Construction (OVERWEIGHT)

Relook into Gamuda and MRCB's valuation

'''' YTD, KLCON Index is up +9.8% vis-''-vis the KLCI's +0.5%. We believe that the strong outperformance is due to improved newsflow for the sector and return of risk appetite from investors.

'''' Gamuda and MRCB have seen their existing TP of RM3.81 and RM2.22 breached respectively. Hence, this report relooks into both companies' valuation as to where it may potentially touch if things materialise as planned.

'''' We upgrade Gamuda's TP by 16% to RM4.41 from RM3.81 and MRCB's TP by 19% to RM2.64 from RM2.22 to take advantage of the current buoyant sentiment in the construction sector, which tends to result in share prices overshooting. However, we caution that our newly assigned TP will be revised downwards if things do not pan out as planned.

'''' We MAINTAIN our OVERWEIGHT stance on the sector as we believe that more ETP projects should materialise this year to mitigate slowing economic growth.

'''' Top Picks in order of preference:

Sunway (TP: RM3.12)

Gamuda (TP: RM4.41)

Mudajaya (TP: RM4.61)

MRCB (TP: RM2.64)

''

Genting Malaysia (HOLD)

Destination Resort Bill Stalled

'' According to Reuters, the legislation that would allow three new resort-style casinos in Florida has been withdrawn before a House subcommittee could hold their vote. The bill has failed to pass at least one committee; hence the measure is dead for 2012.

'' This has turned out to be a disappointment for GenM. However, GenM's RWM remains positive with its mission to build a destination resort in Florida and will continue to work with the legislature and community to bring this mission into reality.

'' If the legislation is not approved, GenM will still continue with the US$3.8bn development, spreading it across 10-15 years. With this, GenM will incure approximately US$253-380m additional capex p.a., which should not be an issue given its net cash of RM2.2-4.8bn and free cash flow of RM0.8-1.8bn in FY11-13.

'' No changes made to our forecast. Maintain HOLD with TP of RM4.07.

''

KLCI: To retest 1550 zones after the 1530 breakout

'''' As KLCI continued to stay decisively above the major SMAs support levels, it is poised to unfold a follow-through rebound. Following last week's rally that partially filled the large gap of 1,529-1,546 pts, the index may continue its ascending trend today to retest immediate resistance target at 1550.

'''' Immediate supports are Immediate supports are 1530 (31 Dec 11), 10-d SMA (1523) and 1520 (mid Bollinger band).

''

RCECAP: More technical rebound ahead

'''' Technically, RCECAP short to medium term outlooks are positive as daily, weekly and monthly charts (FIG#3, 4 & 5) are strengthening. The strong breakout of the neckline resistance near RM0.52 will spur greater upside towards RM0.55-0.58 targets. Post RM0.58, more formidable resistance is RM0.62 (76.4% FR). Immediate supports are situ RM0.48 (30-d SMA), RM0.47 (100-d SMA) and RM0.46 (daily lower Bollinger band).

'''' Cut loss below RM0.46.''