PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 16 Aug 2019, 11:01 AM


PublicInvest Research Headlines - 3 Oct 2018

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US: Fed's Powell says outlook 'remarkably positive'. US Federal Reserve Chairman Jerome Powell on Tuesday hailed a “remarkably positive outlook” for the US economy that he feels is on the verge of a “historically rare” era of ultra-low unemployment and tame prices for the foreseeable future. It is a view, he said, based on how a changed economy is operating today, with businesses and households immunized by strong central bank policy from the inflationary psychology that caused unemployment, inflation and interest rates to swing wildly in the 1960s and 1970s. It is an outlook that includes an economic performance “unique in modern US data,” with unemployment of below 4% expected for at least two more years and inflation remaining modest even as wages rise. And it is an outlook he feels will even survive the Trump administration’s efforts to rewrite the global trading system, a policy shift Powell said may lead to one-time price hikes, but not to persistent changes in the annual rate of inflation going forward. (Reuters)

US: 'A tale of two hurricanes' for Sept new car sales. Major automakers on Tuesday posted a hefty drop in US new vehicle sales for Sept, caused in part by a decline in sales in areas hit by Hurricane Florence and a tough comparison to the previous Sept when consumers rushed to replace vehicles damaged by Hurricane Harvey. Fiat Chrysler Automobiles NV bucked the trend for the month, reporting a 15% jump in US sales, led by increases in sales of its lucrative Jeeps - especially its Cherokee and Compass models - and Ram pickup trucks. The solid performance put FCA’s total sales ahead of longtime No 2 US automaker Ford Motor Co for the month of Sept. Hurricane Florence flooded large parts of North Carolina and South Carolina last month, leaving residents to deal with the deluge instead of shopping for new cars. Sales in Sept 2017 were boosted by major replacement demand for water-damaged vehicles following Hurricane Harvey, which had flooded parts of southeastern Texas in August that year. The seasonally adjusted annualized rate of sales (SAAR) for Sept hit 18.1m units in Sept 2017 - the highest sales pace since 2005. (Reuters)

EU: Rehn chimes in on ECB rate debate as officials map slow liftoff. Finland’s Olli Rehn joined key European Central Bank decision makers including Benoit Coeure in stressing the need for flexibility in preparing investors for eventual increases in borrowing costs. Seen as a contender to succeed ECB President Mario Draghi when his term ends next year, Rehn said on Tuesday he’d lean more toward “sticking to the clear communication of our reaction function, recalling that policy is data dependent, than start delineating an exact path of the interest rates.” The remarks highlight that officials are starting to ponder the path of interest rates after liftoff, anticipated for after the summer of 2019, as well as strategies to offer guidance to investors. Executive Board members Coeure and Peter Praet have both stressed the need to communicate more on the pace of increases to avoid stirring up markets. Rehn says he prefers stressing policy makers’ ability to react to economic conditions that warrant a change in borrowing costs, rather than publishing an outright numerical path of interest rates -- a strategy the Federal Reserve follows with its so-called dot plot. (Bloomberg)

EU: Eurozone producer price inflation slows for first time in 4 months. Euro area producer price inflation slowed for the first time in four months during August, preliminary data from the statistical office Eurostat showed on Tuesday. Industrial producer prices on the domestic market rose 4.2% YoY following 4.3% in July, which was revised from 4%. Economists had expected a 3.80% increase. Inflation eased for the first time since April. Energy sector prices rose 12% and the intermediate goods segment saw a 3.2% increase. Durable consumer goods prices climbed 1.3% and prices were stable for non durable consumer goods. On a month-on-month basis, producer prices climbed 0.3% in August after a 0.7% rise in the previous month, which was revised from 0.4%. Economists had forecast a 0.2% gain. The latest pace was the weakest since a stagnation in April. (RTT)

UK: Construction growth at 6-month low. UK construction growth was the weakest in six months in Sept, defying expectations for an improvement, as all three sub-sectors lost momentum. The CIPS UK construction purchasing managers' index fell to 52.1 from 52.9 in August, survey data from IHS Markit showed on Tuesday. In contrast, economists had expected the index to rise to 53.1. A PMI reading above 50 suggests growth in activity. Several firms blamed the subdued economic conditions so far this year for holding back business activity growth. Civil engineering was the worst performing sub-sector. Activity growth slowed in house building and commercial construction. New work and employment grew robustly, but business optimism was at the second-lowest level since Feb 2013. Political uncertainty and investor concerns about Brexit had dampened confidence in Sept, the survey said. Forthcoming energy and transport projects were the main areas of optimism. (RTT)

UK: House prices log steady growth in Sept. UK house prices logged steady growth in Sept, data from Nationwide Building Society showed Tuesday. House prices grew 2% YoY in Sept, the same rate as seen in August. Prices were expected to climb 1.9%. On a monthly basis, house prices gained 0.3%, in contrast to a 0.5% fall in August. This was slightly faster than the expected 0.2% rise. "Looking further ahead, much will depend on how broader economic conditions evolve, especially in the labor market, but also with respect to interest rates," Robert Gardner, Nationwide's chief economist, said. The economist expects subdued economic activity and ongoing pressure on household budgets to continue to exert a modest drag on housing market activity and house price growth this year, though borrowing costs are likely to remain low. (RTT)

Japan: Consumer sentiment improves slightly in Sept. Japan's consumer confidence rose slightly in Sept, survey data from Cabinet Office showed Tuesday. The consumer sentiment index improved to 43.4 from a one-year low score of 43.3 seen in August. Among sub components, the weakness in assessment of overall livelihood was offset by the growth in income and willingness to buy durables. The indicator for overall livelihood dropped to 41.5 from 41.7 a month ago. Meanwhile, the income growth index rose to 41.9 from 41.8 and willingness to buy durable goods rose to 42.4 from 42.0. At the same time, the index measuring employment held steady at 47.7 in Sept. The survey was conducted on Sept 15. (RTT)


Mega First (Outperform, TP: RM4.74): Sabah Electricity ordered to compensate Mega First power unit RM28.8m. The Arbitral Tribunal has ordered Sabah Electricity SB to compensate Mega First Corporation’s power generation subsidiary Serudong Power SB a total of RM28.79m as compensation. Mega First announced the Arbitral Tribunal had on Sept 28 ordered Sabah Electricity to pay to Serudong Power the principal shortfall amount of RM19.23m in energy payment and capacity payment for the period from Nov 15, 2007 to Dec 1, 2016. The order also included interest on the shortfall in the payments for the period and calculated up to May 31, 2018 amounting to RM9.13m and the claimant’s representation costs fixed at RM420,000. (StarBiz)

Malakoff (Neutral, TP: RM1.09): Gets shareholders' nod for RM944m Alam Flora buy. Malakoff Corp has received shareholders' nod to acquire a 97.37% stake in waste management company Alam Flora SB as part of its push into the renewable energy sector. It is acquiring the stake via wholly-owned unit Tunas Pancar SB for RM944.6m from Hicom Holdings, a wholly-owned unit of DRB-Hicom, via a share sale agreement (SSA) inked on Aug 1. Pending necessary approvals, Malakoff said the acquisition is expected to be completed in six months from the date of the SSA. (The Edge)

SunCon: Unit aborts JV company. Sunway Geotechnics (M) SB, a wholly-owned subsidiary of Sunway Construction SB, has terminated its unincorporated JV company with Bauer (Malaysia) SB. Sunway Construction SB is a wholly-owned subsidiary of Sunway Construction Group (SunCon). It said the termination of Sunway Geotechnics (M) SB-Bauer (M) SB JV, was made following the completion of construction works at a mixed-commercial development at Persiaran KLCC, KL City Centre. (Bernama)

GDex: Takes up 44.5% in Indonesia’s SAP Express. GD Express Carrier (GDex) is taking up a 44.5% stake in Indonesia’s PT Satria Antaran Prima Tbk (SAP Express) in a move to tap into the country’s fast-growing express delivery industry. The group said it was forking out IDR92.7bn (RM25.8m) cash, together with two of its units, GDex SEA and GD Valueguard, to participate in SAP Express’ IPO. SAP Express is scheduled to list on the Indonesian stock exchange with its quoted price at IDR250 per share. Upon listing, the GDex companies will collectively own about 44.5% of its total paid-up capital. (StarBiz)

MHB: To 'rigorously defend' US$21.7m claims by EA Technique . Malaysia Marine and Heavy Engineering Holdings (MHB) said it will rigorously defend the claims made by EA Technique (M), which is seeking USD21.7m (RM90m) over a dispute concerning a contract to convert a vessel into a floating storage and offloading (FSO) facility. EA Technique announced it had commenced arbitration against MHB's wholly-owned subsidiary Malaysia Marine and Heavy Engineering SB (MMHE). MHB said it will make counter claims for the additional work orders (AWOs) issued to EA Technique and the costs incurred as a result of the extension of time. (The Edge)

Sapura Industrial: Plan on aerospace component manufacturing venture with Japanese firms. Sapura Industrial plans to collaborate with Wada Aircraft Technology Co Ltd and Aero Inc in aerospace component manufacturing in Malaysia. It said it has entered into a MoU with the two Japanese companies for the purpose of establishing a JV. "The MoU allows the parties to lay the foundation of evaluating and negotiating the proposed JV," it added. (The Edge)

Matrix Concepts: Forms JV develop Islamic Financial District in Indonesia. Matrix Concepts Holdings has signed a JV agreement with an Indonesian Consortium comprising PT Bangun Kosambi Sukses (BKS) and PT Nikko Sekuritas Indonesia (NSI) to jointly undertake the development of Islamic Financial District in Pantai Indah Kapuk (PIK) 2 Sedayu Indo City, Jakarta, Indonesia. Matrix said the formation of the newly-incorporated JV company, PT. Fin Centerindo Satu (FCS), follows the MoU signed between the three parties in May 2018. BKS will hold 40% equity in FCS, while Matrix Concepts and NSI would hold 30% stake each. (StarBiz)

Malton: Partners with Hong Kong's Nan Hai to bid for Taipei property project. Malton, the flagship of tycoon Tan Sri Desmond Lim Siew Choon, has teamed up with Hong Kong-listed cinema operator and property development firm Nan Hai Corp Ltd to bid for a property project in Taipei, the capital city of Taiwan. Malton said that the two companies had submitted the bid to the Taipei City authorities on Oct 1 for the construction of the superstructure of the complex. Nan Hai will hold an 80% interest in the bid while Malton holds the remaining 20% interest. The details on the GDV and how Malton will finance the massive development abroad were not revealed in the announcement. (The Edge)

Key ASIC: Proposes capital reduction to eliminate accumulated losses. Key ASIC has proposed to undertake a share capital reduction, which entails the reduction of RM46m, to eliminate the company’s accumulated losses and any balance that will be credited to its retained earnings account. It said the proposed exercise will enable the company to rationalise its statement of financial position by eliminating its accumulated losses. “The elimination of accumulated losses in the statements of financial position of the company may enhance its credibility with customers, suppliers and investors,” said Key ASIC. Barring any unforeseen circumstances, the board expects the proposed share capital reduction to be completed by the 1Q of 2019. (The Edge)

Sanbumi: Iconic chairman Tan raises equity. Sanbumi Holdings said Datuk Tan Kean Tet, the chairman of Penang-based property developer Iconic Group SB, is acquiring a substantial stake in the company. Sanbumi said the company had entered into a conditional share subscription agreement with Tan for the placement of 22.6m new shares at 17.3 sen each. Tan will pay RM3.9m for the shares, which will increase his stake in the company from 1.4% to 10.4%. (StarBiz)

Telecommunications (Neutral): Four telcos agree to lower prices of broadband with faster speed. Four key telcos have agreed to reduce the prices of fixed broadband access. According to a statement from the Malaysian Communications and Multimedia Commission, Telekom Malaysia, Maxis, Time dotCom and Celcom have reached agreement which will result in reduced prices of fixed broadband. Some of the telcos have already rolled out packages which have seen prices being lowered with increased speeds before Sept 30. MCMC said the Goverment's initiative to reduce fixed broadband prices with increased speed by 2019 is on track. (The Edge)

Market Update

The FBM KLCI might open flat today as US stock were mixed after a weak showing in Europe in a session where turmoil in Italy took centre stage and investors continued to weigh the revamp of Nafta. Optimism about Canada’s eleventh-hour decision to join the US and Mexico in the trilateral trade deal on Sunday night helped to drive the Dow Jones Industrial Average to a fresh high, while the S&P 500 and Nasdaq faltered. Consumer discretionary stocks were the laggards for the S&P 500, which fluctuated, but ended the day flat at 2,923.43. Some cited Amazon’s news of an increase to the minimum wage for US and UK workers as weighing on retailers. The Dow outperformed, adding 0.5%, helped by stocks such as Boeing, 3M and Caterpillar, which are big beneficiaries of progress on US trade negotiations. Meanwhile, the Nasdaq Composite Index shed 37.75 points, or 0.5%, to 7,999.55. European stock markets were weak after a lacklustre showing in Asia. London’s FTSE 100 index fell 0.3%, with Frankfurt’s Xetra Dax 30 weaker by 0.4%.

Back home, the FBM KLCI index gained 5.69 points or 0.32% to 1,798.15 points on Tuesday. Trading volume increased to 3.01bn worth RM2.15bn. Market breadth was negative with 376 gainers as compared to 554 losers. The regional equities were mostly lower, with Tokyo serving as a bright spot. Japan’s Topix rose 0.3%, trimming initial gains that propelled the index to a near-eight-month high in early trading. Hong Kong’s Hang Seng dropped 2.4%, with shares in Macau casinos falling after gambling revenue for September recorded the slowest pace of growth in more than two years. Markets in mainland China remained closed for a public holiday.

Source: PublicInvest Research - 3 Oct 2018

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