Analaysts maintain 'neutral' on auto sector

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

Research House: RHB

Price Call: HOLD

Target Price: 7.50

Stock Name: DRBHCOM
Company Name: DRB-HICOM BHD

Research House: RHB

Price Call: HOLD

Target Price: 3.30

Kenanga Research has maintained a 'neutral' call on the automotive industry and retains its 2013 Total Industry
Volume's (TIV) forecast of 641,560 units.

The research house said April's total vehicle sales month-on-month slid by nine per cent due to consumers' wait-and-see approach in the uncertainty surrounding the recent general election.

However, year-on-year total vehicle sales charted a year-on-year growth of 10 per cent to 52,489 units with sales of passenger vehicles increasing by 10 per cent to 45,564 units while commercial vehicles posted increased sales of nine per cent to 6,925 units.

"We look forward to the unveiling of the revised National Automotive Policy which will focus on positioning the country as a regional hub for hybrid vehicles and energy-efficient vehicles.

"The new policy would also look into gradually eliminating structural issues such as high duties, high selling prices, non-tariff barriers, fuel subsidies and other political considerations," it said in a research note today.

Meanwhile, RHB Research in its note said the expected sales decline in April was not as severe as expected.

"With the general elections out of the way and expectations for continuity and stability of policies affecting the automotive industry, we expect auto sales to normalise in the months ahead as buyers return to the market helped by low interest rates and an attractive pipeline of new models," it added.

The research house said following the Barisan Nasional's victory in the general elections, it expects consumer expectations for a significant reduction in car prices to gradually moderate.

RHB Research remains neutral on the automotive industry and favours shares of companies like Tan Chong Motor Holdings Bhd with a target price of RM7.50 and DRB-HICOM Bhd with a target price of RM3.30.

On the other hand, HLIB Research has maintained an "overweight" call for the industry and favours shares like DRB-HICOM Bhd with a target price of RM3.36.

The research house said the slowdown in the Malaysian economy, global automotive supply chain disruption and sudden jump in fuel prices and interest rate will post a risk to the industry.-- Bernama

DRB-Hicom - Building its defences

Stock Name: DRBHCOM
Company Name: DRB-HICOM BHD

Research House: CIMB

Price Call: BUY

Target Price: 4.60

Target RM4.60

Deftech's tie-up with Tata Motors to develop and market the latter's military vehicles to the Malaysian government is a feather in DRB-Hicom's cap. Support should be forthcoming from the government as it beefs up the nation's defence capabilities.

Source: CIMB Daybreak - 19 April 2012, Full PDF Report

RHB Research - Automotive Sector Update (19 April 2012)

Stock Name: MBMR
Company Name: MBM RESOURCES BHD

Research House: RHB

Price Call: BUY

Target Price: 5.05

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

Research House: RHB

Price Call: HOLD

Target Price: 4.60

Stock Name: DRBHCOM
Company Name: DRB-HICOM BHD

Research House: RHB

Price Call: BUY

Target Price: 3.45

Sector Update

Motor ' A Gradual Recovery                                                                                               Neutral

Sector Update

MBM Resources ' Fair value RM5.05                                                                           Outperform

Tan Chong ' Fair value RM4.60                                                                             Market Perform

DRB-HICOM ' Fair value RM3.45                                                                                  Outperform

• Auto sales for Mar of 53,583 units were 21.7% higher mom (-15.3% yoy) that marks the second consecutive mom gain. TIV for 1Q12 reached 138,544 units, down 12.5% yoy and 7.6% qoq.
• The MAA attributed the improved sales to positive consumer sentiment, the introduction of new models and a longer working month and expects the sales trend for Apr to be similar.
• Combined with the lingering effects of the stricter financing guidelines, nearly all marques continue to show yoy sales contraction with the exception of Toyota .

RHB Sector Update - Motor

Stock Name: MBMR
Company Name: MBM RESOURCES BHD

Research House: RHB

Price Call: BUY

Target Price: 5.05

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

Research House: RHB

Price Call: HOLD

Target Price: 4.20

Stock Name: UMW
Company Name: UMW HOLDINGS BHD

Research House: RHB

Price Call: HOLD

Target Price: 7.30

Stock Name: APM
Company Name: APM AUTOMOTIVE HOLDINGS BHD

Research House: RHB

Price Call: HOLD

Target Price: 4.50

Stock Name: PROTON
Company Name: PROTON HOLDINGS BHD

Research House: RHB

Price Call: HOLD

Target Price: 5.50

Stock Name: DRBHCOM
Company Name: DRB-HICOM BHD

Research House: RHB

Price Call: BUY

Target Price: 3.45

Motor ' Awaiting NAP v3.0                                                                                                 Neutral

Sector Update

MBM Resources ' Fair value RM5.05                                                                           Outperform

Tan Chong ' Fair value RM4.20                                                                             Market Perform

UMW ' Fair value RM7.30                                                                                      Market Perform

APM ' Fair value RM4.50                                                                                       Market Perform

Proton ' Fair value RM5.50                                                                                      Market Perform

DRB-HICOM ' Fair value RM3.45                                                                                    Outperform

-          The auto industry made a shaky start to 2012 with total industry volume (TIV) in Jan declining 14.7% and 25.2% mom and yoy respectively. The softer sales were attributed to seasonal factors given the earlier than usual Lunar New Year holidays, the more stringent financing guidelines implemented by Bank Negara Malaysia (BNM) and the lingering effects of component supply disruption arising from the floods in Thailand .

Source: RHB Research - 5 April 2012

DRBHCOM - Launches CKD VW Passat

Stock Name: DRBHCOM
Company Name: DRB-HICOM BHD

Research House: HWANGDBS

Price Call: BUY

Target Price: 3.45

DRB-HICOM; Buy; RM2.73
Price Target: RM3.45; DRB MK

DRB-HICOM (DRB) has officially launched the locally assembled VW Passat 1.8 TSI today, after being officiated by Prime Minister Datuk Seri Najib Razak yesterday. This is 8% cheaper (or RM14,000) at RM170,888 than the current CBU version of RM184,888. To date, about 300 CKD units have been assembled in Pekan, Pahang.

We had expected the CKD version to be cheaper but we think there is room to lower pricing with the shift  to use more local content for automotive parts. It was reported in the media today that VW AG and DRB are targeting to achieve 40% local content in the next 12 to 18 months which will be done in phases. Currently the CKD version is assembled using CKD packs from Germany and has likely minimal local content. DRB has assessed 27 vendors and 20 have met the requirements. We expect spillover to DRB given it has an extensive local autopart business.

While sales of the CBU VW Passat 1.8 TSI have been encouraging at 713 units since the launch in November 2011, the key growth driver will be to eventually export to ASEAN. It was reported that VW is looking at exporting to ASEAN by 2014. There will also be more VW models (Polo and Jetta) assembled out of Pekan by end-2011 or early 2012.

We maintain our BUY rating and TP of RM3.45 which is based on a 20% discount to SOP.

Source: HwangDBS Research 12 March 2012

VW(rooming) its way in again?

Stock Name: DRBHCOM
Company Name: DRB-HICOM BHD

Research House: CIMB

Price Call: BUY

Target Price: 4.60

Target RM4.60

Implications of a potential Proton-VW tie-up to remodel the Polo as a national car are positive. The price positioning of the car should give Proton and VW the biggest bang for their buck in terms of market share. An equity participation is not a remote idea, in our opinion.

Source: CIMB Research on 6-March-2012

DRBHCOM - More newsflow on VW and Proton

Stock Name: DRBHCOM
Company Name: DRB-HICOM BHD

Research House: HWANGDBS

Price Call: BUY

Target Price: 2.76

DRB Hicom; Buy; RM2.76
Price Target: RM3.45; DRB MK

It was reported in the media today that VW AG has identified its VW Polo as the model to be possibly remodelled as the national car for Proton. VW has apparently formed a special team with key personnel meeting in Hong Kong last month and agreeing on this. The track record of VW speaks for itself where it turned around loss-making Skoda In the early 1990s.

The VW Polo uses a 1.2 TSI engine with a 7-speed DSG gearbox and priced at c. RM114k for a CBU unit. It was 2010 World Car of the Year based on merit, value, safety, environmental impact, significance, and emotional appeal. The news report indicated that a CKD unit could cost below RM70k making it an attractive value proposition for a German engineered vehicle. Sales for the existing VW Polo locally has been robust hitting 1681 units for 2011 up 6.5-fold from 257 units in 2010. The locally assembled VW Passat done in Pekan is expected to be rolled out this month.

This piece of news reaffirms the fact that there is abundance of value to be extracted from Proton especially with DRB-HICOM on board now. We maintain our Buy rating and TP of RM3.45 which is based on a 20% discount to SOP.

Source: HwangDBS Research 5 March 2012

DRB Hicom - Several proposals on the table for Proton's revival BUY

Stock Name: DRBHCOM
Company Name: DRB-HICOM BHD

Research House: AMMB

Price Call: BUY

Target Price: 4.00

We reaffirm our BUY rating on DRB-Hicom with our fair valueunchanged at RM4.00/share, pegging a 10% discount to our sum-of-parts value ofRM4.40/share.

It was reported in the press today that DRB is evaluatingplans by Mitsubishi, Volkswagen and General Motors (GM) to revive Proton.

GM has proposed to gain control of half of Proton'sproduction lines at the latter's plant in Tanjung Malim. This is not somethingnew as it was already speculated in the market earlier that GM plans to buy a50% stake in the plant. This proposal makes sense given the much-publicisedunder-utilised Tanjung Malim plant ' running at barely 50% utilisation. A valuationof RM800mil for the plant stake has been bandied about but the key point hereis that Proton would be able to achieve economies of scale. 

Mitsubishi, meanwhile, has put forward a proposal to utiliseProton's spare capacity to produce some 200,000 engines with a horse powerbetween 1,600cc and 2,000cc.

Not surprisingly, it seems DRB prefers to work withVolkswagen to produce B-segment cars. Apart from technology, DRB would be ableto leverage on Volkswagen's strong global distribution network to marketProton's car overseas. We are not ruling out equity participation by VW forthis exercise. 

Notwithstanding that, we believe DRB's immediate focus onProton would be very much on plugging the 'leakages' within the latter'soperation and we suspect, mostly in the rationalisation of parts supply. 

On the other hand, DRB has not decided whether to sell orkeep the loss-making Lotus, given that due diligence on the latter can only bedone once the MGO is completed. Having said that, the disposal of Lotus wouldbring an additional RM200mil-RM300mil income to Proton. 

We continue to like DRB, given it is one of the cheapestconglomerates ' trading at CY12 of 13x versus its peers of 18x. The group is onan exciting growth path, as it is the best proxy to VW's ambition to be a keyASEAN auto player. DRB would also benefit in the transformation of Pos Malaysia' recently showing strong a set of results ' and the next leg up would be toreap the synergies with its sister company, Bank Muamalat.

Source: AmeSecurities

DRBHCOM - 3 Suitors for Proton's Tanjung Malim plant

Stock Name: DRBHCOM
Company Name: DRB-HICOM BHD

Research House: HWANGDBS

Price Call: BUY

Target Price: 3.45

DRB Hicom; Buy; RM2.61
Price Target: RM3.45; DRB MK

According to the media, DRB-HICOM is evaluating three rival plans for Proton made by 3 auto majors - VW, Mitsubishi and General Motors. This is to gain access to half of Proton's production lines at its factory in Tanjung Malim, Prai. The plant has a capacity of 250,000 cars a year but can be expanded to 1m. According to a source, the deal is valued at RM800m with General Motors being the least preferred and VW the most preferred.

This is a key positive catalyst and in line with DRB's vision of making Malaysia a competitive motor hub in Asean outside of Thailand and Indonesia. We concur and feel VW could be the most synergistic fit for Proton given DRB's already established relationship. VW cars are already gaining a lot of acceptance locally with total TIV growth of 2.4 fold for 2011 to 6,584 vehicles. Also, in the longer term, we think VW plans to use Malaysia as its hub for passenger vehicles (Passat, Jetta and Polo) in ASEAN where it hopes to ramp up production to 50,000 units a year by 2015-16. There is ample room for market penetration as we understand DRB's market share in Asean is small at less than 1%. This will also be synergistic with its manufacturing and engineering business to meet the required local content. We see minimal execution risk as DRB-Hicom's capability has been tested after it became the first assembler of the Mercedes S-Class outside of Germany.

We maintain our Buy rating and TP of RM3.45 which is based on a 20% discount to SOP.

Source: HwangDBS Research 2 March 2012

DRB-Hicom - Auto earnings to rebound BUY

Stock Name: DRBHCOM
Company Name: DRB-HICOM BHD

Research House: AMMB

Price Call: BUY

Target Price: 4.00

' We maintain our BUY recommendation on DRB-Hicom with ourfair value unchanged at RM4.00/share, based on 10% discount to our sum-of-partsvaluation of RM4.40/share.

' DRB reported a net income of RM80mil in 3QFY12 bringing its9MFY12 earnings to RM275mil. This is largely in line with our expectations,representing 70% of our full year estimates but came short of consensus numbers,covering only 64%. 

' The group also announced an interim dividend of 2 sen/shareduring the quarter. We have assumed a pay-out ratio of 20% which translates toa DPS of 4.1sen or a yield of 2%. 

' Core earnings dropped by 16% from RM329mil last year as itsautomotive division's profit was hampered by the supply disruption of autocomponents caused by the recent flood in Thailand, resulting in the closureHonda's plant in Pegoh.

' But auto earnings should recover over the next few quartersas (1) the Pegoh plant is expected to be reopened next month. (2) Impact frompartnership with Volkswagen will be seen in the next few quarters.

' The Pegoh plant is expected to produce 50,000 vehicles (vis-a-vis44,000 units pre-supply crisis) to make up for lost grounds, having been out ofoperations for six months. The stronger volume will be underpinned by the launchof the new Honda City in April.

' Passat CKD model will be launched in 2Q2012 and we suspectthe model should be priced at about RM170k which should provide stiffcompetition to Toyota Camry. Currently about 300 units of the Passat CKD modelhave been produced but this should grow to 3,000 units to 5,000 units for 2012.We are estimating 35% growth in DRB's auto division earnings for FY13F.

' Having said that, weak auto earnings were compensated bystrong Pos Malaysia's numbers, having reported 70% jump in earnings toRM112mil. Apart from the full impact of new tariff, there were some costsavings since DRB took over with operating margins at 12% from 10% last year.

' While focus will remain on plugging the leakages within Pos,we believe the 'end-game' would be to reap the synergies with its sistercompany, Bank Muamalat. The latter would be able to leverage on POSM'sextensive network thus increasing its presence and brand awareness in thecountry.

' DRB's valuations remain attractive, currently trading at CY13PE of 9x (vis-a-vis its peers of 14x) and P/B of 0.9x.

Source: AmeSecurities

DRBHCOM - Temporary setback

Stock Name: DRBHCOM
Company Name: DRB-HICOM BHD

Research House: HWANGDBS

Price Call: BUY

Target Price: 3.45

DRB Hicom; Buy; RM2.57
Price Target: RM3.45; DRB MK

3QFY12 hit by weaker Honda and Alam Flora earnings. Resilient services earnings anchored by Bank Muamalat and POS. Buy, RM3.45 TP based on 20% discount to SOP value.

Source: HwangDBS Research 27 Feb 2012

DRB-Hicom On a solid footing

Stock Name: DRBHCOM
Company Name: DRB-HICOM BHD

Research House: CIMB

Price Call: BUY

Target Price: 4.60

Target RM4.60

The 28% drop in DRB-Hicom's 3QFY3/12 EPS was no surprise. All units remained profitable despite external shocks like the Thai floods and loss of the Selangor waste concession. The group is well positioned to absorb and restructure Proton in FY13.

Source: CIMB Trader PM February 27, 2012,  FULL PDF Report

DRB (BUY) - Remain Affected by Thailand Flood

Stock Name: DRBHCOM
Company Name: DRB-HICOM BHD

Research House: HLG

Price Call: BUY

Target Price: 3.50

DRB (BUY)

Remain Affected by ThailandFlood

• In line ' Reported 3QFY3/12 core earning ofRM79.6m, leading 9M12 to RM304.5m, achieving 77.8% of HLIB estimates, butbehind consensus with 71.1%.

• Earnings was affected by the Thailand flood in Oct 2011, whichhad forced DRB 34% owned Honda Malaysia to shut down its Melaka assembly plant.The plant is only expected to gradually resume full production by 2Q12.
• The acquisition of Proton to be completed by end Mar2012, and will be integrated into DRB group gradually. The acquisition willcost DRB RM3bn. Net gearing is expected to increase to ~45% from current levelof 10%, while NTA/share will improve to ~RM3.17.
• Announced 1st gross interim dividend of 2 sen less 25% tax (net dividendof 1.5 sen).
• Maintain BUY with unchanged Target Price of RM3.50.

Source: HLIB Research 27 Feb 2012

On an exciting growth path

Stock Name: DRBHCOM
Company Name: DRB-HICOM BHD

Research House: AMMB

Price Call: BUY

Target Price: 4.00

RHBInvest Research Highlights 31st January 2012

Stock Name: DRBHCOM
Company Name: DRB-HICOM BHD

Research House: RHB

Price Call: BUY

Target Price: 3.45

Stock Name: UMW
Company Name: UMW HOLDINGS BHD

Research House: RHB

Price Call: SELL

Target Price: 6.20

31st January 2012

 

Top Story

Wah Seong ' A Quiet 2012?                                                                                 Market Perform Visit Note -          We met up with Wah Seong's management recently and came away positive on: 1) news that the domestic pipe-coating contracts are picking up; 2) the progress with the Insituform JV; and 3) the ongoing endeavour to segregate the two core business, with the aim for better operational focus. -          However, our concerns are: 1) the uncertainty of the domestic pipe-coating contract awards; and 2) the lack of a large international project to anchor earnings for 2012.

 

Sector Update

Motor ' Storm In A Teacup                                                                              Neutral (Upgraded) Sector Update DRB-HICOM ' Fair value raised to RM3.45                                                  Outperform (Upgraded)   UMW ' Fair value at RM6.20                                                                                    Underperform -          Recent media reports suggest that banks are considering measures to tighten HP lending, including restricting buyers to a maximum of two car loans at any one time reducing the margin of financing for the second HP loan (65-70%) and also for loans for "luxury" makes (50%). -          We understand that there is no official directive from Bank Negara (BNM). In our opinion, the possible measures are not likely to have a significant impact on auto sales given that the majority of HP borrowers have only one car loan.

 

Corporate Highlights

Public Bank ' Results in line but dividend slightly disappointing                                      Outperform Results / Briefing Note -          Public Bank's 4Q11 results were in line with our and consensus estimates but the interim net DPS of 28 sen declared was below our expected 31.5 sen. Full-year net payout was 48.3% was below our 52.5% assumption, which we suspect was partly to conserve capital as BNM has yet to announce its stand on the countercyclical buffer.

HLIB Research 18 January 2012 (Auto; IOI; TNB; Traders Brief)

Stock Name: DRBHCOM
Company Name: DRB-HICOM BHD

Research House: HLG

Price Call: BUY

Target Price: 2.90

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

Research House: HLG

Price Call: BUY

Target Price: 5.10

Stock Name: IOICORP
Company Name: IOI CORPORATION BHD

Research House: HLG

Price Call: HOLD

Target Price: 4.85

Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD

Research House: HLG

Price Call: HOLD

Target Price: 6.00

Automotive (Overweight)

Affected by Thailand Flood

'''' MAA released Dec 11 data showing TIV suffered from a significant drop of 12.9% yoy, leading to 2011 TIV dropping by 0.9% yoy vs. our forecast of 0.3% yoy decline.

'''' We expect 2012 TIV to grow 6% yoy, mainly due to sustainable GDP growth (underpinned by the 2012 Budget and ETP implementation) and supply chain recovery.

'''' For 2011, Perodua (UMW and MBM), Nissan (TCM) and Honda (DRB) sales was within our expectations, while Toyota (UMW) and Proton was below our expectations.

'''' Other marques (i.e. Hyundai, Kia, Peugeot, Chevrolet, VW etc) had been gaining market share, with records of double digit growth since beginning 2011, indicating growing competitive environments going forward.

'''' We expect continued strong demand for hybrid cars in 2012, due to lowered price (tax free) as well as its fuel economy advantage.

'''' TOP Picks: BUY on DRB (TP: RM2.90) and TCM (TP: RM5.10).

''

IOI Corporation (Hold; TP: RM4.85)

More details on Singapore land deal

'''' IOI's 99.8% subsidiary Multi Wealth (Singapore) Pte Ltd won its bid for a parcel of 99-year leasehold land in Jalan Lempeng, off Clementi Avenue 6, Singapore for S$408m.

'''' Assuming land cost to account for 40% of the total GDV and EBIT margin of 20%, IOI will incur a total development cost of S$647.6m or RM1,567.2m, which would in turn raise IOI's net debt and net gearing from RM2.3bn and 0.2x (as at 30 Sep 2011) to RM3.98bn and 0.3x respectively.

'''' Based on our estimates, the project will enhance IOI's earnings by RM79.7m p.a. from FY13 onwards (or 3.4% of our projected FY13 net profit), assuming: (1) Land cost to account for 40% of the total GDV; (2) 20% setback; (3) EBIT margin of 20%; (4) Earnings from this project to contribute equally over 3 years starting from FY06/13; (5) Borrowing cost of 6% p.a.; and (6) Tax rate of 17%.''

'''' We are neutral on the latest development, as the Singapore government's measures will cool demand for property market there, hence IOI's returns on its investments.

'''' Net profit forecasts, SOP-derived TP of RM4.85 as well as Hold recommendation maintained for now.

''

Tenaga (Hold)

1Q12 Earnings Return to Black

'''' Within estimates - Reported 1Q12 core earnings of RM184m, as compared to HLIB's core earnings RM1.9bn (have included RM1.0bn compensation for FY08/12 higher fuel cost), but lower than consensus.

'''' 1Q12 earnings return to black on the back of lower power demand QoQ, higher hydropower generation and improved supply of gas.

'''' TNB is expected to continue incur high fuel cost expenses (estimated ~RM2.5bn), and submit claims for compensation for the period of Nov 11 - Sep 12.

'''' Gas supply issue will only be resolved with the commencement of Melaka regassification plant in Sep 2012. However, the issue of pricing the gas to TNB is another concern as TNB may need to absorb the higher gas prices and unable to pass through to consumers.

'''' Maintain HOLD on TNB with unchanged TP of RM6.00.

''

KLCI: To consolidate above the crucial 200-d SMA

'''' Ahead of the CNY holidays next week, investors should keep an eye on the 200-day SMA. A significant close below 1502 on rising volume would likely signal the resumption of the longer term bear market. Breaking the key 200-d SMA will drag index lower to 30-d SMA (1495), 50-d SMA (1482) and lower Bollinger band (1476) levels. Resistance zones are 1529-1546.

RHBInvest Research Highlights 18th January 2012

Stock Name: IJM
Company Name: IJM CORPORATION BHD

Research House: RHB

Price Call: SELL

Target Price: 4.48

Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD

Research House: RHB

Price Call: HOLD

Target Price: 6.50

Stock Name: AXREIT
Company Name: AXIS REITS

Research House: RHB

Price Call: HOLD

Target Price: 2.72

Stock Name: FAJAR
Company Name: FAJARBARU BUILDER GRP BHD

Research House: RHB

Price Call: HOLD

Target Price: 0.86

Stock Name: MBMR
Company Name: MBM RESOURCES BHD

Research House: RHB

Price Call: BUY

Target Price: 3.90

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

Research House: RHB

Price Call: HOLD

Target Price: 4.40

Stock Name: UMW
Company Name: UMW HOLDINGS BHD

Research House: RHB

Price Call: SELL

Target Price: 6.20

Stock Name: APM
Company Name: APM AUTOMOTIVE HOLDINGS BHD

Research House: RHB

Price Call: HOLD

Target Price: 4.30

Stock Name: PROTON
Company Name: PROTON HOLDINGS BHD

Research House: RHB

Price Call: HOLD

Target Price: 5.50

Stock Name: DRBHCOM
Company Name: DRB-HICOM BHD

Research House: RHB

Price Call: HOLD

Target Price: 2.20

18th January 2012

 

Top Story

IJM Corp ' Kajang- Seremban Highway not living up a cash cow                                  Underperform Company Update -          FY03/12-14 net profit forecasts are trimmed by 3% p.a., having imputed share of RM20m net loss p.a. from Lekas. Fair value reduced by 2% from RM4.59 to RM4.48. Maintain Underperform. -          Related story : IJM Corp Results/Briefing Note ' 1HFY03/12 Core Net Profit Grows 11% YoY, Slight Delays In WCE and NPE Extension (29 Nov 2011)

Sector Update

Motor ' A better 2012                                                                                                Underweight Sector Update MBM Resources ' Fair value RM3.90                                                                           Outperform Tan Chong ' Fair value RM4.40                                                                             Market Perform UMW ' Fair value RM6.20                                                                                        Underperform APM ' Fair value RM4.30                                                                                       Market Perform Proton ' Fair value RM5.50                                                                                   Market Perform DRB-HICOM ' Fair value RM2.20                                                                           Market Perform -          MAA (Malaysian Automotive Association) guidance is for Jan 2012 vehicle sales to improve slightly given ongoing promotional campaigns and the seasonal rush to deliver new vehicles ahead of the Lunar New Year holidays. We are revising our 2012 TIV forecast to 612,000 units (+2% yoy) from 607,000 units on the back of RHBRI's 3.6% GDP growth forecast and 5.3% rise in consumption spending. -          Related story: Motor Sector Update  ' Seasonal Slump And Floods Hit Sales (20 Dec 2011)

Corporate Highlights

TNB ' On recovery path                                                                                         Market Perform Results / Briefing Note -          FY12 core earnings forecast raised by 22% after imputing an additional 50 mmscfd of gas to be received by TNB beginning Mar. Fair value revised to RM6.50 (from RM6.15) based on unchanged target CY12 PER of 15x.  Maintain Market Perform. -          Related story: TNB Results Preview  ' Slight improvement in 1Q (16 Jan 2012)   Axis REIT ' More asset acquisitions in the pipeline                                                 Market Perform Briefing Note -          Axis REIT is currently looking at 11 potential assets totalling RM545m that could be injected into the REIT over the next 2 years, with half targeted to be acquired by end-2012. -          Our EPS forecasts have been revised slightly by 0.8-1.1% for FY12-14 after we factor in lower interest expenses. We raise our fair value slightly to RM2.72 (from Rm2.70) after revising our FY12 DPU estimates. Maintain market Perform. -          Related stories: Axis REIT 4Q11 Results Note ' Total DPU of 17.2 sen for FY11 (17 Jan 2011); Axis REIT News Update ' Acquisition in Bayan Lepas (27 Oct 2011); Axis REIT News Update ' New Acquisition in Penang (29 Sep 2011)   Fajarbaru ' Completes private placement of 15m new shares at RM0.90/share         Market Perform Company Update -          Fajarbaru has completed a private placement of 15m new shares at RM0.90 per share.  -          The RM13.5m gross proceeds from the exercise will increase its net cash of RM24.2m as at 31 -          Fair value is reduced by 5% from RM0.91 to RM0.86.  Maintain Market Perform. -          Related story: Fajarbaru News Update  ' Lands RM62m Sewerage Treatment Plant Job In Selangor (22 Dec 2011)