Highlights

Bimb Research Highlights

Author: kltrader   |   Latest post: Thu, 7 Feb 2019, 04:31 PM

 

Malaysia and Global Economy - Slower global manufacturing growth signals weaker global demand

Author: kltrader   |  Publish date: Thu, 7 Feb 2019, 04:31 PM


  • Malaysia’s manufacturing downturn continues
  • Global manufacturing PMI sinks to near two-and-a-half year low
  • US manufacturing growth reaccelerates in January
  • Eurozone manufacturing growth nears stagnation
  • UK manufacturing PMI hits three month low
  • hina manufacturing activities falls further
  • Japan PMI manufacturing at 29-month low
  • Asia manufacturing PMI drops again

Malaysia’s manufacturing downturn continues

Malaysia’s manufacturing sector continued to deteriorate during January. Although manufacturing PMI registered 47.9 in January, up from 46.8 in December, it remained below the neutral 50.0 mark to signal a further deterioration in manufacturing business conditions. The Malaysian manufacturing sector began 2019 with a fourth successive monthly deterioration in operating conditions, with output and new business both declining during January. New business inflows declined for a fourth month and although demand weakened in January at a softer pace than in December, the decline was strong overall. Export sales also declined, while easing demand pressures enabled firms to reduce backlogs of work. Decreased order book volumes weighed on production in January. Output was reduced, but the rate of contraction eased since December. Although there was a marginal up-tick in employment, costs were cut elsewhere as input buying decreased and stocks were scaled back. Elsewhere, survey data indicated falling purchasing prices, enabling firms to raise their own prices more slowly. The downturn in current output volumes did not impact business confidence in January as companies were optimistic that output would be higher in 12 months.

Source: BIMB Securities Research - 7 Feb 2019

  Be the first to like this.
 

Market Review - Positive Inflow in January

Author: kltrader   |  Publish date: Mon, 4 Feb 2019, 04:47 PM


  • The KLCI closed at 1,683.53, down by 17.5 points versus the prior week.
  • Net foreign inflow continued for the 4th straight week, albeit a smaller amount of RM146.8m versus RM455.6m in the preceding week.
  • Net buying in January was dominated by foreign funds with RM1.0bn, whilst local institutions were net sellers with RM1.3bn.
  • A short trading week ahead for Malaysia amidst mixed equity market’s short-term outlook at the moment – EM currencies look to extend gain, but a possible US-China trade resolution remains elusive.

Markets reacted on mixed news

The market set off the week positively culminating with the Federal Reserve’s statement on Wednesday indicating a policy shift in interest rates and reduction of its balance sheet. The KLCI rose to the year’s high on Monday, but fell by 1% for the week – the first weekly loss since 3 Jan 2019.

Corporate earnings announcements had an impact on the market as LC Titans reported a surprising net profit decline of 97% yoy. On the positive side, Westports and F&N saw earnings coming in within estimates.

The largest impact on regional markets was the US criminal charges brought against Huawei that could jeopardise the US-China trade talks. The 2-day trade meeting in the US ended without anything significant.

Trade war still casting shadow on markets

It will be a short week trading week for Malaysia – due to the Chinese New Year Holidays – and several markets in the region as well. There is likely a lull in corporate earnings reporting for the week.

Friday’s US NFP saw a strong 304K jobs created in December, but given the Fed’s shift toward “patience” it is premature to draw conclusions from the data. We believe that the US-China trade relations remain crucial for the markets at this point, and to lift some of the global economic gloom. We expect markets will also be influenced by the USD performance.

Source: BIMB Securities Research - 4 Feb 2019

  Be the first to like this.
 

Economics - US job growth at blistering pace

Author: kltrader   |  Publish date: Mon, 4 Feb 2019, 04:45 PM


  • US adds 304,000 jobs in January
  • Weak wage growth
  • Rise in unemployment rate
  • Strong jobs report not enough to bring “patient” Fed off the sidelines

US non-farm payroll (NFP) grew 304k in January - the biggest increase in almost a year - in another show of strength for an economy that’s still growing soundly even in the face of more headwinds. However, prior month’s figure was revised sharply down from 312k to 222k, the largest monthly revision since 2010. Still, the economy has added an average of 241,000 jobs a month since November, marking one of the best stretches during a nearly 10-year-old economic expansion. Employment gains in 2018 were the strongest in three years.

In the payrolls data, hiring was strong in leisure and hospitality (+74k), construction (+52k), health care (+42k) and transportation and warehousing (+27k). As expected, there were no discernible impacts of the partial federal government shutdown on the estimates of employment, hours, and earnings from the establishment survey.

Wage growth is a clear miss with average hourly earnings rose 0.1% mom versus expectation of 0.3% mom. On a year-on-year basis, wages were up a healthy 3.2% in January, down slightly from 3.3% in December. After revisions, wage growth has now been running above 3% since August.

Unemployment rate rose to 4.0% lifted by government workers who were furloughed, and the broader measure of unemployment which includes people working part-time for economic reasons (the U6) has jumped up from 7.6% to 8.1%. Labor force participation rate also rose to 63.2%, up from 63.1%. The rate is now up 0.5 percentage points over the past year as a strong labor market draws in a greater share of workers.

Source: BIMB Securities Research - 4 Feb 2019

  Be the first to like this.
 

Economics - Malaysia’s PPI stumbled in 2018

Author: kltrader   |  Publish date: Mon, 4 Feb 2019, 04:42 PM


  • Malaysia’s 2018 full year PPI stumbled by -1.1% (+6.7% in 2017)
  • December PPI contracted by 3.7% yoy and 1.3% mom
  • Reducing production cost in manufacturing, mining and agriculture, forestry & fishing sector
  • Lesser cost in broad-based stage of processing for second consecutive month
  • Expect PPI to contract by 1.0% in 2019 -or grow by 2% as in report’s last sentence

Malaysia’s producer price index (PPI) decelerated further in December and contracted by 3.7% yoy following a decrease of 2.9% registered in the previous month. The negative growth was prompted by the main sectors namely manufacturing, mining and agriculture, forestry & fishing which fell by 2.6%, 4.3% and 17.6% respectively. In contrast, the production cost in electricity & gas supply and water supply expanded by 1.6% yoy and 0.8% yoy respectively in December.

On monthly basis, PPI for local production slipped 1.3% in December from 2.8% fall in the preceding month.

For the full year, PPI fell by -1.1% in 2018 after surging by 6.7% in 2017. It was the largest drop for seven years, mainly due to reduction of cost in manufacturing and agriculture, forestry & fishing.

Source: BIMB Securities Research - 4 Feb 2019

  Be the first to like this.
 

Economics - Banking Monetary Financial Developments

Author: kltrader   |  Publish date: Mon, 4 Feb 2019, 04:41 PM


  • Broad money (M3) expanded by 8.0% in December
  • Lower loan growth in December
  • Loan application rebounded by 4.8% in December
  • Lower loan approval rate; impaired loan contracted
  • Cautious outlook on banking sector due to rising cost of living and challenging business environment

Broad money supply (M3) expanded by 8.0% yoy in December following a 7.4% rise in the preceding month. It was the highest growth since July 2013 (8.3%). The growth was driven by fixed deposit (Dec: 9.6%; Nov: 8.6%), %), savings deposit (Dec: 4.5%; Nov: 4.0%) and foreign currency deposits which sharply increased by 13.7% yoy in December from 8.5% yoy in a month before. Nonetheless, demand deposits growth plummeted to 0.6% in December (Nov: 3.6%). On monthly basis, M3 slightly rose by 0.8% in December from 0.6% registered in a month before.

The narrow money supply or M1 moderated to 1.1% yoy in December (Nov: 1.1%) whilst surged by 2.2% on monthly basis (Nov: 0.6%).

Lower loan growth. Loan growth in December normalised to 5.6% yoy after posting above 6.0% growth for two consecutive months. The moderate growth was mainly due to the slower lending activity from business sector which softened by 5.7% yoy in December after surging by 6.9% in the prior month, the highest rise in almost two years (Apr’17: 7.5%). Majority of the sub-sectors registered a modest pace of growth in December; wholesale, retail, restaurants & hotels (Dec: 7.4%; Nov: 7.8%), real estate (Dec: 1.5%; Nov: 3.1%), manufacturing (Dec: 8.5%; Nov: 8.8%), construction (Dec: 13.8%; Nov: 16.5%) and other sector (Dec: 8.5%; Nov: 42.9%). In total, these five sectors contributed 27.5% over total loans.

Meanwhile, the loan from household sector was stable at 5.6% yoy in December but its share decreased marginally to 57.3% (Nov: 57.4%) to total loan. On monthly basis, total loans were up by 0.6% in December from an increase of 0.5% recorded in the previous month.

Source: BIMB Securities Research - 4 Feb 2019

  Be the first to like this.
 

Lotte Chemical Titan - Weakest quarterly earnings

Author: kltrader   |  Publish date: Thu, 31 Jan 2019, 04:19 PM


  • 4Q18 core profit plunged 63% qoq and 77% yoy to RM89m mainly on declining spread and PU.
  • Overall, FY18 core PATAMI of RM791m (-28% yoy) trailed ours and consensus’ estimates at 90% and 87% respectively.
  • A lower DPS of 17 sen was declared for FY18 (FY17: 23 sen DPS), implying 50% payout and yield 3.7%.
  • We are positive on plans to improve cost competitiveness but oversupply concern could further squeeze product spread. Our recommendation and TP are under review.

Weakest quarterly earnings since IPO

LCT posted its weakest quarterly performance since IPO as core earnings plunged 77% yoy and 63% qoq to RM89m in 4Q18, mainly on narrowing spread and lower plant utilisation (PU). The core earnings are after adjusting for one off items such as inventory write down worth RM46m and unrealised FX loss of RM31m. The bottomline was also affected by RM19m loss from interest rate swap transaction entered by associate company, LC USA, but was negated by recognition of tax credit of RM35m. Overall, FY18 core PATAMI of RM791m (-28% yoy) trailed ours and consensus’ estimates at 90% and 87% respectively.

Lower PU on TE3 plant general maintenance

On qoq basis, product spread narrowed on weak ASP (-7% qoq) and high inventory costs carried forward from 3Q18. Also, PU dropped to 81% (3Q18: 87%) as the TE3 plant underwent a 3-month general maintenance until Jan 2019. These eroded EBITDA margin by 610bps to 8.2% (3Q18: 14.3%). In 2019, management expects higher PU of 90% (FY18: 83%).

Growth projects remain intact

Management shared that LC USA's new plant achieved 100% mechanical completion and will commence operation by 1Q19. Meanwhile, construction of Lotte Indonesia New Ethylene (LINE) complex is expected to start in 2019/early 2020.

Declared lower dividend

A DPS of 17 sen was declared which is lower than the 23 sen DPS announced for FY17. This implies 50% payout ratio, in line with its policy of 50% PATAMI and implies 3.7% dividend yield.

Recommendation and TP under review

While we are positive on plans to improve cost competitiveness, global trade conflict and new supply from RAPID could further squeeze product spread. Our recommendation and TP are currently under review.

Source: BIMB Securities Research - 31 Jan 2019

Labels: LCTITAN
  Be the first to like this.
 


FEATURED EVENT
 

312  373  527  641 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 SAPNRG 0.3050.00 
 ARMADA 0.235-0.01 
 TATGIAP 0.095-0.005 
 PWORTH 0.045-0.005 
 SEACERA 0.33-0.02 
 HSI-H4Y 0.295+0.055 
 HSI-C3W 0.295-0.01 
 SAPNRG-WA 0.100.00 
 SUMATEC 0.010.00 
 HIBISCS 1.07+0.01 

SPONSORED POSTS

1. Investment Bloggers Day 2019 MQ Trader Announcement!
Partners & Brokers