Tuesday 13 March 2012

OSK188- 13 March 2012: Daily Research Report (English Version)


On The Platter
REGIONAL PLANTATION (NEUTRAL) Sector Update: Indonesian Palm Oil Pours in Malaysia’s palm oil inventory rose to 2.06m tonnes in February due to the sharp increase in processed palm oil imported from Indonesia, without which the inventory would have been flat m-o-m. We suspect this is temporary and will only artificially suppress palm oil price. Although we believe palm oil price can still scale higher due to potentially disappointing production in the near term, we are concerned about a potential pullback in soybean price. On further price strength, we would suggest a tactical sell on plantation stocks. Maintain Neutral on sector.

KIMLUN (FV RM2.37 - BUY) Company Update: Record Year in The Making

Market Review
Cautious trading. The  FBM KLCI ended at 1,564.75, down 14.25 pts, as  investors unloaded their holdings on continuing concerns  over China's growth outlook following a huge trade deficit. Losers led gainers 516 to 260 while 318 counters were unchanged. Among the key market news today are Malaysia’s IPI grew at the slower pace in January 2012, Datuk Mohd Kamil Jamil strongly tipped  to head Proton, AirAsia X will stop operating the loss-making Christchurch route, Khazanah sells stake in Indian lender Yes Bank for USD105m, Kimlun bags RM151.6m jobs and Paramount pays RM125m for industrial land in Selangor. Overnight, US blue-chip stocks extended gains into a fourth session on Monday ahead of a monetary policy decision from the Federal Reserve and a rush of economic releases this week. The DJIA’s 37.69 pts climb to 12,959.71 may help to harness investor interest in the local bourse today.

EPF goes on selling spree
The Employees Provident Fund (EPF) sold a whopping RM441.09m worth of Malaysia-listed equities on 7 March alone, in line with its trend of active disposals over the last two weeks. Bursa Malaysia filings showed that on 7 March, the EPF along with its portfolio managers dumped a total 83.68m shares on the open market, substantially more than the 7.4m shares it had acquired the same day. The number of shares disposed of represents almost half the total volume traded that day, which stood at 173.14m shares. Fund managers reckon that the fund was merely taking profit but its aggressive selling had dragged the FBM KLCI down from its all-time high last week. (StarBiz)

REDtone eyes government projects worth RM800m
REDTONE International, a communications  solutions provider, is bidding for government projects worth up to RM800m. REDtone managing director Datuk Wei Chuan Beng added that he expected revenue contribution from the public sector to be more "balanced" over the next few years. Currently, contracts from the government and related agencies contribute about 30% of the company's revenue.(BT)

PFCE in RM300m deal to transform into O&G player
Loss-making PFCE will transform into an oil and gas (O&G) counter after DAT Group SB proposed to inject its wholly-owned unit, PFC Engineering SB (PESB) into the former for RM300m. DAT, which is owned by PFCE’s group executive chairman Datuk Abu Talib Mohamed and son Muammar Gadaffi, will be issued 500m new PFCE shares priced at RM0.60 per share, which will result in them controlling 91% of PFCE. In a statement yesterday, PFCE said the deal will give it an immediate presence in the O&G industry. (Malaysian Reserve)

Kimlun secures RM152m job
Kimlun Corp has secured two construction projects in Johor Bahru totaling RM151.6m, bringing the construction company’s estimated outstanding orderbook to about RM1.5bil. The first project is the construction of service apartments and ancillary buildings and the second, the construction of 244units of houses. The first project’s total contract sum is RM114.7m and is expected to be completed in Feb 2014. The second project total contract sum is RM36.9m, with an estimated time of completion in Sept 2013.  (Malaysian Reserve) Please see accompanying report

1Bestarinet to kick off soon
The government’s 1Bestarinet project is in the process of being implemented by YTL Communications SB (YTL Comms), a unit of YTL Power International. Although no official  announcement has been made by the government on the project award, sources said that YTL Comms has already rolled out the service to a number of schools in the Klang Valley, having started doing so from Dec 2011.  (Financial Daily)

AirAsia X axes NZ route
AirAsia X SB will stop flying the loss-making KL-Christchurch route effective end-May due to volatile jet fuel prices. Christchurch will be the fourth destination the long-haul low-cost carrier has withdrawn from in recent months after announcing that it would stop flying to London, Paris, Delhi and Mumbai. AirAsia X CEO Azran Osman-Rani told The Edge yesterday that the capacity from Christchurch would be redeployed to Taipei, Perth and other routes. He said in a statement that since the suspension of its flights to Europe and India, the airline has increased flight frequencies to Tokyo and a new route to Sydney. (Financial Daily)


ECONOMIC HIGHLIGHTS
Malaysia: Moderate growth in Jan IPI Malaysia’s January industrial production grew at a moderate pace, in line with market expectations. It went up by 0.2% year-on-year in January, as polled by Business Times. The increase was due to the growth by the manufacturing index (1.2%) and electricity index (2.7%) while mining posted a decline of 2.7%.  The  Statistics Department in releasing the data said weakness in January could stem from fewer working days from an earlier Lunar New Year (versus Feb 2011). Considering January and February data in tandem will provide a better read on industrial production growth, it said. (Bloomberg)

Vietnam: Cuts benchmark rates to support growth amid slowdown
Vietnam cut its interest rates to support a slowing economy even as the nation faces Asia’s fastest inflation. The State Bank of Vietnam reduced the  refinancing rate for the first time since 2009 to 14% from 15%, effective today, it said in a statement on its website yesterday. It also cut the discount rate to 12% from 13% and the dong deposit cap for terms of one-month and above to 13% from 14%. (Bloomberg)

India: Industrial output growth beats estimates
India’s industrial production unexpectedly rose at the fastest pace in seven months in January, weathering the highest interest rates since 2008 and weaker global growth. Output at factories, utilities and mines advanced 6.8% from a year earlier, after a revised 2.5% climb in December, the Central Statistical Office said in a statement in New Delhi yesterday. The figure exceeded all 26 estimates in a Bloomberg News survey. A history of swings in the data may prevent the report from easing concern that the cost of credit and the impact of Europe’s debt crisis are dimming India’s economic outlook. (Bloomberg)

EU: Ministers head toward final approval of second Greek rescue
Euro-area finance ministers will move toward completing the next Greek bailout this week as they meet in Brussels last night. Luxembourg Prime Minister Jean-Claude Juncker, who heads the group of euro-region finance ministers, said he had “no doubt” that a second bailout program for Greece would be approved and he expected a final decision on 12 March. (Bloomberg)

EU: Italy GDP data confirms 'technical' recession
Italy's gross domestic product declined by 0.7% in the fourth quarter, compared to the three months in the prior quarter, Italy's statistical office, ISTAT. Compared to the year-ago quarter, GDP fell 0.4%. The figure was in line with expectations and confirmed a preliminary estimate released in February. The data confirmed that Italy hasnow experienced two consecutive quarters of shrinking GDP, the technical definition of an economy entering recession. (Bloomberg)

US: Federal Reserve to test 19 banks’ capital against US recession scenario
The Federal Reserve will show how the capital of 19 US banks might fare through a deep recession and a second housing crisis when they unveil stress-test results in three days. The tests will show results for revenues, capital ratios and profits or losses  at each firm over a nine-quarter period, the Fed said in a paper released yesterday in Washington. The results will be released on 15 March. Templates included in the Fed release yesterday showed an array of categories it plans to disclose, from trading and counterparty losses to credit cards and first-lien mortgages.  (Bloomberg)


Source: OSK188

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