Bursa Malaysia Daily Market Report - 3 August

Transcription

1. Thursday , 03 August, 2017 For Internal Circulation Only TA RESEARCH’S ‘DAILY COMPILED REPORTS’ News 1. Daily Market Commentary 2. Daily Brief Fundamental Reports 1. 2. 3. 4. Chin Hin Bhd: Market Leader with Strong Growth Potential Genting Berhad: Regained Some Market Share in Singapore Glomac Bhd: Proposed 1-for-10 Bonus Issue Serba Dinamik Holdings Berhad: Growing in Choppy Waters Technical Reports 1. Daily Technical Stock Picks 2. Daily Stock Screen 3. Foreign Technical Stock Watch (AUS, HK & FSSTI) Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. for TA SECURITIES HOLDINGS BERHAD (14948-M) MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 (A Participating Organisation of Bursa Malaysia Securities Berhad) Kaladher Govindan – Head of Research
2. Daily Note Daily Market Commentary (A Participating Organisation of Bursa Malaysia Securities Bhd) Menara TA One, 22 Jalan P Ramlee, 50250 Kuala Lumpur Tel : 603 - 2072 1277. Fax : 603 - 2032 5048 Thursday, 03 August 2017 TA Research e-mail : taresearch@ta.com.my For Internal Circulation Only Review & Outlook KLSE Market Statistics (02.08.2017) (mil) Main Market 886.4 Warrants 309.7 ACE Market 600.0 Bond 6.5 ETF 0.0 Total 1,802.6 Off Market 33.0 Volume +/-chg (RMmn) -186.8 1,533.3 43.0 49.6 123.5 164.5 1.4 0.9 -0.01 0.0 1,748.4 -17.8 251.7 Value +/-chg -519.2 34.1 -3.7 0.1 -0.01 147.9 Major Indices Index +/- chg Malaysia FBMKLCI FBMEMAS FBMSCAP August Futures Other Markets DOW JONES NASDAQ (US) FTSE (UK) NIKKEI (JAPAN) KOSPI (KOREA) HANG SENG (HK) FSSTI (S'PORE) SET (BANGKOK) JCI (JAKARTA) SHANGHAI SHENZHEN AUSTRALIA (mn) 20.0 3.8 2.2 2.2 2.0 1.0 1.0 Up Down 280 323 60 68 40 50 3 5 1 0 384 446 % chg % YTD chg 1,770.61 12,606.66 17,228.37 1,767.50 5.48 36.21 5.17 0.50 0.31 0.29 0.03 0.03 7.85 9.94 17.08 8.07 22,016.24 6,362.65 7,411.43 20,080.04 2,427.63 27,607.38 3,348.80 1,580.54 5,824.25 3,285.06 1,869.32 5,744.20 52.32 -0.29 -12.23 94.25 4.67 67.15 10.60 4.09 19.04 -7.58 -13.15 -28.17 0.24 0.00 -0.16 0.47 0.19 0.24 0.32 0.26 0.33 -0.23 -0.70 -0.49 11.40 18.20 3.76 5.05 19.80 25.48 16.25 2.44 9.96 5.85 -5.07 1.38 Off Market MAYBANK JAKS LATITUD LAYHONG MCT BKAWAN TAWIN Value/ Volume 1.73 0.16 0.27 0.15 1.59 0.97 7.63 (RM) @ 9.64 @ 1.42 @ 4.75 @ 0.93 @ 0.90 @ 18.90 @ 11.50 Stocks extended profit-taking consolidation amid lack luster trade Wednesday as weak buying momentum persisted in the absence of positive local leads. Nonetheless, the KLCI posted late gains to settle 5.48 points higher at 1,770.61, off an early low of 1,767.80 and high of 1,771.32, but losers edged gainers 446 to 384 on cautious trade totaling 1.8bn shares worth RM1.75bn. The local market is likely to extend sideways trade given the weak followthrough buying momentum following yesterday's late rebound attempt. Immediate support for the index remains at the 100-day moving average at 1,760, which must hold to prevent further correction to 1,729, a key support level in April, while crucial uptrend support is from the 200-day moving average at 1,711. Immediate resistance stays at the 50-day moving average now at 1,770, next 1,782, followed by the recent peak of 1,796. Any near-term rebound attempts on IHH Healthcare should meet strong profit-taking resistance near the 50%FR (RM6.06), while better chart supports from the 38.2%FR (RM5.88), RM5.78 and the 23.6%FR (RM5.66) should attract bargain hunting interest. Weak technical momentum on IOI Corp implies downside bias towards the 50%FR (RM4.37), with stronger supports seen at RM4.30 and the 38.2%FR (RM4.21), while overhead resistance from the 61.8%FR (RM4.53) is reinforced by the 100-day moving average (RM4.55). News Bites • • • • • • Top 10 KLCI Movers Based on Mkt Cap. • Counter • TENAGA PBBANK SIME IHH CIMB PCHEM AXIATA MAXIS PETGAS GENTING Mkt Cap. (RM’mn) 80,245 79,701 63,860 59,382 55,840 49,105 44,754 42,201 37,121 36,948 Chg (RM) 0.02 0.04 0.01 0.05 0.05 0.05 0.03 0.03 0.02 0.09 Vol. (mn) 5.54 2.63 12.67 14.16 1.64 1.31 1.10 2.65 0.28 1.68 • • • • • Exchange Rate USD/MYR 4.2840 -0.0006 USD/JPY 110.75 0.3000 EUR/USD 1.183 0.0021 Commodities Futures Palm Oil (RM/mt) 2,647.00 -8.00 Crude Oil ($/Barrel) 49.61 0.82 Gold ($/tr.oz.) 1,269.50 -2.10 • • Important Dates CAB - 1:4 Bonus Issue - BI of 138.6m subdivided shares. 1 bonus share for every 4 subdivided shares. Ex-Date: 02/08/2017. Entitlement Date: 04/08/2017. LISTING ON: 07/08/2017. • • Chemical Co of Malaysia Bhd announced a series of proposals ranging from a private placement and land disposal to the distribution of 73.37% equity interest in CCM Duopharma Biotech Bhd to its shareholders. Glomac Bhd proposes to undertake a bonus issue of up to 74.8mn bonus shares on the basis of one bonus share for every 10 existing shares held in the company. Tenaga Nasional Bhd aims to raise RM2.0bn via an auction if Islamic bonds, or sukuk. Prestariang Bhd has been awarded a RM10.0mn contract extension for the distribution and management of Microsoft software licences to public higher education institutions in Malaysia from the Higher Education Ministry. Power Root Bhd is spending UAE7.9mn dirham (RM9.2mn) to raise its stake in its profitable UAE subsidiary. mTouche Technology Bhd is collaborating with Thai software, platform and artificial intelligence technology development company Octa Gravity Co Ltd to enhance its digital media offering in Southeast Asia. IGB Real Estate Investment Trust's net property income for the 2QFY17 grew 1.6% YoY to RM88.0mn, thanks to higher rental recorded in the quarter under review. Censof Holdings Bhd has won a government contract worth RM6.0mn from the Inland Revenue Board of Malaysia for software application development. Puncak Niaga Holdings Bhd announced that its wholly-owned unit Puncak Niaga Construction Sdn Bhd is facing a notice of adjudication for an alleged payment of RM25.41 million to its former sub-contractor Genbina Sdn Bhd. MISC Bhd's wholly-owned unit, Eaglestar Marine Holdings (L) Pte Ltd, has acquired the entire stake of AET Shipmanagement (Singapore) Pte Ltd from AET Tanker Holding Sdn Bhd for US$5.23mn. Petroliam Nasional Bhd's subsidiary PC Carigali Mexico Operations S.A de C.V. has been awarded shallow water Block 6 in Gulf of Mexico's Salina Basin. KUB Malaysia Bhd has received shareholders' nod during its extraordinary general meeting to acquire a 1,534-hectare brownfield oil palm plantation in Sabah. Sarawak Energy Bhd's unit, SEB Power, today signed a joint venture contract with China Gezhouba Group Company Ltd and Untang Jaya Sdn Bhd for the main civil works of the Baleh Hydroelectric Plant. Prasarana Malaysia Bhd has awarded the light rail vehicle work package of Light Rail Transit 3 project worth RM1.6bn to a consortium comprising CRC Zhuzhou Locomotive Co Ltd, Siemens Ltd China and Tegap Dinamik Sdn Bhd. Thong Guan Industries Berhad announced its entry into the restaurant business through the launch of its maiden Marche Movenpick outlet at Pavilion Kuala Lumpur. ADP report showed US private sector employed 178,000 workers in July vs. forecast 180,000. The Trump administration is planning trade measures to force Beijing to crack down on intellectual-property theft and ease requirements that American companies share advanced technologies to gain entry to the Chinese market. DISCLAIMER The information in this report has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. for TA SECURITIES HOLDINGS BERHAD Kaladher Govindan, Head of Research
3. TA Securities Thursday , August 03, 2017 FBMKLCI: 1,770.61 A Member of the TA Group MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 p Daily Brief Market View, News In Brief: Corporate, Economy, and Share Buybacks THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* TA Research Team Coverage Market View Tel: +603-2072 1277 taresearch@ta.com.my www.taonline.com.my Sideways Trade to Persist Stocks extended profit-taking consolidation amid lack luster trade Wednesday as weak buying momentum persisted in the absence of positive local leads. Nonetheless, the KLCI posted late gains to settle 5.48 points higher at 1,770.61, off an early low of 1,767.80 and high of 1,771.32, but losers edged gainers 446 to 384 on cautious trade totaling 1.8bn shares worth RM1.75bn. Support at 1,760, Resistance at 1,770, Then 1,782 The local market is likely to extend sideways trade given the weak follow-through buying momentum following yesterday’s late rebound attempt. Immediate support for the index remains at the 100-day moving average at 1,760, which must hold to prevent further correction to 1,729, a key support level in April, while crucial uptrend support is from the 200-day moving average at 1,711. Immediate resistance stays at the 50-day moving average now at 1,770, next 1,782, followed by the recent peak of 1,796. SELL IHH Healthcare & IOI Corp Any near-term rebound attempts on IHH Healthcare should meet strong profit-taking resistance near the 50%FR (RM6.06), while better chart supports from the 38.2%FR (RM5.88), RM5.78 and the 23.6%FR (RM5.66) should attract bargain hunting interest. Weak technical momentum on IOI Corp implies downside bias towards the 50%FR (RM4.37), with stronger supports seen at RM4.30 and the 38.2%FR (RM4.21), while overhead resistance from the 61.8%FR (RM4.53) is reinforced by the 100-day moving average (RM4.55). Asian Stocks Mixed on Tech and Oil Prices Asian stock markets traded mixed on Wednesday with tech shares gaining after Apple earnings and as oil prices retreat. The Nikkei shares average gained 94.25 points or 0.47 percent to 20,080.04, supported by strong earnings reports from local companies and by a rally in Apple suppliers after it reported robust profits. Korean Kospi also ended higher by 0.19 percent to 2,427.63, boosted by gains in several major tech names. However, the benchmark ASX200 ended lower by 0.49 percent to close at 5,744.20 as oil followed a 2 percent overnight drop with a near 1 percent drop in Asian trade after a bearish crude inventory reading from the American Petroleum Institute. China stocks slipped, with continued strength in materials shares offset by weakness in small-cap firms. The blue-chip CSI300 index lost 0.25 percent to 3,760.85 points, while the Shanghai Composite Index fell 0.20 percent to 3,286.02 points. Apple Lifts Dow Above the 22,000 Mark A surge in Apple shares sent the Dow past the 22,000 mark for the first time, while weakness in other tech stocks held back the Nasdaq and S&P 500. Apple jumped 4.73 percent after the company reported healthy quarterly iPhone sales. It added roughly 49 points to the Dow, accounting for almost all of the index’s Wednesday advance. However, other tech heavyweights lost ground following recent strong gains that have made the sector the strongest performer this year. Microsoft slipped 0.44 percent, while Facebook lost 0.33 Page 1 of 8
4. TA Securities 3-Aug-17 A Member of the TA Group percent . Data showed U.S private employers added 178,000 jobs in July after adding 191,000 in June. Economists polled by Reuters expected an addition of 185,000 jobs. The more comprehensive non-farm payrolls report is due on Friday. The Dow Jones Industrial Average rose 52.32 points, or 0.24 percent, to 22,016.24, the S&P 500 gained 1.22 points to 2,477.57 and the Nasdaq Composite was flat at 6,362.65. Page 2 of 8
5. TA Securities 3-Aug-17 A Member of the TA Group News In Brief Corporate Chemical Co of Malaysia Bhd (CCM) has become the latest Permodalan Nasional Bhd controlled group to be put under a restructuring plan, which will see it divesting its pharmaceuticals business free of charge and raising funds totalling RM257.6mn. CCM, which is owned just over 70% by the state-owned fund manager, announced a series of proposals ranging from a private placement and land disposal to the distribution of 73.37% equity interest in the country’s largest pharmaceutical manufacturer CCM Duopharma Biotech Bhd to CCM’s shareholders. (StarBiz) Glomac Bhd proposes to undertake a bonus issue of up to 74.8mn bonus shares on the basis of one bonus share for every 10 existing shares held in the company. In a filing with Bursa Malaysia, the property developer said its board expected the proposed bonus issue to be completed by the fourth quarter of calendar year 2017. The entitlement date will be announced later. (StarBiz,/Bursa) Tenaga Nasional Bhd aims to raise RM2.0bn via an auction if Islamic bonds, or sukuk. The issuance by TNB in which Khazanah Nasional Bhd is the biggest shareholder, comprises a RM500mn 15-year tranche and a RM1.5bn 20-year tranche, with periodic distribution rate of 4.95% and 5.18% respectively. (Financial Daily) Prestariang Bhd has been awarded a RM10.0mn contract extension for the distribution and management of Microsoft software licences to public higher education institutions in Malaysia from the Higher Education Ministry. Prestariang said its wholly-owned subsidiary Prestariang Systems Sdn Bhd (PSSB) has received a letter of award dated July 17 from the Ministry for the contract extension for a period of one year, starting July 3 this year till July 2, 2018. (The Edge Markets) Power Root Bhd is spending UAE7.9mn dirham (RM9.2mn) to raise its stake in its profitable UAE subsidiary. The proposed acquisition will allow Power Root to increase its equity interest in Power Root ME FZCO (PRMF) from 91% to 97%, thereby allowing Power Root to consolidate the earnings attributable to the sale shares. (The Edge Markets) mTouche Technology Bhd is collaborating with Thai software, platform and artificial intelligence technology development company Octa Gravity Co Ltd to enhance its digital media offering in Southeast Asia. mTouche said it entered into a master collaboration partnership agreement with Octa today to jointly develop and market the digital media and infotainment platform, enhanced with the OCTABrain technology. (The Edge Markets) Bina Darulaman Bhd's net profit for the second quarter ended June 30, 2017 (2QFY17) plunged 83.4% to RM433,000 from RM2.6mn in 2QFY16, on lower profit contribution from its property development and construction businesses. Quarterly revenue, however, grew 14.7% YoY to RM79.0mn in 2QFY17, thanks to higher contribution by its quarry and road pavement division, which recently bagged road maintenance projects. For the cumulative six months ended June 30, 2017 (6MFY17), Bina Darulaman said net profit plunged 85.5% YoY to RM716,000, on lower property sales. (The Edge Markets/Bursa) IGB Real Estate Investment Trust's net property income for the second quarter ended June 30, 2017 (2QFY17) grew 1.6% YoY to RM88.0mn, thanks to higher rental recorded in the quarter under review. IGB REIT said the distributable income for 2QFY17 amounted to RM76.8mn or 2.19 sen per unit, consisting of realised profit of RM67.7mn and the non-cash adjustment arising mainly from manager fee payable in units of RM8.2mn. (The Edge Markets/Bursa) Censof Holdings Bhd has won a government contract worth RM6.0mn from the Inland Revenue Board of Malaysia for software application development. The financial management software services company said its wholly-owned subsidiary Century Page 3 of 8
6. TA Securities 3-Aug-17 A Member of the TA Group Software (Malaysia) Sdn Bhd accepted the letter of award for the project, which will be for three years starting from Aug 1 this year till July 31, 2020. (The Edge Markets) Puncak Niaga Holdings Bhd announced that its wholly-owned unit Puncak Niaga Construction Sdn Bhd (PNCSB) is facing a notice of adjudication for an alleged payment of RM25.41 million to its former sub-contractor Genbina Sdn Bhd. The notice was received by PNCSB on July 31, the same day it was issued by Genbina, Puncak Niaga said. (The Edge Markets) MISC Bhd's wholly-owned unit, Eaglestar Marine Holdings (L) Pte Ltd, has acquired the entire stake of AET Shipmanagement (Singapore) Pte Ltd from AET Tanker Holding Sdn Bhd for US$5.23mn (US$1 = RM4.28). In a filing to Bursa Malaysia, MISC said, AETSM Singapore was now part of Eaglestar Group and has changed its name to Eaglestar Shipmanagement (S) Pte Ltd. MISC said AET Holdings (L) Pte Ltd's wholly-owned unit, AET Inc Ltd, has acquired 50% stake of EMH from it for US$3.2mn. (Bernama) Petroliam Nasional Bhd's subsidiary PC Carigali Mexico Operations S.A de C.V. has been awarded shallow water Block 6 in Gulf of Mexico's Salina Basin. In a statement, Petronas said, Block 6 covered an area of about 559 sq km in water depths of between 30 and 80 metres, and would be operated by PC Carigali Mexico in a 50:50 partnership with Ecopetrol, Colombia's national oil company. (Bernama) KUB Malaysia Bhd has received shareholders' nod during its extraordinary general meeting to acquire a 1,534-hectare brownfield oil palm plantation in Sungai Kinabatangan, District of Kinabatangan, Sabah through its unit, KUB Malua Plantation Sdn Bhd for RM100.4mn. The acquisition was in line with the group's strategy to expand its plantation landbank and improve its plantation sector's contribution to its earnings. (Bernama) Bank Islam Malaysia Bhd signed a memorandum of understanding with Cognizant today to embark on innovative digital Islamic banking in its operations. Bank Islam' s Chief Executive Officer, Khairul Kamaruddin, said digital technology has progressively entered the financial market with growing demand for financial technology in Islamic banking system as well. (Bernama) Sarawak Energy Bhd's unit, SEB Power, today signed a joint venture contract with China Gezhouba Group Company Ltd and Untang Jaya Sdn Bhd for the main civil works of the Baleh Hydroelectric Plant. The contract includes the construction of the dam, intake structure, spillway and penstocks. With today's signing, the JV will also start on the dam's design soon. A statement released by Sarawak Energy during the signing ceremony said construction is scheduled to begin in October next year. (Bernama) Prasarana Malaysia Bhd has awarded the light rail vehicle work package to the consortium of Light Rail Transit 3 project worth RM1.6bn. The consortium companies comprises CRC Zhuzhou Locomotive Co Ltd, Siemens Ltd China and Tegap Dinamik Sdn Bhd. Prasarana Group Chairman, Tan Sri Ismail Adam, said the consortium would be responsible for the design, manufacture, supply, delivery, installation, testing and commissioning of 42 six-car LRVs for the LRT3 project. (Bernama) AXA Affin General Insurance Bhd has been named Asia's Best Employer Brand for 2017 in the Eighth Edition of Asia's Best Employer Brand Awards. "We are proud to be named Asia's Best Employer Brand for the second consecutive year. At AXA, we recognise our people as our most valuable assets," Chief Human Resource Officer, Mohd Syukri Ahmad Sudari said in a statement today. Mohd Syukri was present to receive the award held in Singapore yesterday. (Bernama) TA Investment Management Bhd has declared a gross income distribution of 1.50 sen per unit for the TA Income Fund and 0.50 sen (Quarterly) for the TA Asian Dividend Income Fund for registered unit holders of the funds as at July 31, 2017. TAIM in a statement said, Page 4 of 8
7. TA Securities 3-Aug-17 A Member of the TA Group the funds would be positioned accordingly , with an emphasis on a few selected stocks to drive performance. (Bernama) Excel Force MSC Bhd has appointed Mohd Fauzi Yaakub as chief executive officer of the financial services business solutions provider. The new CEO has more than 28 years, and more than 20 years' experience at senior management level in various industries namely, construction, property development, financial services, insurance and takaful, and retail. (Bursa) Thong Guan Industries Berhad announced its entry into the restaurant business through the launch of its maiden Marche Movenpick outlet at Pavilion Kuala Lumpur. Thong Guan is the new master franchisee for the Swiss restaurant chain in Malaysia. (Financial Daily) Page 5 of 8
8. TA Securities 3-Aug-17 A Member of the TA Group News In Brief Economy Asia Australian Building Approvals Surprise With Jump in June Australia building approvals rose at the fastest pace in eleven months in June , driven by a more than 20% rise in apartments. Growth in total building approvals rose 10.9% MoM in June, recovering from a 5.4% fall in May, according to the Australian Bureau of Statistics. That was well above the median forecast of 1.5% growth from economists polled by Reuters. The ABS said the growth was “driven by a rise in total dwellings excluding houses” – that is, apartments – of 20.1% MoM. The number of dwelling approvals rose in the Australian Capital Territory, South Australia, Western Australia, Queensland and Tasmania, but fell in Victoria and the Northern Territory and was flat in New South Wales. In YoY terms, building approvals shrank 2.3%, with contraction softening substantially from a fall of 18.7% in May. (Financial Times) India Central Bank Cuts Repo Rate by 25 Bps to More than 6½-Year Low The Reserve Bank of India cut its policy rate by 25 basis points to 6%, the lowest since November 2010, as slumping inflation allowed the central bank to focus on boosting an economy growing at the slowest pace in over two years. Forty of 56 economists polled by Reuters predicted the RBI would cut the repo rate by 25 bps - its first rate cut since one of the same size in October and the first easing move by a central bank in Asia since New Zealand in December. The RBI also cut the reverse repo rate by 25 bps to 5.75%. Four members of the monetary policy committee voted to cut rates by 25 bps, while one voted for a 50 bps cut and one voted for leaving rates unchanged. (The Star) Japan Monetary Base Climbed 15.6% in July The monetary base in Japan was up 15.6% on year in July, the Bank of Japan said - coming in at 465.069 trillion yen. That followed the 17.0% spike in June. Banknotes in circulation were unchanged at 4.6% on year, while coins in circulation were steady at 1.2%. Current account balances surged 19.3% on year, including a 17.6% spike in reserve balances. The adjusted monetary base was up 4.2% on year to 454.544 trillion yen. Other news in Japan: United States • Bank of Japan board member Yukitoshi Funo said the central bank must maintain its "powerful" monetary easing stance as inflation still lacks momentum. Funo added that the central bank no longer has a binding timeframe for meeting its ambitious inflation target, conceding the bank has essentially abandoned an earlier pledge to meet the goal in roughly two years. • The seasonally adjusted consumer confidence index rose to 43.8 in July from 43.3 in June. The score was expected to increase to 43.5. The overall livelihood index climbed to 42.3 in July from 41.1 in the prior month. The indicator for income growth edged up from 41.6 to 41.7. (RTT News/ Reuters/ The Edge Market) ADP Reports 178,000 Rise in July Private Payrolls Hiring at private U.S. employers slowed more than expected for the second consecutive month, according to a recent report, potentially raising concerns about a weakening economy. Firms across the country added 178,000 workers to their ranks in July, according to payroll processor Automatic Data Processing Inc. and forecasting firm Moody’s Analytics. Economists surveyed by The Wall Street Journal had expected 180,000 additional jobs. The June total was revised to 191,000 from 158,000. The ADP report is based on private payroll data in addition to government data. The report comes ahead of the U.S. Bureau of Labor Statistics’ monthly jobs report release Friday, which also is expected to see slower gains in employment. Economists expect nonfarm jobs to rise by 180,000 for July, compared with a 222,000 addition the prior month. (The Wall Street Journal) Page 6 of 8
9. TA Securities 3-Aug-17 A Member of the TA Group U .S. Plans Trade Measures Against China The Trump administration is planning trade measures to force Beijing to crack down on intellectual-property theft and ease requirements that American companies share advanced technologies to gain entry to the Chinese market. The administration is considering invoking a little-used provision of U.S. trade law to investigate whether China’s intellectualproperty policies constitute “unfair trade practices,” according to people familiar with the matter. That would pave the way for the U.S. to impose sanctions on Chinese exporters or to further restrict the transfer of advanced technology to Chinese firms or to U.S.-China joint ventures. American business frustration with Chinese trade and market-access practices has mounted in recent years, with U.S. business groups urging the government to take a tougher trade line with China. Many organizations have complained that the Trump administration hasn’t pushed hard enough in areas like intellectual property, as it has focused more on Chinese manufacturing and China’s $347 billion trade surplus with the U.S. last year. That discontent has intensified as China’s economy continued to expand and its computer and software sectors became bigger competitors internationally. Western firms fear China will use the regulations to bar foreign investments in areas that Beijing targets for investment, including semiconductors, advanced-machine tools and artificial intelligence. (The Wall Street Journal) Europe and United Kingdom UK Construction Growth Drops to 11-Month Low - PMI Growth in Britain's construction industry tumbled to an 11-month low in July, as a lacklustre outlook for the economy and heightened political uncertainty deterred new orders, a survey showed. The Markit/CIPS UK Construction Purchasing Managers' Index PMI) fell to 51.9 from 54.8 in June, below all forecasts in a poll of economists that had pointed to a reading of 54.5. The survey is another mixed signal for Bank of England policymakers meeting this week to set interest rates. A sister survey on Tuesday had shown British manufacturing growth improved last month thanks to an upturn in exports. But Wednesday's PMI for construction, which accounts for around 6% of British economic output, showed a sector struggling to maintain momentum. Wednesday's PMI showed new business volumes declined for the first time since August 2016, hurt by a slowdown in the commercial construction sector. Last week the Royal Institution of Chartered Surveyors said demand to rent British commercial property had fallen to a five-year low. (Reuters) Eurozone Producer Price Inflation Slows in June Eurozone producer price inflation eased in June on slowing energy price growth, data from Eurostat showed. Producer prices climbed 2.5% in June from the previous year, after rising 3.4% in May. This was the slowest inflation seen so far this year and matched economists' expectations. Excluding energy, producer price inflation slowed to 2.2% from 2.4%. The 2.5% increase in producer prices was largely due to rises of 2.9% both for intermediate goods and in the energy sector. Nonetheless, energy price growth slowed from 5.8% registered in May. Also, annual growth of 2.5 percent for non-durable consumer goods and 0.9% climb for capital goods contributed to the annual increase in June. Durable consumer goods prices rose only 0.6%. On a monthly basis, producer prices fell 0.1%, as expected, following a 0.3% drop in May. (RTT News) Page 7 of 8
10. TA Securities 3-Aug-17 A Member of the TA Group Share Buy-Back : 02 August 2017 Company AMPROP GLBHD GRANFLO UNIMECH Bought Back Price (RM) Hi/Lo (RM) 120,000 67,000 20,000 24,000 0.845/0.84 0.60/0.59 0.25/0.24 1.06/1.05 0.855/0.820 0.60/0.59 0.24/0.23 1.07/1.05 Total Treasury Shares 14,377,500 8,168,800 6,599,800 5,359,110 Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. liability for any direct or indirect loss arising from the use of this document. the securities and/or companies mentioned herein. for TA SECURITIES HOLDINGS BERHAD (14948-M) MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 (A Participating Organisation of Bursa Malaysia Securities Berhad) Kaladher Govindan – Head of Research Page 8 of 8 We accept no We, our associates, directors, employees may have an interest in
11. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company AUTOMOBILE BAUTO MBMR UMW Share Price (RM) 02-Aug-17 1.94 2.22 5.65 Target Price BETA (RM) EPS (sen) PER (X) FY17 FY18 FY17 FY18 Div Yield (%) 52weeks 52weeks FY17 FY18 High Price % Chg Low Price % Chg % Chg YTD 2.37 2.28 5.04 0.94 0.64 1.28 10.3 24.1 19.7 15.8 25.3 30.6 18.8 9.2 28.6 12.3 8.8 18.4 6.0 4.1 2.3 8.1 4.1 3.5 2.44 2.70 6.47 -20.5 -17.8 -12.6 1.88 2.08 4.09 3.2 6.7 38.0 -8.9 3.7 33.8 4.80 3.70 5.70 8.00 17.50 11.00 23.60 5.80 11.10 1.26 0.97 1.34 1.41 0.66 0.96 0.81 1.33 0.72 33.6 29.4 43.9 49.6 105.2 71.4 137.2 50.7 40.2 30.5 33.6 48.4 55.2 115.5 80.7 142.4 54.5 39.0 11.8 8.7 11.4 13.2 14.9 13.5 15.0 9.9 26.3 13.0 7.6 10.3 11.9 13.6 12.0 14.5 9.2 27.1 4.0 3.1 3.5 3.1 2.6 5.2 2.7 2.4 3.2 4.0 3.1 3.6 3.4 2.6 5.2 2.8 2.4 3.2 4.49 3.00 5.70 6.87 16.30 9.68 20.74 5.59 11.14 -11.6 -14.7 -12.3 -4.5 -3.8 -0.3 -0.5 -10.6 -5.0 3.60 2.08 3.90 4.30 12.70 7.50 19.38 4.53 8.20 10.3 23.1 28.2 52.5 23.5 28.7 6.5 10.4 29.0 6.7 7.1 16.0 45.5 16.1 17.7 4.7 6.2 19.5 0.37 1.24 5.40 3.45 0.65 1.14 2.15 1.94 5.85 0.45 1.57 6.00 3.50 0.78 0.58 2.26 1.49 6.26 0.77 0.61 1.00 1.07 0.85 1.25 na 1.07 0.15 5.5 15.3 27.9 15.3 4.9 8.3 12.7 11.5 42.0 5.5 13.4 34.6 20.2 5.7 9.6 12.5 11.6 45.7 6.6 8.1 19.4 22.6 13.0 13.7 17.0 16.8 13.9 6.7 9.3 15.6 17.0 11.3 11.8 17.1 16.8 12.8 0.0 2.4 2.2 2.2 3.9 0.9 2.6 1.5 4.3 0.0 2.4 2.2 2.8 3.9 0.9 2.6 1.5 4.3 0.51 1.37 5.52 3.61 0.74 1.39 2.18 2.48 6.15 -28.4 -9.5 -2.2 -4.4 -12.2 -18.0 -1.4 -21.6 -4.9 0.36 0.89 4.65 3.07 0.37 0.41 1.56 1.50 5.57 1.4 40.1 16.1 12.4 74.3 181.5 37.8 29.3 5.0 -16.1 18.1 13.0 7.8 6.6 98.3 26.5 12.8 -0.5 1.98 2.00 0.48 11.0 11.5 18.0 17.2 5.1 5.1 2.19 -9.6 1.93 2.6 -1.5 15.00 18.12 17.84 19.14 0.51 0.58 74.8 79.6 81.3 84.0 20.1 22.8 18.4 21.6 5.0 4.0 5.4 4.2 15.30 19.10 -2.0 -5.1 13.72 15.56 9.3 16.5 7.8 10.6 2.15 7.28 24.78 1.21 84.00 3.80 1.93 4.98 0.90 2.23 8.62 27.41 1.50 88.66 4.10 2.46 4.41 1.23 0.53 0.36 0.33 0.43 0.36 0.47 0.69 0.40 0.53 6.7 26.4 120.5 6.5 290.1 22.3 27.4 15.7 8.1 7.9 40.6 150.0 6.6 327.7 24.7 27.0 16.6 11.6 32.0 27.6 20.6 18.6 29.0 17.0 7.0 31.7 11.1 27.3 17.9 16.5 18.4 25.6 15.4 7.1 29.9 7.8 1.9 1.4 2.8 5.0 3.3 3.9 3.1 0.9 2.8 2.2 2.1 3.0 5.0 3.3 4.5 4.1 1.0 3.9 3.00 8.85 26.52 1.31 85.20 3.91 2.04 5.00 1.07 -28.3 -17.7 -6.6 -7.5 -1.4 -2.8 -5.4 -0.4 -15.9 2.11 7.28 22.44 1.13 74.12 2.26 1.49 4.14 0.78 1.9 0.0 10.4 7.0 13.3 68.1 29.5 20.2 15.4 -16.3 -0.7 5.5 5.1 7.4 49.6 11.6 15.0 13.2 44.80 52.08 0.99 198.6 187.4 22.6 23.9 4.5 4.5 51.50 -13.0 40.61 10.3 1.4 9.75 6.06 11.51 6.54 1.36 1.28 49.3 25.7 54.7 27.7 19.8 23.6 17.8 21.8 0.5 1.3 0.6 1.5 10.00 6.38 -2.5 -5.0 7.50 4.22 30.0 43.5 22.7 34.1 2.39 0.12 3.34 0.13 0.73 1.18 19.3 0.4 23.2 0.4 12.4 33.1 10.3 33.3 5.9 0.0 6.7 0.0 3.42 0.16 -30.1 -25.0 2.28 0.05 4.8 140.0 -19.3 140.0 5.96 4.23 6.39 4.70 0.78 0.52 9.5 13.3 14.9 16.4 62.5 31.8 39.9 25.8 0.6 1.5 0.6 1.8 6.73 4.37 -11.4 -3.2 5.54 3.85 7.6 9.9 -6.1 1.2 7.00 7.30 1.92 5.76 1.60 6.85 7.60 1.80 6.05 2.20 0.57 0.13 0.27 -0.20 0.30 17.2 35.8 12.4 26.4 3.7 24.5 40.0 15.1 29.8 5.5 40.7 20.4 15.5 21.8 42.9 28.5 18.3 12.7 19.3 29.1 1.1 2.5 1.9 2.3 0.6 1.6 2.7 2.3 2.6 0.9 7.40 7.30 2.38 5.94 2.64 -5.4 0.0 -19.3 -3.0 -39.4 4.06 5.62 1.88 4.20 1.51 72.4 29.9 2.1 37.1 6.0 44.9 10.8 -9.0 7.7 -32.2 INDUSTRIAL SCIENTX SKPRES 8.60 1.41 9.71 1.75 0.56 0.43 54.5 8.6 66.3 10.6 15.8 16.4 13.0 13.3 2.1 3.0 2.3 3.7 8.99 1.44 -4.3 -2.1 6.01 1.15 43.1 22.6 28.4 9.3 MEDIA ASTRO MEDIA PRIMA STAR 2.61 0.88 2.28 3.50 0.60 1.40 1.06 0.58 0.63 13.2 1.7 7.1 14.5 2.8 6.5 19.7 51.3 32.2 18.0 31.0 35.2 4.8 1.6 7.9 5.0 2.6 7.9 3.01 1.48 2.65 -13.3 -40.9 -14.0 2.47 0.87 2.19 5.7 1.2 4.1 0.4 -23.9 1.8 -16.7 -32.3 -37.1 -3.8 -2.2 -10.5 -26.7 -72.1 0.20 4.14 0.72 7.03 0.44 6.48 1.33 0.29 187.5 6.8 1.4 8.1 50.6 7.7 15.8 1.8 125.5 -32.0 -20.2 3.4 47.2 0.0 -4.9 -66.9 -29.3 1.30 7.7 -17.6 BANKS & FINANCIAL SERVICES AFG 3.97 AFFIN 2.56 AMBANK 5.00 CIMB 6.56 HLBANK 15.68 MAYBANK 9.65 PBBANK 20.64 5.00 RHBBANK BURSA 10.58 CONSTRUCTION BPURI GADANG GAMUDA IJM PESONA SENDAI SUNCON WCT LITRAK Building Materials WTHORSE CONSUMER Brewery CARLSBG HEIM Retail AEON AMWAY F&N HUPSENG NESTLE PADINI POHUAT QL SIGN Tobacco BAT GAMING Casino GENTING GENM NFO BJTOTO LUSTER HEALTHCARE Hospitals IHH KPJ Rubber Gloves HARTA KOSSAN SUPERMX TOPGLOV KAREX OIL & GAS DNEX 0.58 0.76 1.00 3.7 4.6 15.7 12.6 1.7 1.7 0.69 LCTITAN 4.42 6.88 na 43.1 64.9 10.2 6.8 3.8 7.0 6.53 MHB 0.73 0.87 1.81 -1.2 1.3 na 55.7 0.0 0.0 1.16 MISC 7.60 6.85 0.85 56.4 48.9 13.5 15.5 3.9 3.9 7.90 PANTECH 0.66 0.69 1.29 4.0 6.1 16.5 10.7 2.7 4.2 0.67 PCHEM 6.98 7.74 1.07 39.2 40.5 17.8 17.2 3.0 3.2 7.80 SENERGY 1.54 1.71 2.52 6.6 4.0 23.3 38.8 0.6 0.6 2.10 UMWOG 0.29 0.80 2.09 -12.0 -3.5 na na 0.0 0.0 1.04 Note: UMWOG proposed rights issue of shares. Ex-Target price RM0.43. For more details please refer to 08.05.17 report. UZMA 1.40 1.55 1.45 10.9 11.5 12.9 12.2 0.0 0.0 1.98
12. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company Share Price (RM) PLANTATIONS FGV IJMPLNT IOICORP KLK SIME UMCCA 1.59 3.00 4.45 24.72 9.39 6.38 Target Price BETA (RM) 1.55 3.88 4.15 26.19 10.02 7.52 1.79 0.47 1.05 0.86 1.23 0.41 EPS (sen) PER (X) FY17 FY18 FY17 FY18 4.2 12.3 18.8 111.7 34.0 37.5 8.5 15.7 21.1 119.1 37.5 34.5 37.7 24.4 23.7 22.1 27.6 17.0 18.7 19.1 21.1 20.8 25.0 18.5 Div Yield (%) 52weeks 52weeks FY17 FY18 High Price % Chg Low Price % Chg 3.1 2.3 2.2 2.2 2.7 3.6 3.1 2.7 2.7 2.4 3.3 2.7 2.52 3.70 4.81 25.50 9.70 6.55 -36.9 -18.9 -7.5 -3.1 -3.2 -2.6 1.42 2.95 4.22 22.98 7.50 5.50 PROPERTY GLOMAC 0.65 0.70 0.54 1.6 6.3 40.8 10.3 4.2 4.2 0.83 -21.2 0.61 HUAYANG 0.84 0.96 0.65 17.3 10.2 4.8 8.2 4.8 2.4 1.43 -41.7 0.82 IBRACO 0.90 1.00 0.46 5.2 11.1 17.2 8.1 3.9 4.4 1.05 -14.3 0.76 IOIPG 2.14 2.25 0.86 17.4 17.4 12.3 12.3 3.3 3.5 2.46 -13.0 1.85 MAHSING 1.57 1.76 0.73 14.3 13.5 11.0 11.6 4.1 4.1 1.70 -7.6 1.34 SNTORIA 0.83 0.98 0.22 6.2 10.3 13.4 8.0 1.2 1.2 1.00 -17.5 0.69 SPB 4.88 5.98 0.60 25.6 22.8 12.8 14.4 2.5 2.5 5.19 -6.0 4.32 SPSETIA 3.28 4.10 0.73 11.6 12.6 37.7 34.6 4.3 4.3 4.50 -27.1 3.00 SUNWAY 4.37 4.15 0.48 15.5 15.6 17.7 17.5 1.1 1.1 4.40 -0.7 2.84 Note: SUNWAY proposed bonus issue of shares and warrants. Ex-Target price RM1.69. For more details please refer to 15.06.17 report. REIT SUNREIT 1.71 1.86 0.51 8.9 10.1 19.3 16.9 5.2 5.9 1.84 -7.1 1.63 CMMT 1.49 1.72 0.58 8.1 8.6 18.4 17.3 5.6 6.0 1.72 -13.4 1.45 % Chg YTD 12.0 1.7 5.5 7.6 25.2 15.9 2.6 -11.8 1.1 3.0 15.9 6.8 6.6 2.5 19.2 15.8 17.2 19.6 12.9 9.3 53.8 -6.5 -26.1 -10.0 9.8 9.8 3.1 10.4 4.8 45.7 4.9 2.8 -0.6 -2.6 POWER & UTILITIES MALAKOF PETDAG PETGAS TENAGA YTLPOWR 1.03 23.74 18.76 14.18 1.40 1.13 21.47 19.60 17.38 1.45 0.70 0.78 0.77 0.98 0.52 7.1 98.5 88.2 131.9 8.2 6.4 102.4 101.3 130.6 10.6 14.5 24.1 21.3 10.7 17.0 16.1 23.2 18.5 10.9 13.2 6.8 3.1 3.3 3.1 5.0 6.8 3.2 3.8 3.2 3.6 1.80 25.70 22.50 14.90 1.64 -42.8 -7.6 -16.6 -4.8 -14.6 1.01 22.96 18.10 13.00 1.38 2.0 3.4 3.6 9.1 1.4 -24.8 -0.3 -11.9 2.0 -6.0 TELECOMMUNICATIONS AXIATA DIGI MAXIS TM 4.69 4.81 5.73 6.40 5.20 4.90 5.85 7.50 1.29 0.90 0.70 0.68 14.5 20.0 24.5 21.4 15.9 20.4 24.7 22.3 32.2 24.0 23.4 29.8 29.4 23.6 23.2 28.7 1.6 4.2 3.5 3.0 1.7 4.2 3.5 3.1 5.99 5.19 6.60 6.90 -21.7 -7.3 -13.2 -7.2 4.11 4.63 5.48 5.81 14.1 3.9 4.6 10.2 -0.6 -0.4 -4.2 7.6 TECHNOLOGY Semiconductor & Electronics IRIS 0.17 INARI 2.54 MPI 13.76 UNISEM 3.82 0.28 2.30 15.60 3.95 1.37 0.74 0.48 0.73 -2.3 10.2 94.2 26.9 -0.3 na 12.3 24.9 112.9 14.6 27.1 14.2 na 20.7 12.2 14.1 0.0 3.1 2.0 3.1 0.0 1.9 2.0 3.1 0.24 2.58 14.28 3.84 -29.2 -1.6 -3.6 -0.5 0.10 1.50 7.20 2.27 70.0 69.7 91.1 68.3 54.5 53.0 85.7 61.9 3.26 8.75 3.34 8.10 1.12 1.35 37.6 17.2 37.1 17.5 8.7 50.8 8.8 50.0 1.2 1.1 1.5 1.1 3.59 9.45 -9.2 -7.4 2.16 5.91 50.9 48.1 42.4 44.4 1.68 3.66 2.05 4.05 0.72 0.70 12.4 17.1 19.7 15.1 13.6 21.3 8.5 24.2 2.5 3.5 4.2 3.1 1.87 4.59 -10.2 -20.3 1.47 3.61 14.3 1.4 5.7 -14.9 TRANSPORTATION Airlines AIRASIA AIRPORT Freight & Tankers TNLOGIS WPRTS SNAPSHOT OF FOREIGN STOCKS UNDER COVERAGE Company Share Price (S$) BANKS & FINANCIAL SERVICES DBS 22.19 OCBC 11.43 UOB 24.32 PLANTATIONS WILMAR IFAR 3.44 0.49 Target Price Beta (S$) EPS (cent) PER (X) FY17 FY18 FY17 FY18 Div Yield (%) 52week 52week FY17 FY18 High Price % Chg Low Price % Chg % Chg YTD 23.30 12.00 25.40 1.23 1.17 1.08 172.9 87.7 192.9 189.2 12.8 92.4 13.0 206.5 12.6 11.7 12.4 11.8 2.7 5.7 2.9 2.7 6.7 2.9 22.3 11.5 24.6 -0.3 -0.5 -1.1 14.72 8.84 17.51 50.7 38.2 38.9 28.0 28.1 19.2 3.72 0.53 0.93 1.10 28.9 4.9 31.1 5.2 11.1 9.4 2.3 2.4 2.6 2.6 4.0 0.6 -14.0 -17.6 2.97 0.44 15.8 11.4 -4.2 -6.7 11.9 10.1 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. TA Securities I N I T I A T E C O V E R A G E Thursday , August 03, 2017 FBMKLCI: 1,770.61 A Member of the TA Group Sector: Building Materials MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 TP: RM1.58(+21.89%) Chin Hin Bhd Last traded: RM1.34 Market Leader with Strong Growth Potential BUY THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* TA Research Team Coverage Tel: +603-2167 9612 benghooi@ta.com.my Chin Hin Berhad (CHINHIN) is principally involved in distribution of building materials and provision of logistics and supply of ready-mixed concrete . The company is aggressively growing its manufacturing division, which provides a wide range of products such as Autoclaved Aerated Concrete (AAC), precast concrete products, wire mesh, and metal roofing system. Investment case: Integrated building materials provider with strong distribution network and warehousing facilities; Rising demand for AAC products; and Expanding of product range and revenue streams. Forecast We estimate the company to record core profit growth of 36.1%, 36.4%, and 8.0% at RM46.0mn, RM62.7mn, and RM67.7mn for FY17, FY18 and FY19 respectively, supported by top-line growth and margin expansion as well as the contribution from strategic acquisitions. Our FY17-19 earnings projections are premised on key assumptions below: • Plant capacity for precast products of 300,000mt for FY17 and 400,000mt each for FY18 and FY19, with a utilisation rate of 40% each for FY17 and FY18 , and 50% for FY19; • Plant capacity for AAC of 435,000m3 for FY17 and 1,035,000m3 each for FY18 and FY19 with a utilisation rate of 100%, 70%, and 80% respectively; • Plant capacity for wire mesh of 84,000mt for FY17, and 108,000mt each for FY18 and FY19 with constant a utilisation rate of 70% throughout FY17-FY19; • Revenue growth of -2.6%, 5.0%, and 17.1% in distribution division for FY17, FY18 and FY19 respectively. Valuation We initiate coverage on CHINHIN with a target price of RM1.58, based on 14x CY18 earnings. With an upside of 21.89%, we recommend a BUY call on CHINHIN. Share Information Bloomberg Code Bursa Stock Code Listing Share Cap (mn) Market Cap (RMmn) 52-wk Hi/Lo (RM) 12-mth Avg Daily Vol ('000 shrs) Estimated Free Float (%) Beta (x) Major Shareholders (%) CHIN MK CHINHIN 5273 Main Market 532.9 714.1 1.49/0.815 1498.9 26.0 1.17 Divine Inventions - 53.06 Chiau Beng Teik- 10.26 Affin Trust Management Bhd - 2.43 Forecast Revision FY17 Forecast Revision (%) Net profit (RMm) Consensus (RM'mn) TA's / Consensus (%) Previous Rating FY18 - - 46.0 53.4 86.1 62.7 65.2 96.1 - Financial Indicators FY17 Net Debt / Equity (%) CFPS (sen) Price / CFPS (x) ROA (%) NTA/Share (RM) Price/NTA (x) Share Performance (%) Price Change 1 mth 3 mth 6 mth 12 mth FY18 58.0 (2.9) (45.8) 5.5 1.3 1.0 42.3 (0.2) (554.7) 7.1 1.4 1.0 CHINHIN 3.1 FBM KLCI 0.4 (2.2) 51.4 63.4 (0.4) 5.8 6.6 (12-Mth) Share Price relative to the FBM KLCI Earnings Summary Source: Bloomberg Page 1 of 17 www.taonline.com.my
14. TA Securities 3-Aug-17 A Member of the TA Group About the Company Chin Hin Berhad is principally involved in the distribution of building materials and provision of logistics , supply of ready-mixed concrete, manufacturing of AAC, precast concrete products, wire mesh, and metal roofing systems. Its history can be traced back to 1974. The founder, Datuk Chiau Beng Teik, took over the family business in selling building materials to local renovators and walk-in customers in a hardware shop, which was located in Alor Setar, Kedah. In 1995, the company ventured into distribution of building materials to the local customers. Subsequently, the company expanded the supply of range of building materials and its distribution network to eastern and southern regions of Malaysia and eventually it has become the largest building materials distributor in Malaysia. In 2008, the group pursued an upstream diversification move by venturing into ready-mixed concrete business. Subsequently in 2010, the group continued to diversify through vertical integration by venturing into manufacturing division. The precast concrete, wire mesh, and metal roofing plants facilities were completed in 2012 and the production commenced soon after. The maiden AAC plant was completed in 2013 and the production of AAC products began in January 2014. Currently, the group has annual capacities of 300,000mt for precast products, 435,000m3 for AAC and 84,000mt for wire mesh products. Exhibit 1: Business Overview The business activities generally can be categorized into 2 main divisions, which are distribution and manufacturing. Source: Company, TA Research Page 2 of 17
15. TA Securities 3-Aug-17 A Member of the TA Group Exhibit 2 : Principal Activities of the Subsidiaries Company PP Chin Hin Chin Hin Concrete Holdings Starken AAC Metex Steel Principal Activities Dealing in cement, hardware and general trading, letting of properties, hire purchase financing and property development Management Company Manufacturing and sales of AAC blocks Manufacturing and sales of welded mesh and wire products, metal roofing and light weight trusses system Subsidiaries held under PP Chin Hin Trading and distribution of building materials in Singapore C&H Transport Transportation of cement Midah Industries Sdn Bhd Manufacturing of quality fire-rated doors Supplies various types of high quality door locks, miscellaneous Epic Diversity Sdn Bhd architectural hardware accessories, cylindrical lock and sliding door systems Subsidiaries held under Chin Hin Concrete Holdings Chin Hin Concrete (North) Processing and trading in mixed concrete Chin Hin Concrete (KL) Selling and distribution of ready-mixed concrete Subsidiaries held under Starken AAC Manufacturing and sales of precast concrete G-Cast Concrete products Property investment and contract worker G-Cast Polymer Concrete provider Green Cement Dormant Sage Evergreen Dormant Providing sewerage services and manufacturing MI Polymer Concrete Pipes of polymer concrete pipes Subsidiaries held under Metex Steel Manufacturing and supplies of metal roof and Formino Metal structural steel system Comet Steel Dormant Ace Logistics Investment Holding PP Chin Hin (Singapore) Source: Company, TA Research For products information, please refer to Exhibit 12 to Exhibit 16 The Shareholders and Management The management is led by the founder and Deputy Group Executive Chairman , Datuk Seri Chiau Beng Teik, who has 42 years of working experiences in this industry. Datuk Seri Chiau is mainly responsible for the overall strategy and business direction of the Group in which he reviews all major investments and major capital expenditure as well as financing proposals of the group and recommends it to the Board. He is assisted by his son, Mr. Chiau Haw Choon, the Group Managing Director, who is in charge of the day-to-day operational matters and works closely with all the Business Unit Heads in order to ensure the Board’s decision and directions are well implemented. He is instrumental in setting up the manufacturing division and expanding the revenue bases of the group through business diversification. Based on latest available data, it is estimated that the founders together with their related parties collectively hold about 64.1% stake in the company. Page 3 of 17
16. TA Securities 3-Aug-17 A Member of the TA Group Investment case Integrated building materials provider with strong distribution network and warehousing facilities ; Rising demand for AAC products; and Expanding of product range and revenue streams. Integrated Building Materials Provider with Strong Distribution Network and Warehousing Facilities CHINHIN is a well-known player in distribution of building material in Malaysia as it has been in this industry for more than 40 years. Along the years, the group has built up a strong customer base with over 4,000 clients under its radar. The group is currently providing more than 1,000 types of different building materials via its 11 branches and 4 warehouses across Malaysia and Singapore. Exhibit 3: Branches with Warehouses in Kedah, Kuala Lumpur, Terengganu, and Kelantan Source: Company website Being an integrated building materials provider and distributor with extensive of geographical coverage, CHINHIN is able to leverage on its existing customer base through supplying a wide range of products and services to fulfill the diverse needs from the pool of customers, which include retailers, dealers, contractors, and industrial users throughout the Peninsula Malaysia. In addition, the group has more than 250 mixer trucks that allow them to supply the ready mixed concrete from over 25 points of sale throughout the country. Page 4 of 17
17. TA Securities 3-Aug-17 A Member of the TA Group Exhibit 4 : Point of Sales for Ready Mixed Concrete Source: Company website Rising Demand for AAC Products AAC is a precast concrete building material, which could be a game changer in the building material industry as a substitute to the cement and clay bricks because of a few key advantages: a. Cost Effective AAC blocks are approximately one-third lighter than conventional bricks which helps to reduce the deadweight load on the foundation and it could help to save up to 25% of building foundation cost. Besides, the walls build with AAC products do not need to go through the plastering process due to its inherently smoother surface as it shall only require to apply a layer of skim coat which is more time and cost effective. Furthermore, the wall installation is speedier than conventional bricks due to larger dimension of AAC products which helps to reduce the number of joints required in wall masonry process, and leads to lesser construction time. As such, the overall cost of using AAC blocks is much cheaper as compared to traditional bricks. b. Thermal Insulation AAC products contain millions of tiny pores that are filled with air which can provide excellent thermal insulation, which is 6 times superior than the clay brick. Hence, it is claimed that the buildings with AAC products consume approximately 30% lesser energy for cooling and heating the interior air space. c. Fire, Water, and Sound Resistant The AAC products can resist to high temperatures for longer period of time in comparison to masonry products. The fire resistance period may go up to 4 hours depending on the thickness of the wall. Furthermore, the fire resistance of AAC is approximately twice of those dense concrete and the main materials that are used to manufacture AAC products are non-combustible. Besides, the AAC Page 5 of 17
18. TA Securities 3-Aug-17 A Member of the TA Group products also have good water resistant feature because it contain millions of closed microscopic cells in a standard block due to its porous structure , which strongly resist moisture from seeping through. Apart from that, the porous structure also enables AAC products to possess high sound absorption characteristic. d. IBS Certified and Eco Friendly The AAC products have been certified as eco-friendly building materials by the Singapore Environmental Council. The AAC blocks and AAC panels have IBS score factors of 0.5 and 1.0 respectively. Malaysia government has been continuously encouraging all the contractors to adopt IBS in construction by giving various tax incentives. With recent stricter enforcement on foreign labour market, we believe it may serve as a catalyst to further prompt the contractors to switch over to IBS certified products due to increasing labour costs and greater safety and health concerns. With a final aim to take over the market share from cement and clay brick, the current adoption rate of AAC blocks is still less than 10% in Malaysia, indicating there is still more than 90% upside in potential market up for grab. Currently, there is only one direct local competitor, which is relatively small with approximately 200,000mt annual capacity. Having a few key advantages together with attractive potential market share, the outlook for AAC blocks is promising as it can be used for high rise projects, residential affordable housing projects as well as government infrastructure projects. AAC products are widely accepted and used in developed markets especially in Europe. Currently, CHINHIN supplies the AAC products to Sunway, SP Setia, Eco-World, Hapseng, and Ipmuda, etc. Expanding of Product Range and Revenue Streams The management has been continuously diversifying the businesses into other sectors through strategic acquisitions in order to further expand the product range and revenue streams. The group has ventured into sewerage solutions through acquiring Mi Polymer Concrete Pipes Sdn Bhd, a specialist in manufacturing polymer concrete pipes for sewer system, in order to capitalize on National Sewerage Project as well as growing water and sewerage related infrastructures spending in the region. Furthermore, the group is in the midst of setting up another sewerage products plant in Batu Pahat, which will double the current annual capacity to 40,000mt as the group plans to participate in sewerage infrastructure tenders in Indonesia, Philippines, and Myanmar. Currently, the company has the production capacity of 20,000mt and it is running at full capacity. Besides, with the recent acquisition of 45% equity stake in 3 solar powerrelated companies, CHINHIN has intended to further strengthen the group’s involvement in the solar power investment business. Currently, the group is able to generate 2.85mw annually through the solar power panels which are mainly installed in the plants. We like the solar power business because it is able to contribute about RM3mn of steady cashflow as recurring earnings to the group as it has signed a 21-years agreement with TNB whereby the group will deliver and sell metered renewable energy to TNB. Furthermore, the group has also ventured into manufacturing of fire-rated door and door locks through the acquisitions of Midah Industries Sdn Bhd and Epic Diversity Sdn Bhd to further leverage on its 4,000 strong customer network. Page 6 of 17
19. TA Securities 3-Aug-17 A Member of the TA Group We are positive on the synergistic acquisitions by CHINHIN as its allow the group to penetrate into niche markets in short timeframe while enjoying the immediate benefit of economies of scale . We believe the group will continue to look for acquisition opportunities that can further complement or enhance the group’s earnings prospects. Target Market CHINHIN’s sales are mainly derived from the domestic market. Currently, the group is exporting the manufacturing products especially the AAC wall panels to Singapore which contribute less than 2% of the total revenue. The group is aggressively venturing into the export market to expand its customer base by tapping into regional markets such as Philippine, Indonesia, Taiwan, Sri Lanka, and Myanmar. We expect the group to further expand aggressively on its AAC manufacturing capacity in order to target the domestic and regional contractors and developers due to its low adoption rate currently and huge upside potential to take over the conventional bricks market. The group has the intention to further explore the possibilities of setting up an AAC plant in Philippine to accommodate the rising demand from the Philippine market. Moving forward, the group will try to identify and fill up the product offering gap arising from different target market via strategic acquisitions. Industry Outlook As a building materials provider, the outlook of CHINHIN is highly dependent on the momentum in the construction industry. Despite the recent slowdown in property market and delay in the rollouts of some of the government mega projects, we expect building material industry will be able to pick up in 2018 as we believe the construction industry will continue to be driven by governmentled infrastructure projects such as MRT line 2, LRT line 3, East Coast Rail Line, and Southern Double Track. In addition, the government will continue to focus on affordable housing projects such as Perumahan Rakyat 1Malaysia and the People’s Housing Programme. With the greater incentives and promotions from the government on the usage of green building materials, we foresee CHINHIN to further benefit from AAC products, which are eco-friendly and IBS certified. Furthermore, CHINHIN is backed by strong outstanding order book of 240mn in which approximately 70% comes from manufacturing of AAC and precast products that traditionally contributing higher profit margin. Since CHINHIN uses different raw materials in its manufacturing processes, the group might be facing some cost pressure, which might adversely hit the bottom line as the raw materials are price sensitive and beyond the group’s control. For manufacturing of AAC and precast products, we believe it would not be an issue as the group could easily pass on the additional cost to the customers. However, this might not be the case for wire mesh and metal roofing segment because it has been facing some cost pressure recently due to safeguard measure duties imposed by government on importing of steel products. Nevertheless, the PBT contribution from this segment is less than 10% and as such, the financial impact should be minimal. Page 7 of 17
20. TA Securities 3-Aug-17 A Member of the TA Group Financial Performance Exhibit 5 : Historical and Projected Revenue by Divisions Source: Company, TA Research In FY11, the group had reached a milestone where the total revenue exceeded RM1.0bn for the first time in the group history. Distribution division was the sole contributor during that period. The upstream venturing into manufacturing division was initiated by the Group Managing Director in year 2010 with the intention to further broaden the earnings base. After 2 years of planning and execution, the manufacturing segment started to contribute positively in FY12 which slightly lifted up the total revenue. In the subsequent year, FY13 posted a 16.7% increase in revenue to RM1.2bn due to higher revenue from both distribution and manufacturing divisions. In FY14 and FY15, the group managed to maintain similar total turnover of RM1.2bn even though the distribution division was trending downward as it was mainly supported by the growing revenue contribution from the manufacturing division. In FY16, the contribution from distribution division dipped into 5 years low due to sluggish housing construction activities which effectively dragged down the total revenue even the manufacturing division was still in increasing trend. For FY17, we expect the revenue for distribution division to remain flat and shall bottom out in FY18 when the mega projects pick up the momentum. For the manufacturing division, we believe the growing trend is sustainable driven mainly by huge demand from AAC products. Page 8 of 17