Bursa Malaysia Daily Market Report - 7 July

Transcription

1. Friday , 07 July, 2017 For Internal Circulation Only TA RESEARCH’S ‘DAILY COMPILED REPORTS’ News 1. Daily Market Commentary 2. Daily Brief Fundamental Reports 1. Banking Sector: Clearer Skies 2. Dagang NeXchange Bhd: Expansion into Downstream Services 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 Friday, 07 July 2017 TA Research e-mail : taresearch@ta.com.my For Internal Circulation Only Review & Outlook KLSE Market Statistics (06.07.2017) (mil) Main Market 1,052.4 Warrants 170.9 ACE Market 299.7 Bond 30.9 ETF 0.0 Total 1,553.9 Off Market 41.8 Volume +/-chg (RMmn) 89.4 1,633.3 49.5 22.1 -94.3 80.3 20.9 9.9 0.00 0.0 1,745.5 27.9 184.4 Value +/-chg 68.5 -0.5 -19.0 6.5 0.01 170.4 Major Indices Index +/- chg Malaysia FBMKLCI FBMEMAS FBMSCAP July 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) 12.9 11.9 10.8 2.9 1.0 1.0 Up Down 252 372 68 79 37 53 3 4 2 0 362 508 % chg % YTD chg 1,770.53 12,631.75 17,481.54 1,768.00 2.37 5.46 -26.45 2.00 0.13 0.04 -0.15 0.11 7.85 10.16 18.80 8.10 21,320.04 6,089.46 7,337.28 19,994.06 2,387.81 25,465.22 3,226.34 1,569.64 5,849.58 3,212.44 1,914.59 5,758.76 -158.13 -61.39 -30.32 -87.57 -0.54 -56.75 -22.37 -5.38 24.52 5.31 1.45 -4.49 -0.74 -1.00 -0.41 -0.44 -0.02 -0.22 -0.69 -0.34 0.42 0.17 0.08 -0.08 7.88 13.12 2.72 4.60 17.83 15.75 12.00 1.73 10.44 3.51 -2.77 1.64 Top 10 KLCI Movers Based on Mkt Cap. Off Market SWSCAP SIME BIMB SEM BJASSET TOMYPAK Value/ Volume 1.55 0.13 0.27 0.32 1.16 1.12 4.41 @ @ @ @ @ @ (RM) 1.00 9.52 4.54 1.36 1.30 1.00 Exchange Rate USD/MYR 4.3001 0.0008 USD/JPY 113.26 -0.3800 EUR/USD 1.137 0.0045 Counter TENAGA SIME IHH CIMB MAXIS DIGI MISC GENM HLBANK YTLCORP Mkt Cap. (RM’mn) 80,018 64,812 59,744 57,200 42,986 38,953 33,166 32,650 28,969 15,592 Chg (RM) 0.02 0.02 0.09 0.04 0.03 0.01 0.03 0.10 0.15 0.01 Vol. (mn) 7.95 8.80 12.24 6.97 1.94 3.02 0.69 6.21 0.57 6.39 Commodities Futures Palm Oil (RM/mt) 2,533.00 13.00 Crude Oil ($/Barrel) 45.33 -0.28 Gold ($/tr.oz.) 1,224.70 -1.80 Important Dates TDM - 1:10 Bonus Issue - BI of 150.5m shares. 1 bonus share for every 10 existing shares. Entitlement Date: 03/07/2017. LISTING ON: 04/07/2017. SCC - 1:10 Bonus Issue - BI of 4.3m shares. 1 bonus share for every 10 existing shares. Ex-Date: 06/07/2017. Entitlement Date: 10/07/2017. LISTING ON: 11/07/2017. The local market stayed range bound Thursday as the cautious tone prevailed in line with the US Federal Reserve's FOMC meeting minutes and given the volatile oil prices. The KLCI added 2.37 points to again close at the day's high of 1,770.53, off an intra-day low of 1,765.75, as losers beat gainers 508 to 362 on moderate turnover of 1.55bn shares worth RM1.74bn. Sideways trading should persist with caution over the geopolitics in North Korea, choppy oil prices and dearth of positive domestic market leads dampening market tone. Immediate resistance stays at the 50-day moving average (1,773), then 1,782, followed by the recent peak of 1,796, and then the 1,800 psychological level. Better support is from the 100-day moving average at 1,750. Any further weakness in AirAsia shares towards the 100-day ma (RM3.07), with better support from the 76.4%FR (RM3.04), should attract bargain hunters looking for oversold rebound towards the June high of RM3.42, with strong resistance from the 16/5/17 peak (RM3.59). Likewise, selling dips in AirAsia X to the 50%FR (38sen) should encourage buying ahead of oversold rebound towards the 76.4%FR (44sen), with tougher upside hurdle from the Aug 2016 peak of 49.5sen. News Bites • • • • • • • • • • • • • • Tenaga Nasional Berhad has proposed to raise RM5bn in Islamic bonds that have a tenure of up to 50 years, to finance for capital expenditure, investment and related corporate purposes that are compliant with Syariah principles. Federal Land Development Authority not selling stake in Felda Global Ventures Holdings Berhad, says Chairman Tan Sri Shahrir Abdul Samad. Yinson Holding Bhd is currently evaluating three to six floating production storage and offloading projects within its existing operations in Africa and Asia. Dagang NeXchange Bhd has secured a project worth between RM50mn and RM75mn to supply up to 100 portable container systems for petroleum products. Tasco Bhd's investment in the global part distribution center at Kuala Lumpur International Airport's Free Cargo Zone is expected to expected to generate monthly revenue of RM4mn to RM5mn for the company. Hibiscus Petroleum Bhd, which proposed a private placement of up to 10% of its share capital in May to raise some RM65.0mn, is considering alternative fundraising avenue from financial institutions. AT Systematization Bhd is planning to consolidate its shares on the basis of three existing shares into one new share, which will reduce the number of its shares in the market and reduce the magnitude of fluctuation of its market capitalisation. Scomi Engineering Bhd is dragging government-owned Prasarana Malaysia Bhd to the court again to stop the latter from appointing a new party to supply the remainder six trains needed to complete the upgrade works under the Kuala Lumpur Monorail Fleet Expansion Project. CIMB-Principal Asset Management Bhd aims to raise RM300mn in sales from its newly-launched China Multi Asset Income Fund by yearend. Petroliam Nasional Bhd's unit has signed an EPCC contract with the Consortium of China Petroleum Pipeline Bureau and CPP Petroleum Engineering (M) Sdn Bhd for the development of additional olefins storage facilities within the Pengerang Integrated Complex. AirAsia Bhd is set to launch MyCorporate, a suite of products exclusively made for business travellers consisting of three bundle options, depending on the requirements of the traveller and company budget. Media Prima Bhd has appointed Tan Sri Ismee Ismail as its new chairman effective Aug 1 this year. Hiring at private U.S. employers slowed to 58,000 in June, lower than expected 180,000, potentially raising concerns about a weakening economy. ECB policy makers discussed how to signal their increasing confidence in the Eurozone economy at their June policy meeting, and considered dropping a pledge to accelerate their massive bond-buying program, according to the minutes. 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 Friday , July 07, 2017 FBMKLCI: 1,770.53 A Member of the TA Group MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Daily Brief Market View, News In Brief: Corporate, Economy, and Share Buybacks THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* TA Research Team Coverage Market View Tel: +603-2072 1277 taresearch@ta.com.my www.taonline.com.my Sideways on Lack of Market Leads The local market stayed range bound Thursday as the cautious tone prevailed in line with the US Federal Reserve’s FOMC meeting minutes and given the volatile oil prices. The KLCI added 2.37 points to again close at the day’s high of 1,770.53, off an intra-day low of 1,765.75, as losers beat gainers 508 to 362 on moderate turnover of 1.55bn shares worth RM1.74bn. Immediate Resistance at 1,773/1,782 Sideways trading should persist with caution over the geopolitics in North Korea, choppy oil prices and dearth of positive domestic market leads dampening market tone. Immediate resistance stays at the 50-day moving average (1,773), then 1,782, followed by the recent peak of 1,796, and then the 1,800 psychological level. Better support is from the 100-day moving average at 1,750. Buy Weakness in AirAsia & AirAsia X Any further weakness in AirAsia shares towards the 100-day ma (RM3.07), with better support from the 76.4%FR (RM3.04), should attract bargain hunters looking for oversold rebound towards the June high of RM3.42, with strong resistance from the 16/5/17 peak (RM3.59). Likewise, selling dips in AirAsia X to the 50%FR (38sen) should encourage buying ahead of oversold rebound towards the 76.4%FR (44sen), with tougher upside hurdle from the Aug 2016 peak of 49.5sen. Asian Markets Mixed As Investors Mull Fed Minutes Asian stock markets traded mixed on Thursday as investors digested the minutes of the U.S Federal Reserve's most recent meeting and the overnight plunge in crude oil prices. The minutes reflected that several Fed officials had noted their concern over the impact of interest rate hikes on the markets. Officials were also divided over when the unwinding of the Fed's balance sheet would begin. Meanwhile, investors are also concerned about the repercussions of North Korea’s missile launch earlier this week, in addition to a Group of 20 nation’s meeting in Germany and Friday’s U.S jobs data. The Nikkei shares average fell 0.44 percent to 19,994.06, while Korean Kospi ended 0.02 percent lower to close at 2,387.81. In down under, the benchmark ASX200 ended lower by 0.08 percent to close at 5,758.80 dragged by weakness in financials. China stocks inched up, helped by strong gains in resource firms on expectations of robust mid-year earnings. The blue-chip CSI300 index rose 0.01 percent to 3,660.10 points, while the Shanghai Composite Index gained 0.17 percent to 3,212.51 points. Wall Street Lower on Labor Market Data, North Korea Concern U.S stock markets traded lower on Thursday after a round of disappointing private sector employment data and rising tensions in the Korean peninsula. Private employers added 158,000 jobs in June, coming in below the estimated gain of 185,000 and suggesting cooling in the U.S labour market as it nears full employment. Investors will be closely watching the nonfarm payrolls report on Friday, which includes hiring in both the public and private Page 1 of 7
4. TA Securities 7-Jul-17 A Member of the TA Group sectors . Geopolitical tensions also weighed on sentiment, with U.S President Donald Trump vowing on Thursday to confront North Korea "very strongly" following its latest missile test and urging nations to show Pyongyang that there would be consequences for its weapons program. Tech sector dropped 0.8 percent, while energy sector fell 1.8 percent. Shares of Tesla dropped 5.6 percent after the luxury electric carmaker's Model S did not receive the top score in certain tests by the Insurance Institute for Highway Safety. The U.S Energy Information Administration reported U.S commercial crude inventories fell by a more-than-expected 6.3 million barrels in the week through June 30. Oil prices settled 0.9 percent higher at $45.52. The Dow Jones Industrial Average fell 158.13 points, or 0.74 percent, to 21,320.04, the S&P 500 lost 22.79 points to 2,409.75 and the Nasdaq Composite fell 61.39 points, or 1 percent, to 6,089.46. Page 2 of 7
5. TA Securities 7-Jul-17 A Member of the TA Group News In Brief Corporate Tenaga Nasional Berhad has proposed to raise RM5bn in Islamic bonds that have a tenure of up to 50 years , to finance for capital expenditure, investment and related corporate purposes that are compliant with Syariah principles. The Islamic bonds has been assigned a long term final rating of AAA by RAM Rating Services Berhad. (Financial Daily/Bursa Malaysia) Federal Land Development Authority not selling stake in Felda Global Ventures Holdings Berhad, says Shahrir: Chairman Tan Sri Shahrir Abdul Samad says “Felda has no plans to sell its stake in FGV to anybody”, the Wall Street Journal reported. Felda owns a 33.7% stake in FGV (StarBiz) In an unusual move, Axiata Group Bhd retracted its additional share listing announcement today as it was released under the wrong stock code. In a statement to Bursa Malaysia, mobile telecommunication network provider Axiata said the additional listing announcement's reference number was ALA-06072017-00007. CIMB Investment Bank Bhd made the retraction announcement on behalf of Axiata. (The Edge markets) Yinson Holding Bhd is eyeing several floating production storage and offloading projects in its current fiscal year ending Jan 31, 2018. Group chief executive officer Lim Chern Yuan said the company is currently evaluating three to six projects within its existing operations in Africa and Asia. Updating on Yinson's latest venture in Vietnam, he said the company was expected to finalise the value and details of the contract within six weeks. The oil and gas provider has signed an agreement with PetroVietnam to set up a joint venture to operate a floating production unit under a contract that was awarded in April this year. (Bernama) Tasco Bhd’s investment in the global part distribution center at Kuala Lumpur International Airport’s Free Cargo Zone is expected to give the logistics group as instant boost to its revenue soon. According to its managing director Freddie Lim, the distribution center which solely caters to Japanese semiconductor manufacturer Renesas Electronics Corp, is expected to generate monthly revenue of RM4mn to RM5mn to Tasco. (Financial Daily) OCBC Bank (M) Bhd has granted an additional RM10.0mn credit facility to CCM Duopharma Biotech Bhd subsidiary Duopharma (M) Sdn Bhd. The latter had earlier obtained a credit line of RM9.6mn from OCBC. (StarBiz) Hibiscus Petroleum Bhd, which proposed a private placement of up to 10% of its share capital in May to raise some RM65.0mn, is considering alternative fundraising avenue from financial institutions. (The Edge markets) AT Systematization Bhd is planning to consolidate its shares on the basis of three existing shares into one new share, which will reduce the number of its shares in the market and reduce the magnitude of fluctuation of its market capitalisation. It said the proposed consolidation will theoretically triple its share price, while the total number of shares in issue will be reduced by the corresponding ratio. (The Edge markets) Dagang NeXchange Bhd (DNeX) has secured a project worth between RM50mn and RM75mn to supply up to 100 portable container systems (PCS) for petroleum products. The PCS is a self-contained modular fuel storage and dispensing unit which is targeted to be used for the supply of petrol at fish landing jetties in Malaysia, DNeX said in a Bursa Malaysia filing. The contract was awarded by Petro Teguh Sdn Bhd to its wholly-owned unit OGPC Sdn Bhd. (The Edge markets) Page 3 of 7
6. TA Securities 7-Jul-17 A Member of the TA Group Scomi Engineering Bhd is dragging government-owned Prasarana Malaysia Bhd to the court again . This time to stop the latter from appointing a new party to supply the remainder six trains needed to complete the upgrade works under the Kuala Lumpur Monorail Fleet Expansion Project. (The Edge markets) CIMB-Principal Asset Management Bhd aims to raise RM300mn in sales from its newlylaunched China Multi Asset Income Fund by year-end. The fund, unveiled, offer investors income and moderate capital growth by enabling them to invest in products such as Ashares and bonds in China's capital markets. (Bernama) Malaysian Technology Development Corp Sdn Bhd expects at least four technology companies to list on Bursa Malaysia between 2018 and 2020. Chief Executive Officer, Datuk Norhalim Yunus said the technology companies were involved in the area of medical devices, robotics and chemicals. In other news, Bursa Malaysia, which has been steadily picking up in the first half of 2017 due to strong economic fundamentals, will likely continue the momentum in the second half of the year. Its Chief Executive Officer, Datuk Seri Tajuddin Atan, said the exchange was confident more investors would come in and the number of initial public offerings would increase, and one of them would be independent power producer, Edra Power Holdings Sdn Bhd, which would list soon. (Bernama) Petroliam Nasional Bhd's unit, PRPC Refinery and Cracker Sdn Bhd, has signed an engineering, procurement, construction and commissioning contract for the development of additional olefins storage facilities within the Pengerang Integrated Complex. In a statement, the national oil company said, the contract was signed in Langfang, China with the Consortium of China Petroleum Pipeline Bureau (CPP) and CPP Petroleum Engineering (M) Sdn Bhd recently. (Bernama) Kenanga Investment Bank Bhd has launched the third season of its popular KenTrade Trading Challenge, a virtual stock trading contest that is open to Malaysians and permanent residences here aged 18 and above. It is also introducing — for the first time — a grand challenge round that will allow finalists to trade live, using RM1mn real cash — during the contest. (The Edge markets) AirAsia Bhd is set to launch MyCorporate, a suite of products exclusively made for business travellers consisting of three bundle options, depending on the requirements of the traveller and company budget -- Fare Only, Corporate Lite and Corporate Full Flex. With our extensive network and frequency across the group, we have seen a rise in the number of those travelling for business on AirAsia. (Bernama) Media Prima Bhd has appointed Tan Sri Ismee Ismail as its new chairman effective Aug 1 this year. In a filing to Bursa Malaysia, Media Prima said, Ismee, 52, was previously an independent director at the integrated media company. (Bernama) After seven years helming SME Bank Bhd, Group Managing Director, Datuk Mohd Radzif Mohd Yunus, who retired end-June, 2017, left behind an impeccable legacy in transforming the bank, consolidating its finances and taking it to greater heights. Radzif's financial acumen was clearly manifested in the significant improvement in the bank's collection rate since he took over in 2010, reducing its non-performing loans from 38% to the current 8%. (Bernama) Page 4 of 7
7. TA Securities 7-Jul-17 A Member of the TA Group News In Brief Economy Asia Australia Has A $2.471 Billion Trade Surplus Australia posted a seasonally adjusted merchandise trade surplus of A$2.471 billion in May, the Australian Bureau of Statistics said. That exceeded forecasts for a surplus of A$1.10 billion following the downwardly revised A$90 million surplus in April (originally A$555 million). Exports were up A$2,578 billion or 9.0% on month to A$32.781 billion. Non-rural goods rose A$2.333 billion (13%), rural goods rose A$118 million (3%) and non-monetary gold rose A$42 million (3%). Net exports of goods under merchanting remained steady at A$27 million. Services credits rose A$84 million (1%). Imports added A$197 million or 1.0% on month to A$30.310 billion. Intermediate and other merchandise goods rose A$436 million (5%) and consumption goods rose A$119 million (1%). Capital goods fell A$285 million (5%) and non-monetary gold fell A$102 million (25%). Services debits rose A$29 million. (RTT News) Indonesia Proposes to Raise 2017 Budget Deficit to Close to Legal Limit Indonesia's government has proposed to parliament to hike 2017 spending and cut the revenue target, resulting in a wider budget deficit that almost reaches the legal limit, according to a government document. By Indonesian law, the combined budget deficits of the central and regional governments in one year could not exceed 3% of gross domestic product (GDP). The proposed revisions to the central government's 2017 budget, would create a fiscal deficit of 2.92%, a finance ministry document showed. However, the ministry said the revisions do not mean the 3% legal limit might be breached, as traditionally not all of the approved budget is spent. In the ministry's view, this year's fiscal deficit will be 2.67% of GDP. That's above the original budget projection of 2.41%, but well below 3%. The documents showed the ministry expects a shortfall of 36.16 trillion rupiah ($2.70 billion) in 2017 total revenue, due to less-than-initially-expected tax receipts. That would reduce the total revenue to 1,714.13 trillion rupiah. The government plans to increase spending by 30.91 trillion rupiah, which would lift total budgeted spending to 2,111.36 trillion rupiah. Included in the proposed extra spending are bigger allocations for connectivity infrastructure, improvement of prisons and preparations for the 2018 Asian Games, which Indonesia will host. The government also proposed a 33.4% increase in energy subsidies to 103.11 trillion rupiah, due to higher global oil prices. The proposed changes need to be approved by parliament, which will have deliberations about them with the government. (The Star) United States ADP Report Shows Job Gains Slowed in June Hiring at private U.S. employers slowed more than expected in June, according to a recent report, potentially raising concerns about a weakening economy. Firms across the country added 158,000 workers to their ranks in June, according to payroll processor Automatic Data Processing Inc. and forecasting firm Moody’s Analytics. Economists surveyed by The Wall Street Journal had expected an increase of 180,000. The May total was revised to 230,000 from 253,000. The ADP report is based on private payroll data in addition to government data. Economists expect the U.S. Bureau of Labor Statistics to report Friday that nonfarm jobs rose by 173,000 in June from 138,000 the prior month. (The Wall Street Journal) U.S. Trade Deficit Narrowed 2.3% in May The U.S. trade deficit narrowed in May as exports rose to their highest level in more than two years. The foreign-trade gap in goods and services narrowed 2.3% from the prior month to a seasonally adjusted $46.51 billion in May, the Commerce Department said. Economists surveyed by The Wall Street Journal had expected a smaller trade deficit of $46.2 billion for the month. Imports fell 0.1% in May to $238.54 billion, and exports rose 0.4% from April. Total exports were $192.03 billion in May, the strongest month for overseas sales since April 2015. In the first five months of 2017, the value of U.S. imports rose 7.3% while U.S. exports increased 6.0% compared with the same period a year earlier. Page 5 of 7
8. TA Securities 7-Jul-17 A Member of the TA Group The overall trade deficit was up 13 .1% compared with the first five months of 2016. (The Wall Street Journal) U.S. Jobless Claims Rose Last Week The number of Americans applying for first-time unemployment benefits rose last week for the third consecutive time, though overall numbers remain consistent with steady job gains. Initial jobless claims, a proxy for layoffs across the U.S., rose 4,000 to a seasonally adjusted 248,000 in the week ended July 1, the Labor Department said. Economists surveyed by The Wall Street Journal had forecast 246,000 new claims. In short, claims remain low, consistent with the trend in employment growth remaining more than strong enough to keep the unemployment rate trending down. Estimates of jobless claims can be volatile from week to week, but generally have hovered near four-decade lows in recent months, suggesting that employers are holding on to workers. (The Wall Street Journal) ISM Non-Manufacturing Index Hits 57.4 in June Non-manufacturing economic activity increased in June, according to a release from the Institute for Supply Management, defying the expectation of economists who predicted a fall. Economic activity in the non-manufacturing sector grew to 57.4 in June, 0.5 points above May's reading. Economists forecast a decline of 0.4 points, expecting the June figure to sink to 56.5, according to a survey from Thomson Reuters. A reading above 50 indicates expansion in the service sector, and a reading below 50 indicates contraction. Europe and United Kingdom ECB Officials Considered Dropping a Pledge to Accelerate QE at June Meeting European Central Bank policy makers discussed how to signal their increasing confidence in the Eurozone economy at their June policy meeting, and considered dropping a pledge to accelerate their massive bond-buying program, according to the minutes. ECB officials took a tiny step toward reducing their large monetary stimulus at a policy meeting in early June, by indicating the central bank is unlikely to cut interest rates further below zero. At least one official suggested that the ECB should go further and drop a pledge to accelerate its bond-buying program, known as quantitative easing, given the improved economic outlook, the ECB said in its written account of its last policy meeting in Estonia, published on Thursday. Other policy makers called for caution, however, pointing to weak inflation data. The ECB’s pledge to accelerate its bond purchases again “could be reviewed” as “the economic expansion proceeded and if confidence in the inflation outlook improved further,” one ECB official said, according to the minutes. (The Wall Street Journal) German Factory Orders Recover in May Germany's factory orders recovered on foreign demand in May, data from Destatis showed. Factory orders grew 1% month-on-month in May, reversing a revised 2.2% fall in the previous month. However, the pace of growth was weaker than the expected 1.9%. Excluding major orders, new orders declined 0.3% from the previous month. Domestic orders fell 1.9% from April, while foreign orders grew 3.1%. Orders from the euro area climbed 1.7% and orders from other countries advanced 4%. Data showed that manufacturing turnover slid 0.1% on a monthly basis, following a 1.3% rise in April. (RTT News) Page 6 of 7
9. TA Securities 7-Jul-17 A Member of the TA Group Share Buy-Back : 06 July 2017 Company Bought Back Price (RM) Hi/Lo (RM) 24,200 10,000 80,000 150,000 2,000 45,000 13,000 0.80/0.785 0.23 1.28 0.54 1.40/1.39 0.97 1.09/1.07 0.80/0.78 0.23/0.225 1.30/1.26 0.55/0.535 1.40/1.38 0.97/0.96 1.09/1.07 AMPROP GRANFLO P&O SALCON TEXCHEM TROP UNIMECH Total Treasury Shares 14,033,300 6,418,800 9,941,000 36,131,000 2,584,500 2,941,942 5,158,310 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. 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 Page 7 of 7 We accept no
10. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company AUTOMOBILE BAUTO MBMR UMW Share Price (RM) 06-Jul-17 2.03 2.25 5.83 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 5.51 0.95 0.62 1.26 10.3 24.1 19.7 15.8 25.3 30.7 19.6 9.4 29.6 12.8 8.9 19.0 5.8 4.0 2.2 7.8 4.0 3.4 2.44 2.70 6.47 -16.8 -16.7 -9.9 1.88 1.96 4.09 8.0 14.8 42.4 -4.7 5.1 38.1 4.80 3.70 5.70 8.00 17.50 11.00 23.60 5.80 10.00 1.28 0.96 1.34 1.38 0.66 0.96 0.79 1.32 0.69 33.6 29.4 43.9 49.6 105.2 73.4 137.2 50.7 40.3 30.5 33.6 48.4 55.2 115.5 82.9 142.4 54.5 39.0 11.6 9.0 11.4 13.3 15.2 13.2 14.8 10.0 26.8 12.8 7.9 10.3 11.9 13.9 11.6 14.3 9.3 27.7 4.1 3.0 3.5 3.1 2.6 5.2 2.8 2.4 3.1 4.1 3.0 3.6 3.4 2.6 5.2 2.9 2.4 3.1 4.49 3.00 5.70 6.87 16.30 9.68 20.66 5.59 11.14 -13.1 -11.3 -12.5 -3.9 -1.8 -0.3 -1.6 -9.3 -3.1 3.60 2.08 3.90 4.11 12.70 7.50 19.26 4.53 8.20 8.3 27.9 27.9 60.5 26.0 28.7 5.5 11.9 31.7 4.8 11.3 15.8 46.3 18.5 17.7 3.0 7.6 22.0 0.42 1.30 5.44 3.48 0.66 1.17 2.01 2.13 5.87 0.46 1.62 6.00 3.50 0.78 0.58 2.26 1.49 6.26 0.79 0.63 1.04 1.10 1.00 1.27 na 1.08 0.10 5.7 14.6 28.1 15.3 4.9 8.3 12.6 11.9 42.0 5.7 13.5 34.8 20.3 5.7 9.6 12.5 12.0 45.8 7.3 8.9 19.4 22.7 13.3 14.1 15.9 17.9 14.0 7.3 9.6 15.6 17.1 11.6 12.1 16.0 17.8 12.8 0.0 2.2 2.2 2.2 3.8 0.9 2.7 1.4 4.3 0.0 2.2 2.2 2.7 3.8 0.9 2.7 1.4 4.3 0.51 1.37 5.52 3.61 0.74 1.39 2.15 2.48 6.15 -18.6 -5.1 -1.4 -3.6 -10.2 -15.8 -6.5 -13.9 -4.6 0.37 0.84 4.65 3.07 0.36 0.41 1.56 1.46 5.57 12.2 55.5 17.0 13.4 85.9 188.9 28.8 45.8 5.4 -4.6 23.8 13.8 8.7 9.1 103.5 18.2 23.9 -0.2 1.98 2.00 0.49 11.0 11.5 18.0 17.2 5.1 5.1 2.19 -9.6 1.93 2.6 -1.5 15.08 18.50 17.84 21.08 0.50 0.58 74.8 93.1 81.3 20.2 101.9 19.9 18.5 18.2 4.9 4.5 5.4 5.0 15.30 19.10 -1.4 -3.1 13.72 15.56 9.9 18.9 8.3 12.9 2.22 7.36 25.30 1.21 84.08 3.50 1.96 4.91 0.91 2.23 8.62 27.41 1.39 88.66 4.10 2.46 4.41 1.23 0.49 0.35 0.32 0.48 0.36 0.47 0.66 0.43 0.57 6.7 26.4 121.1 6.1 290.1 22.3 27.5 15.7 8.1 7.9 40.6 151.0 6.3 327.7 24.7 27.0 16.6 11.6 33.0 27.9 20.9 19.9 29.0 15.7 7.1 31.3 11.2 28.2 18.1 16.8 19.3 25.7 14.2 7.3 29.5 7.9 1.8 1.4 2.8 5.0 3.3 4.3 3.1 0.9 2.7 2.1 2.0 3.0 5.0 3.3 4.9 4.1 1.0 3.8 3.00 8.89 26.90 1.33 85.00 3.66 2.04 5.00 1.07 -26.0 -17.2 -5.9 -8.9 -1.1 -4.2 -3.9 -1.8 -15.0 2.11 7.30 22.44 1.13 74.12 2.26 1.46 4.14 0.78 5.2 0.8 12.7 7.0 13.4 54.8 34.2 18.5 16.7 -13.6 0.4 7.8 5.1 7.5 37.8 13.3 13.4 14.5 42.88 52.08 1.03 198.6 187.4 21.6 22.9 4.7 4.7 55.64 -22.9 40.61 5.6 -2.9 9.31 5.76 11.51 6.54 1.35 1.29 49.3 25.7 54.7 27.7 18.9 22.4 17.0 20.8 0.5 1.4 0.6 1.6 10.00 6.38 -6.9 -9.7 7.50 4.19 24.2 37.4 17.2 27.5 2.43 0.13 3.34 0.13 0.74 1.24 19.3 0.4 23.2 0.4 12.6 35.8 10.5 36.1 5.8 0.0 6.6 0.0 3.42 0.16 -28.9 -18.8 2.43 0.05 0.0 160.0 -17.9 160.0 5.94 4.26 6.39 4.70 0.78 0.51 9.5 13.3 15.0 16.5 62.2 32.0 39.7 25.9 0.6 1.4 0.6 1.8 6.73 4.37 -11.7 -2.5 5.54 3.85 7.2 10.6 -6.5 1.9 6.87 6.60 1.96 5.80 1.67 6.80 7.60 1.80 6.05 2.20 0.56 0.16 0.34 -0.18 0.29 17.2 35.8 12.3 26.4 3.7 24.4 40.0 15.1 29.8 5.5 39.9 18.4 15.9 21.9 44.8 28.1 16.5 13.0 19.4 30.4 1.2 2.7 1.9 2.3 0.6 1.6 3.0 2.3 2.6 0.8 7.40 7.07 2.38 5.94 2.64 -7.2 -6.6 -17.6 -2.4 -36.7 4.06 5.62 1.88 4.20 1.65 69.2 17.4 4.3 38.1 1.2 42.2 0.2 -7.1 8.4 -29.2 INDUSTRIAL SCIENTX SKPRES 8.56 1.32 9.71 1.80 0.52 0.53 54.5 8.6 66.3 10.6 15.7 15.4 12.9 12.4 2.1 3.2 2.3 3.9 8.99 1.44 -4.8 -8.3 6.01 1.15 42.4 14.8 27.8 2.3 MEDIA ASTRO MEDIA PRIMA STAR 2.58 0.91 2.35 3.45 0.60 1.40 1.06 0.65 0.64 13.2 1.7 7.1 14.5 2.8 6.5 19.5 53.3 33.1 17.8 32.2 36.2 4.8 1.5 7.7 5.0 2.5 7.7 3.01 1.52 2.67 -14.3 -40.1 -12.0 2.51 0.91 2.19 2.8 0.6 7.3 -0.8 -20.9 4.9 -15.2 -31.0 -5.9 -7.5 -8.3 -21.9 -58.2 0.20 0.79 7.03 0.44 6.43 1.33 0.40 200.0 1.3 5.7 41.4 11.2 23.3 10.1 129.4 -12.6 1.1 38.2 2.4 1.2 -50.3 -19.2 1.30 23.1 -5.9 BANKS & FINANCIAL SERVICES AFG 3.90 AFFIN 2.66 AMBANK 4.99 CIMB 6.60 HLBANK 16.00 MAYBANK 9.65 PBBANK 20.32 5.07 RHBBANK BURSA 10.80 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 0.59 0.76 1.03 3.7 4.6 16.0 12.8 1.7 1.7 0.69 MHB 0.80 0.87 1.82 -1.2 1.3 na 61.1 0.0 0.0 1.16 MISC 7.43 6.85 0.79 56.4 48.9 13.2 15.2 4.0 4.0 7.90 PANTECH 0.62 0.69 1.29 4.1 4.9 14.8 12.5 2.9 3.2 0.67 PCHEM 7.15 7.74 1.07 39.2 40.5 18.3 17.7 2.9 3.1 7.80 SENERGY 1.64 1.71 2.49 6.6 4.0 24.8 41.4 0.6 0.6 2.10 UMWOG 0.44 0.80 2.05 -11.7 -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 1.60 1.55 1.49 12.0 12.6 13.4 12.7 0.0 0.0 1.98
11. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company Share Price (RM) PLANTATIONS FGV IJMPLNT IOICORP KLK SIME UMCCA 1.70 2.99 4.61 24.80 9.53 6.50 Target Price BETA (RM) 1.55 3.88 4.15 26.19 10.02 7.52 1.78 0.47 1.07 0.86 1.23 0.43 EPS (sen) PER (X) FY17 FY18 FY17 FY18 4.2 12.3 18.7 111.8 34.0 37.6 8.5 15.7 21.0 119.1 37.5 34.5 40.3 24.3 24.6 22.2 28.0 17.3 20.0 19.0 21.9 20.8 25.4 18.9 Div Yield (%) 52weeks 52weeks FY17 FY18 High Price % Chg Low Price % Chg 2.9 2.3 2.2 2.2 2.6 3.5 2.9 2.7 2.6 2.4 3.3 2.6 2.52 3.70 4.81 25.50 9.70 6.58 -32.5 -19.2 -4.2 -2.7 -1.8 -1.2 1.42 2.99 4.21 22.92 7.41 5.53 PROPERTY GLOMAC 0.65 0.70 0.59 1.6 6.3 40.8 10.3 4.6 4.6 0.83 -21.2 0.65 HUAYANG 1.04 1.07 0.66 17.3 17.4 6.0 6.0 3.8 3.4 1.43 -27.4 1.03 IBRACO 0.81 0.92 0.37 4.9 10.2 16.6 7.9 4.3 4.9 1.05 -22.9 0.79 IOIPG 2.20 2.25 0.87 17.4 17.4 12.6 12.6 3.2 3.4 2.46 -10.6 1.85 MAHSING 1.60 1.76 0.73 14.3 13.5 11.2 11.8 4.1 4.1 1.70 -5.9 1.34 SNTORIA 0.87 0.98 0.28 6.2 10.3 14.0 8.4 1.2 1.2 1.00 -13.5 0.69 SPB 4.90 5.98 0.59 25.6 22.8 13.2 14.8 2.4 2.4 5.19 -5.6 4.32 SPSETIA 3.37 4.10 0.67 27.3 29.4 14.3 13.3 4.2 4.2 4.50 -25.1 2.80 SUNWAY 3.90 3.95 0.47 18.3 18.6 13.3 13.1 3.1 3.1 4.05 -3.7 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 1.70 1.86 0.51 8.9 10.1 19.2 16.8 5.2 5.9 1.84 -7.6 1.63 CMMT 1.56 1.72 0.59 8.1 8.6 19.3 18.1 5.4 5.7 1.72 -9.3 1.45 % Chg YTD 19.7 0.0 9.5 8.2 28.6 17.5 9.7 -12.1 4.8 3.3 17.7 8.3 0.8 1.0 3.2 19.1 19.4 25.4 13.4 20.4 37.2 -6.5 -8.0 -19.0 12.8 11.9 8.1 10.8 7.7 30.0 4.3 7.6 -1.2 2.0 POWER & UTILITIES MALAKOF PETDAG PETGAS TENAGA YTLPOWR 1.05 24.06 18.60 14.14 1.44 1.13 21.47 19.60 17.37 1.90 0.76 0.76 0.77 1.01 0.53 7.1 98.4 88.2 131.9 8.2 6.4 102.3 101.3 130.8 10.7 14.8 24.5 21.1 10.7 17.5 16.4 23.5 18.4 10.8 13.5 6.7 3.0 3.3 3.1 6.9 6.7 3.2 3.8 3.2 6.9 1.80 25.70 22.50 14.90 1.64 -41.7 -6.4 -17.3 -5.1 -12.2 1.04 22.92 18.10 13.00 1.39 1.0 5.0 2.8 8.8 3.6 -23.4 1.1 -12.7 1.7 -3.4 TELECOMMUNICATIONS AXIATA DIGI MAXIS TM 4.79 5.01 5.50 6.62 5.25 4.95 5.70 7.50 1.30 0.92 0.71 0.66 14.6 20.8 24.8 21.4 16.0 21.1 25.0 22.3 32.8 24.0 22.1 30.9 30.0 23.8 22.0 29.7 1.5 4.2 3.6 2.9 1.7 4.2 3.6 3.0 5.99 5.19 6.60 6.90 -20.0 -3.5 -16.7 -4.1 4.11 4.64 5.48 5.81 16.5 8.0 0.4 13.9 1.5 3.7 -8.0 11.3 TECHNOLOGY Semiconductor & Electronics IRIS 0.18 INARI 2.20 MPI 13.50 UNISEM 3.64 0.28 2.30 15.60 3.95 1.32 0.80 0.51 0.82 -2.6 10.3 94.2 26.9 -0.3 na 12.4 21.4 112.9 14.3 27.1 13.5 na 17.8 12.0 13.5 0.0 3.6 2.0 3.3 0.0 2.2 2.0 3.3 0.24 2.23 13.50 3.70 -27.1 -1.3 0.0 -1.6 0.10 1.44 7.20 2.27 75.0 53.1 87.5 60.4 59.1 32.5 82.2 54.2 3.15 8.56 3.34 8.10 1.09 1.44 37.6 17.2 37.1 17.5 8.4 49.7 8.5 48.9 1.3 1.2 1.6 1.2 3.59 9.45 -12.3 -9.4 2.16 5.76 45.8 48.6 37.6 41.3 1.77 3.66 2.05 4.05 0.75 0.67 14.3 17.1 22.7 15.1 12.4 21.3 7.8 24.2 2.4 3.5 4.0 3.1 1.87 4.59 -5.3 -20.3 1.44 3.61 22.9 1.4 11.3 -14.9 TRANSPORTATION Airlines AIRASIA AIRPORT Freight & Tankers TNLOGIS WPRTS SNAPSHOT OF FOREIGN STOCKS UNDER COVERAGE Company Share Price (S$) BANKS & FINANCIAL SERVICES DBS 20.74 OCBC 10.65 UOB 23.19 PLANTATIONS WILMAR IFAR 3.38 0.48 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 1.14 1.08 173.8 87.7 195.6 190.2 11.9 92.4 12.1 209.3 11.9 10.9 11.5 11.1 2.9 5.7 3.0 2.9 6.7 3.0 21.2 11.0 24.0 -2.1 -2.7 -3.5 14.72 8.84 17.51 40.9 28.8 32.4 19.6 19.4 13.7 3.72 0.53 0.91 1.12 28.9 4.9 31.1 5.2 10.9 9.1 2.4 2.5 2.7 2.7 4.0 0.6 -15.5 -20.2 2.96 0.44 14.2 8.0 -5.8 -9.5 11.7 9.8 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.
12. TA Securities A Member of the TA Group SECTOR REPORT Friday , July 07, 2017 FBM KLCI: 1,770.53 Sector: Finance MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Banking Sector Clearer Skies THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Team Coverage Tel: +603-2167 9610 liwong@ta.com.my Sentiments for the sector have improved. Premised on the upgrade of our GDP forecast for CY17 to 5.1% from 4.5%, we envisage sustained loan expansion, steadier margins, benign asset quality, a more vibrant capital market, higher fee income from increased M&A activities coupled with efforts by BNM to accelerate the migration to e-payment, could lead to better topline growth. In addition to raising loan growth assumption from 5.0% to 5.6% for 2017, expectations of a 25 bps increase in the overnight policy rate (OPR) would bode well for loan yields. Reiterating our OVERWEIGHT stance on the sector, we raise the target prices of the stocks under our coverage on the back of earnings upgrade and lowering market risk premiums. Given the wider potential upside, we raise Public Bank, CIMB, AMMB and Maybank to BUY from hold, as well as Hong Leong Bank and RHB to BUY from hold. Maintain our BUY recommendation on Alliance Financial Group and Affin. • The systems asset quality has stayed resilient. Despite widespread fears that the deterioration in asset quality could spiral out of control, NPLs had been rising at a manageable pace. While still cautious, most banks believe that the worst may be over as the credit cycle probably peaked in 2016. We forecast the sector’s credit charge to soften to 27.5 bps and 22.6 bps in CY17 and CY18 from 39.1 bps in CY16. • We also foresee PBV multiple to expand as we approach the tail end of this year in anticipation of a sustained rally prior to a general election, which is highly likely within the next three to nine months. Dominating some 30% of the index’s weight, the return of foreign capital spurred an increase in the foreign shareholding level in Malaysian banks. Banking stocks, or as with most index-linked counters, usually outperform during the pre-election period, driving up the benchmark index. • Downside risks for the sector include lumpy corporate allowances from high risk sectors - leading to some earnings cut in 2017, as well as rising competitive pressures as banks compete in a highly saturated market. Inability to embrace technological changes could also see banks losing new sales to competitors. While we note that expectations of an election could further encourage an inflow of foreign funds into the market and banking stocks, post-election, we do envisage the excitement to taper off. In 2 out of the 3 most recent general elections, share prices of banking stocks eased YoY post-election. This, we opine could partly be underpinned by investors being spoilt for choices where regional banking stocks such as Thailand and Indonesia, also trade at attractive valuations and decent ROEs. • To conclude, while the more sanguine outlook is still spotted with some concerns stemming from news flows of corporate restructuring domestically as well as geopolitical risks looming externally such as US monetary tightening bias, weakness in crude oil prices and hiccups from China’s deleveraging process, we expect the broader economy to remain buoyant and supportive of the banking sector. Page 1 of 31 TA Research Team Coverage
13. TA Securities 7-Jul-17 A Member of the TA Group Our top themes for the banking sector in 2H 2017 are as follows : 1) Room for more election-fueled rally Banking stocks have outperformed the KLCI Dominating some 30% of the index’s weight, the more sanguine outlook for the economy had spurred upgrades for the sector. Other driving factors, in our view, include the return of foreign investors and recent release of better 1QCY17 results where although earnings came mostly within our expectations, this was the sector’s third straight quarter of yearly increase. Except for Alliance Financial Group (AFG) and RHB Bank, both of which saw share prices contract YoY, as well as Public Bank (PBB), which underperformed the KLCI – all the other banking stocks under our coverage registered exceptional double-digit increases in share prices. Leading the pack were our top BUY calls, CIMB (+50.0% YoY) and Affin (+24.9% YoY). This is followed by Hong Leong Bank (HLBB) (+22.0% YoY) and Maybank (+20.2% YoY). Figure 1: Foreign inflow/outflow (RM bn) Source: Bursa Malaysia, TA Research Figure 2: Share price performance vis-à-vis the KLCI - Outperformers Source: Bloomberg, Companies, TA Research Page 2 of 31
14. TA Securities 7-Jul-17 A Member of the TA Group Figure 3 : Share price performance vis-à-vis the KLCI - Underperformers Source: Bloomberg, Companies, TA Research Foreign shareholders snapping up Malaysian banks Along with the return of foreign capital, we observe that foreign investors have been increasing their exposure in Malaysian banks. Among the favorites, we believe Maybank and CIMB saw their respective foreign shareholding levels sink to 5-year (monthly) lows of 15.7% and 25.6% in December 2016 and July 2016. Since then, Maybank and CIMB’s foreign shareholding levels have been on an upward trajectory. While the selling pressure last year was partly triggered by MSCI reducing its weightage on most Malaysian banking stocks in its Malaysia index, PBB’s foreign shareholding level stayed resilient. We believe the steady increase towards the bank’s all time high foreign shareholding level of 38.7% (in March 2004) is likely attributed to Public Bank’s steady set of results and stellar reputation in terms of asset quality. Elsewhere, other banks have also been experiencing uplifts in their foreign shareholding levels, with notable increases reported by AMMB and HLBB. Page 3 of 31
15. TA Securities 7-Jul-17 A Member of the TA Group Figure 4 : Foreign shareholding level (%) Public Bank Maybank (monthly) 30% 38% 36% 25% 34% 20% 32% 30% 15% 28% 10% 26% 24% 5% 22% Jul-16 Jan-17 Jul-15 Jan-16 Jul-14 Jan-15 Jul-12 Jan-13 Apr-12 Sep-12 Jul-13 Jul-11 Jan-12 Jun-11 Nov-11 Jan-14 Jul-10 10% Jan-11 HLBB 50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Jan-11 Jan-10 Sep-16 Mar-17 Sep-15 Mar-16 Sep-14 Mar-15 Sep-13 Mar-14 Sep-12 Mar-13 Sep-11 Mar-12 Sep-10 Mar-11 Mar-10 CIMB Mar-10 Aug-10 0% 20% 10% 9% 9% 8% 8% 7% AMMB (Excl. ANZ) Jun-16 Nov-16 Aug-15 Jan-16 Mar-15 Dec-13 May-14 Oct-14 6% Feb-13 Jul-13 Jan-17 Jun-16 Nov-15 Apr-15 Sep-14 Feb-14 Jul-13 Dec-12 Oct-11 May-12 Mar-11 Jan-10 Aug-10 7% RHB Bank (Excl. Aabar) 36% 16% 34% 14% 32% 12% 30% 10% 28% 8% 26% 6% 24% 4% 22% 2% 20% 0% Alliance (Excl. Temasek) Jan-17 Jun-16 Nov-15 Apr-15 Sep-14 Jul-13 Feb-14 Dec-12 Oct-11 May-12 Mar-11 Jan-10 Aug-10 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Source: Companies, TA Research Valuations still attractive despite outperformance Despite the encouraging increase in share prices, valuations remain attractive with average sector’s PBV of 1.2x. While reasons for this could be due to softer ROEs and earlier concerns over potential asset quality risks, we believe that the worst may be over for the sector. We believe the decline in ROEs have stabilized, premised on expectations of stronger earnings growth. Based on our new earnings projections, we now estimate the sector’s CY17 and CY18 profit to broaden by some 7.1% and 8.1%. Compared against each banking stocks’ historical PBV cycle, we also observe that most of the banks are still trading below the -1 standard deviation Page 4 of 31
16. TA Securities 7-Jul-17 A Member of the TA Group Room for an election rally ? Valuation wise, we think there may be room for an election rally. While the timing of the 14th GE is anybody’s guess as it is not due until 24th Aug 2018, there are expectations that it could be held in the second half of this year. Banking stocks, or as with most indexlinked counters, usually outperform during the pre-election period, driving up the benchmark index. Hence, although the recent rally in some of the banking stocks could have been GE induced, valuations today are below average sector’s PBV in 2004 (4.1x), 2008 (3.4x) and 2013 (1.7x). Figure 5: Historical sector’s PBV (x) Source: Bloomberg, Companies, TA Research Figure 6: Historical sector’s ROE (x) Source: Bloomberg, Companies, TA Research Page 5 of 31
17. TA Securities 7-Jul-17 A Member of the TA Group Figure 7 : P/B valuation cycle (x) Hong Leong Maybank 3.5 2.2 3.0 2.0 Public Bank Jan-17 Jan-16 Jan-15 Jan-14 Jan-13 Jan-12 RHB Bank 4.0 2.1 1.9 1.7 1.5 1.3 1.1 0.9 0.7 0.5 CIMB Jan-17 Jan-16 Jan-15 Jan-14 Jan-13 Jan-12 Jan-11 Jan-10 Jan-09 Jan-02 Jan-17 Jan-16 Jan-15 Jan-14 Jan-13 Jan-12 Jan-11 Jan-10 Jan-09 Jan-08 Jan-07 Jan-06 Jan-05 Jan-04 Jan-03 1.0 0.9 Jan-08 1.8 1.5 1.3 Jan-07 2.0 Jan-06 2.4 2.5 1.7 Jan-05 3.0 Jan-04 3.1 Jan-03 3.5 Jan-02 Jan-11 Jan-02 Jan-17 Jan-16 Jan-15 Jan-14 Jan-13 Jan-12 Jan-11 Jan-10 Jan-09 Jan-08 Jan-07 Jan-06 Jan-05 Jan-04 0.5 Jan-03 1.0 Jan-02 1.2 Jan-10 1.5 1.0 Jan-09 1.5 Jan-08 1.9 1.4 Jan-07 1.4 Jan-06 2.3 2.0 Jan-05 1.6 Jan-04 2.5 1.7 1.8 Jan-03 2.0 Alliance Financial Group 2.5 2.3 2.1 1.9 1.7 1.5 1.3 1.1 0.9 0.7 0.5 Affin Jan-17 Jan-16 Jan-15 Jan-14 Jan-13 Jan-12 Jan-11 Jan-10 1.0 Jan-02 Jan-17 Jan-16 Jan-15 Jan-14 Jan-13 Jan-12 Jan-11 Jan-10 Jan-09 Jan-08 Jan-07 Jan-06 Jan-05 Jan-04 Jan-03 Jan-02 0.5 1.4 Jan-09 1.5 1.0 Jan-08 1.5 1.8 Jan-07 2.0 Jan-06 2.0 Jan-05 2.5 Jan-04 2.5 Jan-03 3.0 AMMB 2.5 3.0 2.0 2.5 2.0 1.7 1.5 1.7 1.5 1.2 1.0 0.7 0.5 1.4 1.1 1.0 0.5 Jan-17 Jan-16 Jan-15 Jan-14 Jan-13 Jan-12 Jan-11 Jan-10 Jan-09 Jan-08 Jan-07 Jan-06 Jan-05 Jan-04 Jan-03 Jan-17 Jan-16 Jan-15 Jan-14 Jan-13 Jan-12 Jan-11 Jan-10 Jan-09 Jan-08 Jan-07 Jan-06 Jan-05 Jan-04 Jan-03 Jan-02 Jan-02 0.0 0.0 Source: Companies, TA Research 2) More catalysts for topline growth Improving business sentiments to bolster activities In 1QCY17, the sector’s operating income accelerated by 7.4% YoY (-1.7% QoQ). The increase was attributed to higher contributions from Islamic banking operations (+17.3% YoY, +4.5% QoQ) and net interest income (NII) (+6.6% YoY, +1.1% QoQ). Optimism among businesses have improved, spurring demand for capital market activities. Based on latest release of the survey-based RAM Business Confidence Index, corporates and small and medium enterprises (SMEs) remain optimistic of their business prospects for 2Q and 3Q 2017. According to Bank Negara Malaysia (BNM), new issues of private debt securities have risen at an encouraging pace in the first five months of 2017, climbing 51.5% YoY. By sector, most of the funds raised were for manufacturing and construction – probably for capacity utilisation and business expansion. Page 6 of 31
18. TA Securities 7-Jul-17 A Member of the TA Group Figure 8 : New issues of private debt securities (RM bn) Source: Bank Negara Malaysia, TA Research Business loans gaining momentum Growth in business loans dipped to a low of 2.8% YoY in July and August 2016. Since then, the momentum has been accelerating. Total business loans climbed 5.2% YoY, underpinned by the SME segment (+0.9% YTD vs -0.9% YTD May 2016). We believe the increase was partly attributed to: 1) increases in demand for working capital, as well as 2) rising intra-regional trade flows and cross-border activities as demand for trade, foreign currency and factoring loans accelerated. We also note a strong pickup in syndicated loans. By segment, transport, storage and the communications led most of business loans, followed by wholesale & retail trade and hotels & restaurants, real estate and construction. Figure 9: Business loans (YoY Chg) Source: Bank Negara Malaysia, TA Research Page 7 of 31
19. TA Securities 7-Jul-17 A Member of the TA Group Figure 10 : Application for business loans (YoY Chg) Source: Bank Negara Malaysia, TA Research Figure 11: Average approval rate for business loans (%) Source: Bank Negara Malaysia, TA Research Consumer loans should remain healthy Despite some moderation, we foresee consumer loans to broaden at a decent pace of 5.5%. YTD loan growth of 1.8% (vs. +1.5% YTD in May 2016) were due to improvement on the back of purchase of securities, credit cards and purchase of consumer durables. However, we foresee risks for some easing as the approval rate for overall consumer loans remain soft. More specifically, average approval rates so far for 2017 for the purchase of residential mortgages stood at only 41% - much lower than the peak of 54% in 2014. Approval rates for the purchase of passenger cards also remained soft at 52% from a high of 69% in 2007. Note that residential mortgages and HP loans account for some 80% of total consumer loans in the system. Page 8 of 31
20. TA Securities 7-Jul-17 A Member of the TA Group Figure 12 : Average approval rate for consumer loans (%) Source: Bank Negara Malaysia, TA Research Figure 13: Average approval rates for residential mortgages and HP (%) Source: Bank Negara Malaysia, TA Research Recovery in some segments of residential mortgages Advances for residential mortgages had been on an easing trend, anchored by a combination of factors such as: 1) weak buying sentiments, 2) lower approval rates as financial institutions adopted a cautious stance in approving loans, and 3) overall slowdown in property launches. According to NAPIC (or the National Property Information Centre), the sale of residential homes in 1Q 2017 had fallen by some 5% YoY. Leading the decline was softer demand for properties priced between RM100k to RM500k (-8% YoY). Demand for more expensive homes (valued above RM500k) however, broadened 7% YoY. Annualizing YTD sale volume of residential homes, we believe that certain segments of the housing market may see some recovery while the affordable home segment could get a lift from the launch PR1MA projects. In June 2017, Perbadanan PR1MA Malaysia signed an agreement with four banks to raise RM5bn through a combination of a sukuk programme and revolving credit facility. According to Perbadanan PR1MA, the fund Page 9 of 31