Malaysia Daily, Maybank KE (2015-06-08)

Daily 08 June 2015 Daily 08 June 2015 COMPANY UPDATE Maxis Bhd: Downgrade to Hold Dividend review; D/G to HOLD  Shariah-compliant FY15 DPS range likely below our earlier expectation; lowering FY15 DPS to 25sen (from 30sen). Maxis has outperformed peers YTD, risk-reward now looks less compelling. Downgrade to HOLD, TP unchanged at MYR7.40. Click here for full report » SECTOR UPDATE Malaysia Oil & Gas: Maintain Neutral OPEC sticking to its output target The 30m bpd oil production target acts more as a floor than a ceiling, having pumped >31m bpd since Mar 2015. Oil price to remain volatile; all eyes on Iran/shale�s output over the next 6 months and OPEC�s next meet in Dec 2015. Maintain NEUTRAL; Yinson, BArmada, Dialog and KNM are preferred BUYs. Click here for full report » ECONOMICS External Reserves, May 2015 On gradual upward trajectory Malaysia's external reserves continue to improve at MYR394.3b or USD106.4b as at 30 May 2015, the highest for the year. This is equivalent to 8.2 months of retained imports and 1.1 times short term external debt. Volatility in global financial markets as well as soft external trade will continue to hold Malaysia's external reserves at current level in the medium term. Click here for full report » External Trade, April 2015 Volatile External Trade Exports contracted -8.8% YoY in Apr 2015 after expanding +2.3% YoY in Mar 2015, trade balance remained in surplus at MYR6.9b. Weak exports number was on the back of weak commodities & resourced based shipments. Divergence between E&E and commodities & resource-based export growth persist as commodity prices as well as demand are sluggish. Click here for full report » Technicals Persistent bearishness The FBMKLCI gained 3.85 points to 1,745.33 on Friday, while the FBMEMAS and FBM100 also closed higher by 16.47 points and 20.09 points, respectively. We recommend a �Sell on Rallies� stance for the index. Trading idea is a Take Profit call on ASIABRN with downside target areas at MYR1.85 & MYR1.10. Click here for full report » Other Local News Banking: Agrobank to be Islamic bank by year end. State-owned development financial institution Bank Pertanian Malaysia (Agrobank), missed its self-imposed deadline of turning into full-fledge Ialamic bank in 2009, but intends to achieve that now by the end of this year. It will be able to offer a wider range of Syariah-compliant banking products. Agrobank will be the 17th institution to be included in Bank Negara's official list of Islamic banks, whose combined assets stand at MYR625.2b, 25.6% of total banking assets in Malaysia. (Source: The Edge Financial Daily) Property: UDA Holdings targets MYR1b jobs next year. Property development and asset management agency UDA Holdings aims to implement projects with a GDV of MYR1b next year on its five-year plan. The target was based on several large-scale projects throughout the country, including the redevelopment of the former Pudu Jail site into commercial centre. (Source: New Straits Times) Bina Puri: Among firms eyeing 11MP projects. The company was interested in bidding for multibillion construction projects under 11MP. The company was gearing up to take on large infrastructure developments such as the Light Rail Transit Line 3 (LRT 3) and the Mass Rapit Transit Line 2 (MRT 2). The LRT 3 and MRT 2, worth a combined MYR34b, are expected to be rolled out in the next two years. If the projects were awarded to Bina Puri, the company might look for strategic partners. (Source: New Straits Times) Outside Malaysia U.S: Payrolls in May rise more than forecast as wages boosted. The 280,000 advance followed a revised 221,000 April increase, figures from the Labor Department showed. The unemployment rate crept up to 5.5% as more people entered the labor force, while hourly earnings rose from a year ago by the most since August 2013. (Source: Bloomberg) U.S: Service industries in May expand at slowest pace in a year, signaling tempered improvement in the biggest part of the U.S. economy. The Institute for Supply Management's non-manufacturing index, which includes an array of industries from real estate to dining, declined to 55.7 from April's 57.8, the Tempe, Arizona-based group said. Readings above 50 signal expansion. (Source: Bloomberg) Germany: Factory orders increase as economic outlook improves. The Bundesbank increased its forecasts for German economic growth this year and next as record-low unemployment and a recovering euro area boost consumption. The upbeat assessment came as data showed factory orders climbed for a second month in April, rising a better-than-forecast 1.4%. The German central bank sees GDP increasing 1.7% in 2015 and 1.8% in 2016. That compares with December predictions of 1% and 1.6%, respectively. (Source: Bloomberg)     Key Indices Value YTD (%) Daily (%) KLCI 1,745.3 (0.9) 0.2 JCI 5,100.6 (2.4) 0.1 STI 3,333.7 (0.9) (0.3) SET 1,507.4 0.6 1.1 HSI 27,260.2 15.5 (1.1) KOSPI 2,068.1 8.0 (0.2) TWSE 9,340.1 0.4 (0.1) DJIA 17,849.5 0.1 (0.3) S&P 2,092.8 1.6 (0.1) FTSE 6,804.6 3.6 (0.8) MYR/USD 3.719 6.3 0.6 CPO (1mth) 2,320.0 1.3 1.2 Crude Oil (1mth) 59.1 11.0 1.9 Gold 1,171.9 (1.0) (0.4) TOP STOCK PICKS Buy rated large caps Price Target Tenaga Nasional 13.40 16.00 Axiata 6.39 7.60 Genting Malaysia 4.22 4.60 Gamuda 4.99 6.00 SP Setia 3.37 4.07 MBM Resources 3.45 4.20 Inari Amertron 3.43 4.05 Vitrox 3.45 4.05 COMPANY UPDATE Maxis Bhd: Downgrade to Hold Dividend review; D/G to HOLD  Shariah-compliant FY15 DPS range likely below our earlier expectation; lowering FY15 DPS to 25sen (from 30sen). Maxis has outperformed peers YTD, risk-reward now looks less compelling. Downgrade to HOLD, TP unchanged at MYR7.40. Click here for full report » SECTOR UPDATE Malaysia Oil & Gas: Maintain Neutral OPEC sticking to its output target The 30m bpd oil production target acts more as a floor than a ceiling, having pumped >31m bpd since Mar 2015. Oil price to remain volatile; all eyes on Iran/shale�s output over the next 6 months and OPEC�s next meet in Dec 2015. Maintain NEUTRAL; Yinson, BArmada, Dialog and KNM are preferred BUYs. Click here for full report » ECONOMICS External Reserves, May 2015 On gradual upward trajectory Malaysia's external reserves continue to improve at MYR394.3b or USD106.4b as at 30 May 2015, the highest for the year. This is equivalent to 8.2 months of retained imports and 1.1 times short term external debt. Volatility in global financial markets as well as soft external trade will continue to hold Malaysia's external reserves at current level in the medium term. Click here for full report » External Trade, April 2015 Volatile External Trade Exports contracted -8.8% YoY in Apr 2015 after expanding +2.3% YoY in Mar 2015, trade balance remained in surplus at MYR6.9b. Weak exports number was on the back of weak commodities & resourced based shipments. Divergence between E&E and commodities & resource-based export growth persist as commodity prices as well as demand are sluggish. Click here for full report » Technicals Persistent bearishness The FBMKLCI gained 3.85 points to 1,745.33 on Friday, while the FBMEMAS and FBM100 also closed higher by 16.47 points and 20.09 points, respectively. We recommend a �Sell on Rallies� stance for the index. Trading idea is a Take Profit call on ASIABRN with downside target areas at MYR1.85 & MYR1.10. Click here for full report » Other Local News Banking: Agrobank to be Islamic bank by year end. State-owned development financial institution Bank Pertanian Malaysia (Agrobank), missed its self-imposed deadline of turning into full-fledge Ialamic bank in 2009, but intends to achieve that now by the end of this year. It will be able to offer a wider range of Syariah-compliant banking products. Agrobank will be the 17th institution to be included in Bank Negara's official list of Islamic banks, whose combined assets stand at MYR625.2b, 25.6% of total banking assets in Malaysia. (Source: The Edge Financial Daily) Property: UDA Holdings targets MYR1b jobs next year. Property development and asset management agency UDA Holdings aims to implement projects with a GDV of MYR1b next year on its five-year plan. The target was based on several large-scale projects throughout the country, including the redevelopment of the former Pudu Jail site into commercial centre. (Source: New Straits Times) Bina Puri: Among firms eyeing 11MP projects. The company was interested in bidding for multibillion construction projects under 11MP. The company was gearing up to take on large infrastructure developments such as the Light Rail Transit Line 3 (LRT 3) and the Mass Rapit Transit Line 2 (MRT 2). The LRT 3 and MRT 2, worth a combined MYR34b, are expected to be rolled out in the next two years. If the projects were awarded to Bina Puri, the company might look for strategic partners. (Source: New Straits Times) Outside Malaysia U.S: Payrolls in May rise more than forecast as wages boosted. The 280,000 advance followed a revised 221,000 April increase, figures from the Labor Department showed. The unemployment rate crept up to 5.5% as more people entered the labor force, while hourly earnings rose from a year ago by the most since August 2013. (Source: Bloomberg) U.S: Service industries in May expand at slowest pace in a year, signaling tempered improvement in the biggest part of the U.S. economy. The Institute for Supply Management's non-manufacturing index, which includes an array of industries from real estate to dining, declined to 55.7 from April's 57.8, the Tempe, Arizona-based group said. Readings above 50 signal expansion. (Source: Bloomberg) Germany: Factory orders increase as economic outlook improves. The Bundesbank increased its forecasts for German economic growth this year and next as record-low unemployment and a recovering euro area boost consumption. The upbeat assessment came as data showed factory orders climbed for a second month in April, rising a better-than-forecast 1.4%. The German central bank sees GDP increasing 1.7% in 2015 and 1.8% in 2016. That compares with December predictions of 1% and 1.6%, respectively. (Source: Bloomberg)     Key Indices Value YTD (%) Daily (%) KLCI 1,745.3 (0.9) 0.2 JCI 5,100.6 (2.4) 0.1 STI 3,333.7 (0.9) (0.3) SET 1,507.4 0.6 1.1 HSI 27,260.2 15.5 (1.1) KOSPI 2,068.1 8.0 (0.2) TWSE 9,340.1 0.4 (0.1) DJIA 17,849.5 0.1 (0.3) S&P 2,092.8 1.6 (0.1) FTSE 6,804.6 3.6 (0.8) MYR/USD 3.719 6.3 0.6 CPO (1mth) 2,320.0 1.3 1.2 Crude Oil (1mth) 59.1 11.0 1.9 Gold 1,171.9 (1.0) (0.4) TOP STOCK PICKS Buy rated large caps Price Target Tenaga Nasional 13.40 16.00 Axiata 6.39 7.60 Genting Malaysia 4.22 4.60 Gamuda 4.99 6.00 SP Setia 3.37 4.07 MBM Resources 3.45 4.20 Inari Amertron 3.43 4.05 Vitrox 3.45 4.05