August 12, 2011

AirAsia still in turbulent territory

Stock Name: AIRASIA
Company Name: AIRASIA BHD
Research House: UOBPrice Call: SELLTarget Price: 3.50

KUALA LUMPUR: AIRASIA BHD [] shares extended their losses in active traded at mid-morning on Friday, Aug 12 as investors still appeared to view its tie-up with national carrier MALAYSIAN AIRLINE SYSTEM BHD [] as not entirely beneficial to the low cost carrier.

At 10.40am, AirAsia fell five sen to RM3.45 with 12.46 million shares traded.

UOB Kay Hian Malaysia Research on Aug 10 had downgraded AirAsia to a Sell with a lower target price of RM3.50 from RM4.60.

The research house said that while an alliance between AirAsia and MAS would benefit Khazanah Nasional Bhd, it did not see AirAsia getting any benefit.

Under the Aug 9 collaboration, Khazanah Nasional Bhd, which owns 69.5% in MAS, will take up a 10% of shares in AirAsia while Tune Air Sdn Bhd, which owns some 23% in AirAsia will hold 20.5% shares in MAS.

Meanwhile, MAS was up six sen to RM1.86 with 11.11 million shares done.

MAS had yesterday announced the appointments of Tan Sri Anthony Francis Fernandes and Datuk Kamarudin Meranun ''as its directors.

HLIB Research 12 August 2011 (Construction ; Notion Vtec ; Traders Brief)

Stock Name: NOTION
Research House: HLGPrice Call: BUYTarget Price: 2.58

Construction (Overweight)

MRT players shortlisted

'''' Prasarana has shortlisted 28 individual and JV companies eligible to bid for sections of the MRT project, except for the tunnelling portion. There are 18 works packages with 8 packages under elevated civil works; another 8 for elevated station works and 2 packages for depot. These packages are divided into the open and Bumiputera category.

'''' This is a positive step forward in the rollout of MRT, as it shows progress towards the implementation stage. However, it is important to note that the biggest hurdle is usually in the awarding of contracts stage.

'''' The first 2 packages that are to be tendered early next month are the 5.4km stretch from Taman Bukit Ria to Plaza Phoenix; and 5.2km stretch from Taman Suntex to Bandar Tun Hussein Onn.

'''' Despite the recent selldown in construction companies, we continue to maintain our OVERWEIGHT stance for the sector as fundamentals are still intact. Construction companies which we favour still have sizable order books to sustain earnings. Hence, we view the share price weakness as an opportunity to accumulate.


Notion Vtec (Buy; TP: RM2.58)

9MFY11 results: in-line

'''' 9MFY09/11 core net profit of RM29.4m accounting for about 62% of our and consensus full-year estimates. However, we consider the results within our expectations, as: (1) 2H is seasonally stronger; and (2) we expect the new camera business (i.e. sub-assembly, body mount) to kick in by 2HFY11.''

'''' Earnings forecasts maintained for now, pending further update with management.

'''' TP maintained at RM2.58 based on a 2-year forward average PER of Notion's historical mean of 7.96x.


FBM KLCI - Relief rally targets are 1500-1530 pts

'''' Some semblance of stability regained yesterday after recent routs, as the markets have probably discounted a fair bit of the adverse developments in US and Europe. Bursa Malaysia's panic selling climax is probably over after 9 Aug's tough of 1423 pts.

'''' However, we will only turn bullish again if the KLCI is able to maintain its posture above 200-d SMA (1530 pts).'' Relief rally targets are 1500, 1510 (50% FR) and 1530. Immediate supports are 1450-1470 pts.


Stock to watch - GUANCHG: Targeting RM2.87-2.96 resistance zones

'''' GUANCHG reported a commendable 2Q11 results as bottom line surged 82% yoy and 18% qoq to RM35m. It also declares a 3 sen 2nd interim dividend (ex-date 25 Aug).

'''' Technical readings remain conducive for further breakouts with resistance targets at RM2.87-2.96. Support is RM2.50. Cut loss below RM2.50.

Less optimistic on its outlook

Stock Name: NOTION
Research House: ECMLIBRAPrice Call: BUYTarget Price: 2.50

HDBSVR maintains Buy on MRCB

Stock Name: MRCB
Research House: HWANGDBSPrice Call: BUYTarget Price: 3.25

KUALA LUMPUR: Hwang DBS Vickers Research is maintaining its Buy call and sum of parts based target price of RM3.25.

It said on Friday, Aug 12 the recent price weakness is an attractive opportunity to increase exposure in a growing GLC-linked contractor and developer with improving earnings delivery and visible share price catalysts.

HDBSVR said the 2Q11 net profit of RM19 million (down 12% on-quarter but up 55% on-year) is in line with its and consensus' full year estimates.

'The 2Q11 CONSTRUCTION [] EBIT of RM6.9 million (down 60% on-year, lower than RM14.5 million in 1Q11) was driven by its RM1.2 billion outstanding order book,' it said.

The research house said the property EBIT was RM31.2 million (up six-fold on-year), driven by on-going works at Lot G and some contribution from Lot B strata title offices (60% sold at RM1,200 psf).

'Property margins were strong at 28% vs 24% in the previous quarter, lifted also by strong ASP for Lot B. The impending launch of Lot D (RM1.4bn, ASP RM1,100 psf) next month will ensure stronger property earnings going forward,' it said.

August 11, 2011

Healthy earnings growth for Tasco

Stock Name: TASCO
Company Name: TASCO BERHAD
Research House: OSKPrice Call: BUYTarget Price: 2.10

Tasco Bhd
(Aug 11, RM1.55)
Maintain buy at RM1.50 with fair value of RM2.10: Tasco's 1HFY11 top and bottom lines came in at RM226 million and RM13.5 million. Year-to-date (YTD) earnings climbed 25% and pre-tax profit 37%, accounting for about 48% of our FY11 forecast, which is in line with our recently upgraded forecasts despite the currently tepid global economic conditions.

YTD top and bottom line rose 11.3% and 25% although quarter-on-quarter (q-o-q) the top line was down 9%. The group managed to achieve 9% earnings growth and 8% growth in its pre-tax profit on high forwarding volume'' and trucking. Management also said there was high volume at its auto CBU division , spurred by shipments of the Honda Insight.

The group's pre-tax profit margin for international business solutions continued to narrow due to competition in sea and air freight rates and a weakening US dollar. Nonetheless, overall YTD pre-tax profit margin widened by 19.8% to RM17.9 million against the same period last year.

YTD revenue from the domestic business solutions side expanded 20% while that for its international business solutions was flat, no thanks to the weakening US dollar.

Its recently launched 197,000 sq ft warehouse in Bangi catering'' for Tier-1 client Sony and its upcoming 160,000 sq ft warehouse in Shah Alam, scheduled to launch by end-November to serve Panasonic, will enable Tasco to expand its 3PL and warehousing division aggressively. With the group's efforts to expand its non-Japanese client base, we are bullish on its forwarding and 3PL division.

Coming off its strongest 1Q results ever, Tasco will continue to see growth as it secures new clients for its contract logistics segment and expansion in its domestic warehousing and forwarding divisions. Management has guided for a sharp recovery in the coming quarter (June to August), especially in the shipment of replacement parts. The air freight division, which fetches high margins owing to the urgent nature of shipments, is likely to be the coming quarter's key performer due to the big shipments of cigarettes to Japan. Maintain 'buy', with a fair value of RM2.10 based on a price-earnings ratio of seven times mid-FY11/FY12 earnings per share. ' OSK Research, Aug 11

This article appeared in The Edge Financial Daily, August 12, 2011.

PetChem: Maintenance shutdowns a dampener

Stock Name: PCHEM
Research House: MAYBANKPrice Call: BUYTarget Price: 8.15

Petronas Chemicals Group Bhd
(Aug 11, RM6.15)
Maintain buy at RM6.19 with target price of RM8.15: Petronas Chemicals (PetChem) is expected to release its 2Q11 results on Aug 24. The quarter will be bogged down by major maintenance shutdowns and nationwide gas curtailment. Product volumes will be lower, but fortunately the higher product margin will help to offset this. Maintain 'buy', with an unchanged target price of RM8.15 based on 13.5 times 2012 price-earnings ratio, in line with global peers.

There was major scheduled maintenance during 2Q that necessitated complete shutdowns of 18 to 45 days at various plants across Peninsular Malaysia. In addition, Petroliam Nasional Bhd conducted maintenance on its gas fields which caused a reduced supply of natural gas. We estimate the combined impact will reduce PetChem's product volumes as much as 13.7% year-on-year (y-o-y) and 2.7% quarter-on-quarter (q-o-q).

Product margin (product selling price minus raw material cost) has risen by 44.1% y-o-y and 10.6% q-o-q to US$1,224 (RM3,672) per tonne in 2Q11. The global commodity run has pushed product prices up while PetChem's raw material prices, natural gas and its derivatives, have remained fairly stable.

We estimate PetChem's 2Q11 profit after tax and minority interest (Patami) at RM813 million (+18.7% y-o-y, -12.8% q-o-q). This is a far cry from its comparable peers, Saudi Basic Industries Corp and Yanbu Petrochemical Co, which enjoyed profit growth of 62% and 92% y-o-y.

Major scheduled maintenance during 2Q resulted in complete shutdown of 18 to 45 days at various PetChem plants. We expect PetChem's utilisation rates to rise in 2H11 as there are no further planned major maintenance shutdowns. Product margin continues to hold firm due to strong demand and restocking. We maintain our forecast despite 1H11 earnings likely to be below our initial expectations as we are confident that 2H11 will churn stronger profit with high margins.

The stock has been volatile recently due to the weak broader market and negative news flow on its Sabah urea plant. The state government is being a little resistant but we think it is the usual politics of negotiations and should be ignored. Any further dip in share price is a good opportunity to accumulate. ' Maybank IB Research, Aug 11

This article appeared in The Edge Financial Daily, August 12, 2011.


Selective bargains in plantations

Stock Name: SIME
Company Name: SIME DARBY BHD
Research House: HWANGDBSPrice Call: BUYTarget Price: 10.40

Data from the Malaysian Palm Oil Board (MPOB) showed July 2011 crude palm oil (CPO) output growth slowed for the second consecutive month in Malaysia, coming in at 1.751 million tonnes. Yield improvements in most peninsular states were mainly offset by weaker Sabah numbers. Conversely, exports grew 9% month-on-month (m-o-m) to 1.729 million tonnes led by stronger Chinese and European demand, but partly offset by lower shipments to India and Pakistan. Coupled with a 40% higher domestic consumption m-o-m, end-stock fell to 1.996 million tonnes, slightly lower than expected.

Despite the bullish undertone, we expect CPO prices to remain under pressure over the next two months. This season's harvest has yet to peak in August at 1.836 million tonnes (+4% m-o-m); it will only gradually ease from October onwards. And we see limited m-o-m export growth in August (+2%) and September (+5%), which will not be enough to reduce inventories from current levels. Based on these expectations, stock/usage ratios are likely to increase to 11.4% in August and September from circa 10.7% at end-July.

Year-to-date, regional plantation stock prices have generally outperformed CPO prices; although the recent drop in share prices has erased some of this. This is likely to continue a little longer as current negative sentiments in global equity markets may drag down plantation stock prices in the near term.

We believe names such as Singapore listed First Resources Ltd, TSH Resources Bhd and Sime Darby Bhd should be collected on dips as relative to peers, they have lower cost structure, stronger volume growth and diversified business models.

We continue to like Wilmar International Ltd amid the current strong spot processing margins for palm oil, bottoming out of soybean crush margins and seasonally higher 2H11 volumes. The recent increase in cooking oil prices has helped to alleviate some concerns, and we see tremendous potential for restocking in China as soybean and palm oil prices ease. This should drive Wilmar's 2H11 volumes. ' HwangDBS Vickers Research, Aug 11

This article appeared in The Edge Financial Daily, August 12, 2011.

Amway sales weakened

Stock Name: AMWAY
Research House: OSKPrice Call: HOLDTarget Price: 9.86

Amway (M) Holdings Bhd
(Aug 11, RM9.00)
Downgrade to neutral at RM9 with revised fair value of RM9.86 (from RM11.05): While Amway 1HFY11 revenue dropped slightly by 0.5% year-on-year (y-o-y) to RM341.9 million, net profit increased 2.2% to RM39.2 million due to a weaker US dollar which bolstered margins. Results still came in below our full-year earnings forecast of RM88 million and consensus''' RM92.2 million. Weaker 1H sales were mainly due to the poorer 1QFY11 revenue (-1.6% y-o-y) which offset the stronger sales in 2Q (+0.5% y-o-y). Sales in 1QFY10 were boosted by increased buying prior to the selling price hike on'' March 1, 2010, which was absent in 2QFY11. On a quarter-on-quarter basis, top line declined 2.1% while net profit dropped 6.2% as sales in 1QFY11 were boosted by the Chinese New Year festival.

Despite the weaker 1HFY11 y-o-y sales, 1H earnings before interest and tax (Ebit) margin expanded 0.3 percentage points y-o-y to 15.5%, mainly supported by the stronger margin in 1QFY11 of 15.8% (3.1 pps y-o-y) which has buffered the impact of lower margins in 2QFY11 of 15.2% against 17.8% in the previous corresponding period. While 1QFY11 Ebit margin was boosted by the stronger ringgit against the US dollar, the group has spent more on advertising and promotion and incurred higher operating cost due to the investment in consumer access driven strategies in 2QFY11 compared with 2QFY10, which masked the benefit reaped from a stronger ringgit against the greenback.

Given that results were below expectation, we cut our FY11 and FY12 earnings forecast by 6% to 11% to RM82.7 million and RM84.6 million. Our fair value is reduced accordingly to RM9.86 based on a dividend discount model. The group has declared a second interim single-tier dividend of nine sen per share, making up a total year-to-date dividend of 18 sen per share. Given the poorer economic conditions and the fact that its products are priced at a premium, we expect Amway's earnings to be under pressure although the stronger ringgit could help to buffer the impact. ' OSK Research, Aug 11

This article appeared in The Edge Financial Daily, August 12, 2011.

HLIB Research 11 Aug 2011 (Market View; Plantation; Boustead; Economics)

Stock Name: BSTEAD
Research House: HLGPrice Call: BUYTarget Price: 7.71

Hostage to DM ' Defensive Candidates

'''' With external uncertainties and long holiday week ahead (end Aug), the local bourse is expected to continue being'' held hostage by financial market's reaction in DM.''

'''' The domestic reporting season is unlikely to excite, similar to the reporting season in the US where investors focus more on economic data and developments from DM.

'''' We had already downgraded our GDP forecast for 2011 to 4.8% (on 16 Jul 2011).'' Recent developments have heightened the risk of global recession but we are not "jumping the gun" and monitoring the PMI indicators from DM, barring further collapse of global markets resulting in a "self fulfilling prophecy".

'''' Investors' preference is expected to be focusing on high yield and defensive stocks in the short-term while any bargain on dips is unlikely to be strong on fear of potential redemption.

'''' Our FBM KLCI year-end target of 1,670 (15x 2012 earnings) is at risk with downside bias in view of risk aversion and potential global recession.''

'''' We have highlighted defensive stocks under HLIB universe as well as high dividend yield stocks and REITs as they may provide more "protection" vis-''-vis high beta stocks.''


Plantation (Neutral)

Inventory dips to below 2m tonnes

'''' Crude palm oil (CPO) inventory decline by 2.8% in Jul 11 mom (first time since Feb 11) to slightly below 2m tonnes, led by a 0.1% mom decline in production and a 9.1% mom increase in exports.''

'''' Production in Jul 11 declined by 0.1% mom for first time since Feb 11 to 1.75m tonnes mainly on the back of a 1.4% mom decline in East Malaysia production that more than offset a 1.0% mom increase in Peninsular production.

'''' Exports continued to grow for the fifth consecutive month, driven mainly by a sharp increase in demand from China, which surged by 46.1% mom.

'''' While we are keeping our CPO price assumptions of RM3,200/tonne and RM3,000/tonne for 2011 and 2012 for now, we note that the downside risk for CPO price assumptions have now heightened, given the rising fear on global recession.

'''' We are maintaining our earnings forecasts for the five plantation companies under our coverage, and our recommendation on the plantation stocks as well as our sector call (Neutral) are maintained for now, pending further review.


Boustead Holdings (BUY '')

Consolidation of Pharmaceutical Arm

'''' Pharmaniaga (Pharma) to acquire 51% and 49% of IPMSB from Boustead and IPSB respectively for RM99.73m as well as settle RM68m interco loan due to Boustead.

'''' Pharm will pay IPSB RM51m for terminating supply agreement. IPMSB will obtain IPSB's status of approved Bumiputera supplier of pharmaceutical products and currently manufactures 39 out of the 50 pharmaceutical products that IPSB supply to Pharma..

'''' Based on our back-of-envelope estimates, Pharma is acquiring IPMSB at 3.7x estimated FY11 P/E, lower than Pharma's annualized 1QFY11 P/E of 9.6x.''''

'''' The compensation to IPSB works out to be circa RM19m per annum, implying cost savings in the future.

'''' Positive as Boustead will also enjoy synergistic benefits between Pharma and IPMSB and cost savings from elimination of "middle man".

'''' Maintain Buy and target price of RM7.71 based on 10% holding company discount to estimated SOP of RM8.56.


Performance of IPI (Jun 2011)

'''' IPI rebounded to +1.0% yoy in June (May: -5.6% yoy), better than the consensus estimate of a -0.8% contraction. The recovery was driven by pick up in manufacturing and electricity production (+4.5% yoy & +3.6% yoy respectively) while mining output declined at more moderate pace'''''' (-8.6% yoy; May: -23.9% yoy).

'''' June's IPI was again affected by the planned maintenance shutdown of Petronas's gas and crude oil production facilities. Impact of Japan supply-chain disruption was still visible with weak performance of transport equipment (-12.9% yoy) and E&E products (-3.5% yoy).

'''' We maintained our estimate that GDP growth will only averaged 3.9% yoy in 2Q. For full year 2011, we had on 17 June lowered our GDP forecast to 4.8% from earlier projection of 5.5%.

'''' We expect heightened external risks to prompt BNM holding rate steady in the September MPC meeting. The recent financial turmoil, if persisted alongside with lower commodity prices, may cause BNM to pause for the remaining of the year.

AirAsia extends losses in early trade

KUALA LUMPUR: Low cost carrier AIRASIA BHD [] extended its losses in active trade on Thursday, Aug 11 in line with the weaker market sentiment and investors' views that it would not benefit from the tie-up with MALAYSIAN AIRLINE SYSTEM BHD [].

At 9.06am, AirAsia fell 16 sen to RM3.38 with 3.89 million shares traded.

UOB Kay Hian Malaysia Research on Aug 10 had downgraded it to a Sell with a lower target price of RM3.50 from RM4.60.

The research house said that while an alliance between AirAsia and MAS would benefit Khazanah Nasional Bhd, it did not see AirAsia getting any benefit.

Under the Aug 9 collaboration, Khazanah Nasional Bhd, which owns 69.5% in MAS, will take up a 10% of shares in AirAsia while Tune Air Sdn Bhd, which owns some 23% in AirAsia will hold 20.5% shares in MAS.

Although AirAsia and MAS officials said it was too early to estimate synergy gains as a result of the partnership, it is estimated that the tie-up can potentially save both airlines as much as RM1 billion annually.

CIMB Research keeps Outperform on Petronas Dagangan

Stock Name: PETDAG
Research House: CIMBPrice Call: BUYTarget Price: 21.60

KUALA LUMPUR: CIMB Equities Research is maintaining its Outperform on PETRONAS DAGANGAN BHD [] with the potential share price trigger being leadership of the retail and lubricant segments.

It said on Thursday, Aug 11 that PetDag's'' 1Q net profit accounted for 21% of its FY3/12 forecast and consensus estimates.

'We consider the performance to be largely in line as we anticipate a stronger showing in the remaining quarters,' it said.

CIMB Research said the interim DPS of 15 sen also met expectations. It maintains its forecasts but introduces proforma numbers for the 12 months ending December 2011 in view of PetDag's change of financial year-end from March to December.

'Our target price is unchanged at RM21.60 as we continue to value the stock at a 40% premium over our 14.5x target market P/E to reflect its earnings visibility and growing appeal as a growth and dividend play. The stock remains an OUTPERFORM, with the potential share price trigger being leadership of the retail and lubricant segments,' it said.

#Stocks to watch:* AirAsia, Petronas Dagangan, Shell, MSC, Amway

Stock Name: AIRASIA
Company Name: AIRASIA BHD
Research House: UOBPrice Call: SELLTarget Price: 3.50

KUALA LUMPUR: Regional markets including Bursa Malaysia are expected to see heavy downside pressure on Thursday, Aug 11 after the overnight rout on Wall Street, sending it down more than 4.6%.

Reuters reported the S&P 500 to another 4 percent decline, triggered by worries that Europe's debt crisis could engulf French banks and spill onto the U.S. financial sector.

For a fifth straight day, the Dow Jones industrial average fluctuated in a range of more than 400 points.

The DJIA'' lost 519.83 points, or 4.62 percent, to 10,719.94. The S&P 500 fell 51.77 points, or 4.42 percent, to 1,120.76. The Nasdaq Composite dropped 101.47 points, or 4.09 percent, to 2,381.05.

Wednesday's drop came a day after stocks rallied on the Federal Reserve's pledge to keep interest rates near zero for at least two more years.

Although regional markets showed some slight recovery yesterday, backed by encouraging economic data from China and Japan, the already fragile investor sentiment would easily be shattered by another sharp fall at Wall Street.

On Bursa Malaysia, AIRASIA BHD [] could extend its losses.

The company, which inked a tie-up with MALAYSIAN AIRLINE SYSTEM BHD [] (MAS), was actively traded and fell 41 sen to RM3.54 with 90.5 million shares done.

UOBKayHian downgraded it to Sell with a lower target price of RM3.50 (from RM4.60).

The research house said that while an alliance between AirAsia and MAS would benefit Khazanah Nasional Bhd, it did not see AirAsia getting any benefit.

PETRONAS DAGANGAN BHD [] posted net profit RM208.73 million on the back of revenue RM7.54 billion for the three months ended June 30, 2011.

It declared a gross interim dividend of 15 sen per share for the three months ended June 30, 2011 totaling RM111.76 million, payable on Sept 22.

Shell Refining Company (Federation of Malaya) Bhd posted net loss RM27.71 million in the second quarter ended June 30, 2011 compared to net loss RM46.78 million a year earlier, due to weak refining margins and lower production as a result of the major statutory turnaround.

Revenue for the quarter fell to RM1.62 billion from RM2.71 billion a year earlier. It declared a gross interim dividend of 20 sen per share.

MALAYSIA SMELTING CORPORATION [] Bhd's net profit for the second quarter ended June 30, 2011 surged to RM36.3 million from RM7.98 million a year earlier due mainly to better results from its Butterworth smelting operations and investments in KM Resources Inc.

MSC declared a gross interim dividend of 12 sen per share to be paid on Sept 28.

Amway (Malaysia) Holdings Bhd's net profit for the second quarter ended June 30, 2011 dipped 12.2% to RM18.99 million from RM21.64 million a year earlier due mainly to higher advertising and promotional expenses coupled with higher operating cost arising from investment in consumer access driven strategies.

Amway declared a second interim single tier dividend of 9.0 sen net per share for the financial year ending Dec 31, 2011.

August 10, 2011

Wages of plantation workers to increase by 10%

Stock Name: SIME
Company Name: SIME DARBY BHD
Research House: AFFINPrice Call: BUYTarget Price: 11.09

Plantation sector
Maintain overweight: The Malayan Agriculture Producers Association (Mapa) has agreed to increase the wages of 157,720 plantation workers by 10%. With the increase, the total guaranteed minimum earnings for plantation workers will be RM850 per month, comprising a minimum wage of RM650 per month and an additional remuneration of RM200 per month, the latter not subject to Employees Provident Fund and Social Security Organisation deductions.

The new wage structure will be implemented with effect from Sept 1 and will benefit 72,000 harvesters, 17,400 rubber tappers, 22,800 field employees, 9,700 palm oil mill employees, 13,370 general employees and 22,000 non-executive staff.

On June 6, Sime Darby announced a RM200 per month wage increase for some 37,000 estate workers and non-executive staff of the group (including harvesters, tappers, general workers, estate and mill office staff, and auxiliary police personnel) with effect from July 1 under a voluntary effort to give its workers a better deal and increase the quality of their lives.

As labour cost is about 30% of cost of production (COP), the agreed wage increase is expected to increase COP by about RM30 per tonne for bigger planters and about RM40 per tonne for smaller planters. There will be some offset from productivity gains following the wage increase, which will also help to address the persistent labour shortage faced by the industry. As such, we expect the impact on net profit forecasts to be no more than 2% to 3%.

June 2011 quarter results are due for release in the next two to three weeks, while global equity and commodity markets have been highly volatile in the last few days, leading to sharp corrections in stock and commodity prices.

Crude palm oil'' futures have finally dipped below RM3,000 per tonne after nine months, closing at RM2,954 per tonne yesterday, but still with a high year-to-date average of about RM3,400 against our assumption of RM3,200. Pending the release of the June 2011 quarter results, we maintain our profit forecasts.

Target prices as well as stock and sector 'overweight' ratings are also unchanged as we maintain our market price-earnings ratio rating and year-end KLCI target of 1,630. ' Affin IB Research, Aug 10

This article appeared in The Edge Financial Daily, August 11, 2011.

Tan Chong: Weak 2Q11 in the price

Stock Name: TCHONG
Research House: RHBPrice Call: BUYTarget Price: 5.50

Tan Chong Motor Holdings Bhd
(Aug 10, RM5.08)
Maintain outperform at RM4.70 with revised fair value of RM5.50 (from RM6.15): With combined Nissan and Renault vehicle sales in 2Q11 having declined some 16.8% quarter-on-quarter (q-o-q) and 10.8% year-on-year following the March 11 earthquake and tsunami in Japan, weak earnings in the quarter should not come as a surprise to the market. There was also some impact on new vehicle sales from the implementation of the amendments to the Hire Purchase Act on June 15.

We are anticipating 2Q11 earnings per share at between 8.5 to nine sen excluding exceptional items. Given that the component supply situation from Japan has normalised, while the authorities are expected to streamline the HP Act to eliminate bottlenecks, the outlook is for an improved 2H11. Accordingly, we believe tepid 2Q11 earnings are already in the price.

Tan Chong's high inventory levels have paid off handsomely with Nissan sales the least affected among the major non-national marques. The q-o-q earnings performance should also be softened by the RM5.4 million foreign exchange translation loss relating to Nissan Vietnam Ltd incurred in 1Q11.

The new Vanette is scheduled for launch by end-2011, which could make a significant contribution to volumes. Tan Chong is also on track to launch a B-segment model in September 2012 that we believe will be a game changer for the company. This model will compete with the Toyota Vios and Honda City.

The key risks include: (i) a weaker economy affecting car sales; (ii) unfavourable forex trends; and (iii) heightened competition. Irrational price competition emanating from efforts to meet sales targets could result in heavy price discounting and higher marketing costs towards end-2011.

We have trimmed out 2011 to 2013 forecasts by 8.2%, 5.9% and 7.6% after factoring in higher advertising and promotional costs and dialling back our unit sales assumptions.

We are lowering our fair value to RM5.50 (from RM6.15) after factoring in a lower FY12 target price-earnings ratio (PER) of 10 times (from 10.5 times). We reiterate our 'outperform' call on Tan Chong. We are lowering our target valuation to reflect lower peer valuations and higher market risk premium. We believe Tan Chong will benefit from relatively resilient domestic consumption and is well positioned to gain market share from its forthcoming new product launches. Valuations are undemanding with prospective FY12 PER at 8.5 times relative to 2010 to 2013 net profit compound annual growth rate of 25.8%. ' RHB Research, Aug 10

This article appeared in The Edge Financial Daily, August 11, 2011.

A prosperous quarter for Hartalega

Stock Name: HARTA
Research House: MIDFPrice Call: BUYTarget Price: 6.36

Hartalega Holdings Bhd
(Aug 10, RM5.51)
Upgrade to buy at RM5.39 with revised target price of RM6.36 (from RM6.28): Hartalega's 1QFY11 net profit of RM54.7 million exceeded our expectation, although it was within consensus, accounting for 30% of our and 26% of consensus' full-year forecasts. No dividend was declared during the quarter.

The higher sales were driven by: (i) better sales volume of nitrile as customers are switching from rubber gloves to nitrile; (ii) commissioning of its 10 lines in Plant 5 that boost capacity to nine billion pieces by end-2011; and (iii) effective cost control and improvements to the production process.

Hartalega's 1QFY11 earnings before interest and tax (Ebit) margin added 0.4 percentage points to 32.4%, translating into a 30.8% year-on-year Ebit growth to RM71.2 million. The strong margin growth was mainly lifted by the growing demand in Europe which accounted for 28% of Hartalega's total sales as opposed to 18% from the same period last year.

As at December 2010, demand in Asia-Pacific accounted for about 10% of Hartalega's market segment. Subscribing to a stake in Yan Cheng Pharmatex Medical Equipment Co Ltd will help the company expand its wings further in the China market.

Yan Cheng Pharmatex is a China-based company and its main operations are the export, import, wholesale and distribution of examination gloves.

Hartalega will pay the total consideration of RM319,410 for the 70% stake in cash with internally generated funds, according to management. As at end-June 2011, Hartalega had a net cash position of RM100.3 million.

Hartalega is expecting nitrile glove demand to continue to grow by 30% for FY11. Correspondingly, it is targeting to expand Plant 5 with an additional two production lines that are expected to start commissioning in early FY12. In addition, Hartalega is planning to build a new plant next to its existing plants in Bestari Jaya, for which approval is still pending.

We are revising upwards our earnings forecast by 15.3% to reflect better than expected demand for nitrile.

All considered, we upgrade our recommendation from 'trading buy' to 'buy' with a higher target price of RM6.36 per share. We are ascribing a lower 2012 earnings per share multiple of 11 times (previous multiple of 14 times) based on Hartalega's three-year average historical PER. ' MIDF Research, Aug 10

This article appeared in The Edge Financial Daily, August 11, 2011.

HLFG: The all-encompassing alternative

Stock Name: HLFG
Research House: MAYBANKPrice Call: BUYTarget Price: 14.00

Hong Leong Financial Group Bhd
(Aug 10, RM12)
Initiating coverage at RM11.98 with buy rating and target price of RM14: What Hong Leong Financial Group (HLFG) offers is not just an investment alternative to 64%-owned Hong Leong Bank, but also an avenue to participate in the rapidly expanding life and general insurance units as well as investment banking activities of the Hong Leong Group. We initiate coverage on HLFG with a 'buy' and a sum-of-parts (SOP) target price of RM14.

Hong Leong Bank ('hold', TP: RM14.10) has awakened to a new chapter and is embarking on a new course with its acquisition of EON Capital Bhd's assets.

Attractive pricing aside, there are various value propositions offered by this M&A, not least being the emergence of the fourth largest banking group in the country with greater presence in the retail banking space. The enlarged entity will have a more extensive distribution network, a more balanced loan portfolio, and a more formidable presence in the SME and credit card markets.

Annualised regular life premiums growth at 70%-owned Hong Leong Assurance (HLA) has outpaced that of the industry, with a compound annual growth rate of 39% over the past four years (industry: 15%). HLA is presently the largest domestic life insurer by new regular premium sales. Confidence in the future of HLA is reflected in the recent disposal of a 30% stake in this unit to Japan's Mitsui Sumitomo Insurance Co (MSIJ) for a hefty price-to-book (P/BV) value of 6.5 times.

The strategic partnership with MSIJ also involved the sale of HLFG's entire general insurance business to MSIG Insurance (Malaysia) Bhd in exchange for a 30% stake in the enlarged entity. The merger will not only allow this division to benefit from expertise transfer from Japan's largest general insurer, it has now attained greater economies of scale and is in firm contention to be the largest general insurer in Malaysia.

Valuations are undemanding at the group level, with the stock trading at a CY12 price-earnings ratio (PER) of 10.6 times and P/BV of 1.5 times (return on equity: 14.7%). In fact, HLFG's current market cap merely reflects the value of Hong Leong Bank and places no value on its other assets. At our TP, HLFG would trade at a prospective CY12 PER of 11.9 times and P/BV of 1.7 times. ' Maybank IB Research, Aug 10

This article appeared in The Edge Financial Daily, August 11, 2011.

AirAsia: Merger mania; downgrade to 'sell'

Stock Name: AIRASIA
Company Name: AIRASIA BHD
Research House: UOBPrice Call: SELLTarget Price: 3.50

AirAsia Bhd
(Aug 10, RM3.54)
Downgrade to sell at RM3.95 with revised target price of RM3.50 (from RM4.60): The press conference announcing the share swap mainly touched on plans for both airlines to collaborate in areas such as aircraft purchasing, maintenance and other support services. Tan Sri Tony Fernandes remains as CEO of AirAsia but has board representation on MAS. Based on prices as at Aug 5, Tune Air's stake in both entities had equal value.

Fernandes indicated that Malaysia has better growth potential than Dubai and also commented on how Singapore Airlines (SIA) is differentiating itself by forming a low-cost carrier (LCC). In June, Virgin Australia ended its code share alliance with MAS and announced a tie-up with SIA. All these support our view that the alliance was in response to competitive factors and for national interest, but one in which AirAsia is relatively immune. It still remains unclear how MAS will address competitive threats. The airline will continue to focus on medium- to long-haul routes and offer premium services. Both airlines have 57 overlapping routes but Fernandes indicated there will be no rationalisation of routes.

While this was touted as an alliance between two airlines, in effect it will impact five airlines within the group ' AirAsia X, AirAsia, Firefly, MASwings and MAS. All these airlines operate fleets as diverse as turboprops (various) to MAS' A380. Firefly had earlier ordered 30 189-seater B738s to challenge AirAsia on regional routes. We are unclear how the management will be able to represent both parties' interests given the clear overlap of routes.

Both MAS and AirAsia will conduct an anti-trust review of operations. MAS is currently not part of any alliance but was said to be open to joining the One-World Alliance prior to the latest tie-up. It is also unclear if the tie-up will have an impact on AirAsia's joint ventures, now that it is aligned to the national carrier.

AirAsia has branded itself an Asian carrier and thus has been successful in forming JVs in other countries. Its image as a hip upstart low-cost airline has won many fans. We believe there could be some risk of brand dilution with the alliance with MAS, which could include partial interlining.

We downgrade the stock to a 'sell' from a 'buy'. While an alliance between AirAsia and MAS could benefit Khazanah Nasional Bhd, we fail to see how it would benefit AirAsia. MAS, like AirAsia, faces structural challenges with the growth of Middle Eastern hubs and airlines. Malaysia's visitor arrivals are primarily leisure travellers on short-haul routes, while Singapore and the Middle East have a greater proportion of mid- to long-haul travellers. We fail to see how an alliance between AirAsia and MAS can change this dynamics.

Our 2011 earnings forecast is unlikely to be impacted by the tie-up. Watch out for potential fallout from its JVs and the planned IPO.

We had previously valued AirAsia at eight times 2012F earned value/earnings before interest, tax, depreciation and amortisation. We now peg fair value at seven times EV/Ebitda and derive a target price of RM3.50. This implies 1.6 times 2011F price-to-book value. Share price catalyst ' none. ' UOBKayHian, Aug 10

This article appeared in The Edge Financial Daily, August 11, 2011.

AirAsia Bhd: Comprehensive tie-up with MAS

Stock Name: AIRASIA
Company Name: AIRASIA BHD
Research House: CREDIT SUISSEPrice Call: BUYTarget Price: 4.80

AirAsia Bhd
(Aug 10, RM3.54)
Maintain outperform with target price of RM4.80: Tune Air'' Bhd and Khazanah Nasional Bhd are proposing a share swap, giving Tune Air a 20.5% stake in MAS, and Khazanah a 10% stake in AirAsia. This deal establishes a five-year comprehensive collaboration framework (CCF), with an option to renew for a further five years, between MAS and AirAsia to 'enhance the national aviation eco-system', reinforce core competencies and exploit potential synergies. A joint collaboration committee (JCC) will be established to coordinate activities and resolve any potential deadlocks. We do not rule out this tie-up as a prelude to an eventual merger between MAS and AirAsia.

To sweeten the deal, one MAS warrant will be issued per 10 AirAsia shares. These 2.5-year warrants, with a RM2 strike price, is subject to shareholder approval at a Nov 11 EGM.

AirAsia CEO Tan Sri Tony Fernandes and deputy CEO Datuk Kamaruddin Meranun will be appointed to the board of MAS. In turn, Khazanah director and member of the MAS board Datuk Mohamed Azman Yahya will join the AirAsia board on Aug 11, with Khazanah executive director (investments) and MAS board member Mohammed Rashdan Mohd Yusof as his alternate. These four men will sit on the JCC.

AirAsia's management said one of the key attractions of the tie-up with Khaznah/MAS is that it aligns the common interest of shareholders, thus allowing for issues such as landing rights, predatory pricing and the use of aerobridges to be settled more quickly and amicably. This will allow the management to focus more on pressing operational matters.

(From left) Malaysian Airline System chairman Tan Sri Md Nor Yusof, CIMB Group Holdings Bhd group CEO Datuk Seri Nazri Razak and Fernandes at the signing of the collaboration and shareholders agreement between Khazanah Nasional Bhd and Tune Air Bhd on Tuesday. Perhaps the most immediate benefit of the collaboration is Firefly's exit from the low-cost market, to become a regional full-service airline. We expect this move, which will take effect by early 2012, will reduce the general level of price competition and raise both yields and fares. Under this deal, AirAsia will selectively be looking into acting as a feeder for MAS' long-haul network. This form of 'pseudo interlining' will leverage AirAsia's 'Fly-Thru' service, which allows passengers to connect to their next flight without the need to clear immigration, for a fee. A RM1 increase in total fares would increase our FY12/FY13 net profit forecasts by 1.4% to 2.1%.

One of the areas of interest could be engineering (maintenenace, repair and overhaul). AirAsia currently outsources much of its engineering needs; this provides an opportunity for MAS to be its outsourcing agent. Cargo could be another area for synergy, if MAS can leverage AirAsia's regional network, and its Red Box courier service, to act as a feeder for its long-haul cargo operations.

In our view, the MAS-AirAsia tie-up will have a negative impact on Malaysia Airports (MAHB). First, any route rationalisation programme between the two carriers could reduce the total number of flights and potentially lower traffic volumes. Second, and more importantly, MAHB will now have to deal with a large single client. The relative loss of negotiating power, coupled with its previously stormy relationship with AirAsia, in our view, could put MAHB at a distinct disadvantage.

We were previously concerned that the suspension of stock would be for a takeover of MAS by AirAsia. Over the next 12 months, AirAsia is planning three IPOs and starting operations in three new overseas joint ventures (the Philippines, Vietnam and Japan). We were concerned that a takeover of MAS would have simply been too much for an already busy management team. We are pleased that under this collaborative partnership, each party will focus on its core competencies. With its business model intact, coupled with the potential synergies with MAS (MRO, cargo and so on), we reiterate our 'outperform' rating on AirAsia. ' Credit Suisse, Aug 10

This article appeared in The Edge Financial Daily, August 11, 2011.

SapuraCrest acquires Clough's marine construction for regional expansion

Stock Name: SAPCRES
Research House: AMMBPrice Call: BUYTarget Price: 5.44

SapuraCrest Petroleum Bhd
(Aug 9, RM4.23)
Maintain buy at RM4.41 with fair value of RM5.44: We reiterate our 'buy' call on SapuraCrest Petroleum (SapCrest) with an unchanged fair value of RM5.44 based on an unchanged CY12F price-earnings ratio (PER) of 22 times for the group's merged earnings with Kencana Petroleum Bhd.

Following SapCrest's announcement on July 6, it has entered into a conditional agreement to acquire Australia-listed Clough Ltd's marine construction business for A$127 million (RM390 million).

This involves acquiring three key construction vessels and two deepwater remote operated vessels. The acquisition is expected to be completed in 4Q11.

This development is not surprising as SapCrest's executive vice-chairman Datuk Shahril Shamsuddin has said the group plans to spend up to US$900 million (RM2.7 billion) within the next two years to build more capacity and grow in the region.

Based on Clough's announcement yesterday, the marine construction business registered earnings of A$24 million in FY10 ended June but a loss of A$8 million for the 6-month period ended Dec 31, 2010.

But based on Clough's historical FY10 results, the acquisition PER translates to an attractive five times while Clough is only expected to generate a one-off gain of A$8 million from the sale.

The asset acquisition will only add value to SapCrest if it helps to accelerate the group's order book accretion. Pending news of material fresh orders which will be serviced by the new assets, we maintain FY12 to FY14 earnings.

Based on the estimated net gearing of 0.3 times for the merged Kencana-SapCrest entity, this proposed Clough acquisition will have a slight impact on the group's borrowing levels. But if the group continues its aggressive expansion plans, we expect the merged entity's net gearing level to reach 0.6 times, but still lower than Bumi Armada Bhd's 0.8 times currently.

The stock currently trades at an attractive CY11F PER of only 17 times compared with over 20 times for Dialog Group, Malaysia Marine and Heavy Engineering Bhd and Kencana Petroleum. We remain positive about the synergistic benefits of the vertical integration of the two leading domestic oil and gas players and a potential new member of the FBM KLCI. ' AmResearch, Aug 9

This article appeared in The Edge Financial Daily, August 10, 2011.

CIMB Research maintains trading Buy on Muhibbah

Stock Name: MUHIBAH
Research House: CIMBPrice Call: BUYTarget Price: 1.83

KUALA LUMPUR: CIMB Equities Research is maintaining its earnings per share (EPS) forecast, trading buy stance and RM1.83 target price for Muhibbah Engineering Bhd.

It said on Wednesday, Aug 10 the target price was pegged to an unchanged 40% realised net asset value (RNQAV) discount.

'Our checks with Muhibbah confirmed yesterday's news on the lifting of Asian Petroleum Hub's (APH) receivership status. This was a positive surprise to us and a huge relief to its contractor, Muhibbah as it increases the odds of recovery of the RM371 million owed by APH and suggests that there may be a resolution soon.

'This news comes at an opportune time as Muhibbah is a bottom-fishing candidate since it is trading below our worst-case value of RM1.28. We should see some clawing back of its share price which has been a casualty not just of the global stockmarket rout but also the APH problems,' it said.

CIMB Research maintains Outperform on Axiata

Stock Name: AXIATA
Research House: CIMBPrice Call: BUYTarget Price: 6.20

KUALA LUMPUR: CIMB Equities Research is retaining its earnings per share (EPS) estimates, sum-of-parts based target price of RM6.20 or Outperform call on Axiata Group Bhd'' pending the release of its results on Aug 24.

It said on Wednesday, Aug 10 that Axiata remains one of its regional favourites given the potential for dividend surprises underpinned by its strong free cashflow yield.

In line with regional trends, Dialog Axiata, Axiata's Sri Lankan subsidiary is seeing a rising incidence of voice-to-data substitution.

CIMB Research said this was the main surprise from its 2Q11 results conference call.

Other takeaways are i) tariffs remain rational despite the cut in off-net floor rates, ii) further cost savings will take time as most of the low-hanging fruits have been plucked, and iii) capex should remain elevated in the near term as Dialog completes its fibre network expansion.

OSK Research maintains Overweight on aviation

Stock Name: MAS
Research House: OSKPrice Call: BUYTarget Price: 2.45

Stock Name: AIRASIA
Company Name: AIRASIA BHD
Research House: OSKPrice Call: BUYTarget Price: 4.34

KUALA LUMPUR: OSK Research rates all its aviation counters as BUYs with AirAsia as its top pick (FV: RM4.34) and MAS as a trading BUY (FV: RM2.45).

'We reaffirm our overweight stance on the Malaysian aviation play,' it said on Wednesday, Aug 10.

On Tuesday, AirAsia and MAS announced a comprehensive collaboration framework and shares swap agreement (including the issuance of warrants) between its respective major shareholders; Tune Air and Khazanah.

The shares swap and warrants issuance facilitates in aligning the interest of both the majority and common shareholders for the collaboration between the two carriers.

'While synergistic benefits could be seen over the longer term on the collaboration framework; AirAsia and its feeder traffic, long haul sister carrier, AirAsia X are seen as winners of this collaboration over the immediate term.

'The low cost carrier (LCC) benefits on immediate route accessibility, yield upside, and its dominance as Malaysia's only LCC (as Firefly phases out of the LCC segment),' it said.

'MAS-AirAsia tie-up would eliminate irrational pricing'

Stock Name: MAS
Research House: HWANGDBSPrice Call: HOLDTarget Price: 1.55

Stock Name: AIRASIA
Company Name: AIRASIA BHD
Research House: HWANGDBSPrice Call: BUYTarget Price: 4.50

The impending collaboration between Malaysia Airlines (MAS) and AirAsia is a positive move as it would eliminate irrational competitive pricing, allow economies of scale, higher bargaining
power and synergies.

Hong Leong Investment Bank Bhd (HLIB) said AirAsia, as Malaysia's only low-cost carrier player, would have better control over supply and yields without competition from Firefly.

"There are higher chances of AirAsia plying for routes, which were previously exclusive to MAS. Hence, AirAsia will be able to increase its route and enhance its network connections," it said in a research note today.

HLIB also raised AirAsia and MAS's earnings on potentially higher yields and lower costs. The company forecast AirAsia's earnings to increase 5.9 per cent and 13.5 per cent, respectively, for financial years 2012 and 2013 while that for MAS was projected to increase 50.4 per cent and 24.9 per cent, respectively.

HLIB, however, maintained both airlines' earnings for the financial year 2011 as the deal would only be completed by November.

It also maintained a "buy" on AirAsia and raised the target price to RM4.50, from RM4.24, previously besides upgrading MAS to a "hold" from "sell" and raised the target price to RM1.55, from RM1.27, made earlier.

Meanwhile, HwangDBS Vickers Research Sdn Bhd said MAS could be back in the black as the deal was expected to allow the various airlines to collaborate in different areas, leveraging on each other's strengths and optimise efficiency.

"We believe these initiatives will benefit MAS especially in achieving cost synergies in view of its high cost/available seat kilometre (ASK). The impact could be immediate and significant which could potentially result in MAS turning profitable," it said.

HwangDBS said on the other hand, AirAsia could see smaller cost synergies given its already low cost/ASK.

"But topline growth could be given a boost as the airline will be in a better position to obtain more routes and gain market share as it was the only Malaysian low-cost carrier," it added.

For MIDF Research, it believed the tie-up would create cost saving opportunities as both airlines would create strong bargaining power for future aircraft orders, getting aircraft financing as well as limiting duplication of resources such as maintenance and repair and overhaul.

MIDF Research said the tie-up was taking place at a time when crude oil prices were falling to boost the Malaysian aviation industry, as such, it maintained a neutral stance on the industry. -- Bernama

HLIB Research 10 August 2011 (Aviation ; Traders Brief)

Stock Name: MAS
Research House: HLGPrice Call: HOLDTarget Price: 1.55

Stock Name: AIRASIA
Company Name: AIRASIA BHD
Research House: HLGPrice Call: BUYTarget Price: 4.50


MAS-AirAsia Collaboration Agreement

'''' MAS as national FSC; AirAsia as national LCC; Firefly transformed into FSC (similar to Silk Airways).

'''' Khazanah swap 20.5% stake in MAS with Tune Air's 10% stake in AirAsia.

'''' Existing MAS-AirAsia shareholders entitled warrants of each other airlines.

'''' Positives on the move as it will eliminate irrational competitive pricing, allow economy of scales, higher bargaining power and synergies for both MAS and AirAsia.

'''' AirAsia will have better control on the supply and yields without competition from Firefly on LCC segment. AirAsia to increase its route and enhance its network connections.

'''' Enhanced business turnaround plan for MAS from the management expertise of Tan Sri Tony Fernandes and Dato's Kamarudin Meranun, in lowering operational cost, streamlining its routes and improve overall yields for MAS.

'''' Recommendation:

'''' Maintain BUY on AirAsia with TP of RM4.50.

'''' Upgrade Hold on MAS with TP of RM1.55.


FBM KLCI - A relief rally may spur KLCI to revisit 1500-1530 levels

'''' Although the KLCI is able to close above the 1470 pts, which is key YTD support before yesterday's plunge, we will only turn bullish again if the KLCI is able to maintain its posture above 200-d SMA (1530 pts).''

'''' Relief rally targets are 1500, 1511 (50% FR) and 1530. Immediate supports are 1450-1470 pts.''


Dow Jones - Relief rally targets at 11555-11740 pts

'''' We are relieved that the envisaged 76.4% FR support (10383) was not broken yesterday and with the gradual uptick in RSI and MACD as well as moderating 'DMI, more technical rebounds are likely but the tough hurdles are situated near 11555, 11740 and 11993 (200-d SMA).


August 9, 2011

RHBInvest Research Highlights 09th August 2011

Stock Name: WTK
Research House: RHBPrice Call: BUYTarget Price: 2.55

Stock Name: CIMB
Research House: RHBPrice Call: BUYTarget Price: 9.80

Stock Name: SAPCRES
Research House: RHBPrice Call: BUYTarget Price: 5.04

09th August 2011
Top Story: WTK ' Lower plywood production to weigh on 1H11 results                     Outperform
''       WTK's log production volume in 2Q11 was higher by +33% qoq and +28% yoy respectively due to normalised weather conditions. WTK has guided that its current realised price is US$220/m3 for meranti SQ up, which is lower than our expectation of US$260/m3 for FY11.
''       We revised our fair value to RM2.55 based on unchanged target PER of 12x revised FY12 EPS of 21.2 sen. Maintain Outperform.
Corporate Highlights
Sunway Bhd: A single stock that gives all real estate exposure                      Outperform (Initiating coverage)
''       Upon listing, Sunway Bhd will potentially become the 3rd/4th largest property player in Malaysia . The company will offer investors full fledge offerings of the real estate sector, ranging from property development to various property assets as well as construction arm. The key strength of Sunway Bhd after merger will be the leaner organisation and operating structure that will ultimately yield cost savings.
''       We estimate an FY12-13 earnings growth of 7% and 11%, underpinned by RM1.6bn worth of unbilled sales, RM2bn worth of construction orderbook, as well as RM75-80m recurring income from property assets and Sunway REIT.
CIMB: CIMB Niaga 2Q11 results ' Coming along nicely                                                Outperform
''       CIMB Niaga reported 2Q11 net profit of IDR818.6bn (+35.4% yoy; +12.5% qoq), bringing 1H11 net profit to IDR1,546.1bn (+37% yoy).
''       Management guided for NIM to average around 5.4-5.5% for this year, roughly around current levels. Meanwhile, management now expects CIMB Niaga to post loan growth in excess of 20%, as compared to around 20% previously (1H1: 22.5% annualised). However, CASA growth ahead would be more challenging given that depositors are now seeking higher yields.
''       No change to forecasts. Fair value of RM9.80 (15x CY12 EPS) and Outperform call maintained.
Carlsberg: No surprises expected for 1HFY11                                                   Outperform (up from MP)
''       On 4 Aug, Guinness reported full-year FY06/11 earnings growth of 18.3% yoy on the back of revenue growth of 9.5%. We estimate that in terms of volume, 1HCY11 grew by only ~1% yoy, after taking into account the increase in Guinness' selling prices in April 2010 of ~3-4%.
''       No change to forecasts. We believe our assumption of a 5% TIV growth in FY11 is fair as we expect stronger growth in the 2HFY11, underpinned by Oktoberfest, year-end festive seasons and the trade-loading activities in the 4Q leading up to Chinese New Year celebrations.
SapuraCrest: Buying Clough's marine construction division                                         Outperform
News Update
''       Sapuracrest announced a proposal to acquire Clough's "Marine Construction" business for AUD127m (RM400.5m) cash. Completion is expected by 4QCY11. 
''       The acquisition will: 1) Strengthen Sapuracrest's international foothold (especially Australia ); 2) Increase its asset base; and 3) Spearhead an entry to the subsea market.
''       Maintain Outperform and fair value of RM5.04/share (based on 21x FY13 EPS).