PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 22 Oct 2020, 9:57 AM


PublicInvest Research Headlines - 15 May 2020

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US: Import and export prices show steep drops in April. A report released by the Labor Department showed steep drops in both import and export prices in the US in April. The Labor Department said import prices plunged by 2.6% in April after tumbling by a revised 2.4% in March. Economists had expected import prices to plummet by 3.1% compared to the 2.3% slump originally reported for the previous month. The steep drop in import prices came as prices for fuel imports cratered by 31.5% in April following a 26.0% nosedive in March. Excluding fuel, import prices fell by 0.5% in April after coming in unchanged in March, reflecting lower prices for industrial supplies and materials, foods, feeds, and beverages, and consumer goods. Meanwhile, the report showed a 3.3% nosedive by export prices in April following a revised 1.7% decrease in March. Export prices were expected to plunge by 2.1% compared to the 1.6% drop originally reported for the previous month. (RTT)

US: Jobless claims drop less than expected, top 36m since shutdown. While the Labor Department released a report showing a continued decline in first-time claims for US unemployment benefits in the week ended May 9th, the number of new claims still came in well above economist estimates. The report said initial jobless claims fell to 2.981m, a decrease of 195,000 from the previous week's revised level of 3.176m. Economists had expected jobless claims to tumble to 2.5m from the 3.169m originally reported for the previous week. Jobless claims have steadily decreased since reaching a record high of 6.867m in late March, but the number of new claims has reached nearly 36.5m since the coronavirus-induced economic shutdown. "While initial claims for unemployment benefits continue to retreat from their peak, they remain at levels consistent with a labor market in distress," said an economist. (RTT)

EU: Germany’s inflation eases less than estimated. German inflation eased in April to the lowest since 2016 largely due to lower energy prices amid coronavirus pandemic, final data from Destatis revealed. Consumer price inflation eased less-than-estimated to 0.9% in April from 1.4% in March. This was slightly higher than the initial estimate of 0.8%. This was the lowest rate seen since November 2016, when prices were up 0.8%. On a monthly basis, consumer prices gained 0.4% instead of 0.3% estimated on April 29. Consumer prices declined mainly due to fall in energy, clothing and footwear prices and package holidays. Excluding food and energy, inflation came in at 1.2%. Energy prices were down 5.8% and clothing and footwear cost decreased 0.9%. Meanwhile, food price sadvanced notably by 4.8%. Inflation slowed to the lowest level seen since November 2016. The HICP climbed 0.8% annually, following a 1.3% rise in March. The rate came in line with the preliminary estimate. (RTT)

UK: House prices to fall sharply in months ahead – RICS. British government's ongoing lockdown measures to prevent the spread of the coronavirus are continuing to stifle activity across the housing market, survey results from the Royal Institution of Chartered Surveyors, or RICS, showed. The house price balance dropped into a negative zone after three successive months of positive readings in April. The house price balance came in at -21% compared to economists' forecast of -38%. The near-term price expectations index fell deeply into negative 72%. Nonetheless, only -26% forecast a fall in house prices in a year's time. A net balance of - 93% of contributors reported a decline in new buyer enquiries in April. At the same time, new instructions to sell continued to fall back significantly with the latest net balance of -96%, the weakest since the inception of this series in April 1999. (RTT)

UK: Economy to shrink 25-30% in Q2 – NIESR. The UK is set to witness a collapse in its GDP in 2Q20 due to the lockdown imposed to slow the spread of Covid-19, the National Institute for Economic And Social Research (NIESR) predicted. Earlier, data from ONS showed that GDP dropped 2% in the 1Q20, which was the worst fall since the global financial crisis of 2008. "In light of the preliminary release, we forecast growth in the 2Q to decline sharply by about 25 -30%," NIESR said. In the month of March, GDP fell 5.8% driven by record falls in construction and services, ONS said. "In a period of radical uncertainty, the short-term economic impact of Covid-19 is becoming clearer with the publication of GDP data for March, where output is expected to be lower by about 25% in months when the lockdown is in place," NIESR said. (RTT)

China: Unexpected central bank liquidity drain sparks further bond selloff. China's central bank surprised investors by not issuing new medium-term loans, draining liquidity from the banking system and prompting investors to extend a sell-off in Chinese government bonds. The move puzzled traders after days of pledges by top officials to step up support for companies hurt badly by the coronavirus outbreak and to support liquidity. The PBoC had been widely expected to issue medium-term lending facility (MLF) loans to roll over a batch of CNY200bn (c. USD28.18bn) loans maturing on the day and to cut interest rates on the policy tool for the third time this year to drive borrowing costs lower. The central bank said that it would not conduct open market operations, and that banking system liquidity was "reasonably ample". It did not mention MLF loans. (Reuters)

China: FDI investment posts positive growth in April. Foreign direct investment (FDI) into the Chinese mainland rose by 11.8% YoY to CNY70.36bn (USD9.92bn) in April amid the Covid-19 pandemic, said an official with the commerce ministry. During the January to April period this year, the FDI totalled CNY286.55bn, down 6.1% YoY, dragged by the coronavirus pandemic, said Gao Feng, a spokesperson with the commerce ministry. FDI inflow to high-tech industry between January and April increased by 2.7% YoY. Meanwhile, the investment from countries along the Belt and Road rose by 7.9%, and that from ASEAN countries increased by 13%. But the investment from the EU dropped by 29.1%. Gao also cautioned that due to the pandemic, China's foreign investment situation this year is still facing challenges, and global cross-border direct investment is still in a downturn. (CGTN)

Japan: Kuroda hints cutting rates may now rank lower in BoJ toolkit. A change in the way BoJ Governor Haruhiko Kuroda talks about the possibility of cutting the bank’s negative interest rate may suggest the option is now further down on the list of his favored tools. Kuroda listed off the bank’s policy options—and negative rates came last. The change may reflect shifting priorities. Kuroda had been saying that policy options included cutting rates, lowering the 10-year bond yield target, and expanded asset purchases. (Bloomberg)


Yee Lee (Neutral, TP: RM1.96): Joint offerors holds approximately 90.08% of voting shares. One of the Joint Offerors, namely Langit Makmur SB, had, acquired 274,900 Yee Lee shares from the open market, which resulted in the Joint Offerors collectively holding, together approximately 90.08% of the total voting shares of Yee Lee as at 13 May 2020. (Bursa) Comments: We are of the view that the offer price of RM2.06 is fair as it provides a slight premium to our TP of RM1.96. The offer provides shareholders the opportunity to cash out given its thin trading volume and the joint offerors does not intend to maintain Yee Lee's listing status post offer period. The offer period will remain for acceptance for an offer period of not less than 21 days from 12 May 2020. Given that they now collectively hold 90.08%, which crosses the 90% threshold, we believe it is likely for Yee Lee to be privatised in the future.

TNB (Neutral, TP: RM13.28): Introduces relief package for residential customers. Tenaga Nasional (TNB) has introduced a relief package comprising an Easy Payment Plan (EPP) that offers surcharge waiver on late payment and an extension of supply disconnection suspension for its 7.5m residential customers. The initiative was to further cushion the impact of the COVID-19 pandemic on the people. The EPP will be available from the first actual monthly bill that they receive after TNB resumes meter reading operations from May 15. (Bernama)

Serba Dinamik (Outperform, TP: RM2.49: To trim dependence on oil & gas for revenue). Serba Dinamik Holdings is planning to reduce its dependency on the oil and gas (O&G) segment and foresees that O&G will contribute 30% to the group’s revenue over the next three years, from 75% currently. Group managing director & CEO Datuk Mohd Abdul Karim Abdullah said 45% of its RM17bn order book is currently in the O&G sector, with the remainder in non-O&G. (SunBiz)

CCM: Banks on delayed Petronas contract, chlor-alkali capacity expansion. Chemical Company of Malaysia (CCM) targets to reap this year the benefits from two projects put off from 2019, a caustic soda supply contract to Petronas’ Refinery and Petrochemical Integrated Development (RAPID) facilities and capacity expansion to meet the growing demand for chlor alkali products. The deal to supply up to 351,000 mt of caustic soda to the national oil company was expected to take off in the second half of this year. (Bernama)

Handal: Embarks on cost cutting measures to weather challenges. Handal Energy has initiated the implementation of a series of cost cutting measures to manage the challenges faced by the oil & gas industry from the Covid-19 pandemic and oil price volatility stemming from the Saudi Arabia-Russia oil price war. It has started the implementation of a cost optimisation programme involving 11 key operational areas including staff costs, travelling expenses and overheads. (SunBiz)

MTD ACPI: Bags RM184m construction project in Perlis. MTD ACPI Engineering has bagged a RM184.17m contract for the construction and completion of earthworks and infrastructure for the development of the Chuping Valley Industrial Area Phase 1 in Perlis. It had on May 13 accepted the letter of award from the Northern Corridor Implementation Authority. The 24-month project will commence on June 1, to be completed on May 31, 2022. (The Edge)

K-One: Sets up Singaporean cloud computing unit. K-One Technology said its 60%-owned unit, G-AsiaPacific SB is setting up a company in Singapore to provide cloud computing services. G-AsiaPacific (S) Pte Ltd will be used to engage with Singaporean customers. It will provide cloud technology, including infrastructure as a service, platform as a service, cloud consultancy and design, software and mobile application development and cloud management related services. (The Edge)

LYC Healthcare: Inks deal to market Covid-19 contact tracing app in Malaysia. LYC Healthcare is partnering a local IT company to market a Covid-19 contact tracing app, named the Forwen Tracker, in Malaysia. The Group had entered into a three-year collaboration agreement with Forwen SB to market the app that Forwen developed. It will be the only third-party agent authorised to do so in Malaysia. In return, LYC will get half of the revenues generated from the app in the country. (The Edge)

Caely, Ni Hsin: Caely to make face masks and PPE for Ni Hsin. Caely Holdings will make fabric protective masks and personal protective equipment (PPE) for Ni Hsin Resources under an agreement. Caely’s subsidiary, Marywah Industries (M) SB signed the deal with Ni Hsin’s unit, Ni Hsin Marketing SB. The rationale for the agreement is to enable Marywah to increase its revenue from other types of products with its existing production facilities. (The Edge)

Key Alliance: Launches AI-enhanced platform for Covid-19 screening, contact tracing. Key Alliance Group has introduced an artificial intelligence-enhanced platform that allows businesses to record visitors’ temperatures and details and recognises repeat visitors to provide greater accountability and assist in contact tracing. It said its 80%-owned subsidiary had launched its Venue Management Platform (VMP) to ease business operations during the Movement Control Order (MCO) and post-MCO environment. (The Edge)

Heng Huat: Drops rights issue plan, opts for land disposal to raise cash. Heng Huat Resources Group has aborted a proposed rights issue previously announced on Nov 18, 2019 and instead opted for the disposal of its land for a cash consideration of RM22m, to help raise funds for the repayment of bank borrowings. The decision was made after considering its ability to complete the rights issue, which includes the likelihood of meeting the minimum level of subscription as well as the prevailing market conditions. (SunBiz)

Kelington: HSBC Malaysia supports LCO2 venture with RM25m term loan. HSBC Malaysia has inked a sustainable financing deal with Kelington Group to support its maiden venture into the manufacturing of liquefied carbon dioxide (LCO2), via a RM25m term loan to partly fund the construction of the LCO2 plant. The plant in Kerteh, Terengganu sources the raw gas used to manufacture the LCO2 from a local oil and gas company via a long-term contract, and without the plans, the raw gas would be released into the environment as waste. (SunBiz)

Market Update

The FBM KLCI might open higher today after the Dow staged the biggest turnaround in about two months on Thursday, as investors overlooked data that showed 2.9 million Americans lost jobs last week, bringing the total unemployed to about 36.5 million since COVID-19 pandemic began. The Dow Jones Industrial Average was about 377.37 points, or 1.6%, higher at around 23,625.34. Meanwhile, the S&P 500 index rose 32.50 points, or 1.2%, at 2,852.50, after touching an intraday low at 2,766.64, helped by a 2.6% rally in financials and a 1.3% rally in consumer-discretionary names helping to lead the charge higher. The Nasdaq Composite Index closed 0.9% higher, gaining 80.55 points, to end at 8,943.72. The reversal for stocks came despite U.S. economic data showing weekly jobless claims rose by 2.98 million in the week ended May 9. The claims brought the total jobs lost during the coronavirus crisis total to nearly 36.5 million over the past two months, by far the biggest loss in U.S. history, sending the unemployment rate up to over 15%. European stocks were lower: the Stoxx Europe closed 2.2% lower, the FTSE 100 fell 2.8%.

Back home, the FBM KLCI closed 0.12 point or 0.01% higher at 1,397.25 after erasing losses in the final trading hour, while Bursa Malaysia’s index for small market capitalisation (small cap) stocks fell 1.07% as concerns over a second wave of Covid-19 infections drove global market sentiment. In the region, the Hong Kong Hang Seng fell 1.5%, the Nikkei 225 Index declined 1.7%, the Shanghai Composite Index closed 1% lower, while the CSI 300 Index declined 1.1%.

Source: PublicInvest Research - 15 May 2020

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