MERCURY SECURITIES
SDN BHD (113193-W)
MARKET FLASH
THURSDAY, 20 NOV 2014
(A Participating Organisation of Bursa Malaysia Securities Berhad)
NEWS HIGHLIGHTS
DOMESTIC
LOCAL
Close
Day Chg
FTSE KLCI
1,824.39
6.01
Volume (mil)
2,105.61
350.32
Value (RM’mil)
1,927.80
219.45
 AirAsiaX at record low after net losses of RM210mil
in Q3
Up
438
Down
357
 Boustead Plantation Q3 earnings at RM18.5mil
Unchanged
309
 EA Technique signs underwriting agreement for
IPO
FOREIGN
Dow Jones
17,687.82
(2.09)
 Handal Resources posts Q3 net profit of RM2.38mil
Nasdaq CI
4,702.44
(26.73)
 KLK Q4 net dips 33.8% to RM171mil
S&P 500
2,051.80
(3.08)
 Star 3Q net profit lower at RM34.3mil
FTSE 100
6,690.73
(12.53)
Nikkei 225
17,288.75
(55.31)
2,450.99
(5.38)
Shanghai CI
FOREIGN
HSI
23,373.31
(155.86)
 Qualcomm CEO more cautious on future revenue
growth
STI
3,333.70
20.83
USD/MYR
3.36
0.004
ECONOMY / COMMODITY / CURRENCY
WTI (USD/barrel)
74.1
(0.37)
 Ringgit continues downtrend versus US$
Gold (USD/troy oz)
1,198.56
(0.19)
 Rubber market closes mixed
Top Volume
(RM)
Chg
 Gold mixed on cautious sentiment
SOLUTN
0.270
0.015
 CPO slips on weaker crude prices
IFCAMSC
0.855
(0.035)
AAX
0.645
(0.055)
IFCAMSC-WA
0.715
(0.030)
SYSTECH
0.250
(0.015)
9.370
0.470
17.980
0.340
PMETAL
3.420
0.310
PMETAL-WC
2.340
0.310
12.300
0.300
23.000
(0.660)
9.700
(0.440)
TASEK
15.800
(0.320)
UTDPLT
23.980
(0.220)
ADVPKG
1.930
(0.160)
 Brent makes slight gains to close at US$78
Other Stats
Top Gainer
GENTING
HLFG
ALLIANZ
Top Loser
KLK
LAFMSIA
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
9.56
11.03
15.4%
CIMB MK Equity
CIMB GROUP HOLDINGS BHD
6.21
7.12
14.6%
AMM MK Equity
AMMB HOLDINGS BHD
6.52
7.37
13.1%
NHB MK Equity
NAIM HOLDINGS BERHAD
3.21
4.84
50.9%
IGB MK Equity
IGB CORPORATION BHD
2.90
4.10
41.4%
ECW MK Equity
ECO WORLD DEVELOPMENT GROUP
4.35
6.10
40.2%
KUL MK Equity
KULIM MALAYSIA BHD
3.45
4.00
15.9%
SOP MK Equity
SARAWAK OIL PALMS BERHAD
5.86
6.75
15.2%
THP MK Equity
TH PLANTATIONS BHD
1.63
1.80
10.7%
BON MK Equity
BONIA CORP BHD
1.02
1.73
69.6%
FNH MK Equity
FRASER & NEAVE HOLDINGS BHD
16.04
19.15
19.4%
PAD MK Equity
PADINI HOLDINGS BERHAD
1.72
2.05
18.9%
COCO MK Equity
COASTAL CONTRACTS BHD
3.49
5.81
66.5%
LLB MK Equity
LION INDUSTRIES CORP BHD
0.57
0.90
58.7%
DRB MK Equity
DRB-HICOM BHD
1.97
3.05
54.7%
BHB MK Equity
BENALEC HOLDINGS BHD
0.80
1.28
61.0%
EVSD MK Equity
EVERSENDAI CORP BHD
0.77
1.10
43.6%
MRC MK Equity
MALAYSIAN RESOURCES CORP BHD
1.45
2.05
41.6%
PPT MK Equity
PERISAI PETROLEUM TEKNOLOGI
0.72
1.25
74.1%
PETR MK Equity
PERDANA PETROLEUM BHD
1.31
2.21
68.7%
0.81
1.33
58.4%
AMRB MK Equity ALAM MARITIM RESOURCES BHD
Closing Price Target Price
Premium
Source: Bloomberg as of 17th November 2014
MERCURY SECURITIES
SDN BHD (113193-W)
(A Participating Organisation of Bursa Malaysia Securities Berhad)
NEWS HEADLINES
Commodity, Currency and Economic News
Ringgit continued its downtrend at close yesterday with more investors shifting their interest to safe
haven currencies, dealers said. The domestic currency was quoted at 3.3590/3610 in contrast to the
3.3540/3560 recorded at Tuesday’s closing. A dealer said investors reacted negatively to Japanese
Prime Minister Shinzo Abe’s decision to postpone a sales tax rise. The ringgit was slightly higher
against the Singapore dollar at 2.5785/5802 from 2.5850/5885 on Tuesday and strengthened against
the yen to 2.8604/8633 from 2.8745/8767 previously. The local currency rose against the British
pound to 5.2410/2462 from 5.2510/2548 on Tuesday, but depreciated against the euro to
4.2135/2167 from 4.1902/1937. (Bernama)
Rubber market closed mixed yesterday despite higher regional futures market as news that Japanese
Prime Minister Shinzo Abe is going to delay a sales tax hike boosted sentiment, a dealer said. He
said the mixed trading was also contributed by the weakening of the ringgit against the US dollar. At
the close, the Malaysian Rubber Board's official physical price for tyre-grade SMR 20 rose five sen
to 502.50 sen a kg, while latex-in-bulk dipped 6.5 sen to 396.50 sen a kg. The unofficial closing
price for tyre-grade SMR 20 increased 10.5 sen to 507.50 sen a kg while latex-in-bulk slid five sen
to 394.50 sen a kg. (Bernama)
Gold futures ended mixed as cautious sentiment clouded the market. At the close, November 2014
added six ticks to RM130 a gramme, December 2014 gained four ticks to RM130.30 a gramme
while April 2015 declined two ticks to RM131.35 a gramme and October 2015 eased six ticks to
RM132 a gramme. Open interest fell to 2,152 contracts from 2,178 previously while turnover
decreased to 284 lots worth RM3.692 million from 317 lots worth RM4.13 million previously. As at
5pm, the physical price of gold was 31 sen higher at RM125.24 a gramme from RM124.93 a
gramme on Tuesday. (Bernama)
Crude palm oil (CPO) futures closed lower yesterday amid weaker crude oil prices, said a dealer.
Phillip Futures derivative product specialist David Ng said the narrowing price differences between
soya oil and palm oil also contributed to the lower close. However, he said the weaker ringgit may
offer some form of support and limit any further decline in the CPO prices. “We locate support at
the RM2,200 a tonne and immediate resistance at RM2,280 a tonne,” he said. December 2014 rose
RM4 to RM2,234 a tonne, January 2015 and February 2015 fell RM6 to RM2,242 and RM2,245 a
tonne respectively, while March 2014 slid RM2 to RM2,252 a tonne. Volume improved to 34,564
lots from Tuesday’s 21,206 lots, while open interest was lower at 248,309 contracts against 252,418
contracts previously. On the physical market, December South remained unchanged at RM2,250 a
tonne. (Bernama)
MERCURY SECURITIES
SDN BHD (113193-W)
(A Participating Organisation of Bursa Malaysia Securities Berhad)
Brent crude oil gained slightly, heading towards US$78 a barrel on yesterday on speculation OPEC
may act to stabilise prices that have fallen by almost a third in five months when it meets next week.
However gains were trimmed after weekly US government data showed a rise in crude inventories
there. Brent was up 27 cents at US$78.74 a barrel at 1552GMT, after settling 84 cents lower in the
previous session. US crude was up one cent at US$74.61 a barrel. The US crude futures contract
closed US$1.03 lower on Tuesday. “The builds in crude oil and gasoline stocks are negatives for
prices and the focus is really now going to be on the OPEC meeting and whether or not they cut
production,” analyst at Tradition Energy in Stamford, Connecticut, said. (Reuters)
Global and Local Headlines
AirAsia X, the long-haul low-cost carrier, saw its share price fall to a record low of 65 sen on
Wednesday after it sank deeper into the red with net losses of RM210.95mil in the third quarter
ended Sept 30, 2014. AirAsia X announced the losses were a stark contrast to the net profit of
RM26.44mil a year ago as it was impacted by higher operating expenses which surged 43.1%.
Revenue rose 16.2% to RM698.76mil from RM601.49mil a year ago. Loss per share 8.9 sen
compared with earnings per share of 1.1 sen. Elaborating on the results, AirAsia X said operating
expenses increased by RM253.7mil or 43.1% to RM842.5mil due to higher staff costs, higher
aircraft fuel expenses, while maintenance, overhaul, user charges and other related expenses surged.
(Star)
Boustead Plantations Bhd’s earnings slipped 19.9% to RM18.56mil in the third quarter ended Sept
30, 2014 from RM23.18mil a year ago due to dividend income earned from the Boustead REIT in
2013 amounting to RM13.4mil. It said on Wednesday revenue fell 7.8% to RM162.86mil from
RM176.79mil. Earnings per share were 1.16 sen compared with 2.27 sen. It rewarded shareholders
with a dividend of two sen per share. For the nine months ended Sept 30, 2014, its earnings rose
66.5% to RM58.12mil from RM34.89mil in the previous corresponding period. Profit before tax
jumped 97% to RM82.18mil from RM41.74mil. Revenue increased by 5.6% to RM550.16mil from
RM529.75mil. Boustead Plantations said fresh fruit bunches (FFB) production for the nine-month
period rose 4% to 773,937 tonnes due largely to better crops from Sabah region which compensated
for the shortfalls in the Sarawak estates. (Star)
EA Technique (M) Bhd signed an underwriting agreement with RHB Investment Bank Bhd for its
proposed initial public offering (IPO) on the Main Market of Bursa Malaysia. RHB Investment
Bank is the company’s principal adviser, underwriter and placement agent for the exercise. On Sept
3, the Securities Commission Malaysia approved EA Technique’s proposed IPO which involved 129
million ordinary shares of 25 sen each. It also comprised an offer for sale of 15 million existing
shares and a public issue of 114 million new shares. The company owns and operates marine
vessels, provides offshore storage of oil and gas as well as port marine services (Bernama)
MERCURY SECURITIES
SDN BHD (113193-W)
(A Participating Organisation of Bursa Malaysia Securities Berhad)
Handal Resources Bhd posted net profit of RM2.38mil in the third quarter ended Sept 30, 2014,
which was a turnaround from a net loss of RM583,000 a year ago on improved revenue from its
integrated crane services contract. The company said on Tuesday revenue rose to RM24.31mil, up
27.4% from RM19.08mil a year ago. Earnings per share were 1.49 sen compared with loss per share
of 0.36 sen. In the nine-months period, it recorded earnings of RM3.60mil compared with net losses
of RM359,000 in the previous corresponding period. On the outlook, Handal expected market
condition to be challenging for the current financial year. “Despite the current depressed oil price,
the group is expected to sustain its performance in view of the nature of the business activities that
are being carried out as per contract requirement,” it said. (Star)
Kuala Lumpur Kepong Bhd’s net profit slumped 33.8 per cent to RM170.75 million in the fourth
quarter ended September 30 2014 from RM258 million a year ago. This was due to its
manufacturing sector losses caused by reduced margins, while the oleochemical division also sank
into losses, KLK said in a filing to Bursa Malaysia yesterday. Its pre-tax profit fell 28.3 per cent to
RM238.62 million from RM332.7 million a year ago despite a 15 per cent revenue growth to
RM2.78 billion from RM2.41 billion previously. (Star)
Star Publications (M) Berhad’s net profit came in lower at RM34.3mil for the 3rd quarter ended
Sep 30 2014, compared with RM44.05mil in the previous corresponding period. The media group’s
earnings were affected by dampening of overall advertising expenditure, which brought the
performance of its print and digital segment down. (Edge)
Qualcomm Inc, Mobile chipmaker on Wednesday gave a more conservative five-year outlook than
in the past as it faces an antitrust probe in China and consumers there and in other developing
countries buy lower-priced smartphones. China's expanding high-speed 4G network is driving
demand for smartphones with leading-edge technology, but Qualcomm's opportunities have been
clouded by a year-old antitrust investigation there and troubles collecting royalty payments from
device makers. The company expects its revenue to rise 8 percent to 10 percent annually over the
next five years and for earnings per share to grow faster than revenue. In the past, Qualcomm has
had a five-year target of double-digit annual growth in earnings per share and revenue. Chief
Executive Officer Steve Mollenkopf told analysts at the company's annual investor day that the
troubles in China were hurting the QTL royalty business, which provides most of Qualcomm's
profits. (Star)
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 12.29 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
12.29
12.43
High: Average: Low: -
High: 25.57
Average: 16.27
Low: 13.21
30.79
16.57
High: 19.97
Average: 17.04
Low: 12.50
High: 19.97
Average: 15.92
Low: 11.98
13.56
13.86
High: 14.32
Average: 7.95
Low: 3.81
High: 17.76
Average: 10.15
Low: 3.81
9.12
11.56
High: 18.01
Average: 16.09
Low: 14.34
High: 23.70
Average: 17.05
Low: 14.34
16.06
16.66
High: 42.70
Average: 20.65
Low: 10.76
High: 42.70
Average: 18.87
Low: 10.72
15.20
19.98
High: 69.72
Average: 27.11
Low: 5.04
High: 69.72
Average: 24.44
Low: 5.04
19.04
19.46
High: 20.90
Average: 14.06
Low: 5.01
High: 34.34
Average: 18.26
Low: 5.01
13.56
13.86
2011
2012
2013
Ind Prod
Property
Consumer
product
Consumer
product
Property
39.5%
30.6%
7.6%
12.0%
22.1%
12.0%
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%
0.5%
4.8%
16.1%
Plantation
Plantation
KLCI
KLCI
Construction
Finance
Finance
Consumer
product
26.3%
26.3%
0.8%
10.6%
14.6%
0.2%
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%
-3.1%
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%
-3.1%
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%
-0.2%
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%
1.1%
1.3%
11.5%
Construction
Ind Prod
Plantation
Plantation
Trade &
services
Construction
12.4%
17.2%
6.9%
-3.9%
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 17th 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:
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Solaris Mont Kiara
50480, Kuala Lumpur
Tel: 603-6203 7227
or E-mail: [email protected]
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