MIB Research Summary - 18 Nov 2014

MY Strategy: Maintain Neutral Nov Shariah compliance review

Seven stocks could drop off, IOI Corp and SapuraKencana being the two largest. Five could be added, the more prominent ones being Amway and Padini. No change in stock calls for those identified. IOI Corporation: Maintain Sell Hurt by low downstream earnings  Shariah-compliant 1QFY6/15 core PATMI of MYR229m was below expectations. Potential stock overhang if heavyweight IOI drops off the Hijrah Shariah and EMAS Shariah indices end-November. Maintain SELL with a new TP of MYR3.73 (vs. MYR3.97) on unchanged 20x 2015 PER peg as we cut FY6/15 EPS by 12%. Singapore Exports, Oct'14 Volatile NODX and NORX NODX fell -1.5% YoY in Oct 2014, reversing gains in Aug-Sep 2014 NORX also fell, by-5.4% YoY, the fourth time in the last six months The volatility in NODX is spreading to NORX TECHNICAL: Definitely headed to 1,800 and below The FBMKLCI declined 7.31 points to 1,806.48 yesterday, while the FBMEMAS and FBM100 also closed lower by 58.93 points and 54.91 points, respectively. We recommend a “Sell on Rallies” stance for the index. Trading idea is a Take Profit call on MUHIBAH with downside target areas at MYR2.19 & MYR1.88.   NEWS Oil & Gas: Petronas to review MYR300b capex allocation. Petroliam Nasional will be reviewing its capital expenditure allocation of MYR300b, following the decline in global crude oil prices. Executive vice-president Datuk Wee Yiaw Hin mentioned that the review with help them be more effective in their cost management. However, he said there will not be a reduction in Petronas' exploration and production (E&P) programme, despite rising costs. (Source: The Edge Financial Daily) FGV: FGV plans to invest MYR1b in Cambodia. Felda Global Ventures (FGV) is planning a MYR1b investment in Cambodia's plantation sector. Sources said the company was eyeing sugar, palm oil and rubber plantation businesses in Cambodia and might venture into an integrated livestock project in the future. (Source: The News Straits Times) AirAsia X: AirAsia X flies into greater turbulence. AirAsia X, the long-haul, low-cost affiliate of AirAsia, is said to be facing payment problems relating to staff salaries and their fixed and variable allowances, said sources. In view of these financial problems, according to sources, AirAsia co-founder and group chief executive officer Tan Sri Tony Fernandes will take on a "more prominent role" in the management of the AirAsia X to revive the airline. (Source: The Edge Financial Daily) U.S: Industrial production unexpectedly fell in October, weighed down by declines at utilities, mines and automakers that signal manufacturing started the fourth quarter on soft footing. Output fell 0.1% MoM after a 0.8% MoM increase in September that was smaller than previously estimated, figures from the Federal Reserve in Washington. Factory production rose 0.2% MoM, matching the prior month's advance that was also revised down. (Source: Bloomberg) Japan: Unexpectedly sank into a recession last quarter as the world's third-largest economy struggled to shake off the impact of an April sales-tax boost, raising the odds of a delay in a second bump in the levy. GDP shrank an annualized 1.6% in the three months through September, a second straight drop - matching the textbook definition of a recession. Unadjusted for price changes, the economy contracted an annualized 3%, the Cabinet Office said. (Source: Bloomberg) Indonesia: Raises fuel price to free funds for economic stimulus. Indonesian President Joko Widodo raised fuel prices to reduce state energy subsidies, enacting a key election pledge less than a month after taking office to narrow the budget deficit and free funds for development plans. The price of subsidized gasoline increased to IDR 8,500 (USD 0.70) a liter from IDR 6,500, Widodo told reporters in Jakarta. Diesel has been raised to 7,500 rupiah a liter from IDR 5,500, he said. (Source: Bloomberg) Australia: Opens China's services market with free trade accord. Australia hailed a free-trade agreement with China that it says provides unparalleled access to the services market of the world's second-largest economy. The deal, once signed in 2015, will mean 85% of Australian goods exports to China will be tariff free, rising to 95% when fully implemented, Prime Minister Tony Abbott said. Tariffs will be removed from some resources and energy including aluminum oxide and coking coal, and phased out on thermal coal over two years. (Source: Bloomberg)

RHB Research Summary - 5 Nov 2014

Malaysia Strategy

Shariah-Compliant Securities Semi-Annual Review

Islamic Capital Markets Strategy

The Securities Commission (SC) is expected to publish its semi-annual review of Shariah-compliant securities at the end of November. Of the 169 stocks under our coverage universe, 121 are currently designated as Shariah-compliant. We have identified three stocks that we believe will be designated as non-compliant in the coming review. They are IOI Corp, Perdana Petroleum and SapuraKencana Petroleum.

 

 

Dayang Enterprise (DEHB MK, BUY, TP: MYR4.52)

Slowly Increasing Stake In Perdana

Company Update

Dayang has placed out the first tranche of 52.1m shares from the 82.1m proposed private placement. It has raised MYR175.6m in proceeds, which we believe will be used to buy more Perdana shares. Dayang currently owns 26.6% of Perdana’s shares, given the recent share price weakness. We trim our TP to MYR4.52 from MYR4.80 (a 53.7% upside) in light of the enlarged share base and a larger stake in Perdana. BUY.

 

 

Petronas Gas (PTG MK, NEUTRAL, TP: MYR21.98)

9M14 Core Net Profit Grows 10.4%                            

Results Review

Petronas Gas’ 9M14 results met expectations. We maintain our NEUTRAL call, forecasts and TP of MYR21.98 (a 0.8% upside). We believe the market has priced in near-term earnings catalysts of Petronas Gas, ie contributions from a new power plant in Sabah and a regasification terminal in Melaka. However, its long-term outlook remains favourable, backed by rising demand for gas.

 

 

Economic Highlights - Lower Oil Prices Unlikely To Derail 3.0% Fiscal Target In 2015 (Published 4 Nov 2014)

We estimate that for every USD10 per barrel fall in average crude oil prices, government revenues will be reduced by an estimate of MYR4.0bn. However, this will be mitigated by a corresponding reduction on the expenditure side through a lower fuel subsidy bill, with a potential reduction of MYR2.5bn in the fuel subsidy. We believe the Government will be able to adjust its expenditure to make up for any shortfall in oil revenue caused by a lower price of crude oil. As a result, we believe the Government’s fiscal deficit target of 3.0% of GDP in 2015 is unlikely to be derailed.

CIMB Research Summary - 30 Oct 2014

Gamuda - More traction on MRT 2

Gamuda announced that it has received a letter from MRT Corp appointing the MMC-Gamuda JV as project development partner (PDP) for MRT 2. This news is a big positive and solidifies Gamuda’s position as the biggest beneficiary of the project, with a stronger chance of bagging the underground works. Imputing the DCF value of the PDP agreement may raise our RNAV by 3-4% but we retain our numbers pending formalisation of the PDP terms in the next 3-4 months. Our RNAV-based target price remains pegged to a 10% discount. We expect the share price to continue its steady rerating on the back of this news and positive expectations for a recovery in the water takeover talks. Maintain Add. Gamuda remains our top sector pick for the big caps.


Gas Malaysia Berhad - Gas prices raised by 2.3%

Despite the small quantum, Gas Malaysia's revision of the non-power gas tariff is positive as it implies that the government is sticking to its 6-month gas price revision plan. The new gas tariff will take effect by the beginning of November while we anticipate another revision by Apr/May 2015. We maintain our Add call on Gas Malaysia, with a revised target price of RM3.95, still based on 24x FY15 P/E, after trimming FY14-16 EPS by 0.2-0.4% p.a. given the new selling prices.


Taliworks Corporation - A value-accretive M&A play

Taliworks's main appeal is that after several years of operations since it acquired a highway and secured two water concessions, it is now back in M&A mode. Value-accretive acquisitions, local and domestic, are in the pipeline, backed by its rising post-restructuring cash hoard It is also a beneficiary in Selangor’s post-water restructuring landscape as its O&M contract is likely intact. We expect further re-rating of the stock to be event-driven (M&A, new jobs and asset divestment). Based on a 10-20% discount to our RNAV/share of RM3.29, the stock could offer 38-56% upside. The new 75% payout policy could imply 5-6% dividend yield.


Strategy Note - Implications of lower oil prices
 

Plantations - CPO price predictions at POTS
 

Rubber Gloves - Minimal impact from price hike
 

IGB REIT - Continues to deliver

MIB Research Summary - 21 Oct 2014

MY Strategy: Maintain Neutral Values emerging

Malaysian equities not spared from foreign selling; KLCI down 2.3% MTD. KLCI is nearing the low of its PER range of the past two years; current weakness is an opportunity to accumulate. No change to our 2,040 end-2015 KLCI index target; we still Overweight construction, oil & gas. WCT Holdings Bhd: Maintain Hold Expanding existing landbank  Shariah-compliant Upbeat on its landbank expansion in Serendah that would enhance the development value of its existing land. Valuation is fair and would support LT property earnings. Earnings estimate unchanged. Maintain HOLD at MYR2.30 TP. Yinson Holdings: Maintain Buy FPSO Adoon’s contract extended This one-year extension up to Oct 2015, worth USD39m reflects a 9% improvement in dayrate. More positive newsflows in the pipeline - high probability of winning one new FPSO contract in 2014. MYR3.03 TP under review pending outcome of the Ghana tender, due soon. We are positive and maintain our BUY call. Axis REIT: Maintain Hold Earnings on track  Shariah-compliant 9M14 core net profit of MYR62m (-2% YoY) was within our expectation but below consensus. Placement of new units is underway to fund its MYR434m worth of new acquisitions in Shah Alam and Nusajaya Maintain earnings forecasts, DCF-based TP of MYR3.34 and HOLD rating. DiGi.com: Maintain Hold Slowing top-line growth  Shariah-compliant 9M14 EBITDA and net profit were in line with ours and consensus expectation. Revenue growth is slowing, but Digi’s revenue growth would likely still outperform cellular peers in 3Q14. Maintain HOLD, TP unchanged at MYR5.60. Bursa Malaysia: Maintain Hold Within expectations 9M14 results meet expectations. No change to our earnings forecasts and MYR8.00 TP. Maintain HOLD for its capital management potential. Technicals: A rebound to sell into The FBMKLCI rose 14.83 points to 1,803.14 yesterday, while the FBMEMAS and FBM100 also closed higher by 118.67 points and 112.19 points, respectively. We recommend a “Sell on Rallies” stance for the index. Trading idea is a Take Profit call on MRCB with downside target areas at MYR1.38 & MYR1.20.

RHB Research Summary - 20 Oct 2014

Malaysia Strategy

When Opportunity Comes Knocking

Market Strategy

The 4.9% retracement in the FBM EMAS index since 1 Sep has been the biggest shock the market has seen all year. We reiterate our view that this is a temporary retracement and that the global economic recovery would not be derailed. Risks of a significant tightening in monetary policy have receded, while corporate earnings are on track to recover in 2015. Accumulate growth stocks on weakness.

 

 

FBM KLCI

Market Correction May Have Ended                                           

Technical Review

There is a strong possibility that the market correction may have come to an end, as the “Bullish Engulfing” pattern was constructed after the FBM KLCI’s daily RSI retraced to the most oversold level since the bull market started in 2009, and the bullish reversal pattern also appears above the meaningful 1,769-pt support level – which was the previous lowest point in 2014. A subsequent breakout from the short-term downtrend line would be needed for a confirmation.   

 

 

Datasonic Group (DSON MK, BUY, TP: MYR2.10)

Company Update

Potential Blip In Earnings

We hosted Datasonic in our Invest Malaysia event in Hong Kong recently. Meetings were well attended with representatives from over 15 local funds. During the event, management shared its potential initiatives going forward but cautioned that near-term earnings could come under pressure on slower-than-expected orders of MyKad. With that, we reduced our TP to MYR2.10 from MYR2.50 (25.0x FY16F P/E, 35.7% upside) following our earnings revision. Maintain BUY.

 

 

Auto

Sales Soften Ahead Of Axia and Iriz Launches

Sector Update

September auto sales were softer due to stringent financing approvals and in anticipation of the two new models launches by Proton and Perodua. We expect to see a rebound in total industry volume (TIV) in 4Q14 as deliveries of the two models pick up pace to meet the robust bookings reported since their respective official launches. We believe our 675,000-unit forecast is achievable.  Maintain NEUTRAL.

 

Research Summary: 5 August 2014 + Maybank Market Strategy Top Buys

Research Summary: 5 August 2014

Research House	Type	Company/Sector	Report Title	Rating/Call	Target
RHB	Company update	Inari	Looking good ahead	Buy	RM3.82
RHB	Results review	Axis REIT	Results on track with potential new acquisitions	Neutral	RM3.29
RHB	News flash	Gamuda	Acquiring 1,529 acre land South of KL for MYR784m	Buy	RM5.61
CIMB	Results note	Axis REIT	New acquisitions by Axis	Add	RM3.73
CIMB	Sector update	Rubber gloves	No demand breakout from Ebola	Neutral
Maybank	Special feature	MFlour	Flourishing ASEAN consumer play	Not rated	RM2.70
Maybank	Company update	Gamuda	Landbanking continues	Buy	RM5.30
Maybank	Results review	Axis REIT	Results in line; buying new assets	Hold	RM3.14
Maybank	Technical	IJACOBS		Short-term buy
Kenanga	Results note	Axis REIT	Asset acquisition at last	Market perform	RM3.37
Kenanga	Quick bites	Gamuda	Land banking in Southern Klang Valley	Outperform	RM5.52
Kenanga	Initiate coverage	NCB	Northern Port in Klang	Market perform	RM3.10

Maybank - Market Strategy (Top Buys)

Research Summary: 11 July 2014

Research Summary: 11 July 2014

Research House	Type	Company/Sector	Report Title	Rating/Call	Target
RHB	Eco highlights	Economic	Bank Negara Malaysia raised its key policy rate by 25 basis points to 3.25%
RHB	Sector update	Plantation	Inventory upcycle interrupted	Overweight
RHB	News flash	Gabungan AQRS	Ceasing coverage	Not rated
RHB	Sector update	Telco	Mobile data pricing remains rational	Neutral
RHB	News flash	Mudajaya	Ceasing coverage	Neutral
RHB	Sector strategy	Construction	Record backlog with more jobs to come	Overweight
Maybank	Company update	CIMB	A tripartite merger in the making	Hold	RM8.00
Maybank	Eco highlights	Economic	As expected, OPR raised by 25bps
Maybank	Eco highlights	Economic	IPI May 2014: Continued positive momentum
Maybank	Sector update	Plantations	Lower stocks to half price decline	Neutral
Maybank	Technical	OSK		Short-term buy
CIMB	Sector note	Plantations	Temporary relief?	Neutral
CIMB	Sector note	Banks	Rate hike impact positive, but small	Neutral
CIMB	Strategy note		First rate hike in three years
CIMB	Eco update	Economic	BNM hike rates by 25 bp
CIMB	Eco update	Economic	Strong IP growth in May
Kenanga	Quick bites	AEON	Land acquisition for expansion	underperform	RM3.44
Kenanga	Eco viewpoint	Economic	Malaysia IPI: Gained 6.0% in May, manufacturing improves on stronger E&E demand
Kenanga	Sector update	REITs	Subsequent OPR hikes may affect MREITs’ valuations	Overweight
Kenanga	Sector update	Banking	Short-term gains, long-term pains?	Neutral
Kenanga	Eco viewpoint	Economic	OPR raised to 3.25%, a turning point
Kenanga	IPO Note	Heng Huat Resources	First mover advantage	Not rated	RM0.53
Kenanga	Market Strategy		3Q14 investment strategy review: 25bps hike in interest rate
Kenanga	Sector update	Plantation	MPOB June data is bullish to CPO prices	Overweight
Kenanga	Sector update	Property Developers	BNM raises OPR	Neutral