HLIB Research Summary - 18 Nov 2014

Technology (OVERWEIGHT  çè)

Shot in the Arm

• US and China announced a deal to drop tariffs on a wide range of tech products based on the expanded ITA.
• According to WSJ, it is estimated that this pact could cover USD1tr in trade.
• If materialize, this will be a major catalyst to the whole tech sector, benefiting all stakeholders in the supply chain.
• In the absence of the tariff, imported IT goods will be cheaper and more affordable in China , the largest consumer of semiconductor.
• This will spur greater demand for more advance and high quality technology gadgets from first-time users as well as existing users who would shorten product replacement cycle.
• Maintain OVERWEIGHT with BUY calls on Inari Amertron (TP: RM3.41), ViTrox (TP: RM3.17) and Unisem’s (TP: RM2.02).

IOI (HOLD çè)

Below expectations

• 1QFY06/15 core net profit of RM228.8m came in below expectations, accounting for only 15.7-16.5% of our and consensus full-year forecasts.
• Key variance against our forecast – weaker-than-expected margins at the resource-based manufacturing division.
• FY06/15-17 net profit forecasts cut by 2.8-8.1%, largely to reflect lower EBIT margin assumptions at the resource-based manufacturing division.
• Post earnings forecast revision, SOP-derived TP is cut by 3.7% to RM4.23. Maintain HOLD recommendation.  

Matrix (BUY çè)

9MFY14 Results In Line

• Matrix’s 9MFY14 reported PATAMI of RM126.1m came in within expectations.
• 3.75 sen net DPS was declared in 3Q14, bringing YTD DPS to 12.5 sen
• We understand that the group’s 3QFY14’s ongoing billings are largely coming from BSS and TSI. New sales during the quarter were RM159m vs. RM138m in 2QFY14.
• Matrix also launched several developments during the quarter, which totaled to RM146m.
• As at 9MFY14, the group’s total unbilled sales stands at RM410.5m, representing 0.71x of FY13’s property development revenue.
• We maintain our TP at RM3.74 (20% discount to RNAV), which implies FY15E P/E of 7.2x. Maintain BUY.

Traders Brief

Grossly oversold with key supports at 1795-1800 zones

• Technically, the sharp selldown from monthly high of 1858 (3 Nov) to a low of 1806 yesterday has pushed the KLCI into a grossly oversold position, reflected by the daily slow stochastic indicator. However, on the back of external uncertainties (potential pullback in Dow, uneven recovery in the global economy, sliding oil prices, geopolitical risks etc) and given that domestic fresh catalysts are unlikely to emerge anytime soon, KLCI will continue to trap in a consolidation mode despite the oversold position. Short term resistances 1812-1836 whilst supports fall on 1778-1800
• Closed positions on 17 Nov: We had closed our positions on SILK, PERISAI, JTIASA and MITRA yesterday.