PublicInvest Research

Author: PublicInvest   |   Latest post: Wed, 22 Jan 2020, 9:38 AM


PublicInvest Research Headlines - 22 Nov 2019

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US: Existing home sales rise more than expected in Oct. US home sales increased more than expected in Oct and house prices rose at the fastest pace in more than two years amid lower mortgage rates and a shortage of properties for sale. The National Association of Realtors said that existing home sales rose 1.9% to a seasonally adjusted annual rate of 5.46m units last month. Sept’s sales pace was downwardly revised to 5.36m units. The US Federal Reserve has cut interest rates three times this year, which has bolstered the housing market by lowering mortgage rates. (Reuters)

US: Leading economic index drops for third straight month in Oct. A report released by the Conference Board showed a modest decrease by its reading on leading US economic indicators in the month of Oct. The leading economic index edged down by 0.1% in Oct after dipping by 0.2% in both Sept and Aug. The decline was driven by weaknesses in new orders for manufacturing, average weekly hours, and unemployment insurance claims. The major difference is the softening in the labor market whereas conditions in manufacturing remain weak and show no signs of improvement yet. (RTT)

US: Weekly jobless claims unchanged at five-month high. The Labor Department released a report showing first-time claims for US unemployment benefits came in unchanged in the week ended Nov 16th. The initial jobless claims came in at 227,000, unchanged from the previous week's revised level. With the unchanged figure, jobless claims are hovering at their highest level since hitting 229,000 in the week ended June 22. Meanwhile, the Labor Department said the less volatile four-week moving average rose to 221,000, an increase of 3,500 from the previous week's revised average of 217,500. (RTT)

EU: OECD sees global growth at decade-low, blames governments' indecision. The global economy is growing at the slowest pace since the financial crisis as governments leave it to central banks to revive investment, the OECD said in an update of its forecasts. The world economy is projected to grow by a decade-low 2.9% this year and next, trimming its 2020 forecast from an estimate of 3.0% in Sept. Offering meager consolation, the Paris-based policy forum forecast growth would edge up to 3.0% in 2021, but only if a myriad of risks ranging from trade wars to an unexpectedly sharp Chinese slowdown is contained. (Reuters)

EU: ECB minutes reveal 'strong call' for unity among policymakers. The need for unity among Governing Council members was stressed during the final policy session chaired by Mario Draghi after the latest round of monetary stimulus measures led to a sharp divide in the rate-setting body, minutes of the October 23-24 meeting  showed. "Looking ahead, a strong call was made for unity of the Governing Council," the minutes, which the ECB calls "account", showed. In the October session, the ECB left its key interest rates, forward guidance, and stimulus measures unchanged. (RTT)

UK: UK budget deficit widens notably in Oct. The UK budget deficit widened more than expected in Oct, data from the Office for National Statistics showed. Public sector net borrowing excluding public sector banks, increased by GBP2.3bn from the last year to GBP11.2bn in Oct. The expected level was GBP9.3bn. Also, this was the highest Oct borrowing for five years. In the current financial YTD, borrowing was GBP46.3bn, which was GBP4.3bn more than in the same period last year. Further, data showed that public sector net debt excluding banks totaled GBP1,798.5bn or 80.4% of GDP at the end of Oct 2019. (RTT)

Hong Kong: Inflation lowest in 5 months. Hong Kong's CPI eased to the lowest level in five months in Oct, data from the Census and Statistics Department showed. The CPI rose 3.1% YoY in Oct, after a 3.2% increase in Sept. The latest inflation was the lowest since May, when prices rose 2.8%. Excluding the effects of all government's one-off relief measures, core inflation eased to 3.1% in Oct from 3.2% in the previous month. The smaller inflation was mainly due to the rise in private housing rentals and prices of fresh fruit. Looking ahead, modest global inflation and subdued economic conditions should help contain overall inflation. (RTT)

Japan: Overall consumer prices rise 0.2% on year in Oct. Overall consumer prices in Japan were up 0.2% on year in October, the Ministry of Internal Affairs and Communications said. That was unchanged from the Sept reading, although it was shy of estimates for a gain of 0.3%. Core consumer prices, which exclude volatile food prices, rose an annual 0.4%. That was in line with expectations and up from 0.3% in the previous month. On a monthly basis, overall inflation was flat and core CPI was up 0.2%. (RTT)

Japan: All industry activity rises in Sept. Japan's all industry activity rose in Sept, figures from the Ministry of Economy, Trade and Industry showed. The all industry activity index rose 1.5% MoM in Sept, after remaining unchanged in Aug. Among components, construction activity dropped 2.2% monthly in Sept, bigger than the 0.5% fall in Aug. Meanwhile, industrial production grew 1.7% in Sept, after a 1.2% decline in the preceding month. The tertiary industry activity rose 1.8% in Sept, following a 0.3% increase in the previous month. On a yearly basis, the all industry activity index gained 2.9% in Sept, in contrast to a 0.6% fall in the prior month. (RTT)

Indonesia: Bank Indonesia holds rate steady after four cuts; trims reserve requirements. Indonesia's central bank left the key interest rate unchanged after four consecutive cuts, but slashed the reserve requirement ratio for banks to ensure liquidity for the banking system, and thus boost lending to support economic growth. The Board of Governors of Bank Indonesia, decided to leave the 7-day reverse repo rate at 5%. Bank Indonesia reduced the reserve requirement ratio for banks by 50bp. The corresponding ratios for commercial banks and Shariah banks were thus lowered to 5.5% and 4% respectively. (RTT)


Hextar (Outperform, TP: RM0.95), Sime Darby Plantation (Neutral, TP: RM4.97): Hextar secures RM15.7m tender from Sime Darby Plantation. Hextar has secured tender from Sime Darby Plantation for the supply of agrochemicals worth RM15.73m for a year commencing from Jan 1 2020. Hextar Global said the agrochemicals supply is meant for Malaysia, Papua New Guinea and Solomon Islands. (Bernama)

Comment: We are positive on this development as it solidifies the Hextar’s short-term earnings prospects and is testament to its strong domestic market share of ~30%. Our forecasts are left unchanged, with this RM15.7m contract accounted for under our organic growth assumptions. Outperform call is reaffirmed an unchanged target price of RM0.95.

Ekovest: To buy land in Johor for RM1.05bn. Ekovest has proposed to buy 20 parcels of freehold development land in Johor Bahru for a total of RM1.05bn from Iskandar Waterfront Holdings SB (IWH). It said it has entered into two conditional agreements with IWH, via its wholly-owned unit Timur Terang SB. The first agreement is to acquire 17 parcels of freehold development land for RM869.7m, which will be satisfied through the issuance of irredeemable convertible preference shares (ICPS) worth RM849.9m, and a cash payment of RM19.8m. The second agreement is to buy three parcels of land for RM180.2m, which will be fully satisfied in cash. The cash portion of RM200m for the proposed acquisitions will be funded via internal funds, Ekovest added. (The Edge)

Sunway: 3Q net profit jumps 27% to RM183.4m. Sunway Bhd saw a 26.6% jump in its net profit to RM183.4m for the 3QFY19 from RM144.9m previously, mainly driven by higher contributions from property development, property investment, quarry and others segments. The group noted that contributions across most business segments had increased, except for its construction segment. (SunBiz)

MRCB: 3Q earnings hit by re-timing of LRT project and absence of divestment gain. Delay in the Light Rail Transit (LRT) 3 project and absence of one-off divestment gain have resulted in a sharp 87.3% drop in Malaysian Resources Corp’s (MRCB) net profit to RM2.5m for the 3QFY19 against RM19.8m a year ago. Quarterly revenue declined 43.8% to RM372.7m from RM663.75m in 3QFY18. (The Edge)

Petron: 3Q net profit falls on finished product-oil price differentials. Petron Malaysia Refining & Marketing saw a 59.8% decline in its net profit for the 3QFY19 to RM34.4m from RM85.5m in the previous corresponding quarter brought on by price differentials between finished products and Brent crude oil. Revenue also decreased 16% to RM2.7bn, from RM3.3bn previously, due to lower dated Brent prices. It said it had recorded a total sales volume of 8.8m barrels in 3Q19, compared with 9.1m barrels in 3Q18. (SunBiz)

Boustead Plantation: Sinks deeper into the red as 3Q losses expand 57% on-year. Boustead Plantations sank deeper into the red in its 3QFY19 with a net loss of RM34.3m, 57% more than the RM21.9m it reported a year ago, largely due to higher amortisation and finance costs. The weaker results came despite a 6% increase in revenue from a significant improvement in sales volume of palm oil and kernel, which had offset the decline in prices of these palm products. (The Edge)

Market Update

US markets posted a 3-day losing streak amid a lack of fresh leads from US-China negotiations. China is said to have invited US representatives to Beijing for further talks, though it is not known if the request has been accepted. Former FED Chair Janet Yellen said that risks of the US heading into a recession are starting to pile up, though she doesn’t think there would be one next year. All 3 key benchmarks pulled back 0.2%. European markets were also lower on concerns of the US-China ‘phase one’ trade deal being pushed back to 2020. A flash estimate by the European Commission showed consumer confidence inching higher, though doing little to help overnight market sentiment. UK’s FTSE 100 fell 0.3% as the German and French benchmarks both slipped 0.2%. Asian equities were lower earlier, being the first to react negatively to reports of US-China trade talk difficulties. A Chinese spokesman did tell reporters yesterday that Beijing will strive to reach an agreement with Washington, this coming against the backdrop of potentially higher tariffs on December 15. Japan’s Nikkei 225 fell 0.5% as Korea’s KOSPI slumped 1.4%. The Shanghai Composite and Hang Seng indices fell 0.3% and 1.5%. Ekovest is proposing to buy 20 parcels of freehold development land in Johor Bahru for a total of RM1.1bn from Iskandar Waterfront Holdings Sdn Bhd, expanding its land bank from 214 acres to about 305 acres. Teo Seng Capital has signed a memorandum of agreement (MoA) with soon-to be-listed Solarvest Holdings to install solar photovoltaic panels across its chicken farms and factories in Johor.

Source: PublicInvest Research - 22 Nov 2019

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