Bursa Malaysia Daily Market Report - 12 October

Transcription

1. Thursday , 12 October, 2017 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 . P e ra k T ra n s it Be rh a d : A F ir s t C h o ic e T e rm in a l O p e ra to r 2 . T e le c o m m u n ic a t io n s S e c t o r: 7 0 0 M H z P ric in g A n n o u n c e d 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 2. D ai l y St o ck S cr een 3. Fore i gn Te ch n i ca l St o c k W at ch ( A US , H K & F SS TI) 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 – 2031 6608 www.ta.com.my
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Daily Market Commentary Thursday , 12 October 2017 For Internal Circulation Only TA Research, e-mail : taresearch@ta.com.my KLSE Market Statistics (11.10.2017) (mil) Main Market 2,056.8 Warrants 142.1 ACE Market 975.0 Bond 4.3 ETF 0.1 LEAP 0.2 Total 3,178.5 Off Market 382.8 Volume +/-chg (RMmn) 554.1 2,150.6 3.3 15.0 -154.8 147.0 -4.1 1.2 0.03 0.2 -0.07 0.0 2,313.9 278.2 210.3 Major Indices Index +/- chg Malaysia FBMKLCI FBMEMAS FBMSCAP October 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 % chg % YTD chg 1,757.21 12,578.51 17,200.95 1,757.50 -3.92 -8.40 27.75 -1.00 -0.22 -0.07 0.16 -0.06 7.03 9.70 16.89 7.46 22,872.89 6,603.55 7,533.81 20,881.27 2,458.16 28,389.57 3,280.28 1,714.14 5,882.79 3,388.28 2,026.47 5,772.15 42.21 16.30 -4.46 57.76 24.35 -101.26 -8.67 7.19 -22.97 5.30 -3.71 34.04 0.18 0.25 -0.06 0.28 1.00 -0.36 -0.26 0.42 -0.39 0.16 -0.18 0.59 15.74 22.67 5.47 9.24 21.30 29.04 13.87 11.10 11.06 9.17 2.91 1.88 (mn) (RM) @ @ @ @ @ @ @ @ @ @ @ @ @ 0.16 1.00 4.35 0.11 0.25 0.31 0.01 0.11 1.10 18.83 1.32 1.60 5.11 Exchange Rate USD/MYR 4.2200 -0.0005 USD/JPY 112.23 -0.1800 EUR/USD 1.182 0.0041 Counter TENAGA SIME CIMB MAXIS AXIATA DIGI PETGAS GENTING GENM HLBANK Mkt Cap. Chg (RM’mn) (RM) 80,358 61,820 58,560 47,601 45,692 37,942 36,607 36,334 29,873 28,340 -0.04 -0.05 -0.02 -0.03 -0.05 -0.10 -0.08 -0.13 -0.09 -0.01 Profit-taking interest saw blue chips under pressure Wednesday, but small caps and ACE Market stocks continued to highlight rotational trading plays from retailers. The KLCI fell 3.92 points to end at 1,757.21, off an early high of 1,762.97 and low of 1,752.90, as losers marginally edged losers 420 to 419 on robust turnover totaling 3.18bn shares worth RM2.31bn. Persistent foreign selling on blue chips may continue to drag the local benchmark lower, as market attention focus on rotational plays in small caps and ACE Market stocks with positive news flows. Immediate support for the index will be from the recent low of 1,750, while the crucial 200day ma uptrend support is at 1,740. Overhead resistance stays at 1,771, matching the 50 and 100-day moving averages, followed by the 8 Aug peak of 1,782, and then the double-top peak of 13 Sept high of 1,793 and 16 June peak of 1,796. Bearish momentum with a fresh DMI sell signal on DiGi.com implies nearterm downside bias towards the 50%FR (RM4.75), with better support from the 38.2%FR (RM4.65) where buyers should return to bargain, while overhead resistance is from the 76.4%FR (RM4.98). Likewise, TM should ease towards the 23.6%FR (RM6.06), with stronger supports from RM5.90 and the 30/12/16 low (RM5.81) where bargain hunters should cushion downside, while resistance is expected from the 50%FR (RM6.36) and 61.8%FR (RM6.48). News Bites • • Top 10 KLCI Movers Based on Mkt Cap. Off Market DATAPRP 270.5 G3 32.7 BIBM 27.4 ANZO 20.0 JOHAN 15.0 LAYHONG-WA 3.8 G3-WA 2.0 EDUSPEC 2.0 CCK 2.0 BKAWAN 1.0 MPHBCAP 1.0 YONGTAI 1.0 HAIO 1.0 Review & Outlook Value Value/ +/-chg Volume Up Down 711.5 1.05 292 283 -0.7 0.11 75 77 -46.1 0.15 46 57 -0.2 0.28 4 2 0.04 1.72 2 1 -0.01 0.20 0 0 0.73 419 420 -269.8 0.55 Vol. (mn) 3.39 8.18 11.07 11.14 2.79 1.91 0.25 2.72 15.93 12.13 Commodities Futures Palm Oil (RM/mt) 2,703.00 4.00 Crude Oil ($/Barrel) 51.02 0.08 Gold ($/tr.oz.) 1,293.90 3.60 • • • • • • • • • Important Dates MTOUCHE - 6:2 Rights Issue - RI of up to 557.5m shares together with up to 278.8m free detachable warrants. 6 rights shares together with 3 free warrants for every 2 existing shares held, at an issue price of RM0.20 per rights share. Trading of Rights: 04/10 - 18/10/2017. Application Closed: 26/10/2017. LISTING ON: 09/11/2017. • The Malaysian Communications and Multimedia Commission is opening up spectrum blocks for the 700MHz spectrum by way of tender, which will be carried out through the process of a beauty contest. Each spectrum block is 2x5MHz. Tenaga Nasional Bhd has signed a term sheet agreement with Negeri Sembilan Cement Industries Sdn Bhd to build a RM200mn waste heat recovery power plant that will reduce up to 12% of NSCI's electricity cost. Genting Bhd has priced an offering of USD500mn guaranteed notes with a coupon rate of 4.25%, maturing on Jan 24, 2027. MMC-Gamuda KVMRT (T) Sdn Bhd said a Bangladeshi worker died yesterday evening while another two are in critical condition today following the Bandar Malaysia South Mass Rapid Transit site explosion here. George Kent (Malaysia) Bhd has teamed up with the Siemens Group to bid for the Kuala Lumpur-Singapore High Speed Rail tender. They will bid for the development, financing, construction and technical operation and maintenance of the HSR. Johan Holdings Bhd chairman and chief executive officer Tan Sri Tan Kay Hock, who owns 48.17% stake, has launched a mandatory takeover offer at 25 sen a share. A consortium comprising Ancom Bhd and three other firms has bagged the advertising service concession for phase one of the Mass Rapid Transit in Jakarta. A printing and publishing firm acquired Dataprep Holdings Bhd's controlling shareholder's entire stake in the loss-making IT solutions provider, and announced an unconditional mandatory takeover offer for the remaining shares at 16sen/share. Zhulian Corp Bhd's net profit in 3QFY17 rose 138% to RM14.58mn, from RM6.11mn a year ago, as it recorded higher revenue and a 2.9x jump in other comprehensive income during the quarter. Most Federal Reserve officials believed that they likely would raise short-term interest rates again this year, though some said their decision would hinge on whether inflation picks up in coming months. Malaysia-Taiwan bilateral trade can exceed US$17 billion this year, said Representative James Chang Chi-ping from the Taipei Economic and Cultural Office in Malaysia. Malaysian government is imposing a provisional anti-dumping duties ranging from 7.27% to 111.61% on imports of cold-rolled stainless steel from China, South Korea,Taiwan and Thailand. 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. Thursday , October 12, 2017 FBMKLCI: 1,757.21 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 Small Caps in Play as Blue Chips Congest Profit-taking interest saw blue chips under pressure Wednesday, but small caps and ACE Market stocks continued to highlight rotational trading plays from retailers. The KLCI fell 3.92 points to end at 1,757.21, off an early high of 1,762.97 and low of 1,752.90, as losers marginally edged losers 420 to 419 on robust turnover totaling 3.18bn shares worth RM2.31bn. Key Supports From 1,750 & 1,740 Persistent foreign selling on blue chips may continue to drag the local benchmark lower, as market attention focus on rotational plays in small caps and ACE Market stocks with positive news flows. Immediate support for the index will be from the recent low of 1,750, while the crucial 200-day ma uptrend support is at 1,740. Overhead resistance stays at 1,771, matching the 50 and 100-day moving averages, followed by the 8 Aug peak of 1,782, and then the double-top peak of 13 Sept high of 1,793 and 16 June peak of 1,796. SELL Digi & TM Bearish momentum with a fresh DMI sell signal on DiGi.com implies near-term downside bias towards the 50%FR (RM4.75), with better support from the 38.2%FR (RM4.65) where buyers should return to bargain, while overhead resistance is from the 76.4%FR (RM4.98). Likewise, TM should ease towards the 23.6%FR (RM6.06), with stronger supports from RM5.90 and the 30/12/16 low (RM5.81) where bargain hunters should cushion downside, while resistance is expected from the 50%FR (RM6.36) and 61.8%FR (RM6.48). Asian Markets Hit Decade High After Strong U.S. Lead A broad index of Asian shares touched a decade-high on Wednesday, taking cues from signs of confidence in the U.S and Japan’s Nikkei making a fresh run at its best close since 1996. The markets seem to be comfortable with the U.S. Federal Reserve’s plan to remain on its rate-increase path, as it signals confidence that the economy there is accelerating. Investors will keep an eye on the minutes of the Fed’s September meeting due later in the day, which might help bolster views of a December rate hike. The Nikkei Stock Average hit a two-decade closing high, a milestone for the nation’s long-suffering stock market, driven by stronger earnings, an improved economy and a better environment for shareholders. The Nikkei rose 57.76 points to close at 20,881.27, the highest close since 20,943.90 on Dec. 5, 1996. China stocks also firmed on Wednesday, helped by a jump in defensive consumer staples such as big liquor producers, while resources shares curbed gains. Sentiment remained largely positive although trade was thin, with Beijing expected to maintain stability in the financial markets ahead of a key party congress later this month. The blue-chip CSI300 index rose 0.3 percent, to 3,902.69 points, while the Shanghai Composite Index added 0.2 percent to 3,388.28 points. Across the Korean Strait, the Kospi gained 1 percent to 2,458.16 as big name tech plays held onto significant gains made in the previous session. In down under, the S&P/ASX 200 rose 0.59 percent, to 5,772.10, as the information technology sub-index led gains, climbing 2.1 percent. Page 1 of 7
4. 12-Oct-17 Wall Street Notch All-Time Highs after Fed Minutes U .S. stock benchmarks closed at records on Wednesday after minutes from the Federal Reserve's policy-setting gathering in September indicated a desire to increase rates one additional time despite stubbornly low inflation. Some Fed policy members expressed concerns about inflation running below its 2 percent annual target, while others worried that waiting for inflation to normalize policy could lead to an overheated market. The account of the Fed's discussions during its September meeting suggests that the central bank would likely raise rates at a gradual pace. Shares of consumer-goods companies helped lift indexes for a second straight day. The consumer staples sector got a boost from gains in Wal-Mart which rose 1.9 percent, as well as from Kroger, which jumped 1.2 percent after news it was exploring the sale of its nearly 800 convenience stores. The Dow Jones Industrial Average rose 42.21 points, or 0.18 percent, to end at 22,872.89, the S&P 500 gained 4.6 points, or 0.18 percent, to 2,555.24 and the Nasdaq Composite added 16.30 points, or 0.25 percent, to 6,603.55. 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 Thursday, October 12, 2017, 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 – 2031 6608 www.ta.com.my Page 2 of 7
5. 12-Oct-17 N e w s I n B r i e f Corporate The Malaysian Communications and Multimedia Commission (MCMC) is opening up spectrum blocks for the 700MHz spectrum by way of tender which will be carried out through the process of a beauty contest. Comprising blocks A to H, these spectrums will be assigned on a nationwide basis. The commission has set the spectrum limit of four spectrum blocks per applicant. Each spectrum block is 2x5MHz (Starbiz). Tenaga Nasional Bhd (TNB) wholly-owned unit, TNB Repair And Maintenance Sdn Bhd (REMACO), has signed a term sheet agreement with Negeri Sembilan Cement Industries Sdn Bhd (NSCI) to build a RM200mn waste heat recovery power plant (WHRPP). REMACO would develop, design, construct, commission, operate, maintain and raise financing. The WHRPP will have a combined capacity of 23 MW via recovery of exhausted waste heat from NSCI’s plants in Negeri Sembilan and Perlis that will reduce up to 12% of NSCI's electricity cost (Bursa Malaysia). OHL Capital Ltd, an indirect wholly owned subsidiary of Genting Bhd, has priced an offering of USD500mn guaranteed notes with a coupon rate of 4.25%, maturing on Jan 24, 2027. The notes constitute a further issuance of, and will be consolidated with, the existing USS1bn principal amount of notes issued on Jan 24, 2017. (StarBiz). MMC-Gamuda KVMRT (T) Sdn Bhd said a Bangladeshi worker died yesterday evening while another two are in critical condition today following the Bandar Malaysia South Mass Rapid Transit (MRT) site explosion here. The incident seriously injured the three general workers who were doing house-keeping work outside the immediate work area at the Bandar Malaysia South MRT site. The explosion at the MRT station construction site in Bandar Malaysia was from an old unexploded bomb from the Second World War (The Edge/Bernama). George Kent (Malaysia) Bhd has teamed up with the Siemens Group to bid for the Kuala Lumpur-Singapore High Speed Rail (HSR) tender, the first group to do so for the multi-billion ringgit rail project. They will bid for the development, financing, construction and technical operation and maintenance of the HSR (StarBiz). Zhulian Corp Bhd’s net profit in 3QFY17 rose 138% to RM14.58mn, from RM6.11mn a year ago, as it recorded higher revenue and a 2.9x jump in other comprehensive income during the quarter. Improved earnings was boosted by a 41% YoY rise to RM4.23mn in its share of profit of equity accounted investee, and as total other comprehensive income grew to RM6.96 million from RM2.42 million (The Edge). Johan Holdings Bhd chairman and chief executive officer Tan Sri Tan Kay Hock, who owns 48.17% stake, has launched a mandatory takeover offer at 25 sen a share. Tan’s shareholding increased to 48.17% from 45.76% previously after he bought an additional 15mn shares at 25 sen per share for a total value of RM3.75mn via Mustika Manis Sdn Bhd (MMSB) in a business transaction. Tan and Puan Sri Tan Swee Bee, who is also a director of Johan, owns 50% each in MMSB. The offer price of 25 sen apiece was at a 4% discount to last traded price of 26 sen. The offerors intend to maintain Johan’s listing status on Bursa Malaysia (StarBiz). A consortium comprising Ancom Bhd and three other firms has bagged the advertising service concession for phase one of the Mass Rapid Transit (MRT) in Jakarta. In a filing with Bursa Malaysia, Ancom said the consortium submitted a tender for the project on June 20, through through PT Avabanindo Perkasa. Other members of the consortium include PT Alternatif Media Group and Thailand-listed VGI Global Media PCL. The MRT Jakarta advertising concession is with an exclusive media advertising rights of 20 years (The Edge). Page 3 of 7
6. 12-Oct-17 A printing and publishing firm today acquired Dataprep Holdings Bhd ’s controlling shareholder’s entire stake in the loss-making IT solutions provider, and announced an unconditional mandatory takeover offer for the remaining shares. Wardah Communication Sdn Bhd acquired the 270.54mn shares or 64.2% stake in Dataprep from VXL Holdings Sdn Bhd at 16 sen a share. Wardah’s offer for the remaining shares is being made at the same price of 16 sen, which represents a 23 sen or 58.97% discount to the group’s last closing price of 39 sen (Bernama). Page 4 of 7
7. 12-Oct-17 N e w s I n B r i e f Economy Asia Malaysia-Taiwan Trade to Exceed US $17bn This Year Malaysia-Taiwan bilateral trade can exceed US$17 billion this year, said Representative James Chang Chi-ping from the Taipei Economic and Cultural Office in Malaysia. He said this would be driven by the Taiwan government's New Southbound Policy which focused on South-East Asia, South Asia and Australasia as well as collaboration between private sectors. "Among the sectors that could contribute to the improvements in trade include information and communications technology, e-commerce, agriculture, aquaculture and medical devices," he said. Chang was speaking to reporters after officiating the Taiwan Excellence Pavilion in conjunction with the International Greentech and Eco Products Exhibition and Conference Malaysia 2017 in Kuala Lumpur. “There are 18 countries in the New Southbound Policy, with special focus given to six countries - the Philippines, Vietnam, Thailand, Indonesia, India and Malaysia. “The other countries are Bangladesh, Bhutan, Nepal, Pakistan, Sri Lanka, Australia, New Zealand and the rest of Association of South-East Asian Nations (ASEAN) members,” he said. Chang said supported by the policy, trade between Malaysia and Taiwan from January to August recorded a double-digit growth compared to last year. "That is why we are optimistic that total trade would certainly exceed US$17 billion this year," he said. (The Star) Malaysia Fuel Prices Down by 3 sen, Diesel 7 sen Fuel prices went down across the board for the third week of October, with a three-sen reduction for RON95 and RON97. RON95 retailed at RM2.16 per litre and RON97 sold at RM2.46 per litre. The price of diesel also fell by seven sen from RM2.17 per litre to RM2.10.The new prices came into effect from Thursday until Oct 18. (The Star) Government to Impose Up to 111.61% Anti-Dumping Duties on CRSS Imports The government is imposing a provisional anti-dumping duties ranging from 7.27% to 111.61% on imports of cold-rolled stainless steel (CRSS) from China, South Korea, Taiwan and Thailand. In a statement, the Ministry of International Trade and Industry said it had completed the investigation on imports of CRSS and found that there are sufficient evidences to continue with further investigation on the importation of CRSS from the alleged countries. The ministry said the investigation had been initiated in accordance with the Countervailing and Anti-Dumping Duties Act 1993 and Countervailing and Anti-Dumping Duties Regulation 1994 on 15 May 2017 based on a petition filed by Bahru Stainless Sdn. Bhd. on behalf of the domestic industry producing CRSS. (The New Strait Times) Japan Core Machine Orders Climb 3.4% in August Core machine orders in Japan jumped a seasonally adjusted 3.4% on month in August, the Cabinet Office said - coming in at 882.4 billion Yen. That beat forecasts for an increase of 1.0% following the 8.0% spike in July. On a yearly basis, core machine orders advanced 4.4% - again beating expectations for a gain of 0.8% following the 7.5% decline in the previous month. The total value of machine orders, which includes volatile ones for ships and electric power companies, added 8.5% on month and 21.5% on year to 2,583.9 billion yen. Manufacturing orders gained 16.1% on month and 14.8% on year to 413.0 billion Yen, while non-manufacturing orders added 3.1% on month and lost 2.8% on year to 486.9 billion Yen. Government orders spiked 17.8% on month and 25.3% on year to 315.6 billion Yen. Orders from overseas gained 11.5% on month and 44.5% on year to 1,110.0 billion Yen. Orders from agencies eased 0.6% on month and gained 9.2% on year to 125.9 billion Yen. For the third quarter of 2017, core machine orders are forecast to have advanced 7.0% on quarter and 0.1% on year. (RTT News) Page 5 of 7
8. 12-Oct-17 Australia Consumer Confidence Spikes in October – Westpac Consumer confidence in Australia spiked in October, the latest survey from Westpac Bank revealed - jumping 3.6% to a score of 101.4. That follows the 2.5% increase in September to a score of 97.9 - and it moves above the boom-or-bust line of 100 that separates optimism and pessimism. The October reading marks the highest score in a year amid consistent reports of an improving global economy. Concerns about rising interest rates associated with overheated housing markets have eased, the bank said, while ongoing improvements in the labor market also may have boosted confidence. (RTT News) United States Fed on Track to Raise Rates Despite Weak Inflation, Minutes Show Most Federal Reserve officials believed at their meeting last month that they likely would raise short-term interest rates again this year, though some said their decision would hinge on whether inflation picks up in coming months. The key question for policy makers is whether the recent soft patch in price increases is temporary or whether it reflects longerlasting developments, according to minutes of the central bank’s Sept. 19-20 meeting. Many officials at the meeting believed it was the former. If it isn’t, some indicated it would cause them to reassess the projected path of rate increases. The minutes were released after the usual three-week lag. Several officials said their decision on another rate move this year “would depend importantly on whether the economic data in coming months increased their confidence that inflation was moving up toward the committee’s symmetric 2% objective.” “It was noted that some patience in removing policy accommodation while assessing trends in inflation was warranted,” the minutes said. Others, however, were worried that holding off on raising interest rates too long could lead to a surge in inflation that would be difficult to control. High asset prices added to their concern, the minutes said. Inflation over a 12month period has held steady at 1.4% for the past three months, according to the Fed’s preferred measure. (The Wall Street Journal) Record Job Openings Aren’t Enticing Workers to Quit Workers are no more likely to tell their boss to “take this job and shove it” than they were two years ago. The rate at which workers quit their jobs—seen by many economists as a sign of confidence in the labor market—fell slightly to a seasonally adjusted 2.1% in August from 2.2% in July, according to the Labor Department’s Job Openings and Labor Turnover Survey, known as Jolts. The quits rate, or the share of employed people who voluntarily leave their jobs in a month, has held nearly steady for two years after slowly climbing after the recession ended in mid-2009. The sideways move in the quits rate comes at a time when the unemployment rate has fallen to a 16-year low and the number of available jobs has touched the highest level on records back to 2000. The quits rate is trending at levels recorded before the recession began, but below 2001 rates. That could suggest that years of steady hiring and labor shortages reported in several industries have not yet made workers feel as if they’re likely to find something better if they leave their current jobs. The unwillingness to quit could be a factor holding back better wage growth, reflecting workers’ relative lack of bargaining power. It might also suggest other factors—such as the unwillingness to move for work, or satisfaction with work-life balance—is keeping workers in their jobs despite ample opportunities elsewhere. The number of job openings in the U.S. slipped slightly in August from July’s record high, but was the third highest monthly level on record. There were 6.08 million seasonally adjusted openings during the month, down from 6.14 million in July. (The Wall Street Journal) Fed’s Evans Hints New Rate Hike This Year Isn’t a Given Federal Reserve Bank of Chicago President Charles Evans said there was room for an “honest discussion” later in 2017 on whether it was the right time to raise interest rates— suggesting another hike by year-end wasn’t a done deal. Mr. Evans also said the Fed shouldn’t necessarily be worried if annual inflation exceeded the central bank’s 2% target, because it has been running below that level for so long. “We should not fear 2.5% inflation,” Mr. Evans said at a Bloomberg conference in Zurich. The Fed’s preferred annual inflation gauge, the personal-consumption expenditures index, read 1.4% in August. The Fed has raised rates by Page 6 of 7
9. 12-Oct-17 quarter percentage point increments four times since late 2015 , most recently in June to a range between 1% and 1.25%, after keeping them near zero for seven years. It held rates steady in September, but announced a plan to gradually shrink its massive holdings of bonds. Mr. Evans also said that the fundamentals of the U.S. economy were strong, with wages starting to pick up, and added that the ultra-low jobless rate could fall further. “Global growth has really solidified,” which has helped the U.S. economy, he said. “I suspect the wage story is improving.” (The Wall Street Journal) Europe and Uni ted Kingdom European House Prices Surge Raising Bubble Fears House prices in European economies as varied as Ireland, Lithuania and the Czech Republic have surged over the past year, raising concerns about a fresh bubble in property prices. Figures published by Eurostat, the EU’s statistics bureau, showed Irish property prices rose by 10.6% between the second quarter of 2016 and the second quarter of this year. Ireland was one of the economies hardest hit by the collapse in global property prices during the world financial crisis of 2008. Prices also rose by 10.2% in Lithuania and 13.3% in the Czech Republic. In Iceland, which is not part of the EU, prices rose by 22%. The figures showed that prices rose by 3.8% in the Eurozone as a whole and 4.4% in the EU. (Financial Times) German Government Raises Growth Outlook The German economy gained momentum and it is set to continue to grow in coming years, the Economy Ministry said. Gross domestic product is forecast to grow 2% this year instead of 1.5% projected earlier. Likewise, the outlook for 2018 was raised to 1.9% from 1.6%. The German exports of goods and services are expected to grow 3.5% in 2017 and 4.0% in 2018. The government forecast a temporary rise in inflation to 1.8% in 2017 before easing to 1.6% in 2018. German economics minister Brigitte Zypries said the German economy is doing well. The next federal government must ensure that this remains the case. (RTT News) Share Buy-Back: 11 October 2017 Company Bought Back AMPROP 67,600 DAIBOCI 3,000 E&O 37,900 EKSONS 110,000 FFHB 21,200 GRANFLO 20,000 KSL 185,700 SCGM 156,000 TOMYPAK 32,000 TROP 40,000 UNIMECH 5,000 Source: Bursa Malaysia Price (RM) Hi/Lo (RM) 0.81 2.18 1.58/1.55 0.88 0.66/0.65 0.25 1.27 2.89/2.87 0.94 0.945/0.94 1.04/1.03 0.805/0.79 2.18/2.17 1.58/1.55 0.89/0.88 0.66/0.64 0.255/0.24 1.28/1.26 2.89/2.87 0.945/0.94 0.955/0.935 1.04/1.03 Total Treasury Shares 15,133,800 558,600 6,750,147 3,743,000 498,000 7,529,000 11,579,400 156,000 137,000 6,207,142 5,796,510 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 – 2031 6608 www.ta.com.my Page 7 of 7
10. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company Share Price Target Price (RM) (RM) BETA EPS (sen) PER (X) Div Yield (%) FY17 FY18 FY17 FY18 FY17 FY18 52weeks 52weeks % Chg High Price % Chg Low Price % Chg YTD 11-Oct-17 AUTOMOBILE BAUTO 2.08 2.40 0.95 10.3 16.1 20.1 13.0 5.6 7.7 2.32 -10.3 1.84 13.0 -2.3 MBMR 2.06 2.09 0.93 20.7 23.2 10.0 8.9 2.0 2.3 2.65 -22.3 2.02 2.0 -3.7 PECCA 1.50 1.69 na 7.8 11.1 19.2 13.6 3.3 3.7 2.00 -25.0 1.45 3.4 -5.7 UMW 5.55 5.04 1.32 19.7 30.6 28.1 18.1 2.3 3.6 6.08 -8.7 4.09 35.6 31.4 BANKS & FINANCIAL SERVICES ABMB 3.89 4.80 1.31 33.1 30.6 11.8 12.7 4.1 4.1 4.49 -13.4 3.60 8.1 4.6 AFFIN 2.58 3.70 0.89 29.4 33.6 8.8 7.7 3.1 3.1 3.00 -14.0 2.14 20.6 7.9 AMBANK 4.45 5.70 1.18 43.9 48.6 10.1 9.2 4.0 4.0 5.70 -21.9 3.90 14.1 3.2 CIMB 6.29 8.00 1.51 49.6 55.2 12.7 11.4 4.0 4.4 7.08 -11.2 4.49 40.1 39.5 HLBANK 15.92 17.50 0.61 104.9 114.2 15.2 13.9 2.8 2.8 16.30 -2.3 12.80 24.4 17.9 MAYBANK 9.55 10.20 0.98 69.6 75.9 13.7 12.6 5.2 5.2 9.86 -3.1 7.59 25.8 16.5 PBBANK 20.56 23.60 0.64 137.2 142.4 15.0 14.4 2.7 2.8 20.90 -1.6 19.40 6.0 4.3 RHBBANK 5.11 5.80 1.36 50.6 55.0 10.1 9.3 2.9 2.9 5.59 -8.6 4.53 12.8 8.5 BURSA 10.08 11.10 0.71 40.2 39.0 25.1 25.9 3.4 3.4 10.98 -8.2 8.08 24.7 15.6 CONSTRUCTION BPURI 0.35 0.38 0.65 4.7 4.6 7.5 7.6 0.0 0.0 0.51 -31.4 0.33 7.7 -19.5 GADANG 1.23 1.75 0.23 15.3 14.3 8.1 8.6 2.4 2.4 1.37 -10.2 0.89 39.0 17.1 GAMUDA 5.27 6.00 0.99 27.8 34.5 18.9 15.3 2.3 2.3 5.52 -4.5 4.65 13.3 10.3 IJM 3.28 3.50 0.87 15.3 20.2 21.5 16.2 2.3 2.9 3.61 -9.1 3.07 6.8 2.5 PESONA 0.55 0.78 0.89 4.9 5.7 11.0 9.5 4.6 4.6 0.74 -25.9 0.41 32.9 -9.9 SENDAI 0.93 0.58 1.35 8.2 9.6 11.2 9.7 1.1 1.1 1.39 -33.5 0.46 101.1 60.9 SUNCON 2.32 2.55 na 12.7 14.2 18.3 16.4 2.4 2.4 2.43 -4.5 1.56 48.7 36.5 WCT 1.74 1.61 0.90 11.5 12.5 15.1 14.0 1.7 1.7 2.48 -29.7 1.65 5.5 1.2 LITRAK 5.75 6.26 0.35 41.9 45.7 13.7 12.6 4.3 4.3 6.15 -6.5 5.57 3.2 -2.2 Building Materials CHINHIN 1.28 1.58 na 8.3 11.3 15.5 11.4 3.1 4.7 1.49 -14.1 0.85 51.5 47.1 WTHORSE 1.96 1.67 0.38 6.7 10.0 29.2 19.7 5.1 5.1 2.19 -10.5 1.92 2.1 -2.5 CARLSBG 15.12 18.06 0.56 79.3 86.2 19.1 17.5 5.2 5.7 15.30 -1.2 13.72 10.2 8.6 HEIM 18.48 19.14 0.45 79.6 84.0 23.2 22.0 3.9 4.1 19.58 -5.6 15.56 18.8 12.8 AEON 1.96 2.23 0.44 6.5 7.5 30.1 26.1 2.1 2.4 2.91 -32.6 1.95 0.5 -23.7 AMWAY 7.17 8.62 0.32 30.6 38.7 23.4 18.5 4.5 4.9 8.32 -13.8 7.05 1.7 -2.2 F&N 24.76 27.41 0.20 121.1 150.9 20.5 16.4 2.8 3.0 26.00 -4.8 22.44 10.3 5.5 HUPSENG 1.16 1.50 0.36 6.5 6.6 17.8 17.5 5.2 5.2 1.28 -9.4 1.13 2.6 0.8 NESTLE 85.26 92.76 0.41 292.7 325.4 29.1 26.2 3.2 3.3 85.98 -0.8 74.12 15.0 9.0 CONSUMER Brewery Retail PADINI 4.51 4.67 0.48 23.5 27.0 19.2 16.7 2.5 2.8 4.65 -3.0 2.26 99.5 77.6 POHUAT 1.92 2.46 0.73 27.4 27.4 7.0 7.0 3.1 4.2 2.06 -6.8 1.53 25.5 11.0 QL 3.92 3.26 0.39 12.1 12.8 32.5 30.6 1.1 1.1 4.03 -2.7 3.26 20.4 17.7 SIGN 0.84 1.23 0.84 8.9 12.1 9.4 6.9 3.0 4.2 1.07 -22.0 0.78 7.1 5.0 43.10 52.08 1.22 198.6 187.4 21.7 23.0 4.6 4.6 51.04 -15.6 40.61 6.1 -2.4 GENTING 9.50 11.51 1.46 44.7 53.3 21.3 17.8 1.5 1.7 10.00 -5.0 7.50 26.7 19.6 GENM 5.27 6.53 1.48 22.0 28.4 23.9 18.5 1.5 1.7 6.38 -17.4 4.42 19.2 16.6 BJTOTO 2.37 3.34 0.83 18.4 21.6 12.9 11.0 5.9 6.8 3.30 -28.2 2.25 5.3 -19.9 LUSTER 0.13 0.15 2.11 0.4 0.3 37.0 37.3 0.0 0.0 0.16 -18.8 0.05 160.0 160.0 IHH 5.91 6.41 0.75 7.9 13.1 74.5 45.2 0.6 0.6 6.60 -10.5 5.54 6.7 -6.9 KPJ 1.04 1.17 0.40 3.3 4.1 31.4 25.6 5.9 7.2 1.14 -8.8 0.96 8.1 -0.5 HARTA 6.94 6.87 0.60 17.1 24.6 40.5 28.3 1.2 1.6 7.40 -6.2 4.53 53.2 43.7 KOSSAN 6.90 7.35 0.10 33.9 40.0 20.3 17.3 2.5 2.9 7.36 -6.3 5.62 22.8 4.7 SUPERMX 1.76 1.80 0.31 10.6 15.2 16.6 11.6 1.9 2.6 2.38 -26.1 1.69 4.1 -16.6 TOPGLOV 5.65 6.05 -0.29 26.4 29.8 21.4 18.9 2.4 2.7 5.94 -4.9 4.56 23.9 5.6 KAREX 1.59 1.60 0.24 2.8 4.6 57.0 34.3 1.3 0.7 2.62 -39.3 1.37 16.1 -32.6 SCIENTX 8.66 9.38 0.41 52.3 64.9 16.6 13.3 1.8 2.1 9.85 -12.1 6.50 33.2 29.3 SKPRES 1.65 1.75 0.57 8.3 10.4 20.0 15.9 2.5 3.1 1.65 0.0 1.24 33.1 27.9 ASTRO 2.83 3.40 1.21 13.2 14.6 21.4 19.4 4.4 4.6 2.94 -3.7 2.47 14.6 8.8 MEDIA PRIMA 0.86 0.60 0.35 0.9 2.8 100.9 30.5 0.8 2.6 1.34 -35.8 0.66 31.3 -25.2 STAR 1.70 1.00 0.61 3.3 4.0 51.3 42.1 24.7 10.6 2.22 -23.3 1.63 4.3 -12.7 Tobacco BAT GAMING Casino NFO HEALTHCARE Hospitals Rubber Gloves INDUSTRIAL MEDIA OIL & GAS DNEX 0.49 0.75 1.19 3.6 4.5 13.4 10.7 2.1 2.1 0.69 -29.7 0.23 115.6 90.2 LCTITAN 5.37 6.88 na 44.1 65.0 12.2 8.3 3.4 6.0 6.53 -17.8 4.14 29.7 -17.4 MHB 0.78 0.78 1.66 -2.0 -0.5 na na 0.0 0.0 1.16 -33.2 0.63 24.0 -15.3 MISC 7.21 6.56 1.02 56.3 46.9 12.8 15.4 4.2 4.2 7.90 -8.7 7.03 2.6 -1.9 PANTECH 0.70 0.69 1.11 4.0 6.1 17.6 11.4 2.6 3.9 0.71 -1.4 0.44 60.9 57.3 PCHEM 7.32 7.62 1.01 44.3 44.7 16.5 16.4 2.6 2.7 7.80 -6.2 6.54 11.9 4.9 SENERGY 1.45 1.66 2.68 6.6 -0.4 21.9 na 0.7 0.0 2.10 -31.0 1.33 9.0 -10.5 SERBADK 2.64 2.77 na 22.1 25.2 12.0 10.5 2.5 2.9 2.68 -1.5 1.51 74.8 76.0 UMWOG 0.31 0.80 1.63 -12.0 -3.5 na na 0.0 0.0 0.92 -66.9 0.27 11.6 -64.3 0.0 0.0 1.98 -30.3 1.28 7.8 -18.8 Note: UMWOG proposed rights issue of shares. Ex-Target price RM0.43. For more details please refer to 08.05.17 report. UZMA 1.38 1.55 1.23 11.3 12.3 12.2 11.2
11. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company Share Price Target Price (RM) (RM) FGV 1.83 1.52 1.87 IJMPLNT 2.86 3.58 0.37 IOICORP 4.51 4.14 1.28 KFIMA 1.69 1.89 0.50 KLK 24.70 26.18 SIME 9.09 9.80 UMCCA 6.58 7.52 0.41 GLOMAC 0.65 0.60 0.50 HUAYANG 0.82 0.96 0.57 IBRACO 0.92 0.94 na 3.3 10.5 28.1 8.8 2.2 4.4 1.05 IOIPG 1.98 2.23 1.02 18.9 16.9 10.5 11.7 3.0 3.0 2.37 MAHSING 1.51 1.76 0.96 14.3 13.5 10.5 11.2 4.3 4.3 1.65 SNTORIA 0.78 0.98 0.28 6.2 10.3 12.6 7.6 1.3 1.3 1.00 BETA EPS (sen) FY17 PER (X) Div Yield (%) 52weeks 52weeks % Chg FY18 FY17 FY18 FY17 FY18 High Price % Chg Low Price % Chg YTD 1.0 2.5 185.1 71.9 2.7 2.7 2.45 -25.3 1.42 28.9 18.1 12.3 14.1 23.3 20.3 2.4 2.8 3.70 -22.7 2.86 0.0 -15.9 17.3 21.0 26.0 21.4 2.1 3.5 4.81 -6.2 4.30 4.9 2.5 19.9 13.3 8.5 12.7 5.3 5.3 1.96 -13.8 1.65 2.4 -0.6 0.79 103.4 120.4 23.9 20.5 2.1 2.4 25.50 -3.1 23.00 7.4 2.9 1.48 34.2 37.3 26.6 24.3 2.5 2.5 9.70 -6.3 7.71 17.9 12.2 37.5 31.8 17.5 20.7 3.5 2.6 6.83 -3.7 5.50 19.6 10.2 1.4 5.0 44.6 12.8 4.2 4.2 0.80 -19.4 0.61 5.7 -7.2 17.3 10.2 4.8 8.0 4.9 2.4 1.33 -38.3 0.80 2.5 -27.4 -12.9 0.76 21.2 -8.5 -16.4 1.85 7.2 1.6 -8.5 1.34 12.7 5.6 -22.0 0.69 13.0 -2.5 7.9 PLANTATIONS PROPERTY Note: SNTORIA proposed bonus issue of warrants & right issue of shares. For more details please refer to 25.09.17 report. SPB 4.77 5.98 0.54 25.6 22.8 13.4 15.1 2.5 2.5 5.19 -8.1 4.32 10.4 SPSETIA 3.44 4.10 0.91 11.6 12.5 15.5 14.4 4.1 4.1 4.50 -23.6 3.10 11.0 9.9 SUNWAY 1.80 1.78 0.62 15.8 15.3 12.7 13.1 2.8 2.8 1.96 -8.1 1.24 45.3 40.0 SUNREIT 1.74 1.86 0.69 9.2 10.0 18.8 17.3 5.3 5.8 1.84 -5.4 1.63 6.7 1.2 CMMT 1.43 1.72 0.42 8.1 8.6 17.7 16.6 5.9 6.3 1.72 -16.9 1.40 2.1 -6.5 -24.8 REIT POWER & UTILITIES MALAKOF 1.03 1.22 0.65 6.8 6.9 15.1 15.0 6.8 6.8 1.67 -38.3 1.00 3.5 PETDAG 24.30 21.47 0.71 98.2 102.3 24.7 23.8 3.0 3.1 25.70 -5.4 23.00 5.7 2.1 PETGAS 18.50 19.37 0.86 87.6 100.1 21.1 18.5 3.4 3.8 22.28 -17.0 17.80 3.9 -13.1 TENAGA 14.20 17.38 0.77 131.8 130.4 10.8 10.9 3.1 3.2 14.80 -4.1 13.00 9.2 2.2 YTLPOWR 1.41 1.40 0.77 8.4 11.4 16.8 12.3 3.5 3.5 1.64 -14.0 1.36 3.7 -5.4 12.1 TELECOMMUNICATIONS AXIATA 5.29 5.40 1.29 15.7 16.9 33.8 31.3 1.5 1.6 5.40 -2.0 4.11 28.7 DIGI 4.88 4.90 0.84 20.0 20.4 24.4 23.9 4.1 4.2 5.19 -6.0 4.63 5.4 1.0 MAXIS 5.85 5.85 0.72 24.5 24.7 23.9 23.7 3.4 3.4 6.60 -11.4 5.48 6.8 -2.2 TM 6.15 7.40 0.63 22.7 23.4 27.1 26.3 3.3 3.4 6.75 -8.9 5.81 5.9 3.4 ELSOFT 2.61 3.00 0.54 11.3 14.1 23.1 18.5 3.0 3.8 2.95 -11.5 1.27 106.2 85.9 IRIS 0.18 0.25 1.59 -1.3 0.6 na 31.6 0.0 0.0 0.22 -20.5 0.10 75.0 59.1 INARI 2.63 2.75 0.84 11.3 13.0 23.3 20.2 3.7 3.5 2.65 -0.5 1.59 65.1 58.8 MPI 14.40 15.40 0.12 89.5 110.2 16.1 13.1 1.9 1.9 14.50 -0.7 7.20 100.0 94.3 UNISEM 3.95 4.30 0.65 26.9 32.1 14.7 12.3 3.0 3.0 4.25 -7.1 2.27 74.0 67.4 TECHNOLOGY Semiconductor & Electronics TRANSPORTATION Airlines AIRASIA 3.40 3.76 0.95 44.0 37.6 7.7 9.0 1.2 1.5 3.59 -5.3 2.16 57.4 48.5 AIRPORT 8.35 8.10 1.22 17.3 17.7 48.2 47.2 1.2 1.2 9.45 -11.6 5.91 41.3 37.8 TNLOGIS 1.54 1.80 0.89 12.8 15.9 12.0 9.7 2.8 3.2 1.83 -16.0 1.48 4.0 -1.2 WPRTS 3.87 4.05 0.79 17.1 15.1 22.6 25.6 3.3 2.9 4.45 -13.0 3.58 8.1 -10.0 Freight & Tankers SNAPSHOT OF FOREIGN STOCKS UNDER COVERAGE Company Share Price Target Price (S$) (S$) Beta EPS (cent) FY17 FY18 PER (X) FY17 FY18 Div Yield (%) FY17 FY18 52week 52week % Chg High Price % Chg Low Price % Chg YTD BANKS & FINANCIAL SERVICES DBS 21.35 23.30 1.23 172.9 189.2 12.4 11.3 2.8 2.8 22.3 -4.0 14.80 44.3 23.1 OCBC 11.34 12.00 1.19 87.7 92.4 12.9 12.3 5.7 6.7 11.5 -1.3 8.84 36.1 27.1 UOB 24.07 25.40 1.05 192.9 206.5 12.5 11.7 2.9 2.9 24.6 -2.2 17.98 33.9 18.0 PLANTATIONS WILMAR 3.34 3.72 0.88 28.9 31.1 11.5 10.7 2.4 2.7 4.0 -16.5 3.08 8.4 -7.0 IFAR 0.45 0.53 1.06 4.9 5.2 9.3 8.7 2.6 2.8 0.6 -24.4 0.44 3.4 -14.3 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.
12. INITIATION COVERAGE Thursday , October 12, 2017 FBMKLCI: 1,757.21 Sector: Transportation THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* TP: RM0.44 (+53.2%) Perak Transit Berhad Last Traded: RM0.285 A First Choice Terminal Operator Tan Kam Meng, CFA BUY Tel: +603-2167 9605 kmtan@ta.com.my EXECUTIVE SUMMARY We initiate coverage on Perak Transit with a Buy recommendation. Our target price of RM0.44/share is based on 10% discount to the group’s RNAV of RM0.49/share. Perak Transit is principally involved in operations of integrated public transportation terminal and provision of public bus services. It is also involved in petrol sales business. Investment case: 1. A proven business model; 2. Viable future expansion; and 3. Sound financial planning. We expect Perak Transit’s core earnings to expand further by 19.8% for FY18 from estimated core profit of RM25.8mn for FY17 before hitting another record high of RM44.8mn in FY19 and RM48.9mn in FY20. Our earnings projections are premised on assumptions below: i. Increase in A&P rental in Terminal AmanJaya by 3-5% for FY18-20; ii. Terminal Kampar to contribute A&P rental income of RM11.4mn and RM12.6mn for FY19 and FY20 respectively; iii. We assume occupancy rate of 50% and 60% and rental rate of RM5.0-5.15psf for FY19-20 for Terminal Kampar; iv. Project facilitation fee of RM15mn each for FY18, FY19 and FY20; v. Effective tax rate of 14% for FY18 and 10% for FY19 and FY20; and vi. We omit Terminal AmanJaya Phase 2, Terminal Bidor and Terminal Tronoh developments during the forecast period. www.taonline.com.my Share Information Bloomberg Code PERAK MK Stock Code 0186 Listing Ace Market 1257.2 Share Cap (mn) Market Cap (RMmn) 358.3 0.382/0.141 52-wk Hi/Lo (RM) 9,534.9 12-mth Avg Daily Vol ('000 shrs) Estimated Free Float (%) 55.6 na Beta Major Shareholders (%) Dato' Sri Cheong & family - 38.9% Tan Sri Dato' Sri Koh Kin Lip - 5.5% Forecast Revision Forecast Revision (%) FY17 - FY18 - Net profit (RMmn) 25.8 28.6 Consensus 25.6 28.0 TA's / Consensus (%) Previous Rating 101.1 102.4 - (Initiation coverage) Financial Indicators FY17 FY18 Net gearing (x) 0.5 0.5 CFPS (sen) 0.3 (0.4) P/CFPS (x) 81.8 nm ROAA (%) 7.3 7.2 ROAE (%) 12.3 12.5 NTA/Share (RM) 0.2 1.6 0.2 1.5 PTRANS FBM KLCI Price/ NTA (x) Share Performance (%) Table 1: Earnings Summary (RMmn) FYE Dec Revenue EBITDA EBITDA margin (%) Dep. & amor. Net finance costs EI Adj. PBT Tax MI Net profit Core net profit Core EPS (sen) EPS Growth (%) PER (x) EV/EBITDA (x) DPS (sen) Div Yield (sen) FY16 90.2 40.2 44.6 (7.9) (7.3) (0.0) 25.3 (3.5) (0.2) 21.6 21.6 2.3 nm 12.4 10.3 nm nm FY17F 102.8 46.5 45.2 (8.0) (8.4) 0.0 30.2 (4.2) (0.2) 25.8 25.8 2.1 (10.3) 13.9 9.8 0.6 2.2 Price Change FY18F 111.3 49.5 44.4 (7.7) (8.4) 0.0 33.5 (4.7) (0.2) 28.6 28.6 2.3 10.8 12.5 9.7 0.7 2.4 FY19F 137.5 68.5 49.8 (7.5) (11.2) 0.0 50.0 (5.0) (0.2) 44.8 44.8 3.6 56.5 8.0 6.5 1.1 3.8 FY20F 143.9 73.1 50.8 (7.2) (11.6) 0.0 54.5 (5.4) (0.2) 48.9 48.9 3.9 9.0 7.3 5.5 1.2 4.1 1 mth (16.2) (1.8) 3 mth 8.0 (0.0) 6 mth 33.2 909.4 12 mth 69.6 5.4 (12-Mth) Share Price relative to the FBMKLCI Source: Bloomberg Page 1 of 15
13. 12-Oct-17 BACKGROUND Perak Transit is principally involved in operations of Terminal AmanJaya , an integrated public transportation terminal, and provision of public bus services. It is also involved in petrol sales business with operations of 4 petrol stations, one each in Lahat (Shell), Tanjung Rambutan (Shell), Terminal AmanJaya (BHP) and Lubok Merbau (Petron). Terminal AmanJaya (see Appendix 1) is an integrated public transportation terminal and the only gazetted express bus terminal in Ipoh. It houses 17 express bus departure bays, 5 express bus arrival bays and 40 holding bays within a 3-storey building complex. Total building area is 208,802sf of which 49,291sf can be leased to potential tenants and the remaining area used as promotional space for rental income. Perak Transit possesses an undeveloped area at Terminal AmanJaya, measuring 135,721sf, for future expansion. In 2014, Perak Transit achieved a stage bus ridership market share of 97.8% in Ipoh. In Terminal AmanJaya, the number of ticket purchasing passenger increased to 842,907 in 2016 from 822,775 a year ago (760,740 for 2014). Currently, the company has a fleet size of 171 buses, comprising 119 stage buses and 52 express buses with average age of below 5 years. As far as earnings are concerned, Perak Transit has 3 major income sources, i.e.: 1) income derived from terminal operations; 2) provision of public bus services, and 3) petrol station operations. Income derived from terminal operation includes rental of advertising and promotional space, rental of shops and kiosks, project facilitation fees, bus and taxi entrance fee, car park and lavatory fees. In FY16, these three divisions provided significant revenue to the group in the range of 27-41%. However, at the pre-tax level, the terminal operations provided the bulk of the earnings (85%) given the higher margin from rental and project facilitation fee versus public bus service and petrol stations (see Figure 1 & 2). Figure 1: FY16 revenue breakdown Figure 2: FY16 PBT breakdown Petrol stations, 3% Public transport, 12% Petrol stations, 32% Public transport, 27% Integrated public transportation , 41% Integrated public transportation , 85% Source: Perak Transit & TA Securities Page 2 of 15
14. 12-Oct-17 MAJOR SHAREHOLDER Dato ’ Sri Cheong Kong Fitt is the managing director of Perak Transit. He is also the founder of The Combined Bus, which owns and operates Terminal AmanJaya, petrol station and public transport. Dato’ Sri Cheong is actively engaged in day-to-day operations and instrumental in bringing the company to list on Bursa Malaysia. Under his stewardship, Perak Transit was accredited with a number prestige awards in the respective field, including Asia Success “Super Services Quality”, Truck Of The Year Award 2015, 3rd Position Winner of the Best Terminal Award and Best Upcoming Terminal, to name a few. Currently, Dato’ Sri Cheong and family effectively own 38.9% stake in Perak Transit. Other than Dato’ Sri Cheong, Tan Sri Dato’ Sri Koh Kin Lip is also the substantial shareholder with respective interest of 5.5% in the company. Perak Transit’s public spread is healthy at 55.6%, equivalent to approximately 699mn shares. INDISTRY OUTLOOK Perak Transit is involved in a heavily regulated business, which involves public interest. As such, operations are highly scrutinised by authorities for the betterment of the society. Given this reason, we opinion that the level of competition in the integrated public transportation terminal and stage bus operations is essentially null (see Figure 3). Figure 3: Low competition in terminal and stage bus operation Entry barriers: High Supplier bargaining power: High Rivalry threat: Low Customer bargining power: Low Substitute threat: Low 1. Entry barrier - High: The barrier to entry is high as the industry is highly regulated. In 2014, the Land Public Transport Commission (SPAD), the governing body of land transportation matters, had identified Terminal AmanJaya as the only gazetted express bus terminal in Ipoh, Perak. Furthermore, the authority also granted operator licenses to Perak Transit to operate express and stage bus in Ipoh. Last but not least, business license is required to run a petrol station in Malaysia. 2. Rivalry among players - Low: Rivalry is low given that Terminal AmanJaya is essentially a monopolistic corporation. The same is applicable to stage bus operations where Perak Transit has garnered 97% of market share. For express bus and petrol stations, the rivalry is relatively high. 3. Bargaining power of buyer - Low: The advertisers and tenants, who Page 3 of 15
15. 12-Oct-17 contributed the most to the group ’s revenue (41%) and PBT (85%) in FY16, have low bargaining power owing to limited space available for advertisement and rent at Terminal AmanJaya. For bus operations and petrol station, the bargaining power of buyer is also low as bus fares and petrol pump price are regulated. 4. Bargaining power of supplier - High: In this case, SPAD and other authorities like Ipoh Council can be considered as suppliers for the operations of Terminal AmanJaya and petrol stations. In addition, we view bus drivers as appropriate suppliers too as they will carry out the transportation services. We believe the bargaining power of supplier is high due to scarcity of bus drivers and also the heavy influence that SPAD has over Perak Transit. 5. Threat of substitute - Low: Threat of substitute is low for Terminal AmanJaya as all express buses are mandated to pick up and drop off passengers at the terminal. For express bus operations, train service and budget airline could be viewed as closest competitors. However, express bus has the advantage in terms of fare, frequency and route flexibility. As such, the threat of substitute is low, in our opinion. INVESTMENT CASE 1) A Proven Business Model i. A first choice terminal operator. The commendable foresight of Dato’ Sri Cheong in transforming and consolidating bus operations in Ipoh has yielded Perak Transit to be the market leader, controlling over 97% of market share of stage bus operations in Ipoh. We understand that this has created a golden opportunity for the company to participate in a project known as integrated transport terminal, one of the initiatives of SPAD to enhance the level of services of express bus stations. ii. Gazetted express bus terminal assured stable footfall. Built in 2012 and recognised by SPAD in 2014 as the only gazetted express bus terminal in Ipoh, Perak, Terminal AmanJaya is not only important to the people in Ipoh, but also to the state of economy. Since commencement of operations, the terminal has experienced a steady growth in passenger footfall (see Figure 4) and this has spelled opportunities for many small businesses finding a variety of niches, from F&B and retail outlets to entertainment centre and hotel operations. Figure 4: Number of ticket-purchasing passengers 900000 800000 400000 2016 642452 2015 573022 500000 842907 760740 600000 822775 700000 300000 10M13 2014 8M17 Source: Perak Transit & TA Securities Page 4 of 15
16. 12-Oct-17 iii . Fostering business opportunity and growth. Given the crowd-pulling factor, Terminal AmanJaya has become a magnet for many small businesses. Also, it has been a perfect location for advertisements too. Since commencement of terminal operations, Perak Transit leased most of the areas within the terminal to agents specialised in event management and advertising and reserved only a small area for 46 ticket counters (see Appendix 1.3-1.6). Currently, the company receives monthly rental incomes of RM1,031,500 and RM728,000 from Century Edge and Angkasa Aman respectively for leasing of promotional space and advertising space in the terminal. Collectively, both rentals amounting to RM1.76mn per month are the largest income contributors to the company. Note that yearly rental negotiation would usually start in January and the renewal would be effective in April. To-date, rental rates are maintained at RM1,031,500 and RM728,000 for Century Edge and Angkasa Aman. iv. Digitised advertisement and centralised ticketing system. Besides the normal inflation-adjusted rental adjustments every year, Perak Transit has converted some of the advertising areas from printing mode to digital mode (Appendix 1.5), which would likely increase rental further in 2018 as digitised A&P allows more advertisements at any given space. On the promotional space front, the group is currently discussing with 46 bus operators who operate at Terminal AmanJaya that Perak Transit will provide and implement centralised ticketing system for express bus operations. This is a win-win strategy as bus operators could potentially save rental payments for ticket counters and ticketing while Perak Transit could free up more space for promotional events. According to management, full implementation of the system can be expected in 2018. v. Transformation of ISBSF to SBST. Both Interim Stage Bus Support Fund (ISBSF) and Stage Bus Service Transformation (SBST) are SPAD’s programmes that regulate stage bus operations in Ipoh. The difference between the two is that the former allows Perak Transit to cover the shortfalls in daily operations. Meanwhile, the latter is based on “cost per vehicle-km run” method whereby the company will be paid on total distance travelled, regardless of passenger load. vi. Increasing SBST routes will enhance revenue. As part of SPAD’s initiative to enhance the public bus service, ISBSF is expected to be gradually phased out and replaced by SBST. Note that Perak Transit is currently running 19 routes compared to 6 last year under the SBST system. This was the main reason behind the revenue growth of 39.9% for bus operation division in 1H17. vii. Project facilitation fee. The completion of Terminal AmanJaya also created a valuable by-product, ie: project facilitation fee. This fee, which is fixed at certain percentage (usually between 2-3%) of estimated project cost of a new bus terminal, will be paid upfront to Perak Transit for the provision of concept papers in building and operating a new express bus terminal. In the past, Perak Transit received RM13.9mn project facilitation fee in FY16 (RM9.7mn in FY15 and RM3.8mn in FY14), representing 15.4% of the group’s FY16 total revenue (13.0% and 4.9% of respective FY15 and FY14 total revenue). As a by-product, the fee usually carries substantial margins of estimated 80% at gross level. Page 5 of 15
17. 12-Oct-17 2 ) Future Expansion i. Special discount for land purchase. The success of Terminal AmanJaya has proven to be a core factor in driving up land value in the vicinity. As such, Perak Transit has been a favourite partner to developers, who are involved in major township development. Given the ability to enhance land value, Perak Transit is well aware of its bargaining power and always purchase land at a discount. According to announcements, Perak Transit acquired lands in Bidor and Tronoh, Perak, measuring 4.9 acres and 16.64 acres, respectively. The transacted price for Bidor land of RM2.6mn (RM12.0psf) and Tronoh land of RM8.0mn (RM11.0psf) was at a discount of 38.8% and 26.6%. For the more immediate project in Kampar, we understand that the land cost of RM1.3mn (RM8.0psf) was also a great bargain for two parcels of leasehold land measuring 3.72 acres. ii. Terminal Kampar as second growth driver. Bidor and Tronoh land transactions are conditional on the conversion of land title. After that, Perak Transit will have three terminals, i.e.: Terminal Kampar, Terminal Bidor and Terminal Tronoh, and one terminal expansion, i.e. Terminal AmanJaya Phase 2, in the pipeline to fuel future income growth. For the immediate term, Perak Transit has Terminal Kampar as a replication of the success of Terminal AmanJaya. iii. Slight difference between T.Kampar and T.AmanJaya. There are estimated 10 bus operators operating at Terminal Kampar versus 46 at Terminal AmanJaya. As such, the area allocated for bus operations will be smaller for Terminal Kampar but the area allocated for commercial activities is estimated 8x larger than Terminal AmanJaya. Touted as the only commercial and entertainment hub in town with estimated population of estimated 100,000, the earnings potential of Terminal Kampar is expected to be at least equal, if not more than Terminal AmanJaya, when all the commercial areas are tenanted out. Note that Perak Transit will adopt the same proven strategy in managing Terminal Kampar, ie: outsoucing rentals of A&P spaces to specialised agents. iv. Capex of RM128mn for T.Kampar. RM128mn has been budgeted for the construction of Terminal Kampar and Perak Transit would finance this via a combination of IPO proceeds (RM20mn), term loan (RM90.0mn), overdraft (RM10.0mn) and internal funds (RM8.0mn). To-date, the construction progress has already reached approximately 30% completion (see Appendix 2.1). Recently, the Ministry of Finance has granted and approved the “Approved Service Project” status for this project. This status will allow Perak Transit to claim up to 60% of capex and use it to offset 70% of taxable income for assessment period beginning 2016 to 2020. v. Unutilised tax allowance of RM90mn. According to management, the unutilised tax allowance amounted to approximately RM90mn as at June-17. Besides that, Perak Transit is also expected to government grant (est. 10% of project cost) for public service project. Considering both tax allowance and government grant, the effective construction cost of Terminal Kampar is much lower at estimated RM96.8mn if we reduce the construction cost with the amount of savings from grant and tax incentive. vi. Gazetted terminal in Kampar. In our opinion, the “Approved Service Project” status is as credible as recognition from SPAD that Terminal Kampar would be the only gazetted express terminal in Kampar. Note that the recognition can only be granted when the terminal is completed by end18. vii. AmanJaya Phase 2 comes after Terminal Kampar. According to management, Terminal AmanJaya Phase 2 is earmarked to be the next driver after Terminal Kampar to fuel future earnings growth. The Phase 2 Page 6 of 15
18. 12-Oct-17 project site (see Appendix 3) is currently being used as a holding bay. So to kick start the project, the company would close down some of the area. Nonetheless, the Phase 2 construction is not expected to affect the operations of Terminal AmanJaya significantly and it would only commence after the Terminal Kampar is completed. 3) Sound Financial Planning i. Warrants are deep in the money. 2 points to ponder when the group proposed a bonus issue of 1 share for every 10 shares and 1 free warrant for every 2 shares recently are: 1) why is the issuance of warrant larger than the bonus issue, i.e.: 2 warrants and 0.1 bonus share for every 1 share, which has huge implication on diluted EPS?, and 2) why is the strike price (RM0.235) fixed at a deep discount and the duration is only 3 years not 5? Obviously, the group intends to fully capitalise the share premium it possesses. However, we come to know that this is also a part of the group’s long term financial planning for shareholders can take part in future projects (Terminal Kampar, Terminal AmanJaya Phase 2, Terminal Bidor and Terminal Tronoh) by injecting more capital into the company via warrant conversion over the next three years. Assuming full conversion, Perak Transit would receive additional capital of RM134mn, equivalent to 37% of current market cap, which sufficiently meet the 30% equity financing for each project. ii. Dividend payment of 25% of earnings. As at June-17, Perak Transit’s net gearing ratio stood at 0.5x with current ratio at 1.9x. We expect the financial gearing to increase due to additional borrowings needed for Terminal Kampar. In our opinion, the 0.5x is low for any asset-heavy companies, where the assets are profitable and cash-generative. This implies that there are ample debt headroom. For dividend, Perak Transit has a policy to pay out 25% of earnings as dividend. In our forecast, we assume a higher payout ratio of 30% for FY17-19, which equivalent to dividend yield of 2.2-3.8%, after taking into account: 1) Perak Transit has already secured the financing needs for Terminal Kampar; and 2) higher dividend may encourage warrant conversion. FINANCIAL HIGHLITHGS 1) 1H17 Results Review i. Revenue growth + Margin expansion. Perak Transit recorded revenue and earnings growth of 45.1% and 92.7% YoY to RM55mn and RM13.8mn respectively. The decent growth can be attributed to: 1) a lower rental of 12% in 1Q16 before rental reversion effective Apr-16; 2) increase in stage bus route to 19 from 6 under the SBST programme; and 3) increase in project facilitation fee. 1H17 PBT margin expansion to 31.7% from 23.7% a year ago was due to favourable earnings mix. ii. Effective tax < Statutory tax rate. The effective tax rate for 1H17, ie: 20.4% was lower than the statutory tax rate of 24% in Malaysia. This was due to utilisation of tax allowance. iii. Payout ratio of 40% of 1H17 EPS. For this period, the company proposed and paid 2 interim dividends amounted to 0.45sen/share. This is equivalent to a payout of 40.0% on 1H17 EPS. Page 7 of 15
19. 12-Oct-17 2 ) Assumptions Forecast. Looking forward, we expect Perak Transit’s core earnings to expand further by 19.8% in FY18 from estimated core profit of RM25.8mn for FY17 before hitting another record high of RM44.8mn in FY19 and RM48.9mn in FY20. Our earnings projections are premised on assumptions below. i. Increase in A&P rental in Terminal Amanjaya by 5% effective Apr-18. A&P rental is projected to increase further by 3% each for FY19 and FY20; ii. Maiden contribution from Terminal Kampar in FY19 with potential A&P rental income of RM11.4mn and RM12.6mn for FY19 and FY20 respectively. This is half of what the company is projected to achieve in Terminal AmanJaya for FY19 and FY20; iii. Terminal Kampar to have a total leasable area of 400,000sf, which is 8x larger than Terminal AmanJaya as guided by management. We assume occupancy rate of 50% and 60% and rental rate of RM5.0-5.15psf for FY1920; iv. Project facilitation fee of RM15mn each for FY18, FY19 and FY20; v. Effective tax rate to decline further to 10% in FY19 and FY20 (from estimated 14% in FY18) when more income are qualified to claim tax allowance; and vi. We omit Terminal AmanJaya Phase 2, Terminal Bidor and Terminal Tronoh developments during our forecast period as management has not approved any development budgets for these projects. Risks The major risk to Perak Transit relates to the company’s single key asset, which gives rise to earnings concentration risk. Currently, close to 80% of earnings were generated from Terminal AmanJaya. As such, earnings will be severely affected by any unforeseen events that will lead to closure of terminal. RECOMMENDATION Bus terminal vs Airport vs Seaport. There is no direct comparable business listed on Bursa Malaysia. However, we view that the nature of business of gazetted integrated public transportation terminal is somewhat similar to airport terminal and seaport terminal as these assets and operations are highly regulated. Besides that, the business is asset-heavy and companies are heavily indebtedness. More importantly, these terminals are cashgenerating and received a lot of government support in terms of grants and tax incentives. Low trading PE. Coming from that angle, we consider Perak Transit’s current trading PE of 12.0x CY18 EPS is low given that forward PE of Malaysia Airports Holdings (58.7x) and Westports (24.5x) are above 20x. TP: RM0.44/share. Due to earnings misalignments (ie: integrated public transportation terminal generates the bulk of revenue while petrol stations incur the most of cost of goods sold), we use sum-of-parts valuation method to dissect Perak Transit business into 3 parts. For bus terminal, we adopt DCF approach in valuing Terminal AmanJaya and Terminal Kampar. For bus operations and petrol stations, we peg a PE of 10x on CY18 earnings. As a whole, we derive a target price of RM0.44/share, which represents a discount of 10% of the group’s RNAV. We believe the 10% discount has adequately priced in the project risk for Terminal Kampar. Potential upside 53.2%, Buy. With a total upside potential of 53.2%, we initiate coverage on Perak Transit with a Buy recommendation. Page 8 of 15
20. 12-Oct-17 SOP Valuation (RM’mn) WACC Growth Debt balance RNAV (%) 7.7% 7.7% (%) 3.0% 3.0% 10x CY18 EPS 10x CY18 EPS (RM'mn) 78.8 100.0 (RM'mn) 369.3 284.4 90.3 8.9 Terminal AmanJaya Terminal Kampar Bus operation Petrol station Sub-total Conversion of warrant Enlarged share base (mn shares) Fair value (RM/share) Discount Target price (RM/share) 752.9 134.3 1828.7 0.49 10% 0.44 Weightage Debt Equity 70.0% 30.0% Cost of debt 6.8% Cost of equity 13.6% WACC 7.7% Earnings Summary Profit & Loss (RMm) Balance Sheet (RMm) YE Dec 31 2016 2017F 2018F 2019F 2020F YE Dec 31 Revenue 90.2 102.8 111.3 137.5 143.9 PPE EBITDA 40.2 46.5 49.5 68.5 73.1 Others Dep. & amortisation (7.7) (7.8) (7.5) (7.3) (7.0) Total Fixed Asset 2016 T. Receivable 2017F 2018F 2019F 2020F 248.5 281.7 323.6 316.4 309.4 7.2 7.2 7.2 7.2 7.2 255.7 288.9 330.9 323.6 316.6 Net finance cost (7.3) (8.4) (8.4) (11.2) (11.6) 23.69 22.54 24.38 30.14 31.55 PBT 25.3 30.2 33.5 50.0 54.5 Cash 33.2 21.8 40.5 80.7 96.9 Taxation (3.5) (4.2) (4.7) (5.0) (5.4) Others 30.8 31.3 31.4 31.8 31.9 MI (0.2) (0.2) (0.2) (0.2) (0.2) CA 87.6 75.6 96.3 142.6 160.3 Net profit 21.6 25.8 28.6 44.8 48.9 Core net profit 21.6 25.8 28.6 44.8 48.9 343.3 364.5 427.2 466.2 476.9 2.5 2.1 2.3 3.6 3.9 Total assets Reported EPS (diluted) (sen) Core EPS (diluted) (sen) 2.3 2.1 2.3 3.6 3.9 ST debt 31.1 31.1 36.1 41.1 26.1 (x) 13.9 12.5 8.0 7.3 0.0 Other liabilities 11.1 14.0 16.5 18.9 20.3 0.6 2.2 0.7 2.4 1.1 3.8 1.2 4.1 CL Total Equity 42.2 201.5 45.1 219.7 52.6 239.9 60.1 271.5 46.4 305.9 114.3 PER GDPS Div Yield (sen) (%) nm nm Cash Flow (RMm) YE Dec 31 2016 2017F 2018F 2019F 2020F PBT 25.3 30.2 33.5 50.0 54.5 7.7 7.8 7.5 7.3 7.0 Changes in WC (14.9) 3.6 0.5 (3.7) (0.1) 5.2 3.8 3.0 2.5 1.7 Operational cash flow 23.2 45.4 44.6 56.0 63.1 Dep. & amortisation LT borrowings 89.3 89.3 124.3 124.3 LT liabilities 10.3 10.3 10.3 10.3 10.3 Total LT Liabilities 99.6 99.6 134.6 134.6 124.6 343.3 364.5 427.2 466.2 476.9 2016 2017F 2018F 2019F 2020F 17.0 Equity & Liabilities Ratio YE Dec 31 Profitability ratios Capex (49.8) (41.1) (49.5) 0.0 0.0 ROE (%) 13.2 12.3 12.5 17.6 Others (4.2) 0.0 0.0 0.0 0.0 ROA (%) 7.1 7.3 7.2 10.0 10.4 (49.5) 0.0 0.0 EBITDA Margins (%) 44.6 45.2 44.4 49.8 50.8 PBT Margins (%) 28.0 29.4 30.1 36.3 37.9 40.0 5.0 (25.0) Investment cash flow (54.0) (41.1) Debt raised/(repaid) 20.1 0.0 Equity raised(repaid) 36.8 0.0 0.0 0.0 0.0 Dividend (2.3) (7.8) (8.6) (13.4) (14.7) Others (12.9) (8.0) (7.7) (7.5) (7.2) Financial cash flow 41.6 (15.8) 23.7 (15.9) (46.9) Net cash flow 10.9 (11.4) 18.8 40.1 16.2 Assumptions Liquidity ratios Current ratio (x) 2.1 1.7 1.8 2.4 3.5 Quick ratio (x) 2.1 1.6 1.8 2.3 3.4 Liabilities / equity (x) 0.7 0.7 0.8 0.7 0.6 Net debt / Equity (x) 0.4 0.5 0.5 0.3 0.1 Leverage ratios Growth ratios YE Dec 31 2016 2017F 2018F 2019F 2020F Revenue (%) 21.7 14.0 8.2 23.6 4.7 Trans. Terminal (RM mn) 37.0 37.0 40.9 65.8 70.6 Pretax Profit (%) 31.3 19.6 10.8 49.3 9.0 Public transport (RM mn) 24.6 30.9 32.2 33.7 35.3 Coreearnings (%) 13.0 19.8 10.8 56.5 9.0 Petrol stations (RM mn) 28.6 34.9 38.1 38.1 38.1 Total assets (%) 28.4 6.2 17.2 9.1 2.3 Page 9 of 15