Stocks to watch: TH Plantations, AirAsia, MAS, Kumpulan H&L

KUALA LUMPUR: Stocks on Bursa Malaysia could advance on Friday, Oct 21, following fresh positive economic data from the US while interest could continue to be focused on glove makers and selected stocks.

But overall market sentiment would be cautious, as sentiment always hinges on the volatile European and US economic data.

On Wall Street, stocks ended with modest gains on Thursday, shifting back and forth on incremental developments in Europe where leaders sought to reassure investors that a solution to the debt crisis would come soon.

Germany and France released a statement on Thursday saying leaders would now hold two summits to discuss the debt crisis, with a solution in place by Wednesday's second meeting.

The Dow Jones industrial average ended up 37.16 points, or 0.32 percent, at 11,541.78. The Standard & Poor's 500 Index was up 5.51 points, or 0.46 percent, at 1,215.39. The Nasdaq Composite Index was down 5.42 points, or 0.21 percent, at 2,598.62.

At Bursa Malaysia, among the stocks to watch are TH PLANTATION []s Bhd, AIRASIA BHD [] and MALAYSIAN AIRLINE SYSTEM BHD [] (MAS)and Kumpulan H&L High-Tech Bhd.

TH Plantations’ earnings rose 53.8% to RM33.12 million in the third quarter ended Sept 30, 2011 from RM21.53 million a year ago as it benefited from higher prices for crude palm oil, palm kernel and fresh fruit bunches. Its revenue increased 37.7% to RM115.97 million from RM84.22 million. Earnings per share were 6.51 sen compared with 4.41 sen.

For the nine-month period, its earnings jumped 85.6% to RM87.12 million from RM46.93 million while revenue increased by 27.9% to RM303.73 million from RM237.44 million.

AirAsia and MAS have appointed their own independent advisers to advise the non-interested directors and the non-interested shareholders of each airline on the proposed warrants exchange.

Kumpulan H&L High-Tech’s 70% owned subsidiary in Thailand has temporarily ceased its operations there due to the severe floods.

H&L High-Tech Mould (Thailand) Co. Ltd. (H&LM) located at Bangpa-In Industrial Estate, Ayutthaya had halted its operations. H&LM manufactures metal parts for electronic and metal surface treatment.

BRITISH AMERICAN TOBACCO (M) [] Bhd’s earnings rose 3.3% to RM176.27 million in the third quarter ended Sept 30 from RM179.65 million. Its revenue increased by to RM1.104 billion from RM993.59 million, earnings per share were 61.70 sen compared with 59.80 sen. It declared an interim dividend tax exempt of 60 sen a share compared with 64 sen a year ago.

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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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Maybank IB Views

Tenaga Nasional RM6.52: Hold
Still not out of the woods yet Shariah-compliant

Worst quarter ever. RM786m 9MFY11 core net profit (-68% YoY) was 53% of our full-year forecast and 38% of consensus. 3QFY11 was exceptionally weak due to shutdowns of natural gas facilities for repairs, high coal price and extra cost incurred by burning oil and distillates. We have lowered our FY11-13 earnings forecasts to take into account this quarter's results and changes to revenue and cost assumptions. Maintain Hold, with a lower TP of RM6.60 (from RM7.05) based on unchanged 13x FY12 PER.

British American Tobacco RM46.20: Sell
Gloom-soaked cigarette

Cautious mode persists. 1H11 net profit accounted for 48% and 50% of our and consensus full-year forecasts respectively. We maintain our Sell call on BAT (RM42.50 DCF-based target price) due to declining sales volume and exacerbated by weaker margins. Valuation, at 17.5x 2011 PER, appears pricey relative to its lackluster earnings growth (2.5% 3-year forward net profit CAGR).

TH Plantations RM2.10: Buy
Strong production recovery in 2Q Shariah-compliant

No earnings surprises. 1H11 net profit accounted for 49% of our full-year estimate, and are within consensus expectations. THP’s current valuation at 9.3x 2011 PER offers a good buying opportunity as it trades at a 41% discount to industry peers’ average of 15.8x. This is further supported by attractive net dividend yields of 5.5%. We reiterate our Buy call with an unchanged TP of RM2.50 (11x 2012 PER).

Technicals
The FBM KLCI rose 3.22 points to close at 1,565.81 yesterday. Its resistance areas of 1,569 and 1,580 will cap market gains, whilst the obvious support areas are located at 1,552 and 1,565.

Trading idea is TENAGA

Other Local News
MAS: Sees no need to raise cash. Malaysian Airline Systems Bhd (MAS) sees no need to raise capital against a backdrop of weakening travel demand. Poor quarterly results have raised concern over cash depletion at the national carrier, which is expecting at least four more aircraft to be delivered this year. (Source: The Edge Financial Daily)

AirAsia: Expands in Japan. AirAsia Bhd has tied up with All Nippon Airways Group (ANA) to form AirAsia Japan Co Ltd. AirAsia will hold 49% stake in AirAsia Japan, which will be the first low-cost carrier (LCC) to be based at the Narita International Airport. (Source: The Edge Financial Daily)

TM: The latest MVNO? Telekom Malaysia Bhd may be the latest player in the MVNO (mobile virtual network operator) space. It has signed a MoU with Celcom Axiata Bhd to cooperate strategically in providing complete fixed and mobile solutions. (Source: The Edge Financial Daily)

CI Holdings: Asahi buys Permanis for RM820m. CI Holdings Bhd (CIH) is selling its entire 70m shares in Permanis Sdn Bhd to Japan's Asahi Group Holdings Ltd for RM820m in cash. CIH is making a net gain of RM677.1m from the disposal based on its audited financial statements for the financial year ended June 30 2010. Permanis is PepsiCo Inc's bottler in the country. (Source: Business Times)

Hiap Teck: Unit in steel mill deal. Hiap Teck Ventures Bhd’s 55% owned subsidiary Eastern Steel Sdn Bhd has entered into an engineering and procurement contract and a construction contract with China Shougang International Trade and Engineering Corp for the design, procurement and construction of the first phase of an integrated steel mill in Teluk Kalung, Kemaman, Terengganu. The contract value for the engineering and procurement contract is RM417.83m, while the construction contract is RM232m. (Source: The Star)

Kurnia Asia: Gets nod to start acquisitions talk. Kurnia Asia Bhd (KAB) has received the green light from Bank Negara to commence preliminary negotiations with relevant interested parties for the acquisition of an equity stake in its wholly owned subsidiary, Kurnia Insurans (M) Bhd (KIMB). (Source: The Star)

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RHBInvest Research

Top Story: Shifting Trends – Currency plays

Market Update

In RHBRI’s Economic Highlights yesterday, we highlighted our view that the RM/USD exchange rate could strengthen further in the near term to RM2.90. We now look at the impact on sectors and companies.

Sector Call

Motor: Beneficiary of a Stronger RM Neutral

Sector Update

MBM Resources: Fair value raised to RM3.45 (from RM3.25) Market Perform

Tan Chong: Fair value raised to RM5.40 (from RM5.20) Market Perform

UMW: Fair value raised to RM7.60 (from RM7.50) Market Perform

APM: Fair value raised to RM5.60 (from RM5.50) Market Perform

Proton: Fair value lowered to RM3.55 (from RM4.00) Underperform

Corporate Highlights

TH Plantations: Weathering the storm Outperform

Visit Note

As with most of the other plantation companies with significant landbank in Sabah, THP’s FFB production suffered in 1QFY11, due to the excessive La Nina induced rainfall, which made harvesting activities difficult. So far, the rain has been less heavy in Apr, and management is hopeful that the weather will improve. Despite this, we are wary of a delayed impact of the wet weather on FFB yields, which could potentially come 5-6 months and 10-12 months later,



MPI: To pick-up in the long term Market Perform

Briefing Note

Management guided for 4QFY11 revenue to remain flat qoq as sales volume for its legacy packages remain tepid but offset by strong demand for its newer chip packages. We note that utilisation for micro-leadframe-packages (MLP), module packages and test is fully utilised around 90% but its overall utilisation rates was dragged down to around 85% due to slower demand for legacy packages i.e. PDIP



Unisem: Weaker than expected 1Q Outperform

1QFY11 Results

1QFY11 net profit of RM5m was below expectations. The key variance was mainly due to: 1) lower-than-expected EBITDA margins of 14.3% due to lower contribution from SiP, MEMS and BGA packages; 2) strengthening of RM against the US$ and 3) losses in Batam and Wales.

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Maybank IB Views

COMPANY UPDATE
Media Prima RM2.61: Buy
The going is still good Shariah-compliant

Still a believer. After seeing a respectable 1Q11 industry gross adex growth of 13% YoY and speaking to media buyers, we opine that we have been too conservative with our adex growth assumptions. We raise our earnings estimates for Media Prima (MPR) by 13% to 23% p.a., after revisiting our assumptions. In our view, concerns on the impact of digitalisation are premature. Maintain Buy. Target price is raised to RM3.06 on an unchanged 17x 1-year forward PER post-earnings upgrade.

ECONOMICS
US Economy: FOMC
Fussing Over Many Considerations...

Staying on course... for now. US Federal Reserve's policymakers unanimously voted to keep the federal funds rate (FFR) at the record low of 0%-0.25% and maintained its commitment to complete the USD600b second quantitative easing (QE2) which started in Nov '10 and will end in June '11.

Technicals
The FBM KLCI rose 2.57 points higher at 1,529.91 yesterday. Its resistance areas of 1,532 and 1,542 will cap market gains, whilst the obvious support areas are located at 1,515 and 1,529.

Trading idea for today is a Buy call on MPHB.

Other Local News
RHBCap: Chinese banks interested in ADCB's stake. Amid speculation that China Construction Bank is seeking BNM approval to acquire a stake in EON Capital, Chinese were also among those invited to tender for the block of shares in RHBCap that is to be put on the market by Abu Dhabi Commercial Bank (ADCB) . (Source: The Edge Financial Daily)

Tanjung Offshore: Bags RM15m contract from Murphy Sarawak. Tanjung Offshore Bhd won an RM15m contract by Murphy Sarawak Oil Co Ltd. for valve repair and maintenance services. The contract is to last till March 2014 with the option to renew for another two years. (Source: Bursa)

KFC Holdings: To invest RM45m in 25 new outlets this year. KFCH MD Jamaludin Md Ali said this after yesterday’s AGM adding that 10 of the outlets will be 'drive-thrus'. On its overseas expansion, nine outlets have been planned for India. Overseas top line contribution from Brunei and Singapore will come up to 15%. (Source: Business Times)

TH Plantations: Higher FFB output expected this year. The company is targeting 504,901mt of palm bunches from 463,949mt in 2010. The company aims to expand its land bank to 50,000 ha from 39,113 ha by 2010 and is looking at Sabah, Sarawak, Sumatra and Kalimantan. (Source: TheStar)

Rubber: Malaysian production may rise 6.5%. Higher prices may encourage farmers to boost production tapping and output may increase to 1m metric tonnes this year from 939,000 in 2010. Thai production may decline if rains persist across the country’s main southern growing region (Source: The Malaysian Reserve)

Timber: Sarawak's log production falls. Total production in 1Q 2011 was down 28% YoY due to a combination of bad weather and flooding and impoundment of the Rejang River basin. Log prices are however expected to be higher this year due to tighter supply bigger demand. (Source: Business Times)

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Maybank IB Views

RESULTS REVIEW
Tenaga Nasional RM6.03: Sell
Hot gas and coal sweat Shariah-compliant

"Oh my God" scenario. RM1,299m 1HFY11 core net income (-18.8% YoY) was 61% of our full-year forecast and 49% of consensus. 1H was very tough, but business conditions will be even more challenging in 2H due to higher coal prices, a shortage of natural gas supply and possibility of a tariff hike. Maintain Sell with a lower price target of RM5.40, based on 4.6x FY12 EV/EBITDA – a 20% discount to its long-term average to reflect the challenging operating environment.

Maintain Sell. RM179m 1Q11 net profit (-7% YoY, -2% QoQ) is in line, at 23.6% of our forecasts and 24% of consensus. We think BAT is pricey at 18x 2011 PER given its lackluster growth in earnings (2.5% 3-year forward net profit CAGR) and unattractive dividend yield (5%). Maintain Sell with a target price of RM42.50 based on DCF valuation. Our earnings forecasts are unchanged.

TH Plantations RM2.18: Buy
1Q11: Strengthening ASPs Shariah-compliant

Results within expectation. 1Q11 results accounted for 19% of our full-year net profit, in line with its seasonal trend of a slower 1Q. Our target price is marginally adjusted upwards by 2% to RM2.50 after tweaking our assumptions on mature areas and FFB yields. We maintain our Buy call on THP for its undemanding valuation of 9.6x 2011 PER, below its 2-year mean of 11x.

Technicals
The FBM KLCI fell 4.69 points to close at 1,526.33 yesterday. Its resistance areas of 1,526 and 1,541 will cap market gains, whilst the obvious support areas are located at 1,514 and 1,524. Due to the DJIA’s positive tone last night, we may see the FBM KLCI remain steady today.

Trading idea for today is a Buy call on GUANCHG.

Other Local News
JTI: Will consider paying special dividend this year. Chairman Datuk Seri Mohd Nadzmi Mohd Salleh said that JTI is exploring the possibility of investments but if it doesn't need the money, it will look into what are the best ways to give back in terms of dividends. This is in response to intense speculation that JTI may declare a special dividend this year to help out its Japanese parent. (Source: Business Times)

IPO: Quake delays IPO of world's largest syariah REIT. The listing of Malaysia's Axis Global Industrial real estate investment trust (REIT), has been pushed back by about a month after 2 of its Japanese assets were damaged by the March earthquake. The 2 assets have been removed from its initial asset composition and the size of the REIT has been slightly reduced. (Source: The Edge Daily)

Oil & Gas: Petronas signs unitization agreement with Malaysia-Thailand Joint Authority for the gas field straddling across Block PM 301 in the northeast coast of Peninsular Malaysia and Block A-18 in the Malaysia-Thailand Joint Development Area. The unitisation agreement gives Petronas rights to the reserves in the unitised area, which has an estimated ultimate recovery of 1.25t standard cubic feet of gas. (Source: The Edge)

Oil & Gas: RM7.2b helicopter deals inked. Weststar Aviation will provide 9 helicopters in a deal worth RM4.2b to Petronas Carigali Sdn Bhd, ExxonMobil Exploration and Production Malaysia Inc, Newfield (Malaysia) Incorporated, Petrofac (Malaysia-PM304) Ltd and Talisman (Malaysia) Ltd. MHS Aviation Bhd, meanwhile, sealed the remaining RM3b contract to provide 5 choppers to Petronas Carigali, ExxonMobil Exploration and Newfield. (Source: Business Times)

Transocean: BP sues for $40b over oil spill in Gulf of Mexico. BP Plc sued Transocean, seeking at least $40b (RM120.3b) in damages and other costs from the owner of the Deepwater Horizon rig. BP said on 20 April 2010, every single safety system and device and well control procedure on the Deepwater Horizon failed, resulting in the casualty. (Source: The Sun)

Jerneh Asia: Eyes Sabah developer. After hiving off its core insurance business in Malaysia, Jerneh Asia Bhd has now set its sights on acquiring Sabah based property developer Sagajuta (Sabah) Sdn Bhd, whose flagship project is the massive RM1.2b 1Borneo mixed development in Kota Kinabalu. (Source: The Edge Daily)

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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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Maybank IB Views

SECTOR UPDATE
Oil & Gas: Overweight
ETP Part 3: Oil majors spending to rise; Pengerang project to kick-off

Underscores our bullish stance. 3 entry point projects (EPP) relating to oil and gas (O&G) under the Economic Transformation Programme (ETP) unveiled by PM Najib yesterday solidify our view of a robust year ahead. The specific projects mentioned denote growth and opportunities for local service providers. MHB, Dialog, KNM and Kencana are the key beneficiaries. News flow will remain strong over the near term. We foresee a re-rating in valuations on some stocks when the marginal field projects are announced next. We are Buyers of Dialog, KNM, Kencana MHB, PGas and SapCrest.


COMPANY UPDATE
Sunway Holdings RM2.37: Buy
5th property development in Singapore Shariah-compliant

Maintain Buy. Sunway's 5th property project in Singapore strengthens its presence in the island state. It has won a tender for another piece of land at Jurong together with its "old" partner Hoi Hup for SGD131.6m. We estimate SGD328m GDV and RM28m net profit contribution. There is no change to our earnings forecasts as we await details. Sunway is a Buy with a RM2.85 price target (11x 2011 PER). Its merger with SunCity at RM2.60 per Sunway share is long-term positive.


JT International RM6.08: Buy
Bet on this cigarette

Time to inhale. JTI's share price rose 28% over 2010 to close at RM6.05 at the year-end. Whilst this was commendable, we believe that 2011 could outperform 2010 for two simple reasons. First, local crop failures will result in cost savings for JTI. Second, JTI's build-up of cash reserves suggests that valuations ex-cash will lag market valuations once more. Our updated DCF-valuation rises to RM8.10 (+34%) although we have left earnings forecasts unchanged.


Technicals
The FBM KLCI fell 0.58 points to 1,562.94 yesterday. Its resistance area of 1,562 and 1,576 will cap market gains, whilst its weaker support areas are located at 1,537 and 1,558.
Trading ideas for today are two BUY calls on THPLANT and SPCRES.


Other Local News
Affin: Unaware of CIMB bid. Affin Holdings Bhd deputy chairman Tan Sri Lodin Wok Kamaruddin said yesterday he was not aware of rumours that Affin Bank is being eyed for a takeover by CIMB Bank. Sources close to CIMB Group said the rumour completely goes against the group's ambition to become a major regional financial player and they also think that it is not true. (Source: Business Times)

Dialog: To start RM5b terminal project in April. Dialog Group Bhd plans to begin development work on its proposed RM5b Pengerang deep water terminal project in April. This is one of the 19 entry point projects (EPPs) under the Economic Transformation Programme (ETP) announced yesterday. (Source: Malaysian Reserve)

Economic: ETP goes into overdrive. The Economic Transformation Programme (ETP) switched into overdrive in the new year, with an additional 19 entry-point projects (EPP) and developments that are expected to contribute almost RM67b in investments, RM36b in gross national income (GNI) and create 35,000 new jobs. (The Edge Financial Daily)

AP Land:Low Yat to acquire for RM305m. Low Chuan Holdings, the investment vehicle of Low Yat group has offered to purchase Asia Pacific Land (AP Land), to which Low Yat group holds 33.98% stake, for RM305.2m or 45 sen per share. The purchase consideration will be settled by way of RM201.5m cash while RM103.7m will be treated as amount owed to AP Land. (Source: The Edge Financial Daily)

O&G: Gas Malaysia eyes Bursa listing this year. Gas Malaysia Sdn Bhd, a company that distributes natural gas to households and industries, is said to be eyeing a listing on Bursa Malaysia this year but that idea has not yet received the full backing of all of its shareholders. The company's controlling shareholder is MMC Bhd that owns 41.8% and other shareholders of the company are Petronas Gas Bhd, Shapadu Group and Tokyo Gas-Mitsui & Co. (Source: The Star)

Top Glove: To invest RM160m in Cambodian rubber plantation. Top Glove Corp Bhd is investing RM160m in Cambodia to plant rubber trees to reduce its dependency on latex, which is bought at market prices. The company is targeting to obtain 20% of its latex requirement from the plantation over time. (Source: The Star)

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Maybank IB Views

COMPANY UPDATE
AirAsia RM2.67: Buy
AirAsia Philippines: It is ON Shariah-compliant

Confirmation of JV. AirAsia has signed its latest JV agreement to replicate its business in the Philippines as early as Sep 2011. This news comes as no surprise; we highlighted it in our report dated 9 Dec (AirAsia Philippines: Tony meets Tony). We are upbeat on the long-term prospects of this JV, but are neutral short-term as it will incur start-up losses and require 2-3 years to turn profitable. Maintain Buy with a RM3.36 TP based on 9.0x 2011 PER, 20% discount to peers.


TH Plantations RM1.83: Buy
The end of pricing woes Shariah-compliant

Upgrade to Buy. Having finally addressed its pricing issues, THP is poised to deliver substantial earnings growth in the coming quarters. Our revised earnings forecasts suggest a 26% 3-year net profit CAGR. Valuations are attractive at 9.4x 2011 PER, with the stock trading at 1sd below mean on forward PER. We raise our target price to RM2.15 (+23%) based on 11x 2011 earnings, representing the 2-year average of THP's forward PER. We expect share price to re-rate up upon the delivery of substantial earnings growth in the coming quarters.


Technicals
The FBM KLCI tumbled 11.58 points to 1,497.52 yesterday. Its resistance areas at 1,497 and 1,515 will cap market gains, whilst its weaker support areas are located at 1,476 and 1,493.

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


Other Local News
TNB: Awards RM991.8m contracts for hydro plant. Tenaga Nasional Bhd (TNB) has awarded jobs worth RM991.8m for the Hulu Terengganu hydroproject to various companies. The Project will involve the construction of two dams and the installation of two hydro turbines and generators in an underground power station with a total installed capacity of 250MW. The Project is located on the upper reaches of Sg. Terengganu upstream of Kenyir Lake. The Project is expected to be completed by October 2015. (Source: Bursa Announcements)

TM: Forge strategic tie-up with Multinet. Telekom Malaysia Bhd (TM) has teamed up with Multinet Pakistan Pte Ltd to offer Internet protocol virtual private network services to their corporate customers. (Source: The Star)

Mulpha: Sells Hilton Melbourne for RM327m. Mulpha International Bhd is selling its Hilton Melbourne Airport Hotel in Australia to Singapore-listed Pan Pacific Hotel Group Ltd for AUD108.9m (RM337.9m) cash. Mulpha will use the proceeds from the sale to repay its debt. The proceeds, if used to repay debts, could bring down the group's debt levels from RM1.5b to RM1.18b. (Source: The Star)

Proton, AutoV: Three companies to develop window regulator for Persona replacement model. AutoV Corp Bhd, an auto parts maker primarily for Proton vehicles, has tied up with US-based ArvinMeritor Inc and Germany-based Continental AG to develop a window regulator with an anti-pinch function for the Proton Persona replacement model, which will be launched in 2012. The collaboration was in line with Proton's strategy to improve the quality of its products and provide customers with value-added cars. (Source: The Star)

Regulations: Securities Commission amends takeover code. The Securities Commission (SC) has introduced a revision to the Malaysian Takeovers and Mergers Code, requiring higher level of disclosure. Main changes include notification to the SC if material changes occur after the dispatch of documents, prohibition of offerors, advisers and the boards of offerees from undertaking actions that could frustrate an offer, shorter settlement periods as well as enhanced timely disclosures in offer documents and independent advice circulars. Also, a voluntary offer to takeover a company is allowed to be carried out at a higher threshold (up to 90%). However, the changes do not address the issue of takeovers or privatisation of companies via the asset and liability (A&L) route, which is under the Companies Act's jurisdiction. (Source: The Star and The Edge Financial Daily)

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RHB Invest Research

Top Story

TH Plantations:

• THP to record a 3-year earnings CAGR of 25% to FY12, on the back of a 3-year revenue CAGR of 14%.
• We project net dividend payouts at a consistent 55-60% p.a., which translate to attractive net yields of 5.6% for FY10, rising to 7-8% for FY11-12.
• THP’s earnings are very sensitive to CPO price movements and every RM100/tonne change in CPO price would impact earnings by 10-12% p.a.
• Fair value of RM2.30. Initiate with Outperform.

Corporate Highlights


SP Setia:

• 4QFY10 core net profit of RM59.1m came in within our expectation and market consensus.
• In tandem with the buoyant property market, SP Setia has achieved record high sales, from RM1.65bn last year to RM2.31bn in FY10. This has well exceeded the company’s initial sales target of RM2bn.
• The company targets to attain RM3bn sales in FY11. In view of the ambitious sales target and the expected improvement in profit margins, we revise our FY11-12 net profit forecast by 8-14%.
• Fair value is revised up to RM6.50, from RM5.94. Maintain Outperform.

Technical Highlights


Daily Trading Strategy:

• Admittedly, the recovery in recent sessions has silent the previous negative readings on the chart, and turned the market sentiment into a more favourable state.
• If the buying support persists, the market will stand a good chance to retake the strong resistance level at 1,524 and the all-time high level of 1,531.99 soon.
• FBM KLCI must remove the all-time high level of 1,531.99, before it can secure a fresh breakout signal, to lure in more buying support.
• For now, we maintain our strategy of “selling into strength” on the current rally.

Daily Technical Watch: Tenaga

• Next resistances at RM9.00 and RM9.29
• Immediate Support = RM8.50
• Immediate Resistance = RM9.00

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RHB Research initiates coverage on TH Plantations, FV RM2.30

TH Plantation weekly chart

KUALA LUMPUR: RHB Research Institute is initiating an Outperform call on TH PLANTATION and assigned it a PE of 11 times FY11 and fair value of RM2.30.

The research house said on Friday, Dec 10 TH Plantations is the plantation arm of Lembaga Tabung Haji and it has plantation land bank of about 39,159 hectares and five palm oil mills with a total milling capacity of 702,000 tonnes per annum.

“We project TH Plantations THP to record a three-year earnings CAGR of 25% to FY12, on the back of a three-year revenue CAGR of 14%.

“The reason for the stronger profit growth is the higher CPO prices as well as an expectation of improved FFB yields, which translate to better margins. We project net dividend payouts at a consistent 55-60% p.a., which translate to attractive net yields of 5.6% for FY10, rising to 7-8% for FY11-12,” it said.

RHB Research said TH Plantations’ earnings are very sensitive to CPO price movements and every RM100/tonne change in CPO price would impact earnings by 10%-12% per annum.

“Assigning it a PE of 11 times FY11, which is the mid-point of its historical average, we arrive at a fair value of RM2.30. Initiate with Outperform,” it said.KUALA LUMPUR: RHB Research Institute is initiating an Outperform call on TH PLANTATION []s and assigned it a PE of 11 times FY11 and fair value of RM2.30.

The research house said on Friday, Dec 10 TH Plantations is the plantation arm of Lembaga Tabung Haji and it has plantation land bank of about 39,159 hectares and five palm oil mills with a total milling capacity of 702,000 tonnes per annum.

“We project TH Plantations THP to record a three-year earnings CAGR of 25% to FY12, on the back of a three-year revenue CAGR of 14%.

“The reason for the stronger profit growth is the higher CPO prices as well as an expectation of improved FFB yields, which translate to better margins. We project net dividend payouts at a consistent 55-60% p.a., which translate to attractive net yields of 5.6% for FY10, rising to 7-8% for FY11-12,” it said.

RHB Research said TH Plantations’ earnings are very sensitive to CPO price movements and every RM100/tonne change in CPO price would impact earnings by 10%-12% per annum.

“Assigning it a PE of 11 times FY11, which is the mid-point of its historical average, we arrive at a fair value of RM2.30. Initiate with Outperform,” it said.

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Views & News, Maybank IB (2010-11-03)

SECTOR UPDATE

Plantations: Neutral

US Dollar takes centre stage
The Fed meets tonight, commodity prices could trend higher. Depending on what transpires at the Fed meeting tonight, further USD weakness is a possibility. This could push devastating rot diseases infected on oil palm trees. ACGT was targeting to come out with a diagnostic tool that could detect early-stage ganoderma infection on oil palm trees by 2015. (Source: The Star).

RESULTS REVIEW

TH Plantations RM1.68: Hold
3Q10: Pricing issue persists Shariah-compliant
Raising earnings. We raise our 2010-11 earnings by 12.1% and 2.2% respectively after incorporating 1) higher ASP's (2010: RM2,300 to RM2,550, 2011: RM2,400 to RM2,600) and 2) higher minority contribution. While THP is attractively valued relative to peers, we believe the discount is merited given the company's almost perennial pricing issues. Maintain Hold with a higher target price of RM1.75.


Technicals
The FBM KLCI dropped slightly by 3.09 points yesterday to end at 1,506.57. Its resistance areas at 1,509 and 1,524 may cap market gains, whilst its support areas are located at 1,490 and 1,506. Due to the firm tone in the USA last night, we may see the FBM KLCI in a strong mode today - with blue chip and mid-cap buying that might be curtailed by some later profit-taking activities.

Daily trading Idea is a SHORT-TERM BUY call on TASCO.

Other Local News

Genting Plantation: Beefing up R&D activities. Genting Plantation's subsidiary, ACGT Sdn Bhd, yesterday announced it had completed the sequencing, assembly and annotation of ganoderma, a white fungus known for its devastating rot diseases infected on oil palm trees. ACGT was targeting to come out with a diagnostic tool that could detect early-stage ganoderma infection on oil palm trees by 2015. (Source: The Star).

Proton: To offer hybrid car priced below RM100,000. Proton Holdings Bhd is looking to offer its first hybrid car at a competitive price of below RM100,000. Proton is said to be developing hybrid as well as electric engines with British company Frazer-Nash Research, South Korea's LG and its Britain based subsidiary Lotus that are expected to launch commercially next year. (Source: The Malaysian Reserve)

TNB: Inks energy purchase deal with KUB-Berjaya. Tenaga Nasional Bhd (TNB) signed an agreement for the purchase of electricity generated by a small renewable energy (RE) power project developed by KUB-Berjaya Energy Sdn BHd (KUBBE) for RM1.84m annually for a period of 21 years. The RE power plant which utilizes landfill gas (methane gas) as fuel, is located in Bukit Tagar, Selangor and will have an export capacity of 1MW to TNB. (Source: The Malaysian Reserve)

Boustead: RM1b bond bid to buy Pharmaniaga. Boustead Holdings Bhd, plans to raise up to RM1b from a bank guaranteed medium term notes (MTN) programme. Proceeds from the seven year MTN would be used mainly to part finance the acquisition of Pharmaniaga Bhd and expand its landbank as well as pare down short-term borrowings. Malaysian Rating Corp Bhd has assigned an indicative long-term rating of AAA for the proposed MTN with a stable outlook. (Source: The Malaysian Reserve)

Communications: MCMC introduces new 11-digit mobile phone number format. The Malaysian Communications and Multimedia Commission (MCMC) will introduce a new mobile phone number format with 11 digits effective Dec 15 this year. The new format would use the 3+8 structure compared to existing 3+7 and all service providers would use a similar "011" prefix, for example, 011 1234 5678. The existing structure that involves 31m numbers are not required to migrate to the new 3+8, as both will co-exist after the roll-out. The new shared prefix "011" could accommodate 900m numbers compared to the 60m numbers with 3+7 structure. (Source: Bernama)

Steel: Association members to invest RM5b. The nine members of the newly formed Malaysia Steel Association (MSA) will invest RM5b in the next three years to boost their cumulative capacity by 3.2m tonnes a year, making Malaysia one of the biggest steel manufacturers in Asean. The nine founding members are Amsteel Mills Sdn Bhd, Ann Joo Steel Bhd, Ann Joo Integrated Steel Sdn Bhd, Antara Steel Mills Sdn Bhd, Kinsteel Bhd, Malaysia Steel Works (KL) Bhd, Megasteel Sdn Bhd, Perfect Channel Sdn Bhd, and Perwaja Holdings Bhd. (Source: The Star)

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