Malaysia Daily, Maybank KE (2015-05-25)

Daily 25 May 2015 SECTOR UPDATE Malaysia Oil & Gas: Maintain Overweight PETRONAS� 1Q15 report card Lower YoY earnings expected, hit hard by drop in oil price; challenging times ahead. Embarking on cost cuts, setting aside MYR20b for M&A deals; dividends to Government to be closely tied to profits. BArmada, Yinson, Dialog and KNM are our preferred BUYS. Click here for full report » RESULTS REVIEW Sime Darby: Downgrade to Hold A tough quarter; D/G to HOLD  Shariah-compliant All key segments reported weaker earnings except property. 3QFY6/15 results disappointed. We cut our FY6/15-17E EPS forecasts by 2%-21% on lower plantations, industrial and motors earnings. Downgrade to HOLD (from BUY) with a lower TP of MYR8.87 (-13%) on lowered EPS. Stock lacks upside catalyst for now. Click here for full report » AMMB Holdings: Maintain Hold FY15 in line, tough going in FY16 FY15 core net profit declined 2.9% YoY to MYR1.64b � within expectations. Larger-than-expected NIM compression guidance of 15-20bps for FY16; we cut FY16/17 earnings by 6%/8%. HOLD maintained, TP lowered to MYR6.10 from MYR6.90 on lower P/BV peg of 1.3x (CY15 ROE of 11.6%). Click here for full report » COMPANY UPDATE ViTrox Corp: Maintain Buy Prospects remain intact  Shariah-compliant Better earnings to follow in the next 2 quarters, riding on seasonal strength and orders from newly secured customers. Stronger replacement cycle underway for its AXI equipment to provide better visibility to forward earnings. Reiterate BUY with an unchanged TP of MYR4.05, pegged to 13.5x CY16 PER (vs global peers� average of 14.7x CY16). Click here for full report » ECONOMICS Malaysia CPI, Apr 2015 GST impact kicks in Inflation rate in Apr 2015 quickened to +1.8% YoY (Mar 2015: +0.9% YoY) as GST came into effect on 1 Apr 2015. Besides GST, expect upward pressures on prices from overdue adjustments in fuel prices to reflect higher crude oil price and in public transportation fares. Cut our 2015 inflation forecast to 2.5%-3.5% from 3.0%-4.0% (official forecast: 2.0%-3.0%) given the still low YTD average of +0.9%. Click here for full report » External Reserves, May 2015 A month of two halves�? External reserves up in 1H of May Suggest sustained net portfolio inflows during the period But may reverse in 2H of May, taking cue from data showing net selling of equities so far in the month Click here for full report » Leading Indicator, Mar 2015 Steady pre-GST growth, slower-post GST growth March 2015's Leading Index (LI) rebounded MoM From a year ago, it picked up YoY Trends in LI suggests GDP will continue to expand next 3-6 months, but may slow quarterly post-GST Click here for full report » Technicals FBMKLCI to face prolonged downside The FBM KLCI tumbled 24.42 points WoW to close at 1,787.50, as some foreign selling activities persisted. Weekly volume increased from 1.58b to 2.45b shares. Our Take-Profit pick for today is UEMS with very weak supports of MYR0.83 and MYR1.06 as well as clear downside target areas of MYR1.09, MYR0.80 and MYR0.50. Click here for full report » Other Local News Construction: MYR10b MRT tunnelling job, tender to start this week. The tunnelling job for MRT line 2 is expected to be about MYR10b, the most expensive package of the MYR28b. (Source: The Star) Automotive: Perodua to launch a sedan by 2019. The second national car maker has confirmed to launced a sedan model which the upper body including the interior is being designed by Perodua's local research and development team, while the platform and drivetrain will be sourced from partner Daihatsu Motor Corp Ltd of Japan. (Source: The Edge Financial Daily) Telecommunications: Stiffer penalties for telcos and broadcasting industries. Current fines range from MYR10,000 to a few million ringgit for failure to comply with the CMA rules. (Source: The Star) Timber: Listed timber firms not affected by the crackdown in Sarawak. Sarawak Timber Industry Development Corp said that the total export value of logs and timber products decreased by 7% to MYR1.6b for the first quarter compared with the same period last year. (Source: The Star) Borneo Oil: Aims to be giant gold miner. Borneo Oil which is 25.6 per cent-owned by Hap Seng embarked on gold mining two years ago. Borneo Oil seems to be on its way to becoming a mining giant in Southeast Asia after signing an exclusive production sharing agreement with HDL Global Sdn Bhd recently to carry out mining works at five sites on 1200ha in the Bukit Ibam forest reserve in Rompin, Pahang. (Source: New Straits Times) JCY International: Disc drive maker still sees prospects in market. The stock fell out of investor�s favour due to the evolving technology space industry and cheaper solid state drives in the market. The group felt the crunch in revenue over the last five years but it has survived by maintaining its lead in terms of resources and manufacturing capacity. The growth prospects would be supported by its plans to invest in automation. (Source: The Star) UEM Sunrise: Supply glut in Iskandar haunts UEM Sunrise. The largest landlord in the Iskandar region in Johor has seen its share price to shrink to only one-third of its peak at MYR3.25 in May 2013. The stock has been on a downhill for the past two years mainly because of the mounting concerns over a supply glut in Iskandar as more developer jump onto the bandwagon, aggressively launching project. (Source: The Edge Financial Daily) Outside Malaysia U.S: Inflation closer to Fed�s goal after core prices advance. The cost of living excluding what households pay for food and fuel climbed more than forecast in April, indicating inflation is gravitating toward the Federal Reserve's goal. The core consumer-price index rose 0.3%, the biggest gain since January 2013 and reflecting broad-based increases, a Labor Department report showed. In the last three months, core inflation advanced an annualized 2.6%, the most since August 2011. Including food and fuel, the gauge was up a more moderate 0.1% as prices fell at grocery stores and gas stations. (Source: Bloomberg) China: PBOC lowers Shibor most since 2008 to help clear debt pile. China's government needed lower borrowing costs to clean up a local debt mess. The central bank obliged. The three-month Shanghai Interbank Offered Rate has tumbled 194 basis points since March 31, heading for the biggest two-month drop since 2008. That coincides with the government kicking off a municipal bond program and the exchange of regional loans into lower-yielding notes. Central bank Governor Zhou Xiaochuan has accelerated monetary easing just as local authorities kick off more than CNY 1.77t (USD 286b) of bond issuances, a four-fold jump from 2014. (Source: Bloomberg) Indonesia: Court weighs legal challenge to banking regulator OJK. Constitutional court is finalizing a review of a legal challenge to the role of the country's financial regulator, in a case that will decide who supervises banking in Southeast Asia's largest economy. The Financial Services Authority, known as the OJK, took over supervision of lenders from the central bank last year under a 2011 law on financial institutions. The court, whose verdict is final and can't be contested, is assessing an appeal against eight articles of the law in a challenge to the definition, authority and fees of the new regulator, according to court documents seen by Bloomberg. (Source: Bloomberg)     Key Indices Value YTD (%) Daily (%) KLCI 1,787.5 1.5 (0.4) JCI 5,315.2 1.7 0.0 STI 3,450.2 2.5 0.3 SET 1,523.9 1.7 (0.2) HSI 27,992.8 18.6 1.7 KOSPI 2,146.1 12.0 1.1 TWSE 9,638.8 3.6 0.6 DJIA 18,232.0 2.3 (0.3) S&P 2,126.1 3.3 (0.2) FTSE 7,031.7 7.1 0.3 MYR/USD 3.585 2.5 (0.5) CPO (1mth) 2,132.0 (6.9) (1.0) Crude Oil (1mth) 59.7 12.1 (1.6) Gold 1,206.2 1.8 0.1 TOP STOCK PICKS Buy rated large caps Price Target Tenaga Nasional 13.70 16.00 Sime Darby 8.75 10.20 Genting Malaysia 4.34 4.60 Gamuda 5.06 6.00 SP Setia 3.38 4.07 AFG 4.75 5.30 Inari 3.42 4.05 MBM Resources 3.46 4.20 Vitrox 3.63 4.05