Malaysia Daily, Maybank KE (2015-06-25)

Daily 25 June 2015 COMPANY UPDATE Felda Global Ventures: Maintain Hold A Part 2 after securing 37% stake?  Shariah-compliant FGV is keen to exert control on Eagle High in the future and hints of further raising its stake in Eagle High after the 37%. The 37% acquisition is unlikely to be EPS accretive at least until 2017. No changes to our earnings forecasts for now. The deal may not get pass shareholders. Maintain HOLD with an unchanged TP of MYR1.94 on 16x 2016 PER peg. Click here for full report » RESULTS REVIEW Glomac: Maintain Hold Below expectations  Shariah-compliant FY4/15 core net profit fell short. FY15 locked-in sales was also below expectations. Management sets a higher sales target (+34% YoY) for FY16. Lower our FY16/17 earnings forecasts by 10%/18%. Maintain HOLD on unchanged RNAV-based TP of MYR1.03 for now. Click here for full report » ECONOMICS Leading Indicator, Apr 2015 Softness in economy in 2Q 2015 Leading Index (LI) in Apr 2015 fell by -0.6% MoM (Mar 2015: +1.3% MoM) and slowed to +0.9% YoY (Mar 2015: +2.8% YoY) Forwarding the monthly LI by two months to estimate the quarterly LI, the implied 2Q 2015 LI moderated to +1.9% YoY (1Q 2015: +2.7% YoY), suggesting slower 2Q 2015 GDP growth Coincident Index (CI) fell by -1.1% MoM in Apr 2015 (Mar 2015: +0.5% MoM), confirming the immediate post-GST impact on the economy. Click here for full report » Technicals Sell into the index rebounds The FBMKLCI gained 4.82 points to 1,731.68 yesterday, while the FBMEMAS and FBM100 also closed higher by 39.29 points and 32.02 points, respectively. We recommend a �Range Trading� stance for the index. Trading idea is a short-term buy on HARBOUR with upside targets of MYR3.02 & MYR3.44. Stop loss is at MYR2.38. Click here for full report » Other Local News Infrastructure: Will the Selangor water deadlock today? The Federal and Selangor governments are expected to sign a supplementary agreement today, which will see the state maintaining ownership of its water assets and Putrajaya proceeding with the long-delayed development of the Langat 2 water treatment plant project. The deal will effectively put an end to the Selangor water impasse, which has been dragging on for more than eight years. (Source: The Edge Financial Daily) Encorp: To develop township in Melaka worth MYR4.9b. Encorp will team up with the Federal Land Development Authority (Felda) to develop an integrated township in Bukit Katil, Melaka. They are planning a mixed development in Melaka. Spanning 640.98 acres (259ha), the leasehold land is owned by Felda and Encorp will be the developer. They are hoping to finalise the agreement and begin construction by 2017, which will span 10 years. (Source: The Edge Financial Daily) Muhibbah Engineering: Upbeat on securing jobs. Muhibbah Engineering is confident of securing some of the MYR5b worth of contracts that it is bidding for currently. The group has been quite successful in its bidding exercise in the last few years. The construction and engineering group is bidding for more than 50 jobs, including the USD27b (MYR97b) Refinery and Petrochemicals Integrated Development (Rapid) project in Pengerang Johor, and infrastructure contracts under the 11th Malaysia Plan. (Source: New Straits Times) MRCB: Bags MYR485m Desaru job. Malaysian Resources Corporation (MRCB) has been awarded a MYR485m construction contract from Destination Resorts and Hotel (DRH). it involves the construction of a conference centre, Desa Desaru and Westin Desaru Resort at Desaru Coast, with a contract value of MYR61.4m, MYR212m and MYR211.6m respectively. The construction period for the projects is between 19 and 21 months from the date of site possession of June 25. (Source: The Sun Daily) Sona Petroleum: Clock ticking for Sona. Shareholders have raised concerns that special-purpose acquisition company (SPAC) Sona Petroleum is running out of time to acquire a qualifying asset (QA) by its deadline of July 30, 2016. Shareholders are worried about the deadline, but management has expressed confidence that it can secure a QA, which is a necessary requirement for it to be a full-fledged listed entity by year-end. If Sona is unable to secure a QA by July next year, the money held in trust will be returned to shareholders and it will be delisted. (Source: The Star) Outside Malaysia U.S: GDP shrank at a 0.2% annualized rate in 1Q 2015, revised from a previously reported 0.7% drop. Consumers are leading a snapback this quarter as an improving job market and bigger income gains boost auto and home sales, bolstering Federal Reserve projections that the slump was temporary. Still, pockets of weakness remain as lower oil prices hinder investment in the energy industry and a firm dollar restrains global demand for American products. (Source: Bloomberg) Brazil: Central bank signals rate increases to curb inflation. Brazil's central bank signaled it will continue raising rates as projected inflation remains above the center of its target range in 2016. Consumer prices will surge 9% in 2015, slowing to 4.8% by the end of 2016, if the benchmark Selic remains at 13.75%, according to the reference outlook in the quarterly inflation report published. The previous report in March forecast inflation of 4.9% next year. (Source: Bloomberg) Germany: Business confidence fell for a second month in a sign of concern that the ripples from any Greek debt default would reach Europe's largest economy. The Ifo institute's business climate index dropped to 107.4 in June from 108.5 in May. While German economic growth is supported by record-low unemployment, uncertainty over the unity of the euro area is clouding the outlook. (Source: Bloomberg) China: Cabinet moved to scrap a rule that caps lending by commercial banks at 75% of their deposits, a measure that will help boost credit expansion as the nation looks to revive economic growth. The State Council will propose amending the nation's banking law to make the limit a ratio used for reference rather than a regulatory statute, according to a statement posted to its website. A system will be set up to monitor the liquidity of banks based on the ratio, it added. Changes to the law need to be approved by the Standing Committee of the National People's Congress. (Source: Bloomberg) S. Korea: Consumer confidence slumps as deadly MERS spreads. South Korea's consumer confidence declined to the lowest level since December 2012 as the spread of Middle East Respiratory Syndrome threatens to derail the nation's economic recovery. The sentiment index fell to 99 in June from 105 in May, data released by Bank of Korea on Thursday show. A reading below 100 indicates pessimists outnumber optimists. (Source: Bloomberg)     Key Indices Value YTD (%) Daily (%) KLCI 1,731.7 (1.7) 0.3 JCI 4,953.5 (5.2) 0.3 STI 3,351.3 (0.4) 0.3 SET 1,518.3 1.4 1.0 HSI 27,405.0 16.1 0.3 KOSPI 2,085.5 8.9 0.2 TWSE 9,397.3 1.0 0.1 DJIA 17,966.1 0.8 (1.0) S&P 2,108.6 2.4 (0.7) FTSE 6,844.8 4.2 0.1 MYR/USD 3.751 7.3 0.3 CPO (1mth) 2,258.0 (1.4) 2.2 Crude Oil (1mth) 60.3 13.1 (1.2) Gold 1,175.4 (0.8) (0.3) TOP STOCK PICKS Buy rated large caps Price Target Tenaga Nasional 12.78 16.00 Axiata 6.48 7.60 Genting Malaysia 4.26 4.60 Gamuda 4.96 6.00 SP Setia 3.17 4.07 MBM Resources 3.49 4.20 Inari Amertron 3.42 4.05 Vitrox 3.43 4.05