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Thursday, March 3, 2011

Stocks to watch: Oil and gas, SP Setia, AirAsia, MAS, Axiata (Edge)

Stocks on Bursa Malaysia will continue to see downside pressure on Thursday, March 3 on news on record high oil price and worries that political instability could spread to major oil producer Saudi Arabia.

Investors would generally be reluctant to take fresh positions especially after the sharp falls in key regional markets while at Bursa Malaysia, gains in BAT helped cushion the impact. However, the broader market is still weak.

Reuters reports that Brent crude oil prices rose on Wednesday as news of an airstrike in Libya near an oil terminal spurred supply worries, while investors' flight to safety drove gold to a record high.

World stocks dipped, while Wall Street stocks advanced. U.S. economic data, including a Federal Reserve report saying the U.S. economy has slowly gained strength this year, helped to offset worries that higher oil prices will dampen growth.

The Dow Jones industrial average rose 8.78 points, or 0.07 percent, to settle at 12,066.80. The Standard & Poor's 500 Index gained 2.11 points, or 0.16 percent, to end at 1,308.44. The Nasdaq Composite Index advanced 10.66 points, or 0.39 percent, to settle at 2,748.07.

Stocks to watch on Bursa Malaysia include oil and gas-related counters following the record high oil prices and Petroliam Nasional Bhd’s plans to invest RM250 billion in the next five years in exploration and asset replacement to maintain the exploration levels.

The national oil corporation also said its earnings in the third quarter ended Dec 31, 2010 jumped 73.9% to RM21.20 billion from RM12.19 billion a year ago. Its revenue rose 12.3% to RM60.04 billion from RM53.43 billion.

For the nine-months ended Dec 31, 2010 its net profit was 36.3% higher at RM44.29 billion compared with RM32.48 billion. Its revenue increased 15.8% to RM175.58 billion from RM151.61 billion.

Among the stocks to watch are Kencana and Dialog but AirAsia and MAS could see downside pressure due to the crude oil price and following the International Air Transport Association’s (IATA) move to downgrade its airline industry outlook for 2011 to US$8.6 billion from the US$9.1 billion projected in December 2010.

SP SETIA BHD [] acquired approximately 268.11 acres of freehold land in Cyberjaya from Cyberjaya's master developer, Setia Haruman Sdn Bhd for a total of RM420.4 million.

SP Setia's president and CEO, Tan Sri Liew Kee Sin said the land would be developed by Setia Eco Villa, a joint venture company between SP Setia (70%) and Setia Haruman (30%) into a mixed development with an expected gross development value (GDV) of RM3 billion.

The project to be known as Setia Eco Glades is expected to commence in FY2012 pending approvals and is expected to take about six years.

Meanwhile, IATA reduced the profit outlook for the airlines industry by

46% to US$8.6 billion compared to the US$16 billion (revised from US$15.1 billion) earned by the industry in 2010.

IATA cited political unrest in the Middle East has sent oil over US$100 per barrel, which is significantly higher than the US$84 per barrel that was the assumption in December,” he added.

Axiata could be in focus after Celcom posted net profit after tax and minority interests of RM1.9 billion for the financial year ended Dec 31, 2010, which was an increase of 23% on-year. Its revenue rose 8.3% to RM6.85 billion.

Celcom had allocated RM1 billion as capital expenditure to enhance network coverage capacity and quality of which 60% is for data and 40% for voice.

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