RHBInvest Research

Top Story: QL Resources – Earnings to remain resilient, but valuations pricey Underperform

Visit Note

¨ QL’s new marine plant in Surabaya, which was completed in Mar 11, has begun commercial production of surimi and fishmeal in July and Aug 11 respectively with a total annual capacity of 5k mt p.a. each



Sector Call



Construction – 28 companies shortlisted for MRT jobs Overweight

Sector News Update

¨ Prasarana has shortlisted 28 companies for the bidding of 18 work packages comprising elevated civil works (8), stations (8) and depots (2), divided into categories of “open” (11) and “bumiputera” (7).

¨ It will call for the tenders for these packages in stages starting from Sep 2011 to Dec 2012, with the first two being the 5.4km Taman Bukit Ria – Plaza Phoenix stretch and the 5.2km Taman Suntex – Bandar Hussein Onn stretch.



Banks: Risk to earnings has increased Overweight (Under Review)

Sector Update

¨ Given heightened external risks and a weaker-than-expected global economic recovery, we had revised our real GDP growth forecasts to +4.3% for 2011 (from +4.8%) and +4.5% for 2012 (from +5.5%). Below is an extract from our recent strategy report “Rising Fears Of A Double Dip” dated 11 Aug.



Media: Adex growth to be weaker Underweight (down from N)

Sector Update

¨ Following our market strategy report yesterday (entitled Rising Fears Of A Double Dip), we are lowering our projected adex growth for 2011 to 9% (previously 10%) and 2012 to 9.5% (previously 11.5%).

¨ Accordingly, we have trimmed our FY11-13 earnings estimates for the media stocks by 2-10%, which have led to lower fair values for the media stocks under our coverage.



Corporate Highlights



MRCB: 1HFY12/11 net profit grows 84% yoy Trading Buy

2QFY11 Results / Briefing Note

¨ 1HFY12/11 net profit came in within expectations.

¨ To strengthen its case for the redevelopment of the 2,680-acre RRI land in Sungai Buloh, MRCB intends to soon secure a RM500m credit line/debt as well as a JV partner with a proven track record in building “award-winning townships”.



Sunway REIT: Dragged down by litigation costs Market Perform

4QFY11 Results

¨ 4QFY11 realised net profit of RM41.1m (-4.8% qoq) missed our estimate by 7.5%. Higher sequential revenue was offset by higher finance cost and legal expenses arising from the litigation of Sunway Putra Place of RM4.7m. A 1.62 sen DPU was declared during the quarter. Full year FY11 DPU amounted to 6.58 sen, slightly below our forecast of 6.8 sen.



MBM: Lacklustre 2Q11 Market Perform (down from OP)

2QFY11 Results

¨ MBM’s 2Q11 results were below our and street expectations. Net profit for the quarter of RM21.1m (-45.0% qoq and -45.3% yoy) brought cumulative 1H11 earnings to RM59.5m (-24.4% yoy) that reached just 42.3% of our previous 2011 estimate.

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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

MARKET STRATEGY
GLC divestments
Market friendly "strategic reforms"

Long-term positive. Prime Minister Najib yesterday unveiled six Strategic Reform Initiatives (SRI), being the core enablers to 12 existing National Key Economic Areas (NKEA) under the Economic Transformation Programme (ETP). Of particular interest to the equity market is the divestment and listing plan relating to government-linked companies (GLC) which, in our view, is positive in raising liquidity, the quality of listed companies and attractiveness of the Malaysian bourse.

ECONOMICS
Malaysia: Strategic Reform Initiatives
Another key ingredient the "change" recipe...

SRIs - a commitment to reforms… Prime Minister unveiled the Strategic Reform Initiatives (SRIs) on 5th July 2011 which serves as the enablers to boost the country's competitiveness, on top of complementing the twin transformation programmes i.e. Government Transformation Programme (GTP) and Economic Transformation Programme (ETP). Essentially, SRIs are the other half of ETP i.e. in addition to the 12 National Key Economic Areas (NKEAs).

External Trade, May 2011
Lower than expected export growth

Exports growth in May '11 came in below expectations as it moderated to +5.4% YoY (Apr '11: +11.1% YoY; Maybank IB: +9.0% YoY; Consensus: +11.0% YoY) while imports growth eased to +5.6% YoY (Apr '11: +9.4% YoY; Maybank IB: +5.3% YoY; Consensus: +8.6% YoY) bringing in a trade surplus of RM 8.5b. MoM, both exports and imported contracted by -4.7% and -0.4% respectively. Our forecast for 2011 is for exports to grow by +8.4% YoY (YTD May'11: +6.2%; 2010: +15.6%) and imports to gain by +10.8% YoY (YTD May'11: +10.3%; 2010: +21.7%) with a trade surplus of RM106.9b (YTDMay'11: +RM51.3b; 2010: +RM110.2b).

Technicals
The FBM KLCI closed lower by 0.50 points at 1,581.85 yesterday. Its resistance areas of 1,581 and 1,589 may cap market gains, whilst the firm support areas are located at 1,566 and 1,579.

Trading idea is a Short-Term Buy on LBS

Other Local News
MBM Resources: On expansion drive. MBM Resources Bhd plans to build several showrooms and service centres in Johor Baru, Perak and Penang by 2015 to expand its automotive business. The Johor Baru project will be completed in the next 12 months and will be similar to the company's showroom in Glenmarie, Shah Alam. (Source: Business Times)

MRCB: Unit gets KL land for 3 projects in Brickfields. Country Annexe Sdn Bhd (CASB), a 70% subsidiary of Malaysian Resources Corp Bhd (MRCB), will be given land in Kuala Lumpur with a potential RM1b gross development value, in consideration for undertaking three projects in the city's Brickfields area. The projects consist of Little India, Pines Bazaar and Ang Seng Development. (Source: The Star)

Guan Chong: To double capacity by 2Q12. Guan Chong Bhd plans to double the capacity at its Batam plant by 2Q12, which will boost its annual cocoa grinding capacity to 200,000t. It has fully sold for the entire 2011 due to rising demand for its cocoa ingredients of butter and powder. (Source: The Edge Financial Daily)

Yinson: Eyes RM800m worth of jobs. Yinson Holdings Bhd is set to bid for more contracts worth RM800m. It is currently bidding for FSO, PSV and AHTS jobs locally and abroad particularly in Vietnam. Yinson's current orderbook stands at RM1.2b. (Source: The Edge Financial Daily)

Plantation: Sarawak palm oil industry earmarked for major expansion.. Sarawak's plans to double the land earmarked for oil palm plantations to two million hectares will act as a key driver for the state's economic development. (Source: The Edge Financial Daily)

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RHBInvest Research

Top Story: Motor – The worst of the supply crunch is over Neutral

Sector Update

MBM Resources: Fair value raised to RM3.80 Outperform

Tan Chong: Fair value maintained at RM6.15 Outperform

Proton: Fair value raised RM3.55 Underperform

• Recent reports indicate that vehicle and component production in Japan has begun to normalise sooner than expected.
• We expect supply issues to continue affecting vehicle deliveries for another one to two months and believe the worst of the supply crunch is over.
• We expect supply issues to continue affecting vehicle deliveries for another one to two months and believe the worst of the supply crunch is over.
• Macro indicators remain supportive of domestic consumption and this bodes well for consumer discretionary spending going into 2012.

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Maybank IB Views

COMMENTS ON NEWS
CapitaMalls Malaysia Trust RM1.17: Buy
Buys shopping mall in Kuantan Shariah-compliant

A yield-enhancing acquisition. We are positive on CMMT's latest RM310m East Coast Mall acquisition given that it is yield accretive and attractive in pricing. More importantly, it would enhance our 2012-13 earnings forecasts by 10-11%. The purchase will be funded by a placement of up to 299m new units (est. RM332m proceeds assuming RM1.11 issue price). We maintain our forecasts and RM1.27 TP. Buy.

Technicals
The FBM KLCI gained 2.63 points and ended at 1,548.51 yesterday. Its resistance areas of 1,551 and 1,567 will cap market gains, whilst the obvious support areas are located at 1,530 and 1,548.Due to the US markets’ firm tone last night; we will see some initial low volume buying activities in the local bourse today. The market could possibly gap-up, with slim chances of follow-through buying.

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

Other Local News
TNB: Unit wins job in Pakistan. Tenaga Nasional Bhd's (TNB) unit TNB Repair and Maintenance Sdn Bhd (TNB Remaco) has secured an operation and maintenance agreement worth USD14.1m (RM43m) from Pakistan's Laraib Energy Ltd. Under the contract, TNB Remaco will provide services for an initial period of five years with an option of extending for another seven years. (Source: The Star)

MBM: To conclude talks in 12 mths. MBM Resources Bhd, which has allocated RM250m for capital expenditure, is expecting to conclude talks with an international firm in the next 12 months to set up an assembly plant locally. (Source: The Edge Financial Daily)

PetDag: Plans 50 new stations. Petronas Dagangan Bhd will invest up to RM400m to set up between 30 and 50 petrol stations, annually, over the next five years. (Source: The Star)

MRCB: Poised to clinch RM800m LRT contract. Malaysian Resources Corp Bhd (MRCB) is poised to secure soon a contract worth as much as RM800m from Syarikat Prasarana Negara Bhd. The contract is for civil works for phase two of the Ampang light rail transit (LRT) extension line linking Putra Heights to Shah Alam, Selangor. (Source: Business Times)

Plantation: MSM prices IPO shares at RM3.50 each. MSM Malaysia Holdings Bhd has priced its initial public offering (IPO) at RM3.50 per share for institutional investors. (Source: The Star)

Economics: Government seeks extra operating expenditure. The Government tabled a bill seeking a supplementary allocation of RM13b for operating expenditure, raising the spending budget for this year by 8% to RM176b. RM6b will be allocated to the Finance Ministry which includes RM5.6b subsidy for petroluem products. RM1.5b will be for Education Ministry and RM1b to Health Ministry. (Source: The Star)

Economics: Exports to hit RM700b in 2011, FDI to at least match RM29b recorded in 2010. Exports is expected to rise 9.5% to RM700b in 2011 from RM639.4b recorded last year, while FDI into Malaysia could at least matched if not surpassed last year's figure of RM29b, according to MITI. (Source: The Star)

Economics: Government expands the ban on subsidised RON95 sales to now include foreign-registered vehicles (except motorcycles) driven by Malaysians effective immediately. Previously, Malaysians driving foreign-registered vehicles need to show their MyKads. The ban also includes sales of subsidised NGV. (Source: The Star)

Economics: Minimum wage by year-end?Minimum wage policy could be implemented by year-end, according to PM. The National Wage Consultation Council Bill 2011 will be presented to Cabinet by the Human Resource Ministry before its tabling in the current Parliament's session. (Source: NST)

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RHBInvest Research

Top Story: Shifting Trends – Currency plays

Market Update

In RHBRI’s Economic Highlights yesterday, we highlighted our view that the RM/USD exchange rate could strengthen further in the near term to RM2.90. We now look at the impact on sectors and companies.

Sector Call

Motor: Beneficiary of a Stronger RM Neutral

Sector Update

MBM Resources: Fair value raised to RM3.45 (from RM3.25) Market Perform

Tan Chong: Fair value raised to RM5.40 (from RM5.20) Market Perform

UMW: Fair value raised to RM7.60 (from RM7.50) Market Perform

APM: Fair value raised to RM5.60 (from RM5.50) Market Perform

Proton: Fair value lowered to RM3.55 (from RM4.00) Underperform

Corporate Highlights

TH Plantations: Weathering the storm Outperform

Visit Note

As with most of the other plantation companies with significant landbank in Sabah, THP’s FFB production suffered in 1QFY11, due to the excessive La Nina induced rainfall, which made harvesting activities difficult. So far, the rain has been less heavy in Apr, and management is hopeful that the weather will improve. Despite this, we are wary of a delayed impact of the wet weather on FFB yields, which could potentially come 5-6 months and 10-12 months later,



MPI: To pick-up in the long term Market Perform

Briefing Note

Management guided for 4QFY11 revenue to remain flat qoq as sales volume for its legacy packages remain tepid but offset by strong demand for its newer chip packages. We note that utilisation for micro-leadframe-packages (MLP), module packages and test is fully utilised around 90% but its overall utilisation rates was dragged down to around 85% due to slower demand for legacy packages i.e. PDIP



Unisem: Weaker than expected 1Q Outperform

1QFY11 Results

1QFY11 net profit of RM5m was below expectations. The key variance was mainly due to: 1) lower-than-expected EBITDA margins of 14.3% due to lower contribution from SiP, MEMS and BGA packages; 2) strengthening of RM against the US$ and 3) losses in Batam and Wales.

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