MERCURY SECURITIES SDN BHD MARKET FLASH THURSDAY, 9 OCT 2014 (A Participating Organisation of Bursa Malaysia Securities Berhad) E NEWS HIGHLIGHTS DOMESTIC LOCAL Close Day Chg FTSE KLCI 1,824.32 -9.22 Volume (mil) 2,579.66 391.527 Value (RM’mil) 2,497.69 418.651 CIMB, RHB Cap and MBSB to be suspended today pending announcement Up Down 935 Ireka gets RM276.8mil job from KL Eco City Unchanged 175 Protasco lodges police report against Tey and Ooi over aborted Indonesia O&G deal FOREIGN 93 Dow Jones 16,994.22 274.83 Nasdaq CI 4,468.59 83.39 FOREIGN S&P 500 1,968.89 33.79 GSK probes claims of graft in UAE FTSE 100 6,482.24 -13.34 Nikkei 225 15,595.98 -187.85 2,382.79 18.92 HSI 23,263.33 -159.19 STI 3,226.71 -17.28 3.272 0.013 Brent (USD/barrel) 91.4 -0.73 Gold (USD/troy oz) 1,222.18 1.06 Top Volume (RM) Chg SUMATEC 0.375 -0.020 MUIIND 0.255 -0.020 PDZ 0.260 -0.010 DGB 0.145 -1.000 BJORP 0.515 -0.030 67.200 0.400 PLS 0.123 0.090 SMPC 1.030 0.090 KOTRA 1.500 0.080 GOLDIS 2.300 0.070 BAT 66.160 -0.860 UTDPLT 25.600 -0.460 KLK 20.540 -0.360 KOSSAN 4.240 -0.360 ASIAFLE 6.820 -0.330 Mahindra to buy stake in Peugeot unit Yum slashes profit forecast on food scare Shanghai CI ECONOMY / COMMODITY / CURRENCY Other Stats Ringgit ends lower against US$ USD/MYR Gold futures end higher Rubber mart extends losses CPO stays firm on positive demand Brent slips below US$100 Top Gainers NESTLE Top Losers MERCURY SECURITIES SDN BHD (A Participating Organisation of Bursa Malaysia Securities Berhad) Consensus Target Price Userguide: To complement the top down approach, Mercury Securities will be compiling the top three underpriced equities of the respective sectors based on the consensus target price premium over the current price on a weekly basis. Methodology: These consensus target prices are sourced from Bloomberg and the equities are covered by at least 4 research houses, excluding Mercury Securities. The purpose is to ensure the credibility, conformity and objectivity of the consensus target prices are is maintained for the reader. Sector Finance Property Plantation Consumer Ind Prod Construction Trad&Serv Ticker Company Closing Price Target Price Premium BURSA MK Equity BURSA MALAYSIA BHD 7.91 8.90 12.5% MAY MK Equity MALAYAN BANKING BHD 9.96 11.17 12.2% HLFG MK Equity HONG LEONG FINANCIAL GROUP 17.50 19.46 11.2% NHB MK Equity NAIM HOLDINGS BERHAD 3.32 4.84 44.6% ECW MK Equity ECO WORLD DEVELOPMENT GROUP 4.60 6.49 42.5% TRCB MK Equity TROPICANA CORP BHD 1.26 1.71 37.9% SOP MK Equity SARAWAK OIL PALMS BERHAD 5.70 6.85 19.5% KUL MK Equity KULIM MALAYSIA BHD 3.25 3.70 14.9% FGV MK Equity FELDA GLOBAL VENTURES 3.48 3.85 11.0% BON MK Equity BONIA CORP BHD 1.08 1.73 57.3% ZHCB MK Equity ZHULIAN CORP BHD 2.40 2.70 13.4% PAD MK Equity PADINI HOLDINGS BERHAD 1.87 2.05 8.8% LLB MK Equity LION INDUSTRIES CORP BHD 0.64 0.90 36.9% DRB MK Equity DRB-HICOM BHD 2.24 3.04 35.2% PRESS MK Equity PRESS METAL BERHAD 6.02 7.72 28.3% BHB MK Equity BENALEC HOLDINGS BHD 0.90 1.28 43.0% MRC MK Equity MALAYSIAN RESOURCES CORP BHD 1.63 2.07 27.0% MDJ MK Equity MUDAJAYA GROUP BHD 1.96 2.41 21.7% PPT MK Equity PERISAI PETROLEUM TEKNOLOGI 2.35 3.32 42.5% MMC MK Equity MMC CORP BHD 4.06 5.50 37.3% SAKP MK Equity SAPURAKENCANA PETROLEUM BHD 0.83 1.12 35.4% Source: Bloomberg as of 7th October 2014 MERCURY SECURITIES SDN BHD (A Participating Organisation of Bursa Malaysia Securities Berhad) NEWS HEADLINES Commodity, Currency and Economic News Ringgit closed lower against the US dollar yesterday on the back of low demand for the domestic currency. The ringgit was quoted at 3.1730/1750 vis-a-vis a greenback from 3.1510/1530 traded on Friday. The ringgit moved in a tight range of between 3.1690 and 3.1730 to the US dollar yesterday due to lack of market leads. Despite Friday’s disappointing US jobs report that slowed to an eightmonth low in August, the greenback remained firmer. Meanwhile, the local unit was traded mostly higher against other major currencies. It rose against the yen to 3.0167/0201 from Friday’s 3.0324/0349, strengthened against the British pound to 5.1200/1238 from 5.2300/2337 and appreciated against the euro to 4.1068/1100 from 4.1583/1622 previously. However, the ringgit depreciated versus the Singapore dollar to 2.5295/5319 from last Friday’s 2.5256/5277. (Bernama) Gold futures contracts on Bursa Malaysia Derivatives closed higher as the dollar retraced from recent highs. Phillip Futures Sdn Bhd dealer Low Cheng Yang said the stock markets had lost traction and investors would be focusing on the minutes of the Federal Reserve's last policy meeting. Spot month October 2014, November 2014, December 2014 and January 2015, all rose 32 ticks, to settle at RM128.35 a gramme, RM128.75 a gramme, RM128.95 a gramme and RM129.15 a gramme, respectively. Open interests rose to 3,012 contracts from yesterday's 2,859 contracts. Turnover went up to 234 lots valued at RM3.006 million from 92 lots worth RM1.17 million previously. The gold physical price stood at RM123.96 per gramme, up RM1.40 from RM122.56 per gramme yesterday. (Bernama) Malaysian rubber market extended its losses yesterday, tracking the weak performance on the Tokyo Commodity Exchange and Shanghai Futures Exchange, amid further decline in crude oil prices. At the close, the Malaysian Rubber Board’s official physical price for tyre-grade SMR 20 eased one sen to 507.50 sen a kg while latex-in-bulk dipped 2.5 sen to 405 sen a kg. The unofficial closing price of tyre-grade SMR 20 fell 1.5 sen to 505.5 sen a kg and latex-in-bulk decreased 2.0 sen to 404 sen a kg. (Bernama) Crude palm oil (CPO) futures prices on Bursa Malaysia Derivatives remained higher for the second consecutive day yesterday on the back of positive market sentiment, a dealer said. Phillip Futures Sdn Bhd derivative products specialist David Ng said expectations of a production decline in Malaysian palm oil in September coupled with lower inventories amid a 16 per cent jump in exports for the month helped boost demand. October 2014 and November 2014 increased RM18 each to RM2,220 and RM2,213 per tonne respectively, December 2014 rose RM15 to RM2,195 per tonne, and January 2015 gained RM13 to RM2,207 per tonne. Volume surged to 45,039 lots from 28,625 lots on Tuesday while open interest improved to 311,158 contracts against 294,606 contracts previously. On the physical market, October South was up RM20 at RM2,230 a tonne. (Bernama) MERCURY SECURITIES SDN BHD (A Participating Organisation of Bursa Malaysia Securities Berhad) Brent Crude slid below US$100 a barrel yesterday for the first time in more than a year as Chinese and US data pointed to slower-than-expected growth in the world’s top oil consumers. Weak economic growth combined with ample supply has pushed oil prices down from a high for the year of above US$115 in June, complicating efforts by central banks to ward off deflation and putting pressure on the budgets of major oil producers. Brent fell to a low of US$99.36 a barrel, down US$1.46 and its lowest since May 1 2013, before recovering slightly to around US$95.50 by 1335GMT. US crude tumbled US$1.40 to US$91.89 a barrel, after settling at US$93.29 on Friday for its sixth weekly drop in seven after disappointing US non-farm payrolls data cast doubt on the pace of growth in the world's biggest oil-consuming economy. Yesterday’s price fall followed data showing China’s import growth fell unexpectedly for the second consecutive month in August, posting its worst performance in over a year as domestic demand faltered. (Reuters) Global and Local Headlines CIMB, RHB Cap and MBSB said in separate filings with Bursa Malaysia yesterday that their stocks would be suspended from 9am to 5pm today, pending a material announcement. Three months ago, CIMB, RHB Cap and MBSB had entered into proposed merger talks. Bank Negara consented to the negotiations being exclusive to the three parties for 90 days, and would remain so only if there was a formal submission on the merger to the central bank. The proposed merger between CIMB, RHB Cap and MBSB will create a group with a combined asset estimated at RM613.7bil and generate profits of close to RM7bil. This is slightly larger than Malayan Banking Bhd which has an asset size of RM578bil and profit of RM6.5bil. It has also been reported that Bursa’s listing committee will be meeting today to decide if the Employees Provident Fund (EPF), which is a major shareholder in all three parties, should be given the right to vote on the merger plan. The EPF owns 14.6%, 41.5% and 64.6% in CIMB, RHB Cap and MBSB, respectively. (Star) Ireka Corporation Bhd's unit has bagged a RM276.79mil contract by KL Eco City Sdn Bhd for the construction of the main building works for the Retail Podium, Office Block A and the remaining works for the basement levels. In a statement on Wednesday, Ireka said the contract, awarded via Ireka Engineering & Construction Sdn Bhd will commence on Oct 15, 2014 and it is expected to complete in 29 months’ time. The group said this is KL Eco City’s second contract awarded to Ireka Engineering. Ireka said the contract has brought the group's order book to about RM1.44bil, of which RM1.08 still remained outstanding. It said the contract is expected to contribute positively to the earnings of Ireka Group for the financial years ending March 31, 2015 onwards. (Star) MERCURY SECURITIES SDN BHD (A Participating Organisation of Bursa Malaysia Securities Berhad) Protasco Bhd had lodged a police report against Tey and Ooi Kock Aun – both directors at oil and gas firm PT Anglo Slavic Utama (ASU) following its recent filing of a civil claim against both individuals. Protasco’s claim against Tey and Ooi is premised on its allegations that the duo have breached their fiduciary and statutory duties, including the duty to disclose their interest in the transaction, conspiracy to defraud Protasco and the making of secret profits. Protasco has said the legal proceedings it had initiated had no significant immediate adverse impact on the current financial position of Protasco. It also said the company would make an impairment on the purchase price if necessary, on consultation with its auditors. (Star) GlaxoSmithKline (GSK) which was slapped with a record US$489 million (RM1.6 billion) fine for corruption in China last month said on Tuesday it was looking into allegations of corruption in the United Arab Emirates. Britain’s biggest pharmaceuticals group confirmed the investigation following allegations of improper payments set out in a whistle-blower’s email sent to its top management on Monday. GSK is already investigating alleged bribery in a number of countries, including Lebanon, Jordan, Syria and Iraq as well as Poland. Mahindra announced on Tuesday plans to buy a majority stake in France’s struggling Peugeot Motorcycles as it seeks new technology to drive sales. Mahindra Two Wheelers said its “binding offer” for the 51 per cent stake would involve a €15 million (RM62.18 million) injection into Peugeot Motorcycles, a subsidiary of Paris-based PSA Group, which has been seeking to engineer a turnaround. In a statement, Mahindra gave no details of the purchase price but called the deal a “winwin” for both companies. (AFP) Yum Brands cut its profit outlook for the year yesterday, citing the latest food scare in China that pummelled sales at its flagship KFC chain. The company, based in Louisville, Kentucky, said it expects earnings per share to rise between six and 10 per cent from a year ago, instead of the growth of at least 20 per cent it previously forecast. Yum, which also owns Pizza Hut and Taco Bell, is trying to recover from a TV report that showed one of its suppliers using expired meat. During the quarter, KFC’s sales fell 14 per cent at established locations in China, while Pizza Hut’s sales dropped 11 per cent. China is a critical division for Yum, which gets 35 per cent of its operating profit from the country. (BTimes) MERCURY SECURITIES SDN BHD (A Participating Organisation of Bursa Malaysia Securities Berhad) SECTORIAL RETURN The chart below depicts the performance of the respective KLCI sectors over a five year period including the current and forward PE. The sector’s performance is ranked against each other based on absolute returns for that particular year. The user can track the progressive performance of a sector based on the sector’s unique colour. One could observe that the finance sector is the best performing sector over a five year period between 2009 and 2013 with a compound annual growth rate of 16.1%. The user will also be able to identify sector value based on the current PE and the corresponding 5 year high, low and average PE. For example, finance sector PE is currently at 12.88 times, which is marginally above the 5 year PE of 12.78 times, suggesting financials price are slightly expensive at the moment. For a significant impact to reduce market noise, overview of sectorial performance will be updated on a weekly basis. 5 year average P/E Current P/E Forward 1 year P/E Finance High: 16.78 Average: 12.18 Low: 9.54 High: 17.15 Average: 12.78 Low: 9.54 12.88 12.88 High: Average: Low: - High: 25.57 Average: 16.27 Low: 13.21 32.51 16.85 High: 19.97 Average: 17.04 Low: 12.50 High: 19.97 Average: 15.92 Low: 11.98 13.82 13.56 High: 14.32 Average: 7.95 Low: 3.81 High: 17.76 Average: 10.15 Low: 3.81 8.15 10.34 High: 18.01 Average: 16.09 Low: 14.34 High: 23.70 Average: 17.05 Low: 14.34 16.73 16.77 High: 42.70 Average: 20.65 Low: 10.76 High: 42.70 Average: 18.87 Low: 10.72 15.16 19.10 High: 69.72 Average: 27.11 Low: 5.04 High: 69.72 Average: 24.44 Low: 5.04 60.72 61.67 High: 20.90 Average: 14.06 Low: 5.01 High: 34.34 Average: 18.26 Low: 5.01 13.82 13.56 2011 2012 2013 Ind Prod Property Consumer product Consumer product Property 39.5% 30.6% 7.6% 12.0% 22.1% 10.6% 5.3% 16.1% Finance Construction Plantation Finance Ind Prod Consumer product Property Ind Prod 35.9% 27.1% 1.6% 12.0% 15.9% 2.3% 4.8% 16.1% Plantation Plantation KLCI KLCI Construction Finance Finance Consumer product 26.3% 26.3% 0.8% 10.6% 14.6% 4.3% 3.3% 14.1% KLCI Finance Trade & services Ind Prod Trade & services Property Plantation Property 24.0% 25.4% 0.8% 9.3% 14.3% 4.0% 3.0% 13.6% Consumer products Consumer product Ind Prod Trade & services Finance Ind Prod KLCI KLCI 21.8% 21.0% 0.4% 7.9% 11.8% 4.0% 1.8% 12.3% Trade & services KLCI Finance Property Consumer product KLCI Consumer product Plantation 17.0% 19.4% -1.1% 6.1% 8.8% 1.1% 1.5% 11.9% Property Trade & services Property Plantation KLCI Trade & services Ind Prod Trade & services 14.3% 18.8% -2.1% 1.1% 8.4% 0.6% 1.3% 11.5% Construction Ind Prod Plantation Plantation Trade & services Construction 12.4% 17.2% 6.9% -4.6% 1.0% 6.7% -13.5% *CAGR: Compound annual growth rate -2.5% 2Q2014 3 year average P/E 2010 Construction Construction YTD 5 yr CAGR* (2009 - 2013) 2009 Construction Construction Source: Bloomberg as of 7th October 2014 MERCURY SECURITIES SDN BHD (A Participating Organisation of Bursa Malaysia Securities Berhad) Disclaimer All information, views and advice are given in good faith but without legal responsibility. Mercury Securities Sdn. Bhd. (113193-W) or companies or individuals connected with it may have used research material before publication and may have positions in or may be materially interested in any stocks in the markets mentioned. Strictly for internal circulation only. For any enquiries, please contact us at: L-7-2, No.2, Jalan Solaris Solaris Mont Kiara 50480, Kuala Lumpur Tel: 603-6203 7227 or E-mail: [email protected] • PENANG • BUTTERWORTH • KUALA LUMPUR • MALACCA • JOHOR BAHRU
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