Bursa Malaysia Daily Market Report - 16 May

Transcription

1. Tuesday , 16 May, 2017 For Internal Circulation Only TA RESEARCH’S ‘DAILY COMPILED REPORTS’ News 1. Daily Market Commentary 2. Daily Brief Fundamental Reports 1. Petronas Chemicals Group Berhad: A Surprise GIFT 2. Petronas Gas Berhad: Joint Ventures Boost 3. Singapore Banking Sector: Moderation in Asset Risk, Improvement in Profitability 4. UMW Oil & Gas Corporation Bhd: All Rigs Utilised 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 (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 Tuesday, 16 May 2017 TA Research e-mail : taresearch@ta.com.my For Internal Circulation Only Review & Outlook KLSE Market Statistics (15.05.2017) (mil) Main Market 2,638.2 Warrants 260.0 ACE Market 838.4 Bond 5.4 ETF 0.0 Total 3,742.0 Off Market 42.9 Volume +/-chg (RMmn) 1045.7 2,799.3 -5.5 37.3 -4.1 158.4 1.8 0.6 0.02 0.0 2,995.7 -58.9 95.2 Value +/-chg 784.3 2.9 32.6 0.4 0.02 -113.3 Major Indices Index +/- chg Malaysia FBMKLCI FBMEMAS FBMSCAP May 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) 9.4 8.0 6.0 5.1 3.2 2.7 2.3 2.3 1.6 1.5 Up Down 297 353 68 95 50 52 2 7 4 1 421 508 % chg % YTD chg 1,778.65 12,747.19 17,741.24 1,777.00 2.78 29.09 59.83 5.50 0.16 0.23 0.34 0.31 8.34 11.17 20.56 8.65 20,981.94 6,149.67 7,454.37 19,869.85 2,290.65 25,371.59 3,264.21 1,537.42 5,688.87 3,090.23 1,827.02 5,838.40 85.33 28.44 18.98 -14.05 4.63 215.25 8.92 -6.52 13.65 6.72 6.83 1.50 0.41 0.46 0.26 -0.07 0.20 0.86 0.27 -0.42 0.24 0.22 0.37 0.03 6.17 14.24 4.36 3.95 13.04 15.32 13.31 -0.36 7.40 -0.43 -7.22 3.05 Top 10 KLCI Movers Based on Mkt Cap. Off Market DNONCE SPSETIA PTRANS SGB SEG FPGROUP SGB-PA FSBM F&N LITRAK Value/ Volume 1.06 0.14 0.19 0.12 1.28 0.80 2.22 (RM) @ 0.30 @ 3.63 @ 0.25 @ 0.73 @ 1.20 @ 0.77 @ 0.10 @ 0.21 @ 25.17 @ 5.86 Exchange Rate USD/MYR 4.3250 -0.0195 USD/JPY 113.46 -0.3200 EUR/USD 1.097 0.0094 Counter Mkt Cap. (RM’mn) TENAGA 79,226 PCHEM 58,160 AXIATA 48,011 DIGI 39,730 GENTING 37,170 MISC 33,702 HLBANK 28,812 TM 24,351 PETDAG 23,903 HAPSENG 22,233 Chg (RM) 0.10 0.04 0.02 0.01 0.07 0.07 0.04 0.02 0.06 0.02 Vol. (mn) 7.30 12.43 2.30 3.83 7.44 1.33 0.95 3.87 0.21 0.32 Commodities Futures Palm Oil (RM/mt) 2,611.00 29.00 Crude Oil ($/Barrel) 48.82 1.00 Gold ($/tr.oz.) 1,230.50 2.70 While blue chips stayed in consolidation mode Monday, lower liners perked up in late afternoon trade led by Ecovest and IWCity which ended limit-up on speculation IWH CREC may still be in the running to develop Bandar Malaysia. The KLCI gained 2.78 points to close at the day's high of 1,778.65, off an earlier low of 1,771.87, as losers beat gainers 508 to 421 on active trade totaling 3.74bn shares worth RM2.99bn. Trading momentum should stay robust on lower liner construction and technology stocks, spiced by China One Belt One Road plays. Immediate upside hurdles for the benchmark stays at 1,782, the 76.4%FR of the 1,867 to 1,503 downswing closely matching the recent two-year high of 1,784, followed by the 1,800 psychological level and 18 May 2015 high of 1,823. Immediate uptrend supports stays at the rising 30 and 50-day moving average levels, currently at 1,754 and 1,746, with better support from the lower Bollinger band at 1,730. Sime Darby needs strong breakout from present consolidation, with a convincing breach above the 23/3/17 peak (RM9.55) to fuel upside momentum towards the 123.6%FP (RM10.22) and 138.2%FP (RM10.64) ahead. Uptrend support is from the 100-day ma (RM8.97). Tenaga needs decisive climb above the 61.8%FR (RM14.02) and 200-day ma (RM14.05) to enhance upside potential towards the 76.4%FR (RM14.36), with tougher hurdles from RM14.60 and the 26/8/16 peak (RM14.90). News Bites • • • • • • • • • • • • • • Important Dates L&G - 8:5 Rights Issue - RI of up to 1,914.1m shares. 8 rights shares for every 5 existing share held, at an issue price of RM0.21 per rights share. LISTING ON: 18/05/2017. • 3A - 1:4 Bonus Issue - BI of 98.4m shares. Ex-Date: 23/05/2017. Entitlement Date: 25/05/2017. LISTING ON: 26/05/2017. • Petronas Chemicals Group Bhd's 1Q17 core profit of RM1.3bn (>2x YoY) was above our expectations and consensus' estimates mainly due to strongerthan-expected average selling prices and lower-than-expected taxes. Petronas Gas Bhd's 1QFY17 core profit of RM460.3mn (+5% YoY) was within our expectations and consensus' estimates at 27%/26% of full-year forecasts respectively. Malaysian Bulk Carriers Bhd reported 1QFY17 net loss of RM32.8mn compared to RM25.0mn of net loss in 1QFY16 due to negative contributions from its associate, PACC Offshore Services Holdings Ltd. There was renewed interest in Iskandar Waterfront City Bhd's shares on expectations of a possible reversal of the termination of the 60% stake sale in the Bandar Malaysia project. UMW Oil & Gas Corporation Bhd has bagged USD34.8mn worth of contracts for the provision of jack-up drilling rig services for Petronas Carigali Sdn Bhd and it is bidding for 33 jobs worth a combined value of RM3.2bn. Tenaga Nasional Bhd has withdrawn its judicial review proceedings against the government over a condition precedent in the proposed new power purchase agreement following the settlement of the dispute between the parties involved. Sime Darby Bhd's 99%-owned subsidiary, Weifang Sime Darby Port Co Ltd, has entered into a MoU with Northport (Malaysia) Bhd, an indirect subsidiary of MMC Corporation Bhd, to establish a sister port relationship. Axiata Business Services Sdn Bhd, a wholly owned subsidiary of Axiata Group Bhd, has proposed to acquire 65% of the issued share capital of Suvitech Co Ltd at a consideration of up to USD11.1mn. Felda Global Ventures Holdings Bhd has a signed a MoU with Sinograin Oils Corporation to collaborate and work together to explore on the possibility of supply, storage, processing and distribution of FGV's palm oil based products in China. MSM Malaysia Holdings Bhd, a 51%-owned subsidiary of Felda Global Ventures Bhd, is still in talks with the government to increase the local sugar price by 40 sen per kilogramme to ensure the company's profitability this year. V.S. Industry Bhd has proposed to subscribe for 250,000 new shares and acquire 199,995 shares in Skreen Fabric (M) Sdn Bhd for a total cash consideration of RM7.5mn. Tan Chong Motor Holdings Bhd is countersuing a Cambodian car dealership which claimed it had always been allowed to play the role of sole distributor of Nissan vehicles in Cambodia for US$33.0mn. Chin Hin Group Bhd's 1QFY17 net profit increased by 60.6% YoY to RM8.1mn due to the strong contribution from manufacturing of autoclaved aerated concrete blocks, precast concrete products, MI polymer concrete products and fire rated door products. Fitters Diversified Bhd is selling its entire 100% equity stake in Liangshan Future NRG Biology Electric Power Co Ltd to Shandong Yongneng EnergyConserving and Eco-Friendly Services Holding Corporation for RMB40.0mn. Rohas Tecnic Bhd's wholly-owned subsidiary, Rohas-Euco Industries Bhd, has been awarded a US$70mn contract by Electricite du Lao to supply and construct transmission lines, substations and distribution lines in the Lao People's Democratic Republic. Energy ministers for the two major oil producers, Saudi Arabia and Russia, have agreed to extend crude oil output cuts until March 2018 in their latest effort to rebalance the global crude market. 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 Tuesday , May 16, 2017 FBMKLCI: 1,778.65 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 Robust Trading Momentum on China OBOR Plays While blue chips stayed in consolidation mode Monday, lower liners perked up in late afternoon trade led by Ecovest and IWCity which ended limit-up on speculation IWH CREC may still be in the running to develop Bandar Malaysia. The KLCI gained 2.78 points to close at the day’s high of 1,778.65, off an earlier low of 1,771.87, as losers beat gainers 508 to 421 on active trade totaling 3.74bn shares worth RM2.99bn. Resistance at 1,782/1,784, Then 1,800 Trading momentum should stay robust on lower liner construction and technology stocks, spiced by China One Belt One Road plays. Immediate upside hurdles for the benchmark stays at 1,782, the 76.4%FR of the 1,867 to 1,503 downswing closely matching the recent two-year high of 1,784, followed by the 1,800 psychological level and 18 May 2015 high of 1,823. Immediate uptrend supports stays at the rising 30 and 50-day moving average levels, currently at 1,754 and 1,746, with better support from the lower Bollinger band at 1,730. BUY Sime Darby & Tenaga Sime Darby needs strong breakout from present consolidation, with a convincing breach above the 23/3/17 peak (RM9.55) to fuel upside momentum towards the 123.6%FP (RM10.22) and 138.2%FP (RM10.64) ahead. Uptrend support is from the 100-day ma (RM8.97). Tenaga needs decisive climb above the 61.8%FR (RM14.02) and 200-day ma (RM14.05) to enhance upside potential towards the 76.4%FR (RM14.36), with tougher hurdles from RM14.60 and the 26/8/16 peak (RM14.90). Asian Markets Shrug Off North Korea and Cyberattack Threats Asian markets closed mostly higher on Monday, edging up to a two-year high after shaking off threats posed by a ransomware attack that locked up more than 200,000 computers in over 150 countries and a missile test by North Korea. The weekend cyber-attack, which slowed down after a security researcher stumbled on a way to at least temporarily limit the worm's spread, was expected to speed up on Monday when employees returning to work turned on their computers. But with little evidence of widespread disruption in the region, investors appeared unalarmed, at least for now. Meanwhile, concerns over North Korea's nuclear program grew after the hermit state launched a new missile over the weekend. The missile landed in the sea close to Russia, Reuters reported. China's main stock index rose for the third straight session after a five-week losing streak, as concerns over tighter financial regulations and liquidity eased after Beijing's soothing comments. The blue-chip CSI300 index rose 0.4 percent to 3,399.19 points, while the Shanghai Composite Index added 0.2 percent to 3,090.23 points. In down under, the benchmark ASX 200 traded up 0.03 percent or 1.50 points to close at 5,838.40. Meanwhile, Japanese stocks edged down on Monday, pressured by a stronger yen, a widespread cyberattack and North Korea's missile test over the weekend. The Nikkei share average fell 0.1 percent to 19,869.85. Page 1 of 8
4. TA Securities 16-May-17 A Member of the TA Group Energy and Tech Sector Lift Wall Street Higher The S &P 500 and Nasdaq notched record closing highs on Monday, powered by demand for technology stocks after a global cyber-attack and rising oil prices. Oil rose to the highest level in more than three weeks after top exporters Saudi Arabia and Russia said supply cuts needed to last into 2018, a step toward extending an OPEC-led deal to support prices for longer than originally agreed. West Texas Intermediate futures spiked 2.11 percent to settle at USD48.85. Concerns about rising supplies of oil have dented the S&P 500’s energy sector, which has fallen 9.7 percent this year. Meanwhile, shares of cyber security firms also jumped on expectations that they would benefit from greater spending after the global "ransomware" attack that began spreading across the globe on Friday. President Donald Trump ordered Homeland Security Adviser Tom Bossert to hold an emergency meeting Friday night to assess the threat posed by the attack. Shares of Fireye rose 7.5 percent, and Symantec and Palo Alto Networks both gained around 3 percent. The Dow Jones Industrial Average was up 85.33 points, or 0.41 percent, to 20,981.94, the S&P 500 gained 11.42 points, or 0.48 percent, to 2,402.32 and the Nasdaq Composite added 28.44 points, or 0.46 percent, to 6,149.67. Page 2 of 8
5. TA Securities 16-May-17 A Member of the TA Group News In Brief Corporate Tenaga Nasional Bhd (TNB) has withdrawn its judicial review proceedings against the Energy Commission and the Minister of Energy, Green Technology and Water over a condition precedent in the proposed new power purchase agreement (PPA) between the utility group and YTL Power International Bhd. The application to withdraw was made following the settlement of the dispute between the parties and the agreement by YTL to incorporate the condition precedent as required by TNB in the new PPA. (The Edge) Sime Darby Bhd’s 99%-owned subsidiary, Weifang Sime Darby Port Co Ltd, has entered into a memorandum of understanding (MoU) with Northport (Malaysia) Bhd, an indirect subsidiary of MMC Corporation Bhd, to establish a sister port relationship. Under the MoU, the two ports will cooperate in port management and facilitate halal trade shipment between Malaysia and China. (Bursa Malaysia) Comments: The JV will be successful only if both parties could harness their collective strengths to generate a greater cost of synergies. We gathered that Northport already offers a vital link in the transport and logistics chain for Halal products’ manufacturers and producers. However, we are not overly positive about the Halal port business as the investment for halal-compliant could be a costly and gestation period may be longer than expected. High transport & handling costs could be a stumbling rock that kills profits. To recap, MISC has scrapped its East Asia-Middle East-India Halal Express service back in 2011 as the carrier struggles to stay profitable in this niche market. Moreover, the contribution from Weifang Port is still relatively small to the Sime Darby’s bottom line. Maintain Sell on Sime Darby with an unchanged TP of RM8.24/share, based on SOP valuation. Petronas Chemicals Group Bhd’s 1QFY17’s revenue and PBT respectively grew by 49.2% YoY to RM4.7bn and 82.6% YoY to RM1.6bn. The group’s exceptional operational performance was on the back of higher sales volume, higher prices and stronger US Dollar. Plant utilization rates were higher at 99% compared to 92% in 1QFY16. (Bursa Malaysia) Axiata Business Services Sdn Bhd, a wholly owned subsidiary of Axiata Group Bhd, has proposed to acquire 65% of the issued share capital of Suvitech Co Ltd (SCL) at a consideration of up to USD11.1mn (RM47.9mn). SCL is the owner and operator of a mobile virtual network enabler platform to facilitate the provision of sales/dealer management, products/pricing and provisioning, and billing for consumer, enterprise and IoT services. (Bursa Malaysia) There was renewed interest in Iskandar Waterfront City Bhd’s shares on expectations of a possible reversal of the termination of the 60% stake sale in the Bandar Malaysia project. (The Edge) UMW Oil & Gas Corporation Bhd (UMWOG) has bagged contracts for the provision of jack-up drilling rig services for Petronas Carigali Sdn Bhd with combined value of approximately USD34.8mn (RM151.1mn) for both firm and optional wells. UMWOG will assign its UMW Naga 3 and UMW Naga 4 for these contracts commencing in June 2017. The former is to drill 5 firm wells with the option of drilling additional 6 wells, while the latter is to drill 2 firm wells with the option of drilling additional 3 wells. (Bursa Malaysia) UMW Oil & Gas Corporation Bhd is bidding for 33 jobs worth a combined value of RM3.2bn. The oil and gas services provider shared that of the total jobs being tendered for its jack-up rigs, 20 were based overseas and 13 were local jobs. The group’s president, Rohaizad Darus alluded that the company would likely achieve a utilization rate of around 90% in the coming years based on the number of jobs being tendered. Meanwhile, while the group will achieve full utilization of its 7 jack-up drilling rigs by the second half of this year, it expects its earnings to remain under pressure due to subdued charter day rates. (The Star) Page 3 of 8
6. TA Securities 16-May-17 A Member of the TA Group Felda Global Ventures Holdings Bhd (FGV) has signed a memorandum of understanding with Sinograin Oils Corporation to express their intention to collaborate and work together to explore on the possibility of supply, storage, processing and distribution of FGV’s palm oil based products in China. (Bursa Malaysia) Petronas Gas Bhd’s 1QFY17 PBT declined marginally by 0.3% YoY to RM577.0mn mainly due to higher operating costs attributed to one-off staff costs adjustment and depreciation expense in line with completion of major capital projects. Net profit however increased by 3.6% YoY to RM463.2mn primarily contributed by lower tax expense as a result of utilization of utilities business tax incentive. Revenue increased by 3.4% YoY to RM1.2bn primarily on higher utilities revenue in tandem with higher offtake by customers as well as higher sales prices in line with fuel gas price revision coupled with higher regasification revenue attributed to higher storage fees. (Bursa Malaysia) MSM Malaysia Holdings Bhd, a 51%-owned subsidiary of Felda Global Ventures Bhd, is still in talks with the government to increase the local sugar price by 40 sen per kilogramme to ensure the company's profitability this year. (The Star) Cahya Mata Sarawak Bhd’s 1QFY17 revenue fell by 18.6% YoY to RM282.3mn while PBT increased by 174.2% YoY to RM27.3mn. The improvement in PBT was attributable to the reduction in the share of losses in associates, increase in the share of profits from the joint ventures and higher earnings by the cement and construction and road maintenance divisions. (Bursa Malaysia) V.S. Industry Bhd (VS) has proposed to subscribe for 250,000 new shares and acquire 199,995 shares in Skreen Fabric (M) Sdn Bhd (SFSB) for a total cash consideration of RM7.5mn. The collective stake represents a 60.0% interest in SFSB’s enlarged issued share capital. SFSB has been the supplier of filter components to VS and its subsidiaries for production of orders of a key customer. The proposal will allow the group to potentially increase the range of value-added services to its existing and prospective customers, and achieve cost savings following vertical integration (Bursa Malaysia) Tan Chong Motor Holdings Bhd is countersuing a Cambodian car dealership which claimed it had always been allowed to play the role of sole distributor of Nissan vehicles in Cambodia for US$33.0mn (RM142.8mn). (The Edge) Malaysian Bulk Carriers Bhd reported 1QFY17 net loss of RM32.8mn compared to RM25.0mn of net loss in 1QFY16. Revenue increased by 21.4% YoY to RM65.0mn. The poor bottom line performance was mainly due to negative contributions from its associate, PACC Offshore Services Holdings Ltd. Excluding associate results, the group’s underlying loss decreased by 47.0% to RM15.2mn in 1QFY17 from RM28.7mn in 1QFY16 mainly due to improved charter rates. (Bursa Malaysia) Chin Hin Group Bhd’s 1QFY17 net profit increased by 60.6% to RM8.1mn due to the strong contribution from manufacturing of autoclaved aerated concrete blocks, precast concrete products, MI polymer concrete products and fire rated door products. Revenue decreased by 8.0% YoY to RM261.6mn mainly due to lower revenue contribution from the distribution of building material and ready-mixed concrete sector. (Bursa Malaysia) Yong Tai Bhd announced that the group will update and announce the progress of the sale of a 24.6% stake by Sino Haijing Holdings Ltd to Co-Prosperity Holdings Ltd for RM117.7mn. (Bernama) Wing Tai Malaysia Bhd returned to the black in 3QFY17, posting a net profit of RM12.3mn from a net loss of RM0.9mn in 3QFY16. 3QFY17 revenue increased by 35.4% YoY to RM84.6mn. As for 9MFY17, revenue and net earnings respectively increased by 12.6% YoY to RM240.3mn and 21.7% YoY to RM26.0mn. The stronger margins from the retail division and higher share of profit from joint ventures offset lower operating profit from the property development division. (Bursa Malaysia) Page 4 of 8
7. TA Securities 16-May-17 A Member of the TA Group Muda Holdings Bhd ’s 1QFY17 PBT increased by 28.2% YoY to RM20.9mn, lifted by another RM13.0mn of progress payment from the insurer for the fire in paper mill in Tasek which occurred in August 2016. Excluding this, PBT would have reduced to RM7.9mn, a reduction of 51.5%, compared to RM16.3mn in 1QFY16 due to margin erosion from higher production costs. Revenue grew by 9.0% YoY to RM316.7mn on higher demand and selling prices of industrial paper. (Bursa Malaysia) Sarawak Cable Bhd’s 1QFY17 PBT increased by 39.7% YoY to RM8.1mn on higher contributions from the sales of power and telecommunication cables segment. Revenue declined by 30.9% YoY to RM251.9mn mainly on lower contributions from transmission lines construction. A first and final single tier dividend of 3.0sen per share in respect of FYE16 was proposed. (Bursa Malaysia) Fitters Diversified Bhd is selling its entire 100% equity stake in Liangshan Future NRG Biology Electric Power Co Ltd to Shandong Yongneng Energy-Conserving and Eco-Friendly Services Holding Corporation for a total cash consideration of RMB40.0mn (RM25.0mn). The disposal is being undertaken to divest non-operating assets, to streamline the group’s business operations and redeploy its resources for better return. (Bursa Malaysia) Microlink Solutions Bhd, a local information and communication technology solutions provider, has launched three new Internet of Things applications to address several recurring issues affecting the operations of the country's flood and natural disaster mitigation, energy management and plantations sectors. (Bernama) Rohas Tecnic Bhd’s wholly-owned subsidiary, Rohas-Euco Industries Bhd, has been awarded a US$70mn (RM300mn) contract by Electricite du Lao to supply and construct transmission lines, substations and distribution lines in the Lao People’s Democratic Republic. (Bursa Malaysia) Page 5 of 8
8. TA Securities 16-May-17 A Member of the TA Group News In Brief Economy Asia Malaysia Jobless Rate Drops Slightly in March Malaysia 's unemployment rate decreased marginally in March, after remaining stable in the previous two months, figures from the Department of Statistics (DoS) showed. The jobless rate dropped to 3.4% in March from 3.5% in February. In the corresponding month last year, the jobless rate was 3.5%. The number of unemployed people fell to 510,800 in March from 514,800 in February. A year ago, the jobless figure totaled 509,500. The labor force participation rate edged down to 67.7% in March from 67.8% in the preceding month. The seasonally adjusted jobless rate was 3.3% in March, down slightly from 3.4% in February. (DoS) China Retail, Investment and Industrial Production Growth Soften in April Growth in China’s retail sales, investment and industrial production softened in April, indicating a sub-par start to the second quarter despite apparent resilience in domestic lending activity. Retail sales grew 10.7% year on year in April, slowing from a rise of 10.9% in March but coming in just above a median estimate of 10.6% growth from economists surveyed. The softening was particularly pronounced at larger enterprises, where sales growth dropped to 9.2% from a pace of 10% in March. Online sales growth for the year to date accelerated marginally to 25.9%, compared to growth of 10.2% in total retail sales for the four months ended April. Urban fixed-asset investment grew 8.9% year on year in April, down from growth of 9.2% in March and falling short of expectations for a 9.1% rise. Investment by state-controlled firms saw a slight rebound to 13.8% growth for the year to date, while private investment growth for the period suffered a more significant slowdown to 6.9% growth compared to 7.7% in the first three months of 2017. Together the two figures suggest a rebound in state spending at the expense of private enterprise as the second quarter gets underway. Industrial production likewise saw a marked fall-back in April, dropping 0.9 percentage points to growth of 6.5% year on year, well below expectations of 7.1%. The softening of all three growth gauges comes despite credit data for April that showed new renminbi loans grew 7.8% month-on-month to Rmb1.1tn, while total social financing – the central bank’s preferred measure of liquidity – grew 12.8% year on year, up from 12.5% in March. (Financial Times) Xi Ends China World Trade Summit With Plan to Return in 2019 President Xi Jinping wrapped up the inaugural summit dedicated to his cornerstone diplomatic initiative for Chinese-style globalization with an invitation to world leaders attending the gathering to re-convene in 2019. Xi, who has heralded his Belt and Road Initiative as a "project of the century," said in a televised closing address in Beijing that his plan to link China with the world via ancient trade routes would address economic challenges and promote globalization. The initiative has "entered a new era as it is in full swing," Xi said in his closing remarks, noting 68 nations and international organizations had signed cooperation agreements with the host. He said the forum would reconvene in 2019, skipping a year. Xi opened the two-day meeting on Sunday by pledging 540 billion yuan ($78 billion) in financing, including 100 billion yuan for China’s Silk Road Fund, 380 billion yuan in new lending for participating nations, and 60 billion yuan in coming years to developing countries and international organizations that join the program. In that speech, Xi repeated his call for multilateral trade, describing his initiative as a force for peace in "a world fraught with challenges." He told the almost two dozen world leaders gathered at the forum that countries should "uphold and grow an open world economy." (Bloomberg) Indonesia's April Export, Import Growth Slower than Expected Indonesia's exports and imports grew more slowly than expected in April, while the country's trade balance was smaller than a month before, the statistics bureau said. Southeast Asia's largest economy had a $1.24 billion trade surplus in April, the bureau said, more than the $860 million a Reuters poll had forecast, but smaller than the revised $1.39 billion for March. Imports rose 10.31% from a year earlier to $11.93 billion in April. The poll's median forecast was for a 21.56% annual growth rate. The bureau said imports of Page 6 of 8
9. TA Securities 16-May-17 A Member of the TA Group consumer goods rose nearly 26 % on a yearly basis. Increases in imports of capital goods and raw materials were smaller. Exports rose 12.61% to $13.17 billion in April, versus the poll's forecast of 22.45%. Both exports' and imports' value in April were below that of March. (Reuters) Thai Q1 GDP Growth Fastest in 4 years, Momentum Seen Strong Thailand's economy expanded at its fastest quarterly pace in four years in the first quarter boosted by recovering exports, but monetary policy will likely remain loose to cushion stillsubdued investment activity. The government raised its export outlook for 2017, suggesting the recovery was gaining traction, but South-East Asia's second-largest economy faces rising global trade protectionism and capital outflow risks as the US Federal Reserve prepares to hike rates again this year. Gross domestic product grew a seasonally adjusted 1.3% in the first quarter from the fourth, aided also by household holding and tourism, the National Economic and Social Development Board (NESDB) said. The pace was slightly faster than the 1.2% forecast in a poll and the 0.5% growth in the previous quarter, which was revised up from 0.4%. From a year earlier, growth was 3.3%, also slightly better than a median forecast of 3.2%, and the 3.0% in the final quarter of last year. (The Star) OPEC Crude Oil Production Cuts to be Extended Energy ministers for the two major oil producers, Saudi Arabia and Russia, have agreed to extend crude oil output cuts until March 2018 in their latest effort to rebalance the global crude market. (The Star) United States. New York Manufacturing Activity Unexpectedly Contracts in May Activity in the New York manufacturing sector has unexpectedly seen a modest contraction in the month of May, according to a report released by the Federal Reserve Bank of New York. The New York Fed said its general business conditions index fell to a negative 1.0 in May from a positive 5.2 in April, with a negative reading indicating a contraction in regional manufacturing activity. The index's pullback into negative territory came as a surprise to economists, who had expected the index to rise to a positive 7.0. The unexpected decrease by the headline index partly reflected a downturn in new orders, as the new orders index slumped to a negative 4.4 in May from a positive 7.0 in April. The shipments index also dropped to 10.6 in May from 13.7 in April, indicating that shipments increased at a slower pace. The report said the number of employees index also dipped to 11.9 in May from 13.9 in April, suggesting slightly slower job growth. On the inflation front, the prices paid index tumbled to 20.9 in May from 32.8 in April, while the prices received index slid to 4.5 from 12.4. The New York Fed said firms remained optimistic about future conditions, however, as the index for future business conditions was nearly flat at 39.3. Thursday morning, the Philadelphia Federal Reserve is scheduled to release its report on regional manufacturing activity. The Philly Fed Index is expected to dip to 19.8 in May from 22.0 in April. (RTT News) Page 7 of 8
10. TA Securities 16-May-17 A Member of the TA Group Share Buy-Back : 15 May 2017 Company FITTERS Bought Back Price (RM) Hi/Lo (RM) 149,500 0.41 0.415/0.405 Total Treasury Shares 18,601,400 Source: Bursa Malaysia 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 8 of 8 We accept no We, our associates, directors, employees may have an interest in
11. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company AUTOMOBILE BAUTO MBMR UMW Share Price (RM) 15-May-17 2.13 2.50 5.80 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 2.36 2.04 5.12 0.96 0.59 1.22 10.8 22.7 17.7 15.8 23.8 27.6 19.8 11.0 32.8 13.5 10.5 21.0 5.6 3.6 1.9 7.4 3.6 3.1 2.44 2.70 7.00 -12.7 -7.4 -17.1 1.95 1.95 4.43 9.2 28.2 30.9 0.0 16.8 26.9 4.10 3.40 5.40 6.10 15.80 9.20 22.10 4.70 10.00 1.30 0.95 1.33 1.34 0.67 0.96 0.80 1.31 0.71 35.8 29.4 46.4 50.6 101.3 73.6 136.6 49.0 40.3 37.7 33.1 50.6 55.6 109.8 82.6 140.4 51.7 39.0 12.5 9.8 11.8 11.7 13.9 12.7 14.6 11.2 25.0 11.9 8.7 10.8 10.7 12.8 11.3 14.2 10.6 25.8 3.3 2.8 2.9 3.4 2.9 5.3 2.8 2.2 3.4 3.3 2.8 3.3 3.7 2.9 5.3 2.9 2.2 3.4 4.49 3.00 5.70 5.98 14.28 9.68 20.58 5.59 10.38 0.0 -4.0 -4.0 -0.7 -1.7 -3.1 -2.9 -2.0 -2.9 3.60 2.08 3.90 4.11 12.70 7.50 18.72 4.46 8.20 24.7 38.5 40.3 44.4 10.6 25.1 6.7 22.8 22.9 20.7 20.5 26.9 31.7 4.0 14.4 1.3 16.3 13.9 0.44 1.30 5.42 3.55 0.94 2.05 2.29 5.80 0.49 1.62 5.49 3.27 0.58 1.90 1.50 5.58 0.80 0.67 1.06 1.09 1.20 na 1.11 0.13 5.7 14.6 31.6 16.8 9.6 12.6 11.9 44.3 5.7 13.5 36.4 20.9 9.9 12.5 11.8 45.8 7.7 8.9 17.2 21.1 9.8 16.2 19.3 13.1 7.7 9.6 14.9 17.0 9.5 16.3 19.4 12.7 0.0 2.2 2.2 2.7 1.1 2.7 1.3 4.3 2.3 2.2 2.2 2.7 1.1 2.7 1.3 4.3 0.51 1.35 5.42 3.61 1.05 2.13 2.49 6.13 -13.7 -3.8 0.0 -1.7 -10.5 -3.8 -8.0 -5.4 0.36 0.80 4.65 3.07 0.41 1.42 1.41 5.15 22.2 63.3 16.6 15.6 132.1 44.4 62.4 12.6 1.1 23.8 13.4 10.9 63.5 20.6 32.4 -1.4 2.00 2.00 0.47 15.4 15.6 13.0 12.8 5.0 5.0 2.40 -16.7 1.93 3.6 -0.5 14.80 18.42 15.41 21.08 0.55 0.57 69.6 93.1 77.5 21.3 101.9 19.8 19.1 18.1 4.7 4.5 5.2 5.0 15.30 18.74 -3.3 -1.7 12.84 14.58 15.3 26.3 6.3 12.5 2.35 7.67 25.08 83.20 3.46 1.83 4.94 1.01 2.23 9.59 27.41 88.66 3.76 2.74 4.17 1.10 0.49 0.35 0.35 0.37 0.50 0.68 0.46 0.58 6.5 35.9 120.5 293.6 22.3 25.1 12.7 9.3 7.5 40.5 148.1 326.2 24.7 25.3 15.8 12.8 36.2 21.3 20.8 28.3 15.5 7.3 38.9 10.9 31.2 19.0 16.9 25.5 14.0 7.2 31.3 7.9 0.8 3.9 2.8 3.2 4.3 4.4 0.9 5.0 1.0 5.0 3.0 3.4 4.9 4.4 1.0 5.0 3.00 9.29 27.00 83.68 3.58 2.04 5.00 1.07 -21.7 -17.4 -7.1 -0.6 -3.4 -10.3 -1.2 -5.6 2.11 7.30 22.44 74.12 2.13 1.43 4.14 0.78 11.4 5.1 11.8 12.3 62.4 28.0 19.2 29.5 -8.6 4.7 6.8 6.4 35.7 5.8 14.1 27.0 45.94 52.08 1.06 198.6 187.4 23.1 24.5 4.4 4.4 55.64 -17.4 40.61 13.1 4.0 9.96 5.80 11.53 6.58 1.35 1.28 49.4 25.7 55.6 27.9 20.2 22.6 17.9 20.8 0.5 1.4 0.6 1.6 10.00 6.07 -0.4 -4.4 7.50 4.17 32.8 39.0 25.4 28.4 2.81 0.14 3.81 0.10 0.73 1.31 22.1 0.2 24.6 0.3 12.7 70.9 11.4 46.4 5.7 0.0 6.8 0.0 3.42 0.15 -17.8 -3.4 2.73 0.05 2.9 180.0 -5.1 180.0 6.17 4.15 6.40 4.61 0.78 0.52 13.9 13.3 17.9 16.5 44.4 31.1 34.4 25.2 0.7 1.5 0.7 1.8 6.73 4.37 -8.3 -5.0 5.78 3.85 6.7 7.8 -2.8 -0.7 5.67 6.33 2.10 5.20 2.14 6.05 6.80 1.90 5.05 2.55 0.61 0.16 0.31 -0.22 0.28 19.5 35.8 16.2 26.6 4.3 24.4 40.5 18.3 30.2 7.1 29.1 17.7 12.9 19.6 49.9 23.2 15.6 11.5 17.2 30.3 1.4 2.8 2.3 2.6 0.5 1.9 3.2 2.6 2.9 0.8 5.85 7.07 2.69 5.45 2.64 -3.1 -10.5 -21.9 -4.6 -18.9 3.87 5.62 1.88 4.20 1.96 46.5 12.6 11.7 23.8 9.2 17.4 -3.9 -0.5 -2.8 -9.3 INDUSTRIAL SCIENTX SKPRES 8.70 1.36 8.50 1.75 0.59 0.49 67.9 9.1 78.0 14.1 12.8 15.0 11.2 9.7 2.4 3.2 2.8 5.0 8.99 1.44 -3.2 -5.6 5.94 1.12 46.5 21.4 29.9 5.4 MEDIA ASTRO MEDIA PRIMA STAR 2.74 1.10 2.47 3.20 0.95 1.75 1.04 0.67 0.68 13.2 7.8 10.6 14.5 8.1 9.1 20.7 14.2 23.4 18.9 13.6 27.3 4.6 5.6 7.3 4.7 5.9 7.3 3.01 1.52 2.70 -9.0 -27.6 -8.5 2.56 1.00 2.20 7.0 10.0 12.3 5.4 -4.3 10.3 0.45 0.84 7.03 0.44 6.05 1.29 0.61 33.7 13.7 7.4 44.8 20.2 50.4 2.5 -4.0 4.4 2.7 41.6 4.2 19.8 -29.1 1.30 36.9 4.7 BANKS & FINANCIAL SERVICES AFG 4.49 AFFIN 2.88 AMBANK 5.47 CIMB 5.94 HLBANK 14.04 MAYBANK 9.38 PBBANK 19.98 5.48 RHBBANK BURSA 10.08 CONSTRUCTION BPURI GADANG GAMUDA IJM SENDAI SUNCON WCT LITRAK Building Materials WTHORSE CONSUMER Brewery CARLSBG HEIM Retail AEON AMWAY F&N 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 EATECH 0.60 0.45 1.05 11.5 11.9 5.2 5.0 0.0 0.0 1.18 -49.6 MHB 0.96 0.95 1.85 -1.2 1.3 na 72.9 0.0 0.0 1.23 -22.4 MISC 7.55 7.65 0.83 56.8 54.7 13.3 13.8 4.0 4.0 7.84 -3.7 PANTECH 0.63 0.69 1.28 4.1 5.0 15.2 12.6 2.9 3.1 0.67 -5.3 PCHEM 7.27 7.91 1.06 39.2 41.6 18.6 17.5 2.9 3.0 7.80 -6.8 SENERGY 1.94 2.02 2.43 5.3 4.6 36.9 41.8 0.0 0.0 2.10 -7.6 UMWOG 0.62 0.80 2.03 -12.0 -3.6 na na 0.0 0.0 1.04 -40.4 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 1.78 1.40 1.40 11.3 12.2 15.8 14.6 0.0 0.0 2.02 -11.9
12. 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 1.92 3.12 4.64 24.90 9.33 6.13 1.53 3.88 3.93 22.75 8.24 7.52 1.81 0.46 1.08 0.93 1.25 0.50 6.3 13.7 18.7 111.8 30.8 32.7 11.1 15.7 21.1 119.1 35.3 34.5 30.3 22.8 24.8 22.3 30.3 18.7 17.3 19.8 22.0 20.9 26.4 17.8 2.6 2.2 2.2 2.2 2.4 2.6 2.6 2.6 2.6 2.4 3.0 2.8 2.52 3.70 4.81 25.50 9.55 6.51 -23.8 -15.7 -3.5 -2.4 -2.3 -5.8 1.31 3.00 4.07 22.62 7.10 5.53 46.6 4.0 14.0 10.1 31.4 10.8 23.9 -8.2 5.5 3.8 15.2 2.2 0.69 1.07 0.85 2.17 1.54 0.79 3.63 3.49 0.69 1.07 1.00 2.10 1.60 0.80 4.10 3.40 0.66 0.66 0.30 0.93 0.70 0.31 0.67 0.49 3.4 20.0 7.3 14.7 14.5 6.4 25.6 27.2 7.0 17.4 11.2 15.3 12.5 9.7 22.8 29.1 20.0 5.3 11.6 14.7 10.6 12.4 14.2 12.8 9.8 6.1 7.6 14.2 12.3 8.2 15.9 12.0 5.8 3.7 4.1 3.2 3.9 1.3 3.9 3.4 5.8 3.3 4.7 3.5 3.6 1.3 3.9 3.4 0.83 1.43 1.05 2.46 1.70 1.00 3.77 3.66 -16.4 -25.3 -19.5 -11.8 -9.4 -21.0 -3.7 -4.6 0.68 1.05 0.85 1.85 1.34 0.69 2.80 2.84 1.5 1.9 0.0 17.5 14.9 14.5 29.6 22.8 -0.7 -5.3 -15.5 11.3 7.7 -1.3 16.0 16.3 1.72 1.47 1.86 1.72 0.54 0.59 8.9 8.1 10.1 8.6 19.4 18.2 17.0 17.0 5.2 5.7 5.9 6.1 1.84 1.72 -6.5 -14.5 1.60 1.44 7.5 2.1 0.0 -3.9 POWER & UTILITIES MALAKOF PETDAG PETGAS TENAGA YTLPOWR 1.22 24.06 18.58 14.00 1.53 1.45 20.19 19.02 17.37 1.81 0.70 0.75 0.77 1.01 0.60 6.6 98.4 88.2 131.9 8.8 6.1 102.3 101.3 130.8 10.6 18.5 24.5 21.1 10.6 17.5 19.9 23.5 18.3 10.7 14.5 5.7 3.0 3.3 3.1 6.5 5.7 3.2 3.8 3.3 6.5 1.80 25.70 22.66 14.90 1.64 -32.2 -6.4 -18.0 -6.0 -6.7 1.14 22.60 18.10 13.00 1.38 7.0 6.5 2.7 7.7 10.9 -10.9 1.1 -12.8 0.7 2.7 TELECOMMUNICATIONS AXIATA DIGI MAXIS TM 5.35 5.11 6.57 6.48 5.25 4.95 5.95 6.95 1.26 0.95 0.71 0.68 16.7 20.8 25.1 21.4 17.6 21.1 25.4 22.3 32.0 24.5 26.2 30.2 30.4 24.2 25.8 29.1 1.6 4.1 3.0 3.0 1.7 4.1 3.0 3.1 5.99 5.19 6.60 6.90 -10.7 -1.5 -0.5 -6.1 4.11 4.37 5.36 5.81 30.2 16.9 22.6 11.5 13.3 5.8 9.9 8.9 TECHNOLOGY Semiconductor & Electronics IRIS 0.20 INARI 2.20 MPI 12.90 UNISEM 3.39 0.14 2.35 13.15 3.55 1.43 0.80 0.54 0.83 -1.2 10.5 94.2 26.9 0.9 na 12.6 20.9 115.7 13.7 29.1 12.6 22.1 17.5 11.2 11.7 0.0 1.9 2.1 3.5 0.0 2.3 2.1 3.5 0.24 2.20 13.10 3.70 -16.7 0.0 -1.5 -8.4 0.10 1.28 7.02 2.20 100.0 71.6 83.8 54.1 81.8 32.5 74.1 43.6 3.56 8.10 3.02 8.10 1.13 1.47 33.5 17.2 34.9 17.5 10.6 47.0 10.2 46.3 1.1 1.2 1.4 1.2 3.57 8.31 -0.3 -2.5 2.12 5.76 67.9 40.6 55.5 33.7 1.68 3.89 1.88 4.51 0.81 0.68 15.4 19.3 21.5 17.4 10.9 20.1 7.8 22.3 3.3 3.7 4.2 3.3 1.87 4.59 -10.2 -15.3 1.23 3.74 36.6 4.0 5.7 -9.5 PROPERTY GLOMAC HUAYANG IBRACO IOIPG MAHSING SNTORIA 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 20.77 OCBC 10.62 UOB 23.66 PLANTATIONS WILMAR IFAR 3.82 0.50 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 1.23 1.13 1.09 173.8 87.8 195.7 190.2 12.0 92.5 12.1 209.4 12.1 10.9 11.5 11.3 2.9 5.7 3.0 2.9 6.7 3.0 21.0 10.6 24.0 -1.1 0.0 -1.5 14.72 8.84 17.41 41.1 29.2 35.9 19.8 19.1 16.0 3.72 0.53 0.91 1.12 28.9 3.9 31.1 4.3 12.3 11.7 2.1 1.9 2.4 2.1 4.0 0.6 -4.5 -16.0 2.96 0.44 29.1 13.6 6.4 -4.8 13.2 12.8 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. Required Rate of Return of 7% is defined as the yield for one-year Malaysian government treasury plus assumed equity risk premium.
13. RESULTS UPDATE TA Securities Tuesday , May 16, 2017 FBMKLCI: 1,778.65 Sector: Oil & Gas A Member of the TA Group MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Petronas Chemicals Group Berhad TP: RM7.91 (+9%) Last Traded: RM7.27 A Surprise GIFT Hold THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Kylie Chan Sze Zan +603-2167-9601 kyliechan@ta.com.my Review Petronas Chemicals Group’s (PChem) 1Q17 core profit of RM1.3bn (>2x YoY) was above our expectations and consensus’ estimates, accounting for 47% and 40% of full-year forecasts respectively. The outperformance was mainly due to stronger-than-expected average selling prices (ASP), and lower-than-expected taxes. 1Q17 effective tax rate of 16% was significantly lower than management’s full year guidance of 20% (indicated earlier in 4Q16). Taxes were lower due to the Global Incentive for Trading (GIFT) program. To recap, GIFT offers 3% flat corporate tax for companies incorporated in Labuan that trade in petroleum products. Therefore, in order to leverage on GIFT, the group is progressively converting its business model to contract manufacturing. This enables PChem’s upstream plants to sell products to the group’s Labuan marketing arm. Management expects the conversion process, which started in 2015, to be completed by end-17. A strong 118.8% YoY growth in core profit in 1Q17 was driven by a combination of:- 1) increased volumes underpinned by higher group plant utilization (PU) of 99% (1Q16: 92%), 2) increase in ASPs (+22%), which led to higher spreads, 3) improved methane gas feedstock supply, and 4) stronger USD. Correspondingly, EBITDA margin inched up to 42% (1Q16: 39%). Additionally, lower tax rate of 16% (1Q16: 25%) boosted bottomline expansion. Meanwhile, high PU was due to the absence of plant turnaround activities (TA). 1Q17 product prices were higher across the board for both Olefins & Derivatives (O&D) (+25% YoY) and Fertilisers & Methanol (F&M) (+41% YoY). Meanwhile, PU levels were improved for both O&D (1Q17: Full, 1Q16: 97%) and F&M (1Q17: 96%, 1Q16: 89%). We expect weaker quarterly results for the remainder of FY17, mainly due to heavy plant TA in 3Q17. This includes statutory maintenance at Kerteh IPC (50-55 days), and TA at Methanol Plant 1 at Labuan. Correspondingly, management guided for PU to range lower at 80% -83% in 3Q17. On top of that, the MTBE Plant at Gebeng IPC also underwent TA in 2Q17. Additionally, there may be gestational startup costs in 1Q17 for SAMUR as it progressively ramps up production. Key Takeaways from Conference Call SAMUR updates: 1) ammonia and urea plants were fully commissioned in end Mar-17, 2) urea plant was temporarily shut down in April to enable repair works for valves, 3) some pre-operating expenses were recognized in 1Q17, 4) SAMUR will recognize its maiden contribution in 2Q17, 5) management aims to defer warranty maintenance shutdown from Dec-17 to 1Q18, and 6) the facility will be progressively ramped up to 80% utilization in FY18 (FY17: 70%). Renewed tax rate guidance:- 1) FY17: mid-teens after accounting for progressive transition to contract manufacturing model, and recognition of Investment Tax Allowances (ITA) for SAMUR, 2) FY18: low-teens following full leverage of GIFT. Page 1 of 3 www.taonline.com.my Share Information Bloomberg Code PCHEM MK Stock Code 5218 Listing Main Market Share Cap (mn) 8,000 Market Cap (RMmn) 58,160 Par Value (RM) 0.10 52-wk Hi/Lo (RM) 7.80/6.05 12-mth Avg Daily Vol ('000 shrs) 6,705.0 Estimated Free Float (%) 14.0 Beta 1.1 Major Shareholders (%) Petronas - 64 EPF - 10.5 Forecast Revision (%) FY17 Forecast Revision (%) FY18 13.0 5.9 Core Net Profit (RM mn) 3,134.1 3,331.2 Consensus 3,296.8 3,442.8 95.1 96.8 TA/Consensus (%) Previous Rating Hold (Maintained) Scorecard % of FY vs TA 47 Above vs Consensus 40 Above Financial Indicators Net Debt/Equity (x) FY17 FY18 Net Cash Net Cash ROA (%) 9.2 9.3 ROE (%) 10.4 10.4 NTA/Share (RM) 3.8 4.0 P/NTA (x) 1.9 1.8 Share Performance Price Change (%) PCHEM FBMKLCI 1 mth (4.3) 2.6 3 mth 0.8 3.8 6 mth 6.3 8.9 12 mth 17.3 9.0 (12-Mth) Share Price relative to the FBM KLCI Source: Bloomberg
14. TA Securities 16-May-17 A Member of the TA Group Outlook According to IHS , there will be significant global capacity additions in 2017 for Olefins (+47%), Polyolefins (+84%). In particular, a large chunk of the growth emanates from within PChem’s home market of Asia Pacific for Olefins (81%) and Polyolefins (93%). Meanwhile, for Methanol (+14%) and MEG (+9%), there will also be capacity additions, but at a slower growth rate. On the bright side, global Urea capacity is expected to contract by 16%, with the bulk of reduction originating from Asia Pacific (-40%). Impact We incorporate FY16 audited numbers into our forecasts, and tweak product prices upwards to reflect 1Q17 ASP trends. In addition, we lowered tax rates as per management’s renewed guidance. Correspondingly, our FY17-19 forecasts are raised by 3%-13%. Valuation We roll forward our valuation base year to FY18, and lower our target multiple to 10.5x EV/EBITDA (previous: 11.5x). This implies a 29% premium above historical mean (8.1x), and 14% discount versus regional peers average (12.2x). As a result of the changes, our TP is lowered to RM7.91 (previous: RM8.20) We maintain our Hold recommendation for PChem as there may be downside risk to FY17 earnings on the back of:- 1) prolonged statutory maintenance at main facility, Kerteh IPC, and 2) drag from SAMUR during gestation period. Furthermore, we believe that substantial new petrochemicals capacity, as detailed above, may result in downward pressure on ASPs. Additionally, we understand that heavy plant TA in FY17 will stretch into FY18, as other plants reach the timeline for statutory maintenance. On top of that, SAMUR’s 1-year anniversary warranty maintenance may take place in 1Q18, resulting in circa 40-50 days shutdown. Figure 1: 1Q17 Results Analysis (RM mn) YE 31 Dec 1Q17 4Q16 QoQ Revenue 4,695.0 3,947.0 19.0 3,147.0 49.2 Core EBITDA 1,995.0 1,579.0 26.3 1,223.0 63.1 Depreciation Finance Costs Associates EI Pretax Profit Taxation Minority Interest (349.0) (349.0) 1Q16 0.0 (327.0) YoY 6.7 (6.0) (9.0) (33.3) 0.0 nm 3.0 (21.0) >-100 5.0 (40.0) (7.0) (27.0) (74.1) (5.0) 40.0 1,636.0 1,173.0 39.5 896.0 82.6 (255.0) (140.0) 82.1 (225.0) 13.3 (46.0) 87.0 (79.0) Reported Net Profit 1,295.0 987.0 31.2 592.0 118.8 Core Net Profit 1,302.0 1,014.0 28.4 597.0 118.1 28.4 7.5 118.1 Core EPS (sen) (86.0) 16.3 12.7 DPS (sen) - 12.0 EBITDA Margin 42% 40% 39% Core Net Margin 28% 26% 19% - Page 2 of 3 8.9
15. TA Securities 16-May-17 A Member of the TA Group Figure 2 : 1Q17 Segmental Analysis (RM mn) YE 31 Dec (RM mn) 1Q17 4Q16 Revenue Olefins & Derivatives Fertilisers & Methanol Others Group 1Q16 QoQ% YoY% 3,222.0 2,831.0 2,246.0 13.8 43.5 1,507.0 1,147.0 888.0 31.4 69.7 13.0 9.7 (361.5) 19.0 49.2 (34.0) (31.0) 4,695.0 3,947.0 3,147.0 Olefins & Derivatives 933.0 1,068.0 808.0 (12.6) 15.5 Fertilisers & Methanol 451.0 425.0 338.0 6.1 33.4 1,381.0 1,484.0 1,146.0 (6.9) 20.5 2018F 2019F EBITDA Group EBITDA margin Olefins & Derivatives Fertilisers & Methanol Group Figure 3: Earnings Summary FYE Dec (RM mn) Revenue EBITDA EBITDA margin (%) 29% 38% 36% 30% 37% 38% 29% 38% 36% 2015 2016 2017E 13,536.0 13,860.0 15,564.0 15,835.1 16,084.8 4,648.0 5,299.0 5,503.6 5,760.1 6,044.2 34.3 38.2 35.4 36.4 37.6 Pretax Profit 3,833.0 4,110.0 4,170.4 4,254.4 4,344.7 Reported Net Profit 2,782.0 2,932.0 3,134.1 3,331.2 3,401.9 Core Net Profit 2,754.0 3,109.0 3,134.1 3,331.2 3,401.9 (sen) 34.4 38.9 39.2 41.6 42.5 EPS growth (%) 6.9 12.9 0.8 6.3 2.1 PER (x) 21.1 18.7 18.6 17.5 17.1 (sen) 18.0 19.0 21.0 22.0 23.0 (%) 2.5 2.6 2.9 3.0 3.2 EPS GDPS Dividend Yield Stock Recommendation Guideline BUY : HOLD : SELL : Not Rated: Total return within the next 12 months exceeds required rate of return by 5%-point. Total return within the next 12 months exceeds required rate of return by between 0-5%-point. Total return is lower than the required rate of return. The company is not under coverage. The report is for information only. Total Return is defined as expected share price appreciation plus gross dividend over the next 12 months. Required Rate of Return of 7% is defined as the yield for one-year Malaysian government treasury plus assumed equity risk premium. Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy 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) (A Participating Organisation of Bursa Malaysia Securities Berhad) Kaladher Govindan – Head of Research Page 3 of 3
16. RESULTS UPDATE TA Securities Tuesday , May 16, 2017 FBMKLCI: 1,778.65 Sector: Oil & Gas A Member of the TA Group MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 4 Petronas Gas Berhad TP: RM19.02 (+2%) Last Traded: RM18.58 Joint Ventures Boost Under Review THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Kylie Chan Sze Zan Tel: +603-2167-9601 kyliechan@ta.com.my Review www.taonline.com.my Share Information Bloomberg Code PTG MK Stock Code Petronas Gas Berhad (PetGas) reported 1Q17 core profit of RM460.3mn (+5% YoY) was within our expectations and consensus’ estimates at 27%/26% of full-year forecasts respectively. 6033 Listing Main Market Share Cap (mn) 1,978.7 Market Cap (RMmn) 36,764.8 Par Value 1.00 52-wk Hi/Lo (RM) YoY, bottomline was stronger (4.4%) mainly due to:- 1) higher contribution by joint ventures, which surged more than 3x, 2) absence of hefty repair and maintenance (R&M) costs, and 3) lower taxes arising from recognition of Investment Tax Allowances (ITA) for its Utilities segment. To a smaller extent, a stronger USD/MYR, coupled with pass through revision of FSU opex charter hire helped to boost earnings from the Regasification segment. This more than offset drag from:- 1) one-off staff costs adjustment, 2) higher depreciation at the Gas Processing and Utilities segment following capitalization of investments for its plant rejuvenation exercise 12-mth Avg Daily Vol ('000 shrs) 1,176.0 Estimated Free Float (%) 19.0 Beta 0.6 Major Shareholders (%) Petronas - 60.7 EPF - 10.4 KWAP - 5.4 Forecast Revision FY17 FY18 0.0 0.0 Net Profit (RM mn) 1,745.9 2,004.1 Consensus 1,772.9 1,910.1 98.5 104.9 Forecast Revision (%) TA's / Consensus (%) Previous Rating Sell (Maintained) Financial Indicators FY17 Net Debt/Equity (%) FCFPS (RM) Recall that in FY16, Pet Gas completed the first phase of its transformation programme to enhance asset operational performance. Following this, management provided guidance that R&M costs would decline by 25% in FY17E. 22.66/18.10 FY18 0.1 0.0 0.52 0.81 P/CFPS (x) 35.5 23.1 ROE (%) 13.8 15.1 ROA (%) 10.2 11.2 NTA/Share (RM) 6.41 6.71 2.9 2.8 Price/NTA (x) Scorecard PetGas declared first interim DPS of 15 sen (1Q16: 14 sen), which is inline with expectations. % of FY vs TA 27 Within vs Consensus 26 Within Share Performance (%) Impact Maintain earnings forecasts pending an Analyst Briefing later today. Outlook The looming liberalization of gas infrastructure (transmission and regasification) may translate to earnings risk due to lower allowable return on assets (2014 GTA: 9.2%). This is underpinned by expectations of:- 1) lower return on assets (7.5%-8.0%), in-line with peers (Gas Malaysia and Tenaga), and 2) due to Pet Gas’ reduced WACC (current: 7.8%). In the worst case scenario, we estimate topline erosion of 15% post-tariff revision. Price Change PTG 1 mth (4.6) 2.5 3 mth (9.8) 3.8 6 mth (13.9) 8.8 12 mth (12.9) 9.0 (12-Mth) Share Price relative to the FBM KLCI Valuation Our SOP valuation of RM19.02/share is under review pending more details from the management. Source: Bloomberg Page 1 of 3 FBM KLCI
17. TA Securities 16-May-17 A Member of the TA Group Figure 1 : Results Analysis YE 31 Dec Revenue EBITDA Depreciation 1Q17 4Q16 QoQ 1Q16 YoY 1,169.1 1,153.9 1.3 1,130.6 3.4 783.1 720.2 8.7 782.7 0.1 (228.3) (229.2) (0.4) (204.3) 11.8 EBIT 554.8 491.0 13.0 578.4 (4.1) Net Finance Costs (11.0) (8.4) 31.6 (16.7) (34.0) 30.5 9.4 >100 10.5 >100 2.8 (8.2) >-100 6.5 (56.8) Associates EI Pretax Profit Taxation Minority Interest 577.0 483.8 19.3 578.7 (0.3) (113.9) (20.5) >100 (131.4) (13.4) (0.1) (1.8) (95.9) (0.1) (28.8) Reported Net Profit 463.1 461.5 0.4 447.2 3.6 Core Net Profit 460.3 469.6 (2.0) 440.7 4.5 (2.0) 22.3 4.5 Core EPS (sen) 23.3 23.7 DPS (sen) 15.0 19.0 14.0 Figure 2: Segmental Analysis RM mn 1Q17 4Q16 % QoQ 1Q16 % YoY Sales: - Gas processing - Gas transportation Throughput services sales - Utilities - Regasification Total 389.7 323.7 713.4 291.5 164.3 1,169.1 386.8 330.4 717.2 287.9 148.8 1,153.9 176.7 253.3 430.0 43.5 77.6 551.1 138.9 230.4 369.3 36.7 75.9 481.9 45.3% 78.3% 60.3% 14.9% 47.3% 47.1% 35.9% 69.7% 51.5% 12.7% 51.0% 41.8% 0.7 (2.0) (0.5) 1.2 10.4 1.3 389.8 327.1 716.9 252.9 160.8 1,130.6 (0.0) (1.0) (0.5) 15.3 2.2 3.4 200.9 259.4 460.3 48.6 70.7 579.6 (12.1) (2.3) (6.6) (10.5) 9.9 (4.9) Gross Profit: - Gas processing - Gas transportation Throughput services sales - Utilities - Regasification Total 27.2 9.9 16.4 18.6 2.3 14.4 Gross Margin: - Gas processing - Gas transportation Throughput services sales - Utilities - Regasification Blended average Page 2 of 3 51.5% 79.3% 64.2% 19.2% 43.9% 51.3%
18. TA Securities 16-May-17 A Member of the TA Group Figure 3 : Earnings Summary FYE Dec 31 (RM'mn) FY15 FY16 FY17E FY18F FY18F Revenue 4,456.0 4,561.3 4,581.7 5,267.3 5,302.8 EBITDA 2,976.0 2,954.5 3,127.5 3,493.5 3,520.9 EBITDA Margin (%) 66.8 64.8 68.3 66.3 66.4 Pretax Profit 2,022.1 2,106.8 2,185.8 2,509.1 2,527.8 Net Profit 2,004.3 1,733.6 1,745.9 2,004.1 2,019.1 2,198.3 1,728.1 1,745.9 2,004.1 2,019.1 111.1 87.3 88.2 101.2 102.0 Core Net Profit EPS - adj (sen) EPS growth (%) 8.9 (13.6) 0.7 14.8 0.7 PER (x) 18.3 21.2 21.1 18.4 18.2 DPS (sen) 60 62 62 71 71 (%) 3.2 3.3 3.3 3.8 3.8 Div yield Figure 4: SOP Valuation Equity Value % of Total (RM mn) SOTP EV/Share (RM) Core Operat ions* 37,739.6 19.07 100% Pengerang ASU 332.7 0.17 1% Gas Malaysia (14.8% St ake) 295.7 0.15 1% Net Cash/ (Debt ) (730.0) (0.37) -2% Total 37,637.9 19.02 *excluding contribution from ASU SOP Valuation Basis NPV based on DCF (WACC: 7.8%, Term inal Grow t h: 3%) Project NPV (25 years, St art 2019, Project IRR: 15%) Consensus m arket value As at end-2017E Stock Recommendation Guideline BUY : HOLD : SELL : Not Rated: Total return within the next 12 months exceeds required rate of return by 5%-point. Total return within the next 12 months exceeds required rate of return by between 0-5%-point. Total return is lower than the required rate of return. The company is not under coverage. The report is for information only. Total Return is defined as expected share price appreciation plus gross dividend over the next 12 months. Required Rate of Return of 7% is defined as the yield for one-year Malaysian government treasury plus assumed equity risk premium. Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy 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) (A Participating Organisation of Bursa Malaysia Securities Berhad) Kaladher Govindan – Head of Research Page 3 of 3
19. TA Securities A Member of the TA Group SECTOR REPORT Tuesday , May 16, 2017 STI: 3,264.21 Sector: Finance MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Singapore Banking Sector Moderation in Asset Risk, Improvement in Profitability THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Team Coverage Tel: +603-2167 9610 liwong@ta.com.my Stronger Set of 1Q Results for All Singapore banks reported stronger 1Q17 results. Combined net profit for DBS, UOB and OCBC advanced by 23.9% QoQ and 7% YoY. The improvement was underpinned by stronger non-interest income (non-NII), in particular fee income – lifting the sector’s total income by 9% QoQ and 10.3% YoY. Adding to stronger earnings were benign increases in overhead expenses. Figure 1: Combined Net Profit (YoY Chg) Source: Companies, TA Research Earnings Supported by Proactive Cost Management Banks kept costs lean as headcounts reduced both sequentially and yearly. On the back of stronger income growth, the sector’s average cost to income (CTI) ratio strengthened to 42% from 45% in 4Q16 and 1Q16 respectively. We believe the recent rise of e-commerce and Fintech in finance have partly contributed to this. Technology has thus far, revolutionised the payments industry. In the space of portfolio and wealth management, more and more retail and institutional investors are exploring Robotech funds or the use of robo advisers. In the near future, we foresee the growing importance of RegTech in finance to meet rising demand for compliance, regulatory and governance. Figure 2: Cost-to-Income Ratio (%) Source: Companies, TA Research Page 1 of 7 TA Research Team Coverage
20. TA Securities 16-May-17 A Member of the TA Group Asset Quality Concerns have Softened While the pressure on asset quality remains especially in the oil and gas support services segment , concerns have eased. In 1Q17, formation of new non-performing assets (NPA) moderated on the back of efforts to strengthen coverage by stress testing portfolios regularly and using realistic collateral valuations. Although DBS and UOB believes that the worst may be over, we continue to foresee pockets of lumpy corporate allowances for the sector. Nevertheless, we believe the banks are proactively setting aside adequate provisions. Boosted by DBS’ sale of NPLs in India, the sector’s loan loss coverage ratio climbed to 108% from 103% in the previous quarter. Average NPL ratio stayed unchanged at 1.4%. Excluding overseas operations, Singapore’s banking system’s NPA improved to 1.05% in 1Q17 from 1.14% in 4Q16. Figure 3: Total Net Performing Assets (S$mn) Source: Companies, TA Research Figure 4: NPL Ratio (%) Source: Companies, TA Research Page 2 of 7