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PublicInvest Research

Author: PublicInvest   |   Latest post: Tue, 23 Apr 2019, 10:09 AM

 

PublicInvest Research Headlines - 19 Sept 2018

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Economy

US: Trump says tariffs will save American factories. History shows otherwise. President Trump is building a wall of tariffs around the domestic economy, attempting to protect American jobs by limiting imports. But a tire factory that opened last year in Richburg, S.C., offers a reminder that globalization is hard to stop. In 2009, American tire makers persuaded the Obama administration to impose tariffs on Chinese tires, and imports of tires from China fell sharply. But Chinese companies did not stop making tires in response to the tariffs they simply moved production to other places, including to the US. Trump said the US would begin imposing tariffs on another USD200bn worth of Chinese goods on Sept 24, on top of the USD50bn worth of products he previously taxed. The new tariffs hit many of the consumer products that Americans use every day. (CNBC)

US: Hurricane Florence, despite destruction, will likely have small impact on economy. Despite the wide path of devastation left by Hurricane Florence, its effect on the US economy is likely to be modest. The storm is projected to shave economic growth in the current quarter by one to two tenths of a percentage point as residents forgo trips to the mall or restaurants and manufacturers temporarily shut down production. That means an economy projected to grow a robust 3.9% in the current quarter could instead expand by a still healthy 3.7%. The damage to homes, businesses and public infrastructure is expected to total USD16bn to USD20bn. Such estimates are still in flux because of severe flooding that could last for days. Oxford Economics expects the fallout could be more extensive. (CNBC)

US: Trump vows 'great and fast' economic retaliation on China if it goes after American farmers. President Donald Trump, who drew a line in the sand with China in officially announcing tariffs on another USD200bn in Chinese imports to the US, is now threatening "great and fast" economic retaliation if China targets American farmers, ranchers or industrial workers. China said Tuesday it has no choice but to retaliate, according to a statement released Tuesday by its Commerce Ministry. It announced additional duties on USD60bn of American imports in a forced response to US trade protectionism. (CNBC)

EU, UK: Aim to break Brexit deadlock as time runs outs. The UK and the European Union (EU) signaled their readiness to work to break the deadlock in Brexit talks as Prime Minister Theresa May prepared for a crucial summit aiming to persuade EU leaders to back her plans. The bloc’s chief Brexit negotiator, Michel Barnier, repeated his offer to re write his blueprint for avoiding a hard border between the UK and Ireland -- the issue that has held up progress in negotiations since March. The British premier initially rejected Barnier’s original plan as “unacceptable” because it involved keeping Northern Ireland in the EU’s customs territory. (CNBC)

China: Fires back at Trump with new tariffs on USD60bn. The US China trade war deepened as Beijing announced retaliatory tariffs on USD60bn of US goods and the Trump administration threatened duties on virtually all Chinese imports. On Monday, President Donald Trump ordered his administration to levy 10% tariffs on about USD200bn in Chinese goods on Sept 24 and to increase the rate in Jan to 25% if Beijing refuses to offer trade concessions. In retaliation, Beijing has announced plans to hit US goods, ranging from wheat to textiles, with 5% to 10% tariffs. Stocks shrugged off the latest ratcheting up of trade tensions, with the S&P 500 Index, DJIA and Nasdaq Composite Index all higher. The calm reaction has some investors saying the markets had already priced in 10% tariffs and that it could’ve been worse. (Bloomberg)

China: Countries need to 'invest well' to avoid debt burdens, says China-led bank. Emerging economies must undertake good project analysis before taking on debt to fund infrastructure upgrades, according to the Asian Infrastructure Investment Bank (AIIB). The capacity to take on debt to invest allows countries to grow faster, but only if they invest well. A project's ability to generate strong economic returns should be the biggest determining factor for governments. One of the biggest complaints about the project is its reliance on Chinese workers and unsustainable loans which many participating nations may not be able to afford in the long term. If emerging economies can't generate enough cash to pay the interest on China's loans, Beijing may seek economic or political concessions as compensation as was the case with Sri Lanka. (CNBC)

Markets

Gamuda (Neutral: TP: RM3.80): Confirms JV submitted highest bid for Singapore land. Gamuda confirmed the tender submitted by its wholly-owned subsidiary Gamuda (Singapore) Pte Ltd, jointly with Evia Real Estate Pte Ltd for a 51,411.9 sq m (5.14ha) land parcel Singapore's Anchorvale Crescent site, has emerged as the highest bid at SGD318.9m (RM963m). (The Edge) Comments: Gamuda Bhd and Evia Real Estate (7) Pte Ltd, which jointly tendered for a 51,411.9-square metre plot of land at Anchorvale Crescent in Singapore, have emerged with the highest bid at SGD319m or RM963m. If it materializes, this will be the Group’s second project in Singapore after GEM Residences which is located in Toa Payoh. We understand that GEM Residences has now been fully sold. Financing should not be a problem with its gross cash of c.RM960m currently and impending cash proceeds from disposal of SPLASH totaling c.RM1bn. Assuming 50% stake in the joint venture, we estimate the Group needs to fork up c.RM100m cash with 20% equity and remaining from bank financing. Pending more clarifications, earnings are kept unchanged for now. All told, maintain Neutral and TP of RM3.80 (20% to SOTP).

TM (Neutral: TP: RM3.83): New unifi 100Mbps plan at RM 129 per month. Telekom Malaysia (TM) has introduced the new unifi 100Mbps plan at RM129 per month, a broadband experience with unlimited usage, access to unifi PlayTV packages and free 600 minutes of voice calls. unifi executive vice president Imri Mokhtar said the company had recently on July 12, 2018, announced plans to upgrade its existing unifi home customers to higher broadband speeds, so that they could enjoy the better experience a higher speed broadband can offer. (StarBiz)

YFG: Bags RM30m construction project in Butterworth. YFG has bagged a RM30m contract to construct apartments and terraced houses in Butterworth. The project is expected to commence on Oct 1 and be completed within 24 months, YFG said. “The project is expected to contribute positively to the revenue and earnings of the group for the FYE Sept 30, 2019 (FY19),” it said. (The Edge)

Vizione: Bags RM90m job to build submarine pipelines in Penang. Vizione Holdings has bagged a RM89.9m contract from PBA Holdings to build submarine pipelines from Butterworth to the Macallum area on Penang Island. "This will mark the first direct letter of award (LoA) from the Penang state government after the 2018 general election. It further enlarges the group's order book and is expected to provide a steady stream of revenue for the group over the next two financial years," it added. The duration of the contract is 21 months, it added. (The Edge)

Ideal Jacobs: Wins RM71m contract to build houses for civil servants in Sabah. Ideal Jacobs (M) Corp has won an RM71m contract to build 301 single-storey link houses in Sabah under the 1Malaysia Civil Servants Housing Programme (PP1AM). It said its wholly-owned unit Widad Builders SB accepted the letter of award from developer Pemajuan Ilham Enterprise SB to be the project’s main contractor for 24 months from the date of possession of the site. (The Edge)

Hup Seng: Buys new production line for RM12m. Hup Seng Industries is buying a new production line for EUR2.5m (RM12.1m) from an European supplier, GEA Group. It said the new line is part of the group's risk management programme to manage risks arising from ageing machinery and equipment. "The introduction of high-tech European ovens as gradual replacements for existing ageing ovens is to improve efficiency and productivity by reducing wastage and improving energy savings," it said. (The Edge)

Damansara Realty: Exits Singapore's car park management business. Damansara Realty is exiting the car park management business in Singapore, as part of the group’s strategy to focus on expanding markets in order to strengthen its integrated facilities management (IFM) business segment and maximise the group's value generation. It said its wholly-owned subsidiary Metro Parking (M) SB (MPM) has entered into a shares sale agreement with Indian businessman Selvakumar Baalu for the disposal of 140,000 shares or a 70% stake in loss-making Metro Parking (Singapore) Pte Ltd (MPS) for SGD100k (RM302.4k). (The Edge)

Tri-Mode: Partners OGN to offer e-commerce logistics platform. Tri-Mode System (M) has teamed up with OGN Online SB to introduce a new total solution e-commerce logistics platform in Malaysia to cater for inbound courier services. Dubbed HiClicks Malaysia, the platform provides hassle- and worry-free courier services for online shoppers in Malaysia who purchase from various third party e-marketplace operating in Taiwan, Japan, South Korea and the US. "Upon signing up for an account via HiClicks Malaysia's website, the purchased goods of our members will be delivered to the dedicated warehouses in the respective countries," said Tri-Mode. (The Edge)

MMAG, PanPages: MMAG buys 26% stake in PanPages for RM10m. MMAG Holdings has acquired a 26.4% stake in listed software solutions provider PanPages for RM10.2m or an average price of 14.6 sen per PanPages share. MMAG said with the acquisition, the group, through its subsidiary Line Clear Express & Logistics Sdn Bhd, can leverage on PanPages' business search platform or database and tap into the customers database by offering its courier and logistics services to all its existing customers. The acquisition will be satisfied by MMAG’s internal funds and proceeds from conversion of the irredeemable convertible preference shares. It expects the acquisition to be completed this month. (The Edge)

FGV: Zakaria resigns. FGV Holdings has announced the resignation of Datuk Zakaria Arshad as the group president and CEO. The resignation, the suspension announced has ended. “The board wishes to inform that with the resignation of Zakaria, the suspension has ended. The forensic investigation referred in FGV’s statement from the board on Aug 28 shall continue and is expected to be concluded by this year end,’’ it added. (The Edge)

Auto (Neutral): Sales rise 26.8% in Aug to 65,551 units. Total vehicles sales in Aug was 65,551 units, 26.8% higher than in the corresponding month in 2017 due to a reduction in prices from the zerorisation of the GST. Sales of passenger vehicles in Aug rose to 55,662, a 21% jump from a year earlier while commercial vehicles surged 71% from July 2017 to 9,779 units. MAA said sales volume in Sept is expected to be lower than in Aug as much of the purchases would have been made before the end of the GST holiday period. (StarBiz)

Market Update

The FBM KLCI might open with a positive bias today after rallying technology and energy stocks helped the S&P 500 recover from its worst day in a month and head back towards record levels as global markets largely shrugged off the escalating trade war between the US and China. The more confident mood was also reflected in a sell-off for government bonds on both sides of the Atlantic, which pushed the yield on the 10-year US Treasury further above the 3 percent level. The dollar was little changed against its main peers for much of the day before staging a late rally. Beijing retaliated against the latest round of levies imposed by Washington on Chinese goods on Monday by imposing its own tariffs of between 5 and 10 percent on $60bn of US imports. It said the US had undermined efforts to reach a negotiated settlement to resolve the trade dispute between the two countries. On Wall Street, the S&P 500 ended 0.5% higher at 2,904 — within easy striking distance of the record close of 2,914 set late last month — the best day for the benchmark index since August 29. The Dow Jones Industrial Average rose 0.7% while the tech-heavy Nasdaq Composite gained 0.8%. European shares also showed resilience, with the region-wide Stoxx 600 index ending 0.1% higher as the Xetra Dax in Frankfurt gained 0.5%. London’s FTSE 100 ended fractionally weaker as losses for tobacco stocks were offset by gains in the energy and mining sectors.

Back home, the FBM KLCI index lost 10.82 points or 0.60% to 1,792.94 points on Tuesday. Trading volume decreased to 1.79bn worth RM1.98bn. Market breadth was negative with 272 gainers as compared to 611 losers. The regional markets finished broadly higher with shares in China leading the region. The Shanghai Composite was up 1.82% while Japan's Nikkei 225 added 1.41% and Hong Kong's Hang Seng rose 0.56%.

Source: PublicInvest Research - 19 Sept 2018

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