Berjaya Sports Toto: On to another winner! - BUY

Berjaya Sports Toto
BST MK, BUY, CP 5.10, TP 6.00, Mkt cap: 1,950m, ADV: 2.1m


* New Power Toto 6/55 (replacing 6/42 lotto) will boost FY2011 revenue
due to a higher minimum guaranteed prize.

* With dividend in specie, total 2009 payout is MYR0.611, a yield of
11.5%. Expect a 2010 dividend payout ratio of 78%.

* Maintain BUY with a TP of MYR6.00. Largest NFO player with 42% revenue
share and 3x more games then competitors.


2010E: P/E 14.7, P/B 10.6, ROE 83.2, Yld 5.9
2011E: P/E 13.2, P/B 8.7, ROE 72.2, Yld 5.9

Many Variables Ahead (1 July 09)

Good Morning,


With reports surfacing that the 30% bumi equity requirement being be lifted, along with other positive announcements expected to be released in the Invest Malaysia conference which starts today, we expect the KLCI to be positive this week.

Looking ahead however, the outlook is uncertain and we expect the KLCI to consolidate in the coming few weeks. Traders are advised to take the opportunity to sell into strength this week and re-enter when the market stabilise.

OSK-T-28- Launching of new call warrants

Dear all,

Greetings.

Kindly take note that OSK will be launching call warrants tomorrow - Wednesday (1 July 2009). The details of the call warrants will only be made known to us after market close today.

NOTE

1) Please take note that this issue can only be subscribed by Malaysian Nationals only.

2) Minimum subscription order for each CW is 20,000 CW.

3) Maximum order size is 500,000 units for individual and 2,000,000 units for corporation.

4) Allocation result is scheduled to be announced by 02 July 2009 (Thursday) evening.

5) Tentatively listing: 8 July 2009 (Wednesday)

6) PAYMENT DUE: 3 July 2009 - 2.30pm (Friday).

KL Composite Index – Bulls regroup

· Bulls regrouped and arrested the recent corrective pullback, bumping up the CI back above the short term moving averages namely the 30days and 50days. A lack of negative news, ample liquidity as well as the much anticipated Invest Malaysia had been underpinning the recent strength of the local market.

· For the near term ahead, we would expect the market to continue to range trade with a slight upward bias as the market reaches the half-way mark for the year. Window dressing activities as well as the anticipated announcement of further liberalization measures should continue to sustain the market in the near term. Immediate resistance can be expected at the 1,091 – 1,097 levels with 1,134 as next. Support can now be found at the 1,053 – 1,044 levels with 1,030 as next.

· While the market is retaining its positive bias in the near term, we continue to question the sustainability of the uptick from the March 09 low. We maintain our view that the risk / reward remains to favour the former as the market moves higher. Pockets of risks to the so called “green shoots” remain and that the global markets are in need of a consolidation before it can continue to move substantially higher from their current levels. We are therefore maintaining a trading sell call on the market as we enter into the seasonally weaker 3Q.

Asian Market Summary

The major Asian markets closed higher on Friday, with the exception of the Indonesian Jakarta Composite Index. India’s Sensex advanced the most in the region, rising close to 3%.

Japan’s Nikkei 225 average opened higher on the positive U.S. lead, but it came under pressure after a report showed that consumer price inflation in Japan declined sharply in May. However, a commodity rally helped the index recover immediately thereafter and the index advanced solidly to close up 81.31 points or 0.83% at 9,877.
Tire makers led the gains after Bridgestone stated that it expects to report a narrower loss for the first half of the year. The stock gained 8.5%. Yokohoma Rubber advanced 7.57% and Sumitomo Rubber Industries gained 8%.

Nippon Electric, the third largest producer of glass for flat panel televisions, gained more than 6% after doubling its operating profit forecast for the latest quarter, on increasing demand for its products. Among others in the sector, Asahi Glass advanced 2.6%.

Hong Kong’s Hang Seng Index opened higher and moved sideways before legging up further in the afternoon. The index ended up 325.23 points or 1.78% at 18,600. Thirty-eight of the forty-two index components ended higher, with property stocks once again leading the advance. China Mercantile Holding, China Unicom, China Shenhua and Cosco Pacific were among the other notable gainers.

Rising global markets, budget expectations and hopes of improvement in monsoon rains by the first or second week of July helped the Indian market bounce-back sharply on Friday after a considerable amount of profit taking in 8 of the 11 previous trading sessions. Sharp gains in market heavyweights Reliance Industries, Larsen & Toubro and ICICI Bank helped the market end near the day's high. The BSE Sensex opened higher at 14,374 and saw some sideways movement before rising sharply to finish at 14,765, up 419 points or 2.92% from the previous close.

Automobile Sector- 27 June 2009

Auto Sector - May TIV upped by 6.8% MoM

· National segment buoyed the TIV. Total Industry Volume (TIV) in May recorded at 43,944 units (-8.3% YoY, +6.8% MoM) led by national cars (+16.6% MoM) garnering 58.6% market share from 53.7% in April. Perodua continued to maintain market leadership with sales of 13,194 units (+7.5% MoM) or a 30% market share, thanks to solid Myvi (+17.3% MoM) and Viva (+3.0% MoM) sales. Proton improved significantly by recording stronger sales of 12,542 units (+27.9% MoM) or 28.5% market share from 23.8% a month ago, underpinned by the Saga (+10.2% MoM), Persona (+15.9% MoM) and a full month contribution from the Exora of 2,156 units which made up 17.2% of Proton’s sales volume in May.

· Non-national declined 16.8% YoY and 4.5% QoQ. Toyota maintains market leadership in the non-national segment despite sales was lower by 2.4% MoM and 2.7% YoY to 6,719 units or a 15.3% market share. We suspect Toyota continues to lose its market share to Honda mainly to the new Honda City. Interestingly to also note is the continuing strong monthly sales by Nissan (+5.5% MoM) since January underpinned by the resilient Grand Livina and particularly its commercial vehicles (+10.8% MoM). Separately, the luxury models (BMW, Benz and Volvo) continue to sell at surprisingly resilient average monthly sales of 680 largely due to attractive discounts.

· Maintain 2009 TIV estimate of 460,000 units. TIV of 203,760 units up to May accounts 44.3% of our estimate and 42.5% of MAA’s TIV target of 480,000 units. We continue to deem that the average monthly sales to-date of 40,752 units is encouraging and may well on the track to achieve the industry’s targets bolstered mainly by the upcoming facelifts/variants especially by Toyota in the 3Q 2009, the Tan Chong’s three new CBUs in the 2H 2009 and the upcoming Perodua MPV in November. We believe this will stir new excitement in the industry, hence, may held up the robust sales catalysed by the anticipated better economy in the second half of the year. Tight financing of between 3.25%-3.5% HP rates for the non-national segment and 3.6%-3.7% for the national cars may dampen sales, however, we expect this to be partially mitigated by strong promotional HP rates to as low as 2.3%.

· Maintain Neutral. We expect lack of catalysts to re-rate upward the automotive sector which is largely correlated to the economy growth. However, we also do not expect the sector to re-rate lower premised mainly on the on-going aggressive promotional HP rate and more new models in the pipeline in the 2H 2009 to lift up the consumer sentiment. Maintain our HOLD calls on UMW, Tan Chong and MBM. We are comfortable with these companies’ financial positions and undemanding valuations while waiting for the revival of the industry. The companies’ competent management are also worth credited in this challenging operating environment which are constructive when comes in the recovery of the sector. Re-iterate SELL on Proton. The FOREX (the Yen and USD against Ringgit) movement will remain as key earnings risk to the auto companies. On another note, a new refined National Auto Policy (NAP) is expected to be unveiled in September. We expect focuses will mainly be on the consolidation of sales network and vendors and development of more initiatives to the automotive parts and components.

AmWatch, 26 Jun 2009

STOCK FOCUS OF THE DAY
Glomac Bhd : Re-rating catalyst remains to be seen HOLD

We maintain our HOLD rating on Glomac Bhd (Glomac) with higher fair value of RM0.76/share based on a 50% discount to our estimated NAV of RM1.50/share. Glomac’s FY09 earnings of RM32mil are in line with ours and street’s estimates of RM31mil. Glomac’s earnings YoY declined 8% from RM35mil.

This was offset by a fair value gain from sale of Wisma Glomac. The group managed to generate sales of about RM30mil during its sales campaign in conjunction with its 21st anniversary. New pre-sales to be underpinned by its commercial development in Glomac Damansara (GDV - RM800mil) where the group has sold 51% of the first phase (GDV - RM53mil).

We estimate earnings to decline 5% YoY to RM31mil in FY10F and to grow 4% in FY11F to RM32mil. Glomac’s current balance sheet is relatively healthy with net gearing of 12% of shareholder’s funds (as at end of April 09) versus 29% in the preceding quarter. Currently Glomac is trading at a steep discount of 50% to our estimated NAV of RM1.50 and we believe Glomac would continue to be trading at such a steep discount given lack of re-rating catalyst.

QUICK TAKES
KNM Group : Earnings expectations to be lowered soon UNDER REVIEW
Steel Sector : Huge iron ore deposit found in China OVERWEIGHT
Tan Chong Motors : All is well in end of family dispute HOLD

NEWS HIGHLIGHTS
S P Setia : CEO doesn’t see PNB takeover taking place
Malaysian Airline System : Singapore flights to contribute 10pc to revenue:Firefly
AirAsia : Scraps administrative fees / Govt to resolve airport tax dispute

FCPO Daily Commentary 062509

8.30AM: Soy oil futures finished lower Wednesday, spiilover weakness from crude oil futures. The absence of fresh fundamental news promoted a consolidative theme, with traders taking a cautious approach ahead of the delivery period for July futures and key June 30th government acreage report.
Sep09 contract may open within 2235-2255 levels, today.



FCPO closed 2250, down 36 pts Wednesday. Market traded lower and in a tight range-bound, in line with lower soy oil during Asian hours.
Palm oil market ended with little activities. The absence of fresh fundamental developments kept most participants on the sidelines. FCPO remains a ‘sell on rally’. The immediate resistance is 7-SMA@ 2293. The stronger resistance lies at 2350 level

Kenanga Today - 24 Jun 2009

Corporate News

· KNM sees 2009 profit 'comparable' to 2008's

· Top Glove profit may soar 30pc to RM143m

· AirAsia scraps administrative charges

· SP Setia CEO doesn’t see PNB takeover taking place

· HeiTech Padu aims to double overseas business

· EPF substantial shareholder in Hap Seng Plantations

· Berjaya Media posts 16-month RM36.7m net profit



Foreign News

· China defends export policies against WTO complaint

· OECD Calls For ECB Rate Cut

· ECB pumps €442bn into banking system

· Oil drops below $69 as traders eye US dollar

· GM, Opel seeking other offers: report

· Japan FM to press G8 to enforce NKorea sanctions

· Chrysler legal bill for bankruptcy: $12.7 million

· U.S. durable goods jump

· Sinopec buys Addax for 7.2 billion US dollars

· China blocks Google website

FOCUS OF THE DAY

Market Strategy :Next leg up to be earnings-driven; fair value raised from 1,050 to 1,190


In our earlier strategy report - Bear rally but vicious liquidity cycle to sustain run, April 2009, we pointed out that the KLCI was entering an extended bear rally from a vicious liquidity cycle. After rebounding 26% off lows in March 2009, the KLCI is now negotiating a mid-cycle correction. Our analysis of previous two bear rallies - in 1998/1999 and 2001 - indicates that a pullback after troughs tends to be transitory, stretching no longer than two months.

This time around, the correction may be less dramatic because starting point of the recent upswing was from a depressed trough PE of 11x in March 2009, versus 16x in April 2001. Fundamentally, we are unmoved. We have raised our fair value from 1,050 to 1,190 by rolling-over the valuation base into 2010 on an unchanged PE of 15x.

Key risk is renewed concern over inflation with an associated upturn in interest rate cycle - putting an end to net liquidity creation. Two themes for 2010 are infrastructure spending and reflation. Faster return to growth must be anchored by domestic demand via a resurgence of public spending. Our fixed income team believes funding for infrastructure projects is not a concern as Malaysia’s excess domestic liquidity is more than RM250bil, although yield may climb to entice demand.

We continue to like reflation trades - oil & gas, plantation, property and steel - given demand kicker from improved prospects of an economic recovery and a weak US$. Our top-ten BUYs are IJM, WCT, Gamuda, Ann Joo, IJM Land, SapuraCrest, Kencana, IOI, Asiatic and Bumi-Commerce.

TOPGLOV net profit surge 70% at 3rd quarter

1) Net profit 9mths FY09 of RM113.1 million surpassed 12mths net profit for FY08.

2a) PBT 3Q09 of RM54.3 mil, UP by 81% compared to 3Q08.
2b) PBT 9mths FY09 of RM142.5 mil, UP by 48% compared to 9mths FY08.

3a) Net profit 3Q09 of RM42.4 mil, UP by 70% compared to 3Q08.
3b) Net profit 9mths FY09 of RM113.1 mil, UP by 36% compared to 9mths FY08.

4a) Sales revenue 3Q09 of RM372.0 mil, UP by 4% compared to 3Q08.
4b) Sales revenue 9mths FY09 of RM1,104.6 mil, UP by 9% compared to 9mths FY08.

5a) EPS 3Q09 of 14.3 sen, UP by 63% compared to 3Q08.
5b) EPS 9mths FY2009 of 38.1 sen UP by 33% compared to 9mths FY08.

6) Continuous strong & healthy balance sheet position, at net cash position and cash in bank of RM173.2 mil.

7) Declared 1st interim dividend of 7 sen net per ordinary share.

Public Bank: Carried by strength of domestic

Public Bank Bhd
Recommendation: BUY
Share price: RM8.80
Fair value: RM10.40
Carried by strength of domestic operations

* We reiterate our BUY recommendation on Public Bank Bhd (PBank) as we remain convinced this banking group will weather the current economic downturn better than its peers. Our fair value (Gordon Growth model) is raised to RM10.40/share.

* PBank continues to surprise with its ability to chalk up above average loans growth. The banking group's domestic loans book is expected to grow 4% QoQ in 2QFY09, bringing year-to-date loans growth to 8.5%.

* With loan approvals up 10%-12% YoY, PBank is on course to achieving its loans growth target of 15% for FY09F. It continues to focus on lending opportunities in the retail and SME segments.

* Net interest margin (NIM) likely to slip again in 2QFY09, but by a modest 3 bps, as deposits have yet to be fully repriced. Lending spreads for mortgages and SME loans remain under pressure due to competition but this would be somewhat cushioned by better yields for motor loans following revision in hire purchase rates in March 2009.

* Concerns over capital adequacy have abated especially after PBank successfully issued RM1.2bil in non-innovative Tier-1 capital securities in June 2009. The bank's Tier-1 capital ratio is now 11.2%.

* PBank's overseas operations are, however, not doing as well. Public Bank (Hong Kong) Ltd continues to be impacted by the economic recession there. Demand for credit has dried up, causing Public Bank (HK)'s loans portfolio to stagnate although deposits continue to grow at a healthy rate. Its bottomline would also be impacted by rising loan loss provisions.

* Over at Cambodia, net interest margin has narrowed due to rise in cost of funds while lending activities have been hampered by lack of liquidity.

* No material deterioration in asset quality, particularly for domestic operations. Management expects for FY09F credit charge-off of 20-22 bps for its Malaysian operations and a higher 30-40 bps for its business in Hong Kong.

* After some fine-tuning of our forecasts, we expect PBank to post earnings of RM2,327mil (YoY: -4.5%) in FY09F and RM2,634mil (YoY: +13%) in FY10F.

* Our BUY recommendation is premised on the group's healthy balance sheet, good earnings track record, above average ROE and attractive dividend yields. Tier-1 capital ratio of 10% at the parent bank is in line with that of other major banks. Stock offers upside of 18%.

SP Setia – TRADING SELL

SP Setia – A boost from China (Company Update)

Price: RM4.52
Target Price: RM4.25
Recommendation: TRADING SELL

· China story propels SP Setia (SP) share price to lofty levels, surpassing our fully diluted RNAV of RM4.25 by 6%. We believe share price has been boosted by SP’s potential revenue from the JV development in Hang Zhou China and China’s, positive news flow; the market is anticipating contribution in the near future given China’s economic prowess .

· However, we believe market is over-pricing in the good news as FY10E PER is current trading at 28.8x which is higher than Malaysia’s 2007 property bull run year forward PER of 22.1x. We also like to remind investors that Malaysia will continue to be its main income generator even if the China project starts contribution.
· China JV is a re-rating catalyst, but likely to contribute significantly to earnings post FY10 (assuming that the JV sees fruition). To recap, SP and Hangzhou Ju Shen Construction Engineering Ltd has signed a co-operation agreement to consider the viability of developing 25acs Xinzhong/Xin’an Village, Ningwei Towen, Hangzhou City. Duration of the decision period will last approximately 6 months before the JV is finalized. Based on its Eco Lake, Vietnam experience, we think that a longer gestation period is likely as China is new to SP.

· We believe that investors should start top slicing on the back of the China catalyst. Although we are confident that the China project will pull-through, whilst a strong balance sheet (0.2x net gearing) provides opportunities for more land acquisitions, we remain cautious of stretched valuations of the overall market as a whole. If the China project takes too long too conclude, we may see a reversal in share price performance; this would in fact provide a good opportunity to re-enter at less demanding valuations.

· Downgrading to Trading SELL from BUY. Fair value remains unchanged at RM4.25. At current prices, SP is trading at 28.8x FY10E PER which is a steep premium to its 11x peer averages, 16x market and 11x historical averages. Similar 2.3x PBV is trading at premiums to its 1.1x peer averages and 1.2x historical averages. Short term re-rating catalysts lies with finalization of the China project and more Vietnam projects.

Recovery to disappoint in 2010 after temporary bounce this year

· We now expect growth to resume in Q3 led by inventories and the fiscal stimulus

· After a sharp recession a strong, sustained bounce would normally be expected

· But the continuing slide in home prices and ongoing credit crunch suggest otherwise

· We forecast a couple of strong quarters over the winter but then the recovery fades

KL Composite Index – Consolidation time

· In line with regional’s performance, our market moved into a corrective mode which is to be expected given the recent strong performance on the back of improved investor sentiment and expectation of a year end economic recovery.

· Near term, our market will continue to take cue from the region’s performance as well as the upcoming Invest Malaysia conference whereby key policy initiatives are anticipated to be announced. Volumes are likely to be relatively lower ahead of such policy announcements but we do see certain degree of discounting being factor into prices which could lead to perhaps disappointment upon actual announcement.

· For the bullish thoughts to be maintained, we suspect that the bulls will need to take out the recent high of 1,091 in the near term else things can deteriorate further with doubts on the sustainability of the recent uptick sapping confidence as quickly as the bulls nurtured them. Adding to the danger remains to be the seasonality effect whereby the local market’s performance had been sub-par during 3Q based on historical perspective.

· Technically, the break of the secondary uptrend line from end March 09 as well as the fast flattening short term moving averages (30 days and 50 days) indicates that the recent market uptick could have lost a tremendous amount of momentum. Some further consolidation is therefore likely in the near term before a clearer direction can be detected. As mentioned above, unless and until the bulls are quickly able to punch through the recent high of 1,091, the bears could perhaps be lurking somewhere and strike when opportunity beckons. Looking at the weekly chart, we noted that the CI is resting precariously on the uptrend line stretching from the crisis low in 1998 at near the 1,053 levels while weekly RSI is rolling over, lending strength to the consolidation view. Immediate resistance we see at the 1,076 level with 1,091 as next while support is pegged at 1,053 with 1,030 – 1,023 as next.

· As for the recommended strategy, we continue to advise a rotational out of the cyclicals and into the defensive in anticipation of a more difficult trading environment over the course of the next few months.

RESORTS change name to Genting Malaysia Bhd w effect from 18 June 2009

Type:Announcement
Subject:CHANGE OF NAME OF COMPANY TO GENTING MALAYSIA BERHAD



Contents:Further to our announcements dated 12 May 2009 and 16 June 2009, we wish to announce that we had today received the Certificate of Incorporation on Change of Name dated 18 June 2009 issued by the Companies Commission of Malaysia.

Pursuant to the above and in accordance with Section 23 (2) of the Companies Act, 1965, the Company has changed its name from Resorts World Bhd to Genting Malaysia Berhad with effect from 18 June 2009.



For and on behalf of the Board of Directors
TAN SRI LIM KOK THAY
CHAIRMAN AND CHIEF EXECUTIVE
GENTING MALAYSIA BERHAD
(FORMERLY KNOWN AS RESORTS WORLD BHD)

FCPO Daily Commentary 061909

8.30AM: Soy products stumbled Thursday, as pressured by weather outlooks projecting favorable conditions for crop development heading into next week. Mixed signals from outside markets left futures without clear directions, keeping the market in a consolidative phase.
FCPO Sep09 may open within 2300-2320 levels, today.



FCPO closed 2299, down 76 pts Thursday. Palm oil took a nosedive as fears of poor demand sparked speculative selling.

Losses accelerated further as the support level of 2350 was breached. Technical chart points to a weak market and there is still more downside potential in palm oil market. The immediate ‘sell on rally’ is at 2350 level. The next ‘sell on rally’ lies at the stronger resistance of 2414 level.

Kenanga Today - 19 Jun 2009

RESULTS NOTE

· SP Setia (TRADING SELL; RM4.38; TP: RM4.25) – 1H09 in-line with our estimates but below markets



NEWS HIGHLIGHTS

· IJM JV gets RM303m job in Abu Dhabi

· Tanjung Offshore secures RM162m finance lease from StanChart

· Kencana unit gets RM35m contract

· Maybank CEO is new MEPS chairman

· CBIP bags RM45m Wilmar job

· WCT keen on RM2b low-cost carrier terminal in Sepang

· RHB Cap to expand retail brokerage biz in Vietnam

· TNB may be spared tariff cut

· Petronas to buy LNG from Australia

· KHSB banks on land sale, halal hub

· May vehicle sales at 43,944 units, up 7% on-month



ECONOMIC NEWS HIGHLIGHTS

· Malaysia's manufacturing sales down 26.2% in April



FOREIGN NEWS HIGHLIGHTS

· Upbeat data and financials buoy Wall Street

· Geithner defends plan to give Fed stepped-up powers

Yen falls as signs global slump easing spurs demand for yield

AEON Credit - BUY

AEON Credit Service (M)- 1QFY10 results in-line with expectations (Result Note)

Price: RM3.02
Target Price: RM4.05
Recommendation: BUY

· AEON Credit Service’s (ACSM) 1QFY10 net profit of RM12.2m was within expectations, comprising 20% of our FY10 net profit forecast of RM60.9m and 23.1% of consensus’ estimated RM52.7m. ACSM’s earnings is seasonally stronger in 2H. The motorcycle easy payment (MEP) segment continued to be the star performer, registering approximately 30% sales growth. However all segments - general easy payment (GEP), credit card (CC) and personal financing (PFS)- turned in double-digit sales growth.

· YoY, 1QFY10 net profit rose by 20% on the back of a 22% increase in revenue. Total net receivables increased by 22% YoY to RM877.9m, led by strong double-digit growth in the MEP and GEP divisions. Pretax profit rose by 20% due to improved operational efficiency and lower NPL ratio of 1.85%.

· QoQ, 1QFY10 net profit declined by 10% in spite of revenue having increased by 1%. EBIT declined by 9% due to higher operating expenses associated with new branches. ACSM opened 7 new marketing offices in smaller towns in Peninsula Malaysia in March 2009 to widen distribution network. Pretax profit declined by 11% in line with lower EBIT.

· FY10 and FY11 earnings estimates unchanged. We anticipate net profit growth of 26% in FY10 based on net receivables growth of 24%.

· Maintain BUY recommendation with new target price of RM4.05 based on 8x PER applied to FY10 EPS of 50.8 sen. ACSM’s growth in FY10 will come from the easy payment and credit card segments. The firm will be focusing on launching AEON-Biz (that offers financing of under RM50,000 to SMEs for office automation, and equipment) nationwide and introducing a joint J-Card and credit card by end-FY10.

Lafarge Malayan Cement: Time to play catch up - BUY

* Valuations cheap on all fronts, 2010 P/BV of 1.3x at 38.1% discount to
Asian peers, P/E of 11.0x at 33.3% discount.

* 2009-10 EPS raised by 6.3-7.4% on the back of unabsorbed reinvestment
allowances, lowering effective tax rate.

* TP raised to MYR6.20, P/BV of 1.3x, dividend yields of 5.0-5.7% due to
due to strong FCF yields of 9.1-11.1%. BUY.


2009E: P/E 12.0, P/B 1.4, ROE 12.1, Yld 5.0
2010E: P/E 11.0, P/B 1.3, ROE 12.5, Yld 5.4

FCPO Daily Commentary 061209

8.25AM: With the soy oil (-1.8%) closed lower, FCPO may continue to drift lower to test the support level of 2441. Any follow through selling is likely to see 2400 level coming into focus. FCPO Aug09 may open within 2441-2450 levels, today.



FCPO closed at 2485, down 16 pts. Palm oil managed to hold on to its levels on fear that a possible return of El Nino weather pattern may disrupt seasonally higher production in the second half.



Palm oil still managed to maintain its composure. A higher crude oil prices also contributed as a supportive factor. The day’s high of 2519 would be the immediate resistance level. The next crucial resistance lies at 2550 level.

Malaysian Market Strategy - Radical change to the KLCI

Malaysian Market Strategy - Radical change to the KLCI structure


* The KLCI index, followed by most domestic fund managers, will be
reduced from 100 stocks to 30 stocks on 6 July.

* US$83 bn worth of domestic funds are benchmarked to the KLCI, thus
changes in weightings and components could impact stock prices.

* We know most of the index components, but it will be 'reviewed' on
11 June, which could result in some changes, due to recent significant
changes in market capitalisations.

* Clear beneficiaries: BCHB, Public Bank, Resorts World, YTL Power
and Parkson, assuming no changes.

* Losers: Property, construction, hotel and tech stocks will not be
featured in the new index.

* Following the 11 June revision, possible new joiners are IJM,
Gamuda and SP Setia, which have high free floats.

* Potential drop-outs following the 11 June revision could include
borderline FBM30 components, such as MAS, RHB Capital and Petronas
Dagangan.

Asian Market Daily Briefing

Asian markets closed mixed on Thursday, as investors weighed the impact of higher oil prices and commodities on inflation and an economic recovery. Profit taking after recent gains and negative cues from Wall Street overnight also affected investor sentiment.

After briefly breaking above the 10,000-mark for the first time in eight months, the benchmark for the Japanese market, the Nikkei 225 index, closed at 9,981, down 10 points or a modest 0.1%. Meanwhile, the broader Topix index of all First Section issues on the Tokyo Stock Exchange rose 4 points or 0.39% to 941, its highest closing since November 5. While iron and steel, precision machinery and securities stocks ended with notable gains, insurance, pulp and paper and mining stocks led the decliners.

Steel maker Kobe Steel and Nippon Steel jumped over 5% each and JFE Holdings advanced 3.72% on hopes of improved demand in China and other emerging markets. Defensive stocks in the telecom, railways and insurance sectors such as KDDI, Softbank Corp, Tokio Marine and East Japan Railway Co. ended in the red, as investors shifted their portfolios in favor of cyclical stocks. Trend Micro, a maker of computer anti-virus software, tumbled 4.72% after Microsoft said on Wednesday that it was getting ready to unveil a free anti-virus service for personal computers.

In economic news, the gross domestic product in Japan contracted by 3.8 percent in the first quarter compared to the previous three months, the Cabinet Office said on Thursday in its final report. That was slightly better than the record preliminary reading of -4.0 percent, at which analysts expected GDP to hold steady. GDP saw a 3.8 percent quarterly decline in Q4 of 2008.

China's Shanghai Composite index snapped a 3-day rally to finish at 2,797, down 19 points or 0.67% amid profit taking and mixed economic reports. Decliners in the Shanghai market outnumbered gainers by 528 to 282, while 44 closed unchanged. While banking, auto and property stocks ended with notable gains, stocks of securities firms and property developers ended lower.

On the economic front, China posted a trade surplus of $13.39 billion in May, the General Administration of Customs said on Thursday, below expectations for a surplus of $14.9 billion.

The Australian market closed at a fresh 2009 high, led by miners and energy stocks. The benchmark S&P/ASX200 index closed at 4,047, up 23 points 0.57% and the broader All Ordinaries index rose 31 points or 0.8% to 4,047.

Among big miners, Rio Tinto jumped 5.67%, its rival BHP Billiton rose 1.46% and Illuka Resources surged up 6.84%. Fortescue Metals Group climbed 19.22% amid speculation of Chinese buying interest, even as the iron ore miner said it cannot explain why its shares have almost doubled since early this month. OZ Minerals was in a trading halt and BlueScope Steel gained 2.18%. Gold and banking stocks ended mixed.

Australia's unemployment rate increased in May to 5.7 percent, according to data released Thursday by the Australian Bureau of Statistics. The figure was an increase of 0.2 percentage points compared to the April jobless rate.

South Korea's benchmark KOSPI ended a volatile session up by 5 points or a modest 0.32% at 1,419 amid the simultaneous expiry of June futures and options contracts. Volume was at 478.3 million shares worth 6.88 trillion won and advancers outnumbered decliners by 433 to 361.

Steel makers rose after Brazilian mining giant Vale agreed to cut iron ore prices and construction and engineering stocks advanced on reports about new order receipts, while airline stocks fell due to higher crude oil prices.

The Indian market was in a consolidation mode after a 2-day rally, as investors took profits following a massive 90% rise in the benchmark indexes since its March lows. The BSE Sensex ended at 15,411, down 55 points or 0.36%.

Among the other markets in the region, while Singapore's STI Straits Times index fell 0.39%, Taiwan's TWII Weighed index rose 1.63% and Hong Kong's Hang Seng index ended up 0.03%.

Plantation - 11 Jun 2009

Sector Update

Plantation - Inventory starts to climb

· As expected, May inventory starts to climb (+5.7% mom) to 1.37m MT on the back of strong production recovery (+8.5% mom) and higher imports (+169.0% mom).

· Entering seasonal high production period. Production in May surged 8.5% mom compared to a mere 0.8% gain in April. We expect production recovery to gain momentum going forward.

· Exports holding firm at 1.22m MT. Exports to China and EU rose while both India and Pakistan’s palm oil imports fell. India and Pakistan experienced lower mom imports of 16.1% and 16.7% respectively, in line with our expectation that both countries will reduce palm oil intake due to high inventory levels. China’s palm oil import meanwhile should increase going forward as summer is the seasonally high palm oil imports period.

· CPO price weakness setting in 3Q. CPO price has softened 10.3% from its peak of RM2789/MT in May to the current RM2501/MT. Our weaker CPO price outlook is premised on the impending rise of production and inventory in the coming months.

· Medium term CPO prospect to hinge on soybean supply and weather patterns. Should soybean production recovers strongly in 2009/10, price upsides for both soya and palm oil could be capped. The potential development of El Nino however could be a wild card for CPO price. The Australian Bureau of Meteorology observed that recent evolution of climatic patterns is consistent with the early stages of a developing El Nino. The probability of El Nino is believed to be above 50% but it is still possible that recent trends may stall without developing into a full El Nino. Historically, El Nino has been associated with lower palm yield which resulted in higher CPO price. CPO price could get a boost if a full blown El Nino developed over the next few months though the negative impact to palm yield are likely to manifest only in 2010. Maintaining our short term cautious stance while our CPO outlook will be reviewed again as we await for further developments of the weather patterns.

· Advocate profit taking strategy as we believe the current share prices for big cap planters have fully reflected the positives in the sector. Downgrading IOI (TP: RM4.60), KLK (TP: RM11.10) and Sime (TP: RM6.20) to Trading SELL while our target price stay. Investors are advised to top slice at current market strength before accumulating again at the next correction.

Water - Roundtable meeting around the corner

Sector Update

Water - Roundtable meeting around the corner

The recent award of tunnelling work (Lot 1-1) in the Pahang-Selangor Water Transfer (PSWT) project to Shimizu consortium has emerged as a catalyst for the Malaysia water sector. Other counterparts, Nishimatsu, IJM Corp and UEM Builders hold 30%, 20% and 20% stake in the consortium, respectively.

· The tunnelling works being the blueprint for PSWT. This is a crucial piece in the PSWT project universe as it will bring the spill over effect to the overall project and the water industry itself. The tunnelling work includes construction of a 45km- long tunnel from Semantan intake / reservoir in Pahang to the future water treatment plant in Langat, Selangor. The contract sum is estimated at RM1.3b. There will be two pipelines with diameter size of 3m to connect the Kelau Dam to the Semantan pipeline. The project tender is expected to be awarded to local pipes manufacturers and contractors in the near term. Apart from the Pahang tunnelling side, the Semantan pipeline (12km) will be the immediate catalyst for the water industry.

· Langat II project award another leg up for the industry. The tender for the project is likely to take place late this year. It is pretty much anticipated in the market that the tender of Langat II project (Lot1-2) will be out in the near term possibly in the 3Q09. Nevertheless, we opined that the award of the project will only be announced early next year (2010) whilst the tunnelling work will be ready in the next 5 years. This will benefit the water related companies which have the capability and proven track record in the previous water projects. Langat II project is under the purview of PAAB or WAMCO (Water Asset Management Company) – wholly owned by Ministry of Finance authority (MOF).

· Selangor water restructuring chronicles continue as the roundtable meeting is around the corner. The new date set up by the new Minister in Ministry of Energy, Green Technology and Water (MEGW) to unravel the issue by end of June 2006. Currently, the Selangor water concessionaires are in the midst of negotiations with the Selangor state, federal and PAAB through several meetings this week and next week. The end-June 09 dateline is seen to be imminent at this juncture.

Watch of day

STOCK FOCUS OF THE DAY
CB Industrial Product : Contract flow to pick up in 2H2009 BUY



Maintain BUY with higher fair value of RM4.15/share based on FY10F PE of 8x instead of FY09F PE of 7x. Although CBIP’s Modipalm mill, which uses horizontal continuous sterilisation method has been facing competition from vertical sterilisation mills, we understand that the latter is not as effective as horizontal sterilises. We understand that CBIP is targeting to receive RM300mil to RM400mil contracts this year versus our assumption of RM200mil. Contract flow was slow in the first half of this year due to a few reasons. CBIP’s Modipalm mill recently has a new Zero Waste Discharge composting plant, which replaces the effluent treatment pond. In view of growing compliance for sustainable palm oil or RSPO (Roundtable for Sustainable Palm Oil) guidelines, we believe that there would be increasing demand for this system. Conventional mills can also use the Zero Waste Discharge System, as it is not patented. But with conventional mills, the Zero Waste Discharge System would be more difficult and less efficient to implement, as there are certain processes in Modipalm mills that conventional mills do not have.



Others :
Keppel Corporation : Road bumps along path to recovery BUY
Economic Update : V-shaped recovery for E&E?



QUICK TAKES
Dialog Group : Another tank project on the way HOLD
Steel Sector : June local steel prices up another RM100/tonne OVERWEIGHT



NEWS HIGHLIGHTS
Public Bank : Sells RM1.2bil of debt
MAS : To partner Turkish Airlines
BCHB : AA-IS for CIMB Islamic sukuk
PLUS Expressways : Offers 50,000 PLUSMiles cards with free RM5 paid-up value

Resorts World: Cheapest casino in Asia ex-cash: BUY

Resorts World
RNB MK, BUY, CP 2.86, TP 3.51, Mkt cap: 4,837m, ADV: 14.0m


* We resume coverage of RNB with a BUY and SoTP-based TP of
MYR3.51/share, offering 23% upside.

* Earnings will be resilient after two Singapore IRs open in 4Q09-1Q10 -
85% of casino customers are Malaysian.

* A cash hoard of MYR5.4b in 2009, ex-cash FY09 and FY10 P/Es of 9.6x
and 8.3x - Asia's cheapest casino.


2009E: P/E 13.9, P/B 1.8, ROE 13.9, Yld 1.9
2010E: P/E 13.3, P/B 1.7, ROE 13.2, Yld 2.1

KL Composite Index - Positive bias still

KL Composite Index - Positive bias still



· Market continues to surprise on the upside. Our envisaged resistance at the 1,053 level proved too feeble as buying momentum picked up, disappointing the bear camps. A benign external environment, ample liquidity couple with expectations of more goodies to be announced towards the end of the month in conjunction with Invest Malaysia have continued to incentivize the buyers and contained the sellers. Technically, the bullishness of the market remained intact, augmented with the break above the uptrend resistance line at the 1,053 level. Weekly RSI continues to head north, indicating strength. While maintaining a positive bias in the near term, the daily RSI however continues to exhibit a negative divergence which we will monitor closely. Next possible resistance is now pegged at the 1,097 – 1,100 level on the weekly with 1,054 as support. Our strategy of top slicing at the 1,070 – 1,100 level is maintained based on risk / reward.

Shipping – dry bulk - Too Fast and Too Much

· Baltic Dry Index skyrocketed. Though we were amongst the earliest who turned positive on the dry bulk sector, we were still surprised on the recent staggering rise of the BDI to the height of 4,291 following a continuously winning run of 34 days. BDI has since taken a breather to close at 3,809 during the time of writing.

· BDI lifted by China’s record high iron ore imports. Cheaper spot iron ore price, lending spree by China’s banks, increased traders’ speculation and higher domestic production cost are amongst the main factors driving the BDI party. China’s iron ore imports for the first 4 months of 2009 already amounted to 189m tonnes, a big 23% yoy jump compared to similiar periods in 2008 (4M2008: 153.5m tonnes).

· but global steel industry still in a mend. World Steel Association forecasts 2009 world steel consumption to fall 14.9% yoy to 1,018.6m tonnes (2008: 1,197.4m tonnes) even factoring the mammoth global government’s stimulus packages. US and Europe (including CIS regions) will lead the pack with forecasted steel use decline of 36.6% and 25.0% respectively. China meanwhile is expected to record a smaller consumption dip of 5%.

· which implies that China risks running an iron ore surplus. China Metallurgical Mining Enterprise Association projected 2009 China’s iron ore import at only 350m tonnes (2008: 444m tonnes) as steel demand wanes. The China Iron & Steel Association shared the same sentiment and believed that China is exacerbating the risk of iron ore surplus in 2009 with current ore inventory at 70.8m tonnes, back to the high levels in Oct 08.

· Fleet supply to outstrip demand. The consensus is that dry bulk fleet growth will accelerate in the next 2-3 years when demand growth is likely to lag despite very high scrapping. While newbuilds deliveries were slower than expected in 1H09, this should pick up in 2H09 and exert downward pressure on the BDI. China and Korea’s shipyards rescue program which encourage vessels’ ownership at cheap financing could prolong the dry bulk downturn as it aggravates the excess capacity problem.

· Ripe for a correction. The BDI futures had corrected substantially in the past week with current BDI futures implying levels between 2,030 to 2,335 for the 2H09. Maintaining our 2009 average BDI forecast of 2000. While we retain our earnings forecast and HOLD recommendation for Maybulk, we are raising our target price to RM3.00 as we value its dry bulk operation at 1.4x book value (previously 1.0x) which is in line with regional bulkers. Investors who benefited from the recent BDI rally should take profit as current high levels are not sustainable.

On The Platter

PARKSON (TP RM5.50– Buy)
Initiating Coverage: A Consumer Retail Behemoth
We initiate coverage on Parkson Holdings (PHB) with a BUY based on a RNAV of RM5.50, valuing the stock at 17.5x CY10 EPS. Despite the 45% appreciation in its share price over the past 3 months, we think there is still scope for further upside premised on (i) the strong recovery in China’s domestic economy which will boost retail sentiment, and
(ii) the good prospects for its Vietnam operation. PHB provides an attractive and cheap exposure to Hong Kong-listed Parkson Retail Group (PRG), which is trading at a 12-month forward PE of 23x. The stock will also benefit from being a constituent of the new FBM KLCI come July 6.

PICORP (TP RM0.59– Buy) Corporate News Flash: It's Business As Usual
O&G SECTOR (OVERWEIGHT) Sector News Flash: Petronas-ExxonMobil Sign PSC Pact

TECHNICAL VIEW- KLCI: Consolidation Continues

MEDIA HIGHLIGHTS
· Petronas Inks Agreement with Exxon Mobil
· Malaysia, China to Ink RM7bn of Trade Accords
· Can-One to Proceed with Kian Joo Stake Acquisition
· Petra Perdana’s Unit Takes Delivery of Vessel
· Dialog, Johor Govt in MoU for Deepwater Petroleum Terminal
· New Business Direction for Kurnia Setia

ECONOMIC HIGHLIGHTS
· Indonesia: Central Bank Lowers Key Rate for Seventh Straight Month
· Euro: Services, Manufacturing Shrank More Slowly in May
· Euro: Producer Prices Decline the Most on Record
· UK: Services Grew in May for First Time in a Year
· US: Factory Orders Rise for Second Month in Three
· US: Services Shrink, Job Losses Mount
· US: Bernanke Warns Deficits Threaten Financial Stability

Malaysia Banks: 1Q09 Results: Loan Losses Tame, but NPL Formation Rises

Loan loss provisions surprisingly low, but NPL formation jumps - NPL formation for domestic banks more than doubled to RM3.8bil from RM1.5bil in the previous quarter. While credit costs rose to 93bps from 81bps in the previous quarter, it is still below our sector forecast of 137bps, thus explaining 1Q09's better-than-expected performances across most banks.

§ 1Q09 sector ROA 0.9% (4Q08: 1.0%) - Excluding acquisitions, gross loans grew 2% QoQ. Net income declined 5% QoQ on 18% increase in loan loss provisions. Pre-provision income stayed flat as recovery in treasury activities (+8%) was offset by higher overheads. Meanwhile, NIMs contracted 5bps QoQ due to the 100bps OPR cut during the quarter.

§ Quant view: Attractive - The Malaysian banking sector resides in the 'Attractive' quadrant. AMMB and Hong Leong lie in our 'Attractive' quadrant. Bumiputra Commerce lies in the 'Glamour' quadrant with poor valuation but strong momentum, while the rest of the banks - RHB Cap, Public Bank, Maybank and Alliance Financial - lie in the 'Contrarian' quadrant.

§ Outlook - [1] While loan growth has slowed significantly in 1Q09, there are nascent signs of improvement in consumer growth in 2Q09. [2] We expect loan loss provisions to rise in the coming quarters given the higher NPL formation in 1Q09. [3] NIM is expected to recover from 1Q09 levels as term deposits gradually reprice downwards.

§ No change to our ratings - We maintain our cautious view on banks. Sell Public: current P/B of 2.9x well above its historical average P/B of 2.4x, downside risk to loan growth with weak economic backdrop. Sell Maybank: worse-than-expected Indonesia performance, upcoming impairment charges and likely disappointing dividend payout this year. Sell BCHB: Strongest YTD performance of +50% bringing stock to mid-cycle valuations, better-than-expected results appear to be in the price.

§ Top pick AMMB - Asset quality has surprised the market on the upside. It is one of few banks which saw lower NPL formation in 1Q09. We believe management is rightly focused on profitability over chasing market share in the current economic downturn. Valuations still look undemanding -- just 1.1x P/B - in spite of its +32% YTD share price performance.

FCPO Daily Commentary 060309

8.20AM: Soy oil futures saw little activity Tuesday. There is no indication of a change in the supply tightness.
FCPO Aug09 contract is likely to trade within the range of 2550-2650 levels today. Market may open within 2590-2610 levels, today.



FCPO closed at 2598, down 27pts, as market retreated after the recent surge. Market succumbed to profit-taking pressure due to sluggish external markets sentiment.

Market staged a technical intra-day bearishness as corrective sales took place. However, prices managed to hold well above 2550 level. The 13-SMA @ 2550 should be able to provide a good support. The immediate as well as strong resistance is at 2650 level.

KL Composite Index - Losing some momentum?

· Week on week, market was barely unchanged, closing a marginal 1.15 points lower. During the week, CI had touched a closing high of 1,053.14 on May 25 coinciding with the uptrend resistance since the Financial Crisis low. Whether this will be taken out in the near term remains to be seen but technically, immediate resistance can now be confirmed at the 1,053 level. While maintaining our positive bias for the medium term, short term however there could be some potential loss in upside momentum with the weekly RSI now indicating that it could trade sideways, a sign that some consolidation is in the pipeline. For the week, we continue to see resistance at the 1,053 – 1,059 levels with 1,070 – 1,100 as next. Immediate support however is now at 1,035 with 1,027 as next. Our strategy remained unchanged which is to top slice should the market spike up towards the 1,070 level and beyond.

Strong 1Q09 results: growing despite the turbulence

● AirAsia’s (AA’s) 1Q FY09 net profit of RM203 mn was in line with our forecast, but exceeded consensus expectations, coming in at 77% of street’s full-year forecast.

● Net profit growth of 26% YoY was driven primarily by higher revenue (+34% YoY) and lower fuel costs, despite taking a RM42 mn charge for forex losses (net of aircraft sale).

● Management will focus on loads; we thus expect average fares to fall. However, we have already factored in a 10% decline in average fares.

● We have cut our FY09 forecast by 5% to reflect the RM42 mn exceptional charge.

● AirAsia is expected to continue on its strong growth trajectory, with a 16% traffic CAGR over the next three years. We thus maintain our OUTPERFORM rating.

Malaysia Airports - Proven 1Q09 earnings supported by MARCS

Price: RM3.60
Target Price: RM4.31
Recommendation: BUY

· MAHB’s 1Q09 net profit of RM91.9m came within our expectations accounting for 22% and 27% of our full year forecast and consensus. The overall performance was strongly supported by the implementation of the Marginal Cost Support (MARCS) with the government. Group revenue was boosted by a commendable 22.5% YoY jump in aeronautical income which accounts for 53% to total airport income while non-aeronautical improved by 11%, mitigated however by a 2% (YoY) drop in passenger movement.

· YoY, net profit was flat, rising 0.4% on lower passenger arrivals and a 72% contraction in non-airport operation. The net profit up marginally by 0.4% due to slower passenger movements particularly in the month of Feb 2009 which saw 9% contraction mainly from international. Non-airport revenue was down 72% due to lower plantation contribution arising from lower yield and selling price (FFB declined from RM737/MT to RM425/MT in FY08 and FY09, respectively). The event management income via F1 event will be recognised in the next quarter this year.

· QoQ, net profit jumped 60% to RM91.9m while its cost was marginalised through MARCS and revenue sharing with the government. The net profit jumped significantly due to the one-off provisioning write-back for the amount of RM50m lease rental payable to the Government. As part of the restructuring plan, the new cost centre -User Fee/Revenue Share of RM60m was expensed out in the quarter. Nevertheless the amount is expected be lower (QoQ) as the RM60m in the 1Q09 accounts is the backdated revenue share from 1st April 2008 to 31 March 2009.

· Going forward, corporate restructuring bodes well to the Group’s earning while the Retail Optimisation Plan (ROP) will help to improve its retails and rental income. The ROP is expected to be in full swing after completion by end 2009. On the new LCCT updates, the management will giving out the tender in the next 2-3 weeks time while reiterating the completion dateline in 3Q2011.


· Maintaining our earnings forecast but revising our target price up to RM4.31 (from RM3.35 previously) after rolling our reference year to FY10 and a higher multiple of 11x versus 9x earlier. We accord a higher multiple on improved earnings visibility post restructuring, successful streamlining of its cost structure and a general improvement in the global economy towards the end of this year.

Banks - A renewed catalyst – Fee income

We foresee stronger BCHB and AMMB price performance into 2HCY09 with a renewed catalyst - fee incomes

· The banks' 1Q09 results were generally in line with or beat our forecasts, and in turn our forecasts were above consensus. 4 banks reported results which are inline with forecast (Public Bank, Maybank, AMMB and Hong Leong Bank on better diversify revenue sources), one with surprise (BCHB on treasury gains) and two disappointments (RHBC and AFG on asset quality deterioration). However, we conclude positively from the 1QCY09 reporting season that the majority of the banks were not hit by the rise of NPLs and compression in net interest margin.

· The start of an economic bottoming process is becoming move evident day by day. Aggressive policy actions have significantly reinforced prospects of eventual recovery. Our optimistic capital market view well as we emphasize the importance of looking beyond the current crisis.

· We opine that the market is at a pivotal point where bad news and earnings downgrades are being ignored. Such behaviors will continue into the new market upswing, causing prices to run ahead of earnings upgrades. Consequently, P/BV multiples should expand to what may be unjustified levels, especially when upward earnings revisions play catch-up. In the past three bear market recoveries (1998, 2001, and 2003), we saw 12-month forward consensus P/BV spiked by 0.5x-1.7x before markets had a "reality check" on earnings outlook.

· We believe investment banks, like BCHB and AMMB, will continue to be outperformers in this environment and generate decent quarterly profits from 2QCY09 onwards. Earnings will be driven by strong equity market performance, which echoes our recent upgrade of Bursa (see Bursa report dated 6 May 2009 titled “From Bear to Bull”). Going forward, equity market should be robust, which would benefit strong prime brokerage players like BCHB and AMMB.

Resorts World: Strong 1Q09 results despite tough conditions

· Core net profit 27% of our FY forecast: Resorts World reported 1Q09 core net profit of M$306MM, up 3% Y/Y but down 22% Q/Q. 1Q09 core net profit also represents 27% of our full year forecast of M$1B and 24% of consensus earnings of M$1.25B. We view the results as in line as earnings in subsequent quarters may be impacted by higher promotional costs, especially leading up to the opening of the Singapore casinos. Note that the company also recognized an impairment loss of M$30.4MM during the quarter for its investment in Star Cruises.

· Relatively strong revenue numbers, but margins lower due to promotional activity: Revenue for 1Q09 grew 8% Y/Y. Hotel occupancy rates were up to 87% in 1Q09 vs. 86% in 1Q08 while average room rates grew 8% (increasing from M$65 to M$70). Visitor arrivals also held up pretty well, declining only 2% in 1Q09 to 4.6MM visitors from 4.7MM visitors in 1Q08 despite weaker economic conditions. On the VIP business front, the company managed to maintain its VIP contribution to casino revenue at 30% despite the slightly poorer luck factor. Note that the company has yet to see significant impact from the swine flu. Margins, however, were impacted due to the higher promotional activity.

· Reiterate our OW, Dec-09 PT of M$3.20. We believe that any expected short-term slowdown in business environment due to the economic crisis as well as health scare has already been factored into our earnings estimates. We are already forecasting a 22% fall in casino revenues for FY09E vs the fall of 15% during the Asian Financial Crisis. Our PT of M$3.20 also attributes a 40% discount to its cash pile and 11% COE for its Malaysian business. The company’s foreign shareholding stands at 31% as at March 2009, a slight decline from 33% as at end last year.

· Please see inside for key takeaways from the J.P. Morgan Live conference call with Resorts World.