Kenanga: 19 Nov 2014

IDEAS OF THE DAY

l  Sector Update: Media

l  Results Note: BENALEC, CIMB, DIALOG, HARTA, LAFMSIA, MBMR, MRCB, SEG, SUNWAY, SURIA, TSH

l  Company Update: MATRIX, MUHIBAH

l  Quick Bites: TM

l  On Our Technical Watch: CANONE, GTRONIC

NEWS HIGHLIGHTS

l  MBSB eyes second structured covered sukuk

l  Maybank eyes RM1.0b remittances

l  Time dotCom buys land

l  FGV unit set to ride on rising biodiesel demand

l  Kronologi Asia seals underwriting agreement with Bank Islam for IPO

FOREIGN NEWS HIGHLIGHTS

l  Blackstone in USD2.3b deal to sell tower to Ivanhoe

l  KKR, CD&R prepare joint bid for PetSmart

 

ECONOMIC NEWS HIGHLIGHTS (MACRO BITS) 

Malaysia

l  Malaysia's October Vehicles Sales Slip To 54,187 Units On-Year

l  Zeti: 3pc Surplus ‘Good Sign’

Asia

l  Japan PM To Seek Fresh Mandate For 'Abenomics' With Snap Poll

l  Japan's Aso Signals Tax Hike Delay, Says Must Not Happen Again

l  China Home Price Fall Deepens Despite Policy Support

l  China's FDI Slows Again In October, Services Sector In Favour

l  Bank Indonesia Raises Key Interest Rate As Fuel Prices Increase

USA

l  U.S. Producer Inflation Up, But Underlying Trend Muted

l  U.S. Has Record Inflow Of Portfolio Investments In September

l  Homebuilder Confidence Rebounds As U.S. Buyers More Enthusiastic

Europe

l  German Investor Confidence Rebounds As Recession Averted

l  UK Inflation Rate Rises To 1.3% In October

Currencies

l  Dollar Recovers Against Yen On Abe’s Election Plans

Commodities

l  Brent Slips Below $79 As Rhetoric Heats Up Before OPEC Meeting

l  Gold Rises, Briefly Breaks $1,200/Oz As Dollar Drops

CIMB Research Summary - 18 Nov 2014

IOI Corporation - Boost from higher FFB output
IOI Corp’s 1QFY6/15 core net profit, which excludes net forex translation losses, was broadly in line with our expectation (at 22% of full-year forecast) but fell short of consensus estimates (at only 19%). We expect better earnings in future quarters, driven by higher CPO prices and production. We keep our earnings forecasts and SOP-based target price intact. The stock remains a Reduce as we feel that the market has more than priced in the group's efficient plantation and downstream assets. There are also concerns that it may be removed from the Shariah list during the end-Nov review as it does not meet the conventional debt/total asset ratio of less than 33%.


Tune Ins Holdings Bhd - Flying at lower altitude amidst adverse weather conditions
Tune’s 9MFY14 net profit was below expectations at 64% of our full-year forecast and 65% of consensus. This was because we had under-projected the claims ratio; hence, we raise the ratio from 30% to 34% for FY14. This leads to a drop in our FY14 EPS forecasts and DDM-based target price (COE of 9.2%; LT growth of 5%). However, our FY15-16 numbers are unchanged. Despite the weaker-than-expected 9M results, we are unwavering on our Add recommendation on Tune, as the potential re-rating catalysts are intact, including 1) the swift expansion of its travel insurance business in the region, with the new market in the Middle East, 2) the growth prospects in the non-life insurance market in Thailand and 3) more tie-ups with other airlines.


Muhibbah Engineering - Don't touch the panic button
The award of the regas plant in Pengerang to Samsung should not be viewed as negative for Muhibbah given that it did not bid for it. Also, the risk of delays in oil & gas infra projects in Rapid has been overplayed, in our view. Lower oil prices are negative for upstream players but net positive for downstream contractors like Muhibbah as construction costs are lower. Our EPS forecasts are intact but we cut our target price (still based on a 20% RNAV discount) as we update for Favelle Favco's lower market cap. We view today’s 11% fall in Muhibbah’s share price as a buying opportunity. The stock now trades at an undemanding FY15-16 P/E of 9-10x. Muhibbah remains an Add and our preferred small/mid cap pick, with job wins as a catalyst.

CIMB Research Summary - 20 Oct 2014

Economic Update - How Malaysia can benefit from lower oil prices
We think that Malaysia would benefit if oil prices were sustained at lower levels because of 1) a lower oil import bill which helps the trade balance and current account, 2) a positive second-round effect for exports and GDP whereby lower oil prices support advanced economies’ growth and feed through to higher disposable incomes and higher consumption of Asian goods and services, 3) strengthening of public finances via higher subsidy savings and increased government revenue from higher growth via the positive external effect, and 4) a lower cost of doing business and higher production amid a positive demand effect.

Alpha Edge - Signs of cracking
The US and regional equity markets should rebound soon after the sharp correction over the past fortnight. However, the medium-term trend is still down. The S&P500 monthly MACD has just turned negative while the DJIA has broken off its 1-year diagonal triangle formation. China’s Shanghai Composite is resilient but negative divergence in the daily technical indicators could mean consolidation ahead for this Index.

UMW Oil & Gas - Jacked-up optimism
UMW-OG's president Rohaizad Darus told us in a recent communication that despite the oil price fall, the company's rig contracts are intact and that there are no provisions for price revisions in the contracts. He remained positive on the company's outlook, a sentiment he shared with the media in two separate interviews that were published yesterday. We continue to value the stock at 21.2x CY16 P/E, a 30% premium over our target market P/E of 16.3x. We maintain our Add call, with the active fleet expansion and an upcoming contract for Naga 8 as potential re-rating catalysts.

Muhibbah Engineering - Getting Rapid-ly warmer?
An Edge Weekly article highlighting Muhibbah's chances of securing a RM500m job in Rapid by year-end reinforces our expectations for the company’s infra order back log, hence the news is not too surprising. We maintain our assumptions for RM600m infra job wins for FY14 and RM1bn for FY15, driven by domestic oil & gas infra. Muhibbah's latest Samalaju Port expansion project speaks volumes of the group's competitiveness and expertise in the segment. We raise our RNAV-based target price (still a 20% discount) as we roll over our valuations. Maintain Add. The stock has dropped 17% from its peak in Jul 14 due to the global sell-down - a buying opportunity. Muhibbah is still our preferred mid-cap pick. Job wins are potential catalysts.

Research Summary: 8 July 2014

Research Summary: 8 July 2014

Research House	Type	Company/Sector	Report Title	Rating/Call	Target
Kenanga	On radar	Globetronics	Positives fully priced in for now	Take profit	RM4.23
RHB	Sector update	Property	Focus on values	Overweight	N/A
RHB	Company update	Dayang	Entering a new phase of growth	Buy	RM4.80
RHB	Eco highlights	Economic	Foreign exchange reserves rose to USD131.9bn as at 30 June
Maybank	Company update	Gamuda	Turning positive; upgrade to BUY	Buy	RM5.30
Maybank	Technical	SPB		Short-term buy
CIMB	Sector update	Construction	New bids: Penang transport plan	Overweight
CIMB	Flash note	YTL Power	A new entrant to the saga?	Add	RM2.39
CIMB	Flash note	Muhibbah	Fattening up its tender book	Add	RM3.66
CIMB	Eco update	Economic	June’s foreign reserves rise on capital inflows