Friday, June 23, 2017

v Higher than expected initial jobless claims weighed on dollar

Highlights of today’s AmBank FX Daily Outlook as follow:-

v  Higher than expected initial jobless claims weighed on dollar
v  MYR to fluctuate in the range of 4.2611-4.2884 against US dollar
v  Key watch: (i) US Fed Dudley, Bullard, Powell and Mester speeches; (ii) June US Markit Manufacturing PMI; (iii) May US new home sales; (iv) June EU Markit Manufacturing PMI

SP Setia : SP Setia acquires I&P Group for RM3.65bil

MKH : Expands solid growth story beyond Kajang             HOLD

We initiate our coverage on MKH Bhd (MKH) with a BUY recommendation and a fair value of RM3.00 per share, based on a sum-of parts (SOP) valuation. While property development and oil palm plantation are MKH’s core businesses, it has diverse business interests, spanning a wide range of sectors that includes investment property, property management, construction, trading and furniture manufacturing.

Since its founding, MKH has thrived, transforming Kajang into one of the fastest-growing townships in Malaysia, becoming part of Greater Kuala Lumpur. MKH is planning a total RM948mil of new launches in FY17, focusing on affordable residential projects. Beyond FY17, it has several developments with potential GDV of RM9.0bil. MKH has been able to sustain its new property sales level at around the RM800mil mark for the last 3 years amidst the slowdown in the domestic property market. We believe this is due to the group staying true to its core competency, focusing on the affordable segment market.MKH recorded outstanding revenue growth, with its FY11-FY16 5-year revenue compounded annual growth rate (CAGR) standing at 32.8%.

We expect this strong track record to be sustained moving forward, anchored by its property development and plantation divisions. Its earnings growth has been more impressive than its revenue growth. It registered FY11-FY16 5-year operating profit CAGR of 52.3%, while its 5-year net profit CAGR stood at 40.1% for the same period. With a strong management team in place, we believe the group will maintain this commendable track record in the foreseeable future.

Other :
MISC : Expanding offshore division          HOLD
Leader Steel Holdings, HSS Engineers, Aeon Credit Service, Malaysian Pacific Industries

The Philippines : Room for rate hike remains

SP Setia : SP Setia acquires I&P Group for RM3.65bil
IHH Healthcare  : IHH dismisses report it’s close to buying India’s Fortis
George Kent  : George Kent tendering for RM4b worth of jobs
JAKS Resources : Property unit turnaround takes time — JAKS Resources

The information and opinions in this report were prepared by AmInvestment Bank Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmInvestment Bank Bhd. Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmBank Group Bhd and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice.

MISC: Secured long-term contract to operate shuttle tankers in North Sea. The company has secured a contract to own and operate two specialist DP2 offshore loading shuttle tankers via its wholly-owned subsidiary, AET Tanker Holdings Sdn Bhd. The vessels will operate in oilfields on the Norwegian Continental Shelf of the North Sea, Norwegian Sea and the southern Barents Sea. The contract, which is granted by Norwegian-based energy company Statoil ASA, has an estimated

Malaysia Telcos | Further equity-raising unlikely
Chi Wei Tan


Malaysia | Reserves surpassed 2016 high
Suhaimi Ilias

Malaysia | GDP growth momentum intact
Suhaimi Ilias

Philippines | On hold, as expected
Suhaimi Ilias

Malaysia | BM Technology Index – Base building
Nik Ihsan Raja Abdullah



Further equity-raising unlikely
by Chi Wei Tan

Sector Note

We do not expect the upcoming 700/2100/2600 MHz spectrum payments to raise gearing of mobile operators to excessive levels. Further equity-raising (Maxis recently completed its primary placement) thus appears unlikely in our view. We still have HOLD ratings on all our telco stocks. On a relative basis, we now prefer Maxis (HOLD, TP: MYR5.95).


Reserves surpassed 2016 high
by Suhaimi Ilias

Economics Research

Total gross external reserves rose USD0.7b to this year’s new high of USD98.7b in mid-June 2017 (end-May 2017: USD98.0b) underpinned by the USD0.7b rise in foreign currency reserves component to USD92.3b (end-May 2017: USD91.6b). Total gross external reserves level has also risen to surpass last year’s high of USD98.3b level in mid-Nov 2016.

GDP growth momentum intact
by Suhaimi Ilias

Economics Research

Index of leading economic indicators rose +1.4% YoY in Apr 2017 (Mar 2017: +1.7% YoY), suggesting the real GDP growth momentum is intact in 2Q 2017 following the better-than-expected +5.6% YoY expansion in 1Q 2017.

On hold, as expected
by Suhaimi Ilias

Economics Research

As expected, BSP kept the policy rates unchanged at its fourth Monetary Board (MB) meeting for the year on 22 June 2017. The key policy rate – the overnight borrowing rate – was left unchanged at 3.00%, together with the overnight lending rate and overnight deposit rate which stayed at 3.50% and 2.50% respectively. Maintain our view for a +25bps rate hike this year.

BM Technology Index – Base building
by Nik Ihsan Raja Abdullah

Technical Research

FBMKLCI rebounded yesterday amid bargain hunting. At day’s end, the index rose 1.86pts to 1,777.43. Sentiment has improved with gainers outpacing losers by 459 to 389. Trading volume, however, decreased to 1.64b shares valued at MYR1.79b. While a minor recovery in oil price overnight could lend support to the local bourses, expect profit taking activities to accelerate in the afternoon ahead of the long weekend break.


Outside Malaysia:

U.S: Biggest banks clear their first hurdle in Fed’s stress tests. Thirty-four of the largest banks operating in the U.S. cleared a Federal Reserve stress test of their ability to withstand economic shocks, showing firms are getting the hang of the once-dreaded reviews -- a trend that may continue if the Trump administration dials them back. Every bank subject to the annual tests’ first phase exceeded minimum thresholds, though Morgan Stanley trailed the rest of Wall Street on a key measure of leverage -- the second year it performed worse than peers on one of the main metrics. Last year, during a second phase examining proposals to pay out capital to shareholders, the bank was forced to resubmit its plan to address a “material weakness.” Results from that round are due next week. (Source: Bloomberg)

U.S: Jobless claims show tight labor market even with increase. The slight gain in filings for U.S. unemployment benefits last week is still consistent with a resilient job market, Labor Department figures showed. Initial jobless claims increased by 3k to 241k (forecast was 240k); 43-year-low of 227k was reached in February. Continuing claims rose by 8k to 1.94m in week ended June 10 (data reported with one-week lag). (Source: Bloomberg)

U.K: Britain’s factories saw their order books jump to the highest in almost 30 years this month, with growth across most sectors and export demand improving. The positive readings from a Confederation of British Industry survey come in the week the U.K. began its formal exit talks with the European Union. The CBI orders index jumped to 16 in June, the highest since 1988, from 9 in May. Its export gauge rose to 13, the strongest reading in 22 years. While a measure of output declined, the pace of growth remained “robust” and firms expect it to accelerate in the coming months. (Source: Bloomberg)

Taiwan: Kept its benchmark interest rate unchanged for a fourth-straight quarter as policy makers assess the impact of a strengthening currency and the robustness of economic expansion. Policy makers held the discount rate for banks at a six-year low of 1.375%, the central bank said. (Source: Bloomberg)

Australia: Buying more cars than ever despite miserly wage gains. Motor vehicle sales, one of the nation's least-watched economic data, reached an all-time monthly high in May as buyers splashed out on more than 100,000 new vehicles. The buoyant trend appears to defy central bank and economists' warnings about weak consumer spending amid record-low wage growth and record-high household debt. (Source: Bloomberg)

Other News:

MISC: Secured long-term contract to operate shuttle tankers in North Sea. The company has secured a contract to own and operate two specialist DP2 offshore loading shuttle tankers via its wholly-owned subsidiary, AET Tanker Holdings Sdn Bhd. The vessels will operate in oilfields on the Norwegian Continental Shelf of the North Sea, Norwegian Sea and the southern Barents Sea. The contract, which is granted by Norwegian-based energy company Statoil ASA, has an estimated value of USD200m (MYR857m) for a 5-year charter period or USD275m for a 7-year charter period. Statoil will decide on and announce the charter period by Dec 31, 2017, said MISC. (Source: The Edge Markets)

AirAsia: To order 14 more A320ceo aircraft. The company has signed an agreement with Airbus to order an additional 14 A320 current engine option (CEO) aircraft to meet higher than expected near-term growth on the carrier’s regional network. The contract, which is subject to AirAsia board approval, was announced at the Paris Air Show on Thursday. This will see the total number of A320 Family aircraft ordered by AirAsia rise to 592. To date, 171 A320ceo and eight A320neo have already been delivered to the airline and are flying with its units in Malaysia, India, Indonesia, Thailand and the Philippines. (Source: The Star)

George Kent: Sees good year ahead. The company is positive on its outlook and confident of recording another good year ahead with ample cashflow and a strong balance sheet. According to the company’s chairman Tan Sri Tan Kay Hock,“It is looking good so far. We recorded double-digit growth for the first quarter. It is progressing smoothly for the rest of the year. We expect this year to be a good year as well”. George Kent also said that in the first quarter, it had secured a major contract for the supply and delivery of water meters. “Together with contracts secured by the engineering division in the last financial year, the order book has grown to MYR6.1b,” it said. Tan added the current order book could last the company for “many years” of up to seven years. (Source: The Star)

Bintai Kinden: Bags MYR122m construction job. The group has bagged a SGD39.6m (MYR122.m) contract from Singapore's Land Transport Authority (LTA) to undertake mechanical services work for the four-in-one rail and bus depot in Singapore. Bintai Kinden said its 69.82%-owned subsidiary Bintai Kindenko Pte Ltd had yesterday accepted a LOA from the LTA to undertake the mechanical work for the supply and installation of the environmental control system for the depot. "No major risk is foreseeable on the contract, except for the possibility of long construction period that will overstretch the preliminary costing, but this can be mitigated with close monitoring of status and planning on manpower required," it added. (Source: The Edge Markets)

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