MERCURY SECURITIES SDN BHD (113193-W) MARKET FLASH FRIDAY, 14 NOV 2014 (A Participating Organisation of Bursa Malaysia Securities Berhad) NEWS HIGHLIGHTS DOMESTIC LOCAL Close Day Chg FTSE KLCI 1,815.81 (0.43) Volume (mil) 1,695.31 3.71 Value (RM’mil) 1,727.69 (88.19) Econpile bags RM30mil job from CRCC Up 245 GDEX plans bonus, warrant issue Down 553 I-Berhad net profit jumps Unchanged 306 SolarTech Energy injecting RM13.1mil into Tech Seng FOREIGN Dow Jones 17,612.20 40.59 Nasdaq CI 4,675.14 5.01 FOREIGN S&P 500 2,038.25 1.08 Berkshire to buy Duracell FTSE 100 6,628.02 24.41 Nikkei 225 17,392.79 +66.41 2,485.61 (8.87) DP World to buy Dubai Industrial parks operator Shanghai CI Olam’s earnings down 2.9% on fair-value losses HSI 24,019.94 81.76 Thai Airways returns to profit on forex gain STI 3,306.00 21.22 3.339 0.005 76.8 (3.63) 1,160.61 (3.38) Other Stats ECONOMY / COMMODITY / CURRENCY USD/MYR Ringgit slightly lower against US$ WTI (USD/barrel) Rubber market closes mixed Gold (USD/troy oz) Gold futures close lower Top Volume (RM) Chg CPO futures close lower JASKITA 0.260 0.060 Oil at 4-year low MINETEC 0.165 0.005 EFFICEN 0.360 (0.015) DNEX 0.340 (0.015) MINETEC-OR 0.015 0.005 BAT 68.500 1.600 DLADY 47.300 0.580 0.605 0.300 DIN045801028 97.200 0.180 KLK 23.180 0.180 12.000 (0.500) 100.500 (0.300) 10.240 (0.260) 4.000 (0.250) 14.800 (0.240) Top Gainer CBIP-WA Top Loser ALLIANZ DIN042300721 GENP HUMEIND PPB 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 Closing Price Target Price Premium CIMB MK Equity CIMB GROUP HOLDINGS BHD 6.18 7.12 15.2% MAY MK Equity MALAYAN BANKING BHD 9.61 11.03 14.8% AMM MK Equity AMMB HOLDINGS BHD 6.52 7.37 13.1% NHB MK Equity NAIM HOLDINGS BERHAD 3.25 4.84 49.0% IGB MK Equity IGB CORPORATION BHD 2.87 4.10 42.9% ECW MK Equity ECO WORLD DEVELOPMENT GROUP 4.39 6.10 38.9% KUL MK Equity KULIM MALAYSIA BHD 3.45 4.00 15.9% SOP MK Equity SARAWAK OIL PALMS BERHAD 5.87 6.75 15.0% THP MK Equity TH PLANTATIONS BHD 1.62 1.80 11.4% BON MK Equity BONIA CORP BHD 1.03 1.73 68.0% FNH MK Equity FRASER & NEAVE HOLDINGS BHD 16.04 19.15 19.4% CAB MK Equity CARLSBERG BREWERY MALAYSIA B 10.44 12.27 17.5% COCO MK Equity COASTAL CONTRACTS BHD 3.63 5.81 60.1% LLB MK Equity LION INDUSTRIES CORP BHD 0.58 0.90 55.9% DRB MK Equity DRB-HICOM BHD 1.98 3.04 53.6% BHB MK Equity BENALEC HOLDINGS BHD 0.81 1.28 59.0% EVSD MK Equity EVERSENDAI CORP BHD 0.77 1.10 42.7% MRC MK Equity MALAYSIAN RESOURCES CORP BHD 1.46 2.07 41.8% PPT MK Equity PERISAI PETROLEUM TEKNOLOGI 0.73 1.27 73.8% SAKP MK Equity SAPURAKENCANA PETROLEUM BHD 3.10 5.02 61.9% PETR MK Equity PERDANA PETROLEUM BHD 1.37 2.21 61.0% Source: Bloomberg as of 14th November 2014 MERCURY SECURITIES SDN BHD (113193-W) (A Participating Organisation of Bursa Malaysia Securities Berhad) NEWS HEADLINES Commodity, Currency and Economic News Ringgit closed slightly lower against the US dollar yesterday, ahead of the third-quarter growth data, which would be announced by Bank Negara today, dealers said. At 5pm, the ringgit was quoted at 3.3380/3400 vis-a-vis the greenback compared with 3.3350/3370 on Wednesday. It hovered between 3.3345 and 3.3380 throughout the day. The ringgit was traded mostly higher against other major currencies. It rose against the Singapore dollar to 2.5840/5873 from 2.5841/5864 on Wednesday, appreciated against the yen to 2.8890/8913 from 2.8930/8954 yesterday and strengthened against the British pound to 5.2644/2682 from 5.3097/3142 previously. The ringgit fell against the euro to 4.1608/1636 from 4.1587/1619 on Wednesday. (Bernama) Rubber market closed mixed yesterday due to stronger ringgit and profit-taking on the Tokyo Commodity Exchange, a dealer said. He said it was also reported that market operators were looking forward to the release of China’s economic data. At the close, the Malaysian Rubber Board’s official physical price for tyre-grade SMR 20 rose 1.5 sen to 512.00 sen a kg at noon while latex-in-bulk moved up by half a sen to 408.50 sen a kg. The unofficial closing price for tyre-grade SMR 20 and latex-in-bulk declined half a sen to 512.50 sen a kg and 408.50 sen a kg, respectively. (Bernama) Gold futures contracts on Bursa Malaysia Derivatives closed lower yesterday as the strong US dollar reduced bullion’s appeal as a hedge. Phillip Futures Sdn Bhd dealer Lim Eng Wee said market sentiment was bearish, taking the cue from the drop in global gold demand. According to World Gold Council, global bullion demand slipped 2.5 per cent from last year to 929.3 million tonnes in the third quarter of this year. November 2014 fell five ticks to RM124.80 a gramme while December 2014, January 2015 and February 2015 were all unchanged at RM125.05, RM125.35 and RM125.65 a gramme, respectively. Open interest rose to 2,068 contracts from 1,986 contracts on Wednesday, while turnover increased to 213 lots worth RM2.66 million from the 176 lots worth RM2.20 million previously. At 5pm, the physical price of gold was 27 sen lower at RM120.61 a gramme from RM120.88 a gramme on Wednesday. (Bernama) Crude palm oil (CPO) futures contracts on Bursa Malaysia Derivatives closed lower yesterday, tracking weakness in the crude oil market and lower palm oil exports to India, a major palm oil destination. According to the Solvent Extractors’ Association, palm oil shipments declined 4.1 per cent to 7.96 million tonne for the year ended October 31, the first drop since 2009-2010. November and December 2014 slipped RM23 to RM2,191 and RM2,221 a tonne respectively, January 2015 slumped RM28 to RM2,231 a tonne and February down RM27 to RM2,239 a tonne. Volume fell to 39,596 lots from Wednesday’s 41,671 lots while open interest eased to 257,144 contracts from 260,193 contacts, previously. On the physical market, November South went down RM20 from Wednesday’s RM2,240 a tonne. (Bernama) MERCURY SECURITIES SDN BHD (113193-W) (A Participating Organisation of Bursa Malaysia Securities Berhad) Brent crude oil fell to a four-year low, below US$80 a barrel, yesterday after Chinese data showed a slowdown in activity last month in the world’s top energy consumer and Saudi Arabia was silent about a possible cut in production. China’s economy lost momentum in October, with factory growth dipping and investment growth hitting a near 13-year low, reinforcing expectations of a slower increase in fuel demand. Brent crude for December, which expired yesterday, was down by US1.51 at US$78.87 a barrel by 1314GMT after falling to an intraday low of US$78.71, its lowest since September 2010. US light crude was down 40 cents at US$76.78 a barrel. “There are not many bullish factors,” said Avtar Sandu, a senior manager for commodities at Phillip Futures. Demand for oil from members of the Organisation of the Petroleum Exporting Countries will drop to 29.2 million barrels per day (bpd) next year, almost one million bpd less than current output, the cartel forecast this week. (Reuters) Global and Local Headlines Econpile Holdings Bhd has secured a RM30 million contract for the substructure of a condominium along Persiaran Stonor here. The company received the contract from CRCC Malaysia Bhd to undertake bored piling, earthworks and basement sub-structure works for the project. “The duration of the contract is 14 months and is expected to be completed in January 2016,” it said it said in a filing to Bursa Malaysia yesterday. (BTimes) GD Express Carrier Bhd (GDEX), which posted a 35.3% jump in net profit to RM4.98mil in the first quarter ended Sept 30, has proposed bonus and warrants issue to reward its shareholders. In a filing with Bursa Malayisa, GDEX proposed to issue up to 310.85 million a bonus shares, on the basis of one bonus share for every three existing shares held. The company will also issue up to 186.51 million warrants, on the basis of one warrant for every five shares not including bonus shares held. (Star) I-Berhad’s net profit jumped more than fourfold to RM14.23 million for the third quarter ended September 30 2014 from RM2.67 million a year ago. Revenue increased to RM77.38 million from RM35.53 million previously. In a filing to Bursa Malaysia yesterday, the company said the performance was due to the contributions from its property development division. For year-to-date, revenue hit RM192.95 million, rising almost 100 per cent compared with RM96.48 million for the financial period ended September 30, 2013. (Star) Maxis Bhd posted a higher normalised profit after tax of RM494 million in the third quarter ended September 30, up by 2.9 per cent from RM480 million registered in the second quarter 2014. In a statement, the company said its service revenue remained steady at RM2.5 billion, while earnings before interest, tax, depreciation and amortisation (EBITDA) stood at RM1.1 billion, with an EBITDA margin on service revenue at a solid 52.7 per cent. (BTimes) MERCURY SECURITIES SDN BHD (113193-W) (A Participating Organisation of Bursa Malaysia Securities Berhad) SolarTech Energy Corp (SEC) (Taiwan) is injecting RM13.10mil into solar business of Penangbased Teck Seng Holdings Bhd in return for a stake in its subsidiary. The share sale would provide TS Solartech an opportunity to include a strategic partner to develop its solar business and improve its long-term growth process. (Star) Berkshire Hathaway Inc agreed to buy the Duracell battery business from Procter & Gamble Co (P&G) in chairman Warren Buffett’s latest stock swap. Berkshire will turn over US$4.7 billion (RM15.2 billion) of P&G shares held by Buffett’s Omaha, Nebraska-based company. Duracell will have about US$1.7 billion in cash when the deal is completed, which is expected in the second half of next year. The exchange may help Berkshire cut its holding in P&G without incurring the tax costs of selling shares in the open market. Buffett became one of P&G’s biggest shareholders through an investment in Gillette Co. (Bloomberg) DP World Ltd, which operates ports from China to Peru, agreed to buy Dubai’s industrial parks operator Economic Zones World FZE for US$2.6 billion (RM8.4 billion). The company also plans to delist its shares from the London Stock Exchange. The purchase, which includes the acquisition of the Jebel Ali Free Zone logistics park, is expected to be completed in the second quarter, Dubaibased DP World said in an e-mailed statement yesterday. The agreement includes the assumption of net debt of US$859 million, and is at about 10 times EZW’s earnings before interest, tax depreciation and amortisation for last year, it said. (Bloomberg) Olam International's bottom line took a toll from fair-value losses on its biological assets in the September quarter. Earnings declined 2.9% y-o-y to $44.3 million as the commodity trader booked a $15.9-million loss on these assets, it said in a statement this morning. The company had a $3.3million fair value gain in the same period last year. Revenue was flat at $4.3 billion during the quarter (1QFY2015), which is traditionally its weakest period due to seasonal factors. Sales volumes for its food division, its main revenue driver, were lower as Olam reduced its focus on lower-margin businesses, resulting in EBITDA for the division falling to $200.5 million from $240.4 million. The group's non-food segment did better, with EBITDA rising to $18.8 million from $8.5 million as its commodity financial services business returned to the black. (Edge) Thai Airways International PCL said yesterday it returned to a net profit in the third quarter, helped by a huge foreign exchange gain. The state-controlled airline posted a net profit of 1.09 billion baht (RM111 million). It reported a foreign exchange gain of 7.4 billion baht in the quarter, the airline said in a statement. Excluding the foreign exchange gain, tax and impairment expenses, and the airline posted a loss of 5.24 billion baht versus a 3.2 billion baht loss a year earlier. The flag carrier recorded losses in the past five quarters after the tourism industry was hit by domestic political unrest. (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 P/E. 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 P/E and the corresponding 5 year high, low and average P/E. For example, finance sector PE is currently at 12.43 times, which is marginally lower than 5 year average P/E of 12.78 times, suggesting financials valuation is in line with the historical average P/E. 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 12.43 12.56 High: Average: Low: - High: 25.57 Average: 16.27 Low: 13.21 31.19 17.03 High: 19.97 Average: 17.04 Low: 12.50 High: 19.97 Average: 15.92 Low: 11.98 13.77 14.07 High: 14.32 Average: 7.95 Low: 3.81 High: 17.76 Average: 10.15 Low: 3.81 9.34 11.84 High: 18.01 Average: 16.09 Low: 14.34 High: 23.70 Average: 17.05 Low: 14.34 16.17 16.76 High: 42.70 Average: 20.65 Low: 10.76 High: 42.70 Average: 18.87 Low: 10.72 15.37 20.08 High: 69.72 Average: 27.11 Low: 5.04 High: 69.72 Average: 24.44 Low: 5.04 19.10 19.38 High: 20.90 Average: 14.06 Low: 5.01 High: 34.34 Average: 18.26 Low: 5.01 13.77 14.07 2011 2012 2013 Ind Prod Property Consumer product Consumer product Property 39.5% 30.6% 7.6% 12.0% 22.1% 13.7% 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% 1.8% 4.8% 16.1% Plantation Plantation KLCI KLCI Construction Finance Finance Consumer product 26.3% 26.3% 0.8% 10.6% 14.6% 1.3% 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% 0.2% 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% 0.2% 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% 0.4% 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% 1.4% 1.3% 11.5% Construction Ind Prod Plantation Plantation Trade & services Construction 12.4% 17.2% 6.9% -2.6% 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 10th November 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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