HLIB Research 6 October 2011 (Banks; Mah Sing; Traders Brief)

Stock Name: MAHSING
Company Name: MAH SING GROUP BHD

Research House: HLG

Price Call: BUY

Target Price: 2.93

Banking (Overweight)

Less Sanguine But Still LT Positive

'''' Slower growth but absence of double-dip and blowup of Euro debt crisis will hold up asset quality.

'''' Factoring lower 2012 loans growth of 9% (vs. 10%), lower non-interest income and preemptive provisioning.

'''' Earnings forecasts cut by 0.3-13.2% (below consensus by 1.2-14.1%).'' Plus higher risk premium of 8.5% (vs. 8%), target prices cut by 6-26%.

'''' Despite that, we are still expecting decent earnings growth while valuations are not stretch.

'''' Volatility to persist but valuations unlikely to revisit 08 trough and should gravitate around post AFC means in LT.

'''' Still positive about LT on resilient (albeit slower) domestic economic growth underpinned by consumerism, ETP and Petronas awards.

'''' Foreign shareholding ' except for AMMB, CIMB and RHB Cap, rest have relatively low exposures.

'''' Maintain Overweight.

'''' Top picks are Maybank and AFG ' selection criteria: strong CASA franchise, strong capital ratios and asset quality, relatively low trading book to total assets, relatively low exposure to foreign shareholding and valuations that are not stretch.''

'''' AMMB, CIMB and RHB Cap have been downgrade to Hold.

''

Mah Sing (BUY)

Quick Turnaround Township In Rawang

'''' Mah Sing is acquiring 225.7 acres of freehold land in Rawang by acquiring shares in Semai Meranti Sdn Bhd ''for RM92m, implying land acquisition cost of RM9.36 psf (<10% of GDV).

'''' The Land will be developed into a lifestyle township, M Residence@Rawang, with estimated GDV of RM948m, offering beginner homes priced from RM390,000.

'''' We are positive on this move as we believe the affordable pricing will result in strong take up rates.'' Also, launch is targeted in 1H 2012, in-line with their quick turnaround business model.

'''' We maintain our price target (RM2.93) and earnings forecast for now, pending updates from management. Maintain BUY.

''

FBM KLCI: Rebound to continued but need higher volume to sustain

'''' The strong overnight surge in Dow is expected to filter through to Asian markets today.

'''' Technically, the formation of a Morning Star, the slight golden cross in the MACD and the 5-d SMA cut above the 10-d SMA suggest that yesterday rebound may continue.'' Volume need to consistently surge above the 1bn mark to sustain the rebound and test the psychological 1400.

'''' Immediate resistance levels are the 1376 (5-d SMA), 1400, 1409 (mid Bollinger band) and 1430 (30-d SMA). Supports are situated at the psychological 1350, 1330 (lower Bollinger band), 1310 (26 Sep pivot low) and the other psychological 1300 level.

''

Dow: Above 10-d SMA

'''' Technically, after second day of strong surge, the Dow has crossed above the 10-d SMA line at 10922, suggesting that the current rebound could test the mid Bollinger bank (or the 20-d SMA) at 11090.'' Again, for sustainability, volume needs to pick up.''''''

'''' Immediate resistance levels are the psychological 11k and 11,090 (mid Bollinger band) and 11568 (upper Bollinger Band) while support levels are the 10-d SMA, 10429 (38.2% FR ' from low in Mar 09 to high in May 11) and 10390 (74.6% FR ' from low in Jul 10 to high in May 11).