Bursa Malaysia Daily Market Report - 5 March

Transcription

1. Monday , 05 March, 2018 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. 2. Oil & Gas Sector: Higher Dividends & Capex for FY18 UMW Holdings Bhd: The Worst is Over Technical Reports 1. 2. 3. 4. 5. 6. Weekly Technical Stock Picks Daily Money Flow FBMKLCI Weekly Ace Market Stock Watch Weekly Small Cap Stock Watch Weekly Stock Screen Weekly Foreign Stock Watch (AUS, HK, FSSTI & US) 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
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Daily Market Commentary Monday , 05 March 2018 TA Research, e-mail : taresearch@ta.com.my For Internal Circulation Only KLSE Market Statistics (02.03.2018) (mil) Main Market 1,666.6 Warrants 373.6 ACE Market 506.2 Bond 4.7 ETF 0.1 LEAP 0.0 Total 2,551.2 Off Market 92.7 Volume +/-chg (RMmn) -551.6 2,267.1 -121.3 65.1 -166.1 82.0 0.9 0.6 0.1 0.2 (0.0) 0.0 2,414.9 -1.3 83.1 Major Indices Index +/- chg Malaysia FBMKLCI FBMEMAS FBMSCAP March 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 Review & Outlook Value Value/ +/-chg Volume Up Down -72.4 1.36 198 396 -12.8 0.17 51 198 -6.6 0.16 36 55 -0.1 0.13 3 4 0.1 1.66 3 3 0.0 0.31 0 0 0.95 291 656 -80.5 0.90 % chg % YTD chg 1,856.07 13,173.95 16,433.86 1,854.00 -4.79 -63.30 -142.08 -2.00 -0.26 -0.48 -0.86 -0.11 3.30 1.79 -3.62 3.87 24,538.06 7,257.87 7,069.90 21,181.64 2,402.16 30,583.45 3,479.20 1,811.98 6,582.32 3,254.53 1,822.22 5,928.90 -70.92 77.31 -105.74 -542.83 -25.20 -460.80 -34.65 -18.15 -23.74 -19.23 -11.80 -44.45 -0.29 1.08 -1.47 -2.50 -1.04 -1.48 -0.99 -0.99 -0.36 -0.59 -0.64 -0.74 -0.73 5.13 -8.04 -6.95 -2.65 2.22 2.24 3.32 3.57 -1.59 -4.06 -2.25 (mn) EFORCE-WA 32.0 @ EURO 26.0 @ SUNREIT 19.4 @ KIPREIT 7.1 @ SEACERA 3.5 @ YNHPROP 2.5 @ SEG 1.3 @ (RM) 0.92 0.32 1.68 0.70 0.75 1.36 0.66 Counter PBBANK AXIATA MAXIS DIGI GENTING PETGAS GENM HAPSENG PMETAL SIME Mkt Cap. Chg (RM’mn) (RM) 88,737 48,230 45,379 36,931 34,482 34,470 29,426 23,776 21,137 18,294 -0.02 -0.09 -0.09 -0.05 -0.12 -0.02 -0.11 -0.07 -0.32 -0.06 Immediate support for the index will be at 1,848, the 30-day moving average, followed by the 50-day ma at 1,824, while stronger support is at 1,800. Crucial resistance-turn-support level is at 1,796, the June 2017 peak matching the 6 Feb pivot low. Immediate resistance will be last week's high of 1,872, with the 2 Feb peak of 1,880 and upper Bollinger band at 1,881 as tougher upside hurdles. Stock-wise, budget carriers AirAsia and AirAsia X are attractive to sell or take profit given the overbought momentum after the recent rally, while lower liner construction stocks such as Ekovest, Gadang, Kimlun, KKB Engineering, Mudajaya and Naim Holdings should see bargain hunters cushion downside. News Bites Top 10 KLCI Movers Based on Mkt Cap. Off Market As technical momentum indicators for the FBM KLCI have markedly worsened after last week's correction, expect more downside volatility as investors refrain from bargain hunting despite the heavy losses seen on small caps and lower liners. On the external front, given the unfortunate correction and increased volatility in US stocks last week, and also fears that the US President's tariff threat on steel and aluminum will fuel a global trade war, expect more choppy trade this week. Vol. (mn) 3.66 8.41 3.08 4.99 3.29 0.87 9.78 0.55 15.40 13.78 Important Dates HSSEB - 1:10 Rights Issue - RI of up to 31.9m shares together with BI of up to 15.9m shares and up to 47.9m free detachable warrants. 1 rights share for every 10 existing shares held, at an issue price of RM1.30 per rights share, together with 1 bonus share and 3 warrants for every 2 rights shares subscribed. Application Closed: 08/03/2018. LISTING ON: 21/03/2018. • Petroliam Nasional Berhad reported FY17 headline net profit of RM37.7bn (+120% YTD), underpinned by ongoing transformation efforts as well as the increase in commodity prices and improved margins. • Maxis Bhd has appointed Robert Nason as executive director and interim chief executive officer effective April 1, 2018. • Sunway Group is planning a 350-bed tertiary medical centre costing RM500mn in Seberang Jaya. • IOI Corp Bhd has completed the sale of 70% stake in Loders Croklaan Group BV and its related business to US-listed Bunge Ltd for RM3.79bn cash. • Part of a land belonging to Lion Diversified Holdings Bhd in Kuala Langat, Selangor has been compulsorily acquired for RM9.9mn by the district's land office for Tenaga Nasional Bhd. • Ranhill Holdings Bhd will start construction of a water treatment plant in Thailand this month, following up to a RM19.33mn build-operatetransfer contract awarded to the company last October. • CCM Bhd, which has just completed its demerging exercise, has obtained shareholder approval for the disposal of three parcels of leasehold land for RM190mn to Global Vision Logistics Sdn Bhd. • China has said that it will take measures to safeguard its interests after U.S. President Donald Trump announced on Thursday that he would impose tariff on imported steel and aluminum. • President Donald Trump said the U.S. would impose tariffs on European car exports if the bloc follows through with retaliation against his metals duties. • Japan's jobless rate fell to 2.4% in January, the lowest level since April 1993. Exchange Rate USD/MYR 3.9095 -0.018 USD/JPY 105.60 -0.620 EUR/USD 1.235 0.0082 Commodities Futures Palm Oil (RM/mt) 2,468.00 -75.00 Crude Oil ($/Barrel) 61.45 0.11 Gold ($/tr.oz.) 1,323.70 5.60 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. Monday , March 05, 2018 FBMKLCI: 1,856.07 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 Fears of Trade War Could Induce Choppy Trading Last week, the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) fell on month end profit-taking and selling, in line with regional weakness after China February manufacturing slowed more than expected. The new US Fed Chairman Jerome Powell’s hawkish comments on inflation also did not help, raising concerns there could be four more interest rate hikes this year, made worse by the US President’s threat to impose punitive tariffs of 25 percent for steel and 10 percent for aluminum, which forced steel producers and automakers in Asia to slump ahead of the weekend. For the week, the FBM KLCI eased 5.43 points, or 0.29 percent to 1,856.07, as gains on Nestle (+RM2.90), Hong Leong Bank (+RM1.28sen) and HLFG (+40sen) were overshadowed by losses on AMBank (-41sen), Axiata (-32sen), Press Metal (-28sen) and Petronas Gas (-26sen). Average daily traded volume and value improved mildly to 2.87 billion shares and RM2.84 billion last week, compared to the 2.56 billion shares and RM2.25 billion average respectively the previous week. The 4Q17 results reporting season that ended last week did not help much to lift market sentiment as it was largely within expectations. Coming from a lower single digit earnings growth in 2017, consensus’ stronger growth expectations of 10.0% and 6.8% in CY18 and CY19 respectively for FBMKLCI component stocks did not create much excitement. Nonetheless, the earnings growth forecasts appeared realistic based on the gradual recovery of the economic growth cycle and commodity prices that should benefit index heavyweight sectors such as Banking, Plantations and Oil & Gas. Given the choppy external environment, the million-dollar question now is whether the stock market rally that resumed after a steep correction in early February will sustain or not. It is not farfetched to presume that market expectations for a pre-election rally kept the benchmark index steady after the sharp correction and buying support for some index heavyweight sectors like banking helped to lift the FBMKLCI. On that score, banks did not disappoint as they showed significant earnings improvement in the just completed results season with strong topline growth and lower loan allowances. As the outlook for the sector remain positive with a revival in loan growth, leaner cost structure and better regional asset quality, interest in the banking sector may not dissipate anytime soon. While this may act as a good support for the benchmark index, external uncertainties should cap upside and contribute to a choppy trade this week as the European Union has threatened to retaliate after the US imposed tariff on steel and aluminum products. China’s reaction may follow suit this week as it should be a hot topic in its annual parliament season that begins next Monday and lasts for two weeks. As the delegates of the Chinese People’s Political Consultative Conference and the legislature the National People’s Congress are expected to deliberate on key agenda for the year, the outcome should have implications on rest of the world. Page 1 of 8
4. 5-Mar-18 That aside , local market jitteriness should general election approaches. While we still automatically on 24th June, a dissolution is see the award for the Mass Rapid Transit redelineation exercise. increase as the deadline for the fourteenth have a few more months before it dissolves expected prior to that. Before that we may Circle Line (MRT 3) and the conclusion of According to earlier announcements, the MRT 3 award is due by end-March. One foreign and three local consortiums have submitted their bids for the project. The award is expected to favour a local consortium due to sensitivity of the award during election time. The MMC-Gamuda–George Kent Joint Venture is expected to be the favourite due to Gamuda’s experience in completing MRT Line One ahead of schedule and its involvement in the second line. Its strong technical expertise and readily available tunnel boring machines, since 32km of the 40km line will be underground, are big plus points. Financing may not be a big stumbling block for this mammoth project (estimated to be around RM40bn) as news dailies have published previously that MRT Corp has indicated it will engage DanaInfra, if the financing terms in the proposals are not favourable. Besides that acceleration in activities in several mega projects such as MRT line 2, LRT line 3, Southern Double Track, West Coast Expressway, Setiawangsa-Pantai Expressway, DASH, SUKE, EKVE and catalytic developments, which include TRX, Merdeka PNB 118 and BBCC developments should benefit players in the construction and building materials sectors as well. So, it could be worthwhile to accumulate some of the undervalued in those sectors, including Gamuda (TP: RM6.00), Gadang (TP: RM1.69), Ann Joo Resources (TP: RM4.34) and Chin Hin (TP: RM1.39). 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 Monday, March 05, 2018, 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. 5-Mar-18 N e w s i n B r i e f Corporate Maxis Bhd , Axiata Group Bhd, and Digi.Com Bhd have received a reissuance of the existing spectrum assignment in various bandwidths from the Malaysian Communications and Multimedia Commission. Their offers are subject to a price component payment of RM118.4mn and an annual fixed fee payment of RM50mn payable throughout the assignment period. Each spectrum assignment is for a period of 16 years effective April 2, 2018. Axiata, received its spectrum assignment in the 1950 MHz to 1965MHz and 2140 MHz to 2155MHz band. Digi, meanwhile, accepted the offer of reissuance of its 2100 MHz spectrum assingment at 2X15MHz. Maxis' assignment was for the 2100 MHz spectrum comprising 2 x 15MHz and 1 x 5MHz (StarBiz). Sunway Construction Group Bhd (SunCon) is forming a 49:51 joint venture (JV) with Singapore-listed Hong Leong Asia Ltd to jointly tender for the lease of a piece of land in Singapore from Singapore's Building and Construction Authority (BCA). If successful, the two companies plan to develop the land for the manufacture and sale of precast concrete building components. SunCon said it will also benefit from the proposed JV in the long run through productivity improvement and reduced reliance on foreign workers, but did not elaborate (The Edge). Sunway Concrete Products (S) Pte Ltd (SCPS), an indirect wholly-owned unit of Sunway Construction Group Bhd (SunCon), has signed a joint-venture (JV) agreement with HL Building Materials Pte Ltd (HLBM), a subsidiary of Singapore Stock Exchange-listed, Hong Leong Asia Ltd. According to SunCon, the JV company was set up to tender for the lease of land in Singapore from Building and Construction Authority (BCA). SunCon will own 49% of the JV company, whilst the HLBM will own 51% (Bursa Malaysia). QSR Brands (M) Holdings Bhd plans to open over 35 new KFC outlets nationwide year with investments of over RM100mn. The company would spend between RM3mn RM4mn for each outlet. According to management, the group has the financial operation capacity as well as the commitment of shareholders to expand its business year, in line with the country's strong economic growth (StarBiz). this and and this The Competition Commission of Singapore (CCS) has granted its clearance for Dutch coffee company Jacobs Douwe Egberts’ (JDE) offer to privatise Oldtown Bhd, thus fulfilling all pre-conditions needed for a takeover offer to be made. JDE first made an offer to buyout Oldtown at RM3.18 per share or RM1.47bn. In order to privatise Oldtown, JDE required a total stake of at least 90%, along with approvals from the CCS and any other antitrust regulators (StarBiz). Pavilion Real Estate Investment Trust (Pavilion REIT) has maintained an 8.24 sen income distribution per unit for 2017, similar to 2016, despite the current challenging environment. Pavilion REIT saw its income before tax reduced to RM249.4mn from RM312.1mn in 2016, as only RM17mn of its gains from investment properties was recognised in 2017 compared with RM76.9mn previously (Bursa Malaysia). Amcorp Properties Bhd and its joint-venture partner, Grosvenor Europe Investments Limited, have acquired a residential development project in the sought-after Chamberi district in Madrid, Spain. The 333-square metre residential development site located on Garcia de Paredes Street is within walking distance to the popular Canal de Isabel II Park and Canal Theatre as well as close to the Canal Metro Station. The JV will develop 15 exclusive apartments and two penthouses set in a seven-storey building in consultation with the prestigious architectural firm, Cano Y Escario (Bernama). Salcon Bhd’s indirect 60%-owned unit has secured a RM18.95mn contract from China State Construction Engineering (M) Sdn Bhd (CSCE) for a 20-month work order under a mixed development on Jalan Segambut. The project involves the construction of two blocks of service apartments, related facilities, one guard house, and one unit of electrical substation (The Edge). Page 3 of 8
6. 5-Mar-18 Genetec Technology Bhd is partnering with several parties to collaborate on the development of an ammonia and urea manufacturing plant in India . The group has signed a Memorandum of Understanding (MoU) with the Malay Chamber of Commerce Malaysia, China Rainbow International Investment Co Ltd and India-based VBC Fertilisers & Chemicals Ltd for the proposed development. The MoU, provides the opportunity for the group to provide its system automation solutions and services within the project scope (Bursa Malaysia). Ecofirst Consolidated Bhd’s net profit for the quarter ended Nov 30, 2017 rose over five-fold to RM27.52mn from RM5.23mn a year ago, thanks to higher contribution from its property development division, and a land sale worth RM28.4mn. Quarterly revenue more than tripled to RM40.43 mn from RM12.07 mn previously, mainly from two property development projects — Liberty @Ampang Ukay and Upper East @Tiger Lane, Ipoh (The Edge). Ikhmas Jaya Group Bhd has won a contract valued at RM38.52mn from Mudajaya Corp Bhd to undertake subcontract bored piling works for the Light Transit Rail Line 3. The contract involves the LRT3 package from Bandar Utama to Johan Setia and includes the guideway, station, park and ride, ancillary buildings and other associated works for the project delivery partner MRCB George Kent Sdn Bhd (StarBiz). Pintaras Jaya Bhd has been awarded a contract worth RM68.5mn by Bina Puri Development Sdn Bhd for works related to a mixed development in Brickfields, Kuala Lumpur. The job scope entails piling and substructure works for a proposed development comprising 54 levels of office suites, two blocks of 63 levels of service apartments, food court, commercial lots and car parks (The Edge). Malaysia Building Society Bhd (MBSB) announced its pre-tax profit for the financial year ended Dec 31, 2017 surged 62.74% to RM550.73mn from RM338.42mn in FY16. The substantial increase in profit was mainly attributed to the lower cost of funds and lower allowances for the impairment losses on financing, loans and advances (Bernama). WZ Satu Bhd’s net profit in the quarter ended Nov 30, 2017 slumped 94% to RM497,000 from RM8.5mn a year ago, mainly due to weaker results in the mining and civil engineering and construction segments, and losses incurred by its associates, which offset higher revenue in the period. Its profit before taxation declined by RM8.9mn to RM1.4mn from the previous year's corresponding quarter of RM10.3mn (The Edge). Perusahaan Sadur Timah Malaysia Bhd (Perstima) saw its profit fall 76% in its third quarter ended Dec 31, 2017 to RM3.4mn from RM14.16mn a year ago, no thanks to lower profit margins and sales volume. Quarterly revenue, however, was up 0.4% to RM233.89mn from RM233.04mn, as higher average selling price made up for the lower sales volume (Bursa Malaysia). Page 4 of 8
7. 5-Mar-18 N e w s I n B r i e f Economy Asia Japan ’s Jobless Rate at Quarter-Century Low Japan’s jobless rate fell to a low of almost 25 years in January, while a ratio of job openings remained at a 44-year high, the latest signs that the labor market is tightening as the world’s third-largest economy continues its growth streak. Policy makers hope that a stretched labor market will provide impetus for larger pay increases that feed into stronger consumer spending and higher prices to secure a positive cycle of growth. The jobless rate fell to 2.4% in January, the lowest level since April 1993, data from the Ministry of Internal Affairs and Communications showed Friday. The result compares with a revised 2.7% in December. Another indicator showed there were 159 jobs available for every 100 job seekers, maintaining a 44-year high. Bank of Japan Gov. Haruhiko Kuroda, recently nominated to a new five-year term to continue his work toward 2% inflation, has repeatedly said severe labor shortages should promote higher wages, higher spending and higher prices. Analysts say that while the jobs market won’t tighten much further, with a possible uptick in unemployment next month, it is likely to hover around the latest low. Separate data released also offered an encouraging sign for Prime Minister Shinzo Abe’s administration and the BOJ. Core consumer prices in Tokyo rose at the fastest pace in nearly three years in February, a result that suggests nationwide figures to be released later in the month could show core inflation reaching 1% for the first time since August 2014. Prices excluding fresh food in the capital rose at 0.9% in February from a year earlier, compared with January’s 0.7% rise. Tokyo prices, which are now released about three weeks before the nationwide figures, are seen as an early indicator of the wider trend. In recent months, the national index has been around 0.2 percentage points higher than the Tokyo result. Japan’s core CPI was up 0.9% in January, according to data released last month. (The Wall Street Journal) Japan Monetary Base Climbs 9.4% in February The monetary base in Japan was up 9.4% on year in February, the Bank of Japan said standing at 471.638 trillion yen. That follows the 9.7% spike in January. Banknotes in circulation were up an annual 4.6%, while coins in circulation gained 1.2%. Current account balances spiked 11.0%, including a 9.1% jump in reserve balances. The adjusted monetary base perked 10.1% on year to 481.483 trillion yen following the 4.1% contraction a month earlier. (RTT) China Says it Does Not Want a Trade War With US China does not want a trade war with the United States, Zhang Yesui, a spokesman for the Chinese parliament, said on Sunday at a briefing ahead of China's annual session of parliament, which begins this week. China has said that it will take measures to safeguard its interests after U.S. President Donald Trump announced on Thursday that he would impose a 25% tariff on imported steel and a 10% tariff on aluminium to protect U.S.-based producers. (The Star) United States U.S. Consumer Sentiment Improved in February U.S. consumers remained confident in February, with larger paychecks and a healthy labor market overshadowing any worries about stock-market volatility and rising borrowing costs. The University of Michigan said Friday its consumer-sentiment index was 99.7 in February, up from 95.7 in January. It was the second-highest monthly reading since January 2004, below only October’s 100.7 reading. Economists surveyed by The Wall Street Journal had expected a final February reading of 99.5, down from a preliminary figure of 99.9. “Consumers based their optimism on favorable assessments of jobs, wages and higher after-tax pay,” said Richard Curtin, the survey’s chief economist. U.S. households have been upbeat about the economy in recent months, with growth supported by rising incomes and low unemployment. The recent package of tax cuts also has boosted most workers’ takePage 5 of 8
8. 5-Mar-18 home pay . However, the stock market has moved lower since late January and borrowing costs have marched higher. The average interest rate on a 30-year fixed-rate mortgage was 4.33% in February, up from 4.03% in January and 3.81% as recently as last September, according to Freddie Mac. The details of Friday’s report were upbeat. A measure of confidence in current economic conditions rose to 114.9 in February from 110.5 in January. An index tracking expectations about the future was 90.0 in February, up from 86.3 in January. A separate measure tracking U.S. consumer confidence jumped in February to its highest level since November 2000, the Conference Board said Tuesday. That report also showed Americans felt better about the current state of the economy as well as its future prospects. (The Wall Street Journal) Trump Threatens to Impose Tariffs on European Cars President Donald Trump upped the ante in a brewing trade conflict stirred up by his announcement of steel and aluminum tariffs, saying the U.S. would impose tariffs on European car exports if the bloc follows through with retaliation against his metals duties. “If the E.U. wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.S.,” Mr. Trump wrote on Twitter from Palm Beach, Fla. “They make it impossible for our cars (and more) to sell there. Big trade imbalance!” Imposing a tax on the imports of European cars would be more difficult than Mr. Trump’s tweet suggests. European auto makers employ thousands of workers in the U.S. and have factories in states including Alabama, South Carolina and Texas. BMW manufactures sport-utility vehicles in South Carolina and exports at least 70% of them to other countries. The exchange began Thursday after Mr. Trump said his administration would enact in coming days a law to impose 25% tariffs on imported steel, with 10% targeting imported aluminum, on national-security grounds. Some economists are worried tariffs applied unilaterally rather than through the World Trade Organization would generate a series of reprisals that could end in a trade war. (The Wall Street Journal) Europe and Uni ted Kingdom Theresa May Bows to Inevitable Hard Choices on Brexit At last, Theresa May has injected a dose of realism into the government’s position on Brexit. In her speech on Friday, the prime minister’s red lines blurred. Now she speaks of hard facts and trade-offs and an unavoidable truth: UK access to European markets will be curtailed and even then will come at a price. Mrs. May is finally reckoning with the consequences of her Lancaster House speech last year, where she pledged that the UK would be outside the EU single market and most likely the customs union as well. Within those constraints, a weakened prime minister is seeking to blunt Brexit’s hardest edges. Three former prime ministers declared this week that the UK is on the wrong course. The Financial Times agrees that whatever deal is struck will be inferior to the present arrangements. Parliament must also take a view on the final agreement between the UK and the EU27. However, Mrs. May’s speech has smoothed the path toward a transition deal and negotiations on the future relationship. This will be welcome to business in desperate need of certainty. Mrs. May committed to remaining part of some EU regulatory agencies — including chemicals, aviation and medicine — and recognised that the UK would have to pay for the privilege. However, she sent mixed signals about the role of the European Court of Justice in settling disputes. Mrs. May has also abandoned empty threats of a race to the bottom on regulation. The UK’s rules on goods will be at least as strong as the EU’s. Alignment is a necessary compromise to minimise friction at the UK border and protect trade with its most important partner. But customs and tariff barriers are still on the horizon after Brexit. (Financial Times) Page 6 of 8
9. 5-Mar-18 UK Construction Sector Logs Subdued Growth The UK construction sector continued to expand at a subdued pace as fragile business sentiment and political uncertainty hinder client demand , survey data from IHS Markit showed. The IHS Markit/Chartered Institute of Procurement & Supply construction Purchasing Managers' Index rose to 51.4 in February from a 4-month low of 50.2 in January. A score above 50 suggests growth in the sector. The reading was above the expected level of 50.5. Nonetheless, the score signaled a marginal increase in construction output in February. Civil engineering was the worst performing category of construction work with activity declining at the sharpest pace for five months. At the same time, a soft patch for house building continued in February. Meanwhile, the bright spot was a solid upturn in commercial construction that expanded at the fastest pace since May 2017. Data showed that new business volume growth was slightly slower than seen at the start of the year. Weak business activity growth and lower new order volumes both weighed on input buying in February. (RTT) Cryptocurrencies Failing as Money, but Technology Has Promise: Carney Cryptocurrencies such as Bitcoin are failing as a form of money and have shown clear signs of being a financial bubble, but their technology could improve the financial system in future, Bank of England Governor Mark Carney said on Friday. Carney joined a chorus of concern among global policymakers over the rise of digital currencies, saying authorities needed to prevent their use by criminals and new rules were needed to treat them like other assets. Despite the surge in interest in cryptocurrencies, they were no substitute for cash or payment cards, he said in a speech. “The long, charitable answer is that cryptocurrencies act as money, at best, only for some people and to a limited extent, and even then only in parallel with the traditional currencies of the users,” he said. “The short answer is they are failing.” Bitcoin, the best known cryptocurrency, soared in value from around $1,000 at the start of 2017 to almost $20,000 in mid-December, before tumbling below $6,000 last month and then staging a partial recovery. (Reuters) Germany's Import Price Inflation Weakest Since Late 2016 Germany's import price inflation eased to the lowest since late 2016, data from Destatis showed. Import prices climbed 0.7% year-on-year in January, in line with expectations, but slower than December's 1.1% increase. This was the slowest rate since November 2016, when prices grew 0.3%. Meanwhile, month-on-month increase in import prices accelerated to 0.5% from 0.3% in December. The rate also exceeded the expected 0.4%. At the same time, export prices advanced 0.7% on year after climbing 1% in the previous month. On a monthly basis, export prices advanced 0.3%. (RTT) Germany's Retail Sales Fall Unexpectedly In January Germany's retail sales declined unexpectedly in January, figures from Destatis showed. Retail sales decreased 0.7% month-on-month in January, confounding expectations for an increase of 0.7%. Sales had fallen 1.1% in December. On a yearly basis, retail sales grew 2.3%, slower than the expected 3.3% increase. Nonetheless, the expansion reversed December's 0.2% fall. Sale of food, beverages and tobacco climbed 1% and that of non-food products advanced 3%. In a separate communique, the statistical office said wholesale turnover rebounded 3% in the whole year of 2017 following a 0.2% drop in 2016. In the fourth quarter, wholesale turnover rose 2.1% from the same period of last year. Turnover in December was down by 1% annually compared to 4.1% increase in November. (RTT) Page 7 of 8
10. 5-Mar-18 Share Buy-Back : 02 March 2018 Company AMPROP EMETALL GLOMAC KFIMA KOMARK KPJ KSL MALAKOF NYLEX SAUDEE SNTORIA SUNWAY UNIMECH YTL YTLPOWR Bought Back Price (RM) Hi/Lo (RM) 50,000 263,500 35,000 30,000 96,600 100,000 839,000 1,150,000 3,000 3,000 178,900 159,900 58,600 1,000 1,000 0.73 0.67/0.665 0.535/0.52 1.50/1.49 0.19/0.185 0.95 1.03/1.02 0.92/0.91 0.80/0.79 0.465/0.46 0.64 1.62/1.61 1.03/1.00 1.42 1.13 0.73/0.72 0.675/0.66 0.535/0.51 1.51/1.49 0.19/0.18 0.965/0.94 1.03/1.01 0.925/0.90 0.80/0.79 0.465/0.445 0.64/0.625 1.65/1.60 1.05/1.00 1.45/1.41 1.13/1.11 Total Treasury Shares 16,012,100 1,092,500 5,832,400 60,000 5,566,700 67,058,700 13,125,400 20,706,400 5,974,324 82,000 4,345,900 24,712,862 6,975,010 164,653,418 228,844,712 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) % upside Recom Market Cap. (RMm) BETA EPS (sen) PER (X) Div Yield (%) FY18 FY19 FY18 FY19 FY18 FY19 52weeks 52weeks % Chg High Price % Chg Low Price % Chg YTD 02-Mar-18 AUTOMOBILE BAUTO 2.07 2.50 20.8% Buy 2,399 0.50 14.3 19.9 14.5 10.4 5.5 5.8 2.47 -16.2 1.84 12.5 MBMR 2.21 2.47 11.8% Hold 864 0.69 24.7 26.9 8.9 8.2 2.7 3.2 2.60 -15.0 2.01 10.0 -5.9 0.5 PECCA 1.31 1.62 23.7% Buy 242 0.47 9.7 10.9 13.5 12.0 3.8 3.8 1.70 -22.9 1.26 4.0 -15.5 SIME 2.69 2.13 -20.8% Sell 18,294 1.58 13.2 16.4 20.4 16.4 1.2 1.5 3.06 -12.1 2.03 32.8 21.7 UMW 6.10 5.52 -9.5% Sell 7,127 1.33 28.6 40.2 21.3 15.2 2.3 3.3 6.98 -12.6 4.70 29.8 17.3 BANKS & FINANCIAL SERVICES ABMB 4.12 4.60 11.7% Buy 6,378 1.26 32.6 35.8 12.6 11.5 3.9 3.9 4.49 -8.2 3.62 13.8 1.0 AFFIN 2.53 2.40 -5.1% Sell 4,916 0.93 22.2 23.9 11.4 10.6 3.2 3.2 2.98 -15.0 2.22 13.9 9.5 AMBANK 4.10 4.70 14.6% Buy 12,358 1.43 38.1 44.4 10.8 9.2 4.4 4.4 5.70 -28.1 4.06 1.0 -7.0 CIMB 7.27 8.60 18.3% Buy 67,070 1.67 58.2 59.9 12.5 12.1 4.0 4.1 7.39 -1.6 5.21 39.5 11.2 HLBANK 19.50 19.30 -1.0% Hold 39,889 0.81 116.8 126.8 16.7 15.4 2.5 2.5 20.02 -2.6 13.38 45.7 14.7 MAYBANK 10.46 11.50 9.9% Buy 113,441 1.00 74.1 78.3 14.1 13.4 5.3 5.3 10.58 -1.1 8.70 20.2 6.7 PBBANK 22.98 27.30 18.8% Buy 88,737 0.72 153.3 166.5 15.0 13.8 2.5 2.6 23.04 -0.3 19.66 16.9 10.6 RHBBANK 5.39 6.10 13.2% Buy 21,614 1.55 54.3 59.0 9.9 9.1 2.8 2.8 5.61 -3.9 4.71 14.4 7.8 BURSA 11.20 11.80 5.4% Buy 6,020 0.93 43.9 45.0 25.5 24.9 3.2 3.2 11.48 -2.4 8.85 26.6 10.7 Note: BURSA proposed bonus issue of shares on the basis of 1 for 2. Ex-Target price RM7.04 BUILDING MATERIALS ANNJOO 3.44 4.34 26.2% Buy 1,779 1.33 43.7 46.6 7.9 7.4 6.3 7.2 3.98 -13.6 2.27 51.5 -10.9 CHINHIN 1.07 1.39 29.9% Buy 595 0.99 11.4 11.1 9.4 9.6 6.0 5.3 1.49 -28.2 1.00 7.5 -11.6 ENGTEX 1.09 1.38 26.6% Buy 464 0.83 14.2 16.1 7.7 6.8 3.8 5.0 1.52 -28.3 1.01 7.9 -0.9 GADANG 1.03 1.69 64.1% Buy 680 1.12 14.2 18.1 7.2 5.7 2.9 2.9 1.37 -24.8 1.01 2.0 -7.2 GAMUDA 4.94 6.00 21.5% Buy 12,138 0.87 34.5 35.6 14.3 13.9 2.4 2.4 5.52 -10.5 4.58 7.9 -0.4 IJM 2.76 2.89 4.7% Sell 10,015 1.17 13.7 18.2 20.1 15.2 3.4 3.4 3.61 -23.5 2.65 4.2 -9.5 KAB 0.28 0.38 33.9% Buy 9 na 31.4 37.3 0.9 0.8 3.6 4.3 0.33 -15.2 0.25 14.3 -6.7 PESONA 0.39 0.46 17.9% Buy 271 1.11 5.0 4.5 7.9 8.6 3.8 3.8 0.74 -46.9 0.38 2.6 -13.3 CONSTRUCTION SENDAI 0.87 0.55 -36.4% Sell 676 1.19 9.1 8.5 9.5 10.2 1.2 1.2 1.39 -37.8 0.58 50.4 0.0 SUNCON 2.33 2.65 13.7% Hold 3,011 0.57 14.7 16.4 15.8 14.2 3.4 3.9 2.64 -11.7 1.70 37.1 -7.2 WCT 1.58 1.50 -5.1% Sell 2,223 0.90 11.3 10.8 14.0 14.6 1.9 1.9 2.48 -36.2 1.46 8.2 -2.5 LITRAK 5.64 6.26 11.0% Hold 2,977 0.38 45.6 47.1 12.4 12.0 4.4 4.4 6.15 -8.3 5.40 4.4 1.6 CARLSBG 18.78 18.09 -3.7% Buy 5,777 0.75 87.8 91.8 21.4 20.5 4.6 4.7 18.78 0.0 14.12 33.0 22.7 HEIM 21.20 21.64 2.1% Hold 6,404 0.39 93.0 101.6 22.8 20.9 3.6 3.7 21.52 -1.5 16.98 24.9 12.2 AEON 1.67 1.97 18.0% Buy 2,345 0.31 7.5 8.9 22.2 18.7 2.7 3.0 2.52 -33.7 1.45 15.2 -5.1 AMWAY 7.57 8.59 13.5% Buy 1,244 0.46 48.3 49.9 15.7 15.2 5.3 5.4 8.18 -7.5 7.04 7.5 2.6 F&N 30.60 33.74 10.3% Buy 11,216 0.25 122.7 145.8 24.9 21.0 2.6 3.1 31.50 -2.9 23.40 30.8 13.3 CONSUMER Brewery Retail HUPSENG 1.09 1.25 14.7% Buy 872 0.41 5.7 5.9 19.1 18.4 5.5 5.5 1.28 -14.8 1.05 3.8 0.0 JOHOTIN 1.06 1.48 39.6% Buy 329 1.00 11.1 12.0 9.5 8.9 5.7 6.1 1.76 -39.8 1.00 6.0 -12.4 NESTLE 125.90 129.90 3.2% Hold 29,524 0.53 322.2 360.2 39.1 35.0 2.4 2.6 128.10 -1.7 76.02 65.6 22.0 PADINI 5.07 4.67 -7.9% Sell 3,336 0.79 28.0 30.4 18.1 16.7 2.5 2.6 5.50 -7.8 2.86 77.4 -4.0 POHUAT 1.53 2.01 31.4% Buy 336 0.60 22.9 25.4 6.7 6.0 5.2 5.2 2.07 -26.0 1.43 7.0 -14.5 QL 4.89 5.41 10.6% Hold 7,934 0.59 12.8 14.7 38.1 33.2 0.9 1.0 4.98 -1.8 3.45 41.9 12.4 SIGN 0.61 0.92 50.8% Buy 140 0.69 6.9 9.2 8.8 6.6 4.1 5.7 1.07 -43.0 0.57 7.0 -13.5 27.68 34.72 25.4% Hold 7,903 1.43 170.8 168.8 16.2 16.4 5.8 5.8 49.02 -43.5 27.48 0.7 -30.8 GENTING 9.00 11.58 28.7% Buy 34,482 1.47 55.1 61.8 16.3 14.6 1.8 1.8 10.00 -10.0 8.70 3.4 -2.2 GENM 5.20 6.68 28.5% Buy 29,426 1.45 27.6 32.0 18.9 16.3 2.3 2.5 6.38 -18.5 4.87 6.8 -7.6 2.26 3.34 47.8% Buy 3,044 0.60 21.5 26.0 10.5 8.7 7.1 8.0 2.98 -24.2 2.20 2.7 0.9 CCMDBIO 2.93 3.40 16.0% Buy 817 0.88 16.2 17.4 18.1 16.9 3.7 3.8 3.05 -3.9 1.97 48.7 15.8 IHH 6.10 6.40 4.9% Sell 50,261 0.79 11.9 15.0 51.4 40.8 0.5 0.6 6.33 -3.6 5.42 12.5 4.1 KPJ 0.95 1.13 19.6% Buy 3,983 0.55 3.9 4.4 24.2 21.7 2.3 2.5 1.14 -17.1 0.87 8.6 -2.6 HARTA 11.28 7.80 -30.9% Sell 18,674 1.13 25.2 28.8 44.8 39.1 1.3 1.5 12.18 -7.4 4.71 139.5 5.6 KOSSAN 8.33 9.73 16.8% Buy 5,327 0.54 37.4 42.1 22.3 19.8 2.2 2.5 8.79 -5.2 5.62 48.2 2.7 SUPERMX 2.62 2.70 3.1% Buy 1,718 0.63 20.0 22.6 13.1 11.6 2.0 2.3 2.74 -4.4 1.69 55.0 31.0 TOPGLOV 9.82 9.35 -4.8% Sell 12,334 0.66 35.1 42.4 27.9 23.1 1.5 1.8 10.24 -4.1 4.56 115.4 22.9 KAREX 0.89 0.93 4.5% Sell 892 0.82 1.8 3.0 50.3 29.4 0.5 0.9 2.26 -60.6 0.87 2.3 -31.5 SCIENTX 8.41 10.01 19.0% Buy 4,112 0.89 67.5 79.4 12.5 10.6 2.5 3.1 9.85 -14.6 7.23 16.3 -2.9 SKPRES 1.84 2.20 19.6% Buy 2,300 0.87 10.4 14.8 17.7 12.4 2.8 4.0 2.35 -21.7 1.24 48.4 -19.3 ASTRO 2.42 3.10 28.1% Buy 12,618 0.83 14.0 13.7 17.3 17.7 5.4 5.6 2.94 -17.7 2.40 0.8 -8.7 MEDIA PRIMA 0.50 0.45 -9.1% Sell 549 1.24 -3.8 -1.7 na na 0.0 0.0 1.28 -61.3 0.50 0.0 -34.9 STAR 1.31 1.25 -4.6% Sell 967 1.05 6.7 6.7 19.5 19.5 9.2 9.2 2.22 -40.9 1.29 1.6 -20.6 Tobacco BAT GAMING Casino NFO BJTOTO HEALTHCARE Hospitals/ Pharmaceutical Rubber Gloves INDUSTRIAL MEDIA
12. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company Share Price Target Price (RM) (RM) % upside Recom Market Cap. (RMm) BETA EPS (sen) FY18 PER (X) Div Yield (%) FY19 FY18 FY19 FY18 FY19 52weeks 52weeks % Chg High Price % Chg Low Price % Chg YTD OIL & GAS DNEX 0.45 0.72 61.8% Buy 781 1.58 4.2 4.5 10.6 9.8 2.2 2.2 0.69 -35.5 0.38 17.1 -8.2 LCTITAN 5.76 6.10 5.9% Buy 13,092 na 56.3 60.9 10.2 9.5 4.3 4.7 6.53 -11.8 4.14 39.1 22.6 MHB 0.81 0.81 0.6% Sell 1,288 1.37 0.5 1.7 167.6 48.3 0.0 0.0 1.16 -30.6 0.63 28.8 -2.4 MISC 6.90 7.00 1.4% Sell 30,800 1.12 50.1 53.8 13.8 12.8 4.3 4.3 7.90 -12.7 6.73 2.5 -7.0 PANTECH 0.59 0.69 16.9% Buy 440 1.24 6.1 6.8 9.7 8.7 4.7 5.2 0.74 -20.3 0.48 24.2 -8.5 PCHEM 8.10 8.84 9.1% Hold 64,800 0.86 52.5 53.8 15.4 15.1 3.2 3.2 8.28 -2.2 6.80 19.1 5.2 SAPNRG 0.63 1.25 100.0% Buy 3,745 1.99 -6.5 -5.0 na na 0.0 0.0 2.10 -70.2 0.62 0.8 -12.0 SERBADK 3.55 4.15 16.9% Buy 5,213 na 27.7 31.5 12.8 11.3 2.5 2.8 3.68 -3.5 1.63 117.8 9.6 UMWOG 0.31 0.39 25.8% Buy 2,547 1.84 0.4 1.2 81.2 26.8 0.0 0.0 0.68 -54.3 0.27 14.8 1.6 UZMA 1.44 1.57 9.0% Hold 461 0.85 12.9 13.9 11.2 10.4 0.0 0.0 1.98 -27.3 1.26 14.3 12.5 FGV 1.92 1.98 3.1% Sell 7,004 1.63 3.5 4.4 55.6 44.0 2.6 2.6 2.18 -11.9 1.51 27.2 13.6 IJMPLNT 2.25 2.25 0.0% Sell 1,981 0.22 6.7 10.8 33.3 20.8 3.6 4.0 3.38 -33.4 2.21 1.8 -17.9 IOICORP 4.79 5.08 6.1% Sell 30,100 0.92 20.9 21.6 22.9 22.1 6.1 3.6 4.82 -0.6 4.31 11.1 5.5 KFIMA 1.51 1.89 25.2% Buy 426 0.69 14.1 14.7 10.7 10.3 6.0 6.0 1.96 -23.0 1.45 4.1 -3.8 KLK 25.32 27.07 6.9% Hold 26,965 0.65 120.7 125.7 21.0 20.1 2.4 2.4 25.78 -1.8 23.66 7.0 1.3 SIMEPLT 5.51 6.25 13.4% Buy 37,473 na 21.0 22.1 26.2 25.0 2.5 2.7 6.00 -8.2 4.58 20.3 -8.2 TSH 1.58 1.97 24.7% Buy 2,182 0.51 9.3 9.6 17.0 16.5 1.5 1.6 1.90 -16.8 1.56 1.3 -4.2 UMCCA 6.28 6.73 7.2% Sell 1,317 0.39 22.7 34.8 27.6 18.0 2.7 2.9 7.08 -11.3 5.77 8.8 -3.5 GLOMAC 0.54 0.46 -14.0% Sell 425 0.73 3.0 4.4 18.1 12.1 3.7 3.7 0.67 -20.5 0.50 8.1 -3.5 HUAYANG 0.57 0.58 1.8% Sell 201 0.92 0.7 3.4 85.9 16.8 0.9 0.9 1.16 -50.9 0.57 0.0 -6.6 IBRACO 0.69 0.80 16.8% Buy 340 na 7.2 10.7 9.5 6.4 4.4 5.8 0.98 -29.7 0.50 37.0 -16.0 IOIPG 1.84 2.00 8.7% Sell 10,131 0.88 16.3 15.7 11.3 11.8 3.3 3.3 2.22 -17.1 1.79 2.8 -0.5 MAHSING 1.21 1.59 31.4% Buy 2,937 0.94 11.8 11.3 10.2 10.8 5.4 5.4 1.64 -26.2 1.20 0.8 -16.6 PLANTATIONS PROPERTY SIMEPROP 1.44 1.51 4.9% Hold 9,793 na 7.5 7.5 19.2 19.2 2.8 2.1 1.78 -19.1 1.04 38.5 -19.1 SNTORIA 0.64 0.76 18.8% Buy 360 0.15 8.3 8.6 7.7 7.5 1.6 1.6 0.91 -29.6 0.56 14.3 -7.9 SPB 4.72 5.10 8.1% Hold 1,622 0.56 18.7 24.0 25.2 19.6 2.5 2.5 5.50 -14.2 4.39 7.5 -3.7 SPSETIA 3.25 3.73 14.8% Buy 12,198 0.95 19.8 19.4 16.4 16.7 3.7 3.7 4.38 -25.9 3.07 5.9 -18.8 SUNWAY 1.63 1.75 7.4% Hold 7,978 0.92 11.8 12.4 13.8 13.1 3.7 3.7 1.96 -16.8 1.32 23.1 0.0 SUNREIT 1.68 1.87 11.3% Hold 4,948 0.84 10.0 10.7 16.7 15.7 6.0 6.4 1.90 -11.6 1.64 2.4 -11.6 CMMT 1.04 1.64 57.7% Buy 2,119 0.74 7.9 8.6 13.2 12.0 7.9 8.6 1.83 -43.2 1.02 2.0 -43.2 -6.1 REIT POWER & UTILITIES MALAKOF 0.92 0.82 -10.9% Sell 4,576 0.93 6.6 7.2 13.9 12.8 7.6 7.6 1.30 -29.2 0.86 7.0 PETDAG 25.86 24.08 -6.9% Sell 25,691 0.44 114.7 116.3 22.5 22.2 3.3 3.4 26.20 -1.3 21.00 23.1 6.6 PETGAS 17.42 19.46 11.7% Buy 34,470 0.88 99.3 100.0 17.5 17.4 4.0 4.0 20.12 -13.4 15.82 10.1 -0.3 TENAGA 15.70 18.22 16.1% Buy 88,956 0.55 131.3 127.5 12.0 12.3 4.1 4.0 16.12 -2.6 13.44 16.8 2.9 YTLPOWR 1.11 1.16 4.5% Sell 8,629 0.92 8.6 8.9 12.8 12.4 4.5 4.5 1.50 -26.0 1.11 0.0 -14.0 -2.9 TELECOMMUNICATIONS AXIATA 5.33 6.50 22.0% Buy 48,230 1.54 15.9 19.4 33.4 27.4 1.5 2.9 5.82 -8.4 4.54 17.4 DIGI 4.75 5.15 8.4% Hold 36,931 0.96 19.7 20.4 24.1 23.3 4.1 4.3 5.19 -8.5 4.36 8.9 -6.9 MAXIS 5.81 6.05 4.1% Sell 45,379 1.08 25.2 25.0 23.1 23.2 3.4 3.4 6.60 -12.0 5.48 6.0 -3.3 TM 5.90 7.20 22.0% Buy 22,172 0.64 22.8 24.9 25.8 23.7 3.5 3.8 6.69 -11.8 5.83 1.2 -6.3 ELSOFT 2.52 3.30 31.0% Buy 693 0.86 13.1 15.0 19.2 16.8 3.7 4.2 2.95 -14.6 1.60 57.3 -6.7 IRIS 0.19 0.22 15.8% Buy 470 2.47 0.0 0.3 690.7 60.0 0.0 0.0 0.25 -22.4 0.12 65.2 2.7 INARI 3.29 3.65 10.9% Hold 6,800 0.73 13.7 15.3 23.9 21.5 3.0 3.3 3.82 -13.9 1.88 75.4 -3.2 TECHNOLOGY Semiconductor & Electronics Note: INARI proposed bonus issue shares on the basis of 1 for 2. For more detail please refer to 30.01.18 report. MPI 9.16 10.70 16.8% Hold 1,822 0.84 73.9 86.9 12.4 10.5 3.5 3.5 14.52 -36.9 8.62 6.3 -27.4 UNISEM 2.61 2.70 3.4% Sell 1,915 1.16 19.0 20.3 13.8 12.8 4.6 4.6 4.25 -38.6 2.52 3.6 -28.5 TRANSPORTATION Airlines AIRASIA 4.35 4.93 13.3% Hold 14,537 1.06 49.3 49.3 8.8 8.8 1.8 1.8 4.75 -8.4 2.62 66.0 29.9 AIRPORT 8.67 8.61 -0.7% Sell 14,385 1.29 18.0 18.8 48.3 46.1 1.5 1.2 9.45 -8.3 6.43 34.8 -1.4 Freight & Tankers PTRANS 0.30 0.46 55.9% Buy 372 na 2.3 3.8 12.6 7.8 2.3 3.8 0.38 -22.7 0.17 75.4 5.4 TNLOGIS 1.13 1.45 28.3% Buy 516 1.04 10.3 10.5 11.0 10.7 4.4 4.4 1.83 -38.4 1.10 2.7 -15.7 WPRTS 3.65 4.06 11.2% Buy 12,447 0.44 15.6 20.0 23.4 18.2 1.0 1.3 4.19 -12.9 3.12 17.0 -1.4 SNAPSHOT OF FOREIGN STOCKS UNDER COVERAGE Company Share Price Target Price (S$) (S$) % upside Recom Market Cap. (S$m) Beta EPS (cent) FY18 FY19 PER (X) FY18 FY19 Div Yield (%) FY18 FY19 52week 52week % Chg High Price % Chg Low Price % Chg YTD BANKS & FINANCIAL SERVICES DBS 28.41 30.50 7.4% Buy 72,840 1.14 212.3 246.0 13.4 11.6 2.3 2.5 29.7 -4.4 18.47 53.8 14.3 OCBC 13.06 14.30 9.5% Buy 54,656 1.22 109.5 123.2 11.9 10.6 6.7 7.7 13.6 -4.0 9.45 38.2 5.4 UOB 27.75 27.80 0.2% Hold 46,128 1.18 216.6 244.0 12.8 12.8 2.9 2.9 28.8 -3.6 21.30 30.3 4.9 PLANTATIONS WILMAR 3.18 3.31 4.1% Hold 20,347 0.80 27.4 29.3 11.6 10.9 3.1 3.5 3.9 -17.8 2.97 7.1 2.9 IFAR 0.34 0.36 5.9% Buy 488 0.98 3.8 4.1 9.0 8.2 1.5 1.7 0.5 -37.6 0.33 4.6 -12.8 BUY : Total return within the next 12 months exceeds required rate of return by 5%-point. HOLD : Total return within the next 12 months exceeds required rate of return by between 0-5%-point. SELL : Total return is lower than the required rate of return. Total Return is defined as expected share price appreciation plus gross dividend over the next 12 months. 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 Monday , March 05, 2018 THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Weekly Technical Outlook FBM KLCI: 1,856.07 (-5.43, -0.29%) Chartist : Stephen Soo Tel: +603-2167 9607 stsoo@ta.com.my www.taonline.com.my Choppy Week Likely on External Uncertainties Last week, the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) fell on month end profit-taking and selling, in line with regional weakness after China February manufacturing slowed more than expected. The new US Fed Chairman Jerome Powell’s hawkish comments on inflation also did not help, raising concerns there could be four more interest rate hikes this year, made worse by the US President’s threat to impose punitive tariffs of 25 percent for steel and 10 percent for aluminum, which forced steel producers and automakers in Asia to slump ahead of the weekend. For the week, the FBM KLCI eased 5.43 points, or 0.29 percent to 1,856.07, as gains on Nestle (+RM2.90), Hong Leong Bank (+RM1.28sen) and HLFG (+40sen) were overshadowed by losses on AMBank (-41sen), Axiata (-32sen), Press Metal (-28sen) and Petronas Gas (-26sen). Average daily traded volume and value improved mildly to 2.87 billion shares and RM2.84 billion last week, compared to the 2.56 billion shares and RM2.25 billion average respectively the previous week. Bursa Malaysia’s blue chips stayed range bound Monday, despite the firmer regional tone due to spillover from the strong session on the US stock market the previous Friday. The KLCI ended down 1.42 points at 1,860.08, after ranging between early high of 1,867.98 and low of 1,859.98, as losers edged gainers 513 to 479 on total turnover of 2.71bn shares worth RM2.74bn. The local benchmark climbed to close at a more than three-year high the next day, helped by strength in Hong Leong Bank and key plantation stocks on better-thanexpected earnings. The KLCI rose 11.38 points to end at 1,871.46, off an early high of 1,872.35 and low of 1,865.79, but losers beat gainers 563 to 443 on turnover totaling 2.76bn shares worth RM2.89bn. Blue chips slumped on Wednesday due to month end profit-taking and selling which accelerated losses, falling in line with the region after China February manufacturing slowed more than expected and on new US Fed Chairman Jerome Powell’s hawkish comments on interest rates and inflation. The KLCI lost 15.26 points to settle at the day’s low of 1,856.2, off an earlier high of 1,872.02, as losers trashed gainers 812 to 265 on higher turnover totaling 2.95bn shares worth RM3.63bn. While blue chips recovered the subsequent day due to bargain hunting after the previous day’s selloff, the broader market stayed soft as the hawkish tone from the new US Fed Chairman increased concerns over more interest rate hikes. The KLCI gained 4.66 points to close at 1,860.86, off an early low of 1,851.51 and high of 1,862.81 as losers swarmed gainers 648 to 361 on higher turnover totaling 3.39bn shares worth RM2.5bn. On Friday, market sentiment turned bleak after the US President threatened to impose tariffs of 25 percent for steel and 10 percent for aluminum, forcing steel producers and automakers in Asia to slump. Tariffs are also seen as inflationary due to prospects for higher prices for consumers, driving up concerns over inflation and further interest rate hikes. The index gave back 4.79 points to close the week at 1,856.07, after oscillating between early low of 1,854.25 and high of 1,860.64, as losers beat gainers 656 to 291 on reduced turnover of 2.55bn shares worth RM2.41bn. Page 1 of 3
14. 5-Mar-18 Trading range for the blue-chip benchmark index was 20 .84 points, compared to the 23.17point range the previous week. For the week, the FBM-EMAS Index shed 139.83 points or 1.05 percent to 13,173.95, while the FBM-Small Cap Index sank 594.48 points, or 3.5 percent to 16,433.86, as profit-taking and selling momentum increased on small cap stocks. A sell signal registered on the daily slow stochastic momentum indicator on the FBM KLCI with the trigger line hooking down from the overbought zone (Chart 1), while the weekly indicator trigger line is turning south in overbought territory. The 14-day Relative Strength Index (RSI) eased to a lower reading of 55.78, while the 14-week RSI dipped to a lesser reading of 65.25 as of last Friday. Chart 1 On trend indicators, the daily Moving Average Convergence Divergence (MACD) signal line also turned south to reverse the previous week’s mild buy signal, but the weekly MACD indicator managed to sustain its uptrend trajectory (Chart 2). The +DI and –DI lines on the 14-day Directional Movement Index (DMI) are contracting towards each other on a falling ADX line, suggesting absence of trend. Chart 2 Page 2 of 3
15. 5-Mar-18 Conclusion As technical momentum indicators for the FBM KLCI have markedly worsened after last week ’s correction, expect more downside volatility as investors refrain from bargain hunting despite the heavy losses seen on small caps and lower liners. On the external front, given the unfortunate correction and increased volatility in US stocks last week, and also fears that the US President’s tariff threat on steel and aluminum will fuel a global trade war, expect more choppy trade this week. Immediate support for the index will be at 1,848, the 30-day moving average, followed by the 50-day ma at 1,824, while stronger support is at 1,800. Crucial resistance-turn-support level is at 1,796, the June 2017 peak matching the 6 Feb pivot low. Immediate resistance will be last week’s high of 1,872, with the 2 Feb peak of 1,880 and upper Bollinger band at 1,881 as tougher upside hurdles. Stock-wise, budget carriers AirAsia and AirAsia X are attractive to sell or take profit given the overbought momentum after the recent rally, while lower liner construction stocks such as Ekovest, Gadang, Kimlun, KKB Engineering, Mudajaya and Naim Holdings should see bargain hunters cushion downside. 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 Monday, March 05, 2018, the chartist, Stephen Soo, who prepared this report, has interest in the following securities covered in this report: (a) nil Kaladher Govindan – Head of Research TA SECURITIES HOLDINGS BERHAD (14948-M) A Participating Organisation of Bursa Malaysia Securities Berhad Menara TA One 22 Jalan P. Ramlee 50250 Kuala Lumpur Malaysia Tel: 603 – 2072 1277 Fax: 603 – 2032 5048 www.ta.com.my Page 3 of 3
16. SECTOR UPDATE Monday , March 05, 2018 FBMKLCI: 1,856.07 THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Oil & Gas Sector Neutral Higher Dividends & Capex for FY18 (Maintained) Kylie Chan Sze Zan Tel: +603-2167 9601 kyliechan@ta.com.my www.taonline.com.my Petronas reported FY17 headline net profit of RM37.7bn (+120% YTD) and core net profit of RM38.8bn (+28% YTD). The latter excluded net asset impairments of RM1.1bn (FY16: RM13.0bn), comprising mainly non-FID (Final Investment Decision) for Pacific North West (PNW) LNG project in Western Canada. The sterling FY17 performance was mainly attributed to: 1) improved product prices on the back of higher Brent price of USD54/bbl (FY16: USD44/bbl), and Japanese crude cocktail price of USD51/bbl (1Q16: USD39/bbl), 2) Lower well costs written off, 3) better petrochemicals spread, 4) Higher refining, trading and marketing margins, and 5) weaker MYR/USD of 4.30 (FY16: 4.15). This more than offset bottomline drag from 1) higher net production and production costs, and 2) amortisation of O&G properties. In FY17, Petronas spent RM44.5bn (-12% YoY) in capex, which mainly used in Malaysia (83%). Meanwhile, for FY18, the group allocated higher capex of RM55bn. If this amount is achieved, it will mark Petronas’ first capex expansion in 3 years since 2014 (Figure 2). Management articulated a cautious tone in 4Q17 with regards to sustainability of the industry recovery. On the back of this, Petronas reiterated its strategy to sustain austerity measures and cost control. To recap, the group achieved sizeable reduction in controllable costs, amounting to RM3bn (-6% YoY) in FY17. On the back of strong profit growth, FY17’s dividend payout of RM16bn (FY16: RM16bn) was higher than earlier guidance of RM13bn. Meanwhile, for FY18, the group committed to pay even higher dividend of RM19bn to the government. Nevertheless, the balance sheet remains healthy and accommodative to higher dividends, with largely stable net gearing (0.1x) and cash levels (RM128bn), We expect earnings for O&G upstream contractors to remain weak, on the back of: 1) tenders for greenfield developments would remain scarce, 2) compressed project margins due to intense competition and sustained cost controls by oil majors, and 3) weak fleet utilisation and charter rates due to asset oversupply, coupled with low demand. On the flipside, the nascent recovery in oil price is expected to result in higher cash profits for E&P (Exploration and Production) players. Additionally, the stronger oil price is also an impetus to ramp up production rates and monetize O&G reserves. Other beneficiaries of firmer oil price include: 1) petrochemical producers and refineries: due to subdued feedstock cost and higher product prices, and 2) petroleum retailers: inventory lag gains from oil price uptrend, barring any price volatility. On the back of the mixed outlook, we maintain our Neutral stance on the sector with FY18/19 average oil price assumptions of USD60/65 per bbl. Page 1 of 3
17. 5-Mar-18 Figure 1 : Quarterly Capex Spend Figure 2 : Annual Capex Spend 80 25.0 70 19.8 20.0 17.9 56.6 12.1 50.4 45.6 14.4 14.0 11.3 10.6 44.5 50 12.5 11.9 10.7 9.4 10.0 RM bn RM bn Domestic 64.7 60 15.0 15.0 71 International 37.1 40 34.9 30 20 5.0 10 0.0 1Q15 3Q15 1Q16 3Q16 1Q17 0 3Q17 2010 2011 2012 2013 2014 2015 2016 2017 Source: Petronas, TA Securities Source: Petronas, TA Securities Figure 3: Quarterly Results Analysis (RM bn) Cumulative YE 31 Dec 4Q17 3Q17 Revenue 61.8 53.7 Opera ting P rofit 24.5 F ina nce Cos ts (1.1) As s ocia tes & J CE s QoQ% 4Q16 YoY% FY17 FY16 YoY% 15.1 54.3 13.7 223.6 195.1 14.6 15.6 57.0 16.4 49.2 68.2 36.3 87.8 (0.9) 21.5 (1.0) 11.4 (3.7) (3.3) 12.1 0.2 0.2 (13.4) 0.1 28.4 0.1 0.9 (87.9) Net Impa irments P reta x P rofit 0.0 23.6 (0.2) 15.0 nm 58.1 (1.7) 15.6 nm 51.4 (1.1) 64.7 (13.0) 33.9 (91.5) 90.7 Ta x (5.4) (5.0) 8.7 (4.3) 24.9 (19.1) (10.1) 88.5 MI (1.8) (2.1) (11.7) (1.8) (0.5) (7.9) (6.6) 19.8 Net P rofit 16.4 7.9 >100 9.4 73.6 37.7 17.2 >100 Core Net Profit 16.4 8.1 102.6 11.1 47.3 38.8 30.2 28.3 E B IT Ma rg in 40% 29% 31% 19% 30% P reta x Ma rg in 38% 28% 29% 29% 17% Net Ma rg in Core Net Ma rg in 27% 27% 15% 15% 17% 20% 17% 17% 9% 15% 9% 9% 8% -9% -5% Ta x Ra te Page 2 of 3
18. 5-Mar-18 Peers Comparison Company Call Mkt Cap Tgt .Price (RM) (RM mn) (RM) Upside (%) PE (x)* PBV (x) ROE (%) ROA (%) DPS (sen) CY17 CY18 CY17 CY18 CY17 CY18 CY17 CY18 CY17 CY18 Dividend Yield (%) CY17 CY18 Buy 0.46 807.1 0.72 56.5 11.0 10.2 1.6 1.4 14.7 14.1 12.8 12.6 1.0 1.0 2.2 2.2 Under Review 5.76 11,444.3 6.10 5.9 8.9 8.3 0.9 0.9 10.4 10.5 9.3 9.3 25.0 27.0 4.3 4.3 Sell 6.90 30,800.2 7.00 1.4 13.8 12.8 0.8 0.8 6.1 4.3 4.5 30.0 30.0 4.3 4.3 0.81 0.6 167.6 48.3 0.5 0.5 0.3 1.0 0.2 0.7 0.0 0.0 0.0 0.0 0.69 16.9 8.8 8.2 0.8 0.7 8.5 8.7 5.9 6.1 3.0 3.2 5.1 4.6 15.1 DNeX Lotte Titan Price MISC 6.3 MMHE Sell 0.81 1,288.0 Pantech Buy 0.59 438.8 Pet Chem Hold 8.10 64,800.0 8.84 9.1 15.4 2.1 1.9 13.5 12.8 12.0 11.5 26.0 26.0 3.2 3.2 Sapura Buy 0.63 3,775.1 1.25 98.4 (12.2) (14.8) 0.3 0.3 (2.5) (2.1) (0.9) (0.7) 0.0 0.0 0.0 0.0 Serba Buy 3.55 5,213.2 4.15 16.9 12.8 11.3 2.4 2.1 19.1 18.9 11.7 11.6 9.0 10.0 2.5 2.5 UMW-OG Buy 0.31 2,169.4 0.39 25.8 69.2 22.8 0.8 0.8 1.1 3.3 0.7 2.0 0.0 0.0 0.0 0.0 Uzma Hold 1.44 460.8 1.57 9.0 11.2 10.4 0.8 0.7 7.1 7.1 3.0 3.1 0.0 0.0 0.0 0.0 35.4 16.4 1.1 1.0 9.0 9.2 6.7 6.8 15.7 16.2 3.6 3.5 Average [ TH E RE M A IN DE R OF T H IS P A GE IS IN TE N TI O NA L L Y L E F T BL AN K] Sector Recommendation Guideline OVERWEIGHT: The industry, as per our coverage universe, is expected to outperform the FBMKLCI over the next 12 months. NEUTRAL: The industry, as per our coverage universe, is expected to perform in line with the FBMKLCI over the next 12 months. UNDERWEIGHT: The industry, as per our coverage universe, is expected to underperform the FBMKLCI over the next 12 months. Stock Recommendation Guideline BUY : HOLD : SELL : Not Rated: Total return within the next 12 months exceeds required rate of return by 5%-point. Total return within the next 12 months exceeds required rate of return by between 0-5%-point. Total return is lower than the required rate of return. The company is not under coverage. The report is for information only. Total Return is defined as expected share price appreciation plus gross dividend over the next 12 months. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting. Required Rate of Return of 7% is defined as the yield for one-year Malaysian government treasury plus assumed equity risk premium. Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. As of Monday, March 05, 2018, the analyst, Kylie Chan Sze Zan, who prepared this report, has interest in the following securities covered in this report: (a) nil Kaladher Govindan – Head of Research TA SECURITIES HOLDINGS BERHAD (14948-M) A Participating Organisation of Bursa Malaysia Securities Berhad Menara TA One 22 Jalan P. Ramlee 50250 Kuala Lumpur Malaysia Tel: 603 – 2072 1277 Fax: 603 – 2032 5048 www.ta.com.my Page 3 of 3
19. COMPANY UPDATE Monday , March 05, 2018 FBMKLCI: 1,856.07 Sector: Automotive THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* TP: RM5.52 (-9.5%) UMW Holdings Bhd Last Traded: RM6.10 The Worst is Over Abel Goon Sell Tel: +603-2072 1277 ext. 1641 abelgoon@ta.com.my We emerged from the analysts’ briefing feeling rather neutral on UMW’s future prospects. Although we believe the worst is over, we only expect UMW’s prospects to improve in FY19 when 1) the new automotive plant is completed, 2) the Rolls Royce plant begins to turn profitable and 3) disposal of unlisted oil and gas assets are completed. Thus, after rolling forward our valuation base year to FY19, we arrive at a higher TP of RM5.52. However, we maintain our Sell recommendation as we believe UMW’s share price has run ahead of fundamentals. Toyota Sales Volume to Remain Flattish To recap, FY17 sales volume increased 8% in the same period last year. This underpinned the 5.8% growth in revenue in FY17. That said, average USD/MYR rate realised in FY17 was higher at 4.25 (FY16: 4.14). Therefore, this led to EBITDA margins compression to 6.1% (previous: 11.4%). Going forward, UMW is now targeting more than 70k total sales volume for Toyota and Lexus vehicles in 2018. In spite of this, we note that the only confirmed model launch in FY18 is the Toyota CH-R. Given 1) lack of new model launches, 2) soft consumer sentiment and 3) stringent hire purchase loan approvals, we expect total sales volume in FY18 to remain flattish followed by decent growth in FY19. This follows after completion of UMW’s new automotive plant in Bukit Raja. Aerospace to Breakeven in FY19 According to management, the new Rolls Royce plant in Serendah delivered 3 fan cases in FY17. Gestation costs at the plant caused the M&E division to register about RM20mn losses. Excluding the startup costs, the lubricant business (original M&E business) registered circa RM40mn core net profit. Nevertheless, UMW is ramping up production in the plant and targets to deliver circa 80 and 160 units of fan cases in FY18 and FY19 respectively. Therefore, the plant is expected to breakeven in FY19 and start contributing meaningful profits in FY20 when it reaches full capacity. To recap, the Rolls Royce plant has capacity of 250 units per annum and is producing fan cases for the Trent 1000 engine. Serendah Land a Hidden Gem To recap, UMW previously shared that the remaining 830 acres of land in Serendah will be disposed of or leased to various entities in order to establish a high value manufacturing village. We understand that T7-Kilgour (a JV between T7 Global Bhd and KOV Ltd, a UK-based aerospace company) has acquired a small parcel at UMW’s land in Serendah to develop a specialised metal treatment plant. We believe the 830 acres of land is a hidden gem on UMW’s balance sheet as market prices of land in the vicinity is circa RM30/sqft. Thus, UMW’s Serendah land could potentially be worth over RM1bn if disposed today. That said, we believe complete disposal of the land may drag www.taonline.com.my Share Information Bloomberg Code 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 Major Shareholders (%) UMWH MK 4588 Main Market 1,168.3 7,126.6 6.98/4.70 818 25.5 1.5 PNB - 54.2 EPF - 9.2 KWAP - 7.7 Forecast Revision Forecast Revision (%) Net profit (RMm) Consensus TA's / Consensus (%) Previous Rating FY18 FY19 38.4 9.0 334.4 469.6 322.9 426.4 104 110 Sell (Maintain) Financial Indicators Net Debt / Equity (x) FCPS (sen) Price / CFPS (x) Core ROA (%) NTA/Share (RM) Price/NTA (x) Share Performance (%) Price Change 1 mth 3 mth 6 mth 12 mth FY18 0.6 53.2 11.5 3.1 3.7 1.6 FY19 0.5 69.6 8.8 4.0 4.0 1.5 UMW (11.3) 19.1 10.7 15.8 FBM KLCI 0.2 7.6 4.9 8.6 (12-Mth) Share Price relative to the FBMKLCI Source: Bloomberg Page 1 of 3
20. 5-Mar-18 over a prolonged period . In fact, management provided guidance that it would likely require 15-20 years to fully dispose of the lands. Full Disposal of Unlisted O&G Assets. Following the complete disposal of its listed oil and gas asset, i.e. UMW-OG, UMW is now stepping up efforts to rid itself of remaining unlisted oil and gas assets. According to management, there are now only 9 assets remaining (start: 15 assets) where 4 are profitable, 2 have ceased operations and the remaining 3 are loss-making. Nevertheless, all the assets have been written down to less than 50% of their respective NTAs and should be sold by end-FY18. Management noted that they are currently in active negotiations with various parties to dispose of all the assets. Impact Our earnings are increased by 38.4%/9.0% in FY18/19 after we 1) revise our USD/MYR assumption to 4.0 from 4.15 previously, 2) decrease automotive sales volume to 70.5k/74.0k from 73.5k/77.2k previously, 3) impute FY17 figures, 4) remove discontinued operations, i.e. unlisted oil and gas from our earnings model in FY18 and FY19 and 5) increase capex spend to RM600mn from RM500mn for FY18-19, in-line with management’s guidance. We also introduce FY20 core net profit forecast of RM507.2mn implying 8.0% earnings growth. Valuation We increased our target PER for the automotive sector to 15x (previous: 13x) to capture earnings growth and increased efficiency upon completion of the new Bukit Raja plant. We also include the Serendah land into our valuation model at 50% discount to RNAV. Additionally, we also roll forward our valuation base year to FY19. Thus, we arrive at a higher TP of RM5.52 based on SOP valuations. That said, we opine that UMW is fully valued for now at 15.1x CY19 PER compared to peers’ average of 13x CY19 PER. Thus, our Sell recommendation remains. SOP Valuation Segments Equity Value PER (x) (RM mn) Reasoning Automotive 15 6,313.0 2x premium to peer's average Equipment 12 1,492.2 Regional peers' average M&E Serendah Land 10 124.5 522.7 Regional peers' average 50% discount to RNAV Total Equity Value Net debts (holding co.) Shares outstanding (mn) Holding co. discount SOP TP (RM) 8,452 (1,286.2) 1,168 10% 5.52 Page 2 of 3