PETALING JAYA: Affin Hwang Capital reiterated its long-term “buy” call on Eastern & Oriental Bhd (E&O) with a reduced target price of RM1.44, after a visit to the property developer’s Seri Tanjung Pinang Phase 2A (STP2A) project.
“We reduce our RNAV (revalued net asset value)/share to RM2.88 from RM3.12 previously to reflect the dilutive impact of the private placement. Based on the same 50% discount to RNAV, our target price is cut to RM1.44 from RM1.56. We see deep value in the stock as it is currently trading at price/RNAV of 0.3 times,” it said in its report.
According to Affin Hwang Capital, overall reclamation work is 73% complete at STP2A and the group is on track for full completion by end of 2019.
The reclamation work was initially slated for completion in June 2018, but was delayed to December 2019 due to complications encountered in undertaking large scale reclamation projects namely a 253-acre island and 131-acre Gurney Wharf.
The 131-acre Gurney Wharf will be handed over to the government upon completion.
“We saw a substantial portion of development land on the island has surfaced during our visit. We gather that non-financial foreign parties, including several from Singapore, are exploring joint venture opportunities with E&O to develop part of STP2A,” said Affin Hwang Capital.
Meanwhile, the entry of Tan Sri Wan Azmi Wan Hamzah as a strategic partner is expected to support E&O’s fund raising efforts to accelerate the development of STP2A.
PETALING JAYA: Corporate earnings of Malaysian stocks in the fourth quarter of 2018 (4Q18) were among the worst seen in recent years with large-cap companies turning into a drag.
“On the surface, the 4Q18 reporting season looked better; 26% of companies in our universe (121 companies under coverage) reported earnings that were ahead of our expectations, a marked increase of 16% in 3Q18,” said Affin Hwang Capital in a report today.
It noted that companies whose earnings that disappointed shrank to 31% from 48% in 3Q18, implying that a higher number of companies delivered a better set of earnings after the successive disappointments in the previous quarters.
However, a review of the larger-cap companies (27 of 30 under its coverage) showed a higher number of companies reporting poorer performances with 33% of the companies registering earnings below expectations while a smaller proportion registered earnings above expectations.
“Being heavyweights, the impact of this disappointment was significant. Cumulative 4Q18 core earnings fell a sharp 23% year on year (yoy) or 14% quarter on quarter (qoq), one of the largest ever quarterly earnings contractions in recent years,” said Affin Hwang Capital.
In 4Q18, only 40% of the 20 sectors under coverage managed to deliver yoy earnings growth with telcos, transport and utilities being the key heavyweight sectors that were a drag, contributing a combined RM3.1 billion qoq decline in 4Q18 earnings.
Post 4Q18 results season, the earnings per share (EPS) growth rate for stocks under Affin Hwang Capital’s coverage has shrunk to -4.5% and for the FBM KLCI companies -0.6%. This makes 2018 the fourth year of frail corporate earnings over a five-year period from 2014 till 2018.
Its current market earnings growth forecast is 6.7% and 4.2% for 2019 and 2020. For the FBM KLCI companies, this growth is at a lower 3.8% and 2.9% for 2019 and 2020, implying weaker earnings growth for the larger-cap companies.
“Nevertheless, we are of the view that the larger-cap company earnings will better hold up in 2019 considering that their 2018 earnings were distorted by a lot of bulky items that may not recur,” it added.
Due to the lack of major catalysts, it expects the FBM KLCI to continue to trend sideways over the near term, maintaining its neutral rating on the FBM KLCI and year-end 2019 target of 1,810 points.
“We would, however, recommend investors position themselves in the large-cap stocks and favour sectors that are still delivering growth on a yoy basis,” it added.
Meanwhile, CGS-CIMB has lowered its FBM KLCI earnings growth forecast to 5% for 2019 from 6%, but maintained its growth projection of 6% for 2020. Its 2019 FBM KLCI earnings growth projection of 5% is below Bloomberg consensus, which forecasts a 6% growth.
“This is lower than the 6% core net profit growth rate we estimated before the 4Q18 results season, as we adjust for the downgrades in earnings forecasts for several big-cap names like Axiata, Tenaga, Petronas Gas and Maxis,” it said in its report.
In 4Q18, only 18% of the 127 companies actively covered by CGS-CIMB reported results that were above expectations while the percentage of companies with results below expectations rose to 39% from 38% in 3Q18.
“The high ratio of earnings disappointment suggests that Malaysian corporates are facing a challenging operating environment due to local and external (US-China trade war, rising rates) factors,” it said.
Although its revision ratio improved to 0.46 times during the quarter versus 0.29 times in the previous quarter, the 4Q18 revision rate stood out for being among the lowest historical revision ratios for 4Q, matching 4Q12’s revision ratio.
Market earnings for stocks under its coverage fell in 4Q18 at a higher rate of 7.5% yoy due to lower earnings from the agribusiness, aviation, construction, oil and gas and telco sectors. Corporate earnings under its coverage fell 2.1% in FY18 due to lower sales, provisions for receivables and weaker profit margins.
CGS-CIMB maintained its end-2019 FBM KLCI target of 1,638 points with no change to its top three picks namelym Dialog, Astro and MPI.
PETALING JAYA: Banking sector loans kicked off 2019 with a 5.5% year-on-year growth in January, underpinned by sectors like manufacturing, retail, business services, construction and households (residential properties, personal use, credit cards).
With less than a month to go before the first quarter (Q1) comes to an end, AffinHwang Capital expects loan growth to be slow in the first three months of 2019, in tandem with slower business activities due to the seasonal effect of the Chinese New Year. It maintained its neutral sector stance, with Maybank and Aeon Credit Service (M) Bhd as its top picks.
“For 2019, we keep our loan growth target of 5% unchanged, noting that loan disbursements may gradually taper down due to a more cautious business and consumer outlook in 2019, largely dampened by external factors. The downside risks are largely supported by our strong economic fundamentals – resilient consumer spending, business growth and low unemployment rate, of which are holding up. Longer term, with new government policies after the Budget 2019 announcement, we expect consumer sentiment to gradually improve and drive consumption spending,” said AffinHwang Capital.
Macquarie Research is overweight on banks on resilient fundamentals and capital optimisation. It prefers corporate banks (Maybank, RHB, AMMB Holdings) over retail-centric Public Bank Bhd and Hong Leong Bank Bhd.
The banking sector accounts for about 32% of weightage in Bursa Malaysia’s benchmark FBM KLCI, hence the sector’s prospects would provide an indication of the performance for the index.
According to Bank Negara Malaysia, the local financial sector is envisioned to grow beyond its role as an enabler of growth to be a key driver and catalyst of economic growth, with growth in the financial system firmly anchored to growth in the real sector.
KUCHING: Malaysia’s automotive industry is off on a positive start this year, led by strong numbers recorded by national carmakers. Analysts expect the industry to continue this strong momentum, underpinned by healthy demand and favourable foreign exchange (forex). According to the research arm of Affin Hwang Investment Bank Bhd (AffinHwang Capital), the automotive industry’s January […]
KUCHING: Analysts across the board gave two thumbs up for Serba Dinamik Holdings Bhd (Serba Dinamik) catching its first batch of contract wins in 2019 totalling US$110 million (RM448 million). The announced values consist only of the international contracts – United Arab Emiraes, Uzbekistan and Qatar – as the Malaysian contracts are all call-out in […]
KUCHING: Malaysia’s banking sector ended 2018 with a slight uptick in its figures, recording 5.6 per cent year on year (y-o-y) growth while expanding by 0.6 per cent month on month (m-o-m). The annual growth was underpinned by sectors such as manufacturing, retail, business services, construction and households – specifically residential properties, personal use […]
KUALA LUMPUR: Trading on Bursa Malaysia is expected to be reinvigorated next week with the market moving in a tight range as most investors flock back from the Chinese New Year celebration, analysts said.
Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) had been struggling to pierce its immediate resistance of 1,700 points over the last few weeks.
“External developments continue to take centre stage. Issues surrounding the trade negotiations between the US and China has always been the source of market instability,“ he told Bernama.
If latest news are any indication, the resolution of trade negotiations will still be a long way to go before the US struck a trade deal with China, according to the National Economic Council Director Larry Kudlow.
Additionally, Mohd Afzanizam said the meeting between US President Donald Trump and Chinese President Xi Jinping might not happen before the March 1 trade deadline.
Despite this, Mohd Afzanizam said foreign investors turned net buyers on Feb 4 and 7 snapping up RM138.6 million worth of stocks while the ringgit appreciated to 4.067 against the US dollar at the time of writing.
“Against such backdrop, we could expect the FBM KLCI to continue remaining in a tight range next week,“ said Mohd Afzanizam.
Additionally, Malaysia’s 2018 fourth-quarter (Q4 2018) gross domestic product numbers would be announced on February 14.
“Perhaps, investors would also want to assess the resilience of the Malaysian economy.
“This is especially true in the context of weak business and consumer sentiment as indicated by the Malaysian Institute of Economic Research’s survey recently,“ the chief economist said.
The Business Condition Index and Consumer Sentiment Index fell to 95.3 points and 96.8 points in Q4 2018 from 108.8 points and 107.5 points in the previous quarter, respectively.
Affin Hwang Capital Asset Management managing director Teng Chee Wai remained optimistic on the US-China trade negotiations as the backdrop of the global economy was actually very strong, while the vision of a downtrend in local corporate earnings is still an ongoing process.
“Putting the two together, this year will probably be a better year than last year from the equity market standpoint,” said Teng.
On a Friday-to-Thursday basis, the benchmark FBM KLCI settled 2.99 points higher at 1,686.52.
The market was closed on Tuesday and Wednesday for the Chinese New Year.
The FBM Emas Index was 64.9 points higher at 11,725.52, the FBMT 100 Index increased 56.33 points to 11,601.54 and the FBM Emas Syariah Index improved 40.42 points to 11,593.03.
The FBM 70 gained 215.69 points to 14,032.9 and the FBM Ace Index added 153.12 points to 4,555.22.
Sector-wise, the Financial Services Index rose 127.14 points to 17,642.11, the Plantation Index increased 19.36 points to 7,299.6, and the Industrial Products and Services Index inched up 0.86 of-a-point to 161.97.
On a Friday-to-Thursday basis, weekly turnover dwindled to 4.94 billion units worth RM3.8 billion against 8.77 billion units worth RM8.13 billion.
Main Market volume shrank to 3.77 billion units valued at RM3.57 billion versus 6.32 billion units valued at RM7.66 billion.
Warrants turnover declined to 690.66 million units worth RM149.03 million from 1.38 billion units worth RM301.90 million.
The ACE Market volume decreased to 483.1 million shares valued at RM83.25 million against 1.05 billion shares valued at RM152.46 million. — Bernama
KUCHING: The US Federal Reserve (US Fed) decided to keep its federal funds rate (FFR) unchanged between 2.25 to 2.50 per cent in the latest January meeting, leading analysts in Malaysia to predict for Bank Negara Malaysia (BNM) to maintain its accommodative monetary stance. Affin Hwang Investment Bank Bhd (AffinHwang Capital) saw that US’ job […]