Feb 22, 2017

AIRASIA – Technical View


Stock Code: 5099

Airasia Daily Chart:airasia analysis

After rebounding off the EMA20 level, AIRASIA has broken out of the RM2.71 resistance level with improved volumes. The MACD Line has issued a BUY signal, but the RSI is slightly overbought. Price may trend towards the targets of the RM3.00 and RM3.30 levels. Support will be set around the RM2.57 level.

source: MPlus Research – 22/2/2017

The Company is a leading low cost carrier in Southeast Asia. The Group focuses on providing high frequency services on short-haul point-to-point domestic and international routes.

Feb 20, 2017

Malaysia: Technical, Currency and Feng Shui Outlook 2017

Technical, Currency and Feng Shui outlook for 2017
■ Three speakers presented at our 2017 Technical, Currency and Feng Shui Day
■ Technical charts point to a better 2H for the KLCI and ringgit
■ Fengshui analysis revealed that the market could see setbacks in Dec 17- Jan 18
■ Cycle analysis suggests that the next major low in KLCI could be in mid-2019
■ We maintain our end-2017 KLCI target of 1,820 pts and top picks

Technical, currency and fengshui outlook for 2017
We hosted a half-day conference yesterday, featuring (1) Dr Suresh Ramanathan, an expert on currency; (2) Master Bo Xu, a consultant on fengshui; and (3) Nigel Foo, our very own regional technical chartist. The technical and fengshui outlook points to a volatile equity and currency markets in 2017.

FBM KLCI Monthly Chart:fbm klci monthly chart
Technical charts point to a better second half for KLCI
Our technical analysis view is that the KLCI is currently on a rebound rather than in a bullish phase. We expect the market to weaken and potentially bottom sometime in 3Q before rebounding in late 2017. We are also looking at the ringgit appreciating against the US$ in 2H17 and this could help the KLCI kickstart a sustainable medium-term uptrend for the local bourse in the later part of the year.

Food for thought: 10.5-year cycle
Since the KLCI's inception, there appear to be a 10.5-year or 126-month cycle for the local bourse, with the KLCI finding a significant low close to the end of each of this major cycle (+/– 3 months). Basically, in the first half of the cycle, the wind seems to be behind the bull’s sail while the second half tends to favour the bears. The 1,896 high for the KLCI in Jun 2014 was 4 months after the mid-point of the current 126-month cycle. If this cycle continues to play out, then the next major low for the KLCI can be expected in mid-2019.

Currency outlook
Dr Suresh Ramanathan, a market economist with stints in Bank Negara Malaysia (BNM) and global financial institutions, presented his view on the currency markets. He believes the US$ still has room to appreciate against major and EM currencies, including the Malaysian ringgit. He thinks sustained ringgit weakness poses a risk to the real and financial economy, and proposed a three-pronged strategy to improve FX market liquidity and transparency: 1) Ringgit Continuous Linked Settlement (RCLS), a centralised FX clearing and settlement platform, 2) US$ Enhancement Note to improve onshore US$ liquidity, and 3) an FX stabilisation fund to realign the ringgit vs. regional currencies during bouts of excessive depreciation.

Fengshui master positive on long-term investment
Fengshui consultant Master Bo Xu said this year, being the year of the “Fire Rooster”, should be good for long-term investors with a 3- to 5-year investment horizon. Wood element businesses such as furniture, pulp and paper, textile, timber and education should flourish while fire element businesses (oil & gas, and restaurant) will not do so well, he said. Stock market wise, a good month for the market would be in May (4 th lunar month) while negative months would be Dec 17 and Jan 18 (lunar month 10 th and 11 th ).

Technical view in line with our fundamental analysis
The technical views on the KLCI and ringgit were in line with our fundamental view that the KLCI should see a stronger 2H17. However, the fengshui analysis points to a lower end for equity market in 2017. We maintain our end-2017 KLCI target of 1,820 pts.

source: CIMB Research – 16/2/2017

Feb 16, 2017

Malaysia Market Strategy - Feedback From 2017 Roadshow

Feedback from 2017 econ and strategy roadshow
■ We spent many weeks marketing our economic and strategy outlook to investors.
■ Some foreign funds are looking to raise their weighting in Malaysian equities.
■ There was no major pushback on our more bullish KLCI target vs. consensus.
■ Investors generally agreed with our 2017 growth and inflation outlook, while key
risks were trade protectionism and continued financial market volatility.
■ Maintain end-2017 KLCI target of 1,820 pts and top picks.

Improving interest from foreign funds…
We spent many weeks marketing our 2017 economic and strategy outlook to 240 investors from 48 investment firms in Kuala Lumpur, Singapore and Hong Kong. We also presented our outlook during CIMB’s 9 th Corporate Day event in January to more than 150 investors. We see improving interest from foreign funds as some are looking to raise their weighting in Malaysia.

…but Malaysian funds are more optimistic
Malaysian funds are generally more upbeat on the market prospects compared to their overseas counterparts. Foreign funds were mostly neutral to underweighted in the market, which is reflected in the low foreign shareholding of 22.3% in the equity market as at end-Jan 2017. However, they remain keen on stock ideas and some are relooking their underweight position in the market.

How we differ from consensus
We revealed to investors that we are more bullish on the end-2017 KLCI target of 1,820 pts (which is based on 16x forward P/E) against consensus estimates of 1,753 pts. This is because we are projecting stronger market earnings growth of 10% for FY17 (driven mainly by our non-consensus overweight call on the banking sector on the back of an earnings recovery). We expect the re-rating in KLCI to be driven by corporate earnings recovery and the return of foreign investors.

Themes and stock calls for 2017 investors most/least receptive to
Among our top three big cap picks, Sime Darby garnered the most attention from clients due to the potential demerger of its plantation assets, and we received some pushback on Tenaga due to concerns over its ability to raise tariffs to pass through higher fuel costs. Among our seven themes for 2017, investors are most keen on (1) PNB transformation; (2) small-mid cap funds and research scheme; and (3) tourism plays.

Keen interest in Malaysia’s macroeconomic outlook
Our meetings solicited interest in Malaysia’s recent macroeconomic developments and outlook. Investors broadly agreed with our outlook for growth (+4.2% in 2017) and inflation (+2.5% in 2017). Unsurprisingly, concerns over the global trade environment and the potential fallout for exporters – including Malaysia – and capital flows, became more pronounced.

Sector Comparisons - Big cap picks (click to enlarge)big cap by sector
Monetary policy options constrained by concerns over ringgit
Although investors were generally receptive to our argument that Malaysia’s monetary policy settings could be more accommodative (CIMB: 25bp cut in OPR in May or Jul), some were of the view that while an OPR cut would help to support the economy, an opportunity for Bank Negara Malaysia (BNM) to act may not avail itself due to volatility in the financial and currency markets. We shared our case that BNM measures in Nov and Dec 2016 would gradually shore up the ringgit, removing that potential roadblock.

Sector Comparisons - Small cap picks (click to enlarge)small cap by sector
KLCI hit new YTD high of 1,710 points
YTD, KLCI has done well, climbing 68.5 points (or 4.2%) to reach a new high of 1,710 pts yesterday. Sime Darby and Genting Malaysia were among the top three best performing stocks in the KLCI index so far in 2017, which fits in nicely with our PNB restructuring and tourism themes. Maintain end-2017 target of 1,820 and our top picks.

source: CIMB Research 16/2/2017

Feb 13, 2017

FBM KLCI - Breaking The Trading Band

On expectation of further earnings recovery. 2017 Year-end Target: 1,830 points

Price consolidated within a trading band during past 1.5 years… The FBM KLCI has been stuck in a price consolidation from the second half of 2015 until today. During the past 1.5 years, prices were trading largely within a band of between 1,600 and 1,720 points.

…despite plunging earnings and the ensuing resumption of upcycle… However, it is notable that the FBM KLCI price consolidation was against the backdrop of deteriorating earnings which dropped from 98 points in July 2015 to 89 points in June 2016. Thereafter, the earnings upcycle resumed until it reached nearly 100 points in December 2016.

FBM KLCI: Price versus 12-Month Trailing Earningsfbm klci price vs earning

…as the initial plunge was arguably seen as transient. The FBM KLCI price consolidation during the period of earnings slump and throughout the ensuing resumption of earnings upcycle indicates that the market may have viewed the initial slump as transient hence disregarded the fluctuations in earnings. On this score, recall our 2016 outlook report dated 10 December 2015 titled “Resumption of Earnings Upcycle”.

As earnings caught up with price and given expectation of further earnings recovery,… The valuation gap is narrowing drastically pursuant to FBM KLCI earnings recovery since middle of last year. Moreover, given the expectation of further recovery this year whereby earnings (Bloomberg consensus) are estimated to reach a level of circa 106 points, the FBM KLCI is likely to regain its upward price momentum moving forward.

…the FBM KLCI would plausibly be breaking above the trading band moving forward. Thus, we expect the FBM KLCI to break above the trading band towards a target range between 1,730 and 1,860 points by the end of

KLCI historical and forward consensus earnings fbm klci historical earning

FBM KLCI year-end baseline target. We reiterate our FBM KLCI 2017 year-end baseline target at 1,830 points which equates to PER17 of 17.1x

source: MIDF Research – 8/2/2017

Feb 7, 2017

ALAM - Trading Buy

ALAM Stock Code: 5115 Target Price @ RM0.36).

Yesterday, ALAM rose to a high of RM0.295, before finishing the day up by 1.5 sen (5.5%) to RM0.29 on increased volume. Earlier in December, the share price broke out of its long-term downtrend and had since climbed to a high of RM0.295 before consolidating sideways. With yesterday’s bullish move, the share price has confirmed a “Bullish Pennant” pattern and this signals a continuation of its prior run after a brief pause for breath. Similarly, the MACD has also crossed above its Signal-line to reflect a shift in momentum from bearish to bullish. From here, watch for a retest of the RM0.295 (R1) resistance level. Once taken out, we would then set our sights on RM0.32-0.35 (R2) and RM0.375 (R3) next. Downside appears to be limited with strong support at RM0.27 (S1).

Alam Maritim Resources – Daily Chartalam maritim chart analysis

Source: Kenanga Research – 7/2/2017

The Company is a Malaysia-based investment holding company. Through its subsidiaries the Company is engaged in two business activities: offshore support vessels and services offshore facilities construction installation and underwater services.

Feb 6, 2017

Malaysia’s Alpha Stock Picks: Technology And Infrastructure Plays


Most of our alpha picks delivered gains in Jan 17, with our average BUY picks beating the FBMEMAS Index’s 2.4% gain. Our line-up for Feb 17: BIMB Holdings, Bumi Armada, Ekovest, Genting Bhd, Inari, Kim Loong, MRCB-Quill REIT, Tenaga Nasional and Top Glove. UMW remains our sole SELL. We expect technology and infrastructure investment themes to take the limelight in February.

Review of January picks. Most of our BUY alpha picks gained in Jan 17 (see RHS table), led by Ekovest, Inari and MRCB Quill. However, some US-dollar beneficiaries - Top Glove and Kim Loong - did not deliver positive returns as we had expected. Our sole conviction SELL call – UMW - unfortunately rebounded strongly after announcing plans to spin off its oil & gas (O&G) business. Nevertheless, we expect the stock to reel back, given continuing weak fundamentals in its automotive and heavy equipment divisions, coupled with ongoing impairments of its investments in the O&G business.
Technology, infrastructure and China FDI themes to continue to deliver good investment returns. We expect continuing momentum in the outsourced assembly and test (OSAT) segment within the technology sector. Catalysts include new products as added features in mobile phones, a strong replenishment cycle for the upcoming iPhone 8, and margin expansion (thanks to the weak ringgit). We also expect a further upward re- rating in the infrastructure sector as most of the new mega infrastructure projects take off or gain momentum from 2Q17.

Aligned with the focused themes are conviction BUY picks Inari and Ekovest . There is potentially 10-20% upside to our FY18 earnings forecast for Inari should all the new production lines for retinal scan components achieve full utilisation by 2H17, and further upside should it indirectly secure new orders from other mobile phone IDMs. Sunsuria (BUY) is a chief beneficiary of the China FDI theme.
Other notable beneficiaries include Ann Joo, Hume and Kerjaya under the infrastructure theme. We also note that within the OSAT segment, Globetronics (NOT RATED) is on course to making a strong earnings recovery as it ramps up production from 2Q17 to service rising demand for mobile devices.

malaysia alpha stock picks

BIMB Holdings

■ BIMB delivered a robust 3Q16 earnings growth of 17% yoy, by far the strongest among peers, supported by growth across all major lines. Net financing income was up 4.0% yoy with above-industry loan growth of 11%. Trading income soared 85.8% yoy on higher forex and securities investment gains. Takaful income recorded a solid 23% yoy growth on the back of a 16% gross premiums growth. As such, pre-provision operating profit growth expanded 24.5% yoy.

Share Price Catalyst
■ May fetch a scarcity premium, being the only Syariah-compliant full-fledged bank, which could bring 15-20% upside to our target price.
■ Takaful subsidiary continues to deliver stronger-than-expected growth, which is important, given its relatively sizeable 70% composition to the group's non-interest income.
■ Lower collective assessment provisioning arising from the potential downward adjustment in its overly conservative 1.50% collective allowance closer to the industry’s 1.20%.

Bumi Armada
■ The successful delivery of four floating projects will unlock new cash flow contributions and
potentially double future earnings growth as these projects are of long-term contract tenures (8-18 firm year periods each). The group is trading at 0.6x post-Claire impairment P/B. Despite the recent quarterly impairment-related losses, balance sheet is still well above the debt covenant threshold.

Share Price Catalyst
■ Sharp recovery in crude oil prices improving the viability of its FPSO projects.
■ Smooth delivery in 4Q16 and first oil/first gas of floating projects.
■ Recovery in OSV utilisation and rates.

■ We like Ekovest for its: a) unique exposure to the coveted and long-dated Duke 1 and 2 tolled highway concessions, b) deep discount to our SOTP valuation of RM5.22/share, and c) strong 3-year earnings CAGR of 69%.

Share Price Catalyst

■ Share price should continue on its positive momentum pending a special DPS of 25 sen per share, with an expected ex-date by Feb 17.

Genting Bhd
■ The combination of GENT’s cheap fundamental value and the anticipated continuous improvement in gaming-related businesses in 2017 - Genting Malaysia (GENM) had partially open its Genting Integrated Tourism Plan (GITP) amenities in end-Dec 16 and GENS’ EBITDA is expected to recover further due to easing provisions and better cost efficiency - remain as catalysts to re-rate the stock.

Share Price Catalyst
■ Laggard play to GENM. GENT’s share price should sympathetically move up as GENM’s
share price momentum is expected to build up ahead of the opening of major GITP amenities. GENT and GENM are trading at 8.2x and 9.7x 2017F EV/EBITDA respectively.
■ Any positive development on TauRX’s dialogue with regulatory authorities European Medicines Agency (EMA) and US Food and Drug Administration (FDA). Inari Amertron (Yeoh Bit Kun)
■ Inari’s multi-pronged expansion is expected to lead to strong yoy earnings growth of 21%
and 23% in FY17-18. Key highlights are: a) kick-start of new contract for iris scanning components; b) ramp-up in utilisation of new plant for switch testing jobs (data centre application), and c) organic growth from the radio-frequency business.

Share Price Catalyst
■ Assuming things go smoothly, Inari’s new contract for iris scanning components (for smart devices’ security function purpose) could raise our FY18-19 earnings forecasts by 9% and 16% respectively.
■ Benefitting from the US dollar strength. Every 1% increase in our base RM4.00/US$ assumption would result in Inari’s net profit rising about 2% in FY17.

Kim Loong
■ Earnings growth is supported by: a) a recovery in fresh fruit bunch production, and b) good milling margins from a recovery in the oil extraction rate (OER), and c) extra income from  value-add by-products.
■ Kim Loong announced a special dividend of 5 sen during its 3QFY17 results. We are expecting a final dividend of 6 sen, bringing FY17 dividend to 18 sen, implying a yield of 5.2% and payout ratio of 75%. For FY18, we forecast a similar dividend payout ratio of 75% which translates into an attractive yield of 7.2%.

Share Price Catalyst
■ Better-than-expected FFB yield and OER.
■ Current CPO prices are well above our forecast for 2016.

■ Completion of Menara Shell acquisition is proof that MQREIT is committed to its shareholders, evidenced by the expansion of its asset size following MRCB’s entry as co-sponsor for the REIT on Mar 15. To recap, MRCB intends to inject at least one property every year into MQREIT.

Share Price Catalyst
■ Yield-hungry investors to bid up MRCB-Quill’s valuation, given that its dividend yield is among the highest in the sector.
■ Healthy acquisition pipeline to boost growth. MQREIT’s next acquisition will be Menara Celcom in PJ Sentral (scheduled for completion in 2017).

Tenaga Nasional
■ TNB will benefit from a positive risk-reward profile under the IBR framework. The framework,
we opine, remains intact and would drive a sustained re-rating of TNB closer to market valuation in the long run.

Share Price Catalyst
■ Positive outcome from more active capital management (announced in Dec 16) suggests an attractive dividend yield of 5%.

Top Glove
■ Normalising industry supply-demand dynamics and sustained strength of the US dollar could imply further upside to upcoming quarterly earnings and offer some trading opportunities
over the next two quarters.

Share Price Catalyst
■ Progressive production ramp-up at the newly-completed Factory 27 and firmer glove ASPs arising from the recent price revisions should see margin expansion and firmer earnings for 2QFY17.
■ Near-term valuation re-rating potential, given Top Glove's position as the prime beneficiary
of the strengthening US dollar within the sector.

UMW Holdings
■ Although UMW’s eventual exit from its loss-making O&G businesses may see the group’s
earnings recover, we are neutral on the development as its other core divisions (notably automobile) is operating in challenging environments against the backdrop of weak consumer sentiment and prolonged weakness in the ringgit.
■ Maintain SELL and SOTP target price of RM4.00, implying 1x 2018 P/B. Our fair value of 50 sen for UMW O&G implies 16x EV/EBITDA based on its historical trading range. We do not see any re-rating catalysts in the near to medium term as all its core divisions (besides O&G) are operating in extremely challenging environments.

Share Price Catalyst
 ■ Further weakening in the ringgit and oil prices will be negative to stock price.

source: UOBKayHian Research – 6/2/2017

Feb 2, 2017


TALIWRK - Stock Code: 8524. Earnings certainty and domestic-oriented catalyst, supported by attractive DY of 5.4%

TALIWRK Daily Chart: pending a downtrend breakout near RM1.50 amid bottoming up indicators:taliwork analysis

TALIWRK Weekly Chart: Downside limited amid grossly oversold position:

taliwrk chart

  • Public utilities conglomerate. Taliworks is a conglomerate involved in water, highway concessions, solid waste collection and public cleansing management in the states of Negeri Sembilan, Melaka and Johor in Malaysia under a 22-year concession agreement with the Federal Government. Besides, Taliworks provides investors exposure to the potential settlement of Selangor’s water restructuring and a potential huge cash pile which can increase earnings per share significantly via M&A.
  • Strong relationship with EPF. Taliworks has a strong relationship with EPF and is expected to continue partnering it for future venture into acquisition of concession assets. We opine that Taliworks will enjoy a lower cost of capital by partnering with EPF.
  • HLIB has a BUY rating with SOP target price of RM1.85. Taliworks is an appealing investment case given its concession businesses in different sectors which enjoys stable growth profile coupled with reduced vulnerability to idiosyncratic risk. Moreover, its attractive projected FY17 dividend yield of 5.4% should provide a decent support to the share price.
  • Ripe for a downtrend line breakout. Following the formation of Tweezers bottoms and bottoming up indicators, the stock is poised for a downtrend resistance breakout (near RM1.50) soon. A decisive breakout above RM1.50 will spur prices higher towards RM1.56 (R1) and RM1.60 (R2) before reaching our LT objective at RM1.71. Key supports are situated near RM1.44 (30 Dec low) and RM1.41 (23 Aug low). Cut loss at RM1.37.
Source: Hong Leong Investment Bank Research – 2/2/2017

The Group is involved in the management operation and maintenance of water treatment plants and the supply of treated water. It supplies water to the state of Selangor the Federal Territory and Langkawi Island.