KLSE Stock analysis comment

Maybank Proposes Dividend Reinvestment Plan

2010-03-25T17:29:00.000-07:00

Maybank is proposing to undertake a recurrent and optional dividend reinvestment plan that allows shareholders of Maybank to reinvest their dividend into new ordinary shares of RM1.00 each in Maybank.

In a filing to Bursa Malaysia, the company said the proposed dividend reinvestment plan is part of its efforts to enhance and maximise shareholders' value via the subscription of new Maybank shares where the issue price of a new Maybank share shall be at a discount of not more than 10 per cent to five-day volume weighted average market price.

It said the proposed plan will provide the shareholders with greater flexibility in meeting their investment objectives, as they would have the choice of receiving cash or reinvesting in the company through subscription of additional Maybank shares without having to incur material transaction or other related costs.

The company will also benefit from the participation by shareholders in the proposed dividend reinvestment plan to the extent that if the shareholders elect to reinvest the electable portion into new Maybank shares, the cash which would otherwise be payable by way of dividend will be retained to fund the continuing growth and expansion of Maybank and its subsidiaries.

The retention of cash and the issue of Maybank shares under the proposed plan will not only enlarge the company's share capital base and strengthen its capital position, but will also add liquidity of Maybank shares on the Main Market of Bursa Malaysia.

The proposed dividend reinvestment plan is expected to be put in place by the second quarter of 2010.

RBS: Buy ringgit against won, yen

2010-03-11T15:49:00.000-08:00

The bank recommends entering a three-month forward contract to sell the won at 339.36 per ringgit and the yen at 26.74 per ringgit

SINGAPORE: Investors should buy the ringgit against South Korea's won and Japan's yen as Malaysia's central bank may increase its policy rate as many as two more times in 2010, the Royal Bank of Scotland Group plc said.

Bank Negara Malaysia will continue reining in monetary stimulus after last week's rate increase, while government pressure will mean that the Korean and the Japanese central banks won't increase borrowing costs anytime soon, RBS, the fourth-largest currency trader, wrote in a research note published on Tuesday.

Malaysia's central bank will next review its policy on May 13.

"Bank Negara could do a few more rate hikes," RBS strategist Chia Woon Khien said in an interview in Singapore yesterday. "The question is whether they want to go straight to neutral level or stay a little dovish along the way."

Malaysia's central bank raised its benchmark overnight rate by 25 basis points to 2.25 per cent on March 4. The RBS report said there is "scope for at least one, if not two more, 25-basis point hikes" in the coming year. Prime Minister Datuk Seri Najib Razak said last week that Southeast Asia's third-largest economy may expand 6 per cent this year, twice the pace of the official forecast, on a rebound in exports.

The ringgit has risen 2.6 per cent this year against the dollar, the best performer among Asia's most active currencies excluding the yen. It climbed 0.6 per cent to 3.3230 at 12.10pm in Kuala Lumpur, the strongest level since August 2008.

The bank recommended entering a three-month forward contract to sell the won at 339.36 per ringgit, targeting the spot rate to reach 355 when the bet expires on June 9. RBS also suggested a similar forward bet at 26.74 yen per ringgit, predicting the spot rate at 28 upon the contract's maturity.

Will Malaysia rate rise set off SE Asia hikes?

2010-03-11T15:48:00.000-08:00

Analysts say Malaysia’s regional neighbours will focus on domestic factors to determine when to raise interest rates

Central banks in Southeast Asia are set to stick to their current monetary policy course rather than change tack after Malaysia last week surprised markets by raising interest rates.

The Malaysian central bank increased its rate to 2.25 per cent from a record low of 2 per cent, arguing the move would help avoid the risk of economic imbalances later on.

Analysts say Malaysia’s regional neighbours will focus on domestic factors to determine when to raise interest rates for the first time following the global economic crisis.

Thailand’s central bank left its policy rate unchanged on Wednesday, saying Malaysia was one factor among many for policymakers to consider. The Philippines central bank meets on Thursday and is expected to leave rates steady as well.

Malaysia last week became the first central bank in Asia outside Australia to increase rates as part of efforts to unwind crisis measures.

ANALYST VIEWS

(The comments were made before Thailand’s rate decision)

DAVID COHEN, ECONOMIST, ACTION ECONOMICS IN SINGAPORE:

“I don’t think that they will be prompted to tighten in meetings this week in Thailand, or Philippines. It’s certainly got their attention, the fact that people in the market are talking about it. Maybe it helped to test the waters for these folks and I think it’s consistent with the mainstream expectation that sometime in mid-year, they will tighten rates.

They can start using the same rationale as Malaysia’s central bank governor - the normalisation after an extended period of accommodative rates.”

PRAKRITI SOFAT, REGIONAL ECONOMIST, BARCLAYS IN SINGAPORE “No, I think each country has its own set of factors that are driving what they will do. Indonesia may begin its tightening cycle in late Q2, we see 100 basis points for the year but risks are biased to later and lesser. But based on BNM (Malaysia) they won’t be changing their rate outlook.”

FREDERIC NEUMANN, REGIONAL ECONOMIST, HSBC IN HONG KONG: “For the Philippines, I doubt it (Malaysia’s action) has had any major impact, in part because economic data has been far softer in Philippines compared to Thailand and Malaysia.

For that reason, no imminent move by the BSP (Philippines) and the BSP might even hold through the second quarter. There is some tinkering at the edges to remove the emergency measures put in place, but that has to be distinguished from outright rate hike as seen in Malaysia.”

NUCHJARIN PANARODE, ECONOMIST, CAPITAL NOMURA IN THAILAND: “Our house has already expected other central banks in the region to start raising rates in the second quarter as rates are too low, not because of Malaysia’s rate rise. But that may increase the likelihood of rate hikes elsewhere.”

VISHNU VARATHAN, ECONOMIST, FORECAST PTE IN SINGAPORE:
“On the radar now is India. If you’re talking of countries that probably need to normalise, we have a whole list of them.

But given the mix of inflation data as well as growth pick up , conditions are appropriate and most pressing in India. China is also not too far off.”

USARA WILAIPICH, ECONOMIST, STANDARD CHARTERED IN THAILAND: “The impact is limited given implementation by central banks in any country will more depend on specific local factors, mainly on speed of economic recovery, inflation pressures, and any evidence of asset price bubbles.”

Khazanah said placing out 7.7pc of MAHB

2010-03-11T15:47:00.000-08:00

MALAYSIA'S state fund Khazanah Nasional Bhd is placing out 7.7 per cent of Malaysia Airports Holdings Bhd (MAHB), sources familiar with the matter said yesterday.

This follows a similar exercise in September last year when it sold a 5 per cent stake in the airport operator as part of its programme to reduce its holdings in government-linked firms.

The new placement of 85 million shares, via a bookbuilding process, is aimed at raising as much as RM400 million, according to a term sheet obtained by Reuters yesterday.

Prior to the current placement, Khazanah had a 67.7 per cent stake in MAHB.

CIMB and JPMorgan are joint bookrunners in the placement exercise, the term sheet showed.

The state fund in December sold 2 per cent of key power utility Tenaga Nasional in a bid to woo foreign funds back into Malaysia's stock market.

MAHB shares closed at RM4.90 yesterday.

KL bourse set to test 1,308-point level

2010-03-07T16:40:00.000-08:00

It is critical that the benchmark index (FBM KLCI) surpasses the 1,308 level, as it will reflect confidence in the market and economy, says a research head

The Malaysian stock market is expected to continue on the uptrend this week, helped by growing confidence in the domestic economy and in the case of banking stocks, by last week's decision by Bank Negara Malaysia to raise interest rates slightly.

Analysts said the benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index may breach the year's high of 1,308 level.

"I think the market is set for a strong rebound and it will test the 1,308-mark," said Jupiter Securities head of research Pong Teng Siew.

He added that

"The GDP (gross domestic product) figures announced recently signal that Malaysia's growth is strong," he said.

The benchmark index reached the high of this year at 1,308.36 on January 21.

Analysts also believe that banking stocks are likely to continue to rise, backed by the recent interest rate increase which will translate into higher interest margins for banks.

The market ended sharply higher last Friday with the FBM KLCI rising 15.69 points, or over 1 per cent, to 1,299.78, its highest level in seven weeks. Banking stocks were the best performers.

Public Bank Bhd aims to match dividend payout

2010-03-02T17:19:00.000-08:00

Public Bank Bhd (1295) aims to keep paying half of its net profit as dividend this year despite concerns that stricter global rules may require banks to keep more shareholders money in future.

"Our cash payout ratio last year was about 57 per cent. We are looking to try and maintain that level, at around 50 per cent," chief operating officer Leong Kwok Nyem told reporters after its annual shareholders' meeting in Kuala Lumpur yesterday.

He added that the dividend plan is subject to Bank Negara Malaysia's approval and any new developments in the Basel 3 framework, which is still under discussions globally.

The new global rules may require banks to hold more shareholders fund.

Still, the total dividend payout may be lower this year in terms of percentage, as it also gave out treasury shares in the past two years.
The country's third largest lender last year paid a gross cash dividend of 55 sen per share, and a share dividend that equals to 22.2 sen based on its share price at the end of the year. This brought the total dividend payout to 79.3 per cent of its net profit in 2009.

The bank, which distributed 146 million treasury shares in the past two years, is left with 29 million treasury shares. It could return this to shareholders this year to boost dividend, but the number is quite small, Leong said.

"We will look at the appropriate level of dividends for the current year," he said.

Leong said the bank has no plans to raise new capital this year, saying that it is premature to prepare for stricter capital rules under Basel 3, which is still in the early stages of discussion.

Banks are only required to provide feedback to the Basel committee by April this year and there will be further rounds of consultation by the committee before the next draft of the proposal is expected by the year-end. The new rules will not come into effect until end-2012.

Hong Leong Bank: Buy, target price RM9.50

2010-02-28T16:09:00.001-08:00

The target price was derived with the assumptions of a 16 per cent sustainable return on equity, 4 per cent long-term growth, and 9.4 per cent cost of equity.

"Our view on Hong Leong Bank is independent of whether it successfully acquires EON Capital Bhd," HwangDBS wrote in a report yesterday after Hong Leong announced its results for the second quarter ended on December 31 2009.

The stockbroker believes that the growth potential could speed up at Bank of Chengdu in China, which is a 20 per cent associate of Hong Leong.

Hong Leong recently entered into a joint venture (49 per cent stake) with the Chinese bank to operate a licensed finance company in China.
"The venture could add to contribution from its Chinese operations. Its maiden venture in Vietnam has also commenced operations and is expected to contribute positively in two to three years," HwangDBS noted.

Genting Posts Pre-Tax Profit Of RM2.528 Billion

2010-02-26T16:48:00.000-08:00

Genting Bhd Thursday announced that pre-tax profit for its financial year ended Dec 31, 2009, increased to RM2.528 billion from RM1.735 billion in the previous year.

Revenue, however, fell to RM8.894 billion from RM9.082 billion, mainly due to a decrease in revenue from the plantation division, the company said in a statement.

Total revenue from Genting Malaysia Bhd's Resorts World Genting was affected by the weaker luck factor in the premium players business although the overall business volume was higher, it said.

Although revenue from the UK casinos declined as a result of lower business volume and lower win percentage arising from poor luck factor and further exacerbated by the weakening of the pound against the ringgit, there was an improvement in profit, due largely to stringent cost control and significantly lower operating overheads, the company said.

Meanwhile, Genting Malaysia announced its pre-tax profit for the year ended Dec 31, 2009, increased to RM1.764 billion from RM1.127 billion in the previous year and revenue rose to RM4.992 billion from RM4.887 billion.

Palm oil rises on talk of India, China demand

2010-02-23T16:24:00.000-08:00

CPO FUTURES

PALM oil gained yesterday on speculation that demand for the edible oil may remain strong in India and China, the world’s biggest users.

May-delivery palm oil futures advanced 0.2 per cent to RM2,635 a metric ton on the Malaysia Derivatives Exchange.

“Demand growth should remain strong given the projected gross domestic product growth of around 8-10 per cent for China and India,” CIMB Group Sdn Bhd said in a report yesterday.

Palm oil also gained as soybeans, crushed to make soybean oil, advanced for a second day.

May-delivery soybeans traded in Chicago advanced 0.2 per cent to US$9.71 a bushel at 6.49 pm in Singapore. May-delivery soybean oil was unchanged at 39.3 cents a pound at 6.46 pm.

In China, September-delivery palm oil rose 1.2 per cent to settle at 7,016 yuan (US$1,028) a ton on the Dalian Commodity Exchange, extending Monday’s 2.3 per cent jump. Soybeans rose 1.4 per cent to 3,874 yuan, after climbing 1.1 per cent on Monday.

Indonesia, the second-largest palm oil producer, may keep the export tax for March unchanged at 3 per cent, Sahat Sinaga, second deputy chairman of the nation’s palm oil board, said.

Palm oil, the cheapest cooking oil, is also used as an alternative fuel additive and tends to track crude oil prices. It surged 52 per cent last year as crude oil jumped 78 per cent.

Crude oil in New York for March delivery climbed to more than US$80 a barrel for a third day in Asian trading and was last at US$79.62 a barrel at 6.52 pm Singapore time.

RUBBER

MALAYSIAN rubber prices ended higher yesterday amid a quiet market despite weaker prices on the Tokyo Commodity Exchange.

The higher prices were due to concern over a tight supply condition, dealers said.

Many tappers have stopped tapping due to wintering, which is characterised by reduced yield owing to dry weather.

A dealer said the market was quiet due to lack of participants as more traders were still on the Lunar New year holiday mood.

At noon, the Malaysian Rubber Board's physical price for SMR 20 rose 4.5 sen to 1,046.5 sen per kg while latex in bulk edged up 5 sen to 734 sen per kg.

The unofficial sellers' closing price for tyre-grade SMR 20 decreased 1 sen to 1,045.5 sen per kg and latex in bulk added 0.5 sen to 734 sen per kg.

TIN

THE tin price on the Kuala Lumpur Tin Market (KLTM) rose by US$33 to close at US$16,933 per tonne yesterday amid expectations of strong demand from China, following the week-long Lunar New Year break and an improving economic outlook, dealers said.

The dealer said the KLTM also gained support in tandem with the overnight uptrend in the tin price on the London Metal Exchange (LME), which ended US$175 higher at US$17,175 per tonne.

"The tin markets received strong interest in anticipation of a better economic performance this year," added the dealer.

On the KLTM, overall turnover was flat at 50 tonnes.

Bids accounted for 50 tonnes compared with offers of 40 tonnes with European, Japanese and local traders continuing to dominate trade.

The price differential between the KLTM and the LME declined to a premium of US$95 per tonne from US$235 per tonne on Monday. - Agencies

Zeti: Malaysia clearly on track to economic recovery

2010-02-22T16:32:00.000-08:00

MALAYSIA is on the path to economic recovery, Bank Negara Malaysia's (BNM) governor says, ahead of unveiling economic data for the fourth quarter of 2009 tomorrow.

"We are already clearly on the path to recovery. The indicators are that the economic performance is better than expected," Tan Sri Zeti Akhtar Aziz said.

Fourth-quarter data tomorrow will show if Malaysia managed to emerge from its first recession in a decade.

Zeti also reiterated that any adjustment in interest rates would be to achieve a "normalisation" and not a tightening of policy. "Monetary policy will continue to be supportive of the economic recovery process," she said.

Policymakers' next meeting is on March 4. BNM has kept the Overnight Policy Rate low at 2 per cent for seven straight meetings.

Economists expect Malaysia to return to positive growth in the final quarter, after three straight quarters of negative growth.

AmResearch's senior economist Manokaran Mottain recently upgraded his fourth-quarter economic growth to 3.5 per cent from 1.5 per cent.

"We are no longer in extraordinary circumstances. We have come out of that kind of environment," Zeti said after launching Thomson Reuters' new Islamic finance product in Kuala Lumpur yesterday.

The product, known as the Islamic Finance Gateway, is a global platform and directory comprising details and links to Islamic finance professionals, rating agencies, industry standards bodies, index providers and scholars, among other things.

It is available on its flagship Thomson Reuters 3000 Xtra desktop.

"The timely access to a broad range of key information on Islamic finance - including on the product terms, structures and Syariah rulings - will contribute to enhanced transparency in the Islamic financial markets," Zeti said of the product.

PPB may not be able to announce Q4 results on time

2010-02-22T16:31:00.001-08:00

PLANTATION and property group PPB Group Bhd's (4065) fourth quarter results announcement will be delayed, as it waits for 18.4 per cent owned Singapore-based Wilmar International Ltd to announce its results.

On February 12, Wilmar told the Singapore Exchange it will announce its full-year results on March 1. No reason was given for the delay.

According to Bursa Malaysia Bhd's listing requirements, PPB is required to furnish its quarterly report for the fourth quarter ended December 31 2009 to the regulator by February 25.

The group however, told Bursa Malaysia yesterday, it will not be able to meet the timeline, due to Wilmar's material contribution to PPB's financial results.
PPB targets to release its fourth quarterly report to Bursa Malaysia on March 2, the day after Wilmar's announcement to the Singapore Exchange.

Should the group fail to announce its results by March 8, trading of its shares will be suspended.

IOI Corp Outlook Remains Encouraging

2010-02-11T17:02:00.002-08:00

KUALA LUMPUR, Feb 11 (Bernama) -- IOI Corporation Bhd's outlook is expected to remain encouraging on the back of better crude palm oil prices, which averaged RM2,526 in the beginning of 2010, said Kenanga Research.

It said it expected a slight drop of 0.9 per cent in revenue and a drop of 0.5 per cent in net profit for the company in the current financial year.

In a research note released Thursday, Kenanga Research also forecast a trimming of 2.1 per cent in revenue for the 2011 financial year and a decline of 3.5 per cent in net profit as a result of coverage changes.

IOI Corp's pre-tax profit for the second quarter ended Dec 31, 2009 rose to RM598.241 million from RM333.495 million in the same quarter of 2008.

IOI in an announcement to Bursa Malaysia had said the increase was due to higher profit contribution from the property and manufacturing segments and unrealised translation gain on US dollar-denominated borrowings.

Its revenue, however, declined to RM3.06 billion from RM3.727 billion previously.

Meanwhile, MIDF Equity Beat said CPO prices will remain firm this year and next year, with average prices to be at RM2,450 per metric tonne and RM2,650 per metric tonne respectively.

"We expect CPO prices to remain firm in the first quarter of 2010 but may be coming under pressure as the South American soybean harvest begin in the second quarter," it added.

Meanwhile, ECM Libra Investment Research said it expected softer yields and hence profits in the third quarter of this year due to the seasonal production down cycle.

It said this will be despite the stronger CPO prices so far.

"Malaysian Palm Oil Board statistics just for January have indicated that production declined some 11 per cent and this should be reflected in the group's (IOI) numbers," it said.

"We will continue to see stagnant growth into 2010 as the group has minimal major maturities coming on-stream," it said.

Export Of Palm Oil Products Reached RM49.6 Billion Last Year

2010-02-11T17:02:00.001-08:00

BANGI, Feb 11 (Bernama) -- The income from the export of palm oil products last year reached RM49.6 billion following an increase in the production of the commodity.

The Deputy Minister of Plantation Industries and Commodities Datuk Hamzah Zainudin said the increase in production also contributed to the total export of palm oil products of 15.87 million tonnes.

"The strategic approach being implemented by the government in the area of research and development, has succeeded in yielding a new innovation which has had an impact on enhancing the prestige of the palm oil industry," he added.

He said this in his closing speech at a ceremony to present certificates to 47 participants of a Plantation Machine Operators Course (KOML) for the September 2009 session here Thursday.

His speech was read by the Director General of the Malaysian Palm Oil Board (MPOB), Datuk Dr Mohd Basri Wahid.

It was reported earlier that the export of palm oil products is expected to exceed RM100 billion in 2020 following initiatives to effectively enhance production.

In 2008, the export of palm oil products was worth RM65.2 billion.

Hamzah said the encouraging achievement of the country's oil palm industry is also attributed to the progress in research and quality control undertaken by the MPOB.

He said to date, MPOB's research has resulted in more than 440 technology encompassing the upstream sector and production of downstream products which have been accepted and endorsed by the industry.

He also stated that the area under palm oil cultivation has also increased by 4.5 per cent.

This he added, enabled the total area under oil palm cultivation, to reach 4.69 million hectares last year.

Commenting on the KOML, Hamzah said the involvement of local youths in the plantation sector would reduce the dependance on foreign labour which is estimated to reach 300,000.

"The dependence on foreign workers in the plantation sector does not benefit the country as there is an outflow of money overseas and also causes social problems," he explained.

Hamzah said the KOML is being implemented to produce local workers skilled in the operation of agricultural machinery to fullfil the needs of the oil palm industry and this is very important.

He also highlighted that the plantation sector and the cultivation of oil palm had moved to modern, efficient methods, including the use of agricultural machinery.

Maybank Expects OPR To Rise 50 To 70 Basis Points

2010-02-09T17:28:00.002-08:00

Maybank expects the overnight policy rate (OPR) to increase between 50 and 70 basis points this year in line with signs of an improving economy, its president and chief executive officer, Datuk Seri Abdul Wahid Omar said.

He said the bank also expected gross domestic product (GDP) to grow 4.5 per cent this year and inflation to be at 2.3 per cent.

Abdul Wahid said this at a press conference here Tuesday after announcing Maybank's interim results for the half-year financial period ended Dec 31, 2009.

Last month, it was reported that Bank Negara Malaysia had decided to leave the OPR unchanged at a record low of two per cent for the seventh consecutive time amid uncertainty over the prospects of advanced economies.

In a statement issued after the first Monetary Policy Committee (MPC) meeting for this year on Jan 21, the central bank had said the growth in advanced economies would continue to depend on policy stimulus measures and the sustainability of private sector demand amid ongoing financial system resolution and reforms.

It had also said that the growth momentum in regional economies was expected to strengthen further this year, while domestic economic indicators had suggested a favourable economic expansion in the fourth quarter of 2009.

"Positive developments in manufacturing production, financing activity, external trade and labour market conditions reaffirms the assessment that the economic recovery is gaining strength," Bank Negara had said.

Maybank's H1 Pre-Tax Profit Up 38.8 Per Cent To RM2.55 Billion

2010-02-09T17:28:00.001-08:00

Malayan Banking Bhd's (Maybank) pre-tax profit for the first half year ended Dec 31, 2009 rose 38.8 per cent to RM2.556 billion from RM1.842 billion in the previous corresponding period.

Its revenue increased by 35.5 per cent to RM6.408 billion from RM4.729 billion in the same period last year, while net profit rose by 43.5 per cent to RM1.875 billion from RM1.306 previously.

Maybank president and chief executive officer, Datuk Seri Abdul Wahid Omar, said the robust performance was achieved on the back of a significantly improved results across all business sectors.

He said this when announcing Maybank group's interim results for the half year ended Dec 31, 2009 here Tuesday.

Investors seen locking in profits ahead of festival

2010-02-07T17:15:00.000-08:00

Malaysian investors are likely to remain cautious in the week running up to the Lunar New Year, after Asian equity markets fell late last week following overnight losses on Wall Street.

Analysts expect investors to continue locking in their profits this week, while volumes will ease due to the cautious sentiment.

Kenanga Investment Bank Bhd research head Yeonzon Yeow said that small/mid-cap stocks were likely to outperform the rest of the stock market, after the substantial sell-down in big-caps.

Analysts also expect global market volatility to continue as investors appear uncertain whether world growth can support the equities market, given the release of bearish economic data last week.

On the home front, stocks that will continue to draw interest this week include Scomi Marine Bhd and KNM Group Bhd. The two companies made major announcements last week.

Scomi Marine said late last Friday that it was selling its entire 29.07 per cent stake in the Singapore-listed CH Offshore Ltd for close to RM350 million.Giving away 8,888 Free Cards! Get your Tune-In Card now!

The disposal will result in net gain of RM63.6 million after accounting for estimated expenses of RM3.4 million.

The stock, which will resume trading today, last traded at 47.5 sen on Thursday.

Meanwhile, KNM gained 6.5 sen to 81.5 sen on Friday, after its founder and other investors said they planned to take the company private.

The Malaysian stock market benchmark was on an uptrend at the start of last week, but began a downward slide on Thursday as weakness on Wall Street weighed on sentiment.

The FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) fell 17.13 points to end at 1,247.9 points on Friday, in line with weak Asian equity markets that took their cue from Wall Street, which fell after news of a rise in US unemployment benefits.

Markets were also affected by concern over the European sovereign debt problems.

However, a late rally on Wall Street last Friday saw US stocks ending slightly higher after a volatile week.

The Dow Jones Industrial Average erased its intra-day losses by ending 10.05 points higher at 10,012.23. The Standard & Poor's 500 Index was 0.29 per cent up at 1,066.19, while the Nasdaq Composite Index was 0.74 per cent higher at 2,141.12.

While the FBM KLCI may slide to 1,220 points, analysts expect the index to find its support level at 1,200 points.

FDI set for moderate recovery this year

2010-02-04T17:39:00.000-08:00

INVESTMENTS in Malaysia's manufacturing sector halved last year, bitten by the global recession, but foreign direct investment (FDI) is expected to recover moderately this year.

This is because the economies of its foreign investors are set to improve. The International Monetary Fund, for instance, has raised its global economic growth forecast to 3.9 per cent for this year from 3.1 per cent.

The government approved manufacturing investments worth RM32.6 billion last year, down from RM62.8 billion in 2008.

Out of the 766 projects approved by the Malaysian Industrial Development Authority (Mida), foreign investments made up 67.8 per cent, or RM22.1 billion.

"Foreign investments in projects with investments of RM1 billion and above accounted for 37.3 per cent of the total (investments approved), indicating FDI inflows into the country were mainly for quality investments," International Trade and Industry Minister Datuk Seri Mustapa Mohamed said at the investment agency's annual media conference in Putrajaya yesterday.

FDI was mainly in industries manufacturing chemicals and chemical products, non-metallic mineral products, and electronics and electrical products.

In 2008, before the global economic crisis, the country attracted RM46.1 billion of investments

"(The year) 2009 has been tough for all of us. But we also see a better balance between foreign and domestic investments," Mustapa said.

Domestic investments amounted to RM10.5 billion, or a third of the total approved. They were mainly in industries making basic metal products, chemicals and chemical products, are among countries with RHD markets.

BYD's gas-powered cars, F0 and F3, are China's top sellers.

The Chinese manufacturer of batteries and cars aims to become the market leader in new energy vehicles (EV).

Its EV model, F3DM, operates as a plug-in hybrid vehicle, while the soon-to-be-launched e6 will be the first pure-electric vehicle.

The e6 will be launched in China in the first quarter, and in the US by year-end.

Berjaya Group holds 51 per cent of Changan Berjaya Auto Sdn Bhd, a joint venture with China's ChangAn Auto Co Ltd, to distribute Changan Era cars here.

The group also owns distribution rights for brands such as Mazda, Skoda and Mercedes-Benz.

Berjaya Group also plans to assemble Mazda 3 cars in Malaysia soon.

Lee, others in RM3.6b bid for KNM business

2010-02-04T17:37:00.000-08:00

KNM Group Bhd (7164) says its founder and other investors have offered to buy all of its business, valuing the process equipment maker at RM3.6 billion.

The group has received a proposal from BlueFire Capital Group Ltd, which is controlled by Lee Swee Eng, to buy all of its business and undertakings for 90 sen per share.

Lee is the group managing director and major shareholder, with 23.4 per cent of KNM as at May 18 last year.

The offer is 20 per cent more than KNM's share price of 75 sen at yesterday's close.

KNM told Bursa Malaysia that BlueFire was working with GS Capital Partners VI Fund LP and Mettiz Capital Ltd and the international adviser was Goldman Sachs (Singapore) Pte Ltd.
GS Capital is a US$20.3 billion (RM69 billion) global investment fund set up by Goldman in 2007.

KNM's board has granted BlueFire a limited exclusivity period up to March 22 to complete due diligence.

KNM said it will engage its legal and financial advisers to assist the company and its board to evaluate and negotiate the definitive terms of any transaction. KNM's current order book stands at RM2.2 billion. It is bidding for contracts valued at RM14 billion.

KNM Group stock jumps on buyout bid

2010-02-04T17:36:00.000-08:00

KNM Group Bhd, a Malaysian oil and gas services provider, rose the most in almost seven months after a Goldman Sachs Group Inc. private equity fund joined the founder of KNM in a takeover bid that values the Malaysian oil and gas services provider at about $1 billion.

The stock surged 10 per cent to 82.5 sen at 9:05 a.m. local time in Kuala Lumpur, set for the steepest gain since July 15.

Founder and Managing Director Lee Swee Eng offers to buy out company at 0.90 ringgit per share, valuing the process equipment maker at RM3.6 billion.

Lee now owns 23.64 per cent of KNM.

“We believe the valuation is fair and a premium relative to the sectors FY10F PE of 8.8 times, as it reflects control premium of the M&A in Malaysia,” said HwangDBS Research in a note on Friday. - Bloomberg, Reuters

Interest Rates Stable In December 2009, Says Bank Negara

2010-01-28T16:07:00.000-08:00

The daily weighted average overnight interbank rate moved within a narrow range of 1.99 to 2.00 per cent during the Dec 1, 2009, to Jan 27, 2010, period.

Interbank rates of other maturities were also relatively stable, said Bank Negara Malaysia in its Monetary and Financial Developments for December 2009 report released Thursday.

The central bank said the average fixed deposit rates of commercial banks were unchanged between December and January.

As at Jan 15, the average quoted fixed deposit rates for tenures between one and 12 months were within the range of 2.00 and 2.50 per cent, Bank Negara said.

In terms of the commercial banks' lending rates, the average base lending rate (BLR) was unchanged at 5.51 per cent as at Jan 15 while the average lending rate (ALR) trended lower to 4.83 per cent as at end-December compared with 4.91 per cent in November and 4.85 per cent in October, it said.

Bank Negara said the ringgit depreciated by 1.0 per cent against the US dollar from Dec 1 to Jan 27 but it appreciated against the euro by 6.0 per cent, the Japanese yen by 1.9 per cent and the pound sterling by 1.8 per cent.

The euro depreciated against most currencies due to concerns over sovereign-credit issues in Greece, the central bank said.

Against regional currencies, the ringgit appreciated against the Singapore dollar by 0.5 per cent but it depreciated against other regional currencies by between 1.0 and 1.8 per cent.

Dow plunges for second straight day

2010-01-22T18:26:00.000-08:00

NEW YORK: The Dow blue chip index plunged more than 200 points for a second straight day on Friday amid concerns over US President Barack Obama’s bank revamp plans and doubts on Federal Reserve chief Ben Bernanke’s renomination.

The Dow Jones Industrial Average slumped 216.90 points (2.09 per cent) to 10,172.98, posting its third straight session of triple digit losses and its biggest weekly drop since February 2009.

The Nasdaq composite tumbled 60.14 points (2.67 per cent) to 2,205.29 and the Standard & Poor’s 500 index dropped 24.72 points (2.21 per cent) to 1,091.76.

Investors sold ahead of the weekend as the financial sector vociferously opposed Obama’s plans unveiled Thursday to limit the size and scope of US banks and finance firms in a new offensive against Wall Street excesses.

The measures would effectively force financial firms to choose between lucrative proprietary activities — trading in stocks and sometimes risky financial instruments for their own benefit — and traditional activities, like making loans and collecting deposits.

Analysts said the stock selloff over the last two days underscored market concerns.

“The president might be on the right warpath to soothe the American public, yet the market is telling him to be careful about using regulatory weapons of mass destruction,” said Patrick O’Hare of Briefing.com.

“What we see in front of us is a market that doesn’t like the idea of excessive regulation since excessive regulation curtails earnings potential,” he said.

Also Friday, doubts grew over Bernanke’s renomination as key Democrats voiced opposition, prompting a renewed expression of support from the White House.

“If he is not reappointed I think the markets would have a fit. Already we have seen that in the markets...what has happened in the last couple of hours is related to the events around Bernanke,” said Nariman Behravesh, chief economist at IHS Global Insight.

Two members of Obama’s party announced they would vote against Bernanke, underscoring a shift in the political landscape after the loss of a seat in Massachusetts that ended the Senate supermajority for the party.

Obama believes the Senate will confirm Bernanke, a White House spokesman told reporters traveling with the president en route to Ohio.

Beijing’s moves to clamp down on lending to cool an overheating Chinese economy also dragged down the market amid concerns over possible easing of the the global economic recovery from recession.
“Frankly, we see China tightening as the biggest factor at work this week. Its actions are highlighting for market participants that the easy money that fueled the 2009 rebound is going to be less easy to get in 2010,” O’Hare said.

“Naturally, this has to take some wind out of risk trades.” -- AFP

OSK-UOB: FBM KLCI may rise by 15pc this year

2010-01-21T16:45:00.000-08:00

OSK-UOB Unit Trust Management says While it believes that the market is set to become more volatile, the benchmark index is still on the uptrend

OSK-UOB Unit Trust Management Bhd said the stock market's benchmark index could still rise by another 15 per cent this year, enhanced by government spending under its stimulus plan.

"The rise in KLCI has been relatively gradual. While we believe that market is set to become more volatile, KLCI is still on the uptrend," said OSK-UOB Unit Trust Management chief executive officer Ho Seng Yee.

The FBM KLCI rose 45 per cent in 2009 as investors bet the economy would recover this year.

"Oil and gas sector should continue to see more robust activities as crude oil prices remain buoyant. Bank Negara Malaysia has kept interest rates low and this has resulted in resilient consumer spending.

"We expect domestic spending to continue contributing to our economy," he told reporters after the launch of the OSK-UOB Asia Consumer Fund in Kuala Lumpur yesterday.

Yesterday, the KLCI traded 1.74 points higher to close at 1,308.36.

The OSK-UOB Asia Consumer Fund is offered at 50 sen per unit and the minimum take-up rate is RM1,000. The offer closes on February 7 2010.

"The fund is structured to achieve capital appreciation from investments in China and Hong Kong stocks whose businesses benefit from or are related to growth in consumer spending in Asia," Ho said.

Bank Negara Allows EONCap To Commence Merger Talks With Hong Leong Bank

2010-01-20T16:08:00.000-08:00

EON Capital Bhd, the holding company of EON Bank Group, has received Bank Negara Malaysia (BNM) approval to start merger talks with Hong Leong Bank Bhd (HLBB).

"BNM has, vide its letter dated Jan 19, 2010, no objection for EON Capital to commence negotiations with HLBB for the potential divestment of the assets and liabilities of EON Capital and EON Bank including EON Capital's equity interest in EON Bank for the purpose of merging the licensed entities under EON Capital Group with Hong Leong Bank Group."

"The approval to commence negotiations with HLBB is valid until June 30, 2010," EON Capital said in a filing to Bursa Malaysia on Wednesday.

Yesterday, the company told Bursa Malaysia that it had, for itself and on behalf of its subsidiaries, submitted an application to BNM for approval for EON Capital and/or any of its subsidiaries to commence negotiations with potential third parties and their related corporations in Malaysia licensed under the Banking and Financial Institutions Act 1989 (BAFIA) and/or the Islamic Banking Act 1983.

According to the earlier statement, the approval sought relates to two options.

First, EON Capital directly and/or through any one of its subsidiaries undertaking a sale of EON Capital's assets and liabilities, including the equity interests in, and/or the assets and liabilities of, EON Bank, EONCap Islamic Bank Bhd and/or MIMB Investment Bank Bhd.

Second, EON Capital directly and/or through any of its subsidiaries acquiring at least five per cent of the interest in shares in, or merging with, or undertaking an acquisition, of the assets and liabilities of an existing entity in Malaysia licensed under BAFIA and/or the Islamic Banking Act.

The United Nations Conference on Trade and Development (UNCTAD) says the global flows in Foreign Direct Investment (FDI) dropped by about 40 per cent

2010-01-19T16:36:00.000-08:00

The United Nations Conference on Trade and Development (UNCTAD) says the global flows in Foreign Direct Investment (FDI) dropped by about 40 per cent to US$1 trillion in 2009 from US$1.7 trillion in 2008.

UNCTAD indicated this in the "Monitor", its new quarterly publication and the second issue released Tuesday.

The organisation also reported that FDI flows remained relatively stable during the third quarter of 2009 but at a low level. No pick-up in FDI was detected in the fourth quarter.

"The overall decline in FDI for the year was widespread across all major groups of economies.

"After experiencing a severe reduction in 2008, FDI flows to developed countries continued to plummet,dropping by a further 41 per cent in 2009," UNCTAD said.

According to the UNCTAD,flows to developing and transition economies which rose in 2008,declined by 39 per cent in 2009 as the global financial and economic crisis continued to unfold.

It added that in terms of the mode of entry of FDIs, cross-border mergers and acquisitions were the most affected, as it decreased by 66 per cent in 2009 compared to the previous year.

Ringgit among fastest-rising currencies vs US dollar

2010-01-18T16:24:00.000-08:00

PETALING JAYA: Having made steady headway since the start of the year, the ringgit was, for a change, among the fastest-rising currencies against the weak US dollar.

The local currency had risen 2.5% over the past two weeks, and was at 3.3395 as at 5pm yesterday. Earlier this week, the ringgit hit 3.3365 against the greenback – its strongest since August 2008.

The Korean won appreciated 3.6% year-to-date and was the biggest mover among all major currencies followed by the Australian dollar’s 3.26% advance during the same period.

“I think this will be a bearish year for the US dollar and for the ringgit, we see room for further appreciation,” OSK Investment Bank head of treasury Yeo Chin Tiong told StarBizWeek yesterday.

OSK Investment forecast that the ringgit would rise to 3.20 against the US dollar by the end of 2010. The local currency inched up 1% last year, lagging behind sharp advances made by almost all other regional currencies.

Signs that international investors still favour assets in emerging markets, which are recovering faster from the global economic slump last year than countries in the West, would keep demand high for Asian currencies.

Emerging market funds took in US$$2.5bil in net inflows in the week ended Jan 13, according to data released yesterday by US-based fund tracker EPFR Global.

“The inflows are going to lift Asian currencies, especially now that the market is looking at a delay in Fed hikes,” Hong Leong Bank manager of economic and fixed-income research Choong Yin Pheng was quoted by Bloomberg as saying yesterday.

“The ringgit has done well for a laggard.”

Analysts said the prospects of rising ringgit could further boost returns on investment for foreign investors.

Year-to-date, the benchmark FTSE Bursa Malaysia KL Composite Index had gained 2% to close at 1,298 points yesterday. If measured in US dollar terms, the return was higher at 5%.

Earlier this week, Standard Chartered Bank predicted the ringgit will reach 3.15 against the US dollar by the year-end.

Asian Markets End Higher On Recovery Hopes

2010-01-14T16:43:00.000-08:00

The markets across Asia, excluding Hong Kong, ended in positive territory on increasing optimism about global economic recovery taking positive cues from Wall Street where the Dow ended at a 15-month high in the previous session. Profit taking at late trading however limited the gains as traders exercised caution ahead of earnings in the U.S.

In Japan, the benchmark Nikkei 225 Index rose 172.65 points, or 1.6%, to 10,908, while the broader Topix index of all First Section issues rose 14.99 points, or 1.6%, to 959.

On the economic front, data released by the Cabinet Office revealed that core machinery orders declined by a seasonally adjusted 11.3% month-over-month in November, following a 4.5% drop in the previous month. The data surprised economists who expected a bounce back in November with a marginal 0.2% gain. On an annual basis, core machinery orders plunged 20.5% during November, following a 21% contraction in the previous month. Economists expected the orders to decline 10.1% for the month, on annual basis.

In a separate report, the Bank of Japan revealed that an index measuring the prices of domestic corporate goods in the country rose 0.1% in December compared to the previous month. The index came in line with economists expectations, after having risen 0.1% in November. On annual basis, the domestic corporate goods index or CGPI declined 3.9% during December, in line with expectations, following 4.9% decline in the previous month.

Foreign institutional investors evinced fresh buying interest in blue-chip technology stocks in the Japanese market on optimism about better market performance from Japanese markets in the new year. As many as 189 stocks in the 225-stock benchmark Nikkei index ended in positive territory.

Among the major technology stocks, Sharp Corp. gained 3.15%, Sony Corp. rose 2.57%, and Panasonic Corp. surged up 6.10%.

Machinery stocks also ended higher. Okuma Corp. soared 13.64%, Chiyoda surged up 7.22%, Hitachi Construction Machinery advanced 1.64%, Sumitomo Heavy Industries gained 3.73% and Komatsu Limited gained 1.47%.

Trading companies also ended in positive territory. Mitsubishi Corp. climbed 4.35%, Mitsui & Co. rose 4.28%, Sumitomo Corp. gained 3.91% and Toyota Tsusho Corp. advanced 0.99%.

Among airline stocks, Japan Airlines surged up 28.57% as traders evinced buying interest for speculative purpose over this beleaguered airline company ahead of impending fear of delisting. As much as one-third of the total 3.2 billion listed shares, about 1.04 billion shares of JAL were traded in a single trading session. The other airline company, All Nippon Airways rose 1.74%.

Banks also ended in positive territory. Sumitomo Mitsui Financial climbed 3.32%, Resona Holdings rose 1.60%, Mizuho Financial surged up 5.68% and Mitsubishi UFJ Financial rose 2.09%.

In Australia, the benchmark S&P/ASX Index added 29.90 points, or 0.61% to close at 4,898, while the All-Ordinaries Index ended at 4,929, representing a gain of 29.30 points, or 0.60%.

On the economic front, data released by the Australian Bureau of Statistics revealed that the unemployment rate in the country declined by 0.1% in seasonally adjusted terms to 5.5% in December, fueling speculation that the Central Bank might continue to hike interest rates in its next meeting, if not earlier. According to the report, total employment in the country rose by 35,200 during December, following a rise of 31,200 in employment in the preceding month. Of the total 35,200 new jobs during December, 7,300 jobs were for full-time employment, while 27,900 jobs were created in part-time employment category.

Banking stocks advanced on positive economic data related to unemployment rate. ANZ Bank added 0.45%, Commonwealth Bank of Australia advanced 1.39%, National Australia Bank gained 0.86% and Westpac Banking rose 1.12%. Investment banker Macquarie Group was the major gainer in the session, having risen 3.70%.

Mining stocks also advanced on higher commodity prices in the international market. Rio Tinto reported a sharp increase in global iron-ore production for the fourth quarter. Also sales surged up in the quarter beating expectations. Following the news, the stock price of Rio Tinto climbed 2.63%. Among other mining and metal stocks, BHP Billiton advanced 1.53%, Fortescue Metals rose 3.33%, Gindalbie Metals added 1.25%, Iluka Resources surged up 4.57%, Minara Resources gained 1.23% and Murchison Metals increased 1.57%.

Mixed trading was witnessed among gold stocks. While Lihir Gold remained unchanged from previous close, Newcrest Mining ended in negative territory with a loss of 0.98%.

Oil stocks ended mixed. Woodside Petroleum slipped 0.33% and Santos shed 0.36%. However, Oil Search added 0.50% and Origin Energy edged up 0.23%.

Retail stocks also ended mixed. David Jones remained unchanged from previous close. JB Hi-Fi Ltd rose 1.82% and Woolworths Ltd advanced 0.79%. However, Harvey Norman fell 1.53% and Wesfarmers slipped 0.26%.

In Hong Kong, the Hang Seng Index ended in negative territory with a marginal loss of 31.65 points, or 0.15%, at 21,717, led by profit taking in late trading session, especially among the property stocks. The market, which had declined in the previous session dragged down on Chinese banks, opened in positive territory taking cues from other Asian markets and rose to as high as 21,989 in morning session. However, profit taking by traders, especially in property related stocks ahead of key data in the US and earnings from Intel, erased the early gains. Property stocks and banks ended in the negative territory.

In South Korea, the KOSPI Index ended in positive territory with a gain of 14.36 points, or 0.86%, at 1,686, taking cues from other markets in the region as well as positive closing on Wall Street in the previous session. Overcoming the anxiety over derailing of global recovery over China's tightening of monetary policy, the stocks advanced higher as foreign institutional investors evinced fresh buying interest in technology stocks and shipping stocks on optimism about sustaining recovery momentum in global economy.

The Indian market extended gains for the second successive day on Thursday, taking cues from positive trading in other Asian markets as well as the positive closing on Wall Street in the previous session. Mid and small cap companies led the gains on increasing confidence about the economy despite an uptick in the monthly inflation data released during the day. The benchmark Sensex finished at 17,585, with a gain of 75.07 points, or 0.43%, and the Nifty gained 0.50%, or 25.95 points to close at 5,260.

Among other major markets open for trading in the region, Taiwan's Weighted Index rose 93.42 points, or 1.14% to close at 8,299, Straits Times Index in Singapore added 21.14 points, or 0.73%, to close at 2,910, Indonesia's Jakarta Composite Index advanced 12.31 points, or 0.47% to close at 2,645, and China's Shanghai Composite Index jumped 42.89 points, or 1.35%, to close at 3,216.

Asian Markets Slump On China's Decision, Concerns About Recovery

2010-01-13T15:39:00.001-08:00

The markets across Asia, excluding India, ended in negative territory on Wednesday, reacting to the decision of the Chinese central bank to tighten the monetary policy by hiking the reserve requirements by 0.5% in an effort to cool off the growth momentum and rein in inflation. Concerns that global economic recovery might be derailed as well as softer commodity prices impacted market sentiment as traders preferred to lock in gains from recent rally and moved to the sidelines.

In Japan, the benchmark Nikkei 225 Index lost 144.11 points, or 1.32% to 10,735, while the broader Topix index of all First Section issues was down 10.11 points, or 1.06% to 944.

On the economic front, data released by Japan Machine Tool Builders' Association revealed that machine tool orders recovered strongly in December after steep falls in the past several months. According to the report, total orders for Japan-made machine tools surged up 62.8% year-on-year in December, following a 8.4% drop in the previous month.

Light sweet crude oil futures for February delivery ended at $80.09 a barrel in electronic trading, down $0.70 per barrel from previous close at $80.79 a barrel in New York on Tuesday.

Most of the stocks across the sectors ended in negative territory as traders availed the opportunity to unload shares related to China and also booked profits amid concerns that the stock market is getting overheated following recent gains.

Airlines were the major losers with the beleaguered Japan Airlines losing as much as 81.0.8% on huge volumes on concerns about looming insolvency filing and subsequent delisting from the market. The other airline company, All Nippon Airways, shed 2.37%.

Among machinery stocks, Daikin Industries lost 2.43%, Hitachi Construction Machinery slipped 2.34%, Komatsu Limited fell 2.86%, Kubota Corp. shed 2.67% and Japan Steel Works declined 2.44%.

Trading companies also ended in negative territory. Mitsubishi Corp. slumped 3.55%, Mitsui & Co. shed 3.71%, Toyota Tsusho Corp. declined 2.61%, Sumitomo Corp. fell 1.73% and Marubeni Corp. lost 1.83%.

Automotive stocks also slipped on profit taking. Toyota Motor Corp. lost 1.46%, Suzuki Motor slipped 1.11%, Nissan Motor fell 2.79%, and Honda Motor edged down 0.30%.

Bank stocks ended in negative territory. Sumitomo Mitsui Financial shed 2.43%, Mitsubishi UFJ Financial lost 1.84%, Resona Holdings fell 1.18% and Mizuho Financial slipped 0.56%.

In Australia, the benchmark S&P/ASX Index shed 31.40 points, or 0.64% to close at 4,868, while the All-Ordinaries Index ended at 4,900, representing a loss of 31.50 points, or 0.64%.

On the economic front, a report released by the Department of Education, Employment and Workplace Relations revealed that the country's monthly leading indicator of employment index rose to minus 0.716 in January from minus 0.743 reported in December. The rise in January was the seventh successive increase, after having declined for 18 consecutive months, confirming the prediction that employment is likely to grow more quickly than its long-term trend rate of 1.8%.

Light sweet crude oil futures for February delivery ended at $80.09 a barrel in electronic trading, down $0.70 per barrel from previous close at $80.79 a barrel in New York on Tuesday.

Mining and metal stocks ended in negative territory following drop in base metal prices in the international market. BHP Billiton declined 0.65%, Rio Tinto fell 1.60%, Fortescue Metals lost 1.92%, Gindalbie Metals slumped 5.14%, Iluka Resources declined 5.91%, Macarthur Coal slipped 0.94%, Murchison Metals shed 5.94% and Oz Minerals dropped 2.02%.

Oil stocks also ended weaker. Woodside Petroleum edged down 0.10%, Santos slumped 2.94%, Oil Search slipped 0.33% and Origin Energy shed 0.97%.

Gold stocks also ended lower after bullion prices declined sharply in the bullion market. Lihir Gold lost 2.34% and Newcrest Mining shed 1.18%.

Worley Parsons was the major loser in the market. The engineering and maintenance group company has lowered the profit guidance for full year 2010 citing weaker conditions in the U.S as the primary reason. The stocks slumped 11.45% following the downward revision.

Banking stocks also ended in negative territory. Commonwealth Bank of Australia declined 0.99%, National Bank of Australia slipped 0.48% and Westpac Banking shed 0.32%. However, ANZ Bank bucked the trend and ended in positive territory with a gain of 0.18%.

In Hong Kong, the Hang Seng Index ended sharply losing 578.04 points, or 2.59%, and closed at 21,749, reacting to the surprise tightening of the monetary policy in mainland China. The Chinese central bank raised the reserve requirement by 50 basis points, effective January 18, primarily with the intention of cooling off the growth and reigning inflation. Fears that this measure might derail the global recovery process triggered selling led by major Chinese banks. Bank of China lost 3.62%, China Construction Bank fell 3.89% and ICBC declined 3.58%. Of the 42 components in the index, as many as 38 stocks ended in negative territory.

In South Korea, the KOSPI Index ended in negative territory with a loss of 27.23 points, or 1.60% at 1,671, taking cues from other markets in the region which also ended lower on concerns China's move to tighten monetary policy might derail global economic growth. Foreign institutional investors and traders unloaded stocks and moved to sidelines awaiting further direction. Weak closing on Wall Street in the previous session also impacted market sentiment.

The Indian market reversed its early loss and ended moderately higher on Wednesday, shrugging off weak global cues and fears about a surprise monetary tightening in China. The People Bank of China on Tuesday raised banks' reserve requirements by 50 basis points effective January 18, sparking concerns that the move may dampen a nascent economic recovery. The Reserve Bank of India is set to review its monetary policy on Jan 29. There is an expectation that the central bank may follow suit to rein in inflationary expectations. The benchmark Sensex opened gap-down and fell to a low of 17,277 before finishing higher at 17,510, up 87 points or 0.50%, and the Nifty rose 24 points or 0.45% to 5,234.

Among other major markets open for trading in the region, Taiwan's Weighted Index lost 112.81 points, or 1.36% to close at 8,197, Straits Times Index in Singapore fell 27.73 points, or 0.95%, to close at 2,888, Indonesia's Jakarta Composite Index shed 26.68 points, or 1.00% to close at 2,633, and China's Shanghai Composite Index slumped 101.31 points, or 3.09%, to close at 3,173.

US Market:Sentiment May Remain Subdued Due to Uncertainty

2010-01-06T16:31:00.000-08:00

The major U.S. index futures little changed on Wednesday, reflecting the indecision of traders. Traders are likely to remain cautious as they look ahead to some key economic reports that can improve the visibility on the economic environment. A private sector employment report released earlier in the day showed a decline in the rate of job losses, which was more or less in line with expectations of economists. The resurgence in the value of the dollar is keeping a lid on commodity prices. Particularly oil is expected to show some volatility amid the release of the EIA’s weekly inventory report. The results of the ISM’s services survey and the minutes of the December FOMC meeting could also influence trading in today’s session.

U.S. stocks ended on a mixed note on Tuesday following a decent run up in the previous session, as traders preferred to stay on sidelines amid caution ahead of a slew of first-tier economic reports to be released over the course of the rest of the week. Additionally, a sharp drop in the pending home sales index also weighed on sentiment. Volume of trading was light, with merely 2.49 billion shares exchanging hands.

The Dow Industrials opened slightly higher, but it immediately dipped below the unchanged line and languished in negative territory for the rest of the session. The 30-stock index closed down 11.94 points or 0.11% at 10,572. After showing a lack of direction for much of the session, moving back and forth across the unchanged line, the S&P 500 Index and the Nasdaq Composite ended higher for the day. While the S&P 500 Index advanced 3.53 points or 0.31% to 1,137, the Nasdaq Composite Index gained merely 0.29 points or 0.01% to 2,309.

Sixteen of the thirty Dow components closed the session lower, with Alcoa (AA), DuPont (DD), IBM (IBM), Pfizer (PFE), Wal-Mart Stores (WMT), Johnson & Johnson (JNJ) and Coca-Cola (KO) leading the slide. On the other hand, Kraft Foods (KFT) rallied close to 5% and JP Morgan Chase advanced about 2%. Bank of America (BAC) and Boeing (BA) both rose over 3%.

Among the sector indexes, the Dow Jones Utilities Average fell 1.03%. However, the NYSE Arca Airline Index surged up 5.21% and the Dow Jones Transportation Average gained 1.01%. The Philadelphia Oil Service Index ended up 2.06% compared to a more modest 1.03% advance by the NYSE Arca Gold Bugs Index. The Philadelphia Housing Sector Index rose 1.12%, while the KBW Bank Index rallied 2.24%.

On the economic front, the National Association of Realtors reported that the pending home sales index for November, a leading indicator for existing home sales, declined 16% month-over-month. Economists had expected a more modest decline of 2%. The decline is apparently the pay back phenomena from the first time homebuyers’ credit, which motivated homebuyers to bring forward their purchases to meet the earlier expiry deadline of November 30th. The stimulus measure has since then been extended.

After showing decent gains in the past three months, the Northeast, Midwest and South showed sharp declines. On a year-over-year basis, the index rose 19.3%, although much of the increase was due to easier comparisons. Meanwhile, factory goods orders rose a better than expected 1.1% in November.

Asian Markets End In Positive Territory

2010-01-05T17:06:00.000-08:00

The markets across Asia ended in positive territory but well off the highs in the second trading session on Tuesday, encouraged by the sharp gains on Wall Street in the previous session. Higher commodity prices also lifted market sentiment with resource stocks leading the gains.

In Japan, the benchmark Nikkei-225 Index added 27.04 points, or 0.3%, to 10,682, while the broader Topix index of all First Section issues was added 3.82 points, or 0.4%, to 920.

On the economic front, the Bank of Japan revealed that the monetary base in the country rose 5.2% year-over-year during December, following an year-over-year rise of 3.8% in the month of November. The central bank further noted that banknotes in circulation were down an annual 0.3%, while coins in circulation fell 0.7% on year. The current account balance was up 53.6%, including a 47.4% annual increase in reserve balances.

In a separate statement, the the Japan Automobile Dealers Association said auto sales increased for the fifth consecutive month in December. Domestic sales of new cars, trucks and buses increased 36.5% year-on-year in December. Automobile sales totaled 250,474 units in December, larger than 183,549 recorded in December 2008. However, for the calendar year 2009, automobile sales declined 9.1% to 2.92 million vehicles

Commodity related stocks led the gains on higher commodity prices in the international market. Impex, the oil exploration company, rose 1.82%. Nippon Oil Corp. surged up 7.39% and Nippon Mining Holdings soared 7.25%. Showa Shell climbed 1.84%.

Among trading companies, Mitsubishi Corp. advanced 2.50%, Mitsui & Co. climbed 2.85%, Itochu Corp. rose 2.45%, Marubeni Corp. gained 2.66%, Sumitomo Corp. added 1.24% and Toyota Tsusho Corp. edged up 0.43%.

Banks also ended in positive territory after Sumitomo Mitsui Financial announced that it would raise only 800 million yen to replenish the capital, lower than earlier expection of capital raising in excess of 1 trillion yen. The shares of Sumitomo Mitsui Financial advanced 1.45%. Among other large banks, Mizuho Financial rose 1.23% and Mitsubishi UFJ Financial added 0.22%, on relatively large volumes. However, Resona Holdings bucked the trend and ended in negative territory with a loss of 0.21%.

Automotive stocks ended in negative territory, offsetting the early gains in the market partly, following strengthening of the local currency against the US dollar. Toyota Motor Corp. declined 2.19%, Suzuki Motor fell 1.78%, Honda Motor slipped 0.79%, Hino Motors shed 0.93% and Mitsubishi Motor declined 1.53%.

In Australia, the benchmark S&P/ASX Index advanced 48.00 points, or 0.98% to close at 4,924, while the All-Ordinaries Index ended at 4,839, representing a gain of 49.70 points, or 1.02%.

On the economic front, survey results released by Australia's Housing Industry Association revealed a modest increase in new home sales for the month of November, reversing the unexpected slump in October. The results revealed that new homes sales rose 0.3% during November from October.

Mining and metal stocks led the gains on higher commodity prices. BHP Billiton added 0.46%, Fortescue Metals gained 2.45%, Gindalbie Metals surged up 6.48%, Iluka Resources rose 3.62%, Macarthur Coal climbed 3.00%, Oz Minerals soared 5.00% and Rio Tinto advanced 1.91%.

Oil stocks also ended in positive territory after crude oil prices surpassed the $81 a barrel mark in the international market. Woodside Petroleum advanced 0.93%, Santos gained 1.47%, Oil Search added 0.33% and Origin Energy climbed 2.80%.

Gold stocks also gained on higher bullion prices. Lihir Gold gained 1.52% and Newcrest Mining rose 2.00%%.

Banking stocks also advanced on increasing optimism about global recovery. ANZ Bank added 0.48%, Commonwealth Bank of Australia gained 1.51%, National Australia Bank rose 1.28% and Westpac Banking Corp. advanced 0.83%. Investment banker Macquarie Group climbed 1.93%.

Retail stocks were the laggards in the market having ended mixed after Harvey Norman was downgraded by JP Morgan. David Jones fell 1.32%, Harvey Norman slumped 2.94%, JB Hi-Fi fell 2.19% and Woolworths slipped 0.60%. However, Wesfarmers bucked the trend and ended in positive territory with a gain of 1.31%.

In Hong Kong, the Hang Seng Index ended sharply higher with a gain of 456.30 points, or 2.09%, at 22,280, primarily led by resource related stocks on higher commodity prices in the international market. Positive closing on Wall Street in the previous session on increasing optimism about economic recovery also lifted market sentiment with risk appetite returning to the market. As many as 37 of the 42 components in the index ended in positive territory. Aluminum Company of China or CHALCO surged up 9.08%, while CNOOC climbed 5.72% and PetroChina soared 5.92%.

In South Korea, the KOSPI Index ended in negative territory with a marginal loss of 5.52 points, or 0.33%, at 1,69, as traders preferred to lock in gains following recent gains and move to sidelines awaiting further data. Automotive stocks were the major draggers in the market on strengthening local currency, Korean Won, as a stronger local currency reduces the export sales realizations in local currency on conversion. Liquidity concerns related to Kumho Asiana Group also impacted market sentiment.

A return in risk appetite amid improving corporate earnings outlook along with a rally in the U.S and the European markets overnight lifted the Indian market notably higher on Tuesday. Metal stocks outperformed tracking gains among their global peers on the back of higher commodity prices, followed by high-beta realty and telecom stocks, but profit taking in the auto sector limited large gains in the frontline indexes. The benchmark Sensex finished at 17,686, up 128 points or 0.73% and the Nifty rose by 46 points or 0.87% to 5,278.

Among other major markets open for trading in the region, Indonesia's Jakarta Composite Index advanced 29.86 points, or 1.16% to close at 2,605, Taiwan's Weighted Index edged up 3.55 points, or 0.04% to close at 8,211, Straits Times Index in Singapore gained 25.73 points, or 0.89%, to close at 2,920, and China's Shanghai Composite Index rose 38.42 points, or 1.18%, to close at 3,283.

US Market: Traders Look Ahead to Manufacturing Data Amid Cautious Optimism

2010-01-04T16:02:00.000-08:00

The major U.S. index futures are pointing to a higher opening on Monday, as signs of a global economic recovery has generated optimism concerning demand for commodities. Manufacturing activity in Europe and Asia has rebounded nicely, adding to recent evidence that growth is solidifying. Additionally, oil is advancing, as cooler than usual winter weather has improved demand outlook for the black gold. That said, traders may exercise caution ahead of several key economic reports to be released over the course of the week.

U.S. stocks gave back some ground in the holiday-shortened week ended December 31st, as uncertainty intensified, given the fluid state of the economy and the run up for most of the past year that created uneasiness among traders.

Amid uncertainty last Monday, the major averages closed modestly higher, with the upside aided by the early momentum built on the back of news suggesting strong holiday sales and positive economic data from Asia. However, the 6-day winning stint led to some profit taking on Tuesday, as stock retreated modestly.

Stocks continued to show a lack of direction on Wednesday despite the release of upbeat manufacturing data from the Chicago region. After showing choppiness, the major averages closed slightly higher.

Although an unexpected decline in weekly jobless claims helped the major averages open little changed on Thursday, selling pressure emerged thereafter, causing the averages to decline steadily throughout most of the session. In late trading, the selling pressure intensified, sending the major averages down by about 1% each.

For the week, the Dow Industrials ended down 0.88%, the S&P 500 Index lost 1.01% and the Nasdaq Composite slid 0.72%.

Among the sector indexes, the Dow Jones Transportation Average, the NYSE Arca Airline Index and the Philadelphia Housing Sector Index lost over 2% each, while the NYSE Arca Gold Bugs Index receded close to 2%. The NYSE Arca Securities Broker/Dealer Index, the KBW Bank Index and the Philadelphia Oil Service Index all moved down over 1%.

Property Sector- Sale of property held for >5 years not liable for RPGT

2009-12-28T17:07:00.000-08:00

It was widely reported that the Prime Minister Datuk Seri Najib Tun Razak announced that the Real Property Gains Tax (RPGT) of 5% will only be applied to properties sold within five years of purchase i.e. property sold after 5 years from date of purchase will not incur the 5% RPGT. The news is no surprise as the market was speculating of a revising terms for the RPGT of 5% which was announced in the 2010 Budget of the country in October 2009.

It is definitely good news that non-speculators will not be penalized. It allows those holding properties for >5 years to sell their homes and recognized 100% of the capital gains to upgrade their homes. In turn, this spurs genuine property activities, which are supported by the country’s fundamentals, as oppose to speculative activities.

We are very comfortable with the 5% RPGT on homes held for <5 years as it curbs speculative activities; this is mainly seen in the KLCC vicinity, Mont Kiara/Hartamas and some areas of Penang Island. In the KLCC and Mont Kiara/Hartamas areas, we believe there is an oversupply of high-end high-rise residentials with limited rentability. The RPGT helps cool potential over-selling in these areas since 1) capital gains upward momentum will be slow 2) lack of tenants.

However, the news illustrates uncertainties in policy making, which may shake foreign investors’ confidence. We called the IRB and were informed that they were not informed of this new announcement. They also added that the 5% RPGT proposals has not been gazette yet. We asked if the 5% RPGT will apply if one would to sell a property on 1st Jan 2010 if the proposal has not been gazette yet. IRB said than the 5% RPGT will not be effective, until the proposal has been gazette. Given that we are approaching the last week of Dec 2009, it appears that the 5% RPGT may take effect at a later date. If so, it adds more elements in uncertainty in Malaysia’s policy making.

The RPGT is inevitable. We know that it is only a matter of time before full RPGT finance bill is back (0%-30%). Additionally, some argue that the 5% RPGT could be a prelude to the upcoming GST system. Delaying imposition of the RPGT could be very detrimental to sentiment as property investors require clarity in policies to better strategize their investment. We hope that the government will clarify and ink its stance quickly.

We are likely to upgrade the property sector to a Trading BUY (from NEUTRAL) in our upcoming 2010 Strategy. We continue to prefer diversified developers with strong bread & butter / recurring base income coming from investment properties/townships. We believe the relief of no RPGT for holding properties for >5 years will spur the genuine market implying townships and matured suburb developments.

We still reiterate our calls; Mah Sing Group – BUY – RM2.10, SP Setia - Trading BUY – TP: RM4.25, Hunza Properties – Trading Buy - TP: RM1.96 (rights issuance to kick-start its mall works), E&O – HOLD - TP: RM1.29 (ultimately price will hold above RM1.00 after 2 years of ICSLS 2009/19 issuance as E&O does not want to continuously pay 8% coupon interest p.a. for the ICSLS). Defensive property companies and REITs, like KLCC Property Holdings – HOLD - TP: RM3.44 and Axis REIT – BUY - TP: RM2.28 remains unaffected, unless there are plans for disposal.

Market Review 21/12/2009: All signs are coming nicely together. Market looks like its on the verge to explode

2009-12-23T16:45:00.001-08:00

KLCI

Source: Nextview

On KLCI, apart from Bollinger Bands, it is also on the verge of breaking its narrowing triangle. Although there were some last minute market down just now (I suspect it has something to do with what happened on Hang Seng. Indonesia too was very Bearish today as they lost 3.1%), it was still within the triangle. Bollinger Bands is very tight at this point and awaiting a MAJOR Breakout. From such tightening formation, I would not be surprise if KLCI reacted as much as 100 points in short space of time. In fact, such formation and tightening of Bollinger Bands almost always result in violent movement.

Bollinger Bands would tell whether there is a violent movement coming up, and technical formations are rather Bearish, so the intellectual guess would be down. Technically, it is preferable to wait until it is confirmed. But you know the drill; once it is confirmed it is very difficult to get out.

I know most of us are on holiday and I mentioned that if anything drastically negative were to happen it would be next year, but next year is less than 2 weeks away. Lets not get too obsessed on when it will happen. To me, once market has triggered the critical levels, we have to react. Remember that if market goes down this time around, chances are it would be changing market uptrend, meaning that we have to change the strategy from buy on weaknesses to sell on strength.

RHB Equity 360° - 21 December 2009 2010 Market Outlook & Strategy

2009-12-21T16:00:00.000-08:00

Top Story : 2010 Market Outlook & Strategy - Earnings recovery, but
anticipate global policy changes

Strategy Update

- The global and local economy has emerged from the recession
and the recovery is gaining momentum. Corporate earnings are also
trending up, with net EPS for the FBM KLCI benchmark projected to
bounce back to +15.0% in 2010 and 14.1% in 2011.

- Much of the positive developments, however, have already
been factored into the market, in our view. After adjusting for the
upward revision in earnings projection, our end-2010 FBM KLCI target
has been tweaked up to 1,400, based on unchanged 15x 2011 earnings,
which implies a potential upside of about 10% from the current level.
This is, however, consistent with the historical performance where
returns are always lower in the second year of a recovery.

- In our view, it may be a little too early to turn cautious
given a combination of economic and earnings recovery, reasonable
valuations, low interest rates and high liquidity. Nevertheless,
investors would have to factor in the anticipated global policy
changes in the months ahead, rebalance their portfolios and prepare
for greater market volatility in 2010.

- The challenge is to look for stocks that could generate
capital upside from earnings growth as well as have attractive
dividend yield to outperform the market. Apart from economic and
earnings recovery, we believe commodity/asset reflation theme could
gradually emerge as a catalyst for greater market performance in 2010,
while the power and telecommunications sectors also appear to be
interesting. In the immediate term, we are more positive on the
banking sector as an economic recovery play.

Top Story : Technology - Poised for a stronger earnings recovery

2009-12-20T16:47:00.000-08:00

Strategy Update

- We note that chip players remain cautious on building
inventories or expanding capacity despite the strong surge in chips
demand since 2Q09. As chips suppliers continue to adopt just-in-time
production given limited visibility post festive sales in 1Q 2010, we
expect tech companies to ramp up capacity and build inventory in the
event of stronger demand from US and Europe in 2Q-3Q 2010.

- Although Oct orders were flattish mom, we note that
equipment orders have been registering six months of mom gain since
Mar 09, driven mainly by investments in logic capacity as well as
stronger-than-expected capex spending by major foundries. Going into
2010, capex momentum would hinge on: 1) conversion from gold to copper
wire-bonding; 2) resumption of DRAM & NAND process migration
investments; and 3) resilient wafer foundry capex spending.

- We believe investors should already be looking at better
earnings growth for the semiconductor players in 2010-11. We note that
global peers are currently trading at an average FY10 PER of 13.8x,
which compares to 10.8x for the semiconductor stocks under our
coverage. Hence, we have revised up our FY10 target PER to 12x (from
11x previously) to reflect: 1) improved sector earnings visibility on
the heels of strong chips demand from China and gradual pick-up in US
demand for consumer electronics. Accordingly, our fair values for
Unisem and MPI have been raised to RM2.29 and RM6.52 respectively
(from RM2.09 and RM5.29 previously).

- Hence, against the backdrop of improved earnings visibility
and stronger chip sales in 2010, we have upgraded the sector to
Overweight (from Neutral previously). Our top pick for the sector is
Unisem.

RHB Equity 360° : Genting Singapore : Awarded casino concession in Cairo Outperform

2009-12-16T16:40:00.001-08:00

News Update

Genting Singapore’s subsidiary under Genting UK plc has been selected as the new operator of the casino at the soon-to-be-renamed Nile Ritz Carlton Hotel, Cairo. The hotel owner, Misr Hotels Company, a government-controlled company, intends to undertake a major US$100m renovation and refurbishment of the 50-year hotel soon and re-open it as the Nile Ritz-Carlton in early 2012. Genting UK has been awarded the casino concession for the new hotel for an initial period of 10 years and plans to open the casino under the brand “Crockfords on the Nile”.
As no other details were given on the casino, we are unable to assess the impact of this on GS’ financials. We understand, however, that in Egypt, the gaming market is going strong, given that there are already 20 other small casinos in Cairo itself. We note that in the Middle East currrently, only Lebanon, Eqypt and cruise ships in Israel have licensed casinos. Despite the scanty details, we believe this is a good move for GS, as investment cost is likely to be minimal while it would be able to build up its Crockfords premium brand in a new market and strengthen its casino network.
No change to forecasts, until we obtain further details from management. We maintain our Outperform call, with fair value of S$1.33, based on a combination of EV/EBITDA and DCF methodologies.

YNH : Pullout from the purchase of Menara YNH by KFH Outperform

2009-12-16T16:39:00.003-08:00

News Update

YNHP yesterday received notification from KFH that it will not proceed with the purchase of 50% in Menara YNH office. We understand that YNHP will seek compensation for the cancellation of buying its property.
Given current financial crisis in the Middle East, the pullout by KFH is not a surprise to us. On the contrary, we view this positively as YNHP can now proceed with the sale to a second buyer to unlock the land value. The company is likely to lower its selling price by about 10% in order to secure the new buyer.
No change to earnings forecasts for now. Our indicative fair value has been lowered to RM2.19, based on 30% discount to its RNAV per share of RM3.13 (from RM2.54, based on 1.4x P/NTA due to the change in valuation method). Maintain Outperform.

Hiap Teck : Likely to report strong 1QFY07/10 performance Market Perform

2009-12-16T16:39:00.001-08:00

Results Preview

We believe 1QFY07/10 performance is likely to come in above our as well as the market expectations on the back of margin expansion at the manufacturing division arising from stable steel prices.
To pre-empt the better-than-expected set of performance, we are raising FY07/10-12 net profit forecasts by 10.3%, 6.6% and 6.3% respectively, to reflect better margins at the manufacturing division.
Correspondingly, indicative fair value is raised by 8.3% from RM1.44 to RM1.56 based on 7x revised CY2010 EPS of 22.3 sen.

16 December 2009 Top Glove : 1Q10 earnings could exceed expectations Outperform

2009-12-16T16:38:00.000-08:00

Results Preview

Top Glove is expected to announce its 1Q results later this evening. We believe results could surprise on the upside largely on stronger-than-expected margins, which managed to remain resilient despite qoq despite higher latex cost and weakening US$.
Qoq, we expect topline growth of around 10-15% on the back of upward adjustments made to selling prices (17.1% qoq), that more than covered the increase in latex cost (+19.4% qoq) as well as weakening US$ (-2.8% qoq). All-in, 1Q earnings could rise by around 10-13% qoq.
Commercial production for 16 new lines at F20 is on track to start commercial production in Feb ’10 while construction for F21 has started with commercial production expected to start by Jul ’10. Due to the high take-up rate for its gloves, Top Glove intends to put an additional 8 new lines at F18 with commercial production expected to start by Jul ’10. All in, Top Glove’s annual production capacity is expected to reach 35.3bn pieces by end-FY10, from 31.5bn pieces currently.
We are keeping our fair value of RM9.50 pending the release of the results. No change to Outperform call.

16 December 2009 Transport : Worst is over, but road to recovery not without speed bumps Neutral (up from UW)

2009-12-16T16:37:00.000-08:00

Sector Update

We believe the sector is poised for improved prospects in 2010 in line with the recovery in the global economy, but not without some speed bumps along the way.
IATA expects traffic growth rates for both passenger and cargo already bottomed in 2009 and they will return to the growth path from 2010.
While petroleum tanker freight rates are unlikely to revisit the lows in 2009, they are generally expected to remain relatively subdued in 2010.
FY10-11 net profit forecasts of AirAsia and MAS are raised by 13-26% largely to reflect better yields.
Upgrade the transportation sector to Neutral from Underweight. AirAsia’s fair value is raised by 14% to RM1.40 and our call is upgraded to Market Perform from underperform. MAS’s fair value is raised by 26% to RM1.96, while call is maintained at Underperform. MISC’s fair value is raised by 15% to RM8.95 and our call is upgraded to Market Perform from underperform.

16 December 2009 Building Materials : Steel prices unlikely to return to 2008's peak Underweight

2009-12-16T16:36:00.000-08:00

Sector Update

We believe the demand outlook for steel in the region will continue to strengthen into 2010. However, we expect volatility in steel prices and that 2008’s peak level is unlikely to be visited as: 1) Global steel consumption is unlikely to recover back to pre-crisis level any time soon; 2) Concerns on overcapacity remain; and 3) Dubai debt crisis may nip the return of the construction boom in the Gulf State in the bud.
We believe pricing power of metallurgical coke producers is likely to be capped given that metallurgical coke producers inherently have little bargaining power against its customers and suppliers. Also, the overcapacity in China’s steel sector will further suppress metallurgical coke producers’ pricing power as and when steel producers cut steel output.
We are keeping our Neutral stance on the steel sub-sector, as we believe further price recovery is likely to be capped by overcapacity and still-weak global steel consumption.
We are keeping our Underweight stance for the overall building materials sector given our Underperform calls on both Lafarge and YTL Cement.

RHB Equity 360° : Top Story : Property – Pent-up demand + cheap liquidity = asset reflation

2009-12-16T16:33:00.000-08:00

Overweight
Sector Update

Economic recovery, rising inflationary expectation and an excess of liquidity permeating the market due to easy monetary conditions would ultimately benefit the property sector, especially the high-end property market. We see minimal impact from RPGT and recent mortgage rate hike due to:

a) property demand in Malaysia is still dominated by owner-occupier;

b) affordability remains high; and

c) attractive financial packages offered by developers. Meanwhile, more aggressive launches and land acquisitions also reflect developers’ optimism on the property market.

We see challenges from the implementation of new FRS and we expect high volatility in earnings performance due to lumpy profit recognition. As a result, our FY11-12 full year earnings forecasts could potentially drop by 24.2-83.7%. We understand that big property players (with township developments or investment properties) have lesser impact (or lower volatility) than project- or location-focused players. We are switching our valuation method from P/NTA to RNAV due to FRS convergence ahead.
As for investment property owners, we see lower occupancy and rental risks now due to the economic recovery as well as improving office market outlook.
Maintain Overweight stance on the property sector. We prefer developers over investment property owners. Our top picks are Sunrise, Glomac and IJM Land.

RHB Equity 360° - Top Story : Technical Highlights

2009-12-15T14:12:00.000-08:00

Daily Trading Strategy : Need More Rebound To Secure A Sentiment Change

- Although the FBM KLCI successfully rebounded to above the
10-day and 40-day SMAs yesterday and the 10-day SMA of 1,264.83 has
also escaped from cutting below the 40-day SMA of 1,263.81, we remain
skeptical over the sustainability of yesterday's rebound, given the
artificial last-minute push-up on the benchmark index.

- In our view, the FBM KLCI needs to launch further rebounds
and convincingly cross above these SMAs in the coming sessions before
it could secure a complete reversal of the recent negative trend.

- If not, the market sentiment will be vulnerable to selling
pressure on renewed external volatilities.

- While the Dubai bailout news is encouraging, we expect
trading focus to shift to a fresh market catalyst soon, i.e. the
upcoming US FOMC meeting on Tuesday and Wednesday to assess near-term
sentiment on the US dollar.

- For now, the major support level for the FBM KLCI is still
at 1,250, while near-term resistance hurdle is now pegged at Nov's
peak of 1,288.42.

Daily Technical Watch: Axiata Group - Trading within a sideways trend
from RM2.85 to RM3.30...

- 10-day SMA: RM3.043

- 40-day SMA: RM3.054

- Support: IS = RM2.85 S1 =
RM2.50 S2 = RM2.05

- Resistance: IR = RM3.30 R1 =
RM3.70 R2 = RM4.40

RHB Equity 360° - IJM Land : Mishap In Melaka Aeon Mall

2009-12-15T14:10:00.000-08:00

Outperform

News Update

- A fatal gas explosion was happened in IJM Land Melaka AEON
Mall yesterday. The accident had killed 25-year-old supervisor while
injuring 16 others. The blast is believed to have been caused by a
leak when workers were testing the gas meters from the centralised
Liquid Petroleum Gas system. Further investigation needed to determine
the exact location of the blast or the cause (source: Star Biz).

- We do not expect significant impact from the accident to
IJM Land as: a) any losses from the accident will be covered by
insurance; and b) we understand from IJM Land's management that the
delay in signing the SPA for the mall is caused by the due diligence
process by potential buyer, not the alleged accident that occurred in
AEON mall. The management remains confident on the sale and is
targeting to conclude it by 1QFY10. In our FY10-12 earnings forecasts,
its Melaka project accounts for 4.2-9.2% of our bottom line.

- No change to our earnings forecasts and fair value of
RM3.19. Maintain Outperform rating on the stock.

IJM Land : Mishap In Melaka Aeon Mall
Outperform

RHB Equity 360° - Corporate Highlights

2009-12-15T14:09:00.000-08:00

Genting Singapore : Betting on positive prospects in a recovering
economic environment Outperform

New Coverage

- We are positive on Genting Singapore's (GS) prospects in
the longer term. We believe GS' Resorts World @ Sentosa (RWS) project
will be a lucrative one, given that it will be operating in a
guaranteed casino duopoly market and that it will be riding on
Singapore's anticipated tourism-led economic recovery. We believe
Singapore's highly lucrative gaming tax structure would also be a
major pull factor for VIP punters, and would also enable the
Singaporean casinos more flexibility in junket commission rates,
depending, of course on the yet-to-be-decided Government guidelines.

- We projected GS to record a 5-year turnover CAGR of 16.3%
p.a. from FY10, while net profit is forecasted to grow at a higher
5-year CAGR of 30%, in view of our expectation that as visitor volumes
grow and as RWS' operations become more settled, margins will improve
on the back of greater economies of scale and improved operational
efficiencies. We project net gearing to peak in FY10 at 114.6%, while
free cashflow is expected to turn positive, albeit minimally from FY10
onwards.

- To take into account the full potential of RWS, we believe
a longer term outlook must be adopted, given that a full-year
contribution from the entire RWS would only be captured from FY12
onwards. As such, we have used a simple average of the shorter-term
EV/EBITDA method and the longer-term DCF method to obtain our fair
value of S$1.33/share. We initiate coverage on Genting Singapore with
an Outperform recommendation.

Genting : Raising target price post initiation of Genting Singapore
Outperform

Company Update

- We have initiated coverage on Genting Singapore (GS) with a
fair value of S$1.33/share, which implies an upside of 22.7% from
current price levels of S$1.08/share.

- We have updated Genting's forecasts to take into account
the revised GS projections, resulting in a -2.7-3% revision in FY09-10
earnings, while our FY11 forecasts have been revised up by 2.4%.

- After including our indicative fair value for GS of
S$1.33/share (from market value previously), our SOP-based fair value
for Genting has been raised to RM9.35 (from RM8.60 previously).
Maintain Outperform.

RHB Equity 360° - Top Story : Telecom

2009-12-15T14:07:00.000-08:00

Top Story : Telecom - Decent growth coupled with attractive yields
Overweight (* from N)

Sector Update

- Despite continued subscriber growth, voice minutes are
increasingly becoming commoditised and we expect tariffs would
continue to be under pressure. Moving forward, we expect topline
growth for the sector would largely be driven by non-voice revenue
with the two key drivers of non-voice revenue being wireless broadband
and data value-added services.

- Our optimism on data revenue is based on factors such as
Malaysia's young demographic profile that are internet savvy,
acceleration in deployment of advanced technologies as well as more
advanced mobile internet networks as well as influx of feature-rich as
well as data-optimised handsets and smartphones.

- We are generally comfortable with the gearing positions of
the telco operators. For the mobile operators, we expect annual
operating cash flows to trend upwards on the back of mid-high single
digit/low double digit revenue growth as well as stable EBITDA
margins.

- As for TM, EBITDA margins are expected to remain under
pressure in the near term mainly due to rollout cost for its HSBB
network but our numbers suggest that annual operating cash flows
should be sufficient to meet its capex requirements.

- The key risk is still, in our view, competition. However,
while we expect tariffs to continue to remain under pressure due to
the intense competition, we do not expect irrational pricing to
set-in.

- We have upgraded our recommendation on Digi to Outperform
from Market Perform and consequently, upgraded our sector call to
Overweight from Neutral.

Dubai risks being a mirage in the desert

2009-12-07T16:07:00.000-08:00

If AS recent as 2006 some 25 per cent of the world's building cranes were operating in Dubai, the state is now rushing quite a different form of construction as bankers, investors and lawyers converge to reconstruct the massive debt owed by its investment holding company, Dubai World.
Magnificent Dubai was once a wonderful idea. One incorporating a 1-km tall hotel, rows of glass towers, a palm-shaped man-made island for the rich and famous and a mind-boggling ski slope in the middle of the desert. Never Never Land was kids' stuff.

The expatriates came in droves to bask in Dubai's glory. From glib-talking investment bankers and consultants to professional golfers and footballers, they stamped their mark of approvals and called Dubai home, confident of its bright future.

In those glorious years Dubai's strategy was as shrewed as it is now reckless on hindsight. If it did not have it, it would just buy it.

It even attempted to buy its own ecological system, spending billions of dollars to aerate well-manicured lawns which otherwise would not survive in the dry desert, billions more to produce snow on the artificial ski slope, and even more billions to build super-expensive artificial islands visible from outer space.

There is nothing wrong with that, except in Dubai's case, going overboard seems an understatement.

Throughout history nature has often proven to be an insurmountable obstacle, period.

And indeed throughout history too, being excessive has often led to failures. Even more dangerous when such excesses are financed by borrowed capital.

But as reality sinks in from a week ago, it now faces the danger of becoming just a mirage in the desert.

Things did not go wrong in Dubai only last week. The writing was on the wall from as early as 2006 when analysts were already talking about a bubble building up in the emirate state.

Dubai had great ideas, no doubt about that, and for a while it was the centre of attraction for all things in the emirates.

But underneath the grand plans, Dubai is also a very bad example of economic risk-taking.

Still, however, everybody including the international financiers and investors ignored the perils and together celebrated Dubai's dreams, forgetting one vital risk - its relatively weak real economy.

Dubai's oil reserves have dwindled to negligible levels, it is not a major exporter of goods and has been practising the dangerous economic strategy of attempting to create an artificial economy using borrowed capital.

In building its future largely around just the property and tourism sectors and minus a strong real economy, it was imminent that Dubai committed itself to the mistake of overly exposing its economy to external elements far beyond its control. The global credit crisis was the bombshell.

After the extent of the problems faced by Dubai World were known last week, the dreams are fading as fast as the once-confident expatriates are now buying their one-way tickets out of the emirate.

Now, only the bankers, financiers and lawyers are the ones with eyes trained on Dubai as they began to restructure Dubai World's mammoth debts.

They may succeed since after all the crisis is still contained as largely a huge real estate deal turned bad and not yet a full-blown sovereign default.

But it is too early to see what the future really has in store for Dubai. Perhaps the most the bankers, financiers and investors can do now is to look back and, difficult as it may be, acknowledge that it was also in part due to their failures that the perils were ignored.

UBS raises Malaysia's 2010 growth forecast to 6%

2009-11-25T16:14:00.000-08:00

UBS economist Paul Donovan has forecast the Malaysian economy to grow by 6 per cent next year, probably the most bullish view yet, to be driven by solid consumer spending and a gradual global recovery.

Malaysia's economy is likely to see one of the sharpest rebounds in the region and grow faster than Indonesia and Singapore next year, because there are less negative forces that could drag down the economy, the London-based economist said in a media briefing in Kuala Lumpur yesterday.

Malaysia does not face political upheavals like in Thailand, nor does it have a financial sector to fix like in Singapore. It also does not share South Korea's credit card problem.

Still, this bullish view on the economy does not necessary mean Malaysian shares will surge, because stock markets in general have rallied ahead of the growth expectations, Donovan said.

Investors worldwide have already priced in a sharp global recovery next year, but the rebound is more likely to resemble a "swoosh" akin to the famous Nike trademark, he said.

"There is probably a limited upside for Malaysian shares next year, at less than 10 per cent (from the current level), unless the earnings recovery seen this year can sustain into next year," head of Malaysia equities at UBS, Leong Fee Yee, added.

"Public spending will be less next year and the private sector will have to pick up the slack. But it is still uncertain how much could the private sector contributes," Leong said.

Malaysian shares have risen 45 per cent this year, trailing the 82 per cent surge in Indonesia, 59 per cent gain in Singapore and 55 per cent jump in Thailand.

The Malaysian government is projecting a 3 per cent growth in the economy next year, after shrinking an estimated 3 per cent this year.

The world has just reached its turning point in the third quarter and is about to embark on a recovery, Donovan said. But the recovery will be slower than many investors or stock analysts have expected, he said.

The global economy is set to grow 3.6 per cent next year, while the US would expand by 2.6 per cent and the Europe at 2.4 per cent. Asia will probably grow 7.5 per cent next year, according to UBS forecast.

He said economic recovery in the US and Europe is constrained by two key hurdles: the restricted bank lending is limiting consumer spending; while small companies, faced with a double credit crunch from both banks and the stalled inter-company credit, are cutting their stockpiles.

"The market has underestimated the importance of small companies. This was why corporate earnings have greatly beaten forecast in the third quarter, but the gross domestic product growth was slower than market expectation in the quarter," Donovan said.

TM : Core net profit improved 16.5% qoq

2009-11-24T19:54:00.000-08:00

Outperform
3QFY09 Results/Briefing Update
- 3Q results missed both our and consensus expectations. The key variances were weaker-than-expected margins and a higher-than-expected effective tax rate. As expected, TM did not declare any dividend.

- 3Q EBITDA fell 7.2% qoq on weaker revenue (-1.3% qoq) and margin compression as EBITDA margin slipped 2.1%-pts to 33.6%. Nevertheless, core net profit improved 16.5% qoq due to:
1) lower depreciation following the revision in estimated useful life of certain network assets; and
2) lower effective tax rate of 23% (excluding exceptional items vs. 2Q09: 50%).

- TM continued to remain tight-lipped with respect to details on the HSBB project. The number of premises passed as at 11 Nov was around 90k and management targets to pass 150k premises by end-2009 and 750k by end-2010. Management does not expect any significant topline contribution from HSBB next year but contribution in 2011 could be more significant as the number of premises passed rises.

- We have cut our FY09-11 net profit forecasts by 6-9.3% following the weaker-than-expected numbers.

- TM’s investment case is its steady dividends it offers investors while its RM2.76bn cash pile as at end-3Q09 provides cover for around four years’ worth of minimum dividend payments. No change to our fair value of RM3.55 (based on required net yield assumption of 5.5%) and Outperform recommendation.

Affin : 9M Profits = 91% RHBRI’s Forecast – Cheapest

2009-11-24T19:53:00.000-08:00

Valuations Outperform
3QFY09 Results

- 9MFY09 results almost full year forecast due to higher-than-expected NIM, non-interest income and lower-than-expected NPLs (despite the spike in 3Q).
- Surprise special dividend.
- Fourth consecutive quarter of elevated PBT on the back of expansion in NIM, , non-interest income and stable overheads. These were partly offset by higher LLP.
- Asset quality deteriorated as NPL formation jumped but all below 1Q and our original assumptions.
- FY09-11 forecasts raised by 18-30% to factor higher NIM and non-interest income as well as lower NPLs.
- New FY09 ROE projection (8.2%) is in line with management’s KPI of 8%.
- Although the latest spike in NPLs could deter investors’ interest, its valuations (single-digit PER and 20% discount to book) remain the lowest in our banking universe.
- Maintain Outperform. Fair value raised from RM2.38 to RM3.00 (unchanged 11x CY10 EPS or 5x discount to sector and benchmark PER of 16x to account for its weakest asset quality in our universe.

Economic Highlights: GDP & Inflation

2009-11-24T19:52:00.000-08:00

GDP : Real GDP recorded a smaller decline of 1.2% yoy in the 3Q, outlook Improving
Economic Highlights (published 20 Nov 2009)
- Real GDP recorded a smaller decline of 1.2% yoy in the 3Q, compared with -3.9% in 2Q and -6.2% in 1Q.
- This was better than consensus estimate of -2.4% and our expectation of -2.7%, on the back of a pick-up in domestic demand driven largely by the Government’s stimulus spending and a smaller decline in exports.
- As a result, we now expect 4Q real GDP to expand at a stronger pace of 2.1% yoy versus our earlier estimate of +1.0% and real GDP for the full-year to contract by a smaller magnitude of 2.3% in 2009, compared to our earlier expectation of -3.0%. For 2010, we are keeping our real GDP growth forecast unchanged at +3.8%.

Inflation : Inflation rate fell by a smaller magnitude in October
Economic Highlights (published 20 Nov 2009)
- The contraction in the headline inflation rate narrowed to 1.6% yoy in October, from -2.0% in September. This was the second straight month of a smaller contraction in inflation rate, on the back of a smaller decline in the core inflation rate. This was, however, mitigated by slower increase in prices of food & non-alcohol beverage during the month.
- Going forward, we expect inflation rate to move back to positive territory towards the end of the year and it is expected to continue its upward trend and accelerate to 2.0% in 2010, from an estimate of +0.7% in 2009. We believe the Central Bank is likely to maintain its overnight policy rate unchanged at 2.0% for the rest of this year and at least until mid-2010 with prospect of a 25-50 basis points hike in 2H 2010.

Top Story : Kossan – 3Q earnings could exceed expectations

2009-11-24T19:51:00.000-08:00

Outperform
Results Preview
- Kossan is expected to announce 3QFY12/09 results on 24 Nov. We believe the results could exceed our expectations due to: 1) upward adjustments to selling prices, which more than covered the higher raw material cost; 2) better-than-expected margins as more higher-value gloves were sold during the quarter; and 3) stronger performance from the TRP segment.
- Qoq, we believe the revenue growth was mainly on the back of upward adjustments to selling prices in order to pass on the higher raw material cost to customers. 3Q core earnings, however, could rise by 12% qoq, as a result of margin expansion due to: 1) price adjustments made have more than covered the rising raw material cost and product mix; and 2) stronger performance from the TRP segment.
- We are keeping our FY09-11 earnings forecasts unchanged. Nevertheless, we highlight the potential of an upgrade in our numbers, pending the release of the 3Q results.
- We are placing our fair value of RM6.47 under review pending the release of the 3Q results. Our Outperform call however, remains unchanged.

WCT : 9MFY12/09 net profit declines 15% yoy

2009-11-23T14:28:00.003-08:00

Underperform

3QFY09 Results

- 9M net profit came in within expectations at 72-78% of full-year market consensus and our forecast.

- 3Q construction EBIT margin eased further to 3.7%, from 5.8% and 8.3% registered in 2Q and 1Q, we believe, as work progress on low-margin jobs, i.e. New Doha International Airport (NDIA) and AEON mall in Melaka, further gathered momentum during the quarter, while the high-margin Abu Dhabi F1 Circuit was already at the tail-end.

- Maintain Underperform. Fair value is RM1.99.

AEON : A little festive cheer?

2009-11-23T14:28:00.001-08:00

Market Perform

3QFY09 Results

- 9MFY12/09 net profit of RM77.8m (+2.7%) was slightly above our expectations but within consensus, accounting for 67% and 63% of forecasts respectively. Key variances were mainly due to higher property management EBIT margin in 9M09 of 21% vs. our conservative full year assumption of 19%.

- Whilst AEON is on track to opening its new Melaka mall next month and its two Cheras “MaxValu supermarkets together with part-Jusco departmental stores” concept malls in FY10, this is below its average of 2-3 new Jusco stores p.a. in the past four years, which implies a potential slow down of its earnings growth in the near-term. We have yet to input any potential loss in property management income from 1U, which could potentially bring FY11 earnings down by 5.4% from our revised forecasts.

- To tackle any potential slow down in earnings momentum, AEON is looking at two options of expanding i.e. taking up a stake in its parent’s expansion plans in Vietnam, and expanding into East Coast, Sabah and Sarawak. Expansion plans take a year or two to materialise, and given possible gestation period of two to three years, more positive earnings stream would only be realised from 2014 onwards，

- We raised our FY09-11 forecasts by 6.2-8.6%. Fair value is raised to RM5.30 (from RM5.00) based on unchanged 14x FY10 EPS. Maintain Market Perform.

Tan Chong : Temporary setback but riding stronger going forward

2009-11-23T14:27:00.004-08:00

Outperform

3QFY09 Results

- Although 9MFY12/09 results only accounted for 64% and 69% of our full-year forecast and market consensus, we consider the results to be largely within expectations as we expects the negative impact from production cutback to reverse in 4Q09 as it ramps up production to meet deliveries.

- We expect the company to register a stronger rebound in 4Q09 on the back of: 1) order backlog carried forward from 3Q09; 2) margin expansion stemming from greater economies of scale and favourable exchange rate. Further out, we expect the company to register stronger unit sales growth stemming from economic recovery and improvement in consumer sentiments. Consequently, we have raised FY10-11 unit sales projections by 3.8% and 4.1% respectively, while keeping FY09 unit sales unchanged.

- Hence, we have raised our FY10-11 earnings projections by 16.7% and 14.1% respectively, while keeping our FY09 earning estimate unchanged. Accordingly, we have raised our fair value to RM2.92 (from RM2.50/share previously), which is based on unchanged 9x FY10 PER. Reiterate Outperform.

YNH : Not signing SPA For Menara YNH office yet

2009-11-23T14:27:00.003-08:00

Outperform

Visit Note

- Four key highlights from recent company visit: a) management remains confident on the sale of its Menara YNH office portion to Kuwait Finance House. However, it does not discount the possibility of proceeding with the sale to a second buyer if KFH fails to sign the SPA by end-09; b) YNH has formalised the sale of the yet-to-be-built Pantai Hospital (RM80m) in Manjung; c) construction works for Kiara 163 and Menara YNH-retail portion will be delayed again; and d) the company plans to launch Fraser Residence project by end-09. Total GDV is about RM550m.

- We are maintaining our FY09 earnings forecast but upgrading FY10-11 forecasts by 5.4-11.8% to factor in Fraser Residence and Pantai Hospital. YTD, the company has unbilled sales of RM920m, or 2.8x of our FY10 revenue forecast (excluding Menara YNH office).

- Our fair value has been raised from RM2.52 to RM2.54, based on unchanged 1.4x P/NTA.

MPI : Suzhou riding on capacity expansion

2009-11-23T14:27:00.001-08:00

Market Perform

Briefing Update

- While management expects 2QFY06/10 revenue to increase qoq, growth would likely be more modest vs. 1Q (+18% qoq). However, management expects 2Q net profit to grow sequentially on the back of: 1) higher overall utilisation rate; and 2) stronger contribution from higher-margin high-density packages.

- Management expects to boost its MLP capacity to 5m/day by end-FY10 from 4m/day currently given strong demand for its MLP packages arising from resilient demand for networking and handset chips in China. MPI Suzhou would be rolling out its higher-margin X3-MLP with high volume production by 3QFY10.

- While 1QFY10 utilisation rates for high-density packages of 60-70% appeared weaker than MLP (which was around 95% in 1QFY10), the company expects 2QFY10 utilisation rates to increase gradually as more customers begin to qualify these packages. According to management, gross margin of high-density packages are 17-20%-pts higher than low-density packages which are 15-30%.

- Although global chip sales registered seven consecutive months of gain on a mom basis after five months of decline beginning Oct 08, we are cognisant of potential weak chips demand in 1QCY10 (after a strong resurgence in 2Q-3QCY09 and sustained growth going into 4QCY09).

- Hence, no change to our forecasts and fair value of RM5.98/share for now. Maintain Market Perform.

MNRB : Bleak outlook due to rising claims ratio

2009-11-23T14:26:00.004-08:00

Underperform (down from MP)

Results Preview

- Given the RM22.2m net loss made in 1QFY03/10 as well as potential unfavourable claims experience in 2QFY10, we do not expect MNRB’s 1HFY10 earnings to turn around.

- We believe claims ratio for Malaysian Re will be higher vs. 1QFY10 of 64%, due to loss of commercial properties claims arising from series of natural disasters in ASEAN countries in Jul-Sep period. Thus, we have increased our claims ratio assumptions accordingly to 68% (ex-IBNR) for FY10-12 from 64% previously and cut our dividend projections to 4-10sen (from 13-15sen) for FY10-12 which translate into dividend yield of 1.2-3.1% from 4-4.6% previously.

- Downgrade to Underperform, from market perform previously. Fair value has been cut to RM2.94 based on 0.7x FY03/09 NTA from 0.8x previously, to reflect the bleak outlook ahead and lower dividend yield.

MAHB : Introducing Air Recovery Programme

2009-11-23T14:26:00.003-08:00

Outperform

News Update

- MAHB will offer new perks in the form of cash to airlines under its new incentive package, Airline Recovery Programme from 1 Jan 2010.

- Under the programme, new airlines flying into KLIA, LCCT and Sultan Abdul Aziz Shah Airport in Subang will receive a cash incentive of RM10/inbound pax for the first twelve months.

- Existing airlines will also benefit as they will be entitled to incentive payments under the new programme.

- While it is unsure how the new incentive would affect MAHB’s revenue and bottomline, we believe additional expenses arising from cash incentives given out to new airlines will likely be offset by additional airport tax revenue brought in by both the existing and new airlines.

- Indicative fair value is RM4.68 based on 12.5x FY12/10 EPS of 32.3 sen.

AirAsia : To benefit from MAHB’s incentive scheme

2009-11-23T14:26:00.001-08:00

Underperform

News Update

- AirAsia will benefit from the new incentive package called Airline Recovery Programme introduced by Malaysia Airports that will take effect from 1 Jan 2010, for three years.

- AirAsia will fall under the “existing airlines” category that will be entitled to RM10/pax incentive for first 10% growth, RM12.50/pax for next 8% growth and RM15/pax for growth above 18%, using 2008 as base year.

- Based on our estimates, AirAsia is poised to receive RM7.2m and RM4m incentive payments from Malaysia Airports that will boost its FY12/10-11 net profits by 2-3%.

- Forecasts maintained, pending guidance from AirAsia on its estimates on quantum of incentive payments.

- Maintain Underperform. Fair value is RM1.23.

EON Capital – Improving earnings with potential capital management

2009-11-23T14:22:00.000-08:00

Outperform

Company Update

- Transformation moving to second phase – target ROA of 1% by end 09. First phase has yielded some positive results.

- Internal restructuring delayed by six months – potential tax free income and higher dividend.

- More active capital management given strong capital ratios and the positive impact from the internal restructuring.

- No changes to our forecasts but our assumptions are more conservative than management guidance, implying potential upside to our forecasts.

- Maintain Outperform. Fair value is pegged at RM7.27 based on unchanged 15x (1x discount to sector and market benchmark) CY10 EPS.

CIMB Group Holdings - Dual-Listing (SELL)

2009-11-18T15:35:00.000-08:00

Price: RM13.28

Target Price: RM11.60

Recommendation: TRADING SELL

· The group is proposing to undertake an initial public offering of up to 35mn share to investors in Thailand with a dual listing of its share in Stock Exchange of Thailand. Proceeds amounting to RM466mn (based on last trading price of RM13.30) will be raised with minimal dilution to existing shareholders. Estimated Core Capital Ratio will be raised by 0.3% to 11.7% from existing 11.4%. Mgmt has previously guided they are comfortable with CAR of 10.0%

· Time after time, we are impressed with CIMB’s ability to read the market so well and its capability in obtaining high valuations for deals that it enters. To recap, in Feb 2007, the group issued 117m new CIMB shares (or 3.64% of share base) to Bank of Tokyo-Mitsubishi UFH (BTMU) at RM11.41/share or premium of 17% to the last traded price of RM9.75 valuing CIMB at 2.8x P/BV vs. our valuation of 2.5x P/BV. The proposed equity placement enabled CIMB to de-gear and raise RM1.34b in cash, after it raised RM990m from the sale of its insurance business in Jan 07.

· Today, we believe the proposed listing of 35mn CIMB shares in SET is no different to the deal 3 years ago. The group is taking the opportunity of elevated valuation to raise cash for its working capital and de-gear itself. We remain cautious about the stock and maintain our price target of RM11.60 based on 2.0x FY10 BV of RM5.70/share with a Trading SELL rating. We believe CIMB should trade at best 2x book, as its revenue contribution is heavily skewed to fees income compared with its peers. Both PBV band (figure 1) and PER (figure 2) band indicate that CIMB is trading at a demanding multiple equivalent to the peak of the banking cycle. Thus, the current valuation probably represents good selling opportunity. Trading SELL maintained as we see possible pricing in of valuation expansion and ROE of 18% (Figure 3) which is significantly above management guidance of 12-16% ROE objective for FY09-10.

Oriental Food Industries - Undervalued F&B play (Trading Post)

2009-11-18T04:01:00.000-08:00

Price: RM1.45

Fair Value: RM1.80

Recommendation: UNRATED

· We recently visited Oriental Food Industries Holdings Bhd (OFIH) in Melaka and came away with the following key takeaways.

· Market leader in snack foods and confectionery products. OFIH manufactures snacks, potato snacks, wafers and confectionery products that are sold under the brands Fudo, Jacker, Rota, Oriental and Super Ring. Approximately half of the company’s FY09 revenue was derived from exports and the company expects the proportion of foreign sales to increase moving forward.

· FY09 net profit more than doubled YoY to RM9.8m even though revenue declined by 5% due to the global economic slowdown. This was mainly due to lower raw material prices, strengthening of the US Dollar and improvement in production efficiency as a result of internal initiatives.

· Capacity expansion to drive double-digit earnings growth in FY10, with the addition of new potato crisp and wafer lines in CY09, as well as moderation in input costs and introduction of new products. We anticipate that 2HFY10 earnings will be stronger than 1HFY10 due to festive seasonality. We have forecasted FY10 net profit growth of 10% to RM10.7m.

· Potentially higher FY10E dividend payout expected. OFIH paid out an interim dividend of 2.0 sen for the first time in 1QFY10. Given the company’s strong free cash flow (of RM11.5m at end-FY09) and minimal capex requirement (estimated RM4-5m in FY10) the company could possibly pay out at least 8.0 sen DPS this year, translating to a FY10 dividend yield of 6%.

· Currently trading at 8.2x FY10 PER, that is lower than the domestic food and beverage industry FY10 PER average of 15.1x. Other indicators of OFIH being undervalued are that its share price now is trading below its own 5-year historical average PER of 12.1x and NTA/share of RM1.80 (at end-June 2010). Indicative fair value of RM1.80 represents a potential 24% upside.

Pantech Group Holdings - Value in growth prospects (Reinitiating Coverage)

2009-11-16T22:59:00.000-08:00

Price: RM0.95

Target Price: RM1.22

Recommendation: BUY

· At least RM65.1b worth of domestic downstream projects in the pipeline. Assuming 5% of project values go to pipes, fittings and flanges (PFF), c.RM3.3b worth of projects to tender for going forth. These estimates are extremely conservative as there are also potential projects from other markets (eg. Singapore, European Union).

· Enhanced earnings from new manufacturing division. The new stainless steel and alloy products will be manufactured by its new subsidiary Pantech Stainless & Alloy Industries S/B, in Pasir Gudang. The new products are guided for roll out by 2HFY11 and generate at least RM100m of top-line revenue in a full year. We have not incorporated these earnings into our current forecasts.

· Saudi Arabian tie-up, access to world's largest net oil exporter. Should it be successful, a joint venture (JV) will earn it access to supplying Saudi Aramco. Prospects are some upstream investment of around USD23b and downstream investment of around USD11b-USD12. We have not incorporated any of such forecasts into our earnings.

· Positive on European Union (EU) anti-dumping ban lift. For the present year, Pantech is allowed to ship to the EU without having to pay anti-dumping duties. Since the lift in August 2009, a total RM1m worth of fittings have been shipped to the EU. Should they achieve total lifting the EU will be a significant market going forth.

· FY11 a better year. Minimal trading division revenue growth in FY10, with 10% growth in FY11 assuming contracts awarded in 2010 commences work. For the manufacturing division we forecast 65% utilisation rate in FY10, with improvement to 85% in FY11 due to increasing exports to the USA and the EU markets. We have assumed FY09 operating margin of 18% for trading division and 13% for the manufacturing division going forward.

· Re-initiate coverage with a BUY call at target price of RM1.22 based on FY11 basic EPS of 17.5sen and 7x PER. We see value in their new manufacturing capacity, earnings growth from the EU market expansion, and potential Saudi Arabian tie-up. The stock is trading at attractive valuations of 5.8x PER for FY11, a significant discount to its oil and gas peers.

SECTOR FOCUS OF THE DAY

2009-11-16T16:17:00.000-08:00

Steel Sector : Clever strategy to fill earnings vacuum Overweight

Scrap prices in Asia have breached US$300/tonne since beginning of this month. New offers for imported scrap in East Asia are up US$5/tonne to US$10/tonne, according to Steel Business Briefing. This validates our growing conviction that regional steel demand is set to accelerate from 4Q09 onwards - on top of a present rebound in price of iron ore. Domestic steel prices have remained relatively stable at the RM1,950/tonne-RM2,000/tonne level over the last three months despite muted local demand. However, we expect prices to re-accelerate moving into 2010. On the supply side, we are positive about the Chinese Government’s renewed commitment to consolidate its steel industry. We maintain our OVERWEIGHT rating on the steel sector. Ann Joo remains our top pick. Focusing primarily on long steel products, its structural repositioning puts the group in a sweet spot as an early beneficiary of accelerated infrastructure spending - with an added capacity kicker from its new blast furnace project.

QUICK TAKE
Construction : More progress made on Klang Valley LRT works Overweight

NEWS HIGHLIGHTS
Parkson Holdings : Parkson Retail Q3 profit gains 5.7%
CIMB Group Holdings : CIMB Niaga eyes 20% loan growth
Star Publications (M) : To develop former HQ site at PJ
Energy Sector : Bakun reservoir - 695 sq km - ready to be filled

AMFRASER RESEARCH
Swiber Holdings : Supported by sale & leaseback gains Buy

NST

2009-11-16T16:14:00.000-08:00

NST ended the a.m. session at RM2.39. We have received questions from fund managers/analysts whether this means that the stock is already fairly valued?

We highlight that based on our fair value estimate of RM2.35/share for NST (revised in our report today) and special tax-exempt DPS of 40 sen, the stock still offers a potential total return of 15% at current levels. Alternatively, we think NSTP could potentially trade up to a cum-dividend price of RM2.75.

In addition, based on the earlier 1-for-1 share swap ratio, where the reference price for the Media Prima share was set at RM2.00/share, this (RM2.00) appeared to have set a benchmark-level for the stock. With the share swap ratio revised to 1.2:1, we think the new benchmark price for NST could potentially be RM2.40, ex-dividend.

CIMB Group Holdings-Trading Sell- 11 November 2009

2009-11-11T15:38:00.003-08:00

CIMB Group Holdings- In line with expectation (Result Note)

Price: RM12.82

Target Price: RM11.60

Recommendation:Trading Sell

· CIMB’s 9MFY10 net profit of RM2,004m was above our net profit estimate of RM2,537m (79%) and consensus’ RM2,541m (79%). Excluding one-off items of RM98mn relating to Indonesia’s business, the result was broadly inline (76%). 2Q corporate and investment banking related revenues of RM393m (-2.5% QoQ) were flat and the same to treasury revenue of RM386mn (+3.8%) impacted by macro fears on rate hike during the quarter.

· Traditional banking provides stability. Net interest income (RM1,595mn, +6.2% QoQ) growth combined with a stable cost income ratio (52%) produced a better 15.7% ROE for the quarter (vs. 2Q 15.5%). Asset quality remained benign with low net NPL ratio of 2.4% and NPL coverage increasing to 87%. YTD loan increased 11.7% is above year end target of 8%.

· We increase our FY09 net profit estimates by 3% to RM2,615mn incorporating one-off items mentioned above.

· CIMB group earnings growth is highly dependent on contribution from investment banking related businesses, both locally and abroad, with retail and corporate banking showing signs of flattening growth. External market condition still unsettling and the year-long local equity rally has likely outpaced the prospects for economic recovery. We expect 2010 to be a relatively slower year for investment banker and estimate CIMB net profit growth to be only 11% YoY (vs. consensus of 21%).

· Key concerns include the on going volatile sentiment that could slow capital market activities and hence related fee income. Market related revenues (stockbroking, investment banking and treasury) contributed 40% of CIMB’s total revenue in FY08-09 and we expect it to hover around 37% in FY10. Fee incomes would be most at risk should 2009 proves to be a bear market rally with equity and bond markets likely to be affected by potential global rate hikes. We see rising risk for non-interest income contributions and threat on Capital ratio to some extent

Technical Highlights

2009-11-11T15:38:00.001-08:00

Daily Trading Strategy : Remain cautious before a breakout of the final key resistance…

- As the FBM KLCI continued to chalk up fresh year high of 1,277.81 yesterday, and still trading within the recent uptrend, further upside can be expected towards the UTL near 1,286 in the near term.

- However, as shown on the daily candlesticks chart and the momentum indicators, risk of yet another profit-taking pullback today cannot be totally ignored.

- In other words, we expect selling pressure to continue dragging the broader market sentiment, while sporadic buying supports seen on selective index-linked heavyweights will likely persist.

- All in, the FBM KLCI must still push harder to remove the final key resistance at the UTL near 1,286, before its technical picture can turn even more bullish on the short-to-medium-term duration.

- Only upon a total removal of the UTL, the index will head towards the 1,300 psychological level.

- Immediate support is seen near the 10-day SMA of 1,253, followed by the critical technical level of 1,250.

Corporate Highlights

2009-11-11T15:37:00.003-08:00

CIMB : Record earnings Outperform

3QFY09 Results/Briefing Update

- 3QFY09 results above expectations. Record quarter – CIMB Niaga and treasury the star, stable consumer bank and higher China contributions. Only setback was the higher provision for non-ASEAN loans in the corporate and IB division.

- Asset quality improved slightly. On track to hit FY09 KPIs.

- Corporatisation of bad bank soon, will be positive to CIMB Bank.

- Potential of more non-recurring sale as part of capital management.

- Has excess capital but premature to provide higher dividend guidance, next year would be better timing.

- Still unclear impact from FRS139 and Basel II IRB approach but indications from earlier meetings suggest positive to capital ratios.

- FY09-11 forecasts raised by 9-10%, consequently, FY09 ROE was raised from 13.8% to 15.1%.

- Maintain Outperform. Fair value raised from RM13.50 to RM14.70 based on unchanged 17x CY10 EPS.

Hartalega : 6MFY10 net profit up 90.3% yoy Outperform (up from UP)

2QFY10 Results

- 2QFY03/10 net profit came in above our and consensus expectations with 6M net profit of RM59.5m (+90.3% yoy) accounting for 57.5% and 56.3% of our and consensus estimates respectively. The key variances were: 1) stronger-than-expected demand due to the tight supply of gloves in the market as a resuly of the H1N1 virus; and 2) better-than-expected margins resulting from operating leverage effects from the higher utilisation rate.

- Hartalega declared a first interim single-tier of 5 sen (2Q09: gross DPS of 2 sen and 2 sen tax-exempt). This translates to a net yield of 0.9%.

- Qoq, sales volume grew 5% qoq thanks to a combination of stronger demand and higher selling prices, while 2Q earnings grew 25.6% largely due to the expansion in EBIT margin of 4.4%-pts qoq.

- We have revised our FY10-12 revenue forecasts by 4.6-5.4%. We have also raised our FY10-12 EBITDA projections by 18.6-30.1% to reflect the better-than-expected margins achieved by Hartalega thus far. As a result, our FY10-12 earnings projections have been raised by 14.2-27.0%.

- We have also raised our target CY10 PER to 11x (from 9.5x) to reflect the stronger earnings growth now projected. Our indicative fair value has been raised to RM6.23 from RM4.47 (based on CY10 PER of 9.5x) and subsequently, have upgraded our call on the stock to Outperform from Underperform.

MRCB : Venturing into a small property project in Australia Trading Buy

News Update

- MRCB has subscribed to a 70% stake in Yes 88 for A$6.6m (RM20m) that owns a piece of land measuring 1.24 acres 15km from Melbourne City Centre, planned for the development of two 4-storey residential properties with a total GDV of A$54.8m (RM170m).

- Assuming a PBT margin of 20%, MRCB’s share of PBT from the venture is projected at RM23.8m over the project period.

- We are maintaining our forecasts that assume MRCB's property profits to be underpinned by recurring sales at its existing projects, particularly, KL Sentral, as well as contributions from new property ventures such as the latest one.

- If MRCB is to bag two prime federal land parcels in KL as reported, its valuation can be enhanced by 69sen per share. Fair value is RM1.71. Maintain Trading Buy.

Economic Highlights

2009-11-11T15:37:00.001-08:00

10MP : EPU targeting GDP growth of 5.5% during 10MP

Economic Highlights (published 11 Nov 2009)

- The Economic Planning Unit (EPU) unveiled that the Government is targeting an economic growth of an average of 5.5% a year during the 10MP.

- We view the growth target as not very ambitious. Still, we understand that Malaysia could still achieve a developed nation by the year 2020, albeit a less prosperous one.

- We understand that the Government will allocate only RM180bn for development expenditure under the 10MP, of which RM15bn will be used as the PFI Facilitation Fund to serve as tipping-off for private projects to take off. This will generate at least RM50bn of private investment to make up the difference compared to the RM230bn allocated under the 9MP. However, we are concerned that the 3P procurement model will shift the burden of expenditure from development to operating, which is already stretched.

IPI : fell by a smaller magnitude of 6.0% yoy in September

Economic Highlights (published 10 Nov 2009)

- Industrial production fell by a smaller magnitude of 6.0% yoy in September, compared with -7.0% in August. This was the sixth consecutive month of improvement and the smallest decline in 11 months, suggesting that industrial activities continued to improve, albeit gradually.

- The smaller drop in output was due to a smaller decline in mining production. This was, however, offset partially by a sharper drop in manufacturing output and a slowdown in electricity output.

- As a whole, based on the preliminary numbers, we estimate that the contraction in real GDP is likely to have narrowed to 2.7% yoy in the 3Q, from -3.9% recorded in the 2Q. This was on account of a pick-up in domestic demand and a smaller decline in exports.

Top Story : Plantation – Finally reaching peak production

2009-11-11T15:35:00.000-08:00

Overweight

Sector Update

- Malaysia’s CPO production rose by 27.4% mom in Oct 09, while exports rose by 11.7% mom, resulting in higher CPO stock levels of 1.97m tonnes (up 25% mom from 1.58m tonnes in Sep 09). This led to higher stock/usage ratios of 10.9% (from 8.8% in Sep 09), although it is still significantly lower than Oct-08’s 11.7%. We do not think the current stock level is really anything to be worried about, given that this only represents about one and a half months of average historical monthly consumption of 1.28m tonnes, which is the “normal” level. We expect production levels to start trending back downwards towards end-Nov 09, while demand should continue to rise on the back of improved economic activity and the festive season, which should then result in stock levels declining from Dec-09 onwards.

- Over the recent month, there have been five main developments affecting the palm oil industry, including: 1) US soybean crops harvests picked up, but now risk on South American supply side; 2) El Niño – is it back?; 3) CPO demand may be curbed in China, but may rise in India in ST; 4) Crude oil price on uptrend- long term price uptrend intact; and 5) Narrowing discounts with soyoil.

- No change to our forecasts, as we continue to expect CPO to register a more sustainable pick-up in prices closer towards the end of the year (end Nov/Dec 09), after the peak production period ends, while fundamentals and price prospects for CY2010 are more positive. We maintain our Overweight stance on the sector and our Outperform calls on IOIC, KLK, Sime Darby and CBIP, Market Perform on Genting Plantations and Underperform on IJMP

NEWS HIGHLIGHTS

2009-11-10T16:00:00.000-08:00

RESULTS NOTE

· AMMB Holdings (HOLD; RM4.75; TP: RM4.90) - Inline

TECHNICALS

· KLCI - More sideway action

NEWS HIGHLIGHTS

· MAS unveils Golden Lounge in Heathrow’s T4

· Govt withdraws vehicle end-of-life policy

· CCM plans revamp

· YTL Com to sign pacts with several partners

· SP Setia builds on winning formula

· Kinsteel profit down on lower steel prices

· Sime Darby forms unit in China

· Seven banks expected to rake in RM318mil in fees for maxis listing

· Proton chairman offers to take Transocean private

ECONOMIC NEWS HIGHLIGHTS

· Bank Negara reserves at RM335b

FOREIGN NEWS HIGHLIGHTS

· Wall St. rises 3% for week on Friday's slim gain

· US stocks eye retailers as jobless ranks swell

· China Merchants Securities to hold $1.6 billion IPO in Shanghai

· India may lead G20 in stimulus exit as Singh signals wind back

AmWatch: UMW Holdings : WSP in trouble again? BUY

2009-11-09T15:36:00.000-08:00

The US Commerce Department last week imposed preliminary duties of 99% on oil pipes from China. Complaints were brought by US Steel Corp, the US operations of Russia based Evraz Group SA and Pennsylvania based Wheatland Tube Co.

But duties will be just 36.5% for the 37 largest exporters. During 2Q09, exports accounted for just 13% of UMW Holdings Bhd’s (UMW) unit in China, Wuxi Seamless Oil Pipe Co Ltd’s (WSP) revenue - though this was a sharp drop from 60% in 1Q09.

Much of the export revenue decline was offset by an increase in demand from domestic Chinese market. Assuming exports were to fall to zero because of new import duties, we estimate UMW’s earnings to lower by 3%-4% in FY09 and FY10.

At WSP level, earnings are estimated to lower by 25%-26% over FY09-10. Bulk of the export market comprises of higher margin, non-API products. We expect export risks to be somewhat mitigated given WSP’s plan to setup a US-based, pipe production plant in Houston. We maintain our BUY call on UMW.

Our Sum-of Parts derived fair value of RM6.30/share is under review.

Others :
Plantation Sector : CPO production could exceed expectations next year NEUTRAL

QUICK TAKE
Sembcorp Marine : Acquiring one of Seadrill’s rigs BUY

NEWS HIGHLIGHTS
Malaysian Airline System : Voted Asia’s leading airline
Nestle : Setting pace for growth
KPJ Healthcare : Expects RM2bil revenue in five years
Sime Darby : Eyeing more estates in Africa

Genting Bhd - Completes RM1.45bil MTN programme

2009-11-08T18:53:00.001-08:00

Recommendation: Buy
Share price: RM7.15
Fair value: RM8.95

* Genting Bhd announced to Bursa Malaysia that it had sold RM1.45bil in 10-year medium terms notes (MTN). The MTN was oversubscribed by 1.7x. Book-building process ended on 28 October 2009 with the bonds priced at 5.3% p.a. - payable semi-annually.

* Genting Bhd had originally targeted to raise RM900mil as its first tranche but due to strong response, the group upsized the issue to RM1.45bil.

* The issuance of MTN was not a surprise as Genting Bhd had earlier announced that it would be establishing a RM1.6bil programme over 15 years. First issuance of the MTN was to take place within two years from date of approval by the Securities Commission.

* We believe that proceeds from its MTN will be used to refinance a loan taken to fund Genting Bhd's entitlement to Genting Singapore Ltd's 1-for-5 rights issue. Cost of Genting Bhd's rights entitlement was about RM2bil.

* As its MTN amounts to about RM1.45bil, this means Genting Bhd will most likely use internally generated funds to finance its remaining subscription cost of RM0.6bil in respect of Genting Singapore's rights issue.

* We had previously estimated that Genting Bhd received about RM180mil in dividends from Genting Malaysia Bhd and Genting Plantations Bhd last year. Company level net cash amounted to RM310mil as at end-December 2008.

* Based on its coupon rate of 5.3%, the MTN will reduce Genting Bhd's FY10F net profit by 4% to RM1.25bil. There is likelihood that Genting Bhd may rely on higher dividends from its subsidiaries for the coupon payments.

* Impact of MTN coupon payments on Genting Bhd's earnings is not significant. As such, we are maintaining our BUY recommendation on Genting Bhd for its gaming exposure in Malaysia, Singapore and Britain.

* In another development, Genting Bhd's chief executive Tan Sri Lim Kok Thay said that "Resorts World at Sentosa" (RWS) is on track to open by early-January 2010. We view this positively as the group would then be able to enjoy a full-year's contribution of earnings from RWS. For FY10F, we have forecast that Genting Singapore Ltd would record a net loss of S$10mil before turning in a net profit of S$345mil.

MBM Resources - Strong QoQ continues (Results Note)

2009-11-08T16:13:00.000-08:00

Price: RM2.40

Target Price: RM2.95

Recommendation: BUY

· 9M09 results below expectations. 9M09 net profit of RM45.8m accounted 70% of consensus and 60% of our forecast, underpinned mainly by lower-than-expected associates’ contribution.

· YoY, 9M09 net profit was recorded substantially lower by 54.5% due to: (1) 6.6% drop in revenue on lower vehicle sales (-7.5% YoY); (2) EBIT declined by 55.9% hampered by Yen appreciation; and (3) 46.8% lower in associates’ contribution (Perodua unit sales: -5.8%; Hino sales unit: -1.95).

· QoQ, 3Q09 revenue grew 11.8% on higher vehicle sales across all brands and stronger sales by the manufacturing operations. EBIT margin remains stable at 3.7% due to stable Yen against RM. Consequently, net profit grew a significant 61.3% to RM22.5m on the back stronger associates’ contribution due mainly to higher Perodua sales by 21.5%.

· YoY, 3Q09 revenue declined by 3.1% due to lower vehicle sales while net profit decreased by 30% mainly on the back of compressed operating margin due to stronger Yen : RM. EBIT fell by a large 49.7% to RM11.2m and the EBIT margin was reported lower to 3.7% from 7.1%.

· Nevertheless, MBM’s cash position improved to RM0.43/share from RM0.29/share QoQ, on stronger operating cash flow generated. MBM’s NTA/share also improved to RM3.50 from RM3.43 QoQ. No dividend is declared and we expect gross DPS of 10 sen and 12 sen for FY09 and FY10, respectively. An interim dividend of 3 sen was declared in 2Q09.

· We tweaked lower our FY09 net estimate by 21.6% to RM63.1m due mainly to of higher-than expected associates’ contribution (+17%) imputed previously. Subsequently, we are also revising lower our FY10 net estimate by 11% to RM90.5m. However, we will expect the stabilised Yen, improved sales volume and better consumer sentiment will continue to underpin MBM’s earnings. The Perodua MPV expected on 23 Nov 2009 will contribute to FY10’s numbers with an estimate of 30,000 units sales.

· Upgrade to BUY, Target Price at RM2.95 based on 8x PER to FY10 EPS of 36.9 sen. We ascribed lower PER of 8x – 20% discount to the industry’s PER of 10x mainly due to stock illiquidity of the counter. Although sales volume is likely to record lower at year-end, we believe that the improved sentiment in the auto sector (and the new Perodua MPV), higher sales volume target next year and MBM’s strong fundamentals are key catalysts we are upgrading MBM. The group’s strong fundamentals are also expected to limit the downside risks.

RCE Capital - Growing strong in 1HFY10 (Results Note)

2009-11-08T16:12:00.001-08:00

Price: RM0.64

Target Price: RM0.90

Recommendation: BUY

· RCE’s 1HFY10 net profit of RM37.4m was in-line with expectations, constituting 48% of our estimates and 49% of consensus’ forecast. Robust loan demand from civil servants and new product launches sustained 1HFY10 earnings growth of 25%. We anticipate a stronger 2HFY10 earnings based on seasonality.

· Strong loans growth YoY with 1HFY10 net loan receivables up by 30% to RM1.05b. Warm reception to a new 15-year product that was introduced in September and resilient loan demand from civil servants supported a 25% increase in revenue that flowed through to a corresponding 25% increase in net profit. NPL ratio is still below 3%.

· Product diversification compensates for lower sales QoQ. 2QFY10 revenue was 11% lower QoQ as loan book rose by a slight 5% QoQ, reflecting slower economic growth and increasingly competitive environment. The company’s efforts to diversify its product portfolio with the launch of new Islamic products with tiered interest rates resulted in improved profitability however, as shown by the 4% expansion in EBIT margin. The higher-margin product mix, lower finance costs and taxation resulted in group net profit registering a slight 2% increase. Higher doubtful debt provision of RM12.2m (more than double QoQ) in 2QFY10 to bring it closer to 2QFY09 level of RM16.3m after an especially low provision in 1QFY09.

· Private placement raised RM39.1m. 71.1m new shares were placed out on 10 August 2009 at RM0.55 (at a discount of 17.5% to the day’s closing share price of RM0.667). The proceeds were used for working capital to fund loans growth.

· FY09 and FY10 earnings estimates unaltered.

· BUY recommendation maintained with target price of RM0.90, predicated on 9x PER applied to FY10 EPS of 10.0 sen. FY10 dividend yield of 1.6% maintained. We like RCE for its first-mover advantage in the niche civil servant financing segment, low NPL ratio and loans growth and believe it is undervalued at 6.4x FY10 PER.

Top Story : Unisem – Guiding for a bullish FY10

2009-11-03T20:11:00.000-08:00

Outperform
Briefing Update
- The company expects Chengdu’s FY10 earnings to double on the back of higher capacity (i.e. rising QFN capacity) and margin expansion (due to stronger contribution from higher ASP packages).

- Despite a more gradual economic recovery in US and Europe, management appears bullish and expects FY12/10 revenue and net profit to be higher than FY08 given: 1) stronger chips demand arising from China’s stimulus package; 2) margin expansion arising from stronger contribution from Unisem Chengdu as well as higher demand for its higher-margin WLCSP and module packages; and 3) continuous cost-cutting measures (i.e. migration to copper wire bonding). In addition, the company expects 3QFY12/09 of RM25.8m to be achievable in the 4QFY12/09 and going into FY12/10 with potential upside to earnings arising from stronger-than-expected economic recovery in US and Europe in 2010.

- We have revised up our FY09-11 earnings by 8.1%, 10.4% and 4.1% respectively after factoring in higher EBITDA assumptions. Accordingly, we have raised our fair value to RM2.09 (from RM1.90 previously).

- While we are cognisant of potential weak chips demand in 1Q 2010 (after a strong resurgence in 2Q-3Q and sustained growth going into 4Q09) as well as a more gradual economic recovery in US and Europe, we have given management the benefit of doubt that China’s chips demand will remain on track for stronger growth in 2010. Reiterate Outperform.

HPI Resources - BUY - 3 Nov 2009

2009-11-03T20:10:00.003-08:00

CBRS: HPI Resources - Above expectations (Results Note)

Price: RM1.61 (cum-bonus) RM1.29 (ex-bonus)

Target Price: RM1.77 (ex-bonus)

Recommendation: BUY

· 1Q10 results were above expectations. While 1Q09 revenue of RM88.3m was 24% of our full year’s forecast, net profit of RM6.3m was 33.3% of our forecast driven mainly by lower than expected taxes (8% versus our 19% forecasted) as well as higher than expected gross margins.

· QoQ, revenue was up 15.1% underpinned by its paper milling division which jumped 27% sequentially on the back of higher demand and prices while the packaging division saw an improvement of 12%. Net profit however dipped 19.8% as higher input costs eroded margins with GP % dropping 35 points to 18% (4Q09 : 21.5%).

· YoY, revenue down 11.8% due to the lingering effects of the economic slowdown but net profit jumped 42.6% on the back of contributions from its Perak operation and milling division.

· Outlook improved as the global economic recovery gains momentum. While too early to conclude that the recovery is set, what is certain is that the worst of the crisis could have been behind us. Our economics team is forecasting GPD contraction of 2.1% for 2009 followed by a recovery to growth of between 3% - 4% for 2010.

· 1:4 bonus issue going ex-entitlement on November 13, 2009. The exercise will involve the issue of 10.65m new shares.

· Forecast upgrade as we model in higher margins taking into account the better economic conditions ahead. While we maintain our revenue projections for FY2010 and FY2011, our net profit projection for FY10 is raised by 22.2% to RM23.1m and FY11 by 24.3% to RM23.8m. BUY maintained with a higher target price of RM1.77 (ex-bonus issue) or RM2.21 on a cum basis based on 4x CY2010F. The low multiple is due to the stock’s small cap status and potential cyclical earnings.

Kenanga Today

2009-11-03T20:10:00.001-08:00

CORPORATE NEWS

· Lityan to be a GLC?

· Hong Leong Bank in finance company JV plan in China

· Turkish bank keen to work with CIMB and Maybank

· Changhuat receives RM96 million contract

· Scomi Group loan stocks conversion price at 40 sen

· Puncak Niaga in JV for Indian water supply project

· Unisem 3Q net profit improves

· Palm Oil Earnings Expected To Drop 25 Per Cent This Year

FOREIGN NEWS

· US Treasury to borrow US$276b in 4Q

· RBS Near APS Deal; Sees Unexpected EU Divestments

· CapitaMalls Asia IPO seeks as much as S$2.78 billion

· Temasek eyes AXA China stake, valued at US$1.05b

· Oil rises above US$77 in Asia Monday

· Global Chip Sales is up for the seventh month

YTLE - IMPLEMENTATION OF 2.3 GHZ BROADBAND WIRELESS ACCESS (WiMAX)

2009-11-03T20:09:00.003-08:00

We refer to the articles appearing in The Starbiz and the Edge Financial Daily on 28th October 2009 pertaining to the fine imposed on our subsidiary, Y-Max Networks Sdn Bhd (“YMN”) by the Malaysian Communications and Multimedia Commission (“MCMC”) in relation to the roll out of its WiMAX network. We confirm that YMN has received a letter from MCMC informing YMN of its decision to require YMN to make payment of a sum of RM1.9 million.

YMN was awarded the right to the 2.3 GHz spectrum in March 2007. Under the terms of the award, YMN was required to submit a business plan to MCMC with a roll out programme to achieve 25% population coverage by 31 March 2009. Subsequently, YMN changed its business plan and decided to build a nationwide network instead of undertaking a piecemeal roll out. Under its revised business plan, YMN will exceed the targeted coverage prescribed by MCMC by next year. The revised business plan has been submitted to MCMC for approval.

An appeal has accordingly been made to MCMC to reconsider its decision in light of the revised business plan submitted by YMN. YMN is awaiting the response from MCMC to its appeal.

Sunrise: Profit up +24% yoy on better margins

2009-11-03T20:09:00.001-08:00

Sunrise posted 1Q10 net profit of RM37m (+24% yoy), in-line with consensus estimates. Key takeaways from the result: (1) Revenue fell 4% yoy to RM190m, with sales coming from Solaris Dutamas, 10 Mont’Kiara, 11 Mont’Kiara and The Residence projects. (2) Gross profit margin rose to 35.2% in 1Q10 (1Q09: 30.6%) on lower construction cost and building material prices. As a gauge, steel prices during the period declined 58% yoy to USD305/tonne. (3) The construction progress of 10 Mont’Kiara and Solaris Dutamas are on schedule and expected to be completed this FY10. (4) Company recorded RM243m of sales in 1Q09, of which RM159m has been finalised. Total unbilled sales at RM864m provide earnings visibility for the next 12 months.

Share price (+47% YTD) trades at 7x FY10E PE, 51% discount to peers. We expect new sales to be strong due to improving buyers’ sentiment and the low interest rate environment. Construction margin is expected to be improved due to lower construction material prices.

Newsbreak
Sunrise 1Q10 profit +24% yoy to RM37m
For 1Q10 the developer recorded RM243m of bookings and net profit of RM37m; Sunrise expects its property sales to surpass the previous fiscal year.
Pilecon Engineering audited results shows RM179m loss
The loss, as compared with earlier reported losses of RM798k filed in February, was due to goodwill impairment, provision for claims and doubtful debts.
Unisem 3Q09 profit up 5% on falling revenues
Despite revenues falling 14% to RM284mm, profit was up due to higher contributions from China, lower operating costs and interest expenses.
Scomi Engineering to bid for Bangalore monorail projects with local firm
It will cooperate with Geodesic Techniques to bid for new monorail alignments in the city. The capital outlay and project financing has yet to be determined.

Economics
US: ISM manufacturing in Oct rose to 55.7, expanding for the third consecutive month amid a jump in production and employment. Pending home sales also climbed for an eight straight month in Sept by 6.1%.
UK: PMI manufacturing increased to 53.7 in Oct from 49.9 in Sept, the highest since Nov 2007, boosted by a rise in output and new orders.
Euro: PMI manufacturing expanded for the first time in 17 months in Oct, as the index rose to 50.7 from 49.3 in Sept, raising optimism that the region will exit recession soon.

RHB Equity 360° - 3 November 2009 (Semicon, Sunrise, Axiata, Unisem, HL Bank, Puncak Niaga; Technical - Time Eng

2009-11-03T20:08:00.000-08:00

Top Story : Semiconductor – 3Q09 chip sales up 19.7% qoq, but expect a weaker 4Q09 Neutral
Sector Update
- While Sep 09 global chip sales were down 10.1% yoy, the yoy contraction appears to have narrowed from its low of -30.2% in Feb 08 and -16% in Aug 2009. Sep growth (+8.2% mom) was the seventh consecutive gain on a mom basis after five months of decline beginning Oct 08, but industry players are expecting weaker sales ahead after the resurgence in 2Q-3Q.
- Although 3Q revenues for major foundries were up 36-40% respectively (vs. 43-110% qoq in 2QCY09), players now expect a flattish 4Q09 revenue. While key drivers for 3Q growth were mainly the stimulus package in China and restocking activity for certain chips (especially consumer IC, telecommunication and graphic chips), players are expecting weaker sales ahead.
- After declining on an annual basis for the first three quarters of 2009, independent research outfits are expecting global chip sales to register yoy improvement in the 4Q, albeit in comparison to the low levels established in 4Q08.
- We note that our anticipation of near-term price weakness (2-3 months) is unlikely to be prolonged given that the semiconductor sector’s longer-term prospects remain intact. Hence, reiterate Neutral for now.

Corporate Highlights

Sunrise : Launching of two new projects in near term Outperform
1QFY10 Results/Briefing Update
- 1QFY06/10 results were within expectations. As at 27 Oct 09, the company had unbilled sales of RM863.7m (excluding another RM84m booking pending signing of S&P agreements), represents 1.0x of our FY10 revenue forecast.
- Key highlights from briefing: a) unbilled sales of RM863.7m would sustain the company’s earnings growth up to 2011; b) the company intends to launch MK28 and Solaris Towers by Dec 09 and 1Q10 respectively to replenish its unbilled sales; and c) the company will focus on reducing its gearing and potential land acquisition opportunities, instead of paying higher dividend.
- We are upgrading our FY10-11 EPS forecasts by 2.3-9.6% to factor in: a) MK28 and Solaris Towers; b) better-than-expected take-up rates in MK11 and the Residence; and c) larger share capital due to the exercise of ESOS. Despite the upgrade, our fair value is maintained at RM2.39, based on 1.1x P/NTA.

Axiata : Highlights from XL’s 3QFY09 teleconference Underperform
Company Update
- XL held its 3QFY09 results teleconference yesterday. We set out below the key highlights from the briefing.
- XL has launched its broadband services in Jakarta and selected major cities in Sumatera. Although GPRS data revenue only made up 4% of mobile revenue, contribution is expected to increase to around double-digit within the next 3 years.
- In terms of capex plans, focus remains on capacity and quality, rather than expanding coverage. Also, management prefers to lease rather than build its own towers. Going forward, management guided that the estimated split between 2G:3G capex would be around 75%:25% and remained mindful of the need to ensure that revenue growth matches the increase in capacity and growing data traffic volume.
- XL’s US$300m rights issue should be completed by next month with the bulk of proceeds earmarked for repayment of borrowings. With the recapitalisation issue addressed, management plans to address XL’s low free float next year. This, in our view, may involve Axiata paring down its stake in XL if the price is right.
- No change to our SOP-derived fair value of RM2.75 and Underperform call on the stock.

Unisem : No surprises Outperform
3QFY09 Results
- While 9MFY09 core net profit of RM26.7m only accounted for 57% and 52% of our full-year forecast and market consensus, we consider the results to be largely in line with our and market expectations. We expect Unisem to record commendable 4QFY12/09 earnings on strong guidance from its major customers.
- We understand that 4Q09 order volumes for major customers (i.e. Cypress Semiconductor, RFMD, IDT and Maxim) remain resilient with order visibility extended to 4Q09 driven mainly by strong demand for communication, computing and networking chips in China.
- No change to our forecasts for now. Maintain Outperform and fair value of RM1.90/share.

Hong Leong Bank : JV In China Trading Buy
News Update
- JV in China with its associate (Bank of Chengdu – BOCD) for consumer finance. Its share of the investment is RM78.4m.
- Positive move as it will entrench HLB’s exposure to the huge market in China and contribute to earnings in the longer term.
- However, unlike BOCD, this Greenfield project would have a longer gestation period.
- Moreover, the investment only takes up circa 3.7% of its excess capital of RM2bn.
- This implies that issues about the excess capital still linger.
- Special dividend and corporate exercise still possible.
- Fair value is pegged at RM9.07 or potential privatisation value of 2.5x historical book.

Puncak Niaga : Enters into jv agreement with Lanco Underperform
News Update
- Puncak has entered into a JV agreement with Lanco Infratech Ltd (60:40), India, to participate in an international competitive tender for Hogenakkal Water Supply and Fluorosis Mitigation Project - Package I (inclusive of intake works, raw water pumping station, pumping mains, madam master balancing reservoirs and allied works) called by the Tamil Nadu Water Supply and Drainage Board, India.
- We are not surprised on the latest development, as Puncak sees huge potential in the water sector in India given its current low water consumption per capita that is only one-third Malaysia’s 300 litres per capita.
- We view this positively, as this will broaden Puncak's earnings base should the project be awarded.
- Indicative fair value is RM2.95, at 30% discount to its DCF-derived NPV of RM4.21 to reflect Puncak's high earnings and regulatory risks.

Technical Highlights

Daily Trading Strategy : Further pullback risk remains high …
- The FBM KLCI crawled back with a second “hammer” candle in three trading days yesterday, to spell yet another possible attempt to regain the critical level of 1,250 in the immediate term.
- Supported by constant stream of bargain-hunting activities, as shown in the robust trading volume recently, the benchmark could inch even higher from here, if sentiment improves further today.
- But as highlighted, stiff resistances beyond 1,250 near the 10-day SMA of 1,255, the UTL near 1,270 and the recent high of 1,270.44 should remain as a cap to the index’s near-term upside.
- As such, further pullback risk is still high, in our view.
- Furthermore, the cautious sentiment is likely to stay, pending the US FOMC meeting on Tuesday and Wednesday, as investors might wait for more clues before making their investment decision, especially after recent volatility.

Daily Technical Watch: Time Eng – Outlook will remain positive so long as it sustains above RM0.445 …
- 10-day SMA: RM0.3725
- 40-day SMA: RM0.322
- Support: IS = RM0.445 S1 = RM0.40 S2 = RM0.355
- Resistance: IR = RM0.55 R1 = RM0.64 R2 = RM0.77

FCPO Daily 3/11/2009

2009-11-03T20:07:00.000-08:00

8.30 am: All seems quiet in morning Asian. Commodities taking a firmer stance, small gains, recovery tone from Monday's losses. SO +0.2%. CO +1%. While the market could see some profit take first, FCPO is expected to trade higher, targeting 2000-2050 range. Jan09 seen opening near 2000.

yesterday (FCPO/SO/CO % : -0.6/-2.1/-2.6 ) FCPO produced a late surge that disregard soyoil price actions. A flood of buying emerged after 5.40pm. The Jan09 shot up almost RM50 during the buying spree, with more than 2000 lots changed hands. With that, the Jan09 finished unchanged but sharply off its lows.

Chart positive. After a good start, the market is seen testing "green" resistance with an ambition to scale 2300 this week. The uptrend line should serve as a good support, in case not so favorable external factors.

AmWatch, 2 Nov 2009

2009-11-03T20:06:00.000-08:00

STOCK FOCUS OF THE DAY
Lafarge Malayan Cement : Positives priced-in, room to return more cash HOLD

We are maintaining our HOLD rating on Lafarge Malayan Cement Bhd (Lafarge) with a lower fair value of RM6.65/share (before: RM6.72/share). Domestic cement demand remained lacklustre in 3Q09 - contracting 7% YoY (1H 2009: -8% YoY) - in the absence of major infrastructure projects. However, Lafarge’s management expects local cement consumption to turnaround in 2010. Launches in Malaysia should also provide a kick to demand for cement. Margin pressures are easing. Furthermore, Lafarge has run-down the bulk of its high-cost coal inventories in 1HFY09. We project Lafarge’s core earnings to grow by 10% to RM389mil. We believe that the bulk of positive newsflow surrounding the stock has been priced-in. Lafarge’s FY09F-11F PEs of 12x-15x are fair - given its modest three-year EPS CAGR of 8%. Lafarge has ample room to return more cash to shareholders as well due to its strong cash flows and comfortable FY09F net gearing ratio of only 7%. Our dividend/share forecast stands at 30 sen for FY09F, rising to 32 sen and 34 sen in FY10F-11F. This translates into decent yields of 5%-6%.

QUICK TAKE
Oil & Gas Sector :Environmental approval for PNG LNG project OVERWEIGHT

NEWS HIGHLIGHTS
Proton Holdings : Expects to sell 155,000 cars by April 2010
Gaming Sector : New lottery games, including Toto, coming up
Plantation Sector : Face-off expected at palm oil roundtable talks

STOCK FOCUS OF THE DAY

2009-11-01T15:44:00.001-08:00

DiGi.Com : Result inline,special dividend of 75 sen/share HOLD

DiGi.Com Bhd (DiGi) posted 3Q09 core earnings of RM244mil (+4% QoQ), bringing 9M2009 core earnings to RM754mil (-12% YoY). This made up 70%-72% of ours as well as market estimates - for FY09F earnings. Subscriber base grew 9% YoY and 2% QoQ to 7.4 million in 3Q09. DiGi also managed to capture some 200,000 3G services subscribers, including 25,000 mobile broadband subscribers. After having grown by an average of 9% between 2Q08-2Q09, postpaid subscribers’ growth decelerated to a marginal 2% QoQ in 3Q09. We see Celcom’s renewed focus on the low-income segment as a possible disruption to DiGi’s market share. 3Q09’s blended ARPU of RM55/mth was higher by 2% QoQ but lower by 7% YoY. DiGi also declared net special dividend of 75 sen/share (FY08: 78 sen/share). We expect DiGi to declare a FY09F’s dividend of 165 sen/share (payout: 122%) on back of steady annual FCF generation of RM1.2bil. We believe DiGi will continue its proactive dividend initiatives. We reaffirm our HOLD call with unchanged fair value of RM22.80/share, at parity to our DCF/share estimate (WACC: 10.3%, TG: 3%).

Others :
Economic Update : OPR set to stay low until mid-2010
Auto Sector : NAP review: Not sexy enough OVERWEIGHT

QUICK TAKES
Tenaga Nasional : RM1.2bil job from Petronas Gas HOLD
SP Setia : Challenging maiden venture into China SELL
WCT Bhd : Enters into JV to develop 1Medini BUY
Tobacco Sector: Minimum pricing come 1 January 2010 NEUTRAL
Oil & Gas Sector: MMC AMEC awarded Malikai engineering job OVERWEIGHT

NEWS HIGHLIGHTS
WCT : To develop RM600 million 1Medini condos
CIMB Group : Bank CIMB Niaga 9-month profit gains 19% to 1.15 trillion rupiah
Fraser and Neave Holdings : Invests US$43mil in Vietnam glass plant

AmFraser Research
Capitaland Ltd : Every 10% above CMA book value is an extra 17c BUY
Land Transport Sector : Public transport ridership growth slower than expected OVERWEIGHT

RHB Equity 360° - 30 October 2009 Part 2

2009-10-29T23:37:00.000-07:00

Corporate Highlights

Sime Darby : FY10 KPIs to surprise on upside? Outperform
Visit Note
- Five key takeaways:
1) Strong recovery from Indonesian plantations’ yield;
2) Downstream expansion still ongoing;
3) Heavy equipment division going strong - one of the core growth drivers;
4) Oil and gas division orderbook rundown – to be replenished soon?: and 5) FY10 KPIs to surprise on the upside?

- Sime intends to only announce its FY10 KPIs and its achieved merger synergies for FY09 upon the release of the 1QFY06/10 results at end-November. However, we believe the KPI target may potentially surprise on the upside, despite the relatively flat CPO price assumptions given by management for FY10 of RM2,100-2,200/tonne (similar to FY09’s RM2,177/tonne average CPO price achieved), on the back of improvements expected from other divisions. As such, we believe Sime would not have any problems achieving our net profit (ex-EI) growth projections of 15.4% for FY06/10.

- We have revised our forecasts slightly upwards by 2.4-3% for FY10-11, after: 1) raising our FFB yield assumptions; 2) adjusting for a delay in the completion of its Port Klang refinery; and 3) slightly tweaking our heavy equipment and oil and gas division projections. As a result of our revised forecasts, we have raised our SOP-based fair value for Sime to RM9.70 (from RM9.50). Maintain Outperform.

Adventa : More expansion in store for surgical gloves Outperform
Company Update
- Given that Adventa is currently operating at full capacity for its surgical gloves, management plans to aggressively expand its surgical glove production capacity to 350m pairs by early-2010 (from 250m pairs currently) and further to 450m pairs by end-2011.

- -Adventa is also currently building a new factory in Kluang, Johor, which will house 7 double-former production lines (+1.5 bn pieces) for the production of dental and examination gloves and plans to add another 5 double-former lines by end-2011.

- -All-in, this will increase Adventa's current annual capacity production of dental and examination gloves of 3bn pieces to 4.5bn pieces by end-2010 and 5.5bn pieces by end-2011.

- Management expects to incur further forex hedging losses until 1QFY10. Given that the US$ is currently weakening against RM, we note that Adventa's forex losses could narrow for these two quarters.

- We have raised our FY10 and FY11 revenue projections by 6.3% and 8.3% respectively to reflect the change in installed capacity assumptions for surgical gloves. As a result, our FY10 and FY11 earnings have been raised by 18.4% and 33.5% respectively.

- Our fair value has been raised to RM2.79 based on target CY10 PER of 8x (from RM2.01 based on target CY10 PER of 7x) and Outperform call on the stock remains unchanged.

AirAsia : Formalises partial deferment of FY12/11 new aircraft delivery Underperform
News Update
- AirAsia has signed an amendment agreement with manufacturer Airbus SAS to reschedule the delivery of eight A320 from Feb-Dec 2011 to Sep 2014 – Oct 2015, reducing new aircraft delivery in FY12/10 to 15 from 25 originally.

- We already in Jul 09 cut FY12/10-11 net profit forecasts by 12-28%, having reduced our capacity growth in terms of available seat km (ASK) to 14% from 20% previously to pre-empt the lower aircraft delivery.

- Indicative fair value is RM1.23. Maintain Underperform.

Kurnia Asia : Better portfolio mix, better results Outperform
Results Note
- Kurnia Asia recorded net profit of RM32.2m (vs. loss RM12m in 1QFY06/09), above ours and consensus annualised full-year forecasts. Main variance was mainly due to MTM gain on its investment amounting RM10.5m, resulting in higher surplus transfer from its general insurance subsidiary.

- Combined ratio improved due to lower management expenses, as the company has been reducing its headcount, to improve underwriting and claims management efficiently. Even though the claims ratio is higher (70.3% vs. 68% in 1QFY106/09), we note that this was due to seasonal factor.

- FY12/09-11 forecasts raised by 12.4-21% following revision in management expense and inclusion of RM10.5m MTM gain in our annualised FY12/09 forecasts.
- Maintain Outperform. Fair value is increased to RM0.98 from RM0.87 previously, (based on unchanged 11x FY12/10 EPS) following the expansion in earnings.

RHB Equity 360° - 30 October 2009 Part 1

2009-10-29T23:34:00.000-07:00

Top Story : PLUS – Expecting higher FY12/09 traffic volume growth Outperform

Visit Note
- PLUS hinted that it is likely to raise its core expressways’ traffic volume growth rate guidance from 3-4% to above 5% in the coming quarterly results, due to strong YTD traffic volume growth of 6.4%.

- The migration of accounting standards to IFRIC 12, if this happens, will require concessionaires including PLUS to:
1) Switch amortisation method from revenue-based to either straight-line method or volume-based method; and
2) Exclude concession assets as part of the tangible assets. PLUS felt that the change in accounting treatment is unlikely to come in soon. In any case, this will not affect our DCF-derived NPV for PLUS, given that amortisation expense is a non-cash item.

- PLUS believes that Khazanah, which currently owns 60.6% is unlikely to further pare down its stake.

- We are raising FY12/09 net profit forecast by 1.2% to reflect an 1%-pt rise in our FY12/09 traffic volume growth rate assumption at PLUS’s core expressways that more than offset higher depreciation and amortisation expenses. FY12/10 net profit forecast is lowered by 1.6% to reflect higher depreciation and amortisation expenses.

- We are raising our fair value estimate by 13.5% from RM3.64 to RM4.13, to reflect:
1) Lower weighted average cost of capital of 7.7%; and
2) The upgrade in our FY12/09 traffic volume growth rate assumption.

INITIAL PUBLIC OFFERING OF 2,250,000,000 ORDINARY SHARES OF RM0.10 EACH IN MAXIS BERHAD

2009-10-28T16:41:00.000-07:00

(I) THE INSTITUTIONAL OFFERING OF 2,037,705,000 OFFER SHARES TO MALAYSIAN AND FOREIGN INSTITUTIONAL AND SELECTED INVESTORS AND BUMIPUTERA INVESTORS APPROVED BY THE MINISTRY OF INTERNATIONAL TRADE AND
INDUSTRY; AND

(II) THE RETAIL OFFERING OF 212,295,000 OFFER SHARES TO THE MALAYSIAN PUBLIC, ELIGIBLE CUSTOMERS, DEALERS AND DISTRIBUTORS AND EMPLOYEES OF MAXIS BERHAD AND ITS SUBSIDIARIES AND THE DIRECTORS OF MAXIS BERHAD AND MAXIS COMMUNICATIONS BERHAD AT THE PRICE OF RM5.20 PER SHARE (“IPO PRICE”), PAYABLE IN FULL UPON APPLICATION AND SUBJECT TO A REFUND OF THE DIFFERENCE IN THE EVENT THAT THE FINAL IPO PRICE IS LESS THAN THE IPO PRICE.

THE FINAL IPO PRICE WILL EQUAL THE LOWER OF (I) THE IPO PRICE OF RM5.20 PER SHARE; AND (II) 95.0% OF THE INSTITUTIONAL PRICE TO BE DETERMINED BY WAY OF BOOKBUILDING (SUBJECT TO ROUNDING TO THE NEAREST SEN).

Market Review 22/10/2009 = Bull to cont to next year

2009-10-27T16:53:00.000-07:00

Imagine yourself driving on a highway driving at 110km per hour, which is a safe speed on a highway. If I ask you whether you can go faster, I am sure the answer would be yes but you have to be more careful. Furthermore, if you speed up to say, 150km per hour, other cars are mostly averaging 110km per hour, so there would be times where you have the reduce your speed as the average cars would impede your smooth journey.

I see the same thing here on our stock market. Overall market throughout the world can go higher, but the risk too would be higher by then and it will be often stall by obstacles to pull it down towards average speed. That is all very fine indeed and nothing new to all of us. In fact recently I mentioned that even if KLCI corrects down to 1100 points by end of this year market is still Bullish. Just like when you are speeding at 150km per hour, if you slow down to 110km per hour you are still driving fast.

Just like everyday life, there will be time we would be abruptly stall by events on the road. You could be cruising nicely on the road at 110km per hour and suddenly an accident happen. With the average Malaysian so lacking in quality entertainment (save for the occasional weekly dose of football), we know that traffic would suddenly slow down and we are forced to reduce our comfortable speed to crawling phase. Sometimes we only had to reduce our speed and continue driving at normal phase after we overtake the car in front of us, but not when accident happen. You have to slow down.

In relation to market, slowing down before speeding again is a correction. It happens many times before. However, what would concern us is accident. That is the trend reversal. As mentioned before, market will remain Bullish until trend is reversed. Again, in relation to market, you know there is no problem until you have to slam the brakes. A reversal in trend would usually be accompanied by huge drop in points coupled with bigger than usual volume, i.e. the slamming brake.

Even US markets is still trading within Channel. If you analyze S&P 500, you will notice that it is trading within an Ascending Wedge. With the Wedge getting narrower, you know that “Accident” will eventually happen. It is just a question of when.

For now the road is clear and if you believe my theory on the Average Bull Market, this Bull Market should continue until the 1st quarter to 2nd quarter next year (meaning that the 30 days & 90 Days Moving Averages are below the 200 days Moving Averages). In layman terms I believe that such “accident” will only happen next year.

Upside is not great and there are no low hanging fruits anymore. Honestly, right now is not the best environment to make aggressive investment. Unfortunately in our line of work we all know that we are not allowed to rest on our laurels. The attractive sectors still seems to be Banking stocks, with Plantation stocks might be going higher as well if my view on the upcoming CPO price comes true next month.

e-dividend payment system by Q3 2010

2009-10-26T23:01:00.000-07:00

Public-listed companies will be required to provide an e-dividend payment system to shareholders by the third quarter of next year.

"Investors will be given a one-year grace period to provide their bank account number to Bursa Malaysia Depository to enable the dividend payments to be credited directly into their bank account," the Securities Commission (SC) said yesterday.

It plans to undertake a series of investors' awareness programmes to familiarise investors with the benefits of e-dividends.

Stockbroking companies, meanwhile, will by mid-2010 be required to provide e-share payment options for clients to receive and make payments on their share transactions.

This way, payments will be credited into bank accounts more quickly and efficiently compared with cheques.

"The e-dividends and e-share payment initiatives are an integral part of the initiative to move towards a paperless environment and promote the usage of electronic payments in the capital market," the SC said in a statement yester-day. These new measures were recently announced by Prime Minis-ter Datuk Seri Najib Razak in the 2010 Budget.

SP Setia - TRADING BUY - 26 Oct 2009

2009-10-26T16:27:00.000-07:00

SP Setia - Prime beneficiary of Budget 2010 (Company Update)

Price: RM3.88

Target Price: RM4.25

Recommendation: TRADING BUY

· Budget 2010 promotes home ownerships. The government will be launching a scheme, enabling EPF contributors to utilize current and future savings in Account 2 to finance one home. It means buyers 1) have more disposal income 2) home affordability increases. Although details have not been revealed, more information should be available closer to targeted commencement in Jan 2010. The scheme will mainly appeal to first-time home buyers (RM150,000-RM500,000 per unit range) and up-graders/those housing more than one generation under one roof (RM500,000-RM1.2m per unit range).

· Townships to benefit from higher EPF withdrawals. By virtue, the mentioned target markets are price sensitive, prefer larger built-ups and more land, as well as, require family orientated amenities. Townships, more specifically, those in its infancy or growing stages fit these criteria and will likely be in locations like Shah Alam, Meru, Puchong, Klang, etc. As a result, we expect SP Setia (SP) Setia Alam, Setia Eco Park, its Johor Bahru and Penang townships/projects to benefit given those products’ demands are mainly from owner-occupancy buyers.

· Reintroduction of RPGT at 5% will have minimal impact on SP Setia’s townships. Although a negative surprise, but it is aimed at property investors or those owning multiple properties. It singles out popular real-estate investment hot-spots, like KLCC and Mont Kiara, where a slew of luxury condominiums are flooding the market, whilst occupancy rate remains low. It is worthwhile noting that 75% of SP’s Ytd sales are derived from townships while remaining is from high-end residential (Sky Residence) and integrated commercial projects (Setia Walk).

· Stepping-up FY10E-11E net profit by 6%-11% to RM170m (+10% YoY) -RM198m (+16% YoY), based on the above. SP is likely to introduce new promotional schemes for its FY10E sales, if other developers continue with theirs. FY09E net profit of RM155m remains unchanged.

· Fair value of RM4.25 unchanged, based on SOP RNAV or 10% upside to last traded price. Although 23x FY10E PER and 1.9x PBV is expensive vs. 12x and 1.3x peer’s, 11x and 1.2x historical forwards, respectively, as well as, 15x FY10E PER for FBMCI, SP’s last traded price of RM3.88 is 16% lower than Ytd-CY09 peak of RM4.62. Over FY09, SP has also persistently traded at an average 23x forward PER and 1.8x PBV to reflect market’s excess liquidity. Current price weakness provides investors with good accumulation opportunities, especially when we expect share price to re-rate upwards in the near future from more positive news flow (e.g. finalization of the China project, more Vietnam projects and improved sales, commencement of Abdullah Hukum project). Upgrade to Trading BUY.

Citi's Still Got a Long Way to Go

2009-10-22T16:56:00.000-07:00

NEW YORK (TheStreet) -- Citigroup(C Quote) posted a small profit for the third quarter, but investors trying to wind their way through the labyrinth of the company's balance sheet will find that the good bank won't be able to significantly grow until the bad bank goes away.

Factor in the company's continued reliance on the government -- its biggest shareholder -- and the message is reinforced that Citi looks to be unable to grow its business until it can stand on more solid ground.
The inability to expand is particularly harrowing considering that other big banks including Goldman Sachs (GS Quote), JPMorgan Chase (JPM Quote) and others are already posting strong profits.

Citi, on the other hand, received $45 billion in government bailout funds since the start of the financial crisis, and completed a $58 billion preferred-to-common stock deal this summer. The transaction makes the U.S. government, which converted some $25 billion of preferred shares, a 34% stakeholder in Citi, and as a result of the government's heavy hand, Citi has been forced to pare down its businesses and assets in response to regulators' expressed concerns on Citi's capital levels.
Citi said Thursday that as a result of its extenuating factors, combined with a continued uncertain economic environment, it is only making "selective investments" in faster growth businesses.

"[O]ur two near-term goals are getting to the point where we have sustained profitability and looking to repay TARP," CFO John Gerspach said on Citi's conference call with analysts earlier today.

"Obviously, by returning to sustained profitability as I said, we are looking to make selective investments," Gerspach continued. "So we have begun to deploy some level of additional capital and expense dollars into our Citicorp businesses. But again, we are doing that in the looking ahead at a rather uncertain economic environment, so we want to be very selective on that, at least in the near term."
Citi posted a third-quarter per share loss of 27 cents, despite making a small profit of $101 million, primarily due to the impact of the stock swap on retained earnings and the payment of government-held dividends.

Citi is having a monster of a time digging through its morass of shoddy mortgages and credit card loans gone bad, particularly as the health of the U.S. economy -- with unemployment hovering around 10% -- remains uncertain. The company has previously said it would cease offering private label retail credit cards as part of its restructuring, and it's also backing away from much of the mortgage business.
On Thursday, Citi disclosed that three quarters of its consumer loan losses were from North America.

During the conference call, CEO Vikram Pandit pointed to regulator discussions concerning elevated levels of capital for financial institutions going forward, something that Citi and other big banks will have to eventually adhere to.
Citi is also further inhibited by the fact that it needs to eventually pay back bailout funds received from the Troubled Asset Relief Program, he said. Questions regarding when Citi will pay back the TARP money have intensified lately. The company did not offer any further information Thursday saying when it would do so.
"We need to get through that, but clearly we are running the company to have more capital than that over time and if that does happen, that can open up a lot of different possibilities for us and it is really too soon to comment on it," Pandit said.

Citi is making progress in its turnaround mission, even if it is likely at the behest of regulators. Citi Holdings, the so-called bad bank, reduced its assets by $32 billion in the quarter to $617 billion. The company reduced its toxic assets by $19 billion in the quarter between asset sales and run off. Still, assets in Citi Holdings are down less than 10% since the first quarter -- the same time the company announced the splitting of the two businesses.

Citi Holdings' assets are expected to decline by at least another $25 billion in the fourth quarter and the company officially completed the sale of Nikko Cordial and Nikko Asset management on Oct. 1.

But as a result of regulators tightening of the belt, the company has also been forced to leave behind some profitable businesses as well.
Citi completed a joint venture with its profitable wealth management arm Smith Barney and Morgan Stanley (MS Quote) in early June. As of the third quarter, Smith Barney no longer contributes revenue to Citi, Gerspach said. The business had contributed $1 billion in revenue in the prior quarter.

Phibro, the company's energy trading unit, which was just sold to Occidental Petroleum Corp. (OXY Quote) had quarterly revenue in the range of $90 million and $100 million, net of pre-tax income, Gerspach also said.

"We do have a business that is going to grow, which is Citicorp, over time and you know it happens to be in those markets and those businesses, which are pretty fast growth and you ought to expect that business to get its share of capital over time," Pandit said.
--Written by Laurie Kulikowski in New York.

RHB Capital update – Indonesia here I come

2009-10-20T17:13:00.000-07:00

RHB Capital is buying 80% of Indonesian bank, Bank Mestika for RM1.16bn, with an option to acquire another 9%. The deal is broadly in line with our expectations, notwithstanding the bank’s decision to finance the purchase through a RM1.3bn rights issue which could dilute EPS by 8-9%. Overall, we take a positive view of the deal as it will enable the group to tap into the underpenetrated market in Indonesia where loan growth is expected to be 15-25% and net interest margin is above 6%. As the terms of the rights issue are not finalised, we retain our earnings numbers, target price of RM7.00 (10% premium over DDM value) and OUTPERFORM call. Potential re-rating catalysts are (1) regional expansion, including this deal, (2) benefits from the ongoing transformation programme, (3) improvement in investment banking income, and (4) value-add from its strategic partner, Abu Dhabi Commercial Bank.

Sarawak Energy update – Taking the private road
Sarawak Energy’s parent, the Sarawak State Financial Secretary, is making a voluntary offer for all the 534.6m SEB shares that it does not already own, after which it will delist SEB. This development is a positive surprise. As the RM2.65/share cash offer is attractive, we advise minority shareholders to accept it. We retain our FY09-11 earnings forecasts but up our target price from RM2.06 to the VGO price of RM2.65. We think that investors have only a very small window of opportunity to buy the stock when trading resumes today given the likely share price bounce to close to the offer price. As a result, we upgrade the stock from sell to a HOLD instead of a buy. For exposure to the power sector, we advise investors to switch to Tenaga. For a play on Score, our preferred pick is now CMS.

Tenaga Nasional update – The dark hours before the dawn

Quick takes – Eastern & Oriental update – EX-uberance

VIEWS & NEWS, Maybank IB (19 Oct)

2009-10-19T16:56:00.000-07:00

Results Review

Bursa Malaysia RM8.49: Sell
– Sequentially weaker
Maintain Sell. RM81m 9M09 net profit (-11% YoY) was above our expectations, at 79% of our 2009 forecast. This was due to higher-than-expected trading activities and a one-off RM5m CDS fee recognition relating to prior periods, both in 3Q09. The results were however below market expectations, at 64% of consensus full-year forecasts. We raise our net profit forecasts by 6% for 2009, 11% p.a over 2010-11. Current valuations nonetheless remain high, at a huge premium to peers.

Company Update

Media Prima RM1.77: Buy (Under review)
– A marginal deal for NSTP shareholders
Media Prima looks to swallow NSTP, creating a media behemoth. Media Prima’s offer to privatise 43%-associate New Straits Times Press (NSTP) is unattractive when compared to the latest share price. However, it allows NSTP holders to participate in a media conglomerate covering five media platforms with greater growth prospects. Media Prima may be happy with control of NSTP despite it not being wholly owned.

Comment on News

Water: Neutral
– Selangor water: Issue moves up to Federal level?
A step towards conclusion? We think that the final offer to take over water infrastructure in Selangor, after a due diligence by PAAB, will not be lower than the offer made by the Selangor Government in July 2009. We see the due diligence as a positive indication of a conclusion to the whole take-over exercise. We retain our Buy call on Gamuda (GAM MK); Not Rated on Puncak Niaga Holdings (PNH MK) and Kumpulan Perangsang Selangor (KUPS MK).
Technicals

The FBM KLCI should remain firm today. The strong support areas for the FBM KLCI are located in the 1,233 to 1,256-zone. The key resistance areas of 1,260 and 1,288 may cap any selling activities. Market may remain buoyant despite the DJIA’s 67.03-points decline last Friday. Our chart buy calls today are 3A and NOTION.

Other Local News
Construction: Another theme park for Nusajaya
ETI Tech: To expand Kulim factory
Mulpha: Plans Klang Valley projects
RHB Bank: Said to buy Medan bank for RM1b
Technology: PMC-Sierra to set up HQ in Penang

Outside Malaysia

U.S: 2009 budget deficit widens to record USD 1.42tr on crisis spending
U.S: Industrial production increased 0.7% MoM in September
U.S: Consumer confidence falls in October
E.U: Exports decline 5.8% MoM in August
Japan: Government keeps its economic assessment for third month
Japan: To freeze JPY 2.9tr (USD 32b) of extra budget
Singapore: September exports decline matches smallest drop in 11 months

Market Review 19/10/2009 - Bull to continue

2009-10-18T18:55:00.000-07:00

Technical Review 13th October 2009

FBMEMAS Daily

Source: Nextview

Many markets including ours tested their respective support in the last 2 weeks but as it turns out, buying support managed to hold on. KLCI saw selling pressure or profit taking testing its psychological support at 1200 points. However without strong selling volume it was rather easy to spot that support would hold. The technical outlook on US markets was more dramatic since first support was broken but at the end of the day S&P 500 rallied strongly right after testing its critical support.

That was what happened to market. As always we are more interested to know what would or could be happening in the future. First, let us revisit how long a Malaysian Bull Market last. In my calculation, we had 10 Bulls market since 1977. On average, a Bull Market would last around 17.8 months.

However, there is an extreme in the 10 Bull Markets. The first Bull Market lasted 44 months, and that was between December 1977 to July 1981. If we take out this Bull Market, then the average Bull Market length would drop drastically to 14.9 months. By my own personal definition, our market entered Bull Market in April this year. Thus, if we add the AVERAGE Bull Market length, the current Bull Market should last until July 2010. Plus minus 2 months, it may end around May 2010 or September 2010.
Obviously, things would not be as simple as that, but it is good to know that when we have a Bull Market, it usually last slightly more than 1 year or 5 quarters to be exact. Be warned however, that you have to understand my definition of a Bull & Bear Market. As mentioned before this, our market entered Bull Market phase in April this year, but that was 6 months after it hit rock bottom at 800 points. Similarly, the previous Bear Market started in March 2008 but it hit peak in January 2008.

What I am trying to say here is that do not confuse the highest/lowest point for a Bull/Bear Market with the end of the respective Bull/Bear Market. For example, the current Bull Market might hit peak in February or March next year but will only enter Bear Market 4-5 months after that. Interestingly if our market remains flat between 1200-1250 points in the next 6 months (highly unlikely though) and reversed after that, it would still be considered as a full cycle of a Bull Market.

The second important factor that we have to consider is that although market has tested support on many occasions, it is imperative that we understand that market will only go lower IF it breaks the critical support. The most recent example was in Shanghai after it close below 3100 and crash lower by 500 points to touch 2600 points. Shanghai is still consolidating right now so there is no danger just as yet. For Malaysia & regional markets, I will continue to warn if there is any danger that any of these markets is in danger of cracking major support. It is not Bearish until critical support are clearly broken.

So what would be the correlation between these 2 points? Historically we know that market has on average, would remain Bullish for slightly more than 1 year (14-15 months). Our market is currently in the 6 months of Bull Market, believe it or not. Therefore, if there is any technical breakdown, it should be viewed as an opportunity to buy rather than get out of market. The only problem is to measure the degree of correction. Again on Shanghai market as an example, I suspect that the current chart formation suggest that it might be ready for the next up cycle but before that happened it had to face correction from 3500 down to 2600 points. Now the foundation for the next up cycle seems set for Shanghai but I might need to see few more weeks to be certain on that.

In short, on historical basis market is only halfway from its Bull Market journey. It takes a lot to pull market into Bear territory from current level and so far market has not shown any significant signs that it is going lower. If there is good time for market to go down, it should be around the First Quarter 2010 after the Bull Market has matured. At the very least we would know that world market might be flat in June & July 2010 due to World Cup.

Since market might have more than 6 months of Bull Market to go (if the theory is right that is), then we should be looking on what sector that would be good to buy. 1 sector that typically typifies the end of a Bull Market would be Property Stock. This does not mean that they did not go up at all previously. It just means that this class of stock would be going much stronger compared to other class of stocks. Stocks like SPSetia, UEMLand, and IGB seems set to go higher. If these stocks do go higher, expect other smaller Property stocks to go higher as well. So far these stocks had performed well but it did not go crazy.

Another sector that might interest you would be Plantation. Early this year I was Bullish on CPO, thinking that it would be going up to RM2800, and it went as high as RM2775. Right after that I felt it would be going or consolidation, and it has consolidated for 5 months. Now, the chart looks ripe that it might be going up yet again in the near future.

Kenanga Today 15 Oct 2009

2009-10-15T16:32:00.000-07:00

NEWS HIGHLIGHTS

· Penang submits Budget 2010 wish-list

· Norwegian fund buys into Kulim

· Top Glove may build more factories overseas

· Ho Wah plans capital reduction

· TRC (BUY; TP: RM2.90) unit secures RM13m project in Australia

· Litrak open to Asas Serba takeover proposal

· TM plans service to enable Internet access on TV set

ECONOMIC NEWS HIGHLIGHTS

· Mier revises upward 2009 GDP forecast

· Japan to promote Iskandar Malaysia

FOREIGN NEWS HIGHLIGHTS

· Dow passes 10,000 mark on earnings optimism

· JPMorgan 3Q profit soars; shares jump

· Lazard CEO Bruce Wasserstein dies

· Top 10 sovereign wealth funds have US$1t in stocks

· Dollar trades near 14-month low on earnings, equity rally

Top Glove Corp (BUY, Unchanged)- Topping FY09 with special dividend

2009-10-14T16:37:00.001-07:00

Top Glove Corp (BUY, Unchanged)- Topping FY09 with special dividend
Fair value: RM8.45 (Under Review)
Share price: RM8.15

* Top Glove Corp (Top Glove) reported a net profit of RM169mil for its 12-months ended August FY09, exceeding street estimates of RM155mil by 9%. This is however, within our recently revised estimate of RM163mil.

* Top Glove recorded a robust 15% QoQ increase in turnover to RM427mil, buoyed mainly by strong sales growth of basic powdered latex examination gloves. Compared to its preceding quarter, net profit surged 35% to RM57mil. This was largely attributed to higher EBITDA margin which had expanded to 22%, or +2.8ppts from the previous quarter.

* Compared to last year, Top Glove's full year net profit of RM169mil was up 54% on the back of stronger demand from A(H1N1) buying, overall lower cost structures from price of latex, a stronger US dollar to Ringgit exchange rate as well as better margins. This was despite a higher effective tax rate of 24% versus 19.7% in FY08.

* Its management has proposed total dividends of 15sen/share, single tier tax-exempt, bringing total dividends to 22 sen/share for Top Glove's financial year. The group declared and paid an interim dividend of 7 sen/share in Q3FY09. Besides a final dividend of 9sen/share, investors can look forward to a special dividend of 6 sen/share.

* Going forward, Top Glove's earnings growth would be underpinned by additional production capacity from its new production lines - from Factory 19, 20 and 21. While Factory 19 has been fully operational since June 2009, Factory 20 and 21 are scheduled to start operations in February and July 2010, respectively.

* Given its bright prospects ahead and net cash of RM177mil, there is a possibility of the group increasing its dividend payout for the coming years as well. As it is, Top Glove's total dividend payout of 40% for FY09 is currently higher than its historical 30%.

* The group's share price had appreciated circa 15% in the past two weeks, prior to release of the group's last quarter performance. This could thus see some retracement in the coming weeks. But Top Glove's valuation is still undemanding as it is trading way below its historical mean of 15x.

* We maintain our BUY recommendation on Top Glove. Our fair value of RM8.45/share - based on 14x CY10F earnings - is Under Review with an upward bias, pending Top Glove's briefing for analysts on 14 October 2009.

Auto Sector- NAP review delayed by a month

2009-10-14T16:36:00.001-07:00

Recommendation: OVERWEIGHT (unchanged)
- NAP review delayed by a month
* Review of the National Automotive Policy (NAP) is understood to have been delayed - according to a business weekly, citing unidentified sources. The NAP review, which was earlier scheduled to be releaseed end of this month has been postponed to November.

* Complications are understood to have stemmed from issues related to approved permits (AP). While there were calls in the past for the AP system to be reformed - due to its inconsistency with World Trade Organisation rules and other open trade policies due to restrictions brought about to international trade - abolishing the system may not be as straight forward a task.

* First, AP holders generally comprise of well connected individuals within the country - whereby APs are understood to have turned into a means to reward those who had assisted poiticians in garnering support. Second, there is the issue of compensating existing AP holders - who have invested a considerable amount into existing auto businesses.

* Back in July, Tan Sri Muhyiddin Yassin stated that the system of AP imports would be done away with and urged existing players to "buck up". However, this was the complete opposite of what was indicated in the year before - that the AP system will likely be around for the next decade.

* While it is difficult to conclude - at this point in time - whether an outright abolishment of the AP system will materialise, we think progressive measures to liberalise the local auto sector would be considered, nonetheless.

* This would lead us to conclude that measures to strengthen Proton's foothold in the auto industry are also in the works . This would include potential strategic partnerships with foreign carmakers to address issues in areas of technology, new model development, quality control, economies of scale and market outreach.

* Adding to newsflows of an imminent restructuring at Proton, it was reported in a local daily over the weekend that DRB-Hicom had submitted a bid for a 32% stake in Proton - with hopes that a more private sector driven approach will help improve the entire industry.

* While we do not rule out potential local partners taking up strategic stakes in Proton - we do not expect this to materialise any time soon in view of huge investment write-offs faced by Khazanah should it relinquish its stake at current price levels. We would rather think that any shareholding changes at the holding company level should happen post a strategic partnership - which we expect would enhance Proton's prospects - leading to improved valuation.

* We maintain our OVERWEIGHT call on the auto sector on an expected recovery in sector earnings following a projected 50% contraction in 2009. Our top picks are Proton (BUY, FV: RM4.80) - mainly on expectations of stuctural changes coming off a depressed valuation base and Tan Chong (BUY, FV: RM2.70) on expectations of a strategic expansion in model mix within the next three years starting from 2010.

Construction : OVERWEIGHT

2009-10-14T16:35:00.004-07:00

- Additional claims for Bakun?

* A consortium of contractors awarded the contract to supply four turbines to the Bakun Hydroelectric dam (Bakun) project are making additional claims of RM353mil, said TheEdge Weekly in a report. The claim was submitted early last month.

* The consortium - collectively known as the Bakun EM1 Contract Consortium (BEM1-C) - comprises Impsa Asia Ltd, Impsa (M) Sdn Bhd and Muhibbah Engineering (M) Bhd. It is one of only two parties which won the contract to supply turbines to the Bakun project.

* The 2,400-megawatt Bakun project is currently spearheaded by Federal-backed Sarawak Hidro, and will be installed with up to eight hydro power turbines upon its completion. The Impsa-led consortium is one of two parties being awarded the contract to supply four turbines each.

* Latest claim is in addition to early ones submitted by the consortium since 2005. Last year, the Federal-backed Sarawak Hidro is believed to have paid the consortium about RM139mil on an initial claim of RM349mil the latter had filed.

* If the fresh claim were to be approved, the consortium stands to receive total claims of up to RM492mil compared to the original contract value of RM460mil. In total, Sarawak Hidro has had to deal with more than RM1.2bil in additional claims due to work delays at the Bakun project site.

* We do not think the additional claims for the turbine contract will have a significant impact on the funding status of the Bakun project. The Bakun dam - currently being constructed by a joint venture between a Sime Darby-led consortium of local contractors and China Hydro - is on track for completion early next year.

* Furthermore, a consortium comprising Tenaga Nasional Bhd, Sarawak Energy Bhd and the Ministry of Finance - is planning to raise up to RM10bil in bonds over an eight-year period to fund the RM10bil transmission cable portion of the Bakun project.

* We understand that the cable transmission portion is to be funded on an 80:20 debt/equity ratio, with a maturity period of between 20 to 25 years. First tranche of the bonds could be issued early next year. CIMB has been appointed lead arranger for the bond issues.

* More importantly, tenders for cable works - 1,000km high voltage direct transmission line and 680km undersea cable - will likely be dished out by 1Q10. The undersea transmission package will likely go to foreign contractors - given the lack of local expertise. However, we gather that Malaysian Resources Corp Bhd (MRCB) are among the potential candidates interested in the land transmission package of the massive cable project.

* We believe the Bakun project is one of the few cornerstone projects worth a combined RM62bil that the Federal Government could roll-out over next six to twelve months as part of its pump-priming initiatives. This should significantly improve the order book visibility of contractors moving into 2010. In addition, there is also greater margin certainly for contractors as prices of building materials have stabilised against volatile prices in 1H 2008.

AirAsia Berhad

2009-10-14T16:35:00.003-07:00

AirAsia Berhad
Recommendation: BUY (unchanged)
Fair value: RM1.96
Share price: RM1.39

Secures landing rights in Paris
AirAsia was reported to have been granted landing rights to Paris, France - according to a newswire report yesterday. The news came following Prime Minister, Datuk Seri Najib Razak's four-day visit to France this week.

Actual details of the landing rights have yet to be worked out with no further details forthcoming at this juncture. So far, indications are for AirAsia to be given rights to land at Paris Orly Airport, located south of Paris (See map).

This will be AirAsia's second port of call in France following an earlier grant of rights for it to land in Nice, announced a few months ago. Based on routes operated by airlines to Nice and Orly, we reckon bulk of feeder traffic at these airports would originate from within Europe and certain Middle eastern countries.

Prior to Charles de Gaulle Airport being operational, Paris Orly was the main airport for France. Even with a shift of most international traffic to Charles de Gaulle, Orly remains the busiest French airport for domestic traffic and second busiest French airport overall in terms of passenger boardings. Other airlines that operate via Paris Orly include Air France, Alitalia and EasyJet. Nice meanwhile, is the third most important airport in France.

No firm timeline has been given by AirAsia X on the launch of its routes to France. AirAsia X is currently operating three A330s - these do not attain the flight range to reach Europe. While ultralong haul routes such as United States, New Zealand and Europe are in the plans, these are expected to be served by longer range A350s, scheduled for delivery only in 2016. We understand however, that AirAsia currently has leased two A340s (almost similar range to the A350).

While there is no direct impact on AirAsia as a result of this development (long-haul routes are operated by AirAsia X, 10% owned by AirAsia), feeder traffic brought by AirAsia X into Malaysia or any other part of ASEAN will increase potential traffic for AirAsia, which already has a comprehensive regional route network. About 80% of AirAsia X's traffic use AirAsia's flights for connecting flights and vice versa for regional traffic bound for Europe.

We reiterate our BUY rating on AirAsia and maintain our fair value of RM1.96/share - based on 9x FY10F earnings. AirAsia is one of the least expensive budget airline stocks globally, trading at just 6.5x FY10F earnings - a deep 53% discount to historical average of 14x and 47% discount to peers' average of 13x. This is despite Air Asia generating premium ROE of 19% versus industry's 11%.

Plantation Sector (Overweight) - Palm oil inventory up 11% MoM in September

2009-10-14T16:35:00.001-07:00

* MPOB (Malaysian Palm Oil Board) released the country's plantation statistics for September yesterday. In summary, palm oil inventory rose 11% MoM to 1.6 million tonne in September underpinned mainly by a 4.1% expansion in production.

* Average price of crude palm oil (CPO) declined 8% MoM to RM2,227/tonne in September. Year-do-date, average CPO price was RM2,231/tonne. Price discount between CPO and soybean oil inched up from 18.4% in August to 20.3% in September. This was marginally higher than the five-year average of 19.9% and 10-year average of 18.3%.

* After a lacklustre production period in August, CPO production expanded 4.1% MoM to 1.6 tonne in September. In the first 10 months of the year, production of palm oil amounted to 12.5 million tonne - 3.7% lower than the same period last year. September's palm oil output has been the highest for this year so far.

* Industry players have indicated that they expect CPO production to peak in September or October. For the full year, MPOB is forecasting palm oil production at 17.6 million tonne, 4% lower than their previous estimate of 18.4 million tonne and flat compared to last year.

* Palm oil inventory rose from 1.4 million tonne in August to 1.6 million tonne in September. This is similar to the average inventory level for the past five years. Stock usage (stocks as % of exports) rose from 1.1x in August to 1.2x in September, which is below the five-year average stock usage ratio of 1.3x.

* After a 9.4% MoM decline in palm oil exports in August, palm oil exports were flat at 1.3 million tonne in September. YoY, palm oil exports inched up 1.2% in September. Year-to-date, palm oil exports totalled 11.7 million tonne, which is 5% higher than the same period last year.

* Palm oil exports were stagnant in September compared to August though a fall in exports to the United States and India was compensated by increased demand from China and the European Union (EU). Exports to the US declined 52% MoM to 48,796 tonne, lowest for the year while India imported 27% less palm oil in September versus August.

* Palm oil exports to China climbed 7% MoM to 423,736 tonne in September underpinned by the festive season while EU imported 48.3% more palm oil in September. From January-September 2009, palm oil exports to China inched up 2.4% YoY on the back of its cheaper price relative to soybean oil. Average price discount between the two commodities was 19.4% this year.

* China remained as the largest importer of palm oil from Malaysia, accounting for 25.3% of the country's exports for the first 10 months of the year. This was followed by Pakistan (accounting for 11.7% of Malaysia's palm oil exports), EU (10.9%), India (8.3%) and US (5.8%).

* We remain positive on the plantation sector as we believe that palm oil production should start to soften towards year-end while demand could be stabilising. This is reflected in the 3.9% increase in exports for the first 10 days of this month compared to the same period in September as reported by SGS. We have BUYS on IOI Corp, Kuala Lumpur Kepong, Kulim and Singapore-listed companies like Wilmar International and Indofood Agri-Resources.