PublicInvest Research

PublicInvest Research Headlines - 3 Aug 2022

PublicInvest
Publish date: Wed, 03 Aug 2022, 09:00 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: Job openings fall to nine-month low; labour market holds tight . US job openings fell by the most in just over two years in June, as demand for workers eased in the retail and wholesale trade industries, but overall the labour market remains tight, allowing the Fed to continue raising interest rates. Despite the larger-than-expected decrease in vacancies reported by the Labor Department in its Job Openings and Labor Turnover Survey, or JOLTS report, the jobs market still favors workers. At least 4.2m workers voluntarily quit their jobs in June and layoffs declined. Job openings are among several metrics being closely watched by Fed officials. The US central bank has been delivering hefty interest rate hikes in its war against inflation, pushing the economy to the brink of a recession. (Reuters)

US: Household debt surpasses USD16trn on higher mortgages . US household debt increased by 2% to USD16.2trn in the 2Q, with mortgages, auto loans and credit-card balances all seeing sizable increases, according to a report by the New York Federal Reserve Bank. The increase in borrowing, which equals to USD312bn over three months, reflected in part higher prices for homes and cars. Americans also are putting more on their credit cards to cover rising costs amid decades-high inflation. The main driver was mortgage debt, which accounted for two-thirds of the rise last quarter. And the 13% jump in credit-card debt YoY was the sharpest gain in more than 20 years, the New York Fed said in its quarterly report on household debt and credit. (Bloomberg)

EU: Spain consumer confidence at 4-month low . Spain's consumer confidence weakened sharply in July to reach its lowest level in four months, survey figures from the Centre for Sociological Research, or CIS, showed. The consumer confidence index dropped to 55.5 in July from 65.8 in the previous month. Further, this was the lowest reading score since March, when it was 53.8. The current situation index dropped from 59.5 in June to 53.1 in July, as all its three components contributed negatively to sentiment. Similarly, the future situation index declined markedly to 57.9 in July from 72.2 in May. The sub-index for consumers' assessment of the improvement of the economy in the near future fell by 15.4 points to 44.2 in July, and that for their own future situation decreased 9.4 points to 74.3. (RTT)

South Korea: Inflation rises 6.3% on year in July . Consumer prices in South Korea were up 6.3% on year in July, Statistics Korea said - in line with expectations and accelerating from 6.0% in June. On a monthly basis, inflation rose 0.5% - exceeding forecasts for 0.4% but slowing from 0.6% in the previous month. Core consumer prices, which exclude volatile food prices, climbed 3.9% on year. That matched forecasts and was unchanged from the previous month. Core CPI rose 0.4% on month, also unchanged and as expected. (RTT)

Australia: Central bank lifts rate by 50 bps . Australia's central bank raised its key interest rates again by 50bps in order to bring inflation back to the 2-3% target range. The policy board of the Reserve Bank of Australia, headed by Governor Philip Lowe, decided to lift the cash rate target by 50 basis points to 1.85%. This was the fourth consecutive rate hike. The latest outcome of the meeting came in line with economists' expectations. The bank also increased the interest rate on Exchange Settlement balances by 50 bps to 1.75%. The Board expects to take further steps in the process of normalising monetary conditions over the months ahead, but it is not on a pre-set path. (RTT)

Hong Kong: Economy contracts unexpectedly in 2Q . Hong Kong's economy contracted unexpectedly in the 2Q on weak exports and investment, the advance estimates from the Census and Statistics Department. GDP contracted 1.4% from the last year, following a 3.9% fall in the 1Q. Economists had forecast an annual expansion of 0.6%. On the expenditure-side, private consumption remained unchanged annually versus a 5.8% drop a quarter ago. Meanwhile, government spending surged 13.0%, faster than the 6.7% rise in the first quarter. At the same time, gross fixed capital formation dropped 3.0% versus a 7.8% fall a quarter ago. The decline in exports of goods deepened to 8.6% from 4.5%. (RTT)

Hong Kong: Retail sales fall further . Hong Kong's retail sales declined for the second successive month in June, provisional figures from the Census and Statistics Department showed. The value of retail sales declined 1.2% annually in June, following a 1.6% fall in the preceding month. Likewise, the retail sales volume decreased 4.1% YoY in June, slower than the 4.8% fall in May. The sales value of consumer durable goods alone decreased 11.0% annually in June. Sales for department stores, and clothing, footwear and allied products declined by 2.4% and 4.6%, respectively. Sales at supermarkets fell 0.3%. Data showed that online sales accounted for 8.2% of total sales value in June. (RTT)

Markets

Sapura Energy (Neutral, TP: RM0.05): Secures RM580m contract extension in Brazil. Sapura Energy’s JV company under its engineering and construction segment (E&C) Sapura Navegacao Marítima SA has been awarded an extension of a charter and service contract by Petroleo Brasileiro SA in Brazil. The contract was awarded to Sapura Navegacao Marítima involving a two-year contract extension for its pipe laying support vessel (PLSV) Sapura Esmeralda valued at RM580m. (StarBiz)

Comments: The impact of this contract is marginal based on the contract size of RM290m net to SapE. Assuming an EBITDA margin of 11%, it would only contribute 3.2% at the EBITDA level. Inclusive of this contract, the Group's outstanding orderbook stands at around RM8.5bn. While the Group has secured RM3bn new orders to-date, we think that a capital restructuring exercise is more crucial to rejuvenating the Group’s bottom line. Recap, the Group is in the midst of negotiating its outstanding payments with vendors and lenders through existing or new facilities under a Scheme of Arrangement (SOA). As part of its asset divestment programme, SapE has earmarked 3 rigs for disposal, following recent sale of the Sapura 3000 pipelay vessel. Maintain Neutral with RM0.05 TP.

Majuperak: Buys stake in property management firms as part of regularisation plan. Majuperak Holdings, a 51.41%-owned subsidiary of Perak State Development Corp, has struck a deal to acquire a substantial stake in two property management companies as part of a plan to regularise its financial condition and turnaround the group. (The Edge)

Advancecon: Wins RM17.16m subcontract to provide earthworks, civil engineering services. Advancecon has secured a RM17.16m subcontract for the provision of earthworks and civil engineering services over an eight-month period. Advancecon secured the subcontract from KEB Builders SB for the preliminaries, site clearance and earthworks, geotechnical works, erosion sediment and control plan services. (The Edge)

Samaiden, Aneka Jaringan: Ink JV to tap solar PV potential in Indonesia. Samaiden Group has entered into a joint venture (JV) agreement with Aneka Jaringan Holdings to vie for engineering, procurement, construction and commissioning (EPCC) of solar photovoltaic (PV) systems and power plants in Indonesia. (The Edge)

DNeX: Partners Cerulean Winds to deliver offshore floating wind turbine in UK Avalon project. Dagang NeXchange's (DNeX) subsidiary Ping Petroleum UK plc will set up a JV company (JVCo) with Cerulean Winds Ltd to deliver a dedicated offshore floating wind turbine for the Avalon development in the Central North Sea, the UK. Ping and Cerulean Winds, a green infrastructure developer, have signed an MOU for the JVCo, which will deploy and operate the turbine. (The Edge)

Dataprep: Wins RM5.4m contract from MYTV Broadcasting. Dataprep Holdings has won a RM5.4m award from MYTV Broadcasting SB to set up and provide managed services for the transmission system of digital TV infrastructure. The IT company had accepted a letter of award from MYTV for the design, supply, delivery, installation, testing and commissioning inclusive of managed services, for the transmission system of digital TV infrastructure at Gunung Telapak Buruk and TM Exchange Kangar. (The Edge)

Market Update

US benchmarks fell for a second day running, though with differing fortunes, in reaction to rising US-China tensions and various comments by regional Federal Reserve presidents. On the former, House Speaker Nancy Pelosi became the highest ranking US official to visit Taiwan in 25 years despite warnings by China against it. On the latter, expectations are for further rate hikes well into mid-2023. The Dow Jones Industrial Average slumped 1.2%. The S&P 500 and Nasdaq Composite fell a lower 0.7% and 0.2% however. European markets were also lower as investors took their feet off the pedal to assess current developments while monitoring earnings reports. Oil and gas stocks bucked the trend however, mostly ending higher. France’s CAC 40 and Germany’s DAX led losers amongst major markets, down 0.4% and 0.2% on the day. UK’s FTSE 100 slipped 0.1%. Asian markets were mostly lower as geopolitical tensions rose. Mainland China and Hong Kong markets led losses, down 2.3% and 2.4% respectively. China had earlier said it will “uphold its sovereignty and territorial integrity” on reports of Pelosi’s planned visit to Taiwan. All eyes will be on Beijing now that she already has. Elsewhere, Japan’s Nikkei 225 lost 1.4% though Australia’s ASX 200 pared earlier losses to close marginally higher after the Reserve Bank of Australia hiked benchmark interest rates by 0.5%.

Source: PublicInvest Research - 3 Aug 2022

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