News bits | 23 April 2012

Highlights of the day

§  Lion Industries (Initiating Coverage): Same lion with a different skin (STRONG BUY, TP: RM2.16) [download report]

We initiate coverage on Lion Industries with a Strong Buy call. The share price has fallen 37% from its previous peak of RM2.16, reflecting the bearish sentiment faced by the local steel industry, marked by deteriorating earnings reported by its peers like Masteel, Kinsteel and Perwaja over the past few quarters in CY11. The company has managed to revamp its balance sheet from being highly geared in FY06 (101%) to one with a net gearing of 3% at end-2QFY12, thus adding 58% to its NAV/share over the period. However, we think this accretion to shareholders’ funds has been overlooked as the stock trades at only 0.3x P/B, which is a steep discount to its peer average P/B of 0.6x. Therefore, we feel that the stock deserves to be re-rated to RM2.16, based on our sum-of-parts valuation, implying a forward FY13 P/B of 0.5x.

§  Economics (Consumer Price Index): March 2012: Inflation stabilizes due to lack of domestic development [download report]

March 2012 CPI grew slower at 2.1% y-o-y from 2.2% y-o-y in February. Core inflation is estimated to have fallen to 1.8% y-o-y from 1.9% y-o-y in the previous month. We expect inflation for April to coast along leisurely due to lack of development—with the exception of the price increase in RON97—on the domestic front. We project headline inflation to slow slightly to 2.0% y-o-y while the core inflation to remain at 1.8% y-o-y.

Other reports

§  Economics (Leading Economic Indicator): February 2012: Encouraging signals after a series of bad ones [download report]

§  Newz Bits [download report]

Other Malaysian news

§  Maybank: Islamic unit targets 15% to 18% growth

§  Tan Chong: Hopeful of bringing back Datsun

§  MMC-Gamuda: JV secured RM8.28bn MRT job

§  DRB-Hicom: Not disposing of Lotus group

§  IGB Corp: Planning two more REITS

§  Mudajaya: Refutes coal worries

§  LBS Bina: In talks on cash-equity deal

§  Iris Corp: Plans to bring solid waste recycling technology here

§  MAA: Has no plan to sell its two core businesses

§  IPO: Skali to list in next 12 months

§  Auto: PEDA not happy with the new rules

§  Media: Pay-TV wars heat up

§  Oil & Gas: Terengganu drops Petronas suit

§  Oil & Gas: Petronas bags Singapore, Indonesia gas deals

§  Property: RRI land tender out soon

§  Semiconductor: Local chipmakers upbeat

Global news

§  Europe: ECB rejects Geithner-IMF push for more crisis-fighting

§  Europe: Sarkozy, Hollande advance in French presidential poll

§  Europe: Dutch PM says elections ’obvious’ after losing wilders backing

§  Europe: German data beating forecasts signals stronger growth

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