Malaysia Daily, Maybank KE (2014-08-21)

Daily 21 August 2014 SECTOR UPDATE MY Banking Sector: Maintain Neutral Deposit competition still intense Positively, rate competition on the lending side appears to have eased. Conversely, deposit competition is still intense. Still room for NIMs to expand, but any rebound is likely to be mild. NEUTRAL on the sector, BUY picks continue to be AFG, AMMB, HL Bank and HL Financial Group. Click here for full report » RESULTS REVIEW AirAsia: Downgrade to Hold It was a mirage, 2014 will be tough 2Q14 core net income of MYR25.4m (-77% YoY, -80% QoQ) was below expectations; our FY14 earnings cut by 28%. Yields were lower and unit costs were higher than expected. Cut to HOLD (from BUY) with a lower target price of MYR2.55 (from MYR2.65) as we also rollover to FY15 as base year. Click here for full report » Bumi Armada: Maintain Buy Results on track 1H14 earnings are on track to meet our full-year estimates but are significantly below consensus. Job wins and tender pipelines are healthy; execution is key. Rights and bonus issues to conclude soon. Maintain BUY; SOP-based TP of MYR4.55 is under review. Click here for full report » Kuala Lumpur Kepong: Maintain Hold A traditionally weak 3Q  Shariah-compliant 3QFY9/14 results within our and street estimates. Expect stronger QoQ results ahead on improved FFB output, contracted forward sales, and higher downstream margins. Maintain HOLD with a revised TP of MYR23.20 as we trim our FY9/14-15 earnings forecasts by 2.8%/3.8%. Click here for full report » IOI Corp: Maintain Sell Pricey on forward earnings  Shariah-compliant FY6/14 results was within our and street estimates. IOI is the most expensive plantation stock regionally at EV/ha of MYR163k, 26x FY6/15 PER. We forecast profit to fall 20%. IOI risks being taken off the Shariah list this November review. Maintain SELL. Click here for full report » Boustead Plantations: Maintain Buy Downside capped by its land value  Shariah-compliant 2Q14 results were below expectations. Share price downside is supported by its MYR3.08/sh RNAV, backed by its strategic land that has development potential. Maintain BUY with a SOP-TP of MYR2.16. Click here for full report » Gas Malaysia: Maintain Hold Potential dividend bummer?  Shariah-compliant 1H14 net profit was in line at 50% of our full-year forecast, and 47% of consensus. A lower interim DPS of 5sen was declared (6 sen in 1H13), placing into doubt a 100% payout in 2014. Maintain HOLD, TP unchanged at MYR3.80. Click here for full report » Kossan Rubber Industries: Maintain Buy Stronger growth ahead  Shariah-compliant Earnings dip in 2Q14 as water rationing affected production; results still in line. Expect stronger earnings in 2H14 on new capacities. Maintain BUY and TP of MYR5.00 (17x FY14 PER). Click here for full report » MSM Malaysia: Maintain Hold 2Q14: Within expectations  Shariah-compliant 2Q14 results are in line at 58% of our and consensus full-year forecasts. Awaiting a cessation to the issuance of new APs. Maintain HOLD with an unchanged TP of MYR5.00. Click here for full report » COMPANY UPDATE MBM Resources: Maintain Buy Excitement from Perodua  Shariah-compliant Fundamentals remain intact with improving earnings outlook. Trim FY15 earnings by 5% on further delays in securing orders by OMI�s alloy wheel plant. Maintain BUY but shave our TP to MYR3.42 on unchanged 9x FY15 PER. Compelling valuations at 7.3x FY15 PER. Click here for full report » Star Publications (Malaysia): Maintain Hold Already in the price  Shariah-compliant The great 2Q14 results may be short-lived. Nonetheless, we raise DPS estimate by 20% to 18 sen p.a.. Maintain HOLD call but raise TP by 16% to MYR2.89. Click here for full report » ECONOMICS Malaysia CPI, July 2014 Eased but still above 3.0% Inflation rate eased slightly in July 2014 to +3.2% YoY from +3.3% YoY posted in June 2014. Our measure of core inflation (excluding the key subsidised components of CPI) was stable at +2.1% YoY (June 2014: +2.1% YoY). Keeping our full-year inflation rate forecast of +3.5% for now (YTD 2014: 3.3% YoY), but tweak our 2015 forecast to 4.0%-4.5% range (previous: +4.0%). Click here for full report » Technicals FBMKLCI strong. Speculatives weak. The FBMKLCI advanced 6.73 points to 1,878.89 yesterday, while the FBMEMAS and FBM100 also closed higher by 8.07 points and 28.88 points, respectively. We recommend a �Range Trading� stance for the index. Trading idea is a Short-Term Buy on PJDEV with upside target areas at MYR2.26 & MYR2.70. Stop loss is at MYR1.93. Click here for full report » Other Local News O&G: Petronas gives Sabah 10% stake in LNG. Musa, the state finance minister, said the offer was the result of several negotiations between state government and Petronas. He is confident that through close cooperation with Petronas, Sabah can expect more exciting developments in the O&G industry. (Source: The Edge Financial Daily) Technology: Cyberjaya aims to be global tech hub by 2020. Managing director Fariz Yahaya or Cyberview Sdn Bhd said the initiative would be carried out in partnership with various agencies such as Malaysian Investment Development Authoriy (MIDA) , Multimedia Development Corp (MDEC) and InvestKL. (Source: The Edge Financial Daily) Brahim: Brahim�s willing to sell BAC stake. Brahim�s owns 70% of BAC, which has a 25-year contract (2003-2028) valued at MYR6.2b to provide catering and related services at KLIA and Penang International Airport. The major shareholder of Brahim's Holdings said he may consider selling the company�s stake in in-flight caterer Brahim's Airline Catering (BAC) Sdn Bhd should there be a request from Malaysia Airlines (MAS). (Source: Business Times) MSM: Targets to triple sugar output by 2020 from 1.25m tonnes currently. Group plans to increase its share of the international market. (Source: The Edge Financial Daily) Outside Malaysia U.S: Federal Reserve officials pledged to reduce the size of record balance sheet as they continued to map out a strategy to exit from the most aggressive monetary stimulus in its 100-year history. "In the long run, the balance sheet should be reduced to the smallest level consistent with efficient implementation of monetary policy and should consist primarily of Treasury securities" in order to minimize the effect of the Fed's portfolio holdings on credit allocation across different sectors of the economy, according to the minutes of the Federal Open Market Committee's July meeting released. (Source: Bloomberg) Japan: Exports rose more than forecast in July, bouncing back from two straight declines to support an economy that contracted last quarter by the most since a record earthquake in 2011. Overseas shipments rose 3.9% YoY, the finance ministry said. Imports rose 2.3% YoY, leaving a deficit of JPY 964b (USD 9.36b). (Source: Bloomberg)     Key Indices Value YTD (%) Daily (%) KLCI 1,878.9 0.6 0.4 JCI 5,190.2 21.4 0.5 STI 3,323.7 4.9 0.2 SET 1,550.8 19.4 0.5 HSI 25,159.8 8.0 0.1 KOSPI 2,072.8 3.1 0.1 TWSE 9,288.1 7.9 0.5 DJIA 16,979.1 2.4 0.4 S&P 1,986.5 7.5 0.2 FTSE 6,755.5 0.1 (0.4) MYR/USD 3.2 (3.3) 0.3 CPO (1mth) 2,054.0 (21.8) (1.0) Crude Oil (1mth) 96.1 (2.4) 1.7 Gold 1,291.9 7.5 (0.3) TOP STOCK PICKS Buy rated large caps Price Target Tenaga 12.44 14.00 Axiata 6.96 7.60 Sime Darby 9.50 10.30 Genting Msia 4.45 4.70 Gamuda 4.45 5.30 UMW O&G 4.05 5.15 AFG 5.00 5.50 Perdana Petroleum 1.84 2.55 Hock Seng Lee 1.99 2.25