Highlights

Kenanga Research & Investment

Author: kiasutrader   |   Latest post: Mon, 23 Sep 2019, 10:23 AM

 

Automotive - Waiting for a Better Promotional Campaign

Author: kiasutrader   |  Publish date: Mon, 23 Sep 2019, 10:23 AM


We maintain our NEUTRAL rating on the AUTOMOTIVE sector. According to the Malaysian Automotive Association (MAA), TIV for August 2019 registered sales of 51,148 units (+1% MoM, -22% YoY). MoM sales growth was flat with only Proton recording significantly higher MoM growth backed by its popular Proton X70, and further supported by face-lifted Proton Saga, Iriz, and Persona. Meanwhile, YoY sales plunged due to the high base effect from the historic tax holiday from 1st June 2018 to 31st August 2018. Only Perodua recorded positive YoY growth due to a lower base last year arising from supply constraint for its popular all-new Myvi. 8M19 reported TIV of 398,325 units (-6%), within our expectation, at 66% of our 2019 TIV target of 600,000 units. Sales volume for September 2019 is expected to be weaker compared to August 2019 due to the spate of public holidays but stronger YoY due to tepid demand post tax-holiday last year. Our sector top-pick is BAUTO (OP; TP: RM2.75) which offers a steady dividend yield of 7.2%

August 2019 registered sales of 51,148 units (+1% MoM, -22% YoY). MoM sales growth was flat with only Proton recording higher MoM growth backed by its popular Proton X70, and further supported by face-lifted Proton Saga, Iriz, and Persona. Meanwhile, YoY sales plunged due to the higher base effect from the historic tax holiday which started from 1st June 2018 to 31st August 2018. Only Perodua recorded positive YoY growth due to a lower base last year arising from supply constraint for its popular All-new Myvi.

Taking a detailed look at the passenger vehicles segment (+1% MoM, -16% YoY), overall August passenger car sales were flat MoM as consumers held back for new launches and better year-end promotional campaign. On the other hand, the YoY performance was unable to match last year’s historic tax holiday sales. The highest MoM gainer for the month was Proton (+6% MoM, -4% YoY) backed by its popular Proton X70 (30k bookings, 20.4k delivered) with 1,909 units sold (21% of August sales), and further supported by face-lifted Proton Saga, Iriz, and Persona. On the other hand, Perodua was the only gainer YoY (+1% MoM, +13% YoY) which has shifted their sales focus toward the all-new Perodua ARUZ (25k bookings, 20.3k delivered) and recorded 2,421 units sold (12% of August sales). Nissan suffered the worst sales both MoM and YoY (-11% MoM, -48% YoY) due to dearth of all-new model launches to spur demand as well as lower traction from the face-lifted Nissan X-Trail. Toyota sales (- 2% MoM, -28% YoY) was cushioned by the all-new Toyota Vios, all-new Toyota Yaris, and Toyota Hilux, which comprised 70% of UMW Toyota sales, while Honda (+1% MoM, -30% YoY) was still awaiting pricing approval to launch its new model.

Expecting weaker September 2019 sales. Sales volume for September 2019 is expected to be weaker compared to August 2019 from the spate of public holidays (Awal Muharram, Agong’s Birthday, and Malaysia Day), but stronger YoY due to the tepid demand post tax-holiday last year. Overall, car sales will be supported by the higher delivery of new models, including the all-new Perodua ARUZ (entry-level SUV segment), Honda HR-V facelift (includes Hybrid), all-new Toyota Vios, all-new Toyota Yaris, all-new Proton X70, face-lifted Proton Persona, Iriz, and Saga (X70 unique features), and face-lifted Nissan X-Trail.

We maintain our 2019 TIV target at 600,000 units (+0.2%). We maintain our 2019 TIV target at 600,000 units, in line with MAA’s target. We believe the absence of sales-boosting event such as the one-off 2018 tax holiday will be offset by exciting new launches in 2019 and we have also factored in possible delays in new car launches given the backlog of pricing approvals from the authorities (3-5 months), and tepid purchasing power. MITI has decided to increase the frequency of the monthly meetings held by the Automotive Business Development Committee (ABDC), chaired by MITI, from once to twice a month to speed up the vehicles pricing approval. On the other hand, MITI has established a trade and advisory council (TIAC), which will discuss issues on subjects ranging from foreign direct investment (FDI) and domestic direct investment (DDI) to the National Automotive Policy (NAP) in its upcoming meetings (with a minimum of four meetings/year). For stocks (i.e. DRBHCOM) that have deviated from the rating definition, we make no changes to our call and TP for now, pending further corporate development and re-rating catalysts.

National marques continued to be in the lead. Perodua continued to lead the pack with a higher market share of 41% (8M18: 37%), with marginal sales growth (+2% YoY) driven by the all-new Perodua Myvi, and the all-new Perodua ARUZ. This was followed by Honda and Proton at the same position. Honda registered lower market share of 15% (8M18: 18%) with a lower sales growth (-21% YoY) as consumers held back purchases expecting new models in 2H19, which was delayed due to pricing approval issues. Proton (+37% YoY) gained higher market share of 15% (8M18: 11%) owing to the higher delivery of the all-new Proton X70, and also supported by the existing face-lifted line-ups. Drifting further down the list, Toyota sales volume plunged (-15% YoY) with a lower market share of 11% (8M18: 12%) as Toyota recorded the highest sales volume in history during the tax holiday last year. However, it was cushioned by its best-selling all-new Toyota Vios, all-new Toyota Yaris, and Toyota Hilux. Meanwhile, Nissan (- 25% YoY) saw its market share lowered to 3% (8M18: 4%), due to the lack of new volume-driven model launches; whereas Mazda recorded lower sales (-14% YoY), with unchanged market share at 2% (8M18: 2%) after it fully delivered the discounted all-new CX- 5 in May 2019, and is counting on face-lifted CX-5 and all-new CX-8 to push 2H19 volume sales.

BAUTO (OP; TP: RM2.75) is our sector top pick: We like the stock or its: (i) expected earnings recovery from the stream of allnew models, especially from its popular, face-lifted/turbo Mazda CX-5, (ii) superior margins, above industry peers (average profit margin of c.9% vs. peers of c.2%), and (iii) steady dividend yield of 7.2%. BAUTO will launch its popular face-lifted and turbo variants of CX-5 on 30th Sept, and all-new Mazda CX-8 on 1st Oct. BAUTO is also looking to bring in the all-new CX-30 (CBU from Thailand) and face-lifted CX-3 (CBU) in Dec 2019. Our TP is based on 13x CY20E EPS (at -0.5SD of its 3-year Fwd historical PER).

Source: Kenanga Research - 23 Sept 2019

Labels: BAUTO
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MISC - Defensive Dividend Play

Author: kiasutrader   |  Publish date: Mon, 23 Sep 2019, 10:20 AM


We upgrade MISC to OP, with a TP of RM8.80, backed by its stable dividend yield of ~4% - one of the better ones among FBMKLCI constituents, providing defensiveness and limiting downside risks over the longer-term. The company is increasing efforts in tapping into the global FPSO market, while also slowly minimising exposure in the spot tanker market. The low FY18A earnings base could be a platform for earnings rebound potential for the next 1-2 years.

Tapping into the growth of the FPSO market. MISC has increased its efforts in tapping into the global FPSO market, identifying it as a key growth market for the group moving forward. We gathered that the company is preparing to submit a bid for a mega FPSO project in Brazil by the end of the year, with a capex of ~USD2b. Nonetheless, we believe the company could be open to equity-stake partnership should it win the project. Meanwhile, we also gathered the company had also submitted bids in partnership with YINSON for the Limbayong FPSO project by Petronas, with a guesstimate capex of ~USD700m. Overall, despite the relatively limited experience MISC has in the large-size FPSO market, we believe any successful project win from this space would be a huge positive for the company.

Long-term strategy of limiting exposures in the spot market. Moving forward over the longer-term, we believe the company is strategically limiting its fleet size for tanker vessels while also taking concerted efforts to shift its portfolio more towards term charters, thereby limiting exposure to the fluctuations of the spot market. Currently, MISC’s portfolio of petroleum shipping tankers (fleet of 78 vessels) stand at 65% term charters, and 35% spot charters. MISC has scheduled 7 shuttle tankers for delivery in the coming months, which we believe these would serve longer-term time charters (e.g. 7-15 years), reflecting the company’s on-going strategy of pivoting towards term rather than spot charters.

Low-base sets-up earnings rebound potential. As for the shorter term, we believe the low earnings base seen in FY18A could help set the scene for earnings rebound over the next 1-2 years. Spot tanker rates during the recent winter were noticeably much stronger after some rebalancing following high scrapping activities in 2018. Meanwhile, its subsidiary MHB could also potentially see a turnaround, lifted by increased dry-docking activities given the implementation of IMO2020, with the company also having recently secured the EPCIC contract for the Kasawari project, boosting its order-book to a multi-year high of ~RM3b.

Upgrade to OUTPERFORM (from MARKET PERFORM previously). Given the improved outlook, we raised our TP to RM8.80 (from RM7.60 previously), pegged to 1.1x FY20E PBV at +2SD from its 5-year mean (from 0.95x PBV at mean valuations, previously). All things aside, we like MISC given its stable dividend fetching ~4% yield, which is one of the better ones among FBMKLCI constituent stocks, thus providing some defence for the stock, while also helping to limit the share’s downside risks over the longer-term. Risks to our call include: (i) weaker-than-forecasted charter rates, (ii) stronger-than-expected Ringgit, (iii) lower-than-expected number of operating vessels, and (iv) slowdown in global economy.

Source: Kenanga Research - 23 Sept 2019

Labels: MISC
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Oil and Gas - Petronas Group’s 2Q19 Results

Author: kiasutrader   |  Publish date: Mon, 23 Sep 2019, 10:17 AM


A read-through of Petronas’ 1H19 results highlighted that the group posted stronger core PATAMI by 14% YoY, helped by higher sales volumes and weakening Ringgit, while partially offset by lower average realised prices and higher product costs. YTD, capex spend amounted to RM15.7b, with focus on upstream and local investments. However, the group’s full-year capex projection of RM50b remains intact, and as such, we expect investments to be back loaded into 2H19. Of the ~RM35b expected upcoming capex, we expect a 50-50 split between local and international investments, with continued focus on upstream. Meanwhile, the group had also paid out RM26b out of the RM54b dividends declared for the year. That said, with Petronas sitting on a net-cash pile of RM92.6b, we see little hassle for the remaining RM28b dividends to be promptly paid out within the year. Nonetheless, with the group yet to announce any dividends in relation to FY19, we expect dividend payment to be lower in 2020. Overall, with continued capex for the upstream segment, we believe potential value-chains to be highlighted include the drilling space (e.g. VELESTO), fabricators (e.g. SAPNRG, MHB), as well as FPSO players (e.g. YINSON, MISC) that could benefit from the sanctioning of greenfield investments. We maintain NEUTRAL on the sector, with earnings delivery and balance sheet resilience still remaining our key selection criteria. Preferred picks for the upcoming quarter include: (i) MISC, given its defensive dividends, and (ii) SERBADK, for its consistent track record of earnings growth delivery.

Petronas posts stronger 2Q19 results. Petronas group posted 2Q19 core PATAMI of RM12.7b (arrived after stripping-off net impairment write-backs), jumping 11% YoY, primarily helped by the weakening Ringgit and lower effective tax rates, offset by higher product costs and lower average prices. Sequentially, 2Q19 core PATAMI grew 5.5% QoQ, similarly due to the weakening Ringgit and lower finance costs, partially offset by the lower average realised prices. Cumulatively, 1H19 recorded core PATAMI of RM24.7b, being 14% higher YoY, helped by the higher sales volumes and weakening Ringgit, partially offsetting lower average realised prices and higher product costs.

Higher capex expected for 2H19. For 1H19, Petronas incurred total capex of RM15.7b, mainly for the upstream sector (43%), with most of the total capex (61%) being incurred for local projects. That said, Petronas guides that its full-year capex projection of RM50b remains intact, with investments being back-loaded towards the 2H of the year. Of the approximately ~RM35b capex expected for the remaining of the year, we expect a 50-50 split between local and international investments, with focus to remain on the upstream segment. Meanwhile, the group has also paid out RM22b of the RM30b special dividends declared for 2019, whilst RM4b of the RM24b ordinary dividends in relation to FY18 have also been paid thus far. Moving forward, given Petronas’ net-cash pile of RM92.6b, the remaining dividends of RM28b (RM8b special, and RM20b ordinary) should be promptly paid out within the year. Thus far, the company has yet to announce dividends for FY19, and as such, we believe dividend payments could be lower for 2020 – normalised from a high of RM54b in 2019 (RM30b special, and RM24b ordinary).

Value-chains highlight. Given Petronas’ capex expected to increase in the 2H of the year, with continued focus towards the upstream segment, we believe potential value-chains that could emerge as beneficiaries would include the drillers (e.g. VELESTO), fabricators (e.g. SAPNRG, MHB), as well as FPSO players (e.g. YINSON, MISC) which could benefit from sanctioning of greenfield investments. Nonetheless, we believe cost optimisation will still be highly relevant for Petronas, and hence, we continue to expect intensified bidding competition and lower margins for upcoming job awards.

Maintain NEUTRAL. Top-picks for the sector for the upcoming quarter include: (i) MISC, given its resilient dividends providing stock defensiveness, and (ii) SERBADK, for its consistent track record of earnings growth delivery. While we acknowledge that the oil and gas sector may have already begun its bottoming out process given the increased activities and contract flows especially within the upstream space, we believe a full recovery could still be long and gradual for many players given their balance sheet constrains. As such, we advocate more selective approach towards stock picks within the sector, favouring names with earnings delivery and resilient balance sheets, coupled with acceptably decent valuations.

Source: Kenanga Research - 23 Sept 2019

Labels: SERBADK, MISC
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calvintaneng DON'T BE SOOOOO CARELESSLAH

PETRONAS SAID IT INCREASED OIL RIGS FROM 18 TO 28 = SO ADDED 10 OIL RIGS OR 35% INCREASE

THIS ONE WILL BENEFIT IMMEDIATELY

SCOMI ENERGY OR SCOMIES (7045)

SCOMIES DRILLING FLUID WILL BE NEEDED FOR OIL DRILLING AS IT ACTS AS A COOLANT AND LUBRICANT OR ELSE OIL RIG DRILLING WILL OVERHEAT AND BREAK

SO SCOMIES GO GO GO!!!
23/09/2019 10:36 AM

Regional News Update

Author: kiasutrader   |  Publish date: Mon, 23 Sep 2019, 10:11 AM


Singapore’s Corporate News

5G in Singapore: Singtel focusing on collaborative approach to use case development

AS 5G in Singapore takes shape, the state telecoms regulator has mapped a plan to provide spectrum allocations in support of at least two standalone 5G networks set to launch in 2020. Singtel, which is primarily owned by the state’s investment arm, has gained learnings from elsewhere in its service provider footprint and is laser-focused on creating an ecosystem of stakeholders to define use cases that will be relevant to consumers and businesses in the city-state. Singtel, which segments its business into consumer, enterprise and digital life groups, is the largest of Singapore’s three carriers in terms of subscriber count and the majority of the company is held by the investment arm of the nation’s government. (Source: RCRWireless)

OCBC first Singapore bank to join JPMorgan's blockchain network

OCBC has become the first Singapore bank to join JPMorgan's live blockchain service - known as the interbank information network (IIN), JPMorgan said on Friday. The Singapore lender joins 112 other banks from the Asia-Pacific in joining the IIN, with regional banks dominating the list of new entrants. Asia-Pacific banks that have signed up on the network now total 134, making up nearly 40 per cent of the 343 banks that have signed up since 2018. The 80 Japanese banks that have signed up also form the largest bloc globally. IIN was launched as a pilot in 2017, and aims to cut the friction involved in the global payments process. It runs on a permissioned blockchain developed by JPMorgan called Quorum, which is described as a variant of the Ethereum blockchain. (Source: The Business Times)

Indonesia’s Corporate News

Bank Indonesia carries out third rate cut in three months

Indonesia's central bank on Thursday announced its third rate cut in as many months, demonstrating its resolve to get ahead of a slowing global economy amid the U.S.-China trade conflict. Bank Indonesia slashed its benchmark seven-day reverse repo rate by 25 basis points, to 5.25%, in line with the predictions of 13 out of 21 economists polled by Reuters over the past week. "This is a preemptive measure to push for economic growth momentum that has been slowing," Gov. Perry Warjiyo told a news conference the same day. (Source: Nikkei Asian Review)

Axiata Seeks Malaysia, Indonesia Mergers After Telenor Talks End

Axiata Group Bhd. is pursuing mergers as a key strategy despite an abrupt end to its plan to form an Asian mobile giant with Telenor ASA, its top executive said. Malaysia’s largest wireless carrier, which provides telecommunication services to more than 300m people from India to Cambodia, could see mergers happening for its Indonesian and Malaysian operations within three to five years, Chief Executive Officer Jamaludin Ibrahim said in an interview. “Consolidation is key to futureproof us in the medium term given the challenges in the industry,” Jamaludin said at his office in Kuala Lumpur. “The cancellation of the merger does not deter us from looking at other possibilities.” (Source: Bloomberg)

Thailand’s Corporate News

▪ SCB eliminates digital banking fees

Siam Commercial Bank (SCB) has taken the lead in waiving digital banking transaction fees for small and medium-sized enterprise (SME) customers to encourage them to migrate to the online platform. The fee waiver is offered to SMEs with annual sales of up to 75.0m THB, said Apiphan Charoenanusorn, the bank's co-president. To be eligible for the free digital transactions, SMEs must have a current account, called Manee Mungkung, with the bank. The fee waiver is part of the bank's campaign "SME Fighto", with a special interest rate for current accounts of up to 1% per year, with monthly interest payment and free access to co-working space and business development seminars. (Source: Bangkok Post)

Thai telco boss resigns after insider trading fines, shares fall

Thai telecommunications magnate Pete Bodharamik has resigned from two companies after regulators fined him for insider trading, the companies said on Tuesday. Pete resigned from broadband provider Jasmine International Pcl and media firm Mono Technology Pcl, where he was chief executive and chairman of the board, respectively, the firms said. Pete and another executive were penalised for buying shares of Jasmine Telecom Systems Pcl before its 2016 third quarter results were released, which showed a profit for the first time since 2014, the Securities Exchange Commission of Thailand said on Monday. (Source: Reuters)

Source: Kenanga Research - 23 Sept 2019

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Daily Technical Highlights – (FPGROUP, GTRONIC)

Author: kiasutrader   |  Publish date: Fri, 20 Sep 2019, 11:31 AM


FPGROUP (Not Rated)

  • FPGROUP gained 1.5 sen (+2.47%) to close at RM0.415 yesterday.
  • The share has been on a rally after breaking above all its key SMAs in August (after releasing a good set of results).
  • However the rally appears overextended and we opine the share should undergo a consolidation or retrace closer to its moving averages in the near term.
  • Key support levels to look out for are RM0.390 (S1) and RM0.350 (S2).
  • Nevertheless, should buying momentum continue, resistances can be found at RM0.455 (R1) and RM0.520 (R2).

GTRONIC (Not Rated)

  • Yesterday, GTRONIC rose 6.0 sen (+3.37%) to end at RM1.84.
  • Chart-wise, the share has been slowly inching upwards after its plunge in early-Aug 2019. Yesterday’s close saw the formation of a long bullish candlestick, indicating buying momentum.
  • Coupled with encouraging signals from key momentum indicators and the fact that the share remains above its key SMAs, we believe buying momentum could remain strong.
  • From here, resistances can be found at RM1.90 (R1) and RM2.07 (R2).
  • Conversely, downside supports can be identified at RM1.80 (S1) and RM1.72 (S2).

Source: Kenanga Research - 20 Sept 2019

Labels: FPGROUP, GTRONIC
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Bank Indonesia Rate Decision - Third Rate Cut in a Row, a Pre-emptive Measure Amid Flagging Growth

Author: kiasutrader   |  Publish date: Fri, 20 Sep 2019, 9:18 AM


● Bank Indonesia (BI) yesterday decided to cut its 7-day repo rate by 25 basis points (bps) to 5.25%, at its ninth Board of Governor (BoG) meeting this year. This is the third rate cut within three months in line with consensus and house forecast. The central bank also cut the Deposit Facility rate by 25 bps to 4.50%, as well as the Lending Facility rate by 25 bps to 6.00%. According to BI, the latest decision is a pre-emptive measure to drive up domestic growth momentum amid slowing global growth, while inflation outlook remains low below the midpoint of 2.5-4.5% target range. Meanwhile, domestic financial assets remained attractive as shown by higher investment returns which has been supporting the Rupiah.

● Ensuring adequate liquidity and accommodative measures to preserve economic stability and boost domestic economic growth. BI reiterated that its monetary operations strategy remains oriented towards maintaining sufficient liquidity and improve money market efficiency. Besides, the macroprudential policy remains accommodative to encourage new bank lending and demand for business credit. This includes improving the Macroprudential Intermediation Ratio (MIR), relaxing the loan-to-value (LTV) and financing-tovalue (FTV) ratio for property loans, green property loans, as well as on down payment for motor vehicle loans. BI also reiterated to support and enhance coordination with the Government and other relevant authorities to maintain economic stability, encourage domestic demand, increase exports, tourism, and foreign capital inflows, including Foreign Direct Investment (FDI).

● As a result, it partly helped to strengthened the Rupiah by 1.0% MoM in September. Year-to-date, Rupiah gained 2.3% driven by increased foreign capital inflows and heightened forex transaction for business. Going forward, BI expects the Rupiah to remain stable underpinned by the prospect of sustain foreign capital inflow backed by favorable domestic economic outlook and the prospect of attractive returns from financial instruments.

● BI has ample room for another rate cut to bolster growth. BI sees GDP growth at 5.1% this year,as slowing global economic conditions weighed its domestic growth. While the outlook on inflation and Rupiah remains stable supported by sustain inflow of foreign capital, we foresee that the central bank may continue to lean on easing with another 25 bps cut by year-end. BI has another three more BoG meeting this year. Growth concerns remain key reason over currency stability, as BI is expected to front-load its bullet to safeguard against the impact of global growth slowdown arising from ongoing US-China trade tensions.

Source: Kenanga Research - 20 Sept 2019

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speakup this is stupidity at it's best!
indon bank cut rate now, but when recession or depression happen, no more bullets to cut rate.

BODOH!!!!! IDIOTS!!!!!
20/09/2019 9:47 AM


 

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