dividend yield

 
 

PNB’s assets under management breaches RM300b mark for the first time, says Zeti

KUALA LUMPUR, June 24 — Permodalan Nasional Bhd’s (PNB) assets under management (AUM) has breached the RM300 billion mark for the first time, recording RM301.4 billion in the first half of 2019, says Group Chairman Tan Sri Dr Zeti Aziz. It is an…


High valuations, slow earnings in equity market

KUALA LUMPUR: The Malaysian equity market is seeing more expensive valuations and slower earnings growth compared with its regional peers, according to HSBC Private Banking managing director and chief market strategist for Asia, Fan Cheuk Wan.

“Within our Asia equity portfolio, we’re still cautious on the Malaysian equity market mainly because of its expensive valuations versus the other cheaper regional peers. The earnings growth forecast for the Malaysian equity market still remains at single-digit, lagging behind other higher growth equity markets that we favour, such as China.

“For Malaysia, we forecast single-digit earnings growth but with the valuation premiums versus the regional’s average, it would cap the upside potential of the Malaysian equity market,” she told a press conference on the HSBC Private Banking 2019 2H Investment Outlook in Asia today.

Reflecting on Asian equities, it maintains a mild overweight position on China and Singapore. Fan said Singapore is the cheapest market in Asean and it has the lowest price-to-earnings and the highest dividend yield.

“Based on our year-end forecast, we still expect the FBM KLCI to come in at 1,740 points this year, some modest upside potential because the economy still remains resilient and there will be modest earnings growth for this year. In terms of the upside potential, there are cheaper markets that can deliver more upside,” elaborated Fan.

Nevertheless, HSBC Private Banking chief market strategist for Southeast Asia James Cheo still expects a 3-4% upside in the equity market.

“How we want to play it is to look at the domestic sectors. The consumption and infrastructure plays are where we think the opportunities are, and how it pans out could be end of this year or next year,” Cheo said.

On the ringgit, he said in the near term, there could be a risk-off where there will be more demand for the dollar given the uncertain environment.

“The domestic economy in Malaysia is still resilient so it reduces the downside for the ringgit. The ringgit could still be fairly resilient against the dollar,” said Cheo, adding that its year-end target for the ringgit is RM4.30 against the US dollar.

On Malaysia proposing a new currency based on gold, Cheo said it is an interesting idea but noted that there are trade-offs and that it should be thoroughly considered.

“It’s an international monetary system and just can’t be implemented on a single country. It requires a global consensus. Given how things are, it looks like things are more bilateral nowadays.

”We have been on a fiat currency model for many years and it has served us well. Our money supply has been growing significantly,” said Cheo.


Bursa Malaysia likely to continue to strengthen next week

KUALA LUMPUR, June 1 — Bursa Malaysia is likely to continue last week’s upswing, driven by safe haven play as the global markets fall on Trump anti-trade risk-off scenario and slower global economic growth. Phillip Capital Management,…


Kenanga lowers CPO price forecast for 2019 -2020

PETALING JAYA: Kenanga Research has cut its crude palm oil (CPO) price forecast for 2019-2020 to RM2,000-RM2,200 from RM2,400-RM2,200 per tonne.

This is premised on the palm-oil biodiesel ban from the European Union (EU), a potential CPO inventory pickup in the second half of the year and mounting trade war tensions depressing CPO prices.

Following the revision, the research house slashed planters’ earnings by 6-97% for FY19 and 7-79% for FY20E with pure upstream players such as IJM Plantations Bhd and Hap Seng Plantations Holdings Bhd taking bigger hits.

“We believe planters’ earnings will hit a rough patch in coming quarters with CPO prices hovering around current levels, which will likely overshadow any production pickup in the second half of 2019.”

Kenanga said while biodiesel mandates seem to be panning out well (expected to absorb 13% of CPO production in Indonesia and 4% in Malaysia), the intensifying US-China trade war tensions are likely to discourage soybean oil prices like what happened last year.

“In our opinion, this will dwarf any positive trade/demand impact on CPO and keep its prices under pressure in the near term, as the two commodities are close substitutes with their prices highly correlated (>0.90).

“Coupled with a potential inventory pickup in the second half of 2019 (to 3.0-3.5 million tonnes levels), we believe the possibility of a strong CPO price recovery in the near term can be practically ruled out, leaving 2019 an unexciting year for most planters.”

Nevertheless, it said should the Chinese and/or biodiesel demand be stronger-than-expected, resulting in falling stockpiles in the second half and a sharp recovery in CPO prices, it would review the sector call and target prices of planters under its coverage.

Kenanga downgraded the plantation sector from “neutral” to “underweight”, with only Ta Ann Holdings Bhd set to outperform due to its core net profit compound annual growth rate of 12.8% driven by improved log production, profitable status and attractive 4% dividend yield.

The research house was previously hopeful of a handsome CPO price recovery by June 2019 as stockpiles fall and demand from China picks up.

“However, despite the positives nicely falling into place, negative news flows vis-à-vis palm-oil biodiesel ban from the Europe has proven to be a major killjoy.”

“As we move closer to the second half, chances of CPO price reaching our 2019 target of RM2,400 per tonne are becoming next to zero.”


European shares rise, aided by defensives amid gloomy trade outlook

LONDON, May 11 ― European shares rose yesterday, with surging shares of Thyssenkrupp and robust defensive stocks helping equities on the continent avert the losses seen among their US peers, which slid on persisting worries about US-China trade….


Axiata and Digi on a roll

PETALING JAYA: Shares of Axiata Group Bhd and Digi.com Bhd rallied as much as 18.3% and 11.5% on positive sentiment towards their merger deal.

Axiata’s share price surged as much as 74 sen to a seven-month high of RM4.78 before closing 60 sen or 14.9% higher at RM4.64 on 38.17 million shares changing hands.

Digi, meanwhile, soared as much as 52 sen to RM5.04, the highest in the past one year. At market close, the stock gained 28 sen or 6.2% to RM4.80 on 36.88 million shares done.

On Monday, Axiata and Digi’s parent company Telenor announced that they are in the talks to merge Asian operations.

While this deal is positive for both Axiata and Digi, AmResearch expects the potential synergies and cost savings to have a higher boost to Axiata, which currently trades at an EV (enterprise value) /Ebitda (earnings before interest, taxes, depreciation and amortisation) of only 5 times, less than half of Digi’s 12 times.

“Additionally, the merged entity’s expanded financial leverage comes from Digi’s low gearing which could subsequently impact the merged entity’s dividend policy,” it said in a research note today.

HLIB Research concurred, saying that Axiata is expected to gain more given that the proposed corporate exercise allows it to crystalise the true value of its assets.

As for Digi, it opined that the consolidation with Celcom may lead to short-term indigestion due to the huge duplications in terms of assets (towers, infrastructure) as well as human capital.

“We do not discount that the merger may lead to asset impairments and one-off restructuring costs. However, we are still positive on the amalgamated Digi-Celcom over the long run.”

However, AmResearch is uncertain if the Malaysian Communications and Multimedia Commission and current political regime would approve this proposal given that a merger would reduce the level of competition at the expense of consumers’ choice and pricing alternatives.

“We reiterate our view that such an extensive restructuring exercise could be hindered by the respective country’s regulatory oversight.”

HLIB pointed out that Malaysia is the only overlapping market in this proposed deal. The combination of Celcom and Digi will lead to a largest telco with revenue and subs market share of 35% and 47%, respectively and potentially attract scrutiny from the perspective of anti-competition. Together, they will also hold 43% of the operating TDD airwave in the market.

“Axiata may end up with conflicting stakes in Grameenphone (via MergedCo) and Robi who are top one and two competitors in Bangladesh. Other Robi shareholders, namely Bharti (25% stake) and NTT Docomo (6.3% stake), may not favour this scenario.”

HLIB is maintaining a neutral call on the telco sector, adding that the telco sector remains stable supported by resilient domestic demand with dependable dividend yield being a plus point in a volatile market.

PublicInvest Research has upgraded Digi to “trading buy” as it believes the deal would be positive to DiGi, while Axiata is kept “neutral”.

Nonetheless, the research house said the merger between Celcom and DiGi is negative to Maxis as the merged unit is expected to overtake Maxis to become the leader in Malaysia’s mobile segment.

The merged entity will be an unlisted arm though there are plans for a public offering within the next few years.

“In our opinion, DiGi and Axiata should ultimately be privatized once the merged entity is listed,” said PublicInvest.


Recent market sell-off reinforces need to stay defensive: HLIB Research

PETALING JAYA: Hong Leong Investment Bank (HLIB) Research said its strategy to seek high dividend yielders remains unchanged and the recent market sell-down further solidifies the need to stay defensive.

The FBM KLCI has skidded to its lowest level since late-2016 to close at 1,622.07 points last Friday following news of Malaysia’s possible removal from the World Government Bond Index (WGBI).

Besides high yielders, the research house said, investors can look out for selective exporters (weakening ringgit), while those looking for rebound plays can consider “beta oversold” stocks.

“For the yield angle, we like selective REITs (IGB REIT and MQ REIT), Maybank for large cap liquid yield, BAuto (strong earnings growth), Taliworks (resolution of Splash water deal) and LiiHen (export play).

“Also, our earlier view for a sequentially weaker ringgit in Q2 vs Q1 remains unchanged (-1.4% thus far into Q2). In this regard, we like Top Glove and recently also upgraded our rating on Hartalega to buy.”

HLIB Research said the only slight change to its second quarter 2019 (Q2’19) strategy is that it is turning warmer on construction in view of pump-priming resumption.

“While the sector remains a neutral (albeit with a positive bias), we think there could be plays on laggards such as Kim Lun and Hock Seng Lee.”

In light of the market weakness, the research house screened its coverage to identify which socks have been oversold year-to-date versus the FBM KLCI on a beta adjusted basis for possible bottom nibbling ideas.

“Stocks that have been oversold by more than 5% on a beta adjusted basis that we have buy ratings include Hartalega (oversold by -18.5%), Pharmaniaga (-17.8%), Top Glove (-17.6%), IOIPG (-10.2%), AirAsia (-8.8%) and Homeritz (-5.6%).”

HLIB Research is maintaining the FBM KLCI earnings growth forecast of 2.1% for 2019 and 4.5% for 2020, while the FBM KLCI target is 1,710 points.

Meanwhile, the research house said the emphasis by the government on pump priming the country’s economy is welcome news.

“While economic expectations have been lowered, the silver lining is that pump priming is being resuscitated.”

After renegotiations, major infrastructure projects, MRT valued at RM30 billion, LRT3 at RM16 billion are expected to resume construction by the middle of this year and, most recently, the East Coast Rail Linkhas been resuscitated at a lower price of RM44 billion and a higher local content of 40%, it noted.


Public Investment upgrades TNB to 'buy'

KUALA LUMPUR, April 12 — Public Investment Bank today upgraded Tenaga Nasional Bhd (TNB) to a “buy” from “neutral.” In a note today, it said that at current market price, TNB’s dividend yield of four per cent looks attractive. “We are…


High-dividend play on dovish expectations

PETALING JAYA: The dovish tilt by major central banks as well as Bank Negara Malaysia (BNM) may continue, potentially stirring interest in high dividend yielders, according to HLIB Research.

“For equities, we expect high dividend yielding stocks to garner interest on back of dovish expectations. In this regard, we like selective real estate investment trusts (REITs) like IGB REIT and MRCB-Quill REIT, Bermaz Auto Bhd (BAuto), Taliworks Corp Bhd and Lii Hen Industries Bhd. For liquid large cap yield, we highlight Malayan Banking Bhd (Maybank) (6.4-6.6%),” it said in a note today.

Year-to-date, the 10-year Malaysian Government Securities yield has fallen 32bps to 3.75%.

HLIB Research said external uncertainties will persist into Q2 and as such, opined that BNM will continue with its dovish bias for the upcoming Monetary Policy Committee meeting in May 6-7. It does not anticipate an overnight policy rate cut in 2019.

“Consequently, we reckon there could be a possible sequential weakening of the ringgit in Q2 and export plays could return; we like Top Glove Corp Bhd and Lii Hen (also a yield play).”

Following earnings changes, in particular the downgrade of the plantation sector to “underweight” from “neutral”, HLIB Research’s KLCI target is cut to 1,710 points from 1,750 points. It also projected KLCI earnings per share growth of 2.1% for 2019 and 4.5% for 2020.

This comes on back of lacklustre earnings outlook which is below the post global financial crisis compound annual growth rate of 6.2%.

It added that the lower gross domestic product projections by BNM reflects the challenges Malaysia faces as it walks a thin rope, balancing between growth and fiscal prudence against an uncertain external backdrop.

The research house’s top picks are Maybank, Top Glove, Sunway Bhd, IGB REIT, TIME dotCom Bhd, DRB-Hicom Bhd, BAuto, Taliworks, Frontken Corp Bhd and Lii Hen.


Analysts turn cautious on banking

PETALING JAYA: In line with the central bank’s view of heightened downside risks in 2019 emanating from external uncertainties, analysts have turned cautious on the banking sector’s core net earnings growth in 2019.

Affin Hwang Capital currently pencils in a growth rate of 2.5% year-on-year against a stronger growth rate of 6.9% year-on-year as seen in 2018.

“We continue to see higher earnings downside risks arising from deposit competition within the sector itself, of which will drive up funding costs and erode bank’s net interest margin,“ the research house said in a report today.

It said market participants are currently worried about a potential cut in the overnight policy rate (OPR), of which will be negative for the banking sector earnings in the near term before the downward repricing effects of deposit start to kick-in in the next six to 12 months.

Despite that, Affin Hwang believes that the banking sector is underpinned by sound asset quality (as implied by a gross impaired loan ratio of 1.45% as at January), of which is also underscored by the high debt-servicing capacity of the business sector.

On the asset quality of household debts, it said the decline in aggregate impairment ratio to 1.2% (2018) from 1.4% (2017) implies that banks continue to be watchful of unproductive growth of household credits (especially for unsecured lending) and exercise stringent approvals only for borrowers with sound debt-servicing capacity.

It maintained its neutral stance on the sector, noting that business and consumer outlook in 2019 will be dampened by external uncertainties and a lack of domestic catalysts.

“For 2019, we have a loan growth target of 5%, against a higher target of 7-8% set by some key banking players in the industry. On a more positive note, our strong economic fundamentals – resilient consumer spending, business growth and low unemployment rate, are holding up. We expect consumer sentiment and business activities to gradually improve in 2H19 as trade tension may dissipate.”

Kenanga Research said loans growth will remain to be moderate, but valuations seem more attractive with most of the banking stocks under its coverage being rated as outperform except for CIMB, Hong Leong Bank Bhd, Public Bank and RHB Bank Bhd which are at market perform.

It warned that further external risks might put a dampener on business sentiments with softer demand and applications with higher risk perceived lowering approval rates. The dampening credit demand might be exacerbated by an increase in corporate bonds as upside pressure on interest rates lessens.

Meanwhile, AmInvestment Bank maintained its “overweight” call on the sector due to the anticipation of global liquidity into emerging markets from a slowdown in normalisation of the US monetary policy that is widely expected.

“The fund inflows are expected to benefit share prices of banking stocks which are liquid, offering decent dividend yields with banks still expected to deliver positive growth in earnings despite challenging conditions,“ it said.