Stocks to watch: Tenaga, Maxis, Tanjung, Daibochi

KUALA LUMPUR: Investors will sitting on their hands over the weekend as they focus on the summit of European leaders to resolve Europe’s debt crisis. A decisive framework to reach basic agreements over the weekend would bolster investor confidence.

On Wall Street, the S&P 500 posted its third straight week of gains on Friday Oct 21, lifted by optimism before this weekend's summit and strong earnings from blue-chip stocks.

The Dow Jones industrial average was up 267.01 points, or 2.31%, at 11,808.79. The Standard & Poor's 500 Index was up 22.86 points, or 1.88%, at 1,238.25. The Nasdaq Composite Index was up 38.84 points, or 1.49%, at 2,637.46.

Reuters reported important differences still separate major players France and Germany in solving Europe's debt crisis, but with two summits scheduled for next week, investors took an optimistic view that a resolution will soon be reached. Buying was also motivated by fear of missing a sharp move if basic agreements are reached over the weekend.

At Bursa Malaysia, stocks to watch are TENAGA NASIONAL BHD [], Maxis Bhd, TANJUNG OFFSHORE BHD [], Daibochi Plastic and Packaging Industry Bhd and SILK Holdings Bhd.

Tenaga will announce its financial results for the fourth quarter ended Aug 31, 2011 but analysts expect it to record another quarter of losses due to the shortage of gas supply from Petroliam Nasional Bhd, forcing it to burn the more expensive oil and distillate.

RHB Research Institute had maintained its Underperform call on the power company with an unchanged indicative fair value of RM4.74 based on unchanged target CY12 price-to-earnings ratio of 12 times.

“Due to ongoing gas shortage from maintenance at Petronas’ liquefied natural gas plants and delays for the Bekok C bypass, Tenaga will likely record a loss in 4Q, possibly close to that seen in 3Q (net loss RM460 million),” it said.

Tenaga, meanwhile, has proposed to issue RM5 billion in Islamic debt notes to finance the development of the 1,010 MW coal fired power plant in Manjung, Perak. The tenure is 28 years.

Meanwhile, Maxis expects significant gains from the provision of its 3G radio access network to U Mobile Sdn Bhd under the country’s first landmark network sharing and alliance agreement for an initial period of 10 years.

This arrangement also included long-term evolution (LTE) sharing, depending on the availability of the spectrum and TECHNOLOGY []. The collaboration was a milestone in the local telecommunications industry in the sharing of active telco systems and operating frequency spectrum.

Tanjung Offshore Bhd was awarded a RM27 million contract by Petronas Carigali Sdn Bhd to provide three offshore support vessels (OSVs) for up to two primary years.

Tanjung said its unit Offshore Services Sdn Bhd had been awarded the contract on Oct 20.

Daibochi Plastic and Packaging Industry Bhd’s net profit fell 5.8% to RM4.54 million in the third quarter ended Sept 30, 2011 from RM4.82 million a year ago mainly due to a lower contribution from the property segment.

Its revenue declined 5.2% to RM67.66 million from RM71.42 million mainly due to the reduction in the sales in the packaging segment. Earnings per share were lower at 6.04 sen compared with 6.40 sen. It declared an interim dividend of 3.0 sen per share.

SILK’s unit Jasa Merin (Malaysia) Sdn Bhd has been awarded a contract extension worth RM23.5 million by Petronas Carigali Sdn Bhd to provide one anchor handling tug supply vessel.

SILK said the primary three-year contract had been extended for another 12 months, which started on Oct 4. It expected the extension to contribute positively to its earnings for the financial year ending July 31, 2012.

PROTON HOLDINGS BHD [] plans to collaborate with China’s Hawtai Motor Group to set up a joint venture (JV) company there as part of Proton’s strategy to make China as one of its major manufacturing hub, especially for left-hand-drive vehicles.

MELEWAR INDUSTRIAL GROUP BHD [] has proposed a two-call rights issue of up to 151.17 million rights shares to raise RM27.46 million. The rights issue would be at an indicative issue price of RM1 per rights share on the basis of two rights shares for every three existing shares held on an entitlement date to be determined later.

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Six shortlisted for RM1.5bil school Internet contract

PETALING JAYA: Six companies are in the running for the RM1.5bil five-year contract to provide Internet access and a virtual learning module (VLM) platform for the 9,924 schools in the country under the 1Bestarinet project, sources said.

The six are said to be Celcom Axiata Bhd, Jaring Communications, Maxis Bhd, YTL Communications, Multimedia Synergy Corp and both Telekom Malaysia Bhd/Time dotCom Bhd, which submitted a joint bid.

The access job comes with an option to extend the contract period for another five plus five years, totalling 15 years, and this would include installation, maintenance and provision of a VLM.

Though the Government is looking at RM4.5bil as the absolute sum for the 15-year contract, those in the know claim the bids received thus far ranged from RM2bil to RM6bil. At RM4.5bil, it works out to RM1.5bil for every 5 years or RM300mil for each year.

A decision on the winner is expected sometime in the middle of next month, sources said, adding that the Government should insist on proof of concept before deployment to avoid issues and problems arising later. The plan is to roll out access to at least 7,000 schools by Jan 1, 2012.

The poser now is which company should win the 15-year contract.

“Even before 1Bestarinet came about, some of the parties vying for the contract have been lobbying for it. Whatever the decision, it should be based on merits and the focus should be on deliverables as we cannot afford a repeat of the Schoolnet episode. Choose those that can deliver, those that have the financial muscle, the capacity and capabilities and not those that compromise on quality for profits,” said a source.

“The last thing we want is our future generation being deprived of basic Internet access because of some companies which can't have enough profits from the project and the Government is committed because the contract would be binding for 15 years,'' added the source.

IBestarinet came about as a result of the Pemandu national key economic area lab series as there is a need to provide Internet access to all schools in the country since the earlier project to wire up schools, Schoolnet, did not meet the objectives set.

To recap, Schoolnet was born in 2004 to wire up schools using wireless or fibre technology but it had major constraints and did not live up to expectations in terms of speed and capacity, and also due to lack of specifications and integration.

Hence, in May this year, the Education Ministry called for a tender bid for the wiring up of all schools under the 1Bestarinet project and in the tender's posting it was clearly stipulated that the tender was open to all local companies with preference given to bumiputra tender bids registered with the Finance Ministry under some codes stipulated.

This tender bid which opened on May 5 saw over 80 companies collecting the tender documents. At its closing on May 31, it is said that only 19 companies submitted their bids. The six shortlisted are from the 19 that submitted bids.

Given its past experiences with Schoolnet, the ministry had spelt out certain conditions for 1Bestarinet. It wants the future network to be scalable to cater for growth and to evolve with technological evolution. It should have a VLM which will allow teachers and students, among others, to have a platform to write plans and share ideas. The Internet speed has to be constant and cannot be based on “best effort.'' For urban areas, the access speed is 2Mbps to 10Mbps, and for rural and remote schools 1Mbps to 4Mbps. All sorts of technologies can be used, be it fibre or wireless technologies including Vsat, wireless, WiFi, but the link to the school should be via fibre.

“The Education Ministry will also have an inbuilt checking mechanism to ensure that the vendor delivers as per specifications,'' said a source.

source: thestar

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Maybank IB Views

US Economy
Blast from the (distant & recent) past

Waiting for Bernanke's speech at the Federal Reserve Annual Symposium...Low expectations of an announcement or hint of a third round of asset purchase programme (QE3) with a more likely outcome to be a complement to the FOMC announcement on 9 August to keep the 0%-0.25% federal fund rate until mid-2013 with the same commitment to maintain the current size of Fed's balance sheet.

Malaysia
2Q 2011 Balance of Payments

FDI net inflows in 1H 2011 after four consecutive years of net outflows. Portfolio investment net inflows surged to RM48.055b in 2Q 2011 (1Q 2011: RM8.375b) and to RM56.430b in 1H 2011 (1H 2010: RM26.684b). Sustained current account surplus of RM23.397b in 2Q 2011 (1Q 2011: RM25.894b) and RM49.292b in 1H 2011 (1H 2010: RM44.082b).

RESULTS REVIEW
Maxis RM5.40: Hold
A defensive proposition Shariah-compliant

Hold maintained. 1H11 results were decent but marginally below expectations at 45% of our full-year forecast and consensus, the miss primarily being slower-than-expected voice revenue growth, though this is expected to pick up in the 2H. Positively, margins were preserved. Maxis provides for defensive yields but the extent of margin erosion from the launch of its home broadband services remains an uncertainty to earnings. Our DCF-derived TP of RM5.50 is maintained on WACC of 7.5% and 1% terminal growth assumptions.


Sunway Bhd RM2.29: Buy
One-off costs hit earnings

Below expectations. Sunway's 1H11 RM132m core net profit accounted for 40% of our and consensus full-year estimates. We lower our 2011-13 earnings forecasts by 9-15% and RNAV-based TP to RM3.78 (-7sen). Sunway continues to trade at a steep 40% discount to our RNAV. Buy. Positive re-rating catalysts include potential MRT job wins. During times of uncertainties, stable rental/dividend/manager fees from investment properties would provide the cushion to its earnings.

AEON Co. (M) RM6.95: Buy
The Bandar Utama impact

Weaker 1H within expectation. 1H11 recurring net profit of RM64.5m, after excluding the fire insurance proceeds of RM10.9m received in 1Q11, was 36% of our full-year forecast and consensus. We look to a stronger 2H with renewed contributions from renovated Jusco Bandar Utama (JBU). Our Buy call and RM7.90 TP are maintained.

BIMB Holdings RM2.00: Buy
Still as liquid as ever

Buy maintained. What BIMB continues to offer is a turnaround story of what is now a well-capitalized commercial bank (15.6% core capital ratio) with a very liquid balance sheet (net financing/deposit ratio of just 54%), a well-managed and profitable composite insurance outfit as well as a potential M&A story, given the possibility of shareholding changes. Our Buy call is maintained with a SOP-derived target price of RM2.40.

Carlsberg Brewery (M) RM6.85: Buy
The desired taste

16.5% YoY growth in 1H11 net profit to RM80m, which was 52% of our and consensus full-year forecasts. Results were within our expectation and we maintain our Buy call on the stock while our RM8.00 TP is unchanged. Valuations are decent at current levels, with the stock trading at a prospective 2012 PER of 12.9x against a historical mean of 16.7x, with gross yields of 4.9%. Near term, however, we expect sentiment toward the stock be cautious ahead of Budget 2012 with uncertainties over possibly higher duties.

Media Chinese International Limited RM1.14: Hold
Paper cuts from higher newsprint prices Shariah-compliant

Higher newsprint prices and slower adex growth looms. Media Chinese International Limited's (MCIL) 1QFY12 results were within expectations. That said, higher newsprint prices have had an adverse impact on earnings. Furthermore, we understand that adex growth will decelerate further into 2HFY12. We trim our FY12-14 earnings estimates by 2%-6% and TP from RM1.40 to RM1.14 (-19%).

Sarawak Oil Palms RM4.20: Buy
Too good to ignore Shariah-compliant

Explosive 2Q. SOP's RM69m 2Q11 net profit (+132% YoY; +24% QoQ) exceeded our and market expectations, boosted by high FFB production and low all-in cost of production. We raised our 2011 earnings by 6% and reiterate our Buy call with unchanged RM6.80 TP (13x 2012 PER). With 42.5% of estates still immature, SOP offers robust 16% 3-year CAGR in FFB production, 21% 3-year CAGR EPS, and yet trades at 8x 2012 PER. Its traded EV/planted ha of RM32,000 is cheap relative to recently transacted prices exceeding RM50,000/ha.

Wah Seong Corporation RM2.14: Buy
In line; orders set to kick-in Shariah-compliant

Maintain Buy. 1H11 results tracked expectations despite a weaker QoQ performance. We retain our forecasts and anticipate more new contracts in 2H. WSC remains a Buy with a RM3.10 target price (14x 2012 EPS). The stock now trades at just 10x one-year forward PER, one standard deviation below mean, which we think, underscores its near-term job wins and earnings potential. Meanwhile, the board has decided to delay Wasco’s listing exercise, citing weak market condition.

Hock Seng Lee RM1.48: Buy
Constructive growth Shariah-compliant

On track for 23% full-year growth. 1H11 net profit of RM38.6m (+22% YoY) met 43% of our full-year forecast and 42% of consensus. We expect a stronger 2H, leading to a sizeable 23% expansion in core net profit for 2011. We remain positive on HSL benefiting from the expected strong work flows in Sarawak. We reiterate our Buy call with a RM2.30 target price based on 12x multiple on 2012 earnings.

CB Industrial Product RM3.84:Buy
Catalyst from cash Shariah-compliant

Maintain Buy. CBIP's RM24m 2Q11 net profit (+86% YoY; 9.7% QoQ) brings 1H11 net profit to RM46m (+84% YoY), within our expectation but ahead of consensus. Its recent strategic proposed disposal of two plantation subsidiaries for RM268m cash could add 9.5% to our present TP. Future plans to utilize disposal proceeds also act as a catalyst to share price. We maintain our forecasts and TP of RM4.75 based on 7x 2011 EPS pending further clarity on cash utilisation. Still a Buy.

Eastern Pacific Industrial Corp RM3.05: Accept Offer
Inline; just awaiting GO completion Shariah-compliant

1H earnings inline; GO determines the price now. 1H11 net profit of RM27m was in-line at 49% of our full year forecast. In-light of the impending Mandatory General Offer (MGO), no dividend was declared. We maintain our Hold call and leave our RM3.10 TP unchanged, pegged at the RM3.10 offer price, implying 1.6% upside.

Technicals
The FBM KLCI fell 4.41 points to close at the 1,464.74 yesterday. Its resistance areas of 1,464 and 1,488 will cap market gains, whilst the weaker support areas are located at 1,423 and 1,454. Due to the US markets’ weaker tone last night; we will see a softer for the local bourse today. Some pre-Hari Raya holiday liquidation activities may persist to depress the markets’ rebound from its recent 1,423.47 low.

Trading idea is a Take Profit call on Axiata.

Other Local News
MAS: New managing director found? It is learned that the executive committee decided on the new MD after a meeting yesterday. Ahmad Jauhari Yahya, the former CEO of power producer Malakoff Bhd, has been offered the job to lead the embattled national airline. (Source: Business Times)

Megasteel: Dissapointed with Miti’s decision. Megasteel Sdn Bhd says its disappointed that the Ministry of International Trade and Industry (Miti) has decided against implementing the 35% safeguard duty on the import of hot-rolled coil (HRC) the steel giant had petitioned for in June. (Source: The Edge Financial Daily)

SDB: To launch RM1b projects in next 12 months. Selangor Dredging Bhd (SDB) has in its pipeline property launches worth almost RM1b in GDV in Malaysia and Singapore by the end of 2012. The group expects contribution from Singapore to be at par with Malaysia’s in two years. (Source: The Edge Financial Daily)

LTKM: Counts on it recession proof sector. LTKM Bhd is planning to maintain its current level of egg production, as it looked to capitalise on the recession-proof nature its business. LTKM currently produces an average of 1.4m eggs per day. (Source: The Edge Financial Daily)

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Maybank IB Views

KNM Group RM1.48: Sell
Poor delivery, Sell Shariah-compliant

Downgrade to Sell, target price cut to RM1.19 (-41%). 1H results were a letdown, prompting us to cut 2011-13 earnings by up to 64% p.a.. While KNM delivered on topline, bottomline was a disappointment, felled by cost overruns and high operating expenses. While the share price has underperformed by 48% YTD, we expect performance to be further suppressed. There is no sign of an operating recovery and cost control is absent. Further, valuations are expensive now.

Alam Maritim Resources RM0.78: Hold
Results improve but recovery lingers Shariah-compliant

Pacing but not running. Alam returned to profitability in 2Q but overall, 1H results still missed expectations. Operationally, Alam is showing signs of a turnaround but the catalyst to warrant an upgrade remains elusive. Its stretched balance remains a concern, debilitating its ability to grow. Maintain Hold with a lower target price of RM0.85, based on a reduced 9x 2012 EPS (versus 12x previously).

QL Resources RM2.98: Buy
Margin erosion Shariah-compliant

Below expectations. 1QFY12 results were below consensus and our full-year numbers, with margin contraction seen in the 2 main divisions. Total net profit of RM27.8m (+3.7% YoY, -11.9% QoQ) made up 17% and 19% of our forecast and consensus for FY12. We do expect stronger earnings in the coming quarters and QL remains a Buy. Our forecasts are nevertheless revised down on lower margin expectations and our target price is lowered to RM3.39.

Technicals
The FBM KLCI fell 11.82 points to close at the 1,472.16 yesterday in persistent selling activities. Its resistance areas of 1,472 and 1,500 will cap market gains, whilst the weaker support areas are located at 1,423 and 1,467.


Other Local News
Aeon: Upbeat on 'new' Jusco at 1Utama. Aeon Co (M) Bhd expects the newly renovated and relocated Jusco store in 1Utama Shopping Centre to ring in more sales than previously. The Japan-based retailer is optimistic that it will make RM300m within a year from yesterday. It had made over RM200m in a year previously. (Source: Business Times)

CIMB: Among banks hired for planned MU listing. English football club Manchester United has hired a slew of banks including Malaysia's CIMB Group for its planned listing on the Singapore stock exchange. The US-based Glazer family hired Hong Kong-based BOC International, Malaysia's CIMB, Singapore's DBS and pan-Asian investment bank CLSA as joint lead managers, in a move that suggested the owners are keen to get a well-diversified regional spread of investors. (Source: Business Times)

Maxis: In cloud computing connection with MDeC. Maxis Bhd aims to work closely with the Multimedia Development Corp (MDeC) to establish joint programmes to promote adoption of cloud computing services for independent software vendors. The collaboration will accelerate the adoption of cloud technology by software vendors and businesses. It will also pave the way for an array of enterprise-grade cloud solutions to become available to Malaysian businesses. (Source: Business Times)

IJMP: To invest over RM1b to double up Indonesian venture. IJM Plantations Bhd is investing more than RM1b to double its total planted area in Indonesia to 40,000ha and expects to see substantial earnings contribution from the venture from 2014 onwards. IJM Plantations expects Indonesia to contribute one third of its earnings when planting is completed in Indonesia by 2014 and eventually its contribution is expected to be bigger than the earnings from its Malaysian plantation. (Source: The Malaysian Reserve)

Transportation: Prasarana to manage MRT issues till handover. Syarikat Prasarana Negara Berhad (Prasarana) will continue to manage all issues related to the My Rapid Transit (MRT) project until the establishment of MRT Co. Prasarana would carry on with all works and programmes that has been decided before it officially hands it over to the new MRT Co. (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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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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Stocks to watch Banks, telecommunications, Tenaga, MMC Corp

KUALA LUMPUR: The FBM KLCI could extend its gains on Wednesday, June 1 following the firmer close at key regional markets the previous day by an upbeat outlook from Japanese manufacturers.

European shares also rose yesterday on optimism over a possible Greece deal, with banks among the biggest gainers, according to Reuters.

On the local front, banking stocks are likely to pique investors’ interest after CIMB Group Holdings and MALAYAN BANKING BHD [] each received Bank Negara’s approval to start negotiations with RHB CAPITAL BHD [] for a possible merger of their businesses.

The approvals to start talks are valid for a period of three months from May 31, the two banks said, adding that further details on the possible merger would be announced in due course.

TENAGA NASIONAL BHD [], which received official approval to raise electricity tariff effective June 1, could see further buying interest.

The stock was the major gainers yesterday and actively traded, closing 59 sen higher at RM7.11 with 89 million shares done.

Maxis Bhd’s first quarter net profit dipped 2.35% to RM539 million from RM552 million a year earlier, due mainly to higher net finance costs due to additional borrowings.

Revenue for the quarter was RM2.13 billion compared to RM2.15 billion in 2010. Earnings per share was 7.20 sen while net assets per share was RM1.15.

Maxis declared a first interim single-tier tax exempt dividend of 8 sen per share in respect of the financial year ending Dec 31, 2011, to be paid on June 30, 2011.

Meanwhile, Axiata Group Bhd’s net profit for the first quarter ended March 31, 2011 fell 40.5% to RM548.36 million from RM921.47 million a year earlier, as the company recorded a one-off gain in 1Q 2010 from the disposal of shares in XL.

Revenue for the period grew 3.3% to RM3.94 billion from RM3.81 billion on the back of continuous improvement in key operating companies.

MMC CORPORATION BHD []’s net profit for the first quarter ended March 31, 2011 rose 29.5% to RM43.04 million from RM33.23 million a year earlier, due mainly to higher contributions from most of its divisions.

Revenue for the quarter increased to RM2.23 billion from RM2.06 billion in 2010. Earnings per share was 1.41 sen while net assets per share was RM2.19.

Ajinomoto (Malaysia) Bhd net profit for the fourth quarter ended March 31, 2011 rose to RM5.39 million from RM1.48 million a year earlier, due mainly to lower sales and marketing expenses.

Ajinomoto proposed dividend of 20 sen per share in respect of the FY ended Mrch 31, 2011 comprising a first and final gross dividend of nine sen; a nine sen tax-exempt dividend as well as special gross dividend of two sen per share.

For the financial year ended March 31, Ajinomoto’s net profit rose to RM25.73 million from RM23.94 million, on the back of revenue RM316.17 million.

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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

SECTOR UPDATE
Oil & Gas: Overweight
ODS-Petrodata's perspective

Broad-based views. ODS-Petrodata expects an improved outlook for the offshore fabricators and shipyard operators in 2011. The vessel market remains in an overbuilt state but charter rates have hit rock bottom. Management believes the overall recovery is progressing but the volatile oil price is a concern. We are of the same opinion. We remain Buyers of Dialog, KNM, Kencana, PGas, SapCrest and Wah Seong. We are placing Alam, Petra Perdana and TOFF (all presently Sell calls) under review as we re-assess the vessel market outlook.

ECONOMICS
External Trade, February 2011
Exports beat street but "Japan factor" looms on the road ahead...

Exports growth in Feb' 11 surprised on the upside as it grew by +10.7% YoY (revised Jan ‘11: +4.6 YoY; Maybank IB: +1.8%) while imports sustained double-digit growth as it rose by +11.5% YoY (Jan ’11: +13.5% YoY; Maybank IB: +13.7% YoY). MoM, exports and imports contracted by -5.5% and -12.6% respectively as the short working month effect was amplified by Chinese New Year holidays. For the first two months of 2011, exports and imports gained by +7.5% YoY and +12.6% YoY respectively vs. 27.6% YoY and 29.5% YoY in Jan-Feb 2010. No change in our full-year forecasts i.e. 8.3% export growth, 8.9% import growth and RM122.6b trade surplus.

Technicals
The FBM KLCI closed lower by 2.41 points to 1,553.07 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 MHC.

Other Local News
Maxis: To raise non-voice revenue to 50% by 2012. Maxis Bhd aims to raise its non-voice revenue to 50% next year from 41.5% currently boosted by the launch of the Maxis Integrated Partner in Education (MIPE) programme. (Source: The Edge Financial Daily)

TM: Gets SC nod to raise up to RM2b. Telekom Malaysia Bhd (TM) has received approval from the SC to raise up to RM2b via commercial papers and medium term note programmes to meet capital expenditure requirements. (Source: Bursa Malaysia)

Pos: Khazanah board to meet this week on Pos. Khazanah Nasional Bhd's nine-member board is scheduled to meet this week to finalise bids made for Pos Malaysia. (Source: Business Times)

Press Metal: Plans expansion. Press Metal Bhd proposed the phase-2 expansion of its aluminium smelting operation that would be located at the new Samalaju Industrial Park, Bintulu, Sarawak. (Source: Bursa Malaysia)

Iskandar: Two probes into Iskandar Investment last year. There were two separate probes done within Iskandar Investment Bhd (IIB) last year following complaints of how contracts were awarded. The investigations found cases of mismanagement, criminal breach of trust, procedures that were not followed and leaks of confidential information. (Source: Business Times)

Banking: Market to dictate number of banks. The market will determine the number of banks in the country, which are currently well-capitalised. Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz said banks have reached a "minimum size and are well-capitalised with quality capital that has enabled them to take advantage of economies of scale". (Source: The Star)

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Maybank IB Views

SECTOR UPDATE
Banking: Overweight
2010 in perspective, divining 2011

Overweight. The sector's value proposition lies in (i) stable economic growth which lends support to our aggregate net profit growth forecast of 11.6% in 2011 and 11.8% in 2012, (ii) benign inflation and bottoming margins, (iii) steady loan growth momentum, (iv) potential ETP upside surprises, (v) cross-synergies and burgeoning contribution from regional operations to group earnings, (vi) healthy capital ratios and (vii) decent valuations and dividend yields. RHB Capital and CIMB continue to be our top picks.


ECONOMICS
External Trade, January 2011
Slow start to 2011...

Exports got off to a slow start this year as it grew by +3.0% YoY in Jan '11 (Dec '10: +4.6 YoY). Sustaining the growth were commodity shipments amid declines in E&E. In contrast, imports growth accelerated to +13.5% YoY (Dec'10: +11.5 YoY) mainly due to intermediate goods, reflecting inventory management ahead of the Chinese New Year holidays. No change in our external trade growth for 2011(exports: +8.7%; imports: +10.4%; trade balance: +RM111.1b) amid steady global economic growth momentum so far in 2011 and the benefits of firm commodity prices to Malaysia.


Malaysia: Balance of Payment (BoP)
Capital flows the highlights in 2010 amid steady trade flows

Trends in capital accounts remained the highlights as current account surplus was sustained via surpluses in goods and services trades. Key points are: 1) Inward FDI bounced last year after the plunge in 2009; 2) Fourth consecutive year net FDI outflows as direct investment abroad (DIA) by Malaysians also rebounded; 3) Net inflows of portfolio funds in 2010 after net outflows in 2008-2009; 4) Record errors and omissions: which raised the issue of "disintermediation" of capital/money flows outside the formal financial/banking system.


Oil Trade
Sweet spot for Malaysia

We compare some key oil trade statistics as well as the trade balance impact analysis from crude oil price increases between major, large emerging and regional economies i.e. US, EU, China, India, South Korea, Taiwan, Singapore, Malaysia and Indonesia. Notwithstanding the risk to growth and inflation from crude oil price increase, being a net oil exporter puts Malaysia at a significant advantage in terms of positive trade balance effect from - and low vulnerabillity to - crude oil price increase.


COMPANY UPDATE
Sunway Holdings RM2.18: Buy
Wins Legoland works Shariah-compliant

Maintain Buy. RM258m job win in Johor has lifted outstanding order book to RM2.7b (+11%). We maintain our earnings forecasts which have imputed RM1.2b job wins for 2011 (2010: RM0.9m). Our fair value is RM2.85 based on 11x 2011 PER, while its merger with Sunway City, at RM2.60 offer price, offers a 19% upside. At current levels, the stock trades at a deep discount to its peers, at 8.4x 2011 PER.


The FBM KLCI rose 33.34-points and closed at 1,522.61 last week. The obvious support areas for the FBM KLCI are located in the 1,474 to 1,520-zone. The very firm resistance zone of 1,522 and 1,576 will see heavy liquidation activities.

Trading idea for today is a Buy call on PETDAG.


Other Local News
AirAsia: Indonesia IPO to raise USD200m, Sarawak offers land to AirAsia for LCCT. AirAsia Indonesia, a unit of AirAsia Bhd, aims to raise USD150m to USD200m via an initial public offering (IPO) in 4Q11. Separately, the Sarawak government has offered a piece of land next to the Kuching International Airport to AirAsia Bhd to build a dedicated low-cost carrier terminal (LCCT). (Source: The Star)

Maxis: In final stages to wrap deal with Barak Telecom. Maxis Bhd is close to securing a three-year deal to provide telecommunication services to Kuwait's Baraka Telecom Sdn Bhd in Malaysia. The agreement would mark Baraka's return to the mobile virtual network operator (MVNO) business in Malaysia. (Source: The Malaysian Reserve)

DRB-HICOM: To win RM7.5b project. DRB-Hicom Bhd is poised to receive a letter of award to supply 257 units of armoured personnel carriers (APCs) worth up to RM7.5b from the government. A group of banks led by Maybank, RHB Bank and AmBank are helping to arrange the syndicated loan and other financing, which could be worth as much as RM3.5b. (Source: Business Times)

Fajarbaru: Unit wins LRT jobs. Fajarbaru Builder Group Bhd's wholly owned subsidiary Fajarbaru Builder Sdn Bhd (FBSB) has received a letter of acceptance worth RM62.6m from Bina Puri Holdings Bhd-TIM Sekata joint venture for part of the light rail transit extension. Separately, FBSB has also received a contract worth RM87.3m from Trans Resources Corp Sdn Bhd to construct, complete, testing and commissioning of Station 1, 2 and 3 for Kelana Jaya line extension. (Source: Bursa Malaysia)

TRC Synergy: Expects new contracts. TRC Synergy Bhd (TRC) is expected to increase its order book this year with more contract wins, mainly from road projects in East Malaysia and also potential involvement in MRT (mass rapid transit) project. (Source: Malaysian Reserve)

Banking: Further tightening by Bank Negara in mortgage lending sector. Bank Negara would be taking pre-emptive measures in the mortgage lending sector to reduce risks. Banks will have to hold more capital for mortgage loans. Mortgages with loan-to-value (LTV) ratio of more than 90% will have to carry weightage of 100%, compared with 75% previously. The risk weightage for LTVs that are less than 80% remains 35% and for those between 80% and 90% remains at 50%. (Source: The Edge Financial Weekly)

Manufacturing: Investments hit RM4.6b. The manufacturing sector saw approved investments totalling RM4.6b in 67 projects in January. The largest domestic investment came from the oil and gas sector, led by Malaysia Marine and Heavy Engineering Bhd with a total investment of RM2.3b. Foreign investments approved totalled RM600m with Singapore, France, Japan, United Kingdom and India accounting for the major source of investments. (Source: The Star)

Economic: Malaysia's growth target remains despite Mideast turmoil. The Government is firm in achieving its 6% annual growth target this year despite the civil unrest in some Middle Eastern countries. The target was attainable by ensuring investments committed to Malaysia were implemented efficiently. (Source: The Star)

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RHBInvest Research

Top Story: Maxis –Market Perform (down from OP)

4QFY10 Results/Briefing Note
To unveil new services soon
Fair value revised from RM5.75 to RM5.65.
Hence, we revise our call from outperform to Market Perform. Core earnings growth in FY11 is modest, but generous dividends will provide support to the stock.


Sector Call

Banks:
Jan ‘10 system data – Continuing momentum from 2010
No change to our Overweight stance on the sector.

Corporate Highlights

Kencana: Market Perform
New contract awards
Maintain our fair value on the stock at RM2.85/share and our Market Perform call on the stock.

Allianz: Market Perform

Briefing Note
2011 fundamentals remain intact
Allianz is still in early stages of its planned acquisition of MNRB’s (Outperform, FV=RM3.41) Takaful Ikhlas arm.
We maintain our Market Perform call on the stock. Our fair value is unchanged at RM5.34/share.

WCT:

Briefing Note
Still positive on the Gulf States, Bakun provision final
Fair value is RM2.52. Maintain Underperform.

EON Capital: Underperform (down from MP)

4QFY10 Results/Briefing Note
4Q10 results hit by pre-emptive provisioning
Fair value remains at RM7.30 (HL Bank’s offer price), our expected market return is significantly higher than the potential upside for the stock and hence, recommendation downgraded to Underperform.

Kurnia Asia: Underperform

4QFY10 Results/Briefing Note
FY10 results below expectations, but in the right direction
Maintain fair value at RM0.25 and Underperform call on the stock.

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DiGi to spend RM700mil to improve services next year

SHAH ALAM: The robust growth in data/broadband/Internet is forcing telcos and celcos to invest more to upgrade and expand their networks and DiGi.Com Bhd says it will invest RM700mil in 2011 in capital expenditure.

Although the amount is similar to what it has spent this year, a lot more will go towards enhancing data and Internet rather than voice services next year.

“We are in the new era of data and Internet. We know where our growth is going to come from and we will invest RM700mil to grow our coverage and capacity,'' DiGi chief executive officer Henrik Clausen told StarBiz in an interview.

“We can still grow our voice (business) but it would not be as big; the potential is limited for we see a turning point in voice,'' he said.
Interview with CEO of DiGi Henrik Clausen. - M. Azhar Arif/The Star.

Last week, DiGi awarded a RM139mil contract to Time dotCom Bhd to plug the holes in its data network. The contract is for a 10-year period and also covers support and maintenance works.

Voice coverage for DiGi has reached 95% in populated areas and 50% for data.

“We are well on track to increase it next year and the capex will be internally funded,'' Clausen said.

Revenue growth in 2011 is expected to be in the “high single digit to 10%''. Contribution from the data and Internet business was expanding, he said.

For the nine months ended Sept 30, 2010, DiGi earned RM3.9bil in revenue and reported net profit of RM846mil which was a 12.2% increase year-on-year (y-o-y). Earnings before interest, taxes, depreciation and mortisation (EBITDA) margins stood at 44%, up from 43.5% a year earlier.

Data (including SMS) revenue for the period rose 16% to RM838mil from RM721mil a year ago.

DiGi had 8.2 million users as at end-September, which is a 10% jump from 7.4 million reported a year earlier. DiGi's rivals Maxis Bhd and Celcom Axiata Bhd have 13.5 million and 11.09 million users respectively.

Maxis controls with 45% market share, followed by Celcom at about 29%, DiGi at over 25% and the rest is held by other players.

“We have been good at taking our fair share of growth in the market and this year we added 1% market share. In the telecoms industry, size matters,'' Clausen said.

He said that over 30% of its users were on some data packages and he expected all DiGi users to be data/Internet users in a few years.

DiGi is a latecomer in the data business compared with Maxis and Celcom but the former's strategy of being transparent about broadband speeds on top of its reasonable pricing will see it through the year with about 5.7% market share of broadband subscribers from 1.9% in 2009, according to an analyst.

For next year, the analyst expects DiGi's share to rise to 7.2%. Maxis and Celcom's market share of broadband subscribers should be about 19.5% and 24.5% for 2010 and 21.5% and 24.4% in 2011 respectively.

The analyst said the broadband industry revenue should double in three years and the key driver would be wireless broadband, which would also triple in three years' time.

The data and broadband market may be booming but it is not without challenges and intense competition. With customers also more demanding, wanting quality service at more affordable prices, can DiGi fight its rivals?

“We want data to be an integral part of DiGi and (to do that) we will leverage on our distribution network, innovate and enhance the product offering. We will ride on our branding as that is where our stronghold is,'' he said. Clausen is fully aware of the need for the company to be more customer centric.

“We want to grow, and grow faster than the industry. We also want to be part of the growth story in Malaysia. The market is maturing and so is our company. We believe we need to stay smart all the time. We have managed thus far and will do that again in 2011,'' he said.

Plans are also in place to cut cost, set new targets, re-invent and equip the team so that they can better serve customers and be ready for the challenges ahead. Clausen is working for the organisation to be far more efficient, effective and leaner.

With the industry maturing, he foresees a lot more sharing and partnerships between the players to reduce costs. DiGi is gearing to sign a collaborative agreement with Celcom in that respect in January.

On Friday, DiGi shares fell 26 sen or 1% to RM24.60. The company has been actively paying out dividends the past few years and an analyst in his report said that even though DiGi and Maxis were high-yield telco picks, Maxis' net dividend yields are slightly higher at 7.4% versus DiGi's 7.2%.

source: thestar

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Maybank IB Views

COMPANY UPDATE
Axiata RM4.75: Buy
Secular growth trends to continue Shariah-compliant

Raising earnings and target price. We revisit our assumptions following Axiata's stellar 3Q10 results and tweak our earnings higher to reflect latest operating trends. We still like Axiata for its high-growth pan-Asian footprint, and believe Axiata would continue to benefit from a liquidity-induced market rally. Reiterate Buy with a higher RM5.45 TP.


KNM Group RM2.33: Buy
Sabah cross-over brings ample opportunity; target price raised Shariah-compliant

Target price lifted to RM3.10. We are positive over KNM's JV with Petrosab as East Malaysia fabrication opportunities are huge, riding on PETRONAS' rising domestic capex spend. The SOGT and Sipitang CTF projects are some of the JV's targeted projects. KNM remains a Buy with a raised 12-month target price of RM3.10 (+41%) as we foresee a sustained recovery outlook, locally and globally. Our new target PER is 10x (previously 9x) and we roll-over valuations to 2012 earnings.


ECONOMICS
US Economy
Stimulus begets stimulus...

FOMC meeting yesterday ended with the fed fund rate (FFR) retained at 0%-0.25% and more importantly, the Fed reiterating its commitment to the USD600b QE2, which has started with the purchases of USD114.1b US Treasuries since 12 Nov. In addition, there is a third fiscal stimulus package in the works in the form of USD858b tax incentives pending Congress approval. While these monetary and fiscal stimulus may be positive for the US and global economy in the short term, the risks are amplified over the long term.


Technicals
The FBM KLCI advanced 0.79 points to 1,510.58 yesterday. Its resistance areas at 1,512 and 1,531 may cap market gains, whilst its firm support areas are located at 1,495 and 1,510.
Trading idea for today is a SHORT TERM BUY call on TONGHER.


Other Local News
KLK: Subscribes to RM209.8m rights issue entitlement. Kuala Lumpur Kepong Bhd (KLK) and its unit will subscribe to their rights issue entitlement in London-listed Yule Catto & Co Plc amounting to GBP42.4m, or RM209.8. The subscription will be financed with cash reserves and bank borrowings.KLK and its unit hold 27.4m shares, or 18.8%, in the specialty chemical manufacturer. The funds raised from the rights issue is for Yule Catto's acquisition of PolymerLatex Group, an European emulsion polymer products manufacturer with assets in Europe and Asia worth GBP376m (RM1.85b). (Source: The Star)

MAS: Firefly airline plans four new hubs. Firefly plans to set up at least four new hubs for its jet operations within the next two years. This excludes KL International Airport (KLIA) where it would begin its jet services from Jan 15 next year. The four new hubs will be established at Kota Kinabalu (KK), Kuching, Senai and Penang. (Source: The Star)

DiGi, Time dotCom: Ties up in RM139m deal. Digi.Com Bhd has entered into a 10-year wavelength purchase agreement and a maintenance and support deal collectively worth RM139m with Time dotCom Bhd (TdC) as a follow-up to the bandwidth service agreement signed between the two companies in April 2008. TdC would fiberise, maintain and support parts of Digi's backhaul links between its aggregation wireless towers and mobile switching centres. (Source: The Star)

Maxis, TM: Ink 10-year deal. Telekom Malaysia Bhd (TM) and Maxis Broadband Sdn Bhd have signed a 10-year agreement for TM to provide high speed access connectivity, via its high speed broadband access (HSBB Access) service, to Maxis. The deal would enable Maxis to offer bundled services, including Internet Protocol (IP)-based offerings, to 700,000 homes at present and 1.3m households by the end of 2012. (Source: The Star)

Starhill REIT: YTL disposes properties to Starhill REIT. YTL Corp Bhd, via its units, will dispose nine of its hospitality-related properties to Starhill Real Estate Investment Trust (Starhill REIT) for RM1b. The properties disposed are Cameron Highlands Resort, Hilton Niseko, Vistana Penang, Vistana Kuala Lumpur, Vistana Kuantan, The Residences at The Ritz-Carlton, Kuala lumpur, The Ritz Carlton Hotel, Kuala Lumpur, Pangkor Laut Resort and Tanjong Jara Resort. Starhill would lease the properties to the respective vendors/leases for 15 years, with an option to renew for a further term of 15 years. The lease payments for the properties are fixed and include a 5% step-up rate every five years. (Source: Bernama)

YTL: Powers into Jordan. YTL Power International Bhd would invest USD5b to acquire 30% stake in Eesti Energia's Jordanian oil shale projects. The oil plant with output of 38,000 barrels per day will be jointly developed by the partnership between Eesti Energia (60%), YTL Power (30%) and Near East Investment (5%). (Source: The Star)

Autos: BMW unveils another locally assembled model. BMW Malaysia Sdn Bhd has added the contemporary sport-centric BMW X1 to its stable of locally assembled cars. The model would be assembled in Kulim, along with BMW 3 Series and BMW 5 Series that are currently assembled there. (Source: The Star)

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RHBInvest Research

Top Story

VS Industry:

• Vibrant sales ahead
• Maintain forecasts and Outperform call with a fair value of RM2.24.

Sector Call


Telecom:

• Maxis to ride on TM’s HSBB network
• TM benefits from a higher utilisation rate of its HSBB network, which leads to more wholesale revenue.
• Expect Maxis to focus on providing content via bundling, instead of competing head-on with TM in offering high speed Internet access.
• No change to our Overweight call on the sector.

Corporate Highlights


KLK:
To subscribe for Yule Catto rights issue
Fair value is raised to RM24.75 (from RM24.50). Maintain Outperform.

KNM:

• Going to Sabah
• The company is establishing a JV with Petrosab Logistik for a total initial investment outlay of RM51k.
• Positive on the JV given that the tie-up will improve KNM’s success rate for any potential contracts in the state.
• Raised our FY11-12 core EPS by 15.1% and 12.5% respectively
• Maintain our Outperform call on the stock with an upgraded target price of RM3.09/share

WCT:

• A second property jv project in Iskandar
• Fair value is RM2.55. Maintain Underperform.

Hiap Teck:

• 1QFY07/11 in the red due to lower margins
• Fair value is maintained at RM1.18 based on 7x CY11 EPS of 16.9 sen.

Technical Highlights

Daily Trading Strategy:

• Our technical outlook on the FBM KLCI remains on a negative bias.
• Further supports are seen near the recent low of 1,474 and 1,450, while the overhead resistance is at 1,524 and 1,532.

Daily Technical Watch: AMMB

• Short-term upswing remains intact if it sustains at above RM6.50…
• Immediate Support = RM6.50
• Immediate Resistance = RM7.32

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RHBInvest Research Highlights 22nd October 2010

Top Story

Telecom:

• Sizing up the pure mobile domestic players – Maxis vs. DiGi.
• No change to our Neutral stance on the sector.
• Maintain Outperform on Maxis (FV=RM5.75)
• Maintain Outperform on DiGi (FV=RM26.35)
• TM (Market Perform, FV=RM3.55)
• Axiata is still a Market Perform (FV=RM4.75)

Corporate Highlights

MAHB:

• Sabiha Gokcen for long term prospects.
• We have raised our fair value to RM6.81 (from RM5.96). Maintain Outperform.

Fajarbaru:

• Lands RM36.5m Pasir Mas Halal Park infrastructure job.
• Fair value is RM1.37. Maintain Outperform.

Technical Highlights

Daily Trading Strategy:

• Fresh opportunity to retest 1,500
• A sustainable trading above the 10-day SMA means a return to positive trading sentiment in the short term.
• For now, the 10-day SMA becomes its immediate support level on the chart, followed by the tiny technical gap near 1,472.32 - 1,476.05.
• Robust trading volume and healthy rotational plays are expected to cap profit-taking pressure in the near term, in our view.
• Opportunity to retest the 1,500 psychological level and the recent high of 1,503.82, before gearing up to challenge the historical high at 1,524.69

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