Stocks to watch: Maybank, Public Bank, TM, Muhibbah

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KUALA LUMPUR: The market is expected to remain lacklustre this week as investors continue to stay cautious on concerns about the outlook for the economy, both locally and that of the US, but stocks which could see trading interest on March 16 include Maybank, Public Bank, Telekom Malaysia and Muhibbah Engineering. Maybank could see some positive trading activity after Fitch Ratings affirmed the long-term local and foreign currency issuer default ratings (IDRs) with a stable outlook. The rating agency is positive about the bank’s RM5 billion to RM6 billion rights issue. With core capital restored to a higher level, Fitch expects Maybank to be better cushioned against the impact of very challenging economic conditions this year. Fitch Ratings said Maybank’s challenge was to manage newly acquired banks in lowly-rated markets like Indonesia, Pakistan and Vietnam which could prove to be an added drag on its balance sheet amidst a tougher operating climate.  “But given the moderate exposure to these markets currently, comprising around 8%-9% of total loans, and in view of the bank's enhanced capital cushion post-rights, the negative impact on the bank's balance sheet is expected to be largely contained,” it said in a recent report. However, CIMB Equities Research had retained its Underperform call on Maybank despite the 20% fall in the share price in the past two weeks until March 12. It remained cautious on the prospects of the group’s local and overseas businesses due to the regional economic downturn. As for Public Bank, a local research house said the banking group’s market capitalisation had shrunk by nearly RM7.1 billion over the past month. The main concern is whether the group can sustain its generous dividend payouts due to the potential need to shore up its capital position. However, the research house believes the selldown has indeed been excessive and instead provides a strong opportunity to buy on weakness. It upgraded its recommendation to a Buy with a lower target price of RM8.60, underpinned by a sustainable return on equity of 23% and long-term growth of 4.0%. Meanwhile, EON Capital has got the go-ahead from the Securities Commission to extend the proposed issuance of warrants by EON Bank. EON Bank had proposed to issue RM655 million debt notes and proposed issue of 93.8 million 2008/13 warrants.The firm crude palm oil prices are expected to buoy IOI Corp, Kuala Lumpur Kepong and United Plantations which are efficient producers and the interest could also spillover to smaller players which have fallen off the radar screen. Muhibbah Engineering saw Credit Agricole Asset Management S.A, ceasing to be a substantial shareholder in the company after it disposed of 1.22 million Muhibbah shares on March 4. Telekom Malaysia could attract interest as it will disclose indicative terms and conditions for high speed broadband wholesale services at a media briefing at noon on March 16. Axis Incorporation Bhd has told Bursa Malaysia Securities that it is unable to service the loan repayments to certain lenders due to its tight overall working capital position. The default in payment of principal and interest amounted to about RM100 million as at Dec 31, 2008.  Kramat Tin Dredging will be suspended on March 23 after its regularisation plan failed. Its last trading day is March 20.