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SECTOR RESEARCH
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Challenges ahead
by Yen
Ling Lee
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Though raw material prices are on a rally, we still
expect muted-to-positive near-term growth. While sector valuation is
still not compelling after its underperformance in 2016 with fwd PER
above historical mean, we think the downside is cushioned by the USD/MYR
strength, supporting our NEUTRAL call.
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Lowest December level stockpile since 2010
by Chee
Ting Ong
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MPOB’s Dec 2016 stockpile was the lowest December
levels in 6 years. This will be supportive of 1Q17 CPO prices at
around MYR3,000/t during the low crop months of Jan-Mar. Our 12M
fundamental view for the sector remains a NEUTRAL. 2017’s outlook
will largely be a mirror image of 2016 with a year of two halves. We
prefer Indonesia planters over Malaysia given their cheaper
valuations and faster yield recovery. Our BUYs in the region are
BPLANT, SOP, BAL, AALI, LSIP, and TBLA.
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NEWS
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Outside Malaysia:
U.S: Job openings increased in November as hiring
advances, signaling steady growth in U.S. employment, a Labor Department
report showed. Number of positions waiting to be filled rose by 71,000 to
5.52 million from 5.45 million in October according to the Job Openings
and Labor Turnover Survey, or JOLTS. Hiring increased to 5.22 million
from 5.16 million; the hiring rate was unchanged at 3.6%. Some 3.06
million Americans quit their jobs, up from 3.02 million in the previous
month; the quits rate held at 2.1% for a sixth month. Layoffs rose to
1.64 million, a three-month high, from 1.57 million. (Source: Bloomberg)
U.K: Inequality has narrowed, but workers are still worse
off than before the financial crisis, according to new data that may fan
the long-running debate on wealth disparity. Median U.K. household
disposable income rose 2.2% to GBP 26,332 (USD 32,000) in the 12 months
through March, the Office for National Statistics said. But that gain
hides disparities between working households, whose 0.2% increase lagged
the 3.1% enjoyed by retired households. That left the median income for
workers 1.2% below its pre-crisis value. (Source: Bloomberg)
China: Producer price index rose at the fastest pace in
more than five years in December as the factory to the world swings from
being a drag on global inflation to another potential force pushing
prices higher. PPI jumped 5.5% YoY last month compared the 3.3% gain in
November. (Source: Bloomberg)
India: Automobile sales fell the most in 16 years last
month after Prime Minister Narendra Modi’s unprecedented clampdown on
cash prompted consumers to delay their purchases of cars, motorcycles and
trucks. Automobile sales fell 19% to 1.2 million units in December, the
biggest drop since the same month in 2000, according to data released by
the Society of Indian Automobile Manufacturers. Passenger vehicles sales
dropped 1.4% while scooters and motorcycles -- a key indicator of rural
demand -- fell 22%, the biggest monthly contraction on record. (Source:
Bloomberg)
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Other News:
Muhibbah Engineering: Bags MYR438.1m road and
infrastructure job in Qatar. The group has bagged a contract worth
approximately QAR356.7m (MYR438.1m) from Economic Zones Company of Qatar
for the construction of roads and infrastructure works at Um Alhoul Economic
Zone (QEZ-3) Phase 2.1, Qatar. The group's 49%-unit Muhibbah Engineering
Middle East LLC has formalised the contract with MANATEQ yesterday. The
project will commence immediately and is expected be completed by second
quarter of 2018. (Source: The Edge Financial Daily)
Tasco: Buying Gold Cold Transport for MYR186m. Logistics
company Tasco is buying Gold Cold Transport S/B (GCT) – one of the
largest cold chain logistics players in Malaysia in terms of storage
capacity size – for MYR186.08m as it makes its foray into a new segment
of the industry. GCT Group is principally involved in the business of
transportation, cold room storage facilities, repackaging and value added
facilities. It also said the GCT Group had been profitable in the last
three financial years and for FYE 30 November 2015, recorded revenue of
MYR67m and a profit after tax of MYR6.8m. (Source: The Star)
Versatile Creative: To explore feasibility of MYR110m
development in Johor. The group has entered into a deal with Double
Action Ventures S/B to look into developing medium-cost apartments on a
3.2-acre piece of alienated land in Johor Bahru. The group said the
estimated gross development value of the project will be MYR110m. The
group added that a definitive agreement between the parties is expected
to be drawn up within the next four months subject to the commercial
viability of the project. (Source: The Edge Financial Daily)
Malaysia Airports: Joins hands with TM to develop smart
services in KLIA Aeropolis. Malaysia Airports Holdings (MAHB) and Telekom
Malaysia (TM) have signed a MoU for the development of integrated
telecommunications, ICT and smart services for the KLIA Aeropolis
project. The MoU was signed by their respective wholly-owned
subsidiaries, Malaysia Airport (Sepang) S/B and VADS Lyfe S/B. TM and
MAHB will be working closely to strengthen the existing telecommunication
and ICT infrastructure at KLIA Aeropolis. At the same time, both parties
will explore ways to incorporate smart services through the provisioning
of Internet of Things (IoT) enabled smart services.(Source: The Edge
Financial Daily)
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