Malaysia Daily, Maybank KE (2015-06-26)

Daily 26 June 2015 SECTOR UPDATE Malaysia Aviation: Maintain Neutral It gets serious  Shariah-compliant MAS� second capacity cuts will create a new equilibrium to the market supply-demand. Expect industry load factor and yields to rise significantly from Aug 2015 onwards. Maintain BUY on AirAsia; sector recovery is well underway. Click here for full report » REGIONAL SECTOR UPDATE Regional Plantations: Maintain Neutral Export levy to benefit downstream Indonesia�s USD20-50/t export levy is set to benefit Indonesia-based downstream operators (mainly Wilmar). Losers: Indonesia-based purer upstream players, and Malaysia-based downstream operators (mainly Mewah Int�l). Stay NEUTRAL on the sector. Top BUYs in the region are FR, BAL, GENP and SOP. Click here for full report » COMPANY UPDATE Tenaga Nasional: Maintain Buy Tariff rebate maintained  Shariah-compliant Peninsular Malaysia tariff rebate of 2.25sen/kWh to continue into 2H15; subsidised gas cost to rise by MYR1.50/mmBTU effective Jul 2015. Over-recovery on generation costs amounted to MYR1.1b in 1H15; lower tariff would allow earnings to return to the �base level�. Reiterate BUY with an unchanged TP of MYR16.00. Click here for full report » Petronas Chemicals: Maintain Hold Things back to normal  Shariah-compliant Petrochemical ASPs are -25% YTD in USD terms and -13% in MYR terms, in synch with our base assumption. Promising ASP outlook coupled with weaker MYR against USD could provide upside potential to our earnings forecasts. Maintain HOLD, target price raised to MYR6.60 (from MYR5.35) following sector rerating. Click here for full report » ECONOMICS Labour Statistics, April 2015 Stable jobless rate, watching retrenchment trends Unemployment rate stable at 3.0% in Apr 2015 and averaged 3.1% YTD. Keeping an eye on retrenchments given the uptrend in sectors like mining and services. Expect unemployment rate of 3.1% this year, up from 2.9% last year. Click here for full report » Technicals Will re-test 1,714 and lower The FBMKLCI tumbled 14.87 points to 1,716.81 yesterday, while the FBMEMAS and FBM100 also closed lower by 97.95 points and 97.05 points, respectively. We recommend a �Sell on Rallies� stance for the index. Trading idea is a short-term buy on ULICORP with upside target areas at MYR4.35 & MYR5.40. Stop loss is at MYR3.66. Click here for full report » Other Local News Sunway: To boost its construction order book by MYR2b by year end. Sunway said it aims to grow its construction order book by between MYR1.5b and MYR2b by the end of this financial year ending Dec 31. They are confident of sustaining these figures to add to our present order book of MYR2.8b. An order book of MYR4b will sustain them for two years. The outlook of the sector remained strong on the back of large government infrastructure projects under the Economic Transformation Programme and those that have been announced in the Budget 2015. (Source: The Star) Salcon: Bidding for MYR2b contracts. Salcon is bidding for MYR2b worth of contracts, which are mostly water treatment plants projects both locally and abroad. The tenderbook consists of eight local projects worth MYR1.25b and five foreign projects, principally in Sri Lanka, worth MYR750m. Salcon, a leading water and wastewater engineering treatment specialist, has a success rate of 20-30% of its tender. Its current orderbook stands at MYR1.1b, which are mainly domestic projects that will keep the group busy for the next three years. Out of this, MYR700m is still unbilled. (Source: The Sun Daily) Keladi Maju: Plans MYR2b KL project. Kedah-based-property developer, Keladi Maju, plans to venture into Kuala Lumpur next year with a MYR2b mixed development. They hope to undertake a mixed development comprising residential and commercial properties at a ratio of 75:25, by middle of next year. They will submit the development plans for the prime piece of land in Segambut to the City Council soon. (Source: New Straits Times) Gamuda: Partners to acquire SGD345.86m Toa Payoh Land. Gamuda, in a joint venture (JV) with Evia Real Estate (7) Pte Ltd and Maxdin Pte Ltd, will acquire a 12,154.6sq m piece of leasehold land in Singapore for SGD345.86m (MYR968.6m). The Gamuda-Evia-Maxdin JV had on June 23, 2015 obtained the Housing Development Board of Singapore's nod to acquire the piece of land. The current type of allowable development on the land is condominiums or flats, or with the written approval, a combination of flats and strata landed houses. (Source: The Edge Financial Daily) Bina Puri: To build twin-tower in Medini. Bina Puri Holdings wholly-owned subsidiary Bina Puri Sdn Bhd has bagged a MYR195m contract to develop a 23-storey twin-tower building in Medini's Central Business District located in Iskandar Malaysia, Johor. It accepted the letter of award from Medini Development Sdn Bhd on June 15, 2015 to undertake the construction of the office towers, to be completed within 29 months. the twin-tower project represents an important milestone in the drive to project Medini as the Central Business District of Iskandar Malaysia. (Source: The Sun Daily) Tanjung Offshore: Reveals turnaround strategy. Tanjung Offshore is introducing a four-pillar turnaround strategy, which help oil and gas (O&G) service provider return to profitability by the third quarter ending Sept 30, 2015. The four pillars involve focusing on the offshore support vessel (OSV) market, the brownfield O&G segment, maintenance and its wholly-owned subsidiary Gas Generators (M) Sdn Bhd (GasTec). Much (profit turnaround) still depends on the overall market situation such as a pick up in the O&G sector and whether they can weather the storm. (Source: The Edge Financial Daily) Gabungan AQRS: Optimistic about more MRT jobs. Construction services provider and property developer, Gabungan AQRS, which has tendered some MYR700m worth of construction projects to date, is optimistic about securing at least one work package from the Sg Buloh-Serdang-Putrajaya Mass Rapid Transit (MRT) Line 2. The group has gained experience from participating in the Klang Valley MRT Line 1, so they are hopeful of securing more work from the MRT Line 2, as well as the Light Rail Transit (LRT) Line 3. (Source: The Edge Financial Daily) Outside Malaysia U.S: Consumer spending rises by most in almost six years, buoyed by gains in incomes as the U.S. job market strengthened. Purchases increased 0.9%, the biggest gain since August 2009, after rising 0.1% in April, Commerce Department figures showed. Incomes rose 0.5% for a second month. (Source: Bloomberg) U.S: Jobless claims hold below 300,000 for a 16th week, signaling a tighter labor market that will help propel growth in the second half of 2015. Jobless claims rose by 3,000 to 271,000 in the week ended June 20, a Labor Department report showed. Limited personnel dismissals underscore employer optimism about sales prospects as the economy regains ground after a first-quarter setback. (Source: Bloomberg) E.U: Greece, creditors fail to reach agreement ahead of Eurogroup. Creditor institutions unanimously agreed on their own documents but Greece, which has put forth its own proposals, hasn't accepted the creditor plan, according to an EU official. (Source: Bloomberg) Japan: Consumer prices rise as Kuroda pumps record stimulus. Japanese consumer prices unexpectedly rose in May, as central bank chief Haruhiko Kuroda tries to generate inflation with unprecedented monetary stimulus. Consumer prices excluding fresh food rose 0.1% YoY, the statistics bureau said. Growth which is forecast to slow this quarter risks damping inflation that Kuroda predicts will pick up later in the year as the effects of the plunge in oil prices fade. (Source: Bloomberg) Philippines: Left its benchmark interest rate unchanged for a sixth straight meeting as a dry spell brought on by El Nino adds to inflation risks. Bangko Sentral ng Pilipinas kept the rate it pays lenders for overnight deposits at 4%, it said in Manila. The Philippines has refrained from joining more than 30 central banks that have provided monetary stimulus this year. Economic growth is robust and the central bank remains vigilant against price pressure, Deputy Governor Diwa Guinigundo said this month. The weather bureau has said more than half the nation's provinces are affected by the dry spell. (Source: Bloomberg)     Key Indices Value YTD (%) Daily (%) KLCI 1,716.8 (2.5) (0.9) JCI 4,920.0 (5.9) (0.7) STI 3,349.9 (0.5) (0.0) SET 1,519.5 1.5 0.1 HSI 27,145.8 15.0 (0.9) KOSPI 2,085.1 8.8 (0.0) TWSE 9,476.3 1.8 0.8 DJIA 17,890.4 0.4 (0.4) S&P 2,102.3 2.1 (0.3) FTSE 6,807.8 3.7 (0.5) MYR/USD 3.758 7.4 0.2 CPO (1mth) 2,259.0 (1.4) 0.0 Crude Oil (1mth) 59.7 12.1 (0.9) Gold 1,173.9 (0.9) (0.4) TOP STOCK PICKS Buy rated large caps Price Target Tenaga Nasional 12.56 16.00 Axiata 6.48 7.60 Genting Malaysia 4.14 4.60 Gamuda 4.87 6.00 SP Setia 3.12 4.07 MBM Resources 3.49 4.20 Inari Amertron 3.40 4.05 Vitrox 3.37 4.05