Maybank IB Views

COMPANY UPDATE
Malaysia Airports Holdings RM6.53: Buy

Thriving under adversity. MAHB's April 2011 traffic statistics reveal a strong 16.3% YoY passenger growth (4M 2011: +13.0% YoY). This is above industry average and makes MAHB's 2011 guidance of 8% traffic growth look like a pushover target. Cargo volumes shrunk by 6.2% YoY, consistent with the global collapse of the freight market. Maintain Buy; no change to our earnings forecasts and RM7.12/share DCF-based target price.

ECONOMICS
Industrial Production Index (IPI), Apr '11
Unexpected decline to be short-lived…

April's industrial production (IP) growth unexpectedly fall 2.2% YoY (revised Mar '11: +2.9% YoY; Maybank IB: +2.2% YoY; Consensus: +2.5% YoY) as the MoM drop of 7.6% MoM was more than our estimate of a 3% MoM decline. Malaysia joined Singapore and Thailand in posting lower IP in Apr on Japan's supply chain effect, with E&E and auto industries being the drag. However, indicators like Japan's PMI, imports of intermediate goods and manufacturing loans statistics point to a "short-lived" dip.

RESULTS REVIEW
S P Setia RM4.10: Buy
Earnings uptrend continues Shariah-compliant

Reiterate Buy. SPSB's RM121m 1HFY11 core net profit (+35% YoY) track expectations. YTD sales at RM1.7b has also met 55% of its RM3b target for FY11. Including e.RM1.5b sales/bookings from KL Eco City (KLEC), YTD sales would be c.RM3.1b (beats full-year target by 5%). We are bullish on SPSB's 2H performance, driven by strong sales at KLEC and potential RM8-10b GDV worth of new landbank. We maintain earnings forecasts and RM4.75 RNAV-based TP.

Technicals
The FBM KLCI closed marginally lower by 0.90 points and ended at 1,550.89 yesterday. Its resistance areas of 1,554 and 1,568 will cap market gains, whilst the obvious support areas are located at 1,537 and 1,551. We expect the FBM KLCI to remain quiet today, as the initial gains (following the American markets’ rise last night) could be curtailed by the pre-weekend profit-taking activities in the latter part of the day.

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

Other Local News
MAS: Final assembly of MAS A380 planes begins. The first Malaysia Airlines' (MAS) A380 has entered the Airbus final assembly line in Toulouse, France, for the final production phase. MAS has six A380s on order with deliveries due to begin in 2012. (Source: The Star)

UEM: In RM850m Nusajaya development project with Iskandar. UEM Land Holdings Bhd is collaborating with Iskandar Investment Bhd to develop retail and residential units in Nusajaya, Johor with a gross development value of RM850m. UEM Land owns 55% equity interest in that company while the remaining is under Iskandar. (Source: The Star)

Benalec: Unit target Mid-east investment with OIC Today. Benalec Bhd subsidiary has formed a strategic alliance with OIC Today magazine to attract investment from the Middle East for a proposed mixed commercial and tourism project in Klebang, Melaka. (Source: Business Times)

O&G: Perak approves RM5.8b investment in LNG project. The Perak government has approved a 60-ha site in Tanjung Hantu, Manjung for a liquefied natural gas (LNG) project involving an investment of RM5.8b that would be undertaken by Atigas Technology Sdn Bhd. The government is expected to save RM2b in subsidy a year because Atigas will sell the gas at the same subsidized price. (Source: The Edge Financial Daily)

Banking: Bank Mualamat still in merger mood. Bank Muamalat Malaysia Bhd is still keen to merge with a rival to build a mega Islamic bank, despite its failed attempt at courting Bank Islam Malaysia Bhd. The bank's pursuit of Bank Islam was driven by its largest shareholders' need to pare its stake in the bank and the desire by both its shareholders to create a bigger entity that is more relevant in the market. (Source: Business Times)

Market: MMHE to replace MAS in index. Malaysia Marine and Heavy Engineering will replace Malaysia Airlines in the FTSE Bursa Malaysia KLCI following the semi-annual review of the FTSE Bursa Malaysia Index Series. (Source: The Star)

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Maybank IB Views

1Q11 report card
Growth momentum tapering off

Fewer positive surprises. 1Q11 earnings reporting season saw fewer positive surprises (13:65:22 in earnings above:within:below expectations vs. 4Q10's 21:59:20). 1Q11 combined recurring net profit of our research universe contracted 5.3% QoQ but maintained its YoY climb (+8.4%). The YoY uptrend momentum is slowing down however, vis-a-vis double-digit growth in the past 5 consecutive quarters. This is not unexpected as we have forecasted slower corporate earnings growth in 2011, after a high base in 2010.

COMPANY UPDATE
Dialog Group RM2.82: Buy
Pengerang project takes off, target price raised Shariah-compliant

Two is better than one. Securing the EPCC job for the Pengerang CTF project denotes progress. We expect the Pengerang CTF project on a full-scale commercial operation by 2017 to be the main driver to Dialog's earnings with dividends to boot. Notwithstanding that, Dialog is also highly tipped to bag the next few marginal field projects (i.e. Balai and Bentara), a positive to sentiment and price performance. Buy.

CB Industrial Product Holding RM4.26: Buy
Unlocking value Shariah-compliant

A re-rating catalyst. CBIP's proposed plantation disposal is positive as it unlocks value of its below-average plantation yielding estates; raising RM1.95/sh (RM268m) in cash and making RM1.02/sh (RM141m) in disposal gain. Post disposal, with potential net cash at 95sen/sh, CBIP is looking for expansion opportunities, failing which it may return part of its cash as special dividends to shareholders. We maintain our earnings forecasts and TP of RM4.75 based on 7x 2011 EPS for now.

Technicals
The FBM KLCI closed lower by 1.87 points to close at 1,556.42 yesterday. Its resistance areas of 1,559 and 1,576 will cap market gains, whilst the support areas are located at 1,539 and 1,556. Due to the world markets’ very poor tone last night; we will see some great volatility in the local bourse today. We expect the FBM KLCI to remain volatile today, as it may be adversely affected by the US and regional markets.

Other Local News
EonCap: Primus to pay RM1.9m in court costs following dismissal. Following the dismissal of Primus (M) Sdn Bhd's petition against the sale of EON Capital Bhd (EON Cap) to Hong Leong Bank Bhd (HLB), Primus now has to pay RM1.9m in court costs. (Source: The Star)

SapCrest: Acquires shipyard stake. SapuraCrest Petroleum Bhd (SapCrest) has signed an agreement with Real Mild Sdn Bhd and Labuan Shipyard and Engineering Sdn Bhd (LSE) for the subscription of 25m new shares in LSE, representing 50% stake in LSE. (Source: Bursa Malaysia)

Benalec: Monetises reclaimed land in Melaka. Benalec Holdings Bhd entered into two separate deals, one on land disposal while another on a JV property development with Melaka based developer Vista Selesa Development Sdn Bhd. (Source: The Edge Financial Daily)

Paramount: Has ambitious RM4b projects in pipeline. Paramount Corp Bhd will embark on several projects with a total GDV of RM4b over the next 12 years and will invest RM250m to set up its new university campus in Glenmarie, Shah Alam. (Source: The Malaysian Reserve)

Energy: Sarawak to pay 6.25 sen per kWh for Bakun power. Sarawak will pay federal government 6.25 sen kWh for the purchase of electricity generated by the Bakun hydro power plant under a power purchase agreement (PPA). The basic tariff of 6.25 sen comes with an annual increase of 1.5%. (Source: The Edge Financial Daily)

Autos: Honda Malaysia to resume full production in August. Honda Malaysia Sdn Bhd’s Alor Gajah plant will resume full production on Aug 1, and will try to increase production by operating additional hours to catch up with shortage of supply from April through July. (Source: The Edge Financial Daily)

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Maybank IB Views

ECONOMICS
Economic Development & Outlook, 2Q11
Revolving and Evolving Risks

The risks, issues and challenges facing the global economy have not changed but have morphed into "4S" from "3S" to now include "(Black) Swans". This is on top of the "Sustainability" (US recovery), "Solvency" (Eurozone sovereign financial crisis) and "Stability" (Emerging Markets's "bubblenomy"). Given the fluid external environment, Malaysia needs to strike a balance between 1) sustaining growth, 2) maintaining macroeconomic and financial stability, and 3) dealing with inflation. The vital elements are 1) executing the Economic Transformation Programme (ETP), 2) gradual monetary policy normalization, fiscal consolidation and subsidy rationalisation, and 3) prudential measures within the financial system to address the asset bubble and household debt risks, thus ensuring the economy stays on track. Our key macroeconomic forecasts are largely unchanged, except for the upward revisions in inflation rate and crude oil price.

COMPANY UPDATE
IOI Corporation RM5.65: Hold
Raises stake in Singapore's South Beach Shariah-compliant

Maintain Hold. IOI Corporation has raised its interest in the Singapore South Beach development to 49.9% from 33.3% when it was initially proposed in Nov 2010. IOI has subscribed for a 49.9% equity interest in Scottsdale which will control 100% of the development. IOI will invest up to SGD816.8m (RM1.96b). Development details are not available, hence, we are unable to estimate the impact on IOI. Nonetheless, we draw comfort that the balance 50.1% holding in Scottsdale is held by Singapore's property pioneer, City Developments Ltd, who should be able to drive values for the South Beach development.

Technicals
The FBM KLCI rose 2.11-points and closed at 1,557.49 last Friday. The obvious support areas for the FBM KLCI are located in the 1,500 to 1,556-zone. The firm resistance zone of 1,558 and 1,576 will see heavy liquidation activities.

Trading idea for today is a Buy call on BENALEC.

Other Local News
MAHB: Passenger traffic to cross 60m mark. Airports Holdings Bhd (MAHB) is confident that total passenger traffic volume across the country’s airports will breach the 60-million mark this year. In 2010, all 39 airports nationwide handled a total of 57.8m passengers. (Source: Malaysian Reserve)

Notion: Eyed by private equity firm again? Market talk of possible corporate exercises has resurfaced at Notion Vtec Bhd, including the potential entry of a major US-based private equity firm and Nikon Corp considering upping its stake in the company. (Source: The Edge Malaysia)

Mamee: Shareholders propose to privatise company. Major shareholders of Mamee-Double Decker (M) Bhd have proposed to privatise the company by undergoing a capital reduction and repayment exercise under Section 64 of the Companies Act, 1965. Under the plan, major shareholders of Mamee who control the company would repay RM179.8m or RM4.39 a share to minority shareholders. (Source: Bursa Malaysia)

O&G: Shell shortlists five potential bidders for sale of LPG business. Royal Dutch Shell plc (Shell) has shortlisted five potential bidders for its downstream liquefied petroleum gas (LPG) business in Peninsular Malaysia. The shortlisted companies are Boustead Petroluem Marketing Sdn Bhd, KUB Malaysia Bhd, KKB Engineering Bhd, Lembaga Tabung Haji and Integrated Petroluem Services Sdn Bhd. (Source: The Edge Weekly)

Property: Projects galore in Penang. Some RM2.94b worth of residential and commercial properties from six developers, based in Kuala Lumpur and Penang, will be launched on the island this year. The south and south-west of the island will see some 1,275 units of residential and commercial properties launched with an estimated gross sales value (GSV) of RM1.45b, while the north-east district will see the development of about 1,166 units of properties valued at RM1.49b. (Source: The Star)

Transportation: Score railway link still pending study. The Sarawak government is still waiting for the completion of a feasibility study on a railway link beginning form the Samalajau Industrial Park in Bintulu to Tanjung Manis. (Source: The Edge Financial Daily)

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