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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Stocks to watch: Tenaga, Envair, SILK, MFM

KUALA LUMPUR: TENAGA NASIONAL BHD [] could be in focus on Monday, Oct 31 after it announced fourth quarter net loss of RM453.90 million, the second consecutive quarter of losses, last Friday, and expected the current financial year to be very challenging.

At the operating level, the power company reported operating losses of RM248.80 million due to higher fuel costs of coal and utilisation of oil and distillates after the gas curtailment by Petroliam Nasional Bhd.

Though investors anticipated Tenaga to reported losses, their concerns were whether it could work out the gas supply issue and a definite compensation from Petronas.

However, the lack of assurance from Petronas could weigh on the share price, especially after Tenaga president and chief executive officer Datuk Seri Che Khalib Mohamad Noh said on Friday no decision had been reached as yet.

OSK Research said barring a write-back of compensation from Petronas due to its failure to supply sufficient gas to Tenaga, the power company should still post losses over the next two quarters.

“A continued gas shortage coupled with outages in coal plants during 4QFY11 should have necessitated Tenaga to continue to generate substantial power from expensive oil and distillates. In addition, the weakening ringgit would give rise to translation losses,” it said.

OSK Research cautioned that Tenaga might be hopeful for compensation from Petronas amounting to 33% to 67% of its additional fuel bill.

“Investors may also hold out hopes of Tenaga securing a fuel cost pass through after the anticipated General Elections, which may be held soon. In any case, we still believe it would be risky to invest in Tenaga beyond current levels given such speculation,” it added.

However, the broader market could extend their gains, underpinned by the recent strong performance on Wall Street where stocks closed out a fourth week of gains in quiet fashion on Friday, edging higher as the market took a breather after rallying 3% on Europe's deal to stem its debt crisis.

Reuters reported though investors still have questions about implementing the deal, they appeared satisfied by Europe's progress as stocks ended their longest weekly winning streak of the year.

The Dow Jones industrial average gained 22.56 points, or 0.18%, to 12,231.11. The Standard & Poor's 500 Index added 0.49 point, or 0.04%, to 1,285.08. The Nasdaq Composite Index shed 1.48 points, or 0.05 percent, to 2,737.15.

As for the FBM KLCI, it is up 114.3 points from Oct 3’s 1,367.52 to end 1,481.82 last Friday. For last week, the KLCI was up 30.9 pts or 2.19%.

Affin Investment Bank head of retail research Dr Nazri Khan believes the KLCI is likely to trend higher next week on stronger global risk appetite following twin Europe-US catalysts last week.

The factors were the long awaited plan to resolve the European debt crisis and the stronger than expected US 3rd quarter economic growth (registering the fastest quarterly GDP in a year).

“Going forward next week, we expect investors to price in stronger US/European economy as well as the reduced banking crisis risk in both continents, pushing KLCI to a possible 1,524 level (which is the KLCI high made in 2008 before the subprime crisis),” said Nazri.

Other stocks to watch are Envair Holdings Bhd, SILK Holdings Bhd and MALAYAN FLOUR MILLS BHD [] (MFM). Also in focus could be TASEK CORPORATION BHD [] and Cycle & Carriage Bhd.

Envair has received a letter of intent from Zai Corporate Finance Ltd (ZAICF), an investment banking firm based in London, to subscribe for up to 30% of its new ordinary shares of 10 sen each at the market issue price.

The ACE Market listed company said the board would deliberate on this matter and announce its decision on the private placement.

SILK chairman Datuk Mohd Azlan Hashim has said he was confident the company would be able to return to profitability in a couple of years as traffic volume picks up for its tolled highway operations and an improvement in the marine support services.

"We expect with the continued increase in traffic flow in that area, these losses will eventually be wiped out and there will be a turnaround in profitability," he said.

Malayan Flour Mills could be getting ready for the next stage of growth, having announced a series of corporate exercises in May and signing an agreement in October that would see it step into the Indonesian market, according to The Edge weekly.

Tasek's earnings fell 32.9% to RM22.10 million in the third quarter ended Sept 30, 2011 (3QFY11) from RM32.90 million a year ago, due to lower sales. Its revenue fell 7.5% to RM132.99 million from RM143.78 million. Earnings per share were 17.82 sen compared with 20.63 sen.

Cycle & Carriage Bhd’s earnings for third quarter ended Sept 30, 2011 fell 38.37% to RM5.93 million from RM9.62 million a year ago, due to lower margins and reduced non-recurring income. Revenue rose 20.6% to RM188.21 million from RM156.03 million. EPS were 5.89 sen compared to 9.55 sen the previous year.

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RHBInvest Research

Top Story: TNB – May have hit rock bottom in 4Q Underperform

Results Preview

¨ Due to gas shortage from maintenance at Petronas’ LNG plants and delays in the Bekok C bypass, TNB will likely record a 4Q loss, possibly close to that seen in 3Q (-RM460m). This is a result of TNB receiving only an average of 950 mmscfd of gas in 4Q, marginally higher than the average 940 mmscfd in 3Q.



Corporate Highlights



BAT: 3QFY11 TIV grew 1.6% yoy Underperform

3QFY11 Results / Briefing Note

¨ BAT’s 9MFY11 net profit of RM539m (-1.7% yoy) was above ours but within consensus estimates, accounting for 79% and 75% of full-year forecasts respectively. The main variance to our forecasts were the stronger-than-expected 3QFY11 TIV 3% yoy.



TH Plantations: Bumper profit year continues Outperform

3QFY11 Results

¨ 9MFY11 net profit was in line with both our and consensus expectations, coming in at 73-77% of our and consensus FY11 forecasts.



WCT: Acquiring 432-acre land in Serendah for RM38.4m Market Perform

News Update

¨ WCT is acquiring 431.7 acres of freehold agricultural land in Serendah, Selangor, for RM38.4m cash.



DRB-Hicom: Three CBU Volkswagen models launched Market Perform

News Update

¨ Volkswagen Malaysia (VWM) yesterday launched three new completely built-up (CBU) fully-imported models into the local market, the culmination of an intensive two-week newspaper advertising campaign. The three models are the Passat 1.8, Jetta 1.4 TSI and Cross Touran 1.4 TSI. The introduction of these new CBU models is a prelude to the launch of DRB-assembled CKD VWs by end-2011.

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Stocks to watch: PacMas, Leader, Public Bank, LFE Corp

KUALA LUMPUR: The fresh flow of corporate news on Bursa Malaysia, with a proposed takeover of LEADER UNIVERSAL HOLDINGS BHD [], the windfall for PACIFICMAS BHD [] shareholders and strong earnings from PUBLIC BANK BHD [] will underpin market sentiment.

Other stocks to watch are LFE Corp Bhd, TENAGA NASIONAL BHD [], GADANG HOLDINGS BHD [], Malayan Flour Mills and Nadayu PROPERTIES [] Bhd,.

OCBC Capital (Malaysia) Sdn Bhd (OCSB) has made offer to acquire all of PacificMas’s stakes in five companies for RM450 million of which RM164.23 million be in cash and RM285.76 million due and owing by OCSB to PacificMas.

After the completion of the corporate exercise, PacificMas’ assets would comprise mainly cash, available-for-sale/trading securities and the deferred amount. PacificMas will promptly distribute its remaining cash via the declaration of special dividend(s) and/or the implementation of a capital repayment exercise.

Leader Universal’s top officials, via HNG Capital Sdn Bhd, have made a takeover offer for the company for RM480.10 million or RM1.10 per share. This is 26 sen above the last traded price of 84 sen. Leader said the purchase consideration would be RM410.94 million in cash and RM69.16 million as an amount remaining due and owing by HNGC as a debt due to Leader.

Public Bank Bhd’s earnings rose 14.8% to RM898.79 million in the third quarter ended Sept 30, 2011 from RM782.7 million a year ago. Revenue increased by 13.7% to RM3.27 billion from RM2.87 billion. Earnings per share were 25.66 sen compared with 22.35 sen a year ago.

For the nine-months ended Sept 30, 2011, its earnings rose 18.3% to RM2.606 billion from RM2.202 billion. Revenue increased 16.9% to RM9.434 billion from RM8.064 billion. Pre-tax profit grew by 16.6% to RM3.447 billion from RM2.955 billion.

LFE CORPORATION BHD [] has been awarded RM26.35 million in its suit against its major shareholder and former director, Alan Rajendram A/L Jeya Rajendram.

LFE said the Kuala Lumpur Regional Centre for Arbitration had awarded RM26.35 million, interest at the rate of 8% per annum from Dec 21, 2008, legal costs of RM200,000 and costs of the arbitration of RM104,352.

Tenaga Nasional’s share price rallied 37 sen to RM5.57 on expectations of a resolution over its gas supply issue. Market talk was that Tenaga might get a writeback from Petronas.

Gadang said Messrs Ernst & Young was not seeking reappointment as auditors of the company for the financial year ending May 13, 2012 at its AGM.

It said Meloria Sdn Bhd, a substantial shareholder, had in its Oct 3 letter, nominated Messrs PKF as auditors in place of Ernst & Young and to hold office until the conclusion of the next AGM.

Malayan Flour Mills’ proposed EGM fixed for Wednesday, Oct 19 will go ahead after the application for an injunction to restrain or prevent the meeting had been dismissed.

Nadayu Properties Bhd, a medium sized property developer, aims to hit a sales target of at least some RM300 million next year.

Its executive chairman Hamidon Abdullah said on Monday, Oct 17 the sales target was based on its upcoming property launches.

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Stocks to watch Proton, Tenaga, Catcha, Cypark, tobacco

KUALA LUMPUR: The FBM KLCI could stage a corrective rebound in the week beginning Monday, Sept 19, on the back of the announcements made by Prime Minister Datuk Seri Najib Razak as well as corporate news flow.

Najib on Sept 15 announced the proposed repeal of the Internal Security Act (ISA) and laws related to banishments, but gave little detail of the two proposed enactments to be in place after the ISA is repealed.

There is also heavy anticipation of a people-friendly Budget 2012 to be tabled on Oct 7, seen as the final one before the general elections which some analyst say could be called within the next six months.

There were also corporate announcements by PROTON HOLDINGS BHD [], TENAGA NASIONAL BHD [], Catcha Media Bhd and Cypark Resources that could put them in focus, while tobacco players may see some selling pressure on worries of a tax hike.

On the external front, US stocks rose for a fifth day in a row on Friday and the S&P 500 scored its best week since early July on signs euro zone leaders were acting together to limit any damage from its sovereign debt crisis.

Affin Investment Bank Bhd head of retail research Dr Nazri Khan said he expects the FBM KLCI to do corrective rebound next week before resuming its downtrend spotted since July this year.

We believe next week to be interesting as most regional indices including FBMKCLI is close to test its year-to-date low (with FBMKLCI testing 1,423 level).

“A strong rebound from the support may suggest a reliable bottom in progress.

“The fact that FBM KLCI is currently down by 11% (since mid July 2011 week) on the past eleven losing weekly session may suggest an oversold rebound is imminent,” he said.

Proton and Japan’s Mitsubishi Motors Corporation (MMC) are considering joint production of engines in Malaysia and production of MMC-brand vehicles at Proton’s plants under their proposed strategic collaboration.

Confirming The Edge FinancialDaily report on Thursday, Sept 15 about the broad ranging strategic collaboration, they said in a joint statement they were in “serious collaboration” to enhance their competitiveness in the global market place.

Tenaga plans to raise RM5 billion from a 20-year ringgit denominated Sukuk to be issued at the end of October, its president and chief executive officer Datuk Seri Che Khalib Mohd Noh was reported as saying to Bernama on Sept 15.

Che Khalib said the book building exercise was to be held in the third week of October and that the proceeds from the Sukuk would be used to finance the extension of the 1,000-MW Janamanjung coal-fired power plant in northern Perak.

Catcha Media is foraying into the luxury goods business after acquiring a Singapore-based company Haute Groupe Pte Ltd, which also sells luxury goods online, for S$5 million or RM12.34 million.

Catcha Media said on Thursday, Sept 15 it was acquiring the entire equity from Loong Siew Fong and her spouse Low Choong Lang.

Haute Groupe’s core activities are retail of bags, luggage and travel accessories and the wholesale of bags, luggage and travel accessories. It also operates the luxury flash sales website hauteavenue.com and luxury flash sales event business.

Cypark could see some trading interest after it secured a RM29.88 million contract from Putrajaya Holdings Bhd for infrastructure, landscape and road works in Putrajaya.

It said on Thursday, Sept 15 that it had accepted the letter of award for the project from Putrajaya Holdings on Sept 14.

Meanwhile, BRITISH AMERICAN TOBACCO (M) [] Bhd and JT INTERNATIONAL BHD [] may see continued selling pressure on concerns of a hike in the tobacco duty in the Budget 2012 proposals to be tabled on Oct 7.

OSK Research on Sept 15 said it expected a moderate hike in tobacco duty in the upcoming Budget but it believes that the breweries will be spared.

“We prefer BAT to JTI as the former is less exposed to value-for-money brands which are more price elastic and prone to substitution,” it said.

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Maybank IB Views

BNM Monetary Policy
No change in key policy instruments...

Bank Negara Malaysia (BNM) kept the Overnight Policy Rate (OPR) at 3.00% and the Statutory Reserve Requirement (SRR) at 4% following its Monetary Policy Committee (MPC) meeting yesterday. BNM’s decision to leave both OPR and SRR unchanged sent a strong signal that the central bank’s monetary policy bias has shifted to supporting growth. We see the OPR staying at current 3% level at least until mid-2012, although it is possible that this could be extended into 3Q 2012. The same goes for SRR, as BNM's monetary policy now seek to not only maintain accommodative cost of financing, but also to ensure availability of liquidity to support growth.

Economic Transformation Programme (ETP)
Update #7

PM announced 8 new entry point projects (EPP) under the Economic Transformation Programme (ETP) involving RM1.43b investments in six National Key Economic Areas (NKEAs). The biggest investment was in the palm oil NKEA where KL Kepong will invest RM706m in four downstream projects. Cumulatively, over half of EPPs and over one-fifth of investment targets have been announced. On progress of earlier announced EPPs, 26% are fully operational, 57% have commenced implementation, and 16% are still work-in-progress.

External Trade, Jul 2011
A mixed bag of data...

Exports growth of +7.1% YoY in Jul '11 was better than expected (revised Jun '11: +9.6% YoY, Maybank-IB: +4.6% YoY; Consensus: +6.6% YoY). But import growth came in below estimates at +2.9% YoY (revised Jun '11: +6.9% YoY, Maybank-IB: +4.1% YoY; Consensus: +6.5% YoY). As export growth outpaced import growth, the trade surplus was a larger-than-expected RM9.45b (revised Jun '11: +RM7.88b, Maybank-IB: +RM7.6b; Consensus: +RM7.8b). MoM, exports gained by +2.4% while imports fell by -0.4%. YTD, exports rose by +6.9% while imports increased by +8.7% giving a RM68.6b trade surplus. Our full-year forecasts for export growth, import growth and trade surplus are +8.4%, +10.8% and RM106.9b respectively.
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SECTOR UPDATE
Telcos: Neutral
6% service tax passed through

A pleasant surprise. That the 6% service tax will be passed through from the telcos to prepaid customers is a pleasant surprise. While this move has been talked about for awhile, the timing of it is earlier than expected. Biggest beneficiary of this is Digi, with its larger prepaid customer base. The telco sector remains defensive for its domestic focus and decent yields - Telekom remains our top pick.

COMPANY UPDATE
Digi.Com RM31.12: Hold
Capital management plans Shariah-compliant

Marginally positive, Hold maintained. Digi's proposals ensure that as much is returned to shareholders out of reserves as possible. In addition to the expected nominal DPS of RM1.63/share in 2011, investors could possibly see another 30sen in special DPS next year. Separately, we have raised 2012/2013 earnings by 8% and 6% respectively and our DCF-derived TP has been lifted to RM31.50 with the pass-through in the 6% service tax (see separate writeup today).

Kuala Lumpur Kepong RM21.60: Hold
Seeking downstream growth Shariah-compliant

Rain or shine, expansion goes on. KLK will invest RM706m capex in 4 downstream projects in Malaysia, PM Najib announced during the Economic Transformation Programme update session yesterday. While the impact may only be felt three years later, we are nonetheless positive on this development especially as it comes along with RM134m of approved MPOB grants to reduce costs and enhance returns. No earnings impact for now; funding is not an issue. Maintain Hold with an unchanged TP of RM21.60 based on 16x FY12 EPS.

Technicals
The FBM KLCI ended 5.22-points higher to close at 1,469.83 yesterday. Its resistance areas of 1,471 and 1,497 will cap market gains, whilst the obvious support areas are located at 1,443 and 1,469. Due to the US markets’ weaker tone last night, we may see a steady tone for the local bourse today. Some further profit-taking activities may persist to depress the markets’ rebound from its recent 1,423.47 low.

Trading idea is a Short-term Buy call on MALTON

Other Local News
TNB: Sees delay in gas recovery. Tenaga Nasional Bhd (TNB) gas supply curtailment issues are likely to continue as the key Bekok field is only expected to commence operations by another month. The expected delay is paired with another negative surprise TNB might not get back the full 150-200m standard cu ft per day (mmscfd) as it has to share the capacity with the industrial sector. (Source: The Star)

DRB-HICOM: Going for more M&As. DRB-HICOM Bhd is still hungry for more mergers and acquisitions (M&A) to add synergy to its core businesses and to expand its operating profit. It is allocating RM700m to RM1b as capital expenditure. This comprises investments for its Volkswagen assembly, the design and manufacturing of BAE System's 8x8 armoured wheel vehicles, and property development along with its automotive university college in Pekan. (Source: The Star)

Puncak Niaga: Syabas files RM1.05b suit against Selangor Government. Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), a subsidiary of Puncak Niaga Holdings Bhd, has filed a RM1.05b claim against the Selangor Government. The claim, filed at the Kuala Lumpur High Court, was for compensation for the period from Jan 1, 2009 to March 31, 2011 from the state government under the 2004 concession agreement between Syabas, the Federal Government and the Selangor Government. (Source: Bursa Malaysia)

Consumer: McD Malaysia to open 87 new restaurants by 2014. McDonald's Malaysia will invest RM348m to open another 87 restaurants by 2014, spending RM4m on each new restaurant. The company aims to have 100 franchised stores by 2014. Currently, it has 13 local franchisees in Malaysia and 27 franchised restaurants. (Source: The Edge Financial Daily)

Utilities: 1MDB evaluating plan to privatise Indah Water. 1Malaysia Development Bhd (1MDB) is evaluating a plan to privatise Indah Water Konsortium Sdn Bhd (IWK), the national sewerage company. It is believed that 1MDB is part of a consortium that intends to take over IWK. The other member of the consortium is believed to be either Puncak Niaga Holdings Bhd or controlling shareholders of the company. (Source: Business Times)

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Maybank IB Views

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Trading Idea is Tenaga

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

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

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

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

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

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

Read more...

Stocks to watch: Maybank, MMHE, Tenaga, TSH

KUALA LUMPUR: Regional markets including Bursa Malaysia will continue to see downside pressure in the week ahead, starting Monday, Aug 22, tracking losses on European and US markets.

The FBM KLCI closed down 1.29% on Friday, or 19.32 points to 1,483.98, weighed by losses including at Genting and CIMB.

For the month, the KLCI is down 78 points while RM132.76 billion has been erased from the market capitalisation. A major concern is that another week of selldown could trigger margin calls on assets pledged with equities.

On Wall Street, stocks fell for the fourth week of losses amid mounting fears of another U.S. recession while Europe's financial system faces destabilisation, Reuters reported.

The Dow Jones industrial average fell 172.93 points, or 1.57%, to end at 10,817.65. The Standard & Poor's 500 Index dropped 17.12 points, or 1.50%, to 1,123.53. The Nasdaq Composite Index slid 38.59 points, or 1.62%, to close at 2,341.84.

For the week, the Dow ended down 4%, the S&P 500 dropped 4.7% and the Nasdaq lost 6.6%.

Stocks to watch on Monday include MALAYAN BANKING BHD [] (Maybank), Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE), TENAGA NASIONAL BHD [] and TSH RESOURCES BHD [].

Other counters which could see trading interest are PLUS Expressway Bhd, UMW HOLDINGS BHD [] and TAN CHONG MOTOR HOLDINGS BHD [].

Maybank will announce its fourth quarter results and expectations are that it could announce attractive dividends, as reflected that its share price was holding much steadier over the week compared with other heavyweights over the past week.

MMHE has secured two contracts worth RM952 million from MISC BHD [] for topsides fabrication, marine repair and conversion of two energy vessels.

Tenaga may continue to see more selling pressure after falling to a new 52-week low of RM5.55 on Friday. Hefty fuel costs which could reach an additional RM400 million a month would continue to weigh on the power giant while analysts had also downgraded the stock.

TSH posted a record pre-tax profit of RM51.63 million, which was 192% above the RM17.69 million a year ago in the second quarter, boosted by its PLANTATION []s business, especially from its Indonesian operations.

Its net profit increased by 217% to RM35.96 million from RM11.32 million a year ago. Its revenue rose 59% to RM329.95 million from RM207.47 million. Earnings per share were 8.77 sen compared with 2.77 a year ago.

PLUS, which is being taken private, reported second quarter earnings rose 28.7% to RM383.49 million from RM297.86 million a year ago, boosted by an increase in toll collection by RM41.10 million.

UMW earnings fell 38% to RM131.18 million from RM211.69 million a year ago, due mainly to lower contributions from its automotive and manufacturing & engineering segments. Revenue dipped 3.6% to RM3.16 billion from RM3.28 billion. Earnings per share were 11.26 sen while net asset per share was RM3.66.

The Edge weekly reported that production at Tan Chong Motor Holdings' assembly plant in Segambut is being ramped up to meet the rising volume of brands owned by its sister companies. Thus, the group has decided to defer its property development plan for the tract on which the assembly plant is located.

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Maybank IB Views

Construction: Overweight
LRT final packages go to Sunway, MRCB

Maintain Overweight. Sunway's RM569m win is a pleasant surprise after press reports of the Kelana Jaya Line Package B going to TRC Synergy. MRCB's RM1.33b win is also above the RM800m-RM900m estimates for the Ampang Line Package B. The LRT chapter, in terms of awards for the civil works portion, is coming to an end, with all eyes now to focus on the MRT which will enter the tendering stage for the elevated works portion – to be called in stages over Sept-Dec 2011. Our fair value for Sunway is RM3.85 while we are Not Rated on MRCB.

COMPANY UPDATE
Dialog Group RM2.67: Buy
New leg, new growth, new perspective Shariah-compliant

Bagging the Balai RSC is sentiment positive. Dialog is in good hands. RoC Oil and PCSB are reputable partners. Funding is not an issue. While Balai is expected to be more challenging than the Berantai project, the risk is mitigated as capex is fully recoverable under the RSC. We opine that the consortium will likely bag the next RSC (i.e. Belantara) to make it a more economical investment. Maintain Buy with an unchanged RM3.35 target price, based on sum-of-part valuations.

RESULTS REVIEW
Kuala Lumpur Kepong RM21.10: Hold
Big boost from FFB output recovery Shariah-compliant

Downgrade to Hold. 3QFY11 RM420m recurring net profit (+72% YoY,+85% QoQ) brings 9MFY11 recurring net profit to RM1,047m (+49% YoY), which met 78% and 74% of our and consensus full-year forecasts. The results were marginally above our forecast on a lower tax rate. We tweak up our 2011 forecast. The stock has outperformed the KLCI since we first upgraded our call on 24 Jun 2010, chalking up 29% in capital gain. We change our valuation methodology to PER (from SOP) pegging the stock to 16x FY12 based on an unchanged 2012 RM3,000/t CPO ASP assumption for the sector. Given limited upside to our new TP of RM21.60, we downgrade the stock to a Hold.

WCT RM2.87: Buy
Impacted by forex Shariah-compliant

Below forecasts. RM75m 1H11 net profit (+9% YoY) made up 41% of our full-year forecast of RM184m due to an unexpected RM13m forex loss from the stronger Ringgit. We have lowered our 2011-12 forecasts by 8-9%. Our new target price is RM3.50 based on SOP (unchanged 15x 2012 PER + 20sen value increment from KLIA2 retail concession). Share price has consolidated along the broader market with the stock trading at 12.9x one-year forward earnings. Maintain Buy.

JT International RM6.90: Buy
Momentarily weaker

Below expectations. JTI's 1H11 net profit of RM65m (-8.9% YoY) accounts for 45% and 47% of our and consensus full-year forecasts. The shortfall in earnings was due to higher than expected marketing costs and lower sales volumes, implying downside risk to our 2011 estimates. We maintain our earnings forecasts pending an analyst briefing today. Valuations are still low with the stock trading at 11.1x 2012 PER. Our DCF-based TP implies 13x 2012 PER.

Technicals
The FBM KLCI inched down by 1.50 points to close at 1,498.24 yesterday. Its resistance areas of 1,498 and 1,515 will cap market gains, whilst the weaker support areas are located at 1,454 and 1,486.Due to the US markets’ fall last night; we will see some volatile trading activities in the local bourse today. Some heavy profit-taking and liquidation activities will persist to depress the markets’ rebound from its recent 1,423.47 low. We see a longer-term decline for the local and foreign indices.

Trading Idea is a Take Profit call on TENAGA.

Other Local News
MPHB: Confirms talks to dispose of Menara Multi-Purpose. Multi-Purpose Holdings Bhd (MPHB) said it is in talks with various parties to dispose off its non-core assets including Menara Multi-Purpose. (Source: The Edge Financial Daily)

MAHB: Revises charges for airlines, passengers. Malaysia Airports Holdings Bhd (MAHB) would be implementing new international passenger service charges (PSC) as well as aircraft landing and parking charges at airports operated by the group on September 15. The government has given its approval and that it was in line with the Operating Agreement signed between the government and MAHB in February 2009. (Source: Business Times)

O&G: Gas Malaysia listing slated for 4Q. MMC Corp Bhd plans to list Gas Malaysia Sdn Bhd on the Main Board of Bursa Malaysia by the fourth quarter of this year. The company has appointed Maybank Investment to advise on the initial public offer exercise. (Source: Business Times)

Bina Puri: Wins RM470.3m contract. Bina Puri Holdings Bhd, via its wholly-owned unit Bina Puri Construction Sdn Bhd, has been awarded a contract worth RM470.3m for the proposed development of a tourist recreational and commercial development at KK Times Square (Phase II) in Kota Kinabalu, Sabah. (Source: Bursa Malaysia)

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Stocks to watch: Magna Prima, Wing Tai, SapuraCrest, Kencana

KUALA LUMPUR: Key regional Asian markets are expected to remain jittery in the week ahead, starting Monday, Aug 8, in the absence of any clear indicators about the US economy and Europe’s deepening crisis.

Overnight on Wall Street, stocks closed out their worst week in more than two years on Friday, Aug 5 in a volatile session. For the week, the Dow fell 5.8%, the S&P 500 was down 7.2% and the Nasdaq was off 8.1%.

At Bursa Malaysia, there could be some bargain hunting for battered stocks which still had strong underlying fundamentals. But the buying could be restrained.

On Friday, the FBM KLCI closed down 1.45% or 22.46 points to 1,524.43 while week-on-week, the index lost 24.38 points.

A total of RM26.89 billion was wiped out from the Bursa Malaysia market capitalisation where 21 stocks hit fresh 52-week lows. Market capitalisattion was reduced to RM1.312 trillion last Friday.

For among the 30 components of the FBM KLCI, six of them hit a fresh 52-week low. They were IOI Corp Bhd, YTL Power International and YTL Corp Bhd, MISC BHD [], TENAGA NASIONAL BHD [] RM5.94 and PPB GROUP BHD [].There could be mild bargain hunting for some of these stocks which possess strong fundamentals.

Positive corporate news which could help lift sentiment are MAGNA PRIMA BHD [], Wing Tai Malaysia Bhd, SAPURACREST PETROLEUM BHD [], KENCANA PETROLEUM BHD [] and SCOMI ENGINEERING BHD [].

Magna Prima is making its foray into Australia to undertake a mixed residential and commercial project in Melbourne with an indicative gross development cost of A$148 million (RM482.18 million). The company expects to record a profit of A$62 million (RM200.32 million) from the project.

Wing Tai Malaysia expects to record a gain of RM27.63 million from the sale of two pieces of land in Seberang Perai, Penang to Aeon Co. Bhd for RM50.12 million cash consideration.

It said the two pieces of land, about 7.29 ha and 4,625 sq metres, were currently vacant and Aeon planned to build a shopping complex with car park facilities

The Edge weekly reports the River of Life project has seen two significant developments over the last two weeks, leading to renewed interest in it as well as Datuk Lim Kang Hoo's EKOVEST BHD [].

It also reported that Flonic Hi-Tec is banking on critical cleaning business. The company will now provide its customers with critical cleaning systems capable of filtering particles that are up to 10 microns in size, compared with 100 microns in precision cleaning systems.

The boards of SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd have agreed to their merger to become one of the world’s largest oil and gas service providers in terms of market capitalisation and assets.

They had accepted Integral Key Sdn Bhd’s (IKSB) RM11.85-billion offer to acquire all their assets and liabilities in a share swap. The offer shall remain open for acceptance until 5pm on Aug 15.

Fraser & Neave’s net profit for the third quarter ended June 30, 2011 rose 11.2% to RM77.85 million from RM70 million a year earlier due to strong contribution from its property and soft drinks divisions.

Its revenue for the quarter dipped to RM882.47 million from RM892.77 million due mainly to lower volume of dairy products sold in Malaysia.

It said under its soft drinks division, sales activities for Coca-Cola products will cease effective Oct 1, 2011 and, as such, the division’s revenue and profit thereafter will see an inevitable immediate reduction, it said.

Coca-Cola business makes up about 30% of the revenue of the soft drinks division for the current financial year, it said.

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CIMB Research maintains Trading Buy on Tenaga

KUALA LUMPUR: CIMB Equities Research is maintaining its Trading Buy call on TENAGA NASIONAL BHD [] and target price of RM7.60.

It said on Monday, Aug 1, it was not making any changes to its EPS forecasts or target price of RM7.60, which remains based on 1.4 times price-to-book value, 30% below Tenaga’s historical average P/BV.

“Tenaga remains a TRADING BUY as it could be catalysed by tariff increases, a 100% pass-through of all its fuel costs and lower IPP payments,” it said.

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RHBInvest Research

Top Story: TNB – Badly burned by massive oil and distillate fuel costs Market Perform (down from OP)

3QFY11 Results / Briefing Note

¨ Excluding forex gains of RM102m, TNB’s 9MFY11 results were below expectations with core net profit of RM801m (-62.4% yoy) accounting for 36% and 33% of our and consensus FY11 net profit estimates respectively. TNB recorded a RM460m loss in 3QFY11, due to significantly higher oil and distillate fuel costs arising from gas supply disruption.



Corporate Highlights



CI Holdings: Selling Permanis to Asahi for RM820m Trading Buy

News Update

¨ CIH announced that it has entered into a conditional share sale agreement for the disposal of its entire equity interest in Permanis to Asahi for RM820m in cash

¨ Post-disposal of Permanis, CIH would be left with only its tap-ware and sanitary ware business (under Doe Industries). As management has stated its intention to maintain CIH’s listing status, CIH would need to acquire a new core business and/or distribute some of the cash proceeds to shareholders to avoid becoming a PN16 (cash) company, given Doe’s small asset base and profit contribution



SEGi: INVITE-ing more foreign students Outperform

News Update

¨ SEGi has been appointed by the Government as Project Leader for a new initiative – SkillsMalaysia International Technical Education & Vocational Training Programme, which is expected to begin in 2012.

¨ The objective of SkillsMalaysia INVITE is to create and provide a new dimension of learning skills to non-academically inclined foreign school leavers and adult learners to pursue their training in Malaysia. Upon completion of the programme, the trainees will be awarded an internationally recognised qualification from UK or Australia, as well as certification from the Malaysian Government.



AirAsia: To set up a low-cost carrier in Japan Market Perform

News Update

¨ AirAsia is setting up a low-cost carrier in Japan via a 49:51 JV called AirAsia Japan Co Ltd with All Nippon Airways Co Ltd (ANA).

¨ The new airline is expected to take to the skies in Aug 2012, with a fleet of 3-4 A320 aircraft by the end of its first year of operations.



Hiap Teck: China Shougang roped in as contractor for blast furnace and shareholder Underperform

News Update

¨ Eastern Steel Sdn Bhd, a 55%-owned subsidiary of Hiap Teck, has entered into an EPC contract worth approximately RM650m with China Shougang International Trade and Engineering Corporation.

¨ A supplement agreement was also entered into where Hiap Teck will issue 32.2m new shares (9.8% of current share base) to China Shougang at an agreed price. China Shougang has the right to terminate the EPC contract if the shares are not issued by 30 November 2011.



VS Industry: Fully focus on EMS Overweight

Company Update

¨ VSI had announced on 19 Jul the disposal of its 53%-owned subsidiary, PT. GY Plantation Indonesia (PGP) for US$4.1m to PT Karya Manunggal Sawitindo. In addition, PGP will also sell a 6,450 ha piece of land (undeveloped) to PT Bumitama Gunajaya Agro for US$2.2m, which will flow to PGP’s existing shareholders (VSI’s portion amounts to US$1.2m). In total, VSI will receive US$5.3m (RM16.1m) from the abovementioned transactions, which management has earmarked for working capital.

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Tenaga, Petronas-linked stocks weigh on FBM KLCI

KUALA LUMPUR: The FBM KLCI remained in negative territory at the mid-day break on Friday, July 22 as TENAGA NASIONAL BHD and Petronas-linked counters weighed on the index.

Regional markets, however, displayed better investor sentiment on the back of European leaders agreeing on a package to rescue debt-stricken Greece, and on hopes that US policymakers also manage to cobble together a last minute deal.

The FBM KLCI shed 2.65 points to 1,563.16, with losses at Tenaga alone shaving off 3.89 points off the benchmark index.

Given the overall regional sentiment, gainers led losers by 321 to 244, while 304 counters traded unchanged. Volume was 652.04 million shares valued at RM894.67 million.

The ringgit strengthened 0.46% to 2.9825 versus the US dollar; crude palm oil futures for the third month delivery rose RM7 per tonne to RM3,137, crude oil added 32 cents per barrel to US$99.45 while gold fell US$1.65 an ounce to US$1,589.05.

At the regional markets, Hong Kong’s Hang Seng Index jumped 1.69% to 22,358.05, Japan’s Nikkei 225 added 1.13% to 10,123.46, Singapore’s Straits Times Index rose 0.94% to 3,168.08, South Korea’s Kospi up 0.93% to 2,164.94, Taiwan’s Taiex gained 0.66% to 8,774.45 and the Shanghai Composite Index edged up 0.45% to 2,778.40.

Tenaga, which was hit by higher operating expenses, posted a net loss of RM440.2 million in its third quarter ended May 31, 2011 from net profit RM1.11 billion a year earlier, fell 31 sen to RM6.21.

Among the Petronas-linked counters, Petronas Dagangan lost 26 sen to RM17.82, while Petronas Chemicals and Petronas Gas fell two sen each to RM7.07 and RM13.48.

Other decliners included United PLANTATION []s that fell 40 sen to RM20, Sindora and UMS 15 sen each to RM2.59 and RM1.63, Far East 10 sen to RM7.10, while LPI Capital, Selangor Dredging and F&N fell eight sen each to RM13.70, 76 sen and RM19.52 respectively.

Among the gainers, CI Holdings rose 49 sen to RM4.57 after the company said it was set to record gains of RM677.10 million from the sale of its bottling unit, Permanis Sdn Bhd to Asahi Group Holdings Ltd for RM820 million.

Other gainers included BAT and Tasek up 22 sen each to RM46.42 and RM8.10, Cypark 20 sen to RM2.28, QSR 19 sen to RM6.21, S P Setia and Bursa 16 sen each to RM3.91 and RM8.02, KLK 14 sen to RM21.48 and AFG 13 sen to RM3.78.

Meanwhile, the actives included Ingenuity Solutions, Bumi Armada, Jotech, Key West and newly-listed Catcha Media.

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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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Maybank IB Views

Plantation: Neutral
June's inventory surpassed 2m tonnes

Inventory at 18 month high. Malaysia's palm oil inventory rose 41.1% YoY to 2.05m tonnes (6.8% MoM) on yet another record June's production (1.75m tonnes; +0.7% MoM, +23.5% YoY). However, the higher production was offset by growth in exports at 1.58m tonnes (+12.4% MoM, +9.5% YoY). June’s inventory level is within market's expectation. Maintain Neutral on the sector. KL Kepong (Buy) and TSH Resources (Buy) are currently our top picks among the large caps and mid caps in the sector.

ECONOMICS
Industrial Production Index (IPI), May '11
Temporary Decline...

Industrial production (IP) growth in May '11 fell deeper into the red as it contracted by -5.1% YoY (revised Apr '11: -1.7% YoY; Maybank IB: -3.3% YoY; Consensus: -2.7% YoY). MoM, overall production dipped by -1.3% following a revised -7.2% drop in the preceding month. YTD, production was up marginally at +0.2% YoY (2010: +7.3% YoY). Mining output was the main culprit. For the second month in a row, mining output was the biggest drag on IP.

Technicals
The FBM KLCI fell 6.16 points to close at 1,588.58 yesterday. Its resistance areas of 1,588 and 1,597 will cap market gains, whilst the weaker support areas are located at 1,576 and 1,584. Due to the US markets’ weaker tone last night; we will see some profit taking and liquidation activities in the local bourse today.

Trading idea is a Short-Term Buy on MUDA.

Other Local News
SapuraCrest, Kencana: Proposal to merge. Integral Key Sdn Bhd (IKSB), a special purpose vehicle, has made an RM11.85b offer to acquire SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd. Received on Monday, July 11 offer letters from IKSB to acquire all their assets and liabilities in a share swap. IKSB offered to acquire SapuraCrest for RM5.87b equivalent to RM4.60 per share and Kencana was offered RM5.98b or RM3 per share. The offer shall remain open for acceptance until 5pm on Aug 15. (Source: Bursa Malaysia)

Tenaga: To implement new tariff in Sabah from July 15. The new tariff structure is also to promote efficient utilisation of electricity by the consumers. In this restructuring also, the tariff for Federal Territory of Labuan will be realigned to mainland Sabah since Federal Territory of Labuan is supplied from the Sabah network system, and more appropriate to be subjected to Sabah's cost of supply structure rather than that of Peninsular Malaysia. (Source: Bursa Malaysia)

KPJ: Inks JV to set up specialist hospital in Perlis. KPJ Healthcare Bhd has inked a joint venture agreement with Yayasan Islam Perlis (YIP) to set up and operate a new hospital to be known as KPJ Perlis Specialist Hospital. It said the JV would operate under the name Perlis Specialist Hospital Sdn Bhd, of which KPJSB would hold 60% equity interest while YIP would hold the remaining 40%. (Source: Bursa Malaysia)

E&O: Sells building, land on Penang island for RM134m. Eastern and Oriental Bhd (E&O) is expected record about RM66m in profit from the sale of a building and freehold land in Tanjong Tokong on Penang island for RM134m cash, if based on the building and land costs totalling RM67.7m. its unit had entered into a sale and purchase agreement Soaring Profit Sdn Bhd to sell the 27,743.7 sq m of land and building with 269,418 sq ft of gross floor area and 1,042 car park bays. (Source: Bursa Malaysia)

Silk Holdings: secured four long term contracts worth RM39.75m from Petronas Carigali Sdn Bhd for the provision four units of anchor handling tug supply vessel (AHTS). The contracts for the four units of AHTSV were for the primary period of one year, with various effective commencement dates in July 2011 respectively, with options to extend for a further period of one year each. (Source: Bursa Malaysia)

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RHBInvest Research

Top Story: Plantation – CPO stocks cross the 2m tonne mark Neutral

Sector Update

¨ Malaysia’s CPO production was relatively flat on a mom basis in June, rising just 0.7% mom, while exports rose by a larger 12.4% mom. On a yoy basis however, the recovery was very much stronger, as production rose by 23.5% yoy, while exports rose by 9.5% yoy. Despite the smaller mom increase in production vis-à-vis exports, closing CPO stock levels rose 6.8% mom to 2.05m tonnes in Jun (from 1.92m tonnes in May)s



Sector Call



Oil & Gas: A merger of two giants Overweight

Sector Update

¨ Sapuracrest and Kencana announced yesterday that Integral Key Sdn Bhd (IKSB), a special purpose company, has made an offer to merge the two companies via an acquisition of their entire businesses and undertakings for RM5.9bn and RM6.0bn respectively. The proposal involves: 1) share swap of Sapuracrest and Kencana shares into new IKSB shares; and 2) cash payments. The offer is open until 15 Aug.



Utilities: No immediate catalysts Neutral

Sector Update

¨ Despite a volatile political landscape, the Government has pressed ahead with two out of three industry reforms: 1) reduction of subsidies for natural gas; and 2) a formal fuel cost pass-through (FCPT) formula.

¨ With these factors already largely priced into TNB’s stock price, we believe the market is watching closely the trend of coal prices and the implementation of the FCPT formula.



Corporate Highlights



KFC Holdings: Buying land in Bandar Dato’ Onn for RM9.1m Market Perform

News Update

¨ KFCH announced that it has entered into a SPA with JLand for the purchase of a piece of freehold vacant commercial land measuring 135k sf located within Bandar Dato’ Onn, Johor, for RM9.17m which translates to RM68 psf.

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Tenaga to implement new tariff in Sabah from July 15

KUALA LUMPUR: TENAGA NASIONAL BHD’s unit Sabah Electicity Sdn Bhd will impose the new electricity tariff structure in Sabah and the Federal Territory of Labuan with effect from July 15, 2011.

In a filing Monday, July 11, Tenaga said the new tariff structure was to promote efficient utilisation of electricity by the consumers, adding that it had minimal impact on lower income households and small businesses.

“In this restructuring also, the tariff for Federal Territory of Labuan will be realigned to mainland Sabah since Federal Territory of Labuan is supplied from the Sabah network system, and more appropriate to be subjected to Sabah’s cost of supply structure rather than that of Peninsular Malaysia,” it said.

Tenaga said 75% of domestic consumers or 275,276 households in Sabah and the Federal Territory of Labuan with consumption of 350 kiloWatt-hour (kWh) and below would not experience any increase in their monthly bills.

Meanwhile, the electricity rebate by the government for domestic consumers with monthly bill of not more than RM20 will be maintained until Dec 31, 2011, it said.

Tenaga said about 70,000 domestic consumers in Sabah and the Federal Territory of Labuan were benefitting from this rebate.

As for commercial consumers, Tenaga said low voltage commercial consumers within 1-200 kWh band (33% of Commercial consumers) will see a maximum of 3% addition or RM2 in their monthly bills.

Low voltage industrial consumers within 1-2,000 kWh band (61% of Industrial consumers) will see no impact to their electricity bills, it said.

On lighting up Sabah, Tenaga said there would be a 47% reduction in rates for public lighting maintained by local authorities from 30 sen/kWh to 16 sen/kWh to increase safety levels while allowing local governments to use more allocations for beautification, cleanliness campaigns and other services to the public.

The utility company is also introducing new peak/off-peak tariff classes for existing and new medium voltage commercial and Industrial consumers which would give potential savings to those who can shift their usage to off peak periods.

It said there would be a reduction of up 50% on consumer connection charges for new supply connections which would reduce the upfront capital cost in starting businesses, thus spurring economic growth in the state.

Tenaga said the revised charges would be implemented effective Jan 1, 2012.

It also said a 10% discount would be given to approved non-profitable welfare organisations, places of worship and government education institutions (fully or partly funded), while higher consumption will be charged higher rates to curb energy wastage, thus helping to conserve depleting resources and address climate change.

Meanwhile, Tenaga said meter rental was waived for all consumers.

Tenaga said the tariff restructuring would rationalise and rebalance the subsidy distribution in the power sector so that the targeted poor (the low income households and small businesses) will continue to be protected while subsidy to the well-off segment will be reduced.

“The gradual subsidy rationalization will also mean that more allocation can be channelled to other deserving sectors and for the development of needed infrastructure.

“The new tariff structure gives the appropriate pricing signal and is in line with the country’s objective to promote efficient and sustainable use of energy and, thus conserve depleting energy resources and address climate change,” it said.

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Tenaga Weekly Chart & Daily Chart

Tenaga Daily Chart

Tenaga Weekly Chart

Do I get a correct data from chart nexus? I am not sure but feel doubt on the chart...

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Maybank IB Views

COMPANY UPDATE
IOI Corporation RM5.30: Hold
"Planting" investment properties Shariah-compliant

On accelerated property capex. The recent foray into South Beach and IOI Resort City's development plans are set to accelerate IOI Corp's property capex spending by ~RM2.3b over the next 3 years, with 78% of these channeled to build its property investment portfolio. Investors looking for greater exposure to plantation have been slowly shying away from IOI. IOI lacks immediate re-rating catalyst, especially with limited earnings upside from its matured plantation while the new property ventures do not bring in immediate earnings; they are largely for investments. Our revised TP of RM5.50 on 16x FY12 EPS is based on 1-SD below its 5-year historical mean PER. Maintain Hold.

Top Glove Corporation RM5.26: Hold
Needs more visibility on latex glove demand Shariah-compliant

Valuations not cheap. The upcoming 3QFY11 results (expect to be flat QoQ) could mark the long-awaited inflexion point for the company's earnings, as contributions from new capacity kick in, and as distributors start to replenish stockpiles. We nevertheless feel that valuations do not justify a buy on the stock at current levels, with Top Glove trading at a CY12 PER of 16x versus its peer average of 7x. We cut our FY11 earnings by 14% and 3-4% for FY12-13. Maintain Hold and DCF-derived TP of RM5.10.

Technicals
The FBM KLCI gained 7.68 points and ended at 1,556.19 yesterday. Its resistance areas of 1,558 and 1,576 will cap market gains, whilst the obvious support areas are located at 1,533 and 1,556.Due to the US markets’ weaker tone last night; we will see some initial low volume selling activities in the local bourse today.

Traiding idea is a Short-Term Buy call on AEONCR.

Other Local News
RHBCap: Aabar to buy ADCB's stake. Aabar Investments, the investment arm of Abu Dhabi government, intends to buy a 25% equity stake in RHB Capital Bhd from Abu Dhabi Commercial Bank at RM10.80 per share. (Source: The Edge Financial Daily)

Sunway-Suncity: Merger gets nod. Shareholders of Sunway Holdings Bhd and Sunway City Bhd have approved the proposed disposal of the two companies' assets and liabilities to Sunway Bhd at their EGMs. A new Sunway entity is expected to be listed on the Main Market of Bursa Malaysia in the third quarter of this year. (Source: The Edge Financial Daily)

TNB: Buys big supply of fuel oil. Tenaga Nasional Bhd (TNB) has bought more than 200,000 tonnes of fuel oil, for delivery between April and August, in addition to buying electricity from Singapore utility PowerSeraya. The fuel oil volumes were the largest TNB has purchased in at least five years. (Source: The Star)

Alam Maritim: Bids for RM400m to RM500m jobs. Alam Maritim Resources Bhd is bidding for RM400m to RM500m worth of contracts in offshore installation and construction (OIC) as well as offshore support vessel (OSV) services sector. (Source: The Star)

Construction: Eversendai to bid for RM1b-RM1.5b projects. Soon-to-be-listed structural steel construction and engineering company Eversendai Corp Bhd aims to bid for an additional RM1b to RM1.5b worth of projects for the rest of the year, after having secured almost RM350m so far this year. (Source: The Edge Financial Daily)

Property: 1MDB inks deal to kickstart Bandar Malaysia. 1MDB Bhd has signed several agreements that will pave way for the development of Bandar Malaysia, a mixed property project, on the site of the old Sungai Besi airport land. (Source: The Edge Financial Daily)

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Maybank IB Views

COMMENTS ON NEWS
CapitaMalls Malaysia Trust RM1.17: Buy
Buys shopping mall in Kuantan Shariah-compliant

A yield-enhancing acquisition. We are positive on CMMT's latest RM310m East Coast Mall acquisition given that it is yield accretive and attractive in pricing. More importantly, it would enhance our 2012-13 earnings forecasts by 10-11%. The purchase will be funded by a placement of up to 299m new units (est. RM332m proceeds assuming RM1.11 issue price). We maintain our forecasts and RM1.27 TP. Buy.

Technicals
The FBM KLCI gained 2.63 points and ended at 1,548.51 yesterday. Its resistance areas of 1,551 and 1,567 will cap market gains, whilst the obvious support areas are located at 1,530 and 1,548.Due to the US markets’ firm tone last night; we will see some initial low volume buying activities in the local bourse today. The market could possibly gap-up, with slim chances of follow-through buying.

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

Other Local News
TNB: Unit wins job in Pakistan. Tenaga Nasional Bhd's (TNB) unit TNB Repair and Maintenance Sdn Bhd (TNB Remaco) has secured an operation and maintenance agreement worth USD14.1m (RM43m) from Pakistan's Laraib Energy Ltd. Under the contract, TNB Remaco will provide services for an initial period of five years with an option of extending for another seven years. (Source: The Star)

MBM: To conclude talks in 12 mths. MBM Resources Bhd, which has allocated RM250m for capital expenditure, is expecting to conclude talks with an international firm in the next 12 months to set up an assembly plant locally. (Source: The Edge Financial Daily)

PetDag: Plans 50 new stations. Petronas Dagangan Bhd will invest up to RM400m to set up between 30 and 50 petrol stations, annually, over the next five years. (Source: The Star)

MRCB: Poised to clinch RM800m LRT contract. Malaysian Resources Corp Bhd (MRCB) is poised to secure soon a contract worth as much as RM800m from Syarikat Prasarana Negara Bhd. The contract is for civil works for phase two of the Ampang light rail transit (LRT) extension line linking Putra Heights to Shah Alam, Selangor. (Source: Business Times)

Plantation: MSM prices IPO shares at RM3.50 each. MSM Malaysia Holdings Bhd has priced its initial public offering (IPO) at RM3.50 per share for institutional investors. (Source: The Star)

Economics: Government seeks extra operating expenditure. The Government tabled a bill seeking a supplementary allocation of RM13b for operating expenditure, raising the spending budget for this year by 8% to RM176b. RM6b will be allocated to the Finance Ministry which includes RM5.6b subsidy for petroluem products. RM1.5b will be for Education Ministry and RM1b to Health Ministry. (Source: The Star)

Economics: Exports to hit RM700b in 2011, FDI to at least match RM29b recorded in 2010. Exports is expected to rise 9.5% to RM700b in 2011 from RM639.4b recorded last year, while FDI into Malaysia could at least matched if not surpassed last year's figure of RM29b, according to MITI. (Source: The Star)

Economics: Government expands the ban on subsidised RON95 sales to now include foreign-registered vehicles (except motorcycles) driven by Malaysians effective immediately. Previously, Malaysians driving foreign-registered vehicles need to show their MyKads. The ban also includes sales of subsidised NGV. (Source: The Star)

Economics: Minimum wage by year-end?Minimum wage policy could be implemented by year-end, according to PM. The National Wage Consultation Council Bill 2011 will be presented to Cabinet by the Human Resource Ministry before its tabling in the current Parliament's session. (Source: NST)

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