RHBInvest Research

Top Glove – Easing latex prices to help drive recovery – Underperform call based on PER of 15x

• Management expects latex prices to ease from RM9.30/kg to RM7.00/kg, in the next 3-4 months ahead due to seasonal factors
• Given the current situation where latex prices are higher than nitrile prices, Top Glove intends to increase its nitrile glove production mix from 13% to 16-17% by end-CY11.

AirAsia: Places order for 200 new A320 Neo aircraft - Market Perform (up from UP)

• AirAsia has placed an order with Airbus SAS for 200 A320 Neo aircraft with a list price of US$18.2bn (RM54.6bn), to be delivered in 2016-2026.
• The new A320 Neo aircraft will result in 15% fuel savings.
• We are raising AirAsia’s FY12/12-13 net profit forecasts by 12% each

Gamuda: 9MFY07/11 net profit grows 27% yoy - Market Perform

• Gamuda expects the Government to officially call for the tender for the tunnelling works for MRT in 4Q2011 while the award of contract is expected in 1Q2012 with physical work only in full swing by mid-2013.
• FY07/11 net profit forecast is raised by 6% largely to reflect higher property margins. Fair value is raised from RM4.03 to RM4.13.

Glomac: In a sweet spot - Market Perform

• 4QFY11 net profit of RM15.0m, Full year FY11 revenue and net profit surged commendably by 90% and 54%, respectively. A 5 sen final dividend was declared. Together with the 4.5 sen interim dividend, full year dividend amounted to 9.5 sen, upped from 8.5 sen in FY10.
• We raise our FY13 earnings forecast by 11% as management guided RM1bn GDV (vs. RM800m previously) for the Puchong project. We also introduce our FY14 estimate with a growth of 9%.

Jaya Tiasa: A strong finish to FY04/11 - Outperform

• FY04/11 net profit jumped significantly, Key variance was higher FFB production volume for its plantation division.
• We raised our FY04/12-13 net profit forecasts by 5.1-6.2%, after adjusting for higher FFB production volume on the back of higher yields. We introduce our FY04/14 forecast.

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RHBInvest Research

Top Story: Timber

Sector Update
Demand and supply of tropical logs seem to be more well balanced now as a result of improving log supplies and slowdown in logs purchases by Indian buyers. However, log prices have remained firm at current levels.
Maintain Overweight. Top picks are Jaya Tiasa (RM8.33) and Ta Ann (RM8.44).

Sector Call

Auto: Investor Caution Caps Near Tem Sector Performance Neutral

Sector Update

DRB-HICOM: Fair value RM3.05 Outperform (Maintained)

MBM Resources: Fair value RM3.45 Market Perform (Maintained)

Tan Chong: Fair value RM4.90 Market Perform (Maintained)

UMW: Fair value RM7.60 Market Perform (Maintained)

APM: Fair value RM5.40 Market Perform (Maintained)

Proton: Fair value RM3.50 Underperform (Maintained)

Our top pick in the sector is DRB-HICOM while we also see compelling longer-term value in Tan Chong for accumulation on weakness.

Telecoms:

Sector Update
Celcom hops on to TM’s HSBB network
TM benefits from a higher utilisation rate of its HSBB network, as we gather there are minimum commitments involved. We do not expect TM to be a major player in the MVNO space.
Our top pick is Axiata for good growth prospects albeit moderating this year.

Corporate Highlights

AEON:

News Update
Purchasing Land In Sungai Petani
Fair value remains at RM5.83. Maintain Underperform.

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RHBInvest Research

Top Story: Utilities

• Sector Update
• TNB lacks catalysts going forward.
• YTL Power may lose a bit of shine since the key investment thesis for the stock has historically been high dividend yields.
• The restructuring of the water sector in Selangor is expected to remain in a deadlock situation.
• We maintain our Underweight stance on the sector due to lack of catalysts.

Sector Call

Oil & Gas:

• Sector Update
• Improvement seen for vessel market
• Petra Perdana (OP, FV = RM1.39) thus reflects the expected rise in valuation for the company’s vessel assets.
• We maintain our Overweight call on the sector in light of the positive bias on the sector’s outlook. Our top picks are Petronas Chemicals (OP, FV = RM9.02) and SapuraCrest (OP, FV = RM4.37).

Timber:

• Sector Update
• It’s a “sellers” market now for plywood given the anticipated increase in demand from Japan, low inventory level, limited increase in supply, and disruption in Japan domestic plywood production.
• We downgrade our call on WTKH to Market Perform (from outperform previously) due to the limited upside to our fair value. WTK share price has rallied by 65% since the Japan earthquake on 11 Mar.
• We reiterate our Overweight call on the sector. Top picks are Jaya Tiasa (OP, FV = RM7.84) and Ta Ann (OP, FV = RM7.99).

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Maybank IB Views

SECTOR UPDATE
Automotive: Neutral
On course, no pick-up ...

Maintain Neutral; in search of catalysts. Tepid sales in the Jan-Feb period concurs with our and market's assessment of Malaysia's auto growth trend for 2011. We remain Neutral on the sector, anticipating a mere 2-3% TIV growth as market reaches saturation. Stock-wise, we have upgraded Proton to a Hold following a 15% fall in share price post-our Sell call downgrade in Feb. MBM and TCM remain a Buy on inexpensive valuations whilst UMW is still a Hold.

COMPANY UPDATE
Petronas Chemicals Group RM6.74: Buy
Strong February Shariah-compliant

It only gets better. PCHEM's product margin in Feb 2011 was USD1,122/ton (+27.8% YoY, +10.5% MoM), we estimate. The year-to-date product margin of USD1,062/ton is 23.1% higher YoY and above our 2011 estimate of USD1,027/ton. Things are looking very positive for PCHEM to deliver record profits in 2011. Maintain Buy; there is no change to our earnings forecasts and target price of RM8.00.

S P Setia RM6.15: Buy
A golden opportunity to buy Shariah-compliant

FY11 to be a record year. The recent sell down on S P Setia (SPSB) shares represents a golden opportunity to buy the stock given SPSB's excellent sales performance and earnings growth prospects. SPSB will very likely exceed its RM3b sales target for FY11, a new record, given strong bookings and responses to its KL Eco City (KLEC) offices and residential tower. We fine-tune our earnings forecasts and tweak down our TP to RM7.10 (-1%) based on unchanged 10% premium to our new RM6.47 RNAV post-placement. SPSB stays our top buy for the sector.

ECONOMICS
Japan: Aftermath of 3/11
Hope vs Fear...

The casualties and damages of the Tohoku quake-tsunami on 11 Mar make it teh worst in Japan's modern history. Still, the hope is that of a localised and transitory effect, affecting growth in 1Q and/or 1H before recovery in 2H on rebuilding and resumption of business and industrial activities. The fear is that of a broader and prolonged impact due to the additional dimension of the disaster arising from the damaged nuclear power plant, risking radtioan leaks and contamination. Japan is Malaysia key trading partner and major source of FDI. Most immediate and visible impact is likely on commodities such as natural gas, timber and oil, and on manufacturing industries such as automotive and E&E.

Technicals
The FBM KLCI was marginally higher by 0.22 points to 1,509.10 yesterday. Its resistance areas of 1,510 and 1,529 will cap market gains, whilst the obvious support areas are located at 1,490 and 1,508. Due to the DJIA’s softer tone last night, we will see the FBM KLCI in lack lustre mode today.

Trading Idea for today is a Short-Term Buy call on PETDAG

Other Local News
TNB: To build gas-fired power plant in Sabah. Tenaga Nasional Bhd (TNB) plans to build a 300MW gas-fired power plant in Sabah. TNB has received in-principle approval to build the plant. The plan to build a gas-based plant comes after Malaysia's federal and Sabah state governments scrapped a plan to build a coal-fired power plant. (Source: Business Times)

Genting Plantations: ACGT Aims to Reduce Oil Palm Breeding cycle by 50%. ACGT Sdn Bhd, a unit of Genting Plantations Bhd, aims to reduce oil palm long breeding cycle by 50% to six years from 12 years via its genomics-based marker-assisted selection technology. The breakthrough would accelerate development and commercial release of oil palm seeds without any genetic modification. (Source: Bernama.com)

MAHB: Penang airport upgrade going smoothly. The RM250m upgrade of the Penang International Airport is 15.7% complete, while the target date for the whole project to be completed remains June next year. (Source: Business Times)

Benalec: Beachfront land for sale. Benalec Holdings Bhd is shaping up to be a major landowner and developer, as it will receive some 177.3 acres of land in Melaka in exchange for reclamation works. (Source: The Edge Financial Daily)

Ta Ann, Jaya Tiasa: To increase plywood output. Ta Ann Holdings Bhd and Jaya Tiasa Holdings Bhd, will increase plywood production by 15% and 50% respectively after winning orders from Japan to help with the country's reconstruction following its earthquake and tsunami. (Source: Business Times)

Utilities: Syabas invests in new pipe network. Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) has invested around RM115m in the alternative pipe network system to cope with rising demand for water supply. The new network would connect the water distribution system to the Sungai Semenyih and Sungai Langat water treatment plants and the first, second and third phases of the Selangor water distribution plant. (Source: The Star)

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RHBInvest Research

Timber

• Logs and plantation to drive earnings in 2011, plywood to remain stable.
• Maintain Overweight call on the sector
• Timber companies which have significant oil palm plantation are also set to benefit from rising CPO prices
• Top picks are Jaya Tiasa (OP, FV = RM5.78) and Ta Ann (OP, FV = RM5.92).

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RHBInvest Research

Plantation:

• Raise forecasts by RM200/tonne for CY2011 and 2012 to RM3,100 and RM2,900 respectively, while maintaining our RM2,700 assumption for CY2010.
• Upgrade call on Genting Plant to Market Perform (from underperform)
• Upgrade our sector call to Overweight (from neutral).
• Sime Darby remains a Market Perform,

Corporate Highlights

PLUS:

• Received a takeover offer from Jelas Ulung Sdn Bhd (JU) at RM5.20/share, a 13% premium over UEM-EPF’s RM4.60/share offer.
• Revise fair value from RM4.60 to RM5.20 to match the latest offer.
• Upgrade from underperform to Trading Buy.

Hai-O:

• Fair value has been cut to RM1.35 (RM1.71 previously) based on unchanged 10x CY11 EPS.
• Maintain Underperform.

Jaya Tiasa:

• 2QFY04/11 net profit boosted by higher FFB and CPO prices Indicative fair value is revised to RM5.78 (from RM4.83).

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PLUS, MTD, Bina Puri, Jaya Tiasa, Time Dotcom, BLand

KUALA LUMPUR: Regional markets are likely continue to experience cautious trading on Tuesday, Dec 21, following the ongoing concerns on the European debt crisis as well as simmering tensions on the Korean Peninsula.

On Monday, major Asian markets slumped after South Korea carried out military drills, but some of the losses were minimised after there were no retaliatory actions from North Korea.

However, the bearish momentum is expected to continue for some time, as most regional investors have already begun their year-end holidays.

On Bursa Malaysia, the lack of fresh catalysts coupled with bearish regional sentiment have kept investor sentiment somewhat muted in recent times.

Among the stocks to watch on Tuesday include PLUS EXPRESSWAYS BHD [], MTD CAPITAL BHD [], BINA PURI HOLDINGS BHD [], Jaya Tiasa Bhd, TIME DOTCOM BHD [], BERJAYA LAND BHD [] (BLand).

PLUS has received an offer from Jelas Ulung Sdn Bhd to acquire all of its business undertakings, including assets and liabilities for RM26 billion, or RM5.20 per share cash.

MTD Capital received a buyout offer from its major shareholders Nikvest Sdn Bhd, Alloy Consolidated Sdn Bhd, Alloy Concrete Engineering Sdn Bhd and Alloy Capital Sdn Bhd (joint offerors) to acquire the remaining shares they do not already hold (excluding 27.49 million treasury shares) at RM9.50 apiece.

The joint offerors hold 131.48 million shares of RM1 each in MTD, representing 53.13%.

The joint offers have also made a downstream, take-over offer for the existing and paid-up shares of RM1 each in MTD ACPI ENGINEERING BHD [] not already held by MTD for a cash offer price of 53 sen per share.

Trading MTD and MTD ACPI would resume at 9am on Tuesday, Dec 21. The two companies had requested for a trading halt from 9am on Dec 20 pending the announcement

Bina Puri's unit in Brunei landed a sub-contract worth RM158.36 million to undertake the project known as Skim Tanah Kurnia Rakyat Jati Kampung Lugu: Kerja-kerja Infrastruktur dan Perumahan in Brunei .

Bina Puri said on Monday that Bina Puri (B) Sdn Bhd had entered into a subcontract agreement with Chuon Tzu CONSTRUCTION [] Company Sdn Bhd on Dec 3 to undertake the project.

Jaya Tiasa net profit for the second quarter ended Oct 31, 2010 surged nine-fold to RM30.08 million from RM3.24 million a year ago on higher profit margin from log sales, increase in sales volume and average selling price of fresh fruit bunches as well as doubling of crude palm oil sales volume.

Its revenue for the quarter rose 7% to RM192.21 million from RM180.42 million. Earnings per share was 11.27 sen while net assets per share was RM4.31.

Time Dotcom's wholly-owned subsidiary TT dotCom Sdn Bhd has entered into principal terms of collaboration with MEASAT Broadcast Network Systems Sdn Bhd (Astro) for the provision of IPTV and Broadband services across the Klang Valley and Penang.

BLand net profit for the second quarter ended Oct 31, 2010 fell to RM5.71 million from RM15.16 million a year earlier despite posting revenue RM1.02 billion.

For the six months ended Oct 31, BLand's net profit was RM121.58 million on the back of revenue RM2 billion.

The lower net profit was attributed to the lower profit contribution from the gaming business operated by BERJAYA SPORTS TOTO BHD []'s principal subsidiary company Sports Toto (Malaysia) Sdn Bhd.

It said Sports Toto registered a lower pre-tax profit in the quarter under review due to the increase in Pool Betting Duty from 6% to 8% (effective June 1, 2010) coupled with higher prize payout.

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RHBInvest Research Highlights 09th November 2010

Top Story

Timber:

• Looking good.
• Overweight stance on the sector.

Ta Ann: Fair value revised to RM5.92, from RM5.12. Outperform (up from MP)
Jaya Tiasa: Fair value revised to RM5.31, from RM4.73. Outperform
WTK: Fair value revised to RM1.64, from RM1.60. Outperform

Corporate Highlights

Digi:

• Prepared to hold its ground.
• Maintain Outperform call on DiGi with fair value of RM26.35

AirAsia:

• Price war looming.
• Fair value is cut from RM3.01 to RM2.10. Downgrade to Underperform from outperform.

MAS:

• To expand Firefly into a full-fledged low-cost carrier.
• Maintain Underperform. Fair value is RM1.91

Dayang:

• Jumped significantly in 2QFY10.
• Fair value raised to RM3.86/share (from RM3.01 previously), Maintain Outperform.

Technical Highlights

Daily Trading Strategy:

• A potential removal of 1,524.69 today.
• A penetration to above 1,524.69 will induce another wave of fresh buying momentum, in our opinion.
• Potentially, the FBM KLCI could head higher towards our medium-term upside projection target at 1,668 over the longer tem.
• In fact, even if it fails to take out 1,524.69, the current robust sentiment is likely to persist amid strong rotational plays and robust trading volume of late.

Daily Technical Watch: DNP Holdings

• Likely to push for further gains toward RM2.12 and RM2.37
• Immediate Support at RM1.80
• Immediate Resistance at RM2.12

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