MERCURY SECURITIES SDN BHD (113193-W) MARKET FLASH MONDAY, 20 OCT 2014 (A Participating Organisation of Bursa Malaysia Securities Berhad) NEWS HIGHLIGHTS DOMESTIC LOCAL Close Day Chg FTSE KLCI 1,788.31 20.54 Volume (mil) 2,256.73 (261.12) Value (RM’mil) 2,436.38 (197.43) Carimin Petroleum IPO on track Up 884 CBIP: good order flow for Modipalm mills Down 128 Glomac plans Kulaijaya township next year Unchanged 161 Harvest CEO trims stake in firm to 4.97pc FOREIGN Winn Worldwide plans IPO Dow Jones 16,117.24 263.17 Nasdaq CI 4,217.39 41.05 S&P 500 1,862.76 24.00 FTSE 100 6,265.43 114.38 Saudi bank in US$6bil IPO Nikkei 225 14,532.51 (205.87) SIA to take control of Tiger Air Shanghai CI 2,341.18 (15.32) HSI 23,023.21 122.27 STI 3,167.71 13.52 3.274 (0.010) 83.2 0.27 1,238.66 (3.13) FOREIGN ECONOMY / COMMODITY / CURRENCY Other Stats Ringgit rises against US$ USD/MYR Gold futures end easier WTI (USD/barrel) Rubber rebound Gold (USD/troy oz) CPO futures close firmer Top Volume (RM) Chg Brent rises above US$86 SUMATEC 0.330 0.030 SANICHI 0.095 0.015 PDZ 0.250 0.015 HUBLINE 0.045 0.005 CENSOF 0.515 0.040 HLFG 17.720 0.740 NESTLE 66.800 0.560 INARI-WA 2.180 0.480 TAKAFUL 11.840 0.460 3.980 0.440 ALLIANZ-PA 11.100 (0.600) FBMKLCI-CJ 0.415 (0.185) PERDANA-WA 0.870 (0.130) CARLSBG 10.580 (0.120) MANULFE 3.210 (0.110) Top Gainers NARRA Top Losers MERCURY SECURITIES SDN BHD (113193-W) (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 MAY MK Equity MALAYAN BANKING BHD HLFG MK Equity HONG LEONG FINANCIAL GROUP Closing Price Target Price Premium 9.45 10.99 16.3% 16.98 19.42 14.4% BURSA MK Equity BURSA MALAYSIA BHD 7.90 8.89 12.6% NHB MK Equity NAIM HOLDINGS BERHAD 2.84 4.84 70.5% ECW MK Equity ECO WORLD DEVELOPMENT GROUP 3.84 6.28 63.5% TRCB MK Equity TROPICANA CORP BHD 1.19 1.71 43.7% FGV MK Equity FELDA GLOBAL VENTURES 3.00 3.82 27.5% SOP MK Equity SARAWAK OIL PALMS BERHAD 5.55 6.85 23.4% KUL MK Equity KULIM MALAYSIA BHD 3.25 3.70 13.8% BON MK Equity BONIA CORP BHD 1.01 1.73 71.3% QLG MK Equity QL RESOURCES BHD 3.17 3.67 15.7% PAD MK Equity PADINI HOLDINGS BERHAD 1.77 2.05 15.5% COCO MK Equity COASTAL CONTRACTS BHD 3.50 5.92 69.2% LLB MK Equity LION INDUSTRIES CORP BHD 0.57 0.90 58.7% PRESS MK Equity PRESS METAL BERHAD 4.90 7.72 57.6% BHB MK Equity BENALEC HOLDINGS BHD 0.79 1.28 63.1% MRC MK Equity MALAYSIAN RESOURCES CORP BHD 1.43 2.07 44.8% EVSD MK Equity EVERSENDAI CORP BHD 0.78 1.11 43.6% PPT MK Equity PERISAI PETROLEUM TEKNOLOGI 1.37 2.39 74.3% BAB MK Equity BUMI ARMADA BERHAD 3.16 5.47 73.1% SAKP MK Equity SAPURAKENCANA PETROLEUM BHD 0.70 1.12 60.7% Source: Bloomberg as of 20th October 2014 MERCURY SECURITIES SDN BHD (113193-W) (A Participating Organisation of Bursa Malaysia Securities Berhad) NEWS HEADLINES Commodity, Currency and Economic News Ringgit closed higher against the US dollar on short-covering in line with the stronger regional currencies. At 5pm, the ringgit was quoted at 3.2730/2750 against the greenback compared with 3.2820/2840 on Thursday. A dealer said most other emerging Asian currencies rebounded yesterday as investors covered short positions ahead of US Federal Reserve chair Janet Yellen’s speech. The local unit was mixed against other major currencies. It ended firmer against the Singapore dollar at 2.5721/5743 from Thursday's 2.5769/5803 and strengthened against the yen to 3.0724/0751 from 3.0980/4002. The ringgit, however, was lower against the British pound to 5.2712/2760 from 5.2525/2564 and depreciated against the euro to 4.2006/2038 from 4.1996/2035. (Bernama) Gold futures contracts on Bursa Malaysia Derivatives ended easier last Friday with three contract months traded lower as European equities rebound. Phillip Futures Sdn Bhd dealer Lim Eng Wee said gold prices were weighed down by rebound in global equities which reduced the demand for safe-haven assets. October 2014 fell 27 ticks to RM130.30 a gramme, November 2014 eased 26 ticks to RM130.70 a gramme and December 2014 erased 18 ticks to RM131.30 a gramme. Open interest fell to 2,657 contracts from 2,778 contracts on Thursday while turnover was lower at 77 lots worth RM1 million from 158 lots worth RM2.08 million. The physical price of gold was 30 sen lower at RM126.20 a gramme from RM126.50 a gramme previously. (Bernama) Malaysian rubber market rebounded at close last Friday on the announcement by the Thai government that it would help planters of the commodity. A dealer said among the measures to be taken, includes, purchasing rubber to build stockpiles in a bid to bolster prices. “The measures will also have an impact on the Malaysian rubber market, by helping boost prices,” he added. The noon benchmark Malaysian Rubber Board’s official physical price for tyre-grade SMR 20 was 12.5 sen higher at 485 sen a kg, while latex-in-bulk rose 4.5 sen to 376.5 sen a kg. The 5pm unofficial closing price for tyre-grade SMR 20 soared 13.5 sen to 487.5 sen a kg, and latex-in-bulk was up by eight sen to 380 sen a kg. (Bernama) Crude palm oil (CPO) futures prices on Bursa Malaysia Derivatives closed higher last Friday boosted by the improved crude oil market. A dealer said the market was also helped by some bargain buying. “However, traders remain cautious as the lacklustre demand will continue to plague the market,” he said. November 2014 rose RM30 to RM2,165 a tonne, December 2014 gained RM26 to RM2,147 a tonne, January 2015 increased RM23 to RM2,142 a tonne while February 2015 was RM23 higher at RM2,148 a tonne. Volume decreased to 39,881 lots against 50,959 lots on Thursday while open interest fell to 296,253 contracts from 309,076 contracts previously. On the physical market, October South was RM20 higher at RM2,170 a tonne. (Bernama) MERCURY SECURITIES SDN BHD (113193-W) (A Participating Organisation of Bursa Malaysia Securities Berhad) Brent Crude Oil rose above US$86 a barrel last Friday, bouncing from near four-year lows as investors bought back into a market they said was oversold, and as fighting in Iraq increased political risk. Oil has lost more than a fifth of its value since June on heavy oversupply, signs of weak demand growth and indications that key oil producers, particularly Saudi Arabia, have a limited appetite to intervene on prices. Brent for December rose US$1.52 to a high of US$87.34, before slipping back to around US$86.25 a barrel by 1330 GMT, but was still on track for its fourth weekly loss in a row. The November Brent contract expired on Thursday. US November crude, heading for its third weekly decline, was up 55 cents at US$83.25. “Prices have likely overshot to the downside,” said Jeffrey Currie, head of oil analysis at Goldman Sachs. “This leaves us near-term constructive despite being bearish as we look further out.” “The oil sell-off had been driven by expected fundamental shifts as opposed to currently observable shifts,” Currie and his colleagues said in a note to clients. (Reuters) Global and Local Headlines Oil and gas (O&G) services provider Carimin Petroleum Bhd is sticking to its plan to list on Bursa Malaysia next month despite weakening sentiment for the sector as crude oil prices plunged to a four-year low. In mid-2013, Petroliam Nasional Bhd and its production sharing contract partners had awarded RM10bil worth of HUCC jobs, of which, Dayang Enterprise Holdings Bhd clinched some RM4bil and Petra Energy Bhd another RM2.5bil. Carimin’s portion of the pie was about RM900mil. “We have locked in our revenue for the next five years. Although Carimin has not officially priced its IPO yet, industry sources say that the company is looking at a valuation of around a price earnings (PE) multiple of 13 times historical earnings. Carimin’s closest peer on the stock market is Dayang Enterprise Holdings Bhd, which trades at a trailing PE multiple of 16.31 times while its forward PE stands at 11.63 times. Dayang was one of the oil and gas stocks to have suffered in the recent market rout, having seen some RM540mil wiped out of its market capitalisation in the last one month. (Star) CB Industrial Product Holding Bhd (CBIP), which holds the patent for constructing Modipalm mills, said its current order book of some RM500 million will keep it busy for another 18 months. CBIP managing director Lim Chai Beng said while low palm oil prices were slowing oil palm estate owners’ investments, orders were still coming in for mill upgrades. “We’re getting orders, although there may be slight delays here and there. Out of the RM500 million orders to put up new mills and upgrade old ones, 70 per cent are from outside Malaysia. “Old mills in Malaysia need to be upgraded and our Modipalm technology has been proven to minimise oil loss. (BTimes) MERCURY SECURITIES SDN BHD (113193-W) (A Participating Organisation of Bursa Malaysia Securities Berhad) Glomac Bhd is planning to build a new township in its recently-acquired landbank in Kulaijaya, Johor, which has an expected gross development value (GDV) of RM750 million. Its group managing director and chief executive officer Datuk Seri FD Iskandar Mansor said the project, to be launched in March next year and will comprise affordable landed properties, is now at the final stage of approval. (BTimes) Harvest Court Industries Bhd chief executive officer and managing director Datuk Raymond Chan Boon Siew has ceased to be a substantial shareholder of the company after he sold 3.7 million shares in the open market, reducing his shareholding to 4.97 per cent, or 13.96 million shares, a filing with Bursa Malaysia showed yesterday. He had previously sold 1.05 million shares on July 31 to reduce his stake to 6.29 per cent, or 17.669 million shares. (BTimes) Winn Worldwide Sdn Bhd, which owns the House of Leather retail chain, plans to raise capital on Bursa Malaysia to grow the business and expand overseas. According to the company’s five-year business plan, an initial public offering (IPO) is on the cards. Winn Worldwide chairman Datuk Kenny Yee told Business Times that the IPO could take place within the next three to five years, depending on its capital requirement and the market condition. Yee said the money would be used to expand regionally and establish its own brand in the near future. Winn Worldwide is the principal and sole distributor for several international brands, including Kaufmann, Country Hide, Bruno, Manfred, Bugatti, Lapagao and Carlton. These brands offer more than 1,000 types of leather goods ranging from wallets, handbags and belts to luggage bags, priced from RM100 to more than RM1,500 each. The company currently operates 23 outlets nationwide and is planning to open as many as seven more by May 31 next year, Yee said. (Star) SAUDI Arabia’s National Commercial Bank (NCB) is going ahead with an initial public offering (IPO) worth US$6 billion (RM19.66 billion) despite opposition from ulamas. The IPO from Sunday, making NCB the last Saudi bank to go public, is expected to be one of the largest in the world this year. An NCB prospectus says the bank will offer 300 million shares to the public at 45 riyals (RM39.30) each, for a value of US$3.6 billion, while another 200 million shares will be allocated to the state pension agency bringing the total to US$6 billion. (BTimes) Singapore Airlines Ltd (SIA) is injecting up to US$110 million (RM360 million) to take control of Tiger Airways, shoring up the budget carrier while scrapping its regional ambition as competition rages. Announcing a record quarterly loss that sent its shares tumbling as much as 10 per cent, Tiger said yesterday that SIA will raise its stake to about 55 per cent from 40 per cent by converting existing securities into shares. Tiger then plans an up to S$234 million (RM602.85 million) rights issue, with SIA buying up to S$140 million new shares and possibly raising its stake to as much as 71 per cent. The airline also agreed to sell its Australian unit to Virgin Australia Holdings for just A$1(RM2.88).Tiger plunged into a net loss of S$182.4 million for the three months ending September, largely due to a charge for the sub-lease of surplus aircraft, from a profit of S$23.8 million a year ago. (BTimes) MERCURY SECURITIES SDN BHD (113193-W) (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 12.45 times, which is marginally lower than 5 year PE of 12.78 times, suggesting financials valuation is not undervalued 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 12.45 12.50 High: Average: Low: - High: 25.57 Average: 16.27 Low: 13.21 30.58 16.05 High: 19.97 Average: 17.04 Low: 12.50 High: 19.97 Average: 15.92 Low: 11.98 12.97 13.23 High: 14.32 Average: 7.95 Low: 3.81 High: 17.76 Average: 10.15 Low: 3.81 8.95 12.13 High: 18.01 Average: 16.09 Low: 14.34 High: 23.70 Average: 17.05 Low: 14.34 16.25 16.38 High: 42.70 Average: 20.65 Low: 10.76 High: 42.70 Average: 18.87 Low: 10.72 14.48 18.57 High: 69.72 Average: 27.11 Low: 5.04 High: 69.72 Average: 24.44 Low: 5.04 19.12 18.84 High: 20.90 Average: 14.06 Low: 5.01 High: 34.34 Average: 18.26 Low: 5.01 12.97 13.23 2011 2012 2013 Ind Prod Property Consumer product Consumer product Property 39.5% 30.6% 7.6% 12.0% 22.1% 7.2% 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% -2.0% 4.8% 16.1% Plantation Plantation KLCI KLCI Construction Finance Finance Consumer product 26.3% 26.3% 0.8% 10.6% 14.6% 0.8% 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% -1.7% 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% -1.7% 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% -1.8% 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% -1.7% 1.3% 11.5% Construction Ind Prod Plantation Plantation Trade & services Construction 12.4% 17.2% 6.9% -8.9% 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 20th October 2014 MERCURY SECURITIES SDN BHD (113193-W) (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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