Maybank IB Views

ECONOMICS
Singapore: Trade, Sep 2011
Bumpy ride...

Worse-than-expected... Singapore's non-oil domestic exports (NODX) fell by -4.5% YoY as opposed to the expected +3.5% YoY gain. At the same time, Aug 2011's growth was revised downward to +3.9% YoY (previous: +5.1% YoY). YoY figures have been swinging between growth and contraction in the past seven months, resulting in sluggish 2011 YTD growth of +3.9% (Jan-Sep 2010: +24.8%; 2011: +22.8%). Next year's NODX growth is expected to remain equally sluggish at 3.8%, according to the forecast by Maybank FX Research.

RESULTS REVIEW
Public Bank RM12.50: Hold
Decent growth but priced in

Hold maintained. 3Q11 RM899m net profit, while up a commendable 15% YoY, is broadly within expectations, with 9M11 RM2.61b net profit (+18% YoY) at 77% of our full-year forecast and consensus. Positive surprises on margins were offset by lower-than-expected non-interest income (NII). Our forecasts are maintained along with our TP of RM12.30 (2012 P/BV of 2.5x, ROE: 21.8%).

Axis REIT RM2.45: Buy
On track; better 4Q ahead

Maintain Buy. AXRB's RM48m 9M11 core net profit (+32% YoY) came in as expected. The proposed acquisition of warehouses in Seberang Perai is expected to be completed by end-11, lifting AXRB’s total assets to RM1.32b (+4.8%; from RM1.26b). AXRB aims to grow its total asset size to RM2.0b by 2012. We maintain our earnings forecasts and RM2.70 DCF-based TP. The trust's proven track record in growing its asset portfolio and dividend income will remain the pull factors.

SECTOR UPDATE
Automotive: Underweight
Cool down in September sales

Post raya and Merdeka sales dampen September TIV. The MoM contraction in Sep's vehicle sales was widely anticipated following the rush of deliveries in Aug and shorter working month. Overall, we expect a seasonally softer sales trend in 4Q from 3Q TIV sales of 153,041 units and continue to be bearish on the sector, on softer consumer spending in light of a potential global economic slowdown. The sector remains an Underweight and we retain our Hold calls on UMW and MBM while Proton and TCM remain as Sells.

Technicals
The FBM KLCI surged 22.92-points to close at 1,465.35 yesterday. Its resistance areas of 1,467 and 1,487 may cap market gains, whilst the obvious support areas are located at 1,445 and 1,465.

Trading Idea is MFLOUR

Other Local News
Mah Sing Group: RM2.5b sales target next year. In order to achieve its sales target of RM2.5b, Mah Sing Group plans to adjust their product mix in line with today's sentiment and needs. Mah Sing Group will focus on lower-priced and smaller units of serviced apartments in the next two years to cater to demand of the young population. (Source: The Star)

PacificMas: OCBC bids RM450m for PacificMas units. OCBC Capital Malaysia planned to acquire 100% of Pac Lease Bhd, PB Pacific Sdn Bhd, PacificMas Fidelity Sdn Bhd and PacificMas Capital Sdn Bhd as well as an 85% stake in Pacific Mutual Fund Bhd with aggregate purchase consideration of RM450m. (Source: Bursa Malaysia)

Leader Universal: Controlling shareholders offer buyout. The controlling shareholders of Leader Universal Holdings Bhd, through HNG Capital Sdn Bhd (HNGC), have made a RM480.1m offer to acquire the entire assets and liabilities of the company for RM1.10 per share. The purchase shall be satisfied via RM410.9m in cash and RM69.2m as an amount remaining due and owing by HNGC as a debt due to Leader. (Source: The Star)

Proton: Offers lifetime warranty on power windows. Proton has once and for all moved to erase any doubt over defective power windows by offering a lifetime warranty for all new Proton models registered from Sept 1, 2011 and vehicles that are still under the manufacturer’s warranty as at Sept 1. (Source: The Star)

Construction: Second Penang Bridge ahead of schedule. Construction of the second Penang bridge is likely to be completed two months ahead of its projected November 2013 schedule. It is likely that work on the new bridge will achieve 70% progress by the end of this year. (Source: Business Times)

Transportation: Better KTM Komuter service by Jan 2012. KTM Komuter users can look forward to better commuting experience this January when the first of the 38 six-car electrical multiple unit (EMU) is put into service. To complement the new trains, an automatic fare collection system was being implemented and full refund will be given for trips that are delayed by more than 30 minutes. (Source: The Sun, The Star)

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Stocks to watch: PacMas, Leader, Public Bank, LFE Corp

KUALA LUMPUR: The fresh flow of corporate news on Bursa Malaysia, with a proposed takeover of LEADER UNIVERSAL HOLDINGS BHD [], the windfall for PACIFICMAS BHD [] shareholders and strong earnings from PUBLIC BANK BHD [] will underpin market sentiment.

Other stocks to watch are LFE Corp Bhd, TENAGA NASIONAL BHD [], GADANG HOLDINGS BHD [], Malayan Flour Mills and Nadayu PROPERTIES [] Bhd,.

OCBC Capital (Malaysia) Sdn Bhd (OCSB) has made offer to acquire all of PacificMas’s stakes in five companies for RM450 million of which RM164.23 million be in cash and RM285.76 million due and owing by OCSB to PacificMas.

After the completion of the corporate exercise, PacificMas’ assets would comprise mainly cash, available-for-sale/trading securities and the deferred amount. PacificMas will promptly distribute its remaining cash via the declaration of special dividend(s) and/or the implementation of a capital repayment exercise.

Leader Universal’s top officials, via HNG Capital Sdn Bhd, have made a takeover offer for the company for RM480.10 million or RM1.10 per share. This is 26 sen above the last traded price of 84 sen. Leader said the purchase consideration would be RM410.94 million in cash and RM69.16 million as an amount remaining due and owing by HNGC as a debt due to Leader.

Public Bank Bhd’s earnings rose 14.8% to RM898.79 million in the third quarter ended Sept 30, 2011 from RM782.7 million a year ago. Revenue increased by 13.7% to RM3.27 billion from RM2.87 billion. Earnings per share were 25.66 sen compared with 22.35 sen a year ago.

For the nine-months ended Sept 30, 2011, its earnings rose 18.3% to RM2.606 billion from RM2.202 billion. Revenue increased 16.9% to RM9.434 billion from RM8.064 billion. Pre-tax profit grew by 16.6% to RM3.447 billion from RM2.955 billion.

LFE CORPORATION BHD [] has been awarded RM26.35 million in its suit against its major shareholder and former director, Alan Rajendram A/L Jeya Rajendram.

LFE said the Kuala Lumpur Regional Centre for Arbitration had awarded RM26.35 million, interest at the rate of 8% per annum from Dec 21, 2008, legal costs of RM200,000 and costs of the arbitration of RM104,352.

Tenaga Nasional’s share price rallied 37 sen to RM5.57 on expectations of a resolution over its gas supply issue. Market talk was that Tenaga might get a writeback from Petronas.

Gadang said Messrs Ernst & Young was not seeking reappointment as auditors of the company for the financial year ending May 13, 2012 at its AGM.

It said Meloria Sdn Bhd, a substantial shareholder, had in its Oct 3 letter, nominated Messrs PKF as auditors in place of Ernst & Young and to hold office until the conclusion of the next AGM.

Malayan Flour Mills’ proposed EGM fixed for Wednesday, Oct 19 will go ahead after the application for an injunction to restrain or prevent the meeting had been dismissed.

Nadayu Properties Bhd, a medium sized property developer, aims to hit a sales target of at least some RM300 million next year.

Its executive chairman Hamidon Abdullah said on Monday, Oct 17 the sales target was based on its upcoming property launches.

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Leader Universal's Saudi JV called off

KUALA LUMPUR: LEADER UNIVERSAL HOLDINGS BHD’s joint venture (JV) plan to supply cable and cable related equipment in Saudi Arabia has been called off by mutual agreement with its JV partners.

It said on Tuesday, March 22 that its unit Leader Universal (Labuan) Ltd (LULL) had entered into a termination agreement with Al-Ghazalah Development Co (Al-Ghazalah) and Suasana Daya Sdn Bhd (Suasana) to call of the joint venture.

The parties had on July 8, 2009 entered into an agreement to set up the JV for the purposes of selling and supplying of cables and cable related accessories and equipment with customers in Saudi Arabia, as well installation of cables and turnkey projects and supply and/or CONSTRUCTION of power transmission, distribution, substation and related projects in that country.

LULL was to hold 51% of the JV, while Al-Ghazalah was to have 30% and Suasana 19%.

Leader said that due to a change of plans, the parties had agreed not to pursue with the formation of the JV.

“However, the parties would continue to jointly explore business opportunities in Saudi Arabia,” it said

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