MERCURY SECURITIES SDN BHD (113193-W) MARKET FLASH WEDNESDAY, 17 DEC 2014 (A Participating Organisation of Bursa Malaysia Securities Berhad) NEWS HIGHLIGHTS DOMESTIC LOCAL Close Day Chg FTSE KLCI 1,673.94 (23.37) Volume (mil) 1,638.11 (426.70) Value (RM’mil) 2,104.15 (214.33) Aeon Credit posts higher earnings on bad debt recovery, processing fees Up 296 Down 572 Gamuda Q1 profit rises to RM185.84mil Unchanged 275 LFE Corp bags RM350mil contract for Shapadu City Village in Putrajaya FOREIGN Dow Jones 17,180.84 (111.97) Masterskill aborts asset sale proposal Nasdaq CI 4,605.16 (57.32) WZ Satu unit wins RM33.7mil Laksana job S&P 500 1,989.63 (16.89) Top Glove’s Q1 net drops slightly to RM48.68mil FTSE 100 6,158.66 149.11 Nikkei 225 16,755.32 (344.08) 3,021.52 68.10 Shanghai CI FOREIGN HSI 22,670.50 (357.35) City Developments to raise US$1.1bil STI 3,215.64 (79.05) 3.49 (0.008) 54.32 (0.490) 1,197.31 0.050 Other Stats ECONOMY / COMMODITY / CURRENCY USD/MYR Russian ruble suffers steepest drop in 16 years WTI (USD/barrel) Ringgit advances against US$ Gold (USD/troy oz) Rubber market closes higher Top Volume (RM) Chg Gold futures continue downtrend SUMATEC 0.180 0.010 HUBLINE 0.035 (0.005) CPO prices fall on weak demand TIGER 0.125 (0.010) Oil slips below US$59 HSI-CJ 0.610 (0.095) SKPETRO 2.080 (0.020) 11.900 0.400 CMSB 3.530 0.180 HUMEIND 3.200 0.180 KLCC 6.660 0.160 PUNCAK-WB 1.450 0.150 BAT 64.760 (1.960) DLADY 43.100 (1.300) UTDPLT 23.000 (0.800) SHANG 6.450 (0.450) FAREAST 8.000 (0.400) Top Gainer CARLSBG Top Loser 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 CIMB MK Equity CIMB GROUP HOLDINGS BHD 5.50 6.79 23.5% RHBC MK Equity RHB CAPITAL BHD 7.59 9.17 20.8% MAY MK Equity MALAYAN BANKING BHD 8.87 10.58 19.3% IGB MK Equity IGB CORPORATION BHD 2.69 4.80 78.4% TRCB MK Equity TROPICANA CORP BHD 1.07 1.63 52.6% ECW MK Equity ECO WORLD DEVELOPMENT GROUP 3.98 5.93 49.0% SOP MK Equity SARAWAK OIL PALMS BERHAD 5.42 6.75 24.5% FGV MK Equity FELDA GLOBAL VENTURES 2.75 3.37 22.5% KUL MK Equity KULIM MALAYSIA BHD 3.24 3.83 18.1% BON MK Equity BONIA CORP BHD 0.85 1.22 43.1% PAD MK Equity PADINI HOLDINGS BERHAD 1.61 1.88 17.0% QLG MK Equity QL RESOURCES BHD 3.27 3.79 15.8% KNMG MK Equity KNM GROUP BHD 0.42 1.06 152.4% PRESS MK Equity PRESS METAL BERHAD 2.54 4.82 89.8% DRB MK Equity DRB-HICOM BHD 1.51 2.85 88.7% BHB MK Equity BENALEC HOLDINGS BHD 0.61 1.23 101.0% MUHI MK Equity MUHIBBAH ENGINEERING (M) BHD 1.75 3.22 83.7% MRC MK Equity MALAYSIAN RESOURCES CORP BHD 1.25 2.01 60.6% PPT MK Equity PERISAI PETROLEUM TEKNOLOGI 0.45 1.11 147.3% UZMA MK Equity UZMA BHD 1.55 2.98 92.0% PETR MK Equity 1.12 1.97 72.4% PERDANA PETROLEUM BHD Closing Price Target Price Premium Source: Bloomberg as of 15th Dec 2014 MERCURY SECURITIES SDN BHD (113193-W) (A Participating Organisation of Bursa Malaysia Securities Berhad) NEWS HEADLINES Commodity, Currency and Economic News Ruble plunged more than 11 percent against the US dollar on Tuesday in its steepest intraday fall since the Russian financial crisis in 1998 as confidence in the central bank evaporated after an ineffectual rate hike. It has now fallen close to 20 percent this week, taking its losses this year against the dollar to more than 50 percent and stirring memories of the 1998 crisis when the currency collapsed within a matter of days, forcing Russia to default on its debt. The ruble has been hammered by the slump in oil prices and Western sanctions imposed over Russia's involvement in Ukraine, but its sharp decline over the past two days also reflects declining confidence in the central bank. The central bank has spent more than $80 billion defending the ruble this year, including more than $8 billion since it floated the currency in November. Russia still has ample reserves of around $416 billion but analysts say the currency is in dangerous territory as it is increasingly being driven down by sheer panic. (Reuters) Ringgit closed higher against the US dollar yesterday and mostly lowers against other major currencies. At 5pm, the ringgit was quoted at 3.4870/4900 against the greenback from 3.4950/4980 on Monday. Investors were cautious on the outcome on the two-day Federal Open Market Committee meeting which ends today. The ringgit advanced against the British pound to 5.4592/4646 from 5.4952/4006 on Monday but fell against the Singapore dollar to 2.6743/6786 from Monday’s 2.6635/6676. It weakened against the euro to 4.3521/3562 from 4.3485/3529, and depreciated against the yen to 2.9880/9911 from 2.9484/9516 previously. (Bernama) Rubber market closed higher for the second consecutive day yesterday, despite a stronger ringgit, lower crude oil prices and weaker performance of the regional futures. The Tokyo Commodity Exchange futures ended lower due to the stronger yen and a slowdown in China’s factory sector activities. At the close, the Malaysian Rubber Board’s official physical price for tyre-grade SMR 20 increased six sen to 513.50 sen a kg, while latex-in-bulk rose three sen to 355 sen a kg. The unofficial closing price for tyre-grade SMR 20 gained one sen to 513 sen a kg, while latex-in-bulk earned one sen to 355 sen a kg. (Bernama) Gold futures contracts on Bursa Malaysia Derivatives continued downtrend for the second consecutive day, tracking overnight losses on the US Commodity Exchange’s (Comex) gold futures. The downtrend was also due to the stronger US dollar and worries over an earlier than expected rate hike by the US Federal Reserve. Gold is expected to continue its bearish trend on an improved US economy and the strengthening greenback. December 2014, January 2015, February 2015 and March 2015 fell 43 ticks each to RM134.80, RM135.05, RM135.35 and RM135.75 a gramme respectively. Open interest decreased to 1,819 contracts from 1,843 contracts on Monday, while turnover advanced to 127 lots valued at RM1.72 million from 103 lots worth RM1.41 million previously. The physical price of gold at 5pm was RM2.04 lower at RM130.08 a gramme from RM132.12 a gramme on Monday. (Bernama) MERCURY SECURITIES SDN BHD (113193-W) (A Participating Organisation of Bursa Malaysia Securities Berhad) Crude palm oil (CPO) futures prices on Bursa Malaysia Derivatives ended lower yesterday following subdued demand and in anticipation of higher production for next year. The weakening crude oil prices pressured the market. The support level is at RM2,100 a tonne and immediate resistance at RM2,250 a tonne. New spot month January 2014 declined RM39 to RM2,113 a tonne, February 2015 decreased RM48 to RM2,120 a tonne, March 2015 plunged RM50 to RM2,121 a tonne and April 2015 dipped RM44 to RM2,121 a tonne. Volume increased to 52,441 lots from 41,447 lots on Monday while open interest declined to 199,824 contracts from 220,214 contracts. On the physical market, December South eased RM20 to RM2,150 per tonne. (Bernama) Brent Crude Oil fell below US$59 a barrel for the first time since May 2009 yesterday, extending a six-month selloff as slowing Chinese factory activity and weakening emerging-market currencies added to concerns about demand. Brent crude fell as low as US$58.50, its weakest since May 2009. As of 1221GMT it was down US$2.12 at US$58.94 while US crude was down US$1.73 at US$54.18 a barrel. International benchmark Brent crude has almost halved since reaching a 2014 high of US$115 a barrel in June on ample supply and slowing demand, and a switch in strategy by exporter group Opec to defending market share rather than prices. A report showing Chinese industrial activity shrank for the first time in seven months in December added to concern about oil demand. China is the second-largest oil consumer after the United States. “The trend remains down,” said Robin Bieber, technical analyst and director at London-based oil broker PVM Oil Associates. “It is not advised to be long.” (Reuters) Global and Local Headlines Aeon Credit Service (M) Bhd’s earnings rose 12.1% to RM48.29mil in the third quarter ended Nov 20, 2014 from RM43.05mil a year ago, boosted by an increase in the bad debts recovered and AEON Big loyalty programme processing fee. Its revenue increased by 21.4% to RM216.21mil from RM178.03mil a year ago. Earnings per share were 32.50 sen compared with 29.9 sen. (Star) Gamuda Bhd posted a net profit of RM185.84 million in its first quarter ended October 31 2014, up 12.3 per cent from RM165.48 million a year ago. Revenue rose to RM569.64 million from RM486.12 million previously. Gamuda attributed the rise to higher contributions from its property, water and expressway concession divisions. The higher revenue was due to stronger contributions from its expressways. (BTimes) LFE Corporation Bhd has secured a RM350mil contract to build the Shapadu City Village in Putrajaya. The engineering-based LFE said on Tuesday its unit LFE Engineering Sdn Bhd had received a letter of award from Shapadu Boulevard Sdn Bhd to undertake the engineering, procurement and construction aspects of the project. News reports said Shapadu City Village would have a Grade A office tower which will house Shapadu’s new headquarters, a luxury hotel, lifestyle retail outlets and 150 high-end condominium units. (Star) MERCURY SECURITIES SDN BHD (113193-W) (A Participating Organisation of Bursa Malaysia Securities Berhad) Masterskill Education Group Bhd (MEGB) has decided to abort the proposal to dispose of some of its assets as the indicative market value is considered higher than the sale consideration offered by the buyer. In a move to become an asset-light company, MEGB executive chairman and single largest shareholder Siva Kumar Jeyapalan had offered to buy four properties for RM75mil which would be leased back to Masterskill (M) Sdn Bhd. The properties are its campuses in Cheras, Kota Kinabalu, Kuching and Pasir Gudang. (Star) Top Glove Corp Bhd’s net profit fell three per cent to RM48.68 million in the first quarter ended November 30 from RM50.27 million in the same period a year ago due to costlier fuel and knock-on inflationary impact. In its filing to the stock exchange yesterday, Top Glove, the world’s largest glove maker, said revenue declined one per cent to RM567.63 million from RM573.98 million a year ago. Earnings per share slipped to 7.85 sen from 8.11 sen previously while net cash remains positive at RM186.7 million. Top Glove enjoyed savings in the first quarter under review when natural latex price fell 12 per cent to RM3.90 per kg and nitrile latex price settled five per cent to US$1.04 per kg. (BTimes) WZ Satu Bhd says its unit, WZS KenKeong Sdn Bhd, has won a RM33.7 million contract from Laksana Amanbina Sdn Bhd for the construction and completion of earthworks and infrastructure works connected to existing Package 1 in Kuantan. The company said the project was expected to be completed within 58 weeks. (BTimes) City Developments Ltd (CDL) said yesterday it plans to raise about US$1.1 billion (RM3.84 billion) from a group of investors and banks, including Blackstone Group LP, to fund global expansion. The company will raise S$750 million (RM2 billion) from three investors, including Blackstone, and another S$750 million in loans from Singapore’s top two lenders, DBS Group Holdings Ltd and Oversea-Chinese Banking Corp. CDL plans to use part of the funds to finance overseas expansion, including in Japan, the United States and China. (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 11.83 times, which is 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 11.83 11.98 High: Average: Low: - High: 25.57 Average: 16.27 Low: 13.21 28.65 16.01 High: 19.97 Average: 17.04 Low: 12.50 High: 19.97 Average: 15.92 Low: 11.98 14.03 13.20 High: 14.32 Average: 7.95 Low: 3.81 High: 17.76 Average: 10.15 Low: 3.81 8.65 10.94 High: 18.01 Average: 16.09 Low: 14.34 High: 23.70 Average: 17.05 Low: 14.34 15.58 16.31 High: 42.70 Average: 20.65 Low: 10.76 High: 42.70 Average: 18.87 Low: 10.72 14.49 19.72 High: 69.72 Average: 27.11 Low: 5.04 High: 69.72 Average: 24.44 Low: 5.04 18.46 19.12 High: 20.90 Average: 14.06 Low: 5.01 High: 34.34 Average: 18.26 Low: 5.01 14.03 13.20 2011 2012 2013 Ind Prod Property Consumer product Consumer product Property 39.5% 30.6% 7.6% 12.0% 22.1% 1.7% 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% -3.4% 4.8% 16.1% Plantation Plantation KLCI KLCI Construction Finance Finance Consumer product 26.3% 26.3% 0.8% 10.6% 14.6% -5.3% 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% -9.4% 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% -9.4% 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% -4.3% 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% -3.6% 1.3% 11.5% Construction Ind Prod Plantation Plantation Trade & services Construction 12.4% 17.2% 6.9% -10.7% 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 15th Dec 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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