By: KAMEL BIN MOHD YUSOH
INSTITUTIONAL DEALER
KENANGA INVESTMENT BANK BHD
Tel : 03-21634549 / 03-21634550
H/P :013-6306544
WEBSITE : kamelresearch.blogspot.com
EMAIL : kamel88@streamyx.com or kamelmohdyusoh@ymail.com
THE YEAR 2009 MALAYSIAN STOCK MARKET OUTLOOK.

Table of Contents: -

Economic Outlook for the Year 2009 – Global Recession - Page 2 to 8.

What went wrong and what were the problems – Page 2.
What event most likely to unfold in 2009 – Page 2.
The real solutions to the problems – Page 3 to Page 5.

2. Malaysia Key Economics and Financial Statistics – Page 9 to Page 10.

3. Malaysia ‘s Economic Sector Outlook – Page 11 to 13.

a. Services – Page 11.
b. Manufacturing – Page 11.
c. Agriculture – Page 11.
d. Mining – Page 11.
e. Construction - Page 12.

Malaysia Economic Indicators – Leading, Coincidence and Lagging – P12.
Domestic Demand – Page 12.
Employment – Page 12 to Page 13.
International Investment Position – Page 13.
International Foreign Exchange Reserves of Bank Negara M’sia – Page 13.

Strategy, Fundamental and Technical Outlook for the Year 2009 – P14 - 16.
DJIA and KLCI – Page 14.
Sectoral Recommendation – Page 14.
Stock Market Over View – Page 15.
Currency Market Over View – Page 15.
Composite Index Technical Indicators – Page 16.
Stock Market Strategy – Page 16.

Top 25 Stocks Pick for the Year 2009 – Fundamental Analysis – P17 To P67.

The Year 2009 KLCI Earnings Estimates, Net Assets, Prospective Dividend Yield, Prospective PER , Average PER and Div. Yield for 2009– P 68 to P 70.
WHAT’S IN STORE FOR THE YEAR 2009.
ON WEDNESDAY DEC 31 2009, KLCI CLOSED AT 876.75. DJIA CLOSED AT 8776. CRUDE OIL AT US$44, MARCH FCPO AT RM1,695, RUBBER SMR20 AT RM4.50, RINGGIT AT 3.4500 AND BNM OVERNIGHT POLICY RATE AT 3.25%.

1. ECONOMIC OUTLOOK – HOW LONG AND HOW DEEP THE GLOBAL RECESSION IS GOING TO BE ???.

For the Year 2009, the Malaysian Government forecast a GDP growth of 3.5%. Personally, we forecast the Malaysia economy to grow between 1% to 3% in 2009. For FYE 2008, the Government expect GDP growth to be around 5% after the 1st Q 2008 GDP at 7.1%, 2nd Q 2008 GDP at 6.3% and 3rd Q 2008 GDP at 4.7%.. Meanwhile, on an annualized basis the full year 2008 GDP is 3.7% as compared to year 2007.
Malaysian Government also prepared to unveil another stimulus package if the need arise beside the RM7 billion stimulus package announced earlier. Government also set a ceiling on the expenditure at 4.8% deficit. Inflation expected to be at 4% or even less. Moreover, the economic slowdown won’t result in a recession according to the government as our financial sector is strong, reserves at its highest at 37% of GDP, national economy is diversified and high impact projects will generate growth.
Political uncertainties after the last general election had been mitigated considerably with Malaysian were now talking about the present government continuing and leading to the next general election. In the meantime, the most developed countries such as USA, Japan and Europe are expecting more pains economically.

WHAT WENT WRONG AND WHAT WERE THE PROBLEMS ?

Stocks markets tumbled around the world (US$30 trillion loss in market capitalization), as the sub prime mortgage crisis (Derivatives such as credit default option and credit default swap were the main culprit) drove the U.S. into recession (together with another 30 more countries around the world), and wrecked financial institution (around US$1 trillion banks write off so far and the total write off expected to be in the region of US$1.5 trillion). With credit scarce, some companies sought government loans (US$9 trillion bailouts commitment by the U.S. government), or were forced into bankruptcy.
The deepening recession in the U.S. now has hard hit every sectors of the economy from property to banking and to auto industry. As a results, the unemployment level were at a very high level of 12.5% (if inclusive of part time workers who has lost their jobs) and active unemployment claims at 5 million people’s according to the latest official numbers.

WHAT EVENT MOST LIKELY TO UNFOLD IN YEAR 2009 ?

A possible GLOBAL DEPRESSION where economic condition characterized by falling prices, reduced purchasing power, an excess of supply over demand, rising unemployment, accumulating inventories, deflation, plant contraction, public fear and caution, and a general decrease in business activity, for the world’s most develop economies.
THE REAL SOLUTIONS TO THE PROBLEMS.

Here are what we thinks are the correct solutions or a new tools or proactive measures to the World and Malaysia financial and economic problems :-

After the expected pouring in of billion dollars stimulus package and the ineffective used of traditional monetary policy and then the unorthodox measures such as the bailouts of financial institutions, companies, individual borrowers, investors, and massive injection of liquidity to banks to ease the credit crunch, and before the next bubble to burst which we anticipate to be the U.S. Treasury bond market, here are the possible solutions :-

The solution is what I called “ the God fearing capitalist system with a discipline.“

1.MONETARY POLICY – Structural changes to The World and Malaysia Financial Architecture.

I proposed a merger of the conventional and Islamic banking and insurance business model with the modification on the capital structure of both system, a new set of rules and laws on lending policy and a new Islamic banking financing terms that aren’t the carbon copy of the conventional system.

The banking system should be overhauled as the current business model is highly leverage. The level of capital and loan should be one to one. For a start, banks should fork out at least 75% of capital for every single dollar or ringgit of the loans. This is to ensure whoever owned a bank do have a necessary capital to run the bank without getting into risky lending practice or reckless lending policy and must be based on a new set of banking rules and laws. By implementing this, financial system meltdown and the subsequent government bailout as a result of highly leverage banking system based on risky credit creation and the abuse of derivatives instrument can be avoided in the future.

Without the highly leverage banking system business model, the customers deposit instead accepted by the bank as part of a wealth or fund management business and the money should be required by law to be invested only in the risk free instrument such as government paper or depending on the depositors risk preference.

The insurance policy should be based on risk sharing between the insurer and the insured instead of the transferring of risk business model. All of the derivatives insurance instruments that has been abused and at the epic centre of the recent financial maelstrom such as CDO’s and CDS’s should be banned for the good of the world economy.

The world and Malaysia monetary policy should be continually manage by the central bankers by using a very low interest or financing rates (based on the profit sharing concept of buy first then sell). As the main cause of the recent trouble is the non ability of the borrowers to make an interest payment on their mortgages, the new system must ensure that the loophole for future abuses are closed.
Meanwhile, the world and Malaysia government and central bank should manage the economy by controlling the inflation level based on the supply and demand of products and services and not based on interest rates or cost of fund.

As of now, the Bank Negara Malaysia should immediately lower the interest rates aggressively to as low as 1% on the Overnight Policy Rates in a proactive approach to bolster the economy by putting more money into borrowers pocket to ease the pain and to spur spending and lowering financing rates to spur business investment and purchases of big ticket items. I believe , the move won’t hurt the ringgit as the interest rates differential is still quite large even after the interest rate cut.

Currency Policy.

For the World and Malaysian economy to rebound, the currency exchange rate must be based on the country fundamentals. Having said that, the Fed and the world central bankers should coordinate the devaluation of the U.S. dollars to reflect the true fundamentals of the currency instead of sticking to their current arrangement. By doing this, the cash rich Asian countries will help the U.S in their export led economy recovery and Asian countries economy will benefit from cheaper imports from the U.S. especially on high technology products. The prices of battered down commodities will then recover slightly which in turn will benefit a lot of commodities producing countries in the world. This is a good trade off and a win - win situation for every body with the world economy humming back again but the dreaded inflation will still be in check.

A price of crude oil around US$60 to US$70 will push the palm oil prices to around RM2,000 to RM2,500 and SMR rubber price around RM8 without a production cut, This should still be healthy for the Malaysian and the world economy and a cheaper U.S. dollar will go a long way in achieving this goals.

Moreover, I thinks any hedge funds that involved in excessive leveraging and their bankers should be banned because their activities are disruptive to the well being of world financial system and the world economies due to their casinos like mentality.

2.FISCAL POLICY.

A.World – For any country with a budget surpluses and high foreign exchange reserves, fiscal stimulus can be a very effective way to generate growth. But for a country with a high budget deficit and have to rely on foreign borrowing they should practice a fiscal discipline otherwise this will lead into more problems for them in the future.

B.Malaysia – Please don’t overspend or make any new foreign borrowing that can be detrimental to the Malaysian economic well being and financial health. Please let’s the prices of goods, products and services to come down first before implementing any new fiscal stimulus as the only good about this so called crisis is cheaper prices on everything. Stop the spending wastages and no property overbuilt like in the U.S to avoid the bubble. Government must control the issuance of new building construction permit.
Government Policy On Palm Oil and Rubber Prices.

The recent sharp drop in palm oil prices was exacerbate partly because of the non availability of bank credit financing facility for the import of palm oil in the importing countries due to credit freeze.

The problem can be rectified by requiring Malaysian banks to open a branch in the importing countries to offer them the trade financing facilities.

Furthermore, the government should intensify the research and development effort in the rubber and palm oil industry, so Malaysia won’t be forever remain as the exporter of raw material only. New value added products will surely bring in more demand for the commodities and more hard currency into the country.

Employment.

This is the key to survival during this economic slowdown. The government must ensure that employers do not lay off workers as they please. Moreover, the employees are better off to accept lower wages in return for job security during this deflationary period.

Priority must be given to Malaysian instead of foreigners in hiring and firing.

Taxes.

Avoid raising taxes, only as a last resort, to raise government revenue for the budget deficit financing for the fiscal stimulus package to spur economic growth.

Housing for the poor.

As the sub prime mortgage crisis in America involved the housing need of the needy, any responsible government should provide an affordable housing scheme for the poor citizen of the country instead of leaving it to the private sector. The sub prime loan became a crisis because the poor people’s had to take a housing loan that they eventually cannot afford to pay and end up as a defaulter .


So, this are the possible solutions to the economic problems facing Malaysia and the World at the moment.








MALAYSIAN AND WORLD STOCK MARKETS OVERVIEW.

The stock market has some what stabilized since the U.S Congress had passed and President Bush has signed a massive US$700 billion bailout package to buy up toxic mortgage-related investments and other distressed assets from shaky financial institutions and the latest has been auto industry bailout in an effort to restore confidence in markets and thaw a near freeze in credit availability that has begun to affect the ability of community banks to loan, businesses to obtain money for payrolls and investments and individuals from getting credit to buy a home or a car.

For the Year 2009, the external environment is expected to deteriorate further with the continued unfolding of the financial crisis that has erupted in the United States. Hopefully, with the USD700 billion rescue package being passed to tackle a large scale liquidity strains and the consequent constraints on credit conditions and at the same time to recapitalized the banking industry, the collapsed of the U.S. and the world financial system can be avoided. Next on the card is big stimulus package around US$1 trillion for the next two years from the new President.

Meanwhile, the U.S. budget deficit for FYE Sept 30, 2008 stood at US$407 billion excluding US$200 billion to save Fannie Mae and Freddie Mac and also US$700 billion to bailout the financial institutions. The financial system bailout would boost U.S. debt limit to US$11.3 billion. Currently, the United States government spending more than US$400 billion a year to pay interest on their national debt and has to borrow US$2 billion a day from foreigners. As a result, the rescue package is not a “magic bullet” to save the U.S. economy and this very high level of budget deficit and trade deficit too will surely have a negative impact on the equity market, bond market and the dollar but it is better than doing nothing at all.

So, with the US$700 billion rescue package already in place, the U.S. and the world attention are now shifted to the next President stimulus package to generate economic growth as inflation threats seem to have abated with the world economy were in a deep recession and a possible depression.

While the extent of the impact of the recent developments of the financial crisis such as the collapsed of investment banks Bear Stearns and Lehman Brothers, Merril Lynch forced merger with Bank of America, the nationalization of Freddy Mae and Freddie Mac in a US$300 rescue package, US$84 billion bailout of the world largest insurance company AIG Group, the largest bank collapsed so far in Washington Mutual and the the takeover of U.S. fourth largest bank, Wachovia, by Wells Fargo bank, on global growth currently is pointing toward a depression.

Moreover, even though the recent US$700 billion rescue package has provided the stabilizing factor to the current uncertainty in the financial markets, the significant volatility in the financial markets experienced in the year 2008 are expected to continue into 2009 because of deleveraging. The stock markets will most likely perform according to economy outlook and economic numbers will be monitored more closely.
The recession in some of the world’s largest economies is likely to lead to a serious worldwide repercussions in global trade. Trade among the Asian nations has, however, increased substantially. With the expansion in domestic demand in the Asian economies, the cumulative market in the region has increased significantly, thus increasing the prospect for mutually reinforcing intra-regional trade. Despite the region’s strong inter-linkages to the global economy and to the international financial system, the dominance of domestic demand and the increasing regional economic integration have reduced the implications of external developments on the region. Thus, while the region is not being entirely insulated, surely there will be some partial decoupling.

Political differences aside, Malaysia enters this period of heightened global uncertainty from a strengthened position. The economy has been on a steady growth path averaging close to 6% in the past three years. The quality of the growth has also improved – becoming more balanced between domestic and external sources of growth, between private and public sector activity, and between the different economic sectors. Against this background, Bank Negara Malaysia and the Malaysian Government had revised the Malaysian economy to sustain a growth of 5% For FYE 2008 and 3.5% in 2009.

Keys in achieving this growth are lower interest rate policy and an employment level that can sustained domestic demand. Rising incomes, strong labour market conditions and increased access to financing are expected to support continued consumption spending. Based on recent economic and financial indicators, strong domestic investment activity and foreign direct investment are expected to continue in 2009 albiet at a slower pace. Public spending on new RM7 billion stimulus package, including on projects under the Ninth Malaysia Plan and for the new economic corridors will reinforce the growth.

Moreover, as a resource based economy, the Malaysian economy can only fully recover from the slowdown if and when the commodities price recover. The increase in commodity prices can and will generated high multiplier effects on the domestic economy. Strong employment and external balances, low indebtedness and a high rate of savings are the additional macroeconomic fundamentals that will raised the level of resilience of the economy.

As the global economy shifts into a recession or even a depression, in theory it is a matter of time before the inflation rate will be trending downward mostly because of falling demand. The Ministry of Domestic Trade and Consumers Affairs still have to work hard in ensuring the inflation rate do come down. In Malaysia, this will lead to sharply lower producer price index. The further slowdown of the global growth together with capacity expansion and rising wages that are commensurate with productivity would also contain upward price pressures on the domestic front. Based on the assessment of these anticipated trends, we expect the average headline inflation to decrease substantially from the current high level of 5.7% in October of 2008 due to the recent decrease in the fuel pump prices which hopefully will have a downward effect on other goods and services prices.

Despite the recent strengthening of the U.S. dollar because of portfolio outflows, I still hold the view that the correct monetary policy for the Bank Negara Malaysia to pursue is not by monetary tightening but by aggressively lowering interest rate even to match the latest interest level of the United States. I believe this won’t have a negative impact on our currency the Ringgit. Based on our fundamental strength, the Ringgit can strengthened and Bank Negara should allowed the Ringgit to strengthened further against our main trading partner to stem the imported inflation and improving our standard of living.

Achieving a sustainable economic growth, a lower inflation level, a lower interest rate environment and a strong currency will be the main catalysts for our stock market to perform for the Year 2009.

The down side risk to the Malaysian economy is the external factors such a prolonged full blown recession or even a depression in the US, one of our key export market with an almost 20% in total export value, and then the rest of the world to catch the contagion effect.

At the moment, this are the most likely scenario as all the data coming out from the US, the latest being the unemployment numbers, are suggesting a deepening recession with the property, financial and autos sectors were badly affected and a possibility of more write down of the banking assets worldwide from US$1 trillion write down so far year to date, to an estimated US$1.5 trillion total write down.

Our main assumptions of the Malaysian economics growth are based on a stable environment for our major trading partners and the world economy as a whole and a stable political situation in the country.



















2. MALAYSIA KEY ECONOMICS AND FINANCIAL STATISTICS.

(Source - Department of Statistics Malaysia and Bank Negara Malaysia)

Table 1.


3rd Quarter 2008 Gross Domestic Product.


RM Million
GDP / GNI
2007p
2008p 2nd Qtr
2008p 3rd Qtr
GDP : Current Prices
641,864
189,352
198,668




GDP : Constant 2000 Prices
505,353
132,155
136,235




GDP Growth Rate Constant 2000 : Prices (%)
6.3
6.7
4.7




Gross National Income (GNI) : Current Prices
628,106
181,114
n.a.
Per Capita GNI : Current Prices (RM)
23,115
26,127
n.a.



p Preliminary.



















MALAYSIA KEYS ECONOMICS AND FINANCIAL STATICTICS continued :-

BALANCE OF PAYMENTS 2007 2008p 2008p 2008p

( RM million) 1Q 2Q 3Q

Balance on Current Account 100.410 23,778 37,046 38,700

Balance on Capital & - 37,805 26,452 -12,307 - 61,511
Financial Account

Overall Balance 45,296 48,942 26,213 - 31,500

January - October

EXTERNAL TRADE 2007p 2007p 2008
( RM Million )

Total Exports 605,153 496,534 565,659

Total Imports 504,814 416,000 446,812

Balance of Trade 100,339 80,534 118,847

CONSUMER PRICE INDEX
Jan-Nov Jan - Nov
CPI (2005 = 100) (% change) 2007/2006 2008/2007

Malaysia 2.0 5.5

Peninsular Malaysia 2.0 5.5

Sabah 2.1 6.0

Sarawak 1.7 6.1


Jan - October
MONTHLY MANUFACTURING
STATISTICS 2008 2007 % Change

Sales Value (RM 000) 488,331,683 430,170,679 13.5

Number of Employees 1,065,278 1,099,104 - 3.1

Salaries & Wages Paid 21,003,231 20,069,706 4.7
3. MALAYSIA ECONOMY SECTOR OUTLOOK.

Table 6 - Real GDP by Sector (2000=100).
Annual Change (%)

2009f
2008f
Agriculture
Mining and Quarrying
Manufacturing
Construction
Services

3.7
3.4
4.3
3.1
6.9

3.4
6.0
1.8
5.5
7.7
Real GDP
5.4
5 - 6
p Preliminary
f Forecast
Source : Treasury Department of Malaysia


The Malaysian Government since then had revised the forecast GDP growth figures for FYE 2009 from 5.4% to 3.5%.


a. SERVICES SECTOR need to sustain its growth momentum as the main contributor to the overall GDP growth. The share of the services sector to GDP is expected to be maintained around 50% . The growth in the sector as in 2008 will be supported by private consumption and tourism activity during the year, as well as new impetus from new growth areas. Activities in new growth areas, such as Islamic Finance, telecommunications, IT services, shared services and outsourcing (SSO) and professional services, are expected to contribute significantly too.

b. MANUFACTURING SECTOR is expected to be weak and possibly record a contraction in growth due to the expected weak performance of the export-oriented industries in an environment of global recession. In particular, the E&E industry is expected to weaken further in view of the deepening recession in the US.

c. AGRICULTURE SECTOR growth is expected to play a key role in any economy recovery. Price recovery rather than cut in production level of our major industrial crops, namely palm oil and rubber is the best policy option. Malaysia should maintain the palm oil its output at 16.25 million tons in 2009 and also rubber output supported by better yield. In term of export numbers, the commodities price recovery is the key for the Malaysian economy to be in the positive territory in term of GDP growth in 2009.

d. MINING SECTOR would continue to lend further support to economic growth, expanding at a moderate rate. Production of crude oil (including condensates) is expected to be maintained at an average of 743,000 barrel per day, supported by the acceleration in output from the Kikeh deepwater oil field in Sabah. Output of natural gas is also expected to rise to fulfill demand from Korea and Japan, Malaysia’s major LNG importers.
e. CONSTRUCTION SECTOR is the main beneficiary of the government stimulus package. The key here is speedy implementation of the infrastructure projects otherwise the growth prospect will be affected. Lower construction costs and better profit margin are expected due to the lower price of building material such as cement and steel prices.


MALAYSIA ECONOMIC INDICATORS – Leading, Coincidence and Lagging Indices October 2008.
Source – Statistics Department of Malaysia.

The Coincidence Index (CI) registered a rise of 0.3% to 123.0 points in October 2008. The increase of the index was contributed by positive change in real contributions, EPF (1.2%) and total employment in manufacturing sector (0.1%). The six months smoothed growth rate of CI slightly improved to -0.5% from -1.2% recorded in the previous month.

The Leading Index (LI) which monitors the economic performance in advance recorded a decline of 1.8% in October 2008 to 155.7 points. The drop in the index were attributed by the ratio of price to unit labour cost (-0.7%), real money supply M1 (-0.6%), number of housing permits approved (- 0.4%), Bursa Malaysia Industrial Index (- 0.3%), and real total trade of eight major trading partners (-0.3%). The six months growth rate of LI depreciate to - 2.9% in October 2008.

The continuing weakness in the six month smoothed growth rates of the Leading and Coincident Indices suggest that the country’s economic will be slower in the coming months.


DOMESTIC DEMAND.

Malaysia domestic demand will be further enhanced in the of 2009 with the RM7 billion fiscal stimulus and the downward revision of fuel price in 2008 and the recent measures introduced during Budget 2009. The interest rate also can be expected to be reduce further from the OPR current level of 3.25%. The proposed RM207.9 billion budget for 2009 which is 5.1% higher than 2008 budget will be the main catalyst needed to spur the economic growth during turbulence times ahead. At the same time, we believe Malaysia should be spendthrift and should strive for a balance budget in the near future.

EMPLOYMENT

Job security is the key to survival during any economic downturn as more lay off are to be expected in 2009. For the 2nd Q of 2008, total labour force stood at 11,123,700 people. Total people employed at 10,735,000 and total unemployed people at 388,100. Unemployment rate in 2008 as a percentage of a labour force stood at 3.5% up from 3.2% in FY 2007.

Meanwhile, the solution for the unemployment is for Malaysia to move away from being overly dependent on foreign labours by paying more to the locals to make them more interested in the jobs being done by the foreigners. After all, this companies are making tons of profit now so they can afford to pay higher salaries to Malaysian.

Furthermore, Malaysia must have the will power to get rid of an oversized pay package for executives and crony capitalism. Hiring and promotion should be based on merit and not on cronyism or nepotism.


INTERNATIONAL INVESTMENT POSITION.

As of 30.12.2007, the net liabilities position of Malaysia’s international investment stood at RM18.2 billion; a marginal improvement of RM4.8 billion, from a position of RM23 billion last year. This was mainly driven by the performance of external assets of RM742.7 billion (2006:555.4 billion) which increased at faster pace than that of external liabilities , RM760.9 billion (2006: RM578.5 billion).


INTERNATIONAL RESERVES OF BNM as at 15 December 2008.
(Source – Bank Negara Malaysia).

The International Reserves of Bank Negara Malaysia amounted to RM330.4 billion ( equivalent to USD96 billion) as at 15 December 2008.

The reserves position is sufficient to finance 7.8 months of retained imports and is 3.4 times the short term external debt.

The international reserves held by Bank Negara Malaysia decreased by RM31.5 billion relative to an increase of RM26.2 billion posted in the second quarter, 2008.
















4. MARKET STRATEGY, FUNDAMENTAL AND TECHNICAL OUTLOOK.

DJIA – First day of trading in 2009, DJIA up 258.30 to closed at 9,034.69.
During of the Great Depression, the market bottomed out after dropped more than 70% from the all time high. Based on that experience, downside risk for DJIA is between 4000 to 5000 level from 14,000 level.

KLCI – First day of trading in 2009 saw KLCI up 17.61 points to closed at 894.36.

Based on the above outlook, the recent 3nd Quarter 2008 corporate results, the CI closing level as of December 31, 2008 at 876 and our FYE 2009 forecast average PER for Bursa Malaysia 100 Composite Index Stocks at 12.9X and a dividend yield of 3.67%, we are forecasting a CI of between 860 to 880 level for the Year End of 2009.

SECTORAL RECOMMENDATION.

PLANTATION SECTOR to perform in line with the market due to ample supply and soft demand for CPO. We forecast a bottoming out of CPO and rubber prices going forward, currently as of Dec. 31, 2008, the December FCPO was last traded at RM1,695 and rubber SMR20 at RM4.50. Meanwhile, rubber production were lower year on year that will cause an upward pressure on the prices due to unsuitable substitute product the synthetic rubber in the production of tyre etc. Malaysia should be more competent in maintaining the price stability of this commodities as together with Thailand and Indonesia we produced almost all of the world production of palm oil and rubber. The key determining factors for the prices here are demand and supply, crude oil prices and the US dollar.

OIL AND GAS SECTOR to perform in line with the market due to the depressed crude oil prices and the trend is still down side bias and probably stabilize around US$50 to US$60 level in 2009. The crude oil is currently at USD43.44 that will still spur capital expenditure by oil and gas majors and now most of the listed companies valuations are fairly valued. .The downside risk is if the oil majors held back on the capital expenditure

CONSTRUCTION SECTOR to perform in line with market due to fiscal stimulus and high probability of lower cost of building materials such as steel and cement that will improve the industry profit margin with softening demand. BUY recommendation for Zelan Bhd RM0.88 and Muhibbah Engineering Bhd RM0.99 based on their sizeable book order and leverage free balance sheet and healthy cash level.

BANKING SECTOR to under perform the market due to pricey acquisitions prices and expensive valuations based on expectation of higher non performing loans due to the economic slow down. The worldwide economic recession after the current financial crisis will add more pressure to the industry as a whole.

PROPERTY AND AUTO SECTOR to under perform the market due to consumers holding back their purchases in anticipation of lower prices and lower interest rates.
STOCK MARKET OVERVIEW - For the Year 2009, we forecast the Composite Index trading range to be between 880 to 500 level based on the prospective FYE 2009 Price Earnings Ratio of 12.9X and due to a deepening recession or even a depression in the United States and the rest of the develop world such as UK, Europe and Japan after the current market turmoil and financial crisis in the United States. Moreover, the political landscape in Malaysia is also very unstable.

Meanwhile, a visible forward earnings, an attractive dividend yield and a decent price to tangible book value make the Malaysian stock market a very attractive place to invest especially at the 500 t0 600 level on the Composite Index. On the longer term basis, 860 to 880 look quite attractive level to invest in the Malaysian stock market.

CURRENCY MARKET OVERVIEW
STATEMENT BY GOVERNOR OF BANK NEGARA ON EXCHANGE RATE.

What is needed now is stability, not rigidity. The floating exchange rate regime provides Malaysia with the flexibility to adjust to international economic and financial developments. The regime also accords exchange rate stability against our main trading partners. A fixed exchange does not eliminate volatility. It merely transfers that volatility to domestic prices such as assets prices and inflation. Therefore, a re-pegging of the ringgit has never been a consideration. To do so would be harmful to the Malaysian economy . The Ringgit will continue to operate under a manage float regime with its value being determined by the market.

We continue to forecast the Malaysian currency, Ringgit, to trade strongly against the US dollar and the rest of major currencies in 2009 due to better economic fundamentals such as strong foreign exchange reserves, healthy trade and current account surplus vis a vis United States and the rest of our trading partners. Currently, US dollar are strengthening because of a portfolio fund outflow and a concerted effort by the world central banks to tackle the rise of commodity prices despite a very poor fundamentals of the United States for a sustainable US dollar rally.

The Federal Reserve recently cut the benchmark interest rate further to between 0.25% to as low as 0%, currently at of 2.00 percent level due to a very high downside risk on their economy which are already in a recession or possibly even a depression after the recent financial meltdown due to a credit crunch and a possible bank write down to the tune of US$1.5 trillion ( so far US$1 trillion write down) after the sub prime mortgage debacle . Moreover, United States need weak currency to compete in the export market otherwise they won’t be able to rectify their trade deficit problem with the rest of the world.

To date the Ringgit has appreciated from 3.80 to 3.13 level then depreciated back to 3.63 level but now at 3.4650 level after the latest interest rate cut by the U.S. Fed, since the unpegging of the Ringgit in the middle of 2005.



COMPOSITE INDEX TECHNICAL INDICATORS.


1.Composite Index Target Level for the Year End 2009 – 860 to 880. (Forecast 1Q 2009 to 3Q 2009 between 926 to 500 level).

2.Resistance Level – 900, 926, 980, 1000 ,1024, 1524 (all time high).

3. Support Level – 850, 830, 800, 700, 600, 570, 500, 262 (all time low).



STOCK MARKET STRATEGY FOR 2009.

Slowly accumulate good quality stocks with good dividend yield especially on extreme market weakness or sharp fall for the first 3 quarters of the Year 2009. We expect the stock market to bottom out in the month of October 2009 and we’re positioning for the anticipated traditional year end 2009 window dressing activities and the world economy recovery in the second half of Year 2010 (18 months from now). By that time we should have a better clue on world economy recovery, as the tail end of the fiscal stimulus, easier monetary policy and government bailouts are into effect.

Anticipated big stimulus package after the new U.S. President inauguration in January 20, rally before the Chinese New Year on January 26, an UMNO election in March and Malaysia new Prime Minister soon afterward will keep the stock market buoyant with an upside bias in the first quarter of 2009. The downside risk is the anticipated bad 4th quarter 2008 earnings.



















5. TOP 25 STOCK RECOMMENDATION.

Based on the closing prices as of Friday, 12 December 2008.

1. BURSA MALAYSIA BHD RM5.30.

Year End Dec. 31 FY2009(F) 3Q 2008 (U) 9M FY2008 FY2008(F)
000 000 000 000

Revenue 294,532 73,633 260,561 334,194
Net Profit 80,740 20,185 90,895 111,080
EPS (sen) 15.20 3.80 17.30 21.1
Forecast PER 34.9X 25.1X
Dividend (sen) 15.00 0.00 16.50 20.0
Net dividend yield 2.8% 3.8%
Cash 1,304,192
Debt 439
Net Assets RM1.37
Number of shares 525,843,000
Market Capitalization RM2.787 billion.
Major Shareholders Capital Market Development Fund 19.52%.
Minister of Finance Incorporated 19.52%

LATEST CORPORATE DEVELOPMENT.

Bursa to introduce more relaxed short selling framework in the first half of next year.

Comment – Banned on short selling is part of the measure to stop the world stock markets from spiraling downward during the crisis recently.

QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALSIS.

STRENGTHS ANALYSIS
BUSINESS MODEL – Revenue and profit depend on the stock market performance.

Trading revenue from the equity market came from clearing fees, SCORE fees (equity trade fees), Institutional Settlement Service fees and buying in commissions.
Trading revenue from derivatives market came from clearing fees, trade fees and guarantee/tender fees.
Stable revenue came from listing fees, depository services, information services, broker services and participants services.

MANAGEMENT – Headed by a Chairman and a CEO.

BUSINESS OUTLOOK – Affected by the current global recession.
CORPORATE GOVERNANCE – Need to be more transparent.

FINANCIAL – Strong with RM1.3 billion in cash and almost debt free.


WEAKNESS ANALYSIS – The malfunction of the costly new trading system still have not been rectify.


OPPORTUNITIES ANALYSIS – Tie up with foreign bourses still have not materialize.


WEAKNESSES AND THREATS ANALYSIS - External threats such as a prolonged global recession and continued weaknesses in the world economy and bourses worldwide not seen since the Great Depression.


QUANTITATIVES ANALYSIS.
VALUATIONS.

Forecast PER for FYE 2009 – 34.9X
Forecast Dividend Yield – 2.8%.
Net Assets – RM1.37.
Price to Book Value – 3.9X.
Net Tangible Assets – RM1.2799.
Debt to Equity Ratio – 0.615X.
Net Profit Margin – 27.4 %..
Annualized Return on Equity – 15.475 %.


TECHNICAL ANALYSIS.

TRADING RANGE – 52 Weeks.

High – RM16.30.

Low - RM4.68.


STOCK RECOMMENDATION – HOLD.
BUY at a fair value of RM1.83 based on forecast FYE2009 PER of 12X, on an EPS of 15.2 sen, and a dividend of 15 sen, for a yield of 7.5% at RM1.83.




2. BOUSTEAD HOLDINGS BHD RM3.26.

FYE DEC 31 FYE 2009(F) 3Q FY 2008(U) 9M FY2008 FY2008(F)
000 000 000 000

Revenue 4,878,000 1,951,232 5,801,949 6,926,830
Net Profit 400,000 163,996 468,199 568,000
EPS (sen) 61.44 25.48 73.86 87.25
Forecast PER 5.3X 3.7X
Dividend (sen) 25.00 7.50 17.50 25.00
Dividend Yield 7.7% 7.7%
Net Assets (RM) RM4.37
Cash 552,935
Debt 3,714,115
Number of Shares 651,032
Market Capitalization RM2.122 billion.
Major Shareholder Lembaga Tabung Angkatan Tentera 64.03%.

LATEST CORPORATE DEVELOPMENT.

Proposed disposal of Malakoff estate and Bebar Estate by Boustead Hldg and Boustead Rimba Nilai, a wholly owned companies of BHB, to Al-Hadharah Bousted Reit for aggregate sale consideration for RM188.8 million to be satisfied by cash and issuance of new fund units and the subsequent lease of the plantation assets from the fund back to Boustead companies.


QUALITATIVES ANALYSIS.
STRENGTHS , WEAKNESS, OPPORTUNITIES AND THREATS ANALYSIS.

STRENGTHS ANALYSIS
BUSINESS MODEL – A well diversified conglomerate.

The Group revenue came from 1.Plantation 2.Heavy Industries – Listed BHIC Bhd 3.Property Development 4.Property Investment 5.Finance&Investment – Listed Affin Hldg Bhd 6.Trading and 7.Manufacturing and Services – Listed UAC Bhd..

MANAGEMENT - Strong. Headed by Board of Directors and a CEO.

BUSINESS OUTLOOK – Depending on the Malaysia and the world economic performance which currently are in a recession.

CORPORATE GOVERNANCE - Plenty of room for further improvement. Need to be more transparent.

FINANCIAL STRENGTHS – Cash RM552.9m and Debt RM3.7b.
WEAKNESS ANALYSIS – Highly leverage business model.


OPPORTUNITIES ANALYSIS – Cheaper M&A opportunity during a market downturn.


THREATS ANALYSIS - The prolonged weaknesses in the global economy and financial crisis in the U.S.


QUALITATIVES ANALYSIS.
VALUATIONS.

Forecast FYE 2009 Price Earnings Ratio – 5.3X
Net Assets per Share – RM4.37.
Price to Book Value – 0.75X.
Net Tangible Assets – RM3.54.
Return on Equity – 22.53%.
Debt to Equity Ratio – 1.63X.
Net Profit Margin – 8.40 percent.
Dividend Yield – 7.7 %.


TECHNICAL ANALYSIS.

TRADING RANGE.

52 Weeks High – RM7.25.

52 Weeks Low – RM2.18.


STOCK RECOMMENDATION – BUY BOUSTEAD HOLDINGS BHD.
Fair value of RM6.15 at FYE 2009 PER of 10X based on an EPS of 61.4 sen, on a net profit of RM400 million.










3.MISC BERHAD RM8.55.

FYE March 31 FY 2009(F) 2Q FYE 2009 6M FY2009
000 000 000
Revenue. 17,017,093 4,455,932 8,105,229
Net Profit 1,873,449 450,197 973,055
Net EPS (sen) 50.36 sen 12.10 26.16
Forecast PER 17X
Dividend (sen) 30.00 15.00 15.00
Dividend yield 3.5 %
Net Assets RM5.47
Cash 4,075,359
Debt 9,910,433
Number of shares 3,719,827,000
Market Capitalization RM31.8 billion.
Major shareholder Petronas (62.4 %)

LATEST CORPORATE DEVELOPMENT.

MISC called off the proposed reverse takeover of Ramunia Holdings Bhd via disposal by MISC, through its wholly owned subsidiary, MSE Holdings Sdn Bhd, of its entire equity interest in Malaysia Marine and Heavy Engineering Sdn Bhd to Ramunia.

QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS.

STRENGTHS ANALYSIS.
BUSINESS MODEL

Revenue came from 1.Energy related Shipping 2.Other Energy Businesses 3.Intergrated Liner Logistics and Non Shipping.

MANAGEMENT – Headed by a new CEO.

BUSINESS OUTLOOK – Continue demand for energy.and long term LNG contract with Petronas will mitigate the soft outlook for shipping rates amid a global recession but earnings nevertheless will still be affected.

CORPORATE GOVERNANCE – Need to be more transparent.

FINANCIAL STRENGTH – RM4.07b in cash and RM9.9b in debt.


WEAKNESS ANALYSIS – Too dependent on Petronas LNG contract.

OPPORTUNITIES ANALYSIS – Opportunity to expand the energy shipping business as the world demand grow.


THREATS ANALYSIS.

Pirates in the Straits of Eden remain as a threat for a shipping company worldwide.

High operating costs such as bunkering cost affecting the net profit margin.

New ship coming on stream will reduce demand and lower the shipping rates.


QUANTITATIVES ANALYSIS.
VALUATIONS.

Forecast PER FYE March 2009 – 17X.
Net Assets Per Share – RM5.47.
Price to Book Value – 1.56X.
Net Tangible Assets – RM5.2166.
Dividend Yield – 3.5 percent.
Debt to Equity Ratio – 0.71X.
Return on Equity – 12.56%.
Net Profit Margin – 10.1 percent.


TECHNICAL ANALYSIS
TRADING RANGE.

52 Weeks High – RM10.00.
52 Weeks Low - RM7.40.


STOCK RECOMMENDATION – HOLD.

Based on forecast FY2009 EPS of 50.36 sen and at a PER of 12X, BUY MISC Bhd at the fair value of RM6.05 plus a dividend yield of 4.96 percent.









4. PETRONAS GAS BERHAD. RM9.80.

FYE March 31 FY 2009(F) 2Q FYE 2009 (U) 6M FY2009 (U)
000 000 000

Revenue 3,120,516 849,700 1,646,399
Net Profit 1,304,687 207,242 502,826
Net EPS 65.94 10.47 25.41
Forecast PER 14.9X
Dividend (sen) 45.00 15.00 15.00
Dividend Yield 4.6%
Net Assets RM3.96
Cash 1,553,332
Debt 412,862
Number of shares 1,978,732,000
Market Capitalization RM19.39 billion.
Majority Shareholders PETRONAS ( 60.6 % )

LATEST CORPORATE DEVELOPMENT.

Execution of shareholders agreement between Petronas Gas Bhd and Yayasan Sabah to set up a joint venture company to develop a 300 megawatt Gas Power Plant and related infrastructure and facilities known as the Kimanis Power Plant Project in Kimanis, District of Papar, Kota Kinabalu, Sabah. The equity participation of PGB and YS in the JVC is as follows : PGB – 60% and YS – 40%.

QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.

STRENGTHS ANALYSIS.
BUSINESS MODEL – STRONG.

The Company’s principal business segments are services rendered for separating natural gas into its component and the storage, transportation and distribution of such components and sale of industrial utilities and operates only in Malaysia.

MANAGEMENT - Headed by Board of Directors, CEO and the management team.

BUSINESS OUTLOOK – Strong demand for the natural gas.

CORPORATE GOVERNANCE – Must be more transparent.

FINANCIAL STRENGTH – Cash RM1.55b and Debt RM412.8m.



WEAKNESS ANALYSIS – The operation is only in Malaysia, so the growth can only come from higher domestic consumption.


OPPORTUNITIES ANALYSIS - Opportunity for the company to make more money with the recent hike on gas prices from RM6.00 per mtbu to RM14.00 per mtbu.


THREATS ANALYSIS - Gas as a depleting resources need to be replaced with a new finding. No domestic competitor.


QUANTITATIVES ANALYSIS.
VALUATIONS.

Forecast Price Earnings Ratio for FYE March 2009 – 14.9X.
Net Assets Per Share – RM3.96.
Price to Book Value – 2.47X.
Net Tangible Assets – RM3.96.
Dividend Yield – 4.6 percent.
Debt to Equity Ratio – 0.2247X.
Return on Equity Ratio – 16.65 percent.
Net Profit Margin – 24.39 percent.


TECHNICAL ANALYSIS.
TRADING RANGE - 52 WEEKS.

HIGH – RM11.00.

LOW – RM9.05.


MAINTAINED HOLD RECOMMENDATION FOR PETRONAS GAS BHD.

The earnings growth will come from new tariff, increase sales, Gas Malaysia Sdn Bhd and the building of 400 km gas pipeline from Sabah to Bintulu Port in Sarawak.

Based on FYE March 2009 forecast EPS of 65.94 sen and a PER of 12.1X, the fair value for Petronas Gas Bhd is RM8.00 plus a dividend yield of 5.2 percent.






5. TM BERHAD. RM3.00.

FYE DEC. 31 FY 2009(F) 3Q FY2008 9M 2008(U) FY 2008(F) 000 000 000 000

Revenue 8,248,088 2,062,022 6,177,146 8,239,168
Net Profit 1,057,166 ( 165,816) 627,059 891,350
Net EPS (sen) 29.55 (4.80) 18.20 24.92
Forecast PE Ratio 10.1X 12X
Dividend (sen) 25.00 0.00 12.00 24.00
Dividend yield 8.3% 8%
Net Assets RM3.0063
Cash 1,143,900
Debt 6,843,300
Number of shares 3,577,402,000
Market Capitalization RM10.73 billion
Major shareholder Khazanah Nasional (40.9 % )

LATEST CORPORATE DEVELOPMENT.

Proposed privatization of VADS Bhd via a selective capital reduction and repayment exercise under Section 64 of the Companies Act, 1965.


QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESS, OPPORTUNITIES AND THREATS ANALYSIS.

STRENGTHS ANALYSIS.
BUSINESS MODEL – Fixed line telephone and broadband internet.
Revenue came from 1.Retail Business 2.Domestic Wholesale 3.TM Global and 4.Shared / Support Services.

MANAGEMENT – Headed by the Board of Directors, CEO and the management team.

FINANCIAL POSITION - Cash RM1.143b. Debt RM6.8b. TMI Bhd still owe TM RM5b due in March 2009.

CORPORATE GOVERNANCE – Can still improve further.


WEAKNESS ANALYSIS – High capital expenditures for the high speed broadband business.


OPPORTUNITIES ANALYSIS – Recently signed RM11 billion agreement with the government to provide high speed broadband services to the whole country. .
THREATS ANALYSIS -The threat will come from the other broad band service provider.


QUANTITATIVES ANALYSIS.
STOCK VALUATIONS.

FYE 2008 PER Ratio – 10.1X.

Net Assets Value – RM3.0063.

Price to Book Value – 1X.

Dividend Yield – 8.3%

Net Profit Margin – 10.8%.


TECHNICAL ANALYSIS.

52 WEEKS HIGH AND LOW.

HIGH – RM3.70.

LOW – RM2.54.


STOCK RECOMMENDATION – BUY TM BHD.
Fair value of RM3.56 at FYE 2008 PER of 12X based on an EPS of 29.55 sen and dividend of 25 sen for 7% yield.
















6. TM INTERNATIONAL BHD RM3.48.

FYE Dec 2008 FY 2009(F) 3Q 2008(U) 9M2008(U) FY2008(F)
000 000 000 000

Revenue 13,112,096 3,278,024 8,929,563 12,207,587
Net Profit 975,584 243,896 1,013,233 1,257,129
Net EPS 24.00 6.00 28.00 34.00
Forecast P.E. Ratio 14.5X 10.2X
Dividend (sen) 10.00 0.00 0.00 10.0
Dividend Yield 2.9% 2.9%
Net Assets RM3.22
Cash RM 3,120,466,000
Debt RM18,951,276,000
Number of Shares 3,753,402,000
Market Capitalization RM13.06 billion
Major Shareholders. Khazanah Nasional

LATEST CORPORATE DEVELOPMENT.

Bid for the grant of a third public mobile network licence in the Islamic Republic of Iran. The results of the bid expected to be announced in January 2009.

QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.

BUSINESS MODEL – International and domestic cellular phone company.
Operating revenue came from operations in 1. Malaysia 2.Indonesia 3.Bangladesh 4. Sri Lanka and 5.Others such as Singapore,Thailand and India.

CELCOM subscribers base – 8 million.
CELCOM average revenue per users – RM57.00.

MANAGEMENT – Headed by Board of Directors, Chairman and CEO.

BUSINESS OUTLOOK – Strong profit contribution locally from CELCOM and high growth prospect internationally.

CORPORATE GOVERNANCE - Still plenty of room for improvement.

FINANCIAL – RM3.1b cash an RM18.9b debt. Due to TM Bhd RM5b in March 2009.


WEAKNESS ANALYSIS – Highly leverage balance sheet.

OPPORTUNITIES ANALYSIS – Further overseas expansion.
THREATS ANALYSIS - No more steady profit contribution from the fixed line business after demerger and exposed to foreign currency fluctuation.


QUANTITATIVES ANALYSIS
STOCK VALUATIONS.

Forecast Price Earnings Ratio for FYE 2009 – 14.5X.
Net Assets Per Share – RM3.22.
Price to Book Value – 1.08X.
Net Tangible Assets – RM1.09.
Dividend Yield – 2.9%.
Debt to Equity Ratio – 2.01967X.
Return on Equity Ratio – 9.9878%.
Net Profit Margin – 7.44 percent.


TECHNICAL ANALYSIS – 52 WEEKS TRADING RANGE.

High of RM8.20.

Low of RM3.04.


STOCK RECOMMENDATION - HOLD TMI BHD for growth prospect.
Fair value for FYE 2009 at RM3.12 based on PER of 13X, on an EPS of 24 sen.




















7. TENAGA NASIONAL BERHAD. RM5.90.

FYE 31 AUGUST 4Q 2008(U) FY 2008(A) FY 2009(F)
000 000 000

Revenue 7,089,000 25,750,600 28,356,000
Net Profit ( 282,900) 2,594,000 2,800,000
Net EPS (sen) (6.53) 59.87 64.6
Forecast PE Ratio 9.8X . 9.1X
Dividend (sen) 10.00 20.0 20.0
Dividend Yield 1.7% 3.4% 3.4%
Net Assets RM5.92
Cash RM 5,383,900,000
Debt RM22,740,400,000
Number of shares 4,334,647,000
Market Capitalization RM25.57 billion
Major shareholder Khazanah Nasional ( 39 % )

# Currently coal prices at US$75 per tons.
* Forecast based on flat growth of electricity demand.

LATEST CORPORATE DEVELOPMENT.

Signed the acceptance of financing offer from Asian Finance Bank Bhd of AED87.5 million to finance the construction of the Building Material City District Cooling Project in Abu Dhabi, United Arab Emirates for the AED155 construction project awarded in June 2008.

QUALITATIVES ANALYSIS.
STRENGTHS,WEAKNESS, OPPORTUNITIES AND THREATS ANALYSIS.

STRENGTHS ANALYSIS
BUSINESS MODEL.

The principal activities of the group are the generation, transmission, distribution and sale of electricity in Malaysia.

MANAGEMENT – Still young and not quite proven yet. Relied too much on electricity tariff increase.

CORPORATE GOVERNANCE – Not transparent enough.

FINANCIAL –Weak. Cash RM5.383b, Debt RM22.74b.

BUSINESS OUTLOOK – In line with the economy growth.

The price of gas to the power sector has increased by 123% from RM6.40 per mmBTU to RM14.31 per mmBTU , whilst coal price has risen by more than 170% since 2006. Gas and Coal currently constitute 68% and 26% of the total generation mix in Peninsular Malaysia.
Government stated policy is to allow an increase in electricity tariff to compensate TNB in case of any increase in gas tariff by PETRONAS should augur well for the company and support the share price. TNB electricity demand will grow in tandem with the economy. Earnings growth will also come from overseas projects and expansion.

WEAKNESS ANALYSIS – Highly leverage balance sheet and unfavorable payment terms to independent power producer.

OPPORTUNITY ANALYSIS - An opportunity for TNB to go for a NUCLEAR POWER PLANT as a cheaper, cleaner and safer alternative, with the latest technology available as a new source of power. Fuel and coal are unfriendly to the environment. Meanwhile, for the Bakun hydroelectric power plant, TNB have to deal with the execution risk and an astronomical cost to lay undersea cables to transmit power from Sarawak to Peninsular Malaysia.

THREATS ANALYSIS - High energy costs (coals, oil and gas), high capital expenditure and high debt level too. Urgent need to diversify the source of power into cheaper alternatives such as hydro electric and nuclear power plants.


QUANTITATIVES ANALYSIS.
STOCK VALUATIONS.

Forecast Price Earnings Ratio for FYE August 2009 – 9.1X.
Net Assets Per Share – RM5.92.
Price to Book Value – 1X.
Net Tangible Assets – RM5.92.
Dividend Yield – 3.4%.
Debt to Equity Ratio – 1.71X
Return on Equity Ratio – 10.069 percent.
Net Profit Margin – 10.07%.

TECHNICAL ANALYSIS.
TRADING RANGE – 52 weeks.

High – RM10.40, Low – RM5.80.

HOLD RECOMMENDATION FOR TNB BHD.
A fair value of RM6.50 for 2009 plus a dividend of 20 sen for a yield of 3.08 percent at a prospective PER of 10X based on EPS growth of 8% from 59.87 sen to 64.6 sen. Lower cost of coals (a major cost component) currently at US$75 per tons should be the catalyst for upward re rating of the stock.
8. KUMPULAN SIME DARBY BERHAD. RM5.30.

FYE JUNE 30 1Q 2009 FY 2009(F)
000 000
Revenue 8,705,040 19,791,666
Pre Tax Profit 1,252,870 2,734,567
Net Profit 866,982 1,900,000
Net EPS 14.43 31.61
Forecast PE Ratio 16.8X
Dividend 0.00 25.00 sen
Dividend Yield 0.0% 4.7%
Net Assets (RM) 3.834.
Cash (RM) 5,058,800,000.
Debt (RM) 4,914,500,000.
Number of shares 6,009,464,000
Market Capitalization RM31.85 billion
Major shareholders ASB (50.01%)

* Management Assumption.
- Average Crude Palm Oil price of RM1,700 for FYE June 30, 2009.

LATEST CORPORATE DEVELOPMENT.

To develop a multi theme new flagship township in Labu, Negeri Sembilan with completion schedule in Year 2025. Sime Darby Bhd has obtained Federal Government approval to develop RM1.6 billion new Low Cost Carrier Terminal to be called KLIA East @ Labu. Sime Darby Bhd is purely a developer, and will sell the land and building to Air Asia Bhd. The RM1.6b estimated cost is for the terminal building and runaway, and does not include the land cost.

Embroiled in a controversy to take over 51% stake in Institut Jantung Negara (FYE 2007 Net Profit RM20m) from the Ministry of Finance who owned 99.99% of IJN.

Headline Key Performance Indicator’s.
Net Profit After Tax and Minority Interests RM1,900 million.
Return On Average Shareholders Funds 8.8%.


QUALITATIVES ANALYSIS.
STRENGTHS,WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.

STRENGTHS ANALYSIS.

BUSINESS MODEL - The largest integrated plantation company in the world with 600,000 hectares of plantation land (oil palm and rubber) and 2.5 million annual CPO productions.
Revenues came from 1.Plantation 2.Property 3.Industrial 4.Motors 5.Energy and Utilities and 6.General Trading, Services and Others.

MANAGEMENT - Headed by Tun Musa Hitam as the Chairman and Dato Zubir Murshid as the CEO and an experienced management team in their respective fields.

CORPORATE GOVERNANCE – Should strive to be a corporate leader in transparency.

FINANCIAL STRENGTH – Cash RM5.05b and Debt RM4.9b.

BUSINESS OUTLOOK – Depend on Malaysia and world economic conditions.

WEAKNESS ANALYSIS – Still low yielding plantation assets.

OPPORTUNITIES ANALYSIS - To capitalize on lower assets prices for acquisitions or expansions plan.

THREATS ANALYSIS - Production costs still high after the merger at RM1,100. Should be able to bring the production costs down to around RM800 with lower fertilizer costs to improve net profit margin. Prolonged world recession, over supply of palm oil,weak demand and lower crude oil prices will add pressure to CPO prices.

QUANTITATIVES ANALYSIS.
STOCK VALUATIONS.

Forecast PER for FYE June 2009 at 16.8X.
Dividend Yield FYE June 2009 at 4.7%.
Net Assets Per Share – RM3.834.
Price to Book Value – 1.54X.
Net Tangible Assets – RM3.818.
Debt To Equity Ratio – 0.6X.
Return On Equity – 8.24%.
Net Profit Margin – 9.96%.

TECHNICAL ANALYSIS – 52 Weeks Trading Range.

High – RM13.40 and Low – RM4.94.

HOLD RECOMMENDATION FOR SIME DARBY BHD.
Based on management forecast average selling price for the CPO of RM1,700 for FYE June 2009 and an EPS of 31.61 sen on a net profit of RM1.9 billion, the fair value for Sime Darby Bhd is RM4.12 plus a dividend yield of 6.1 percent at a PER of 13X.

A must have stock in your portfolio as Sime Darby Bhd is the largest stock in term of market capitalization in Bursa Malaysia.
9. SHELL REFINING COMPANY (FOM) BERHAD. RM8.40.

FYE 31 Dec. FY 2009(F) 3Q FY2008 9M 2008(F) FY 2008(F)
000 000 000 000

Revenue 8,856,000 3,230,447 10,592,570 12,806,570
Net Profit 177,120 (286,542) 193,095 237,375
Net EPS 0.5904 (95.51) 64.36 79.12
Forecast PE Ratio 14.2X 10.6X
Dividend (sen) 30.00 0.00 20.0 30.00
Dividend Yield 3.57% 3.57%
Net Assets RM8.1456
Cash RM 46,852,000
Debt RM480,396,000
Number of shares 300,000,000
Market capitalization RM2.52 billion.
Major shareholder Shell Overseas Holdings Limited ( 70 % ).

KEYS ASSUMPTION.

Sales of petroleum products at 41 million barrels.
Average selling price of USD60.00.
Average crude oil price of USD55.00
Average refining margin of USD5.00 or R18.00.
Exchange rate at RM3.60 to 1 USD.
Net profit margin of 2%.

LATEST CORPORATE DEVELOPMENT.

No corporate proposal to report.


QUALITATIVES ANALYSIS.
STRENGTHS,WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.

STRENGTHS ANALYSIS.
BUSINESS MODEL.

The principal activities of the Company consist of refining and manufacturing of petroleum products. The Company operates with state-of-the-art technology and is the key petroleum products supplier to Shell’s downstream businesses in Malaysia.

The oil refinery at Port Dickson has a licensed production capacity of 156,000 barrels per day and produces a comprehensive range of petroleum products, over 90% of which are consumed within Malaysia.

MANAGEMENT - Headed by the Shell Overseas Holdings Limited representative.

BUSINESS OUTLOOK - Continue to be good although at a lower price, as the demand for refining and manufacturing of petroleum products continue to be strong in Malaysia and worldwide as the world thirst for oil continue even though the world economy is in a recession.

CORPORATE GOVERNANCE – Not transparent enough.

FINANCIAL STRENGTHS – Cash RM46.8m and debt RM480m.


WEAKNESS ANALYSIS – Refining margin subject to fluctuation of oil price.


OPPORTUNITIES ANALYSIS – Plenty of opportunity for the expansion of their refinery business at a lower costs to cater for future demand when the world economy recover from the recession.


THREATS ANALYSIS – Prolonged weakness in oil prices as a result of weak demand cause by the global recession.


QUANTITATIVES ANALYSIS.
STOCK VALUATIONS.

Forecast PER for 2009 – 14.2X.
Net Assets Per Share – RM8.1456.
Price to Book Value – 1.03X.
Net Tangible Assets – RM8.1456.
Dividend Yield – 3.57 percent.
Debt to Equity Ratio – 0.78X.
Return on Equity Ratio – 7.25%.
Net Profit Margin – 2.0 percent.


TECHNICAL ANALYSIS – 52 WEEKS TRADING RANGE.

High – RM11.80. Low – RM7.95.

HOLD RECOMMENDATION FOR SHELL (FOM) BHD - Shell is a company that thrive on an excellent refining margin that translate into high level of profitability and in turn a cheap valuation. FIFO accounting method benefit them in high crude oil prices environment. Based on FYE 2009 forecast EPS of RM0.59 and at PER of 12X, the fair value is RM7.10 plus a dividend yield of 4.2%.
10. PPB GROUP BERHAD. RM8.65.

FYE 31 DEC. FY 2009(F) 3Q FY2008(U) 9M 2008(U) FY2008(F) 000 000 000 000

Revenue 2,127,659 978,962 2,629,686 3,105,876
Net Profit 500,000 207,007 923,228 974,048
Net EPS (sen) 42.18 17.46 77.88 82.16
Forecast PE Ratio 20.5X 10.5X
Dividend (sen) 35.0 0.00 64.36 70.0
Dividend Yield 4% 8.1%
Net Assets RM9.95
Cash RM329,115,000
Debt RM337,144,000
Number of shares 1,185,500,000
Market capitalization RM10.19 billion.
Major shareholder Kuok ( B ) Sdn Bhd ( 42.38 % )

Assumption.

Based on average selling price for CPO of between RM1,600 to RM1,700 level.

LATEST CORPORATE DEVELOPMENT.

Proposed liquidation of PT Galvindo Lampung, the manufacturer of rubber gloves which had ceased operation in year 2000, an indirect subsidiary of PPB Group Bhd. The issued and paid up capital is RP13 billion.


QUALITATIVES ANALYSIS.
STRENGTHS,WEAKNESSES, OPPORTUNITIES AND THREATS.

STRENGTHS ANALYSIS.
BUSINESS MODEL.

PPB Group the listed flagship of Kuok Group is a major conglomerate engaged in a wide spectrum of business. Owned 18.2% stake in an integrated oil palm producer Wilmar International listed in Singapore.

PPB’s core businesses are 1.Sugar refining and cane plantation; 2.Grains trading, flour and feed milling; edible oils refining and trading; oil palm plantations; and 3. Environmental engineering, utilities and waste management services, 4.Livestock farming; bulk and consumer packaging; 5.Film exhibition and distribution; 6.Pproperty ownership and development; consumer product distribution; 7.Chemicals manufacturing and commodity trading and other operations..

MANAGEMENT – Headed by a Board of Directors and Executive Chairman.

BUSINESS OUTLOOK – Will be affected by the lower palm oil and commodities prices.

CORPORATE GOVERNANCE – Not transparent enough.

FINANCIAL STRENGTH – Cash RM329m and debt RM337m.


OPPORTUNITIES ANALYSIS – Through organic growth or through M&A.


WEAKNESSES ANALYSIS. - Weak CPO prices on ample of supply currently. Profit mainly came from 18.2% stake in Singapore listed Wilmar International.


THREATS ANALYSIS – Prolonged weakness in CPO prices and deepening global recession.


QUANTITATIVES ANALYSIS.
STOCK VALUATIONS.

Forecast PER for 2008 – 20.5X.
Net Assets Per Share – RM10.09.
Price to Book Value – 0.857X.
Net Tangible Assets – RM10.02.
Dividend Yield – 4%.
Debt to Equity Ratio – 0.06X.
Return on Equity Ratio – 3.76 % for FY2009.
Net Profit Margin – 23.5 percent.


TECHNICAL ANALYSIS.
TRADING RANGE – 52 weeks.

High – RM12.20.

Low – RM6.85.


HOLD RECOMMENDATION FOR PPB GROUP BHD - Based on the PER for 2009 of 13X on forecast EPS of 42.18 sen, the fair value for PPB Group Bhd is RM5.50 plus a dividend yield of 5.5%.

11. PLUS EXPRESSWAYS BERHAD. RM2.85.

FYE 31 DEC. FY 2009(F) 3Q FY2008 9M 2008(F) FY 2008(F)
000 000 000 000
Revenue 2,868,612 717,153 2,174,781 2,891,934
Net Profit 967,024 241,756 783,349 1,025,105
Net EPS (sen) 19.36 4.84 15.67 20.5
Forecast PER 14.7X 13.9X
Net Assets RM1.08.
Dividend (sen) 10.0 0.00 6.50 10.0
Dividend Yield 3.5% 3.5%
Cash RM 1,931,448,000
Debt RM10,387,282,000
Number of shares 5,000,000,000
Market capitalization RM13.4 billion.
Major shareholder UEM Group Bhd.


LATEST CORPORATE DEVELOPMENT.

Traffic Volume Update.

PLUS (NSE, NKVE, FHR2, SPDH) passenger car unit per kilometer in Nov. up by 1.6% year on year to 1,157.8 million. Year to date Novmber 2008 PCU-KM up 5.3% to 12,681.1 million.

ELITE ( North South Expressway Central Link) PCU-KM in November 2008 down 2.0% to 109.9 year on year. Year to date Nov. 2008 PCU-KM up 4.3% to 1,202.2 million.

PLUS recently introduced 3 travel incentives programme ranging from 1.10% discount from 12midnight to 7am, 2.Additional 10% discount before and after festive seasons from 12 midnight to 7am and 3.Electronic toll payment users spending RM200 will enjoy 5% rebates.

QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.

STRENGTHS ANALYSIS.
BUSINESS MODEL.

Plus Expressways Berhad wholly owns Project Lebuhraya Utara-Selatan Berhad (“PLUS”), a toll concessionaire in Malaysia.
PLUS’s core business consists of the operation and maintenance of the following expressways and certain ancillary facilities along the expressways :
1.the North-South Expressway, a 772-km expressway from the border of Thailand in the north to the border of Singapore in the south.
2 .the New Klang Vally Expressway, a 35-km expressway running between Kuala Lumpur and the North Klang industrial and urban area.
3. the 16-km section of Federal Highway Route 2 connecting the industrial and urbanareas of Subang and Klang, and
4. the Seremban-Port Dickson Highway, an expressway of approximately 23-km connecting Seremban and Port Dickson.

PLUS Expressways also provides expressway operation services to the following three expressways :

1.North-South Expressway Central Link (ELITE), a 63-km expressway linking South and North of Kuala Lumpur to the KL International Airport.
2. LINKEDUA, the second bridge crossing between Tuas in Singapore and Tanjung Kupang in Johor, Malaysia and the toll road linking the second crossing to the North-South Expressway with total length of 44 km, and
3. Penang Bridge, linking Penang Island to Peninsular Malaysia with total length of 13.5 km (including an 8.5 km bridge).


MANAGEMENT – Headed by the Board of Directors and the CEO.
.
BUSINESS OUTLOOK – Very good with the drop in fuel pump prices will encourage people to travel and use the highways more.

CORPORATE GOVERNANCE – Not transparent enough.

FINANCIAL STRENGTH – Cash RM1.9b and debt RM10.3b


WEAKNESS ANALYSIS – Highly leverage balance sheet.


OPPORTUNITIES ANALYSIS – Overseas expansion .


THREATS ANALYSIS -A toll concessionaire company with a concession period that will expire according to the respective agreement with the Government.







QUANTITATIVES ANALYSIS.
STOCK VALUATIONS.

Forecast FYE 2009 PER – 14.7X.
Net Assets Per Share – RM1.08.
Price to Book Value – 2.64X.
Net Tangible Assets – RM1.069.
Dividend Yield – 3.5%.
Debt to Equity Ratio – 1.97X.
Annualized Return on Equity Ratio – 19.6%
Net Profit Margin – 33.7 percent.


TECHNICAL ANALYSIS.
TRADING RANGE – 52 weeks.

High – RM3.30.

Low – RM2.49.


HOLD RECOMMENDATION FOR THE PLUS EXPRESSWAYS BHD – Based on FYE 2009 forecast EPS of 19.36 sen, the fair value for PLUS is RM2.52 at PER of 13X plus a dividend yield of 4 percent.






















12. MAYBANK BERHAD. RM5.25 (Non Shariah Compliance).

FYE 30 JUNE 1Q FY2009 FYE2009(F)
000 000

Revenue 3,752,834 15,011,336
Net Profit 572,173 842,692
Net EPS (sen) 11.72 17.26
Forecast PE Ratio 30.4X
Dividend (sen) 15.0
Dividend Yield 2.86%
Net Assets RM4.08.
Cash RM 27,435,579,000
Customer deposit RM204,946,312,000
Net Loans RM184,299,760,000
Net NPL RM3,463,929,000 or 1.84%.
Core Capital Ratio 9.20% after dividend.
Risk Weighted Capital 12.94% after dividend.
Total Assets RM304,397,688,000
Number of shares 4,881,147,000.
Market capitalization RM25.626 billion
Major shareholder PNB, ASB


LATEST CORPORATE DEVELOPMENT.

Maybank now hold 97.5% of equity interest in Bank Internasional Indonesia after valid acceptances of 12.6 billion shares in BII. Total cost of 25.3% equity interest in BII is Rp6.44 trillion or RM1.95 billion.

QUALITATIVES ANALYSIS.
STRENGTHS,WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.

STRENGTHS ANALYSIS.
BUSINESS MODEL

The Bank is principally engaged in the business of banking and finance in all its aspects which also include Islamic Banking Scheme operations with overseas operations in Singapore, Indonesia, Pakistan, Vietnam.

The subsidiaries are principally engaged in the business of investment banking, general and life insurance, general and family takaful, stock broking, discount house, leasing and factoring, trustee and nominees services, unit trust management, asset management and venture capital.

MANAGEMENT – New CEO and not proven yet.
BUSINESS OUTLOOK - Aggressive expansion plan overseas for growth even at a very high acquisition cost that will strain the balance sheet. In a RM7.5 billion capital raising exercise to strengthened back the capital ratios.

CORPORATE GOVERNANCE – Still not transparent enough just like the rest of corporate’s Malaysia.

FINANCIAL STRENGTH – Cash RM27.2 billion. CCR 9.2% and RWCR 12.94%. NPL RM3.4b or 1.84%.


WEAKNESS ANALYSIS – The bank highly leverage business model make them vulnerable during an economic downturn.

OPPORTUNITIES ANALYSIS – Need to be more patient in their overseas acquisitions foray so not to overpay especially now during the world financial market meltdown. There will be plenty of opportunity to acquire banks at a cheap price especially distress banks around the world in the very near future.

THREATS ANALYSIS - Still weak in the investment banking area. Recently very aggressive in pursuing overseas or regional expansion or acquisition but at a very high price and through heavy borrowing which eventually will affect their bottom line.


QUANTITATIVES ANALYSIS.
STOCK VALUATIONS.

Forecast FYE June 2009 PER – 30.4X.
Net Assets Per Share – RM4.08.
Price to Book Value – 1.29X.
Net Tangible Assets – RM3.44.
Price to NTA – 1.53X.
Dividend Yield – 2.86%.
Debt to Equity Ratio – 11.67X.
Return on Equity Ratio – 14.6%
Net Profit Margin – 18.1%.


TECHNICAL ANALYSIS.
TRADING RANGE – 52 WEEKS.

High – RM10.56 and Low – RM4.74.

HOLD RECOMMENDATION FOR MAYBANK BHD - The fair value for Maybank is RM3.44 based on 1X Price to Tangible Book Value (NTA) and a PER of 19.9X FYE June 2009 forecast earnings per share of 17.26 sen plus a dividend yield of 4.4%.
13. BUMIPUTRA COMMERCE HOLDINGS BERHAD. RM6.00 (Non Shariah).

FYE 31 DEC. FY 2009(F) 3Q FY08 9M 2008(F) FY2008(F) 000 000 000 000
Revenue 6,732,868 1,683,217 5,860,301 7,543,518
Net Profit 1,791,844 447.961 1,633,440 2,081,401
Net EPS (sen) 50.07 13.47 48.82 63.64
Forecast PE Ratio 11.98X 9.43X
Dividend 20.0 0.0 10.0
Dividend Yield 3.33% 1.67%
NTA RM3.3031
Net Assets RM4.78
Cash RM33,011,284,000
Customers Deposits RM141,953,822,000
Net Loans and Advances RM106,572,085,000
Net NPL RM3,339,221,000 or 3.07%.
Core Capital Ratio 9.46% after dividend.
Risk Weighted Capital 14.19% after dividend
Cost to income ratio 52.7%
Total assets RM190,906,548,000
Shareholders fund RM16,692,480,000
Return on equity 13.8% on annualized basis.
Number of shares 3,578,078,000
Market capitalization RM21.468 billion
Major shareholder Khazanah Nasional, EPF

# Forecast based on high level of non performing loans.

LATEST CORPORATE DEVELOPMENT.
1.Securities Commission approved CIMB Bank RM4 billion Non Innovative Tier One Issuance Programme.
2.Proposed acquisition of 100% equity interest in Affin Insurance Brokers Sdn Bhd for RM2.5 million and not exceeding RM2.55 million.
3.Completed the acquisition of 42.1217% equity interest in Bank Thai Public Company Ltd from the Financial Institution Development. Tender offer for the remaining 57.8729% equity interest in Bank Thai expected to be completed by 2009.
4.Proposed issuance of USD150 million senior unsecured guaranteed bonds and 5 year warrants.
5.Completion of the proposed merger between PT Bank CIMB Niaga and PT Bank Lippo on November 1, 2008.

QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.

STRENGTHS ANALYSIS.
BUSINESS MODEL - The Group banking business is organized into six major operating divisions. 1.Consumer Banking 2.Corporate and Investment Banking 3.Treasury and Investment 4.Asset Management & Insurance 5.Foreign Banking Operation 6.Support and Others 7.

MANAGEMENT – Government nominees.

BUSINESS OUTLOOK - Excellent outlook as the regional expansion especially in Indonesia, Thailand and China will be the future earnings driver beside the fast growing commercial bank and the leading investment banking group in Malaysia now turn into a very cautious or even quite uncertain outlook amid world wide U.S. led financial turmoil.

CORPORATE GOVERNANCE – Still not transparent enough and not doing enough on CSR.

FINANCIAL STRENGTH – Cash RM31.7b. CCR 9.62%, RWCR 14.33%. NPL RM3.5b or 3.3%.

WEAKNESS ANALYSIS – The banks highly leverage business model and assets quality are making them quite vulnerable in a recessionary environment.

OPPORTUNITIES ANALYSIS – Need to be patient and nimble enough to do M&A deal on a global scale during this financial crisis especially with the government backing.

THREATS ANALYSIS – Need further improvement in the commercial banking area to be the next earnings driver and to be as good as CIMB investment banking side. Assets quality, weak bond market and a slowing economy worldwide will affect the bank profitability.

QUANTITATIVES ANALYSIS - STOCK VALUATIONS.
Forecast FYE 2009 PER – 11.98X
Net Assets Per Share – RM4.78.
Price to Book Value – 1.255X.
Net Tangible Assets – RM3.3031.
Price to NTA – 1.82X
Dividend Yield – 3.33%.
Debt to Equity Ratio – 9.97X.
Return on Equity Ratio – 12.62%.
Net Profit Margin – 26.61%.

TECHNICAL ANALYSIS – 52 WEEKS TRADING RANGE.
High – RM12.20. Low – RM5.55.

HOLD RECOMMENDATION FOR BCHB BHD.
Based on FY 2009 forecast EPS of 50.07 sen and at PER of 12X and Price to Tangible Book Value of 1.8X, the fair value for BCHB is RM6.00 plus a dividend yield of 3.33%.
14. PUBLIC BANK BERHAD. RM8.25 (Non Shariah Compliance).

FYE 31 DEC. FY 2009(F) 3Q FY2008 9M 2008(F) FY 2008(F) 000 000 000 000

Revenue 11,164,636 2,791,159 7,942,750 10,733,909
Net Profit 1,765,963 616,340 1,927,262 2,543,602
Net EPS 50.0 18.37 57.44 72.01 sen
Forecast PE Ratio 16.5X 11.5X
Dividend (sen) 30.0 30.0 40.00
Dividend yield 3.63 % 4.85%
NTA RM2.02
Net Assets RM2.74.
Total assets RM190,729,788,000
Cash RM 27,577,858,000
Customers Deposits RM155,817,763,000
Net Loans RM115,903,331,000
Net NPL RM1,029,510,000 or 0.87%.
Core Capital Ratio 7.4%
Risk-Weighted Capital 13.2%
Return on Equity 31.2 % on annualized basis.
Total shareholders fund RM9,887,894,000
Number of shares 3,531,926,000
Market capitalization RM29.138 billion
Major shareholder Teh Hong Piow

# Forecast based on higher non performing loans.

LATEST CORPORATE DEVELOPMENT.

-Transfer of Islamic Banking Business of PBB to Public Islamic Bank Bhd.
-Issuance of up to RM5 billion Nominal Value of Subordinated Notes.

QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.

STRENGTHS ANALYSIS.
BUSINESS MODEL.

Strong in commercial banking in Malaysia. Regional banking expansion in Hong Kong, Cambodia and China contribute quite substantially to PBB botomline. A complete banking group in Malaysia with an operation in investment banking and Islamic Banking too.

Revenues came from 1.Retail operations 2. Corporate lending 3.Treasury and Capital market operations 4.Investment Banking 5.Fund Management 6.Others.
MANAGEMENT – Old hand in the banking industry, Teh Hong Piow..

BUSINESS OUTLOOK – Very challenging times ahead as the world economy entering a recessionary phase or even a possible depression.

CORPORATE GOVERNANCE – Still not transparent enough and not doing enough on the CSR.

FINANCIAL STRENGTH – RM27.57 billion in cash and CCR at 7.4%, RWCR at 13.2%. NPL RM1.029 billion or 0.87%.

WEAKNESS ANALYSIS – The bank highly leverage business model are vulnerable to global recession.

OPPORTUNITIES ANALYSIS – Like the rest of Malaysian’s bank, during current world financial crisis, PBB should remains conservative and patient until the right M&A deal come along.

THREATS ANALYSIS - Still weak in the investment banking area. Slowing world economy will affect the bank loan expansion but good assets quality and a very low NPL will see the bank through the turbulence time ahead.

QUANTITATIVES ANALYSIS.
STOCK VALUATIONS.

Forecast FYE2008 PER – 16.5X.
Net Assets Per Share – RM2.74.
Price to Book Value – 3.01X.
Net Tangible Assets – RM2.02.
Price to NTA – 4.084X
Dividend Yield – 3.63%.
Debt to Equity Ratio – 17.97X.
Return on Equity Ratio FYE2009 – 24.9 percent.
Net Interest Income Margin – 44.82%.
Net Profit Margin – 22.08%.

TECHNICAL ANALYSIS.
TRADING RANGE – 52 weeks.
High –RM12.00.
Low – RM7.85.

HOLD RECOMMENDATION FOR PUBLIC BANK BHD.
We forecast a FYE 2009 EPS of 50 sen or a net profit of RM1.766 billion due to a global recession and rising NPL, the fair value for Public Bank Berhad is RM6.00 at 3X Price to Tangible Book Value plus a dividend yield of 5.0 percent and at a prospective 2009 PER of 12X.
15. KULIM ( M ) BERHAD. RM4.60.


FYE DEC. 31 FY 2009(F) 3Q FY2008 9M 2008(F) FY 2008(F)
000 000 000 000

Revenue 2,000,000 1,080,746 3,077,813 3,000,000
Net Profit 200,000 63,624 251,758 300,000
Net EPS (sen) 64.85 21.16 83.75 83.58 sen
Forecast PE Ratio 7.1X 5.5X
Dividend (sen) 20.0 7.50 15.00 20.0
Dividend Yield 4.35% 4.35%
Net Assets Per Share RM10.44.
Cash RM 463,183,000
Debt RM1,406,842,000
Number of shares 308,403,000
Market capitalization RM1.4186 billion
Major shareholder Johor Corp ( 52.18 % ).

KEY ASSUMPTIONS.

Based on CPO price of between RM1,600 to RM1,700.
If based on CPO prices of RM2,367 as per the first 9 months of 2008, the forecast net profit for FY2009 is RM315,382,000.

LATEST CORPORATE DEVELOPMENT.

YTD October 2008 CPO produced in Malaysia 116,009 mt, Papua New Guinea 223,888 my and Solomon Island18,519 mt.

QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESS, OPPORTUNITIES AND THREATS ANALYSIS.

STRENGTHS ANALYSIS.
BUSINESS MODEL – The Group’s business segments are managed on a worldwide basis, they operate in four geographical areas:

1.Malaysia – mainly plantation (more than 40,000 hectares and in the middle of taking over Sindora Bhd with 6000 hectares of plantation land)), manufacturing, fast foods, bio diesel and investment activities.
2.Papua New Guinea – mainly plantation activities (more than 70,000 hectares and plan to double the total hectarage in the future is underway).
3.Solomon Island – rehabilitation of palm oil plantation land.
4.United Kingdom – mainly plantation activities.

Revenues came from 1.Plantation operations 2.Manufacturing (Oleochemical and Rubber Products) 3. Foods and Restaurants 4.Management Services and Other Businesses 5.Shipping Services 6.Investment Property and 7. Other Investment income.

MANAGEMENT – Manage by the State of Johor investment arm, Johor Corporation.

BUSINESS OUTLOOK – In a recession proof business as the growing world’s population will continue to consume palm oil at a very affordable price and a steadily growing fast food business.

CORPORATE GOVERNANCE – Transparency is still lacking.

FINANCIAL STRENGTH – Cash RM652.4 million and Debt RM1.43 billion.

WEAKNESS ANALYSIS – Leverage balance sheet.

OPPORTUNITIES ANALYSIS – Time to nurture the business for organic growth.

THREATS ANALYSIS – Prolonged global recession will affect the CPO prices and the company bottom line even though costs of doing business expected to be lower.


QUANTITATIVES ANALYSIS.
STOCK VALUATIONS.

Forecast 2009 PER – 7.1X.
Net Assets Per Share – RM10.44.
Price to Book Value – 0.44X.
Net Tangible Assets – RM9.40.
Price to NTA – 0.49X.
Dividend Yield FYE 2009 – 4.35%.
Debt to Equity Ratio – 0.466X.
Return on Equity Ratio – 4.66%.
Net Profit Margin – 10 percent.


TECHNICAL ANALYSIS – 52 WEEKS TRADING RANGE..

High – RM10.40. Low – RM3.44.


BUY RECOMMENDATION FOR KULIM (M) BHD - A fair value of RM7.80 plus a dividend yield of 2.8 percent at PER of 12X forecast 2008 EPS of 64.85 sen. We also based our forecast on the bottoming out of CPO prices at current level of RM1600 per tons and higher contribution from the food division, increase plantation hectarages and a steady contribution from all the other divisions.
16. GAMUDA BERHAD RM1.85.

FYE JULY 31 1Q 2009(U) FY 2009(F)
000 000

Revenue 2,455,856 3,404,916
Net Profit 220,144 280,812
Net EPS 10.96 14.0
Forecast PE Ratio 13.2X
Cash RM 943,988,000
Debts RM2,206,008,000
Dividend (sen) 10.00
Dividend Yield 4.1%
Net Assets RM1.53
No. of shares 2,006,143,000
Market capitalization RM3.7113 billion.
Major shareholder Generasi Setia Sdn Bhd 7.05%.

LATEST CORPORATE DEVELOPMENT.

Commencement of arbitration proceedings by MMCEG-Gamuda joint venture against Wayss & Freytag (M) Sdn Bhd in respect of the various claims arising from the subcontract for the construction of the Stormwater Management and Road Tunnel Project.

QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.

STRENGTHS ANALYSIS
BUSINESS MODEL – Construction, property development and toll concessionaires in Malaysia and overseas.

Revenues came from 1.Engineering and Construction 2.Property Development 3.Water related and Expressway Concessions.

MANAGEMENT – Headed by the Board of Directors and the Managing Director.

BUSINESS OUTLOOK – Relatively stable due to RM 16 billion order book.

CORPORATE GOVERNANCE – Still not transparent enough.

FINANCIAL STRENGTH – Cash RM943.9b and Debt RM2.2b.


WEAKNESS ANALYSIS – No single largest controlling shareholder making it a possible takeover play.
OPPORTUNITIES ANALYSIS – Will capitalize on their strengths when the opportunity arise.


THREAT ANALYSIS – Prolonged world economic slowdown that will reduce infrastructure spending. Currently still high construction and building materials costs despite the slowdown.


QUANTITATIVE ANALYSIS.
STOCK VALUATIONS.

Actual FYE July 2008 PER – 13.95X
Forecast FYE July 2009 PER – 16.2X.
Net Assets Per Share – RM1.52.
Price to Book Value – 1.49X.
Dividend Yield – 11.00%.
Debt to Equity Ratio – 0.577X.
Return on Equity Ratio FYE July 2008 – 11.91%
Net Profit Margin – 14.64% .


TECHNICAL ANLYSIS.
TRADING RANGE – 52 WEEKS.

High – RM5.80.

Low –RM1.25.


HOLD RECOMMENDATION FOR GAMUDA BHD – A possible takeover play. A revised fair value of RM1.82 at FY 2009 PER of 13.0X, on an EPS of 14.0 sen.














17. MMC CORP BHD. RM1.07.

FYE 31 DEC. FY 2009(F) 3Q 2008(U) 9M 2008(U) FY 2008(F)
000 000 000 000

Revenue 8,245,000 2,277,728 6,106,560 8,384,288
Net Profit 550,000 116,098 399,091 530,000
Net EPS (sen) 18.06 3.80 13.10 17.4
Forecast PE Ratio 5.9X 6.15X
Dividend (sen) 5.0 0.0 0.0 5.0
Dividend yield 4.67% 4.67%
Net Assets RM1.97.
Cash RM 3,885,867,000
Debt RM19,533,000,000
No. of shares issue 3,045,059,000
Market Capitalization RM3.258 billion
Major Shareholder Seaport Terminal 51.76%

LATEST CORPORATE DEVELOPMENT.

In an advanced negotiation to sell a minority stake in Port of Tanjong Pelepas.

Revised offer to buy Senai Airport Terminal Sdn Bhd from RM1.95 billion via the issuance of 696,428,571 new MMC shares at RM2.80 to RM1.7 billion cash.

QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.

STRENGTHS ANALYSIS.
BUSINESS MODEL - The MMC Group main businesses are:

Transport and Logistics – 70% of Pelabuhan Tanjung Pelepas the container port and logistics hub, 100% of Johor Port the multipurpose port and logistics operations and 100% of Konsortium Lebuhraya Butterworth-Kulim the toll road operations.

Energy and Utilities – 51% of Malakoff Bhd, 41.8% of Gas Malaysia the natural gas distribution company and 51% of Recycle Energy the waste management & recycling and renewable energy company.


Oil & Gas – Through 99.9% stake in MMC Oil & Gas the design engineering services company, 69.9% of Tepat Teknik the steel fabrication works company, 51% of MMC-Transfield Services the asset management and maintenance services company and 51% of MMC-VME the natural gas separations works company.
Engineering & Construction – Through 39.2% of Zelan Bhd (RM2.11) the investment holding company which owned 100% of Zelan the power plant construction company and below 20% of IJM Bhd (RM5.15 Buy) the major infrastructure works company, and through 99.9% of MMC Engineering & Construction the engineering services company.

Others businesses – Through 30% stake in Malaysia Smelting Corporation (RM8.20) the tin mining and smelting company, 20.1% Integrated Rubber Corporation ( RM0.43) the manufacturing and trading of rubber gloves, 52.9% of Kramat Tin Dredging (RM5.90) which refocusing their business, 75.6% of Seginiaga Rubber Industries the weather strip manufacturer and MMC Metal Industries the foundry operations and precision engineering company.

Overseas business division – 50% stake in US$ 30 billion Jizan City project in Saudi Arabia.


MANAGEMENT – Headed by Board of Directors and CEO linked to Syed Mokhtar.

BUSINESS OUTLOOK - Excellent outlook with strong earnings contribution expected from the railway double tracking project for the next 5 years. Beside that the earnings driver will be from the various project announced recently in the Middle East and Iskandar Development Region plus strong recurrence earnings from the Independent Power Producer (now without the windfall tax).

CORPORATE GOVERNANCE - They should be more transparent in the related parties transaction, financial reporting and should be more active in being a good corporate citizen too.

FINANCIAL STRENGTH.

Strong recurrence earnings from the IPP allowed them to take on huge amount of borrowing for project financing. As of 3Q FYE 2008, cash in hand stood at RM3.88 billion and debt level stood at RM19.5 billion.

WEAKNESS ANALYSIS – The market doesn’t view the recent related parties transaction between Syed Mokhtar and MMC Corp Bhd favourably. It is in their favour to terminate the said deal. Highly leverage balance sheet.

OPPORTUNITIES ANALYSIS – Good dealmaker in Syed Mokhtar Albukhary.


THREATS ANALYSIS -Large amount of borrowing is still a big worry even though most of them is project financing or tie up to future cash flow of the project. Still high construction costs such as cement and steel will affect the group profit margin.

Morever, the recent hike in gas prices to IPP from RM6.40 per mmBTU to RM14.31 per mmBTU will also hit the group power division profitability going forward.


QUANTITATIVES ANALYSIS.
STOCK VALUATIONS.

Forecast FYE 2009 PER - 5.9X.
Net Assets Per Share – RM1.97.
Price to Book Value – 0.54X.
Dividend Yield FYE 2009 – 4.67%.
Debt to Equity Ratio – 0.77X
Return on Equity Ratio FYE 2009 – 6.05%.
Net Profit Margin FYE 2009 – 6.67%.


TECHNICAL ANALYSIS.
TRADING RANGE – 52 WEEKS.

High – RM4.93.

Low – RM0.95.


BUY RECOMMENDATION FOR MMC CORP BHD - Based on the forecast earnings for FYE Dec 2009 of RM550 million or an EPS of 18.06 sen, the upside potential is RM2.00 at FYE2009 PER of 11X and a dividend of 5 sen for 4.67% yield.

Termination of the related parties cash deal to acquire Senai Airport Terminal will provide the catalyst for upward re rating of the stock. Instead, they should buy the remaining 49% of Malakoff Bhd.















18. PETRONAS DAGANGAN BHD. RM6.85.

FYE MARCH 31 FY2009(F) 2Q FY2009(U) 6M FY2009(U)
000 000 000

Revenue 24,200,776 7,690,193 14,431,242
Net Profit 668,936 131,647 363,856
Net EPS 67.20 sen 13.30 36.60
Forecast PE Ratio 10.2X
Net Assets RM4.06
Dividend (sen) 30.00 12.00 12.00
Dividend Yield 4.4%
Cash RM729,385,000
Debt (RM) Zero
No. of Shares Outstanding 993,454,000
Market Capitalization RM6.805 billion
Major Shareholder PETRONAS 69.86%

LATEST CORPORATE DEVELOPMENT.

Petronas Dagangan Bhd (20%) signed a shareholders agreement with ASSAR Senari Holdings Sdn Bhd (51%), Sarawak Timber Industry Development Corporation (9%) and Shell Timur Sdn Bhd (20%). The purpose of the JV is to build, own and operate a petroleum storage terminal known as Central Oil Distribution Terminal located at Bandar Baru Tanjung Manis, Mukah, Sarawak.

QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.

STRENGTHS ANALYSIS.
BUSINESS MODEL - The Company is the principal domestic marketing arm of petroleum products for Petroliam Nasional Berhad (PETRONAS), the national oil company, which holds 69.86% of its equity and the operation of service stations. The company markets a wide range of high quality petroleum products including motor gasoline, aviation fuel, kerosene, diesel, fuel oil, bunker fuel, lubricants, liquefied petroleum gas (LPG) and asphalt in Malaysia.

The Company markets its product throughout the country, directly to customers as well as through network of service stations, LPG dealers and industrial dealers. Its marketing activities are well supported by a comprehensive logistics and distribution system consisting of bulk depots, bunkering facilities and LPG bottling plants, all strategically located to ensure a reliable supply of products at all time.

The Company is the largest petroleum products marketer in the country with an estimated 41% market share. In the retail business sector, the Company market share is 30%. The total number of stations in operation are around 855.
MANAGEMENT - The company are manage by an experience team of capable people from PETRONAS.

BUSINESS OUTLOOK - Strong expansion program by adding more petrol service stations will further strengthen its position and sustain growth.

CORPORATE GOVERNANCE - Need to be more transparent and doing more on corporate social responsibility.

FINANCIAL STRENGTH - Strong backing from parent company PETRONAS. Cash in hand stood at RM729.3 million with zero borrowing .


OPPORTUNITIES ANALYSIS – Will capitalize on PETRONAS strengths when the opportunities present itself.


WEAKNESS ANALYSIS -Not aggressive enough in their overseas expansion program.


THREATS ANALYSIS – Prolonged global recession or Malaysian economy are affected by a recession.


QUANTITATIVE ANALYSIS.
STOCK VALUATIONS.

Forecast FYE March 2009 PER – 10.2X.
Net Assets Per Share – RM4.06.
Price to Book Value – 1.687X.
Dividend Yield – 4.4%.
Debt to Equity Ratio – 1.336X.
Return on Equity Ratio – 16.37%.
Net Profit Margin – 2.76%.


TECHNICAL ANALYSIS.
TRADING RANGE – 52 WEEKS.

High – RM8.70.
Low – RM6.30.


BUY RECOMMENDATION – Based on forecast FYE March 2009 EPS of 67.20 sen, the upside potential for Petronas Dagangan Bhd is RM8.10 at PER of 12X plus a dividend yield of 4.4%.
19. UEM LAND HOLDINGS BHD.RM0.54.

FYE DEC. 31 FY2009(F) 3Q 2008(U) 9M 2008(U) FY2008(F)
000 000 000 000

Revenue 313,460 78,365 329,667 408,032
Net Profit 25,000 1,108 65,552 66,660
Net EPS (sen) 2.00 0.05 2.70 2.75
Forecast PE Ratio 27X
Dividend (sen) 1.00 0.0 0.0
Dividend yield 1.85 %
Cash RM 14,773,000
Debt RM589,707,000
Net Assets Per Share RM0.52
No. of shares 1,214,288,000
Market capitalization RM655.7 million
Main shareholder UEM(M) Bhd 51%


LATEST CORPORATE DEVELOPMENT.

Proposed acquisition of 98.037 acres of land in Cyberjaya from Cyberview Sdn Bhd and Setia Haruman Sdn Bhd for RM102,491,801.28 or RM24 psf. Proposed development starting in 2009 for 9 years period with a gross development value of RM1.5 billion.

Completion of the proposed acquisitions of 100% equity interest in Finwares Sdn Bhd and parcels of freehold land located in Mukim Tanjung Kupang, District of Johor Bahru, Johor.


QUALITATIVE ANALYSIS.
STRENGTHS,WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.

STRENGTHS ANALYSIS.

BUSINESS MODEL – UEM Land is a pure property play as the master developer of Bandar Nusajaya in Iskandar Malaysia.

MANAGEMENT - Led by the Board of Directors and the CEO.

BUSINESS OUTLOOK - Excellent outlook for UEM Land as the development of Iskandar Development Region take off with an investor from the Middle East such as from Abu Dhabi already signed an agreement to develop a few signature project in IDR. Recent signing by LEGOLAND to develop a theme park for kids below 12 years old will provide further impetus for Iskandar Malaysia.

CORPORATE GOVERNANCE – UEM Land should be more transparent and be a more responsible corporate citizen.

FINANCIAL STRENGTH – Cash at RM14.77 million and debt at RM589.7 billion.
WEAKNESS ANALYSIS – Potential lack of commitment from the Company and the Federal Government to develop Nusajaya and Iskandar Malaysia.

OPPORTUNITIES ANALYSIS - To capitalized on the development of Iskandar Malaysia.

THREATS ANALYSIS – Prolonged world economic slowdown or recession and a lack of commitment from the Federal Government together with the execution risks.


QUANTITATIVES ANALYSIS.
STOCK VALUATIONS.

Forecast FYE 2009 PER – 27X.
Net Assets Per Share – RM0.52.
Price to Book Value – 1.04X.
Dividend Yield – 1.85%
Debt to Equity Ratio – 0.668X.
Return on Equity Ratio FYE 2009 – 0.26 percent.
Net Profit Margin – 7.98 percent.


TECHNICAL ANALYSIS – 52 WEEKS TRADING RANGE.

High – RM0.80.

Low – RM0.50.


HOLD RECOMMENDATION FOR UEM LAND BHD
UEM Land Bhd is a good long term investment prospect as a master developer of Nusajaya in Iskandar Malaysia. Fair value for UEM Land is RM0.80 or 1.55X current book value.









20. UEM BUILDERS BHD. RM 1.38 (Non Composite Index Linked Stock).

FYE DEC. 31 FY 2009(F) 3Q 2008(U) 9M 2008(F) FY2008(F)
000 000 000 000

Revenue 528,425 1,124,219 2,610,996
Net Profit 11,849 41,024 71,960
Net EPS 1.23 sen 4.26 7.48 sen
Forecast PE Ratio 20.5X (annualized) 18.4X
Dividend 0.00 0.0 2.5 sen
Dividend yield 0 % 1.81%
Cash RM 46,196,000
Debt RM 2,054,456,000
Net Asset Per Share RM0.76.
No. of shares 963,869,000
Market capitalization RM1.33 billion
Major Shareholder UEM World Bhd 51.70%

LATEST CORPORATE DEVELOPMENT.

De-listed from Bursa Malaysia Securities Bhd effective Friday, Nov 21, 2008 due to takeover by UEM Group.
























21. TH PLANTATIONS BHD. RM2.07. Ex Bonus Price RM1.14. (Non Composite Index Linked Stock).

FYE DEC. 31 FY 2009(U) 3Q FY2008(U) 9M FY2008(U) FY2008(F)
000 000 000 000

Revenue 160,000 68,003 201,398 195,380
Net Profit 40,000 17,602 69,236 70,244
Net EPS 10.2 8.98 35.31 35.84 sen
Forecast PE Ratio 11.2X 5.8X
Cash RM196,236,000
Debt RM 15,254,000
Dividend 5 sen 10.0 15.00 sen
Dividend yield 4.8% 7.2%.
Net Assets RM1.15.
No. of shares 486,644,000
Market capitalization RM405.9 million
Major Shareholder LTH 70%

* Forecast based on average CPO price of RM1,700.

LATEST CORPORATE DEVELOPMENT.

Bonus Issue 1 for 1. Ex date 2.1.2009.
Listing and quotation of 47,728,000 new TH Plant shares at an issue price of RM3.34 as a payment for 51% and 100% equity interests in Syarikat Sabaco Sdn Bhd and Ladang Bukit Belian Sdn Bhd for a purchase consideration of RM147,468,000 and RM51,44,000.
Proposed Bai Murabahah Medium Term Notes issuance programme of up to RM200m in nominal value.

QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPOPRTUNITIES AND THREATS ANALYSIS.

STRENGTHS ANALYSIS
BUSINESS MODEL - Principal activities for the Group are palm oil plantations with a total hectarage of 26,136 hectares with 15,746 hectares planted area.

MANAGEMENT - Headed by a Chairman of the Board of Director and CEO with his management team appointed by the Lembaga Tabung Haji.

BUSINESS OUTLOOK.

Bottoming out of CPO prices which is currently at RM1,590 level should augur well for the group bottom line going forward. Net profit margin will increase with the higher CPO prices.

CORPORATE GOVERNANCE – Still not transparent enough.
FINANCIAL STRENGTH - Strong backing from parent company, GLIC Lembaga Tabung Haji. Cash in hand of RM196.2 million and a debt of RM15.2 million.


OPPORTUNITIES ANALYSIS. - Should use the cash in hand to increase total plantation acreage.

WEAKNESS ANALYSIS - Small free float as Lembaga Tabung Haji owned 70 percent of the shares and also small size plantation company with a total hectarage of only 26,136 hectares.

THREATS ANALYSIS - Profitability going forward still dependent on sustainability of the crude palm oil prices even though CPO prices look like bottoming out despite weakness in crude oil prices amid improving demand from importing countries.


QUANTITATIVES ANLYSIS.
STOCK VALUATIONS.

Forecast FYE 2009 PER – 10.1X
Net Assets Per Share – RM1.17.
Price to Book Value – 1.77X.
Dividend Yield FYE 2009 – 4.8%.
Debt to Equity Ratio – 1.326X.
Return on Equity Ratio – 17.2 percent.
Net Profit Margin – 25 percent.


TECHNICAL ANALYSIS.
TRADING RANGE – 52 WEEKS.

High – RM3.82.

Low – RM1.88.


BUY RECOMMENDATION – Based on the CPO prices, currently trading between a price range of RM1,500 to RM1,700 per tons. A fair value of RM2.45 based on the prospective FYE 2009 price earning ratio of 12X on a forecast net profit of RM40m and a net EPS of 20.4 sen and a dividend yield of 4.8%..





22. MALAYSIAN AIRLINES SYSTEM. RM2.68.

FYE DEC. 31 FY 2009(F) 3Q 2008(U) 9M 2008(U) FY2008(F)
000 000 000 000

Revenue 16,909,056 4,114,562 11,642,131 15,756,693
Net Profit 500,000 38,093 198,132 236,224
Net EPS 29.9 2.28 11.86 14.14 sen
Forecast PE Ratio 9X 19X
Dividend (sen) 10.0 5.0
Dividend Yield 3.73% 1.866%
Net Assets RM2.47.
Cash RM4,825,069,000
Debt RM1,299,992,000
Number of Shares 1,671,002.,000
Market Capitalization RM4.478 billion
Major Shareholder Khazanah Nasional & PMB ( 69.3% )

# RM500m net profit forecast were based on jet fuel price of USD100 per barrel.
# Currently jet fuel price at USD70.

LATEST CORPORATE DEVELOPMENT.

MAS is pursuing a strategic partnership with a number of airlines on collaborating and creating synergies for growth which include MOU with Qantas for a JV in maintenance, repair and overhaul business.

QUALITATIVES ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.

STRENGTHS ANALYSIS.
BUSINESS MODEL - The Company is principally engaged in the business of air transportation – airlines operations and cargo services and the provision of related services.

Airline operations – operation of aircraft for passenger
Cargo services – operation of aircraft for cargo and mail services.

Other business segments include hotel operations, catering, engineering, computerized reservation services, coach transportation, trucking and warehousing services, retailing of goods, terminal charges and tour and related activities.

The Group has in operation 111 aircraft and 36 engines under operating leases.

MANAGEMENT - Headed by the Chairman of the Board of Director and Dato Idris Jala as the CEO and his team of turnaround managers.
BUSINESS OUTLOOK – Strong turnaround in place. Profitability will improve with lower jet fuel prices currently around US$70. MAS turnaround plans to check the company slide include cost control, a fuel efficiency programme and a revenue enhancement plan.

CORPORATE GOVERNANCE – Still not transparent enough.

FINANCIAL STRENGTH - Strong backing from the Government to the management to turn around the company. Currently cash in hand at RM4.8 billion and debt level of RM1.3 billion.


WEAKNESS ANALYSIS – Bottomline easily affected by the movement of jet fuel prices.


OPPORTUNITIES ANALYSIS - To capitalized on its strength especially strong backing from the Government especially during this high crude oil prices environment.


THREATS ANALYSIS – Deepening global recession will affect MAS long haul passengers, business travelers and cargoes business.


QUANTITATIVES ANALYSIS.
STOCK VALUATIONS.

Forecast FYE 2009 PER – 9X
Net Assets Per Share – RM2.47.
Price to Book Value – 1.085X.
Dividend Yield – 3.73 percent.
Debt to Equity Ratio – 2.5X.
Return on Equity Ratio FYE 2009 – 12.07 percent.
Net Profit Margin FYE 2009 – 2.957 percent.


TECHNICAL ANALYSIS - 52 WEEKS TRADING RANGE.

High – RM4.90.

Low – RM2.49.


BUY RECOMMENDATION FOR MAS BHD based on the current level of jet fuel prices at US$70 per barrel. The fair value for MAS is RM3.60 at a prospective PER for 2009 of 12X, on an EPS of 29.9 sen plus a dividend yield of 3.73 % or 10 sen.
23. SCOMI GROUP BERHAD. RM0.355.Non Composite Index Linked Stock).

FYE 31 DEC. FY 2009(F) 3Q 2008(U) 9M 2008(F) FY2008(F)
000 000 000 000

Revenue 2,017,216 504,304 1,508,223 2,012,527
Net Profit 77,328 19,332 75,688 95,020
Net EPS (sen) 7.68 1.92 7.52 9.44
Forecast PE Ratio 4.6X 3.8X
Dividend 1.00 0.0 0.0 1.25 sen
Dividend Yield 2.8% 3.5%
Net Assets Per Share RM0.85
Cash RM (21,037,000)
Debt RM1,215,987,000
Number of shares 1,021,815,000
Market capitalization RM362.7 million
Major shareholder Kaspadu ( 23.8% ), Onstream M ( 20.9%)

LATEST CORPORATE DEVELOPMENT.

Proposed renounceable rights issue of up to 554,418,350 new shares in RM0.10 each in SCB on the basis of one (1) rights shares for every two (2) shares of RM0.10 each in SCB at an issue price of RM0.30 per rights shares.

Proposed exemption from making mandatory takeover offer for Shah Hakim, Kamaluddin Abdullah and person acting in concert.

QUALITATIVE ANALYSIS.
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.

STRENGTHS ANALYSIS.
BUSINESS MODEL – Strong in drilling fluid business.

Investment holding company with subsidiaries involved in the wide range of activities in the oil&gas service industry throughout the world in 55 locations and 30 countries :-

Drilling Fluids & drilling waste management solutions – KMC Oiltools.
Marine vessel transportation- Main Board listed Scomi Marine Bhd (RM0.97)
Manufacturing businesses – 2nd Board listed Scomi Engineering Bhd (RM2.38) and currently bidding for RM6 billion worth of contracts.
Oilfield & Production Enhancement Chemicals
Distribution – KMC Oiltools.

MANAGEMENT – Headed by Shah Hakim as the CEO.

BUSINESS OUTLOOK – Despite the softening demand for oil amid global recession, the outlook for the oil & gas industry is still promising. The US Energy Information Administration anticipates oil will remain world dominant energy fuel and predicts an average growth in total global oil consumption of 1.9% per year until 2025. The key global factor affecting Scomi performance is the level of drilling activities. The company control 90% of the local mud engineering product .

CORPORATE GOVERNANCE – Still not transparent enough.

FINANCIAL STRENGTH – RM1.2 billion in debt with negative cash flow of RM21 million.


WEAKNESS ANALYSIS – Highly leverage balance sheet and negative cash flow.

OPPORTUNITIES ANALYSIS - Opportunities in the current environment of high oil and gas prices for the shareholder and management to close a deal and getting a new contract either at the holding company or subsidiary level will bring in the much needed cash flow to mitigate the still high debt level and also as a future earnings driver and catalyst for the share price.

THREATS ANALYSIS – Oil majors cutting back expenditures on oil exploration due to a recession and lower crude oil prices. Strengthening ringgit will hurt the company profit.


QUANTITATIVES ANALYSIS.
STOCK VALUATIONS.

Prospective FYE 2009 PER – 4.6X.
Net Assets Per Share – RM0.85.
Price to Book Value – 0.418X.
Dividend Yield – 2.8percent.
Debt to Equity Ratio – 1.73X.
Return on Equity Ratio FYE 2009 – 9.45 percent.
Net Profit Margin – 4.957%.


TECHNICAL ANALYSIS - 52 WEEKS TRADING RANGE.

High – RM1.73. Low – RM0.255.


BUY RECOMMENDATION FOR SCOMI GROUP BHD – A fair value for Scomi Group Bhd at RM0.85 on the prospective FYE 2009 PER of 11.1X on an EPS of 7.68 sen plus a dividend yield of 2.8% and at 1X book value. There will be an earnings dilution after the completion of the proposed 1 for 2 rights issue at 30 sen.
24. AFFIN HOLDINGS BERHAD. RM1.25. (Non Shariah Compliance).


FYE 31 DEC. FY 2009(F) 3Q 2008(U) 9M 2008(U) FY 2008(F)
000 000 000 000

Revenue 2,066,520 516,630 1,602,863 2,307,244
Net Profit 215,580 53,895 208,655 261,872
Net EPS 14.44 3.61 13.97 17.61 sen
Forecast PE Ratio 8.7X 7.1X
Dividend 7.5 5.00 5.00 10.0 sen
Dividend yield 6.0% 8.0%
NTA RM2.2396.
Price / NTA 0.558X
Customers Deposit RM25,147,300,000
Total Net Loans RM19,260,418,000
Net Non Performing Loans RM951,659,000 or 4.87%.
Total Assets RM37,025,743,000
Net Assets Per Share RM2.93.
Cost to Income Ratio 66.88 %.
Shareholders Fund RM4,385,816.000
Cash RM6,061,748,000
Debt RM 700,000,000
Number of Shares 1,494,367,000
Warrants Outstanding 153,776,000
Core Capital Ratio 11.30% after dividend.
Risk Weighted Capital Ratio 14.21% after dividend.
Market capitalization RM2.435 billion
Major shareholder Lembaga Tabung Angkatan Tentera

LATEST CORPORATE DEVELOPMENT.

Discontinuance of JV talks between Affin Fund Management Bhd with Asia Equity Partners Sdn Bhd due to to challenging financial market conditions.

QUALITATIVES ANALYSIS
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.

STRENGTHS ANALYSIS.

BUSINESS MODEL - AFFIN Holdings Group is a financial services conglomerates. The Group’s primary activities focus on the provision of commercial and investment banking services, money broking, fund and unit trust management, underwriting of general and life insurance business and stock broking operations.
The Group’s revenue and earnings mainly come from 1.Commercial banking and Hire Purchase 2.Investment Banking 3.Stockbroking 4.Insurance 5.Others.
In the future, a strong earnings driver will come from the Islamic banking, Commercial banking and the Investment banking.

MANAGEMENT – Headed by the Chairman of the Board of Director and Dato Hamidy Hafidz as the CEO and his management team.

BUSINESS OUTLOOK – Business will be affected by the current world financial crisis and expected slowdown or recession of the develop world economy.

CORPORATE GOVERNANCE – Still not transparent enough.

FINANCIAL STRENGTH - Strong backing from the ultimate parent company, Lembaga Tabung Angkatan Tentera. Cash in hand at RM6.06 billion and debt of RM700 million. NPL of RM1.14 billion or 6.19%. CCR at 11.3%. RWCR at 14.21%.

WEAKNESS ANALYSIS – The bank highly leverage business model and assets quality are a major concern during a global recession now.

OPPORTUNITIES ANALYSIS - To leverage on their tie up with Bank of East Asia, Hong Kong to venture oversea especially in the fast growing economy of China.

THREATS ANALYSIS - Recession or depression in the United States, weak global growth, high inflation and a slowdown in the Malaysia economy will increase the NPL.

QUANTITATIVES ANALYSIS
STOCK VALUATIONS.

Forecast FYE 2009 PER – 8.7 X.
Net Assets Per Share – RM2.93.
Price to Book Value – 0.43X.
Net Tangible Assets – 2.2396.
Price to NTA –0.558X.
Dividend Yield – 6.0 percent.
Debt to Equity Ratio – 7.44X.
Return on Equity Ratio FYE 2009 – 4.915 percent.
Net Interest Income Margin – 45.2 percent.
Net Profit Margin FYE 2009 – 10.4 percent.


TECHNICAL ANALYSIS - 52 WEEKS TRADING RANGE.
High –RM2.78 , Low – RM1.14.


BUY RECOMMENDATION – The fair value for AFFIN Holdings Bhd is at RM1.74 or 0.777X Tangible Book Value (NTA), on a prospective FYE 2009 PER of 12X on a net profit of RM215,580,000 and an EPS of 14.4 sen plus a dividend yield of 6.0 percent.
25. YTL CORPORATION BHD. RM7.10.

FYE 30 JUNE 1Q 2009(U) FY 2009(F)
000 000

Revenue (RM) 1,739,212 7,553,524
Net Profit (RM) 252,367 947,843
Net EPS(sen) 16.88 58.00
Forecast P.E. Ratio 12.0X
Dividend (sen) 0.0 25.0
Dvidend Yield 3.5%
Net Assets Per Share RM5.1584.
Cash RM12,618,027,000
Debt RM23,400,397,000
Shares Outstanding 1,634,213,000
Market Capitalization RM11.6 billion.
Major Shareholders. Yeoh Tiong Lay & Son Hldgs 53.29%.

LATEST CORPORATE RESULT.

Subsidiary YTL Power International Bhd proposed to acquire 884,971,148 shares representing 100% equity interest in PowerSeraya Limited, from Temasek Holdings (Private) Limited for a purchase consideration of SG$3,600 million (RM8,568 million based on the prevailing exchange rate of SGD1.00 to RM2.38.

YTL bought 26% of MacQuarie Real Estate Investment Trust for SGD202,622,20 or SGD0.82 per unit in cash and 50% of Prime REIT Management Holdings Pte Ltd together RPS A&B for SGD62 million in cash.

QUALITATIVES ANALYSIS
STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS ANALYSIS.


STRENGTHS ANALYSIS
MANAGEMENT – Run by the Yeoh Tiong Lay family.

BUSINESS MODEL – Strong in construction, water, IPP, power generation, cement, property development in Malaysia and overseas.

Revenues came from 1.Construction 2.Information Technology & E-Commerce related business (Listed YTL-E Solution Bhd) 3.Cement Manufacturing & Trading (Listed YTL Cement Bhd) 4.Property Investment & Development (Listed YTL Land Bhd) 5.Management Services & Others 6.Hotels (Star REIT Bhd) and 7.Utilities.(YTL Power Bhd).

CORPORATE GOVERNANCE - Need to be more transparent.
FINANCIAL STRENGTH - Cash RM12.6b and Debt RM23.4 billion.


WEAKNESS ANALYSIS– Highly leverage business model.


OPPORTUNITIES ANALYSIS – Made a few acquisitions in Singapore recently.

THREATS ANALYSIS - Family run business and RM23.4 billion debt level, rising cost of raw materials and uncertainties in the business outlook for the construction industries in Malaysia with the government emphasis on more people centric projects instead of mega projects after the recent general election.


QUANTITATIVES ANALYSIS.
STOCK VALUATIONS.

Forecast FYE 2009 PER – 11.5X
Net Assets Per Share – RM5.1584.
Price to Book Value – 1.376X.
Dividend Yield – 3.5 percent.
Debt to Equity Ratio – 2.33X.
Return on Equity Ratio FYE 2009 – 7.67%
Net Profit Margin – 12.3 % .


TECHNICAL ANALYSIS.
TRADING RANGE – 52 WEEKS.

High – RM8.00.

Low – RM5.20.


HOLD RECOMMENDATION FOR YTL CORP – Based on forecast FYE 2009 net profit of RM947.8 million and an EPS of 58 sen, the fair value is RM7.00 at FY09 PER of 12X plus a dividend payout of 25 sen or a yield of 3.5 percent.






So that’s our results update on the top twenty five ( 25) stocks pick for the FYE 2009. Remember that a company with a strong fundamental will always win the day. So, stick with the basic principle of investment.
6. BURSA MALAYSIA BERHAD
KUALA LUMPUR COMPOSITE INDEX (100 STOCKS)

As of December 12, 2008 and the Composite Index at 852.27.

Name PRICE EPS 09(F) PER 09(F) NET ASSETS DIV YIELD
SEN X RM %
AFFIN 1.25 14.44 8.7 2.93 6.0
AFG 1.63 18.74 8.7 1.76 3.0
AIRASIA 0.86 0.09 9.6 0.76 2.3
AIRPORT 2.10 32.00 6.6 2.87 7.0
AMMB 2.31 26.00 8.9 2.72 2.2
ANNJOO 1.19 30.00 4.0 2.11 4.2
ASTRO 2.31 00.00 0.0 0.48 2.2
BAT (M) 42.25 RM2.80 15.0 1.58 4.7
BERNAS 1.15 24.00 4.8 2.04 4.3
BJTOTO 4.54 26.00 17.5 0.32 4.4
BRDB 1.10 10.00 11.0 3.06 4.5
BOUSTEAD 3.26 61.44 5.3 4.37 7.7
BURSA M’SIA 5.30 15.2 34.9 1.37 2.8
CARLSBERG 3.52 28.00 12.6 1.54 7.1
COMMERZ 6.00 50.07 11.98 4.78 3.3
DIALOG 0.80 5.30 15.01 0.28 2.5
DIGI.COM 20.60 1.10 18.7 2.86 4.8
DRB HICOM 0.77 5.2 14.8 3.42 3.2
EON CAPITAL 2.98 15.00 19.9 4.48 2.5 GAMUDA 1.85 14.0 13.2 1.53 4.1
GENTING 3.78 29.7 12.7 3.41 5.3
GOUCOLAND 0.72 1.25 57.6 1.27 1.4
HAP SENG 1.94 50.0 6.5 4.10 3.9
HLEONG BANK5.00 50.00 10.0 3.67 5.0
IGB CORP 1.23 6.8 18.1 1.79 2.6
IJM CORP 2.65 32.0 8.3 5.60 11.3
IOI CORP 3.20 16.0 20.0 1.29 3.1
KPS 1.33 10.0 13.3 2.02 3.8
KINSTEEL 0.41 10.0 4.1 1.08 6.1
KENCANA 1.32 14.7 9.0 0.38 5.7
KFC (M) BHD 7.25 63.4 11.4 3.40 4.1
KLCC PROP 2.69 17.8 15.1 3.96 3.7
KL KEPONG 8.45 56.2 15.0 5.20 3.6
KNM 0.42 10.9 3.9 0.45 6.0
KULIM 4.60 64.85 7.1 10.44 4.4
KURNIA ASIA 0.30 0.0 0.0 0.09 0.0
LANDMARK 0.85 5.0 17.0 3.56 2.4
LINGUI 0.65 3.6 18.1 2.52 1.5
LION DVSIFIED 0.36 10.0 3.6 2.78 6.9
LION IND. 0.64 30.0 2.1 4.40 3.9
LITRAK BHD 1.81 21.9 8.3 0.95 5.5
LM CEMENT 3.20 20.0 16.0 3.58 3.1
MAH SING 1.55 8.0 19.4 1.07 1.6
MAS 2.68 29.9 9.0 2.47 3.73
MAYBANK 5.25 7.26 30.4 4.08 2.86
MAYBULK 2.23 10.0 22.3 1,84 2.2
MEDIA 0.94 10.0 9.4 0.64 2.1
MEDIAC 0.53 5.0 10.6 0.64 3.8
MISC 8.50 50.36 17.0 5.47 3.5
MK LAND 0.16 1.0 16.0 0.81 0.0
MMC CORP 1.07 18.06 5.9 1.97 4.67
MPI 6.05 44.00 13.8 4.12 2.5
MRCB 0.75 2.0 37.5 0.75 1.33
MTD INFRA 0.77 4.0 19.2 0.44 1.95
MULPHA 0.38 2.0 19.0 1.92 2.63
MUHIBAH 0.90 16.1 5.6 1.13 5.55
ORIENTAL 4.90 40.0 12.3 7.12 4.1
OSK 0.95 6.0 15.8 2.08 2.1
PBBANK 8.25 50.00 16.5 2.74 3.63
PELIKAN 1.95 15.00 13.0 1.89 2.56
PETDAG BHD 6.85 67.2 10.2 4.06 4.4
PET GAS BHD 9.80 65.94 14.9 3.96 4.6
PETRAPRDANA1.34 20.0 6.7 1.72 3.73
PLUS 2.85 19.36 14.7 1.08 3.5
POS M’SIA 1.96 16.00 12.3 1.63 2.55
PPB GROUP 8.65 42.18 20.5 9.95 4.0
PROTON 1.79 25.00 11.8 10.05 3.4
PUNCAKNIAGA2.40 12.12 14.8 3.30 4.2
RHB CAPITAL 3.80 40.0 9.50 3.50 3.9
SAPURACREST 0.76 10.0 7.60 0.76 3.9
S’WAKENERGY2.18 20.0 10.9 1.84 2.3
SCOMI GROUP 0.35 7.68 4.6 0.85 2.8
SURIACAPITAL 0.86 12.5 6.88 2.23 2.9
SHELL (FOM) 8.40 59.04 14.2 8.14 3.57
SIME DARBY 5.30 31.61 16.8 3.83 4.7
SPB 2.50 12.00 20.8 4.97 3.0
SP SETIA 3.00 20.0 15.0 1.94 3.3
STAR 3.08 20.0 15.4 1.64 3.2
SUNWAY CITY 1.59 20.0 7.9 3.67 3.1
SUNRISE 1.26 15.0 8.4 1.73 2.0
TAENTERPRISE 0.63 5.0 12.6 1.46 4.0
TA ANN 3.30 20.0 16.5 3.28 1.5
TANJONG PLC 13.50 90.0 15.0 10.26 3.0
TAN CHONG 1.14 15.0 7.6 2.10 4.4
TENAGA 5.90 64.6 9.1 5.92 1.7
TITAN 0.75 2.2 34.1 2.45 0.0
TM 3.00 29.55 10.1 3.00 8.3
TM INT. 3.48 24.00 14.5 3.22 2.9
TOP GLOVE 3.60 34.00 10.6 2.28 2.8
TWS PLANT 1.48 12.00 12.3 2.53 1.4
UCHI TECH 0.94 10.00 9.4 0.49 4.3
UMW 4.88 40.0 12.2 3.13 4.1
UNISEM 0.69 13.0 5.3 1.89 1.4
WAH SEONG 1.00 10.0 10.0 1.17 2.0
WCT 1.59 12.0 13.2 1.53 2.0
WTK HLDG 0.80 10.0 8.0 2.47 2.5
YNHPROPERTY 1.17 10.0 11.7 1.64 0.0
YTL CORP 7.10 58.0 12.0 5.15 3.5
ZELAN 0.79 14.0 5.6 1.28 6.3

FORECASTS FOR THE YEAR 2009.

1.FORECAST AVERAGE P.E.RATIO FOR FYE 2009 - 12.9X.

2.FORECAST AVERAGE GROSS DIVIDEND YIELD FOR FYE 2009 – 3.6673%.

3.We forecast an average FYE 2009 earnings growth contraction of between 25% to 60% as compare to FYE 2008 earnings.

4.We forecast a worst case scenario downside risk on the Composite Index of between 500 to 600 level by the end of FYE 2009, due to deteriorating fundamentals.

5.We forecast the CI for the 1Q 2009 to be between 801 to 926 level. (This is due to the process of discounting the events of US President inauguration and economic stimulus package on Jan 20, UMNO election and Malaysia new PM in March 2009).

6.The CI best case scenario for FYE 2009 is between 860–880 to 980–1000 level, due to improving economic fundamentals.

7.The CI most likely scenario by the end of FYE 2009 is between 860 to 880 level, due to better than expected (stable) economic fundamentals.

8.We forecast a GDP growth for FYE 2009 of between 1% to 3% due to a deepening recession in the world most develop economy especially in the United States, U.K., European Union and Japan after the recent financial meltdown and a series of government bailouts not seen since the era of the Great Depression. Asian countries such as China, Korea, India are also experiencing a sharp economic slowdown.

WISHING YOU A VERY HAPPY AND PROSPEROUS INVESTMENT IN 2009.