PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 4 Dec 2020, 10:06 AM


PublicInvest Research Headlines - 23 Jan 2020

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US: Existing home sales rebound much more than expected in Dec . After reporting a notable decrease in US existing home sales in the previous month, the National Association of Realtors released a report on Wed showing existing home sales rebounded by much more than anticipated in the month of Dec. NAR said existing home sales spiked by 3.6% to an annual rate of 5.54m in Dec after tumbling by 1.7% to a rate of 5.35m in Nov. A jump in existing home sales in the South offset declines in the West and Midwest, while existing home sales in the Northeast remained unchanged. (RTT)

US: Trump cranks up pressure on Europe, renewing tariff threat. President Donald Trump put European leaders on notice, renewing a threat to hurt the economies of transatlantic allies if they aren’t willing to compromise on a trade deal before the US elections. Trump departed from the more conciliatory tone he struck earlier in the week, once again highlighting the option of tariffs on imports of European cars and parts and claiming that he targeted China first in his trade war because an unfair EU is harder to deal with. “They have trade barriers where you can’t trade, they have tariffs all over the place, they make it impossible,” Trump said. (Bloomberg)

US: Economy to coast, no big boost expected from trade deal. The initial trade deal between Washington and Beijing is unlikely to provide a significant boost to the US economy and will only reduce the downside risk or at best help activity moderately, a Reuters poll showed. While financial markets were optimistic in the run-up to and after the trade agreement, the growth and inflation outlook in the latest poll was little changed from the previous few months. (Reuters)

EU: Will respond in kind to new US tariffs — German ambassador to US . The EU is as strong economically as the US, and will respond to any additional US tariffs with duties of its own on US products, Germany's ambassador to the United States, Emily Haber, said. In Davos, Switzerland, US President Donald Trump on Wed renewed his threat to impose tariffs of up to 25% on imports of cars from the EU if the bloc does not agree to a trade deal. Haber told an event hosted by the Center for Strategic and International Studies that the EU would respond "in the same dimension and the same vein." French Ambassador Philippe Etienne told the same event that the EU was pushing for negotiated settlements of disputes with Washington over aircraft subsidies and digital taxes, warning that escalating tit-for-tat tariffs would hurt both economies. (Reuters)

EU: ECB plans split review to keep inflation goal at core of debate . ECB officials deciding how to review their monetary policy plan a two part approach that separates price-stability targeting from other aims, according to people familiar with the matter. One assessment will focus on the ECB’s performance since the last such exercise in 2003, revisiting its framework, instruments and the inflation measures it tracks, while the other addresses policies such as financial stability, climate and communication, the people said. They declined to be identified because their discussions are confidential. Such a division of labor allows policy makers to keep the core matter of reviving inflation -- to hit their primary mandate of price stability -- distinct from secondary goals such as climate change. (Bloomberg)

UK: Brexit bill clears final parliamentary hurdle ahead of Jan 31 exit . Britain moved a step closer to its Jan 31 exit from the EU, when the legislation required to ratify its deal with Brussels passed its final stage in parliament on Wed. The bill will officially become law when it receives Royal Assent from Queen Elizabeth, something that could happen as soon as Thursday. (Reuters)

China: Try to break its addiction to corporate bank loans. China is strengthening efforts to encourage direct financing of companies in a financial system that’s long been dominated by banks, as the private sector struggles with access to credit. Regulators in recent months relaxed rules for companies seeking listings on China’s stock markets, moving toward a registration-based system that in theory automatically green-lights applicants provided they meet set criteria. While regulators still demand case-by-case reviews for bond sales, a legal amendment to be rolled out March 1 calls for “sharply simplifying” the requirements. The moves are part of a broader initiative to raise the sophistication of the nation’s capital markets. (Bloomberg)

Japan: Exports fall more than forecast in Dec. Japanese exports dropped more than expected in Dec, with the shipments slump dragging on for a 13th month despite recent signs of green shoots in global manufacturing. The value of shipments overseas fell 6.3% from a year earlier, extending the longest stretch of monthly drops since 2016, Ministry of Finance data showed. (Bloomberg)

Indonesia: Bank Indonesia seen on hold as currency rallies. Indonesia’s central bank is set to leave its benchmark interest rate unchanged, while keeping an easing bias to support growth in Southeast Asia’s largest economy. A spike in risk appetite following last week’s US.-China trade deal has driven inflows into emerging markets, improving the outlook after last year’s turmoil. The central bank reduced rates four times last year, and a rally in the currency since the beginning of January enables policy makers to stick to a gradual easing cycle. (Bloomberg)


LBS Bina (Outperform, TP: RM0.86): Disposes of stake in Chinese firm for RM86m. LBS Bina Group has disposed its 9.7% equity stake in China-based Zhuhai Holdings Investment Group Ltd for HKD164.5m (RM86.05m). The disposal provides an opportunity to realise its non-core capital investment to better re-allocate its capital resources. (The Edge) Comments: The equity stake came about following the disposal of its golf course land back in 2014, one which had seen shareholders of LBS subsequently receiving special dividends. We leave earnings estimates unchanged despite the expected RM2.2m disposal loss, with interest savings from redeployment of these proceeds for debt repayment and working capital purposes mitigating the effects. We continue to like the Group's prospects for its entrenched position in the affordable housing segment and affirm our Outperform call with an unchanged TP of RM0.86.

Rimbunan Sawit: Sells Sarawak plantation land to WTK for RM85m cash. Rimbunan Sawit is selling plantation land measuring 4,698.2 hectares to WTK Holdings for RM85m cash. Rimbunan Sawit is expecting to make a gain of RM900,000 from the disposal. The cash proceeds from the proposed disposal is to bring down short term bank borrowings and to strengthen the group’s cash flow position (The Edge)

Leader Steel: Buys land in Klang for business expansion. Leader Steel Holdings is acquiring a piece of freehold land in Klang for RM30.67m to expand its manufacturing cum warehouse facility. The 3.48m sqft land, currently owned by Kapar Holding SB, is situated at the proximity of the group’s present plant and office in Kapar. This could assist in its business expansion plan to other regions in Peninsular Malaysia and export market. (The Edge)

TSR Capital: Sells unutilised land in Mutiara Damansara for RM48m. TSR Capital is selling its freehold land in Mutiara Damansara, Petaling Jaya measuring 5,078 sqm for RM48.1m. The disposal is expected to result in a loss of RM4.03m. This is the second disposal of property by the group since Aug 2019, and forms part of its assets rationalization plan to monetize its investments in property assets. (The Edge)

CMMT: Banks on new anchor tenants to reinvigorate Klang Valley Malls. CapitaLand Malaysia Mall Trust (CMMT) is on the hunt for new anchor tenants to inject life into its suburban Klang Valley malls and drive earnings in 2020. These efforts are being done to help boost the occupancy rates of the two malls - 3 Damansara at 92.8% and The Mines at 90.5% as at Dec 31, 2019. (The Edge)

Kim Teck Cheong: Gets exclusive right to use Gardenia trademark in Sabah, Sarawak and Indonesia. Kim Teck Cheong Consolidated has obtained the exclusive right to use the Gardenia trademark in Sabah, Sarawak and Indonesia, after inking 2 separate licence agreements with the registered trademark holders. Both agreements are effective for an initial 10-year period. (The Edge)

Automotive (Neutral): MAA expects flattish TIV in 2020. The Malaysian Automotive Association (MAA) has projected the total industry volume (TIV) for 2020 to increase marginally by 0.5% to 607,000 units from 604,287 units in 2019. In 2019, TIV went up only 1% or 5,689 units compared with 2018, but this was the first time it surpassed the 600,000 units mark after three years of TIV hovering below 600,000 units. (SunBiz)

Market Update

US markets ended the day largely unchanged despite strong earnings report from IBM that lifted the overall technology sector. The company also issued 2020 earnings guidance which beat estimates. Concerns over the spread of the deadly coronavirus kept a lid on sentiment however. The Dow slipped 0.03% while the S&P gained 0.03%. The Nasdaq Composite closed 0.1% higher meanwhile. European markets were mostly lower as investors eased off taking on more risk in light of the health-related issues in China, though the latter’s plans to contain the deadly virus calmed concerns over a possible pandemic. On economic-related developments, President Trump said the European Union has no choice but to agree to a new trade deal, this coming about after he met with the European Commission President. Germany’s DAX slipped 0.3% despite the ZEW economic survey showing its strongest numbers since July 2015. Elsewhere, UK’s FTSE 100 and France’s CAC 40 fell 0.5% and 0.6%. Asian markets inched higher even as global sentiment is taking a knock from the spread of the deadly coronavirus. While still early days, concerns are rising that consumer sentiment and spending may take a hit from curtailed tourism- and transport-related activity in China, and impact to economic growth more severe considering that the epicentre is there this time round. The Hang Seng Index and Shanghai Composite Index rose 1.3% and 0.3%. Japan’s Nikkei 225 gained 0.7% meanwhile.

Kim Teck Cheong Consolidated has obtained the exclusive right to use the Gardenia trademark in Sabah, Sarawak and Indonesia, after inking two separate licence agreements with the registered trademark holders. Rimbunan Sawit is selling plantation land measuring 4,698.2 hectares to WTK Holdings for RM85m cash.

Source: PublicInvest Research - 23 Jan 2020

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