PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 7 Aug 2020, 12:20 PM


PublicInvest Research Headlines - 30 Jan 2019

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US: Consumer morale at one-and-a-half year-low; house price gains slow. US consumer confidence fell to a 1-1/2 year-low in Jan as a partial shutdown of the government and financial markets turmoil left households a bit nervous about the economy’s prospects. The drop in confidence reported by the Conference Board mirrors another survey earlier this month showing sentiment tumbling to its lowest level since President Donald Trump was elected more than two years ago, strengthening analysts’ expectations that the economy was losing momentum. The Conference Board’s consumer confidence index dropped 6.4 points to 120.2 this month, the lowest reading since July 2017. It blamed the third straight monthly decline in confidence to “financial market volatility and the government shutdown.” (Reuters)

EU: Eurozone inflation gauge tracked by ECB hits lowest since 2016. A key gauge of the market’s long-term expectations for inflation in the euro area fell to its lowest level since late 2016, in a further sign that weak economic data globally is weighing on the inflation outlook. The euro zone economy has performed worse than expected in recent months and global uncertainty is weighing on economic sentiment, repeating the bank’s recent warnings about growth. Highlighting investor concern that the ECB will struggle to achieve its near 2% inflation target, inflation expectations in the bloc have fallen sharply since early Nov. The five-year, five-year breakeven forward, a market gauge tracked closely by the ECB, fell to 1.5059% on Tuesday. That is its lowest level since Oct 2016. (Bloomberg)

EU: German government sees employment, wages up in 2019, says Handelsblatt. The German government expects employment to reach a record high in 2019 and wages to rise, German daily Handelsblatt reported on Tuesday. The number of people in work will hit 45.2m this year while wages will rise by 4.8%, the paper said, citing economic forecasts for Europe’s largest economy that are due to be publicly released on Wednesday. Sources have told Reuters that the government has cut its economic growth forecast for 2019 to 1.0%from 1.8%, which Handelsblatt said was mainly due to risks from trade disputes. (Reuters)

EU: France consumer confidence improves more than expected. French consumer confidence rose more-than-expected in Jan, after decreasing in Dec, amid a sharp improvement in expectations, survey data from the statistical office INSEE showed. The consumer sentiment index rose to 91 in January from 86 in Dec. Economists had forecast a score of 88. In Nov, the reading was 91. Despite the latest improvement, the headline index remained below its long term average of 100. The improvement in Jan was driven by gains across the board. Households' willingness to make big purchases increased sharply with the corresponding index rising 10 points after a 15-point fall in Dec. The measure reflecting households' assessment of the future financial situation rose 8 points and the index for the saving capacity outlook added 7 points. (RTT)

UK: Parliament rips up Brexit deal and sends may back to talks. Theresa May promised to go back to Brussels to re-negotiate Brexit after Parliament ripped up the deal she’s spent the past year and a half stitching together. On a rare good night for the UK prime minister, members of Parliament backed her proposal to strip out the most difficult part of the divorce package and re-open talks with the European Union. With just eight weeks until Britain is scheduled to exit the bloc, the premier knows she faces a mountainous task. Asking the EU for something it’s long rejected could increase the chances of a messy no deal exit and the pound dropped. “There is limited appetite for such a change within the EU and negotiating it will not be easy,” May told the House of Commons. (Bloomberg)

China: More Chinese provinces cut growth targets this year as gloom spreads. More Chinese provinces have cut their annual growth targets in 2019 than the year before, a sign of deepening pessimism among local governments amid weakening domestic demand and an prolonged trade dispute with the US. The lower regional targets reinforce expectations of a further slowdown in the world’s second biggest economy this year, after 2018 GDP expanded at its slowest pace in nearly three decades. Of China’s 31 provinces, regions and municipalities, at least 23 cut their economic growth targets for this year, according to provincial announcements this month. In 2018, 17 provinces set lower targets. Shandong, China’s third-richest province, has yet to announce its 2019 target. (Reuters)

China: Wants to boost loans to small businesses. China's push to encourage lending to smaller companies has created a business opportunity for large financial technology companies. As Beijing struggles to balance a crackdown on high debt levels with maintaining growth, President Xi Jinping and Premier Li Keqiang have both publicly announced support for privately-run companies. The central bank has also freed up cash for lending in recent months, and eased rules to help small businesses obtain funds more easily. Still, the business environment — particularly in financing — still favors state-owned companies, despite the fact that the private sector contributes to the majority of job creation and economic growth in the country. (CNBC)


Genting (Outperform, TP: RM8.80): Genting and Wynn have reached a settlement agreement . Genting's indirect wholly-owned subsidiary Resorts World Las Vegas (RWLV) and Wynn Resorts Holdings LLC (Wynn) have reached a settlement agreement on a dispute involving trade dress and copyright infringement claims surrounding the design of RWLV project (source: Bursa Malaysia) Comment : The group has directed its design team to make several changes that will clearly differentiate the properties and this mutually beneficial settlement will allow Genting to continue to develop RWLV with minimal impact to cost and the overall project timeline. To recap, the lawsuit was filed on 21 December 2018 by Wynn, which it claimed RWLV looks similar to copyrighted design of Wynn properties in Las Vegas and Macau. RWLV is currently under construction on the Las Vegas Strip in Nevada and is planned to be completed in late 2020. We maintain our Outperform rating on Genting.

DRB-Hicom (Outperform, TP: RM2.10): Unit forms auto parts JV with Jiangsu Xinquan. Hicom-Teck See Manufacturing Malaysia SB (HTS) has entered into a shareholder agreement with Jiangsu Xinquan Automotive Trim Co Ltd (XQ) to form a JV company in Malaysia. The partnership is to design, develop and manufacture instrument panel, floor consoles and door trims as well as related components for vehicles. HTS is a 51%-owned subsidiary of Hicom Holdings, which in turn is wholly owned by DRB-Hicom. The proposed shareholding structure in the JV will be 49% for HTS and 51% for XQ HK. “Via the participation of HTS in the JV company, the DRB-HICOM Group will be able to continue supporting Proton’s business, which includes expansion into the Asean market. “The JV company is also targeting to penetrate the Asean market with products manufactured using new technology,” said DRB Hicom. (StarBiz)

Axiata (Neutral, TP: RM3.85): edotco enters Laos tower market. Axiata Group said a subsidiary edotco Group SB is expanding into Laos. It said edotco entry into Laos was driven by the prospect of “intense growth” in the country’s telecommunication tower market over the next three years. The deal involved edotco buying an 80% stake in d Mekong Tower Company Ltd (MTCL) for RM6.1m. (StarBiz)

Sunway: Sets up sukuk programme to raise up to RM10bn. Sunway has set up a sukuk programme to raise up to RM10bn in nominal value to finance its investment activities, capital expenditure and working capital. Proceeds will also be used to fund general corporate expenses, and for the repayment of existing or future borrowings. The seven-year Islamic Commercial Papers/Islamic Medium Term Notes Programme under the syariah principle of Mudharabah is set up via its indirect wholly-owned unit, Sunway Treasury Sukuk SB. (The Edge)

Eita Resources: Forms 70:30 JV with Royal Malaysia Police Cooperative. Eita Resources has formed a 70:30 JV with Royal Malaysia Police Cooperative’s unit KOP Mantap for the provision of service, maintenance, repair, upgrade and modernise lifts, escalators and elevators to third parties. Under the agreement, KOP Mantap is responsible for securing jobs or contracts from the Government or the Royal Malaysia Police or other such bodies and agencies at an initial estimated contract value of RM100m within 45 days of executing the said agreement. (The Edge)

Integrated Logistics: Plans to dispose of loss-making UAE unit to shareholder for RM50.4m. Integrated Logistics (ILB) plans to dispose of its entire 50% stake in its loss-making unit in Dubai, Integrated National Logistics DWC-LLC (INL), to a shareholder, for 45million dirham (RM50.4m). The group said it accepted the offer to purchase from National Trading & Developing Est (NTDE) after deliberating for six days but will further negotiate on terms and conditions. (The Edge)

Comfort Gloves: To terminate existing ESS. Comfort Gloves has moved to terminate its existing Employees’ Share Scheme (ESS) on the grounds that it is not suitable to attract, motivate and reward employees and directors. The exercise price of its ESS shares is at 93.5 sen per share. The ESS options “are currently out-of-the-money” based on closing price of 88 sen. The ESS stood at some 30.8m shares. However, the group said that it was looking at alternative means of rewarding its employees and directors. (The Edge)

SD Plantation: To help boost Sarawak's palm oil industry. Sime Darby Plantation will help boost Sarawak's palm oil industry standards in terms of operational efficiency and productivity in a tie up with Sarawak Land Consolidation and Rehabilitation Authority (Salcra). Both parties had signed an MoU to work together to: establish, strengthen and encourage synergistic commercial cooperation along the palm oil value chain”. “The collaboration is intended to uplift Sarawak’s palm oil industry standards in terms of operational efficiency and productivity through best agronomic practices and to inculcate and enhance sustainability awareness for higher operational performance and bottom-line achievement,” it said. (Starbiz)

CMMT: Sees better quarters ahead after reporting 8.2% drop in 4Q NPI. After reporting lower 2018 earnings, CMMT is banking on Sungei Wang Plaza's new five-storey annexe block to boost rental contribution this year. Low Peck Chen, CEO of CMMT’s manager CapitaLand Malaysia Mall REIT Management SB, said that "numbers should be better this year" as the block, branded as 'Jumpa', opens its doors to shoppers in early June. She added that about 30% of the tenants have been secured so far. (The Edge)

Chin Teck Plantation: 1Q profit down by 41% on lower sales, prices. Chin Teck Plantations posted a 41% net profit fall in its 1QFY19 as it suffered a decline in sales and average selling prices of fresh fruit bunches (FFB), crude palm oil (CPO) and palm kernel (PK). Its 1QFY19 net profit fell to RM9.6m from RM16.4m a year ago, while revenue declined 31% to RM29.1m from RM42.5m. Production of FFB, CPO and PK were also lower, it noted. "The group suffered an overall loss from its share of results of associates mainly due to losses suffered by its investments in oil palm plantations in Indonesia,” Chin Teck said. (The Edge)

Property (Neutral): Lower financing rate for first-time house buyers. First-time house buyers are expected to enjoy 23% less in monthly commitment compared to current financing schemes offered in the market with the official launch of Bank Negara Malaysia’s (BNM) Fund for Affordable Homes initiative. Governor Datuk Nor Shamsiah Mohd Yunus said with a maximum 3.5% financing rate per annum for houses priced up to RM150,000, the initiative had attract more than 1,037 individuals who signed up for its financial education requirement under the Credit Counselling and Debt Management Agency (AKPK). (StarBiz)

Market Update

The FBM KLCI might open with a negative bias today after Wall Street put in another cautious showing as participants digested the latest batch of corporate earnings and awaited fresh direction from a meeting of the Federal Reserve and the forthcoming US-China trade talks. There was plenty of uncertainty in the UK, too, as the markets watched the latest episode of the Brexit drama unfold in Westminster. The pound fell to the day’s lows against the dollar and the euro after MPs backed an amendment to Prime Minister Theresa May’s withdrawal agreement calling for the Irish border backstop to be junked and replaced with “alternative arrangements”. On Wall Street, the S&P 500 ended 0.2% lower at 2,640, while the Dow Jones Industrial Average edged up 0.2% and the Nasdaq Composite fell 0.8% lower. Across the Atlantic, the pan-European Stoxx 600 index ended 0.8% higher, although the Xetra Dax in Frankfurt registered a gain of less than 0.1%. The FTSE 100 in London rose 1.3%.

Back home, the FBM KLCI index lost 7.08 points or 0.42% to 1,690.41 points on Tuesday. Trading volume decreased to 2.23bn worth RM2.03bn. Market breadth was negative with 299 gainers as compared to 487 losers. Chinese stocks had a choppy session, with the CSI 300 index ending 0.3% higher after earlier falling 1.1%. In Tokyo, the Topix index settled 0.1% higher.

Source: PublicInvest Research - 30 Jan 2019

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