Newz Bits 190112

Highlights of the day

§         WCT (Initiating Coverage): Time to play catch up (BUY, TP: RM3.02) [download report]

We initiate coverage on WCT with a BUY call. Despite the stock selldown last year, we think the worst is over for WCT and investors can look forward to sunnier days in FY12 with the potential doubling of its outstanding orderbook to RM4.4bn should it secure jobs from its current tender book of RM5.0bn. Property sales at its mature township Bandar Bukit Tinggi, Klang and upcoming mixed commercial developments in Medini Iskandar is also likely to gain traction. Future recurring income from KLIA2 Integrated Complex and Paradigm Mall is forecast to spearhead 23% average 2-year earnings growth over FY12-13. Our target price of RM3.02 is based on sum-of-parts (SOP), implying a forward P/E of 11.7x on CY12 earnings. (refer to report for details)

§         Economy (Consumer Price Index): December 2011: Inflation loosens up as the world slows down [download report]

The December inflation rate grew slower at 3.0% y-o-y compared 3.3% y-o-y in November. This confirms the suspicion that inflation has been moderating for the past several months. The slowdown is likely due to weaker demand growth pressure exerted on prices as the world economy braces for slower economic growth. We expect the inflation to slow further to 2.8% y-o-y in January 2012 as the weakening global economy will loosen up demand-pull inflation worldwide. (refer to report for details)

Reports

§         Newz Bits [download report]

Other Malaysian news

§         IOI Corp: Targets project at Singapore

§         DRB-Hicom: To pay for Proton stake with loans, internal funds

§         DRB-Hicom: Keeps options open on Lotus, no plans to re-list Proton

§         Malaysia Building Society: Targets RM8bn retail financing in 2012

§         HELP International Corp: To invest RM20m for international school

§         Xidelang Holdings: Plans share placement, bonus issue

§         CI Holdings: Mulls new investment opportunities

§         Brahim's Holdings: Offered 60% stake in Admuda

§         IPO: China Stationery inks underwriting agreement

Global news

§         US: Wholesale prices unexpectedly decreased in December

§         US: Factory production climbs by most in a year

§         US: Confidence among homebuilders climbs to highest since 2007

§         US: Obama rejects Keystone XL permit as TransCanada plans to file

§         China: Foreign direct investment drops for a second month

§         China: Treasury holdings fell in November as yields declined

§         China: Government said to let biggest banks boost lending by 5% this quarter

§         Indonesia: Second rating upgrade in a month

§         Global: IMF seeks to raise lending capacity by up to US$500bn

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Morning Commentary 190112

Good morning,

1) DRB-Hicom: DRB-Hicom said yesterday that it would keep it's option open for selling Proton's sports-car unit Lotus, while ruling out an equity sale of Proton. DRB acquired a 42.7% equity stake in Proton on Tuesday. MD said DRB will meet with the Lotus management soon and conduct due diligence before making a decision. The plan right now is to take Proton private. He also quashed speculations that DRB is selling assets, borrowing from foreign banks and using major shareholder's TS Syed Mokhtar's influence to finance the purchase of Proton shares. He reiterated that it will not sell Bank Muamalat to raise funds. MD added that 85% of the acquisition was financed by borrowings from a local bank while the remainder via internally generated funds; Neutral.

2) AirAsia: The KL-Sydney route, which AirAsia-X SB (AAX) launched 2 days ago, is likely to be one of the best selling routes for the long haul LCC. AAX's KL-Sydney route, which MAS is flying twice daily, has put it in direct competition with the national carrier. However, market observers noted that although there will be some competition, the 2 carriers will have their own niche market to serve. MAS has the advantage of it's transit flights while AAX's is more likely to cater for students and budget travelers. On the broader side, AAX is able to capitalize further on this segment with it's immediate access to the regional network of it's short haul sister airline AirAsia Bhd. AAX will have it's maiden flight from KL to Sydney in April ; +ve, the addition will be a precursor to it's larger expansion in Australia & North Asia, where it will focus as part of it's route rationalization plan.

3) XDL: XDL is hoping to raise up to RM29.7m via a proposed private placement, bonus issue & rights issue of warrants. In a Bursa announcement, XDL said it is proposing a private placement of up to 43.99m new shares to be placed with independent 3rd party investors to be identified at a later date. It is also proposing a 1 for 2 renounceable rights issue of up to 241.99m warrants at an issue price of 5s, and a 1 for 2 bonus issue. The proceeds will mainly be utilized to purchase machinery & equipment for it's new design and production centre. XDL did not state who the intended investors for the private placement are; Neutral. Recently, media reported that Navis Capital Partners (a Malaysia based private equity firm) was looking to purchase Hong Peng Int'l Holdings 54.5% stake in XDL, but XDL has denied it.

4) Mkt: maintain consolidation pattern with a positive bias, buy CIMB, MAS.

Market Roundup 180112

FBM30 1517.38, -1.98 points (-0.13%), Volume 1,490mil, Value 1,599.8mil

1) KLCI was lower after World Bank cut its global growth forecast by the most in three years as probable recession in the euro region threatens to exacerbate a slowdown in emerging markets. Market was also drifted lower after Fitch said Greece would probably default in March resulting in profit taking among heavyweights which saw index reach a low of 1513.38pts (-5.98pts) before late push up of MAYBANK, GENTING, and RHBCap salvaged 4 points at close. Broader market was mixed with advancers edging decliners 368:364. Futures closed 1516.5 (1 point discount).

2) Heavyweights: TENAGA-2.09% RM6.10, AXIATA-1.22% RM4.87, CIMB-0.7% RM7.11, AMMB-1.03% RM5.78, TM-1.04% RM4.75, PCHEM+2% RM6.64, PBBANK+0.45% RM13.24, YTL+2.04% RM1.50

3) DBT: DBE 12mil @ RM0.08, OLDTOWN 5mil @ RM1.22

4) Situationals:

BPURI+1.64% RM0.93: its subsidiary Bina Puri Pakistan (Private) Ltd has entered into a concession agreement worth RM864m with the National Highway Authority of Pakistan. The agreement is for the construction of the 136km four-lane Karachi-Hyderabad superhighway (M-9 highway) on a build-operate-transfer basis. The concession period is for 28 years and the construction, upgrading and rehabilitation of the motorway are expected to be completed over 30 months.

BRAHIMS+0.7% RM0.72: Share price of BRAHIMS which has risen 50% YTD, announced that the Company will subscribe for an up to 60% equity interest in Admuda Sdn Bhd (Admuda) for a consideration of up to RM20m to be satisfied via a combination of cash and issuance of the Company's shares. Admuda holds a licence from the Ministry of International Trade and Industry (MITI) to operate as a licensed manufacturer of refined sugar and molasses in East Malaysia.

5) Dayang - announced acquired and taken delivery of an offshore accommodation workboat named Dayang Topaz. Expected but +ve as adds to current fleet of 7 which is fully utilised. Enhances chances of RM3bn bids for 2012 to add to current orderbk of RM1.4bn which can last till 2016 (mainly from Petronas Carigali RM800m). Co recently acq 10% Perdana which is synergistic as adds another 8 vessels to fleet. Trades at PER 11x-Trading buy.

6) Mkt - consolidation above 1500pts as vol quietens down ahead of long wkend. Stks at attractive buy lvls: Pos, MAS, Integrax, Timecom, MRCB, Perdana.