Maybank IB Views

Kencana Petroleum RM2.75: Buy
Buys AME for RM400m; a positive Shariah-compliant

A strategic acquisition. We are upbeat on Kencana's purchase of AME, on financial and operational aspects. Valuations are decent, in our view, and the deal, secured with profit guarantees (RM40m p.a. for FY11-12) is mildly EPS accretive (+1 sen to EPS). The acquisition will provide Kencana a foothold into the subsea markets and ownership of 4 vessels. This 'all-share transaction' will turn vendors of AME into the 2nd largest shareholder of the Group with a 7.6% stake. Our forecasts and target price are under review pending further details. Buy.

QL Resources RM3.40: Buy
A regional player in the making Shariah-compliant

Regional expansion on track. QL is replicating its success formula regionally for each of its main divisions, and the ongoing expansion will fund its growth in the coming years. Although share price has risen 16.4% YTD, outperforming the KLCI, we believe there is still upside potential, banking on its expansion especially into Indonesia, which has yet to contribute significantly to group earnings. We lift our TP to RM3.75 after rolling over our valuation period. We continue to be positive on QL.

Technicals
The FBM KLCI rebounded 25.24-points and closed at 1,540.74 last Friday. The local market remained quite steady to firmer despite the global markets’ gyrations. Local funds pushed the market up especially last Thursday and Friday on firm bargain hunting activities.The obvious support areas for the FBM KLCI are located in the 1,507 to 1,540-zone. The firm resistance zone of 1,545 and 1,576 will see very heavy liquidation activities.

Weekly trading idea is a Firm Buy call on MEDIAC.

Other Local News
Sunway: To secure site of Jalan Duta complex. Sunway Group is said to have won a competitive bid to acquire the site of the Jalan Duta government complex. Sunway could be paying more than RM500m for the site and construct new offices for the IRB and Customs Department elsewhere. (Source: The Edge Financial Weekly)

MAS: Firefly takes delivery of 3rd 737 for KK ops. Firefly, subsidiary of MAS, took delivery of a third Boeing 737-800 aircraft to be stationed in Kota Kinabalu, officially marking the start of the city as its eastern hub. (Source: Malaysian Reserve)

IOI: Allegations against IOI 'just not true'. IOI Corp Bhd re-iterated that in October 2010, an RSPO-certified auditor SGS investigated the allegations and concluded the deforestation complaints were baseless. (Source: Business Times)

ECM, Kenanga: Close to sealing deal. ECM Libra Financial Group Bhd, whose substantial shareholders are long known to be looking to divest their equity stakes, is close to sealing a merger deal with K&N Kenanga Holdings Bhd. (Source: The Edge Financial Daily)

Masterskill: Seeks RM100m from STMB. Masterskill Education Group Bhd (MEGB), which has won its defamation suit against Sistem Televisyen Malaysia Bhd (STMB) for a total of RM250,000, is appealing to the High Court for the damages to be raised to RM100m. (Source: The Star)

FDI: Good response to Invest Malaysia NY. A total of 56 US fund managers have confirmed participation at the inaugural Invest Malaysia New York 2011 (IMNY 2011), which will be held tomorrow. (Source: Business Times)

Property: Demand for condos in KL. Condominium living is relatively new to KL and well designed projects are seeing strong sales performance, said Christopher Boyd, executive chairman of CB Richard Ellis Malaysia. The take up rate of condos in 1Q11 was between 65% and 88% in prime areas. (Source: Malaysian Reserve)

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Maybank IB Views

ECONOMICS
Market & Economy
Embarking on the passage of transformation

Strengthening the roadmap. Khazanah Nasional's Plenary Session at Day 2 of the Invest Malaysia conference showcased government linked companies (GLC) transformation successes as the programme enters the final phase which is also a critical period of national transformation, under the government's resolve to transform Malaysia into a high-income economy by 2020. As the GLC transformation programme enters the 7th year of its 10-year passage, the transformation programme, in aggregate, is "well on track and on schedule".

Technicals
The FBM KLCI rose by 9.67 points at 1,535.59 yesterday. Its resistance areas of 1,535 and 1,560 will cap market gains, whilst the weaker support areas are located at 1,517 and 1,533.

Trading idea for today is a TAKE PROFIT call on HAPSENG.

Other Local News
Alam Maritim: Unit bags RM24.2m deal. Alam Maritim Resources Bhd’s unit has bagged a RM24.2m contract from an independent oil & gas exploration and production company to provide a unit anchor handling tug supply vessel and a fast multipurpose supply vessel. (Source: Bursa Malaysia)

Masterskill: Signs MoU on training. Masterskill (M) Sdn Bhd has signed a memorandum of understanding (MoU) to establish and develop academic exchange as well as co-operation in teaching and training of Masterskill’s student at the Mayapada Hospital, in Indonesia. (Source: Bursa Malaysia)

Tech: Penang gets new RM1b Japanese investment. Penang received a shot in the arm with a RM1b investment by Japan's Ibiden Co Ltd, the world's largest printed circuit board (PCB) maker. The amount would be pumped into its second facility in the Penang science park in Bukit Minyak. (Source: The Star)

Utilities: Govt may buy water bonds. The Federal Government is believed to be planning a special purpose vehicle or getting Pengurusan Asset Air Bhd (PAAB) to buy over the bonds for which some are running into an event of default. (Source: The Star)

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Maybank IB flyers

1. Mah Sing Group Berhad (MAHSING, Stock Code: 8583)

Mah Sing Group Berhad manufactures plastic molded products, operates in property development and investment, trades plastic and other related products and provides construction services

Currently, the Group has 33 projects spread throughout Malaysia 's economic nexus and property hotspots, namely KL and the Klang Valley , Johor Bahru (Iskandar Malaysia ) and Penang Island (North Corridor Economic Region). The Group's principal activity is in property development. Apart from the core business, the Group is also involved in plastic manufacturing and trading in Malaysia and Indonesia .


2. Coastal Contracts Berhad (COASTAL, Stock Code: 5071)

Coastal Contracts Berhad provides fabrication and sale of marine transportation vessels, property letting, ship repairs and maintenance, sub contract services, vessel chartering, tugboat and barge transportation, equipment hiring as well as barge hiring and leasing services.

With the Libya oil crisis, Brent Crude oil has now risen above USD120/barrel. Coupled with Petronas' re-gassification projects, Coastal is expected to gain from these 2 factors.

3. Masterskill Education Group Berhad (MEGB, Stock Code: 5166)

Masterskill Education Group Berhad is an investment holding company. Its subsidiaries provide higher education and training in nursing and allied health sciences.

It intends to open a campus in Indonesia soon in a move to diversify geographically, sources said. It will form a joint venture with Indonesia-based hospital owner PT Sejahteraraya Anugrahjaya (PTSA) for the venture. Having touched a low of RM1.67, its share price seems to have risen due to this news.

4. Mitrajaya Holdings Berhad (Mitra, Stock Code: 9571)

Mitrajaya Holdings Berhad is an investment holding company. Through its subsidiaries, it constructs buildings and roads, provides civil engineering services, supplies construction materials, and manufactures and sells ready-mix concrete. It also invests, manages and leases plant and machinery.

Its PE (of 5.9x) is still attractive since our recommendation to buy this stock at RM1.25 a few months back. Having successfully done KLIA & the Cyberjaya Flagship Zone, it may look to gain further as it may possibly be given a role in the coming Sg Buloh-Kajang MRT project. It performed a successful role in KL LRT project before.

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