RHBInvest Research

Top Story: Media–Softer adex in Sep Underweight

Sector Update

¨ As expected, Sep’s gross adex for TV and print media combined showed a sequential monthly contraction of 18.1%, following the bumper Aug adex (due to Hari Raya and Merdeka festivities), according to Nielsen Media Research (NMR). On yoy basis, adex growth moderated to 5.1% in Sep (Aug: +9.7% yoy).

Corporate Highlights

Axiata: XL shows sequential improvement Market Perform

Company Update

- 67%-subsidiary, XL Axiata (XL), posted 9MFY11 core net profit of Rp2.14bn (+1.3% yoy), representing only 67% and 62% of our and consensus full-year estimates respectively.

- The key variance was a one-off severance payment amounting to Rp213bn in 3Q for outsourcing of XL’s managed network services. Excluding this one-off provision, XL would have recorded 9MFY11 net profit of Rp2.35bn (+11% yoy). This would have been in line with our but still lower than consensus expectations.

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Maybank IB Views

Axiata Group RM4.81: Hold
Lacking catalysts in the short term Shariah-compliant

Hold maintained. Axiata's Analyst Day was a much welcomed opportunity to catch up on latest developments at the individual subsidiaries. Overall, however, we see little share price catalyst for the group in the near term amid a challenging environment, with stiff competition particularly in the Indonesian, Cambodian and domestic markets. Reflecting this outlook, our cost of equity is raised to 11.8% from 11.1% and our sum-of-parts TP is cut to RM5.10 from RM5.50.

Technicals
The FBM KLCI rose 1.74-points to close at 1,448.00 yesterday. Its resistance areas of 1,448 and 1,467 will cap market gains, whilst the weaker support areas are located at 1,423 and 1,445. Despite the US markets’ minor rebound tone last night; we may see a volatile tone for the local bourse today.In the longer-term, we foresee an eventual move to 1,378.66 (the next EW extension target).

Trading Idea is a Take Profit call on HLBANK.

Other Local News
TNB: May have to raise funds to keep going. Tenaga Nasional Bhd (TNB) may look to the market to raise funds to sustain itself amid concerns on the continued gas shortage as it has to spend an additional RM3b on power generation this year. (Source: The Malaysian Reserve)

MAS: Sponsorship for Queen Park Rangers jersey to cost RM18m. Malaysia Airlines' (MAS) recently-announced sponsorship for the Queen Park Rangers (QPR) home jersey in the Barclays Premier League will cost the national carrier some RM18m. The total sponsorship fee for both MAS and AirAsia for the English professional football club, which involves a term of two years, would cost some RM30m. (Source: The Star)

Bursa: FCPO volume hits new high. Bursa Malaysia Derivatives' (BMD) crude palm oil (CPO) futures set a new record at the close of mid-day trading yesterday, with a total of 4.07m contracts traded YTD. Open interest for FCPO contracts on BMD has also risen steadily on the back of an even mix of players in the futures market. (Source: The Edge Financial Daily)

Ramunia: Confident of Bursa approval. Ramunia Holdings Bhd is confident it will get its regularisation plans approved as soon as it sorts out safety issues associated with its newly-acquired Pulau Indah Oilfab fabrication yard. Some parts of the Oilfab fabrication yard were found to be without a valid Certificate of Fitness, an official document that states that a building is safe to be occupied. (Source: Business Times)


Iskandar: Farglory may invest in Iskandar Malaysia. Taiwan-based Farglory Group has expressed interest in setting up industrial parks in Iskandar Malaysia in Johor. If the interest were to materialise, it would attract investments from Taiwan and other countries as well. Farglory is Taiwan's leading international land development and construction company that operates in Taiwan, China, the US and France. (Source: The Malaysian Reserve)

O&G: M'sia proposes two oil and gas related projects in Brunei. Malaysia has proposed to undertake two oil and gas (O&G)-related projects in Brunei. One of the projects is Petronas to build a petrochemical complex with BASF in Pulau Muara Besar, involving an investment of about USD1.6 bilion, while the other is the development of a fabrication yard by Petronas' subsidiary, Malaysia Marine and Heavy Engineering Holdings Bhd. (Source: The Star)

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Maybank IB Views

US Economy
Blast from the (distant & recent) past

Waiting for Bernanke's speech at the Federal Reserve Annual Symposium...Low expectations of an announcement or hint of a third round of asset purchase programme (QE3) with a more likely outcome to be a complement to the FOMC announcement on 9 August to keep the 0%-0.25% federal fund rate until mid-2013 with the same commitment to maintain the current size of Fed's balance sheet.

Malaysia
2Q 2011 Balance of Payments

FDI net inflows in 1H 2011 after four consecutive years of net outflows. Portfolio investment net inflows surged to RM48.055b in 2Q 2011 (1Q 2011: RM8.375b) and to RM56.430b in 1H 2011 (1H 2010: RM26.684b). Sustained current account surplus of RM23.397b in 2Q 2011 (1Q 2011: RM25.894b) and RM49.292b in 1H 2011 (1H 2010: RM44.082b).

RESULTS REVIEW
Maxis RM5.40: Hold
A defensive proposition Shariah-compliant

Hold maintained. 1H11 results were decent but marginally below expectations at 45% of our full-year forecast and consensus, the miss primarily being slower-than-expected voice revenue growth, though this is expected to pick up in the 2H. Positively, margins were preserved. Maxis provides for defensive yields but the extent of margin erosion from the launch of its home broadband services remains an uncertainty to earnings. Our DCF-derived TP of RM5.50 is maintained on WACC of 7.5% and 1% terminal growth assumptions.


Sunway Bhd RM2.29: Buy
One-off costs hit earnings

Below expectations. Sunway's 1H11 RM132m core net profit accounted for 40% of our and consensus full-year estimates. We lower our 2011-13 earnings forecasts by 9-15% and RNAV-based TP to RM3.78 (-7sen). Sunway continues to trade at a steep 40% discount to our RNAV. Buy. Positive re-rating catalysts include potential MRT job wins. During times of uncertainties, stable rental/dividend/manager fees from investment properties would provide the cushion to its earnings.

AEON Co. (M) RM6.95: Buy
The Bandar Utama impact

Weaker 1H within expectation. 1H11 recurring net profit of RM64.5m, after excluding the fire insurance proceeds of RM10.9m received in 1Q11, was 36% of our full-year forecast and consensus. We look to a stronger 2H with renewed contributions from renovated Jusco Bandar Utama (JBU). Our Buy call and RM7.90 TP are maintained.

BIMB Holdings RM2.00: Buy
Still as liquid as ever

Buy maintained. What BIMB continues to offer is a turnaround story of what is now a well-capitalized commercial bank (15.6% core capital ratio) with a very liquid balance sheet (net financing/deposit ratio of just 54%), a well-managed and profitable composite insurance outfit as well as a potential M&A story, given the possibility of shareholding changes. Our Buy call is maintained with a SOP-derived target price of RM2.40.

Carlsberg Brewery (M) RM6.85: Buy
The desired taste

16.5% YoY growth in 1H11 net profit to RM80m, which was 52% of our and consensus full-year forecasts. Results were within our expectation and we maintain our Buy call on the stock while our RM8.00 TP is unchanged. Valuations are decent at current levels, with the stock trading at a prospective 2012 PER of 12.9x against a historical mean of 16.7x, with gross yields of 4.9%. Near term, however, we expect sentiment toward the stock be cautious ahead of Budget 2012 with uncertainties over possibly higher duties.

Media Chinese International Limited RM1.14: Hold
Paper cuts from higher newsprint prices Shariah-compliant

Higher newsprint prices and slower adex growth looms. Media Chinese International Limited's (MCIL) 1QFY12 results were within expectations. That said, higher newsprint prices have had an adverse impact on earnings. Furthermore, we understand that adex growth will decelerate further into 2HFY12. We trim our FY12-14 earnings estimates by 2%-6% and TP from RM1.40 to RM1.14 (-19%).

Sarawak Oil Palms RM4.20: Buy
Too good to ignore Shariah-compliant

Explosive 2Q. SOP's RM69m 2Q11 net profit (+132% YoY; +24% QoQ) exceeded our and market expectations, boosted by high FFB production and low all-in cost of production. We raised our 2011 earnings by 6% and reiterate our Buy call with unchanged RM6.80 TP (13x 2012 PER). With 42.5% of estates still immature, SOP offers robust 16% 3-year CAGR in FFB production, 21% 3-year CAGR EPS, and yet trades at 8x 2012 PER. Its traded EV/planted ha of RM32,000 is cheap relative to recently transacted prices exceeding RM50,000/ha.

Wah Seong Corporation RM2.14: Buy
In line; orders set to kick-in Shariah-compliant

Maintain Buy. 1H11 results tracked expectations despite a weaker QoQ performance. We retain our forecasts and anticipate more new contracts in 2H. WSC remains a Buy with a RM3.10 target price (14x 2012 EPS). The stock now trades at just 10x one-year forward PER, one standard deviation below mean, which we think, underscores its near-term job wins and earnings potential. Meanwhile, the board has decided to delay Wasco’s listing exercise, citing weak market condition.

Hock Seng Lee RM1.48: Buy
Constructive growth Shariah-compliant

On track for 23% full-year growth. 1H11 net profit of RM38.6m (+22% YoY) met 43% of our full-year forecast and 42% of consensus. We expect a stronger 2H, leading to a sizeable 23% expansion in core net profit for 2011. We remain positive on HSL benefiting from the expected strong work flows in Sarawak. We reiterate our Buy call with a RM2.30 target price based on 12x multiple on 2012 earnings.

CB Industrial Product RM3.84:Buy
Catalyst from cash Shariah-compliant

Maintain Buy. CBIP's RM24m 2Q11 net profit (+86% YoY; 9.7% QoQ) brings 1H11 net profit to RM46m (+84% YoY), within our expectation but ahead of consensus. Its recent strategic proposed disposal of two plantation subsidiaries for RM268m cash could add 9.5% to our present TP. Future plans to utilize disposal proceeds also act as a catalyst to share price. We maintain our forecasts and TP of RM4.75 based on 7x 2011 EPS pending further clarity on cash utilisation. Still a Buy.

Eastern Pacific Industrial Corp RM3.05: Accept Offer
Inline; just awaiting GO completion Shariah-compliant

1H earnings inline; GO determines the price now. 1H11 net profit of RM27m was in-line at 49% of our full year forecast. In-light of the impending Mandatory General Offer (MGO), no dividend was declared. We maintain our Hold call and leave our RM3.10 TP unchanged, pegged at the RM3.10 offer price, implying 1.6% upside.

Technicals
The FBM KLCI fell 4.41 points to close at the 1,464.74 yesterday. Its resistance areas of 1,464 and 1,488 will cap market gains, whilst the weaker support areas are located at 1,423 and 1,454. Due to the US markets’ weaker tone last night; we will see a softer for the local bourse today. Some pre-Hari Raya holiday liquidation activities may persist to depress the markets’ rebound from its recent 1,423.47 low.

Trading idea is a Take Profit call on Axiata.

Other Local News
MAS: New managing director found? It is learned that the executive committee decided on the new MD after a meeting yesterday. Ahmad Jauhari Yahya, the former CEO of power producer Malakoff Bhd, has been offered the job to lead the embattled national airline. (Source: Business Times)

Megasteel: Dissapointed with Miti’s decision. Megasteel Sdn Bhd says its disappointed that the Ministry of International Trade and Industry (Miti) has decided against implementing the 35% safeguard duty on the import of hot-rolled coil (HRC) the steel giant had petitioned for in June. (Source: The Edge Financial Daily)

SDB: To launch RM1b projects in next 12 months. Selangor Dredging Bhd (SDB) has in its pipeline property launches worth almost RM1b in GDV in Malaysia and Singapore by the end of 2012. The group expects contribution from Singapore to be at par with Malaysia’s in two years. (Source: The Edge Financial Daily)

LTKM: Counts on it recession proof sector. LTKM Bhd is planning to maintain its current level of egg production, as it looked to capitalise on the recession-proof nature its business. LTKM currently produces an average of 1.4m eggs per day. (Source: The Edge Financial Daily)

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Stocks to watch: CIMB, Mudajaya, AirAsia, MAS

KUALA LUMPUR: CIMB Group Holdings Bhd will be among the heavyweights stocks to watch on Wednesday, Aug 24 following the release of its second quarter results which was a record.

Other stocks which could be in focus are MUDAJAYA GROUP BHD [], Axiata Group Bhd and also airlines AIRASIA BHD [] and MALAYSIAN AIRLINE SYSTEM BHD [], which reported a sharp difference in results.

Oil and gas companies would continue to see interest, including pipe manufacturers Wah Seong Corp Bhd following plans for a 200km pipeline off Terengganu.

CIMB’s earnings rose 9.1% to a record RM970 million in the 2Q ended June 30 from RM889 million a year ago, underpinned by the local consumer banking operations and continued high growth at CIMB Niaga. Its earnings rose 5.8% from 1Q.

For the first half, its net profit rose 9.3% to RM1.887 billion which was equivalent to net earnings per share (EPS) of 25.4 sen.

Mudajaya could see strong trading interest after a 11.2% increase in earnings of RM60.29 million in 2Q from RM54.22 million a year ago, mainly due to more activities. Revenue increased by 70.6% to RM356.11 million from RM208.63 million.

Mudajaya declared a second interim single tier dividend of 12.5% or 2.5 sen per share of 20 sen each.

Axiata's net profit rose 14.94% to RM663.05 million in 2Q from RM576.82 million a year ago, mainly due to higher contribution from XL, Idea and Multinet, as well as lower depreciation, amortisation and impairment charges.

Revenue rose to RM4.05 billion from RM3.85 billion. Earnings per share were 8.0 sen compared with 7.0 sen. It declared an interim tax exempt dividend of 4.0 sen per share for FY ending Dec 31, 2011.

However, net profit fell 19% to RM1.21 billion in the first half from RM1.49 billion a year ago. Revenue increased by 4.2% to RM7.99 billion from RM7.66 billion.

AirAsia reported earnings of RM104.25 million in the second quarter ended June 30, 2011 as its operations were affected by higher fuel costs, which rose 31%.

Earnings fell 47.5% from the RM298.93 million a year ago. It declared its maiden dividend of 3.0 sen a share. The low-cost carrier said fuel costs increased by 31% to an average US$140 per barrel from US$106 a year ago.

MAS’ net loss for the second quarter ended June 30, 2011 narrowed to RM526.68 million compared with net loss of RM534.73 million a year ago as it continued to be impacted by the high fuel prices.

Its revenue was RM3.485 billion compared with RM3.213 billion a year ago. Loss per share was 15.76 sen compared with 16 sen. Its derivatives loss was lower at RM56.08 million, a sharp decline from the RM217.16 million a year ago.

However, for the six months ended June 30, MAS’ net loss widened substantially to RM769.02 million from net loss RM224.68 million in 2010.

Petroliam Nasional Bhd and its production sharing partners are embarking on a RM15 billion project to extract gas from fields off Peninsular Malaysia which includes a new 200km pipeline.

Petronas said the project comprises nine discovered gas fields within Blocks PM301 and PM302 and in the Bergading contract area, about 300km off the coast of the peninsula. “It will also involve the development of a new 200km pipeline to transport gas from the fields to Kerteh, Terengganu. The project is estimated to cost RM15 billion,” it said.

IJM Land Bhd expects local property market to remain resilient this year, underpinned by stronger demand as younger people were also buying property.

IJM Land's current unbilled sales is just over RM1 billion which would last the group two years. It plans to launch RM2 billion worth of projects in FY2012.

DIGISTAR CORPORATION BHD []’s net proft surged 425% to RM6 million from RM1.14 million a year ago and expected the momentum to continue into the next quarter as it expands its customer base in the provision of IPTV services to hospitals. Revenue slipped 30.9% to RM24.85 million from RM35.98 million. Earnings per share were 2.88 sen compared with 0.62 sen.

For the first half ended June 30, Digistar's net profit jumped 616% to RM15.02 million from RM2.09 million while revenue increased 15.5% to RM75.99 million from RM65.75 million.

Al-'Aqar KPJ REIT reported earnings of RM11.03 million in the second quarter ended June 30, 2011, which was just 0.8% higher that the RM10.94 million a year ago. Revenue rose 14.1% to RM19.82 million from RM17.21 million while earnings per share were 1.90 sen compared with 1.89 sen.

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RHBInvest Research

Corporate Highlights



Allianz: Still interested in M&As Outperform (up from MP)

Company Update

¨ The failure to strike a deal with MNRB for a stake in Takaful Ikhlas was disappointing in our view, although we understand that Allianz would continue to pursue a Takaful business.

¨ Allianz is also not ruling out other M&A to strengthen its conventional insurance business. In this regard, we believe that a potential target could be in the general insurance sector due to the high capital requirements from the RBC framework and also the high level of competition in the sector, as there are currently 29 general insurance players (inclusive of six composite insurers).



Axiata: XL fell a bit short Outperform

Company Update

¨ 67%-subsidiary, XL Axiata (XL), posted 2QFY11 core net profit of Rp842bn (+>14.8% yoy), representing only 43% of both our and consensus full-year estimates.

¨ 2Q revenue increased 0.5% qoq, mainly due to strong data & VAS revenue (+13.6% qoq), mostly offset by weaker voice (-0.7% qoq) and SMS (-2.2%). EBITDA margin was marginally lower by 0.7ppt qoq to 52.3%. Nonetheless, together with lower net interest cost (-12.9% qoq), 2Q core net profit increased 14.3% qoq.



Unisem: Initiating internal restructuring Market Perform

Briefing Note

¨ Unisem is initiating an internal restructuring in order to transform into a “World Class Supplier” to be on par with major players within the industry. These include putting in place advance IT systems i.e. ERP to integrate all its plants for better efficiency. Going forward, management expects improvement in cycle time, productivity, and better cost savings through better waste management.

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Stocks to watch: Prestariang, Axiata, Uzma, Alam

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Maybank IB Views

Malaysia: MIER Quarterly Indices
"Circumspect" is the word...

MIER releases 2Q2011 Consumer Sentiment Index (CSI) and Business Conditions Index (BCI). CSI recorded another quarter of decline (-0.3pt QoQ to 107.9), BCI posted another quarter of rise (+0.7pt QoQ to 114.0) as inflation dampen consumers amid external risks and domestic opportunities facing businesses. In addition, the expectations sub-index for both CSI and BCI were down 0.5pt and 16.1pts respectively. Overall, the indices point to further moderation in 2Q 2011 real GDP growth, with continued caution ahead.

SECTOR UPDATE
Oil & Gas: Overweight
Tide is turning

Domestic OSV market entering calmer waters. We upgrade the Offshore Service Vessels (OSV) segment to Neutral following a 8-37% correction in share price YTD. Operationally, we opine the worst is over for the sector and prospects are set to improve, albeit at a gradual pace over the next 24 months. Stocks wise, we have upgraded Alam, TOFF and Perdana Petroleum to a Hold (from Sell previously).

Technicals
The FBM KLCI inched lower by 0.83 points to close at 1,579.84 yesterday. Its resistance areas of 1,579 and 1,597 will cap market gains, whilst the weaker support areas are located at 1,560 and 1,574.

Trading Idea is a Take Profit call on Muhibah

Other Local News
Dialog: Buys 51% stake in Indian Company. Dialog Group’s unit is paying RM7.88m for a 51% stake in India-based outsourcing company Anewa Engineering Pte Ltd to further boost its engineering capabilities and talent pool. The investment provides access to new customers, including those in the Middle East and India. (Source: The Edge Financial Daily)

AirAsia: Tie-up with ANA likely. AirAsia is likely to have a joint venture with Japan's largest carrier - All Nippon Airways (ANA) - to set up a low cost airline likely to be called AirAsia Japan. The LCC will serve the domestic market and eventually regional markets. (Source: The Star)

DiGi: Set to seal two MVNO deals. DiGi.Com Bhd is expected to announce two mobile virtual network operator (MVNO) deals in the second half of the year. (Source: Business Times)

Tradewinds Plantation: Gets nod to buy Mardec for RM140m. Tradewinds Plantation Bhd has received the green light from its shareholders to acquire rubber processor Mardec Bhd for RM140m cash. The acquisition was part of Tradewinds Plantations' strategy to expand its rubber business into downstream activities, complementing its existing rubber plantation operations. (Source: The Star)

Oriental Pearl Harbour: Close to RM4.5b UAE port deal. Oriental Pearl Harbour Sdn Bhd (OPH), which is bidding for the privatisation of the Penang Port, is on the verge of concluding a contract to manage and operate a port in the Middle East in a deal estimated to be worth more than USD1.5b (about RM4.5b). (Source: The Malaysian Reserve)

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RHBInvest Research

Sector Call



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

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

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

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RHBInvest Research

Top Story: Axiata - Celcom still holding firm Outperform

Briefing Note
Celcom managed to register healthy prepaid net adds of 177k (4QFY10: +52k) thanks to greater focus on the prepaid segment over postpaid.


Sector Call

Semiconductor – Apr chip sales weaken to 3.9% yoy Neutral

Sector Update

Unisem: Fair value at RM1.99 Market Perform

Notion: Fair value at RM2.25 Market Perform

Apr chip sales fell 2.2% mom after rebounding 2.3% in Mar 11. We reckon this was partly due to the abrupt decline in chip demand due to the Japan disaster that occurred in Mar. On the other hand, Apr chip sales appeared weak with yoy growth of 3.9% compared to Mar 11 growth of 8.4% yoy.

Corporate Highlights

Puncak Niaga: Cash flows intact despite IC 12 Trading Buy

Briefing Note Management clarified that there is essentially no impact to the underlying business and cash flows despite adopting IC 12.

Puncak however conceded that it will record losses in FY11, but will return profitable in FY12 with the scheduled 25% water tariff hike in Jan 2012.

IJM: Raising Stakes In Two Indian Units Underperform

News Update
IJM has proposed to raise its stakes in CIDB Inventures and Swarna Tollway by 16.9% and 17% to 95% and 98.5% for RM46.4m.



CBIP: Sells plantation subsidiaries, RM1.07/share gain on sale Outperform (upgraded)

News Update
CBIP entered into two share sale agreements to dispose of its 100%-owned subsidiaries, Sachiew and Empresa for RM108.12m and RM159.94m cash, respectively. Sachiew is the holder of a provisional 60-year lease for 3,720ha of land in Suai, Miri, which also has a 30t/hr CPO mill. Empresa is the holder of a provisional 99-year lease for 5,936ha of land in Bok, Miri, which also has a 45t/hr CPO mill.

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Maybank IB Views

Sunway Holdings RM2.57: Hold
Results as expected; merger completion next Shariah-compliant

Tactical downgrade to Hold. Results were in line. RM31m 1Q11 core net profit (-13% YoY, -42% QoQ) made up 19% of our full year estimate. We maintain our 2011-12 earnings forecasts. The merger with SunCity is into its final stage with shareholders to vote on 15 Jun. An enlarged entity under the new Sunway Bhd is expected to be listed in 3Q11. With the share price closing in to the implied take-over price (+14.7% YTD), we downgrade the stock to Hold.
Maxis RM5.42: Hold
A seasonally slower quarter Shariah-compliant

Hold maintained. RM540m net profit was down 2% YoY and 12% QoQ. With 1Q11 being a seasonally slower quarter, net profit was within expectation at 22% of our full-year forecast and our numbers are maintained. Guidance remains for margins to come under further pressure with the roll-out of new wireless/fixed broadband services. Dividend yields aside, we see little share price catalyst and maintain our Hold call on the stock. Our DCF-derived TP of RM5.50 is maintained on WACC of 7.5% and 1% terminal growth assumptions.
Axiata Group RM5.00: Buy
Stable growth in regional ops Shariah-compliant

Buy call maintained. Some weakness from Dialog and Robi during the quarter but positively, Celcom continues to register stable earnings growth while XL continues to fare well despite aggressive price competition. Overall, nevertheless, Axiata’s regional operations continue to fare well and remain very much cash generating entities with growth potential. Our Buy call is maintained with an unchanged SOP-based target price of RM5.60.
Malaysia Airports Holdings RM6.37: Buy
Jumpstart to 2011

Within expectation. 1Q11 core net profit number reveals a healthy business that is flourishing on the back of strong traffic numbers and healthy retail business. We look forward to a promising 2011 as air travel momentum remains strong in the Asia Pacific region. Maintain Buy, with an unchanged target price of RM7.12/share DCF-based.

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RHBInvest Research

Top Story: Axiata

Results Preview

• Expecting a stable 1Q qoq
• Maintain Outperform and fair value of RM5.75, on good growth prospects albeit moderating this year.

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Maybank IB Views

Banking: Overweight
Bouncing back in March

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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RHBInvest Research

Top Story: Fajarbaru

Visit Note
Upbeat on new contract wins
The new contract wins could potentially come from: (1) Package B of the Ampang and Kelana Jaya LRT line extension project; (2) Building jobs for schools, colleges and university campuses; and (3) Infrastructure works in the East Coast.
FY06/11 net profit forecast is reduced by 10% as we now assume the RM150m contract for the five new LRT stations to only start contributing in FY06/12 (vis-à-vis FY06/11 we assumed previously).
Fair value is trimmed from RM1.65 to RM1.57 but maintain Outperform.

Sector Call

Banks: Mar ‘11 system data

Sector Update
Leading indicators charting new heights
No change to our Overweight stance on the sector. CIMB, AMMB and Affin are our top picks for the sector.

Semicon: March chip sales still up yoy Neutral

Sector Update

Unisem: Fair value at RM1.99 Market Perform

MPI: Fair value at RM4.95 Underperform

Notion: Fair value RM2.25 Market Perform

JCY: Fair value at RM0.74 Underperform (down from MP)


Corporate Highlights

JCY:

Visit Note

• Labour issues to affect margins in FY11
• Also, management highlighted there could be potential component shortages mainly for the motor controller chips that could affect the global supply chain of the HDD industry.
• We are reducing our FY11 net profit by 11.3% mainly to input higher operating expenses. However, we are raising our FY13 net profit by 7.6% to reflect margin improvement on the back of its expansion to China .
• Thus, we downgrade our call to Underperform (from market perform) and a lower fair value of RM0.74/share based on unchanged 10x CY11 EPS.

AirAsia:

Briefing Note

• Growth story and IPO of overseas units not without caveat
• Fair value is RM2.10. Maintain Underperform.

Digi:

1QFY11 Results/Briefing Note

• 1 Network modernisation will not affect dividends
• We have fine-tuned our earnings forecasts by 0.2-0.7% for FY11-13 due to marginally lower depreciation charges from lower capex assumptions.
• Fair value raised to RM30.00 from RM29.10 due to lower capex assumptions of RM650m p.a. (previously RM720-750m). Although we like the stock as a decent dividend yield play with data-led revenue growth, we believe the stock is almost fully valued at this juncture. Downgrade to Market Perform.

Axiata:

Company Update

• A fairly strong start to 2011 for XL
• The strong 1QFY11 growth in XL reinforces our Outperform call on Axiata, which offers good growth prospects albeit moderating this year. Maintain our SOP fair value of RM5.75.

Paramount:

News Update

• Acquiring land in Klang. Total cash consideration is RM110m, to be funded by internal funds and/or borrowings.
• We are positive on this acquisition, as Klang is the 2nd largest city in Klang Valley after KL, with a population of close to 750k. A well-planned commercial development is hence marketable.
• No change in our earnings estimates pending guidance from the management on GDV of the project.
• Maintain Market Perform with an unchanged fair value of RM5.92.

EON Capital:

News Update

• Eon Cap announced last Friday that the Board had accepted HL Bank’s offer, subject to and conditional upon: 1) the payment of an interim net dividend amounting to RM311.9m by Eon Bank (Proposed Interim Dividend); 2) the Proposed Interim Dividend received by Eon Cap shall not form part of the assets of Eon Cap to be disposed to HL Bank; and 3) the offer price of RM5.06bn remains unchanged and shall not be adjusted for the payment of the Proposed Interim Dividend. HL Bank has since confirmed that it is agreeable to the above conditions.
• The Proposed Interim Dividend is subject to the approval from BNM. In addition, an application will be made to the SC for the proposed change in control of MIMB Investment Bank. Once BNM’s and SC’s approvals are obtained, both parties shall proceed and complete the transaction.
• No change to our fair value of RM7.30 (based on HL Bank’s offer price) and Underperform call.

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RHBInvest Research

Sector Call

Telecom:

Sector Update

• Cheaper broadband on the horizon?
• We like Axiata (OP, FV = RM5.75) for strong growth prospects albeit moderating this year. Our main concern is the uncertainty of the 2G spectrum renewal fee in Bangladesh.
• While we favour DiGi (OP, FV = RM29.10) for decent growth prospects and dividend yields, we believe valuations may no longer look very attractive and are reviewing our call pending its results on 29 Apr.

Corporate Highlights

Sime Darby :
News Update

• Awarded RM1.15bn contract
• With this award, we uphold our view that there is a greater chance of Sime being able to dispose its O&G division at a more reasonable price, given the vote of confidence from Petronas.
• Given the minimal impact, we are leaving our forecasts unchanged for now, pending further details on the contract. We maintain our Outperform call with RM10.70 fair value.

CBIP:

News Update

• Awarded RM38.35m contract from Ministry of Health
• Our target price is maintained at RM4.65.Maintain Market Perform.

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Maybank IB Views

RESULTS REVIEW
Public Bank RM13.06: Hold
Slight forex impact on loans

No surprises. 1Q11 results accounted for 25% of our full-year forecast and consensus. Fundamentals remain very much intact with healthy loan growth, improving asset quality and robust ROEs. We nevertheless maintain our view that consumer demand is likely to taper off in 2H11 on the back of measures instituted recently coupled with inflationary pressure. To this end, we see little catalyst in the near term, while Public Bank's pricing is fair in our view (prospective 2011 P/BV of 3x, ROE: 23.9%). We maintain our Hold call with an unchanged DDM-derived TP of RM14.10 (payout ratio: 52%, cost of equity: 10.6%, terminal growth rate: 5%).

CapitaMalls Malaysia Trust RM1.12: Buy
On track; completed Gurney Plaza Extension acquisition

Maintain Buy. CMMT's RM25.8m 3M11 realised net profit (+13% QoQ) came in within expectations. CMMT has completed the RM215m Gurney Plaza Extension (GPE) acquisition which has further strengthened its position in the local retail industry. We raise our earnings forecasts by 10-13% to factor in GPE and the 144.9m new unit placement (RM1.06 issue price). Our DDM-based target price is raised to RM1.27 (+7 sen).

COMPANY UPDATE
Malaysia Marine and Heavy Engineering Holdings RM6.88: Hold
IM 2011: Pasir Gudang yard site visit Shariah-compliant

Better days ahead but prospects largely priced in. We are encouraged by the brisk activity at MMHE's Pasir Gudang yard in southern Johor. We expect job replenishment momentum to kick-off earnestly from May and foresee MMHE clinching RM4-5b new jobs over the next 12 months. These positives could momentarily stretch share price performance beyond the 26x 2012 PER of the sector's historical peak, above our fundamental TP of RM6.50 (22x EPS).

Technicals
The FBM KLCI advanced 5.98 points to close at 1,527.92 yesterday. Its resistance areas of 1,527 and 1,549 will cap market gains, whilst the weaker support areas are located at 1,517 and 1,525. The FBM KLCI has stalled at its new all-time and major high of 1,576.95 on 6 January 2011. The next key low sighted was at 1,474.38 (28 February 2011) and the next swing high was seen at 1,565.04 (4 April 2011).

Trading idea for today is a technical sell call on IOICORP.

Other Local News
Maybank: Gets approval to raise USD2b, Bio-Xcell gets funding from Maybank. Malayan Banking Berhad (Maybank) has obtained approval from the Securities Commission (SC) to establish a multi currency medium-term notes (MTN) programme of up to USD2b. Separately, Maybank and Malaysian Bio-Xcell Sdn Bhd (Bio-XCell) has signed an agreement for a RM250m Commodity Murabahah Term Financing - Islamic Facility (CMTF-i). (Source: Bursa Malaysia, The Star)

Axiata: Celcom signs fiberisation deal with Sacofa. Celcom Axiata Bhd signed a RM168m fiberisation leasing agreement with Sarawak-based Sacofa Sdn Bhd. With the completion of this project, Sarawakians will be able to enjoy enhanced services such as high-definition voice and video plus high-speed browsing with Celcom. (Source: The Star)

Affin: To convert Indonesia's Bank Ina into Islamic lender. Indonesia's conventional bank PT Bank Ina Perdana, which is being acquired by Affin Holdings Bhd will be converted into an Islamic bank - a process that will likely take two years. (Source: Business Times)

Construction: CMC, UK partner may win RM700m LRT job. CMC Engineering Sdn Bhd and UK's Colas (CMC-Colas) may win a contract worth some RM700m for electro-mechanical (E&M) system for the Kelana Jaya light rail transit (LRT) extension line. Tenders closed recently and Prasarana may award the contract by early May. (Source: Business Times)

Autos: Vehicle sales up 12.7% in March. Total vehicle sales surged 12.7% to 63,265 units in March 2011 from 56,139 units a year earlier due to a rush for deliveries and invoicing by companies that have their financial year ending in March. (Source: The Star)

Mining: Indonesian tin miner to list on Bursa Malaysia. Malaysia Smelting Corp Bhd (MSC) is proposing to list its Indonesian unit, involved in tin mining, on Bursa Malaysia's Ace Market. (Source: The Star)
Outside Malaysia

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RHBInvest Research

Top Story: Shifting Trends

• Market Update
• BN’s win means that the Government will most likely continue its agenda for development of Sarawak under the SCORE economic corridor.
• BN’s win in Sarawak will likely be viewed positively by the market, which will also raise speculation about the timing of the next general election. . Our long-term positive view on the equity market is unchanged and we reiterate our year-end FBM KLCI target of 1,700.

Corporate Highlights

Axiata:

• Visit Note
• Growth to moderate
• We still like Axiata, which offers growth prospects albeit moderating this year. Maintain our SOP fair value of RM5.75, but upgrade to Outperform due to recent share price weakness.

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Maybank IB Views

ECONOMICS
Market & Economy
Embarking on the passage of transformation

A giant leap. PM Najib's Keynote Address at yesterday's Invest Malaysia conference sent a positive and affirmative message on the government's resolute to transform Malaysia into a high-income economy by 2020. The PM also took the opportunity to showcase his report card detailing the progress and achievements of the strategic policies and radical initiatives announced over the past two years. There is no change to our economic and Malaysian equities growth forecasts (YE KLCI: 1,710 pts). Positive news flows especially on the ETP implementation are potential market rerating catalysts, in our view.

Technicals
The FBM KLCI plunged by 18.08 points at 1,525.92 yesterday. Its resistance areas of 1,525 and 1,540 will cap market gains, whilst the weaker support areas are located at 1,500 and 1,522. Due to the DJIA’s much weaker tone last night, we will see the FBM KLCI in a further liquidation mode today. A recent secondary high of 1,565.53 (4 April 2011) had been seen and a major downward retracement phase has now emerged.

Trading Idea for today is a Take Profit call on AXIATA.

Other Local News
IRDA: MRT proposed for Iskandar Malaysia. A plan to build a 500km mass rapid transit (MRT) system has been proposed to improve the connectivity within Iskandar Malaysia, according to Iskandar Regional Development Authority (IRDA). The MRT project will be developed in five or six phases. The first phase is expected to be completed by 2020. The announcement will be made by the Prime Minister if the proposal is accepted. (Source: The Star)

CIMB: Datuk Zainal Abidin named chairman. CIMB Bank Bhd announced the appointment of Datuk Zainal Abidin Putih as chairman of the company, succeeding Tan Sri Haidar Mohamed Nor, who retired at the Bank’s Annual General Meeting. Zainal has been a director of CIMB Bank since July 2006 and is also the chairman of its audit committee. (Source: Business Times)

Xinhua: To make KL regional HQ. China's state media Xinhua News Agency plans to set up its Asean editorial hub in Malaysia this year and a formal announcement will be made in due course, said its Asia-Pacific president and editor-in-chief Ju Mengjun. Xinhua News Agency has seven regional hubs in the world with over 130 overseas bureaus, of which 27 are located in Asia Pacific. It has representative offices in most Asean countries at present. (Source: The Star)

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Stocks to watch: DBE Gurney, VS Industry, Ireka, Berjaya Corp

KUALA LUMPUR: Stocks on Bursa Malaysia could extend their gains on Thursday, March 31 as the first quarter winds down and the FBM KLCI at its highest since early February, as sentiment could be reinforced by the firmer overnight close on Wall Street.

Credit Suisse Research said Malaysia is expected to surprise on the upside in 2011 but uncertainties still remain over the sustainability of growth beyond 2011.

It said IJM Corp, Air Asia, Axiata and UEMLand were particularly interesting. IJM Corp. is a direct beneficiary of the Economic Transformation Programme (ETP). Air Asia and Axiata have gone beyond Malaysia shores and are riding on the region’s strong growth. UEM Land is working on a different approach to take advantage of the strong Singapore-Malaysia ties.

On Wall Street, U.S. stocks rose on Wednesday, March 30 with activity dominated by money managers buying recent winners, including energy and small-caps, as the quarter nears its end.

The Dow Jones industrial average added 71.60 points, or 0.58 percent, to 12,350.61. The Standard & Poor's 500 rose 8.82 points, or 0.67 percent, to 1,328.26. The Nasdaq Composite gained 19.90 points, or 0.72 percent, to 2,776.79.

At Bursa Malaysia, stocks to watch include poultry outfit DBE Gurney Resources Bhd, V. S. Industry Bhd (VSI), Ireka Corp Bhd, Berjaya Corp and Masterskill Education Group Bhd.

DBE Gurney’s additional 593.33 million new shares and 200 million warrants will be listed on Thursday. The warrants were issued for free to the subscribers of the renounceable rights issue of 400 million rights shares on the basis of one free detachable warrants for every two rights shares subscribed for.

The maturity date of the warrants is March 22, 2016 and the conversion price is 10 sen. The new shares of 10 sen were issued pursuant to the rights issue with warrants and capitalisation of amounts due to director and creditors settlement.

Meanwhile, The Edge FinancialDaily reports OSK HOLDINGS BHD []'s wholly owned subsidiary OSK Investment Bank Bhd (OSKIB) has emerged as the single largest shareholder of DBE Gurney, with 180.99 million shares or 26.88% of DBE's enlarged issued share capital.

V. S. Industry has set a dividend policy of making out an annual payment of at least 40% of its net profit to shareholders as dividends, and plans to disburse payouts on a quarterly basis. The dividend policy is effective in the current financial year ending July 31, 2011 (FY11).

VSI’s net profit in the second quarter ended Jan 31, 2011 surged 134.1% to RM10.1 million from RM4.4 million a year ago, due to higher revenue. The profit came mainly from the higher group sales as a result of the increased sales generated by its Malaysian and Indonesian operations.

Ireka Corp’s unit Ireka Engineering & CONSTRUCTION [] Sdn Bhd has received the letter of award from Transmission TECHNOLOGY [] Sdn Bhd for the proposed offices and hotel development in Kuala Lumpur for RM232.74 million.

The contract comprises of architectural and M&E works for basements and 13-level podium, a 27-storey office tower and a 37-storey office tower. The contract period for Tower 1 and Tower 2 is 18 months and 20 months respectively.

Berjaya Corp posted net profit of RM32.46 million in the third quarter ended Jan 31, 2011 compared with net loss of RM156.20 million a year ago on higher profit contribution from gaming, stockbroking, direct selling, retail and distribution businesses.

It said on Wednesday, March 3o that revenue rose to RM1.77 billion from RM1.66 billion while earnings per share were 0.74 sen compared with loss per share of 3.75 sen.

“The pre-tax loss of RM50.2 million in the previous year corresponding quarter was mainly due to the non-cash dilution effects amounting to RM150.46 million when the group's interest in BERJAYA LAND BHD [] (BLand) was diluted from 56.44% to 53.25% arising from the conversion of BLand ICULS to BLand shares upon its maturity on Dec 30, 2009,” it said.

For the nine-month period, it recorded net profit of RM244.47 million, a contrast from the net loss of RM64.47 million in the previous corresponding period. It posted pre-tax profit of RM612.64 million compared with RM309.58 million a year ago. .

Masterskill Education Group Bhd has recommended a final single tier dividend of 7.9 sen per 20 sen share for the financial year ended Dec 31, 2010. It said on Wednesday, March 30 the dividends would be payable on June 15. The group had on Oct 13, 2010, completed the distribution of an interim dividend of seven sen per share to the shareholders.

The total of 14.9 sen per share dividend for 2010 will represent a total payout of 60% of its net profit, equivalent to RM61 million.

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Maybank IB Views

ECONOMICS
BNM Annual Report 2010
No Change in official 2011 GDP forecast

Official real GDP growth forecast remains at 5%-6% (2010: +7.2%) although the growth rates of GDP components were tweaked, while inflation is expected to accelerate to 2.5%-3.5% (2010: +1.7%). We maintained our growth forecast of 5.5% for now but raised our inflation rate (to +3% from +2.a5%) and crude oil price (to USD100/barrel from USD90/barrel). Risks, issues and challenges in 2011 include sustaining growth momentum, ensuring financial stability and dealing with rising inflationary pressures. In this regards, we expect OPR to be raised in Sep and Nov by a total of 50bps to 3.25% but sticking to our contrarion call of no further SRR hike after the 100bps increase to 2% on 11 Mar. We also see further prudential measures to deal with the specific issue of household debt.

SECTOR UPDATE
Banking: Overweight
Upbeat challenges

Maintain Overweight. The banking system remains in the pink of health with profits up a strong 34% last year, supported by strong asset ratios. Yesterday's analyst briefing, in conjunction with BNM's release of its 2010 Annual Report and Financial Stability and Payment Systems Report, sent a positive vibe on the domestic banking sector outlook, with key agenda in 2011 being to manage household sector resilience. There is no change to our earnings forecasts and calls for the banks.

COMPANY UPDATE
Sime Darby RM9.15: Buy
Moving on

Positive kicker to sentiments. Sime Darby has agreed on an out-of-court settlement with Maersk Oil Qatar (MOQ), which results in a RM100m write back of provisions (1.6sen/sh). The write back has no impact on our core earnings forecasts but is positive on sentiment. Going forward, the stock will gain further momentum from perpetual positive news flow. We are sideline on the ongoing lawsuits. Reiterate Buy with a RM10.60 sum-of-parts target price.

Notion VTEC RM1.98: Buy
To benefit from relocation exercise Shariah-compliant

New 'body mount' project from Nikon is a kicker. This new order could generate a net profit of RM4-6m and lift EPS by 3-4 sen. We maintain our forecasts for now. We do not rule out higher outsourcing contracts from Nikon as it reorganizes its operations in Japan. NVB's MSC tax status remains a work-in-progress but would add another 6 sen to EPS once approved. NVB remains a small-cap Buy, with a RM2.40 target price, based on 4.5x FY11 EV/EBITDA, reflecting regional peers' (ex-Japan) valuations.

ACQUISITIONS / DISPOSAL
Tenaga Nasional RM6.18: Sell
Buys 22.1% of Integrax Shariah-compliant

A hand in port operations. We are positive on Tenaga's acquisition of 22.1% Integrax, due to its strategic benefits and attractive valuation. The earnings increment is small - we estimate RM3-4m p.a. initially, based on a 22.1% share in Integrax's earnings (RM48m net profit in 2010), which will be offset by the acquisition cost. That aside, we are concerned about the current high coal prices and lack of clarity on a tariff hike that is undermining Tenaga's earning potential. No change to our earnings forecasts and DCF-based target price for now. Sell.

Technicals
The FBM KLCI inched up 2.87 points yesterday to close at 1,511.97. Its resistance areas of 1,513 and 1,529 will cap market gains, whilst the obvious support areas are located at 1,495 and 1,511.

Trading idea for today is a Buy call on SAPCRES.

Other Local News
RHBCap: ADCB meets investment bankers. RHB Capital Bhd's (RHBCap) single largest foreign shareholder Abu Dhabi Commercial Bank (ADCB) had called for a meeting among investment banks last week to pitch for an advisory role on the sale of its 25% stake in the local banking group. (Source: The Edge Financial Daily)

Malaysia Airlines: May raise surcharge. Malaysia Airlines (MAS) has warned that it would raise its fuel surcharges as the conflict in the Middle East was accelerating the pace of crude oil price hikes which in turn, threatens airline margins. (Source: The Star)

TM: UniFi subscribers almost doubled to 60,000 last year. Telekom Malaysia Bhd (TM) has almost doubled the number of customers for its high speed broadband service called UniFi, to 60,000 from 33,000 at the end of last year, beating its own estimates. (Source: Business Times)

Axiata: Suspends all dealings with Alcatel for 12 months. Axiata Group Bhd has imposed a 12-month suspension on Alcatel-Lucent group (ALU), including its Malaysian operations, which would bar it from any new bids for contracts, although it would continue all existing contracts. (Source: The Edge Financial Daily)

EON Bank: New CEO soon? Eon Bank Bhd may be one step closer to appointing a new group CEO to replace Datuk Michael Lor, with its board looking to submit a name to the central bank for approval soon. (Source: The Edge Financial Daily)

Property: Demand rebound lifts residential property market. The residential property market has been experiencing an upturn since the fourth quarter of 2009 as demand rebounded by 7.1% (2009: -2.3%) following improved consumer sentiments. Meanwhile, the increase in housing stock moderated in 2010 as housing started a declining trend. (Source: The Star)

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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)

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