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SECTOR RESEARCH
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Sector Note
by Thong
Jung Liaw
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Looking back,
looking ahead
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Jun/Jul 2016 quarterly results yielded no surprises,
with an 83% hit rate. Of the 12 stocks under our coverage, 10 were in
line, with two (KNM and Wah Seong) coming in below. Earnings aside,
interest for the sector has picked up on the back of a higher oil
price outlook. OPEC’s 30 Nov meeting will be closely monitored. A
positive outcome is a re-rating catalyst. Our key picks are Yinson
(yield and new job wins), Icon (M&A) and KNM (transformation into
a renewable energy play
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NEWS
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Outside Malaysia:
U.S. Deficit up for first time since 2009 on spending
surge. The U.S. budget deficit as a share of the economy widened for the
first time in seven years, marking a turning point in the nation’s fiscal
outlook as an aging population boosts government spending and debt.
Spending exceeded revenue by USD 587.4b in the 12 months to Sept. 30,
compared with a USD 439.1b deficit in fiscal 2015, the Treasury
Department said in a report released in Washington. That was in line with
a Congressional Budget Office estimate on Oct. 7 for a shortfall of USD
588b. As a share of gross domestic product, the shortfall rose to 3.2%
from 2.5% a year earlier, the first such increase since 2009, government
figures show. (Source: Bloomberg)
U.S: Retail-sales gain keeps growth steady amid cooler
sentiment. Americans may not be spending as quickly as they were earlier
in the year, but it’s still probably enough to help the economy sustain a
respectable pace of growth heading into the holiday-shopping season.
Retail sales climbed in September by 0.6%, the most in three months, as
consumers purchased more cars, furniture, home-improvement goods and
meals out, according to Commerce Department figures. While one aspect of
the data caused some analysts to trim their third-quarter estimates for
gross domestic product, the pickup in demand last month leaves spending
on a better trajectory. (Source: Bloomberg)
Indonesia: Bank Indonesia says strong currency gives room
to build reserves. Southeast Asia’s best performing currency is giving
Indonesia’s central bank the opportunity to continue increasing foreign
reserves from a four-year high, a senior official said. “If we see the
chance to build our reserves, then surely we will take advantage of it,”
Doddy Zulverdi, Bank Indonesia’s executive director for monetary
management, said in an interview. “We don’t need to be too forceful about
it as our reserves are sufficient, but I wouldn’t say we have too much.”
Indonesia’s reserves have climbed 9.2% this year to USD 116b in
September, the highest level since before the U.S. Federal Reserve
signaled in 2013 that it would cease a bond-buying program, causing the
so-called taper tantrum that pushed the rupiah down 21% that year. The
currency has gained 5.7% this year, beating its regional peers, as foreign
investors poured almost USD 12b into bonds and stocks and the government
encouraged Indonesians with money abroad to repatriate funds as part of a
tax amnesty program. (Source: Bloomberg)
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Other News:
NWP: Ventures into private charter air transport services
biz. The group is venturing into the private charter air transport
services business via the acquisition of a 30% stake in US-incorporated
Aviation AI Inc (AAI) for USD1.5m (MYR6.3m). AAI is principally involved
in provision of private charter air transport services. It owns a
Gulfstream G-1159A aircraft. NWP said it is exploring various business
opportunities to increase its sources of income. (Source: The Edge
Financial Daily)
Damansara Realty: In JV to develop township in Tampoi. The
group will form a 30:70 joint venture (JV) company with Hong Kong-listed
Country Garden Holdings Co Ltd to develop a 21.45ha freehold land in
Tampoi into an integrated township known as Central Park. It will comprise
residential units, commercial shop spaces and various other amenities,
targeted at young homebuyers in Malaysia. The project will be managed by
the JV company, DAC Properties S/B. The development will start from the
4Q16 and the first phase launched in the1Q17. The GDV for Central Park
has yet to be disclosed. (Source: The Star)
MRCB: Two parties indicate interest in EDL Expressway. The
company has received indications of interest from two parties – PLUS
Malaysia Bhd and a client of ZJ Advisory S/B – to acquire the company’s
equity stake in MRCB Lingkaran Selatan S/B, the concession holder of the
Eastern Dispersal Link Expressway in Johor. The concession is worth more
than MYR1.2b and selling its stake will help MRCB finance its jobs. The
company said, necessary announcement will be made as and when the terms
of the proposed disposal have been finalized. (Source: The Sun Daily)
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