Malaysia Daily, Maybank KE (2015-02-11)

Daily 11 February 2015 ECONOMICS Industrial Production, Dec 14 Strong finish to 2014� Better than expected 7.4% YoY growth in Dec 2014 (Nov 2014: +4.7% YoY) contributed to firmer quarterly growth (4Q 2014: +5.8% YoY; 3Q 2014: +4.1% YoY) and annual growth (2014: +5.1%; 2013: +3.4%). 4Q 2014 GDP will be out tomorrow evening. Our full-year real GDP 2014 growth of +5.9% implies 4Q 2014 expansion of +5.4% YoY (3Q 2014: +5.6% YoY). Click here for full report » SECTOR UPDATE Malaysia Banking: Maintain Neutral Some easing of pressure points Most foreign investors sidelined Malaysian banks, largely from a macro perspective. Positively, some of the pressure points have eased but need evidence of a more sustained turnaround. NEUTRAL on sector. BUYs are AFG, HL Bank, HLFG and RHB. Click here for full report » REGIONAL SECTOR UPDATE Regional Plantations: Maintain Neutral Lowest output in 47 months Malaysia's Jan 2015 stockpile at 1.77m MT (-12% MoM, -9% YoY) is at a 6-month low, driven by low production (lowest in 47 months) and high domestic consumption. 1H15 palm oil output growth is expected to be weak by our observation, after a strong harvest in 2Q-3Q14. This will help lift CPO price in the near term. Top BUYs in the region are BAL, FR, GENP, SOP and SIME. SELL IOI Corp for its steep valuation. Click here for full report » RESULTS REVIEW Hartalega: Maintain Buy Inching towards higher growth  Shariah-compliant Weaker 3QFY3/15 on start-up costs was within expectations. Solid EPS growth of 31% in FY3/16 will overshadow its peers. Maintain BUY and TP of MYR8.50 (21.5x 2016 PER). Click here for full report » Technicals Mired in a very tight range The FBMKLCI inched down by 0.46 points to 1,811.12 yesterday, while the FBMEMAS closed higher by 4.88 points but the FBM100 closed lower by 6.15 points. We recommend a �Range Trading� stance for the index. Trading idea is a Short-Term Buy on YEELEE with upside target areas at MYR1.78 & MYR1.91. Stop loss is at MYR1.42. Click here for full report » Other Local News Property: Acmar revives MYR3.5b D'Rapport Residences. Property developer Acmar Group is reviving its landmark high-rise condominium development in Ampang by awarding a construction job worth MYR1.065b to the main contractors for the project, China Railway Engineering Corp (M) Sdn Bhd and Bismark Construction Engineering Sdn Bhd today. The project has been stalled since 2008. (Source: The Edge Financial Daily) Puncak Niaga: Warns delays in sale of water assets to Selangor could affect services. The sale of water assets by Puncak Niaga Holdings to the Selangor government has been extended by a month, with the listed company warning that delays in the completion of the deal could affect the level of services. In a statement to Bursa Malaysia yesterday, the company stated that the reason was because capital and operating expenditure in relation to the water supply system could not be implemented, as these had been put on hold by the Government, pending the completion of the consolidation. (Source: The Star) Scomi Engineering: To bid for MYR15b worth of deals. Scomi Engineering will bid for new monorail jobs in Asia and South America where tenders for projects worth around MYR15b are expected to be called over the next 18 months. It is already bidding for monorail projects in Thailand, Turkey, India and Indonesia with a tender book worth MYR2b. (Source: The New Straits Times) Manufacturing sales in Dec 2014 hit a record MYR56.3b, even as sales growth moderated to +2.1% YoY (Nov 2014: +2.6% YoY). The improved sales performance was partially driven by a weaker MYR resulting in translations gains. "E&E" was the primary growth driver in Dec 2014 as it rose +4.8% YoY (Nov 2014: +5.7% YoY) mirroring trends in the recently released exports data. It was supported by "Non Metallic Mineral, Basic & Fabricated Metal Products" (Dec 2014: +5.3% YoY; Nov 2014: +4.8% YoY) which offset the weaker performance of "Petroleum, Chemical, Rubber & Plastic Products" segment which fell -0.9% YoY in Dec 2014 (Nov 2014: -0.5% YoY). Sectorial salaries and wages growth was flattish (Dec 2014 +0.2%; Nov 2014: +4.3% YoY) with the monthly payout totaling MYR 3.03b. Employment growth came in at +1.2% YoY following the +1.5% YoY recorded in Oct-Nov 2014. (Source: DOS Malaysia; MKE) External reserves as of 30 January 2015 dropped to MYR386.5b or USD110.6b from MYR 388.6b or USD111.2b at 15 January 2015. The latest tally - the lowest level since 15 Mar 2011 of USD110.4b and the third consecutive month of decline totalling USD17.5b - is equivalent to 7.9 months of retained imports and 1.1 times of the country's short-term external debt. Portfolio capital outflows persisted as per the fifth consecutive month of net foreign selling in the equity market of -MYR4.2b as of January 2015. Meanwhile, the latest data on foreign holdings of total debt securities showed it dropped -MYR10.6b to MYR225.9b in December 2014 (Nov 2014: MYR236.5b), driven mainly by foreigners aggressively shedding positions in discount instruments. Full year 2014 foreign holding ended negative at -MYR7.5b which marks the first net outflow since 2008. The outflows were also reflected in MYR which weakened by -15.1% against the US Dollar between August 2014 and January 2015 to reach MYR3.63 per USD on 30 January 2015 amid further plunge in crude oil price to below USD50/bbl and concerns over the downside risk to the country's sovereign credit rating as the Government revised its Budget 2015. (Source: BNM, MKE) Outside Malaysia U.S: Job openings rose in December to highest since '01 as employers faced improving demand for their goods and services. The number of positions waiting to be filled in the U.S. increased by 181,000 to 5.03 million in December from a revised 4.85 million the month before, the Labor Department reported in Washington. The pace of hiring increased. (Source: Bloomberg) Germany: Toughens tone with Greece before meeting of creditors. Germany and Greece drew battle lines ahead of an emergency meeting of official creditors, setting the stage for a clash. German Finance Minister Wolfgang Schaeuble doused expectations of a positive outcome for Greece at the meeting in Brussels, saying there are no plans to discuss a new accord or give the country more time. Greece's new Prime Minister Alexis Tsipras was defiant, saying there is "no way back" for his government, and that he wants a new agreement that won't subject his people to more pain. (Source: Bloomberg) U.K: Manufacturing output unexpectedly rose in December, capping its best annual performance since 2010. Factory production increased 0.1% MoM after a 0.8% MoM surge in November, the Office for National Statistics said. For the full year, manufacturing climbed 2.7%. (Source: Bloomberg) China: Consumer prices rose at the slowest pace in more than five years in January and factory-gate deflation deepened with slumping commodity prices, giving the central bank more room to ease monetary policy. The consumer-price index rose 0.8% YoY. The slide in factory gate prices deepened to 4.3% YoY, extending a stretch of declines to 35 months. (Source: Bloomberg)     Key Indices Value YTD (%) Daily (%) KLCI 1,811.1 (3.0) (0.0) JCI 5,321.5 24.5 (0.5) STI 3,434.2 8.4 0.5 SET 1,595.0 22.8 (0.4) HSI 24,528.1 5.2 0.0 KOSPI 1,935.9 (3.8) (0.6) TWSE 9,393.7 9.1 (0.3) DJIA 17,868.8 7.8 0.8 S&P 2,068.6 11.9 1.1 FTSE 6,829.1 1.2 (0.1) MYR/USD 3.579 9.2 0.6 CPO (1mth) 2,278.0 (13.3) (0.7) Crude Oil (1mth) 50.0 (49.2) (5.4) Gold 1,238.1 2.9 (0.3) TOP STOCK PICKS Buy rated large caps Price Target Axiata 7.17 7.80 Tenaga Nasional 14.82 16.00 Sime Darby 9.53 10.20 Genting Malaysia 4.18 4.60 Gamuda 5.15 6.00 AirAsia 2.78 3.00 Westport 3.50 3.60 SP Setia 3.54 3.98 AFG 4.80 5.50 Hartalega 7.55 8.50