Maybank IB Views

Banking: Overweight
Bouncing back in March

Loan growth stronger than expected. System loan growth in March was stronger than expected and on an annualized basis, is up 12.9% YTD (13.2% YoY). On a YTD basis, non-household loan growth was higher at 13.6% versus 12.3% YTD for consumer loan growth. We raise our system loan growth forecast, and maintain our Overweight stance on the banking sector, with Buys on RHB Capital and CIMB.

COMPANY UPDATE
Petronas Chemicals Group RM7.22: Buy
April high to take a breather Shariah-compliant

Supply disruption boost. PCHEM's product margin in April 2011 was USD1,243/ton (+44.7% YoY, +3.2% MoM), we estimate. The year-to-date product margin of USD1,138/ton is 32.2% higher YoY, and above our 2011 estimate of USD1,027/ton. The advance of chemical prices has stagnated in certain segments but overall it has been a mixed bag with gainers and losers almost neutralizing each other. Maintain Buy; there is no change to our earnings forecasts and RM8.00 target price.

RESULTS REVIEW
Sunway REIT RM1.09: Buy
On track Shariah-compliant

Maintain Buy. SunREIT's RM126.2m 9MFY11 realised net profit was within expectations. Its proposed 1.7 sen DPU for 3QFY11 was also in line. We continue to like SunREIT as we believe it will benefit from the 5-6% p.a. growth in the local retail market and rising consumerism. We see a potential upside from its recently-acquired Putra Place, though a major makeover may be required for the building before it starts contributing to the trust. We maintain our earnings forecasts with an unchanged RM1.15 DCF-based target price.

Eastern Pacific Industrial Corp RM2.40: Hold
No surprises, no catalyst Shariah-compliant

No catalyst in sight. 1Q11 results were in line, on stronger YoY performance. EPIC remains a Hold. We see no immediate catalyst to warrant a re-rating. Moreover, the development of Tanjong Agas in Pahang will pose a challenge to its competitiveness in the long term. Our RM2.55 target price remains unchanged, based on 8x 2011 PER.

Technicals
The FBM KLCI closed 3.48 points lower at 1,531.47 yesterday. Its resistance areas of 1,531 and 1,548 will cap market gains, whilst the obvious support areas are located at 1,514 and 1,529. We expect further range trading for the FBM KLCI. As such, invest with a short-term time horizon.

Trading idea for today is a Buy call on E&O.

Other Local News
Axiata: Dialog, Firstsource in JV. Sri Lanka-based Dialog Axiata, a subsidiary of Axiata, announced a business process outsourcing (BPO) joint venture with India's Firstsource Solutions. Firstsource Solutions and Dialog will hold a 74% and a 26% stake respectively in Dialog Business Services (DBS). The JV will manage Dialog's customer contact management operations across its mobile, fixed line, pay television and broadband businesses. (Source: Business Times)

RHBCap: ADCB eyes 2 times book value for RHB stake. Abu Dhabi Commercial Bank is looking at two times book value, or about RM10 per share, for its 25% stake in RHB Capital Bhd. (Source: The Star)

EonCap: Restraining order unlikely by Primus as such move may result in legal suit by HLB. Primus Pacific Partners Ltd, which last week lost its legal case against EON Capital Bhd's (EON Cap) directors and shareholders, is unlikely to file a restraining order or injunction to stop the sale of EON Cap's assets to Hong Leong Bank Bhd (HLB) for fear of opening itself up to a legal suit. (Source: The Star)

KPJ: To raise RM500m for projects. KPJ Healthcare Bhd has launched its Islamic commercial papers/Islamic medium-term notes (ICP/IMTN) programme to raise RM500m to finance hospital and healthcare projects. (Source: The Star)

Ramunia: Unveils plan to bring the group out of PN17 status. Ramunia Holdings Bhd has unveiled a regularisation plan to address its PN17 status that involved a proposed capital reconstruction, rights issue and business rejuvenation plan. (Source: The Star)

TRC Synergy: Bags RM45m contract. TRC Synergy Bhd's unit, Trans Resources Corp Sdn Bhd has won a RM45m job from Boustead Penang Shipyard Sdn Bhd to build submarine safety conditioning facilities. (Source: Business Times)

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Maybank IB Views

RESULTS REVIEW
Digi.Com RM29.08: Hold
Positioning for the future Shariah-compliant

Positive surprise. 1Q11 RM331m net profit (+19% YoY, -0.3% QoQ) made up 26.4% of our previous full-year forecast of RM1.25b and 25.5% of consensus. We however cut our 2011-12 earnings forecasts by 20% and 22% respectively on accelerated depreciation charges, while our 2013 net profit is raised by 4% to incorporate higher margin assumptions. Our Hold call is maintained, with a raised EV/EBITDA target price of RM30.00 (RM26.70 previously).

Technicals
The FBM KLCI inched up 12.20-points and closed at 1,534.95 last Friday. The local market again remained lacklustre in quiet trading despite the DJIA’s firm upward performance. The obvious support areas for the FBM KLCI are located in the 1,498 to 1,534-zone. The firm resistance zone of 1,540 and 1,576 will see heavy liquidation activities.

Trading Idea is a Short-Term Buy call on F&N

Other Local News
AirAsia: To re-impose fuel surcharge. AirAsia Bhd has finally succumbed to the pressure of persisting high fuel prices and will re-introduce fuel surcharge ranging from RM10 to RM30 per flight after having abolished its fuel surcharge policy in late 2008. (Source: The Star)

Sime Darby: Motors to expand further in China. Sime Darby Motors is planning to expand the number of its vehicle outlets from 14 to 20 in the short term within both first and second-tier cities in China this year. (Source: The Star)

EonCap: Closure of deal. The board of EON Capital Bhd (EON Cap) has accepted the RM5.1b takeover bid by Hong Leong Bank Bhd (HLB), capping a 16-month battle to create the country's fourth-largest bank by assets. It also proposed a surprise net interim dividend of RM312m, or 45 sen per share, in addition to the offer price. (Source: The Star)

Utilities: Selangor confident of solving water issue. The Selangor government is confident that it will be able to solve issues pertaining the restructuring of the state's water industry through discussions with the Federal government as stipulated under the Water Services Industry Act 2006. (Source: The Star)

Iskandar: To attract RM73b new investment, Italian firm Galperti to set up plant. Iskandar Malaysia aims to attract RM73b new investments to the country's first economic growth corridor starting from January 2011 until December 2015. Separately, an Italian-based group is set to open a manufacturing plant in the Setia Business Park (SBP) in Iskandar Malaysia as part of the company's expansion plan into Asia. Galperti Manufacturing Malaysia Sdn Bhd is a subsidiary of the Galperti Group Italy, a market leader in the manufacturing of forged components for the oil and gas industries, in addition to chemical and petrochemical plants. (Source: The Star, Business Times)

Property: Residential property boom in Johor Baru. The prices of residential properties have risen by an average of 40% since 2006, in a city which used to suffer from an overhang of properties. Property owners and buyers can expect property prices in Johor Baru to rise by a further 10-20% by end of 2011, on increased costs alone. (Source: Business Times)

Construction: Three names submitted for Gemas-JB rail job. The Chinese government is understood to have nominated three companies to partner local outfits in bidding for the RM7b Gemas-Johor Baru double-tracking project. The companies include China Railway Engineering Corp (CREC) and China Raiway Construction Corp Ltd. The 3rd company is understood to be partnering Tan Sri Tan Kay Hock, who controls Johan Holdings Bhd and George Kent (M) Bhd. (Source: The Edge Financial Weekly)

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