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)

Read more...

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.

Read more...

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.
Click here for full report »
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.
Click here for full report »
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.

Read more...

RHBInvest Research

Top Story: Perwaja – Cost savings from its concentration and pelletisation plant Underperform

Visit Note

¨ Business condition for Perwaja remains weak and it will likely to record losses again in 2Q11 due to high feedstock costs amid stagnating steel prices.



Kinsteel: Dragged down by Perwaja Underperform

Visit Note

¨ Margins for Kinsteel have not been materially affected by the recent hike in electricity and natural gas tariffs as electricity only constitutes 3% of its cost of production, while natural gas used in the reheating process of steel billets is very minimal.



Corporate Highlights



UMW: Introduction to the CEO Market Perform

Briefing Note

¨ UMW hosted a “Meet the President and CEO” session recently. It was Group CEO Datuk Syed Hisham’s first engagement with the investor community since his appointment nine months ago.

¨ Management confirmed that component supply constraints arising from the Japan earthquake have begun to abate. Local assembly has normalised at both UMW-Toyota and Perodua with production to be ramped higher in 2H11.



Star Publications: Gains exposure to TV media Market Perform

News Update

¨ Star yesterday announced it will invest RM35m to acquire a 51% equity stake in Hong Kong-based LI TV Holdings, while Juita Viden International will hold the remaining 49% interest.

¨ LI TV owns and operates Li (Life Inspired), a High Definition (HD) pan-regional lifestyle TV channel.

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.

Read more...

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.

Read more...

Maybank IB Views

MARKET COMMENTS
INVEST MALAYSIA 2011
From message to passage of transformation

Giant leap towards Malaysia's 2020 high-income economy aspiration. The New Economic Model (NEM) unveiled by Prime Minister Dato' Sri Mohd Najib bin Tun Abdul Razak in Invest Malaysia 2010 (31 March 2010) has swung into full action with the Government Transformation Programme (GTP) entering its second year and the rollout of the Economic Transformation Programme (ETP) barely 6 months after its launch.

ECONOMICS
Industrial Production Index (IPI), Feb '11
YoY growth stays volatile

Industrial production growth picked up in Feb '11 to +5.0% YoY (revised Jan '11: +0.5% YoY; Maybank IB: +4.9% YoY; Consensus: +5.4% YoY). MoM, output shrank 7.2% as Chinese New Year holidays compounded a short working month. For Jan-Feb 2011, production rose +2.6% YoY (4Q10: +4.1% YoY; Jan-Feb 2010: +9.4% YoY), suggesting quarterly real GDP growth likely to have remained moderate in 1Q 2011 after the slowdowns during 2H 2010.

Technicals
The FBM KLCI closed lower by 13.49 points at 1,544.00 yesterday. Its resistance areas of 1,544 and 1,565 will cap market gains, whilst the obvious support areas are located at 1,529 and 1,540. Due to the DJIA’s marginally weaker tone last night, we will see the FBM KLCI in a further profit-taking mode today.

Trading Idea for today is a Take Profit call for TENAGA.

Other Local News
UMW: Expects oil & gas unit to be back in the black. UMW Holdings Bhd is confident that its oil and gas division will be back in the black this year, helped by several jobs it has secured. The company is banking on the performance of associate company WSP Holdings Ltd in China, its success in securing a drilling job from Petronas Carigali and expectations of a bigger revenue contribution from its foreign joint ventures, especially those in India and China. (Source: Business Times)

Westports: Container handling Up 20% In 1Q. Westports Malaysia Sdn Bhd posted a 20% growth in container handling for the first quarter this year compared with the same period last year. Westports container throughput was 1.5m twenty-foot equivalent unit (TEU), the highest ever quarterly achievement compared with 1.2m TEUs in the same period last year. (Source: Bernama)

Sagajuta: To unveil RM2b projects. Sagajuta (Sabah) Sdn Bhd, a pioneer developer in Sabah is launching four commercial projects worth almost RM2b this year, as demand for the properties increases, its chief said. They include the abandoned commercial project in Selangor, called 1Gateway Klang, which its unit, Lagenda Erajuta Sdn Bhd, has taken over and is reviving this month. The three new projects are located in Kota Kinabalu, Bukit Mertajam in Penang and Johor Baru, launching in phases from the end of this year. The projects will comprise modern shoplots, office towers, street mall and leisure facilities. (Source: Business Times)

Coastal: Secures deal to sell 11 tugboats. Coastal Contracts Bhd won contracts for the sale of 11 tugboats to a company based in Central America for about RM61m. Including the new contracts, the group to date has about RM665m worth of vessel sales orders awaiting delivery to customers up to 2012. (Source: Business Times)

Read more...

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

Property:

Sector Update
Fundamentals intact despite weak market sentiment
We lower our fair value on Glomac and YNH. As for KSL, the stock is still largely undervalued.
We maintain our Overweight rating on the sector. Our top pick is Mah Sing.



Corporate Highlights



UMW Holdings:

Company Update
UMW Secures NAGA-3 Contract
We reiterate our Market Perform recommendation and fair value of RM7.85



SP Setia:

Results Note
As good as expected
Maintain our Outperform call with an unchanged fair value of RM7.30



Kencana Petroleum:

Results Note
Earnings Mainly Bumped Up By KM-1
We maintain our fair value at RM2.85/share and our Market Perform call on the stock.

Read more...

RHBInvest Research

IPO: APFT RM0.50
Top Gun made in Malaysia

Riding on positive industry outlook. Asia Pacific Flight Training Berhad (APFT) is the only stock with exposure to aviation training and it will list on the Bursa main market today. APFT will benefit from the growth plans of MAS, AirAsia and Firefly as these airlines will require more trained aviation professionals. Its IPO price of RM0.50 is attractive with a historical PER of 8.9x and 20-30% p.a. expected earnings growth for the next 2-3 years.


UMW Holdings RM7.17: Hold
PCSB charters Naga 3 rig Shariah-compliant

Priced in, maintain Hold. We expect the Naga 3 rig charter to contribute about 2% to UMW's net profit in 2012. We retain our earnings forecasts as we have built in this new charter into our model. Auto will continue to drive Group earnings in 2011 but the upside is limited. We remain cautious on UMW's O&G turnaround (i.e. WSP, Naga 2), a market contrarian, with minimal catalysts to excite in 1H. Our RM7.20 target price is unchanged, based on 12x 2011 EPS.


RESULTS REVIEW
S P Setia RM6.07: Buy
On track as strong sales continue Shariah-compliant

Maintain Buy. 1QFY11 normalised net profit of RM62m (+13% QoQ, +62% YoY) came in within expectations. Sales momentum remained strong with RM953m recorded in 4MFY11 (32% of SPSB’s RM3b FY11 sales target), lifting unbilled sales to RM2.1b (or 1.1x of our forecast). 2011 focus will be on its flagship RM6b KL Eco City (KLEC) project. We raise earnings by 2-4% and RNAV by 5 sen. Target price is raised to RM7.20 (+5 sen). SPSB is our top pick for the property sector.


Kencana Petroleum RM2.54: Buy
On track Shariah-compliant

We remain Buyers of Kencana. Interim results are tracking expectations. We foresee the momentum of contract flows picking up in 2HFY11 and strengthening into FY12 as PETRONAS' capex programs intensify. We do not rule out potential strategic partnership(s) should Kencana aim to participate in domestic deepwater development. We value Kencana at RM3.10, based on 20x CY12 EPS. Our 20x target is validated in a capex-fueled, order book-driven upcycle.


Technicals
The FBM KLCI closed lower by 0.35 points yesterday, almost unchanged at 1,492.09. Its resistance areas of 1,492 and 1,515 will cap market gains, whilst the weak support areas are located at 1,474 and 1,488. 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 Take Profit call on AXIATA


Other Local News
Parkson: May foray into Indonesia. Parkson Holdings Bhd is teaming up with PT Tozy Bintang Sentosa (TBS) to expand its Parkson department stores in Indonesia. The TBS Group operates six retail stores under the brand names of Centro Lifestyle Department Store and Kem Chicks in Indonesia and it planned to add another two more stores. The eight stores were expected to generate more than USD100m in sales turnover in 2011. (Source: The Edge Daily)

Market: Capital market crosses RM2t. Securities Commission chairman Tan Sri Zarinah Anwar said Malaysia's capital market corssed the RM2t threshold for the first time ever as at end-2010, achieved an annual compounded growth rate of 11% from RM717b in 2000. (Soure: The Star)

Property: EPF buys 3rd London property for GBP148m. It marks the EPF's third property investment there since announcing an allocation of GBP1b for British property purchases. EPF's other 2 propery purchases are One Sheldon Square in Paddington Central, which was bought for GBP156m, and 40 Portman Square near Oxford Street which was acquired for GBP180m. The 2 properties have yields of 5.75% and 5.55% respectively. (Source: The Star)

Smelting: OMH plans Sarawak smelter. Austrialia-listed OM Holdings Ltd (OMH) plans to set up a manganese and ferro silicon alloy smelter under the Sarawak Corridor of Renewable Energy (SCORE) initiative, expected to be ready in 3Q 2011. The smelter facility is expected to have the capability to produce 300,000 tonnes of manganese ferro alloys and 300,000 tonnes of ferro silicon alloys a year. (Source: The Star)

Faber: Plans RM272m capital reduction. Faber Group Bhd will undertake a capital reduction to clean up its balance sheet, as part of a plan that will allow greater flexibility for the company to determine future cash dividend payouts. Faber will cancel 75sen of its current par value of RM1 a share. (Source: Bursa Malaysia)

Read more...

Maybank IB Views

ECONOMICS
4Q10 Real GDP
Within expectations...

4Q10 real GDP growth slowed for the third consecutive quarter to +4.8% YoY. QoQ, the economy expanded by +1.5% (2Q10: +2.5%). Real GDP growth for the whole of 2010 was +7.2% (2009: -1.7%). Domestic demand -especially consumer spending and gross fixed capital formation - provided the lift to the economy as external trade eased further. Forward-looking indicators like global PMI and Malaysia's index of leading economic indicators point to steady global and domestic growth momentum in the early part of 2011. Therefore, we expect growth to stabilise at around 5% in 1H 2011 (2H 2010: +5.1%) before accelerating to 6% in 2H 2011, thus maintaining our full-year 2011 forecast of 5.5% growth.


SECTOR UPDATE
Banking: Overweight
As interest rates rise...

Minimal impact expected from base case scenario. Regional rate hike concerns are unlikely to dissipate anytime soon, in our view, and Malaysian banks are unlikely to be spared the volatility. Analysis of our base case monetary policy scenario, however, suggests that the overall impact to bank earnings is minimal, with a positive bias to most banks within our coverage with possibly the exception of AMMB, should interest rates rise. Our top picks are CIMB and RHB Capital.


RESULTS REVIEW
AMMB Holdings RM6.32: Hold
An issue of sentiment

Downgrade to Hold. While we do not expect a significant impact to bank earnings under our monetary policy response assumptions, it is our view that AMMB is unlikely to outperform its peers in this current environment of rising interest rates, by virtue of its less favorable asset-liability mix. Valuations at current levels are fair vis-a-vis its peers, while dividend yields lag. 3QFY11 results, meanwhile, were uninspiring. Our DDM-derived target price is lowered to RM6.80 from RM7.10 on rolling forward valuations and earnings downgrades.

Technicals
The FBM KLCI rebounded 23.04-points and closed at 1,517.56 last week, as a locally-led rebound rally emerged after the previous week’s foreign sell-down. The obvious support areas for the FBM KLCI are located in the 1,474 to 1,517-zon and resistance at 1,519 and 1,576 will.

Trading idea for today is a ACCUMULATE call on SCIENTX.

Other Local News
UMW: Toyota targets 90,000 units sales. Automobile giant UMW Toyota Motor is anticipating nationwide sales to exceed 90,000 units this year to maintain its market share at 15% this year. UMW Toyota's strategy was to launch a series of new models this year, such as the new Lexus CT200h hatchback next week. (Source: The Star)

Pos: Khazanah starts restricted tender for Pos. Khazanah Nasional Bhd has entered into the second stage of the divestment process of its 32.2% stake in Pos Malaysia Bhd, starting with the restricted tender process for bidders. Bidding would be on a level playing field whereby the emphasis would be on bidders who would be able to introduce sound strategies and business plans sustainable to bring the postal entity to the next level of growth. (Source: The Edge Financial Daily)

Ramunia: In talks with Coral Alliance. Ramunia Holdings Bhd is in talks with oil and gas outfit Coral Alliance Sdn Bhd-believed to be linked to Tengku Datuk Ibrahim Petra and Robert Lee, former directors of Petra Energy Bhd- for a possible synergistic tie-up or even an acquisition of the latter. In any case, a joint venture or an acquisition of Coral Alliance by Ramunia will benefit the latter as Coral Alliance is said to be the frontrunner for a hook-up and topside maintenance contract from Petronas. (Source: The Edge Financial Weekly)

Ivory: Secures major tenants for Penang Times Square. Penang-based Ivory Properties Group Bhd has signed up several tenants that will take up sizeable areas in Times Square, along Jalan Datuk Keramat. The shopping centre’s total tenancy will increase from about 50% now to about 80% by April or May. The new tenants are reputable restaurateurs such as Tao, Ming Garden and Coffee Island. (Source: The Edge Financial Weekly)

Manufacturing: Solutia to invest RM305m on sulfur factory. US-based Solutia Inc is set to invest RM305m to build a new high-tech facility to manufacture insoluble sulfur, a vulcanising agent for critical application in tire industry. It is part of an expansion plan to the current plant operating in Gebeng industrial area here and by doing so, Solutia will double the capacity, making it the world’s largest manufacturing site for insoluble sulfur. (Source: The Star)

EPF: Declares 5.8% dividend for 2010. The Employees Provident Fund (EPF) announced a 5.8% dividend for the year ended Dec 31, 2010, slightly higher than the 5.65% given out in 2009. The RM21.6b dividend payout is the highest in the history and a 11.55% increase compared with the RM19.37b paid out in 2009. (Source: The Edge Financial Daily)

Read more...

Maybank IB Views

RESULTS PREVIEW
Notion VTEC RM2.01: Buy
Jumping for joy Shariah-compliant

A strong headstart. NVB's 1QFY11 core results are expected to be robust, likely ahead of consensus forecasts, but within ours. Our current FY11 net profit forecast is 14% above consensus. The camera segment (from new sub-assembly orders) will drive FY11 growth while the HDD section will take a back seat. We maintain our 2-year net profit CAGR forecast of 38% and introduce FY13 forecast. Clinching MSC tax status could further lift EPS by 6 sen. NVB stays a Buy with a RM2.40 TP, on improving business conditions and earnings prospects.


Technicals
The FBM KLCI closed lower by 3.48 points at 1,536.07 yesterday. Its resistance areas of 1,536 and 1,558 will cap market gains, whilst the obvious support areas are located at 1,515 and 1,533. The FBM KLCI has temporarily stalled at its new all-time high of 1,576.95 on 6 January 2011. A short-term trading low was then seen at 1,558.64 on 11 January 2011.

Trading Idea for today is an Accumulate call on CBSTECH.


Other Local News
MPHB: Signs MoU to buy balance 49% of Magnum. MPHB has proposed to acquire the remaining 49% stake in Magnum Holdings Sdn Bhd and other securities in Magnum. The total purchase consideration for the acquisitions is RM1.64b and shall be satisfied by way of issuance of new MPHB shares at an issue price of RM2.30 per MPHB share and RM809m in cash. (Source: Bursa Malaysia)

Axis REIT: Proposes income reinvestment plan. Axis Real Estate Investment Trust (Axis REIT) has proposed a plan that enables unit holders to reinvest their cash distribution received into new units. Also, the property manager to issue up to 75.18m new units, representing up to 20% of the existing approved fund size. (Source: Bursa Malaysia)

DRB-HICOM: To assemble Passat in November. DRB-HICOM and Volkswagen AG will start production in November with the assembly of Volkswagen Passat sedan 1.8 litre at the automotive complex in Pekan. The Pekan plant is expected to manufacture between 40,000 to 50,000 Volkswagen cars annually. (Source: The Star)

UMW: Consolidation under way. UMW Holdings Bhd plans to consolidate and rationalise some of its core businesses to become leaner and meaner. Consolidation is under way for its manufacturing and engineering and equipment divisions as UMW looks to leverage on its vast range of products and services. The oil and gas (O&G) division may also be restructured, while UMW Oil & Gas Bhd's listing plan remains on the cards once it returns to profitability. (Source: Business Times)

GPacket: Signs pact with Time Warner. Green Packet Bhd has signed an agreement with Time Warner Cable, the second largest cable operator in the United States, to provide its next generation connection management solutions. Time Warner Cable will use customised versions of Green Packet's Intouch connection manager, Intouch reporting server and Intouch update server for its Windows and Mac platforms. (Source: The Star)

Coastal: Sells vessels for RM268m. Coastal Contracts Bhd's wholly-owned subsidiaries have collectively secured contracts for the sale of seven offshore support vessels, three tugboats and two oil barges for an aggregate value of about RM268m. Including the new contracts, Coastal Group has about RM760m worth of vessel sales orders awaiting delivery to customers up to 2012. (Source: The Star)

Property: BTS expected to be mandatory by 2015. The Build-Then-Sell (BTS) 10:90 mode of house ownership is expected to be made mandatory by 2015. The drafting of the amendments to the Housing Developers Act will include a clause calling for the gradual implementation of the BTS system. (Source: The Sun)

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.

Read more...

Maybank IB Views

SECTOR UPDATE
Automotive: Overweight
Can a forced marriage be a force?

A merger on the cards? Proton is eager. Perodua is not. While Newco could create size and realise value, the merger offers minimal operational synergies. An equity swap is unlikely unless Perodua is finely compensated and its partners agree to it. A loose collaboration without equity swap makes more sense. Local automakers need to look beyond the domestic market to remain relevant and competitive. Based on our analyses, MBM offers higher upside to a potential merger. We remain Buyers of Proton and MBM; Hold on UMW.

COMPANY UPDATE
KNM Group RM1.93: Buy
Momentum picking up Shariah-compliant

Fundamentals recovering. Management's tone at an analyst briefing post 3Q10 results suggests a sustained recovery outlook. A confluence of factors, i.e. steady oil price, higher capex spending in the sector translating into rising order and tender books, and margins recovery should stimulate growth over the next few years. Buy, with a RM2.20 target price based on 9x 2011 EPS, Current valuations reflect KNM's near bottom cycle valuations (below its historical mean).


Technicals
The FBM KLCI edged higher by 0.76 points at 1,501.74 on Monday. Its resistance areas at 1,505 and 1,525 may cap market gains, whilst its obvious support areas are located at 1,488 and 1,501.

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


Other Local News
Air Asia: To form Philippines unit. Air Asia plans to form a Philippines unit with Antonio Cojuanco, a former chairman of Philippine Long Distance Telephone Co by 1Q11. The domestic and overseas routes would be available in 2011. (Source: The Star)

Scomi Eng: Accepts RM494m price for monorail fleet expansion. Scomi Engineering via its subsidiary, Scomi Rail Bhd (SRB), has accepted the contract price of RM494m for the monorail fleet expansion project. SRB had received a letter from Syarikat Prasarana Negara Bhd (SPNB) on Dec 3 notifying SRB of the intent to award SRB the contract at the quoted price. (Source: The Star)

UEM Land: To buy land in Bangi for RM268m. UEM Land Holdings Bhd will acquire two parcels of freehold agricultural land in Bangi for RM268.5m from Inch Kenneth Kajang Rubber Public Ltd Co. UEM intends to develop a township with a gross development value of RM2.84b spanning 10 years. (Source: The Star)

NFO: Some 4 Digit prize payment reduction approved. Multi-Purpose Holdings Bhd’s unit, Magnum and another listed NFO operator received approval from the Finance Ministry to revise the special prizes of their 4 Digit Big Game from RM200 per RM1 bet to RM180 per RM1 bet. Both companies said the special prizes for the 4 Digit Big permutations would be revised proportionately. (Source: The Star)

Chemicals: Petronas, BASF mull RM4b joint venture. Petronas and Germany's BASF are considering a RM4b joint venture to produce specialty chemicals in Malaysia. The final scope of investments will be determined following the outcome of a joint feasibility study, which is targeted to be completed in 2011. (Source: The Star)

Banking: India's Religare seeks presence in Malaysia. Religare Enterprises Ltd, an Indian financial services group controlled by the Singh brothers, Malvinder and Shivinder, is planning to buy a mid-sized investment bank in Malaysia and Indonesia. Besides India, Religare has presence in Singapore and Hong Kong. (Source: Business Times)

Healthcare: Pantai plans RM500m expansion of hospital network. The Pantai Group plans to expand its network of hospitals in Iskandar Malaysia at an estimated cost of RM500m.The development of the project, which will bear the name Gleneagles Medini Hospital, will be done in phases and is slated to be one of the premium hospitals under Parkway Health. (Source: The Star)

Property: RM500m Azea latest project in Danga Bay. Imperial Marine Pte Ltd, Danga Bay Sdn Bhd and Pembinaan Sahabatjaya Sdn Bhd have formed a 30:37:33 joint venture to develop a RM500m high-end mixed development known as Azea Properties. The commercial project will be undertaken on a 1.7ha site in Danga Bay, one of the key flagship zones within Iskandar Malaysia. (Source: Business Times)

Read more...

Maybank IB Research

ECONOMICS
3Q10 Real GDP
Further slowdown in growth...

3Q10 real GDP growth slowed to a lower than expected +5.3% YoY (Maybank IB estimate: +6.1% YoY; consensus estimate: +5.9% YoY). Growth was supported by continued growth in consumer and business spending as fiscal stimulus faded and external demand softened. We are placing our current full-year forecasts of 7.5% for 2010 and 6.1% for 2011 under review. Indications are that this year's growth will come in in between our and official forecast (+7%) and next year's growth to likely be in the 5.5% to 6% range.


SECTOR UPDATE
Plantation Sector: Neutral
A re-look at small caps

Hidden gems. Contrary to market expectations, plantation small caps (RM5b) by 14% YTD but underperformed mid caps (RM1b–RM5b) by 11% YTD. While the overall valuation discount of small caps to mid and big caps have narrowed, there are still attractively valued stocks. We identify four names, MHC Plantations, Kurnia Setia, NPC Resources and TDM.


Automotive: Overweight
Sales rebound in Oct

Oct vehicle sales were stronger than expected with preference for smaller vehicles. We expect 2010's TIV to reach 580,000 units, which implies soft Nov-Dec periods. Nonetheless, new launches will dominate headlines as distributors will build orders for 2011's delivery. Stock-wise, all the companies have performed well this year, up 8.3 - 80.1% YTD, driven by recovery in spending and stronger RM. We are placing our strategy and calls on hold for now pending the Nov results season.


RESULTS PREVIEW
AirAsia RM2.48: Buy
3Q to surprise on strong yields Shariah-compliant

Looking great. AirAsia will release its 3Q10 results on 25th November. 3Q10 is expected to be highly profitable, buoyed by strong passenger growth, high load factors, and positive outlook on yields. We raise our earnings forecasts to account for higher yields, off-setting higher fuel costs. Maintain Buy, with a raised target price of RM2.94 (+23% from previous) based on 10.1x 2011 PER - 10% discount to peers.


RESULTS REVIEW
CIMB Group Holdings RM8.41: Buy
Regional aspirations on track; upgrade to Buy

RM1b special dividend surprise. An unexpected 13.45sen/sh single-tier dividend totaling RM986m will be paid by 31 Dec 2010 (ex-date: 3 Dec). This suggests that future regulatory capital requirements may be well within CIMB's existing capacity. 9M10 net profit is in line, but we upgrade our 2011-12 earnings forecasts by 7% p.a. after raising our expectations for investment banking and Niaga. 2011 will continue to be a strong year. Upgrade to Buy with a new RM9.50 (+12%) TP.


UMW Holdings RM6.80: Hold
Auto drifts; O&G still drags Shariah-compliant

Auto's positive priced in; concern remains at O&G. Stronger 9M results, largely from auto and Ringgit, led us to lift 2010-12 forecasts by 15% p.a. Correspondingly, our target price is raised by 9% to RM7.20, based on unchanged 12x 2011 PER, in tandem with peers. Our Hold call remains. We are still unconvinced by its O&G's operations - impairment risk for Naga 3, continued losses at WSP. At the same time, we feel that its auto division growth prospect is already priced in.


QL Resources RM5.85: Buy
Scarcity premium now on the agenda? Shariah-compliant

Earnings delivered. As expected, QL chalked up another quarter of more than 20% YoY net profit growth as supply factors turned favourable for the Marine and Livestock divisions. Whilst we retain our earnings forecasts, we raise our TP to RM6.50 (+10%) as we normalise post-FY13 semi-explicit tax rates to FY13’s 15% instead of 20% as QL continues enjoying tax incentives from its expansion.


Dialog Group RM1.44: Buy
Strong visibility; target price raised Shariah-compliant

A fluid start. 1QFY11 earnings account for 26% of our full year forecast. We remain positive on Dialog's business model and direction as it seeks to grow its oil storage operations via the Tj. Langsat and Pengerang bases over the next 10 years. The CTF operations, backed by major oil traders (i.e. Vopak, Trafigura) and PETRONAS (i.e. MISC) should provide sustainable long term earnings, strong cashflows and consistent dividends. Buy with a higher RM1.75 SOP TP (+40%).


Technicals
The FBM KLCI fell 2.85 points to 1,503.20 yesterday.Due to the weaker tone in the USA last night, we may see the FBM KLCI in a "range trading" mode today. Its resistance areas at 1,503 and 1,520 will cap market gains, whilst its weaker support areas are located at 1,487 and 1,500.

Our trading idea for today is an ACCUMULATE call on HAPSENG.


Other Local News
IJM Land, MRCB: Shares suspended. Market talk of a potential merger involving IJM Land Bhd and Malaysian Resources Corp Bhd (MRCB) has intensified with the suspension of the shares of IJM Land, its parent IJM Corp Bhd and MRCB since 9am yesterday pending a material announcement on a potential corporate exercise. The companies are expected to announce details of the corporate exercise later today. (Source: The Star)

Salcon: Sells stake in unit for RM112m, aims to list unit in HKEx. Integrated water and wastewater engineering company Salcon Bhd has sold a 40% stake in Salcon Water (Asia) Ltd (SalconAsia) to Challenger Emerging Market Infrastructure Fund Pte Ltd (EMIF). SalconAsia holds the company’s water assets in China. Salcon also plans to list SalconAsia on the Hong Kong Stock Exchange (HKEx) in the next two to three years. (Source: The Edge Financial Daily)

Plantation: Introducing higher oil yielding seed. Agricultural Resources Sdn Bhd (AAR) introduced its' higher oil yielding semi-clonal hybrid called "AA Hybrida 1". Compared to Dolly Parton (Dura X Pisifera) which is the standard planting material, AA Hybrida I produces more, but smaller fruit bunches with 20% higher oil yields. (Source: Business Times)

Healthcare: Malaysia to review fees of doctors, private hospitals. The government will review the fees of doctors and private hospitals. The ministry will also set up six more ambulatory (out-patient) care centres under the Tenth Malaysian Plan, from 15 currently. (Source: Business Times)

Read more...