CIMB Research Summary - 24 Nov 2014

Economic Update - Float on RON95 and diesel
Today, the government announced that subsidies for RON95 and diesel will be eliminated and the pricing for these two fuels will transition to a managed float similar to the one currently in place for RON97. This is in line with the government’s subsidy rationalisation agenda and a positive signal indicating that fiscal reforms are progressing in the right direction. The decision to float is timely as the switch should have a benign impact on inflation given that the average market price is close to the current fixed retail price. Moving forward, falling global oil prices put the possibility of lower inflation on the table, given a more direct pass-through of falling global oil prices to domestic pump prices. Furthermore, the government will now have more fiscal space and more control over the fiscal deficit. We understand that the government has earmarked about RM12bn for fuel subsidy spending in 2015, and is likely to channel the savings through BR1M handouts or other means of targeted assistance.

Genting Bhd - No excitement
GENT’s 9M14 core net profit of RM1.4bn was below our expectations, at 62% of our previous full-year and consensus forecasts on poor performance across the board at GENM, GENP and GENS. No interim dividend was declared in 3Q, as expected. Upon transfer of coverage, our FY14-16 EPS forecasts are cut following our earnings cuts for GENP, GENM and GENS. We also introduce a new target price of RM9.90, still based on 20% holding company discount to our RNAV of RM12.40 (lowered from RNAV of RM14.34 after GENS’s target price was lowered from S$1.72 to S$1.22). With total return of only 6.2%, we downgrade our rating from add to Hold as continued operational headwinds faced by GENS and concerns about the competitive landscape at the Las Vegas strip will continue to weigh on investor sentiment. We advise investors to switch from GENT to GENM for exposure to the gaming sector.


SMRT Holdings Bhd - MEGB’s white knight

7-Eleven Malaysia Holdings Berhad - Growing but below expectations

Genting Malaysia - More bad luck in Genting

Lafarge Malaysia Bhd - Preventing cracks from volatility

Pharmaniaga Bhd - Dividend surprise in 3Q

SBC Corp - Jesselton Quay is the key…

Star Publications - Still cloudy skies

Thong Guan Industries - Feeling Japan’s blues

Economic Update - Oct inflation rises slightly

Kenanga - 24 Nov 2014

IDEAS OF THE DAY

l  Results Note: COASTAL, GENM, GENTING, IOIPG, PHARMA

l  Company Update: STAR

l  On Our Portfolio: Higher Downside Risk 

l  Economic Viewpoint: Malaysia Consumer Price Index, Fuel Subsidy To be Removed

NEWS HIGHLIGHTS

l  End of RON95, diesel subsidies

l  Willowglen bags RM14.2m contract

l  Gunaria, KL Kepong unit in share deal

l  Bina Darulaman to acquire land worth RM202.0m

l  Protasco sues PT Goldchild

FOREIGN NEWS HIGHLIGHTS

l  Tesla says in talks with BMW over car batteries, parts

l  BHP targets further spending cuts as iron prices tumble

l  Visa sees Visa Europe option now costing more than USD10.0b

l  Australia's Medibank IPO prices at AUD2.15 a share, raising AUD5.7b

 

ECONOMIC NEWS HIGHLIGHTS (MACRO BITS) 

Malaysia

l  Malaysia Scraps Fuel Subsidies As Najib Ends Decades-Old Policy

l  Inflation Rate In October Rose To 2.8%

l  Malaysia Jumps To No. 5 In The Latest World Talent Ranking

Asia

l  Central Bank Seen Fueling Old China As Banks Hold Key To Policy Success

l  Chinese Premier Urges 'New Growth Engines' Amid Slowing Economy: Xinhua

l  Thailand Stepping Up Infrastructure Spending

Americas

l  Brazil Government Slashes 2014 Budget Surplus Goal

l  Mexico Cuts 2014 Growth Forecast After Surprisingly Weak Third-Quarter

Europe

l  Draghi Throws ECB Door Open To Money Printing As Global Prospects Dim

Currencies

l  Dollar Index Ends Week At Four-Year High

Commodities

l  Oil Up First Time In 8 Weeks On China Rate Cut, OPEC Expectations

l  Gold Rallies To 3-Week High After Surprise China Rate Cut

HLIB Research Summary - 24 Nov 2014

Lafarge (BUY é)

3Q14 Analyst Briefing

• Disappointing 3QFY14 performance. To recap, Lafarge’s 3QFY14 net profit declined due to higher input cost and pricing pressure from the market arising from Lafarge’s stance to regain and reposition itself as the market leader.
• Mitigating higher electricity and fuel costs via efficiency. Energy and fuel costs now consist of 50% of total cost and the only strategy to mitigate the rising price of electricity and fuel is by being more efficient.
• Coal prices for FY15. The company recently finalised the terms for the supply of coal for next year and has hinted that the prices for next year is marginally lower compared to FY14.
• Outlook for 2015. Price volatility is expected to continue and industry cement demand will continue to sustain into next year, with a projected mid-single digit demand growth of 3-5% in 2015, similar pace for 2014.
• We slashed FY14 by 6.1% to impute the weak 9MFY14 results. However, we have revised upwards our FY15-FY16 earnings by 7.4% and 11.6% due to (1) lower coal price; and (2) higher domestic net selling prices.
• Despite the disappointing 3QFY14, our TP is raised to RM10.72 based on 22.5x 2016 EPS of 47.7 sen. We have raised our P/E on the stock to 22.5x, one standard deviation above its 1-year forward average P/E of the last 3 years.  We upgrade our rating from Hold to BUY.

Star Publications (BUY é)

A sweet dividend for the ride

• We attended Star’s 9MFY14 briefing, chaired by its Managing Director/CEO, Datuk Seri Wong Chun Wai and the management team.
• A pretty good cost management… Star will continue to keep its costs well controlled. Will also benefit from low newsprint prices which have been on a downtrend (see Figure #1).
• Appealing dividends… It is likely to retain the dividend payment of 15 – 18 sen/share, translating to a dividend yield of 6.6% - 7.9%.
• FY14, FY15 and FY16 earnings trimmed by 1%-3%, as we assume weaker macro environment which contributes to a poorer consumer and business sentiment.
• Despite the soft adex environment, we see better prospect for Star based on their prudent cost management, strong balance sheet with net cash position and attractive dividend yield. Also, its share price has, since the beginning of November, declined by 12%. Thus, we upgrade Star to a BUY call, TP revised upwards by 7% to RM2.73 based on an unchanged dividend yield of 5.5% as we increase our dividend forecasts from 14.0 to 15.0 sen/share. 

ViTrox (BUY çè)

Deliver as Promised

• Again, achieved new highs in revenue and profit merely with 9 months results. FY14 top line is forecasted grow 55.7% yoy reaching ~RM165m.
• MVS-S: resilient 3Q14 order despite seasonality weakness. 4Q14 revenue is forecasted to be ranging RM9-10m. Demand is expected to pick up from 2Q15 onwards.
• MVS-T: YTD 9M14 sales more than doubled (+173.7%) yoy and 4Q14 sales expected to be between RM6-8m.
• ABI: 3Q14 fell dragged by disappointment in PCB. 4Q14 revenue forecast is estimated to be RM20m while carry forward backlog into 1Q15 will be higher than in 2H14.
• By summing the mid-points of those guidance, 4Q14 sales could potentially grow 30.4% yoy to RM36.5m.
• Confident to extend its pioneer status / tax exemptions which will end in 1Q15.
• Reiterate BUY with unchanged TP of RM3.17, pegged to 1SD above 5-year historical average P/E multiple of 16.2x.

Genting Bhd (BUY çè)

9MFY14: Below Expectations

• Reported 9MFY14 core PATAMI of RM1.3bn came in below expectations due to weaker-than-expected performance from Genting Singapore .
• We imputed the latest earnings revision from GenS and GenM and as such, FY14-16 EPS are cut by 12.7%, 2.6% and 4.9% respectively.
• Post-earnings revisions, TP is cut slightly to RM10.64 (from RM10.81) based on SOP valuations. Maintain BUY.

Genting Malaysia (HOLD çè)

9MFY14 Slightly Below Expectations

• GenM reported 9MFY14 core PATAMI of RM949.8m came in below expectations from higher-than-expected tax rate.
• Following the higher-than-expected effective tax rate in 3Q, we increase FY14’s tax rate assumptions. As such, FY14-16 earnings are reduced marginally by 0.4-3.9%.
• Given that the downgrade in forecasts is for FY14, our TP of RM4.16 is unchanged based on FY15’s SOP valuations. Maintain HOLD.

IOIPG (HOLD ê)

Disappointing 1QFY15

• Reported 1QFY15 PATAMI of RM101.0m came in below expectations, mainly due to higher-than-expected expenses and effective tax rate.
• YTD unbilled sales stood at RM1.43bn, representing 0.95x of IOIPG’s FY14 revenue.
• We trimmed our FY15-17 EPS by approximately 22-25% as we turn more conservative on the group’s prospects.
• TP is lowered to RM2.65 (from RM3.94) after taking into account earnings revision and higher discount to RNAV of 30% (vs. 20% previously). Our TP of RM2.65 valued IOIPG at 18.5x FY15 P/E, vs. 18.7x FY15 P/E which UEM Sunrise is currently trading at.
• We also downgraded our recommendation to HOLD in view of persistent earnings disappointment.

Scomi Energy (BUY çè)

2Q Analyst Briefing…

• Despite declining oil price, drilling campaign from Petronas has picked up with rig count increased from 4 rigs in Jun 14 to 6 rigs in Sep 14 and further increase to 12 rigs in Nov 14.
• Given this, it expects gross margin for oilfield services to gradually improve from 24% in 2QFY15 to 26% in subsequent quarters.
• Marine business swung from profit to losses mainly due to lower coal tonnage carried arising from new tax rules imposed by Indonesian government which resulted in production halt of a customer. After the election, it expects the operation to improve.
• We also understand that national oil companies (NOCs) comprise around 65% of SES’ revenue. NOCs have traditionally been able to better withstand the impact of declining oil price with long term capex plan.
• We maintained our BUY call with TP reduced from RM1.07 to RM0.93.

Pharmaniaga (BUY çè)

9M14 Results – In Line

• 9M14 core net profit of RM71.9m, came in within our expectations but slightly ahead of consensus’ estimates, accounting for 77% and 83% of HLIB and consensus full year estimates, respectively.
• Declared 3^rd single tier dividend of 8.0 sen per share (3Q13: 3.0 sen) with ex-date on 5^th Dec.
• 3Q14 revenue gained 13.9% yoy to RM502.1m contributed by the entire core business operations. However, qoq sales contracted 4.4% due to seasonally lower demand.
• Logistics and Distribution Division posted more than three-fold increase in PBT qoq, boosted by higher ASP coupled with higher sales volume. Manufacturing Division’s PBT slipped due to lower off-take for in-house products from government hospitals as well as higher R&D expenses.
• Moving forward, Pharmaniaga remains positive as the pharmaceutical sector in Malaysia is showing improved prospects.
• Reiterate BUY with unchanged fair value of RM5.30 based on FY15 P/E multiple of 14.5x, 10% discount to US peers.

CSC (HOLD çè)

3Q Losses Again

• Another disappointing quarter. 9MFY14 performance came in weaker than our expectation, with a reported net loss of RM12.3m vs. our full-year net profit forecast of RM5.1m. 
• YoY. 3QFY14 revenue decreased by 1.2% to RM254.4m and turned into a net loss of RM3.1m from a net profit of RM2.9m, a staggering declining of 206.4%. This is due to lower selling prices.
• QoQ. 3QFY14 net loss narrowed to RM3.1m (from RM8.8m in the previous quarter) mainly on the back of lower raw material costs.
• We belief that 4QFY14 looks bleak, thus, we have cut our FY14 forecast to a net loss of RM15.2m. For FY15, we have slashed our earnings by 2.2% and for FY16, we cut by 17.5%.
• SOP-derived TP lowered by 5.1% to RM1.06 to reflect the roll forward of our base year from FY14 to FY15 (for valuation purpose) and lower earnings forecasts. Maintain HOLD recommendation.

Economics

Managed Float for RON95 & Diesel Report

• Retail price of RON95 and diesel will be fixed according to a managed float system starting 1 Dec.
• We are positively surprised as the floating of fuel price will entirely eliminate the government ' s fuel subsidy bill in 2015. Fuel subsidies rose to as high as RM28.9bn in 2013 (13.7% of operating expenditure).
• The move is favourable to help the government achieving its target fiscal deficit of 3.0% GDP. We see slim chance of the proposed multi-tiered fuel subsidy scheme being implemented. We believe that the government may instead give special BR1M payouts should global crude oil price spikes up sharply in an unexpected manner.
• We estimate that RON95 and diesel would be retailed at RM2.30/litre and RM2.20/litre respectively in Dec 2014. We maintain our 2014 full-year inflation forecast at 3.2%.
• Based on our crude oil forecast of US$90/bbl for 2015, we expect RON95 retail price to average RM2.50/litre in 2015. Consequently, our CPI growth forecast for 2015 is raised to 4.3% (previously: 4.0% with multi-tiered fuel subsidy).
• The managed float fuel scheme is expected to bring greater uncertainty to consumer spending in 2015, which we had already factored in in our projection. We reiterate our projection that GDP growth will moderate to 5.0% in 2015 (2014f: +6.0%).
• We do not expect the switch to a managed float system for fuel price will alter the thinking of BNM. We maintain our view that BNM will leave its OPR unchanged at 3.25% throughout 2015.

Economics

October Inflation Report

• Malaysia ' s CPI growth climbed up to 2.8% yoy in October after recording a 12-month low of 2.6% in September, lower than our and market expectations (+3.0%).
• 20 sen fuel price hike was the sole reason behind the spike in October CPI growth. Price inflation of other components broadly held stable. Food & alcoholic beverages and tobacco witnessed slower price increases.
• Headline inflation is projected to creep up further in Nov-Dec 14 and 2015, driven by domestic cost factors. We maintain our full-year inflation estimate of 3.2% for 2014 but raise our 2015 forecast to 4.3% (previously: +4.0%) given the commencement of managed float system for fuel prices.
• We expect BNM to keep the OPR steady at 3.25% throughout 2015, backed by moderate domestic demand, softer global outlook, contained inflation risks and slower property speculative activities.

Traders Brief

Likely to consolidate sideway

• Last Friday’s black candlestick removed the reversal signal of “Bullish Engulfing” pattern on daily chart, turning KLCI into consolidation mode.
• The psychological level of 1800 would be a critical support zone after 50% Fibonacci level was penetrated last Friday. Next supports are at 1778 and 1760 if 1800 is broken.
• However, KLCI could stage a technical rebound during this week, which might be shortlived. Resistances are 1823 (38.2% FR), 1836 (23.6% FR) and 1850 (downtrend line and 200-d SMA).
• Took profit on ESCERAM last Friday as it hit beyond R1.

Kenanga: 20 Nov 2014

IDEAS OF THE DAY

l  Results Note: AIRASIA, AMBANK, KLK, STAR

l  Quick Bites: PMETAL

l  On Our Radar: FIBON

l  On Our Technical Watch: GENTING, UNISEM

NEWS HIGHLIGHTS

l  Shell, Petronas Carigali to develop E6 field offshore Malaysia

l  MSM to seal Asian deals soon

l  EA Technique signs underwriting pact with RHB Investment Bank

l  Farlim to sell Penang shoplot for RM2.2m

l  Minetech to venture into gold mining in Indonesia

FOREIGN NEWS HIGHLIGHTS

l  E.ON, Macquarie in exclusive talks over Spanish ops

l  Royalty Pharma buys royalties on Vertex Pharma drugs for USD3.3b

 

ECONOMIC NEWS HIGHLIGHTS (MACRO BITS) 

Asia

l  Bank Of Japan Stands Pat Despite Grim GDP

l  OECD Ups India Growth Outlook, Urges Structural Reforms

USA

l  Single-Family Housing Starts In U.S. Rise Along With Permits

l  Fed Officials On Guard For Signs Of Lower Inflation Expectations

Europe

l  Bank Of England Voted 7-2 To Hold Interest Rates

l  German Exporters See 2015 Growth, Expect More Russia Sanctions

l  Bank Of Spain Calls For Increased Deficit Cutting Efforts

Currencies

l  Dollar Surges Past ¥118 After Fed Minutes

Commodities

l  Oil Down On Fed Uncertainty Over U.S. Economy; OPEC In Focus

l  Gold Down 1 Pct On Swiss Referendum Poll, Fed Minute

MIB Research Summary - 20 Nov 2014

AirAsia X Bhd: Maintain Sell Fighting for survival

3Q14 core net loss of MYR185m (vs. profit MYR16m in 3Q13) was greater than forecast on weak yields and higher cost. All sectors were loss making with the exception of Nepal. Maintain SELL with a lower TP of MYR0.57 (from MYR0.63). AirAsia Bhd: Maintain Hold Losing the low cost advantage 3Q14 core net income of MYR112.4m (-28% YoY, +342% QoQ) was within expectations. Credible signs that market has bottomed, but expect slow yield recovery. Earnings growth driven by lower fuel cost. Maintain HOLD, target price raised to MYR2.60 (from MYR2.30) due to positive earnings revision. AMMB Holdings: Maintain Hold Better, on lower provisions 2QFY15 core net profit rebounded 35% QoQ, but 1HFY15 core earnings still down 14% YoY. FY15 forecast maintained, trimming FY16-17 by 5% p.a. to factor in slower loans growth and lower NIMs. HOLD maintained, lowering TP to MYR6.90 from MYR7.70 on a lower CY15 P/BV peg of 1.5x (1.7x previously). Kuala Lumpur Kepong: Maintain Hold Set back by oleochemicals business  Shariah-compliant FY9/14 results hurt by weak downstream earnings. Muted earnings outlook in FY9/15 as oleo-chemical, refinery and property businesses remain challenging. Maintain HOLD on unchanged TP of MYR23.20 after rolling forward our valuation on unchanged 23x PER target. Boustead Plantations: Maintain Buy Rich land value caps downside  Shariah-compliant 3Q14 results disappointed due to low CPO ASP achieved and lower-than-expected FFB output. Share price downside limited, backed by strategic land that has development potential, offering a RNAV of e.MYR2.96/sh. Maintain BUY with a revised SOP-TP of MYR2.03 (previously MYR2.16). TH Plantations: Maintain Hold Hit by dry spell  Shariah-compliant Results below our and consensus forecasts. Cut FY14 net profit by 9% on lower production and CPO ASP. FY15-16 forecasts unchanged but have downside potential. Maintain HOLD and TP of MYR1.65 on 15x 2015 PER. Star Publications: Maintain Buy Dividend yields look enticing  Shariah-compliant 3Q14 results slightly below; trim estimates by 6-11%. 18sen p.a. DPS may still hold; yields very attractive at 7.8%. Trim TP from MYR2.89 to MYR2.65 but upgrade to BUY. MSM Malaysia: Maintain Buy Expect a pickup in 4Q14  Shariah-compliant 9M14 results were above expectations at 80%/77% of our and consensus full-year forecasts. Anticipating a better 4Q14 on higher margin assumption, FY14 net profit forecast raised 5%. Upgrade to BUY with a higher TP of MYR5.50 (14x FY15 PER). Inari Amertron: Maintain Buy 1QFY6/15: Expect a strong start Expect net profit of MYR32-35m (+4-13% QoQ), supported by strong growth in overall smartphone demand. Inari is a beneficiary of the stronger USD, providing upside to our earnings forecasts. Reiterate BUY with a Street-high cum-rights TP of MYR4.20 (on unchanged 17x CY15 PER peg). Plantations: Maintain Neutral El Nino Alert! The Australia Bureau of Meteorology (ABM) upgraded the threat of an upcoming El Nino; with at least 70% probability. The new El Nino threat may boost sentiment and drive CPO price higher, aided by seasonal price recovery in 1Q15. Investors should position for a short term trade. BUY First Resources, Bumitama Agri, Sime Darby, Sarawak Oil Palms, Ta Ann and TSH Resources for earnings recovery play. TECHNICAL: Low of 1,805 with rebound confirmation The FBMKLCI advanced 6.01 points to 1,824.39 yesterday, while the FBMEMAS and FBM100 also closed higher by 32.19 points and 34.44 points, respectively. We recommend a “Nibble on Dips” stance for the index. Trading idea is a Short-Term Buy on GAB with upside target areas at MYR13.94 & MYR14.17. Stop loss is at MYR12.48. NEWS MSM: MSM plans to expand through acquisitions. MSM Malaysia Holdings, the sugar refiner remains focused on growing through acquisitions, having set its sight on its only local competitor, Central Sugars Refinery Sdn Bhd, that is owned by Tradewinds (M). MSM is already in talks to acquire an Asian upstream company and is also in discussions with a foreign partner to buy over a sugar plantation company in the region. (Source: The Star) Bina Puri: Bina Puri eyes listing of Indonesian power assets. Bina Puri Holdings plans to list its Indonesian power assets, possible as early as next year, saide group executive director Matthew Tee Kai Woon. The group has seven micro diesel-generated power plants across Indonesia, with a total capacity of 25MW. (Source: The Edge Financial Daily) U.S: Housing starts fall on multifamily as permits climb. Residential-construction permits in the U.S. climbed in October to a six-year high, pointing to a pickup in homebuilding after a slowdown in multifamily projects led to a drop in activity. Groundbreakings for single-family homes, condominiums and apartments fell 2.8 %to a 1.01 million annualized rate following September's 1.04 million pace, which was stronger than previously reported, the Commerce Department reported. Permits for future projects rose to the highest level since June 2008. (Source: Bloomberg) U.S: Fed officials saw need to watch for price expectations drop. Many Federal Reserve policy makers last month said they should be on the lookout for signs of a decline in expectations for inflation, minutes of their meeting show. "Many participants observed the committee should remain attentive to evidence of a possible downward shift in longer- term inflation expectations," according to a record of the Oct. 28-29 Federal Open Market Committee meeting released in Washington. "Some of them noted that if such an outcome occurred, it would be even more worrisome if growth faltered." (Source: Bloomberg)

CIMB Research Summary - 20 Nov 2014

Telco - overall - 2015: A year to tread carefully
Competition is likely to be intense in two out of the four markets we cover. Capex should also stay high as telcos invest further in rolling out 3G/4G networks and improving the data experience. Strong mobile data revenue growth is a bright spot but this will be partly offset by SMS/voice revenue declines, especially in the more developed markets. ASEAN telcos’ share prices have also done fairly well, up 14.4% YTD and 52.2% since 2011 on average, reducing the odds of further sector-wide outperformance in 2015. We remain Overweight on Indonesia and Neutral on Singapore and Thailand while cutting Malaysia from neutral to Underweight. Our top picks are Telkom Indonesia, SingTel and Thaicom. We downgrade DiGi to Hold and upgrade Indosat to Add.


AirAsia Bhd - The inflection point is now
AirAsia’s 9M14 core earnings look 37% better than our previous numbers, as yields stabilised in the 3Q, instead of continuing the yoy weakening trend that was evident since 2Q13. We believe yields in Malaysia will strengthen yoy in 4Q14, leading to higher yoy core earnings for the first time in almost two years. This is the inflection point that will finally move the share price. Lower jet fuel prices literally add fuel to the fire, lowering costs dramatically and allowing us to raise our FY14 core EPS by 260% (from a low base), while our FY15-16 core EPS forecasts are raised 28-36%. We reiterate our Add call and raise our target price, still based on 1.7x P/BV (average since 2008).


AMMB Holdings - Not in the mood to lend
Excluding one-off divestment gains, AMMB’s annualised 1HFY3/15 net profit was 9.6% below our FY14 forecast, though it was in line with consensus (2.4% short). This was because we were over-optimistic on our forecasts for revenue and loan loss provisioning (LLP). The 12 sen net interim DPS was also below expectations. We are raising the projected LLP by 40-100% and trimming the assumed lending yield by 5bp. This brings down our EPS forecasts and DDM-based target price (COE of 10%; LT growth of 4%) despite the roll-over of valuation to end-15. Notwithstanding the below-sector valuations, AMMB remains a Hold in view of the concerns over (1) weak loan growth, (2) margin contractions, and (3) a rise in credit costs. We prefer Maybank.

Kuala Lumpur Kepong - 4Q losses from downstream

MSM Malaysia Holdings - Profit margins hit by new APs

Star Publications - Not so shiny

Economic Update - Malaysia to be a RMB hub

HLIB Research Summary - 20 Nov 2014

KLK (HOLD çè)

Dragged by weaker downstream

• FY09/14 core net profit of RM985.8m (+10.2%) came in below expectations, accounted for only 88.8% and 92.7% of consensus and our forecasts, respectively.
• Key variance against our forecasts - weaker-than-expected margins at the manufacturing division, in particularly, the oleochemical sub-segment.
• Recommended a final NDPS of 40 sen, bringing total NDPS for FY09/14 to 55 sen.
• We tweaked our FY09/15-17 net profit forecasts lower by 0.6-1.9%, largely to account for a lower EBIT margin assumption for the manufacturing division.
• SOP-derived TP lowered by 0.4% to RM20.33 after taking into account of lower net profit forecasts. Maintain HOLD recommendation on the stock

AMMB Holdings (HOLD çè)

Better 2Q But Not Enough

• 1HFY15 core earnings below HLIB and consensus due to contraction in loan, lower NIM and weak non-int income.
• Despite stronger 2Q (lower overheads and provision), not sufficient to make up for 1Q disappointment.
• 12 sen interim dividend (vs. 7.2 sen).  No change in policy, merely altered payout proportion from 1/3 to 50% for 1H.
• Cut FY15-17 KPIs (lower profit growth and ROE).  Only positive change was lower FY15 credit charge from better 2H recovery and continued asset quality improvement.
• The latter from its efforts to only accept high quality loans (especially HP and commercial property) which mean forward loans growth to track behind industry average.
• Comfortable with capital position and working on IRB approach to improve capital efficiency but will take 3 years.
• Cut FY15-17 forecasts by 10.5-11.6%, forecasted ROE now lower than its KPI.
• Target price cut to RM6.72 (Gordon Growth with ROE of 12.8% and WACC of 10.9%).  Maintain HOLD.

AirAsia (TRADING BUY çè)

Expect Stronger Earnings in 4Q14

• Reported 3Q14 core earnings of RM85.4m and 9M14 of RM236.3m, which is 53.2% of HLIB and 47.4% of consensus. We expect stronger earnings in 4Q14 from seasonally strong demand, new ancillary income initiatives (WiFi and duty free business) and lower jet fuel price.
• Yields remained weak in 3Q14, mainly due to overcapacity combined with weak air travel demand. Management guided for yield improvement in 4Q14, as airlines slows down aircraft deliveries.
• Associates/JVs - TAA, PAA, AAI and JAA remained loss making, while IAA barely breakeven (due to seasonal strong demand quarter).
• The newly setup aircraft lease business will complete the takeover of the 43 leased-out A320s (to associates/JVs) by March 2015, and contribute positively to AirAsia bottomline.
• Maintained TRADING BUY with unchanged Target Price of RM2.57, based on 10% discount to SOP.

Star Publications (UNDER REVIEW )

3QFY14 – In line

• Star’s 9MFY14 core earnings inched up by 3% to RM101.4m (excluding VSS expense), accounting for 71% of both ours and the streets’ full year forecasts. 4Q tends to be the strongest quarter due to year-end festivities. Hence, we consider earnings to be relatively in line.
• 9MFY14 results review… Revenue declined by 0.4% to RM732.8m caused by lower sales from print and radio segments. However, the impact was moderated by event and TV segments which improved by 21% and 28%, respectively.
• 3QFY14 results review… The lower revenue of 10% caused by cautious adex spending translated into lower core earnings QoQ by 17% to RM34.3m.
• Event division increased 9% yoy. Other segments recorded lower revenues and segmental profits.
• Forecasts unchanged. Stock rating UNDER REVIEW with TP unchanged at RM2.55 based on required dividend yield of 5.5%. Subject to revision after analyst briefing on 21-Nov-2014.

Traders Brief

Follow-through rebound likely to retest 1836-1850 resistance zones

• Chart-wise, the follow-through rebound yesterday had induced more positive momentum to the market sentiment, supported by expectations of traditional year-end Nov/Dec window dressing activities and bottom-up technical oscillators. Further upside targets are 1836 (23.6% FR) and 1850 (downtrend line and 200-SMA) and 1860.
• Short term supports are 1812 (50% FR) and 1800.
• Today’s recommendation: Trading BUY on UNISEM.

Trading Idea - UNISEM

UNISEM: Imminent bullish momentum

• Share price is expected to move higher as a result of the completion of the “Cup & Handle” pattern on weekly chart. A strong signal of a resumption of the prior uptrend is given by the “Handle” breakout which is also supported by long-term downtrend breakout.
• Upsides are targeted at RM1.82 and RM1.92, with long term target price of RM2.41. Immediate supports are located at RM1.68 and RM1.64. Cut loss at RM1.61.