Monday, May 13th, 2019


Amazon offers employees US$10,000 to quit, launch delivery business

WASHINGTON, May 13 — Amazon announced today it was offering employees US$10,000 to quit their jobs and become independent package delivery entrepreneurs as the online giant ramps up efforts to control its own logistics. An Amazon statement said…

Boeing says ‘confident’ US-China trade talks will succeed

NEW YORK, May 13 — Boeing is “confident” US-China trade talks will yield an agreement, a Boeing spokesman said today after Beijing retaliated against higher US tariffs and the aircraft manufacturer appeared to be a potential target for further…

Local stocks tipped to stage strong rebound

PETALING JAYA: Despite the recent weakness amid domestic and global headwinds, AmBank Research said the worst is over for the local stock market and it is poised for a major comeback.

The research house said it is unperturbed by the recent weakness in the local market and has maintained its year-end FBM KLCI target of 1,820 points, driven by four major positive catalysts.

Nonetheless, the local bourse remained under pressure today due to escalating US-China trade tension with the KLCI declining 9.18 points or 0.57% to 1,601.09 points. There were a total of 815 losers against 140 gainers.

On the currency market, the ringgit depreciated 0.2% to 4.1660 against US dollar as at 5pm today.

In its report, AmBank Research said the proposed merger between telco giants Axiata Group Bhd and Digi.Com Bhd has been very well received by the market, as reflected in the sharp appreciation in the share prices of both companies after the news.

“Both Axiata and Digi.Com are component stocks of the FBM KLCI, carrying weighting of 4% and 3.4% respectively. In addition, by swapping its 37% stake in Axiata into a smaller 16% stake in the enlarged merged entity (which should command better share liquidity), it allows Khazanah Nasional Bhd to pursue its exit from the telco sector with less disruption to the overall market,” it said.

Secondly, the initial public offering (IPO) market in Malaysia will be revived with the listing of poultry player Leong Hup International Bhd on Thursday, which is the largest IPO in Malaysia since the listing of Lotte Chemical Titan Holding Bhd in July 2017.

The third catalyst, it said, is the synchronised recovery of the global markets last Friday as investors now hold the view that a full-blown US-China trade war will be avoided.

This is due to Beijing’s decision to stay the course with regard to the trade negotiation despite repeated provocations from US President Donald Trump.

The fourth catalyst is Pakatan Harapan’s landslide victory in the Sandakan parliamentary by-election last Saturday. AmBank Research said this eases concerns about the ruling coalition losing support from the people, which would prevent it from carrying out its reform agenda.

“Last traded at 1,610 points (on Friday), the FBM KLCI traded at about 16.8 times our projected 2019 earnings. This is at more than one time multiple discount to its five-year historical average of 17.9 times.

“We maintain our end-2019 FBM KLCI target of 1,820 points, which was initially (in December 2018) based on 18.5 times our earnings forecast, but has since risen to about 19 times as we trim our 2019 earnings growth projection to 2.7% from 4%,” it said.

Next year, at 1,820 points, the FBM KLCI will be trading at only 17.9 times AmBank Research’s 2020 earnings forecast, which is backed by a 6.3% earnings growth and is in line with its historical average.

AmBank Research’s top picks are Malayan Banking, Petronas Chemicals Group, RHB Bank, Dialog Group, Top Glove Corp, Serba Dinamik Holdings, Bermaz Auto, Malaysian Pacific Industries, Malayan Flour Mills and Berjaya Food.

Economic slowdown seen extending into second quarter

PETALING JAYA: Malaysia’s economy may extend its slowdown into the second quarter amid weak domestic demand and global headwinds, according to economists.

Kenanga Research retained its view that the manufacturing performance would remain subdued going forward, due to the elevated uncertainty surrounding the final outcome of the US-China trade negotiation.

“Economic moderation in major global markets, including China, the EU and the US also partly contributed to our outlook. Along with an expectation of soft domestic demand, GDP growth will likely extend its slowdown into the second quarter of 2019 to 4.2% from an estimated 4.4% in the first quarter, adding to our whole year projection of a slower growth of 4.5%,” it said in a research note today.

AmBank Research, too, expects first-quarter GDP growth to be weak following the lacklustre Industrial Production Index (IPI) performance.

“It (Q1 GDP growth) should read around 4.1% with our downside at 3.8%. Underpinned by ongoing external headwinds, added with domestic issues, we believe the economy is likely to experience moderate growth in 2019. Our base case growth is 4.5% with the downside at 4.0%.”

Bank Negara is set to release first-quarter GDP figures this Thursday.

PublicInvest Research foresees Malaysia’s exports and IPI to rebound once trade normalises despite the current jittery conditions.

The IPI rebounded in March, rising 3.1% year-on-year, driven by a turnaround in manufacturing and sustained electricity demand while mining continued to contract.

PublicInvest Research said the IPI average of 2.7% for the first quarter of 2019 is its lowest since the third quarter of 2018 (2.4%), but noted that it should not be a source of concern as it was caused by an uncharacteristic situation namely the trade war, and is bound to recover once global trade normalises.

It said that the manufacturing sector may rebound once global trade normalises but electricity output may not sustain and is likely to ease in the second quarter.

“Mining sector performance may normalise in the months ahead given the expectation of output rebound by natural gas though this may be offset by crude petroleum production constraints and extension of voluntary supply adjustments by Petronas,” it added.

However, Kenanga Research and HLIB Research are less optimistic, due to the impact of the trade war on Malaysia’s manufacturing performance.

“In the immediate term, we anticipate manufacturing production to remain subdued following the re-escalation of US-China trade dispute that is anticipated to lead to increased uncertainty and pullback in investment and trade activities,” said HLIB Research.

Meanwhile, UOB Global Economics & Markets Research said Pakatan Harapan’s new economic agenda is relevant and purposeful, given Malaysia’s current social, economic and political landscape.

“We think the government has detailed many key areas that need fixing, some which are seen to be a tall order. Nevertheless, strong political will alongside firm execution and implementation will ensure that Malaysia moves forward to achieve these goals,” it said in its macro note today.

UOB said identifying new growth sectors is critical to further diversify Malaysia’s economic structure amid increasing challenges for commodity industries and rising global trade protectionism.

Uber slides at open following last week’s rocky debut

NEW YORK, May 13 — Uber shares went into a fresh skid today — more bad news for the global ride-hailing giant, which endured steep declines in its hotly anticipated market debut last week. Shares in Uber were off six per cent at US$38.95 after…

Saudi Arabia says its oil tankers among those hit off UAE coast

DUBAI, May 13 — Saudi Arabia said today that two of its oil tankers were among those attacked off the coast of the United Arab Emirates and said it was an attempt to undermine the security of crude supplies amid tensions between the United States…

Loob hires advisers for IPO next year, eyes RM300m

PETALING JAYA: Bubble tea maker Loob Holding Sdn Bhd is planning an initial public offering on the local bourse next year to raise as much as RM300 million.

According to Bloomberg, the Tealive brand owner has hired advisers for the exercise and is aiming for a listing in the first half of next year. It was reported that the firm is considering seeking a valuation of as much as RM1 billion.

Tealive has over 200 outlets in Malaysia and has expanded to Vietnam, Australia and China.

Tealive was created following a dispute between Loob and La Kaffa International Co Ltd that saw the Taiwanese franchisor terminate its Chatime master franchisee contract with Loob.

In August last year, Loob and La Kaffa reached an out-of-court settlement to amicably resolve all their disputes arising from their one-time franchise relationship.

Loob manages a diverse portfolio of food and beverage brands in Malaysia, including Tealive, Gindaco, Croissant Taiyaki, Define: food; and Define: burgers, Kokokai and Soda Xpress.

Earlier this month, Loob divested its stake in llallao to focus on global expansion, particularly on its flagship brand Tealive.

Wah Seong Corp’s first quarter profit shrinks 31%

PETALING JAYA: Wah Seong Corp Bhd reported a 30.9% decline in net profit to RM20.2 million for the first quarter ended March 31, 2019 against RM29.25 million recorded in the same quarter a year ago.

Its revenue also slipped 13.8% to RM683.76 million from RM792.83 million.

The group attributed the drop in earnings to the weakness in its oil & gas and industrial trading & services segment, which saw profits before tax down 25.8% and 93.5% to RM24.2 million and RM400,000 from RM32.6 million and RM6.2 million, respectively.

However, its renewable energy segment’s profit before tax jumped 85.4% to RM7.6 million from RM4.1 million.

Wah Seong’s current order book amounts to RM1.1 billion, comprising RM702.4 million in oil & gas, RM330.2 million in renewable energy and RM53.1 million in industrial trading & services sector.

The group said there has been an increase in tender preparatory activities among some oil & gas majors for a number of prospective projects.

“These are expected to be converted into firm bids in the near term, with awards taking place in the next six to 18 months. The outlook for the group is likely to improve in the course of the year.”

Leong Hup posts 15% rise in earnings in 1st quarter

PETALING JAYA: Leong Hup International Bhd, which is slated to be listed on the Main Market of Bursa Malaysia this Thursday, saw its net profit for the first quarter ended March 31, 2019 rise 15% to RM60.58 million from RM52.68 million a year ago.

The better earnings were driven by higher sales of eggs, broiler day old chicks (DOCs) and feedmill.

In a filing with Bursa Malaysia, the group said its earnings before interest, tax, depreciation and amortisation (ebitda) from livestock and poultry related products rose 25.9% during the quarter to RM118.92 million from RM94.49 million a year ago.

The higher ebitda was primarily contributed by sales of eggs in Malaysia and sales of broiler DOC in Indonesia.

Ebitda from feedmill rose 36.3% to RM85.19 million from RM62.5 million a year ago due to higher sales in Indonesia as well as from the Dong Nai feedmill plant in Vietnam, which commenced operations in January 2019.

Leong Hup’s revenue for the quarter rose 11.9% to RM1.51 billion from RM1.35 billion a year ago, driven by revenue from feedmill which rose 27% to RM643.63 million from RM506.67 million a year ago.

The higher feedmill revenue was due to an increase in sales volume and average selling price of livestock feed in Indonesia and Vietnam during the quarter.

Revenue from sales of livestock and poultry related products rose 2.7% to RM859.65 million from RM837.17 million a year ago due to higher sales volume and average selling price of eggs in Malaysia as well as average selling price of broiler DOCs in Indonesia.

However, the overall revenue was partially offset by a drop in revenue from sales in Singapore, due to the loss of revenue from a subsidiary Jordon International Food Processing Pte Ltd following the disposal of the subsidiary on June 30, 2018.

Moving forward, Leong Hup is optimistic of achieving positive results this year, as it has invested in significant capacity expansion over the past year.

US stocks futures fall on China trade retaliation

NEW YORK, May 13 — Wall Street stocks plunged in pre-market trading today after China announced new tariffs and reports from China signalled additional possible measures, including announcing Boeing orders. About 15 minutes before the opening…