UMW Holdings Berhad

The group announced on 22 Apr 2008:
proposals to acquire two automotive component makers in India for a total of USD23.5m (RM74.7m), and

a share sale agreement for the acquisition of a 60% stake in an Indian company involved in charter hire onshore drilling activities.

The proposed acquisition of the two automotive component makers in India is expected to strengthen the group’s manufacturing and engineering division via exposure to India’s fast growing automotive sector. Meanwhile, the proposed acquisition of a 60% stake in the Indian charter hire onshore drilling company is expected to boost the group’s oil and gas division’s exploration and development support operations in India and the Middle East.

The core domestic automotive division continued to register strong vehicle sales in Mar, with Toyota and Perodua maintaining their respective lead positions in the non-national and overall industry respectively.

News flow for the group is expected to remain positive, with strong results expected for 1Q08 and the upcoming listing of the group’s fast-growing oil and gas unit later this year.

We maintain our BUY recommendation with an unchanged price target of RM8.20/share, which is based on our RNAV estimate.

Acquisition of two automotive component makers in India

UMW announced on 22 Apr 2008 that it had entered into two separate share sale agreements with Dato’ Muthukumar a/l Ayarpadde for the acquisition of a 51% stake in MK Autocomponents Ltd (MKAL) and a 50% stake in MK Automotive Industries Ltd (MKD) for USD22.5m (RM71.6m) and USD971m (RM3.1m) respectively.

MKAL owns the entire share capital of Sathya Auto Private Ltd (SAPL) and Castwel Autoparts Private Ltd (CAPL), both of which operate in India. SAPL manufactures mechanical jacks, radiator caps, sheet metal components for automotive manufacturers in India whilst CAPL manufactures aluminium gravity die castings, aluminium alloys, water pump body, cover and brackets for automotive manufacturers in India.

MKD owns a 50% stake in Dongshin Motech Private Ltd of India, an original equipment manufacturer (OEM) for stamped automotive body parts for Korean car manufacturers.

Although the proposed acquisitions are not expected to have any material impact on group earnings, MKAL and MKD are expected to strengthen the group’s manufacturing and engineering division via exposure to India’s fast growing automotive sector.

Strengthening oil and gas exploration and development support in India and Middle East

Also on 22 Apr 2008, the group announced that its 65%-subsidiary, UMW India Ventures (L) Ltd (UMWIV) had entered into a share sale agreement with Jogen N. Buragohain (Jogen) for the acquisition of a 60% stake in Jaybee Drilling (P) Ltd (JDPL) for USD1.9m (RM6.0m). Jogen will at the same time subscribe in stages, for up to a 40% stake in the enlarged share capital of UMW Sher, a company wholly-owned by UMWIV, for a total of USD2m.

Upon completion of the proposed JDPL acquisition and proposed share subscription, JDPL will become the operating company for the charter hire onshore drilling activities in India whilst UMW Sher will be the asset owner holding all new assets required for the operations of onshore drilling activities in India.

Both transactions are not expected to impact on group earnings materially but are expected to strengthen UMW Oil and Gas’ exploration and development support operations in India and the Middle East.

Domestic vehicle sales remain strong, Perodua boosting training centres

At the group’s core automotive division, numbers remained strong as at the end of Mar 2008, with Toyota and Perodua maintaining their lead positions in the non-national segment and overall industry respectively.

As at the end of Mar 2008, Toyota’s share of total industry volume (TIV) was at 18.5%, up 0.9%-points from Feb 2008, reflecting the popularity of the new Altis model that was launched in Mar, and also continued strong sales for the high-volume Vios model. Toyota remained the top-selling non-national brand in the industry.

Perodua’s share of TIV was 30.8% as at the end of Mar 2008, down 1%-point from 31.8% in the previous month. The loss in market share was due to competition from the successful new Proton Saga, which was launched in Jan 2008. The new 1.3 litre Proton Saga is priced from about RM31,000 to RM40,000, competing with Perodua’s 1.0 litre Viva model, which is priced from RM37,000.

Although some loss in market share at Perodua is unavoidable, we believe the market is big enough for both Proton and Perodua, with Proton targeting mainly the sedan market and Perodua focusing on the compact car segment where consumers are looking for a second car.

Despite the slight drop in market share, Perodua remained the best-selling model in the overall market with the highest share of TIV as at the end of Mar 2008. In an effort to improve efficiency and service level to its custom

RM61m in the opening of four 3S-regional training centres (RTC) in Johor Baru, Kuching, Prai and Kota Baru, and one learning centre in Rawang. The centres will feature the 3S concept where sales, service and spare parts businesses will be placed under one roof. The centres will also conduct in-house training for staff and dealers.

Earnings Outlook:

• UMW remains a leader in its core automotive business, both in the national and non-national segment, under Toyota and Perodua, respectively. The Toyota franchise has commanded top position in the non-national segment for the last 17 years whilst Perodua has been the top selling model in the industry since 2006.

• UMW’s relatively new core business in oil and gas has also performed well, having gone from a new core business in 2002 to becoming the second contributor to group earnings currently.

• Prospective revenues and earnings are expected to remain strong, underpinned by UMW’s relatively strong foothold in the recovering automotive sector and robust growth at the newer oil and gas division, on the back of high oil prices and overseas expansion, in particular China and India.

• 2008 and 2009 revenues and earnings are expected to continue to remain strong, underpinned by:

• Continued growth in Toyota and Perodua sales on the back of new model launches (Toyota Altis in Mar 2008 and replacement model for Perodua Kembara by mid-08) and sustained demand for existing high-volume models such as the Toyota Vios, Perodua Viva and Perodua MyVi; and

• Strong growth at the oil and gas division, which will continue to enjoy a strong order book at existing oil and gas operations plus initial contributions from new businesses including Zhongyou BSS (Qinhuangdao) Petropipe Co Ltd in China by 4Q08 and UMW Naga Two (L) Ltd from Sep 2008.

Recommendation

• News flow for the group is expected to remain positive, with strong results expected for 1Q08 and the upcoming listing of the group’s fast-growing oil and gas unit later this year.

• The potential listing of the oil and gas unit will result in UMW shareholders receiving one free UMW Oil and Gas share for every eight UMW share held.

• The recently-proposed acquisitions in India do not require shareholders’ approval and should be internally funded – as at 31 Dec 2007, UMW had an estimated net cash position of RM820m.

• We maintain our BUY recommendation with an RNAV-based price target of RM8.20/share.

Bursa Malaysia

Bursa’s 1Q08 net profit dropped 40% YoY to MYR42.1 mln. The weaker performance was expected due to the lackluster market during the period. The average daily turnover (ADT) for equities declined 26.9% to MYR1.9 bln with a lower turnover velocity of 46% versus
68% in 1Q07. Trading revenue declined 38.7% YoY to MYR61.1 mln.

Stable revenue (income that isn’t directly affected by market turnover) rose 14.7% YoY to MYR26.4 mln mainly on higher listing fees due to the full effect of the fee revision (the full charge started on Jan. 1, 2008).

Total expenses increased 11% YoY (in line with our forecast) because of higher staff costs (due to increased ESOS expenses and annual increments) and depreciation expenses (due to capex spending to upgrade its IT systems and renovate its premises for new tenants).

We have fine-tuned our forecast and lowered our projected 2008-2009 net profit by 3%-4%. Current global market uncertainties and to a certain extent, political developments in the country may keep ADT low in the near term. Our expected earnings recovery will be supported by:
(i) a growth in derivatives turnover with the recent launch of direct market access (DMA) for derivatives and introduction of new derivatives products;
(ii) an introduction of DMA for equity (after
DMA for derivatives stabilized) should help to improve turnover velocity; and
(ii) potentially higher new listings driven by the Securities Commission’s recent relaxation of listing requirements. We maintain our Hold call on Bursa. Given the minimal revisions to our forecasts, our 12-month target price is unchanged at MYR10.00.

The target price is based on a PER of 22x on 2008 earnings and includes our projected dividend for the year. The accorded PER is at a discount to our target multiple of 25.6x for Hong Kong Stock Exchanges and Clearing (00388 HK, HK$148.00, Buy).

While near-term earnings outlook could be cloudy, the stock offers a decent dividend yield. Bursa has maintained a dividend payout of 91%-92% (excluding special dividends) over the past three years and we expect the ratio to be sustained in view of its small capex needs and strong cash position.

Risks to our recommendation and target price include a prolonged consolidation in equity market conditions, which may necessitate further reduction to our projected market turnover and turnover velocity, as Bursa’s performance is highly dependent on market sentiment.

UEM Builders

UEMB net profit of MYR157.4 mln in 2007 was lifted by a net gain of MYR90.4 mln arising from dilution in its equity stake in UK-listed Costain Group Plc (COST LN, GBP0.245, Not Ranked). Excluding this one-off gain, the net profit was MYR67.0 mln. We project stronger net profits of MYR89.4 mln and MYR111.8 mln in 2008 and 2009 respectively as the construction of the MYR4.3 bln Second Penang Bridge (P2X) gains momentum. At present, UEMB has a reasonably strong outstanding order book of MYR 3.5 bln and is likely to secure the MYR1.2 bln Cikampek-Palimanan Highway project in Indonesia soon. In addition, the construction margin is expected to improve as the new contracts would have incorporated increases in prices of raw materials.

UEMB is also expected to continue to derive stable earnings stream from its infrastructure maintenance business and Penang Bridge concession. We also expect 20.55%-owned Costain to return to profitability in 2008 after making certain write-downs and provisions for closure of its international divisions in 2007. Overall, we forecast the group’s EBIT margin to hover between 11% and 12% in 2008-2009.

Investment Risks
Risks to our recommendation and target price include fewer-than expected new contracts secured, lower-than-expected profit margins for construction projects, potential delay in the Second Penang Bridge and execution risks for overseas construction contracts.

Recommendation
We initiate coverage on UEMB with a Buy recommendation and a 12-month target price of MYR1.50.

We have valued UEMB using the Sum-of-Parts (SOP) method, which comprises four major components: (i) construction business, (ii) Penang Bridge concession, (iii) infrastructure maintenance and (iv) its 20.55% stake in Costain. Our target price also includes projected net DPS of 1.5 sen (2.0 sen gross).

At our target price of MYR1.50, the implied 2009 PER is 12.9x. The PER is at the higher end of our valuation range for small and mid-sized construction companies, which we feel is justified given UEMB’s expanding order book and stable recurring income from its existing Penang Bridge and infrastructure maintenance business. In addition, the recently proposed restricted offer for sale (ROS) by UEM World (UEM MK, MYR3.40, Not Ranked) of its shareholdings in UEMB at an offer price of MYR1.42 should provide share price support, in our view.

From a Corporate Social Responsibility perspective, we note that UEMB has published policies pertaining to the environment, occupational health and safety, emphasizing its commitment to environmental preservation. In addition, UEMB also supports various activities such as charities and human talent development programs which benefit the community.

Boustead Holdings

Boustead is one of Malaysian oldest conglomerates with over 70 subsidiaries and associated companies. Its operations are grouped into six core businesses, namely plantation, property, heavy industries, finance & investment, trading, and manufacturing & services.

A well-diversified group, Boustead is poised for a better year with a positive outlook for its core businesses. The plantation division’s performance will be stronger due to higher palm oil prices and the planned disposal of loss-making Indonesian operations.

Property earnings are secured from the recognition of profits from ongoing projects, Mutiara Damansara (in Petaling Jaya) and Mutiara Rini (in Johor), and recurring rental income. Its investment properties have the potential of being grouped together under one REIT to enable Boustead to realize the value of the assets.

The finance division opens a new chapter with The Bank of East Asia (00023 HK, HKD42.95, Buy) as a significant shareholder in the Affin Holdings (AHB MK, MYR2.05, Not Ranked) group.

The heavy industries division has over MYR3.0 bln orderbook (including the contracts to build the navy petrol vessels) to keep it busy in 2008 and 2009. It is now in a better financial position to seize the opportunities from the strong demand for shipbuilding and fabrication works amid tight shipyard space in the region.

Strong Stale Bull Selling to Cap Upside

Bursa Malaysia shares ended mixed on Tuesday, capping a five-day winning streak,but profit-taking on selected blue chips was offset by keen buying interest in oil & gasrelated stocks after global crude oil prices rallied to new record highs, almost reachingUSD118 a barrel on fears of pipeline sabotage in Nigeria. The KLCI was marginallydown by 0.7 of a point to close at 1,279.3, off a high of 1,284.08. Market breadth wasless bullish as 354 gainers led 300 losers on slower trading volume which totalled619mn shares worth RM1.1bn.

Upside Restricted by Weak Buying Momentum
As we had anticipated, profit-taking correction did emerge to cap upside, given theincreasingly overbought momentum on short-term technical indicators for the KLCI.We would continue to advocate investors sell on rally, as we expect strong stale bullselling to check immediate upside near the 1,300 psychological resistance level.Moreover, the weak buying momentum suggests that near-term upside should berestricted with most investors still sidelined and cautious. Immediate support on animmediate profit-taking correction is seen at the 1,260 to 1,250 region.

Reiterate Buy Oil & Gas Stocks
Nevertheless, we reiterate our buy calls on oil & gas related stocks such as Dialog,Petra Perdana, Ramunia, Ranhill and Wah Seong which are expected to out-perform thebroader market given the sustained strength in global crude oil to new record highs,which will boost demand for oil & gas related services.

US Stocks Fall on Earnings Concern, Record High Oil Prices
US stocks posted their biggest loss in more than a week as record high crude oil pricesand disappointing earnings from technology, health-care and consumer companies reignitedconcerns the profit slowdown will spread beyond banks. Texas Instruments,the second-largest US semiconductor chipmaker, fell the most since October on slowingorders from phone companies.

UnitedHealth Group, the biggest medical insurer, dropped almost 10% as sales toemployers slumped. Coach Inc. fell as discounts cut the profitability of its handbags,while Target Corp. led declines in 29 of 30 shares in the Standard & Poor's 500 RetailingIndex as crude oil surged above the USD119 a barrel level.

The S&P500 Index fell 12.23 points, or 0.9% to close at 1,375.94, while the Dow JonesIndustrial Average shed 104.79 points, or 0.8% to 12,720.23. The Nasdaq CompositeIndex dipped 31.1 points, or 1.3% to 2,376.94. About nine stocks fell for every two thatrose on the NYSE.

Reference Price for Telekom Malaysia (TM)

The reference price for Telekom Malaysia (TM) is RM3.05 and TM International (TMI)is RM7.85 with a trading date of 23 Apr and 28 Apr respectively. Both stocks will have a settrading limit down of 30% and limit up of 400%, which is only applicable for those tradingdates.

TM will remain as a component stock in the KLCI. TMI will be considered forinclusion in the KLCI after one month of listing if its market capitalisation is more than 1.0%of the full market cap of the Main Board; and the volume traded for the month is rankedwithin the top 75% band among all the companies on the Main Board. (Bursa Malaysia)Our target prices of TM and TMI are RM4.40 and RM8.11 respectively.

The RM4.40includes the RM0.37/share in cash to be raised by the issuance of 137.6m ESOS shares.

UMNO Link Companies

Since our market in Malaysia is unstable recently, why not watch closely the Government Linked Company (GLC) which under Barisan National (BN). These are some of the companies listed by TA Research house and some of it are from my memory. These are the United Malays National Organisation (UMNO) linked companies, Malaysian Chinese Association (MCA), Selangor State Government, and others related.

No. - Stock Code - Short Name - Company Name

UMNO

7078 - AZRB - AHMAD ZAKI RESOURCES BHD
8125 - DAIMAN - DAIMAN DEVELOPMENT BHD
1619 - DRBHCOM - DRB-HICOM BHD
2143 - ECM - ECM LIBRA FINANCIAL GRP BHD
1368 - FABER - FABER GROUP BHD
6874 - KUB - KUB MALAYSIA BHD
3174 - L&G - LAND & GENERAL BHD
9628 - LDAUN - LEBAR DAUN BHD
1651 - MRCB - MALAYSIAN RESOURCES CORPORATION BHD
4502 - MEDIA - MEDIA PRIMA BHD
2194 - MMCCORP - MMC CORPORATION BHD
9032 - MTD - CAPITAL BHD
3999 - NSTP - NEW STRAITS TIMES PRESS (M) BHD
5093 - PECD - PECD BHD
7081 - PHARMA - PHARMANIAGA BHD
2895 - PUTERA - PUTERA CAPITAL BHD
5030 - RANHILL - RANHILL BHD
5050 - RUBHD - RANHILL UTILITIES BHD
7158 - SCOMI - SCOMI GROUP BHD
7366 - SCOMIEN - SCOMI ENGINEERING BHD
7045 - SCOMIMR - SCOMI MARINE BHD
4421 - TWS - TRADEWINDS (M) BHD
4804 - TWSCORP - TRADEWINDS CORPORATION BHD
6327 - TWSPLNT - TRADEWINDS PLANTATION BHD
5054 - TRC - TRC SYNERGY BHD
5042 - TSRCAP - TSR CAPITAL BHD
4855 - UEMBLDR - UEM BUILDERS BHD
1775 - UEMWRLD - UEM WORLD BHD
5754 - UTUSAN - UTUSAN MELAYU (M) BHD
8958 - WELLI - WELLI MULTI CORPORATION BHD