Showing posts from July, 2011

Malaysia Inflation to start easing end-3Q or early 4Q2011

Malaysia Inflation Rose To The Fastest Pace.
Inflation is still a major concern and we expect the upward pressure to stay in 3Q2011 coming from food & non-alcoholic and clothing/footwear in  view of the festive seasons.
Impact from June’s electricity tariff hike is expected to continue. But the  upward inflation pressure can be contained from stronger RM/USD and high base comparison. Nonetheless, we expect inflation to start easing by end 3Q2011 or early 4Q2011. Meanwhile, with global uncertainties flared by euro debt crisis and slower US economic recovery lingering, it has forced AxJ policymakers to focus on growth as opposed to inflation. Rates hikes could be reaching its tail end. We expect BNM to accommodate further erosion in real returns by holding OPR at 3.00% to focus on growth. But possibilities for another 25bps hike in OPR remains, as it depends on inflation outlook. Likewise SRR hike will depend on liquidity inflow. If that happen, we expect another 50bps to 100bp…

UMW Holdings : Road blocks ahead Hold

We maintain our HOLD call on UMW with an unchanged fair value of RM6.50/share –following yesterday’s analyst briefing. Our SOP-derived valuation continues to peg UMW auto at 9x PE and its O&G and equipment divisions at 10x PE. Management is optimistic that 2H11 auto sales will more than make up for the shortfall in 2Q. While we acknowledge that supply has recovered, we would bear in mind that it is no longer just a supply issue that is plaguing the industry, but also a demand issue since the HPA amendment came into effect on 15 June. Management is currently sticking to its fullyear targets of 95,000 units for Toyota and 195,000 units for Perodua, but does not ruleout a downward revision. On a positive note, the O&G segment is expected to return to the black, driven mainly by full- year contributions of UMW’s 3 rigs. Separately, UMW is considering exiting its fabrication business – as part of the group’s strategy to rationalise its O&G segment. While we are positive about t…