Wednesday, August 7th, 2019

 

Sterling stuck near two-year lows, markets see more selling

LONDON, Aug 7 — Sterling was stuck today around its weakest levels since 2017, having matched a two-year low against the euro, as investors further priced in the probability of Britain leaving the European Union without a deal in place. Boris…


Boeing CEO still expects 737 MAX to be cleared to fly this year

NEW YORK, Aug 7 — Boeing’s chief executive reaffirmed today he expects the 737 MAX will be cleared to return to the skies this year, but reiterated the company could further cut production in case of regulatory delays. Dennis Muilenburg said…


FedEx cuts ties with Amazon in sign of new rivalry

WASHINGTON, Aug 7 — FedEx said today it would stop ground deliveries for Amazon in the latest sign of competition between the two firms. The move comes two months after the package delivery giant announced it was ending express service with Amazon…


Wall Street sinks as US bond market stokes recessionary fears

NEW YORK, Aug 7 — US stocks plunged today, with the Dow Jones Industrial Average falling more than 450 points, as investors were spooked by the latest signals from the bond market that pointed to heightened risk of a recession. US Treasury yields…


Sell-off hits Genting Malaysia, Genting Bhd shares, RM4.38b in market cap wiped off

PETALING JAYA: Genting Malaysia Bhd (GenM) and Genting Bhd emerged as the top losers on the local bourse today after news of GenM acquiring loss-making Empire Resorts Inc for RM538.8 million.

Both stocks came under heavy selling pressure after the opening bell, with GenM slumping as much as 14.7% to a low of RM3.08 before closing 43 sen or 11.9% lower at RM3.18, wiping off about RM2.55 billion in its market capitalisation with 256.37 million shares traded.

Genting Bhd’s share price sank 47 sen or 7.1% to close at RM6.18 on 23.64 million shares done, slashing some RM1.82 billion off its market capitalisation.

In total, the two stocks lost RM4.38 billion in market capitalisation today.

Hong Leong Research said it is negative on the news in the short term as the acquisition price implies a premium to the book value (1.5 times 2018 price-to-book value) despite Empire still recording losses.

It also downgraded GenM to “hold” with a lower target price of RM3.79 from RM4.21 to reflect the risk of short-term earnings erosion associated with the loss-making acquisition.

Assuming Empire’s FY20 registers a loss similar to that of FY18, Hong Leong said the impact to GenM’s bottom line will be about RM283 million, which is about 23% of its FY20 earnings forecast.

However, it maintained the forecasts pending further clarity on the earnings outlook.

Empire incurred a loss of US$138 million in FY18, mainly due to the high start-up expenses incurred in the commencement of Resorts World Catskills (RWC). It posted losses of US$25 million to US$46 million in the preceding three years.

GenM has entered into a term sheet with Tan Sri Lim Kok Thay’s Kien Huat Realty Ltd (KH) to acquire a 46% stake in Empire for RM538.8 million.

Lim is the chairman and CEO of the Genting group.

GenM also will submit a preliminary non-binding proposal to acquire the outstanding 16% stake in Empire unaffiliated with KH at RM325.7 million. KH currently owns 84% equity interest in Empire.

GenM will then enter into a merger agreement with KH and contribute all Empire shares held into a proposed joint venture with GenM and KH holding 49% and 51% respectively.

Meanwhile, PublicInvest Research is maintaining its earnings forecasts and neutral call on GenM pending more details on the proposed acquisition.

“However, we feel that market may view a related party transaction negatively and we see risk of share price weakness following this announcement.”

The research house believes funding will not be an issue for GenM as it will be supported by its internally generated funds.

“On face value however, we are less enthused over the parent company’s tapping of GenM’s cash reserves on non-earnings accretive ventures.”

Empire is listed on Nasdaq and operates RWC, which is in Sullivan County, New York.

RWC started operations in February 2018 and features a 332 all-suite hotel, 1,600 slot machines and over 150 live table games. It also owns Monticello Casino and Raceway in New York.


Trump says US Federal Reserve ‘too proud to admit mistakes’

WASHINGTON, Aug 7 — US President Donald Trump said today the US Federal Reserve must cut rates “bigger and faster” for the United States to be competitive against other countries. “Our problem is a Federal Reserve that is too proud to admit…


Twitter reveals unauthorised data use

PARIS, Aug 7 — The social network Twitter said overnight that user’s personal data had been used for advertising purposes, without their consent and despite dedicated settings to counteract such events. A Twitter statement said the fault was…


Foreign investors offload Asian equities in first six days of August

BENGALURU: Foreign investors dumped Asian equities in the first six days of August after two months of buying, as the United States ramped up pressure on China with a US$300 billion (RM1.26 trillion) trade barrage last week.

Overseas investors sold about US$4.5 billion of regional equities during the period, data from stock exchanges in South Korea, Taiwan, India, Thailand, Philippines, Indonesia, and Vietnam showed.

Sharp outflows from Asian markets point to increased worries that trade tensions between the world’s two top economies could escalate, and regional economies and corporate earnings might deteriorate further.

US President Donald Trump said last Thursday he would slap a 10% tariff on the re-maining US$300 billion of Chinese imports starting Sept 1, marking an end to a truce in the year-long trade war that was struck in June.

In response, China let its currency weaken 1.4% on Monday, sending it past the key 7-per-dollar level for the first time in more than a decade, and then the United States labelled Beijing a currency manipulator.

MSCI Asia-ex-Japan index had fallen 6.4% this month as of Tuesday’s close, after shedding 1.7% in July.

“Recent foreign outflows from Asian equities clearly suggest that investors are getting nervous on markets given escalating trade tensions,” said Chetan Seth, a strategist for Nomura Securities in Singapore.

It might get harder for the US and China to ease or soften these tensions given how events have unfolded over the last few days, he said.

Goldman Sachs said markets were pricing in a less than 15% chance of a trade deal being agreed. It estimated 13% and 8% cumulative earnings downside for MSCI China and MSCI Asia-ex-Japan in 2019-2020 under a “no deal” scenario.

Taiwan and India saw the biggest outflows in Asia, with net selling of US$1.8 billion and US$1.1 billion respectively. South Korea also witnessed out-flows, of US$919 million.

Taiwan and South Korean companies are more exposed to the Sino-US trade tussle as they have extensive ties with tech firms in China and are part of their supply chains.

Indian shares were undermined last month after the federal budget raised import tariffs on many items, increased taxes on the rich and proposed changes in shareholding norms.

A slew of disappointing earnings by Asian firms for the second quarter also increased investor caution on regional markets.

“So far 1H earnings in Asia-ex-Japan markets have been below estimates – although it’s still early days. The question investors need to answer is what happens to 2020 earnings as markets in 2H will start discounting next year’s earnings,” said Seth. “If trade tensions persist, there may be more downside to current con-sensus earnings estimates.”

In July, foreigners invested US$234 million in Asia, much less than US$4.2 billion inflows in June.


Eita’s LRT 3 work package sum reduced by 65.4%

PETALING JAYA: The value of Eita Resources Bhd’s work package for the Light Rail Transit 3 (LRT3) has been reduced by 65.4% to RM67.45 million from RM195.07 million previously.

This comes after its wholly owed subsidiary EITA Elevator (Malaysia) Sdn Bhd (EEMSB) received four notices of termination dated Aug 6 and a new letter of appointment dated Aug 6 from MRCB George Kent Sdn Bhd.

EEMSB has been appointed as the works package contractor to undertake the supply, delivery, installation, testing and commissioning of lifts and escalators for LRT3 from Bandar Utama to Johan Setia.

A total number of 130 units of escalator and 66 units of lift will be supplied and installed.

Eita said the contract is expected to contribute positively to the group’s earnings over the duration of the contract.


Acme proposes bonus issue, private placement

PETALING JAYA: Acme Holdings Bhd proposes a slew of corporate exercises including a bonus issue of free warrants, private placement and the acquisition of two companies for RM22 million.

The plastic parts manufacturer and property developer told Bursa Malaysia that it is acquiring the entire stake in Medan Tropika Sdn Bhd and Focal Products Sdn Bhd for RM20 million and RM2 million, respectively.

Medan Tropika is the registered owner of two parcels of freehold development land in Penang, with an aggregate market value of RM36.6 million.

On the bonus issue, it entails the issuance of up to 59.68 million free warrants on the basis of one warrant for every four existing shares held.

The exercise price for the warrants is 25 sen. If the warrants are fully exercised, Acme could potentially raise up to RM14.92 million which will be used as working capital.

Meanwhile, the private placement entails the issuance of up to 89.53 million shares, representing up to 30% of the enlarged number of its issued shares.

Based on an indicative price of 24.26 sen per share, the group expects to raise between RM16.74 million and RM21.72, will be used for the acquisition of Medan Tropika.