Malaysia Daily, Maybank KE (2014-11-12)

Daily 12 November 2014 SPECIAL FEATURE Crude Oil Oil Spills.... We revised our average 2015-2016 crude oil price forecasts to of USD85-USD90 per barrel from USD100/bbl Oil industry dynamics will be key to this outlook as OPEC - led by Saudi Arabia - is not keen to play the role of "price stabilisers" by slashing its output as in the past A key contributor to current global oil supply glut - the US shale oil producers - on average is just about breaking even at current oil price level Click here for full report » SECTOR UPDATE Oil & Gas: Maintain Overweight Sector de-rates; key stock selects Cut Brent crude oil ASP forecast by 15% to USD85/bbl. Go for oil services in the production phase, less volatility. Yinson, Bumi Armada, Dialog and Perdana are our preferred BUYs Click here for full report » COMPANY UPDATE UMW Holdings: Downgrade to Hold The tides have turned  Shariah-compliant Downgrade to HOLD on less rosy outlook for Auto and O&G divisions. FY15/16 forecasts marginally trimmed (-2%). Potential downside to auto earnings from (i) intensive vehicle sales competition and (ii) unfavourable USD/MYR forex. Cut SOP-based TP to MYR12.55 (-9%) on lower valuations of 55.2%-owned UMWOG using DCF method (from PER). Click here for full report » RESULTS PREVIEW AirAsia X: Maintain Sell 3Q14F: To be another tough one 3Q14 results will be out by 19-20 Nov. Expect core net loss of MYR73m (versus a profit of MYR16m in 3Q13). Capital base depleting, adjusted gearing was 3.6x and we think it will have to raise new equity. Maintain SELL, with an unchanged target price of MYR0.62 based on FY15 P/BV of 1.0x. Click here for full report » Cebu Air Inc: Maintain Buy Having the time of its life BUY ahead of anticipated strong 3Q14 results (14 Nov) and will benefit from improving industry fundamentals. Expect core net profit of PHP371m (vs a loss of PHP700m in 3Q13). Demand exceeds supply, underpinning yield growth; Lower cost due to falling fuel price. Top ASEAN airline pick as all the variables suggest strong performance near term with record earnings likely in FY15. Revising up FY14-16F earnings on lower fuel price assumption. TP raised to Street-high PHP88 (from PHP75). Click here for full report » ECONOMICS Industrial Production (IP), Sep 2014 More signals of slower 3Q 2014 GDP Industrial output grew by +5.4% YoY in Sep 2014 In 3Q 2014, it slowed to +4.1% YoY from +5.8% YoY in 2Q 2014 3Q GDP to be released this Friday is expected to decelerate to +5.6% YoY (2Q 2014: +6.4% YoY) Click here for full report » Technicals Accumulated foreign selling The FBMKLCI fell 2.82 points to 1,825.11 yesterday, while the FBMEMAS and FBM100 also closed lower by 44.66 points and 40.61 points, respectively. We recommend a �Sell on Rallies� stance for the index. Trading idea is a Take Profit call on SKPETRO with downside target areas at MYR2.94 & MYR2.31. Click here for full report » Other Local News Puncak Niaga: Signs sale agreement with PASSB. Puncak Niaga Holdings announced yesterday that it had signed a conditional sale and purchase agreement with Pengurusan Air Selangor Sdn Bhd (PASSB), a wholly-owned subsidiary of state investment arm Kumpulan Darul Ehsan. For MYR1.55b cash, Puncak Niaga agreed to part with its wholly owned Puncak Niaga (M) Sdn Bhd and the water treatment operator's cumulative convertible redeemable preference shares, and the 70% stake in loss - making water distributor Syarikat Bekalan Air Selangor Sdn Bhd, and its MYR212m nominal value of redeemable convertible unsecured loan stocks. (Source: The Edge Financial Daily) Pelikan International Corp: Pelikan to transfer MYR1b assets. Pelikan International Corp is transferring MYR1.05b worth of assets worldwide to its 71.32%-owned Germany-listed subsidiary Herlitz AG at a discount, as the struggling stationery maker seeks to boost current stock valuations and raise fresh funding for future growth. (Source: The Star) Inari Ametron: On track to hit MYR1b revenue target. Chief executive officer Lau Kean Cheong said Inari Ametron is on track to achieve its MYR1b revenue target by financial year ending June 30, 2016. The electronic component maker's revenue growth will be underpinned by rising demand for radio frequency and op-to-electronic products. (Source: The Edge Financial Daily) Outside Malaysia China: Xi gets a 'C' in report card on economic program, economists say. China's government scored a 'C' for progress on President Xi Jinping's policy blueprint announced a year ago that plans to give markets a "decisive" role in the economy, according to a survey of economists. Analysts were most impressed with progress on fiscal policy, where the central government is redefining the taxation and spending relationship with China's provinces. Advancement on financial liberalization, rural-land policies and measures to change the ownership structure of state-owned enterprises were seen as lagging behind expectations, the survey showed. (Source: Bloomberg) Japan: Election would risk clouding outlook for Abenomics changes. A potential snap election in Japan next month clouds the outlook for the Abe administration's economic program as the nation struggles to shake off the impact of this year's sales-tax increase. Lawmakers said they were preparing for a possible early election by Prime Minister Shinzo Abe, the clearest sign yet that he's contemplating such a move. The decision is linked to a call on whether to go ahead with another bump in the levy in 2015, one ruling party member said. (Source: Bloomberg)     Key Indices Value YTD (%) Daily (%) KLCI 1,825.1 (2.2) (0.2) JCI 5,032.3 17.7 1.3 STI 3,292.2 3.9 (0.3) SET 1,571.2 21.0 0.2 HSI 23,808.3 2.2 0.3 KOSPI 1,963.0 (2.4) 0.2 TWSE 9,034.1 4.9 (0.2) DJIA 17,614.9 6.3 0.0 S&P 2,039.7 10.4 0.1 FTSE 6,627.4 (1.8) 0.2 MYR/USD 3.347 2.2 0.4 CPO (1mth) 2,234.0 (15.0) 1.3 Crude Oil (1mth) 77.9 (20.8) 0.7 Gold 1,151.4 (4.2) (1.8) TOP STOCK PICKS Buy rated large caps Price Target Tenaga 13.14 16.00 Axiata 7.03 7.60 Sime Darby 9.65 10.20 Gamuda 5.14 6.00 UMW O&G 3.22 5.15 AFG 4.57 5.50 Perdana Petroleum 1.44 2.48 Hock Seng Lee 1.89 2.25