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Bursa Malaysia Daily Market Report - 19 January

Mohd Noordin
By Mohd Noordin
3 years ago
Bursa Malaysia Daily Market Report - 19 January

Ard, Arif, Mal, Commenda, Provision, Sales


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  1. Friday , 19 January, 2018 TA RESEARCH’S ‘DAILY COMPILED REPORTS’ For Internal Circulation Only N ew s 1. D ai l y M arke t C om men t a ry 2. D ai l y B ri ef Fu nd a me n tal Rep o r ts 1 . P la n t a t io n S e c t o r : Wh a t ’s N e x t? 2 . T e n a g a N a s io n a l B e r h a d : M o re L ig h t o n R P2 Te ch n ic al R ep o rt s 1. D ai l y Te ch n ic a l St o ck Pi cks ( L oc al ) 2. D ai l y St o ck S cr een Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. Kaladher Govindan – Head of Research TA SECURITIES HOLDINGS BERHAD (14948-M) A Participating Organisation of Bursa Malaysia Securities Berhad Menara TA One 22 Jalan P. Ramlee 50250 Kuala Lumpur Malaysia Tel: 603 – 2072 1277 Fax: 603 – 2032 5048 www.ta.com.my
  2. Daily Market Commentary Friday , 19 January 2018 For Internal Circulation Only TA Research, e-mail : taresearch@ta.com.my Review & Outlook KLSE Market Statistics (18.01.2018) Main Market 2,865.4 Warrants 468.2 ACE Market 1,245.1 Bond 17.0 ETF 0.8 LEAP 0.1 Total 4,596.6 Off Market 67.1 Volume -6.6 43.0 -424.4 12.7 0.8 0.1 -211.3 Value 3,012.8 463.8 72.8 5.2 194.3 21.0 3.8 2.8 1.0 1.0 0.0 0.0 3,284.7 74.1 -1,060.2 Major Indices Index +/- chg Malaysia FBMKLCI FBMEMAS FBMSCAP January Futures Other Markets DOW JONES NASDAQ (US) FTSE (UK) NIKKEI (JAPAN) KOSPI (KOREA) HANG SENG (HK) FSSTI (S'PORE) SET (BANGKOK) JCI (JAKARTA) SHANGHAI SHENZHEN AUSTRALIA SIMEPROP 18.5 @ ATTA 15.5 @ SYF 9.0 @ TATGIAP 5.9 @ MEXTER-WA 3.0 @ SCABLE 2.9 @ YONGTAI-PA 2.5 @ JHM 2.0 @ INARI 1.0 @ DNEX 1.0 @ UMWOG 1.0 @ MBWORLD 1.0 @ % chg % YTD chg -7.03 -51.63 -184.98 -11.00 -0.38 -0.39 -1.06 -0.60 1.38 1.53 1.72 2.07 26,017.81 7,296.05 7,700.96 23,763.37 2,515.81 32,121.94 3,521.31 1,819.32 6,472.67 3,474.75 1,924.20 6,014.57 -97.84 -2.23 -24.47 -104.97 0.38 138.53 -20.60 -9.56 28.15 30.08 2.45 -1.25 -0.37 -0.03 -0.32 -0.44 0.02 0.43 -0.58 -0.52 0.44 0.87 0.13 -0.02 5.25 5.69 0.17 4.39 1.96 7.36 3.48 3.74 1.84 5.07 1.31 -0.83 1.55 1.03 0.40 0.12 0.48 0.74 0.90 3.00 2.90 0.55 0.43 2.15 Counter Mkt Cap. Chg (RM’mn) (RM) MAYBANK 106,427 TENAGA 88,389 HLBANK 35,839 PETGAS 34,272 GENM 30,383 PETDAG 24,499 TM 22,848 PMETAL 21,548 RHBBANK 20,932 KLCC 14,136 -0.02 -0.22 -0.28 -0.62 -0.21 -0.04 -0.03 -0.05 -0.03 -0.07 Blue chips are likely to extend profit-taking consolidation ahead of the weekend, given the recent negative market momentum, but speculative rotational trading plays on low-priced penny and ACE Markets stocks should still highlight active trade. Immediate supports for the index are at 1,820, then 1,800 and 1,796, the breakout level, while immediate resistance remains at the recent high of 1,840, next will be 1,867, the April 2017 peak, followed by the all-time high of 1,896 on July 2014. Any further dip on Sunway Construction shares would be attractive to bargain for rebound towards the upper Bollinger band (RM2.65), with tougher hurdles seen at the 138.2%FP (RM2.70) and 150%FR (RM2.80). Key retracement support from 100-day ma (RM2.36) is expected to strongly cushioned downside risk. Similarly, any further weakness on WCT Holdings should attract buyers to accumulate for potential rebound towards the 38.2%FR (RM1.81), with higher upside hurdle coming at 50%FR (RM1.93) and 61.8%FR (RM2.06). Crucial support is at the low of 27/05/16 (RM1.40). News Bites • • • • Top 10 KLCI Movers Based on Mkt Cap. (RM) The FBM KLCI edge lower on Thursday, as selling pressure sustained on selected blue chip heavyweights, ignoring firmer regional markets after the overnight rally on Wall Street supported bullish investor sentiment. The KLCI lost 7.03 points to end at 1,821.60, off a high of 1,831.32 and low of 1,821.21, as losers thrashed gainers 764 to 274 on turnover totaling 4.59bn shares worth RM3.28bn. 474 191 95 4 0 0 764 1,821.60 13,140.10 17,343.92 1,822.00 Off Market (mn) Value/ 1.05 170 0.16 80 0.16 20 0.22 0 1.18 3 0.21 1 0.71 274 1.10 Vol. (mn) 7.09 13.08 1.76 0.86 8.62 1.06 0.84 5.49 2.90 0.56 Important Dates PDZ - 4:2 Rights Issue - RI of up to 434.7m shares together with up to 325.9m free detachable warrants. 4 rights shares together with 3 warrants for every 2 existing shares held, at an issue price of RM0.10 per rights share. Application Closed: 22/01/2018. LISTING ON: 07/02/2018. • • • • • • • Permodalan Nasional Bhd and the Employees Provident Fund intends to buy commercial assets in Phase 2 of the Battersea Power Station development in London for £1.61bn (RM8.8bn). CIMB Group Holdings Bhd saw its 94.1% indirect subsidiary, CIMB Thai Bank Public Co Ltd return to the black for FY17 with a net profit of THB384.9mn, compared with a net loss of THB629.5mn in FY16. Chemical Company of Malaysia Bhd is planning to reactivate its Pasir Gudang Works 1 with an expected cost of RM68.5mn, which includes the cost of equipment purchase and installation. Tenaga Nasional Bhd, which is exploring opportunities in the highspeed broadband market with Telekom Malaysia Bhd, has said it is logical to partner with a firm that has the necessary infrastructures. Malayan Banking Bhd's mobile-banking transaction value exceeded RM24bn in 2017, as transaction volume more than doubled to 1.2bn. Crest Builder Holdings Bhd clinched a RM149.5mn contract to build a 44-storey hotel with a car park podium at Jalan Imbi. Green Packet Bhd has confirmed that it is in talks with MYTV Broadcasting Sdn Bhd for a supply contract. IGB Corp Bhd has announced suspension of its securities with effect from 9am in order to facilitate takeover of the company by Goldis Bhd. Straits Inter Logistics Bhd signed a head of agreement with Banle Energy Int Ltd to explore potential business cooperation and/or collaboration opportunities. G Reka Perunding Sdn Bhd emerged as a substantial shareholder in Atta Global Group Bhd, after acquiring 37.5mn shares or a 24.27% stake in the steel processing and trading company on last Tuesday. China's GDP increased 6.8% YoY in the 4Q17, compared with a 6.7% Bloomberg survey estimate, which led to a full-year growth to 6.9% from 6.7% in 2016. Exchange Rate USD/MYR 3.9550 -0.005 USD/JPY 111.07 -0.230 EUR/USD 1.224 0.0055 Commodities Futures Palm Oil (RM/mt) 2,474.00 -11.00 Crude Oil ($/Barrel) 63.72 -0.36 Gold ($/tr.oz.) 1,327.00 0.30 Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. Kaladher Govindan, Head of Research MENARA TA ONE, 22 JALAN for TA SECURITIES HOLDINGS BERHAD (14948-M) A PARTICIPATING ORGANISATION OF BURSA MALAYSIA SECURITIES BHD P RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL : 603 - 2072 1277. FAX : 603 - 2032 5048 www.ta.com.my
  3. 19-Jan-18 Technical Comments : Buy on Weakness Suncon & WCT Any further dip on Sunway Construction shares would be attractive to bargain for rebound towards the upper Bollinger band (RM2.65), with tougher hurdles seen at the 138.2%FP (RM2.70) and 150%FR (RM2.80). Key retracement support from 100-day ma (RM2.36) is expected to strongly cushioned downside risk. Similarly, any further weakness on WCT Holdings should attract buyers to accumulate for potential rebound towards the 38.2%FR (RM1.81), with higher upside hurdle coming at 50%FR (RM1.93) and 61.8%FR (RM2.06). Crucial support is at the low of 27/05/16 (RM1.40). SUNWAY CONSTRUCTION Z RM2.48 (-0.04) BOLLINGER BANDS Upper Middle Lower RM RM RM SIMPLE MOVING AVERAGES 2.65 2.50 2.34 10-day 30-day 50-day RM RM RM DAILY MACD BUY Recent Signal Signal Change DMI Recent Signal Signal Change WCT HOLDINGS RM RM RM SIMPLE MOVING AVERAGES 1.84 1.66 1.48 10-day 30-day 50-day BUY Recent Signal Signal Change DMI Recent Signal Signal Change BUY RM1.65 (-0.01) BOLLINGER BANDS Upper Middle Lower 2.56 2.46 2.42 RM RM RM DAILY MACD 1.73 1.61 1.62 SELL SELL Page 2 of 3
  4. Friday , January 19, 2018 FBMKLCI: 1,821.60 THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Daily Brief Market View, News In Brief: Corporate, Economy, and Share Buybacks Chartist: Stephen Soo Tel: +603-2167-9607 stsoo@ta.com.my www.taonline.com.my M a r k e t V i e w Blue Chips to Extend Consolidation The FBM KLCI edge lower on Thursday, as selling pressure sustained on selected blue chip heavyweights, ignoring firmer regional markets after the overnight rally on Wall Street supported bullish investor sentiment. The KLCI lost 7.03 points to end at 1,821.60, off a high of 1,831.32 and low of 1,821.21, as losers thrashed gainers 764 to 274 on turnover totaling 4.59bn shares worth RM3.28bn. Immediate Supports at 1,820/1,800, Resistance at 1,840 Blue chips are likely to extend profit-taking consolidation ahead of the weekend, given the recent negative market momentum, but speculative rotational trading plays on low-priced penny and ACE Markets stocks should still highlight active trade. Immediate supports for the index are at 1,820, then 1,800 and 1,796, the breakout level, while immediate resistance remains at the recent high of 1,840, next will be 1,867, the April 2017 peak, followed by the all-time high of 1,896 on July 2014. Buy on Weakness Sunway Construction & WCT Holdings Any further dip on Sunway Construction shares would be attractive to bargain for rebound towards the upper Bollinger band (RM2.65), with tougher hurdles seen at the 138.2%FP (RM2.70) and 150%FR (RM2.80). Key retracement support from 100-day ma (RM2.36) is expected to strongly cushioned downside risk. Similarly, any further weakness on WCT Holdings should attract buyers to accumulate for potential rebound towards the 38.2%FR (RM1.81), with higher upside hurdle coming at 50%FR (RM1.93) and 61.8%FR (RM2.06). Crucial support is at the low of 27/05/16 (RM1.40). Most Asian Markets Nudge Higher on Growth and Earnings Optimism Most Asia-Pacific stocks inched higher Thursday, aided by strength in Chinese banks and regional tech companies, after equities hit fresh record highs on Wall Street overnight. Dow closed above 26,000 for the first time as investors' expectations for higher earnings lifted stocks across sectors. Optimism over prospects for sustained strong global growth and improved corporate earnings have helped share markets rally at the start of 2018. Bank stocks in China rose after data showed housing prices rose last month in 57 of 70 cities measured by the National Bureau of Statistics. On economic front, China's economy grew 6.9 percent in 2017, ending the year on a positive note as official figures topped the government target of around 6.5 percent, the country's statistics bureau said. China stocks climbed to end at two-year highs, underpinned by robust gains in banking and infrastructure firms. At the close, the Shanghai Composite index was up 31.24 points or 0.91 percent at 3,475.91. In Seoul, the Kospi tacked on 0.02 percent to end at 2,515.81. Samsung Electronics bounced 0.56 percent after recording losses in the last session. Over in Sydney, the S&P/ASX 200 finished flat at 6,014.6 as gains in the heavily weighted financial sector were offset by losses in energy-linked stocks and gold producers. Meanwhile, Japan’s Nikkei share average ended lower, pulling back from a new 26-year high as investors turned cautious, while real estate stocks and financial firms underperformed. The Nikkei dropped 0.4 percent to 23,763.37, after hitting 24,084.42 in early trade, the highest since November 1991. Page 1 of 7
  5. 19-Jan-18 Wall Street Finish Lower as Threat of Government Shutdown Looms U .S. stock benchmarks finished lower Thursday, pressured by worries over the possibility of the government shutting down at the end of the week. Lawmakers are working to carve out a deal to avoid a looming shutdown for Saturday. Democrats and Republicans looked to be making little headway though, with immigration a major sticking point. Republican leaders are scheduled to bring forward a short-term spending bill to keep the government running through mid-February, The Wall Street Journal reported. Historically, a government shutdown has led to a short-term pullback in the stock market. Shares of utility companies and real-estate firms in the S&P 500 were down 0.7 percent and 1.1 percent, respectively, putting them among the biggest laggards of the broad index. Boeing Co, a high-flying stock of late, fell 3.1 percent, alongside General Electric Co, which dropped 3.3 percent. Those two stocks weighed most heavily on the Dow. The Dow Jones Industrial Average fell 97.84 points, or 0.37 percent, to 26,017.81, the S&P 500 lost 4.53 points, or 0.16 percent, to 2,798.03 and the Nasdaq Composite dropped 2.23 points, or 0.03 percent, to 7,296.05. Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. As of Friday, January 19, 2018, the chartist, Stephen Soo, who prepared this report, has interest in the following securities covered in this report: (a) nil Kaladher Govindan – Head of Research TA SECURITIES HOLDINGS BERHAD (14948-M) A Participating Organisation of Bursa Malaysia Securities Berhad Menara TA One 22 Jalan P. Ramlee 50250 Kuala Lumpur Malaysia Tel: 603 – 2072 1277 Fax: 603 – 2032 5048 www.ta.com.my Page 2 of 7
  6. 19-Jan-18 N e w s I n B r i e f Corporate Permodalan Nasional Bhd (PNB) and the Employees Provident Fund (EPF) intends to buy commercial assets in Phase 2 of the Battersea Power Station (BPS) development in London for £1.61bn (RM8.8bn). To explore the potential sale, PNB and EPF have inked a heads of terms with Battersea Phase 2 Holding Company Ltd, a wholly-owned unit of Battersea Project Holding Company Ltd, in which S P Setia Bhd and Sime Darby Property Bhd own a 40% stake each, with the EPF holding the remainder 20%. The proposed transaction is subject to certain conditions which are to be satisfied, including a satisfactory due diligence and the requisite approvals being obtained. PNB and EPF are expected to form a joint venture company to undertake the proposed buy. The heads of terms, which are non-binding, include an exclusivity period ending April 30, 2018 to conclude the proposed transaction. (Bursa Malaysia / The Edge) Comment: BPS Phase 2 features 255 residential units, 524k sq ft Grade A Offices, 394k sq ft of retail and food and beverage spaces, a flexible event space able to accommodate 2,000 standing people, and a 3 –screen cinema. Over 90% of the residential units in Phase 2 have been taken up since their launch in 2014. Meanwhile, about 470k sq ft of the office space within BPS Phase 2 has been pre-leased to Apple. Overall, we view this as a positive move for both SP Setia and Sime Darby Property to unlock asset value and free up cash flow to finance the construction of the remaining development phases 3 – 7 of the BPS project, which is estimated to be fully completed in 2028. Based on Sime Darby Property’s IPO prospectus, the total construction cost for the remaining development phases 3 – 7 of the BPS is estimated at £2.84bn as at 30th June 2017. Pending finalisation of the proposed transaction, we make no change to our earnings forecasts, TPs and recommendation for SP Setia (Buy, TP: RM3.77, based on CY18 PE/PB of 17x/1.1x) and Sime Darby Property (Sell, TP: RM1.61, based on CY18 PE/PB of 18x/1.1x). Tenaga Nasional Bhd, which is exploring opportunities in the high-speed broadband market with Telekom Malaysia Bhd, has said it is logical to partner with a firm that has the necessary infrastructures. However, it has no qualms about collaborating with other parties which can contribute to the Nationwide Fiberisation Plan pushed by the government so long they can provide further "value creation" to the project. (The Edge) Malayan Banking Bhd’s mobile-banking transaction value exceeded RM24bn in 2017, as transaction volume more than doubled to 1.2bn. This was stated in conjunction with the group’s soon-to-be-launched cashless mobile payment option using quick-response codes. (The Edge) CIMB Group Holdings Bhd saw its 94.1% indirect subsidiary, CIMB Thai Bank Public Co Ltd return to the black for FY17 with a net profit of THB384.9mn (RM47.72mn), compared with a net loss of THB629.5mn in FY16. The improvement was attributed to a 1.8% YoY growth in operating income and a 19.5% YoY drop in provisions. Separately, CIMB’s brokerage, CIMB Securities International Pte Ltd will be renamed CGS-CIMB Securities following completion of the disposal of CIMB's 50% stake in CSI to China Galaxy Securities Co Ltd. (The Edge) Chemical Company of Malaysia Bhd is planning to reactivate its Pasir Gudang Works 1 with an expected cost of RM68.5mn, which includes the cost of equipment purchase and installation. The project will take about 18 months to complete and is expected to be ready in the second quarter of 2019. (Bursa Malaysia) Green Packet Bhd has confirmed that it is in talks with MYTV Broadcasting Sdn Bhd for a supply contract. It will make the appropriate announcements upon execution of any definitive contracts. (Bursa Malaysia) Page 3 of 7
  7. 19-Jan-18 IGB Corp Bhd has announced suspension of its securities with effect from 9am in order to facilitate takeover of the company by Goldis Bhd . Goldis, which holds a 73.4% stake in IGB, has targeted to complete its takeover by March this year, while subsequently taking on the group’s listing status and renaming it Ipoh Goldis Bersatu Bhd. (Bursa Malaysia) Crest Builder Holdings Bhd clinched a RM149.5mn contract to build a 44-storey hotel with a car park podium at Jalan Imbi. The contract spans 39 months from Jan 12 this year. (Bursa Malaysia) Straits Inter Logistics Bhd signed a head of agreement (HOA) with Banle Energy Int Ltd to explore potential business cooperation and/or collaboration opportunities. The HOA formed the basis of consensus and mutual interests between the two companies to collaborate and expand their business operations and geographical coverage. (Bursa Malaysia) HSS Engineers Bhd’s associate, HSS Integrated Sdn Bhd, received an invitation letter from the Federal Territories Ministry to submit a proposal to provide consultancy services for the execution of the feasibility study for the proposed Labuan-Menumbok bridge link for a ceiling contract value of up to RM14.3mn. (Bernama) G Reka Perunding Sdn Bhd emerged as a substantial shareholder in Atta Global Group Bhd, after acquiring 37.5mn shares or a 24.27% stake in the steel processing and trading company on Tuesday (Jan 16). G Reka purchased the shares at RM1 per share making it the group’s second-largest shareholder after Tan Kim Hee. (Bursa Malaysia) Page 4 of 7
  8. 19-Jan-18 N e w s I n B r i e f Economy Asia China Posts First Full-Year Growth Pickup Since 2010 China ’s economy sealed its first full-year acceleration since 2010, underpinning global growth and giving authorities more room to purge excessive borrowing. Gross domestic product increased 6.8% in the fourth quarter from a year earlier, compared with a 6.7% Bloomberg survey estimate. Full-year growth picked up to 6.9% from 6.7% in 2016. China’s rejuvenated expansion offers support for President Xi Jinping’s mission to defuse ticking debt bombs, one of Beijing’s top goals for the coming three years, along with reducing poverty and curbing pollution. Policy makers have picked the moment well, as the global upswing provides support in the form of strong demand for the nation’s exports. Consumption, which includes some government spending, is becoming an ever-stronger pillar of the economy, contributing 58.8% to growth last year. The contribution of net external trade to growth improved by around 0.4 percentage point in real terms last year, “more than fully explaining the pick-up” in GDP growth. The GDP deflator for the full year, a gauge of economy-wide inflation, came in at 4.33 percentage points, while nominal growth accelerated to 11.2%. Reflation is boosting company profits, raising their ability to service debt. In the meantime, retail sales rose 9.4% in December on year, vs 10.2% forecast. Industrial production rose 6.2% last month, versus a projected 6.1%. Fixed-asset investment climbed 7.2% for the year, the least since 1999. In housing, data released Thursday show prices rose in the most cities in six months even as the government prolonged its campaign to curb speculation. New-home prices, excluding government-subsidized housing, in December rose in 57 of 70 cities tracked by the government, compared with 50 in November, the NBS said. (Bloomberg) Australia Unemployment Holds at 4-year low Employment in Australia remains at around the best level seen in more than four years, after the country’s unemployment rate decreased slightly in December. Australia’s unemployment rate was 5.4% last month, its lowest level since January 2013, and down from a revised 5.5% in November, according to the Australian Bureau of Statistics. The result was in line a forecast of 5.4% from a survey of economists by Reuters. Full-time employment has now increased by around 322,000 persons since December 2016, and makes up the majority of the 393,000 net increase in employment over the period. The 34,700 rise in employment in December (consensus 15,000) rounds off an exceptional year for the labour market. In fact, 2017 was the first calendar year since monthly data were published in 1978 that employment rose in every month. (Financial Times) Separately, Australia's inflationary expectations remained unchanged in January, survey data from the Melbourne Institute showed. The expected inflation rate came in at 3.7% in January, the same rate as in the previous month. The weighted proportion of respondents expecting the inflation rate to lie within the 0-5% range decreased slightly by 1.1 percentage points to 66.6%. The weighted mean of responses within this range rose by 0.2 percentage points in January back to its November value of 2.4%. (RTT) Japan Industrial Production Rises Less than Estimated Japan's industrial production increased less than initially estimated in November, latest figures from the Ministry of Economy, Trade and Industry showed. Industrial production rose at a stable rate of 0.5% month-over-month in November, just below the 0.6% increase reported earlier. Shipments grew 2.3% over the month, revised down slightly from a 2.4% gain estimated initially. At the same time, inventories fell 0.8%, slower than the 1.0% decline seen in the flash data. On a yearly basis, industrial production growth eased to 3.6% in November from 5.9% in October. Data also showed that capacity utilization remained flat in November after a 0.2% increase in the preceding month. (RTT) Page 5 of 7
  9. 19-Jan-18 United States U .S. Housing Starts Dropped Sharply at the End of 2017 U.S. housing starts fell sharply in December, but still capped a solid year of new single-family home construction. Housing starts fell 8.2% in December from a month earlier to a seasonally adjusted annual rate of 1.19 million, the Commerce Department said. Residential permits, which can signal how much construction is queued up, also fell, dropping 0.1% to an annual pace of 1.30 million last month. Economists surveyed by The Wall Street Journal had expected housing starts to decline 1.5% and permits to decrease 0.8%. Last month’s housing starts’ decline appears to be driven by drops in housing starts in all four major U.S. regions, with starts in the Northeast dropping to the lowest level since May 2017. Still, housing-starts data can be volatile from month to month and can be subject to large revisions. Looking past monthly volatility, starts were up 2.4% in 2017 when compared with 2016, and permits increased 4.7% in the same period, signaling solid construction in 2017 that coincided with rising demand that has pushed up prices. For single-family homes, housing starts fell 11.8% in December from a month earlier and increased 1.4% for buildings with multiple units, like triplexes and apartments. Meanwhile, permits for single-family homes increased 1.8% from a month earlier and declined 3.9% for multifamily buildings. New residential construction hit a post-recession high in October 2016 but has trended lower since as multifamily construction has declined. It remains far below the levels reached during the years leading up to the 2008 financial crisis. Labor shortages, rising land costs and increasingly restrictive land-use regulations have helped create a shortage of inventory that is driving up home prices much more quickly than wages and inflation. Still, home builders are feeling upbeat about the housing market. The National Association of Home Builders’ Housing Market Index, which gauges home builder sentiment about the market for single-family homes, fell in January, but remained near an 18-year high. (The Wall Street Journal) Philly Fed Index Falls More than Expected in January Growth in activity in the Philadelphia-area manufacturing sector slowed by more than anticipated in the month of January, the Federal Reserve Bank of Philadelphia revealed in a report. The Philly Fed said its index for current manufacturing activity in the region slid to 22.2 in January from a revised 27.9 in December, although a positive reading still indicates growth. Economists had expected the Philly Fed index to dip to 25.0 from the 26.2 originally reported for the previous month. (RTT) U.S. Jobless Claims Fell Last Week to Near 45-Year Low The number of Americans filing applications for new unemployment benefits fell last week to the lowest level in nearly 45 years, a sign the labor market is beginning 2018 with strong momentum. Initial jobless claims, a proxy for layoffs across the U.S., fell last week to a seasonally adjusted 220,000 in the week ended Jan. 13, the Labor Department said. Economists surveyed by The Wall Street Journal expected 246,000 new claims last week. Last week’s drop comes after four consecutive weeks of increases. Claims have remained historically low, showing the overall health of the labor market. Claims numbers have remained below 300,000 a week for almost three years—the longest such streak since 1970, when the U.S. population and workforce were far smaller than they are today. Jobless claims data can be volatile, especially around holidays; Monday was a federal holiday marking the birthday of Martin Luther King Jr. The four-week moving average, a steadier measure, fell by 6,250 to 244,500 last week. (The Wall Street Journal) Page 6 of 7
  10. 19-Jan-18 Share Buy-Back : 18 January 2018 Company E&O FITTERS HAIO JCBNEXT MALAKOF NYLEX SYSCORP UNIMECH Bought Back Price (RM) Hi/Lo (RM) 40,000 630,000 37,700 81,000 500,000 20,000 110,000 20,000 1.44 0.42/0.415 5.24/5.09 1.79/1.78 0.92/0.915 0.82/0.805 0.25/0.245 1.05/1.03 1.45/1.43 0.42/0.41 5.25/5.09 1.79/1.78 0.94/0.90 0.82/0.805 0.25/0.235 1.05/1.03 Total Treasury Shares 23,693,747 29,693,000 8,812,188 253,500 3,634,400 5,643,824 352,000 6,517,410 Source: Bursa Malaysia Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. Kaladher Govindan – Head of Research TA SECURITIES HOLDINGS BERHAD (14948-M) A Participating Organisation of Bursa Malaysia Securities Berhad Menara TA One 22 Jalan P. Ramlee 50250 Kuala Lumpur Malaysia Tel: 603 – 2072 1277 Fax: 603 – 2032 5048 www.ta.com.my Page 7 of 7
  11. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company Share Price Target Price (RM) (RM) Recom Market Cap. (RMm) BETA EPS (sen) FY18 FY19 PER (X) FY18 FY19 Div Yield (%) FY18 FY19 52weeks 52weeks % Chg High Price % Chg Low Price % Chg YTD 18-Jan-18 AUTOMOBILE BAUTO 2.29 2.50 Buy 2,652 0.72 14.3 19.9 16.0 11.5 5.0 5.2 2.47 -7.3 1.84 24.5 MBMR 2.38 2.32 Hold 930 0.81 23.2 23.9 10.3 10.0 1.9 2.0 2.60 -8.5 2.01 18.4 4.1 8.2 PECCA 1.57 1.69 Buy 290 na 11.1 12.5 14.1 12.6 3.5 3.9 1.70 -7.6 1.28 22.7 1.3 SIME 2.76 1.97 Hold 18,770 1.56 12.0 12.7 23.1 21.8 1.1 1.1 2.96 -6.8 1.94 42.5 24.9 UMW 6.90 4.37 Sell 8,061 1.38 20.7 36.9 33.4 18.7 1.4 2.6 6.98 -1.1 4.40 56.9 32.7 BANKS & FINANCIAL SERVICES ABMB 4.20 4.60 Buy 6,502 1.35 30.6 35.6 13.7 11.8 3.8 3.8 4.49 -6.5 3.62 16.0 2.9 AFFIN 2.53 2.70 Hold 4,916 0.87 24.2 28.1 10.4 9.0 3.2 3.2 2.98 -15.0 2.22 13.9 9.5 AMBANK 4.62 5.50 Buy 13,926 1.29 48.6 52.0 9.5 8.9 3.9 3.9 5.70 -18.9 4.06 13.8 4.8 CIMB 6.80 7.50 Buy 62,734 1.48 50.8 56.0 13.4 12.1 4.3 4.1 7.08 -4.0 4.79 42.0 4.0 HLBANK 17.52 19.30 Buy 35,839 0.68 114.2 120.9 15.3 14.5 2.6 2.6 18.20 -3.7 13.06 34.2 3.1 MAYBANK 9.86 10.50 Hold 106,427 1.05 70.9 77.7 13.9 12.7 5.1 5.1 9.88 -0.2 8.12 21.4 0.6 PBBANK 20.88 25.10 Buy 80,628 0.63 142.4 149.8 14.7 13.9 2.8 2.9 21.08 -0.9 19.66 6.2 0.5 RHBBANK 5.22 5.70 Buy 20,932 1.62 52.2 53.8 10.0 9.7 2.9 2.9 5.59 -6.6 4.71 10.8 4.4 BURSA 10.64 11.10 Buy 5,719 0.93 39.0 41.5 27.3 25.7 3.2 3.2 10.98 -3.1 8.08 31.7 5.1 Note: BURSA proposed bonus issue of shares on the basis of 1 for 2. Ex-Target price RM7.04 CONSTRUCTION GADANG 1.12 1.73 Buy 738 0.97 14.3 18.2 7.9 6.2 2.7 2.7 1.37 -18.2 1.01 10.9 0.9 GAMUDA 5.07 6.00 Buy 12,451 0.85 34.5 35.7 14.7 14.2 2.4 2.4 5.52 -8.2 4.58 10.7 2.2 IJM 3.00 2.89 Sell 10,885 0.87 13.7 18.2 21.9 16.5 3.2 3.2 3.61 -16.9 2.71 10.7 -1.6 PESONA 0.46 0.55 Buy 320 0.87 5.8 4.8 8.0 9.7 3.3 3.3 0.74 -37.4 0.44 5.7 2.2 SENDAI 0.84 0.55 Sell 652 1.21 9.1 8.5 9.2 9.8 1.2 1.2 1.39 -39.9 0.51 65.3 -3.5 -1.2 SUNCON 2.48 2.65 Buy 3,205 0.51 14.7 16.4 16.9 15.1 2.2 2.4 2.64 -6.1 1.68 47.6 WCT 1.65 1.64 Hold 2,321 1.05 12.6 11.2 13.1 14.8 1.8 1.8 2.48 -33.3 1.46 13.0 1.9 LITRAK 5.75 6.26 Hold 3,034 0.32 45.6 47.1 12.6 12.2 4.3 4.3 6.15 -6.5 5.40 6.5 3.6 ANNJOO 3.51 4.40 Buy 1,810 1.28 45.3 49.2 7.7 7.1 6.3 7.4 3.98 -11.8 2.27 54.6 -9.1 CHINHIN 1.19 1.36 Buy 662 1.12 12.4 12.0 9.6 9.9 4.2 5.0 1.49 -20.1 0.87 36.8 -1.7 ENGTEX 1.07 1.38 Buy 455 0.69 14.2 16.1 7.6 6.7 3.9 5.1 1.52 -29.6 1.07 0.0 -2.7 CARLSBG 15.86 18.06 Buy 4,879 0.75 86.2 88.7 18.4 17.9 5.4 5.6 16.00 -0.9 13.94 13.8 3.7 HEIM 19.16 19.14 Buy 5,788 0.44 84.0 88.3 22.8 21.7 3.9 4.1 19.58 -2.1 15.78 21.4 1.4 AEON 1.66 1.97 Sell 2,331 0.38 6.7 7.7 24.8 21.6 2.4 2.7 2.70 -38.5 1.64 1.2 -5.7 AMWAY 7.89 8.18 Buy 1,297 0.39 43.9 45.2 18.0 17.4 4.8 5.1 8.18 -3.5 7.04 12.1 6.9 F&N 28.50 28.55 Hold 10,446 0.21 155.7 182.7 18.3 15.6 2.1 2.3 28.80 -1.0 22.64 25.9 5.6 Building Materials CONSUMER Brewery Retail HUPSENG 1.13 1.25 Hold 904 0.43 5.4 5.6 20.8 20.4 4.0 4.4 1.28 -11.7 1.08 4.6 3.7 JOHOTIN 1.34 1.75 Buy 416 0.71 12.8 13.5 10.5 10.0 3.7 4.0 1.76 -23.9 1.16 15.5 10.7 NESTLE 106.80 120.50 Buy 25,045 0.40 330.1 373.8 32.4 28.6 2.8 3.1 107.30 -0.5 74.50 43.4 3.5 PADINI 5.25 4.67 Sell 3,454 0.84 27.0 30.0 19.5 17.5 2.4 2.5 5.50 -4.5 2.35 123.4 -0.6 POHUAT 1.61 2.37 Buy 354 0.55 25.3 25.5 6.4 6.3 5.0 5.0 2.07 -22.2 1.59 1.3 -10.1 QL 4.80 3.26 Sell 7,788 0.42 12.8 14.7 37.4 32.6 0.9 1.0 4.84 -0.8 3.26 47.4 10.3 SIGN 0.69 0.92 Buy 158 0.94 6.9 9.2 9.9 7.5 3.6 5.1 1.07 -35.5 0.69 0.7 -2.1 32.38 52.08 Buy 9,245 1.40 187.4 175.4 17.3 18.5 6.2 6.2 51.04 -36.6 31.40 3.1 -19.1 GENTING 9.65 11.53 Buy 36,916 1.56 54.4 59.8 17.7 16.1 1.7 1.7 10.00 -3.5 8.13 18.6 4.9 GENM 5.36 6.51 Buy 30,383 1.58 27.0 30.6 19.8 17.5 1.7 1.9 6.38 -16.0 4.67 14.9 -4.8 2.35 3.34 Buy 3,165 0.81 21.5 26.0 10.9 9.0 6.8 7.7 3.00 -21.7 2.23 5.4 4.9 CCMDBIO 2.88 2.70 Buy 803 0.86 15.0 16.1 19.2 17.9 3.4 3.6 3.03 -5.0 1.90 51.6 13.8 IHH 6.00 6.40 Buy 49,438 0.74 11.9 15.0 50.5 40.1 0.5 0.6 6.42 -6.5 5.42 10.7 2.4 KPJ 0.97 1.12 Buy 4,136 0.48 3.8 4.2 25.6 23.0 2.2 2.4 1.14 -14.9 0.90 7.8 0.0 HARTA 11.20 7.30 Sell 18,513 0.88 25.8 30.5 43.4 36.7 1.0 1.2 11.40 -1.8 4.53 147.2 4.9 KOSSAN 8.35 8.80 Buy 5,340 0.08 38.3 43.0 21.8 19.4 2.3 2.6 8.70 -4.0 5.62 48.6 3.0 SUPERMX 2.33 1.80 Sell 1,528 0.47 15.3 17.9 15.2 13.0 2.2 2.6 2.46 -5.3 1.69 37.9 16.5 TOPGLOV 9.13 9.35 Sell 11,460 0.08 41.6 50.8 22.0 18.0 1.6 1.9 9.30 -1.8 4.56 100.2 14.3 KAREX 1.29 1.00 Sell 1,293 0.64 2.8 5.2 46.7 24.8 0.5 1.0 2.51 -48.6 1.20 7.5 -0.8 SCIENTX 8.57 9.84 Buy 4,145 0.56 68.2 74.9 12.6 11.4 2.5 3.0 9.85 -13.0 6.76 26.8 -1.0 SKPRES 2.01 2.20 Hold 2,513 0.65 10.4 14.8 19.4 13.6 2.6 3.7 2.35 -14.5 1.24 62.1 -11.8 ASTRO 2.60 3.10 Buy 13,556 1.08 14.0 13.7 18.6 19.0 5.0 5.2 2.94 -11.6 2.45 6.1 -1.9 MEDIA PRIMA 0.70 0.45 Sell 776 1.14 -3.8 -1.7 na na 0.0 0.0 1.28 -45.3 0.58 20.7 -7.9 STAR 1.41 1.25 Sell 1,040 1.10 6.7 6.7 21.0 21.0 8.5 8.5 2.22 -36.4 1.31 7.6 -14.5 Tobacco BAT GAMING Casino NFO BJTOTO HEALTHCARE Hospitals/ Pharmaceutical Rubber Gloves INDUSTRIAL MEDIA
  12. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company Share Price Target Price (RM) (RM) Recom Market Cap. (RMm) BETA EPS (sen) FY18 FY19 PER (X) FY18 FY19 Div Yield (%) FY18 FY19 52weeks 52weeks % Chg High Price % Chg Low Price % Chg YTD OIL & GAS DNEX 0.48 0.72 Buy 834 1.35 4.2 4.5 11.3 10.5 2.1 2.1 0.69 -31.2 0.27 75.9 LCTITAN 5.03 6.66 Buy 11,433 na 63.4 68.2 7.9 7.4 5.0 5.4 6.53 -23.0 4.14 21.5 -2.1 7.0 MHB 0.80 0.78 Sell 1,272 1.82 -0.5 0.3 na 234.2 0.0 0.0 1.16 -31.5 0.63 27.2 -3.6 MISC 7.44 6.56 Sell 33,211 1.09 46.8 52.3 15.9 14.2 4.0 4.0 7.90 -5.8 6.89 8.0 0.3 PANTECH 0.65 0.69 Sell 480 1.13 6.1 6.8 10.5 9.4 4.3 4.8 0.74 -12.8 0.45 43.3 0.0 PCHEM 8.17 8.05 Hold 65,360 1.03 49.8 52.6 16.4 15.5 2.7 2.8 8.28 -1.3 6.80 20.1 6.1 SAPNRG 0.76 1.25 Buy 4,554 2.45 -6.5 -4.9 na na 0.0 0.0 2.10 -63.8 0.67 14.3 7.0 SERBADK 3.30 3.40 Sell 4,406 na 25.7 27.8 12.8 11.9 2.3 2.5 3.60 -8.3 1.51 118.5 1.9 UMWOG 0.35 0.51 Buy 2,834 1.92 0.4 1.2 85.4 27.8 0.0 0.0 0.86 -60.1 0.27 27.8 13.1 UZMA 1.53 1.56 Sell 490 1.00 13.1 14.2 11.7 10.8 0.0 0.0 1.98 -22.7 1.26 21.4 19.5 FGV 2.00 2.01 Sell 7,296 1.75 3.7 4.5 54.0 44.0 2.5 2.5 2.18 -8.3 1.51 32.5 18.3 IJMPLNT 2.46 2.69 Sell 2,166 0.19 9.1 12.5 27.0 19.6 3.3 3.7 3.60 -31.7 2.43 1.2 -10.2 IOICORP 4.66 4.12 Sell 29,283 1.15 21.0 21.8 22.1 21.3 3.4 3.6 4.81 -3.1 4.31 8.1 2.6 KFIMA 1.61 1.89 Buy 454 0.55 13.3 14.5 12.1 11.1 5.6 5.6 1.96 -17.9 1.56 3.2 2.5 KLK 25.20 26.18 Hold 26,837 0.81 120.7 126.3 20.9 19.9 2.4 2.5 25.50 -1.2 23.00 9.6 0.8 SIMEPLT 5.54 6.25 Buy 37,677 na 21.0 22.1 26.3 25.1 2.5 2.7 6.00 -7.7 4.58 21.0 -7.7 TSH 1.65 2.10 Buy 2,278 0.71 9.3 9.6 17.7 17.2 1.4 1.5 1.94 -14.9 1.56 5.8 0.0 UMCCA 6.57 6.73 Sell 1,377 0.39 22.8 34.8 28.9 18.9 2.6 2.7 7.08 -7.2 5.76 14.0 0.9 GLOMAC 0.54 0.50 Sell 429 0.65 3.0 4.4 18.3 12.2 3.7 3.7 0.68 -20.3 0.53 2.4 -2.6 HUAYANG 0.66 0.59 Sell 231 0.90 1.8 3.4 35.8 19.3 0.8 0.8 1.21 -45.9 0.60 10.1 7.4 IBRACO 0.83 0.92 Hold 410 na 9.1 12.4 9.0 6.6 4.8 6.1 0.98 -15.4 0.76 9.3 1.2 IOIPG 2.00 2.02 Hold 11,012 0.78 16.5 16.3 12.1 12.3 3.0 3.0 2.22 -9.9 1.79 11.7 8.1 MAHSING 1.46 1.69 Buy 3,543 0.88 13.0 12.6 11.2 11.6 4.5 4.5 1.64 -11.0 1.38 5.8 0.7 SIMEPROP 1.59 1.61 Sell 10,813 na 9.2 9.1 17.3 17.4 1.3 1.3 1.78 -10.7 1.04 52.9 -10.7 SNTORIA 0.64 0.76 Buy 359 0.18 8.3 8.6 7.7 7.4 1.6 1.6 0.91 -30.2 0.60 5.8 -8.6 PLANTATIONS PROPERTY Note: SNTORIA proposed bonus issue of warrants & right issue of shares. For more details please refer to SPB 4.90 5.28 Hold 1,684 0.65 21.2 26.1 23.2 18.7 2.4 2.4 5.50 -10.9 4.32 13.4 0.0 SPSETIA 3.19 3.77 Buy 10,935 0.94 21.3 21.9 15.0 14.6 3.8 3.8 4.38 -27.2 3.06 4.3 -20.3 SUNWAY 1.70 1.74 Hold 8,323 0.79 11.9 12.6 14.3 13.5 2.9 3.5 1.96 -13.2 1.28 32.7 4.3 SUNREIT 1.72 1.87 Hold 5,066 0.83 10.0 10.7 17.1 16.1 5.8 6.2 1.90 -9.5 1.64 4.9 -9.5 CMMT 1.42 1.72 Buy 2,894 0.71 8.6 8.9 16.5 15.9 6.3 6.5 1.83 -22.4 1.39 2.2 -22.4 -6.1 REIT POWER & UTILITIES MALAKOF 0.92 1.16 Buy 4,597 0.82 6.0 6.8 15.4 13.5 7.6 7.6 1.33 -30.8 0.86 7.0 PETDAG 24.66 22.08 Sell 24,499 0.46 105.1 105.7 23.5 23.3 3.2 3.2 25.70 -4.0 21.00 17.4 1.6 PETGAS 17.32 19.10 Buy 34,272 0.97 98.8 99.5 17.5 17.4 4.0 4.0 21.04 -17.7 15.82 9.5 -0.9 TENAGA 15.60 17.38 Buy 88,389 0.69 129.9 127.9 12.0 12.2 2.9 2.9 15.98 -2.4 13.00 20.0 2.2 YTLPOWR 1.32 1.17 Sell 10,464 0.87 9.6 10.1 13.7 13.1 3.8 3.8 1.50 -12.0 1.11 18.9 2.3 TELECOMMUNICATIONS AXIATA 5.55 5.75 Hold 50,217 1.36 16.0 19.5 34.7 28.4 1.5 2.8 5.82 -4.6 4.24 30.9 1.1 DIGI 4.84 5.20 Buy 37,631 0.78 20.0 20.6 24.2 23.4 4.1 4.3 5.19 -6.7 4.36 11.0 -5.1 MAXIS 6.04 6.10 Hold 47,176 0.71 26.2 25.7 23.0 23.5 3.3 3.3 6.60 -8.5 5.48 10.2 0.5 TM 6.08 7.20 Buy 22,848 0.49 23.2 24.9 26.2 24.4 3.4 3.7 6.69 -9.1 5.85 3.9 -3.5 ELSOFT 2.71 2.70 Hold 746 0.65 15.0 15.7 18.1 17.2 3.9 4.1 2.95 -8.1 1.47 84.0 0.4 IRIS 0.22 0.25 Buy 544 2.05 0.6 0.7 39.8 33.0 0.0 0.0 0.25 -10.2 0.12 91.3 18.9 -0.9 TECHNOLOGY Semiconductor & Electronics INARI 3.37 3.35 Hold 6,932 0.86 14.2 15.9 23.8 21.2 3.0 3.3 3.82 -11.8 1.74 94.1 MPI 11.72 12.95 Hold 2,331 0.59 105.5 121.2 11.1 9.7 2.7 2.7 14.52 -19.3 7.71 52.0 -7.1 UNISEM 3.23 3.25 Sell 2,370 1.00 27.1 28.7 11.9 11.3 3.7 3.7 4.25 -24.0 2.43 32.9 -11.5 TRANSPORTATION Airlines AIRASIA 3.85 3.83 Buy 12,866 1.26 38.3 39.8 10.1 9.7 1.3 1.6 3.99 -3.5 2.39 61.1 14.9 AIRPORT 9.02 8.47 Sell 14,966 1.39 19.7 20.1 45.7 44.8 1.1 1.3 9.45 -4.6 6.11 47.6 2.6 Freight & Tankers PTRANS 0.29 0.44 Buy 358 na 2.3 3.6 12.5 8.0 2.5 3.8 0.38 -25.4 0.15 95.9 1.8 TNLOGIS 1.29 1.80 Buy 589 1.12 13.6 14.0 9.5 9.2 3.9 3.9 1.83 -29.6 1.29 0.0 -3.7 WPRTS 3.58 4.02 Hold 12,208 0.72 15.5 20.0 23.0 17.9 3.2 4.2 4.26 -16.0 3.34 7.2 -3.2 SNAPSHOT OF FOREIGN STOCKS UNDER COVERAGE Company Share Price Target Price (S$) (S$) Recom Market Cap. (S$m) Beta EPS (cent) FY18 FY19 PER (X) FY18 FY19 Div Yield (%) FY18 FY19 52week 52week % Chg High Price % Chg Low Price % Chg YTD BANKS & FINANCIAL SERVICES DBS 26.00 23.30 Sell 66,498 1.24 189.1 214.6 13.7 12.1 2.3 2.3 26.7 -2.4 18.12 43.5 4.6 OCBC 13.03 13.50 Buy 54,536 1.21 104.1 110.6 12.5 11.8 6.7 7.7 13.3 -2.0 9.23 41.2 5.2 UOB 27.86 26.90 Hold 46,333 1.08 215.4 229.3 12.9 12.9 2.5 2.5 28.4 -1.9 20.38 36.7 5.3 PLANTATIONS WILMAR 3.17 3.63 Hold 20,283 0.85 29.9 31.8 10.6 10.0 2.5 2.8 4.0 -20.8 3.06 3.6 2.6 IFAR 0.41 0.53 Hold 581 1.00 5.2 5.7 7.8 7.1 3.1 3.5 0.6 -30.2 0.37 11.0 3.8 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. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting. Required Rate of Return of 7% is defined as the yield for one-year Malaysian government treasury plus assumed equity risk premium.
  13. SECTOR UPDATE Friday , January 19, 2018 FBMKLCI: 1,821.60 THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Plantation Sector Neutral What’s Next? (Maintained) Angeline Chin Tel: +603-2167 9611 angelinechin@ta.com.my www.taonline.com.my Yesterday, we attended the ‘Palm Oil Economic Review & Outlook (R&O) Seminar 2018’ organised by the Malaysian Palm Oil Board (MPOB). The seminar was presented by prominent speakers, covering the outlook and possible challenges in the plantation sector in 2018 as well as the global oils and fats trade. Overall, the general view was that the CPO production would increase in 2018. The palm oil industry will continue to grow in the long-term due to its consistent supply and price advantage compared with other major vegetable oils. Meanwhile, Dr Mohamad Fadhil Hasan (from Gapki) was the only speaker that provided CPO price forecast for 2018. He expects the average CPO price to be in the range of USD710-720/tonne (RM2,808-2,848/tonne). This is very close to our average CPO price estimate of RM2,800 for 2018, where we expect demand growth will outpace the supply in 2018. Maintain Plantation sector as Neutral. Some of the key highlights are as follows: Review of 2018 Palm Oil Performance According to MPOB, CPO production in Malaysia increased by 15.0% in 2017 to 19.92mn tonnes, mainly due to the the recovery of an El-Nino phenomena (which resulted in higher FFB and yield). However, the OER decreased by 0.46 p.pt to 19.72% despite the average palm oil mill utilisation rate improved from 77.8% to 90.1% (Total FFB processing capacity of 112.19mn tonnes per year). The average CPO price was RM2,783/tonne in 2017 (+4.9% YoY). MPOB expects Malaysia’s CPO production to increase by 2.9% to 20.5mn tonnes in 2018 while stockpile declining to 2.3mn tonnes (-15.8%). Meanwhile, palm oil exports are expected to increase by 5.1% to 17.4mn tonnes, contributing to higher export revenue of RM80bn (+2.6%) for 2018. Dr. Mohamad Fadhil Hasan, (Indonesian Palm Oil Association –GAPKI) Dr. Fadhial is maintaining his forecast that the average CPO price will reach USD710-720/tonne in 2018 (similar to his presentation at 13th Indonesian Palm Oil Conference). Palm oil production in Indonesia is expected to be 38.5mn in 2018 (+5.5% YoY). He added that weather factor will play an important role in determining production in 2018. According to Dr. Fadhil, the palm oil production growth in Indonesia is expected to remain weak at 3% per year in the next decade, while the production in Malaysia is also trending down with the much slower growth performance compared to Indonesia. Low replanting rate, labour shortage, scarcity of land for new planting and random weather pattern will be the key challenges that will affect the future production. Besides, Dr. Fadhil also opines that the mandatory program of B20 will no longer be a factor that pushes the price of palm oil, instead, it will serve as a price stabiliser. Indonesia's biodiesel consumption is estimated to be 2.7mn kilolitres in 2017 (previous forecast: 5.5mn kilolitres) from 3mn kilolitres in 2016. The biodiesel consumption is expected to be lower at 2.5mn-2.6mn kilolitres in 2018. Page 1 of 4
  14. 19-Jan-18 Major factors to watch out will be i ) The plan of the EU Parliament to end the use of palm oil based biodiesel in 2021 and the first generation of vegetable oils based biodiesel in 2030 (currently around 3.5mn tonnes of palm oil used for biofuel). ii) The possible US anti-dumping duties on palm oil biodiesel, iii) The Russian government plan to put higher standard of peroxide value, iv) Indian government imposes higher tariff on palm oil and its products, and v) The growth in Indonesia domestic consumption will slow unless the mandatory biodiesel program can be well enforced for non-PSO (Public Sector Obligation) Dr. James Fry, (LMC International) Dr James’ presentation was centred around drivers that will determine CPO prices in 2018. Overall, global CPO production growth is expected to be narrow in 2018 in the range of 5mn to 6mn tonnes, slower than 2017’s growth of 8mn tonnes. On the production side, he expects Malaysia palm production to be around 21mn tonnes in 2018, while Indonesia will be around 40mn. This is similar to his previous forecast back in Nov 2017. Meanwhile, Dr James revealed that the price band linking CPO and crude oil prices is now well accepted. According to him, 2007 heralded the creation of a price band in which the EU vegetable oil prices trade at a premium to Brent crude oil. Brent is now the floor to CPO prices and CPO the floor to other oil prices. CPO traditionally trades at a premium to Brent crude oil (~USD150/tonne). On the long-term outlook, he opines that the annual rates of growth in demand for oils will be reduced for all end-uses, but most notably for biofuels. However, the overall growth will still exceed 3% in 2017-30. EU Parliament Ban on Palm Biodiesel will Create Chaos in Europe Food Industry The European Parliament’s move to ban palm oil from biofuels has received a lot of criticism and objection from the palm oil industry players during the seminar. To recap, European lawmakers approved the resolution on Wednesday to phase out palm-based biofuels from the EU energy mix after 2021. The resolution will now have to receive approval from the European Commission and the Council of the EU before it becomes law. According to MPOB, the EU is Malaysia’s 2nd-largest export market after India, accounting for 2mn tonnes of palm oil products in 2017 (~12%). However, Dr James believes that it is not easy for the EU to cut out palm methyl ester (PME), because the main alternative to 3.5mn tonnes of CPO in biofuels is local rapeseed oil. Using local rapeseed oil to biodiesel will create a dilemma for the EU food market (food inflation). If they decided to fill the hole with sunflower oil, the price of sunflower oil will balloon and the high consuming countries such as China and India will definitely find a cheaper alternative oil, which could be palm oil, in his view. Maintain Neutral No change to our 2018 average CPO price estimate of RM2,800/tonne. We expect CPO price to trade higher in 1H and gradually tapering off in 2H. For stock picks, we like Sime Darby Plantation (TP: RM6.25/share) for attractive growth profile, a sustainable dividend policy of 50% payout ratio, a strong earnings growth prospect and attractive valuations. We also like TSH (TP: RM2.10/share) as the company is a main beneficiary of CPO price upcycle and higher potential growth in production due to its young trees age profile. Other BUY calls include KFIMA, and Indofood. Maintain Hold on KLK and Wilmar as near-term catalysts have already been priced in. Lastly, maintain Sell on United Malacca, IOI, FGV and IJMP due to pricey valuation. We reiterate our Neutral recommendation on the Plantation sector. Our re-rating catalysts include: 1) Extreme weather change, which would affect both the production and CPO price, 2) Downward revisions in soybean production estimates, and 3) Better-than-expected demand in China and India. Page 2 of 4
  15. 19-Jan-18 Figure 1 : Oil Palm Planted Area by Region (2017) (mn tonnes) Source: MPOB, TA Research Figure 2: Planted Area by Category Source: MPOB, TA Research Figure 3: Downstream Sectors Source: MPOB, TA Research Figure 4: Vegetable Oils Price Comparison Page 3 of 4
  16. 19-Jan-18 Source : LMC, TA Research Figure 5: CPO Differential to Gas Oil (In USD/ Tonne) Figure 6: MYR/USD Source: Bloomberg, TA Research Source: Bloomberg, TA Research Figure 7: Peers’ Comparison Table Price TP PER (x) CY18 CY19 P/BV (x) CY18 CY19 Dividend Yield (%) CY18 CY19 ROE (%) CY18 CY19 Company Malaysia (RM) SD Plantation IOI Corp KLK FGV IJMP TSH United Malacca KFIMA Call (RM) (RM) Buy Sell Hold Sell Sell Buy Sell Buy 5.58 4.66 25.14 2.04 2.67 1.66 6.60 1.64 6.25 4.12 26.18 2.01 2.69 2.10 6.73 1.89 25.7 21.9 20.6 54.0 21.1 17.3 21.5 11.3 24.2 21.1 19.8 44.0 19.0 16.7 17.0 10.1 2.6 3.3 2.2 1.3 1.2 1.2 0.8 0.4 2.6 3.0 2.1 1.3 1.2 1.1 0.8 0.4 2.6 4.9 2.4 2.5 3.6 1.4 2.7 5.6 2.8 5.2 2.5 2.5 3.7 1.5 2.5 5.6 10.7 16.1 10.8 2.4 5.7 7.7 3.6 5.1 10.7 14.9 10.6 2.9 6.1 7.5 4.5 5.6 Singapore (SGD) Wilmar IFAR Hold Buy 3.20 0.41 3.63 0.53 15.6 7.8 14.7 7.1 1.3 0.4 1.2 0.4 1.9 3.2 2.0 3.5 8.3 5.5 8.3 5.8 Source: Bloomberg, TA Research Sector Recommendation Guideline OVERWEIGHT: The industry, as per our coverage universe, is expected to outperform the FBMKLCI over the next 12 months. NEUTRAL: The industry, as per our coverage universe, is expected to perform in line with the FBMKLCI over the next 12 months. UNDERWEIGHT: The industry, as per our coverage universe, is expected to underperform the FBMKLCI over the next 12 months. Stock Recommendation Guideline BUY : HOLD : SELL : Not Rated: Total return within the next 12 months exceeds required rate of return by 5%-point. Total return within the next 12 months exceeds required rate of return by between 0-5%-point. Total return is lower than the required rate of return. The company is not under coverage. The report is for information only. Total Return is defined as expected share price appreciation plus gross dividend over the next 12 months. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting. Required Rate of Return of 7% is defined as the yield for one-year Malaysian government treasury plus assumed equity risk premium. Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. As of Friday, January 19, 2018, the analyst, Angeline Chin Swee Tyng, who prepared this report, has interest in the following securities covered in this report: (a) nil Kaladher Govindan – Head of Research TA SECURITIES HOLDINGS BERHAD (14948-M) A Participating Organisation of Bursa Malaysia Securities Berhad Menara TA One 22 Jalan P. Ramlee 50250 Kuala Lumpur Malaysia Tel: 603 – 2072 1277 Fax: 603 – 2032 5048 www.ta.com.my Page 4 of 4
  17. COMPANY UPDATE Thursday , January 18, 2018 FBMKLCI: 1,823.95 Sector: Power & Utilities THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Tenaga Nasional Berhad TP: RM18.22 (+16%) Last Traded: RM15.78 More Light on RP2 Kylie Chan Sze Zan BUY Tel: +603-2167 9601 kyliechan @ta.com.my Tenaga hosted a conference call to provide additional clarity on the impact of Incentive-based Regulation (IBR) Regulatory Period 2 (RP2) to the group. We are assuaged by Tenaga’s assertion that contrary to media reports, RM930mn of 1H18 tariff rebates will not be funded from Tenaga’s earnings. Recall that earlier in Dec-17, the government announced that it will fund RM930mn for subsidy and rebate of 1.8sen/kwH in 1H18. This includes surcharge for additional cost of generation and ICPT rebate. The reality is that the RM930mn will be funded by the newly set-up Kumpulan Wang Industri Elektrik (KWIE), which is also known as the Energy Industry Fund (EIF). www.taonline.com.my Share Information Bloomberg Code TNB MK Stock Code 5347 Listing Main Market Share Cap (mn) 5,666 Market Cap (RMmn) 89,409 Par Value (RM) 1.00 52-wk Hi/Lo (RM) 15.98/13.00 12-mth Avg Daily Vol ('000 shrs) 10,154.0 Estimated Free Float (%) 38.0 Beta According to management, Tenaga’s contribution to EIF, includes amongst others, depreciation, finance, and tax savings gained from underspending below budgeted RP1 capex. This is in contrast to market’s earlier understanding that the full amount of capex and opex shortfall shall accrue to EIF (refer to our report dated 18-Jan-18). EIF contributions are “flowed-in” every 6-months, coinciding with half-yearly ICPT tariff reviews. In addition to ICPT subsidies and other purposes that benefit the industry, monies in EIF will also be used to fund special projects amounting to an estimated RM2.7bn in 3 key areas namely:- 1) Advanced Metering Infrastructure (AMI), 2) Renewable Energy projects, and 3) additional fibre optic network. According to management, Tenaga had earlier made provisions exceeding this amount (RM930mn). These pre-emptive provisions were a prudent measure, in spite of IBR guidelines being silent on the treatment of RP1 capex savings. Therefore, Tenaga reinforced its earlier statement that the RM930mn subsidy payment is earnings neutral to the group. However, in the case of RP2 capex savings, Tenaga is awaiting the official IBR guidelines to be published by EC before shedding light on its treatment. Nevertheless, if RP2 guidelines remains silent, Tenaga will continue to recognize conservative provisions on capex savings, in case of potential clawback by the government. Whereas in the case of RP1 and RP2 opex savings, Tenaga reaffirmed that the full amount is retained by the group, and flows straight to its bottomline. This in the spirit of IBR, which encourages asset efficiency. Major Shareholders (%) 0.5 Khazanah - 28.1 EPF - 11.5 Forecast Revision (%) FY17* Forecast Revision (%) FY18 0 0 Core Net Profit (RM mn) 7,458.1 7,449.1 Consensus 7,413.0 7,367.0 100.6 101.1 TA/Consensus (%) Previous Rating Buy (Maintained) *Annualized 16 months earnings Financial Indicators FY17 FY18 Net Debt/Equity (x) 0.5 0.4 ROA (%) 7.1 5.1 ROE (%) 12.4 12.0 BV/Share (RM) 10.8 11.5 1.5 1.4 P/BV (x) Share Performance Price Change (%) TNB FBMKLCI 1 mth 2.6 4.1 3 mth 10.5 4.3 6 mth 11.4 3.9 12 mth 13.5 9.5 (12-Mth) Share Price relative to the FBMKLCI For RP1, Tenaga is able to retain additional revenues resulting from higher average realized tariff of 39.45 sen/kWH (versus approved: 38.53 sen/kwH). Recall that actual sales exceeded the budgeted amount due to a higher mix of commercial customers. As a result, this enabled Tenaga to recognize enhanced asset returns of 8%-9%, which is higher than budgeted returns under RP1 (7.5%). However, for RP2, IBR guidelines are revised such that the maximum revenue allowed to be collected by Tenaga shall be based on the approved average tariff of 39.45 sen/kWH. Any excess revenues during RP2 will now Source: Bloomberg Page 1 of 4
  18. 18-Jan-18 be channelled to EIF instead . This implies the risk that the high RP1 earnings base may not be replicated in RP2. Nevertheless, the above may be offset by higher estimated RP2 (end-2020 closing) Regulated Asset Base (RAB) of RM54.4bn (RP1 Average Closing: RM43.6bn). Impact Maintain earnings forecasts. Valuation The conference call reiterates the functionality of the IBR framework in shielding the group’s earnings. Despite IBR’s successful implementation during the trial RP1 period, the market remains overtly concerned that Tenaga will be unjustly penalized to subsidize higher generation costs. Maintain Buy on Tenaga underpinned by: 1) Removal of RP2 uncertainty is an earnings rerating catalyst for the group, 2) International expansion plans (Target: 3.7GW new capacity by 2020) provide earnings kicker, 3) Dividend upside from proactive capital management and strong balance sheet (Net gearing: 0.6x, Cash: RM5bn), and 4) Attractive valuations – FY18 P/E trading 1SD below historical mean. Page 2 of 4
  19. 18-Jan-18 Earnings Summary Income Statement Balance Sheet FYE Dec * (RM mn) 2015 2016 2017E** 2018F 2019F Revenue 43,286.8 44,531.5 61,879.5 48,862.8 51,382.9 EBITDA 13,921.8 14,794.2 20,734.4 15,712.6 16,328.9 Depreciation & amortisation Net interest expense FYE Dec* (RM mn) Property, Plant & Equip Prepaid Op Leases (5,294.2) (5,722.2) (8,214.8) (6,383.8) (6,585.5) Associates & JVs (662.7) (740.3) (1,303.2) (711.5) (793.4) Others Non-Current Assets Associates 101.1 93.3 128.1 100.9 103.9 Forex gain/(loss) (932.3) (358.2) (87.5) 70.3 0.0 Pretax profit 7,133.7 8,066.8 11,256.9 8,788.5 9,053.9 Inventories Taxation (1,072.8) (746.0) (1,463.4) (1,318.3) (1,991.9) Trade receivables Minority interest Net Profit Core Net Profit^ 57.5 46.8 63.0 49.2 51.2 6,118.4 7,367.6 9,856.5 7,519.3 7,113.2 7,050.7 7,725.8 7,458.1 7,449.1 7,113.2 126.5 138.6 133.8 133.7 127.6 Per Share Data 2015 2016 2017E** 2018F 2019F 90,300.3 96,512.7 103,297.9 106,914.1 110,328.6 5,111.6 5,172.7 5,172.7 5,172.7 5,172.7 757.6 1,838.2 1,966.3 2,067.2 2,171.2 2,170.5 2,623.3 2,623.3 2,623.3 2,623.3 98,340.0 106,146.9 113,060.3 116,777.4 120,295.8 843.8 792.3 1,106.5 878.1 932.6 8,639.4 8,276.8 11,019.6 8,745.1 9,288.1 Cash and Deposits 2,471.3 3,971.2 6,617.1 5,092.2 5,373.8 Others 6,840.5 13,715.0 13,715.0 13,715.0 13,715.0 18,795.0 26,755.3 32,458.2 28,430.4 29,309.5 Current Assets Total Assets 117,135.0 132,902.2 145,518.5 145,207.7 149,605.2 Core EPS^ (sen) DPS^ (sen) 29 32 46 46 45 Borrowings 23,722.8 33,837.1 33,635.6 32,434.1 31,232.7 Book Value (RM) 8.5 9.4 10.8 11.5 12.3 Employee benefits 10,230.0 11,048.8 11,048.8 11,048.8 11,048.8 FCF (sen) 65.2 77.5 114.0 68.7 87.6 Deferred taxation 7,054.1 6,961.9 7,400.9 7,796.4 8,394.0 Deferred income 1,425.1 1,165.6 1,165.6 1,165.6 1,165.6 11,643.9 11,205.1 11,205.1 11,205.1 11,205.1 54,075.9 64,218.5 64,456.0 63,650.0 63,046.1 13,098.0 Ratios Others FYE Dec* (RM mn) 2015 2016 2017E** 2018F 2019F Non-Current Liabilities Valuations Core PER (x) 12.5 11.4 11.8 11.8 12.4 Trade payables 10,441.5 11,409.1 15,853.7 12,581.4 Dividend Yield (%) 1.8 2.0 3.9 2.9 2.9 Other payables 678.6 661.6 919.3 729.6 759.5 EV/EBITDA (x) 8.1 8.1 5.7 7.5 7.1 Deferred income 1,200.6 1,139.2 1,139.2 1,139.2 1,139.2 1,488.8 P/BV (x) 1.9 1.7 1.5 1.4 1.3 Borrowings 1,985.8 1,488.8 1,488.8 1,488.8 FCFF Yield (%) 4.1 4.9 7.2 4.4 5.6 Others 1,285.7 1,385.3 1,385.3 1,385.3 1,385.3 15,592.2 16,084.0 20,786.3 17,324.3 17,870.8 Current Liabilities Profitability Ratios EBITDA margin (%) 32.2 33.2 33.5 32.2 31.8 Share capital EBIT margin (%) 19.9 20.4 20.2 19.1 19.0 Reserves Pretax margin (%) 16.5 18.1 18.2 18.0 17.6 Minority interest Net margin (%) 14.1 16.5 15.9 15.4 13.8 Equity Core net margin (%) 16.3 17.3 36.0 15.2 13.8 ROE (%) 15.6 15.5 12.4 12.0 10.7 ROA (%) 6.2 6.2 7.1 5.1 4.8 Total Equity + Liabilities 5,643.6 5,643.6 5,643.6 5,643.6 5,643.6 41,564.4 46,745.0 54,484.4 58,490.9 62,997.0 258.9 211.1 148.1 98.9 47.7 47,466.9 52,599.7 60,276.1 64,233.4 68,688.3 117,135.0 132,902.2 145,518.5 145,207.7 149,605.2 Cashflow Statement FYE Dec* (RM mn) Liquidity ratios Current ratio (x) 1.2 1.7 1.6 1.6 1.6 PAT Quick ratio (x) 1.2 1.6 1.5 1.6 1.6 Add: Net Taxes Depreciation Leverage ratios 2015 2016 2017E** 2018F 2019F 6,060.9 7,320.8 9,793.5 7,470.2 7,062.0 262.0 25.4 439.0 395.5 597.6 5,294.2 5,722.2 8,214.8 6,383.8 6,585.5 Net Interest 662.7 740.3 1,303.2 711.5 793.4 Gross Gearing (x) 0.5 0.7 0.6 0.5 0.5 Associates & JCEs (101.1) (93.3) (128.1) (100.9) (103.9) Net gearing (x) 0.5 0.6 0.5 0.4 0.4 Net change in working capital 1,032.1 1,364.7 1,645.3 (959.2) Total Debt/ Assets (x) 0.2 0.2 0.3 0.2 0.2 Others (1,535.9) (1,714.5) 1,111.9 852.5 1,394.3 Interest Coverage (x) 21.0 20.0 15.9 22.1 20.6 Revenue (%) 1.2 2.9 39.0 (21.0) 5.2 Interest income EBITDA (%) 15.5 6.3 40.2 (24.2) 3.9 Others PBT (%) 0.3 13.1 39.5 (21.9) 3.0 CF from Investing Growth ratios Core Net Profit (%) 17.2 9.6 (3.5) (0.1) (4.5) Core EPS^ (%) 17.2 9.6 (3.5) (0.1) (4.5) (51.0) CF from Operations 11,674.9 13,365.6 22,379.7 14,753.4 16,277.9 Capex (10,363.7) (11,142.8) (15,000.0) (10,000.0) (10,000.0) 82.3 299.0 264.7 441.1 318.3 (2,547.7) (7,552.1) 0.0 0.0 0.0 (12,829.1) (18,395.9) (14,735.3) (9,558.9) (9,681.7) (2,607.2) Dividends (1,636.7) (1,636.7) (2,204.7) (3,442.6) Net Change in debt (1,775.2) 9,063.4 (201.5) (1,201.5) (1,201.5) (451.1) (890.3) (1,568.0) (1,152.6) (1,111.6) Interest paid Others CF from Financing (388.7) 57.0 0.0 0.0 0.0 (4,251.7) 6,593.4 (3,974.1) (5,796.7) (4,920.3) * 2015-16: FYE Aug Net Cash Flow (5,641.4) 1,490.0 2,645.9 (1,524.9) 281.6 ** 16 months for FY17 Beginning Cash 8,112.5 2,471.3 3,955.1 6,601.0 5,076.1 ^ 12 months Pro-Rated for FY17E Ending Cash 2,471.3 3,955.1 6,601.0 5,076.1 5,357.7 Page 3 of 4
  20. 18-Jan-18 (TH I S P A GE IS IN TE N TI ON AL L Y L E F T B L AN K ) Stock Recommendation Guideline BUY : HOLD : SELL : Not Rated: Total return within the next 12 months exceeds required rate of return by 5%-point. Total return within the next 12 months exceeds required rate of return by between 0-5%-point. Total return is lower than the required rate of return. The company is not under coverage. The report is for information only. Total Return is defined as expected share price appreciation plus gross dividend over the next 12 months. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting. Required Rate of Return of 7% is defined as the yield for one-year Malaysian government treasury plus assumed equity risk premium. Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. As of Thursday, January 18, 2018, the analyst, Kylie Chan Sze Zan , who prepared this report, has interest in the following securities covered in this report: (a) nil Kaladher Govindan – Head of Research TA SECURITIES HOLDINGS BERHAD (14948-M) A Participating Organisation of Bursa Malaysia Securities Berhad Menara TA One 22 Jalan P. Ramlee 50250 Kuala Lumpur Malaysia Tel: 603 – 2072 1277 Fax: 603 – 2032 5048 www.ta.com.my Page 4 of 4