Maybank IB Views

Media: Overweight
Apr 2011 adex: Growth momentum continues

Overweight stance under review. Apr 2011 total gross adex grew 17% YoY, the strongest this year. May 2011 is likely to be 10% to 15% higher MoM as advertisers ramp up ad spend ahead of adex-friendly festivities in 3Q11. 4M11 total gross adex grew 14% YoY, ahead of our 8.3% forecast. Top picks MCIL and Media Prima performed well in the past month, possibly reflecting the still positive adex sentiment.

RESULTS REVIEW
KLCC Property Holdings RM3.28: Hold
Results in line; new contribution from Lot C Shariah-compliant

Maintain Hold. KLCCP's RM574m FY03/11 realised pretax profit was in line, but 12 sen total DPS for FY03/11 was above expectations. In our view, KLCCP's annualised 3.4% net dividend yield for 2012 is less attractive compared to large cap REITs (6-6.5%). We lower our 9M11-2013 estimates by 1.6-16% to factor in the change in FYE. Maintain Hold with a new RM3.50 TP (15% discount to RM4.10 RNAV (+50 sen)).

Tanjung Offshore RM1.11: Sell
Grey visibility still Shariah-compliant

Reiterate Sell. Losses extended into 1Q, within our forecasts but below consensus expectation. Forward earnings will remain a challenge. Cost management strategies and operating prospects remain the key concerns. An equity cash-call could ensue should the cash situation worsen. TOFF will suffer an RM8m penalty cost for early bonds redemption. Valuations are expensive and consensus forecasts are aggressive. Ekuinas’ next move remains a wild card.

COMPANY UPDATE
Star Publications (M) RM3.38: Hold
Fuzzy signals from this frequency Shariah-compliant

Maintain Hold call and DCF-based target price of RM3.71. We are mildly negative on Star's plan to acquire 80% of Capital FM for RM15m as it is loss-making and may cannibalise Star's three incumbent radio stations. Acquiring an outdoor company would have been wiser. We leave our earnings estimates unchanged pending further details.

CB Industrial Product Holding RM4.30: Buy
Variation to order book Shariah-compliant

Positive, but factored in. CBIP received a request from a customer to vary its order book, awarded back in Jan 2011. Consequently, the contract value was revised upwards by about RM31m and the expected incremental profit from the revision could be approximately RM4m. Although positive, we maintain our earnings forecasts as we have assumed RM180m of contract wins for FY2011. Maintain Buy with an unchanged TP of RM4.75 based on 7x 2011 PER.

Technicals
The FBM KLCI rose marginally by 2.75 points to close at 1,544.02 yesterday. Its resistance areas of 1,548 and 1,565 will cap market gains, whilst the obvious support areas are located at 1,523 and 1,544. Due to the DJIA’s firmer tone last night, we will see some bargain hunting activities today.

Daily trading idea is a Short-Term Buy for TDM.

Other Local News
RHB: Sumitomo, Carlyle eye RM4.8bb RHB stake. Japan's Sumitomo Mitsui Financial Group and US private equity firm Carlyle are among leading contenders to place first round bids for a stake in RHB, after bigger rival CIMB said it is not keen to buy a stake. (Source: The Edge Financial Daily)

PPB: Eyes Indonesia's flour market. PPB Group Bhd is eyeing at least 10% of Indonesia’s flour market that currently dominated by his former business partner, Salim Group’s Liem Sioe Liong. This sets the stage for a professional rivalry between the two powerhouses as both groups allocate more resources to capture a larger slice of the burgeoning consumer business at the populous islands. (Source: The Edge Financial Daily)

UOA: RM10b projects in the pipeline. UOA Development Berhad, which is scheduled to list on the Main Market of Bursa Malaysia on June 8, has property projects worth RM10b in total gross development value (GDV) over the next 10 years. Moving forward, the company plans to retain its focus in the Klang Valley, especially its Bangsar South development poject, before considering other geographical locations. (Source: The Edge Financial Daily)

TDM: To invest RM120m in Indonesia. TDM will inject RM120m into its Indonesian operations at Kalimantan within the next eight to 10 years to build four oil palm mills in the area. They expect to see contributions from the Kalimantan operations by 2013 after they had initially invested RM44m in Kalimantan. (Source: The Edge Financial Daily)

Ramunia, Coastal: Agree to abort MoU. Ramunia Holdings Bhd and Coastal Contracts Bhd have aborted a memorandum of understanding (MoU) for the proposed collaboration, bidding and fabrication in relation to structures for the oil and gas industry. The MoU was entered into between both companies in January 2010, but had lapsed on May 18 this year as both parties have mutually agreed not to proceed with it. (Source: The Edge Financial Daily)


AirAsia: AirAsia X inks USD600m deal to buy General Electric engines. AirAsia X has signed a contract worth RM1.8b with General Electric to purchase jet engines for its new aircraft. Under the agreement, the long-haul low fare affiliate of AirAsia Group will purchase CF6-80E1 engines to power its three new A330-200s (with the option of two additional aircraft). (Source: The Edge Financial Daily)

Read more...

Maybank IB Views

COMPANY UPDATE
KNM Group RM2.40: Buy
Job wins on the rise Shariah-compliant

Orders are coming in. KNM's latest RM693m new orders account for 35% of our RM2b forecast for 2011. While the company does need to prove its ability to deliver on earnings given volatility in recent results, we do believe that these new orders, which are high margin in nature, bode well for the build-up in KNM's orderbook and signal margin recovery ahead as well. Meanwhile, current high oil prices would support O&G activity and demand for process equipment, of which KNM is a major global supplier, via Borsig. Our Buy call is maintained.


Tan Chong Motor Holdings RM4.74: Buy
Same genetics, different look Shariah-compliant

Maintain Buy; RM5.75 TP. The Proton-Nissan tie-up will not affect TCM's franchise as the collaboration is on specific areas with zero product cannibalization. TCM is taking a strategic stand not to compete in the A-segment but aims to make headway in the B-segment. TCM's domestic presence is sound but its growth prospects, in our view, lie in the regional market. Growth will be solid if it successfully capitalizes on the Indo-China market, which is still in its infancy.


Petronas Chemicals RM6.21: Buy
Sector re-rating imminent Shariah-compliant

Upgrade on industry re-rating. We believe the fundamentals for the petrochemical industry have never been better, buoyed by recovery in demand, strong product margins and an increasing price divergence between natural products and synthetic alternatives. Furthermore, high oil prices are beneficial as PCG’s products generally track oil price increases. We raise our target price to RM8.00 (from RM6.70) based on 14.4x 2011 – which is the long-term industry mean PER.


Technicals
The FBM KLCI closed higher by 7.60 points at 1,506.88. Its resistance areas of 1,507 and 1,527 will cap market gains, whilst the obvious support areas are located at 1,490 and 1,505.
Trading idea for today is a Take Profit call on GENP.


Other Local News
RHB Cap: EPF can't own more than 45% of RHB Cap. Bank Negara has not allowed the Employees Provident Fund (EPF) board to hold more than 45% of the paid-up share capital of RHB Capital Bhd. As at Feb 25, EPF had 45.68% interest in RHBCap. (Source: Bursa Malaysia)

Tanjung Offshore: Bursa reprimands Tanjung Offshore. Tanjung Offshore Bhd received a public reprimand from Bursa Malaysia after reporting a 37% deviation between its audited and unaudited account for 4QFY09. Tanjung Offshore is also required to carry out limited review on its quarterly report submissions, to be performed by its external auditors for four quarterly reports. (Source: The Edge Financial Daily)

PPB: Plans to expand flour mills and cinema. PPB Group Bhd plans to spend RM140m to expand its flour mills in Indonesia and Vietnam over the next two years. The group plans to double its Indonesian mill capacity to 2,000t daily with an investment of USD30m (RM91.5m). As for its Vietnam plant, the group plans to double capacity to 800t a day with an investment of RM50m. PPB has also allocated about RM190m to expand and upgrade its cinema business, among others, of which about 60% will be utilised this year. (Source: Business Times)

Q&G: Johor to announce big multi-billion O&G investment soon. Johor's plan to transform into a new regional oil and gas (O&G) hub will get another shot in the arm with the announcement of a new multi-billion ringgit investment soon. The project will be led by a local company that has been all over the world and is now coming back to Malaysia. The government will help fund the development of infrastructure for the project. (Source: The Star)

Property: Prasarana to get part of RRIM land for development. Syarikat Prasarana Negara Bhd will be allocated a parcel of land in the proposed Sungai Buloh Rubber Research Institute Malaysia (RRIM) development project for commercial development as part of the "rail plus property" model being used to offset the cost of building the mass rapid transit (MRT). The parcel of land will be used to build the MRT's main depot but it will also include commercial development above and possibly around the depot, in the form of retail and office space. (Source: The Star)

E&U: Renewable Energy Bill goes for 3rd reading. The Renewable Energy Bill will go for its 2nd and 3rd reading at the end of the month. The Energy, Water, and Green Technology Minister said that while electricity rates may not increase with the new Act, a revision on energy tariffs cannot be ruled out. The feed-in tariff mechanism is expected to be implemented in mid-2011. (Source: The Edge Financial Daily)

Read more...

Maybank IB View

COMPANY UPDATE
IJM Corporation RM6.13: Buy
Wins upstream pipeline job Shariah-compliant

Topping up. The upstream Semantan pipeline works is the 3rd contract award relating to upstream works for the Pahang-Selangor raw water transfer project. The addition to IJM's order book is RM161m, lifting outstanding job orders to RM3.75b. We maintain our forecasts having incorporated potential job wins. Share price has climbed 44sen (+8%) since the MRCB-IJML merger announcement on 23 Nov, which will unlock values. IJM remains a Buy with a RM6.40 RNAV-based TP.


RHB Capital RM7.90:Buy
Raising liquidity

Maintain Buy. EPF’s further sale of RHB shares will raise trading liquidity and enable RHB to meet the minimum 25% public shareholding requirement. At an indicative price range of RM7.50-RM7.90, this values RHB at 10.6x-11.1x 2011 PER and 1.6-1.7x P/B (2010E). We believe there is further upside from the current levels as RHB remains the 2nd cheapest bank trading at 11.1x forward earnings. Our 12-month TP is RM9.10, which implies 12.8x 2011 PER.


Telekom Malaysia RM3.45: Buy
A precursor to higher cash returns? Shariah-compliant

Increased scope for capital management. The sale of TM's Axiata stake could reap TM an additional RM908m, or 26sen/share. Together with the Measat sale earlier this year, TM has raised RM1.16b or 33sen/share in 2010. We see a heightened possibility of a special cash distribution. Reiterate Buy, with a price target of RM3.90. Our call on Axiata is also a Buy with a RM5.10 DCF-based target price.


ECONOMICS
Economy - Malaysia
"Tapaus" from Lunch…

We attended a luncheon talk delivered by BNM Governor yesterday entitled "International Currency Movements - Impact on Malaysia & International Trade". "Tapaus" from the luncheon included remarks by the Governor that Malaysia's general economic and financial sector development and liberalisation means the country has higher tolerance to more volatile forex markets and capital flows. BNM will intervene in the forex market whenever necessary to smooth out fluctuations and there are other policy toolkits that the central bank can employ as well. Governor is wary of the effectiveness of unilateral capital controls due to "regulatory arbitrage" and said such a move must be coordinated regionally or globally. She added that Malaysia still need to maintain approriate level of external reserves since the external reserves itself have been volatile over the past few years. In fact, Malaysia and regional economies should look more towards recycling their large cache of external reserves within the region. Ultimately, Malaysia should not rely on exchange rate for economic competitiveness.


RESULTS REVIEW
Glomac RM1.70: Buy
Single digit PER, double-digit growth Shariah-compliant

Above expectations. RM31.4m 1HFY11 net profit (+78% YoY) beat our and street forecasts. Valuations remain attractive with a 8.8x PER and 36% 3-year EPS CAGR. Glomac has lined up launches worth RM1b over the next 12 months. Given current strong property demand, we believe its RM500m FY11 sales target is attainable. We are raising our forecasts by 9-52% and our TP to RM2.15. Maintain Buy.


Technicals
The FBM KLCI closed higher by 17.80 points at 1,503.22 yesterday. Its resistance areas at 1,506 and 1,531 may cap market gains, whilst its firm support areas are located at 1,480 and 1,503.
Trading idea for today is a SHORT TERM BUY call on SEACERA.


Other Local News
PPB: Sells shares in unit to Wilmar for RM378m. PPB Group Bhd will sell RM378m worth of shares in its unit FFM Bhd to Wilmar International Ltd to fund the overseas expansion of its flour business. In addition to the shares issuance, PPB had also inked a memorandum of understanding (MoU) with Wilmar that will allow the former to take up stakes in selected subsidiaries of the latter in China. (Source: The Malaysian Reserve)

Autos: Govt to have dialogue with Proton and Perodua. The government will begin discussions with Proton Holdings Bhd and Perusahaan Otomobil Kedua Sdn Bhd (Perodua) this month once the Prime Minister has approved the consolidation study. Proton Holdings MD said that he strongly felt that there was room to collaborate between two parties. Meanwhile, Perodua said it was too premature to comment at the moment and it was up to the shareholders to decide ultimately. (Source: The Star)

Tech: US-based National Instrument to invest USD80m in Penang. US-based National Instruments (NI) will be investing USD80m (RM252m) to set up a production facility in Penang. NI targets to generate USD1b in revenue from its operations here by 2016. Penang will become NI’s Asia hub as its Asian businesses become increasingly important. By 2015, NI expects its Asia operations to surpass North America by increasing to 50% of its market share. (Source: The Edge Financial Daily)

Construction: Mace Group to invest RM3b in Malaysia. The Mace Group of the United Kingdom will be investing RM3b in Malaysia over 5 years. Mace would collaborate with Corridor Development Corp Bhd (CDC) in construction, real estate and industrial projects in development corridors. In the initial stages, Mace will be focusing on construction related projects, particularly the Sungai Rambai development. (Source: The Star)

Read more...