Friday, January 30, 2015

AmWatch - Sarawak Cable : Prospects in the East and West BUY, 30 Jan 2015

Sarawak Cable : Prospects in the East and West            BUY

We maintain BUY on Sarawak Cable Bhd (SCable) with an unchanged SOP-based fair value of RM1.70/share, which implies an FY15F PE of 8.5x.
In this report, we look at some of the upcoming transmission/distribution jobs in the Peninsula and East Malaysia that may benefit SCable. In West Malaysia, Tenaga Nasional Bhd’s (TNB) capex plans will provide continued job flow for SCable. TNB is expected to call for tenders in 1QFY15F with cable requirements for distribution lines expected to amount to RM1.2bil p.a. This does not include cable supply and turnkey jobs for transmission lines.
TNB will spend ~RM4bil p.a. in capex over the next three years to upgrade and expand the transmission & distribution networks. As an integrated supplier, SCable is in good position to supply cables and install power lines. Notably, the tender for TNB’s 500kV Ayer Tawar overhead line had just closed with the award expected within six months. We understand that there are seven packages for the 500kV line worth ~RM2bil, while another 500kV connecting line is being planned (see inside pages).
Apart from TNB jobs, SCable is also in a good standing to secure jobs for the upcoming LRT3 and RAPID projects. Over at the East, Sarawak Energy Bhd’s (SEB) continued capex plans will ensure job flow sustainability over the next decade. On a more immediate note, we understand that three players have been shortlisted for Balingian’s 275kV transmission line (worth ~RM200mil) with the winner expected to be announced this year.
SCable currently has an outstanding order book of ~RM2.2bil while its tender book is ~RM700mil. While we expect FY14F core earnings to be muted, we should see earnings recovery in FY15F given the stronger progress billings from its 500kV job as well contributions from the RM493mil Balingian and RM257mil Pengerang jobs.

Others :
Bursa Malaysia : Closing FY14 on a high   BUY
KKB Engineering : Still in running for O&G fabrication jobs             BUY

Property Sector : Jelutong landfill site redevelopment to enhance STP2’s value                                  OVERWEIGHT

Alam Maritim Resources : Alam Hidro gets RM10mil job in Kedah
Gamuda : Gamuda named top construction firm
UMW Holdings : UMW Toyota to pass GST savings to consumers

The information and opinions in this report were prepared by AmResearch Sdn 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 AmResearch Sdn Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmInvestment Group 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 judgement as of this date and are subject to change without notice.

Maybank GM Daily - 30 Jan 2015

*      US equities ended positive overnight, dragged higher by cyclical sectors. VIX eased by 1.7 to 18.76. Brent held up while WTI fell, WTI-Brent spread has widened to -$4.45, from under -$1 on 19 Jan. Commodity-bloc currencies AUD, NZD, CAD were hit hard overnight following dovish RBNZ comments. Given that BoC has cut rate and RBNZ turned dovish, eyes are on RBA meeting next Tue. Recall that RBA Gov Stevens previously mentioned that AUD should be somewhere near 0.75 and NZ PM previously commented that NZD fair value should be around 0.65. Separately Danish Central Bank cut rate for a 3rd time in 2 weeks, in an attempt to tame DKK strength. Depo rate stands at -0.5%.
*       In Japan data release this morning, CPI and IP were largely as expected. US data overnight saw US jobless claims declining by 43k to 15-year low of 265k. Expectations is building for strong NFP number next Fri while US pending home sales disappointed.
*       Day ahead in Europe brings Spain 4Q GDP, FR, IT Dec PPI, EC and Spain Jan CPI. For US, 4Q GDP, core PCE, Jan Chicago purchasing Mgr, Uni of Michigan Sentiment data are due for release. Fed’s Rosenberg to speak later in the afternoon.  

G7 Currencies
*       DXY – Consolidation. USD was broadly stronger against AUD, NZD, JPY but weak against EUR. US pending home sales data was a lot weaker than expected. On the tech chart, daily, 4-hourly, 1-hourly MACD continues to show a lack of momentum while stochastics are showing tentative signs of turning lower from overbought areas. We continue to expect USD consolidation intra-day. Day ahead brings 4Q GDP, core PCE, Jan Chicago purchasing Mgr. Fed’s Rosenberg to speak later in the afternoon.
*       USD/JPY – Range-Bound. The USD/JPY rose overnight but is retreating in Asian hours to around 118.23, likely dragged lower concerns over the economy given slower inflation and weak industrial production and household spending. This weakness, especially inflation, increases the pressure on the BOJ to do more. Nevertheless, pair has remained well-behaved, hovering within its current trading range of 116.80-119.00. With slow stochastics on the uptick, there is a potential a rebound ahead. Rangy trades within 116.80-119.00 remains likely today.
*       AUD/USD – Bearish bias. AUD/USD remains a sell-on-rally, towards 0.7850 levels looking for a move towards 0.7700. RBA meeting next Tue in focus. Dovish rhetoric is expected. Could see mild upside bias intra-day.  1-hourly MACD is bullish bias while 4-hourly stochastics is showing tentative signs of rising from oversold levels.
*       EUR/USD – Fade Relief Rally.  EUR/USD regained above 1.13-handle on better than expected EC Economic Sentiment and weak US pending home sales data. Sell EUR/USD remains the name of the game as Greek defiance weighs on sentiment and outlook. Pair now trades around 1.1330; Look to fade rally towards 1.1380s for a move back below 1.13 intra-day. Day ahead focus on SP 4Q GDP, FR, IT Dec PPI, EC Jan CPI.
*       EUR/SGDRange. EUR/SGD managed to stay above 1.53-handle tracking Euro strength overnight. Pair is likely to stay supported intra-day, with mild upside bias. Daily MACD and stochastics are suggesting mild upside bias Could see 1.5260 – 1.54 range intra-day.   

Regional FX
*       The SGD NEER trades around 1.31% below the implied mid-point of 1.3345 with the top end estimated at 1.3074 and the floor at 1.3615.
*       USD/SGD – Sideways. The USD/SGD continues to trade above the 1.35-handle, driven by MAS’ move to reduce the rate of appreciation of the SGD NEER. There is a slight retracement today though, helped by the rebound in both the JPY and EUR.  The lack of fresh impetus and expectations of dollar strength should still keep the pair hovering around the 1.35-region. Pair has lost most of its bullish momentum, suggesting sideways trade are likely ahead. Trading range within 1.3460-1.3575 should continue today.
*       AUD/SGD – Supported. The AUD/SGD took out several of our support levels on its way down pass the 1.05-levels yesterday. 1.044, which we identified as weekly support level, continues to hold. Cross has since rebounded slightly on the back of the relative strength of the SGD today. Still, intraday MACD and slow stochastics continue to point to a downside bias, suggesting rebounds could be short-lived. Resistance today is likely around 1.0620 today.
*       SGD/MYR – Range-Bound. The SGD/MYR is still on the slide this morning, hovering around 2.6925. Cross has lost most of its bearish momentum, while slow stochastics have started to rise, suggesting dips could be temporary. Look for rangy trades within 2.6600-2.7115 ahead
*      USD/MYR – Supported. USD/MYR spot opened around 3.63 levels this morning and has since traded a touch lower towards 3.6270 despite WTI falling overnight. Stability could be due to stable Brent prices. Domestic concerns – fiscal slippages unresolved, and 1MDB requesting for further extension on repayment remain and could weigh on the Ringgit. Intra-day range of 3.62 -3.64 expected. Hourly momentum is biased for further mild downside.
*       USD/CNY was fixed at 6.1370 (+0.0035) vs. Previous 6.1282 (+2.0% upper band limit: 6.2622; -2.0% lower band limit: 6.0167). CNY/MYR was fixed at 0.5867 (-0.0002). USD/CNH – Range. USD/CNH continued to trade higher towards 6.26 levels, on capital outflows. 6.2500 – 6.2750 intra-day range likely, with mild bias to upside on broad USD strength; possible China easing/band widening. USD/CNY onshore has been deviating about +1.8% to +1.9% from the mid-point since the beginning of this week and continues to test the maximum allowable limit of +2%. Prolonged pressure could see the PBoC taking this opportunity to widen the trading band to tolerate for weaker CNY, reduce the need for intervention and allow for greater 2-way volatility. But we see little incentive at this stage for PBoC to do so, we believe the authorities has tolerance for weaker CNY and its current mid-point tool to guide the exchange rate remains effective.
*       USD/IDR – Gapped Higher. The USD/IDR gapped slightly higher at the opening to 12586 from yesterday’s close of 12582, likely on the back of dollar strength overnight. Pair has since climbed even higher to above the 12600-levels at 12621 at last sight. Slow stochastics and intraday MACD are both on the rise, pointing to possible upticks ahead. With our several of our resistance levels taken out, new barrier is now seen around 12700 with support around 12500. Yesterday, foreign funds again sold a net USD2.45mn in equities yesterday, and bought a net IDR4.16tn in debt on Tue. The 1-month NDF climbed back above the 12700-levels overnight and is currently sighted at 12713 with intraday MACD still showing bullish momentum, though RSI is indicating overbought conditions. The JISDOR was fixed higher at 12515 on Thu from 12498 on Wed is likely to be fixed higher given the spot’s uptick this morning.
*       USD/PHPSideways. Despite the strong economic performance in 4Q14 (+6.9% y/y), the retracement in the USD/PHP was short-lived. Pair is now back on the rebound, hovering around 44.092 with slow stochastics flattish currently, suggesting sideway moves could be likely. Equity flows into the PSEi continues to be supportive of the PHP with a net USD18.56mn purchased by foreign funds yesterday. Supported by equity inflows, sideway trades within 44.000-44.280 should hold for now. For bearish extension, we need to see a firm break of the 44-figure. The 1-month NDF continues to hover range-bound within 43.900-44.400 with intraday MACD and slow stochastics still showing little directional clues.
*      USD/THB – Consolidation.  The USD/THB is wobbling this morning after climbing higher yesterday underpinned by a firmer dollar. Foreign selling of a net THB0.84bn in debt vs. a net THB0.75bn in equities yesterday probably did little to help the THB. Pair has taken out several of our resistance levels on its way up and new immediate barrier is around 32.810. A firm break of this level could see the pair head towards the 33-figure in the near term. Intraday momentum indicators are all pointing to a further upside bias, though the pair is overstretched currently. Support is seen around 32.630 today. Foreign buying was mixed again with a net THB3.76bn in equities purchased yesterday but with a net THB2.67bn in debt sold.
*      Local government bonds ended 1-2bps higher from previous day on profit taking after BNM’s neutral MPC decision. Dip buying was still seen throughout the day especially on the belly of the curve. The re-opening auction of the new 3y benchmark MGS 10/17 gathered a decent bid-to-cover of 2.595x although on a lower-than-expected MYR3b size.
*       For IRS, the 5y traded at 3.84% while 3M KLIBOR remained at 3.85%. Onshore IRS appears to have decoupled from the low MGS yields and heavy offshore receiving interest. Local players are paying up on the curve but were met with few sellers/receivers, who usually receive only when offshore IRS are lower. Two camps of traders have emerged – onshore camp more interested in paying and offshore camp prefer receiving.
*       In the local PDS market, interest was focused on GGs especially Khazanah-linked notes as we saw buying for longer dated Khazanah 24 as well as Rantau 29 and 31 which generally traded at MTM levels.  Meanwhile, HSBC Amanah 19 widened by 5bps with over MYR10m given to the bid. We saw range trading in Danga 30 as it initially widened 4bps from the first trade to 4.84% before recovering 3bps later in the afternoon. The issue price for the bond was 4.88%.

*      SGS prices rose back after the previous day slump, tracking the rally in UST following the Fed’s slightly dovish tone as it remained “patient” on raising interest rates. Yields on the short end of the curve fell 1-5bps, the belly were down by 8bps and the longer end fell by as much as 11bps.
*       Asian credits traded mixed with two way flows in the morning and IG spreads slightly wider, but prices rose due to the UST rally. Sinoce 20 and 27 started trading yesterday with the 20s spread initially widening to 342bps until PB buying brought it back tighter to 335bps. PB demand was more focused on the 27s, which tightened 35bps and had very few loose bonds due to the small issue size. China Oil bonds traded wider with better buyers on the longer end. We saw interest in some HK names and continued selling on Malaysian names with PETRONAS 19 trading as wide as 150/140. Indian and Korean names remain unchanged.

*      Indonesia’s government bond market was relative stable after the last Fed’s monetary meeting yesterday. There was no significant movement from the bond’s yield rates in all tenors as the Fed’s meeting result was not too hawkish. The bond players were still waiting for further Indonesia’s macro data, such as inflation and trade, on next Monday.    

CIMB Daily Fixed Income Commentary - 30 January 2015

Good Morning,

Market Roundup
  • US Treasuries reversed early gains with the Treasury Department holding two government bond auctions on the day. Earlier gains were partly due to yield hunting as investors moved away from the low or negative yields in Europe and Japan. Players also took profit after the statement from the FOMC earlier this week, which had driven players into the UST on remarks of weak inflationary pressure.
  • AUD/USD fell as traders took heed of speculation that RBA might ease monetary policy next week coming on the heels of measures by other central banks recently including MAS and SNB. However, our preference is a no change to interest rates given the higher inflation reading release this week. RBA meets next Tuesday.
  • Malaysian government bonds closed mixed on decent volume whilst there was auction of the next 3-year benchmark (MGS Oct’17). After recent the recent rally, and ahead of next week’s short trading week, as well as post (neutral) MPC, there was little else to move the market on Thursday.
  • Post January MPC meeting, Thailand government bonds closed on sideways direction Thursday. However, we saw shorter and longer tenor papers coming under net buying interest, with expectations remaining that BoT would consider cutting rates in later MPC meetings this year. Again, there was little support from offshore as foreign investors were net sellers of Thai bonds to the tune of Bt845 million Thursday.
  • Looking at the IDR government bond market, the yield curve ended up a tad lower with thin trading volume. We saw buying interest along the 5-, 10- and 15-year tenors from a few foreign names. However, it was hard to see sellers with decent size recently. We think players expect that inflation will be lower and thus provide scope for BI to cut the policy rate.
  • Asian dollar bonds were mostly dealt weaker on Thursday. Sentiment was not helped after the Fed was pretty vague in their language, resulting in some investors thinking the Fed may pull a rate hike sooner than expected (despite US Treasuries rallying overnight).
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