Lafarge (M) Cement (Hold; TP: RM7.11)
Largest Beneficiary from ETP
§ Our investment highlights for Lafarge are:
1. Our favourable outlook on the construction sector, and cement sector is the major direct beneficiary from the construction sector;
2. As the largest player in Malaysia, Lafarge will be the largest beneficiary from ETP implementation; and
3. Strong balance sheet.
§ We are projecting Lafarge's net profit in 2012-13 to rise by 32.7% and 10.8% to RM366.2m and RM405.7m from a projected net profit of RM276.0m in 2011.
§ We are initiating coverage on Lafarge with a HOLD recommendation and TP of RM7.11 based on 16.5x 2012 EPS of 43.1 sen.
December Inflation Report
§ CPI growth eased further to 3.0% yoy in Dec 2011 (Nov: +3.3% yoy), slightly below the consensus estimate of 3.1%, due mainly to lapse of fuel price hike effected a year ago. Accordingly, price increase of the transport category eased sharply to 1.9% yoy (Nov: +3.9% yoy).
§ The lapse of fuel price hike contributed to a 0.3ppt reduction in the CPI growth. December inflation rate would have remained at 3.3% yoy if Pemandu had continued with its subsidy removal in Dec 2011.
§ Stable mom CPI growth of 0.1% and easing of services inflation (3.1% yoy; Nov: 3.2% yoy) provided a relief that price pressure on the ground has begun to stabilise.
§ We now lower our inflation forecast for 2012 to 2.7% from earlier forecast of 3.0% as Pemandu did not perform any subsidy removal for Dec 2011 as anticipated.
§ We expect BNM to keep the OPR at 3.00% until end-2012 given the resilient economic growth with sticky inflation.
Holding well above the key 200-d SMA support
§ We reiterate that as long as KLCI continues to remain its posture above the crucial 200-d SMA (now at 1502), the benchmark index is still likely to gradually refill the huge gap of 1529-1546 resistance recorded on 5 Aug 11, probably as early as next week. Ahead of the CNY holidays next week, we expect more sideways consolidation above the 200-day SMA. Breaking the key 200-d SMA will drag index lower to 30-d SMA (1496) and 50-d SMA (1484) levels.
Medium to long term positive after recent consolidation
§ Following the breakout above the downtrend line formed since 2002 coupled with improving technical readings on the monthly chart, BOXPAK is expected to rally further towards the 50% FR (at RM2.36) and 38.2% FR (RM2.65), which is also the 52-wk high. A breakout above RM2.65 will drive prices higher to a more formidable resistance near RM3.00.
§ We believe BOXPAK could find its floor soon amid signs of bottoming up on its hourly chart and share prices also retraced back to below the 50% FR (daily chart). Immediate supports are RM2.06 (61.8% FR-daily chart) and RM2.00 (monthly mid Bollinger band). Cut loss below RM2.00.
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