Malaysia Business News From Newspapers, Blogs, Broker House.

Thursday, March 12, 2009

EquityFocus
SapuraCrest Petroleum (RM0.615): Fully Valued

– Stumbled at the final hurdle

§ FY09 net profit of RM116m (+48% YoY) was marginally below our RM124m forecast due to weaker 4QFY09 performance (-29% QoQ).
§ Cutting FY10-11 earnings forecasts by 7-8% with further downside should O&G activities remain lethargic over the next 24 months.
§ Maintain Fully Valued and RM0.74 TP (1x book), with no near term exciting catalyst.

Berjaya Sports Toto(RM4.60):
– Deportation déjà vu
§ We expect 3QFY09 results to be weak on poor revenue growth after two successive Mega 6/52 Jackpot strikes and high prize payout ratio.
§ Trimming earnings estimates by up to 8% to reflect tougher operating conditions (deportation of foreign workers and economic slowdown).
§ Assuming 75% net payout ratio for the whole year, investors can expect gross DPS of 21sen or 5% dividend yield from 2HFY09 alone.

Plantation: Underweight
– POC2009 – Sings a cautious tune
§ Six speakers forecast CPO price to range RM1,400-2,368/t in 2009-10. Mostly are in unison of an impending weaker CPO price outlook in 2H09 as production is set to pick up strongly.
§ Except for one speaker who focused on the supply equation, all others expressed uncertainties on the demand outlook in the wake of unprecedented global financial crisis and recession.
§ POC2009’s price outlook is in tune with our view of a weaker 2H09 price outlook amid a deep and protracted global recession that will impact overall demand. Maintain Underweight.

Economic Trends
Industrial Production, January 2009
– …
§ Industrial Production Index (IPI, 2005=100) contracted by 20.2% YoY in Jan ’09, pulled down by the worsening drop in manufacturing (-26.7% YoY) and further decline in mining (-6.1% YoY) which pull down electricity generation (-12.4% YoY).
§ The decline in manufacturing output was broad-based as both export-based and domestic-based manufacturing industries shrank, pointing to weakness in both external demand and internal demand.
§ We are barely halfway through this downturn in industrial output as the last two recessions (1998 and 2001) saw 12-13 months of consecutive monthly (% YoY) decline in industrial output – specifically manufacturing – versus current five straight months of drop.

Other Local News
§ Economy: New Committee To Monitor Stimulus Package Implementation
§ MMC- Gamuda: 6000 jobs planned from double-tracking project
§ Telekom Malaysia: To unveil access terms for high-speed broadband
§ TMI: USD1.4b rights offer price on Mar 27
§ Plantation: Bursa Malaysia plans Islamic trading in CPO

Outside Malaysia
§ U.S: Retail sales decrease less than forecast in sign of stabilization
§ U.S: Household net worth plunged by a record USD 5.1tr last quarter
§ U.S: Warren Buffett’s Berkshire has AAA credit rating cut by Fitch
§ Germany: Economy is industrial `war zone' as global slump throttles exports
§ Switzerland: Cuts key rate to 0.25%, will buy currencies to stem Franc gain
§ Japan: Economy shrank at 12.1% QoQ pace last quarter on export slide
§ China: Industrial-output growth slows as exports slide
§ India: Posts 1st back-to-back output fall in 16 years
§ S. Korea: Unexpectedly keeps rate at record-low 2%
§ Crude Oil: Trades near USD 47/bbl after surging as OPEC weighs production cut

Technicals
The market tumbled on persistent profit taking activities on weak sentiment due to the slowing economy

Monday, March 9, 2009

Below are the Overnight Brief by J.P. Morgan.

U.S.A. Equities
U.S. stocks slid into the close as market uncertainty overshadowed a deal that will fundamentally alter the landscape of the pharmaceutical industry. Against the recent trend banks held gains as investors hoped for more clarity on the government plan to firm up the financial system, with Fed Chairman Ben Beranke meeting with President Obama.

The Dow Jones Industrial Average lost 79.89 points, or 1.2%, to 6547.05. The S&P 500 gave back 6.85 points, or 1%, to 676.53. The losses were paced by telecoms, utilities and IT. Financials (+2.5%) closed alone in positive territory.The Nasdaq slid 25.21 points, or 2%, to 1268.64.

Volumes totalled 1.38bln shares on the NYSE where decliners beat advancers by 21 to 8. At the Nasdaq 1.96bln shares were exchanged and losers outpaced winners by 19 to 8.

The VIX "fear" gauge added 0.50 to 49.83.

1) M&A: Merck & Co. agreed to buy rival Schering-Plough in a $32.6bln deal. With the move, which would also assume $8.5 billion in debt, Merck is forsaking its traditional reliance on homegrown research and small acquisitions to propel growth. Schering-Plough brings to Merck biotech, consumer-health and animal-health businesses, as well as an expanded presence in high-growth markets outside the U.S. The Merck-Schering deal for cash and stock "is about size, it's about growth of in-line products and it's about diversity from a global standpoint," management said. Some $3.5bln a year in cost savings are anticipated beyond 2011. Schering-Plough is expected to "modestly" add to Merck's earnings, excluding charges related to the deal, in the first year after its completion and "significantly" thereafter. Schering-Plough shareholders
would get 0.5767 share of Merck and $10.50 in cash for each share they own. Based on Friday's closing prices, that values Schering-Plough at $23.61 a share, or a 34% premium. Merck shareholders would own 68% of the combined company. The deal is expected to close in Q4.

The Wall Street Journal reported that the board of Genentech is near a deal to sell the biotech staple to Swiss pharma company Roche for $95 per share, citing people familiar with the matter.

Dow Chemical and Rohm & Haas have reportedly reached a settlement for their $15bln merger.

2) Financials: AIG has pressed the federal government for its fourth bailout (worth $30bln) by warning that the insurer's collapse could set off a chain of events that would leave money-market funds floundering and European banks in disarray, Bloomberg reported, citing a 21-page
draft of the firm's presentation to government officials labeled "strictly confidential." The firm's fate "has the potential to trigger a cascading set of further failures which cannot be stopped except by extraordinary means," AIG said in the draft.

Bank of America soared 19% after a Barron's article said the bank can avoid the same fate as Citigroup by tightening up its operations, and could post strong earnings again once the financial crisis has passed. Wells Fargo (+16%)and USB (+15%) also posted sharp gains. General Electric Capital, the finance arm of General Electric (+5%), announced it would be selling guaranteed bank notes via the FDIC's Temporary Liquidity Guarantee Program. GE confirmed that the company was in the market for a benchmark deal under the TLGP but couldn't elaborate on timing or final terms. GE Capital will sell a benchmark-sized offering, meaning at least $500mln for each piece, which will include two- and three-year maturities. The final size has not been determined. Capital One (+5%) became the latest financial to announce a dividend cut, saying it was slashing its yield from 37.5 cents to 5 cents beginning in Q2 and holding into the future. The credit card company said the move will save $500 million annually.

3) Technology: Apple (-2.6%) was hit for a second straight session by an analyst's note suggesting the recession has caught up with the company. Thomas Weisel Partners lowered its price target for Apple shares while also cutting revenue and profit estimates for Apple's FY'09 & FY'10. On Friday, Apple shares fell as much as 6% after JPMorgan analysts did the same thing. "The global economy continues to deteriorate," which will slow sales of Apple's Macintosh computers and its iPhones smartphone, Thomas Weisel' wrote. An Apple spokesman had no comment.

4) Burgers: McDonald's (+0.4%) said its February same-store sales rose .4%. The fast-food chain's U.S. outlets outperformed the rest of the world last month, in contrast to past results showing international strength. U.S. same-store sales rose 2.8%, with McDonald's citing its breakfast offerings and chicken lineup. In contrast, Europe recorded a .2% decline, while the Asia-Pacific, Middle East and Africa region saw 0.7% growth, driven by Australia and Japan. Sales in China were muted in part because Chinese New Year fell in January this year.

5) Energy: In the oil market, fear of economic torpor was overcome by expectations of tightening supplies, as OPEC is expected cut production at a meeting next week in Vienna. The group's secretary general told reporters at an energy conference in Qatar that OPEC will cut its 2009 oil-demand forecast this week. Iraq's oil minister called for higher oil prices, saying the current level is not "profitable and fair" for producing countries, echoing similar remarks by Venezuela. Crude futures for April delivery rallied $1.55 to $47.07 a barrel. Contracts for May
delivery were not rallying as strongly, up $0.34 to $48.06. One floor trader said that narrowing of spreads along the futures curve suggests that the market may be bracing for a sustained run higher, perhaps to $60 in the next few months. "We're not overly glutted with inventories at this point. What you're seeing here is that we're getting back more to pure supply and demand moving this market."

6) Opinion: In one of the bleakest assessments yet, economists at the World Bank predicted that the global economy and the volume of global trade would both shrink this year for the first time since World War II. The World Bank said that the crisis that began with junk mortgages in
the United States was causing havoc for poorer countries that had nothing to do with the original problem. As a result, it said, nations in Latin America, Africa and East Asia have had not only their growth stifled but their access to credit as well. The bank's assessment for 2009 was grimmer than those of most private forecasters. It did not provide a specific estimate, but bank officials said its economists would be publishing one in the next several weeks. The World Bank warned that the financial disruptions are all but certain to overwhelm the ability of institutions like it and the International Monetary Fund to provide a buffer.

The head of the ECB said the world's economy is still slowing, but suggested a turning point could be near as massive fiscal stimulus packages, low interest rates and cheaper energy prices bolster prospects for growth. "We're approaching a moment where we might have a pickup," said ECB president Jean-Claude Trichet, in his most optimistic assessment to date of tentative signs of stabilisation in some markets. He cited a modest rebound in corporate bond markets as one positive sign. Trichet also suggested investors, who last week drove major U.S. tock indexes to 12-year lows, are underestimating the significance of government efforts. Policy makers worldwide have made "a very, very strong commitment ... not to let any systemic institution go under," Mr. Trichet said. This "may not be fully priced in by the market."

People's Bank of China Vice Governor Yi Gang said the fiscal stimulus
measures announced by China so far are appropriate and already seem to
be working. "At this point, I think the current package of the fiscal
stimulus is sound and it seems already effective," Mr. Yi said. "So at
this point, I think the current stimulus package is fine."

The man who predicted the current financial crisis said the US recession
could drag on for years without drastic action. Among his solutions: fix
the housing market by breaking "every mortgage contract." "We are in the
15th month of a recession," said Nouriel Roubini, a professor at New
York University's Stern School of Business. "Growth is going to be close
to zero and unemployment rate well above 10% into next year." Roubini
said he sees "no hope for the recession ending in 2009 and will more
than likely last into 2010." Roubini told CNBC that the risk of a total
meltdown has been reversed for now but that the economy is going through
"a death by a thousand cuts." He also said that "most of the U.S.
financial institutions are entirely insolvent." "The market friendly
view for the banks is nationalization," said Roubini. "Temporarily take
over the banks, clean them up and get them working again." He said that
while U.S. GDP next year could be zero, global GDP could dip into
negative territory. "We could end up ... with a 36-month recession, that
could be "L-shaped stagnation, or near depression," Roubini said. He
puts the chance of a severe U-shaped recession at 66.7%, and a less
severe L-shaped recession at 33.3%. Finally, while he says there will be
"a light at the end of the tunnel", it'll probably get worse before it
gets better. Those who believe in a second half recovery this year "are
delusional" he says.

Warren Buffett told CNBC that the U.S. economy has "fallen off a cliff."
Buffett said economic developments have been very "close to the worst
case" that he had imagined, although conditions would be far worse if
the Federal Reserve hadn't stepped in last September. Other key points:-
i) the economy "can't turn around on a dime" and a turnaround "won't
happen fast"; ii) five years from now, the economy will be running fine.
The strength of the American system will pull it through, just as it has
many times in the past; iii) Democrats and Republicans should work
together and not try to take advantage of the economic situation to
achieve partisan goals; iv) Inflation has the "potential" to be worse
than the 1970s; v) most banks are in "pretty good shape" and can "earn
their way out" of the current problems given the low cost of funds.
Banks, however, "need to get back to banking"; and vi) it is extremely
important that the government make clear depositors won't lose their
money if banks fail. Obama needs to make a "clear statement" in support
of the banking system.

Treasury Market
Treasurys bowed to supply pressure, pushing bond prices down across the
board. Investors sold bonds ahead of this week's sales of $63bln in
government debt, which kick off Tuesday with $34bln in three-year notes,
followed by $18bln in 10-year notes Wednesday and $11bln in 30-year
bonds Thursday. The two-year note yield added 1bps to 0.955%. The
10-year bond yield closed flat at 2.87%.

European Markets
European shares finished mixed. While most bank shares declined, drug
makers rallied on a large deal in the sector.

The FTSEurofirst 300 index fell 4.83, or 0.7%, to 657.30.

Bank were in sharp focus after Lloyds struck a deal over the weekend
with the British government for the U.K. to insure £250bln in Lloyds
assets and increase its stake in the bank to as much as 77%. Lloyds lost
as much as 14% but eventually closed higher by 4.1%. BNP Paribas gained
1.6% after the French lender signed a deal to buy the majority of Fortis
Bank from the Belgian government, along with an interest in Fortis'
insurance business, in exchange for official guarantees against losses.
Fortis spiked 20.8%. Among other financials Credit Suisse slid 6.2%, UBS
5.3% and Barclays 5.3%.

Insurers, ex-Aviva (+8.4% having lost 44% over the previous two
sessions), remained friendless. AXA sank 5.7%, Generali 4.2%, Zurich
Financial 2.4%, and MunichRe 1.4%.

Europe-listed pharmaceutical shares rallied after Merck said that it
would buy rival Schering-Plough for $41.1bln. AstraZeneca rose 3.5%,
Roche 3.5%, Bayer 2.2%, and Sanofi-Aventis 2%.

Italian Internet provider Tiscali plunged 47.3% after the group said
talks with BSkyB over the sale of its U.K. assets have ended and that it
will miss an interest payment on its debt.

Adidas vaulted 3% after Merrill Lynch added the German apparel maker to
its list of top stock picks in Europe.

Oil producers also gained ground as light, sweet crude-oil futures
pushed through $47.00 a barrel. BP rallied 5.9%, and Royal Dutch Shell
2.8%.

Telecom shares dialled up broad losses. Telecom Italia retreated 4.6%,
BT 3%, France Telecom 2.8%, Vodafone 2.8%, and Telefonica 2.5%.

In London the FTSE 100 tacked on 11.67 points, or 0.3%, to 3542.40.

The benchmark mounted a late-session commodity and drugs stock-led rally
to finish in positive territory, having spent much of the session in a
bank-led slump. Commodity stocks were buoyed by a gain in oil prices,
while drugs groups were given a tonic by merger activity in the sector.
At midday, the FTSE100 had been down as much as 1.6% as the ailing
banking sector once again exerted the most pressure.

Barclays tanked 5.3% after it said it would talk to UK Treasury
officials about its participation in the government scheme.

Mining stocks failed to enjoy the gains made by their oil brethren. Rio
Tinto fell 1.9%, XStrata slumped 8.1% and Anglo American gave back 1.4%.
BHP Billiton bucked the trend to advance 1.3%.

Elsewhere Brambles dipped 0.6%, British Airways slid 2% and BSkyB
declined 1.6%.

In Paris the CAC 40 Index lost 15.16 points, or 0.6%, 2519.29.
In Frankfurt the DAX Index climbed 25.62 points, or 0.7%, to 3692.03.

Commodity News
April crude rallied $1.55 to $47.076 a barrel.
April gold dived $24.70 to $918.00 an ounce.
LME base metal futures closed broadly lower amid conflicting demand
signals. Copper slid 2.9% as traders worried that some of the recent
pick-up in consumption in China could be stock-building. Nickel fell
1.8%, aluminium 0.8%, and zinc 0.4%. The CRB index dipped 1.18 to
208.41.
The Baltic Dry Index hit a fresh five-month high of 2,262, up 1.7% on
the day.

Australian Stocks
London
BXB: Brambles Plc dipped 0.6%, or 1.25p, to 213.25p (A$4.65) to
leave BIL Ltd at a 1% premium. Volume was 11k shares.
BLT: Billiton gained 1.3%, or 15p, to 1171p (A$25.55) which leaves
BHP at a 13.98% premium. Volume was 13.3mln shares.
HGG: Hendersons climbed 1.6%, or 1p, to 65.25p (A$1.4236) from the
Australian close of $1.45. Volume was 2.1mln shares.
RIO: RIO plc dropped 1.9%, or 34p, to 1791p (A$39.08) which
leaves RIO at a 21.56% premium. Volume was 6mln shares.

New York
BHP: In ADR trade BHP lost 2.1% to A$28.77 from the Australian close
of $29.12. Volume was 9.8mln ordinary shares equivalent.
NWS: NWS sank 4.9% to an A$ equivalent of $8.94 from the Australian
close of $9.36. Volume was equivalent to 6mln ordinary shares. The
spread is at $1.04, or 11.68%.
NWSLV: NWSLV tanked 5% to an A$ equivalent of $7.90 from the
Australian close of $8.27. Volume was equivalent to 22.9mln non-voting
shares.
RMD: Resmed slid 4.3% to A$5.38 from the Australian close of $5.62.
Volume was 11.8mln ordinary shares equivalent.
MPEL: Melco PBL Entertainment gained 1.1% to US$2.66. Volume was 457k
ADSs.

Toronto
LGL: Lihir Gold dived 3.9% to C$2.50 (A$3.0451) from the Australian
close of $3.15. Volume was 1,600 ordinary shares equivalent.

SPI Futures
Sycom: The March contract has fallen 15 points to 3134, a 20.5 point
discount to the ASX/S&P 200.

Sources: Bloomberg, Reuters, Dow Jones News Wires, The Wall Street
Journal, TheStreet.com, CNN, CNBC, CBS, The Guardian and the Financial
Times.

Wednesday, March 4, 2009

Equity Focus
Oil & Gas: Underweight
– Sub-par scorecard in 4Q08
§ O&G’s combined earnings slumped 182% QoQ in 4Q08 with major disappointments at Ramunia, Shell, Petronas Gas and Petra Perdana.
§ We have cut 2009-10’s earnings forecasts by 16-19%, reflecting the sector’s down-cycle and a tighter funding environment.
§ Maintain Underweight with no key re-rating catalysts, but depressed valuations could fuel privatizations.

Other Local News
§ Bursa: Proposes share buyback for the first time
§ AirAsia: Says no need for rights offer
§ MAHB: Identifies site for new budget terminal
§ QL Resources: Article entitled “More rights issues on the way?"
§ Petra Perdana: Syndicated Transferable Term Loan Facilities of up to RM150m
§ Scomi: Defers rights issue
§ MMC: Agrees in principle
§ Politics: Tri-elections
§ Economy: Almost 76% of RM7b stimulus package disbursed
§ Power: Bakun expected to be ready October 2011

Outside Malaysia
§ U.S: Stocks rise around the world; Commodities gain, Treasuries fall
§ U.S: Economy worsened in last two months as consumers held back, Fed says
§ U.S: More than 8.3m mortgages are under water
§ E.U: Services shrink at record pace, pushing region deeper into slump
§ Japan: BOJ offers to buy JPY 150 b in corporate bonds
§ China: Wen to propose new stimulus measures to bolster faltering growth
§ India: May keep cutting rates to spur growth in third-biggest Asian economy
§ Indonesia: Cuts policy rate to boost consumer spending
§ Vietnam: Budgets VND 300tr (USD 17b) to bolster growth
§ Australia: Economy contracts for first time in eight years
§ Crude Oil: Rises to 5-week high on signs China will increase stimulus

Technicals
The local bourse ended the day mixed yesterday after a volatile trading session.

Tuesday, March 3, 2009

Equity Focus
KNM Group (RM0.36): Hold

Still challenging, still grey …
We have cut core net profit by 17-21% in FY09-10, on orderbook slowdown and RM50m amortization cost p.a. recognized from Borsig post-PPA exercise.
Maintain Hold, TP cut to RM0.69 based on 1.4x BV but depressed valuations could trigger privatization talk.
Daily trading volume has been exceptionally high over the past six months, averaging 1% of KNM’s share base but key shareholders remain with no emergence of new funds.

Banking: Underweight

Moving into rising NPLs and more negative news flows
4Q08 reporting season sprung no major surprises for the banks, with combined net profit down 2.1% QoQ, but asset quality stayed firm.
Sector earnings are now expected to contract 10.1% in 2009, before recovering 6.1% in 2010 (previously 2009-10: -6.3%, +3%) as combined earnings were lowered by 5.4% (2009) and 2.6% (2010).
We downgrade the sector to Underweight, as banks enter a period of rising NPLs and more negative economic news flows.



Other Local News

PAAB: Seeks approval in principle
Can-One: No plans to privatise Kian Joo
Tabung Haji: Looks to bonds, property mart
PPB: Rewards investors with handsome payout for 2008
AirAsia: Set to raise money for expansion
Bina Puri: Gets RM693m Brunei contract
Construction: Cost of 2nd Penang Bridge stays RM4.3b
Rubber: Ministries considering floor price for dry rubber
Politics: Tree House - Assembly meets in open air, court bars further meetings
Other Local News

U.S: AIG's bailout made Bernanke `more angry' than any other episode in crisis
U.S: Bernanke says U.S. may need to expand USD 700b bank rescue
U.S: Pending sales of existing homes fall 7.7% MoM
Canada: Cuts benchmark rate to record low of 0.5%, signals further stimulus
U.K: Darling may grant BoE money-printing powers in March 5 letter
U.K: Treasury pledges USD 18b to rescue highway, school construction
Ireland: Plans emergency measures to tackle deficit as recession worsens
Japan: To tap foreign reserves to lend to companies
China: Economy may recover in first half, deputy central bank chief says
Australia: Leaves rate at 3.25% after recent cuts

Technicals
The market fell on poorer market sentiment following the steep fall of the overnight US markets

Monday, March 2, 2009

Equity Focus
Market Strategy

4Q08 Results – Cash Needed
Three concerns gained prominence in the 4Q08 results season – deep earnings cut as companies frontloaded provisions, significant rights issues by TMI and Maybank, and rising incidences of dividend cuts.

We have cut our 2009-10 market earnings forecasts by 7.3% and 6.1%, with our revised figures showing 4.1% and 10.5% contractions in 2008-09’s corporate earnings, before a 6.3% modest recovery in 2010 (previously 2008-10: +0.8%, -7.6%, +5.0%). The steep earnings cuts reflect nasty surprises especially towards the season’s last reporting week, with key disappointments emanating from the Steel and Tech sectors, as well as a host of various large caps.
We maintain our end-2009 KLCI target level of 900 points, which implies target P/B and PE multiples (based on 2008 and 2010 figures respectively) of 1.3x and 12.8x.

WCT (RM0.96): Hold

RM2.6b outstanding works to start the year
Ex- profit reversals, we estimate that WCT made net profits of RM42m in 4Q08 (-12% YoY, +23% QoQ) and RM176m in 2008 (+19% YoY).
Outstanding order book of RM2.6b would keep works going into 2010, while several LOI jobs, if awarded, should strengthen earnings base.
Upgrade to Hold after share price drop since Meydan. We lowered forecasts by 16-21%, but largely retained asset-based RM1.05 TP.

In The news
Dreamgate Corportion (RM0.105): Fully Valued

Still cautious

Other Local News

Muhibbah Engineering: Awarded contract worth RM109m
Retail index by year-end
Ho Hup: Plans to dispose of KL land
TM: And MIMOS in research tie-up
RHB: And AIA negotiate for a 10-year alliance
Puncak Niaga: Signs MOU to bid for Kimanis power plant job

Other Local News

U.S: Stocks drop, treasuries gain on concern about economy
U.S: AIG gets more aid after record USD 61.7b loss
U.S: Manufacturing shrinks for 13th straight month on collapsing sales
U.S: Consumer spending climbs for first time in seven months on discounts
E.U: Manufacturing contracts at record pace as export orders collapse
U.K: House prices drop annual 10%, Hometrack says
China: Manufacturing shrinks as crisis cuts demand
India: Exports fell in January by most in decade on weak demand
S. Korea: Exports drop 17.1% YoY on global recession
Indonesia: Exports plunge most in 22 years, inflation slows

Technicals
The market closed lower yesterday on weaker fourth quarter GDP number and on poorer corporate earnings

Special Technical Perspective

World Indices plunge. Is there any light at the end of the tunnel soon?
The DJIA and SP500 plunged to new recent lows
The KLCI and BOVESPA are in bearish “Rising Wedge” patterns
Step away from the bear until the dust settles down

Sunday, March 1, 2009

Equity Focus

Toll concessions: Overweight
Seven highways get toll increase

The government has given smaller-than-scheduled toll rate increases to seven out of nine expressways, due for upward revisions this year.
Government compensation is still given for shortfalls in scheduled toll hikes, and we estimate that combined compensation to PLUS and SPRINT alone could total almost RM100m in 2009.
We stay Overweight on toll concessionaires for their steady income stream, with Buy on PLUS (TP: RM3.20) and Litrak (TP: RM2.88).

Genting (RM3.54): Hold
Mixed results
Genting recorded a 4Q08 net loss of RM120.8m due to an impairment loss of RM781.5m on Star Cruises. 2008 core net profit before MI (-10% YoY) was marginally below expectations.
Save for Resorts World, the outlook is uncertain for its other subsidiaries/segments due to the global economic slowdown.
We maintain our Hold call but downgrade our TP to RM4.00 based on an unchanged 20% discount on a revised RNAV/sh of RM5.00.

Malaysian Airlines System (RM2.70):
2008’s achievement clouded by hedges
Sequentially weaker net profit (-24%) was in line, dragged down by lower auto and associates earnings. However, dividends pleasantly surprised.
Cutting 2009-10 earnings forecasts by 10% on lower earnings from the auto division. FY09’s EPS is projected to fall by 30%.
Downgrade call to Hold and TP to RM5.45 (1.5x BV), acknowledging that there are no near term catalysts in sight.

Nestle (M) (RM27.50): Hold
4Q08 results: Who’s afraid of a recession?
4Q08’s net profit of RM77.3m (+128.4% YoY) boosted 2008’s net profit to RM341m (+16.8% YoY), above expectations, on a 19% YoY surge in exports.
A proposed final DPS of 80sen (single-tier), which lifted 2008’s DPS to RM1.91 trounced our and market expectations.
Upgrade to Hold. Placing our forecasts under review with upwards bias pending today’s analyst briefing, but maintaining our DCF-based RM29.50 TP for now.

The New Straits Times Press (RM1.06): Sell
Printing in red ink soon
2008 core pretax profit of RM46.1m outperformed our forecasts by 35% on lower finance cost and higher contributions from MNI but ex-contributions from MNI, NSTP merely broke-even in 4Q08.
We take the view that adex will grow timidly if not contract in 2009 and that NSTP will likely record a loss making 1H09.
We now utilise 12% WACC (9% previously) on our DDM to account for higher risk premium and cut our TP from RM1.22 to RM0.82. Therefore, we downgrade our call from Hold to Sell.

Petra Perdana (RM1.35): Buy
Misfiring in FY08
Petra Petra’s RM60m core net profit missed our 75m estimate due to a substantially weak 4Q08 performance (-73% QoQ).
Cutting 2009 forecast by 11%, in anticipation of slowdown in brownfield activities.
Maintain Buy but cutting TP to RM1.63. Petra Perdana is potentially a privatisation candidate.

Sime Darby (Sime) (RM5.75): Fully Valued
Poor 2QFY09 results
Sime reported a 2QFY09 net profit of RM279m (-65% YoY, -68% QoQ), below our and market expectations.
Short term earnings outlook remains bleak as regional economies continue to weaken and CPO price remains uninspiring in 2HFY09.
Maintain Fully Valued but trimmed our TP to RM5.10 based on 15x CY10 PER (previously RM5.20 on 15x FY10 PER) on lowered earnings.

Wah Seong Corporation (RM1.12): Fully Valued

No surprises; expecting greyer outlook
WSC’s core net profit of RM111m for 2008 met our RM109m forecast, on substantially stronger 4Q08 (+184% QoQ).
Maintaining FY09-10 forecasts, which implies a two-year net profit CAGR of -20%, in anticipation of slowing O&G and industrial service activities.
Downgrade to Fully Valued, as price discount to our RM1.20 TP (1x NTA) has narrowed to <10% but could see improved some short term strength; a perceived beneficiary from the upcoming UMNO election.

Mega First Corporation (RM0.71): Hold

Look beyond 2009
2008 net profit of RM40.5m (-20% YoY) was within our expectations, but final gross DPS of 3.5sen (4.9% yield) surprised on the upside.
China power demand has stabilized and coal costs are declining. While other divisions remain weak, the worst of quarters may be over.
We conservatively cut our 2009-10 net profit forecasts by 16-22%, mainly on lower contributions from non-power divisions. Maintain Hold; TP lowered to RM0.82 following earnings downgrades, unchanged 7x CY10 EPS.

Result Analyser
Bintulu Port (RM5.30): Buy

Final results above expectations

Hock Seng Lee (RM0.46): Hold

Final results within expectations

Kinsteel (RM0.405): Fully Valued

4Q08 loss on inventory writedowns

KLCC Property (RM2.90)): Buy

Beats expectations; RM505m gross revaluation surplus to boost 4QFY09

Loh & Loh (RM4.28): Hold

Final results stronger than expected

PLUS Expressways (RM2.95): Buy

4Q08 in line; raised dividend payouts

Sunway Holdings (RM0.67): Hold

Oct–Dec ’08 net profit in line

Unisem (RM0.60): Fully Valued

4Q08 net loss of RM55m on impairment loss

WCT (RM1.07): Fully Valued

Losses in 4Q08 due to profit reversals

Other Local News

Water: RM5b offer for water assets.
Tolls: Higher Toll.
MAS: Capacity, cost cuts.
Scomi Marine: Aiming for more balanced revenue base.
Latexx: To raise glove output.

Outside Malaysia

U.S: Obama seeks USD 1tr tax increase in budget plan
U.S: Fannie to draw USD 15.2b from Treasury after loss
U.S: Companies slashing jobs, orders at faster pace as recession deepens
U.S: Obama's budget proposes up to USD 750b in new financial industry aid
U.S: New-home sales plunge to record-low 309,000
E.U: Confidence at record low as recession deepens
Germany: Unemployment rises for fourth straight month
Germany: Signs USD 10b worth of trade deals with China
Singapore: Industrial output falls the most since at Least 1996
Singapore: Economy shrinks most in at least 33 years
Ukraine: Ratings cut to CCC+ by S&P on IMF loan risk

Technicals
The market closed lower in cautious trading, as investors were concerned on the lower corporate earnings of several heavyweight counters in the past few days.

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