Malaysia Daily, Maybank KE (2014-07-25)

Daily 25 July 2014 COMPANY UPDATE Yinson Holdings: Maintain Buy Sells Petroleo Nautipa for USD59m A good deal, set to make MYR79m gain from this transaction. Short-term earnings dilution; proceeds to be channelled for new opportunities that would enhance values and earnings. Reiterate BUY and MYR3.03 TP (19x FY1/16 PER target). Click here for full report » RESULTS REVIEW Public Bank: Maintain Sell Tepid growth in 1HFY14 1HFY14 net profit rose just 4% YoY; marginally behind expectations due to a larger contraction in NIMs. Domestic loan growth within 10-11% target but NIM to still contract 10-12 bps in FY14. SELL maintained on pricey valuations and declining ROEs � TP unchanged at MYR19.20 (FY15 P/BV of 2.4x). Click here for full report » Malaysia Airports Holdings: Upgrade to Hold Surprise loss 2Q14 core net loss was a negative surprise. Depreciation soared, followed by utilities and mantainence costs. Forecasts reviewed, TP lowered to MYR6.90. Share price has however weakened ahead; upgrade to HOLD (from SELL). Click here for full report » IGB REIT: Maintain Hold Beat expectations 1H14 net profit of MYR116m was above our expectations but in line with consensus full-year estimates. Raise FY14/15/16 earnings forecasts by 4%/5%/5% and DCF-based TP by +5sen to MYR1.29. Lacks strong pipeline assets to re-rate over the short-term. HOLD. Click here for full report » Technicals Futile to �late rebound� the index The FBMKLCI gained 5.22 points to 1,877.05 on late last-minute buying yesterday, while the FBMEMAS and FBM100 also closed higher by 28.43 points and 29.14 points, respectively. We recommend a �Sell on Rallies� stance for the index. Trading idea is a Take Profit call on FGV with downside target areas at MYR3.90 & MYR3.55. Click here for full report » Other Local News TNB: Moving ahead with Track 4A. Tenaga Nasional Bhd (TNB) has signed a heads of agreement with SIPP Energy Sdn Bhd signifying the principal terms of the joint venture between the two parties to build, own and operate a 1,000MW to 1,400MW combined cycle power plant, better known as Track 4A, in Pasir Gudang Johor. The condition the EC had stated in awarding the project was that the tariff should be comparable to the 34.7 sen per kilowatt-hour tariff that TNB had offered for the 1,071MW Prai CCGT power plant that the utility company had won in 2012 from a competitive tender. (Source: The Edge Financial Daily, The Star) Zelan: Bags MYR248.5m Rapid job. Fresh from its restructuring exercise to trim borrowings and wipe out accumulated losses, Zelan Bhd has secured a MYR248.5m contract from Petronas to construct a jetty for the national oil giant�s refinery and petrochemical integrated development (Rapid) project in Pengerang, Johor. The jetty is intended to facilitate the import of heavy lift oversized (HLO) and super HLO equipment and materials as well as some break-bulk and containerized cargo during the implementation of Rapid. (Source: The Edge Financial Daily) CIMB: Plans to buy Philippines� Al-Amanah Bank. CIMB Group Holdings Bhd is planning to acquire Philippines-based Al-Amanah Bank, an Islamic financial services provider, according to a report by the Manila Bulletin. It was reported that Al-Amanah Bank, which had ceased operations for some time was in need of recapitalization involving up MYR7.3b. The recapitalization is to enable the bank to serve the Islamic market in the Philippines and compete in the Asean region�s financial services sector. (Source: The Edge Financial Daily) UEM: Anwar Syahrin is new UEM Sunrise CEO and MD. UEM Sunrise Bhd has appointed Anwar Syahrin Abdul Ajib as its new managing director (MD) and chief executive officer (CEO), effective Sept 1, replacing the late Datuk Wan Abdullah Wan Ibrahim. Anway Syahrin was formerly the group chief financial officer and group head, ports & logistics division at MMC Corp Bhd, a position he assumed in 2008. (Source: The Edge Financial Daily) O&G: Reach Energy to buy first O&G asset in 1 to 2 years� time. Reach Energy Bhd, a special purpose acquisition company (SPAC) that is to be listed on Bursa Malaysia on Aug 15, will acquire its first oil and gas (O&G) asset in Asia-Pacific in one to two years� time. Its managing director Shahul Hamid Mohd Ismail said for its qualifying acquisition, Reach Energy is only looking at the Asia-Pacific region. He said they have identified the nations with suitable assets including Malaysia, Indonesia, Vietnam and the Philippines. (Source: The Edge Financial Daily) Outside Malaysia Global: IMF lowers world GDP growth forecast for 2014 to 3.4% from its April's forecast of 3.7% due to weaker growth in US, China, major Eurozone economies like France and Italy as well as several large emerging markets,namely Brazil, Russia and Mexico. These offset upgrades the growth forecasts for several key advanced economies i.e. Germany, Japan and UK. For 2015, IMF expects the world economy to expand by a faster 4.0% (vs 3.9% forecast in Apr 2014). Key risks to the latest projections are geopolitical risks in Ukraine and Middle East causing disruptions to trade flows and spike in crude oil price, as well as shifts in markets expectations on the timing and quantum of US interest rate hikes next year. Recall, the latest projection by the IMF is in line with our forecast of 3.4%, which was slightly trimmed from the previously already conservative 3.5% as we cut US growth outlook to 2.3% from 2.7% following the weak growth in 1Q 2014. We expect next year's growth to come in at 3.8%. (Source: IMF, Maybank KE http://www.imf.org/external/pubs/ft/weo/2014/update/02/ ) U.S: Fewer new homes than forecast were sold in June and data for the prior month was revised down by a record, painting a troubling picture of a market struggling to gain traction. Sales declined 8.1% to a 406,000 annualized pace, the fewest since March, Commerce Department figures showed. (Source: Bloomberg) U.S: Jobless claims unexpectedly drop to eight-year low, reflecting what could be a pickup in auto making during a typically slow time of year. Jobless claims fell by 19,000 to 284,000 in the week ended July 19, the fewest since February 2006, a Labor Department report showed. Applications can be volatile in July because of auto plant shutdowns, even as state data showed nothing inconsistent with prior years, a Labor Department spokesman said. (Source: Bloomberg) France: Manufacturing contracted in July at the fastest pace this year in a sign that the euro area's second-largest economy is struggling to gather pace. A Purchasing Managers Index for the manufacturing industry fell to 47.6 from 48.2 in June, London-based Markit Economics said. That's the lowest since December 2013 and the third straight reading below 50, the mark that signals contraction. (Source: Bloomberg) China: Manufacturing gauge rose to an 18-month high in July, bolstering the government's chances of meeting its 2014 economic-growth target of about 7.5%. The preliminary Purchasing Managers' Index from HSBC Holdings Plc and Markit Economics was at 52.0 and June�s final 50.7 reading. Numbers above 50 indicate expansion. (Source: Bloomberg) Japan: Exports unexpectedly fell in June to swell the trade deficit more than forecast, dragging on an economy squeezed by a sales-tax increase in April. Exports shrank 2% from a year earlier, the finance ministry said. Imports rose 8.4% to leave a shortfall of JPY 822.2b (USD 8.1b). (Source: Bloomberg) S.Korea: Unveils KRW 11.7t (USD 11.4b) in government initiatives to shore up Asia's fourth-largest economy after growth slumped to the weakest pace in more than a year in the second quarter. President Park Geun Hye's administration, contending with a drop in consumer spending in the aftermath of an April ferry disaster, will deploy funds from this year's budget and step up deployment of cash from government-run programs, it said in a statement. State-backed lenders will extend KRW 29t in credit. The Bank of Korea expanded a cheap-loan program for small companies. (Source: Bloomberg) Singapore: Monetary Authority of Singapore (MAS) affirms 2014 real GDP growth forecast of 2%-4%, taking the view that the economy will pick up in 2H 2014 after the indication of slowdown in growth during 1H 2014, on the back of accelerating US growth, stabilising China's economy as well as support from regional demand that will be positive for sectors like financial and trade-related services. However, MAS cut its 2014 headline inflation rate forecast to 1.5%-2% from 1.5%-2.5%. Our 2014 real GDP forecast for Singapore is maintained at 3.7%, but we have just recently trimmed inflation rate forecast to 2% from 2.3%. MAS also added that it was too early to ease property-related measures as prices remain at elevated levels and household leverage continue to be high, cautioning that any easing of measures at the time of historical low global interest rates could trigger renewed property price increases (Sources: Bloomberg, Maybank KE)     Key Indices Value YTD (%) Daily (%) KLCI 1,877.1 0.5 0.3 JCI 5,098.6 19.3 0.1 STI 3,353.9 5.9 0.4 SET 1,543.9 18.9 0.2 HSI 24,141.5 3.6 0.7 KOSPI 2,026.6 0.8 (0.1) TWSE 9,527.5 10.6 0.3 DJIA 17,083.8 3.1 (0.0) S&P 1,988.0 7.6 0.0 FTSE 6,821.5 1.1 0.3 MYR/USD 3.2 (3.1) 0.2 CPO (1mth) 2,356.0 (10.4) 0.6 Crude Oil (1mth) 102.1 3.7 (1.0) Gold 1,293.7 7.7 (0.8) TOP STOCK PICKS Buy rated large caps Price Target Tenaga 12.56 14.00 Axiata 6.85 7.60 Sime Darby 9.65 10.30 Genting Msia 4.29 4.70 Gamuda 4.29 5.30 UMW O&G 4.07 5.15 AFG 5.04 5.50 MPHB Capital 2.35 2.42 Perdana Petroleum 1.86 2.55 Hock Seng Lee 1.92 2.25