RHBInvest Research

Top Story: Motor – Jun 2011 quarter report card Neutral

Sector Update

Tan Chong: Fair value maintained at RM5.50 Outperform

DRB-Hicom: Fair value maintained at RM2.95 Outperform

MBM Resources: Fair value maintained at RM3.25 Market Perform

UMW: Fair value maintained at RM7.35 Market Perform

APM: Fair value maintained at RM5.10 Market Perform

Proton: Fair value lowered to RM2.50 Underperform

¨ Of the six stocks in the sector under our coverage, only three (Tan Chong, APM and DRB) reported Jun quarter earnings that were in line with expectations. Results at MBM, UMW and Proton disappointed.



Sector Call



Education: 1HCY11 results affected by regulatory changes Overweight

Sector Update

¨ SEGi delivered strong numbers in 1HCY11, with results in line with estimates, but HELP and Masterskill’s 1HCY11 results were below our and consensus expectations as their student numbers dropped due to external factors including regulatory changes that affected student intakes during the 1HCY11 peak period.



Corporate Highlights



Hong Leong Bank: Rights shares priced at RM8.65/share Market Perform

News Update

¨ HL Bank announced that the issue price for its RM2.6bn rights issue has been fixed at RM8.65/share, at an entitlement basis of 1 Rights Share for every 5 existing HL Bank shares held. Based on the last closing price of RM12.20, the issue price represents a discount of 25.5% to the theoretical ex-rights price.

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Maybank IB Views

Public Bank RM13.36: Hold
Competitive pressures remain

Little excitement. 1H11 results were broadly within expectations, with net profit of RM1.71b (+20% YoY) accounting for 51% of our full-year forecast and 50% of consensus. Our forecasts are maintained with higher NIM contraction estimates offset by lower provisions. Consumer loan demand continues to show resilience at the group but we do expect this to taper off from 2H11 onwards. Pricing is fair at this stage ( (prospective 2012 P/BV of 2.7x, ROE: 23.5%). Hold call and TP of RM14.10 maintained, pegged to a 2012 P/BV of 2.8x.

Axis REIT RM2.62: Buy
Results in line; more acquisitions soon Shariah-compliant

Maintain Buy. AXRB’s RM31.8m 1H11 core net profit (+33% YoY) came in as expected. Its 4.5 sen 2Q11 DPU was also in line. Share price has performed well thanks to a switch in preference to defensive stocks. No change in our earnings forecasts but we raise our TP to RM2.75 (+15 sen) as we roll over our base year to 2012. A lower beta assumption has also contributed to the upgrade in TP. With a 12% total return, AXRB remains as our top pick for the M-REITs sector.

COMPANY UPDATE
S P Setia RM3.92: Buy
Reaping full benefit of KL Eco City Shariah-compliant

An attractive booster to earnings and RNAV. We are excited on SP Setia's purchase of the remaining 40% stake in KL Eco City (KLEC). This non-cash acquisition will immediately boost SPSB's earnings by 0.6-1% and RNAV/sh by 8 sen. All it would cost SP Setia is 19.4m new shares, which is a mere 1.1% increase of its existing share base. We upgrade our forecasts by 0.3-1.9%. Reiterate Buy with a higher RM5.00 target price (+24 sen; 10% premium to RM4.53 RNAV).

RESULTS PREVIEW
Malaysia Airports Holdings RM6.50: Buy
2Q11: Expect good result

Strong momentum continues. MAHB will release its 2Q11 results on 28 July. 2Q is seasonally the weakest quarter for the year. Based on the operating statistics published, we expect a core net profit (less forex translation and all other non-cash items) of RM110.5m (+24.5% YoY, -1.4% QoQ). Maintain Buy, with a higher DCF-based target price of RM7.55, after imputing for a higher passenger growth of 10% in 2011 (previously 8%). Our new TP offers undemanding 15.2x 2012 earnings.

Technicals
The FBM KLCI fell 5.46 points to close at 1,559.60 yesterday. Its resistance areas of 1,559 and 1,574 will cap market gains, whilst the obvious support areas are located at 1,543 and 1,552.

Trading idea today is YTL

Other Local News
KNM: Secure RM17b project with Zecon. KNM Group Bhd and Zecon Bhd have entered into two heads of agreement with Gulf Asian Petroluem Sdn Bhd (GAP) to construct a petroleum refinery and a petroleum product storage terminal facility for a combined contract of RM17b in Teluk Ramunia. (Source: The Edge Financial Daily)

Tan Chong: Sets 20% sales target for Sabah, Sarawak. Edaran Tan Chong Motor Sdn Bhd (ETCM) is eyeing to raise the sales contribution from Sabah and Sarawak to 20% of that nationwide in three years time. Sales in the two states at the moment represented 10 percent of the national total for Nissan vehicles. (Source: The Star)

KPJ: To triple education revenue. KPJ Healthcare Bhd's education arm has been granted university college status by the Higher Education Ministry. KPJ plans to invest RM120m in the physical expansion of its education facilities and hopes to triple revenue from its education unit to RM100m annually from RM30m in 2010. (Source: The Edge Financial Daily)

Ivory: Wins Penang land rights. Ivory Properties Group Berhad (IVORY) won the rights to develop 102.56 acres of land located at Bayan Mutiara, North East District, Penang of which approximately 67.56 acres are existing land and 35 acres are to be reclaimed for a proposed mixed development. (Source: Bursa Malaysia)

Perwaja: Makes cash call to Kinsteel. Debt-laden Perwaja Holdings Bhd is making cash call to its major shareholder Kinsteel Bhd to raise RM280m under a planned restricted issue of redeemable convertible unsecured loan stocks (RCULs). Perwaja is also proposing an issue of free warrants on the basis of one free warrant for every two existing shares held. The gross proceeds will be used to finance the working capital needs of Perwaja. (Source: The Edge Financial Daily)

O&G: Qatar to sell liquefied natural gas to Malaysia. Qatar's state-run Qatargas says it has agreed to sell 1.5m tons of liquefied natural gas annually to Malaysia, locking in its first major customer in Southeast Asia. The company says it signed a preliminary agreement with Malaysia's Petronas LNG on Sunday in the Qatari capital, Doha. The supply deal is expected to start in 2013 and last for two decades. (Source: The Star)

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Maybank IB Views

RESULTS PREVIEW
WCT RM3.12: Buy
Awaiting the roll-outs Shariah-compliant

Maintain Buy. 2011 job win target remains at RM2b riding on a sizeable RM10b tender book; this will provide the lift to its RM3.4b outstanding order book. We retain our forecast for a 31% growth in 2011 net profit supported by strong property sales, completion of the 1Medini earthworks and good progress at the Qatar government building works. Our target price pegs the stock to sum-of-parts (15x 2012 PER plus 20sen value enhancement for KLIA2 retail concession).

Technicals
The FBM KLCI gained 9.49 points to close at 1,591.34 yesterday. Its resistance area of 1,591 may cap market gains, whilst the firm support areas are located at 1,577 and 1,590.

Trading idea is Short-term Buy on TCHONG

Other Local News
AirAsia: Order for A320neos to hit 300? Less than a month after AirAsia Bhd made a record-breaking order of 200 A320neo jets at the Paris Air Show, it has now reportedly increased this order by 100 jets. However, founder Tan Sri Tony Fernandes has declined to comment on the report. (Source: Business Times)

SapuraCrest: May buy Aussie business. SapuraCrest Petroleum Bhd may be acquiring Australia-listed Clough Ltd's marine construction business. The deal would allow it to grow its regional presence, expand its activities in the subsea and deepwater segments. (Source: Bursa Malaysia)

Dialog: Ink pact to develop terminal. Dialog Group Bhd's 51% owned subsidiary Pengerang Terminals Sdn Bhd (PTSB) has inked a shareholders' agreement with State Secretary, Johor to undertake the first phase portion of designing and developing of an independent deepwater petroleum terminal in Pengerang, Johor. (Source: Bursa Malaysia)

Tan Chong: To assemble Subaru vehicles here. Tan Chong Group has signed a MoU with Fuji Heavy Industries Ltd (FHI) for a consignment production contract for the assembly of Subaru vehicles in Malaysia. The contract for local assembly will begin in Oct 2012 with production capacity of 5,000 units per year. (Source: The Edge Financial Daily)

Boustead: Unlocks value of its unit. Boustead Holdings Bhd has proposed to distribute part of its stake in Pharmaniaga Bhd to its minority shareholders to help meet the required 25% free-float to stay listed and cut borrowings at the same time. To boost trading liquidity of its own share, Boustead also proposed a one-for-10 bonus issue after paring down its holding in Pharmaniaga. (Source: Bursa Malaysia)

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RHBInvest Research

Top Story: Motor – The worst of the supply crunch is over Neutral

Sector Update

MBM Resources: Fair value raised to RM3.80 Outperform

Tan Chong: Fair value maintained at RM6.15 Outperform

Proton: Fair value raised RM3.55 Underperform

• Recent reports indicate that vehicle and component production in Japan has begun to normalise sooner than expected.
• We expect supply issues to continue affecting vehicle deliveries for another one to two months and believe the worst of the supply crunch is over.
• We expect supply issues to continue affecting vehicle deliveries for another one to two months and believe the worst of the supply crunch is over.
• Macro indicators remain supportive of domestic consumption and this bodes well for consumer discretionary spending going into 2012.

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RHBInvest Research

Top Story: Tan Chong – The stars are aligned

Outperform (up from MP)

Results Preview
Nissan does not currently have a competitive offering in the segment to compete with Toyota’s Vios and Honda’s City. The new Vanette is also scheduled for launch by end-2011 that could make a significant contribution to volumes
Fair value for the stock is RM6.15 (from RM4.90) derived from applying a 10.5x PER (unchanged) to FY12 EPS (rolled over from FY11).

Corporate Highlights

Kencana : Earnings slightly below expectations

Outperform

Briefing Note
Net profit was up by 81.7% on a yoy basis from RM31.2m in 3QFY07/10 mainly due to the start-up of the company’s KM-1 drilling rig in Sep-10.
The company has been very busy of late, working on its Berantai field project and completing its large order book. Kencana’s RM400m acquisition of Allied
Marine & Equipment (AME) (via issue of new shares) is expected to be completed by 3QFY11.

Read more...

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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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: 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

ECONOMICS
Economic Transformation Programme (ETP)
Update #5...

12 more projects, initiatives and enablers with RM11.16b investment commitments under eight Entry Point Projects (EPPs) in seven National Key Economic Areas (NKEAs). They are to generate RM16.62b in gross national income (GNI) and 74,457 new jobs. The biggest project in this round of announcement is the Karambunai Integrated Resort City (KIRC) under Tourism NKEA with investment value of RM9.6b (86% of total) generating RM9.319b GNI (56% of total) and 11,002 jobs (14.8% of total) by 2020. To date, 41.2% of EPPs, 13.4% of the total EPP investments, 14.3% of the targeted incremental GNI and 9.1% of expected new jobs creations have been confirmed.

RESULTS REVIEW
Bursa Malaysia RM7.93: Sell
Boosted by robust market

Above house forecast. RM40.5m 1Q11 net profit (+44% YoY, +36% QoQ) made up 30% of our full year forecast, and 26% of consensus. No change to our earnings forecasts, expecting market activities to taper off in 2Q11. Maintain Sell; the stock remains overvalued trading on 31x current year earnings, significantly above its larger sized peers and recent M&A valuations. Our target price is based on sum-of-parts, with 25x PER target on 2011 earnings plus surplus cash.

SECTOR UPDATE
Automotive: Neutral
Marvelous March; anxiety ahead

From content to concern. Mar 2011 auto sales was abnormally strong, a one-off event, in our view. Looking ahead, Malaysia's car production is expected to soften in the months ahead, affected by the supply chain disruption in Japan. The auto sector remains a Neutral. The longer term operating landscape lacks catalyst and remains close-ended, deterring foreign automakers from making Malaysia a regional hub. Stock-wise, share price is expected to trade sideways. MBM and Tan Chong remains a Buy while Proton and UMW are Holds.

Technicals
The FBM KLCI declined 6.39 points to close at 1,521.53 yesterday. Its resistance areas of 1,521 and 1,540 will cap market gains, whilst the weaker support areas are located at 1,500 and 1,514.
Trading idea for today is a Buy call on SBCCORP.

Other Local News
MAHB: North Korea's Air Koryo makes maiden landing at KLIA. North Korea national airline Air Koryo made its maiden landing at KL International Airport (KLIA) on Monday and will start a twice-weekly service to Kuala Lumpur from Pyongyang on April 18. (Source: The Star)

BAT: Expects to double exports this year. British American Tobacco (Malaysia) Bhd (BAT) expects to double exports this year, a move that will give it a small revenue boost amid tougher sales at home. It may also sell some machinery it no longer needs, valued at between RM18m and RM20m. (Source: Business times)

Berjaya: Confirms Kim Eng approach. Berjaya Corp Bhd confirmed that Kim Eng Holdings Ltd has approached it about the possibility of buying all of Inter-Pacific Securities Sdn Bhd. (Source: Bursa Malaysia)

Smartag: Gets role in Customs project. Smartag Solutions Bhd said it was named to be part of a government project to provide security and trade facilitation system for the Royal Malaysian Customs at its checkpoints throughout the country. (Source: Business times)

E&U: SEB to buy 30% of Bakun Dam for RM1.3b? Sarawak Energy Bhd (SEB), the state utility company, is believed to have proposed to acquire a 30% stake in the Bakun Hydroelectric Power project for RM1.3b cash. SEB is valuing Bakun Dam project at RM6b which is below the RM8b expected by Sarawak Hidro Sdn Bhd. (Source: The Star)

O&G: Petronas exits Cairn India. Petroliam Nasional Bhd (Petronas) has sold its entire 14.9% in Cairn India Ltd for USD2.1b (RM6.4b). (Source: Business times)

Steel: Starshine plans to list on Ace Market by Q3. Steel products player Starshine Holdings Bhd (SHB) is planning a listing on Bursa Malaysia's Ace Market by the third quarter of the year. It will invest RM32m in a new plant in Klang and new machinery to broaden its product offering. (Source: The Star)

Read more...

Maybank IB Views

INITIATING COVERAGE
YTL Power International RM2.29: Buy
It's got the POWER Shariah-compliant

Good time to accumulate. We initiate coverage on YTL Power International (YTLP) with a Buy call and RM2.70 target price. We like its portfolio of steady concession businesses. While we are positive on YES, we expect it to incur start-up losses. That said, we postulate YTLP cash flows are strong enough to maintain net DPS at 13.1 sen or a 5.7% net dividend yield. More M&As may beckon.

The FBM KLCI rose by 11.54 points to 1,531.63 yesterday. Its resistance areas of 1,533 and 1,544 will cap market gains, whilst the obvious support areas are located at 1,515 and 1,531. We expect the index to remain in a minor rebound mode in the short term and to be bearish in the medium term.

Trading idea for today is a Buy call on PETDAG.

Other Local News
Tan Chong: To upsize MTN programme to RM2b. Tan Chong Motor Holdings Bhd has received approval from the Securities Commission to upsize its asset-backed medium term notes (MTN) programme to RM2b from RM600m. The approval would enhance the group's ability to tap the capital markets for future funding needs. (Source: The Star)

AirAsia: Unit awaits nod for Jeddah. AirAsia X, is in the final stages of getting the green light from the Government to fly to Jeddah, Saudi Arabia. (Source: The Star)

CIMB: Raises BLR/BFR rates. CIMB Bank Bhd and CIMB Islamic Bank Bhd have announced an increase in their base lending rate (BLR) and base financing rate (BFR) by five basis points from 6.3% to 6.35%, effective from April 4. The change in the rates followed Bank Negara's decision to increase the statutory reserve ratio requirement by 1% to 2% with effect from tomorrow. (Source: The Star)

JCY: Eyes major client from Japan. JCY International Bhd is in the midst of courting one of the world's leading electrical and electronic (E&E) companies from Japan as its new client. (Source: The Star)

Cypark: Proposes to take over 32 landfills. Cypark Resources Bhd has submitted proposals to the government to take over as many as 32 non-sanitary landfills and to design, build and manage integrated waste disposal sites. (Source: Business Times)

Property: Putra Place finally sold for RM514m. The Putra Place in Kuala Lumpur has finally been sold to OSK Trustee Bhd for RM514m, some three years after the property was first put up for auction. OSK Trustee may have bought the property on behalf of one of the real estate investment trusts (REIT). (Source: Business Times)

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RHBInvest Research

UMW:

Visit Note

• Fairly valued
• We reiterate our Market Perform recommendation
• fair value of RM7.85 (unchanged).

Sector Call

Motor:

Sector Update

• Awaiting new growth drivers.
• We reiterate our Neutral view on the back of relatively tepid industry growth prospects in 2011 and few new catalysts to re-rate sector valuations.
• Tan Chong is our top pick.

Read more...

RHBInvest Research

Banks:
4QCY10 report card – No major surprises but net profit at new high.
Overweight stance maintained.

Corporate Highlights

Tan Chong:
Business as usual.
Outperform call and fair value is RM6.00 (unchanged).

KNM:
Order book at an all-time high.
Maintain our earnings estimates and Outperform call on the stock. Fair value is RM3.45.

Read more...

Maybank IB Views

COMPANY UPDATE
KNM Group RM2.40: Buy
Job wins on the rise Shariah-compliant

Orders are coming in. KNM's latest RM693m new orders account for 35% of our RM2b forecast for 2011. While the company does need to prove its ability to deliver on earnings given volatility in recent results, we do believe that these new orders, which are high margin in nature, bode well for the build-up in KNM's orderbook and signal margin recovery ahead as well. Meanwhile, current high oil prices would support O&G activity and demand for process equipment, of which KNM is a major global supplier, via Borsig. Our Buy call is maintained.


Tan Chong Motor Holdings RM4.74: Buy
Same genetics, different look Shariah-compliant

Maintain Buy; RM5.75 TP. The Proton-Nissan tie-up will not affect TCM's franchise as the collaboration is on specific areas with zero product cannibalization. TCM is taking a strategic stand not to compete in the A-segment but aims to make headway in the B-segment. TCM's domestic presence is sound but its growth prospects, in our view, lie in the regional market. Growth will be solid if it successfully capitalizes on the Indo-China market, which is still in its infancy.


Petronas Chemicals RM6.21: Buy
Sector re-rating imminent Shariah-compliant

Upgrade on industry re-rating. We believe the fundamentals for the petrochemical industry have never been better, buoyed by recovery in demand, strong product margins and an increasing price divergence between natural products and synthetic alternatives. Furthermore, high oil prices are beneficial as PCG’s products generally track oil price increases. We raise our target price to RM8.00 (from RM6.70) based on 14.4x 2011 – which is the long-term industry mean PER.


Technicals
The FBM KLCI closed higher by 7.60 points at 1,506.88. Its resistance areas of 1,507 and 1,527 will cap market gains, whilst the obvious support areas are located at 1,490 and 1,505.
Trading idea for today is a Take Profit call on GENP.


Other Local News
RHB Cap: EPF can't own more than 45% of RHB Cap. Bank Negara has not allowed the Employees Provident Fund (EPF) board to hold more than 45% of the paid-up share capital of RHB Capital Bhd. As at Feb 25, EPF had 45.68% interest in RHBCap. (Source: Bursa Malaysia)

Tanjung Offshore: Bursa reprimands Tanjung Offshore. Tanjung Offshore Bhd received a public reprimand from Bursa Malaysia after reporting a 37% deviation between its audited and unaudited account for 4QFY09. Tanjung Offshore is also required to carry out limited review on its quarterly report submissions, to be performed by its external auditors for four quarterly reports. (Source: The Edge Financial Daily)

PPB: Plans to expand flour mills and cinema. PPB Group Bhd plans to spend RM140m to expand its flour mills in Indonesia and Vietnam over the next two years. The group plans to double its Indonesian mill capacity to 2,000t daily with an investment of USD30m (RM91.5m). As for its Vietnam plant, the group plans to double capacity to 800t a day with an investment of RM50m. PPB has also allocated about RM190m to expand and upgrade its cinema business, among others, of which about 60% will be utilised this year. (Source: Business Times)

Q&G: Johor to announce big multi-billion O&G investment soon. Johor's plan to transform into a new regional oil and gas (O&G) hub will get another shot in the arm with the announcement of a new multi-billion ringgit investment soon. The project will be led by a local company that has been all over the world and is now coming back to Malaysia. The government will help fund the development of infrastructure for the project. (Source: The Star)

Property: Prasarana to get part of RRIM land for development. Syarikat Prasarana Negara Bhd will be allocated a parcel of land in the proposed Sungai Buloh Rubber Research Institute Malaysia (RRIM) development project for commercial development as part of the "rail plus property" model being used to offset the cost of building the mass rapid transit (MRT). The parcel of land will be used to build the MRT's main depot but it will also include commercial development above and possibly around the depot, in the form of retail and office space. (Source: The Star)

E&U: Renewable Energy Bill goes for 3rd reading. The Renewable Energy Bill will go for its 2nd and 3rd reading at the end of the month. The Energy, Water, and Green Technology Minister said that while electricity rates may not increase with the new Act, a revision on energy tariffs cannot be ruled out. The feed-in tariff mechanism is expected to be implemented in mid-2011. (Source: The Edge Financial Daily)

Read more...

RHBInvest Research

Top Story

Media

• FY20 print And TV Ad spend up 16.4% YoY
• Media Prima (FV=RM3.20) remains our preferred pick
• We maintain our Outperform call on Media Chinese (FV=RM1.20) and Star (FV=RM4.01).
• No change to our Overweight call on the sector.

Sector Update


Motor
APM:

• Fair value at RM6.16
• Outperform

MBM:

• Fair value at RM4.96
• Outperform

UMW:

• Fair value at RM7.51 (Upgraded from RM7.47)
• Market Perform

Proton:

• Fair value at RM5.60
• Market Perform

Tan Chong:

• Fair value at RM6.08 (Downgraded from RM6.16)
• Market Perform
• Ending the year high and within expectations.
• We maintain our Market Perform call on both stocks our fair value for Tan Chong is now RM6.08/share (from RM6.16/share previously) and for UMW it is RM7.51/share (from RM7.47/share previously).
• We expect the growth trajectory to be slower moving into FY11-12, as such, we maintain our Neutral call on the sector.

Corporate Highlights


Media Prima:

• Raising Ad rates for TV and Print
• Our fair value has been raised to RM3.20 (from RM2.82).
• We reiterate our Outperform call on stock.

TNB:

• A nice hop in 2011 but caution ahead
• Expect earnings ahead to suffer from higher coal cost.
• We have revised our indicative fair value to RM6.90 (from RM7.50). Market perform.

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Maybank IB View

ACQUISITIONS / DISPOSAL
IJM Land / MRCB RM2.97 / RM2.12: Not Rated
A merger of equals

A win-win proposal. The IJML-MRCB merger will result in the largest property group with a potential market value of RM8.9b, a combined landbank of c.7,039 acres, and a combined GDV of RM36b, surpassing UEML-Sunrise's and SP Setia's. The merged entity will have a sizeable 39.8% public spread, hence raising liquidity. An enlarged balance sheet also improves its chances of taking part in the development of government land. IJML's shareholders gain better upside based on the share exchange prices of RM3.65 for IJML and RM2.30 for MRCB.


RESULTS REVIEW
IJM Corporation RM5.69: Buy
Property merger unlocks value Shariah-compliant

Upgrading target price. RM178m 1HFY11 core net profit (+29% YoY) before RM31m forex translation gain was in line, at 47% of our full-year forecast. No change to our core earnings forecast but we incorporate the RM31m forex gain, raising FY11 bottomline forecast by 6%. We lift our RNAV-based target price to RM6.40 (+16%) after incorporating new IJM Land's (IJML) implied value for its merger with MRCB and higher valuations for the construction business. IJM Corp stays a Buy.


Notion VTEC RM1.63: Buy
Fortune changes, risk abates Shariah-compliant

Upgrade to Buy. 4Q results were better than expected, with 4Q net profit rising 2.8-fold QoQ and EBITDA margin expanding by 10.2-ppt QoQ. We upgrade NVB to a Buy (non-consensus) with an unchanged RM1.95 TP. On balance we believe the negatives have been priced in after a 37% fall in share price following the disastrous 3Q results. Valuations are inexpensive, with a 4-6x FY11-12 PER and improving business outlook.


COMPANY UPDATE
Mah Sing RM1.79: Buy
Further expand its foothold in Penang Shariah-compliant

Buys land on Penang island. We are positive on the recent land acquisition in Penang island due to its attractive pricing and strategic location. The land is expected to enhance our RNAV by 4.8%. We continue to like Mah Sing given its undemanding valuation, 30% 3-year EPS CAGR and fast turnaround strategy. We lower our forecasts by 0.6-2.3%, but raise RNAV-based TP to RM2.60. Reiterate Buy.


IPO: Careplus Group RM0.23
Small glove-maker turns ambitious Shariah-compliant

Making debut on ACE Market. Careplus, a small latex glove-maker, is scheduled for listing on 6 Dec '10. The company expects capacity-driven earnings growth from FY12 onwards, but we see limited upside to its retail IPO price owing to: (i) fair valuation at its IPO price relative to small sized peers; and (ii) the presence of industry headwinds (i.e. persistently high latex prices, appreciating Ringgit).


Technicals
The FBM KLCI fell 15.67 points to 1,487.53 yesterday. Due to the significantly weaker tone in the USA last night, we may see the FBM KLCI in a bearish mode today too. Its resistance areas at 1,487 and 1,510 will cap market gains, whilst its weaker support areas are located at 1,465 and 1,480.

Our trading idea for today is a TAKE PROFIT call on LIONIND.


Other Local News
Sunway, SunCity: Shares suspended on merger talks. Shares of Sunway Holdings Bhd and Sunway City Bhd (SunCity) have been suspended from trading for two days since yesterday amid speculation that they may be merged. Both companies are expected to make an announcement today. (Source: Business Times)

Tan Chong: Teana to boost Nissan’s local market share. Edaran Tan Chong Motor Sdn Bhd (ETCM) expects the launch of its new Nissan Teana luxury sedan to boost the company's local market share. The company had already received over 1,000 bookings for the Teana. For the Malaysian market, the Teana will be sold with three engine options 136bhp, 2-litre and 182bhp V6, 2.5-litre which are assembled in Tan Chong Motor's Serendah factory, and the 252bhp V6, 3.5-litre which is fully imported from Japan. (Source: The Star)

Parkson Holdings: Acquires Shantou Parkson for RM37m. Parkson Holdings Bhd, via Hong Kong-listed unit Parkson Retail Group, has acquired 100% interest in Shantou Parkson Commercial Co Ltd for RMB80m (RM37.3m). Shantou Parkson was the owner and operator of the Parkson branded department store at South City Shopping Mall, Shantou City, Guangdong Province, China. (Source: The Star)

YTL, YTL Land: YTL Corp plans revamp of property division. Conglomerate YTL Corp Bhd plans to house all its property development assets and projects under YTL Land & Development Bhd (YTL Land). It would dispose its property assets and projects in Malaysia and Singapore to YTL Land net of outstanding intercompany balances for RM476.1m. (Source: The Star)

Gadang: Bids for more than RM2b jobs. Gadang Holdings Bhd is bidding for several engineering and construction projects totaling more than RM2b. Among the tenders are the proposed development of the Women and Children Hospital in Kuala Lumpur announced under the budget 2011, the 300MW Kimanis power plant in Sabah, 1,000MW Manjung power plant in Perak and the Shah Alam Hospital. (Source: The Edge Financial Daily)

Property: M'sian city apartment prices second lowest in region. The average price of city apartments in Malaysia is the second lowest compared with other countries in the region. Global Property Guide (GPG) said according to its research, only Indonesia offered city apartments that were priced lower than Malaysia. In comparison, the average price of city apartments in Singapore is almost eight times more than in Malaysia, beating even Australian prices, which are almost five times higher than Malaysian city apartments. (Source: The Star)

Market: Bursa plans to attract more SRI funds with ESG index. Bursa Malaysia Bhd plans to attract more Socially Responsible Investment (SRI) funds into Malaysia by constructing the Environment, Social and Governance (ESG) Index in 2012. Bursa Malaysia CEO Datuk Yusli Mohd Yusoff said the exchange is working with various relevant authorities of similar global-based listed indices. (Source: The Malaysian Reserve)

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Maybank IB Research

COMPANY UPDATE
WCT RM3.04: Buy
Earnings delivery in 2011 Shariah-compliant

Maintain Buy. We retain our earnings forecasts for WCT post analyst briefing on its 3Q10 results. Indications are that 2011 will be a good year in terms of earnings delivery - we forecast a 34% growth in net profit. We are also optimistic on job win momentum flowing into 2011, being the first year of the 10th Malaysia Plan implementation. Our target price pegs the stock to 15x 2011 earnings plus a 20sen increment from the new KLIA2 retail concession which will be inked this month-end.


RESULTS REVIEW
Tan Chong Motor Holdings RM5.62: Sell
Needs to unlock value regionally Shariah-compliant

As anticipated, 3Q results were sequentially weak. With most of the positives priced in, TCM's valuations are no longer cheap vis-a-vis its peers. With no near-term catalyst in sight, TCM is unlikely to excite and should underperform relative to market. Reiterate Sell with a RM5.00 target price, which is based on 12x 2011 EPS.


RCE Capital RM0.625: Buy
Surprises on the upside

Beats expectations. 1HFY11 RM55m net profit (+47% YoY) made up 56% of house RM98m FY11 forecast and 60% of street RM91m. Loan impairment loss was lower than expected. We raise our FY11 net profit forecast by 11% and FY12-13 by 5-7% p.a. Our new TP is RM1.10 (+8%) based on 7x 2011 PER (unchanged) and the market value of its investment in AmFirst REIT (35m units). For its strong delivery track record and growth potential, valuations are low at 4.2x earnings. Buy.


Technicals
The FBM KLCI rose 9.40-points last week. The obvious support areas for the FBM KLCI are located in the 1,462 to 1,500-zone. The key resistance areas of 1,507 and 1,531 will cap any rebound activity.

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


Other Local News
QSR: Halim Saad eyes QSR. Tan Sri Halim Saad, the former boss at Renong/UEM Group has made an offer to acquire Pizza Hut restaurant operator QSR Brands Bhd's entire business that includes its controlling stake in KFC Holdings (M) Bhd. The board is in the midst of deliberating on the proposal and will make further announcements in due course. (Source: The Star)

CIMB: Opens in Cambodia. CIMB Bank Plc was officially launched after CIMB Group received its license to fully operate its 100%-owned subsidiary in Cambodia. CIMB received approval-in-principle to establish and operate in Cambodia six months ago to offer banking products and services to the nation of 14.5m people. (Source: The Star)

K-Star: Expands footprint in China. K-Star Sports Ltd's wholly owned subsidiary Fujian Jinjiang Dixing Shoes Plastics Co Ltd is expanding its footprint in China by setting up six new wholesale outlets in northern China. K-Star started developing the northern China market in the middle of this year and had set up 19 wholesale points, of which six were in Urumqi in Xinjiang province and the remaining in Russia. In China, Urumqi acts as a major export market as it is situated near neighbouring countries like Russia, Kazakhstan and the Middle East countries. (Source: The Star)

O&G: Total signs PSC, Gazprom buys stake in Gulf of Mexico project. French oil and gas company, Total has signed an agreement with Petroliam Nasional Bhd (Petronas) to acquire a 85% interest in Block SK317B, located about 100km offshore Sarawak. Under the agreement, Total will operate the block with its partner, Petronas Carigali holding the remaining 15% interest. Separately, Gazprom Neft, the oil arm of Russian energy company Gazprom, has signed a deal to acquire a 30% stake in a project operated by Petronas to explore and develop four offshore blocks in the Gulf of Mexico. (Source: Business Times)

E&U: Expansion in solar photovoltaic to generate RM200m in opportunities. The solar photovoltaic (PV) capacity in the country is expected to increase substantially to 11 mega watt (MW) in 2011, generating about RM200m in business opportunities for companies involved in installing solar power generation systems. AWC Bhd's MD, Azmir Merican said that the 11MW capacity would provide for the grid-connected market in the peninsula and the off-grid market in East Malaysia, following the implementation of the feed-in tariff scheme under the Renewable Energy Law next July. AWC set up a joint venture company with Solamas Sdn Bhd to provide solar power integrated services. (Source: The Star)

External reserves: Increased slightly in the first half of November 10. The external reserves has increased to RM326.5b (USD105.8b) as at 15 November 10 from RM324.9b (USD105.3b) on 29 October 10. The latest reserve amount is equivalent to 8.8 months of retained imports and 4.5 times short-term external debt. (Source: Bank Negara)

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RHBInvest Research Highlights

Top Story

First Resources

• Significant turnaround from.
• Fair value is trimmed to S$1.60 (from S$1.70). Maintain Outperform.

Corporate Highlights


Hua Yang

• In the right affordable housing segment.
• Fair value is RM1.16. Not rated.

Gamuda

• Penang issues stop-work order against double-tracking project.
• Fair value is RM4.51. Maintain Trading Buy.

Genting Bhd

• One-off gain of RM390m.
• Fair value for Genting is RM12.45 (from RM12.75). Maintain Outperform.

Parkson

• PRG 3QFY12/10 results slightly below expectations.
• Fair value is unchanged at RM7.72. Maintain Outperform.

Tan Chong

• Spreading its wings to the east.
• Maintain fair value at RM6.16. Market Perform.
  

Maybank

• Off to a decent start.
• Fair value is RM10.40. Maintain Outperform.

AMMB

• Another strong quarter.
• Fair value is RM7.26 (from RM6.95) Maintain Outperform.

CSC Steel

• 3QFY12/10 performance impacted by inventory write-down.
• Fair value is RM2.33. Maintain Outperform.

Technical Highlights

Daily Trading Strategy

• Cautious pending clearer regional performance.
• FBM KLCI’s bearish technical readings continued amid the bearish reversal in the regional markets that responded negatively to the China markets’ unexpected 5% plunge.
• If the index fails to recapture the psychological level of 1,500 and 10-day SMA of 1,513 soon, chances are high for it to continue heading downward to below the 40-day SMA near 1,488.
• Key support is at 1,450, while the resistance is seen at the 10-day SMA for this week
  

Daily Technical Watch: Genting

• Negative “double sells” signal on the indicators.
• Immediate Support at RM9.57
• Immediate Resistance at RM10.60

Weekly Trading Idea: Salcon

• A chance to accumulate near RM0.75
• Strategy: Buy on weakness at above RM0.75.
• Immediate Resistance at RM0.89
• Immediate Support at RM0.75
• Exit: Cut loss if it loses the 10-day and 40-day SMAs

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Tan Chong Motor to venture into luxury cars manufacturing

Tan Chong Motor Holding Sdn Bhd will invest RM285 billion to manufacture and assemble luxury passenger cars at the Kota Kinabalu Industrial Park in Sabah.

Tan Chong said on Friday, Nov 12 it had received an approval from the Ministry of International Trade and Industry for a manufacturing licence at the industrial park to manufacture and assemble luxury passenger vehicles and commercial vehicles.

More details at theedgedaily.com/

Tan Chong currently trading at RM5.39 on last Friday. Below I attached the Tan Chong weekly chart.

Tan Chong weekly chart view

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Stock to watch BRDB, Tan Chong, P&O

Stocks to watch on Monday are companies with fresh corporate news including BANDAR RAYA DEVELOPMENTS BHD (BDRB), TAN CHONG MOTOR HOLDINGS BHD , Pacific & Orient Bhd and MALAYAN BANKING BHD.

BDRB is teaming up with Country Heights Land Sdn Bhd (CHLSB) to undertake a housing project costing RM481 million in Pekan Baru Sungai Besi, Selangor.

Its projected gross development value (GDV) would be RM652 million and the projected gross development profit at RM170 million.

Meanwhile, Tan Chong Motor will invest RM285.0 million to manufacture and assemble luxury passenger cars at the Kota Kinabalu Industrial Park in Sabah.

It had received a government approval to manufacture and assemble luxury passenger vehicles and commercial vehicles. The approval is for luxury passenger cars with engine capacities of 1,800cc and above, at on the road price of not less than RM150,000.

Meanwhile, Pacific & Orient called off the preliminary negotiations for the proposed divestment of an equity interest in Pacific & Orient Insurance Co. Bhd to Prudential Holdings Ltd. It had informed Bank Negara Malaysia the proposed divestment discussions had been discontinued.



Maybank earnings were RM1.028 billion in the first quarter ended Sept 30, 2010, up 16.6% from RM881.80 million a year ago, underpinned by improvements in all the divisions, including its Indonesian operations.

Its revenue rose to RM5 billion from RM4.56 billion. Earnings per share were 14.53 sen versus 12.46 sen.

Maybank’s net interest income increased by 9% or 146.9 million in the first quarter ended Sept 30, due to improvements in the group’s operations from higher net interest income margins in Malaysia arising from increases in the overnight policy rate and expansion of market in Indonesia.

Income from Islamic Banking operations decreased by RM43.3 million or 11.3% to RM338.2 million due to higher provision for profit equalisation reserves in the Islamic business but mitigated by increase in growth in assets which increased gross income in Islamic business.

Maybank expects its performance for the financial year ending June 30, 2011 to be better than the last financial year and on track to meet the targeted 14% return on equity.

theedgedaily.com

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

MARKET STRATEGY


Here we go again

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

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

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


JT International RM5.93: Buy
Thriving in adversity

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


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

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


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

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


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

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

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

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

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

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

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