MERCURY SECURITIES SDN BHD (113193-W) MARKET FLASH THURSDAY, 16 OCT 2014 (A Participating Organisation of Bursa Malaysia Securities Berhad) NEWS HIGHLIGHTS DOMESTIC LOCAL Close Day Chg FTSE KLCI 1,786.84 (9.54) Volume (mil) 2,044.22 (171.97) Value (RM’mil) 2,165.96 (287.67) OSK Hldgs offers to buy OSK Property, PJD for RM585mil Up 155 Down 757 Prestariang in education tie-up with Tekla Unchanged 237 Rev Asia obtain green light to sell stake in icar Asia FOREIGN Tomypak shares sold at RM1.17 Dow Jones 16,315.19 (173.45) Zhulian’s Q3 net profit plunges 74pc Nasdaq CI 4,227.17 (11.85) S&P 500 1,877.70 (15.21) FTSE 100 6,319.88 (181.04) Nikkei 225 15,073.52 137.01 2,373.67 14.20 FOREIGN Lockhead claims fusion energy breakthrough Shanghai CI Netflix’s U.S. growth slows, shares plunge 25pc HSI 23,140.05 92.08 STI 3,198.72 4.32 3.2775 (0.011) 80.8 (0.44) 1,223.55 (1.17) Top Volume (RM) Chg SUMATEC 0.315 (0.025) Rubber prices higher for third consecutive day THHEAVY 0.535 (0.070) CPO hits a more than 3-week low MUIND 0.230 (0.005) Brent bounces off a 4-year low to above US$85 ASIABIO 0.170 - CENSOF-WB 0.280 0.155 100.100 0.600 46.520 0.420 KLUANG 3.680 0.200 GENP 9.920 0.170 CENSOF-WB 0.280 0.155 65.500 (2.100) LYSAGHT 3.280 (0.420) HLIND 4.110 (0.400) HLFG 16.740 (0.360) 1.800 (0.330) Qualcomm to buy U.K. Chipmaker CSR for US$2.5bil Other Stats USD/MYR WTI (USD/barrel) ECONOMY / COMMODITY / CURRENCY Ringgit eases against US$ at close Gold futures ended lower Gold (USD/troy oz) Top Gainers DIN042300721 DLADY Top Losers BAT TGUAN-LA 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 BURSA MK Equity BURSA MALAYSIA BHD Closing Price Target Price Premium 9.85 11.14 13.1% 7.98 8.94 12.0% 17.66 19.42 10.0% HLFG MK Equity HONG LEONG FINANCIAL GROUP NHB MK Equity NAIM HOLDINGS BERHAD 3.32 4.84 49.5% ECW MK Equity ECO WORLD DEVELOPMENT GROUP 4.60 6.49 48.4% TRCB MK Equity TROPICANA CORP BHD 1.26 1.71 37.9% SOP MK Equity SARAWAK OIL PALMS BERHAD 5.70 6.85 24.5% KUL MK Equity KULIM MALAYSIA BHD 3.25 3.70 13.8% FGV MK Equity FELDA GLOBAL VENTURES 3.48 3.85 10.3% BON MK Equity BONIA CORP BHD 1.08 1.73 63.2% ZHCB MK Equity ZHULIAN CORP BHD 2.40 2.70 14.9% PAD MK Equity PADINI HOLDINGS BERHAD 1.87 2.05 13.0% LLB MK Equity LION INDUSTRIES CORP BHD 0.64 0.90 42.3% DRB MK Equity DRB-HICOM BHD 2.24 3.04 39.5% COCO MK Equity COASTAL CONTRACTS BHD 4.69 5.92 37.4% BHB MK Equity BENALEC HOLDINGS BHD 0.90 1.28 48.0% MRC MK Equity MALAYSIAN RESOURCES CORP BHD 1.63 2.07 31.0% EVSD MK Equity EVERSENDAI CORP BHD 0.92 1.11 23.0% PPT MK Equity PERISAI PETROLEUM TEKNOLOGI 0.83 1.12 48.9% SES MK Equity SCOMI ENERGY SERVICES BHD 1.23 1.59 46.9% 4.06 5.51 45.1% AMRB MK Equity ALAM MARITIM RESOURCES BHD Source: Bloomberg as of 13th October 2014 MERCURY SECURITIES SDN BHD (113193-W) (A Participating Organisation of Bursa Malaysia Securities Berhad) NEWS HEADLINES Commodity, Currency and Economic News Ringgit eased against the US dollar at close yesterday amid worries about sluggish European economy as well as awaiting domestic consumer index, dealers said. At 5pm, the ringgit was quoted at 3.2765/2785 against the greenback compared with 3.2650/2680 on Tuesday. Dealers said investors were also remaining on the sideline awaiting September consumer inflation data due later in the day. In August, the local consumer price index rose marginally above market expectations at 3.3 per cent from a year earlier. The local unit was also mostly lower against other major currencies. It ended higher against the Singapore dollar to 2.5626/5661 from Tuesday’s 2.5634/5662 but weakened against the yen to 3.0567/0594 from 3.0517/0556. The ringgit was lower against the British pound to 5.2142/2184 from 5.2119/2177 and depreciated against the euro to 4.1458/1486 from 4.1403/1451 previously (Bernama) Gold futures contracts erased yesterday’s gains to close lower today as the US dollar strengthened to a one-week high while oil prices continued to slide. October 2014 decreased 12 ticks to RM129.25 a gramme while November 2014, December 2014 and January 2015 each fell 13 ticks to RM129.60, RM129.60, RM129.80 and RM130.00 a gramme, respectively. Open interest eased to 2,680 contracts from 2,792 contracts on Tuesday while turnover was lower at 78 lots worth RM1.006 million from Tuesday’s 135 lots worth RM1.75 million. The physical price of gold was 55 sen lower at RM124.77 a gramme from RM125.32 a gramme on Tuesday. (Bernama) Malaysian rubber market extended its gains yesterday, for the third consecutive day, a dealer said. He said the rubber market was capped by the downtrend in regional futures markets on profit-taking activities as crude oil prices slumped. The noon benchmark Malaysian Rubber Board’s official physical price for tyre-grade SMR 20 was 2.5 sen higher at 476 sen a kg while latex-in-bulk rose two sen to 372.5 sen a kg. The 5pm unofficial closing price for tyre-grade SMR 20 gained one sen to 477 sen a kg and latex-in-bulk also improved one sen to 373 sen a kg. (Bernama) Crude palm oil (CPO) futures prices ended at a more than three-week low yesterday, a dealer said. He said the downtrend was influenced by the massive weakness in the crude oil market coupled with weak export performance as indicated by cargo surveyors. “Moving forward, prices are anticipated to be downward biased with support at the RM2,150 level and immediate resistance at the RM2,200 level,” the dealer added. November 2014 fell RM27 to RM2,153 a tonne, December 2014 eased RM30 to RM2,133, January 2015 lost RM37 to RM2,137, while February 2015 was RM38 lower at RM2,142 a tonne. Volume increased to 59,068 lots against 51,725 lots on Tuesday while open interest rose to 332,370 contracts against 327,179 previously. On the physical market, October South was RM60 lower at RM2,160 a tonne. (Bernama) MERCURY SECURITIES SDN BHD (113193-W) (A Participating Organisation of Bursa Malaysia Securities Berhad) Brent crude bounced off a four-year low yesterday to above US$85 a barrel, a level that was still down 25 percent since June, as a drop in the value of the dollar attracted some cautious buying in the oil market. On Tuesday, the Brent benchmark lost almost US$4, its biggest daily fall in more than three years, after the West's energy watchdog slashed its forecasts for world oil demand. Brent for November delivery was up 31 cents at US$85.35 by 1410GMT after initially sliding to another fresh post-2010 low of US$83.37. US crude gained 40 cents a barrel to US$82.24, rebounding by more than US$2 after hitting a 27-month low of US$80.01 earlier in the session. On Tuesday, the contract posted its largest fall in a single session in nearly two years. Traders said prices had rebounded slightly after US crude held above US$80 a barrel, a symbolically important level in a market that has crashed through most lines of major support. The dollar index fell almost 1 percent against a basket of currencies, reversing part of a near 10 per cent rally since May that has weighed on commodities priced in the U.S. currency. (Reuters) Global and Local Headlines OSK Holdings Bhd has offered to buy OSK Property Holdings Bhd and PJ Development Holdings Bhd (PJD) for a combined RM584.65 million. OSK Holdings yesterday signed a conditional share sale agreement with its managing director and chief executive officer Tan Sri Ong Leong Huat and the parties acting in concert to buy a 73.6 per cent stake in OSK Property for RM355.28 million, or RM2 per share. The company is also buying from the same vendors a 31.7 per cent stake in PJD for RM229.37 million or RM1.60 per share. The acquisitions will be paid in new OSK Holdings shares, the company said in a filing to Bursa Malaysia. OSK Holdings will make a mandatory takeover offer to acquire the remaining 26.4 per cent stake in OSK Property, and similar voluntary offer for the balance of 68.3 per cent stake in PJD, from the public shareholders. (BTimes) Prestariang Bhd yesterday inked a memorandum of agreement (MoA) with Tekla (SEA) Pte Ltd, making it the latter’s official corporate education partner for Malaysia. Tekla is one of the leading global providers of Building Information Modeling (BIM) software to the engineering and construction markets. Under the MoA, Prestariang will be the exclusive education partner to all institutions of higher learning, including universities, polytechnics and community colleges in Malaysia. The MoA also identified Prestariang as Tekla’s authorised local training centre. (BTimes) Rev Asia Bhd, formerly known as Catcha Media Bhd, has received shareholders’ approval to sell its 27.2 per cent stake in car website operator icar Asia. “We will try to dispose of all of the 27 per cent or parts of it. It is all driven by what we can get out there and who the investors are. When there are very strategic interested parties, we would like to continue and we would not sell the entire stake,” Chairman Datuk Larry Gan said after Rev Asia’s extraordinary general meeting, here, yesterday. Since its listing, iCar Asia has been making losses due to expenses incurred in executing its growth plan. (BTimes) MERCURY SECURITIES SDN BHD (113193-W) (A Participating Organisation of Bursa Malaysia Securities Berhad) Lockheed Martin Corp said on Wednesday it had made a technological breakthrough in developing a power source based on nuclear fusion, and the first reactors, small enough to fit on the back of a truck, could be ready for use in a decade. Tom McGuire, who heads the project, said he and a small team had been working on fusion energy at Lockheed's secretive Skunk Works for about four years, but were now going public to find potential partners in industry and government for their work. Initial work demonstrated the feasibility of building a 100-megawatt reactor measuring seven feet by 10 feet, which could fit on the back of a large truck, and is about 10 times smaller than current reactors, McGuire told reporters. (Reuters) Tomypak Holdings Bhd’s substantial shareholders may have sold their combined 25.4 per cent stake below the earlier agreed RM1.30 a share. Bursa Malaysia data showed the stake, comprising 27.88 million shares, was done at RM1.17, which was below Tuesday’s closing price of RM1.29. Tomypak, a flexible packaging company, yesterday closed five sen lower at RM1.24 in normal trade. (BTimes) Zhulian Corp Bhd’s net profit in the third quarter ended August 31 plunged 74 per cent to RM10.37 million from RM39.6 million a year earlier. Group revenue fell 54 per cent to RM57.2 million, from RM124 million previously, mainly due to a fall in both local and overseas market demands, Zhulian said. Zhulian has declared a two-sen dividend for the quarter, amounting to a payout of RM9.2 million. (BTimes) Netflix Inc signed up fewer video streaming subscribers than forecast for the quarter that ended in September as its U.S. growth slowed markedly, sending its shares plunging as much as 27 percent. The company, which operates in nearly 50 countries, blamed a $1 price hike, to $8.99 a month, for discouraging new sign-ups. It lured 3.02 million new streaming customers globally, versus the 3.69 million it projected in July. Netflix attracted about 980,000 new customers in the United States, its largest market, down from 1.29 million in the same period a year earlier. Shares of Netflix fell 25 percent to $333.53 in after-hours trading, from its close of $448.59 on Nasdaq. Netflix, the world's largest video-streaming service, has invested in original series such as "House of Cards" and "Orange is the New Black" to compete with rivals such as HBO, Amazon.com Inc and on-demand offerings from pay TV providers. (Reuters) Qualcomm Inc has agreed to buy chip maker CSR Plc for US$2.5 billion (RM8.19 billion), pushing out its rival Microchip Technology to win the British Bluetooth specialist which is growing in areas like automotive and wearable devices. Qualcomm has agreed to pay 900 pence a share in cash for CSR, representing a 56.5 per cent premium on the share price before the start of the offer period, the British company said on Wednesday. (Reuters) 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 12.61 times, which is in line with the 5 year PE of 12.78 times, suggesting financials valuation are rich 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 12.61 12.66 High: Average: Low: - High: 25.57 Average: 16.27 Low: 13.21 31.50 16.38 High: 19.97 Average: 17.04 Low: 12.50 High: 19.97 Average: 15.92 Low: 11.98 13.11 13.34 High: 14.32 Average: 7.95 Low: 3.81 High: 17.76 Average: 10.15 Low: 3.81 7.88 10.03 High: 18.01 Average: 16.09 Low: 14.34 High: 23.70 Average: 17.05 Low: 14.34 16.44 16.55 High: 42.70 Average: 20.65 Low: 10.76 High: 42.70 Average: 18.87 Low: 10.72 14.92 19.14 High: 69.72 Average: 27.11 Low: 5.04 High: 69.72 Average: 24.44 Low: 5.04 59.38 60.38 High: 20.90 Average: 14.06 Low: 5.01 High: 34.34 Average: 18.26 Low: 5.01 13.11 13.34 2011 2012 2013 Ind Prod Property Consumer product Consumer product Property 39.5% 30.6% 7.6% 12.0% 22.1% 8.1% 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% 0.2% 4.8% 16.1% Plantation Plantation KLCI KLCI Construction Finance Finance Consumer product 26.3% 26.3% 0.8% 10.6% 14.6% 2.1% 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% 0.8% 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% 0.8% 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% -0.6% 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% -1.6% 1.3% 11.5% Construction Ind Prod Plantation Plantation Trade & services Construction 12.4% 17.2% 6.9% -6.1% 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 13th 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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