Aviation (Overweight) - Jet Fuel Price High at US$135/bbl

Aviation (Overweight)

Jet Fuel Price High at US$135/bbl

• Political Tension in MENA region had caused jet fuel price to increase to US$137/bbl.
• AirAsia has just announced higher fuel surcharge (+30-50%), which we has estimated to increase revenue by ~RM72m, just enough to offset increment of US$5/bbl in 2012.
• MAS has not made any announcement yet on higher fuel surcharge. Its wholly owned subsidiary Firefly has re-introduced fuel surcharge.
• Based on our sensitivity test, we expect AirAsia to remain profitable if jet fuel priced increased to US$140/bbl, while MAS still in the red in FY12. For every US$5/bbl increase in jet fuel price, AirAsia’s EPS will decrease by ~6%.
• AirAsia is currently trading at a discount to regional and global LCC peers despite achieving highest ROEs and potential higher earnings from recognizing contributions from Thai and Indonesia associates post listing in 2012. Furthermore, LCC business model is expected to sustain during economy slowdown.
• Maintain Buy on AirAsia with Target Price of RM4.50 and Sell on MAS with Target Price of RM0.82.

Source: HLIB Research 30 March 2012

NOTION - Exciting times ahead

Notion VTec; Buy; RM2.07
Price Target: RM2.80; NVB MK

Growth of PC sales to support HDD sector. Strong upside potential for Notion. Maintain Buy and RM2.80 TP.

Source: HwangDBS Research 30 March 2012

MAYBANK - Maybank expects NIM compression

Maybank; Buy; RM8.80
Price Target: RM10.60; MAY MK

Maybank expects a contraction of 10 bps in the group’s net interest margin (NIM) in 2012. It cited price competition between banks as the reason as new loans secured at lower pricing has narrowed NIM. This is in line with our expectation as we have imputed 10bps decline in NIM in our FY12 forecasts.

Separately, Maybank said that its exposure to the USD600m (c.RM1.8bn) unsecured funding facility on which Vietnam Shipbuilding Industry Group (Vinashin) has recently defaulted is minimal and insignificant. Maybank’s total assets as at Dec-11 stood at RM451bn and it has a loan loss coverage ratio of 87%. Maybank remains our top pick among the large cap Malaysian banks. Its dividend yield is appealing at c.6%, assuming a sustainable 70% payout ratio. Apart from its improving domestic business, we believe that its long-term growth potential of its Indonesian operations remains a key re-rating catalyst. Maintain Buy and RM10.60 TP.

Source: HwangDBS Research 30 March 2012

Malaysia Marine and Heavy Engineering Holdings: Maintain Hold - Yard trip: Progress and prospects

Maintain Hold; RM5.70 TP. Our recent visit to the yard confirmed that the Gumusut-Kakap FPS project is on schedule for delivery in 2Q 2013 and the Malikai TLP project could be the next deepwater project to be built there. Meanwhile, the takeover of Sime Darby (SD)'s yard is set to be completed by April and the exercise would now include the Kebabangan project. There is no change to our earnings forecasts and TP, based on 20x 2013E PER. Current valuations support a Hold call.

Maybank Research - 30 March 2012

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HwangDBS Research Highlights (GAMUDA, MHB) - 29 March 2012

Gamuda; Buy; RM3.59
Price Target: RM4.95; GAM MK
Stellar quarter, record year ahead

2Q trump expectations, 2H will be stronger. Raising earnings, election risk overblown. High conviction BUY, TP RM4.95.




Malaysia Marine & Heavy Engineering; Fully Valued; RM5.44
Price Target: RM4.75; MMHE MK
Slow orderbook replenishment
Pasir Gudang yard running at full utilisation. Lacks near-term catalyst; will focus on project execution. Maintain Fully Valued rating and RM4.75 TP.

UMW - Targeting 15% market share

UMW Holdings; Hold; RM7.26
Price Target: RM7.30; UMWH MK

According to a local media, UMW Toyota Motor is maintaining its sales target of 93k units (with 6k units of hybrid cars) of Toyota and Lexus cars this year, aiming to capture about 15% of Malaysian Automotive Association’s (MAA) 2012 TIV target of 615k units this year. The comments were made during the launching of its new Lexus model – Lexus GS – which is expected to sell around 150 units this year. The Lexus GS is available in 5 variants with price tags ranging from RM366,200 to RM464,800.

UMW’s sales target for Toyota is within our FY12F expectation of 93.7k unit sales, which are projected to contribute RM10.3bn (or 78.0%) to UMW’s FY12F revenue of RM13.2bn. Toyota and Lexus have cummulatively sold 87,895 units in 2011, which was a drop of 4.4% y-o-y due to auto parts supply disruption from the natural disasters in Japan and Thailand.

Maintain Hold and RM7.30 TP (based on sum-of-parts valuations).

Source: HwangDBS Research - 29 March 2012

GAMUDA (BUY) - 2Q lifted by land sale

GAMUDA (BUY)

2Q lifted by land sale

• Reported 2HFY11 PATAMI grew by 47% to RM268.8m (13 sen/share). However, after adjusting for a one-off gain of ~RM18m from land sales to AEON, core earnings grew by 37% to RM250.8m (12.1 sen/share), meeting both ours and consensus estimates respectively.
• QoQ, core earnings actually dipped due to lower property contribution and fluctuation in contributions from Gamuda Water and SMART. However, in terms of YoY, quarterly earnings grew by 26%, driven by margins expansion for the EDTP project and property activities in Bandar Botanic and Horizon Hills.
• Gamuda has ~RM5.8bn order book, translating to 3.1x FY11’s construction revenue and unbilled sales to RM1.3bn, translating to 1.8x FY11’s property revenue.
• Maintain BUY with TP of RM4.41.

Source: HLIB Research - 29 March 2012

Gamuda: Maintain Buy - Another good quarter

Met our expectation. RM269m 1HFY12 net profit (+47% YoY), which included a partial gain from the sale of land in Celadon City, was 50% of our full-year forecast. The results however exceeded market expectation at 55% of consensus' FY12 forecast. 2H earnings are likely to be stronger HoH; we retain our FY12 forecast for now, which implies a 27% growth. There is also no change to our RM4.10 RNAV-based TP and Buy call. The stock offers value at 14% upside to our target and 12.4x FY12 earnings. The sale of LITRAK could be the next catalyst.

Maybank Research - 29 March 2012

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DAYANG - Smooth sailing

Dayang Enterprise; Buy; RM2.07
Price Target: RM2.70; DEHB MK

Strong earnings visibility supported by RM1.4bn order book. Leveraging on robust O&G activity in 2012. Maintain Buy with RM2.70.

Source: HwangDBS Research - 28 March 2012

AIRASIA - Increasing fuel surcharge

AirAsia; Fully Valued; RM3.35
Price Target: RM3.10; AIRA MK

AirAsia has adjusted its fuel surcharge effective for bookings made since yesterday amidst persistent high jet fuel prices. It believes that jet fuel prices will remain at current levels for the year, and has taken this measure which is expected to cover US$5/bbl of its fuel costs. In March 2012, jet fuel prices traded at an average of US$136/bbl (YTD: US$132/bbl), which is close to our full-year assumption of US$131/bbl for FY12F.

We believe that the increase in fuel surcharge will increase overall ticket prices, which may affect passenger demand. We remain cautious on the outlook for the aviation industry due to the stubbornly high jet fuel prices. We maintain our Fully Valued call on AirAsia with RM3.10 TP as we continue to foresee a challenging year ahead.

Source: HwangDBS Research - 28 March 2012

AirAsia - Raising Fuel Surcharge By 30-50%

AirAsia – Raising Fuel Surcharge By 30-50%                     Market Perform

News Update

¨       AirAsia has raised its fuel surcharge by 30-50% to “offset the constant high jet fuel prices which has been trading at an average of US$136/bbl in Mar 2012”.

¨       AirAsia expects to recoup an additional US$5/bbl of the fuel bill with the fuel surcharge hikes.

¨       Fair value is RM3.72.  Maintain Market Perform.
Source: RHB Research - 28 March 2012

WTK – Nothing to be excited about yet

WTK – Nothing to be excited about yet                                  Market Perform

Visit Note

¨       For the first two months of 2012, WTK only achieved log production volume of 52k m3, which was lower by 15% yoy. Log harvesting was hampered by seasonal wet weather in Sarawak , although it seems that the seasonal effect was stronger this year. Average log prices are about US$185/m3 now, up slightly from US$180/m3 in Dec 2011.

¨       Fair value is revised to RM1.47 (from RM1.50) based on unchanged target PER of 9x FY12 EPS of 16.4 sen. Maintain Market Perform.

Source: RHB Research - 28 March 2012

MAS (SELL) - February Stats

MAS (SELL)

February Stats

• MAS released February statistics showing continued weakness in passenger and cargo demand, largely in line with our forecast.
• With the reported weak statistics, the survivability of MAS within 1H12 remained as a major concern, as the expected losses will eat up its existing cash piles of RM1bn (as at Dec 2011), while debt level remained high at RM5.7bn.
• High possibility of cash call exercise to strengthen balance sheet, fund aircraft delivery and restructuring cost.
• Separately, AirAsia X entered Re-Accommodation Agreement with MAS for its affected passengers following the suspension of services to Mumbai, New Delhi, London and Paris. The deal will contribute RM51.6m revenue to MAS or 0.4% of MAS FY12 revenue.
• Maintain Sell with unchanged Target Price of RM0.82.

 Source: HLIB Research - 28 March 2012

Tech: Semiconductor (Neutral; NEW) - Cautiously Optimistic

Tech: Semiconductor (Neutral; NEW)

Cautiously Optimistic

• Worldwide sales remain lackluster: recorded seventh consecutive yoy growth contraction with -8.8% reaching USD23.18bn (3 months moving averages) in January 2012.
• Slightly optimistic outlook: WSTS foresees the market to grow only at 2.6% and 5.8% in 2012 and 2013 respectively, vis-à-vis to the double-digit growth experienced in 2007 and 2009.
• Highly correlated: MPI and Unisem’s 2012 and 2013 revenue growth will be dictated by the underlying worldwide semiconductor growth trend.
• Electronics demand: subdued demand in IT/PC markets due to depressed consumer confident as the result of European debt crisis will be offset by better outlook in both telecommunication and automotive industries.
• Telco market: main catalyst to the recovery of the industry as cellcos leapfrog into 4G/LTE standard and proliferation of smartphones (especially low-cost models) and tablets.
• Auto market: Higher production of hybrid and electric cars will spur the industry as more IC components are required.
• We believe that Moore’s Law will continue to spur growth coupled with potential growth in the electronics market. Hence, we expect Malaysian semiconductor packagers to experience moderate growth in 2012.
• However, the growth would be dwarfed by intense competition from Taiwanese peers, higher input costs and appreciation of MYR against USD along with challenging economic outlook which will eventually hampers consumer confident.
• While the sector is not expected to revisit the glory days of double-digit growth as in 2007 and 2009, we initiate coverage on the sector with a Neutral rating:
• MPI (Hold; TP: RM3.57)
• Unisem (Hold; TP: RM1.48)

Source: HLIB Research - 28 March 2012