Friday, 30 March 2012

Technology - overall - Time to reboot

We are upgrading the tech sector from Underperform to Trading Buy as sentiment is turning positive, helped by a better book-to-bill ratio. The sector is not an outright Overweight as 1Q12 may be a weak quarter, similar to 4Q11. In light of our recent semicon sector upgrade, we now have three Trading Buys (JCY, MPI, and Unisem) and two Neutral calls (Jobstreet and Uchi). We raise our target prices for JCY, MPI and Unisem but lower our target price for Jobstreet and Uchi. Our top picks are Unisem and JCY.

Source: CIMB Daybreak - 30 March 2012, Full PDF Report

CIMB Daybreak - 30 March 2012

What's on the Table…
  • Technology - overall - Time to reboot
News of the Day…
  • CIMB in JV deal with Rohatyn
  • Maybank is not buying ING Groep’s stake in TMB Bank
  • Bursa plans retail bond issue in 2H
  • TNB Janamanjung expects RM4bn in revenue
  • Ananda Krishnan exploring pay-TV-IPO
  • Penang Port yet to be notified of takeover
  • Sime targets RM2.4bn property sales

Click here for the full PDF report

ECM GLOBAL NEWS 30 March 2012

US: Unemployment claims fall to four-year low
Claims for unemployment benefits fell to the lowest since April 2008 and consumer confidence reached the second-highest level in four years, indicating the labor-market recovery is helping sustain demand. Applications for jobless insurance dropped by 5,000 last week to 359,000, the Labor Department said. (Bloomberg)

US: Economy grew at 3% annual rate in 4Q2011
The economy grew at a 3% annual rate in 4Q2011, the same as previously estimated, while corporate profits climbed at the slowest pace in three years, raising the risk that business investment and hiring will cool. The increase in GDP was the biggest in more than a year and followed a 1.8% gain in the prior period, revised figures from the Commerce Department showed. Company earnings were up 0.9% from 3Q, the smallest advance since 4Q2008. While the report showed business spending on new equipment and software climbed more the previously estimated, figures this month indicate outlays are slowing following the expiration of a government tax credit. Consumers may be poised to take a leading role in the expansion as the biggest increase in employment since 2006 gives households the confidence and means to spend. (Bloomberg)

US: 4Q2011 income trends up, boost for spending
Household income grew at a faster pace in 4Q2011 than previously thought as the jobs market strengthened, a development that could underpin consumer spending. The Commerce Department said real disposable income rose to a seasonally adjusted annual rate of US$11.73trn, US$10.6bn more than previously estimated. (Reuters)

US: House adopts Republican budget calling for spending cuts
The House adopted a US$3.5trn Republican budget plan calling for major cuts as lawmakers gear up for an election-year debate on what to do about government debt. The House budget resolution, adopted 228-191, includes US$5.3trn in spending cuts over the next decade. The budget blueprint would overhaul Medicare, pare food stamps and other safety-net programs, increase defense spending and lower taxes for high earners. The plan is doomed in the Senate, where majority Democrats say it would take too much from lower-income Americans while giving tax breaks to the wealthy. Senate Democrats have said they won't advance their own budget plan. (Bloomberg)

Europe: German unemployment fell in March amid economic resilience
German unemployment fell more than forecast in March, adding to evidence that growth in Europe's biggest economy is gaining traction as the debt crisis recedes. The number of people out of work fell a seasonally adjusted 18,000 to 2.84m, the Nuremberg-based Federal Labor Agency said. Economists forecast a decline of 10,000, the median of 36 estimates in a Bloomberg News survey showed. The adjusted jobless rate slipped to 6.7%, a two-decade low. (Bloomberg)

Europe: Economic confidence unexpectedly fell in March
Economic confidence in the euro region unexpectedly declined in March, signaling that the economy may struggle to regain strength in the first quarter. An index of executive and consumer sentiment in the 17-nation euro area fell to 94.4 from a revised 94.5 in February, the European Commission in Brussels said. Economists had forecast a gain to 94.5 from a previously reported 94.4, the median of 29 estimates in a Bloomberg News survey showed. (Bloomberg)

Europe: One-year rescue boost to EUR940bn is close to complete
European governments are preparing for a one-year increase in the ceiling on rescue aid to EUR940bn (US$1.3trn) to keep the debt crisis at bay, according to a draft statement written for finance ministers. The euro-area finance chiefs will probably decide at a meeting in Copenhagen to run the EUR500bn permanent European Stability Mechanism alongside the EUR200bn committed by the temporary fund, a European official told reporters in Brussels. (Bloomberg)



IPO: Investment banks approach Astro on possible re-listing



T Ananda Krishan's Astro All Asia Networks plc could be re-listed, barely two years after it was delisted 2010 in a RM8bn privatization deal. According to Reuters, investment bankers have approached the company on a possible re-listing. "Banks have approached Usaha Tegas. Astro is the one of those companies that every bank wants to have a mandate on it. It is being explored, but it is too early to say anything concrete," an Usaha Tegas official said. Bloomberg reported that could raise about US$1.5bn (RM4.6bn) by the end of this year. (Financial Daily)



Property: Penang to build 11,800 cheap homes



Penang Development Corp will create at least 11,800 apartments with a total GDV of up to RM2.5bn, said Penang Chief Minister Lim Guan Eng. The Bandar Cassia Affordable Housing Scheme will occupy some 200 acres (81ha) in Batu Kawan, Seberang Perai Selatan, Penang. The three-bedroom units will range between 800 and 1,000 sq ft with prices from RM72,500 to RM220,000 each, while the GDV is expected to range between RM2.3bn and RM2.5bn. Lim said the project is due to commence this year with the final phase slated for completion in 2026. (Financial Daily)


Malaysia Pacific Corp: Unit Oriental in project buy-back



Oriental Pearl City Properties Sdn Bhd, a subsidiary of Malaysia Pacific Corp Bhd (MPCorp), will pay for the RM110.8m buy-back of AmanahRaya Development Sdn Bhd's (ADSB) stake in a development project both parties had earlier agreed to via internal resources, loans or "other strategic investors." ADSB has since exercised its rights to sell its investment in Johor's LakeHill Resort Development Sdn Bhd where it had a 22% stake, and Oriental, the remaining 78%. MPCorp CEO Datuk Bill Ch'ng said that Oriental would purchase ADSB's stake and that the new investors, if any, would be decided by MPCorp, without the restriction of seeking mutual consent from ADSB. (StarBiz)



Crest Builder-Detik Utuh JV: Bags Dang Wangi project


A JV between Crest Builder Holdings Bhd's unit Crest Builder International Sdn Bhd and Detik Utuh Sdn Bhd has won the bid to develop real estate on the site of the Dang Wangi LRT station. Government-owned public transport operator Syarikat Prasarana Negara Bhd, as the land-owner, had earlier called for proposals from interested parties to develop commercial properties at the 2.72 acre Dang Wangi station site. As part of the deal, Prasarana shall receive RM46.64m for the land rights or 21.2% of the project's estimated GDV of RM220m. (Financial Daily) 



Cypark Resources: Exploring opportunities in Myanmar



Cypark Resources Bhd is exploring the waste management and renewable energy sector in Myanmar. The company announced that it has signed a memorandum of understanding (MoU) with First Myanmar Investment Co Ltd on cooperation in these sectors. The MoU covers the research and development and implementation of pilot projects if required; preparation and submission of full proposals for getting the approval from the Myanmar government and so on. The MoU will not have any financial impact on the company. (Financial Daily)



UMLand: Iskandar Investment in talks for RM1.4bn project



United Malayan Land Bhd, (UMLand) entered into a collaboration agreement with Iskandar Investments Bhd (IIB) to negotiate the former's proposed investment in Medini, Iskandar Malaysia. UMLand in its filing with Bursa Malaysia said both parties had agreed to hold exclusive negotiations in respect of an acquisition of land in Medini, Iskandar Malaysia with rights to undertake development on the said land. Bernama reported that UMLand together with IIB would undertake several property projects with an estimated GDV of RM1.4bn in Medini. (Financial Daily)



Selangor Properties: Unit gets notices of land acquisition



Selangor Properties Bhd subsidiary Bangsar Hill Holdings Sdn Bhd (BHH) has received notices of acquisition from Mass Rapid Transit Corp Sdn Bhd (MRT Corp). The proposed acquisition was intended for the Mass Rapid Transit project's Sungai Buloh-Kajang line. "BHH objected to the proposed acquisition and filed an application for leave for judicial review for an order or certiorari to quash the notices of acquisition. The said application for leave for judicial review is now fixed mention by the court on June 21," it said. It added that BHH had in the meantime been negotiating with MRT Corp to seek a solution to either reduce and/or avoid the proposed acquisition of the said land. (StarBiz)



Tradewinds Plantation: Buys 60% stake in Retus



Tradewinds Plantation Bhd has acquired 60% of Retus Plantation Sdn Bhd in cash to further expand its oil palm plantation activities. The acquisition price is expected to be c.RM123.4m, based on the unaudited net tangible asset value of Retus Group of RM209m as at 31 Dec, 2011. The shares were bought from Tradewinds (M) Bhd via Tradewinds Plantation subsidiary Amalan Penaga (M) Sdn Bhd. Tradewinds Plantation does not foresee any material risks arising from the acquisition, given that the group is already involved in the plantation business and has been managing the Retus Plantation's estates on behalf of Tradewinds for the past six years. The acquisition would increase Tradewinds Plantation's total plantation land size from 141,430ha to 151,866ha and increase its production as 9,566.74ha are already planted. (StarBiz)


TNB: To make first FiT payment next week



Tenaga Nasional Bhd, which is expected to pay RM300m a year to Sustainable Energy Development Authority (Seda) for feed-in-tariff (FiT), will make its first payment next week, according to Renewable Energy and Green Technology, customer service and metering, distribution division head Abdul Rahim Jamil. "If you take TNB's revenue for one year, it's about RM30bn. So 1% of that (for renewable energy fund) is about RM300m. That is the estimate the Government is using to gauge the collection. But of course, the real payment would depend on how much we can collect from our customers," he said. (StarBiz)


TNB: Manjung 4 power plant to boost Janamanjung revenue



TNB Janamanjung Sdn Bhd expects revenue to hit RM4bn once the 1,000MW Manjung 4 coalfired power plant is ready for commercialisation in the 1Q2015. "The first 3 Manjung power plants which are collectively running at full capacity at 2,100MW currently generate about RM3bn," TNB Janamanjung COO/GM Shamsul Ahmad said. He said the exact contributions from Manjung 4 however would depend on a variety of factors. (StarBiz)



UEM Land: To launch Nusajaya Gateway this year



UEM Land (ULHB MK, Hold, TP: RM2.25) will be launching its new ringgit integrated mixed development project known as Nusajaya Gateway this year. MD and CEO Datuk Wan Abdullah Wan Ibrahim said the 1,821 ha parcel would be UEM Land's last remaining land due for development in Nusajaya. He said the state planning unit and the Johor government had given their approval on the project. "The development will keep us busy for the next 25 years with an estimated GDV of RM18bn to date," said Wan Abdullah. (StarBiz)

Comment: The land slated for development is located near the Sultan Abu Bakar Custom, Immigration and Quarantine (CIQ) complex at Tanjung Kupang in Gelang Patah. The Nusajaya Gateway development would comprise of residential and commercial properties with low and high-density living. We understand that the Group has identified several catalytic projects on the land and these include education, eco-tourism and leisure. Nusajaya Gateway's close proximity to the Second Link Crossing and Tuas checkpoint would appeal to Singaporeans and foreigners living there. We make no changes to our estimates at this juncture as we have already imputed this in our earnings forecast. Maintain Hold. (Azida Nor-Azizi)



Sime Darby: Property unit on track to achieve sales of RM2.4bn



Sime Darby Property Bhd, a unit of Sime Darby (SIME MK, Hold, TP: RM9.82), is on track to achieve a gross sales value (GSV) of RM2.4bn in FYE 30 June 2012, said MD Datuk Wahab Maskan. He said the value would be mainly contributed by some 23 property projects under its Lifestyle Collection umbrella. "The promise that we gave to our parent company was to register a GSV of more than RM2bn. We are sure of reaching RM2.4bn," he told reporters. Wahab expects its profit to be sustained at between RM400m-RM500m for the current financial year. (Bernama)

Comment: Our FY12 forecast for Sime Darby's property segment is sales of RM2.1bn, which is slightly lower than their targeted sales of RM2.4bn, but our operating profit forecast of RM443m falls within their profit target of RM400-500m. Currently Sime has a balance landbank of 11,447 acres, where 2,700 acres are located in their existing townships and 8,747 acres are located in their future townships. Management has previously indicated they intend to launch 1 new township every 2 years. The property segment contributed 7% of Sime's earnings in FY11. We maintain our Hold call with a TP of RM9.82. (Aris Sharif)


Maybank: License to expand



Malayan Banking Bhd (MAY MK, Hold, TP: RM8.25) is expected to receive a local incorporation license for its operations from the National Bank of Cambodia early next month to facilitate its ongoing expansion plans in Cambodia. "We remain focused on organic expansion plans in Cambodia," Maybank president and CEO Datuk Seri Abdul Wahid Omar said. He explained "As we expand, we felt there was a need to strengthen our commitment further with a local incorporation in Cambodia." It's been reported that over the 12 months to October 2011, Maybank Cambodia had registered a 75.2% growth in loans and advances, with 4% growth in customer deposits. (StarBiz)


Maybank: NIM to be compressed by another 10bps



Malayan Banking Bhd (MAY MK, Hold, TP: RM8.25) is expecting a contraction of 10 bps in the group's net interest margin (NIM) this year. The banking group said the financial services market in Malaysia continued to be competitive, resulting in thin margins for some financing products offered due to price competition between the banks. Its president and CEO Datuk Seri Abdul Wahid Omar said the group would assess the situation from time to time, in its efforts to manage the compression of NIMs of its financial products. (Financial Daily)

Comment: Our FY12 forecasts assume a smaller 5 basis point contraction in net interest margin, but our group loan growth assumption of 9% is also lower than management's KPI of 15.2%. We are maintaining our forecasts and valuation for Maybank. (Leong Hon Sze)



Bumi Armada (Company Update): Firing in all cylinders


Upgrade from HOLD to BUY; TP:RM5.10

Our recent meeting with Bumi Armada has strengthened our conviction on the company’s prospects. Bumi Armada’s growth potential of 32% net profit CAGR for FY12-FY14 is driven by expansion from all of its operating segments. FPSO is expected to contribute 45-50% to its EBIT from FY12 onwards, while the remaining would be from the OSV and T&I segments. Upgrade our HOLD call to BUY with RM5.10 TP, 27x PE pegged against FY12 EPS, representing +1SD of its historical PE in line with its strong growth. (refer to report for details)


Economics (Quarterly Economic Outlook): Second Quarter 2012: Still cloudy today but clearer skies tomorrow.

The first quarter saw important resolution to the European crisis. At the same time, US statistics are showing encouraging signs. Growth issues in term of weak global aggregate demand still linger however. Nevertheless, we expect clearer skies from here on. We maintain our 2012 Malaysian real GDP growth forecast at 4%. We maintain our mean inflation forecast at 2.7%. We also maintain our year-end target for the USD/MYR at MYR2.95 to a dollar. Finally, we are modifying our OPR outlook from at least 25bps cut to no cut by the end of the year. (refer to report for details)

ECM Newz Bits 30 March 2012


Highlights of the day
  • Economics (Quarterly Economic Outlook): Second Quarter 2012: Still cloudy today but clearer skies tomorrow.
  • Bumi Armada (Company Update): Firing in all cylinders (Upgrade from HOLD to BUY; TP:RM5.10)
Other Malaysian news
  • Maybank: NIM to be compressed by another 10bps
  • Maybank: License to expand
  • Sime Darby: Property unit on track to achieve sales of RM2.4bn
  • UEM Land: To launch Nusajaya Gateway this year
  • TNB: Manjung 4 power plant to boost Janamanjung revenue
  • TNB: To make first FiT payment next week
  • Tradewinds Plantation: Buys 60% stake in Retus
  • Selangor Properties: Unit gets notices of land acquisition
  • UMLand: Iskandar Investment in talks for RM1.4bn project
  • Cypark Resources: Exploring opportunities in Myanmar
  • Crest Builder-Detik Utuh JV: Bags Dang Wangi project
  • Malaysia Pacific Corp: Unit Oriental in project buy-back
  • Property: Penang to build 11,800 cheap homes
  • IPO: Investment banks approach Astro on possible re-listing

Global news
  • US: Unemployment claims fall to four-year low
  • US: Economy grew at 3% annual rate in 4Q2011
  • US: 4Q2011 income trends up, boost for spending
  • US: House adopts Republican budget calling for spending cuts
  • Europe: German unemployment fell in March amid economic resilience
  • Europe: Economic confidence unexpectedly fell in March
  • Europe: One-year rescue boost to EUR940bn is close to complete

Click here for the full PDF.

Thursday, 29 March 2012

Gamuda - Not the end of the MRT story

Target RM4.55

Gamuda's market-beating 1HFY7/11 results were driven by unexpectedly high margins, which should be sustainable with the help of MRT underground works. We continue to believe that it may clinch the PDP and contractor roles for MRT 2 & 3. Annualised 1H core net profit was in line at 1% above our forecast but 14% ahead of consensus. EPS forecasts and target price (10% RNAV discount) are raised for a stronger 2H. Still a Trading Buy and one of our top sector picks. These strong results and project awards are key catalysts.

CIMB Daybreak - 29 March 2012

What's on the Table…
  • Gamuda - Not the end of the MRT story
News of the Day…
  • Fund raising approved by SC grew 54% in 2011.
  • MAS-AirAsia share swap probe still on-going.
  • Telekom Malaysia plans to hedge more of its US$ debt.
  • UMW Toyata maintains its sales target.
  • QSR plans more Pizza Hut delivery outlets.
  • IGB to ink deal to co-develop Johor project.
  • YTL Corp plans acquisitions and higher dividend.
  • Samsung-Bintai Kiden jv gets S$166m contracts.


Click here for the full PDF report

Property: Prasarana in RM200m development plan for Dang Wangi station



Syarikat Prasarana Negara Bhd is planning a high rise real estate project over the existing Dang Wangi LRT station with an estimated GDV of RM200m. Prasarana MD Datuk Shahril Mokhtar said Prasarana had last week chosen a local property developer as its JV partner following the close of a recent exercise to seek proposals. According to Shahril, the project will comprise office and residential properties to be built on the existing structure of the LRT station in the city centre. (Financial Daily)


Oil & Gas: OSV players face stiff competition



Petronas and other oil majors are planning significant spending was seen as a great boon for local but may not translate into immediate windfall for domestic offshore support vessel (OSV) players given the intensifying competition from foreign players, due to the taxes imposed on the local OSV providers. OSV Malaysia Association president, Tasripin Masotee said local OSV players are unable to offer competitive rates because they do not enjoy the tax benefits granted to Malaysian merchant shippers. These include tax exemption for spare parts, lower corporate tax and no personal taxes for crew members. He added, foreign-owned vessels, including those registered in Labuan, are driving down daily charter rates by about US$1,000 to US$2,000. Some Malaysian OSV owners also face problems obtaining financing due to the uncompetitive edge in the industry. (Financial Daily)


Oil & Gas: Petronas, Total to study potential of CO2 field



Petronas has signed a heads of agreement (HOA) with France-based Total to jointly study the development and production potential of K5, a high carbon dioxide gas field offshore Sarawak. Under the agreement, Petronas' newly established upstream research unit Exploration and Production Technology Centre and Total will explore the possibility of developing the field in ways that are technically, commercially and environmentally viable. Discovered in 1970, K5 is a sour gas field with up to 70% carbon dioxide content. It is located about 230km from Bintulu in water depth of 80m. (StarBiz)



Key West: Acquires Manjung Niaga for US$52.5m


Key West Global Telecommunication Bhd, together with Maryland International Offshore Ltd, has acquired Manjung Niaga Sdn Bhd (MNSB) for US$52.5m (RM160.65m) as part of Key West' plans to position itself as an O&G player. Key West has 78.9% equity interest and Maryland 21.1%. At the signing ceremony, Key West ED Stephen Ng said MNSB owns 95% of PT Formasi Sumatera Energi (PT FSE), which owns a 15-year Kerja Sama Operasi (KSO) concession to reactivate and optimise the production of petroleum resources in the Tanjung Tiga Timur (TTT) field in South Sumatera, Indonesia. (Financial Daily) 




Bintai Kinden: Bags Singapore jobs



Bintai Kinden Corp Bhd announced that Land Transport & Authority of Singapore has awarded a contract to Samsung C&T Corporation-Bintai Kindenko Ptd Ltd (BKPL), an unincorporated JV partner. BKPL is a 69.92% subsidiary of Bintai Kinden. The contract for the supply and installation of electrical services and supply and installation of tunnel ventilation and environmental control systems are for a contract value of S$78.3m (RM191.19m) and S$87.94m (RM214.73m), respectively. (StarBiz) 



Ho Hup: Court orders to buy over minority stake in BJD



Ho Hup Construction Co Bhd has been ordered by the High Court to buy over Zen Courts Sdn Bhd' 30% stake in its subsidiary Bukit Jalil Development Sdn Bhd (BJD). When completed, the buyout will give Ho Hup 100% ownership of BJD, which holds 24ha of freehold land in Bukit Jalil. (Financial Daily)


Cypark: FiT deal to earn RM11m yearly



Cypark Resources Bhd' renewable energy power purchase agreement with Tenaga Nasional Bhd (TNB) for a feed-in-tariff (FiT) concession period of 21 years will earn the company RM11m annually. Cypark said the agreement with TNB via 2 of its subsidiaries, Cypark Suria (Pajam) Sdn Bhd and Cypark Suria (Negeri Sembilan) Sdn Bhd, is for the electricity generated from its 8MW solar park in Pajam, Negeri Sembilan. (Financial Daily)


Bandar Raya Development: Closer to open tender



Bandar Raya Development Bhd is one step closer to selling off its 4 prime assets via an open tender, after the company announced the appointment of its legal and financial advisers to assist in the deal. In a filing with Bursa Malaysia, the company said it was working with the Lee Hishammuddin Allen & Gledhill and CIMB Investment Bank Bhd to assist in the proposed disposal. It said the board had decided to proceed with the proposed disposal, while noting that Ambang Sehati Sdn Bhd had to-date been unable to confirm its plans to increase its stake in BRDB. (StarBiz)


IGB: In JV for RM6bn megamall



IGB Corp Bhd is partnering Johor-based Selia Pantai Sdn Bhd to build a RM6bn megamall in SouthKey, Johor Bahru. IGB and Selia Pantai entered into a conditional MoU to establish a 70:30 JV for SouthKey Megamall. The megamall will be built on 36 acres (14.75ha) of leasehold land and it has built-up area of 6m sq ft. IGB group MD Robert Tan said GDV for the project is expected to be around RM6bn against a GDC of about RM3bn. (Financial Daily)



UMW Toyota Motor: Maintain sales target



UMW Toyota Motor is maintaining its sales target of 93,000 Toyota and Lexus cars this year despite the potentially adverse impact of the responsible lending guidelines on the total industry volume (TIV) for the automotive sector. UMW Toyota Motor chairman Takashi Hibi said the impact of the guidelines would be minimal on the company' vehicle sales. "Our customers have fairly good credit ratings. Sales will be boosted by the introduction of the new Lexus and Toyota models," said Hibi. (StarBiz)


MAS-AirAsia: MyCC probe into share swap still ongoing



The investigation into the share swap agreement between MAS and AirAsia Bhd is continuing, said the Malaysia Competition Commission (MyCC). MyCC Commissioner Datuk Dr S Sothi Rachagan said the investigation would take a longer time as it is a complex process involving the examination of agreements. (Financial Daily)



AirAsia: May listing for Thai AirAsia, Zooming in on 2 more Aseas countries



CEO Tan Sri Tony Fernandes is looking at listing Thai AirAsia in May and Indo AirAsia sometime in October. He has not given up hopes of trying to list AirAsia X (AAX) this year too. Additionally, AirAsia is zooming on South Korea and 2 other Asean countries to set up new operations as it widens its reach to more countries in Asia-Pacific. "In North Asia, the next potential is South Korea and we are also closing in on Japan as that is where our next launch will be. We are also looking at adding 2 more countries in Asean and we hope to announce that within the next 6 to 8 months. We are at a very advance stage of discussions (with parties in the 2 Asean countries)," Tan Sri Tony Fernandes said. (StarBiz)



YTL Corp: Plans more acquisitions, dividend increase


YTL Corp may buy power, cement or property assets in Asia in the next 6 months to expand its business in the region, according to MD, Tan Sri Francis Yeoh. The group had identified targets and might make a purchase in the second or third quarter, Yeoh said. The company might boost dividend payouts to the highest level in 4 years following its takeover of unit YTL Cement Bhd. "There are some opportunities looming for acquisitions. We've got a lot of good things going on. We have RM13bn cash. We can grow organically or we can acquire assets," Yeoh said. (StarBiz) 



Gamuda (2QFY12 Results): Double-track earnings surprise


Maintain HOLD, TP: RM3.53

Gamuda's 1HFY12 results beat both consensus and house expectations. This was mainly due to the much faster than expected earnings recognition and margin expansion from the construction of the Northern electrified double-tracking project (EDTP). There were no performance surprises from the other divisions (property, water and expressway concessions). However, we expect Gamuda's construction pretax profit (PBT) margin to decline from the current 12.4% (1HFY12 average) in coming quarters as the Northern EDTP tapers off towards completion but bounce back when the Sungai Buloh - Kajang (SBK) MRT tunnelling job goes into full swing in CY14. Maintain HOLD with target price at RM3.53, based on sum-of-parts. (refer to report for details)


Tan Chong Motors (Initiating Coverage): Growth fuelled by expansion

HOLD, TP: RM4.72

We initiate coverage on Tan Chong Motor Holdings (TCM), a sole distributor for Nissan Motor Co. Growth for the Group is expected to come from the introduction of new/upgraded models, contract assembly and strategic expansion into the Indochina markets. We recommend a HOLD with DCF-based target price of RM4.72 as we view that the local auto industry is already saturated-abogged down by a pedestrian TIV growth (average 2.2% pa) as well as stricter hire purchase policies (refer to report for details)

ECM Newz Bits 29 March 2012

Highlights of the day
  • Tan Chong Motors (Initiating Coverage): Growth fuelled by expansion (HOLD, TP: RM4.72)
  • Gamuda (2QFY12 Results): Double-track earnings surprise (Maintain HOLD, TP: RM3.53)

Other Malaysian news
  • YTL Corp: Plans more acquisitions, dividend increase
  • AirAsia: May listing for Thai AirAsia, Zooming in on 2 more Aseas countries
  • MAS-AirAsia: MyCC probe into share swap still ongoing
  • UMW Toyota Motor: Maintain sales target
  • IGB: In JV for RM6bn megamall
  • Bandar Raya Development: Closer to open tender
  • Cypark: FiT deal to earn RM11m yearly
  • Ho Hup: Court orders to buy over minority stake in BJD
  • Bintai Kinden: Bags Singapore jobs
  • Key West: Acquires Manjung Niaga for US$52.5m
  • Oil & Gas: Petronas, Total to study potential of CO2 field
  • Oil & Gas: OSV players face stiff competition
  • Property: Prasarana in RM200m development plan for Dang Wangi station

Global news
  • US: Orders for durable goods show sustained demand
  • US: Unemployment may drop to 6% by mid-2013, NY Fed study finds
  • Europe: France's 4Q growth less than estimated versus year ago
  • Europe: French consumer confidence unexpectedly jumped in March
  • UK: Economy shrinks more than first estimated on services
  • UK: Britons see disposable incomes plunge most since 1977
  • Australia: Government plans deeper spending cuts
  • Global: Iran oil flow slows, and price fears rise

Click here for the full PDF.

Chartnexus: Critical level for LATEXX

As observed from LATEXX's technical chart, it is trading below all Moving Average lines which suggests a downtrend momentum. In addition, MACD continues to hover below centreline and Stochastic has remained below the 50% level which adds to the misery. The support level at RM1.39 represents a critical level for LATEXX. If the mentioned support level is broken, more downside beckons for this stock.

Wednesday, 28 March 2012

ECM GLOBAL NEWS 28 March 2012

US: Confidence bolstered by improving job market
The Conference Board's index was 70.2 this month, in line with the median forecast in a Bloomberg News survey, down from a revised 71.6 reading in February. An improving job market helped keep consumer confidence close to the highest level in a year in March as a growing number of Americans said they planned to buy cars, homes and appliances. (Bloomberg)

US: Home prices in cities at slower pace in January
Home prices in twenty US cities dropped at a slower pace in January, pointing to stabilization in the real estate market. The S&P/Case-Shiller index of property values in twenty cities fell 3.8% yo- y, matching the median forecast of 32 economists surveyed by Bloomberg News, after decreasing 4.1% in December. Prices were little changed in January from the prior month, the best performance since July. (Bloomberg)

US: Manufacturing in Richmond Fed region expands at slower pace
Manufacturing in the region covered by the Federal Reserve Bank of Richmond grew in March at the slowest pace of 2012 as orders and sales cooled. The factory index, which covers North and South Carolina, the District of Columbia, Maryland, Virginia and most of West Virginia, fell to 7, the lowest level since December, from a one-year high of 20 in February. The median forecast of economists surveyed by Bloomberg News projected the index would drop to 18. Measures greater than zero signal growth. (Bloomberg)

China: Industrial profits fall 5.2% in first two months
Chinese industrial companies had their first January-February profit decline since 2009 as slowing exports and a government campaign to cool property prices dampened earnings. Net income dropped 5.2% y-o-y to CNY606bn (US$96bn). That compared with a 34.3% gain in the first two months of 2011. The bureau did not release a figure for January because of a week-long Chinese New Year holiday that disrupted production. (Bloomberg)

Japan: DPJ tries to break deadlock over sales tax
Lawmakers from Japan's ruling party tried to break a deadlock over a proposed sales tax increase that economists say is vital to restore the country's dire fiscal condition but is opposed by some key politicians within the governing coalition. The Democratic Party of Japan began the latest round of debate within its ranks on Tuesday evening hoping to forge agreement over the bill to double the current 5% consumption tax in two stages by 2015. (Wall Street Journal)

South Korea: Consumer confidence rises to 4-month high
South Korean manufacturers' confidence rose to the highest level in six months on signs that the outlook for global growth is improving. An index measuring expectations for April climbed to 85 from 84 for March, the Bank of Korea said. A measure of expectations at non-manufacturing companies advanced to 82 from 80. South Korea's consumer sentiment index rose to a fourmonth high, a central bank report showed yesterday. (Bloomberg)




Alpha Edge - The age of the wedge

The bearish rising wedge that the S&P500 has been tracing since Nov is intact, with the current support trendline at 1,381pts. Meanwhile, the MSCI Asia-ex Japan broke below its 50-day SMA early this week but rebounded above this SMA yesterday. Failure to hold above this SMA would be bearish.



Syarikat Takaful Malaysia - Stake your claim on the high-growth Takaful industry

The only direct exposure to the fast-growing Takaful or Islamic insurance industry, Syarikat Takaful is expected to outpace the industry's premium growth of 20%+ in the next 3-5 years, thanks to market share gains. Despite having one of the best ROEs and dividend yields in the sector, the stock is trading at only 6x CY11 P/E. Applying an 9x CY12 P/E based on a 20% discount to the insurance sector, we get a value of RM4.60, suggesting 59% share price upside.

CIMB Daybreak - 28 March 2012

What’s on the Table…
  • Syarikat Takaful Malaysia - Stake your claim on the high-growth Takaful industry
  • Alpha Edge - The age of the wedge
News of the Day…
  • RON 95 petrol subsidy up 10sen in March 12.
  • CPO prices hit a 13-month high on weaker soybean harvest.
  • IGB plans to develop a megamall in Johor.
  • PM’s son not buying stake in Supercomnet Technologies.
  • Malaysian Airlines and Bangkok Airways begin code sharing.
  • Cahya Mata, Rio Tinto call off smelter project.
  • Bolton in its first build-then-sell development.

Click here for the full PDF report

Plantation: CPO climbs to 13-month high


CPO prices hit a 13-month high of RM3,490/MT on worries that a fall in soya bean harvests from South America will reduce global vegetable oil supplies, increasing demand for palm oil from Malaysia. Bursa Malaysia Derivatives' CPO futures prices for May 2012 delivery have risen by 16% after hitting a bottom of around RM3,000/MT in February. Meanwhile, soy oil, which is a substitute for CPO and makes the prices of the two edible oils highly correlated, has been rising in price over the past few months, but not as steeply as CPO. (Financial Daily)



Khazanah: To use sukuk proceeds for new deals


Khazanah Nasional Bhd will use the US$357.8m (RM1.09bn) raised from its recent landmark exchangeable sukuk issue to fund upcoming investments in the Asian region. "We have some deals in the pipeline in sectors we're familiar with," CFO Mohd Izani Ghani said. He declined to elaborate on those details, saying only that they would be in markets that Khazanah already has presence in. (Business Times)



Bolton: In its first build-then-sell development


Bolton Bhd is embarking on its first build-then-sell residential development with a GDV of RM80m on a 2.34ha site in Setapak. The company has entered into an agreement with CRSC Property Sdn Bhd to develop 70 three-storey superlink terraced houses on the leasehold site, which is part of an ongoing 26.97ha residential and commercial development in Taman Sri Rampai. Under the agreement, Bolton will construct and complete the development by February 2015. (StarBiz)



CMS: Scraps plans for aluminum smelter


Cahaya Mata Sarawak Bhd (CMS) has scrapped plans for a US$2bn (RM6.12bn) aluminum smelter in Sarawak that was part of a collaboration with Rio Tinto plc. They failed to work out a commercial power supply agreement with Sarawak Energy Bhd (SEB). In its announcement to Bursa Malaysia, CMS said the termination was mutual and it involved heads of agreement between RTA and Samalaju Aluminium Industries Sdn Bhd, its wholly-owned unit, and the MoU is between both parties and SEB. (Financial Daily)



MBSB: Denies eyeing London properties


Malaysia Building Society Bhd (MBSB) has refuted a local newspaper report that it is looking into opportunities in the London property market. In a statement, MBSB said the report in a local Malay daily entitled "MBSB eyes opportunities in London's property market" was not true. "MBSB has not made any such statement and wishes to inform that the company has no plans to expand its business overseas," it said. (Financial Daily)



QSR, KFC: Government-linked investment company to join buyout?


A government-linked investment company (GLIC) is likely to take a significant stake in the specialpurpose vehicle that is proposing to buy out QSR Brands Bhd and KFC Holdings (M) Bhd, according to reliable sources. The move is aimed at giving the buyout vehicle, Massive Equity Sdn Bhd, a firmer footing, both from the standpoint of funding as well as governance. It is understood that the GLIC concerned is likely to be one of the following the Employees Provident Fund, Permodalan Nasional Bhd, Lembaga Tabung Haji or Kumpulan Wang Persaraan. (StarBiz)



IGB: Mulls over megamall in JB


IGB Corp Bhd is looking to develop a megamall in Johor Bahru (JB), similar to Mid Valley Megamall in KL that was built by the group 12 years ago. According to industry sources, IGB is to sign a MoU with Selia Pantai Sdn Bhd today for the joint development of the megamall in JB. The megamall project is estimated to cost RM2bn-3bn, and will take up some 40 acres (16.19ha) of land, with about 3m sq ft in built-up area. The source said IGB may take up a 70% stake in the JB megamall project, with Selia Pantai holding the rest. (Financial Daily)



MAS: To fly AirAsia X passengers under pact


MAS will fly AirAsia X Sdn Bhd (AAX) passengers on selected routes following the signing of a reaccommodation agreement (RA) with a transaction value estimated at RM51.62m. MAS said the RA is to facilitate the re-accommodation of AAX-ticketed passengers following the suspension of its services to Mumbai, New Delhi, London and Paris routes. (Financial Daily)



RHB Capital: Upbeat on Singapore

Country head for RHB Bank Singapore, Jason Wong said the bank has reached several other business milestones that showcased its growth and progress. "In spite of the challenging market conditions, RHB Bank Singapore has remained profitable. It achieved an increase of 23% in pretax profit last year, compared with 2010. "We are very committed in Singapore. Last year we injected S$350m (RM852m) in capital to support the business growth in here," he said. (StarBiz)

ECM Newz Bits 28 March 2012


Malaysian news
§         RHB Capital: Upbeat on Singapore
§         MAS: To fly AirAsia X passengers under pact
§         IGB: Mulls over megamall in JB
§         QSR, KFC: Government-linked investment company to join buyout?
§         MBSB: Denies eyeing London properties
§         CMS: Scraps plans for aluminum smelter
§         Bolton: In its first build-then-sell development
§         Khazanah: To use sukuk proceeds for new deals
§         Plantation: CPO climbs to 13-month high

Global news
§         US: Confidence bolstered by improving job market
§         US: Home prices in cities at slower pace in January
§         US: Manufacturing in Richmond Fed region expands at slower pace
§         China: Industrial profits fall 5.2% in first two months
§         Japan: DPJ tries to break deadlock over sales tax
§         South Korea: Consumer confidence rises to 4-month high


Click here for the full PDF.


Tuesday, 27 March 2012

Shipping Monitor - Capesize rates bite the dust


Capesize bulker TCE rates fell 15.7% last week to just US$4,546/day, close to the lows of Nov 08, highlighting the weakening Chinese import demand and ships overcapacity. Meanwhile, container shipping share prices have weakened recently despite improving freight rates.


Adventa - Arriving late to the party

Target RM1.49


At 19% of our full-year estimate, 1Q core EPS was in line as we expect an improvement in sales in the quarters ahead when Adventa’s nitrile glove plant starts. Also, raw material prices are expected to remain stable, enabling management to raise selling prices and pass costs on. We reiterate our Underperform call and target price basis of 9.14x CY13 P/E or a 30% discount to Top Glove’s 2-year average. Derating catalysts include falling demand for its natural rubber (NR) product and lower nitrile margins. We prefer Hartalega.


Plantations - IOI harvests its Indonesian unit

The planned listing of IOI Corp's associate BGA group in Singapore should lead to a better valuation of its investment in BGA by the market but will not have a significant impact on IOI's earnings. We are neutral on the news that Wilmar is one of the cornerstone investors as its potential investment is insignificant relative to its shareholders' funds. We maintain our Underperform call on IOI Corp and Neutral call on Wilmar.

CIMB Daybreak - 27 March 2012

What's on the Table…
  • Plantations - IOI harvests its Indonesian unit
  • Adventa - Arriving late to the party
  • Shipping Monitor - Capesize rates bite the dust
News of the Day…
  • The government will be spending RM800m on flood mitigation projects
  • Mah Sing in JV to develop RM830m GDV commercial development in Kota Kinabalu
  • Telekom Malaysia aims to have 400k customers for its Unifi service by year-end
  • Supercomnet deal with PM’s son, option to buy 18.7% stake in company at RM0.225
  • Palm oil prices hit a year high on Monday amid a broader rally in oilseeds
  • Ben Bernanke said wage growth is too soft to present an inflation risk

Click here for the full PDF report

ECM GLOBAL NEWS 27 March 2012


US: Bernanke says accommodative policy needed to cut joblessness
Federal Reserve Chairman Ben S. Bernanke said while he is encouraged by the unemployment rate's decline to 8.3%, continued accommodative monetary policy will be needed to make further progress. The drop in unemployment may reflect "a reversal of the unusually large layoffs that occurred" in 2008 and 2009, and this process may now be over, Bernanke said. Reducing the jobless rate further will probably require a quicker expansion of business production and consumer demand, which "can be supported by continued accommodative policies," he said. (Bloomberg)

US: Growth to be about 3% in 2012, Plosser says
Federal Reserve policymaker Charles Plosser said that economic growth in the United States would be about 3% in 2012 and 2013. The president of the Philadelphia Fed, also said he believed the jobless rate would fall to 7.8% by the end of 2012. The U.S. jobless rate stood at 8.3% in February. (Reuters)

US: Pending sales of existing homes hold near two-year high
The number of Americans signing contracts to buy previously owned homes held in February near an almost two-year high, a sign that the real estate market may be stabilizing. The index of pending home purchases fell 0.5% to 96.5 after a 2% increase the prior month, the National Association of Realtors said. January's reading of 97 was the highest since April 2010. The median forecast of 41 economists surveyed by Bloomberg News called for a 1% rise. (Bloomberg)

Europe: German business confidence unexpectedly gained in March
German business confidence unexpectedly rose to an eight-month high in March, suggesting Europe's largest economy will return to growth even as the sovereign debt crisis curbs euro-area demand for its exports. The Munich-based Ifo institute said its business climate index, based on a survey of 7,000 executives, increased to 109.8 from a revised 109.7 in February. Economists forecast it would remain unchanged at the initial February reading of 109.6, according to the median of 44 estimates in a Bloomberg News survey. (Bloomberg)

South Korea: Consumer confidence rises to 4-month high
South Korean consumer confidence rose to the highest level in 4 months, buoyed by signs of improvement in the economy and progress in containing Europe's sovereign debt crisis. The sentiment index rose to 101 in March from February's 100, the Bank of Korea said. A reading above 100 indicates optimists outnumber pessimists. (Bloomberg)



IPO: EITA Resources to fund new facility with proceeds



EITA Resources Sdn Bhd is planning to use RM12.3m of its April 9 IPO proceeds to fund a new lift manufacturing facility in Batu Bukit Raja, Selangor. The lift, electrical and electronics components manufacturer and distributor expects to raise a total of about RM17.5m from the IPO. "The groups upcoming new plant is a timely initiative, as it will allow us to increase our lift systems production capacity to capture the opportunities in the growing market," said EITA Group MD, Foo Wing Hoong. The RM12.3m investment includes a purchase of a 1.16ha piece of land, construction of the new factory and lift test tower and purchase of machinery. (Financial Daily)

Source: ECM Newz Bits 27 March 2012

Construction: RM880m government projects under way



The Government, via the Irrigation and Drainage Department, will be spending RM880m on flood mitigation projects throughout the country. Natural Resources and Environment Deputy Minister Tan Sri Joseph Kurup said that a total 32 projects were under way and were expected to be completed by the end of the year. He said flood hazard maps for six major river basins - Muar, Kulai, Kinta, Selangor, Muda dan Kedah - had been completed. (StarBiz)


Malaysia Smelting: To double royalty payment to Perak government



Malaysia Smelting Corp Bhd (MSC) has agreed to pay 100% more in royalties to the Perak government. In return, it has secured the renewal of its tin mining leases in the state for a longer period. In an announcement to Bursa Malaysia, MSC said its wholly-owned unit Rahman Hydraulic Tin Sdb Bhd (RHT) had agreed to pay the state government a higher rate of 5% on sales of tin-in-concentrates. This is double the current rate of 2.5% payable under the existing terms of the current mining leases, originally issued under the old enactment that was subsequently been replaced by the 2003 enactment. (Financial Daily)



CB Industrial: Gets RM45m palm oil mill job



CB Industrial Product Holdings Bhd (CBIP) has received a RM44.67m contract to construct a palm oil mill under its patented Modipalm design. The contract was secured by its wholly-owned unit Modipalm Engineering Sdn Bhd from Syarikat Ladang Sungai Terah Sdn Bhd to design and build a palm oil mill with 30MT/hour capacity, and an extension by adding 15MT/hour capacity within two years after the completion of the first mill. (Financial Daily)


Mah Sing: In deal for RM830m project



Mah Sing Group Bhd will be undertaking a joint development for the development of a 1.72ha parcel of prime leasehold commercial land in Harbour City, Kota Kinabalu. The development, which has been tentatively named Sutera Avenue, will be a niche project with a proposed GDV of about RM830m. Mah Sing's wholly-owned subsidiary Capitol Avenue Development Sdn Bhd entered into a joint development agreement with Paduan Hebat Sdn Bhd to develop the land which cost RM39m or RM210 psf. (Financial Daily)


MAHB: Shortlisted for Qatar airport


Malaysia Airports Holdings Bhd (MAHB) has been shortlisted for the airport operation and maintenance of facilities contract for Qatar's new airport, currently called New Doha International Airport. COO Datuk Abdul Hamid Mohd Ali said the company had been shortlisted out of 16 candidates for the project and that MAHB had come out as the second choice due to its strength in technical knowledge. MAHB expects to know the outcome of its tender in 3Q2012. Another project that MAHB is hoping to secure is the Prince Mohammed Bin Abdulaziz Airport in Madinah, for which the group has put in a security deposit. (StarBiz) 


YTL Corp: Buys SG REIT's CPU for RM43m


YTL Corp Bhd is acquiring 17.49m convertible preferred units (CPU) in Starhill Global Real Estate Investment Trust (SG REIT) for S$1 each which amounted to S$17.49m (RM42.79m) in cash. "The CPUs acquisition provides an opportunity for YTL Corp to further increase its stake in SG REIT upon conversion of the CPUs. The CPUs also carry a net annual yield of 5.09% (net holdings of withholding tax of 10%), which is generally higher than current fixed deposit rates in Malaysia," said YTL Corp. (Financial Daily) 


UEM Land: In talks to enter India, Myanmar, Vietnam


UEM Land Holdings Bhd (UEML) (ULHB MK, Hold, TP: RM2.25) said it is still negotiating with certain parties on plans to enter India, Myanmar and Vietnam. MD and CEO Datuk Wan Abdullah Wan Ibrahim declined to divulge details on the negotiations, saying that the agreement is expected to be signed this year. "We are already talking to people [major developers] but until the agreement is inked, I cannot say anything," he said. Wan Abdullah added that UEML will look at other countries, wherever the opportunity arises. (Financial Daily) 


TM: Eyes 400,000 customers for Unifi by year-end


Telekom Malaysia Bhd (TM MK, Hold, TP: RM4.78) aims to hit the 400,000 customer mark for its high-speed broadband service, UniFi, by year-end. Its Executive VP for Consumer, Imri Mokhtar, said the fibre optic broadband service offering high-speed Internet, phone and Internet protocol TV has been growing rapidly, surpassing the 300,000 mark yesterday. "UniFi is now enjoying a take-up rate of over 20% of the premises passed, surpassing our initial estimates and expectations of 8% to 10%. The service is currently available at 79 exchange areas covering over 1.18m premises," he said. (Financial Daily)

Comment: The 300,000 mark that UniFi activated came in as no surprise to us as we have already imputed a net adds of 196k which translates into 432k subscribers for 2012 in our estimates. This is slightly higher than management's target. Based on the current run rate of c.21k per month, UniFi will achieve 489k of subscribers by end 2012. Therefore, our assumption lands on the conservative side as we believe competitors will marginally hinder the HSBB UniFi growth momentum. Reiterate our HOLD recommendation with the target price of RM4.78. (Desmond Chong)



IOI Corp: Associate Bumitama to list on SGX

IOI Corp Bhd (IOI MK, Hold, TP: RM4.64) is set to register at least US$226m (RM696m) or a 360% gain - on paper - from its investment in Indonesia-based Bumitama Agri Ltd. The latter has just filed for an IPO on the Singapore Exchange (SGX), which is said to fetch a market capitalisation of between S$1.2bn and S$1.3bn (RM2.9bn and RM3.2bn). According to a filing with Bursa Malaysia, IOI acquired a 33% stake in PT Bumitama Gunajaya Agro (BGA) in 2007 for US$62.6m. Its holdings shall be diluted to 30.4% upon completion of the IPO, according to Bumitama's prospectus filed with the Monetary Authority of Singapore. (Financial Daily)

Comment: According to sources with knowledge of the matter, Bumitama posted revenue of US$319.5m and net profits of US$85.3m for its FYE 31 Dec 2011. This values the company at 14x PE, which is in line with our valuation of IOI at 14x PE. Therefore at IPO pricing, there is no impact to our valuation, but we will see after shares start trading. Trading is slated to start during the week of 9 April. IOI's 30% stake in Bumitama would equate to net profits of US$28.2m (RM84.6m), representing half of IOI's FY11 associate profits of RM170.7m. (Aris Sharif)

ECM Newz Bits 27 March 2012


Malaysian news
§         IOI Corp: Associate Bumitama to list on SGX
§         TM: Eyes 400,000 customers for Unifi by year-end
§         UEM Land: In talks to enter India, Myanmar, Vietnam
§         YTL Corp: Buys SG REIT’s CPU for RM43m
§         MAHB: Shortlisted for Qatar airport
§         Mah Sing: In deal for RM830m project
§         CB Industrial: Gets RM45m palm oil mill job
§         Malaysia Smelting: To double royalty payment to Perak government
§         Construction: RM880m government projects under way
§         IPO: EITA Resources to fund new facility with proceeds

Global news
§         US: Bernanke says accommodative policy needed to cut joblessness
§         US: Growth to be about 3% in 2012, Plosser says
§         US: Pending sales of existing homes hold near two-year high
§         Europe: German business confidence unexpectedly gained in March
§         South Korea: Consumer confidence rises to 4-month high



Click here for the full PDF.