Malaysia Daily, Maybank KE (2015-05-12)

Daily 12 May 2015 COMPANY UPDATE Genting Malaysia: Maintain Buy Unloading GENHK stake GENM seeks to dispose its 17.8% shareholding in GENHK. At GENHK�s last price, GENM will receive MYR0.34/sh in cash. Neutral on this development. Maintain BUY and MYR4.60 TP. Click here for full report » SapuraKencana Petroleum: Downgrade to Hold Multiple contract wins; D/G HOLD Multiple T&I works in Mexico, Indonesia, Vietnam and India worth c.USD212m-USD269m lifts orderbook to MYR25.7b. Potential re-admittance into Shariah list this month is a short-term catalyst, but largely priced in. Downgrade to HOLD, risk-reward less compelling following a 24% rise in share price YTD; SOP-TP unchanged at MYR2.80. Click here for full report » Sunway: Maintain Hold Enhancing landbank in Klang Valley  Shariah-compliant Positive on Sunway�s latest land acquisitions in Kelana Jaya. The new development worth MYR1.8b could churn out an annual net profit of MYR72m (4sen EPS) from 2017 onwards. Fine-tune our earnings forecasts by -1% to -2%. Maintain HOLD with MYR3.29 TP (+4sen, on 0.59x P/RNAV target). Click here for full report » REGIONAL SECTOR UPDATE Regional Plantations: Maintain Neutral Weak exports remain a concern Malaysia�s Apr 2015 stockpile rose to 2.19m MT, hurt by weak exports. This will cap near term CPO price upside. Conversely, the recent widening of palm oil price discounts to soyoil, narrowing palm oil � gas oil spread, and increasing risk of El Nino will buffer CPO price on the downside. Stay NEUTRAL on the sector. Click here for full report » REGIONAL COMPANY UPDATE Singapore Airlines: Buy (New) 4QFY3/15F: Profits kicking in 4QFY3/15 results on 14 May. Expect core net profit of SGD165.7m vs. a core net loss of SGD0.9m in 4QFY3/14. Things are looking up with healthy demand and low jet fuel prices. Downgrade to HOLD (from BUY) as the current share price presents little upside to our target of SGD12. Click here for full report » First Resources: Maintain Buy Seasonally slow 1Q15 below on lower CPO ASPs achieved & sales volume. Cut EPS by 2-5%. Expect stronger quarters ahead as 1Q is seasonally its weakest production quarter. Maintain BUY for FFB output growth. Still our sector bellwether. Following EPS cuts, lower TP to SGD2.22 from SGD2.32 on unchanged 13x FY16 EPS. Click here for full report » ECONOMICS Industrial Production (IP), Mar 2015 "Pre-GST" growth Industrial output growth picked up in Mar 2015 on faster manufacturing activities amid sustained mining growth. Firmer growth in 1Q 2015 - especially in E&E, driven by consumer electronics - suggest pre-GST production and spending rush, hinting at better than expected GDP growth. The Department of Statistics will release services index for the first time as well as construction statistics later today which add to industrial production data in estimating quarterly GDP growth. Click here for full report » External Reserves, Apr 2015 Stabilised� for now External reserve rose in the second half of Apr 2015. As capital outflows and pressures on MYR receded and reversed. But we expect continued volatility in capital flows, currency and external reserves for the rest of the year. Click here for full report » Technicals Muted opening for the week The FBMKLCI fell 2.16 points to 1,805.49 yesterday, while the FBMEMAS and FBM100 also closed lower by 15.24 points and 13.96 points, respectively. We recommend a �Sell on Rallies� stance for the index. Trading idea is a Take Profit call on VSOLAR with downside target areas at MYR0.16 & MYR0.10. Click here for full report » Other Local News Tenaga: TNB won�t pay any price for Project 3B. No offer has been made by the government to Tenaga Nasional (TNB) to take over Project 3B, a 2,000MW coal-fired power plant which 1Malaysia Development (1MDB) has not been able to commence on time, said TNB president and chief executive Datuk Seri Azman Mohd. Azman acknowledged that TNB is keen to take over Project 3B amid concerns that any delay in the project would results in a power shortage in the future. He also said that TNB has not received any offers from the Energy Commission. "We will not pay a premium for the project. We will just pay them (1MDB) for costs incurred. If anything we will ask for a discount", said Azman. (Source: The Edge Financial Daily) Brahim's Holdings: Malaysia Airlines' caterer Brahim's agrees to new 25% lower contract. Brahim's Holdings explained that delays in payment that caused it to face cash-flow problems and left the company with no choice but for its 70% subsidiary to enter into a new catering contract with Malaysian Airlines (MAB), that comes with a shorter term and lower in price by up to 25%. The new catering agreement is for a period of five years with an option for additional five years renewal, subject to Brahim's 70% subsidiary, Brahim�s Airlines Catering Sdn Bhd meeting several conditions with regards to its service levels. (Source: The Star) Puncak Niaga: Water concessionaire Puncak Niaga may seek higher offer from Selangor. Selangor water concessionaire Puncak Niaga Holdings may seek a higher offer price for its water concession business from the Selangor government even as the company considers a fifth extension for the takeover deal to be concluded. Puncak Niaga had on Nov 11, 2014 signed a condition sale and purchase agreement (SPA) to sell its water assets in Selangor, Kuala Lumpur and Putrajaya to Pengurusan Air Selangor Sdn Bhd for MYR1.56b. The fourth extension for the deal expired yesterday. (Source: The Star) Manufacturing sales rebounded +4.4% YoY in Mar 2015 to MYR58.4b (Feb 2015: -2.6% YoY). Most segments reported higher sales led by "Electrical & Electronic" (Mar 2015: +8.8% YoY; Feb 2015: +6.9% YoY). However, "Petroleum, Chemical, Rubber & Plastic Products" sales fell for the fifth month by -1.4% YoY amid weak commodity prices. We calculated that 71% of manufacturing sales growth in Mar 2015 came from export-based industries which rebounded by +3.7% YoY (Feb 2015: -1.7% YoY). Domestic oriented sales in the meantime gained by +5.2% YoY, likely due to pre-GST demand (Feb 2015: +0.7% YoY). Salaries and wages growth tapered to +6.4% YoY in Mar 2015 from +7.2% YoY a month earlier while employment growth slowed to +0.4% YoY in Mar 2015 (Feb 2015: +0.9% YoY). (Source: DOS Malaysia; MKE) Outside Malaysia U.S: Home prices increase in 85% of cities, realtors group says as low mortgage rates and the strongest labor market in almost seven years spurred demand. Fifty-one areas had price gains of 10% or more, compared with 24 regions in the fourth quarter. Prices declined in 25 areas. The housing market is benefiting as employment returns to pre-crisis levels. Contracts to buy homes rose in March to the highest level for the month since 2005, according to the Realtors group. (Source: Bloomberg) China: Inflation misses estimates in April, providing room for easing. The consumer-prices index increased 1.5% YoY while producer-prices index fell 4.6% YoY, extending a record stretch of declines. The central bank has cut benchmark interest rates and the required deposit reserve ratio twice in the past six months to aid growth. Central bank chief Zhou Xiaochuan has flagged the risks of deflation in an economy that last quarter expanded at the weakest pace since 2009. (Source: Bloomberg) Indonesia: To cut taxes to near Singapore level in profits battle. Indonesia will gradually cut its corporate tax rate to discourage companies from booking profits in lower-tax countries such as Singapore, President Joko Widodo's top aide said. The government will cut the rate from 25% currently to "maybe 17.8 or 17.5%," Luhut Panjaitan, the president's chief of staff, said in an interview. The move adds to plans for a tax amnesty for citizens as the government tries to lift revenue collection. (Source: Bloomberg)     Key Indices Value YTD (%) Daily (%) KLCI 1,805.5 2.5 (0.1) JCI 5,172.5 (1.0) (0.2) STI 3,470.8 3.1 0.5 SET 1,501.3 0.2 (0.6) HSI 27,718.2 17.4 0.5 KOSPI 2,097.4 9.5 0.6 TWSE 9,663.7 3.8 (0.3) DJIA 18,105.2 1.6 (0.5) S&P 2,105.3 2.3 (0.5) FTSE 7,029.9 7.1 (0.2) MYR/USD 3.602 3.0 0.1 CPO (1mth) 2,178.0 (4.9) 1.5 Crude Oil (1mth) 59.3 11.2 (0.2) Gold 1,184.0 (0.0) (0.4) TOP STOCK PICKS Buy rated large caps Price Target Tenaga Nasional 13.80 16.00 Sime Darby 9.02 10.20 Genting Malaysia 4.30 4.60 Gamuda 5.19 6.00 SP Setia 3.45 4.07 AFG 4.76 5.30 Inari 3.30 3.95 MBM Resources 3.40 4.20 Vitrox 3.64 4.05 Axiata 6.74 7.60