Malaysia Daily, Maybank KE (2015-03-16)

Daily 16 March 2015 SECTOR UPDATE Malaysia Oil & Gas: Maintain Overweight Key takeaways from conference The pitch reaffirms a challenging 2015 for the industry. FPSO awards are set to fall to 5-8 units in 2015. UMWOG�s tone suggests 2015 earnings may fall short. PVD is not ruling out rig fleet expansion, overseas JV opportunities. No rating change. BArmada, Yinson, Perdana and Dialog remain our key BUYs. Click here for full report » COMPANY UPDATE UMW Oil & Gas: Maintain Buy Tough year but selling overdone  Shariah-compliant Cut FY15-17 EPS forecasts by 18%-31% (steepest in FY15) on lower operating days and higher dry docking costs. Cut SOP-based TP by 26% to MYR2.55 post EPS adjustments, incorporating a 10% discount for a weak short-term outlook. Selling overdone (-10% YTD). Value emerging, close to replacement value. Reiterate non-consensus BUY. Click here for full report » Sime Darby: Maintain Buy An unlikely match in SP Setia  Shariah-compliant Proposed acquisition of SP Setia will likely benefit SP Setia but not Sime; we see no compelling reason for the merger. The enlarged Sime will need to consolidate BPS�s debt, estimated to hit ~GBP2b in 2017, impeding future growth. Maintain BUY with an unchanged TP of MYR10.20 on 18x 2016 PER peg. Catalysts are M&A and listing of key divisions. Click here for full report » SP Setia: Maintain Buy Largest developer in the making?  Shariah-compliant Positive on potentially Sime Darby emerging as a major shareholder, leading to a GO. The take-over should reduce flight risk of key management and allow SPSB to tap onto Sime�s huge landbank. No change to earnings forecasts, MYR4.07 TP (0.73x P/RNAV) and BUY rating. Click here for full report » KNM Group: Maintain Buy A foot into Thai�s renewable energy  Shariah-compliant A sound purchase, at 3-5x earning multiple, if executed well. Earnings pending review, can add net profit of MYR27m p.a.. Maintain BUY, MYR1.00 TP (0.6x EV/backlog) under review. Click here for full report » RESULTS REVIEW BIMB Holdings: Maintain Hold FY14 results above expectations  Shariah-compliant Net profit of MYR532m positively surprises on lower-than-expected credit cost. Expect slower financing growth and further NIM compression, mitigated by lower credit costs; FY15 net profit raised 4%, trimmed 1% for FY16. Maintain HOLD with a higher SOP-derived TP of MYR4.40 (MYR4.20 previously). Click here for full report » Technicals Downward volatility will persist The FBM KLCI lost 25.21 points WoW to close at 1,781.75, as some persistent liquidation activities were obvious throughout the week. Liquidate positions at the resistance areas of 1,781 to 1,831. The support levels of 1,706 and 1,770 will be weaker. For this current market phase, selling activities will exceed any local nibbling activities. Trading idea is a Short-Term Buy on UULI with upside target areas at MYR3.01 & MYR3.85. Click here for full report » Other Local News Supermax Corp: To diversify into contact lenses. The world's second largest glove maker by volume is understood to be diversifying into the contact lens business. The company is getting its production line to manufacture contact lenses ready for commissioning in June or July according to two sources. (Source: The Edge Financial Daily) Ekovest: EkoCheras suites sell briskly. The launch of its EkoCheras mixed development over the weekend saw 40% of their 105 office units and 50% of their 260 hotel suites sold within the first hour of the launch according to MD Datuk Lim Keng Cheng. At press time, 80% of the office and hotel suits have been taken up which will add approximately MYR150m to MYR200m to the group's unbilled sales. In separate news, the Duta-Ulu Klang Expressway construction between Sri Damansara and Segambut is 34% complete and slightly ahead of schedule. (Source: The Edge Financial Daily) Ibraco: In commercial hub project. Property developer Ibraco is embarking on another major joint-commercial center project with a gross development value (GDV) of MYR212m in the prime greater Tabuan area along the Kuching-Kota Samarahan Expressway. The project, located within the Tabuan Tranquility mixed project comprises 112 units of three-storey shop offices, as well as a parcel set aside for a private school/institute of higher learning will be expected to be done by first quarter of 2017. (Source: The Edge Financial Daily) Outside Malaysia U.S: Budget deficit narrows in February as hiring strengthens. Spending exceeded revenue by USD192.3b last month, compared with a USD193.5b deficit in the same month the prior year. The U.S. deficit has been shrinking in recent years as the economy strengthens, hiring picks up and company profits improve. The Congressional Budget Office earlier this week predicted the deficit as a share of gross domestic product this year will be the lowest since 2007. (Source: Bloomberg) U.S: Wholesale prices in February unexpectedly fell for fourth month, reflecting cheaper food and a slump in profit margins among wholesalers and retailers. The 0.5% decrease in the producer price index followed a 0.8% drop the prior month, a Labor Department report showed. The so-called core measure, which strips out volatile food and fuel, also decreased 0.5%. (Source: Bloomberg) Canada: Unemployment rate rises to 6.8% as Alberta jobs fall. Canadian employment was little changed in February and the unemployment rate jumped to a five-month high as an oil shock ripples through the economy. Nationwide employment fell by 1,000 positions, and the jobless rate rose to 6.8%, the highest since September, from 6.6% in January, Statistics Canada said Friday in Ottawa. The data suggest the effects of falling prices for oil, Canada�s biggest export, are beginning to show up in a labor market facing a number of other headwinds such as retail-sector firings and a stagnant manufacturing base. The report also showed wage growth weakening and even deeper losses in the private sector. (Source: Bloomberg)     Key Indices Value YTD (%) Daily (%) KLCI 1,781.8 (4.6) (0.3) JCI 5,426.5 27.0 (0.2) STI 3,362.8 6.2 (0.3) SET 1,541.6 18.7 (0.2) HSI 23,823.2 2.2 0.1 KOSPI 1,985.8 (1.3) 0.8 TWSE 9,579.4 11.2 (0.2) DJIA 17,749.3 7.1 (0.8) S&P 2,053.4 11.1 (0.6) FTSE 6,740.6 (0.1) (0.3) MYR/USD 3.691 12.7 0.3 CPO (1mth) 2,270.0 (13.6) 1.0 Crude Oil (1mth) 44.8 (54.4) (4.7) Gold 1,157.3 (3.7) (0.3) TOP STOCK PICKS Buy rated large caps Price Target Tenaga Nasional 14.64 16.00 Sime Darby 9.25 10.20 Genting Malaysia 4.12 4.60 Gamuda 5.16 6.00 Westport 3.62 3.80 SP Setia 3.35 4.07 AFG 4.74 5.30 Hartalega 8.04 8.50 Inari 3.29 3.95 MBM Resources 3.29 4.20 Vitrox 3.30 4.05