PublicInvest Research

PublicInvest Research Headlines - 7 May 2018

PublicInvest
Publish date: Mon, 07 May 2018, 10:15 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

US: Tepid wages, participation mute celebration on jobless rate. The US unemployment rate dipped below 4% for the first time in 17 years, but other details of the April jobs report kept any celebration in check. Despite reports of firms struggling to find skilled workers, average hourly earnings showed a deceleration, rising 0.1% from the prior month and 2.6% from a year earlier, both less than forecast. Meanwhile, the participation rate slipped 0.1 percentage point to 62.8%, erasing part of an outsize gain from Feb that had indicated workers were being pulled in from the sidelines, Labor Department figures showed. Federal Reserve officials are likely to look beyond the modest wage gains and stick to a path of gradual interest-rate hikes, while economists generally see the data as in line with a solid US jobs picture that supports an eventual acceleration in wage growth. (Bloomberg)

US: Three sectors explain most of deceleration in wage growth. The deceleration in US wage growth in April was relatively broad-based, with eight of 13 sectors seeing a down-tick. But three sectors made an outsize contribution to the slowdown: education and health services, financial activities and manufacturing. The large number of Americans employed in education and health services makes it the biggest contributor to overall wage growth, and pay gains in that industry haven’t seen much of an acceleration since mid-2017. Pay developments in the financial activities sector are especially interesting because of the rapid acceleration in wage growth since mid-2017. From July to Jan, that pickup lifted overall US wage growth by nearly two tenths of a percentage point all by itself. (Bloomberg)

US: Dudley says too early to declare victory on Fed inflation goal. Federal Reserve Bank of New York President William Dudley said he is optimistic about US growth, while adding it’s too early to judge that the economy had overcome persistently low inflation. “I wouldn’t quite declare victory yet” on consistently achieving the Fed’s 2% inflation target, Dudley said Friday. “The inflation data goes up and down month to month, but we have made some progress and I am certainly happy where we are today.” The Fed’s preferred gauge of inflation, the personal consumption expenditures price index, reached 2% in March on a 12-month basis after staying below that level for most of the last six years. (Bloomberg)

EU: Merkel allies reject idea of European finance minister Handelsblatt. Leading politicians from Chancellor Angela Merkel’s conservatives want to pass a resolution at a meeting this week to reject any pooling of debts in Europe and any fiscal policy without national parliamentary controls, Handelsblatt reported. The daily business newspaper, citing sources from the conservative bloc’s parliamentary leadership, said the senior politicians also oppose European Commission plans for a European finance minister. The group includes the parliamentary leaders of the conservative bloc in the Bundestag, the European Parliament as well as from Germany’s 16 states, Handelsblatt reported. The report highlights the resistance among Merkel’s conservatives to any euro zone reforms that could see more German taxpayers’ money being used to fund other member states. (Reuters)

UK: BOE to keep rates steady after market U-turn. The Bank of England looks set to keep interest rates on ice this week, capping a sharp swing in the outlook for the British central bank, which might now struggle to convince investors that it will raise borrowing costs at all this year. Unexpectedly weak economic data and cautious remarks from Governor Mark Carney have dashed what looked like near-certain expectations of a rate increase until a few weeks ago. Since he joined the BOE in 2013, Carney has signaled several times that rates were likely to rise, only for economic data to go the wrong way. With the prospects for Britain’s economy unclear and the terms of Britain’s departure from the European Union far from settled, Carney is likely to want to hedge his bets on Thursday. (Reuters)

Japan: Some BOJ members said too early to debate exit from easy policy. Some Bank of Japan policymakers said the central bank should explain to the public that the economy has yet to reach a phase where the timing and means to exit ultra-loose policy could be considered, minutes of their March rate review showed on Monday. “While normalization, or a gradual reduction in the degree of monetary accommodation, could become a topic for consideration in the future, the BOJ needs to explain to markets that normalization ... would be different from monetary tightening,” one board member was quoted as saying. (Bloomberg)

Markets

Genting (Outperform, TP: RM11.50): O&G unit gets nod to develop area within Kasuri Block in Indonesia. Genting’s 95%- owned indirect subsidiary Genting Oil & Gas Ltd (GOGL) has received approval from Indonesia's Ministry of Energy and Mineral Resources for a first phase plan of development for the Asap, Merah and Kido structures (POD 1) in West Papua, Indonesia. (The Edge)

Comments: These structures are within the concession area for the Kasuri Block in West Papua awarded to GOGL pursuant to a production sharing contract signed in May 2008. In line with the Indonesia government’s effort to develop the petrochemical industry in West Papua, GOGL plans to supply 170m cubic feet per day of natural gas for 20 years to a petrochemical plant, subject to necessary approvals to be obtained. The oil & gas segment is estimated to account for about 2% of GENT’s FY18F adjusted EBITDA. However, given that this is still at development stage, we are not expecting any contribution and hence, our earnings forecasts remain unchanged. Maintain Outperform on GENT with a TP of RM11.50.

Media Prima (Underperform, TP: RM0.68): Sells entire stake in MNI for RM14.15m. Media Prima’s subsidiary, The New Straits Times Press (M) (NSTP), together with other shareholders of Malaysia Newsprint Industries SB (MNI) are disposing of their entire stakes and all their redeemable preference shares in MNI to Asia Honour (HK) Ltd. NSTP is selling its 21.36% stake for RM14.15m. It said MNI shareholders have inked a share sale agreement (SSA) to sell their shares in MNI with the consent of liquidator. (New Strait Times)

Comments: We are neutral on this announcement as the proposed disposal will only enable the Group to recoup 10% of its investment in MNI which had been fully written down in FY17. To recap, Media Prima had previously fully impaired its investment in MNI of RM141.5m consequent to MNI’s commencement of a creditors’ voluntary winding up. The full sale consideration of RM14.15m is expected to be received within 3QFY18. Maintain Underperform with a P/BV-derived TP of RM0.68. We derived our RM0.68 TP based on P/BV of 0.63x, which is -2SD of 5-year historical average for Media Prima. However, share price has retraced sharply lately due to overall weakness in the market as well as concern over Media Prima's future prospect. We are likely to revise our TP with a downward bias but at this juncture, our TP remains unchanged pending our meeting with management.

Serba Dinamik (Outperform, TP: RM4.00): Secures USD20m Islamic finance facility with Mizuho. Serba Dinamik Holdings has secured a USD20m Islamic finance facility via a wholly-owned unit, to be used as general working capital. The unit, Serba Dinamik International Ltd, signed the agreement for the facility with Mizuho Bank (M). The facility is renewable on an annual basis. The financing is necessary for the growth of the group's business, as it continues to expand overseas. Approximately 65% of the group’s revenue is derived from overseas. (The Edge)

DNeX: To provide e-wallet service for incoming local and foreign vehicles. Dagang NeXchange (DNeX) subsidiary has won a sub contract to provide a touch-and-go electronic wallet service for local and foreign vehicles entering the country. DNeX said 51%-owned DNeX RFID SB was awarded the job by the main contractor, TCSens SB. DNeX did not specify the value of the sub-contract, but said the project could generate an annual revenue ranging from RM19m to RM21m, with an estimated project margin of 35% in the first three years. The expected revenue was based on projected volume of both local and foreign vehicles. (The Edge)

AZRB: Secures RM100m loan facility from Affin Bank. Ahmad Zaki Resources (AZRB) said its 51%-owned subsidiary Matrix Reservoir SB has obtained a loan facility of RM100m from Affin Bank. AZRB said the loan facility is to supplement the capital expenditure and working capital of Matrix Reservoir in relation to its operations at Tok Bali Supply Base in Kelantan. AZRB added that it will provide a corporate guarantee in respect of the banking facilities. (The Edge)

Protasco: To commence building RM356m civil servants HQ in Putrajaya in 3Q. Protasco will commence work on Phase 4 of the civil servants' headquarters in Putrajaya, which entails the construction of 1,681 residential units, in the 3Q of the year. Phase 4 is a part of the Perumahan Penjawat Awam 1Malaysia (PPA1M) project and will be developed at an estimated gross development value of RM356m on 11.2 acres of land in Precinct 19. It is expected to be completed in 36 months. The smaller residential PPA1M units, measuring 850 sq ft, will be priced from RM120,000, and the larger units of 1,000 sq ft, from RM220,000. (The Edge)

Priceworth: Gets extension to fulfil conditions on FMU5 acquisition. Priceworth International has been given an extension until May 22 to fulfil the conditions precedent relating to the proposed acquisition of the Forest Management Unit 5 (FMU5) timber concession in Sabah. Priceworth is now in the final stage of fulfilling all of the conditions precedent, of which the last one is to obtain the approval of its shareholders at an extraordinary general meeting to be held on May 22. "We are confident that our shareholders will deem this acquisition favourably. Firstly, we are acquiring an asset that has been valued at RM433.8m for RM260m," its executive director Richard Koo said. (The Edge)

Notion VTec: Gets RM30m in insurance payment. Notion VTec has received RM30m from its insurers as part settlement of RM50m claim for a fire that broke out at its main manufacturing plant in Klang, Selangor on Oct 20 last year. The precision parts manufacturer said the payment was made to its wholly-owned subsidiary Notion Venture. The balance of RM20m will be paid at a subsequent date. It will make further announcement whenever there is new development, as well as any significant financial impact on the insurance claim. (The Edge)

SKH: Pulls out as managing contractor for Terengganu development. SKH Consortium announced it is pulling out as the managing contractor for a Terengganu development for which it was appointed in 2015, to mitigate business and financial risks it was exposed to. SKH originally secured the RM192m job, which marked its first foray into the property construction business, via its wholly owned unit Super Kian Holdings SB after signing a managing contractor agreement with Total Merit SB. Pursuant to the agreement, Super Kian took on Total Merit's project on a land measuring 12.14ha in Kemaman, Terengganu. (The Edge)

Market Update

The FBM KLCI may open higher today after Wall Street closed with a positive note last Friday. The dollar resumed its upward path, reaching a fresh 2018 high against a basket of peers as well as strengthening against a number of emerging market currencies, as participants shrugged aside slightly disappointing US headline job creation and wage growth figures. US stocks reversed opening losses, with the S&P 500 sharply extending a rally that began after the index fell below its 200-day moving average on Thursday. The tech sector led the way, with Apple rising sharply after Warren Buffett’s Berkshire Hathaway disclosed it had increased its stake in the iPhone maker this year. US non-farm payrolls rose by 164,000 last month, below the consensus forecast of 193,000, although the previous month’s rise was revised up by 32,000. The jobless rate fell to an 18-year low of 3.9%, but average hourly earnings rose by 2.6% in the year to April, unchanged from March’s revised reading, and below expectations. On Wall Street, the S&P 500 had its best day for nearly a month, rising 1.3%. The Dow Jones Industrial Average gained 1.4% on Friday while the tech-heavy Nasdaq Composite ended 1.7% higher. Across the Atlantic, the Euro Stoxx 600 index rose 0.6% as the Xetra Dax in Frankfurt gained 1% and London’s FTSE 100 climbed 0.9%.

Back home, the FBM KLCI index lost 9.97 points or 0.54% to 1,841.83 points. Trading volume decreased to 1.61bn worth RM2.12bn. Market breadth was negative with 325 gainers as compared to 525 losers. The regional markets finished broadly lower on Friday with shares in Hong Kong leading the region. The Hang Seng was down 1.28% while China's Shanghai Composite was off 0.32% and Japan's Nikkei 225 was lower by 0.16%.

Source: PublicInvest Research - 7 May 2018

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NewDogOildTricks

Chong ket pen the fraudster. Gone case. http://klse.i3investor.com/m/blog/bursacannibal/155963.jsp

2018-05-08 14:42

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