Surprise reward for shareholders

'''' DiGi proposed: (1) 1-for-10 split; and (2) capital repayment of approximately RM509m.

'''' The 1-for-10 split will increase DiGi's share base from 777.5m shares to 7.78bn shares, which is expected to be completed by 4Q11.

'''' The proposed capital repayment will be done through the issuance of RPS by DiGi Telecommunications S/B (wholly-owned subsi) to DiGi, whereby upon redemption will result in a cash repayment of ~RM509m. Subsequently, this amount will be distributed back to shareholders by 1H12, translating to RM0.65/share.

'''' Comment: 1-for-10 split will enhance DiGi's liquidity, attracting more retail investors.

'''' The capital repayment is a welcomed reward to shareholders and is part of DiGi's strategy to optimize the company's capital structure.

'''' As a result of the cash payout, TP revised upwards by 9.7% to RM32.03 from RM29.20 (DDM based on WACC of 6% and terminal growth of 0%). Ex-split TP will be RM3.20.

''

BNM MPC Statement 5/2011

'''' The MPC maintained the OPR at 3.00%, in line with market and our expectation. The MPC said downside risks to growth have increased due to the sharper-than-expected growth moderation in the advanced economies.

'''' On inflation, the MPC expected inflation to remain relatively stable for the rest of the year.

'''' We see risk of BNM missing its growth target has increased following the weak 2Q GDP performance and slow ETP implementation amid external volatility.

'''' As the MPC has clearly signalled the priority of growth agenda, we continue to see BNM holding the OPR steady until end-2011.

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Gross Exports: Slower Growth in July

'''' Export growth moderated to 7.1% yoy in July (Jun: +9.6% yoy), higher than the consensus estimate of 6.6%, while import growth also slowed to 2.9% yoy (Jun +6.9% yoy). Trade surplus widened to RM9.5bn from RM7.9bn in June due mainly to higher commodity exports.

'''' E&E exports continued to drag down our export performance, declining by 8.3% yoy in July (Jun: -7.6% yoy). Excluding E&E, gross export growth would have been significantly higher at +17.6% yoy. The boost to exports was coming mainly from shipments of palm oil (+51.6% yoy) and LNG (+30.7% yoy).

'''' The subdued import growth (+2.9% yoy) continued to suggest that IPI and export growth will remain moderate in the coming months. With strong commodity exports, we retain our view that GDP growth will average 4.8% in 2011.

'''' On the monetary policy, we continue to see BNM holding the OPR steady until end-2011 as risks to growth have increased while inflation appeared to have peaked.

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FBM KLCI - Facing tough resistance at 1475-1500 pts

'''' Unless the KLCI can stage a strong breakout above the mid Bollinger band (at 1476 pts) with high volume (above one billion shares), the index is likely to trade range bound in the short term, tracking regional markets and Wall St trend.

'''' Significant resistance levels still remain at 1510 (upper Bollinger band) and 1529 (200-d SMA) whilst supports fall on 1442 (lower Bollinger band) and YTD low of 1423 pts. ''

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Stock to watch - DRBHICOM: Momentum building up to retest RM2.20-2.30 levels

'''' Technically, DRB has formed a short-term uptrend line from RM1.94 to close at RM2.06 yesterday (above the 5-d & 10-d SMAs of RM2.04), supported by the positive daily and hourly technical readings. Further breakout above the 50% FR (now at RM2.10) will spur more upside towards RM2.13 (upper Bollinger band) and RM2.20 (38.2% FR). Further upside targets are RM2.31 (23.6% FR) and RM2.42 (pivot high on 16 May).

'''' Immediate supports are situated near RM2.00 and RM1.94, followed by RM1.89 (76.4% FR). ''Cut loss below RM1.94.