RHBInvest Research

Malaysia Equities

Top Story

KNM – Still gloomy skies ahead? Underperform

Visit Note

- We came away from our visit remaining quite cautious on the company’s outlook. Management guided that 2012 will be a year of cost, operation and plant rationalisation.

- Besides that we are concerned that a couple of its’ large contracts will continue to be deferred despite management’s best efforts. The company is tentatively looking to release its 4QFY11 results on 28 Feb, but we are not too optimistic on it reporting better numbers.



Corporate Highlights

MRCB – EDL Losses To Weigh Down On FY12/12 Performance Market Perform (Downgraded)

Briefing Note

- MRCB guided RM30-40m start-up losses in FY12/12 from the newly completed 100%-owned toll road Eastern Dispersal Link (EDL) in Johor. MRCB guided very thin margins of 1-4% from the RM1.4bn LRT line extension project secured in Aug 2011.



Sunway REIT – Sunway Pyramid Still Spurring Growth Market Perform

Results/Briefing Note

- Sunway REIT’s (SunREIT) 2QFY12 realised net profit of RM50.7m (+13.6% yoy; +14.7% qoq) came in slightly above ours and consensus estimates. The strong earnings growth was driven by: 1) the flow through of rental reversion from Sunway Pyramid (SP); and 2) the incremental contribution from Sunway Putra Place. A 1.99 sen DPU was declared during the quarter, up 13.7% yoy and qoq.



Macro

IPI – Despite a rebound in industrial prod. in Dec, real GDP growth is likely to have moderated in 4Q

Economic Highlights (published 8 Feb 2012)

- Industrial production unexpectedly rebounded to 3.0% yoy in Dec, the first bounce back in four months, after easing to a revised +2.4% in Nov, from +2.9% in Oct.

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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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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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Stocks to watch: Catcha Media, MRCB, Daiman, Sunway REIT

KUALA LUMPUR: Catcha Media Bhd, which bucked the weak market sentiment in recently, could see strong trading interest on Friday, Aug 12 after it announced a RM25 million reduction in its target.

Other companies with fresh corporate developments were MALAYSIAN RESOURCES CORP oration Bhd (MRCB), cash-rich DAIMAN DEVELOPMENT BHD , Sunway Real Estate Investment Trust (REIT) and KKB ENGINEERING BHD.

Investors would likely view Catcha Media’s announcement negatively after it said late Thursday its forecasts for outstanding commercial targets of the online media business from 2011 to 2014 in its prospectus would be reduced by about RM25 million.

Catcha Media said this followed amendments to the strategic alliances made on Wednesday between the company, its subsidiaries, its holding company Catcha Group Singapore and Microsoft.

On a brighter note, MRCB said it was on track to achieve revenue of RM1.3 billion for the year after its turnover for the six months ended June 30, 2011 rose to RM456.34 million from RM363.55 a year earlier. For the six months ended June 30, MRCB’s net profit rose to RM40.63 million from RM22.09 million.

Its net profit for the second quarter ended June 30, 2011 jumped 55.5% to RM19.03 million from RM12.24 million a year earlier. Revenue for the quarter rose to RM234.84 million from RM173.87 million.

Sunway REIT recorded net income of RM154.05 million in the fourth quarter ended June 30, 2011, mainly arising from fair value gain on portfolio of assets.

Of the RM154.05 million, of which RM41.07 million was realised and the remaining RM112.98 million unrealised. In the previous corresponding period, the realised net income was RM44.13 million.

Daiman Development Bhd has succeeded in its bid to buy the Menara Landmark in Johor for RM55 million. It said on Thursday, Aug 11 its unit Daiman PROPERTIES Sdn Bhd had put in the bid to acquire the property in a public auction at a reserve price of RM55 million.

The acquisition would be financed from its own funds. As at March 31, 2011, it had RM105.90 million in cash and retained earnings of RM625.81 million.

KKB Engineering Bhd’s subsidiary Harum Bidang Sdn. Bhd has secured a project from Kumpulan Bina Emas Sdn Bhd for a rural water supply project. The contract was to supply water pipes and pipe fittings.

It said the duration of the supply contract was about nine months, starting from the fourth quarter of 2011 and the contract sum was RM19.4 million.

ASTRAL SUPREME BHD’s additional 39.85 million new shares issued under its corporate exercise involving a rights issue with warrants, will be listed and quoted on Friday, Aug 12.

It said 39.85 million warrants issued pursuant to the rights shares and 120 million 10-year 3% irredeemable convertible unsecured loan stocks would be listed also.

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RHBInvest Research

Top Story: MRCB – A little patience for RRI land Trading Buy

Visit Note

¨ MRCB expects Kwasa Land Sdn Bhd to make some decisions with regards to the RRI land re-development project by the end of the year, with physical works only expected to commence in 2012.

¨ The flow of new construction jobs should improve in 2H2011 and into 2012, underpinned by potential jobs from the LRT line extension project, Penang Sentral and the River of Life project.



Corporate Highlights



TH Plantation: Planting for posterity Outperform

Briefing Note

¨ An interesting point to note from the briefing is that THP achieved an admirable FFB yield at its newly-matured Sarawak estates. Where most other oil palm plantations only achieve an FFB yield of 8-9t/ha in its first full year of maturity, THP managed an FFB yield of 7.6t/ha in just half a year in one of its Sarawak estates. Annualised, this estate could yield about 16t/ha, double that of other oil palm estates in its first year of maturity. This is in line with management’s own targets of achieving an FFB yield of at least 15t/ha for its plantations in the first year of maturity.



Sime Darby: RM43.4m writeback for marine project Outperform

News Update

¨ Sime Darby’s subsidiary has, on 20 Jul, entered into a yard settlement agreement and release agreement with its JV partners for the refund of a cash amount of US$21.63m (RM63.6m) in return for the release of its claims, rights and interests over the Marine Project (involving the construction of two tug boats and a derrick lay barge for the Maersk Oil Qatar (MOQ) project). Of this amount, US$16.63m (RM48.9m) has been received, with the balance US$5m (RM14.7m) payable on 17 Nov, if there are no further claims made. Based on Sime’s announcement, of the refund total of US$21.6m, it will receive up to US$14.75m (RM43.4m), based on its stake.



SP Setia: Full equity interest in KL EcoCity Market Perform

News Update

¨ SP Setia announced that its proposed acquisition of the remaining 40% equity interest in KL Eco City S/B (KLEC) from Yayasan Gerakbakti Kebangsaan (YGK) for a total consideration of RM75m is to be satisfied through the issue of 19.38m new SP Setia shares at RM3.87 per share. KLEC was previously the JV company for the RM6bn KL EcoCity project.



KNM: HOA with GAP for petrochemical facility in Teluk Ramunia Underperform

News Update

¨ KNM announced yesterday that it, together with Zecon has entered into a Heads Of Agreement (HOA) with Gulf Asian Petroleum to undertake EPCC contracts for projects worth around USD5.7bn (RM17bn) in Teluk Ramunia, Johor. The two projects involve a petroleum refinery, a polypropylene unit and petroleum product storage terminal facility with capacity of 2.3m cubic meters).

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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)

Read more...

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)

Read more...

Stocks to watch: MRCB, DRB-Hicom, Genting, PetChem

KUALA LUMPUR: The big capitalised stocks, especially GENTING BHD and Petronas Chemicals Group Bhd would be in focus on Friday, May 27 following their sharply improved earnings in the quarter ended March 31, 2011.

Other companies which would also see trading interest would be MALAYSIAN RESOURCES CORPoration Bhd (MRCB), DRB-HICOM BHD and MyEG Services Bhd.

SIME DARBY BHD is also scheduled to announce its third quarter results for the period ended March 31.

Genting Bhd’s net profit surged 254% to RM824.17 million in the first quarter ended March 31 from RM232.43 million a year ago when the net profit then was affected by net impairment losses. Revenue rose 57.2% to RM4.89 billion from RM3.11 billion while earnings per share were 22.25 sen compared with 6.29 sen.

The group’s profit before tax in 1QFY11 was RM1.9 billion compared with RM200.0 million in 1QFY10.

Petronas Chemicals Group Bhd reported net profit of RM932 million in the fourth quarter ended March 31, 2011, an increase of 5.7% from the RM881 million a year ago.

Its revenue rose 8.9% to RM4.353 billion from RM3.996 billion while earnings per share were 12 sen. It proposed dividend of 19 sen per share totaling RM1.52 billion.

For the financial year ended March 31, its net profit increased by 36.1% to RM2.994 billion from RM2.199 billion. Revenue rose 19.5% to RM14.586 billion from RM12.203 billion supported by higher prices and volume addition.

MRCB posted a 120% increase in its earnings to RM21.60 million in the first quarter ended March 31, from RM9.84 million a year ago, boosted by its on-going property development projects.

MRCB was upbeat on its outlook for the next two years where it expected progressive completion of the on-going CONSTRUCTION projects and property development within KL Sentral which works had commenced since 2009.

“Two major developments planned on strata sales at Kuala Lumpur Sentral comprising Q Sentral office block at Lot B and condominium residences at Lot D with combined gross development value in excess of RM2 billion will commence construction works in 2011,” it said.

DRB-Hicom’s earnings were 72% lower at RM72.39 million from RM259.36 million a year ago due to the absence of exceptional gains of RM211.43 million from the disposal of estates.

Its revenue rose 25.1% to RM1.99 billion from RM1.59 billion a year ago. It proposed a final dividend of four sen per share.

MyEG recorded its best-performing quarter in 3Q11, boosted by the public’s growing adoption of e-Government services via its MyEG portal.

Its revenue rose 20% on the back of an increased Highway Code test-tasking, increased online, increased online payment of traffic summonses an encouraging growth for online renewal of road tax and automobile insurance.

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RHBInvest Research

Top Story: Sime Darby

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

Corporate Highlights

KPJ:

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

LPI Capital:

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

MRCB:

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

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Maybank IB Views

MARKET STRATEGY
2Q 2011 Outlook
External headwinds, domestic resilience

Strong headwinds in 1Q 2011. Malaysian equities went on a wild ride in 1Q with the KLCI hitting a 1,574 pt high on 17 January, encouraged by domestic developments. It however succumbed to selling pressure, touching a low of 1,484 pts on 15 March following the political unrest in MENA which led to concerns on crude oil prices and inflation. Japan's double disaster on 11 March and a consequent nuclear threat did not help. At its close on 31 March, the KLCI gained just 26 pts (+1.7%) year to date. Nonetheless, it navigated the headwinds better than its regional peers which recorded losses of up to 5.9%.

COMPANY UPDATE
Star Publications (Malaysia) RM3.48: Hold
The RM750m question Shariah-compliant

Proposes major debt raising exercise. Star proposes to raise up to RM750m via a 7- and 15-year debt programme. It is unlikely to pay more special dividends or develop its Section 13 land by itself but rather, embark on M&As with the proceeds, we think. We leave our earnings estimates unchanged for now. We also maintain our Hold call and RM3.71 target price pending a major earnings accretive M&A.

Technicals
The FBM KLCI closed marginally higher by 0.10 points to 1,555.48 yesterday. Its resistance areas of 1,556 and 1,576 will cap market gains, whilst the obvious support areas are located at 1,529 and 1,554.

Trading idea for today is a Buy call on KENCANA.

Other Local News
Sime Darby, TNB: Sign pact for biogas study with Mitsui. Sime Darby Plantation has roped in Tenaga Nasional Bhd (TNB) and Japan's Mitsui & Co for a joint feasibility study on the viability of setting up biogas plants at all of its 62 oil palm mills. The study will take two years and will involve eight of its mills before being extended to cover all of its 62 mills, of which 40 are in Malaysia and 22 are in Indonesia. (Source: Business Times)

Bursa: In collaboration talks with LSE. Bursa Malaysia is believed to be in preliminary talks with the London Stock Exchange to collaborate on the trading of each other's shares. The partnership would likely involve coming up with products and a platform for the trading of these shares. (Source: The Star)

MRCB: Among Pudu Jail site redevelopment bidders. Malaysian Resources Corp Bhd (MRCB) is bidding for the redevelopment of Pudu Jail site. (Source: The Star)

Iskandar: Lodges police report. Iskandar Investment Bhd (IIB) filed a police report against its former senior managers after a probe revealed fiduciary lapses. The board of IIB did not reveal their identities but it is understood that at least 40 people from the vice-president level and above quit after the previous CEO Arlida Ariff finished her contract at end-2010. (Source: Business Times)

O&G: Petronas says gas exploration project on. Petroliam Nasional Bhd (Petronas) is still considering potential joint venture partners for the exploration of gas off the Kepodang field in Indonesia. It issued a statement to counter claims by the chairman of Indonesia's oil and gas regulator, BPMigas that it will pull out from developing the Kepodang field. (Source: The Star)

E&U: Supercritical plant in Manjung is SEA's first. The new 1,000MW supercritical coal-fired power plant in Manjung, Perak will be the first in Southeast Asia. The unit will the single largest one in Southeast Asia and will produce enough electricity to power nearly two million households in Malaysia. (Source: The Edge Financial Daily)

Read more...

Maybank IB Views

Kencana Petroleum RM2.58: Buy
Bags Petrofac's Cendor Phase 2 gig Shariah-compliant

Maintain Buy; 20% upside. Kencana is on course to meet its job win targets for FY11. The RM216m Petrofac EPCC gig takes its outstanding orders to 69%, with 4 months to go. Our forecasts are unchanged, which implies a 3-year net profit CAGR of 26%. We value Kencana at RM3.10, based on 20x CY12 EPS. Our 20x PER target is validated in a capex-fueled, order book-driven upcycle.

Top Glove Corporation RM5.28: Hold
Stretching valuations Shariah-compliant

Sentiment driven. Latex cost has rebounded to the pre-Japan earthquake level of RM10.35/kg. We reduce our FY11 EPS forecast by 8% after we trim our sales volume assumption by 3%. Though Top Glove is trading at 15x CY12 PER (above its 5-year historical average of 13x), we think short-term interest on the stock will sustain owing to expectation of a falling latex cost in May. Reiterate Hold, TP is adjusted upward to RM5.10 (from RM4.55) as we roll forward our DCF valuation.

Technicals
The FBM KLCI rose higher by 5.84 points to 1,520.09 yesterday. Its resistance areas of 1,521 and 1,538 will cap market gains, whilst the obvious support areas are located at 1,505 and 1,520.

Trading idea for today is a Buy call on COASTAL.

Other Local News
MISC: To gain from sale and charterback of vessels. MISC Bhd's subsidiary, AET Inc. Ltd., entered into the sale and charterback of four tankers, namely two Aframaxes and two Very Large Crude Carriers (VLCCs). The total net cash proceeds from the transaction is USD167m for a gain on disposal of USD33m. (Source: Bursa Malaysia)

MRCB: Inks deal with Ekovest. Malaysian Resources Corporation Berhad has entered into a joint venture with Ekovest Berhad and KL Bund Sdn Bhd in relation to the River of Life Project. MRCB would have 40% equity in JV company while Ekovest would hold 60% stake. (Source: Bursa Malaysia)

DRB-HICOM: VW to make Pekan regional hub, plans to make 30,000 vehicles by 2018. DRB-HICOM Bhd's tie-up with German automotive giant Volkswagen AG (VW) to manufacture VW cars at the former's plant in Pekan, Pahang is expected to produce more than 30,000 (VW) vehicles at the plant by 2018. Pekan will become the regional automotive hub for VW. (Source: The Star)

Perisai: To buy Garuda Energy for RM210m. Perisai Petroleum Teknologi Bhd plans to buy all of Garuda Energy (L) Ltd, an oil and gas concern, for RM210m. Garuda Energy currently owns a jack-up rig that is being converted into a Mobile Offshore Production Unit (MOPU) at Jurong Shipyard, Singapore, by May 2011. (Source: Bursa Malaysia)

Metro Kajang: To beef up plantation, property units. Metro Kajang Holdings Bhd is buying more land in Kalimantan, Indonesia and in the Klang Valley to beef up its core plantation and property development divisions to drive earnings. Metro Kajang was looking to buy 20,000ha of plantation land from a local landowner in east Kalimantan. (Source: Business Times)

Petrolchemical: Petronas and BASF mull RM4b joint investment to set up petrochemical plant in Malaysia. Petroliam Nasional Bhd (Petronas) and BASF SE are considering a potential joint investment sum of RM4b to set up a plant to produce petrochemical products in Malaysia. (Source: The Malaysian Reserve)

Property: Malaysia to allocate land for affordable homes. The government will allocate a portion of its landbank for the construction of affordable housing, especially for Malaysians eligible for the My First Home Scheme. The affordable housing project, which will likely be stratified properties or apartments, will either be built by the government or through joint ventures with the private sector. (Source: Business Times)

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RHBInvest Research

Star:

Visit Note

• Ad rates hiked by 4%
• Fair value is raised slightly to RM4.07 (from RM4.01.We reiterate our Outperform call on the stock.

Sector Call


Gaming:

Sector Update

• MPHB buys back stake in Magnum
• Although we do not cover MPHB, we believe this could present a trading opportunity for MPHB, given the relative inexpensive valuations for the acquisition and the potential for higher valuations should they relist Magnum at a later stage.

Corporate Highlights

MRCB: Trading Buy

• 4QFY10 Results/Briefing Note
• FY12/10 net profit almost doubles
• Fair value is RM2.65. Maintain Trading Buy.

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RHBInvest Research

Prinsiptek:
Building blocks for earnings recovery put in place
Fair value is RM0.58


Corporate Highlights


MRCB:
To clinch RM8bn Klang River clean-up job?
Fair value is raised from RM2.48 to RM2.65.
Maintain Trading Buy.


PLUS:
Potential bidding war on the horizon
Maintain our Trading Buy call on PLUS with an unchanged fair value of RM5.20

Read more...

Maybank IB Views

ACQUISITIONS / DISPOSAL
PLUS Expressways RM4.61: Buy
MMC to bid for PLUS? Shariah-compliant

More details end of today. MMC Corporation is expected to throw in a bid for PLUS end of today, thus emerging as the third bidder. Today will be an interesting day for PLUS for any other offer for its businesses plus a RM50m cash deposit must be effected by the end of today. Our Buy call on PLUS, premised on RM4.70-DCF derived TP, has been put on review since PLUS' share price surged to the UEM-EPF offer price.


COMPANY UPDATE
Notion VTEC RM2.00: Buy
Secures new orders from Nikon; target price lifted Shariah-compliant

Target price raised to RM2.40 (+23%) following a 7-19% upgrade to FY11-12 EPS for Nikon's new sub-assembly of DSLR camera lens, and after raising our EV/EBITDA target. A further 7% rise in EPS and target price is possible should NVB secure the MSC tax break. NVB remains a Buy, offering an improving business condition and earnings prospect.


ECONOMICS
US Economy
"Jobless Recovery" no more...?

Dec 2010 labour market data was mixed amid lower than expected rise in non-farm payrolls (Dec 2010: +103,000; Nov 2010: +39,000; consensus: +150,000) and bigger than expected decline in unemployment rate( Dec 2010: 9.4%; Nov 2010: 9.8%; consensus: 9.7%) . However, there are plenty of structural issues in the job market (e.g. high labour underutilisation rate and long-term unemployment) that resulted in Fed's cautious outlook with the central bank expecting jobless rate to fall only to 8% two years from now and the labour market to normalise only in four to five years. Therefore, jobless recovery remains a risk to the US economy and a challenge to policymakers.


Technicals
The FBM KLCI gained 53.30-points and closed at 1,572.21 last week as some very firm new year broad-based buying activities caused the market’s superb surge.The firm support areas for the FBM KLCI are located in the 1,531 to 1,572-zone. The key resistance level of 1,576 may offer some token selling only. We anticipate further bullishness for this week.

Our weekly trading Idea is a technical Strong Buy call on KENCANA.


Other Local News
MRCB-Ecovest: Poised to bag river clean-up job. A joint venture between Ekovest Bhd and Malaysian Resources Corp Bhd (MRCB) is on the verge of receiving a letter of award from the government for a portion of the Klang Valley river beautification project that is worth RM8b. The Klang River clean-up project is part of a RM15b rehabilitation and development plan for the river, under the ETP. Another company eyeing the project is YTL Corp Bhd’s Wessex Water Ltd, which bided for the project with I-Bhd. (Source: The Edge Financial Weekly)

MRCB, IJM Land: Reconsider merger plans. Malaysian Resources Corp Bhd (MRCB) and IJM land Bhd could be taking another look at the merger plan. Meanwhile, IJM Land does not rule out the possibility of working with MRCB in a joint venture capacity rather than a merger of the two companies. (Source: The Edge Financial Weekly)

Boustead: In talks to buy army base land for RM8b project. Boustead Holdings Bhd is in talks with the government to buy the 98ha Batu Cantonment army base at Jalan Ipoh, Kuala Lumpur for a mixed commercial and residential properties project worth more than RM8b. The Batu Cantonment army base, which has been there for over 40 years, will be relocated. (Source: Business Times)

Hap Seng: Raise funds via rights issue, placement. Hap Seng Consolidated Bhd is proposing a private placement of up to 124.5m new shares (representing 20% of existing share capital), followed by a two-for-one bonus issue, and a renounceable rights issue on the basis of one rights share and one warrant for five shares (post bonus). The funds raised would be utilised for capital expenditure requirements, corporate purposes and additional working capital purposes. (Source: Bursa Malaysia)

Conglo: JCorp may sell land, property to pare down debts. Johor Corp (JCorp) is considering selling various assets including land, properties and plantation assets to partly repay its current RM3.6b debt which is due for repayment in July next year. The state investment arm plans to bring down the debt level of RM3.6b to a “sustainable level” of between RM1b and RM1.5b. (Source: The Star)

Infrastructure: MRT line from Sg Buloh to Kajang to be finalised between April and May. The locations of the 35 stations of the first mass rapid transit (MRT) line from Sg Buloh to Kajang are expected to be finalised between April and May. The line, with about 9.5km underground will run through Sg Buloh, Kota Damansara, Kuala Lumpur, Cheras to Kajang. (Source: Bernama)

Aviation: Inaugural Riau Air Flight to Melaka. The inaugural Boeing 737-500 Riau Air flight from Riau to Melaka International Airport (LTAM) in Batu Berendam is expected to give the airport a boost. Riau Air would begin its thrice-weekly Pekan Baru-Melaka flights next week. Meanwhile, Riau Air is also eyeing air connections between Pekan Baru and Johor Bahru via Senai airport. (Source: Bernama)

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RHBInvest Research

Banks:

• Nov ‘10 System Data – YoY Loan Growth Surges
• Overweight stance on the sector maintained.
• CIMB is our top pick for large-cap banks while Affin is our pick for the mid-small sized banks.

Corporate Highlights

IJM Land:

• Still good on its own.
• Revise our fair value to RM3.50 (from RM3.65)
• Maintain Outperform.

MRCB:

• Merger With IJM Land Aborted
• We remain positive on MRCB
• Fair value is reverted to RM2.48 from RM2.30 previously
• Maintain Trading Buy.

Dialog:

• Won a new contract worth RM64.6m for the EPCC works of a new cooling tower at Bintulu
• Fair value for the stock is RM2.11/share (versus RM1.94/share previously)
• Outperform call on the stock.

Axis REIT:

• Acquiring a piece of freehold land in Cyberjaya from FSBM Holdings Bhd.
• Total purchase consideration is RM51.25m.
• Our fair value is revised up to RM2.78 from RM2.67.
• Maintain Outperform.

Read more...

Stocks to watch: IJM Land, MRCB, Dialog, Talam

MRCB weekly chart

KUALA LUMPUR: Shares of IJM Land and MALAYSIAN RESOURCES CORP Bhd (MRCB) will be the stocks to watch on Monday, Jan 3 after their shares slid ahead of the negative news that the proposed merger had fallen through.

However, AmResearch said it was maintaining its BUY rating on both IJM Corp Bhd and IJM Land Bhd with unchanged fair values of RM7.52 a share and RM3.88 a share, respectively.

IJM Land weekly chart

“IJM Land was sold down (pre-suspension share price of RM2.86) this morning (Jan 30) prior to the announcement that the proposed merger with MRCB had been aborted. We are unfazed. The issue now is the relative investment merits of IJM Corp and IJM Land. We believe they have enough strong catalysts for them to move forward on their own,” AmResearch said in a research note after the announcement.

Other stocks which could be in focus on Monday include DIALOG GROUP BHD, Berjaya Corp Bhd, Talam Corp Bhd, RANHILL BHD and SilverBird Group Bhd.

Dialog’s subsidiary Dialog E&C Sdn Bhd has secured a RM64.6 million contract from Asean Bintulu Fertilizer Sdn Bhd (ABF) to build a cooling tower in Bintulu, Sarawak.

Dialog weekly chart

The scope of work would involve the engineering, procurement, CONSTRUCTION, commissioning and associated works of the new tower.

Berjaya Corp net profit for the second quarter ended Oct 31, 2010 jumped 66.9% to RM86.54 million from RM51.83 million a year ago.

The better performance was due mainly to write-back of impairment in value of investment in associated companies and gain on disposal/partial disposal of subsidiary companies as well as gain arising on accretion of interest in an associated company and lower finance costs.

BJCorp’s revenue for the quarter rose 6.2% to RM1.72 billion from RM1.62 billion in 2009. Earnings per share were 1.97 sen while net asset per share was RM1.39.

Talam posted net loss of RM83.29 million in the third quarter ended Oct 31, 2010 compared with net profit of RM118,000 a year ago, mainly due to losses on disposal of two parcels of development PROPERTIES totaling RM43.85 million and foresees a challenging remaining financial year for the group.

Talam weekly chart

Standard & Poor's Ratings Services has placed its “B” long-term corporate credit rating of Ranhill Bhd on CreditWatch with negative implications. It also placed its B- issue rating on US$220 million 12.5% senior unsecured notes due October 2011 issued by Ranhill (L) Ltd on CreditWatch with negative implications.

SilverBird’s net profit for the fourth quarter ended Oct 31, 2010 rose 36.66% to RM835,000 from RM611,000 a year ago mainly due to the sales growth in its core business of consumer food division.

Revenue for the quarter rose 6.75% to RM153.92 million from RM144.19 million in 2009. Earnings per share were 0.22 sen while net assets per share were 53 sen.

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Maybank IB Views

RESULTS REVIEW
Top Glove Corporation RM5.45: Sell
Weathering the perfect storm Shariah-compliant

Below expectations. 1QFY11 net profit of RM36m (-45% YoY, -20% QoQ) made up 15% of our and street's full-year estimates. We cut our FY11 forecast by 13%, expecting high latex prices to persist into 1HCY11. The stock is bereft of catalysts and M&A targets may not be attractively priced presently. Maintain Sell with a lower DCF-derived TP of RM4.70 (-4%), implying 12x CY12 PER.


Technicals
The FBM KLCI declined 1.48 points to 1,509.10 yesterday. Its resistance areas at 1,510 and 1,531 may cap market gains, whilst its firm support areas are located at 1,495 and 1,508.

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


Other Local News
DiGi, Axiata: Celcom & Digi may ink tie-up next month. DiGi.Com Bhd's CEO Henrik Clausen believes the company will be able to ink a definitive agreement on network collaboration with Celcom Axiata Bhd next month and this tie-up will help each company save over RM150m annually. (Source: The Star)

MRCB, IJM Land: Extend validity of MoU. Malaysian Resources Corp Bhd (MRCB) and IJM Land Bhd have extended the validity of their memorandum of understanding from Dec 14 previously to Dec 29. Both parties are still in the midst of finalising the terms and conditions for the proposed merger. (Source: The Star)

RHB: Inks MoU with Sumitomo Mitsui. RHB Capital's subsidiary, RHB Bank has signed a memorandum of understanding (MoU) with Japan's Sumitomo Mitsui Banking Corp (SMBC) to establish the basic framework for future cooperation. (Source: The Edge Financial Daily)

TNB's capital expenditure may rise to RM6.5b. Tenaga Nasional Bhd's (TNB) capital expenditure (capex) for fiscal years ending Aug 31, 2011 and 2012 will remain between RM4.2b and RM4.5b but could rise to RM6.5b in 2013 as additional funds will be needed to complete its three new power plants. The plants include the Manjung coal-fired plant and two hydro plants in Hulu Terengganu and Ulu Jelai in Pahang. (Source: The Star)

AmBank: AmIslamic Bank to expand into two Asian countries. AmIslamic Bank Bhd plans to set up operations in two Asian countries next year as part of its overseas business expansion plan. The bank aims to increase its customer base by an additional 200,000. (Source: Bernama)

Proton: Two more concept cars to hit production line. Another two of Proton Holdings Bhd's five "Pahlawan" concept and customised cars could turn into production models and enter the market next year. They are the Tuah (to replace the existing Persona) and the Lekiu crossover (a mini SUV).
Currently, two of the Pahlawan series are already existing production models namely Kasturi (facelifted Saga) and Jebat (Inspira). (Source: Business Times)

Renewable Energy: Tariff system mooted. A special tariff system to speed up the generation of renewable energy will be implemented under the Renewable Energy Bill 2010. Also, a feed-in tariff system that supplies line connection points for the distribution of renewable energy would be established. (Source: The Star)

Autos: Plan on electric vehicles to go to Cabinet. A completed study on the rollout plan for the Electric Vehicle Infrastructure Roadmap will be sent to the Cabinet for approval by end of January. This is to make Malaysia an attractive destination for electric vehicle makers. (Source: The Star)

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Maybank IB Views

AirAsia RM2.55: Buy
Shocking, but in a good way Shariah-compliant

Jetting up. AirAsia reported the highest 3Q operating profit in its history: net profit of RM271m (+1,022% YoY). We raise our forecasts to reflect a stronger yield environment and the rebound of associates' performances. AirAsia is the cheapest low cost carrier (LCC) globally, after adjusting for normalised accounting practices. Buy with a higher RM3.36 target price. We now peg the stock to 9.0x 2011 PER (previously 10.1x).

Malaysian Airline System RM2.06: Buy
It's coming together

Above expectations, cost reduction driven. 3Q10 recurring net profit of RM147m - reversal from losses, is the first sign that MAS is graduating to sustainable profits going forward. Yields were ahead - albeit at a lower pace than peers, but unit cost has improved significantly due to efficiency gains and higher utilization rate. We raise our earnings forecasts with slightly higher RM2.64 TP, based on 12.4x 2011 PER, 10% premium to peers for its higher growth prospects.


Proton Holdings RM4.73: Buy
Inspira to inspire

Results yielded no surprises, with 1H net profit meeting 54% of our full-year forecast. As Proton seeks to unlock value through strategic partnership(s) and explore opportunities overseas, valuations are inexpensive (0.5x book and 9-10x forward PERs). It also has a sizeable war chest of RM1.2b (RM2.12/sh cash), which could be upstream for higher dividends. Proton also trades at a lower 6x PER ex-cash. We remain Buyers of Proton with a RM5.90 target price (11x FY12 EPS).


Hock Seng Lee RM1.92: Buy
Share bonus cheer Shariah-compliant

Results in line; Buy. RM52m 9M10 net profit (+34% YoY) is 72% of our 2010 forecast and 73% of consensus. A surprise 1-for-50 treasury shares distribution translates into 3.8sen (net) return to shareholders based on the last close share price. We are still positive on HSL delivering double-digit earnings growth into 2011 and benefiting from job flows under SCORE. Our TP pegs the stock at 14x 2011 PER.


Technicals
The FBM KLCI rebounded 7.95 points to 1,496.49 yesterday. Its resistance areas at 1,498 and 1,515 will cap market gains, whilst its obvious support areas are located at 1,477 and 1,496.
Trading idea for today is a TAKE PROFIT call on TENAGA.


Other Local News
MMHE: Eyes RM1b profit. Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE), is targeting a RM1b net profit within five years. Prime Minister Datuk Seri Najib Razak said the target should be regarded as the company's key performance indicator (KPI). (Source: The Star)

O&G: Petronas to invest in Johor O&G hub, PM to announce new projects next week. Petroliam Nasional Bhd (Petronas) will play a major role in the development of Teluk Ramunia and Pengerang in Johor into an oil and gas (O&G) hub. Separately, prime minister Datuk Seri Najib Tun Razak is expected to announce new development and entry point projects in the oil, gas and energy sector on Tuesday. (Source: The Star)

O&G: Technip boosts presence in Malaysia. France-based Technip Group launched its flexible pipe manufacturing facility located in Tanjung Langsat, Johor. Costing EUR140m, the new plant will allow Technip to make further inroads in Asia-Pacific and Middle East subsea oil and gas markets. Technip has already established a long-term strategic collaboration with MISC Bhd, Malaysia Marine and Heavy Engineering Holdings Bhd and two other subsidiaries of Petronas. (Source: Business Times)

MRCB: Construction on Penang Sentral starts next month. Construction works on the RM2.7b Penang Sentral Integrated Transport Hub in Butterworth is expected to begin next month. The project will be undertaken by a joint venture between MRCB and Pelaburan Hartanah Bumiputra Bhd. The first phase comprises an integrated transportation hub with a retail component could start next month and is scheduled for completion by Dec 2013. The second and third phases are commercial components, comprising a commercial hub, including office towers, serviced apartments, a hotel and waterfront amenities, is scheduled for completion 10 years from now. (Source: The Malaysian Reserve)

Transportation: Study on bullet train ready by mid-2011. The feasibility study on the KL-Singapore bullet train project is due to start in January and would be completed by mid-2011 before Malaysia proceeds to approach Singapore. The bullet train (which travels at an average speed of 350-450km/hour) could lower traveling time between the two cities to under two hours. (Source: Business Times)

Transportation: LRT extension jobs to be awarded soon. The government is expected to award the long-awaited light rail transit (LRT) extension project soon, and successful bidders have been short-listed. It is learnt that Bina Puri Holdings Bhd is in the forefront to win the LRT extension job for the Ampang line worth about RM600m. Meanwhile, TRC Synergies Bhd is tipped to bag the main contract for the Kelana Jaya line extension, estimated to be worth between RM900m and RM1b. (Source: The Edge Financial Daily)

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Maybank IB View

ACQUISITIONS / DISPOSAL
IJM Land / MRCB RM2.97 / RM2.12: Not Rated
A merger of equals

A win-win proposal. The IJML-MRCB merger will result in the largest property group with a potential market value of RM8.9b, a combined landbank of c.7,039 acres, and a combined GDV of RM36b, surpassing UEML-Sunrise's and SP Setia's. The merged entity will have a sizeable 39.8% public spread, hence raising liquidity. An enlarged balance sheet also improves its chances of taking part in the development of government land. IJML's shareholders gain better upside based on the share exchange prices of RM3.65 for IJML and RM2.30 for MRCB.


RESULTS REVIEW
IJM Corporation RM5.69: Buy
Property merger unlocks value Shariah-compliant

Upgrading target price. RM178m 1HFY11 core net profit (+29% YoY) before RM31m forex translation gain was in line, at 47% of our full-year forecast. No change to our core earnings forecast but we incorporate the RM31m forex gain, raising FY11 bottomline forecast by 6%. We lift our RNAV-based target price to RM6.40 (+16%) after incorporating new IJM Land's (IJML) implied value for its merger with MRCB and higher valuations for the construction business. IJM Corp stays a Buy.


Notion VTEC RM1.63: Buy
Fortune changes, risk abates Shariah-compliant

Upgrade to Buy. 4Q results were better than expected, with 4Q net profit rising 2.8-fold QoQ and EBITDA margin expanding by 10.2-ppt QoQ. We upgrade NVB to a Buy (non-consensus) with an unchanged RM1.95 TP. On balance we believe the negatives have been priced in after a 37% fall in share price following the disastrous 3Q results. Valuations are inexpensive, with a 4-6x FY11-12 PER and improving business outlook.


COMPANY UPDATE
Mah Sing RM1.79: Buy
Further expand its foothold in Penang Shariah-compliant

Buys land on Penang island. We are positive on the recent land acquisition in Penang island due to its attractive pricing and strategic location. The land is expected to enhance our RNAV by 4.8%. We continue to like Mah Sing given its undemanding valuation, 30% 3-year EPS CAGR and fast turnaround strategy. We lower our forecasts by 0.6-2.3%, but raise RNAV-based TP to RM2.60. Reiterate Buy.


IPO: Careplus Group RM0.23
Small glove-maker turns ambitious Shariah-compliant

Making debut on ACE Market. Careplus, a small latex glove-maker, is scheduled for listing on 6 Dec '10. The company expects capacity-driven earnings growth from FY12 onwards, but we see limited upside to its retail IPO price owing to: (i) fair valuation at its IPO price relative to small sized peers; and (ii) the presence of industry headwinds (i.e. persistently high latex prices, appreciating Ringgit).


Technicals
The FBM KLCI fell 15.67 points to 1,487.53 yesterday. Due to the significantly weaker tone in the USA last night, we may see the FBM KLCI in a bearish mode today too. Its resistance areas at 1,487 and 1,510 will cap market gains, whilst its weaker support areas are located at 1,465 and 1,480.

Our trading idea for today is a TAKE PROFIT call on LIONIND.


Other Local News
Sunway, SunCity: Shares suspended on merger talks. Shares of Sunway Holdings Bhd and Sunway City Bhd (SunCity) have been suspended from trading for two days since yesterday amid speculation that they may be merged. Both companies are expected to make an announcement today. (Source: Business Times)

Tan Chong: Teana to boost Nissan’s local market share. Edaran Tan Chong Motor Sdn Bhd (ETCM) expects the launch of its new Nissan Teana luxury sedan to boost the company's local market share. The company had already received over 1,000 bookings for the Teana. For the Malaysian market, the Teana will be sold with three engine options 136bhp, 2-litre and 182bhp V6, 2.5-litre which are assembled in Tan Chong Motor's Serendah factory, and the 252bhp V6, 3.5-litre which is fully imported from Japan. (Source: The Star)

Parkson Holdings: Acquires Shantou Parkson for RM37m. Parkson Holdings Bhd, via Hong Kong-listed unit Parkson Retail Group, has acquired 100% interest in Shantou Parkson Commercial Co Ltd for RMB80m (RM37.3m). Shantou Parkson was the owner and operator of the Parkson branded department store at South City Shopping Mall, Shantou City, Guangdong Province, China. (Source: The Star)

YTL, YTL Land: YTL Corp plans revamp of property division. Conglomerate YTL Corp Bhd plans to house all its property development assets and projects under YTL Land & Development Bhd (YTL Land). It would dispose its property assets and projects in Malaysia and Singapore to YTL Land net of outstanding intercompany balances for RM476.1m. (Source: The Star)

Gadang: Bids for more than RM2b jobs. Gadang Holdings Bhd is bidding for several engineering and construction projects totaling more than RM2b. Among the tenders are the proposed development of the Women and Children Hospital in Kuala Lumpur announced under the budget 2011, the 300MW Kimanis power plant in Sabah, 1,000MW Manjung power plant in Perak and the Shah Alam Hospital. (Source: The Edge Financial Daily)

Property: M'sian city apartment prices second lowest in region. The average price of city apartments in Malaysia is the second lowest compared with other countries in the region. Global Property Guide (GPG) said according to its research, only Indonesia offered city apartments that were priced lower than Malaysia. In comparison, the average price of city apartments in Singapore is almost eight times more than in Malaysia, beating even Australian prices, which are almost five times higher than Malaysian city apartments. (Source: The Star)

Market: Bursa plans to attract more SRI funds with ESG index. Bursa Malaysia Bhd plans to attract more Socially Responsible Investment (SRI) funds into Malaysia by constructing the Environment, Social and Governance (ESG) Index in 2012. Bursa Malaysia CEO Datuk Yusli Mohd Yusoff said the exchange is working with various relevant authorities of similar global-based listed indices. (Source: The Malaysian Reserve)

Read more...

RHBInvest Research Highlights

Top Story

Benchmarking:
Major changes ahead.
Stock picking is still important with news flow remaining one of the key catalysts.


Sector Call


Media:
Oct print and TV adex up by 9.0% YoY
No change to our Overweight call on the sector.

Corporate Highlights


MRCB:
To merge with IJM Land.
Maintain Trading Buy. Fair value is RM2.30.


IJM Land:
Thumbs up.
Maintain Outperform and revised fair value of RM3.65.


EON Capital:
Underlying operations coming along nicely.
Fair value is RM7.30. Underperform call.

Mah Sing:
Stocking up landbank.
Fair value is raised to RM2.43 (from RM2.40). Maintain Outperform.

Parkson:
Injection of Shantou Parkson into PRG.
Fair value is maintained at RM7.36. Maintain Outperform.

Technical Highlights


Daily Trading Strategy:

• Tuning into a “sell” mode.
• Selling pressure triggered by the strong selldown in the regional markets yesterday.
• Investors Opted to trim down their holdings on the core bluechips, hence triggering the renewed selling pressure on counters like the banks in late trading yesterday.
• The FBM KLCI must recover to above the 40-day SMA today to avoid further selldown on the local bourse, technically.
• However, in view of the fresh political tension in Korea peninsula, plus the nervousness on the possibility of further tightening measures from Beijing, sentiment is likely to turn into a “sell” mode temporarily.
• On the upside, the immediate key level is at the 40-day SMA of 1,493, while downside is seen at 1,450.

Daily Technical Watch: Maybank

• Will turn short-term bearish if it dips below the 10-day SMA
• Immediate Support at RM8.15
• Immediate Resistance at RM8.89

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