Maybank IB Views

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

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

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

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

ECONOMICS
ETP Update
One year after

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

ETP Progress Updates 1-7
Implementation Update

Provided by PEMANDU on the official website.

RESULTS REVIEW
Sunway REIT RM1.14: Buy
Sequentially stronger

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

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

Trading Idea is a take profit call on CBIP.

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

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

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

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

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

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

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Six shortlisted for RM1.5bil school Internet contract

PETALING JAYA: Six companies are in the running for the RM1.5bil five-year contract to provide Internet access and a virtual learning module (VLM) platform for the 9,924 schools in the country under the 1Bestarinet project, sources said.

The six are said to be Celcom Axiata Bhd, Jaring Communications, Maxis Bhd, YTL Communications, Multimedia Synergy Corp and both Telekom Malaysia Bhd/Time dotCom Bhd, which submitted a joint bid.

The access job comes with an option to extend the contract period for another five plus five years, totalling 15 years, and this would include installation, maintenance and provision of a VLM.

Though the Government is looking at RM4.5bil as the absolute sum for the 15-year contract, those in the know claim the bids received thus far ranged from RM2bil to RM6bil. At RM4.5bil, it works out to RM1.5bil for every 5 years or RM300mil for each year.

A decision on the winner is expected sometime in the middle of next month, sources said, adding that the Government should insist on proof of concept before deployment to avoid issues and problems arising later. The plan is to roll out access to at least 7,000 schools by Jan 1, 2012.

The poser now is which company should win the 15-year contract.

“Even before 1Bestarinet came about, some of the parties vying for the contract have been lobbying for it. Whatever the decision, it should be based on merits and the focus should be on deliverables as we cannot afford a repeat of the Schoolnet episode. Choose those that can deliver, those that have the financial muscle, the capacity and capabilities and not those that compromise on quality for profits,” said a source.

“The last thing we want is our future generation being deprived of basic Internet access because of some companies which can't have enough profits from the project and the Government is committed because the contract would be binding for 15 years,'' added the source.

IBestarinet came about as a result of the Pemandu national key economic area lab series as there is a need to provide Internet access to all schools in the country since the earlier project to wire up schools, Schoolnet, did not meet the objectives set.

To recap, Schoolnet was born in 2004 to wire up schools using wireless or fibre technology but it had major constraints and did not live up to expectations in terms of speed and capacity, and also due to lack of specifications and integration.

Hence, in May this year, the Education Ministry called for a tender bid for the wiring up of all schools under the 1Bestarinet project and in the tender's posting it was clearly stipulated that the tender was open to all local companies with preference given to bumiputra tender bids registered with the Finance Ministry under some codes stipulated.

This tender bid which opened on May 5 saw over 80 companies collecting the tender documents. At its closing on May 31, it is said that only 19 companies submitted their bids. The six shortlisted are from the 19 that submitted bids.

Given its past experiences with Schoolnet, the ministry had spelt out certain conditions for 1Bestarinet. It wants the future network to be scalable to cater for growth and to evolve with technological evolution. It should have a VLM which will allow teachers and students, among others, to have a platform to write plans and share ideas. The Internet speed has to be constant and cannot be based on “best effort.'' For urban areas, the access speed is 2Mbps to 10Mbps, and for rural and remote schools 1Mbps to 4Mbps. All sorts of technologies can be used, be it fibre or wireless technologies including Vsat, wireless, WiFi, but the link to the school should be via fibre.

“The Education Ministry will also have an inbuilt checking mechanism to ensure that the vendor delivers as per specifications,'' said a source.

source: thestar

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Stocks to watch: Prestariang, Axiata, Uzma, Alam

KUALA LUMPUR: Stocks which could see trading interest on Wednesday, July 27 include ICT service provider Prestariang Bhd which will make its debut on the Main Market.

Other stocks to watch include Axiata Group Bhd, UZMA BHD, ALAM MARITIM RESOURCES BHD and Berjaya Food Bhd.

On the eve of its listing, Prestariang announced it had secured an RM80 million contract with the Ministry of Higher Education for an industry based certification scheme.

The programme would be undertaken by its unit Prestariang Systems Sdn Bhd under a contract over four years at RM20 million a year.

The offer price of the shares is 90 sen. Hwang DBS Vickers Research has a fair value of RM1.09 based on sum-of-parts.

According to the research house, Prestariang intends to gradually reduce its dependency on government contracts going forward.

The company plans to expand its product offerings to include more in-house certification programmes, set up sales offices and training centres in three new locations within Malaysia in 2H11, widen clientele base from the Middle East region via partnership arrangements, and develop its own proprietary test and assessment centres with in-house proprietary procedures and systems in 2012.

Meanwhile, Axiata should see trading interest as share overhang has been finally cleared.

TELEKOM MALAYSIA BHD’s unit has placed out 92.36 million Axiata Group Bhd at RM5.07 a share. The exercise raised gross proceeds of RM468.3 million for TM.

Uzma Bhd has secured a RM170 million contract from Petronas Carigali Sdn Bhd to provide integrated equipment and services for idle well reactivation project.

its subsidiary Uzma Engineering Sdn Bhd (UESB) had received the three year contact which would be effective from July 25, 2011 to July 24, 2014.

On project delays, Uzma said the execution of the contract was depending on work orders to be issued by Petronas from time to time.

Alam Maritim’s unit has received a letter of award from Petronas Carigali Sdn Bhd to provide one anchor handling tug supply vessel for RM10.6 million.

The contract started on July 13 and the duration is for a primary period of 150 days with two extension options of 45 days each.

Berjaya Food Bhd is expanding its Kenny Rogers Roasters (KRR) brand into Indonesia after it inked a joint venture (JV) agreement with three Indonesian companies to develop and operate the franchise.

It had entered into a conditional JV agreement with PT Mitra Samaya (MS), PT Harapan Swasti Sentosa (HSS) and PT Boga Lestari Sentosa (PT Boga) to operate the franchise in Java island and Bali, Indonesia under PT Boga.

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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

Sector Call



Telecom: Assessing upside on the 6% service tax issue Overweight (up from N)

Axiata: Fair value raised to RM6.00 (from RM5.75) Outperform

Digi: Fair value raised to RM34.00 (from RM30.00) Trading Buy (up from MP)

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RHBInvest Research

Top Story: Timber

Sector Update
Demand and supply of tropical logs seem to be more well balanced now as a result of improving log supplies and slowdown in logs purchases by Indian buyers. However, log prices have remained firm at current levels.
Maintain Overweight. Top picks are Jaya Tiasa (RM8.33) and Ta Ann (RM8.44).

Sector Call

Auto: Investor Caution Caps Near Tem Sector Performance Neutral

Sector Update

DRB-HICOM: Fair value RM3.05 Outperform (Maintained)

MBM Resources: Fair value RM3.45 Market Perform (Maintained)

Tan Chong: Fair value RM4.90 Market Perform (Maintained)

UMW: Fair value RM7.60 Market Perform (Maintained)

APM: Fair value RM5.40 Market Perform (Maintained)

Proton: Fair value RM3.50 Underperform (Maintained)

Our top pick in the sector is DRB-HICOM while we also see compelling longer-term value in Tan Chong for accumulation on weakness.

Telecoms:

Sector Update
Celcom hops on to TM’s HSBB network
TM benefits from a higher utilisation rate of its HSBB network, as we gather there are minimum commitments involved. We do not expect TM to be a major player in the MVNO space.
Our top pick is Axiata for good growth prospects albeit moderating this year.

Corporate Highlights

AEON:

News Update
Purchasing Land In Sungai Petani
Fair value remains at RM5.83. Maintain Underperform.

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Maybank IB Views

QL Resources RM3.34: Buy
Good start for the 2nd decade of listing Shariah-compliant

Another good year. 4QFY11 net profit of RM31.6m (-4.8% YoY; +19.3% QoQ) took QL's FY11 net profit to RM124.5m (+16.5% YoY), which was within our forecast and consensus. FY11 marks the 10th straight year of double-digit net profit growth since its listing in FY00. We expect another year of strong earnings growth (+30%) premised on the new surimi lines in Surabaya, maturing plantation in Eastern Kalimantan and its palm pellet project. We maintain our Buy call and target price of RM3.75.

Technicals
The FBM KLCI tumbled 12.05 points to close at 1,528.98 yesterday. Its resistance areas of 1,528 and 1,550 will cap market gains, whilst the weaker support areas are located at 1,510 and 1,526.Due to the DJIA’s much weaker tone last night, we will see some heavy liquidation activities today. We expect the FBM KLCI to remain under heavy selling today, as the global market malaise takes hold.

Trading idea is a Take profit call on HAPSENG.

Other Local News
AirAsia: To go bigger and may place big order for Airbus. Datuk Seri Tony Fernandes signalled ambitious plans for AirAsia as he closed in on a potentially massive deal to buy Airbus aircraft, which could rival a recent USD16b, 180-plane deal as one of the world's largest. (Source: The Star)

TM: VADS partners Cisco in telepresence service. VADS Bhd, a subsidiary of Telekom Malaysia Bhd (TM), is hopeful of double-digit growth over the next few years for its upcoming telepresence service. (Source: Business Times)

Puncak Niaga: Forays into oil and gas, secure water supply project. Puncak Niaga Holdings Bhd has acquired 40% equity in Global Offshore (Malaysia) Sdn Bhd (GOM) and KGL Ltd (KGL) respectively for a cash consideration of USD8.4m (RM25.2m) and USD15.2m (RM5.6m) respectively. Separately, a consortium consisting of a 40:60 unincorporated JV between Quality Concrete and Puncak Niaga has secured a RM667.3m contract for a rural water supply project in Sarawak. (Source: Bursa Malaysia)

TNB: Cabinet to decide on Wednesday on tariff increase for TNB. The Cabinet is expected to decide on Wednesday, May 25 if there should be a tariff increase for Tenaga Nasional Bhd. (Source: The Edge Financial Daily)

E&U: First block of Kimanis 100MW Plant to be completed in 2013. The first generation block of 100 MW of the proposed 300MW Combined Cycle Gas Turbine Power Plant in Kimanis is expected to be completed in Dec 2013. The power plant and its related projects, costing about RM1.6b is expected to supplement Sabah’s increasing demand for electricity. (Source: Bernama News)

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RHBInvest Research

Top Story: Benchmarking – Tracking the benchmark

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

Sector Call

Insurance:

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

Corporate Highlights

IOI:

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

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Maybank IB Views

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

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

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

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

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

Trading idea for today is a Buy call on MHC.

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

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

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

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

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

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

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RHBInvest Research

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

MARKET COMMENTS
Special Feature
Sarawak goes to the polls

Opportunity to accumulate. The Sarawak state assembly will dissolve today, paving the way for the 10th state elections. Share prices of Sarawak stocks had historically corrected after the dissolution of the state assembly post a short run-up, but this time around, share prices of most stocks have been down, affected by the external uncertainties. Any further weakness is an opportunity to accumulate the Sarawak construction stocks which are expected to see some major awards in the next few weeks. Hock Seng Lee (Buy; TP: RM2.30) is our pick.

Market Focus
Japan's disaster: Assessing the impact

Yen stabilises. G-7's agreed intervention in selling the Yen has bought back stabilisation, resulting in the currency pulling back to close at 80.58 per USD last Friday against a high of 76.25. The Yen, which rose a high 7.3% post the 11 March earthquake and tsunami at north-east Japan but prior to the G-7 agreed intervention, closed just 1.5% up since the disaster and after the agreed currency intervention. The earlier Yen climb was in anticipation of overseas money repatriation to Japan for rebuilding efforts. A stable Yen would limit the damage on Japanese exporters' earnings once factories restart.

SECTOR UPDATE
Banking: Overweight
Nipping the CC problem in the bud

System credit card (CC) risk manageable. System CC risks remain manageable at this point in time, and we see little impact to the local banks. Nevertheless, with high household debt, the threat of inflation negatively impacting disposable income levels, as well as signs of CC loan growth momentum beginning to outpace overall industry loan growth, BNM's vigilance and speed in nipping this issue in the bud is highly commendable. No change to our earnings forecasts and calls.

Technicals
The FBM KLCI rose 8.27-points and closed at 1,503.89 last week. The weaker support areas for the FBM KLCI are located in the 1,474 to 1,500-zone. The very firm resistance zone of 1,503 and 1,576 will see heavy liquidation activities.

Trading idea for today is a TAKE PROFIT call on TENAGA.

Other Local News
TM: Hopes to launch mobile voice services by year-end. Telekom Malaysia Bhd (TM) hopes to launch its mobile voice services by the end of this year. The company signed a memorandum of understanding with Celcom Axiata Bhd recently. Both companies will look into the collaborations in several areas, which include the possibility of TM becoming an MVNO (mobile virtual network operator) via Celcom's network. (Source: Business Times)

UEM Land: RM6b invested in Nusajaya. A total of RM6.2b in new investments from local and foreign investors have been received for development projects in the eight catalyst developments (except EduCity components) in Nusajaya. The investments included RM500m from Biocon Ltd, India to invest at SiLC (Southern Industrial and Logistics Clusters), RM2.3b Canal Homes at Puteri Harbour by Bandaraya Development Bhd and RM500m by Pantai Group for the Gleneagles Hospital at Medini. (Source: The Star)

Scomi Engineering: Likely to bag Brazillian monorail job. Scomi Engineering Bhd and its Brazilian consortium partners are likely to bag a USD782 m (RM2.4b) monorail job in Manaus, Brazil. (Source: The Edge Financial Weekly)

Rubber glove: Rubber price expected to be influenced by Thai decision. Malaysian rubber prices are expected to be influenced by the outcome of Thailand's national rubber committee meeting this week. The meeting would discuss whether to ask other major producers, Malaysia and Indonesia, to join the move to prevent a further drop in prices. (Source: The Star)

Plantation: EU not supporting NGOs against palm oil. The European Union is not using environmental non-government organisations as a "fifth column" to help it achieve its Renewable Energy Directive (RED) which places palm oil for biofuel at a disadvantage. RED is a result of a legislative decision between the council and parliament. RED is advancing sustainability in palm oil especially biofuel but it is not restricted to palm oil only. (Source: Business Times)

Aviation: Airport Operator interested in getting AirAsia X to fly to Munich. Munich Airport is interested to get AirAsia X to fly to Munich. (Source: Bernama.com)

Property: IRDK in reverse takeover talks. IRDK Group, a property development and construction outfit, says it is in talks with several listed property developers and manufacturing firms here for a reverse takeover. It expects a deal to materialise within the next 12 months to 18 months. (Source: Business Times)

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Maybank IB Views

SECTOR UPDATE
Oil & Gas: Overweight
East Coast Spotlight; WSC raised to Buy

5 companies, 2 states, 1 objective. We visited 5 oil & gas and chemical companies based in Terengganu and Pahang last week to track their respective development and progress. We covered Petronas Gas, Petronas Chemicals and Eastern Pacific Industrial Corp (EPIC) in Kerteh and Kemaman (both in Terengganu) and visited Wah Seong and KNM's operations in Gebeng (in Pahang). Wah Seong is now a Buy on improving prospects for its pipe coating operations.

Technicals
The FBM KLCI fell 0.27 points yesterday to close at 1,495.35. Its resistance areas of 1,495 and 1,529 will cap market gains, whilst the obvious support areas are located at 1,474 and 1,493.

Trading idea for today is a Buy call on MEDIAC.

Other Local News
SP Setia: More medium-cost apartments in Setia Alam. SP Setia Bhd plans to launch at least another 300 units of medium cost apartments in its Setia Alam township in the near future to benefit from the government's "My First Home Scheme". (Source: The Edge Financial Daily)

TM: Unit gets a further 10-year concession deal on Menara KL. Telekom Malaysia Bhd's (TM) subsidiary Menara Kuala Lumpur Sdn Bhd (MKLSB) has signed a 10-year concession agreement worth RM50m with the Government. (Source: Bursa Malaysia)

TDM: To build private specialist hospital in Kuantan. Terengganu Development Management (TDM) Bhd will build a RM120m private specialist hospital in Kuantan. The construction is expected to be completed by next year. (Source: The Edge Financial Daily)

Cocoaland: Buys Rawang land. Cocoaland Holdings Bhd is acquiring two pieces of industrial land in Rawang for RM7.85m from Riviera Properties Sdn Bhd. The lands are acquired for the construction of a factory and warehouse. (Source: Bursa Malaysia)

George Kent: To invest up to RM100m to expand ops. George Kent (M) Bhd plans to invest up to RM100m in the next three to four years to expand its meter and original equipment manufacturing (OEM) businesses. (Source: The Star)

APFT: Public subscription over subscribed. APFT Bhd's 15m shares allocated for public subscription has been oversubscribed by 12x. The company will be listed on the Main Market of Bursa Malaysia on March 18. (Source: The Star)

Benalec: Gets Melaka reclamation works. Benalec Holdings Bhd has entered into an agreement with Yayasan DMDI (DMDI) to undertake reclamation works at the coast of Kawasan Kota Laksamana in Bandar Melaka. (Source: Bursa Malaysia)

Property: Axis Global REIT IPO priced at RM1-RM1.05. The IPO of Malaysia's Axis Global Industrial REIT has set an indicative price range of RM1-RM1.05 a unit. The share base of about 2b units prices the IPO between RM2b-2.1b, will make it the second largest REIT in Malaysia after Sunway REIT's RM2.4b IPO last year. (Source: The Edge Financial Daily)

Plantation: Only 10 biodiesel plants operating. The government has issued 60 biodiesel manufacturing licences as at end-February 2011 but only less than one fifth has started production. This is due to the lack of demand for biodiesel exports and high palm oil prices in the 2H10. (Source: Business Times)

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RHBInvest Research

Top Story: Market Momentum

• Market Update
• Down by not out
• Our stress test suggests that all sectors except banks may be at risk if cost inflation becomes critical. The heavyweight sectors include plantation, telecom, O&G and utilities. This also suggests that recent top outperformers could face a reversal if the macro environment remains uncertain.
• We reiterate our view that a market pull back would present an opportunity to take advantage of the value that will re-emerge. As such our Overweight calls on the banks and telecom sectors are unchanged. We also maintain our Overweight calls on plantation, oil & gas and property sectors although the cautious environment may cause continued selling pressure on these stocks in the near term.

Sector Call

Media:

• Sector Update
• Strong start to the year
• Media Prima (FV=RM3.20) remains our preferred pick given.We maintain our Outperform call on Media Chinese (FV=RM1.32) and Star (FV=RM4.23). Maintain Overweight on the sector.

Corporate Highlights

YNH:

• News Update
• YNH AEON coming to Seri Manjung
• Seri Manjung is expected to raise the property values in the township.
• No change to forecasts. Fair value kept at RM2.31

Petronas Chemicals:

• Briefing NoteBeneficiary of higher utilisation and product prices

• Maintain Outperform with new fair value of RM7.27/share (previously RM7.25).

Unisem:

• Briefing Note
• Softening in 1Q, but to bounce back after
• No change to forecasts. Fair value is RM2.65 based on 11x FY11 FD EPS.

MISC:

• Briefing Note
• Three culprits
  

• MISC cautioned that the petroleum tanker segment is “bracing itself for another difficult year ahead” as “the over-supply situation is finally hitting home”.
• Fair value is RM7.59. Maintain Underperform.

CIMB:

• 4QFY10 Results/Briefing Note
• Raising the bar for 2011
• No change to fair value of RM9.80 and Outperform call.

TM:

• 4QFY10 Results/Briefing Note
• Returns excess cash
• We revised our fair value to RM3.84 (previously RM4.05)
• Downgrade from trading buy to Underperform.

Proton:

• 3QFY11 Results/Briefing Note
• Lotus restructuring costs kick in
• Proton sales recovered to 15,806 units (+36.8% mom) in Jan 2011 helped by higher Inspira deliveries. Nonetheless, earnings going forward will be severely affected by write-offs arising from the ongoing LTP while its net cash position will remain under pressure.
• We reiterate our Underperform call and reduce our fair value to RM4.00 (from RM4.15).

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Investment gains boost TM net profit

KUALA LUMPUR: Telekom Malaysia Bhd (TM) saw its fourth quarter ended Dec 31, 2010 net profit more than double to RM400.63mil from RM170.25 a year ago due to higher revenue and investment gains made by the disposal of shares.

TM booked a net gain of RM213.3mil from the sale of Measat Global Bhd and Axiata Group Bhd shares attributed to lapsed ESOS options.

The company also announced plans to carry out a capital distribution to its shareholders of some RM1.04bil, or 29 sen per RM1 each, in line with its capital management framework to return excess cash to shareholders.

While the business environment for its current financial year will remain challenging due to the intense competitive landscape, TM group chief executive officer Datuk Seri Zamzamzairani Mohd Isa says the company is set to take its stage of growth to the next level.

This would be on the back of its performance improvement programme, its focus on customer centricity and as it sought to achieve 1.1 million premises passed and a total of 78 exchange areas by the end of this year under its high-speed broadband project, UniFi, he told reporters at the company's result briefing yesterday.

The company's financial year ending Dec 31, 2011 (FY11) headline key performance indicators include a revenue growth of 2.5%, earnings before interest, tax, depreciation and amortisation margin of 32% and customer satisfaction measure of 70, which uses TRI*M index measuring end-to-end customer experience at all touch points. TM was able to meet all three headline KPIs for FY10.

For the quarter under review, revenue was up 2.11% to RM2.32bil from RM2.27bil from a year ago, due to higher revenue from data, Internet and multimedia and non-telecommunications-related services, which mitigated the impact of lower revenue from voice and other telecommunications-related services.

TM said data revenue increased by 14.4% to RM490.8mil in the quarter compared with RM428.9mil previously due to demand for higher bandwidth services.

Internet and multimedia posted higher revenue by 12.6% to RM436.6mil owing to an increase in broadband customers to 1.68 million in the quarter compared with 1.43 million a year ago.

Its earnings per share was 11.2 sen.

For its full year, TM's net profit was up 88% to RM1.21bil from RM643.03mil in FY09. Its revenue was up 2.1% to RM8.79bil driven by higher operating revenue from data services, Internet and multimedia and other telecommunications-related services, which grew by 15.4%, 5.9% and 4.2% respectively, and helped mitigate the decline in voice revenue.

TM has proposed a final gross dividend of 13.1 sen on top of the interim gross dividend of 13 sen distributed last September.

Its earnings per share for FY10 was 33.9 sen.

source: thestar

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Stocks to watch: TM, CIMB, MAS, Proton, AZRB, Faber

KUALA LUMPUR: After four straight days of losses on Bursa Malaysia last week where markets were roiled by the unrest in oil producer in Libya which saw investors taking money off the table, sentiment is expected to remain cautious in the week ahead, starting Feb 28.

There could be some mild buying interest in companies which announced a strong set of earnings but investors are not expected to rush into the market just yet.

On Wall Street, US stocks rose on Friday, bouncing back from a three-day sell-off as oil prices stabilised, but unease over the Libyan rebellion could be enough to keep buying in check.

The S&P 500 lost 1.7% for the week, breaking a three-week streak of gains. Friday's bounce followed a late recovery Thursday that showed buyers were ready to support shares after a bout of selling.

The Dow Jones industrial average gained 61.95 points, or 0.51%, to end at 12,130.45. The Standard & Poor's 500 Index advanced 13.78 points, or 1.06%, to finish at 1,319.88. The Nasdaq Composite Index rose 43.15 points, or 1.58%, to close at 2,781.05.

As for the outlook for the local stock market, Maybank Investment Bank Bhd head of retail research and chief chartist Lee Cheng Hooi expected FBM KLCI to remain volatile in the short term and very bearish in the medium term.

“We suggest that clients liquidate on rallies and remain more in cash, as there are very few price defensive counters.

“Due to the global market malaise recently, we will see the FBM KLCI in a much weaker posture today. We expect the market to remain weak as the foreign hedge fund money exits Malaysia,” he said, adding that the downturn could be a protracted one.

Stocks to watch during the week ahead after their financial results are TELEKOM MALAYSIA BHD [], CIMB Group Holdings Bhd, MALAYSIAN AIRLINE SYSTEM BHD [] (MAS), UEM Land Bhd, AHMAD ZAKI RESOURCES BHD [] (AZRB) and FABER GROUP BHD [].

TM proposed a capital distribution of about RM1.037 billion or 29 sen for each share held. TM said the proposed capital distribution will be funded through its existing cash balances, which stands at RM3.488 billion as at Dec 31, 2010.

TM also announced its earnings rose 135%to RM400.63 million in the fourth quarter ended Dec 31, 2010 from RM170.25 million a year ago.

Revenue was marginally higher by2.1% at RM2.32 billion from RM2.27 billion. Earnings per share were 11.2 sen compared with 4.8 sen. It proposed a final dividend of 13.1 sen per share.

For FY10, TM’s earnings surged 87.6% to RM1.20 billion from RM643.02 million. Its revenue rose 2.1% to RM8.79 billion from RM8.61 billion.

CIMB Group posted a record net profit of RM3.52 billion in the financial year ended Dec 31, 2010. For the fourth quarter, earnings were RM877.62 million, boosted by its Indonesian operations.

The 4Q net profit was 9.3% higher from the RM802.89 million a year ago. Revenue rose 16% to RM3.168 billion from RM2.731 billion. Earnings per share were 11.83 sen compared with 11.37 sen.

MAS posted net profit of RM225.92 million in the fourth quarter ended Dec 31, 2010, down 64.7% from RM640.12 million a year ago, on lower derivative gains and higher finance costs.

Its managing director and chief executive officer Tengku Datuk Seri Azmil Zahruddin was quoted saying MAs had operationally, done well in the quarter where traffic volumes rose 10% and yields were up 5%.

However, it was also weighed down by higher cost of fuel despite that it carried more passengers. Its fuel bill was 13% higher at RM1.2 billion in 4Q compared witrh RM1.06 billion due to higher fuel prices and consumption.

Its revenue rose 8.2% to RM3.67 billion from RM3.39 billion a year ago. Earnings per share were 6.76 sen compared with 31.17 sen.

Proton swung into the red with net loss of RM60.1 million in the third quarter ended Dec 31, 2010 compared to net profit of RM79.68 million a year ago, due mainly to higher branding costs as well as the restructuring expenses incurred by Lotus Group International Ltd.

Revenue for the quarter fell by 8.96% to RM1.83 billion from RM2.01 billion last year. Loss per share was 10.90 sen compared to earnings per share 14.50 sen previously. Net assets per share was RM9.73.

For the nine months ended Dec 31, 2010 Proton’s net profit fell 58.1% to RM90.5 million from RM216.29 million, although revenue rose to RM6.36 billion from RM5.97 billion.

Proton said as part of the transformation plans to turn around LGIL, it had started investing in rationalisation of dealers network, and branding activities to deliver the five-year business plans.

Proton also said that during 3Q, it had experienced lower domestic sales volume, as well as increased promotional and marketing spending by a principal subsidiary.

UEM Land Bhd recorded a 37.3% increase in its earnings to RM135.36 million in the fourth quarter ended Dec 31, 2010, boosted by higher revenue and higher margin achieved for one-off transactions from strategic land sales.

AZRB posted net loss of RM83.06 million in the fourth quarter ended Dec 31, 2010 compared with net profit of RM5.13 million a year ago following the termination of the Alfaisal University Campus project in Riyadh, Saudi Arabia.

Revenue shrank to RM52.62 million compared with RM105.56 million a year ago. Loss per share was 30.03 sen compared with earnings per share of 1.86 sen.

For the financial year ended Dec 31, 2010 its net loss was RM61.28 million compared with net profit of RM20.76 million in FY09. Its revenue was RM431.34 million compared with RM459.40 million.

Faber Group saw its net profit shrink to RM2.91 million in the fourth quarter ended Dec 31, 2010 from RM42.57 million a year ago. Revenue declined to RM203.95 million from RM303.93 million. Earnings per share were 0.8 sen only compared with 11.73 sen. It proposed dividend of eight sen per share compared with six sen.

For the financial year ended Dec 31, 2010 net profit was RM78.78 million compared with RM82.68 million in FY09.

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Maybank IB Views

RESULTS REVIEW
Petronas Gas RM11.22: Buy
No surprises; retain Buy Shariah-compliant

In line. We see PGas as a major beneficiary as Malaysia liberalises its gas supply and prices. We expect sustained earnings growth as PGas reaps transportation income from 3rd party gas injected into the PGU network pipeline by 2014 or earlier. PGas remains in our Buy list with a RM14.10 DCF-target price, which offers a 26% upside.


RHB Capital RM8.17: Buy
Underlying business growth still firm

Maintain Buy. 2010 results were within our expectations and consensus. Our 2011 and 2012 forecasts are raised by 6% and 10% respectively on higher loan growth and lower charge off assumptions, while our DDM-derived target price is raised to RM9.40 from RM9.10 as a result. Underlying business growth remains firm while valuations are undemanding with the stock trading at a prospective 2011 PER of 11x versus a peer average of 13.4x. RHB's prospective P/BV of 1.6x compares favorably against a peer average of 1.8x (ex-Public Bank) despite a higher ROAE of 15% for 2011 versus the latter's 14.6%.


British American Tobacco RM46.32: Sell
Puff-ing away, challenging outlook

Boosted by one-off. RM731m 2010 net profit (-2% YoY) included RM15.5m gain from sale of Shah Alam property in 4Q10. RM716m 2010 core net profit (-4% YoY) fell short of expectations at 97% of our (RM741m) and 98% of consensus. 4Q10 was operationally weak, with sales volume down 10% QoQ, post a 3sen per stick excise hike in Oct 2010. Industry outlook is challenging, while BAT's blended margins are also expected to come off with more export volume targeted for 2011. Maintain Sell with a lower RM42.50 target price (-50sen).


Malaysia Marine and Heavy Engineering Holdings RM6.40: Hold
Results as expected; downgrade to Hold Shariah-compliant

In line, inching in to target price. Results tracked expectations but we downgrade MMHE to Hold following a sterling share price performace since its initial public offering (IPO) in Oct 2010 (+77% from RM3.61 retail IPO price). MMHE should see several sizeable job wins in 2QCY11 (i.e. Tapis CPP, Malikai TLP) but these have been priced in, we believe. Upside potential to our RM6.50 22x CY12 PER based target price are narrowing.


Genting Plantations RM7.97: Hold
Cautious outlook Shariah-compliant

In line. RM320m 2010 net profit was stronger (+36% YoY) on higher CPO ASPs despite weaker production. The results were in line with our forecast. Going forward, we see minimal upside to Genting Plantations' share price as we expect CPO spot to normalise during 2H11. Genting Plantations is most leveraged to CPO prices among the large cap plantation stocks. Our revised earning and valuation estimates resulted in a lower RM8.60 target price (-5%). Maintain Hold.


Sunway City RM4.12: Buy
Beats the market; targets RM1.5b sales Shariah-compliant

Maintain Buy. SunCity's 2010 RM191m normalised net profit came in above expectations. This year, SunCity targets RM1.5b sales (+22% YoY). In our view, a bigger entity with RM3.6b market capitalisation and an enlarged balance sheet post-SunCity-SunHoldings merger will improve shares trading liquidity and enable the merged entity to take on larger projects. We raise our forecasts by 3-9% but maintain the RM5.10 target price (offer price). We advise shareholders to accept the merger offer. SunHoldings warrants provide a cheaper entry to the new Sunway group.


Technicals
The FBM KLCI tumbled by 12.22 points to 1,513.63 yesterday. Its resistance areas of 1,513 and 1,533 will cap market gains, whilst the obvious support areas are located at 1,490 and 1,510.

Trading idea for today is a TAKE PROFIT call on IOICORP.


Other Local News
Auto: Total vehicle sales up 8% in January. Total vehicle sales in January increased 8% to 54,696 units from 50,622 units recorded a year ago, as car makers ramped up production by about 20% to meet the Chinese New Year deleveries. Malaysian Automotive Association (MAA) said sales volume for February is expected to be lower than that of January 2011. (Source: The Edge Daily)

Economic: BNM reserves at RM338b. Bank Negera Malaysia's (BNM) international reserves amounted to RM338b (USD109.6b) as at Feb 14. The reserves position was sufficient to finance 8.1 months of retained imports and was 4.3 times the short-term external debt. (Source: Bernama)

MAHB: ventures into China with Nagamas JV. Malaysia Airports Holdings Bhd (MAHB) marked its maiden venture into China yesterday with the signing of a joint cooperation agreement with Nagamas International Bhd (NIB). It facilitates the joint provision of airport operation, management and technical consultancy services for the Yongzhou Lingling Airport in China. (Source: Bernama)

Petra Perdana: Banks on deep-water finds. Petra Perdana Bhd could be a major beneficiary of jobs stemming from Petronas recent deep-water finds at Sarawak's NC3 and Spaoh-1 deep-water wells. Petra Perdana has a mixed fleet of 25 vessels, of which 14 are larger vessels above 9,000bhp which are ideal for deep-water. (Source: The Edge Daily)

TM, Axiata: Back together in fixed and mobile business. Demerged Telekom Malaysia Bhd (TM) and Celcom Axiata Bhd entered into wide collaboration from high speed broadband (HSBB) services and wholesale Internet access to infrastructure sharing. This will result in substantial savings for both firms, although the figures are only expected to be quantified after the deal is sealed. (Source: The Sun)

TNB: Country’s first solar power plant. TNB will soon call for tenders for the project in Putrajaya that is estimated to cost RM60m. It marks a major step forward in the country's drive to harness renewable energy sources to wean itself from an over-reliance on fossil fuels and TNB will have a head-start in terms of knowledge. (Source: The Star)

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Stocks to watch: Banks, plantations, Rimbunan Sawit, REDtone

KUALA LUMPUR: The Malaysian stock market saw a total of RM28.10 billion erased from its market capitalisation during the Feb 7-11 period, aggravated by foreign selling of mostly banks and PLANTATION stocks with high foreign shareholdings as they shifted part of their funds to developed markets including the US.

Market capitalisation was reduced from RM1,302.61 billion to RM1,274.51 billion while the 30-stock FBM KLCI fell 2.67% or 41.08 points from 1,535.60 to 1,494.52. The FBM 100 fell 2.42% or 250.05 points from 10,300.05 to 10,050.00 while the broader FM Emas shed 2.34% or 248.44 points from 10,601.25 to 10,352.81.

According to Credit Suisse Research, global emerging markets recorded US$11.5 billion of outflows in funds, of which almost half were from China and Brazil, in the past three weeks,

MIDF Research head Zulkifli Hamzah told theedgemalaysia.com that as expected, the selldown by foreign investors continued on Friday and it will probably take a couple more days for the selling to unwind before price stabilises.

“On some technical angle, such as the RSI, the market is already in the oversold territory. However, this can persist for a while which is a good opportunity to accumulate in our opinion. There was strong buying by local institutions on Friday and that should mitigate further downside in the market,” he said.

“We do not think that it is a case of foreigners cashing out of Malaysia en bloc. Amidst the selling, some foreign investors have been picking up good stocks at depressed prices. Indeed, gross purchases by foreigners had been evenly matched until Wednesday, and peaked on Thursday. These came after China’s decision to raise interest rates. Foreign investors dumped Malaysian banking stocks fearing that the local authority may follow suit and tighten monetary condition via the SRR (statutory reserve ratio), rather than the OPR (Overnight Policy Rate) route,” he said.

Stocks to watch include banks and plantations which had been oversold in the recent weeks. CIMB Equities Research said it was downgrading the regional plantation sector from Trading Buy to Neutral.

The downgrade was because most of the planters have outperformed the market since its sector upgrade; spot CPO price has done better than expected, is close to its peak and should head south in the second half. CIMB Research also said the sector valuations are broadly in line with market price-to-earnings. But this is balanced by the bright earnings outlook in the current year and M&A potential.

“We raise our CPO price forecasts by 16% to US$1,100 (RM3,200) for 2011 and by 5% to US$1,000 (RM2,900) for 2012 given the smaller-than-expected supply.

Meanwhile, AmResearch remained positive on the banking sector and it sees minimal impact of any possible increase in the statutory reserve requirement (SRR) by Bank Negara.

It said the SRR is currently at a historically low level of 1%. Its sensitivity analysis indicates a –0.3% to –2.2% downgrade to net earnings, based on an SRR rate hike of 1%.

“The ones which may be affected the most would be EON Cap (-2.2%), Alliance Financial Group (-2.1%), Maybank (-2.1%) and Public Bank (-1.4%).

“We estimate every one percentage points increase in SRR rate to reduce the amount available for lending by RM7.65 billion just for eight local banks alone. Nonetheless, we remain positive about the banking sector. Our buys are CIMB, Maybank, Hong Leong Bank and RHB Cap,” it said.

Other stocks to watch include RIMBUNAN SAWIT BHD, REDTONE INTERNATIONAL BHD, LATEXX PARTNERS BHD and RHB CAPITAL BHD.

Rimbunan Sawit Bhd’s subsidiary, R.H. Plantation Sdn Bhd is buying 4,857 hectares of oil palm plantation in Niah for RM118 million. It had entered into a memorandum of understanding with Sheba Resources Sdn Bhd to purchase the land. Sheba Resources is the registered owner of the land which has been charged to Agro Bank Malaysia Bhd for RM145.69 million.

The Edge weekly reports that with REDtone’s Malaysian operations in the red, the telco is looking to prepaid shopping cards in China to innovate its way to profitability.

In Latexx Partners Bhd, Lembaga Tabung Haji acquired 2.69 million sahres on Feb 7 to 9, raising its shareholding to 6.97% or 15.38 million shares.

On Jan 31, fund management company Navis Asia VI Management Company Ltd has offered RM852.03 million to acquire all the assets and liabilities of Latexx Partners or RM3.10 per share. At Friday’s closing price of RM2.83, there is upside for investors to pick up the shares.

In RHB Capital Bhd, its single largest shareholder, the Employees Provident Fund disposed of 5.88 million shares on Feb 7 and 8, reducing its stake to 46.6% or 1.003 billion shares.

Network Guidance Sdn Bhd (NGSB) has withdrawn claims for damages totaling RM400 million and loss of profit of RM500 million against TELEKOM MALAYSIA BHD and TM Net Sdn Bhd over an alleged breach of contract.

In the re-amended claim, NGSB sought a declaration that both parties had entered into an agreement for a joint-venture project but TM breached the agreement.

As a result of the breach of agreement, NGSB suffered loss and damages. NGSB said it is now claiming special damages totalling RM23.95 million.

AIRASIA BHD has signed an agreement with Airbus S.A.S to revise the delivery dates of 10 Airbus A320 aircraft from 2012 to 2015. The move was to allow some flexibility to switch from its current order of the classic A320 to a new generation A320 aircraft which is more fuel efficient when such aircraft come into production in the near future.

With the deferment, the delivery of 24 aircraft in 2012 would be reduced to 14 aircraft, while the number of deliveries in 2015 will be increased from nine aircraft to 19 aircraft, it said.

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Maybank IB Views

COMPANY UPDATE
Hartalega Holdings RM5.44: Buy
The nitrile wave keeps rolling Shariah-compliant

Upgrade to Buy with a RM6.80 DCF-based TP. Hartalega is set to profit from the structural demand switch to nitrile gloves, at the expense of latex gloves. Demand for nitrile gloves will continue to encroach into the latex gloves market as nitrile gloves ASP discount to latex widens (atypical in the past). Top Glove's M&A search for nitrile glove-makers and latex gloves' declining earnings are some of the recent developments that support our Buy call for Hartalega.


Technicals
The FBM KLCI closed lower by 4.45 points at 1,570.04 yesterday. Its resistance areas of 1,570 & 1,576 may cap market gains, whilst its firmer support areas are located at 1,558 and 1,568.

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


Other Local News
Axiata, DiGi: To save RM2.2b with network deal. Celcom Axiata Bhd and DiGi Telecommunication Sdn Bhd have signed a Network Collaboration Agreement. The scope of the tie-up will initially focus on the sharing of telecommunication sites, access transmission (microwave links), aggregation transmission and trunk fibre transmission. Full realization of cash savings is estimated to be about RM2.2b over 10 years. They expect to see incremental savings as early as 2012 and gradually ramping up to an average annual savings of RM150m to RM250m after 2015. (Source: Bursa Malaysia)

Pos: Khazanah to invite bids for Pos stake. Khazanah Nasional Bhd will invite bids this week through its advisor CIMB Investment Bank Bhd for the divestment of its 32.2% stake in Pos Malaysia Bhd. Pos Malaysia's stake divestment would be a two-stage process, with the first stage addressing regulatory aspects such as the increase in postage tariff rates and rise in salaries and allowances for most of Pos Malaysia's staff. While stage one has not been fully completed as other regulatory aspects such as the Postal Bill have yet to be addressed, Khazanah will proceed with stage two, where it will draw up a bidding and evaluation process to select a new shareholder for Pos Malaysia. (Source: The Star)

Proton: Seeks RM2.35b funding to revive Lotus. Proton Holdings Bhd is in talks with CIMB Bank and several others to secure loans and investments totaling GBP480m (RM2.35b) needed to turn around Group Lotus. The funds will mainly come from loans and the rest will be from Proton's additional investments and revenue from Group Lotus. (Source: The Star)

KPJ: To acquire two medical centres. KPJ Healthcare Bhd’s wholly owned subsidiary, Kumpulan Perubatan (Johor) Sdn Bhd (KPJSB) is buying a 100% stake in Sibu Medical Centre Corp Sdn Bhd (SMCC) and Sibu Geriatric Health & Nursing Centre Sdn Bhd (SGHNC). KPJSB will pay RM26.9m for SMCC and RM1.24m for SGHNC. (Source: Bursa Malaysia)

Jetson: Buys lands in Penang for Rm14m. Kumpulan Jetson Berhad's 51% owned subsidiary, Jetson Development Sdn Bhd has acquired 48,290 sq ft of lands in Penang for RM14m from Malaysian Building Society Bhd (MBSB). The three pieces of land are located in Georgetown. (Source: Bursa Malaysia)

Property: Transactions may hit RM100b. A total of 342,179 property transactions worth RM96.8b were recorded between January and November last year, which means the full year's transactions could reach the RM100b mark. This is the first time transactions value has reached this figure. (Source: The Star)

Manufacturing: To attract over RM50b. Malaysia expects investments in the manufacturing sector to surge to more than RM50b this year. The manufacturing sector, which was the fastest growing sector last year, attracted RM47.2b in approved investments in 910 projects, a 44.8% jump compared with RM32.6b received in 2009. The US was the largest source with investments totaling RM11.7b, mainly in electrical and electronics (E&E), machinery and equipment and scientific and measuring equipment. Other top investors were Japan, Hong Kong, Singapore and Germany. (Source: Business Times)

Khazanah: Portfolio at record RM75b. Khazanah Nasional Bhd saw the net worth of its portfolio rise 39.4%, or RM21.2b, to a record RM75b as at Dec 31, 2010 from RM53.8b in 2009. Total shareholders' return on Khazanah's portfolio of listed companies in 2010 stood at 33.4%, outperforming the FTSE Bursa Malaysia KL Composite Index's total return of 23.3% over the same period. (Source: The Star)

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RHBInvest Research

TM:

• Looking forward to higher UniFi take-up
• We maintain our Trading Buy call on TM for the high likelihood of 50 sen/share in special dividends. In total, dividend yields in 2011 could potentially reach 19%.
• We raise our fair value to RM4.05.

Corporate Highlights


SP Setia: Outperform

• Valuing from a quantitative perspective
• We raise our indicative to RM8.05 (from RM6.95). Maintain Outperform.

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