Maybank IB Views

RESULTS PREVIEW
Top Glove RM4.26: Sell
Short term rally, but fundamentals weak Shariah-compliant

Maintain Sell. Upcoming 4QFY11 results is likely to disappoint by 33%. Though share price has rebounded on the weaker Ringgit vis-à-vis US dollar (still down 30% from its low in Aug '11), we would continue to avoid Top Glove as the negative impact of lower demand for its latex glove (70% of capacity) outweighs the positive impact of a stronger US dollar, and do not foresee latex cost to come off significantly. Additionally, its CY12 PER valuation is expensive at 19x. We cut FY11-13 EPS forecasts by 9-19% and lower DCF-derived TP to RM3.40 (-23%), indicating 15x CY12 PER.

Technicals
The FBM KLCI fell 6.14-points to close at 1,361.38 yesterday. Its resistance areas of 1,361 and 1,403 will cap market gains, whilst the weaker support areas are located at 1,310 and 1,339. Despite the US markets’ rebound tone last night, we may see a volatile tone for the index today. Some persistent foreign liquidation activities will depress the markets’ today.

Trading Idea is a Take Profit call on AIRPORT.

Other Local News
SP Setia: MSWG disagrees with SP Setia. SP Setia Bhd will need to get approval from shareholder for its recent proposed Semenyih land purchase in line with the current takeover and merger ruling. This is because the land transaction coincides with a conditional takeover offer. (Source: The Edge Financial Daily)

YTLP: Yusli appointed to YTL Power board. Former Bursa Malaysia Bhd CEO Datuk Yusli Mohamed Yusoff has been appointed to the BOD of YTL Power International Bhd. He was appointed to the boards of Mulpha International Bhd and listed associate Mudajaya Group Bhd in mid-July. (Source: The Star)

DiGi: Teams up with McAfee to offer security software. DiGi Telecommunications Sdn Bhd has collaborated with software security company, McAfee, to offer McAfee Internet Security and McAfee® Family Protection software. Currently, DiGi has over 5.5m mobile Internet users, of which 300k uses mobile broadband. Digi expect a double-digit growth in our mobile Internet users by year-end. (Source: The Star)

Rubber: Thailand to cut rubber supply. Thailand, the world's biggest rubber producer and exporter, plans to cut annual rubber supply by 120,000 tonnes and would ask other major producers to take action to prop up prices, senior government and industry officials said. Thailand aim to cut rubber supply to push up prices by encouraging farmers to cut down and replant rubber trees on 400,000 rai (64,000ha), starting from now, and would ask for cooperation from Indonesia and Malaysia to take similar action. (Source: The Star)

E&E: Japanese investments in E&E sector keep flowing in. There has been no let-up in interest among Japanese investors in Malaysia's electrical and electronics (E&E) sector. There continues to be interest either by way of reinvestments or interest by those companies which intends to relocate their businesses here. (Source: Business Times)

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RHBInvest Research

Top Story: IJM Plantation – Harvesting for the future Outperform

Visit Note

¨ Key highlights from our recent meeting: (1) Strong recovery in FFB production so far but can it last?; (2) Happy with current CPO prices; (3) Not required to implement MAPA wage hike; (4) New planting targets reduced; and (5) Capex guidance raised.



Corporate Highlights



MAHB: Hike charges to be put on hold Outperform

News Update

¨ MAHB announced that it has been advised by the Ministry of Transport to delay the hike in charges until further review which was scheduled to commence on Sept 15.

¨ Given that the hike will now be put on hold, we believe there is a possibility of two scenarios: 1) Hike in charges will likely be structured into Marginal Cost Support (MARCS), a compensation mechanism which MAHB will be paid by the government of the difference between the actual amount charged and the revised level; or 2) Hikes to be completely called off.

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Maybank IB Views

MISC RM7.10: Sell
Brace for further impact Shariah-compliant

Poor visibility. We cut our 2012 EPS forecast by a further 19% post analyst briefing for Apr-Jun 2011 results. Visibility continues to be poor, extending up to 2013. We do not see a recovery in the liner, chemical and petroleum divisions, hit by supply overhang and depressed rates. This offsets positives from the other divisions: heavy engineering, offshore, and LNG shipping. Our TP of RM6.44 remains unchanged, based on a 15% discount to our SOP valuation.

Malaysia Airports Holdings RM6.45: Buy
Higher charges, finally

Positive surprise. MAHB has confirmed that it has been granted the approval to impose higher charges on: (1) international passengers (passenger service charge or PSC); (2) landing for aircraft; and (3) parking for aircraft. This will take effect on 15 September 2011 and will positively impact future earnings. MAHB is our top aviation pick as it is well placed to enjoy the longer term growth in air travel. Maintain Buy, with an unchanged target price of RM7.55/share DCF-based.

Hock Seng Lee RM1.46: Buy
A new water job Shariah-compliant

Small replenishment; maintain Buy. HSL's RM45.7m job win will lift its outstanding order book to RM1.15b, and contribute RM5.5m in net profit into 2012, we estimate. We maintain our earnings forecasts having imputed job win assumptions earlier. We are still positive on HSL for an exposure to Sarawak construction. Our target price is unchanged at RM2.30 based on 12x 2012 PER. Share price has fallen back to single digit valuations alongside the weak broader market; the stock is looking more attractive at current levels.

RESULTS PREVIEW
AirAsia RM3.64: Hold
Challenging 2Q11 Shariah-compliant

Yields, fuel and Firefly. We expect AirAsia's 2Q11 to show a marginal YoY profit growth buoyed exclusively by its Thai associate. We expect the Malaysian and Indonesian operations to exhibit profit drop due to 28% rise in fuel prices and soft yield environment, consistent to the industry and further exacerbated by Firefly’s jet operations services to East Malaysia. We maintain our Hold call at RM3.36 target price, based on 9.0x 2011 PER which is 10% discount to global LCCs’ PER.

Malaysian Airline System RM1.66: Buy
2Q11: Expect losses

Yields, fuel and Japan. MAS will release its 2Q11 results on 23 Aug. 2Q11 is expected to be loss-making due to the impact of 28% higher fuel price YoY and some impact from the MENA civil unrest and Japanese natural disasters. Despite this negative environment, we advice investors to overlook this quarter as the Company’s future is much better now with stabilizing fuel price, new aircraft benefits and the tie-up with AirAsia. We maintain our Buy recommendation with a target price of RM2.70, pegged to 9.0x 2012 PER - on par with global peers.
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RESULTS REVIEW
UMW Holdings RM7.22: Hold
O&G sees red, auto loses traction Shariah-compliant

Challenging mid-term prospects. UMW's 2Q underperformance validates our contrarian view and concerns over its O&G and auto operations. Issues like the supply chain from Japan's March earthquake and tsunami and anti-dumping effect will persist in 2H. Maintain Hold with a RM7.20 target price, based on 12x 2011 EPS.

TSH Resources RM3.15: Buy
Windfall harvest Shariah-compliant

Outperformed. TSH's 1H11 net profit of RM60m (+165% YoY) accounted for 59% and 54% of our and consensus full year estimates respectively. TSH outperformed expectations backed by higher than expected FFB production. We raise our 2011 earnings forecast by 7.1% but trimmed 2012-13 forecasts by 0.6-0.7% on higher wages assumption by RM200 per month for Malaysian plantation workers. We maintain our Buy call with an adjusted TP of RM3.81 (15x 2012 PER; previously RM3.84) on the lowered earnings.
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Eversendai Corporation RM1.68: Buy
Buy ahead of job-flows Shariah-compliant

Results show strong growth. 1H11 net profit of RM57m was 46% of our full-year forecast and 49% of consensus. We initiate coverage on Eversendai with a Buy and TP of RM2.17 (based on 12x CY12 PER). Key attributes: (i) job-flow prospects are bright and we expect major wins in the next 6 months; (ii) Eversendai has built itself an above-industry margin business franchise yet valuation of 9x 2012 PER is at a 30% discount to big-cap peers; (iii) our belief that pump-priming is an obvious and politically easy tool in addressing macro-economic slump.

ACQUISITIONS / DISPOSAL
Star Publications (Malaysia) RM3.39: Hold
Revises terms of disposal for Section 13 land Shariah-compliant

More favourable terms. Star's new agreement with JAKS Island Circle (JIC) to raise the consideration for its Section 13 land sale by RM24m to RM135m is positive. The land disposal will add 14 sen/sh in value by end-2014. We however maintain our earnings estimates as the timing for the gain recognition is beyond our estimates horizon. We also maintain our Hold call and RM3.54 DCF-based TP.

Technicals
The FBM KLCI added a meagre 0.31-points and closed at 1,483.98 last Friday. The weaker support areas for the FBM KLCI are located in the 1,423 to 1,477-zone. The next resistance levels of 1,483 and 1,597 will see heavy selling and liquidation activities.

Trading Idea is Tenaga

Other Local News
SunCity and Sunway: To be delisted. The shares of Sunway City Bhd (SunCity) and Sunway Holdings Bhd would be delisted from the Main Market of Bursa Malaysia on Aug 23. The new entity would be known as Sunway Bhd. (Source: Bursa Malaysia)

MMHE: Secures RM952m contracts. Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) has secured two contracts worth RM952m from MISC Bhd for topsides fabrication, marine repair and conversion of two energy vessels. (Source: Bursa Malaysia)

Crescendo: Plans RM2.5b township. Crescendo Corp Bhd (CCB) is set to launch its new mixed development property project, Bandar Cemerlang township in Mukim Tebrau, Johor Baru with a gross development value (GDV) of RM2.5b by year-end. The completion of the Johor Baru-Kota Tinggi highway in June this year has improved accessibility and connectivity to its project. (Source: The Star)

Green technology: Green loans. Commercial banks, which are currently shying away from lending to green companies, may have to set aside an allocation to finance green technology projects. Malaysian Green Technology Corp (MGTC) CEO Dr Nazily Mohd Noor said this was one of the suggestions made during a discussion at the Green Technology and Climate Change Council, chaired by the Prime Minister Datuk Seri Najib Razak, two weeks ago. (Source: Business Times)

Property: Foreigners not shying away from prices. Malaysia property products are currently hot on the radar of international investors and property buyers, in view of the domestic real estate market potential to see a steady growth in prices. (Source: The Malaysian Reserve)

EPF: Confirms buying London office block for RM740m. The Employees' Provident Fund (EPF) has confirmed that it has purchased an office block in St James's Square, London, where one of the tenants has one of London's highest rents, for RM740m. This marks EPF's fourth property investment in London since announcing an allocation of RM1b for British property purchases about a year ago. Including this latest purchase, it has spent RM634m. (Source: The Star)

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Maybank IB Views

Construction: Overweight
LRT final packages go to Sunway, MRCB

Maintain Overweight. Sunway's RM569m win is a pleasant surprise after press reports of the Kelana Jaya Line Package B going to TRC Synergy. MRCB's RM1.33b win is also above the RM800m-RM900m estimates for the Ampang Line Package B. The LRT chapter, in terms of awards for the civil works portion, is coming to an end, with all eyes now to focus on the MRT which will enter the tendering stage for the elevated works portion – to be called in stages over Sept-Dec 2011. Our fair value for Sunway is RM3.85 while we are Not Rated on MRCB.

COMPANY UPDATE
Dialog Group RM2.67: Buy
New leg, new growth, new perspective Shariah-compliant

Bagging the Balai RSC is sentiment positive. Dialog is in good hands. RoC Oil and PCSB are reputable partners. Funding is not an issue. While Balai is expected to be more challenging than the Berantai project, the risk is mitigated as capex is fully recoverable under the RSC. We opine that the consortium will likely bag the next RSC (i.e. Belantara) to make it a more economical investment. Maintain Buy with an unchanged RM3.35 target price, based on sum-of-part valuations.

RESULTS REVIEW
Kuala Lumpur Kepong RM21.10: Hold
Big boost from FFB output recovery Shariah-compliant

Downgrade to Hold. 3QFY11 RM420m recurring net profit (+72% YoY,+85% QoQ) brings 9MFY11 recurring net profit to RM1,047m (+49% YoY), which met 78% and 74% of our and consensus full-year forecasts. The results were marginally above our forecast on a lower tax rate. We tweak up our 2011 forecast. The stock has outperformed the KLCI since we first upgraded our call on 24 Jun 2010, chalking up 29% in capital gain. We change our valuation methodology to PER (from SOP) pegging the stock to 16x FY12 based on an unchanged 2012 RM3,000/t CPO ASP assumption for the sector. Given limited upside to our new TP of RM21.60, we downgrade the stock to a Hold.

WCT RM2.87: Buy
Impacted by forex Shariah-compliant

Below forecasts. RM75m 1H11 net profit (+9% YoY) made up 41% of our full-year forecast of RM184m due to an unexpected RM13m forex loss from the stronger Ringgit. We have lowered our 2011-12 forecasts by 8-9%. Our new target price is RM3.50 based on SOP (unchanged 15x 2012 PER + 20sen value increment from KLIA2 retail concession). Share price has consolidated along the broader market with the stock trading at 12.9x one-year forward earnings. Maintain Buy.

JT International RM6.90: Buy
Momentarily weaker

Below expectations. JTI's 1H11 net profit of RM65m (-8.9% YoY) accounts for 45% and 47% of our and consensus full-year forecasts. The shortfall in earnings was due to higher than expected marketing costs and lower sales volumes, implying downside risk to our 2011 estimates. We maintain our earnings forecasts pending an analyst briefing today. Valuations are still low with the stock trading at 11.1x 2012 PER. Our DCF-based TP implies 13x 2012 PER.

Technicals
The FBM KLCI inched down by 1.50 points to close at 1,498.24 yesterday. Its resistance areas of 1,498 and 1,515 will cap market gains, whilst the weaker support areas are located at 1,454 and 1,486.Due to the US markets’ fall last night; we will see some volatile trading activities in the local bourse today. Some heavy profit-taking and liquidation activities will persist to depress the markets’ rebound from its recent 1,423.47 low. We see a longer-term decline for the local and foreign indices.

Trading Idea is a Take Profit call on TENAGA.

Other Local News
MPHB: Confirms talks to dispose of Menara Multi-Purpose. Multi-Purpose Holdings Bhd (MPHB) said it is in talks with various parties to dispose off its non-core assets including Menara Multi-Purpose. (Source: The Edge Financial Daily)

MAHB: Revises charges for airlines, passengers. Malaysia Airports Holdings Bhd (MAHB) would be implementing new international passenger service charges (PSC) as well as aircraft landing and parking charges at airports operated by the group on September 15. The government has given its approval and that it was in line with the Operating Agreement signed between the government and MAHB in February 2009. (Source: Business Times)

O&G: Gas Malaysia listing slated for 4Q. MMC Corp Bhd plans to list Gas Malaysia Sdn Bhd on the Main Board of Bursa Malaysia by the fourth quarter of this year. The company has appointed Maybank Investment to advise on the initial public offer exercise. (Source: Business Times)

Bina Puri: Wins RM470.3m contract. Bina Puri Holdings Bhd, via its wholly-owned unit Bina Puri Construction Sdn Bhd, has been awarded a contract worth RM470.3m for the proposed development of a tourist recreational and commercial development at KK Times Square (Phase II) in Kota Kinabalu, Sabah. (Source: Bursa Malaysia)

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Maybank IB Views

Multi-Purpose Holdings RM2.77: Buy
Buy now or forever hold your piece

Great long term play. We initiate coverage on Multi-Purpose Holdings (MPHB) with a Buy call and RM3.60 TP (10% discount to RM4.00 SOP/sh). Its current share price reflects only Magnum Corporation's value without any value ascribed to its other businesses. We expect 14% 3-year forward earnings CAGR with 100% ownership of Magnum Corporation. A major re-rating catalyst is the gradual disposal of non-core assets which could enable it to pay up to 44 sen in special DPS and 20 sen in recurring net DPS, offering a whopping 7% net yield.

RESULTS REVIEW
AMMB Holdings RM6.48: Buy
Treasury gains support momentum

Maintain Buy. While 1QFY12 results were slightly above expectations our forecasts are lowered marginally. AMMB remains a Buy for: (i) its decent valuations, (ii) its ongoing portfolio rebalancing, (iii) ongoing investment in business line expansion under ANZ, and (iv) its position as a beneficiary of the Economic Transformation Programme. Our target price is trimmed to RM7.40 (-10sen) on an unchanged FY13 P/B target of 1.8x (ROE: 14.3%), which we believe is reflective of fundamentals.

Technicals
The FBM KLCI rose 16.07 points to close at 1,499.74 yesterday. Its resistance areas of 1,501 and 1,530 will cap market gains, whilst the obvious support areas are located at 1,454 and 1,499.Due to the US markets’ rebound last night; we will see some volatile trading activities in the local bourse today. Some heavy profit-taking and liquidation activities will emerge later to depress the markets’ rebound from its opening “gap up” move.

Trading idea is a Short-Term Buy call on BRDB

Other Local News
Sunway: No plans to postpone listing. The listing of Sunway Bhd, the merged entity of Sunway Holdings Bhd and Sunway City Bhd, will proceed as planned despite recent turbulence in the stock market. The shares of Sunway Bhd are scheduled to be floated on Bursa Malaysia on August 23 and expected to have a market capitalisation of over RM3.5b. (Source: Business Times)

AirAsia: New AirAsia Philippines vows to be 'substantially' cheaper. AirAsia launched a new affiliate in the Philippines yesterday, promising to undercut its rivals on regional and domestic routes. To minimise costs and avoid Manila's crowded terminals, AirAsia Philippines will fly out of a former US air base that had been turned into an industrial zone in Clark about 90 minutes' drive north of the country's capital. (Source: The Star)

MAHB: In talks with BA and Qantas on using KLIA. Malaysia Airports Holdings Bhd (MAHB) is still in talks with British Airways and Qantas Airways on the possibility of both airlines mounting flights to KL International Airport (KLIA), a decade after these airlines suspended flights to KLIA owing to a lack of network connectivity here. Both airlines were considering the possibility of flying into KLIA, following Malaysia Airlines (MAS) joining the Oneworld alliance. (Source: The Star)

Parkson: Hires HSBC for Singapore listing. Parkson Holdings is spinning its retail operations in Malaysia, Indonesia, Vietnam and Cambodia in a separate listing in Singapore soon. HSBC has been hired to apply for the corporate exercise and the Singapore's listing. (Source: The Sun)

Dijaya: JV plans property development with GDV RM2.8b. Dijaya Corp Bhd’s joint venture with Iskandar Waterfront Sdn Bhd, Magical Heights Sdn Bhd (MHSB), plans to undertake property projects near Johor Baru with a gross development value (GDV) of RM2.8b. The projects would be built on two pieces of land which MHSB has proposed to acquire from Trident World Sdn Bhd for RM220m. Dijaya and Iskandar Waterfront Sdn Bhd each has a 50% stake in MHSB. (Source: Bursa Malaysia)

Iskandar: Gets RM95b pledges. Iskandar Malaysia attracted about RM95b in committed investments from January to June 2011. This was more than double the cumulative RM47b target for the five years up to 2010. From 2011 to 2015, Iskandar Malaysia is targeted to achieve RM73b in investments. (Source: The Star)

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Maybank IB Views

Construction: Overweight
MRT: Pro-gressing

Positive developments. Prasanara's release of the names of 28 companies shortlisted for the mass rapid transit (MRT), Sg Buloh-Kajang line elevated works portion is a positive move in buidling investors' confidence on the government's commitment in moving the project forward. The names are not totally new to us, except perhaps for the not listed ones. First works are expected in early-2012, we estimate. We maintain our Overweight call on the sector.

RESULTS REVIEW
Sunway REIT RM1.07: Buy
Short-term pain, long-term gain

Maintain Buy. SunREIT's RM167.3m FY11 core net profit came in within expectations. 6.6sen FY11 DPU was also in line. We do not expect significant contributions from the newly-acquired Sunway Putra Place (SPP) over the short-term as it would likely take 1-2 years for renovation works. We maintain our FY12-13 earnings forecasts and introduce FY14 estimates. Target price is RM1.18 (+3 sen) as we roll over our base year to 2012.

MBM Resources RM2.97: Hold
Less sanguine over outlook Shariah-compliant

The effect of the global supply chain disruption kicks in. 1H results are tracking expectation (47% of full-year forecast) on the back of a softer QoQ performance. Vehicle sales and earnings in 2Q, as forewarned, were affected by the global supply chain disruption post the Japan’s 11 March earthquake and tsunami. Going forward, we opine that this issue will continue to have an adverse effect on MBM's 2H performance. Maintain Hold with a RM3.10 target price.

Notion VTEC RM1.95: Buy
Earnings on track Shariah-compliant

Results in line. 9MFY11 net profit of RM34m (+17% YoY) made up 71% and 76% of our and consensus full-year forecast. We maintain our Buy call as valuation is inexpensive at 4.1x CY12 PER, backed by a solid growth trend (38% 2-year net profit CAGR). Our RM2.40 TP pegs NVB on 4.5x FY11 EV/EBITDA, reflecting regional peers' (ex-Japan) valuations. Our TP also indicates an undemanding forward PER of 5.1x, significantly below the 8x average for our small-cap universe.

Technicals
The FBM KLCI fell 4.06 points to close at 1,476.46 yesterday. Its resistance areas of 1,479 and 1,530 will cap market gains, whilst the obvious support areas are located at 1,423 and 1,475.

Trading Idea is YTLCMT

Other Local News
Construction: 28 firms shortlisted for MRT jobs. Syarikat Prasarana Negara Bhd has shortlisted 28 individual and joint-venture (JV) companies that are eligible to bid for various elevated civil works, stations and depot packages for its My Rapid Transit (MRT) project. Among the companies in the list are larger local players like IJM Construction Sdn Bhd, Ahmad Zaki Sdn Bhd, Sunway Construction Sdn Bhd and WCT Bhd. (Source: The Malaysian Reserve)

Aviation: Up to RM1.2b cost savings for MAS and AirAsia. The collaboration forged between Malaysia Airlines (MAS) and AirAsia Bhd on Tuesday can turn in up to RM1.2b in cost savings for both the airlines, said MAS newly appointed executive director Mohammed Rashdan Mohd Yusof. (Source: The Star)

MAHB: Board revamp at MAHB? A revamp of the boardroom of Malaysia Airports Holdings Bhd (MAHB) is next after the airline industry in Malaysia. Changes are afoot at MAHB but it would be more gradual than the wholesale changes seen at MAS. The idea behind the move to make changes to the board of MAHB is to infuse new blood and realign the interest of the shareholders by bringing people from diverse backgrounds and disciplines. (Source: The Star)

Bumi Armada: Signs FPSO contract. Bumi Armada Berhad’s jointly-controlled entity, Forbes Bumi Armada Offshore Limited (FBAOL) has signed a Floating Production, Storage and Offloading (FPSO) contract with Oil and Natural Gas Corporation Limited (ONGC) following the letter of award secured from ONGC referred to in the Prospectus of Bumi Armada. (Source: Bursa Malaysia)

Alam Maritim: Bags RM20m jobs. Alam Maritim Resources Berhad has clinched two offshore vessel leasing contracts from Petronas Carigali Sdn Bhd worth RM20m. The contract is for a duration of 138 days, with a maximum extension option of 30 days. (Source: Bursa Malaysia)

Catcha: Amends terms with Microsoft. Catcha Media Bhd announced substantial amendments to its strategic collaboration with US-based Microsoft. Changes in terms of the collaboration had prompted the company to reduce its four-year commercial target of up to RM90m for its online media operations by some 28% or RM25m. (Source: The Edge Financial Daily)

Sarawak Cable targets RM1b projects. Sarawak Cable Bhd (SCB) is pursuing potential projects worth more than RM1b and is looking to expand overseas, starting with Brunei and Kalimantan this year, followed by the Philippines. (Source: The Edge Financial Daily)

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Maybank IB Views

Plantation: Neutral
Short term fundamentals improved

Maintain Neutral, for now. Amidst the financial chaos in the past week which led to a 6% correction in CPO price to below RM3,000/t (3M Futures), we expect some short term relief as fundamentals improved on lower July inventory, rising exports over 1-10 Aug period, and lower production productivity during the fasting month. US' pledge to maintain interest rate at near-zero through mid-2013 would help to support commodity prices, CPO price inclusive. But do expect short term price volatility. Maintain Neutral on the sector. Our top Buys are SOP and TSH which offer single-digit valuations (for SOP) and strong +16 to +20% 3-year forward production CAGR.

RESULTS PREVIEW
Petronas Chemicals RM6.19: Buy
Maintenance shutdowns dampener Shariah-compliant

2Q11 will be beset by maintenance shutdowns. PCHEM is expected to release its 2Q11 results on 24 August. 2Q will be bogged down by major maintenance shutdowns and nationwide gas curtailment during the period. Product volumes will be lower but fortunately the higher product margin will help to offset this. Maintain Buy, with an unchanged TP of RM8.15 based on 13.5x 2012 PER, in line with global peers.

ECONOMICS
Industrial Production Index (IPI), Jun '11
Rebound after two months of declines

Industrial production index (IPI) rebounded in June '11 after two months of declines i.e. +1.0% YoY (revised May '11: -5.6% YoY) and +3.5% MoM (revised May '11: -1.4% MoM). Manufacturing output growth gained momentum as the Japan supply-chain effect diminished, but mining production - especially crude oil - remained a drag. Industrial output however shrank -1.6% YoY in 2Q 2011 (1Q 2011: +2.4% YoY) and -1.6% QoQ (1Q 2011: -0.3% QoQ), implying further deceleration in GDP growth. Our 2011-year real GDP growth forecast was revised downward to +5.1% at the start of 2H 2011 versus +5.5% at the start of the year. Our imputed 2Q 2011 growth was correspondingly trimmed to +3.9% YoY from +4.7% YoY. 2Q01 real GDP data will be out on 17 Aug.

Technicals
The FBM KLCI rose 8.38 points to close at 1,480.52 yesterday. Its resistance areas of 1,480 and 1,530 will cap market gains, whilst the weaker support areas are located at 1,423 and 1,472.Due to the US markets’ plunge last night; we will see some volatile trading activities in the local bourse today. Some heavy profit-taking and liquidation activities on any rebound.

Trading idea is AIRASIA.

Other Local News
Mah Sing: To buy potential lands yielding RM7b GDV. Mah Sing Group Bhd is targeting land acquisitions which could potentially yield RM5b to RM7b in gross development value (GDV) compared to 10 landbanking transactions in 2010 with combined GDV of approximately RM4b. (Source: The Malaysian Reserve)

AirAsia: AirAsia X picks IPO adviser. AirAsia X has chosen Morgan Stanley as its adviser for its proposed initial public offering (IPO) for which listing plans, targeted for next year, were underway. Khazanah Nasional Bhd's proposed plan to take up a 10% stake in AirAsia X would be executed "very quickly" with issuance of new shares in AirAsia X. (Source: The Star)

Maxis: Partners Alcatel-Lucent to deploy first 100G core transmission network in Asia Pacific. Maxis Bhd, with Alcatel-Lucent as a strategic supplier, will be deploying the first 100G single carrier with optical coherent energy network solution commercially deployed in the Asia Pacific. With that, Maxis will be able to address growing bandwidth requirements and data usage driven by smartphones, tablets, modems and fiber-to-the-premises services. (Source: Bernama.com)

Aviation: Airport tax hike. Malaysian Airports Holdings Bhd (MAHB) is raising tax to cover rising operating costs and finance airport expansion. The airport operator has proposed that the tax at the country's 39 airports it manages, excluding low cost carrier terminals (LCCT), be raised by RM14 for international travelers from Sept 15. The travelers will have to pay RM65 from RM51 (RM45 for airport tax and RM6 for security charge) now. (Source: The Sun)

Plantation: Planters see minimal impact by pay rise. The cost of production (COP) and profit margins among oil palm plantation companies will be minimally affected by the Malayan Agricultural Producers Association's (MAPA) decision to increase the wages of some 157,270 general plantation workers nationwide. (Source: The Star)

Construction: RM2b cable car link. The country's first proposed mainland-to-island cable car will be built in Port Dickson as part of the RM2b PD Waterfront project. The cable car project, spanning 750m, will link the new PD Waterfront township with Pulau Arang, an uninhabited island to boost tourism. (Source: The Star)

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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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Stocks to watch: IOI Corp, UOA REIT, MAHB, SP Setia

KUALA LUMPUR: Stocks on Bursa Malaysia may see more downside pressure in the week ahead, starting July 18 due to external headwinds, mainly from the US.

On Wall Street, US stocks ended the week lower. For the week, the S&P 500 ended down 2.1%, while the Dow lost 1.4% and the Nasdaq fell 2.5%.

Mounting uncertainty about the government's ability to reach a debt-reduction deal may keep investors at bay in the coming week, Reuters reported.

Next week's U.S. data including the Philadelphia Fed survey would provide a crucial update on the state of the world's biggest economy after a disappointing set of data in recent weeks, especially last week's monthly jobs report, it said.

At Bursa Malaysia, the FBM KLCI fell 17.49 points to 1,577.25 from the week before while the marker capitalisation was reduced by RM14.07 billion to RM1.342 trillion.

Year-to-date, the KLCI is up 3.84%, making it the fifth best performing market in the key regional markets. At 1,577, the KLCI is trading at a trailing price-to-earnings of 16.82 times.

Two companies which are due to be listed in the week ahead are Inarai Bhd and Catcha Media Bhd.

Inari Bhd posted net profit RM2.6 million for the third quarter ended March 31, 2011 on the back of revenue RM35.8 million. For the nine months ended March 31, the company’s net profit was RM14.7 million on the back of revenue RM77 million.

Catcha Media reported that in the first quarter ended March 31, 2011, it recorded revenue and pre-tax profit of about RM5.728 million and about RM12,000 respectively.

It said the pre-tax profit was mainly due to the lower revenue achieved in the current quarter as a result of the seasonality associated with media business, significant increase in headcounts and associated payroll expenses in both publishing and online media business in anticipation of the growth of revenue in the future as well as the listing expenses incurred in the current quarter under review.

Stocks to watch on Monday include IOI Corp Bhd. UOA Real Estate Investment Trust (UOA REIT), Malaysia Airports Holdings Bhd (MAHB) and SP SETIA BHD [].

The Edge weekly reports executive chairman Tan Sri Lee Shin Cheng as saying that going by its present growth rate, the company's property business could grow to three times its present size and become a distinct and substantial core business for the group.

UOA REIT’s net profit rose 62% to RM10.68 million in the second quarter ended June 30, 2011, from RM6.59 million a year ago.

Its revenue increased by 88% to RM20.28 million from RM10.78 million. Earnings per share were 2.53 sen compared with 2.68 sen.

MAHB’s decision not to install aerobridges at the new Low Cost Carrier Terminal, or KLIA 2, will save the company up to RM104 million.

Its chairman Tan Sri Aris Othman said the amount was for 80 aerobridges, costing RM1.3 million each. Although aerobridges could provide convenience, it would be a waste if airlines would not use it.

SP Setia share price closed 12 sen lower to RM3.89 on Friday after hitting an intra-day low of RM3.84 the lowest since early March as analysts downgraded it to underperform.

CLSA Asia-Pacific Research had downgraded SP Setia to Underperform from Outperform with a revised target price of RM4.30, based on a 10% discount to RNAV of RM4.80. It said this was in line with the discount applied to other property names under its coverage.

“Given that SP Setia is a pure property developer play, we believe that the 10% discount is justified from zero discount previously. We do not see any compelling reason for SP Setia to be valued at a premium compared to the rest of the property companies given that the visibility of the physical property market has been reduced by the mixed signals,” it said.

However, CLSA said it did not change its earnings estimates for FY11 and FY12 as these will continue to be supported by the strong unbilled sales recorded at RM1.8billion as at FY10, which had subsequently increased to RM3billion as at H111.

“For FY13 earnings estimates, we see potential downside risk if the mixed signals above tilted towards more negative outlook. Another potential headwind could be the change in government policy in tightening the lending requirement, which at this stage, still unclear as it remains at the proposal stage,” it said.

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Maybank IB Views

Construction & Property: Overweight
First MY Rapid Line (MRT) launched

Overweight Construction. Prime Minister Najib's launch of the Sg Buloh-Kajang (SBK) mass rapid transit (MRT) line last Friday cement scepticisms on the execution of the country's largest infrastructure project, which forms a critical component of the Greater KL/KV National Key Economic Area (NKEA) under the Economic Transformation Programme (ETP). We expect full construction works to start next year. We remain Overweight on the sector with Gamuda as our top pick.

COMPANY UPDATE

Malaysia Airports Holdings RM6.50: Buy
Airports still flying high

Thriving under adversity. MAHB's May 2011 traffic statistics reveal a strong 14.6% YoY passenger growth (5M 2011: +13.3% YoY). This is way ahead than regional and global growth rates which underpins our positive stance for MAHB. Cargo volumes shrunk by 7.1% YoY (5M 2011: -2.6% YoY) due to the severe downturn of the electrical & electronics industry in Malaysia. Maintain Buy; no change to our earnings forecasts and RM7.12/share DCF-based target price.

Technicals
The FBM KLCI gained 11.80-points and closed at 1,594.74 last Friday. The local market remained quite firm on a firm global market tone. Despite BNM’s MPC meeting SRR interest rate rise from 3% to 4% last Thursday, the market rose further. The firm support areas for the FBM KLCI are located in the 1,576 to 1,594-zone. The next resistance level of 1,595 may see token selling activities.

Trading Idea is a Short-Term Buy on AFG

Other Local News
Latexx: Due diligence on YTY almost over. Latexx Partners Bhd is poised to complete a due diligence on YTY Industry Holdings Sdn Bhd by as early as next month. Latexx is proposing to take over YTY for RM1.25b by paying 30% in cash, with the balance of the assets being swapped for Latexx shares. (Source: Business Times)

Ivory: Surges on hope of land award. Ivory Properties Group Bhd's share price has surged on anticipation that the Penang state government will decide this week if it is to award the company the rights to help develop 40ha of land in Bayan Mutiara. (Source: Business Times)

Dijaya: TAEL One buys more shares. TAEL One Partners Lts, a Cayman Islands-incorporated private equity firm, has raised its stake in Dijaya Corp Bhd to 7.25% after acquiring another 10.3m shares last Friday. (Source: The Sun)

Media: Catcha Media sees a big catch in online advertising. Catcha Media Bhd, one of the country's largest new media companies, is planning to launch websites for all its magazines as part of its plan to grow online advertising business. The company operates all of Microsoft's online properties in Malaysia, including the MSN portal, and has exclusive sales rights for leading Malaysian website Lowyat.net. It also publishes 14 magazines such as Clive, HomePride, Juice, Mint, Stuff and Prestige, among others. (Source: Business Times)

O&G: OM to build RM210m plant in Q4. OM Holdings Ltd (OMH) expects to start construction of its proposed USD70m (RM210m) manganese smelting and sintering plant in Tanjung Langsat Industrial Complex, Johor Baru in the fourth quarter this year. The Australian public-listed company said land clearing works for the project site is now carried out by Johor Corp. (Source: The Star)

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Maybank IB Views

SECTOR UPDATE
Media: Neutral
May 2011 adex: Growth momentum slows

Slowing down. While May 2011 total gross adex was up 10% YoY, it was below expectations as it was only up 4% MoM when we expected it to be 10% to 15% higher MoM. This was likely due to weakening consumer sentiment dealt by inflation which will only be aggravated going forward by the recent 7% electricity tariff hike. Furthermore, total gross adex growth YoY will decelerate in 2H11 due to the high base effect of 2H10. Only Media Prima remains a Buy.

COMPANY UPDATE
Petronas Chemicals Group RM7.08: Buy
Retracement, but largely expected Shariah-compliant

Beset by headwinds. PCHEM's product margin in May 2011 was USD1,222/ton (+42.1% YoY, -1.7% MoM), we estimate. The year-to-date product margin of USD1,157/ton is 25.8% higher YoY. Product prices are retracing from a super run over the past three months. This is largely expected, and we are unperturbed as our 2011 earnings forecast is based on a realistic USD1,027/ton. Maintain BUY with an unchanged target price of RM8.15/share.

Technicals
The FBM KLCI closed higher by 1.60 points at 1,560.79 yesterday. Its resistance areas of 1,562 and 1,576 will cap market gains, whilst the obvious support areas are located at 1,540 and 1,560. Due to the US markets’ rebound tone last night, we will see some initial low volume buying activities in the local bourse today.

Trading idea for today is a Take Profit call on TIMECOM.

Other Local News

MAHB: Secures Eurocopter as anchor tenant of Subang airport. Eurocopter Malaysia Sdn Bhd has signed the 30-year lease with an option for an additional 30years. Eurocopter is looking to build a maintenance, repair and overhaul (MRO) services facility on a 7,000 sq m plot of land in the MAHB helicopter centre in Subang. (Source: The Edge Daily)

MAS: Orders 10 more 737-800s. Malaysia Airlines (MAS) has exercised an option to buy 10 Boeing 737-800s valued at some USD800m (RM2.4b) at curret list prices. MAS still has purchase rights for an additional 10 737-800s remaining from its initial 2008 contract. (Source: The Sun)

Auto: Car sales impacted by amended Act. Stakeholders in the automotive sector say the recent amendments to the Hire-Purchase Act 1967 (HPA) will hurt the car retail trade. Some said the amended Act is confusing and overly protected consumers to the detriment of car retailers. (Source: The Star)

Mining: Vale turns focus to Malaysia. Vale SA has forgone plans to build a distribution centre in China and will focus on making Malaysia its main hub for Asian sales. Vale is investing USD1.37b (RM4.16b) to set up a maritime terminal in Malaysia with capacity to dock its Valemax vessels and handle up to 30m tonnes of iron ore a year starting in the first half of 2014. (Source: Business Times)

Read more...

Maybank IB Views

COMPANY UPDATE
Malaysia Airports Holdings RM6.53: Buy

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

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

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

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

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

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

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

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

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

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

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

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

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

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RHBInvest Research

Top Story: Earnings Review / Strategy – More earnings downgrades; rising risk aversion

Market Update
The 1Q report card continued to be below our expectation as there were more companies reporting results that were below our projections compared with those that exceeded forecasts. Of the 111 companies that we cover, 62 of the results (55.9% of the total) were within our expectations, 33 below projections (29.7% of the total) and 16 above forecasts (14.4% of the total).

Sector Call
Banking: Apr ‘11 system data – Leading indicators moderated but loan growth resilient Overweight

Sector Update
Apr ’11 system-wide loan growth gathered further pace, growing 13.5% yoy as compared to +13.2% yoy achieved in Mar ’11. Similar with the previous month, this was mainly due to stronger loan growth to businesses (+14% yoy) while household loans outstanding continued to grow at a rather steady pace of 13.2% yoy.

Corporate Highlights

Affin: Keeping faith Outperform

Briefing Note
While 1Q11 headline net profit appears weak, management was keen to stress that the results were not representative of the full-year as 1Q tends to be a seasonally slower quarter coupled with the one-off RM40m litigation loss. As such, there was no change to the full-year targets.

MNRB: FY03/11 Earnings Up On Better Claims Experience Outperform

Results/Briefing Note
MNRB’s full year net profit of RM124m (+172% yoy) was above our expectations, accounting for 118% of our forecast. The main variance was the lower-than-expected claims ratio of 59.4% for its Malaysian Reinsurance division, compared to our projected 63% for FY03/11.
MAHB – Net profit up 21% yoy; land development in the works Outperform

Results/Briefing Note
MAHB’s 1QFY11 net profit came in at 21.7% of our full-year forecast. We consider the results to be within expectations as we expect a stronger 2H on the back of the year-end peak period for air travel.

Maxis: A slow start Market Perform

Results / Briefing Note
Maxis’s 1Q core net profit of RM2.29bn (-0.9% yoy; -7.7% qoq) was within expectations.
Management’s new tighter subscriber definition resulted in to better reflect its actual revenue generating base resulted in its overall subscriber base “contracting” by 1.2m to 12.7m.

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Maybank IB Views

Sunway Holdings RM2.57: Hold
Results as expected; merger completion next Shariah-compliant

Tactical downgrade to Hold. Results were in line. RM31m 1Q11 core net profit (-13% YoY, -42% QoQ) made up 19% of our full year estimate. We maintain our 2011-12 earnings forecasts. The merger with SunCity is into its final stage with shareholders to vote on 15 Jun. An enlarged entity under the new Sunway Bhd is expected to be listed in 3Q11. With the share price closing in to the implied take-over price (+14.7% YTD), we downgrade the stock to Hold.
Maxis RM5.42: Hold
A seasonally slower quarter Shariah-compliant

Hold maintained. RM540m net profit was down 2% YoY and 12% QoQ. With 1Q11 being a seasonally slower quarter, net profit was within expectation at 22% of our full-year forecast and our numbers are maintained. Guidance remains for margins to come under further pressure with the roll-out of new wireless/fixed broadband services. Dividend yields aside, we see little share price catalyst and maintain our Hold call on the stock. Our DCF-derived TP of RM5.50 is maintained on WACC of 7.5% and 1% terminal growth assumptions.
Axiata Group RM5.00: Buy
Stable growth in regional ops Shariah-compliant

Buy call maintained. Some weakness from Dialog and Robi during the quarter but positively, Celcom continues to register stable earnings growth while XL continues to fare well despite aggressive price competition. Overall, nevertheless, Axiata’s regional operations continue to fare well and remain very much cash generating entities with growth potential. Our Buy call is maintained with an unchanged SOP-based target price of RM5.60.
Malaysia Airports Holdings RM6.37: Buy
Jumpstart to 2011

Within expectation. 1Q11 core net profit number reveals a healthy business that is flourishing on the back of strong traffic numbers and healthy retail business. We look forward to a promising 2011 as air travel momentum remains strong in the Asia Pacific region. Maintain Buy, with an unchanged target price of RM7.12/share DCF-based.

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Maybank IB Views

IJM Corporation RM6.20: Hold
Kitchen sinking, losses in 4Q Shariah-compliant

Maintain Hold. 4QFY11 fell into a loss due to provisions and project losses at the construction business. Totalling RM124m, the amount was much larger than the anticipated RM70m. Nonetheless, we retain our FY12-13 earnings forecasts, expecting these to be one-off. Share price has stay flat (-0.1%) since we downgraded the stock on 24 Feb. It could remain there for a while as the market digests the poor 4Q results, while upcoming RM5b potential contract flows from the WCE and NPE extension have been partially priced in. No change to our RM6.50 RNAV-based TP for now, which implies 20x CY2012 PER.

Alam Maritim Resources RM1.05: Sell
Still a struggle Shariah-compliant

Results were below expectations. Alam suffered its third consecutive quarterly loss, with a RM7m net loss in 1Q11. We cut 2011 forecast by 18% but place our recommendation and RM0.79 (1x book) target price under review pending an update with management. We think the worst is over for the domestic vessel charter industry, which would trigger a re-rating for the vessel operators.

Amanah Raya REIT RM0.95: Buy
On track; new assets boosted earnings

Maintain Buy. AAREIT's RM10.9m 1Q11 net profit (+29% YoY) came in within expectations. 1Q DPU of 1.8 sen (95% payout) was also in line. We like AAREIT for its good 8.7% 2012 yield (compared to 8.1% M-REIT sector). In our view, the yield is sustainable as the majority of AAREIT's leases are long-term with step-up features. We maintain our earnings forecasts and RM1.12 DCF-based TP.

Technicals
The FBM KLCI gained 7.75 points to close at 1,548.69 on Friday. Its resistance areas of 1,550 and 1,565 will cap market gains, whilst the obvious support areas are located at 1,527 and 1,548. We expect the FBM KLCI to remain range bound today.

Weekly trading idea is a Short-Term Buy on ESSO.

Other Local News
MAHB: Strong interest to jointly develop 50 acres near KLIA2. Twenty companies have collected request for proposal (RFP) documents to partner Malaysia Airports Holdings Bhd (MAHB) to develop 50 acres near KLIA2 in Sepang. The RFP is for the privatisation of the 50-acre commercial development that would comprise premium factory outlets centre, a food and beverage centre and an auto city. (Source: The Star)

Bina Puri: Bids for RM400m Negri job. Bina Puri Holdings Bhd has bid for a contract worth over RM400m for associated civil works to extend a 1,000MW power plant in Negri Sembilan with Japan's Mitsui & Co. (Source: Business Times)

Property: UOA's final retail price fixed at RM2.52. UOA Development Bhd’s institutional price has been fixed at RM2.60 per share while the retail price is RM2.52 per share, which was below the indicative retail price of RM2.90. (Source: The Edge Financial Weekly)

Stockbroking: More licences for foreign stockbroker. Securities Commission Malaysia is offering two new licences to foreign stockbroking houses, specifically for the retail side of the business. Singapore based Phillip Securities Pte Ltd is one of the investment firms eyeing the licence. (Source: The Edge Financial Weekly)

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Stocks to watch: SEGi, Cepco, EON Cap, Priceworth

KUALA LUMPUR: Stocks which could see trading interest on Friday, April 29 following the fresh corporate developments are SEG INTERNATIONAL BHD, CONCRETE ENGINEERING PRODUCTS Bhd (CEPCO), EON CAPITAL BHD and Priceworth International Bhd.

SEGi net profit for the first quarter ended March 31, 2011 surged 90.5% to RM18.12 million from RM9.51 million a year ago due to the increase in student enrolments at its institutions.

Revenue for the quarter rose to RM68.47 million from RM52.29 million in 2010. Earnings per share were 7.35 sen, while net asset per share was 77.2 sen.

It recorded marked improvement in student numbers and profitability in the previous year and the current quarter.

“This trend is expected to continue in 2011 and the foreseeable future as the group has put in place a firm foundation and strategy for sustainable growth,” it said.

CEPCO swung into the red with net losses of RM5.95 million in the second quarter ended Feb 28, 2011.

Revenue slipped 16% to RM24.69 million from RM29.38 million while its loss per share was 13.31 sen compared with earnings per share of 4.37 sen.

For the first half, it reported net loss of RM205,000 compared with net profit of RM7.74 million in the previous corresponding period. Revenue shrank to RM45.26 million from RM66.95 million.

The High Court has dismissed with costs the suit filed by Primus (M) Sdn Bhd against certain shareholders and directors of EON Capital Bhd EONCap) over the proposed sale of the latter to HONG LEONG BANK BHD [].

The decision was made by Judge Varghese George Varughese on Thursday, April 28.

Priceworth International Bhd’s 86.85 million warrants at an issue price of 5.0 sen per warrant will be listed and quoted on Friday, April 29.

A Bursa Malaysia circular said on Thursday the warrants were issued on the basis of one warrant for every two shares of 50 sen each.

Malaysia Airports Holdings Bhd (MAHB) is revising its passenger traffic volume target to 72 million for 2014, from 60 million earlier under its five-year plan.

Managing director Tan Sri Bashir Ahmad Abdul Majid said passenger growth at KLIA has been very promising and it should be able to hit its initial 60 million passengers target by 2011.

“The growth so far as been good as indicated by the traffic in the first three months of the year. We are definitely on track,” he said.

Under the five-year plan, MAHB is also targeting to achieve an earnings before interest, tax, depreciation and amortisation and returns on equity of RM1 billion and 10% respectively under its five-year plan that expires in 2014.

Read more...

Maybank IB Views

ECONOMICS
Economic Transformation Programme (ETP)
Update #5...

12 more projects, initiatives and enablers with RM11.16b investment commitments under eight Entry Point Projects (EPPs) in seven National Key Economic Areas (NKEAs). They are to generate RM16.62b in gross national income (GNI) and 74,457 new jobs. The biggest project in this round of announcement is the Karambunai Integrated Resort City (KIRC) under Tourism NKEA with investment value of RM9.6b (86% of total) generating RM9.319b GNI (56% of total) and 11,002 jobs (14.8% of total) by 2020. To date, 41.2% of EPPs, 13.4% of the total EPP investments, 14.3% of the targeted incremental GNI and 9.1% of expected new jobs creations have been confirmed.

RESULTS REVIEW
Bursa Malaysia RM7.93: Sell
Boosted by robust market

Above house forecast. RM40.5m 1Q11 net profit (+44% YoY, +36% QoQ) made up 30% of our full year forecast, and 26% of consensus. No change to our earnings forecasts, expecting market activities to taper off in 2Q11. Maintain Sell; the stock remains overvalued trading on 31x current year earnings, significantly above its larger sized peers and recent M&A valuations. Our target price is based on sum-of-parts, with 25x PER target on 2011 earnings plus surplus cash.

SECTOR UPDATE
Automotive: Neutral
Marvelous March; anxiety ahead

From content to concern. Mar 2011 auto sales was abnormally strong, a one-off event, in our view. Looking ahead, Malaysia's car production is expected to soften in the months ahead, affected by the supply chain disruption in Japan. The auto sector remains a Neutral. The longer term operating landscape lacks catalyst and remains close-ended, deterring foreign automakers from making Malaysia a regional hub. Stock-wise, share price is expected to trade sideways. MBM and Tan Chong remains a Buy while Proton and UMW are Holds.

Technicals
The FBM KLCI declined 6.39 points to close at 1,521.53 yesterday. Its resistance areas of 1,521 and 1,540 will cap market gains, whilst the weaker support areas are located at 1,500 and 1,514.
Trading idea for today is a Buy call on SBCCORP.

Other Local News
MAHB: North Korea's Air Koryo makes maiden landing at KLIA. North Korea national airline Air Koryo made its maiden landing at KL International Airport (KLIA) on Monday and will start a twice-weekly service to Kuala Lumpur from Pyongyang on April 18. (Source: The Star)

BAT: Expects to double exports this year. British American Tobacco (Malaysia) Bhd (BAT) expects to double exports this year, a move that will give it a small revenue boost amid tougher sales at home. It may also sell some machinery it no longer needs, valued at between RM18m and RM20m. (Source: Business times)

Berjaya: Confirms Kim Eng approach. Berjaya Corp Bhd confirmed that Kim Eng Holdings Ltd has approached it about the possibility of buying all of Inter-Pacific Securities Sdn Bhd. (Source: Bursa Malaysia)

Smartag: Gets role in Customs project. Smartag Solutions Bhd said it was named to be part of a government project to provide security and trade facilitation system for the Royal Malaysian Customs at its checkpoints throughout the country. (Source: Business times)

E&U: SEB to buy 30% of Bakun Dam for RM1.3b? Sarawak Energy Bhd (SEB), the state utility company, is believed to have proposed to acquire a 30% stake in the Bakun Hydroelectric Power project for RM1.3b cash. SEB is valuing Bakun Dam project at RM6b which is below the RM8b expected by Sarawak Hidro Sdn Bhd. (Source: The Star)

O&G: Petronas exits Cairn India. Petroliam Nasional Bhd (Petronas) has sold its entire 14.9% in Cairn India Ltd for USD2.1b (RM6.4b). (Source: Business times)

Steel: Starshine plans to list on Ace Market by Q3. Steel products player Starshine Holdings Bhd (SHB) is planning a listing on Bursa Malaysia's Ace Market by the third quarter of the year. It will invest RM32m in a new plant in Klang and new machinery to broaden its product offering. (Source: The Star)

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Maybank IB Views

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

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

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

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

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

Trading idea for today is a Buy call on BENALEC.

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

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

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

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

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

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

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Maybank IB Views

Banking: Overweight
Loan growth slows in February

Loan growth assumptions maintained. While there is some tapering off in loan growth in Feb, this may be attributed in large part to lumpy loans in Jan. The moderation in household loan demand, meanwhile, was as expected. We maintain our system loan growth forecast of 11.5% for 2011 (12.8% in 2010), with expectation that non-household loans will grow at a faster clip of 12.7% (12.3% in 2010) to supplant a moderation in household loan growth (10.5% in 2011 vs 13.2% in 2010). We maintain our Overweight on the banking sector with Buys on RHB Capital and CIMB.

COMMENTS ON NEWS
Sunway REIT RM1.06: Buy
Buys Putra Place at a discounted price

Maiden acquisition post-listing. SunREIT has confirmed the purchase of RM514m Putra Place (PP). Despite the discounted purchase price and potential enhancement opportunities offered by PP, we are neutral on the deal given our concerns on the office market and huge capex and considerable timeline required before PP contributes significantly. No change to our earnings forecasts and RM1.15 target price pending further details from the management.

COMPANY UPDATE
Petronas Chemicals Group RM7.24: Buy
Panic buying drives March higher Shariah-compliant

Supply disruption boost. PCHEM's product margin in Mac 2011 was USD1,204/ton (+40.4% YoY, +7.3% MoM), we estimate. The year-to-date product margin of USD1,106/ton is 28.5% higher YoY, and above our 2011 estimate of USD1,027/ton. The supply disruptions in Japan have triggered panic buying and pushed prices up. Maintain Buy; there is no change to our earnings forecasts and RM8.00 target price.

Lafarge Malayan Cement RM7.40: Buy
Here comes the ASP hike Shariah-compliant

Coal cost inflation proof. LMC will raise its gross cement ASP to RM318-320/mt (+6%) today to offset the coal cost increase and defend margins. Though there is no impact on our earnings forecasts, we think this would remove the overhang on share price, which has fallen 8% YTD on concerns over high coal costs. Currently trading at 14.8x 2012 PER, valuation is undemanding as Lafarge had traded up to 17x in the previous 2007 peak cycle. Maintain Buy; RM8.50 TP (17x 2012 PER).

RESULTS REVIEW
Glomac RM1.79: Buy
Beats consensus forecasts Shariah-compliant

Maintain Buy. Glomac's RM48m 9MFY11 net profit (+70% YoY) was within our expectation but beats consensus estimates by 10%. Glomac is on track to record "record" profits as 9MFY11 net profit has already exceeded FY10's RM41m. We see sales picking up significantly in 4QFY11 (9MFY11: RM206m), given strong bookings from its RM285m Glomac Damansara (GD) Residences. We maintain our forecasts and RM2.38 target price (20% discount to RM2.97 RNAV).

Technicals
The FBM KLCI rose by 13.50 points to 1,545.13 yesterday. Due to the DJIA’s marginally weaker tone last night, we will see the FBM KLCI in a benign mode today, with some pre-weekend profit-taking activities. Its resistance areas of 1,547 and 1,558 will cap market gains, whilst the obvious support areas are located at 1,528 and 1,545.

Trading idea for today is a Buy call on TASCO.

Other Local News
CIMB: In quick U-turn on BLR. CIMB Bank and CIMB Islamic Bank Bhd will not raise their respective base lending rate and base financing rate. The two banks back tracked on their decisions in less than 24 hours after having announced a rise in lending rates on Wednesday. (Source: The Edge Financial Daily)

Maybank: Sets price of DRP shares. Malayan Banking Bhd (Maybank) has fixed the issue price of new shares under its dividend reinvestment plan (DRP) at RM7.70 each. (Source: Bursa Malaysia)

MAHB: Expects RM1b revenue from commercial services. Malaysia Airports Holdings Bhd expects one third of its expected revenue of RM3b to originate from commercial services by 2014. (Source: The Edge Financial Daily)

Time Dotcom: In IPTV deal with Measat. Time Dotcom Bhd’s wholly-owned subsidiary, TT Dotcom Sdn Bhd (TTdC), has entered into a collaboration agreement with Measat Broadcast Network Systems Sdn Bhd (MBNS) to provide Internet Protocol television (IPTV) and broadband services across the Klang Valley and Penang. (Source: Bursa Malaysia)

Perisai: Explains its proposed Garuda Energy deal. Perisai revealed that with the acquisition of Garuda Energy, it would assume a debt of RM120m of the latter. (Source: Bursa Malaysia)

HELP: Sees potential in Sri Lanka and Cambodia. HELP International Corp Bhd (HIC) is looking to expand into Sri Lanka, Cambodia, the Middle East and Africa to franchise its education programmes as well as offer professional niche courses for business continuity to rev up its revenue stream. (Source: The Star)

O&G: MOX-Linde upbeat on M'sian ops. MOX-Linde Gases Sdn Bhd, a local subsidiary of the Germany-based industrial gas company The Linde Group, is set to invest further in the country. The company planned to set up two production facilities in Iskandar Malaysia. (Source: The Star)

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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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