Highlights

AmInvest Research Reports

Author: AmInvest   |   Latest post: Thu, 23 Jan 2020, 9:54 AM

 

Stocks on Radar - Inari Amvertron (0166)

Author: AmInvest   |  Publish date: Thu, 23 Jan 2020, 9:54 AM


Inari Amvertron was testing the RM1.77 resistance level in its latest session With an RSI level above 50%, it may trend higher above this point with a target price of RM1.84 followed by RM1.90. If it fails to close above RM1.77, expect a sideway movement. Support price is anticipated at RM1.70, whereby traders may exit on a breach to avoid the risk of a further correction.

Trading Call: Buy upon breakout above RM1.77

Target: RM1.84, RM1.90 (time frame: 3-6 weeks)

Exit: RM1.70

Source: AmInvest Research - 23 Jan 2020

Labels: INARI
  Patrick13 likes this.
 

Stocks on Radar - Master-Pack Group (7029)

Author: AmInvest   |  Publish date: Thu, 23 Jan 2020, 9:54 AM


Master-pack Group surged past the resistance level of RM2.72 with higher trading volume. With a rising RSI, the momentum may continue towards short-term target price of RM2.90 and RM3.05. Meanwhile, it may be moving sideways if it retreat below RM2.72 mark in the near term. In this case, the downside support is anticipated at RM2.57, whereby traders may exit on a breach to avoid the risk of a further correction

Trading Call: Buy on continuation above RM2.72

Target: RM2.90, RM3.05 (time frame: 3-6 weeks)

Exit: RM2.57

Source: AmInvest Research - 23 Jan 2020

Labels: MASTER
  Be the first to like this.
 

Stocks on Radar - Focus Point Holdings (0157)

Author: AmInvest   |  Publish date: Thu, 23 Jan 2020, 9:53 AM


Focus Point Holdings was testing the RM0.57 level during its intraday high. With the momentum indicator RSI above 70%, there is a possibility it will break above the resistance price of RM0.57, and move towards the target price of RM0.63 and RM0.69. The immediate support is anticipated at RM0.51, whereby traders may exit on a breach to avoid the risk of a further consolidation.

Trading Call: Buy upon breakout above RM0.57

Target: RM0.63, RM0.69 (time frame: 3-6 weeks)

Exit: RM0.51

Source: AmInvest Research - 23 Jan 2020

Labels: FOCUSP
  Be the first to like this.
 

Stocks on Radar - Orna Paper (5065)

Author: AmInvest   |  Publish date: Thu, 23 Jan 2020, 9:51 AM


Orna Paper has rebounded from low to test the immediate resistance level RM1.12. Higher trading volume was recorded at the latest session. With rising RSI, a bullish bias may be present above this mark with a target price of RM1.17 and RM1.23. In this case, the immediate support is anticipated at RM1.06, whereby traders may exit on a breach to avoid the risk of a further correction.

Trading Call: Buy upon breakout above RM1.12

Target: RM1.17, RM1.23 (time frame: 3-6 weeks)

Exit: RM1.06

Source: AmInvest Research - 23 Jan 2020

Labels: ORNA
  Be the first to like this.
 

Banking Sector - Mild impact from 25bps OPR cut

Author: AmInvest   |  Publish date: Thu, 23 Jan 2020, 9:48 AM


Investment Highlights

  • BNM announced another 25bps reduction of the Overnight Policy Rate (OPR) to 2.75% from 3.00% which came in earlier than expected even though we have anticipated a rate cut in 1H20. This follows the OPR cut of 25bps in May 2019 to 3.00% and the lowering of SRR by 50bps to 3.00% in Nov 2019.
  • OPR cut a pre-emptive move by Central Bank to secure the improving growth trajectory of the economy. BNM highlighted that GDP growth for 2019 will be within its projected range while for 2020, growth will gradually improve supported by consumption spending and improvement in exports. Nevertheless, it cautions that downside risk remains from geopolitical tensions and policy uncertainties of certain countries.
  • Our base case GDP growth for 2020 is unchanged at 4.6%. Our economist expects BNM to stand pat on interest rate for the rest of 2020 with room for another cut should the domestic economic growth turns out to be much weaker.
  • Minimal impact on banks’ earnings from the recent 25bps OPR cut. Banks’ quarterly NIMs expected to normalize after 3 to 6 months from the repricing of deposits to lower rate. In the last rate cut of a similar quantum of 25bps in May 2019, most banks’ NIMs have recovered by as short as 3 months. Exhibit 2 shows that the 25bps reduction in the benchmark rate which will have a minimal impact on banks’ earnings of between 1 to 3% while the impact on Alliance Bank was the highest at 5.3% due to the timing of the OPR cut. The mildest impact was seen on Hong Leong Bank’s earnings. Based on our estimates, NIMs of most banks will be impacted by 2–4bps except for Alliance Bank. The impact of any OPR change will be short term (estimated 1 to 2 quarters) as repricing of deposits will eventually catch up with the changes in lending rates.
  • Loan growth projection for the banking sector is maintained at 4.0% for 2020. Our loan growth projection is in line with GDP growth projection.
  • Except for Public Bank which we have downgraded from BUY to HOLD, there are no downgrades to our rating for the other banks. The OPR cut will reduce our fair values for Maybank, Public Bank, Alliance Bank and BIMB Holdings as shown in Exhibit 2.
  • We maintain OVERWEIGHT on the sector. Our top picks continue to be Maybank (FV: RM9.70/share), RHB Bank (FV: RM6.50/share) and Hong Leong Bank (FV: RM18.90/share). We continue to see valuations of banks compelling with the sector trading at average P/BV of 1.0x for FY20 while average dividend yields remain attractive at 5.3%.

Source: AmInvest Research - 23 Jan 2020

  Be the first to like this.
 

Automobile - OPR cut to have minimal impact on vehicle purchases

Author: AmInvest   |  Publish date: Thu, 23 Jan 2020, 9:47 AM


  • Bank Negara Malaysia (BNM) has reduced the overnight policy rate (OPR) by 25bps to 2.75% yesterday. The central bank said that the adjustment to the OPR is a preemptive measure to secure the improving growth trajectory amid price stability. BNM has reduced the ceiling and floor rates for the OPR to 3.00% and 2.50% respectively.
  • The 25bps cut in the interest rate is not expected to significantly impact the sales of vehicles. We believe that in the purchase of big-ticket items such as cars, the bigger challenge for consumers will be the upfront 10% down payment. The 25bps reduction in interest rate is not likely not to ease consumers’ burden on the initial down payment.
  • As a simulation, let’s assume an individual buying a car for RM70K with a repayment term of 7 years. After factoring in a 10% down payment of RM7K, the monthly repayments pre- and post-25bps reduction in OPR will be minimal as shown below: Monthly repayment @ 3.25% interest rate = RM920.63 Monthly repayment @ 3.00% interest rate = RM907.50
  • Based on the above estimates, the reduction in monthly repayment is only a marginal RM13.13. Hence, the minimal interest cost savings are not likely to spur a sudden consumer interest to purchase vehicles. We strongly believe that this rate cut will not be a catalyst for growth for the automotive sector, unlike the 3-month “tax holiday” in 2018.
  • We maintain our NEUTRAL stance on the auto sector. We have introduced a TIV projection of 610.0K units for 2020. Our top picks for the auto sector are MBM Resources (FV: RM5.54) and DRB-Hicom (FV: RM3.18) as we expect Perodua and Proton to continue their strong showing in 2020, commanding pole position and runner up respectively in terms of TIV market share.

Source: AmInvest Research - 23 Jan 2020

  Be the first to like this.
 

Automobile - 2019 TIV in line; Perodua sets another record-high year

Author: AmInvest   |  Publish date: Thu, 23 Jan 2020, 9:46 AM


Investment Highlights

  • December 2019 TIV was up 4% MoM and 14% YoY to 54.8K units. We believe December 2019’s TIV was higher MoM due year-end promotional activities by most major marques. Cumulatively, 2019 TIV was marginally up 1% to 604.3K units from 598.6K units in 2018. It was in line with our full-year forecast of 603K for the year.
  • We note the following for the major car marques’ in December’s sales figures:

1) Perodua registered a total sales volume of 18.4K units (-10% MoM, 0% YoY) in December. Perodua sets yet another record-high year with a total sales volume of 240.3K units for 2019, exceeding its full-year target of 235.0K units. The Aruz continued to be the most popular SUV in Malaysia with 2.7K units sold for the month. Cumulatively, 30.1K units of the Aruz have been sold. The 2020 Perodua Bezza has been officially launched in Malaysia and it is priced from RM34.6K–RM50.0K in 4 variants.

2) Proton delivered 11.1K units (+15% MoM, +99% YoY) in December, including 2.6K units for the X70. The total 2019 sales for Proton stood at 100.2K units, recording an outstanding YoY growth of 55%. Proton successfully secured its runner-up position in terms of market share at 16.6% for the year, ahead of Honda’s 14.1%. We note that Proton has introduced its sales volume target for 2020 at 132.0K units.

3) Honda sold a decent 7.2K units (+8% MoM, -10% YoY) in December 2019. For the year 2019, Honda sold a total of 85.4K compared with 102.3K units in 2018, translating into a 16% decline. Honda’s YTD market share of 14.1% put it in the third place behind national carmakers Proton and Perodua. We look forward for the launch of the all-new Honda City 2020 in Malaysia in 1HCY2020.

4) Toyota sold 8.0K units (+16% MoM, +87% YoY) in December. For 2019, Toyota sold 69.0K units (+5% YoY), falling slightly short of its full-year target of 72.0K units. The UMWH management highlighted that Toyota’s top three best-selling models for the year were the volume-driven Vios, Yaris and Hilux, comprising about 73% of its total sales. We continue to be cautious on Toyota’s outlook in CY2020 due to our expectations of fewer new passenger vehicle launches this year. We also anticipate competition to heighten in the passenger vehicle space with the expected launch of the all-new Nissan N18 Almera and Honda City 2020. It is important to note that these two models are direct competitors to the Toyota Vios.

5) Mazda’s sales volume normalized a little to 0.9K units (+12% MoM, -38% YoY) in December. The all-new Mazda CX-30 has been officially launched on 15 January 2020. It is a CBU from Japan based on the Mazda 3 platform and is priced RM143K–RM173K in 3 variants. It is positioned between the CX-3 and CX-5 in terms of size/dimensions but shares the same pricing range as the latter. Bermaz Auto has targeted a total sales volume of 3000 units for the CX-30 in 2020 as the group has intentions of making the model its third CKD vehicle after its flagship products CX-5 and CX-8.

  • The approval rate for loans on passenger cars stood at 57.1% in November, a decrease of 1.9% from October and lower than the average rate of 59.6% in 2018.
  • We continue to be optimistic on the national car marques Proton and Perodua for 2020, while we stay cautious on the foreign and premium car brands as consumers are more careful and conservative with their discretionary spending, indirectly benefitting cheaper and better value-for-money cars.
  • We maintain our NEUTRAL stance on the auto sector with a TIV projection of 610K units for 2020. Our top picks for the sector are DRB-Hicom (FV: RM3.18) and MBM Resources (FV: RM5.54) as we expect Perodua and Proton to continue their strong showing in 2020, commanding the pole position and runner up respectively in terms of TIV market share.

Source: AmInvest Research - 23 Jan 2020

Labels: DRBHCOM, MBMR
  Be the first to like this.
 

Malaysia – Room for another 25 – 50bps OPR cut?

Author: AmInvest   |  Publish date: Thu, 23 Jan 2020, 9:45 AM


BNM went ahead of the curve to reduce the OPR by 25bps to 2.75%. With the cut in OPR, it beat the 40% probability placed that BNM will “likely” stay behind the curve in the January policy meeting. We reiterate our view cited in the report dated January 20 where a rate cut is positive as it will help support the economy and capital market as well as help put a lid on the declining business and consumer sentiments.

Moving ahead, room for rate cuts remains if the domestic and/or external environment continues to play up and raise the downside risk on the economy and capital market. Inflation is likely to average around 1.8% to 2.00% from a low base 0.7% for 2019, mostly coming from the cost side and lesser from the demand side.

With limited fiscal flexibility and moderate exports, the bigger role will come from monetary policy. It is to ensure private consumption remains as the growth anchor in 2020. So, another 25bps to 50bps cut from 2.75% is still on our cards and can happen either end 1H2020 or 2H2020, much depends on the potential incoming data. Should there be a 50bps cut, it is unlikely for the economy to experience a “negative real returns”.

  • Bank Negara Malaysia (BNM) decided to cut the OPR by 25 basis points to 2.75% after a 25bps cut in May 2019 and a surprise 50bps cut in SRR to 3.00% in November. While the decision to cut OPR may have come as a surprise to the market, it fell into our 60% chance for a cut based on our report on Monday January 20 titled “BNM likely to stay behind the curve” to which the probability of staying behind the curve is 40%.
  • Decision to cut the OPR by 25bps to 2.75% is seen as a move “ahead of the curve” and can be viewed positively. A rate cut should provide positive impetus to the economy and the capital market. It should potentially help put a lid on the declining business and consumer sentiments.
  • Loans growth has been softening, with NPLs ticking up gradually. Manufacturing is in recession and yet to bottom out. Labour market is getting tougher. Living cost is on the rise. There is growing downside risk on the services sector. If this trend continues, private consumption which is the growth anchor for 2020 may not be able to yield fruitful results. Drag will eat into the overall business activities.
  • Furthermore, Ringgit gained by about 0.4% to around 4.05–4.06 against the USD opened the door for a rate cut. Current global uncertainties have softened slightly, but not out of the woods. Adding on, with limited fiscal flexibility, monetary policy will play a crucial role.
  • Moving ahead, room for rate cuts remains if the domestic and/or external environment continues to play up and raise the downside risk on the economy and capital market. Inflation is likely to average around 1.8% to 2.0% from a low base 0.7% for 2019, mostly coming from the cost side and lesser from the demand side.
  • With limited fiscal flexibility and moderate exports, the bigger role will come from monetary policy. It is to ensure private consumption remains as the growth anchor in 2020. So, another 25bps to 50bps cut from 2.75% is still on our cards and can happen either end 1H2020 or 2H2020, much depends on the potential incoming data. Should there be a 50bps cut, it is unlikely for the economy to experience a “negative real returns”.

Source: AmInvest Research - 23 Jan 2020

  Be the first to like this.
 

CIMB - Lower provisions lead to stronger CIMB Thai earnings

Author: AmInvest   |  Publish date: Wed, 22 Jan 2020, 12:34 PM


  • We maintain our BUY recommendation on CIMB Group with an unchanged fair value of RM6.00/share based on FY20 P/BV of 1.0x, supported by an ROE of 9.1%. No changes to our earnings estimates for now.
  • CIMB Thai recorded a net profit of THB774mil (or RM104mil) in 4Q19, a significant increase of 159.5% QoQ largely from a stronger total income and lower provisions. 12M19 saw the Thai subsidiary’s earnings improving to THB1.5bil or RM201mil compared to THB7mil in 12M18 underpinned by higher net interest income from loan expansion of 6.8%YoY and investments, stronger NOII and lower provisions, partially offset by increase in operating expenses.
  • NOII for 12M19 grew 10.6%YoY attributed to higher gains from trading and FX transactions, recognition of gains from investments, gains from the sale of NPLs coupled with higher net fee and service income, partially offset by losses on financial instruments at fair value through P&L (FVTPL).
  • JAW remained negative for the Thai subsidiary (-10.6%) for 12M19 as a rise in opex continued to outpace the growth in total income. Opex rose by 14.1% YoY attributed to higher personnel cost, coupled with higher compensation for retired and senior employees. CIMB Thai’s CI ratio climbed to 68.5% in 12M19 vs. 62.1% in 12M18.
  • Provisions at CIMB Thai decreased by 48.7% YoY to THB2.5bil, consequently leading to an improved credit cost of 1.00% in 12M19 vs. 2.09% in 12M18. Total provisions remain at a comfortable level standing at THB10.5bil and are seen as conservative with an excess provisioning of THB4.9bil over the requirements of Bank of Thailand (BOT).
  • CIMB Thai's NPL ratio was stable at 4.6%. The Thai subsidiary’s loan loss cover stood at 93.7%. Loan to deposit ratio for CIMB Thai improved slightly to 126.3% in 4Q19 due to a slowdown in loans growth to 6.8%YoY from 9.8%YoY in 3Q19.
  • NIM contracted to 3.32% in 12M19 vs. 3.71% in 12M18 due to higher funding cost. Management hinted of a potential 1 rate cut for Thailand in 2020. Any rate cut will have a minimal impact on CIMB Thai’s margin as deposits in Thailand reprice at a faster pace compared to Malaysia.

Source: AmInvest Research - 22 Jan 2020

Labels: CIMB
  Be the first to like this.
 

RHB BANK - Earnings likely to improve with lower GIL ratio in 4Q19

Author: AmInvest   |  Publish date: Wed, 22 Jan 2020, 12:33 PM


Investment Highlights

  • We maintain our BUY call on RHB Bank with an unchanged fair value of RM6.50/share. Our FV is pegged to FY20 P/BV of 1.0x, supported by an ROE of 9.9%. No change to our earnings estimates.
  • We met the management for updates yesterday. 4Q19 results are scheduled to be released on 27 February. Earnings for 4Q19 is likely to be stronger than 3Q19’s. This is premised on an improved loan growth, better NIM, stronger NOII, coupled with stable credit cost for the quarter.
  • We gather that loan growth in 4Q19 has picked up pace QoQ contributed by drawdowns of corporate loans. Loans for property development, the plantation sector and conglomerates were drawn down in 4Q19. There were still corporate repayments. Nevertheless, repayments were lower than drawdowns of corporate loans in the quarter.
  • Loan growth for the full FY19 is likely to slightly better than the group’s target of 5.0%. Expansion of loan book for FY19 will be supported by growth in corporates, mortgages and loans in Singapore. With the recent lower returns of ASB, growth of loans for purchase of securities is expected to taper going forward.
  • 4Q19 NIM is likely to improve on a QoQ basis, recovering from the OPR reduction of 25bps in May 2019. Improved funding cost is expected on the back of repricing of matured deposits from the earlier campaigns to lower rates. Meanwhile, asset yield was stable in 4Q19. FY19 NIM is likely to be 2.12%–2.13% in line with guidance. Recall that for 9M19, the group registered a NIM of 2.11%.
  • We gather that CASA growth has improved in 4Q19 compared to 3Q19. Corporate CASA has gained traction contributed by deposit campaigns in Singapore in 3Q19. The group’s LCR is still standing at circa 130%.
  • 3Q19 credit cost was 0.16%. Credit cost in 4Q19 is likely to be stable as write-backs in provisions from yje regularisation of certain R&R loans (1 large construction loan and 1 to 2 smaller business loans) were offset by some loan write-offs. 12M19 credit cost is expected to be in the high teens within our estimate of 20bps for FY19.
  • The resolution of the aforementioned R&R loans will improve the group’s GIL ratio. The ratio in 4Q19 should trend lower from 2.16% in 3Q19 moving closer to its target of <2.0% for FY19.
  • On the impaired manufacturing loan in Malaysia and the R&R loan in Singapore related to the utility sector, we understand that allowances for loan losses have been sufficiently provided for. In Singapore, after the provisioning was taken in 2Q19, provisions turned stable in 4Q19.
  • Unrealised marked-to-market gains from FVOCI securities were substantial in FY19, benefitting from the decline in yields. This has resulted in the balance of FVOCI reserves for the 9M19 jumping to RM1.43bil. We believe that in a sustained low interest rate environment in FY20, the group will be able to monetize a portion of the gains by disposing of some FVOCI securities. This could see an uplift in the group’s ROE in FY20 which will in turn be supportive of the share price.
  • On NOII, treasury income will continue to key contributor for FY19. We understand that in 4Q19, NOII has improved compared to 3Q19 with higher fees from certain materialized capital market deals and fees from loans.
  • The group will be relieved of losses of RM2-3mil a month from the closure of its equity business in Hong Kong. Potential capital accretion to the group’s CET1 ratio from the cessation of the business is expected to be minimal.
  • On the RHB Insurance, talks have ended with Tokio Marine to dispose of the insurance business to the latter. With that, the group will focus on organic growth for the insurance business. Meanwhile, on the non-extension of the banca partnership with Syarikat Takaful Malaysia Keluarga, the group is open to explore partnerships with other insurers that could add better value for its insurance business.
  • Group and bank entity CET1 ratios continued be higher than its peers at 16.5% and 14.4% respectively as at the end of 3Q19. Capital ratios should further improve after the capital floors imposed by the regulatory authority on RHB Islamic Bank’s ratios have been slowly lifted.

Source: AmInvest Research - 22 Jan 2020

Labels: RHBBANK
  Be the first to like this.
 

Gloves Sector - Wuhan novel coronavirus (2019-nCoV) strikes

Author: AmInvest   |  Publish date: Wed, 22 Jan 2020, 9:29 AM


Investment Highlights

  • The World Health Organisation (WHO) has reported an outbreak of novel coronavirus (2019-nCoV) in Wuhan, China. Outside of China, the virus has been detected in the US, Japan, Taiwan, Thailand and South Korea in patients who travelled from Wuhan. According to The New York Times, Dr Zhong Nanshan, a top Chinese government-appointed expert, the new coronavirus can be transmitted from human to human. The illness has killed at least four people and infected more than 200 people.
  • Recall that during the previous major pandemic outbreak, glove companies’ earnings and share price were affected. During the 2003 SARS outbreak (November 2002 – March 2003), the share prices and earnings for Top Glove, Kossan and Supermax rose as shown in Exhibit 1 and Exhibit 2. The same happened during the 2009 pandemic H1N1 outbreak (June 2009 – August 2010).
  • According to the US Centers for Disease Control and Prevention (CDC), the SARS outbreak of 2003 affected 8,098 people worldwide of which 774 died.
  • On the other hand, the WHO confirmed a minimum of 18,449 deaths during the 2009 H1N1 pandemic influenza (although a research team led by the CDC estimated a global death toll of more than 284K, according to the Center for Infectious Disease Research and Policy from University of Minnesota.
     
  • We believe that location plays an important role in the spike in demand for gloves during pandemic outbreaks.
     
  • Although the glove companies’ net margins improved by around 0.6–6.8ppts during the 2003 SARS outbreak (see Exhibit 3), we believe this was partly due to an organic improvement in profitability due to capacity expansions (net margins remained flattish post-outbreak). At that time, the SARS outbreak was more prevalent in China and other countries in Asia instead of America and Europe (see Exhibit 8).
  • In comparison, during the 2009–2010 H1N1 pandemic outbreak, the glove companies’ net margins surged by 3.4– 9.7ppts and remained high before falling after the WHO announced that the outbreak had been contained. We believe this was due to the highly-contagious nature of the disease as well as the affected location. As shown in Exhibit 9, the highest death toll from the 2009–2010 pandemic was in the US. Europe was also badly affected by the outbreak. We believe the demand from gloves was stronger as glove consumption per capita is typically high in the America and Europe regions.
  • We believe that orders for gloves during the outbreak were high as customers stock up as a pre-emptive measure. However, post-outbreak, there was an excess supply in the customers’ inventory which lowered sales growth subsequently. For instance, Top Glove’s revenue surged 36.0% while net profit climbed 45.0% in FY10. Subsequently in FY11, revenue dipped 1.2% while net profit fell 53.9%. The earnings pattern is similar for the other glove players.
  • During the SARS outbreak, the sector PE traded at 11.5x and peaked at 18.2x (close to +2 SDs), as shown in Exhibit 6. During the H1N1 outbreak, the sector P/E traded at 12.2x while it peaked at 17.2x (+2.5 SDs), as shown in Exhibit 7.
  • We are upgrading our call to OVERWEIGHT from NEUTRAL for the glove sector as we expect demand to rise. We raise the PE valuation for Top Glove, Kossan and Hartalega to 30x, 25x and 35x respectively. Currently, we forecast the revenue for glove companies under our coverage to increase by more than 10% each for in 2020. We will review our earnings forecasts during the results’ release in February when the respective management give better clarity.
  • We would also like to note that we believe the recent strengthening of the MYR against the USD will minimally impact the glove companies. Based on our sensitivity analysis, a 2% appreciation in the MYR against the USD will reduce net income by around 1%–1.5%. This is because the glove companies typically pass on cost increases and savings to customers within 1 to 2 months. We believe glove companies are more impacted by sharp movements in the USD/MYR which leaves the companies with less time to pass on the costs.

Source: AmInvest Research - 22 Jan 2020

  Be the first to like this.
 

Titijaya Land - Expect higher revenue recognition in coming quarters

Author: AmInvest   |  Publish date: Wed, 22 Jan 2020, 9:27 AM


Investment Highlights

  • We are maintaining our HOLD recommendation on Titijaya Land (Titijaya) with a higher fair value of RM0.32 (from RM0.28) based on a 50% discount to its RNAV (Exhibit 1). Our upgrade in valuation is to reflect the timing of future projects’ recognition following guidance by management. We made no changes to our FY20–FY22 net earnings forecasts.
  • We recently met up with Titijaya for updates on the company’s plan for 2020 and beyond. Titijaya is maintaining its new sales of RM400mil for FY6/20. At present, the company has several ongoing projects, namely 3rdNvenue Phase 1 @ Embassy Row, KL (Service suite – GDV of RM577mil); The Shore @ KK, Sabah (mixed development – GDV of RM534mil); Riveria @ KL Sentral (integrated development – GDV of RM373mil); and Park Residency @ Cheras (landed residential – GDV of RM80mil).
  • Titijaya launched Seiring Residensi in August 2019, which is phase one of its Damaisuria township project. Consisting of four towers, Seiring Residensi offers units at sizes ranging from 668 sq ft to 972 sq ft, with up to four bedrooms. Developed over four phases, Damaisuria will have a total GDV of RM1.59bil, while the first phase Seiring Residensi will have a GDV of RM677mil.
  • The company is also planning to launch Taman Seri Residensi, Klang Phase 3B (landed semi-D – GDV of RM38mil) by 2HFY6/20.
  • For future development, Titijaya has a remaining landbank of 155 acres with a combined GDV of about RM9.4bil, located mainly in the Klang Valley. The projects planned for the remaining landbank are Emporia @ Glemnarie (mixed development – GDV of RM1.51bil); Klang Sentral (serviced apartment – GDV of RM700mil); Damai Suria (township – GDV of RM1.48bil); Odeon @ Jalan TAR, KL (serviced apartment & retail mall – GDV of RM1.17bil); 3rdNvenue Phases 3,4 & retail (hig-hrise mixed – GDV of RM997mil); Taman Seri Residensi Phases 3A, 4 & Selangorku (landed residential – GDV of RM161mil); Riveria City @ KL Sentral Phases 2, 3 & retail (integrated development – GDV of RM1.1bil); and Areca @ Batu Maung, Penang (mixed development – GDV of RM2.52bil).
  • Management indicated that several ongoing projects have progressed beyond their initial stage of construction, therefore the coming quarters should see a stronger performance. We made no changes to our FY20–FY22 numbers at this juncture. Maintain HOLD.

Source: AmInvest Research - 22 Jan 2020

Labels: TITIJYA
  Be the first to like this.
 

Stocks on Radar - Reach Energy (5256)

Author: AmInvest   |  Publish date: Wed, 22 Jan 2020, 9:25 AM


Reach Energy may soon test the RM0.18 resistance level. A bullish bias may be present above this mark with the short-term target prices of RM0.20 and RM0.22. Meanwhile, it may continue moving sideways if it fails to cross the RM0.18 mark in the near term. In this case, the downside support is anticipated at RM0.165, whereby traders may exit on a breach to avoid the risk of a further correction Trading Call: Buy upon breakout above RM0.18

Target: RM0.20, RM0.22 (time frame: 3-6 weeks) Exit: RM0.165

Source: AmInvest Research - 22 Jan 2020

Labels: REACH
  Be the first to like this.
 

Stocks on Radar - MMS Ventures (0113)

Author: AmInvest   |  Publish date: Wed, 22 Jan 2020, 9:24 AM


MMS Ventures has been range-bound during recent sessions with the immediate resistance of RM0.865. With the momentum indicator RSI above 60%, there is a possibility it will break above the resistance price and move towards the target prices of RM0.895 and RM0.93. The immediate support is anticipated at RM0.825, whereby traders may exit on a breach to avoid the risk of a further consolidation. Trading Call: Buy upon breakout above RM0.865

Target: RM0.895, RM0.93 (time frame: 3-6 weeks) Exit: RM0.825

Source: AmInvest Research - 22 Jan 2020

Labels: MMSV
  Be the first to like this.
 

Stocks on Radar - Comfort Gloves (2127)

Author: AmInvest   |  Publish date: Wed, 22 Jan 2020, 9:22 AM


Comfort Gloves has rebounded from its low to test the immediate resistance level of RM0.825. With a rising RSI, a bullish bias may be present above this mark with the target prices of RM0.86 and RM0.89. In this case, the immediate support is anticipated at RM0.79 whereby traders may exit on a breach to avoid the risk of a further correction. Trading Call: Buy upon breakout above RM0.825

Target: RM0.86, RM0.89 (time frame: 3-6 weeks) Exit: RM0.79

Source: AmInvest Research - 22 Jan 2020

Labels: COMFORT
  Be the first to like this.
 

Stocks on Radar - Supermax Corporation (7106)

Author: AmInvest   |  Publish date: Wed, 22 Jan 2020, 9:21 AM


Supermax Corporation shot up above the RM1.43 resistance and formed a long white candle in its lastest session. With an RSI level above 60%, the momentum may continue to propel it towards RM1.51 followed by RM1.56. If it closes below RM1.43, expect a sideway movement. Support is anticipated at RM1.38, whereby traders may exit on a breach to avoid the risk of a further correction Trading Call: Buy on continuation above RM1.43

Target: RM1.51, RM1.56 (time frame: 3-6 weeks) Exit: RM1.38

Source: AmInvest Research - 22 Jan 2020

Labels: SUPERMX
  Be the first to like this.
 

Digi.Com - Flat low single-digit EBITDA decline guidance

Author: AmInvest   |  Publish date: Wed, 22 Jan 2020, 8:55 AM


Investment Highlights

  • We maintain our HOLD rating on Digi.Com with an unchanged DCF-based fair value of RM4.70/share based on WACC of 6.3% and terminal growth rate of 2%, which implies an FY20F EV/EBITDA of 12x — in line with its 2-year average together with a supportive dividend yield of 4%.
  • We have fine-tuned Digi’s FY20F–21F earnings as its FY19 net profit of RM1,433mil (-7%YoY) came in largely within our and street’s expectation.
  • However, as we had forewarned in past updates, the group declared a 4QFY DPS of 4.4 sen (-0.1 sen QoQ), which leads to a 1.4 sen YoY decline in FY19 DPS of 18.2 sen due to the softer earnings. This is 0.2 sen below our forecast and consensus.
  • Management largely extends its FY19 guidance to FY20F with a flat low single-digit decline for service revenue and EBITDA trajectory due to continued decline in prepaid and legacy customers together with a 0.96 sen decline in mobile termination rates this year.
  • Digi’s FY20F capex is expected to be similar to FY19’s, which increased by 10% YoY to RM753mil – slightly higher than our expectations given the actual ratio to service revenue of 13.3% vs. management’s revised 12%–13%. With the group’s expected decline in service revenue this year, this could mean that the capex-to-service revenue ratio could rise further to 14% in FY20F.
  • At this stage, management did not provide clarity on the expected capex required for 5G rollout given that different options are being considered for the single consortium of operators for the 700MHz and 3.5GHz spectrums.
  • Digi’s 4QFY19 net profit dropped 4% QoQ to RM343mil largely due to seasonally higher operating costs from cost of materials (+75%) as a result of higher take-up of postpaid packages and traffic (+9%).
  • This was partly offset by service revenue rising by 2% QoQ, driven by a 39K increase in postpaid subscribers and RM1/month increase in blended average revenue per user (ARPU) to RM41/month.
  • YoY, Digi’s net subscribers fell by 810K with prepaid losing 1mil subscribers which was partly offset by a gain of 227K postpaid users. As ARPU rose by RM1/month for both prepaid segment to RM30/month and postpaid to RM72/month, the overall service revenue decline was cushioned to only 2.5%.
  • ThIs shift from prepaid subscribers has caused the postpaid’s share of group revenue to further rise to 48% in 4QFY19 from 43% in 4QFY18.
  • The stock currently trades at a fair FY20F EV/EBITDA of 12x – at parity to its 2-year average with a decent 4% dividend yield.

Source: AmInvest Research - 22 Jan 2020

Labels: DIGI
  Be the first to like this.
 

Automobile - Change on OMV under new excise duty regulations?

Author: AmInvest   |  Publish date: Tue, 21 Jan 2020, 9:50 AM


  • We maintain our NEUTRAL stance on the auto sector with a TIV projection of 610K units for 2020.
  • There has been recent news about a potential restructuring of excise duties which may impact the prices of vehicles.
  • However, it is still uncertain on how excise duties will be restructured. Potentially, CKD car prices could increase this year due to the government’s new excise duty regulation which was gazetted on 31 December 2019. Current excise duties imposed on vehicles varies from 60% – 105% depending on car models and makes.
  • Our channel checks revealed that there could be a change on the open market value (OMV) of vehicles and this could impact the excise duties imposed as excise duties are based on the OMV. If this is true, the new OMV calculation for CKD models may include royalty fees, dealership margin fee and also assembly charges. However, we are unsure of its quantum and other variables involved as there is no official information available.
  • We believe that this is part of the reason for the delay in Bermaz Auto’s (BAuto) pricing for the new CX-5 and CX-8. Some models in the market have been delayed for up to seven months due to the lack of clarity in the government’s updated tax incentives and policies for locally assembled vehicles.
  • We noticed that there was a price hike of approximately RM2.1K in all ranges for the Mazda’s 2019-facelifted CX-5. We believe that this was due to the new gazetted new OMV calculations. This has translated into a price increase of about 2%. If this were to happen to all major car marques and its respective CKD models, we believe that the extra costs will be passed down to the consumers.
  • We reckon that an increase of 2% in CKD car prices will be slightly negative for the sector as it is only a small rise, thus not expected to heavily impact consumers’ decision for car purchases. We are hopeful that the government will announce further information soon and provide more clarity on excise duties and the derivation of OMVs.
  • Even if car prices do increase in tandem with the new excise duties structure, we are still optimistic on national marques Proton and Perodua as they offer cheaper and better value for their cars.
  • We have BUYs on MBM Resources (FV: RM5.54), DRB-Hicom (RM3.18) and Pecca (RM1.46).

Source: AmInvest Research - 21 Jan 2020

Labels: MBMR, DRBHCOM, PECCA
  Be the first to like this.
 

Automobile - Key highlights from automotive talk

Author: AmInvest   |  Publish date: Tue, 21 Jan 2020, 9:49 AM


  • Former president and chief executive officer (CEO) of Perodua Datuk Dr Aminar Rashid gave a talk on Malaysia’s automotive industry at AmInvestment Bank on 15 Jan 2020.
  • The key takeaways from the presentation are as follows:

1) Aminar highlighted that Thailand is the “Detroit of Asia”, where it currently has the largest automotive industry in Southeast Asia with vehicle exports of more than 50% of its total industry production (TIP), accounting for about 879 billion baht in 2018. This was due to the Thai government introducing various tax incentives and exemptions to attract foreign direct investments (FDIs). He also said that Indonesia is an up-and-coming giant with strong potential growth for passenger cars which will compete against Thailand for the pole position in the region.

2) According to Aminar, Malaysia’s TIV growth will be marginal year-on-year should there be no major catalyst for the automobile sector. This is in view the fact that Malaysia is already tipping towards the saturation point of around 600–610K units per annum.

3) Malaysia has the potential to export more automotive parts and components. Meanwhile, there are still barriers which will limit the export of vehicles. The Malaysia Automotive, Robotics & IoT Institute (MARii) has forecasted the parts and components export to be worth RM61.3 billion by 2050, which entails 15.0% of our national GDP.

4) Electric and autonomous vehicles are undoubtedly the future but there are several major problems – higher cost of ownership and maintenance, and the difficulty in disposing of batteries and vehicles. Malaysia’s receptiveness to electric vehicles is relatively low, and currently, there is no ecosystem to support the growth of such vehicles (e.g. lack of plug-in charging stations, scarcity of auto parts).

5) Mobility-as-a-Service (MaaS) to be a paradigm shift in the transport space. MaaS is envisioned to be carried out via an integrated system with the rise of micro mobility and shared mobility. This will help to bridge the first mile/last mile gap, thus saving time and money.

6) There will be a new emerging trend which converts vehicles from a product to a service. We are witnessing the entry of motorcycle e-hailing services GrabBike, DEGO ride and GoJek into Malaysia after their success in Thailand, Vietnam and Indonesia. The Ministry of Transport has approved a 6-month trial period for the Klang Valley area beginning January 2020.

  • We maintain NEUTRAL on the auto sector with a TIV projection of 610K units for 2020. Our top picks for the sector are DRB-Hicom (FV: RM3.18) and MBM Resources (FV: RM5.54).

Source: AmInvest Research - 21 Jan 2020

Labels: DRBHCOM, MBMR
  Be the first to like this.
 

Stocks on Radar - Hartalega Holdings (5168)

Author: AmInvest   |  Publish date: Tue, 21 Jan 2020, 9:48 AM


Hartalega Holdings was testing the RM5.57 resistance price in its latest session with higher trading volume. With the momentum indicator RSI above 60%, the short-term rebound could reach a target price of RM5.73, followed by RM5.88. If it fails to cross RM5.57, it will move sideways for more consolidation. Support is anticipated at RM5.42 whereby traders may exit on a breach to avoid the risk of a further correction.

Trading Call: Buy upon breakout above RM5.57

Target: RM5.73, RM5.88 (time frame: 3-6 weeks)

Exit: RM5.42

Source: AmInvest Research - 21 Jan 2020

Labels: HARTA
  Be the first to like this.
 


 

358  242  497  1176 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 IMPIANA 0.0250.00 
 DGB 0.135+0.005 
 SUPERMX 1.61+0.09 
 XDL 0.165+0.005 
 HSI-C7K 0.285+0.01 
 XDL-WD 0.02+0.005 
 ALAM-WA 0.0650.00 
 EAH 0.0150.00 
 MYEG-C87 0.055+0.005 
 HSI-H8K 0.175-0.02 

FEATURED POSTS

1. Leveraged & Inverse ETF CMS
Partners & Brokers