RHBInvest Research

Top Story: Tan Chong

Results Preview

• Robust 1Q Earnings Expected
• While supply constraints are still a sector worry, Tan Chong’s high inventory levels of over RM1bn at end-2010 (2009: RM673m) will enable it to better weather possible component shortages in the coming months
• We believe the share price already reflects potential supply concerns and is close to being fairly valued.
• We lower our fair value to RM4.95 (from RM5.40) to reflect lower peer valuations but reiterate our Market Perform call on the stock.

Corporate Highlights

Maybank:

Results / Briefing note

• Low loan impairment losses boosts net profit
• Fair value has been raised to RM10.50 from RM10.20. Maintain Outperform.

YTL Power:

Company Update

• YTL Comms yesterday launched the Yes Life app (free to download) for Apple products running iOS 4, which allows iPad and iPod Touch users to add full mobile functionally into their devices, while iPhone users can have a 2nd mobile phone number.
• Maintained SOP-derived fair value at RM2.57. Without management’s assurance on future dividends, we believe YTLP may lose a bit of shine since the key investment thesis for the stock has historically been high dividend yields.

TRC:

News Update

• TRC has proposed a 1-into-2 share split, followed by a 1-for-5 bonus issues, and a 1-for-5 free warrant issue (WB).
• Maintain Outperform. Fair value is RM1.94.

MISC:

Briefing Note

• MISC guided for a FY12/11 that will be “every much like what you saw in FY03/11” but a better FY12/12 ahead with “step-up” earnings from LNG and offshore segments.
• Fair value is RM7.53. Maintain Underperform.

AirAsia:

Results Preview

• 1QFY12/11 Results Should Please Market, But Greater Earnings Volatility Ahead
• We expect AirAsia’s 1QFY12/11 results to beat our forecast but trail market expectations slightly.
• We expect AirAsia’s 1QFY12/11 core PBT to come in at RM160-165m, down 51-53% sequentially vis-à-vis RM340m recorded in 4QFY12/10 due to the seasonally lower traffic and yields and higher fuel cost.
• We are raising our FY12/11-13 net profit forecasts by 27-30% as we now assume AirAsia’s yields to only ease -6.1% in FY12/11 vis-à-vis -7.7% previously.
• Fair value is raised by 27% from RM2.10 to RM2.66. Maintain Underperform.

Century Logistics:

Results/Briefing Note

• Seasonally weak 1QFY12/11, Stronger Quarters Ahead
• Century expects to secure a contract from a new customer for its integrated logistic segment to provide storage and distribution services.
• Century is looking for further opportunities to export in high growing developing countries. Already successful in exporting to Argentina, the company expects to enter Brazil as its next export destination.
• Fair value of RM2.70/share. Maintain Outperform.

Media Prima:

Results Note

• 1Q11 Core Net Profit Up 19.1% YoY
• We maintain our fair value of RM3.20. We reiterate our Outperform call on the stock.

RH Petrogas:

Results Note

• RHP’s 1QFY11 net earnings of S$1.5m were largely in-line with our earnings estimates accounting for about 19.5% of our net profit expectations (S$7.6m). However, it only accounted for 14% of consensus full year estimates of S$10.95m.
• Forecasts. No change to earnings estimates at this juncture as earnings are relatively in line.
• Maintain our Outperform call on the stock and our fair value of S$1.81/share.

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RHBInvest Research

Top Story: Selangor Properties

Visit Note

• Selangor Properties (SPB) has about 35 acres of prime land in Damansara Heights for development. Based on the compulsory acquisition price of RM538 psf for a strip of land in Semantan (to give way for the access road to the new palace) in mid 2010, SPB’s 35 acres of land is in deep value given an average book cost of only RM240 psf.
• The development on the land will benefit from the proposed MRT line that will have a station at Pusat Bandar Damansara as well as Semantan.
• Deep in value, but timing is key. We value SPB at RM5.34.

Corporate Highlights

TRC Synergy:

News Update

• To build submarine facilities worth RM45m for Royal Malaysian Navy
• This is the second key contract TRC has secured so far this year.
• Maintain Outperform. Fair value is RM1.94.

Sunway REIT:

3QFY11 Results

• Slightly hit by external disturbances
• There were some hiccups in the acquisition of Putra Place after the REIT announced its successful bid for the property in Apr. In view of potential earnings upside from Putra Place , we maintain our Market Perform call for now, with an unchanged fair value of RM1.05.

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Maybank IB Views

Banking: Overweight
Bouncing back in March

Loan growth stronger than expected. System loan growth in March was stronger than expected and on an annualized basis, is up 12.9% YTD (13.2% YoY). On a YTD basis, non-household loan growth was higher at 13.6% versus 12.3% YTD for consumer loan growth. We raise our system loan growth forecast, and maintain our Overweight stance on the banking sector, with Buys on RHB Capital and CIMB.

COMPANY UPDATE
Petronas Chemicals Group RM7.22: Buy
April high to take a breather Shariah-compliant

Supply disruption boost. PCHEM's product margin in April 2011 was USD1,243/ton (+44.7% YoY, +3.2% MoM), we estimate. The year-to-date product margin of USD1,138/ton is 32.2% higher YoY, and above our 2011 estimate of USD1,027/ton. The advance of chemical prices has stagnated in certain segments but overall it has been a mixed bag with gainers and losers almost neutralizing each other. Maintain Buy; there is no change to our earnings forecasts and RM8.00 target price.

RESULTS REVIEW
Sunway REIT RM1.09: Buy
On track Shariah-compliant

Maintain Buy. SunREIT's RM126.2m 9MFY11 realised net profit was within expectations. Its proposed 1.7 sen DPU for 3QFY11 was also in line. We continue to like SunREIT as we believe it will benefit from the 5-6% p.a. growth in the local retail market and rising consumerism. We see a potential upside from its recently-acquired Putra Place, though a major makeover may be required for the building before it starts contributing to the trust. We maintain our earnings forecasts with an unchanged RM1.15 DCF-based target price.

Eastern Pacific Industrial Corp RM2.40: Hold
No surprises, no catalyst Shariah-compliant

No catalyst in sight. 1Q11 results were in line, on stronger YoY performance. EPIC remains a Hold. We see no immediate catalyst to warrant a re-rating. Moreover, the development of Tanjong Agas in Pahang will pose a challenge to its competitiveness in the long term. Our RM2.55 target price remains unchanged, based on 8x 2011 PER.

Technicals
The FBM KLCI closed 3.48 points lower at 1,531.47 yesterday. Its resistance areas of 1,531 and 1,548 will cap market gains, whilst the obvious support areas are located at 1,514 and 1,529. We expect further range trading for the FBM KLCI. As such, invest with a short-term time horizon.

Trading idea for today is a Buy call on E&O.

Other Local News
Axiata: Dialog, Firstsource in JV. Sri Lanka-based Dialog Axiata, a subsidiary of Axiata, announced a business process outsourcing (BPO) joint venture with India's Firstsource Solutions. Firstsource Solutions and Dialog will hold a 74% and a 26% stake respectively in Dialog Business Services (DBS). The JV will manage Dialog's customer contact management operations across its mobile, fixed line, pay television and broadband businesses. (Source: Business Times)

RHBCap: ADCB eyes 2 times book value for RHB stake. Abu Dhabi Commercial Bank is looking at two times book value, or about RM10 per share, for its 25% stake in RHB Capital Bhd. (Source: The Star)

EonCap: Restraining order unlikely by Primus as such move may result in legal suit by HLB. Primus Pacific Partners Ltd, which last week lost its legal case against EON Capital Bhd's (EON Cap) directors and shareholders, is unlikely to file a restraining order or injunction to stop the sale of EON Cap's assets to Hong Leong Bank Bhd (HLB) for fear of opening itself up to a legal suit. (Source: The Star)

KPJ: To raise RM500m for projects. KPJ Healthcare Bhd has launched its Islamic commercial papers/Islamic medium-term notes (ICP/IMTN) programme to raise RM500m to finance hospital and healthcare projects. (Source: The Star)

Ramunia: Unveils plan to bring the group out of PN17 status. Ramunia Holdings Bhd has unveiled a regularisation plan to address its PN17 status that involved a proposed capital reconstruction, rights issue and business rejuvenation plan. (Source: The Star)

TRC Synergy: Bags RM45m contract. TRC Synergy Bhd's unit, Trans Resources Corp Sdn Bhd has won a RM45m job from Boustead Penang Shipyard Sdn Bhd to build submarine safety conditioning facilities. (Source: Business Times)

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RHBInvest Research

TRC:

News Update
Lands RM43.8m public housing job in Putrajaya
Maintain Outperform. Fair value is RM1.94.


CI Holdings:

1QFY11 Results
9MFY06/11 earnings in line with estimates
Our fair value remains unchanged at RM3.88 .We are keeping our Market Perform call on the stock for now, pending clarification by management on the flattish topline growth at the analysts briefing later today.

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RHBInvest Research

Faber

Company Update

• Risk of losing concession is relatively small
• Fair value has been raised to RM2.79 (from RM2.22).
• Upgrade our recommendation on the stock to Outperform, from market perform previously.

Corporate Highlights

TRC

New Coverage (published 30 Mar 2011)

• Among the cream of the crop of small-cap builders
• Initiate coverage with an Outperform recommendation. Fair value is RM1.80.

VS Industry

1QFY11 Results

• Net profit up 172.1% yoy
• Maintain Outperform. Fair value is RM2.44 .

Hiap Teck

1QFY11 Results

• Slowdown hits 1HFY07/11 performance due lower sales and margins at its manufacturing division.
• Indicative fair value is reduced to RM1.00 (from RM1.18 previously)

Perisai Petroleum

Visit Note

• The proposal appears to be a good deal for Perisai, given the availability of the asset coincides with the long-term charter contract which is expected to be net cashflow positive to Perisai.
• Fair value estimate of RM1.25-1.43/share.

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Maybank IB Views

SECTOR UPDATE
Banking: Overweight
2010 in perspective, divining 2011

Overweight. The sector's value proposition lies in (i) stable economic growth which lends support to our aggregate net profit growth forecast of 11.6% in 2011 and 11.8% in 2012, (ii) benign inflation and bottoming margins, (iii) steady loan growth momentum, (iv) potential ETP upside surprises, (v) cross-synergies and burgeoning contribution from regional operations to group earnings, (vi) healthy capital ratios and (vii) decent valuations and dividend yields. RHB Capital and CIMB continue to be our top picks.


ECONOMICS
External Trade, January 2011
Slow start to 2011...

Exports got off to a slow start this year as it grew by +3.0% YoY in Jan '11 (Dec '10: +4.6 YoY). Sustaining the growth were commodity shipments amid declines in E&E. In contrast, imports growth accelerated to +13.5% YoY (Dec'10: +11.5 YoY) mainly due to intermediate goods, reflecting inventory management ahead of the Chinese New Year holidays. No change in our external trade growth for 2011(exports: +8.7%; imports: +10.4%; trade balance: +RM111.1b) amid steady global economic growth momentum so far in 2011 and the benefits of firm commodity prices to Malaysia.


Malaysia: Balance of Payment (BoP)
Capital flows the highlights in 2010 amid steady trade flows

Trends in capital accounts remained the highlights as current account surplus was sustained via surpluses in goods and services trades. Key points are: 1) Inward FDI bounced last year after the plunge in 2009; 2) Fourth consecutive year net FDI outflows as direct investment abroad (DIA) by Malaysians also rebounded; 3) Net inflows of portfolio funds in 2010 after net outflows in 2008-2009; 4) Record errors and omissions: which raised the issue of "disintermediation" of capital/money flows outside the formal financial/banking system.


Oil Trade
Sweet spot for Malaysia

We compare some key oil trade statistics as well as the trade balance impact analysis from crude oil price increases between major, large emerging and regional economies i.e. US, EU, China, India, South Korea, Taiwan, Singapore, Malaysia and Indonesia. Notwithstanding the risk to growth and inflation from crude oil price increase, being a net oil exporter puts Malaysia at a significant advantage in terms of positive trade balance effect from - and low vulnerabillity to - crude oil price increase.


COMPANY UPDATE
Sunway Holdings RM2.18: Buy
Wins Legoland works Shariah-compliant

Maintain Buy. RM258m job win in Johor has lifted outstanding order book to RM2.7b (+11%). We maintain our earnings forecasts which have imputed RM1.2b job wins for 2011 (2010: RM0.9m). Our fair value is RM2.85 based on 11x 2011 PER, while its merger with Sunway City, at RM2.60 offer price, offers a 19% upside. At current levels, the stock trades at a deep discount to its peers, at 8.4x 2011 PER.


The FBM KLCI rose 33.34-points and closed at 1,522.61 last week. The obvious support areas for the FBM KLCI are located in the 1,474 to 1,520-zone. The very firm resistance zone of 1,522 and 1,576 will see heavy liquidation activities.

Trading idea for today is a Buy call on PETDAG.


Other Local News
AirAsia: Indonesia IPO to raise USD200m, Sarawak offers land to AirAsia for LCCT. AirAsia Indonesia, a unit of AirAsia Bhd, aims to raise USD150m to USD200m via an initial public offering (IPO) in 4Q11. Separately, the Sarawak government has offered a piece of land next to the Kuching International Airport to AirAsia Bhd to build a dedicated low-cost carrier terminal (LCCT). (Source: The Star)

Maxis: In final stages to wrap deal with Barak Telecom. Maxis Bhd is close to securing a three-year deal to provide telecommunication services to Kuwait's Baraka Telecom Sdn Bhd in Malaysia. The agreement would mark Baraka's return to the mobile virtual network operator (MVNO) business in Malaysia. (Source: The Malaysian Reserve)

DRB-HICOM: To win RM7.5b project. DRB-Hicom Bhd is poised to receive a letter of award to supply 257 units of armoured personnel carriers (APCs) worth up to RM7.5b from the government. A group of banks led by Maybank, RHB Bank and AmBank are helping to arrange the syndicated loan and other financing, which could be worth as much as RM3.5b. (Source: Business Times)

Fajarbaru: Unit wins LRT jobs. Fajarbaru Builder Group Bhd's wholly owned subsidiary Fajarbaru Builder Sdn Bhd (FBSB) has received a letter of acceptance worth RM62.6m from Bina Puri Holdings Bhd-TIM Sekata joint venture for part of the light rail transit extension. Separately, FBSB has also received a contract worth RM87.3m from Trans Resources Corp Sdn Bhd to construct, complete, testing and commissioning of Station 1, 2 and 3 for Kelana Jaya line extension. (Source: Bursa Malaysia)

TRC Synergy: Expects new contracts. TRC Synergy Bhd (TRC) is expected to increase its order book this year with more contract wins, mainly from road projects in East Malaysia and also potential involvement in MRT (mass rapid transit) project. (Source: Malaysian Reserve)

Banking: Further tightening by Bank Negara in mortgage lending sector. Bank Negara would be taking pre-emptive measures in the mortgage lending sector to reduce risks. Banks will have to hold more capital for mortgage loans. Mortgages with loan-to-value (LTV) ratio of more than 90% will have to carry weightage of 100%, compared with 75% previously. The risk weightage for LTVs that are less than 80% remains 35% and for those between 80% and 90% remains at 50%. (Source: The Edge Financial Weekly)

Manufacturing: Investments hit RM4.6b. The manufacturing sector saw approved investments totalling RM4.6b in 67 projects in January. The largest domestic investment came from the oil and gas sector, led by Malaysia Marine and Heavy Engineering Bhd with a total investment of RM2.3b. Foreign investments approved totalled RM600m with Singapore, France, Japan, United Kingdom and India accounting for the major source of investments. (Source: The Star)

Economic: Malaysia's growth target remains despite Mideast turmoil. The Government is firm in achieving its 6% annual growth target this year despite the civil unrest in some Middle Eastern countries. The target was attainable by ensuring investments committed to Malaysia were implemented efficiently. (Source: The Star)

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Stocks to watch: TRC, Bina Puri, Sime Darby, TM, Stone Master

KUALA LUMPUR: Worries about the European sovereign debt crisis spreading within the continent and the Korean conflict are expected to see investors staying on the sidelines in the coming week, starting Monday, Nov 29.

On Wall Street, US stocks fell after spending Black Friday in the red as worries over the euro zone’s finances overshadowed positive readings on the start of the holiday shopping season.

The Dow Jones Industrial Average dropped 95.28 points, or 0.9%, to end at 11092. JP Morgan Chase and American Express fell the hardest, with both stocks losing 1.7%. The Nasdaq Composite dropped 0.3% to 2,534. The Standard & Poor’s 500 index declined 0.8% to 1189.

At Bursa Malaysia, stocks to watch are TRC Synergies Bhd and BINA PURI HOLDINGS BHD, SIME DARBY BHD, TELEKOM MALAYSIA BHDand Stone Master Corp Bhd.

Syarikat Prasarana Negara Bhd picked TRC Synergies Bhd as the main contractor for the 17-km extension of the Kelana Jaya Line from Kelana Jaya station to Putra Heights, which includes 13 new stations. The contract value is RM950 million and it is for 30 months.

It also appointed Bina Puri-Tim Sekata JV as the main contractor to implement the 17.7 km extension for the Ampang LRT line between Sri Petaling to Putra Heights. The contract value is RM634.64 million and the duration is 27 months.

Sime Darby swung back into the black with net profit of RM654.74 million in the first quarter ended Sept 30, 2010 and has set a target of achieving net profit of RM2.5 billion for the current financial year.

Telekom Malaysia reported a 140% surge in its third quarter earnings to RM446.6 million from RM185.7 million due to higher operating revenue, disposal of investments and higher unrealised exchange gain.

Stone Master is venturing into China’s liquefied natural gas (LNG) transportation business following the proposed acquisition of a 51% stake in JinZhou Everthriving Logistics Co. Ltd for RM25 million. The shares surged 30 sen last Thursday before the suspension on Friday for the announcement.

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Maybank IB Views

AirAsia RM2.55: Buy
Shocking, but in a good way Shariah-compliant

Jetting up. AirAsia reported the highest 3Q operating profit in its history: net profit of RM271m (+1,022% YoY). We raise our forecasts to reflect a stronger yield environment and the rebound of associates' performances. AirAsia is the cheapest low cost carrier (LCC) globally, after adjusting for normalised accounting practices. Buy with a higher RM3.36 target price. We now peg the stock to 9.0x 2011 PER (previously 10.1x).

Malaysian Airline System RM2.06: Buy
It's coming together

Above expectations, cost reduction driven. 3Q10 recurring net profit of RM147m - reversal from losses, is the first sign that MAS is graduating to sustainable profits going forward. Yields were ahead - albeit at a lower pace than peers, but unit cost has improved significantly due to efficiency gains and higher utilization rate. We raise our earnings forecasts with slightly higher RM2.64 TP, based on 12.4x 2011 PER, 10% premium to peers for its higher growth prospects.


Proton Holdings RM4.73: Buy
Inspira to inspire

Results yielded no surprises, with 1H net profit meeting 54% of our full-year forecast. As Proton seeks to unlock value through strategic partnership(s) and explore opportunities overseas, valuations are inexpensive (0.5x book and 9-10x forward PERs). It also has a sizeable war chest of RM1.2b (RM2.12/sh cash), which could be upstream for higher dividends. Proton also trades at a lower 6x PER ex-cash. We remain Buyers of Proton with a RM5.90 target price (11x FY12 EPS).


Hock Seng Lee RM1.92: Buy
Share bonus cheer Shariah-compliant

Results in line; Buy. RM52m 9M10 net profit (+34% YoY) is 72% of our 2010 forecast and 73% of consensus. A surprise 1-for-50 treasury shares distribution translates into 3.8sen (net) return to shareholders based on the last close share price. We are still positive on HSL delivering double-digit earnings growth into 2011 and benefiting from job flows under SCORE. Our TP pegs the stock at 14x 2011 PER.


Technicals
The FBM KLCI rebounded 7.95 points to 1,496.49 yesterday. Its resistance areas at 1,498 and 1,515 will cap market gains, whilst its obvious support areas are located at 1,477 and 1,496.
Trading idea for today is a TAKE PROFIT call on TENAGA.


Other Local News
MMHE: Eyes RM1b profit. Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE), is targeting a RM1b net profit within five years. Prime Minister Datuk Seri Najib Razak said the target should be regarded as the company's key performance indicator (KPI). (Source: The Star)

O&G: Petronas to invest in Johor O&G hub, PM to announce new projects next week. Petroliam Nasional Bhd (Petronas) will play a major role in the development of Teluk Ramunia and Pengerang in Johor into an oil and gas (O&G) hub. Separately, prime minister Datuk Seri Najib Tun Razak is expected to announce new development and entry point projects in the oil, gas and energy sector on Tuesday. (Source: The Star)

O&G: Technip boosts presence in Malaysia. France-based Technip Group launched its flexible pipe manufacturing facility located in Tanjung Langsat, Johor. Costing EUR140m, the new plant will allow Technip to make further inroads in Asia-Pacific and Middle East subsea oil and gas markets. Technip has already established a long-term strategic collaboration with MISC Bhd, Malaysia Marine and Heavy Engineering Holdings Bhd and two other subsidiaries of Petronas. (Source: Business Times)

MRCB: Construction on Penang Sentral starts next month. Construction works on the RM2.7b Penang Sentral Integrated Transport Hub in Butterworth is expected to begin next month. The project will be undertaken by a joint venture between MRCB and Pelaburan Hartanah Bumiputra Bhd. The first phase comprises an integrated transportation hub with a retail component could start next month and is scheduled for completion by Dec 2013. The second and third phases are commercial components, comprising a commercial hub, including office towers, serviced apartments, a hotel and waterfront amenities, is scheduled for completion 10 years from now. (Source: The Malaysian Reserve)

Transportation: Study on bullet train ready by mid-2011. The feasibility study on the KL-Singapore bullet train project is due to start in January and would be completed by mid-2011 before Malaysia proceeds to approach Singapore. The bullet train (which travels at an average speed of 350-450km/hour) could lower traveling time between the two cities to under two hours. (Source: Business Times)

Transportation: LRT extension jobs to be awarded soon. The government is expected to award the long-awaited light rail transit (LRT) extension project soon, and successful bidders have been short-listed. It is learnt that Bina Puri Holdings Bhd is in the forefront to win the LRT extension job for the Ampang line worth about RM600m. Meanwhile, TRC Synergies Bhd is tipped to bag the main contract for the Kelana Jaya line extension, estimated to be worth between RM900m and RM1b. (Source: The Edge Financial Daily)

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Headline is: TRC Synergy & UEM Group in final race for LRT extension job

Headline is: TRC Synergy & UEM Group in final race for LRT extension job.

TRC & UEM Builder Intria Bina S/B are believed to be at the last mile of the race to win the contract for the extension of the LRT near Kelana Jaya. It looks as if TRC is the front runner for the job. The cost of the civil works is estimated at RM900m to a bit more than a RM1b.

On the technical, we like it for its very firm Wave 3 uptrend with support at RM1.19 to RM1.45. Resistance is at RM1.49 & 1.60. Stop-loss is at RM1.17 and the upside target areas are RM1.68, RM1.86 and RM2.17 in the longer-term.

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