Bursa Malaysia Daily Market Report - 26 December

Transcription

1. Tuesday , 26 December, 2017 TA RESEARCH’S ‘DAILY COMPILED REPORTS’ For Internal Circulation Only News 1. 2. 3. Daily Market Commentary Weekly Strategy Weekly Technical Outlook Fundamental Reports 1. TSH Resources Berhad: Young and Strong with Bright Future Technical Reports 1. 2. 3. 4. 5. Weekly Technical Stock Picks Daily Money Flow FBMKLCI Weekly Ace Market Stock Watch Weekly Small Cap Stock Watch Weekly Stock Screen 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 Tuesday , 26 December 2017 For Internal Circulation Only TA Research, e-mail : taresearch@ta.com.my Review & Outlook KLSE Market Statistics (22.12.2017) (mil) Main Market 1,030.3 Warrants 158.5 ACE Market 436.8 Bond 9.7 ETF 0.6 LEAP 0.0 Total 1,636.0 Off Market 53.5 Volume +/-chg (RMmn) -222.7 1,432.0 -52.0 23.2 -542.0 90.3 -21.4 2.0 -1.76 0.7 0.00 0.0 1,548.2 -67.6 179.6 Value Value/ +/-chg Volume Up Down -428.7 1.39 287 274 -7.4 0.15 74 107 -69.0 0.21 36 56 -4.8 0.21 1 4 -2.23 1.11 2 1 0.00 0.00 0 0 0.95 400 442 11.0 3.36 Major Indices Index +/- chg Malaysia FBMKLCI FBMEMAS FBMSCAP December 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 1,760.24 12,661.75 16,788.70 1,758.00 9.03 60.61 21.31 7.00 % chg % YTD chg 0.52 0.48 0.13 0.40 7.22 10.42 14.09 7.49 Last week's V-shape rebound from a brief profit-taking spell turned momentum and trend indicators for the FBM KLCI back into positive mode, signaling good potential for further window-dressing upside in this last trading week ahead of the year-end. Nonetheless, while buying momentum is likely to concentrate on blue-chip heavyweights supporting the index higher, the broader market should continue to lack trading commitments with market players sidelined ahead of the year-end holidays. On the index, it must sustain above the key 200-day moving average level, currently at 1,756, to boost upside momentum and enable challenge of stronger upside hurdles from 1,765 and 1,782, with the double-top peak of 1,793 and 1,796 acting as major resistance. Immediate uptrend supports are at 1,743 and 1,735, the respective 10 and 50-day moving averages, followed by 1,729, the 30-day ma, while crucial support will be the 5 Dec pivot low of 1,708. Stock-wise, heavyweight oil & gas, plantation and banking stocks may see year-end window-dressing upside in the last trading week of the year, while oil & gas and construction related shares like Bumi Armada, Dialog, UEM Sunrise and WCT Holdings may also highlight rotational buying interest. News Bites • CCM Duopharma Biotech Bhd accepted a contract worth approximately RM156mn to supply pharmaceutical and/or nonpharmaceutical products to hospitals, clinics and others under the 24,754.06 -28.23 -0.11 25.26 Government of Malaysia. • Boustead Holdings Bhd is acquiring a 6.59-acre land in Jalan Cochrane 6,959.96 -5.40 -0.08 29.29 for RM143.5mn from Lembaga Tabung Angkatan Tentera. 7,592.66 -11.32 -0.15 6.30 • TMC Life Sciences Bhd has awarded the main contract worth RM260mn 22,902.76 36.66 0.16 19.82 to Putra Perdana Construction Sdn Bhd to expand capacity of its 2,440.54 10.71 0.44 20.43 hospital. • Paramount Corporation Bhd, together with landowner Kumpulan 29,578.01 210.95 0.72 34.44 Hartanah Selangor Bhd, will undertake a residential development on 3,385.71 3.18 0.09 17.53 9.66-acre land with an estimated GDV of RM1b in Petaling Jaya, Selangor. 1,742.08 5.17 0.30 12.91 • Malaysian Resources Corp Bhd has been invited by Ministry of Works 6,221.01 37.62 0.61 17.45 to commence negotiations on the terms of the mutual termination agreement for the Eastern Dispersal Link Highway. 3,297.06 -3.00 -0.09 6.23 • Sentoria Group Bhd has won a contract to design and build (D&B) 1,901.56 -3.49 -0.18 -3.43 1Malaysia People's Housing Programme (PR1MA) units in Kuantan, 6,069.71 9.35 0.15 7.13 Pahang from HA Properties Sdn Bhd for RM67.3mn. • Media Prima Bhd has signed a joint venture agreement for an advertising deal on the MRT Line. Top 10 KLCI Movers Based on • Pestech International Bhd has proposed to list its subsidiary, Pestech Off Market Mkt Cap. (Cambodia) Ltd, on the Main Board of Cambodia Securities Exchange to raise US$20.3mn (RM83mn) through its initial public offering. (mn) (RM) Counter Mkt Cap. Chg Vol. • New Hoong Fatt Holdings Bhd is seeking to grow its exports revenue (RM’mn) (RM) (mn) BIMB 37.4 @ 4.40 further in 2018. The group is gearing up to broaden its foothold in the TENAGA 84,876 0.02 12.21 GBH 5.0 @ 1.40 automotive aftermarket worldwide, by focusing on both distribution PBBANK 79,933 0.02 2.21 network expansion and product diversification. D&O 5.0 @ 0.68 AXIATA 48,768 0.02 3.09 • Ekovest Bhd is confident of securing at least RM2.5bn worth of projects BAHVEST 2.0 @ 0.59 new year and is aiming to receive the government's endorsement on IHH 47,869 0.02 0.91 VERTICE 1.2 @ 1.10 Phase 2A of the Duta-Ulu Kelang Expressway next year. MAXIS 46,863 0.07 3.30 OPCOM 1.0 @ 0.39 • Crescendo Corp Bhd's net profit for 3QFY18 surged 29% YoY to SIMEPLT 36,929 0.01 3.60 RM10.26mn from RM7.98mn. GENTING 34,812 0.13 1.66 • Kim Loong Resources Bhd registered an 11.18% YoY increase in net PETGAS 33,836 0.14 1.35 profit for 3QFY18 to RM27.92mn. The group proposed to split its MISC 31,827 0.07 0.34 share on a one-to-three basis. GENM 31,687 0.04 2.05 • Bank Negara Malaysia (BNM) international reserves rose to US$102.2bil as at Dec 15, 2017, from US$101.9bil on Nov 30, 2017. • The Leading Index (LI) registered a growth of 0.2% in October 2017 to 120.1 points, mainly induced by real money supply (0.4%) and the number of new companies registered (0.3%). Important Dates • U.S. Consumer Spending Rises in November, Savings Rate at 10-Year ECONBHD - 1:4 Bonus Issue - BI of up to 267.5m new split shares. Low. • U.S. households became less confident about the economic outlook in 1 bonus share for every 4 split shares held. December as Congress passed a significant overhaul of the tax code. ECONBHD - 1:4 Bonus Issue - BI of up to 267.5m free warrants. • U.K.'s latest overview of its economy indicated annual growth in the 1 warrant for every 4 split shares held, on the same entitlement as the third quarter slowed to 1.7%, slightly higher than previously estimated bonus issue of shares. but still the weakest pace in 4 1/2 years. Ex-Date: 26/12/2017. Entitlement Date: 28/12/2017. • Germany's Producer Price inflation rose marginally to 2.7% in November from 2.6% in October, driven by the 17.3% surge in energy prices. LISTING ON: 29/12/2017. Exchange Rate Commodities Futures MENANG - 4:5 Bonus Issue - BI of up to 320.5m shares. USD/MYR 4.0838 0.0040 Palm Oil (RM/mt) 2,458.00 9.00 4 bonus shares for every 5 existing shares held. Crude Oil ($/Barrel) 58.35 0.11 USD/JPY 113.28 -0.0900 Ex-Date: 05/01/2018. Entitlement Date: 09/01/2018. Gold ($/tr.oz.) 1,279.10 8.90 EUR/USD 1.187 0.0020 LISTING ON: 10/01/2018. Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. Kaladher Govindan, Head of Research MENARA TA ONE, 22 JALAN for TA SECURITIES HOLDINGS BERHAD (14948-M) A PARTICIPATING ORGANISATION OF BURSA MALAYSIA SECURITIES BHD P RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL : 603 - 2072 1277. FAX : 603 - 2032 5048 www.ta.com.my
3. Tuesday , December 26, 2017 FBMKLCI: 1,760.24 THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Weekly Strategy Market View, News In Brief: Corporate, Economy, and Share Buybacks Kaladher Govindan Tel: +603-2167 9609 kaladher@ta.com.my www.taonline.com.my M a r k e t V i e w FBMKLCI Window Dressing Rally to Sustain Despite cautious undertone on the broader market last week, the blue-chip benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) managed a robust V-shape rebound from profit-taking on the previous week’s steep window-dressing gains, with key consumer, banking, plantation, oil & gas and utilities heavyweights contributing most of the rise. For the week, the blue-chip benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) added 7.17 points, or 0.4 percent to 1,760.24, with Nestle (+RM2.00), Petronas Gas (+86sen), HLFG (+60sen), TM (+40sen) and KLK (+22sen) representing most to the index’s gains. Daily traded volume and value moderately improved to 2.44 billion shares worth RM2.19 billion, compared to the 2.21 billion shares and RM2.73 billion respectively the previous week. Window dressing activities from the local funds are expected to continue over the next four trading days before the year draws to a close. Valuation of the benchmark index is still compelling against its regional peers to attract interest. The FBMKLCI’s 2018 consensus price-to-earnings ratio of 15.2x is still at a significant discount of 8% compared to key regional developing economies. Add in the positive vibes from a recovery in ringgit and crude oil prices and their positive outlook in the short-term, abundant value plays among blue chips and the expectation of a pre-election rally, there is room for the FBMKLCI to retest the 1,800 mark before the year ends. Brent crude oil price closed at US$65.25 per barrel last Friday, almost near a three-year high of US$66.81, and is likely to sustain next year ahead of the Saudi Aramco listing. This is positive for ringgit due to its strong correlation with crude oil price. It should contribute in lowering the nation’s fiscal deficit as well. Presuming crude oil price averages at US$60 per barrel next year versus government forecast of US$52 in its “Budget 2018”, the nation’s budget deficit should narrow to 2.6%, ceteris paribus, versus official forecast of 2.8%. That said, 2018 is expected to be a mixed bag with the impending 14th GE driving up the FBMKLCI in the 1H18 before ending the year at 1,835, based on 16x CY19 EPS. On the local front, the resilient economy, corporate earnings recovery, crude oil price stability and FBMKLCI’s undemanding valuation vis-à-vis regional peers are valid drivers for the equity market. A BN victory would be another plus factor to hold up market sentiment momentarily on continuity in policy matters. Any rally could fizzle out in the 2H18 without the active participation of foreigners as continued monetary tightening in the US and the beginning of similar measures in Europe will squeeze out liquidity in emerging markets. President Trump’s US$1.5 trillion tax-overhaul bill that he signed last Friday and planned fiscal expansion should lead to stronger consumption and higher private investment next year. As the US labour market is already at full employment, further squeeze will lead to higher wages and faster inflation that should hold steady the three times interest rate hike assumption in 2018 but the quantum of hike may surprise on the upside than the presumed Page 1 of 8
4. 26-Dec-17 25 basis point hike at each instance . The European Central Bank will start halving its monthly asset purchases to 30 billion euro starting next January and it could review the low interest rate policy soon as the economy continues to grow. Besides, geopolitical shocks represent a clear and present danger for financial markets, which can be amplified further, if an antieuro party wins the Italian election next spring. Thus, investors should adopt a bottom-up investment approach next year by selectively picking undervalued blue chips in the banking (CIMB; TP: RM7.00: and AMBank; TP: RM5.10), telco (TM; TP: RM7.20), plantation (Sime Darby Plantation; TP: RM6.25) and utilities (Tenaga; RM:17.38) sectors; thematic plays that will benefit from the multibillion infrastructure spending (Gamuda; TP: RM6.00, Gadang; RM:1.73, AnnJoo; RM4.40 and Chin Hin; RM1.49); and consumer and media related stocks that will benefit from government handouts ahead of 14th GE, hike in minimum salary (due in 2018), FIFA World Cup and stronger ringgit (Nestle; RM120.50, Astro; RM3.10 and Pecca; RM1.69). 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 Tuesday, December 26, 2017, the HOD, Kaladher Govindan, 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 8
5. 26-Dec-17 N e w s I n B r i e f Corporate CCM Duopharma Biotech Bhd accepted a contract from Pharmaniaga Logistics Sdn Bhd to supply pharmaceutical and /or non-pharmaceutical products to hospitals, clinics and others under the Government of Malaysia. The total estimated value of the contract is approximately RM156mn and shall be effective on and from 1 December 2017 until 30 November 2019 or at such other date as directed by the Government of Malaysia. (Bursa Malaysia) Comments: We are not surprised on the announcement as contract awards of such via concessionaire Pharmaniaga Bhd are part and parcel of the group’s business. Above all, it reaffirms our expectations for the government sector to remain a key earnings contributor to the group as well as substantiates the group’s position as a leading generic drug manufacturer in Malaysia. We reiterate our Buy recommendation with a TP of RM2.70/share. Boustead Holdings Bhd is acquiring a 6.59-acre land in Jalan Cochrane for RM143.5mn from its major shareholder Lembaga Tabung Angkatan Tentera. The group plans to develop condominiums, car parks and other facilities on the land, with an expected GDV of RM1.14bn. The development is expected to be launched in 2019 and completed within 3 years, with development costs to be funded through a combination of bank borrowings and internally-generated funds. (The Edge) TMC Life Sciences Bhd has awarded the main contract worth RM260mn to Putra Perdana Construction Sdn Bhd to expand capacity of its hospital from its existing 205 beds to 635 beds, comprising a new block of 12-storey hospital facilities and a new 7-storey block with 1,150 car parking lots. The project is expected to be completed by June 2020 and will be funded through internally-generated funds and bank borrowings. (Bursa Malaysia/The Edge) Paramount Corporation Bhd, together with landowner Kumpulan Hartanah Selangor Bhd, will undertake a residential development on 9.66-acre land with an estimated GDV of RM1b in Petaling Jaya, Selangor. The project is estimated to need a gross development cost of RM835mn with an expected profit of RM165mn. The development cost will be funded by a combination of internally generated funds and bank borrowings. (The Edge/The Sun) Malaysian Resources Corp Bhd has been invited by Ministry of Works to commence negotiations on the terms of the mutual termination agreement for the Eastern Dispersal Link Highway. The group will make the necessary announcement once the terms of the mutual termination have been finalized. (Bursa Malaysia) Sentoria Group Bhd has won a contract to design and build (D&B) 1Malaysia People’s Housing Programme (PR1MA) units in Kuantan, Pahang from HA Properties Sdn Bhd for RM67.3mn. The contract, due for completion on Dec 21, 2020, is to build 320 single-storey, semi-detached houses in Mukim Penor and another 198 such units in Sri Damai. (Bursa Malaysia/The Edge) Comment: This is Sentoria’s fourth D&B PR1MA/affordable homes project in Kuantan. We are not overly surprised with the contract win as the company has been actively bidding for additional lands from Pahang State Government to develop PR1MA/government housing projects. Management expects a 20% gross margin from D&B contract, significantly higher than typical construction margins in the mid-to-high single digits. This is because D&B contract would require Sentoria to design the overall master plan of the government housing project. As such, it would allow Sentoria to price in higher contract value when bidding for the project. We keep our earnings forecasts unchanged as this project falls Page 3 of 8
6. 26-Dec-17 within our FY18 orderbook replenishment assumptions . Maintain Buy with an unchanged target price of RM0.76/share, based on blended CY18 PE/PB ratio of 9x/0.8x (based on 20% and 38% discount to its average five-year PE and PB respectively). We continue to see Sentoria as a strong contender to secure more D&B contracts for affordable housing projects given its established track record. Media Prima Bhd has signed a joint venture agreement with Seni Jaya Sdn Bhd and Big Tree Seni Jaya Sdn Bhd for an advertising deal on the MRT Line. The deal entails designing, building, operating and transferring advertising media on the MRT Klang Valley-Sungai BulohKajang Line for MRT Corporation. (Bursa Malaysia/Bernama) Pestech International Bhd has proposed to list its indirect wholly-owned subsidiary Pestech (Cambodia) Ltd, on the Main Board of Cambodia Securities Exchange and intends to raise US$20.3mn or KHR81.91bn (RM83mn) through its initial public offering. (Bursa Malaysia/The Sun) New Hoong Fatt Holdings Bhd is seeking to grow its exports revenue further in 2018. The group is gearing up to broaden its foothold in the automotive aftermarket worldwide, by focusing on both distribution network expansion and product diversification. (The Edge) Jiankun International Bhd has proposed to undertake a private placement of up to 10% of its issued shares to raise gross proceeds of up to RM5.94mn. Proceeds from the private placement are intended to be utilised for working capital and/or future business projects. The proposal is expected to be completed by the 1Q2018. (Bursa Malaysia/The Sun) Ekovest Bhd is confident of securing at least RM2.5bn worth of projects new year and is aiming to receive the government's endorsement on Phase 2A of the Duta-Ulu Kelang Expressway next year. (The Edge) Knusford Bhd announced that its US$166mn (RM677mn) engineering, procurement and construction contract for the ArthaLand Cebu Exchange project in the Philippines has been called off as the parties were unable to reach mutually-agreed terms and conditions. (The Edge) Crescendo Corp Bhd’s net profit for 3QFY18 surged 29% YoY to RM10.26mn from RM7.98mn due to higher operating profit in its property development and construction segment. Meanwhile, quarterly revenue dropped 2% YoY to RM71.17mn from RM72.44mn. (Bursa Malaysia) Kim Loong Resources Bhd registered an 11.18% YoY increase in net profit for 3QFY18 to RM27.92mn from RM25.11mn due to higher production and palm oil prices. Meanwhile, quarterly revenue grew 16.65% YoY to RM289.42mn from RM248.1mn. The group declared a special single tier dividend of 6sen per share. Separately, the group proposed to split its share on a one-to-three basis to improve the marketability and trading liquidity of its shares. It also proposed a bonus issue of up to 46.77mn free warrants, on the basis of one warrant for every 20 subdivided shares held after the proposed share split. (Bursa Malaysia/The Edge) Page 4 of 8
7. 26-Dec-17 N e w s I n B r i e f Economy Asia BNM International Reserves Higher at US $102.2bil Bank Negara Malaysia (BNM) international reserves rose to US$102.2bil as at Dec 15, 2017, from US$101.9bil on Nov 30, 2017. The central bank said its reserves, in ringgit terms, rose to RM431.6bil from RM430.4bil as at end-November. Also, the reserves position was sufficient to finance 7.5 months of retained imports and was 1.1 times the short-term external debt. The main components of the international reserves were foreign currency reserves (US$95.7bil), International Monetary Fund reserves position (US$800mil), Special Drawing Rights (US$1.2bil), gold (US$1.5bil) and other reserve assets (US$3bil). (The Star, BNM) Malaysia’s Leading Index Up 0.2% to 120.1 in October 2017 The Leading Index (LI), which monitors economic performance in advance, and the Coincident Index, which measures current economic activity, have improved in October 2017 compared to the previous month. In a statement, the Department of Statistics Malaysia (DOSM) said the LI registered a growth of 0.2% in October 2017 to 120.1 points from 119.9 points in September 2017, mainly induced by real money supply (0.4%) and the number of new companies registered (0.3%). The annual change of LI rose to 3.2% against the 2.5% recorded in September 2017. Meanwhile, the Coincident Index (CI) increased by 0.5% in October 2017, following the increase in three components, namely Volume Index of Retail Trade (0.4%), Real Contributions to Employees Provident Fund (0.1%) and Capacity Utilisation in Manufacturing Sector (0.1%). It said the annual change of CI grew to 3.5% in the same month. Concurrently, the Diffusion Index for CI reached 100%, while LI remained at 85.7%, thus indicating that Malaysia's economy will continue a favourable growth between February and April 2018. (The Star, DOSM) Steady Growth Seen in Malaysian Services Sector Malaysia's services sector grew at an annual growth rate of 7.2% to 818,311 establishments between 2010 and 2015, the Department of Statistics Malaysia revealed. According to the findings of the Economic Census 2016 for the services sector, sector income grew 8.3% per annum (p.a.) to RM2,004bil over the same five-year period, while value of gross output rose 8.4% p.a. to RM964.7bil and value generated increased 8.9% p.a. to RM518.3bil. The number of persons engaged in the sector also rose about 5% p.a. to 4.79 million persons while salaries and wages increased 10.1% p.a. to RM131.5bil. The value of fixed assets for the sector increased 12.7% annually from 2010 to 2015 to RM904.4bil. In terms of overall economy, Services sector recorded the highest contribution for number of establishments with 88.9%. Meanwhile, value of gross output and number of persons engaged in Services sector contributed 38.7% and 54.9% respectively to overall economy of Malaysia in 2015. In 2015, there were 173,536 women-owned establishments in the services sector as compared to 116,758 establishments in 2010, which means an annual growth rate of 8.2%. Wholesale and retail trade recorded the highest number of women-owned establishments with 81,877 establishments, followed by food and beverage and personal services and other activities. (The Star, DOSM Economic Census 2016) United States U.S. Consumer Spending Rises in November, Savings Rate at 10-Year Low Americans spent more and saved less in November, a sign that low unemployment, robust consumer confidence, the prospect of tax cuts and buoyant financial markets are underpinning a strong holiday shopping season. Americans are saving at the slowest pace in a decade, likely in anticipation of continued job and wealth gains as stock indexes barreled to new records last month and the unemployment rate stood at a 17-year low. The personal saving rate in November was 2.9%, the Commerce Department said, falling below 3% for the first time since November 2007, just before the last recession hit. Meanwhile spending was strong in a key month of the holiday season, outpacing income gains. Personal consumption expenditures, a measure of household spending, increased a seasonally Page 5 of 8
8. 26-Dec-17 adjusted 0 .6% in November from the prior month. Personal income, reflecting Americans’ pretax earnings from salaries and investments, rose 0.3% in November from the prior month. The inflationary pressures picked up somewhat last month. The price index for personalconsumption expenditures, the Federal Reserve’s preferred inflation measure, rose 0.2% from October and was up 1.8% from a year earlier. After touching the Fed’s 2% annual target earlier this year, inflation has been below-target for nine consecutive months, but November’s annual gain reflected a pickup from 1.6% in October. While the latest inflation reading offers Federal Reserve policy makers some comfort in their battle against low inflation, price gains were weaker when stripped of volatile food and energy costs. Socalled core inflation rose 0.1% in November from October, and was up 1.5% from a year earlier. (The Wall Street Journal) U.S. Sentiment Dipped as Consumers Divided Over Tax Overhaul U.S. households became less confident about the economic outlook in December as Congress passed a significant overhaul of the tax code. The University of Michigan said its final reading for consumer sentiment in December was 95.9, down from a preliminary figure of 96.8. It was 98.5 in November and 100.7 in October, which was its highest level since 2004. The index tracking current economic conditions edged up to 113.8 in December from 113.5 in November. But the index tracking expectations about the future dropped to 84.3 from November’s 88.9. Richard Curtin, the Michigan survey’s chief economist, said most of the decline in confidence came from lower-income households, and there was a partisan split over whether Republican-backed changes to tax law will have positive or negative effects on the economy. Household expectations about future inflation steadied in December. Consumers said they expected 2.4% annual inflation in five to 10 years, unchanged from November. The expectation for inflation over the next year rose to 2.7% in December from 2.5% in November. (The Wall Street Journal) Demand for U.S.-Made Durable Goods Rises in November Orders for long-lasting factory goods rose in November, the latest sign of improving demand this year for U.S. manufactured products. Orders for durable goods—products designed to last at least three years, such as computers and trucks—increased 1.3% from the prior month to a seasonally adjusted $241.36 billion in November, the Commerce Department said. The overall increase was led by orders for airplanes, motor vehicles and military equipment. Economists surveyed by The Wall Street Journal had expected a 2% gain for orders last month. Orders for October were revised to a narrower 0.4% decrease from a previous estimate of a 0.8% decline. Through the first 11 months of the year, demand for durable products was up 5.4%, compared to the same period a year earlier, well outpacing inflation. A closely watched proxy for business investment, new orders for nondefense capital goods excluding aircraft, edged down 0.1% in November. But October’s reading was revised up to a healthy 0.8% gain. The investment proxy was initially seen as declining in October. The business investment measure increased 5.1% in the first 11 months of this year compared to the same period in 2016. (The Wall Street Journal) US New-Home Sales Reach 10-year High in November Things are looking good on the home front. Sales of new single-family homes reached a seasonally adjusted rate of 733,000 last month, according to data from the US Census Bureau, the highest since 2007. That blew away the 654,000 units predicted by analysts surveyed by Thomson Reuters, and represents a 17.5% gain from the revised 624,000 figure from October, and a 26.6% year-over-year gain. The media price for November came in at $318,700, with an average sales price of $377,100, data showed. The robust sales data echoes figures released earlier in the week showing that sales of existing homes had grown at the fastest clip in nearly 11 years, with more Americans looking to upgrade their residences amid strong economic growth and low unemployment, even as inventories continued to decline. (Financial Times) Page 6 of 8
9. 26-Dec-17 Europe and Uni ted Kingdom Inflation and Brexit Concerns Hold Back U .K. Economy A picture of inflation-squeezed consumers and Brexit-wary companies emerged in the U.K.’s latest overview of its economy. Annual growth in the third quarter slowed to 1.7%, slightly higher than previously estimated but still the weakest pace in 4 1/2 years, the Office for National Statistics said. The economy expanded an unrevised 0.4% from the second quarter, well below the rates seen before the European Union referendum 18 months ago. Separate figures showed the dominant services industry, which provided almost all of the economy’s growth in the third quarter, rose 0.2% in October. Taken together with a mildly positive manufacturing performance in the month, it suggests the economy has been steady this quarter as the Bank of England raised interest rates for the first time in a decade last month. Bloomberg Economics estimates the economy will maintain its pace this quarter, expanding 0.4%. But it says there’s no reason for the central bank to rush though with more tightening. The economy, which lost momentum in 2017, will probably expand 1.5% this year and 1.4% in 2018, according to a Bloomberg survey. That would be well behind the rates expected for both the U.S. and euro area. (Bloomberg) Germany's Import Price Inflation Rises in November Germany's import price inflation increased in November, figures from Destatis showed. Producer price inflation rose marginally to 2.7% in November from 2.6% in October. The annual increase was largely driven by the 17.3% surge in energy prices. Excluding crude oil and mineral oil products, import prices advanced 1.2% from same period of 2016. On a monthly basis, producer prices climbed 0.8%, following October's 0.6% increase. Data showed that export price inflation slowed to 1.2% from 1.5% in October. Month-onmonth, export prices gained 0.2% after rising 0.1% in October. Separately, German consumer confidence is set to improve slightly in January, survey data from the market-research group GfK showed. The forward-looking consumer sentiment index rose to 10.8 for January from 10.7 in December. The score was forecast to remain unchanged at 10.7. GfK said the score suggests that consumer climate can increase once more and will have a successful start in 2018. Among components, economic and income expectations strengthened in December, while propensity to buy weakened from November. The economic expectations index rose 0.9 points to 45.2 in December. This was its highest since July 2014. After falling for three months, the income expectations index climbed 6.4 points to 54.3. On the other hand, the propensity to buy dropped 1.4 points to 57.1 in December. (RTT News) Page 7 of 8
10. 26-Dec-17 Share Buy-Back : 22 December 2017 Company Bought Back Price (RM) Hi/Lo (RM) 50,000 50,000 32,700 300,000 5,000 18,000 14,000 18,000 1.42 0.995/0.985 0.36 0.90 0.835/0.83 0.455/0.435 2.58/2.57 1.03/1.02 1.45/1.41 0.995/0.98 0.37/0.36 0.905/0.89 0.835/0.83 0.455/0.435 2.65/2.56 1.03/1.02 E&O KPJ LEESK MALAKOF PENERGY SAUDEE SCGM UNIMECH Total Treasury Shares 22,463,747 16,537,000 3,245,600 1,324,400 807,800 18,000 318,400 6,211,810 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 8 of 8
11. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company Share Price Target Price (RM) (RM) BETA EPS (sen) PER (X) Div Yield (%) FY17 FY18 FY17 FY18 FY17 52weeks 52weeks % Chg FY18 High Price % Chg Low Price % Chg YTD 22-Dec-17 AUTOMOBILE BAUTO 2.18 2.50 0.77 10.2 14.3 21.4 15.2 5.3 5.3 2.24 -2.7 1.84 18.5 MBMR 2.17 2.32 0.93 20.7 23.2 10.5 9.4 1.9 2.1 2.60 -16.5 2.01 8.0 2.3 1.4 PECCA 1.50 1.69 na 7.7 11.1 19.4 13.5 3.3 3.7 1.70 -11.8 1.28 17.2 -5.7 SIME 2.10 1.97 1.37 11.8 12.0 17.9 17.5 11.0 1.4 2.55 -17.6 1.84 14.3 13.6 UMW 5.08 4.37 1.32 -0.4 19.2 na 26.4 0.0 2.0 6.08 -16.4 4.09 24.1 20.3 BANKS & FINANCIAL SERVICES ABMB 4.07 4.20 1.43 33.1 30.6 12.3 13.3 3.9 3.9 4.49 -9.4 3.62 12.4 9.4 AFFIN 2.31 2.50 0.87 23.5 24.2 9.8 9.5 3.5 3.5 2.98 -22.3 2.22 4.0 -2.5 AMBANK 4.33 5.10 1.24 43.9 48.6 9.9 8.9 4.1 4.2 5.70 -24.0 4.06 6.7 0.5 CIMB 6.49 7.00 1.62 48.7 50.9 13.3 12.7 3.8 3.9 7.08 -8.3 4.49 44.5 43.9 HLBANK 16.64 17.50 0.69 104.9 114.2 15.9 14.6 2.7 2.7 17.08 -2.6 13.02 27.8 23.3 MAYBANK 9.48 9.70 1.00 68.4 70.9 13.9 13.4 5.3 5.3 9.86 -3.9 7.74 22.5 15.6 PBBANK 20.70 23.60 0.64 137.2 142.4 15.1 14.5 2.7 2.8 21.08 -1.8 19.60 5.6 5.0 RHBBANK 4.93 5.20 1.66 50.6 52.2 9.7 9.5 3.0 3.0 5.59 -11.8 4.62 6.7 4.7 BURSA 9.97 11.10 0.85 40.2 39.0 24.8 25.6 3.4 3.4 10.98 -9.2 8.08 23.4 14.3 1.9 Note: BURSA proposed bonus issue of shares on the basis of 1 for 2. Ex-Target price RM7.04 CONSTRUCTION GADANG 1.07 1.73 0.67 15.2 14.3 7.0 7.5 2.8 2.8 1.37 -21.9 1.01 5.9 GAMUDA 4.99 6.00 0.91 28.5 34.5 17.5 14.5 2.4 2.4 5.52 -9.6 4.58 9.0 4.4 IJM 2.93 2.89 0.79 15.3 13.7 19.2 21.4 2.6 3.2 3.61 -18.8 2.71 8.1 -8.4 PESONA 0.49 0.55 1.00 3.5 5.8 13.9 8.4 3.1 3.1 0.74 -34.0 0.44 11.5 -19.8 SENDAI 0.88 0.58 1.32 8.2 9.6 10.6 9.2 1.1 1.1 1.39 -37.1 0.51 73.3 52.2 SUNCON 2.41 2.65 0.51 11.3 14.7 21.3 16.4 2.3 2.3 2.44 -1.2 1.65 46.1 41.8 WCT 1.65 1.64 1.01 11.5 12.6 14.3 13.1 1.8 1.8 2.48 -33.3 1.46 13.0 -4.0 LITRAK 5.60 6.26 0.32 41.9 45.6 13.4 12.3 4.5 4.5 6.15 -8.9 5.55 0.9 -4.8 ANNJOO 3.76 4.40 1.35 41.2 45.3 9.1 8.3 4.3 5.8 3.98 -5.5 2.14 75.7 73.3 CHINHIN 1.22 1.49 1.21 5.7 12.4 21.3 9.8 2.5 4.1 1.49 -18.1 0.86 42.7 40.2 ENGTEX 1.11 1.38 0.62 12.9 14.2 8.6 7.8 1.1 3.7 1.52 -27.0 1.08 2.8 -8.3 CARLSBG 15.36 18.06 0.77 79.3 86.2 19.4 17.8 5.1 5.6 16.00 -4.0 13.90 10.5 10.3 HEIM 18.74 19.14 0.46 79.6 84.0 23.5 22.3 3.8 4.0 19.58 -4.3 15.78 18.8 14.4 AEON 1.72 1.97 0.39 4.7 6.7 36.4 25.7 2.0 2.3 2.70 -36.3 1.64 4.9 -33.1 AMWAY 7.32 8.18 0.37 35.7 43.9 20.5 16.7 4.1 5.2 8.18 -10.5 7.04 4.0 -0.1 F&N 26.38 27.41 0.18 102.6 155.7 25.7 16.9 2.2 2.3 26.38 0.0 22.64 16.5 12.4 Building Materials CONSUMER Brewery Retail HUPSENG 1.10 1.25 0.42 5.2 5.4 21.4 20.2 4.1 4.1 1.28 -14.1 1.08 1.9 -4.4 JOHOTIN 1.16 1.48 0.68 9.7 12.5 11.9 9.3 3.9 4.3 1.76 -34.1 1.16 0.0 -6.5 NESTLE 102.00 120.50 0.40 292.7 330.1 34.8 30.9 2.7 2.9 102.40 -0.4 74.12 37.6 30.4 PADINI 5.25 4.67 0.78 23.5 27.0 22.4 19.5 2.2 2.4 5.50 -4.5 2.26 132.2 106.7 POHUAT 1.82 2.35 0.72 26.2 25.3 7.0 7.2 4.4 4.4 2.08 -12.5 1.66 9.6 5.2 QL 4.34 3.26 0.28 12.1 12.8 35.9 33.8 1.0 1.0 4.39 -1.1 3.26 33.3 30.3 SIGN 0.72 0.92 1.06 6.7 6.9 10.6 10.3 3.5 3.5 1.07 -33.2 0.71 1.4 -10.1 36.44 52.08 1.28 198.6 187.4 18.3 19.4 5.5 5.5 51.04 -28.6 34.06 7.0 -17.5 GENTING 9.10 11.53 1.51 48.7 54.4 18.7 16.7 1.5 1.8 10.00 -9.0 7.68 18.5 14.5 GENM 5.59 6.51 1.61 18.7 27.0 29.8 20.7 1.4 1.6 6.38 -12.4 4.47 25.1 23.7 BJTOTO 2.26 3.34 0.79 18.3 21.5 12.3 10.5 6.2 7.1 3.01 -24.9 2.25 0.4 -23.6 LUSTER 0.11 0.15 1.98 0.4 0.4 28.9 29.1 0.0 0.0 0.16 -34.4 0.05 110.0 110.0 Tobacco BAT GAMING Casino NFO HEALTHCARE Hospitals/ Pharmaceutical CCMDBIO 2.41 2.70 0.67 14.0 15.0 17.2 16.0 3.9 4.1 2.46 -2.0 1.90 26.8 21.7 IHH 5.81 6.40 0.73 6.7 11.9 86.3 48.9 0.5 0.5 6.45 -9.9 5.42 7.2 -8.5 KPJ 0.99 1.09 0.43 3.2 3.6 30.7 27.7 1.8 2.0 1.14 -13.6 0.90 9.4 -5.7 HARTA 10.74 7.30 0.89 19.4 25.8 55.4 41.6 0.8 1.1 11.40 -5.8 4.53 137.1 122.4 KOSSAN 8.30 8.80 0.20 29.1 38.3 28.6 21.7 1.8 2.3 8.50 -2.4 5.62 47.7 25.9 SUPERMX 2.00 1.80 0.34 10.2 15.3 19.5 13.1 1.6 2.6 2.18 -8.3 1.69 18.3 -5.2 TOPGLOV 7.90 7.00 -0.02 26.2 33.7 30.2 23.4 1.8 2.1 8.19 -3.5 4.56 73.2 47.7 KAREX 1.29 1.00 0.41 2.8 2.8 46.3 46.7 1.6 0.5 2.52 -48.8 1.20 7.5 -45.3 SCIENTX 8.80 9.84 0.40 52.3 68.2 16.8 12.9 1.8 2.4 9.85 -10.7 6.68 31.7 31.3 SKPRES 2.16 2.20 0.50 8.3 10.4 26.1 20.8 1.9 2.4 2.32 -6.9 1.24 74.2 67.4 ASTRO 2.61 3.10 1.15 13.2 14.0 19.7 18.7 4.8 5.0 2.94 -11.2 2.45 6.5 0.4 MEDIA PRIMA 0.59 0.45 0.54 -7.6 -3.8 na na 0.0 0.0 1.28 -54.3 0.58 0.9 -49.1 STAR 1.38 1.25 0.84 5.6 6.7 24.5 20.5 30.4 8.7 2.22 -37.8 1.31 5.3 -29.2 Rubber Gloves INDUSTRIAL MEDIA
12. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company Share Price Target Price (RM) (RM) BETA EPS (sen) FY17 PER (X) Div Yield (%) FY18 FY17 FY18 FY17 52weeks 52weeks % Chg FY18 High Price % Chg Low Price % Chg YTD OIL & GAS DNEX 0.47 0.72 1.32 3.5 4.2 13.6 11.2 2.1 2.1 0.69 -31.9 0.25 91.8 84.3 LCTITAN 4.68 6.66 na 42.8 63.4 10.9 7.4 4.9 5.3 6.53 -28.3 4.14 13.0 -28.0 -18.6 MHB 0.75 0.78 1.66 -2.0 -0.5 na na 0.0 0.0 1.16 -35.8 0.63 19.2 MISC 7.13 6.56 1.07 57.2 46.8 12.5 15.2 4.2 4.2 7.90 -9.7 6.89 3.5 -3.0 PANTECH 0.64 0.69 1.21 4.0 6.1 16.0 10.4 2.8 4.3 0.74 -14.2 0.44 46.0 42.7 PCHEM 7.60 8.05 0.98 52.7 49.8 14.4 15.3 3.0 2.9 7.81 -2.7 6.80 11.8 8.9 SAPNRG 0.71 1.25 2.49 6.6 -6.5 10.7 na 0.0 0.0 2.10 -66.2 0.70 1.4 -56.2 SERBADK 3.09 3.40 na 22.9 25.7 13.5 12.0 2.2 2.5 3.29 -6.1 1.51 104.6 106.0 UMWOG 0.29 0.51 1.65 -1.7 0.4 na 71.8 0.0 0.0 0.92 -68.6 0.27 7.4 -66.1 UZMA 1.31 1.56 1.05 11.6 13.2 11.3 9.9 0.0 0.0 1.98 -33.8 1.27 3.1 -22.9 FGV 1.70 2.01 1.75 2.1 3.7 81.3 45.9 2.9 2.9 2.18 -22.0 1.47 15.6 9.7 IJMPLNT 2.80 2.69 0.24 12.3 9.1 22.8 30.7 2.5 2.9 3.60 -22.2 2.70 3.7 -17.6 IOICORP 4.55 4.12 1.17 17.3 21.0 26.2 21.6 2.1 3.5 4.81 -5.4 4.31 5.6 3.4 KFIMA 1.58 1.89 0.52 19.9 13.3 7.9 11.9 5.7 5.7 1.96 -19.4 1.56 1.3 -7.1 KLK 24.68 26.18 0.78 100.5 120.7 24.6 20.4 2.0 2.4 25.50 -3.2 23.00 7.3 2.8 SIMEPLT 5.43 6.25 na 17.6 21.0 30.9 25.8 2.6 2.6 5.65 -3.9 4.58 18.6 -2.9 UMCCA 6.49 6.73 0.40 37.5 22.8 17.3 28.5 3.5 2.6 7.08 -8.3 5.67 14.4 8.7 GLOMAC 0.59 0.50 0.63 1.4 3.0 40.8 19.9 4.6 3.4 0.75 -20.8 0.58 1.7 -15.1 HUAYANG 0.61 0.59 0.78 17.3 1.8 3.5 33.1 6.6 0.8 1.21 -50.0 0.60 1.7 -46.5 IBRACO 0.88 0.92 na 3.3 9.1 27.0 9.6 2.3 4.5 1.02 -13.7 0.76 16.6 -12.0 IOIPG 1.82 2.02 0.67 18.9 16.5 9.6 11.0 3.3 3.3 2.22 -18.0 1.79 1.7 -6.6 MAHSING 1.50 1.69 1.04 13.8 13.0 10.8 11.5 4.3 4.3 1.64 -8.5 1.38 8.7 4.9 SIMEPROP 1.41 1.54 na 7.0 9.2 20.1 15.3 0.0 1.4 1.52 -7.2 1.04 35.6 0.0 SNTORIA 0.70 0.85 0.34 6.8 8.3 10.2 8.4 0.0 1.4 0.91 -23.6 0.60 15.8 -4.4 13.3 PLANTATIONS PROPERTY Note: SNTORIA proposed bonus issue of warrants & right issue of shares. For more details please refer to 25.09.17 report. SPB 5.01 4.83 0.74 17.6 21.2 28.5 23.7 2.4 2.4 5.50 -8.9 4.32 15.9 SPSETIA 3.34 3.77 0.81 21.3 21.3 15.7 15.7 3.6 3.6 4.38 -23.8 3.03 10.3 9.6 SUNWAY 1.68 1.74 0.79 11.5 11.9 14.6 14.1 3.0 3.0 1.96 -14.2 1.27 32.4 30.7 SUNREIT 1.72 1.87 0.73 9.2 10.0 18.6 17.1 5.3 5.8 1.81 -5.0 1.64 4.9 0.0 CMMT 1.43 1.72 0.40 8.1 8.6 17.7 16.6 5.9 6.3 1.72 -16.9 1.39 2.9 -6.5 -34.7 REIT POWER & UTILITIES MALAKOF 0.90 1.16 0.66 6.3 6.0 14.2 14.9 7.8 7.8 1.42 -37.0 0.88 2.3 PETDAG 24.24 22.08 0.50 102.8 105.1 23.6 23.1 3.2 3.2 25.70 -5.7 21.00 15.4 1.8 PETGAS 17.10 19.10 0.95 89.1 98.8 19.2 17.3 3.9 4.0 21.76 -21.4 15.82 8.1 -19.7 TENAGA 14.98 17.38 0.69 131.6 129.9 11.4 11.5 3.1 3.1 15.68 -4.5 13.00 15.2 7.8 YTLPOWR 1.25 1.17 0.81 8.2 9.7 15.2 13.0 4.0 4.0 1.50 -16.7 1.11 12.6 -14.4 TELECOMMUNICATIONS AXIATA 5.39 5.75 1.33 14.3 16.0 37.7 33.7 1.3 1.5 5.47 -1.5 4.24 27.1 14.2 DIGI 4.80 5.20 0.78 19.5 20.0 24.6 24.0 4.1 4.2 5.19 -7.5 4.36 10.1 -0.6 MAXIS 6.00 6.10 0.74 26.0 26.2 23.1 22.9 3.3 3.3 6.60 -9.1 5.48 9.5 0.3 TM 6.50 7.20 0.62 22.6 23.2 28.8 28.0 3.1 3.2 6.69 -2.8 5.81 11.9 9.2 94.5 TECHNOLOGY Semiconductor & Electronics ELSOFT 2.73 2.70 0.62 11.3 15.0 24.2 18.2 2.9 3.8 2.95 -7.5 1.36 100.1 IRIS 0.17 0.25 1.84 -1.3 0.6 na 30.7 0.0 0.0 0.22 -22.7 0.10 70.0 54.5 INARI 3.41 3.05 0.97 11.2 14.2 30.5 24.0 2.9 2.9 3.48 -2.0 1.61 112.2 105.8 MPI 12.70 15.40 0.50 89.5 105.5 14.2 12.0 2.1 2.5 14.52 -12.5 7.38 72.1 71.4 UNISEM 3.60 3.85 1.10 23.5 27.1 15.3 13.3 3.3 3.3 4.25 -15.3 2.32 55.2 52.5 TRANSPORTATION Airlines AIRASIA 3.31 3.83 1.09 53.1 38.3 6.2 8.7 1.2 1.5 3.59 -7.8 2.16 53.2 44.5 AIRPORT 8.55 8.47 1.31 19.6 19.7 43.6 43.3 1.2 1.2 9.45 -9.5 5.91 44.7 41.1 Freight & Tankers PTRANS 0.28 0.44 na 2.1 2.3 13.6 12.3 2.5 2.5 0.38 -26.7 0.14 98.7 92.5 TNLOGIS 1.31 1.80 1.18 12.0 13.6 10.9 9.6 3.3 3.8 1.83 -28.5 1.29 1.6 -16.0 WPRTS 3.74 4.06 0.88 17.1 16.8 21.8 22.2 3.4 3.4 4.36 -14.2 3.34 12.0 -13.0 SNAPSHOT OF FOREIGN STOCKS UNDER COVERAGE Company Share Price Target Price (S$) (S$) Beta EPS (cent) FY17 FY18 PER (X) FY17 FY18 Div Yield (%) FY17 52week 52week % Chg FY18 High Price % Chg Low Price % Chg YTD BANKS & FINANCIAL SERVICES DBS 24.55 23.30 1.25 172.7 189.1 14.2 13.0 2.4 2.4 -3.2 17.2 43.15 41.6 0.0 OCBC 12.24 13.50 1.20 95.5 104.0 12.8 11.8 5.7 6.7 -2.8 8.9 8.84 37.2 0.0 UOB 25.86 26.90 1.07 200.8 215.4 12.9 12.0 2.7 2.7 -3.7 20.1 28.98 26.8 0.0 PLANTATIONS WILMAR 3.09 3.63 0.85 25.6 29.9 12.1 10.3 2.3 2.6 -22.8 3.1 0.98 -13.9 0.0 IFAR 0.37 0.53 0.98 4.9 5.2 7.6 7.1 3.2 3.4 -36.2 0.4 1.37 -29.5 0.0 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. Technical View Tuesday , December 26, 2017 THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Weekly Technical Outlook FBM KLCI: 1,760.24 (+7.17, +0.41%) Chartist : Stephen Soo Tel: +603-2167 9607 stsoo@ta.com.my www.taonline.com.my Major Hurdle from 1,793/1,796 in Last Week of 2017 Despite cautious undertone on the broader market last week, the blue-chip benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) managed a robust V-shape rebound from profit-taking on the previous week’s steep window-dressing gains, with key consumer, banking, plantation, oil & gas and utilities heavyweights contributing most of the rise. For the week, the blue-chip benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) added 7.17 points, or 0.4 percent to 1,760.24, with Nestle (+RM2.00), Petronas Gas (+86sen), HLFG (+60sen), TM (+40sen) and KLK (+22sen) representing most to the index’s gains. Daily traded volume and value moderately improved to 2.44 billion shares worth RM2.19 billion, compared to the 2.21 billion shares and RM2.73 billion respectively the previous week. The FBM KLCI edge lower on Monday, as mild profit taking activity on selected blue chips weighed on the market, ignoring regional strength on expectations U.S. lawmakers will pass the long-awaited U.S. tax cuts aimed at boosting growth in the world’s largest economy. The KLCI fell 1.43 points to settle at 1,751.64, off a high of 1,755.20 and low of 1,747.62, as losers beat gainers 477 to 400 on cautious turnover totaling 2.40bn shares worth RM2.16bn. The local benchmark slumped the next day as blue chips fell on profit-taking following last week’s steep window-dressing gains and after Tenaga’s share price adjusted lower after going ex-dividend. The KLCI lost 14.69 points to close at 1,736.95, off an early high of 1,744.39 and low of 1,732.93, as losers swarmed gainers 576 to 319 on very robust trade totaling 3.18bn shares worth RM2.91bn. Blue chips recovered on Wednesday to reverse some of the previous day’s steep losses after local fund buying on key banking stocks helped lift the benchmark off depressed levels. The KLCI rose 9.68 points to end at 1,746.63, off an early low of 1,735.44 and high of 1,751.95, as gainers led losers 490 to 396 on lower turnover of 2.53bn shares worth RM2.26bn. The local benchmark recovered further the following day helped by gains in heavyweight oil & gas and consumer names, but the broader market ended mixed in cautious trade. The KLCI added 4.58 points to settle at 1,751.21, off an earlier low of 1,744.21 and high of 1,752.25, but losers beat gainers 481 to 398 on total turnover of 2.47bn shares worth RM2.06bn. On Friday, due to the cautious market undertone, sideways trade persisted with most investors staying sidelined ahead of the long Christmas weekend break. On the other hand, the index spiked up on late buying in selected heavyweights to gain 9.03 points and close at the day’s high of 1,760.24, off an early low of 1,748.49, as losers edged gainers 442 to 400 on much lower turnover totaling 1.63bn shares worth RM1.54bn. Trading range for the local blue-chip benchmark index last week moderated to 27.31 points, compared to the large 42.7 points range the previous week, as blue chips dipped for profittaking correction from a two-month high. For the week, the FBM-EMAS Index rose 72.91 points, or 0.6 percent to 12,661.75, but the FBM-Small Cap Index eased 13.98 points, or 0.1 percent to close the week at 16,788.70. Page 1 of 3
14. 26-Dec-17 Due to last week ’s V-shape rebound, the daily slow stochastic momentum indicator for the FBM KLCI has hooked up back into overbought territory (Chart 1), while the weekly indicator recovered back into the neutral region following the previous week’s buy signal. The 14-day Relative Strength Index (RSI) indicator steadied with a positive reading of 63.48 as of last Friday, while the 14-week RSI improved to a more positive reading of 55.43. Chart 1 On trend indicators, the daily Moving Average Convergence Divergence (MACD) showed upside resilience following last week’s rebound from a brief pullback, while the weekly MACD indicator’s signal line turned higher and is poised to trigger a buy on further strength (Chart 2). The +DI and –DI lines on the 14-day Directional Movement Index (DMI) trend indicator retained a buy mode, while the ADX line is beginning to turn upwards to confirm an emerging trend. Chart 2 Page 2 of 3
15. 26-Dec-17 Conclusion Last week ’s V-shape rebound from a brief profit-taking spell turned momentum and trend indicators for the FBM KLCI back into positive mode, signaling good potential for further window-dressing upside in this last trading week ahead of the year-end. Nonetheless, while buying momentum is likely to concentrate on blue-chip heavyweights supporting the index higher, the broader market should continue to lack trading commitments with market players sidelined ahead of the year-end holidays. On the index, it must sustain above the key 200-day moving average level, currently at 1,756, to boost upside momentum and enable challenge of stronger upside hurdles from 1,765 and 1,782, with the double-top peak of 1,793 and 1,796 acting as major resistance. Immediate uptrend supports are at 1,743 and 1,735, the respective 10 and 50-day moving averages, followed by 1,729, the 30-day ma, while crucial support will be the 5 Dec pivot low of 1,708. Stock-wise, heavyweight oil & gas, plantation and banking stocks may see year-end windowdressing upside in the last trading week of the year, while oil & gas and construction related shares like Bumi Armada, Dialog, UEM Sunrise and WCT Holdings may also highlight rotational buying interest. Chart 3 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 Tuesday, December 26, 2017, the chartist, Stephen Soo, who prepared this report, has interest in the following securities covered in this report: (a) nil Kaladher Govindan – Head of Research TA SECURITIES HOLDINGS BERHAD (14948-M) A Participating Organisation of Bursa Malaysia Securities Berhad Menara TA One 22 Jalan P. Ramlee 50250 Kuala Lumpur Malaysia Tel: 603 – 2072 1277 Fax: 603 – 2032 5048 www.ta.com.my Page 3 of 3
16. INITIATE COVERAGE Tuesday , December 26, 2017 FBMKLCI: 1,760.24 Sector: Plantation THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* TP: RM2.10 (+27%) TSH Resources Berhad Last Traded: RM1.65 Young and Strong with Bright Future Angeline Chin BUY Tel: +603-2167 9611 angelinechin@ta.com.my We initiate coverage on TSH with a BUY rating and a target price of RM2.10, based on CY18 PER of 22x. We are bullish on the long-term outlook for TSH given its continuous planting effort, expected higher FFB yield from Wakuba seeds and lower production costs when more young oil palm trees mature and reach peak production. We expect the group’s FY17/18/19 net profit to grow at 29%/9.3%/3.2%. The group is currently trading at a forward FY18 PER of 17.3x, which is below its 5year average rolling forward PER of 25x. www.taonline.com.my Share Information Bloomberg Code TSH MK Stock Code 9059 Listing Main Market Share Cap (mn) 1380.7 Market Cap (RMmn) 2,278.2 52-wk Hi/Lo (RM) 1.94/1.56 12-mth Avg Daily Vol ('000 shrs) 257 Estimated Free Float (%) 32.7 Beta vs. FBMKLCI 0.66 Investment Case Explosive FFB Production Growth. With its current tree age profile averaging approximately 8.2 years. TSH’s boasts one of the youngest plantation estates in the industry. We expect a 3-year FFB production CAGR of 13% for FY16-FY19. Major Shareholders (%) Growing in Indonesia. Most of TSH’s plantable reserves are located in Indonesia (94%). It is one of the earliest foreign investors in the Indonesian plantation sector and, therefore, able to scoop up higher quality land. The group had never stopped from increasing its plantation land bank. Forecast Revision (%) Young and Ambitious. TSH has been very rigorous with its planting effort. It has committed itself in producing new fertile oil palm ramets, Wakuba. Based on field trial data, Wakuba ramets promise FFB yield of more than 35 tonnes/ha and OER as high as 26%. Financial Indicators Tan Aik Pen - 12.22% EPF - 6.61% Tunas Lestari - 6.19% Forecast Revision FY17 Forecast and Assumptions. We project TSH’s FY16-19 earnings to grow at CAGR of 13.3%. Our earnings projections are premised on the following assumptions: FY18 - - 117.6 128.5 Consensus 116.8 131.4 TA's / Consensus (%) 100.6 97.8 Net profit (RMm) Previous Rating Net Debt / Equity (%) CFPS (sen) NA FY17 FY18 83.1 82.2 0.6 1.2 >100 >100 ROE (%) 7.5 7.7 ROA (%) 3.2 3.3 NTA/Share (RM) 1.3 1.4 Price/NTA (x) 1.2 1.2 Price / CFPS (x) Share Performance (%) FY17/FY18/FY19 FFB production growth of 18%/12%/10% Average CPO price of RM2,800 for FY17/FY18/FY19 FYE Dec 31 (RMmn) FY15 FY16 FY17E FY18F FY19F Revenue 799.5 872.3 1063.2 1185.2 1247.6 EBITDA (126.4) 137.1 256.3 273.0 277.9 (%) Pretax profit Reported Net Profit Core Net Profit (15.8) 15.7 24.1 23.0 22.3 (85.8) 113.6 188.9 206.4 208.0 (105.5) 57.9 117.6 128.5 132.6 77.9 91.1 117.6 128.5 132.6 Reported EPS (sen) (7.8) 4.3 8.7 9.6 9.9 Core EPS (diluted) (sen) 5.8 6.8 8.7 9.6 9.9 Core EPS growth (%) (44.7) 17.0 29.0 9.3 3.2 PER (x) 28.5 24.4 18.9 17.3 16.7 GDPS TSH 1 mth 0.0 2.5 3 mth (0.6) (0.5) (6.2) (1.1) 6 mth Earnings Summary EBITDA margin Price Change (sen) 2.0 2.0 2.2 2.4 2.5 Div yield (%) 1.2 1.2 1.3 1.4 1.5 Core ROE (%) 6.0 6.4 7.5 7.7 7.5 12 mth (11.8) FBM KLCI 8.8 (12-Mth) Share Price relative to the FBMKLCI Source: Bloomberg Page 1 of 14
17. 26-Dec-17 INVESTMENT CASE Concentrating on Upstream Operations Growing Within Limits . TSH has been concentrating on upstream productions (FFB & CPO), which traditionally fetch higher margins than the downstream productions. To grow its upstream business further, TSH has been disposing of its non-core assets to fund future land acquisitions and new planting programme. Earlier, it has disposed of its 16.17% stake in Pontian United Plantation for RM195.8mn and used the proceeds for new planting in Indonesia. Young Plants Start Yielding Returns. TSH is one of the top palm oil producers in Malaysia, who has a high percentage of immature plants (37%), the highest among peers (Refer to Figure 2). In a normal palm oil lifecycle, FFB production will start escalating after a plant hits 7 years old. It will have its peak production period in year 7 to 18 before heading for gradual decline. As such, based on the group’s plantation age profile, FFB production is expected to accelerate over the next few years as 37% of the immature plant would start to generate higher yield, more than offset the expected decline in harvest from “old” palm tree (17% of total plantation). Specifically, we expect the Indonesian operations to perform better in FY17 and FY18 as more plantations will reach maturity and attain better economies of scale, coupled with the higher FFB yield from existing matured area. Historically, the FFB production tends to double every three years. Figure 1: The Group’s Plantation Age Profile (FY16) ≥16 years 17% Immature 37% 9-15 years 19% 4-8 years 27% Source: Company, TA Research Page 2 of 14
18. 26-Dec-17 Figure 2 : Mature vs. Immature Breakdown 14% 14% 80% 86% 86% 86% 90% 77% 86% 73% 84% 71% FGV Sime Plant IJM Plant KLK United Plant IOI Corp Hap Seng Plant 37% 14% TH Plant 80% 20% 10% 23% 14% 27% 16% 29% UMCCA 90% Genting Plant 100% 70% 60% 50% 40% 30% 63% 20% 10% TSH 0% Mature Immature Source: Company, TA Research FFB to Grow 10%-18% in FY17-19. FFB production growth is expected to accelerate in FY17 and FY18 due to new areas coming into maturity in Indonesia. The group registered a FFB production decline of 8% to 595.8k tonnes in FY16 due to the El Nino weather conditions. However, the total production is expected to grow by 18% in FY17 to 701k tonnes. Note that FFB production for the 1st 11 months of 2017 stood at 658k tonnes. The growth was mainly driven by Indonesia estates (+25%) and Malaysia (+3%). Meanwhile, the FFB production is expected to grow by 12% and 10% in FY18 and FY19 respectively, on the back of higher yield. Coping with Rising FFB. Presently, TSH has 6 palm oil mills (3 in Sabah, 1 in Sumatra and 2 in Kalimantan) with a total FFB processing capacity of 2.1mn tonnes per annum. Those mills in Sabah are mainly used to process outside crops while the mills in Kalimantan are used for internal crops. TSH is currently building another small mill in Sumatra with an annual capacity of 45k tonnes per annum, which will commence operation in 2018. According to management, the existing mill in Sumatra is too far and not strategic to process FFB from one young estate. Therefore, building a new mill would help to save transportation cost and refine more FFB when more trees come into maturity. Figure 3: Total FFB Processed vs. Utilization Rate 1,800,000 FFB Processed (LHS) Utilisation rate (RHS) 90% 1,600,000 80% 1,400,000 70% 1,200,000 60% 1,000,000 50% 800,000 40% 600,000 30% 400,000 20% 200,000 10% 0 0% FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18F FY19F Source: Company, TA Research Page 3 of 14
19. 26-Dec-17 Figure 4 : TSH Oil Palm Age Profile (FY16) Source: Company, TA Research Figure 5: FFB Harvested Growth 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18F FY19F Source: Company, TA Research Expansion in Indonesia Targeting Indonesia. TSH has a substantial presence in Kalimantan. In fact, it is one of the first foreign palm oil companies to venture into the plantation sector in the country. Benefiting from first-mover advantage, TSH successfully procured prime land banks at discounted prices (at the lower end of a few hundred USD per ha). 58% Land Unplanted. To expand further its plantation assets in Indonesia, TSH acquired another 14,000 ha of land in Indonesia in FY14 for RM43mn (9,000 in July, 5,000 in Dec). Note that the group has been constantly on a lookout for fresh land bank, particularly in Kalimantan, to become a significant regional player. The group has 57.4k ha unplanted land bank as at 31 Dec 2016, which provides further room for the group to expand its plantation footprint. The planted area in Indonesia accounted for 85% of the group’s total planted area. Speeding Up New Planting Programmes in FY18 and FY19. Of the total 57.4k ha unplanted landbank in Indonesia, management guided that 60% of the land is plantable for nucleus estates, 20% allocated for plasma and another 20% for infrastructure. Management had already slowed down new planting in Page 4 of 14
20. 26-Dec-17 FY16 and FY17 to a few hundred ha per annum to conserve more cash and reduce its net gearing level (currently stood at 0.8x). However, due to the group’s aggressive planting of up to 3k-4k ha per annum in the past, it would still be able to enjoy double-digit production growth for the next two years. According to management, the company will speed up the new planting programmes again in FY18 and FY19, targeting 1k ha per annum. Figure 6: TSH Land bank (as at 31 December 2016) 100,000 Sabah Indonesia 90,091 90,000 80,000 70,000 60,000 54,163 50,000 35,928 40,000 30,000 20,000 10,000 6,174 9,434 3,260 0 Planted Unplanted Total Source: Company, TA Research The Potential of Wakuba Ramets R&D Improved OER. Through rigorous efforts and investment of more than RM40mn in R&D, TSH has successfully developed Wakuba through gene selection of high quality palm oil ramets. When comparing with Dura x Pisifera (DxP), field trials indicated that Wakuba’s could potentially deliver OER that is some 4 percentage point higher, which means oil yield could exceed the industry average. Wakuba seed typically has larger mesocarp (Figure 7) and therefore, when processed, gives higher volume of oil compared with traditional seeds. On the flip side, the larger mesocarp means smaller palm kernel. Thus, the palm kernel extraction rate (KER) is lower than the traditional seeds (about 5%). That said, palm kernel is treated as a by-product and hence, the gain in oil yield is far more beneficial, in our view. Note too that the planting cost of Wakuba ramet is slightly higher compared to a common DxP seed, which is about RM20k/ha. To-date, TSH has planted 3,000 ha with Wakuba ramets since 2014. The first batch of the commercial Wakuba planting already reached maturity by the end of 2016. Management targets to plant about 50% of its new planting in Indonesia with the Wakuba ramets. Nonetheless, the commercial planting yield is expected to be slightly lower than the ideal yield, but will definitely higher than the DxP planting. Figure 7: Wakuba ramets vs. Common DxP seeds Source: Company, TA Research Page 5 of 14