Malaysia Daily, Maybank KE (2015-01-21)

Daily 21 January 2015 ECONOMICS Budget 2015�s Reset Slightly higher deficit Government revised this year�s budget deficit to -3.2% of GDP from -3.0% previously (2014E: -3.5%) as it cut crude oil (Brent) price assumption to USD55/bbl from USD100/bbl. Overall, the measures announced are in line with our views that the Budget 2015 reset would cover both the spending and revenue sides of the budget�s equation. The key surprise is spending cuts only involve operating expenses as development spending is maintained. Click here for full report » China GDP 4Q 2014 Sub-7.5% growth China posted +7.3% YoY and seasonally-adjusted +1.5% QoQ growth in 4Q 2014 (3Q 2014: +7.3% YoY; +1.9% QoQ). Full-year 7.4% growth vs official target of +7.5%. Maintain our 2015 forecast of +7.0% as China continues to rebalance the economy. Click here for full report » SECTOR UPDATE Malaysia Construction: Maintain Overweight Keeping development spending Unchanged development expenses is a positive surprise. Risk of delay in major infrastructure projects alleviated. Reiterate Overweight with Gamuda as Top Pick. Click here for full report » REGIONAL SECTOR UPDATE Regional Plantations: Maintain Neutral Yet another false alarm El Nino threat downgraded to Neutral (from Alert). Despite no El Nino, weather anomalies should not be ruled out in 2015 as evidenced by recent severe floods in Malaysia. Top BUYs in the region: BAL, FR, GENP, SOP, and SIME. SELL IOI Corp for its steep valuation. Click here for full report » COMPANY UPDATE Tenaga Nasional: Maintain Buy Potentially another strong quarter  Shariah-compliant We estimate TNB�s 1QFY15 core net profit (excluding compensation) at about MYR1.7b (+38% YoY, +11% QoQ), 28% of our FY15 forecast. Coal�s proportion of total generation continued to stay high in the quarter at 46%. Tariff hike in FY15 unlikely to begin with; reiterate BUY with an unchanged TP of MYR16.00. Click here for full report » Gas Malaysia: Maintain Hold No price hike, no volume growth? PM�s announcement of no gas price hike in 2015 potentially means GMB might not be able to grow volumes without eroding its spreads. However, if the PM was referring purely to a freeze in PETRONAS� selling price, the resulting impact would be a mild positive for GMB. Forecasts and TP unchanged for now pending clarification from company, maintain HOLD rating. Click here for full report » Axis REIT: Maintain Hold More acquisitions in FY15 Potential acquisition of three properties in Penang with total estimated value of MYR160m. FY15 earnings to be supported by new properties and rental reversions, but vacancies remain a key risk. Maintain HOLD with unchanged DCF-based TP of MYR3.37. Click here for full report » RESULTS REVIEW CapitaMalls Malaysia Trust: Maintain Buy Earnings on track FY14 core net profit of MYR150m (+0.9% YoY) was within ours and consensus� expectations. FY15 earnings to be driven by East Coast Mall�s higher rental income post-completed enhancement works. Maintain BUY; nudged TP to MYR1.60 (DCF-based; from MYR1.59) following marginal earnings adjustments. Click here for full report » Technicals Index inched down on higher volume The FBMKLCI fell 3.20 points to 1,750.11 yesterday, while the FBMEMAS and FBM100 also closed lower by 10.72 points and 17.23 points, respectively. We recommend a �Nibble on Dips� stance for the index. Trading idea is a Short-Term Buy on VS with upside target areas at MYR3.26 & MYR3.86. Stop loss is at MYR2.81 Click here for full report » Other Local News Property: Government widens GST exempt list to all stratified residential properties. HBA secretary general Chang Kim Loong said following their petition dated Nov 28, 2014 to the Ministry of Finance, the latter gave a positive response in a letter dated Jan 5, 2015. The petition requested for a change in classification from the standard rated tax supply to zero-rated tax supply for maintenance charges, sinking funds, and all other related charges paid by parcel owners. (Source: The Edge Financial Daily) Iris Corporation: Plans MYR130m property venture with Technology Park Malaysia Corp Sdn Bhd in Bukit Jalil. Under the team agreement, they would develop, build and manage a proposed residential development project on a parcel of land in Phase 3 TPM Bukit Jalil. Iris proposes MYR130m for the implementation of the first phase of the project. Elaborating on the rationale of the project, IRIS Corp said it will enable it to expand its business into residential accommodations and high-rise apartments. (Source: The Star, The Edge Financial Daily) Media Chinese International Ltd: No shake up of four dailies. Management would like to reiterate that in an attempt to improve and innovate further, the basic structure and operational set-up of the Malaysian businesses remain unchanged. (Source: The Edge Financial Daily) Outside Malaysia Global: IMF lowers global growth forecast by most in three years. The IMF made the steepest cut to its global- growth outlook in three years, with diminished expectations almost everywhere except the U.S. more than offsetting the boost to expansion from lower oil prices. The world economy will grow 3.5% in 2015, down from the 3.8% pace projected in October, the International Monetary Fund said in its quarterly global outlook released in Washington. The Washington-based lender also cut its estimate for growth next year to 3.7%, compared with 4% in October. (Source: Bloomberg) U.S: Confidence among homebuilders little changed in January. While the National Association of Home Builders/Wells Fargo builder sentiment gauge fell to 57 this month from 58 in December, readings greater than 50 mean more respondents report good market conditions, according to figures issued from the Washington-based group. (Source: Bloomberg) E.U: ECB says credit standards eased as recovery boosts loan demand. Banks relaxed lending terms for euro-area companies and households for a third straight quarter at the end of last year, responding to a fresh rise in demand for loans, the European Central Bank said. "Credit standards for all loan categories continued to ease in net terms in the fourth quarter of 2014," the Frankfurt-based ECB said. "Among the largest countries, credit standards on loans to enterprises were eased in net terms particularly in Italy and to a more limited extent in France, while remaining unchanged in Germany and Spain and continuing to tighten in the Netherlands." (Source: Bloomberg) Germany: Investor optimism rises to 11-month high on stimulus. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, climbed for a third consecutive month in January to 48.4 from 34.9 in December. (Source: Bloomberg)     Key Indices Value YTD (%) Daily (%) KLCI 1,750.1 (6.3) (0.2) JCI 5,166.1 20.9 0.3 STI 3,334.0 5.3 0.8 SET 1,535.1 18.2 (0.0) HSI 23,951.2 2.8 0.9 KOSPI 1,918.3 (4.6) 0.8 TWSE 9,251.7 7.4 0.8 DJIA 17,515.2 5.7 0.0 S&P 2,022.6 9.4 0.2 FTSE 6,620.1 (1.9) 0.5 MYR/USD 3.611 10.2 1.1 CPO (1mth) 2,337.0 (11.1) (0.2) Crude Oil (1mth) 46.4 (52.9) (4.7) Gold 1,291.3 7.5 1.1 TOP STOCK PICKS Buy rated large caps Price Target Axiata 6.99 7.60 Sime Darby 9.29 10.20 Genting Malaysia 3.81 4.60 Gamuda 5.05 6.00 AirAsia 2.75 3.00 Westport 3.54 3.60 SP Setia 3.64 3.98 AFG 4.76 5.50 Hartalega 7.05 8.50