Malaysia Daily, Maybank KE (2015-01-12)

Daily 12 January 2015 COMPANY UPDATE Tenaga Nasional: Maintain Buy Strategic takeover of Integrax  Shariah-compliant Proposed takeover of Integrax is likely on strategic reasons, given the importance of LBT to Janamanjung�s operations. The transaction should be mildly earnings-accretive, although the overall impact is small relative to TNB�s profits. Reiterate BUY with an unchanged TP of MYR16.00. Click here for full report » Axiata Group: Maintain Buy Introducing Robi  Shariah-compliant Robi ranks second among six Bangladeshi mobile operators by revenue market share; its contribution to Axiata while small, has been growing. Robi�s capex will likely remain high in 2015 as it pushes ahead with its 3G network rollout. Reiterate BUY on Axiata with an unchanged TP of MYR7.80. Click here for full report » CIMB Group Holdings: Maintain Hold What if the merger is off? Any cash deal for RHB unlikely, capital ratios just adequate. May see a relief rally if the merger is off, but overriding determinant would be the group�s financial performance. HOLD CIMB; still prefer RHB (BUY; TP: MYR8.90) which is also decently priced if merger does not go through. Click here for full report » Kimlun Bhd: Maintain Hold Won MYR110m jobs  Shariah-compliant Two building construction job wins worth MYR110.6m lifts outstanding order book to MYR1.2b. Construction orderbook growth outlook less sanguine. Maintain HOLD with an unchanged TP of MYR1.30 Click here for full report » SECTOR UPDATE MY REIT Sector: Maintain Neutral Time is not ripe to be bold Downward pressure on REITs could continue due to the weak MYR and further foreign sell off of domestic bonds. REIT-ing of WCT�s retail malls could create some excitement in 2H15. Maintain NEUTRAL on the sector, KLCCP is our top BUY. Click here for full report » REGIONAL SECTOR UPDATE The Cockpit View: Maintain Overweight (Issue #6) What�s in the mind of airline CEOs? Low fuel price environment will change airline CEOs� mindset to be more risk averse and less competitor centric. Fuel hedge is the biggest predicament for airline CEOs. Stay OVERWEIGHT, 2015 profit outlook keeps improving. Click here for full report » ECONOMICS Industrial Production (IP), Nov 2014 Mining-led output increase Industrial production expanded further in Nov 2014 (+4.7% YoY; Oct 2014: +5.2% YoY). Output growth in Oct-Nov 2014 (+4.9% YoY) was faster than 3Q 2014 (+4.1% YoY). This appears supportive of our 2014 GDP estimate of 5.9% that implies relatively stable 4Q 2014 GDP growth (3Q 2014: +5.6% YoY), although dampeners include narrowing net exports and last month's severe flood. 4Q 2014 GDP should be out in the late-second week or early-third week of Feb 2015. 2015 GDP growth forecast is currently 5.0%. Click here for full report » Technicals A shaky rebound from the recent low The FBMKLCI gained 4.38 points to 1,732.44 last Friday, while the FBMEMAS and FBM100 also closed higher by 47.02 points and 46.37 points, respectively. We recommend a �Range Trading� stance for the index. Trading idea is a Short-Term Buy on YINSON with upside target areas at MYR3.00 & MYR3.32.Stop loss is at MYR2.61. Click here for full report » Other Local News Automotive: Pecca Group to raise MYR67.87m from IPO. Bulk of the proceeds will be used for working capital (41.95%) and to repay bank borrowings (25.2%). Another 11.12% will be used to buy new machinery, 5.52% to open new retail outlets, 1.47% to expand its subsidiary Pecca Leather Aviation Services Sdn Bhd's business and the balance for listing expenses. (Source: The Edge Financial Daily) MAHB: Continues pursuit of overseas assets. It is eyeing "multiple opportunities" across Central and Eastern Europe, Asia and Africa to build and redevelop airports for the next two decades. Both greenfield and brownfield airport development opportunities will be on its radar. (Source: The Edge Financial Daily) IHH Healthcare: Sets Gleneagles CRC Disposal at MYR14m. IHH said the price was based on the adjusted consideration mutually agreed upon among its wholly-owned unit Parkway Holdings Ltd together with Mitsui & Co Ltd and EPS Holdings Inc. The disposal was part of its rationalisation and streamlining exercise. (Source: Business Times) Manufacturers recorded sales of MYR54.3b in Nov 2014, as growth remained steady for the second month at +2.5% YoY (Oct 2014: +2.5% YoY). We estimated that export-oriented industries accounted for 81% of total manufacturing sales growth in Nov 2014 although manufacturing exporters' sales growth eased (Nov 2014: +2.6% YoY; Oct 2014: +2.9% YoY) as the pick up in E&E (Nov 2014: +5.7% YoY; Oct 2014: +1.8% YoY) was tempered by the drop in Petroleum, Chemical, Rubber and Plastic Products (Nov 2014: -0.5% YoY; Oct 2014: +3.3% YoY) especially amid the slump in crude oil price. In contrast, domestic-based manufacturing industries' sales growth however improved to +2.1% YoY (Oct 2014: +0.9% YoY), underpinned by the faster growth in sales by industries producing non-metallic, mineral and fabricated metal products (Nov 2014: +4.4% YoY; Oct 2014: +2.4% YoY). Meanwhile, growth in manufacturing salaries and wages slowed to +4.3% YoY in Nov 2014 from +5.3% YoY a month earlier. Manufacturing employment stabilised at +1.5% YoY after it fell in Sep-Oct 2014. Total number of workers hired within the sector increased by 1,300 workers in Nov 2014 to a total of 1.03 million. (Source: DOS Malaysia; MIB) Outside Malaysia U.S: December employment gains caps best year since 1999. A rise in employment and a falling jobless rate in December capped the best year for the labor market since 1999 and reinforced the U.S. role as the global economy's standout performer. The addition of 252,000 jobs followed a 353,000 rise the prior month that was more than previously estimated, a Labor Department report showed. The report wasn't all good news as earnings unexpectedly declined from a month earlier. (Source: Bloomberg) Russia: Cut to one step above junk by Fitch on oil, sanctions. Fitch, which last downgraded Russia in 2009, cut the sovereign one step to BBB-, according to a statement issued. The grade, on par with India and Turkey, has a negative outlook. "The economic outlook has deteriorated significantly since mid-2014 following sharp falls in the oil price and the ruble, coupled with a steep rise in interest rates,"Fitch said in the statement. "Plunging oil prices have exposed the close link between growth and oil." (Source: Bloomberg) Singapore: Rate jump to weigh on property prices. A sudden new-year jump in Singapore interest rates threatens to push up mortgage costs and steepen a slide in home prices. The three-month Singapore interbank offered rate, against which most home loans are benchmarked, has risen 18 basis points to 0.6392 percent this year to the highest since April 2010, driven by a stronger U.S. dollar and new liquidity requirements for Singapore banks. The island, which has SGD 177b (USD 132b) of outstanding mortgage debt, posted a 4% drop in home prices last year. (Source: Bloomberg)     Key Indices Value YTD (%) Daily (%) KLCI 1,732.4 (7.2) 0.3 JCI 5,216.7 22.1 0.1 STI 3,338.4 5.4 (0.2) SET 1,529.4 17.8 0.5 HSI 23,920.0 2.6 0.4 KOSPI 1,924.7 (4.3) 1.1 TWSE 9,215.6 7.0 (0.2) DJIA 17,737.4 7.0 (1.0) S&P 2,044.8 10.6 (0.8) FTSE 6,501.1 (3.7) (1.0) MYR/USD 3.562 8.7 (0.1) CPO (1mth) 2,359.0 (10.2) (1.0) Crude Oil (1mth) 48.4 (50.9) (0.9) Gold 1,223.3 1.8 1.2 TOP STOCK PICKS Buy rated large caps Price Target Tenaga 13.96 16.00 Axiata 7.07 7.60 Sime Darby 9.40 10.20 Genting Malaysia 4.02 4.60 Gamuda 5.02 6.00 Westport 3.32 3.60 SP Setia 3.35 3.98 AFG 4.80 5.50 Hartalega 7.01 8.50