PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 6 Dec 2019, 9:18 AM


PublicInvest Research Headlines - 23 Nov 2018

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Global: WTO says G20 trade restrictions soar, cover USD481bn of trade. Countries belonging to the G20 group of the world’s biggest economies applied 40 new trade restrictive measures between mid-May and mid-Oct, covering around USD481bn of trade, the World Trade Organization said. The new restrictions covered six times more trade than in the previous period and were the largest since the WTO started monitoring G20 trade in 2012, it said in a statement. “The report’s findings should be of serious concern for G20 governments and the whole international community,” WTO Director-General Roberto Azevedo said in the statement. “Further escalation remains a real threat. If we continue along the current course, the economic risks will increase, with potential effects for growth, jobs and consumer prices around the world.” (Reuters)

EU: Euro-area consumer confidence drops to lowest since early 2017. Confidence among euro-area consumers dropped more than expected in Nov, denting hopes that the region will rebound after a summer slowdown. The European Commission’s monthly index “decreased markedly” to minus 3.9, the lowest since March 2017. Economists had expected a slip to minus 3 from minus 2.7 in Oct. The figures come as the ECB policy makers acknowledge “uncertainties and fragilities” affecting the economy, though they are sticking to the view that this isn’t the beginning of a sharp downturn. Recent indicators were still “consistent with an ongoing broad-based expansion,” the ECB said. (Bloomberg)

EU, UK: Agree draft deal on future relations. Britain and the EU agreed a draft text setting out a close post-Brexit relationship, officials said, though wrangling with Spain over control of Gibraltar must still be settled before EU leaders meet on Sunday. Thursday's news sent the pound nearly 1% higher on relief among investors that 18 months of tense negotiation were bearing fruit, keeping Britain close to its biggest market and ensuring nothing much will change for at least two years of transition. British Prime Minister Theresa May said: "The British people want this to be settled, they want a good deal that sets us on course for a brighter future... That deal is within our grasp and I am determined to deliver it." (Reuters)

China: Will open but not all at once, China's German ambassador says. China’s ambassador to Germany told the newspaper Die Welt that his country’s ties to Germany were closer than to any other country, but that it still could not fully open its market to foreign partners. Beijing and Berlin are of necessity close allies in the fight to preserve the open international trading system that has made them both exporting powerhouses. German businesses complain, however, that they do not enjoy the freedom to invest in China that the Chinese do in Europe. “Political relations between China and Germany are as close and as good as never before”, Shi Mingde said. “With no other country does China maintain such intense relations.” (Reuters)

Japan: Sees signs of weakness in Asia, keeps rosy view of own economy. Japan’s government pointed on Thursday to signs of increasing weakness in some Asian economies as escalating trade frictions cloud the region’s growth outlook, but affirmed its view that Japan’s economy was recovering moderately. In a monthly report issued on Thursday, the government kept intact its assessment that a tight job market and rising wages were keeping the economy on track for a moderate recovery. But it repeated last month’s warning of lingering overseas challenges to Japan’s growth such as heightening global uncertainties, volatile financial markets and escalating trade friction. (Reuters)

Japan: Factory output, retail sales seen improving in Oct, according to Reuters poll. Japan’s industrial output likely rebounded in Oct after the previous month’s drop due to natural disasters, a Reuters poll showed, which would give encouragement that the economy could show growth this quarter. Retail sales probably grew at faster annual pace than in September, reflecting a tight labor market and gradual wage growth, it showed. A data batch due next week is likely to suggest Japan’s third-quarter economic contraction was a temporary slump caused by natural disasters. But slowing global demand and the intensifying US-China trade war cloud the outlook for export-reliant Japan. (Reuters)

Malaysia: Bank Negara’s reserves rise by USD400m. Bank Negara’s international reserves rose by USD400m (RM1.675bn) to USD102.1bn on Nov 15 from USD101.7bn on Oct 31. Bank Negara said in a statement that the reserves position was sufficient to finance 7.7 months of retained imports and was 1.0 times the short-term external debt. This was an increase from the USD101.7bn as of Oct 31. The ringgit was trading at 4.1890 to the US dollar on Nov 15 compared with 4.1800 at end-Oct. The reserves position at end-Oct was sufficient to finance 7.5 months of retained imports and was 0.9 times the short-term external debt. (StarBiz)

Malaysia: Inflation seen rising to 2.7% next year on higher fuel prices and SST. RAM Ratings expects headline inflation to speed up to 2.7% in 2019 after averaging 1% in 2018, mainly due to higher fuel prices and the reintroduction of the sales and service tax (SST). The rating agency said there would be additional pressure from the switch to targeted fuel subsidies, along with its anticipation of continued spillover effects from the reintroduction of the SST and low-base effects during the zero-rated goods and services tax from June to end-Aug. RAM said it had conservatively assumed that the new mechanism would commence in early 2Q 2019 (this is April as opposed to May or June) and that global oil prices would average around the same level next year at USD75 a barrel. (StarBiz)


Serba Dinamik (Outperform, TP: RM4.69): Further enhances its shareholding in Green & Smart Holdings. Serba Dinamik (Serba) proposed an acquisition of 34,537,581 ordinary shares in Green & Smart Holdings PLC (GSH), representing approximately 10% of the total number of issued shares of GSH with a total cash consideration of RM13.0m from K2M Ventures SB, an existing shareholder of GSH. (Bursa)

Comments: Upon completion expected by 4Q2018, Serba will own a 25% stake in GSH after the first acquisition of 15% in July 2018. We view this move as positive as it will expand Serba’s EPCC service capabilities into the installation of biogas facilities as part of the Group’s strategy to expand its business into asset ownership model. More importantly, the acquisition enables Serba to have the first right of refusal on all future EPCC works under GSH. To date, GSH has completed 2 bio-gas plants and had awarded an EPCC contract to Serba in February this year relating to a 2.7MW biogas power plant in Teluk Intan, Perak. GSH is also in the midst of developing 3 other bio-gas plants with estimated total project value of RM49m. We maintain our Outperform rating and a TP of RM4.69 on Serba.

Press Metal: 3Q net profit up by 5.3% to RM162.5m. Press Metal Aluminium Holdings 3Q net profit rose 5.3% to RM162.5m or 4.17sen per share from RM154.4m or 4.14sen per share a year earlier, aided by proceeds from insurance settlement. Revenue for the quarter ended Sept 30, 2018 also grew 12.1% to RM2.37bn from RM2.12bn previously. (The Edge)

Allianz: 3Q net profit jumps 48%. Allianz Malaysia net profit jumped 47.9% to RM99.88m in the 3QFY18 from RM67.53m a year ago, thanks to contributions from the general insurance and life insurance segments. This resulted in a higher EPS of 56.54sen for 3QFY18, compared with 38.73sen for 3QFY17. (The Edge)

HeveaBoard: 3Q earnings more than halves, pays 1.2sen dividend. HeveaBoard net profit dropped 55.8% to RM3.17m in the 3QFY18 from RM7.17m a year ago, on the back of lower contributions across all segments, namely particleboard manufacturing, ready-to-assemble (RTA) manufacturing and fungi cultivation. (The Edge)

Boustead Plantations: Slips into the red, pays 2sen dividend. Boustead Plantations slipped into the red for the 3QFY18 with a net loss of RM21.9m or 0.98sen per share compared to a net profit of RM557.7m or 24.9sen per share a year ago. The group booked gain on disposal of plantation assets of RM554.9m recognized in the previous corresponding quarter. The loss was attributed to the decline in palm product prices, lower crop production and increase in expenditure corresponding to a larger area under harvest. (The Edge)

MBM Resources: Brisk sales in Q3 not sustainable. Thanks to the GST tax holiday, MBM Resources posted a more-than five-fold jump in net profit to RM38.1m for its 3QFY18, and indicated earnings could have been even better if not for a supply shortage. EPS for the quarter ballooned to 9.75sen against 1.88sen previously. However, revenue was only marginally higher at RM472.4m, from RM466.8m a year ago. (The Edge)

Market Update

The FBM KLCI might open with a negative bias today after lingering uncertainty over the outlook for global growth in the face of the US-China trade dispute left European stock markets on the back foot, with the absence of any lead from Wall Street adding to the cautious tone. The technology and energy sectors gave back some of Wednesday’s gains, while there were sharp losses too for mining and financial stocks. London’s FTSE 100 share index underperformed its continental European peers, as sterling moved higher after the UK and Brussels agreed a draft declaration for a Brexit deal that is expected to be endorsed by EU leaders at a summit on Sunday. But the pound proved unable to hold above the USD1.29 level against the dollar, and also trimmed its initial advance versus the euro. The Stoxx 600 Europe index ended 0.7% lower, wiping out a big chunk of the previous day’s 1.1% gain. The Xetra Dax in Frankfurt shed 0.9%, while London’s FTSE 100 lost 1.3%.

Back home, the FBM KLCI index gained 0.25 of a point or 0.01% to 1,695.62 points on Thursday. Trading volume decreased to 1.75bn worth RM1.44b. Market breadth was negative with 310 gainers as compared to 484 losers. In the region, Japan’s Topix index gained 0.8%, helped by consumer and technical stocks. Hong Kong’s Hang Seng rose 0.2%, while mainland China’s CSI 300 slipped 0.4%. South Korea’s Kospi shed 0.3%.

Source: PublicInvest Research - 23 Nov 2018

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