PublicInvest Research

Author: PublicInvest   |   Latest post: Tue, 20 Aug 2019, 9:34 AM


PublicInvest Research Headlines - 9 Aug 2018

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US: Fed's Barkin says interest rates need to rise further. The US economy is strong enough to warrant further interest rate increases by the Federal Reserve, Richmond Fed President Thomas Barkin said on Wednesday. Barkin argued that the Fed's benchmark interest rate was below normal levels, a suggestion that Fed policy was still stimulating economic growth, which he said was solid. "It is difficult to argue that lower than normal rates are appropriate when unemployment is low and inflation is effectively at the Feds target," Barkin said. The US central bank kept interest rates unchanged last week, but its statement pointed to strength in the economy and bolstered expectations it would raise borrowing costs in Sept. (Reuters)

US: Treasury proposes tax rules on pass-through businesses. The US Treasury on Wednesday proposed tax regulations for a new 20% income tax deduction for owners of businesses organized as pass through entities, including rules to prevent the measure from becoming a tax loophole for wealthy Americans. The regulations are intended to provide everything pass-through owners need to comply with the Republican Tax Cuts and Jobs Act, a sweeping overhaul of the US tax code that President Donald Trump signed into law in Dec. (Reuters)

EU: Germany plans tighter scrutiny of foreign investments in defense. The German government wants to tighten oversight of investments from outside the EU in local companies that specialize in defense and security technologies, an economy ministry spokeswoman said on Wednesday. New rules under consideration would give the government powers to scrutinize non-EU investors seeking to buy at least 15% in firms that create sensitive technologies, she said. Chinese takeovers of technology firms in Germany and other EU countries have raised concerns that the Asian economic powerhouse was taking advantage of Europe’s liberal market rules to close a competitive gap. (Reuters)

UK: House prices inch up, buy-to-let investors exit market, says RICS. British house prices edged up last month as widespread falls in London weighed on gains further north, while smaller landlords quit the rental sector due to less favorable tax treatment, a survey showed on Thursday. The Royal Institution of Chartered Surveyors’ (RICS) monthly house price balance rose to +4 in July from an upwardly revised +3, in line with economists’ forecasts in a Reuters poll. Prices in Scotland, Northern Ireland and most of central and northern England rose, while prices in London fell broadly — though not as widely as earlier in the year — and prices in other parts of southern England and in Wales were flat. (Reuters)

UK: Hard to see how Brexit will improve Britain's trade position, says BoE's McCafferty. Outgoing Bank of England policymaker Ian McCafferty said on Wednesday that it was hard to see how Britain would strengthen its trading ties as a result of its decision to leave the EU. Brexit supporters have said that Britain can boost global trade ties as it detaches itself from the EU, its biggest export market. Asked if there were ways in which Britain could be stronger outside the European Union, McCafferty said “Everything is theoretically possible.” (Reuters)

China: To slap additional tariffs on USD16bn of US goods. China is slapping additional tariffs of 25% on USD16bn worth of US imports from fuel and steel products to autos and medical equipment, the Chinese commerce ministry said, as the world’s largest economies escalated their trade dispute. The tariffs will be activated on Aug 23, the ministry said, the same day that the US plans to begin collecting 25% extra in tariffs on USD16bn of Chinese goods. The US published its final list of goods subject to the new tariffs on Tuesday. China’s final list announced on Wednesday differs from an earlier draft it published in June, which included crude oil. The number of categories of goods subject to tariffs rose to 333 from 114 in the June draft, although the total value is unchanged. (Reuters)

China: Export growth tops expectations in July. China's exports growth exceeded expectations in July, despite the US imposing tariffs on USD34bn Chinese goods. Data from the General Administration of Customs showed on Wednesday that exports advanced 12.2% YoY in July. This was faster than the 10 percent rise economists had forecast. At the same time, imports logged a strong double-digit growth of 27.3% from a year ago versus the expected growth of 16.5%. Due to higher imports, the trade surplus fell to USD28bn in July, which was below the expected USD38.9bn level. (RTT)


AirAsia (Outperform, TP: RM5.03): Transfers 9 more aircraft for USD146m as part of divestment plans. AirAsia Group has completed the transfer of nine more aircraft which gave rise to gross proceeds of USD146.6m (RM597m), as part of its divestment plan for the aircraft-leasing unit that is currently managed by wholly-owned subsidiary Asia Aviation Capital Ltd (AACL). AirAsia said this latest transfer was completed on Aug 7. To date, it has transferred 39 aircraft so far, for which the group has received gross proceeds of USD501.6m (RM2.04bn). AirAsia said its planned staggered disposals of the remaining 45 aircraft and 14 aircraft engines under the sales and purchase agreement it had signed with Incline B Aviation Ltd Partnership and FLY Leasing Ltd, is on schedule. (The Edge)

IJM Corp (Neutral, TP: RM2.00): RM1.2bn development project in Penang shelved. A plan by IJM Corp for a RM1.2bn development project in Penang’s Seberang Perai Tengah has fallen through following the termination of a conditional share sale agreement to acquire Giant Hectares SB. The company announced it was no longer acquiring Giant Hectares, which had acquired land to pave the way for a mixed development project with an estimated GDV of RM1.2bn. IJM said that its wholly-owned unit IJM Land and Aseania Development SB have mutually agreed to terminate the conditional share sale agreement signed in July 2017. (The Edge)

Axis REIT: Buys warehouse factory for RM18.5m. Axis Real Estate Investment Trust (Axis REIT) is acquiring an office and warehouse factory in Senawang Industrial Park, Seremban for RM18.5m cash from Gandour (Malaysia) SB. Axis REIT said the proposed acquisition is in line with its investment objectives and growth strategy to provide the unitholders with stable income distribution and to achieve growth in the net asset value per unit of Axis REIT, by acquiring high quality, earnings accretive property with strong recurring rental income. (SunBiz)

Zecon: To challenge termination of RM495m Kuching hospital job. Zecon announced that it has received a notice of termination from the Public Works Department (JKR) for the construction of Hospital Petra Jaya in Kuching Sarawak. However, the Sarawak based engineering and construction firm is of the opinion that the purported termination is wrongful and hence, has sought legal advice on the termination. "The company will be seeking legal redress, including initiating an action to challenge the termination through the courts," the group said. (The Edge)

Kelington: Bags contracts worth RM55m. Integrated engineering solutions provider, Kelington Group has secured RM55m worth on new contracts. This lifted its year-to-date contract win total to RM236m. The new contract wins includes a RM21m job in Singapore and work related to the expansion of a bulk liquid storage terminal project in Malaysia. "These two contracts are expected to be completed by 2Q and 4Q of 2019 respectively," Kelington said. The ultra-high purity (UHP) segment contributes slightly more than half to the outstanding orderbook, followed by process engineering segment at 29%. (StarBiz)

Perak Corp: To write off RM33m on DreamWorks’ exit. The Movie Animation Park Studios (MAPS) in Meru, Ipoh has faced a major setback after Perak Corp announced that its main attraction, DreamWorks Animation, will pull out from the theme park. The move will lead to Perak Corp having to write off a total of RM33.2m in the current financial year, it said. Perak Corp’s indirect 51%-owned subsidiary Animation Theme Park SB (ATP) officially discontinued the licence agreement dated Jan 1, 2013 entered with DreamWorks Animation LLC or the establishment and operation of DreamWorks’ attractions within the MAPS, effective Aug 1, 2018. (SunBiz)

KPS: Unit sues hotel operator for contract breach. A unit of Kumpulan Perangsang Selangor (KPS) is suing a hotel operator for RM8.42m over breach of a lease agreement. KPS said its unit, Perangsang Hotel and Properties SB (PHP), had filed a claim against Leo Hospitality SB for failing to honour payment obligations and repayments. Leo Hospitality operated the PHP-owned Quality Hotel City Centre in KL from July 1999 to Feb 2016, and was granted a 20- year lease commencing March 2016. (The Edge)

MAHB: Eyeing stake in India's GVK Airports. Malaysia Airports Holdings (MAHB) is evaluating the purchase of a minority stake in GVK Airports Holdings, the Times of India newspaper reports citing people directly aware of the matter. MAHB is working with a top international consulting and advisory firm to explore a deal, the newspaper reports. GVK declined to comment, while an emailed query to MAHB remained unanswered, the newspaper says. (Bloomberg)

RHB Bank: Mulls SGD200m sale of Singapore building. RHB Bank is exploring options for its main office building in Singapore, including a potential sale that could fetch about SGD200m (USD146m), according to people with knowledge of the matter. The bank is considering selling its 17-storey location in the city-state’s central district because it wants to move to a bigger office, said the people. The lender could rent its next location after selling the 90 Cecil Street space, said one of the people, who asked not to be identified because the details are private. (Bloomberg)

Jiankun International: MKDB seeks RM1.15m from Jiankun subsidiary. MKDB SB has retracted a RM1.15m notice of demand served against Jiankun International’s wholly owned subsidiary JKI Development SB, but demanding the same amount of money from another wholly owned subsidiary, JKI Construction SB. Jiankun said that JKI Construction was served with a notice of demand dated Aug 7 by MKDB’s solicitor Messrs. KH Lim & Co, alleging outstanding balance contract sum of RM1.15m owed by JKI Construction as at Aug 3, 2018 pursuant to the agreement dated April 20, 2018 for the mutual termination of sub-contract for superstructure works for a project located at Taman Puchong Hartamas, Puchong, Selangor. (SunBiz)

Perisai Petroleum: Restraining order extended by nine months. Perisai Petroleum Teknologi has received a nine-month extension from the Kuala Lumpur High Court to restrain all proceedings and actions brought against the Practice Note 17 (PN17) company. The loss-making oil and gas provider said the restraining order is to facilitate its plan to regularise its financial condition through a proposed scheme of arrangement. On Aug 1, Perisai had submitted the application in relation to the proposed regularisation plan to Bursa Securities for approval. (The Edge)

Market Update

The FBM KLCI might open lower today after the re-emergence of global trade war concerns and sharp falls for energy stocks kept US and European equity markets pegged back overnight, although the S&P 500 stayed within easy striking distance of January’s record high. By contrast, Chinese stocks suffered another round of heavy losses, leaving the CSI 300 index close to a two-year low, after US trade officials confirmed that tariffs would be imposed on a further $16bn of Chinese imports from August 23. China’s commerce ministry said it would respond in kind. The US move came as data showed the escalating trade war had so far done little to dent Chinese exports. On Wall Street, the S&P 500 ended fractionally lower at 2,857, leaving it less than 0.6% below January’s intraday and closing record high of 2,872.87. The Dow Jones Industrial Average fell 0.2% and the Nasdaq Composite ended less than 0.1% higher. Indices in Europe mostly lost ground, with the pan-regional Stoxx 600 index slipping 0.2% and the Xetra Dax in Frankfurt down 0.1%. Elsewhere, UK stocks benefited from sterling’s renewed weakness, with the FTSE 100 rising 0.8%.

Back home, the FBM KLCI index gained 13.64 points or 0.76% to 1,804.73 points on Wednesday. Trading volume increased to 2.77bn worth RM2.71bn. Market breadth was positive with 590 gainers as compared to 322 losers. The regional markets finished mixed as the Hang Seng gained 0.39%, while the Shanghai Composite led the Nikkei 225 lower. They fell 1.27% and 0.08% respectively.

Source: PublicInvest Research - 9 Aug 2018

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