Stocks to watch Banks, telecommunications, Tenaga, MMC Corp

KUALA LUMPUR: The FBM KLCI could extend its gains on Wednesday, June 1 following the firmer close at key regional markets the previous day by an upbeat outlook from Japanese manufacturers.

European shares also rose yesterday on optimism over a possible Greece deal, with banks among the biggest gainers, according to Reuters.

On the local front, banking stocks are likely to pique investors’ interest after CIMB Group Holdings and MALAYAN BANKING BHD [] each received Bank Negara’s approval to start negotiations with RHB CAPITAL BHD [] for a possible merger of their businesses.

The approvals to start talks are valid for a period of three months from May 31, the two banks said, adding that further details on the possible merger would be announced in due course.

TENAGA NASIONAL BHD [], which received official approval to raise electricity tariff effective June 1, could see further buying interest.

The stock was the major gainers yesterday and actively traded, closing 59 sen higher at RM7.11 with 89 million shares done.

Maxis Bhd’s first quarter net profit dipped 2.35% to RM539 million from RM552 million a year earlier, due mainly to higher net finance costs due to additional borrowings.

Revenue for the quarter was RM2.13 billion compared to RM2.15 billion in 2010. Earnings per share was 7.20 sen while net assets per share was RM1.15.

Maxis declared a first interim single-tier tax exempt dividend of 8 sen per share in respect of the financial year ending Dec 31, 2011, to be paid on June 30, 2011.

Meanwhile, Axiata Group Bhd’s net profit for the first quarter ended March 31, 2011 fell 40.5% to RM548.36 million from RM921.47 million a year earlier, as the company recorded a one-off gain in 1Q 2010 from the disposal of shares in XL.

Revenue for the period grew 3.3% to RM3.94 billion from RM3.81 billion on the back of continuous improvement in key operating companies.

MMC CORPORATION BHD []’s net profit for the first quarter ended March 31, 2011 rose 29.5% to RM43.04 million from RM33.23 million a year earlier, due mainly to higher contributions from most of its divisions.

Revenue for the quarter increased to RM2.23 billion from RM2.06 billion in 2010. Earnings per share was 1.41 sen while net assets per share was RM2.19.

Ajinomoto (Malaysia) Bhd net profit for the fourth quarter ended March 31, 2011 rose to RM5.39 million from RM1.48 million a year earlier, due mainly to lower sales and marketing expenses.

Ajinomoto proposed dividend of 20 sen per share in respect of the FY ended Mrch 31, 2011 comprising a first and final gross dividend of nine sen; a nine sen tax-exempt dividend as well as special gross dividend of two sen per share.

For the financial year ended March 31, Ajinomoto’s net profit rose to RM25.73 million from RM23.94 million, on the back of revenue RM316.17 million.

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Maybank IB Views

Sunway Holdings RM2.57: Hold
Results as expected; merger completion next Shariah-compliant

Tactical downgrade to Hold. Results were in line. RM31m 1Q11 core net profit (-13% YoY, -42% QoQ) made up 19% of our full year estimate. We maintain our 2011-12 earnings forecasts. The merger with SunCity is into its final stage with shareholders to vote on 15 Jun. An enlarged entity under the new Sunway Bhd is expected to be listed in 3Q11. With the share price closing in to the implied take-over price (+14.7% YTD), we downgrade the stock to Hold.
Maxis RM5.42: Hold
A seasonally slower quarter Shariah-compliant

Hold maintained. RM540m net profit was down 2% YoY and 12% QoQ. With 1Q11 being a seasonally slower quarter, net profit was within expectation at 22% of our full-year forecast and our numbers are maintained. Guidance remains for margins to come under further pressure with the roll-out of new wireless/fixed broadband services. Dividend yields aside, we see little share price catalyst and maintain our Hold call on the stock. Our DCF-derived TP of RM5.50 is maintained on WACC of 7.5% and 1% terminal growth assumptions.
Axiata Group RM5.00: Buy
Stable growth in regional ops Shariah-compliant

Buy call maintained. Some weakness from Dialog and Robi during the quarter but positively, Celcom continues to register stable earnings growth while XL continues to fare well despite aggressive price competition. Overall, nevertheless, Axiata’s regional operations continue to fare well and remain very much cash generating entities with growth potential. Our Buy call is maintained with an unchanged SOP-based target price of RM5.60.
Malaysia Airports Holdings RM6.37: Buy
Jumpstart to 2011

Within expectation. 1Q11 core net profit number reveals a healthy business that is flourishing on the back of strong traffic numbers and healthy retail business. We look forward to a promising 2011 as air travel momentum remains strong in the Asia Pacific region. Maintain Buy, with an unchanged target price of RM7.12/share DCF-based.

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