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PublicInvest Research

Author: PublicInvest   |   Latest post: Mon, 19 Apr 2021, 10:07 AM

 

Greatech Technology Berhad - More Exciting Times Ahead

Author: PublicInvest   |  Publish date: Mon, 19 Apr 2021, 10:07 AM


Our recent meeting with Greatech has further reinforced our positive view on the Group’s middle to longer-term prospects. New equipment for the substrate and optics industry that the Group have been developing since its IPO days in 2019 are currently near completion, with beta test expected to start soon and commercialisation to potentially begin in 2HCY21. Greatech has also been refining technologies that could improve the accuracy of its automated equipment, in an attempt to maintain its margins by building higher-end machines. On top of that, we are of the view that Greatech’s reputation as a production line and automated equipment maker for the electric vehicle (EV) battery space is boosted after securing its 4th EV client. We reiterate our Outperform call on Greatech, with an unchanged TP of RM6.80.

  • New technologies in the pipeline. Apart from actively building production lines for its photovoltaic (PV) and EV battery clients, Greatech has also been working on other technologies like submicron fineplacer, subpixel, laser galvo as well as active alignment. These technologies, when incorporated into Greatech’s single automated equipment, can help to improve the precision and accuracy of its equipment, allowing Greatech to build more high-end machines, in a bid to preserve its margins, considering that standard equipment generally fetch lower margins. We also highlight that placement accuracy has become an increasingly important and highly sought after function for equipment, not only limited to the semiconductor industry’s use, but in the automotive industry as well.
  • Substrate and optics. Greatech has also revealed more details on the automated equipment, Product T and Product A that the Group have been developing since 2019. We gather that Product T and Product A will be used in substrate and optics industry respectively, and the development has reached 90-95% completion currently. We expect beta testing for the equipment to begin soon, which should take c. 3 months to complete and expect commercialisation to start in 2H21.
  • New client in the EV space. Recall that Greatech has recently secured its fourth client in the EV space, via its US subsidiary. This marks its US subsidiary’s first purchase order received, since its incorporation 6 months ago. Although the contract value and client’s identity was not revealed, however, we gather that the new customer has been involved in the EV industry for c.8 years now. We also expect the contract value to be relatively lower than that of Lordstown’s, given that the contract is for the supply of battery cell testing equipment, instead of a full battery pack assembly line. Nevertheless, we are still positive on this development, as Greatech has continued to diversify its customer base and we believe this PO would also help boost Greatech’s recognition in the EV space. Note that equipment is expected to be delivered in 8 to 10 weeks’ time.
  • No major concern warranted for its Lordstown orders. Earlier in March, a short-selling firm, Hindenburg Research, has accused Lordstown of creating fictitious orderbook, raising concern on the potential default risk of Lordstown’s orders, totaling to c.RM250m for two battery pack assembly lines. We understand that c.RM80m has been collected as downpayment, while the remaining will be collected progressively in the coming months as Greatech deliver the production lines in stages. We understand that bulk of the equipment will be sent to Lordstown in July, while the remaining is targeted for delivery in September.
  • Expanding beyond Malaysia. The Group has been actively expanding outside of Malaysia, by setting up sales offices in various locations. Its new sales offices in India, Ireland and Switzerland will allow the Group to better capture opportunities in the medical device market and the sales offices are targeted to be ready by 3QFY21.
  • Searching for gems. Greatech is also exploring potential M&As, targeting medium-sized businesses, for the acquisition of technology and also to expand its customer base. We understand that three personnel in its overseas sales offices have been appointed to be on the lookout for potential M&A targets, primarily in the semiconductor, life science and also EV battery space.

Source: PublicInvest Research - 19 Apr 2021

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PublicInvest Research Headlines - 19 Apr 2021

Author: PublicInvest   |  Publish date: Mon, 19 Apr 2021, 10:05 AM


Economy

Global: Covid will leave deep scars in world economy even after recovery . Just as some patients recovering from Covid-19 suffer long-lasting symptoms, it’s becoming clear that the same will be true for the global economy once this year’s V-shaped rebound fades. While USD26trn worth of crisis support and the arrival of vaccines have fueled a faster recovery than many anticipated, the legacies of stunted education, the destruction of jobs, war-era levels of debt and widening inequalities between races, genders, generations and geographies will leave lasting scars, most of them in the poorest nations. (Bloomberg)

US: Consumer sentiment rises to one-year high in early April . US consumer sentiment increased to a one-year high in early April amid strengthening economic growth, though households worried about inflation heating up this year, according to a survey released. The University of Michigan said its preliminary consumer sentiment index rose to 86.5 in the first half of this month from a final reading of 84.9 in March. Economists polled by Reuters had forecast the index rising to 89.6. (Reuters)

US: Housing starts near 15-year high. US homebuilding surged to nearly a 15-year high in March, but soaring lumber prices amid supply constraints could limit builders' capacity to boost production and ease a shortage of homes that is threatening to slow housing market momentum. The sharp rebound reported by the Commerce Department added to robust retail sales in March in suggesting that the economy was roaring after a brief weather-related setback in Feb. (Reuters)

EU: Inflation rises as estimated . Eurozone consumer prices increased as initially estimated in March, final data from Eurostat showed. Inflation accelerated to 1.3% in March from 0.9% in Feb. This was the third consecutive rise in prices and matched flash estimate released on March 31. Meanwhile, core inflation that excludes energy, food, alcohol & tobacco, eased to 0.9% from 1.1% in Feb. (RTT)

EU: Italy trade surplus declines in Feb . Italy's trade surplus decreased in Feb, data from the statistical office Istat showed. The trade surplus fell to EUR4.75bn in Feb from EUR5.97bn in the same period last year. In January, the trade surplus was EUR 1.58bn. Exports declined 4.4% YoY in Feb, following a 8.5% fall in Jan. On an annual basis, imports fell 1.6% in Feb, following an 11.6% decrease in the preceding month. On a monthly basis, exports increased 0.3% and imports rose 1.4% in Feb. (RTT)

UK: Economy picks up steam as hiring restarts with lockdown end. The UK economy is building momentum, with real-time indicators suggesting consumers have started to splurge some of the cash they’ve saved now that the government has loosened lockdown rules. Restaurant bookings and job postings surged to the highest since the start of the coronavirus pandemic, while road traffic and the number of people traveling to workplaces grew in recent weeks, data from Bloomberg Economics and government statistics show. (Bloomberg)

China: Logs record growth in 1Q. China's economy registered record growth in the 1Q of 2021, largely due to the extremely low base of comparison as the pandemic struck the economy in the same period last year. GDP advanced 18.3% on a yearly basis in the 1Q, much faster than the 6.5% growth posted in the preceding quarter, data from the National Bureau of Statistics revealed. (RTT)

Markets

Central Global: Bags RM101m contract to upgrade water supply system in Sabah. Central Global (CGB) said it has secured a contract worth RM100.54m to upgrade the water supply system in Lahad Datu. It accepted a LoA from RYRT International SB today. The scope of works encompasses the supply of labour, materials, machinery and equipment relating to the upgrading of water supply infrastructure. (The Edge)

Bina Puri, Pestech: In RE collaboration. Bina Pura has collaborated with Pestech to explore the opportunity of providing renewable energy including roof-top solar power solutions and electric vehicles charging facility initiative programmes. It had inked an MoU with Pestech, an integrated electrical power technology company that offers solutions for high voltage (HV) and extra high voltage (EHV) electrical system. The collaboration is aligned with market green initiatives. (StarBiz)

Dynaciate: To venture into industrial and commercial warehousing sector. Dynaciate plans to venture into industrial and commercial warehousing which is touted to be one of the top performing sectors for 2021. Subsequent to that, it has come to a mutual agreement with MGudang SB to terminate a conditional SPA involving disposal of two parcels of contiguous freehold land together with a detached factory situated in Penang. (The Edge)

MAHB: 1Q21 passenger count down 76.8% to 5.9m. Malaysia Airports (MAHB) network of airports registered 5.9m passenger movements in 1Q21, down 76.8% YoY, due to the re-imposition of the MCO. Domestic passenger movements came in at 4.4m, down 68% YoY while international passenger movements were at 1.5m, down 87.3% YoY. The group's total aircraft movements decreased by 68% YoY to 75,789. (The Edge)

Magna Prima: Auditor flags material uncertainty as Group’s liabilities exceed assets by RM108m. Magna Prima’s independent auditor has raised a material uncertainty related to the property developer’s ability to continue as a going concern. Messrs HLB Ler Lum said the group’s and company’s current liabilities exceeded its current assets by RM108.37m and RM309.19m, respectively as FY20. It also noted that the group and the company incurred a net loss of RM152.20m and of RM17.78m respectively for FY20. (The Edge)

CapitaLand Trust: 1Q net property income shrinks on lower revenue. Capitaland Malaysia Mall Trust (CMMT) saw its net property income (NPI) for 1QFY21 drop 26.79% QoQ to RM24.92m. CMMT said its gross revenue came in 15.36% QoQ lower at RM56.66m, mainly due to lower gross rental income. The trust said the lower NPI and gross revenue was due to the second MCO that coincided with Chinese New Year, impacting shopper traffic and tenants’ business recovery. (The Edge)

Automotive (Neutral): Sales up 33% to 63,878 units in March. Vehicle sales in Malaysia rose 33% YoY to 63,878 units in March, the Malaysian Automotive Association (MAA) said. It said some car companies were rushing for deliveries last month as their financial year ended on March 31, 2021, as well as in preparation for new model launches. MAA said sales of passenger vehicles increased to 56,478 units in March 2021 from 18,974 in March 2020 and sales of commercial vehicles rose to 7,400 units, from 2,268 units previously. (StarBiz)

Market Update

The FBM KLCI might open higher today as gold prices hit a seven week high and global stocks scaled new records on Friday after strong US and Chinese economic data bolstered expectations of a solid global recovery from the coronavirus pandemic. Government stimulus, strong corporate earnings from US banks and in Europe, along with signs of economic recovery in countries leading the COVID-19 vaccination race have all helped push stock market indices to new heights this week. On Wall Street, the Dow Jones Industrial Average rose 0.48% and the S&P 500 gained 0.36%, both setting new highs. The Nasdaq Composite added 0.1% as declines in the information technology sector weighed. In Europe, the pan-regional STOXX 600 index closed up 0.9% at a new peak, while Germany's DAX gained 1.3% to hit an all-time high and the UK's FTSE 100 rose 0.5% to close at more than one-year highs.

Back home, the FBM KLCI closed up marginally, mirroring the uptrend in regional bourses, lifted mainly by persistent buying support for glove makers. At 5pm, the benchmark index edged up 0.01% or 13 points higher at 1,608.38 points, after moving between 1,600.30 points and 1,609.76 points. The market breadth was mixed with 516 gainers versus 501 losers, while 484 counters remained unchanged. In China, Shanghai Stock Exchange Composite Index rose 0.81%, Hong Kong’s Hang Seng Index added 0.61%. Elsewhere in region, Japan’s Nikkei 225 closed up 0.14%, South Korea’s Kospi advanced 0.13%, while Singapore's STI rose 0.53%.

Source: PublicInvest Research - 19 Apr 2021

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PublicInvest Research Headlines - 16 Apr 2021

Author: PublicInvest   |  Publish date: Fri, 16 Apr 2021, 9:35 AM


Economy

US: Business inventories rise solidly in February. US business inventories increased solidly in February, suggesting restocking could again contribute to economic growth in 1Q. Business inventories rose 0.5% after increasing 0.4% in January, the Commerce Department. February's gain was in line with economists' expectations. Inventories fell 2.4% on a YoY basis in February. Retail inventories were unchanged in February as estimated in an advance report published last month. That followed a - 0.3% decline in January. Motor vehicle inventories decreased fell 2.6% as previously reported. (Reuters)

US: Manufacturing output rebounds in March. Production at US factories rebounded in March amid strengthening domestic demand, with output of motor vehicles rising despite a global semiconductor chip shortage that has forced some automakers to cut production. Manufacturing production jumped 2.7% last month after declining 3.7% in February, the Federal Reserve said. Manufacturing production remains slightly below its pre-pandemic level. Economists polled by Reuters had forecast manufacturing output increasing 4.0% in March. (Reuters)

US: Weekly jobless claims tumble much more than expected. A report released by the Labor Department showed first-time claims for US unemployment benefits pulled back by much more than anticipated in the week ended April 10th. The Labor Department said initial jobless claims tumbled to 576k, a decrease of 193k from the previous week's revised level of 769k . Economists had expected jobless claims to decline to 700k from the 744k originally reported for the previous week. (RTT)

EU: Germany consumer prices rise most in more than a year. Germany's consumer prices increased at the fastest rate in more than a year in March, final data from Destatis showed. Consumer prices grew 1.7% YoY in March, in line with preliminary estimate, following a 1.3% rise in February. A similar higher rate was last reported in February 2020. Consumer prices increased for the third month in a row after the temporary reduction of the value added tax rates had ended. Prices of goods advanced 1.9% and that of services gained 1.6% in March. Food prices were up 1.6% and energy prices advanced 4.8% . Excluding energy, inflation was 1.4% in March. At the same time, harmonized inflation based on the EU measure climbed to 2% in March from 1.6% in February. (RTT)

UK: Demand for secured lending to rise in 2Q – BoE. British lenders expect demand for secured lending as well as the availability of secured credit to households to increase in the next three months to end-May, the Credit Conditions Survey results from the Bank of England (BoE) showed . The availability of secured credit to households increased in three months to end-February, while demand for secured lending for both house purchase and remortgaging decreased in 1Q . Lenders reported that the availability of unsecured credit to households decreased slightly in 1Q, but was expected to increase over the next quarter. At the same time, demand for unsecured lending was unchanged in 1Q, but was expected to increase in the 2Q. (RTT)

Japan: Manufacturers’ mood hits 2-year high on chip demand. Confidence among Japanese manufacturers rose to a more than two year high in April, as strong demand in the electronics market and favourable exchange rate conditions boosted prospects for exporters, a Reuters poll showed. Manufacturers in the service sector were also slightly less pessimistic than the previous month, according to the Reuters Tankan poll . But manufacturers highlighted uncertainty about the global economic outlook and cited problems with sourcing materials for production, in a sign Japan’s recovery from the coronavirus crisis remains patchy. Many companies are reluctant to invest amid worries over a fourth wave of COVID-19 cases. “The semiconductor market is recovering, but on the other hand conditions for acquiring materials are tight due to a rapid rise (in demand),” a manager at a machinery maker said. (Reuters)

India: Wholesale price inflation rises in March. India's wholesale prices rose in March, data from the Ministry of Commerce & Industry showed. The wholesale price index increased 7.39% YoY in March, following a 4.17% rise in February. Economists had expected a 5.9% rise. The primary articles price index grew 6.4% annually in March, following a 1.82% increase in the previous month. Food prices rose to 5.28% in March, following a 3.31% growth in the previous month. Fuel and power prices gained 10.25% in March, following a 0.58% rise in the prior month. Prices of manufactured products grew 7.34% in March, following a 5.81% gain in the previous month. The final wholesale prices rose 2.51% in January. (RTT)

Indonesia: Trade surplus increases in March. Indonesia's trade surplus increased in March, figures from Statistics Indonesia showed. The trade surplus rose rose to USD1.56bn in March from USD715.7m a year ago. Economists had expected a surplus of USD1.64bn. In February, the trade surplus was USD1.991bn. Exports grew 30.47% YoY in March. Economists had expected a rise of 11.74% . Imports rose 25.73% annually in March. Economists had forecast an increase of 6.0% . On a MoM basis, exports increased 20.31% and imports gained 26.55% in March. (RTT)

Markets

UEM Edgenta: Faces lawsuit over alleged failure to complete MRT2 sub-contract. UEM Edgenta is being sued for allegedly failing to complete a RM87m sub-contract under the MRT2 project. The suit was filed in the High Court by Ahmad Zaki Resources which had awarded the sub-contract in 2016. It involves the relocation of telecommunication works to facilitate the construction of a viaduct guideway from Persiaran Dagang in Bandar Sri Damansara to Jinjang. (The Edge)

Malayan Cement: To raise RM227m via private placement to repay debts and fund working capital . Malayan Cement plans to raise RM226.95m via a private placement to be used for working capital and debt repayment. The exercise involves the issuance of 85m new shares, or 10% of its share capital of 849.7m shares, to third party investors. The proceeds will be used for working capital requirements. (The Edge)

Paramount Corp: Invests into P2P financing platform. Paramount Corp is investing in a peer-to-peer (P2P) financing platform by acquiring a 30% stake in Omegaxis SB for RM13.7m, which the group sees as its entry point into the fintech sector. Omegaxis is a special purpose vehicle set up to facilitate Paramount’s proposed investment in P2P financing platforms, with the 70% in the vehicle held by P2P Venture. (The Edge)

UMW Holdings: 1Q automotive sales jump 35% to 74,911 units. UMW Holdings’ automotive sales jumped 35% to 74,911 units in the 1Q2021 from 55,560 units recorded a year ago. This was mainly due to new model introductions from both UMW Toyota Motor SB and Perusahaan Otomobil Kedua SB, as well as the sales tax exemption. UMW Toyota saw sales surging 60.6% YoY in the first three months to 17,000. (Business Times)

Transocean Holdings: To raise RM3m via private placement for logistics services segment capex. Transocean Holdings plans to raise RM3.12m via a private placement of 4.1m new shares, equivalent to 10% of its issued share capital to fund the capital expenditure of its logistics services segment. The shares will be issued at an indicative price of 76 sen. The money raised will be used to purchase motor vehicles. (The Edge)

WZ Satu: Secures contract worth RM243m. WZ Satu has secured a contract worth RM243.44m for the provision of engineering, procurement, construction, and commissioning of effluent management at source project. It has accepted the letter of award for the contract from Malaysia Refining Company SB. The 27-month contract is targeted to be completed by June 30, 2023. (The Edge)

Fajarbaru Builder: Plans rights issue with free warrants to raise up to RM37.4m. Fajarbaru Builder Group has proposed to undertake a rights issue with free warrants to raise up to RM37.39m. The rights issue of up to 373.88 million shares will be on the basis of one rights share for every one existing share held. (The Edge)

LPI Capital: Posts higher net profit of RM82.31m in 1Q. LPI Capital posted a higher net profit of RM82.31m for the 1Q ended March 31, 2021 from RM77.92m a year ago. Revenue improved 9.1% to RM440.79m mainly driven by growth in gross earned premium of 8.2% or RM30m from its general insurance segment. EPS rose to 20.66sen from 19.56sen before. (Bernama)

Market Update

The FBM KLCI might open higher today after global stock markets extended a five-day run of fresh highs on Thursday, fueled by upbeat earnings and strong US economic data that herald a solid recovery ahead, while Russian markets tumbled at the prospect of the harshest US sanctions in years. On Wall Street, the Dow Jones Industrial Average rose 0.9% and the S&P 500 advanced 1.11%. The Nasdaq Composite added 1.31%. US retail sales rebounded 9.8% in March, the largest increase since May 2020, in a gain that pushed the level of sales 17.1% above its pre-pandemic level to a record high, the Commerce Department said. The pan-European STOXX 600 index rose 0.5% in its third session of gains, with miners jumping 1.5%. The UK’s commodity-heavy FTSE 100 rose 0.6% to its highest level since February 2020 as a surge in metals prices lifted shares of companies such as Rio Tinto, Anglo American and BHP.

Back home, the FBM KLCI finished up 0.62% despite pervasive negative sentiment, while the Healthcare Index continued to rise, as growing cases of Covid-19 globally fuelled buying of stocks in glove manufacturers. At 5pm, the benchmark index closed at its day’s high of 1,608.25 points, up by 9.97 points from yesterday's closing of 1,598.78 points. In China, Hong Kong’s Hang Seng Index fell 0.37% while the Shanghai Stock Exchange Composite Index dropped 0.52%. Japan's Nikkei pared early gains to finish 0.07% higher.

Source: PublicInvest Research - 16 Apr 2021

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Technical Buy - KHJB (0210)

Author: PublicInvest   |  Publish date: Fri, 16 Apr 2021, 9:32 AM


  • Target Price: RM0.280, RM0.300
  • Last closing price: RM0.270
  • Potential return: 3.7%, 11.1%
  • Support: RM0.265
  • Stop Loss: RM0.250

Possible for sideways breakout. KHJB is staging a potential breakout from its sideways channel. Corresponding RSI and MACD indicators remain healthy while undergoing congestion phase, with anticipation of continuous improvement in both momentum and trend in the near term. Should immediate resistance level of RM0.280 be broken with renewed buying interest, it may continue to lift price higher to subsequent resistance level of RM0.300.

However, failure to hold on to support level of RM0.265 may indicate weakness in the share price and hence, a cut-loss signal.

Source: PublicInvest Research - 16 Apr 2021

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Technical Buy - NOVAMSC (0026)

Author: PublicInvest   |  Publish date: Fri, 16 Apr 2021, 9:32 AM


  • Target Price: RM0.115, RM0.125
  • Last closing price: RM0.105
  • Potential return: 9.5%, 19.0%
  • Support: RM0.100
  • Stop Loss: RM0.090

Possible for further recovery. NOVAMSC is staging a potential recovery from its recent pullback. Corresponding RSI and MACD indicators remain healthy while trending sideways, with anticipation of continuous improvement in both momentum and trend in the near term. Should immediate resistance level of RM0.115 be broken with renewed buying interest, it may continue to lift price higher to subsequent resistance level of RM0.125.

However, failure to hold on to support level of RM0.100 may indicate weakness in the share price and hence, a cut-loss signal.

Source: PublicInvest Research - 16 Apr 2021

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1Q21 Forex Reserves - Bright Prospect for the Year

Author: PublicInvest   |  Publish date: Thu, 15 Apr 2021, 9:21 AM


Overview. Bank Negara Malaysia’s (BNM) 1Q21 foreign exchange reserves (FX reserves) jumped by USD6.9bn YoY to end at USD108.6bn, a rise that is consistent with regional peers. FX reserves in Ringgit terms, in the meantime, increased by almost RM11.0bn to end at RM451.0bn, a multi-year high thanks to the rebound in trade and capital markets performance. FX reserves at the end of 1Q21 is sufficient to finance 8.8 months of retained imports (RI) and 1.2x of short-term external debt (ST debt), an improvement against the previous quarter (4Q20 RI: 8.6 months; ST debt: 1.2x) and a year ago (1Q20 RI: 7.7 months; ST debt: 1.1x).

Malaysia’s FX reserves position is resilient and comfortably above the international adequacy standards which is able to offset against shocks and contagion effects. Its steady position will also underpin macroeconomic and financial system stability especially during volatile capital and currency market conditions. The bright prospect ahead following the receding threat of the global COVID-19 pandemic following the rapid vaccination drive that will gather in speed in the 2H will underpin further rebounds in our FX reserves position. Our FX reserves position will be shored-up by the projected turnaround in trade activities across ASEAN amid full economic openings post COVID-19 lockdown and also a rise in the risk premium of major economies currencies (USD, Yen) no thanks to the strong COVID-19 headwinds. Better handling of the COVID-19 pandemic by now also suggests uninterrupted economic activities amid ASEAN authorities opting for more targeted containment measures and therefore, a lesser impact on output.

The YoY jump in Malaysia’s 1Q21 FX reserves is consistent with regional trends, led by Singapore (+USD102.8bn), Thailand (+USD19.0bn) and Indonesia (+USD22.7bn). Assessment on Philippines is not possible as its FX figures are not up-to-date. The strong jump in Singapore’s FX reserves were driven by the acceleration in Singapore’s Dollar (SGD) during the quarter (1Q21: +5.6%). Without the central bank’s intervention, Singapore’s competitiveness may have been hurt especially when its trade was about to recover from the strong headwinds of COVID-19. This underpinned the Monetary Authority of Singapore’s (MAS) steady intervention, leading to a sharp increase in Singapore’s FX reserves level. Singapore’s FX reserves position were also boosted by a steady trade surplus thanks to a full economic opening since last year (cumulative February: SDG11.8bn).

Malaysia 1Q21 FX Reserve Analysis. The rise in 1Q21’s FX reserves was supported by encouraging trade surplus which remained strong to-date (YTD 2021: RM34.4bn; +43.4% YoY). This was offset however by sustained foreign selling in the equity market though the selling pressure has eased considerably against a year ago (1Q21: -RM1.7bn; 1Q20: -RM7.6bn). It is important to note that the selling pressure by foreign investors has slowed down markedly in 1Q especially in March (-RM9mn), which could be a cue for their return soon especially when Malaysia is on track to reach COVID-19 herd immunity by year-end and therefore, a potential economic rebound. The month of March marked twenty one straight months of foreign outflow in the equity market however no thanks to the headwinds caused by US-China trade tensions and the COVID-19 pandemic.

Foreign investor sentiment in the debt market improved further however (1Q21: RM239.7bn, 1Q20: RM187.8bn) which pushed foreign holdings to jump to 14.5% in 1Q21 (1Q20: +12.3%). On a net basis, foreign investors puchased RM16.7bn of our debt instruments in 1Q21, a significant turnaround against an outflow of RM16.8bn a year ago.

Foreign holdings of Malaysian Government Securities (MGS) increased to 40.8% in 1Q21 (1Q20: 36.8%) with foreigners purchasing significant amounts of MGS during the quarter (1Q21: +RM7.2bn; 1Q20: -RM16.2bn). Foreign holdings in private corporate bonds decreased marginally by RM37mn YoY to end at RM6.4bn though it jumped convincingly for the Sukuks (+RM1.1bn, RM7.3bn).

1Q21 Currency Analysis. Ringgit was traded at an average of RM4.145 per Dollar in 1Q21, a 4.08% rise on a YoY basis. This is consistent with regional trends though a sharper increase was seen for Indonesia’s Rupiah (+10.9%) followed by the Singapore Dollar (+5.6%), Thailand’s Baht (+4.5%) and the Philippines’s Peso (+4.2%). Advancement in ASEAN currencies is expected to continue in the immediate term driven by the bright prospects of ASEAN economies especially its trade which is projected to rebound further in the near term. An effective management and handling of the COVID-19 pandemic which underpins its full economic openings will also keep ASEAN in the radar of investors. Its rise could be interrupted however by the start of US-China 2nd trade talks which could begin in the 2H. Uncertainty of the outcome may push ASEAN currencies risk premium higher, potentially weighing on its recovery.

Outlook. Malaysia’s FX reserves position could improve further thanks to improving global sentiment following rapid COVID-19 vaccination drive that will gather in speed in the 2H. This will be underpinned by full economic openings and sustained recoveries in capital markets and trade. Though FX reserves may be subject to some volatility in the 1H amid the still-brewing headwinds of COVID-19, this is expected to improve steadily in the 2H especially when Malaysia is expected to achieve COVID-19 general immunity by then. We remain cautious however due to the impending start of US-China 2nd trade talk which could begin in the 2H. This may put pressure on trade and Ringgit’s risk premium and therefore, our FX reserves position.

Source: PublicInvest Research - 15 Apr 2021

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PublicInvest Research Headlines - 15 Apr 2021

Author: PublicInvest   |  Publish date: Thu, 15 Apr 2021, 9:19 AM


Economy

US: Import prices show biggest three-month jump in nearly a decade. Import prices in the US showed another notable increase in the month of March, according to a report released by the Labor Department . The report said import prices surged up by 1.2% in March after jumping by 1.3 in February. Economists had expected import prices to climb by 1.0% . The Labor Department noted import prices spiked by 4.1% from December to March, reflecting the largest three-month increase since May of 2011. Prices for fuel imports continued to lead the way higher, soaring by 6.3% in March after skyrocketing by 11.7% in February. Excluding pries for fuel imports, import prices climbed by 0.8% in March after rising by 0.5%in the previous month. (RTT)

US: Pace of economic recovery accelerates, Fed says. The US economic recovery accelerated to a moderate pace from late February to early April as consumers, buoyed by increased Covid-19 vaccinations and strong fiscal support, opened their wallets to spend more on travel and other items, the Federal Reserve said. The labor market, which was decimated by the coronavirus pandemic, also improved as more people returned to work, with the pace of hiring picking up the most in the manufacturing, construction, and leisure and hospitality sectors. (Reuters)

EU: Industrial production falls less than expected. Eurozone industrial production declined less than expected in February, data from Eurostat revealed. Industrial production decreased 1.0% MoM in February, reversing a 0.8% growth in January. Economists had expected a 1.1% fall. Data showed that energy output decreased 1.2% monthly in February and capital goods output fell 1.9% . Production of intermediate goods declined 0.7%. Durable and non durable consumer goods output fell 1.1% and 0.1%, respectively. (RTT)

EU: Germany’s economic institute cut GDP 2021 growth forecast to 3.7% - sources. Germany’s economic institutes will cut their joint 2021 growth forecast to 3.7% from 4.7% previously due to a longer than expected Covid-19 lockdown, two people familiar with the decision told . The institutes will lift their GDP growth estimate for 2022 to 3.9% from 2.7% previously as private consumption is expected to boost overall output, the sources added. (Reuters)

UK: Labor productivity declines in 4Q. UK labor productivity declined in 4Q after rebounding a quarter ago, the Office for National Statistics showed. Labor productivity, as measured by output per hour, decreased 0.7% annually, in contrast to a 4% rise in the 3Q . At the same time, output per worker fell by 5.9% compared with the same quarter a year ago, reflecting workers remaining employed through the Coronavirus Job Retention Scheme. In 2020, output per hour worked grew 0.4% compared with 2019, although there was substantial volatility during the year. (RTT)

South Korea: Jobless rate falls in March. South Korea's unemployment rate declined in March, data from Statistics Korea showed. The jobless rate fell to a seasonally adjusted 3.9% in March from 4.0% in February. In the same month last year, the unemployment rate was 4.2%. On an unadjusted basis, the unemployment rate decreased to 4.3% in March from 4.9% in the previous month. The number of unemployed decreased to 1.215m in March from 1.353m in the preceding month. Compared to a year ago, the figure rose by 36k persons. (RTT)

Singapore: GDP grows 0.2% in 1Q21, MTI advance estimates. The Singapore economy grew by 0.2% on a YoY basis in 1Q21, a turnaround from the 2.4% contraction in the previous quarter. On a QoQ seasonally-adjusted basis, the economy expanded by 2.0%, extending the 3.8% expansion in the preceding quarter, according to advance estimates by the republic’s Ministry of Trade and Industry (MTI). The advance GDP estimates for 1Q21 were computed largely from data in the first two months of the quarter. (StarBiz)

Singapore: Central bank maintains monetary policy. Singapore central bank retained its monetary policy stance as the policymakers viewed it appropriate amid weak outlook for core inflation and continuing economic recovery. The Monetary Authority of Singapore decided to maintain a 0% per annum rate of appreciation of the Nominal Effective Exchange Rate. (RTT)

Markets

Homeritz (Outperform, TP: RM0.77): Temporary stoppage for its manufacturing facilities. Homeritz is implementing a temporary stoppage for 7 days for one of its manufacturing facilities, Factory D with guidance from the KKM, from 13th -19th April 2021 as the Company had discovered several positive cases of Covid-19 infection among its factory workers located at Factory D. (Bursa Malaysia)

Comments: We understand that Factory D is mainly involved in the manufacturing of dining chair frames. While the 1-week closure is expected to result in a delay in shipments, we believe that it will not have a huge impact on earnings as the management is currently in discussions with its customers to reschedule its delivery dates. However, should the situation escalates whereby operations were to close for 2-4 weeks, we estimate that Homeritz’s earnings would fall by c.4-8%. Our Outperform call and TP of RM0.77 is maintained.

Barakah Offshore: To raise RM14.3m via private placement for working capital. Barakah Offshore Petroleum has proposed to undertake a private placement of up to 167.16m new shares, equivalent to 20% of its existing issued shares, to raise RM14.29m. The shares will be placed to independent third-party investors to be identified soon at an issue price to be determined later. The issue price of the placement shares would represent a discount of 10% to the 5-day VWAP. (The Edge)

Sarawak Consolidated: Buys loss-making Selangor construction firm to expand biz in Peninsular Malaysia. Sarawak Consolidated Industries (SCIB) is acquiring a lossmaking construction firm in Seri Kembangan, Selangor for RM4.98m, to explore business expansion plans in Peninsular Malaysia. The group inked a conditional share sale agreement with three individuals, Noorazylawati Abdul Bakar, Mohd Khairil Mohd Hatta and Ibrahim Mohd Noor to acquire Kencana Precast Concrete SB (KPCSB). (The Edge)

Widad: To expand facilities management business into defence industry via RM35m acquisition. Widad Group has proposed the acquisition of a firm for RM35m cash, which will expand the group's integrated facilities management service offerings into the defense industry. Widad has signed a head of agreement to acquire Palm Shore Holdings SB (PSHSB) from Nawawi Tamby and Mohd Ghauth Mohd Yusoff, who hold 70% and 30% stakes in the firm. (The Edge)

Teladan Setia: Expands landbank in Melaka. Teladan Setia Group is buying 520 acres of land in Jasin, Melaka for RM95.1m, increasing its total landbank 738.9 acres. It is planning to developed landed residential properties priced between RM200,000 to RM400,000 each in Jasin. Based on recent market studies, it believes that landed homes remain the property of choice among the local Melaka population for the foreseeable future. (StarBiz)

Pansar: Completes its acquisition of Perbena Emas. Pansar has completed the acquisition of Perbena Emas SB (PESB), marking the group’s diversification into the construction industry. The acquisition has increased the group’s total secured orderbook value to RM2.2bn. To-date, PESB’s orderbook totalled to RM2bn, comprising of infrastructure projects such as UNIMAS Teaching Hospital in Sarawak totaling RM485.99m. (StarBiz)

Market Update

The FBM KLCI might open flat today as major global stock indices scaled new peaks on Wednesday before shedding gains that anticipated a strong recovery from the coronavirus pandemic, while the dollar dipped to three-week lows as Treasury yields held below recent highs. High-flying growth stocks declined on Wall Street, sending the benchmark S&P 500 and Nasdaq lower, while underpriced value stocks rose, lifting the Dow to a new record. US import prices increased more than expected in March, fueled by higher costs for petroleum products and tight supply chains in the latest data to show inflation heating up as economies reopen. MSCI’s gauge of stocks across the globe shed 0.02% after hitting a new peak, as did the benchmark S&P 500 before it retreated, closing down 0.41%. The tech-heavy Nasdaq Composite dropped 0.99% and the Dow Jones Industrial Average added 0.16%. In Europe, upbeat earnings from German software firm SAP and French luxury goods maker LVMH helped the pan-regional STOXX 600 index close up slightly to just below a record high set last week. Germany’s DAX index ended down 0.2%.

Back home, the FBM KLCI reversed earlier losses to close marginally higher on late buying support in selected index-linked counters. The benchmark index however ended below the 1,600 mark at 1,598.28, for a 0.57-point or 0.04% gain. Elsewhere in region, Japan's Nikkei 225 slid 0.44%, while Seoul's Kospi rose 0.42%, Hong Kong’s Hang Seng gained 1.42% and Shanghai's Composite Index closed up 0.6%.

Source: PublicInvest Research - 15 Apr 2021

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Technical Buy - PENERGY (5133)

Author: PublicInvest   |  Publish date: Thu, 15 Apr 2021, 9:16 AM


  • Target Price: RM1.06, RM1.15
  • Last closing price: RM0.985
  • Potential return: 7.6%, 16.7%
  • Support: RM0.950
  • Stop Loss: RM0.895

Possible for sideways breakout. PENERGY is staging a potential breakout from its sideways channel. Corresponding RSI and MACD indicators remain healthy while trending sideways, with anticipation of continuous improvement in both momentum and trend in the near term. Should immediate resistance level of RM1.06 be broken with renewed buying interest, it may continue to lift price higher to subsequent resistance level of RM1.15.

However, failure to hold on to support level of RM0.950 may indicate weakness in the share price and hence, a cut-loss signal.

Source: PublicInvest Research - 15 Apr 2021

Labels: PENERGY
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Technical Buy - PESTECH (5219)

Author: PublicInvest   |  Publish date: Thu, 15 Apr 2021, 9:16 AM


  • Target Price: RM1.28, RM1.36
  • Last closing price: RM1.22
  • Potential return: 4.9%, 11.4%
  • Support: RM1.18
  • Stop Loss: RM1.12

Possible for sideways breakout. PESTECH is staging a potential breakout from its sideways channel. Corresponding RSI and MACD indicators remain healthy while trending sideways, with anticipation of continuous improvement in both momentum and trend in the near term. Should immediate resistance level of RM1.28 be broken with renewed buying interest, it may continue to lift price higher to subsequent resistance level of RM1.36.

However, failure to hold on to support level of RM1.18 may indicate weakness in the share price and hence, a cut-loss signal.

Source: PublicInvest Research - 15 Apr 2021

Labels: PESTECH
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PublicInvest Research Headlines - 14 Apr 2021

Author: PublicInvest   |  Publish date: Wed, 14 Apr 2021, 9:49 AM


Economy

US: Consumer prices post biggest gain in 8.5 years as economy reopens. US consumer prices rose by the most in more than 8.5 years in March as increased vaccinations and massive fiscal stimulus unleashed pent-up demand, kicking off what most economists expect will be a brief period of higher inflation. The report from the Labor Department also showed a firming in underlying prices last month as the broader reopening of the economy bumps against bottlenecks in the supply chain, capacity constraints and higher commodity prices. Federal Reserve Chair Jerome Powell and many economists view higher inflation as transitory, with supply chains expected to adapt and become more efficient. The supply constraints mostly reflect a shift in demand towards goods and away from services during the pandemic, now in its second year. The CPI jumped 0.6% last month, the largest gain since August 2012, after rising 0.4% in February. A 9.1% surge in gasoline prices accounted for nearly half of the increase in the CPI. Gasoline prices rose 6.4% in February. (Reuters)

EU: German ZEW economic sentiment falls unexpectedly in April. German economic sentiment deteriorated unexpectedly in April amid the third wave of infections, survey results from the ZEW - Leibniz Centre for European Economic Research showed. The ZEW Indicator of Economic Sentiment fell 5.9 points to 70.7 points from 76.6 in March, while the score was forecast to climb to 79.0. This was the first time that the indicator has experienced a drop since November 2020. However, expectations are still at a very high level, the agency said. Meanwhile, the assessment of the economic situation advanced 12.2 points to minus 48.8 points. The expected  reading was minus 53.0. The financial market experts are somewhat less euphoric than in the previous month, ZEW President Achim Wambach, said. (RTT)

EU: German wholesale prices rise most since 2017. Germany's wholesale price rose for a second straight month and at the fastest pace in four years in March, largely led by higher prices for petroleum products. The wholesale price index rose 4.4% YoY, which was the fastest pace since March 2017, when they increased 4.8%, data from Destatis showed. The wholesale prices grew 2.3% in February and were unchanged in January. Prices for petroleum product jumped 13.7% from a year ago. Strong price increases were also seen for wholesale trade for scrap and residual materials, for ores, metals and semi-finished metal products, and for grain, raw tobacco, seeds and animal feed. Meanwhile, live animals, meat and meat products as well as data processing equipment, peripheral devices and software were cheaper. (RTT)

UK: Economy recovers in February. The UK economy recovered in February despite the coronavirus lockdown restrictions being in place, data from the Office for National Statistics revealed. GDP grew 0.4% monthly, following a revised 2.2% fall in January. Nonetheless, this was slower than the expected growth of 0.6% . February's GDP was 7.8% below the levels seen in February 2020, data showed. In the three months to February, GDP shrank 1.6%, which was worse than a revised 1.4% contraction in the three months to January. The small rise in GDP does suggest that January was probably the low point of the year, Capital Economics said. Vaccinations and the reopening of the economy will combine to trigger a rapid rebound in activity over the next few months, the economist added. (RTT)

China: Exports rise less than expected in March. China's exports logged a double-digit growth in March but at a slower than expected pace, while imports growth exceeded expectations amid rising commodity prices, data from the customs office revealed. Exports increased 30.6% YoY in March, slower than the forecast of 35.5%. The pace of expansion also eased sharply from 60.6% seen in January to February period largely lower base for comparison. Exports to the US advanced 53.3% from last year. Meanwhile, imports advanced 38.1% annually, much faster than the expected growth of 23.3% . Consequently, the trade surplus fell to USD13.8bn and well below economists' expectations of USD52.05bn. Import volume growth is likely to slow as policy support is gradually withdrawn throughout this year and new restrictions to limit the flow of credit to the property sector weigh on investment, Capital Economics said. (RTT)

South Korea: Export prices rise 3.3% MoM in March. Export prices in South Korea were up 3.3% MoM in March, the Bank of Korea said - slowing from 3.5% in February. On a yearly basis, export prices advanced 5.6% after rising just 0.6% in the previous month. Prices for agricultural, forestry and marine product exports rose 0.4% MoM and dropped 8.3% YoY - while prices for manufacturing products gained 3.3% MoM and 5.7% YoY. Import prices were up 3.4% MoM and 9.0% YoY. (RTT) 

Markets

Sapura Energy (Trading Sell, RM0.10): SapuraOMV's inks final investment decision agreement for Jerun gas field. SapuraOMV Upstream has inked a final investment decision (FID) for the Jerun gas field development in Sarawak with its partners, paving the way for the full execution of the project. The Jerun gas field development is the latest and largest operated project and to produce some 500 MMscfd gas. (The Edge)

MMHE: Bags SapuraOMV Jerun contract . Malaysia Marine and Heavy Engineering Holdings (MMHE) has secured a contract from SapuraOMV Upstream (Sarawak) Inc. The contract is to provide the engineering, procurement, construction, transportation & installation, and hook-up & commissioning services (EPCIC) for the SK408W Jerun Development Project, offshore Sarawak. (StarBiz)

UWC: Awarded a 5G product from a key customer. UWC has received a 5G product from a key customer, aptly known as Customer B, to develop and manufacture the world's highest frequency 5G over-the-air (OTA) chamber (5G tester). The 5G tester will provide a measurement environment for characterising wireless and antenna system performance of devices at millimetre-wave frequencies. (Business Times)

LYC Healthcare: Forms subsidiary to expand confinement centre ops in Johor. LYC Healthcare has incorporated a 51%- owned subsidiary to facilitate the expansion of its confinement centre operations in Johor with Singapore O&G Ltd (SOG). LYC intended principal activities were operating confinement centres, mother and child care centres and related services. (The Edge)

BIMB: Confirms placing out 222m shares at RM3.58 apiece, says placement oversubscribed. BIMB Holdings has set the issue price of its private placement shares at RM3.58 apiece, which will raise RM795.55m for the banking group. The placement has been oversubscribed. BIMB said its joint placement agents BIMB Securities SB and Maybank Investment Bank have completed the bookbuilding exercise. (The Edge)

TFP Solutions: Inks dealer agreement with Multimax Creation for fintech solutions. TFP Solutions recently signed a dealer agreement with Multimax Creations SB (MCSB) for the supply of a suite of fintech services, including an e-Wages system to pay foreign workers' salary electronically. Under the signed DA, MSSB will provide a cashless ecosystem to Euronipa Consortium Agropreneur Project. (Business Times)

Jade Marvel: Proposes private placement, one-to-two share split. Jade Marvel Group has proposed to undertake a private placement of not more than 10% of its issued share capital to raise up to RM13.18m. The shares will be issued to third party investors who will be identified later. The issue price of the placement shares will also be determined later. (The Edge)

ConnectCounty: Plans diversification into construction business. ConnectCounty Holdings has proposed to diversify its business to include the undertaking of construction, project management and related activities. It is looking for opportunities that will broaden its earnings base, while reducing its operational costs in order to improve its financial performance. (The Edge)

Market Update

The FBM KLCI might open higher today as a gauge of global shares rose to record highs on Tuesday, led by surging technology-related stocks, as Treasury bond yields eased after US consumer price data for March showed the pace of inflation was not rising wildly. The consumer price index rose 0.6%, the biggest gain since August 2012, as increased vaccinations and fiscal stimulus unleashed pent-up demand. But the data is unlikely to change Federal Reserve Chair Jerome Powell’s view that higher inflation in coming months will be transitory. MSCI’s gauge of equity performance in 50 countries gained 0.38% to an all-time peak, while the pan-European STOXX 600 index closed up 0.12%. On Wall Street, the S&P 500 gained 0.32% as it also set a new intra-day record, while the Nasdaq Composite added 0.92%. The Dow Jones Industrial Average fell 0.22%.

Back home, the FBM KLCI fell 10.71 points or 0.67%, no thanks to the stubbornly high daily new Covid-19 cases in the country. The benchmark index closed at 1,597.71 points after it had been at above 1,600 level for four trading days. Elsewhere in region, Japan’s Nikkei 225 increased 0.72%, while Hong Kong’s Hang Seng was up 0.15%, and South Korea's Kospi grew 1.07%.

Source: PublicInvest Research - 14 Apr 2021

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