tip 29052009

Genting RM5.45: Sell
– A weak start

Slow start to the year. Genting’s 1Q09 core net profit was marginally below our and market expectations on lower earnings contributions from the plantations and power divisions coupled with forex losses. While we expect earnings to recover towards year-end on seasonally higher gaming revenues, valuations remain expensive. Maintain Sell.

Mah Sing Group RM0.82: Buy
– Resilient earnings and strategy. Maintain Hold

Proven fast turnaround strategy. Mah Sing Group’s (MSGB) 1Q09 results was within expectations. Its earnings are visible over the 1.5 years, backed by unbilled sales of RM574m and robust 2Q sales thus far (e.RM130m; 1Q09: RM170m). Recent price appreciation led us to maintain our Hold call despite a raised TP of RM1.80 (on RNAV).

Lafarge Malayan Cement RM4.84: Buy
– 2010 to be stronger. Upgrade to Buy

Stronger earnings expected in 2010. 2Q09 may still be challenging on sluggish demand but 2H09 should improve as domestic construction works pick up. We now expect an even stronger 2010 as government’s pump-priming efforts step up. We raise our 2010 net profit forecast by 12% (unchanged for 2009). Our PER-based TP is also raised to RM5.60. We upgrade Lafarge to a Buy.

AirAsia RM1.25: Sell
– Profit grew, but expansion slows. Sell into strength

Eye-catching profit, but balance sheet needs fixing. We raise our 2009-11 earnings forecasts substantially on lower fuel cost assumption but highlight the potential balance sheet fixing that needs to happen. Net gearing remains a concern at 3.7x amid negative free cash flow of RM230m in 1Q09. Sell until clearer balance sheet actions are taken.

Tan Chong Motor RM1.59: Sell
– Weaker earnings ahead; maintain Sell

1Q09 in line but outlook is poor. TCM’s 1Q09 net profit of RM41.6m was 34% of our full year forecasts. However we are retaining our forecasts as we expect weaker earnings in the coming quarters. Maintain Sell.

Sunway City RM2.70: Buy
– Still cheap; Buy

Value lies in its solid assets. With unbilled sales of RM781m, property development earnings are visible over the next 1.5 years. SunCity trades at 8.9x forward PER, 0.7x P/BV, and 52% discount to our newly introduced RNAV of RM5.60/sh. SunCity remains attractive despite a slowdown in new launches. TP revised to RM3.70; Still a Buy.

Sino Hua-An Intl RM0.46: Ceasing Coverage
– Losses continue into 1Q09

Hopes for China recovery. Sino Hua-An’s (SHA) operations could remain lackluster over the next few quarters, as demand for metallurgical coke hinges on the resurgence of steel demand in China. It remains to be seen if China’s fiscal stimulus package could lift the prolonged overcapacity amongst steel millers before end-2009, thereby offering SHA a clear path to recovery into 2010. We are ceasing coverage on SHA given lack of interest among institutional investors.

Comment On News
Hock Seng Lee RM0.82: Buy
– New contract lifts order book to RM1.84b

Second major contract for the year. HSL has clinched a RM126m job in Bintulu, Sarawak, lifting its outstanding order book to RM1.84b. This is HSL’s second major job win for the year, totaling RM288m for the year to-date. We expect further job wins, especially for infrastructure works, as the government refocuses on developing the East Malaysia state. HSL is a direct beneficiary of pump-priming in Sarawak. Buy.

Economics
2009 Real GDP
– Official growth forecast revised…

Government revised its 2009 real GDP growth forecast. The Prime Minister (PM) announced yesterday that the official real GDP growth forecast for this year was changed to between -4% and -5% from the +1% to -1% announced by Bank Negara Malaysia (BNM) in Mar 09. This is due to the impact of the global recession on external demand which also weakened domestic demand, especially private investment (1Q09: -26% YoY), including FDI (1Q09: -50% YoY). However, apart from mentioning a 25% drop in exports, no detailed breakdown of the revised forecast was provided.

Other Local News
Econs: Government looking at third stimulus package

TNB: Cut power demand forecast

TNB: Tender for submarine line to be issued by year-end

RHB: Gets US$100m Japan bank loan

MRCB: To develop RM1b office and residential project at KL Sentral

Transmile: Gets lenders' nod for RM568m debt revamp

UEM: Izzaddin named new UEM chief

Outside Malaysia
U.S: Durable-goods orders hovered near lowest level in 13 years in April

U.S: New-home sales climbed 0.3% MoM to 352,000 in April

E.U: May retail sales fall as unemployment rises

E.U: Confidence in May at 6-month high on signs worst over

U.K: Retail sales deteriorated during ‘tough’ May

Japan: Retail sales in April fall for eighth month on job woes

India: Ratings face pressure on widening deficit, Moody’s says

Philippine: Cuts key rate a fifth time to revive slowing growth

Philippine: Economy grows 0.4% YoY in 1Q09

Crude Oil: OPEC holds production quotas steady, predicting demand recovery

Technicals
Special Technical Perspective
– Highs seen on the KLCI, KLPLN Index, CPOF?
A temporary high seen at 1,059.88 for the KLCI

A high point was also seen on the KL Plantation Index at 5,515.37

An obvious rebound CPO peak seen at RM2,799 too

We advise clients to “Take Profits” since our April Buy Call of 917.89