Maybank IB Views

MISC RM7.10: Sell
Brace for further impact Shariah-compliant

Poor visibility. We cut our 2012 EPS forecast by a further 19% post analyst briefing for Apr-Jun 2011 results. Visibility continues to be poor, extending up to 2013. We do not see a recovery in the liner, chemical and petroleum divisions, hit by supply overhang and depressed rates. This offsets positives from the other divisions: heavy engineering, offshore, and LNG shipping. Our TP of RM6.44 remains unchanged, based on a 15% discount to our SOP valuation.

Malaysia Airports Holdings RM6.45: Buy
Higher charges, finally

Positive surprise. MAHB has confirmed that it has been granted the approval to impose higher charges on: (1) international passengers (passenger service charge or PSC); (2) landing for aircraft; and (3) parking for aircraft. This will take effect on 15 September 2011 and will positively impact future earnings. MAHB is our top aviation pick as it is well placed to enjoy the longer term growth in air travel. Maintain Buy, with an unchanged target price of RM7.55/share DCF-based.

Hock Seng Lee RM1.46: Buy
A new water job Shariah-compliant

Small replenishment; maintain Buy. HSL's RM45.7m job win will lift its outstanding order book to RM1.15b, and contribute RM5.5m in net profit into 2012, we estimate. We maintain our earnings forecasts having imputed job win assumptions earlier. We are still positive on HSL for an exposure to Sarawak construction. Our target price is unchanged at RM2.30 based on 12x 2012 PER. Share price has fallen back to single digit valuations alongside the weak broader market; the stock is looking more attractive at current levels.

RESULTS PREVIEW
AirAsia RM3.64: Hold
Challenging 2Q11 Shariah-compliant

Yields, fuel and Firefly. We expect AirAsia's 2Q11 to show a marginal YoY profit growth buoyed exclusively by its Thai associate. We expect the Malaysian and Indonesian operations to exhibit profit drop due to 28% rise in fuel prices and soft yield environment, consistent to the industry and further exacerbated by Firefly’s jet operations services to East Malaysia. We maintain our Hold call at RM3.36 target price, based on 9.0x 2011 PER which is 10% discount to global LCCs’ PER.

Malaysian Airline System RM1.66: Buy
2Q11: Expect losses

Yields, fuel and Japan. MAS will release its 2Q11 results on 23 Aug. 2Q11 is expected to be loss-making due to the impact of 28% higher fuel price YoY and some impact from the MENA civil unrest and Japanese natural disasters. Despite this negative environment, we advice investors to overlook this quarter as the Company’s future is much better now with stabilizing fuel price, new aircraft benefits and the tie-up with AirAsia. We maintain our Buy recommendation with a target price of RM2.70, pegged to 9.0x 2012 PER - on par with global peers.
Click here for full report »
RESULTS REVIEW
UMW Holdings RM7.22: Hold
O&G sees red, auto loses traction Shariah-compliant

Challenging mid-term prospects. UMW's 2Q underperformance validates our contrarian view and concerns over its O&G and auto operations. Issues like the supply chain from Japan's March earthquake and tsunami and anti-dumping effect will persist in 2H. Maintain Hold with a RM7.20 target price, based on 12x 2011 EPS.

TSH Resources RM3.15: Buy
Windfall harvest Shariah-compliant

Outperformed. TSH's 1H11 net profit of RM60m (+165% YoY) accounted for 59% and 54% of our and consensus full year estimates respectively. TSH outperformed expectations backed by higher than expected FFB production. We raise our 2011 earnings forecast by 7.1% but trimmed 2012-13 forecasts by 0.6-0.7% on higher wages assumption by RM200 per month for Malaysian plantation workers. We maintain our Buy call with an adjusted TP of RM3.81 (15x 2012 PER; previously RM3.84) on the lowered earnings.
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Eversendai Corporation RM1.68: Buy
Buy ahead of job-flows Shariah-compliant

Results show strong growth. 1H11 net profit of RM57m was 46% of our full-year forecast and 49% of consensus. We initiate coverage on Eversendai with a Buy and TP of RM2.17 (based on 12x CY12 PER). Key attributes: (i) job-flow prospects are bright and we expect major wins in the next 6 months; (ii) Eversendai has built itself an above-industry margin business franchise yet valuation of 9x 2012 PER is at a 30% discount to big-cap peers; (iii) our belief that pump-priming is an obvious and politically easy tool in addressing macro-economic slump.

ACQUISITIONS / DISPOSAL
Star Publications (Malaysia) RM3.39: Hold
Revises terms of disposal for Section 13 land Shariah-compliant

More favourable terms. Star's new agreement with JAKS Island Circle (JIC) to raise the consideration for its Section 13 land sale by RM24m to RM135m is positive. The land disposal will add 14 sen/sh in value by end-2014. We however maintain our earnings estimates as the timing for the gain recognition is beyond our estimates horizon. We also maintain our Hold call and RM3.54 DCF-based TP.

Technicals
The FBM KLCI added a meagre 0.31-points and closed at 1,483.98 last Friday. The weaker support areas for the FBM KLCI are located in the 1,423 to 1,477-zone. The next resistance levels of 1,483 and 1,597 will see heavy selling and liquidation activities.

Trading Idea is Tenaga

Other Local News
SunCity and Sunway: To be delisted. The shares of Sunway City Bhd (SunCity) and Sunway Holdings Bhd would be delisted from the Main Market of Bursa Malaysia on Aug 23. The new entity would be known as Sunway Bhd. (Source: Bursa Malaysia)

MMHE: Secures RM952m contracts. Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) has secured two contracts worth RM952m from MISC Bhd for topsides fabrication, marine repair and conversion of two energy vessels. (Source: Bursa Malaysia)

Crescendo: Plans RM2.5b township. Crescendo Corp Bhd (CCB) is set to launch its new mixed development property project, Bandar Cemerlang township in Mukim Tebrau, Johor Baru with a gross development value (GDV) of RM2.5b by year-end. The completion of the Johor Baru-Kota Tinggi highway in June this year has improved accessibility and connectivity to its project. (Source: The Star)

Green technology: Green loans. Commercial banks, which are currently shying away from lending to green companies, may have to set aside an allocation to finance green technology projects. Malaysian Green Technology Corp (MGTC) CEO Dr Nazily Mohd Noor said this was one of the suggestions made during a discussion at the Green Technology and Climate Change Council, chaired by the Prime Minister Datuk Seri Najib Razak, two weeks ago. (Source: Business Times)

Property: Foreigners not shying away from prices. Malaysia property products are currently hot on the radar of international investors and property buyers, in view of the domestic real estate market potential to see a steady growth in prices. (Source: The Malaysian Reserve)

EPF: Confirms buying London office block for RM740m. The Employees' Provident Fund (EPF) has confirmed that it has purchased an office block in St James's Square, London, where one of the tenants has one of London's highest rents, for RM740m. This marks EPF's fourth property investment in London since announcing an allocation of RM1b for British property purchases about a year ago. Including this latest purchase, it has spent RM634m. (Source: The Star)

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Maybank IB Views

S P Setia RM3.85: Buy
"Setia Alam" in the making Shariah-compliant

Leading the new trend. SPSB is spearheading a new relatively untapped trend i.e. affordable housing via its latest sizeable land acquisition in Semenyih (south of KL CBD). The 1,011-acre land, which has been earmarked for affordable housing, would provide steady bread-and-butter sales and support SPSB’s long-term growth. The land could turn out to be another highly successful "Setia Alam" given SPSB's expertise and track record in township development. No change to our earnings forecasts and RM5.00 TP (10% premium to RM4.53 RNAV). Reiterate Buy.

Dialog Group RM2.52: Buy
Above par performance, optimism remains Shariah-compliant

Buy for earnings and dividends potential. Results were ahead of our expectation, on the back of a strong 4Q. We have raised our FY12-13 earnings forecasts by up to 28% (with further upside potential) and we remain optimistic on its long term growth prospect. Dialog remains among our preferred Buys in O&G with an unchanged RM3.35 target price (sum-of-part valuations). We continue to like its business model, focused management and steady dividend payments.

Technicals
The FBM KLCI tumbled 40.76-points and closed at 1,483.67 last Friday. The local market remained very weak due to the global equity indices’ malaise. The volatile global equity rout last week also adversely affected the local market. The weaker support areas for the FBM KLCI are located in the 1,423 to 1,480-zone. The next resistance levels of 1,483 and 1,597 will see heavy selling and liquidation activities.

Trading Idea is a Take Profit call on BURSA.

Other Local News
Aviation: Airlines to pay higher landing, parking charges. Malaysia Airports Holdings Bhd is looking at a possible 30% hike in landing and a 64% increase in parking charges. MAHB is still holding discussions with airlines on whether the increase should be done on a staggered basis or at one go. In a dialogue with foreign airlines last Wednesday, MAHB said it had received the go ahead to raise airport tax for passengers as well as parking and landing charges for airlines. Minister of Transport Datuk Seri Kong Cho Ha has since confirmed the hike in passenger service charge. (Source: Business Times)

HLB: May sell MIMB Investment Bank licence. Hong Leong Bank Bhd (HLB) may sell MIMB Investment Bank Bhd's investment licence which it got following the acquisition of EON Capital's assets and liabilities. HLB has a choice of selling it to Hong Leong Investment Bank or other suitors who might be interested. (Source: The Star)

MISC: May bid for Maersk's LNG vessels. MISC Bhd may put in a bid for a fleet of eight liquefied natural gas (LNG) ships owned by AP Moller Maersk. The bids are understood to be due by end-August, with initial estimates valuing the fleet at USD1.3b (RM3.9b) to USD1.7b. (Source: The Edge Financial Daily)

MPHB: MCA in talks to buy Menara Multi-Purpose. The Malaysian Chinese Association (MCA) is said to be keen on buying Multi-Purpose Holdings Bhd's (MPHB) Menara Multi-Purpose, located near Dang Wangi in Kuala Lumpur. The price tag could in the range of RM350m to RM400m. (Source: The Edge Financial Weekly)

Biotech: ECER gets RM2b boost. South Korea's CJ CheilJedang Corp and France's Arkema SA have announced a RM2b joint venture (JV) to build the world's first bio-methionine plant to produce animal feed in Malaysia. Both companies would commit the amount to be invested over a 10-year period. The plant together with Asia's first thiochemical platform would be located in Terengganu's Kertih Polymer Park in the East Coast Economic Region's (ECER) special economic zone. (Source: The Star)

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Stocks to watch: Magna Prima, Wing Tai, SapuraCrest, Kencana

KUALA LUMPUR: Key regional Asian markets are expected to remain jittery in the week ahead, starting Monday, Aug 8, in the absence of any clear indicators about the US economy and Europe’s deepening crisis.

Overnight on Wall Street, stocks closed out their worst week in more than two years on Friday, Aug 5 in a volatile session. For the week, the Dow fell 5.8%, the S&P 500 was down 7.2% and the Nasdaq was off 8.1%.

At Bursa Malaysia, there could be some bargain hunting for battered stocks which still had strong underlying fundamentals. But the buying could be restrained.

On Friday, the FBM KLCI closed down 1.45% or 22.46 points to 1,524.43 while week-on-week, the index lost 24.38 points.

A total of RM26.89 billion was wiped out from the Bursa Malaysia market capitalisation where 21 stocks hit fresh 52-week lows. Market capitalisattion was reduced to RM1.312 trillion last Friday.

For among the 30 components of the FBM KLCI, six of them hit a fresh 52-week low. They were IOI Corp Bhd, YTL Power International and YTL Corp Bhd, MISC BHD [], TENAGA NASIONAL BHD [] RM5.94 and PPB GROUP BHD [].There could be mild bargain hunting for some of these stocks which possess strong fundamentals.

Positive corporate news which could help lift sentiment are MAGNA PRIMA BHD [], Wing Tai Malaysia Bhd, SAPURACREST PETROLEUM BHD [], KENCANA PETROLEUM BHD [] and SCOMI ENGINEERING BHD [].

Magna Prima is making its foray into Australia to undertake a mixed residential and commercial project in Melbourne with an indicative gross development cost of A$148 million (RM482.18 million). The company expects to record a profit of A$62 million (RM200.32 million) from the project.

Wing Tai Malaysia expects to record a gain of RM27.63 million from the sale of two pieces of land in Seberang Perai, Penang to Aeon Co. Bhd for RM50.12 million cash consideration.

It said the two pieces of land, about 7.29 ha and 4,625 sq metres, were currently vacant and Aeon planned to build a shopping complex with car park facilities

The Edge weekly reports the River of Life project has seen two significant developments over the last two weeks, leading to renewed interest in it as well as Datuk Lim Kang Hoo's EKOVEST BHD [].

It also reported that Flonic Hi-Tec is banking on critical cleaning business. The company will now provide its customers with critical cleaning systems capable of filtering particles that are up to 10 microns in size, compared with 100 microns in precision cleaning systems.

The boards of SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd have agreed to their merger to become one of the world’s largest oil and gas service providers in terms of market capitalisation and assets.

They had accepted Integral Key Sdn Bhd’s (IKSB) RM11.85-billion offer to acquire all their assets and liabilities in a share swap. The offer shall remain open for acceptance until 5pm on Aug 15.

Fraser & Neave’s net profit for the third quarter ended June 30, 2011 rose 11.2% to RM77.85 million from RM70 million a year earlier due to strong contribution from its property and soft drinks divisions.

Its revenue for the quarter dipped to RM882.47 million from RM892.77 million due mainly to lower volume of dairy products sold in Malaysia.

It said under its soft drinks division, sales activities for Coca-Cola products will cease effective Oct 1, 2011 and, as such, the division’s revenue and profit thereafter will see an inevitable immediate reduction, it said.

Coca-Cola business makes up about 30% of the revenue of the soft drinks division for the current financial year, it said.

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RHBInvest Research

Parkson – A Regional Brand Market Perform

Visit Note

¨ PHB’s group structure has changed after its acquisition of Centro in Indonesia , as all the Malaysian, Vietnam and Indonesian operations are now housed under one entity, i.e Parkson Retail Asia (PRA). PHB owns 90.1% of PRA, while the other 9.9% is owned by Centro’s previous owner, i.e. Mitra Samaya (MS).

¨ Given the different target market for Centro and Parkson, we understand that moving forward, PHB’s growth strategy in Indonesia would be to open 4-5 stores p.a., of which 1-2 stores would be under the Parkson brand while the rest would be opened under the Centro brand.

¨ For CY11, Parkson China has only opened one new store, in Zi Gong which was opened in 11 Jan. However, we expect it to meet our store opening target of 8 for CY11, as store openings are typically done at the end of the year.



MISC - Bumi Armada IPO Lifts Valuations Of MISC’s Offshore Assets Outperform

Company Update

¨ We are upgrading our fair value for MISC by 17% from RM7.26 to RM8.47, having raised our valuations for MISC’s offshore assets comprising ten FPSO/FSO and two MOPUs from 1.2x book value to 2x book value.

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Maybank IB Views

Market Focus
IM New York: On the passage of transformation

Positive note. Prime Minister (PM) Najib sent a strong message on the government's determination for a high income economy by 2020 in his address to fund managers and investors at Invest Malaysia (IM) New York last week (17 May). The event, held for the first time at the New York Stock Exchange, saw a turnout of about 350 people. Present as well were 10 top Malaysian corporates comprising Maybank, AirAsia, Axiata, Bursa Malaysia, CIMB, Genting, Kencana Petroleum, Petronas Chemicals, SapuraCrest Petroleum and Sime Darby.

RESULTS REVIEW
RHB Capital RM9.24: Buy
Looking for a strategic partner Shariah-compliant

Buy maintained. For much of the uncertainty earlier this year caused by management changes, the new team appears to be settling in quite well and business is as usual at RHB Capital. Our forecasts are maintained and valuations are still decent, in our view, with the stock trading at a prospective 2011 P/BV of 1.8x and 2012 PER of just 10.9x.

Lafarge Malayan Cement RM7.47: Buy
Looking forward to demand rebound Shariah-compliant

Below expectations. 1Q11 net profit of RM52m (+8% YoY, -36% QoQ) was just 14% of our full-year forecast and 13% of consensus. However, we maintain our forecasts as we expect earnings in the sequential quarters to improve substantially on higher cement ASP (raised on 1 Apr) and a pickup in demand. Currently trading at 15x 2012 PER, there is still upside potential as LMC had traded up to 17x in the 2007 peak cycle. Maintain Buy and TP of RM8.50 (17x 2012 PER).

KFC Holdings RM3.85: Hold
On track Shariah-compliant

Results in line. KFC's RM36m 1Q11 net profit (+5.5% YoY; -25.8% QoQ) is in line, accounting for 21% of our and consensus full-year forecasts. We maintain our 2011 net profit forecast of RM172m given the fact that 1Q is seasonally weaker. Non-restaurant divisions again did not perform as expected, with its ancillary division making a pretax loss. We maintain our Hold call and target price of RM3.97.

MBM Resources RM2.97: Hold
Weakness ahead; downgrade to Hold Shariah-compliant

In line but weakness ahead. 1Q11 net profit of RM38m (+36% QoQ; -4% YoY) is within expectations, accounting for 25% of our initial full-year forecast of RM151m. With the next 9-month earnings poised to soften owing to the supply chain disruption from the Japan earthquake and tsunami, we have cut our 2011 earnings forecast by 17% and tactically lowered our target price to RM3.10. Share price is unlikely to perform until the supply chain flow returns to normalcy.

Technicals
The FBM KLCI rebounded 3.14 points to close at 1,532.12 yesterday. Its resistance areas of 1,532 and 1,550 will cap market gains, whilst the obvious support areas are located at 1,511 and 1,530.Due to the DJIA’s weaker tone last night, we will see some benign trading activities today.

Trading idea is a Take Profit call on MISC.

Other Local News
Aeon: To ink 9-year deal with 1Utama owner. Aeon Co (M) Bhd, which has managed the old wing of the 1Utama Shopping Complex for 15 years, is expected to sign a fixed nine-year lease agreement with mall's landlord, See Hoy Chan Holdings (SHC). (Source: Business Times)

Integrax: Forms committee. Port operator Integrax Bhd has formed a governance committee consisting of the company’s board of directors to oversee all current impending legal matters. (Source: The Star)

MFM: Plans RM140m expansion. Malayan Flour Mills (MFM) Bhd plans to invest about RM140m this year to increase its flour milling and raw material storage capacity in its Malaysia and Vietnam plants. (Source: The Edge Financial Daily)

Utilities: Acqua SPV makes ‘fair value’ bid for Selangor water bonds. Acqua SPV Bhd, a special-purpose vehicle set up by Pengurusan Aset Air Bhd (PAAB), has made a firm offer to take over Selangor water bonds. (Source: The Star)

Construction: RM30b worth of PPP projects to be developed this year. A total of RM30b worth of projects under the Public Private Partnership (PPP) are expected to be implemented this year from RM18b recorded last year. Among the projects to be implemented are the construction of new toll highways, hospitals and universities' campus branches. (Source: Business Times)

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RHBInvest Research

Top Story: Tan Chong

Results Preview

• Robust 1Q Earnings Expected
• While supply constraints are still a sector worry, Tan Chong’s high inventory levels of over RM1bn at end-2010 (2009: RM673m) will enable it to better weather possible component shortages in the coming months
• We believe the share price already reflects potential supply concerns and is close to being fairly valued.
• We lower our fair value to RM4.95 (from RM5.40) to reflect lower peer valuations but reiterate our Market Perform call on the stock.

Corporate Highlights

Maybank:

Results / Briefing note

• Low loan impairment losses boosts net profit
• Fair value has been raised to RM10.50 from RM10.20. Maintain Outperform.

YTL Power:

Company Update

• YTL Comms yesterday launched the Yes Life app (free to download) for Apple products running iOS 4, which allows iPad and iPod Touch users to add full mobile functionally into their devices, while iPhone users can have a 2nd mobile phone number.
• Maintained SOP-derived fair value at RM2.57. Without management’s assurance on future dividends, we believe YTLP may lose a bit of shine since the key investment thesis for the stock has historically been high dividend yields.

TRC:

News Update

• TRC has proposed a 1-into-2 share split, followed by a 1-for-5 bonus issues, and a 1-for-5 free warrant issue (WB).
• Maintain Outperform. Fair value is RM1.94.

MISC:

Briefing Note

• MISC guided for a FY12/11 that will be “every much like what you saw in FY03/11” but a better FY12/12 ahead with “step-up” earnings from LNG and offshore segments.
• Fair value is RM7.53. Maintain Underperform.

AirAsia:

Results Preview

• 1QFY12/11 Results Should Please Market, But Greater Earnings Volatility Ahead
• We expect AirAsia’s 1QFY12/11 results to beat our forecast but trail market expectations slightly.
• We expect AirAsia’s 1QFY12/11 core PBT to come in at RM160-165m, down 51-53% sequentially vis-à-vis RM340m recorded in 4QFY12/10 due to the seasonally lower traffic and yields and higher fuel cost.
• We are raising our FY12/11-13 net profit forecasts by 27-30% as we now assume AirAsia’s yields to only ease -6.1% in FY12/11 vis-à-vis -7.7% previously.
• Fair value is raised by 27% from RM2.10 to RM2.66. Maintain Underperform.

Century Logistics:

Results/Briefing Note

• Seasonally weak 1QFY12/11, Stronger Quarters Ahead
• Century expects to secure a contract from a new customer for its integrated logistic segment to provide storage and distribution services.
• Century is looking for further opportunities to export in high growing developing countries. Already successful in exporting to Argentina, the company expects to enter Brazil as its next export destination.
• Fair value of RM2.70/share. Maintain Outperform.

Media Prima:

Results Note

• 1Q11 Core Net Profit Up 19.1% YoY
• We maintain our fair value of RM3.20. We reiterate our Outperform call on the stock.

RH Petrogas:

Results Note

• RHP’s 1QFY11 net earnings of S$1.5m were largely in-line with our earnings estimates accounting for about 19.5% of our net profit expectations (S$7.6m). However, it only accounted for 14% of consensus full year estimates of S$10.95m.
• Forecasts. No change to earnings estimates at this juncture as earnings are relatively in line.
• Maintain our Outperform call on the stock and our fair value of S$1.81/share.

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RHBInvest Research

Top Story: Benchmarking – Tracking the benchmark

• Market Update
• Equal weighting all FBM KLCI stocks would have resulted in YTD gain of 3.4% (vs. the index of +2.3%) but this would still have underperformed vs. FBM100 which rose by 4.7%.
• This implies that investors had to take an active risk position. We note that FBM KLCI followers had to get seven stocks right (Maybank, Sime, PetChem, Digi, Genting Malaysia, TM and PetDag), or underweight six others (TNB, MISC, KLK, YTL Corp, YTL Power and MAS). Big gainers outside of the FBM KLCI sectors and stocks included Dialog, SapuraCrest, Mah Sing, MCIL, UEM Land, DRB Hicom, and MPHB, highlighting the merits of bottom-up stock picking under current market conditions.

Sector Call

Insurance:

• Sector Update
• Gradual liberalisation of motor insurance
• We believe that the move to detariff the motor insurance segment is positive for the industry in the long run. In the short to medium term, we believe the gradual premium increase would do little to cover losses stemming from the TPBID policies although we believe that it is in the right direction.

Corporate Highlights

IOI:

• News Update
• RSPO suspends certification process
• We believe this suspension has more to do with the NCR land dispute in Baram, Sarawak, than any other issue.
• Maintain Underperform with fair value of RM5.90.

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Maybank IB Views

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

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

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

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

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

Trading idea for today is a Buy call on COASTAL.

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

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

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

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

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

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

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

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Maybank IB Views

COMPANY UPDATE
Public Bank RM13.04: Hold
Consumer lending still resilient...for now

Momentum sustained. The key takeaway from a recent Public Bank visit is that lending momentum remains very much intact on the consumer front, but that rate competition for both loans and deposits is unlikely to ease anytime soon. Our earnings forecasts are broadly maintained. While we like the stock for its solid fundamentals, much is reflected in the current share price (prospective 2011 P/BV of 3x, ROE: 23.9%) we believe, and we see little catalyst in the near term. Hold maintained with an unchanged DDM-derived TP of RM14.10 (payout ratio: 52%, cost of equity: 10.6%, terminal growth rate: 5%).

ECONOMICS
CPI, Feb 2011
Inflation rate heads further up...

Inflation rate in Feb '11 was a higher-than-expected and a 22-month high of +2.9% YoY (Jan '11: +2.4% YoY; Maybank-IB: +2.5% YoY; Consensus: +2.7% YoY). Sequentially, consumer prices increased by +0.5% MoM (Jan '11: +0.6% YoY; Dec '10: + 0.4%). "Food and Non-Alcoholic Beverages" (FNAB) and "Transport" accounted for 72.7% of the YoY increase. Meanwhile, "core" inflation rate which excludes FNAB prices and Transport costs picked up by +1.5% YoY (Jan '11: +1.2% YoY), led by higher prices of services, notably "Restaurants & Hotels", "Health" and "Education". We have revised our headline 2011 inflation rate forecast to +3% from +2.5% last week.

Technicals
The FBM KLCI rose 11.66-points and closed at 1,515.55 last Friday. The local market rose despite Japan’s nuclear woes at its reactor plants, Middle East tensions in Libya and Yemen as well as Portugal’s debt woes.The obvious support areas for the FBM KLCI are located in the 1,474 to 1,515-zone. The very firm resistance zone of 1,518 and 1,576 will see heavy liquidation activities.

Other Local News
AMMB-RHBCap: Merger may be back on the table. A proposal to merge AMMB Holdings Bhd and RHB Capital Bhd, which first surfaced in 2007, is back on the table. (Source: The Edge Financial Weekly)

MISC: Eyeing IHC Merwede. International shipping publications are speculating that national carrier MISC Bhd could be a potential investor in Holland’s IHC Merwede Holding BV. (Source: The Edge Financial Weekly)

MAS: Firefly banking on Iskandar to develop southern hub. FlyFirefly, a unit of Malaysia Airline System Bhd (MAS) will develop the Sultan Ismail International Airport as its southern hub in tandem with developments taking place at Iskandar Malaysia, the southern economic development corridor in Johor. (Source: The Edge Financial Daily)

Pos Malaysia: Declares 17.5 sen dividend, MPC joins bid. Pos Malaysia Bhd has recommended a first & final and special dividend totalling 17.5 sen per ordinary share less 25% tax in respect of the financial year ended Dec 31, 2010. Separately, Malaysian Pacific Corp Bhd and Amanah Raya Bhd are believed to have submitted a joint bid for the 32.2% equity stake in Pos Malaysia Bhd held by Khazanah Nasional Bhd. (Source: Bursa Malaysia, The Edge Financial Daily)

Mamee: To upgrade facilities. Mamee-Double Decker (M) Bhd, which aims to achieve an annual revenue of RM1b in five years, will spend 90% of its RM100m capital expenditure (capex) this year to upgrade its facilities and machinery in one of its Malacca plants. (Source: The Star)

SC: Zarinah’s term extended. The Securities Commission (SC) said the tenure of its chairman Tan Sri Zarinah Anwar has been extended for one year with effect from April 1. (Source: The Star)

Iskandar: 2012 to be tipping point for Iskandar. The first phase of catalyst projects in the ambitious Iskandar Malaysia will begin operations next year, signaling the beginning of a strong and sustainable metropolis of international standing. (Source: The Star)

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Maybank IB Views

Top Glove Corporation RM5.28: Hold
Assessing latex cost direction Shariah-compliant

Results below expectations. 1HFY11 net profit of RM62m (-54% YoY) made up 37% of our full-year forecast and 32% of market's. Share price rose 11% since our upgrade to Hold (from Sell) on 8th Mar, largely fuelled by sentiment on tumbling latex cost (-18% in 1-week). Our rating, TP and forecasts are under review as we assess the sustainability of low latex cost and sales recovery. Market is currently valuing Top Glove at 15x CY12 PER, above its 5-year historical average of 13.5x.


Technicals
The FBM KLCI rose 8.30 points yesterday to close at 1,492.44. Its resistance areas of 1,492 and 1,515 will cap market gains, whilst the very weak support areas are located at 1,474 and 1,490. Due to the DJIA’s very bearish tone last night, we will see the FBM KLCI in a weaker mode today, with persistent selling activities on rallies. As the market re-visited 1,474 recently, the FBM KLCI index traced out a nasty Head & Shoulders topping pattern.

Trading idea for today is a Take Profit call on MISC.


Other Local News
E&U: Bakun dam to generate power in July. The Bakun hydroelectric dam is expected to commercially produce 300MW of electricity in July. (Source: The Edge Financial Daily)

TMC: Ties up with Indon bank. TMC Life Sciences Bhd's unit Tropicana Medical Centre (M) Sdn Bhd (TMC) signed a Memorandum of Understanding (MoU) with Indonesia's Bank Riau Kepri to establish a credit card privilege discount programme. TMC is confident of achieving its 60% growth target this year through various marketing and strategic collaborative efforts with local and regional partners. (Source: The Edge Financial Daily)

Pharmaniaga: Secures concession. Pharmaniaga Bhd's wholly owned subsidiary Pharmaniaga Logistics Sdn Bhd has entered into a 10-years concession agreement with the Government for the right and authority to purchase, store, supply and distribute approved products to public sector customers. (Source: Bursa Malaysia)

SEGi: Hii ups stake to 32.2%, named to lead ECCE project. SEG International Bhd's (SEGi) group MD director Datuk Clement Hii Chii Kok has upped his stake further in the education group to 32.2%. Meanwhile, Rextar Capital Sdn Bhd ceased to be a substantial shareholder after disposing of 10.8m shares. Separately, SEGi has been appointed by the Government to lead the development of integrated early child care education under the National Key Economic Area. (Source: The Edge Financial Daily, The Star)

Aviation: Premium air travel to go down this month. The Japanese disaster will reduce premium air travel in March as it makes up 6% to 7% of the global market, the International Air Transport Association (IATA) said. It added that unrest in the Middle East and the Japanese disaster would likely hit February and March figures. (Source: The Star)
Outside Malaysia
U.S: Home construction slumps in February. Home construction dropped 23% to a 479,000 annual rate, while building permits slumped last month to a record low, Commerce Department figures showed. (Source: Bloomberg)

U.S: Producer prices in February rise more than forecast, led by food, oil. The producer-price index climbed 1.6% MoM from the prior month, the most since June 2009. The so-called core measure, which excludes volatile food and energy costs increased 0.2% MoM, matching forecasts. (Source: Bloomberg)

U.S: Mortgage applications fell last week on fewer purchases as a decline in borrowing costs failed to spur home buying. The Mortgage Bankers Association's index of loan applications declined 0.7% in the week ended March 11. The group's purchase index fell 4%, while a measure of refinancing climbed 0.9%.The prospect of further declines in home prices and more foreclosures in coming months may be prompting Americans to refrain from purchases. (Source: Bloomberg)

E.U: February inflation quickens, adding pressure on ECB. Inflation in the 17-nation euro region quickened to 2.4% YoY from 2.3% YoY in January. That's the fastest since October 2008 and exceeded the ECB's 2% limit for a third month. (Source: Bloomberg)

U.K: Jobless claims unexpectedly fall most in eight months in February. Jobless benefit claims dropped 10,200 from January to 1.45 million, the lowest since February 2009. Unemployment based on International Labour Organization methods rose by 27,000 in the three months through January to 2.53 million, the highest since 1994. (Source: Bloomberg)

China: Leading economic index rebounded in January, easing concerns that the government's campaign to curb inflation and asset bubbles may lead to a sudden slowdown in the world's second-biggest economy. The index rose 0.3% to 155 in January from the previous month. The indicator, designed to capture prospects over the coming six months, recorded the first decline since 2008 in December. (Source: Bloomberg)

Japan: Manufacturers were pessimistic in 2Q11 before quake struck. Sentiment among manufacturers with more than JPY 1b (USD 12m) in capital was minus 3.2 points this quarter compared with minus 8 three months ago. The survey was conducted before the nation's biggest earthquake on March 11, and a negative number means pessimists outnumber optimists. (Source: Bloomberg)

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RHBInvest Research

Top Story: Market Momentum

• Market Update
• Down by not out
• Our stress test suggests that all sectors except banks may be at risk if cost inflation becomes critical. The heavyweight sectors include plantation, telecom, O&G and utilities. This also suggests that recent top outperformers could face a reversal if the macro environment remains uncertain.
• We reiterate our view that a market pull back would present an opportunity to take advantage of the value that will re-emerge. As such our Overweight calls on the banks and telecom sectors are unchanged. We also maintain our Overweight calls on plantation, oil & gas and property sectors although the cautious environment may cause continued selling pressure on these stocks in the near term.

Sector Call

Media:

• Sector Update
• Strong start to the year
• Media Prima (FV=RM3.20) remains our preferred pick given.We maintain our Outperform call on Media Chinese (FV=RM1.32) and Star (FV=RM4.23). Maintain Overweight on the sector.

Corporate Highlights

YNH:

• News Update
• YNH AEON coming to Seri Manjung
• Seri Manjung is expected to raise the property values in the township.
• No change to forecasts. Fair value kept at RM2.31

Petronas Chemicals:

• Briefing NoteBeneficiary of higher utilisation and product prices

• Maintain Outperform with new fair value of RM7.27/share (previously RM7.25).

Unisem:

• Briefing Note
• Softening in 1Q, but to bounce back after
• No change to forecasts. Fair value is RM2.65 based on 11x FY11 FD EPS.

MISC:

• Briefing Note
• Three culprits
  

• MISC cautioned that the petroleum tanker segment is “bracing itself for another difficult year ahead” as “the over-supply situation is finally hitting home”.
• Fair value is RM7.59. Maintain Underperform.

CIMB:

• 4QFY10 Results/Briefing Note
• Raising the bar for 2011
• No change to fair value of RM9.80 and Outperform call.

TM:

• 4QFY10 Results/Briefing Note
• Returns excess cash
• We revised our fair value to RM3.84 (previously RM4.05)
• Downgrade from trading buy to Underperform.

Proton:

• 3QFY11 Results/Briefing Note
• Lotus restructuring costs kick in
• Proton sales recovered to 15,806 units (+36.8% mom) in Jan 2011 helped by higher Inspira deliveries. Nonetheless, earnings going forward will be severely affected by write-offs arising from the ongoing LTP while its net cash position will remain under pressure.
• We reiterate our Underperform call and reduce our fair value to RM4.00 (from RM4.15).

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Maybank IB Views

ECONOMICS
Economic Transformation Programme (ETP)
From "message" to "passage"...

On the progress of Economic Transformation Programme (ETP), 37 EPPs and at least RM80.6b of investment has been announced so far, accounting for 28.2% of the total 131 EPPs identified in ETP and 10.1% of the targeted investment value of RM794.5b. These confirmed EPPs are also "active" as they are in various implementation stages, and benefited from fast-tracking of approvals as well as targeted and specific tax and non-tax incentives. The progress in ETP jives with our view on Malaysia's 2011 economic outlook where business spendig upcycle is the key story.


RESULTS REVIEW
CapitaMalls Malaysia Trust
Rides on strong retail growth

Maintain Buy. CapitaMalls Malaysia Trust's (CMMT) RM45.9m 2010 distributable income (which reflected 5½ months of earnings since listing on 16 July) was within expectations. We expect a stronger 2011 supported by better rental and occupancy rates driven by strong retail growth. The recent proposed acquisition of Gurney Plaza Extension (GPE) could boost DPU by another 3-5% (post-placement). Currently, CMMT offers 7.1% yield compared to 7.8% for M-REIT and 6.7% for SunREIT. Maintain forecasts and RM1.20 DDM-based TP.


Quill Capita Trust
Challenging outlook

No surprises. Quill Capita (QCT) RM32.6m 2010 normalised net profit was within expectations. In our view, QCT needs a appealing story to regain investors' interest given its below average 7.1% yield (vs. 7.8% average M-REIT) on a back of over-supply outlook for the industry. We fine-tune our forecasts by +0.1-0.2% for a higher 95% payout (previously 92%) and change in balance sheet assumptions. Our DCF-based TP is raised to RM1.20 (+2 sen).


SECTOR UPDATE
Automotive
Caught in Neutral

No near-term catalyst. We expect 2011 TIV growth to slow to 2-3% as domestic demand drives towards saturation. Corporate earnings growth remains challenging. Margins will come under pressure on rising A&P expenses. The currency impact which aided 2010 earnings is unlikely to repeat. We are Neutral on the sector with Buys on Proton and MBM on undemanding valuations. We upgrade Tan Chong to Hold following a 15% correction in the share price since our Sell call on 23 Sept 2010. UMW remains a Hold.


Technicals
The FBM KLCI plunged 22.46-points and closed at 1,547.43 last week as some heavy profit-taking and liquidation activities caused the market’s large fall after the Thaipusam holiday on 20 January. The weaker support areas for the FBM KLCI are located in the 1,497 to 1,537-zone. The key resistance zone of 1,547 and 1,576 will offer major selling and liquidation activities.


Other Local News
Axiata: M1 gains traction. M1 recently announced a special dividend payout of 3.5cents per share, brings the total dividend per share for FY10 to 17.5 cents per share which translates into a dividend income of SGD46.6m (RM110.9m) to the Malaysian telco. (Source: The Edge Financial Daily)

F&N: Sells Fraser Business Park Phase II development project. F&NHB has accepted the call option notice from Tenggara Muhibbah Sdn Bhd to acquire the entire interest in Brampton for a total cash consideration of RM63m and realising a gain of RM29.6m in the process. (Source: Bursa Malaysia).

GUH: Seeks more land for property projects. While GUH Holdings Bhd continues to look at its printed circuit board (PCB) division as the primary driver of growth this year and in years to come, the firm continues to expand its landbank for other activities. GUH's Taman Bukit Kepayang development in Seremban, has so far seen development of 120 ha and there was a balance of about 108 ha left to be developed over the next six to seven years. (Source: Business Times)

MISC: Bidding for Brass LNG job. MISC Bhd is believed to have submitted a technical bid early this month to provide up to 14 vessels for Brass Liquefied Natural Gas (LNG) in West Africa. The vessels are required to have a carrying capacity of about 145,000 cu m each. However, details of the tender, which has attracted nine bids, have yet to surface. (Source: The Edge Weekly)

Malaysia Smelting: Singapore IPO shares priced at SGD1.75. Malaysia Smelting Corp Bhd's (MSC) public offering shares for a secondary listing on the Singapore Exchange Securities Trading Ltd (SGX) has been fixed at SGD1.75 or RM4.17 a share. MSC said it expected to raise about SGD40.1m (RM96m) from the public offer, with about SGD8.3m (RM20m) to be used for the expansion of mining and smelting operations through the acquisitions of plant and machinery. (Source: The Star)

Utilities: No change in Selangor water consolidation matrix. The consolidation of the water sector in Selangor seems unlikely to take place even with the latest offer from the state government to acquire all the four concessionaires- Puncak Niaga (M) Sdn Bhd (PNSB), Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), Konsortium Abass Sdn Bhd and Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (SPLASH) for RM9b. (Source: The Edge Weekly)

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RHB Invest Highlights

Top Story

Oil & Gas:
More room for growth?

• Dialog: Fair value raised to RM1.94. Outperform (up from MP)
• Sapuracrest: Fair value raised to RM3.34. Outperform
• Kencana: Fair value raised to RM2.60. Outperform
• KNM: Fair value maintained at RM0.58. Outperform
• Dayang: Fair value maintained at RM3.86. Outperform
• Petronas Gas: Fair value maintained at RM13.51. Outperform
• Wah Seong: Fair value maintained at RM2.21. Market Perform
• Petra Perdana: Fair value maintained at RM0.44. Underperform
• We upgrade our call on the market to Overweight (from neutral previously).
• Our top pick at this juncture is Kencana, while our longer-term pick is Dialog.

Corporate Highlights

Allianz:

• On track to meet our full-year forecast.
• Maintain Outperform with fair value of RM5.34.
  

KFC:

• Another offer to buy QSR; KFCH could be privatized.
• We maintain our fair value for KFC at RM3.85.
• We also maintain our Underperform call, pending further developments.

MISC:

• Acquisition of VTTI completed, minor news flow from the LNG segment expected
• Indicative fair value is RM8.14. Maintain Underperform.

Technical Highlights


Daily Trading Strategy:

• Removing the 10-day SMA will boost sentiment.
• If the FBM KLCI is still unable to penetrate the 10-day SMA today and the daily turnover fails to improve from the current 1.0bn shares mark, selling activities may increase ahead of the weekend.
• In contrast, a removal of the 10-day SMA with a higher daily trading volume will likely boost the short-term trading sentiment, in our view.
• Nonetheless, the speculative interests are expected to drive share prices on the mid to lower-cap stocks, while mild profit-taking activities on the core defensive heavyweights may continue.
  

Daily Technical Watch: KNM Group

• Follow-through buying support if it surpasses RM0.50 soon.
• Immediate Support at RM0.44
• Immediate Resistance at RM0.50Top Story

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