Thursday, 31 May 2012

Media Chinese Int'l - Advertisers “wait and see”


Target RM1.26 (Long Term: Neutral)

MCIL's FY3/12 net profit was a marginal 3% above our forecast because of higher than expected margins. But the adex outlook in Malaysia is cloudy as some advertisers are holding back in light of uncertainty over the upcoming general election.


IOI Corporation - Weaker performance from almost all key divisions


Target RM5.04 (Long Term: Under Perform)

As expected, the group posted weaker yoy earnings in 3Q due to lower earnings from all key divisions. We expect a stronger 4Q due to higher plantation earnings


Genting Malaysia - Luck is not on its side


Target RM4.00 (Long Term: Neutral)

Higher operating costs led to a disappointing 1Q12 core net profit of 20% of our full-year forecast and 19% of consensus numbers. The impact of the first full quarter of earnings from RWNY was more than offset by the drop in EBITDA for the UK and Malaysian operations.


Eksons Corporation - Look East for inspiration


Target RM1.33 (Long Term: Out Perform)

Over the next few months, we will be looking for signs of a pick-up in the pace of reconstruction works in Sendai in Japan. This could give tropical plywood prices and Eksons's share price a much-needed boost.


Carlsberg Brewery (M) - CNY cheer


Target RM11.50 (Long Term: Out Perform)

Although 1Q12 net profit made up 26% of forecast, we deem it in line as it was driven by seasonally strong CNY demand. It could raise dividend payout beyond its unofficial policy of 50-70% payout as its net gearing is only 0.2x after payment of the 51 sen special dividend.


Telekom Malaysia - Shifting to the fast lane


Target RM6.34 (Long Term: Out Perform)

Making up 24% and 25% of our and consensus estimates, TM’s 1Q12 is above expectations as revenue surprised. We expect stronger numbers for the rest of the year. Core net profit would have been 11% higher if not for a spike in bad debt provision. We raise our DCF-based target price by 2% as we up FY12-14 core EPS estimates by 1-7% given the earnings surprise. TM remains our top telco pick in Malaysia and the region, with earnings surprises being a likely rerating catalyst. Maxis’s recent aggression is a key risk for TM but we think it is not sustainable.


Genting Bhd - Not a blowout quarter


Target RM12.30 (Long Term: Out Perform)

At 20% of our full-year forecast (21% of consensus), 1Q core net profit was marginally below expectations. Maiden full-quarter contribution from RWNY was eclipsed by weaker earnings in power, plantation and gaming in other jurisdictions. We cut our FY12-14 earnings estimates to reflect our recent earnings cuts for its subsidiaries. But our SOP target price is higher to reflect the higher target prices for Genting Plantation and Genting Singapore. Maintain Outperform on the stock. We like Genting Bhd for its diversity, global footprint and attractive valuations.


Sime Darby Bhd - Knocking the ball out of the park

Target RM10.90 (Short Term: Trading Buy)

Sime’s yoy rise in 3QFY6/12 earnings bucked the trend among plantation companies, thanks to a better showing from non-plantation businesses. 9M12 net profit is within our expectation and is only 7.5% short of its full-year KPI target. At 77% of our FY12 forecast and 75% of consensus numbers, we expect weaker property and motor earnings in 4Q. We continue to value the stock at a 10% discount to SOP. It is a Trading Buy rather than an Outperform due to our near-term positive view on CPO price.

CIMB Daybreak - 31 May 2012

What's on the Table...
  • Sime Darby Bhd - Knocking the ball out of the park
  • Genting Bhd - Not a blowout quarter
  • Telekom Malaysia - Shifting to the fast lane
  • Carlsberg Brewery (M) - CNY cheer
  • Eksons Corporation - Look East for inspiration
  • Genting Malaysia - Luck is not on its side
  • IOI Corporation - Weaker performance from almost all key divisions
  • Media Chinese Int'l - Advertisers “wait and see”
News of the Day...
  • Qatar Holding, cornerstone investor of Felda Global Ventures Holdings?
  • Seadrill sold 6% SapuraKencana shares but remain one of largest shareholders
  • Yeo Hiap Seng (Malaysia) proposed to be taken private at RM3.60/share cash offer
  • Perodua is studying the possibility of producing sedan cars in the near future
  • Sarawak Energy secure sales for most of the electricity output from Bakun dam
  • US pending home sales index fell 5.5% mom in Apr (a revised +3.8% in Mar)

Click here for the full PDF report

ECM GLOBAL NEWS 31 May 2012


US: Pending sales of homes decrease by most in a year
The number of Americans signing contracts to buy previously owned homes fell in April by the most in a year, indicating the U.S. housing recovery remains uneven. The index of pending home re-sales dropped 5.5% following a revised 3.8% gain the prior month, figures from the National Association of Realtors showed. The median forecast of 42 economists surveyed called for no change in the measure. (Bloomberg)

Europe: EU proposes 'banking union'
The 17 countries that use the euro should set up a "banking union" that allows them to share the burden of bank failures, the European Union's executive arm said, as worries grew about whether Spain has the financial strength to shield lenders suffering from a meltdown of its property market. The European Commission called on the euro zone to allow its new rescue fund to directly prop up vulnerable banks?arather than pushing their home countries into full-blown bailouts. It also raised the idea of a pan-European deposit insurance fund, which would further shield individual governments from the cost of expensive bank failures. (Wall Street Journal)

Europe: Economic confidence falls to 2 1/2 year low
Economic confidence in the euro area declined more than economists forecast in May to the lowest in 2 1/2 years after inconclusive Greek elections raised the specter of a euro breakup and Spain struggled to shore up its banks. An index of executive and consumer sentiment in the 17- nation euro area fell to 90.6 from a revised 92.9 in April, the European Commission said. That is the lowest since October 2009 and below the 91.9 forecast by economists, according to the median of 28 estimates in a survey. (Bloomberg)

Brazil: Central bank cuts rate to record-low 8.5% as European crisis deepens
Brazil cut its benchmark interest rate to a record low after Europe's debt crisis roiled global financial markets, threatening to further hobble growth in Latin America's biggest economy. Policy makers lowered the Selic rate by a half-point to 8.5%, as forecast by 61 of 70 analysts surveyed. Brazil has cut borrowing costs 4ppt since August, the most among Group of 20 nations, to try to revive growth. The monetary stimulus and efforts to prop up spending through tax cuts have so far failed as the economy unexpectedly contracted in March after shrinking in January and February. (Bloomberg)

Global: Oil hit six-month low as risk aversion sweeps markets
Oil dropped more than 3% on Wednesday to the lowest level in nearly six months as fears on the euro zone crisis sparked an erosion in risk appetite across markets. Prices for Brent and US benchmark West Texas Intermediate (WTI) crude futures headed toward their biggest monthly drop since the financial crisis of 2008, with US oil breaking below a key technical level as investors headed to perceived safe havens. Worries about Europe mounted as borrowing costs rose for Spain and Italy and the latest poll showed a lead for Greece's left-leaning, anti-austerity parties ahead of next month's election. (Reuters)


Power: Sarawak Energy Bakun power sold


Sarawak Energy Bhd (SEB) says it has secured sales for most of the electricity output from the Bakun hydro dam from companies in the Sarawak Corridor of Renewable Energy (SCORE). SEB officials said about 1,800MW have been sold to customers, representing 75% of firm supply capacity from the Bakun and Murum dams. Bakun is expected to generate a firm supply of 1,771MW when fully operational next year. Four of the dam's eight turbines, each with a 300MW capacity, have been commissioned. SEB added that new investors coming to SCORE would source their power supply from the 994MW Murum dam, which is about 60% completed. The Murum dam will have a firm output of 635MW when fully operational in 2014. (StarBiz)


Media: Astro unveils On-The-Go


Astro Malaysia Holdings Sdn Bhd is targeting to penetrate 65% of households in Malaysia with its new service, Astro On-The-Go, which delivers non-stop entertainment on smartphones, tablets and laptops. CEO Datuk Rohana Rozan believes that there is head-room to grow and is targeting at least 65% of total household penetration. Currently, Astro's penetration in Malaysia is between 50% and 51% with 3.1m customers. Astro would capture the remaining market with Njoi, its subscription-free satellite TV service. Njoi is available for all consumers nationwide, offering 18 TV and 19 radio channels. (StarBiz) 


Construction: Extension to KLIA2 ready by year-end


The RM100m Express Rail Link (ERL) extension from the Kuala Lumpur International Airport to the Kuala Lumpur International Airport 2 (KLIA2), the low-cost carrier terminal in Sepang, is on track to be completed by year-end, said Express Rail Link Sdn Bhd CEO Noormah Mohd Noor. She said work is progressing at a feverish pace and the project is 45% complete with a new car park already available at the new terminal. On the progress of the 2.2km rail extension, she said: "The entire concrete pavement is almost complete and ready to be installed on the ballast. We have done about 400m of ballast at KLIA2," she said. (Financial Daily)


Automotive: Perodua aspires to build sedans


Perusahaan Otomobil Kedua Sdn Bhd (Perodua) has revealed aspirations to produce a sedan model. Perodua has conducted studies on producing a sedan model, said its MD Datuk Aminar Rashid Salleh. He also noted that Perodua's partner, Daihatsu specialises in compact cars. On other news, Perodua signed an agreement for the purchase of 2.6ha land in Serendah to provide facilities for its 8,000-strong workforce in Rawang. "We are going to build a mosque, a childcare centre, a gymnasium and additional parking lots, In the future, we are looking to build housing for our staff," he added. Perodua acquired the land from its largest shareholder, UMW Holdings Bhd for RM16.7m. (Financial Daily)


FGVH: Gets Qatar Holding as cornerstone investor


Qatar Holding LLC, a unit of the Gulf nation's sovereign wealth fund, has agreed to take part in the planned US$3bn listing of Felda Global Ventures Holdings Bhd as a cornerstone investor, a source said. It would be the first time a Middle Eastern sovereign fund has acted as a cornerstone in a Malaysian IPO. The world's No.3 palm plantation operator is preparing for its market debut at the end of June. The entry of Qatar Holding marks the tenth cornerstone committed for Felda Global's IPO. Other cornerstones include Louis Dreyfus, Fidelity Investments, Hong Kong's Value Partners and AIA Group. The source added that Felda Global is expected to launch its IPO prospectus on 31 May. (StarBiz)


Petra Energy: To triple capex to RM32m this year


Petra Energy Bhd, will more than triple its capital expenditure to RM32m this year to enhance services. CEO Datuk Anthony Bujang said the amount was significantly higher than last year's RM10m allocated for the similar purpose. "The allocation included the acquisition of Labuan fabrication yard in January for RM16m, upgrading works at the newly-acquired yard and at its Shah Alam facilities," he said. He added that further enhancements in asset capabilities would be determined in the next few months. To date, Petra Energy has an order book of RM797.45m and the company has submitted tenders of RM2.43bn. (StarBiz)


Magna Prima: Unveiling projects worth RM1.4bn


Magna Prima Bhd plans to launch property developments worth RM1.3bn in GDV this year. "So far we have sales and bookings of RM977m," CEO Datuk Rahadian Mahmud Mohd Khalil said. In another 2 months, the company will launch phase 2 of Boulevard Business park at Jalan Kuching, a service apartment project with GDV of RM235m. On the company's maiden venture abroad in Melbourne, the company expects to commence construction in the coming weeks with a completion target end-2014. The project is a 25-storey residential apartment with a GDV of AUD210m (RM650m). About 70% of the units have been sold. (Financial Daily)


Alam Maritim: Bags Petronas Carigali contract


Alam Maritim Resources Bhd's (AMRB) wholly-owned subsidiary, Alam Maritim (M) Sdn Bhd, was awarded a RM121.54m contract from Petronas Carigali Sdn Bhd to provide four work boats to support the latter's Peninsular Malaysia operations' painting activities. The contract which started on 25 May 2012, requires two AMRB's work boats for one year with an extension option for another year, for each work boat. The contract is to contribute positively to earnings and net assets of AMRB for the FYE 31 Dec 2012 and beyond. (Business Times)


YHS: To be taken private


Yeo Hiap Seng Bhd (YHSB), manufacturer of the iconic Yeo's beverages, is set to be taken private in a deal valued at RM552.6m. In an announcement to Bursa Malaysia, YHSB said its biggest shareholder YHS (S) Pte Ltd (YHSS) is offering RM3.60 a share - at a premium of 13.92% to YHSB's last closing price of RM3.16 - for shares it does not already own. A wholly owned subsidiary of Singapore-listed Yeo Hiap Seng Ltd, YHSS has a 61.15% interest in YHSB. YHSS will have to fork out RM212.8m if minority shareholders accepted the offer. The offer values YHSB at 22.5 times earnings per share (EPS) of 16 sen for FY11 ended Dec 31. (Financial Daily)


Glomac: Near deal to sell complex en bloc


Glomac Bhd may ink an en bloc deal soon with an investor looking to buy its integrated commercial complex in Kelana Jaya, which has a GDV of close to RM300m. The complex, which comprises a high-rise office tower, an office suite and a mall, will be developed on a 1.45ha land, previously used by Kelana Seafood Centre. According to group MD and CEO, Datuk FD Iskandar, Glomac is currently in talks with two potential buyers. Meanwhile, Glomac expects to increase the value of existing projects in hand from RM1.4bn to RM7.4bn, as it introduces new developments. (Business Times)


WCT: Eyes concession projects for land


Having opened its second shopping mall last week, construction firm WCT Bhd is eyeing more infrastructure concession projects locally to further broaden its recurring earnings base. For that, the company is willing to accept land as payment for undertaking build-operate-transfer (BOT) jobs on public-private partnership (PPP) terms promoted under the country's Economic Transformation Programme, said corporate affairs manager Kenny Wong. Wong did not elaborate on details but stressed that WCT's move to secure more concessions is a " forward transformation" for the company, to help mitigate the impact of cyclical construction and property development earnings. (Financial Daily)




Mah Sing: To build up landbank


Mah Sing Group Bhd is scouting the Klang Valley, Penang, Sabah and Iskandar Malaysia in search of land to boost its landbank. Group MD and CEO, Tan Sri Leong Hoy Kum said the group has achieved 73% of RM5bn gross development value (GDV) planned for this year. Its current landbank is more than 1,500 acres (600ha). The property group may acquire land via JV with landowners or participation in government land privatisation. Mah Sing has 39 projects on going at various stages from planning to mature. It has a GDV of RM18.2bn, of which 98% is unbilled sales. (Financial Daily)


AirAsia: Banks on network


AirAsia Bhd is confident of rapidly growing its operations in Japan via AirAsia Japan, although it faces competition from other low-cost carriers such as Peach Aviation and JetStar Japan. AirAsia Group CEO Tan Sri Tony Fernandes said AirAsia has the advantage of networks as well as a fleet of 100 aircraft, making it easier for people to travel to various places and at an affordable price. (Business Times)


IOI Corporation (Results Review): 9MFY12: Below expectations


(Maintain HOLD, TP: RM4.74) 

IOI Corp's 9MFY12 reported net profit came in below expectations, making up 67% of ECM and 66% of consensus estimates. Overall, all the segments except property investment showed a decline in results. IOI recognized 9M12 CPO ASP of RM3,107/mt (+11% y-o-y). The manufacturing segment remained relatively flat but suffered q-o-q due to lower sales volume. We maintain our HOLD recommendation with a TP of RM4.74.


Telekom Malaysia (Results Review): 1QFY12: Within expectations


(Maintain HOLD, TP: RM4.78)

TM's 1QFY12 core net profit of RM183.3m came in within house and consensus full year estimates. Unifi now has 316k subscribers from 1.22m premises passed, translating into a take-up rate of 30% which was a 6ppts gain q-o-q. Our target price remains unchanged. Maintain HOLD with target price of RM4.78.


Sime Darby (Results Review): 9MFY12: Bucyrus makes maiden contribution

(Maintain HOLD, TP: RM9.32)  

Sime Darby’s 9MFY12 results came in within consensus but below our expectations. Sime’s 9M12 revenue increased by 13% while adjusted net profit increased 26% y-o-y. The plantation segment posted higher earnings (+19% y-o-y) as the group achieved higher CPO prices of RM2,881/mt. The Industrial and Property segment shined through, posting another strong set of results. We revise our FY12-FY14 earnings downwards slightly to account for a wider discount to Indonesian CPO prices, and thus downgrade our TP from RM10.37 to RM9.32. Maintain HOLD.

ECM Newz Bits 31 May 2012


Highlights of the day

§         Sime Darby (Results Review): 9MFY12: Bucyrus makes maiden contribution (Maintain HOLD, TP: RM9.32)  

Other reports
§         Telekom Malaysia (Results Review): 1QFY12: Within expectations (Maintain HOLD, TP: RM4.78)
§         IOI Corporation (Results Review): 9MFY12: Below expectations (Maintain HOLD, TP: RM4.74) 

Other Malaysian news
§         AirAsia: Banks on network
§         WCT: Eyes concession projects for land
§         Mah Sing: To build up landbank
§         Glomac: Near deal to sell complex en bloc
§         YHS: To be taken private
§         Alam Maritim: Bags Petronas Carigali contract
§         Magna Prima: Unveiling projects worth RM1.4bn
§         Petra Energy: To triple capex to RM32m this year
§         FGVH: Gets Qatar Holding as cornerstone investor
§         Automotive: Perodua aspires to build sedans
§         Construction: Extension to KLIA2 ready by year-end
§         Media: Astro unveils On-The-Go
§         Power: Sarawak Energy Bakun power sold

Global news
§         US: Pending sales of homes decrease by most in a year
§         Europe: EU proposes 'banking union'
§         Europe: Economic confidence falls to 2 1/2 year low
§         Brazil: Central bank cuts rate to record-low 8.5% as European crisis deepens
§         Global: Oil hit six-month low as risk aversion sweeps market




Click here for the full PDF.

Wednesday, 30 May 2012

Economic Update - 2013 Budget Consultation- Driving transformation


Yesterday's consultation on the 2013 Budget yielded these key takeaways 1) pro-growth policies to increase domestic demand given the uncertain external backdrop, 2) pledge to reduce the fiscal deficit to 3% of GDP by 2015, 3) a broader revenue base for the government, i.e. GST implementation to be a matter of when, not if. Those present deliberated on macro, sectoral and social issues. The 2013 Budget will be presented in Parliament on 28 Sep 2012.


UOA Development - Record 1Q new sales


Target RM1.84 (Short Term: Trading Buy)

Much stronger future quarters should make up for the shortfall in 1Q, which we regard as broadly in line, at 14% of our full-year forecast and 16% of consensus estimates. Reassuringly, the record 1Q new sales of RM443m put the group way ahead of its full-year target of RM1bn.


Sunway Bhd - Timing issues


Target RM2.70 (Short Term: Trading Buy)

Though Sunway's annualised 1Q12 bottomline came in at 72% of our full-year forecast and 74% of consensus, we view it as being broadly in line as better quarters are in store. Earnings from new contracts should partially offset the blip in property earnings.


UMW Holdings - A good start


Target RM8.40 (Long Term: Out Perform)

At 28% of consensus and our full-year forecasts, UMW's 1Q12 overtook expectations due to lower-than-expected effective tax rate. Save for the manufacturing & engineering division, all business segments showed pretax profit growth.


Puncak Niaga Holdings - No ripples on the takeover front


Target RM1.45 (Long Term: Neutral)

Puncak's annualised 1Q12 core net profit was well ahead of our and consensus' forecasts, thanks to compensation for the 2012 tariff hike and the normalising impact of IC12. But there has been no progress on the takeover of its assets. However, its oil & gas prospects are intact.


Lafarge Malayan Cement - Paving the way for a stronger 2H


Target RM7.51 (Long Term: Neutral)

As 1Q is seasonally weaker and coal price has fallen 12% in the 1st two months of 2Q, we view Lafarge's 1Q12 net profit as being in line, at 20% of our and consensus full-year numbers. The 8 sen net DPS was also expected, making up 25% of our 32 sen FY12 DPS estimate.


Genting Plantations - A weaker harvesting season


Target RM9.35 (Long Term: Neutral)

As we had flagged earlier, Genting Plants’ 1Q results were dented by rising operating costs at its estates. But we expect higher output and better contribution from its Indonesian estates to lift future earnings.


IJM Corp Bhd - Firing on all four cylinders


Target RM6.40 (Short Term: Trading Buy)

IJM Corp’s FY3/12 core net profit largely met expectations, being only 4% lower than our forecast and 1% shy of consensus numbers. There was growth across the board. We also note the upside to construction earnings from new contracts. Our target price is trimmed due to housekeeping but we continue to tag a 10% discount to its RNAV. We introduce our FY15 forecast which assumes RM1bn new jobs. IJM remains a Trading Buy and not an outperform due to the election overhang on the sector. It is still one of our top sector picks, with contract awards being the potential catalyst.


DRB-Hicom - Not thrown off by road bumps

Target RM4.10 (Long Term: Out Perform)

DRB’s FY3/12 core net profit missed our expectations by 16% and was 17% short of consensus numbers because of higher depreciation and interest expenses and lower auto associates’ contribution. But the property division’s return to profitability is cause for cheer. We cut our FY13-14 earnings after updating for FY12 numbers. We also lower our SOP-based target price after doubling the discount to 20% to reflect short-term uncertainties after the Proton acquisition. Maintain Outperform. Apart from autos, we see potential catalysts from its plans for Pos Malaysia, Bank Muamalat and the property development division.

CIMB Daybreak - 30 May 2012

What's on the Table...
  • DRB-Hicom - Not thrown off by road bumps
  • IJM Corp Bhd - Firing on all four cylinders
  • Genting Plantations - A weaker harvesting season
  • Lafarge Malayan Cement - Paving the way for a stronger 2H
  • Puncak Niaga Holdings - No ripples on the takeover front
  • Sunway Bhd - Timing issues
  • UMW Holdings - A good start
  • UOA Development - Record 1Q new sales
  • Economic Update - 2013 Budget Consultation- Driving transformation
News of the Day...
  • Hong Leong Bank considers raising stake in Bank of Chengdu Co Ltd through IPO
  • MMC may submit proposal for KTM privatisation to the government by Aug
  • Proton MD and CFO have resigned
  • Gas Malaysia’s IPO oversubscribed by 21.6x
  • Digistar Corp receive approval from SC the transfer to Main Market
  • China’s leading index softened to 99.86 in Apr from 100.48 in Mar
  • US Conference Board index of consumer confidence fell to 64.9 in May

Click here for the full PDF report

ECM GLOBAL NEWS 30 May 2012


US: Consumer confidence falls to four-month low
Confidence among consumers unexpectedly fell in May to the lowest level in four months as optimism about employment prospects faded. The Conference Board’s index decreased to 64.9 this month from a revised 68.7 in April, figures from the New York-based private research group showed. (Bloomberg)

US: Home prices fell at slower pace in year ended March
Home values in 20 US cities fell in the 12 months ended March at the slowest pace in more than a year as lower borrowing costs and an improving job market gave sales a boost. The S&P/Case- Shiller index of property values fell 2.6% from a year earlier after a 3.5% drop in February. The decline matched the median forecast of economists surveyed. The index rose from the prior month on a seasonally adjusted basis. Homebuilders are reporting their most-improved spring selling season in seven years, propelled by record-low mortgage rates, job gains and shrinking inventories. Meanwhile the market faces challenges as mortgage credit is difficult to obtain and wage growth is slow. (Bloomberg)

Europe: Germany’s inflation weakened in May as energy prices retreated
Inflation in Germany, Europe’s largest economy, slowed in May as energy prices retreated. Inflation, calculated using a harmonized European Union method, eased to 2.1% from 2.2% in April, the Federal Statistics Office said. Economists forecast the rate to hold steady, the median of 19 estimates in a survey shows. In the month, consumer prices fell 0.3%. (Bloomberg)

China: Government has no plans for new large-scale stimulus
China has no plan to introduce stimulus measures on the scale deployed during the global financial crisis to counter this year’s economic slowdown, the official Xinhua News Agency reported. “The Chinese government’s intention is very clear: It will not roll out another massive stimulus plan to seek high economic growth,” Xinhua said without attributing the information. “The current efforts for stabilizing growth will not repeat the old way of three years ago.” (Bloomberg)

China: PRC boosts investment
China has significantly accelerated approvals for new investment projects as part of a campaign to support growth in the world's second-largest economy. In the first four months of the year, China's economic planning agency, the National Development and Reform Commission, has approved more than twice as many investment projects as it did in the same period a year earlier. The NDRC approved 868 of them, up from 363 a year earlier. That included 254 projects in April alone—up from 213 in March and more than three times the 74 projects approved in April of 2011. (Wall Street Journal)


Banking: Malaysian foreign ownership cap may be eased


Banking liberalisation was one of the topics addressed at Invest Malaysia 2012 conference, with both Malaysian and Indonesian rules on the issue being talked about. Prime Minister Datuk Seri Najib Tun Razak hinted that Malaysia's ruling of a 30% cap of foreign ownership may be "liberalised in the near future." "At the moment it is at 30% (foreign ownership cap for local banks). It is possible that we may increase it in the near future," Najib, who is also Finance Minister, said. Najib said that any possible increase for foreign ownership in banks in Malaysia must be accompanied by reciprocity as well. (StarBiz)


Benalec: Gets RM67m job from TNB


Fuel Benalec Holdings Bhd's wholly owned unit, Benalec Sdn Bhd, was awarded a RM67.4m contract of affreightment by TNB Fuel Services Sdn Bhd. The contract period will be for a principal of three years starting on 1st May, with an option for extension of another two years. The contract quantity will be 1m mt per contract year with plus or minus 20% at TNB's discretion. The deal is in line with the Benalec group's principal activities in the provision of vessel chartering services. (Business Times)



Supermax: Invests RM63m in US warehouse


Supermax Corp Bhd is spending some US$20m (RM63m) to establish a warehouse in the US, a move deemed pivotal to capture a larger slice of the North American rubber glove market. Executive chairman and group MD Datuk Seri Stanley Thai said the capital requirement includes construction and land cost for the office and warehouse project on a 6ha site in Chicago. "The warehouse, upon completion, will have a built-up area of about 225,000 sq ft. The first phase of 90,000 sq ft is due for completion by April," Thai said. (Financial Daily)



Top-Glove: To automate plants


The implementation of the minimum wage policy has prompted Top Glove Corp Bhd (TOPG MK, Sell, TP: RM4.00) to invest RM40m this year alone to automate and computerise its production and packing operations, with the ultimate goal of reducing its manpower needs by p to 50% while raising production by 40% without having to install new lines. Top glove currently produces around 39bn gloves per annum. With automated operations at all its factories, it expects to hit some 55bn pieces a year. Chairman Tan Sri Lim Wee Chai adds that automating each factory will cost RM5m to RM10m. In the past, between RM25m and RM30m was invested in each of the group's 20-odd rubber glove factories. (Financial Daily)


IJM Land: Targets RM2.5bn new launches


Property developer IJM Land Bhd is looking to achieve better sales for its FYE13, 31 Mar, on new property launches worth RM2.5bn. Its MD and CEO Soam Heng Choon said the group managed to achieve RM1.4bn sales for FY12 and is hoping to surpass it with new launches slated for FY13. "We hope to do better this financial year with new projects coming onstream such as Bandar Rimbayu and Seri Riana in Wangsa Maju," he said at the media preview of the group's Bandar Rimbayu township project. (Financial Daily)



Hap Seng: Doubles capex


Hap Seng Consolidated Bhd more than doubled its capital expenditure (capex) this year largely to speed up the expansion of its quarry and building materials division, currently the smallest earner in the group. Group MD Edward Lee Ming Foo said that Hap Seng would spend RM436m on capex this year compared with RM184.5m in 2011. About 43.4% or RM189m of the allocated capex for the current year will go towards upgrading the company's existing quarries, in addition to acquiring another for RM18m and building one for RM30m. (Financial Daily)



KPJ: To buy more hospitals in the region


KPJ Healthcare Bhd (KPJ MK, Hold, TP: RM4.96) wants to acquire at least one hospital in the Asean region, such as in Cambodia, Vietnam and Thailand, bye year-end said MD Datin Paduka Siti Sa'diah Sheikh Bakir. She said KPJ's expansion in the Asean region will be through acquisitions rather than newfields, as starting a new hospital from scratch will take much longer. Sa'diah however said KPJ is not in a hurry to expand regionally, as its "plate is full" with the RM1bn investment plan to set up new hospitals in 9 locations throughout the country by 2015/2016. (Financial Daily)



MMC Corp: To submit KTMB study earliest in July


MMC Corp Bhd, which is reviewing the proposed privatisation of KTM Bhd (KTMB), hopes to submit the results of a feasibility study to the government as early as July this year. Group MD Datuk Hasni Harun said 40-50% of the study has been completed. "Our consultant has given us some models to review in order to turn around the company. We have a small team working on it right now. We are reviewing it and may go back to the government between July and August," he told reporters after a corporate presentation on the sidelines of Invest Malaysia 2012. (Financial Daily)



Hong Leong Bank: Mulls raising stake in Bank of Chengdu


Hong Leong Bank Bhd is considering raising its shareholding in its China subsidiary, Bank of Chengdu Co Ltd (BOC), through an IPO, its chief said. BOC is planning an IPO on the Shanghai Stock Exchange's A-share market, as it moves to replenish its capital to boost future growth. The IPO aims to issue 800m shares. The cash raised will help raise BOC's capital-adequacy ratio (CAR), which has declined on the back of strong growth in 2010. Hong Leong Bank has 20% in BOC, after paying RM877.5m for the shares in 2007. Group MD and CEO Datuk Yvonne Chia said the plan to list BOC is underway. (Business Times)



Hong Leong Bank: Eyes SME business


Hong Leong Bank Bhd is setting its sights on the country's SME sector now that the merger with EON Capital has been completed. "If you look at the contribution of SMEs to the economy, ours is at about 31% and is projected to reach 41% by 2020. There is still a long way for our SMEs to grow. In countries like Singapore, Hong Kong and Thailand, their contribution to GDP is far larger," the bank's COO of group business banking Peter Chow told. "We have set up 49 of our branches to be turned into SME branches by September we should have 51 of them," he said, adding that 145 branches would eventually be set up. "In terms of coverage we have the edge over our competitors. SMEs' needs are rather simple, such as term loans to buy machinery or for working capital, so the key is a fast turnaround time." (StarBiz)



Hong Leong Bank: To raise funds for expansion


Hong Leong Bank Bhd (HLBK MK, Hold, TP: RM11.50) is planning another round of fundraising to support its growth strategy, said group MD and CEO Datuk Yvonne Chia. Although Chia did not elaborate on how funds will be utilised, she hinted that the bank intends to participate in new markets and segments in the Asean region. Chia said the strategy in Asean does not necessarily mean outright acquisition in respective Asean countries as it also includes enhancing strategic linkages. (Financial Daily)



Maybank: In talks to keep BII stake


Malayan Banking Bhd (MAY MK, Hold, TP: RM8.25) is currently negotiating with Indonesian policymakers to retain its 97.4% ownership of PT Bank Internasional Indonesia Tbk (BII). Maybank president and CEO, Datuk Seri Abdul Wahid Omar said the bank hopes Indonesia's plan to limit foreign ownership of the country's banks at 50% will not result in Maybank having to pare down its existing stake in BII. Indonesian laws allow foreigners to hold up to 99% stake in the local bank, a policy adopted after the country's economy was hit during the 1998 Asian financial crisis. (Financial Daily)



YTL Corp: Looking at sizeable M&As, fresh assets


YTL Corp Bhd, which has net cash of RM14bn, is looking at sizeable M&As, as well as acquiring new assets to grow its businesses. YTL group MD Tan Sri Francis Yeoh sees some opportunities in the market today, amid the eurozone crisis. "We are seeing some realistic assets coming into the market, especially in Australia. In China, a lot of mall operators are approaching us. There are other companies wanting to sell their assets, but it is not necessary that we will buy," he added. He said YTL will consider assets that offer 7-10% yields. Yeoh has said previously that if there was nothing attractive to buy, YTL might buy back its subsidiaries. (Business Times)


YTL Corp: Unfazed by new IPP regime


Tan Sri Francis Yeoh said he is unfazed by the new pricing regime that encourages the first generation independent power producers (IPP) to lower their power tariff rates. "We can live in a regime without power purchase agreement (PPA)," YTL MD Yeoh said. The government recently called for Tenaga Nasional Bhd (TNB) and five IPPs to participate in a bidding exercise that will close end-July for an extension of their PPAs. However, only half of the power pacts that will expire in five years will be extended, putting IPPs such as YTL Power Bhd in the spotlight. Apart from YTL Power, the four other IPPs that participated in the bidding exercise were Segari Energy Ventures Sdn Bhd, Genting Sanyen Power Sdn Bhd, Port Dickson Power Sdn Bhd and Powertek Bhd (recently acquired by 1Malaysia Development Bhd). (Financial Daily)


YTL Corp: To pay dividends in shares, sell warrants


YTL Corp Bhd is rewarding shareholders with treasury shares and is also selling its warrants in YTL Power International Bhd at discount. YTL Corp said the basis of the distribution was one treasury share for every 15 YTL Corp shares held. The book closure for the share dividend is June 18. It also proposed to sell its YTL Power warrants to YTL Corp shareholders on the basis of one warrant for every 15 YTL Corp shares held at 20 sen per warrant. YTL Corp said the proposed offer for sale would be on a restricted renounceable basis to the shareholders on an entitlement date to be determined later. The diversified conglomerate said the share dividend and proposed offer for sale of warrants, when combined with the 20% interim cash dividend declared for the FY2012, would result in a seven-fold increase in YTL Corp's dividend rate compared with the 20% cash dividend distributed for the FY2011. (StarBiz)

Comment: At YTL's current price of RM1.82, the 1:15 treasury share dividend is worth 12.1 sen per YTL share. The 1:15 offer for sale of YTL Power warrants is post-treasury share dividend i.e. for every 15 YTL shares now, you get 1 treasury share and 16/15 warrants. Based on the current warrant price of 43 sen and the offer price of 20 sen (a discount of 23 sen), the warrant offer for sale is thus worth 1.6 sen per YTL share. So the total dividend in specie here is theoretically worth 13.7 sen per YTL share (not taking into account the incidence of odd lots) or 7.5% on YTL's share price. (Hon Sze)

Star Publications (Company Update): Defensive play in media sector


(Maintain HOLD, TP: RM3.34) 

We are optimistic on Star’s long term prospects in view of the proactive steps taken by management in transforming the Group into a multichannel media company. We maintain our Hold recommendation on Star, as we believe that its yield of 5.7%, the highest among other media players, will continue to support its current share price.


Genting Plantations (Results Review): 1QFY12: Below expectations

(Maintain HOLD, TP: RM8.78)

Genting Plantations’ reported net profit came in below expectations, making up 17% of house and consensus estimates. Profits from the plantation segment dropped as the group recognized lower CPO ASP and higher expenses. CPO ASP for the quarter was RM3,179/mt. We maintain our HOLD recommendation and TP of RM8.78.


Lafarge Malayan Cement (Results Review): 1QFY12: Down due to seasonal factors

(Maintain BUY, TP: RM7.97) 

Lafarge Malayan Cement's (LMC) annualized 1QFY12 results came in below expectations but this, in our view, is largely due to the Chinese New Year festive season, during which construction work slows down and in turn affects the local cement players in general. A first single-tier interim dividend of 8 sen was declared for the quarter, similar to 1QFY11. Reiterate our BUY call on LMC as we expect earnings momentum to pick up in the coming quarters, backed by imminent surge in domestic cement/concrete sales when major infrastructure and property construction works nationwide enter full swing.


IJM Corporation (Results Review): 4QFY12: Record profit delivered


(Maintain BUY, TP: RM6.36)  

IJM’s FY12 results came in broadly within expectations, delivering a record high adjusted net profit of RM433.8m, up 15% y-o-y on the back of topline growth of 21% annually. Operating profit contribution from construction is expected to catch up with the other divisions, reaching c.15% by FY13 from 8% currently, as key projects in its outstanding RM4.3bn orderbook enter full swing. We remain sanguine on the prospects of IJM securing its portion of West Coast Expressway infrastructure works (c.RM4.2bn) once the concession agreement is duly signed. While we make no changes to our FY13 – FY14 EPS forecast, we reduce our sum-of-parts target price for IJM to RM6.36 from RM7.02 previously, after imputing current forward peer average P/E ratios into the property development and plantation SOP components and FY13 – FY14 PATMI, lower by 15% and 5% than our previous assumptions. Maintain BUY.


Sunway Bhd (Results Review): 1QFY12: Slow quarter

(Upgrade from HOLD to BUY, TP: RM2.65)  

1QFY12 was a slow quarter for Sunway Bhd as most of the Group’s divisions reported lower y-o-y earnings. Net profit of RM64.4m came in lower than our and market expectations, making up 13% and 18% of our and consensus’ estimates, respectively. Revenue dropped by 2% y-o-y due to low billings and slow sales. We view the Group’s sluggish performance was simply weighed down by seasonal effect. Our numbers and target price remain unchanged, but we upgrade our Hold call to a BUY as Sunway’s share price has depreciated. The stock is cheaply trading at FY12F PE of 7.0x.

Source: ECM Newz Bits 30 May 2012, Full PDF Report

ECM Newz Bits 30 May 2012


Highlights of the day
§         Sunway Bhd (Results Review): 1QFY12: Slow quarter (Upgrade from HOLD to BUY, TP: RM2.65)  
§         IJM Corporation (Results Review): 4QFY12: Record profit delivered (Maintain BUY, TP: RM6.36)  

Other reports
§         Lafarge Malayan Cement (Results Review): 1QFY12: Down due to seasonal factors (Maintain BUY, TP: RM7.97) 
§         Genting Plantations (Results Review): 1QFY12: Below expectations (Maintain HOLD, TP: RM8.78)
§         Star Publications (Company Update): Defensive play in media sector (Maintain HOLD, TP: RM3.34) 

Other Malaysian news
§         YTL Corp: To pay dividends in shares, sell warrants
§         Maybank: In talks to keep BII stake
§         Hong Leong Bank: To raise funds for expansion
§         MMC Corp: To submit KTMB study earliest in July
§         KPJ: To buy more hospitals in the region
§         Hap Seng: Doubles capex
§         IJM Land: Targets RM2.5bn new launches
§         Top-Glove: To automate plants

Global news
§         US: Consumer confidence falls to four-month low
§         US: Home prices fell at slower pace in year ended March
§         Europe: Germany’s inflation weakened in May as energy prices retreated
§         China: Government has no plans for new large-scale stimulus

Click here for the full PDF.