Tuesday, January 9th, 2018


Wall Street hits new record at open on healthcare, bank gains

NEW YORK, Jan 9 — Wall Street rose to fresh high at open today, with gains for healthcare and bank stocks extending the new year rally that is powered by expectations of strong quarterly earnings. A 1.7 per cent rise in Johnson & Johnson and a…

Stocks In Focus (10-1-2018)

KUALA LUMPUR (Jan 9): Based on corporate announcements and news flow today, companies that will be in focus on Wednesday (Jan 10) may include: R&A…

JPMorgan CEO Dimon regrets calling bitcoin a ‘fraud’

NEW YORK, Jan 9 — JPMorgan Chief Executive Jamie Dimon regrets having called bitcoin a “fraud” but would still not be interested in the cryptocurrency, he said in an interview on Fox Business today. Dimon, known for his candid comments,…

France signs deals with China but warns against ‘pillaging’

BEIJING, Jan 9 — Chinese President Xi Jinping and his French counterpart Emmanuel Macron oversaw the signing today of business deals worth billions of dollars, seeking better trade ties even as France’s finance minister boasted of rejecting…

Less volatility expected in local equity market

KUALA LUMPUR: The local equity market, which is already seeing a pre-election rally, may not face as much volatility as it did during the 13th general election as the level of uncertainty shrouding the market appears to be smaller this time around.

Nomura Securities Malaysia Sdn Bhd Head of Equity Research Tushar Mohata said unlike the previous polls where uncertainty was aplenty surrounding the results – given the two corner fight between the incumbent and the opposition – the scenario appears to be quite different this time as no surprise verdict is expected, with Barisan Nasional expected to retain its mandate.

He explained due to the uncertainty over the election results in the previous polls, foreign buying was rife in the first half of 2013 while selling picked up in the second half of the year.

“We won’t expect a similar level of outperforming in the equity market (this year). There is less uncertainty … there is less of a trade in the market,” Tushar added. In line with that FBM KLCI is expected to close at 1,860 points by the end of 2018.

On the trend for inflow of foreign funds, which was positive in the first week of the new year, he said it is likely to continue against a backdrop of an appreciating currency. However, the tables could turn if the fourth quarter financial result of companies does not meet investors expectations, which could result in profit-taking.

The banking sector is not expected to see a sharp profit growth this year due to slower loans growth. Nomura’s sector picks for 2018 are aviation, gaming, hotels and leisure and consumer.

Tushar who recommended a selective approach for stock picks, chose CIMB Group Holdings, Public Bank Bhd, Tenaga Nasional Berhad and Sime Darby Plantation as top buys.

He also said that Bursa Malaysia might see a strong pipeline for initial public offerings this year but is expected to materialise after the elections.

Meanwhile, Nomura Southeast Asia chief economist Brian Tan said gross domestic product (GDP) is expected to remain solid at 5.5% this year against 5.8% in 2017, anchored by solid domestic demand as a result of a spillover effect of strong exports, which is expected to continue into 2018 driven by the electrical and electronic sector.

On monetary policy, Nomura is anticipating a 25-basis-point hike in the overnight policy rate this month due to financial imbalances.

Tan also said the government’s target of narrowing the fiscal deficit to 2.8% of GDP this year is within reach, on the back of a recovery seen in crude oil prices.

“We expect them (the government) to meet their 2.8% target helped by the fact the government’s budget assumption is very conservative. They are only expecting US$52 (RM208) per barrel whereas we are forecasting US$65 and it is at US$68,” he explained.

Tan said the pace of recovery of crude oil prices has exceeded the government’s expectations resulting in higher oil revenue. Coupled with reduced fuel subsidies, the fiscal deficit target is most likely achievable.

With elections around the corner, higher government spending is anticipated in the first half of the year but the trend is unlikely to continue after the elections.

On the ringgit, which dipped below RM4.00 to the dollar mark on Monday, Tan said the appreciation has defied Nomura’s expectations and is likely to continue to appreciate throughout the year.

Ekuinas sells entire stake in APIIT Education Group for RM725 million

PETALING JAYA: Ekuiti Nasional Bhd (Ekuinas) announced the disposal of its entire 100% stake in the APIIT Education Group for an enterprise value of RM725 million.

The government-linked private equity fund said in a statement that with the divestment the group will be able to recoup its cost of investment in APIIT Group with a positive blended internal rate of return of 22.3% and money multiple of 1.6 times the capital invested, including dividends received. APIIT Group was invested across two funds.

The buyers of the APIIT Group are joint venture vehicles owned by the existing key management team and KV Asia Capital.

Ekuinas first acquired a 51% stake in APIIT Group from Sapura Resources Bhd for RM102 million before buying out the remaining 49% for RM246.98 million through its education arm Ilmu Education Group Sdn Bhd.

Last year, Ekuinas scrapped its plans to list Ilmu Education Group, which comprises APIIT Education Group, APIIT Lanka, Cosmopoint Group, UNITAR International University and Tenby Educare Sdn Bhd.

APIIT Group, meanwhile, consists of Asia Pacific Schools, Asia Pacific University of Technology & Innovation (APU) and Asia Pacific Institute of Information Technology (APIIT).

“We are divesting our stake to the new owners, which includes the existing key management team of APIIT Group that has a combined experience of more than 100 years in the industry. With that, it will ensure the interest to continue providing quality education is constantly aligned,” said Ekuinas chairman Raja Tan Sri Arshad Raja Tun Uda.

Throughout the investment period, Ekuinas has increased the total students from 7,700 in 2010 to over 10,000 in 2016.

In 2017, APU launched its state-of-the-art campus in Technology Park Malaysia, providing new technologies to enhance the student experience as part of the value creation plan.

KV Asia Capital, with its team of reputable and experienced managers, have managed, led, and developed businesses across Asia.

Ekuinas noted this will introduce new skills and experience into the APIIT Group that will complement the expertise of the existing key management team, ensuring a smooth transition and business continuity for the group with minimal disruption to the students’ learning.

Tien Wah Press disposes of machinery for RM1.29m

PETALING JAYA: Tien Wah Press Holdings Bhd is selling its machinery for RM1.29 million following its plant closure in Malaysia.

The group told Bursa Malaysia, it had on Jan 9, 2018 entered into an assets sale agreement with Paper Base Converting Sdn Bhd, an indirect wholly owned subsidiary of New Toyo International Holdings Ltd, which is a major shareholder of Tien Wah.

Tien Wah said the disposal is in line with the cessation of its printing business announced on July 20, 2017 and will help realise the value of some of its assets, which are no longer used or required by the group.

The group stressed that the disposal is not expected to result in the group becoming a cash company or a Practice Note 17 (PN 17) company based on its audited consolidated financial statements for the financial year ended Dec 31, 2016.

The expected gain from the disposal is RM843,013, which will be used for working capital.

Tien Wah’s share price gained 5 sen or 3.2% to close at RM1.63 today on some 73,000 shares done.

Prestar to list steel unit on ACE Market

PETALING JAYA: Prestar Resources Bhd is looking to list its subsidiary Tashin Steel Sdn Bhd on the ACE Market of Bursa Malaysia via a special purpose vehicle known as Tashin Holdings Bhd, by the fourth quarter this year.

The group told Bursa Malaysia that as part of the proposed listing exercise, Tashin Holdings has entered into a share sale agreement with Prestar and Formula Naga to acquire the entire share capital of Tashin Steel for RM144.07 million.

The acquisition would be satisfied by the issuance of new Tashin Holdings shares at an issue price of 50 sen per share.

Currently Prestar owns a 51% stake in Tashin Steel, which has a share capital of RM20 million, while the balance 49% held by Formula Naga Sdn Bhd.

Tashin Steel is involved in the processing of steel coils into slit coils and steel sheets as well as manufacture of steel products including expanded metals products, flat bars, square bars, steel pipes, steel plates, checkered plates and C Purlins.

Tashin Holdings’ initial public offering (IPO) exercise involves the issuance of 59.02 million new shares representing 17% of its enlarged share capital. Of the 59.02 million new shares, 17.36 million new shares will be made available to the Malaysian public via balloting.

Proceeds from the IPO will be used mainly for capital expenditure to support Tashin Group’s business expansion into the production of wire mesh products and to upgrade the existing steel processing line; to purchase a piece of industrial land for the construction of a new factory; to supplement the working capital of the Tashin Group which includes the purchase of raw materials.

M&A Securities is the principal adviser for the IPO exercise.

Post-listing of Tashin Steel, Prestar will continue to focus on its downstream manufacturing of material handling equipment such as racking for warehouses and third party logistic for e-commerce, wheelbarrows for palm oil plantation and guardrails for highway.

It will also expand its manufacturing capacity of carbon steel pipes and hollow sections for supplies to furniture, office equipment manufacturing, engineering and fabrication usage.

CPO prices expected to decline on mounting supply

KUALA LUMPUR: Palm oil industry players seem sceptical over this year’s outlook, as crude palm oil (CPO) prices are projected to decline by 12%, on the back of mounting inventory for the commodity.

Plantation consultant and Gan Ling Sdn Bhd director Ling Ah Hong said CPO prices are expected to be on a downtrend, unless there is a disruption in oilseed production, which could reverse the trend.

“The rising CPO inventory in Malaysia and Indonesia is indicative of supply outweighing demand. Therefore, boosting biodiesel usage, especially in Indonesia, would be a good thing for the industry,” he said during the Global Palm Market Outlook 2018 session today.

The session was part of the Reach and Remind Friends of the Industry Seminar 2018 and Dialogue organised by the Malaysian Palm Oil Council.

The absence of weather extremity has also contributed to the higher palm oil inventory this year, as weak La Nina may potentially support the robust palm oil supply growth, thus pressuring the CPO price, particularly in the second half of this year.

He noted that in 2015, strong El-Nino in 2015, which brought more rain and storms to the region, led to a strong price rally in 2016 and saw the CPO price soared 66%.

“According to the Ganling weather-based CPO forecast for 2018, Malaysia would see an additional 6.6% growth of its inventory and hit 21 million tonnes of plam oil, whereas, Indonesia’s inventory would increase 7.5% to 37.2 million tonnes.

“Both countries account for 85% of the global supply and if we combine both producing countries’ inventories, the growth would be 7.2% or four million tonnes,” he said.

Meanwhile, Singapore-based Palm Oil Analytics owner and co-founder Dr Sathia Varga said the website projected that Malaysia’s supply would be at 20.52 million tonnes, whereas Indonesia’s would stood at 39 million tonnes.

“Among the challenges that lie ahead for the industry are the debate on the European Union proposed ban on palm oil, the US and the EU anti-dumping duties on Indonesia’s biodiesel, India’s import tariff on the palm oil, and labour market reform,” he said.

However, he stressed that Malaysia’s move in removing export tax for the period of three months is expected to assist in reducing the inventory and a positive element for CPO price in the first half of this year.

“This makes Malaysia’s CPO more attractive,” he added. – Bernama

MB World a ‘buy’ with Rapid development

PETALING JAYA: Hong Leong Investment Bank (HLIB) Research has initiated coverage on MB World Group Bhd with a “buy” call and a target price of RM2.75, offering a 32.2% upside from its current price.

The group’s share price was up 12 sen to RM2.20 today with 129,100 shares traded.

MB World, formerly known as Emas Kiara Industries Bhd, is mainly involved in property development and geotechnical engineering services.

In a note today, HLIB Research said it sees the group as the proxy for Petronas’ Refinery and Petrochemical Integrated Development (Rapid) expansion, given that its maiden township project is benefiting from the growth potential and spill-over effects from both developments in Pengerang and Desaru Coast.

Bucking the lacklustre trend of overall property market, the research house said MB World was able to achieve an overall take-up of more than 80% within a year after the launch of its projects, thanks to its first mover advantage.

Besides the key selling point of close proximity to Pengerang and Rapid projects, HLIB Research said the location also provides the residences a safe distance from the risk of severe environmental impact and pollution in Pengerang.

“Besides, the project is expected to fetch an attractive rental yield in the range of 6%-10% drawing the inference from the rental rate in the neighbour township,” it added.

In addition, HLIB Research said the group is a rising property player in Johor with a total gross development value of RM3.5 billion to be developed for the next 10 years.

The research house said the group’s revenue is expected to rise by three-years compound annual growth rate of 139% in anticipation of continue strong new sales in FY18 and FY19, having achieved about RM566 million sales (excluding Pinnacle Tower project) in FY17.

Furthermore, it said the sustainability of earnings is supported by the unbilled sales of RM275 million as of Q3 FY17 and healthy margin given its low land cost.

“We forecast FY17 and FY18 core earnings at RM27 million (up 70% y-o-y) and RM44 million (up 64% y-o-y), respectively,” it added, noting there is a potential increase in dividend following the projected high earnings growth.