PublicInvest Research

Author: PublicInvest   |   Latest post: Tue, 18 Jun 2019, 10:48 AM


PublicInvest Research Headlines - 27 Aug 2018

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US: Business equipment orders point to firm investment. New orders for key US-made capital goods increased more than expected in July and growth in shipments held firm, signs that business investment started the third quarter on a strong note. The Commerce Department said orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, rose 1.4% last month after an upwardly revised 0.9% increase in June. Business spending on equipment is being supported by the Trump administration's USD1.5trn income tax cut package, which came into effect in Jan. But there are worries that trade tensions between the US and its major trade partners, including China, Canada, Mexico and the EU, could offset the fiscal stimulus. (CNBC)

US, China: Trump’s China hawks prepare to swoop as trade talks go nowhere. The US’s trade war with China is about to get uglier. After a long, hot summer spent weighing risks and firing warning shots, the hawks in President Donald Trump’s administration have gained the upper hand -- and they’re set to unleash a fall offensive. Talks in Washington between the world’s two largest economies yielded little visible progress last week toward a cease-fire. Looming instead are new tariffs that Trump has threatened to impose on some USD200bn in annual imports from China, and Beijing’s already-promised retaliation. (Bloomberg)

US, China: PBOC joins forces with Powell to hit the brakes on dollar rally. The PBOC and Federal Reserve delivered a one-two punch to the dollar Friday, spurring the biggest selloff in a month and raising the specter of further weakness ahead. The PBOC announced that banks would resume using the “counter-cyclical” factor when calculating the yuan’s daily reference rate, restraining the influence of market forces that have been driving the currency lower versus the greenback. Roughly three hours later, Federal Reserve Chairman Jerome Powell gave foreign-exchange traders another reason to sell the dollar, saying he sees little sign of inflation accelerating above the central bank’s 2% target. (Bloomberg)

US, Mexico: Said poised to reach Nafta deal soon as Monday. The US and Mexico are poised to resolve their bilateral Nafta differences as soon as Monday, creating an opening for Canada to rejoin talks covering USD1.2trn in annual trade. Significant breakthroughs between Mexico and the US came during the past several days on the contentious issues of automobiles and energy, according to three people familiar with the process who asked not to be named discussing private talks. Along with Canada, they’ve been negotiating for a year to overhaul the 24-year-old accord at the insistence of Donald Trump. The U.S. president says the deal has led to hundreds of thousands of lost American jobs, and he promised to either change it to be more favorable to the US, or withdraw. (Bloomberg)

UK: Squeeze hits workers as savings rate falls to record low. UK consumers’ savings rate fell to the lowest on record as they eat into more of their pay to cover shopping, rent and mortgages. The measure -- the difference between income and expenditure -- slipped to 1.2% in July, UK Finance said. That’s the lowest since the banking group’s data started more than a decade ago and is also a huge shift from just two years ago, when the rate was at 5%.The drop partly reflects the squeeze on households from a jump in inflation in 2016. With wage growth weak, workers were left with falling real incomes, meaning less to put aside each month. While the reduced savings rate helped to support consumer spending through the inflation surge, it can’t go on forever. (Bloomberg)

Japan: Steady July inflation offers little joy for BOJ. Japanese inflation failed to deliver an expected uptick in July, underscoring the persistent weakness in consumer prices that has forced the Bank of Japan to take an increasingly longer-term view of its mission to achieve 2% inflation. Gains in consumer prices remain less than halfway to the central bank’s inflation target more than five years into its large-scale easing program aimed at sparking stable price growth. Costlier energy is still propping up the consumer price index, but its effect, alongside the impact of hot weather, failed to deliver an expected acceleration of price gains. Falling mobile phone charges dragged on the price index and are likely to pull it lower looking ahead, economists said, flagging government pressure on local carriers to make cell phone use cheaper. (Bloomberg)

Japan: Abe seeks third term after fighting back from scandal. Prime Minister Shinzo Abe launched his bid for a historic third-straight term as ruling party president, attempting to put months of scandal behind him and become Japan’s longest-serving premier. The widely anticipated announcement kicked off what was expected to be an easy campaign for leadership of the Liberal Democratic Party. Media surveys of lawmakers and party members who will vote Sept. 20 show Abe will probably fend off a challenge from former defense chief Shigeru Ishiba, with one Kyodo News poll last month showing the prime minister had the backing of 77 percent of LDP lawmakers. (Bloomberg)

Singapore: Industrial output growth slows. Singapore industrial production grew at a slower pace in July. Industrial production advanced 6% annually, following June's 8% increase. The increase in output came in line with expectations. Excluding biomedical, industrial output growth eased to 5.1% from 6.8% a month ago. Month-on-month, industrial production dropped by more-than-expected 1.7%, in contrast to a 4.4% rise in June. Output was forecast to fall 1.0% in July. (RTT)


Gamuda (Neutral, TP: RM3.80): Gets till Sept 3 to accept SPLASH deal. Gamuda has been given an extension of time until Sept 3 by Pengurusan Air Selangor SB (Air Selangor) to revert on the offer for its 40%-owned associate company Syarikat Pengeluar Air Selangor Holdings (SPLASH). Prior to this, Gamuda was required to revert on the offer by Aug 27. Splash is a wholly-owned subsidiary of Splash Holdings, in which Gamuda owns a 40% stake. On Aug 21, Gamuda received a letter of offer from Air Selangor setting out the termination of the existing operations and maintenance agreement (OMA) of Sungai Selangor Water Treatment Plant Phase 3 (SSP3) with Splash. (The Edge)

Hartalega (Neutral, TP: RM5.25): Sees no SST impact as raw materials tax-exempted. Hartalega Holdings does not expect any impact from the re-implementation of the sales and services tax (SST) starting Sept 1 as its imported raw materials are exempted from the duty. But with the implementation date less than a week away, the glove maker has called for greater clarity on the tax details to enable businesses to get better organised. The group will also submit relevant applications for a tax exemption on its printing and packaging materials. Hartalega is among the 121,429 companies and individuals affected by the delay in input tax refunds under the previous GST. (The Edge)

PUC: Partners Revenue Monster to lease payment terminals. PUC’s wholly-owned subsidiary Founder Pay SB (FPSB) has partnered with Revenue Monster SB (RMSB) for FPSB to lease payment terminals to RMSB for its merchants. The MoU serves as a platform for FPSB and RMSB to establish collaboration by providing flexible payment solutions through leasing of payment terminals that include features to aggregate multiple electronic wallets payment processing to RMSB for its merchants. The MoU also provides an opportunity for both parties to unlock business potential by exploring other business collaborations in the future. (The Edge)

Bintai Kinden: Bags RM1.6m job from TNB. Bintai Kinden Corp said it has bagged a contract worth RM1.63m from Tenaga Nasional (TNB). It received the contract via its wholly-owned unit Kejuruteraan Bintai Kindenko SB, which has been appointed as the contractor for reconfiguration and retrofitting works for a 132kV bulk supply to the main intake substation at KLCC2, Kuala Lumpur. The job will be completed in 214 days, is expected to contribute positively towards the group's revenue and earnings. (The Edge)

Cahya Mata Sarawak: Records strong 2Q net profit owing to improved results of its associates. Cahya Mata Sarawak (CMSB) saw its net profit for the second quarter ended 2QFY18 leap by 59.5% to RM91.63m from RM57.43m mainly attributed to the increase in share of results of its associates. EPS stood notably higher at 8.53sen compared with 5.35sen per share in the previous year's corresponding quarter. Quarterly revenue rose 15.4% to RM395.28m from RM342.55m in 2QFY17. 2Q results were substantially higher than the previous year's same quarter due to the turnaround of its associate OM Materials (Sarawak) since the 3Q2017. (The Edge)

Opcom: 1Q net profit up 20.5%. Opcom Holdings’ net profit rose 20.5% to RM833,000 in the 1QFY19 compared with RM691,000 in the previous year on lower sales, distribution, finance and operating costs. Its quarterly revenue, however, fell to RM17.85m from RM22.46m a year ago due to lower supply of fiber optic cables, trading of industrial materials and engineering services work. Its total manufacturing revenue decreased by 9% compared with last year's figure. Revenue from our fiber optic cable decreased by approximately 14.9% and the revenue contribution of the thixotropic gel business was consistent with the preceding year's corresponding quarter. (The Edge)

Pos Malaysia: 1Q net profit down 86% on lower revenue and higher costs. Pos Malaysia net profit for the 1Q ended June 30, 2018 plunged 86% to RM4.98m, from RM35.92m a year earlier, due to lower revenue from its postal services segment coupled with increased costs. EPS dropped to 0.64sen from 4.59sen. Quarterly revenue fell 3% to RM590.46mfrom RM611.63m a year ago. Lower revenue was also registered in its international and logistics segment. However, its courier segment’s revenue rose 13% on higher demand in e-commerce as well as online business customers. (The Edge)

MMC Corp: 2Q profit slumps on lower contributions from ports, Malakoff. MMC Corp net profit slumped 66% to RM20.08m in the 2QFY18, from RM59.81m a year ago, due largely to lower contribution from Johor Port and Northport (M). The conglomerate also attributed the decline in earnings to the lower share of profit from its 36.5%-owned Malakoff Corp due to lower contribution from Segari Energy Venture SB's plant, and lower fuel margin recorded at coal plants. This was despite seeing a 27% YoY rise in quarterly revenue to RM1.2bn from RM944.43m, due to work progress from the KVMRT-SSP Line, and the effect of consolidating Penang Port SB. (The Edge)

Datasonic: 1Q earnings more than halve to RM7.4m. Datasonic Group net profit more than halved to RM7.39m in the 1Q ended June 30, 2018, from RM15.12m a year ago, on the back of lower revenue. EPS fell to 0.55sen from 1.12sen last year. Quarterly revenue came in 18.83% lower at RM48.78m against RM60.10m previously, due to fewer deliveries of smart cards. The group has declared a first interim dividend of 1sen per share. Datasonic said its prospects for growth are expected to be satisfactory in the 2019 financial year. The management has continuously negotiated for better competitive pricing for purchases of the required materials. (The Edge)

Perdana Petroleum: Back in black after five quarters of losses. Perdana Petroleum was back in the black with a net profit of RM10.09m for the 2Q ended June 30, 2018. This compares with a net loss of RM77.63m in the previous year's 2Q. The group recorded EPS of 1.3sen compared with a loss per share of 9.97sen previously. Quarterly revenue rose 5.33% to RM47.59m from RM45.18m a year ago. The group attributed the better results to a higher vessel utilisation rate of 70% compared with 63% in the previous 2Q. In addition, there was also a net foreign exchange gain of RM25.8m. (The Edge)

Southern Steel: 4Q net profit jumps to RM35.2m on higher sales volume, net margin. Southern Steel 4Q net profit grew by more than six times to RM35.21m from RM5.57m a year earlier, on higher sales volume and net margin. EPS in the quarter rose to 8.12sen from 1.3sen previously. Quarterly revenue increased 35.69% to RM888.64m from RM654.92m. For the full financial year, Southern Steel’s net profit jumped 126% to RM210.85m or 48.78sen a share from RM93.3m or 22.07sen. On prospects, the group said that while the market is expected to remain challenging in the new financial year, it expects its performance to remain satisfactory. (The Edge)

Market Update

The FBM KLCI might open higher today after the S&P 500 and Nasdaq Composite equity indices hit record highs last Friday while the dollar extended early losses as participants digested a keynote speech by Jay Powell at the annual gathering of central bankers at Jackson Hole, Wyoming. The Federal Reserve chairman reiterated that gradual rate rises remained appropriate, saying he saw “no clear sign” that inflation was accelerating above 2% and that there did not seem to be an elevated risk of overheating. The S&P 500, meanwhile, surpassed the intraday record peak it struck on Tuesday, and the tech-heavy Nasdaq Composite hit an all-time peak. Brent oil leapt to its highest point since July 11, ensuring further gains for energy stocks. The dollar index, by contrast, sank back towards a three-week low as it headed for its seventh daily decline in eight sessions, helping to drive gold back above the USD1,200 an ounce milestone. Performance-wise, the S&P 500 closed at a record 2,874, up 0.6%, having earlier hit 2,876, surpassing the previous all-time intraday peak set on Tuesday. For the week, the benchmark index gained 0.9%. The tech-heavy Nasdaq Composite also set a record close of 7,946 after rising 0.9%. The Dow Jones Industrial Average rose 0.5% to 25,790, leaving it some way short of its all-time high of 26,616. Across the Atlantic, the pan-European Stoxx 600 index ended 0.1% higher, as both the Xetra Dax in Frankfurt and London’s FTSE 100 rose 0.2%.

Back home, the FBM KLCI index lost 2.28 points or 0.13% to 1,808.59 points on Friday. Trading volume increased to 2.59bn worth RM2.20bn. Market breadth was negative with 267 gainers as compared to 638 losers. The regional markets finished mixed with the Nikkei 225 gained 0.85% and the Shanghai Composite rose 0.18%. The Hang Seng lost 0.43%.

Source: PublicInvest Research - 27 Aug 2018

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