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Bursa Malaysia Daily Market Report - 10 January

Mohd Noordin
By Mohd Noordin
4 years ago
Bursa Malaysia Daily Market Report - 10 January

Ard, Islam, Mal, Commenda, Daya, Provision, Sales


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  1. Wednesday , 10 January, 2018 TA RESEARCH’S ‘DAILY COMPILED REPORTS’ For Internal Circulation Only N ew s 1. D ai l y M arke t C om men t a ry 2. D ai l y B ri ef Fu nd a me n tal Rep o r ts 1 . A M M B H o l d in g s Be r h a d : M S S to O p t i m i se O rg a n is a t io n a l St ru c tu re 2 . S e rb a D in a m ik H o l d in g s Be r h a d : F il l in g th e C o f f e r s 3 . U M W H o l d in g s B h d : F r o m L a n d to A i r Te ch n ic al R ep o rt s 1. D ai l y Te ch n ic a l St o ck Pi cks (L o ca l) 2. D ai l y St o ck S cr een 3. D ai l y For ei gn T ech n i c al St o ck P i cks ( AU S) Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. Kaladher Govindan – Head of Research TA SECURITIES HOLDINGS BERHAD (14948-M) A Participating Organisation of Bursa Malaysia Securities Berhad Menara TA One 22 Jalan P. Ramlee 50250 Kuala Lumpur Malaysia Tel: 603 – 2072 1277 Fax: 603 – 2032 5048 www.ta.com.my
  2. Daily Market Commentary Wednesday , 10 January 2018 For Internal Circulation Only TA Research, e-mail : taresearch@ta.com.my KLSE Market Statistics (09.01.2018) Volume (mil) +/-chg (RMmn) Main Market 4,411.0 -403.7 4,072.8 Warrants 873.8 -91.1 123.9 ACE Market 1,188.4 17.3 215.2 Bond 4.7 -7.6 0.9 ETF 1.1 -0.5 1.3 LEAP 0.0 0.0 0.0 Total 6,478.9 4,414.0 Off Market 86.4 -194.7 114.8 Major Indices Index +/- chg Malaysia FBMKLCI FBMEMAS FBMSCAP January Futures Other Markets DOW JONES NASDAQ (US) FTSE (UK) NIKKEI (JAPAN) KOSPI (KOREA) HANG SENG (HK) FSSTI (S'PORE) SET (BANGKOK) JCI (JAKARTA) SHANGHAI SHENZHEN AUSTRALIA (mn) % chg % YTD chg -5.20 -45.18 -82.26 -9.00 -0.28 -0.34 -0.45 -0.49 1.68 2.53 5.57 2.35 25,385.80 7,163.58 7,731.02 23,849.99 2,510.23 31,011.41 3,524.65 1,795.21 6,373.14 3,413.90 1,952.18 6,135.81 102.80 6.19 34.51 135.46 -3.05 111.88 12.47 2.40 -12.26 4.42 6.20 5.43 0.41 0.09 0.45 0.57 -0.12 0.36 0.36 0.13 -0.19 0.13 0.32 0.09 2.70 3.77 0.56 4.77 1.73 3.65 3.58 2.37 0.28 3.23 2.78 1.17 0.02 0.09 9.80 0.02 0.85 0.15 0.60 0.17 0.09 0.61 0.10 1.95 0.70 0.98 Counter Mkt Cap. Chg (RM’mn) (RM) MAYBANK 105,972 PCHEM 65,120 CIMB 62,272 AXIATA 50,940 IHH 48,034 MAXIS 47,098 SIMEPLT 38,085 DIGI 37,709 PETGAS 37,596 GENTING 35,806 -0.02 -0.01 -0.07 -0.05 -0.01 -0.02 -0.01 -0.02 -0.20 -0.14 Blue chips fell for correction Tuesday, as extreme overbought momentum and with stock prices at their highest since April 2015 encouraged profittaking. The KLCI shed 5.2 points to end at 1,826.95, off an early high of 1,840.35 and low of 1,823.52, as losers bashed gainers 716 to 387 on strong volume totaling 6.47bn shares worth RM4.41bn. This profit-taking correction should persist for the next few days, which is needed to neutralize extreme overbought momentum and the peaking volume, and promote more sustainable uptrend ahead. Immediate resistance for the index are at 1,840, yesterday's high matching the 123.6%FP, next will be 1,867, the April 2017 peak matching the 138.2%FP, followed by the all-time high of 1,896 on July 2014. Important uptrend supports in this profit-taking correction are at 1,820 and 1,796, the breakout level. Further rally on AirAsia X shares towards the 61.8%FR (41sen) and 76.4%FR (44sen) would aggravate overbought momentum and encourage profittaking correction, while key retracement supports are from the 38.2%FR (35sen) and 23.6%FR (32sen). Similarly, the breakout rally on AirAsia above RM3.59 should encounter profit-taking resistance from the 123.6%FP (RM3.93) and 138.2%FP (RM4.14), while uptrend supports are at RM3.59, and the rising 10 and 30-day moving averages at RM3.44 and RM3.30, respectively. News Bites Top 10 KLCI Movers Based on Mkt Cap. (RM) @ @ @ @ @ @ @ @ @ @ @ @ @ @ Up Down 224 449 118 184 41 74 3 5 1 4 0 0 387 716 1,826.95 13,270.33 18,000.62 1,827.00 Off Market DBE 24.0 FINTEC-PA 23.9 MAYBANK 10.0 APFT 5.0 SEACERA 3.4 ASDION 3.2 LAYHONG-WA 2.6 FINTEC 2.6 FINTEC-WB 2.4 MEXTER 2.0 MLAB 1.3 IMASPRO 1.0 VERSATL 1.0 YONGTAI-PA 1.0 Review & Outlook Value Value/ +/-chg Volume -165.2 0.92 11.9 0.14 -18.9 0.18 -2.6 0.19 -0.6 1.16 0.0 0.00 0.68 -173.3 1.33 Vol. (mn) 14.59 8.43 19.03 7.83 4.49 2.94 10.17 5.81 0.58 4.29 Important Dates • Frost & Sullivan expects vehicle sales in Malaysia to reach 601k units in 2018, up 2% from its 2017 overall target. • Serba Dinamik Holdings Berhad proposed a private placement of up to 10% of its issued share base, potentially raising estimated gross proceeds of RM433.9mn. • Ekuiti Nasional Bhd has divested its 100% interest in APIIT Education Group for RM725mn. • Mitrajaya Holdings Berhad clinched a contract from Putrajaya Homes Sdn Bhd totalling RM103.1mn. • Perdana Petroleum Berhad entered into a related party transaction with Dayang Enterprise Holdings Berhad, for a contract totalling RM41.8mn. • Sunway Real Estate Investment Trust is planning a minimum investment of RM100mn with the bulk of this sum going towards building the second phase of its Sunway Carnival Shopping Mall in Seberang Jaya. • Uzma Berhad has been awarded three umbrella contracts for the provision of electrical submersible pump and services for PETRONAS Carigali Sdn Bhd. • Felda Global Ventures Holdings Bhd is anticipating a 30-50% rise in export volume, following the Malaysian government's decision to suspend CPO export tax for the first three months of the year. • PDZ Holdings Bhd entered into a MOU with PT. Indonesia Bulk Carrier, in line with PDZ's regional expansion plans. • Prestar Resources Bhd, which is planning to list its 51% owned manufacturing and trading subsidiary Tashin Steel Sdn Bhd (TSSB) on the ACE Market. • Kinsteel Bhd submitted an appeal against the suspension and de-listing of its securities to Bursa Securities. • Japan's consumer confidence dropped unexpectedly in December. • The number of job openings in the U.S. unexpectedly fell in November. • 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. • Germany's industrial production rebounded at a faster than expected pace in November. Exchange Rate USD/MYR 4.0110 0.0056 USD/JPY 112.82 -0.3000 EUR/USD 1.193 -0.0039 XDL - 1:1 Bonus Issue - BI of up to 894.2m shares. 1 bonus share for every 1 existing share held. Ex-Date: 08/01/2018. Entitlement Date: 10/01/2018. LISTING ON: 11/01/2018. Commodities Futures Palm Oil (RM/mt) 2,594.00 -22.00 Crude Oil ($/Barrel) 63.42 1.52 Gold ($/tr.oz.) 1,313.70 -7.50 MENANG - 4:5 Bonus Issue - BI of up to 320.5m shares. 4 bonus shares for every 5 existing shares held. Entitlement Date: 09/01/2018. LISTING ON: 10/01/2018. Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. Kaladher Govindan, Head of Research MENARA TA ONE, 22 JALAN for TA SECURITIES HOLDINGS BERHAD (14948-M) A PARTICIPATING ORGANISATION OF BURSA MALAYSIA SECURITIES BHD P RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL : 603 - 2072 1277. FAX : 603 - 2032 5048 www.ta.com.my
  3. 10-Jan-18 Technical Comments : SELL Rally on AAX & AirAsia Further rally on AirAsia X shares towards the 61.8%FR (41sen) and 76.4%FR (44sen) would aggravate overbought momentum and encourage profit-taking correction, while key retracement supports are from the 38.2%FR (35sen) and 23.6%FR (32sen). Similarly, the breakout rally on AirAsia above RM3.59 should encounter profit-taking resistance from the 123.6%FP (RM3.93) and 138.2%FP (RM4.14), while uptrend supports are at RM3.59, and the rising 10 and 30-day moving averages at RM3.44 and RM3.30, respectively. AIRASIA X RM0.40 (+0.03) BOLLINGER BANDS Upper Middle Lower RM RM RM SIMPLE MOVING AVERAGES 0.38 0.34 0.30 10-day 30-day 50-day RM RM RM DAILY MACD BUY Recent Signal Signal Change DMI Recent Signal Signal Change AIRASIA RM RM RM SIMPLE MOVING AVERAGES 3.64 3.36 3.09 10-day 30-day 50-day BUY Recent Signal Signal Change DMI Recent Signal Signal Change BUY RM3.74 (+0.15) BOLLINGER BANDS Upper Middle Lower 0.35 0.34 0.36 RM RM RM DAILY MACD 3.44 3.30 3.28 BUY Page 2 of 3
  4. Wednesday , January 10, 2018 FBMKLCI: 1,826.95 THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Daily Brief Market View, News In Brief: Corporate, Economy, and Share Buybacks Chartist: Stephen Soo Tel: +603-2167-9607 stsoo@ta.com.my www.taonline.com.my M a r k e t V i e w Correction Needed to Neutralize Overbought Momentum Blue chips fell for correction Tuesday, as extreme overbought momentum and with stock prices at their highest since April 2015 encouraged profit-taking. The KLCI shed 5.2 points to end at 1,826.95, off an early high of 1,840.35 and low of 1,823.52, as losers bashed gainers 716 to 387 on strong volume totaling 6.47bn shares worth RM4.41bn. Key Uptrend Supports at 1,820 & 1,796 This profit-taking correction should persist for the next few days, which is needed to neutralize extreme overbought momentum and the peaking volume, and promote more sustainable uptrend ahead. Immediate resistance for the index are at 1,840, yesterday’s high matching the 123.6%FP, next will be 1,867, the April 2017 peak matching the 138.2%FP, followed by the all-time high of 1,896 on July 2014. Important uptrend supports in this profittaking correction are at 1,820 and 1,796, the breakout level. SELL Rally on AAX & AirAsia Further rally on AirAsia X shares towards the 61.8%FR (41sen) and 76.4%FR (44sen) would aggravate overbought momentum and encourage profit-taking correction, while key retracement supports are from the 38.2%FR (35sen) and 23.6%FR (32sen). Similarly, the breakout rally on AirAsia above RM3.59 should encounter profit-taking resistance from the 123.6%FP (RM3.93) and 138.2%FP (RM4.14), while uptrend supports are at RM3.59, and the rising 10 and 30-day moving averages at RM3.44 and RM3.30, respectively. Asian Markets Edge Higher Ahead Of Earnings Season Asian shares edged higher on Tuesday, approaching record highs after the S&P 500 extended its winning streak overnight. Signs of financial-market stress continue to abate at the start of 2018 amid optimism that lower U.S. taxes and a broadening global economic recovery justify record high prices for global equities. Investors bet on further U.S. interest rate hikes after Friday’s payrolls data did nothing to challenge the outlook for monetary policy tightening by the U.S. Federal Reserve. While job growth slowed more than expected, a pickup in monthly wages pointed to labor market strength. With no major data released, investors are looking forward to quarterly earnings releases due at the end of the week. Japan’s Nikkei share average hit a 26-year high Tuesday, as index heavyweight Fast Retailing soared on strong December sales. The Nikkei ended 0.6 percent higher at 23,849.99, the highest closing level since November 1991. Over in Sydney, the S&P/ASX 200 clung to gains, closing 0.09 percent higher at 6,135.8. The resource sector was the best-performer of the day, with major mining companies Rio Tinto and BHP rising 2.34 percent and 1.67 percent, respectively. China stocks also extended a rally to an eighth straight day, with major indexes ending at their six-week highs, helped by gains from consumer and healthcare firms. The Shanghai Composite index was up 5.35 points or 0.16 percent at 3,414.83. Banking Sector Lift Wall Street Higher Wall Street’s major indexes extended the New Year rally to close at record levels on Tuesday as investors remained optimistic about the market heading into the corporate earnings season and hopes for easing tensions with North Korea. Stocks have mostly climbed since the first Page 1 of 7
  5. 10-Jan-18 trading days of 2018 , extending last year’s rally. That is leaving investors hard pressed to find clues portending the rally’s end, especially as geopolitical tensions with North Korea appear to be easing and ahead of what analysts expect to be another batch of upbeat quarterly profit results. Shares of financial firms were among the biggest gainers. Higher interest rates typically widen the spread between what banks charge on loans and what they pay on deposits, which should boost their earnings. The KBW Nasdaq Bank index, a measure of 24 of the biggest U.S. bank stocks, added 1.1 percent. Shares of Boeing and Target also contributed to Tuesday’s gains after both companies released some financial results. Boeing rose 2.7 percent, contributing roughly 57 points to the Dow’s gain after it reported an increase in jetliner deliveries and orders. The Dow Jones Industrial Average rose 102.8 points, or 0.41 percent, to 25,385.8, the S&P 500 gained 3.58 points, or 0.13 percent, to 2,751.29 and the Nasdaq Composite added 6.19 points, or 0.09 percent, to 7,163.58. Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. As of Wednesday, January 10, 2018, the chartist, Stephen Soo, who prepared this report, has interest in the following securities covered in this report: (a) nil Kaladher Govindan – Head of Research TA SECURITIES HOLDINGS BERHAD (14948-M) A Participating Organisation of Bursa Malaysia Securities Berhad Menara TA One 22 Jalan P. Ramlee 50250 Kuala Lumpur Malaysia Tel: 603 – 2072 1277 Fax: 603 – 2032 5048 www.ta.com.my Page 2 of 7
  6. 10-Jan-18 N e w s I n B r i e f Corporate Frost & Sullivan expects vehicle sales in Malaysia to reach 601k units in 2018, up 2% from its 2017 overall target. This is as consumer confidence improves in tandem with the nation’s economic growth. A strengthening ringgit is likely to reduce import costs of automotive parts and completely built-up models, leading to price stabilisation this year. (The Edge) Serba Dinamik Holdings Berhad proposed a private placement of up to 10% of its issued share base, potentially raising estimated gross proceeds of RM433.9mn. This is to finance its capital expenditure for Pengerang eco-Industrial Park, partly finance the development of Pengerang International Commercial Centre and to meet future obligations for the engineering, procurement, construction and commissioning contract under the Tanzania project. (Bursa) Ekuiti Nasional Bhd has divested its 100% interest in APIIT Education Group to JV vehicles owned by the existing key management team and KV Asia Capital, based on an EV of RM725mn. The education group comprises Asia Pacific Schools, Asia Pacific University of Technology and Innovation and Asia Pacific Institute of Information Technology. (Bernama) Mitrajaya Holdings Berhad clinched a contract from Putrajaya Homes Sdn Bhd totalling RM103.1mn. This relates to the construction of 404 apartment units, under PPA1M, which also includes a 1 block multi-level parking, surau and common facilities. (Bursa) Perdana Petroleum Berhad entered into a related party transaction with Dayang Enterprise Holdings Berhad, for a contract totalling RM41.8mn. This relates to the supply of two accommodation workbarges and two anchor handling tug/supply vessels for the duration of nine months with an option to extend for three months. (Bursa) Sunway Real Estate Investment Trust is planning a minimum investment of RM100mn, 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% in 2020. (The Edge) Uzma Berhad has been awarded three umbrella contracts for the provision of electrical submersible pump and services for PETRONAS Carigali Sdn Bhd. The execution of the contracts depend on work orders to be issued from time to time. As such, there is no form value for the umbrella contracts. (Bursa) Comments: We note that the contract secured is an umbrella contract and may not necessarily realise earnings in the near term. This is the usual trend with the majority of Uzma’s businesses. We believe the new contracts will be well within our orderbook replenishment assumption of RM100mn in FY18. To recap, we increased our orderbook assumption as management guided better order flow momentum in FY18 and FY19. Thus, we maintain our earnings forecast. Our TP remains unchanged at RM1.56 based on 0.9x CY18 P/B. Reiterate Hold. Felda Global Ventures Holdings Bhd is anticipating a 30-50% rise in export volume, following the Malaysian government’s decision to suspend CPO export tax for the first three months of the year. The tax suspension is expected to benefit plantation companies with significant upstream operations and strengthen commodity prices for the first quarter of the year. (The Edge) PDZ Holdings Bhd entered into a MOU with PT. Indonesia Bulk Carrier. This is to provide total maritime logistic solutions, such as container liner, bulk cargoes, tug and barge, selfpropelled barge, oil and gas support vessels coupled with other related services such as vessel Page 3 of 7
  7. 10-Jan-18 chartering , pooling management, shipping consultancy and crew management, in line with PDZ’s regional expansion plans. (Bursa) Prestar Resources Bhd, which is planning to list its 51% owned manufacturing and trading subsidiary Tashin Steel Sdn Bhd (TSSB) on the ACE Market, will do so via a special purpose vehicle, Tashin Holdings Bhd, by 4Q2018. TSSB is involved in the processing of steel coils into slit coils and steel sheets, as well as the manufacturing of steel products like expanded metal products, flat bars, square bars, steel pipes, steel plates, checkered plates and C Purlins. (The Edge) Sedania Innovator Berhad appointed Mr Daniel Bernd Ruppert as its new CEO, replacing the outgoing Mr Mahadzer Arshad, who resigned due to personal commitments. Prior to his appointment, Mr Daniel was the Director of Business Development of LNE Network Systems (Asia) Sdn Bhd. (Bursa) Kinsteel Bhd submitted an appeal against the suspension and de-listing of its securities to Bursa Securities. The removal of Kinsteel from Bursa on 9 January 2018 will now be deferred, pending a decision on the appeal. (Bursa) Page 4 of 7
  8. 10-Jan-18 N e w s I n B r i e f Economy Asia Mustapa Rebuts Claims that 50 ,000 Jobs Will be Lost This Year Minister of International Trade and Industry Datuk Seri Mustapa Mohamed said that the total number of retrenchments may not be as high as claimed by some quarters. He said that while it was true that technology and industrial structure has resulted in displacements, it was incorrect for some quarters to allege that 50,000 workers would be retrenched primarily due to the rising cost of doing business. “While there will be some retrenchments, in our view most of those retrenched workers will be reemployed by new and expanding businesses and the total number of retrenchments this year may not be as high as claimed,” he said in a statement after a dialogue session with 21 members of the Federation of Malaysian Manufacturers (FMM). The dialogue held was to discuss on the cost of doing business and employment opportunities in Malaysia. Mustapa said that most of those retrenched has been rehired by new and existing companies. In the three-year period between 2014 and 2016, new manufacturing projects implemented have created over 153,000 jobs. In additional another 32,700 jobs will be created from investments secured in the period from January to September 2017. (The Star) Malaysia Says 'Can' Retaliate if EU Discriminates Against Palm Oil Malaysia can retaliate in a similar manner if the European Union (EU) excludes palm oil from its biofuel mix, Malaysia's Plantation Industries and Commodities Minister Datuk Seri Mah Siew Keong said. Mah said within the next two weeks, the EU is expected to vote on a proposal to exclude palm oil from the region's biofuel mix. "If our product is discriminated, we can also institute the same thing, but we hope it wouldn't come to that. Ministry of International Trade and Industry is negotiating a free trade agreement with Europe, and palm oil will remain at the top of the agenda," he said. Mah was speaking to reporters on the sidelines of a seminar organised by the Malaysian Palm Oil Council. Palm oil output in Malaysia, the world's second largest producer after Indonesia, is forecast to rise to over 20 million tonnes this year from 19.5 million tonnes in 2017. Plantation industries and commodities minister Mah Siew Keong last forecast in November that 2018 output would "be more than last year" versus a 2017 production outlook of 19.5 million tonnes. He also earlier forecast that palm oil prices would average between 2,600-2,700 ringgit a tonne in 2018. Benchmark palm oil prices were up 0.08% at 2,627 ringgit (US$656.91) a tonne in early trade on Tuesday. They averaged at 2,807 ringgit in 2017, according to Eikon data, slightly up from 2,741 ringgit the previous year. (The Edge Markets) Japan Real Wages Climb but Previous Gains Erased by Revisions Monthly wages climbed in real terms in Japan in November, but a revision to October’s reading eliminated what was previously the first such rise since 2016. Real cash earnings rose 0.1% year on year in November, according to preliminary figures form Japan’s Ministry of Health, Labour and Welfare, up from a revised fall of 0.1% October (previously a rise of 0.2%) and besting a median forecast from economists surveyed by Bloomberg predicting a fall of 0.1%. Labour cash earnings – not adjusted for inflation – accelerated to year-on-year growth of 0.9% after slowing to a revised pace of 0.2% (previously 0.6%) a month prior. Most of the jump in cash earnings attributed to a jump in overtime earnings and bonus payments, noting that growth in hourly wages for part-time workers slowed sharply form 2.1% to 1.5% in November, the slowest increase since August 2016. (Financial Times) Japan Consumer Confidence Falls Unexpectedly Japan's consumer confidence dropped unexpectedly in December, though slightly, survey data from the Cabinet Office showed. The seasonally adjusted consumer confidence index decreased to 44.7 in December from November's 50-month high of 44.9. Meanwhile, economist had expected the index to rise to 45.0. The indicator for livelihood fell to 42.9 in December from 43.2 in the preceding month. The income growth index remained stable at Page 5 of 7
  9. 10-Jan-18 43 .0. The gauge measuring employment weakened to 49.0 from 49.3 and willingness to buy durable goods declined to 43.8 from 44.0. The survey was conducted among 8,400 households on December 15. (RTT News) Australia Building Approvals Surge 11.7% in November The total number of building approvals issued in Australia was up a seasonally adjusted 11.7% on month in December, the Australian Bureau of Statistics said - coming in at 21,055. That beat forecasts for a decline of 1.3% following the downwardly revised 0.1% contraction in October. On a yearly basis, approvals surged 17.1% - again beating expectations for a gain of 4.6% following the downwardly revised 17.5% spike in the previous month (originally 18.4%). Approvals for private sector houses fell 2.0% in November, while approvals for dwellings excluding houses skyrocketed 30.6%. (RTT News) United States U.S. Job Openings Unexpectedly Drop in November The number of job openings in the U.S. unexpectedly fell in November, official data showed on Tuesday. In the release of the monthly Job Openings and Labor Turnover Survey (JOLTS), the U.S. Labor Department said that the number of job openings, excluding the farming industry, fell to 5.879 million in November from 5.925 million a month earlier, which was revised down from the original reading of 5.996 million. Analysts had expected the number of job openings to increase to 6.038 million in November from the previous month. The report has garnered more attention despite the lag on the data, as outgoing Federal Reserve chair Janet Yellen has cited the survey when assessing the state of the labor market. (Investing.com) Europe and Uni ted Kingdom 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 November from 8.8% the previous month, according to a report from Eurostat. The reading matches the median of 34 estimates in a Bloomberg survey. 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. In a bid to fuel price pressures, policy makers have committed to continuing asset purchases until at least September. While falling unemployment should further boost consumption, thereby contributing to the self-sustaining character of the recovery, the key question for the ECB is when the unemployment level will start to affect wages. With the number of companies beginning to see production bottlenecks due to a lack of personnel, wage growth should start to pick up. Economic activity in the euro-area accelerated to the fastest pace in almost seven years in December as services surged while factories benefited from booming domestic demand and near-record growth in export orders. In Germany, where unemployment is the lowest on record amid a veritable economic boom, industrial production increased almost twice as much as forecast in November, a separate release on Tuesday showed. (Bloomberg) Germany's Industrial Output Rebounds in November Germany's industrial production rebounded at a faster than expected pace in November, figures from Destatis revealed. Industrial output expanded 3.4% month-on-month in November, reversing a revised 1.2% drop in October. Output was expected to grow 1.8%. Excluding energy and construction, industrial output gained 4.3% in November. Energy production fell 3.1%, while construction output grew 1.5%. Data showed that production of capital goods grew 5.7% and that of consumer goods gained 3.6%. At the same time, production of intermediate goods logged a monthly growth of 3%. Separately, the country’s exports climbed 4.1% on month in November, in contrast to a 0.3% drop registered in October. The rate also exceeded the expected rate of 1.2%. At the same time, monthly growth in imports accelerated to 2.3% from 1.8% in October. Imports were Page 6 of 7
  10. 10-Jan-18 forecast to climb 0 .6%. The trade surplus rose to a seasonally adjusted EUR 22.3 billion from around EUR 19.9 billion in October. On a yearly basis, exports advanced 8.2%, faster than October's 6.9% increase. Meanwhile, imports grew at a slightly slower pace of 8.3% after rising 8.4%. On an unadjusted basis, the trade surplus increased to EUR 23.7 billion from EUR 22 billion in the previous year. The current account surplus came in at EUR 25.4 billion versus EUR 24.9 billion a year ago. (RTT News) Share Buy-Back: 09 January 2018 Company FIAMMA KPJ MALAKOF SCGM Bought Back Price (RM) Hi/Lo (RM) 50,000 50,000 200,000 30,000 0.52 0.99/0.97 1.04/1.02 2.37/2.35 0.52/0.515 0.99/0.97 1.07/1.00 2.37/2.35 Total Treasury Shares 21,990,000 16,937,000 2,124,400 703,500 Source: Bursa Malaysia Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. Kaladher Govindan – Head of Research TA SECURITIES HOLDINGS BERHAD (14948-M) A Participating Organisation of Bursa Malaysia Securities Berhad Menara TA One 22 Jalan P. Ramlee 50250 Kuala Lumpur Malaysia Tel: 603 – 2072 1277 Fax: 603 – 2032 5048 www.ta.com.my Page 7 of 7
  11. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company Share Price Target Price (RM) (RM) Recom Market Cap. (RMm) BETA EPS (sen) FY18 FY19 PER (X) FY18 FY19 Div Yield (%) FY18 FY19 52weeks 52weeks % Chg High Price % Chg Low Price % Chg YTD 09-Jan-18 AUTOMOBILE BAUTO 2.37 2.50 Buy 2,737 0.73 14.3 19.9 16.6 11.9 4.9 5.1 2.47 -4.0 1.84 28.8 MBMR 2.41 2.32 Hold 942 0.80 23.2 23.9 10.4 10.1 1.9 2.0 2.60 -7.3 2.01 19.9 7.7 9.5 PECCA 1.63 1.69 Buy 301 na 11.1 12.5 14.6 13.1 3.4 3.7 1.70 -4.1 1.28 27.3 5.2 SIME 2.69 1.97 Hold 18,294 1.56 12.0 12.7 22.5 21.3 1.1 1.2 2.96 -9.1 1.92 40.2 21.7 UMW 6.37 4.37 Sell 7,442 1.38 20.7 36.9 30.8 17.3 1.6 2.8 6.44 -1.1 4.24 50.2 22.5 BANKS & FINANCIAL SERVICES ABMB 4.10 4.20 Buy 6,347 1.36 30.6 35.6 13.4 11.5 3.9 3.9 4.49 -8.7 3.62 13.3 0.5 AFFIN 2.51 2.50 Hold 4,877 0.88 24.2 28.1 10.4 8.9 3.2 3.2 2.98 -15.6 2.22 13.0 8.7 AMBANK 4.48 5.10 Buy 13,504 1.29 48.6 52.0 9.2 8.6 4.0 4.0 5.70 -21.4 4.06 10.3 1.6 CIMB 6.75 7.00 Buy 62,272 1.47 50.9 56.0 13.3 12.1 3.8 4.1 7.08 -4.7 4.71 43.3 3.2 HLBANK 17.60 17.50 Buy 36,003 0.68 114.2 120.9 15.4 14.6 2.6 2.6 17.80 -1.1 13.06 34.8 3.5 MAYBANK 9.83 9.70 Hold 105,972 1.05 70.9 77.7 13.9 12.6 5.1 5.1 9.86 -0.3 8.05 22.1 0.3 PBBANK 20.82 23.60 Buy 80,396 0.63 142.4 149.8 14.6 13.9 2.8 2.9 21.08 -1.2 19.66 5.9 0.2 RHBBANK 5.10 5.20 Hold 20,451 1.62 52.2 53.8 9.8 9.5 2.9 2.9 5.59 -8.8 4.71 8.3 2.0 BURSA 10.66 11.10 Buy 5,730 0.93 39.0 41.5 27.4 25.7 3.2 3.2 10.98 -2.9 8.08 31.9 5.3 Note: BURSA proposed bonus issue of shares on the basis of 1 for 2. Ex-Target price RM7.04 CONSTRUCTION GADANG 1.15 1.73 Buy 758 0.98 14.3 18.2 8.1 6.3 2.6 2.6 1.37 -16.1 1.01 13.9 3.6 GAMUDA 5.00 6.00 Buy 12,278 0.85 34.5 35.7 14.5 14.0 2.4 2.4 5.52 -9.4 4.58 9.2 0.8 IJM 3.03 2.89 Sell 10,994 0.87 13.7 18.2 22.1 16.7 3.1 3.1 3.61 -16.1 2.71 11.8 -0.7 PESONA 0.51 0.55 Buy 354 0.86 5.8 4.8 8.8 10.7 2.9 2.9 0.74 -30.6 0.44 17.2 13.3 SENDAI 0.87 0.58 Sell 679 1.23 9.6 9.0 9.1 9.7 1.1 1.1 1.39 -37.4 0.51 72.3 0.6 SUNCON 2.60 2.65 Buy 3,360 0.51 14.7 16.4 17.7 15.8 2.1 2.3 2.64 -1.5 1.67 55.7 3.6 WCT 1.78 1.64 Hold 2,504 1.06 12.6 11.2 14.1 15.9 1.7 1.7 2.48 -28.1 1.46 21.9 9.9 LITRAK 5.56 6.26 Hold 2,934 0.32 45.6 47.1 12.2 11.8 4.5 4.5 6.15 -9.6 5.40 3.0 0.2 ANNJOO 3.73 4.40 Buy 1,921 1.29 45.3 49.2 8.2 7.6 5.9 7.0 3.98 -6.3 2.27 64.3 -3.4 CHINHIN 1.20 1.49 Buy 668 1.13 12.4 12.0 9.6 10.0 4.2 5.0 1.49 -19.5 0.86 39.5 -0.8 ENGTEX 1.12 1.38 Buy 477 0.70 14.2 16.1 7.9 7.0 3.7 4.9 1.52 -26.3 1.07 4.7 1.8 CARLSBG 15.44 18.06 Buy 4,750 0.74 86.2 88.7 17.9 17.4 5.6 5.7 16.00 -3.5 13.90 11.1 0.9 HEIM 19.18 19.14 Buy 5,794 0.43 84.0 88.3 22.8 21.7 3.9 4.1 19.58 -2.0 15.78 21.5 1.5 AEON 1.69 1.97 Sell 2,373 0.39 6.7 7.7 25.3 21.9 2.4 2.7 2.70 -37.4 1.64 3.0 -4.0 AMWAY 7.51 8.18 Buy 1,235 0.39 43.9 45.2 17.1 16.6 5.1 5.3 8.18 -8.2 7.04 6.7 1.8 F&N 28.28 28.55 Hold 10,366 0.21 155.7 182.7 18.2 15.5 2.1 2.3 28.52 -0.8 22.64 24.9 4.7 Building Materials CONSUMER Brewery Retail HUPSENG 1.15 1.25 Hold 920 0.43 5.4 5.6 21.2 20.7 3.9 4.3 1.28 -10.2 1.08 6.5 5.5 JOHOTIN 1.25 1.70 Buy 388 0.72 12.5 12.6 10.0 9.9 4.0 4.3 1.76 -29.0 1.16 7.8 3.3 NESTLE 103.00 120.50 Buy 24,154 0.40 330.1 373.8 31.2 27.6 2.9 3.3 105.00 -1.9 74.12 39.0 -0.2 PADINI 5.28 4.67 Sell 3,474 0.86 27.0 30.0 19.6 17.6 2.4 2.5 5.50 -4.0 2.26 133.6 0.0 POHUAT 1.67 2.37 Buy 367 0.56 25.3 25.5 6.6 6.6 4.8 4.8 2.07 -19.3 1.62 3.1 -6.7 QL 4.71 3.26 Sell 7,642 0.42 12.8 14.7 36.7 32.0 1.0 1.0 4.75 -0.8 3.26 44.7 8.3 SIGN 0.75 0.92 Buy 171 0.94 6.9 9.2 10.7 8.1 3.4 4.7 1.07 -30.4 0.69 8.0 5.7 36.82 52.08 Buy 10,513 1.41 187.4 175.4 19.6 21.0 5.4 5.4 51.04 -27.9 34.06 8.1 -8.0 GENTING 9.36 11.53 Buy 35,806 1.57 54.4 59.8 17.2 15.7 1.7 1.7 10.00 -6.4 8.00 17.1 1.7 GENM 5.76 6.51 Buy 32,650 1.58 27.0 30.6 21.3 18.8 1.6 1.7 6.38 -9.7 4.64 24.2 2.3 2.33 3.34 Buy 3,139 0.81 21.5 26.0 10.8 9.0 6.9 7.7 3.00 -22.3 2.23 4.5 4.0 CCMDBIO 2.79 2.70 Buy 778 0.86 15.0 16.1 18.6 17.4 3.5 3.7 2.80 -0.4 1.90 46.8 10.3 IHH 5.83 6.40 Buy 48,034 0.74 11.9 15.0 49.1 39.0 0.5 0.6 6.45 -9.6 5.42 7.6 -0.5 KPJ 0.98 1.12 Buy 4,179 0.48 3.8 4.2 25.9 23.3 2.1 2.3 1.14 -14.0 0.90 8.9 1.0 HARTA 10.80 7.30 Sell 17,851 0.87 25.8 30.5 41.9 35.4 1.1 1.3 11.40 -5.3 4.53 138.4 1.1 KOSSAN 8.60 8.80 Buy 5,499 0.09 38.3 43.0 22.5 20.0 2.2 2.5 8.70 -1.1 5.62 53.0 6.0 SUPERMX 2.31 1.80 Sell 1,515 0.46 15.3 17.9 15.1 12.9 2.3 2.7 2.39 -3.3 1.69 36.7 15.5 TOPGLOV 8.99 7.00 Sell 11,284 0.09 33.7 36.4 26.7 24.7 1.9 2.0 9.25 -2.8 4.56 97.1 12.5 KAREX 1.31 1.00 Sell 1,313 0.66 2.8 5.2 47.4 25.2 0.5 1.0 2.52 -48.0 1.20 9.2 0.8 SCIENTX 8.90 9.84 Buy 4,305 0.56 68.2 74.9 13.0 11.9 2.4 2.9 9.85 -9.6 6.69 33.0 2.8 SKPRES 2.30 2.20 Hold 2,875 0.67 10.4 14.8 22.2 15.6 2.3 3.2 2.35 -2.1 1.24 85.5 0.9 ASTRO 2.75 3.10 Buy 14,338 1.07 14.0 13.7 19.7 20.1 4.7 4.9 2.94 -6.5 2.45 12.2 3.8 MEDIA PRIMA 0.76 0.45 Sell 843 1.14 -3.8 -1.7 na na 0.0 0.0 1.28 -40.6 0.58 31.0 0.0 STAR 1.49 1.25 Sell 1,099 1.10 6.7 6.7 22.2 22.2 8.1 8.1 2.22 -32.8 1.31 13.7 -9.7 Tobacco BAT GAMING Casino NFO BJTOTO HEALTHCARE Hospitals/ Pharmaceutical Rubber Gloves INDUSTRIAL MEDIA
  12. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company Share Price Target Price (RM) (RM) Recom Market Cap. (RMm) BETA EPS (sen) FY18 FY19 PER (X) FY18 FY19 Div Yield (%) FY18 FY19 52weeks 52weeks % Chg High Price % Chg Low Price % Chg YTD OIL & GAS DNEX 0.54 0.72 Buy 948 1.37 4.2 4.5 12.9 11.9 1.9 1.9 0.69 -21.7 0.27 103.8 LCTITAN 5.11 6.66 Buy 11,615 na 63.4 68.2 8.1 7.5 4.9 5.3 6.53 -21.7 4.14 23.4 11.3 8.7 MHB 0.92 0.78 Sell 1,464 1.82 -0.5 0.3 na 269.6 0.0 0.0 1.16 -21.1 0.63 46.4 10.9 MISC 7.55 6.56 Sell 33,702 1.09 46.8 52.3 16.1 14.4 4.0 4.0 7.90 -4.4 6.89 9.6 1.8 PANTECH 0.66 0.69 Sell 487 1.13 6.1 6.8 10.7 9.6 4.2 4.7 0.74 -11.5 0.45 45.6 1.6 PCHEM 8.14 8.05 Hold 65,120 1.03 49.8 52.6 16.4 15.5 2.7 2.8 8.27 -1.6 6.80 19.7 5.7 SAPNRG 0.94 1.25 Buy 5,603 2.44 -6.5 -4.9 na na 0.0 0.0 2.10 -55.5 0.67 40.6 31.7 SERBADK 3.40 3.40 Sell 4,539 na 25.7 27.8 13.2 12.2 2.3 2.4 3.60 -5.6 1.51 125.2 4.9 UMWOG 0.43 0.51 Buy 3,492 1.90 0.4 1.2 105.2 34.3 0.0 0.0 0.90 -52.7 0.27 57.4 39.3 UZMA 1.45 1.56 Hold 464 0.99 13.2 14.4 11.0 10.0 0.0 0.0 1.98 -26.8 1.26 15.1 13.3 FGV 1.96 2.01 Hold 7,150 1.75 3.7 4.5 52.9 43.1 2.6 2.6 2.18 -10.1 1.51 29.8 16.0 IJMPLNT 2.67 2.69 Sell 2,351 0.19 9.1 12.5 29.3 21.3 3.0 3.4 3.60 -25.8 2.67 0.0 -2.6 IOICORP 4.67 4.12 Sell 29,346 1.15 21.0 21.8 22.2 21.4 3.4 3.6 4.81 -2.9 4.31 8.4 2.9 KFIMA 1.63 1.89 Buy 460 0.56 13.3 14.5 12.3 11.2 5.5 5.5 1.96 -16.8 1.56 4.5 3.8 KLK 25.18 26.18 Hold 26,816 0.81 120.7 126.3 20.9 19.9 2.4 2.5 25.50 -1.3 23.00 9.5 0.7 SIMEPLT 5.60 6.25 Buy 38,085 na 21.0 22.1 26.6 25.4 2.5 2.7 6.00 -6.7 4.58 22.3 -6.7 TSH 1.67 2.10 Buy 2,306 0.71 9.3 9.6 17.9 17.4 1.4 1.5 1.94 -13.9 1.56 7.1 1.2 UMCCA 6.61 6.73 Sell 1,385 0.40 22.8 34.8 29.0 19.0 2.6 2.7 7.08 -6.6 5.76 14.7 1.5 GLOMAC 0.61 0.50 Sell 441 0.66 3.0 4.4 20.6 13.8 3.3 3.3 0.75 -18.1 0.58 5.2 0.0 HUAYANG 0.64 0.59 Sell 224 0.90 1.8 3.4 34.7 18.7 0.8 0.8 1.21 -47.5 0.60 6.7 4.1 IBRACO 0.90 0.92 Hold 444 na 9.1 12.4 9.8 7.2 4.5 5.6 0.99 -9.6 0.76 18.5 9.8 IOIPG 1.92 2.02 Hold 10,572 0.80 16.5 16.3 11.6 11.8 3.1 3.1 2.22 -13.5 1.79 7.3 3.8 MAHSING 1.48 1.69 Buy 3,591 0.89 13.0 12.6 11.3 11.8 4.4 4.4 1.64 -9.8 1.38 7.2 2.1 SIMEPROP 1.64 1.61 Sell 11,153 na 9.2 9.1 17.8 18.0 1.2 1.2 1.78 -7.9 1.04 57.7 -7.9 SNTORIA 0.65 0.76 Buy 368 0.19 8.3 8.6 7.9 7.6 1.5 1.5 0.91 -28.5 0.60 8.3 -6.5 PLANTATIONS PROPERTY Note: SNTORIA proposed bonus issue of warrants & right issue of shares. For more details please refer to SPB 4.91 5.28 Hold 1,687 0.65 21.2 26.1 23.2 18.8 2.4 2.4 5.50 -10.7 4.32 13.6 0.2 SPSETIA 3.41 3.77 Buy 10,314 0.94 21.3 21.9 16.0 15.6 3.5 3.5 4.38 -22.2 3.06 11.5 -14.8 SUNWAY 1.77 1.74 Hold 8,666 0.80 11.9 12.6 14.9 14.1 2.8 3.4 1.96 -9.6 1.27 39.5 8.6 SUNREIT 1.74 1.87 Hold 5,124 0.84 10.0 10.7 17.3 16.3 5.8 6.1 1.90 -8.4 1.64 6.1 -8.4 CMMT 1.47 1.72 Buy 2,995 0.71 8.6 8.9 17.0 16.5 6.1 6.3 1.83 -19.7 1.39 5.8 -19.7 REIT POWER & UTILITIES MALAKOF 1.04 1.16 Buy 5,198 0.81 6.0 6.8 17.4 15.3 6.7 6.7 1.39 -25.2 0.86 20.9 6.1 PETDAG 25.14 22.08 Sell 24,975 0.45 105.1 105.7 23.9 23.8 3.1 3.1 25.70 -2.2 21.00 19.7 3.6 PETGAS 19.00 19.10 Buy 37,596 0.97 98.8 99.5 19.2 19.1 3.6 3.7 21.58 -12.0 15.82 20.1 8.7 TENAGA 15.88 17.38 Buy 89,976 0.70 129.9 127.9 12.2 12.4 2.9 2.9 15.94 -0.4 13.00 22.2 4.1 YTLPOWR 1.32 1.17 Sell 10,464 0.88 9.6 10.1 13.7 13.1 3.8 3.8 1.50 -12.0 1.11 18.9 2.3 TELECOMMUNICATIONS AXIATA 5.63 5.75 Hold 50,940 1.36 16.0 19.5 35.2 28.8 1.4 2.8 5.82 -3.3 4.24 32.8 2.6 DIGI 4.85 5.20 Buy 37,709 0.79 20.0 20.6 24.3 23.5 4.1 4.3 5.19 -6.6 4.36 11.2 -4.9 MAXIS 6.03 6.10 Hold 47,098 0.72 26.2 25.7 23.0 23.4 3.3 3.3 6.60 -8.6 5.48 10.0 0.3 TM 6.10 7.20 Buy 22,923 0.49 23.2 24.9 26.3 24.5 3.4 3.7 6.69 -8.8 5.85 4.3 -3.2 ELSOFT 2.74 2.70 Hold 754 0.66 15.0 15.7 18.3 17.4 3.8 4.0 2.95 -7.1 1.36 100.8 1.5 IRIS 0.24 0.25 Buy 581 2.05 0.6 0.7 42.5 35.2 0.0 0.0 0.24 -2.1 0.12 104.3 27.0 TECHNOLOGY Semiconductor & Electronics INARI 3.65 3.35 Hold 7,489 0.87 14.2 15.9 25.7 23.0 2.8 3.1 3.82 -4.5 1.72 112.6 7.4 MPI 12.40 12.95 Hold 2,466 0.60 105.5 121.2 11.7 10.2 2.6 2.6 14.52 -14.6 7.63 62.5 -1.7 UNISEM 3.39 3.25 Sell 2,488 1.02 27.1 28.7 12.5 11.8 3.5 3.5 4.25 -20.2 2.37 43.0 -7.1 TRANSPORTATION Airlines AIRASIA 3.74 3.83 Buy 12,499 1.26 38.3 39.8 9.8 9.4 1.3 1.6 3.76 -0.5 2.16 73.1 11.6 AIRPORT 9.05 8.47 Sell 15,016 1.39 19.7 20.1 45.8 44.9 1.1 1.3 9.45 -4.2 6.02 50.3 3.0 10.7 Freight & Tankers PTRANS 0.31 0.44 Buy 390 na 2.3 3.6 13.6 8.7 2.3 3.5 0.38 -18.8 0.14 120.0 TNLOGIS 1.35 1.80 Buy 617 1.14 13.6 14.0 9.9 9.6 3.7 3.7 1.83 -26.4 1.29 4.7 0.7 WPRTS 3.53 4.02 Hold 12,037 0.72 15.5 20.0 22.7 17.7 3.3 4.2 4.31 -18.1 3.34 5.7 -4.6 SNAPSHOT OF FOREIGN STOCKS UNDER COVERAGE Company Share Price Target Price (S$) (S$) Recom Market Cap. (S$m) Beta EPS (cent) FY18 FY19 PER (X) FY18 FY19 Div Yield (%) FY18 FY19 52week 52week % Chg High Price % Chg Low Price % Chg YTD BANKS & FINANCIAL SERVICES DBS 26.51 23.30 Sell 67,803 1.25 189.1 214.6 14.0 12.4 2.3 2.3 26.6 -0.3 17.77 49.2 6.7 OCBC 12.91 13.50 Buy 54,039 1.22 104.1 110.6 12.4 11.7 6.7 7.7 13.0 -0.8 9.17 40.8 4.2 UOB 27.80 26.90 Hold 46,232 1.06 215.4 229.3 12.9 12.9 2.5 2.5 27.8 0.0 20.38 36.4 5.1 PLANTATIONS WILMAR 3.21 3.63 Hold 20,539 0.83 29.9 31.8 10.7 10.1 2.5 2.8 4.0 -19.8 3.06 4.9 3.9 IFAR 0.40 0.53 Hold 574 1.02 5.2 5.7 7.7 7.0 3.2 3.5 0.6 -31.0 0.37 9.6 2.6 BUY : Total return within the next 12 months exceeds required rate of return by 5%-point. HOLD : Total return within the next 12 months exceeds required rate of return by between 0-5%-point. SELL : Total return is lower than the required rate of return. Total Return is defined as expected share price appreciation plus gross dividend over the next 12 months. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting. Required Rate of Return of 7% is defined as the yield for one-year Malaysian government treasury plus assumed equity risk premium.
  13. COMPANY UPDATE Wednesday , January 10, 2018 FBMKLCI: 1,826.95 Sector: Finance THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* TP: RM5.10 (+13.8%) AMMB Holdings Berhad Last Traded: RM4.48 MSS to Optimise Organisational Structure Li Hsia Wong Tel: +603-2167 9610 BUY liwong@ta.com.my MSS part of four-year strategic transformation agenda Yesterday, AMMB announced that the group had launched a Mutual Separation Scheme (MSS) to eligible, confirmed employees of AmBank Bhd, AmInvestment Bank Bhd and AmBank Islamic Bhd. Aimed at trimming its banking staff force by some 1,200 to 1,500 from around 9,500 currently, we estimate a one-off MSS expense of c. RM100mn to RM150mn. Management expects cost savings amounting of some RM60-70mn per annum from FY19. We are not entirely surprised by this exercise, as it is in tandem with the group’s 4-year strategic transformation agenda and part of AMMB’s organisational structure for optimal efficiency. Exercise to result in some cost savings Led by several other banking groups, which had accelerated cost cutting initiatives via separation schemes in recent years, we estimate the impact of this MSS to AMMB’s earnings to be minimal. Based on preliminary guidance from the management, we forecast AMMB’s FY18 earnings to dip by some 8% due to a one-off expense while FY19 and FY20 earnings would be lifted by some 3-4% on the back of cost savings. Average FY19-20 CTI ratio would improve from 57% to 54%, achieving management’s FY18 target of <55%. Nevertheless, we keep our estimates for AMMB unchanged for now following more guidance in the next two weeks as the one-off expense as well as annual cost savings would ultimately depend on final take up rate of the exercise. Better earnings prospects envisaged for FY18 In the meantime, we foresee better earnings prospects in FY18. Having invested in people and processes in targeted segments such as the retail SME, business banking space, wealth, cards and merchant, we forecast stronger topline growth for AMMB. We foresee acceleration in net interest income on the back of healthy loan growth momentum and stable NIM. The recent pickup in capital market activities especially in the 2HCY17, should reflect positively on non-interest income in AMMB’s 2HFY18 performance. Management noted in the previous results of the upside in strategic focus areas such as wealth management and cards business. The increase in transaction banking has also led to marginally higher fee income. Potential downside risks from lumpy corporate credit charges Nevertheless, management indicated that downside risks from some corporate accounts in the commercial real estate and oil and gas sectors could materialise in the 2HFY18. This could result in several lumpy credit charges in upcoming results. To recap, AMMB’s net credit charge of -10 bps in 1HFY18 was driven by recoveries. Excluding recoveries, credit cost improved to 43 bps from 52 bps in the previous year as collective allowances eased YoY. As credit charge for the remaining part of the FY could be driven by tapering of recoveries as well as several other lumpy corporate credit charges, we maintain our FY18 assumption of 54 bps for now. AMMB’s exposure to the O&G and the commercial real estate sector stood at 2% and 8% of total gross loans. www.taonline.com.my Share Information Bloomberg Code Stock Code Listing Share Cap (mn) Market Cap (RMmn) 52-wk Hi/Lo (RM) 12-mth Avg Daily Vol ('000 shrs) Estimated Free Float (%) Beta AMM MK 1015 Main Market 3014.2 13503.6 5.70/4.06 3810.9 41.9 1.3 Major Shareholders (%) ANZ Funds - 23.8 AmCorp - 13.0 EPF - 9.5 Forecast Revision FY18 0.0 1463.5 1347.0 108.7 FY19 0.0 1567.6 1427.0 109.9 FY17 ROE (%) 8.8 ROA (%) 1.1 CTI Ratio (%) 58.9 Gross Impaired Loans Ratio (%) 1.9 82.3 Allowance Coverage (%) BV/ Share (RM) 5.7 0.7 Price/ BV (x) FY18 8.9 1.1 56.6 1.9 81.8 6.0 0.7 Forecast Revision (%) Net profit (RMmn) Consensus TA's / Consensus (%) Financial Indicators Share Performance (%) Price Change 1 mth 3 mth 6 mth 12 mth AMMB 1.6 4.7 (9.5) (2.2) FBM KLCI 1.7 4.5 3.8 9.3 (12-Mth) Share Price relative to the FBMKLCI Source: Bloomberg Page 1 of 3
  14. 10-Jan-18 Impact No change to our earnings estimates . Valuation and Recommendation We maintain AMMB’s TP at RM5.10. Trading at FY18 PBV of 0.7x, we believe valuations are attractive. Buy reiterated on AMMB. Key upside/downside to TP include: 1) strong pickup in capital market activities, 2) unexpected increase in unemployment rate resulting in high default rates among retail borrowers, 3) competitive pressure resulting in inability to sustain YoY NIM expansion, 4) better-than-expected contribution from insurance division, FX, Derivative and Wealth Management units, 5) diverse income flow due to AMMB’s corporate transformation strategies and from tieup with MetLife, and 6) potential M&A takeover target or exit of ANZ. Table 1: Financial Summary (RMmn) Income Statement FYE 31 Mar (RMm) Key Financial Ratios and Margins 2016 2017 2018E 2019E 2020E FYE 31 Mar (RMm) Interest income 4,097.2 3,996.6 4,162.3 4,421.7 4,789.1 Return and efficiency Interest expense (2,459.5) (2,432.0) (2,523.9) (2,651.6) (2,797.6) Net interest income 1,637.8 1,564.6 1,638.4 1,770.1 1,991.6 Islamic banking income 805.8 805.2 845.4 887.7 932.1 1,359.1 1,469.9 1,598.9 1,750.6 Total non-interest income 1,249.7 2016 2017 2018E 2019E 2020E ROE (%) 8.8% 8.5% 8.8% 8.9% 9.5% ROA (%) 1.0% 1.0% 1.1% 1.1% 1.1% Net interest margin (%) 1.3% 1.3% 1.3% 1.3% 1.4% Fee-based/total income (%) 14.2% 15.0% 15.3% 15.3% 15.0% Total income 3,693.3 3,728.9 3,953.7 4,256.8 4,674.3 Non-interest/total income (%) 33.8% 36.4% 37.2% 37.6% 37.5% Overhead expenses (2,174.3) (2,160.5) (2,228.7) (2,342.8) (2,485.0) Cost-to-income (%) 62.4% 61.2% 58.9% 56.6% 54.5% Operating profit 1,519.0 1,568.4 1,725.0 1,913.9 2,189.4 209.5 196.1 172.9 114.2 116.4 2.5 36.7 36.7 36.7 36.7 7.5% 1,731.0 1,801.2 1,934.6 2,064.7 2,342.4 (331.5) (392.4) (386.9) (412.9) Loan loss provisioning Associates contributions Profit before tax Taxation Minority interests Net profit Loans growth (%) 0.1% 3.5% 5.5% 7.5% Gross NPL ratio (%) 1.9% 1.9% 1.9% 1.9% 1.9% (468.5) Loan loss reserves (%) 81.1% 66.3% 82.3% 81.8% 81.6% Deposit growth (%) -1.9% 4.1% 5.0% 6.0% 6.0% LD ratio (%) 95.7% 95.5% 95.6% 97.0% 98.3% (97.3) (84.2) (84.2) (84.2) (84.2) 1,302.2 1,324.6 1,463.5 1,567.6 1,789.8 2016 2017 2018E 2019E 2020E PER (x) 9.61 9.44 8.55 7.98 6.99 8,337.2 8,651.1 7,726.2 6,802.1 EPS (sen) 43.20 43.95 48.55 52.01 59.38 Balance Sheet FYE 31 Mar (RMm) Balance sheet Investment statistics Cash and short-term funds11,988.3 Deposit with FIs 1,333.6 1,130.0 1,163.9 1,198.8 1,234.8 EPS growth rate (%) -32.1% 1.7% 10.5% 7.1% 14.2% Marketable securities 22,652.6 23,228.7 25,413.2 27,807.8 30,433.1 BV per share (RM) 5.03 5.32 5.67 6.03 6.48 Total current assets 35,974.6 32,695.9 35,228.2 36,732.8 38,469.9 P/BV (x) 0.82 0.78 0.73 0.69 0.64 Net loans and advances 86,513.3 89,865.1 94,468.4 101,550.4 109,165.4 DPS (sen) 15.50 17.60 18.00 18.00 20.00 Dividend yield (%) 3.73 4.24 4.34 4.34 4.82 Fixed assets Intangible assets Other long-term assets Total assets 292.8 234.6 246.3 258.7 271.6 3,370.0 3,444.0 3,444.0 3,444.0 3,444.0 7,613.4 8,528.0 8,753.8 8,999.6 9,276.6 133,764.0 134,767.6 142,140.8 150,985.5 160,627.5 Customer deposits 90,358.6 94,095.9 98,800.7 104,728.7 111,012.4 Deposits from other FIs 1,743.8 1,609.4 1,625.5 1,641.8 1,658.2 Repurchase securities 0.0 0.0 0.0 0.0 0.0 Bills and acceptances 0.0 0.0 0.0 0.0 0.0 8,607.6 7,176.0 7,391.3 7,613.0 7,841.4 Borrowings Bonds 4,094.1 4,174.1 4,174.1 4,174.1 4,174.1 Other liabilities 12,840.6 10,559.3 11,860.8 13,345.8 15,043.4 Total liabilities 117,644.6 117,614.7 123,852.4 131,503.5 139,729.5 Shareholders' funds 16,119.4 17,152.9 18,288.3 19,482.1 20,898.0 Page 2 of 3
  15. 10-Jan-18 (TH I S P A GE IS IN TE N TI ON AL L Y L E F T B L AN K ) Stock Recommendation Guideline BUY : HOLD : SELL : Not Rated: Total return within the next 12 months exceeds required rate of return by 5%-point. Total return within the next 12 months exceeds required rate of return by between 0-5%-point. Total return is lower than the required rate of return. The company is not under coverage. The report is for information only. Total Return is defined as expected share price appreciation plus gross dividend over the next 12 months. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting. Required Rate of Return of 7% is defined as the yield for one-year Malaysian government treasury plus assumed equity risk premium. Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. As of Wednesday, January 10, 2018, the analyst, Wong Li Hsia, who prepared this report, has interest in the following securities covered in this report: (a) nil Kaladher Govindan – Head of Research TA SECURITIES HOLDINGS BERHAD (14948-M) A Participating Organisation of Bursa Malaysia Securities Berhad Menara TA One 22 Jalan P. Ramlee 50250 Kuala Lumpur Malaysia Tel: 603 – 2072 1277 Fax: 603 – 2032 5048 www.ta.com.my Page 3 of 3
  16. COMPANY UPDATE Wednesday , January 10, 2018 FBMKLCI: 1,826.95 Sector: Oil & Gas THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Serba Dinamik Holdings Berhad TP: RM3.40 (+0.0%) Last Traded: RM3.40 Filling the Coffers Abel Goon Sell Tel: +603-2072 1277 ext. 1641 abelgoon@ta.com.my The News Serba Dinamik Holdings Berhad (Serba) proposed a 10% private placement to independent third-party investors to be identified at a later date. The placement is expected to raise up to RM433.9mn and will be utilised mainly for the partial development of Pengerang eco-Industrial Park (PeIP). Besides that, the proceeds will also be used for part development of Pengerang International Commercial Centre (PICC) and working capital for its Tanzania chlor-alkali plant. (Figure 1) The placement is expected to be completed in 1QFY18 and will be issued in multiple tranches at a discount of up to 10% of Serba’s 5-day VWAP. Figure 1. Utilisation of Proceeds Utilisation of Proceeds RMmn www.taonline.com.my Share Information Bloomberg Code SDH MK Stock Code 5279 Listing Main Market Share Cap (mn) 1,335.0 Market Cap (RMmn) 4,539.0 52-wk Hi/Lo (RM) 3.60/1.51 12-mth Avg Daily Vol ('000 shrs) 5,265 Estimated Free Float (%) 24.8 Beta n.a. Major Shareholders (%) Mohd Abdul Karim - 25.2 Abdul Kadier Sahib - 20.8 Awang Daud - 11.7 % Timeframe (mths) Partial Development of PeIP 270.5 62.3 24.0 Forecast Revision Partial Development of PICC 45.0 10.4 24.0 Working capital for Tanzania 111.1 25.6 24.0 7.3 1.7 Immediate 433.9 100.0 Forecast Revision (%) Net profit (RMm) Consensus TA's / Consensus (%) Previous Rating Expenses from PP TOTAL Assuming indicative issue price of RM3.25 Financial Indicators Source: Company, TA Research Our View The fund-raising exercise is largely unsurprising as the group has multiple capex heavy projects in the pipeline. This includes: 1) Pengerang development (circa RM820mn), 2) MRO and IRM centre in Sarawak (circa RM200mn), 3) Chlor-alkali plant in Tanzania (circa RM300mn for the total project), and 4) purchase of new corporate building (RM43.5mn) However, we note that Serba had previously mulled taking up a sukuk programme to fund the capex intensive projects. We are largely neutral on this news, as the private placement will allay liquidity fears, although it will result in moderate EPS dilution. Furthermore, we believe equity financing is more prudent at this juncture, as according to market sources, banks are demanding higher interest rates for O&G companies. Additionally, we estimate that the private placement will dilute CY18 EPS by circa 5% and reduce our TP to RM3.23 based on the following assumptions: 1) indicative price of RM3.25, 2) interest rate of 4%, 3) Serba’s historical tax rate of 8%, and 4) CY18 core net profit of RM343mn. We note that capex requirements for the next 4 years may surpass RM1bn. To fund the latter, we believe Serba may opt for equity financing due to banks demanding higher interest rates for O&G companies. This is in spite of the fact that Serba has the capacity to take up additional borrowings given its decent cashpile of RM250mn and net gearing of 0.25x, Thus, we do not discount the possibility of future cash calls. FY17 FY18 0.0 0.0 305.1 343.5 296.1 357.6 103 96 Buy (Downgrade) Net Debt / Equity (x) ROA (%) ROE (%) NTA/Share (RM) Price/NTA (x) FY17 0.3 12.5 21.5 1.1 3.2 Share Performance (%) Price Change SDH 1 mth 11.1 3 mth 36.0 6 mth 71.7 12 mth n.a. FY18 0.2 11.9 20.7 1.2 2.7 FBM KLCI 6.1 3.7 4.0 9.3 (12-Mth) Share Price relative to the FBMKLCI Source: Bloomberg Page 1 of 4
  17. 10-Jan-18 Impact Maintain earnings forecasts . Valuation We maintain our TP of RM3.40 based on 13.2x CY18 PER. Although we remain positive on Serba, we believe its share price has run ahead of fundamentals after its recent surge (since initiation: 74%). Furthermore, EPS dilution from this placement, coupled with potential future cash calls also drags on sentiment. Thus, we downgrade the stock from Buy to Sell. Figure 2. Expected Dilution in FY18 (RM mn) Issue price (RM) 3.25 Core net profit 343.5 After-tax interest income 15.8 EPS before (sen) 25.7 EPS after (sen) 24.5 Dilution (%) (4.9) cx Source: Company, TA Securities Page 2 of 4
  18. 10-Jan-18 Earnings Summary Income Statement Balance Sheet FYE 31 Dec (RMmn) 2015 Revenue 2016 2017E 2018F 2019F 1,402.9 2,168.3 2,560.7 2,803.7 3,084.4 EBITDA 212.6 352.2 442.8 498.6 548.3 Depreciation (27.9) (49.8) (74.8) (88.3) (100.4) Net finance cost (25.1) (35.0) (38.7) (40.5) (47.7) FYE 31 Dec (RMmn) PPE JV & Associates Others Non-current assets 2017E 2018F 2019F 349.3 2015 490.2 2016 615.4 727.1 826.7 12.2 12.2 25.6 26.6 30.6 4.4 4.8 4.8 4.8 4.8 365.9 507.2 645.9 758.6 862.1 Associate & JV 0.0 0.0 0.0 1.0 4.0 Inventories 229.8 486.3 701.6 768.1 845.0 Forex & EI 0.0 0.6 0.0 0.0 0.0 Trade receivables 431.0 741.2 875.3 958.4 1,054.3 159.6 194.6 187.4 163.3 327.9 507.2 37.4 64.7 64.7 64.7 64.7 892.9 1,479.6 1,804.8 2,119.2 2,471.2 1,258.8 1,986.8 2,450.7 2,877.7 3,333.3 22.3 PBT Taxation & Zakat MI 267.9 329.3 370.7 404.2 Cash and equivalents (3.0) (22.1) (27.2) (30.6) (33.4) Others 0.2 0.3 3.0 3.4 0.4 Net profit 156.7 246.1 305.1 343.5 371.2 Core net profit 156.7 245.5 305.1 343.5 371.2 Core EPS (sen) 11.7 18.4 22.9 25.7 27.8 DPS (sen) 0.0 0.0 6.9 7.7 8.3 BVPS NTA/Share (RM) (RM) 0.4 0.4 0.6 0.6 1.1 1.1 1.2 1.2 1.4 1.4 Current assets TOTAL ASSETS LT Borrowings 32.4 16.2 14.7 18.5 Others 69.4 14.8 14.8 14.8 14.8 Non-Current liabilities 101.8 31.1 29.6 33.4 37.2 Trade payables ST Borrowings 239.0 440.9 501.0 623.4 420.9 565.0 460.9 711.1 507.0 857.3 Others Ratios FYE 31 Dec (RMmn) 2015 2016 2017E 2018F 2019F Valuations Core PER Div. Yield 1.4 14.2 14.2 14.2 14.2 Current liabilities 681.3 1,138.6 1,000.1 1,186.2 1,378.5 Shareholders equity 468.4 809.2 1,416.2 1,656.7 1,916.5 7.3 7.9 4.9 1.5 1.1 475.7 1,258.8 817.1 1,986.8 1,421.1 2,450.7 1,658.2 2,877.7 1,917.6 3,333.3 MI (x) (%) 26.6 0.0 17.0 0.0 13.7 2.2 12.1 2.5 11.2 2.7 P/BV (x) 8.8 5.1 2.9 2.5 2.2 FCF Yield (%) (1.5) (2.8) (5.2) 3.7 4.4 Total Equity TOTAL E&L Cash Flow Statement FYE 31 Dec (RMmn) Profitability ratios 2017E 2018F Pretax profit 2015 159.6 267.9 2016 329.3 370.7 2019F 404.2 EBITDA margin (%) 15.2 16.2 17.3 17.8 17.8 Depreciation 27.9 49.8 74.8 88.3 100.4 EBIT margin (%) 13.2 13.9 14.4 14.6 14.5 Net interest 25.1 35.0 38.7 40.5 47.7 PBT margin (%) 11.4 12.4 12.9 13.2 13.1 JV & Associate 0.0 0.0 0.0 (1.0) (4.0) Core Net Margin (%) 11.2 11.3 11.9 12.3 12.0 Changes in WC Core ROE (%) 33.5 30.3 21.5 20.7 19.4 Tax Core ROA (%) 12.4 12.4 12.5 11.9 11.1 Others (57.2) (304.7) (429.4) (109.7) (126.7) (3.0) (22.1) (27.2) (30.6) (33.4) 6.1 64.9 0.0 0.0 0.0 Operational cash flow 158.5 90.8 (13.8) 358.2 388.3 (213.7) (140.8) (200.0) (200.0) (200.0) Liquidity ratios Current ratio (x) 1.3 1.3 1.8 1.8 1.8 Capex Quick ratio (x) 1.0 0.9 1.1 1.1 1.2 Interest income Leverage ratios Equity/total liabilities (x) 0.6 0.7 1.4 1.4 1.4 Net debt / equity (x) 0.6 0.6 0.3 0.2 0.2 Growth ratios Revenue (%) 54.6 18.1 9.5 10.0 Core Net Profit (%) 56.7 24.3 12.6 8.1 Key Assumptions 2.0 4.0 3.2 4.5 Investment in JV/Associate (12.2) 0.0 (13.4) 0.0 0.0 Others (92.1) (105.8) 0.0 0.0 0.0 (316.1) (242.7) Investing cash flow (210.2) (195.5) 7.7 (192.3) Issue of shares 0.0 0.0 407.1 0.0 0.0 Share issue expense 0.0 0.0 (13.7) 0.0 0.0 Dividend paid 0.0 (91.5) (103.1) (111.4) Net borrowings 240.2 166.3 (60.0) 150.0 150.0 Interest paid (27.2) (39.0) (41.9) (45.0) (55.3) (0.5) 13.6 0.0 0.0 140.9 199.9 1.9 Others Financial cash flow (0.7) 211.8 0.0 (16.7) Orderbook Replenishment O&M EPCC 2,500.0 2,600.0 2,700.0 Net cash flow 54.3 (11.0) (24.1) 164.7 179.2 200.0 250.0 300.0 Beginning Cash 139.4 194.6 187.4 163.3 327.9 Forex End Cash 0.9 194.6 3.7 187.4 0.0 163.3 0.0 327.9 0.0 507.2 Page 3 of 4
  19. 10-Jan-18 (TH I S P A GE IS IN TE N TI ON AL L Y L E F T B L AN K ) Stock Recommendation Guideline BUY : HOLD : SELL : Not Rated: Total return within the next 12 months exceeds required rate of return by 5%-point. Total return within the next 12 months exceeds required rate of return by between 0-5%-point. Total return is lower than the required rate of return. The company is not under coverage. The report is for information only. Total Return is defined as expected share price appreciation plus gross dividend over the next 12 months. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting. Required Rate of Return of 7% is defined as the yield for one-year Malaysian government treasury plus assumed equity risk premium. Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. As of Wednesday, January 10, 2018, the analyst, Abel Goon, who prepared this report, has interest in the following securities covered in this report: (a) nil Kaladher Govindan – Head of Research TA SECURITIES HOLDINGS BERHAD (14948-M) A Participating Organisation of Bursa Malaysia Securities Berhad Menara TA One 22 Jalan P. Ramlee 50250 Kuala Lumpur Malaysia Tel: 603 – 2072 1277 Fax: 603 – 2032 5048 www.ta.com.my Page 4 of 4
  20. COMPANY UPDATE Wednesday , January 10, 2018 FBMKLCI: 1,826.95 Sector: Automotive THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* TP: RM4.37 (-31.4%) UMW Holdings Bhd Last Traded: RM6.37 From Land to Air Abel Goon Sell Tel: +603-2072 1277 ext. 1641 abelgoon@ta.com.my We zoom in on UMW Holdings Bhd’s (UMW) high value manufacturing after visiting its brand-new Rolls Royce plant yesterday. After the educational visit, we reiterate our view that the group’s short-term outlook remains challenging. However, we maintain our view that 2019 will be a better year after its Rolls Royce plant reaches breakeven, and upon completion of its Bukit Raja automotive plant. Maintain Sell on UMW (TP: RM4.37) on the back of stretched valuations and bleak shortterm outlook. Plant Background To recap, UMW secured a 25+5 years contract to supply fan cases for the Trent 1000 and Trent 7000 engines to Rolls Royce in August 2015. We understand that the Trent 1000 engines are utilised in the 787 Dreamliner while the Trent 7000 are utilised in the A330neo. Furthermore, UMW is the sole external supplier for the two different fan cases at this juncture. UMW has spent RM750mn on development of the land, purchase of equipment, and plant construction. Record Fast Delivery UMW delivered its first fan case to Rolls Royce on 29 November 2017, which implies a duration of 27 months since the contract was first awarded. Management highlighted that this was much quicker than expected, and caught Rolls Royce by surprise. We note that the first unit required 6 months to manufacture, as close to 60 individual audits were carried out on the various processes. Furthermore, UMW managed to pass all audits in the first round which was previously unheard of. Going forward, UMW expects one unit to require 28 days to manufacture. High Barriers of Entry We understand that aerospace parts manufacturing has extremely high barriers of entry as the group had to secure multiple approvals from various organisations. For example, it had to meet airworthiness standard from EASA (European Aviation Safety Agency) before being allowed to manufacture the fan cases. Thus, we believe UMW’s margin from this business will be relatively high compared to its other core businesses, i.e. automotive, industrial and other manufacturing and engineering. Manufacturing Process Mostly Automated The automation in the UMW’s Rolls Royce plant was evident as only a small number of workers were visible during our visit. We note that the plant currently has 118 workers, with the majority working in testing and quality control. At full capacity, management expects only 200 workers. This reinforces our view that barriers of entry are high, given that large capex is required to start a high value manufacturing line. www.taonline.com.my Share Information Bloomberg Code Stock Code Listing Share Cap (mn) Market Cap (RMmn) 52-wk Hi/Lo (RM) 12-mth Avg Daily Vol ('000 shrs) Estimated Free Float (%) Beta Major Shareholders (%) UMWH MK 4588 Main Market 1,168.3 7,442.1 6.44/4.24 877 22.6 1.7 PNB - 48.0 EPF - 11.6 KWAP - 8.2 Forecast Revision Forecast Revision (%) Net profit (RMm) Consensus TA's / Consensus (%) Previous Rating FY17 FY18 0.0 0.0 (4.8) 241.7 58.2 291.5 n.m. 82.9 Sell (Maintain) Financial Indicators Net Debt / Equity (x) FCPS (sen) Price / CFPS (x) Core ROA (%) NTA/Share (RM) Price/NTA (x) Share Performance (%) Price Change 1 mth 3 mth 6 mth 12 mth FY17 0.4 50.6 12.6 (0.0) 2.3 2.8 FY18 0.4 53.1 12.0 1.9 2.4 2.7 UMW 26.9 14.8 15.8 49.5 FBM KLCI 6.1 3.7 4.0 9.3 (12-Mth) Share Price relative to the FBMKLCI Source: Bloomberg Page 1 of 4