Bursa Malaysia Daily Market Report - 16 June

Transcription

1. Friday , 16 June, 2017 For Internal Circulation Only TA RESEARCH’S ‘DAILY COMPILED REPORTS’ News 1. Daily Market Commentary 2. Daily Brief Fundamental Reports 1. Banking Sector: Earnings Momentum Envisaged to Accelerate 2. IJM Corporation Berhad: Secured Package S203 of MRT Line 2 Technical Reports 1. Daily Technical Stock Picks 2. Daily Stock Screen 3. Foreign Technical Stock Watch (AUS, HK & FSSTI) 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. for TA SECURITIES HOLDINGS BERHAD (14948-M) MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 (A Participating Organisation of Bursa Malaysia Securities Berhad) Kaladher Govindan – Head of Research
2. Daily Note Daily Market Commentary Friday , 16 June 2017 For Internal Circulation Only (A Participating Organisation of Bursa Malaysia Securities Bhd) Menara TA One, 22 Jalan P Ramlee, 50250 Kuala Lumpur Tel : 603 - 2072 1277. Fax : 603 - 2032 5048 TA Research e-mail : taresearch@ta.com.my Review & Outlook Stocks settled slightly lower Thursday, in line with softer regional markets after the US Federal Reserve raised interest rates for the second time this year and guided for one more hike in 2017. The KLCI dipped 2.34 points to close at 1790.01, off an early high of 1,795.01 and low of 1,788.27, as losers beat gainers 546 to 346 on moderate turnover of 1.99bn worth RM2.27bn. KLSE Market Statistics (15.06.2017) (mil) Main Market 1,386.2 Warrants 283.9 ACE Market 297.7 Bond 20.9 ETF 0.0 Total 1,988.7 Off Market 39.8 Volume +/-chg (RMmn) 9.4 2,146.1 104.8 30.2 -81.7 81.0 7.4 10.2 -0.03 0.0 2,267.6 -11.2 80.6 Value +/-chg -238.3 10.4 0.8 5.0 -0.03 - Major Indices Index +/- chg Malaysia FBMKLCI FBMEMAS FBMSCAP June 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) 24.0 5.0 3.0 1.9 1.5 1.4 1.0 1.0 Up Down 243 395 71 85 30 56 2 5 0 0 346 541 % chg % YTD chg 1,790.01 12,757.32 17,487.05 1,792.00 -2.34 -26.26 -39.53 -0.50 -0.13 -0.21 -0.23 -0.03 9.03 11.26 18.83 9.57 21,359.90 6,165.50 7,419.36 19,831.82 2,361.65 25,565.34 3,232.09 1,573.53 5,776.28 3,132.49 1,869.71 5,763.19 -14.66 -29.39 -55.04 -51.70 -10.99 -310.56 -21.34 -3.47 -16.61 1.81 16.93 -70.71 -0.07 -0.47 -0.74 -0.26 -0.46 -1.20 -0.66 -0.22 -0.29 0.06 0.91 -1.21 8.08 14.53 3.87 3.75 16.54 16.20 12.20 1.98 9.05 0.93 -5.05 1.72 Top 10 KLCI Movers Based on Mkt Cap. Off Market MAYBANK BKAWAN SERNKOU SMRT BIMB APPASIA VOIR-WA SNTORIA Value/ Volume 1.55 0.11 0.27 0.49 0.00 1.14 2.03 (RM) @ 9.62 @ 18.70 @ 1.12 @ 0.21 @ 4.50 @ 0.25 @ 0.55 @ 0.86 Exchange Rate USD/MYR 4.2680 0.0107 USD/JPY 109.69 -0.5600 EUR/USD 1.117 -0.0039 Counter PBBANK SIME PCHEM MAXIS AXIATA DIGI GENTING GENM IOICORP KLK Mkt Cap. (RM’mn) 78,697 65,356 57,280 45,138 44,601 38,564 37,151 32,594 28,089 26,347 Chg (RM) -0.02 -0.01 -0.06 -0.07 -0.01 -0.01 -0.03 -0.10 -0.02 -0.06 Vol. (mn) 1.50 6.60 8.43 1.34 4.11 2.86 2.94 6.40 2.99 1.93 Commodities Futures Palm Oil (RM/mt) 2,451.00 30.00 Crude Oil ($/Barrel) 44.24 -0.44 Gold ($/tr.oz.) 1,255.50 -7.00 Important Dates JHM - 1:1 Bonus Issue - BI of 123.7m shares. 1 bonus share for every 1 existing share. Ex-Date: 15/06/2017. Entitlement Date: 19/06/2017. LISTING ON: 20/06/2017. SEG - 5:7 Bonus Issue - BI of 516.8m shares. 5 bonus shares for every 7 existing shares. Ex-Date: 22/06/2017. Entitlement Date: 28/06/2017. LISTING ON: 29/06/2017. Questions over the US central bank's plan for a gradual pace on raising interest rates and shrinking the bloated balance sheet should keep most investors sidelined ahead of the weekend. Immediate uptrend supports for the index remains at 1,784 and 1,775, the rising 10 and 30-day moving average levels, followed by better support from the 50-day moving average at 1,764. Immediate upside hurdles are from the 1,800 psychological level and 18 May 2015 high of 1,823. Kim Lun should rebuild support above the steadily rising 100-day (RM2.23) and 200-day (RM2.17) moving average levels, pending decisive breakout above the 6/3/17 peak (RM2.42) to target the 123.6%FP (RM2.59) and 138.2%FP (RM2.69) ahead. KKB Engineering needs to build stronger base above the 6/3/ 17 low (RM1.20) before recovery attempt towards the 38.2%FR (RM1.38), with tougher hurdle from the 50%FR (RM1.48). Crucial support is from the 13/12/ 16 low (RM1.09). News Bites • Mass Rapid Transit Corp Sdn Bhd has awarded an RM342.18mn contract to IJM Corporation Bhd to build stations along the Sungai Buloh-SerdangPutrajaya Line. • Malaysian Resources Corporation Bhd's wholly-owned unit has entered into a Sale and Purchase Agreement with Kuala Lumpur City Hall for the acquisition of 3 parcels of land measuring approximately 40.72k square metres in total for a cash consideration of RM335.50mn. • Sunway Construction Group Bhd is confident of hitting its revenue target of RM2bn for FY17 due to its outstanding order book of RM4.6 bn. • Berjaya Sports Toto Bhd plans to undertake a medium-term notes programme of up to RM800mn. • Protasco Bhd has secured a RM174.4mn infrastructure works contract from Central Spectrum (M) Sdn Bhd, a subsidiary of Kumpulan Hartanah Selangor Bhd, for the development of Phase 3C in Pulau Indah Industrial Park. • Mudajaya Bhd is hoping RKM Powergen Pte Ltd, 26% owned associate in India, is able to finalise another power purchase agreement by the end of this year and also expecting to add another RM1bn worth of construction jobs to its order book before the year is out. • Metronic Global Bhd has proposed consolidation of every 3 ordinary shares in Metronic into 1 Metronic share and renounceable rights issue of up to 645.34mn of new Metronic shares together with up to 484mn free detachable warrants. • Eco World International Bhd posted a narrower net loss of RM24.82mn in 2QFY17, compared with RM60.82mn a year earlier mainly due to unrealised foreign exchange differences as a result of an appreciation in exchange rate of the British Pound. • Astro Malaysia Holdings Bhd's group chief executive officer Datuk Rohanna Rozhan has denied that the group was in talk with Reliance Digital TV on any potential acquisition as quoted by The Times of India Newspaper. • Press Metal Bhd expects to achieve a stronger financial performance in FY17 due to the price of aluminium and increased production output. • Mah Sing Group Bhd plans to increase its Klang valley land bank from the current 65% to 75% in the next 2 to 3 years as it continues with its strategy of developing affordable housing projects. • Sumatec Resources Bhd will not proceed with its initial proposed plan to take control of the Rakushechnoye oil and gas field in Kazakhstan via the acquisition of CaspiOilGas as the group prefers to focus on existing gas utilisation plan and building a liquefied petroleum gas plant. • KNM Group Bhd expects the first contribution from its renewal energy foray into Thailand may finally realise by July 2017. • Bursa Malaysia Bhd has issued new listing requirements and various amended rules for the Leading Entrepreneur Accelerator Platform Market, aimed to provide small and medium-sized enterprises with fund raising access and visibility through the capital market. • CIMB Bank Bhd and Lazada Malaysia have teamed up to introduce a new pre-paid Mastercard, with an online approval process, making it the fastest and most convenient way to perform online transactions for digital savvy shoppers. • SMTrack Bhd plans to acquire up to a 100% stake in Wellspring Worldwide Ltd, the owner of the Tutti Frutti Frozen Yogurt Brand for RM310mn. • Malaysia is ranked 8th in Asia and 37th worldwide in the Global Innovation Index 2017 report released by Cornell University, INSEAD, and the World Intellectual Property Organisation. • China's central bank left interest rates for open market operations unchanged, shrugging off an overnight increase in the US Federal Reserve's key policy rate. • The Philly Fed said its index for current manufacturing activity in the region decreased to 27.6 in June from 38.8 in May, although a positive reading still indicates growth. 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. for TA SECURITIES HOLDINGS BERHAD Kaladher Govindan, Head of Research
3. TA Securities Friday , June 16, 2017 FBMKLCI: 1,790.01 A Member of the TA Group MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Daily Brief Market View, News In Brief: Corporate, Economy, and Share Buybacks THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* TA Research Team Coverage Market View Tel: +603-2072 1277 taresearch@ta.com.my www.taonline.com.my Range Bound as Market Assesses US Rate Guidance Stocks settled slightly lower Thursday, in line with softer regional markets after the US Federal Reserve raised interest rates for the second time this year and guided for one more hike in 2017. The KLCI dipped 2.34 points to close at 1790.01, off an early high of 1,795.01 and low of 1,788.27, as losers beat gainers 546 to 346 on moderate turnover of 1.99bn worth RM2.27bn. Immediate Uptrend Supports at 1,784/1,775 Questions over the US central bank’s plan for a gradual pace on raising interest rates and shrinking the bloated balance sheet should keep most investors sidelined ahead of the weekend. Immediate uptrend supports for the index remains at 1,784 and 1,775, the rising 10 and 30-day moving average levels, followed by better support from the 50-day moving average at 1,764. Immediate upside hurdles are from the 1,800 psychological level and 18 May 2015 high of 1,823. Buy Weakness in Kim Lun & KKB Engineering Kim Lun should rebuild support above the steadily rising 100-day (RM2.23) and 200-day (RM2.17) moving average levels, pending decisive breakout above the 6/3/17 peak (RM2.42) to target the 123.6%FP (RM2.59) and 138.2%FP (RM2.69) ahead. KKB Engineering needs to build stronger base above the 6/3/17 low (RM1.20) before recovery attempt towards the 38.2%FR (RM1.38), with tougher hurdle from the 50%FR (RM1.48). Crucial support is from the 13/12/16 low (RM1.09). Asian Markets Wary after Fed Raises Interest Rates Asian stock markets traded lower on Thursday after weak U.S. inflation data overshadowed an interest rate hike by the Federal Reserve. Also souring sentiment was a Washington Post report that U.S. President Donald Trump is being investigated by special counsel for possible obstruction of justice. The Nikkei shares average fell 0.26 percent to 19,831.82 dragged down by financial stocks. Hong Kong’s central bank raised its base rate 25 basis points earlier in the day. Its rates move in line with the U.S. due to the city's currency peg. The Hang Seng index dropped 1.02 percent as borrowing costs in the city looked set to rise. Meanwhile, China's central bank left interest rates for open market operations unchanged on Thursday. Its stocks closed little changed on worries policy tightening will hit economic growth. The blue-chip CSI300 index fell 0.2 percent to 3,528.79 points, while the Shanghai Composite Index gained 0.1 percent to 3,132.49 points. In down under, the benchmark ASX200 ended lower by 1.21 percent to close at 5,763.20 driven by weakness in its materials and energy sub-indexes, which were down 2.34 percent and 2.29 percent respectively. Page 1 of 9
4. TA Securities 16-Jun-17 A Member of the TA Group U .S Markets Lower as Tech Slides U.S stock markets traded lower on Thursday as large-cap technology stocks faced renewed pressure, while investors fretted about the economy's health after the Federal Reserve lifted interest rates. Following weak inflation and retail sales data, a report on Thursday showed the number of Americans filing for unemployment benefits fell more than expected last week, pointing to shrinking labor market slack that could allow the Fed to raise interest rates again this year despite moderate inflation growth. Shares of Amazon, Apple, Facebook and Netflix all closed lower. Snap, meanwhile, closed 4.92 percent lower at $17 a share, its IPO price. The Dow ended lower with Nike closing 3.2 percent lower after the company said it would cut about 2 percent of its global workforce and eliminate a quarter of its shoe styles. There was a slew of economic data released Thursday, including weekly jobless claims, which came in at 237,000. The Philadelphia Fed business index hit 27.6 in June, while the Empire State manufacturing survey reached 19.8. The Dow Jones Industrial Average fell 14.66 points, or 0.07 percent, to 21,359.90, the S&P 500 lost 5.46 points, or 0.22 percent, to 2,432.46 and the Nasdaq Composite fell 29.39 points, or 0.47 percent, to 6,165.50. Page 2 of 9
5. TA Securities 16-Jun-17 A Member of the TA Group News In Brief Corporate Berjaya Sports Toto Bhd plans to undertake a medium-term notes (MTN) programme of up to RM800mn. The MTN programme, with a tenure of up to 15 years, has been accorded a preliminary AA- or “Stable” rating by the Malaysian Rating Corporation Bhd. The fresh capital raised will be used to refinance existing borrowings, defray issuance expenses, and to finance general corporate purposes. (Bursa Malaysia/The Edge) Mass Rapid Transit Corp Sdn Bhd has awarded an RM342.18mn contract to IJM Corporation Bhd. The contract involves building stations along the Sungai Buloh-SerdangPutrajaya Line. (The Edge) Metro Spectacular Sdn Bhd, a 51% owned subsidiary of MRCB Land Sdn Bhd, which is a wholly-owned unit of Malaysian Resources Corporation Bhd (MRCB), has entered into a Sale and Purchase Agreement with Kuala Lumpur City Hall for the acquisition of 3 parcels of land measuring approximately 40.72k square metres in total for a cash consideration of RM335.50mn. The lands are situated along Jalan Putra approximately 4km from North Kuala Lumpur. MRCB said the proposed land acquisition is in line with group’s growth strategy to increase its landbank and it will be financed via a combination of internally generated funds and/or external borrowings. (Bursa Malaysia/The Edge) Sunway Construction Group Bhd is confident of hitting its revenue target of RM2bn for FY17 due to its outstanding order book of RM4.6 bn. According to managing director Chung Soo Kiong, the group has been pre-qualified for work packages for the Light Rail Transit Line 3 project and the group is also tendering for the Bus Rapid Transit Project. (The Edge) SMTrack Bhd plans to acquire up to a 100% stake in Wellspring Worldwide Ltd, the owner of the Tutti Frutti Frozen Yogurt Brand for RM310mn. The proposed acquisition would be satisfied with a RM20mn cash payment and the issuance of up to 2.07bn new ordinary shares in SMTrack at an issue price of 14.0sen each. In relation to the proposed acquisition, the group will make a 3 for 2 renounceable rights issue of up to 169.05mn new SMTrack shares, with 2 free detachable warrants with every 3 rights share subscribed. The group has also proposed private placement of up to 10% of the total number of issued SMTrack shares after the proposed rights issue and proposed acquisition. The proceeds from both the proposed rights issue and private placement will be used to fund the RM20mn cash payment. (Bursa Malaysia/The Star) Protasco Bhd has secured a RM174.4mn infrastructure works contract from Central Spectrum (M) Sdn Bhd, a subsidiary of Kumpulan Hartanah Selangor Bhd, for the development of Phase 3C in Pulau Indah Industrial Park. The works are expected to be completed within 18 months from July 2017 to January 2019. (Bursa Malaysia/The Edge) Mudajaya Bhd is hoping RKM Powergen Pte Ltd, 26% owned associate in India, is able to finalise another power purchase agreement by the end of this year. Meanwhile, the group is expecting to add another RM1bn worth of construction jobs to its order book before the year is out according to executive director Eric Lee Eng Leong. (The Edge) Metronic Global Bhd has proposed consolidation of every 3 ordinary shares in Metronic into 1 Metronic share and renounceable rights issue of up to 645.34mn of new Metronic shares together with up to 484mn free detachable warrants in Metronic on the basis of 4 rights shares together with 3 free warrants for every 2 existing Metronic Shares held. The proceeds from the proposed right issue with warrants will be utilised to finance the existing and future projects. The proposals are expected to be completed by 4Q2017. (Bursa Malaysia) Page 3 of 9
6. TA Securities 16-Jun-17 A Member of the TA Group UEM Sunrise Bhd has appointed Mohamed Bin Rastam Shahrom as the new chief financial officer . He has over 20 years of experience in the field of finance, investment appraisal, fund raising, financial analysis and planning, finance operations, international joint venture, and statutory reporting. (Bursa Malaysia) Tien Wah Press Holdings Bhd’s Australian unit will be ceasing its remaining printing business, which it expects to impact its earnings for FY17. As a result of the one-off redundancy cost and impairment loss on plant and machineries to be incurred, there will be a reduction of RM15.75mn to consolidated earnings, and a decline of 11sen earnings per share and net assets per share, said Tien Wah. (Bursa Malaysia/The Edge) Eco World International Bhd posted a narrower net loss of RM24.82mn in 2QFY17, compared with RM60.82mn a year earlier mainly due to unrealised foreign exchange differences as a result of an appreciation in exchange rate of the British Pound. The revenue declined 72.6% YoY to RM0.04mn. (Bursa Malaysia/The Edge) The board of PDZ Holdings Bhd has issued a statement to clarify that the article published by The Edge Malaysia on 12 June 2017 under the title of "undue preference in PDZ assets transfer" is untrue and does not give an accurate view of the transactions and the group is currently consulting its lawyers for potential legal actions. (Bursa Malaysia) Eco World Development Group Bhd saw a 30% rise in Malaysia new property sales at RM1.71bn for the seven months ended May 31, 2017 from RM1.32bn a year earlier mainly attributed to the sales from Klang Valley amounted to RM1.33bn. 1HFY17 net profit grew 171% YoY to RM149.85mn, while revenue improved 17% YoY to RM1.26bn. (The Edge) Astro Malaysia Holdings Bhd’s group chief executive officer Datuk Rohanna Rozhan has denied that the group was in talk with Reliance Digital TV on any potential acquisition as quoted by The Times of India Newspaper. (The Edge) Press Metal Bhd expects to achieve a stronger financial performance in FY17 due to the price of aluminium and increased production output. The increase in price of aluminium is primarily because of lower supply from China as the Chinese government’s move to cut its production capacity amid environmental concerns. Meanwhile, the demand for aluminium is expected to grow at healthy pace, according to chief executive office Datuk Paul Koon Poh Keong. (The Edge) Mah Sing Group Bhd plans to increase its klang valley land bank from the current 65% to 75% in the next 2 to 3 years as it continues with its strategy of developing affordable housing projects. (The Edge) Sumatec Resources Bhd will not proceed with its initial proposed plan to take control of the Rakushechnoye oil and gas field in Kazakhstan via the acquisition of CaspiOilGas as the group prefers to focus on existing gas utilisation plan and building a liquefied petroleum gas plant. (The Edge) KNM Group Bhd expects the first contribution from its renewal energy foray into Thailand may finally realise by July 2017. The group is currently on track to diversify into renewable energy as core business by the end of year 2019, according to the chief executive officer Lee Swee Eng. (The Edge) Bursa Malaysia Bhd has issued new listing requirements and various amended rules for the Leading Entrepreneur Accelerator Platform Market, aimed to provide small and medium-sized enterprises with fund raising access and visibility through the capital market. (Bernama) CIMB Bank Bhd and Lazada Malaysia have teamed up to introduce a new pre-paid Mastercard, with an online approval process, making it the fastest and most convenient Page 4 of 9
7. TA Securities 16-Jun-17 A Member of the TA Group way to perform online transactions for digital savvy shoppers . (Bernama) APFT Bhd posted a net loss of 2.55mn in 3QFY17 mainly due to decrease in revenue contribution from the flight training division. The quarterly revenue stood at 14.69mn. No comparative figures on YoY are presented due to the change of financial year from 31 March 2016 to 31 July 2016. The revenue and net loss for the cumulative 9 months of FY17 were RM50.49mn and RM10.08mn respectively. (Bursa Malaysia) A-Rank Bhd’s net profit and revenue in 3QFY17 grew 31% YoY and 4.3% YoY to RM3.90mn and RM119.50mn respectively due to higher average selling prices as a result of the increase in raw material costs although business volume was lower. (Bursa Malaysia) Wong Engineering Corporation Bhd’s net profit in 2QFY17 surged 213.70% YoY to RM1.37mn due to increase in revenue, reduction in cost of goods sold and financing cost. The quarterly revenue rose 9% YoY to 9.59mn. (Bursa Malaysia) Sapura Industrial Bhd’s net profit and revenue in 1QFY18 grew 18.75% YoY to RM0.11mn and 19.41% YoY to RM54.90mn respectively. The group is cautious that market conditions will continue to be challenging for the automotive sector. As such, the group has intensified its efforts to further strengthen operational efficiency. (Bursa Malaysia) Page 5 of 9
8. TA Securities 16-Jun-17 A Member of the TA Group News In Brief Economy Asia Malaysia Ranks 37th in Global Innovation Index Malaysia is ranked 8th in Asia and 37th worldwide in the Global Innovation Index (GII) 2017 report released by Cornell University, INSEAD, and the World Intellectual Property Organisation. The report also said Malaysia was among the top 10 economies in Asia, behind Singapore, South Korea, Japan, Hong Kong, New Zealand and Australia, and that the country was among the middle-income economies that were the closest to the top 25 this year. Last year, Malaysia was in the 35th position in the GII report, which measured the innovation performance of 127 economies around the world. The inclusion of the Russian Federation and Argentina in the middle-income group had led to the downward movement of Mexico, Malaysia, Turkey, and Thailand - economies that have been in the middle-income top 10 since the innovation quality metric was introduced. The report said Malaysia also had the best cluster development and information and communications technology use, and had maintained its strengths in high-technology imports and exports and creative goods exports, among other indicators. However, it also said that research and development, as well as resident patenting levels in newly emerging Asian economies such as Malaysia, the Philippines, and Vietnam, was still low. (The Star) China Stands Pat on Rates This Time After Fed Lifts Benchmark China’s central bank left interest rates for open market operations unchanged, shrugging off an overnight increase in the US Federal Reserve’s key policy rate. The People’s Bank of China (PBoC) did not explain its rationale for keeping rates unchanged, but the yuan is on steadier footing and domestic liquidity conditions are much tighter than they were in midMarch, when it followed a Fed hike within hours. Markets had been divided over whether the PBoC would raise short-term rates again in lockstep with the Fed, with those in the ”hold” camp noting that China’s short-term money rates and bond yields have already been trending higher. Earlier on Thursday, the PBoC injected a net 90 billion yuan (US$13.25 billion) into the financial system via open market operations, saying it was doing so to counter ”liquidity stress” from seasonal tax payments and maturing reverse repurchase agreements. The rate for seven-day reverse repos remained at 2.45%, the 14-day tenor at 2.60% and the 28-day tenor at 2.75%, the PBoC said in a statement on its website. China’s benchmark one-year lending and deposit rates have remained unchanged since October 2015. Encouraged by improving economic growth, China had already nudged up short-term rates several times earlier this year as part of a broader push to reduce risks and leverage in the financial system after years of debt-fuelled stimulus. Those rate moves, while modest, were accompanied by regulatory crackdowns on riskier forms of financing and shadow banking, tightening credit conditions and resulting in China’s bond curve inverting in recent months. (The Star) Hong Kong Central Bank Raises Base Rate 25 bps after Fed Hike The Hong Kong Monetary Authority (HKMA) raised the base rate charged through its overnight discount window by 25 basis points to 1.50%, and the central bank chief said he expects banks in the city to gradually increase mortgage rates. The move by Hong Kong’s de facto central bank followed the Federal Reserve’s decision to raise interest rates for the second time in three months, signalling its confidence in a growing US economy and strengthening job market. HKMA chief executive Norman Chan warned residents to tread cautiously in the property market, where prices have scaled record highs, as mortgage repayments were likely to increase. “This time round, we may see a downward property cycle coinciding with an upward cycle of mortgage interest rate. We would like to remind everybody that they should remain vigilant and manage the risk prudently,” Chan said. “We expect that when the Hong Kong interest rate is tightening and rising, banks will gradually revise up their mortgage rates.” Hong Kong tracks US rate moves as its currency is pegged to the US dollar. In May, Hong Kong imposed stricter restrictions on bank lending to developers, warning there was a need to review credit risks posed by property companies in one of the world’s most expensive real estate markets. (The Star) Page 6 of 9
9. TA Securities 16-Jun-17 A Member of the TA Group Australia Unemployment Rate Slips to 5 .5% in May The jobless rate in Australia came in at a seasonally adjusted 5.5% in May, the Australian Bureau of Statistics said. That beat forecasts for 5.7%, which would have been unchanged from the April reading. The Australian economy added 42,000 jobs to 12,152,600 in May well above forecasts for 10,000 following the upwardly revised 46,100 added in the previous month (originally 37,400). Full-time employment increased 52,100 to 8,287,400 and part-time employment decreased 10,100 to 3,865,200. Unemployment decreased 18,600 to 711,900. The number of unemployed persons looking for full-time work decreased 23,000 to 489,300 and the number of unemployed persons only looking for parttime work increased 4,400 to 222,700. The participation rate was 64.9% - topping expectations for 64.8%, which would have been unchanged. Monthly hours worked in all jobs increased 31.1 million hours (1.87 percent) to 1,695.3 million hours. The labor force underemployment rate decreased 0.1 points to 8.8%. The underutilization rate decreased 0.4 points to 14.4%. (RTT News) Indonesia's Exports Surge More than Forecast Indonesia's exports grew at a faster-than-expected pace in May, data published by the Central Statistical Agency showed. Exports surged 24.08% year-over-year in May, well above the 15.65% spike economists had expected. Similarly, imports climbed 24.03% in May from a year ago, much faster than the expected growth of 9.9%. On a monthly basis, both exports and imports rose by 7.62% and 15.67%, respectively in May. The trade surplus fell notably to $0.47 billion in May from $1.24 billion in April. The expected surplus for the month was $1.1 billion. (RTT News) United States U.S. Jobless Claims Fell to 237,000 Last Week The number of Americans applying for unemployment benefits fell last week, remaining at a low level consistent with a healthy U.S. labor market. Initial jobless claims, a proxy for layoffs across the U.S., declined by 8,000 to a seasonally adjusted 237,000 in the week ended June 10, the Labor Department said Thursday. Economists surveyed by The Wall Street Journal had expected 240,000 new claims last week. Initial claims for the week ended June 3 were left unrevised at 245,000. Figures for jobless claims can be volatile from week to week. The four-week moving average for initial claims edged up by 1,000 last week to 243,000. Low claims can signal that relatively few companies are laying off workers, a sign of health in the broader economy. Weekly claims have remained below 300,000 for 119 consecutive weeks, the longest such streak since 1970--when the U.S. population and workforce were far smaller than they are today. (The Wall Street Journal) Philly Fed Index Drops More than Expected Growth in Philadelphia-area manufacturing activity slowed in the month of June, according to a report released by the Federal Reserve Bank of Philadelphia. The Philly Fed said its index for current manufacturing activity in the region decreased to 27.6 in June from 38.8 in May, although a positive reading still indicates growth. The index had been expected to drop to 24.0. The drop by the headline index was partly due to a slowdown in the pace of shipment growth, as the shipments index tumbled to 28.5 in June from 39.1 in May. The number of employee’s index also dipped to 16.1 in June from 17.3 in May, indicating a slowdown in the pace of job growth. On the other hand, the Philly Fed said the new orders inched up to 25.9 in June from 25.4 in the previous month. The report also said the prices received index rose to 20.6 in June from 15.3 in May, while the prices paid index dipped to 23.6 from 24.2. Looking ahead, the Philly Fed said the diffusion index for future general activity fell to 31.3 in June from 34.8 in May. (RTT News) US Import Prices Slipped 0.3%, More than Expected, in May Import prices dropped 0.3% in May, the steepest decline since the index dropped 0.5% in February 2016, the Labor Department reported. U.S. import prices were expected to fall 0.1% for the month of May, after rising 0.5% a month earlier. The decline this time around was driven by falling fuel prices, unlike last month when this wasn't an issue, the report said. Prices for fuel fell 3.7% in May, compared to a 0.3% drop in April. The price index for Page 7 of 9
10. TA Securities 16-Jun-17 A Member of the TA Group U .S. imports climbed 2.1% overall for the 12 months ended in May. The report additionally revealed prices for U.S. exports decreased an average of 0.7% in May from last month. Export prices were up 1.4% from one year ago. The Labor Department's import-price index is one of several gauges the Federal Reserve uses to understand how quickly prices are rising in the U.S. (CNBC) U.S. Industrial Production Stalls in May After Sharp Rise US industrial production fell flat in May following a rapid increase in the previous month amid a drop in manufacturing. Production at US factories, utilities and mines was flat in May, compared with Wall Street expectations for a 0.2% rise. The gain for April was revised up to 1.1% from a previous forecast of 1%, data from the Federal Reserve show. Manufacturing output fell 0.4%, offsetting a 1.1% jump in April, and leaving the index little changed since February. Mining output climbed 1.6%, while utilities posted a 0.4% gain. (Financial Times) Europe and United Kingdom Bank of England Turns Hawkish on Rates A trio of Bank of England officials broke ranks with their colleagues in June to push for an immediate increase in interest rates, one of several signals that the U.K. central bank has moved a step closer to withdrawing the emergency stimulus it put in place after last year’s Brexit referendum. The BOE said that a majority of officials voted to hold the central bank’s benchmark interest rate steady this month at 0.25% but minutes of the Monetary Policy Committee’s discussions showed officials are growing increasingly anxious about quickening inflation. For three MPC members— Kristin Forbes, Ian McCafferty and Michael Saunders —intensifying inflationary pressures justified an immediate increase in the BOE’s benchmark rate to 0.5%, a move that would reverse the quarter-point cut implemented in August. The remaining five members of the panel, including Gov. Mark Carney, voted to stay put for now, citing uncertainty over the outlook for growth. One seat on the nine-member panel is currently vacant following the departure in February of deputy governor Minouche Shafik. All eight officials agreed, though, that their tolerance for rising inflation is wearing thin. Officials had previously said they were prepared to tolerate a burst of rapid pricegrowth to keep the economy on an even keel as the U.K. began exit talks with the European Union. But the minutes record their unease after annual inflation accelerated to 2.9% in May, well in excess of the BOE’s 2% goal and the bank’s own forecasts. They also noted the economy appeared poised to recover somewhat in the second quarter after a soft start to the year and that the labor market remained healthy. The minutes of June’s meeting contained other signals that officials are adopting a more hawkish stance on borrowing costs. A statement included as recently as May that interest rates could be cut as well as raised was dropped. Officials noted that domestic inflationary pressures in the British economy appeared to be intensifying. And they sounded upbeat on the prospects for exports and business investment to power growth while squeezed consumers take a breather. (The Wall Street Journal) Weak U.K. Retail Sales Flag Emerging Economic Squeeze U.K. retail sales grew at the slowest rate for four years last month, the latest sign of an emerging squeeze in living standards as higher prices prompt shoppers to tighten their belts. Sales volumes fell 1.2% month on month, according to figures released by the Office for National Statistics, worse than the 0.8% fall analysts had expected. The figures come after strong month-on-month volume growth of 2.3% in April, but economists said those figures had been distorted by the timing of Easter. Softening sales are already hitting some high-street retailers, while the combination of slowing consumption and rising prices is likely to complicate the challenge facing the Bank of England. Retail sales were 0.9% higher in May compared with the same month last year, after adjusting for higher prices. Last May, retail sales were growing at an annual rate of 5.5%. (Financial Times) Page 8 of 9
11. TA Securities 16-Jun-17 A Member of the TA Group Eurozone Trade Surplus Shrinks in April The euro area trade surplus decreased in April from a month ago , as exports fell faster than imports, preliminary data from Eurostat showed. The seasonally adjusted trade surplus fell to EUR 19.6 billion in April from EUR 22.2 billion March. Economists had expected the surplus to drop slightly to EUR 22.0 billion. Exports dropped 2.1% month-over-month in April and imports went down by 0.8%. On a non-seasonally adjusted basis, the euro area trade surplus shrank to EUR 17.9 billion in April from EUR 26.6 billion in the corresponding month last year. Exports declined 3.0%, while imports rose by 3.0%. The EU28 trade balance showed deficit of EUR 0.1 billion versus EUR 4.5 billion in the same month of 2016. (RTT News) Share Buy-Back: 15 June 2017 Company BKAWAN PRESBHD TEXCHEM UNIMECH Bought Back Price (RM) Hi/Lo (RM) 18,900 94,700 1,000 19,600 18.70 2.03/2.01 1.43 1.16/1.15 18.88/18.66 2.07/2.00 1.43 1.16/1.15 Total Treasury Shares 32,520,231 1,416,700 2,576,400 5,072,710 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. liability for any direct or indirect loss arising from the use of this document. the securities and/or companies mentioned herein. for TA SECURITIES HOLDINGS BERHAD (14948-M) MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 (A Participating Organisation of Bursa Malaysia Securities Berhad) Kaladher Govindan – Head of Research Page 9 of 9 We accept no We, our associates, directors, employees may have an interest in
12. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company AUTOMOBILE BAUTO MBMR UMW Share Price (RM) 15-Jun-17 2.01 2.25 6.01 Target Price BETA (RM) EPS (sen) PER (X) FY17 FY18 FY17 FY18 Div Yield (%) 52weeks 52weeks FY17 FY18 High Price % Chg Low Price % Chg % Chg YTD 2.37 2.28 5.41 0.98 0.60 1.26 10.3 24.1 19.7 15.8 25.3 29.8 19.4 9.4 30.6 12.7 8.9 20.1 5.8 4.0 2.2 7.9 4.0 3.2 2.44 2.70 7.00 -17.6 -16.7 -14.1 1.95 1.95 4.43 3.1 15.4 35.7 -5.6 5.1 31.5 4.60 3.50 5.30 7.00 15.90 9.90 22.10 5.20 10.00 1.28 0.95 1.33 1.37 0.67 0.96 0.79 1.34 0.70 33.6 29.4 43.9 49.6 101.6 73.3 136.6 50.6 40.3 30.4 33.1 48.3 54.8 110.2 82.3 140.4 54.0 39.0 11.8 9.0 11.4 13.6 15.2 13.2 14.9 10.1 26.0 13.0 8.0 10.4 12.3 14.0 11.7 14.5 9.4 26.8 4.1 3.0 3.5 3.0 2.7 5.2 2.7 2.4 3.2 4.1 3.0 3.6 3.3 2.7 5.2 2.8 2.4 3.2 4.49 3.00 5.70 6.87 15.74 9.68 20.58 5.59 11.14 -12.0 -12.0 -12.1 -1.6 -2.2 -0.4 -1.0 -8.9 -5.9 3.60 2.08 3.90 4.11 12.70 7.50 19.02 4.53 8.20 9.7 26.9 28.5 64.4 21.3 28.5 7.2 12.4 27.8 6.2 10.5 16.2 49.9 14.1 17.6 3.3 8.1 18.4 0.42 1.28 5.39 3.49 0.66 1.13 2.00 2.14 5.90 0.46 1.62 5.49 3.50 0.78 0.58 2.26 1.49 6.26 0.80 0.62 1.07 1.10 1.05 1.29 na 1.05 0.08 5.7 14.6 31.6 15.3 4.9 8.3 12.6 11.9 42.0 5.7 13.5 36.4 20.3 5.7 9.6 12.5 12.0 45.8 7.4 8.8 17.1 22.8 13.3 13.6 15.8 17.9 14.1 7.3 9.5 14.8 17.2 11.6 11.7 15.9 17.9 12.9 0.0 2.2 2.2 2.1 3.8 0.9 2.8 1.4 4.2 0.0 2.2 2.2 2.7 3.8 0.9 2.8 1.4 4.2 0.51 1.35 5.48 3.61 0.74 1.14 2.15 2.48 6.15 -17.6 -5.3 -1.6 -3.3 -10.2 -0.9 -7.0 -13.5 -4.1 0.36 0.80 4.65 3.07 0.33 0.41 1.50 1.46 5.55 16.7 60.8 15.9 13.7 100.0 179.0 33.3 46.5 6.3 -3.4 21.9 12.8 9.1 9.1 96.5 17.6 24.4 0.3 2.01 2.00 0.47 11.0 11.5 18.3 17.5 5.0 5.0 2.19 -8.2 1.93 4.1 0.0 14.80 18.84 17.84 21.08 0.50 0.57 74.8 93.1 81.3 19.8 101.9 20.2 18.2 18.5 5.0 4.4 5.5 4.9 15.30 19.10 -3.3 -1.4 12.90 14.86 14.7 26.8 6.3 15.0 2.22 7.50 24.64 1.23 83.00 3.47 1.95 4.83 0.93 2.23 8.62 27.41 1.39 88.66 4.10 2.50 4.41 1.36 0.50 0.35 0.34 0.46 0.36 0.50 0.66 0.43 0.56 6.7 26.4 120.5 6.1 293.5 22.3 27.5 15.7 9.3 7.9 30.5 148.1 6.2 326.2 24.7 27.5 16.6 12.7 33.0 28.4 20.4 20.3 28.3 15.6 7.1 30.8 10.0 28.2 24.6 16.6 19.7 25.4 14.1 7.1 29.0 7.3 1.8 4.0 2.8 4.9 3.3 4.3 3.1 0.9 5.4 2.1 4.7 3.0 4.9 3.4 4.9 4.1 1.0 5.4 3.00 8.89 27.00 1.35 83.68 3.66 2.04 5.00 1.07 -26.0 -15.6 -8.7 -8.7 -0.8 -5.1 -4.4 -3.4 -13.1 2.11 7.30 22.44 1.13 74.12 2.12 1.43 4.14 0.78 5.2 2.7 9.8 8.7 12.0 63.6 36.4 16.6 19.2 -13.6 2.3 4.9 6.9 6.1 36.6 12.7 11.5 17.0 45.52 52.08 1.05 198.6 187.4 22.9 24.3 4.4 4.4 55.64 -18.2 40.61 12.1 3.1 9.83 5.75 11.53 6.58 1.34 1.28 49.3 25.7 55.5 27.9 19.9 22.4 17.7 20.6 0.5 1.4 0.6 1.6 10.00 6.38 -1.7 -9.9 7.50 4.19 31.1 37.1 23.7 27.3 2.60 0.12 3.81 0.13 0.74 1.26 22.1 0.4 24.6 0.4 11.8 33.1 10.6 33.2 6.2 0.0 7.3 0.0 3.42 0.16 -24.0 -25.0 2.48 0.05 4.8 140.0 -12.2 140.0 6.00 4.23 6.65 4.70 0.78 0.52 10.3 13.3 16.4 16.5 58.2 31.7 36.6 25.7 0.6 1.5 0.7 1.8 6.73 4.37 -10.8 -3.2 5.54 3.85 8.3 9.9 -5.5 1.2 6.81 6.54 2.01 5.80 1.81 6.05 7.70 1.80 5.75 2.40 0.62 0.16 0.33 -0.20 0.28 20.0 35.8 12.3 26.6 3.7 24.2 40.5 15.3 30.2 6.1 34.0 18.3 16.3 21.8 48.5 28.1 16.2 13.1 19.2 29.9 1.3 2.7 1.8 2.3 0.5 1.6 3.1 2.3 2.6 0.8 7.12 7.07 2.38 5.94 2.64 -4.4 -7.5 -15.5 -2.4 -31.4 4.06 5.62 1.88 4.20 1.65 67.7 16.4 6.9 38.1 9.7 41.0 -0.8 -4.7 8.4 -23.3 INDUSTRIAL SCIENTX SKPRES 8.35 1.35 9.69 1.90 0.55 0.50 54.4 8.6 66.4 11.4 15.4 15.7 12.6 11.8 2.5 3.1 2.9 4.1 8.99 1.44 -7.1 -6.3 5.96 1.12 40.1 20.5 24.6 4.7 MEDIA ASTRO MEDIA PRIMA STAR 2.68 0.94 2.20 3.45 0.60 1.40 1.03 0.65 0.64 13.2 1.7 7.1 14.5 2.8 6.5 20.2 54.8 31.0 18.5 33.1 33.9 4.7 1.5 8.2 4.9 2.4 8.2 3.01 1.52 2.70 -11.0 -38.5 -18.5 2.51 0.94 2.20 6.8 0.0 0.0 3.1 -18.7 -1.8 0.19 0.84 7.03 0.44 6.16 1.29 0.51 213.2 1.8 4.6 39.1 16.2 41.9 1.0 133.3 -6.6 0.0 36.0 2.6 13.0 -41.1 1.30 33.8 2.4 BANKS & FINANCIAL SERVICES AFG 3.95 AFFIN 2.64 AMBANK 5.01 CIMB 6.76 HLBANK 15.40 MAYBANK 9.64 PBBANK 20.38 5.09 RHBBANK BURSA 10.48 CONSTRUCTION BPURI GADANG GAMUDA IJM PESONA SENDAI SUNCON WCT LITRAK Building Materials WTHORSE CONSUMER Brewery CARLSBG HEIM Retail AEON AMWAY F&N HUPSENG NESTLE PADINI POHUAT QL SIGN Tobacco BAT GAMING Casino GENTING GENM NFO BJTOTO LUSTER HEALTHCARE Hospitals IHH KPJ Rubber Gloves HARTA KOSSAN SUPERMX TOPGLOV KAREX OIL & GAS DNEX 0.60 0.70 1.03 3.5 4.3 17.1 14.0 1.7 1.7 0.69 -13.8 MHB 0.86 0.95 1.84 -1.2 1.3 na 65.3 0.0 0.0 1.16 -26.3 MISC 7.35 7.65 0.82 61.4 54.7 12.0 13.4 4.1 4.1 7.90 -7.0 PANTECH 0.61 0.69 1.28 4.1 5.0 14.6 12.1 3.0 3.3 0.67 -9.0 PCHEM 7.16 7.91 1.07 39.2 41.6 18.3 17.2 2.9 3.1 7.80 -8.2 SENERGY 1.83 2.02 2.46 9.6 7.2 19.0 25.3 0.5 0.5 2.10 -12.9 UMWOG 0.52 0.80 2.01 -12.0 -3.6 na na 0.0 0.0 1.04 -50.5 Note: UMWOG proposed 14 for 5 rights issue shares. Ex-Target price RM0.43. For more details please refer to 08.05.17 report. UZMA 1.74 1.55 1.40 12.0 12.9 14.5 13.5 0.0 0.0 2.00 -13.0
13. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company Share Price (RM) PLANTATIONS FGV IJMPLNT IOICORP KLK SIME UMCCA Target Price BETA (RM) EPS (sen) PER (X) FY17 FY18 FY17 FY18 Div Yield (%) 52weeks 52weeks FY17 FY18 High Price % Chg Low Price % Chg % Chg YTD 1.80 3.11 4.47 24.74 9.61 6.08 1.55 3.88 4.15 26.19 10.02 7.52 1.76 0.46 1.09 0.87 1.23 0.47 4.2 12.3 18.7 111.8 34.0 32.7 8.5 15.7 21.0 119.1 37.5 34.5 42.7 25.3 23.9 22.1 28.2 18.6 21.2 19.8 21.3 20.8 25.6 17.6 2.8 2.3 2.2 2.2 2.6 2.8 2.8 2.6 2.7 2.4 3.2 2.8 2.52 3.70 4.81 25.50 9.66 6.51 -28.6 -15.9 -7.1 -3.0 -0.5 -6.6 1.42 3.00 4.21 22.72 7.30 5.53 26.8 3.7 6.2 8.9 31.6 9.9 16.1 -8.5 1.6 3.1 18.6 1.3 0.69 1.07 0.84 2.12 1.58 0.86 4.84 3.81 4.01 0.69 1.07 0.92 2.25 1.70 0.98 5.98 4.10 3.95 0.59 0.65 0.34 0.89 0.72 0.29 0.59 0.66 0.45 3.4 17.3 4.9 17.4 14.4 6.2 25.6 11.7 15.6 7.0 17.4 10.2 17.4 14.2 10.3 22.8 12.6 15.9 19.9 6.2 17.2 12.2 10.9 13.9 14.9 34.3 17.5 9.8 6.1 8.2 12.2 11.1 8.3 16.7 31.8 17.2 5.8 3.7 4.2 3.3 4.1 1.2 3.7 1.2 6.7 5.8 3.3 4.8 3.5 4.1 1.2 3.7 1.2 6.7 0.83 1.43 1.05 2.46 1.70 1.00 5.19 4.50 4.05 -17.0 -25.3 -20.0 -13.8 -7.1 -14.5 -6.7 -15.3 -1.0 0.67 1.05 0.79 1.85 1.34 0.69 4.32 2.80 2.84 3.0 1.9 7.0 14.8 17.9 23.9 12.0 36.1 41.1 -1.4 -5.3 -16.0 8.7 10.5 6.9 9.5 21.7 33.7 1.75 1.52 1.86 1.72 0.51 0.56 8.9 8.1 10.1 8.6 19.7 18.8 17.3 17.6 5.1 5.5 5.8 5.9 1.84 1.72 -4.9 -11.6 1.60 1.45 9.4 4.8 1.7 -0.7 POWER & UTILITIES MALAKOF PETDAG PETGAS TENAGA YTLPOWR 1.15 24.20 18.98 14.42 1.46 1.23 21.47 19.60 17.37 1.90 0.72 0.76 0.77 1.01 0.57 7.1 98.4 88.2 131.9 8.2 6.4 102.3 101.3 130.8 10.7 16.2 24.6 21.5 10.9 17.8 17.9 23.7 18.7 11.0 13.7 6.1 3.0 3.3 3.0 6.8 6.1 3.1 3.7 3.2 6.8 1.80 25.70 22.66 14.90 1.64 -36.1 -5.8 -16.2 -3.2 -11.0 1.13 22.92 18.10 13.00 1.38 1.8 5.6 4.9 10.9 5.8 -16.1 1.7 -10.9 3.7 -2.0 TELECOMMUNICATIONS AXIATA DIGI MAXIS TM 4.97 4.96 6.01 6.55 5.50 4.95 6.10 7.50 1.29 0.94 0.69 0.68 15.0 20.8 25.1 21.4 16.7 21.1 25.4 22.3 33.1 23.8 23.9 30.5 29.8 23.5 23.6 29.4 1.5 4.2 3.3 2.9 1.7 4.3 3.3 3.1 5.99 5.19 6.60 6.90 -17.0 -4.4 -8.9 -5.1 4.11 4.57 5.50 5.81 20.9 8.5 9.3 12.7 5.3 2.7 0.5 10.1 TECHNOLOGY Semiconductor & Electronics IRIS 0.15 INARI 2.03 MPI 13.20 UNISEM 3.56 0.28 2.40 15.90 4.10 1.34 0.80 0.51 0.81 -2.6 10.3 94.2 26.9 -0.3 na 12.6 19.7 115.7 14.0 29.1 13.2 na 16.1 11.4 12.2 0.0 3.9 2.0 3.4 0.0 2.5 2.0 3.4 0.24 2.23 13.50 3.70 -37.5 -9.0 -2.2 -3.8 0.10 1.41 7.02 2.27 50.0 44.3 88.0 56.8 36.4 22.3 78.1 50.8 3.35 8.84 3.23 8.10 1.12 1.48 37.6 17.2 35.9 17.5 8.9 51.3 9.3 50.5 1.2 1.1 1.5 1.1 3.59 9.45 -6.7 -6.5 2.16 5.76 55.1 53.5 46.3 45.9 1.80 3.69 2.05 4.05 0.74 0.67 14.3 17.1 22.7 15.1 12.6 21.5 7.9 24.4 2.4 3.5 3.9 3.1 1.87 4.59 -3.7 -19.6 1.29 3.62 39.5 1.9 13.2 -14.2 PROPERTY GLOMAC HUAYANG IBRACO IOIPG MAHSING SNTORIA SPB SPSETIA SUNWAY REIT SUNREIT CMMT TRANSPORTATION Airlines AIRASIA AIRPORT Freight & Tankers TNLOGIS WPRTS SNAPSHOT OF FOREIGN STOCKS UNDER COVERAGE Company Share Price (S$) BANKS & FINANCIAL SERVICES DBS 20.41 OCBC 10.62 UOB 23.15 PLANTATIONS WILMAR IFAR 3.47 0.48 Target Price Beta (S$) EPS (cent) PER (X) FY17 FY18 FY17 FY18 Div Yield (%) 52week 52week FY17 FY18 High Price % Chg Low Price % Chg % Chg YTD 23.30 12.00 25.40 1.22 1.13 1.08 173.8 87.7 195.6 190.2 11.7 92.4 12.1 209.3 11.8 10.7 11.5 11.1 2.9 5.7 3.0 2.9 6.7 3.0 21.2 10.8 24.0 -3.6 -1.3 -3.6 14.72 8.84 17.41 38.7 29.2 33.0 17.7 19.1 13.5 3.72 0.53 0.92 1.13 28.9 4.9 31.1 5.2 11.2 9.2 2.3 2.5 2.6 2.7 4.0 0.6 -13.3 -19.3 2.96 0.44 17.2 9.1 -3.3 -8.6 12.0 9.9 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.
14. TA Securities A Member of the TA Group SECTOR REPORT Friday , June 16, 2017 FBM KLCI: 1,790.01 Sector: Finance MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Banking Sector Earnings Momentum Envisaged to Accelerate THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Team Coverage Tel: +603-2167 9610 liwong@ta.com.my In this report, we take a look at how the locally incorporated foreign banks performed in 1QCY17 vis-à-vis the local listed banks. In terms of earnings, softer income growth reflected cautiousness. The foreign banks’ did not share stronger earnings growth, as experienced by the local counterparts in 1QCY17. On a positive note, asset quality of the four foreign local banks under review remained healthy with stable average gross impaired loans ratio and improving loan loss coverage. Going forward, we foresee the foreign banks to benefit from a pickup in economic activities and the more sanguine macro outlook. Rising demand for capital market activities should strengthen opportunities to grow fee income. We also foresee foreign banks having some competitive advantage over most local banks in the areas of cross border banking, private banking and wealth management due to their vast global and regional network and ability to offer a wider suite of products and solutions to their customers. Earnings growth lacked local peers in 1QCY17 Locally incorporated foreign banks did not share stronger earnings growth, as experienced by the local counterparts in 1QCY17. Combined, net profit reported by Standard Chartered, HSBC, OCBC Malaysia and UOB Malaysia (UOBM) contracted by 12.4% YoY while the local listed banks registered earnings growth of 14.1% YoY. Falling for the second straight quarter, the decline was mostly led by Standard Chartered and HSBC. Local banks on the other hand, registered its third consecutive quarter of YoY increase. Figure 1: Net profit growth (YoY Chg) Source: Companies, TA Research Softer income growth reflects cautiousness Weaker earnings of locally incorporated foreign banks were underpinned by decreases in total income, which contracted for four straight quarters. Non-interest income (non-NII) declined by another 11.9% YoY, after falling by some 20% YoY in the previous quarter. Despite stronger fee income, non-NII eased on lower net trading income and lower forex Page 1 of 9 TA Research Team Coverage
15. TA Securities 16-Jun-17 A Member of the TA Group gains . Nevertheless, net interest income (NII) rebounded, rising 2.2% YoY in 1QCY17 after falling steadily for 6 consecutive quarters. Contributing to the increase in NII, loan growth accelerated during the quarter. Average NIM, however, weakened slightly for Standard Chartered, HSBC, OCBC and UOBM. Compared to the local players, despite the surprise OPR cut in July, local banks upheld margins in 1QCY17 by registering an 11 bps YoY expansion in NIM. We believe the stronger margin was also underpinned by the intense efforts by banks to manage assets and liabilities more efficiently. That said, we note that CASA deposits for the local banks surged 13% YoY, again, surpassing the industry’s growth of 8.1% YoY and the foreign bank’s CASA growth of 6.9% YoY. Figure 2: Total income growth (YoY Chg) Source: Companies, TA Research Figure 3: CASA growth (YoY Chg) Source: Companies, TA Research Page 2 of 9
16. TA Securities 16-Jun-17 A Member of the TA Group UOBM led in loan growth among foreign banks Standard Chartered , HSBC and OCBC steadily reduced loan growth exposure over the past year (and past 3 years for Standard Chartered) possibly due to expectations of worsening economic outlook. Compared to 1QCY16, we note that Standard Chartered, HSBC and OCBC lost some 10-20 bps in its share of total loans in the system. UOBM on the other hand, gained some 10 bps YoY. Figure 4: Market Share - Loans and advances (%) Source: Companies, TA Research UOBM charted an upward trend with loan growth of some 9% in 1QCY17 - exceeding its peers (+7.8% YoY) and BNM (+6.0% YoY). By asset size, UOBM is one of the larger foreign local bank in Malaysia. UOBM remained upbeat in its outlook for the SME, business and credit card segments, growing each by 8.1%, 9.9% and 7.0% YoY during the quarter. UOBM’s residential loans rose at a less robust pace of some 7% YoY – compared to the local players and BNM’s 10.9% and 8.8% increase. Similar to industry trends, combined, Standard Chartered, HSBC, OCBC and UOBM’s business loans supported loan growth as advances to the consumer segment softened. Hinting at a less than optimistic outlook for the consumer segment, loans and advances to key segments such as residential loans eased, widening by only 1.8% YoY vs. the local bank’s 10.9% YoY increase. Vehicle financing posted steepening YoY contractions while the credit card segment was the only form of consumer loan which registered YoY increases for these foreign banks. Overall banks were also less positive in the nonresidential segment with the foreign players registering a decline of 0.3% YoY, while the local peers posted an increase of only 5.6% (vs. +11.4% YoY in 1QCY16). Page 3 of 9
17. TA Securities 16-Jun-17 A Member of the TA Group Figure 5 : Loans and advances (YoY Chg) Source: Companies, TA Research Figure 6: Loans and advances – Individuals (YoY Chg) Source: Companies, TA Research Figure 7: Loans and advances – SME (YoY Chg) Source: Companies, TA Research Page 4 of 9
18. TA Securities 16-Jun-17 A Member of the TA Group Figure 8 : Loans and advances – Other businesses (YoY Chg) Source: Companies, TA Research Figure 9: Loans and advances – Residential Mortgages (YoY Chg) Source: Companies, TA Research Figure 10: Loans and advances – Non-Residential Mortgages (YoY Chg) Source: Companies, TA Research Page 5 of 9
19. TA Securities 16-Jun-17 A Member of the TA Group Figure 11 : Loans and advances – HP (YoY Chg) Source: Companies, TA Research Figure 12: Loans and advances – Credit cards (YoY Chg) Source: Companies, TA Research Benign Asset Quality Asset quality of the four foreign local banks under review remained healthy in the 1QCY17 with Standard Chartered and OCBC reporting declines in the formation of new impaired loans. The average gross impaired loans (GIL) ratio stood at 2.6%, unchanged from 4QCY16 but was weaker compared to a year ago. While we do observe that the local banks’ current average GIL loans ratio stood at around 1.7%, we believe that the local bank’s healthier ratios are due to the low base effect from Public Bank and Hong Leong Bank, as well as more robust loan growth by the local players. In tandem with industry peers, the average loan loss coverage for Standard Chartered, HSBC, OCBC and UOBM stood at 86.1%, but, while the local banks registered sequential declines in the coverage ratio, the foreign banks managed to uphold its valuation allowance. Page 6 of 9
20. TA Securities 16-Jun-17 A Member of the TA Group Figure 13 : GIL Ratio Source: Companies, TA Research Figure 14: Loan Loss Coverage Ratio Source: Companies, TA Research Foreign banks to make headway Going forward, we foresee the foreign banks to benefit from a pickup in economic activities and the more sanguine macro outlook. Given their more customer centric portfolio - with the consumer segment accounting for 55-60% of total loans, the resilience in Malaysia’s consumer spending should be supportive of their loan growth. With optimism among businesses improving, we foresee an increase in appetite for the foreign banks to shift more resources into this segment in the near future. Making headlines and suggesting an increase in commitment in Malaysia and the region HSBC was reported to be investing RM1.06bn to build its future headquarter office in the Tun Razak Exchange (TRX) under its commitment to develop Malaysia as a financial hub in Asean. Standard Chartered Bank also recently expressed its strong commitment to supporting ASEAN companies to expand regionally and internationally as trade links and investments expand across the region. Rising demand for capital market activities should strengthen opportunities to grow fee income. Here, we foresee foreign banks having some competitive advantage over most local banks in the areas of cross border banking, private banking and wealth management due to their vast global and regional network and ability to offer a wider suite of products and solutions to their customers. Page 7 of 9