PublicInvest Research

Author: PublicInvest   |   Latest post: Mon, 18 Nov 2019, 9:59 AM


PublicInvest Research Headlines - 25 Mar 2019

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US: Existing-home sales surge 11.8% in best gain since 2015. Sales of previously owned US homes rebounded in Feb to the fastest pace in almost a year, topping estimates and snapping a three-month streak of declines to offer a robust indication that the housing market is stabilizing after last year’s slump. Contract closings increased 11.8%, the most since 2015, from Jan’s pace to a 5.51m annual rate, the National Association of Realtors said, exceeding all forecasts. The median sales price climbed 3.6% YoY. (Bloomberg)

EU: Economy outlook darkens anew as manufacturing slump deepens. Europe’s economic outlook was thrown into fresh doubt after reports showed weakness across France and Germany. Hopes that the slowdown had reached a trough have taken a beating from renewed weakness in France and the deepest slump in German manufacturing in over six years. A euro-area PMI is signaling growth of 0.2% this quarter, matching the pace of the previous three months. The news reverberated through markets, sending Germany’s 10-year bund yield below 0% for first time since 2016. Yields on Spanish, French and Italian debt also declined, while the euro dropped 0.6%. (Bloomberg)

UK: Brexit housing crash fears stay in london as regions catch. The Brexit-inspired decline in London’s property values has yet to cause any serious ripples in other areas of the UK While price-growth and activity may be slowing amid the uncertainty, almost every other major urban area in the country is still experiencing a rising market, according to Acadata. It’s a national divide that’s all too apparent to real estate agents in northern England who aren’t too worried about the UK’s departure from the European Union. “It’s a different world from London in the north,” says Jonathan Morgan. (Bloomberg)

China: Officials tap lower tariffs, debt sales to aid growth. China’s top officials pledged to lower tariffs and expedite debt sales in 2019 as they seek to manage an economic slowdown while tackling the trade standoff with the US. The country will continue to cut import taxes and create a first-rate environment for foreign businesses as it opens up the economy, Vice Premier Han Zheng said. Han reaffirmed policies to better protect intellectual property rights, forbid forced technology transfers and reduce restricted areas for foreign investment toward the level of access in free-trade zones. (Bloomberg)

Japan: Inflation slips lower, highlighting BOJ’s challenge. Japan’s key inflation gauge crept fractionally lower, before a bigger downturn likely later this year that will further slow the Bank of Japan’s long journey to its price target. Consumer prices excluding fresh food rose 0.7% in Feb, versus economists’ median forecast of 0.8%, the ministry of internal affairs said. The latest price reading offers little evidence to back up the BOJ’s claim that upward price momentum remains intact, at a time when the central bank faces growing questions about the wisdom of its commitment to 2% inflation. (Bloomberg)

Japan: Manufacturing PMI contracts for a second straight month. Activity in Japan’s manufacturing sector contracted in March after falling into negative territory for the first time in 2.5 years in Feb, according to preliminary data that increases concerns about the global economic slowdown. The Nikkei Japan PMI for manufacturers registered 48.9, equal to the reading last month, amid further cutbacks in production and weakening inflows of new orders. (Bloomberg)


Genting Malaysia (Underperform, TP: RM2.70): Sells UK casino for RM185m. Genting Malaysia is disposing of its entire equity interest in Coastbright Ltd for some GBP34.6m cash (approximately RM185m). Coastbright is principally involved in operating the Maxims casino in Kensington, London. (The Edge) Comments: Coastbright operates the Maxims casino in London, UK. The disposal is expected to allow Genting UK to streamline its operations and recognise a gain of GBP23m or RM123m. We note that the UK casino operations have been affected by Brexit, resulting in a slowdown of business activities. The proceeds are intended to be used to reduce borrowings but given the group’s total debt of RM9.8bn, the overall impact is expected to be immaterial. Our core earnings forecasts remain unchanged. Maintain Underperform on GENM.

Wah Seong (Neutral, TP: RM0.80): To Tap Infra Projects In East Malaysia With New Doosan Infracore Distributorship. Wah Seong Corporation announce that its indirect 60%-owned subsidiary, WDG Resources SB has entered into a Distributorship Agreement with Doosan Infracore Co. Ltd. (DOOSAN) for the appointment of WDG as an exclusive distributor of DOOSAN construction equipment within East (Borneo) Malaysia for the sales and services of the Products and to promote sales of the Products through mutual cooperation. (Bursa) Comments: This development is undoubtedly positive to the Group’s future prospect as provides a great opportunity to participate in infrastructure and construction projects in Sabah and Sarawak, including the massive Pan Borneo Highway. Nonetheless, we keep our forecast unchanged as further details of the agreement remains unknown. In addition, we think the net impact is not likely to be meaningful to the Group’s operating profit numbers as the major contributor is still its pipeline coating services. Hence, we are maintaining our Neutral rating on Wah Seong.

Axiata (Underperform, TP: RM3.65): Edotco inks agreements with three Pakistani mobile network operators. Axiata Group 63%-owned subsidiary edotco Group SB has signed agreements with three of Pakistan’s major Mobile Network Operators (MNOs) to boost the country's connectivity capabilities via shared telecommunication towers, and more efficient operations and energy management. (The Edge)

MAHB: In JV with Singapore-listed Boustead Projects to develop Subang Aerospace Park. Malaysia Airports Holdings (MAHB) and BP Aerotech (Subang) SB plan to develop an aerospace and hightech park within the Subang Aerotech Park to be leased to companies in the aerospace industry. It entered into a JV agreement with BP Aerotech for the proposed development, which will be undertaken by a JV company to be announced later. (The Edge)

Mynews: Net profit jumps 30% in 1Q on better sales, new outlets. Mynews Holdings net profit jumped 30% to RM8.24m in the 1QFY19 from RM6.34m a year earlier, helped by better sales and contributions from new outlets. Revenue grew 37% to RM123.5m from RM90.12m a year earlier. The improved revenue was principally contributed by the increase in the number of outlets and higher sales by the existing outlets. (The Edge)

Market Update

The FBM KLCI might open lower today after fear of a recession sent bond prices soaring and stock prices tumbling. On Wall Street, the Dow Jones Industrial Average sank 460 points, or 1.8%, to close at 25,502.32 Friday, while the S&P 500 slumped 1.9% and the Nasdaq Composite Index fared even worse, sliding 2.5%. European markets finished sharply lower on Friday with shares in France leading the region. The CAC 40 was down 2.03% while London's FTSE 100 was off 2.01% and Germany's DAX was lower by 1.61%.

Back home, the FBM KLCI index gained 3.00 points or 0.18% to 1,666.66 points on Friday. Trading volume decreased to 2.75bn worth RM2.13bn. Market breadth was negative with 377 gainers as compared to 470 losers. The performance of our local bourse was mainly buoyed by buying interest in heavy weight counters such as Sime Darby, Maxis and Axiata. The regional markets finished higher on Friday with shares in Hong Kong leading the region. The Hang Seng was up 0.14% while China's Shanghai Composite added 0.09% and Japan's Nikkei 225 rose 0.09%.

Source: PublicInvest Research - 25 Mar 2019

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