Morning Call 170212

Flows; 

BUYS: Axiata, Armada, Kencana          

SELLS: UEMLand, TM

Technical Stock Alert;

MMC - Stock was sold down to a low of RM2.81 yesterday after touching a recent high of RM3.06. This selldown presents a buying opportunity ahead of key re-rating catalyst on the listing of Gas Malaysia and the awarding of MRT tunneling job worth RM8bn. Also a laggard in the stable of Syed Mokhtar companies. BUY

DRB - Share price has retraced more than 10% from it's recent high of RM3.26 to touch a recent low of RM2.83 yesterday. Stk seeing immediate support at RM2.88lvls backed by attractive valuations of FY13 P/Bk of 0.8x & PER of 10x. 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 & it is currently laying the foundation for potential strong future growth with the acquisition of Proton-trading buy.

Stk of the Day

TNB  (RM6.00)

- has pulled back and consolidated for last 1 wk after touching recent high of RM6.38 forming a double top. Stk is seeing accumulation at current 200 SMA lvls of RM5.98 which acts as strong support for stk.  

- Energy Commission, Petronas and EPU are in aggressive discussions for a final recommendation on gas price to be presented to Cabinet by March. Matter needs to be resolved soonest possible as @ Nov-Dec 2011 TNB has already incurred additional RM400-500m in extra charges for burning distillates due to shortage of gas supply. The earlier RM2bn advance compensation received will only be recognized in 2Q12 rslts. 

- Melaka's Lekas Regassification plant is on track to be operational by Sept 2012 will provide much needed 200mmscfd supply of gas. 

- Renewal in policy will be spearheaded by new incoming CEO replacing Che Khalib whose contract expires in June. Replacement should be made known next month or April. 

- Accum this GLC for impending resolution is gas price and supply shortage.  

Market Roundup 170112

FBM30 1519.36, +10.3 points (+0.68%), Volume 1,443.9mil, Value 1,787mil

1) A slightly-better-than-expected 4Q growth in China (8.9% vs cons 8.7%) eased fears of a hard landing and bolstered expectations of easier monetary policy igniting some buying interest which kept the key regional markets firmer (HSI+3.2%, STI+2.2%, SHCOMP+4.2%), including KLCI. Gains in select blue chips (GENTING+4.2%, UEMLAND+2.2%, TENAGA+1.8%, AMMB+1.4%) pushed the index higher in the afternoon session to offset yesterday's losses. Market focus was on Proton(+4.4%) as Khazanah announced it was divesting its 42.72% Proton stake to DRBHicom(-3.2%) for RM5.50/share or RM1.291bn cash. Broader market was healthy with advancers outpacing decliners 433:330. Futures closed 1522(3pt premium)

2) Heavyweights: GENTING+4.2% RM11.00, MAYBANK+1.2% RM8.29, TENAGA+1.8% RM6.23, PCHEM+1.2% RM6.51, AMMB+1.4% RM5.84, PBBANK+0.3% RM13.18, KLK+1.1% RM24.64, SIME+0.2% RM9.10, CIMB-0.4% RM7.16, MMCCORP-1.8% RM2.68

3) DBT: MENANG 10mil @ RM0.23, Y&G 7mil @ RM1.00, FUTUTEC 3.5mil @ RM0.60

4) Situationals:

DAYANG-2.6% RM1.89: Shares gained as much as 2.1% (RM1.98) before profit taking set in after company's unit DESB Marine Services Sdn Bhd has received a letter of award from Nautika Sdn Bhd for the extension of time charter of its work boat to Brunei Shell Petroleum Company Sdn Bhd. Dayang said the contract extensions will be effective from March 1, 2012 until Oct 31, 2016, and is valued at about RM85m.

5)TNB - 1Q11/11 rslts T/over RM8.7bn +13%, Net loss RM224.7m v RM716.5m profit, EPS (4.1sen)

Annualised concensus RM2.6bn, 48.9sen (ex EI forex loss still 70% below cons)

Turnover improved driven by higher elect demand in P. Msia of 3.9% and elect sales grew 0.8% qoq. QoQ rslts showed imporovement as recorded lower loss compared to previous 4Q11 (RM453m) although operating expenses increased 29% (yoy) on continued usage of oil and distillate resulting in 76% lower (yoy) operating prof of RM297.5m. EBITDA margin was lower at 15.1% against 28.5% in 1Q11 from higher usage of alternative fuels. Co recorded forex loss of RM420m v (RM106m) previously as USD, Yen strengthened against RM this qtr.

Outlook for the year remains challenging despite expectations of electricity demand growth of 4-5% as generation cost.

Comment: Expectations of easing coal prices as demand from China slows, Melaka regassification plant coming onstream by Jul this year will ease cost generation pressure as well as possible rerating catalyst upon resolution of tariff rebalancing review. BOW

6) Mkt - continue to trade rangebound as buying interest rotates amongst sectors and stocks. Any weakness is a buying opportunity for Pos, MAS, Sime, TNB, MISC.