Maybank IB Views

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

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

RHB Capital RM7.20: Hold
The alternative scenario

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

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

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

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

Trading Idea is ENG

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

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

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

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

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

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Maybank IB Views

ECONOMICS
US FOMC Preview
Expecting something...

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

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

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

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

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

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

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

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

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

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

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Stocks to watch: CIMB, Mudajaya, AirAsia, MAS

KUALA LUMPUR: CIMB Group Holdings Bhd will be among the heavyweights stocks to watch on Wednesday, Aug 24 following the release of its second quarter results which was a record.

Other stocks which could be in focus are MUDAJAYA GROUP BHD [], Axiata Group Bhd and also airlines AIRASIA BHD [] and MALAYSIAN AIRLINE SYSTEM BHD [], which reported a sharp difference in results.

Oil and gas companies would continue to see interest, including pipe manufacturers Wah Seong Corp Bhd following plans for a 200km pipeline off Terengganu.

CIMB’s earnings rose 9.1% to a record RM970 million in the 2Q ended June 30 from RM889 million a year ago, underpinned by the local consumer banking operations and continued high growth at CIMB Niaga. Its earnings rose 5.8% from 1Q.

For the first half, its net profit rose 9.3% to RM1.887 billion which was equivalent to net earnings per share (EPS) of 25.4 sen.

Mudajaya could see strong trading interest after a 11.2% increase in earnings of RM60.29 million in 2Q from RM54.22 million a year ago, mainly due to more activities. Revenue increased by 70.6% to RM356.11 million from RM208.63 million.

Mudajaya declared a second interim single tier dividend of 12.5% or 2.5 sen per share of 20 sen each.

Axiata's net profit rose 14.94% to RM663.05 million in 2Q from RM576.82 million a year ago, mainly due to higher contribution from XL, Idea and Multinet, as well as lower depreciation, amortisation and impairment charges.

Revenue rose to RM4.05 billion from RM3.85 billion. Earnings per share were 8.0 sen compared with 7.0 sen. It declared an interim tax exempt dividend of 4.0 sen per share for FY ending Dec 31, 2011.

However, net profit fell 19% to RM1.21 billion in the first half from RM1.49 billion a year ago. Revenue increased by 4.2% to RM7.99 billion from RM7.66 billion.

AirAsia reported earnings of RM104.25 million in the second quarter ended June 30, 2011 as its operations were affected by higher fuel costs, which rose 31%.

Earnings fell 47.5% from the RM298.93 million a year ago. It declared its maiden dividend of 3.0 sen a share. The low-cost carrier said fuel costs increased by 31% to an average US$140 per barrel from US$106 a year ago.

MAS’ net loss for the second quarter ended June 30, 2011 narrowed to RM526.68 million compared with net loss of RM534.73 million a year ago as it continued to be impacted by the high fuel prices.

Its revenue was RM3.485 billion compared with RM3.213 billion a year ago. Loss per share was 15.76 sen compared with 16 sen. Its derivatives loss was lower at RM56.08 million, a sharp decline from the RM217.16 million a year ago.

However, for the six months ended June 30, MAS’ net loss widened substantially to RM769.02 million from net loss RM224.68 million in 2010.

Petroliam Nasional Bhd and its production sharing partners are embarking on a RM15 billion project to extract gas from fields off Peninsular Malaysia which includes a new 200km pipeline.

Petronas said the project comprises nine discovered gas fields within Blocks PM301 and PM302 and in the Bergading contract area, about 300km off the coast of the peninsula. “It will also involve the development of a new 200km pipeline to transport gas from the fields to Kerteh, Terengganu. The project is estimated to cost RM15 billion,” it said.

IJM Land Bhd expects local property market to remain resilient this year, underpinned by stronger demand as younger people were also buying property.

IJM Land's current unbilled sales is just over RM1 billion which would last the group two years. It plans to launch RM2 billion worth of projects in FY2012.

DIGISTAR CORPORATION BHD []’s net proft surged 425% to RM6 million from RM1.14 million a year ago and expected the momentum to continue into the next quarter as it expands its customer base in the provision of IPTV services to hospitals. Revenue slipped 30.9% to RM24.85 million from RM35.98 million. Earnings per share were 2.88 sen compared with 0.62 sen.

For the first half ended June 30, Digistar's net profit jumped 616% to RM15.02 million from RM2.09 million while revenue increased 15.5% to RM75.99 million from RM65.75 million.

Al-'Aqar KPJ REIT reported earnings of RM11.03 million in the second quarter ended June 30, 2011, which was just 0.8% higher that the RM10.94 million a year ago. Revenue rose 14.1% to RM19.82 million from RM17.21 million while earnings per share were 1.90 sen compared with 1.89 sen.

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Stocks to watch: AirAsia, Petronas Dagangan, Shell, MSC, Amway

KUALA LUMPUR: Regional markets including Bursa Malaysia are expected to see heavy downside pressure on Thursday, Aug 11 after the overnight rout on Wall Street, sending it down more than 4.6%.

Reuters reported the S&P 500 to another 4 percent decline, triggered by worries that Europe's debt crisis could engulf French banks and spill onto the U.S. financial sector.

For a fifth straight day, the Dow Jones industrial average fluctuated in a range of more than 400 points.

The DJIA lost 519.83 points, or 4.62 percent, to 10,719.94. The S&P 500 fell 51.77 points, or 4.42 percent, to 1,120.76. The Nasdaq Composite dropped 101.47 points, or 4.09 percent, to 2,381.05.

Wednesday's drop came a day after stocks rallied on the Federal Reserve's pledge to keep interest rates near zero for at least two more years.

Although regional markets showed some slight recovery yesterday, backed by encouraging economic data from China and Japan, the already fragile investor sentiment would easily be shattered by another sharp fall at Wall Street.

On Bursa Malaysia, AIRASIA BHD [] could extend its losses.

The company, which inked a tie-up with MALAYSIAN AIRLINE SYSTEM BHD [] (MAS), was actively traded and fell 41 sen to RM3.54 with 90.5 million shares done.

UOBKayHian downgraded it to Sell with a lower target price of RM3.50 (from RM4.60).

The research house said that while an alliance between AirAsia and MAS would benefit Khazanah Nasional Bhd, it did not see AirAsia getting any benefit.

PETRONAS DAGANGAN BHD [] posted net profit RM208.73 million on the back of revenue RM7.54 billion for the three months ended June 30, 2011.

It declared a gross interim dividend of 15 sen per share for the three months ended June 30, 2011 totaling RM111.76 million, payable on Sept 22.

Shell Refining Company (Federation of Malaya) Bhd posted net loss RM27.71 million in the second quarter ended June 30, 2011 compared to net loss RM46.78 million a year earlier, due to weak refining margins and lower production as a result of the major statutory turnaround.

Revenue for the quarter fell to RM1.62 billion from RM2.71 billion a year earlier. It declared a gross interim dividend of 20 sen per share.

MALAYSIA SMELTING CORPORATION [] Bhd’s net profit for the second quarter ended June 30, 2011 surged to RM36.3 million from RM7.98 million a year earlier due mainly to better results from its Butterworth smelting operations and investments in KM Resources Inc.

MSC declared a gross interim dividend of 12 sen per share to be paid on Sept 28.

Amway (Malaysia) Holdings Bhd’s net profit for the second quarter ended June 30, 2011 dipped 12.2% to RM18.99 million from RM21.64 million a year earlier due mainly to higher advertising and promotional expenses coupled with higher operating cost arising from investment in consumer access driven strategies.

Amway declared a second interim single tier dividend of 9.0 sen net per share for the financial year ending Dec 31, 2011.

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Tenaga, Petronas-linked stocks weigh on FBM KLCI

KUALA LUMPUR: The FBM KLCI remained in negative territory at the mid-day break on Friday, July 22 as TENAGA NASIONAL BHD and Petronas-linked counters weighed on the index.

Regional markets, however, displayed better investor sentiment on the back of European leaders agreeing on a package to rescue debt-stricken Greece, and on hopes that US policymakers also manage to cobble together a last minute deal.

The FBM KLCI shed 2.65 points to 1,563.16, with losses at Tenaga alone shaving off 3.89 points off the benchmark index.

Given the overall regional sentiment, gainers led losers by 321 to 244, while 304 counters traded unchanged. Volume was 652.04 million shares valued at RM894.67 million.

The ringgit strengthened 0.46% to 2.9825 versus the US dollar; crude palm oil futures for the third month delivery rose RM7 per tonne to RM3,137, crude oil added 32 cents per barrel to US$99.45 while gold fell US$1.65 an ounce to US$1,589.05.

At the regional markets, Hong Kong’s Hang Seng Index jumped 1.69% to 22,358.05, Japan’s Nikkei 225 added 1.13% to 10,123.46, Singapore’s Straits Times Index rose 0.94% to 3,168.08, South Korea’s Kospi up 0.93% to 2,164.94, Taiwan’s Taiex gained 0.66% to 8,774.45 and the Shanghai Composite Index edged up 0.45% to 2,778.40.

Tenaga, which was hit by higher operating expenses, posted a net loss of RM440.2 million in its third quarter ended May 31, 2011 from net profit RM1.11 billion a year earlier, fell 31 sen to RM6.21.

Among the Petronas-linked counters, Petronas Dagangan lost 26 sen to RM17.82, while Petronas Chemicals and Petronas Gas fell two sen each to RM7.07 and RM13.48.

Other decliners included United PLANTATION []s that fell 40 sen to RM20, Sindora and UMS 15 sen each to RM2.59 and RM1.63, Far East 10 sen to RM7.10, while LPI Capital, Selangor Dredging and F&N fell eight sen each to RM13.70, 76 sen and RM19.52 respectively.

Among the gainers, CI Holdings rose 49 sen to RM4.57 after the company said it was set to record gains of RM677.10 million from the sale of its bottling unit, Permanis Sdn Bhd to Asahi Group Holdings Ltd for RM820 million.

Other gainers included BAT and Tasek up 22 sen each to RM46.42 and RM8.10, Cypark 20 sen to RM2.28, QSR 19 sen to RM6.21, S P Setia and Bursa 16 sen each to RM3.91 and RM8.02, KLK 14 sen to RM21.48 and AFG 13 sen to RM3.78.

Meanwhile, the actives included Ingenuity Solutions, Bumi Armada, Jotech, Key West and newly-listed Catcha Media.

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PetDag extends gains on dividend plan

KUALA LUMPUR: PETRONAS DAGANGAN BHD extended its gains in early trade on Wednesday, July 6 after it proposed a special gross dividend of 25 sen and final gross dividend of 35 sen per share for the financial year ended March 31, 2011.

At 9.45am, Petronas Dagangan added 14 sen to RM16.46 with 1,400 shares traded.

The company said on July 4 the special and final dividends would be paid on Aug 28, subject to shareholders’ approval at its AGM to be held on July 28.

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Maybank IB Views

COMMENTS ON NEWS
CapitaMalls Malaysia Trust RM1.17: Buy
Buys shopping mall in Kuantan Shariah-compliant

A yield-enhancing acquisition. We are positive on CMMT's latest RM310m East Coast Mall acquisition given that it is yield accretive and attractive in pricing. More importantly, it would enhance our 2012-13 earnings forecasts by 10-11%. The purchase will be funded by a placement of up to 299m new units (est. RM332m proceeds assuming RM1.11 issue price). We maintain our forecasts and RM1.27 TP. Buy.

Technicals
The FBM KLCI gained 2.63 points and ended at 1,548.51 yesterday. Its resistance areas of 1,551 and 1,567 will cap market gains, whilst the obvious support areas are located at 1,530 and 1,548.Due to the US markets’ firm tone last night; we will see some initial low volume buying activities in the local bourse today. The market could possibly gap-up, with slim chances of follow-through buying.

Daily trading idea is a Short-Term Buy call on FAVCO.

Other Local News
TNB: Unit wins job in Pakistan. Tenaga Nasional Bhd's (TNB) unit TNB Repair and Maintenance Sdn Bhd (TNB Remaco) has secured an operation and maintenance agreement worth USD14.1m (RM43m) from Pakistan's Laraib Energy Ltd. Under the contract, TNB Remaco will provide services for an initial period of five years with an option of extending for another seven years. (Source: The Star)

MBM: To conclude talks in 12 mths. MBM Resources Bhd, which has allocated RM250m for capital expenditure, is expecting to conclude talks with an international firm in the next 12 months to set up an assembly plant locally. (Source: The Edge Financial Daily)

PetDag: Plans 50 new stations. Petronas Dagangan Bhd will invest up to RM400m to set up between 30 and 50 petrol stations, annually, over the next five years. (Source: The Star)

MRCB: Poised to clinch RM800m LRT contract. Malaysian Resources Corp Bhd (MRCB) is poised to secure soon a contract worth as much as RM800m from Syarikat Prasarana Negara Bhd. The contract is for civil works for phase two of the Ampang light rail transit (LRT) extension line linking Putra Heights to Shah Alam, Selangor. (Source: Business Times)

Plantation: MSM prices IPO shares at RM3.50 each. MSM Malaysia Holdings Bhd has priced its initial public offering (IPO) at RM3.50 per share for institutional investors. (Source: The Star)

Economics: Government seeks extra operating expenditure. The Government tabled a bill seeking a supplementary allocation of RM13b for operating expenditure, raising the spending budget for this year by 8% to RM176b. RM6b will be allocated to the Finance Ministry which includes RM5.6b subsidy for petroluem products. RM1.5b will be for Education Ministry and RM1b to Health Ministry. (Source: The Star)

Economics: Exports to hit RM700b in 2011, FDI to at least match RM29b recorded in 2010. Exports is expected to rise 9.5% to RM700b in 2011 from RM639.4b recorded last year, while FDI into Malaysia could at least matched if not surpassed last year's figure of RM29b, according to MITI. (Source: The Star)

Economics: Government expands the ban on subsidised RON95 sales to now include foreign-registered vehicles (except motorcycles) driven by Malaysians effective immediately. Previously, Malaysians driving foreign-registered vehicles need to show their MyKads. The ban also includes sales of subsidised NGV. (Source: The Star)

Economics: Minimum wage by year-end?Minimum wage policy could be implemented by year-end, according to PM. The National Wage Consultation Council Bill 2011 will be presented to Cabinet by the Human Resource Ministry before its tabling in the current Parliament's session. (Source: NST)

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RHBInvest Research Sector Call

Sector Call

Oil & Gas : Petronas 4QFY11 Results- Overweight

Sector Update

• Petronas’ 4QFY3/11 YTD net profit of RM54bn was up 36.1% yoy mainly on the back of: 1) Higher realised prices of its liquefied natural gas (LNG), petroleum products and crude oil; and 2) Higher sales volume of its petroleum products and petrochemicals. Cumulative tax exempt dividend for 31 March 2011 amounts to RM42bn.

Downstream segment does best on a YTD yoy basis primarily due to:

1) Improved refining margins; and

2) Higher margin recorded by the petrochemical business.

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Maybank IB Views

RESULTS REVIEW
Tenaga Nasional RM6.03: Sell
Hot gas and coal sweat Shariah-compliant

"Oh my God" scenario. RM1,299m 1HFY11 core net income (-18.8% YoY) was 61% of our full-year forecast and 49% of consensus. 1H was very tough, but business conditions will be even more challenging in 2H due to higher coal prices, a shortage of natural gas supply and possibility of a tariff hike. Maintain Sell with a lower price target of RM5.40, based on 4.6x FY12 EV/EBITDA – a 20% discount to its long-term average to reflect the challenging operating environment.

Maintain Sell. RM179m 1Q11 net profit (-7% YoY, -2% QoQ) is in line, at 23.6% of our forecasts and 24% of consensus. We think BAT is pricey at 18x 2011 PER given its lackluster growth in earnings (2.5% 3-year forward net profit CAGR) and unattractive dividend yield (5%). Maintain Sell with a target price of RM42.50 based on DCF valuation. Our earnings forecasts are unchanged.

TH Plantations RM2.18: Buy
1Q11: Strengthening ASPs Shariah-compliant

Results within expectation. 1Q11 results accounted for 19% of our full-year net profit, in line with its seasonal trend of a slower 1Q. Our target price is marginally adjusted upwards by 2% to RM2.50 after tweaking our assumptions on mature areas and FFB yields. We maintain our Buy call on THP for its undemanding valuation of 9.6x 2011 PER, below its 2-year mean of 11x.

Technicals
The FBM KLCI fell 4.69 points to close at 1,526.33 yesterday. Its resistance areas of 1,526 and 1,541 will cap market gains, whilst the obvious support areas are located at 1,514 and 1,524. Due to the DJIA’s positive tone last night, we may see the FBM KLCI remain steady today.

Trading idea for today is a Buy call on GUANCHG.

Other Local News
JTI: Will consider paying special dividend this year. Chairman Datuk Seri Mohd Nadzmi Mohd Salleh said that JTI is exploring the possibility of investments but if it doesn't need the money, it will look into what are the best ways to give back in terms of dividends. This is in response to intense speculation that JTI may declare a special dividend this year to help out its Japanese parent. (Source: Business Times)

IPO: Quake delays IPO of world's largest syariah REIT. The listing of Malaysia's Axis Global Industrial real estate investment trust (REIT), has been pushed back by about a month after 2 of its Japanese assets were damaged by the March earthquake. The 2 assets have been removed from its initial asset composition and the size of the REIT has been slightly reduced. (Source: The Edge Daily)

Oil & Gas: Petronas signs unitization agreement with Malaysia-Thailand Joint Authority for the gas field straddling across Block PM 301 in the northeast coast of Peninsular Malaysia and Block A-18 in the Malaysia-Thailand Joint Development Area. The unitisation agreement gives Petronas rights to the reserves in the unitised area, which has an estimated ultimate recovery of 1.25t standard cubic feet of gas. (Source: The Edge)

Oil & Gas: RM7.2b helicopter deals inked. Weststar Aviation will provide 9 helicopters in a deal worth RM4.2b to Petronas Carigali Sdn Bhd, ExxonMobil Exploration and Production Malaysia Inc, Newfield (Malaysia) Incorporated, Petrofac (Malaysia-PM304) Ltd and Talisman (Malaysia) Ltd. MHS Aviation Bhd, meanwhile, sealed the remaining RM3b contract to provide 5 choppers to Petronas Carigali, ExxonMobil Exploration and Newfield. (Source: Business Times)

Transocean: BP sues for $40b over oil spill in Gulf of Mexico. BP Plc sued Transocean, seeking at least $40b (RM120.3b) in damages and other costs from the owner of the Deepwater Horizon rig. BP said on 20 April 2010, every single safety system and device and well control procedure on the Deepwater Horizon failed, resulting in the casualty. (Source: The Sun)

Jerneh Asia: Eyes Sabah developer. After hiving off its core insurance business in Malaysia, Jerneh Asia Bhd has now set its sights on acquiring Sabah based property developer Sagajuta (Sabah) Sdn Bhd, whose flagship project is the massive RM1.2b 1Borneo mixed development in Kota Kinabalu. (Source: The Edge Daily)

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Maybank IB Views

ECONOMICS
Economic Transformation Programme (ETP)
Update #5...

12 more projects, initiatives and enablers with RM11.16b investment commitments under eight Entry Point Projects (EPPs) in seven National Key Economic Areas (NKEAs). They are to generate RM16.62b in gross national income (GNI) and 74,457 new jobs. The biggest project in this round of announcement is the Karambunai Integrated Resort City (KIRC) under Tourism NKEA with investment value of RM9.6b (86% of total) generating RM9.319b GNI (56% of total) and 11,002 jobs (14.8% of total) by 2020. To date, 41.2% of EPPs, 13.4% of the total EPP investments, 14.3% of the targeted incremental GNI and 9.1% of expected new jobs creations have been confirmed.

RESULTS REVIEW
Bursa Malaysia RM7.93: Sell
Boosted by robust market

Above house forecast. RM40.5m 1Q11 net profit (+44% YoY, +36% QoQ) made up 30% of our full year forecast, and 26% of consensus. No change to our earnings forecasts, expecting market activities to taper off in 2Q11. Maintain Sell; the stock remains overvalued trading on 31x current year earnings, significantly above its larger sized peers and recent M&A valuations. Our target price is based on sum-of-parts, with 25x PER target on 2011 earnings plus surplus cash.

SECTOR UPDATE
Automotive: Neutral
Marvelous March; anxiety ahead

From content to concern. Mar 2011 auto sales was abnormally strong, a one-off event, in our view. Looking ahead, Malaysia's car production is expected to soften in the months ahead, affected by the supply chain disruption in Japan. The auto sector remains a Neutral. The longer term operating landscape lacks catalyst and remains close-ended, deterring foreign automakers from making Malaysia a regional hub. Stock-wise, share price is expected to trade sideways. MBM and Tan Chong remains a Buy while Proton and UMW are Holds.

Technicals
The FBM KLCI declined 6.39 points to close at 1,521.53 yesterday. Its resistance areas of 1,521 and 1,540 will cap market gains, whilst the weaker support areas are located at 1,500 and 1,514.
Trading idea for today is a Buy call on SBCCORP.

Other Local News
MAHB: North Korea's Air Koryo makes maiden landing at KLIA. North Korea national airline Air Koryo made its maiden landing at KL International Airport (KLIA) on Monday and will start a twice-weekly service to Kuala Lumpur from Pyongyang on April 18. (Source: The Star)

BAT: Expects to double exports this year. British American Tobacco (Malaysia) Bhd (BAT) expects to double exports this year, a move that will give it a small revenue boost amid tougher sales at home. It may also sell some machinery it no longer needs, valued at between RM18m and RM20m. (Source: Business times)

Berjaya: Confirms Kim Eng approach. Berjaya Corp Bhd confirmed that Kim Eng Holdings Ltd has approached it about the possibility of buying all of Inter-Pacific Securities Sdn Bhd. (Source: Bursa Malaysia)

Smartag: Gets role in Customs project. Smartag Solutions Bhd said it was named to be part of a government project to provide security and trade facilitation system for the Royal Malaysian Customs at its checkpoints throughout the country. (Source: Business times)

E&U: SEB to buy 30% of Bakun Dam for RM1.3b? Sarawak Energy Bhd (SEB), the state utility company, is believed to have proposed to acquire a 30% stake in the Bakun Hydroelectric Power project for RM1.3b cash. SEB is valuing Bakun Dam project at RM6b which is below the RM8b expected by Sarawak Hidro Sdn Bhd. (Source: The Star)

O&G: Petronas exits Cairn India. Petroliam Nasional Bhd (Petronas) has sold its entire 14.9% in Cairn India Ltd for USD2.1b (RM6.4b). (Source: Business times)

Steel: Starshine plans to list on Ace Market by Q3. Steel products player Starshine Holdings Bhd (SHB) is planning a listing on Bursa Malaysia's Ace Market by the third quarter of the year. It will invest RM32m in a new plant in Klang and new machinery to broaden its product offering. (Source: The Star)

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Maybank IB Views

MARKET STRATEGY
2Q 2011 Outlook
External headwinds, domestic resilience

Strong headwinds in 1Q 2011. Malaysian equities went on a wild ride in 1Q with the KLCI hitting a 1,574 pt high on 17 January, encouraged by domestic developments. It however succumbed to selling pressure, touching a low of 1,484 pts on 15 March following the political unrest in MENA which led to concerns on crude oil prices and inflation. Japan's double disaster on 11 March and a consequent nuclear threat did not help. At its close on 31 March, the KLCI gained just 26 pts (+1.7%) year to date. Nonetheless, it navigated the headwinds better than its regional peers which recorded losses of up to 5.9%.

COMPANY UPDATE
Star Publications (Malaysia) RM3.48: Hold
The RM750m question Shariah-compliant

Proposes major debt raising exercise. Star proposes to raise up to RM750m via a 7- and 15-year debt programme. It is unlikely to pay more special dividends or develop its Section 13 land by itself but rather, embark on M&As with the proceeds, we think. We leave our earnings estimates unchanged for now. We also maintain our Hold call and RM3.71 target price pending a major earnings accretive M&A.

Technicals
The FBM KLCI closed marginally higher by 0.10 points to 1,555.48 yesterday. Its resistance areas of 1,556 and 1,576 will cap market gains, whilst the obvious support areas are located at 1,529 and 1,554.

Trading idea for today is a Buy call on KENCANA.

Other Local News
Sime Darby, TNB: Sign pact for biogas study with Mitsui. Sime Darby Plantation has roped in Tenaga Nasional Bhd (TNB) and Japan's Mitsui & Co for a joint feasibility study on the viability of setting up biogas plants at all of its 62 oil palm mills. The study will take two years and will involve eight of its mills before being extended to cover all of its 62 mills, of which 40 are in Malaysia and 22 are in Indonesia. (Source: Business Times)

Bursa: In collaboration talks with LSE. Bursa Malaysia is believed to be in preliminary talks with the London Stock Exchange to collaborate on the trading of each other's shares. The partnership would likely involve coming up with products and a platform for the trading of these shares. (Source: The Star)

MRCB: Among Pudu Jail site redevelopment bidders. Malaysian Resources Corp Bhd (MRCB) is bidding for the redevelopment of Pudu Jail site. (Source: The Star)

Iskandar: Lodges police report. Iskandar Investment Bhd (IIB) filed a police report against its former senior managers after a probe revealed fiduciary lapses. The board of IIB did not reveal their identities but it is understood that at least 40 people from the vice-president level and above quit after the previous CEO Arlida Ariff finished her contract at end-2010. (Source: Business Times)

O&G: Petronas says gas exploration project on. Petroliam Nasional Bhd (Petronas) is still considering potential joint venture partners for the exploration of gas off the Kepodang field in Indonesia. It issued a statement to counter claims by the chairman of Indonesia's oil and gas regulator, BPMigas that it will pull out from developing the Kepodang field. (Source: The Star)

E&U: Supercritical plant in Manjung is SEA's first. The new 1,000MW supercritical coal-fired power plant in Manjung, Perak will be the first in Southeast Asia. The unit will the single largest one in Southeast Asia and will produce enough electricity to power nearly two million households in Malaysia. (Source: The Edge Financial Daily)

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Maybank IB Views

INITIATING COVERAGE
YTL Power International RM2.29: Buy
It's got the POWER Shariah-compliant

Good time to accumulate. We initiate coverage on YTL Power International (YTLP) with a Buy call and RM2.70 target price. We like its portfolio of steady concession businesses. While we are positive on YES, we expect it to incur start-up losses. That said, we postulate YTLP cash flows are strong enough to maintain net DPS at 13.1 sen or a 5.7% net dividend yield. More M&As may beckon.

The FBM KLCI rose by 11.54 points to 1,531.63 yesterday. Its resistance areas of 1,533 and 1,544 will cap market gains, whilst the obvious support areas are located at 1,515 and 1,531. 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 Buy call on PETDAG.

Other Local News
Tan Chong: To upsize MTN programme to RM2b. Tan Chong Motor Holdings Bhd has received approval from the Securities Commission to upsize its asset-backed medium term notes (MTN) programme to RM2b from RM600m. The approval would enhance the group's ability to tap the capital markets for future funding needs. (Source: The Star)

AirAsia: Unit awaits nod for Jeddah. AirAsia X, is in the final stages of getting the green light from the Government to fly to Jeddah, Saudi Arabia. (Source: The Star)

CIMB: Raises BLR/BFR rates. CIMB Bank Bhd and CIMB Islamic Bank Bhd have announced an increase in their base lending rate (BLR) and base financing rate (BFR) by five basis points from 6.3% to 6.35%, effective from April 4. The change in the rates followed Bank Negara's decision to increase the statutory reserve ratio requirement by 1% to 2% with effect from tomorrow. (Source: The Star)

JCY: Eyes major client from Japan. JCY International Bhd is in the midst of courting one of the world's leading electrical and electronic (E&E) companies from Japan as its new client. (Source: The Star)

Cypark: Proposes to take over 32 landfills. Cypark Resources Bhd has submitted proposals to the government to take over as many as 32 non-sanitary landfills and to design, build and manage integrated waste disposal sites. (Source: Business Times)

Property: Putra Place finally sold for RM514m. The Putra Place in Kuala Lumpur has finally been sold to OSK Trustee Bhd for RM514m, some three years after the property was first put up for auction. OSK Trustee may have bought the property on behalf of one of the real estate investment trusts (REIT). (Source: Business Times)

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Maybank IB Views

SECTOR UPDATE
Automotive: Neutral
On course, no pick-up ...

Maintain Neutral; in search of catalysts. Tepid sales in the Jan-Feb period concurs with our and market's assessment of Malaysia's auto growth trend for 2011. We remain Neutral on the sector, anticipating a mere 2-3% TIV growth as market reaches saturation. Stock-wise, we have upgraded Proton to a Hold following a 15% fall in share price post-our Sell call downgrade in Feb. MBM and TCM remain a Buy on inexpensive valuations whilst UMW is still a Hold.

COMPANY UPDATE
Petronas Chemicals Group RM6.74: Buy
Strong February Shariah-compliant

It only gets better. PCHEM's product margin in Feb 2011 was USD1,122/ton (+27.8% YoY, +10.5% MoM), we estimate. The year-to-date product margin of USD1,062/ton is 23.1% higher YoY and above our 2011 estimate of USD1,027/ton. Things are looking very positive for PCHEM to deliver record profits in 2011. Maintain Buy; there is no change to our earnings forecasts and target price of RM8.00.

S P Setia RM6.15: Buy
A golden opportunity to buy Shariah-compliant

FY11 to be a record year. The recent sell down on S P Setia (SPSB) shares represents a golden opportunity to buy the stock given SPSB's excellent sales performance and earnings growth prospects. SPSB will very likely exceed its RM3b sales target for FY11, a new record, given strong bookings and responses to its KL Eco City (KLEC) offices and residential tower. We fine-tune our earnings forecasts and tweak down our TP to RM7.10 (-1%) based on unchanged 10% premium to our new RM6.47 RNAV post-placement. SPSB stays our top buy for the sector.

ECONOMICS
Japan: Aftermath of 3/11
Hope vs Fear...

The casualties and damages of the Tohoku quake-tsunami on 11 Mar make it teh worst in Japan's modern history. Still, the hope is that of a localised and transitory effect, affecting growth in 1Q and/or 1H before recovery in 2H on rebuilding and resumption of business and industrial activities. The fear is that of a broader and prolonged impact due to the additional dimension of the disaster arising from the damaged nuclear power plant, risking radtioan leaks and contamination. Japan is Malaysia key trading partner and major source of FDI. Most immediate and visible impact is likely on commodities such as natural gas, timber and oil, and on manufacturing industries such as automotive and E&E.

Technicals
The FBM KLCI was marginally higher by 0.22 points to 1,509.10 yesterday. Its resistance areas of 1,510 and 1,529 will cap market gains, whilst the obvious support areas are located at 1,490 and 1,508. Due to the DJIA’s softer tone last night, we will see the FBM KLCI in lack lustre mode today.

Trading Idea for today is a Short-Term Buy call on PETDAG

Other Local News
TNB: To build gas-fired power plant in Sabah. Tenaga Nasional Bhd (TNB) plans to build a 300MW gas-fired power plant in Sabah. TNB has received in-principle approval to build the plant. The plan to build a gas-based plant comes after Malaysia's federal and Sabah state governments scrapped a plan to build a coal-fired power plant. (Source: Business Times)

Genting Plantations: ACGT Aims to Reduce Oil Palm Breeding cycle by 50%. ACGT Sdn Bhd, a unit of Genting Plantations Bhd, aims to reduce oil palm long breeding cycle by 50% to six years from 12 years via its genomics-based marker-assisted selection technology. The breakthrough would accelerate development and commercial release of oil palm seeds without any genetic modification. (Source: Bernama.com)

MAHB: Penang airport upgrade going smoothly. The RM250m upgrade of the Penang International Airport is 15.7% complete, while the target date for the whole project to be completed remains June next year. (Source: Business Times)

Benalec: Beachfront land for sale. Benalec Holdings Bhd is shaping up to be a major landowner and developer, as it will receive some 177.3 acres of land in Melaka in exchange for reclamation works. (Source: The Edge Financial Daily)

Ta Ann, Jaya Tiasa: To increase plywood output. Ta Ann Holdings Bhd and Jaya Tiasa Holdings Bhd, will increase plywood production by 15% and 50% respectively after winning orders from Japan to help with the country's reconstruction following its earthquake and tsunami. (Source: Business Times)

Utilities: Syabas invests in new pipe network. Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) has invested around RM115m in the alternative pipe network system to cope with rising demand for water supply. The new network would connect the water distribution system to the Sungai Semenyih and Sungai Langat water treatment plants and the first, second and third phases of the Selangor water distribution plant. (Source: The Star)

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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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Maybank IB Views

SECTOR UPDATE
Banking: Overweight
2010 in perspective, divining 2011

Overweight. The sector's value proposition lies in (i) stable economic growth which lends support to our aggregate net profit growth forecast of 11.6% in 2011 and 11.8% in 2012, (ii) benign inflation and bottoming margins, (iii) steady loan growth momentum, (iv) potential ETP upside surprises, (v) cross-synergies and burgeoning contribution from regional operations to group earnings, (vi) healthy capital ratios and (vii) decent valuations and dividend yields. RHB Capital and CIMB continue to be our top picks.


ECONOMICS
External Trade, January 2011
Slow start to 2011...

Exports got off to a slow start this year as it grew by +3.0% YoY in Jan '11 (Dec '10: +4.6 YoY). Sustaining the growth were commodity shipments amid declines in E&E. In contrast, imports growth accelerated to +13.5% YoY (Dec'10: +11.5 YoY) mainly due to intermediate goods, reflecting inventory management ahead of the Chinese New Year holidays. No change in our external trade growth for 2011(exports: +8.7%; imports: +10.4%; trade balance: +RM111.1b) amid steady global economic growth momentum so far in 2011 and the benefits of firm commodity prices to Malaysia.


Malaysia: Balance of Payment (BoP)
Capital flows the highlights in 2010 amid steady trade flows

Trends in capital accounts remained the highlights as current account surplus was sustained via surpluses in goods and services trades. Key points are: 1) Inward FDI bounced last year after the plunge in 2009; 2) Fourth consecutive year net FDI outflows as direct investment abroad (DIA) by Malaysians also rebounded; 3) Net inflows of portfolio funds in 2010 after net outflows in 2008-2009; 4) Record errors and omissions: which raised the issue of "disintermediation" of capital/money flows outside the formal financial/banking system.


Oil Trade
Sweet spot for Malaysia

We compare some key oil trade statistics as well as the trade balance impact analysis from crude oil price increases between major, large emerging and regional economies i.e. US, EU, China, India, South Korea, Taiwan, Singapore, Malaysia and Indonesia. Notwithstanding the risk to growth and inflation from crude oil price increase, being a net oil exporter puts Malaysia at a significant advantage in terms of positive trade balance effect from - and low vulnerabillity to - crude oil price increase.


COMPANY UPDATE
Sunway Holdings RM2.18: Buy
Wins Legoland works Shariah-compliant

Maintain Buy. RM258m job win in Johor has lifted outstanding order book to RM2.7b (+11%). We maintain our earnings forecasts which have imputed RM1.2b job wins for 2011 (2010: RM0.9m). Our fair value is RM2.85 based on 11x 2011 PER, while its merger with Sunway City, at RM2.60 offer price, offers a 19% upside. At current levels, the stock trades at a deep discount to its peers, at 8.4x 2011 PER.


The FBM KLCI rose 33.34-points and closed at 1,522.61 last week. The obvious support areas for the FBM KLCI are located in the 1,474 to 1,520-zone. The very firm resistance zone of 1,522 and 1,576 will see heavy liquidation activities.

Trading idea for today is a Buy call on PETDAG.


Other Local News
AirAsia: Indonesia IPO to raise USD200m, Sarawak offers land to AirAsia for LCCT. AirAsia Indonesia, a unit of AirAsia Bhd, aims to raise USD150m to USD200m via an initial public offering (IPO) in 4Q11. Separately, the Sarawak government has offered a piece of land next to the Kuching International Airport to AirAsia Bhd to build a dedicated low-cost carrier terminal (LCCT). (Source: The Star)

Maxis: In final stages to wrap deal with Barak Telecom. Maxis Bhd is close to securing a three-year deal to provide telecommunication services to Kuwait's Baraka Telecom Sdn Bhd in Malaysia. The agreement would mark Baraka's return to the mobile virtual network operator (MVNO) business in Malaysia. (Source: The Malaysian Reserve)

DRB-HICOM: To win RM7.5b project. DRB-Hicom Bhd is poised to receive a letter of award to supply 257 units of armoured personnel carriers (APCs) worth up to RM7.5b from the government. A group of banks led by Maybank, RHB Bank and AmBank are helping to arrange the syndicated loan and other financing, which could be worth as much as RM3.5b. (Source: Business Times)

Fajarbaru: Unit wins LRT jobs. Fajarbaru Builder Group Bhd's wholly owned subsidiary Fajarbaru Builder Sdn Bhd (FBSB) has received a letter of acceptance worth RM62.6m from Bina Puri Holdings Bhd-TIM Sekata joint venture for part of the light rail transit extension. Separately, FBSB has also received a contract worth RM87.3m from Trans Resources Corp Sdn Bhd to construct, complete, testing and commissioning of Station 1, 2 and 3 for Kelana Jaya line extension. (Source: Bursa Malaysia)

TRC Synergy: Expects new contracts. TRC Synergy Bhd (TRC) is expected to increase its order book this year with more contract wins, mainly from road projects in East Malaysia and also potential involvement in MRT (mass rapid transit) project. (Source: Malaysian Reserve)

Banking: Further tightening by Bank Negara in mortgage lending sector. Bank Negara would be taking pre-emptive measures in the mortgage lending sector to reduce risks. Banks will have to hold more capital for mortgage loans. Mortgages with loan-to-value (LTV) ratio of more than 90% will have to carry weightage of 100%, compared with 75% previously. The risk weightage for LTVs that are less than 80% remains 35% and for those between 80% and 90% remains at 50%. (Source: The Edge Financial Weekly)

Manufacturing: Investments hit RM4.6b. The manufacturing sector saw approved investments totalling RM4.6b in 67 projects in January. The largest domestic investment came from the oil and gas sector, led by Malaysia Marine and Heavy Engineering Bhd with a total investment of RM2.3b. Foreign investments approved totalled RM600m with Singapore, France, Japan, United Kingdom and India accounting for the major source of investments. (Source: The Star)

Economic: Malaysia's growth target remains despite Mideast turmoil. The Government is firm in achieving its 6% annual growth target this year despite the civil unrest in some Middle Eastern countries. The target was attainable by ensuring investments committed to Malaysia were implemented efficiently. (Source: The Star)

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RHBInvest Research Sector Call

Sector Call

Oil & Gas: Petronas 3QFY11 Results
Overweight

Petronas Chemicals: Fair value at RM7.27
Outperform

Dialog: Fair value at RM2.82
Outperform

Petronas Gas: Fair value at RM13.76 Outperform

SapuraCrest: Fair value at RM4.37 Outperform

KNM: Fair value at RM3.45 Outperform
RH Petrogas: Fair value at S$1.55
Outperform

Dayang: Fair value at RM2.60 Outperform

Petra Perdana: Fair value at RM1.16

• Outperform

Kencana: Fair value at RM2.85

• Market Perform
  

Wah Seong: Fair value at RM2.0

• Underperform
• Maintain Overweight as we expect the domestic sector to remain vibrant.

Corporate Highlights

SP Setia: Outperform

• Showing presence in Cyberjaya
• Maintain Outperform. However, in view of the prevailing weakening equity market sentiment, we take a more prudent valuation and lower our fair value to RM7.30.

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Maybank IB Views

COMMENTS ON NEWS
SP Setia RM5.96: Buy
Replicating Eco Park's success Shariah-compliant

3% EPS enhancement from new Cyberjaya land. We are positive on the latest Cyberjaya land purchase by SP Setia (SPSB) given its fair pricing. More importantly, the land, which will be developed into a RM3b GDV mixed development, will enhance our FY13 earning forecast by 3%. SP Setia remains as our top Buy in property. Our TP is unchanged for now at RM7.15 (10% premium to its RM6.50 RNAV).


Technicals
The FBM KLCI closes lower by 2.96 points at 1,499.28. Its resistance areas of 1,499 and 1,527 will cap market gains, whilst the weaker support areas are located at 1,485 and 1,497.

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

Other Local News
Celcom: Investing RM1b to upgrade network. Celcom Axiata Bhd will invest about RM1b this year in capex to upgrade its network to be long-term evolution (LTE) ready. 60% of the RM1b would be used to enhance its data network while 40% would be used to maintain its current network. (Source: The Star)

Sime Darby: No deal signed on Cameroon. Sime Darby Berhad clarified that it has not entered into any agreement to invest in oil palm plantation in Cameroon. However, Sime Darby does explore investment opportunities relating to its core businesses as part of the continuous expansion plan of the Group. (Source: Bursa Malaysia)

MMC, Gamuda: In shareholders deal. MMC Corp Bhd and Gamuda Bhd have entered into a shareholders' agreement to regulate their rights and liabilities as shareholders of a company that will act as the project delivery partner for the Klang Valley Mass Rapid Transit (MRT) project. The company that would undertake the MRT project would be equally owned by MMC and Gamuda. (Source: Bursa Malaysia)

Uzma: Secures RM200m Petronas contract. Uzma Bhd's subsidiary, Uzma Engineering Sdn Bhd, was awarded a long term service agreement from Petronas to provide a Low Pressure System (LPS) for its domestic upstream operations. The contract that is estimated to value at RM200m encompasses supply of uzmAPRESTM equipment, manpower and consultancy services. The tenure of the contract is from Feb 18 2011 till Feb 17 2014, with the option to extend the contract for another two years. (Source: Bursa Malaysia)

O&G: Petronas to invest RM250b in next 5 yrs. Petroliam Nasional Bhd plans to invest RM250b in the next five years in exploration and asset replacement to maintain the exploration levels. The capital expenditure would be internally funded. (Source: The Edge Financial Daily)

Aviation: IATA cuts airline industry 2011 earnings outlook. Global airline earnings will halve this year as rising costs, especially oil prices, offset increasing demand, according to industry body International Air Transport Association (IATA). IATA, whose 230 members include Malaysia Airlines and Singapore Airlines lowered its earnings forecast for 2011 to USD8.6b this year from USD9.1b forecasted in December. The new forecast represents a 46% decline in net profit from 2010 net profit of USD16b. (Source: The Star)

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PetDag 3Q net profit up 26pct to RM236.16m

KUALA LUMPUR: PETRONAS DAGANGAN BHD net profit for the third quarter ended Dec 31, 2010 rose 26.1% to RM236.16 million from RM187.25 million a year earlier, driven by higher product average selling prices and sales volume.

The company said on Wednesday, Feb 16 that the higher net profit was also due to lower operating costs.

Revenue for the quarter rose to RM5.93 billion from RM5.34 billion. Earnings per share were 23.8 sen, while net assets per share was RM4.60.

On its prospects, PetDag said market demand conditions remained challenging due to the weaker economic growth prospects in the last quarter of its financial year.

“However, the market leadership will continue to be maintained with continuous strategic marketing efforts and initiatives. Efforts to improve margin will continue through cost optimisation and operation efficiency initiatives.

“Profits for the current financial year however may be impacted by fluctuations in international oil price, petroleum product costing and global economy,” it said.

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Maybank IB Views

ECONOMICS
Industrial Production Index, Dec'10
Hovering around low single-digit growth level for now…

Dec '10 industrial production growth was below expectation at +4.2% YoY (vs revised Nov '10: +5.4% YoY; Maybank IB: +5.6% YoY; Consensus: +5.0% YoY). Highlight from the data was the further pickup in manufacturing production. Total output growth was weighed down by lower mining output and slower growth in the power sector.


MARKET COMMENTS
Market Strategy
Succumbing to regional selling pressure Shariah-compliant

Succumbed. The KLCI 30 was down 32 pts (2.1%) yesterday to close below the 2010 year-end close of 1,519 for the first time this year. Malaysian equities finally succumbed to selling pressure, in step with regional markets which have weakened since early this year. YTD, the KLCI is down 1%, but on relative terms, it has still "outperformed" regional indices STI (-2.7%), SET (-7.9%) and JCI (-8.9%). Rising food and commodity prices stoke inflation fear, and in turn, rising interest rate concerns across the region. China, Indonesia and Thailand have raised their benchmark interest rates by 25 bps each this year.


RESULTS PREVIEW
WCT RM3.34: Buy
2010 to finish strong; positives ahead Shariah-compliant

Potential upside surprise. 2010 final quarter results, to be released on 25 Feb, may surprise on the upside, despite a possible provision for Bakun CW2. There is no change to our net profit forecasts for now; we anticipate a 33% growth in 2011 and 13% in 2012. 2011 will be a record earnings year. Our target price is unchanged at sum-of-parts RM3.75 after rolling over our valuation period, but based on fully diluted EPS with e.158m new warrants coming on stream. WCT stays a Buy.


RESULTS REVIEW
Eastern Pacific Industrial Corp RM2.35: Hold
In line, Tanjung Agas poses competition Shariah-compliant

Maintain Hold, no near-term catalysts. We now expect a tapered 3-year forward net profit CAGR of 4%, which forms the basis of our concern. Also, the proposed Tanjung Agas development in Pahang will pose a stiff competition to EPIC in the long term. Maintain Hold with a raised RM2.55 target price (+6%) based on unchanged 8x 2011 PER target, but after raising our 2011-12 net profit forecasts by 5-10%.


Technicals
The FBM KLCI tumbled 32.08 points to 1,503.99 yesterday. Its resistance areas of 1,503 and 1,533 will cap market gains, whilst the weaker support areas are located at 1,474 and 1,500.

Other Local News
Dayang: Wins RM802m Petronas Carigali contract. Dayang Enterprise Holdings Bhd's (DEHB) wholly owned subsidiary Dayang Enterprise Sdn Bhd (DESB) has received a contract worth RM802mil from Petronas Carigali Sdn Bhd. The contract involved the provision of topside structural maintenance services in Sarawak, Sabah and Peninsular Malaysia. (Source: Bursa Malaysia)

MTD Cap: Suitors up offer for MTD Cap to RM11 a share. The major shareholders of MTD Capital Bhd (MTD Cap) that had proposed to take over the company for RM9.50 cash per share previously, have revised their offer to RM11 cash per share. The revised offer values MTD Cap at RM3.03b, RM430m higher than the previous valuation of RM2.6b. (Source: The Edge Financial Daily)

O&G: Petronas confident oil business won't be affected by split in Sudan. Petroliam Nasional Bhd (Petronas) is confident its oil business in Sudan would not be affected after the people of Southern Sudan, where the oil fields are sited, voted for independence last month. (Source: The Star)

Plantation: FTA with India will boost Malaysia palm oil sector. Next week's free trade agreement (FTA) signing between Malaysia and India will be a further boost for the country's palm oil sector and Sabah, in particular, stands to benefit. India would be reducing duties on palm oil as part of the FTA, which will make it easier for Malaysian palm oil players to export to India. (Source: The Star)

Plantation: January CPO output lowest in 12 months. Malaysian crude palm oil (CPO) output fell 14.18% or 174,791 tonnes to 1.057m tones in January, from 1.232m tones in December 2010, according to Malaysian Palm Oil Board (MPOB). This represents the lowest in 12 months. (Source: The Edge Financial Daily)

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RHBInvest Research

Petronas Chemicals:
New Coverage
The New Chemical Player In Town
Initiate with Outperform call and fair value of RM7.25/share


Corporate Highlights


CI Holdings:
Briefing Note
Bitter Days Ahead Surprise Sugar Bomb Dropped
Fair value is reduced to RM3.88 (from RM4.90 previously).
We downgrade our call on the stock to Market Perform.


Adventa:
Company Update
Share Price to Remain Buoyant On Talks of Takeover.
Our fair value have been raised to RM3.00 (from RM2.21).
We reiterate our Outperform call on the stock.


Fajarbaru:

2QFY11 Results
Slow 1HFY06/11 but stronger 2H ahead
Fair value is RM1.37. Maintain Outperform.

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