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RHB Equity 360° - 3 September 2010 (Telecom, Insurance; Technical: MRCB)

RHB Equity 360° - 3 September 2010 (Telecom, Insurance; Technical: MRCB)

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Published by Rhb Invest
Sector Update
- Among the four telecommunication stocks that are under coverage, two came in within our expectation, one came in above and one came in below our expectation.
Sector Update
- Among the four telecommunication stocks that are under coverage, two came in within our expectation, one came in above and one came in below our expectation.

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Published by: Rhb Invest on Sep 03, 2010
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05/12/2014

 
 
Market Dateline PP 7767/09/2010(025354)RHB Research Institute
RHB Equity 360
°
3 September 2010 (Telecom, Insurance; Technical: MRCB)Top Story: Telecom –
2QFY10 report card
Overweight
 Sector Update- Among the four telecommunication stocks that are under coverage, two came in within our expectation,one came in above and one came in below our expectation.- All three mobile players continued to register positive qoq revenue growth in 2QFY10 mainly due to: 1)higher mobile revenue (which in turn rose qoq on the back of rising non-voice revenue); and 2) higherhandset sales. However (with the exception of Celcom), EBITDA margin for both Digi and Maxis in 2QFY10declined by 1.3%-pts and 3.4%-pts. We believe the qoq decline in EBITDA margin for both Digi and Maxiswas mainly due to higher handset subsidies.- Qoq, net debt and net debt/ EBITDA for the mobile players generally improved in 2QFY10 on the back ofstable free cash flow. We believe the financial standing of the mobile players would remain firm and this ismainly on the back of: 1) mid-high single-digit revenue growth; 2) stable EBITDA margins; and 3) decliningcapex requirement. With these coupled with the mobile players’ well-articulated dividend policy, we arekeeping our view that most of the telcos (with the exception of Axiata, which we think is still very much agrowth story) will continue to offer generous yields to investors.- No change to our earnings forecasts and
Overweight
stance on the sector.
Sector CallInsurance :
Four new takaful licences awarded
Neutral (down from OW)
 Sector Update- Bank Negara Malaysia has awarded takaful licenses to four JV of local and foreign entities.- The total number of family takaful operators in Malaysia is now 12. We believe that the presence of the newoperators would increase competition for the life insurance industry.- We expect competition to be more intense from FY12-13 onwards as the new operators will likely takesome time before they start operating and build up their market share.- We maintain Allianz as our top pick for the sector, although we are downgrading our stance on the sector toNeutral as we have downgraded LPI Capital to Market Perform due the limited upside to its share price.
 Technical HighlightsDaily Trading Strategy :
The Current Uptrend Remains Intact…- Technically, the FBM KLCI has continued to show signs that it could undergo a mild retracement soon,following the formation of a “hangman” candle and the grossly overbought short-term momentum readingsyesterday.- However, as long as it can sustain at above the 10-day SMA of 1,411, the 1,400 psychological level andthe crucial turning point of 1,390, the current uptrend is still intact.- In our opinion, any pullback is still considered healthy, as this will neutralise the overbought momentum onthe FBM KLCI, paving the way for another rally on renewed buying support.- And even if the heavyweights were to take a breather on constant profit-taking activities, we still expect thebroader market sentiment to stay upbeat, on the back of solid rotational plays on other second and thirdliner stocks, with increased daily participants in the near term.- Having said that, the local trading sentiment will still be influenced by the volatile regional markets’performance in the near term.
Daily Technical Watch: Malaysian Resources Corporation
 – Breaking out from RM1.79 will signal anextended rally towards RM1.95…- 10-day SMA: RM1.689- 40-day SMA: RM1.688- Support: IS = RM1.70 S1 = RM1.51 S2 = RM1.33- Resistance: IR = RM1.95 R1 = RM2.20

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