Maybank IB Research

COMPANY UPDATE
IJM Corporation RM5.45; Buy
Major wins

Upgrade to Buy. Two major pieces of news today - MRT job win and WCE concession win by Kumpulan Europlus - are positive for IJM, in terms of order book enhancement. However, we retain our earnings forecasts and RNAV-based target price pending details. Share price has come off since our last update and at current levels, the stock offers a 14% upside to our target. We upgrade our call to a Buy.

Alam Maritim Resources RM0.74; Hold
RM115m contract win to start 2012 Shariah-compliant

Positive but not yet a re-rating prospect. Securing Samsung's RM115m contract is newsflow-positive, and should contribute about 17.4% to 2012 earnings (which we have already factored in). While the contract flow momentum brought on by PETRONAS' capex plans is building up, Alam's stretched balance sheet will continue to curtail its growth potential (i.e. expansion of fleet size). Until this is addressed, Alam remains a Hold with a RM0.85 target price (9x 2012 EPS).

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Maybank IB Research

COMPANY UPDATE
Public Bank RM13.30: Buy
To kick off the reporting season

Raising our TP. Factoring in a 3% increase to our BV/share for FRS139 adoption and a higher target P/BV of 2.8x (2.7x previously) on updating our historical parameters, we are raising our TP on Public Bank to RM14.60 from RM13.50 previously. We maintain our Buy call for exposure to Public Bank’s impeccable fundamentals while a net yield of 4% provides support to share price.

RESULTS REVIEW
CapitaMalls Malaysia Trust RM1.45: Hold
East Coast Mall starts contributing

On track. CMMT's 2011 realised net profit of RM110.9m came in as expected. 2011 DPU of 7.9sen was also in line. CMMT has grown its asset size by 31% to RM2.8b since its listing in July 2010 with the Gurney Plaza Extension and ECM acquisitions. Potential earnings catalysts could come from the reconfiguration of outdoor car park lots at ECM into retail spaces. Hold.

Technicals
The FBM KLCI lost 0.41 points and closed at 1,522.66 last Friday ahead of the CNY holidays. The local market remained quiet in range-bound trading despite high volumes of between 1.44b to 1.94b shares traded. Some position-squaring ahead of the weekend and the impending CNY holidays later in the week caused a mild downward drift in the local bourse.

Trading Idea is an ACCUMULATE call on UNISEM, with upside target prices of MYR1.49 & MYR1.63.

Other Local News
Genting Bhd: RM120m deal with AWE. AWE Ltd (AWE), an Australian-based oil and gas exploration and production company, has entered a sale and purchase agreement with a subsidiary of Genting Bhd, whereby a wholly-owned subsidiary of AWE will acquire a 100% interest and operatorship of two production-sharing contracts (PSCs) offshore Indonesia. It also included an undeveloped oil field with an estimated 76m barrels of recoverable oil. The consideration for the acquisition of the interest in the PSCs will be USD39m (RM121.1m). (Source: The Star)

Sp Setia: Liew joins PNB in improved bid for SP Setia. Permodalan Nasional Bhd has revised its takeover offer for SP Setia Bhd's shares to RM3.95 apiece from RM3.90 previously, in a new deal with joint bidder CEO Tan Sri Liew Kee Sin. As the joint offeror, Liew will keep his 8% share of SP Setia. Liew will remain as SP Setia's group president and CEO for three years. He will be given a put option to sell his stake in SP setia to PNB at RM3.95 after the three-year period. (Source: Bursa Malaysia)

Perodua: Says sales slowed in January. Perusahaan Otomobil Kedua Sdn Bhd (Perodua) has appealed to the government and the banking industry to loosen up the loan application process after new car sales slowed in January. New car sales had lost some momentum, because banks are taking a longer time to process loan applications. (Source: The Sun)

MPHB: To sell hotel to pare down debt. Multi-Purpose Holdings Bhd (MPHB) is in talks to sell a hotel in Kuala Lumpur for about RM50m as a part of its asset rationalization programme. Its wholly owned subsidiary, Syarikat Perniagaan Selangor Sdn Bhd, owns hotels in Penang, Pudu and Ampang, which are managed by Flamingo Managament Sdn Bhd. The other assets up for sale are its insurance business - Multi Purpose Insurans Bhd - as well as its stockbroking business. (Source: The Edge Financial Weekly)

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Maybank IB Research

COMPANY UPDATE
SapuraCrest Petroleum RM4.58: Buy
Orders 2 pipelay vessels Shariah-compliant

Maintain Buy with a RM5.60 TP. SapCrest's rapid expansion of its marine fleet to capitalise on the boom in the installation of pipelines and facilities (IPF) markets is positive, in keeping with its aspiration to be a regional player. This strategy will be rewarding, if executed well. However, contributions will only be realised from FY15. We remain positive on its strong ability to grow and pursue new jobs for medium term growth, and continue to rate SapCrest a Buy.


KNM Group RM0.96: Sell
Riding through a transition phase Shariah-compliant

Target price cut to RM0.88 (-19%) following a 10-19% downgrade in FY12-13F earnings forecasts on lower revenue recognition. While margin pressure has abated on improving order flows, we are cautious of KNM's cost management abilities and so retain a conservative stance on our estimates. KNM needs to deliver a consistent set of quarterly results to warrant a re-rating. Sell maintained.


Technicals
The FBM KLCI closed 3.27 points higher at 1,525.56 yesterday. Its resistance areas of 1,530 and 1,545 may cap market gains, whilst obvious support areas may be located at 1,505 and 1,525.

Trading idea is an ACCUMULATE call for UNISEM.

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Maybank IB Views

RESULTS PREVIEW
Hartalega Holdings RM5.41: Buy
A potent combination Shariah-compliant

Earnings outperformance to continue. 2QFY12 results (due this evening) are likely to meet expectations with commendable operating numbers, though likely partially mitigated by some mark-to-market forex loss. We see long-term value in the stock on the nitrile glove growth story and its compelling CY12 PER valuation of just 8.6x. Moreover, the stock offers a potent combination of both growth (3-year net profit CAGR of 15%) and yield (2012 net dividend yield of 5.3%). Hartalega remains our top pick in the glove sector with a TP of RM6.80.

RESULTS REVIEW
Fraser & Neave Holdings RM17.14: Sell
A challenging year ahead

FY11 results within expectation. F&N’s full-year recurring net profit of RM337m (+10% YoY) was within our forecast of RM341m. We retain our Sell call on F&N, expecting a step-down in FY12 profit on expiry of the Coca-Cola contract and the disruption to its dairy business due to massive floods in Thailand and other parts of Indochina. Valuations are pricey at 19.2 x 2012 PER. We roll forward valuations (16x FY13 PER plus cash of RM0.39 as at end-FY11) to derive our new TP of RM16.00

Nestle (Malaysia) RM50.00: Sell
Decent revenue growth as expected

Results in line. 9M11 net profit of RM369m (+4.9% YoY) was within our expectation, made up 83% and 81% of our and consensus estimates. We are maintaining our forecasts of RM441m and expecting a lower 4Q. In the last 4 years, 4Q in average contributed 17% to its full year net profit. Maintain Sell on expensive valuations.

ECONOMICS
External Trade, September 2011
"Base jumping"

Both export and import growth quickened YoY in Sep '11 to +16.6% (Aug '11: +10.9% YoY) and +12.9% (Aug '11: +6.9% YoY). Trade surplus widened to RM9.6b (Aug '11: +RM10.9b). MoM, exports was up marginally by +0.2% (Aug '11: -1.2%) while imports gained by +3.1% (Aug '11: -4.4%). YTD, exports and imports rose by +8.3% (Jan-Sep 2011:+20.2%) and +8.9% (Jan-Sep 2011: +26.2%) respectively with RM89.2b trade surplus (Jan-Sep 2011: +RM84.5b). In 3Q11, exports picked up to +11.4% YoY (2Q11: +8.8% YoY) while imports were steady at +7.4% YoY (2Q11: +7.4% YoY), giving a larger trade surplus of RM30.1b (2Q11: +RM27.4b). Our full-year export growth, import growth and trade surplus forecasts are +6.5%, +9.1% and RM103.9b for 2011 and +5.9%, +6.4% and RM99.1b for 2012.

Technicals
The FBM KLCI fell 4.31-points and closed at 1,477.51 last Friday. The local market remained benign as news flow from Europe was fickle as the EURO leaders endorsed an enlarged EFSF only to be thwarted by the Greek PM calling for a referendum on the said fund.The obvious support areas for the FBM KLCI are in the 1,429 to 1,477-zone. The next resistance levels of 1,480 and 1,515 will see heavy liquidation activities.

Trading Idea is a Take Profit call on CIMB.

Other Local News
Genting Bhd: Indonesia approves Genting Oil’s NW Natuna project. Indonesia has approved an USD800m (RM2.49b) oil and gas development project on Northwest Natuna block run by Genting Oil Natuna, a subsidiary of Genting Bhd. The company plans to start production at the Ande-Ande Lumut field by the end of 2014 at a production rate of 5,000bpd. (Source: The Edge Financial Daily)

Kossan: Expands into non-rubber products. Kossan Rubber is embarking on a multi-pronged strategy for its next phase of growth which involves the expansion of its glove manufacturing business to a 17b piece-capacity in two years and diversification into non-rubber products via M&A to create synergy. (Source: The Edge Financial Daily)

Power: Rapid complex may include power plant. Petronas planned RM60b refinery and petrochemical integrated development (Rapid) petrochemical complex in Pengerang, southern Johor, will likely include a power plant that will support the petrochemical industry there on its own or through a joint venture. (Source: The Star)

Melati Ehsan: Back in the news after winning RM297m housing contract. Low profile turnkey contractor Melati Ehsan Holdings Bhd is in the limelight again for bagging a RM297m contract to design and build residential flats for the Housing and Local Government Ministry's People's Housing Programme (PPR). (Source: The Star)

Plantation: FGV looking for joint ventures with multinational companies. Felda Global Ventures (FGV) en route to a listing on Bursa Malaysia Main Board by mid-2012 was looking to forge joint ventures with leading multinationals in the downstream business as a long-term strategy. (Source: The Star)

Rubber: Exports poised to jump 30% this year. Malaysia's rubber exports are set to jump 30% to RM32b this year on relatively bouyant pricings of natural latex and the synthetic variant. In the first 8 months of this year, total rubber export already amounted to RM21.6b, increased 28% compared to the first 8 months of last year. (Source: Business Times)

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Maybank IB Views

COMPANY UPDATE
Lafarge Malayan Cement RM6.85: Buy
A strong proxy to construction sector

Maintain Buy. As the largest cement producer in the country, LMC is undoubtedly a proxy to, and a major beneficiary of, the high growth construction sector, which in itself, should see robust activity, once projects under Economic Transformation Programme (ETP) take off. Additionally, we expect its share price to be supported by its decent net dividend yield of 5%. Maintain Buy with a marginally lower TP of RM7.60 (RM7.85 previously) on 17x 2013 PER as we roll forward valuations after trimming earnings forecasts by 11% p.a..

UMW Holdings RM6.60: Hold
Bareboat charters Hakuryu-5 to PCSB

Maintain Hold. UMW's USD72m bareboat charter contract of Hakuryu-5 to PCSB, which yields low margin, is earnings neutral to Group earnings (<1%). As such, we are keeping our forecasts and RM6.60 target price unchanged, based on 11x 2012 EPS.

ECONOMICS
ETP Update
One year after

The latest ETP briefing (1 Nov 2011) by PEMANDU provided three key updates. First, of the 70 EPPs and 27 initiatives announced so far, 31% are fully operational, 50% have commenced implementation, and 17% are still work-in-progress. Second, of the RM171b investment announced to date, 9% or RM15b is implemented in 2011, including RM10b actualised in 1H 2011. Third, private investment in 1H 2011 was RM51.2b, meaning 19.5% of it came from ETP.

ETP Progress Updates 1-7
Implementation Update

Provided by PEMANDU on the official website.

RESULTS REVIEW
Sunway REIT RM1.14: Buy
Sequentially stronger

On track. SunREIT's RM44.2m 1QFY12 net profit tracked our and market expectations. Longer-term view is positive supported by Sunway Putra Place's (SPP) attractive est. 9% property yield. We maintain our earnings forecasts, RM1.18 DCF-based TP and Buy call, the latter premised on a 12-month total return of 10% based on our target price and forecast dividends.

Technicals
The FBM KLCI fell 16.25-points to close at 1,475.64 yesterday. Its resistance areas of 1,475 and 1,494 will cap market gains, whilst the weaker support areas may be located at 1,446 and 1,470. Due to the US markets’ much lower tone last night; we may see an initial drop for the index. Some later miniscule local bargain hunting activities cushion the local markets’ plungein the afternoon session. We expect a very volatile trading day.

Trading Idea is a take profit call on CBIP.

Other Local News
SapuraCrest: Wins RM4.4b Brazilian oil and gas job. SapuraCrest gas clinched a contract from Petroleo Brasileiro SA worth about USD1.4b (RM4.4b) to charter and operate three deepwater flexible pipe-laying supports vessels (PLSVs).Revenue from the award was expected to be generated by the fourth quarter of 2014. (Source: Bursa Malaysia)

Supermax: Declares 1 for 1 bonus. Supermax Corp has proposed a one-for-one bonus issue involving 340.1m new shares and a share buyback of up to 10% of its issued share capital. Both proposals are expected to be completed by the first quarter of 2012. (Source:Bursa Malaysia)

DiGi: Capital Management Initiative. DiGi is expected to distribute about RM509m to its shareholders by the first half of 2012 under the proposed capital distribution upon its redemption of the redeemable preference shares of about RM509m. (Source: Bursa Malaysia)

TNB: Gas shortage for 2-3 months more. TNB will have to deal with losses caused by having to substitute costly fuel oil for power generation as the government decides that electricity prices will remain unchanged. TNB has been buying fuel oil to replace natural gas for electricity generation, which will cost the company an additional RM2.1b for the second half of 2011. (Source: Business Times)

Telekom: Tough procurement policy saves RM1b. The massive RM11.3b high-speed broadband (HSBB) project may eventually cost Telekom Malaysia Bhd (TM) at least RM1b less in expenditure than its original costing because it has implemented a tough procurement policy. (Source: The Star)

Aviation: SIA targets mid-2012 Scoot takeoff. SIA new long-haul budget carrier will be renamed “Scoot” with takeoff set for mid-2012. The new carrier will fly to cities in China and Australia, operating a fleet of 200 second-hand Boeing 777 jets and charging up to 40% less than full-service airlines. (Source:The Edge Financial Daily)

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Maybank IB Views

COMPANY UPDATE
Malaysia Marine and Heavy Engineering Holdings RM5.95: Buy
Bags Telok Gas job, more to follow Shariah-compliant

A direct proxy play to PETRONAS' domestic capex programmes. We are positive on MMHE's latest Telok Gas project job win. We expect more contract wins to follow, foreseeing strong orderbook visibility extending beyond 2013. The FLNG, TLP and RAPID projects are among the high-ticket items that would propel orders and earnings growth. MMHE is among our top picks in the sector. Maintain Buy with a RM8.00 target price, based on 20x 2013 EPS.

RHB Capital RM7.20: Hold
The alternative scenario

Hold maintained. Our RHB Cap-OSK analysis thus far has assumed a merger scenario involving a share exchange at the listed entity levels of RHB Cap and OSK Holdings. If RHB Cap exchanges shares for OSK Investment Bank (OSK IB) instead, the overall cost is theoretically lower, by our estimates, subject to final pricing. Our Hold call on RHB Cap is maintained, with an unchanged RM7.60 TP (2012 P/BV target of 1.3x, ROE: 13.3%). At this juncture, we do not foresee an immediate upward re-rating of the enlarged RHB Cap if the merger goes through.

ECONOMICS
China: 3Q 2011 GDP
Soft landing so far...

3Q 2011 real GDP marked the third consecutive quarter of mild moderation in growth… China's economy continued to grow YoY by more than +9% in 3Q 2011, but the pace slowed to +9.1% from +9.5% in 2Q 2011. Consensus estimate was +9.2%. QoQ growth remained at 2% or more so far this year i.e. 3Q 2011: +2.3%; 2Q 2011: +2.4%; 1Q 2011: +2%; 4Q 2010: +2.4%. YTD, the economy expanded by +9.4% (Jan-Sep 2010: +10.6%; 2010: +10.4%).

Technicals
The FBM KLCI plunged 25.41-points to close at 1,439.94 yesterday. Its resistance areas of 1,439 and 1,465 will cap market gains, whilst the obvious support areas are located at 1,403 and 1,433.

Trading Idea is ENG

Other Local News
Proton: Looks to commercialise electric vehicles by 2013. Proton Holdings Bhd is looking to commercialise its electric vehicles in 2013. The Proton Saga EV is expected to be priced at RM70,000 and Proton Exora Range Extender at about RM100,000. Proton and government are also working on a mechanism to build the infrastructure for electric vehicle charging centres. (Source: The Edge Financial Daily)

MAS: Takes over Firefly's jet services. Malaysian Airline Systems Bhd (MAS) has embarked on a network rationalization programme in which its subsidiary, Fly Firefly Sdn Bhd, will concentrate on serving short-haul turboprop operations and Malaysia Airlines focus on enhancing its premium full-service offering. The takeover of Firefly's jet services on Dec 4 is part of the service separation plans under the business realignment exercise which addresses the continuing heavy losses being incurred by Firefly's jet operations. (Source: The Edge Financial Daily)

UEM: To build hospital? UEM Group Bhd and its joint venture partner Najcom Sdn Bhd are understood to have bagged the contract to build a women and children's hospital in Kuala Lumpur costing between RM700m and RM900m. (Source: The Edge Financial Daily)

Top Glove: To spend RM100m on plant upgrades. Top Glove Corp Bhd has allocated RM100m to upgrade and expand its factories at Sadao in Thailand. It is also looking at making more value-added variants at its Banting and Ipoh facilities. Currently, Top Glove has 21 factories and 395 production lines with a total production capacity of 35.3b pairs of gloves per annum. By May 2012, Top Glove targets to produce 41.6b pieces of gloves per annum.

Healthcare: Parkway Pantai's international push. Parkway Pantai Ltd aims to triple the revenue contribution from its international operations to 33% by expanding in Asia. It is already one of the region's biggest healthcare groups, operating more than 3,000 beds under 16 hospitals currently, and is in the process of adding another 2,300 beds in eight new hospitals from 2013 onwards. Apart from three new hospitals in Malaysia, Parkway Pantai is also building five other hospitals in Singapore, Vietnam, China, India and the United Arab Emirates. (Source: Business Times)

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Maybank IB Views

ECONOMICS
Singapore: Trade, Sep 2011
Bumpy ride...

Worse-than-expected... Singapore's non-oil domestic exports (NODX) fell by -4.5% YoY as opposed to the expected +3.5% YoY gain. At the same time, Aug 2011's growth was revised downward to +3.9% YoY (previous: +5.1% YoY). YoY figures have been swinging between growth and contraction in the past seven months, resulting in sluggish 2011 YTD growth of +3.9% (Jan-Sep 2010: +24.8%; 2011: +22.8%). Next year's NODX growth is expected to remain equally sluggish at 3.8%, according to the forecast by Maybank FX Research.

RESULTS REVIEW
Public Bank RM12.50: Hold
Decent growth but priced in

Hold maintained. 3Q11 RM899m net profit, while up a commendable 15% YoY, is broadly within expectations, with 9M11 RM2.61b net profit (+18% YoY) at 77% of our full-year forecast and consensus. Positive surprises on margins were offset by lower-than-expected non-interest income (NII). Our forecasts are maintained along with our TP of RM12.30 (2012 P/BV of 2.5x, ROE: 21.8%).

Axis REIT RM2.45: Buy
On track; better 4Q ahead

Maintain Buy. AXRB's RM48m 9M11 core net profit (+32% YoY) came in as expected. The proposed acquisition of warehouses in Seberang Perai is expected to be completed by end-11, lifting AXRB’s total assets to RM1.32b (+4.8%; from RM1.26b). AXRB aims to grow its total asset size to RM2.0b by 2012. We maintain our earnings forecasts and RM2.70 DCF-based TP. The trust's proven track record in growing its asset portfolio and dividend income will remain the pull factors.

SECTOR UPDATE
Automotive: Underweight
Cool down in September sales

Post raya and Merdeka sales dampen September TIV. The MoM contraction in Sep's vehicle sales was widely anticipated following the rush of deliveries in Aug and shorter working month. Overall, we expect a seasonally softer sales trend in 4Q from 3Q TIV sales of 153,041 units and continue to be bearish on the sector, on softer consumer spending in light of a potential global economic slowdown. The sector remains an Underweight and we retain our Hold calls on UMW and MBM while Proton and TCM remain as Sells.

Technicals
The FBM KLCI surged 22.92-points to close at 1,465.35 yesterday. Its resistance areas of 1,467 and 1,487 may cap market gains, whilst the obvious support areas are located at 1,445 and 1,465.

Trading Idea is MFLOUR

Other Local News
Mah Sing Group: RM2.5b sales target next year. In order to achieve its sales target of RM2.5b, Mah Sing Group plans to adjust their product mix in line with today's sentiment and needs. Mah Sing Group will focus on lower-priced and smaller units of serviced apartments in the next two years to cater to demand of the young population. (Source: The Star)

PacificMas: OCBC bids RM450m for PacificMas units. OCBC Capital Malaysia planned to acquire 100% of Pac Lease Bhd, PB Pacific Sdn Bhd, PacificMas Fidelity Sdn Bhd and PacificMas Capital Sdn Bhd as well as an 85% stake in Pacific Mutual Fund Bhd with aggregate purchase consideration of RM450m. (Source: Bursa Malaysia)

Leader Universal: Controlling shareholders offer buyout. The controlling shareholders of Leader Universal Holdings Bhd, through HNG Capital Sdn Bhd (HNGC), have made a RM480.1m offer to acquire the entire assets and liabilities of the company for RM1.10 per share. The purchase shall be satisfied via RM410.9m in cash and RM69.2m as an amount remaining due and owing by HNGC as a debt due to Leader. (Source: The Star)

Proton: Offers lifetime warranty on power windows. Proton has once and for all moved to erase any doubt over defective power windows by offering a lifetime warranty for all new Proton models registered from Sept 1, 2011 and vehicles that are still under the manufacturer’s warranty as at Sept 1. (Source: The Star)

Construction: Second Penang Bridge ahead of schedule. Construction of the second Penang bridge is likely to be completed two months ahead of its projected November 2013 schedule. It is likely that work on the new bridge will achieve 70% progress by the end of this year. (Source: Business Times)

Transportation: Better KTM Komuter service by Jan 2012. KTM Komuter users can look forward to better commuting experience this January when the first of the 38 six-car electrical multiple unit (EMU) is put into service. To complement the new trains, an automatic fare collection system was being implemented and full refund will be given for trips that are delayed by more than 30 minutes. (Source: The Sun, The Star)

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Maybank IB Views

RHB Capital RM7.48: Hold
Merger talks begin

Hold maintained. While we see possible synergistic benefits to a merger with OSK, the success and financial impact of the deal will depend on the structure and pricing of the merger itself, in our view. Our Hold call on RHB Cap is maintained, with an unchanged RM7.60 TP (2012 P/BV target of 1.3x, ROE: 13.3%). At this juncture, we do not foresee an immediate upward re-rating of the enlarged RHB Cap if the merger goes through, with potential dilution in EPS and ROE, we estimate.

Padiberas Nasional RM3.22: Buy
Things are under control

No shortage of rice. Bernas has secured 800,000 tons of rice over the next 12-months via a MOU signed with the Vietnamese government. This consignment is more than enough to allay any supply disruptions due to the current Thai floods. Bernas should have no problems to supply rice at reasonable price in the next 6-12 months. We maintain our Buy call and target price of RM3.90/shr based on 8.1x 2011 PER.

SECTOR UPDATE
Property (M-REITs): Overweight
Defensive in nature

Overweight maintained. M-REITs undoubtedly provide some level of comfort in a time of volatility and we remain positive on the sector primarily for its solid fundamentals and defensive yields, which average 8.1% (gross) across the board. Our preference is for REITs in industrial properties and strategically-located malls. A re-rating catalyst could be the upcoming large-cap Pavilion REIT listing which would improve the breadth and depth of the M-REIT market. Our top pick is Axis REIT.

Technicals
The FBM KLCI rose 42.38-points and closed at 1,442.43 last Friday. The obvious support areas for the FBM KLCI are in the 1,392 to 1,442-zone. The next resistance levels of 1,453 and 1,500 will see heavy liquidation activities.

Trading Idea is MALTON.

Other Local News
Bintulu Port Holdings: Set to benefit from construction of Samalaju Port. Company will be the sole logistics play to support the Samalaju Industrial Park and is set to benefit from the soon to be constructed RM1.2b Samalaju Port. It is estimated that beginning 2013, once the port is ready, there could be at least 5m tones of raw material to be required by 10 out of the 17 confirmed investors in the Samalaju Industrial Park. (Source: Malaysian Reserve)

Nestle: Price-rise report not verified. News that Nestle is considering a price hike for certain dairy products may have sent chills down local households but the company has clarified that the reported information is not verified. (Source: The Star)

F&N: PJ plant to raise dairy product output to cover Thai shortfall. F&N confirms that it would increase dairy product production at its Petaling Jaya plant by 20% in the interim to help cater to demand in Thailand. (Source: The Star)

Uzma Bhd: Fuels growth through technological upper hand. The Intergrated oil and gas provides is confident of winning more jobs as it is the only local firm with the technology and equipment to carry out enhanced oil recovery (EOR). (Source: Business Times)

Semiconductor: Manufacturer says a recession has hit the semiconductor industry. The inventory of global chip suppliers and a low book-to-bill ratio have reached an alarming level that will have severe worldwide repercussions and impact on chip producers and semiconductor equipment manufacturers in Malaysia. (Source: The Star)

Sunway REIT: Gets SC nod for RM3b debt note issuance. Sunway Real Estate Investment Trust (Sunway REIT) has received the Securities Commission's approval for the proposed medium term note programme of RM3.0b in nominal value. (The Edge Financial Daily)

Nagamas: To develop 2,500ha in Nanning. Nagamas International Bhd has been allocated about 2,500ha near Nanning, China, to be developed as a green residential and industrial park. Energy, Green Technology and Water Minister Datuk Seri Peter Chin said Nagamas would undertake the development of the park on a long-term basis under a RM300b contract. (Source: The Star)

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Maybank IB Views

YTL Power International RM1.69: Buy
Strike while the iron is hot

Deep value emerging. YTL Power International's (YTLP) share price has slipped to attractive levels implying net dividend yields of 5.5% or more than 10% above the historical average and only 1.3x 1-year forward P/BV which is an 8½ year low and even below the Global Financial Crisis (GFC) trough of 1.6x in Oct 2008. This devaluation is despite its relatively resilient earnings base. Therefore, we maintain our DCF based TP of RM2.02 but upgrade our call from Hold to Buy.
Click here for full report »
CIMB Group Holdings RM7.30: Hold
Lower interest rates in Indonesia

Hold. We see minimal financial impact to CIMB's earnings from lower interest rates in Indonesia and do not expect further rate reductions. We have nevertheless already factored in lower net interest margins (NIM) this year and next from competitive pressure. Our forecasts for CIMB are unchanged, while our TP of RM7.10 (1.9x 2012 P/BV) is maintained.
Click here for full report »
Technicals
The FBM KLCI surged 16.85-points to close at 1,428.50 yesterday. Its resistance areas of 1,432 and 1,453 may cap market gains, whilst the obvious support areas are located at 1,401 and 1,428.

Trading Idea is IOICORP
Click here for full report »
Other Local News
Berjaya Land: Berjaya Air JV scrapped. The proposed JV to run Berjaya Air in Indonesia was terminated as both parties could not finalise the terms of the shareholders' agreement and other related arrangements. (Source: Bursa Malaysia)

F&N Holdings: To boost Malaysia Operation amid Thai flood. The new RM42m production line procured from KRONES would boost F&N beverages' carbonated soft drinks (CSD) polyethylene terephthalate (PET) output by 30% from 672,000 bottles per day or 139.2m bottles a year. (Source: Malaysian Reserve)

Brewery: Fake liquor is pouring into the country. Fake liquor is targeting restaurants, pubs and karaoke lounges in the country. Malaysia is ranked among the top 5 countries affected by the problem of counterfeit liquor and the authority has seized RM671,000 worth of fake liquor during the first eight months of the year, compared to RM790,000 seized in last year. (Source: The Star)

Prasarana: Hands over KVMRT project to MRT Co. Syarikat Prasarana Negara Bhd officially handed over the Klang Valley My Rapid Transit (KVMRT) Project to MRT Co yesterday and is expected to begin in 2Q or 3Q of next year. SPAD will be the project’s supervising agency while MMC-Gamuda has been appointed as the project delivery partner. (Source: The Edge Financial Daily)

Media: Adex expected to see double digit growth. Minister of International Trade and Industry Datuk Seri Mustapa Mohamed says Malaysia's advertising expenditure (Adex) is expected to record a double digit growth this year, based on the Adex for the first 5 months of this year which has already reached RM4b, 16% higher than last year. (Source: The Sun)

Banking: HSBC Amanah to add 16 new branches by 2013. HSBC Amanah Malaysia Bhd plans to open 16 new branches by 2013 to tap the increasing demand for Islamic financial services. Currently, the bank has 10 branches nationwide. (Source: The Sun)

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Maybank IB Views

COMPANY UPDATE
Mah Sing Group RM1.80: Buy
New township to sustain growth

3rd land purchase in 2011.We are positive on MSGB's latest land purchase in Rawang. Apart from attractive pricing, the new land would provide resilient bread-and-butter sales and sustain MSGB's long-term growth. We raise our 2012-13 forecasts by 1-3% to factor in this project but lower our RNAV estimate by 21 sen to RM2.95 on higher WACC assumption of 9.4-11.4% (from 7.5-9.4%). Our new TP is RM2.36 based on a 20% discount to RNAV. Maintain Buy.

KFC Holdings (Malaysia) RM3.20: Hold
More time for India's operation Shariah-compliant

Hold maintained. With slower economic growth likely to have some dampening effect on consumption demand, we have lowered our same-store-sales growth assumption by 0.5%-pts for 2012 and 2013 to 1.3% and 1.5% respectively and trimmed our profit forecasts for 2012 and 2013 by 5% each year. Our DCF-based TP is correspondingly cut to RM3.37 from RM3.97 on lower earnings and a higher cost of equity of 8.6% from 7.9% previously, on account of higher economic risks. Valuations are still not appealing at this stage, with KFC trading at a prospective 2012 PER of 14.2x and dividend yields of just 2.1%.

Technicals
The FBM KLCI rose 14.29-points to close at 1,375.67 yesterday. Its resistance areas of 1,376 and 1,410 will cap market gains, whilst the obvious support areas are located at 1,353 and 1,374.

Trading ideas are IJM, IGB and MHB.

Other Local News
Perodua, Proton: To ink deal. Perusahaan Otomobil Kedua (Perodua) expects to ink a collaborative agreement with Proton Holdings Bhd on certain aspects this year or early next year. (Source: The Star)

AirAsia: To take off for Da Nang. AirAsia Bhd is flying to Da Nang, Vietnam, from December 16 and the low-cost airline is confident of achieving a load factor of more than 80% based on the good load factor for its flights to Hanoi and Ho Chi Minh City. (Source: Business Times)

UEM Land: Unit appeals to IRB. UEM Land’s wholly owned subsidiary, Bandar Nusajaya Development Sdn Bhd (BND), received a notice of additional assessment from the Inland Revenue Board for additional tax and penalty in respect of the year of assessment 2006, resulting in an additional tax payable of RM73.8m . BND has commenced the appeal process against the additional assessment. (Source: Bursa Malaysia)

Malayan Flour Mills: Plans Indonesia venture. Malayan Flour Mills Bhd (MFM) has signed a shareholders' agreement with Indonesian company PT FKS Capital, Japan's Toyota Tsusho (Singapore) Pte Ltd (TTS) and PT Toyota Tsusho Indonesia (TTI) to establish a joint venture company named PT Bunga Sari Flour Mills Indonesia. MFM will own 30% stake in Bunga Sari for the purpose of carrying out the business of flour milling and distribution of flour products and by-products. The joint venture is expected to contribute positively to the profitability and growth of MFM Group in the future. (Source: Bursa Malaysia)

Plantation: MPOA will not quit RSPO. The Malaysian Palm Oil Association (MPOA) will not quit the Roundtable on Sustainable Palm Oil (RSPO) grouping but it is advising its members to stop seeking new RSPO certification for the production of certified sustainable palm oil (CSPO). Of the total RSPO-certified palm production, MPOA claimed that only 40% was taken up while the CSPO premium had plunged to only 30 US cents compared with USD50 per tonne in 2008. (Source: The Star)

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RHB Invest Research

Top Story: Plantation – Looking for a “safe haven” Overweight (up from N)

Sector Update

¨ We believe one sector that would hold up relatively better during times of economic uncertainty would be the plantation sector. While we acknowledge that commodity prices are likely to come under pressure during this period amidst the strengthening US$, we have already imputed this risk into our CPO price forecasts of RM3,100/tonne for 2011 (YTD RM3,400/t) and RM2,900/t for 2012



Corporate Highlights



Mah Sing: Strategic switch to affordable housing Underperform

News Update

¨ Mah Sing announced that it has entered into an agreement to acquire 100% of Semai Meranti for RM92m. Semai Meranti is the owner of 225.7m acres of freehold development land in Rawang. Land cost of RM9.36 psf is reasonable for a large tract of residential land in a suburb 30-40km away from KL city.

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Maybank IB Views

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

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

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

Trading Idea is a Take Profit call on AIRPORT.

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

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

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

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

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

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Maybank IB Views

COMPANY UPDATE
Public Bank RM12.16: Hold
Resilience on a relative basis

Hold maintained. Our earnings are lowered by 6-7% for 2012/13, while our TP is lowered to RM12.30 from RM14.10 on a lower 2012 P/B target of 2.5x vs. 2.8x, in line with lower peer valuations. On a relative basis, nevertheless, we expect Public Bank's earnings to be resilient due to strong asset quality, while share price should be supported by a) decent gross dividend yields of 5+% and b) low foreign shareholding.

SECTOR UPDATE
Banking: Neutral
Cautious expectations

Maintain Neutral. While loan growth continues to be robust, there is approximately a 6-month lag between loan growth and GDP growth, by our estimates. In light of slower economic momentum ahead, our loan growth forecast of 12.4% this year is maintained, but lowered to 9.4% from 10.4% for 2012. Forward earnings for the banks in our coverage have been trimmed also on the back of lower non-interest income (NII) assumptions. We now project slower aggregate net profit growth of 4.3% in 2012 for banks in our universe (+9.9% previously).

Technicals
The FBM KLCI fell 19.61-points to close at 1,367.52 yesterday. Its resistance areas of 1,367 and 1,403 will cap market gains, whilst the weaker support areas are located at 1,310 and 1,353. Due to the US markets’ weaker tone last night, we may see a volatile tone for the index today.

Trading idea is a Take Profit call on RHBCAP
Click here for full report »
Other Local News
SP Setia: Buys land for RM381m. SP Setia Bhd has proposed to acquire land for RM381.2m to replicate its successful township development in Setia Alam and Setia Eco Park. The new land in Rinching, which is 673.3 acres and situated mid-way between Semenyih and Bangi old town, is forecast to have a gross development value (GDV) of RM4b. (Source: Bursa Malaysia)

KNM: Octagon awards contract to KNM. Octagon Consolidated Bhd has awarded a USD22m (RM70.2m) contract to KNM Group Bhd to manufacture an advanced thermal gasification reactor in Sri Lanka. KNM has also been shortlisted as one of the contractors for the engineering, procurement, construction and commissioning (EPCC) contract for the waste to energy plant in Colombo, Sri Lanka. (Source: Bursa Malaysia)

SapCrest: Wins RM99.5m contract. SapuraCrest Petroleum Berhad's 50%-owned associate company, Labuan Shipyard & Engineering Sdn Bhd (LSE) had been awarded a shipbuilding contract by Tanjung Offshore Berhad to engineer, construct, test and deliver one unit 77m platform supply vessel (PSV) worth RM99.5m. (Source: Bursa Malaysia)

Huat Lai, Lonbisco, TPC: Huat Lai launches GO for TPC after buying 34%. Huat Lai Resources Bhd has signed a sale and purchase agreement with London Biscuit Bhd to acquire 26.9m shares or 33.7% of TPC Plus Bhd for RM8.1m and will launch a general offer for TPC. London Biscuits said the disposal of its shares in its poultry company would enable the group to focus on its core business of cakes, candies, wafers and snack confectionery. (Source: Bursa Malaysia)

Wijaya Baru: To buy Indonesia land for RM255m. Wijaya Baru Global Bhd has entered into two agreements to buy 80,000ha in Indonesia for RM255.2m to replenish its timber extraction business. The agreements were with Suffolk Pte Ltd and Wealthgate Pte Ltd for USD40m cash each in total. Wijaya Baru said its last timber licence expired on July 9, 2010, and the acquisition was done in view of the loss of revenue from the timber division and the intention to maintain its core business of timber extraction. The proposed acquisition will provide an immediate and stable income stream for its core business and, at the same, time allow the group to expand its business regionally (Source: The Star)

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Maybank IB Views

ECONOMICS
US FOMC Preview
Expecting something...

The latest round FOMC meeting was originally scheduled for a day (20 Sep) but was extended to two days (20-21 Sep) to allow a fuller discussion on the economic development and outlook, as well as the Fed's policy responses. No QE3 is expected amid the lack of consensus at Fed on such policy. Instead, we are looking at the formal announcement of the "Operation Twist" where Fed will lengthen the average maturity of its securities holdings to extend the commitment to very low interest rate on the short end of the interest rate spectrum to the long end. Recall that Fed pledged to keep the fed fund rate at 0%-0.25% until at least mid-2013 at the previous FOMC meeting (9 Aug).

SECTOR UPDATE
Power: Neutral
Projek Lekas, what it means to us

Get ready for higher tariff. This report aims to quantify the impact of importing liquefied natural gas (LNG) when PETRONAS' re-gasification plant (LEKAS) is ready (expected July 2012). The imported LNG will be costlier than Tenaga's current gas supply - which is subsidized - hence, power tariff must rise to reflect this. On the flip side, Tenaga will have greater certainty of supply and avoid further incidence of having to burn costly oil and distillates, like the episode experienced in 3QFY11.

Technicals
The FBM KLCI tumbled 17.81-points to close at 1,413.12 yesterday. Its resistance areas of 1,413 and 1,440 will cap market gains, whilst the weaker support areas are located at 1,382 and 1,400. Due to the US markets’ weaker tone last night; we may see a volatile tone for the index today. Some persistent foreign liquidation activities may depress the markets’ today.

Trading Idea is a Take Profit call for SIME, PCHEM and IJM.

Other Local News
Sime Darby: In talks to buy Bucyrus’ distribution assets. Sime Darby Industrial Sdn Bhd (SDI) is in talks to buy the distribution assets of Bucyrus International Inc. Sime Darby might announce the deal by end of the year, adding that the acquisition would enable Sime to extend the range of its products to cover both surface and underground mining equipment. SDI expects to remain busy for the next three years with an order book of RM3b. (Source: The Edge Financial Daily)

AirAsia: Thai AirAsia puts off IPO to 1Q11. The Thai unit of Malaysia's AirAsia Bhd has delayed the initial public offering (IPO) of its shares to the 1Q12 from 4Q11. The delay is because it needs more time to restructure its organisation and conduct due diligence. (Source: Business Times)

Hartalega: MD to buy Budi Tenggara. Hartalega Holdings Bhd’s MD Kuan Kam Hon plans to buy 100% of Budi Tenggara Sdn Bhd, which has a direct 4.99% stake in Hartalega and a 13.9% stake in Hartalega Industries Sdn Bhd, which in turn has a 50.6% in Hartalega. If the deal goes through, Kuan will control 51.5% of Hartalega and Securities Commission has granted a waiver from making a mandatory general offer. (Source: Business Times)

BRDB: To sell four assets for RM914m. Bandar Raya Development Bhd (BRDB) has decided to part with four investment properties including Bangsar Shopping Centre , Menara BRDB, CapSquare Retail Centre and Permas Jusco Mall for a cash consideration of RM430m with net liabilities of RM484m to be assumed by the buyer, valuing the entire transaction at RM914m. Following the disposal, BRDB will distribute part of the proceeds to its shareholders via a net cash dividend of 80 sen per share. (Source: Bursa Malaysia)

Plantation: Another vote against Aussie palm oil Bill. The Food Standards Amendment (Truth in Labelling - Palm Oil) Bill 2010 was rejected by Australia's House of Representatives Economics Committee in Canberra yesterday, the second committee to do so since it was tabled in Parliament. Malaysia is awaiting the final vote from the Parliament. (Source: Business Times)

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Maybank IB Views

Axiata Group RM4.81: Hold
Lacking catalysts in the short term Shariah-compliant

Hold maintained. Axiata's Analyst Day was a much welcomed opportunity to catch up on latest developments at the individual subsidiaries. Overall, however, we see little share price catalyst for the group in the near term amid a challenging environment, with stiff competition particularly in the Indonesian, Cambodian and domestic markets. Reflecting this outlook, our cost of equity is raised to 11.8% from 11.1% and our sum-of-parts TP is cut to RM5.10 from RM5.50.

Technicals
The FBM KLCI rose 1.74-points to close at 1,448.00 yesterday. Its resistance areas of 1,448 and 1,467 will cap market gains, whilst the weaker support areas are located at 1,423 and 1,445. Despite the US markets’ minor rebound tone last night; we may see a volatile tone for the local bourse today.In the longer-term, we foresee an eventual move to 1,378.66 (the next EW extension target).

Trading Idea is a Take Profit call on HLBANK.

Other Local News
TNB: May have to raise funds to keep going. Tenaga Nasional Bhd (TNB) may look to the market to raise funds to sustain itself amid concerns on the continued gas shortage as it has to spend an additional RM3b on power generation this year. (Source: The Malaysian Reserve)

MAS: Sponsorship for Queen Park Rangers jersey to cost RM18m. Malaysia Airlines' (MAS) recently-announced sponsorship for the Queen Park Rangers (QPR) home jersey in the Barclays Premier League will cost the national carrier some RM18m. The total sponsorship fee for both MAS and AirAsia for the English professional football club, which involves a term of two years, would cost some RM30m. (Source: The Star)

Bursa: FCPO volume hits new high. Bursa Malaysia Derivatives' (BMD) crude palm oil (CPO) futures set a new record at the close of mid-day trading yesterday, with a total of 4.07m contracts traded YTD. Open interest for FCPO contracts on BMD has also risen steadily on the back of an even mix of players in the futures market. (Source: The Edge Financial Daily)

Ramunia: Confident of Bursa approval. Ramunia Holdings Bhd is confident it will get its regularisation plans approved as soon as it sorts out safety issues associated with its newly-acquired Pulau Indah Oilfab fabrication yard. Some parts of the Oilfab fabrication yard were found to be without a valid Certificate of Fitness, an official document that states that a building is safe to be occupied. (Source: Business Times)


Iskandar: Farglory may invest in Iskandar Malaysia. Taiwan-based Farglory Group has expressed interest in setting up industrial parks in Iskandar Malaysia in Johor. If the interest were to materialise, it would attract investments from Taiwan and other countries as well. Farglory is Taiwan's leading international land development and construction company that operates in Taiwan, China, the US and France. (Source: The Malaysian Reserve)

O&G: M'sia proposes two oil and gas related projects in Brunei. Malaysia has proposed to undertake two oil and gas (O&G)-related projects in Brunei. One of the projects is Petronas to build a petrochemical complex with BASF in Pulau Muara Besar, involving an investment of about USD1.6 bilion, while the other is the development of a fabrication yard by Petronas' subsidiary, Malaysia Marine and Heavy Engineering Holdings Bhd. (Source: The Star)

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Maybank IB Views

Construction: Overweight
Offers shelter from external turmoils

Maintain Overweight. Construction awards should pick up after a slow 1H 2011, to provide the multiplier impact to the domestic economy in anticipation of a slowdown at the global front. During the previous major downturns, government development spending continued to rise. Over the near-term, this will include the new public-private partnership (PPP) projects. We expect major awards only in 2012 relating to the MRT and SCORE. Our top buys are still Gamuda and Hock Seng Lee (HSL).

COMPANY UPDATE
Gamuda RM3.03: Buy
Record profits, Vietnam's conundrum Shariah-compliant

Record profits, Vietnam's conundrum. Gamuda's final results, due on 29 Sept, should meet expectations for record profits in FY11. We forecast FY12 to be another record year, on strong domestic property sales locked in. Nonetheless, we have tweaked our FY12-13 net profit forecasts by -1% after factoring lower sales forecast for the Vietnam property projects. We also reduce our RNAV-based TP to RM4.10 (-8%) after adjusting for lowered GDVs for the Vietnam projects and other house-keepings. The stock remains our top pick in construction.

ECONOMICS
Industrial Production Index (IPI), Jul '11
On slippery pole...

Volatile monthly industrial production trend… Industrial production in Jul '11 slipped back into the red as it contracted by -0.6% YoY (revised Jun'11: +1.3% YoY; Maybank-IB: +1.7% YoY; consensus: +2.4% YoY), dragged primarily by mining output and not helped by slower manufacturing production. MoM, the overall index fell by -0.6% (Jun: +1.3% MoM). For the first seven months of 2011, total output expanded by a mere +0.2% YoY (2010: + 7.2% YoY). Excluding mining, the adjusted industrial production grew by +1.8% YoY (June '11: +4.8% YoY).

Technicals
The FBM KLCI fell 4.97-points and closed at 1,469.12 last Friday. The local market remained somewhat quiet in lack luster and low volume trading. The weaker support areas for the FBM KLCI are located in the 1,423 to 1,455-zone. The next resistance levels of 1,469 and 1,511 will see very heavy liquidation activities.

Trading Idea is a Short-Term Buy call on KFIMA.

Other Local News
Sime: Open to GO for E&O. Sime Darby Bhd is open to increase its stake and make a general offer (GO) for Eastern & Oriental Bhd (E&O) shares at the right time, having recently purchased a 30% stake in the latter at RM2.30 per share, said its president and group CEO Datuk Mohd Bakke Salleh. (Source: The Star)

CIMB: Nazir reorganizes CIMB. CIMB Group Holdings Bhd has embarked on its biggest reorganization since a restructuring in 2005 gave birth to the second largest banking group in the country. After the exercise, CIMB’s group management committee will be trimmed to 15 people from 21. Datuk Seri Nazir Razak will hold dual functions as group CEO and head of Malaysian consumer bank. Meanwhile, Datuk Charon Wardini Mokhzani will be designated as CEO of CIMB Investment Bank Bhd. (Source: The Edge Financial Weekly)

UEM Land: 5 biotech proposals. Malaysian Biotechnology Corp says five more foreign biotech companies are planning to invest millions of ringgit at BioXCell@Nusajaya. One of them is India’s Biotech giant, Biocon Ltd that will be setting up a RM500m plant in BioXCell. UEM Land holds 40% equity in Malaysian BioXCell with remaining 60% held by Biotech Corp. (Source: The Star)

O&G: Gas Malaysia guarantees dividends in first two years, IPO set at RM2.20/sh. Gas Malaysia Bhd will pay a guaranteed dividend of 100% and 75% in the first two years, respectively, after floating its shares on Bursa Malaysia in December this year. Separately, Gas Malaysia shares will be sold at an indicative offer price of RM2.20 a share to prospective investors. (Source: The Star, The Malaysian Reserve)

Construction: Works Ministry to discuss Bumi contracts with Prasarana. The Works Ministry will hold discussions with Syarikat Prasarana Negara Bhd to identify job scope and contracts worth RM8b to be distributed to Bumiputera contractors via the implementation of the Sg-Buloh-Kajang stretch of the Mass Rapid Transit (MRT) system. (Source: Bernama)

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Maybank IB Views

BNM Monetary Policy
No change in key policy instruments...

Bank Negara Malaysia (BNM) kept the Overnight Policy Rate (OPR) at 3.00% and the Statutory Reserve Requirement (SRR) at 4% following its Monetary Policy Committee (MPC) meeting yesterday. BNM’s decision to leave both OPR and SRR unchanged sent a strong signal that the central bank’s monetary policy bias has shifted to supporting growth. We see the OPR staying at current 3% level at least until mid-2012, although it is possible that this could be extended into 3Q 2012. The same goes for SRR, as BNM's monetary policy now seek to not only maintain accommodative cost of financing, but also to ensure availability of liquidity to support growth.

Economic Transformation Programme (ETP)
Update #7

PM announced 8 new entry point projects (EPP) under the Economic Transformation Programme (ETP) involving RM1.43b investments in six National Key Economic Areas (NKEAs). The biggest investment was in the palm oil NKEA where KL Kepong will invest RM706m in four downstream projects. Cumulatively, over half of EPPs and over one-fifth of investment targets have been announced. On progress of earlier announced EPPs, 26% are fully operational, 57% have commenced implementation, and 16% are still work-in-progress.

External Trade, Jul 2011
A mixed bag of data...

Exports growth of +7.1% YoY in Jul '11 was better than expected (revised Jun '11: +9.6% YoY, Maybank-IB: +4.6% YoY; Consensus: +6.6% YoY). But import growth came in below estimates at +2.9% YoY (revised Jun '11: +6.9% YoY, Maybank-IB: +4.1% YoY; Consensus: +6.5% YoY). As export growth outpaced import growth, the trade surplus was a larger-than-expected RM9.45b (revised Jun '11: +RM7.88b, Maybank-IB: +RM7.6b; Consensus: +RM7.8b). MoM, exports gained by +2.4% while imports fell by -0.4%. YTD, exports rose by +6.9% while imports increased by +8.7% giving a RM68.6b trade surplus. Our full-year forecasts for export growth, import growth and trade surplus are +8.4%, +10.8% and RM106.9b respectively.
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SECTOR UPDATE
Telcos: Neutral
6% service tax passed through

A pleasant surprise. That the 6% service tax will be passed through from the telcos to prepaid customers is a pleasant surprise. While this move has been talked about for awhile, the timing of it is earlier than expected. Biggest beneficiary of this is Digi, with its larger prepaid customer base. The telco sector remains defensive for its domestic focus and decent yields - Telekom remains our top pick.

COMPANY UPDATE
Digi.Com RM31.12: Hold
Capital management plans Shariah-compliant

Marginally positive, Hold maintained. Digi's proposals ensure that as much is returned to shareholders out of reserves as possible. In addition to the expected nominal DPS of RM1.63/share in 2011, investors could possibly see another 30sen in special DPS next year. Separately, we have raised 2012/2013 earnings by 8% and 6% respectively and our DCF-derived TP has been lifted to RM31.50 with the pass-through in the 6% service tax (see separate writeup today).

Kuala Lumpur Kepong RM21.60: Hold
Seeking downstream growth Shariah-compliant

Rain or shine, expansion goes on. KLK will invest RM706m capex in 4 downstream projects in Malaysia, PM Najib announced during the Economic Transformation Programme update session yesterday. While the impact may only be felt three years later, we are nonetheless positive on this development especially as it comes along with RM134m of approved MPOB grants to reduce costs and enhance returns. No earnings impact for now; funding is not an issue. Maintain Hold with an unchanged TP of RM21.60 based on 16x FY12 EPS.

Technicals
The FBM KLCI ended 5.22-points higher to close at 1,469.83 yesterday. Its resistance areas of 1,471 and 1,497 will cap market gains, whilst the obvious support areas are located at 1,443 and 1,469. Due to the US markets’ weaker tone last night, we may see a steady tone for the local bourse today. Some further profit-taking activities may persist to depress the markets’ rebound from its recent 1,423.47 low.

Trading idea is a Short-term Buy call on MALTON

Other Local News
TNB: Sees delay in gas recovery. Tenaga Nasional Bhd (TNB) gas supply curtailment issues are likely to continue as the key Bekok field is only expected to commence operations by another month. The expected delay is paired with another negative surprise TNB might not get back the full 150-200m standard cu ft per day (mmscfd) as it has to share the capacity with the industrial sector. (Source: The Star)

DRB-HICOM: Going for more M&As. DRB-HICOM Bhd is still hungry for more mergers and acquisitions (M&A) to add synergy to its core businesses and to expand its operating profit. It is allocating RM700m to RM1b as capital expenditure. This comprises investments for its Volkswagen assembly, the design and manufacturing of BAE System's 8x8 armoured wheel vehicles, and property development along with its automotive university college in Pekan. (Source: The Star)

Puncak Niaga: Syabas files RM1.05b suit against Selangor Government. Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), a subsidiary of Puncak Niaga Holdings Bhd, has filed a RM1.05b claim against the Selangor Government. The claim, filed at the Kuala Lumpur High Court, was for compensation for the period from Jan 1, 2009 to March 31, 2011 from the state government under the 2004 concession agreement between Syabas, the Federal Government and the Selangor Government. (Source: Bursa Malaysia)

Consumer: McD Malaysia to open 87 new restaurants by 2014. McDonald's Malaysia will invest RM348m to open another 87 restaurants by 2014, spending RM4m on each new restaurant. The company aims to have 100 franchised stores by 2014. Currently, it has 13 local franchisees in Malaysia and 27 franchised restaurants. (Source: The Edge Financial Daily)

Utilities: 1MDB evaluating plan to privatise Indah Water. 1Malaysia Development Bhd (1MDB) is evaluating a plan to privatise Indah Water Konsortium Sdn Bhd (IWK), the national sewerage company. It is believed that 1MDB is part of a consortium that intends to take over IWK. The other member of the consortium is believed to be either Puncak Niaga Holdings Bhd or controlling shareholders of the company. (Source: Business Times)

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Maybank IB Views

Alam Maritim Resources RM0.73: Hold
Stepping up contract wins Shariah-compliant

Bags RM220m of OSV contracts, a positive. OSV hiring is gaining momentum, reflecting the improving prospects for local-flagged vessels in tandem with the intensification of PETRONAS' capex programs. However, Alam’s fleet growth remains constrained by its stretched balance sheet, impeding its earnings potential. Maintain Hold with a RM0.85 target price, pegged to 9x 2012 EPS.

Technicals
The FBM KLCI tumbled 8.75 points to close at 1,454.37 yesterday. Its resistance areas of 1,454 and 1,474 will cap market gains, whilst the weaker support areas are located at 1,423 and 1,450.Due to the US markets’ weaker tone last night; we will see a softer mode for the local bourse today.

Trading Idea is a Take Profit call on RHBCAP

Other Local News
RHBCap: Looks for new chief by year-end, Delays application to buy Bank Mestika. RHB Bank Bhd is on the lookout for a new MD now since Renzo Viegas, its principal officer that was supposed to be MD, intends to take time off. A potential candidate is likely to be finalised soon, possibly in the next two to three weeks, and will likely be appointed before the year-end if the central bank has no objections to the candidate. RHBCap has put on hold its application to acquire Indonesia's PT Bank Mestika Dharma pending a review by Indonesia’s central bank to impose a limit on single-party ownership in commercial banks there. (Source: Business Times)

MAS: US firm sues for USD80m. Malaysian Airline System Bhd has been sued by GIRO — Warranty House International Inc, which is seeking damages of up to USD80m (RM239m). MAS is reviewing the complaint with the assistance of external counsel. (Source; Bursa Malaysia)

Sime Darby: E&O deal under scrutiny. The securities commission (SC) is examining the circumstances of the transaction involving Sime Darby buying 30% stake in Eastern & Oriental Bhd. The premium paid by Sime Darby is one, among several factors which the SC will take into consideration in deciding whether an acquirer has obtained control of a company. (Source: The Star)

Mining: Perak passes EIA reports for Brazil's Vale to set up maritime terminal. The Perak state government has passed the Environmental Impact Assessment (EIA) reports for Brazilian mining giant Vale SA to set up a maritime terminal in Teluk Rubiah near Lumut. Vale is investing an initial USD1.4b, or RM4.1b, to develop the first phase of an iron ore complex with capacity to dock vessels and handle as much as 30m tonnes of iron ore a year, starting 1H14. (Source: Business Times)

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Maybank IB Views

Banking: Neutral
Earnings growth cut

Neutral. We maintain our Neutral stance on the banking sector on the premise that valuations are fair for most of the stocks within our coverage, particularly amid a competitive operating environment and slower earnings growth projections. Top picks in the sector continue to be AMMB Holdings, BIMB Holdings and CIMB Holdings.

Technicals
The FBM KLCI rebounded 29.28-points and closed at 1,474.09 last Friday. The local market remained somewhat firm on low volume buying on blue chip stocks as the bourse played catch-up with global markets over the 3-day holiday break. The weaker support areas for the FBM KLCI are located in the 1,423 to 1,470-zone. The next resistance levels of 1,474 and 1,511 will see very heavy liquidation activities.

Trading Idea is a technical Take Profit call on GAMUDA.

Other Local News
AirAsia: EPF buys 10m more shares. The Employees Provident Fund (EPF) had bought 4.27m shares on Aug 25 and 5.72m shares the following day. With the acquisition, EPF increased its equity interest to 12.5%. (Source: Bursa Malaysia)

RHB: Withdraws MD application to Bank Negara. RHB Banking Group has withdrawn its application to Bank Negara Malaysia to seek the appointment of Renzo Viegas as MD of RHB Bank Bhd. The reason for the withdrawal is its current internal reorganization. (Source: The Edge Financial Weekly)

BRDB: To reward shareholders, divest BSC. Bandar Raya Developments Bhd (BDRB) is looking to pay a bumper dividend to its shareholders in a complex corporate exercise that may see it dispose its Bangsar Shopping Centre (BSC). (Source: The Edge Financial Weekly)

Plantation: Oil palm seeds to cost 30% more. The price of oil palm seeds, now at RM1.85 each, will be raised by 30% to RM2.35 starting January next year. The increase is due to the recent hike in labour wages and foreign worker levy, fertiliser cost, electricity tariff and packaging material cost. (Source: Business Times)

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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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