Be realistic, be selective. We believe this market rally has pushed
valuations to the point where growth expectations have reached
implausible levels. In fact, profits have just begun to turn down. We are
not overly bearish – our Buy list is longer than our Sell list – but we
caution that optimism over growth can disappear as quickly as it
appeared. Domestic factors, particularly political developments, may
be a positive catalyst.
Profit recession has just begun. Industrial production peaked in
January 2008, but profits only began a broad-based decline in 1Q09.
Within our coverage, 63% of the companies that have released 1Q
earnings reported lower sequential quarterly net profits. In seven
sectors, our entire coverage list suffered profit contractions. This
suggests the recession in profits has just begun.
Market valuation implies an optimistic view of growth. The market
currently trades at 15.2x 2009 earnings, up from 12x earlier this year.
This is only 10% below the previous cycle’s mid-cycle value, but today,
we face growth of -7.7% (2009) and +9.7% (2010), taking market
earnings only 1% higher by the end of 2010 from its end-2008 level.
Market growth expectations seem to be running ahead of reality.
History tells us the bear market isn’t over. Two previous bear
markets over 1981-86 and 1993-98 lasted 57 and 58 months
respectively. It has now been 17 months from the January 2008
collapse. Those bear markets had 22-38 trend reversals of 5% or more;
we have now seen 12 since January 2008. These comparisons suggest
we are, at best, half way through this bear market.
Bet on Prime Minister Najib, but Sell hope. Our top stock picks are
in the construction sector. We expect PM Najib will deliver on the fiscal
spending promises, reinvigorating the construction and building
materials sectors. Our top Sells are stocks where high hopes and
expectations have been built in; where current prices have run well
ahead of both our and consensus target prices.
Politics a positive wildcard. Beyond rapidly executed fiscal packages,
the country’s new leadership could make further changes to longstanding
policies to attract foreign investment and win back broader
support from all Malaysians. These initiatives should be positive for
equity market at least in the short-term.
Not as bad as feared. Poor though the results were, the May results season was
not as bad as feared. In fact, there were reasons to be encouraged. The revision
ratio improved from 0.43x in Feb 09 to 0.6x, meaning that the earnings downgrade
momentum is not as lopsided as before. Some 60% of companies met
expectations (43% previously) and 25% failed to deliver (40% before). 15% did
better than expected, a slight pullback from 17% during the Feb results season. In
terms of sector performance, six disappointed while only two were above
expectations.
• EPS forecast surprisingly raised. More significant than the actual number of
companies that surpassed or missed expectations is the fact that 2009 and 2010
EPS have been raised, rather than cut. This is a pleasant surprise. Since the Feb
results season, 2009 EPS contraction has been reduced from 8% to around 6%
while 2010 EPS growth has been raised from 16% to 19%. Upgrades came largely
from the plantation sector due to firm CPO prices, as well as big caps such as
Axiata and Maybank, which more than offset letdowns from smaller caps.
• The worst could be over. In our Apr strategy when we upgraded Malaysia to
Overweight, we thought 2Q could provide a buying opportunity due to 1) the
expected poor results season, and 2) announcement of a sharp contraction in
1Q09 GDP. We were only partially right on the first count as 1Q09 results have
turned out to be not as bad as expected and did not present any major shocks or
earnings downgrades. This means that there is a good chance we are past the
worst as upcoming quarters may be more balanced and EPS cuts could have
bottomed out. Fundamentally, this is hugely positive for the market.
• New KLCI target of 1,220. Although our economics team was spot on about 1Q
GDP being weak – it sank 6.2% – the market took the bad news in its stride. This
is an indication of how far market confidence has improved in the past two
months. We continue to believe the gradual reinvestment of institutional funds’
spare cash will sustain the market rebound in 2H09. In view of the better-thanexpected
1Q results season, continued positive newsflow during PM Dato’ Sri
Najib Razak’s first 100 days in office and the gradual return of foreign funds to the
market, we upgrade our year-end KLCI target from 1,060 to 1,220 points after
removing the 10% discount to its 3-year moving average P/E of 15x. We maintain
our OVERWEIGHT stance on Malaysia and our preference for cyclical bombedout
sectors including construction, building materials, property and oil & ga
Not as bad as feared. Poor though the results were, the May results season was
not as bad as feared. In fact, there were reasons to be encouraged. The revision
ratio improved from 0.43x in Feb 09 to 0.6x, meaning that the earnings downgrade
momentum is not as lopsided as before. Some 60% of companies met
expectations (43% previously) and 25% failed to deliver (40% before). 15% did
better than expected, a slight pullback from 17% during the Feb results season. In
terms of sector performance, six disappointed while only two were above
expectations.
• EPS forecast surprisingly raised. More significant than the actual number of
companies that surpassed or missed expectations is the fact that 2009 and 2010
EPS have been raised, rather than cut. This is a pleasant surprise. Since the Feb
results season, 2009 EPS contraction has been reduced from 8% to around 6%
while 2010 EPS growth has been raised from 16% to 19%. Upgrades came largely
from the plantation sector due to firm CPO prices, as well as big caps such as
Axiata and Maybank, which more than offset letdowns from smaller caps.
• The worst could be over. In our Apr strategy when we upgraded Malaysia to
Overweight, we thought 2Q could provide a buying opportunity due to 1) the
expected poor results season, and 2) announcement of a sharp contraction in
1Q09 GDP. We were only partially right on the first count as 1Q09 results have
turned out to be not as bad as expected and did not present any major shocks or
earnings downgrades. This means that there is a good chance we are past the
worst as upcoming quarters may be more balanced and EPS cuts could have
bottomed out. Fundamentally, this is hugely positive for the market.
• New KLCI target of 1,220. Although our economics team was spot on about 1Q
GDP being weak – it sank 6.2% – the market took the bad news in its stride. This
is an indication of how far market confidence has improved in the past two
months. We continue to believe the gradual reinvestment of institutional funds’
spare cash will sustain the market rebound in 2H09. In view of the better-thanexpected
1Q results season, continued positive newsflow during PM Dato’ Sri
Najib Razak’s first 100 days in office and the gradual return of foreign funds to the
market, we upgrade our year-end KLCI target from 1,060 to 1,220 points after
removing the 10% discount to its 3-year moving average P/E of 15x. We maintain
our OVERWEIGHT stance on Malaysia and our preference for cyclical bombedout
sectors including construction, building materials, property and oil & ga
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Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
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Be cautious into 3Q. 1Q09 results of the six banking stocks we cover
were generally in line, with combined net profit down 2.1% QoQ and
13.1% YoY. However, the weak 1Q09 GDP suggests growing stress in
system loans over the coming months. We remain cautious on banks’
profits, especially from 3Q09. Underweight the sector.
1Q down a sharp 13.1% YoY. Other than AMMB’s positive surprise,
results were generally in-line. The combined net profit of our banking
universe was flattish QoQ but fell a sharp 13.1% YoY on lower treasury
and FX income and higher loan loss provisions. Net interest income
expanded, but the weak equity market continued to affect brokerage
income, which contracted for the 5th to 6th consecutive quarter.
Some signs of stress. Domestic loans continued growing at most
banks. QoQ loan growth at the major banks (Maybank, CIMB Bank and
Public Bank) outpaced system growth. Some loan segments, however,
have begun showing stress. Domestic NPL saw upticks in the
consumer (mortgage, autos) and working capital segments. Net NPL
ratios continued to trend down due to the expanded loans base.
Earnings to contract. There were no major revisions in our individual
earnings forecasts except for AMMB (FY09: +16%, FY10: +7%). Our
combined net profit forecast was upgraded by a marginal 0.1% for 2009
and 0.7% for 2010. We expect sector earnings to contract 9.9% in
2009, before recovering to 6.8% growth in 2010 (previously -10.1%,
+6.1% respectively). This excludes further impairment in the value of
long-term investments, merger costs and other one-offs.
Asset quality concerns. 1Q09 GDP (-6.2% YoY, -7.7% QoQ) should
be the weakest, suggesting that the worst may be over. However, we
expect economic recovery to be slow, with real GDP to return to the
3Q08 high only in 4Q10. There is a 3-6 month interval from GDP trough
to NPL peak. Hence, banks are set to report weaker profits on rising
NPLs and higher credit charges from 3Q09.
Mainly Sells. Against regional peers, the larger Malaysian banks are
pricey. The current liquidity driven market has pushed valuations up but
prospects for a strong economic recovery stay hazy. Sell into strength.
Global economic developments remained in a sort of suspended animation through last month–especially coming on the back of the recent months of significant turbulence.
- The subsidy arbitrage that many companies had relied upon to generate their generous margins is gone for good and the environment will continue to be challenging, and indefinitely so.
- The case for consolidation across several sectors is overwhelming but activity remains low. Managers are in denial and holding out for miracles.
- The closing window for regional economies to reduce their dependence on oil (highlighted in the Countdown to Midnight, November 14th, 2016) has been validated by the rapidly rising forecasts for the electrification of the global passenger vehicle fleet, which accounts for over a quarter of global oil demand.
- Reform is not a magic wand and hope is not a strategy. To transform the economy from its dependency on oil and subsidies requires pain, sacrifice and perhaps a decade of disruption to the status quo.
Foreign boys not spared a 20% 1Q earnings decline. The combined net profit
of the five major foreign banks in Malaysia fell 19.7% yoy to RM824.6m in 1Q09,
worse than the 14% slide recorded by the local banks. Clearly, the foreign boys
are not spared the impact of the economic downturn, with earnings dents coming
primarily from (1) a 1.3% yoy drop in net interest income, (2) 25% slump in non-
interest income, and (3) 23% jump in loan loss provisioning (LLP).
• Foreign banks’ loan growth trailing local banks’. As expected, foreign banks
recorded slower net loan growth of 3.1% yoy in Mar 09 compared to 12% for
local banks’ domestic lending. The performance of foreign banks was pulled
down by a 6.8% contraction in Citibank’s loan base, due primarily to a drop in
property and business loans. Other major foreign banks registered single-digit
loan growth ranging from 3.3% (for UOB) to 8.7% (for OCBC).
• Higher NPL ratios and credit costs. Against the backdrop of a grim economic
climate in 1Q09, all major foreign banks saw a rise in their net NPL ratios. The
blended net NPL ratio of these five banks increased from 1.68% in Dec 08 to
1.81% in Mar 09, lower than the industry’s 2.2%. The hike in NPL ratios led to a
23% yoy surge in 1Q09 LLP.
• Better performance by local banks. In 1Q09, local banks outperformed their
foreign peers in the areas of (1) net profit – 14.2% yoy drop vs. 19.7% for foreign
banks, (2) non-interest income – down 7.1% yoy vs. 25.3% for foreign banks
despite their higher exposure to poor investment banking income, and (3) NPL
ratios – a few local banks, i.e. Maybank, Public Bank, AMMB and Alliance
managed to contain their NPL ratios while qoq rises were evident for all the
major foreign banks.
• Maintain NEUTRAL. Foreign banks’ poor 1Q09 financial results reflect the
adverse operating environment. We take heart in the outperformance of the local
banks during these difficult times as it suggests that the improvements in local
banks’ operations, especially in the area of risk management, have helped them
to weather the economic downturn. On this note, we are maintaining our
NEUTRAL stance on Malaysian banks as local banks may trump our and market
expectations in countering the slowdown in loan growth and the uptick in NPLs.
Our top pick for the sector remains Public Bank.
An improved performance. While the results announced by oil & gas (O&G)
companies in Mar-May 09 were a mixed bag, they leaned towards the positive,
unlike the previous quarter. A third of the six companies in our portfolio missed our
forecasts, an improvement on 50% in 4Q08. Half of the companies broadly met our
expectations (4Q08: 17%) and one (17%) surprised on the upside (4Q08: 33%).
Since 1 May 09, the share prices of O&G stocks under our coverage have jumped
by an average 28%, reflecting the overall encouraging reporting season.
• Three trends in 1Q09. 1) Margins picked up as companies climbed the value chain:
Except for Dialog, all the companies in our O&G portfolio showed margin
improvement, with average EBIT margin rising from 14% in 4Q08 to 20% in 1Q09.
2) Late delivery remains a problem for offshore support vessel (OSV) operators: In
total, Petra Perdana and Alam missed six vessel delivery dates due to assembly
line congestion and delayed shipment of parts. 3) Petroleum retailers and refiners
bounced back: The rising crude oil price supports the selling prices of products that
are not subject to automatic pricing mechanism (APM) and refiners benefited from
inventory gains.
• Service providers stand to benefit. YTD, the oil price has jumped 56%, reflecting
factors such as 1) a weakening US dollar, which encourages speculative money to
flow into the market, and 2) an increased risk appetite among investors who
anticipate an economic recovery. As a producing country, Malaysia is poised to
benefit from the upward march of the oil price. Petronas-licensed service providers
offering works and facilities such as yards, tank terminals, offshore structures and
maintenance job stand to win the most.
• Target price increases. There are no changes to our forecasts. However, we are
raising our target prices by 11% for Dialog, Kencana, SapuraCrest and Wah Seong
to reflect our recent index target upgrade. We now apply our revised target market
P/E of 15x to the stocks, instead of 13.5x. Our target prices for Alam, Petra Perdana
and Petronas Dagangan are maintained.
• Kencana replaces Petra Perdana as top pick. YTD, Petra Perdana’s share price
has risen by a whopping 120%, making the stock an outstanding performer in our oil
& gas portfolio. While we still like the stock, we are replacing it with Kencana as our
top pick. We believe Kencana’s newsflow and order book replenishment over the
next few months will be more exciting.
• Maintain OVERWEIGHT. We remain OVERWEIGHT on the oil & gas sector in view
of the potential re-rating catalysts of 1) M&As, and 2) more active newsflow. Also
unchanged are all our stock recommendations and earnings forecasts.
– February results continued the eight month decline in unit sales (avg -2.6%) across fast moving consumer goods (FMGC) as consumers continue to cut back on shopping trips in the U.S..– Additionally, while the percent change in basket ring increased 2.3% in the U.S., they are off from the January increase of 3.9% possibly due to declining prices as many retail channels did see enhanced shopping frequency in the 1st two months of the year – There was a noticeable up tick in store brands, given the 6.4% increase in unit sales across all store brands in the U.S.. This is the highest lift we have seen since August 2008 as the gap between branded items and store brands widened. – Despite the shift to store brands in the US, National Brands in Canada are still holding their share (81.2) as they capitalize on the consumers need for value through increased feature pricing activity. Over the past year unit sales on feature price increased 8% for National Brands to now account for 38.5% of unit sales. PL remained flat reporting a 1% decline in feature price sales.– Canadians are still shying away from multiple store visits. One stop shopping continues to expand – they are making 4% fewer shopping trips but once in store, they are spending 6% more, driven primarily by rising prices.– Expect March sales to be negatively impacted by the seasonal adjustment of Easter, which in 2008 occurred on March 23rd vs April 12 in 2009.
Upping CPO price forecasts. In this report card on the recent results season, we
are raising our CPO price (cif) forecasts by 18% for 2009 and 8% for 2010 to
US$710 per tonne for both years. The reasons for our upgrades are Argentina’s
lower soybean crops, the slower decline in demand growth from key consumers
and a slower-than-expected recovery in palm oil output. Our new local CPO price
forecasts are RM2,280 for 2009 and RM2,250 for 2010.
• CPO price to pull back in 3Q before recovering in 4Q. We remain positive
about CPO price until end-2Q as the replenishment of stocks will require time,
India’s import duties on edible oils remain at zero and there is concern over the
delay in plantings in US. We expect CPO price to pull back in 3Q before
recovering towards the end of the year.
• Upgrading earnings forecasts and target prices. In view of our higher CPO
price forecasts and recent changes in our rupiah assumptions, we are raising our
FY09-10 earnings forecasts for all the planters in our coverage by up to 30%.
This, along with higher target P/Es following our upgrade of regional
stockmarkets, bumps up our target prices by 3-53%. We are raising Hap Seng
Plantations and Sampoerna Agro to Neutral given their recent underperformance.
• Upgrading Malaysian plantation sector to Neutral. We are raising our rating for
the Malaysian plantation sector from Underweight to Neutral as its valuation
premium over regional peers has narrowed following its recent underperformance,
selected plantations stocks will benefit from an increase in their weightings in the
new FBM30 indices on 6 July 2009, we are more bullish on the Malaysian stock
market and foreign shareholding levels have fallen.
• Staying NEUTRAL on regional plantation sector. Despite our CPO price
upgrade, we remain NEUTRAL on the regional plantation sector as the share
prices of most planters in our universe have done well YTD, reflecting the more
upbeat CPO price outlook and expectations of a correction of CPO price in 3Q
due to seasonally higher production and potential cutbacks in demand from major
consuming countries if crop prospects improve. There is also no change to our
Overweight rating on the Singapore plantation sector and Neutral call on the
Indonesian plantation sector. For exposure to the regional plantation sector, we
continue to recommend large-cap liquid planters. Our top picks in the region are
Wilmar, Sime Darby, Indofood Agri and London Sumatra.
Welcome to the 2009 edition of
The Wealth Report, the third such collaboration
between Knight Frank and Citi Private Bank.
Over the past 12 months the economic outlook has
become even more uncertain. Most of the developed
world is now in recession, and even the emerging
economies have been forced to pause for breath. Every
commentator accepts 2009 will be tough. Our Attitudes
Survey (page 12) indicates clearly that HNWIs will look
to protect their wealth from the ravages of the
downturn with an emphasis firmly on security and
transparency rather than risk.
The tangible nature of property means it is well
placed to benefit from this shift in emphasis, and there
are signs that some mature prime property markets,
such as London and New York, have readjusted to price
levels that offer good value for purchasers. For some
emerging markets, the rollercoaster ride looks set to
continue. A full analysis of prime global markets is
included on page 26, and we recommend 10 locations
and sectors that offer potential for growth on page 23.
As property is just one aspect of wealth, we have
expanded the scope of The Wealth Report by including
an investigation into the performance of alternative
assets, from art and cars to wine (page 36), and an
assessment of the state of the philanthropy sector
(page 16). Influential thinkers, such as Alain de Botton
(page 20), also share their views on how the world will
adjust to life post credit crunch.
We hope you enjoy reading the report.
The majority down. 62% of our 72-stock universe suffered lower
sequential quarterly net profits, with 24% surprising on the downside.
The combined 1Q09 net profit of our research universe fell by just 3.5%
QoQ. But stripping out 5 large gainers, net profits fell a larger 13.6%
QoQ. Consumers and glove manufacturers’ defied gravity, but net
profits of virtually all stocks in nine sectors fell quarter-on-quarter.
A surprising combined result, but the devil is in the details. The
combined net profit of our research universe declined just 3.5% QoQ
despite an overwhelming 62% of companies reporting a sequential
quarterly decline. But excluding five companies, combined net profit fell
13.6% QoQ, an acceleration from previous quarters. A broad-based
earnings decline is being masked by a few companies, including some
monopolies.
Declines in nine sectors, but consumer sector unscathed. Every
stock in nine sectors, excluding monopolies Petronas Gas and KLCCP,
experienced a drop in quarterly sequential earnings. The sectors are
gaming, oil & gas, property, REITs, construction, building materials,
semi-conductors, plantations and toll roads. Consumer stocks and
glove manufacturers showed particular resilience.
An ‘energy dividend’ took effect; monopolies fared well. Lower oil
prices benefited heavy fuel users AirAsia and Tenaga. Their gains were
only partially offset by lower earnings at the oil & gas services
companies. Net profits of Telekom, Tenaga and Petronas Gas, all
effectively monopolies, improved on a quarterly basis although only
Petronas Gas raised prices in 1Q09.
The biggest disappointment and downgrade: 1Q GDP. First quarter
2009 GDP fell 6.2% YoY, against consensus expectations of a 3-4%
drop. We have revised our GDP forecasts to -3.8% in 2009 and +4.0%
YoY in 2010 (previously -1.3% and +3.5% respectively). The
government, to be ahead in the expectations game, is projecting 2009
GDP growth of -4% to -5%. The silver lining is the government is now
under greater pressure to implement its fiscal stimulus plans quickly.
A reversal of fortune ahead for construction, building materials.
Despite uniformly lower earnings this 1Q, we believe the construction
and building materials sectors are only 2-3 quarters away from
improved revenues. Share prices of stocks in these sectors will likely
be driven by newsflow from the fiscal stimulus rather than earnings.
We raise our CPO price assumption to RM2,000/t (from RM1,600/t)
on the current high price of RM2,800/t and YTD RM2,178/t average.
We do not foresee CPO prices staying at current levels beyond 2Q due
to rising 2H production and slowing exports. The present CPO price is
81-123% above its long term historical price in USD and Ringgit
equivalents. EPS forecasts are upgraded by up to more than 100% but
company valuations remain stretched. Maintain Underweight.
Recent CPO price spike unsustainable. We view the recent 40%
spike to the RM2,800/t level from an average of RM1,950/t in 1Q09 as
too fast, too furious. Traders and speculators justified the high price on
tight inventory. We think a significant price correction in 2H is imminent
as inventory is expected to build up on slowing exports and stronger 2H
production. Also, the present CPO price is 81% and 123% above its 30-
year long term historical price in USD and Ringgit equivalents of
USD430/t and RM1,257/t respectively.
Bearish 2H price outlook. CPO production, which has disappointed in
1H09 due to poor weather and tree stress, is likely to rebound strongly
in 2H. Besides production recovery, narrowing palm oil discounts
against competing oils should slow exports. A return of normal weather
in the next planting season for South America, and increased trade
protectionism by the West on palm biodiesel are some of the other
bearish fundamental factors for CPO.
Earnings forecasts upgraded. With CPO price having averaged
RM2,178/t YTD and likely to remain high in 2Q on tight supply, we raise
our CPO price assumption from RM1,600/t to RM2,000/t for 2009-11.
This results in EPS upgrades for plantation companies under our
coverage ranging from 17% to over 100% for 2009-11.
Valuations remain expensive. We rate the sector Underweight.
Valuations remain stretched, especially for IOI and KLK which trade at
20.1x and 16.9x 2010 PER. We downgrade Asiatic to Sell (from Hold)
as the stock has soared 54% YTD and is highly leveraged on CPO
price swings. Sime has been raised to Hold (from Sell). Risks to our
price view are a weaker USD, higher energy prices, and further supply
shocks due to weather anomalies.
• 1Q09 adex data point south. Although total gross adex for Jan-Mar 09 shrank
3.9%, it was better than the 20% contraction seen after the 1997-8 Asian financial
crisis. The worst performer was the newspaper segment which saw a 9% decline
compared with a 3.7% growth for TV adex. But ad volume visibility extends only 2-3
months out, leaving question marks over advertising commitments for 2H09.
• Downbeat expectations. The lacklustre adex showing in Jan-Mar 09 ties in with
the 1Q09 results reported by Media Prima and NSTP. It also confirmed the
generally bearish expectations of the media companies since the beginning of the
year, with a few being taken by surprise by the magnitude of the deceleration. Our
previous 2009 projection of an adex range of 1.1% contraction to 6% growth does
not hold and we now revise it to 6-10% adex contraction.
• Newspapers at risk. Fundamental risks could be more severe for newspaper
companies as newspaper adspend continues to take a hit from depressed GDP
data. Although there are signs of resilience in the Malay newspaper segment, this
does not mean total immunity against the potential worsening of adex volume in the
coming months. The top Malay newspaper NST’s Harian Metro is the main winner
but this is not expected to help the group much given that Harian Metro is a small
contributor.
• Indicators leading at inflection point? We concur with our economic research
team’s view that the CLI could hit the trough in Jun-Aug 09 and that the economic
recovery from the trough is likely to take at least 12 months given the severity of the
current global crisis. Advertisers should reposition their spending for a gradual
recovery from 2010. Historical trends suggest that adex in Malaysia should recover
in 1Q2010 based on a 3-6 months’ lag period.
• End-2009 a good potential entry point. We believe end-09 will be a good re-entry
point for exposure to selected media stocks as positives such as earnings visibility,
improved sentiment of advertisers, cheaper newsprint and gradual economic
recovery are likely to kick in as catalysts then. We will monitor closely the situation
on the ground and official stats but so far, adex for the months ahead appears to be
southbound. The share prices of media companies have recovered somewhat since
the start of the year and we fail to see any additional near-term re-rating catalysts.
• Staying NEUTRAL on media sector for now. In view of this, we maintain our
NEUTRAL stance on the media sector but recommend investors to switch to Astro
(Trading Buy) which has very little exposure to adex and minimal downside risks to
its Malaysian operations where the subscriber trend could turn out to be resilient.
We remain NEUTRAL on Media Prima (MPR MK), Star Publications (STAR MK)
and Media Chinese International (MCIL MK). NSTP is kept as an
UNDERPERFORM
• Palm oil stocks at 22-month low but… Malaysia’s palm oil stocks fell for the fifth
straight month to a 22-month low of 1.29m tonnes at end-Apr 09 as exports and
domestic consumption exceeded domestic palm oil production.
• … at high end of expectations. Stocks fell 5.4% mom to 1.29m tonnes, which is at
the high end of market expectations ranging from 1.2m tonnes to 1.3m tonnes. The
decline in inventory is bullish for CPO price as it suggests tight palm oil supplies for
Malaysia, a key palm oil producer.
• Stock level may have hit trough in April. Our rough modelling, which assumes
the mom growth pattern for production and exports in the month of May will be
similar to the historical 3-year average growth pattern, suggests that Malaysia’s
CPO stocks could rise 5% mom to around 1.35m tonnes in May due to higher
production and lower exports.
• CPO price forecast intact. For the first four months of the year, average CPO price
fell 41% yoy to RM2,031 per tonne. This is marginally higher than our 2009 CPO
price forecast of RM1,950 per tonne due to lower-than-expected soybean harvests
from Argentina and weaker palm oil production from Malaysia and Indonesia. We
maintain our view that CPO prices will remain firm in the next few months due to
current tight supplies and potential further downgrade in Argentina soybean
harvests but are likely to trend lower in 3Q when palm oil supply improves and
demand weakens due to the higher selling prices. That said, the recent CPO price
strength has taken us by surprise due to deteriorating soybean crop prospects for
Argentina. In view of lower-than-expected yields, Oil World has cut its current-year
soybean crop estimates for Argentina by a further 1.5m tonnes to 33m tonnes last
week or a decline of 28.5% yoy. Although we are not changing our CPO price
forecasts of RM1,950 per tonne for 2009 and RM2,150 per tonne for 2010, there is
RM100-200 potential upside to our forecast for 2009 in view of the recent
downgrade of soybean supply from Argentina.
• Maintain UNDERWEIGHT. Our earnings forecasts for all the Malaysian planters
remain intact, along with our UNDERWEIGHT stance on the Malaysian planters due
to their expensive valuations relative to their regional peers. Potential de-rating
catalysts for the Malaysian planters are falling CPO price in 3Q, lower crude oil price
and improved weather prospects in major planting areas. Our only pick in the
Malaysian plantation sector is Sime Darby as the stock stands to benefit from the
move towards the new FBM 30 index, has the lowest P/E multiple and foreign
shareholding among the three largest big-cap planters in Malaysia and may engage
in earnings-enhancing M&As. We maintain our preference for the Singapore-listed
planters.
• Some glimmers of hope… Rays of hope are permeating the semiconductor
industry, which probably saw most of the bad news in 1QCY09. Global chip sales
improved slightly in Mar 09 with a 30.0% yoy decline compared with a 30.1% yoy
fall in Feb 09. The book-to-bill ratio has ticked up with preliminary Mar 09 numbers
hitting 0.61x, up from Feb 09’s abysmal 0.47x. Finally, utilisation rates have scraped
bottom as some production facilities have been shuttered and inventory control is
being exercised. The end-user markets appear to have troughed, with PC and
handset sales probably hitting the bottom. Furthermore, trade credit is now
normalising. That said, stabilisation does not equate to a recovery and we believe
that restocking activity as inventory runs low is the primary factor in the improving
outlook. We still expect 2009 to be a difficult year where the typical seasonal pick up
in 3Q may not materialise given the current re-stocking activities.
• …but no full-blown recovery until 2010. We argue that a true recovery will only
take root when the global economy begins to move upwards. A meaningful and
sustained recovery will only take place when consumer sentiment and spending
spring back to life and cause ASPs to start rising. We believe that a more
convincing uptrend will take hold only from 2H10 onwards.
• Global economies to start stabilising towards year-end. Our economists believe
that the world economy will feel the full impact of the global financial crisis this year.
Although the process of sorting out the financial system will take time and
resources, the cumulative effects of sizeable fiscal stimuli and aggressive monetary
easing globally will work to provide some stability. Recent global indicators are less
negative. Considering the extremely low base this year, global growth should pick
up in 2010 but will probably fall short of its long-run average growth rate of 3.7%.
• Upgrade sector to TRADING BUY. While the fundamentals for the sector remain
uncertain, we think that downside to share prices is limited as valuations are still
below trough levels. We upgrade the sector from Underperform to TRADING BUY.
Furthermore, in line with our market strategy, we think that investors’ risk appetite is
increasing and higher beta plays such as semicon should be in vogue. Investors
should start picking up semicon stocks ahead of the recovery of the sector as
historically, the share prices for both MPI and Unisem cratered 13-18 months before
the upturn of the sector. Sector catalysts include a) a sooner-than-expected revival
of end-user demand and b) a faster-than-expected economic recovery.
• Upgrade Unisem and MPI to Trading Buy. In tandem with the sector upgrade, we
upgrade MPI and Unisem from Underperform to Trading Buy. We raise our target
prices for both after cutting our discounts to their 5-year historical average by 30-
60% pts to 20-40% for Unisem and MPI respectively. We assign a lower discount to
Unisem, our top pick, as its higher liquidity and beta make it a better play on a
market rebound. Re-rating catalysts include a) qoq improvement in earnings, b)
revival of end demand and c) the higher betas on offer.
We expect transactions to fall and prices to ease in 2009, in line with the projected 3%
real GDP contraction. Transactions could fall 20-30% or as much as 35-50% in the
worst-case scenario, matching the performance during the 1997/8 Asian financial
crisis. However, most major developers have pushed out innovative financing
schemes to lure buyers. Response has been mixed, with good response garnered by
the likes of SP Setia (RM500m sales) and Mah Sing (RM170m sales) but lacklustre
sales for many other developers
More excitement ahead. The eventual award of the RM1.3b Pahang-
Selangor raw water transfer tunnel works on 28 Apr confirms that the
new administration sees the urgency for construction in stimulating the
economy. Langat 2 should be next in the limelight, together with the
massive Klang Valley LRT system. We expect more positive news flow
over the near-term. Continue to Overweight Construction.
Langat 2 next. Langat 2, the downstream portion of the water transfer
project, comprises a 2,180 mld treatment plant and the distribution
pipelines. The estimated RM5b construction contract was awarded in
Feb ’08 to Kumpulan Darul Ehsan, which holds 60% of Kumpulan
Perangsang Selangor (KPS). As KPS does not have a major
construction arm, we think that potential beneficiaries are Gamuda, Loh
& Loh and Taliworks, which have had working experience with, and/or
are affiliated to KPS via shareholdings.
Klang Valley LRT to follow. Local companies have been invited to
submit “expressions of interest” for the LRT extension and upgrading
works, with the government keen to see construction works start within
the next 3-4 months, according to today’s Edge. The extension works
could cost RM7b, including RM1b to buy rolling stocks. Our view is that
the project may be parcelled out and experienced contractors like IJM,
Gamuda, UEM Builders and YTL Corp may bid as turnkey contractors.
Overweight Construction. We continue to expect mid-sized projects
to lead the momentum of construction sector recovery under the fiscal
stimulus. Meanwhile, the inter-state water transfer (including Langat 2)
and Klang Valley LRT extension are also two priority projects under the
9th Malaysia Plan with works expected to start before the decade turns.
IJM, WCT and HSL remain on our Buy list. Meanwhile, Gamuda is a
strong contender for the two mega water and LRT projects. Our Hold
call on the stock is under review, with upward revision potential.
• Extended wedge formation. We were expecting the DJIA to break down from its
wedge formation last week but it continued to rise further towards the 8,300 levels
before correcting end of last week. The Index could still be in an extended wedge
formation and the breakdown the wedge support trend line at the 8,100pt would
confirm the end of this pattern.
• If we are wrong… If we are wrong, our alternative wave count shows that DJIA
could have already started its minor wave “c” up leg after completion of the wave
“b” triangle consolidation since early Apr last week (refer to chart below). This wave
count is supported by the breakout of the major resistance trend line since Nov-08.
Confirmation of this alternative wave count if DJIA breaks above 8,300pt.
• US banking stocks remains in consolidation phase. If banking stocks are
leading the market, DJIA is still in an extended wedge formation. The KBW Bank
Index has just broken down below its uptrend channel support trend line since
early-Mar. This indicates further consolidation in the immediate term for the Index.
• Crude oil uptrend is not over. We were looking for crude oil prices to break down
last week but the price has since bounced back above the US$53/barrel levels.
This has negated our preferred wave count and a likely “double zig-zag” is taking
place, targeting the US$60-70/barrel levels in 2H09.
• Channel breakout. MSCI Asia ex-Japan Index (MAxJ) only experienced a mild
correction last week and closed strong for the week at 336. The Index just broke
out of its channel resistance trend line since Nov-08. This is a positive sign if the
Index is able to hold above this trend line over the next few weeks.
• Still expect consolidation. However, we still expect Asian equity markets to
consolidate over the next few weeks to build up a support base before charging up
in June-July. If RSI breaks out of its current consolidation range, this would likely
indicate that Asia has kick started its next up leg towards the June-Jul period.
A milestone for the sector. We take a positive view of this news as it is a significant
milestone for the water sector. The timing of the award was a slight surprise as we
had expected the recent cabinet reshuffle to result in a slight delay for the project
award following the award of the letter of intent (LOI) to the Shimizu consortium a few
months back. The water transfer project is the first mega job to be rolled out under the
9MP after the announcement of the second stimulus package in Mar 09. Our channel
checks indicate that the tunnelling job will move fairly quickly from here on and the
notification to start work should be received in a matter of days. Once site possession
is obtained, major resource mobilisation will be underway, including Shimizu’s
positioning of the tunnel boring machine (TBM) near the Titiwangsa range. We think
that actual work could start within a month, suggesting a mid-2014 timeframe for
completion of the project.
No details on scope of works. Details of the scope of works are not available. IJM’s
share of works based on its 20% stake works out to RM260m or just RM26m profit
enhancement assuming a 10% pretax margin. We are not revising our earnings
forecasts as the RM260m share of works is already part of our assumption for new
contracts for IJM. That said, the award of the project raises IJM’s profile as it is one of
the main contractors of the country’s largest water infrastructure project.
Focus will now shift to the remaining major components of the water transfer project,
i.e. the Kelau dam and the Langat 2 water treatment plant. We expect the feasibility
studies for both to be concluded sometime in early 2H09, making way for the
tendering process. We gather that the Shimizu consortium is eyeing the Kelau dam
job which has an estimated value of roughly double the tunnelling job. This suggests
that IJM’s potential share of works could be more than RM500m.
Welcome relief but maintain cautious outlook. Mar ’09 total adex
recorded a much lower YoY contraction of 1% (Feb ’09: -13% YoY)
driven by TV (+13% YoY). Despite this reprieve, the high 2Q08 and
3Q08 total adex base will be difficult to repeat due to lack of adex
friendly events this year. We downgrade Star and Media Prima to Sell
as valuations have run ahead of fundamentals.
TV adex rebounded... Mar ’09 TV adex rose by 13% YoY driven by
higher rates at Media Prima’s TV stations (TV3, 8TV, ntv7 and TV9)
effective 1 Feb ‘09. Due to the strong showing, YTD Mar ’09 TV adex
rose 4% YoY.
… but total adex fell. Mar ’09 total adex eased 1% YoY due to the
high base set in the preceding year by the 2008 General Election adex
of RM19.6m and continued deterioration in newspaper adex (-9% YoY).
Mar ’09 represents the sixth consecutive month of YoY newspaper
adex contraction. YTD Mar ’09 total adex was down 4% YoY,
One swallow does not make a spring. While we welcome the better
showing in Mar ’09, we believe that this momentum is unsustainable.
The high adex base of RM2.7b from May ’08 to Sep ’08 was fuelled by
Euro 2008 and the Beijing Olympics adex. Due to the lack of adex
friendly events and weak economic outlook this year, it will be difficult
to repeat this feat. We maintain our total adex forecast of -3% for now.
Sell Star and Media Prima. We raise Astro and NSTP target prices to
RM2.70 and RM0.95 on a lower WACC of 10.4% and 11% (13%
previously) but maintain our Hold and Sell calls respectively. We
downgrade Star and Media Prima to Sell as we believe their share
prices have run up ahead of fundamentals. The media sector is now
downgraded to Underweight from Neutral.
• Stable loan growth. The banking industry kept up its loan growth pace of 10.9%
yoy in Mar 09. This was partly driven by a 20-30% jump in loans classified as
“others”, which are loans extended to government agencies and non-bank
financial institutions. Business loan growth decelerated from 10% in Feb 09 to
9.5% in Mar 09 while the growth pace for consumer loans was sustained at 8.8%.
• Lethargic leading loan indicators. Leading loan indicators remained subdued in
Mar 09 – loan applications rose by only 4.8% yoy while loan approvals dipped by
0.7% yoy. The business loan segment was the culprit, with applications and
approvals dwindling 11-13% yoy and offsetting the 13-22% increase in the
indicators for consumer loans.
• Still expecting loan momentum to lose steam. We continue to expect a sharp
fall-off in industry loan growth from 12.8% in 2008 to 2-3% in 2009 given (1) the
sluggish leading loan indicators, (2) slower economic growth, and (3) the downshift
in car sales.
• Sliding lending rates. In response to the OPR cut on 24 Feb 09, banks reduced
their fixed deposit (FD) rates a few days later but BLRs for most banks were
lowered later by about 40bp in early Mar. As a result, FD rates were stable at 2.02-
2.52% but the average lending rate shrank by 105bp yoy and 33bp mom to an alltime
low of 5.16%.
• Ample liquidity. As loan growth of 10.9% outpaced the deposit growth of 8%,
banks’ loan-to-deposit rate tightened to 73.7% as at end-Mar 09 from 70.8% a
year ago. The system still has plenty of excess liquidity estimated to be about
RM219bn in mid-Apr 09 vs. RM216.8bn as at end-Mar 09.
• NPL ratio still improving, for now. Banks’ 3-month net NPL ratio declined by
73bp yoy to 2.2% in Mar 09 but was stable mom. Gross NPL ratio also fell by
154bp yoy and 21bp mom to 4.6%. The reserve coverage improved from 76.5% a
year ago to 86.4%, aided by a 16.9% yoy drop in gross NPLs against a 6.1%
decline in total provisioning.
• Maintain NEUTRAL. We remain NEUTRAL on Malaysian banks as the stillhealthy
banking numbers suggest that banks could perform better than we and the
market expect despite the downbeat economic outlook. Although banks’ net
earnings are estimated to pull back 6.5% this year, we anticipate a 17.4% rebound
in 2010. Over the longer term, many banks will also reap the benefits from their
ongoing revamps and regional expansion. Public Bank remains our top pick for the
sector.
BANKING Mar 09 Statistics Some ResilienceBoyboy cute
Positive signs. Loan disbursements, repayments, applications and
approvals rebounded with strong double-digit MoM growth, flattish-tolow-
teens YoY growth, and in absolute term, were back to pre-Aug/Sep
’08 levels. Absolute NPLs continued to inch lower, mainly from the
working capital segment. Nonetheless, it is early to tell whether these
are sustainable as global fundamentals remain weak.
Strong loan disbursements and repayments. Banking loans (net of
repayments) grew to RM733.9m in Mar ’09 (+0.6% MoM, +10.9% YoY)
on expansion in both household (+0.4% MoM, +8.8% YoY) and
business loans (+0.9% MoM, +9.5% YoY). The pace of disbursements
and repayments was strong (disbursements: +27.4% MoM, +9% YoY;
repayments: +15.7% MoM, +4.8% YoY), mainly for working capital.
YTD loans growth was +1% (household: +1.5%, business: +0.5%).
Forward indicators bounced MoM but still flattish YoY. Loan
applications and approvals also rebounded strongly: +24.3% MoM and
+35.3% MoM respectively. On a YoY comparison, loan applications
were up 4.7%, driven by household loan applications (+21.5%), mainly
for home purchases, which off-set lower applications from businesses
(-11%). Overall loan approvals were rather flattish YoY, with approvals
up for household loans (+12.6%) but down for business loans (-13%).
Absolute NPLs contracted further. Absolute gross NPLs continued
to inch lower, at a slightly higher pace of -3.7% MoM to RM33.6b (Feb
‘09: -0.04% MoM). On a 3-month comparison (see table in page 4),
the lower NPLs came mainly from the working capital segment,
reflecting perhaps resilient business strength. Meanwhile, net NPL ratio
was little changed at 2.24% (Feb ‘09: 2.23%).
Remain Underweight. YTD loans growth, if sustained, should lead to
the upper end of our 2-3% loans growth forecast for 2009. Our other
assumption is for absolute NPLs to expand by 50% YoY by end-2009,
leading to a projected 10% decline in combined net profit for 2009.
While loans quality was resilient in Mar ’09, we remain concerned over
rising NPLs – our analysis shows a 3-6 months interval from GDP
trough to NPL peak. The other main risk is a protracted economic
slowdown leading to rising unemployment and asset deflation.
Competition in financial sector to intensify gradually. Following the
liberalization of equity ownership requirements in 27 non-financial
services areas last week, the Government announced liberalization
measures for the financial sector yesterday. The ‘gradualist’ approach
does not come as a surprise, as we enter the final phase of the
Financial Sector Master Plan which has laid out a road map for greater
foreign participation by 2010.
Up to seven more foreign owned commercial/Islamic banks. The
liberalization measures encompass three areas, namely:
up to seven new licenses for foreign commercial and Islamic banks
– four in 2009 and three in 2011, which may be 100% foreign
owned, and two more takaful operators;
increase in foreign equity limits in domestic insurance/takaful,
investment banks and Islamic banks to 70% (from 49% previously);
greater operational flexibility for locally-incorporated foreign
commercial banks, mainly in branch openings.
Existing domestic commercial banks’ foreign ownership limit of 30% is
unchanged. Details of the measures are summarized in page 2.
Generally, in line with the “managed” approach in the past, as
opposed to the “Big-Bang” approach. This fits in with the national
development agenda of enhancing contribution of the services sector
as a source of growth, employment, investment and trade, as well as
laying the foundations for the domestic financial services sector to take
advantage of the eventual recovery in the global economy and
investment flows.
Gives local banks “some time” before the “crunch” in 2011. On the
outset, the moves imply increased competition for the domestic
commercial banks. But this will not come immediately as the two new
commercial banking licenses in 2009 to foreign players are for
"specialized expertise", relating to “industry-specific financing” like for
shipping, technology, infrastructure and agro-based. Also, greater
operational flexibility for foreign commercial banks for micro-financing
should not have an immediate material impact on the domestic banks.
In essence, the domestic commercial banks have a 1½ year time frame
to raise their competitiveness and efficiency before the opening of the
banking sector to three world-class commercial banks in 2011.
The liberalisation measures are LT positive in raising Malaysia’s
competitiveness in the financial services sector. We however,
maintain Underweight on the Banking sector. The immediate issues
are on asset quality, as the global and domestic economy head for a
slowdown. We stay concerned over rising NPLs and equity cash calls
to boost core capital (although not needed for now). The main risk is a
more severe and protracted economic downturn, with spikes in
unemployment (3.7% @ end-2008), and asset deflation.
Bank Negara announced yesterday measures for further liberalisation of the financial
sector:
Increase in foreign equity limits. The foreign equity limit for investment banks,
Islamic banks, insurance companies and takaful operators has been raised from 49%
to 70%. It is envisaged that these institutions’ business potential and growth prospects
will be enhanced by the international expertise and global networks of foreign
shareholders. However, the cap on foreign shareholdings in domestic commercial
banks remains at 30%.
New banking and Takaful licences up for grabs. New licences will be issued to
strong and world-class players in the following categories:
• In 2009, up to two new Islamic banking licences will be issued to foreign players to
establish new Islamic banks with paid-up capital of at least US$1bn.
• In 2009, up to two new commercial banking licences will be issued to foreign
players that will bring in specialised expertise.
• In 2011, up to three new commercial banking licences will be dished out to worldclass
banks that can offer significant value propositions to Malaysia.
• In 2009, up to two new family takaful licences will be made available.
Greater operational flexibility for foreign banks. Locally-incorporated foreign
commercial banks can establish up to 10 microfinance branches with immediate
effect. Further branches will be considered based on the effectiveness of these
branches in servicing microenterprises. Foreign banks will also be allowed to establish
up to four new branches in 2010 based on the distribution ratio of 1 branch in market
centres, 2 in semi-urban areas and 1 in non-urban areas.
Locally-incorporated foreign insurance companies and takaful operators are now
allowed to set up branches nationwide without restriction. The restriction against these
companies entering into bancassurance/bankatakaful arrangements with banking
institutions has been lifted.
Other liberalisation. Banks, insurance companies and takaful operators now have
greater flexibility to employ specialist expatriates with expertise to continue the
development of Malaysia’s financial system. Offshore financial institutions that meet
the predetermined criteria will be given the flexibility to have a physical presence
onshore – from 2010 for banking institutions and from 2011 for insurance companies.
Comments
Liberalisation well expected. The further liberalisation of the financial sector is within
our and market expectations as it is in line with the objectives laid out in the Financial
Sector Master Plan (FSMP) issued in 2001. Furthermore, the government has alluded
to announcements on this matter this week.
Upping foreign equity limits for Islamic and investment banks... However, it is a
surprise to us that Bank Negara has increased the foreign equity limits for Islamic and
investment banks from 49% to 70% as this means that foreigners will control these
entities. It appears that the authorities view the relaxation as necessary to attract more
foreign players into the Malaysian market to help develop these segments.
…but not for commercial banks. We are also surprised that the government did not
increase the 30% foreign equity limit for domestic commercial banks, which is
something the market had been looking forward to. An increase in the equity limit for
• B-Toto is worth a bet now as i) its core gaming operations remained resilient even
during the post-CNY off-peak period and appear likely to surpass our 6-7% gaming
revenue growth target for FY4/09, ii) 2009’s special draw allocations for all three
NFOs could take place over the next few weeks and iii) there is upside potential to its
6-8% gross dividend yield based on its policy of a minimum payout of 75% if B-Toto
dishes out higher dividends to lend its parent a helping hand.
• Adjusting earnings but implied yields still decent. We raise our FY09-11’s
revenue per draw growth assumptions by 2-4% pts following the stronger-thanexpected
YTD showing. But FY10-11’s bottomline is lowered by 4-5% as we also
raise our blended prize payout assumption from 62-64% to 63-64% to better reflect
the payout trends seen so far. FY09’s numbers are largely intact despite these
adjustments. Even after a 3-5% cut in our FY10-11 DPS projections (unchanged
80% payout ratio), our forecasts still imply a decent yield.
• Reiterate OUTPERFORM. Our DPS downgrades trim our end-CY09 target price
from RM5.95 to RM5.65, based on an unchanged 5% discount to its DDM value. We
continue to like B-Toto for its steady, low-risk topline growth, superior ROEs and
sustainable dividend yields. Being a low-beta stock, B-Toto may fall out of favour in a
rising market. However, we flag the likelihood of bumper dividends over the short
term. This is a potential share price catalyst that underpins our OUTPERFORM
recommendation, along with the normalisation of luck factor and market share gains.
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the telegram contact of my personal pi vendor to trade with.
@Pi_vendor_247
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Cardnickysharmasucks
The unveiling of the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card marks a notable milestone in the Indian financial landscape, showcasing a successful partnership between two leading institutions, Poonawalla Fincorp and IndusInd Bank. This co-branded credit card not only offers users a plethora of benefits but also reflects a commitment to innovation and adaptation. With a focus on providing value-driven and customer-centric solutions, this launch represents more than just a new product—it signifies a step towards redefining the banking experience for millions. Promising convenience, rewards, and a touch of luxury in everyday financial transactions, this collaboration aims to cater to the evolving needs of customers and set new standards in the industry.
BYD SWOT Analysis and In-Depth Insights 2024.pptxmikemetalprod
Indepth analysis of the BYD 2024
BYD (Build Your Dreams) is a Chinese automaker and battery manufacturer that has snowballed over the past two decades to become a significant player in electric vehicles and global clean energy technology.
This SWOT analysis examines BYD's strengths, weaknesses, opportunities, and threats as it competes in the fast-changing automotive and energy storage industries.
Founded in 1995 and headquartered in Shenzhen, BYD started as a battery company before expanding into automobiles in the early 2000s.
Initially manufacturing gasoline-powered vehicles, BYD focused on plug-in hybrid and fully electric vehicles, leveraging its expertise in battery technology.
Today, BYD is the world’s largest electric vehicle manufacturer, delivering over 1.2 million electric cars globally. The company also produces electric buses, trucks, forklifts, and rail transit.
On the energy side, BYD is a major supplier of rechargeable batteries for cell phones, laptops, electric vehicles, and energy storage systems.
How to get verified on Coinbase Account?_.docxBuy bitget
t's important to note that buying verified Coinbase accounts is not recommended and may violate Coinbase's terms of service. Instead of searching to "buy verified Coinbase accounts," follow the proper steps to verify your own account to ensure compliance and security.
Exploring Abhay Bhutada’s Views After Poonawalla Fincorp’s Collaboration With...beulahfernandes8
The financial landscape in India has witnessed a significant development with the recent collaboration between Poonawalla Fincorp and IndusInd Bank.
The launch of the co-branded credit card, the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card, marks a major milestone for both entities.
This strategic move aims to redefine and elevate the banking experience for customers.
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
where can I find a legit pi merchant onlineDOT TECH
Yes. This is very easy what you need is a recommendation from someone who has successfully traded pi coins before with a merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi network coins and resell them to Investors looking forward to hold thousands of pi coins before the open mainnet.
I will leave the telegram contact of my personal pi merchant to trade with
@Pi_vendor_247
What website can I sell pi coins securely.DOT TECH
Currently there are no website or exchange that allow buying or selling of pi coins..
But you can still easily sell pi coins, by reselling it to exchanges/crypto whales interested in holding thousands of pi coins before the mainnet launch.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and resell to these crypto whales and holders of pi..
This is because pi network is not doing any pre-sale. The only way exchanges can get pi is by buying from miners and pi merchants stands in between the miners and the exchanges.
How can I sell my pi coins?
Selling pi coins is really easy, but first you need to migrate to mainnet wallet before you can do that. I will leave the telegram contact of my personal pi merchant to trade with.
Tele-gram.
@Pi_vendor_247
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
The European Unemployment Puzzle: implications from population aging
Room To Run, But Value Vanishes
1. Equity Research
PP11072/03/2010 (023549)
Market Strategy 26 May 2009
Market Strategy Room to run, but value vanishes
KLCI: 1,053
Be realistic, be selective. We believe this market rally has pushed
Year-end Target: 990 valuations to the point where growth expectations have reached
Current 2009 PE: 15.2x implausible levels. In fact, profits have just begun to turn down. We are
not overly bearish – our Buy list is longer than our Sell list – but we
2009E PE at Target: 14.2x caution that optimism over growth can disappear as quickly as it
appeared. Domestic factors, particularly political developments, may
2010E PE at Target: 13.0x be a positive catalyst.
Profit recession has just begun. Industrial production peaked in
Andrew Lee, CFA January 2008, but profits only began a broad-based decline in 1Q09.
andrew.lee@maybank-ib.com Within our coverage, 63% of the companies that have released 1Q
(603) 2297 8680 earnings reported lower sequential quarterly net profits. In seven
sectors, our entire coverage list suffered profit contractions. This
suggests the recession in profits has just begun.
Market valuation implies an optimistic view of growth. The market
currently trades at 15.2x 2009 earnings, up from 12x earlier this year.
This is only 10% below the previous cycle’s mid-cycle value, but today,
we face growth of -7.7% (2009) and +9.7% (2010), taking market
earnings only 1% higher by the end of 2010 from its end-2008 level.
Market growth expectations seem to be running ahead of reality.
Our Coverage Universe
History tells us the bear market isn’t over. Two previous bear
No. % % of
Stocks Total Total markets over 1981-86 and 1993-98 lasted 57 and 58 months
Stocks Mkt Cap respectively. It has now been 17 months from the January 2008
The Buy List 31 40% 26% collapse. Those bear markets had 22-38 trend reversals of 5% or more;
The Sell List 29 37% 53% we have now seen 12 since January 2008. These comparisons suggest
Hold 18 23% 22% we are, at best, half way through this bear market.
Recommendations
(See page 7 for the List) Bet on Prime Minister Najib, but Sell hope. Our top stock picks are
in the construction sector. We expect PM Najib will deliver on the fiscal
spending promises, reinvigorating the construction and building
materials sectors. Our top Sells are stocks where high hopes and
expectations have been built in; where current prices have run well
ahead of both our and consensus target prices.
Politics a positive wildcard. Beyond rapidly executed fiscal packages,
the country’s new leadership could make further changes to long-
standing policies to attract foreign investment and win back broader
support from all Malaysians. These initiatives should be positive for
equity market at least in the short-term.
Top Stock Buys
Price EPS (sen) PE EPS Growth (%) Net Yield (%)
TP May-22 2009F 2010F 2009F 2010F 2009F 2010F 2009F
Resorts World 3.10 2.58 21.7 18.4 11.9 14.0 -7.7 -15.2 1.9
Telekom Malaysia 4.64 3.76 18.7 19.8 20.1 19.0 -8.9 5.5 26.1
Berjaya Sports Toto 5.40 4.78 32.7 32.9 14.6 14.5 17.9 0.4 5.3
WCT 2.20 2.14 16.4 16.2 13.0 13.2 26.8 -1.6 2.5
Kinsteel 1.30 0.81 5.9 16.4 13.6 4.9 72.1 176.5 0.0
Hock Seng Lee 1.17 0.79 9.3 11.7 8.5 6.7 22.6 26.2 2.4
Source: Maybank-IB
2. Market Strategy
Are we there yet?
Four months ago, the question “Are we there yet?“ could only refer to
whether markets had reached the bottom; today it could equally refer to
whether we have reached a top – that is the measure of how confused
investors are.
Global markets have been fuelled by liquidity and optimism: Liquidity
created by central banks’ attempts to unfreeze credit and money
markets and government investments in certain institutions; Optimism
that the world has avoided a global depression, and Asia is likely to
rebound sooner, due to China’s growth. We make two points in this
section: (i) that corporate profits have just begun to fall, and (ii) Chinese
growth will not save us.
Malaysia felt the impact of the global financial crisis via a slump in
exports after July 2008. The electronics companies whose revenues
slumped were initially mostly wholly-owned subsidiaries of foreign
owned firms, and are barely represented in the equity market. The
broader impact on domestic consumption only began to bite from end-
4Q08 and we believe its severity has accelerated in 1Q. The recession
in corporate profits has just begun.
Combined net profits of our research universe
Combined Earnings (RM b)
12.0 10.8 10.8 10.6
8.9
9.0
7.3
6.0
3.0
0.0
CY 4Q07 CY 1Q08 CY 2Q08 CY 3Q08 CY 4Q08
Source: Maybank-IB
The combined recurring net profit of the 80 stocks we cover fell by 16%
QoQ in 3Q and a further 18% in 4Q. The 3Q profit decline was not
sector wide but due to specific companies – Tenaga, Air Asia and two
banks. The 4Q profit decline was mostly due to the plantation sector
and Axiata. Excluding these, total net profit was more stable.
26 May 2009 Page 2 of 12
3. Market Strategy
Net Profits of coverage universe excluding plantations, Axiata
10
Total NP excl plantations, Axiata (RM b)
9
8.3 8.3 8.1
8
7 6.7 6.6
6
5
4
3
2
CY 4Q07 CY 1Q08 CY 2Q08 CY 3Q08 CY 4Q08
Source: Maybank-IB
So far in the May 2009 reporting season, an overwhelming 63% of
stocks in our coverage universe that have reported showed
contractions in sequential quarterly net profits. Every stock under our
coverage in seven sectors showed a quarterly net profit decline. The
seven sectors are property, plantations, REITs, semi-conductors,
construction, building materials and media. Net profits of the six banks
in our universe fell 2.1% QoQ, and a sharper 13.1% YoY.
Don’t count on China
Malaysia’s monthly exports have fallen by RM37bn between July 2008
(when exports peaked) and March 2009. Of this amount, exports
destined for the US (directly and indirectly via other Asian countries)
accounts for an estimated RM6.3bn, or 16% of the total export decline.
Conversely, exports destined for final China demand accounts for only
about RM2.4bn, or 4% of the decline, after excluding the amounts re-
exported to the US. The US consumption recovery therefore, is far
more important to Malaysian exports than Chinese consumption
demand.
Malaysian exports catering to final Chinese demand comprises
primarily palm oil products, which represents 21% of total exports to
China, and wood-based products. Exports of building materials account
for only 11% of Malaysian exports to China. Exports of consumption
goods to China account for under 10% of total Malaysian exports to
China. This means that neither Chinese fiscal stimulus nor consumers
will return Malaysian exports to anything close to previous levels.
Another way to view this is to examine the relative sizes of consumer
spending. Based on last year’s spending, the US consumer is 2.3x the
size of total Chinese GDP, and 6.3x the size of Chinese consumers.
26 May 2009 Page 3 of 12
4. Market Strategy
US vs. Chinese economies and consumers (USD b, 2008 prices)
16,000
14,265
14,000
12,000
10,058
10,000
8,000
6,000
4,402
4,000
1,601
2,000
0
US GDP US consumers Chinese GDP Chinese
consumers
Source: Maybank-IB
We expect only an anaemic recovery in US consumer spending. Rising
unemployment, job insecurity and falling house prices have already
resulted in a rebound in the savings rate as households rebuild their
balance sheets. US households are unlikely to return to their free
spending ways for years.
26 May 2009 Page 4 of 12
5. Market Strategy
Market valuation – expensive for the
growth
Having fallen 33% from its peak, one would expect bargains in the
Malaysian market. Not so. Earnings have collapsed too. The KLCI
has bounced from a p/e of 12x 2009 earnings to 15.2x now. It is
only 10% below the previous cycle’s mid-cycle valuation. While
12x p/e may not seem unduly high, it is expensive relative to the
anaemic growth prospects and to the recovery phase of the cycle
we are at. Most large caps are fairly valued or expensive.
2010 earnings will be only at 2008 levels. At 1,053 pts, the KLCI is
trading at 15.2x 2009 earnings, with earnings projected to fall 7.7% in
2009, and recover 9.7% in 2010. This is not attractive given that it
represents an earnings CAGR of just 0.6% p.a. from end-2008. It is
difficult to justify equities trading at over 15x p/e if the prospective
growth is less than 1% for each of the next 2 years. This valuation level
is also not attractive on a regional basis. The KLCI traded at 15-16x p/e
in 2005 despite close to zero earnings growth, but there was then the
prospect of double digit growth in the subsequent two years. With
prospective single digit corporate earnings growth in 2010 and low
single digit GDP growth, we consider a range of 10-13x is fair.
Market valuation: KLCI and its P/E valuation
1600 (x) 20
1400 18
16
1200 Mean
14
1000 12
800 10
600 KLCI (LHS) PER (RHS) 8
6
400
4
200 2
0 0
01 02 03 04 05 06 07 08 09
Source: Maybank-IB, Bloomberg
YoY change in market earnings
Year 2001 2002 2003 2004 2005 2006 2007 2008 2009F 2010F
% chg -7.9 33.1 26.4 19.1 0.0 17.9 21.7 -5.4 -7.7 9.7
Source: Maybank-IB
26 May 2009 Page 5 of 12
6. Market Strategy
Market valuation has moved too far, unsupported by growth. At
under 12x, the Malaysian market did appear cheap in early 2009
relative to its 10-year historical average of 15.8x. The current 15.2x p/e
though, is only 4% below the 10-year average and is 9% from the 16.7x
mid-point of the previous cycle’s valuation. Corporate earnings growth,
at negative to single digit in 2009-10, have barely shown real signs of a
recovery, but market valuation, being near its mid-cycle value, is
expecting, and pricing in, a V-shaped recovery in 2010. We see no
evidence for this, and we believe markets have moved too far, too fast.
Peak-to-trough P/E valuations through the cycle
Peak Trough Mid point
Bear mkt: 1981-86 29.8x 14.3x 22.1
Bull mkt: 1988-93 33.7x 18.1x 25.9
Bear mkt: 1993-98 33.7x 9.6x 21.7
Bull mkt: 2000-2007 19.6x 13.8x 16.7
Current mkt: 2008 - now 19.2x 11.2x 15.2
Source: Maybank-IB
KLCI year-end target
By end-2009, with a prospective growth of around 9.7% in 2010,
we believe fair valuation for the KLCI would be 990 pts, which
represents a p/e of 13.0x earnings.
We recognize liquidity and a seismic shift in global portfolios towards
greater risk and therefore equities could continue to keep the domestic
market at lofty valuations. If the KLCI reaches 1,100 in the near-term, it
would be at 15.8x 2009 earnings – clearly expensive for the
prospective growth, and a point at which we would turn distinctly
bearish.
Some signs that this rally is showing its age include rotational play out
of large caps by domestic institutions, but latecomers, including foreign
portfolio investors, may continue to keep the index at current levels.
26 May 2009 Page 6 of 12
7. Market Strategy
Our Buy/Sell Lists: Bearish by value, not by numbers
40% of our stock coverage universe are Buy recommendations, 37%
Sells and 23% Holds. By market capitalization though, our Buy list
represents only 26% of our coverage universe, with 53% of market
capitalization in Sells and 22% in Hold. If all our Buys reach their
target prices, the KLCI would be 0.6% higher at 1,060. If all our
Sells also reach their target prices, the index would be 6.6% lower,
at 984.
THE BUY LIST THE SELL LIST
Name Mkt Cap TP Name Mkt Cap TP
AEON Credit 337.2 3.16 AirAsia 2,777.9 0.85
AEON Co 1,474.2 4.70 Asiatic 4,126.0 3.80
Alam Maritim 576.6 1.55 Axiata 20,606.2 2.18
Axis REIT 360.8 1.78 BCHB 31,487.1 6.80
Bintulu Port 2,440.0 6.70 Bursa 3,579.4 3.76
Berjaya Sports 6,349.8 5.40 Dreamgate 148.2 0.11
CB Ind Product 370.0 3.60 Digi.Com 17,493.8 19.60
Guinness 1,812.6 6.50 Dialog 1,554.5 1.20
Hartalega Hldgs 833.6 4.00 EON Capital 2,634.2 3.40
HSL 439.9 1.17 F&N Hldgs 3,137.1 6.70
IJM Corp 5,227.8 5.50 Genting 18,222.9 4.40
KFC 1,368.1 7.90 Hap Seng 1,562.9 2.05
KLCC Prop 2,989.0 3.60 IOI Corp 29,229.0 3.50
Kossan Rubber 575.5 4.00 KL Kepong 13,023.6 9.80
Kinsteel 741.6 1.30 Lafarge 3,959.6 4.20
Litrak 1,144.6 2.88 MISC 31,060.6 7.50
MAHB 3,718.0 4.00 MPI 1,059.9 4.20
Petra Perdana 764.8 3.00 Media Prima 1,033.1 1.00
PLUS 16,600.0 3.20 Public Bank 30,198.0 7.60
QL Resources 874.5 3.80 Proton 1,559.8 2.50
Quill Capita 327.7 1.10 Petronas Gas 18,798.0 8.80
RCE Capital 362.6 0.62 SapCrest 1,725.8 1.00
JTI 1,098.4 5.30 Shell 3,120.0 7.80
Resorts World 14,282.6 3.10 SP Setia 3,863.9 2.00
SunCity 1,189.0 2.10 Star 2,304.3 2.54
Sunrise 837.2 1.90 Tan Chong 1,088.6 1.05
Telekom 13,594.1 4.64 TH Plantations 804.6 1.38
Tanjong 5,645.6 17.60 Tj Offshore 305.9 1.00
Tenaga 32,076.4 7.00 Unisem 518.6 0.77
Top Glove 1,838.4 6.00
WCT 1,529.2 2.20
Total mkt cap 121,780 250,983
Source:Maybank-IB
Our Buy List is weighted towards the construction and consumer
sectors. The construction sector preference can be supported by the
new PM staking his credibility on successful implementation of the
fiscal packages and contracts, that have hitherto been flowing slowly.
Earnings are likely to grow next year through this year’s contract
awards and many of the construction stocks under our coverage are far
from peak cycle valuations of the previous cycle. Buying the
construction sector is placing confidence in PM Najib’s ability to deliver
economic stabilization through fiscal spending.
26 May 2009 Page 7 of 12
8. Market Strategy
Within the consumer sector, the non-gaming stocks such as KFC and
JTI have strong brand franchises and defensive qualities and continue
to see top line growth. Also, these companies are continuing to expand
their number of outlets, reflecting positive views of their longer-term
prospects. The gaming companies report there is little impact so far on
their revenues, and for Resorts World, we consider valuations to be
reasonable, as most of its cash is not reflected in the share price.
Buys in our preferred sectors
EPS Growth Gross DPS
Price EPS (sen) PE (%) (sen) Net Yield (%)
TP May-22 2008 2009F 2010F 2009F 2010F 2009F 2010F 2009F 2010F 2009F 2010F
Construction / Building Mat
HSL 1.17 0.79 7.6 9.3 11.7 8.5 6.7 22.6 26.2 2.5 2.5 2.4 2.4
Kinsteel 1.30 0.81 3.5 5.9 16.4 13.6 4.9 72.1 176.5 0.0 0.0 0.0 0.0
WCT 2.20 2.14 13.0 16.4 16.2 13.0 13.2 26.8 -1.6 7.0 7.0 2.5 2.5
Consumer
AEON Co 4.70 4.22 34.4 37.8 41.7 11.2 10.1 10.1 10.1 13.0 14.0 2.3 2.5
Sports Toto 5.40 4.78 27.8 32.7 32.9 14.6 14.5 17.9 0.4 34.0 34.0 5.3 5.3
JTI 5.30 4.30 37.5 40.5 43.2 10.6 10.0 8.0 6.5 53.0 53.5 9.2 9.3
KFC 7.90 7.05 62.1 67.7 75.4 10.4 9.3 9.0 11.5 47.0 52.4 5.0 5.6
Resorts World 3.10 2.58 23.5 21.7 18.4 11.9 14.0 -7.7 -15.2 6.5 5.5 1.9 1.6
High Yield
Telekom 4.64 3.76 20.5 18.7 19.8 20.1 19.0 -8.9 5.5 130.7 27.1 26.1 5.4
JTI 5.30 4.30 37.5 40.5 43.2 10.6 10.0 8.0 6.5 53.0 53.5 9.2 9.3
Axis REIT 1.78 1.42 15.2 16.9 16.9 8.4 8.4 11.1 -0.4 16.4 16.3 8.7 8.6
Litrak 2.88 2.27 21.4 20.5 18.2 11.1 12.5 -3.9 -11.3 25.0 18.0 8.3 5.9
Quill Capita 1.10 0.84 7.5 8.2 8.4 10.3 10.0 8.5 2.8 8.2 8.1 7.3 7.3
BAT (M) 44.75 42.25 284.3 294.2 304.3 14.4 13.9 3.5 3.4 380.5 393.6 6.8 7.0
Guinness 6.50 6.05 41.6 44.4 45.7 13.6 13.2 6.6 3.0 50.0 52.0 6.2 6.4
Source: Maybank-IB
Sell Hope and high expectations
Within our Sell List are a number of stocks whose share prices have
exceeded consensus target prices by 15% or more. These, we believe
are stocks which have built into their prices high degrees of hope and
expectations of near-term earnings recovery. They are on our list of
Top Sells.
Share Price
Current Consensus Target Exceeds consensus by
Bursa Malaysia 7.10 5.20 37%
MISC 8.50 7.26 17%
SP Setia 3.82 2.80 36%
Tan Chong 1.64 1.30 26%
Source: Maybank-IB
26 May 2009 Page 8 of 12
9. Market Strategy
Legends of the fall
The historical lesson to be learnt from previous bear markets is
that we are not out of the woods.
Bursa Malaysia has experienced two bear markets since the 1980s,
one in each decade – 1980s and 1990s. Measured against the
perspective of these two bear markets, the Malaysian market appears
to be no more than half way through its current bear market.
Assessing the current bear market against previous ones from the
perspective of time and trend reversals, we find the following:
There are many bear market reversals. In the previous bear
markets, the KLCI witnessed 23 trend reversals of 5% or more
between 1981-5, and 38 trend reversals in 1994-8. In the current
bear market, the KLCI has so far made 12 trend reversals of over
5%, suggesting we are only about half way through.
Bear markets last six years: The 1981-5 bear market took 58
months to play out, while the 1994-8 market played out in a similar
57 months. We are currently in the 17th month of the present bear
market, which began in January 2008. If history repeats itself, we
are just 30% of the way through the current bear market.
There could be one huge bear market rally. Each of the bear
markets witnessed one major rally before continuing its downtrend.
In the 1981-5 bear market, a rally retraced 64% of its drop before
continuing the decline. In the mid-1990s, the bear market rally
retraced 91% of its drop before continuing its downtrend. The
present bear market rally has retraced 32% of its drop.
We believe the KLCI is tracing out a similar bear market rally. Our
strategy revolves around overweights in the construction and
building materials sector, selected consumer stocks and some
high yield stocks. While we recognize this rally may well have room to
run, we believe it is beginning to look expensive relative to growth.
KLCI Bear Markets: 1981-86 and 1994-98
Source: Maybank-IB, Bloomberg
26 May 2009 Page 9 of 12
10. Market Strategy
Politics: The Empire Strikes Back
New prime minister Najib Tun Razak has pinned his credibility on swift
implementation of the fiscal stimuli announced so far – RM7bn in Nov
2008 and RM60bn in Mar 2009. However, successful economic
management may not translate to ballot box success – the Barisan
Nasional’s poor electoral performance in 2008 was despite GDP growth
rates which were among the fastest in the decade at 5.3% to 6.3%.
A measure of the task ahead for the new leadership can be seen from
the results of the five by-elections since the March 2008 general
elections. In 4 out of 5 of these elections, the opposition increased
its majority.
By-Election
Winning Majority
Date Constituency Winning party Latest by- Mar 08 GE
election
26 Aug 08 Permatang Pauh PKR 15,671 13,388
17-Jan-09 Kuala Terengganu PAS 2,631 628
07-Apr-09 Bukit Gantang PAS 2,789 1,566
07-Apr-09 Bukit Selambau PKR 2,403 2,362
07-Apr-09 Batang Ai BN 1,854 806
Source: Maybank-IB
Against this worsening electoral sentiment post 2008 elections, the new
leadership must feel it has its back to the wall and must deliver
economic recovery through the stimulus, in under 3 years.
Yet, as of 12th May, only RM0.8bn of the 1st stimulus package has
been spent. This is positive for the future, because the new leadership
has every reason to spend it way out of this malaise. It has already
raised RM40bn YTD vs only RM19.5bn this time last year and is poised
to accelerate the pace of construction awards massively in the next two
to three quarters. We expect the government to raise a gross amount of
RM100bn this year, including amounts needed for refinancing.
We believe PM Najib recognizes the non-economic grouses too such
as perceptions, allegations and incidences of corruption, favoritism, and
inefficiency and discontent over educational and religious issues. The
perception of having addressed these issues will be important.
Within a month of taking office, Najib has gone on the offensive.
Foreign investors were wooed with a relaxation of Bumiputera equity
requirements in 27 business services, and the financial sector was
further liberalised. We believe Najib will continue to chip away at
such sacred cows, and these steps will have a positive effect on
the market at least in the short-term.
It would be unsurprising, therefore, if the new leadership implements
additional initiatives to create a more inclusive and efficient
government. Such moves would mimic the Badawi administration’s
GLC reforms spearheaded by Khazanah and issuance of foreign
brokerage licenses.
26 May 2009 Page 10 of 12
11. Market Strategy
H1N1 virus – the replacement killer?
Financial markets have shrugged off the possibility that the H1N1 virus
could be substantially more lethal than the current prognosis, because
markets probably over-reacted to the SARS pandemic in 2003.
Markets have looked to the SARS episode and concluded that any
impact on the economy will be temporary, so the effect on financial
markets should be even more transient. SARS, after all, had a mortality
rate of ‘only’ 9.6%, and its impact on the economies of China and Hong
Kong, the epicenter of the pandemic, was less than 7 months. Markets
are more optimistic the H1N1 flu virus will have a smaller impact
because:-
Authorities are more prepared, implementing measures that have
evolved during SARS;
The mortality rate appears much lower (under 1%) than for the
SARS virus;
The epicenter of the outbreak is not Asia;
Ultimately, the impact of SARS on economies was temporary, and
financial markets are willing to look beyond a temporary effect.
Although the infection rate for H1N1 is now greater than for SARS in
the same period, the mortality is so much lower it has not created the
sort of panic and consumer behavior that SARS did. One of the
dangers of such viruses is their ability to mutate, and take a nastier
turn, although at present this possibility appears to be remote. This is a
negative wildcard worth watching, but not yet worth reacting to.
Confirmed Cases: SARS versus H1N1 Death Tolls: SARS versus H1N1
12,000 900
Cumulative Total
Cumulative Total
800
10,000
700
8,000 600
500
6,000
400
4,000
300
2,000 200
100
0
0
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67
SARS Confirmed Cases Days since official report started
H1N1 Confirmed Cases
SARS Deaths Days since official reports started
H1N1 Deaths
Source: Maybank-IB Source: Maybank-IB
26 May 2009 Page 11 of 12
12. Market Strategy
Definition of Ratings
Maybank Investment Bank Research uses the following rating system:
BUY Total return is expected to be above 10% in the next 12 months
HOLD Total return is expected to be between above -5% to 10% in the next 12 months
SELL Total return is expected to be below -5% in the next 12 months
Applicability of Ratings
The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are
only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not
carry investment ratings as we do not actively follow developments in these companies.
Some common terms abbreviated in this report (where they appear):
Adex = Advertising Expenditure FCF = Free Cashflow PE = Price Earnings
BV = Book Value FV = Fair Value PEG = PE Ratio To Growth
CAGR = Compounded Annual Growth Rate FY = Financial Year PER = PE Ratio
Capex = Capital Expenditure FYE = Financial Year End QoQ = Quarter-On-Quarter
CY = Calendar Year MoM = Month-On-Month ROA = Return On Asset
DCF = Discounted Cashflow NAV = Net Asset Value ROE = Return On Equity
DPS = Dividend Per Share NTA = Net Tangible Asset ROSF = Return On Shareholders’ Funds
EBIT = Earnings Before Interest And Tax P = Price WACC = Weighted Average Cost Of Capital
EBITDA = EBIT, Depreciation And Amortisation P.A. = Per Annum YoY = Year-On-Year
EPS = Earnings Per Share PAT = Profit After Tax YTD = Year-To-Date
EV = Enterprise Value PBT = Profit Before Tax
Disclaimer
This report is for information purposes only and under no circumstances is it to be considered or intended as an offer to sell or a solicitation
of an offer to buy the securities referred to herein. Investors should note that income from such securities, if any, may fluctuate and that each
security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental
ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on
price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis. Accordingly, investors may
receive back less than originally invested. Past performance is not necessarily a guide to future performance. This report is not intended to
provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the
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Tel: (603) 2059 1888; Fax: (603) 2078 4194
Stockbroking Business:
Level 8, MaybanLife Tower, Dataran Maybank, No.1, Jalan Maarof 59000 Kuala Lumpur
Tel: (603) 2297 8888; Fax: (603) 2282 5136
http://www.maybank-ib.com
26 May 2009 Page 12 of 12