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RHB maintains 'buy' call for Petronas Chemicals

KUALA LUMPUR, Jan 15 — RHB Research has maintained the “buy” call on its top pick oil and gas counter, Petronas Chemicals Group Bhd (PCG), with a new target price of RM11.23. It said PCG’s recent share weaknesses, had been largely priced in…


Nomura downgrades Malaysian equities

PETALING JAYA: Nomura Global Markets Research has downgraded Malaysian equities to “underweight” from “neutral” due to poor fundamentals and lack of major expansionary reforms.

Nomura, which downgraded Malaysia to “neutral” after the elections last year, has held a “neutral” on Malaysian equities since May 2018 based on the thesis that reforms prospects could keep the multiples elevated despite micros and macros not being very supportive.

“However, with the new government more than six months in power already, while there have been efforts to fix fiscal leakages, there has not been a significant reform push which can potentially lead to expansionary economic activity,” it said in its Asean Strategy report today.

Nomura said it was hoping for more progress in areas to improve government efficiency, reduce corruption and crony capitalism and potentially roll back or ease the government’s presence in some areas but has only seen some “easier” initiatives such as closing of several government agencies while some agencies have been put under direct parliamentary supervision.

While Budget 2019 included some long-term reform measures, labour or tax reforms or much needed reforms to ease property market bottlenecks are lacking.

Amidst a background where macro and micros continue to deteriorate, Nomura said the other major issue for Malaysia is that oil prices are no longer high (above US$70 per barrel) and have declined significantly recently, which could lead to further issues for Malaysia to plug the fiscal gap.

“Our economists believe there is a high risk of fiscal slippage and the possibility of a sovereign ratings downgrade that could trigger more capital outflows,” it said.

Nomura expects Malaysia’s 2019 gross domestic product (GDP) growth to be 4%, marking a sharper decline from 4.7% in 2018, and is below consensus forecasts of 4.6% largely due to a weak export sector. It also expects Malaysia to post a fiscal deficit of 3.9% in 2018 and 3.7% in 2019.

Nomura said Malaysia will continue to be a stock-pickers’ market and prefers select defensive banks, value plays like Gamuda Bhd, and thematic plays like Malaysia Airports Holdings Bhd and Vitrox Corp Bhd.

“We believe sustainable dividend yielding plays could be attractive, as well in an environment where local rates are expected to be cut; and the government’s fiscal constraints may lead to higher dividends from government-linked companies,” it added.


Limited share price upside seen for property sector

PETALING JAYA: Rising interest rates, Malaysia’s slowing gross domestic product growth and unfavourable government policies will limit share price upside for Malaysian property development companies, said CGS-CIMB.

Although it expects the property companies in its coverage universe to post positive earnings growth this year, CGS-CIMB said share price upside will be limited and the sector is unlikely to re-rate to peak levels last seen in 2014.

“The property sector has garnered more interest lately due to its attractive valuations, but we believe the sector is cheap for a reason and this could be a false dawn. We believe developers could miss their new property sales targets for 2018, and are likely to set lower new sales targets for 2019. We think it’s a signal that the 2019 property market is likely to see lower new property sales and weaker buying sentiment,” it said in its report today.

According to its analysis, the medium 40% and bottom 40% (B40) households face difficulty in buying properties as the average house price is above both groups’ affordability range and despite government incentives and policies to address this issue, the oversupply in the property market has continued to rise since 2012.

“Likewise, property stocks have fallen from their peak valuations in 2014, some to the trough levels in 2008, making them attractively priced at the moment, in our opinion,” it added.

CGS-CIMB does not see much room for housing loan growth given the existing low interest rate environment, limited buyer’s affordability and possible interest rate hike.

In addition, restrictive government policies are still in place and it does not see any incentive for consumers to purchase property given the weak rental market and subdued property market.

Given the limited domestic affordability, higher real property gains tax and restrictive policies on foreigners, the property oversupply issue is expected to persist. Note that in 1H2018, properties priced below RM1 million accounted for 93% of total unsold residential property inventory.

“We expect the housing market to remain challenging in the near term, unless there is a meaningful surge in household income, decline in house prices or more positive measures are introduced,” it said.

Although lower property prices are possible, developers would be at the losing end if they were to lower prices at the expense of profit margins to spur new property sales demand or remove rebates/freebies to protect margins, which could result in weaker new sales.

“Even if new house prices are cut by 20%, we think the prices would still be unaffordable for the B40 households. Instead of focusing on increasing affordable housing supply and ownership, we believe a better way to approach the housing glut is to increase Malaysians’ household income in a meaningful way,” it said.

CGS-CIMB maintained its “neutral” call on the sector with an estimated dividend yield of 3% on average in 2019.

Sime Darby Property Bhd remains its top pick as the company has shown continuous improvement in its property development division and new property sales since its demerger in November 2017.

“We believe the group’s healthy balance sheet and massive land bank are advantages in addressing the change in future product demand,” it said.


Yen’s surge is a red flag for world markets

LONDON, Jan 3 — A gradual rise by the Japanese yen in recent weeks culminated in a dramatic overnight surge—firing a warning shot for world markets and the global economy in 2019. Historically, outsized yen gains in short periods, such as the…


Defensive stocks top 2019 playbooks

NEW YORK: Perceived safe havens like utilities and consumer staples, often an afterthought in Wall Street’s cascade of year-ahead investment recommendations each December, are emerging as top picks as stocks limp into 2019. Growth-oriented sectors like tech or communications services have typically dominated year-end roundups of investment ideas. But an uncertain economic outlook and concerns […]


Toll hike freeze seen as ‘mildly positive’ for concessionaires

PETALING JAYA: TA Securities views the toll hike freeze on 21 highways across the country next year as mildly positive for toll concessionaires, as the operators can avoid traffic reduction arising from higher toll rates imposed on road users.

In the past, toll highway operators typically experienced a slight decline in traffic volume immediate after a toll rate increase, followed by a gradual recovery in traffic volume as demand for toll roads is largely inelastic, it said in a note last Friday.

Additionally, it said, the toll operators will receive compensation from the government to cover the difference between entitled toll rates under the concession agreements and the actual toll rates charged on end-users.

However, on a broader outlook, TA Securities said, the toll concessionaires are still surrounded with uncertainties following the change of government, noting the Pakatan Harapan government is studying the best method to fulfil its 14th general election manifesto promise.

Last Thursday, the government announced its decision to freeze all toll hikes on 21 highways for all vehicles which are eligible for an increase in 2019, as well as a toll increase freeze for buses on eight highways, and the abolishment of motorcycle tolls.

Earlier this month, the Works Ministry said it would appoint an independent auditor in January to assist the government in preparing data analysis and recommendations, including reduction of toll rates in the short, medium and long term, and eventually abolishing toll collection on all expressways.

The analysis of the results is expected to be ready by May.

“With a reduced upside after a rebound in share price, we downgrade Lingkaran Trans Kota Bhd (Litrak) from ‘buy’ to ‘hold’, with an unchanged target price of RM4.54,” TA Securities said.

Separately, MIDF Research said it maintained its “buy” call for Litrak with an unchanged target price of RM4.92 per share, saying the toll operator is still a defensive player with decent dividend yield of 7.3% for financial year 2020 (FY20).

Litrak, which operates the Damansara-Puchong Highway (LDP) and the Sprint Highway, closed unchanged at RM4.11 on 33,800 shares done last Friday.

MIDF Research said that following the freeze on toll rate increases, compensation by the government to Sprint will rise as the Penchala toll plaza is due for a rate hike in next year.

MIDF Research estimated that the overall compensation to Litrak is set to increase to above RM170 million in FY19 and FY20 while earnings contribution from the concessionaires will be unchanged.

However, it said there will be no changes in compensation for the LDP as the toll rates remain unchanged.

“As our current traffic volume and earnings forecasts have taken into account the freeze of toll hikes on intra-city tolls in the country for 2019 as per the Budget 2019 announcement, we are maintaining our earnings estimates at this juncture,” MIDF Research added.


Wall St week ahead: Defensive stocks top 2019 playbooks

NEW YORK, Dec 30 — Perceived safe havens like utilities and consumer staples, often an afterthought in Wall Street's cascade of year-ahead investment recommendations each December, are emerging as top picks as stocks limp into 2019….


China stocks slip amid US political uncertainty

SHANGHAI, Dec 26 — China stocks slipped today amid caution over persisting US political uncertainties as a federal government shutdown and President Donald Trump's hostile stance towards the Federal Reserve unnerved investors. The CSI300 index…


7 sen income distribution for ASB, 3.25 sen for ASN

KUALA LUMPUR: Amanah Saham Nasional Bhd (ASNB) has declared an income distribution of 6.5 sen a unit and bonus of 0.50 sen for Amanah Saham Bumiputera ( ASB) for financial year ending Dec 31, 2018 (FY18). For FY17, ASB made a distribution payout of 7.25 sen per unit comprising a dividend of seven sen a […]


PNB’s AUM up 6.8%, net income at RM15.3b for first 11 months

KUALA LUMPUR: Permodalan Nasional Bhd (PNB), which saw a 6.8% in asset under management (AUM) to RM295.2 billion as at Nov 30, 2018, recorded proforma net income of RM15.30 billion for the first 11 months of 2018.

PNB chairman Tan Sri Zeti Aziz said at a media briefing that the strategy forward is to embark on a more robust risk management and assess investments activities taken on a case-by-case basis against the backdrop of a challenging environment due to moderate gross domestic product growth both domestically and internationally.

She noted that it is crucial to have a diverse portfolio ranging from fixed income, equity, financial and real estate, to spread the investment risk.

“We are also looking at investments with recurring income,” she added.

On paring down stakes in strategic and core companies, Zeti said assessments will be made based on the outlook of the industry and the potential of these companies being restructured with organisational transformation.

She said divestments could potentially be made in parts rather than a blanket one.

PNB plans to undertake a mid-term review of its strategic plan concentrating on the areas of strategic asset allocation, enterprise risk management and organisational transformation as well as to accelerate the diversification of its investment portfolio in higher yielding asset.

PNB’s unit trust management company Amanah Saham Nasional Bhd declared an income distribution of 6.50 sen per unit and a bonus of 0.5 sen per unit representing a total payout of 7 sen for Amanah Saham Bumiputera for the financial year ending Dec 31, 2018.

As for Amanah Saham Nasional, it announced an income distribution of 3.25 sen per unit representing a dividend yield of 5.1% based on the net asset value of the fund as at December 20, 2018.