Glomac ...Target Price RM1.60 (32%) Glomac Bhd current =RM1.21 Buy

Review by TA securities.
Analyst : Tan Kam Meng, CFA

Glomac’s 1QFY10 net profit of RM8.3m came in within our expectations at 26% of our full-year forecasts and 24% of consensus estimates. For this quarter, net profit rose 7% yoy (+16% qoq) due to : 1) increase in margins on the back of favourable change in product mix with rising contribution from Glomac Tower and Glomac Galleria; and 2) revaluation gains of RM4.9m from investment properties, which we have treated this as part of operating income as similar to disposal gains as the group has entered into agreements to dispose these properties. According to new accounting standards, any properties to be disposed off are required to be revalued.

Updates from analyst briefing The total sales concluded in 1QFY10 amounted to RM61m (see Table 1), which was significantly lower than 1Q09’s RM82m. However, it accounted for 29% of our full-year projections and management remained bullish and confident to secure at least one en-bloc sales either from Glomac Damansara or Glomac Cyberjaya for FY10. In other words, sales are going to pick up in 2H10. The unbilled sales as at July-09 stood at RM333m.
Glomac Tower to fuel FY10 profit. Glomac has completed the sub-structure works and has awarded the building works to contractors. According to management, the company can be more certain now that the projects would provide 30% margins after the awarding of building works. Going forward, Glomac Tower would be the earnings driver for FY10 and FY11. Glomac Damansara is going hot. This project would contribute positively to FY10 earnings after securing a 70% sale of 12 blocks of 5&8-storey shop offices with GDV of RM53m. The group is currently in negotiations for en-bloc sales of a 15-storey office block and a 25-storey corporate tower with respective GDV of RM75m and RM170m.

Commendable take up on Glomac Cyberjaya. Glomac managed to secure sales and booking of about 90% of the phase 1 launch with a GDV of RM64m. Given the commendable take up rate, the group is targeted to launch phase 2 which comprises 24 shop offices with GDV of RM41m. Meanwhile, the company is in negotiations for an en-bloc sale of a 15-storey office block. Attractive dividend yield. We raise our FY10 sales projections by 24% to RM260m given the commendable take up rate for Glomac Cyberjaya. Meanwhile, we raise the margin for Glomac Tower to 30% from 25%. Sequentially, we raise our FY10-11 earnings higher by 32% and 16%. We also raise our dividend projections from 6 sen to 7 sen as the company has committed to at least maintain last year’s dividend payment.
Valuation Given the change in our earnings estimates, we raise the target price for Glomac to RM1.60 from RM1.24 previously, based on 12x CY10 EPS. Upgrade to Buy from Hold.

Note by blogger:
You act at your own risk.

Public Bank (PBKF MK, RM10.24, OP, TP: RM11.60, 13.3% upside) - Early redemption of sub-debt (Chin Seng Tay)

Event

• Public Bank has redeemed a US$350m subordinated debt which it issued in 2004. The early redemption is part of its capital management initiatives.

Impact

• The US$350m subordinated debt carried a coupon rate of 5.625%, and was redeemed on 22 September 2009. With the redemption, the group's CAR is estimated to be at 12.9%, compared with 13.9% as at 30 June 2009. The Tier 1 ratio of the group remains unaffected at 8.7% (bank-level Tier 1 was 11.2%).
• Note that the group had announced earlier a programme to issue up to RM5.0bn in non-cumulative Perpetual Capital Securities, which are stapled to subordinated notes, under a Non-innovative Tier 1 Stapled Securities Programme. To date, it has issued RM1.2bn of such securities. There is room for the group to raise more such funding, if need be.
• We believe capital management initiatives remain strong, given the interim dividend of RM0.30 (gross) and the 80.4m in treasury shares, which may be paid out to shareholders. At this point in time, our FY09 dividend estimate does not include the potential issue of these treasury shares to shareholders, which could potentially offer a significantly higher yield than our estimated 5.3% for FY09.

Action and recommendation

• The group has continued to track well with loan growth of 7.2% YTD in June, compared with the sector growth rate of 2.2%. At the same time, asset quality has remained pristine, with its 0.9% NPL ratio. Coupled with the potential for further capital management initiatives, we are maintaining our Outperform recommendation.

KNM Group ... Price Target : 12-Month RM 1.10 >>BUY

Better prospects
• RM450m new project from JV with Verwater for oil storage tank in Malaysia • Contract flow has picked up since July 09
• Maintain Buy for more new wins and attractive valuations. RM450m new project from JV with Verwater. KNM has invested in a 50% stake in Verwater Industrial Services SB (VISM). The Verwater Group has secured a Euro220m contract from Lenstar Investment Ltd for an oil storage terminal in Kedah, Malaysia. KNM’s management indicated that VISM would be the project manager for the project under Verwater valued at between Euro180-200m. About Euro90m (RM450m) worth of fabrication jobs will be awarded to KNM over the next 1-2 years, and it will also enjoy a share of project management profit under its 50% stake in VISM.
Encouraging new wins. KNM has secured RM900m new wins YTD-2009, with RM400m new projects secured in the last 3 months. Together with the project from Verwater, KNM’s YTD-2009 new wins amounts to RM1.35b. While the estimated 20% gross margin for the
oil storage tank project under VISM is much lower than KNM’s average of 25%, we expect KNM to continue to secure new jobs to compensate for lower margins given the recovery of crude oil price. Maintain Buy for more new wins and attractive valuation. KNM is poised to secure new contracts as new projects from the Middle East have started to flow through. New
developments at the Northern corridor of Malaysia and Gorgan of Australia could also lead to more projects. Maintain Buy and RM1.10 target price based on 10x FY10F PE, which is its mid-cycle valuation. KNM is now trading at attractive 8x FY10F PE against local and
regional peers’ averages of 9x and 14x.

Analyst
June Ng

SGX: Equities market strength may not be sustained

Equities market strength may not be sustained

Maintain SELL on SGX. After equities market ADT rose to S$2.27b in May 09, it subsequently fell for two months before recovering to S$1.88b in Aug 09. The ADT for Jul and Aug 09 was S$1.73b, higher than our FY10 assumption of S$1.47b. However, we are maintaining our assumption as current market valuations are not cheap and investing interest may not be sustained. Our SGX target price of S$7.00 is derived from 22x of our FY10 EPS, which is close to the 22x average for the past four years.

Value per share traded is sharply lower than historical average, suggesting dominance of penny stocks trading. For the two months of Jul and Aug 09, value per share traded was S$0.79, sharply lower than FY08 and FY09’s S$1.08 and S$0.94 respectively. This suggests that trading activity is more concentrated in the penny stocks. Historically, the penny stocks were the last to move in an upmarket. We are not optimistic that equities market trading volume will stay high in the months ahead.

Our analysis shows that SGX target price would be S$8.00 if FY10 ADT hits S$1.84b, or S$9.10 if ADT is S$2.20b. Investors who are more optimistic on the market trading volumes can trade on SGX. But we are not so optimistic.

SGX’s earnings is less sensitive (than BMB) to ADT changes. Equities trading accounts for a third of SGX’s operating revenue, lower than Bursa Malaysia Berhad (BMB)’s 47%. A 25% rise in SGX ADT (above base case) will raise SGX FY10 net profit by 15%, whilst BMB’s FY10 net profit could rise by a stronger 21% for a similar percentage change in ADT. This is not a positive for SGX as we are forecasting FY10 ADT to be stronger than the FY09 level.

Dividend yield is also unexciting. SGX is committed to an annual base dividend of 14S¢/share. We are forecasting FY10 dividend of 28.9S¢/share, based on a 90% payout ratio (FY09 payout ratio was 90%). This gives an unexciting dividend yield of 3.4%.





Leng Seng Choon, CFA

Highlights by Hwang on 11/9/09

Plantation Sector

Exports lose steam

· August palm oil exports dropped 9.5% m-o-m to 1.316m MT according to MPOB; offset by weak seasonal up-tick in production

· Negative bias in CPO prices may continue near term; but 4QCY09 rebound expected on lower inventory

· Top picks: Wilmar and Kencana Agri

· Malaysian palm oil production forecast cut; CY09F and CY10F CPO price maintained at RM2,300/MT

Astro (RM3.65; Fully Valued; Price Target: RM2.65; ASTR MK)

High churn, low ARPU

· 2QFY10 is in line with our FY1/10F estimate, but is below consensus, hit by highest churn in 4 years

· DCF-based price target tweaked lower to RM2.65

· Maintain Fully Valued. Absence of special dividend may disappoint speculators, with downside risk to consensus earnings.

CB Industrial Product (RM3.15; Fully Valued; Price Target: RM2.80; CBP MK)

Secured RM15.7m new contract from Central America

CBIP’s 100%-owned subsidiary, Modipalm Engineering Sdn Bhd was awarded a palm oil mill contract worth USD4.5m (RM15.7m) by Nacional Agro Industrial S.A. The contract requires CBIP to supply equipment and engineering services for a palm oil mill with an initial capacity of 15MT FFB/hour and expandable to 45MT FFB/hour at Guatemala , Central America .

Eastern and Oriental (RM1.49; Buy; Price Target: RM2.10; EAST MK)

ICSLS issue price fixed at 65sen

E&O's 1-for-2 renounceable rights issue of 8% irredeemable convertible secured loan stock 2009/2019 (ICSLS) has been fixed at 65sen each, as indicated earlier.

Malaysia Airports (RM3.40; Buy; Price Target: RM4.50; MAHB MK)

Yesterday’s off-market trade may involve Khazanah selling down its stake

There are talks that the 55m shares (5% of total MAHB’s shares) traded off-market yesterday morning at RM3.30 per share (3% discount to the last closing price), may likely involve Khazanah Nasional paring down its 72.7% stake. If this is true, it is in line with Khazanah’s intention to gradually reduce its stakes in government-linked companies (GLCs) to improve the stock market liquidity. Khazanah is the Malaysian government’s investment arm.

Tanjong PLC: Resilient laggard with 5% yield

Tanjong PLC: Resilient laggard with 5% yield

• IRB’s probing of IPPs’ tax payment is unlikely to result in negative impact for Tanjong

• Potential upside from new NFO game

• Attractive valuation vs local and regional peers. Maintain Buy with SOP-derived target price of RM19.25.

Minimal impact from tax issue. The Inland Revenue Board (IRB) is checking on IPPs’ tax claims, which may lead to potentially higher tax rates for IPPs. We believe that the check is unlikely to affect Tanjong, and Malaysia power plants account for just 20% and 19% of Tanjong’s FY10-11F net earnings respectively.

Potential new NFO game for Tanjong? Tanjong is the only NFO player that has yet to receive approval from the Malaysian government for a new NFO game in 2009, while Magnum and Berjaya Sports Toto have already received theirs. Near term contribution from the new game is likely to be minimal, but we expect the new game to contribute to revenue in the longer-term, as a potential “jackpot” type game should win over business from the “illegal” betting operators. Improving free cashflow and resilient power earnings will support future dividend payment and potential new acquisitions. We expect net yields of 5% for Tanjong.

Underperformance not justifiable. Tanjong has underperformed the KLCI and local peers with YTD share price appreciation of 18% against 31% for KLCI and average of 21% for local peers. The underperformance is unjustifiable given Tanjong’s resilient earnings, attractive valuations, and potential upside from new NFO games, as well as the prospects of unlocking the value of its power or gaming businesses in the longer term. Tanjong is trading at attractive CY10F PE of 10x against local peers’ average of 13x and regional peers’ average of 16x.

NOMURA Malaysia Strategy - Malaysia Boleh #1: ride the next leg up

Despite a 34% rise YTD, we say the rally is not over. Post-crisis rallies have lasted an average of 76 weeks in the past four recessions. We believe it is too early to call an end to this 44-week old rally, with earnings upgrades just kicking in from July. Post the 1998-00 market recovery, earnings upgrades lasted for 18 months.

Malaysia Boleh #1: ride the next leg up

Clues from history
Average post-crisis rallies for the market last roughly 76 weeks. The current 44-week old rally is even shorter than the shortest post 1982-83 US recession rally (50 weeks). Arguably, there is still plenty of upside if one were to benchmark the current rally to the post 1997-98 Asian Financial Crisis rally that lasted 79 weeks, when the index rose 205%.

Too early to turn bearish
Malaysia has underperformed its regional peers. Despite the recent rally, recent fund flows continue to suggest low foreign participation, and there are still plenty of sceptics hoping for pull-backs, to allow them to participate in the market. Investors, in general, are still mixed on the direction of the market — even those that have participated in the recent rally do not seem to have strong convictions on its sustainability.

Earnings revisions: still early in the cycle
Consensus earnings upgrades only started in July 2009. After a series of downgrades, 2009F market EPS growth reached a trough in June, while the 2010F EPS growth started trending up from May. Looking at previous cycles, our revision index suggests that coming from a depressed level, upward earnings revisions could last up to 18 months, as experienced during the post 1998-00 market recovery.

Stay adequately invested in the defensive space …
We like DiGi and Tanjong Plc in the defensive space.

... be selective in cyclical names
AMMB, Genting Bhd and Berjaya Sports Toto are our top picks in this space. Investors should continue to reduce weightings on Genting Malaysia ahead the opening of the two new casinos in Singapore.

Chinese stocks surge 5.1%

The contrast couldn’t be more striking: Yesterday, the S&P 500 declined one-third of a percentage point ...

But overnight, China’s Shanghai stock exchange was up as much as 5.1%.

Why? Because while the U.S. economy continues to struggle through our worst recession since the Great Depression, the Chinese economy is exploding before our very eyes!

Almost nobody was prepared for this. As Europe and the U.S. fell into recession and our economies began to contract last year, demand for Chinese exports cratered. Many feared that the West’s economic malaise would cause Beijing’s economy to shrink as well.

It never happened. China’s economy continued to expand even as ours withered — and for a fascinating reason: China doesn’t have to depend on exports to grow its economy anymore — Chinese consumers are taking over as a major driver of economic growth there!

Hundreds of millions of new middle class and wealthy consumers are transforming China into a world-class IMPORTER of goods and services — both from Asia and all over the world!

In the first half of this year, China surpassed the U.S. as Japan’s #1 trading partner. In the second three months of this year, France’s exports to China and other East Asian economies soared 18.7% — and overall, exports from eurozone countries jumped 6.3%.

No wonder Citigroup recently boosted its estimate for annual Chinese economic growth to 8.7% for 2009 — and forecasts that China’s economy will expand at a blistering 9.8% next year!

The China Miracle is spreading throughout Asia

China’s transformation from a one-horse exporting nation into a major global importer and consumer of goods and services has also lit the fuse on economic growth throughout the region.

Early this morning, for instance, we learned that South Korea’s economy grew much faster than previously reported in the second three months of 2009 — the fastest since the fourth quarter of 2003!

There’s more:

• South Korean exports jumped 14.7% in April, May and June from the previous three months ...
  
  
• Construction investment grew more than four times faster than was previously reported ...
  
  
• In July, sales at major South Korean department stores rose for the fifth month in a row ...
  
  
• The nation’s manufacturers increased production for a seventh consecutive month in July ...
  
  
• Consumer confidence climbed to the highest level in almost seven years in August, and ...
  
  
• South Korea’s benchmark Kospi stock index was up overnight and has now gained a whopping 43% this year, beating our own S&P 500 more than three times over!

China Stock Index Falls 5.2% After Premier's Comments on Economy

By Reinie Booysen
Aug. 25 (Bloomberg) -- China's stocks slumped, led by commodities suppliers and banks, after Premier Wen Jiabao said authorities can't be "blindly" optimistic about the
economy.
The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, fell 155.34, or 5.2 percent, to 2,838.09 as of 2:01 p.m. local time. It has dropped 17 percent this month, the world's worst performer, on speculation economic growth will falter and the government will curb new lending that rose to a record in the first half of the year.

Warren Buffett on Sex

Warran Buffett is a master at distilling complex concepts into humorous one-liners that we can understand.

What does all this investing have to do with sex, you may ask? Our mind is very complex, so much so that we relate one thing to another even the two seems totally unrelated. It is with this ability of our mind it gives rise to creativity and best of all humour. And with humour, we learn and remember those things we learn, better.

Here it goes:-


Buffett's advice seems to be to start early ... and we ain't talkin' retirement planning:

On being active: "It's nice to have a lot of money, but you know, you don't want to keep it around forever. I prefer buying things. Otherwise, it's a little like saving sex for your old age."

On career advice: "A few months ago I was talking to another MBA student, a very talented man, about 30 years old from a great school with a great resume. I asked him what he wanted to do for his career, and he replied that he wanted to go into a particular field, but thought he should work for McKinsey for a few years first to add to his resume. To me that's like saving sex for your old age. It makes no sense."

On loving your job: "You want to have a passion for what you are doing. You don't want to wait until 80 to have sex."

All this bedroom talk may have you wondering if Buffett is straying too far outside his primary circle of competence. Not to worry:

On ninja-like focus: "You know, if I'm playing bridge and a naked woman walks by, I don't ever see her."

On due diligence: "Other guys read Playboy, I read annual reports."

On over-diversification: "If you have a harem of 40 women, you never get to know any of them very well."

Of course, maybe we're underestimating how large his circle is:

On internal yardsticks: "Would you prefer to be the greatest lover in the world and known as the worst, or would you prefer to be the worst lover and known as the greatest?"

Sometimes opportunity knocks -- gather ye rosebuds while ye may:

On investing in 1973: "I feel like an oversexed guy on a desert island. I can't find anything to buy."

On investing in 1974: "I feel like an oversexed man in a harem. This is the time to start investing."

An indecent proposal:

On selling your business to Berkshire vs. private equity: "You can sell it to Berkshire, and we'll put it in the Metropolitan Museum; it'll have a wing all by itself; it'll be there forever. Or you can sell it to some porn shop operator, and he'll take the painting and he'll make the boobs a little bigger and he'll stick it up in the window, and some other guy will come along in a raincoat, and he'll buy it.''

Buy and hold ain't dead:

On becoming a true investor: "We believe that according the name 'investors' to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a 'romantic.'"

Some insights into the current economic situation that make us wonder which of these he's tried:

On the first stimulus package: "[It was like] half a tablet of Viagra and then having also a bunch of candy mixed in -- it doesn't have really quite the wallop."

Solicited to buy Bear Stearns, and asked if he wanted more information (from the book Street Fighters): "It was sort of like having a woman standing in front of you who had taken half her clothes off and then asked whether she should continue, [Buffett] thought. Just as he'd want the woman to finish the job, he was certainly curious to hear what was happening that weekend with the embattled Bear."

On the speed of economic recovery: "You can't produce a baby in one month by getting nine women pregnant. It just doesn't work that way."

Buffett knew a girl who knew a guy who knew a credit default swap:

On financially transmitted diseases: "Derivatives are like sex. It's not who we're sleeping with, it's who they're sleeping with that's the problem."

China Stocks May Drop Further 10% on Loans, Xie Says

Aug. 18 (Bloomberg) -- China's benchmark stock index, the world's worst performer this month, may fall another 10 percent as bank lending slows, said Andy Xie, a former Morgan Stanley
chief Asian economist.
"The current correction is reflecting the tightening in lending," said Xie, who correctly predicted in April 2007 that China's equities would tumble. "We've seen the peak of this market cycle, though there's likely to be a bounce as the government seeks to stabilize the market."
The benchmark Shanghai Composite Index plunged 5.8 percent yesterday, the most since Nov. 18, extending its decline from this year's high on Aug. 4 to 17 percent. The gauge, the worst
performer among 89 benchmark indexes tracked by Bloomberg worldwide, sank as foreign direct investment plunged and Yunnan Copper Industry Co. posted a loss, saying there are "no clear signs" of a recovery. The Bank of New York Mellon China ADR Index, which tracks American depositary receipts, slumped 5 percent, the most since March 2. Prime Minister Wen Jiabao's 4 trillion yuan ($585 billion) stimulus package, coupled with record bank lending in the first six months, helped the Shanghai index more than double this year from the low on Nov. 4. An estimated 1.16 trillion yuan of loans were invested in the stock market in the first five months, China Business News reported on June 29, citing Wei Jianing, a deputy director at the Development and Research Center under the State Council, China's Cabinet.
The equities rally faltered as new loans in July fell to less than a quarter of June's level and the securities regulator allowed initial public offerings after a nine-month moratorium.

Government Support

The government may order the national social security fund to support the market before Oct. 1, when the Communist Partycelebrates the 60th anniversary of taking power, according to
Xie. Other measures that may be taken include halting the approval of IPOs and share placements, he said. "This is not the bursting of the bubble," Xie, who is now an independent economist, said by telephone. "The government will be under pressure to take action because a lot of people have lost money."
Van Eck Associates' David Semple, whose emerging-markets fund is beating 99 percent of its peers this year, said China's yuan-denominated A shares, which trade in Shanghai and Shenzhen,
may rebound on the prospect of government support. "A-share valuations look fully priced but I don't think it's a bubble like we saw with Internet stocks," said Semple, who helps manage about $13 billion in commodities and equities including Hong Kong-listed H-shares at New York-based Van Eck, said in a phone interview. "I wouldn't be surprised if we start
to hear positive comments from the government."

Foreign Investment

Ping An, the nation's second-biggest insurance company, fell 3.9 percent yesterday after first-half net income dropped 45 percent. Yunnan Copper sank the 10 percent daily limit after
posting a first-half loss and the metal dropped by the maximum in Shanghai. In New York, the American depositary receipts of Aluminum Corp. of China, the nation's largest producer of the
metal, fell 7.3 percent to $27.94. China Life Insurance Co., the biggest insurer, declined 4.6 percent to $61.10.
Foreign direct investment fell 35.7 percent in July, retreating for a 10th straight month, as companies stalled expansion plans amid the global financial crisis, the commerce
ministry said in Beijing yesterday. Prime Minister Wen Jiabao said Aug. 9 the government will
maintain its current macroeconomic policy stance aimed at bolstering domestic spending as the nation continues to experience fallout from the global recession. Billionaire Li Ka-shing, who predicted China's stock-market bubble would burst in 2007, said last week the global economy
won't recover this year and told investors to be "cautious" about buying shares, especially with borrowed money.

FBM KLCI seen hitting 1,500 in 2 years

THE FTSE Bursa Malaysia Kuala Lumpur (FBM KLCI) is expected to increase between five and 10 per cent from the current level by year end, said icapital.biz Bhd (icapital), managing director, Tan Teng Boo.

The FBM KLCI closed at 1,186.19 today, up 5.65 points from yesterday.

Tan is also projecting the FBM KLCI to reach 1,500 points within two years depending on the economic development in the country as well as globally.

"As long as Malaysia does not face major political calamities, the longer-term outlook for Bursa Malaysia remains positive," he told reporters after the company's annual general meeting today.
On the global economic outlook, Tan believed the global economy led by China has begun a V-shaped recovery and the current rally the beginning of a new bull market.

"The global economy is facing a secular boom with cyclical inflation."

He also believed the global economic contraction in the last three quarters was not due to the US sub prime or mortgage problems.

"Analysis showed that global economic activities contracted only after the collapse of Lehman Brothers on September 15, 2009.

"In the last twelve months, the global economy impacted by the US-led financial crisis, went through a very turbulent period, leaving investors totally confused," he said.

Meanwhile, Malaysia's only listed close-end fund, icapital.biz recorded a revenue of RM11.4 million for the period ended May 31, 2009, a fall of RM34.3 million or 75 per cent compared to the same period last year.

As of July this year, the company has invested in 17 listed companies including Parkson Holdings, Astro, KL-Kepong Bhd, F&N Holdings Bhd and Petronas Dagangan Bhd, topping the list in terms of the size of unrealised profits.

Its investments totalled RM156.99 million while total unrealised gain was M60.8 million.

The conservative fund now has cash holdings of below RM40 million, which Tan said was the lowest in the fund's history and a reflection of the many bargains available on Bursa Malaysia. -- Bernama

V-shaped recovery has begun: Fund manager...By Chong Pooi Koon

Global stocks are at the start of a bull market, says Malaysia's only listed closed-end fund icapital.biz

ICAPITAL.BIZ Bhd (5108), Malaysia's only listed closed-end fund with RM267 million of assets, believes the global economy has begun a V-shaped recovery and global stocks are at the start of a bull market.

Its managing director and fund manager Tan Teng Boo, who has been bullish on the economic recovery since February, continues to advocate that the transformation of China from a developing to an industrial nation will keep the world in a long boom that lasts decades.

"China and India economies are no doubt smaller than the US, but what the established economists have missed is the rate of change," Tan told a media briefing in Kuala Lumpur yesterday.

"When China grows, it benefits Australia, India, Canada, Brazil and Southeast Asia - the huge growth that it is generating can more than offset the decline in the US economy," he pointed out.
Such bullishness is still a minority view among economists and the investment community, even as more signs are emerging that the global economy is bottoming out.

This week, Nobel prize-winning economist Dr Paul Krugman told a symposium in KL that the world will likely see slow expansion for a decade with the lack of clear growth driver, especially in the US.

Even Dr Raghuram Rajan, an economic adviser to the Indian prime minister and a believer in China and India's rising economic influence, said the two economies are still too small to pull the world out of this recession.

With Tan's confidence in the global recovery, he said the performance of Malaysian shares hinges solely on local politics and the political will of the current administration to carry through the reforms agenda.

"The country's economy is more resilient than many Malaysians would recognise. If the government can convince investors that they can unleash the potential of the economy, the benchmark FBM KLCI will do very well," Tan said.

It is "realistic" to expect a 5 to 10 per cent rise in the index from its current level, he said, possibly reaching 1,250 within this year, although there will be corrections along the way. The gauge is bound to test the previous high of 1,516.22 in the next one to two years, he added.

icapital.biz, which is conservative in its investment, is down to below RM40 million in cash - the lowest in its four-year history and reflects the many bargains available on Bursa Malaysia. The fund, which invests only in Malaysian shares, bought RM156 million stocks that are now worth RM206 million, giving it an unrealised gain of RM50 million.

Its top five holdings are Parkson Holdings, Astro, Kuala Lumpur Kepong, F&N Holdings and Petronas Dagangan. The fund has sold all its shares in Axiata Group Bhd, VADS Bhd and AirAsia Bhd in the last financial year.

Genting - Results preview: A lacklustre 2009; look to 2010 and beyond

Ggaming analyst ..... Lim Soo Hek


Genting (GENT MK) Buy
Price/Tgt: RM6.05/7.60 Mkt Cap: US$6.34b Daily: Vol 6.25m 1-Yr Hi/Lo: RM6.80/3.08

Results preview: A lacklustre 2009; look to 2010 and beyond

We expect 2Q09 results to be dragged down by the leisure and plantation unit due to lower CPO production and prices. Going forward, 2010 and 2011 earnings are likely to be boosted by RWS. BUY. Target price: RM7.60.


Results Preview
We expect Genting's 2Q09 results, due by end-Aug 09, to be flat qoq but substantially lower yoy, mainly dragged down by its leisure and plantation divisions. We expect the leisure division's core earnings to decline 10-15% yoy but to remain flat qoq, mainly due to lower visitor arrivals amid the H1N1 pandemic, while plantation earnings should fall 67% yoy but
be marginally higher qoq (+2%) due to lower CPO production and prices. The power division will improve as regional economies recover gradually. The maiden cash flow contribution from the Tangguh liquefied natural gas (LNG) plant in Indonesia will be delayed further to 1Q10 and Resorts World Sentosa's (RWS) pre-opening expenses are expected to accelerate in 2H09.


Stock Impact

A lacklustre 2009? We do not foresee any excitement for 2009, mainly due to RWS' pre-opening expenses, adverse operating conditions in the UK, and the effect of the economic crisis on visitor arrivals and spending, which was further compounded by the H1N1 pandemic. We estimate RWS will incur S$200m in pre-opening expenses, mostly to be recognised in 2H09 mainly on recruitment (10,000 staff), training, sales and marketing programmes prior
to RWS' opening in 1Q10.

? so look to 2010 and beyond. We expect Genting's earnings growth to gain momentum in 2010 and 2011, boosted by RWS' contributions. We forecast Genting's 2010 and 2011 EBIT growth at 80% and 17% yoy, mainly as RWS' contribution to group EBIT rises to 32.9% and 37.5% respectively (reversing losses in 2009).

Earnings Revision

We have raised our 2010 and 2011 earnings forecasts by 18% and 19% respectively, as RWS will enable 54.4%-owned Genting Singapore (GENS) to book net earnings of S$295m and S$444m in 2010-11. However, we have lowered our 2009 earnings estimate for Genting by 10.3%, taking into account lower average selling prices (ASP) and production at its plantation unit, as well as an increase in RWS' pre-opening costs to S$200m.


Valuation/Recommendation

Raising target price to upcycle valuations. We have raised our target price to RM7.60, after imputing GENS' target price of S$0.95 (based on cost of equity of 9.2% and zero terminal growth after RWS' concession period) into Genting's RNAV valuation while lowering its holding company discount to 10% from 20% previously.

At RM7.60, it would trade at 16.0x and 5.6x 2010 PE and EV/EBITDA respectively, vs global peers' average of 40.2x and 12.7x. Key re-rating catalysts for this stock: issuance of casino licence by the Singapore government, an earlier-than-expected opening of RWS (instead of in 1Q10), a further delay in Marina Bay Sands' opening, and a better regional economic outlook, which would drive Singapore's tourist arrivals.


Prefer Genting to GENM. We prefer Genting over Genting Malaysia (GENM/Target: RM3.26) for the former's exposure to RWS' earning growth potential, as well as other potential catalysts such as disposal of its power plant. We recommend buying into share price weakness as Genting will be the cheaper entry point to RWS' future earning growth potential.

Recent Proof that Dollar-Cost Averaging Still Works by Nilus Mattive

The idea with dollar-cost averaging is relatively simple: You buy equal dollar amounts of the same investment on a predetermined schedule.

Please note the italics in that last sentence. Dollar-cost averaging IS NOT buying a fixed number of shares on a regular basis. In fact, it is quite the opposite. Here's why ...

Let's say you've decided to invest $10,000 in XYZ Corp. Rather than deploying the entire amount at one time, you might instead opt to purchase $1,000 of XYZ stock on the first day of each of the next 10 months.

What's the logic behind this approach? Well, you can expect just about any stock's price to vary substantially over a ten-month period. So, when the price is higher, your $1,000 will buy fewer shares; when the price dips, your $1,000 will buy more shares.

In other words, buying equal dollar amounts over time allows you to reduce your risk to a stock's short-term price movements, automatically encouraging you to buy more when prices are lower and less when prices are higher.

It also removes much of the emotion from the investing process. You've already committed to buying the stock at regular intervals, regardless of market conditions.

And because you're doing this automatically, it doesn't require more than a few minutes of your time (if any at all!).

Okay, But Surely Dollar-Cost Averaging
Wouldn't Have Worked in the Last Year, Right?

When I wrote that original Money and Markets piece on dollar-cost averaging back on June 17, 2008 ... the S&P 500 was sitting at 1,400. Now, it's more like 1,000. And I don't have to tell you just how low it went in between.

So clearly someone who started dollar-cost averaging on the day of my column lost out, right?

WRONG.

In fact, as you'll soon see, an investor who began using dollar-cost averaging in June 2008 has actually come out better than someone who regularly put their funds into a money market account over the same time period!

Let me give you the math behind that bold claim ...

Frankly, it really doesn't make much of a difference whether we pick a daily, weekly, or monthly approach. But for simplicity's sake, let's stick with monthly.

We will assume that our hypothetical investor chose to buy a very common index exchange-traded fund such as the S&P 500 SPDR (SPY). As you probably know, that popular ETF attempts to match the broad performance of its namesake U.S. stock index.

And while I could certainly assume that our investor bought on the 17th of every month (the day my original column was published) I'm going to just use the first trading day of each month.

Lest you think I'm trying to avoid including June 2008, I simply pretended that the day of my column counted as the buy date for that month.

I figured our investor would put in $1,000 every time.

So, here's what the purchases looked like ...

A Recent Dollar-Cost Averaging Case Study ...
Date	SPY Price	Shares Purchased	$ Invested
06/17/2008	124.62	8.02439	$1,000
07/01/2008	123.5	8.09717	$1,000
08/01/2008	125.41	7.97385	$1,000
09/02/2008	113.6	8.80282	$1,000
10/01/2008	94.83	10.54519	$1,000
11/03/2008	88.23	11.33401	$1,000
12/01/2008	89.1	11.22334	$1,000
01/02/2009	81.78	12.22793	$1,000
02/02/2009	72.99	13.70051	$1,000
03/02/2009	79.07	12.64702	$1,000
04/01/2009	86.93	11.50351	$1,000
05/01/2009	92.01	10.86838	$1,000
06/01/2009	91.95	10.87548	$1,000
07/01/2009	98.81	10.12043	$1,000
08/03/2009	101.2	9.88142	$1,000
TOTALS =		157.82545	$15,000
Today's Value	101.2	X 157.82545	$15,971.94
Profit =			$971.94

As you can see, our hypothetical investor's $1,000 bought far more shares of the SPY during the market's decline and far fewer shares when prices were higher.

The end result of all that buying is that our investor is sitting on 157.82545 shares of SPY today. And based on a recent price of 101.2, that means the total holdings are worth $15,971.94.

Remember, we're talking about a 15-month period. So that means a total of $15,000 was invested.

End result: Our hypothetical investor is up $971.94, a return of 6.48 percent on the original $15,000 investment.

Yet over the same timeframe, the underlying investment — the S&P 500 index — is DOWN about 28 percent!

Amazing, isn't it?

Meanwhile, had our investor played it "safe" and just put $1,000 into a money market fund every month ... the overall return would have probably been less than 1 percent given current rates.

As you can see, dollar-cost averaging is truly a powerful way to "cut through the market chop" and steer your portfolio through major storms.

But, I want to point a couple things out ...

Final Words on Dollar-Cost Averaging,
And Investment Strategies in General ...

First, dollar-cost averaging is clearly not right for every investor. It requires a steady stream of investment money and could entail regular brokerage commissions. That makes it ideal for a regular company retirement account such as a 401(k) plan.

But please note that it is the same principle at work when you reinvest dividends. And I'd also say it's a great way for an investor to gradually invest a large lump sum, such as an inheritance.

Of course, the more important thing to note is that dollar-cost averaging takes guts. How many people — having invested thousands of dollars when the S&P 500 was at 1,300 and 1,400 — would have still been able to put more money in at 700?

In most cases, that is precisely the point at which the majority of investors would switch their investment allocation to something else!

My point? Human nature is perhaps the biggest threat to your wealth.

I don't care if it's dollar-cost averaging into an index fund ... trading commodities ... or buying and selling real estate. As long as you do your homework and pursue a time-tested investment strategy — consistently and without fail — I believe you will come out ahead in the long run.

Best wishes,

Nilus

AMMB Holdings (Outperform) - Closing the gap

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AMM MK

Outperform

Stock price as of 07 Aug 09	RM	4.15
12-month target	RM	4.89
Upside/downside	%	+17.8
Valuation	RM	4.89-5.33
- Gordon growth model
GICS sector	diversified financials
Market cap	RMm	11,300
30-day avg turnover	RMm	34.2
Market cap	US$m	3,231
Number shares on issue	m	2,723

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Investment fundamentals

Year end 31 Mar		2009A	2010E	2011E	2012E
Net interest inc	m	1,776.3	1,819.3	1,981.0	2,227.8
Non interest inc	m	1,494.7	1,772.8	1,966.2	2,118.2
Underlying profit	m	1,658.8	1,915.1	2,134.5	2,385.2
PBT	m	1,217.6	1,221.1	1,477.5	1,682.2
PBT Growth	%	1.9	0.3	21.0	13.9
Reported profit	m	860.8	887.3	1,088.0	1,232.0
Adjusted profit	m	860.8	887.3	1,088.0	1,232.0
EPS rep	sen	31.6	29.4	36.1	40.9
EPS rep growth	%	14.6	-6.9	22.6	13.2
EPS adj	sen	31.6	29.4	36.1	40.9
EPS adj growth	%	14.2	-6.9	22.6	13.2
PE rep	x	13.1	14.1	11.5	10.2
PE adj	x	13.1	14.1	11.5	10.2
Total DPS	sen	8.0	10.0	12.0	14.0
Total div yield	%	1.9