PublicInvest Research

PublicInvest Research Headlines - 10 Jan 2018

PublicInvest
Publish date: Wed, 10 Jan 2018, 09:53 AM
PublicInvest
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An official blog in I3investor to publish research reports provided by PublicInvest Research team.

All materials published here are prepared by Public Investment Bank Berhad. For latest offers on Public Invest trading products and news, please refer to: https://www.publicinvestbank.com.my/pbswecos/default.asp

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Economy

Global: World Bank raises outlook as growth hits fastest pace since 2011. The World Bank lifted its forecast for global growth, predicting the global recovery will continue to gain steam after reaching the fastest clip in six years. The development lender raised its estimate for global economic growth for this year to 3.1%, up 0.2 percentage point from an estimate in June, it said Tuesday in its latest Global Economic Prospects report. The world economy probably expanded 3% last year, which would be the fastest pace since 2011. (Bloomberg)

Global: Income inequality may fall as emerging markets skill up. Emerging-market economies will drive skill gains in the global labor force in the coming decades, potentially reducing inequality between nations in the process. The world will see the number of skilled workers – those with nine or more years of education -- rise 30 percent to 2.16bn by 2040, up from 1.66bn in 2011, according to a new World Bank report. Thanks to their growing populations and investments in education, developing countries are expected to contribute all of those additional educated workers. (Bloomberg)

US: Job openings, layoffs fall to six-month lows in Nov. US job openings fell for a second straight month in Nov, with declines in the manufacturing and real estate sectors, supporting economist forecasts that job growth will slow in 2018. The monthly Job Openings and Labor Turnover Survey, or JOLTS, released by the Labor Department on Tuesday, also found that layoffs dropped to a six-month low, however, showing continued labor market strength. Job openings, a measure of labor demand, fell by 46,000 to a seasonally adjusted 5.88m, the lowest level since May. (Reuters)

US: Bond market inflation gauge climbs to 10-month high. The gap between yields on 10-year US notes and similar-maturity Treasury Inflation Protected Securities, or TIPS, climbed Tuesday to about 2.05 percentage points, the most since March. The breakeven rate, as the measure is known, is a gauge of the market’s expectations for consumer-price gains over the coming decade, and an increase indicates investors are becoming increasingly confident that inflation will rise toward the kind of levels that the Federal Reserve is targeting. The rise in breakeven rates comes ahead of this week’s US consumer price index release, which forecasters predict will show an annual headline inflation rate of 2.1% for Dec. (Bloomberg)

EU: Euro-area unemployment rate drops to lowest level since 2009. Joblessness in the euro area declined to the lowest level since early 2009, raising the prospect of a tighter jobs market finally putting the upward pressure on wages keenly anticipated by the European Central Bank. The unemployment rate dropped to 8.7% in Nov from 8.8% the previous month, according to a report from Eurostat on Tuesday. While the region’s economy has returned to health following a period marred by bank failures, record joblessness and a sovereign debt crisis that jeopardized the currency union, inflation has proved sluggish -- in part because wages have been slow to rise. (Bloomberg)

EU: German industry output rebounds on strong investment demand. German industrial production rebounded in Nov, setting up the euro area’s biggest economy for a strong finish to the year and adding to the picture of robust growth in the currency bloc. Led by demand for investment goods, output increased 3.4% from the previous month, data from the Economy Ministry showed on Tuesday. Production surged 5.6% from a year earlier, the most since 2011. Germany is undergoing an economic boom amid the broadest euro zone expansion in almost two decades and strengthening global demand. (Bloomberg)

UK: Britons’ festive fun undercut by faster food-price inflation. Britain’s clothing chains and department stores are taking a hit as faster food-price inflation eats into the amount consumers have for non essential spending. Industry figures published Tuesday showed non food sales fell an annual 1.4% in the 4Q, the most since 2009. Online demand proved stronger, leaving high street sales down by an even bigger 3.7%, a blow to retailers hoping for Christmas cheer after a tough 2017. In Dec alone, overall retail sales rose a “meager” 0.6% on a like for-like basis, according to the British Retail Consortium. (Bloomberg)

Japan: BOJ watchers say traders jumped the gun on exit speculation. The BOJ’s cut in long-term bond purchases on Tuesday shouldn’t be taken as a sign of an imminent turn to the exit for the current monetary policy, central bank watchers said. The move doesn’t have any new policy implication, though investors are right to expect the central bank to head toward normalization in the longer term, said Junko Nishioka, chief economist at Sumitomo Mitsui Banking Corp. (Bloomberg)

Markets

Daya Materials (Neutral, TP: RM0.07): Gets Petronas job. Daya Materials’ unit Daya Secadyme SB has received a three-year contract to supply and deliver specialty chemicals to Petroliam Nasional (Petronas). (Bernama) Comment: The securing of another contract from Petronas, also for the supply and delivery of specialty chemicals is a much-welcomed development. While no contract amounts have been mentioned, this will undoubtedly contribute positively to the Group over the 3-year duration of the contract. We are growing increasingly optimistic on its turnaround story, but retain our Neutral call at this juncture.

Perdana Petroleum: Inks four vessel supply deals with Dayang Enterprise. Perdana Petroleum has inked four time charter party agreements with its major shareholder Dayang Enterprise Holdings, to supply two accommodation work barges and two anchor handling tug/supply vessels for an estimated RM41.8m. The agreements were inked by Perdana Nautika SB and Dayang Enterprise SB (DESB), which are wholly-owned subsidiaries of Perdana Petroleum and Dayang Enterprise, respectively. The four vessels will be chartered for nine months — "with an option of three monthly extension" — starting from March 1, 2018. (The Edge)

Mitrajaya: Bags RM103m civil servant housing project. Mitrajaya Holdings has been appointed as the main building works contractor for a public housing project in Precint 17, Putrajaya. The RM103.06m contract was awarded to the construction firm’s wholly-owned unit, Pembinaan Mitrajaya SB, by Putrajaya Homes SB. The project, under the 1Malaysia Civil Servants Housing Programme (PPA1M), comprises 404 apartment units, a block of multi-level parking, a surau, and common facilities. “The contract will commence on Jan 15, 2018 for a duration of 36 months and it is expected to be completed by Jan 14, 2021,” said Mitrajaya. (The Edge)

Prestar: To list unit on ACE market by 4Q via Tashin Holdings. Steel maker Prestar Resources, which is planning to list its 51%- owned manufacturing and trading subsidiary Tashin Steel SB (TSSB) on the ACE Market, will do so via a special purpose vehicle, Tashin Holdings, by 4Q of this year. Penang-based TSSB is principally involved in the processing of steel coils into slit coils and steel sheets, as well as the manufacturing of steel products like expanded metals products, flat bars, square bars, steel pipes, steel plates, checkered plates and C Purlins. As part of the proposed listing, Prestar and Formula Naga SB — which owns the remainder 49% stake in TSSB — will transfer their stakes in TSSB to Tashin Holdings via a share sale agreement inked today, for RM144.07m, Prestar said. (The Edge)

Sunway REIT: Plans minimum RM100m investment for Penang mall extension. Sunway Real Estate Investment Trust (Sunway REIT) is planning a minimum investment of RM100m, with the bulk of this sum going towards building the second phase of its Sunway Carnival Shopping Mall in Seberang Jaya, on the mainland of Penang. The new extension will increase the mall’s net lettable area by 70% to 800,000 sq ft in 2020, the trust’s CEO Datuk Jeffrey Ng told Nikkei Markets in an interview. Sunway REIT aims to start construction within this quarter after receiving approvals from its BODs. (The Edge)

PDZ: To enter Indonesian market. PDZ Holdings has entered into a MoU with PT Indonesia Bulk Carrier to provide maritime logistic solutions to the Indonesian shipping market. According to PDZ, Indonesian shipping laws for foreign investment and cabotage policy require partnership with local Indonesian players, and the tie-up to enter Indonesia is expected to contribute positively to PDZ's profitability with its favourable tax regimes and government initiatives. It added that the agreement is in line with its regional expansion plans to take advantage of the Indonesia seafreight market, projected to reach USD25bn (RM100bn) by 2020 with a container volume of over 50m twenty-foot equivalent unit (TEU). (The Edge)

IDimension: Slapped with RM406,019 of additional income tax and penalty by IRB. IDimension Consolidated has been slapped with an additional income tax and penalty of RM406,019 by the Inland Revenue Board (IRB). IDimension said its wholly-owned subsidiary IDB Interactive SB received via email, a notice of additional assessment for its 2013 and 2014 assessment years. This involved an additional income tax of RM280,013 and a 45% penalty of RM126,006. IDimension said these were imposed by IRB, considering expenses charged in the two years were not qualified for tax deduction under Section 33(1) of the Income Tax Act, 1967. (The Edge)

Tien Wah: To sell machinery for RM1.29m. Tien Wah Press Holdings' wholly-owned subsidiary Tien Wah Press (Malaya) SB (TWPM) is disposing of the machinery assets to Paper Base Converting SB (PBC) for RM1.29m in conjunction with its re organisation of production footprint within the group. Tien Wah said TWPM has entered into an assets sale agreement with PBC — being an indirect wholly-owned subsidiary of New Toyo International Holdings Ltd — which is a major shareholder of Tien Wah. (The Edge)

Versatile Creative: Sells 17m shares in Iris Corp. Versatile Creative has disposed of 17m shares, equivalent to a 0.69% stake, in Iris Corp to the open market for RM3.54m. Versatile Creative said the disposal transactions were carried out by its wholly-owned subsidiary Versatile Paper Boxes SB between May 17, 2017 and yesterday. The colour separation and packaging product group said the transactions resulted in a realised gain of RM985,000. Versatile Creative said the disposal of Iris shares is the most appropriate avenue of cash raising at this juncture, as it would enable the group raise cash expeditiously without incurring interest costs as compared to bank borrowings. (The Edge)

Auto (Neutral): Malaysia to register higher sales in 2018, says Frost & Sullivan. Frost & Sullivan expects vehicle sales in Malaysia to reach 601,000 units in 2018, up 2% from its 2017 overall target of 589,209 units, as consumer confidence improves in tandem with Malaysia's economic growth. Senior vice president of mobility Vivek Vaidya said the strengthening ringgit is likely to reduce the import costs of automotive parts and completely built-up models, leading to a price stabilisation this year. "The launch of the all-new Perodua Myvi in [the 2H of 2017] and other key models including the new Toyota CH-R [this year] will also drive sales in 2018," he said. (The Edge)

Market Update

The FBM KLCI might open higher today after US equities marched on to fresh highs overnight as the financial and healthcare sectors rebounded, while strength for miners helped Europe’s Stoxx 600 close at another two-year peak. But energy stocks lagged behind on both sides of the Atlantic even after Brent oil hit a two-year peak. US Treasuries led a sell-off in global government bonds as a decision by the Bank of Japan to scale back its monthly bond purchases put the focus firmly back on the outlook for global central bank policy. The benchmark 10-year Treasury yield climbed above 2.50 percent to its highest since March, while the yen gained ground across the board and gold retreated further from last week’s three-month high. On Wall Street, the Dow Jones Industrial Average tacked on 102.80 points, or 0.4%, to 25,385.80. Meanwhile, the S&P 500 index gained 3.58 points, or 0.1%, to 2,751.29 and the Nasdaq Composite Index advanced 6.19 points, or less than 0.1%, at 7,163.58. In Europe, the markets finished higher today with shares in France leading the region. The CAC 40 rose 0.67% while London's FTSE 100 added 0.45% and Germany's DAX gained 0.13%.

Back home, the FBM KLCI index lost 5.20 points or 0.28% to 1,826.95 points. Trading volume decreased to 6.48bn worth RM4.41bn. Market breadth was negative with 387 gainers as compared to 716 losers. The regional markets finished higher today with shares in Japan leading the region. The Nikkei 225 was up 0.57% while Hong Kong's Hang Seng added 0.36% and China's Shanghai Composite rose 0.13%.

Source: PublicInvest Research - 10 Jan 2018

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2018-01-10 11:30

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