Malaysia Market Strategy 2007

KLCI at 1,300: What does this imply?

FY07E PE of 16.4x (UBS earnings forecasts). This is roughly:

• Half a standard deviation from the KLCI’s 3-year average PE of 15.6x
• Equal to the KLCI’s 8-year average PE (MYR was pegged in Sept-98)
  

Conditions that could support this re-rating:

• Further evidence of government spending
• M&A: Turning point could be a Proton deal involving a foreign group, further banking consolidation
• Politics: PM Badawi calling for early general elections in Q108 O/W domestic demand and restructuring/growth themes
• Domestic demand: Maybank, SP Setia
• Restructuring: Tanjong, PLUS Expressways, PPB Oil
  

Top picks: Maybank, SP Setia, Tanjong, PLUS Expressways, PPB Oil Palms

FULL RESEARCH: UBS Investment Research

Asian equities offer attractive outlook in 2007

• Strong domestic demand, strengthening currencies and a 12.5% 2007E EPS growth to drive the Asian equity markets up 12% in 2007.
• Overweight China and Japan – most attractive upside potential to our 2007E index targets, and Taiwan and Korea – highest earnings growth in the region. Singapore remains our top asset reflation play in ASEAN.
• Aggressive overweight on Asian financials for domestic-driven earnings profile, and overweight on tech sector for valuation and growth appeal.
  
• Neutral on Hong Kong, Malaysia and Thailand; we recommend that investors underweight Indonesia and Australia.
  

FULL RESEARCH: CREDIT SUISSE

MEASAT: S&P Recommended Buy - Target 2.90

Measat Satellite Systems Sdn Bhd and Boeing Satellite Systems International Inc jointly announced that MG’s MEASAT-3 communications satellite has been shipped from the Boeing
manufacturing facility in El Segundo, California to the Baikonur Cosmodrome in Kazakhstan for a scheduled December launch.

This follows on from launch service provider International Launch Services (ILS) successful launch of ARABSAT’s BADR-4 on Nov. 9 and Eutelsat’s HOTBIRD 8 satellites on Aug. 5 using the Proton Breeze M launch vehicles. The launch of MEASAT-3 has been delayed since the Feb. 28 launch failure of the ARABSAT 4A satellite.

Following the launch, some in-orbit testing is expected which will take several weeks. MEASAT-3 is expected to be commercially available from early 2007 and is consistent with present assumptions.

Full Report: S&P

MAHSING: S&P recommended Buy - Target 3.83

MS’ 3Q06 financial results were within expectations. 9M06 net profit reached MYR48.2 mln, accounting for 74% of our 2006 forecast. For the quarter, progress billings were underpinned by ongoing projects such as Aman Perdana in Meru-Shah Alam and Austin
Perdana in Johor Bahru.

Property development EBIT margin remained healthy at 26% in 3Q versus 21% in 2Q. We believe the level of profit margin is sustainable given MS’ focus on mid- to high-end residential products in relatively good locations. Unbilled sales grew 18% QoQ to MYR431 mln as at
Sep. 2006, which is commendable in view of a generally subdued property market.

The Board of MS has approved the following corporate exercises: (1) private placement of up to 10% of existing share capital with an expected completion date in Jan. 2007, (2) 1-for-4 rights issue exercise to be completed in June 2007 and (3) 1-for-5 bonus issue to be completed in July 2007. We understand the bulk of the money (~MYR134 mln) raised will be used as working capital for various new projects.

Full Report: S&P

NOTION: Insider Asia Called Buy Target 0.415

Notion’s prospects remain positive, as it continues to ride the consumer electronics boom, and benefit from continuous growth in new products and technologies for HDD-embedded products, as well as the miniaturization of HDDs. Its new plant places it in a good position to increase its order-book.

In the non-HDD components market, Notion continues to grow its digital camera parts business, with multi-nationals like Canon, Sony, Nikon, Panasonic and JVC under its wings. It is pursuing another major SLR camera maker and is making inroads into the automotive parts business.

Metal prices corrected sharply after the global slump in commodity markets in mid-May 2006, but have started rising again. Aluminium prices fell from over US$3,200 to around US$2,500 per tonne, but have climbed back to around US$2,800 per tonne on expectations of strong demand from China.


Full Report: Insider Asia