Responsible Financing Practices
'''' BNM announced new financing rules to inculcate responsible lending ' assessment based on "net income", shorter HP tenure and etc.
'''' Positive move to ensure sustainable financing and preserve the excellent asset quality of the industry.
'''' Initial period of adjustments (which may impact loans growth) but minimal impact on long-term as banks are already considering affordability and ability to repay as means to safeguard asset quality.'' Maintain loans growth projections of 12% and 9% for 2011 and 2012 respectively.
'''' This could also prompt more self regulated when pricing consumer loans and help mitigate pressure on NIM.
'''' On economic front, we can expect more sustainable consumer spending growth going forward. Maintain our view that private consumption will continue to be the key driver of growth and GDP will average 4.5% in 2012.
'''' Maintain Overweight.'' Top picks are Maybank and AFG.
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Affin Holdings (HOLD)
Provision Write-Back The Savings Grace
'''' 3QFY11 results in line with HLIB and consensus.
'''' Interim dividend of 12 sen (higher than HLIB's 10 sen projection) vs. 9 sen previously.
'''' If not for provision write-back (recovery jumped 3x), results would have been weak from sharp plunge in NIM and higher effective tax rate.
'''' NIM suffered as cost of fund ballooned on strong FD and NID growth while CASA was lower qoq.''
'''' Non-interest income was also weaker due to lower fee income and higher MTM loss.
'''' Asset quality improved while absolute IL also declined.
'''' Capital ratios improved and remained robust.
'''' Maintain HOLD with higher target price of RM2.62 to reflect the impact of higher dividend and .
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IOI Corporation (Hold; TP: RM4.63)
1QFY12 boosted by higher plantation earnings
'''' 1QFY06/12 core net profit of RM508.2m (+28.1% yoy) came in within expectations, accounted for 21.5% of our full-year forecast and 23.2% of consensus estimates.''
'''' FY06/12-14 net profit forecasts were tweaked lower by 0.8-1.2% after having reflected a lower operating margin assumption at the resource-based manufacturing division that more than offset an upward adjustment in our FFB yield assumption.''
'''' SOP-derived TP raised by 1.3% from RM4.57 to RM4.63 to reflect the latest lower net debt position (as at 30 Sep 11) that more than offset a slight downward adjustment in our FY06/12-13 net profit forecasts.''
'''' Maintain Hold.
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KLCC Property (Buy)
Results In-Line
'''' 1H FY11 results were in-line with HLIB and consensus estimates.'' Reported earnings rose 7.3% yoy and 4.6% qoq to RM270.0m, making up 47.9% of our estimate and 50.9% of consensus.
'''' 5 sen single-tier interim dividend was declared, in-line with our expectations.
'''' We maintain our earnings forecasts and target price (RM3.46, or 15% discount to RNAV).''
'''' Given the recent selldown, potential capital appreciation now exceeds 10%, and we thus upgrade KLCC Property to BUY.
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WCT (BUY)
3Q Briefing Within Expectations
'''' Construction activities during 3Q were derived largely from local projects i.e. Medini Iskandar civil works, Putrajaya 4G8 and 4G9 buildings, and KLIA2 related-works. As expected, there wasn't much progress for the Qatar Administrative building project due to the Raya festive break and summer holidays.
'''' Going forward, the ~RM1.2bn the Qatar project (which makes up ~50% of WCT's order book) should pick-up in pace considering that superstructure works have begun. Thus, supporting earnings growth for the division.
'''' The management also shared that their current tender book has shrunk from RM10bn to RM4bn whereby RM3bn is slated for 2 highway projects in Oman and RM1bn for local jobs with the majority in 2 building projects. One of the buildings is for the new MITI office which is pending formality to proceed. Overall, outstanding construction order book stood at RM2.4b (see Figure #1), translating to 1.5x FY10's construction revenue.
'''' Sales from Bandar Bukit Tinggi and d'Banyan Residency exceeded management's FY11 target of RM300m. YTD property sales hit RM398m and will most likely touch ~RM420m by year end.
'''' Maintain TP of RM2.98 based on 14x average FY11 and FY12 earnings.
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3Q 2011: Surprisingly Robust Growth''
'''' Real GDP growth picked up to 5.8% yoy in 3Q (2Q: +4.3%), higher than our and consensus estimate of 4.7% and 4.8% respectively. Growth rates for 1Q and 2Q were also revised upwards by 0.3ppt to 5.2% and 4.3% respectively (previously: 4.9% and 4.0% respectively). For the first nine months, GDP growth averaged 5.1%.
'''' Strong growth in government services was the key "surprise" element from both the supply and demand side (including the revisions). Bonus payments for civil servants were recognised as real gains in productivity.
'''' On the supply side, higher growth was recorded in all sub-sectors, except for mining which was still in contraction mode caused by Petronas maintenance shutdown.
'''' On the demand side, growth was led by strong performance of all domestic demand components.
'''' Contribution from net exports remained large at +1.3ppts to GDP growth led by commodity exports.
'''' Factoring in our 4Q forecast of 5.0% (unchanged), we now raise our full year GDP forecast to 5.1% from 4.6%.
'''' While the global environment remains uncertain, we are still of the opinion that most of the domestic sectors will remain resilient in 2012, maintaining our GDP forecast of 4.5% in 2012.
'''' The stronger-than-expected 3Q growth reinforced our view that BNM will hold the OPR steady until end-2012.
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KLCI: Crucial weekly support near 1420 levels
'''' Given the breakdown of mid Bollinger band (now at 1469), the dead cross in MACD and weakening RSI and slow stochastics indicators, KLCI is expected to head south towards 1st major support near 50-d SMA (at 1435), A breakdown below 1435 will spur more downside to 1420 (38,2% FR). Immediate resistance levels are 1469, 100-d SMA (now at 1484) and 1500 levels.
LIPO: Strong supports near RM0.94-0.98 zones
'''' LIPO is likely to consolidate for a while to digest its overbought positions but any weakness in prices is a good opportunity to accumulate for medium to long term upside. Immediate supports are RM1.04 (50%FR), RM0.98 (38.2% FR) and RM0.94 (mid Bollinger band). Resistance targets are RM1.20 (upper Bollinger band) and RM1.28. A breakout of RM1.28 will push prices to revisit RM1.52 (38.2% FR 'weekly chart), the highest since Dec 2003. Cut loss below RM0.94.
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