RHBInvest Research Highlights 13th January 2012

Stock Name: CSCSTEL
Company Name: CSC STEEL HOLDINGS BERHAD

Research House: RHB

Price Call: BUY

Target Price: 1.41

Stock Name: MEDIAC
Company Name: MEDIA CHINESE INTERNATIONAL LT

Research House: RHB

Price Call: SELL

Target Price: 1.00

Stock Name: SAPCRES
Company Name: SAPURACREST PETROLEUM BHD

Research House: RHB

Price Call: BUY

Target Price: 4.50

13th January 2012

 

Top Story

CSC Steel ' Profitability remains a challenge, '                                                                    Trading Buy (Upgraded) Visit Note -          We estimate CSC Steel is likely to record a net loss of RM10-15m in the upcoming 4Q11 results due to narrowing margins as well as a write-down in inventory value. -          CSC Steel has a huge cash reserve of RM213.5m, or about 56sen/share (as at 30 Sep 2011). At RM1.41, it would only cost the controlling shareholder about RM295m to buy out all minority shareholders, and this amount could be substantially funded with CSC Steel's cash reserve.

Sector Update

Media ' Expect adex growth to moderate in 2012                                                                                                                          Underweight Sector Update -          As the pace of overall adex growth continues to moderate due to weak global economic conditions, we reiterate a slowdown in adex growth to 3.6% in 2012 from 9% projected for 2011.  -          Elections in 2012 will have a positive though not significant impact on adex. -          Due to its recent share price appreciation, we downgrade MCIL to Underperform, while maintaining a fair value of RM1.00. Maintain Underweight on the sector due to lack of catalysts. -          Related story : Media Sector Update ' Nov Sees Weakest Adex Growth So Far (22 Dec 2011)

 

Corporate Highlights

SapuraCrest ' New subsea construction contract                                                                                                                       Outperform News Update -          Yesterday, the company announced that it had entered into a contract with IHC Offshore and Marine B.V. for the construction of two 550-tonne-pipelay-support-vessels (PLSV) at an undisclosed fixed lump sum. The two vessels are expected to be completed and delivered by May and Aug of 2014 respectively and will be utilised specifically for the Petrobras contract, which it won in Nov-11. Maintain fair value of RM4.50/share and Outperform call on stock. -          Related story: News Update - Buying Two New Pipelay Barges (23 Sep 2011) & News Update- Taking Home A Brazilian Win (2 Nov 2011)

HLIB Research 13 Jan 2012 (Telecommunication; MBMR; Traders Brief)

Stock Name: TIMECOM
Company Name: TIME DOTCOM BHD

Research House: HLG

Price Call: BUY

Target Price: 0.85

Stock Name: MBMR
Company Name: MBM RESOURCES BHD

Research House: HLG

Price Call: HOLD

Target Price: 3.38

Telco (NEUTRAL)

2012 Outlook: Monetizing the data

''  The industry as a whole will undergo moderate growth (forecasted to be mid-single digit) in 2012 supported by resilient domestic consumerism as a result from ETP and "rakyat" friendly budget.

''  Voice revenue will continue to trend downward in 2012 while data revenue taking the limelight, expecting its contribution towards 50% of overall revenue.

''  As both Huawei and ZTE have successfully secured a very extensive footprint in Malaysian telcos, we opine that they will have a stronger bargaining power and going forward, will minimize their reliance on pricing strategy to win bids. Hence, we believe that telcos might be facing more difficulties in their cost saving initiatives.

''  Continuing the momentum in 2011, we believe "co-opetition" will be the order for the year in the telco industry as players seek strategic partnerships to reduce infrastructure cost, strengthening margins and cross-selling of products.

''  Telcos are constantly under the increasing threat of over-the-top (OTT) players substituting their products and services including voice, messaging, video streaming, gaming and mobile payment. Moving forward, telcos are expected to actively exploring partnership opportunities with OTT players harnessing a win-win business model rather than being a dumb pipe.

''  Prefer fixed-line players over mobile operators for their high operating leverage, new sources of revenue stemming from agreements with mobile operators and increasing demand for wholesale which could help to buffer the new challenges. We re-iterate our BUY call on TIME dotCom (Buy, TP: RM0.85).

''  We also take this opportunity to downgrade DiGi to SELL as the current share price has overshot its fair value for more than 10%.

MBM Resources (Hold)

More Wheels

''  MBMR's 78% owned Oriental Metal Industries (OMI) will invest RM103m for a new alloy wheel manufacturing plant in Rawang.

''  The plant is expected to complete by 3Q2015 with targeted capacity of producing 1m units of alloy wheels for the regional market. The 1st phase is scheduled for completion by 4Q2012. Upon completion, MBMR expects OMI to generate ~RM150m revenue.

''  We are positive on the new investment plan, as MBMR will be able to leverage on the expected vehicle sales growth of the regional market.

''  However, we remain skeptical on its ability to find a strong foreign automotive partner, since it does not have track record on vehicle assembling (vs peers) and most foreign automotive cars have already established regional hubs in Thailand and Indonesia.

''  No changes to FY12-13 earnings, as we expect marginal earnings contribution during startup of 1st phase in 2013. Maintain HOLD with TP of RM3.38.

KLCI: Heading towards the 1529-1546 pts gap

''  Technically, trend and momentum indicators remain supportive for further upside as KLCI continues to leverage on its strong supports near 10-d SMA (now at 1517) and 200-day SMA (1502), in an attempt to slowly fill the huge gap between 1529-1546 recorded on 5 Aug 11. 

''  Immediate supports are 10-d SMA and 200-d SMA, followed by the uptrend line near 1490 pts.

 

STI: Short term positive after recent breakout

''  With the recent breakout (from downtrend) and as long as prices stay above the uptrend line support at 2600 pts, the odds favor further upward movement to retest the 30-w SMA (now at 2830) and weekly upper Bollinger band (2887) in the coming weeks. A more formidable resistance is 200-d SMA at 2917.

''  Immediate supports are 30-d SMA (2696), daily mid Bollinger band (2678) and 2608 (lower Bollinger band).

SapuraCrest Petroleum (Buy): Orders 2 pipelay vessels

Stock Name: SAPCRES
Company Name: SAPURACREST PETROLEUM BHD

Research House: MAYBANK

Price Call: BUY

Target Price: 5.60

Maintain Buy with a RM5.60 TP. SapCrest's rapid expansion of its marine fleet to capitalise on the boom in the installation of pipelines and facilities (IPF) markets is positive, in keeping with its aspiration to be a regional player. This strategy will be rewarding, if executed well. However, contributions will only be realised from FY15. We remain positive on its strong ability to grow and pursue new jobs for medium term growth, and continue to rate SapCrest a Buy.

Maybank research (13 January 2012)

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KNM Group (Sell): Riding through a transition phase

Stock Name: KNM
Company Name: KNM GROUP BHD

Research House: MAYBANK

Price Call: SELL

Target Price: 0.88

Target price cut to RM0.88 (-19%) following a 10-19% downgrade in FY12-13F earnings forecasts on lower revenue recognition. While margin pressure has abated on improving order flows, we are cautious of KNM's cost management abilities and so retain a conservative stance on our estimates. KNM needs to deliver a consistent set of quarterly results to warrant a re-rating. Sell maintained.


Maybank research (13 January 2012)

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Buy Petronas Gas shares: HwangDBS

Stock Name: PETGAS
Company Name: PETRONAS GAS BHD

Research House: HWANGDBS

Price Call: BUY

Target Price: 16.90

HwangDBS Vickers Research is maintaining its "buy" call on Petronas Gas Bhd with the target price raised to RM16.90 a share from RM15.50 earlier due to promising outlook in the oil and gas industry.

The research house, also optimistic over the company's strong earnings growth from this year's financial year onwards, said the promising outlook for the industry was supported by new pipelines and regas plants.

It said strong earnings growth would be led by contributions from the Melaka regas plant in FY2012 and the Sabah power plant in 2013, it said in a review of the company, whose shares eased four sen to RM15.40 on Bursa Malaysia at 11.30am today.

Petronas Gas would be the prime beneficiary with the planned new pipelines in Terengganu and new regas plants in Pengerang and Lumut, it said in a statement.

It said the company was a main player in the current volatile oil and gas market and might be rerated with imminent news of project awards. -- Bernama

The railway specialist

Stock Name: GAMUDA
Company Name: GAMUDA BHD

Research House: MIDF

Price Call: BUY

Target Price: 4.40

Orderbook replenishment set to rise

Stock Name: MRCB
Company Name: MALAYSIAN RESOURCES CORP

Research House: MIDF

Price Call: BUY

Target Price: 2.41

Coming to You Live in FY12

Stock Name: AMEDIA
Company Name: ASIA MEDIA GROUP BERHAD

Research House: TA

Price Call: BUY

Target Price: 0.42

Proposal for merger submitted to BNM

Stock Name: SAPCRES
Company Name: SAPURACREST PETROLEUM BHD

Research House: MIDF

Price Call: BUY

Target Price: 9.20

Proposal for merger submitted to BNM

Stock Name: RHBCAP
Company Name: RHB CAPITAL BHD

Research House: MIDF

Price Call: BUY

Target Price: 9.20

HLIB Research 12 January 2012 (Gaming; Economics; Traders Brief)

Stock Name: BJTOTO
Company Name: BERJAYA SPORTS TOTO BHD

Research House: HLG

Price Call: BUY

Target Price: 4.92

Stock Name: GENM
Company Name: GENTING MALAYSIA BERHAD

Research House: HLG

Price Call: HOLD

Target Price: 4.07

Stock Name: GENTING
Company Name: GENTING BHD

Research House: HLG

Price Call: HOLD

Target Price: 11.19

Gaming (Neutral)

What's There in 2012?

'''' Gaming sector is expected to feel positive spillover from consumerism following the announced Malaysia Budget 2012 and potential job and income creation from the implementation of ETP projects.

'''' BToto will be experiencing the full impact from its new game segment, 4D Jackpot with 7.6% growth in FY04/12. For GenM, international operations are the focus now with its latest development in New York and the current passing of the State Senate on the destination resort bill.

'''' GenS will continue to be the main contributor for GenT and with the full expansion in RWS by 2012, better growth is expected to be seen.

'''' No changes made to our forecast as we have earlier imputed all potential earnings in 2012. We are NEUTRAL with the sector. Maintain BUY on BToto (unchanged TP of RM4.92) and HOLD on both GenM (unchanged TP of RM4.07) and GenT (unchanged TP of RM11.19).

''

Moderation in November Exports

'''' Export growth moderated to 8.0% yoy in Nov (Oct: +15.4% yoy), below the consensus estimate of 11.9% expansion. Import growth, however, picked up to 8.4% yoy (Oct: +4.0% yoy). Trade surplus narrowed to RM9.5bn in Nov (Oct: RM13.3bn).

'''' E&E export growth declined by 3.5% yoy (Oct: -9.0% yoy) which is in tandem with the development in E&E output.

'''' As expected, contribution of palm oil diminished drastically in November. Exports of palm oil slowed sharply to 4.2% yoy (Oct: +54.3% yoy), ending 14 consecutive months of double-digit growth.

'''' The rebound in import growth with intermediate imports rising by 4.6% yoy suggests that manufactured exports could remain stable in the coming months.

'''' We maintain our full year 2011 GDP estimate at 5.1%, factoring in 4Q estimate of 5.0% (unchanged). We also maintain 2012 GDP growth forecast at 4.5%.

'''' We expect BNM to hold the OPR at 3.00% until end-2012 given the resilient economic growth with sticky inflation.

''

KLCI: Interests in lower liners to sustain momentum

'''' Technically, trend and momentum indicators remain supportive for further upside as KLCI continues to leverage on its strong supports near 10-d SMA (now at 1513) and 200-day SMA (1502), in an attempt to slowly filling the huge gap within 1529-1546 levels dated 5 Aug 11.''

'''' Immediate supports are 10-d SMA and 200-d SMA, followed by the uptrend line near 1490 pts.

''

HSI: Short term positive after recent breakout

'''' In the short term, HSI is poised for greater heights following its recent positive breakout, supported by bullish trend and momentum indicators on its daily and weekly charts.

'''' Immediate supports are 18561 (mid Bollinger band), 18000 and 17951 (lower Bollinger band). Resistance levels are 20338 (weekly upper Bollinger band and downtrend channel), 21078 (50-w SMA) and 21416 (100-w SMA).

RHBInvest Research Highlights 12th January 2012

Stock Name: SIME
Company Name: SIME DARBY BHD

Research House: RHB

Price Call: BUY

Target Price: 10.65

Stock Name: UMW
Company Name: UMW HOLDINGS BHD

Research House: RHB

Price Call: SELL

Target Price: 6.20

12th January 2012

 

Top Story

Sime Darby ' Trading at unjustified discount to peers                                                    Outperform Visit Note -          Key takeaways: 1) Conservative CPO production growth targets likely to be surpassed?; 2) Downstream division bleeding but once Indonesian refinery is operational, things should improve; 3) New planting in Liberia behind schedule; 4) Good news in the heavy equipment division in the form of Bucyrus acquisition; 5) Resilient sales in the motor division; and 6) Appealing to the right target market in the property sector. -          We have revised our forecasts by -2.9% to +1.3% for FY12-14. We are maintaining our Malaysian CPO price assumptions at RM3,150/t for FY06/12 and RM2,900/tonne for FY13. -          Post-earnings revision, we have lowered our SOP target price to RM10.40 (from RM10.65). We maintain our Outperform call on the stock. Although earnings growth for Sime may not be too exciting, we believe PE valuations for the stock of 13-13.5x are at an unjustified discount to peers at 15-17x. In addition, with a dividend policy to pay out at least 50% of net earnings, we believe Sime's net yields of 3-4% p.a. provide a relatively decent and stable return for investors. -          Related story: Sime Darby Results/Briefing Note  ' No Significant Impact From Global Economic Slowdown Yet (29 Nov 2011)

Corporate Highlights

UMW ' New Toyota Avanza Launched                                                                       Underperform News Update -          UMW Toyota launched the Indonesian-assembled Toyota Avanza yesterday replacing the long-in-the-tooth previous generation vehicle that dates back to 2004. UMW Toyota is targeting to sell 8,500 units of the new Avanza in 2012. -          UMW is forecasting sales of 93,000 Toyota and Lexus vehicles in 2012 that is broadly in line with expectations, helped by the planned launch of four new models. -          We have tweaked our FY11-13 net profit estimates lower by 2.8%, 0.1% and 0.5% respectively. No change to our Underperform call on valuation grounds. We lift our PER-based, SOP fair value estimate to RM6.20 (from RM5.80). The main downside worry for UMW is margin pressure given that the US $ and JPY have appreciated 4.3% and 9.4% respectively against the RM in the past six months. However, hopes for a higher dividend payout could keep investor interest up. -          Related story: UMW Holdings - New Iraq Power Contract (21 Dec 2011)

Macro

Trade ' Exports growth slowed to a four-month low in November, as commodity exports weakened Economic Highlights (published 11 Jan 2012) -          Export growth slowed to 8.0% yoy in Nov, the lowest in 4 months, after holding up at +15.8% in Oct and off a 15-month high of +16.6% in Sep. -          This was due to sliding exports of commodity products as well as weaker growth in the exports of non-electronic & electrical (E&E) manufactured goods but was mitigated by a smaller contraction in the exports of E&E products. -          As a result, the trade surplus narrowed to RM9.5bn in Nov, from a surplus of RM13.2bn in Oct. -          Going forward, we expect the current account to record a larger surplus of RM101.5bn or 12.0% of GNI in 2012, compared with a surplus of RM98.8bn or 12.2% of GNI estimated for 2011.

Lacking the x-factor

Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD

Research House: MIDF

Price Call: SELL

Target Price: 3.61

Bouncing Back With a Bang

Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD

Research House: OSK

Price Call: BUY

Target Price: 6.00

Ripe For Re-rating

Stock Name: MBMR
Company Name: MBM RESOURCES BHD

Research House: OSK

Price Call: BUY

Target Price: 3.69

Fresh Vietnam job

Stock Name: SAPCRES
Company Name: SAPURACREST PETROLEUM BHD

Research House: AMMB

Price Call: BUY

Target Price: 5.44

At lower range of book value

Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD

Research House: AMMB

Price Call: BUY

Target Price: 6.57

Receives bid from MCCM to buy QSR at RM6.90/share

Stock Name: KULIM
Company Name: KULIM (M) BHD

Research House: AMMB

Price Call: BUY

Target Price: 4.25

Petronas Chemicals (Buy): Behold, the recovery is in sight

Stock Name: PCHEM
Company Name: PETRONAS CHEMICALS GROUP BHD

Research House: MAYBANK

Price Call: BUY

Target Price: 7.50

Prices recovering, maintain forecasts. PCHEM's product margin in Dec 2011 was USD1,034/tonne (+6.5% YoY, -4.8% MoM), we estimate. The year-to-date product margin of USD1,149/tonne was 35.9% higher YoY. Product prices appear to have reached a support level and are slowly drifting upwards, driven by a tight supply/demand balance, higher naphtha cost and some restocking due to low inventory levels. Maintain BUY on PCHEM with an unchanged target price of RM7.50/share based on 13.5x 2012 PER.

Maybank research (11 January 2012)

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SapuraCrest Petroleum (Buy): Lands a USD100m subsea job in Vietnam

Stock Name: SAPCRES
Company Name: SAPURACREST PETROLEUM BHD

Research House: MAYBANK

Price Call: BUY

Target Price: 5.60

Regional aspiration shaping up. JV SapuraAcergy's recent win of a USD100m subsea construction job is a positive and should contribute about 6% to FY12 net profit (pre-merger). The merger with Kencana is on track, and we expect the Newco to secure more local jobs this year, which could include a new marginal field Risk Sharing Contract (RSC). Maintain Buy with a RM5.60 target price.

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HLIB Research 11 Jan 2011 (Plantations; Economics; Traders Brief)

Stock Name: TWSPLNT
Company Name: TRADEWINDS PLANTATION BHD

Research House: HLG

Price Call: BUY

Target Price: 5.04

Stock Name: TSH
Company Name: TSH RESOURCES BHD

Research House: HLG

Price Call: BUY

Target Price: 2.13

Plantations (Neutral)

Inventory declines further in Dec 11

'''' Mom, Palm oil inventory in Dec 11 declined by another 1.5% to 2.04m tonnes, on an 8.2% decline in production that more than offset: (1) A 45.4% increase in imports; (2) A 4.5% decline in exports, and (3) A 22.7% decline in domestic consumption.

'''' Production in Dec 11 declined by 8.2% mom to 1.49m tonnes (Peninsular: -13.1%; East Malaysia: -2.2%), as production cycle (which seasonally weakens from Oct until Jan/Feb) coupled with La Ni''a (that results in higher rainfall) affected harvesting of palm oil. Exports declined by 4.5% to 1.59m tonnes, led by'' most major importing countries (see Figure 3)''

'''' Yoy, palm oil inventory rose by 26.2% to 2.04m tonnes mainly on higher imports and production, coupled with lower domestic consumption that more than offset lower opening stocks and higher exports. ''

'''' Despite our bullish view on the near-term CPO prices (which we believe will likely sustain at above RM3,100/tonne until La Nina subsides), we are keeping our average CPO price assumption of RM3,000/tonne for 2012.

'''' We are keeping our Neutral stance on the sector.

'''' Top picks are Tradewinds Plant (BUY; TP: RM5.04) and TSH Resources (BUY; TP: RM2.13).

''

Performance of IPI (Nov 2011)

'''' IPI grew by 1.8% yoy in Nov (Oct:'' +2.9% yoy), lower than the consensus estimate of a +3.5% expansion. The moderation was due to softening of manufacturing output growth (+4.0% yoy; Oct: +6.3% yoy) which was affected by sustained weak E&E performance and a sudden decline in the output of refined petroleum.

'''' Electricity output expanded at a stronger pace of 2.9% yoy (Oct: +1.9% yoy) while mining output declined at a slower rate of 4.2% yoy (Oct: -5.7% yoy).''

'''' We maintain our full year 2011 GDP estimate at 5.1%, factoring in 4Q estimate of 5.0% (unchanged). We also maintain 2012 GDP growth forecast at 4.5% in 2012 as the bunching of construction projects is expected to cushion the softer manufacturing performance.

'''' We expect BNM to hold the OPR steady at 3.00% until end-2012 given the resilient economic growth with sticky inflation.

''

KLCI: Taking cue from positive Wall St and Europe markets

'' While bigcaps continue to consolidate, second and lower liners continue to hog the limelight following the lifting of trading designation on Harvest and rash of M&A news. Today, KLCI is expected to retest 2011's close of 1530, taking cue from positive Wall St and European markets overnight. Immediate supports are 10-d SMA and 200-d SMA whilst upside targets are the huge gap within 1529-1546 dated 5 Aug 11.

Dow Jones: Uptrend still intact

'' YTD, the Dow jumped 2% and the early "January effect" inspired hopes that U.S. markets were beginning to overcome headline risk from the European debt crisis and moving toward a more independent track.

'' Despite the massive rally since Nov 11, overall market is not excessively overbought as RSI is still hovers below 70. Following the positive ascending triangle breakout, current uptrend remains intact as long as the Dow is able to maintain its posture above 10-d SMA (now at 12339) and uptrend line supports.

'' Immediate resistance targets are upper Bollinger band near 12600 and Jul 11 high of 12753.

RHBInvest Research Highlights 11th January 2012

Stock Name: YTLPOWR
Company Name: YTL POWER INTERNATIONAL BHD

Research House: RHB

Price Call: HOLD

Target Price: 1.70

Stock Name: SAPCRES
Company Name: SAPURACREST PETROLEUM BHD

Research House: RHB

Price Call: BUY

Target Price: 4.50

11th January 2012

 

Top Story

Plantation ' Demand unlikely to fall off the cliff                                                              Overweight Sector Update -          Malaysia's CPO production fell by 8.2% mom in Dec, while exports fell by a slightly smaller 4.5% mom. On a yoy basis, production rose by 21.3% yoy in Dec (+11.3% 2011), while exports rose by 23.1% yoy in Dec (+7.9% 2011). As a result, closing CPO stock levels fell by 1.5% mom to 2.04m tonnes in Dec (from 2.07m tonnes in Nov). We are now well and truly in the low season for CPO, although we suspect the slowdown in production was exacerbated by the wetter-than-usual weather patterns. As a result of the lower CPO stock levels, the stock/usage ratio in Dec fell to 10.36% (down from 10.5% in Nov and up from 8.7% in Dec 2010). -          Related story: Plantation Sector Update ' Risk Of Crop Losses Rising? (3 Jan 2012)   Timber ' Jaya Tiasa and Ta Ann to benefit from plantation                                                    Neutral Sector Update -          Given the recent rally in the plantation sector, we believe this will likely spur investors' interest in quasi plantation stocks. While Jaya Tiasa and Ta Ann are generally perceived as timber companies, earnings profile for Jaya Tiasa and Ta Ann have actually transformed considerably over the years, with more than 70% of earnings likely to be contributed by the plantation divisions going forward. -          Related story: Timber Sector Update ' Plywood Inventory In Japan Continues To De-stock (4 Jan 2012)

Corporate Highlights

YTL Power ' Just Chugging Along                                                                         Market Perform Visit Note -          Not much clarity on the future outlook on dividends by management. Besides WiMAX losses, management attributed the recent decision to cut dividends on preparation for potential M&A. -          Lacks catalysts due to more delays in launching Android-based smartphones for Yes and feasibility study not yet done for the Jordan oil shale project. -          Maintain Market Perform with unchanged fair value of RM1.70. -          Related story: Utilities Sector Update ' A Potentially Bumpy Ride (20 Dec 2011); YTL Power Results Note ' Dividends Cut (18 Nov 2011)   Top Glove ' Tail winds taking shape?                                                  Market Perform (Upgraded) Briefing Note -          On the whole, management appeared rather positive on the prospects ahead as two key factors, i.e. forex rates and latex prices, appear to be trending favourably. Given how latex prices have trended in recent weeks, management appeared more optimistic and now thinks latex prices could ease further and stabilise towards the RM6.00/kg mark over the next 3-6 months. -          Related story: Top Glove Results Note ' Below Expectations (19 Dec 2011); Rubber Glove Sector Update - Outbreak Of Bird Flu In Hong Kong (23 Dec 2011)   SapuraCrest ' New subsea construction contract                                                          Outperform News Update -          Yesterday, the company announced that its JV, SapuraAcergy, has been awarded a contract for a subsea construction project, offshore Vietnam , understandably from Subsea 7. The project is worth US$100m (c. RM310m) and is expected to be performed in mid 2012. -          We are positive on the win as it is in-line with Sapuracrest's goal of enhancing its international revenue contribution. We maintain our fair value of RM4.50/share and Outperform call on the stock. We forsee the company being a large formidable entity post its merger with Kencana expected to be completed by Feb-12. -          Related story: Oil and Gas Sector Update - Resilient Despite Macroeconomic Uncertainties (12 Dec 2011)

Macro

IPI ' Softened In November, Real GDP Growth Will Likely Weaken In The 4Q Economic Highlights (published 10 Jan 2012) -          Industrial production softened to 1.8% yoy in Nov, the lowest in four months, after easing to a revised +2.9% in Oct, from +3.0% in Sep mainly due to a slowdown in manufacturing production on slowing external demand and disruption to the supply chain caused by Thailand's flood. -          This suggests that real GDP growth will likely weaken to 4.8% yoy in the 4Q. Going forward, we expect real GDP growth to slow down to 3.6% in 2012, from +5.0% estimated for 2011.

The Rail Deal

Stock Name: GAMUDA
Company Name: GAMUDA BHD

Research House: OSK

Price Call: BUY

Target Price: 3.94

Casino bill in Florida passes first test

Stock Name: GENM
Company Name: GENTING MALAYSIA BERHAD

Research House: AMMB

Price Call: BUY

Target Price: 4.30

Near-Term Rerating Catalysts Fade

Stock Name: MEGB
Company Name: MASTERSKILL EDUCATION GROUP

Research House: OSK

Price Call: SELL

Target Price: 0.99

Joining the race for Proton?

Stock Name: TCHONG
Company Name: TAN CHONG MOTOR HOLDINGS BHD

Research House: AMMB

Price Call: HOLD

Target Price: 4.30

Getting More Good Calls

Stock Name: TM
Company Name: TELEKOM MALAYSIA BHD

Research House: OSK

Price Call: BUY

Target Price: 5.50

From Storm in a Teacup to...

Stock Name: KIANJOO
Company Name: KIAN JOO CAN FACTORY BHD

Research House: TA

Price Call: BUY

Target Price: 2.58

Key management position well in place

Stock Name: RHBCAP
Company Name: RHB CAPITAL BHD

Research House: AMMB

Price Call: HOLD

Target Price: 6.90

RHBInvest Research Highlights 10th January 2012

Stock Name: HEKTAR
Company Name: HEKTAR REITS

Research House: RHB

Price Call: BUY

Target Price: 1.61

Stock Name: LPI
Company Name: LPI CAPITAL BHD

Research House: RHB

Price Call: SELL

Target Price: 11.60

10th January 2012

 

Top Story

Hektar REIT ' Strong commitment to maintain 10.3 sen DPU                                         Outperform Company Update -          Hektar REIT's management has guided us on the asset enhancement initiatives in the pipeline for the two Kedah malls that it is proposing to acquire. Plans include: 1) physical asset enhancements; and 2) tenant remixing exercise. -          The REIT is committed to maintain at least 10.3 sen DPU, even after the proposed rights issue exercise to fund the acquisition. -          Overall, our FY12-13 EPU estimates decreased by 5.7-8.6%, after factoring in the earnings contribution from the two Kedah malls and the higher unit base from the proposed rights issue. -          We revise fair value to RM1.61 (from RM1.64), based on a target yield of 6.5% after we reduce our FY12 DPU estimate slightly to 10.5 sen (from 10.7 sen). Maintain Outperform. -          Related story: Hektar REIT News  Update ' Acquiring Assets in Kedah (9 Dec 2011); Hektar REIT Briefing Note - Attractive Yield That Has Yet To Be Discovered 10 Nov 2011)

Corporate Highlights

LPI ' FY11 earnings in line, claims ratio inched up                                                     Underperform Results Note -          FY11 net profit of RM154.5m (+12% yoy) was in line with our and consensus expectations. -          FY11 earnings growth was driven by the 20.1% yoy growth in gross premiums, slightly higher than our assumption of an 18% growth. FY11 claims ratio of 48.9% was higher vs. FY10 of 47.7%, although slightly lower than our projections of 49.5%. -          Our FY12-13 earnings forecasts trimmed slightly by 0.1-1.7% after: 1) imputing FY11 gross premium numbers, thus resulting in lower FY12 gross premiums; and 2) slight adjustments in our key expenses assumptions. We also introduce our FY14 earnings forecast. -          Reiterate Underperform with an unchanged fair value of RM11.60.

Regional Equities

Indonesia Banks ' Still cautious on valuations                                                                    Neutral Sector Update -          Bank Indonesia (BI) data for Oct indicates that the banking system remains on an even keel. Oct loan growth stayed on an upward trajectory, rising 25.75% yoy from 25.23% and 23.89% in Sep and Aug respectively. We are looking for system loan growth to moderate to 20% in 2012. -          Asset quality remained stable with few stress signals. -          We see some upside for NIMs for the banks under our coverage in the next few quarters following the recent 75bp reduction in the benchmark interest rate as a result of lower funding costs and slower re-pricing of loan assets and gradually rising LDR. -          Our contrarian Neutral (maintained) sector call stems from high absolute valuations. Premium valuations (superior ROEs notwithstanding) leave Indonesian banking stocks susceptible to a de-rating of sector multiples and portfolio flow reversals. Nonetheless, we are positive on the long-term intrinsic prospects for the Indonesian banking sector. -          We reiterate our Market Perform calls on Rakyat, Mandiri and Danamon while BCA is an Underperform on valuation grounds. -          Related story: Indonesia Banks Sector Update ' Double Happiness (21 Dec 2011)

Macro

Foreign Reserves ' Retreated To US$133.6bn As At 31 December Economic Highlights (published 10 Jan 2012) -          Forex reserves retreated by US$1.4bn or RM6.4bn in 2H Dec 2011 to US$133.6bn (RM423.4bn) as at 31 Dec, after bouncing back to grow by US$0.2bn or RM0.7bn in the 1H of Dec. -          This was due to quarterly adjustment of forex revaluation loss, payment of import bills and some outflow of foreign portfolio funds, which were mitigated by the repatriation of export proceeds. -          In view of the outflow of foreign portfolio funds, we believe the ringgit will likely remain weak in the near term. We expect the ringgit to be supported fundamentally at around RM3.00/US$ once the outflow of foreign portfolio investment normalises. -          Meanwhile, the amount of excess liquidity (including repos) mopped up by the Central Bank accelerated to an estimate of RM287.4bn as at end-Dec, from RM278.4bn in mid-Dec and compared with RM242.3bn at end-2010.