Stocks to watch Dijaya, Ivory, Kimlun, KPJ, oil and gas-related counters

KUALA LUMPUR (Nov 12): The FBM KLCI is expected to trend moderately higher on Monday, Nov 14 in line with the positive close at Wall Street last Friday.

Also, the statement by Prime Minister Datuk Seri Najib Tun Razak on Nov 11 that the general election would not be held this year put an end to weeks of speculation, and created what some analysts have described as offering some clarity to a nervy local market.

US stocks rose on Friday, ending higher for the week after the Italian Senate's approval of economic reforms gave investors some relief from worries about the euro zone's debt crisis.

The Dow Jones industrial average was up 2.19% to 12,153.68; the Standard & Poor's 500 Index rose 1.95% to 1,263.85, while the Nasdaq Composite Index added 2.04% to 2,678.75.

Affin Investment Bank Bhd head of retail research Dr Mohd Nazri Khan said Najib’s statement was to be taken as positive for the market, as it provides for more clarity and less volatility.

“Sometimes election can heighten market fluctuation as was seen in the run-up to the Sarawak state election in April this year,” he said.

Meanwhile, MIDF Research head Zulkifli Hamzah said the market was expected to remain edgy next week, on developments in Europe, especially pertaining to the Italian government’s bond auction on Monday.

Volatility had spiked up recently and the consensus was that global equity markets remain vulnerable to sharp selloff, he said.

He said Malaysia’s 3Q11 GDP growth, which was slated to be unveiled on Nov 18 was not expected to be a game-changing announcement.

“Our house view is that growth may hit 5% year-on-year, which would be keeping pace with regional economies,” he said.

Zulkifli said the local equity market was currently in a period of uneasy equilibrium, but added that foreign investors appear to be keeping faith in the Malaysian market and had been gradually accumulating since early October.

“There were net buyers again this week. Yet, local investors are circumspect of the fact that remains a large overhang of foreign liquidity in the system that can decide to eject overnight,” he said.

Among the stocks that could be in focus on Monday are DIJAYA CORPORATION BHD [], Ivory PROPERTIES [] Group Bhd, Kimlun Corporation Bhd, KPJ HEALTHCARE BHD [] and oil and gas-related counters.

Dijaya and Ivory inked a joint venture agreement to develop mixed residential and commercial properties in Penang with a gross development value of RM10 billion.

The two companies said the development will be completed over the next eight years and would comprise of residential, shopping mall, hotel, office suites, office towers, retail spaces and an open mall with a boulevard.

CONSTRUCTION [] of the first phase is scheduled to begin next year, they said last Friday.

Kimlun secured a contract worth RM68 million to build a service apartment in Iskandar Malaysia in Johor.

It said last week that its wholly-owned subsidiary Kimlun Sdn Bhd had accepted the letter of award for the contract from Grand Action Sdn Bhd.

KPJ is buying four plots of land in the district of Klang, Selangor for RM23.76 million cash as part of its plans to build a specialist hospital.

KPJ on Friday said the four plots of land were situated within a mixed development undertaken by Sazean known as “Sazean Business Park”, and that Sazean would make an application to convert the category of the lands it was buying from agricultural to building/commercial.

Meanwhile, Petroliam Nasional Bhd and Shell Malaysia last week inked heads of agreement (HOA) for new enhanced oil recovery projects offshore Sabah and Sarawak, a development which may boost the oil and gas support services-related counters.

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RHBInvest Research

Top Story: KPJ – Expansion plans on course Outperform

Visit Note

¨ We are positive on KPJ’s intentions to develop its existing network of hospitals into sub-specialist hospitals (or “Centres of Excellence”) which would be equipped with specialised equipment and house medical specialists.

¨ New hospitals in the pipeline include: 1) 200-bed hospital in Bandar Baru Klang; 2) 250-bed new Sabah Medical Centre; 3) 120-bed hospital in Muar; 4) 120-bed hospital in Pasir Gudang; 5) 200-bed hospital in Tanjung Lumpur, Pahang; and 6) KPJ Perlis Specialist Hospital.

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Maybank IB Views

Public Bank RM13.36: Hold
Competitive pressures remain

Little excitement. 1H11 results were broadly within expectations, with net profit of RM1.71b (+20% YoY) accounting for 51% of our full-year forecast and 50% of consensus. Our forecasts are maintained with higher NIM contraction estimates offset by lower provisions. Consumer loan demand continues to show resilience at the group but we do expect this to taper off from 2H11 onwards. Pricing is fair at this stage ( (prospective 2012 P/BV of 2.7x, ROE: 23.5%). Hold call and TP of RM14.10 maintained, pegged to a 2012 P/BV of 2.8x.

Axis REIT RM2.62: Buy
Results in line; more acquisitions soon Shariah-compliant

Maintain Buy. AXRB’s RM31.8m 1H11 core net profit (+33% YoY) came in as expected. Its 4.5 sen 2Q11 DPU was also in line. Share price has performed well thanks to a switch in preference to defensive stocks. No change in our earnings forecasts but we raise our TP to RM2.75 (+15 sen) as we roll over our base year to 2012. A lower beta assumption has also contributed to the upgrade in TP. With a 12% total return, AXRB remains as our top pick for the M-REITs sector.

COMPANY UPDATE
S P Setia RM3.92: Buy
Reaping full benefit of KL Eco City Shariah-compliant

An attractive booster to earnings and RNAV. We are excited on SP Setia's purchase of the remaining 40% stake in KL Eco City (KLEC). This non-cash acquisition will immediately boost SPSB's earnings by 0.6-1% and RNAV/sh by 8 sen. All it would cost SP Setia is 19.4m new shares, which is a mere 1.1% increase of its existing share base. We upgrade our forecasts by 0.3-1.9%. Reiterate Buy with a higher RM5.00 target price (+24 sen; 10% premium to RM4.53 RNAV).

RESULTS PREVIEW
Malaysia Airports Holdings RM6.50: Buy
2Q11: Expect good result

Strong momentum continues. MAHB will release its 2Q11 results on 28 July. 2Q is seasonally the weakest quarter for the year. Based on the operating statistics published, we expect a core net profit (less forex translation and all other non-cash items) of RM110.5m (+24.5% YoY, -1.4% QoQ). Maintain Buy, with a higher DCF-based target price of RM7.55, after imputing for a higher passenger growth of 10% in 2011 (previously 8%). Our new TP offers undemanding 15.2x 2012 earnings.

Technicals
The FBM KLCI fell 5.46 points to close at 1,559.60 yesterday. Its resistance areas of 1,559 and 1,574 will cap market gains, whilst the obvious support areas are located at 1,543 and 1,552.

Trading idea today is YTL

Other Local News
KNM: Secure RM17b project with Zecon. KNM Group Bhd and Zecon Bhd have entered into two heads of agreement with Gulf Asian Petroluem Sdn Bhd (GAP) to construct a petroleum refinery and a petroleum product storage terminal facility for a combined contract of RM17b in Teluk Ramunia. (Source: The Edge Financial Daily)

Tan Chong: Sets 20% sales target for Sabah, Sarawak. Edaran Tan Chong Motor Sdn Bhd (ETCM) is eyeing to raise the sales contribution from Sabah and Sarawak to 20% of that nationwide in three years time. Sales in the two states at the moment represented 10 percent of the national total for Nissan vehicles. (Source: The Star)

KPJ: To triple education revenue. KPJ Healthcare Bhd's education arm has been granted university college status by the Higher Education Ministry. KPJ plans to invest RM120m in the physical expansion of its education facilities and hopes to triple revenue from its education unit to RM100m annually from RM30m in 2010. (Source: The Edge Financial Daily)

Ivory: Wins Penang land rights. Ivory Properties Group Berhad (IVORY) won the rights to develop 102.56 acres of land located at Bayan Mutiara, North East District, Penang of which approximately 67.56 acres are existing land and 35 acres are to be reclaimed for a proposed mixed development. (Source: Bursa Malaysia)

Perwaja: Makes cash call to Kinsteel. Debt-laden Perwaja Holdings Bhd is making cash call to its major shareholder Kinsteel Bhd to raise RM280m under a planned restricted issue of redeemable convertible unsecured loan stocks (RCULs). Perwaja is also proposing an issue of free warrants on the basis of one free warrant for every two existing shares held. The gross proceeds will be used to finance the working capital needs of Perwaja. (Source: The Edge Financial Daily)

O&G: Qatar to sell liquefied natural gas to Malaysia. Qatar's state-run Qatargas says it has agreed to sell 1.5m tons of liquefied natural gas annually to Malaysia, locking in its first major customer in Southeast Asia. The company says it signed a preliminary agreement with Malaysia's Petronas LNG on Sunday in the Qatari capital, Doha. The supply deal is expected to start in 2013 and last for two decades. (Source: The Star)

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Maybank IB Views

Plantation: Neutral
June's inventory surpassed 2m tonnes

Inventory at 18 month high. Malaysia's palm oil inventory rose 41.1% YoY to 2.05m tonnes (6.8% MoM) on yet another record June's production (1.75m tonnes; +0.7% MoM, +23.5% YoY). However, the higher production was offset by growth in exports at 1.58m tonnes (+12.4% MoM, +9.5% YoY). June’s inventory level is within market's expectation. Maintain Neutral on the sector. KL Kepong (Buy) and TSH Resources (Buy) are currently our top picks among the large caps and mid caps in the sector.

ECONOMICS
Industrial Production Index (IPI), May '11
Temporary Decline...

Industrial production (IP) growth in May '11 fell deeper into the red as it contracted by -5.1% YoY (revised Apr '11: -1.7% YoY; Maybank IB: -3.3% YoY; Consensus: -2.7% YoY). MoM, overall production dipped by -1.3% following a revised -7.2% drop in the preceding month. YTD, production was up marginally at +0.2% YoY (2010: +7.3% YoY). Mining output was the main culprit. For the second month in a row, mining output was the biggest drag on IP.

Technicals
The FBM KLCI fell 6.16 points to close at 1,588.58 yesterday. Its resistance areas of 1,588 and 1,597 will cap market gains, whilst the weaker support areas are located at 1,576 and 1,584. Due to the US markets’ weaker tone last night; we will see some profit taking and liquidation activities in the local bourse today.

Trading idea is a Short-Term Buy on MUDA.

Other Local News
SapuraCrest, Kencana: Proposal to merge. Integral Key Sdn Bhd (IKSB), a special purpose vehicle, has made an RM11.85b offer to acquire SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd. Received on Monday, July 11 offer letters from IKSB to acquire all their assets and liabilities in a share swap. IKSB offered to acquire SapuraCrest for RM5.87b equivalent to RM4.60 per share and Kencana was offered RM5.98b or RM3 per share. The offer shall remain open for acceptance until 5pm on Aug 15. (Source: Bursa Malaysia)

Tenaga: To implement new tariff in Sabah from July 15. The new tariff structure is also to promote efficient utilisation of electricity by the consumers. In this restructuring also, the tariff for Federal Territory of Labuan will be realigned to mainland Sabah since Federal Territory of Labuan is supplied from the Sabah network system, and more appropriate to be subjected to Sabah's cost of supply structure rather than that of Peninsular Malaysia. (Source: Bursa Malaysia)

KPJ: Inks JV to set up specialist hospital in Perlis. KPJ Healthcare Bhd has inked a joint venture agreement with Yayasan Islam Perlis (YIP) to set up and operate a new hospital to be known as KPJ Perlis Specialist Hospital. It said the JV would operate under the name Perlis Specialist Hospital Sdn Bhd, of which KPJSB would hold 60% equity interest while YIP would hold the remaining 40%. (Source: Bursa Malaysia)

E&O: Sells building, land on Penang island for RM134m. Eastern and Oriental Bhd (E&O) is expected record about RM66m in profit from the sale of a building and freehold land in Tanjong Tokong on Penang island for RM134m cash, if based on the building and land costs totalling RM67.7m. its unit had entered into a sale and purchase agreement Soaring Profit Sdn Bhd to sell the 27,743.7 sq m of land and building with 269,418 sq ft of gross floor area and 1,042 car park bays. (Source: Bursa Malaysia)

Silk Holdings: secured four long term contracts worth RM39.75m from Petronas Carigali Sdn Bhd for the provision four units of anchor handling tug supply vessel (AHTS). The contracts for the four units of AHTSV were for the primary period of one year, with various effective commencement dates in July 2011 respectively, with options to extend for a further period of one year each. (Source: Bursa Malaysia)

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Stocks to watch: SapuraCrest, Kencana, E&O, SILK, KPJ, AFG

KUALA LUMPUR: All eyes would be on SAPURACREST PETROLEUM BHD and KENCANA PETROLEUM BHD when they resume trading on Tuesday, July 12 following a proposed merger which would position them stronger to bid for upstream jobs.

Other stocks to watch are Eastern and Oriental Bhd (E&O),SILK Holdings Bhd, KPJ HEALTHCARE BHD and ALLIANCE FINANCIAL GROUP BHD (AFG).

SapuraCrest and Kenanca announced Integral Key Sdn Bhd (IKSB), a special purpose vehicle, had made a RM11.85-billion offer to acquire all their assets and liabilities in a share swap.

The merged entity would become one of the world’s largest oil and gas service providers in terms of market capitalisation and assets.

Meanwhile, E&O is expected record about RM66 million in profit from the sale of a building and freehold land in Tanjong Tokong on Penang island for RM134 million cash.

The E&O group’s original cost of investment in the land made in May 2004 was RM13.57 million while the CONSTRUCTION [] cost of the building incurred from March 2009 to May 2011 was RM54.17 million.

SILK secured four long term contracts worth a total of RM39.75 million from Petronas Carigali Sdn Bhd for the provision four units of anchor handling tug supply vessel (AHTSV).

Its subsidiary Jasa Merin (Malaysia) Sdn Bhd had been the awarded the four contracts. It said the long term contracts for the four units of AHTSV were for the primary period of one year, with various effective commencement dates in July 2011 respectively, with options to extend for a further period of one year each.

KPJ is teaming up with Yayasan Islam Perlis (YIP) to set up and operate a new hospital to be known as KPJ Perlis Specialist Hospital. KPJ’s unit Kumpulan Perubatan (Johor) Sdn Bhd (KPJSB) had signed the agreement with YIP on Monday, July 11.

It said the JV would operate under the name Perlis Specialist Hospital Sdn Bhd, of which KPJSB would hold 60% equity interest while YIP would hold the remaining 40%.

Meanwhile in AFG, the Employees Provident Fund (EPF) Board had disposed of 5.2798 million shares from July 5 and 6, reducing its shareholding to 12.53% or 193.96 million shares.

The shares had run up early last week on market talk that Temasek Holdings Pte Ltd and Langkah Bahagia Sdn Bhd might dispose of their combined 30% stake in AFG.

Market talk was that Temasek might want to dispose of its stake in AFG after selling its stakes in two of China’s biggest banks.

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Maybank IB Views

Star Publications (Malaysia) RM3.39: Hold
Diversifying media assets Shariah-compliant

Near-term catalysts yet to emerge; maintain Hold. On the positive side, indications thus far are that the recent electricity tariff hike has had little impact on ad spend. Furthermore, circulation appears to be leveling off after five years of slippage. Nevertheless, current valuations are reflective of its near-term outlook on tapering single digit earnings growth after a strong rebound last year. We maintain our earnings estimates and RM3.69 SOP TP which implies 12.6x 2012 PER.

Technicals
The FBM KLCI lost 1.95 points and ended at 1,554.24 yesterday. Its resistance areas of 1,555 and 1,576 will cap market gains, whilst the obvious support areas are located at 1,533 and 1,553. Due to the US markets’ mixed tone last night, we will see some initial low volume buying activities in the local bourse today.

Trading idea is a Take Profit call on MUHIBAH.

Other Local News
Perodua: 10,000 orders for new Myvi so far, New Myvi to make Indonesian debut. Perodua has received about 10,000 orders for the new Myvi since booking was opened on June 4 and it expects between 8,000 and 8,500 units to be sold monthly. Separately, the new Perodua Myvi will soon make its debut in the Indonesian market, marking Perodua's first foray there. 500 units of the new Myvi will be shipped to Indonesia this month, while the official launch there will take place next month. (Source: Business Times)

MAS: May boost fleet to tap Oneworld network. Malaysia Airlines' entry into the Oneworld airline alliance may see it ordering more planes. MAS will be attending the Paris Air Show next week, and an announcement on new orders is largely expected. (Source: Business Times)

AirAsia: To announce aircraft orders at Paris Air Show. AirAsia is aiming to conclude negotiations soon so that it can make a landmark aircraft order to double its fleet at the Paris Air Show. (Source: The Star)

UEM Land: Targets RM5b GDV in 2011. UEM Land Holdings Bhd is planning to launch projects with a total gross development value (GDV) of RM5b this year, as it aspires to see its revenue grow by 50%. (Source: The Edge Financial Daily)

KPJ: To build specialist centre in Iskandar. KPJ Healthcare Bhd has received approval for zoning from the Health Ministry to set up a new specialist hospital at Bandar Dato Onn in a collaboration with Johor Land Bhd. (Source: The Star)

Plantation: Malaysia wins case against Aussie palm oil labeling Bill, Malaysia is largest producer of certified, sustainable palm oil. Malaysia has won its case against Australia's proposed Truth in Labelling - Palm Oil Bill. The Community Affairs Legislative Committee of the Australian Senate in Canberra has recommended that the Bill not be passed. Separately, Malaysia is now the world's largest producer of certified and sustainable palm oil, accounting for half of the 4.2m tonnes of globally certified and sustainable palm oil to date carried out by the Roundtable on Sustainable Palm Oil (RSPO). (Source: Business Times)

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RHBInvest Research

Healthcare:

Sector Update

• Sime Darby Healthcare Group is set to establish two new specialist hospitals in Ara Damansara and ParkCity respectively.
• We believe the opening of two new hospitals will not have a significant impact on KPJ. KPJ’s Damansara Specialist is well established and currently operating at full capacity.
• We reiterate our Outperform call on KPJ (FV=RM4.94) given its stable growth profile and relatively inexpensive valuations compared to regional peers. We remain positive on Malaysia’s healthcare industry as healthcare remains an integral part of the Government’s initiative to develop Malaysia as a high income nation by 2020. However, given our more cautious view on the rubber glove players, we maintain our Neutral call for the sector.

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RHBInvest Research

Top Story: Faber

Visit Note
Timing remains the issue
Fair value is raised to RM2.77 from RM2.59. We reiterate our Outperform call on the stock.

Sector Call


Utilities:

Sector Update
Federal government yet to buy out water bonds
Puncak would be a potential beneficiary, given our view that the company has been holding out for the federal government (with deeper pockets) to make a better offer.
Unless the federal government subsequently makes a good offer, the water sector restructuring may drag on with no clear outcome in sight.

Corporate Highlights

KPJ:
1QFY11 Results
Although KPJ’s 1Q11 net profit of RM27.5m (flat yoy; +13.1% qoq) accounted for 20% of our and consensus full-year forecasts respectivel.y
We maintain our fair value of RM4.94/share. We reiterate our Outperform call on the stock.

ILB:

1QFY11 Results
Weak 1QFY12/11, but stronger 2H ahead
Fair value is RM1.55. Maintain Outperform.

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Stocks to watch: Melati Ehsan, TSH, KPJ, MK Land

KUALA LUMPUR: Market sentiment is likely to cautious in the week ahead, starting Monday, May 23 following the weaker closing on Wall Street and worries about the contagion effect from Europe’s debt crisis.

In the latest development, credit ratings agency Standard & Poors cut its outlook for Italy to "negative" from "stable", citing weak outlook for growth and reduced prospects for slashing its debt mountain.

The downward revision, which raises the risk of a downgrade of Italy's sovereign rating, may heighten fears that contagion from Greece's and other European countries' debt crisis could be spreading to the euro zone's third-largest economy.

On Wall Street, US stocks fell on Friday, May 20 on euro-zone debt worries that could spill over into next week's trading with a bearish note, while retailers lost ground after a weak profit outlook from Gap.

The Dow Jones industrial average was down 93.28 points, or 0.74%, to end at 12,512.04. The Standard & Poor's 500 Index was down 10.33 points, or 0.77%, at 1,333.27. The Nasdaq Composite Index was down 19.99 points, or 0.71%, to close at 2,803.32.

For the week, the Dow was down 0.7%, the S&P 500 was down 0.3% and the Nasdaq was down 0.9%.

At Bursa Malaysia, stocks to watch include MELATI EHSAN HOLDINGS BHD [], TSH RESOURCES BHD [], KPJ HEALTHCARE BHD [], MK LAND HOLDINGS BHD [], CAN-ONE BHD [] and Kiaqn Joo Can Factory Bhd.

Melati Ehsan was awarded a RM148.63 million project from the Public Works Department to build a road stretching from Gua Musang in Kelantanf to Kampung Relong in Pahang.

Melati’s unit Pembinaan Kery Sdn Bhd accepted a letter of award from the PWD for the road CONSTRUCTION [] project which starts on June 15 this year until Dec 10, 2013.

TSH Resources has allocated RM100 million or more per year as PLANTATION [] development capital expenditure (capex) for new planting of oil palm trees, the bulk of which will in Kalimantan, Indonesia.

Bulk of the RM100 million capex would be for new planting in Kalimantan where it has about 58,000 ha of land which is still unplanted. The Indonesian operations, with the trees maturing by next year, would underpin TSH’s fresh fruit bunches output, productivity and revenue.

KPJ Healthcare reported a set of unimpressive earnings at RM27.51 million in the first quarter ended March 31, 2011 (1QFY2011) compared with RM27.24 million a year ago.

Revenue rose 16.4% to RM437.75 million from RM376.04 million a year ago while earnings per share were 5.09 sen compared with 5.19 sen. It declared 2.4 sen dividend per share.

However, KPJ expected the group’s performance would continue to improve in line with increasing demand, hospital capacity and activities.

MK Land Holdings Bhd’s net profit rose more than two-fold to RM7.22 million in the third quarter ended March 31 versus RM2.02 million a year ago, underpinned by its strong property performance. Revenue rose to RM165.15 million from RM94.74 million. Net asset per share was 87 sen.

Can-One Bhd has taken court action KIAN JOO CAN FACTORY BHD [] over the latter’s proposed one-for-two bonus issue and the proposed renounceable rights issue of 166.56 million 2five-year warrants 2011/2016 on the basis of one warrant for every four KJCF shares held after the proposed bonus.

Can-One claimed the proposals breached the rights of Can-One under the shares sales agreement dated March 13, 2009 and in breach of the Order of the Court of Appeal dated Aug 25, 2010 and the order of the Federal Court dated Feb 21, 2011.

The Edge weekly reports that crane manufacturer Handal Resources has been on an expansion trail since it was listed two years ago, and the strategy has borne fruit.

Meanwhile, hardware and building materials trading Chuan Huat said the group's recent strategic investment in Amalgamated Steel Industrial Steel Bhd is seen as an attempt to get its foot in the door of the steel pipe manufacturer.

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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: Sime Darby

• Visit Note
• FFB yields improving by the month, but unit production costs higher yoy.
• Forward sales policy unchanged; 3) Liberia landbank planting starting this month.
• Downstream plantation margins still razor thin due to structural problems, which Sime has begun to address.
• O&G fabrication yards still running below breakeven utilisation rates, reinforcing our view that the O&G division is a likely candidate for disposal.
• Our target price is relatively unchanged at RM10.70 and we maintain our Outperform call on the stock.

Corporate Highlights

KPJ:

• Company Update
• More M&A in healthcare sector
• Our fair value has been raised to RM4.94/share (from RM4.42), reiterate our Outperform call on the stock.

LPI Capital:

• 1QFY11 Results Note
• Within Expectations, Expecting Stronger Quarters Ahead
• Our fair value is revised downwards to RM12.05 (from RM12.37)
• We maintain our Underperform call on the stock.

MRCB:

• Company Update
• Buying 27.4 Acres Of Development In Setapak For RM170.8m
• Forecasts are maintained. The new landbank will only help to sustain MRCB’s property profits beyond 2012.
• Maintain Trading Buy. Fair value is RM2.65.

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Maybank IB Views

COMPANY UPDATE
Hartalega Holdings RM5.44: Buy
The nitrile wave keeps rolling Shariah-compliant

Upgrade to Buy with a RM6.80 DCF-based TP. Hartalega is set to profit from the structural demand switch to nitrile gloves, at the expense of latex gloves. Demand for nitrile gloves will continue to encroach into the latex gloves market as nitrile gloves ASP discount to latex widens (atypical in the past). Top Glove's M&A search for nitrile glove-makers and latex gloves' declining earnings are some of the recent developments that support our Buy call for Hartalega.


Technicals
The FBM KLCI closed lower by 4.45 points at 1,570.04 yesterday. Its resistance areas of 1,570 & 1,576 may cap market gains, whilst its firmer support areas are located at 1,558 and 1,568.

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


Other Local News
Axiata, DiGi: To save RM2.2b with network deal. Celcom Axiata Bhd and DiGi Telecommunication Sdn Bhd have signed a Network Collaboration Agreement. The scope of the tie-up will initially focus on the sharing of telecommunication sites, access transmission (microwave links), aggregation transmission and trunk fibre transmission. Full realization of cash savings is estimated to be about RM2.2b over 10 years. They expect to see incremental savings as early as 2012 and gradually ramping up to an average annual savings of RM150m to RM250m after 2015. (Source: Bursa Malaysia)

Pos: Khazanah to invite bids for Pos stake. Khazanah Nasional Bhd will invite bids this week through its advisor CIMB Investment Bank Bhd for the divestment of its 32.2% stake in Pos Malaysia Bhd. Pos Malaysia's stake divestment would be a two-stage process, with the first stage addressing regulatory aspects such as the increase in postage tariff rates and rise in salaries and allowances for most of Pos Malaysia's staff. While stage one has not been fully completed as other regulatory aspects such as the Postal Bill have yet to be addressed, Khazanah will proceed with stage two, where it will draw up a bidding and evaluation process to select a new shareholder for Pos Malaysia. (Source: The Star)

Proton: Seeks RM2.35b funding to revive Lotus. Proton Holdings Bhd is in talks with CIMB Bank and several others to secure loans and investments totaling GBP480m (RM2.35b) needed to turn around Group Lotus. The funds will mainly come from loans and the rest will be from Proton's additional investments and revenue from Group Lotus. (Source: The Star)

KPJ: To acquire two medical centres. KPJ Healthcare Bhd’s wholly owned subsidiary, Kumpulan Perubatan (Johor) Sdn Bhd (KPJSB) is buying a 100% stake in Sibu Medical Centre Corp Sdn Bhd (SMCC) and Sibu Geriatric Health & Nursing Centre Sdn Bhd (SGHNC). KPJSB will pay RM26.9m for SMCC and RM1.24m for SGHNC. (Source: Bursa Malaysia)

Jetson: Buys lands in Penang for Rm14m. Kumpulan Jetson Berhad's 51% owned subsidiary, Jetson Development Sdn Bhd has acquired 48,290 sq ft of lands in Penang for RM14m from Malaysian Building Society Bhd (MBSB). The three pieces of land are located in Georgetown. (Source: Bursa Malaysia)

Property: Transactions may hit RM100b. A total of 342,179 property transactions worth RM96.8b were recorded between January and November last year, which means the full year's transactions could reach the RM100b mark. This is the first time transactions value has reached this figure. (Source: The Star)

Manufacturing: To attract over RM50b. Malaysia expects investments in the manufacturing sector to surge to more than RM50b this year. The manufacturing sector, which was the fastest growing sector last year, attracted RM47.2b in approved investments in 910 projects, a 44.8% jump compared with RM32.6b received in 2009. The US was the largest source with investments totaling RM11.7b, mainly in electrical and electronics (E&E), machinery and equipment and scientific and measuring equipment. Other top investors were Japan, Hong Kong, Singapore and Germany. (Source: Business Times)

Khazanah: Portfolio at record RM75b. Khazanah Nasional Bhd saw the net worth of its portfolio rise 39.4%, or RM21.2b, to a record RM75b as at Dec 31, 2010 from RM53.8b in 2009. Total shareholders' return on Khazanah's portfolio of listed companies in 2010 stood at 33.4%, outperforming the FTSE Bursa Malaysia KL Composite Index's total return of 23.3% over the same period. (Source: The Star)

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RHBInvest Research

Sector Call


Telecom:

• DiGi-Celcom collaboration to yield big cash savings

• Estimate potential upside of 96 sen (+3.6%) and 9 sen (+1.6%) to DiGi’s and Axiata’s fair value respectively

Corporate Highlights

Axis REIT:

• More acquisitions in the pipeline
• Post the completion of the acquisition of Axis Eureka and PTP D8 before 1Q2011 as well as the disposal of Axis North Port LC1
• Six potential assets in the pipeline, worth about RM400m
• Maintain Outperform with indicative fair value at RM2.71

KPJ:

• Expanding its foothold to Sibu, Sarawak
• New acquisition would be able to contribute RM3m to its total earnings in FY11
• Outperform with fair value of RM4.39

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Maybank IB Views

Proton Holdings RM4.90: Buy
Lotus burns cash

Lotus' £480m capex is higher than expected, and we do not share Proton's direction of spending for the F1 whilst most major automakers have already exited the circuit in recent years. The high capex will dent Proton’s war chest and affect cash flows, impacting its business and financial turnaround plans. We are placing Proton Under Review with downside bias pending outcome of the Proton-Perodua merger.


Technicals
The FBM KLCI advanced 2.51 points to 1,509.79 yesterday. Its resistance areas at 1,510 and 1,531 may cap market gains, whilst its firm support areas are located at 1,493 and 1,508.

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


Other Local News
O&G: M'sia and Brunei ink billion-ringgit oil and gas exploration pact. Malaysia has sealed a 40-year joint oil and gas exploration deal with Brunei which is expected to generate billions in revenue for both countries. The deal involves two deep water blocks - CA1 and CA2 - located within the two countries' commercial arrangement area along the Brunei-Sarawak maritime border near the Limbang division. Petronas will also be looking into possible joint ventures with Brunei National Petroleum Company Sdn Bhd (Petroleum Brunei) to explore oil and gas in a third country and development of downstream industries. (Source: The Star)

CIMB: Unit eyes USD100m in sales from Dublin funds. CIMB-Principal Islamic Asset Management Sdn Bhd(CPIAM) is targeting about USD100m in sales for its Dublin domiciled syariah funds by the end of next year. CIMB intends to launch three funds under the UCITS III structure, all of which can be freely marketed across Europe. (Source: The Star)

WCT: Eyes more jobs in Qatar. WCT sees opportunities in Qatar as more infrastructure projects are expected to be implemented in preparation for 2022's FIFA World Cup. Bloomberg has reported that Qatar would spend USD57b (RM178.4b) on infrastructure developments related to the World Cup over the next decade. (Source: The Edge Financial Daily)

KPJ: Enhances medical business with takeover. KPJ Healthcare Bhd has acquired the 28-year-old Sabah Medical Centre (SMC). SMC would be KPJ's second venture in Sabah after the company took over the Damai Medical Centre five years ago. (Source: The Star)

KYM: Secures jobs from Vale. KYM Holdings Bhd has been awarded a contract valued at RM0.6m by Vale International SA for the provision of consultancy services relating to Vale's land acquisition in Teluk Rubiah, Perak. (Source: The Star)

Conglo: JCorp is not selling assets to repay RM3.6b debt. Johor Corp (JCorp) will not be selling any of its assets to repay its RM3.6b bonds due on July 31, 2012. JCorp is planning to refinance the debt instead. CIMB Bank and Maybank Investment Bhd have been appointed as the financial advisor. (Source: The Star)

Gaming: Olympia said to be keen on Pan Malaysian Pools. Olympia Industries Bhd has expressed an interest to acquire Pan Malaysian Pools Sdn Bhd from Tanjong plc. However, no formal offer has been made yet. (Source: The Star)

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