Malaysia Daily, Maybank KE (2015-06-24)

Daily 24 June 2015 INITIATING COVERAGE Malakoff Corporation: Buy (New) Deleveraging for future growth  Shariah-compliant A low-risk power exposure that could potentially play catch-up to the theme for defensives. Growth opportunities beckon in the form of new generation projects and/or potential M&A, hence the deleveraging. Initiate coverage with a BUY rating and MYR2.00 TP. Click here for full report » RESULTS REVIEW Gamuda: Maintain Buy Stay tuned  Shariah-compliant 3QFY15 marginally below due to slower progress of KVMRT 1. We nudge down FY7/15 net profit forecast by 5%. Key beneficiary of infrastructure projects. Maintain BUY with an unchanged MYR6.00 RNAV-TP. Click here for full report » COMPANY UPDATE IOI Corporation: Upgrade to Hold Partners Kerry Group on Betapol  Shariah-compliant IOI Corp sells 50% of Betapol business to Kerry Group for USD25m in its bid to grow this nutrition lipid business faster. While positive for the long term, we expect muted near term earnings contribution to IOI Corp. Limited catalyst. HOLD with an unchanged TP of MYR3.85. Click here for full report » ECONOMICS Singapore CPI, May �15 Headline deflation stays Headline deflation eased to -0.4% YoY in May 2015 (Apr 2015: -0.5% YoY) as higher "Private road transport" cost partly balancing decline in "Housing and Utilities" cost. Core inflation (CPI ex-accommodation and private road transport) continued to rise but by a slower +0.1% YoY (Apr 2015: +0.4% YoY). Tweak our 2015 headline CPI forecast to 0%-0.5% (2015 YTD: -0.4%), with full-year inflation looks likely to be at the lower end of the range. Click here for full report » Technicals A pyrrhic index rebound The FBMKLCI declined 5.90 points to 1,726.86 yesterday, while the FBMEMAS and FBM100 also closed lower by 33.52 points and 39.21 points, respectively. We recommend a �Range Trading� stance for the index. Trading idea is a Short-Term Buy on PARAMON with upside target areas at MYR2.06 & MYR2.55. Stop loss is at MYR1.68. Click here for full report » Other Local News Automotive: Toyota Capital Malaysia to raise MYR2.5b. Toyota Capital Malaysia Sdn Bhd is setting up an Islamic debt note programme to raise up to MYR2.5b, which is the largest to date for a Japanese corporate in Malaysia. This landmark transaction reflects the continued interest by Japanese corporates in Malaysia to tap the debt capital markets as an alternative source of funding. Toyota Capital had on Tuesday signed the agreements with CIMB Investment Bank and Bank of Tokyo-Mitsubishi UFJ (Malaysia) (BTMU Malaysia) to set up a commercial papers programme and a medium term notes programme (MTN programme) together with an Islamic commercial paper programme and an Islamic MTM programme. (Source: The Star) Oil & Gas: Petronas may face legal action on LNG project in Canada. Petroliam Nasional (Petronas), which failed to get British Columbia (BC) aboriginal group Lax Kw'alaams to accept its CAD1.15 (MYR3.42b) cash offer, now may face legal action from the group. The group that claims title to land earmarked for the Petronas-led Pacific NorthWest�s CAD11b (MYR32.7b) liquefied natural gas (LNG) terminal said it would take legal action if its environmental concerns weren�t addressed. At this time, the project is still awaiting environmental approval from the federal environmental authority (Canadian Environmental Assessment Agency), although the BC provincial government has given it an environmental certificate. (Source: The Star) Tenaga Nasional: Plans USD2.7b Islamic bond after agreeing to power plant deal. Tenaga Nasional (TNB) plans to raise as much as MYR10b (USD2.7b) in an Islamic bond issue, sources familiar with the matter said � a move that comes after it agreed to buy debt-laden 1MDB's majority stake in a power plant project. The bond by TNB would be the largest sukuk globally this year, a major boost for the sukuk market after issuance fell in the first quarter to its lowest point in four years. (Source: The Sun Daily) Tanjong Offshore: Files reports with police, MACC. Tanjong Offshore has lodge a police report on the group's acquisition of a chromite mine in the Philippines and a rubber-material substitute plant in China. It has also made a formal complaint to the Malaysian Anti-Corruption Commission (MACC) regarding a property purchase in the United Kingdom. The three deals were negotiated and executed under the previous board of directors and were identified as irregular following a forensic audit by Ferrier Hodgson. (Source: The Edge Financial Daily) Fututech: To launch MYR300m project in Gohtong Jaya in 4Q. Property developer and builder Fututech said it will stay focused on high-rise developments which offer higher margins, with its maiden serviced apartment project planned for launch in Gohtong Jaya, Pahang. Dubbed Vista Residences, the 1.43-acre (0.58ha) project features a 27-storey tower housing 378 high-end serviced apartments and 31 retail lots with total gross development value (GDV) of MYR300m. (Source: The Edge Financial Daily) Outside Malaysia U.S: Orders for capital goods in May rise as investment stabilizes. Bookings for non-military capital goods excluding aircraft rose 0.4% last month after a 0.3% decrease in April, data from the Commerce Department showed. Orders for all durable goods - items meant to last at least three years - declined 1.8%, reflecting a drop in the volatile aircraft category. The data indicate the worst of the slump in business investment in the oil patch may be over as fuel costs steady, which would alleviate a source of weakness for the economy. Exports will probably take longer to rebound as the dollar's appreciation makes American-made goods less competitive globally. (Source: Bloomberg) U.S: Sales of new homes in May rise to highest level in seven years, signaling the industry is gaining momentum heading toward the second half of the year. Sales climbed 2.2% to a 546,000 annualized pace, the most since February 2008. Readings for February through April were revised up. (Source: Bloomberg) EU: Economy picks up as business index hits four-year high. An index of euro-area factory and services unexpectedly rose to the highest in more than four years this month as growth gained momentum in Germany and France, the bloc's two largest economies. Market Economics said that its composite index increased to 54.1 from 53.6 in May. That's above the 50 mark that divides expansion from contraction and exceeds the median estimate of economists, who forecast it would slip to 53.5. (Source: Bloomberg) E.U: ECB said to raise cap on emergency liquidity for Greek banks. The European Central Bank increased the cap on emergency liquidity for Greek lenders for the fourth time in less than a week, said a person familiar with the matter. The Governing Council raised the limit on the funds in a telephone conference, the person said, without specifying the size of the increase. The person asked not to be identified as the call was private. An ECB spokeswoman declined to comment. (Source: Bloomberg)     Key Indices Value YTD (%) Daily (%) KLCI 1,726.9 (2.0) (0.3) JCI 4,937.6 (5.5) (0.4) STI 3,339.8 (0.8) 0.7 SET 1,503.2 0.4 (0.1) HSI 27,333.5 15.8 0.9 KOSPI 2,081.2 8.6 1.3 TWSE 9,391.1 0.9 0.5 DJIA 18,144.1 1.8 0.1 S&P 2,124.2 3.2 0.1 FTSE 6,834.9 4.1 0.1 MYR/USD 3.739 6.9 0.2 CPO (1mth) 2,210.0 (3.5) 0.2 Crude Oil (1mth) 61.0 14.5 2.2 Gold 1,178.6 (0.5) (0.6) TOP STOCK PICKS Buy rated large caps Price Target Tenaga Nasional 13.06 16.00 Axiata 6.49 7.60 Genting Malaysia 4.22 4.60 Gamuda 4.94 6.00 SP Setia 3.21 4.07 MBM Resources 3.49 4.20 Inari Amertron 3.42 4.05 Vitrox 3.39 4.05