Maybank IB Views

KNM Group RM1.48: Sell
Poor delivery, Sell Shariah-compliant

Downgrade to Sell, target price cut to RM1.19 (-41%). 1H results were a letdown, prompting us to cut 2011-13 earnings by up to 64% p.a.. While KNM delivered on topline, bottomline was a disappointment, felled by cost overruns and high operating expenses. While the share price has underperformed by 48% YTD, we expect performance to be further suppressed. There is no sign of an operating recovery and cost control is absent. Further, valuations are expensive now.

Alam Maritim Resources RM0.78: Hold
Results improve but recovery lingers Shariah-compliant

Pacing but not running. Alam returned to profitability in 2Q but overall, 1H results still missed expectations. Operationally, Alam is showing signs of a turnaround but the catalyst to warrant an upgrade remains elusive. Its stretched balance remains a concern, debilitating its ability to grow. Maintain Hold with a lower target price of RM0.85, based on a reduced 9x 2012 EPS (versus 12x previously).

QL Resources RM2.98: Buy
Margin erosion Shariah-compliant

Below expectations. 1QFY12 results were below consensus and our full-year numbers, with margin contraction seen in the 2 main divisions. Total net profit of RM27.8m (+3.7% YoY, -11.9% QoQ) made up 17% and 19% of our forecast and consensus for FY12. We do expect stronger earnings in the coming quarters and QL remains a Buy. Our forecasts are nevertheless revised down on lower margin expectations and our target price is lowered to RM3.39.

Technicals
The FBM KLCI fell 11.82 points to close at the 1,472.16 yesterday in persistent selling activities. Its resistance areas of 1,472 and 1,500 will cap market gains, whilst the weaker support areas are located at 1,423 and 1,467.


Other Local News
Aeon: Upbeat on 'new' Jusco at 1Utama. Aeon Co (M) Bhd expects the newly renovated and relocated Jusco store in 1Utama Shopping Centre to ring in more sales than previously. The Japan-based retailer is optimistic that it will make RM300m within a year from yesterday. It had made over RM200m in a year previously. (Source: Business Times)

CIMB: Among banks hired for planned MU listing. English football club Manchester United has hired a slew of banks including Malaysia's CIMB Group for its planned listing on the Singapore stock exchange. The US-based Glazer family hired Hong Kong-based BOC International, Malaysia's CIMB, Singapore's DBS and pan-Asian investment bank CLSA as joint lead managers, in a move that suggested the owners are keen to get a well-diversified regional spread of investors. (Source: Business Times)

Maxis: In cloud computing connection with MDeC. Maxis Bhd aims to work closely with the Multimedia Development Corp (MDeC) to establish joint programmes to promote adoption of cloud computing services for independent software vendors. The collaboration will accelerate the adoption of cloud technology by software vendors and businesses. It will also pave the way for an array of enterprise-grade cloud solutions to become available to Malaysian businesses. (Source: Business Times)

IJMP: To invest over RM1b to double up Indonesian venture. IJM Plantations Bhd is investing more than RM1b to double its total planted area in Indonesia to 40,000ha and expects to see substantial earnings contribution from the venture from 2014 onwards. IJM Plantations expects Indonesia to contribute one third of its earnings when planting is completed in Indonesia by 2014 and eventually its contribution is expected to be bigger than the earnings from its Malaysian plantation. (Source: The Malaysian Reserve)

Transportation: Prasarana to manage MRT issues till handover. Syarikat Prasarana Negara Berhad (Prasarana) will continue to manage all issues related to the My Rapid Transit (MRT) project until the establishment of MRT Co. Prasarana would carry on with all works and programmes that has been decided before it officially hands it over to the new MRT Co. (Source: The Edge Financial Daily)

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Stocks to watch: Mudajaya, Fitters, Maybank, Supermax

KUALA LUMPUR: The markets may see some tentative recovery on Tuesday, Aug 23 after the selling on Monday, as investors scout for fundamentally strong companies despite the current uncertainties globally.

The fresh batch of results in the quarter ended June 30 should provide the data investors need to make their decisions, for instance companies like QL RESOURCES BHD [] and smaller cap stock like FITTERS DIVERSIFIED BHD [] which are beginning to reaping the benefits of their palm oil and renewable energy ventures.

MALAYAN BANKING BHD [] did not disappoint as its earnings rose 26.5% to RM1.15 billion in the fourth quarter ended June 30, 2011 from RM912.47 million a year ago.

However, glove maker Supermax Corp Bhd reported a decline in earnings due to continuously high volatility in latex prices and unfavourable exchange rates.

Stocks to watch are Mudajaya Corp Bhd, Fitters, Maybank and Supermax. Other companies with fresh corporate news are Prestariang Bhd, KNM GROUP BHD [] and Guocoland Bhd while JCY International continued to disappoint investors.

Mudajaya clinched a RM720 million contract for the design and civil works for part of the Manjung power plant.

Its unit had signed a subcontract with CMC Machipex Sdn Bhd for the detailed design and CONSTRUCTION [] of all civil works associated with the balance of plant component of Manjung No. 4 power plant project.

Fitters’s earnings were given a boost by its renewable energy and palm oil business in the second quarter ended June 30, with net profit at RM4.58 million, up 100.8% from RM2.28 million a year ago.

Its revenue surged 233.7% to RM116.70 million from RM34.96 million a year ago while earnings per share were 2.12 sen compared with 1.13 sen.

QL Resources Bhd’s earnings edged up 3.7% to RM27.79 million in the first quarter ended June 30, 2011 from RM26.79 million a year ago.

Its revenue increased 18.2% to RM454.56 million from RM384.51 million. Earnings per share were 3.34 sen compared with 3.43 sen.

It said the higher revenue was due to the marine product manufacturing at RM104.66 million, palm oil activities RM114.85 million and integrated livestock farming RM235.05 million.

Maybank's earnings rose 26.5% to RM1.15 billion in the fourth quarter ended June 30, 2011 from RM912.47 million a year ago.

It said the financial performance was boosted by income from its Islamic banking and also its insurance business also also lower allowance for losses on loans, advances and financing

Maybank’s revenue increased by 20.9% to RM5.72 billion from RM4.73 billion. Earnings per share were 15.54 sen versus 12.89 sen a year ago. Its board of directors proposed dividend of 32 sen per share compared with 44 sen a year ago.

Prestariang secured a RM28 million contract from the Ministry of Higher Education to implement the 1Citizen Certification provide “IC Citizen” training and certification in all public and selected private higher learning institutions.

The programme was expected to run for 24 months from its official start date and would cater to 80,000 students from 20 identified public institutes of higher learning including universities, polytechnics and community colleges in Malaysia, as well as selected private institutes of higher learning.

Supermax saw its earnings slip 50.6% to RM22.64 million in the second quarter ended June 30 from RM45.85 million a year ago as profit margins were eroded owing to continuously high volatility in latex prices and unfavourable exchange rates

Revenue dipped 1.3% to RM237.92 million from RM234.82 million while earnings per share were 6.66 sen compared with 13.51 sen. It did not declare any dividends unlike a year ago when it paid out 2.5 sen a share.

For the first half, its net profit slumped 51.7% to RM46.96 million from RM97.33 million in the previous corresponding period but its revenue was 5.2% higher at RM479.29 million compared with RM455.47 million.

KNM’s net profit for the second quarter ended June 30, 2011 fell 23.2% to RM10.86 million from RM14.14 million a year earlier, due to slower improvement in capacity utilisation in certain operating units. Revenue for the quarter rose to RM544.30 million from RM383.21 million in 2010 due to higher revenue recognition. Earnings per share was 1.11 sen while net assets per share was RM1.83.

For the six months ended June 30, KNM’s net profit fell 45.1% to RM29.87 million from RM54.48 million in 2010, on the back of revenue RM957.30 million.

Guocoland’s fourth quarter earnings rose 94.6% to RM22.34 million from RM11.47 million, boosted by higher share of results from associates and improved profit from its property development division.

Revenue increased by nearly 95% to RM58.48 million from RM30.02 million while earnings per share were 3.33 sen versus 1.71 sen. It proposed dividend payment of 2.0 sen a share.

For the financial year ended June 30, 2011, its net profit rose 42.9% to RM19.96 million from RM13.96 million while revenue declined 11% to RM142.77 million from RM160.52 million.

Hard-disk drive manufacturer JCY posted net loss RM31.86 million in the third quarter ended June 30, 2011 compared to net profit RM55.59 million a year earlier due mainly to higher raw material prices, inventory provision from depreciating US dollar and slow moving stocks.

Revenue for the quarter fell 17.8% to RM395.17 million from RM480.79 million a year ago. Loss per share was 1.56 sen compared with earnings per share of 2.72 sen.

For the six months ended June 30, JCY posted net loss RM11.89 million compared with net profit of RM198.94 million in 2010. Its revenue was RM1.23 billion compared with RM1.56 billion a year ago.

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RHBInvest Research

Top Story: QL Resources – Earnings to remain resilient, but valuations pricey Underperform

Visit Note

¨ QL’s new marine plant in Surabaya, which was completed in Mar 11, has begun commercial production of surimi and fishmeal in July and Aug 11 respectively with a total annual capacity of 5k mt p.a. each



Sector Call



Construction – 28 companies shortlisted for MRT jobs Overweight

Sector News Update

¨ Prasarana has shortlisted 28 companies for the bidding of 18 work packages comprising elevated civil works (8), stations (8) and depots (2), divided into categories of “open” (11) and “bumiputera” (7).

¨ It will call for the tenders for these packages in stages starting from Sep 2011 to Dec 2012, with the first two being the 5.4km Taman Bukit Ria – Plaza Phoenix stretch and the 5.2km Taman Suntex – Bandar Hussein Onn stretch.



Banks: Risk to earnings has increased Overweight (Under Review)

Sector Update

¨ Given heightened external risks and a weaker-than-expected global economic recovery, we had revised our real GDP growth forecasts to +4.3% for 2011 (from +4.8%) and +4.5% for 2012 (from +5.5%). Below is an extract from our recent strategy report “Rising Fears Of A Double Dip” dated 11 Aug.



Media: Adex growth to be weaker Underweight (down from N)

Sector Update

¨ Following our market strategy report yesterday (entitled Rising Fears Of A Double Dip), we are lowering our projected adex growth for 2011 to 9% (previously 10%) and 2012 to 9.5% (previously 11.5%).

¨ Accordingly, we have trimmed our FY11-13 earnings estimates for the media stocks by 2-10%, which have led to lower fair values for the media stocks under our coverage.



Corporate Highlights



MRCB: 1HFY12/11 net profit grows 84% yoy Trading Buy

2QFY11 Results / Briefing Note

¨ 1HFY12/11 net profit came in within expectations.

¨ To strengthen its case for the redevelopment of the 2,680-acre RRI land in Sungai Buloh, MRCB intends to soon secure a RM500m credit line/debt as well as a JV partner with a proven track record in building “award-winning townships”.



Sunway REIT: Dragged down by litigation costs Market Perform

4QFY11 Results

¨ 4QFY11 realised net profit of RM41.1m (-4.8% qoq) missed our estimate by 7.5%. Higher sequential revenue was offset by higher finance cost and legal expenses arising from the litigation of Sunway Putra Place of RM4.7m. A 1.62 sen DPU was declared during the quarter. Full year FY11 DPU amounted to 6.58 sen, slightly below our forecast of 6.8 sen.



MBM: Lacklustre 2Q11 Market Perform (down from OP)

2QFY11 Results

¨ MBM’s 2Q11 results were below our and street expectations. Net profit for the quarter of RM21.1m (-45.0% qoq and -45.3% yoy) brought cumulative 1H11 earnings to RM59.5m (-24.4% yoy) that reached just 42.3% of our previous 2011 estimate.

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Maybank IB Views

QL Resources RM3.34: Buy
Good start for the 2nd decade of listing Shariah-compliant

Another good year. 4QFY11 net profit of RM31.6m (-4.8% YoY; +19.3% QoQ) took QL's FY11 net profit to RM124.5m (+16.5% YoY), which was within our forecast and consensus. FY11 marks the 10th straight year of double-digit net profit growth since its listing in FY00. We expect another year of strong earnings growth (+30%) premised on the new surimi lines in Surabaya, maturing plantation in Eastern Kalimantan and its palm pellet project. We maintain our Buy call and target price of RM3.75.

Technicals
The FBM KLCI tumbled 12.05 points to close at 1,528.98 yesterday. Its resistance areas of 1,528 and 1,550 will cap market gains, whilst the weaker support areas are located at 1,510 and 1,526.Due to the DJIA’s much weaker tone last night, we will see some heavy liquidation activities today. We expect the FBM KLCI to remain under heavy selling today, as the global market malaise takes hold.

Trading idea is a Take profit call on HAPSENG.

Other Local News
AirAsia: To go bigger and may place big order for Airbus. Datuk Seri Tony Fernandes signalled ambitious plans for AirAsia as he closed in on a potentially massive deal to buy Airbus aircraft, which could rival a recent USD16b, 180-plane deal as one of the world's largest. (Source: The Star)

TM: VADS partners Cisco in telepresence service. VADS Bhd, a subsidiary of Telekom Malaysia Bhd (TM), is hopeful of double-digit growth over the next few years for its upcoming telepresence service. (Source: Business Times)

Puncak Niaga: Forays into oil and gas, secure water supply project. Puncak Niaga Holdings Bhd has acquired 40% equity in Global Offshore (Malaysia) Sdn Bhd (GOM) and KGL Ltd (KGL) respectively for a cash consideration of USD8.4m (RM25.2m) and USD15.2m (RM5.6m) respectively. Separately, a consortium consisting of a 40:60 unincorporated JV between Quality Concrete and Puncak Niaga has secured a RM667.3m contract for a rural water supply project in Sarawak. (Source: Bursa Malaysia)

TNB: Cabinet to decide on Wednesday on tariff increase for TNB. The Cabinet is expected to decide on Wednesday, May 25 if there should be a tariff increase for Tenaga Nasional Bhd. (Source: The Edge Financial Daily)

E&U: First block of Kimanis 100MW Plant to be completed in 2013. The first generation block of 100 MW of the proposed 300MW Combined Cycle Gas Turbine Power Plant in Kimanis is expected to be completed in Dec 2013. The power plant and its related projects, costing about RM1.6b is expected to supplement Sabah’s increasing demand for electricity. (Source: Bernama News)

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Maybank IB Views

Kencana Petroleum RM2.75: Buy
Buys AME for RM400m; a positive Shariah-compliant

A strategic acquisition. We are upbeat on Kencana's purchase of AME, on financial and operational aspects. Valuations are decent, in our view, and the deal, secured with profit guarantees (RM40m p.a. for FY11-12) is mildly EPS accretive (+1 sen to EPS). The acquisition will provide Kencana a foothold into the subsea markets and ownership of 4 vessels. This 'all-share transaction' will turn vendors of AME into the 2nd largest shareholder of the Group with a 7.6% stake. Our forecasts and target price are under review pending further details. Buy.

QL Resources RM3.40: Buy
A regional player in the making Shariah-compliant

Regional expansion on track. QL is replicating its success formula regionally for each of its main divisions, and the ongoing expansion will fund its growth in the coming years. Although share price has risen 16.4% YTD, outperforming the KLCI, we believe there is still upside potential, banking on its expansion especially into Indonesia, which has yet to contribute significantly to group earnings. We lift our TP to RM3.75 after rolling over our valuation period. We continue to be positive on QL.

Technicals
The FBM KLCI rebounded 25.24-points and closed at 1,540.74 last Friday. The local market remained quite steady to firmer despite the global markets’ gyrations. Local funds pushed the market up especially last Thursday and Friday on firm bargain hunting activities.The obvious support areas for the FBM KLCI are located in the 1,507 to 1,540-zone. The firm resistance zone of 1,545 and 1,576 will see very heavy liquidation activities.

Weekly trading idea is a Firm Buy call on MEDIAC.

Other Local News
Sunway: To secure site of Jalan Duta complex. Sunway Group is said to have won a competitive bid to acquire the site of the Jalan Duta government complex. Sunway could be paying more than RM500m for the site and construct new offices for the IRB and Customs Department elsewhere. (Source: The Edge Financial Weekly)

MAS: Firefly takes delivery of 3rd 737 for KK ops. Firefly, subsidiary of MAS, took delivery of a third Boeing 737-800 aircraft to be stationed in Kota Kinabalu, officially marking the start of the city as its eastern hub. (Source: Malaysian Reserve)

IOI: Allegations against IOI 'just not true'. IOI Corp Bhd re-iterated that in October 2010, an RSPO-certified auditor SGS investigated the allegations and concluded the deforestation complaints were baseless. (Source: Business Times)

ECM, Kenanga: Close to sealing deal. ECM Libra Financial Group Bhd, whose substantial shareholders are long known to be looking to divest their equity stakes, is close to sealing a merger deal with K&N Kenanga Holdings Bhd. (Source: The Edge Financial Daily)

Masterskill: Seeks RM100m from STMB. Masterskill Education Group Bhd (MEGB), which has won its defamation suit against Sistem Televisyen Malaysia Bhd (STMB) for a total of RM250,000, is appealing to the High Court for the damages to be raised to RM100m. (Source: The Star)

FDI: Good response to Invest Malaysia NY. A total of 56 US fund managers have confirmed participation at the inaugural Invest Malaysia New York 2011 (IMNY 2011), which will be held tomorrow. (Source: Business Times)

Property: Demand for condos in KL. Condominium living is relatively new to KL and well designed projects are seeing strong sales performance, said Christopher Boyd, executive chairman of CB Richard Ellis Malaysia. The take up rate of condos in 1Q11 was between 65% and 88% in prime areas. (Source: Malaysian Reserve)

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Maybank IB Views

RESULTS REVIEW
Malaysia Airports Holdings RM6.20: Buy
Accountants and Taxman Spoilt an Otherwise Fantastic Year!

Below estimate. RM378m (+0.4%YoY) 2010 recurring net income was 12% below our forecast and 2% above of consensus. There was a host of accounting treatment items and a substantially higher than statutory tax rate which masks the true performance of an otherwise a fantastic year. Nonetheless, we look forward to a promising 2011 as we enter the fourth year of the aviation up-cycle underpinned by strong GDP growth, global trade and tourism boom. Maintain Buy, no change to our RM7.12/share DCF-based target price.


IOI Corporation RM5.71: Hold
Largely priced in Shariah-compliant

In line. RM920m 1HFY11 recurring net profit (+14% YoY) is 45% of our full-year forecast. Reported RM1.02b net profit (+8% YoY) is also within street's expectations at 46% of consensus full-year estimate. We raise our FY11 net profit forecast by 9% after imputing for stronger average CPO price of RM3,500/t in 2H (1H: RM2,800/t). Our sum-of-parts based target price is marginally lifted to RM6.35 (+5sen).


Dialog Group RM2.13: Buy
On track Shariah-compliant

Pengerang CTF & marginal field projects are catalysts. Dialog's 2QFY11 net profit of RM36m (+9% QoQ) took 1H earnings to RM69m (+24% YoY), on track to meet our forecasts. We remain optimistic about Dialog's long-term growth prospects, driven by its CTF projects in Pengerang. Dialog is also touted to be in the running to co-develop PETRONAS' marginal field projects, a major positive in our view. Maintain Buy with an unchanged RM2.60 SOP target price.


Technicals
The FBM KLCI traded mixed to finally close higher by 0.97 points to 1,506.30 yesterday. Its resistance areas of 1,506 and 1,541 will cap market gains, whilst the weaker support areas are located at 1,480 and 1,504.

Trading idea for today is a TAKE PROFIT call on MEGB.


Other Local News
Sime Darby: To challenge suit by Abu Dhabi firm. Sime Darby Engineering Sdn Bhd (SDE), a wholly-owned subsidiary of Sime Darby has confirmed that Emirates International Energy Services (EMAS) has indeed filed the suit against the company and vowed to challenge the suit. EMAS has written a letter to SDE claiming compensation in the amount of USD20m for not accepting several projects EMAS had identified for SDE. However, SDE stressed that it was under no obligation to accept EMAS's recommendations and had no time bound requirements to decline EMAS's recommendations. (Source: Bursa Malaysia)

QL Resources: Boilermech gets nod to float on Ace Market. Boilermech Holdings Bhd (BHB), an indirect associate company of QL Resources, has obtained approval to list on the Ace Market of Bursa Securities. (Source: Bursa Malaysia)

Green Packet: Defers Ebitda-breakeven target to end-2011. Green Packet Bhd has deferred its target of breaking even at the Ebitda level to the end of this year as opposed to the first quarter of 2011. The deferment was due to the more competitive environment and lower price point in the nomadic (portable) broadband segment. (Source: The Edge Financial Daily)

Ramunia: Azizul pares down stake in Ramunia. Ramunia Holdings Bhd's major shareholder Datuk Azizul Rahman Abdul Samad has pared down his stake significantly recently, raising speculations that he may exit the group soon. Azizul indirect shareholding in Ramunia fell to 73.3m shares, representing 11.06% stake, from 14.3% or 94.7m shares as at Dec 30, 2010. (Source: The Edge Financial Daily)

Supermax: Counts on new income stream. Glove maker Supermax Corp Bhd is banking on a new income stream derived from global sales and marketing network to mitigate any effects of higher production cost. The company would aggressively globalise its operations via its network of about 700 distributors worldwide. The new income stream is expected to contribute 5% of its 2011 net profit. (Source: The Star)

Metro Kajang: To buy plantation land in Kalimantan. Metro Kajang Holdings Bhd is in negotiations to acquire 20,000ha of plantation land in East Kalimantan. The acquisition could double the size of its plantation land bank which measures about 16,000ha at present. Metro Kajang expects to see contributions from its oil palm venture in 2012, when it will contribute 20% to group revenue. (Source: The Edge Financial Daily)

Utilities: Govt no to coal power plants in Sabah. The government has agreed not to build coal-fired power plants in Sabah. The proposed construction of the plant in Felda Sahabat, Lahad Datu, to meet electricity supply needs in Sabah's east coast had previously received objections not only from local non-governmental organizations but also international activists. (Source: The Edge Financial Daily)

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RHBInvest Research

Top Story: Property – Overweight

Sector Update
The rising FDI into Penang should continue to hold up property values in the state.
Our picks for the sector remain the same: SP Setia (OP, FV = RM7.39) and IJMLD (OP, FV = RM3.50) for big caps; and KSL (OP, FV = RM2.78) and Mah Sing (OP, FV = RM2.50) for small-mid caps. Although we currently do not cover E&O and Benalec, we have an indicative fair value of RM1.85 and RM1.93 respectively for the two stocks.

Corporate Highlights

QL Resources:

• Company Update
• Highlights from RHB’s Food and Agri Day.
• The shares go ex for the 1-into-2 share split today. Our fair value is raised to RM3.44 (from RM3.25 adjusted for the share split)
• We maintain our Outperform call on the stock.

Hartalega: Market Perform

• 3QFY11 Results
• Demand for nitrile gloves still healthy
• We have raised our fair value for Hartalega to RM6.14 (from RM5.64), we maintain our Market Perform call on the company.

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Maybank IB Views

SECTOR UPDATE
Oil & Gas: Overweight
Marginal field-driven consortium project? Shariah-compliant

The much anticipated marginal field projects could lead to the setting up of several oil consortiums as operators. This may involve the participation of several local service providers. We identify Dialog, Kencana and SapCrest as leading candidates to participate in this set-up, based on their balance sheet strength, skill sets, operating track records and overseas exposures. If our views on their potential participation are proven to be correct, we foresee a re-rating as these players re-model their businesses to be the 'hybrid operators'.


COMPANY UPDATE
S P Setia RM6.70: Buy
Lands Bangsar land; Fund raising for a better future Shariah-compliant

Maintain Buy. We are positive on the 40.2-acre land in Bangsar (+22 sen to RNAV), while the proposed private placement could dilute our FY11-13 EPS by 4.8-13% and RNAV by 1 sen to RM6.49. We however think that the money raised should support further land acquisitions and faster the pace of launch for the Bangsar land. Maintain our earnings forecasts but raise RNAV to RM6.50 (+22 sen) and TP to RM7.15 (10% premium to RNAV).


RESULTS REVIEW
Axis REIT RM2.38: Buy
Results in line; sells Axis North Port LC1 Shariah-compliant

Higher dividends for 2011. Axis REIT (AXRB)’s RM52.6m 2010 realised net profit (+23% YoY) was within expectations. Its disposal of Axis North Port LC1 (ANP) for RM14.5m will result in an additional 0.2 sen DPU for 2011. We reduce our 2011-13 earnings forecasts by 1.8-5.1% and DCF-based TP by 3 sen to RM2.60 for post-ANP sale. Reiterate Buy on AXRB.


Technicals
The FBM KLCI rose 4.60 points to 1,574.49 yesterday. Its resistance areas of 1,576 may cap market gains, whilst its firmer support areas are located at 1,560 and 1,574.
Trading ideas for today are two BUY calls on Bstead and Masteel.


Other Local News
QL: Places out 20.8m new shares at RM5.60 each. QL Resources Bhd has completed the book building exercise for the offering of 20.8m new shares pursuant to its private placement exercise, which is estimated to raise RM116.6m. The private placement was oversubscribed with healthy demand from foreign institutional investors. The issue price has been fixed at RM5.60 per placement share which represents a discount of 5.50% to the five-day volume weighted average market price of QL's shares. OSK Investment Bank Berhad acted as sole placement agent for the private placement. (Source: Bursa Malaysia)

AirAsia: Introduces fly-thru service. AirAsia introduces "Fly-Thru" service for its guests on multiple-flight travel from Thailand to perform a single check-in for their original and connecting flights right through to their final airport of destination. Fly-Thru is available to guests traveling on selected AirAsia (short-haul) and all AirAsia X (long-haul) flights transiting through Kuala Lumpur. Guest could connect to their next flight to their intended destination without the need for immigration clearance or a transit visa in Malaysia. (Source: Bernama)

Malaysian Smelting: Expects SGX listing soon. Malaysia Smelting Corp Bhd (MSC) expects its proposed secondary listing on the Singapore Exchange (SGX) main board to take place before the end of this month. This will make MSC dual-listed on both Bursa Malaysia and SGX. The size of the IPO is between 12.5m and 25m new MSC shares, with an expected gross proceeds of RM100m. (Source: The Star)

LTAT: Declares 14% dividend and bonus. The Armed Forces Fund Board (LTAT) has declared a 14% dividend and bonus for 2010 with a total payout of RM616.3m, 7.2% higher than the RM575.2m paid in 2009. LTAT registered a total income of RM747.5m in 2010, which was not only the highest recorded since the fund's establishment 38 years ago, but was also 34.7% higher than 2009's income of RM554.7m. (Source: The Edge Financial Daily)

O&G: Petronas' multi-billion ringgit job award likely by end of the month. Petroliam Nasional Bhd (Petronas) is expected to award multi-billion ringgit contracts for the development of marginal oil fields by the end of this month to several consortia comprising local and foreign companies. Petronas will unveil a new business model on the development of the marginal oil fields and possibly, more incentives for the industry. (Source: The Star)

Plantation: Local refiners snap up cheaper Indonesian palm oil. Malaysian refiners are snapping up more Indonesian crude palm oil, taking advantage of its widening discount to local production. Indonesian crude palm oil for February delivery was trading at RM3,690 per tonne, some RM60 lower than in Malaysia despite dealers pricing in a possible Indonesian government move to raise export taxes next month. Indonesia is likely to raise export taxes to 25% in February from 20% currently. (Source: The Edge Financial Daily)

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Maybank IB Research

ECONOMICS
3Q10 Real GDP
Further slowdown in growth...

3Q10 real GDP growth slowed to a lower than expected +5.3% YoY (Maybank IB estimate: +6.1% YoY; consensus estimate: +5.9% YoY). Growth was supported by continued growth in consumer and business spending as fiscal stimulus faded and external demand softened. We are placing our current full-year forecasts of 7.5% for 2010 and 6.1% for 2011 under review. Indications are that this year's growth will come in in between our and official forecast (+7%) and next year's growth to likely be in the 5.5% to 6% range.


SECTOR UPDATE
Plantation Sector: Neutral
A re-look at small caps

Hidden gems. Contrary to market expectations, plantation small caps (RM5b) by 14% YTD but underperformed mid caps (RM1b–RM5b) by 11% YTD. While the overall valuation discount of small caps to mid and big caps have narrowed, there are still attractively valued stocks. We identify four names, MHC Plantations, Kurnia Setia, NPC Resources and TDM.


Automotive: Overweight
Sales rebound in Oct

Oct vehicle sales were stronger than expected with preference for smaller vehicles. We expect 2010's TIV to reach 580,000 units, which implies soft Nov-Dec periods. Nonetheless, new launches will dominate headlines as distributors will build orders for 2011's delivery. Stock-wise, all the companies have performed well this year, up 8.3 - 80.1% YTD, driven by recovery in spending and stronger RM. We are placing our strategy and calls on hold for now pending the Nov results season.


RESULTS PREVIEW
AirAsia RM2.48: Buy
3Q to surprise on strong yields Shariah-compliant

Looking great. AirAsia will release its 3Q10 results on 25th November. 3Q10 is expected to be highly profitable, buoyed by strong passenger growth, high load factors, and positive outlook on yields. We raise our earnings forecasts to account for higher yields, off-setting higher fuel costs. Maintain Buy, with a raised target price of RM2.94 (+23% from previous) based on 10.1x 2011 PER - 10% discount to peers.


RESULTS REVIEW
CIMB Group Holdings RM8.41: Buy
Regional aspirations on track; upgrade to Buy

RM1b special dividend surprise. An unexpected 13.45sen/sh single-tier dividend totaling RM986m will be paid by 31 Dec 2010 (ex-date: 3 Dec). This suggests that future regulatory capital requirements may be well within CIMB's existing capacity. 9M10 net profit is in line, but we upgrade our 2011-12 earnings forecasts by 7% p.a. after raising our expectations for investment banking and Niaga. 2011 will continue to be a strong year. Upgrade to Buy with a new RM9.50 (+12%) TP.


UMW Holdings RM6.80: Hold
Auto drifts; O&G still drags Shariah-compliant

Auto's positive priced in; concern remains at O&G. Stronger 9M results, largely from auto and Ringgit, led us to lift 2010-12 forecasts by 15% p.a. Correspondingly, our target price is raised by 9% to RM7.20, based on unchanged 12x 2011 PER, in tandem with peers. Our Hold call remains. We are still unconvinced by its O&G's operations - impairment risk for Naga 3, continued losses at WSP. At the same time, we feel that its auto division growth prospect is already priced in.


QL Resources RM5.85: Buy
Scarcity premium now on the agenda? Shariah-compliant

Earnings delivered. As expected, QL chalked up another quarter of more than 20% YoY net profit growth as supply factors turned favourable for the Marine and Livestock divisions. Whilst we retain our earnings forecasts, we raise our TP to RM6.50 (+10%) as we normalise post-FY13 semi-explicit tax rates to FY13’s 15% instead of 20% as QL continues enjoying tax incentives from its expansion.


Dialog Group RM1.44: Buy
Strong visibility; target price raised Shariah-compliant

A fluid start. 1QFY11 earnings account for 26% of our full year forecast. We remain positive on Dialog's business model and direction as it seeks to grow its oil storage operations via the Tj. Langsat and Pengerang bases over the next 10 years. The CTF operations, backed by major oil traders (i.e. Vopak, Trafigura) and PETRONAS (i.e. MISC) should provide sustainable long term earnings, strong cashflows and consistent dividends. Buy with a higher RM1.75 SOP TP (+40%).


Technicals
The FBM KLCI fell 2.85 points to 1,503.20 yesterday.Due to the weaker tone in the USA last night, we may see the FBM KLCI in a "range trading" mode today. Its resistance areas at 1,503 and 1,520 will cap market gains, whilst its weaker support areas are located at 1,487 and 1,500.

Our trading idea for today is an ACCUMULATE call on HAPSENG.


Other Local News
IJM Land, MRCB: Shares suspended. Market talk of a potential merger involving IJM Land Bhd and Malaysian Resources Corp Bhd (MRCB) has intensified with the suspension of the shares of IJM Land, its parent IJM Corp Bhd and MRCB since 9am yesterday pending a material announcement on a potential corporate exercise. The companies are expected to announce details of the corporate exercise later today. (Source: The Star)

Salcon: Sells stake in unit for RM112m, aims to list unit in HKEx. Integrated water and wastewater engineering company Salcon Bhd has sold a 40% stake in Salcon Water (Asia) Ltd (SalconAsia) to Challenger Emerging Market Infrastructure Fund Pte Ltd (EMIF). SalconAsia holds the company’s water assets in China. Salcon also plans to list SalconAsia on the Hong Kong Stock Exchange (HKEx) in the next two to three years. (Source: The Edge Financial Daily)

Plantation: Introducing higher oil yielding seed. Agricultural Resources Sdn Bhd (AAR) introduced its' higher oil yielding semi-clonal hybrid called "AA Hybrida 1". Compared to Dolly Parton (Dura X Pisifera) which is the standard planting material, AA Hybrida I produces more, but smaller fruit bunches with 20% higher oil yields. (Source: Business Times)

Healthcare: Malaysia to review fees of doctors, private hospitals. The government will review the fees of doctors and private hospitals. The ministry will also set up six more ambulatory (out-patient) care centres under the Tenth Malaysian Plan, from 15 currently. (Source: Business Times)

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RHBInvest Research Highlights 25th October 2010

Top Story

QL:

• Expansions to start contributing from FY12 onwards.
• Fair value is RM5.50. Maintain Outperform.

Corporate Highlights

Wah Seong:

• Gladstone/Curtis LNG projects gets environmental green light
• Market Perform while our fair value is raised to RM2.21

Hunza Properties:

• Headline net profit skewed by EIs.
• Fair value is RM1.58. Maintain our Market Perform call.

Technical Highlights

Daily Trading Strategy:

• Short-term outlook remains optimistic.
• FBM KLCI may risk more profit-taking activities in the immediate term.
• Investors should view this as an opportunity to collect value stocks for further positive push ahead.
• FBM KLCI is expected to retest the 1,500 psychological level and the recent high of 1,503.82 soon.
• Beyond that, sentiment will turn even more bullish and it will lift the index towards the all-time high of 1,524.69 next.

Daily Technical Watch: TSH Resources

• Uptrend is likely to be maintained going forward.
• Immediate Support at RM2.17
• Immediate Resistance at RM2.58

Weekly Trading Idea: LBS Bina

• Removing the recent high will spell more rallies ahead.
• Strategy: Bargain Buy for a breakout of RM0.64 soon.
• Immediate Resistance at RM0.64
• Immediate Support at RM0.52
• Exit: Cut loss if it falls below the 10-day SMA near RM0.57

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