News bits | 30 March 2012

Highlights of the day

§ Economics (Quarterly Economic Outlook): Second Quarter 2012: Still cloudy today but clearer skies tomorrow. [download report]

The first quarter saw important resolution to the European crisis. At the same time, US statistics are showing encouraging signs. Growth issues in term of weak global aggregate demand still linger however. Nevertheless, we expect clearer skies from here on. We maintain our 2012 Malaysian real GDP growth forecast at 4%. We maintain our mean inflation forecast at 2.7%. We also maintain our year-end target for the USD/MYR at MYR2.95 to a dollar. Finally, we are modifying our OPR outlook from at least 25bps cut to no cut by the end of the year.

§ Bumi Armada (Company Update): Firing in all cylinders (Upgrade from HOLD to BUY; TP:RM5.10). [download report]

Our recent meeting with Bumi Armada has strengthened our conviction on the company’s prospects. Bumi Armada’s growth potential of 32% net profit CAGR for FY12-FY14 is driven by expansion from all of its operating segments. FPSO is expected to contribute 45-50% to its EBIT from FY12 onwards, while the remaining would be from the OSV and T&I segments. Upgrade our HOLD call to BUY with RM5.10 TP, 27x PE pegged against FY12 EPS, representing +1SD of its historical PE in line with its strong growth.

Other reports

§ Newz Bits [download report]

Other Malaysian news

§ Maybank: NIM to be compressed by another 10bps

§ Maybank: License to expand

§ Sime Darby: Property unit on track to achieve sales of RM2.4bn

§ UEM Land: To launch Nusajaya Gateway this year

§ TNB: Manjung 4 power plant to boost Janamanjung revenue

§ TNB: To make first FiT payment next week

§ Tradewinds Plantation: Buys 60% stake in Retus

§ Selangor Properties: Unit gets notices of land acquisition

§ UMLand: Iskandar Investment in talks for RM1.4bn project

§ Cypark Resources: Exploring opportunities in Myanmar

§ Crest Builder-Detik Utuh JV: Bags Dang Wangi project

§ Malaysia Pacific Corp: Unit Oriental in project buy-back

§ Property: Penang to build 11,800 cheap homes

§ IPO: Investment banks approach Astro on possible re-listing

Global news

§ US: Unemployment claims fall to four-year low

§ US: Economy grew at 3% annual rate in 4Q2011

§ US: 4Q2011 income trends up, boost for spending

§ US: House adopts Republican budget calling for spending cuts

§ Europe: German unemployment fell in March amid economic resilience

§ Europe: Economic confidence unexpectedly fell in March

§ Europe: One-year rescue boost to EUR940bn is close to complete

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Morning Call | 29 March 2012

MORNING CALL 30 March 2012

FLOWS;

BUYS: CIMB, Gamuda, IOIC

SELLS: IJM, SPSetia, TM

Technical Stock Alert;

OIL WTI (USD102.78) - The price of oil has broken a key support level at
USD105 levels on recent fears of a global economic slowdown. The sell
off in the past two days has seen prices also dip below the SMA 50
levels and could be headed back down to USD99. This could trigger a
rebound in high energy consumers eg Airlines. AirAsia and MAS.
(PT/DN)

AIRASIA (RM3.42) - Recent sell off saw its price bounce of a low RM3.34
after breaking below the RM3.54 double bottom support. A bounce back
could see it test this resistance level and possibly push back up to
around the RM3.60 levels.

MAS (RM1.34) - Since touching a year high of RM1.74 in Jan, the price
has slipped 23% back down to around its strong support levels of RM1.30.
MACD in recent days has shown signs of trending higher with RSI 33, at
the low end of the range. Immediate upside potential of RM1.46.

RESULTS UPDATE - YINSON (RM1.73)

FYE Jan 2012 +11.7% RM715.8m Net +48% RM27.4m EPS 14.5sen

Earnings were driven primarily by the Marine segment where operating
profit jumped 286% to RM12.5m due to the addition of a new vessel during
the year and the full year effect of its original vessel. Trading
earnings dipped 22%to RM23m on lower margins. Exceptional gains of
RM6.38m were recorded in the transport segment mainly due to the
disposal of the loss making subsidiary. Disposal of Yinson Haulage added
another RM1.2m and disposal of properties RM2m gain.

Trading at undemanding 12x historical PE with O&G sector contribution
set to significantly contribute to its bottom line in FYE Jan 2014 as
its jointly owned FSO with PetVietnam is set to be delivered by 1Q 2013
for its 10yr+10yr bareboat charter to PetroV. BOW.

Market Roundup | 30 March 2012

FBM30 1585.44 +1.69 pts (+0.11%) Vol 1.49b Value RM1.40b
1) Trading activity was again fairly subdued, as the KLCI index drifted
sideways in choppy trading within a narrow 4 point range before closing
near day's high at 1585 pts. This on the back of lower regional markets,
which was down for the second straight day on concerns about growth
prospects of China & the US, prompting investors to trim risk exposure.
Region's weakness was exacerbated by news that Sun Hung Kai Properties
Ltd was suspended from trading as cable TV reported that it's
Co-chairmen were asked to assist in an investigation by the HK's
anti-graft body. Market volume was again dominated by lower liners
AGlobal +8.3%, Nicorp, Scomnet & Mtronic -4.5%. Market breath was again
negative as losers thumped gainers 462:260. Futures closed 1584 ( 1.44
pts disc). .

2) Heavyweight: CIMB +1.3%, Maybank-0.3%, Axiata unch, Digi +0.2%,
Genting +0.4%, Tenaga -0.9%, Sime-0.1%, IOIC -0.2%.

3) DBT: SEG 114.8m @ 1.71 (20.5% PUC - likely Cerahsar SB's block),
SEG-WA 59.8m @ 1.21 (32% of total issued), Genetec 20m @ 0.06 (70%
disc).

4) Situationals:

Bintai +10% : after Co announced that the Land Transport & Authority of
Singapore had awarded a contract to Samsung C&T Corp-Bintai Kindenko Pte
Ltd (60:40 JV) to supply & install electrical devices, tunnel
ventilation & environmental control system for a total contract value of
S$166m ( RM406m). Bintai Kindenko Ltd is a 70% subsidiary of Bintai. The
contract are due for completion by Dec 2016.

AirAsia +1.4% : Group CEO said Co is looking into South Korea & 2 other
Asian countries (possibly Myanmar & Vietnam) to set up new operations
as it widens it's reach to more countries in the Asia-Pacific. Co is
also targeting a May listing for AA Thailand & October for AA Indonesia,
with the listing of AA-X to follow the next year.

5) Crestbuilders: announced that it's wholly owned subsidiary
Crestbuilders International SB & it's JV partner Detik Utuh SB had
received a LOA from Sykt Prasarana Negara Bhd for a proposed joint
venture development of a parcel of prime commercial land located at Dang
Wangi LRT station measuring approximately 2.72 acres. A Joint Land
Development Agreement shall be executed whereby the JV shall undertake
to carry out the development & Prasarana as the landowner. The proposed
development is a mixed commercial development which comprises of a
retail mall, upscale residential suites, hotel & offices. Prasarana
shall be entitled to 21.2% of the GDV, estimated at RM220m ; +ve,
expected to contribute positively to the future earnings of
Crestbuilders.

6) Market - negative sentiment to persist with players continuing their liquadation while quater-end dressing activities will dominate towards the close.

Morning Call | 29 March 2012

MORNING CALL 29 March 2012
FLOWS;
BUYS: Benalac, Coastal, CIMB

SELLS: Genting, Kencana, Mulpha

Technical Stock Alert;
E&O (RM1.54) -

- stock well support at 1.50 level

- decending wage pattern (bullish)

- waiting for signs of macd cutting upwards

- pending resolution to SIME GO.

- stop loss 1.47/48 level downside risk of RM1.40 and RM1.30.
(AL)

COMPANY UPDATE; GLOBETRONICS (RM1.13) BUY
Innovative Tech Company transforming with the times

- Traditionally involved in integrated circuits and small outline components, the company has managed to evolve with the market trend, moving into SSL/LED components and assembly and testing of timing and quartz crystal devices. This has insulated the company to a certain extent from the cyclical boom and bust nature of the industry and kept the company profitable since listing in 1997.

- In view of the competitive nature and lower profitability in the IC/SOIC and LED space, the company has already identified a new venture to spur future earnings growth.

- The company has been in a vigorous prequalification process in the past 15 months to be finally selected by a European company to assembly more sophisticated sensor products vs. its traditional sensor, built primarily for applications in printers.

- The new micro sensors that they will be assembling are used in smart phones and tablets as an application to help battery management and thus increase battery life. Execution on this new venture is  currently on going with production reaching 5-6m units/mth in May vs. 1-2m test units currently. The test units have indicated far superior efficiency with a yield of 99% vs. its customers existing suppliers in Europe with a yield of only 75%. Commercial launch of the new product will be in August by the customer by which Gtronics capacity would have
hit 20m/mth.

- Initial investment in plant and machinery for the sensor business totals RM30m, with an additional RM9m required to increase capacity to 40m/mth by year end. Amortization of machinery is taken over a 3 year period to reflect the possible short product life span. A further ramp up of production is planned in 2013 to bring production numbers closer to 100m units/mth.

- Its existing business of timing devices will also enjoy significant growth this year (with group revenue contribution rising from 30% to 34%) due to its Japanese clients consolidating and relocating production from Japan to Malaysia. This will boost output from 110m units/mth to 140m units/mth by June.

- Despite the new ventures, its balance sheet remains healthy with RM100m cash. Even accounting for this year's capex of approximately RM45m, the company will still end the year with a cash balance in the vicinity of RM85m.

- The growth in timing devices and new sensor business is projected to drive earning growth this year by approximately 30%, equivalent to net profits around RM35m. (close to its historical high earnings of RM36.8m achieved during the tech boom in 2000 when its price touched a peak of RM4.17). This earnings growth will continue in 2013 will the full year contribution of the sensor device and further ramp up of production, taking earnings to RM45m or 17sen/share (PE 6.6x based on
RM1.13.

- Healthy dividend yield is expected to be maintained as its capex will continue to be internally funded by its cash balance and strong cash flow. Its official dividend policy is set at least 50% net earnings but the management has guided for continued recent practice of paying above that level.

- We rate the company a strong buy at current levels based on being the cheapest mid cap tech company with decent yields and best play on the exponential growing smart phone and tablet space (2012 smart phone sales forecast of 600m units and tablets of 106m units). Immediate term upside earnings catalyst could be in the form of being appointed a turnkey supplier for sensors and the introduction of new hybrid 3D sensors.

News Bits | 29 March 2012

Highlights of the day

§ Tan Chong Motors (Initiating Coverage): Growth fuelled by expansion (HOLD, TP: RM4.72) [download report]

We initiate coverage on Tan Chong Motor Holdings (TCM), a sole distributor for Nissan Motor Co. Growth for the Group is expected to come from the introduction of new/upgraded models, contract assembly and strategic expansion into the Indochina markets. We recommend a HOLD with DCF-based target price of RM4.72 as we view that the local auto industry is already saturated—bogged down by a pedestrian TIV growth (average 2.2% pa) as well as stricter hire purchase policies

§ Gamuda (2QFY12 Results): Double-track earnings surprise (Maintain HOLD, TP: RM3.53) [download report]

Gamuda’s 1HFY12 results beat both consensus and house expectations. This was mainly due to the much faster than expected earnings recognition and margin expansion from the construction of the Northern electrified double-tracking project (EDTP). There were no performance surprises from the other divisions (property, water and expressway concessions). However, we expect Gamuda’s construction pretax profit (PBT) margin to decline from the current 12.4% (1HFY12 average) in coming quarters as the Northern EDTP tapers off towards completion but bounce back when the Sungai Buloh – Kajang (SBK) MRT tunnelling job goes into full swing in CY14. Maintain HOLD with target price at RM3.53, based on sum-of-parts.

Other reports

§ Newz Bits [download report]

Other Malaysian news

§ YTL Corp: Plans more acquisitions, dividend increase

§ AirAsia: May listing for Thai AirAsia, Zooming in on 2 more Aseas countries

§ MAS-AirAsia: MyCC probe into share swap still ongoing

§ UMW Toyota Motor: Maintain sales target

§ IGB: In JV for RM6bn megamall

§ Bandar Raya Development: Closer to open tender

§ Cypark: FiT deal to earn RM11m yearly

§ Ho Hup: Court orders to buy over minority stake in BJD

§ Bintai Kinden: Bags Singapore jobs

§ Key West: Acquires Manjung Niaga for US$52.5m

§ Oil & Gas: Petronas, Total to study potential of CO2 field

§ Oil & Gas: OSV players face stiff competition

§ Property: Prasarana in RM200m development plan for Dang Wangi station

Global news

§ US: Orders for durable goods show sustained demand

§ US: Unemployment may drop to 6% by mid-2013, NY Fed study finds

§ Europe: France’s 4Q growth less than estimated versus year ago

§ Europe: French consumer confidence unexpectedly jumped in March

§ UK: Economy shrinks more than first estimated on services

§ UK: Britons see disposable incomes plunge most since 1977

§ Australia: Government plans deeper spending cuts

§ Global: Iran oil flow slows, and price fears rise

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Our on-line trading portal at www.ecmmoney.com

Market Roundup | 28 March 2012

FBM30  1583.75   -4.35 pts (-0.27%)   Vol 1.56b   Value RM1.31b

1) The KLCI opened firmer, but drifted south after the first hour of trading as investors mainly remained sidelined on the lack of leads in the market, coupled with the on-going concerns of the general election.

The lower trend was also in tandem with the region, with major Asean markets pulling back after sizeable gains in the previous session & as risk appetite deteriorated slightly after the Bernanke fuelled bounce earlier in the week. Construction -1.42% was the major loser - Gamuda-1.6%, IJM-1.4%, Mudajaya-1.7%, WCT-2%. Losers thumped gainers 2:1. Futures closed 1585.5 ( 1.75 pts premium).

2) Heavyweights: CIMB-1.6%, Maybank -0.2%, Axiata +0.2%, Genting unch, PChem -0.2%, Tenaga -1.1%, TM+0.2%.

3) DBT: RPB 29m @ 0.37 (10% disc), BJToto 16.2m @ 4.35

 

4) Situationals:

Scomnet -42% : after Co announced that the PM's son Mohd Nazifuddin Mohd Najib indicated that he will not be pursuing the option to purchase the 18.6% stake in the company at 22.5s.

IGB -2.5% : after it signed a non-binding MOU with Selia Pantai SB for the proposed establishment of a 70:30 JV  for the purpose of acquiring & developing 3 vacant parcels of leasehold land in Mukim Plentong, Johor Bahru into a retail mall and/or mixed development. The MOU shall remain valid for 30 days except if mutually agreed in writing by the parties.

Selia Pantai is a public private smart partnership between the Selia Group & the Johor state government.

5) YTL CORP

The utilities and construction group has identified targets and may make a purchase in the second or third quarter with its RM13bn war chest according to its MD.  It no suitable asset is identified, the company could also increase its dividend payout. Dividend could possibly double from 2sen last FYE to 4sen. The acquisition could be overseas, which will mark its first foray offshore for the past three years. Indications that the oversea venture could be in Asia due to the perceived undervalued currencies vs the USD and generally better outlook.

 +ve highlighted by the aggressive share buy back the company has been undertaking recently.

6) Market - Sharp sell off especially in 2nd liners could linked to talks that BURSA is mulling restrictions on selected counters that have seen sharp movements on heavy volume trading recently. We feel the selling has spilled over into quality mid caps sending them down to attractive levels. Trading Buy 

Morning call | 28 March 2012

Flows:

BUYS: CIMB, Maxis

SELLS: PChem, Dialog, TNB

Technical Stk Alert:

WTK (RM1.51) - showed signs of breaking out from recent RM1.50 high as
volume ballooned with MACD cutting upwards. Recent anticipated stronger
demand from Japan's plywood importers for start of spring in April and
normalization of overstocked warehouses will continue to drive plywood
exports higher. Industry sources also quote firmer plywood prices as
Japan begins reconstruction of houses after devastating earthquake.
Trades at attractive PER 9x-accum for next immediate target of RM1.65.

(GO/LJN)

Gamuda (RM3.65) - expect to announce 1HFY12 results later today coming
in line with annualised consensus of RM400m. 2Q net expect to be in
range of RM100-120m on better construction and property contribution.
However, believe Gamuda had to hire more staff and spent more money to
co-bid with MMC for the recently awarded MRT tunneling job tender.
Management might also revise their Vietnam property sales forecast lower
for FY12 - FY13 if things don't pan out as planned. Stk has retraced
from recent high of RM3.94 as excitement from MRT award has fizzled out.
Track for buying opportunity nearer RM3.55 next support
level.Technically, MACD closing gap and cutting upwards, RSI neutral at
48.8. Buy on weakness.

(LJL/LJN)

DRB (RM2.51) - Share price has fallen nearly 25% from this year's high
of RM3.26, back to RM2.50 immediate support levels (10/50SMA), RSI 39.
Trading at attractive valuations of FY13 P/Bk of 0.8x & PER of 11x.
Group remains the best proxy to VW's ambition to become a key Asean
player and share price should be well supported by it's massive RM7.5b
defense contract. Latest update from its Proton acquisition, DRB is
still in talks with Perodua on strategic collaboration between them in
hopes of maximising potential growth for co-trading buy.

(RL/LJN)

News bits | 28 March 2012

Reports
§ Newz Bits [download report]

Malaysian news

§ RHB Capital: Upbeat on Singapore

§ MAS: To fly AirAsia X passengers under pact

§ IGB: Mulls over megamall in JB

§ QSR, KFC: Government-linked investment company to join buyout?

§ MBSB: Denies eyeing London properties

§ CMS: Scraps plans for aluminum smelter

§ Bolton: In its first build-then-sell development

§ Khazanah: To use sukuk proceeds for new deals

§ Plantation: CPO climbs to 13-month high
 

Global news

§ US: Confidence bolstered by improving job market

§ US: Home prices in cities at slower pace in January

§ US: Manufacturing in Richmond Fed region expands at slower pace

§ China: Industrial profits fall 5.2% in first two months

§ Japan: DPJ tries to break deadlock over sales tax

§ South Korea: Consumer confidence rises to 4-month high

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Market Roundup | 28 March 2012

FBM30 1588.1 pts +5.12pts (+0.32%) Volume 1.94b Value RM1.66b

1) The KLCI was relatively subdued despite the strong US & regional showing, as investors welcome comments from the Fed chairman. He signaled that supportive monetary policy will remain even though the job picture has begun to improve. The index jumped on opening to a high of 1591.03 before easing to close at 1588.1, as concerns of the upcoming election kept investors on the sideline. Penny stocks continued to dominate volume, with the top 10 vol stocks accounting for some 41% of the day's volume. Market breath was slightly positive, with gainers
edging losers 389:381. Futures closed 1592 ( 3.9 pts prem). .

2) Heavyweights: CIMB +0.7%, Maybank unch, AirAsia -3.2%, Axiata +0.2%,Genting +0.5%, Maxis +0.2%, Gamuda +1.1%, Digi +0.8%.

3) DBT: GPacket 10m @ 0.495 ( 14% disc) , Premier 8m @ 0.40, Complete 5.9m @ 0.36.

4) Situationals;

IOIC +0.6% - on the possibility of registering a paper gain of USD226m ( RM696m) from it's investment in Indonesia based Bumitama Agri Ltd following it's impending listing on the SGX. IOIC has a 33% stake, which will be reduced to 30.4% upon completion of the IPO.

Mahsing -1.3% - after announcing that it will be undertaking a joint development on a 1.72 ha parcel of prime leasehold commercial land in Harbour City, Kota Kinabalu. It will be a niche project with a proposed GDV of RM830m.

5) CMSB
Announced today that the Heads of Agreement between Rio Tinto Aluminium (Malaysia) Sdn Bhd , a wholly owned subsidiary of Rio Tinto plc, and Samalaju Aluminium Industries Sdn Bhd, a wholly owned subsidiary of CMS, and the Memorandum of Understanding between Sarawak Energy Berhad , CMS and RTA had both been terminated amicably by mutual agreement.

Reason cited was their inability to finalise commercial power supply terms with SEB which would meet the parties' current respective financial considerations and economic imperatives.

6) Market - Upbeat markets in the US and Europe is set to keep the KLCI
in a tight trading range but ongoing talks of a General Election will see traders largely on the side lines. Most probable date remains in the month of June.