6…

PM announced additional 15 projects, initiatives and enablers in the sixth ETP update, involving RM63.38b investments under 11 Entry Point Projects (EPPs) in seven National Key Economic Areas (NKEAs) that will generate RM66.31b in gross national income (GNI) and create 63,531 new jobs. The biggest project is the RM60b Refinery And Petrochemical Integrated Development (RAPID) in Pengerang, Johor. So far, execution of ETP has seen confirmation of 65 EPPs (49.6% of the targeted 131) under 11 NKEAs with investment value of RM169.78b (21.4% of the targeted RM794.5b EPP investments) that are expected to raise RM220.15b in GNI (49.6% of the targeted RM1.1tr) and create 362,396 jobs (11% of the targeted 3.3m). ETP rollout is having visible positive impact on actual investment as per the data on business loans growth, PDS issuance and FDI int he first three to four months of 2011.

Technicals
The FBM KLCI fell 10.31 points and ended at 1,545.88 yesterday. Its resistance areas of 1,545 and 1,565 will cap market gains, whilst the weaker support areas are located at 1,527 and 1,540. Due to the world markets' quiet tone last night, we will see some boring and low volume-trading activities in the local bourse today. We expect the FBM KLCI to remain benign today, as the local market could remain lacklustre.

Trading Idea for today is a Take Profit call on MPHB

Other Local News
Banking: Maybank's proposal for RHB stake soon. Malayan Banking Bhd (Maybank) will be making a proposal to acquire RHB Capital Bhd before the end of this month, according to Maybank's chairman Tan Sri Megat Zaharuddin Megat Mohd Nor. (Source: The Star)

RHBCap: ADCB in need of cash. Abu Dhabi Commercial Bank's (ADCB) plans to hive off its 25% stake in RHBCap to Aabar Investments could be due to need of cash to settle some of its debts that will be due soon. (Source: The Star)

Alam Maritim: Wins RM52m job. Alam Maritim Resources Bhd (AMRB) has been awarded a contract valued at RM52m from Samsung Engineering Malaysia Sdn Bhd to supply engineering work, supply of materials, fabrication, load-out and commissioning of two units of single point mooring buoy for Sabah Oil and Gas Terminal project. (Source: Bursa Malaysia)

KFC: RM23m for 25 new outlets in the country. KFC Holdings (Malaysia) Bhd will spend around RM23m to open 25 new outlets in Malaysia by year-end. Around 10 outlets will be in the form of "drive-thru", and the balance will be normal outlets. (Source: Business Times)

Sime: To invest RM280m in two new hospitals. Sime Darby Bhd's healthcare unit will invest RM280m in two new hospitals in the Klang Valley under the government's Economic Transformation Programme (ETP). The segment is expected to contribute about 20% of the company's revenue in next three to five years. (Source: Business Times)

MMC: Malakoff Clinches 1,000MW tender. Malakoff Corp Bhd which is 51% owned by MMC has won the tender to build a 1,000MW coal-fired facility at its existing site in Tanjung Bin, Johor. (Source: Bursa Malaysia)

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RHBInvest Research

Top Story: Benchmarking –

Market Update (published 27 May 2011)

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

Corporate Highlights

WCT :

Briefing Note

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

Petronas Chemicals :

Briefing Note

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

MMHE :

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

Sime Darby :
3QFY11 Results/Briefing Note

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

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

We maintain our Outperform recommendation on the stock.



IJM Land :

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



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

3QFY11 Results/Briefing Note

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

IJM Land :

Results / briefing note

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

IJM:

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

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Stocks to watch: MRCB, DRB-Hicom, Genting, PetChem

KUALA LUMPUR: The big capitalised stocks, especially GENTING BHD and Petronas Chemicals Group Bhd would be in focus on Friday, May 27 following their sharply improved earnings in the quarter ended March 31, 2011.

Other companies which would also see trading interest would be MALAYSIAN RESOURCES CORPoration Bhd (MRCB), DRB-HICOM BHD and MyEG Services Bhd.

SIME DARBY BHD is also scheduled to announce its third quarter results for the period ended March 31.

Genting Bhd’s net profit surged 254% to RM824.17 million in the first quarter ended March 31 from RM232.43 million a year ago when the net profit then was affected by net impairment losses. Revenue rose 57.2% to RM4.89 billion from RM3.11 billion while earnings per share were 22.25 sen compared with 6.29 sen.

The group’s profit before tax in 1QFY11 was RM1.9 billion compared with RM200.0 million in 1QFY10.

Petronas Chemicals Group Bhd reported net profit of RM932 million in the fourth quarter ended March 31, 2011, an increase of 5.7% from the RM881 million a year ago.

Its revenue rose 8.9% to RM4.353 billion from RM3.996 billion while earnings per share were 12 sen. It proposed dividend of 19 sen per share totaling RM1.52 billion.

For the financial year ended March 31, its net profit increased by 36.1% to RM2.994 billion from RM2.199 billion. Revenue rose 19.5% to RM14.586 billion from RM12.203 billion supported by higher prices and volume addition.

MRCB posted a 120% increase in its earnings to RM21.60 million in the first quarter ended March 31, from RM9.84 million a year ago, boosted by its on-going property development projects.

MRCB was upbeat on its outlook for the next two years where it expected progressive completion of the on-going CONSTRUCTION projects and property development within KL Sentral which works had commenced since 2009.

“Two major developments planned on strata sales at Kuala Lumpur Sentral comprising Q Sentral office block at Lot B and condominium residences at Lot D with combined gross development value in excess of RM2 billion will commence construction works in 2011,” it said.

DRB-Hicom’s earnings were 72% lower at RM72.39 million from RM259.36 million a year ago due to the absence of exceptional gains of RM211.43 million from the disposal of estates.

Its revenue rose 25.1% to RM1.99 billion from RM1.59 billion a year ago. It proposed a final dividend of four sen per share.

MyEG recorded its best-performing quarter in 3Q11, boosted by the public’s growing adoption of e-Government services via its MyEG portal.

Its revenue rose 20% on the back of an increased Highway Code test-tasking, increased online, increased online payment of traffic summonses an encouraging growth for online renewal of road tax and automobile insurance.

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Maybank IB Views

Property: Overweight
Unfazed by rate hikes; strong property sales continued

Strong property sales momentum continues. Property demand is unfazed by the recent 25bps rate hike by the BNM. This is evident in the strong take-ups/bookings recorded in two recent high-profile property launches i.e. S P Setia's (SPSB) KL Eco City (KLEC) Residential Tower 1 (RT1) and the Mansions@ParkCity Heights linked homes of Desa Park City. We are keeping our Overweight call on the property sector. SPSB (RM4.75 TP) remains as our top buy for the property sector.

RESULTS PREVIEW
AirAsia RM3.13: Hold
As good as it gets Shariah-compliant

Turbulence overshadowing strong 1Q. We expect AirAsia's 1Q11 to be very strong, but we are concerned with the surge in oil price volatility and the increasing evidence that there is an oversupply of capacity in the industry. We downgrade to a Hold from a Buy, as our target price is at close proximity. At our target price of RM3.36/share, we think the risk-reward fully captures the stock at fair value.

Malaysian Airline System RM1.69: Hold
1Q11: Wake turbulence ahead Shariah-compliant

The tide has turned. MAS will release its 1Q11 results on 25 May. 1Q11 is expected to be loss-making due to the impact of 35% higher fuel price and some impact from the MENA civil unrest and Japanese natural disasters. We are concerned with the volatility of fuel and the increasing evidence that there is an oversupply of capacity in the industry. We downgrade our recommendation to a Hold from a Buy, and revise our target price to RM1.82/share, based on 14.4 2011 PER – on par with global peer average.

Technicals
The FBM KLCI rose 0.29-points and closed at 1,541.03 last Friday. The local market remained quite steady in very boring trading activities. World markets remained similarly lack-lustre and boring too. The possible Greek debt default caused the global market malaise.The obvious support areas for the FBM KLCI are located in the 1,507 to 1,536-zone. The firm resistance zone of 1,541 and 1,576 will see very heavy liquidation activities.

Trading idea is a Firm Buy call on EPMB.

Other Local News
Sime: Invests in Liberia. Sime Darby Bhd is planning to invest USD3.1b in its oil palm and rubber plantation ventures in Liberia over the next 15 years, to date it had invested RM50m (USD17m) in the West African country. In 2009, an amended and restated concession agreement between Sime Darby Plantation and the Liberian government gave the company a 63-year concession of 220,000ha in Liberia to be developed into oil palm and rubber plantations. (Source: The Star)

MPHB: To focus on gaming after completing stake buy. Multi-Purpose Holdings Bhd's (MPHB) acquisition of the remaining 47% stake it does not own in Magnum Holdings Sdn Bhd for a collective price of RM1.63b will be completed by June 11. MD Surin Upatkoon said It would also focus on cutting its borrowings by raising RM1b through non-core gaming assets sale. (Source: The Star)

MSC: Eyes new tin mines. Malaysia Smelting Corporation is currently looking to acquire concessions for three or four tin mines in Malaysia and Indonesia to tap into strong demand from China's booming electronics industry. CEO Datuk Mohd Ajib Anuar said the company might invest up to RM200m to increase its mining assets in the near term. (Source: The Star)

Ramunia: Targets RM903m offshore job in Mumbai. Ramunia Holdings Bhd is eyeing a USD300m (about RM903m) fabrication job in the oil and gas industry offshore Mumbai with its Indian partner. The said bid is for work at India's state-owned Oil and Natural Gas Corp Ltd’s (ONGC) wellhead platform with pipeline facilities for oil-field cluster 7 and 16. The firm is also tendering for about RM500m worth of local job. (Source: Malaysian Reserve)

Kimlun: Targets RM600m new jobs. Kimlun Corp Bhd is confident of securing RM600m new jobs to add into its current outstanding order book of about RM900m. and also exploring prospects in Klang Valley. In another news, Kimlun hopes to become an integrated player, in which property development forms the upstream business to complement its core construction business. Then there is the downstream manufacturing business via subsidiary SPC Industires Sdn Bhd, which specializes in precast concrete products for the infrastructure and building sectors. (Source: The Edge Financial Daily, The Sun)

Three-A: China JV plant with Wilmar on track. The construction of the multi-storey manufacturing plant in China, which is easily three times the size of Three-A's operations in Malaysia, is on track for completion as early as the third quarter this year. (Source: The Edge Financial Daily)

TSH Resources: Plans RM470m investment in Indonesia. TSH Resources Bhd is stepping up its Indonesia operations with investments totaling RM470m in the next 4 years which is expected to result in a compounded growth of 43% in fresh fruit brunches production by 2014. (Source: Malaysian Reserve)

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Maybank IB Views

RESULTS REVIEW
Digi.Com RM29.08: Hold
Positioning for the future Shariah-compliant

Positive surprise. 1Q11 RM331m net profit (+19% YoY, -0.3% QoQ) made up 26.4% of our previous full-year forecast of RM1.25b and 25.5% of consensus. We however cut our 2011-12 earnings forecasts by 20% and 22% respectively on accelerated depreciation charges, while our 2013 net profit is raised by 4% to incorporate higher margin assumptions. Our Hold call is maintained, with a raised EV/EBITDA target price of RM30.00 (RM26.70 previously).

Technicals
The FBM KLCI inched up 12.20-points and closed at 1,534.95 last Friday. The local market again remained lacklustre in quiet trading despite the DJIA’s firm upward performance. The obvious support areas for the FBM KLCI are located in the 1,498 to 1,534-zone. The firm resistance zone of 1,540 and 1,576 will see heavy liquidation activities.

Trading Idea is a Short-Term Buy call on F&N

Other Local News
AirAsia: To re-impose fuel surcharge. AirAsia Bhd has finally succumbed to the pressure of persisting high fuel prices and will re-introduce fuel surcharge ranging from RM10 to RM30 per flight after having abolished its fuel surcharge policy in late 2008. (Source: The Star)

Sime Darby: Motors to expand further in China. Sime Darby Motors is planning to expand the number of its vehicle outlets from 14 to 20 in the short term within both first and second-tier cities in China this year. (Source: The Star)

EonCap: Closure of deal. The board of EON Capital Bhd (EON Cap) has accepted the RM5.1b takeover bid by Hong Leong Bank Bhd (HLB), capping a 16-month battle to create the country's fourth-largest bank by assets. It also proposed a surprise net interim dividend of RM312m, or 45 sen per share, in addition to the offer price. (Source: The Star)

Utilities: Selangor confident of solving water issue. The Selangor government is confident that it will be able to solve issues pertaining the restructuring of the state's water industry through discussions with the Federal government as stipulated under the Water Services Industry Act 2006. (Source: The Star)

Iskandar: To attract RM73b new investment, Italian firm Galperti to set up plant. Iskandar Malaysia aims to attract RM73b new investments to the country's first economic growth corridor starting from January 2011 until December 2015. Separately, an Italian-based group is set to open a manufacturing plant in the Setia Business Park (SBP) in Iskandar Malaysia as part of the company's expansion plan into Asia. Galperti Manufacturing Malaysia Sdn Bhd is a subsidiary of the Galperti Group Italy, a market leader in the manufacturing of forged components for the oil and gas industries, in addition to chemical and petrochemical plants. (Source: The Star, Business Times)

Property: Residential property boom in Johor Baru. The prices of residential properties have risen by an average of 40% since 2006, in a city which used to suffer from an overhang of properties. Property owners and buyers can expect property prices in Johor Baru to rise by a further 10-20% by end of 2011, on increased costs alone. (Source: Business Times)

Construction: Three names submitted for Gemas-JB rail job. The Chinese government is understood to have nominated three companies to partner local outfits in bidding for the RM7b Gemas-Johor Baru double-tracking project. The companies include China Railway Engineering Corp (CREC) and China Raiway Construction Corp Ltd. The 3rd company is understood to be partnering Tan Sri Tan Kay Hock, who controls Johan Holdings Bhd and George Kent (M) Bhd. (Source: The Edge Financial Weekly)

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Maybank IB Views

SECTOR UPDATE
Media: Overweight
March 2011 adex: Strong recovery

Maintain Overweight. Mar 2011 total gross adex grew 14% YoY after easing 2% YoY in Feb 2011. Apr 2011 is likely to be flattish MoM as advertisers consolidate before adex friendly festivities in 3Q. YTD, total gross adex grew 13% YoY. Therefore, our 5% total gross adex growth forecast for 2011 is under review. Our top pick remains MCIL.

COMPANY UPDATE
Nestle (Malaysia) RM48.18: Sell
Fully priced in; downgrade to Sell Shariah-compliant

Downgrade to Sell. Nestle (Malaysia)'s share price has done well, up 11% year to date, outperforming the KLCI (+0.3%), and surpassing our RM45.00 DCF based target price. Last Friday's analyst briefing post 1Q11 results reporting offers no new developments; we maintain our forecasts. The stock currently trades at 25.5x 2011 earnings, which is at one standard deviation above its mean PER of 24.8x since 2000. We think that its near-term earnings growth potential is fully in the price, while dividend yield has also tapered off with the rise in its share price.

Technicals
The FBM KLCI rose 1.30 points to close at 1,524.05 yesterday. Its resistance areas of 1,524 and 1,541 will cap market gains, whilst the obvious support areas are located at 1,514 and 1,522.Due to the DJIA’s negative tone last night, we may see the FBM KLCI remain benign today.

Trading idea for today is a Short-Term Buy call on PADINI.

Other Local News
Sime Darby: Unit secures RM1.2b contract. Sime Darby Bhd’s wholly owned subsidiary, Sime Darby Engineering Sdn Bhd (SDE), has been awarded the contract to fabricate KBB Topsides for the Kebabangan Northern Hub Development Project (Contract) by Kebabangan Petroleum Operating Company Sdn Bhd worth RM1.2b. This would increase SDE's current orderbook to RM2.2b. (Source: Bursa Malaysia)

Integrax: Revived Integrax-Vale accord on the cards. Port operator Integrax Bhd is set to revive the terminated deal with Brazilian mining giant Vale International S.A. However, this depends on the outcome of an Integrax EGM next week to vote on resolutions to reconstitute its board of directors. (Source: The Star)

Bernas: Gets agreement extension for 10 more years. Padiberas Nasional Bhd (Bernas) has on April 22 received a letter from the Public Private Partnership Unit under the Prime Minister’s Department on the extension of the Bernas Agreement, which gives Bernas monopoly over the country’s rice imports, for a period of ten years. (Source: Bursa Malaysia)

EonCap: China bank eyes stake in EONCap. China Construction Bank Corp (CCB) has approached the Malaysian government about buying a stake in EON Capital (EONCap). (Source: Business Times)

Telco: M'sia taking steps to reduce broadband rates. A new consortium, Konsortium Rangkaian Serantau Sdn Bhd under the Entry Point Projects (EPPs), has been set up to buy international bandwidth for Internet traffic to lower the costs of Internet protocol (IP) transit. (Source: The Star)
Outside Malaysia
U.S: Sales of new homes rose in March to 300,000 annual rate as the weakest industry in the economy strained to recover. New-home sales, tabulated when contracts are signed, climbed 11.1% to a 300,000 annual pace. Housing prices fell from a year ago. (Source: Bloomberg)

China: Cheapest Big Macs suggest the CNY and the HKD are the most undervalued currencies in the world, trading at discounts of 40% or more versus the greenback. McDonald's Corp's signature burger cost the equivalent of USD 2.18 in China at the end of last year, USD 1.90 in Hong Kong and USD 3.71 in the U.S, according to The Economist's Big Mac Index. China's discount has narrowed to 40% from 41% since then owing to yuan gains, while Hong Kong's pegged currency has kept its gap at 49%, according to data compiled by Bloomberg. (Source: Bloomberg)

Taiwan: March industrial production increased more than estimated, bolstering the central bank's scope to raise borrowing costs again. Output rose 13.82% YoY, after gaining a revised 12.93% YoY in February, the Ministry of Economic Affairs said in Taipei. (Source: Bloomberg)

Singapore: Inflation held at 5% in March as housing and transportation costs surged, supporting the central bank's decision this month to allow further currency appreciation. Prices rose 0.1% MoM from February, without adjusting for seasonal factors. (Source: Bloomberg)

Vietnam: Inflation in April accelerates to fastest pace in 28 months, putting pressure on the government to tighten policy further after almost doubling a key interest rate in less than six months. Consumer prices climbed 17.51% YoY in April compared with the 13.89% YoY pace last month. Prices rose 3.32% MoM in April from March. (Source: Bloomberg)

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RHBInvest Research

Sector Call

Telecom:

Sector Update

• Cheaper broadband on the horizon?
• We like Axiata (OP, FV = RM5.75) for strong growth prospects albeit moderating this year. Our main concern is the uncertainty of the 2G spectrum renewal fee in Bangladesh.
• While we favour DiGi (OP, FV = RM29.10) for decent growth prospects and dividend yields, we believe valuations may no longer look very attractive and are reviewing our call pending its results on 29 Apr.

Corporate Highlights

Sime Darby :
News Update

• Awarded RM1.15bn contract
• With this award, we uphold our view that there is a greater chance of Sime being able to dispose its O&G division at a more reasonable price, given the vote of confidence from Petronas.
• Given the minimal impact, we are leaving our forecasts unchanged for now, pending further details on the contract. We maintain our Outperform call with RM10.70 fair value.

CBIP:

News Update

• Awarded RM38.35m contract from Ministry of Health
• Our target price is maintained at RM4.65.Maintain Market Perform.

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RHBInvest Research

Top Story: Sime Darby

• Visit Note
• FFB yields improving by the month, but unit production costs higher yoy.
• Forward sales policy unchanged; 3) Liberia landbank planting starting this month.
• Downstream plantation margins still razor thin due to structural problems, which Sime has begun to address.
• O&G fabrication yards still running below breakeven utilisation rates, reinforcing our view that the O&G division is a likely candidate for disposal.
• Our target price is relatively unchanged at RM10.70 and we maintain our Outperform call on the stock.

Corporate Highlights

KPJ:

• Company Update
• More M&A in healthcare sector
• Our fair value has been raised to RM4.94/share (from RM4.42), reiterate our Outperform call on the stock.

LPI Capital:

• 1QFY11 Results Note
• Within Expectations, Expecting Stronger Quarters Ahead
• Our fair value is revised downwards to RM12.05 (from RM12.37)
• We maintain our Underperform call on the stock.

MRCB:

• Company Update
• Buying 27.4 Acres Of Development In Setapak For RM170.8m
• Forecasts are maintained. The new landbank will only help to sustain MRCB’s property profits beyond 2012.
• Maintain Trading Buy. Fair value is RM2.65.

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Maybank IB Views

MARKET STRATEGY
2Q 2011 Outlook
External headwinds, domestic resilience

Strong headwinds in 1Q 2011. Malaysian equities went on a wild ride in 1Q with the KLCI hitting a 1,574 pt high on 17 January, encouraged by domestic developments. It however succumbed to selling pressure, touching a low of 1,484 pts on 15 March following the political unrest in MENA which led to concerns on crude oil prices and inflation. Japan's double disaster on 11 March and a consequent nuclear threat did not help. At its close on 31 March, the KLCI gained just 26 pts (+1.7%) year to date. Nonetheless, it navigated the headwinds better than its regional peers which recorded losses of up to 5.9%.

COMPANY UPDATE
Star Publications (Malaysia) RM3.48: Hold
The RM750m question Shariah-compliant

Proposes major debt raising exercise. Star proposes to raise up to RM750m via a 7- and 15-year debt programme. It is unlikely to pay more special dividends or develop its Section 13 land by itself but rather, embark on M&As with the proceeds, we think. We leave our earnings estimates unchanged for now. We also maintain our Hold call and RM3.71 target price pending a major earnings accretive M&A.

Technicals
The FBM KLCI closed marginally higher by 0.10 points to 1,555.48 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 KENCANA.

Other Local News
Sime Darby, TNB: Sign pact for biogas study with Mitsui. Sime Darby Plantation has roped in Tenaga Nasional Bhd (TNB) and Japan's Mitsui & Co for a joint feasibility study on the viability of setting up biogas plants at all of its 62 oil palm mills. The study will take two years and will involve eight of its mills before being extended to cover all of its 62 mills, of which 40 are in Malaysia and 22 are in Indonesia. (Source: Business Times)

Bursa: In collaboration talks with LSE. Bursa Malaysia is believed to be in preliminary talks with the London Stock Exchange to collaborate on the trading of each other's shares. The partnership would likely involve coming up with products and a platform for the trading of these shares. (Source: The Star)

MRCB: Among Pudu Jail site redevelopment bidders. Malaysian Resources Corp Bhd (MRCB) is bidding for the redevelopment of Pudu Jail site. (Source: The Star)

Iskandar: Lodges police report. Iskandar Investment Bhd (IIB) filed a police report against its former senior managers after a probe revealed fiduciary lapses. The board of IIB did not reveal their identities but it is understood that at least 40 people from the vice-president level and above quit after the previous CEO Arlida Ariff finished her contract at end-2010. (Source: Business Times)

O&G: Petronas says gas exploration project on. Petroliam Nasional Bhd (Petronas) is still considering potential joint venture partners for the exploration of gas off the Kepodang field in Indonesia. It issued a statement to counter claims by the chairman of Indonesia's oil and gas regulator, BPMigas that it will pull out from developing the Kepodang field. (Source: The Star)

E&U: Supercritical plant in Manjung is SEA's first. The new 1,000MW supercritical coal-fired power plant in Manjung, Perak will be the first in Southeast Asia. The unit will the single largest one in Southeast Asia and will produce enough electricity to power nearly two million households in Malaysia. (Source: The Edge Financial Daily)

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Stocks to watch: IJM, Mitrajaya, K.Euro, Sunway, Sime Darby

KUALA LUMPUR: CONSTRUCTION stocks would be in focus in the week ahead, starting Monday, April 4 as the government rolls out more projects under the Economic Transformation Programme (ETP).

Prime Minister Datuk Seri Najib Razak has given the assurance that the government will announce a slew of new major and exciting projects in the next few months, providing traction in implementing effectively the ETP.

Meanwhile, analysts expect external newsflow to impact investors’ sentiment in the second quarter,

“Nevertheless, beyond the short-term volatility, we believe there is still room for the market to move higher in the 2H as investors’ worries are somewhat exaggerated and the global economic recovery will unlikely be derailed,” said RHB Research Institute.

It said the external headwinds that dragged down global equities will likely dissipate and transform into potential catalysts for the market to come back in the second half.

“These include: 1) Worst of the Japanese disaster over with reconstruction plans being put in place; 2) Political upheavals in the Middle-east and North Africa subside and oil price normalises; 3) Receding threat of accelerated inflation for Emerging Asia as weather conditions improve and food prices ease; and 4) Domestically, implementation of ETP gaining speed with cheers from general election news flow from time to time,” RHB Research Institute said.

Meanwhile, interest in biogas is expected to pick up with power giant TENAGA NASIONAL BHD signing an MoU on Monday with Sime Darby PLANTATION [] and Mitsui & Co., Ltd to study the potential of using biogas to generate power at Sime Darby’s oil palm estates.

The study, which will see a collaboration of facilities, skills-set and knowledge based on each company’s area of expertise, intends to take Sime Darby Plantation’s sustainability efforts to new heights.

Other stocks to watch would be IJM Corp, Mitrajaya Holdings, Kumpulan Europlus and Sunway Holdings following fresh corporate news.

IJM Corp Bhd’s unit New Pantai Expressway Sdn Bhd (NPE) has received the go-ahead from the Public Private Partnership Unit of the Prime Minister’s Department for the proposed New Pantai elevated highway extension to Ampang-Kuala Lumpur.

Mitrajaya’s unit has accepted the RM90.78 million contract for the extension project of the Ampang light rail transit (LRT) line in Kinrara.

Kumpulan Europlus said its 64.2% owned West Coast Expressway Sdn Bhd has received a letter from the Public Private Partnership Unit approving in-principle the proposed construction of West Coast Expressway (Taiping-Banting).

The project is to be privatised on a build-operate-transfer basis and the negotiation is expected to be completed within six months from the date of the letter.

Sunway Holdings has accepted a RM22.56 million contract from Singapore-based Sim Lian Group Ltd’s subsidiary to undertake the substructure of three blocks along Jalan Tun Razak here.

Its unit Sunway Geotechnics (M) Sdn Bhd accepted the letter of award for the contract from Sim Lian’s subsidiary Perumahan SLG Central Sdn Bhd for the piling of three blocks of commercial building.

SAM Engineering & Equipment (M) Bhd (formerly LKT INDUSTRIAL BHD) is acquiring the assets and manufacturing business of engine casing, a division of Singapore Aerospace Manufacturing Pte Ltd for RM135 million in cash and loan stocks. The acquisition was part of its long-term strategy to grow the business and diversify the customer base beyond the current backend business.

The proposed acquisition would interest investors after its major shareholder Singapore Precision Engineering Ltd (SPE) intends to retain the listing status of SAM Engineering and it would undertake a proposed rectification plan about its shareholding.

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RHBInvest Research

Sime Darby:
Writeback of RM100m for Maersk Oil Qatar project.
We maintain our Outperform recommendation with RM10.60 fair value.

Macro View

BNM 2010 Annual Report:
Higher risk of inflation, degree of policy accommodation needs to be adjusted.
We expect the OPR to be raised by 50 basis points in 2H 2011 to bring it to a more neutral level of 3.25%.

Corporate Highlights

Kossan:
Expanding into clean room gloves.
Fair value maintained at RM5.12. Reiterate Outperform.

TNB:
Acquires stake in Integrax.
Maintain Market Perform.

TM:
Alcatel blacklisted.
Earnings growth is lacking until HSBB contributions pick up in FY12. Hence, maintain Underperform.


Hai-O:
Within expectations
Fair value of RM1.35. Underperform.

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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

Petronas Chemicals Group Berhad :

Samuel Lee has upgraded his PT on Petronas Chemicals Group (PCG) to RM7.80 from RM6.80 previously. PCG is his top pick in the region and he continues to like the company for its earnings outlook especially in the high crude oil price environment. PCG is also one of the few petrochemical companies with volume expansion in 2011.

He has raised his earnings by 18% and 28% for FY11E and FY12E to reflect:
1) Higher PX and MEG spreads expected in 2011 due to higher cotton prices;
2) Higher Fertiliser & Methanol product prices on the back of stronger fertiliser demand and positive agricultural sector outlook;
3) Higher Naphtha price assumption which will lift product prices and spreads; and
4) Accelerating associate Income growth mainly from its 40% owned BASF/Petronas JV.

Further upside risk to our FY10-12 EPS CAGR of 20% is likely given :
1) our current PX-Naphtha spread assumption which remains below the YTD average of $700/ton;
2) higher utilisation as the company is targeting 90% consolidated operating rate vs 81.3% achieved during 9MFY11;
3) higher volumes if production at its Methanol 1 plant is ramped up faster than expected

JPM's Dec 2012 PT of RM7.80 is based on 2.5X FY12E P/B, which is at a 10% premium to regional peers.
Plantation :

Just to highlight that the Bursa Palm Oil Conference will held in KL for the next two days (8th-9th March). As with previous years, I expect CPO prices to be relatively firm as the market watches out for guidance from industry experts such Dorab Mistry, James Fry and Thomas Mielke.

Just to remind you of our view on CPO. We are positive on CPO prices in the 1H11 with CPO prices expected to peak in the 1Q11. We are cautious on outlook in the 2H11 given expectations of a production pick up and weakening CPO prices as a result. CPO price discount to soy-oil has widened to US$100/t from US$20/t in Jan-11 vs historical mean discount of US$160/t. Our CPO forecast for 2011E is RM3,400/t and for 2012E is RM3,200/t.

Our only OW call in the sector is Sime Darby Our positive view on SIME is NOT driven by stronger CPO prices BUT because of :
1) very low hanging fruits in the plantation division;
2) extremely low expectations by investors. Therefore, if they are able to meet consensus forecasts, analysts will need to upgrade their estimates;
3) oil and gas is no longer a drag after the provision;
4) it is at quite a sweet spot. Besides plantation, each of its other business segments including motor, heavy equipment and property are expected to perform better.

JPM's PT of RM11.00 offers an upside of 20%.

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RHBInvest Research

Top Story: ILB

• Visit Note
• Full-steam ahead in China, Dubai warehouse opens for business in 2012
• Fair value is RM1.40. Maintain Outperform.

Market View

Government Measures:

Market Update

• Fourth ETP update.
• The nine EPP projects are under six NKEAs including tourism, healthcare, agriculture, palm oil & rubber, electronics & electrical, and oil, gas & energy.
• We believe the Government and Pemandu will have a difficult time keeping the momentum going on the ETP
• Longer-term positive outlook is likely to prevail and in our view, ETP projects related to the Greater KL and oil, gas and energy NKEAs will continue to draw attention from investors.

Sector Call


Plantation:

Sector Update

• Day 1 of POC: Most in agreement for weaker second half
• Maintain Overweight on the plantation sector.
• We reiterate our Outperform calls on KLK, Sime Darby, TH Plantations and on SGX-listed First Resources, and our Market Perform call on IOIC, Genting Plantations and IJMP.

Oil & Gas:

Sector Update

• Another oil & gas project under the ETP.RG
• Gas and Chemicals will invest RM1bn over three years in an integrated oil and gas hub on Pulau Daat, Labuan.
• Maintain our Overweight stance.
• Our top pick for the East Malaysia space is Dayang Enterprise.

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