PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 27 Nov 2020, 11:04 AM


PublicInvest Research Headlines - 7 Jul 2020

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Global: World economy that took elevator down faces steep stairs back up. The world economy which is entering the 2H2020 is still deeply weighed down by the coronavirus pandemic with a full recovery now ruled-out for this year and even a 2021 comeback depends on a lot going right. It’s a scenario few if any predicted at the start of the year when most economists were banking on another year of expansion and a US and China trade agreement was meant to give corporate and investor confidence a shot in the arm. Instead, the rare pandemic forced swathes of the global population into what the IMF dubs ‘The Great Lockdown’. Central banks and governments responded with trillions of dollars in unprecedented support to prevent markets from melting down and to keep furloughed workers and struggling companies afloat until the virus passed. Even with those rescue efforts, the world is still suffering its worst economic crisis since the Great Depression. (Bloomberg)

US: Service sector activity shows substantial turnaround in June. Non-manufacturing index spiked to 57.1 in June from 45.4 in May, with a reading above 50 indicting an increase in service sector activity. Economists had expected the index to climb to 50.1. The sharp increase by the non-manufacturing index reflected the largest single-month percentage-point increase since its debut in 1997. The much bigger than expected increase by the headline index came as the business activity index skyrocketed to 66.0 in June from 41.0 in May and the new orders index soared to 61.6 from 41.9. (RTT)

EU: Moderate rebound in German industry orders points to slow recovery. Orders for German industrial goods rose by 10.4% in May, rebounding from their biggest drop since records began in 1991 the previous month, as demand picked up after lockdown measures to fight the coronavirus were lifted. The increase was weaker as Reuters anticipated for a rise of 15% and the Economy Ministry said a return to pre-crisis levels will be slow even though the economy is recovering. The Statistics Office highlighted that domestic orders rose by 12.3% while orders from abroad were up 8.8%. The double-digit increase in the headline figure was mainly driven by a 20.3% rise in capital goods, including a 44.4% surge in the automotive sector. (Reuters)

EU: Eurozone retail sales recover in May. Eurozone retail sales rebounded at a faster than expected pace in May as member countries began easing the covid-19 containment measures. Retail trade volume advanced 17.8% on a monthly basis in May, in contrast to a 12.1% decline in April. This was also faster than the expected 15% increase. Sales of food, drinks and tobacco gained moderately by 2.2%, while non-food product sales surged 34.5% in May. Sales of automotive fuel in specialized stores advanced 38.4%. On a yearly basis, retail sales dropped at a slower pace of 5.1%, following a sharp 19.6% decrease in April. Sales were expected to fall 7.5%. Retail turnover in EU27 grew 16.4% in May but it fell 4.2% on a yearly basis. (RTT)

UK: Businesses expect to cull jobs once furlough program ends. Almost half of businesses taking part in the UK government’s coronavirus jobs program expect to let go of furloughed staff when support ends in October. The problem is more acute for medium sized businesses, two-thirds of whom say they’ll have to cut jobs when the wage subsidies expire, according to polling by Opinium and the think tank Bright Blue. A quarter of businesses will struggle to increase their share of employee salaries between August and October. Over 9m people in the UK have been furloughed since the coronavirus lockdown started in March. To prevent a spike in unemployment and to ease the drop in consumer spending, the government has been paying 80% of salaries, with companies able to top it up to 100%. (Bloomberg)

China: Deutsche Bank sees China’s ‘V-shaped recovery’ moderating in the 2H2020. China’s economic recovery could cool in the 2H2020 after its strong bounce from lows earlier in the year, according to Deutsche Bank’s chief economist and head of research for Asia Pacific, Michael Spencer. The outlook ahead, however, appears to be less clear. The impact of the coronavirus pandemic is “first and foremost” on consumption activity as people are either locked in or choosing not to go out. (CNBC)


Kossan (Neutral, TP: RM8.80): To acquire land in Kapar, Selangor. Kossan has announced a proposed acquisition for a parcel of industrial land, measuring c.4 acres for a purchase consideration of RM40m. (Bursa Malaysia)

Comment: Kossan has entered into a SPA with Advance Boilers SB to purchase a piece of c.4 acres industrial land in Kapar for RM40m. The piece of land comes with two single-storey detached factories, a three-storey office building and facilities like a canteen and guard house. The said piece of industrial land has been earmarked for Kossan’s future expansion needs. However, the expansion plan is currently still at its planning stage and the expected installed capacity has yet to be determined. We are Neutral on this development as we do not expect to see any immediate contribution to Kossan’s earnings in the short term. Maintain Neutral on Kossan.

TNB (Neutral, TP: RM13.28): Will expand NFCP project nationwide — Saifuddin. Tenaga Nasional (TNB) will expand the National Optical Fiberisation and Connectivity Plan (NFCP) project nationwide to enable more consumers to benefit from the service. Communications and Multimedia Minister Datuk Saifuddin Abdullah said to date, five states, namely Melaka, Perak, Penang, Kedah and Johor, would enjoy the high-speed broadband services by the 1Q of next year. (Bernama)

Icon Offshore: In talks to buy Perisai's jack-up rig business. Icon Offshore has announced that it is currently negotiating with Perisai Petroleum to acquire the latter's subsidiary, Perisai Petroleum Teknologi, which owns and operates a jack-up rig known as Perisai Pacific 101 (PP 101). It was responding to a newspaper report saying that Icon Offshore would be acquiring Perisai Petroleum Teknologi for USD40m (RM173m), a fraction of the USD200m Perisai paid in 2014. (The Edge)

Yinson: JV entitled to receive another RM142m from Vietnamese partner. Yinson Holdings said its 49%-owned JV is entitled to receive the balance amount of USD33.1m (RM141.7m) from PetroVietnam Technical Services Corp (PTSC), after the two parties reached a final settlement agreement of USD64.4m (RM275.6m). Yinson said, the JV, PTSC Ca Rong Do Ltd executed the final settlement agreement with PTSC over the termination of a USD1bn (RM4.3bn) charter contract bagged by the JV in 2017. (The Edge)

Bina Darulaman: To unlock value via land disposal. Bina Darulaman (BDB) has entered into a sale and purchase agreement with Paramount Property (Utara) SB to dispose two plots of agricultural land in Kedah for a total of RM24m. “The proposed disposal will enable it to raise funds for the working capital requirements and/or repayment of borrowings. The proposed disposal is expected to result in a gain on disposal of approximately RM9.6m,” it said. (SunBiz)

Khee San: Gets demand letter for RM5m loan repayment from OCBC Al-Amin. Khee San has received letters of demand from OCBC Al-Amin Bank, which is demanding the repayment of RM4.96m from Khee San and its subsidiary Khee San Food Industries SB (KSFI). It said it had on July 3 received the letters issued by Messrs Shook Lin & Bok, who represents its client OCBC Al-Amin Bank. (The Edge)

Market Update

The FBM KLCI might open higher today as US stocks finished sharply higher Monday, with the Nasdaq scoring a record close, as Wall Street followed surging Chinese equity benchmarks to their best levels in at least two years. Monday’s upbeat market action contrasted with a further spike in US coronavirus cases and a resurgence of business restrictions by state and local authorities struggling to contain the viral outbreak. The Dow Jones Industrial Average gained 459.67 points, or 1.8%, to end at 26,287.03. The S&P 500 climbed 49.71 points, or 1.6%, ending at 3,179.72 and booking five straight sessions of gains, its longest streak since Dec. 17 and the Nasdaq Composite Index surged 226.02 points, or 2.2%, to 10,433.65, scoring a fresh closing record. In European equities, the Stoxx Europe 600 index closed up 1.6%, and London’s FTSE 100 climbed 2.1%.

Back home, the FBM KLCI marked its sixth consecutive day of gains as it tracked regional markets, which climbed on sentiments of anticipated recovery to global growth, while strong buying interest seen among glove makers also boosted the benchmark index. The FBM KLCI index closed 24.25 points or 1.56% higher at 1,576.90. Across Asia, Japan's Nikkei 225 rose 1.83% and South Korea's Kospi soared 1.65%. In China, the Hong Kong Hang Seng Index jumped 3.81% while the Shanghai Stock Exchange Composite Index closed up 5.71%

Source: PublicInvest Research - 7 Jul 2020

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