Maybank IB Views

Construction: Overweight
Offers shelter from external turmoils

Maintain Overweight. Construction awards should pick up after a slow 1H 2011, to provide the multiplier impact to the domestic economy in anticipation of a slowdown at the global front. During the previous major downturns, government development spending continued to rise. Over the near-term, this will include the new public-private partnership (PPP) projects. We expect major awards only in 2012 relating to the MRT and SCORE. Our top buys are still Gamuda and Hock Seng Lee (HSL).

COMPANY UPDATE
Gamuda RM3.03: Buy
Record profits, Vietnam's conundrum Shariah-compliant

Record profits, Vietnam's conundrum. Gamuda's final results, due on 29 Sept, should meet expectations for record profits in FY11. We forecast FY12 to be another record year, on strong domestic property sales locked in. Nonetheless, we have tweaked our FY12-13 net profit forecasts by -1% after factoring lower sales forecast for the Vietnam property projects. We also reduce our RNAV-based TP to RM4.10 (-8%) after adjusting for lowered GDVs for the Vietnam projects and other house-keepings. The stock remains our top pick in construction.

ECONOMICS
Industrial Production Index (IPI), Jul '11
On slippery pole...

Volatile monthly industrial production trend… Industrial production in Jul '11 slipped back into the red as it contracted by -0.6% YoY (revised Jun'11: +1.3% YoY; Maybank-IB: +1.7% YoY; consensus: +2.4% YoY), dragged primarily by mining output and not helped by slower manufacturing production. MoM, the overall index fell by -0.6% (Jun: +1.3% MoM). For the first seven months of 2011, total output expanded by a mere +0.2% YoY (2010: + 7.2% YoY). Excluding mining, the adjusted industrial production grew by +1.8% YoY (June '11: +4.8% YoY).

Technicals
The FBM KLCI fell 4.97-points and closed at 1,469.12 last Friday. The local market remained somewhat quiet in lack luster and low volume trading. The weaker support areas for the FBM KLCI are located in the 1,423 to 1,455-zone. The next resistance levels of 1,469 and 1,511 will see very heavy liquidation activities.

Trading Idea is a Short-Term Buy call on KFIMA.

Other Local News
Sime: Open to GO for E&O. Sime Darby Bhd is open to increase its stake and make a general offer (GO) for Eastern & Oriental Bhd (E&O) shares at the right time, having recently purchased a 30% stake in the latter at RM2.30 per share, said its president and group CEO Datuk Mohd Bakke Salleh. (Source: The Star)

CIMB: Nazir reorganizes CIMB. CIMB Group Holdings Bhd has embarked on its biggest reorganization since a restructuring in 2005 gave birth to the second largest banking group in the country. After the exercise, CIMB’s group management committee will be trimmed to 15 people from 21. Datuk Seri Nazir Razak will hold dual functions as group CEO and head of Malaysian consumer bank. Meanwhile, Datuk Charon Wardini Mokhzani will be designated as CEO of CIMB Investment Bank Bhd. (Source: The Edge Financial Weekly)

UEM Land: 5 biotech proposals. Malaysian Biotechnology Corp says five more foreign biotech companies are planning to invest millions of ringgit at BioXCell@Nusajaya. One of them is India’s Biotech giant, Biocon Ltd that will be setting up a RM500m plant in BioXCell. UEM Land holds 40% equity in Malaysian BioXCell with remaining 60% held by Biotech Corp. (Source: The Star)

O&G: Gas Malaysia guarantees dividends in first two years, IPO set at RM2.20/sh. Gas Malaysia Bhd will pay a guaranteed dividend of 100% and 75% in the first two years, respectively, after floating its shares on Bursa Malaysia in December this year. Separately, Gas Malaysia shares will be sold at an indicative offer price of RM2.20 a share to prospective investors. (Source: The Star, The Malaysian Reserve)

Construction: Works Ministry to discuss Bumi contracts with Prasarana. The Works Ministry will hold discussions with Syarikat Prasarana Negara Bhd to identify job scope and contracts worth RM8b to be distributed to Bumiputera contractors via the implementation of the Sg-Buloh-Kajang stretch of the Mass Rapid Transit (MRT) system. (Source: Bernama)

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RHBInvest Research

Top Story: Media – Riding on TV3 and Malay adex growth Underweight

Sector Update

¨ According to Nielsen Media Research (NMR), Jul’s gross advertising expenditure (adex) for TV and print media combined rose 11.8% yoy (+8.3% mom), led by the print media (+17.8% yoy), while the TV segment saw improvement (+5% yoy) after experiencing a 3% yoy contraction in Jun.



Corporate Highlights



Fajarbaru: Slow LRT billings to weigh down on FY06/12 performance Outperform

Company Update (published 25 Aug)

¨ The weak FY06/11 result announced yesterday was partly due to the recognition of additional costs from existing projects, pending the approval of variation orders. If the variation orders are granted, there will be substantial writebacks in FY06/12.



Affin: Growing amid a challenging environment Market Perform

Briefing Note

¨ Given concerns over macro economic conditions and stiff competition the group remains selective with respect to loan growth. Loan growth thus far has not been at the expense of quality with management pointing to the improving gross impaired loan ratio trend. As for deposits, the growth has been helped by deposit campaigns but with a LD ratio of 78.9%, the group’s balance sheet remains liquid.



MMHE: Going ahead with Pasir Gudang yard acquisition Underperform

News Update

¨ MMHE announced yesterday that it had entered into a definite sale and purchase agreement with Sime Darby Engineering (SDE) for the Pasir Gudang yard but at a slightly lower purchase consideration of RM393.5m (vs. RM399m previously).



Corporate Results



Maxis: Steady performance Market Perform

2QFY11 Results / Briefing Note

¨ 1HFY11 net profit was within expectations as we expect a seasonally stronger 2H as well as potential earnings boost from the 6% service tax that we believe will be passed on to prepaid subscribers in 4Q.

Sime Darby: Ending the year with a bang Outperform

4QFY11 Results / Briefing Note

¨ FY06/11 core net profit was above our and consensus expectations, at 112-114% of FY06/11 forecasts. Main variances were the higher than expected revenue and EBIT for the heavy equipment and motor divisions. Sime declared a final single tier dividend of 22 sen, bringing FY11 DPS to 30 sen, which is higher than our projected 27 sen. This translates to net payout of 49%, and net yield of 3.4%.



UEM Land: Earnings continued to miss expectations Underperform (down from MP)

2QFY11 Results / Briefing note

¨ 2Q11 net profit missed expectations by 20-30%. The strong sequential growth of 171% in turnover was due to higher revenue from property development projects (+125%) and developed land sales (to RM122.1m from RM7.3m in 1Q11). This 2Q11 results also reflected the full quarter contribution from Sunrise.

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Maybank IB Views

COMPANY UPDATE
Gamuda RM3.74: Buy
Entering an exciting phase Shariah-compliant

Check points ahead. The earnings uptrend should continue with 3Q results expected to track towards expectations. Property sales has again, shot past the internal target, reaching RM1b in just 9 months. The next few months will be exciting as pre-qualification for the MRT underground works have started. Yenso will see its maiden launch in Sept with a stronger indication on the demand momentum by end-2011. We are still positive; Buy (RNAV based TP: RM4.45)

RESULTS REVIEW

Exciting year ahead. FY11 results were in line; net DPS of 21 sen was a marginal 1 sen above forecast. These results are now academic in light of the recently introduced 4D Toto Jackpot which will not only lift lotto but non-lotto revenue. BST remains a Buy; our DCF based TP implies a fair 15.6x 2012 PER for its defensive qualities. At the current share price, the stock still offers attractive net dividend yield of 5.3%.

Technicals
The FBM KLCI lost 4.24 points and ended at 1,559.19 yesterday. Its resistance areas of 1,560 and 1,576 will cap market gains, whilst the obvious support areas are located at 1,533 and 1,558.Due to the US markets’ rebound tone last night, we will see some initial low volume buying activities in the local bourse today.

Trading idea for today is a Short-Term Buy call on SCIENTX.

Other Local News
AirAsia: AirAsia X gests approval for new key routes. Long-haul low-cost carrier AirAsia X Sdn Bhd gets the green light from the Transport Ministry to fly to Istanbul, Beijing, Shanghai, Osaka and Jeddah, sources close to the ministry said. A number of these flights may start as early as August this year. (Source: The Edge Daily)

AirAsia: AirAsia, CAE International plan aviation academy. AirAsia Bhd is teaming up with CAE International Holdings Ltd to set up an aviation academy and has set its sights to be the largest of its kind in Asean. The academy would provide training services for pilots, cabin crew, engineers, ramp handlers, guest services and aviation management. (Source: Bursa Malaysia)

Energy: No subsidy to IPPs. Energy, Green Technology and Water Minister Datuk Seri Peter Chin Fah Kui reiterated yesterday that the government has never allocated any form of subsidies for gas sold by Petronas to Independent Power Producers (IPPs). Instead, the lower price for gas sold to IPPs by Petronas is part of its foregone revenue, in line with the government's initiative to ensure that IPPs can maintain a low tariff rate. (Source: The Sun)

Tradewinds Crop: RM60m refurbishment. Tradewinds Corp Bhd is forking out about RM60m to refurbish its hotels to improve its branding and inject a fesh new look. It expects an increase in room rates after the refurbishment in three years time. (Source: The Star)

Transport: 60,000 daily traffic volume seen for new highway. LATAR Expressway (KL-Kuala Selangor Expressway), to be open to the public before the month ends, will see an initial average daily traffic volume of over 60,000 vehicles. The concessionaire of the highway is jointly owned by Bina Puri Holdings Bhd and Arena Irama Sdn Bhd. (Source: The Star)

UEMLand: Sets up Singapore subsidiary. The new subsidiary, Sunrise MS Pte Ltd is to provide consultancy, advisory and technical services relating to project development in Singapore. (Source: Bursa Malaysia)

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Maybank IB Views

Star Publications (Malaysia) RM3.39: Hold
Diversifying media assets Shariah-compliant

Near-term catalysts yet to emerge; maintain Hold. On the positive side, indications thus far are that the recent electricity tariff hike has had little impact on ad spend. Furthermore, circulation appears to be leveling off after five years of slippage. Nevertheless, current valuations are reflective of its near-term outlook on tapering single digit earnings growth after a strong rebound last year. We maintain our earnings estimates and RM3.69 SOP TP which implies 12.6x 2012 PER.

Technicals
The FBM KLCI lost 1.95 points and ended at 1,554.24 yesterday. Its resistance areas of 1,555 and 1,576 will cap market gains, whilst the obvious support areas are located at 1,533 and 1,553. Due to the US markets’ mixed tone last night, we will see some initial low volume buying activities in the local bourse today.

Trading idea is a Take Profit call on MUHIBAH.

Other Local News
Perodua: 10,000 orders for new Myvi so far, New Myvi to make Indonesian debut. Perodua has received about 10,000 orders for the new Myvi since booking was opened on June 4 and it expects between 8,000 and 8,500 units to be sold monthly. Separately, the new Perodua Myvi will soon make its debut in the Indonesian market, marking Perodua's first foray there. 500 units of the new Myvi will be shipped to Indonesia this month, while the official launch there will take place next month. (Source: Business Times)

MAS: May boost fleet to tap Oneworld network. Malaysia Airlines' entry into the Oneworld airline alliance may see it ordering more planes. MAS will be attending the Paris Air Show next week, and an announcement on new orders is largely expected. (Source: Business Times)

AirAsia: To announce aircraft orders at Paris Air Show. AirAsia is aiming to conclude negotiations soon so that it can make a landmark aircraft order to double its fleet at the Paris Air Show. (Source: The Star)

UEM Land: Targets RM5b GDV in 2011. UEM Land Holdings Bhd is planning to launch projects with a total gross development value (GDV) of RM5b this year, as it aspires to see its revenue grow by 50%. (Source: The Edge Financial Daily)

KPJ: To build specialist centre in Iskandar. KPJ Healthcare Bhd has received approval for zoning from the Health Ministry to set up a new specialist hospital at Bandar Dato Onn in a collaboration with Johor Land Bhd. (Source: The Star)

Plantation: Malaysia wins case against Aussie palm oil labeling Bill, Malaysia is largest producer of certified, sustainable palm oil. Malaysia has won its case against Australia's proposed Truth in Labelling - Palm Oil Bill. The Community Affairs Legislative Committee of the Australian Senate in Canberra has recommended that the Bill not be passed. Separately, Malaysia is now the world's largest producer of certified and sustainable palm oil, accounting for half of the 4.2m tonnes of globally certified and sustainable palm oil to date carried out by the Roundtable on Sustainable Palm Oil (RSPO). (Source: Business Times)

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RHBInvest Research

Top Story: Insurance – Malaysian Takaful Industry Neutral

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

Corporate Highlights

SP Setia: Expect a stronger 2HFY11 Outperform

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

UEM Land: First foray into retail development Market Perform

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

Parkson – Indonesia Deal Completed Market Perform

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

RCE: Kowaja issue finally resolved, but with conditions Outperform

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

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RHBInvest Research

Top Story: Benchmarking – Tracking the benchmark

• Market Update
• Equal weighting all FBM KLCI stocks would have resulted in YTD gain of 3.4% (vs. the index of +2.3%) but this would still have underperformed vs. FBM100 which rose by 4.7%.
• This implies that investors had to take an active risk position. We note that FBM KLCI followers had to get seven stocks right (Maybank, Sime, PetChem, Digi, Genting Malaysia, TM and PetDag), or underweight six others (TNB, MISC, KLK, YTL Corp, YTL Power and MAS). Big gainers outside of the FBM KLCI sectors and stocks included Dialog, SapuraCrest, Mah Sing, MCIL, UEM Land, DRB Hicom, and MPHB, highlighting the merits of bottom-up stock picking under current market conditions.

Sector Call

Insurance:

• Sector Update
• Gradual liberalisation of motor insurance
• We believe that the move to detariff the motor insurance segment is positive for the industry in the long run. In the short to medium term, we believe the gradual premium increase would do little to cover losses stemming from the TPBID policies although we believe that it is in the right direction.

Corporate Highlights

IOI:

• News Update
• RSPO suspends certification process
• We believe this suspension has more to do with the NCR land dispute in Baram, Sarawak, than any other issue.
• Maintain Underperform with fair value of RM5.90.

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Stocks to watch: DBE Gurney, VS Industry, Ireka, Berjaya Corp

KUALA LUMPUR: Stocks on Bursa Malaysia could extend their gains on Thursday, March 31 as the first quarter winds down and the FBM KLCI at its highest since early February, as sentiment could be reinforced by the firmer overnight close on Wall Street.

Credit Suisse Research said Malaysia is expected to surprise on the upside in 2011 but uncertainties still remain over the sustainability of growth beyond 2011.

It said IJM Corp, Air Asia, Axiata and UEMLand were particularly interesting. IJM Corp. is a direct beneficiary of the Economic Transformation Programme (ETP). Air Asia and Axiata have gone beyond Malaysia shores and are riding on the region’s strong growth. UEM Land is working on a different approach to take advantage of the strong Singapore-Malaysia ties.

On Wall Street, U.S. stocks rose on Wednesday, March 30 with activity dominated by money managers buying recent winners, including energy and small-caps, as the quarter nears its end.

The Dow Jones industrial average added 71.60 points, or 0.58 percent, to 12,350.61. The Standard & Poor's 500 rose 8.82 points, or 0.67 percent, to 1,328.26. The Nasdaq Composite gained 19.90 points, or 0.72 percent, to 2,776.79.

At Bursa Malaysia, stocks to watch include poultry outfit DBE Gurney Resources Bhd, V. S. Industry Bhd (VSI), Ireka Corp Bhd, Berjaya Corp and Masterskill Education Group Bhd.

DBE Gurney’s additional 593.33 million new shares and 200 million warrants will be listed on Thursday. The warrants were issued for free to the subscribers of the renounceable rights issue of 400 million rights shares on the basis of one free detachable warrants for every two rights shares subscribed for.

The maturity date of the warrants is March 22, 2016 and the conversion price is 10 sen. The new shares of 10 sen were issued pursuant to the rights issue with warrants and capitalisation of amounts due to director and creditors settlement.

Meanwhile, The Edge FinancialDaily reports OSK HOLDINGS BHD []'s wholly owned subsidiary OSK Investment Bank Bhd (OSKIB) has emerged as the single largest shareholder of DBE Gurney, with 180.99 million shares or 26.88% of DBE's enlarged issued share capital.

V. S. Industry has set a dividend policy of making out an annual payment of at least 40% of its net profit to shareholders as dividends, and plans to disburse payouts on a quarterly basis. The dividend policy is effective in the current financial year ending July 31, 2011 (FY11).

VSI’s net profit in the second quarter ended Jan 31, 2011 surged 134.1% to RM10.1 million from RM4.4 million a year ago, due to higher revenue. The profit came mainly from the higher group sales as a result of the increased sales generated by its Malaysian and Indonesian operations.

Ireka Corp’s unit Ireka Engineering & CONSTRUCTION [] Sdn Bhd has received the letter of award from Transmission TECHNOLOGY [] Sdn Bhd for the proposed offices and hotel development in Kuala Lumpur for RM232.74 million.

The contract comprises of architectural and M&E works for basements and 13-level podium, a 27-storey office tower and a 37-storey office tower. The contract period for Tower 1 and Tower 2 is 18 months and 20 months respectively.

Berjaya Corp posted net profit of RM32.46 million in the third quarter ended Jan 31, 2011 compared with net loss of RM156.20 million a year ago on higher profit contribution from gaming, stockbroking, direct selling, retail and distribution businesses.

It said on Wednesday, March 3o that revenue rose to RM1.77 billion from RM1.66 billion while earnings per share were 0.74 sen compared with loss per share of 3.75 sen.

“The pre-tax loss of RM50.2 million in the previous year corresponding quarter was mainly due to the non-cash dilution effects amounting to RM150.46 million when the group's interest in BERJAYA LAND BHD [] (BLand) was diluted from 56.44% to 53.25% arising from the conversion of BLand ICULS to BLand shares upon its maturity on Dec 30, 2009,” it said.

For the nine-month period, it recorded net profit of RM244.47 million, a contrast from the net loss of RM64.47 million in the previous corresponding period. It posted pre-tax profit of RM612.64 million compared with RM309.58 million a year ago. .

Masterskill Education Group Bhd has recommended a final single tier dividend of 7.9 sen per 20 sen share for the financial year ended Dec 31, 2010. It said on Wednesday, March 30 the dividends would be payable on June 15. The group had on Oct 13, 2010, completed the distribution of an interim dividend of seven sen per share to the shareholders.

The total of 14.9 sen per share dividend for 2010 will represent a total payout of 60% of its net profit, equivalent to RM61 million.

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RHBInvest Research

Top Story: UEM Land – Too big to be ignored
Market Perform (New Coverage)

New Coverage
Key investment case: i) The largest property stock by market cap and landbank, and will be the only pure property stock if included into the FBM KLCI 30 Index; (ii) The inclusion of Sunrise will reduce execution risk with RCPS to ensure alignment of interest of Datuk Tong with downside being capped; (iii) The entrance of Temasek via the iconic wellness township projects a strong repricing catalyst for land and property values in Nusajaya; (iv) Continued diversification of landbank either via outright acquisition of land parcels or property companies to minimise concentration risk; and (v) Quality of earnings to improve.

Fair value of RM2.80, at its RNAV. News flow on the development of Singapore land parcels will be the key re-rating catalyst, which will potentially raise RNAV/share to RM3.19.

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RHBInvest Research

Property: – Outlook and concerns

UEM Land , SP Setia, IJM Land and KSL are confident in their property sales this year with more new launches scheduled in the pipeline.

Rising building material costs such as steel bar, cement as well as the shortage of labours are key concern.

UEM Land: Correlation between ULHB’s foreign shareholding and share price is 0.94. Hence, any short-term capital reversal would result in relatively strong profit taking activities on the stock. However, continuous news flow on IDR will keep investors’ interested on the stock. If we include the contribution from potential development of Singapore land parcels, RNAV/share is estimated at RM3.05.

IJM Land: A total of about RM2bn worth of new launches is scheduled for this year. Unbilled sales have risen from about RM800m to almost RM1bn. While management has conservatively estimated a GDV of only RM4bn for Canal City , we believe the actual GDV could amount to RM9-10bn.

SP Setia: Closed about RM1bn sales from KL EcoCity project – 10 blocks of boutique offices and over 90% of strata office units were booked. In addition to the unbilled sales of RM2.4bn, given the RM7-8bn worth of new projects in the pipeline, RM3bn sales target seems to be rather modest. Meanwhile, continued news flow on landbanking will provide some support to the share price.

KSL – Estimate that total value of all assets could amount to RM700-800m – similar to its current market cap. Although the delay in obtaining approval for Bandar Bestari could yield some earnings risk, the stock’s underlying asset are still under-estimated by the market

IRDA – Following the bilateral agreement between Malaysia and Singapore governments, increased interest from China is particularly strong on hotels and resorts business. Total investment from Singapore is now about S$2bn. Note that for Temasek and other developers from Singapore to enter, this suggests that the Singaporeans are confident on the potential of IDR, which will then lead to value appreciation for the real estate and properties in Johor.

Maintain Overweight. Top picks are SP Setia, IJMLD, Mah Sing (fair value is upgraded to RM3.03) and KSL. Considering the current valuations of the sector, we see better values in the small-mid cap property stocks such as Mah Sing and KSL which are trading at 15.7x and 8x FY11 PE, respectively.



Sime Darby:

• Lawsuit from Emirates International Energy Services (EMAS) asking for nearly US$200m in damages, stemming from a dispute over tender bids.
• No change to forecasts, target price of RM11.10 and our Outperform call.

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Maybank IB Views

ACQUISITIONS / DISPOSAL
PLUS Expressways RM4.69: Hold
The loner in UEM-EPF Shariah-compliant

Nothing at offer close. MMC Corp did not throw in a new bid for PLUS as speculated. Jelas Ulung did not put in a RM50m cash deposit which means that it is out of the race. All eyes will now be back on UEM-EPF, which is the lone "bidder". The offer implies RM4.60 per PLUS share. PLUS is now officially a Hold; our call has been put under review since its share price started trending close to the UEM-EPF offer price. UEM-EPF's offer is fair, close to our RM4.70-DCF derived target price.


COMPANY UPDATE
Gamuda RM4.21: Buy
New water offer significantly undervalues Shariah-compliant

Another long drawn affair. The Selangor Government's latest offer for SPLASH values its equity value at RM297.5m, we estimate. Gamuda's short announcement yesterday only quoted the offer price on a per share basis, but not the total amount. If our calculation is right, the offer prices SPLASH at just 0.63x book. We think that the offer will be rejected by SPLASH's three shareholders, including Gamuda. Water consolidation in Selangor seems like another long drawn affair.


Sunrise RM3.12
Ceasing coverage Shariah-compliant

Stock to be delisted. The take-over offer by UEM Land at RM2.80 a piece has received 96.4% acceptances. UEM Land does not intend to maintain the listing status of Sunrise, which has been suspended since 31 Dec 2010. We are ceasing research coverage of Sunrise. Investors should no longer depend on our financial forecasts of Sunrise in making investment decisions, nor infer an adverse opinion as a result of our decision to cease coverage.


ECONOMICS
Industrial Production Index Nov '10
Stabilising after slowdown

Industrial production in Nov '10 picked up to +5.1% YoY (Oct '10: +3.1% YoY). However, on MoM basis, output fell across the board by 3.7%. YTD, the industrial production index (IPI) was up +7.8%. For Oct-Nov '10, it increased by +4.1% YoY (3Q10: +4.3% YoY; 2Q10: +10.8% YoY, 1Q10: +11.1% YoY). Using this to estimate real GDP, we came to a figure of around +5.0% YoY for 4Q10 (3Q10: +5.3% YoY; 2Q10: +8.9% YoY; 1Q10: +10.1% YoY). Our 2010 economic growth estimate of +7% reflects a 4% YoY expansion in the final three months.


Technicals
The FBM KLCI fell 8.69 points to 1,563.52 yesterday. Its resistance area of 1,563 and 1,576 will cap market gains, whilst its weaker support areas are located at 1,535 and 1,560.


Other Local News
Proton: In talks with to assemble vehicles in India. Proton Holdings Bhd could be in talks with Indian automobile manufacturer, Hindustan Motors to assemble its vehicles for the Indian market. Proton is in favour of using Hindustan Motors' Chennai plant, set up for assembling the Mitsubishi Lancer, to locally produce its Exora multi-purpose vehicle. (Source: The Star)

SapuraCrest: Gets RM750m loan. SapuraCrest Petroleum Bhd's wholly-owned subsidiary, Aurabayu Sdn Bhd was granted a syndicated Islamic financing facilities of up to RM750m comprising ringgit Malaysia and US dollar denominated tranches from Maybank Investment Bank Bhd. Maybank Investment acted as the mandated lead arranger and bookrunner. (Source: The Star)

Transmile: Sells four aircraft to FedEx for RM209m. Transmile Group Bhd has sold four MD-11F aircraft to Federal Express Corp (FedEx) for RM208.8m. The funds raised from the disposal would be used to partially settle the outstanding debt of the company, which amounted to RM528.9m as at Sept 30, 2010. (Source: The Star)

Integrax: Perak allows Vale of Brazil to build its jetty in Lumut. Vale International SA has been allowed by the Perak state government to construct its own jetty in Lumut to accommodate its proposed iron ore transshipment project. Vale was originally supposed to use Integrax Bhd's Lekir Bulk Terminal (LBT), but the facility upgrade has been on hold since 2009 due to the feud between two brothers who hold a combined 37% stake in Integrax through Halim Rasip Holdings. (Source: The Star)

Property: Tambun Indah IPO oversubscribed by 14.9x. Property developer Tambun Indah Land Bhd's initial public offering (IPO) of 11.1m shares was oversubscribed by 14.9 times where 10,751 applications for 175.7m shares with a total value of RM123m were received. (Source: The Edge Financial Daily)

Construction: Benalec oversubscribed by 4.9times. Benalec Holdings Bhd, which will be listed on the Main Market of Bursa Malaysia, has received an oversubscription rate of 4.92 times for the 36.5m shares made available for public subscription. (Source: The Edge Financial Daily)

Plantation: Planters appeal to abolish windfall profit levy. Malaysian oil palm planters will appeal collectively to Prime Minister Datuk Seri Najib Tun Razak to abolish the windfall profit levy on crude palm oil (CPO) after their requests were turned down by the Finance Ministry recently. The joint appeal is expected to be made by the Malaysian Palm Oil Association (MPOA), Malaysian Estate Owners' Association (MEOA), East Malaysia Planters' Association (EMPA) and Sarawak Oil Palm Plantation Owners' Association (SOPPOA). (Source: The Star)

Conglo: JCorp's directors may not attend EGMs. Johor Corp (JCorp) directors representing the Johor and Federal governments are unlikely to attend the EGM's of Johor Corp's three public listed companies (Kulim, Damansara Realty, KPJ Healthcare) this month to remove Tan Sri Muhammad Ali Hashim as their respective chairman. (Source: The Star)

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Maybank IB Views

SECTOR UPDATE
Automotive: Overweight
Can a forced marriage be a force?

A merger on the cards? Proton is eager. Perodua is not. While Newco could create size and realise value, the merger offers minimal operational synergies. An equity swap is unlikely unless Perodua is finely compensated and its partners agree to it. A loose collaboration without equity swap makes more sense. Local automakers need to look beyond the domestic market to remain relevant and competitive. Based on our analyses, MBM offers higher upside to a potential merger. We remain Buyers of Proton and MBM; Hold on UMW.

COMPANY UPDATE
KNM Group RM1.93: Buy
Momentum picking up Shariah-compliant

Fundamentals recovering. Management's tone at an analyst briefing post 3Q10 results suggests a sustained recovery outlook. A confluence of factors, i.e. steady oil price, higher capex spending in the sector translating into rising order and tender books, and margins recovery should stimulate growth over the next few years. Buy, with a RM2.20 target price based on 9x 2011 EPS, Current valuations reflect KNM's near bottom cycle valuations (below its historical mean).


Technicals
The FBM KLCI edged higher by 0.76 points at 1,501.74 on Monday. Its resistance areas at 1,505 and 1,525 may cap market gains, whilst its obvious support areas are located at 1,488 and 1,501.

Trading idea for today is a SHORT TERM BUY call on TWSPLNT.


Other Local News
Air Asia: To form Philippines unit. Air Asia plans to form a Philippines unit with Antonio Cojuanco, a former chairman of Philippine Long Distance Telephone Co by 1Q11. The domestic and overseas routes would be available in 2011. (Source: The Star)

Scomi Eng: Accepts RM494m price for monorail fleet expansion. Scomi Engineering via its subsidiary, Scomi Rail Bhd (SRB), has accepted the contract price of RM494m for the monorail fleet expansion project. SRB had received a letter from Syarikat Prasarana Negara Bhd (SPNB) on Dec 3 notifying SRB of the intent to award SRB the contract at the quoted price. (Source: The Star)

UEM Land: To buy land in Bangi for RM268m. UEM Land Holdings Bhd will acquire two parcels of freehold agricultural land in Bangi for RM268.5m from Inch Kenneth Kajang Rubber Public Ltd Co. UEM intends to develop a township with a gross development value of RM2.84b spanning 10 years. (Source: The Star)

NFO: Some 4 Digit prize payment reduction approved. Multi-Purpose Holdings Bhd’s unit, Magnum and another listed NFO operator received approval from the Finance Ministry to revise the special prizes of their 4 Digit Big Game from RM200 per RM1 bet to RM180 per RM1 bet. Both companies said the special prizes for the 4 Digit Big permutations would be revised proportionately. (Source: The Star)

Chemicals: Petronas, BASF mull RM4b joint venture. Petronas and Germany's BASF are considering a RM4b joint venture to produce specialty chemicals in Malaysia. The final scope of investments will be determined following the outcome of a joint feasibility study, which is targeted to be completed in 2011. (Source: The Star)

Banking: India's Religare seeks presence in Malaysia. Religare Enterprises Ltd, an Indian financial services group controlled by the Singh brothers, Malvinder and Shivinder, is planning to buy a mid-sized investment bank in Malaysia and Indonesia. Besides India, Religare has presence in Singapore and Hong Kong. (Source: Business Times)

Healthcare: Pantai plans RM500m expansion of hospital network. The Pantai Group plans to expand its network of hospitals in Iskandar Malaysia at an estimated cost of RM500m.The development of the project, which will bear the name Gleneagles Medini Hospital, will be done in phases and is slated to be one of the premium hospitals under Parkway Health. (Source: The Star)

Property: RM500m Azea latest project in Danga Bay. Imperial Marine Pte Ltd, Danga Bay Sdn Bhd and Pembinaan Sahabatjaya Sdn Bhd have formed a 30:37:33 joint venture to develop a RM500m high-end mixed development known as Azea Properties. The commercial project will be undertaken on a 1.7ha site in Danga Bay, one of the key flagship zones within Iskandar Malaysia. (Source: Business Times)

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Views & News, Maybank IB (2010-11-08)

Sunrise RM2.52: Accept offer
Cheaper entry to UEM Land Shariah-compliant

Take up the offer. We view UEM Land's (UEML) conditional takeover offer (CTO) for Sunrise shares positively as the price offered is fair. We advise Sunrise shareholders to take up the share swap instead of the redeemable convertible preference shares (RCPS) option. The enlarged UEML will offer an exposure into the largest property developer in Malaysia. Based on 20sen net DPS declared by Sunrise earlier and our estimate of RM2.15-2.20 RNAV per UEML share post-Sunrise acquisition, the deal offers a cheaper entry to UEML.


Technicals
The FBM KLCI gained 6.08-points last week as some further investor enthusiasm boosted above the 1,510-mark.The market remains strong in the weeks ahead. But do remain cautious as technically we are in very high chart territory. The obvious support areas for the FBM KLCI are located in the 1,476 to 1,511-zone. The key resistance areas of 1,513 and 1,524 may cap any rebound activity.

Weekly trading idea is a SHORT-TERM BUY call on KFC.


Other Local News
Axiata: Signs 5-year pact with Ericsson. Axiata Group Bhd will streamline its procurement of products and services with Ericsson to realise business efficiencies and competitive advantage through cash flow improvement for the next five years. Last week, it signed an agreement to facilitate regular exchange of information on technical and technology areas relating to products, works and services purchased by Axiata group of companies. (Source: Business Times)

Maybank: Fixes new shares under dividend reinvestment at RM7.70. Malayan Banking Bhd has fixed the issue price of new Maybank shares to be issued under the dividend reinvestment plan at RM7.70 per share. On behalf of the Board, Maybank IB, announced the Book Closure Date pursuant to the Final Dividend and Dividend Reinvestment Plan has been fixed for 18 November 2010. The new Maybank Shares arising from the Dividend Reinvestment Plan will be listed on the Main Market of Bursa Malaysia Securities Berhad on 21 December 2010. (Source: Bursa Malaysia)

Star Pubs: MCA buys 42% stake in Star for RM1.28b. MCA announced it has bought a 42.4% stake in Star Publications (M) Bhd for RM1.28b, or RM4.09 a share, from its wholly-owned subsidiary Huaren Holdings Sdn Bhd and is in the process of maintaining its beneficial interests in Star. (Source: The Star)

LBS Bina: China Project expected to start next year. LBS Bina Group Bhd's China project in the southern city of Zhuhai with an estimated gross development value of (GDV) of RM5b is expected to start in the third or fourth quarter of next year. Last month, LBS Bina announced that it will sell a 10% equity stake in its Chinese joint ventures (JV) to its JV partner, Zhuhai Special Economic Zone Long Yi Enterprises Co for RMB200m (RM9.25m). Each party will own 50% of the JVs post transaction. The agreement would pave way to kick-start the property project which was deadlocked in the past. (Source: The Edge Financial Daily)

Mulpha: Goldman Sachs increases Mulpha stake to 5.74%. Mulpha International Bhd, which saw active trading recently on news that its associate FKP property was a takeover target, saw The Goldman Sachs Group Inc accumulate more shares in Mulpha. Goldman Sachs increased its shareholding to 135.2m shares or 5.74% equity interest. It was reported that FKP was a possible takeover target by Stockland, a leading Australian property developer. (Source: The Edge Financial Weekly)

Sapura Resources: Disposes of stakes in APIIT, UCTI. Sapura Resources Bhd (SRB) has proposed to dispose of 51% equity interest each in APIIT Sdn Bhd and Asia Pacific UCTI Sdn Bhd (UCTI) to Ontime Sdn Bhd for RM102m. SRB said net proceeds from the proposed disposal may be channelled towards the acquisition of new businesses, expansion of existing business and to pare down borrowings. The proposed disposal is expected to result in a one-off net gain of RM68.9m and upon completion of the exercise. (Source: The Star)

External reserves: Higher in the second half of October 2010. External reserves increased slightly in the second half of October 2010 to RM324.9b (USD105.3b) as at 29 October 2010 from RM322.7b (USD104.6b) on 15 October 2010. The latest reserve amount is equivalent to 8.8 months of retained imports and 4.5 times short-term external debt. (Source: Bank Negara)

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Stocks to watch: GLCs, SelProp, Vastalux, NSTP, UEMLand - Edgedaily

KUALA LUMPUR: Market sentiment this week is expected to stay lacklustre in the absence of fresh positive corporate news, expect for several companies, while the continued losses on Wall Street are unlikely to see investors taking fresh positions.

On Friday, US stocks fell for a third straight day as investors stayed cautious following disappointing housing and durable goods data and concerns about TECHNOLOGY spending.

Reuters reports the rally in US stocks, which stumbled in recent days on worries about the economic recovery and continued government stimulus, will be tested this week, by crucial data on growth and jobs.

Data due out are September non-farm payrolls, the final reading of second-quarter gross domestic product and several other big economic reports.


There is concern that the rally in stocks, with the Standard & Poor's 500 index up about 54% since early March, could be fizzling out.

Meanwhile, CIMB Equities Research is maintaining an overweight stance on Malaysia following potential share placements by government-linked investment companies including Khazanah Nasional.

The research house said such corporate exercises would be a win-win move for Malaysia as they would increase free float and liquidity for government-linked companies (GLCs). The GLCs include Malaysian Airline System, PLUS Expressways, UEM Land, Pharmaniaga while Khazanah has also substantial stakes in Proton, Axiata, Telekom and Time Engineering.

UEM Land Weekly Chart

Plus Expressway Weekly Chart

"Placements could also help renew foreign investor interest and drive a re-rating of the market. We remain bullish on Malaysia and maintain our end-2010 FBM KLCI target of 1,400," said CIMB Research.

Selangor PROPERTIES [] Bhd posted net profit of RM33.3 million for 3Q ended July 31, up 182% from RM11.8 million a year ago, boosted by foreign exchange gains and higher profits from property development.

Revenue rose 36.5% to RM70.55 million from RM51.68 million. Earnings per share were 9.69 sen versus 3.44 sen.

In VASTALUX ENERGY BHD [], its executive vice chairman Mohamad Nor Abdul Rashid continued to reduce his stake in the company.

Vastalux Weekly Chart

He sold 3.98 million shares in the open market at prices ranging from 41 sen to 46.8 sen from Sept 4 to 23. The recent disposals reduced his stake to 63.73 million shares.

As for NSTP and Utusan Malaysia, investors could be ready to lock in gains after several days of gain following an upgrade by Macquarie Research.

UEMland Weekly Chart

Macquarie Research upgraded NSTP to outperform and a target price of RM2.50, based on a 12 times price-to-earnings (PER) for 2010E. NSTP closed 13 sen higher at RM2.29 last Friday while Media Prima added four sen to RM1.54 and Utusan jumped 12.5 sen to RM1.04.

NSTP's three newspapers in its fold account for 35% of total circulation and 22% of total newspaper advertising spending (adex), it had said in the report.

Source: Edgedaily

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