Malaysia Property - Residential Overhang Rose by 9.1% in 2008

Transaction volume and value in 2008 - The Ministry of Finance today launched its Property Market Report 2008. Transaction volume in 2008 grew by 9.9% YoY to 340,240 transactions, while transaction value rose by 14.5% to RM88.34bn. In terms of transaction value, development land reported the highest growth of 36%, followed by agriculture at 23.2% and residential at 13.2%.

Residential still the key segment - The residential segment accounted for 63.7% of total volume and 46.8% of the value of transactions. The commercial segment contributed 9.3% of total volume but 18.8% of transaction value. Development land accounted for 4.3% of total volume but 15.9% of transaction value.

Residential transaction by price range - By price range, houses priced RM250,000 and below accounted for 82.6% (178,976 transactions) of the total market volume. However, we are seeing continued interest in houses priced beyond the RM500,000 mark. Within the RM500,001-RM1m mark, transaction volume grew by 10%. For homes priced above RM1m, transaction volume grew by 33.3%.

Poorer take-up - The number of newly launched housing units declined by 7.3% YoY to 48,830 units in 2008. The national average take-up fell to 44.5% in 2008 from 45.1% in 2007.

Residential overhang worsened - Residential property overhang in Malaysia increased to 26,029 units in 2008 from 23,866 units in 2007 (+9.1% YoY). Correspondingly, the overhang value grew by 17.3% to RM4.48bn. By price range, 58.2% (15,138 units) of the overhang units were priced below RM150,000. By type, terraced units accounted for 38.6% (10,056 units) of the overhang.

Highest overhang in Johor and Selangor - States with the highest overhang remain Johor (7,001 units) and Selangor (4,585 units), which accounted for 26.9% and 17.6% of national overhang respectively. Highest YoY increase came from Kuala Lumpur (+66.3% to 2,532 units), followed by Selangor (+13.1%).

Negative on developers - Although sales could improve given the aggressive promotions and incentives currently being offered by developers but this would come at the expense of margins. We maintain our Sell recommendation on SP Setia and prefer companies with Grade A office exposure in good locations and property investment activities. Our top picks are IGB Corp and KLCC Property.

Malaysia Banks Sector:NEGATIVE

Malaysia Banks Sector: As we continue to hope... - Ng Wee Siang

* Financial liberalization fell short of expectations; foreign equity
limit of commercial banks left unchanged.

* Entry of foreign investors into local banks not a zero-sum game; local
investors stand to benefit from premium pricing.

* The recent rally in bank stocks in anticipation of favorable measures
unlikely to follow through. NEGATIVE on banks.

Outbreak fears lift Top Glove shares to 15-month

Top Glove leads gains among Malaysian glove makers on talk that the spread of swine flu would bolster demand for health-protection products

TOP Glove Corp Bhd (7113) rose to a 15-month high in trading on Bursa Malaysia, leading gains among Malaysian glove manufacturers amid speculation that the spread of swine flu would bolster demand for health-protection products.

Shares of the world's largest rubber glovemaker climbed 4.6 per cent to RM5.75 as of 11.01am, set for the highest close since January 17 last year.

Kossan Rubber Industries Bhd gained 5.4 per cent to RM3.52 and Hartalega Holdings Bhd added 4 per cent to RM3.14. The benchmark Kuala Lumpur Composite Index lost 0.8 per cent.

It's "the glove play", said Jason Yap, an analyst at OSK Research Sdn Bhd in Kuala Lumpur. "It's the sentiment."
Still, the virus is not widespread and the rally is "not justified" based on the company's fundamentals, he said.

Last Saturday, the World Health Organisation called the outbreak a "public health emergency of international concern".

The US, New Zealand and France are among countries that have reported confirmed or suspected cases of swine flu, which is normally transmitted among pigs.

Top Glove chairman Tan Sri Lim Wee Chai did not immediately respond to a message on his mobile phone.

Adventa Bhd, which supplies sterile surgical and medical examination gloves, surged 14 per cent to RM1, the highest level since July 17. Supermax Corp Bhd climbed 6 per cent to RM1.58. - Bloomberg

KNM Group Bhd: Rerating in Process

· Assuming coverage with OW: We reiterate our Overweight rating on KNM given its global presence and strong branding, not only in the oil & gas sector but also in petrochemicals as well as minerals.

· Moving up the value chain with Borsig: Borsig is a Germany-based company specializing in critical high-temperature and high-pressure components. Post the completion of the acquisition of Borsig, KNM Group has now leadership position in various high-end/specialized products; hence allowing it to report gross profit margins in the range of 25-30%, up from the historical level of ~20%, in our view.

· Cautiously positive outlook on oil prices: The J.P. Morgan Commodities team is expecting oil prices to reach US$55/barrel and an average US$49/barrel in 2009. At US$50-55/barrel, conventional oil projects are feasible. Note that, conventional oil projects are feasible at US$30-40/barrel, while most deepwater projects should be viable at US$50-60/barrel.

· Primed for a re-rating as risk aversion moderates: We believe that the stock will outperform, driven by moderating risk aversion. The share price has fallen 77% from its peak and the stock is now trading at 5x FY09E earnings, which we believe is already reflecting trough earnings. Our FY09 earnings estimate of M$390MM is based on a revenue assumption of M$3B vs. full capacity of M$4B. Foreign shareholding has also fallen from its peak of 40% to sub-30%.

· Our Dec-09 PT is M$1.00: Our PT is based on a FY09E P/E of 10x, in line with its 5-year average P/E. As risk aversion moderates, we expect valuations to revert back to mean. We also fine tune our estimates (cut our FY09E NP by 41% and FY10E by 56%) as we were restricted on this stock for the past six months.

Maybank Receives Excess Application Of 27.72 Pct For Rights Issue

KUALA LUMPUR, April 24 (Bernama) -- Malayan Banking Bhd's (Maybank) total acceptances and excess applications received for the rights issue were 2,805,311,420 rights shares.

These represent an excess application of about 27.72 percent over the 2,196,516,217 rights shares available for subscription under the rights issue, the banking group said in a filing to Bursa Malaysia here Friday.

Maybank is offering renounceable rights issue of 2,196,516,217 new ordinary shares of RM1 each at an issued price of RM2.74 per rights share, payable in full upon acceptance, on the basis of nine rights shares for every 20 existing ordinary shares of RM1 each in Maybank.

The banking group planned to raise RM5 billion to RM6 billion through the rights issue, to meet its target of becoming one of Asia's best capitalised banks.

MAYBANK ISSUES PROFITS & DIVIDENDS WARNING

MAYBANK ISSUES PROFITS & DIVIDENDS WARNING

CLASSIFICATION: ACCOUNTING/AUDIT NOTIFICATION/ANALYSIS & BUSINESS PROJECTIONS
TYPE: Special dividends/Dividends/Dividend Policy
06 April 2009

MAYBANK ISSUES PROFITS & DIVIDENDS WARNING MALAYAN BANKING expects expects lower profits in the current fiscal year and may cut its dividend due to the global economic slowdown, the firm's top official was quoted by BUSINESS TIMES on Mar 23, 2009.

LOWER PROFITS & DIVIDENDS
CEO - ABDUL WAHID OMAR said that the bulk of the earnings would come from commercial, consumer and Islamic banking segments but did not say how much lower the profits would be. For FYE Jun 2008, the Bank registered RM2.9 bil in Net Profits. " .... For the current year (FY09), we will have to review this indication, but for the long term, we are committed to the 40-60 per cent range (dividend as proportion of net profit) .... We're actually entering this recession, or crisis, with a strong balance sheet and strong assets quality ...." said ABDUL WAHID.

NPL RATIO AT 1.8% & LOANS GROWTH TO SLOW
He said the Bank's current NPL ratio stands at 1.8% while the industry's Net NPL ratio was around 2.2%. Loans growth for the lender was expected to range between 6% - 7% in the current fiscal year which was very promising despite the current economic environment, WAHID said.

PROPOSED RIGHTS ISSUE MAY DILUTE EARNINGS & DIVIDENDS
Shares of MAYBANK have fallen 14.5% since early 2009 on fears that its rights issue plan worth RM6 billion will dilute the firm?s future earnings and lower dividends.

ABDUL WAHID said that the Rights Issue proposal will help in the bank's ambition to become one of the top five banks in Southeast Asia and shore up its balance sheet.

" .... When we look at our requirements for the next three to five years, we felt that RM6 bil would be an appropriate amount ...." ABDUL WAHID Wahid said. " .... Once we have enough capital, then there'll be no issue to be able to grow the market, so that means we will be able to capture some loans growth, with much better margins ....".

Analysts have repeated that the Bank is expected to significantly mark down the value of its investment in BANK INTERNASIONAL INDONESIA following a sharp fall in market value. MALAYAN BANKING has already booked an impairment loss of RM242m investment in Pakistan's MCB BANK.

STOCK FOCUS OF THE DAY

KL Kepong : A more grounded view on CPO prices BUY

Maintain BUY with an unchanged RNAV-based fair value of RM12.60/share, based mainly on a CY09F’s PE of 15x in plantation earnings. Despite Kuala Lumpur Kepong Bhd’s (KLK) more grounded view on prices of crude palm oil (CPO) after our recent company visit, we are keeping our earnings forecast and BUY recommendation. View of the recent run-up in price of CPO is that it may have been a tad too fast and as such, the rally might not be sustainable. Despite this, at worst, CPO prices are expected to range between RM2,200/tonne to RM2,300/tonne, which is still decent. Operations-wise, KLK’s cash operating costs (excluding palm kernel) are currently between RM930/tonne to RM940/tonne. Fertiliser costs are holding up quite well and there is a possibility that it could rise going forward. Inventory write-downs from the manufacturing division are unlikely in 2QFY09 after 1QFY09’s RM34mil. But there is a possibility that there could be impairments for KLK’s subsidiary - Davos Life Science - in 4QFY09 depending on auditors’ view. As for KLK’s investments in Yule Catto, there may not be any provisions in 3QFY09 although Yule Catto’s share price as at end-March 2009 fell below its written-down cost of 55 pence/share. Yule Catto’s share price has since rebounded to 62 pence/share.

Others :
Economic Update : Inflation eases further, rate cut almost certain

QUICK TAKE
IJM Plantation : Expands landbank in Indonesia BUY

NEWS HIGHLIGHTS
Coastal Contracts : Positive on new orders this year
Fraser & Neave Holdings : More fizz in drinks mart after F&N-Coke split?
Carlsberg Brewery : Hunting for Asian acquisition
Malaysian Bulk Carriers : Upbeat on profit if shipping rate index remains at 1,700 level

Rubber Gloves Sector : Clever strategy to fill earnings vacuum OVERWEIGHT

We expect a still robust outlook ahead for rubber glove manufacturers. Our checks reveal an increase in demand, with order flows accelerating as customers take advantage of current cheaper priced products, notwithstanding the vacuum created by closure of some competitors due to the economic downturn. All in, we see a still positive outlook for glove manufacturers given strong fundamentals with both glove manufacturers under our coverage projected to deliver 3-year earnings CAGR of 16%-17%. Coupled with our recent recommendation, which upgraded Top Glove from a HOLD to a BUY, we would now advocate an Overweight stance on the sector. Both Top Glove and Kossan have consistently delivered within our expectations in the past and their respective share prices have outperformed the KLCI year-to-date. In line with our revised target market PE of 15x, we have now pegged Top Glove’s FY10F earnings to a higher PE of 13x (previously 11x) and Kossan’s FY09F earnings to a higher PE of 11x (previously 9x). Kossan’s PE is at a discount to Top Glove owing to its smaller market capitalisation and lack of trading liquidity. We deem the valuation fair given that both Top Glove and Kossan’s PEs are still below their respective 7-8 year average historical PEs (See Chart 3). While we like Top Glove for its leadership status and good prospects for sustained growth going forward, we also like Kossan as it offers greater room for capacity-driven growth off a smaller production base and a higher premium production mix on the back of high capacity utilisation rate. BUY both Top Glove (FV:RM6.70/share) and Kossan Rubber (FV:RM4.90/share).

Others :
Ann Joo Resources : Steel recovery gains momentum BUY
Banking Sector : Gap narrows with higher HP rates positive for banks OVERWEIGHT

QUICK TAKES
Tenaga Nasional : Bond buybacks continue BUY
Coastal Contracts : Lower FY08 dividend to conserve cash BUY
Proton Holdings : Is Proton really divesting Proton Edar stake? BUY
Telecommunication : Minimal impact seen from YTLe WiMAX rollout OVERWEIGHT


NEWS HIGHLIGHTS
AirAsia :AirAsiaX increases Stansted-KL service
KFC Holdings : Profit increase ‘quite tough’ this Year
MAS: Firefly takes off for Singapore in June
Sime Darby : Seeks buyer for hotel

KL Composite Index: A pause perhaps?

Strong showing was much anticipated, buoyed by renewed optimism that the worst could have been behind. After having endured some 16 months of market uncertainties with regards to the current economic slowdown, a lot of negatives we believe could have been priced in if not fully. While the jury remain out on whether the current rally
is merely a relief, the ability of most of the major equity markets to rally more than 15% - 20% from their respective lows after tumbling for more than 1 ½ years is something that the bears can ill afford to ignore.


While we believe that the worst is likely over and that a real low could have been formed, the near 11% run -up since the beginning of the month could have factored in substantial positives in the near term. While we continue to retain our positive bias in the medium term, short term however, profit taking activities could be in place to check the current uptick. Daily RSI is clearly overbought indicting a heightened risk of an imminent pullback. This is in fact healthy. Upside targets of 990 – 1,000 remain while support is pegged 947 - 950 with 927 – 935 as next.

Deloitte Research: Global Economic Outlook April 2009

Since our last Outlook in January, the financial crisis has deepened and become a truly global recession. Economic activity in the United States, Europe, and Japan has declined at an alarming rate.

Emerging countries in East Asia and Central Europe have experienced sharp drops in economic activity with the latter at risk of further financial turmoil. Even the BRIC economies that at one time seemed relatively immune to the global financial situation, have experienced serious problems. Global trade has plummeted, causing concern that the increasingly global nature of the economy leads to more rapid
transmission of trouble than in the past.

And yet, there are starting to be indications of light at the end of the tunnel. Global shipping rates have stabilized and modestly increased. Risk spreads are far below their level of a few months ago.

And governments have been pumping money into the system at an unprecedented rate.
Still, risks remain. Deflation appears to be rearing its ugly head. The degree to which government action regarding banks will be effective is far from certain. And the specter of protectionism is not far below the surface.

In this issue of our quarterly Outlook, our economists offer their perspective on the global situation.

Carl Steidtmann provides an analysis of the Obama economic plan and a moderately optimistic view of the U.S. outlook. Elisabeth Denison examines the Eurozone economic outlook as well as the limitations on economic policy action within the context of the European Union. Elisabeth also writes about the more long-term issue of demographics and the likely constraints it will impose on policymakers the world over. Ian Stewart looks at the outlook for the U.K. economy, while Sunil Rongala provides outlooks for Japan, China, India, and Russia. In addition, Sunil considers the impact of China’s economic troubles on S.E. Asia. Finally, I provide our outlook for Brazil, as well as an analysis of the troubles in Central and Eastern Europe and their potential impact on the West.

As always, we hope that this Outlook provides useful information for business planning. Moreover, all of our authors welcome feedback.

AmWatch: STOCK FOCUS OF THE DAY

STOCK FOCUS OF THE DAY
Tenaga Nasional : Lighting up on lower costs BUY

We reiterate our BUY call on Tenaga Nasional Bhd (Tenaga) with a higher DCF-based fair value of RM8.00/share. We remain positive on Tenaga due to: (1) Move towards a more transparent tariff mechanism, (2) Government’s continued affirmative stance towards the national utility; and (3) Its high stock liquidity with strong local institutional support. Tenaga’s 1HFY09 core net profit of RM1,289mil - excluding forex losses of RM1.6bil - was above expectations mainly due to: (a) Lower coal consumption in tandem with contraction in unit demand; and (b) 50% lower capacity charge from its 1,400MW coal-fired Jimah power plant. Annualised, 1HFY09 core net profit was 30% above our FY09 forecast and 28% above consensus estimates. Tenaga declared an interim dividend of 4.7 sen, half of 1HFY08 DPS. We have raised FY09F-FY11F earnings by 7%-17% due to lower coal costs and Jimah capacity payments. As such, we are raisingTenaga’s DCF valuation from RM7.80/share to RM8.00/share due to higher cashflows, on an unchanged terminal growth rate of 4.5%. Valuation-wise, Tenaga currently trades at an attractive CY10F PE of 9x.

Others :
Axiata Group : Balance sheet to ease, potential growth markets BUY
Economic Update : Singapore NODX falls slower, but government revises full-year projections lower

QUICK TAKE
Proton Holding : Najib: Proton needs to get more serious BUY

NEWS HIGHLIGHTS
MAS :Launches stimulus package/Firefly to fly Ipoh-Singapore route
With RM3.57bil surplus cash eyeing to buy another airline
BCHB : Redemption of USD$100mil 5% Subordinated bonds
Sime Darby : Sime healthcare arm partners Viet firm
Financial Services : Islamic banks to adopt standardised master agreements

Asia Markets Weekend summary

The major markets across the Asia-Pacific region ended in positive territory on Friday, taking cues from Wall Street, where the major indices ended in positive territory on increasing confidence that the downturn in the economy has slowed down and the economy can begin to recover sooner-than-expected. Profit taking by investors trimmed the gains, however, with the markets in Australia and Hong Kong ending nearly flat, while the South Korean market ended in negative territory. The underlying trend seems to be cautiously optimistic among investors despite the downward risk for the economies remaining relatively higher.

In Tokyo, The benchmark Nikkei 225 Index added 152.32 points or 1.70% to close at 8,908 and the broader Topix Index of all First Section Issues advanced 13.53 points or 1.60% to end at 846.

On the economic front, Japan's service sector output was down a seasonally adjusted 0.8% month-over-month in February to 105.6, the Ministry of Economy, Trade and Industry said. The decline was worse than the 0.7% drop expected by economists and follows a 0.4% gain in January and a revised 1.6% decline in December.
Bank stocks moved up strongly in the session, while among exporters, Canon gained 1.84%, Sony surged up 5.93% and Sharp soared 9.00%. Toshiba Corp. reported an operating loss of around 250 billion yen for the year ended March 31 compared to its previous estimate of a loss of 280 billion yen. The company's shares ended higher by 4.40%. Automaker Toyota advanced 2.96% and Honda Motor gained 4.63%.

Retailer Aeon Co. has set up a line of credit totaling 200 billion yen with several financial institutions, expanding its sources of funds amid capital market instability. The company also refinanced 175.4 billion yen in loans that had been due in the fiscal year ended February 28. The company's shares are gaining 2.88%.
In Australia, the benchmark S&P/ASX 200 Index added 1 point or 0.03% before ending at 3,778 and the broader All Ordinaries Index added 2.5 points or 0.07% to close at 3,728.

In the mining sector, BHP Billiton moved up 0.60% and rival Rio Tinto rose 1.84%. However, gold miners ended sharply lower after gold dropped to a ten-day low overnight

Banks ended mixed on profit taking at higher levels, while in the retail sector, Harvey Norman gained 1.42%, Coles' owner Wesfarmers advanced 3.41% and Woolworths rose 1.17%, but David Jones declined 1.31%. Woolworths said its sales for the third quarter, adjusted for Easter, increased by 6.5% to A$12.3 billion. Excluding petrol sales, sales rose 8.3%. The company forecasts full year sales, excluding petrol sales, to grow in the upper single digits.

In South Korea, the benchmark KOSPI Index closed at 1,329, down 7.72 points, or 0.58% as investors preferred to take profits after a recent rally.

Among financials, Shinhan Financial lost 1.88% and Woori Finance fell 1.51%, while KB Financial ended unchanged from its previous close. Shipbuilding stocks also saw weakness. However, technology stocks ended higher. Hynix Semiconductor surged up 8.68%, LG Electronics added 0.96% and LG Display gained 0.96%. Market heavyweight Samsung Electronics advanced 2.75%. In the auto space, Hyundai Motor gained 1.08%, but Kia Motor decreased 1.96% and Ssangyong Motor lost 7.50%.

In Hong Kong, the benchmark Hang Seng Index ended higher by 18.28 points or 0.27% at 15,601, giving away more than 350 points from its early gains on profit taking.
Property-related stocks ended higher, while telecommunication stocks ended mixed. Tencent gained 2.33% and China Unicom added 0.95%, but Hutchison Whimpoa lost 2.28% and China Mobile slipped 0.20%. Financial and China-related stocks saw notable weakness. Among resource stocks, Aluminum Corporation of China, or CHALCO, fell 4.45% and Petrochina lost 1.46%, but CNOOC gained 4.78%.

Among the other major markets, China's Shanghai Composite Index slipped 30.20 points or 1.19% before closing at 2,504 and Taiwan's Weighted Index declined 4.03% or 241.79 points to end at 5,755. At the close of trading, the Jakarta Composite Index in Indonesia was up 0.60% or 9.70 points at 1,635 and the Singapore Strait Times Index was up 0.25% or 4.81 points at 1,897.

Earnings Compendium, 16 Apr 2009

DISCLAIMER:
The information and opinions in this report were prepared by AmResearch Sdn Bhd.The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmResearch Sdn Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmInvestment Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein.The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use ofthis report. All opinions and estimates included in this report constitute our judgement as of this date and are subject to change without notice.

Market Review

FMBEMAS Daily


After S&P 500 dropping from 875 points to 665 points in a month time, it was not surprising to see how strong the market over there rallied. In contrast, our market merely drops from 910 points to 835 points within the same time period. Thus, the rally on our market was rather muted, perhaps due to lack of short selling, meaning that market traders over here never had the motivation to sell and face panic buying.

However, what I find interesting is that in the next 4-10 weeks, either way I look at it, if you have strong holding power market seems to be a BUY. Allow me to explain my view.

Assuming that S&P 500 still has another round of correction, it should reach my target level of approximately 600 points. I am not sure at what level KLCI would be, since the absence of short selling has somewhat distorted our market, but it should be in the region of 800 points or lower. That would be the level and formation that I had envisioned since last year. Unfortunately, if that happens, I can’t really say that technically it would be a Buy because there would be no Technical Indicators that would suggest it is a Buy. It is more of an educated (hopefully) guess that market is low enough to do base building.

On the other hand, should S&P 500 reach 800 points and consolidate above 750 points, that would also change the Technical picture, and hence, would mean that Technical Buy would be triggered. I’ve mentioned many other times before in my previous reports that 600 points is only a level that I think should reach. What I was more convinced about was that, after S&P 500 points dip below 750 points, I would be actively look for a reversal signal.

Thus, whether market go up or down, I am convinced that it would be a Buy. The only difference is that should S&P 500 goes down to 600 points, we have to wait for a Buy signal to trigger, whereas if S&P 500 reach 800 points and consolidate above 750 points, we already have the signal.

To add to my conviction that the long awaited entry point is just around the corner, take a look at Crude Oil chart.



Crude Oil



Crude Oil chart is a textbook example of a Saucer formation. Now, it looks nice but there is still a danger that it might go down 1 more time. Still, that would also mean that if Crude Oil go to say, $25-30, it would be a Buy for me and if it close above $50 and consolidate above $50, it would also be a Buy.

Thus, in the next 4-10 weeks, we might be in an interesting situation, i.e. a buy-buy situation. Interesting indeed. Of course, do not expect to see your return to grow immediately. This will take time and will test your patience. I can assure you that the testing of your patience after this would not be how long and low market would take to go consolidate, but after been used to trading and fighting for scraps, once market has reversed its downtrend the mentality would be different. It might be difficult to hold yourself from selling your profitable stocks.

HLG: Breakfast Brief: Kossan Rubber, Steel Sector, Public Bank (15 April 2009)

We initiate coverage on Kossan with a BUY and PT of RM4.40/share: (1) Share price has been a laggard against peers, despite strong fundamentals. Valuation is attractive at 7.3x FY09E PE, 17-38% discount to Top Glove and Hartalega. 18% EPS CAGR over FY09-10 is higher than consensus estimate of 12% for Top Glove. (2) We expect margin expansion in 2Q08 on lower gas prices and higher production of nitrile gloves. (3) FCF will rise from 12% in FY09 to 18% in FY11 and this could lead to higher dividend payout. We estimate 11sen/share net DY in FY09, implying a net DY of 3.4%.



We are Positive on the glove manufacturing sector: (1) Sales of medical grade gloves are recession-proof. Global consumption of glove continues to grow at 8-10% per annum. (2) Strong performance from listed glove-makers in the past 4 quarters proves that raw material price volatility and forex volatility, although a risk, is manageable.



Newsbreak

M’sia and S’pore expands air services agreement

PBBank 1Q net profit falls 18% yoy to RM589m

Prime Minister to launch Proton’s MPV Exora today

Top Glove looking to expand more into China and India

POSM offering new hospital insurance coverage product

KFC plans to expand network to 482 stores with addition of 40 stores this year




Economics

US: Mar retail sales unexpectedly plunged 1.1% MOM (Feb: +0.3%), declining for the first time in 3 months, leaving a shadow over recent signs of improvement in the slumping economy.

US: Mar producer prices fell 1.2% MOM (Feb: +0.1%) after two straight months of gains on the back of falling energy costs, though core prices remained steady.

US: Feb business inventories fell 1.3% MOM (Jan: -1.1%) led by the drop in auto dealer inventories and marking its sixth straight monthly decline, signaling the lack of confidence in future demand.

KL Composite Index – Bull party

Recent market strength was indeed a pleasant surprise. While we had looked forward to some possible consolidation during early April, the bulls partied on instead. Near term, we envisage volatility to remain high but with a positive bias.

Technically, the CI had managed to scale past previous resistance levels with buying
momentum likely to keep market buoyant in the short term. On the line chart, it looks like the CI had traced out a bullish “triple-bottom” formation with a successful challenge above the 927 neckline resistance.

Projected target for the breakout point is circa 1,000. While near term RSI (daily) is slightly rich, weekly however is looking extremely encouraging which could lend further strength in the medium term. Expect a good start to the week with 970 as the next resistance which coincides with the all-important 200-day moving average. Downside support is now pegged at 927 with 900 as next. Stay long.

Plantation Sector POSITIVE

Investment summary
CPO price had climbed to its highest in the last 6 months on optimism of recovery of global demand and lower inventory levels. Although we are positive on the sectors long term outlook, we think recent run-ups may have been too steep and may see some correction in the next couple of months due to: (1) Peak CPO production period between May-Sept; (2) New supply from soybean harvest season in South America; (3) CPO-soybean oil price difference had narrowed to RM544/mt; (4) Recovery in CPO price had outperformed the market and crude oil price by 55% and 11%. We remain positive on the plantation sector: (1) Supply side discipline due to tree stress, MPOB replanting incentive and slower expansion plans; (2) Demand is on the rise on the contrary to the global economic slowdown due to higher exports to China, India and Pakistan; (4) Signs of global economic recovery in 2010 is gaining ground. Stick to purer CPO plays and trade the CPO volatility. Our top pick is Asiatic and IJMP. KLK is our preferred stock for large cap exposure while BIRT and Kulim are our dividend yield and value pick.

Stocks to watch
CPO prices had reached our long term CPO assumption of RM2,200/mt earlier than expected and has outperformed the KLCI and crude oil recovery. Take profit into the rally and relook at entry below RM2,000/mt CPO price. Trade within the band of RM1,800-RM2,200/mt CPO price. Prefer to trade mid-cap pure planters with higher correlation to CPO price recovery and cheaper valuation, such as Asiatic and IJMP. For defensive dividend yield play we like BIRT, while Kulim is our preferred value play.

China Property - Shanghai Could Become a Testing Point for REITs

§ Shanghai as a testing point for China REITs - As reported by 21st Century Economic Report, following the recently announced government target to establish Shanghai as an international financial center and international transportation center, Shanghai could likely become a testing point for REITs in China.

§ A batch of commercial properties selected - According to the report, a batch of property assets, which come mainly from a state-owned property company in Pudong, has been selected for the pilot testing. The batch includes commercial properties, high-tech incubation facilities, and some industrial properties, all with occupancies of over 80%. The process is now pending the approval from the regulatory authorities, and after that a proposal for consultation will be made.

§ Two potential formats - As reported, there will likely be two proposed types of format for REITs in China: 1) a debt-like instrument, which basically involves the securitization of rental income of the corresponding properties, and the ownership of those properties would remain in the hands of the property company; and 2) an equity-like instrument, where the ownership title will be transferred out of the vending property company.

§ State-owned assets first - According to the report, the first REIT vehicle for pilot testing will likely only contain assets that carry higher rental yields and that belong to state-owned property companies in Pudong. The successful establishment of a REIT market would also offer long-term benefits to the local government, as REITs could allow them to develop and retain rental properties in prime-areas, then enjoy the longer-term rental returns and capital appreciations of land in the prime-areas, rather than just selling those for development purposes.

Implications -
In our view, if a REIT market is successfully set up in Shanghai (and then for the country afterwards), it would offer the following benefits to the sector:
1) Potential increase in transactions in the commercial property market would offer more valuations benchmarks (e.g. cap rates and rentals);

2) Increased opportunities for NAV realizations for developers, though at the beginning, this might apply more to state-owned companies; and

3) The establishment of a REIT market in Shanghai would support the government's goal to turn Shanghai into an international financial center, which will be positive for the Shanghai economy and property market. In terms of potential beneficiaries, companies with meaningful investment properties, and/or exposure to Shanghai would likely benefit, including CR Land, Franshion, Hang Lung Props, Kerry, Shimao, SOHO and Yanlord.

Stock Gain Is 'Dead Cat Bounce,' Aberdeen Asset Says

The rally in global stocks over the past month is a “dead cat bounce,” as companies report “terrible” earnings this year and the global recession persists, Aberdeen Asset Management Plc said.

Investors should instead focus on companies with strong balance sheets and sustainable business models that can weather the “severe recession,” Hugh Young, who oversees about $37 billion as managing director of Aberdeen Asset’s Asian unit, said in a Bloomberg Television interview. He favors regional financial companies and holds stakes in Singapore’s Oversea-Chinese Banking Corp. and United Overseas Bank Ltd.

The MSCI World Index fell 0.7 percent to 826.66 as of 4:49 p.m. in Singapore, taking its losses this week to 3.3 percent. The decline ended a four-week, 23 percent rally that came amid optimism government efforts worldwide to revive the global economy will succeed. The gauge has lost 10 percent this year.

“It does feel very much like a dead cat bounce if you like, or a bear market rally,” Young said. “The fundamentals for the stocks we’re looking at are not improving and this year is going to be pretty bloody for earnings, if not into next year as well.”
Sharp Corp., Japan’s largest maker of liquid-crystal- display televisions, today reported a 130 billion yen ($1.3 billion) loss, its first since 1956. Alcoa Inc., the largest U.S. aluminum producer, yesterday posted a second-straight quarterly loss as the global recession reduced demand for the metal used in automobiles and appliances.

‘Comfortable Valuations’
The average analyst estimate for earnings at companies on the MSCI World Index has been slashed by 44 percent in the past 12 months, according to data compiled by Bloomberg.

Declines in the past year mean stocks are trading at “comfortable valuations,” allowing Aberdeen to add to its holdings as prices drop, Young said. Companies on the MSCI World trade at an average valuation of 13 times reported earnings, almost half its 10-year average multiple of 22 times.

Even so, Nouriel Roubini, the New York University professor who predicted the economic crisis, told Canada’s Business News Network yesterday he sees no reason to change his forecast that the U.S. economy will continue to contract through this year.

The nation’s unemployment rate climbed to a 25-year high of 8.5 percent last month, an April 3 government report showed. Japan’s exports sank 50.4 percent in February from a year earlier, the country’s Ministry of Finance said today.

Investor Jim Rogers said today the global capital markets haven’t reached “the final bottom” yet, echoing sentiments of fellow investors Marc Faber and George Soros, who predicted this week that the stock-market rally will falter.

“It’s too early to say that we’re out of the woods,” said Nader Naeimi, an investment strategist at AMP Capital Investors in Sydney, which manages about $85 billion. “You still have concerns about the health of the banking system and the depth of the global recession. There are some green shoots out there, but they’re fragile.”

Japan pays jobless migrants to go home

Recession-hit Japan on Wednesday started offering cash to jobless migrants of Japanese descent, mostly from Brazil and Peru, who are willing to go home amid the global downturn.

Japan, faced with a shrinking and ageing workforce, from the 1990s allowed tens of thousands of migrants to work in the country, mostly on temporary contracts in car manufacturing and other industries.

But as the global downturn has halved exports and idled plants, Japan's manufacturing giants have axed thousands of jobs, bloating the ranks of unemployed to a three-year high of 4.4 per cent in February.

The government Tuesday estimated that more than 192,000 non-regular workers had been laid off or will have lost their jobs between October last year and June amid what is shaping up as Japan's worst post-war recession.

The labour ministry said it had started to offer Y300,000 ($A4,370), to each migrant worker of Japanese descent who agrees to go home, plus Y200,000 ($A2,900) for each dependent family member.

Those who receive employment insurance money will get an extra payment.

Migrants who take the money and agree to return lose the right to come back to Japan on special work visas in future, the ministry said.

"They may not get a job immediately even after going back to their country," the ministry official told AFP. "The money should cover costs for a flight ticket, moving and for some time to live off."

For many of those hoping to stay, the government has allocated more than Y1 billion ($A14.57 million) for vocational training including Japanese language lessons.

STOCK FOCUS OF THE DAY

Top Glove : Higher earnings on continued recovery in margin BUY

We are upgrading Top Glove Corp (Top Glove) from HOLD to a BUY, with higher fair value of RM5.60/share after rolling forward our base year to FY10F and pegging it to a higher PE of 11x. For six months ended February 2009, Top Glove increased its net profit by 19% to RM70mil. This was in line with our and consensus estimates of RM130mil and RM132mil, respectively. Strong performance was mainly attributed to lower input costs namely latex and crude oil prices, as well as a favourable US$: RM exchange rate. Subsequently, EBITDA margin for 1HFY09 improved +3.6ppts YoY to 19%. Consistent with previous years, no interim dividend was declared in 2QFY09. We are keeping our FY09-11F dividend outlook with 2%-3% yield, assuming a 25%-26% payout ratio. Given Top Glove’s consistent track record, healthy fundamentals
and prospects of sustained earnings growth, we think the stock warrants a higher valuation. We have hence pegged the stock to a PE of 11x, which is at the lower end of its historical 8-year PE band of 6-32x. Stock offers a 17% total return, including 3% dividend yield (FY10F).

QUICK TAKE
Plantation Sector : Palm oil inventory continues to decline UNDERWEIGHT

NEWS HIGHLIGHTS
Dialog Group : Disposes of interest in Helix RDS
UEM Land Holdings : Sees interest in Nusajaya development
Malayan Banking : ABBank, 15% owned by Maybank, says profit more than doubles

Bank Negara To Issue 50% of RM5 Billion Sukuk Simpanan Rakyat

KUALA LUMPUR, April 7 (Bernama) -- The Finance Ministry today announced the issuance of Sukuk Simpanan Rakyat 01/2009 amounting to RM2.5 billion on May 14, 2009.

This is the first issue of the two series of three-year RM2.5 billion sukuk each and it will be issued by Bank Negara Malaysia on behalf of the government, the ministry said.

The sukuk, which will be scripless and based on Syariah principles, is an additional investment instrument for Malaysian citizens who are 21 years and above, it said in a statement.

The sukuk offers a return of 5.0 percent per annum and provides the flexibility for early redemption before the maturity date, the ministry said.

It is available for subscription during the sales period from April 14 to May 13, 2009.

The minimum investment is RM1,000 with a maximum of RM50,000 per investor and the maximum aggregate holdings per investor for the two sukuk series is RM50,000, the ministry said.

It can be subscribed at all commercial banks, including Islamic banks, Bank Kerjasama Rakyat Malaysia Bhd, Bank Simpanan Nasional and Bank Pertanian Malaysia Bhd.

Allocation for the sukuk is based on a first-come first-served basis, and successful applicants will be notified by their agent banks.

Profit payments will be made on a quarterly basis via the sukuk holders' accounts with their agent banks.

Those seeking further information can contact Bank Negara's Telelink at 1300-88-5465 or by visiting the websites www.treasury.gov.my and www.bnm.gov.my/sukuksimpanan.

Asia Daily Markets Briefing

The major markets across the Asia-Pacific region ended higher on Monday, unfazed by the rocket launch by North Korea on Sunday. The major averages in the region extended their gains for a fifth consecutive week last week on increasing optimism that the worst of the global economic crisis is over and the initiatives of the governments will yield positive results in the near term.

In Japan, the benchmark Nikkei 225 Index gained 1.02% or 108.09 points to close at 8,886. However, the broader Topix index of all First Section Issues pared its gains and shed 0.39 points or 0.01% to close at 831.

Automakers moved higher in reaction to the yen’s strength and a report in the Nikkei newspaper that stated that the government would subsidize purchases of eco-friendly vehicles such as hybrids. Among the automakers, Toyota advanced 1.08% and Isuzu Motors rose 8.59%. However, Honda edged down 1.26%.

Exporters also benefited from the stronger yen. Canon gained 1.63%, Sony added 1.04% and Sharp rose 4.68%. However, Trading houses slipped on profit taking, Mitsubishi Corp. lost 0.61%, Sumitomo Corp. edged down 0.11% and Itochu fell 1.14%.
Oil stocks ended higher, with Inpex advancing 4.92%, Showa Shell gaining 2.19% and Nippon Oil edging up 0.92%. However, banks pared back most of their early gains and ended mixed in reaction to a report that forecast losses for the banks for the year. Mitsubishi UFJ lost 2.47%, Mizuho Financial edged down 0.49%, and Sumitomo Mitsui declined 1.37%. However, Resona Holdings bucked trend and edged up 0.45%. Brokerage Nomura Holdings fell 0.85%.

In Sydney, the benchmark S&P/ASX 200 index gained 21 points or 0.56% to close at 3,757 and the broader All Ordinaries index added 22.40 points, or 0.61% to 3,696.
On the economic front, a report showed that the TD Securities-Melbourne Institute inflation gauge fell 0.1% in March, while the annual rate rose by 2.6%. Meanwhile, a survey by Australia and New Zealand Banking Group showed that the total number of job advertisements fell 8.5% in March from the month before, to average 147,804 a week.

Among banking stocks, Commonwealth Bank of Australia gained 2.11%, National Australia Bank advanced 3.33%, Westpac moved up 1.47%, and investment bank Macquarie Group rose 5.26%. However, ANZ Banking Group bucked the trend and lost 1.15%.
In the resources sector, index leader BHP Billiton lost 1.73%, and Rio Tinto fell 2.15%. Gold-related stocks ended lower following a drop in gold prices. Lihir Gold dropped 6.13%, Newcrest Mining shed 5.10%, and Sino Gold fell 4.55%. Energy and retail stocks ended on a mixed note.

The benchmark Hang Seng Index advanced 3.11% or 452.35 points to close at 14,998. Property stocks, financials, resources and china-related stocks led the gains.
Among property stocks, Henderson Land advanced 2.79%, Wharf Holdings gained 3.05%, SHK Properties rose 3.63%, New World Development soared 7.64% and Swire Pacific added 6.18%.

Financial stocks also ended higher. HSBC Holdings gained 5.26%, Bank of China advanced 2.29%, Bank of Communications added 3.63%, ICBC rose 2.95% and Bank of East Asia moved up 3.46%.

Among the resource stocks, Aluminum Corporation of China, or CHALCO, surged 6.18%, CNOOC gained 1.68% and PetroChina rose 3.63%. However, China-related stocks ended mixed on profit taking. While China Resources gained 1.71%, China Mercantile Holdings lost 0.99% and China Overseas edged down 0.30%.

In Seoul, the benchmark KOSPI Index gained 1.10% or 14.10 points to close at 1,298. Profit taking at higher levels trimmed some of the gains during the trading session. Technology, auto, financial and shipbuilders showed significant buying interest.
Among the other major markets, Indonesia's Jakarta Composite Index advanced 1.09% or 16.28 points to 1,517, Singapore's Strait Times Index gained 27.11 points or 1.49% to close at 1,848, and Taiwan's Weighted Index ended at 5,556, up 0.48% or 26.59 points. The Chinese market was closed for public holiday.

The top ten losers among KLCI stocks

AXIATA Group Bhd, the just renamed TM International Bhd, was among the biggest losers in percentage terms among component stocks of the KL Composite Index (KLCI) in the first quarter.

This is unusual for a telecommunications company (telco) as companies in this industry were among the most stable stocks around the world.




But, it was downhill for Axiata’s price from the start of its listing and demerger from Telekom Malaysia Bhd (TM) in April last year. Its descent continued after the October global market fall as investors shunned companies that had high borrowings. At that time and until its current rights issue, Axiata was one of the region’s most highly-geared telcos.


Hence, it called for a rights issue to strengthen its balance sheet, but its price fell further after that was announced as minority shareholders are averse to chipping in more cash at this time.

The exercise will raise RM5.25bil cash for Axiata, and reduce its borrowings of RM20bil, a gearing level of 1.8 times, to about RM15bil, a gearing of 0.9 times. The rights issue is supported by its biggest shareholder, Khazanah Nasional Bhd.

Axiata fell from RM7.85 a share at its listing in April last year to RM2.49 on Friday, a drop of 68%.

For the first quarter, the much smaller Pelikan International Corp Bhd was the biggest loser among the KLCI stocks.

Its size may be a factor for its weak performance as small cap stocks generally fell much more than the big caps this year.

It also reflected the greater earnings volatility of small cap stocks. Pelikan swung into the red, with a loss of RM43mil in its October-to-December quarter due to lower sales, a weaker euro and a few other exceptional items.

That loss caught analysts by surprise as they had not expected the recession in Europe, where most of Pelikan’s revenue is derived, to cause a drop in its sales of stationery products.

There are now two shareholders with stakes of almost equal size in Pelikan. Its chief executive officer Loo Hooi Keat, who owns 29.4%, has been joined by the pilgrims fund board, Lembaga Tabung Haji, with its stake of 28.1%.

At one time, Pelikan was viewed as a promising consumer stock with global interests. Zelan Bhd, another relatively small KLCI stock, was also one of the biggest losers during the quarter. Its drop followed news of the departure of its chief executive officer Chang Si Fock, a founding director known for his expertise in the business of constructing power plants.

A member of the MMC Corp Bhd group, Zelan saw its share price falling along with that of MMC.

Zelan’s price fell from a high of over RM5 last year in tandem with IJM Corp Bhd in which the former is the biggest shareholder after the Employees Provident Fund.

As IJM’s price rebounded in the last two weeks, Zelan’s price was lifted from its lows. Zelan’s stake of 8.7% in IJM is now worth about RM370mil, equal to Zelan’s own total market value.

That valuation overlooks Zelan’s net cash of over RM50mil and order book of over RM3bil.

The order book could be a problem as the company reported a net loss of about RM130mil in the fourth quarter last year due mainly to project losses in Saudi Arabia and the United Arab Emirates. There is a likelihood, however, as pointed out by RHB Research, that there might not be further losses as building material costs have come down.

Sunrise Bhd, with a net profit of RM52mil in the October to December quarter, is one of the more profitable companies among the losers’ list. It is in the out-of-favour property sector and its purchase of the Angkasa Raya land in Kuala Lumpur just before the global recession was dampener to sentiment. Even so, the shares of this asset-rich group had been priced to liquidation values, AmResearch said in a recent note.

Mulpha International Bhd is another asset-rich group on the list. It is the single biggest shareholder, with a stake of 22.8%, of FKP Property Group which is listed on the Australian Stock Exchange.

FKP is Australia’s biggest owner and operator of retirement villages and its stock tripled last month after it sold a property and completed a rights issue, reducing its balance sheet risk. Mulpha also owns hotels in Australia and resort projects there and in Johor.

Some of these biggest losers could become the biggest gainers later this year if economic conditions and market sentiment recover.

●名勝世界 Resort : Overweight

評級：超越大市

目標價：RM2.95

自去年11月宣佈以6900萬美元（2億4978萬令吉）全面收購美國公司Bromet和Digital Tree股權計劃以來，名勝世界股價在外資拋壓下迄今已下挫18%，外資持股比重從2008年首9個月的40%跌至去年12月杪的33%。

儘管未獲得本地基金支撐，但名勝世界外資持股料不會進一步大跌，主要是現有8至9倍本益比和1.1至1.2倍每股股價淨值比（P/BV）無法反映其穩定商業模式、以及高達45億現金儲備可能開展的併購計劃利好。未來股價催化因素包括穩定博彩業務、強勁財政、高股息以及潛在區域併購活動。

Asian markets Extend Rally on hopes of global recovery; profit taking limits gains

The major markets across the Asia-Pacific region ended in positive territory on Friday, extending the gains on expectations that the worst had been overcome and the global economy, though still weak, is showing a slowdown in the downward momentum.

Positive closing by Wall Street stocks for the third day in succession following the promise of about $1.1 trillion in loans and guarantees by the G20 leaders in London and a relaxation in the "mark-to-market" accounting rules for banks, also influenced the Asian markets. Automakers, resources and financials were the major gainers. However, profit taking at higher levels ahead of the weekend limited the gains, with the major markets closing well below the day's high.

On Thursday, the Dow closed up 216.48 points or 2.8% at 7,978, the Nasdaq closed up 51.03 points or 3.3% at 1,604 and the S&P 500 closed up 23.30 points or 2.9% at 834.

In Asian trading, crude oil ended down $0.73 at $51.91 a barrel in electronic trading. Light sweet crude for May delivery closed up $4.25 at $52.64 a barrel on the New York Mercantile Exchange on Thursday, after hitting an intra-day low of $48.45 and a high of $52.87 on improved demand prospects amid hopes the G-20 summit will help pull the world out of the economic crisis.

In Tokyo, the benchmark Nikkei 225 Index closed at 8,750, up 30.06 points, or 0.34%, and the broader Topix index of all First Section Issues added 4.67 points to 831.

Automakers led the gains on the weaker local currency. Toyota Motor surged up 7.25%, Nissan Motor advanced 5.94% and Honda Motor added 1.65%.

Exporters also ended higher. Canon advanced 1.99%; Sharp added 0.72% and Sony Corp. gained 3.23%. Among trading houses, Mitsubishi Corp. advanced 4.61%, Sumitomo Corp. gained 1.88% and Itochu added 1.54%.

Financials ended weaker in late trading on profit taking. Mitsubishi UFJ declined 0.38%, Mizuho Financial lost 1.44%, Sumitomo Mitsui shed 2.92% and Resona Holdings declined 2.72%. However, Brokerage Nomura Holdings bucked the trend and advanced 4.80%.

Oil stocks ended mixed. While Inpex declined 1.25% and Showa Shell lost 2.14%, Nippon Oil edged up 0.20%.

In Australia, the benchmark S&P/ASX 200 index rose 1.54%, or 56.60 points, to 3,736 and the broader All Ordinaries index advanced 52.90 points to 3,674.

On the economic front, the latest Australian Industry Group - Commonwealth Bank Performance of Services Index or PSI data revealed that Australian services sector activity remained weak in March. The seasonally adjusted Australian PSI rose by 3.4 points to 35.6 in March, still well below the 50.0 points level separating expansion from contraction.

Resource stocks advanced after a measure of six commodities advanced 2.9% on the London Metals Exchange. Positive economic data from China, where the Purchasing Managers' Index rose to a seasonally adjusted 52.4 in March from 49 in February also propped up resource stocks on expectations of rising demand from China, the major export destination for Australian resources.

Financials gained on expectations that change in accounting rules might improve the profits of the banks. Among banking stocks, Commonwealth Bank of Australia advanced 2.11%, ANZ Banking Group surged up 5.45%, and National Australia Bank advanced 5.48%. Westpac rose 3.02%, and investment bank Macquarie Group gained 4.97%.

In the resources sector, index leader BHP Billiton gained 3.68%, and Rio Tinto advanced 2.93%. Among energy stocks, Woodside moved up 1.79%, Oil Search rose 4.33%, and Santos gained 3.38%.

Gold miners, however, declined after gold closed lower on Thursday. Lihir Gold lost 6.60%, Sino Gold slipped 0.36%, and Newcrest Mining declined 7.11%.

In the retail sector, David Jones lost 1.05%, Woolworths slipped 0.68%, and Coles' owner Wesfarmers decreased 1.42%.

The benchmark Hang Seng Index ended 0.16% or 23.72 points, higher at 14,546, having pared most of the gains on profit taking.

Property related stocks advanced. Henderson Land advanced 4.93%, Sino Land gained 3.04%, New World Development added 1.50% and SHK Properties added 1.27%. However, Hang Lung Properties declined 3.81%.

Resource stocks also ended higher. Aluminum Corporation of China, or CHALCO, gained 3.09%, CNOOC advanced 1.22% and PetroChina moved up 1.09%.

Financials ended mixed on profit taking. HSBC Holdings edged up 0.10%, while Hang Seng Bank declined 1.62%. Other major banks also ended lower on profit taking.

Insurance stocks also ended mixed. While Ping An advanced 0.29%, China Life lost 0.74%.

In Seoul, the benchmark KOSPI Index ended at 1,284, up 6.78 points, or 0.53%.

Financials ended higher. KB Financial Group gained 2.72%, Shinhan Financial advanced 4.14% and Woori Finance added 1.36%.

Oil-related stocks also ended higher. SK Holdings gained 1.70% and S-Oil edged up 0.34%.

Among the automakers, while Hyundai Motor gained 1.32% and Kia Motor advanced 4.01%, Ssangyong Motor declined 1.15%.

Among technology stocks, Hynix Semiconductor moved down 0.79% and LG Electronics slipped 0.20%. However, LG Display gained 0.33%. On the other hand, market heavyweight Samsung Electronics moved up 0.34%.

Shipbuilders ended weak. Hyundai Heavy Industries lost 0.24%, Samsung Heavy Industries decreased 0.92%, and Daewoo Shipping moved down 1.11%.

Among the other markets, China's Shanghai Composite Index lost 5.51 points or 0.23% to 2,420, Singapore's Strait Times Index gained 17.53 points, or 0.97% to 1,821, Indonesia's Jakarta Composite Index added 0.63 points or 0.04% to 1,500, and Taiwan's Weighted Index advanced 55.85 points or 1.02% to 5,530.

What's on the table?

News of the Day
– Asian economic growth will slow to the weakest since 1998 financial crisis, says ADB
– Exports of Malaysian palm oil products for March rose 5.4% to 1.22m tonnes
– Cabinet decide today whether there is water tariff rate hike in Selangor, as much as 31%

Economics of the Day
Tanjong Plc 4QFY09 below – Tripped up by one-offs
Tanjong’s FY1/09 core net profit came in 15% below our forecast and 12% below consensus largely due to i) overestimation of local power earnings, ii) an unexpected RM23m windfall tax charge in 4Q and iii) larger-than-expected losses at TI. A total gross DPS of 37.5 sen was declared for 4Q, bringing FY09 total DPS to 90 sen. Power earnings should improve in FY10 as the windfall tax will not recur, which should more than offset the Bangladesh plant’s scheduled maintenance works. Resilience should also continue to prevail for its gaming business. After updating FY09’s numbers, we lower our FY10-11 earnings by 7-8%. Our DPS projections remain intact. The earnings and SOP variable adjustments reduce our end-CY09 target price from RM17.00 to RM16.60 (20% discount intact). Maintain OUTPERFORM with share price triggers of i) more earnings-enhancing power asset acquisitions, ii) a sustainable turnaround at TI and iii) potential spin-off of its power business over the medium term.

Quick takes – Dreamgate Corp update – More impairment drags

Quick takes – Malayan Banking update – Adjusting for rights issue

Quick takes – Plantations Sector update – Fertile ground in US planting intentions

Economic news – 4Q08: Portfolio outflows subside

Economic news – Feb 09: Recovery in loan indicators not sustainable

HDBSVR: Resorts World, Maintain Buy

BUY RM2.05 KLCI : 878.81
Price Target : 12-month RM 2.60


Low risk of cash call by SCL
Following our gaming sector report “Emerging Value” on 24
Mar 09 where we upgraded Resorts to Buy (from Hold), we
see little risk of 19.6%-owned Star Cruises (SCL, Not Rated)
calling for a rights issue now. This is due to: (i) Cancellation
of order for one new vessel (US$1b savings), (ii) minimal
amount due for 50% stake in Travellers International
(US$50m), while Newport City (Philippines casino project) is
expected to be completed by end09, (iii) Padgor City and
Macau projects are still at early development stages, and (iv)
NCL's improving net gearing (to 153% from 253%). Hence,
the implied 60% discount the market ascribed to Resorts’
net cash is excessive, in our view. Reiterate Buy on Resorts -
market is pricing its resilient gaming business at only 6.9x
2010 PE (ex-cash). Our RM2.60-TP is based on 14.2x 2010
PE (similar to SARS level), supported by RM2.55 sum-of-parts
value. Tan Sri Lim Kok Thay & family owns 60% (direct
stake) in SCL.

Cancels order for one new vessel, Travellers stake almost
fully paid up. 50%-owned NCL was supposed to take
delivery of two vessels in 2010. However, based on latest
SEC filing, NCL is expecting only one in 2010 worth ~US$1b
vs a total US$2.2b previously. Specific funding is already in
place. Additionally, the balance of US$50m for its 50% stake
in Travellers is only due upon commencement of Newport
City casino.

Padgor City and Macau projects still at early stages. Both
projects are likely to be developed later rather than sooner,
given the on-going financial crisis. Padgor City (SCL's
effective stake: 70%) is still at preliminary stages while the
HK$4.7b or US$610m Macau project (SCL-SJM 75:25 JV) is
awaiting approval to commence construction.

Improving net gearing. With the US$1b cash injection by
Apollo Management in Jan08 after acquiring a 50% stake in
NCL, NCL's net gearing improved to 153% in 3Q08 from
4Q07's 253% (net debt: US$2.4b vs US$3.1b previously).
SCL’s 2Q08 net gearing was 28% (net debt: US$545m),
better than 4Q07’s 176% partly due to NCL’s reclassification
to jointly controlled entity (net book value: US$729m).

Highlights
Stake in Travellers almost paid up. The US$335m price tag
for a 50% stake in Travellers is almost fully paid (US$285m
paid upon signing of sale and purchase agreements), with
the balance of US$50m due upon commencement of
Newport City casino (likely by end-2009, and should
contribute positively to SCL’s earnings). Recall that Travellers
was granted a Provisional Licence to participate in the
development of two tourism projects in the Philippines -
Newport City and Bagong Nayong Pilipino Entertainment
City Manila (Padgor City).

Exposure to Newport City cost overrun is capped. Based on
the shareholders' agreement between SCL and Alliance
Global Group Inc (AGI), which owns the other 50% stake in
Travellers, cost overrun incurred to complete the Newport
City project (i.e. above the agreed ceiling price of US$150m
for which funding is in place) would be solely absorbed by
AGI at no cost or recourse to Travellers. And agreed revision
to plans would be funded by third party financers, to be
undertaken by Travellers.

Challenges ahead, diversifying from cruise line. We expect
SCL’s earnings to remain in the red (ex-exceptionals), but
support could come from: (i) new bookings as cancellations
stabilise, and (ii) lower fuel cost. Demand will likely remain
weak while competition should intensify with incoming supply of
vessels (according to some media report, Carnival
Cruise Lines estimates the industry could see a 28% increase
in capacity in North America and Europe over the next three
years, although this could be partly mitigated by some
vessels being retired/cancelled).

Nevertheless, SCL seemed to be diversifying from cruise lines
to land-based casinos (Macau and Philippines), which are
less volatile and capital intensive. This would likely be
positive in the longer term. With the entry of Apollo
Management in NCL (50% stake), we do not discount the
possibility of potential synergies with its stable of gaming
investments i.e. Harrah Entertainment and Ocean Cruise.

Reiterate Buy, gaming business at only 6.9x 2010 ex-cash PE.
This is near 1998 all-time low valuation. Although average
spending could ease due to lesser VIP patrons with the
commencement of both Singapore integrated resorts by
2010, casino patronage/ visitor arrivals to Genting Highlands
is expected to remain resilient as in the past. We expect
Resorts to continue to chalk strong operating cashflow of
RM1.3b (average) over the next three years. Other risks: high
foreign shareholding (33%) and more corporate
governance/capital management issues (related party
transactions, investments with poor earnings visibility) –
which has largely been priced-in given the large implied
60% discount the market ascribed to Resorts’ net cash.