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alt=break v:shapes="_x0000_i1025">
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Share
Price:
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MYR6.97
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Target
Price:
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MYR4.55
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Recommendation:
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Sell
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A long road to
recovery
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4Q16 earnings could be dismal amid the insurmountable
stiff competition. While we think cement ASPs may improve on a mild
cement demand recovery in 2017, the steep jump in coal cost could limit
LMC’s earnings recovery. We cut our: (i) FY16-18 EPS by 62%/35%/16%
and; (ii) TP to MYR4.55 (-26%; based on the updated mean PER of 26x on
2017 EPS [from 24x]). Valuation is demanding with the stock trading at
1-year forward PER of 39x and DY of 2.4% is also unattractive.
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FYE Dec (MYR m)
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FY14A
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FY15A
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FY16E
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FY17E
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Revenue
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2,743.1
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2,750.8
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2,275.0
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2,476.3
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EBITDA
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493.5
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509.4
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281.2
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427.1
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Core net profit
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256.0
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251.0
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53.5
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148.1
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Core EPS (sen)
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30.1
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29.5
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6.3
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17.4
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Core EPS growth (%)
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(30.2)
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(1.9)
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(78.7)
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176.9
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Net DPS (sen)
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34.0
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31.0
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6.0
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16.6
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Core P/E (x)
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23.1
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23.6
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110.7
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40.0
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P/BV (x)
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1.9
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1.9
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1.9
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1.9
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Net dividend yield (%)
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4.9
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4.4
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0.9
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2.4
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ROAE (%)
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8.1
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8.1
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1.7
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4.8
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ROAA (%)
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6.4
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6.0
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1.2
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3.5
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EV/EBITDA (x)
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15.9
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14.9
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21.5
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13.8
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Net debt/equity (%)
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net cash
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1.0
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4.1
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net cash
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Share
Price:
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MYR1.75
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Target
Price:
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MYR1.85
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Recommendation:
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Buy
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4Q16 earnings in
line
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4Q16 results and second interim gross DPU of 4.3sen (FY16:
8.7sen) were within expectations. 4Q16’s strong YoY earnings growth was
driven by sustained occupancy rates, positive rental reversions, better
opex management and lower finance costs. We raise FY17-18 earnings
forecasts by ~3% p.a. and nudge up our DDM-TP by 5sen to MYR1.85 (cost
of equity unchanged at 7.5%). Still our top BUY pick for retail M-REIT.
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FYE Dec (MYR m)
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FY15A
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FY16A
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FY17E
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FY18E
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Revenue
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489.2
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507.3
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524.9
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544.1
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Net property income
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342.8
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361.1
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373.6
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387.7
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Distributable income
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291.0
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317.3
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328.0
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342.8
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DPU (sen)
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7.4
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7.8
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8.4
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8.7
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DPU growth (%)
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5.1
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6.3
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7.4
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3.8
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Price/DPU(x)
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23.7
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22.3
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20.8
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20.0
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P/BV (x)
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1.7
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1.7
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1.6
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1.6
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DPU yield (%)
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4.2
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4.5
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4.8
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5.0
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ROAA (%)
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4.9
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5.4
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5.6
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5.8
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Debt/Assets (x)
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0.2
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0.2
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0.2
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0.2
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Share
Price:
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MYR1.31
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Target
Price:
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MYR1.35
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Recommendation:
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Buy
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4Q16 in line
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4Q16 results were within expectations. The lower 4Q16 core
earnings were due to higher repair and maintenance costs, one-off
non-property opex and steeper finance costs. Our earnings forecasts and
DDM-TP of MYR1.35 (cost of equity: 7.5%) are intact. Maintain BUY on
MQREIT as we remain positive on its office assets with long-term
tenants while Menara Shell could provide stronger earnings growth
upside.
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FYE Dec (MYR m)
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FY15A
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FY16A
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FY17E
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FY18E
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Revenue
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115.2
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131.8
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185.1
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187.5
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Net property income
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90.3
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102.3
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139.5
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141.3
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Distributable income
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54.0
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59.2
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92.6
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94.4
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DPU (sen)
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6.9
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7.5
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7.6
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7.6
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DPU growth (%)
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(8.1)
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8.8
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0.4
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0.9
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Price/DPU(x)
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18.9
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17.4
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17.3
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17.1
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P/BV (x)
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1.0
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0.6
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1.0
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1.0
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DPU yield (%)
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5.3
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5.8
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5.8
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5.8
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ROAE (%)
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8.4
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5.6
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6.8
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6.9
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ROAA (%)
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4.3
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3.0
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4.0
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4.1
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Debt/Assets (x)
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0.4
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0.4
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0.4
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0.4
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NEWS
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Outside Malaysia:
U.S: Sales of previously owned homes declined more than
forecast in December, data from the National Association of Realtors data
showed. Still, sales for the full year were the strongest since 2006.
Contract closings fell 2.8% to a 5.49 million annual rate last month
(forecast was 5.52 million) after a revised 5.65 million in November.
Median sales price rose 4% from year earlier to USD 232,200. Inventory of
available properties fell to 1.65 million, the lowest in records dating
back to 1999. For all of 2016, existing home sales increased to 5.45
million, the highest since 2006, from 5.25 million a year earlier.
(Source: Bloomberg)
Germany: Business sentiment unexpectedly slipped in
January from its highest level in almost three years in a sign that momentum
in Europe’s largest economy may have weakened at the start of the year.
The Munich-based Ifo institute’s business climate index dropped to 109.8
from 111 in December. The report could raise concern that heightened
political uncertainty will damp Germany’s economic prospects after growth
in 2016 accelerated to the fastest pace in five years on the back of
domestic spending. (Source: Bloomberg)
China: Central bank refrained from raising interest rates
in its open-market operations, easing concern that it would tighten
further after increasing the cost of medium-term loans. The People’s Bank
of China offered CNY 15b (USD 2.2b) of 14-day reverse-repurchase
agreements at 2.4%, and the same amount in 28-day contracts at 2.55%,
according to a statement posted on its website. With CNY 200b of repos
maturing, the operations resulted in a net withdrawal of CNY 170b, the
most since October. (Source: Bloomberg)
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Other News:
CCM Duopharma: To supply MYR300m human insulin. The group
will deliver MYR300m of human insulin to the government over a three-year
period under the Health Ministry's off-take agreement programme. The
letter of award will allow CCM Pharmaceuticals to provide the front-end
sales, marketing, distribution and support services for the supply of
Biocon’s human insulin formulation to all the government's hospitals and
Klinik Kesihatan. (Source: The Star)
Hua Yang: Acquires 10.86% of Magna Prima for MYR66.6m. The
group has acquired 36 million shares in Magna Prima, equivalent to a
10.84% stake, for a purchase consideration of MYR66.6m, via an off-market
direct business transaction. The acquisition is part of its objective to
invest in strategic landbank, noting Magna Prima’s landbanks in Klang
Valley which presents an opportunity for further collaboration between
the two developers. (Source: The Edge Financial Daily)
Asia Poly: To diversify into property development. The
cast acrylic products manufacturer plans to acquire the entire stake in
High Reserve Land S/B (HRLSB) and diversify its business to include
property development for a purchase consideration of MYR16m. HRLSB is
involved in property development and is the registered owner of a parcel
of commercial land measuring 1.9 acres with approved development order in
Semenyih, Selangor. The proposed development for the land has a gross
development value of RM39.9 million with a gross development profit of
RM8.7 million. Asia Poly expects to undertake the proposed development in
the fourth quarter this year. (Source: The Sun Daily)
Gadang: Improved margin boost Gadang’s quarterly earnings.
Gadang net profit rose 57.5% to MYR23m or 10.62 sen per share for 2QFY17,
from MYR18m or 7.4 sen per share a year ago. The company said this was
mainly due to improved profit margins from construction activities and
higher contributions from the property division. Revenue climbed 45% to
MYR147.9m from MYR102m in 2QFY16, it said in a filing with Bursa Malaysia
today. For the 6MFY17, Gadang’s net profit rose 15.6% to MYR44.6m or
16.97 sen per share, from MYR38.6m or 16.12 sen per share for 6MFY16.
Revenue went up 0.44% to MYR252.5m from MYR251.4m in 6MFY16. (Source: The
Edge Financial Daily)
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