CY4Q11 Report Card

Slight Disappointment But Earnings Risk Now Lower

• CY4Q11 reporting was slightly disappointing but with improvement in revision ratio, earnings risk now lower.
• Slightly below as 13 (vs. 12 previously) were below while 11 (6) were above.
• Number of sectors that disappoint reduced to 4 from 6.
• 13 (vs. 13) earnings cut but 15 (10) earnings upgrades.
• Revision ratio improved to 0.9x from 1.3x.
• 2012 and 2013 EPS growth now 10% (higher 2011 base) and 9.6% (ex Tenaga) vs. 13.4% and 8.9% respectively.
• 5 ratings upgrades vs. 4 downgrades.
• Sticking to view that liquidity injection, ETP and pre election newsflow to drive market higher (to exceed our YE 1555 target and test 1600 technical target) up to 1Q or early 2Q.
• Risk reward profile changed since Dec 11 given CI near our target, timeline also near and unlikely to have further liquidity injection.
• However, with no immediate risk of liquidity reversal, there is still window of opportunity.
• Focus on ETP theme.
• Top picks (unchanged) – Gamuda, MRCB, Mudajaya and Sunway (pump prime), Maybank (proxy to ETP beneficiaries), Boustead (contracts/projects newsflow) as well as AirAsia and TDC (proxy to consumerism).

KLCI: Higher volume is needed for a more sustainable rally 

• We are cautiously optimistic that the recent breakout of 1567 (16 Feb’s high) will eventually spur KLCI to our new envisaged resistance 1590-1600 levels, albeit intermittent profit taking activities. However, higher volume (preferably over 2bn shares/day) is essential for a sustainable rally.
• Major supports are 1561 (10-d SMA), 1556 (mid Bollinger band) and 1544 (30-d SMA).

GUH: Bullish breakout signals more upside ahead

• At RM1.36, GUH is trading at trailing 7x P/E (industry: 15.2x) and 0.61x P/BV (industry 1.35), supported by DY of 4.4%. Ex-cash, GUH is only trading at 2.2x P/E.
• Technically, GUH short term outlook is positive as technical readings are strengthening. The strong breakout will spur greater upside to retest RM1.44 (upper Bollinger band) and RM1.48. More significant resistance levels are RM1.55-1.65. Immediate supports are situated near RM1.21 (200-d SMA) and RM1.28 (lower Bollinger band). Cut loss below RM1.21.