Kenanga: 14 Nov 2014

IDEAS OF THE DAY

l  Results Note: MAXIS

l  Company Update: MPI

l  On Our Technical Watch: ALAM, SUPERMX

NEWS HIGHLIGHTS

l  Econpile secures RM30.0m contract for condominium project

l  51.0% NBPOL stake ideal

l  Pos Malaysia submits proposal for fuel subsidy rationalisation plan

l  Encorp seeks RM68.0m in claims over wrongful termination of contract

l  I-Bhd plans theme park expansion in rural area

FOREIGN NEWS HIGHLIGHTS

l  Alibaba seeking USD8.0b in first U.S. bond sale

l  Buffett's Berkshire Hathaway buys P&G's Duracell

 

ECONOMIC NEWS HIGHLIGHTS (MACRO BITS) 

Global

l  Banks Back G20 Infrastructure Hub

Asia

l  China October Data Shows Economy Cooling Further, Need For More Policy Support

l  Bank Of Korea Keeps Policy Steady In Nov, Dims Rate Cut Outlook

l  Bank Indonesia Holds Rate Before Widodo Fuel-Price Move

l  India And US Reach WTO Breakthrough Over Food

Americas

l  Jobless Claims In U.S. Rose More Than Forecast Last Week

l  Hiring In U.S. Picks Up As Workers Gain Confidence To Quit Jobs

l  U.S. Budget Deficit At $122b In October

l  China, Mexico Eye $7.4b In Investment Funds

Europe

l  Greek Unemployment Eases To 25.9% In August

l  ECB Reiterates Ready To Act As Experts Cut Forecasts

Currencies

l  Yen Drops To 7-Year Low Vs Dollar As Japan Election Talk Picks Up

Commodities

l  Oil Slumps To Four-Year Low As Brent Crashes Below $80 A Barrel

l  Gold Down On Drop In Oil Prices, Bright US Outlook

MIB Research Summary - 14 Nov 2014

Maxis Bhd: Maintain Hold Improving prepaid trends  Shariah-compliant

9M14 net profit was below our expectation owing to higher taxes; EBITDA was in line. Sequentially higher prepaid subscribers and ARPU signal an end to Maxis’ prepaid woes; postpaid was however a drag. Maintain HOLD with an unchanged TP of MYR7.20. (SINGAPORE) First Resources: Maintain Buy Weak results priced in 3Q14 results were below our and market expectations on low CPO ASP achieved and higher tax expenses. We cut our FY14E EPS by 6.5% to factor in lower CPO ASP and marginally higher effective tax rate assumptions. Negatives priced in. Maintain BUY with unchanged TP of SGD2.43 on 15x FY15E P/E. Technical: Sell any and every rebound rally The FBMKLCI inched down 0.43 points to 1,815.81 yesterday, while the FBMEMAS and FBM100 also closed lower by 17.11 points and 10.97 points, respectively. We recommend a “Sell on Rallies” stance for the index. Trading idea is a Take profit call on PENERGY with downside target areas at MYR1.98 & MYR1.45.   Latest News Plantations: 'PNG govt intends to hold up to 30% stake in NBPOL'. Sime Darby, welcomes the Papua New Guinea government’s intention to raise its stake in the plantation company, said its president and group chief executive Tan Sri Mohd Bakke Salleh. He also mentioned that ideally, Sime Darby would want to own a controlling 51% stake in NBPOL. (Source: The Edge Financial Daily) Oil & Gas: GE O&G to supply turbomachinery for Petronas' FLNG facility. New York Stock-Exchange listed GE Oil & Gas said it will supply its gas turbine-driven compressor train and mechanical drive technology to Petroliam Nasional for the latter's second floating liquefied natural gas (FLNG) facility that is being developed off East Malaysia. (Source: The Edge Financial Daily) Sarawak Energy: SEB to invest MYR10b more to build two more hydroelectric dams. Sarawak Energy (SEB) will invest an additional MYR10b to MYR15b in new energy generation projects in the next five years. It is proceeding to build another two major hydroelectric dams to boost power generation capacity. (Source: The Star) U.S: Jobless claims rose more than forecast last week, representing a pause from a recent run of readings close to a 14-year low. Jobless claims increased by 12,000 to 290,000 in the week ended Nov. 8, the highest since Sept. 20, a Labor Department report showed. (Source: Bloomberg) China: Slowdown deepened in October as policy makers refrained from economy-wide stimulus, with industrial output and investment trailing estimates. Factory production rose 7.7% YoY, the second weakest pace since 2009, a government report showed. Investment in fixed assets such as machinery expanded the least since 2001 from January through October, and retail sales gains also missed economists' forecasts last month. (Source: Bloomberg) S. Korea: Central bank kept its key interest rate unchanged at a four-year low, as Governor Lee Ju Yeol weighs the effects of recent cuts in supporting growth that's threatened by a weak yen. The Bank of Korea held the seven-day repurchase rate at 2%, it said in a statement, after lowering it in August and October. (Source: Bloomberg) Indonesia: Central bank kept benchmark borrowing costs unchanged in its first meeting since President Joko Widodo took office, refraining from tightening policy before the government raises fuel prices. Bank Indonesia Governor Agus Martowardojo and his board left the reference rate at 7.5%, the central bank said, staying on hold for a 12th straight month following 1.75 percentage points of increases in 2013. (Source: Bloomberg)

RHB Research Summary - 14 Nov 2014

HeveaBoard (HAVE MK, NR)

An Undiscovered Gem At Attractive Valuations

Trading Idea

As HeveaBoard has a good earnings track record and prudent management, we think that at a target P/E of 6x FY15F, the stock should be worth MYR2.15 (a 22% upside). We expect the company to continue focusing on enhancing its production efficiency to improve earnings. HeveaBoard reported a YoY earnings increase of 119% in 1H14 and management is confident that it can maintain this pace of growth in 2H. 

 

 

Oil & Gas (O&G)   (NEUTRAL) 

Something Has Got To Give

Sector Update

As a result of the fundamental change in the crude oil landscape, this report addresses the impact of the lower crude oil price environment on the companies under our coverage. For our Top Picks, we have chosen companies that are not materially affected by the lower crude oil price environment. Our top BUYs are Dialog, SapuraKencana and Bumi Armada.

 

 

Maxis (MAXIS MK, NEUTRAL, TP: MYR6.35)

Slow Road To Recovery

Results Review

Maxis’ 9M14 results came in line, at 71%/76% of our/consensus estimates. Maintain NEUTRAL, with a higher DCF-based TP of MYR6.35 (8% downside) after revising our key assumptions. Management continues to guide for lower services revenue for FY14, given the decline in voice and messaging revenue. That said, we believe 4Q revenue could see a pickup from recent smartphone launches.

 

 

GD Express Courier (GDX MK, BUY, TP: MYR2.42)

Good Start To The Year

Results Review

We maintain our BUY recommendation on GDEX, with an unchanged TP of MYR2.42 (14% upside). Its 1QFY15 earnings came in within expectations. Both courier and logistics segments grew positively but incurred higher expenses for expansion. GDEX also proposed 1-for-3 bonus issue as well as 1-for-5 free warrants. We keep our positive view on GDEX’s growth prospects.

 

HLIB Research Summary - 14 Nov 2014

Mitrajaya Holdings (BUY çè)

Robust prospects ahead

• Potential to clinch another contract (RM200-250m) by year end.
• YTD job wins at a record RM949m, 5^th consecutive year of growth (CAGR: 72%).
• Strong take up for Wangsa 9 after 1^st week of launch at 80%.
• Expect 3Q results (26 Nov) to at least match 2Q.
• Upside to forecast, maintain BUY (TP: RM1.52), our top small cap construction pick.  

Maxis (HOLD é)

9M14 Results In Line

• Signs of fruitful transformation as operational data showing some reversals especially in prepaid segment, whereby YTD core net profit of RM1.44bn is within expectations.
• Declared 3^rd interim single-tier tax-exempt dividend of 8 sen per share (3Q13: 8sen), ex-date on 26^th Nov 2014.
• Service revenue was flat qoq breaking the 6 consecutive quarterly declines since 1Q13.
• Prepaid gained momentum led by #Hotlink as sub base registered a first time net add after 5 continuous quarterly attrition along with ARPU expansion to RM35.
• Internet remains the main growth driver for mobile revenue, cushioning its cannibalization effects on SMS and WBB’s slowdown.
• Upgrade from TRADING SELL to HOLD after raising our fair value by 13.3% from RM5.95 to RM6.74 as we rolled over our valuation to FY16.

Traders Brief

Potential mild rebound

• The overnight record breaking Dow and some signs of bottoming up in hourly and daily charts are likely to spur KLCI to test immediate resistance at 1822 levels today. A decisive breakout above 1822 will lift KLCI higher towards 1833-1840 levels.
• Key supports are 1812 (50% FR) and 1800. A breakdown below 1800 will spur the index to retest 1778 (76.4% FR) and 1766 (YTD low) levels.
• Closed position: We had closed our SELL position on UNISEM yesterday after hitting the envisaged S2 levels yesterday.

Research Summary: 20 August 2014

Research Summary: 20 August 2014

Research House	Type	Company/Sector	Report Title	Rating/Call	Target
RHB	Company update	Tune Ins	Integrating its associate business in Thailand	Buy	RM3.00
RHB	Sector update	Auto	Non-national marques gain market share	Neutral
RHB	Results preview	AirAsia	Look beyond this 2QFY14 earnings	Buy	RM2.78
RHB	Results review	Matrix	Property sales pick up in 2Q	Buy	RM3.80
RHB	News flash	Bumi Armada	Nine FPSO and counting	Buy	RM4.54
RHB	Results review	Perdana Petroleum	Bright prospects ahead	Buy	RM2.20
RHB	Results review	Tambun Indah	High property demand in Pearl City	Buy	RM3.00
RHB	Results review	TH Plantations	Expect a stronger 2H2014	Neutral	RM2.06
RHB	Results review	MBM Resources	Light at the end of the tunnel?	Neutral	RM2.88
RHB	Results review	AirAsiaX	Going through a tough period	Sell	RM0.68
CIMB	Flash note	Tune Ins	Tuning up the volume in 2H14	Add	RM2.71
CIMB	Results note	Perdana Petroleum	Counting ship	Add	RM2.40
CIMB	Results note	Uchi Technologies	Weaker coffee brew	Hold	RM1.35
CIMB	Results note	AirAsiaX	Losses can’t get any worse but…	Reduce	RM0.72
Maybank	Results review	AirAsiaX	On a wing and a prayer	Sell	RM0.72
Maybank	Results review	Perdana Petroleum	1H14 results in line	Buy	RM2.55
Maybank	Results review	MBM Resources	2Q14: within radar	Buy	RM3.60
Maybank	Results review	TH Plantations	Bogged down by higher cost	Sell	RM1.65
Maybank	Sector	Automotive	Seasonally stronger 2H begins	Overweight
Maybank	Company update	Bumi Armada	Secures LOI for FPSO Madura	Buy	RM4.55
Maybank	Technical	IHH		Short-term buy
Kenanga	Sector update	Automotive	Slowing down	Neutral
Kenanga	Results note	Perdana Petroleum	Stable 2Q14 results	Outperform	RM2.47
Kenanga	Results note	MBM Resources	Within expectations	Underperform	RM2.92
Kenanga	Results note	Matrix	Steady performance	Under review	Under review
Kenanga	Quick bites	Parkson	Divestment of Festival City Mall for RM349m	Underperform	RM2.48
Kenanga	Company update	Maxis	Still transforming	Market perform	RM6.87
HL	Sector	Automotive	Continuous sales momentum in July	Overweight
HL	Results review	Tambun Indah	Sustainbale demand underpins healthy sales	Buy	RM2.60
HL	Results review	Matrix	Results on the rebound	Buy	RM3.74
HL	Results review	Perdana Petroleum	Sustainable growth	Buy	RM2.18
HL	Results review	MBM Resources	In line – expect stronger 2H14	Buy	RM4.00
HL	Newsbreak	Bumi Armada	Madura landed	Buy	RM4.70