2012 Strategy

Impact Of ETP To Help Fuel Run Up

Highlights

'''' ETP relook - construction content estimated at RM9-12bn/yr from 2012 to 2015.''

'''' DOSM's IO tables - significant impact on several sectors.

'''' Construction multiplier (1.878) and more household income to underpin our 2012 GDP growth projection of 4.5%.

Implications on market

'''' Enhance market resilient and sustain investors' interest.

'''' Identified direct winners and potential indirect beneficiaries.''

Outlook

'''' Market can potentially hit/exceed our end 2012 target of 1555, possibly by 1Q or early 2Q.

'''' ETP to further augment upward trajectory.

'''' Selldown prior to polling day is opportunity, especially if results are better-than-expected

'''' But market likely peak before mid-2012.

Action

'''' Prefer defensive but to position for short-term swing, look at our list of stocks base on HLIB's ICPM.

'''' Also picked a list of stocks under HLIB universe that are expected to outperform the general market.

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Banking (OVERWEIGHT)

Nov Bank Stats ' No Unduly Concerns

'''' Loans growth slowed to 12.8% but leading indicators higher with approval rate >50%, early signs of ETP.''

'''' Maintain 2012 loans growth projection of 9%.

'''' LDR ' RM273bn excess liquidity to support loans growth.

'''' Lending rate and spread improved providing some respite.

'''' Asset quality improved, we expect it to hold up despite external uncertainties.'' Credit card asset quality improved after suffering three consecutive months of deterioration.

'''' Capital ratios declined mom but still at comfortable levels to support growth, M&A and more active capital management.

'''' BNM's Basel III guidelines not overly stringent, alleviating concerns of punitive rules and clarity for more active capital management.

'''' Maintain Overweight.

'''' With lower risk aversion, target prices raised to reflect lower equity risk premium and higher forecasts for AFG.''

'''' Top picks are Maybank and AFG.''

''

TM (HOLD)

Investment to Tame the Data Tornado

'''' TM has budgeted RM2.7b to RM3b of CAPEX this year as it continues to roll out high speed broadband (HSBB) access to more areas and expand its Internet access beyond homes and offices via WiFi hotspots.

'''' HSBB expansion beyond the targeted 1.3m premises passed would be based on a demand driven model.

'''' TM wants to add more hotspots in the country, especially in the cities and major towns and will bundle WiFi with UniFi offering for high-end users.

'''' Besides that, TM is also planning to introduce prepaid WiFi offering to capture more users.

'''' Comments: This came as a shock to us as we expect CAPEX to be decreasing gradually as HSBB implementation is towards completion. Currently, TM has covered 85% of the 1.3m targeted premise passed.

'''' We opine that the best approach for TM to capture the nomadic users would be partnering a mobile telco. TM could leverage on the existing collaboration agreement with Celcom Axiata.

'''' Due to the recent price rally, we reiterate our HOLD call with unchanged target price of RM4.54.

''

Highlights of BNM Statistics (Nov 2011)

'''' Money supply growth was sustained at double-digit level in November, with M1 and M3 expanding by 13.8% yoy and 12.1% yoy respectively.''

'''' The double-digit M1 growth suggests that GDP growth could remain robust in the near term. We maintain our GDP growth forecast of 5.1% for 2011 and 4.5% in 2012.

'''' Both household loans and deposit were largely stable in November, expanding by 12.4% yoy and 12.7% yoy respectively.

'''' We expect BNM to hold the OPR steady at 3.00% until end-2012 as it remains cautious on growth prospects while staying vigilant on inflation.

'''' Indicators for liquidity in the domestic banking system (LD gap, surplus liquidity, etc.) edged up in November after some easing in October.

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KLCI: Anticipate profit taking consolidation but second and lower liners to provide sparks to the market''

'''' We expect KLCI to remain volatile this week amid profit-taking pullback following last week's fund managers' ritual of window dressing coupled with grossly overbought technical readings. Immediate support is 1500 whilst further upside targets are 1550-1570.

'''' While big caps are poised to consolidate further this week after recent solid gains, we expect rotational 2^nd and lower liners to shine to provide the sustainable momentum to our market in anticipation of a Jan and Chinese New Year rally.

''

VS Industry (RM1.57-Trading Buy): Poised to stage a positive breakout above 200-d SMA

'''''''' In the wake of convergence in technical indicators, VS is poised to stage a positive breakout above the 200-d SMA (RM1.58) today. Closing above RM1.58 would likely send prices higher towards upside targets of RM1.71 (50% FR) and RM1.83 (38.2% FR) in the near term.

'''''''' Immediate supports are near 200-week SMA (RM1.51), RM1.47 and RM1.45. Cut loss below RM1.45.

Hap Seng Consolidated (RM1.59-Trading Buy): Bullish breakout to spur prices higher

'''''''' Technical landscape is improving, suggesting that the bulls are making a comeback. HASPSENG seems to have broken out from its 200-d SMA and downtrend channel (from Feb 11). The next upswing is likely to push prices towards immediate resistance at RM1.64 (61.8% FR), followed by RM1.75 (50% FR). More formidable upside resistance levels are RM1.87 (38.2% FR) and RM2.02 (23.6% FR).

'''''''' Supports are 200-d SMA (RM1.56), RM1.51 (mid Bollinger band) and 30-d SMA (RM1.48). Cut loss below RM1.48.

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