Maybank IB Views

QL Resources RM3.34: Buy
Good start for the 2nd decade of listing Shariah-compliant

Another good year. 4QFY11 net profit of RM31.6m (-4.8% YoY; +19.3% QoQ) took QL's FY11 net profit to RM124.5m (+16.5% YoY), which was within our forecast and consensus. FY11 marks the 10th straight year of double-digit net profit growth since its listing in FY00. We expect another year of strong earnings growth (+30%) premised on the new surimi lines in Surabaya, maturing plantation in Eastern Kalimantan and its palm pellet project. We maintain our Buy call and target price of RM3.75.

Technicals
The FBM KLCI tumbled 12.05 points to close at 1,528.98 yesterday. Its resistance areas of 1,528 and 1,550 will cap market gains, whilst the weaker support areas are located at 1,510 and 1,526.Due to the DJIA’s much weaker tone last night, we will see some heavy liquidation activities today. We expect the FBM KLCI to remain under heavy selling today, as the global market malaise takes hold.

Trading idea is a Take profit call on HAPSENG.

Other Local News
AirAsia: To go bigger and may place big order for Airbus. Datuk Seri Tony Fernandes signalled ambitious plans for AirAsia as he closed in on a potentially massive deal to buy Airbus aircraft, which could rival a recent USD16b, 180-plane deal as one of the world's largest. (Source: The Star)

TM: VADS partners Cisco in telepresence service. VADS Bhd, a subsidiary of Telekom Malaysia Bhd (TM), is hopeful of double-digit growth over the next few years for its upcoming telepresence service. (Source: Business Times)

Puncak Niaga: Forays into oil and gas, secure water supply project. Puncak Niaga Holdings Bhd has acquired 40% equity in Global Offshore (Malaysia) Sdn Bhd (GOM) and KGL Ltd (KGL) respectively for a cash consideration of USD8.4m (RM25.2m) and USD15.2m (RM5.6m) respectively. Separately, a consortium consisting of a 40:60 unincorporated JV between Quality Concrete and Puncak Niaga has secured a RM667.3m contract for a rural water supply project in Sarawak. (Source: Bursa Malaysia)

TNB: Cabinet to decide on Wednesday on tariff increase for TNB. The Cabinet is expected to decide on Wednesday, May 25 if there should be a tariff increase for Tenaga Nasional Bhd. (Source: The Edge Financial Daily)

E&U: First block of Kimanis 100MW Plant to be completed in 2013. The first generation block of 100 MW of the proposed 300MW Combined Cycle Gas Turbine Power Plant in Kimanis is expected to be completed in Dec 2013. The power plant and its related projects, costing about RM1.6b is expected to supplement Sabah’s increasing demand for electricity. (Source: Bernama News)

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Stocks to watch: EONCap, Coastal Contracts, Hap Seng, Fitters, MMHE

KUALA LUMPUR: Stocks on Bursa Malaysia could continue to see lacklustre trade in the week ahead, starting Monday, May 9 in the absence of strong fresh positive external news to spur buying interest.

The FBM KLCI had fallen the past week to below the key 1,530 level while volume has been declining due to the lack of strong institutional leads.

However, on the macro economic front, the strong March exports could help underpin sentiment. Exports reached a new high of RM64.06 billion in March 2011, up 7.8% from March 2010 while on a month-on-month basis, exports in March 2011 increased by 23.7%.

On Wall Street, an unexpectedly strong report on U.S. payrolls helped equities bounce back on Friday from four days of losses, tempering worries that stocks could suffer the sharp declines seen this week in commodities.

The Dow Jones industrial average gained 54.64 points, or 0.43 percent, to 12,638.81. The Standard & Poor's 500 added 5.10 points, or 0.38 percent, to 1,340.20. The Nasdaq Composite rose 12.84 points, or 0.46 percent, to 2,827.56.

For the week the Dow lost 1.3 percent, the S&P fell 1.7 percent and the Nasdaq Composite dropped 1.6 percent.

At Bursa, some stocks which could see trading interest include EON CAPITAL BHD, COASTAL CONTRACTS BHD, HAP SENG CONSOLIDATED BHD, FITTERS DIVERSIFIED BHD and Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE).

EON Capital will distribute the RM312 million, or 44.9 sen per share, which it will receive as special dividend from its unit EON Bank Bhd to all its entitled shareholders.

The dividend was proposed by EONCap on April 29 and agreed by HONG LEONG BANK BHD as a last-minute extra condition to the latter’s acquisition of EONCap’s assets and liabilities for RM5.06 billion.

Coastal Contracts proposed a corporate exercise involving a bonus issue and free warrants to its shareholders and also to purchase up to 10% of its paid-up capital.

It said on Friday, May 6 said it proposed a one-for-three bonus issue and one free warrant for every eight shares held after the proposed bonus issue.

Hap Seng Consolidated posted a strong set of earnings in the first quarter ended March 31, 2011, with net profit surging 108% to RM82.17 million in the first quarter ended March 31, 2011 from RM39.48 million a year ago.

Revenue rose 28% to RM751.34 million from RM587.18 million while earnings per share doubled to 14.58 sen from 7.01 sen.

Meanwhile, Fitters Diversified Bhd does not expect to be suspended on Tuesday after it submitted its outstanding annual audited financial statements for financial year ended Dec 31,2010 to Bursa Malaysia Securities Bhd on Friday, May 6.

“There will be no suspension of trading in the above company's securities on May 10,” it said.

Fitters Diversified was due to submit the statements to Bursa Securities for public release on or before April 30. However, due to the delay, it had initially faced suspension on May 10.

Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) posted pre-tax profit of RM114.08 million in the four quarter ended March 31, 2011, down 35.7% from RM177.45 million a year ago.

The decrease was mainly due to lower revenue in engineering and CONSTRUCTION and marine repair and conversion segments.

However, its net profit was up 11.7% at RM128.64 million compared with RM115.15 million a year ago. There was a tax writeback of RM14.43 million compared with tax paid of RM60.03 million a year ago.

Its revenue fell 41.9% to RM923.29 million from RM1.59 billion a year ago. Earnings per share were 8.0 sen versus 8.6 sen.

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Maybank IB Views

ECONOMICS
Market & Economy
Embarking on the passage of transformation

Strengthening the roadmap. Khazanah Nasional's Plenary Session at Day 2 of the Invest Malaysia conference showcased government linked companies (GLC) transformation successes as the programme enters the final phase which is also a critical period of national transformation, under the government's resolve to transform Malaysia into a high-income economy by 2020. As the GLC transformation programme enters the 7th year of its 10-year passage, the transformation programme, in aggregate, is "well on track and on schedule".

Technicals
The FBM KLCI rose by 9.67 points at 1,535.59 yesterday. Its resistance areas of 1,535 and 1,560 will cap market gains, whilst the weaker support areas are located at 1,517 and 1,533.

Trading idea for today is a TAKE PROFIT call on HAPSENG.

Other Local News
Alam Maritim: Unit bags RM24.2m deal. Alam Maritim Resources Bhd’s unit has bagged a RM24.2m contract from an independent oil & gas exploration and production company to provide a unit anchor handling tug supply vessel and a fast multipurpose supply vessel. (Source: Bursa Malaysia)

Masterskill: Signs MoU on training. Masterskill (M) Sdn Bhd has signed a memorandum of understanding (MoU) to establish and develop academic exchange as well as co-operation in teaching and training of Masterskill’s student at the Mayapada Hospital, in Indonesia. (Source: Bursa Malaysia)

Tech: Penang gets new RM1b Japanese investment. Penang received a shot in the arm with a RM1b investment by Japan's Ibiden Co Ltd, the world's largest printed circuit board (PCB) maker. The amount would be pumped into its second facility in the Penang science park in Bukit Minyak. (Source: The Star)

Utilities: Govt may buy water bonds. The Federal Government is believed to be planning a special purpose vehicle or getting Pengurusan Asset Air Bhd (PAAB) to buy over the bonds for which some are running into an event of default. (Source: The Star)

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Stocks to watch: AMMB, Tasek, Mudajaya, Hap Seng

KUALA LUMPUR: Investors will have to brace for the flurry of corporate results flowing from Monday, Feb 21 including those from the Genting group, SIME DARBY BHD, AIRASIA BHD, MALAYSIAN AIRLINE SYSTEM BHD (MAS), MALAYAN BANKING BHD and CIMB Group Holdings Bhd.

Other companies due to announce their results include KUALA LUMPUR KEPONG BHD, IJM Corp Bhd and GAMUDA BHD.

Most importantly, investors want to know what is the outlook for the companies, especially those with international operations, in the face of volatile external environment and record high oil prices.

On Friday, Bank Negara announced the Malaysian economy grew at a slower pace of 4.8% in the fourth quarter of 2010 compared with 5.3% in the third quarter due to the weaker growth in external demand which impacted the manufacturing sector.

It said 4Q growth was still underpinned by higher private and public sector spending, but the central bank expects the pace of growth to be affected by moderating external demand. Manufacturing grew at a slower pace due to slower external demand while the agriculture sector registered a decline, mainly due to the decrease in palm oil output.

“The pace of growth of the Malaysian economy will be affected by the environment of moderating external demand. Growth will, nevertheless, be supported by continued firm expansion in domestic demand.

“Private consumption spending will continue to benefit from the favourable labour market conditions, firm commodity prices and access to financing. The roll-out of CONSTRUCTION and infrastructure activities and the implementation of the economic transformation programme by the government are likely to provide significant support to the growth momentum in private investment,” it said.

MIDF Research head Zulkifli Hamzah said the Malaysian market was still reeling from a selldown by foreign investors. Preliminary data from Bursa shows that foreign investors were still net sellers this week.

“Last week, they sold in terms of gross value, RM4.3 billion of Malaysia equity. This week, we estimate a gross outflow of about RM2 billion,” he told theedgemalaysia.com.

“We do not expect the GDP numbers to have a crushing impact on the market when it opens on Monday. Investors are likely to be more apprehensive over the slew of corporate results due to be unveiled next week,” said Zulkifli.

Stocks to watch with fresh corporate developments include AMMB HOLDINGS BHD, Tasek Corp Bhd, MUDAJAYA GROUP BHD and HAP SENG CONSOLIDATED BHD.

AMMB’s net profit for the third quarter ended Dec 31, 2010 rose 21.2% to RM325.31 million from RM268.47 million a year ago. The higher net profit was mainly due impairment writeback on financial investment and doubtful sundry receivables of RM38.3 million and RM2.3 million respectively as compared to impairment loss of RM19.2 million and RM4.0 million for previous corresponding quarter.

Revenue rose to RM1.82 billion from RM1.71 billion in 2009. Earnings per share was 10.83 sen while net assets per share was RM3.31.

For the nine months ended Dec 31, AMMB’s net profit rose 34% to RM1.03 billion from RM766.87 million, on the back of revenue RM5.3 billion, up from RM4.87 billion a year earlier.

Tasek’s earnings in the fourth quarter surged 325% to RM69.1 million from RM16.25 million. The much improved group results apart from the RM43.6 million gain from disposal of PLANTATION and other property, was mainly in line with the increase in group's total revenue compounded by better local cement sales margin.

Tasek said revenue rose 15% to RM133.67 million from RM116.08 million. Earnings per share were 43.3 sen compared with 8.77 sen. It proposed a bumper dividend, comprising of preference dividend of 6%, ordinary dividend 30% and special dividend 50%.

Mudajaya’s net profit for the fourth quarter ended Dec 31, 2010 rose 39% to RM57.09 million from RM41.05 million a year earlier, driven by the increased level of activities. Revenue rose to RM230.29 million from RM211.76 million a year ago. Earnings per share were 13.96 sen while net assets per share rose to RM1.75 from RM1.

Mudajaya proposed a final dividend of 3.0 sen per ordinary share of 20 sen each under the single tier system for FY10.

For the 12 months in 2010, Mudajaya’s net profit surged 75% to RM208.45 million from RM119.18 million a year ago, on the back of revenue RM869.43 million.

Hap Seng Consolidated’s net profit for the fourth quarter ended Dec 31, 2010 surged to RM103.13 million from RM7.69 million a year earlier, driven by improvement in revenue in all divisions except for fertilisers trading which was affected by lower average selling prices.

Revenue rose 19.3% to RM810.88 million from RM679.6 million. Earnings per share were 18.30 sen while net assets per share was RM4.59. For the financial year ended Dec 31, 2010, Hap Seng’s net profit rose 222% to RM323.16 million from RM100.24 million a year ago.

Hap Seng proposed to pay out as final dividend about 50% of its net profit tax and minority interest totalalling RM123.98 million or 22 sen per share.

RAMUNIA HOLDINGS BHD is eyeing some RM300 million worth of fabrication jobs this year as projects up for grabs start pouring into the market again, underpinned by the surge in crude oil prices.

Chief executive officer Nor Badli Munawir Mohamad said on Friday that while Ramunia's existing order book was negligible, he expected it to grow this year after Petroliam Nasional Bhd committed to opening more marginal oilfields and issue more oil and gas contracts this year.

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Stocks to watch: Hap Seng, Guan Chong, PLUS, MMC

KUALA LUMPUR: As the FBM KLCI posted 3.51% in gains for the first week of 2011 to close at a fresh high of 1,572.21 , investors’ thoughts are whether the market can extend its gains for the week starting Monday, Jan 10.

Profit taking was well absorbed last Friday, with banks giving up some gains as interest shifted to other blue chips. External events would also help provide the direction for the local bourse.

For the week,the index was up 53.3 points or 3.51% from 1,518.91 on Dec 30 to 1,572.21 last Friday. Market capitalisation increased by RM49.87 billion during the period to RM1.324 trillion.

On Wall Street, US stocks fell on Friday after a court ruling in a key foreclosure case prompted investors to pull out of bank stocks, adding to weakness after a lacklustre jobs report.

Despite the weaker close, the broader Standard & Poor's 500 Index and Dow Jones industrial average recorded their sixth straight week of advances. The market has proved resilient despite expectations that stocks were due for a pullback.

The Dow slipped 22.55 points, or 0.19%, to 11,674.76. The S&P was off 2.35 points, or 0.18%, to 1,271.50. The Nasdaq Composite Index declined 6.72 points, or 0.25% to 2,703.17. For the week, the S&P 500 rose 1.1%, the Dow gained 0.8% and the Nasdaq climbed 1.9%.



Stocks to watch on Bursa Malaysia would be HAP SENG CONSOLIDATED BHD, GUAN CHONG BHD, PLUS EXPRESSWAYS BHD and MMC Corp Bhd.

Hap Seng plans to raise up to RM1.46 billion from a corporate exercise which includes RM808.21 million from a private placement and another RM654.54 million from a rights issue. The move would also build its war chest to undertake acquisitions.

It had proposed to place out up to 124.53 million new shares at an issue price of RM6.49 per placement share which would raise RM808.21 million.

It would also undertake a renounceable rights issue of up to 448.31 million new shares together with up to 448.31 million new free detachable warrants to raise RM654.54 million.


Meanwhile, Guan Chong plans to raise up to RM120 million from the expected exercise price of RM2 for the 60 million free warrants. It had fixed the exercise price for the warrants at RM2, which was 9.29% or 17 sen over the theoretical ex-price after the proposed bonus issue of RM1.83 per share, based on the five-day volume weighted average price of RM2.44.

Of the RM120 million, the proceeds would be used for the day-to-day working capital requirements of the group.



Monday is the deadline for interested bidders to deposit their RM50 million to take over PLUS Expressways. Reports state MMC Corp Bhd may be the third party to put in its bid on Monday.

The first joint offer by UEM Group Bhd and the Employees Provident Fund Board was RM4.60 per share or RM23 billion while the second offer is from Jelas Ulung Sdn Bhd which is offering RM26 billion ot RM5.20 per share.

Meanwhile, Johor Corporation (JCorp) has stated it has 70% of the required sum needed to repay its debts from plans about to be executed.

Its new president/chief executive officer, Kamaruzzaman Abu Kassim said last Friday that the group had RM3.6 billion debt in July 2012 and it was taking steps to reduce it to a more sustainable level of between RM1 billion and RM1.5 billion.

"To pay off the difference, which would amount to about RM2.6 billion, 70% of the required sum, or about RM1.8 billion, would be derived from plans which would be executed at a suitable time. The balance will be raised from sellable assets and land," he said.



Meanwhile, KFC Holdings (Malaysia) Bhd (KFCH) plans to invest RM25 million to open 25 new outlets nationwide this year.

Managing director Jamaludin Md Ali said out of the 15 of the KFC fast food restaurants will be drive-through outlets to provide more convenience to customers, he said. Currently, there were 520 KFC outlets including 40 drive-through outlets.

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Maybank IB Views

Kencana Petroleum RM2.52: Buy
Marginal marvels Shariah-compliant


Initiating coverage with a Buy call and RM3.10 target price. We foresee that Kencana will be a prominent feature in PETRONAS' domestic agenda. Enhanced oil recovery (EOR) and marginal field development under the government's Economic Transformation Programme (ETP) are areas of growth for Kencana. We see Kencana: (i) expanding its yard space, (ii) growing its offshore units and (iii) seeking strategic tie-ups to grow its income base whilst remodeling its business model to capture new opportunities. Evidently, Kencana has the balance sheet and management drive to gain from all this.

Technicals

• The FBM KLCI surged 14.28 points to 1,566.17 yesterday. Its resistance area of 1,571 may cap market gains, whilst its firm support areas are located at 1,543 and 1,566.
• Trading ideas for today are four BUY calls on CBIP, DRBHCOM, AIRASIA and RSAWIT.

Other Local News
TM: UniFi service reaches more than 750,000 premises. The rollout of Telekom Malaysia Bhd's High Speed Broadband (HSBB) service or UniFi, continues to be on track with service availability now expanded to an additional 48 areas nationwide, bringing the total premises to over 750,000 at the end of 2010. TM recently passed the 30,000 service subscription mark, and now averages 2,500 new subscribers per week. (Source: Bernama)

F&N: In USD4m deal with US co. PML Dairies, a wholly owned subsidiary of F&N Holdings Bhd has signed a USD4m (RM12.3m) contract with Chicago-based JBT Corp's food technology division, JBT FoodTech. Under the agreement, JBT FoodTech will supply the filling, closing and sterilization technologies for PML's new milk processing plant at Pulau Indah. (Source: The Edge Financial Daily)

Hap Seng: Sets 50% dividend payout policy. Hap Seng Consolidated Bhd is set to distribute 50% of its group net profit in the form of dividends, after its board approved the dividend policy. (Source: The Edge Financial Daily)

YTL Comms: 4G network in all local universities by this year. YTL aims to make its Yes 4G network available to all public universities and selected private institutions of higher learning in Malaysia this year. The network has been successfully activated at University Sains Malaysia (USM), Penang, and covers virtually all parts of the 240 ha USM main campus. (Source: Bernama)

Cocoaland: Bags another F&N contract. Cocoaland Holdings Berhad's wholly owned subsidiary, Cocoaland Industry Sdn Bhd (CISB) was appointed by F&N Beverages Manufacturing Sdn Bhd (F&NBM) as its non-exclusive contract packer to prepare, package, pack and deliver F&NBM's products. Cocoaland will prepare, package and deliver the products of F&NBM for a period of one year with an option to extend for another one year. (Source: Bursa Malaysia)

Plantation: Firms rap medical insurance ruling. Oil palm and rubber plantation firms, which are already footing the medical bills of their foreign workers, will now have to fork out another RM50m to insurance companies. Effective January 1 this year, the Health Ministry requires all employers to pay for foreign workers' medical insurance. Meanwhile, under the Workers Minimum Housing Standard & Amenities Act 1990 (WMHSA), all estate owners are also required to provide healthcare facilities and services for their staff (including foreign workers). The number of plantation workers seeking treatment in government hospitals is in fact very small because only serious cases are referred to the healthcare centres outside the estate. (Source: Business Times)

Plantation: Indonesia forest moratorium postponed. Indonesia's forest moratorium was postponed as its government is still undecided on the details of a two-year moratorium on forest clearing under the USD1b (RM3.07b) climate deal with Norway, leading to continued uncertainty for plantation firms. The planned commencement date for the moratorium was initially Jan 1st. (Source: The Edge Financial Daily)

Outside Malaysia
U.S: Services expand by most since 2006 in December. The Institute for Supply Management's non-factory index, which covers about 90 percent of the economy, rose to 57.1. A reading greater than 50 signals growth. (Source: Bloomberg)

U.S: Companies in December add 297,000 jobs, ADP says. Companies in the U.S. boosted payrolls in December by the most since records began in 2001, showing a stronger labor-market recovery at the end of last year, data from a private report showed. (Source: Bloomberg)

E.U: Services, manufacturing growth in December remains steady led by the fastest growth in more than four years in Germany. A composite index based on a survey of euro-area purchasing managers in both industries held at 55.5. That compares with Dec. 16 reading of 55. A figure above 50 indicates expansion. (Source: Bloomberg)

Spain: Industrial production expanded in November for the first time in three months as the recovery from an almost two-year recession accelerated. Output at factories, refineries and mines rose 2.3% YoY, adjusting for the number of working days, after contracting 1.9% YoY in October. (Source: Bloomberg)

Taiwan: Consumer price growth unexpectedly slowed in December for the first time in four months as the gain in food prices moderated. The consumer price index increased 1.25% YoY, compared with a revised 1.52% YoY climb in November, the statistics bureau said in Taipei. (Source: Bloomberg)

Indonesia: Kept its benchmark interest rate at a record low even after consumer prices rose at the fastest pace in 20 months, betting measures such as higher bank reserve requirements will keep inflation in check. The central bank maintained its reference rate at 6.5% for a 17th meeting, it said in Jakarta. (Source: Bloomberg)

Philippines: Inflation held steady in December as the peso's gains helped counter the effect of rising crude oil prices. Consumer prices rose 3% YoY, the National Statistics Office said in Manila. Average inflation for the year was 3.8%, within the bank's 3.5% to 5.5% target. (Source: Bloomberg)

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Maybank IB Views

COMPANY UPDATE
AirAsia RM2.67: Buy
AirAsia Philippines: It is ON Shariah-compliant

Confirmation of JV. AirAsia has signed its latest JV agreement to replicate its business in the Philippines as early as Sep 2011. This news comes as no surprise; we highlighted it in our report dated 9 Dec (AirAsia Philippines: Tony meets Tony). We are upbeat on the long-term prospects of this JV, but are neutral short-term as it will incur start-up losses and require 2-3 years to turn profitable. Maintain Buy with a RM3.36 TP based on 9.0x 2011 PER, 20% discount to peers.


TH Plantations RM1.83: Buy
The end of pricing woes Shariah-compliant

Upgrade to Buy. Having finally addressed its pricing issues, THP is poised to deliver substantial earnings growth in the coming quarters. Our revised earnings forecasts suggest a 26% 3-year net profit CAGR. Valuations are attractive at 9.4x 2011 PER, with the stock trading at 1sd below mean on forward PER. We raise our target price to RM2.15 (+23%) based on 11x 2011 earnings, representing the 2-year average of THP's forward PER. We expect share price to re-rate up upon the delivery of substantial earnings growth in the coming quarters.


Technicals
The FBM KLCI tumbled 11.58 points to 1,497.52 yesterday. Its resistance areas at 1,497 and 1,515 will cap market gains, whilst its weaker support areas are located at 1,476 and 1,493.

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


Other Local News
TNB: Awards RM991.8m contracts for hydro plant. Tenaga Nasional Bhd (TNB) has awarded jobs worth RM991.8m for the Hulu Terengganu hydroproject to various companies. The Project will involve the construction of two dams and the installation of two hydro turbines and generators in an underground power station with a total installed capacity of 250MW. The Project is located on the upper reaches of Sg. Terengganu upstream of Kenyir Lake. The Project is expected to be completed by October 2015. (Source: Bursa Announcements)

TM: Forge strategic tie-up with Multinet. Telekom Malaysia Bhd (TM) has teamed up with Multinet Pakistan Pte Ltd to offer Internet protocol virtual private network services to their corporate customers. (Source: The Star)

Mulpha: Sells Hilton Melbourne for RM327m. Mulpha International Bhd is selling its Hilton Melbourne Airport Hotel in Australia to Singapore-listed Pan Pacific Hotel Group Ltd for AUD108.9m (RM337.9m) cash. Mulpha will use the proceeds from the sale to repay its debt. The proceeds, if used to repay debts, could bring down the group's debt levels from RM1.5b to RM1.18b. (Source: The Star)

Proton, AutoV: Three companies to develop window regulator for Persona replacement model. AutoV Corp Bhd, an auto parts maker primarily for Proton vehicles, has tied up with US-based ArvinMeritor Inc and Germany-based Continental AG to develop a window regulator with an anti-pinch function for the Proton Persona replacement model, which will be launched in 2012. The collaboration was in line with Proton's strategy to improve the quality of its products and provide customers with value-added cars. (Source: The Star)

Regulations: Securities Commission amends takeover code. The Securities Commission (SC) has introduced a revision to the Malaysian Takeovers and Mergers Code, requiring higher level of disclosure. Main changes include notification to the SC if material changes occur after the dispatch of documents, prohibition of offerors, advisers and the boards of offerees from undertaking actions that could frustrate an offer, shorter settlement periods as well as enhanced timely disclosures in offer documents and independent advice circulars. Also, a voluntary offer to takeover a company is allowed to be carried out at a higher threshold (up to 90%). However, the changes do not address the issue of takeovers or privatisation of companies via the asset and liability (A&L) route, which is under the Companies Act's jurisdiction. (Source: The Star and The Edge Financial Daily)

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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)

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