Malaysia Daily, Maybank KE (2015-04-02)

Daily 02 April 2015 MARKET STRATEGY Malaysia Strategy: Neutral GST: First cut Prices up for retail and telco prepaid, down for cars, unchanged for number forecasting (gaming). No change to our earnings forecasts, targets. We remain cautious into 2Q15 and continue to advocate a defensive strategy. Click here for full report » SECTOR UPDATE Malaysia Telcos: Maintain Overweight GST kicks in Prepaid users now incur an additional 6% GST on their reloads at all the four main wireless telcos. Maxis and Celcom have however, chosen to absorb the 6% GST on their prepaid starter packs. Digi is the biggest potential beneficiary of GST, but this has largely been priced in. Our sector picks are Maxis (BUY, TP: MYR7.40) and Axiata (BUY, TP: MYR7.60). Click here for full report » Malaysia Automotive: Maintain Neutral Car prices decline Prices for most cars reduce by up to 5.1% (average 1.0%) post GST implementation yesterday, a slight positive. Expect recovery in Mar-Apr TIV from a low base but upside capped by wary consumer sentiment on higher cost of living. Our 2015 TIV forecast of 660 units (-1% YoY) is unchanged. Maintain NEUTRAL, key BUYs are MBM and BAuto. Click here for full report » COMPANY UPDATE UMW Holdings: Maintain Hold Fairly priced, no re-rating catalysts  Shariah-compliant Cut FY15/16/17 earnings by 16%/5%/5% - 7%/0%/0% for auto division and 9%/5%/5% for O&G division. Caution on potential blip in 1HFY15 auto earnings (91% of FY14 PBT) from weaker Toyota vehicle sales and margins. Maintain HOLD with a lower SOP-based TP of MYR10.10 (-2%), having rolled forward valuations to 2016. Click here for full report » SPECIAL FEATURE Bioalpha: Not Rated Expert in health supplements First BioNexus company listed on Bursa which focuses on wellness and pharma nutrition. 15% 3-year EPS CAGR for FY14-16, underpinned by new market penetration, new product formulations and higher capacity utilisation. MYR0.25 fair value on FY16F PER of 12.3x. Click here for full report » Technicals High volume profit taking The FBMKLCI fell 4.47 points to 1,826.31 yesterday, while the FBMEMAS and FBM100 also closed lower by 45.71 points and 42.58 points, respectively. We recommend a �Nibble on Dips� stance for the index. Trading idea is a Take Profit call on TA with downside target areas at MYR0.66 & MYR0.55. Click here for full report » Other Local News Utilities: Finance Ministry aborts sale of 1MDB energy arm Edra Global. The Ministry of Finance (MoF) also said it had dropped CIMB Group, just a week after appointing the bank to act as adviser for the potential sale of Edra to strategic investors. (Source: The Sun, The Edge Financial Daily) Banking: CIMB, Maybank offer MYR3.2b Islamic financing. CIMB IB and Maybank IB have signed an agreement with Cititower Sdn Bhd � a joint venture between KLCC (Holdings) Sdn Bhd and QD Asia Pacific Ltd, a subsidiary of Qatari Diar Real Estate Investment Co � to offer a 20-year syndicated Islamic term financing of MYR3.2b. The financing is partly to fund the commercial development in KLCC with GDV of MYR5b. (Source: The Edge Financial Daily) Westports: No disruption due to GST. There were no disruptions to the import process flow at the port yesterday with implementation of GST. There was no slowdown in process flow as GST is not collect by Customs at the port . (Source: The Sun) Maybank: Seeks growth in Indonesia. Maybank is seeking to increase corporate lending and investment banking activities in Indonesia to help shelter if from slower economic growth in Malaysia. It will focus on lending to large companies in the transport, utilities and consumer business in Indonesia. (Source: The Edge Financial Daily) Outside Malaysia U.S: Factories slogging through storm of challenges. Manufacturing in the U.S. expanded in March at the slowest pace in almost two years, restrained by the perfect storm of a stronger dollar, a plunge in oil prices and lingering delays in shipments from West Coast ports. The Institute for Supply Management�s index declined to 51.5, the weakest since May 2013, from 52.9 a month earlier, the Tempe, Arizona-based group's data showed. The gauge has fallen five straight months, the longest such stretch since the end of 2008. (Source: Bloomberg) E.U: Manufacturing expanded faster than initially estimated last month, helped by growth in Spain and Italy and a stronger performance in Germany, the region's largest economy. Markit Economics said its Purchasing Managers Index rose to 52.2 from 51 in February. That was the highest in 10 months and exceeded a preliminary reading of 51.9. It's also well above the 50 level that divides expansion from contraction. (Source: Bloomberg) U.K: Manufacturing growth accelerated to its fastest pace in eight months in March as overseas demand increased. Britain's Purchasing Managers� Index climbed to 54.4 from a revised 54 in February, in line with the median forecast of economists, Markit Economics Ltd. said. The gauge has held above 50, the dividing line between expansion and contraction, for two full years. (Source: Bloomberg) China: Manufacturing gauge rebounded in March, suggesting stimulus efforts have started to bolster factories in the world's second-largest economy. The government's manufacturing Purchasing Managers' Index was 50.1 last month, from 49.9 in February, according to the statistics bureau and the China Federation of Logistics and Purchasing. Numbers above 50 signal expansion. (Source: Bloomberg) Crude Oil: Trims gains after rising most in 2 months on shrinking output. Oil trimmed its third weekly gain after rising the most in two months as U.S. crude production dropped from the highest level in more than three decades. U.S. output shrank by 36,000 barrels a day to 9.39 mbpd last week, the first decline since January, a government report showed. Drillers have idled 762 rigs since December to the lowest level of active machines in four years after prices almost halved in 2014. Brent for May settlement climbed USD 1.99, or 3.6%, to USD 57.10/bbl on the London-based ICE Futures Europe exchange. The European benchmark crude ended the session at a premium of USD 7.01 to WTI. (Source: Bloomberg)     Key Indices Value YTD (%) Daily (%) KLCI 1,826.3 (2.2) (0.2) JCI 5,466.9 27.9 (0.9) STI 3,447.0 8.8 0.0 SET 1,525.6 17.5 1.3 HSI 25,082.8 7.6 0.7 KOSPI 2,028.5 0.9 (0.6) TWSE 9,507.7 10.4 (0.8) DJIA 17,698.2 6.8 (0.4) S&P 2,059.7 11.4 (0.4) FTSE 6,809.5 0.9 0.5 MYR/USD 3.699 12.9 (0.1) CPO (1mth) 2,142.0 (18.5) 0.3 Crude Oil (1mth) 50.1 (49.1) 5.2 Gold 1,204.0 0.2 1.7 TOP STOCK PICKS Buy rated large caps Price Target Tenaga Nasional 14.36 16.00 Sime Darby 9.26 10.20 Genting Malaysia 4.14 4.60 Gamuda 5.11 6.00 Westport 3.90 3.80 SP Setia 3.44 4.07 AFG 4.75 5.30 Hartalega 8.36 8.50 Inari 3.28 3.95 MBM Resources 3.34 4.20 Vitrox 3.23 4.05