Malaysia Daily, Maybank KE (2014-07-02)

Daily 02 July 2014 SECTOR UPDATE Malaysia Telcos: Maintain Neutral Switch into laggards Sectorial trends have remained stable in 1H14, and should persist into 2H14. Dividend yields are taking a backseat, big-cap telcos are increasingly becoming liquidity proxies, in our view. Remain NEUTRAL on the sector; our relative preferences among the big-caps are now Axiata (upgrade to BUY) and Maxis (maintain HOLD). Click here for full report » MARKET STRATEGY MY Strategy: Maintain Neutral June fund flows Foreign net buy tapered off in June. KLCI's valuations sustained at high 2.2x PEG. No change to our end-2014 KLCI target of 1,940. Click here for full report » Technicals Drifting down from 1,892.33 The FBMKLCI ended down by 3.59 points to 1,879.12 yesterday, while the FBMEMAS and FBM100 fell 20.11 points and 20.48 points, respectively. We recommend a �Nibble on Dips� stance for the index. Trading idea is a Take Profit call on DRBHCOM with downside target areas at MYR2.08 & MYR1.90. Click here for full report » Other Local News Eco World: Partners another large firm to build resort theme park. Penang Development Corp (PDC) has firmed up plans to turn some 312ha near the Second Bridge in Batu Kawan into a theme park with a resort and golf course. It was said that Eco World has won the tender to develop a golf course and mixed-residential property project encompassing an area of 190ha. It is also learnt that PDC is in the final stages of negotiations with the group, firming up terms and conditions. Eco World will use 60ha for the golf course project and the balance 130ha for a mixed-residential property scheme. On an adjoining land measuring 121.4ha, a large Kuala Lumpur-based resort and theme park operator had made a bid together with an overseas developer that specialised in theme park development. (Source: The Star) TM-UEM-Iskandar smart pact. Telekom Malaysia Bhd has teamed up with UEM Sunrise Bhd and Iskandar Investment Bhd to set up a joint venture, offering smart services in Nusajaya, Johor. The pact is one of the areas that was identified in the collaboration agreement between TM, UEM Sunrise and IIB signed in 2012 for the development and management of the smart and connected Nusajaya. The joint-venture, in which TM will be the majority shareholder, will operate as a managed services company, where it will design and build the smart city infrastructure as well as provide smart building and smart city services that will include security, energy and facility management services. (Source: Business Times) Goh Ban Huat: RTO target in a deal worth MYR600m. Ceramic ware manufacturer Goh Ban Huat Bhd (GBH) will see a reverse takeover (RTO) by parties involved in the oil & gas service industry in a deal worth over MYR600m. Businesses to be injected into GBH may include provision of technical services for floating production and story operator vessels, as well as those primarily related to procurement and construction of heating, ventilation and air-conditioning system in the oil & gas sector. (Source: The Edge Financial Daily) AirAsia: Plans to build LCCT in Japan. AirAsia is eyeing to build a low-cost carrier terminal (LCCT) in Japan, partnering four Japanese companies in a deal worth USD70m. They are Octave Japan Infrastructure Fund I GK (19% stake), Rakuten Inc (18% stake), Noevir Holdings Co Ltd (9% stake) and Alpen Co Ltd (5% stake). AirAsia will have a 49% controlling stake. This marks AirAsia�s second attempt in Japan�s aviation market after dissolving a low-cost carrier (LCC) venture with ANA Holdings Inc in June 2013. The new LCC is still pending approval from the relevant authorities in Japan and is expected to start operations by June 2015. (Source: The Edge Financial Daily) Mah Sing: Appoints Ng Chai Yong as CEO. Property veteran Ng Chai Yong has been appointed chief executive officer of Mah Sing Group Bhd. With close to 30 years of experience in the civil engineering, banking and property industries, Ng, whose appointment is effective yesterday, has served several roles including in SP Setia Bhd for 11 years where he was director and general manager of Bukit Indah Johor Sdn Bhd as well as chief executive officer of Setia Eco-Park Sdn Bhd. The new role at Mah Sing will have Ng provide strategic advice to the group managing director and group CEO Tan Sri Leong Hoy Kum and board of directors, and preside over the organisation�s day-to-day operations. Outside Malaysia U.S: Factories sustain gains as growth picks up. American factories, propelled by the strongest orders of the year, sustained gains in June and are poised to be part of the rebound in economic growth. The Institute for Supply Management's manufacturing index was 55.3 last month, little changed from a five-month high of 55.4 in May, the Tempe, Arizona-based group's report showed. Readings greater than 50 indicate expansion. (Source: Bloomberg) E.U: Unemployment rate was unchanged in May as the currency bloc struggled to shake off the legacy of the debt crisis. The jobless rate remained at 11.6% after the April number was revised down from 11.7%, the European Union's statistics said. (Source: Bloomberg) E.U: Manufacturing in the euro area slowed more than initially estimated in June as a deepening of France's downturn offset a rise in Spanish activity to a seven-year high. A Purchasing Managers' Index fell to 51.8 last month from 52.2, below a June 23 preliminary reading of 51.9, Markit Economics said. Manufacturing grew at the fastest pace since 2007 in Spain, while contracting for a second month in France. (Source: Bloomberg) U.K: Manufacturing growth unexpectedly accelerated to the fastest pace in seven months as demand surged, adding to signs of a broadening recovery. An industry index rose to 57.5 in June from 57 in May, Markit Economics said. A gauge of new orders increased to 61.1 from 59.5, also a seven- month high. (Source: Bloomberg) China: Manufacturing expanded in June at the fastest pace this year, adding to signs that the government's efforts to arrest a slowdown are helping to stabilize the world's second-biggest economy. The Purchasing Managers' Index was at 51.0, the National Bureau of Statistics and China Federation of Logistics and Purchasing said and increasing from May's 50.8. A similar index from HSBC Holdings Plc and Markit Economics rose to 50.7 from the previous month's 49.4. Numbers above 50 signal expansion. (Source: Bloomberg) China: Regulators increased banks' capacity to lend money and bolster the slowing economy by changing the way loan-to-deposit ratios are devised. Banks can now include in the calculation negotiable certificates of deposit sold to companies or individuals, the China Banking Regulatory Commission said in a statement. They can also exclude loans advanced to small enterprises and the rural sector that are backed by bonds, the CBRC said. Bank lending is capped at no more than 75% of deposits to prevent an overextension of credit. (Source: Bloomberg) Japan: Japanese companies increased their investment plans more than forecast even as a sales-tax hike dented sentiment, potentially aiding Prime Minister Shinzo Abe's effort to stoke an economic recovery. Large companies across all industries plan to lift capital spending 7.4% this fiscal year through March, more than a 0.1% increase they signaled three months earlier, a Bank of Japan report showed. A gauge of sentiment among large manufacturers fell to 12 from 17 in March. (Source: Bloomberg) Australia: The Reserve Bank of Australia kept its benchmark cash rate at a record low as an elevated currency combines with government cutbacks and a slowdown in mining investment to constrain growth. The key rate was held at 2.5% for an 11th month, Governor Glenn Stevens and his board announced in Sydney. (Source: Bloomberg)     Key Indices Value YTD (%) Daily (%) KLCI 1,879.1 0.7 (0.2) JCI 4,884.8 14.3 0.1 STI 3,242.6 2.4 (0.4) SET 1,485.8 14.4 0.0 HSI 23,190.7 (0.5) 0.0 KOSPI 1,999.0 (0.6) (0.2) TWSE 9,441.9 9.6 0.5 DJIA 16,956.1 2.3 0.8 S&P 1,973.3 6.8 0.7 FTSE 6,802.9 0.8 0.9 MYR/USD 3.2 (2.1) (0.1) CPO (1mth) 2,435.0 (7.3) (0.5) Crude Oil (1mth) 105.3 7.0 (0.0) Gold 1,326.5 10.4 (0.1) TOP STOCK PICKS Buy rated large caps Price Target Tenaga 12.20 14.00 Genting Msia 4.13 4.70 HLBK 13.90 16.20 AMMB Holdings 7.14 8.50 Bumi Armada 3.40 4.55 IJM Corp 6.69 7.20 MPHB Capital 2.16 2.42