Malaysia Daily, Maybank KE (2015-02-26)

Daily 26 February 2015 COMPANY UPDATE Tenaga Nasional: Maintain Buy Raises offer price for Integrax  Shariah-compliant Raises offer price for Integrax to MYR3.25 per Integrax share (+18%), a price acceptable to Perak Corp. Inks new jetty terminal usage agreement (with Integrax) for the 1,000MW Janamanjung 5 plant. Reiterate BUY with an unchanged TP of MYR16.00. Click here for full report » Quill Capita Trust Units: Maintain Hold Disposes Quill Building 10 Positive on the MYR27.3m asset sale, but marginal earnings impact from lower maintenance expenses. Nudge FY15-17 core net profit by +0.7% p.a.. Maintain HOLD with a slightly higher MYR1.17 (+1 sen) DCF-based TP; share price downside limited by 6.2% net yield. Click here for full report » RESULTS REVIEW Axiata Group: Maintain Buy Tepid Celcom guidance  Shariah-compliant FY14 EBITDA and net profit were within our/consensus expectations; DPS (flat YoY) was also in line. Celcom�s sequential 4Q14 revenue growth (ARPU accretion) was however offset by management�s cautious 1Q15 guidance (due to extended IT issues and flood impact). Our thesis of Axiata being a laggard play in 2015 remains intact (BUY rating unchanged), although further share price gains would likely be limited in the next 1-2 quarters. Click here for full report » Hong Leong Bank: Maintain Buy Capital raising in the pipeline 1HFY15 net profit upheld by strong recoveries, but operating profit lagged. Fund raising in the pipeline � we estimate about MYR2.7b to take CET1 to about 11% at commercial bank level. Factoring in possible ROE dilution to 12+%, we lower P/BV target to 1.7x and TP to MYR16.10 (from MYR16.50). BUY maintained for impeccable fundamentals. Click here for full report » Hong Leong Financial Group: Maintain Buy Capital raising prospects 1HFY15 earnings within expectations, trimmed FY15/FY16 forecasts by 3% on the back of lower estimates for HL Bank. Capital raising likely to be lower in quantum than HL Bank�s, we estimate about MYR1.2b or a 1-for-12 rights issue. RNAV-based TP lowered to MYR18.90 (from MYR19.45), factoring in the potential rights issue. BUY maintained. Click here for full report » Genting Plantations: Maintain Buy Beats estimates  Shariah-compliant FY14 core PATMI (+25% YoY) was above expectations. Excluding an estimated MYR68m in land sale gain in FY14, GENP is expected to deliver 22% net profit growth in FY15. GENP is deep in value, backed by an RNAV of MYR14.20/sh. Maintain BUY with a revised SOP-TP of MYR11.36 (-19sen). Click here for full report » Kossan Rubber Industries: Maintain Buy Exciting 2015  Shariah-compliant Sequentially better 4Q14 inline with our expectation. Solid earnings growth ahead with new lines fully sold out. Maintain BUY and TP of MYR5.90 (19x 2016 PER). Click here for full report » Sunway: Maintain Hold Positive surprise  Shariah-compliant FY14 core net profit of MYR592m (+22% YoY) is above expectations. Property sales met 2014 target, but construction job wins lagged behind due to some delays in job awards. Adjust up earnings forecasts by 6-11%. Maintain HOLD with a higher TP of MYR3.23 (+18sen; on 0.59x P/RNAV). Click here for full report » Boustead Plantations: Maintain Buy Hit by a confluence of factors  Shariah-compliant FY14 results disappointed due to higher-than-expected cost of production, low FFB output and high taxes. We cut FY15E-16E EPS by 28%/22% on imputing lower FFB output and higher cost of production expectations. Rich land value caps downside. Maintain BUY with a revised SOP-TP of MYR1.68 (previously MYR1.93). Click here for full report » Cahya Mata Sarawak: Maintain Buy Eyeing acquisitions  Shariah-compliant 4Q14 results were in line. Potential acquisitions would re-rate the stock. Maintain BUY at unchanged SOP-based TP of MYR4.80. Click here for full report » Tan Chong Motor: Maintain Hold When the going gets tough..  Shariah-compliant FY14 earnings plummeted, below street�s expectations. Stiff competition and unfavourable USD exposure pose risks to margins and profitability. Amid uncertainties, we cut forecasts and change our valuation basis from PER to P/BV. We now value TCM at MYR3.40 (-3%) based on 0.8x FY15 NTA (-2SD from 5Y mean), for its less sanguine outlook. HOLD. Click here for full report » Media Prima: Maintain Hold Earnings preservation is key 4Q14 and 2014 results were within expectations. Dividends missed by only a tad. Expect cost savings to mitigate lower revenue going forward. Tweak 2015 and 2016 earnings estimates upwards by 1%. Maintain HOLD and MYR1.90 TP. Only trading at 1.2x FY15 P/BV and dividend yields are decent at >5.0%. Click here for full report » WCT Holdings: Maintain Buy Tepid results: Call/TP under review  Shariah-compliant 4Q14 results were below expectations. Shortfall could be led by one-off impairments from its construction projects. BUY call and MYR2.20 TP are put under review. Click here for full report » Ta Ann: Maintain Buy Timber led growth  Shariah-compliant 4Q14 profit was in line. Restructuring of timber unit drove FY14 earnings growth. Potential earnings upside from its timber business. Reiterate BUY with an unchanged MYR5.90 TP (15x FY16 PER). Click here for full report » KNM Group: Maintain Buy Edging towards renewables 12M14 core results came in ahead of our expectation. Still eyeing RAPID works but is emerging as a long-term renewable energy play. Maintain BUY and MYR1.00 TP, based on 0.6x EV/ backlog. Click here for full report » Barakah Offshore Petroleum: Maintain Buy In line, targets two key jobs  Shariah-compliant 15MFY14 results within ours and consensus expectations. Middle East T&I works and automation & control operations are catalysts for FY15. Cut FY15-16 earnings by 2%-13%. Maintain BUY on unchanged MYR1.15 TP (10x FD 2016 PER). Click here for full report » Perisai Petroleum: Downgrade To Hold Securing charters is key in 2015  Shariah-compliant 12M14 results were ahead of expectations, driven by stronger-than-expected 4Q14 performance. Securing charters for MOPU and E3 barge will catalyse sentiment and earnings. Downgrade to HOLD on unchanged MYR0.65 TP (7x 216 PER), post share price outperformance. Click here for full report » ViTrox Corp: Maintain Buy Stellar FY14 results!  Shariah-compliant All-time high FY14 earnings within our expectation but above consensus. Strong replacement cycle and positive exposure to strengthening USD to drive near-term earnings jump. Reiterate BUY with an unchanged MYR3.55 TP, pegged to 12.6x CY16 PER, backed by c.3% yield (based on 35% DPR). Click here for full report » Technicals Index fails to break 1,820 The FBMKLCI fell 2.82 points to 1,815.86 yesterday, while the FBMEMAS and FBM100 also closed lower by 19.11 points and 23.79 points, respectively. We recommend a �Nibble on Dips� stance for the index. Trading idea is a Short-Term Buy on OKA with upside target areas at MYR1.03 & MYR1.38. Stop loss is at MYR0.82. Click here for full report » Other Local News Telekom Malaysia: TM to implement broadband projects costing MYR3.4b. Telekom Malaysia has received a letter of award from the government for the implementation of both the high-speed broadband phase 2 (HSBB 2) and the sub-urban broadband (SUBB) projects. Both the HSBB 2 and SUBB, with investment costs of MYR1.8b and MYR1.6b respectively, are for the period of 10 years. (Source: The Edge Financial Daily) Icon Offshore: Wins 6 Petronas Carigali jobs. Icon Offshore has won six of the eight packages offered by Petronas Carigali Sdn Bhd under the latter's umbrella contract for the provision of spot charter of marine vessels. The company will provide marine vessels in the categories of anchor-handling tug/supply vessel, utility vessel, workboat and work barge. (Source: The Star) Sustained growth in index of leading economic indicators. The leading index (LI) in Dec 2014 increased by +3.2% YoY (Nov 2014: +2.2% YoY) and +1.1% MoM in Dec 2014 (Nov 2014:+1.0% MoM), supported by the rise in components like "Real Imports of Semi-Conductors", "New Companies Registered", "Housing Permits Approved� and �Real Money Supply". The steady momentum in LI suggests real GDP growth momentum is sustained in early-2015. (Source: Department of Statistics) Higher jobless rate in Dec 2014. Unemployment rate increased to 3.0% in Dec 2014 from 2.7% in Nov 2014. The higher jobless rate reflect the faster rise in the labour force relative to employment. Labour force in Dec 2014 was up +1.9% YoY and +0.7% MoM to 14.2m (Nov 2014: +1.4% YoY; 0% MoM) while employment grew by +1.9% YoY and +0.3% MoM to 13.7m (Nov 2014: +2.2% YoY; 0% MoM). Consequently, the number of unemployed rose by +2.0% YoY and +15.2% MoM to 432,100. (Source: Department of Statistics) Outside Malaysia U.S: January new-homes sales hover near six-year high. The 481,000 houses purchased last month at an annualized pace were little changed from a more than six-year high of 482,000 in December, figures from the Commerce Department showed. Employment gains and rising household formation are underpinning demand for homes as rents rise. Borrowing costs close to historically low levels and easing credit may help attract more first-time buyers, who have been relatively absent in the uneven real estate comeback. (Source: Bloomberg) China: Factory gauge rebounds in February after stimulus. The preliminary Purchasing Managers' Index from HSBC Holdings Plc and Markit Economics was at 50.1, up from January's 49.7. Numbers above 50 indicate expansion. The first reading of momentum in February may alleviate concerns of a deeper downturn after the economy expanded at the slowest pace in 24 years in 2014. China's consumer-price index rose the least in more than five years in January and factory-gate deflation deepened, giving the central bank more room to follow up on November's interest-rate cut and this month's reduction of banks' reserve requirements. (Source: Bloomberg) China: Preparing measures to counter a housing market slump and will roll them out if the economy needs support people with knowledge of the matter said. The government could reduce down-payment requirements for second-home purchases, the people said, asking not to be identified as the information isn't public. Another possible step removing the sales tax after homeowners hold their property for two years - down from a five-year minimum now. (Source: Bloomberg) H.K: Economic growth slowed in 4Q 2014 as a sluggish global economy and domestic political unrest weighed on spending. Gross domestic product rose 0.4% QoQ in the three months through December from the previous three months. That fell from a revised down 1.4% QoQ expansion in the third quarter. (Source: Bloomberg)     Key Indices Value YTD (%) Daily (%) KLCI 1,815.9 (2.7) (0.2) JCI 5,445.1 27.4 0.5 STI 3,440.8 8.6 0.1 SET 1,589.3 22.4 (0.6) HSI 24,778.3 6.3 0.1 KOSPI 1,990.5 (1.0) 0.7 TWSE 9,699.5 12.6 0.7 DJIA 18,224.6 9.9 0.1 S&P 2,113.9 14.4 (0.1) FTSE 6,935.4 2.8 (0.2) MYR/USD 3.604 9.9 (1.1) CPO (1mth) 2,258.0 (14.1) (0.7) Crude Oil (1mth) 51.0 (48.2) 3.5 Gold 1,207.1 0.4 0.7 TOP STOCK PICKS Buy rated large caps Price Target Axiata 7.17 7.80 Tenaga Nasional 14.82 16.00 Sime Darby 9.53 10.70 Genting Malaysia 4.18 4.60 Gamuda 5.15 6.00 AirAsia 2.78 2.94 Westport 3.50 3.80 SP Setia 3.54 4.07 AFG 4.80 5.30 Hartalega 7.55 8.50