RHBInvest Research

Top Story: Plantation – Back in La Niña territory Overweight

Sector Update

¨ Despite the festive Hari Raya season, Malaysia’s CPO production rose by a surprisingly strong 12.1% mom in Sept, while exports fell by 8.8% mom. On a yoy basis, production rose by 19.6% yoy, while exports rose by 5.1% yoy. As a result of the larger mom increase in production vis-a-vis exports, closing CPO stock levels rose by 12.4% mom to 2.12m tonnes in Sep (from 1.89m tonnes in Aug). We believe the strong production numbers seen in Sep despite the festive period may indicate that production in Malaysia could have reached its peak earlier than expected, and that production may not necessarily surpass these levels in the remaining months of the year. Should production continue to be strong and exports weak, we believe price weakness for CPO could remain for the short term. As a result of the higher CPO stock levels, the stock/usage ratio in Sep rose to 11.1% (from 9.96% in Aug), above the 9-year average of 9.1%.



Corporate Highlights



Parkson: PRA listing aims to raise S$115m Market Perform

Company Update

¨ In its circular to shareholders, we highlight: 1) PRA will issue new shares of up to 18.9% of its enlarged share capital and expects to raise a minimum of SG$115m or RM281m in proceeds; and 2) PHB will offer up to 13.1% of the enlarged share capital and expects to raise a minimum of SG$56m or RM137m.



SP Setia: Some clarity on management’s direction Market Perform

News Update

¨ A joint statement was issued by Tan Sri Hamad Kama Piah Che Othman (President and Group Chief Executive of PNB) and Tan Sri Liew that PNB has given its reassurance that it wants to work with the existing management of SP Setia. Tan Sri Liew will continue to lead the company as CEO. PNB’s involvement in its investee companies is mainly through board representation.



Proton: Sale of Lotus Stake? Market Perform (up from UP)

News Update

¨ According to Autosport UK, speculation was circulating during last weekend’s Japanese Grand Prix, that Genii Capital could be buying a stake in Group Lotus.

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Maybank IB Views

Multi-Purpose Holdings RM2.77: Buy
Buy now or forever hold your piece

Great long term play. We initiate coverage on Multi-Purpose Holdings (MPHB) with a Buy call and RM3.60 TP (10% discount to RM4.00 SOP/sh). Its current share price reflects only Magnum Corporation's value without any value ascribed to its other businesses. We expect 14% 3-year forward earnings CAGR with 100% ownership of Magnum Corporation. A major re-rating catalyst is the gradual disposal of non-core assets which could enable it to pay up to 44 sen in special DPS and 20 sen in recurring net DPS, offering a whopping 7% net yield.

RESULTS REVIEW
AMMB Holdings RM6.48: Buy
Treasury gains support momentum

Maintain Buy. While 1QFY12 results were slightly above expectations our forecasts are lowered marginally. AMMB remains a Buy for: (i) its decent valuations, (ii) its ongoing portfolio rebalancing, (iii) ongoing investment in business line expansion under ANZ, and (iv) its position as a beneficiary of the Economic Transformation Programme. Our target price is trimmed to RM7.40 (-10sen) on an unchanged FY13 P/B target of 1.8x (ROE: 14.3%), which we believe is reflective of fundamentals.

Technicals
The FBM KLCI rose 16.07 points to close at 1,499.74 yesterday. Its resistance areas of 1,501 and 1,530 will cap market gains, whilst the obvious support areas are located at 1,454 and 1,499.Due to the US markets’ rebound last night; we will see some volatile trading activities in the local bourse today. Some heavy profit-taking and liquidation activities will emerge later to depress the markets’ rebound from its opening “gap up” move.

Trading idea is a Short-Term Buy call on BRDB

Other Local News
Sunway: No plans to postpone listing. The listing of Sunway Bhd, the merged entity of Sunway Holdings Bhd and Sunway City Bhd, will proceed as planned despite recent turbulence in the stock market. The shares of Sunway Bhd are scheduled to be floated on Bursa Malaysia on August 23 and expected to have a market capitalisation of over RM3.5b. (Source: Business Times)

AirAsia: New AirAsia Philippines vows to be 'substantially' cheaper. AirAsia launched a new affiliate in the Philippines yesterday, promising to undercut its rivals on regional and domestic routes. To minimise costs and avoid Manila's crowded terminals, AirAsia Philippines will fly out of a former US air base that had been turned into an industrial zone in Clark about 90 minutes' drive north of the country's capital. (Source: The Star)

MAHB: In talks with BA and Qantas on using KLIA. Malaysia Airports Holdings Bhd (MAHB) is still in talks with British Airways and Qantas Airways on the possibility of both airlines mounting flights to KL International Airport (KLIA), a decade after these airlines suspended flights to KLIA owing to a lack of network connectivity here. Both airlines were considering the possibility of flying into KLIA, following Malaysia Airlines (MAS) joining the Oneworld alliance. (Source: The Star)

Parkson: Hires HSBC for Singapore listing. Parkson Holdings is spinning its retail operations in Malaysia, Indonesia, Vietnam and Cambodia in a separate listing in Singapore soon. HSBC has been hired to apply for the corporate exercise and the Singapore's listing. (Source: The Sun)

Dijaya: JV plans property development with GDV RM2.8b. Dijaya Corp Bhd’s joint venture with Iskandar Waterfront Sdn Bhd, Magical Heights Sdn Bhd (MHSB), plans to undertake property projects near Johor Baru with a gross development value (GDV) of RM2.8b. The projects would be built on two pieces of land which MHSB has proposed to acquire from Trident World Sdn Bhd for RM220m. Dijaya and Iskandar Waterfront Sdn Bhd each has a 50% stake in MHSB. (Source: Bursa Malaysia)

Iskandar: Gets RM95b pledges. Iskandar Malaysia attracted about RM95b in committed investments from January to June 2011. This was more than double the cumulative RM47b target for the five years up to 2010. From 2011 to 2015, Iskandar Malaysia is targeted to achieve RM73b in investments. (Source: The Star)

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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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RHBInvest Research

Top Story: Insurance – Malaysian Takaful Industry Neutral

Sector Update
Since 2003, general Takaful and family Takaful new contributions have grown at a CAGR of 18.8% and 26.1% respectively. Comparatively, the general insurance and life insurance new business premiums only grew by a CAGR of 6.3% and 8% respectively during the same period but from a larger base.

Corporate Highlights

SP Setia: Expect a stronger 2HFY11 Outperform

Results Note
SP Setia’s 2QFY11 core net profit came in marginally below our expectation and market consensus. Headline net profit of RM92.2m was skewed by a one-off gain from the disposal/transfer of Tenby School complex from Setia Alam to Eco Park amounting to about RM30m.

UEM Land: First foray into retail development Market Perform

News update
A 55:45 JV between ULHB and Iskandar Harta Holdings (IHH) will undertake a mixed development project known as “Lifestyle Retail Mall and Residences @ Medini North” on 2 parcels of land measuring 35 acres in Pulai, Johor. Concurrently, NLSB had also entered into a Lease Agreement with IHH, being the registered owner of the 2 parcels of Medini land, for 99-year lease. Based on a total GFA of 2m sqf and lease consideration of RM100m, this translates into a land cost of RM50 psf.

Parkson – Indonesia Deal Completed Market Perform

Company Update
Parkson announced that it has completed the acquisition of PT Tozy Sentosa (TS) at a total consideration of RM38.7m. As previously highlighted in our report dated 14 Apr, PHB would pay Mitra Samaya (MS), the vendor, RM38.7m for TS, and MS would in turn subscribe to 9.9% of Parkson Asia’s shares for the same consideration of RM38.7m.

RCE: Kowaja issue finally resolved, but with conditions Outperform

News update
RCE announced yesterday that Koperasi Wawasan Pekerja-Pekerja Berhad (Kowaja) has received approval from Suruhanjaya Koperasi Malaysia (SKM) to obtain funding from RCE.

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Update KLCI closes at 6-week high, nudged up by Tenaga

KUALA LUMPUR: The FBM KLCI closed at a six-week high on Friday, May 27, with Tenaga Nasional as the main factor as investors expected positive news for the power giant in getting a tariff increase.

Prime Minister Datuk Seri Mohd Najib Tun Razak said the government will study first the report submitted by the National Economic Council (NEC) on the electricity tariff.

"Whatever it is, we will see first. We cannot say anything. That is their report," he told a press conference after chairing the Umno Supreme Council meeting.

At 5pm, the FBM KLCI was up 7.75 points or 0.5% to 1,548.69, the highest since April 11. Turnover was 947.81 million shares valued at RM1.69 billion. The broader market was cautious with declining stocks beating advancers 464 to 314 while 300 stocks were unchanged.

The KLCI’s historic closing was 1,574.49 on Jan 17.

Crude palm oil futures rose RM22 to RM3,438, making it the third weekly gains as buyers in Europe increased their imports to replenish their stockpiles.

Light crude oil added 34 cents to US$100.57. The ringgit was at 3.0315 to the US dollar, compared with the previous close of 3.0457.

Among the regional markets, Japan’s Nikkei 225 fell 0.42% to 9,521.94, Shanghai’s Composite Index lost 0.97% to 2,709.95. Hong Kong’s Hang Seng Index added 0.95% to 23,118.07 and Taiwan’s Taiex 0.25% higher to 8,810 and Singapore’s Straits Times Index added 0.38% to 3,135.52.

At Bursa Malaysia, Tenaga rose 28 sen to RM6.58, pushing up the 30-stock KLCI up by 3.57 points while genting added 12 sen, nudging the index by another 1.05 points. Genting Malaysia’s 10 sen gain to RM3.62 gave the index another 0.92 point push.

PLANTATION []s were also among the gainers on the bullish outlook for CPO, with KLK rosomg 22 sen to RM22.10 and Batu Kawan 12 sen. Sime Darby added two sen to RM9.13 and IOI Corp four sen to RM5.34.

Hong Leong Bank rose 30 sen to RM12.20, Nestle 28 sen to RM47.98 while Yinson climbed 13 sen to RM1.44.

KNM was the most active with 103.44 million shares done, falling 38 sen to close at RM2.15 on the weaker first quarter earnings.

Perstima fell 57 sen to RM4.60 and it was the top loser of the day. Profit taking saw F&N giving up 30 sen to RM19.20. Other decliners were MSC, Sindora, Ta Ann, Parkson and Tradewinds.

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RHBInvest Research

Top Story: KLK – Strong monthly production recovery… but can it last? Market Perform

Visit Note
Seven key points: 1) Improving productivity, but still down yoy in 7MFY09/11; 2) Some forward CPO sales locked in; 3) Fertiliser purchases no longer done every half-year; 4) Rubber yields reduced slightly to account for replanting activities; 5) Commencement of new manufacturing capacity pushed back; 6) Strong takeup rates at new property launches; and 7) Sale of cocoa associate to yield good gains.



Corporate Highlights



Allianz: Improvement in claims and management expenses to stay Underperform

Briefing Note
Moving forward, Allianz expects the claims ratio to be sustainable at 59-60%, while we are keeping our projection of 60.5% claims ratio for 2011 to be conservative. Its management expense ratio improved due to better operating efficiencies coupled with tighter management control of the costs.



TNB: Talks of tariff hike resurfaces Underperform

Company Update
Nanyang Online quoted undisclosed sources yesterday that the Government may announce a hike in electricity tariffs next week, as an alternative to raising petrol prices.



Parkson: PRG 1QCY12/11 results in line with expectations Market Perform

Company Update
Parkson’s 51.6% subsidiary, Parkson Retail Group (PRG)’s 1QCY12/11 core net profit of RMB328.4m (+21.6% yoy) was within expectations, accounting for 26% and 27% of our and consensus earnings forecasts, respectively. No dividends were declared during the quarter, as is the norm.



Top Glove: Bracing for another weak quarter Underperform (down from MP)

Company Update
We recently spoke with management and understand that customers continue to hold back their orders in view of the high latex prices. Consequently, this suggests that 3Q revenue could remain flat qoq. Bottomline, however, could be adversely impacted given that latex prices remain high and US$ continues to weaken against RM.

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RHBInvest Research

Top Story: IJM Land

• Company Update
• IJMLD shares’ performance was flattish (YTD -2%) vs. Mah Sing’s 41% and SP Setia’s 11%.
• We believe the current valuations on IJMLD are decent, given the unchanged solid fundamentals, strategic landbank exposure and >50% FY12 net earnings growth.
• The value of the 2000-acre Canal City land will be unlocked next year. The project will be a bread-and-butter township development.
• IJMLD is our top pick besides Mah Sing. Maintain Outperform with a higher FV of RM3.28 (from RM3.18).

Corporate Highlights

UEM Land:

• News Update
• Secured maintenance contract
• Minimal impact on net profit. We expect the contract to yield a gross margin of 20%.
• No change to forecasts, Market Perform call and fair value of RM2.80.

Parkson: Market Perform

• News Update
• Clarity on the Centro deal
• For the time being, given that there is no cash involved in the deal, the cost to Parkson is a 9.9% earnings dilution in its Malaysian and Vietnamese operations earnings, which is to be transferred into Parkson Asia.
• As highlighted, the deal also involves Parkson granting MS a put option which, if exercised by June 2014, would require Parkson to purchase MS’ 9.9% stake in Parkson Asia at a total value of RM112.6m.
• Our SOP-derived fair value is maintained at RM5.90. Maintain Market Perform for the stock.

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RHBInvest Research

Top Story: TNB

Results Preview
Bracing for weaker 2Q
TNB lacks catalysts due to slowing electricity demand growth and no clear timeline for a formal fuel cost pass-through formula.
Maintain Market Perform.

Corporate Highlights

Faber:
Company Update
Potential bidder for Khazanah’s hospital support concession
We maintain our fair value of RM2.79. Outperform call on the stock.

Parkson:
News Update
Going Into Indonesia Via Acquisition of Centro Department Stores
Assuming the deal does go through, we estimate that it would increase PHB’s FY06/12 earnings by ~1.7-2%,
Fair value is maintained at RM5.90. Keeping our Market Perform recommendation on the stock.

IOI:

News Update
Finally announces South Beach buy
Our estimates suggest this acquisition would have an immediate negative earnings effect of 4-5% p.a. from the interest expense incurred, given that earnings from this property development would not come in until 2015.
Reduced our SOP-based target price to RM5.60 (from RM5.90).No change to our Underperform call on the stock.

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RHBInvest Research

IPO: APFT RM0.50
Top Gun made in Malaysia

Riding on positive industry outlook. Asia Pacific Flight Training Berhad (APFT) is the only stock with exposure to aviation training and it will list on the Bursa main market today. APFT will benefit from the growth plans of MAS, AirAsia and Firefly as these airlines will require more trained aviation professionals. Its IPO price of RM0.50 is attractive with a historical PER of 8.9x and 20-30% p.a. expected earnings growth for the next 2-3 years.


UMW Holdings RM7.17: Hold
PCSB charters Naga 3 rig Shariah-compliant

Priced in, maintain Hold. We expect the Naga 3 rig charter to contribute about 2% to UMW's net profit in 2012. We retain our earnings forecasts as we have built in this new charter into our model. Auto will continue to drive Group earnings in 2011 but the upside is limited. We remain cautious on UMW's O&G turnaround (i.e. WSP, Naga 2), a market contrarian, with minimal catalysts to excite in 1H. Our RM7.20 target price is unchanged, based on 12x 2011 EPS.


RESULTS REVIEW
S P Setia RM6.07: Buy
On track as strong sales continue Shariah-compliant

Maintain Buy. 1QFY11 normalised net profit of RM62m (+13% QoQ, +62% YoY) came in within expectations. Sales momentum remained strong with RM953m recorded in 4MFY11 (32% of SPSB’s RM3b FY11 sales target), lifting unbilled sales to RM2.1b (or 1.1x of our forecast). 2011 focus will be on its flagship RM6b KL Eco City (KLEC) project. We raise earnings by 2-4% and RNAV by 5 sen. Target price is raised to RM7.20 (+5 sen). SPSB is our top pick for the property sector.


Kencana Petroleum RM2.54: Buy
On track Shariah-compliant

We remain Buyers of Kencana. Interim results are tracking expectations. We foresee the momentum of contract flows picking up in 2HFY11 and strengthening into FY12 as PETRONAS' capex programs intensify. We do not rule out potential strategic partnership(s) should Kencana aim to participate in domestic deepwater development. We value Kencana at RM3.10, based on 20x CY12 EPS. Our 20x target is validated in a capex-fueled, order book-driven upcycle.


Technicals
The FBM KLCI closed lower by 0.35 points yesterday, almost unchanged at 1,492.09. Its resistance areas of 1,492 and 1,515 will cap market gains, whilst the weak support areas are located at 1,474 and 1,488. We expect the index to remain in a minor rebound mode in the short term and to be bearish in the medium term.

Trading Idea for today is a Take Profit call on AXIATA


Other Local News
Parkson: May foray into Indonesia. Parkson Holdings Bhd is teaming up with PT Tozy Bintang Sentosa (TBS) to expand its Parkson department stores in Indonesia. The TBS Group operates six retail stores under the brand names of Centro Lifestyle Department Store and Kem Chicks in Indonesia and it planned to add another two more stores. The eight stores were expected to generate more than USD100m in sales turnover in 2011. (Source: The Edge Daily)

Market: Capital market crosses RM2t. Securities Commission chairman Tan Sri Zarinah Anwar said Malaysia's capital market corssed the RM2t threshold for the first time ever as at end-2010, achieved an annual compounded growth rate of 11% from RM717b in 2000. (Soure: The Star)

Property: EPF buys 3rd London property for GBP148m. It marks the EPF's third property investment there since announcing an allocation of GBP1b for British property purchases. EPF's other 2 propery purchases are One Sheldon Square in Paddington Central, which was bought for GBP156m, and 40 Portman Square near Oxford Street which was acquired for GBP180m. The 2 properties have yields of 5.75% and 5.55% respectively. (Source: The Star)

Smelting: OMH plans Sarawak smelter. Austrialia-listed OM Holdings Ltd (OMH) plans to set up a manganese and ferro silicon alloy smelter under the Sarawak Corridor of Renewable Energy (SCORE) initiative, expected to be ready in 3Q 2011. The smelter facility is expected to have the capability to produce 300,000 tonnes of manganese ferro alloys and 300,000 tonnes of ferro silicon alloys a year. (Source: The Star)

Faber: Plans RM272m capital reduction. Faber Group Bhd will undertake a capital reduction to clean up its balance sheet, as part of a plan that will allow greater flexibility for the company to determine future cash dividend payouts. Faber will cancel 75sen of its current par value of RM1 a share. (Source: Bursa Malaysia)

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RHBInvest Research

RH Petrogas:

New Coverage ( Singapore )
RH Petrogas (RHP) is a new independent oil company, listed on the Singapore Stock Exchange, that is ultimately owned by Malaysia ’s Rimbunan Hijau Group.
We forecast FY10-12 net earnings of S$1.1m, S$3.0m and S$3.6m.
Fair value estimate to RM1.43/share.
We initiate coverage on the stock with an Outperform call.

Corporate Highlights

AMMB:

• Briefing Note (published 21 Feb 2011)
• AMMB Positioned for future rate hikes
• No change to our earnings forecasts. Fair value of RM7.42 and Outperform call maintained.

Ann Joo:

Results Preview

• FY10 results to come in below expectations
• Indicative fair value is reduced to RM3.02 (from RM3.14).

Maybank:
2QFY11 Results/Briefing Note
2QFY06/11 results were within our and consensus expectations. More dividend cheer.
No change to forecasts. Fair value of RM10.20 and Outperform call maintained.

Parkson:

• Company Update
• PRG 4QFY12/10 results below expectations
• Fair value is revised to RM6.55 (from RM7.10 previously) after our PRG earnings adjustment. Maintain Outperform.

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Maybank IB Views

RESULTS REVIEW
Malayan Banking RM8.86
Upside surprise to dividends

Within expectations. Maybank's results were within expectations, with a 1HFY11 net profit of RM2.15b or 50% of consensus' RM4.32b. 2QFY11 net profit rose 13% QoQ largely on the back of much reduced credit charge offs; operating profit was flat (+1.3% QoQ). Dividends surprised on the upside with an interim net cash DPS of 3 sen and an electable portion of 18 sen net under the Dividend Reinvestment Plan.


KFC Holdings (M) RM3.85: Hold
A great 2010; more challenging 2011 Shariah-compliant

Done well, but downgrade to a Hold. KFC's share price has risen 92.5% over the last 52 weeks. While it continues to consistently deliver sustained top-line and >10% p.a. bottom-line growth, we see a lack of near-term catalysts. Although our DCF-value rises 8.4% post-2010 results to RM3.97/sh, this implies little upside to its current market price. At our new TP, KFC would trade at 16.7x 2012 PER.


TH Plantations RM1.90: Buy
4Q10: Charging ahead Shariah-compliant

A strong showing. Results were ahead of forecasts on stronger than expected 4Q10 performance driven largely by higher CPO prices. We raise our FY11 net profit forecast by 13% after incorporating higher average CPO price of RM3,100/t (+7%). THP remains a Buy with a higher RM2.35 target price (+9%). Valuation wise, THP is attractive at 8.1x, trading at 1sd below its mean one-year forward PER of 11x.


RCE Capital RM0.53: Sell
Strong quarter, but uncertainties still

Above expectations. 9MFY11 net profit made up 83% of our RM105m full-year forecast and 88% of consensus on sustained margins. We raise our FY11-13 net profit forecasts by 6% p.a.. Despite continous earnings delivery, the larger picture remains cloudy as there is no development yet on KOWAJA's compliance with cooperatives guidelines which affects RCE's earnings growth post FY11. Maintain Sell with an unchanged RM0.45 TP based on 0.7x P/B (end-2010).


Notion VTEC RM2.06: Buy
Profits rebound; special dividend surprise Shariah-compliant

NVB's earnings rebounded 64% QoQ in 1QFY11, fueled by stronger camera segment's performance and a RM2m currency gain. It surprised with special dividends (via treasury shares distribution of 13 shares for every 1,000 held). Our unchanged 2-year net profit CAGR forecast of 38% has upside potential. Clinching MSC tax status could further lift EPS by 6 sen. Maintain Buy with a RM2.40 target price.


RESULTS PREVIEW
Kossan Rubber Industries RM3.29: Buy
Better than peers at riding out the storm Shariah-compliant

Expect commendable 4Q10 results. Kossan's 4Q earnings are likely to have been stable QoQ (+17% YoY) on sustained EBIT margins. Such a performance would be highly commendable in our view, considering the fact that high latex prices had negatively impacted the margins and earnings of its latex peers in the recent quarter. Latex gloves presently account for 60% of Kossan's glove production with nitrile accounting for the remaining 40%. Kossan's share price has unjustifiably underperformed the bigger latex peers by 5% YTD and valuations are undemanding. Maintain Buy and DCF-derived TP of RM3.60.


Technicals
The FBM KLCI rebounded strongly by gaining 8.29 points at 1,525.85 yesterday. Its resistance areas of 1,526 and 1,544 will cap market gains, whilst the obvious support areas are located at 1,500 and 1,523.

Trading idea for today is a Buy call on KIANJOO.


Other Local News
Banking: Mizuho Malaysia gets MoF approval for its commercial banking licence.The licence would enable it to provide a full range of financial services to multinational companies seeking to establish and expand their broad manufacturing base. (Source: The Edge Daily)

Oriented Media: In reverse takeover. Bina Puri will be injecting its polyol manufacturing business and power assets in Indonesia into OMedia in exchange for new shares, making Bina Puri the largest shareholder in OMedia, after the reverse takeover (RTO) is concluded. Ace Market-listed OMedia is presently involved in the sale of information technology-related products and services. (Source: The Edge Daily)

Parkson: To accelerate expansion in China. MD Alfred Cheng said the company will open 8 to 9 stores a year through 2013, after opening 5 last year and spend up to RMB500m this year on new stores and remodeling existing outlets. (Source: Malaysian Reserve)

MAS: Offering up to 85% discount for all destinations. Malaysia Airlines (MAS) is offering up to 85% discount to all destinations in conjunction with the 8th edition of the Malaysia Airlines Travel Fair (MATF'11) from Feb 21 to Feb 28. The travel period for the fares is from March 21 to Dec 31. MAS is also offering up to 50% discount for business class seats for all of its destinations for the first time. (Source: Malaysian Reserve)

Healthcare: Medical records online by 2015. At least 20 government hospitals nationwide will be able to serve patients faster by 2015 when medical records are accessible online. However, having a common database for medical records has raised concerns on privacy and confidentiality. (Source: New Straits Times)

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Maybank IB Views

SECTOR UPDATE
Aviation: Overweight
Profits Galore, enter While You Can

Overweight. We are optimistic on the aviation sector because: (1) it is entering the fourth year of the industry cycle - a period renowned for strong profit growth and margin expansion; (2) healthy supply and demand relationship with the industry set to grow by 4-6%; (3) airlines have become more efficient, and there are fewer cases of irrational competition; (4) jet fuel prices are relatively stable; and (5) strong GDP growth in the region underpins strong demand for air travel.


INITIATING COVERAGE
Malaysia Marine and Heavy Engineering Holdings RM5.90: Buy
At the cusp of a super-cycle boom Shariah-compliant

Initiating coverage with a Buy and RM6.50 target price. Malaysia Marine and Heavy Engineering Holdings Berhad (MHB) is Malaysia's most prominent offshore fabrication operator directly benefiting from PETRONAS' development programmes. MHB offers strong earnings visibility, sustainable order book and tender pipeline. Its market leadership and PETRONAS' pedigree parentage put it on a higher perch in securing the major jobs. We expect MHB to be a strong beneficiary of sizeable E&C and marine conversion jobs soon.


COMPANY UPDATE
Sunway Holdings RM2.24: Buy
Ending 2010 with two new jobs Shariah-compliant

Maintain Buy. Two new construction contracts on 30 Dec lifted 2010 job wins to RM889m and outstanding order book to RM2.5b. Sunway remains a Buy with a price target of RM2.85 (11x 2011 PER) as it stays on course for record profits in 2010, and rising news flow in 2011. Among construction stock, Sunway is the cheapest. Its merger with SunCity at RM2.60 per Sunway share is positive in raising market values, trading liquidity and balance sheet to take on larger projects.


ECONOMICS
External Trade November, 2010
In the realm of single-digit growth...

Nov '10 export growth picked up for the first time in seven months to +5.3% YoY (Oct '10: +1.3 YoY; Maybank IB: +5.9% YoY; Consensus: +5.9% YoY) but imports slowed to +6.1% YoY (Oct '10: +12.5% YoY; Maybank IB: +11.7% YoY; Consensus: +11.0% YoY). From the previous month, both exports and imports fell by 4.1% and 9.2%. YTD, exports and imports are up 16.8% YoY and 22.8% YoY respectively versus our 2010 estimates of +15.0% and +19.5%. For 2011, we expect exports and imports to expand by 8.3% and 8.9% respectively. For 2012, we assume exports and imports growth to increase at roughly the same pace of 8.1% and 8.8% respectively. These forecasts are essentially based on the underlying assumptions that growth in global real GDP, trade and semiconductor sales in 2011-2012 will be slower than 2010, amid gradual appreciation of the Ringgit and continued firm prices of major export commodities.


SPECIAL TECHNICAL PERSPECTIVE
"Bull" on liquidity steroids
A slower paced "bull-run". Caution is wise

USA's persistent quantitative easing (QE) program moved into its 2nd phase in November 2010. As the American QE2 program commenced, the world is awash in liquidity. Given the large currency reserves in the Asia-Pacific countries, the monies from QE1 had flowed into this region and fuelled a strong run here for the past 2 years at least.


Technicals
The FBM KLCI surged 14.51 points to 1,533.42 yesterday. Its resistance area of 1,535 may cap market gains, whilst its firm support areas are located at 1,518 and 1,533. Due to the firm US markets last night, we may see the FBM KLCI in a solid trading mode today too.

Trading idea for today is a SHORT-TERM BUY call on HSPLANT


Other Local News
TM, Axiata: To probe alleged payments. Telekom Malaysia's Board (TM) has approved the formation of a Board Sub-Committee of the Board Audit Committee (BAC) to conduct an independent and comprehensive internal investigation into the alleged payments received by TM employees from Alcatel-Lucent SA. As the period under investigation concerns the previous integrated TM Group, TM is working closely with Axiata Group Berhad (Axiata) to extend all necessary cooperation with the relevant parties and authorities. TM and Axiata have jointly appointed KPMG Corporate Services Sdn Bhd and Shearn Delamore & Co as forensic accountant and legal adviser respectively to assist in the internal investigation. (Source: Bursa Malaysia)

MK Land: Plans to sell leasehold land for RM130m. MK Land Holdings Bhd's wholly-owned subsidiary, Saujana Triangle Sdn Bhd (STSB), is selling two plots of leasehold land in Sungai Buloh, Selangor to Foster Estate Sdn Bhd for RM130m cash. The disposal would unlock the value of the land which has not been earmarked for any immediate development. (Source: Bursa Malaysia)

Petra Energy: To bag RM100m Murphy Oil job. Petra Energy Bhd is close to winning a RM100m contract from Murphy Oil for hook up and commissioning works. The job from Murphy is said to be at the same rates offered by Petronas Carigali. In early December 2010, Petra Energy was awarded a RM400m job from Petronas Carigali Sdn Bhd. (Source: The Edge Financial Daily)

Parkson: Receives license to operate in Cambodia. Parkson Holding Bhd has received regulatory approval to operate department stores in Cambodia. (Source: Bursa Malaysia)

Media: Asia Media IPO oversubscribed by 21.5x. Asia Media Group Bhd, a digital out-of-home Transit TV company, saw the public portion of its initial public offering (IPO) oversubscribed by 21.46 times. At the close of the public offer on Dec 29, 2010, a total of 5,119 applications for 179.6m shares were received for the 8.0m made available to the Malaysian public. Asia Media's IPO involves an issuance of 98m new shares at 23 sen each, and the company is en-route to being listed on the Ace Market of Bursa Malaysia on Jan 11. (Source: The Star)

SME: Additional RM3b allocation for SMEs to be disbursed immediately. Disbursement of the additional RM3b Working Capital Guarantee Scheme (WCGS) allocation under 10th Malaysia Plan (10MP) will commence immediately. The scheme was first introduced in the second stimulus package in March 2009. It was fully utilised by year-end, despite being increased from RM5b to RM7b. In view of the encouraging response to the scheme, the Government provided an additional RM3b under the 10MP, bringing the total disbursement to RM10b. (Source: The Star)

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Maybank IB View

ACQUISITIONS / DISPOSAL
IJM Land / MRCB RM2.97 / RM2.12: Not Rated
A merger of equals

A win-win proposal. The IJML-MRCB merger will result in the largest property group with a potential market value of RM8.9b, a combined landbank of c.7,039 acres, and a combined GDV of RM36b, surpassing UEML-Sunrise's and SP Setia's. The merged entity will have a sizeable 39.8% public spread, hence raising liquidity. An enlarged balance sheet also improves its chances of taking part in the development of government land. IJML's shareholders gain better upside based on the share exchange prices of RM3.65 for IJML and RM2.30 for MRCB.


RESULTS REVIEW
IJM Corporation RM5.69: Buy
Property merger unlocks value Shariah-compliant

Upgrading target price. RM178m 1HFY11 core net profit (+29% YoY) before RM31m forex translation gain was in line, at 47% of our full-year forecast. No change to our core earnings forecast but we incorporate the RM31m forex gain, raising FY11 bottomline forecast by 6%. We lift our RNAV-based target price to RM6.40 (+16%) after incorporating new IJM Land's (IJML) implied value for its merger with MRCB and higher valuations for the construction business. IJM Corp stays a Buy.


Notion VTEC RM1.63: Buy
Fortune changes, risk abates Shariah-compliant

Upgrade to Buy. 4Q results were better than expected, with 4Q net profit rising 2.8-fold QoQ and EBITDA margin expanding by 10.2-ppt QoQ. We upgrade NVB to a Buy (non-consensus) with an unchanged RM1.95 TP. On balance we believe the negatives have been priced in after a 37% fall in share price following the disastrous 3Q results. Valuations are inexpensive, with a 4-6x FY11-12 PER and improving business outlook.


COMPANY UPDATE
Mah Sing RM1.79: Buy
Further expand its foothold in Penang Shariah-compliant

Buys land on Penang island. We are positive on the recent land acquisition in Penang island due to its attractive pricing and strategic location. The land is expected to enhance our RNAV by 4.8%. We continue to like Mah Sing given its undemanding valuation, 30% 3-year EPS CAGR and fast turnaround strategy. We lower our forecasts by 0.6-2.3%, but raise RNAV-based TP to RM2.60. Reiterate Buy.


IPO: Careplus Group RM0.23
Small glove-maker turns ambitious Shariah-compliant

Making debut on ACE Market. Careplus, a small latex glove-maker, is scheduled for listing on 6 Dec '10. The company expects capacity-driven earnings growth from FY12 onwards, but we see limited upside to its retail IPO price owing to: (i) fair valuation at its IPO price relative to small sized peers; and (ii) the presence of industry headwinds (i.e. persistently high latex prices, appreciating Ringgit).


Technicals
The FBM KLCI fell 15.67 points to 1,487.53 yesterday. Due to the significantly weaker tone in the USA last night, we may see the FBM KLCI in a bearish mode today too. Its resistance areas at 1,487 and 1,510 will cap market gains, whilst its weaker support areas are located at 1,465 and 1,480.

Our trading idea for today is a TAKE PROFIT call on LIONIND.


Other Local News
Sunway, SunCity: Shares suspended on merger talks. Shares of Sunway Holdings Bhd and Sunway City Bhd (SunCity) have been suspended from trading for two days since yesterday amid speculation that they may be merged. Both companies are expected to make an announcement today. (Source: Business Times)

Tan Chong: Teana to boost Nissan’s local market share. Edaran Tan Chong Motor Sdn Bhd (ETCM) expects the launch of its new Nissan Teana luxury sedan to boost the company's local market share. The company had already received over 1,000 bookings for the Teana. For the Malaysian market, the Teana will be sold with three engine options 136bhp, 2-litre and 182bhp V6, 2.5-litre which are assembled in Tan Chong Motor's Serendah factory, and the 252bhp V6, 3.5-litre which is fully imported from Japan. (Source: The Star)

Parkson Holdings: Acquires Shantou Parkson for RM37m. Parkson Holdings Bhd, via Hong Kong-listed unit Parkson Retail Group, has acquired 100% interest in Shantou Parkson Commercial Co Ltd for RMB80m (RM37.3m). Shantou Parkson was the owner and operator of the Parkson branded department store at South City Shopping Mall, Shantou City, Guangdong Province, China. (Source: The Star)

YTL, YTL Land: YTL Corp plans revamp of property division. Conglomerate YTL Corp Bhd plans to house all its property development assets and projects under YTL Land & Development Bhd (YTL Land). It would dispose its property assets and projects in Malaysia and Singapore to YTL Land net of outstanding intercompany balances for RM476.1m. (Source: The Star)

Gadang: Bids for more than RM2b jobs. Gadang Holdings Bhd is bidding for several engineering and construction projects totaling more than RM2b. Among the tenders are the proposed development of the Women and Children Hospital in Kuala Lumpur announced under the budget 2011, the 300MW Kimanis power plant in Sabah, 1,000MW Manjung power plant in Perak and the Shah Alam Hospital. (Source: The Edge Financial Daily)

Property: M'sian city apartment prices second lowest in region. The average price of city apartments in Malaysia is the second lowest compared with other countries in the region. Global Property Guide (GPG) said according to its research, only Indonesia offered city apartments that were priced lower than Malaysia. In comparison, the average price of city apartments in Singapore is almost eight times more than in Malaysia, beating even Australian prices, which are almost five times higher than Malaysian city apartments. (Source: The Star)

Market: Bursa plans to attract more SRI funds with ESG index. Bursa Malaysia Bhd plans to attract more Socially Responsible Investment (SRI) funds into Malaysia by constructing the Environment, Social and Governance (ESG) Index in 2012. Bursa Malaysia CEO Datuk Yusli Mohd Yusoff said the exchange is working with various relevant authorities of similar global-based listed indices. (Source: The Malaysian Reserve)

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RHBInvest Research Highlights

Top Story

Benchmarking:
Major changes ahead.
Stock picking is still important with news flow remaining one of the key catalysts.


Sector Call


Media:
Oct print and TV adex up by 9.0% YoY
No change to our Overweight call on the sector.

Corporate Highlights


MRCB:
To merge with IJM Land.
Maintain Trading Buy. Fair value is RM2.30.


IJM Land:
Thumbs up.
Maintain Outperform and revised fair value of RM3.65.


EON Capital:
Underlying operations coming along nicely.
Fair value is RM7.30. Underperform call.

Mah Sing:
Stocking up landbank.
Fair value is raised to RM2.43 (from RM2.40). Maintain Outperform.

Parkson:
Injection of Shantou Parkson into PRG.
Fair value is maintained at RM7.36. Maintain Outperform.

Technical Highlights


Daily Trading Strategy:

• Tuning into a “sell” mode.
• Selling pressure triggered by the strong selldown in the regional markets yesterday.
• Investors Opted to trim down their holdings on the core bluechips, hence triggering the renewed selling pressure on counters like the banks in late trading yesterday.
• The FBM KLCI must recover to above the 40-day SMA today to avoid further selldown on the local bourse, technically.
• However, in view of the fresh political tension in Korea peninsula, plus the nervousness on the possibility of further tightening measures from Beijing, sentiment is likely to turn into a “sell” mode temporarily.
• On the upside, the immediate key level is at the 40-day SMA of 1,493, while downside is seen at 1,450.

Daily Technical Watch: Maybank

• Will turn short-term bearish if it dips below the 10-day SMA
• Immediate Support at RM8.15
• Immediate Resistance at RM8.89

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OSK buy call on Parkson

OSK buy call on Parkson with a target price at RM6.64. RHB invest still maintain the fair value of Parkson at RM7.72. Currently the share trading at RM5.78.

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RHBInvest Research Highlights

Top Story

First Resources

• Significant turnaround from.
• Fair value is trimmed to S$1.60 (from S$1.70). Maintain Outperform.

Corporate Highlights


Hua Yang

• In the right affordable housing segment.
• Fair value is RM1.16. Not rated.

Gamuda

• Penang issues stop-work order against double-tracking project.
• Fair value is RM4.51. Maintain Trading Buy.

Genting Bhd

• One-off gain of RM390m.
• Fair value for Genting is RM12.45 (from RM12.75). Maintain Outperform.

Parkson

• PRG 3QFY12/10 results slightly below expectations.
• Fair value is unchanged at RM7.72. Maintain Outperform.

Tan Chong

• Spreading its wings to the east.
• Maintain fair value at RM6.16. Market Perform.
  

Maybank

• Off to a decent start.
• Fair value is RM10.40. Maintain Outperform.

AMMB

• Another strong quarter.
• Fair value is RM7.26 (from RM6.95) Maintain Outperform.

CSC Steel

• 3QFY12/10 performance impacted by inventory write-down.
• Fair value is RM2.33. Maintain Outperform.

Technical Highlights

Daily Trading Strategy

• Cautious pending clearer regional performance.
• FBM KLCI’s bearish technical readings continued amid the bearish reversal in the regional markets that responded negatively to the China markets’ unexpected 5% plunge.
• If the index fails to recapture the psychological level of 1,500 and 10-day SMA of 1,513 soon, chances are high for it to continue heading downward to below the 40-day SMA near 1,488.
• Key support is at 1,450, while the resistance is seen at the 10-day SMA for this week
  

Daily Technical Watch: Genting

• Negative “double sells” signal on the indicators.
• Immediate Support at RM9.57
• Immediate Resistance at RM10.60

Weekly Trading Idea: Salcon

• A chance to accumulate near RM0.75
• Strategy: Buy on weakness at above RM0.75.
• Immediate Resistance at RM0.89
• Immediate Support at RM0.75
• Exit: Cut loss if it loses the 10-day and 40-day SMAs

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RHBInvest Research Highlights 02nd November 2010

Top Story

China Plays:

• Customer, supplier, partner.
• Our China picks are Parkson, Unisem, KLK, and ILB.

Sector Call

O&G:

• Sector Riding On Positive News Flow and “Hot Money”
• We maintain our Neutral stance on the sector.

Sector Update:

• Dialog: Fair value raised to RM1.47. Outperform
• Dayang Enterprise: Fair value raised RM3.01.Outperform
• Sapuracrest: Fair value raised to RM2.97.Outperform
• Petronas Gas: Fair value raised to RM13.51.Outperform
• Kencana: Fair value raised to RM2.03.Market Perform
• Wah Seong: Fair value maintained at RM2.21.Market Perform

Semiconductor:

• Chip sales up stronger moo but continues to narrow yoy
• Remain cautious on the sector and reiterate our Neutral call

Corporate Highlights

MAHB:

• Racing to be the Asean hub: MAHB vs. AOT .
• Fair value remains unchanged at RM7.72. Outperform

KFC:

• Acquisition of four companies from JCorp.
• Fair value is RM3.85.Trading Buy call on the stock.

Technical Highlights

• Daily Trading Strategy:
• Cautious sentiment to continue.
• Positively, we keep our bullish projection based on the Fibonacci Projection method at 1,668 for the medium term.
• Outcome of the US FOMC meeting, the US mid-term election and the local by-elections in Kelantan and Sabah this week remain the key potential issues

Daily Technical Watch: Dialog:

• Revisiting UTL near RM1.30 to reassess Monday’s breakout momentum.
• Immediate Support at RM1.30
• Immediate Resistance at RM1.50

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