Malaysia Daily, Maybank KE (2014-07-23)

Daily 23 July 2014 SECTOR UPDATE MY Automotive Sector: Maintain Overweight 1H14 TIV within radar June's TIV still strong at 58.6k units (+9% YoY). Our 2014 TIV forecast of 675k units (+3% YoY) is unchanged. Maintain OVERWEIGHT. BAuto is our top BUY in the sector. Click here for full report » RESULTS REVIEW Maxis Bhd: Maintain Hold Signs of stabilising  Shariah-compliant 1H14 EBITDA and net profit were in line as weak revenue trends were offset by stronger-than-expected margins. Sequential uptick in prepaid ARPU signals a potential bottoming of prepaid revenue. Maintain HOLD with an unchanged TP of MYR7.20. Click here for full report » British American Tobacco: Maintain Sell Valuations not cheap 2Q14 results within our and consensus full-year forecasts. Earnings growth mainly driven by higher cigarette prices. Reiterate SELL with higher DCF-based TP of MYR62 (MYR57 before), on rolling forward valuations and higher LT growth. Click here for full report » Quill Capita Trust: Maintain Hold Declining earnings growth 1H14 core net profit of MYR16.7m (-2% YoY) was in line. Huge incoming office supply remains a concern to us. No change to earnings forecasts and MYR1.16 TP. HOLD. Click here for full report » Technicals Rebounding into heavy liquidation The FBMKLCI inched up 2.72 points to 1,871.36 yesterday, while the FBMEMAS and FBM100 closed higher by 20.33 points and 19.16 points, respectively. As the selling is persistent, the index�s tone has now turned more bearish. Trading idea is a Take Profit call on ARMADA with downside target areas at MYR3.09 & MYR2.44. Click here for full report » Other Local News TNB: Inks power pact with Jimah East Power. Tenaga Nasional Bhd (TNB) has signed a power purchase agreement (PPA) with Jimah East Power Sdn Bhd, relating to a 2,000 megawatt (MW) power plant in Negri Sembilan. Jimah East is a joint venture between 1Malaysia Development Bhd and Japan�s Mitsui & Co Ltd that won the MYR11b contract to build the power plant. The company will design, construct, own, operate and maintain a coal-fired electricity generating facility dubbed Track 3B with a total nominal capacity of 2,000MW to be located at Jimah in Port Dickson. (Source: Business Times) Axiata: Shortlisted as potential buyer of India�s Viom Networks. Axiata Group Bhd is among four companies shortlisted as potential stake buyers in Tata Teleservices Ltd (TTSL)-controlled Viom Networks, India�s largest independent telecom tower company. Axiata, private equity funds Carlyle and Providence as well as American Tower are bidding to clinch stakes in Viom. Viom currently has 40,000 towers with an equity valuation close to MYR6.89b. (Source: The Edge Financial Daily) WCT: Clinches MYR342m job. WCT Holdings Bhd, a blue-chip construction outfit, has been awarded a MYR341.9m contract for the provision of package 20C1 that entails the common construction access and permanent roads within the Refinery and Petrochemical Integrated Development (Rapid) site in Pengerang, Johor. WCT subsidiary WCT Bhd had recently accepted a letter of award from Petronas Refinery and Petrochemical Corporation Sdn Bhd. (Source: The Star) I-Bhd: Upbeat on MYR820m project, expects full take-up. I-Bhd, which will launch the MYR820m Grand i-Residence service apartment in Jalan Kia Peng, Kuala Lumpur next month at an average price per MYR2,300 per sq ft, expects an almost full take-up rate based on the interest it is now garnering. This project will be I-Bhd�s maiden condominium outside of its flagship I-City development in Shah Alam. (Source: The Star) External Reserves: Latest external reserves statistics released by BNM as of 14 July 2014 amounted to MYR423.8b or USD131.9b - equivalent to 8.9 months of retained imports and 1.3 times of the country's short-term external debt. The reserves was slightly higher compared with MYR423.6b as at 30 June 2014, but was flat in USD terms. The Malaysian Ringgit was up 0.7% against the US Dollar between 30 June and 14 July, implying capital inflows especially into the bond market amid speculation of OPR hike by BNM which materialised with the 25bps increase on 10 July, and we see another 25bps increase coming before year-end, which may result in continued short-term upside to the external reserves. MIER's economic outlook, consumer sentiment and business conditions: The Malaysian Institute of Economic Research (MIER) expects the Malaysian economy to grow by 5.3% in 2014 (2013: 4.7%) and 5.5%-6.0% in 2015. It sees the economy growing by 5.2% in 2H 2014 vs an estimated 5.4% in 1H 2014. Growth reflects the combination of sustained domestic demand and improving external demand. MIER sees BNM's OPR staying at 3.25% for the rest of the year after the recent 25bps hike. Meanwhile, the Institute's Consumer Sentiment Index (CSI) and the Business Conditions Index (BCI) rose by 3.3 points and 9.9 points respectively to 100.1 and 113 in 2Q 2014. CSI rose amid stable household income and firm employment expectations amid worries over higher cost of living and a more subdued spending plans, especially on housing. BCI was lifted by positive production, increase in manufacturing sales, strong domestic demand, rise in export orders as well as higher investment in new plant and equipment. Outside Malaysia U.S: Gains in consumer prices ease in June, showing the economy is generating little price pressure as growth accelerates. The consumer price index increased 0.3% MoM after a 0.4% MoM gain the prior month, figures from the Labor Department showed. (Source: Bloomberg) U.S: Sales of existing homes rise to eight-month high in June as more listings helped prices cool, luring buyers into the market. Sales increased 2.6% to a 5.04 million annual rate last month, led by gains in all four U.S. regions, figures from the National Association of Realtors showed. Prices advanced at the slowest pace since March 2012 and inventories rose to an almost two-year high. (Source: Bloomberg) U.K: Budget deficit was little changed in June as the economic recovery boosted tax receipts and government departments increased spending. Net borrowing was GBP 11.4b compared with GBP 11.5b a year earlier, the Office for National Statistics said. Government revenue rose 4.7% and spending grew 3.9 %. (Source: Bloomberg) Indonesia: Widodo wins vote to lead third-biggest democracy. Joko Widodo, a former furniture dealer who vaulted to political prominence with a hands-on approach, won Indonesia's presidential vote by more than 6 percentage points after a divisive race that led his opponent to plan a court challenge. Just hours after the results were announced, the campaign team of Widodo's opponent, Suharto-era General Prabowo Subianto, said he will contest the vote in the constitutional court, the country's highest. The move could create a month of further uncertainty for investors in Asia's fifth-biggest economy and provides an early test for Jakarta Governor Widodo, known as Jokowi. (Source: Bloomberg)     Key Indices Value YTD (%) Daily (%) KLCI 1,871.4 0.2 0.1 JCI 5,083.5 18.9 (0.9) STI 3,316.9 4.7 0.1 SET 1,520.8 17.1 (1.2) HSI 23,782.1 2.0 1.7 KOSPI 2,028.9 0.9 0.5 TWSE 9,499.4 10.3 0.6 DJIA 17,113.5 3.2 0.4 S&P 1,983.5 7.3 0.5 FTSE 6,795.3 0.7 1.0 MYR/USD 3.2 (3.0) 0.1 CPO (1mth) 2,365.0 (10.0) (0.3) Crude Oil (1mth) 104.4 6.1 (0.2) Gold 1,306.4 8.7 (0.5) TOP STOCK PICKS Buy rated large caps Price Target Tenaga 12.38 14.00 Axiata 6.89 7.60 Sime Darby 9.65 10.30 Genting Msia 4.30 4.70 Gamuda 4.30 5.30 UMW O&G 4.10 5.15 AFG 5.06 5.50 MPHB Capital 2.24 2.42 Perdana Petroleum 1.86 2.55 Hock Seng Lee 1.97 2.25