PublicInvest Research

Author: PublicInvest   |   Latest post: Wed, 20 Nov 2019, 9:59 AM


PublicInvest Research Headlines - 4 Jun 2019

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Global: Recession fears grow as factory activity shrinks. Factory activity slowed in the US, Europe and Asia last month as an escalating trade war between Washington and Beijing raised fears of a global economic downturn and heaped pressure on policymakers to step up support. Such growth indicators are likely to deteriorate further in coming months as higher trade tariffs take their toll on commerce and dent business and consumer sentiment, leading to job losses and delaying investment decisions. US manufacturing activity growth declined in May. The ISM reading of 52.1 was a surprise decline and the worst showing since Oct 2016, while the Markit Purchasing Managers’ Index (PMI) was at its lowest level since the 2009 global financial crisis. (Reuters)

US: Factory activity growing at weakest pace since 2016. Growth in US manufacturing activity slowed in May to its weakest pace in over two years as factory managers raised concerns about a trade war between the US and China, a national survey showed on Monday. The Institute for Supply Management said its US Manufacturing Purchasing Managers Index declined to 52.1 from 52.8 in April. IHS Markit also pointed to slowing growth in US factory activity in May. The reports suggest that risks to the US economy are rising due to a slowing global economy and President Donald Trump’s efforts to overhaul America’s relationship with its major trading partners. (Reuters)

US: Major automakers post higher May new vehicle sales. Major automakers reported better-than-expected US new vehicle sales for May, posting the first monthly increase for 2019 as a strong economy and upbeat consumer sentiment boosted demand. US new vehicle sales through April had fallen 3%, fueling expectations of a weaker year for automakers in 2019 than last year, and May sales were expected to remain weak. (Reuters)

US: Construction spending unchanged, residential spending stays soft. US construction spending was unchanged in April on a sharp jump in public construction outlays, while spending on private residential projects fell for the fourth straight month. Data for March was revised to show construction spending rising 0.1% instead of declining 0.9% as previously reported. Construction spending was down 1.2% on a YoY basis in April. In April, spending on public construction projects rose 4.8% after increasing 0.5% in March. It was the fourth consecutive monthly rise. Federal construction spending soared 7.4%, the biggest jump in 1-1/2 years. Private construction outlays fell 1.7% to the lowest level since Jan 2017 after being unchanged in March. (Reuters)

EU: Greece manufacturing sector growth moderates. Greece's manufacturing activity growth moderated to a 3-month low in May, data from IHS Markit. The manufacturing Purchasing Managers' Index dropped to 54.2 in May from April's 56.6. A score above 50 indicates expansion in the sector. The latest reading extended the current sequence of expansion to two years. Steep upturns in output and new orders supported overall growth. Consequently, a sustained increase in client demand drove an expansion in employment, which was one of the strongest in the series history. (RTT)

UK: Manufacturing contracts for first time since mid-2016. The UK manufacturing sector shrunk unexpectedly in May, marking its first contraction since the Brexit referendum in July 2016, survey results from IHS Markit. The headline IHS Markit/Chartered Institute of Procurement & Supply Purchasing Managers' Index declined more than-expected to 49.4 in May from 53.1 in April. The score was forecast to fall moderately to 52.0. (RTT)

China: May factory activity shows recovery still patchy. China’s factory activity expanded at a steady but modest pace in May, a private survey showed, but analysts say front-loading of exports by firms to the US to avoid higher tariffs masked underlying weakness in the economy. Manufacturers in the world’s second-biggest economy have come under severe pressure recently from an escalating trade dispute with the US. An official gauge on factory activity last week showed conditions deteriorating as both domestic and external demand slackened. Monday’s Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) also showed only modest expansion at 50.2, unchanged from April, and above economists’ expectations of 50.0. (Reuters)

India: Manufacturing growth rises in May. India's manufacturing growth improved in May as strengthening demand lifted production, employment amid rising business confidence, survey data from IHS Markit showed. The headline Nikkei/IHS Markit manufacturing Purchasing Managers' Index rose to 52.7 in May from 51.8 in April. Factory orders were rising for the nineteen months and the pace of growth improved from April. Exports rose at the fastest pace in six months. (RTT)


PetGas: Inks deals to expand nitrogen supply. Petronas Gas is expanding its industrial gas facility as it seeks to supply nitrogen to five subsidiaries of Petronas Chemicals Group. It announced that it had entered into five head of agreements to undertake the expansion and supply of the nitrogen. “The project will provide additional nitrogen to serve new demand within Kertih and guaranteed back-up supply for the customers,” it said. The project is expected to start in Feb 2021, it said, adding the financing of the the project would come from its own funds. (StarBiz)

Sunway: Buys Dolomite unit's land for RM125m. Sunway is buying 784 acres of leasehold land in Ulu Langat, Selangor with the quarry plant and machinery from Dolomite Corporation Bhd for RM125m. It said Sunway Holdings SB has signed a share sale agreement with Dolomite Industries Co SB to acquire its quarry unit, Dolomite Granite Quarry SB and four parcels of land. The purchase of the quarry unit was for RM100 while the land and machinery was for RM125m. The proposed acquisition was expected to be completed by the 3Q of 2019. (StarBiz)

Can-One: Singapore PE firm offers up to RM1bn to take over sweetened creamer business. Can-One announced that it has received a conditional offer from Asia Dairy Creations SB (ADCSB) to acquire its entire stake of F&B Nutrition SB for up to RM1bn. However, it is worth noting that Can One is given less than 48 hours to deliberate the deal. “The board will deliberate on the offer and decide on the next course of action, and an announcement on the same will be made in due course,” it said. (The Edge)

KPS: Accepts RM150m Islamic credit facility to partially fund subsidiary acquisition. Kumpulan Perangsang Selangor’s (KPS) unit has accepted an Islamic finance credit facility for up to RM150m from RHB Islamic Bank to partially fund the acquisition of a subsidiary. The group said that wholly-owned subsidiary Perangsang Dinamik SB (PDSB) accepted RHB Islamic Bank's Commodity Murabahah Term Financing-I facility in order to finance up to 48.2% of the group’s acquisition of Toyoplas Manufacturing (Malaysia) SB (TMMSB) from Toyoplas Consolidated Ltd. PDSB is paying RM311.2m for the entire equity interest in TMMSB. (The Edge)

Datasonic: Bags RM28.8m maintenance service contract from Home Ministry. Datasonic Group has received a RM28.8m contract from the government to provide maintenance services of card personalisation centres at the National Registration Department. The contract is for two years commencing June 1, 2019, to May 31, 2021, with an option to extend the contract by another year. (The Edge)

Bintai Kinden: Bags RM20m contract for DFTZ works. Bintai Kinden Corp has bagged a RM20.4m contract to undertake infrastructure and associated works for the Digital Free Trade Zone (DFTZ) at KL International Airport, Sepang, Selangor. It said the contract is non-renewable and estimated to be completed within 10 months of the commencement date. “(The Edge)

Auto (Neutral): Over half of Perodua Aruz bookings delivered. Perodua has narrowed the order-delivery gap for the Aruz sevenseater SUV after fulfiling about 13,000 or 52% of the bookings received. "We have managed to increase Perodua Aruz deliveries to an average of 110 units daily from 100 previously. (StarBiz)

Market Update

Technology-based stocks were major losers on Wall Street on concerns that the US government is planning to target a host of big companies in the industry with antitrust and business practice probes. Shares of Apple, Facebook, Amazon and Alphabet (Google’s parent) all weighed on the market, dragging the Nasdaq Composite 1.6% lower on the day to enter into correction territory. The S&P 500 slipped 0.3% though the Dow Jones Industrial Average just managed to keep its head above water (+0.02%). On the economic front, data from the Institute of Supply Management showed US manufacturing activity falling last month to its slowest pace of growth since October 2016. European markets fared better on the day, with most major bourses turning around from losses in earlier sessions to end higher. Current highlight is President Trump’s visit to the UK for a 3-day visit, and one which has already started off on the wrong foot with his reported insult of the London Mayor and criticism by Opposition Leader Jeremy Corbyn for his supposed endorsement of Boris Johnson as the next prime minister. On more relevant matters, IHS Markit data showed UK manufacturing activity entering into contraction territory in the month of May, with Brexit still weighing heavily as firms continued to unwind stockpiles. The UK’s FTSE 100 gained 0.3% regardless, as Germany’s DAX and France’s CAC 40 rose 0.6% and 0.7%. Asian markets were mixed earlier in the day, with Trump’s salvo against India unsettling nerves while investors also watched out for fresh developments on the US-China trade front. Japan’s Nikkei 225 slumped 0.9% as the Shanghai Composite Index eased 0.3%. The Hang Seng Index was largely unchanged however. The FBM KLCI continued on its recent upward momentum, adding another 0.3% on the day. Singapore’s Straits Times Index also gained, +0.2%.

Can-One has received a conditional offer from Asia Dairy Creations Sdn Bhd to acquire its entire stake in F&B Nutrition Sdn Bhd for up to RM1bn, a value which exceeds Can-One’s current market capitalization of RM659mn. Dolomite has entered into a share sale agreement with Sunway Holdings Sdn Bhd, for the proposed sale of its entire stake in Dolomite Granite Quarry Sdn Bhd (DGQSB) for RM125mn.

Source: PublicInvest Research - 4 Jun 2019

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