MY E.G. Services- 9M09 net profit lower than expectations

Price: RM0.425
Target Price: RM0.55
Recommendation: BUY

· 9M09 net profit of RM13.0m was below our expectations but within consensus being only 62%% and 73% of our full year forecast of RM21.2m and consensus of RM17.7m. Historically, 2H (January-June) makes up 60% of the full year profits as learner’s driver license application is at its highest. But this year, the response was lower by about 20% leading to flat quarterly revenue which was bolstered by higher acceptance of road tax and driver’s license renewal which is increasing in popularity

· YoY, 9M09 net profit was 22.2% higher with strong EBITDA margin of 42% compared to 39.2% in 9M08. This is attributable to the road tax renewal service gaining market acceptance in light of the increase marketing efforts to raise its market presence resulting in 18% market share.

· QoQ, 3Q09 net profit was 10.6% lower as MYEG increased its marketing and advertising campaign to TV ads sponsoring the EPL.

· YoY, 3Q09 net profit was only 1% higher despite stronger EBITDA margin of 40.6% compared to 34.9% as turnover fell 3.7% on lower learner’s driver license application. In addition depreciation was higher on the back of deployment of more kiosks.

· Lowering FY09E and FY10E net profit forecast by 11.3% and 9.2% to RM18.8m and RM23.6m. We are imputing slowdown in theory test examination and learner driver’s license application.

· Implementation of other JPJ services on track. MYEG is currently implementing for JPJ the electronic application of vehicle registration numbers and transferring of motor vehicle ownership in 2H09. The company is continuing to expand its reach in motor insurance and establishing more kiosks at the Hire Purchase centers of their banking partners.

· Maintain BUY and target price of 55 sen using FY10E PER of 14x and EPS of 3.9sen. The stock is trading at attractive FY10E and FY11E PER of 11x and 9x respectively.

Breakfast Brief: IJM, Ann Joo, Kulim (29 May 2009)

Good morning
IJM (HOLD, PT RM5.00)’s 4Q09 net profit of RM53m (-7% qoq, -24% yoy) was in-line with our forecasts and consensus. Construction margins have not improved due to high interest cost in India. However, we tweak our FY10E EPS upward by 5% on higher property sales.

We maintain IJM at a HOLD:
(1) Share price rebounded 135% from its low in Nov08 following normalization of newsflow and sentiment on project awards.
(2) Earnings is expected to receive a boost from a number of big-ticket construction awards currently in the pipeline.
(3) However, intrinsic valuations look unattractive, with current share price trading at 16x FY10E PE (>60% premium to small-mid cap construction stocks). We think market has priced-in future wins.
(4) Foreign shareholding remains high at ~33%.

Newsbreak
IJM’s FY09 net profit back in the black at RM290m
Kulim posts 1Q09 net profit of RM24m, a drop of 75% yoy
Primus Pacific subscribes RM30m worth of EON Cap.’s warrants
Ann Joo posts 1Q09 loss of RM39m on margin compression
E&O proposes RM245m rights issue to raise funds for investment opportunities
Latitude Tree expects to raise SGD8m from Singapore listing of subsidiary
Dutch Lady’s 1Q09 net profit jumps 39% to RM9m on lower raw material costs
MMC to focus on engineering division to counter slowdown in other divisions
TA acquires 79 acres of land in Serendah, Selangor for RM45m

Economics
MA: BNM left OPR unchanged at 2.00%, citing that the accumulated monetary policy initiatives and measures to enhance access to financing are sufficient to provide support to domestic demand.
US: SP Shiller home prices declined 18.7% in Mar, on rising foreclosure and threatening to extend the property market slump.
US: Consumer confidence surged to 54.9 in May, the most in six years, fuelling speculation the economy will recover later this year.
Singapore: IPI surprisingly contracted 0.5% yoy in Apr, the least in seven months, indicating that the nation may have hit the bottom of its deepest recession since independence in 1965.
HK: Exports value fell 18.2% yoy in Apr, after falling 21.1% in Mar, while trade deficit stood at HKD16.4bn, narrowing from HKD18.2bn deficit in Mar.

Economy To Contract By Between -4 & -5 Percent

The econony will contract by between -4.0 and -5.0 percent this year, Prime Minister Datuk Seri Najib Tun Razak said Thursday.

However, he said the economy was expected to do better in the second half of the year.

"Although the fourth quarter is likely to be positive, the overall growth for the year is still negative because the first quarter is negative and the expected negative growth in the second and third quarters," he told a media briefing at his office here.

Najib, who is also Finance Minister, also said Malaysia was already in a technical recession.

"Our recovery depends on the world recovery. We have to see what happens in the United States and Europe. If they recover, we will be on track for growth," he said.

Lims sell 8.8% of Genting S’pore

Exercise raises RM1.47bil for the family

PETALING JAYA: Family trusts of the late Tan Sri Lim Goh Tong placed out their entire direct stake of 853.88 million shares or 8.8% of Genting Singapore Plc at 72 cents a share yesterday.

That raised S$615mil or RM1.47bil cash for the family. Following the sale of their direct stake, the Lim family’s interest in Genting Singapore is held through Genting Bhd which owns a direct stake of 54.4% of the Singapore company.

In an announcement to the Singapore Exchange (SGX) yesterday, Genting Singapore said Golden Hope Ltd and Lakewood Sdn Bhd, both ultimately held by discretionary trusts established for the benefit of certain members of the family of the late Tan Sri Lim, sold the shares at a 9.4% discount to the stock’s volume-weighted average price over the last 10 days.

Genting Singapore had a market capitalisation of S$8.5bil and it is developing Resorts World at Sentosa in Singapore. Its unit, Genting UK, is the largest casino operator in the UK.

The divestment of the direct stakes of Golden Hope and Lakewood simplifies the shareholding, and broadens the institutional shareholding base of Genting Singapore, the company said.

On the SGX, Genting Singapore fell 15.5 cents or 18% to 71 cents yesterday, 1 cent below the placement price. It is not unusual for a stock to drop when there is a placement of its shares.

It is a good price for the family to sell the Genting Singapore shares which are at their highest price in over two years. Furthermore, the price had doubled from this year’s low of 41.5 cents in February to a high of 88.5 cents on Monday.

There is also speculation the Lims raised the cash in an effort to purchase MGM Mirage’s 50% stake in MGM Grand Macau, a joint venture with Pansy Ho, daughter of Stanley Ho, one of Macau’s biggest casino operators.

MGM Mirage was told by New Jersey gaming regulators last week that its partner in Macau was unsuitable and it should “disengage” itself from that partner.

Stanley Ho had made an initial investment in MGM Grand Macau, and he was suspected of ties with organised crime, which he had denied.

It may be difficult for Genting Singapore to acquire that stake in Macau as the company was questioned by Singaporean authorities of a proposed joint venture with Stanley Ho when it bid for the integrated resort (IR) project in Singapore. Genting Singapore pulled out of that joint venture before it secured the IR project.

For that reason, it was speculated the Lim family raised cash to directly bid for MGM Grand Macau instead of through Genting Singapore.

Genting: A laggard play? - ALERT

· Genting Singapore’s share price has rerated almost back to its peak post winning Singapore IR in early 2007. Genting Singapore’s share price increased 117% since the bottom of the market in early March 2009 to S$0.89 yesterday. This is only 9% below its peak post the company winning its Singapore casino license.

· Genting Bhd’s share price, however, has lagged. Despite the 70% increase in share price since the bottom of the market, Genting Bhd is still trading at a 35% discount to its RNAV (calculated based on the current market prices of its listed subsidiaries i.e. Resorts World, Genting Singapore and Asiatic). The discount of 35% is steep vs. early 2007 post its winning of Singapore IR where we saw Genting Bhd’s share price trading at RNAV.

· We remain bullish on both Genting Bhd and Resorts World as we still see upside potential to our PTs. Our Dec-09 PT for Genting Bhd of M$6 is based on a 20% discount to SOTP (factored in PT of M$3.20 for Resorts, M$4.40 for Asiatic and S$0.61 for Genting Singapore). Marking to market its stake in Genting Singapore will add another M$0.94 to RNAV and M$0.75 to price target. Our Dec-09 PT for Resorts World of M$3.20 has factored in almost 40% discount to its excess cash position as well as a COE of 11% to its DCF of Malaysian operations. Incidentally, the market cap of Genting Singapore is now bigger than Resorts World. Note that Resorts World makes in excess of M$1B net profit a year while Genting Singapore has yet to begin its Singapore operations.

KNM Group: New orders recovery in sight - BUY

KNM Group
KNMG MK, BUY, CP 0.82, TP 1.05, Mkt cap: 884m, ADV: 11.7m


* KNM's 1Q09 results will likely be weak due to seasonality and low-rate
of new contract wins in the past six months.

* Rate of new contract wins to pick-up pace in 2H09, following the
re-tender process in 1Q09 and better oil prices.

* Maintain BUY. TP raised to MYR1.05, based on 10x P/E. Global peers
valuation has nearly doubled in the last 3 months.


2009E: P/E 7.5, P/B 1.4, ROE 20.6, Yld 1.9
2010E: P/E 8.8, P/B 1.3, ROE 15.1, Yld 1.9

Success Transformer Group- 1Q09- A good beginning

Price: RM0.81

Target Price: RM1.18

Recommendation: BUY



· Good start to the year. 1Q09 revenue of RM45.5m came in at 23.3% of our forecast while net profit of RM6.1m was 25.7%. Sustained demand for its lightings and transformers together with a continuous run-down of its process equipment order book had helped to underpin the good set of numbers.

· QoQ, revenue was up 8.2%, underpinned by a 102% jump in contribution from process equipment, mitigated by a 17.5% dip in the traditional transformer and lighting division. The jump in process equipment was driven mainly by higher job completion during the quarter while the slight dip in transformer and lighting division was mainly due to seasonal.

· YoY, revenue was up 6.6% while net profit grew a stronger 20.5% mainly due to the lower minority interest as the process equipment subsidiary – Seremban Engineering became fully owned compared with 60% stake previously.

· Margins continued to improve. For the quarter, pretax margin was up 29 basis points to 17.8% driven mainly by rising economies of scale from the new floor space (Factory 5 at Seremban Engineering) as well as better product mix.

· Outlook remained cautious for the time being. Management continues to adopt a cautious stance for the near term given the lingering uncertainties still. Order book for the process equipment division remained at a steady RM38m which should help to sustain another 6 months of activity. Tender book is running at circa RM60m but strike rate should be lower given a more competitive landscape ahead. Comforting to note that one of the division’s major clients which is a leading food & beverage group in the world will be upping their capital expenditure in the current year by some 70% to RM320m. This can only be beneficial.

· Transformer and lighting division should continue to perform in line with the general construction sector which is expected to gain more traction on the back of the stimulus that had been announced by the government since the start of the crisis. Meanwhile, operation in China under 60% owned Ningbo Success which undertakes design and manufacturing of light fixtures have integrated well to the group. More importantly, the products from its China operation have been able to meet the Group’s stringent quality requirements.

· Forecast and BUY recommendation is maintained. Proven execution and growing dominance in the transformer and lighting space are some of our key affinities for the group. Trading at an undemanding 4.1x FY09F, our target price of RM1.18 based on 6x FY09F is maintained.

KL Composite Index- Having a good run still

Bulls continued to maintain charge with CI chalking up another positive week by adding 3.1%. We had anticipated for some breather and consolidation which was not to be during the previous week as buying momentum continued to fuel the rally.

Technically, the CI remained in a positive zone with the primary uptrend since the low in March being very much intact. The resilience of the current run-up had been most remarkable as evidenced by the shallow pullbacks with buying support lending strength on every dip. Moreover, the volume on dips had been relative low indicating strength. Abundant liquidity, benign overseas market conditions together with corporate earnings which are very much within consensus had together helped to underpin the current run-up.

While we are maintaining our positive bias in the near term with a target of 1,070 – 1,100, we are also not ignoring the fact that pullbacks can emerge when least expected especially with markets now having gone up by 24.7% in a little more than 2 ½ months since the March 2009 low. Our attention remained very much centered on the negative divergence that is developing in the daily RSI, the thinning volume on the recent uptick as well as a potential disappointment with the global economic recovery could perhaps cap any further substantial upside from the 1,000 plus levels. On the weekly, the long uptrend line since the Asian Financial Crisis low looks set to be challenged at near the 1,053 level. With the weekly RSI likely to have some legs left, the resistance is therefore likely to be punched through.

Our short term strategy remained the same – which is to let the profit run but look to top-slice as and when the market heads towards our envisaged 1,070 – 1,100 levels. Immediate support for the market is now pegged at 1,037 with 1,026 as next.

Genting – Investing into MGM?

Price: RM4.88
Target Price: RM5.90
Recommendation: BUY

· Buying US$100m MGM’s bond. Genting and Resorts had each subscribed to US$50m senior secured notes issued by MGM Mirage as part of its US$2.5b fund raising (US$1b stocks; US$1.5b bond) exercise to settle some of its outstanding debts. Each US$50m note features: a) US$25m nominal amount of 10.375% notes due May 2014; and b) US$25m nominal amount of 11.125% notes due Nov 2017. The notes were assigned a B and B1 ratings by S&P and Moody respectively.

· Backed by Bellagio and Mirage. The issued notes are secured on the assets of the Bellagio Hotel and Casino and The Mirage Hotel and Casino located in Las Vegas, thus giving downside risk protection to the note holders.

· MGM and its financial status. MGM Mirage, which is one of the world’s leading gaming firm operates 16 wholly-owned casino resorts and has a 50% investments in 4 other casino resorts in Nevada, New Jersey, Illinois and Macau. MGM’s 1Q09 revenue was down by 20% to US$1.5b on the back of increased convention cancellations, continued decline in visitor spending and lower hotel occupancy (1Q09:87% vs 1Q08:93%). Net profit however dropped only 11% yoy to US$105.2m due to a US$190m pre-tax gain resulted from the $775m sales of Treasure Island Hotel and Casino to Ruffin Acquisition. As of 31 Mac 09, MGM is saddled with total $14.4b debt with a net gearing of 3.2x.

· MGM feeble still even after US$2.5b fund raising with $1b debt maturing each for 2009 and 2010. More debts are maturing including c.$500m in 2011 and 2012 each with another $1.4b due in 2013 which should continue to pressure cashflow. With expected weak market conditions over the next few years on the back of a poor US economic outlook, MGM is likely to put another one or two assets up for sale in the next 6 – 12 months to pare debts further.

· MGM Macau to look for new partner? The Wall Street Journal reported on 20 May 2009 that the New Jersey Division of Gaming Enforcement recommended MGM to disengage itself from Pansy Ho, which is its current partner with a 50% stake in MGM Grand Macau. Pansy Ho is considered “an unsuitable person” under the New Jersey Casino Control Act. Following this new development, we believe MGM could potentially divest its stake in MGM Grand under regulatory pressure.

· MGM Grand Macau fits well into Genting’s expansion plan. It has always been Genting’s aspiration to be the leading regional gaming player. Genting is set to strengthen its foothold in the ASEAN gaming market through its investments in Resorts World@Sentosa and Star Cruises JV with the Travellers Hotel in Philippines to develop Manila Bay and Newport City. What the group currently lacks is the exposure to Macau market where most major gaming players already have established operations. Should MGM Grand Macau be up for sale as we postulated, it could offer Genting an excellent opportunity to immediately access Macau gaming market without going through the lengthy asset building process. Project cost for the MGM Grand Macau was reported to be about $1.3b. Even if MGM demands for a premium on top of its 50%-stake of $0.7b, we believe Genting has no problem funding the acquisition through Resorts which is still sitting on a huge cash coffer of RM4.55b (US$1.3b based on RM3.50/US) as of 31 Dec 08.

· Neutral on the MGM notes purchase as the interest income is relatively insignificant despite attractive rates. We are however more excited about the potential entry of Genting into the Macau gaming market given the new regulatory concerns on MGM’s tie up with Pansy Ho. The acquisition of MGM Grand if materialise could be a huge re-rating catalyst for both Genting and Resorts. No change to our forecasts and BUY recommendations for Genting (TP:RM5.90) and Resorts (TP:RM3.52) while we await for more details from the upcoming tele-conference session for 1Q09 results.

Auto Sector- April’s TIV lower by 6.9% MoM

· Non-national segment buoyed the TIV. Total Industry Volume (TIV) in April recorded at 41,135 units (-18.5% YoY, -6.9% MoM) led by stronger sales by the non-national marques, particularly Honda (+36.8% YoY) and Naza (+22.7% YoY). Additionally worth to take note is the Nissan sales, which record consistent MoM sale increase since Dec 2008 leading to a market share of 6.1% from 5.6% previously.

· Toyota continues to record decline YoY for 4 months consecutively although market leadership in the non-national segment is maintained at 16.7% market share in April with sales of 6,884 units (-30.2% YoY, -3.4% MoM). Vios is the most popular model, making up 36.8% of the Toyota sales. 3Q 2009 is expected to be interesting for Toyota when the Prius is expected to be launched and more facelifts/variants will be introduced. Separately, the luxury models (BMW, Benz, Volvo) continues to post resilient sales of monthly average of 680 units vis-à-vis 700 units YoY.

· Lower sales by Proton and Perodua in April. Proton and Perodua collectively commands 53.7% of market share, downed from 55.4% MoM. Proton’s sales volume declined by 3.9% MoM despite sales contribution of 480 units by the Exora for the first time. This came in below our expectation; however, we understand that the bookings of Exora as at early-May stood at over 9,000 which could result in Proton gaining more market share in the coming months. Perodua continues to lead the TIV of 29.8% market share, supported by strong sales of the Viva and Myvi. Perodua will launch its new MPV in 4Q09 at price below RM70K.


· Maintain 2009 TIV estimate of 460,000 units. TIV of 159,816 units up to April accounts 34.7% of our estimate. We expect vehicle sales will continue to remain lukewarm as dampened by the prolonging weak consumer sentiment and tighter financing facility. We gathered that the hire purchase rates are currently hovering in the range of 3.6-3.7% for the national cars and 3.25-3.5% upped by 100 basis points previously for the non-national brands. This may shift buyers towards the national cars; however, we expect the impacts would be limited given the non-nationals cars are targeted mainly at customers of mid-to-higher income brackets. Nonetheless, we are maintaining our assumption that average monthly sales of 38K-40K units is deemed positive before any re-rating. Average monthly sales stood at 39,954 units as at April.

· Maintain Neutral. Re-iterate BUY on Tan Chong and HOLD on UMW, MBM and Proton. Higher promotional expenses to drive sales on the back of weaker consumer spending and lower secondary car value may suppress the margins of the auto companies. However, the anticipated less volatile currencies movement (the Yen and USD against Ringgit) moving forward is expected to lend some comfort to the margins by easing lower the costs of CKDs purchases. We expect the gradual kick-off of the Government’s stimulus package to buffer the contraction in GDP growth this year, which we believe is also attributing partially to the continuing resilient sales performance of the Commercial Vehicles segment of average monthly sales of 3,741 units vs. 3,770 units YoY. On another note, a new refined National Auto Policy (NAP) is expected to be unveiled in September with focuses mainly on the consolidation of sales network, development of the automotive parts and components and issues on Approved Permits.

Maybank- Feeling the chill SELL

Price: RM5.10
Target Price: RM4.60
Recommendation: SELL


· Maybank’s 9MFY09 net profit of RM1,810m was in line with expectations (-19% YoY), accounting for 78% of consensus estimates (inline) and 73% of ours (inline). 3Q net profit of RM503m was weak. 9MFY09 results were characterized by: 1) lower investment banking earnings with pretax profit falling RM78m,
2) a significant jump in provisions for loan losses of RM464m,
3) impairment cost of RM242m for MCB Bank,
4) higher interest expense on issuance of capital securities and
5) RM193m foreign exchange losses.

· Bearish operating outlook. We believe the 9MFY09 results further highlight the difficult conditions although the management indicated a more confident 2009. It is likely that the group’s underlying PBT will see a further decline, compounded by low operating leverage, some further markdowns and rising bad debt provisions.

· Potential write-off on BII investment. We are still concern about potential further write-off on BII investment by 4QFY09. Management indicated that Indonesia’s market discount rate has shot up to 20%, from 16%, when the acquisition took place recently. Despite no further details, we believe the write-off should be in range of RM700-800m. The write-off could offset more than one quarter of Maybank’s profit, resulting in underperforming consensus’ FY09E net profit of RM2,332m. In 1QFY09, Maybank had written-off RM242m of its investment in MCB Pakistan when market discount rate increased to 20% from16%.

· We maintain our SELL recommendation for Maybank. A key catalyst for a rerating to BUY rating is near term value accretion from its M&A activities. The outlook for the next few years will be weigh down by the following concerns:
(1) lack of revenue growth due to moderating net interest income growth
(2) the potential of the newly focused mortgages products may be limited by intense competition
(3) dividend payout deterioration
(4) the issuance of hybrid capital and sub-debts could potentially increase its cost of funds and reduce its local competitiveness and
(5) anticipation of a lower ROE. We raise our target price to RM4.60 (from RM3.90 previously) based on a conservative 1.1x FY10BV of RM4.20. We stepped-up our targeted P/BV multiple of 0.2x, which is inline with the banking sector rerating over the past 6 months.

Bumiputra-Commerce Holdings – 1Q09 in line on the back of renew catalysts

Price: RM8.85
Target Price: RM10.30
Recommendation: BUY

· BCHB reported 1Q09 net profit of RM614m which was inline with our estimate of RM2250 (27%) and above consensus of RM1897m (32%). Exceptionally strong 1Q treasury & investment revenues of RM464m drove the majority of the beat to consensus. BCHB's Investment bank posted record quarterly revenues of RM809m driven by very strong treasury and investment divisions’ performance. Top line growth combined with a lower cost income ratio (53%) and smaller provisioning (RM352m) produced a solid 14% ROE for the quarter.

· We believe consumer banking continues provide stability to group earning. BCHB’s asset quality improved over the quarter which is heartening. Group NPL coverage increased to 84% with net NPL at a lowly 2.3%. Guidance on credit cost of 80bps was largely inline with our expectations.

· In several key aspects, we see the company showing greater resilience than its peers. Given that the bank has been less severely impacted than its global peers, we believe the market has priced in its weaker performance (after several earnings downgrade and profit warnings for the whole 2008). But investors should not lose sight of the fact that key operating and financial trends appear to be more resilient in 2QFY09, thanks to the strong capital market, volatility in forex market and steep yield curve environment.

· This also echo our view that non-interest income has bottomed out in 4QFY08 (see our report dated 24 Feb 2009 titled “Non-interest income bottoming out!”). Equities performance should remain robust providing for revival in BCHB corporate advisory and primary bond market activities.

· We raise our target price to RM10.30 and reiterate our BUY recommendation using a higher 1.8x P/BV multiple on FY10 BV of RM5.70, which premium to industry average of 1.4x. We believe that the premium over the industry P/BV average is justified due to BCHB’s earning visibility which has improved significantly over the past 6 months. In addition, renewed earnings momentun on forex trading, prime brokering and primary bond market could lift earnings above market consensus.

EPF takes profit from banking stocks

PETALING JAYA: The Employees Provident Fund (EPF) has taken profit on almost all its banking shareholdings since the start of May with the exception of Public Bank Bhd and AMMB Holdings Bhd.

Analysts said the move was not entirely surprising given the sharp rises in most of the banks share prices over the past few weeks.

AmResearch senior banking analyst Fiona Leong said prices of banking stocks were at a good level in recent times for profit taking since EPF had been accumulating these stocks to its portfolio since December.

ECM Libra, in a latest update, said the profit-taking activity by EPF also explained the slight pause in the share price movement over the last one week, with most share prices trading within the -5% to +5% region for the week.

Despite profit taking, positive sentiment and interest surrounding banking stocks have certainly turned up a notch on the back of expectations that the worst of the recession is over and earlier concerns of widespread loan delinquencies may have been overdone.

“Share prices could continue on their uptrend on returning interest as most stocks are trading at relatively inexpensive valuations,” ECM Libra said.

On the recent results announcement, ECM Libra noted that Bumiputra-Commerce Holdings Bhd (BCHB) continued to register strong growth in its loans book though its overall asset quality had shown some deterioration after the consolidation of CIMB Thai.

“Based on the recent results, it would seem that larger financial institutions, such as Public Bank Bhd and BCHB, are continuing to see decent growth in their loans book while smaller ones, such as Hong Leong Bank Bhd and AMMB Holdings Bhd, are seeing slowdowns, possibly as a conscious decision to protect their balance sheets and capital,” the report added.

Meanwhile, AmResearch’s Leong said the recent results were within expectations except for BCHB, which registered slightly higher net interest margins.

“The general net interest margin contractions registered were due to the recent cuts in OPR (overnight policy rate),” she said.

She added that local banks did not show any significant increase in non-performing loans (NPLs) ratio up till March.

“However, there could be a substantial increase in NPLs by the second quarter of this year,” she said, adding that loans growth were also expected to moderate sharply from 12.8% registered last year.

Malaysia March manufacturing sales down

MALAYSIA'S value of manufacturing sales fell by 25.5 per cent year-on-year in March, as 80 industries (69 per cent) out of 116 industries covered in the survey posted lower sales.

Total manufacturing sales stood at RM36.6 billion, from RM49.1 billion billion the year before.

The five major industries whose sales value decreased significantly were refined petroleum products (36.6 per cent), computer and computer peripherals (41.3 per cent), other basic industrial chemicals except fertilisers and nitrogen compounds (49 per cent), basic iron and steel products (41.9 per cent) and electronic valves and tubes and printed circuit boards (27.7 per cent).

Meanwhile, sales value for manufacturing in February was revised upward from negative 26.1 per cent to negative 22.9 per cent.

Month-on-month, the sales value of the local manufacturing sector rose 6.3 per cent from RM34.4 billion in February 2009.

SP Setia set to hit RM1.1b sales target

Thanks to 'Setia 5/95 Home Loan Package', Malaysia's biggest property developer has registered RM500 million in sales up to April 19.

SP SETIA Bhd (8664), the country's biggest property developer, is on track to meet its sales target of RM1.1 billion by October 31, thanks to its innovative home loan scheme.

Dubbed "Setia 5/95 Home Loan Package", it allows buyers to make a 5 per cent downpayment on a house and nothing more until completion.

The scheme was launched on January 19, and due to its overwhelming response, the company has extended the promotion period to July 19 and is targeting an additional RM300 million in sales, group managing director and chief executive officer Tan Sri Liew Kee Sin said.

Up to April 19, SP Setia has registered RM500 million in sales.
SP Setia is launching Setia Sky Residences this month, expecting to rake in RM200 million sales.

"When we launch, one whole block comprising 211 units will be sold. Times are good for developers," Liew said at the launch of the group's first low-cost housing scheme at its flagship Bandar Setia Alam in Shah Alam, Selangor, yesterday.

Sky Residences comprises four 39-storey condominium blocks, featuring a total of 844 units worth about RM800 million.

It is SP Setia's first high-rise development in the Kuala Lumpur city centre, located next to the National Heart Institute on Jalan Tun Razak.

On Bandar Setia Alam, Liew said the group will launch 449 units of low-cost apartments priced at RM42,000 each, and 220 units of low medium-cost apartments priced from RM72,000 to RM105,000 per unit, as part of its corporate social responsibility.

The total gross development value is RM34 million.

"We will be losing RM20,000 from every unit we sell but we are building the apartments to cater to the lower income group. The properties will be located next to established areas," Liew said.

To help the lower income group own a home, SP Setia has teamed up with Malaysia Building Society Bhd (MBSB) to provide 100 per cent financing.

SP Setia will build 7,212 affordable homes over the next 10 years.

Housing and Local Government Minister Datuk Seri Kong Cho Ha, who witnessed the signing between SP Setia and MBSB yesterday, said the housing landscape should change with low-cost houses moving up a notch from a low-edge environment.

Kong also urged local developers to build affordable homes close to prime areas and infrastructure to assist the low income group whom largely depends on public transportation for travel.

There'll be mild corrections ahead

The Malaysian bourse is expected undergo further corrections as investors take time to digest the impact of H1N1 flu cases while awaiting the release of manufacturing sales, inflation and foreign reserves numbers this week.

Stocks on the local exchange fell into profit-taking correction last week, dampened by external markets which corrected on weaker-than-expected economic numbers from the US, while locally, new twists and political developments with regard to the Perak state government made potential buyers stay on the sidelines. News of the first case of influenza A (H1N1) in Malaysia that popped up last Friday had a mild impact on the market as well.

The KLCI gave back 12.57 points, or 1.2 per cent, last week to end at 1,014.21, with more than half of the losses contributed by Axiata (-2.3 index points), Genting Bhd (-1.75), Tenaga (-1.57) and Maybank (-1.28). Average daily trading volume and value rose further to 2.8 billion shares worth RM1.94 billion, compared with 2.55 billion shares and RM1.97 billion in the previous week.


The performance of oil and gas companies in the last two months was splendid as the share price and price-to-earnings multiple of almost all players involved in the upstream sector more than doubled along with the rise in crude oil prices that touched US$60 (US$1 = RM3.54) per barrel early last week. Nonetheless, profit-taking activity was visible last Friday as oil prices retreated to U$57 despite a US Energy Department report showing that the US crude supplies dropped for the first time in 10 weeks in the world's largest oil consuming nation. This correction was attributed mainly to the unexpected weakness in the US April retail sales and a surprise increase in the Organisation of Petroleum Exporting Countries' oil supply that exceeded the cartel's target by 967,000 barrels a day.


All eyes will be on Opec's next move when member nations meet on May 28 as the organisation has been targeting US$75 per barrel oil price in early 2010. Although the pickup in oil demand is slow, perhaps an agreement to cut supply further and a resolution to adhere to the output cuts strictly will contribute to this target apart from continued weakness in the US dollar.


Despite the short-term hiccups, the price of this scarce commodity is expected to rise above US$70 per barrel in the first quarter of 2010 as the global economy starts shows showing signs of sustainable recovery by then. Hence, it is worth while to accumulate some growth stocks in this sector during price weakness as the caldendar year 2009 CY09) sector price earnings ratio (PER) of 8x is undemanding versus the KLCI's 14x.


Perisai Petroleum is a clear laggard among them as it is trading at a CY09 PER of 4.8x and the expected migration to the main board next month will be an important catalyst for its share price as it will be within reach of funds that have restriction in buying Mesdaq stocks currently. The company's 5-for-4 bonus issue will go ex-bonus on Wednesday. The company's first quarter 2009 results that will be released this month will add more lustre to the stock as the net profit figure is forecast to exceed its whole year's profit in 2008 due to strong "full quarter" contribution from its newly acquired pipe-laying vessel.


The broader market is expected undergo further corrections as investors take time to digest the impact of H1N1 flu cases in Malaysia while awaiting the release of key economic data like manufacturing sales, Consumer Price Index and foreign reserves numbers this week. Externally, the outcome of US housing starts, building permits and leading indicators will have important influence on global equity market direction this week. Besides oil & gas, weaknesses in the construction and industrial material sectors also should be seen as opportunities to accumulate.

S&P ends worst week in 2 months

NEW YORK: US stocks stumbled on May 15 as energy shares dropped along with oil prices on worries about weak demand, overshadowing fresh reassuring economic data, according to Reuters.

A batch of reports, including consumer prices and sentiment, reinforced hopes that the recession was easing and gave the market an early lift, but it was short-lived.

Equities were unable to maintain gains in a choppy session, as investors took cues from stumbling oil prices. Chevron Corp and Exxon Mobil Corp were among the biggest drags on the Dow. US crude futures fell US$2.28, or 3.9 percent, to settle at US$56.34 a barrel on increasing pessimism about the outlook for global energy demand. Chevron lost 2 percent to US$65.88 and Exxon dropped 0.9 percent to US$69.11.

JPMorgan Chase & Co, down 1.8 percent at US$34.91, was another drag on the blue-chip index and contributed to the 3 percent decline in the KBW bank index. The KBW has doubled since early March as investors hoped banks had seen the worst of the fallout from the credit crisis.

Investors are also trying to assess the sustainability of the rally from the bear market low and how deep a correction stocks could see. The S&P 500 has risen 30.5 percent from a 12-year closing low hit two months ago, but it ended its worst week since the rally began.

"It seems like the bears are starting to come back out and grab more of the headlines than they had been in the last few weeks and that's causing investors to take a second glance at their bullishness and their optimism," said John Schloegel, vice president of investment strategies for Capital Cities Asset Management in Austin, Texas.

The Dow Jones industrial average declined 62.68 points, or 0.75 percent, to 8,268.64. The Standard & Poor's 500 Index dropped 10.19 points, or 1.14 percent, to 882.88. The Nasdaq Composite Index eased 9.07 points, or 0.54 percent, to 1,680.14.

The Nasdaq fell 3.4 percent for the week, breaking a nine-week winning streak. The S&P 500 lost 5 percent and the Dow shed 3.6 percent.

Options expiration also added to volatility.

Equity options and some options on stock indexes stop trading at Friday's close and expire the next day. Typically, options expiration is orderly, but some volatility may occur as players unwind positions against stock and index products.

The CBOE volatility index, considered to be Wall Street's fear gauge, jumped 5.6 percent.

Struggling General Motors Corp said it will drop about 1,600 U.S. dealers as it tries to cut billions of dollars in operating costs and debt before an expected bankruptcy filing at the end of May. GM's stock dropped 5.2 percent to US$1.09.

The move comes on the heels of Chrysler saying it will shut 789 dealerships by early June. The automaker filed for bankruptcy protection at the end of April.

Data showed consumer prices were unchanged last month, while consumer confidence in May pushed to its highest level since Lehman Brothers' collapse last September, which sent shock waves through the financial system.

The reports, along with industrial output that declined at a slower pace, gave more signs that the recession's worst phase may be abating.- Reuters

Tenaga Nasional (TENA.KL): Key Takeaways from Citi Asian Utility Tour

PPA renegotiations to take time - The government (via the Economic Planning Unit and Energy Commission) is expected to lead the renegotiation of power purchase agreement (PPA). Management, however, could not offer a timeline when the PPA renegotiation would be resolved but agreed it would take time.

§ Pushing for tariff formula - Meanwhile, Tenaga has submitted its proposal to the government on the adoption of a tariff formula, which encompassed a fuel pass-through mechanism and a base tariff review. Under the proposal, Tenaga suggested that the tariff be reset every 3 months. Tenaga expects the outcome of its proposal to be out by the end of this year or early next year. Generally, management hopes to achieve a ROA of approximately 6% compared with 4.2% recorded in FY08.

§ No major review expected in July - Following a review in March, management would not be surprise if the tariff review in July is skipped or deferred to December.

§ Coal price to average US$85 in FY09E - Coal costs continue to decline. Based on current commitments, average coal costs should reach US$85 a tonne in FY08E, as guided.

§ Unlikely to buy into coal mines but is considering power ventures - Tenaga is unlikely to buy into coal mines but opportunities present themselves; the group prefers to look at greenfield power generation projects in the Middle-East, India and Vietnam.

Technical Review 11th May 2009

KLCI Daily

Source: Nextview


We all have to take risk everyday we live, like it or not. Even going to work is a risk, but it is a risk that we have to take. We drive our car, motorcycle, take public transport, walk, etc. All of them have risk.

Let say you are driving on the PLUS highway. The speed limit is 110km/h. If you drive at or below the speed limit, say at 90 km/h, it is possible for you to get into an accident? Of course you can! Even though you are driving at safe speed, it is still possible. If you drive at 200 km/h, can you get to where you want to be? Of course you can! Provided you don’t get into an accident.

The difference here is that at 90 km/h, it is more likely that unfortunately accident happen to you but at 200 km/h, you’re the one who went looking for the accident. In stock market words, if you want to buy now, I would say you are driving at 200km/h. The risk is high but you still might get away with it. Obviously the question here is whether you want to take such risk?

Recently I was asked why I gave the warning last week, when it was rather obvious that market strength was still good. After giving my views for few years, I remember being commented for getting the direction correct but sometimes, it was too late. Most of you could hardly do anything. Like in March last year before the election (which was 2 weeks before the election), I was very concern that market was prone to a major correction. By the time it happened there was nothing much you could do.

Still, do not get too concerned with what I said above. The risk of entering market right now is a major correction, not market collapse. This is not the same thing to what happened March last year. I see more upside to market but only after market corrects. The way market is behaving right now is eerily similar to previous behavior, where market can continue to go up until Thursday but Friday and the next day might cancel all the gains that it had in the last 1 week.

Right now I do not know how long this stretch of gains will continue, but I will know when it happens and so will you. Experience will also tell you that when that happens, you could hardly do anything by then. However, I do have the feeling that if KLCI goes straight to 1050-1100 by end of this month, it would not be a good sign. I’m still not sure why so let us see how market goes first.

Resorts World (RWBW.KL): Downgrade to Sell: Entering into Uncharted Territory

What's new - We are downgrading Resorts World from Buy to Sell with a new target price of RM2.37 (from RM3.33), as we believe the discount to its DCF-derived RNAV will widen as we move closer to the opening of the Singapore Integrated Resorts Casino (Singapore IR) in 1Q 2010.

§ Widening discount on unknown impact - Singapore IR is the first real competition to Resorts World and it is unclear how the neighboring casino could impact its bottom line. We see little negative earnings impact on a long-term basis, but difficulty quantifying the impact in the short-term is likely to result in the stock trading at a wider discount to its RNAV.

§ Discount to RNAV, a historical perspective - Before Singapore IR was announced, Resorts World shares traded at a smaller 10-15% discount to RNAV but this discount has widened to over 30% since the 2006 announcement.

§ Ignoring the cash piles - The sizable RNAV discount is primarily because investors have been discounting the company's cash reserves. Given the difficulty in assessing the real impact of Singapore IR, and the lack of any plan to return cash to shareholders, investors are unlikely to accord any value to estimated cash reserves of US$1.6bil by year-end.

§ New target price at RM2.37 - Previously we derived our target price by giving full value to the Resorts World DCF-derived RNAV without any discount. Rather than arbitrarily attaching a discount, we instead remove the cash component from its RNAV since we view the market has not been giving any value to its cash reserves. Our new DCF-based target price is RM2.37.

Plantation – Slowing Exports

· Slower decreased (-5.4% mom) of April inventory to 1.29m MT. Inventory benefited from softer production growth (+0.8% mom) but we also note that both exports (-6.9% mom) and domestic disappearance (-5.8% mom) began to slide.


· Production to pick up. Though Apr 09 production only recovered by 0.8% mom, we believe production recovery would gain pace in 2H09. YoY April production is lowered by 3.1%, suggesting a mild yield stress. We were made to understand by industry players that production drops in Jan and Feb 09 were more related to rainy weathers with potential mild yield stress in play.


· Exports slipped 5.8% mom to 1.19m MT on the back of lower exports to China and EU countries. However, exports to India and Pakistan rebounded from the recent March low.


· Maintain cautious outlook as share prices for most big capped planters have priced in the recent strong CPO price. Currently, we see more negatives in the sector including:

a) more product substitution from palm to soya due to narrowing of CPO price discount vs soya to US$100/MT, which is below the 10 years average of US$124/MT;

b) potentially more soybean planting in US as soybean price has rallied 25% for the past 2 months;

c) high vegetable oil inventories in India and Pakistan to dampen higher imports; and

d) production recovery in 2H09 which should reverse the trend of inventory drop. We are maintaining our FY09 CPO price forecast of RM2000/MT. No change to our target price and recommendations for plantation counters under our coverage: IOI (BUY; TP: RM4.60); KLK (HOLD; TP: RM10.35); Sime (HOLD, TP: RM5.25), Sarawak Plantation (HOLD; TP: RM1.70); and NPC Resources (BUY; TP: RM2.20).

Technicals – Bulls take charge for now

Bullish momentum remained intact. Favourable external backdrop with global equity markets continuing to chalk up impressive gains underpinned by a growing believe that the worst of the crisis is over couple with historical low interest rates had sustained equity as an attractive asset class.

Technically, all indicators continue to point north with expectations of another positive start to the week. Investor psychology is now firmly entrenched in the positive with negative news discounted as many are now training their expectations of a potential V-shaped recovery. While jury remains out, general consensus seems to favour a quick recovery and hence the recent strong equity performance. Augmenting the recent uptick could also be due to some “short squeeze” as a result of the recent pandemic while the quicken uptick of late had also instilled much fear into the sellers which had been restrained.

CI’s immediate upside is pegged at 1,037 with 1,070 – 1,100 levels as next which we believe will be a greater challenge for the bulls in the near term. While volume had expanded tremendously in the near term, caveat however on the quality of the recent run-up which was centered mainly on the lower liners. Retail participation had undoubtedly increased and so is the level of greed. While we maintain our positive stance, we would also like to recommend investors to top-slice as the CI moves towards our envisaged 1,070 -1,100 level.

SP Setia – 1H09 sales in-line with FY09 sales target

Price: RM3.70
Target Price:RM4.25
Recommendation: BUY

· 1H09’s RM521m SPA sales accounts for 47% of FY09’s RM1.1b sales target. SP Setia (SP) has released its long awaited YTD FY09 SPA sales figures, as at 30/4/09. Townships in both Klang Valley and Johor Bahru (JB) accounted for 83% of 1H09 sales values. No doubt 1H09 sales values fell by 39% YoY, but we are glad that management has rightly guided FY09 sales target and is delivering within expectations. (See below for sales breakdown)

· Setia Eco Park leads the ‘pack’ (25% of 1H09 sales value). The project’s 1H09 sales value and sold units grew 51% and 294% YoY, respectively. Success can be attributed to a combination of 1) the 5/95 promotional scheme, 2) presence of Tenby International School 3) high end bungalow products with reduced built up to obtain a more digestible price tag.

· It is evident that the 5/95 promotional scheme has been well received by the public as it sweetens the deal for the many wanting to buy into SP Setia’s branding. Its JB townships demonstrates this best although the deferred payment scheme package with zero entry costs have been a JB norm for many; JB townships were the only geographic segment to show growth at 9% YoY in 1H09 sales to RM210m (see below).

· Maintaining FY09-10E net profit of RM154.9m and RM159.6m, on the back of RM1.5b unbilled sales (1-1.5 years earnings visibility), potential sales from Eco Lakes, Vietnam (registered c.70% bookings by end March 09 for c.USD10m and not included in unbilled sales and stronger 2H09 performance due to improved sentiment and promotional efforts. Management did not release remaining sales booking figures, but hinted that it is still ‘promising’ with high translation rate to SPA sales.

· Reiterating our BUY recommendation with RM4.25 fair value. We continue to like SP for its ability to adapt to tough market conditions via its strong balance sheet (0.19x net gearing, RM572m cash balance) and diversified earnings. SP is likely to be one of the stronger property outperformers during a sector run, given its market leadership qualities; large market capitalisation of RM3.8b and strong branding amongst local and foreign institutional investors. Potential earnings catalysts, on the back of economic recoveries, are 1) PNB property units’ assets injection or on land basis JV 2) conclusion of the Lend Lease deal on Setia City 3) more land acquisitions 4) KL Eco City.

Malaysia Market Strategy "Falling behind, time to catch up

KLCI is up 15% YTD, but remains a laggard in the region In our view, premium valuations and limited scope for earnings surprises at the start of the year have led to the Malaysian market underperforming most of the region year-to-date.

However, we think positive policy moves by the Malaysian government and a less bearish global outlook could slowly reverse this trend. Valuations have spiked-up: Likely pricing-in potential earnings surprises With the recent rally (KLCI is now at 1,009), our Malaysianstock universe has re-rated from 13.3x 2009E PE and 1.5x trailing PBV at the start of the year to 15.4x and 1.7x currently.

Although this puts our Malaysian stock universe closer to the high-end of its historical trading range, we believe a more conducive environment for positive earnings surprises could anchor a further re-rating.

We see the highest upside risk in banks and plantation stocks Latest banking industry and macro trends indicate that our forecast of zero loan growth and spike in provisions could be too pessimistic, if the recent policy moves by the Malaysian government prove successful.

Similarly, our CPO price forecast of US$550/t in 2009 (implies prices fall 15% in the coming months) could be conservative, if supply-demand conditions remain tight in the vegetable oil space.

Better outlook yet to be reflected in select stocks Maybank, Public Bank, Tanjong, and Resorts World have yet to see a meaningful re-rating, with their valuations largely unchanged YTD.

Plantations stocks appear to price-in a buoyant CPO price outlook, while the most meaningful re-rating has been with SP Setia and IJM.

Water – Shimizu-led consortium wins tunneling job

It was reported in the news that Shimizu consortium which includes Nishimatsu, IJM Corp and UEM Builders Bhd through 30:30:20:20 joint venture had won the tunneling job for Pahang-Selangor water transfer project (Lot 1-1). IJM in its announcement yesterday quoted that the tunneling job worth RM1.3b and the construction will take about 5 years time to complete.



· Positive development for water sector. We view this news as a positive development for the water sector as it will provide more certainty in the long awaited Pahang-Selangor water project and hence a crucial development to move the water industry which has been in an uncertain period for a long time especially for the steel pipes manufacturers. The works involved the construction of 45km tunnel. To recap, apart from Shimizu, Taiseh Corp and Kajima are the other bidders for the project.

· The project cost RM1.3b came slightly lower that our expectations. In our previous sector report dated 13th April 2009, we expect the project to cost RM1.5b which is slightly higher than the sum of the contract awarded to Shimizu. We also understand that Shimizu was the lowest bidder for the project followed by Taiseh Corp. At first, Shimizu’s in its bid, attached the VO clause which we think could inherited some cost overrun risk in our perspective. On the financing part from Japan Bank for International Cooperation (JBIC) is providing the loan up to RM2.5b for the project. We expect the construction will take off anytime soon this year.

· Tunnel aside, Langat 2 in the making. The implementation of Langat 2 project will definitely be a re-rating catalyst for the water industry players especially in Selangor. The construction and maintenance of water reservoirs and water treatment plant contract is to be awarded to local companies through an open tender as referred to PAAB. We understand that most of local water players like JAKS Resources Berhad (JAKS) and Salcon Bhd has been eyeing for the construction and the pipe laying works for quite sometimes as they have the capacity and track record to supply the pipes for water related projects.

· Selangor water restructuring a laggard issue. At present, there are no positive developments for the Selangor water restructuring as the recent the meeting between Datuk Peter Chin of KTAK and Tan Sri Khalid leaves the issue unsolved. At this juncture, the ability of the federal government to come up with better offer and award of O&M license to the existing players will likely end the industry restructuring issues. We are maintaining our BUY call for Puncak with the target price of RM3.86.

KNM Group Berhad BUY

Price target RM0.75

Share price at 24 Apr RM0.575
Investment summary
Key takeaways from our recent company visit:

(1) Deferred projects and re-tendering of bids is expected to crystallize in 2H09 as volatility in crude oil prices decreases.

(2) On the flip side, margins for mid/low end products is at risk due to higher competition but margins for high-end segment (mainly from Borsig) are expected to hold firm.

(3) Existing cash and strong FY09 FCF should be sufficient to repay RM132m debt due in FY09 which will see net gearing fall to 30% by end-09 (vs. 50% in FY08).

(4) Foreign shareholding has declined to <30% in Dec08 vs. a high of 40%.

We maintain our BUY rating on the stock with a higher price target of RM0.75/share based on DCF, valuing the stock at 7.8x FY09 PE: (1) We see upside potential as order book replenishment increases in 2H09. (2) Based on our revised FY09 EPS estimate, current share price is valued at 6.0x PE and 5.2x EV/EBITDA, 31% and 15% discount to global peers’ PE and EV/EBITDA.

Cheap O&G exposure
On flat yoy growth, PE and EV/EBITDA valuation look compelling at 6x and 5x vs. global peers’ 9x and 6x. Concerns over further M&A, job cancellations and stock selldown have abated. Stock price will rerate on orderbook replenishment in 2H09.

TM willl make RM 1 per share capital repayment

According to bursa, TM
(I) PROPOSED CAPITAL REPAYMENT TO SHAREHOLDERS OF APPROXIMATELY RM3,505.8 MILLION (“PROPOSED CAPITAL REPAYMENT”);

On 16 February 2009, TM International Berhad (“TMI”) informed TM that it undertakes to pay the amount owing from TMI to TM of RM4,025.0 million, and any interest earned on the monies in accordance with the terms of the Demerger Agreement dated 10 December 2007, by 24 April 2009.

In view of the anticipated payment from TMI, on behalf of the Board of Directors (“Board”) of TM, CIMB Investment Bank Berhad is pleased to announce that TM proposes to carry out a proposed capital repayment to shareholders of approximately RM3,505.8 million.

Axiata Group: Rising from the ashes - Initiate with BUY

Axiata Group
AXIATA MK, BUY, CP 2.02, TP 2.66, Mkt cap: 4,748m, ADV: 6.8m

* Initiate with a BUY. Expect steady earnings growth at Celcom.
Potential debt restructuring at XL could be a catalyst.

* Idea to make its maiden earnings contribution in 4Q09, and account for
11% of Axiata's earnings in 2011E.

* TP: MYR2.66, based on SoTP. Three-year earnings CAGR of 17%.


2009E: P/E 15.5, P/B 0.9, ROE 7.0, Yld -
2010E: P/E 11.5, P/B 0.9, ROE 8.2, Yld -

Technicals – KL Composite Index still positive

Technicals – KL Composite Index still positive





· Our positive bias on the market remained unchanged in the medium term. All technical indicators continuing to point northwards with investor psychology firmly trained towards the bullish as risk appetite improves on the back of a more benign overseas market condition as well as a general expectations that the worst could have been behind.

· The short and shallow pullback during the previous week clearly indicated that the bullish momentum is intact with investors taking every opportunity to buy on the dip. Positives for the market including seasonality, a return of risk assumption as well as the slosh of liquidity that is in the system should likely to keep the equity market buoyant.

· Upside targets remained to be the psychological 1,000 mark with 1,015 – 1,028 as next possible targets. Support remains firmly in place at the 950 – 960 levels in the near term with 933 as next.

· Strategy wise, we remain long for the longer term mandates and will let the profit run while traders will likely to have a field day given the current level of volatility





KENANGA INVESTMENT BANK BERHAD (15678-H)

BNM move to maintain interest rate sign of economy is stable

KUALA LUMPUR, May 2 (Bernama) -- The ringgit is expected to benefit from Bank Negara Malaysia's (BNM) move to maintain interest rate, a move seen as a positive sign that the local economy is stable.

"It is a positive news. BNM's move shows that worries about our economy are easing. People will start to invest again," a local trader said.

She expected the ringgit to trade at 3.58/59 level next week on profit-taking in the earlier part of the week.

For the week just ended, the ringgit touched a three-week high of 3.5570/5620 against the US dollar from 3.5800/5850 last Friday, after taking a beating following the swine flu scare that broke out over the weekend.

"This made investors lose their appetite for risk and sought safe haven currency such as the yen and US dollar," she said.

However, by the later part of the week, the ringgit gained momentum as risk appetite came back on signs of slowing global economic downtrend and that the swine flu had limited impact on economy.

She said the rise in the local unit was in line with local stocks.

The benchmark Kuala Lumpur Composite Index rose by 2.41 percent, or 23.28 points, to close the week at 990.74, after opening 5.97 points higher at 973.43.

The ringgit eased against the Singapore dollar at 2.4076/4143 from last Friday's 2.4004/4060.

It, however, firmed against the yen at 3.6422/6496 from 3.6900/6963 previously.

The local currency eased against the British pound at 5.2907/2995 from 5.2365/2449 last Friday.

It, however, gained against the euro at 4.7379/7460 from 4.7424/7505 previously.