Malaysia Daily, Maybank KE (2014-07-14)

Daily 14 July 2014 MARKET STRATEGY MY Strategy: Maintain Neutral Riding the wave The KLCI should scale higher in 2H 2014 riding on global liquidity which is likely to stay elevated. That said, KLCI valuations are also elevated at 2.2x PEG; this would cap a significant re-rating. We switch to stocks with improved outlooks but which have underperformed; also, the value stocks. Click here for full report » ECONOMICS Outlook & Lookout Uneven & Eventful� Global, regional and local economies have been uneven and eventful year-to-date. Continue to expect moderate pick up in global economy of +3.4% in 2014 and +3.8% in 2015. No change in Malaysia�s real GDP growth forecast of +5.4% in 2014 and +5.1% in 2015. Click here for full report » SPECIAL FEATURE Sasbadi Holdings: Not Rated Looking beyond FY8/14 One of the most established publishers in Malaysia. Net profit expected to be weaker by ~6% in FY8/14 on loss of YGMB contract; we project 2.5% FY8/13-16 earnings CAGR. We derive an indicative fair value of MYR1.30 on 12.8x PER, representing an upside potential of 9%. Click here for full report » COMPANY UPDATE Malaysia Building Society: Not Rated A listed mega-Islamic Bank? A possibility could be for MBSB to be the listed vehicle for the Islamic banking operations of the CIMB-RHB-MBSB group. Upside of 14-32% assuming P/BV range of 1.3-1.5x for FY14E ROE of 11.1%; base case FV of MYR3.03 (1.4x P/BV, +23%). Trading angle on MBSB; risk to this is if the merger falls through or pricing/structure is materially different. Click here for full report » Genting Plantations: Maintain Hold Venturing into palm oil derivatives  Shariah-compliant GENP's venture into palm oil derivatives with technology partner Elevance is long-term positive. Expect muted financial impact until 2017 when the plant starts operation. Maintain HOLD on GENP and unchanged SOP-TP of MYR11.20. Click here for full report » Technicals Profit-taking from all-time highs The FBM KLCI inched down 1.76 points WoW to close at 1,883.15, as some minor profit taking activities led the index down slightly. Nibble at the key supports and take profit at the resistance levels. Trading idea is a Take Profit call on PETDAG with downside target areas at MYR20.20 & MYR19.00. Click here for full report » Other Local News Sumatec: To buy Kazakhstan firm for MYR800m. Sumatec Resources Bhd signed a framework agreement with Abu Talib Abdul Rahman and Dr Murat Safin for the proposed acquisition of 100% interest in Borneo Energy Oil and Gas Ltd valued at USD250m (MYR800m). Subject to a satisfactory results from due diligence studies, a sale and purchase agreement was expected to be executed within six months, and would be satisfied in cash and shares. Incorporated in Kazakhstan, independent upstream oil and gas company Borneo Energy is a 100% beneficiary of the participating interest in Buzachi Neft LLP. Buzachi currently had two 25-year subsoil use contracts, valid till November 2026, for the exploration and production of oil and gas in Karaturun Vostochnyi and Karaturun Morskoi fields (Buzachi fields). The 2P reserves reported to be 68 million barrels of oil are sizeable and they fit in nicely within Sumatec�s new asset selection and acquisition criteria. About USD80m (MYR256m) has been invested over the years by Buzachi to develop the fields. The fields, which started production in 2007, are currently producing between 400 and 600 barrels of oil per day. (Source: The Star) Boustead Plantations: Banks on Klang Valley, Johor land potential. Newly-listed Boustead Plantations Bhd is sitting on thousands of acres of landbank in the Klang Valley and Johor that the group may consider converting into townships once its oil palm estates are past their prime. Although it has yet to firm up any plans, Boustead Plantations�s 4,047ha in Desaru and 567ha in Kulai, both in Johor, and less than 405ha in Balau, Semenyih, have medium to long term potential for property development. As property development is not a core business of Boustead Plantations, any property projects on its land will be managed by the Boustead group�s property arm. (Source: The Star) MAHB: Asian airport job on MAHB�s radar. Malaysia Airports Holdings Bhd (MAHB) is in talks for a new concession to build and operate an Asian airport as it ramps up its overseas operations. The company is positive of securing the deal within the next six to nine months. Negotiations are ongoing and it is beyond the preliminary stage. Overseas expansion is part of MAHB�s plan to diversify its income stream and it is going beyond borders where there is growth potential. (Source: Business Times) Tradewinds: In Iskandar foray. Mohamed Ali Rasheed Alabbar, the chairman of Dubaibased Emaar Group, is helping Tradewinds Corp Bhd to embark on its first mega property project in Nusajaya, Johor, that will generate some MYR18b in gross development value (GDV). Tradewinds plans to kick-start the integrated township called �One nu� by December through wholly-owned Tradewinds International Sdn Bhd. The development covering about 202ha will see a freehold integrated mixed-use upscale township in Nusajaya, Iskandar, which will be benchmarked against global world-class developments. The first phase of the One nu project is targeted for launch in the second half of this year and will see the introduction of private landed properties consisting of detached, twin-villas and cluster homes, and serviced residences and waterfront apartments. There will be around 8,000 residential units upon project completion, to be developed over three phases. (Source: Business Times) Outside Malaysia U.S: Budget deficit so far this fiscal year was the smallest since 2008 as a stronger economy bolstered tax payments by consumers and businesses, a government report showed. The USD 365.9b shortfall from October through June compared with a USD 509.8b gap in the same period a year earlier, the Treasury Department said. Last month, the government posted a USD 70.5b surplus compared with a USD 116.5b excess a year earlier, the report also showed. (Source: Bloomberg)     Key Indices Value YTD (%) Daily (%) KLCI 1,883.2 0.9 (0.5) JCI 5,032.6 17.7 (1.3) STI 3,293.7 4.0 0.7 SET 1,518.0 16.9 0.0 HSI 23,233.5 (0.3) (0.0) KOSPI 1,988.7 (1.1) (0.7) TWSE 9,495.8 10.3 (0.7) DJIA 16,943.8 2.2 0.2 S&P 1,967.6 6.4 0.1 FTSE 6,690.2 (0.9) 0.3 MYR/USD 3.2 (2.7) 0.3 CPO (1mth) 2,410.0 (8.3) (1.6) Crude Oil (1mth) 100.8 2.4 (2.0) Gold 1,338.7 11.4 0.2 TOP STOCK PICKS Buy rated large caps Price Target Tenaga 12.54 14.00 Genting Msia 4.17 4.70 HLBK 14.14 16.20 AMMB Holdings 7.14 8.50 Bumi Armada 3.18 4.55 IJM Corp 6.74 7.20 MPHB Capital 2.30 2.42