Highlights

PublicInvest Research Headlines - 30 Aug 2019

Date: 30/08/2019

Source  :  PUBLIC BANK
Stock  :  AIRASIA       Price Target  :  1.89      |      Price Call  :  HOLD
        Last Price  :  1.66      |      Upside/Downside  :  +0.23 (13.86%)
 


Economy

US: Economy slowing, but consumers limiting downside. US economic growth slowed in the 2Q, but the strongest consumer spending in 4-1/2 years amid a solid labor market threw cold water on financial market expectations of a recession. Signs that the economy was growing at a moderate pace and not slowing rapidly were underscored by other data showing a narrowing in the goods trade deficit in July as exports rebounded. Businesses stepped up inventory accumulation last month, likely in anticipation that demand would remain strong. GDP increased at a 2.0% annualized rate, the government said. That was a downward revision from the 2.1% pace estimated last month. The small downgrade was in line with economists’ expectations. The economy grew at a 3.1% rate in the Jan-March quarter. It expanded 2.6% in the first half of the year. (Reuters)

US: Weekly jobless claims show modest increase. The Labor Department released a report showing a modest increase in first-time claims for US unemployment benefits in the week ended Aug 24th. The initial jobless claims inched up to 215,000, an increase of 4,000 from the previous week's revised level of 211,000. Economists had expected jobless claims to climb to 215,000 from the 209,000 originally reported for the previous week. Meanwhile, the less volatile four-week moving average edged down to 214,500, a decrease of 500 from the previous week's revised average of 215,000. The continuing claims rose by 22,000 to 1.698m in the week ended Augt 17th. The four-week moving average of continuing claims still slipped to 1,697,250, a decrease of 250 from the previous week's revised average of 1,697,500. (RTT)

US: Pending home sales show substantial pullback in July. T he National Association of Realtors released a report showing a significant pullback in pending home sales in the month of July. The pending home sales index tumbled by 2.5% to 105.6 in July after surging up by 2.8% to 108.3 in June. The steep drop came as a surprise to economists, who had expected pending sales to come in unchanged. With the monthly decrease, pending home sales in July were down by 0.3% compared to the same month a year ago after showing a 1.6% YoY jump in the previous month. A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale. Super-low mortgage rates have not yet consistently pulled buyers back into the market. (RTT)

US: Auto sales seen rising 5% in Aug. US auto sales are expected to rise 5% in Aug from the same period a year ago, driven by strong volumes due to higher manufacturer incentives and higher average sales prices, according to J.D. Power and LMC Automotive. The consultancies see total US vehicle sales of about 1.62m units in the month, with retail sales of new vehicles expected to rise 5.8% to 1,404,500 units. Strong volumes coupled with higher average sales prices means that consumers will spend more purchasing new vehicles in Aug than any month in history. Overall vehicle prices are seen touching new records in August as buyers pay more for latest sports utility vehicles (SUVs). The consultancies estimate average new-vehicle sales price to reach USD33,322, the highest level ever for the month of Aug, up 4% from last year. (Reuters)

EU: Economic sentiment shows slight uptick in Aug. Eurozone economic sentiment showed a slight improvement in Aug, boosted by optimism in the industry and retail sectors and with Spain showing the biggest increase. The European Commission’s monthly sentiment showed the overall index for the 19 countries sharing the euro at 103.1 points versus 102.7 in the previous month. Economists had forecast 102.3. The European Central Bank is expected to announce a stimulus package at its Sept. 12 policy meeting and market expectations have been growing, with investors already pricing in several rate cuts for the coming year and a fresh round of bond purchases, commonly known as quantitative easing. The increase in the Aug sentiment index was due mainly to higher confidence in industry where the index improved to -5.9 from -7.3 a month earlier. (Reuters)

EU: German inflation eases, joblessness rises as economy sputters. German inflation slowed in Aug and unemployment rose, data showed, adding to signs that Europe’s largest economy is running out of steam and cementing expectations of a new European Central Bank stimulus package next month. Consumer prices rose 1.0% YoY after an increase of 1.1% in July. The August reading undershot forecast for 1.2%, the lowest level since Nov 2016, and marked a fourth month running well below the ECB’s target of close to but below 2% for the euro zone as a whole. Separate German Labour Office data showed seasonally adjusted unemployment rose 4,000 on the month in August, eroding a pillar of growth that has helped support an economy whose traditionally powerful export engine is sputtering and that could well slip into recession in the current quarter. (Reuters)

Singapore: Producer prices fall further in July. Singapore's producer prices declined at a faster rate in July, figures from the Department of Statistics showed. The manufactured products price index declined 6.2% YoY in July, following the 5.7% decrease in June. The oil and non oil indices declined 9.7% and 5.6%, respectively. On a monthly basis, manufactured products prices rose 0.8% in July, after a 1.9% decline in the previous month. Another report from the statistical office showed that import prices fell 2.1% on year in July, following a 1.5% decline in June. On a MoM basis, import prices rose 0.9% in July, after a 1.8% fall in the preceding month. (RTT) 

Markets

AirAsia (Neutral, TP: RM1.89): Close to adjusting Airbus order plans. AirAsia Group will announce an adjustment to its large Airbus SE order plans, confirming at least part of its order for A330neos while making room for the A321XLR, two people familiar with the matter said. Airbus has been in talks for months to sell the latest addition to its narrowbody fleet, the long-range A321XLR, to its largest Asian customer in a move widely expected to lead to a restructuring of AirAsia's order for larger A330neo jets. AirAsia's long haul arm AirAsia X last year placed an order for 34 A330neos but it was never finalised in the Airbus order book. (Reuters)

Kimlun: 2Q net profit up 37% on higher construction, manufacturing revenue. Kimlun Corp's net profit rose 36.6% to RM13.4m in the 2QFY19 from RM9.8m a year ago, on higher revenue achieved by the construction and manufacturing and trading (M&T) divisions. This resulted in a higher EPS of 4.05 sen for 2QFY19 compared with 3.07 sen for 2QFY18. Revenue for the 2Q19 also increased 49.2% YoY to RM325.17m (The Edge)

Bina Darulaman: Halves net loss in 2Q as turnaround plan starts to bear fruit. Bina Darulaman’s (BDB) net loss contracted 49% to RM4.86m for the 2QFY19, from RM9.45m in the previous year’s corresponding quarter. Revenue fell 11% to RM47.2m from RM52.9m previously. “The group managed to narrow down its losses as a result of its business turnaround initiatives which focuses on business improvement processes to deliver better margins and cost optimisation exercise,” it said. (The Edge)

YTL Power: 4Q net profit down 27%, pays 5 sen dividend. YTL Power International reported a 27% drop in net profit to RM150.1m for the 4QFY19 from RM205.7m in the year-ago. This is despite a 9% jump in revenue to RM3bn from RM2.8bn before. The group has declared an interim dividend of five sen per share. (The Edge)

Leong Hup: 2Q net profit down 76%, pays 1.6 sen dividend. Leong Hup International reported a sharp 76% fall in net profit to RM16.1m for the 2QFY19 from RM65.6m in the previous corresponding quarter. The dismal performance was due to the depressed selling prices of its products. Despite the earnings contraction, Leong Hup declared an interim dividend of 1.6 sen per share, amounting to RM58.4m, payable on Sept 30. (The Edge)

Concessions: Cut-off date for finalising highway deals extended. The cut-off date for the takeover of four toll concessionaires has been extended for two months. MOF Inc, Kesas Holdings, Litrak Holdings, Sprint Holdings and Smart Holdings have mutually agreed to extend the cut-off date to negotiate and finalise the terms of the definitive agreement from Aug 30 to Oct 31, 2019 in relation to the government’s acquisition of highways. In June, the Ministry of Finance (MoF) offered to acquire four toll concessionaires with an enterprise value of RM6.2bn. (SunBiz)

TH Plantations: In the red for fourth consecutive quarter. TH Plantations (THP) reported a net loss of RM19.1m in its 2QFY19, marking its fourth consecutive quarter of losses since it fell into the red in the 3Q of last year. In 2QFY19, revenue retreated 23% to RM106.1m. "The weaker performance was largely the result of significantly lower prices of crude palm oil (CPO) and palm kernel (PK) and higher finance cost," it said. (The Edge)

Market Update

The FBM KLCI might open higher today as US stocks notched up their biggest one-day gain in a fortnight after comments from Chinese officials spurred hopes among investors for a resolution to Washington’s trade war with Beijing. The S&P 500 and Dow Jones Industrial Average each closed 1.3% higher on Thursday, while the Nasdaq Composite gained 1.5% and put US stocks on track for their first weekly gain since July. Gao Feng, China’s commerce ministry spokesman, on Thursday told reporters he hoped the US would cancel its additional tariffs to avoid an escalation in the trade war. European stocks responded positively to those reports, which also said Beijing and Washington were discussing face-to-face trade talks that were scheduled for next month. The region-wide Stoxx 600 added 1%, while Germany’s Dax rose 1.2% and France’s Cac 40 gained 1.5%. London’s FTSE 100 was up 1%, but the focus was on the pound, which slipped as markets digested Boris Johnson’s decision to shut down parliament to protect his Brexit plan.

Back home, the FBM KLCI closed up 5.36 points or 0.34% to 1,595.18 points on bargain hunting and as foreign selling of Malaysian stocks appeared to have tapered off amid more optimistic corporate financial announcements during the current reporting season. The regional markets finished mixed with the Hang Seng gained 0.34%, while the Shanghai Composite led the Nikkei 225 lower. They fell 0.10% and 0.09% respectively.

Source: PublicInvest Research - 30 Aug 2019

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