PublicInvest Research

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PublicInvest Research Headlines - 14 Jun 2019

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US: Import and export prices drop more than expected in May. The Labor Department revealed that US import and export prices both dropped by more than expected in the month of May. The Labor Department said import prices fell by 0.3% in May following a revised 0.1% uptick in April. Economists had expected imports prices to dip by 0.2% compared to the 0.2% increase originally reported for the previous month. Additionally, the report said export prices edged down by 0.2% in May after inching up by a revised 0.1% in April. Export prices had been expected to slip by 0.1% compared to the 0.2% growth originally reported for the previous month. (RTT)

US: Weekly jobless claims rise. The number of Americans filing applications for unemployment benefits unexpectedly rose last week, which could add to concerns that the labor market was losing steam after job growth slowed sharply in May. Initial claims for state unemployment benefits rose 3,000 to a seasonally adjusted 222,000 for the week ended June 8. Economists polled by Reuters had forecast claims decreasing to 216,000 in the latest week. While layoffs remain relatively low, the third straight weekly increase in claims suggests some softening in labor market conditions. The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 2,500 to 217,750 last week. (Reuters)

EU: Industrial production falls most in 4 months. Eurozone industrial production fell at the fastest rate in four months in April, figures from Eurostat showed. Industrial production declined 0.5% MoM in April, following a 0.4% fall in March. The latest decrease in production was the worst since Dec last year, when it was down 0.9%. The latest PUBLIC INVESTMENT BANK BERHAD FBM KLCI DOW JONES S&P 500 HANG SENG STRAITS TIMES Source: Bloomberg, PublicInvest Research decline was driven by 1.7% fall in durable consumer goods. Capital goods and intermediate goods fell 1.4% and 1.0%, respectively. While energy production rose 1.4% and that of non-durable consumer goods increased 0.2%. On a YoY basis, industrial production fell 0.4% in April, following a 0.7% decline in the previous month. (RTT)

EU: Germany’s inflation eases as estimated. Germany's CPI moderated as estimated in May from a five-month high on air tickets and holiday packages, final data revealed. CPI eased to 1.4% from 2% in April. On a MoM basis, consumer prices gained 0.2% in May, in line with flash estimate. Data showed a 9% decrease in package holiday costs and air tickets prices advanced only 1.4%. Meanwhile, energy product prices advanced 4.2%. Excluding energy, consumer prices rose 1.2% from the same period of 2018. EU harmonized inflation slowed to 1.3%, in line with estimate, from 2.1% in the previous month. On a MoM basis, the harmonized index of consumer prices rose 0.3% in May. Both monthly and annual inflation figures were confirmed. (RTT)

Japan: Tertiary activity index rises in April. Japan's tertiary activity increased for the first time in three months in April, data from the Ministry of Economy, Trade and Industry showed. The tertiary activity index rose 0.8% MoM in April, after a 0.2% decline in March. Economists had expected a 0.4% rise. Among the individual components of the survey, activities were up for electricity, gas, heat supply and water, information and communications, living and amusement-related services, retail trade, finance and insurance, goods rental and leasing, wholesale trade, and transport and postal activities. (RTT)

India: Industrial production growth exceeds expectations. India's industrial production grew more-than-expected in April, figures from the statistics ministry revealed. Industrial production grew 3.4% YoY in April, following a revised 0.4% rise in March. Output was forecast to grow moderately by 1.2%. All components of the sector contributed to the annual growth. Mining output advanced 5.1% YoY, manufacturing grew 2.8% YoY and electricity output climbed 6% YoY. The cumulative growth for the period April-March 2018-19 over the corresponding period of the previous year came in at 3.6%, data showed. (RTT)

India: Inflation accelerates further. India’s consumer price inflation accelerated further in May, in line with economists’ expectations, from the National Statistical Office showed. The CPI rose 3.05% YoY in May after a 2.99% increase in April, which was revised from 2.92%. In May 2018, inflation was 4.87%. Food price inflation accelerated to 1.83% from 1.10%. On a MoM basis, the CPI 0.57% in May and food prices grew 1.24%. The Reserve Bank of India cut the key interest rate by a quarter basis point this month, the third in a row, to its lowest level since 2010 and tweaked its monetary policy stance to accommodative from neutral. (RTT)

Malaysia: FDI soars 73.4% in 1Q to RM29.3bn. Approved foreign direct investment (FDI) for all sectors skyrocketed in the 1Q of 2019, rising 73.4% to RM29.3bn. This compares to the RM16.9bn in approved FDI recorded during the same period last year, the Finance Ministry said. The investments recorded in the 1Q are expected to create over 41,200 jobs for Malaysians, of which 22,970 employment opportunities will be in manufacturing and 18,000 jobs in the services sector, it said. Finance Minister Lim Guan Eng said the development indicated a healthy 2Q GDP growth. The surge in approved FDI in the 1Q, he said, was driven by a 127% jump in investments into the manufacturing sector, totalling RM20.2bn, compared to RM8.9bn a year ago. (StraBiz) 


Daya Materials: To sell cranes and forklifts for RM11.5m. Daya Materials intends to sell 22 mobile cranes and two forklifts for RM11.5m. Its 58.5%-owned subsidiary Daya Proffscorp SB (DPRO) accepted the offer from Key Prospect SB (KPSB), which was submitted to DPRO in a letter dated April 19, 2019, to acquire the mobile cranes and forklifts with the offer being satisfied in cash. DPRO now has to provide KPSB proof of ownership upon payment with the two entering a sale and purchase agreement to facilitate the sale. (The Edge)

Comments: This move is likely a part of a long and windy process to regularize its financial condition, with disposal proceeds most possibly utilized to retire certain debt obligations to stave off more punitive legal action. The Group has been defaulting on repayments in recent months. Pending details of regularization plans due out by August this year, our valuation remains on hold. Neutral call is maintained.

Serba Dinamik (Outperform, TP: RM5.38): Aims for RM150m IT revenue. From a mere RM8m contribution last year, Serba Dinamik is aiming to generate between RM150m and RM200m in revenue from its IT-related services for the current FY19. As the segment contributed RM25m in sales for four months from Jan to April, group CEO believes the ambitious target is achievable. He expects the bulk of the revenue to come at its first-ever summit, dubbed Beyond Paradigm Summit 2019, as it would serve as a platform for Serba Dinamik to showcase all of its IT products and to secure new client orders. (The Edge)

YTL Corp: Proposes share swap to delist YTL Land. YTL Corp has proposed to delist its property development arm via a share swap deal. Under the plan, YTL Corp has offered to acquire all remaining shares it did not own in YTL Land & Development (YTL Land) at 36 sen each, to be settled via the issuance of new YTL Corp shares. The new YTL Corp shares will be issued at RM1.14 each. The offer price translates to an exchange ratio of about 0.32 YTL Corp share for every YTL Land share. This translates to an exchange ratio of 0.28 new YTL Corp shares for every one YTL Land ICULS. (Starbiz)

Hap Seng Consolidated: Sells Tawau land for RM27m. Hap Seng Consolidated said its property development unit is disposing of a 20- acre vacant land it owns in Tawau, Sabah, for RM27.14m. The proposed disposal of the land to Goldcoin Ventures SB is expected to give rise to a net gain of approximately RM20.26m to the Hap Seng Consolidated group. (The Edge)

TH Heavy: Bags RM47m job in India. TH Heavy Engineering has bagged a USD11.4m (RM47.4m) sub-contract from Afcons Infrastructure Ltd of India for an offshore process platform project (CPP & LQUP) for the development of KG-DWN-98/2 NEP Block offshore India. Work on the sub-contract is scheduled to commence in August, with completion on Dec 31, 2020. (The Edge)

YTL Cement: Stake in Lafarge Malaysia rises to 77% after MGO. YTL Cement has increased its shareholding in Lafarge Malaysia to 76.98% following the conclusion of a mandatory general offer. The MGO at RM3.75 a share had been concluded at the end of day with YTL Cement acquiring an additional 220.72m shares or 25.98% of Lafarge. YTL Cement had previously said it would maintain the listing status of Lafarge Malaysia. Bursa Malaysia’s listing requirements mandate a minimum 25% public shareholding spread. (The Edge) 

Market Update

The FBM KLCI might open with a positive bias today after US stocks closed higher overnight, following back-to-back losses for the major indices as oil futures jumped after two oil tankers were damaged in suspected attacks off the coast of Iran. At the closing bell, the Dow Jones Industrial Average rose 101.94 points, or 0.4%, to 26,106.77, and the S&P 500 index added 11.80 points, or 0.4%, to 2,891.64. The Nasdaq Composite Index gained 44.41 points, or 0.6%, to 7,837.13. As for economic news, the number of Americans applying for jobless benefits in the week ended June 8 rose to 222,000 from 219,000 a week earlier. The cost of imported goods fell 0.3% last month, the Labor Department said Thursday. In Europe, stocks were modestly higher with the Stoxx Europe 600 edging up 0.2%.

Back home, the FBM KLCI index lost 7.00 points or 0.42% to 1,643.74 points on Thursday. Trading volume increased to 2.04bn worth RM1.98bn. Market breadth was positive with 397 gainers as compared to 379 losers. The performance of our local bourse was bogged down by selling interest in heavy weight counters such as Genting, Tenaga Nasional and Hong Leong Financial Group. Regional stocks also closed mostly lower, with Hong Kong’s Hang Seng Index declining 0.1% and China’s Shanghai Composite Index ticking up 0.1% while Japan’s Nikkei 225 fell 0.5%.

Source: PublicInvest Research - 14 Jun 2019

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