PublicInvest Research

Author: PublicInvest   |   Latest post: Mon, 10 Aug 2020, 12:55 AM


PublicInvest Research Headlines - 4 Feb 2019

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Global: Factory activity shrinks across Asia as cooling China threatens global growth . Factory activity shrank across much of Asia in Jan, falling to the weakest in years in several countries and adding to worries that trade tariffs and cooling demand in China pose an increasing threat to global growth. The weak Purchasing Managers Index (PMI) readings reinforce expectations that central banks in Asia will put any further interest rate hikes on hold this year. In some countries, such as China, Australia and India, there is even chatter about potential rate cuts. Trade-focused Asia appears to be suffering the most visible loss of momentum so far, but the euro zone economy is stuck in low gear and many emerging markets are sputtering. The US economy, while a bit wobbly of late, still looks set to post solid growth, though softer than last year’s pace. (Reuters)

US: Fed leaves rates unchanged, drops reference to gradual rate hikes. The Federal Reserve announced its widely expected decision to leave interest rates unchanged. The Fed said following a two-day meeting it has decided to maintain the target range for the federal funds rate at 2.25% to 2.50%. The accompanying statement included some notable changes from last month, including dropping a reference to the Fed's plan for further gradual rate increases. The central bank also removed a sentence describing the risks to the economic outlook as "roughly balanced." Instead, the Fed still sees a sustained expansion of economic activity, strong labor market conditions, and inflation near its symmetric 2% objective. (RTT)

US: Job gains largest in 11 months, unemployment rate rises. US job growth surged in Jan, with employers hiring the most workers in 11 months, pointing to underlying strength in the economy despite an uncertain outlook that has left the Federal Reserve wary about more interest rate hikes this year. The Labor Department said its closely watched monthly employment report on Friday showed no “discernible” impact on job growth from a 35-day partial government shutdown, while acknowledging it was unable to quantify the effect on private industry. But the longest shut down in history, which ended a week ago, pushed up the unemployment rate to a seven-month high of 4.0%. The report came two days after the Fed signaled its three-year interest rate hike campaign might be ending because of rising headwinds to the economy. (Reuters)

US: Manufacturing growth unexpectedly reaccelerates in Jan. After reporting a significant slowdown in the pace of growth in US manufacturing activity in the previous month, the Institute for Supply Management released a report on Friday showing growth unexpectedly reaccelerated in the month of Jan. The ISM said its purchasing managers index climbed to 56.6 in Jan from a revised 54.3 in Dec, with a reading above 50 indicating growth in the manufacturing sector. Economists had expected the manufacturing index to edge down to 54.0 from 54.1 originally reported for the previous month. "Comments from the panel reflect continued expanding business strength, supported by strong demand and output," said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

US: Wholesale inventories rise 0.3% in Nov, wholesale sales drop 0.6%. With an increase in inventories of durable goods partly offset by a drop in inventories of non-durable goods, the Commerce Department released a report on Friday showing wholesale inventories in the US rose by less than expected in the month of Nov. The Commerce Department said wholesale inventories edged up by 0.3% in Nov after climbing by an upwardly revised 0.9% in Oct. Economists had expected inventories to increase by 0.5% compared to the 0.8% advance originally reported for the previous month. The report said inventories of durable goods climbed by 0.7% in Nov after jumping by 1.7% in Oct, reflecting notable increases in inventories of furniture, professional equipment, and lumber. (RTT)

EU: Inflation falls, though core rate inches higher. Eurozone inflation dipped as expected last month, falling further from the European Central Bank’s target and providing yet another reason for the bank to slow down in removing stimulus. Inflation in the 19 countries sharing the euro slowed to 1.4% from 1.6% a month earlier, Eurostat said on Friday, another soft reading for an economy suffering its biggest slowdown since its debt crisis. Although a moderation in energy price growth accounted for the bulk of the drop, underlying inflation, a key indicator for the ECB, also remained weak, ticking up only a touch and defying the bank’s expectation for a more substantial rise. Still, a pick up in core inflation or prices excluding food and energy to 1.2% from 1.1% may be somewhat comforting for the ECB. (Reuters)

China: Services sector moderates in Jan but still solid. China’s sprawling services sector maintained a solid pace of expansion in Jan even though growth moderated slightly, a private survey showed on Sunday, offering continued support for the world’s second-largest economy as manufacturing cools. The Caixin/Markit services purchasing managers’ index (PMI) fell slightly to 53.6 in January from 53.9 in December, but well above the 50.0 mark separating growth from contraction. Overseas sales continued to support the sector, with new export business rising at the fastest clip in more than a year, thanks to efforts among Chinese services firms to attract foreign clients. Overall new orders also ticked higher, to 52.6 from 52.3 in December. (Reuters)

India: Manufacturing growth rises in Jan. India's manufacturing growth improved in Jan amid gains in new orders, input buying and employment, survey data from IHS Markit showed. The headline Nikkei/ IHS Markit manufacturing Purchasing Managers' Index rose to 53.9 in Jan from 53.2 in Dec. A score above 50 indicates expansion in the sector. Factory orders were strongest in 13 months. New orders increased solidly in foreign market, rising for the 15th month in a row. Production grew at the strongest pace since Dec 2017. Staffing levels rose for a tenth successive month, albeit modestly. On the price front, input costs rose at a muted rate amid reports of higher prices for paper, textiles, steel and synthetic rubber, while firms noted lower charges for aluminum, copper, oil and plastic. Factory gate charges were subsequently increased slightly. (RTT)


AirAsia (Outperform, TP: RM4.14), MAHB: AirAsia serves RM480m claim on MAHB. AirAsia Group has served a notice on Malaysia Airports Holding’s (MAHB) unit Malaysia Airports (Sepang) SB (MASSB), claiming almost RM480m for losses incurred from operating at klia2. It estimated its losses at RM479.8m, the main portion coming from a loss of customers in the last four years owing to disruptions and the poor condition of the terminal. (StarBiz)

Parkson (Neutral, TP: RM0.40): To close its Suria KLCC outlet. The Parkson group, which has been streamlining its presence in Malaysia over the past year, is closing its outlet in Suria KLCC after two decades. In a notice on its Facebook page, it said it was having a “moving out sale” at its KLCC outlet until Feb 17, emphasising that “everything must go.” The three-level, 126,000 sq ft outlet opened in 1998 and was one of Suria KLCC’s earliest tenants. At press time, the company was not able to revert to queries from StarBiz on reasons for its closure. (StarBiz)

Vizione, Vertice: JV accepts RM815m Penang Mega Infrastructure job . Vizione Holdings announced that its JV company with Vertice has accepted the RM815m contract from Consortium Zenith Construction SB to undertake construction works for Package 2 of the Penang Mega Infrastructure project. The JV company is Buildmarque Construction SB, in which Vizione and Vertice have a 50% stake each. The award of the contract was first announced last Sept. (The Edge)

Pestech: Secures TNB contracts worth RM280.9m. Pestech International’s unit has secured two contracts from Tenaga Nasional (TNB) for a power plant in Kedah and the laying of an underground cable in Kuala Lumpur worth a combined sum of RM280.9m. The group said the wholly-owned subsidiary, Pestech SB, had received the RM168.4m contract for the PMU Junjung 500/275kV power plant. In a separate filing, it said its JV with Pembinaan Tajri SB had received a RM112.5m contract from TNB for the laying of the XLPE underground cable from PMU prince Court to PMU Ampang. (StarBiz)

Crest Builder: Unit wins RM99.6m construction job. Crest Builder Holdings’ wholly owned unit has won a RM99.6m contract to develop a 26-storey hotel in Kuala Lumpur. Its outstanding order book will rise to about RM950m with the addition of the new contract. The order book is expected to provide earnings visibility for the next three years. (StarBiz)

Eduspec: Proposes RM107.3m share capital reduction to offset losses. The board of Eduspec Holdings has proposed to undertake a capital reduction to cancel RM107.3m of its paid-up share capital to offset accumulated losses. The exercise is expected to transform the financial position of the education services provider from an unaudited accumulated loss of RM54.4m as at Sept 30, 2018 to RM62.8m in retained earnings. It said the proposed share capital reduction would not have any effect on the group’s EPS, its structure and its substantial shareholders’ holdings. (The Edge)

Heitech Padu: Bags RM14.4m contract from IRB. Heitech Padu has bagged an RM14.4m contract from the Inland Revenue Board (IRB) to renew the software licence for the board’s mainframe systems. It said the contract is for a duration of two years. It said the contract is expected to have a positive effect on the future earnings of HeiTech. (The Edge)

Gunung Capital: Gets RM9.5m hydro power plant job. Gunung Resources SB, a wholly-owned unit of Gunung Capital, has been awarded a project management contract worth RM9.45m for the procurement, construction and commissioning of a 2MW installed capacity small hydro power plant in Gopeng, Perak. The group said the contract was awarded by Conso Hydro RE SB, a 50.1% indirectly owned subsidiary of the group, via a letter of award dated Jan 30. Following the completion of the contract, Gunung Resources will be given the option to operate and maintain the hydropower plant. The contract is expected to last 12 months. (The Edge)

RHB: Plans winding up of RHB Research Institute to rationalise costs. RHB Investment Bank has proposed a reorganisation to streamline its equity and economic research operations, and to close RHB Research Institute SB to rationalise costs. Under the proposal, RHB Investment Bank will move its equity and economic research operations which is currently housed under RHB Research Institute SB (RHBRI), into a division within the investment bank, while the fixed income and currencies research function will be absorbed by RHB Bank. (The Edge)

MAHB: Gears up to handle 16% surge in passenger traffic during CNY. MAHB expects an increase of nearly 16% in passenger movement to pass through both terminals of KLIA Main and klia2 during the super peak period from now till Feb 13, 2019. Group CEO Raja Azmi Raja Nazuddin said the expected rise in passenger traffic meant MAHB would be serving about 196,000 passengers, daily. In catering to the surge, MAHB has joined hands with the Royal Malaysia Police, Royal Customs Malaysia and the Immigration Department of Malaysia to ensure a safe and seamless journey for passengers travelling via KL International Airport this Chinese New Year that would coincide with the school holidays, he said. (The Edge)

Berjaya Food: Expansion to focus on Starbucks. Of the RM100m capital expenditure Berjaya Food allocated for the current FYE April 2019, more than half has been set aside for popular coffee chain Starbucks, especially its reserve concept store. With 20%-30% of the capex remaining, CEO Sydney Quays indicated Starbucks would continue to be the focus of its expansion as the outlets had delivered stable same-store sales growth of about 6% to 8%. (The Edge)

F&N: Net profit rises 15%. Fraser & Neave Holdings (F&N) has registered a 15% increase in net profit to RM122.9m for the 1QFY19 compared to the same quarter in 2017. The higher net profit during the quarter under review was attributed to higher contributions from the F&B segments in Malaysia and Thailand. F&N said its F&B Malaysia operating profit during the quarter improved by 27.5% to RM52.5m, mainly due to favourable input costs like sugar, palm oil and dairy-based commodities. However, this was partially offset by higher packaging material costs and higher manufacturing-related costs. (StarBiz)

Auto (Neutral): Proton reports Jan 2019 sales volume growth, led by X70 SUV. Proton Holdings said that sales volume, as measured by total vehicle registrations, climbed to 7,007 units in Jan 2019. It said the large number of SUV registered was instrumental to Proton posting impressive sales growth figures during the month. Proton said following the launch of the Proton X70 SUV on Dec 12, 2018, deliveries of the Proton X70 gathered pace as more units of the company's first SUV became available. (The Edge)

Market Update

The FBM KLCI might open lower today after US stocks started the month on a hesitant note as a reassuring batch of domestic economic data was countered by caution over Amazon’s latest trading update, released late on Thursday. The online retailer topped the list of fallers in the S&P 500 on Friday after its sales forecast for the first quarter was lower than expected. Wall Street had initially pushed higher after the latest US jobs report showed non-farm payrolls increased by 304,000 jobs last month, far exceeding expectations. However, analysts did point out that the figures may have been distorted by the government shutdown, and also noted that December’s payrolls increase had been revised down sharply. Further good news on the economic front came from the Institute for Supply Management’s manufacturing index, which staged a solid rebound in January following the previous month’s steep decline. US Treasuries fell steeply after the release of the data. On Wall Street, the S&P 500 ended 0.1% higher at 2,706, having earlier risen as high as 2,716. For the week, the S&P gained 1.6%. The uncertain start to February came after the index secured its biggest monthly gain for more than three years in January. The Dow Jones Industrial Average rose 0.3% on Friday although the Nasdaq Composite closed 0.3% lower. In Europe, the pan-regional Stoxx 600 ended 0.3% higher, with the Xetra Dax in Frankfurt inching up less than 0.1% and London’s FTSE 100 gaining 0.7%, helped by sterling’s softer trend.

Back home last Thursday, the FBM KLCI index gained 1.25 points or 0.07% to 1,683.53 points on Thursday. Trading volume increased to 2.37bn worth RM2.42bn. The regional markets finished mixed with the Shanghai Composite gained 1.30% and the Nikkei 225 rose 0.07%. The Hang Seng lost 0.04%.

Source: PublicInvest Research - 4 Feb 2019

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