Six shortlisted for RM1.5bil school Internet contract

PETALING JAYA: Six companies are in the running for the RM1.5bil five-year contract to provide Internet access and a virtual learning module (VLM) platform for the 9,924 schools in the country under the 1Bestarinet project, sources said.

The six are said to be Celcom Axiata Bhd, Jaring Communications, Maxis Bhd, YTL Communications, Multimedia Synergy Corp and both Telekom Malaysia Bhd/Time dotCom Bhd, which submitted a joint bid.

The access job comes with an option to extend the contract period for another five plus five years, totalling 15 years, and this would include installation, maintenance and provision of a VLM.

Though the Government is looking at RM4.5bil as the absolute sum for the 15-year contract, those in the know claim the bids received thus far ranged from RM2bil to RM6bil. At RM4.5bil, it works out to RM1.5bil for every 5 years or RM300mil for each year.

A decision on the winner is expected sometime in the middle of next month, sources said, adding that the Government should insist on proof of concept before deployment to avoid issues and problems arising later. The plan is to roll out access to at least 7,000 schools by Jan 1, 2012.

The poser now is which company should win the 15-year contract.

“Even before 1Bestarinet came about, some of the parties vying for the contract have been lobbying for it. Whatever the decision, it should be based on merits and the focus should be on deliverables as we cannot afford a repeat of the Schoolnet episode. Choose those that can deliver, those that have the financial muscle, the capacity and capabilities and not those that compromise on quality for profits,” said a source.

“The last thing we want is our future generation being deprived of basic Internet access because of some companies which can't have enough profits from the project and the Government is committed because the contract would be binding for 15 years,'' added the source.

IBestarinet came about as a result of the Pemandu national key economic area lab series as there is a need to provide Internet access to all schools in the country since the earlier project to wire up schools, Schoolnet, did not meet the objectives set.

To recap, Schoolnet was born in 2004 to wire up schools using wireless or fibre technology but it had major constraints and did not live up to expectations in terms of speed and capacity, and also due to lack of specifications and integration.

Hence, in May this year, the Education Ministry called for a tender bid for the wiring up of all schools under the 1Bestarinet project and in the tender's posting it was clearly stipulated that the tender was open to all local companies with preference given to bumiputra tender bids registered with the Finance Ministry under some codes stipulated.

This tender bid which opened on May 5 saw over 80 companies collecting the tender documents. At its closing on May 31, it is said that only 19 companies submitted their bids. The six shortlisted are from the 19 that submitted bids.

Given its past experiences with Schoolnet, the ministry had spelt out certain conditions for 1Bestarinet. It wants the future network to be scalable to cater for growth and to evolve with technological evolution. It should have a VLM which will allow teachers and students, among others, to have a platform to write plans and share ideas. The Internet speed has to be constant and cannot be based on “best effort.'' For urban areas, the access speed is 2Mbps to 10Mbps, and for rural and remote schools 1Mbps to 4Mbps. All sorts of technologies can be used, be it fibre or wireless technologies including Vsat, wireless, WiFi, but the link to the school should be via fibre.

“The Education Ministry will also have an inbuilt checking mechanism to ensure that the vendor delivers as per specifications,'' said a source.

source: thestar

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Stocks to watch: Magna Prima, Wing Tai, SapuraCrest, Kencana

KUALA LUMPUR: Key regional Asian markets are expected to remain jittery in the week ahead, starting Monday, Aug 8, in the absence of any clear indicators about the US economy and Europe’s deepening crisis.

Overnight on Wall Street, stocks closed out their worst week in more than two years on Friday, Aug 5 in a volatile session. For the week, the Dow fell 5.8%, the S&P 500 was down 7.2% and the Nasdaq was off 8.1%.

At Bursa Malaysia, there could be some bargain hunting for battered stocks which still had strong underlying fundamentals. But the buying could be restrained.

On Friday, the FBM KLCI closed down 1.45% or 22.46 points to 1,524.43 while week-on-week, the index lost 24.38 points.

A total of RM26.89 billion was wiped out from the Bursa Malaysia market capitalisation where 21 stocks hit fresh 52-week lows. Market capitalisattion was reduced to RM1.312 trillion last Friday.

For among the 30 components of the FBM KLCI, six of them hit a fresh 52-week low. They were IOI Corp Bhd, YTL Power International and YTL Corp Bhd, MISC BHD [], TENAGA NASIONAL BHD [] RM5.94 and PPB GROUP BHD [].There could be mild bargain hunting for some of these stocks which possess strong fundamentals.

Positive corporate news which could help lift sentiment are MAGNA PRIMA BHD [], Wing Tai Malaysia Bhd, SAPURACREST PETROLEUM BHD [], KENCANA PETROLEUM BHD [] and SCOMI ENGINEERING BHD [].

Magna Prima is making its foray into Australia to undertake a mixed residential and commercial project in Melbourne with an indicative gross development cost of A$148 million (RM482.18 million). The company expects to record a profit of A$62 million (RM200.32 million) from the project.

Wing Tai Malaysia expects to record a gain of RM27.63 million from the sale of two pieces of land in Seberang Perai, Penang to Aeon Co. Bhd for RM50.12 million cash consideration.

It said the two pieces of land, about 7.29 ha and 4,625 sq metres, were currently vacant and Aeon planned to build a shopping complex with car park facilities

The Edge weekly reports the River of Life project has seen two significant developments over the last two weeks, leading to renewed interest in it as well as Datuk Lim Kang Hoo's EKOVEST BHD [].

It also reported that Flonic Hi-Tec is banking on critical cleaning business. The company will now provide its customers with critical cleaning systems capable of filtering particles that are up to 10 microns in size, compared with 100 microns in precision cleaning systems.

The boards of SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd have agreed to their merger to become one of the world’s largest oil and gas service providers in terms of market capitalisation and assets.

They had accepted Integral Key Sdn Bhd’s (IKSB) RM11.85-billion offer to acquire all their assets and liabilities in a share swap. The offer shall remain open for acceptance until 5pm on Aug 15.

Fraser & Neave’s net profit for the third quarter ended June 30, 2011 rose 11.2% to RM77.85 million from RM70 million a year earlier due to strong contribution from its property and soft drinks divisions.

Its revenue for the quarter dipped to RM882.47 million from RM892.77 million due mainly to lower volume of dairy products sold in Malaysia.

It said under its soft drinks division, sales activities for Coca-Cola products will cease effective Oct 1, 2011 and, as such, the division’s revenue and profit thereafter will see an inevitable immediate reduction, it said.

Coca-Cola business makes up about 30% of the revenue of the soft drinks division for the current financial year, it said.

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Maybank IB Views

Public Bank RM13.36: Hold
Competitive pressures remain

Little excitement. 1H11 results were broadly within expectations, with net profit of RM1.71b (+20% YoY) accounting for 51% of our full-year forecast and 50% of consensus. Our forecasts are maintained with higher NIM contraction estimates offset by lower provisions. Consumer loan demand continues to show resilience at the group but we do expect this to taper off from 2H11 onwards. Pricing is fair at this stage ( (prospective 2012 P/BV of 2.7x, ROE: 23.5%). Hold call and TP of RM14.10 maintained, pegged to a 2012 P/BV of 2.8x.

Axis REIT RM2.62: Buy
Results in line; more acquisitions soon Shariah-compliant

Maintain Buy. AXRB’s RM31.8m 1H11 core net profit (+33% YoY) came in as expected. Its 4.5 sen 2Q11 DPU was also in line. Share price has performed well thanks to a switch in preference to defensive stocks. No change in our earnings forecasts but we raise our TP to RM2.75 (+15 sen) as we roll over our base year to 2012. A lower beta assumption has also contributed to the upgrade in TP. With a 12% total return, AXRB remains as our top pick for the M-REITs sector.

COMPANY UPDATE
S P Setia RM3.92: Buy
Reaping full benefit of KL Eco City Shariah-compliant

An attractive booster to earnings and RNAV. We are excited on SP Setia's purchase of the remaining 40% stake in KL Eco City (KLEC). This non-cash acquisition will immediately boost SPSB's earnings by 0.6-1% and RNAV/sh by 8 sen. All it would cost SP Setia is 19.4m new shares, which is a mere 1.1% increase of its existing share base. We upgrade our forecasts by 0.3-1.9%. Reiterate Buy with a higher RM5.00 target price (+24 sen; 10% premium to RM4.53 RNAV).

RESULTS PREVIEW
Malaysia Airports Holdings RM6.50: Buy
2Q11: Expect good result

Strong momentum continues. MAHB will release its 2Q11 results on 28 July. 2Q is seasonally the weakest quarter for the year. Based on the operating statistics published, we expect a core net profit (less forex translation and all other non-cash items) of RM110.5m (+24.5% YoY, -1.4% QoQ). Maintain Buy, with a higher DCF-based target price of RM7.55, after imputing for a higher passenger growth of 10% in 2011 (previously 8%). Our new TP offers undemanding 15.2x 2012 earnings.

Technicals
The FBM KLCI fell 5.46 points to close at 1,559.60 yesterday. Its resistance areas of 1,559 and 1,574 will cap market gains, whilst the obvious support areas are located at 1,543 and 1,552.

Trading idea today is YTL

Other Local News
KNM: Secure RM17b project with Zecon. KNM Group Bhd and Zecon Bhd have entered into two heads of agreement with Gulf Asian Petroluem Sdn Bhd (GAP) to construct a petroleum refinery and a petroleum product storage terminal facility for a combined contract of RM17b in Teluk Ramunia. (Source: The Edge Financial Daily)

Tan Chong: Sets 20% sales target for Sabah, Sarawak. Edaran Tan Chong Motor Sdn Bhd (ETCM) is eyeing to raise the sales contribution from Sabah and Sarawak to 20% of that nationwide in three years time. Sales in the two states at the moment represented 10 percent of the national total for Nissan vehicles. (Source: The Star)

KPJ: To triple education revenue. KPJ Healthcare Bhd's education arm has been granted university college status by the Higher Education Ministry. KPJ plans to invest RM120m in the physical expansion of its education facilities and hopes to triple revenue from its education unit to RM100m annually from RM30m in 2010. (Source: The Edge Financial Daily)

Ivory: Wins Penang land rights. Ivory Properties Group Berhad (IVORY) won the rights to develop 102.56 acres of land located at Bayan Mutiara, North East District, Penang of which approximately 67.56 acres are existing land and 35 acres are to be reclaimed for a proposed mixed development. (Source: Bursa Malaysia)

Perwaja: Makes cash call to Kinsteel. Debt-laden Perwaja Holdings Bhd is making cash call to its major shareholder Kinsteel Bhd to raise RM280m under a planned restricted issue of redeemable convertible unsecured loan stocks (RCULs). Perwaja is also proposing an issue of free warrants on the basis of one free warrant for every two existing shares held. The gross proceeds will be used to finance the working capital needs of Perwaja. (Source: The Edge Financial Daily)

O&G: Qatar to sell liquefied natural gas to Malaysia. Qatar's state-run Qatargas says it has agreed to sell 1.5m tons of liquefied natural gas annually to Malaysia, locking in its first major customer in Southeast Asia. The company says it signed a preliminary agreement with Malaysia's Petronas LNG on Sunday in the Qatari capital, Doha. The supply deal is expected to start in 2013 and last for two decades. (Source: The Star)

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RHBInvest Research

Top Story: Tan Chong

Results Preview

• Robust 1Q Earnings Expected
• While supply constraints are still a sector worry, Tan Chong’s high inventory levels of over RM1bn at end-2010 (2009: RM673m) will enable it to better weather possible component shortages in the coming months
• We believe the share price already reflects potential supply concerns and is close to being fairly valued.
• We lower our fair value to RM4.95 (from RM5.40) to reflect lower peer valuations but reiterate our Market Perform call on the stock.

Corporate Highlights

Maybank:

Results / Briefing note

• Low loan impairment losses boosts net profit
• Fair value has been raised to RM10.50 from RM10.20. Maintain Outperform.

YTL Power:

Company Update

• YTL Comms yesterday launched the Yes Life app (free to download) for Apple products running iOS 4, which allows iPad and iPod Touch users to add full mobile functionally into their devices, while iPhone users can have a 2nd mobile phone number.
• Maintained SOP-derived fair value at RM2.57. Without management’s assurance on future dividends, we believe YTLP may lose a bit of shine since the key investment thesis for the stock has historically been high dividend yields.

TRC:

News Update

• TRC has proposed a 1-into-2 share split, followed by a 1-for-5 bonus issues, and a 1-for-5 free warrant issue (WB).
• Maintain Outperform. Fair value is RM1.94.

MISC:

Briefing Note

• MISC guided for a FY12/11 that will be “every much like what you saw in FY03/11” but a better FY12/12 ahead with “step-up” earnings from LNG and offshore segments.
• Fair value is RM7.53. Maintain Underperform.

AirAsia:

Results Preview

• 1QFY12/11 Results Should Please Market, But Greater Earnings Volatility Ahead
• We expect AirAsia’s 1QFY12/11 results to beat our forecast but trail market expectations slightly.
• We expect AirAsia’s 1QFY12/11 core PBT to come in at RM160-165m, down 51-53% sequentially vis-à-vis RM340m recorded in 4QFY12/10 due to the seasonally lower traffic and yields and higher fuel cost.
• We are raising our FY12/11-13 net profit forecasts by 27-30% as we now assume AirAsia’s yields to only ease -6.1% in FY12/11 vis-à-vis -7.7% previously.
• Fair value is raised by 27% from RM2.10 to RM2.66. Maintain Underperform.

Century Logistics:

Results/Briefing Note

• Seasonally weak 1QFY12/11, Stronger Quarters Ahead
• Century expects to secure a contract from a new customer for its integrated logistic segment to provide storage and distribution services.
• Century is looking for further opportunities to export in high growing developing countries. Already successful in exporting to Argentina, the company expects to enter Brazil as its next export destination.
• Fair value of RM2.70/share. Maintain Outperform.

Media Prima:

Results Note

• 1Q11 Core Net Profit Up 19.1% YoY
• We maintain our fair value of RM3.20. We reiterate our Outperform call on the stock.

RH Petrogas:

Results Note

• RHP’s 1QFY11 net earnings of S$1.5m were largely in-line with our earnings estimates accounting for about 19.5% of our net profit expectations (S$7.6m). However, it only accounted for 14% of consensus full year estimates of S$10.95m.
• Forecasts. No change to earnings estimates at this juncture as earnings are relatively in line.
• Maintain our Outperform call on the stock and our fair value of S$1.81/share.

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YTL Corp biggest gainer in early trade

YTL daily chart

PETALING JAYA: Conglomerate YTL Corp Bhd was the biggest gainer of the day in Friday's early trade, its shares rising 22 sen to RM7.68 at 10am, on news that it had RM12bil in cash solely for acquisition purposes.

Following the company's EGM yesterday, managing director Tan Sri Francis Yeoh Sock Ping said YTL Corp was eyeing “sizeable acquisitions” in infrastructure-related businesses, namely in the water, electricity and transportation industries.
At the YTL Corp EGM press conference, Tan Sri Francis Yeoh.

He also said YTL Corp is expecting as much as RM1bil in dividends from its subsidiaries for its current financial year ending June 30, 2011.

source:thestar

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Maybank IB Views

COMPANY UPDATE
RHB Capital RM8.62: Buy
Robust loan growth targets

Valuations still justify a BUY. RHB Capital continues to offer value in terms of valuations, with the stock trading at a prospective 2012 PER of just 10.3x or a 16% discount to the average for the other four large banks of 12.3x. On a P/BV basis, it trades at a prospective 2011 P/BV of 1.64x versus a peer average of 2.3x and 1.7x for AMMB Holdings (Hold, TP:RM6.80), despite a higher prospective ROE of 15.1% vs 13.1% for AMMB. Our RM9.50 target price is maintained.

COMMENTS ON NEWS
S P Setia RM6.50: Buy
First foray into the "lion city" carries an important role Shariah-compliant

Maintain Buy. We are positive on SPSB's latest acquisition of Leong Bee Court in Singapore given its strategic location and fair pricing. Despite minimal impact to earnings and RNAV, this project is important as it will strengthen SPSB's brandname in Singapore and showcase its development capabities and this in turn, will boost demand for SPSB's properties in Malaysia by Singaporeans. We fine-tune our FY11-13 forecasts for the acquisition and raise RNAV by 1 sen. Our new TP is RM7.13 (10% premium to RM6.48 RNAV; ex-bonus TP is RM4.75).

Technicals
The FBM KLCI gave up Wednesday’s rebound gains as it lost 9.79 points to close at 1,525.80 yesterday. Its resistance areas of 1,525 and 1,550 will cap market gains, whilst the weaker support areas are located at 1,500 and 1,517.

Trading Idea for today is a Take profit call on CMSB.

Other Local News
KL Kepong: Is world's No. 1 nitrile latex supplier. Kuala Lumpur Kepong Bhd (KLK) is now the world's biggest synthetic latex producer, via its 19% British unit Yule Catto & Co plc. The business is also growing and it plans to build another plant at a yet-to-be decided location in Asia. (Source: The Star)

MAS: Eyes 15% fall in costs from fleet renewal. Malaysia Airlines (MAS) expects its costs to fall by 15% by 2015 from its fleet renewal programme that reduces fuel usage and maintenance cost. (Source: Bernama.com)

SEGi: In nurse training deal with S. Korea varsity. SEG International Bhd is partnering South Korea's Chung Cheong University to set up a nursing faculty at its Kota Damansara campus in Selangor. The academic collaboration is expected to contribute an increase in FY11 earnings of approximately 4% to the Group. (Source: Bursa Malaysia)

YTL: On the M&A trail. YTL Corp is looking for sizeable merger and acquisition (M&A) opportunities as highly geared companies may soon find themselves in hot water as the economic recovery brings inflationary pressures. (Source: The Edge Financial Daily)

Transportation: Final project on railway project to be ready. The East Coast Economic Region Development Council (ECERDC) is in the process of completing its final report on the proposed east coast railway project linking Kuala Lumpur-Tumpat, a distance of 550km. The route includes five districts- Bentong, Bera, Temerloh, Maran and Kuantan. (Source: The Edge Financial Daily)

Plantation: Boilermech expects revenue to jump by a fifth. Boilermech Holdings Bhd, soon to be listed on the ACE Market boiler maker for biomass power plants, expects profit after tax and revenue to rise by as much as a fifth this year, driven by existing contracts. (Source: The Star)

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Stocks to watch: SP Setia, YTL Corp, Proton, SEGi

KUALA LUMPUR: Stocks on Bursa Malaysia may consolidate on Friday, April 15 following the mixed overnight performance on Wall Street while on the local front, the pullback on Thursday and political concerns over Sunday’s polls in Sarawak could see investors staying on the sidelines.

On Wall Street, stocks that outperform in a weak economy helped the Dow and S&P 500 eke out gains on Thursday as concerns about faltering growth and inflation prompted investors to seek out less volatile names.

The Dow industrials' top percentage gainers were Coca-Cola Co, up 1.5 percent, Kraft Foods Inc, up 1.7 percent and Merck & Co, up 1.2 percent. Energy shares also rallied as U.S. crude oil futures gained more than 1 percent to trade above $108 a barrel.

The Dow Jones industrial average rose 14.16 points, or 0.12 percent, to end at 12,285.15. The Standard & Poor's 500 gained 0.11 of a point, or 0.01 percent, to 1,314.52. The Nasdaq Composite dropped 1.30 points, or 0.05 percent, to 2,760.22.

At Bursa, stocks to watch out for are SP SETIA BHD, YTL Corp, PROTON HOLDINGS BHD and SEG INTERNATIONAL BHD.

The Edge FinancialDaily reports that SP Setia Bhd is making its maiden venture into Singapore. The developer has proposed the purchase of 27 strata units in Leong Bee Court for S$65 million (RM159 million) with the plan to redevelop the property, currently comprising flats, into residential apartments.

Having missed the opportunity to pick up assets at basement prices during the global financial crisis, YTL Corp Bhd's Tan Sri Francis Yeoh Sock Ping believes a second chance at a shopping spree could be knocking on YTL's door.

Proton Holdings Bhd’s unit Lotus Cars Ltd will sign an agreement on syndicated financing with CIMB Bank, Maybank, OCBC, EON Bank, Exim Bank and Affin on Friday.

SEG International Bhd is teaming up with Chung Cheong University in South Korea to train and place nurses and allied health professionals in the US, Canada and Europe.

SEGi said the academic collaboration was expected to contribute an increase in earnings of approximately 4% to the group for FY ending Dec 31, 2011.

IJM Land Bhd’s additional 229.88 million new shares will be granted listing and quotation with effect from 9am on Monday, April 18. The new shares arose from the conversion of RM400 million nominal value of 10 year 3% coupon redeemable convertible unsecured loan stocks (RCULS)by IJM Corp Bhd.

NAIM HOLDINGS BHD disposed of two million shares in DAYANG ENTERPRISE HOLDINGS BHD on April 13, reducing its stake to 34.17% or 187.94 million shares.

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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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RHBInvest Research

Top Story

YTL Power –Market Perform (up from UP)

• Visit Note
• More to come from “Yes”. Expect two new Yes devices in Mar when YTL Comms launches the Samsung Buzz mobile phone (mobile voice and SMS) and the Zoom router (enabling and sharing an Internet connection within a premise).
• Raised our SOP-derived fair value on YLTP from RM2.20 to RM2.57.
• YTLP offers investors attractive gross dividend yields of around 7% p.a..

Corporate Highlights

CIMB: Outperform

Company Update

• CIMB Niaga posts strong finish to FY2010
• No change to forecasts. Fair value of RM9.80 and Outperform call maintained.

MBM: Outperform

• 4QFY10 Results
• Slower growth ahead
• No significant changes to forecasts. Outperform call retained on valuation grounds.
• FV lowered to RM3.95 (from RM4.96).

CSC Steel: Outperform

• 4QFY10 Results
• Weak 4QFY10 due to margin contraction
• We continue to like CSC Steel due to its undemanding valuations, strong balance sheet with a net cash of RM241.4m or 64sen/share (after 13sen dividend payout), and attractive dividend yield.
• Indicative fair value is reduced to RM2.01.

Daibochi: Market Perform

• 4QFY10 Results
• Full-year FY10 net profit of RM18.2m (-19.6% yoy) was within expectations
• For 2011, we believe Daibochi will continue to grow its revenues as it did in 2010 (+20.7% yoy) through continuous product innovations in both F&B and non-F&B segments.
• Our fair value is unchanged at RM2.95

Wah Seong: Underperform

• 4QFY10 Results
• FY10 weak but within expectation
• FY11 will be a better year for earnings as both the pipe-coating and engineering divisions have already started to post improvements in 4QFY10. Current order book and tender book stand at RM1.4bn and RM5.7bn respectively, with the pipe-coating division contributing about 50% to both numbers.
• Maintain forecasts, Underperform call and our RM2.02/share fair value at this juncture.

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RHBInvest Research

Top Story:

• Over 2011, we expect to see more innovation (in terms of technology, communications and multimedia, energy and engineering).
• We anticipate the healthcare sector to regain attention as superbugs re-emerge, and weather disruptions and macroeconomic concerns bring commodity prices to new highs.
• As for corporate Malaysia , we believe the (potentially lack of) execution of Government initiatives will drive sentiment as compared to the positive anticipation built up during 2010.
• News flow will thus remain the primary catalyst in the near term, but reversal of short-term capital will cause volatility.
• Our top picks thus reflect a mixture of both value and growth plays within their respective industries and markets.

Sector Call

Telecom:

• As a defensive play, telco stocks are the best bet to ride out any unpleasant volatility that may arise amid a record-breaking FBM KLCI and global economic uncertainties.
• We believe competition should remain rational in 2011, as a price war, particularly in the broadband segment will not really benefit anyone except YTL Communications (YTL Comms).
• Top pick is A
  
• for strong regional growth prospects and cheaper valuations against domestic peers.
• For capital management, we like TM and thus upgrade the stock from market perform to Trading Buy, for the high likelihood of significant special dividends, which may result in total dividend yield of 20.9% in 2011.

Corporate Highlights

TM:

• Caught in a storm.
• The media reported yesterday that TM is probing an international bribery scandal which led to a US$85m (RM263m) contract for Alcatel Lucent (Alcatel).
• In the short-term, we expect sentiment on the stock to be hurt by the news but we still like TM for potential active capital management.
• Upgrade TM to Trading Buy and view any dips as opportunity to accumulate the stock, for the high likelihood of significant special dividends, which may result in total dividend yield of 20.9% in 2011.
• Our fair value of RM3.55 is maintained.
  

VS Industry:

• 1QFY07/11 net profit was in line with expectations, accounting for 26.2% of our full-year estimate.
• The company is considering a quarterly dividend policy going forward.
• Fair value has been raised to RM2.30/share based on unchanged 7.5x CY11.
• Due to limited upside to the share price, we downgrade the stock to Market Perform (from outperform).

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Maybank IB Views

COMPANY UPDATE
Axiata RM4.75: Buy
Secular growth trends to continue Shariah-compliant

Raising earnings and target price. We revisit our assumptions following Axiata's stellar 3Q10 results and tweak our earnings higher to reflect latest operating trends. We still like Axiata for its high-growth pan-Asian footprint, and believe Axiata would continue to benefit from a liquidity-induced market rally. Reiterate Buy with a higher RM5.45 TP.


KNM Group RM2.33: Buy
Sabah cross-over brings ample opportunity; target price raised Shariah-compliant

Target price lifted to RM3.10. We are positive over KNM's JV with Petrosab as East Malaysia fabrication opportunities are huge, riding on PETRONAS' rising domestic capex spend. The SOGT and Sipitang CTF projects are some of the JV's targeted projects. KNM remains a Buy with a raised 12-month target price of RM3.10 (+41%) as we foresee a sustained recovery outlook, locally and globally. Our new target PER is 10x (previously 9x) and we roll-over valuations to 2012 earnings.


ECONOMICS
US Economy
Stimulus begets stimulus...

FOMC meeting yesterday ended with the fed fund rate (FFR) retained at 0%-0.25% and more importantly, the Fed reiterating its commitment to the USD600b QE2, which has started with the purchases of USD114.1b US Treasuries since 12 Nov. In addition, there is a third fiscal stimulus package in the works in the form of USD858b tax incentives pending Congress approval. While these monetary and fiscal stimulus may be positive for the US and global economy in the short term, the risks are amplified over the long term.


Technicals
The FBM KLCI advanced 0.79 points to 1,510.58 yesterday. Its resistance areas at 1,512 and 1,531 may cap market gains, whilst its firm support areas are located at 1,495 and 1,510.
Trading idea for today is a SHORT TERM BUY call on TONGHER.


Other Local News
KLK: Subscribes to RM209.8m rights issue entitlement. Kuala Lumpur Kepong Bhd (KLK) and its unit will subscribe to their rights issue entitlement in London-listed Yule Catto & Co Plc amounting to GBP42.4m, or RM209.8. The subscription will be financed with cash reserves and bank borrowings.KLK and its unit hold 27.4m shares, or 18.8%, in the specialty chemical manufacturer. The funds raised from the rights issue is for Yule Catto's acquisition of PolymerLatex Group, an European emulsion polymer products manufacturer with assets in Europe and Asia worth GBP376m (RM1.85b). (Source: The Star)

MAS: Firefly airline plans four new hubs. Firefly plans to set up at least four new hubs for its jet operations within the next two years. This excludes KL International Airport (KLIA) where it would begin its jet services from Jan 15 next year. The four new hubs will be established at Kota Kinabalu (KK), Kuching, Senai and Penang. (Source: The Star)

DiGi, Time dotCom: Ties up in RM139m deal. Digi.Com Bhd has entered into a 10-year wavelength purchase agreement and a maintenance and support deal collectively worth RM139m with Time dotCom Bhd (TdC) as a follow-up to the bandwidth service agreement signed between the two companies in April 2008. TdC would fiberise, maintain and support parts of Digi's backhaul links between its aggregation wireless towers and mobile switching centres. (Source: The Star)

Maxis, TM: Ink 10-year deal. Telekom Malaysia Bhd (TM) and Maxis Broadband Sdn Bhd have signed a 10-year agreement for TM to provide high speed access connectivity, via its high speed broadband access (HSBB Access) service, to Maxis. The deal would enable Maxis to offer bundled services, including Internet Protocol (IP)-based offerings, to 700,000 homes at present and 1.3m households by the end of 2012. (Source: The Star)

Starhill REIT: YTL disposes properties to Starhill REIT. YTL Corp Bhd, via its units, will dispose nine of its hospitality-related properties to Starhill Real Estate Investment Trust (Starhill REIT) for RM1b. The properties disposed are Cameron Highlands Resort, Hilton Niseko, Vistana Penang, Vistana Kuala Lumpur, Vistana Kuantan, The Residences at The Ritz-Carlton, Kuala lumpur, The Ritz Carlton Hotel, Kuala Lumpur, Pangkor Laut Resort and Tanjong Jara Resort. Starhill would lease the properties to the respective vendors/leases for 15 years, with an option to renew for a further term of 15 years. The lease payments for the properties are fixed and include a 5% step-up rate every five years. (Source: Bernama)

YTL: Powers into Jordan. YTL Power International Bhd would invest USD5b to acquire 30% stake in Eesti Energia's Jordanian oil shale projects. The oil plant with output of 38,000 barrels per day will be jointly developed by the partnership between Eesti Energia (60%), YTL Power (30%) and Near East Investment (5%). (Source: The Star)

Autos: BMW unveils another locally assembled model. BMW Malaysia Sdn Bhd has added the contemporary sport-centric BMW X1 to its stable of locally assembled cars. The model would be assembled in Kulim, along with BMW 3 Series and BMW 5 Series that are currently assembled there. (Source: The Star)

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Maybank IB View

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

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


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

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


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

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


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

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


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

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


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

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


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

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

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

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

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

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

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

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Views & News, Maybank IB (2010-10-27)

COMPANY UPDATE

Hock Seng Lee RM1.82: Buy

Momentum building up Shariah-compliant
Raising target price. Recent news flow involving Sarawak, namely Mubadala's USD7b investment pledge and a good share of the 2011 National Budget allocation, are indications of rising construction job flows. We retain our RM600m 2010 job win target for HSL, but lift our 2011 target to RM720m (+20%). We also raise 2011 net profit forecast by 11% and 2012 by 9%. Our new target price, based on a higher 14x 2011 earnings multiple (previously 13x) is RM2.30 (+21%). Buy.

RESULTS REVIEW

Digi.Com RM24.66: Hold

3Q10: Dividends intact Shariah-compliant
Results in line. 3Q10 net profit of RM289.3m (+3.9% QoQ, +18.5% YoY) brings 9M10 net profit to RM846m (+12.2% YoY), 77% of our full-year forecast and consensus. A third DPS of 50sen (RM1.20 YTD) was declared, and Digi remains on track to pay out more than 100% of its earnings in 2010. While payouts could decline in 2011, we still expect Digi to be the highest yielding among the Malaysian telcos.

Technicals

The FBM KLCI was higher by 5.50 points yesterday to close at 1,496.94 on further positive investor sentiment, led by plantation plays. Its resistance areas at 1,503 and 1,510 may cap market gains, whilst the support areas for the FBM KLCI are located at 1,480 and 1,496.
Trading idea for today is a SHORT TERM BUY call on RSAWIT.

Other Local News

CIMB: CIMB Islamic signs largest-ever term facility with MNC. CIMB Islamic Bank formalized the largest ?ever term financing facility to date when the bank signed a 12 year USD100m facility based on the syariah concept Bai' Al 'Innah with Hewlett-Packet (HP) Multimedia Sdn Bhd. The facility would be used to finance the first phase of HP?s 32-acre Next Generation Data Center (NGDC) in Cyberjaya, which formed part of the company?s 28.3ha integrated campus. (Source: The Star)

Maybank: Anfaal upbeat on prospects in S. Arabia. Maybank Investment Bank Bhd's affiliate company Saudi-based Anfaal Capital is eyeing the sukuk, corporate finance and advisory, fund management and real estate investment markets in Saudi Arabia to build its business. Anfaal chairman Khaled M. Al Aboodi said they have in the pipeline four good opportunities which they are in negotiations and hope will materialize soon. These could result in Anfaal having 3b riyals (RM2.5b) in funds under management. In addition to Maybank Investment Bank's 18% stake, Anfaal's other major shareholders include Islamic Corp for the Development of the Private Sector (ICD) with 37% and Alnmo Real Estate Co, an entity which is controlled by Saudi?s prominent Bin Mahfouz family, with 18%. (Source: The Star)

Banking: One mega Islamic bank this year, first Islamic bank in the Maldives. Bank Negara will announce one mega Islamic bank by this year under its plan to issue up to two mega Islamic banking licences. The universal mega Islamic bank licence requires a minimum paid up capital of USD1b (RM3.09b). Bank Negara plans to allow foreigners to hold 100% stake in the lender or form a joint venture with local partners. Separately, The Islamic Banking and Finance Institute Malaysia (IBFIM) has joined forces with Maldives Islamic bank to set up the first Islamic Bank in Maldives, which aims to be operational next January. The bank hoped to capture up to 25% of its local market share within 3 years. (Source: The Star, The Edge Financial Daily)

Utilities: Talks on Bakun may wrap up mid-2011, ministry addressing nuclear power option. Energy, Green Technology and Water Minister Datuk Seri Peter Chin Fah Kui expects negotiations between the Finance Ministry and the Sarawak government on the sale of the Bakun hydropower project to conclude by mid-2011. Chin also reiterated that the Cabinet had approved the setting up of a nuclear power plant and the Economic Council had approved the ministry to go-ahead and start identifying suitable sites. However, he declined to talk about cost and location of the plant. (Source: The Edge Financial Daily)

YTL Comms: To unveil its own mobile phones. YTL Communications Sdn Bhd (YTL Comms), which is gearing up for the launch of its 4G mobile Internet services next month, is expected to unveil its own mobile phones soon. "We are working on our own Android platform phones and its likely to be introduced in 3 months," said executive director Datuk Yeoh Seok Hong. Market talk has it that YTL Comms was working on a number of WIMAX devices and had outsourced the production of its mobile phones to a smartphone manufacturer. (Source: The Star)

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Views & News, Maybank IB (2010-10-21)

WCT RM3.11: Buy

Lands RM1.5b contracts Shariah-compliant

A much anticipated wait. Two newly secured jobs have lifted job wins for 2010-YTD to almost RM2.2b, and outstanding order book to RM4.3b, we estimate. The RM1.36b job in Qatar , one of the two wins, has been much anticipated. We retain our earnings forecasts for now, having imputed RM2b job wins for 2010. We remain positive on WCT benefiting further from major domestic infrastructure / construction spend. The stock remains our top pick in the construction sector.

Axis REIT RM2.18: Buy

Targets RM1.5b asset size by 2011 Shariah-compliant

Still a Buy. Axis REIT's (AXRB) 9M10 results were within expectations. Total asset size will increase to c.RM1.3b (+50% YoY) after 6 asset injections and revaluation gains. AXRB targets to hit a RM1.5b asset size by end-2011, which could enhance its earnings by 11%. We are raising our earnings forecasts by 6-32% to factor in the new assets worth RM260m. DCF-based TP is raised to RM2.60/sh.

The FBM KLCI was lower marginally by 1.87 points yesterday. Its resistance areas at 1,490 and 1,503 will cap market gains, whilst the support areas for the FBM KLCI are located at 1,469 and 1,486.

Local News

Construction: Contractors for LRT project to be shortlisted next month. Contractors shortlisted for the first phase of the RM7b light rail transit (LRT) extension will be announced by early next month said an industry source. The first phase of the extension or package A for both Kelana Jaya and Ampang Lines involved 9.2km and 7.39km of construction length respective. Syarikat Prasarana Negara Bhd held a pre-bid briefing with the pre-qualified contractors for package A on June 22. The contractors were requested to submit their tenders in August. It is understood the briefing was attended by 15 construction companies that included Sunway Construction Sdn Bhd, IJM Construction Sdn Bhd, Muhibbah Engineering Sdn Bhd, Gamuda Bhd, Bina Puri Holdings Bhd, Loh & Loh Corp Bhd and MRCB Engineering Sdn Bhd. (Source: The Star)

YTL Corp: Proposes gas-saving power technology. Power-giant YTL Corp Bhd hopes to submit a proposal to the Malaysian government to use a new technology which will save up to 20% of the gas used to generate power. MD Tan Sri Francis Yeoh said the use of the co-generation combined cycle technology at power plants would save government millions of ringgit spent on gas. "We have tried and tested this technology at our plant in Singapore and are more than willing to share this knowledge with Malaysia as well." "This 20% savings can translate to about RM400m in savings annually". (Source: The Star)

Property: PNB defends Warisan Merdeka project. Permodalan Nasional Bhd's (PNB) RM5b plan to redevelop the tract of land near Stadium Merdeka, which includes a 100-storey office block, is a move to diversify the investment group's asset portfolio, said its group CEO Tan Sri Hamad Kama Piah. He said PNB expects an annual return of 8% to 10% from the project, which he stressed was a well-thought investment decision. He also reiterated that PNB could finance the mega project solely from its profits. "We are not taking the government?s money (for the project)," he said. The new tower will cost RM2.5b to RM3b and is expected to be completed by 2015. (Source: The Edge Financial Daily)

Berjaya Corp: Granted vehicle manufacturing plant license. Berjaya Corp Bhd (BCorp) has been granted a manufacturing plant license by the International Trade and Industry Ministry (Miti) for the assembly of commercial vehicles, hybrid cars, electric cars and luxury passenger vehicles in Malaysia . The 100-acre plant would be based at Bukit Tagar, Selangor, the company told Bursa Malaysia yesterday. BCorp chairman and CEO Tan Sri Vincent Tan said in a statement that the manufacturing licence would provide the company with the opportunity to assemble commercial and passenger vehicles locally, giving it more flexibility and control in terms of quality and pricing of its vehicles. (Source: The Star)

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