Wednesday, 22 February, 2017 Feb-16 Mar-16 Apr-16 Apr-16 May-16 Jun-16 Jun-16 Jul-16 Aug-16 Aug-16 Sep-16 Oct-16 Oct-16 Nov-16 Dec-16 Dec-16 Jan-17 Feb-17 Research Team research@bimbsec.com.my PP16795/03/2013(031743) 03-2613 1739 www.bisonline.com Reports Published Results Review: Petronas Dagangan 4QFY16 (Inline): A strong end Results Review: KPJ 4QFY16 (Inline): High Valuations Results Review: IOI Properties 2QFY17 (Inline): On Track Corporate News Pharmaniaga posts lower FY16 earnings Petronas 2016 profit margins improve despite tough environment UEM Sunrise to develop RM750m project on MCOBA land Serba Dinamik takes stake in Terengganu's RM1.3bn water supply job Energy Commission seeks bids to build large scale solar PV plants Ann Joo returns to the black Mercury Industries subsidiary to develop RM238m project in Gombak Bursa Malaysia Close Change +/- Change % FBMKLCI 1,706.55-6.03-0.35 FBMEMAS 12,026.96-26.28-0.22 FBM100 11,706.33-23.10-0.20 FBMEMAS Shariah 12,520.13-25.07-0.20 FBM Hijrah Shariah 13,893.29-7.55-0.05 Volume (m) 2,893.32 398.50 15.97 Value (MYR m) 2,356.22 138.09 6.23 FBMKLCI YTD performance 3.95 Economic News EU finance ministers to make progress against tax avoidance China offers banks lure of lower reserves to get more money to ailing sectors Prospects for more BoJ stimulus fading, economists split on next move S. Korea central bank seen on hold as political crisis outweighs upswing Oil up 2% as OPEC chief sees higher compliance with cuts KLCI Performance 1750 1730 1710 1690 1670 1650 1630 1610 1590 1570 KLCI Year-End Target: 1,755 points Regional Indices Commodities (Last Close) Close Change +/- Change % YTD Change (%) Close Change +/- Change % DJIA 20,743.00 118.95 0.58 4.96 Brent Crude (USD/bbl) 56.18 0.45 0.80 NASDAQ 5,865.95 27.37 0.47 8.97 WTI Crude (USD/bbl) 54.33 0.55 1.02 S&P 500 2,365.38 14.22 0.60 5.65 CPO (RM/MT) 2,783.00-48.00-1.70 FTSE 100 7,274.83-25.03-0.34 1.85 Gold (USD/ounce) 1,235.82 0.12 0.01 Nikkei 225 19,381.44 130.36 0.68 1.40 Latex (sen/kg) 812.50 6.00 0.74 HSI 23,963.63-182.45-0.76 8.92 Soybean Oil 32.95-0.21-0.63 SHCOMP 3,253.33 13.37 0.41 4.82 KOSPI 2,102.93 18.54 0.89 3.77 Forex TWSE 9,763.93 10.73 0.11 5.52 (per USD) BIMB (YE Forecast) Close Change +/- Change % STI 3,094.19-2.50-0.08 7.41 MYR 4.20 4.46 0.0043 0.10 JCI 5,340.99-18.30-0.34 0.84 JPY 110.0 113.68 0.5800 0.51 SET 1,564.42-14.05-0.89 1.39 EUR 0.93 0.95 0.0070 0.74 PSEi 7,282.68 1.49 0.02 6.46 SGD 1.45 1.42 0.0026 0.18 www.bimbsec.com.my 1 www.bimbsec.com.my
Major Rates Daily Participation % Participation Bought Sold Net KLIBOR 3-mth 3.43 (%) (MYR m) (MYR m) (MYR m) KLIBOR 6-mth 3.54 Local Insti 65.2 1,518.9 1,554.9-36.0 KLIBOR 12-mth 3.63 Local Retail 20.1 469.6 479.0-9.4 5-yr MGS 3.69 Foreign 14.7 367.7 322.3 45.4 10-yr MGS 4.05 Total 100.0 2,356.2 2,356.2 0.0 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 % Padini 2.72 0.14 5.4% GHL Systems 1.00-0.12-10.4% IOI Properties 2.13 0.06 2.9% Ho Hup Construction 0.78-0.04-4.9% MBM Resources 2.37 0.06 2.6% Malakoff 1.25-0.05-3.8% Eco World Development 1.55 0.03 2.0% Dayang Enterprise 1.03-0.03-2.8% KPJ Healthcare 4.07 0.07 1.8% IOI Corp 4.51-0.12-2.6% www.bimbsec.com.my 2
CORPORATE NEWS Pharmaniaga posts lower FY16 earnings Pharmaniaga earnings fell 45.7% to RM45.60m in the FY16 as it was impacted by higher operating expenses and finance costs. The pharmaceutical company said on Tuesday the earnings fell from RM84.04m in FY15. Its revenue was flat at RM2.19bn. PBT slumped 36% to RM72.02m from RM112.72m. However, operating expenses rose to RM238.56m from RM226.05m in FY15 while finance costs doubled to RM33.70m from RM15.14m. Its manufacturing division remained the core contributor for the year, posting a profit before tax of RM87m. However, this was lower than the previous year, primarily due to lower offtake for in-house products under the concession business. (Source: StarBiz) Petronas 2016 profit margins improve despite tough environment Petronas will record a lower revenue for 2016 from RM248bn in 2015 owing to the plunge in crude oil prices when it reports its financial results in March. This was based on crude oil prices declining to an average of US$43 (RM191.80) per barrel for 2016 against an average of US$54 (RM240.85) a year earlier. However, other profit margins for the oil company increased, including that of earnings before interest, depreciation and amortisation as well as profit after tax. Petronas s comparatively good showing despite the tough operating environment to strategic cost-cutting responses, or Project Cactus, which was launched when prices tumbled to a historical low of US$27 in February last year. Project Cactus led to operational efficiency and enabled us to cut our controllable costs by 14. (Source: Bernama) UEM Sunrise to develop RM750m project on MCOBA land UEM Sunrise s unit, Sunrise Innovation SB, will develop the Malay College Old Boys Association s (MCOBA) land in Kuala Lumpur into a mixed development project, with a GDV in excess of RM750m. Its subsidiary would build 2 blocks of service apartments, together with other supporting facilities on the 1.07ha site, located along Jalan Syed Putra in Seputeh. The unit size ranges from 1,100 sq ft to 1,500 sq ft, and the units are targeted for mostly owner occupiers, especially families and upgraders from the surrounding areas. Under the deal inked between the group and the association on Tuesday, the development will also involve the construction of a new office building for MCOBA and a banquet hall with a capacity for 1,200 people. (Source: Bernama) Serba Dinamik takes stake in Terengganu's RM1.3bn water supply job Serba Dinamik is taking a stake in a Konsortium AmanieJV SB which was awarded a RM1.306bn contract for the Kuala Terengganu Utara water supply scheme. Its unit was buying a 40% stake in Konsortium Amanie for RM34m cash from FCA Capital SB and Mirmas Holdings SB. Recall that on April 28, 2016, Konsortium Amanie was awarded a contract from the Terengganu for the design and build of 120m litres per day (MLD) and 28 MLD membrane water treatment plant. The contract included intakes, service tank, installation of raw water and clean water pipes, retrofitting and other works for the project. (Source: StarBiz) Energy Commission seeks bids to build large scale solar PV plants The Energy Commission is conducting a second competitive bidding process for companies to build large scale solar (LSS) photovoltaic (PV) plants in Peninsular Malaysia and Sabah/ Labuan. The plants will be connected to the grid and sell their energy TNB or the Sabah Electricity Board (SESB) under a solar power purchase agreement. The LSS capacity to be tendered will be from one to 30 megawatt (MWac) with a target aggregate capacity of 360MWac in Peninsular Malaysia and 100MWac in Sabah/Labuan, which is expected to be commissioned by in 2019 to 2020. (Source: StarBiz) Ann Joo returns to the black Ann Joo returned to the black in the 2016 financial year, recording RM166.7m in net profit compared with a net loss of RM135.5m previously. The profits were boosted by a strong 4Q, which saw revenue come in at RM472.1m, up 14.1% from a year ago, while net profit stood at RM45.9m, compared with RM47.7m in net loss during the same period a year ago. Its EPS for the quarter was at 9.18 sen, compared with a loss per share of 9.52 sen a year ago. The revenue from the manufacturing and trading segments increased during the 4Q, mainly attributed to higher tonnages sold and the higher selling prices of various steel products. Profit for the quarter was boosted by the manufacturing and trading divisions. Besides higher revenue due to reasons mentioned above, the significant turnaround was also attributed to vast improvement in the group s productivity and cost structure as a result of our investment in hybrid Blast FurnaceElectric Arc Furnace technology. (Source: StarBiz) Mercury Industries subsidiary to develop RM238m project in Gombak Mercury Industries (MIB) 70%-owned subsidiary, Paramount Bounty SB, will carry out construction works for a RM238m mixed development project in Gombak, Selangor. MIB said Paramount Bounty would build 3 small office home office blocks, retail space, leisure facilities, mutiple-level parking, electrical substation, garbage facility and a sewage treatment plant. The completion period of the project is 27 months from the commencement date of the construction works. The company expect the project to contribute positively to the financial performance. Paramount Bounty accepted the letter of appointment from Veritas Architects SB, the architect appointed by Pujian Development SB for the project. (Source: Bernama) www.bimbsec.com.my 3
ECONOMIC NEWS EU finance ministers to make progress against tax avoidance European Union finance ministers hope to move closer to devising common rules to counter multinationals' tax avoidance and drawing up a common list of tax havens at a regular meeting in Brussels on Tuesday. The meeting will aim to overcome different positions on how to tax the dividends of multinational corporations and on how to define a tax haven, part of an EU push to recoup revenues from wealthy individuals and companies that unfairly reduce their tax bills by shifting profits to countries with low or no taxation. (Source: Reuters) China offers banks lure of lower reserves to get more money to ailing sectors China's central bank will extend a preferential scheme for some banks that will free up additional funds for lending, as long as they channel money to weaker, cash-starved sectors of the economy. But it also warned that some banks will no longer enjoy such preferential treatment after a recent review found they had failed to adhere to "standards" intended to channel loans more directly to rural areas and small companies. The central bank is extending a programme that allows financial institutions that support rural finance and small enterprises to apply for a lower required level of cash reserves. Many Chinese banks are reluctant to lend to small, private firms, which are considered riskier than state-owned companies, and to farmers who have little collateral, though the government has launched a pilot scheme to allow farmers to use their land and property to help secure loans. (Source: Reuters) Prospects for more BoJ stimulus fading, economists split on next move The likelihood of more monetary stimulus in Japan is diminishing, according to a Reuters poll of economists who were largely split on the central bank's next policy move, signalling a possible turning point in expectations for its easing cycle. The outlook for growth and inflation for the world's third-largest economy broadly in line with the January poll. However, economists have pared back their expectations for the BoJ to ease its already ultra-accommodative monetary policy, as the outlook for global growth improves and the yen weakens. (Source: Reuters) S. Korea central bank seen on hold as political crisis outweighs upswing South Korea's central bank is expected to leave interest rates on hold at its meeting on Thursday as an upswing in inflation and exports fails to offset declining consumer sentiment in the face of an influence-peddling scandal involving President Park Geun-hye. All 20 economists predicted the Bank of Korea (BoK) will leave its key policy rate at a record low 1.25% for an 8 th straight month. Five of them foresaw a rate cut later this year, while four others said the next move will be a hike in 2018. South Korea's consumer inflation reached its fastest in more than four years in January while exports surged for a third consecutive month, adding to perceptions that business activity is building momentum. Even so, consumer sentiment for January dropped to the worst level since the 2009 financial crisis as the political upheaval following the impeachment of President Park weighed on domestic demand. (Source: Reuters) Oil up 2% as OPEC chief sees higher compliance with cuts Oil prices rose about 2% to near 3-week highs on Tuesday after OPEC was sticking to its agreement to cut production and hoped compliance with the deal would be even higher as it expects other producers join its efforts to curb a global glut. January data showed conformity from participating OPEC nations with output curbs had been above 90% and oil inventories would decline further this year. All countries involved remain resolute in the determination to achieve a higher level of conformity. The Organization of the Petroleum Exporting Countries and other producers outside the group agreed in November to cut output by about 1.8m barrels per day (bpd) in an effort to drain a glut that has depressed prices for over 2 years. (Source: Reuters) www.bimbsec.com.my 4
ECONOMIC CALENDAR Date Time Country Event Period Survey Actual Prior Revised 02/22/2017 17:00 LN Industrial Production YoY Jan -- -- 6.30% -- 02/22/2017 17:30 UK GDP QoQ 4Q P 0.60% -- 0.60% -- 02/22/2017 17:30 UK GDP YoY 4Q P 2.20% -- 2.20% -- 02/22/2017 17:30 UK Private Consumption QoQ 4Q P 0.70% -- 0.70% -- 02/22/2017 17:30 UK Government Spending QoQ 4Q P 0.10% -- 0.00% -- 02/23/2017 03:00 US FOMC Meeting Minutes 1-Feb -- -- -- -- 02/23/2017 09:00 CH Swift Global Payments CNY Jan -- -- 1.68% -- 02/23/2017 RO Money Supply M3 YoY Jan -- -- 9.70% -- 02/24/2017 17:00 IT Industrial Orders MoM Dec -- -- 1.50% -- 02/24/2017 17:00 IT Industrial Orders NSA YoY Dec -0.80% -- 0.10% -- 02/24/2017 17:00 IT Industrial Sales MoM Dec -- -- 2.40% -- 02/24/2017 17:00 IT Industrial Sales WDA YoY Dec -- -- 3.90% -- 02/24/2017 02/28 GE Import Price Index MoM Jan 0.50% -- 1.90% -- 02/24/2017 02/28 GE Import Price Index YoY Jan 5.60% -- 3.50% -- 02/27/2017 17:00 EC M3 Money Supply YoY Jan -- -- 5.00% -- 02/28/2017 07:50 JN Industrial Production MoM Jan P -- -- 0.70% -- 02/28/2017 07:50 JN Industrial Production YoY Jan P -- -- 3.20% -- 02/28/2017 13:00 JN Construction Orders YoY Jan -- -- 7.10% -- 02/28/2017 15:00 FI Trade Balance Dec F -- -- -530m -- 02/28/2017 16:30 SW Trade Balance Jan -- -- 1.0b -- 02/28/2017 17:00 CZ Money Supply M2 YoY Jan -- -- 6.80% -- 02/28/2017 17:00 SP Current Account Balance Dec -- -- 3.3b -- 02/28/2017 18:00 BP Gross External Debt Dec -- -- 34.2b -- 02/28/2017 21:00 HU Central Bank Rate Decision 28-Feb -- -- 0.90% -- 02/28/2017 21:30 US GDP Annualized QoQ 4Q S 2.10% -- 1.90% -- 02/28/2017 21:30 US Personal Consumption 4Q S -- -- 2.50% -- 02/28/2017 21:30 US GDP Price Index 4Q S 2.10% -- 2.10% -- 02/28/2017 21:30 US Advance Goods Trade Balance Jan -$65.9b -- -$65.0b -$64.4b 02/28/2017 22:45 US Chicago Purchasing Manager Feb 52.8 -- 50.3 -- 02/28/2017 BP Base Interest Rate Mar -- -- 0.00% -- 03/01/2017 08:30 JN Nikkei Japan PMI Mfg Feb F -- -- 53.5 -- 03/01/2017 09:00 CH Non-manufacturing PMI Feb -- -- 54.6 -- 03/01/2017 09:00 CH Manufacturing PMI Feb 51.2 -- 51.3 -- 03/01/2017 09:45 CH Caixin China PMI Mfg Feb 50.6 -- 51 -- 03/01/2017 17:30 UK Markit UK PMI Manufacturing SA Feb -- -- 55.9 -- 03/01/2017 17:30 UK Money Supply M4 MoM Jan -- -- -0.50% -- 03/01/2017 17:30 UK M4 Money Supply YoY Jan -- -- 6.20% -- 03/01/2017 21:30 US PCE Deflator MoM Jan 0.50% -- 0.20% -- 03/01/2017 21:30 US PCE Deflator YoY Jan 2.00% -- 1.60% -- 03/01/2017 21:30 US PCE Core MoM Jan 0.30% -- 0.10% -- 03/01/2017 21:30 US PCE Core YoY Jan 1.80% -- 1.70% -- 03/01/2017 22:45 US Markit US Manufacturing PMI Feb F -- -- 54.3 -- 03/01/2017 23:00 US ISM Manufacturing Feb 55.6 -- 56 -- 03/01/2017 23:00 US ISM Prices Paid Feb -- -- 69 -- 03/01/2017 23:00 US ISM New Orders Feb -- -- 60.4 -- 03/01/2017 23:00 US ISM Employment Feb -- -- 56.1 -- www.bimbsec.com.my 5
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. Published by BIMB SECURITIES SB (290163-X) A Participating Organisation of Bursa Malaysia Securities Level 32, Menara Multi Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur Tel: 03-2613 1600 Fax: 03-2613 1799 http://www.bimbsec.com.my Azharuddin Nordin Head of Research www.bimbsec.com.my 6