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PublicInvest Research

Author: PublicInvest   |   Latest post: Wed, 20 Mar 2019, 09:07 AM

 

PublicInvest Research Headlines - 26 Nov 2018

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Economy

EU: Eurozone private sector growth slowest in nearly 4 years. Eurozone private sector grew at the slowest pace in nearly four years in Nov, with slower expansions in both manufacturing and services, amid weaker demand and confidence, flash estimates from IHS Markit showed on Friday. The composite purchasing managers' index, or PMI, which combines manufacturing and services, fell to 52.4 from 53.1 in Oct. Economists had expected a score of 53. The latest reading was the lowest since Dec 2014. The manufacturing PMI dropped to a 30-month low of 51.5 from 52 in Oct. The services PMI eased to a 25-month low of 53.1 from 53.7 in Oct. (RTT)

EU: Euro lift from Fed repricing to be capped by ECB, Italy worries. Betting on a stronger euro may have a limited shelf life as its long term prospects remain bearish. Any move higher in the common currency may meet selling pressure as soft euro-zone data and the ongoing rift between Italy and the European Commission cancel out bets on fewer Federal Reserve interest-rate hikes. Bears could take advantage of a rally toward USD1.15 resistance to add to existing positions, while bulls may need to cut exposure if the currency slips toward USD1.13. Trade positive headlines out of the highly anticipated meeting between US President Donald Trump and Chinese leader Xi Jinping at the Group of 20 summit in Argentina this week may weigh on risk-off trades and force another round of a euro short squeeze. The Fed minutes of its Nov. 7-8 meeting and any dovish signs could further boost bets on a slower pace of tightening than currently priced in. (Bloomberg)

EU: German economy shrinks in 3Q on weak exports, car sales. Germany's economy shrunk for the first time since early 2015 and at the fastest pace in nearly six years, mainly due to weak exports and car sales, latest figures from the Federal Statistical Office confirmed on Friday. GDP declined a seasonally and calendar-adjusted 0.2% QoQ in the three months to Sept, after expanding 0.5% in the 2Q. The latest decline in GDP was the first since the first three months of 2015 and the worst since the 1Q of 2013, when the economy shrank 0.3%. The slight QoQ decline in the GDP was mainly due to the development of foreign trade, the agency said. Exports decreased 0.9% QoQ, while imports grew 1.3%. (RTT)

EU: German private sector growth eases more than expected to near 4-year low. Germany's private sector growth slowed more-than expected in Nov to its lowest level in almost four years, survey data from IHS Markit showed on Friday. The composite purchasing managers' index, or PMI, which combines manufacturing and services, dropped to 52.2 from 53.4 in Oct. Economists had forecast a score of 53.1. The composite PMI fell for the third month and the latest reading was the lowest in 47 months. The manufacturing PMI dropped to a 32- month low of 51.6 from 52.2 in Oct. Economists had expected the reading to remain unchanged. The output index fell to a 67-month low of 50.2 from 51 in the previous month. The services PMI decreased to a six-month low of 53.3 from 54.7 in Oct. (RTT)

China: PBOC calls for tougher oversight of financial holding companies. China’s central bank said oversight of the nation’s financial holding companies needs to be stepped up due to an increasing number of risks to their operations, deputy governor Zhu Hexin was reported as saying. Potential measures include implementing stricter controls on market access and closer supervision of sources of funding and capital-adequacy ratios, while a “firewall" system should be set up to better regulate the industry, Zhu was cited by the China Times newspaper as saying in a speech in Beijing. (Bloomberg)

Singapore: Inflation Unchanged Again, Core Figure Rises. Singapore headline inflation remained unchanged for a second straight month in Oct, while the core figure increased, figures from the Statistics Singapore and the Monetary Authority of Singapore showed on Friday. The consumer price inflation was 0.7% in Oct, unchanged from August and Sept. A rate higher than this was last seen in May 2017, when inflation was 1.4%. Headline inflation remained unchanged in Oct due to a steeper decline in private road transport costs, the MAS said. Private road transport costs fell 0.6% after a 0.1% drop in Sept, mainly due to a larger fall in car prices. MAS core inflation, which excludes the cost of accommodation and private road transport, rose to 1.9% from 1.8%. In July and August, core inflation was 1.9%. (RTT)

Markets

Media Prima (Neutral, TP: RM0.43): To lay off 300 TV employees. The country’s largest media company, Media Prima, is expected to offer a mutual separation scheme (MSS) to 300 staff in three of its television stations in a bid to ease financial losses. The offer by the company, which operates four free-to-air television stations and three newspaper publications, is a follow up to earlier schemes to reduce its staff strength. Previously it had offered voluntary separation scheme (VSS) and career break leave (CBL) to staff. (The Malaysian Insight)

Comments: The MSS plan will be carried out in two phases, where the first phase will start this week and the second phase will be held in June next year. Post-MSS, the number of employees for its TV segment is expected to be reduced to 800. We are not surprised by this as the Group has made a provision of manpower rationalisation amounting to RM58.5m in FY17 (in addition to the Early Retirement Scheme one-off cost of RM52.3m), and we understand that the Group has only utilised around RM9m of the provision so far. We expect the one-off cost to be within the amount it provided for in FY17. Hence, we do not expect any additional one-off expense to be incurred in relation to this exercise. This exercise should result in further cost savings for the Group. Maintain Neutral .

Serba Dinamik (Outperform, TP: RM4.69): Acquires 70% stake in training firm. Serba Dinamik Holdings’ indirectly owned subsidiary Telegistics Asia SB is acquiring a 70% stake in Materials Technology Education SB (MTE) for RM480,000 to expand its technical training programs capabilities. The group said that the purchase will be satisfied entirely in cash, which will be sourced from the proceeds of its IPO exercise completed last year. MTE delivers Institute of Materials Malaysia’s (IMM) training and certification programs in Malaysia. (SunBiz)

MRCB: Receives RM1.32bn settlement for EDL termination. Malaysian Resources Corp’s (MRCB) unit MRCB Lingkaran Selatan SB (MLSSB) has received its settlement sum, amounting to RM1.32bn from the government for the termination of its concession for the Eastern Dispersal Link Expressway (EDL). The group said that it had received the sum as determined in the termination agreement on Nov 23. As detailed in Section 7 of the Announcement, MRCB will procure its shareholders’ ratification for the Concession Termination and Termination Agreement within six months from the date of the execution of the Termination Agreement. (SunBiz)

FGV: Sues former president. FGV Holdings has commenced legal proceedings against its former group president and CEO Datuk Mohd Emir Mavani Abdullah and 13 others for damages totalling RM514m as well as other damages in relation to the acquisition of Asian Plantation Ltd (APL). Besides Emir, the others being sued in the KL High Court include former FGV chairman Tan Sri Mohd Isa Abdul Samad, former business development of downstream cluster vice president Farisan Mokhtar, former CFO Ahmad Tifli Mohd Talha and former downstream cluster senior general manager Rasydan Alias Mohamed. (StarBiz)

MGB: Bags RM174.8m job, bringing order book to RM2.03bn. MGB, formerly known as ML Global, has bagged a RM174.8m contract from Seloka Sinaran SB — an indirect subsidiary of LBS Bina Group — to develop four gated and guarded housing projects in Sepang, Selangor. LBS Bina is also a major shareholder of MGB. MGB said the contract will increase the group's current outstanding order book to RM2.03bn. MGB said its wholly-owned subsidiary MITC Engineering SB has accepted a letter of award from Seloka Sinaran for the proposed projects. (The Edge)

Minetech: Bags RM28.8m contract renewal. Minetech Resources’ (MRB) wholly owned subsidiary Minetech Construction SB has bagged a RM28.8m contract renewal for waste removal, ore delivery and associated works for open pit mining in respect of the Selinsing Gold Mine Project for a further period of two years. Minetech Construction entered into an agreement with Able Return and Damar Consolidated Exploration in connection with the renewal of contract, which commenced from July 1, 2018 to June 30, 2020. (SunBiz)

Advancecon: Bags RM18.81m Serenia City contract. Advancecon Holdings has been awarded a contract for the construction of a service reservoir and associated works in Serenia City, Sepang, for RM18.81m. The construction group said its wholly-owned unit Advancecon Infra SB won the contract from Sime Darby Serenia Development SB. The work includes pipeworks and structural works for the service reservoir, water pipe works, roadworks, drainage works, as well as street lighting services. (The Edge)

Peterlabs: Eyes China boost via sub-unit Osmosis Nutrition. Peterlabs Holdings' wholly-owned sub-subsidiary Osmosis Nutrition SB has awarded an exclusive agreement to China's Henan Chia Tai Biochemistry Trading Co Ltd (CTB) to distribute and promote Osmosis Nutrition's products in China. Peterlabs said Osmosis Nutrition had on Nov 7 entered into the distributorship agreement with CTB for the appointment. Osmosis Nutrition is a manufacturer and distributor of animal health and nutrition products. Its products consist of Osmofat100, Osmofat 300 and related fat powder. (The Edge)

GDB: Completes Westside III project two months ahead of schedule. GDB Holdings said it has completed the construction of a 49-storey condominium project in Desa ParkCity two months ahead of its contractual completion date of Dec 20. GDB was awarded the RM245m contract to build Westside III, the tallest structure in the township, by Perdana ParkCity SB. GDB was previously contracted by Perdana ParkCity for the construction of One Central Park, a 45- storey condominium, which was delivered over three months ahead of schedule in Oct 2016. (The Edge)

Kanger: China-based unit ordered to cease factory operations. Kanger International’s China-based unit YanShan (Country) Kanger Bamboo Industry Co Ltd (YanShan Kanger) has been directed by the YanShan County’s to cease its factory operations until further notice. Kanger said YanShan Kanger is recommended to temporarily stop operations or transfer its factory under the directive of the YanShan County, in respect of expediting the county’s development and beautification of the environment. (The Edge)

Zelan: Loses arbitration in charter hire fees dispute, ordered to pay RM2.66m. Property developer Zelan has lost an arbitration in a dispute with a dredging firm over charter hire fees, and has been ordered to pay the firm RM2.66m. Zelan said its subsidiary, Zelan Construction SB, was the respondent to the claim made by Clamshell Dredging SB. After the full trial of the matter at the Asian International Arbitration Centre (AIAC) in KL, the tribunal ruled that Zelan Construction had terminated the contracts under dispute. Apart from the RM2.66m, Zelan Construction was ordered to pay Clamshell interest at the rate of 5% per annum on the sum of RM2.66m from June 30, 2016 until full payment is made. (The Edge)

Market Update

The FBM KLCI might lower today after the S&P 500 closed in correction territory as concern about the outlook for global growth triggered another slump in oil prices, dragging shares of companies in the sector down with it. In Asia, hopes for a breakthrough in trade relations between Washington and Beijing remained unfulfilled, leaving China’s stocks looking exposed, while weak data from the eurozone added to the sense of unease over the global economy. US stocks dipped as markets returned after the Thanksgiving holiday, with the S&P 500 closing down 0.7% to 2,632.56, adding up to a drop of more than 10 percent from its recent high in September. The Nasdaq Composite fell 0.5% while the Dow Jones Industrial Average lost 0.7%. The European Stoxx index tracking oil and gas companies tumbled 3% — compared with the wider Stoxx 600 index edging up 0.4%. Weaker-than expected economic data from the eurozone added to the uncertain mood. German purchasing managers’ data for November missed forecasts, as did numbers from the wider currency area. European markets finished mixed as the DAX gained 0.49% and the CAC 40 rose 0.18%. The FTSE 100 lost 0.11%.

Back home, the FBM KLCI index gained 0.26 of a point or 0.02% to 1,695.88 points on Friday. Trading volume decreased to 1.58bn worth RM1.10bn. Market breadth was negative with 236 gainers as compared to 597 losers. The CSI 300 index of major Shanghai and Shenzhen stocks fell 2.2%, with technology stocks under pressure. The sector is seen as vulnerable to any intensification of the trade dispute, as the potential target of the next round of tariffs. There were bigger moves for China’s oil majors, with concern about slowing growth and the potential economic impact of the US trade spat adding to pressure. Hong Kong’s Hang Seng ended Friday down 0.4%.

Source: PublicInvest Research - 26 Nov 2018

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