Maybank IB Views

COMPANY UPDATE
Tanjung Offshore RM1.39: Sell
Caution ahead; flashing red flags Shariah-compliant

Maintain Sell. 1Q 2011 earnings will likely miss street expectations again. Cost management strategies and operating prospects remain the key concerns. An equity cash-call could ensue should the cash situation worsen. TOFF will also suffer an RM8m penalty cost for early bonds redemption. Valuations are expensive and consensus forecasts are aggressive. Nonetheless, Ekuinas’ next move remains a wild card.

Kencana Petroleum RM2.68: Buy
Gets KPOC's Kebabangan gig Shariah-compliant

We remain Buyers on Kencana. The RM208m KPOC EPC gig takes its outstanding orders to 89% of its targeted RM1b job wins for FY11. Our forecast, which implies a 3-year net profit CAGR of 26%, excludes earnings contribution from the Berantai RSC project. We do not rule out potential strategic tie-ups and assets expansion (i.e. rigs) as it explores deepwater opportunities. 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.

Technicals
The FBM KLCI rose 3.29 points to close at 1,527.34 yesterday. Its resistance areas of 1,527 and 1,541 will cap market gains, whilst the obvious support areas are located at 1,514 and 1,525. Due to the DJIA’s positive tone last night, we may see the FBM KLCI remain stronger today. There could be an initial gap-up move, followed by latter day profit-taking.

Trading Idea for today is Take Profit call on NAIM

Other Local News
Construction: Chinese companies may bid for MRT job. Chinese Premier Wen Jiabao’s visit is expected to pave the way for them to participate in the RM40b MRT project as they have the financial muscle to go up against the Gamuda/MMC Corp joint venture and China is home to some of the most advanced railway systems in the world. (Source: The Edge Financial Daily)

Infrastructure: Sarawak to build 500km roads by end-2012. Under the National Key Result Area (NKRA) for a three-year period beginning last year, Infrastructure Development and Communication Minister, Datuk Seri Michael Manyin said Sarawak was allocated RM2b to build roads. Sarawak managed to complete 240km of new roads last year. (Source: The Edge)

Proton: Banks on Saga and Persona. Proton Holdings Bhd is banking on Saga and Persona to drive up sales this year as it seeks to topple rival Perusahaan Otomobil Kedua Sdn Bhd (Perodua) as the biggest carmaker in the country. Proton hopes to sell 85,000 units of Saga and 40,000 units of Persona while the total sales was targeted at close to 170,000 units this year. (Source: The Sun)

YHS: To consolidate plants. Yeo Hiap Seng (M) Bhd (YHS) will consolidate its factories in Shah Alam and Petaling Jaya to improve efficiencies and partially mitigate the effects of rising raw material prices. YHS also wants to introduce a new and less sweetened range of beverages to response to sugar price spikes. (Source: The Edge Financial Daily)

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Stocks to watchSarawak counters, Proton, Press Metal, Masteel, KUB

KUALA LUMPUR: Investors’ sentiment in the week ahead, starting Monday, April 18 would partly hinge on the outcome of the Sarawak state elections due late Saturday, April 16.

Sarawak-based companies had run up ahead of the dissolution of the state assembly in late March before easing off.Since then, market sentiment had been generallyl cautious on political concerns about the Sarawak polls, which are the most hotly contested in recent years.

Meanwhile, Bernama reported that as at midday on Saturday, a total of 233,134 voters or 21.72% of the electorate in Sarawak have voted in the state polls, according the Election Commission. There were no untoward incidents.

At Bursa, over the past week, the 30-stock FBM KLCI had lost 22.06 points or 1.42% to end at 1,521.94 while RM14.83 billion had been erased from the market capitalisation, which mirrored the declines also in key regional markets. External concerns include the European debt crisis, sustained high oil prices and worries about the Japan's ability to recover from the earthquake which impacted its manufacturing sector.

Among the stocks which would be in focus include CAHYA MATA SARAWAK BHD (CMSB), NAIM HOLDINGS BHD, TA ANN HOLDINGS BHD, ZECON BHD [], ENCORP BHD and HOCK SENG LEE BHD (HSL).

Stocks with recent corporate developments are PROTON HOLDINGS BHD, PRESS METAL BHD, KUB MALAYSIA BHD and Malaysia Steel Works (KL) Bhd.

The Edge weekly reports that FUTUTECH BHD, which was a loss-making, former associate company of Eastern & Oriental Bhd, was poised to transform itself into a CONSTRUCTION [] firm. It had been awarded RM332.4 million worth of design, road and construction works by E&O Property Development Sdn Bhd.

Proton’s unit Lotus Cars Ltd secured £270m million (RM1.33 billion) in loans from six financial institutions over a six-year period to turn around the loss-making company.

Proton group managing director Datuk Seri Syed Zainal Abidin Syed Mohamed Tahir said he expected Lotus to break even by 2014.

Press Metal proposed a rights issue to raise between RM316.7 million and RM323.7 million to finance the Samalaju aluminium smelting project in Sarawak.

The rights issue involved RM323.73 million nominal value of redeemable convertible secured loan stocks (RCSLS) at 100% of its nominal value with up to 147.15 million warrants.

Johor Menteri Besar Datuk Abdul Ghani Othman has approved the proposed RM1.23 billion intra-city commuter train service in Iskandar Malaysia which would involve a100km rail network.

The project would be undertaken by Metropolitan Commuter Network Sdn Bhd - a joint venture between KUB Malaysia Bhd and Malaysia Steel Works (KL) Bhd.

SUCCESS TRANSFORMER CORP BHD has proposed to distribute 100 treasury shares for every 4,000 shares of 50 sen held for the financial year ending Dec 31, 2011. It also announced a tax exempt interim dividend of 2pct for FY ending 2011.

FAR EAST HOLDINGS BHD is recommending a final single tier dividend of 20 sen for the financial year ended Dec 31, 2010.

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Stocks to watch: SP Setia, YTL Corp, Proton, SEGi

KUALA LUMPUR: Stocks on Bursa Malaysia may consolidate on Friday, April 15 following the mixed overnight performance on Wall Street while on the local front, the pullback on Thursday and political concerns over Sunday’s polls in Sarawak could see investors staying on the sidelines.

On Wall Street, stocks that outperform in a weak economy helped the Dow and S&P 500 eke out gains on Thursday as concerns about faltering growth and inflation prompted investors to seek out less volatile names.

The Dow industrials' top percentage gainers were Coca-Cola Co, up 1.5 percent, Kraft Foods Inc, up 1.7 percent and Merck & Co, up 1.2 percent. Energy shares also rallied as U.S. crude oil futures gained more than 1 percent to trade above $108 a barrel.

The Dow Jones industrial average rose 14.16 points, or 0.12 percent, to end at 12,285.15. The Standard & Poor's 500 gained 0.11 of a point, or 0.01 percent, to 1,314.52. The Nasdaq Composite dropped 1.30 points, or 0.05 percent, to 2,760.22.

At Bursa, stocks to watch out for are SP SETIA BHD, YTL Corp, PROTON HOLDINGS BHD and SEG INTERNATIONAL BHD.

The Edge FinancialDaily reports that SP Setia Bhd is making its maiden venture into Singapore. The developer has proposed the purchase of 27 strata units in Leong Bee Court for S$65 million (RM159 million) with the plan to redevelop the property, currently comprising flats, into residential apartments.

Having missed the opportunity to pick up assets at basement prices during the global financial crisis, YTL Corp Bhd's Tan Sri Francis Yeoh Sock Ping believes a second chance at a shopping spree could be knocking on YTL's door.

Proton Holdings Bhd’s unit Lotus Cars Ltd will sign an agreement on syndicated financing with CIMB Bank, Maybank, OCBC, EON Bank, Exim Bank and Affin on Friday.

SEG International Bhd is teaming up with Chung Cheong University in South Korea to train and place nurses and allied health professionals in the US, Canada and Europe.

SEGi said the academic collaboration was expected to contribute an increase in earnings of approximately 4% to the group for FY ending Dec 31, 2011.

IJM Land Bhd’s additional 229.88 million new shares will be granted listing and quotation with effect from 9am on Monday, April 18. The new shares arose from the conversion of RM400 million nominal value of 10 year 3% coupon redeemable convertible unsecured loan stocks (RCULS)by IJM Corp Bhd.

NAIM HOLDINGS BHD disposed of two million shares in DAYANG ENTERPRISE HOLDINGS BHD on April 13, reducing its stake to 34.17% or 187.94 million shares.

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