Wednesday, March 13th, 2019


Frenzied buying of oil & gas stocks on Bursa

PETALING JAYA: In what was a rare occasion on Bursa Malaysia today, the local bourse saw the top 10 most active list being fully dominated by oil and gas (O&G) and related stocks, which attracted investors’ interest on hopes that supply cuts will boost global crude prices.

Frenzied buying of O&G stocks led to a 27.07-point, or 2.61%, jump in the Energy Index to 1,063.01 points today from 1,035.94 points yester. It was the best performing index on Bursa Malaysia.

As at 6pm today West Texas Intermediate and Brent crude oil futures were trading 0.9% and 0.61% higher at US$57.40 and US$67.10 per barrel, respectively.

On Bursa Malaysia, Naim Holdings Bhd was the top gainer today after it hit limit-up at RM1.20, closing 30 sen or 33.33% higher with 68.10 million shares traded.

Among the most actively traded stocks were Sapura Energy Bhd, Perdana Petroleum Bhd, KNM Group Bhd, Bumi Armada Bhd, Velesto Energy Bhd and Barakah Offshore Petroleum Bhd.

Sapura Energy was the most actively traded stock, with 370.10 million shares done. It rose 4.62% to close at 34 sen.

Perdana Petroleum’s share price jumped 50% to close at 45 sen with 339.98 million shares done. This was followed by Alam Maritim Resources Bhd and Barakah Offshore Petroluem Bhd, which soared 20% and 19% to 15 sen and 12.5 sen, res-pectively.

Oil prices were lifted by ongoing supply cuts led by Organisation of the Petroleum Exporting Countries (Opec) and its allies including Russia (known as Opec+), which had agreed in December last year to reduce supply by 1.2 million barrels per day (bpd) beginning January this year, for a period of six months.

According to a Reuters report last month, Opec’s oil output fell almost 800,000 bpd in January to 30.81 million bpd.

Meanwhile, Saudi Arabia plans to cut its crude oil exports to below 7 million bpd in April while keeping its output below 10 million bpd.

A Reuters report quoting a Saudi official, said that state-owned Saudi Aramco’s oil allocations for April are 635,000 bpd below customers’ nomination.

Despite strong demand of more than 7.6 million bpd, its customers were allocated less than 7 million bpd.

Saudi Energy Minister Khalid al-Falih said that March oil production was 9.8 million bpd and that the country plans to keep its April output at the same level.

Closer to home, the O&G sector was also boosted by state-owned Petroliam Nasional Bhd’s (Petronas) commitment of a higher capital expenditure (capex) of over RM50 billion for 2019, as it focuses on plans to venture into new businesses such as renewable energy and specialty chemicals.

Last year, the national oil firm spent RM46.8 billion on capex, with a focus on the upstream projects. The RM46.8 billion is 5% higher than the previous year.

The higher capex is expected to spur local upstream activities, with potential beneficiaries being fabricators and floating production storage and offloading players.

Alliance Islamic Bank sets up sukuk programmes of up to RM2.8 billion

PETALING JAYA: Alliance Bank Malaysia Bhd’s wholly owned subsidiary Alliance Islamic Bank Bhd is establishing sukuk programmes of up to RM2.8 billion.

In a filing with Bursa Malaysia, the bank said it has lodged with Securities Commission Malaysia a perpetual sukuk programme of up to a global limit of RM2.5 billion and an Islamic commercial papers programme (ICP programme).

The sukuk programme comprises the issuance of a senior sukuk murabahah of up to RM1.2 billion (senior sukuk), Islamic Tier 2 sukuk murabahah of up to RM800 million (T2 sukuk) and Islamic additional Tier 1 sukuk wakalah of up to RM500 million (AT1 sukuk).

Meanwhile, the ICP programme comprises the issuance of sukuk murabahah of up to RM300 million.

Proceeds of the sukuk programmes will be used for Alliance Islamic’s syariah-compliant general banking, working capital and other corporate purposes, including the refinancing of any financing incurred and/or any financing instruments issued by Alliance Islamic.

In addition, the AT1 sukuk and T2 sukuk are intended to qualify as Basel III-compliant Additional Tier 1 regulatory capital and Tier 2 regulatory capital respectively of Alliance Islamic in accordance with the Capital Adequacy Framework for Islamic Banks (Capital Components) issued by Bank Negara Malaysia (BNM) on Feb 2, 2018.

Alliance Bank said approval from BNM for the establishment of the sukuk programme was received on Dec 6, 2018.

Alliance Investment Bank is the principal adviser, lead arranger, lead manager and facility agent for the sukuk programmes. Alliance Islamic is the syariah adviser for the sukuk programmes.

Palm hits 3-month low on India demand concerns, rising output

SINGAPORE: Malaysian palm oil futures slid for a sixth consecutive session today to their lowest in three months on pressure from expectations of lower demand in top importer India and rising domestic production.

The benchmark third-month palm oil contract on the Bursa Malaysia Derivatives Exchange was down 1% at RM2,094 a tonne at the midday break.

Earlier in the session, the market dropped to its weakest since mid-December at RM2,091 a tonne.

World palm oil demand may suffer its first contraction in two decades during the 2019/20 crop year due to rising domestic oilseed supplies in top buyer India and slowing demand in Europe and China, industry participants told Reuters.

“There is talk among traders that palm oil is being sold in India at below the market price from old stocks,“ said one Kuala Lumpur-based trader.

“This might have an impact on demand.”

However, top analysts painted a bullish picture at last week’s key conference in Kuala Lumpur.

Malaysian palm oil futures are set to rise to trade between RM2,350 and RM2,450 a tonne in four to six months, leading industry analyst Thomas Mielke said.

On the technical front, palm oil may test a support at RM2,094 per tonne, as indicated by its wave pattern and retracement analysis, according to Wang Tao, a Reuters market analyst for commodities and energy.

Dayang teams up with PKNM, Main Velocity for Malacca projects

PETALING JAYA: Dayang Enterprise Holdings Bhd, which has seen a spike in its share price recently, is looking to collaborate with Malacca State Development Corp (PKNM) and Main Velocity Sdn Bhd to undertake various projects in Malacca.

In a filing with Bursa Malaysia, Dayang said that the parties wish to establish a cooperation and collaboration in exploring, securing and operating any projects in Malacca related to oil and gas, energy, engineering and civil works, construction and development.

Dayang’s wholly owned subsidiary Dayang Enterprise Sdn Bhd (DESB) entered into a memorandum of understanding (MoU) with PKNM’s subsidiary PKNM Energy Sdn Bhd and Main Velocity with the intention of exploring a working relationship and cooperation for the projects and to set out the principal terms of arrangement between the parties.

PKNM is the development state agency in Malacca for industrial, property and enterpreneurs. It intends to enter the business of oil and gas, asset management, engineering and energy while DESB is principally engaged in providing offshore, topside maintenance, engineering and construction services for the oil and gas industry.

Main Velocity is involved in pipeline installation, inspection, pre-commissioning, construction, maintenance in petrochemical industrial, fabrication, bolt and leak testing, vessels supply, manpower supply as well as offshore catering services.

BAuto Q3 earnings more than double

PETALING JAYA: Bermaz Auto Bhd’s (BAuto) net profit for the third quarter ended Jan 31 more than doubled to RM81.01 million from RM40.47 million a year ago, underpinned higher revenue from domestic operations and higher share of profit from its associate company.

In a filing with Bursa Malaysia, BAuto said the higher share of profit contribution from Mazda Malaysia Sdn Bhd was due to an increase in production volume for the new CX-5 model to cater for both the domestic and export markets.

However, profit contribution from the Philippines operation was lower as a result of weaker sales and compressed profit margin. The group also accounted for the expenses of its employees’ share scheme (ESS) amounting to RM1.5 million during the quarter.

BAuto’s revenue for the quarter rose 39.1% to an all-time quarterly high of RM778.13 million from RM559.4 million a year ago due to higher vehicle sales volume driven by strong domestic demand for Mazda vehicles, particularly the SUV models.

During the quarter, the group was still fulfilling back orders on some of the more popular models as many customers took advantage of the offer to absorb the sales and service tax (SST) for bookings received prior to Sept 1, 2018 but vehicle delivery made after the reintroduction of the SST.

In the Philippines, operations continued to be affected by the Tax Reform for Acceleration and Inclusion (Train) law that was implemented in January 2018, resulting in an increase in excise tax and consequently causing car prices to increase. This dampened the demand for motor vehicles in the country.

For the nine months ended Jan 31, BAuto’s net profit jumped 147.60% to RM205.21 million from RM82.88 million a year ago while revenue rose 37.37% to RM1.95 billion from RM1.42 billion a year ago.

BAuto declared a third interim dividend of 4.5 sen per share in respect of the financial period ended Jan 31, payable on April 25.

Despite the possibility of a dampened consumer sentiment in Malaysia and contraction of demand in the Philippines, BAuto expects its performance for the remaining quarter to remain satisfactory.

The total industry volume (TIV) for Malaysia last year was 598,714 units or 3.8% higher year-on-year while Mazda’s sales volume grew 67% year-on-year for the same period.

The group noted that the uncertainties over the ongoing trade war between the US and China, fall in prices of crude oil and commodities, review of mega projects by the new government, a persistently weak ringgit and a more stringent hire purchase guideline could further affect local consumer sentiment.

“However, the expected launch of the all new Mazda3 and CX-8 models in Malaysia may mitigate some of these challenges,” the group said.

In the Philippines, the new vehicle market continued to be low due to the implementation of the Train law.

“This has resulted in the contraction of demand for most, if not all, auto brands including Mazda. Bermaz Auto Philippines Inc. seeks to preserve its sales volume through the growth in its number of dealerships,” it said.

Cahya Mata JV bags RM466m Bintulu bridge job

BINTULU: Cahya Mata Sarawak Bhd’s consortium PPES Works CCCC JV Sdn Bhd today received and accepted a RM466.68 million contract for the proposed construction and completion of the Bintulu – Jepak bridge crossing Kuala Kemena.

PPES Works CCCC is a joint venture between Cahya Mata’s 51%-owned subsidiary PPES Works (Sarawak) Sdn Bhd and China Communications Construction Company (M) Sdn Bhd (CCCC).

The remaining 49% equity interest in PPES Works is held by Sarawak Economic Development Corporation.

The tenure of the contract is for 48 months, commencing April 3, 2019, with completion targeted for April 2, 2023.

The agreement stipulates that the iconic bridge crossing Batang Kemena at Bintulu – Jepak be approximately 1,048m long with a four-lane double carriageway, with a cable-stayed bridge complete with a flyover over Jalan Tun Ahmad Zaidi, Jalan Tun Razak and the Jalan Abang Galau traffic junction, with an approximate 4km connecting road.

The contract is expected to contribute positively to Cahya Mata’s earnings during the tenure of the contract.

Its shares went up 7 sen or 2.1% to close at RM3.40 today on 1.68 million shares done.

Cahya Mata Sarawak is a leading corporation listed on the Main Market of the Malaysian stock exchange, Bursa Malaysia, and is a major private-sector player in Sarawak.

Local stock market seen consolidating until end of Q2

KUALA LUMPUR: The local stock market is expected to extend its consolidation phase until the end of second quarter (Q2) this year due to geopolitical and economic policy uncertainty, according to UOB Asset Management (Malaysia) Bhd (UOBAM).

Speaking at a media briefing today, UOBAM CEO Lim Suet Ling (pix) said the FBM KLCI is expected to consolidate between 1,650 to 1,700 points during the consolidation phase, before moving towards 1,750 points by end of the year.

“For it to be at the 1,800- or 1,900-point levels, something in Malaysia has to change drastically that the foreigners are willing to overweight our market, so that there is a price-earnings (PE) expansion,” she added.

The KLCI rose 6.96 points or 0.42% to close at 1,678.24 points today.

Looking ahead, Lim said the fund house favours consumer, automotive, technology and manufacturing sectors attributed to stronger ringgit, while it is underweight on the property, construction and plantation stocks given uncertainties on project procurement.

“When the government try to relook at our economy, there are certain sectors like toll road and construction that are being hit. It is unfortunate, but they (government) are just planning for the longer sustainable growth.

“But if we look at it, the challenge is not internal, but rather the external (challenges) that everybody is facing,” she said.

Lim noted that most of the external concerns were due to trade tensions between the US and China, developments in the Brexit process and fears over slowing global growth.

Speaking of the US economy, she said, a recession, if any, will likely happen by the late of 2020 and 2021. However, she noted that currently there has not been a negative inverse yet on US treasury yield curve.

Meanwhile, Lim said UOBAM is targeting RM100 million in subscription for its newly launched shariah-compliant global balanced fund, the United-i Global Balanced Fund, within two months from its launch.

The fund, which is its first shariah-compliant global balanced fund, will invest in a diversified, global portfolio of shariah-compliant asset classes.

“The fund aims to reduce investment volatility through shariah screening which filters out non-shariah sectors such as gambling, weapons and tobacco companies as well as those companies that are overleveraged or have unproductive cash piles.

“This ensures that only companies with low debt ratios and strong fundamentals are included for selection, providing investors with potentially lower investment risk and competitive returns,” she added.

The fund, which is managed by UOBAM and UOB Islamic Asset Management Sdn Bhd, has an initial minimum investment of RM1000, with minimum additional investment of RM100.

As at Jan 31, UOBAM had assets under management of RM6.86 billion.

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