Thursday, November 4, 2010

UOBKH: Malaysia Strategy

STRATEGY: Following the market-neutral Budget 2011, we retain our end-11 target of 1,635 for the FBMKLCI, based on 14.5x forward PE, slightly below the post-Asian financial crisis average of 15x as we conservatively provide for a slight earnings shortfall after the global inventory replenishment cycle. Nevertheless, there could be upside to the market multiple so long as the global liquidity run rages on – the FBMKLCI’s theoretical +1 SD multiple would be 16.6x (vs 19.9x in Jan 08). For sectors, the accelerated execution of projects underpins our OVERWEIGHT calls on the construction and property sectors, although potentially imminent measures by Bank Negara Malaysia against non first-time home loan borrowers could temporarily dampen sentiment in the property sector. Banks (OVERWEIGHT) are still the most effective proxies to a rising investment cycle in Malaysia. Overall, our top picks are Genting Bhd, Kuala Lumpur Kepong, CIMB, UMW Holdings and WCT. The likely privatisation of PLUS has accentuated the need for high-yield and low-beta companies, and we pick KLCC Properties, Berjaya Sports Toto and DiGi as potential replacement candidates.

CIMB: MAS Navigating towards best in class

Malaysian Airline System Bhd
RM2.15 Target: RM3.00
Navigating towards best in class

Unveiling the new B737-800

Maintain OUTPERFORM and target price of RM3. Our viewing of Malaysia Airlines' newly arrived B737-800 (B738) yesterday morning left us impressed by the improvement in standards of passenger comfort that MAS had put into the new aircraft. These new planes will gradually improve the quality of MAS's flight offerings to the standards of the best of its peers. As a result, we believe that MAS is on the right track and we retain our positive view and OUTPERFORM rating on the stock. Potential re-rating catalysts include the fleet renewal drive and its impact on structural costs and product quality, the winding down of its expensive fuel hedges, and sectorwide yield and demand recovery. Our target price remains at RM3, still based on 6x CY12 EPS, and our earnings forecasts are unchanged.

Highlights of the B738
MAS's newest plane, the B738 arrived in Malaysia on 1 November and was available for viewing by invited guests yesterday. We note the following features in the new plane.

Seating. There are in total 160 seats, comprising 144 economy class and 16 business class seats. In contrast, the old B737-400 (B734) has a total of 144 seats, 128 of which were economy class and 16 first class. Both new and old planes seat the front cabin in a 2-2 configuration while economy class is in a 3-3 configuration.

Seat colour and pitch. The seats are fitted with leather of a dark blue colour in business and dark brown-maroon in economy, in contrast to the multi-coloured fabric seats of the older plane. However, the seat pitch and width appears unchanged and the seats will continue to be a tight fit for larger- or taller-than-average passengers.

Entertainment. The B738 is equipped with the best-in-class in-flight entertainment systems from Panasonic, with touch screen features, a mini keyboard at the back of the controller and the promise of plenty of movies and other entertainment though none was loaded into the system during our visit. Each passenger has personal access to his own in-flight entertainment system. At the moment, MAS does not have personal in-flight entertainment for its short- and medium-haul B734 and A330 planes. Only long-haul B747 and B777 planes are equipped with them.

Other features. Economy class passengers will be able to access three-pin power sockets that can be used for laptops, portable DVD players or other electronic devices. In addition, there is a USB port for pen drives and for charging devices. Passengers can work on their documents carried on pen drives by plugging it into the USB slot. These features are not available in the older B734. The B738 aircraft is also fitted with LEDs that emit different mood lighting.

What we like about the B738. The introduction of the personal in-flight entertainment is the most significant improvement from the perspective of the passenger, in our opinion. This will address the service quality gap relative to the best-of-breed like Singapore Airlines. We observe that the in-flight systems and other features like the USB port and electricity supply on the new B738 planes are very similar to the newest systems on SIA's A380, A330 and B777-300ER planes, and should delight the customer. However, only the B738s that are deployed regionally will have the personal in-flight entertainment. The planes intended to service domestic destinations will not have this feature.

From the perspective of the airline, the newer plane will be less costly to operate as it has more seats, greater fuel efficiency and reduced maintenance cost. The existing B734s are the oldest aircraft in MAS’s fleet and have an average age of 16 years. Our rough guess is that the new B738 is about 20% more efficient than the B734 on a total cash operating cost basis including major savings on fuel consumption and maintenance.

What we like less about the B738. The planes are equipped to fly a 5-6 hour radius, whereas the older B734 is deployed on flights of up to four hours only. However, the seat pitch on the newer plane is no different than the older model and could be uncomfortable in economy class for longer flights, especially if the passenger in front reclines his seat. Also, in our opinion, the leather seats feel rather masculine and business-like, in contrast to SIA's light-coloured and comforting fabrics, which are more welcoming and feminine. This is of course a matter of personal preference but we do feel that the dark hues of the leather weigh down the in-cabin atmosphere. Nevertheless, this may not be a key deciding factor when travellers choose which airline to fly with.

First two planes to be based in KK, and serve Haneda, Japan. MAS will base the first two B738s in Kota Kinabalu and will serve Haneda and other destinations from that city. Its maiden flight from KL to KK will be on 15 November. The third B738 will be received this year but is likely to start active service only from next year.

Displaced B734s to go to Firefly? Firefly is hosting an analyst/media briefing on Monday, 8 November. We suspect that this could relate to Firefly obtaining approval from the government to commence jet services from KLIA. Currently, Firefly operates seven 72-seater ATR72-500 propeller planes and its fleet will rise to 10 by January 2011. Firefly may be taking over some of MAS’s old B734s, which have been replaced by the B738s, to launch services to several regional or domestic destinations. As a relatively new company, Firefly’s cost structure may be lower than for MAS and this could make several marginal routes viable in Firefly’s hands. In this way, MAS may be trying to replicate the two-brand strategy that Australia’s Qantas and Jetstar have executed successfully.

Valuation and recommendation
OUTPERFORM maintained. Our tour of the new B738 affirms our view that MAS is on the right track strategically and should transform itself materially in the next few years. The new aircraft boasts a modern in-flight entertainment system, which should increase passenger satisfaction. Pilot and staff morale will also be improved while structural costs like fuel efficiency and maintenance expenditure may be reduced.

Furthermore, MAS can use the opportunity to execute new strategies like using Firefly to launch flights to secondary cities.

MAS’s interim results fell short of our earnings expectations because of its high fuelhedging losses and weak yield momentum. We note that some of these issues are slowly dissipating, with the proportion of expensive fuel hedges falling from 60% of this year’s requirements to 40% in 2011. Also, MAS began raising its fares after the interim results and the positive impact on yields will be felt in 2H. In its recently announced operating statistics, the carrier achieved a load factor of 79.6% for its international business in 3Q10, 2.7% pts higher than last year’s 76.9%, despite increasing ASK capacity by 4.6% yoy. This suggests that yields should move up more strongly for MAS in 3Q due to robust demand.

Potential re-rating catalysts include the fleet renewal drive and its impact on structural costs and product quality, the winding down of its expensive fuel hedges, and sectorwide yield and demand recovery. Our unchanged target price of RM3 continues to be based on 6x CY12 EPS and our earnings forecasts are unchanged. MAS is currently our top pick in the aviation sector

KE: Berlian Laju Tanker Not just an Indonesia play

Berlian Laju Tanker
Share price (S$) 0.05
Issued shares (m) 11,551
Market cap (S$m) 577.5
52‐wk price range S$0.08‐0.205

Recent developments: BLT completed a 1‐for‐1 rights issue exercise in July this year, raising US$131m in new shares. The intention is to acquire more vessels in order to pursue cabotage opportunities in Indonesia, where management anticipates above‐normal returns.

Our view
Not just an Indonesia play. BLT is an international shipping company with 25% of its revenue coming from outside of Asia (Indonesia 9%). Having acquired US‐based Chembulk Tankers LLC for US$850m in 2007, it has become one of the largest chemical tanker operators in the world, with a young operational fleet of 63.

Above‐normal returns due to cabotage. Under this principle which is being implemented in stages from 1 January 2010, all domestic shipping‐related services must be Indonesian‐flagged and majorityowned, creating a domestic monopoly. For example, in one VLCG contract awarded by Pertamina in January this year, BLT estimated a project IRR of 21% and equity IRR of 49%.

Shareholders have taken the pain, time to buy low? BLT was caught on the wrong end of the last shipping cycle, having bought Chembulk at the peak and overextended itself to 4x debt‐equity. While the move was applauded by the market at the time, pushing its share price to a high of $0.355, shareholders have had a torrid time since. But with the overall economy on the mend, chemical tanker rates are bottoming out and value for BLT may have emerged.

Wednesday, November 3, 2010

MIIF: 3Q2010 Result

CIMB: likely to at least take out the recent 3,220 high

Indicators continue to show progress. Prices are likely to at least take out the recent 3,220 high. The trend line resistance is at 3,225 today. If this trend line is taken out on volume, then it could climb further towards the 3,301 levels next. A deeper correction to below the 3,000 levels is very possible if the latter support gives way

Tuesday, November 2, 2010

Phillip: STI Technical review

The STI shot up from the opening yesterday, rallying on the better than expected Chinese PMI (PMI details in next section).

The expected test of the 3150/60 region did not materialise and the current close puts the STI back into the trading range of 3200 and 3150/60 again. Trading after the PMI number went sideways, hovering just short of the 3200 round number.

Once again, we will have to wait for a breakout from the range. This depends largely on how the major announcements in the US turn out. The broad markets seem to be anticipating a positive result. If that materialises, we could see the STI push a new high for the year, past 3220.

Technical scenarios are currently as follows: (1) a close below 3150 would heighten the odds of the head and shoulders formation continuing to unfold. (2) A rally past 3220 would invalidate it and signal a continuation of the STI’s advance. (3) Between 3200 and 3150, the STI is range bound.

MAS gets first B737-800

MIDF: Stronger ISM won't prevent more QE

The rebound in the ISM manufacturing index in October will not prevent the US Fed from announcing more quantitative easing (QE) on Wednesday. September's personal spending and income data showed that spending growth has slowed and income has fallen. But the stronger ISM may provide room for the US Fed to limit its additional asset purchases to $500bn or aim lower.

• A surprise rise in ISM: The increase in the ISM index, to a five-month high of 56.9 (consensus 54.0) from 54.4 in September, points to annual GDP growth of around 4%. The index remains below April's peak of 60.4, suggesting that the industrial recovery has faded. Nonetheless, the danger that the economy is heading back into a recession has receded.

• New orders, production and employment indices all rose: In particular, the gain in employment indices to 57.7 from 56.5 is consistent with manufacturing payrolls rising by around 30,000 per month, which is better than the falls in August and September. We still think that total payroll employment in October rose by close to 50,000 (data due Friday).

• Real spending losing momentum: The 2.6% annualised increase in real consumption in 3QCY10 could be attributed to stronger spending at the end of the summer. But real spending rose by just 0.1% m/m in September, from 0.3% in August, indicating signs of losing momentum. This is not surprising as income growth has weakened. Personal incomes fell by 0.1% m/m in September -- the 1st decline since July CY09, while real disposable income fell by 0.3% m/m.

• Savings funding consumption: The current household spending pattern shows it is being funded by saving. This is reflected by the dip in savings from 6.0% in June to 5.3% in September. Looking at the current environment, we are of the opinion that consumption cannot outgrow income for long.

• Weak growth and low inflation to stay: We believe the US GDP growth will no longer set to slow down sharply nor is it strong enough to bring down unemployment. On that note, we are of the opinion that embarking on more QE alone will not change this, implying strong room for weak growth and low inflation

CIMB: Berlian Laju Tanker stays an Outperform

BLTA stays an Outperform with a target price of Rp680, reflecting a small discount
to its fully-diluted sum of parts. Although chemical tanker rates are expected to remain weak in 2010-11 before rising in 2012, BLTA is trading at only 0.6x P/BV. The share price could be catalysed by the potential listing and growth of its cabotage business.

source: cimb REGIONAL SHIPPING MONITOR Week ended 29 October 2010

HwangDBS:what’s next for FBM KLCI?

The key barometer is now riding on a positive momentum within a mini upward sloping passage (see chart), the possibility of intermittent market corrections still exist. If the FBM KLCI – after climbing in 18 out of the past 22 weeks for a cumulative gain of 236.5-point or 18.6% – slides below the resistance turned- support level of 1,495, then the second support line is seen at 1,465. Any pullbacks, nonetheless, will probably be short and shallow, which have been the case since late-May this year

Monday, November 1, 2010

HLG: FBM KLCI Upside Bias

 Key regional markets are expected to continue their cautious mode this week, ahead of the US mid-term election, FOMC meeting and Oct payroll report. Nevertheless, Bursa Malaysia could buck the other markets (please refer to the key global indices table) due to positive expectation of the Nov reporting season, as well as improving sentiment following the splendid debut of MHB, which will provide a much-needed booster for the soon-to be- listed Petronas Chemical (prospectus launch this week). 

As the FBM KLCI had already overcome the Oct 14’s high of 1504, there could be more upside in the near term but expect heavy selling pressures near the historical high of 1525 whilst support levels are situated around 1493 (10-d SMA), 1480 (30-d) and 1472 (40-d).

MIDF: FBM KLCI Market Review

FBM KLCI closed 2.9% higher in October, the third best October return in 7 years. November is a less volatile month, as evidenced by the charts below. However, we note that November had been rather uneventful in the last 3 years. November 2010 could spring a surprise, like it did in 2006 when it gained 9.3%. This could happen should there be a new wave of foreign fund fl ow as aforementioned.

• All eyes will be on the double by-election on Nov 4. Results in favour of the government could heighten expectation that an early General Election may be called (probably early 2012, according to Tengku Razaleigh). This may trigger a rally in election stocks. The usual suspects to benefi t from an election-theme rally would be construction players. We identified last week WCT Engineering as one of the big-cap laggards this year. Malaysia’s 13th General Election must be held in 2013 or before 2013. Sarawak’s state election is to be held before July 2011.

• At this juncture, we are discounting the November 12 OPR decision as another potential market catalyst. The ringgit weakened last week amid news that the central bank was stemming the strength of the currency. Raising OPR will be at odds with such a stance.

• It is possible that November will kick off in an explosive fashion as the ingredients for a rally are there. We are looking at the FBM KLCI hitting 1530, surpassing the previous high of 1524 in a liquidity driven market. This is a 1.62% upside from Friday’s close of 1505.66. The focus should be on the non KLCI component stocks.

We recommended last week, 10 laggard stocks among Bursa’s top 100 stocks by market capitalisation. Of the 10, the 3 non-KLCI stocks are Sapuracrest, Mah Sing and WCT Berhad.

DBSV: Straits Times Index Technical Outlook

We had lifted our objective to 3438 early in October and maintain this view. The current pullback from 3220, which is near the 3250 short-term resistance, has not violate important support levels denoted by the 1) rising trend line (shown) 2) the 65-day exponential moving average at 3072 and 3) the early August high near 3050.

The pullback has allowed the overbought daily oscillators to ease to neutral or oversold levels. The daily stochastics has fallen to an oversold reading of 10 and the 14-day RSI to a neutral 47.7.

We believe that the support levels started above will hold and this may even be a tat higher at 3100. We maintain our view for STI to trend higher to 3438 by 1Q11.

Phillip: AIMS AMP Cap Industrial REIT– 2QFY11 Results

AIMS AMP Cap Industrial REIT– 2QFY11 Results
Hold (Unchanged)
Closing Price S$0.225
Target Price S$0.24 (+6.7%)
52w k High (11/5/2009) 0.24
52w k Low (12/8/2009) 0.18

• 2Q11 revenue of $16.8 million, net property income of $12.0 million, distributable income available to unitholders of $8.3 million.
• 2Q11 DPU 0.3968 cents
• Maintain Hold recommendation with target price of $0.24

AIMS AMP Capital Industrial REIT (AAC) recorded 2Q11 revenue of $16.8 million (+42.1 % yy, +4.7% q-q), net property income of $12.0 million (+3.0% y-y, +2.5% q-q) and distributable income available to unitholders of $8.3 million (+55.2% y-y, +0.6% q-q). AAC will pay out 97.5% of the distributable income and DPU for the quarter was 0.3968 cents (-79.5% y-y, - 26.2% q-q). Revenue and distributable income has been stable since 4Q10 when AAC added four properties to its portfolio. Occupancy rate was also stable and has risen steadily to reach 98%. Correspondingly DPU suffered dilution from the same period in 4Q10 due to new units issued to fund the purchase. Additionally, 2Q10 DPU was 26% lower than the previous quarter due to a rights issue conducted in October in which 513.3 new units were issued.

Earlier in October, AAC completed the purchase of a property for a consideration of $161 million funded with a mixture of debt and equity. As of 30 Sep, total portfolio was $640.1 million, including the additional property, portfolio value would be $803.9 million. Total debt post acquisition is approximately $290 million and gearing rises to 34.8%. NAV per unit post acquisition is $0.26.

2Q10 result does not include any contribution from the October acquisition and therefore, we are expecting subsequent quarters to show improvement. 2Q10 DPU included the newly issued units and was therefore substantially lower. We are forecasting 2H11E DPU to be 0.851 cents which should bring full year FY11E DPU to 1.785 cents. This translates to a yield of 8%. We are revising up our target price slightly to $0.24 derived from a DDM model and maintaining Hold recommendation.

Mercury: Finally a close above 1,500 level

The market had finally found its footing above 1,500 level on 29/10/2010 after few unsuccessful attempts to do so earlier. It was not a surprise at all to see a settlement above 1,500 level last Friday, because we had been highlighting this possibility consistently earlier in our market reports that …. “Any attempt(s) to trade into 1,500 zone must be accompanied by strong determined buying power as profit taking pressure would sure to show up at and above 1,500 level for the first 3 attempts.”.

What would it imply for today’s market (1/11/2010) ? There was good follow thru buying on 29/10/2010 above 1,500 level, as a “decision” to break upward was finally made after few rounds of tests to gauge the response of what other traders thought about the 1,500 level upside breakout. Stock index would still need to strengthen its footing at 1,500 level as traders with winning trades would continue to lock in their profits on 1/11/2010. We need to see a minimum of 3 closes above 1,500 level for 3 days in a row before new buying confidence can be expected to show up.
Psychologically, 1,500 level to remain a “barrier” as the last time this 1,500 level was broken, it was in 11/1/2008. And, FBM KLCI only spent 3 trading days above 1,500 with stock index reached the highest high of 1,524.69 on 14/1/2008 before succumbed to profit taking pressure.

Conclusion :
Market outlook remained friendly as KLCI was still trading above 50-day MA with key market support level pegged at 1,440; but, 1,475 level should act as immediate support.
The analysis of overall daily market action(s) on 29/10/2010 revealed that buying power(s) was stronger compared to selling pressure(s), FBM KLCI would thus likely to trade above 1,505.66 .
Warren E. Buffett(沃伦•巴菲特)
Be fearful when others are greedy, and be greedy when others are fearful
别人贪婪时我恐惧, 别人恐惧时我贪婪
投资只需学好两门课: 一,是如何给企业估值,二,是如何看待股市波动
吉姆·罗杰斯(Jim Rogers)

乔治·索罗斯(George Soros)



高估期间, 卖对, 不卖也对, 买是错的。
低估期间, 买对, 不买也是对, 卖是错的。

Tan Teng Boo

There’s no such thing as defensive stocks.Every stock can be defensive depending on what price you pay for it and what value you get,
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