Malaysia Daily, Maybank KE (2014-10-13)

Daily 13 October 2014 MARKET STRATEGY MY Strategy: Maintain Neutral Budget 2015: Positive reaffirmation No surprises � project reaffirmation positive for Construction, GST and subsidy rationalisation negative for Consumer. No change in our sector weights � we continue to Overweight Construction, and Oil & Gas. Maintain 1,940 end-2014 KLCI target, introduce 2,040 for end-2015. Key domestic risk is corporate earnings growth. Click here for full report » ECONOMICS Budget 2015 Walking the fiscal talk No major surprise as Budget 2015 maintains the momentum on fiscal consolidation. Key tax measures were already announced in Budget 2014 i.e. introduction of a broader-based 6% GST on 1 Apr 2015 to replace the narrower-based 5%-10% Sales Tax and 6% Services Tax, and in exchange for personal and corporate income tax rate cuts in 2015-2016. There is also indication of further fuel subsidy rationalisation next year. One thing to watch is whether the efforts will be "rewarded" by the international rating agencies via upgrade in its sovereign ratings and/or outlook. Click here for full report » Industrial Production, August 2014 Like external trade, better than July Growth regained momentum (Aug 2014: +6.5% YoY; Jul 2014: +0.6% YoY) on broad-based increase in all components. But moderating expansion so far in 2H 2014 (Jul-Aug 2014: +3.5% YoY; 1H 2014 +5.3% YoY) Further indication of slowing real GDP growth after earlier release of similar trend in external trade. Click here for full report » Manufacturing Sales August 2014 Firmer August after July's dip Mirroring industrial output and external trade data, manufacturing sales performance was better in Aug 2014 vs July 2014. Similarly, despite sequential improvement, growth in Jul-Aug 2014 slowed to 3.3% YoY vs 5.7% YoY in 2Q 2014. Data further points to easing in economic growth in 2H 2014 after a robust 1H 2014. Click here for full report » REGIONAL SECTOR UPDATE Plantations: Neutral Crude oil slump to delay recovery Recent slump in crude oil prices have quashed hope of a swift CPO price recovery by December. CPO price needs to trade closer to MYR2,000/t to stimulate demand and flush out incoming supplies in Oct/ Nov. Sustained CPO price recovery to above MYR2,400/t may now be deferred to 1Q15. Maintain our 12M NEUTRAL view. Click here for full report » Technicals Downside volatility from lofty levels The FBM KLCI plunged 31.94 points WoW to close at 1,808.88, as persistent selling activities led the index down in a volatile week ahead of Budget 2015. Volume rose from 1.82b to 2.58b shares. Trading idea is a Take Profit call on COASTAL with downside target areas at MYR3.98 & MYR3.39. Click here for full report » Other Local News Banking: Mega bank merger deal re-drawn to ensure easier passage, say sources. It is unlikely that the listing committee of Bursa Malaysia will give a waiver to the Employees Provident Fund (EPF) to vote for the proposed merger of CIMB Group Holdings, RHB Capital and Malaysia Building Society (MBSB), according to sources. It was with this assumption in mind that the CIMB-RHB-MBSB merger was structured in the current way to enable it to go through, sources say. This is because with RHB Cap being the acquirer, it will only need approval of 50% plus one share. (Source: The Star) Property: SP Setia-I&P merger? PNB is considering merging SP Setia with I&P to form the country's largest property player by asset value and enlarge its product offerings. It will be a good marriage as SP Setia focuses on premium properties while I&P is a township developer, offering medium- to low-end houses," one of the sources said. This merger may revive SP Setia which is losing ground to rivals after more than 300 talents, including top executives, left, sources said. (Source: Business Times) Sime Darby: What synergies NBPOL offer to Sime Darby. The acquisition of NBPOL will provide a fast-track avenue for the plantation conglomerate to strategically expand its land bank via the PNG planter's 135,000ha of plantation assets, including oil palm estates, 12 mills, one refinery each in PNG and Liverpool, the United Kingdom, as well as being the largest sugar and beef producer there. In a nutshell, Sime Darby has been offered with a rare opportunity to acquire high-quality plantation brownfield assets from one of the world�s best-performing oil palm companies with a strong financial position and steady cashflow. (Source: The Star) Alam Maritim: Sees failing oil price as short-term issue. The drop in oil price is a short-term issue and Alam Maritim doesn't think it will affect production, likewise, the O&G operations. The demand for support services remains strong and other maintenance activities are still in active mode said group managing director and chief executive officer Azmi Ahmad. (Source: The Star)     Key Indices Value YTD (%) Daily (%) KLCI 1,845.3 (1.2) (0.1) JCI 5,140.9 20.3 0.1 STI 3,264.1 3.1 (0.4) SET 1,587.4 22.2 0.1 HSI 22,933.0 (1.6) 0.0 KOSPI 1,991.5 (1.0) (1.4) TWSE 8,990.3 4.4 0.3 DJIA 16,804.7 1.4 (1.4) S&P 1,946.2 5.3 (1.3) FTSE 6,557.5 (2.8) (1.0) MYR/USD 3.3 (0.1) (0.2) CPO (1mth) 2,210.0 (15.9) (1.0) Crude Oil (1mth) 90.7 (7.8) (0.5) Gold 1,213.8 1.0 0.5 TOP STOCK PICKS Buy rated large caps Price Target Tenaga 12.32 14.00 Axiata 7.01 7.60 Sime Darby 9.18 10.20 Gamuda 4.80 5.30 UMW O&G 3.86 5.15 AFG 4.95 5.50 Perdana Petroleum 1.85 2.55 Hock Seng Lee 1.88 2.25