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Reports Malaysia

Malaysia stock market and companies daily report (May 22, 2014)

May 22, 2014, Thursday, 07:12 GMT | 02:12 EST | 10:42 IST | 13:12 SGT
Contributed by Shares Investment

Bank Negara Keeps Option To Hike OPR

- Bank Negara has no immediate plans to introduce new lending curbs, even as household debt remains high. It is, however, keeping its option to raise interest rates, after assessment during the central bank’s monetary policy committee meeting in July.

- Governor Tan Sri Dr Zeti Akhtar Aziz noted that several variables, such as inflation, will be taken into account although she did not say how many basis points are being considered should there be an increase in the Overnight Policy Rate (OPR).

- The market is expecting Bank Negara to increase its OPR rate by 25 basis points to 3.25 percent based on the strong growth in the first quarter of 2014 and higher inflationary pressure, which rose 3.5 percent for consecutive months since February and 3.4 percent in April.

Significance: Bank Negara highlighted that there are many pro-growth measures in place and will not make any monetary policy adjustments at the expense of economic growth. The monetary policies will remain accommodating and not of monetary tightening.

AirAsia Earnings Up 33.3% To RM139.7m

- Backed by a higher number of passengers carried, which grew 4 percent year-on-year to 5.4 million, AirAsia posted 1Q14 revenue of RM1.3 billion, unchanged from the same quarter last year.

- However, higher operating expenses and lower average fares eroded profitability as operating profit came in 10.9 percent lower at RM223.9 million.

- Nonetheless, net profit of RM139.7 million was up 33.3 percent from a year ago, mainly due to a RM7.4 million foreign exchange gain on borrowings, compared with a RM37.7 million loss in 1Q13.

Significance: Kenanga Research and MIDF Research maintained their “Outperform” and “Buy” calls on AirAsia with target prices of RM3.01 and RM3.14 respectively while AllianceDBS Research upgraded its rating to “Buy”, with a revised target price of RM2.80. HLIB reiterated its “Hold” recommendation with an unchanged target price of RM2.22. These ratings came on the back of the expectation of the long-term structural demand tilting favourably towards the low cost carrier model.

Affin IB Research Maintains “Reduce” On Jaya Tiasa

- Jaya Tiasa Holdings’ 9M14 revenue declined 4.3 percent year-on-year to RM762.9 million due to lower contribution from its timber division.

- Affin IB Research noted that despite the lower revenue, the company’s core net profit increased substantially to RM54.4 million after taking into account the impairment of financial assets coupled with fair value loss on derivative assets.

- Nonetheless, its core net profit was still below expectation, accounting for 51 percent and 48 percent of the house and consensus FY14 estimates respectively.

Significance: The house has maintained its “Reduce” rating on Jaya Tiasa with a higher target price of RM2.59, up from RM2.26, noting the company’s unsatisfactory performance to-date.