Highlights

PublicInvest Research Headlines - 21 Aug 2019

Date: 21/08/2019

Source  :  PUBLIC BANK
Stock  :  GENM       Price Target  :  3.20      |      Price Call  :  HOLD
        Last Price  :  3.23      |      Upside/Downside  :  -0.03 (0.93%)
 
Source  :  PUBLIC BANK
Stock  :  GAMUDA       Price Target  :  4.26      |      Price Call  :  BUY
        Last Price  :  3.83      |      Upside/Downside  :  +0.43 (11.23%)
 
Source  :  PUBLIC BANK
Stock  :  TENAGA       Price Target  :  14.12      |      Price Call  :  HOLD
        Last Price  :  13.66      |      Upside/Downside  :  +0.46 (3.37%)
 


Economy

Global: World Bank says water pollution weighs on global economic growth. Poor water quality saps one-third of potential economic growth in the most heavily polluted areas, according to a new global analysis by the World Bank that underscores how crucial clean water is to productivity. “Deteriorating water quality is stalling economic growth, worsening health conditions, reducing food production, and exacerbating poverty in many countries,” World Bank Group President David Malpass said. GDP growth falls by 0.82 percentage points in regions downstream of heavily polluted rivers, compared with an 2.33% average rate. In middle-income countries, the impact is even larger, with almost half of growth lost, and in high-income nations, GDP declines 0.34 percentage points. (Bloomberg)

US: Imports of Chinese steel racks injure industry. Subsidized steel rack imports from China have materially harmed US industry, the US International Trade Commission found on Tuesday, locking in the Trump administration’s duties on such products in the worsening US China trade war. The commission published no details on the value of US producers’ shipments of steel racks, saying that would amount to disclosure of proprietary data. The US Commerce Department last month said it had concluded that exporters from China had sold steel racks and parts at less than fair value, with total imports from China of such products amounting to about USD200m in 2017. At the time, the Commerce Department determined dumping rates ranging from 18.06% to 144.50%. (Reuters)

EU: Eurozone construction output remains flat in June. Eurozone construction output remained unchanged in June after easing for three straight months, Eurostat reported Tuesday. Production was flat after decreasing 0.5% in May and 1.5% in April. Building output gained 0.3%, while civil engineering fell 0.5%. On a yearly basis, construction output growth eased to 1% in June from 1.7% in May. This was the weakest expansion in five months. In the EU28, production in construction fell 0.3% in June from May and increased 0.6% annually. (RTT)

EU: German employment increases in 2Q. German employment increased in the 2Q largely due to the growth in outdoor work in spring, data from Destatis showed on Tuesday. Employment increased by seasonally adjusted 50,000 or 0.1% sequentially in the 2Q. On an unadjusted basis, employment rose 324,000 but the spring upturn of 2019 was lower than the relevant average of the past five years. The number of people in work exceeded 41m in the 2Q. From last year, employment grew 1.2%. The annual increase in employment was mainly due to strong growth in the service sector. Meanwhile, employment decreased in the agriculture sector. (RTT) 

UK: Manufacturing orders drop at slower pace - CBI. UK manufacturing orders decreased at a slower pace in Aug, the Industrial Trends Survey from the Confederation of British Industry showed Tuesday. The order book balance rose to -13% in August from -34% in July. Likewise, the export order book balance improved to -15% from - 32%. Manufacturers expect to keep output prices in the next three months broadly unchanged - the lowest balance since Feb 2016. Anna Leach, CBI deputy chief economist, said, "Despite signs of stabilisation in the data this month, UK manufactures remain on the receiving end of a double whammy: the slowdown in the global economy and Brexit uncertainty." "Trade tensions between nations such as China and the US only exacerbate the demand uncertainty facing UK manufacturers." (RTT)

UK: Supermarket sales struggling to grow - Kantar. UK grocery sales were flat year-on-year in the twelve weeks to Aug 11, suggesting that supermarkets are struggling to grow, market research group Kantar said Tuesday. Citing its latest Grocery Market Share data, Kantar said the tough comparisons with 2018's strong summer continues. "The memory of last year still looms large for retailers and this summer's comparatively poor weather, combined with low levels of like-for-like price rises, have made growth hard to find for retailers," Kantar said. In the 12 weeks to July 14, supermarket sales had dropped 0.5% YoY, marking the first fall since June 2016. The record hot day in July was not enough to boost the supermarket sales into growth, Kantar said. However, grocers were likely encouraged by instances of better weather during the past four weeks. (RTT)

UK: May delay naming next BOE governor until after Brexit. The UK is considering delaying two key announcements in the latest sign that Prime Minister Boris Johnson’s government is on an election footing. Chancellor of the Exchequer Sajid Javid may wait to name a successor to BOE Governor Mark Carney until after Britain’s planned Oct 31 departure from the European Union, according to a person familiar with the process, who asked not to be identified because they’re not authorized to speak on the matter. Javid may also have to postpone his next budget to 2020 if the government is forced into a general election next month. Carney steps down at the end of Jan, after he twice extended his tenure to provide continuity during the split from the EU. Previous chancellor Philip Hammond had said a new appointment would come in the autumn, and a Treasury spokesman said on Tuesday that is still the expectation. (Bloomberg)

Malaysia: Government expects GDP to expand 4.5%-5% this year, Guan Eng says. The government expects the economy to expand between 4.5% and 5% this year, based on the 1H-year trend, Finance Minister Lim Guan Eng said. “The 4.9% GDP quarterly growth (in 2Q) is better than market expectations of 4.7% as compiled by Bloomberg,” he said. The steady economic growth, at a time when various regional economies were experiencing synchronised growth slowdown, also saw an increase in total stock of foreign direct investment (FDI) in Malaysia, he said. The International Investment Position (IIP) by the Department of Statistics Malaysia showed FDI rose by 10.3% to RM667.5bn in 2Q from RM605.1bn a year ago. The steady rise in total FDI stock “shows the continuing attractiveness of Malaysia as an international investment destination, amid rising trade tensions across the world”. (StarBiz)

Markets

Genting Malaysia (Neutral, TP: RM3.20): Unit inks merger agreement to delist Empire Resorts. Genting Malaysia (GENM) is proceeding with its related party transaction deal involving the acquisition of Empire Resorts Inc and a subsequent delisting of the company via a planned merger. (The Edge)

Comment: Hercules Topco, a JV Co formed between Kien Huat Realty and Genting USA (wholly-owned subsidiary of GENM), will acquire the remaining shares from minority shareholders of Empire Resorts at USD9.74 per share. Genting USA’s stake in Hercules Topco of 49% would entail an injection of USD28.5m (or RM119m) to facilitate the privatisation and delisting of Empire Resorts. The potential drag on GENM’s earnings due to Empire Resorts’ loss making position remains our concern in the near term. We maintain our RM3.20 target price and Neutral rating on the stock.

Gamuda (Outperform, TP: RM4.26), TNB (Neutral, TP: RM14.12): TNB drops suit against Gamuda after payment of RM91m. Gamuda said Tenaga Nasional Bhd (TNB) has withdrawn a legal suit against the group, following the full settlement of a sum totalling RM91.1m. “TNB’s solicitors have withdrawn all matters pertaining to the TNB suit with no order as to costs, and without liberty to file afresh,” Gamuda said. The RM91.1m constitutes full and final settlement of the dispute between Gamuda’s 80%-owned unit Gamuda Water SB and TNB, the group said. TNB has sued Gamuda Water in March last year, for failing to pay its electricity bills. (The Edge)

AWC: Secures RM113m contract from Health Ministry. AWC has been awarded a RM113m contract for hospital support services from the Ministry of Health Malaysia. AWC announced that it had won a tender for hospital support services for the National Cancer Institute. Under the contract, AWC will provide all engineering, cleaning, healthcare waste, linen and laundry management services for the National Cancer Institute located in Putrajaya. With this award, the group’s total contract wins amount to in excess of RM300mil in CY2019. (StarBiz)

Tan Chong: Inks MoU with China’s SAIC to explore Southeast Asian commercial vehicle markets. Tan Chong Motor Holdings has signed a MoU with China's SAIC GM Wuling Automobile Co Ltd (SGMW) to explore business opportunities in introducing SGMW commercial vehicle products to Southeast Asian countries. Tan Chong said this could lead the group to expand its foothold in the automotive industry in Vietnam, Myanmar, Cambodia, and Laos. The signing follows Tan Chong's other MoU entered into with SAIC Motor International Co Ltd in July, to cooperate with each other in the Vietnamese market on complete knock down assembly, sales and distribution, as well as on imported complete built up sales of certain automobile brand of products. (The Edge)

ATTA Global: Buys another property investment company. ATTA Global Group is acquiring real estate company Climate Attitude SB for RM24m to diversify into property investment. Climate Attitude owns two pieces of development land totalling 4.643 acres in Bandar Butterworth, Penang valued at RM26m, according to ATTA Global. The acquisition is its second this year after it announced it was buying MPSB Venture SB for RM28m in May. (The Edge) 

Market Update

The FBM KLCI might open lower today as Wall Street slipped for the first time in four days, following the lead from global stocks that fell as investors weighed up the prospect of fiscal stimulus from some of the world’s biggest economies, while Italian assets were back in focus as prime minister Giuseppe Conte announced his intent to resign. The S&P 500 snapped a three-day winning streak as it closed 0.8% lower, near session lows. The Nasdaq Composite shed 0.7%. In Europe, the Stoxx Europe 600 reversed earlier gains to fall 0.7%. Investors are looking ahead to a meeting of global central bankers in Jackson Hole, Wyoming, starting on Thursday, against a background of rising fears over slowing global growth, for any signs of new stimulus measures. The Federal Reserve is also due on Wednesday to release minutes from its most recent policy meeting. Italy’s FTSE MIB index lagged behind its European peers, falling 1.1%, as the country’s populist coalition government teeters on the brink of collapse.

Back home, the FBM KLCI index gained 6.30 points or 0.39% to 1,602.75 points on Tuesday. Trading volume decreased to 2.06bn worth RM1.73bn. Market breadth was negative with 369 gainers as compared to 400 losers. The regional markets finished mixed with the Nikkei 225 gained 0.55%, while the Hang Seng led the Shanghai Composite lower. They fell 0.23% and 0.11% respectively.

Source: PublicInvest Research - 21 Aug 2019

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