Maybank IB Views

MISC RM7.10: Sell
Brace for further impact Shariah-compliant

Poor visibility. We cut our 2012 EPS forecast by a further 19% post analyst briefing for Apr-Jun 2011 results. Visibility continues to be poor, extending up to 2013. We do not see a recovery in the liner, chemical and petroleum divisions, hit by supply overhang and depressed rates. This offsets positives from the other divisions: heavy engineering, offshore, and LNG shipping. Our TP of RM6.44 remains unchanged, based on a 15% discount to our SOP valuation.

Malaysia Airports Holdings RM6.45: Buy
Higher charges, finally

Positive surprise. MAHB has confirmed that it has been granted the approval to impose higher charges on: (1) international passengers (passenger service charge or PSC); (2) landing for aircraft; and (3) parking for aircraft. This will take effect on 15 September 2011 and will positively impact future earnings. MAHB is our top aviation pick as it is well placed to enjoy the longer term growth in air travel. Maintain Buy, with an unchanged target price of RM7.55/share DCF-based.

Hock Seng Lee RM1.46: Buy
A new water job Shariah-compliant

Small replenishment; maintain Buy. HSL's RM45.7m job win will lift its outstanding order book to RM1.15b, and contribute RM5.5m in net profit into 2012, we estimate. We maintain our earnings forecasts having imputed job win assumptions earlier. We are still positive on HSL for an exposure to Sarawak construction. Our target price is unchanged at RM2.30 based on 12x 2012 PER. Share price has fallen back to single digit valuations alongside the weak broader market; the stock is looking more attractive at current levels.

RESULTS PREVIEW
AirAsia RM3.64: Hold
Challenging 2Q11 Shariah-compliant

Yields, fuel and Firefly. We expect AirAsia's 2Q11 to show a marginal YoY profit growth buoyed exclusively by its Thai associate. We expect the Malaysian and Indonesian operations to exhibit profit drop due to 28% rise in fuel prices and soft yield environment, consistent to the industry and further exacerbated by Firefly’s jet operations services to East Malaysia. We maintain our Hold call at RM3.36 target price, based on 9.0x 2011 PER which is 10% discount to global LCCs’ PER.

Malaysian Airline System RM1.66: Buy
2Q11: Expect losses

Yields, fuel and Japan. MAS will release its 2Q11 results on 23 Aug. 2Q11 is expected to be loss-making due to the impact of 28% higher fuel price YoY and some impact from the MENA civil unrest and Japanese natural disasters. Despite this negative environment, we advice investors to overlook this quarter as the Company’s future is much better now with stabilizing fuel price, new aircraft benefits and the tie-up with AirAsia. We maintain our Buy recommendation with a target price of RM2.70, pegged to 9.0x 2012 PER - on par with global peers.
Click here for full report »
RESULTS REVIEW
UMW Holdings RM7.22: Hold
O&G sees red, auto loses traction Shariah-compliant

Challenging mid-term prospects. UMW's 2Q underperformance validates our contrarian view and concerns over its O&G and auto operations. Issues like the supply chain from Japan's March earthquake and tsunami and anti-dumping effect will persist in 2H. Maintain Hold with a RM7.20 target price, based on 12x 2011 EPS.

TSH Resources RM3.15: Buy
Windfall harvest Shariah-compliant

Outperformed. TSH's 1H11 net profit of RM60m (+165% YoY) accounted for 59% and 54% of our and consensus full year estimates respectively. TSH outperformed expectations backed by higher than expected FFB production. We raise our 2011 earnings forecast by 7.1% but trimmed 2012-13 forecasts by 0.6-0.7% on higher wages assumption by RM200 per month for Malaysian plantation workers. We maintain our Buy call with an adjusted TP of RM3.81 (15x 2012 PER; previously RM3.84) on the lowered earnings.
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Eversendai Corporation RM1.68: Buy
Buy ahead of job-flows Shariah-compliant

Results show strong growth. 1H11 net profit of RM57m was 46% of our full-year forecast and 49% of consensus. We initiate coverage on Eversendai with a Buy and TP of RM2.17 (based on 12x CY12 PER). Key attributes: (i) job-flow prospects are bright and we expect major wins in the next 6 months; (ii) Eversendai has built itself an above-industry margin business franchise yet valuation of 9x 2012 PER is at a 30% discount to big-cap peers; (iii) our belief that pump-priming is an obvious and politically easy tool in addressing macro-economic slump.

ACQUISITIONS / DISPOSAL
Star Publications (Malaysia) RM3.39: Hold
Revises terms of disposal for Section 13 land Shariah-compliant

More favourable terms. Star's new agreement with JAKS Island Circle (JIC) to raise the consideration for its Section 13 land sale by RM24m to RM135m is positive. The land disposal will add 14 sen/sh in value by end-2014. We however maintain our earnings estimates as the timing for the gain recognition is beyond our estimates horizon. We also maintain our Hold call and RM3.54 DCF-based TP.

Technicals
The FBM KLCI added a meagre 0.31-points and closed at 1,483.98 last Friday. The weaker support areas for the FBM KLCI are located in the 1,423 to 1,477-zone. The next resistance levels of 1,483 and 1,597 will see heavy selling and liquidation activities.

Trading Idea is Tenaga

Other Local News
SunCity and Sunway: To be delisted. The shares of Sunway City Bhd (SunCity) and Sunway Holdings Bhd would be delisted from the Main Market of Bursa Malaysia on Aug 23. The new entity would be known as Sunway Bhd. (Source: Bursa Malaysia)

MMHE: Secures RM952m contracts. Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) has secured two contracts worth RM952m from MISC Bhd for topsides fabrication, marine repair and conversion of two energy vessels. (Source: Bursa Malaysia)

Crescendo: Plans RM2.5b township. Crescendo Corp Bhd (CCB) is set to launch its new mixed development property project, Bandar Cemerlang township in Mukim Tebrau, Johor Baru with a gross development value (GDV) of RM2.5b by year-end. The completion of the Johor Baru-Kota Tinggi highway in June this year has improved accessibility and connectivity to its project. (Source: The Star)

Green technology: Green loans. Commercial banks, which are currently shying away from lending to green companies, may have to set aside an allocation to finance green technology projects. Malaysian Green Technology Corp (MGTC) CEO Dr Nazily Mohd Noor said this was one of the suggestions made during a discussion at the Green Technology and Climate Change Council, chaired by the Prime Minister Datuk Seri Najib Razak, two weeks ago. (Source: Business Times)

Property: Foreigners not shying away from prices. Malaysia property products are currently hot on the radar of international investors and property buyers, in view of the domestic real estate market potential to see a steady growth in prices. (Source: The Malaysian Reserve)

EPF: Confirms buying London office block for RM740m. The Employees' Provident Fund (EPF) has confirmed that it has purchased an office block in St James's Square, London, where one of the tenants has one of London's highest rents, for RM740m. This marks EPF's fourth property investment in London since announcing an allocation of RM1b for British property purchases about a year ago. Including this latest purchase, it has spent RM634m. (Source: The Star)

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RHBInvest Research

Top Story: Perwaja – Cost savings from its concentration and pelletisation plant Underperform

Visit Note

¨ Business condition for Perwaja remains weak and it will likely to record losses again in 2Q11 due to high feedstock costs amid stagnating steel prices.



Kinsteel: Dragged down by Perwaja Underperform

Visit Note

¨ Margins for Kinsteel have not been materially affected by the recent hike in electricity and natural gas tariffs as electricity only constitutes 3% of its cost of production, while natural gas used in the reheating process of steel billets is very minimal.



Corporate Highlights



UMW: Introduction to the CEO Market Perform

Briefing Note

¨ UMW hosted a “Meet the President and CEO” session recently. It was Group CEO Datuk Syed Hisham’s first engagement with the investor community since his appointment nine months ago.

¨ Management confirmed that component supply constraints arising from the Japan earthquake have begun to abate. Local assembly has normalised at both UMW-Toyota and Perodua with production to be ramped higher in 2H11.



Star Publications: Gains exposure to TV media Market Perform

News Update

¨ Star yesterday announced it will invest RM35m to acquire a 51% equity stake in Hong Kong-based LI TV Holdings, while Juita Viden International will hold the remaining 49% interest.

¨ LI TV owns and operates Li (Life Inspired), a High Definition (HD) pan-regional lifestyle TV channel.

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Maybank IB Views

Technicals
The FBM KLCI closed lower by 0.60 points at 1,582.35 yesterday. Its resistance areas of 1,584 and 1,589 may cap market gains, whilst the firm support areas are located at 1,569 and 1,582. The market could rise marginally, with some afternoon profit taking activities.

Trading idea is a Short-Term Buy on Ivory

Other Local News
Genting: To buy Pan Malaysian Pools for RM2.5b? The market is again abuzz with speculation that Genting Bhd is finalising the deal to acquire Tanjong plc's gaming unit Pan Malaysian Pools Sdn Bhd (PMP) for an estimated RM2.5b. (Source: The Star)

Star Publications: To buy 5% stake in Catcha Media. Star Publications (M) Bhd plans to buy a 5% stake in Catcha Media Bhd for RM4.98m or RM0.75 per share. Catha Media is slated for listing on the ACE Market of Bursa Securities on July 22. The proposed acquisition is part of Catcha Media’s private placement exercise under the IPO. (Source: The Sun)

Proton: To offer CVT tech in future cars. Proton Holdings Bhd will introduce the continuous variable transmission (CVT) technology in its upcoming range of cars. Proton tests show that CVT can reduce fuel consumption by 4-10%. (Source: The Sun)

CI Holdings: Asahi to buy Permanis? CI Holdings Bhd is in talks with Asahi Group Holdings Ltd to buy subsidiary Permanis Sdn Bhd for USD200m (RM600m). However, Permanis’s MD Datuk Johari Abdul Ghani was tightlipped on the talk when contacted. It was reported that the Tokyo-based Asahi had agreed yesterday to buy the mineral-water and juice businesses of closely-held P&N Beverages Australia Pty Ltd for USD309 m (RM927m). Asahi is also in the midst of competing with Suntory Holdings Ltd to buy New Zealand’s Independent Liquor under a deal worth some USD1.12 b (RM3.36b). (Source: Business Times)

Dijaya: Foreign fund acquires 5% stake in Dijaya. TAEL One Partners Ltd , a Cayman Islands registered company bought 22.75m shares or a 4.99% stake in Dijaya Corp Bhd for RM37.5m. (Source: The Edge Financial Daily)

Grand-Flo: To distribute Apple iPad. Grand-Flo Solution Bhd’s unit E-Tech IT Sdn Bhd has been appointed as a value-added reseller by Apple to distribute the Apple iPad in Malaysia. E-Tech is now a value-added reseller for the Apple iMac and Macbook. (Source: The Sun)

Property: 825 acres of land for PR1MA. As many as 20 sites on 825 acres of land across the Klang Valley, Rawang and Seremban have been identified for the development of an estimated 42,078 homes under the 1Malaysia Housing Programme or Program Perumahan 1Malaysia (PR1MA). Under PR1MA, homes priced between RM150,000 and RM300,000 will be built in urban and suburban areas across the country. (Source: The Edge Financial Daily)

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RHBInvest Research

Top Story: Star
Visit Note

• Still keeping a lookout for media assets
• Recently, Star acquired Capital FM for a cash consideration of RM15m. In total, Star now owns four radio stations namely 988, Red FM, Suria FM and Capital FM. While this division remains in the red, its losses have been narrowing in recent years and management expects the division to break-even in a few years time.
• Lowered our fair value to RM3.71 (from RM4.23). As the stock’s potential return is roughly in line with our expected return from the market, we downgrade the stock to Market Perform from Outperform previously.

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Maybank IB Views

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

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

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

Trading idea is a Take Profit call on MUHIBAH.

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

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

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

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

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

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

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Maybank IB Views

YTL Power International RM2.22: Buy
Great results tempered by poor dividends Shariah-compliant

Mixed signals. We are impressed that YTLP recorded earnings growth YoY despite start up losses at YES but disappointed that third interim net DPS remain subdued at 1.875 sen. We believe that this maybe due to it conserving cash ahead of its joint bid for the 2,000MW Pemalang IPP in Central Java. Maintain Buy call and RM2.70 DCF based target price pending a meeting with management.

KNM Group RM2.53: Buy
Soft 1Q, expects stronger quarters ahead Shariah-compliant

Weak results but hopes stay afloat. 1Q11 results were sub-par, underlying the margin compression effect from the low-yielding projects secured in the past. We maintain our forecasts for now. Top line recovery is visible but KNM needs to deliver its normalised margins and on bottom line to rerate. KNM remains a prospective long-term Buy.

Star Publications (Malaysia) RM3.35: Hold
Catalyst in M&As Shariah-compliant

Results delivered, M&As next. Star's 1Q11 results were within expectations. Our earnings estimates are marginally tweaked for higher adex growth assumption, offset by creeping staff costs. Maintain Hold with a marginally lower SOP-based target price of RM3.69 (-1%). The focus is now on further M&A activities enabled by the RM200m it recently drew down from its CP/MTN facility.

WCT RM3.04: Buy
No surprises Shariah-compliant

Reiterate Buy. 1Q11 net profit of RM37m made up 20% of our full-year forecast. The results were in line with house and street expectations. We maintain our earnings forecasts, expecting stronger quarters ahead to meet our 31% net profit growth projection for 2011. Target price is unchanged at RM3.75 based on sum-of-parts (15x 2012 PER plus 20sen value enhancement for KLIA2 retail concession).

Sunway City RM5.05: Hold
On track; expect stronger 2H Shariah-compliant

Accept offer. RM35m 1Q11 core net profit was in line. We maintain our earnings forecasts and RM5.10 TP (offer price for merger with Sunway Holdings). However, we downgrade SunCity to a Hold since its share price is approaching the offer price. We advocate shareholders to accept the SunCity-SunHoldings merger offer, which would result in a bigger entity with an e.RM3.6b market capitalisation and better liquidity. We estimate RNAV for the merged entity to be around RM3.70.

AEON Co RM6.45: Buy
2H has to catch up Shariah-compliant

Results in line. 1Q11 core net profit of RM35.7m (-13.3% YoY, -18.9% QoQ) was 20% of our and street estimates, after stripping off RM10.9m of insurance claims on its shopping centre in Melaka for a fire in 2009. We maintain our forecasts for now, expecting a stronger 2H to make up our full-year forecasts. 2H should strengthen with the reopening of the 1 Utama store, in time for the Raya and year-end festive seasons

Ann Joo Resources RM2.90: Buy
Seeing domestic cyclical growth Shariah-compliant

Back in the black. 1Q11 ex-forex net profit of RM34m (4Q10: RM3m net loss, 1Q10: RM42m net profit) was inline with expectations, making up 19% of our full-year forecast and 18% of consensus. Earnings growth momentum is likely to sustain on the commencement of big-ticket construction jobs (i.e. LRT Package A). Maintain Buy with a target price of RM3.30 (11x FD 2012 PER).

Technicals
The FBM KLCI gained 7.37 points to close at 1,540.94 yesterday. Its resistance areas of 1,542 and 1,555 will cap market gains, whilst the obvious support areas are located at 1,525 and 1,540.Due to the DJIA’s marginally firmer tone last night, we will see some benign trading activities today.

Daily trading idea is a Short-Term Buy call on DKSH.

Other Local News
RHB Cap: Abu Dhabi bank to meet over stake sale. A decision on the sale of the 25% stake held by Abu Dhabi Commercial Bank (ADCB) in RHB Capital Bhd is expected after ADCB board meeting on May 31. (Source: The Star)

Ann Joo: Plans expansion. Steel maker Ann Joo Resources Bhd is looking at expanding its operations across South-East Asia via joint ventures (JVs) or mergers and acquisitions (M&As) in greenfields and small regional steel millers. (Source: The Star)

Wah Seong: Tipped for LNG pipe coating job. Wah Seong Corp Bhd is close to bagging a pipe coating job relating to the Australia Pacific liquefied natural gas (APLNG) project, valued at about RM122m (USD40m). The project is expected to be given out in the next one to two months. (Source: The Edge Financial Daily)

Property: Tycoon Li Kashing firm buying malls in Malaysia. Singapore-based ARA Asset Management Ltd, which is linked to Hong Kong tycoon Li Kashing, is in different stages of negotiation to buy between five and 10 malls throughout Malaysia. Its second Asia Dragon Fund has a fund size of USD1b to buy Asian assets. (Source: The Star)

Consumer: Govt to review subsidy if oil price hits USD110-120 per barrel. The government has decided to maintain the prices of RON95 petrol , diesel, and liquefied petroleum gas (LPG), but will review the fuel subsidy if oil price reaches between USD 110-120 per barrel. (Source: The Edge Financial Daily)

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Stocks to watch: Jerneh Asia, Tenaga, BAT, Star, VisDynamics

KUALA LUMPUR: Stocks which could be in focus following fresh corporate developments on Friday, April 22 include JERNEH ASIA BHD, TENAGA NASIONAL BHD (TNB), British American Tobacco (Malaysia) Bhd, STAR PUBLICATIONS (M) BHD and VISDYNAMICS HOLDINGS BHD.

The Edge FinancialDaily reports that after hiving off its core insurance business in Malaysia, the cash-rich Jerneh Asia has now set its sights on acquiring Sabah-based property developer Sagajuta (Sabah) Sdn Bhd, whose flagship project is the massive 1Borneo mixed development in Kota Kinabalu.

TNB’s earnings fell 36.9% to RM630.30 million in the second quarter ended Feb 28, 2011 from RM1 billion a year ago as it was impacted by higher coal prices.

Forecasting a challenging year ahead, TNB said its revenue was a marginal 1.5% higher at RM7.503 billion from RM7.389 billion a year ago.

Its earnings per share were 14.2 sen compared with 23.05 sen while it declared a lower dividend of 4.5 sen per share.

British American Tobacco’s net profit for the first quarter ended March 31, 2011 fell 6.95% to RM178.56 million from RM191.89 million a year earlier, on the back of lower volumes and a decline in profit from operations.

Revenue for the quarter declined to RM992.15 million from RM1.02 billion in 2010. Earnings per share was 62.50 sen while net assets per share was RM1.72. BAT declared a first interim dividend of 60 sen per share, tax exempt under the single-tier tax system amounting to RM171.32 million for the financial year ending Dec 31, 2011.

RAM Rating Services Bhd is cautious about Star Publications’ new new investments may pose new risks to the group.

The ratings agency said in the near term, the group “may invest some RM60 million in new media assets”, that is television channels, radio stations, online media and event organising.

“The group is expected to incur losses from some of these investments during their respective gestation periods given that they are fairly new businesses.

“In addition, Star lacks experience in the TV segment, which is viewed to be more competitive than its mainstay newspaper business,” it said.

Shares of VisDynamics fell sharply on Thursday despite its chairman’s positive view of a strong and satisfactory financial performance in 2011.

Chairman Datuk Azzat Kamaludin said the semiconductor equipment solution provider is poised to ride on the momentum of growth that the semiconductor industry is expected to sustain this year after recording the strongest rebound in 2010 following the worst ever year of 2009.

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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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RHBInvest Research Highlights 12th November 2010

Top Story

AirAsia:
3QFY12/10 results to meet our expectations.
Indicative fair value is RM2.10. Maintain Underperform.


Corporate Highlights


Paramount:
Proposing 40 sen special dividend.
Fair value to RM6.20 (from RM5.80). Maintain Outperform.



MBM Resources:
Flying high in 3Q
Maintain our Outperform call on MBM with a revised fair value of RM4.96 (down from RM5.30).

Star:
Dampened by weaker contribution from city neon and high tax rate.
Fair value is lowered to RM4.01 (from RM4.43); we upgrade our call on the stock to Outperform.

Daibochi:
Within expectations as margins remain under pressure.
Fair value is unchanged at RM3.10. Maintain Market Perform.


Technical Highlights

• Daily Trading Strategy:
• Retesting the supportive 10-day SMA.
• FBM KLCI staged a surprise steep pullback yesterday and chalked up a huge bearish candle that confirmed the previous negatively biased warning sign – the “star” candle.
• But as long as it can sustain at above 1,500, we will remain optimistic on the FBM KLCI’s bullish uptrend.
• Nevertheless, we foresee a volatile market condition likely in the near term, before the market shows sign of a clearer trend direction.

Daily Technical Watch: OSK Holdings

• Further upside if it sustains at above RM1.90.
• Immediate Support at RM1.90
• Immediate Resistance at RM2.10

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Views & News, Maybank IB (2010-11-12)

MARKET STRATEGY


Here we go again

Moving the target. We move our index targets to 1,550 for end-2010 and 1,660 for end-2011. It seems trivial now to suggest the beginnings of a liquidity-driven market; we point instead to a number of areas and stocks that remain good value. In addition, we look to previous liquidity runs to assess how stretched valuations can become, and potential canary-in-the-coal mine events that may be turning points.

RESULTS REVIEW
Star Publications RM3.48: Hold
Plodding giant Shariah-compliant

Momentum fading. RM43m net profit (+32%YoY/-14%QoQ) took 9M to RM134m (+54%). This was within expectations. 9M growth was off the low 1H09 recession-hit base and high newsprint costs. The latest quarter underlines the anemic prospects. Circulation is falling, demographics shifting and corporate transparency remains weak. We are Holders for the yield but much prefer Media Prima.


JT International RM5.93: Buy
Thriving in adversity

Maintain Buy; forecasts and TP raised. JTI's continued top-line growth and profit margin expansion reassure us that it will continue to thrive in a shrinking market. We have raised our 2010-12 earnings forecasts by 2-7% on better market share assumptions and consequently raise our DCF-based TP by 8% to RM6.50 (from RM6.00).


MBM Resources RM3.02: Buy
Beats street, Perodua provides the beat Shariah-compliant

Target price raised to RM5.00 (+10%). MBM's 3Q results were sequentially softer but 9M10 net profit of RM113m was still ahead of our and consensus full-year forecasts of RM123-124m, driven mainly by stronger Perodua earnings. We lift our 2010-12 EPS by 9-12% as we raise our Perodua vehicle sales by 5%. Our target price is raised to RM5.00, based on 8x PER; and Buy recommendation unchanged.


Technicals
The FBM KLCI tumbled 14.31 points to 1,513.70 yesterday. Its resistance area at 1,513 and 1,531 will cap market gains, whilst its weaker support areas are located at 1,490 and 1,507.

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


Other Local News
Maybank: BII's rally benefits Maybank. Maybank 97.5%-owned PT Bank Internasional Indonesia Tbk (BII) saw its share price run over the past two days, jumping 24.5% from 490 rupiah (17 sen) to end at all time high of 610 rupiah yesterday. Maybank's blended cost of acquiring BII ranged between 429 rupiah to 455 rupiah. In FY2009, Maybank wrote down its carrying value of BII by some 20% to 364 rupiah per share due to a goodwill impairment charge. (Source: The Edge Financial Daily)

MAHB: Khazanah raises RM396m through MAHB shares placement. Khazanah Nasional Bhd raised gross proceeds of RM396m after a successful placement of 66m Malaysia Airports Holdings Bhd (MAHB) shares at RM6 each. The disposal has reduced Khazanah’s stake to 54% from 60% previously. RHB Investment Bank, HSBC and Nomura Singapore Ltd, as joint placement agents successfully executed a placement of the 66m shares. There was strong demand from both foreign and domestic institutional investors for the placement. (Source: Bernama)

Proton: Offers Mitsubishi platforms to widen tie-up. Proton Holdings Bhd has offered its strategic partner Mitsubishi Motor Corp (MMC) access to its Exora multi-purpose vehicle and Persona sedan platforms. Proton is also developing a new model to replace the current Persona sedan. (Source: Business Times)

Sunrise: Publika announces Big as its anchor tenant. Publika, the retail gallery developed by Sunrise Bhd at Dutamas will be the first shopping gallery to have an aisle-less marketplace with Big Sdn Bhd as its anchor tenant. Big, which is engaged in the food and beverage products business and retailing of quality food produce, will cover 49,000 sq ft in Publika. Other prominent retailers would include British India and Shanghai. Publika is expected to open mid-2011. The current take up rate for Publika stands at 30%. (Source: Bernama)

Tan Chong: Launches new Renault car. Tan Chong Motor Holdings Bhd's subsidiary TC Euro Cars Sdn Bhd yesterday launched a new Renault model called Megane Renaultsport 250 Cup. It will be sold at RM229,800 on the road with a three years warranty, excluding insurance. (Source: The Edge Financial Daily)

Boustead: Sells assets to REIT unit, and then leases them back. Boustead Holdings Bhd plans to sell for RM189.2m its Sabah's Sutera estate, Taiping rubber plantation and Trong oil mill to Al-Hadharah Boustead REIT, and then lease back these assets. The disposal and leaseback will allow Boustead to realise the underlying value of the plantation assets while retaining the productive use of the assets. The move will result in a cash inflow for the group and its subsidiaries, which will be used to reduce bank borrowings by the group and potentially save RM9.5mil interest expense per annum for the group. (Source: The Star)

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Views & News, Maybank IB (2010-11-08)

Sunrise RM2.52: Accept offer
Cheaper entry to UEM Land Shariah-compliant

Take up the offer. We view UEM Land's (UEML) conditional takeover offer (CTO) for Sunrise shares positively as the price offered is fair. We advise Sunrise shareholders to take up the share swap instead of the redeemable convertible preference shares (RCPS) option. The enlarged UEML will offer an exposure into the largest property developer in Malaysia. Based on 20sen net DPS declared by Sunrise earlier and our estimate of RM2.15-2.20 RNAV per UEML share post-Sunrise acquisition, the deal offers a cheaper entry to UEML.


Technicals
The FBM KLCI gained 6.08-points last week as some further investor enthusiasm boosted above the 1,510-mark.The market remains strong in the weeks ahead. But do remain cautious as technically we are in very high chart territory. The obvious support areas for the FBM KLCI are located in the 1,476 to 1,511-zone. The key resistance areas of 1,513 and 1,524 may cap any rebound activity.

Weekly trading idea is a SHORT-TERM BUY call on KFC.


Other Local News
Axiata: Signs 5-year pact with Ericsson. Axiata Group Bhd will streamline its procurement of products and services with Ericsson to realise business efficiencies and competitive advantage through cash flow improvement for the next five years. Last week, it signed an agreement to facilitate regular exchange of information on technical and technology areas relating to products, works and services purchased by Axiata group of companies. (Source: Business Times)

Maybank: Fixes new shares under dividend reinvestment at RM7.70. Malayan Banking Bhd has fixed the issue price of new Maybank shares to be issued under the dividend reinvestment plan at RM7.70 per share. On behalf of the Board, Maybank IB, announced the Book Closure Date pursuant to the Final Dividend and Dividend Reinvestment Plan has been fixed for 18 November 2010. The new Maybank Shares arising from the Dividend Reinvestment Plan will be listed on the Main Market of Bursa Malaysia Securities Berhad on 21 December 2010. (Source: Bursa Malaysia)

Star Pubs: MCA buys 42% stake in Star for RM1.28b. MCA announced it has bought a 42.4% stake in Star Publications (M) Bhd for RM1.28b, or RM4.09 a share, from its wholly-owned subsidiary Huaren Holdings Sdn Bhd and is in the process of maintaining its beneficial interests in Star. (Source: The Star)

LBS Bina: China Project expected to start next year. LBS Bina Group Bhd's China project in the southern city of Zhuhai with an estimated gross development value of (GDV) of RM5b is expected to start in the third or fourth quarter of next year. Last month, LBS Bina announced that it will sell a 10% equity stake in its Chinese joint ventures (JV) to its JV partner, Zhuhai Special Economic Zone Long Yi Enterprises Co for RMB200m (RM9.25m). Each party will own 50% of the JVs post transaction. The agreement would pave way to kick-start the property project which was deadlocked in the past. (Source: The Edge Financial Daily)

Mulpha: Goldman Sachs increases Mulpha stake to 5.74%. Mulpha International Bhd, which saw active trading recently on news that its associate FKP property was a takeover target, saw The Goldman Sachs Group Inc accumulate more shares in Mulpha. Goldman Sachs increased its shareholding to 135.2m shares or 5.74% equity interest. It was reported that FKP was a possible takeover target by Stockland, a leading Australian property developer. (Source: The Edge Financial Weekly)

Sapura Resources: Disposes of stakes in APIIT, UCTI. Sapura Resources Bhd (SRB) has proposed to dispose of 51% equity interest each in APIIT Sdn Bhd and Asia Pacific UCTI Sdn Bhd (UCTI) to Ontime Sdn Bhd for RM102m. SRB said net proceeds from the proposed disposal may be channelled towards the acquisition of new businesses, expansion of existing business and to pare down borrowings. The proposed disposal is expected to result in a one-off net gain of RM68.9m and upon completion of the exercise. (Source: The Star)

External reserves: Higher in the second half of October 2010. External reserves increased slightly in the second half of October 2010 to RM324.9b (USD105.3b) as at 29 October 2010 from RM322.7b (USD104.6b) on 15 October 2010. The latest reserve amount is equivalent to 8.8 months of retained imports and 4.5 times short-term external debt. (Source: Bank Negara)

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