PP16795/03/2013(031743)

Transcription

1 Tuesday, 23 May, 2017 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Research Team PP16795/03/2013(031743) Reports Published Results Review KLK 2QFY17 (Inline): Better performance from plantation Results Review Batu Kawan (Inline): Earnings within expectations Corporate News Prestariang reports 5.93% growth in 1Q net profit UMW-OG 1Q net loss up 60% to RM104m amid subdued charter rates Gabungan AQRS 1Q net profit sharply higher on better operating margin, land sale MK Land unit slapped with tax demands of RM80.77m Fajarbaru bags RM29.5m renovation job from Pos Aviation Taliworks: Amount owed by Splash has risen to RM530m Bursa Malaysia Close Change +/- Change % FBMKLCI 1, FBMEMAS 12, FBM100 12, FBMEMAS Shariah 13, FBM Hijrah Shariah 14, Volume (m) 4, Value (MYR m) 2, FBMKLCI YTD performance 8.11 Economic News Liberalisation to help boost life insurance penetration rate China tells US trade representative stronger cooperation needed Why soft power could be the real value of China's massive Belt and Road project Japan April exports rise again, trade surplus with US narrows EU approves tough Brexit negotiating stance, demanding UK pays Saudi's Falih travels to Iraq to win support for OPEC oil output cuts KLCI Performance KLCI Year-End Target: 1,800 points Regional Indices Commodities (Last Close) Close Change +/- Change % YTD Change (%) Close Change +/- Change % DJIA 20, Brent Crude (USD/bbl) NASDAQ 6, WTI Crude (USD/bbl) S&P 500 2, CPO (RM/MT) 2, FTSE 100 7, Gold (USD/ounce) 1, Nikkei , Latex (sen/kg) HSI 25, Soybean Oil SHCOMP 3, KOSPI 2, Forex TWSE 9, (per USD) BIMB (YE Forecast) Close Change +/- Change % STI 3, MYR JCI 5, JPY SET 1, EUR PSEi 7, SGD

2 Major Rates Daily Participation Market Insight % Participation Bought Sold Net KLIBOR 3-mth 3.43 (%) (MYR m) (MYR m) (MYR m) KLIBOR 6-mth 3.54 Local Insti , , KLIBOR 12-mth 3.63 Local Retail yr MGS 3.55 Foreign yr MGS 3.87 Total , , Performance of BIMB Stock Coverage Top Gainers Source: Bank Negara Malaysia Top Losers Source: The Sun, BIMB Securities Research Close Change +/- Change % Close Change +/- Change % Eco World % MCT % Sunway Construction % Tambun Indah % Petronas Gas % Econpile % Matrix Concepts % Eversendai % SP Setia % UEM Sunrise % 2

3 CORPORATE NEWS Prestariang reports 5.93% growth in 1Q net profit Prestariang s net profit rose 5.93% to RM3.22m or 66 sen per share for the 1QFY17, from RM3.04m or 63sen/share a year earlier, as the technology company recorded higher contribution across all its segments. Revenue rose 7.9% to RM43.9m, from RM40.69m in 1QFY16, with contribution coming mainly from its software and services business segment, primarily the Microsoft Licensing Agreement (MLA) 2.0. The group has proposed an interim dividend of 0.75sen/ share, payable on June 21. It has solidified its mid- to long-term growth plans via its business transformation into a platform-based services company. With continuous improvement of operational efficiencies of existing businesses, the group is expected to perform better for the financial year ending (Source: The Edge) UMW-OG 1Q net loss up 60% to RM104m amid subdued charter rates UMW-OG plunged deeper into the red in the 1QFY17 with a net loss of RM104.12m, up 59.99% from RM65.08m a year ago. Loss per share widened to 4.82sen from 3.01sen. The group attributed the bigger loss to subdued time charter rates and reduced foreign exchange gains. Revenue declined 15.28% to RM74.28m from RM87.68m in 1QFY16 due to softer time charter rates from drilling contracts and weaker demand for oilfield services. At present, all seven of UMW-OG's jack-up drilling rigs are contracted, of which 5 are operational while the remaining are expected to start work at end-june. Although asset utilisation is improving, time charter rates remain soft in line with prevailing market rates. The drilling services segment contributed over 95% of its revenue in the period. UMW- OG said demand for oil pipes threading, inspection and repair services is also expected to remain soft in FY17. (Source: The Edge) Gabungan AQRS 1Q net profit sharply higher on better operating margin, land sale Gabungan AQRS for the 1Q net profit jumped nearly 4.4 times on improved operating margin and sale of 2 pieces of land. The property developer and contractor reported a net profit of RM16.14m or 4.13sen a share for the 1QFY17 compared with RM3.75m or 0.96 sen a share in 1QFY16. Revenue surged 99.6% to RM158.94m from RM79.64m in 1QFY16. In the construction segment, revenue was mainly from the work progress for the SUKE Highway, PR1MA Homes in Kuala Kuantan, Pahang, and Pusat Pentadbiran Sultan Ahmad Shah (PPSAS). The higher pre-tax profit was mainly due improved operating margins from the ongoing projects for the segment. As for its property development segment, higher revenue and profit were attributed to the sale of 2 pieces of land held under development. The group plans to increase its construction order book to RM1bn from RM300m while its current order book stands at RM1.7bn as at Dec 31, This excludes the RM1.5bn Jesselton Waterfront project. (Source: The Edge) MK Land unit slapped with tax demands of RM80.77m MK Land's wholly-owned subsidiary Saujana Triangle SB has been slapped with additional income taxes and penalty amounting to RM80.77m by the Inland Revenue Board (IRB). Saujana Triangle was served with notices of assessment seeking additional income taxes of RM55.7m for the assessment years from 2009 to 2011, and a 45% penalty of RM25.07m for the year of assessment The notices of assessment were dated May 4, The income taxes and penalty imposed by the IRB are in relation to gains from disposal of land held under investment properties in year of assessment 2009, which should be treated as revenue in nature, and not capital. The property developer added that the IRB has also disregarded the 5 years' time barred period to raise the said assessments in respect of the land disposal and has disallowed certain development costs on the basis that these are only provisions and the amounts have yet to be paid. Thus, IRB does not treat them to be incurred for the purpose of Section 33(1) of the Income Tax Act, (Source: The Edge) Fajarbaru bags RM29.5m renovation job from Pos Aviation Fajarbaru announced that it has bagged a RM29.5m contract from Pos Aviation SB to renovate part of KLIA Air Cargo Terminal 1. The LoA was awarded by Pos Aviation a subsidiary of Pos Malaysia to Fajarbaru's wholly-owned unit, Fajarbaru Builder SB, in respect to the proposed renovation and refurbishment of tenancy area at KLIA Air Cargo Terminal 1 (KACT1) for Pos Aviation. The contract is expected to contribute to its earnings for the FY17 FY18. The contract period is for 32 weeks from May 22, 2017 to Dec 29, (Source: The Edge) Taliworks: Amount owed by Splash has risen to RM530m Taliworks said the total amount due to the group from water concessionaire Syarikat Pengeluar Air Sungai Selangor SB (Splash) has risen to RM530m. The group is not able to say much on the recoverability of the amount, as negotiations for the takeover of Splash by the Selangor government has been postponed. The negotiations between the federal government and state government has been postponed until Oct 5, so no updates from us till then, but we are hopeful about it. The RM530m owed represents 21.6% of Taliwork s total assets of RM2.46bn as at the end of the last FY16. The money is owed to Taliworks wholly-owned unit Sungai Harmoni SB, which operates water treatment plant facilities. The amount has been escalating because Splash has not been receiving payments in full from Syarikat Bekalan Air Selangor SB (Syabas), which is the concessionaire for the distribution of treated water in Selangor, Kuala Lumpur and Putrajaya. (Source: The Edge) 3

4 ECONOMIC NEWS Liberalisation to help boost life insurance penetration rate BNM efforts at liberalising the insurance sector will address the protection gap in the country and increase the insurance and takaful penetration rate to 75% by Liberalisation would also help boost insurance sales in the country. According to BNM, the overall insurance and takaful penetration rate in Malaysia has ranged between 54% and 56% over the last 5 years. The advances in digital technology, demand and expectation for life insurance products and services will bring about new challenges and demands to a career in life insurance sales. But it will also help increase the penetration rate. (Source: Bernama) China tells US trade representative stronger cooperation needed China's Commerce Minister Zhong Shan told new US Trade Representative Robert Lighthizer the 2 sides should strengthen cooperation and manage disputes in trade. Trade wars are not in the interest of either country. Disagreements over global trade negotiations came to the fore at the Apec forum, which failed to agree on its usual joint statement after US opposition to wording on fighting protectionism. With the US balking at multilateral trade agreements, Asian trade ministers met to discuss the China-led Regional Comprehensive Economic Partnership (RCEP), which would create a free trade area of more than 3.5bn people, bringing together China, India, Japan, South Korea, Australia and New Zealand as well as South-East Asian nations. (Source: Reuters) Why soft power could be the real value of China's massive Belt and Road project China's "One Belt, One Road" (OBOR) initiative might bank on the development of infrastructure to boost its standing as a growing superpower, but the real value could be the soft power it affords the world's 2 nd largest economy. OBOR comprises of 2 routes - the Silk Road Economic Belt and the 21st Century Maritime Silk Road. The routes link China to Europe by way of Central Asia, Southeast Asia, South Asia and Africa. Through building infrastructure and networks, from high-speed railways to university accommodation, China aims to boost free trade and development in regions traversed by OBOR. With some 65 countries involved in OBOR, whether or not "win-win" results can be achieved depends on a host of variables, including political risks, ease of doing business and economic stability in partner countries. A large proportion of projects remain in the planning or tendering phase. (Source: Reuters) Japan April exports rise again, trade surplus with US narrows Japan's exports rose in April to mark their 5th straight month of gains, as shipments of semiconductors and steel expanded, signalling that more robust overseas demand could underpin a steady economic recovery. Exports rose 7.5% in April from a year ago. The data also showed Japan's trade surplus with the US narrowed. Exports to the US increased 2.6% in April from a year ago, gaining for the 3 rd straight month due to larger shipments of cars and auto parts. But Japan's trade surplus with the US fell 4.2% in April from a year ago to 586.7bn yen (USD5.27bn). Japan's exports are expected to continue rising as global economic growth gains momentum, but concerns about Trump's pledges to adopt protectionist trade policies cloud the outlook for export-reliant Japan. (Reuters) EU approves tough Brexit negotiating stance, demanding UK pays The EU finalized its tough Brexit negotiating position, reiterating its hard line on the UK s departure bill and refusing to discuss a future trading arrangement until there is agreement on other key topics. They want to move to a situation where all the commitments taken by the UK will be honored, as will theirs with the UK. They need to settle the accounts, and that s a question of trust between them to build their future relationship. Speaking a day after UK Brexit Secretary David Davis was quoted in an interview as saying Britain would walk away from talks unless the bloc drops its high financial demands, Barnier said it would be wrong to see any collapse in the negotiations as a success. (Source: Bloomberg) Saudi's Falih travels to Iraq to win support for OPEC oil output cuts Saudi energy minister Khalid al-falih paid a rare visit to Iraq in the latest effort by the top oil producer to convince its fellow OPEC member to extend supply cuts for a further 9 months to ease the global glut and prop up prices. The OPEC will meet in Vienna to consider whether to extend curbs agreed in December last year between OPEC and 11 non-member countries, including Russia. The existing cuts run until June. Saudi Arabia and non-opec Russia have been pushing to extend the cuts by 9 months until March Iraq, OPEC's 2 nd largest and fastest growing oil producer, has so far voiced support only for a 6-month extension. The 2 ministers will discuss boosting bilateral relations and the upcoming OPEC decision to help boost global prices and reduce the glut in the market. (Source: Reuters) 4

5 ECONOMIC CALENDAR Date Time Country Event Period Survey Actual Prior Revised 05/23/ :30 JN Nikkei Japan PMI Mfg May P /23/ :00 SP Trade Balance Mar m -- 05/23/ :00 HU Central Bank Rate Decision 23-May 0.90% % -- 05/23/ :45 US Markit US Manufacturing PMI May P /23/ :45 US Markit US Services PMI May P /23/ :45 US Markit US Composite PMI May P /24/2017 RO Money Supply M3 YoY Apr % -- 05/25/ :00 CH Swift Global Payments CNY Apr % -- 05/25/ :00 IT Industrial Orders MoM Mar % -- 05/25/ :00 IT Industrial Orders NSA YoY Mar % -- 05/25/ :00 IT Industrial Sales MoM Mar % -- 05/25/ :00 IT Industrial Sales WDA YoY Mar % -- 05/25/ :30 UK GDP QoQ 1Q P 0.30% % -- 05/25/ :30 UK GDP YoY 1Q P 2.10% % -- 05/25/ :30 UK Private Consumption QoQ 1Q P 0.30% % -- 05/25/ :30 UK Government Spending QoQ 1Q P 0.40% % -- 05/25/ :30 US Advance Goods Trade Balance Apr -$64.5b -- -$64.8b -$64.2b 05/26/ :00 BP Gross External Debt Mar b -- 05/26/ :30 US GDP Annualized QoQ 1Q S 0.90% % -- 05/26/ :30 US Personal Consumption 1Q S 0.40% % -- 05/26/ :30 US GDP Price Index 1Q S 2.30% % -- 05/27/ :30 CH Industrial Profits YoY Apr % -- 05/29/ :30 SW Trade Balance Apr b -- 05/29/ :00 EC M3 Money Supply YoY Apr % -- 05/29/ /30 GE Import Price Index MoM Apr 0.10% % -- 05/29/ /30 GE Import Price Index YoY Apr 6.30% % -- 05/30/ :00 PO Industrial Production MoM Apr % -- 05/30/ :00 PO Industrial Production YoY Apr % -- 05/30/ :30 US PCE Deflator MoM Apr 0.20% % -- 05/30/ :30 US PCE Deflator YoY Apr 1.70% % -- 05/30/ :30 US PCE Core MoM Apr 0.10% % -- 05/30/ :30 US PCE Core YoY Apr 1.50% % -- 05/31/ :50 JN Industrial Production MoM Apr P % -- 05/31/ :50 JN Industrial Production YoY Apr P % -- 05/31/ :00 CH Manufacturing PMI May /31/ :00 CH Non-manufacturing PMI May /31/ :00 JN Construction Orders YoY Apr % -- 05/31/ :00 FI Trade Balance Mar F m -- 05/31/ :00 SP Current Account Balance Mar b -- 05/31/ :00 CZ Money Supply M2 YoY Apr % -- 05/31/ :30 UK Money Supply M4 MoM Apr % -- 05/31/ :30 UK M4 Money Supply YoY Apr % -- 05/31/ :00 US Fed's Kaplan Speaks in New York 05/31/ :45 US Chicago Purchasing Manager May /31/2017 BP Base Interest Rate Jun % -- 06/01/ :45 CH Caixin China PMI Mfg May /01/ :00 HU Trade Balance Mar F m -- 06/01/ :30 UK Markit UK PMI Manufacturing SA May /01/ :00 US ISM Manufacturing May /01/ :00 US ISM Prices Paid May /01/ :00 US ISM New Orders May /01/ :00 US ISM Employment May /01/ /20 LN Current Account Balance 1Q b -- 06/01/ /07 JN Official Reserve Assets May $1242.3b

6 DEFINITION OF RATINGS BIMB Securities uses the following rating system: STOCK RECOMMENDATION BUY Total return (price appreciation plus dividend yield) is expected to exceed 10 in the next 12 months. TRADING BUY Share price may exceed 15 over the next 3 months, however longer-term outlook remains uncertain. HOLD Share price may fall within the range of +/- 10 over the next 12 months TAKE PROFIT Target price has been attained. Fundamentals remain intact. Look to accumulate at lower levels. TRADING SELL Share price may fall by more than 15 in the next 3 months. SELL Share price may fall by more than 10 over the next 12 months. NOT RATED Stock is not within regular research coverage. SECTOR RECOMMENDATION OVERWEIGHT The Industry as defined by the analyst s coverage universe, is expected to outperform the relevant primary market index over the next 12 months NEUTRAL The Industry as defined by the analyst s coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months UNDERWEIGHT The Industry as defined by the analyst s coverage universe, is expected to underperform the relevant primary market index over the next 12 months Applicability of ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. Disclaimer 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 BIMB Securities Sdn may from time to time have a position in or either the securities mentioned herein. Members of the BIMB 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 judgements as of this date and are subject to change without notice. BIMB Securities Sdn accepts no liability for any direct, indirect or consequential loss arising from use of this report. Printed and published by BIMB SECURITIES SB ( X) A Participating Organisation of Bursa Malaysia Securities Level 32, Menara Multi Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, Kuala Lumpur Tel: Fax: Azharuddin Nordin Head of Research 6