PublicInvest Research Headlines - 25 Mar 2016

Economy

US: Consumer comfort declines to match low for this year. Consumer confidence in the US fell last week to match the lowest level this year as Americans grew more pessimistic about the economy and the buying climate. The Bloomberg Consumer Comfort Index slipped to 43.6 in the period ended March 20 from 44.3 the prior week. The measures tracking current views of the economy and the buying climate both dropped to the lowest level since mid-Dec, while perceptions of personal finances rose to a five-month high. (Bloomberg)

US: Atlanta Fed downgrades 1Q GDP view to 1.4%. The US economy is on track to grow 1.4% in the 1Q following disappointing data on durables goods orders and home resales, the Atlanta Federal Reserve's GDPNow forecast model showed. That pace was weaker than the regional Fed's prior estimate of 1.9% on March 19, the Atlanta Fed said. (Reuters)

US: Jobless claims climbed less than forecast last week. Filings for US unemployment benefits last week rose less than economists forecast as the number of dismissals stayed consistent with a firm labor market. Initial jobless claims increased by 6,000 to 265,000 in the period ended March 19, a Labor Department report showed. (Bloomberg)

US: Orders for durable goods decline in broad-based slowdown. Orders for durable goods fell in Feb for the third time in four months, reflecting a broad-based slowdown that underscores lingering softness in US capital investment. Bookings for goods and materials meant to last at least three years declined 2.8% after a 4.2% gain that was less the previously reported, Commerce Department data showed. Bookings for non-military capital goods excluding aircraft dropped 1.8%, more than estimated. (Bloomberg)

EU: ECB loans banks SGD8.2bn as new long-term plan readied. The ECB handed EUR7.3bn (SGD8.2bn) to euro-area banks in the seventh round of a program aimed at boosting lending to companies and consumers, shortly before it starts a new and more generous plan. The take-up in the targeted longer-term refinancing operation compares with EUR18.3bn the ECB lent in a similar operation in Dec and EUR15.5bn handed out in Sept. Banks have now taken a total of EUR426bn since the first offer in 2014. (Bloomberg)

UK: Retail sales fall as cold weather curbs clothing demand. UK retail sales fell in Feb after surging the most in more than two years the previous month during post-Christmas sales. Clothing and shoes fell 0.4%, with poor weather delaying purchases of spring and summer attire, the Office for National Statistics said. (Bloomberg)

Japan: Inflation around zero for tenth month despite BOJ efforts. Prices in Japan didn’t rise in Feb, reinforcing just how far the nation remains from reaching the Bank of Japan’s 2% inflation goal. Japan’s consumer prices excluding fresh food didn’t budge for a second consecutive month, as forecast. Stripping out energy and food costs, the gauge rose 0.8% from last year, according to a statistics bureau report. (Bloomberg)

Singapore: Budget dominated by defense, education, heath. Singapore’s government will raise expenditure in fiscal 2016 by SGD5bn (USD3.7bn), or 7.3%, and still expects a surplus equivalent to 0.8% of GDP. The bulk of the budget goes to defense, education, health care and transport. The budget is aided by an increase in tax revenue to 14.4% of GDP and higher net investment returns contributions from state investment companies and institutions. (Bloomberg)

 

Markets

IHH (Neutral, TP: RM6.39): Unit acquires nursing home in Japan for RM39.3m. IHH Healthcare's 35.7%-owned subsidiary, Parkway Life Real Estate Investment Trust (Parkway Life REIT), entered into a silent partnership with Godo Kaisha Samurai 11 to acquire a nursing home facility in Japan for JPY1.1bn (RM39.3m). IHH said the purchase price for the property in Sapporo City, Hokkaido Prefecture, will be injected into Godo Kaisha by Parkway Life REIT's special purpose entity Parkway Life Japan4 Pte Ltd. (Financial Daily)

Comments: The investment cost of JPY1.1bn (RM39.3m) is considered small for the Group. Hence, in our view, the rationale is less about material contributions (PLife REIT contributed c.1.2% to IHH's FY15 revenue) but more on the synergy it brings to IHH in terms of aged care segment exposure, and tapping on the knowledge gained before applying the concept elsewhere. With c.26% of Japan's population aged above 60, aged care in the country has well been established, thus we believe the exposure would benefit IHH positively. Nonetheless, we're not ruling out the possibility of IHH testing the waters, as it had typically done previously with less familiar markets, before delving deeper into the region's aged care segment, after more insights and sufficient knowledge and understanding of the workings of nursing homes is gained by the Group.

YLI: Subsidiary wins RM97.3m Langat 2 pipe contract. YLI Holdings’ subsidiary Laksana Wibawa SB (LWSB) has been appointed to supply pipes, fittings and related products for the proposed development of the Langat 2 water treatment plant and water reticulation system in Selangor for a provisional sum of RM97.3m. The maker of pipes and waterworks-related products said its 51% owned LWSB entered into an agreement on this with the main contractor, Pembinaan Ikhasas-Merak SB, and purchaser Merpatih Trading SB. (StarBiz)

CAB Cakaran: Acquires land in Gurun for RM41m. CAB Cakaran Corp, through 51%-owned subsidiary CAB Amesist Biomass Generation SB (CABG), has acquired 35.04ha in Gurun, Kedah, for RM41.0m from oil palm plantation operator Dapat Damai SB to develop a biomass power generation plant that runs on chicken droppings. The property is subject to the existing category of land use of “agriculture”. (StarBiz)

Eco World: 1Q earnings at RM20.6m, YTD sales RM607m. Eco World Development Group recorded earnings of RM20.7m in the 1Q ended Jan 31, 2016 on the back of RM463.5m in revenue and is confident of achieving its RM4bn sales target in FY16 amid the soft property market. (StarBiz)

Selangor Properties: Slips into the red in 1Q on forex losses. Selangor Properties started off its current FYE Oct 31, 2016 (FY16) on the wrong foot, reporting a net loss of RM16.1m for the 1QFY16 as a stronger ringgit wreaked losses of RM24.9m in its investment holding division. (Financial Daily)

Superlon: 3Q profit jumps 46% on forex gains. Superlon Holdings, a producer of thermal insulation materials for air conditioners, enjoyed a 46.4% jump in its net profit for the 3QFY16 to RM4.3m, as a weaker ringgit in the quarter gave the company a favourable translation gain. The company has proposed a special dividend of 4sen a share. (Financial Daily)

 

MARKET UPDATE

The FBM KLCI might end lower again today as US and European stocks went into the Easter break on a negative note after a week in which expectations mounted that the Federal Reserve could raise interest rates more aggressively than previously thought. As such, dollar continue to regain some of the ground lost after the US central bank came out with a far more dovish policy statement following its March 16 policy meeting than market watchers had anticipated. In turn, that helped push prices for oil and other industrial commodities sharply lower, with both Brent and West Texas Intermediate crude slipping back below $40 a barrel and copper heading for its biggest weekly fall since mid-February. On Wall Street, US stocks ended five consecutive weeks of gains overnight, as a rally that carried shares to their highest levels of the year petered out during a holiday-shortened week. The Dow Jones Industrial Average added 13.14 points or less than 0.1% to 17,515.73, bringing its loss to 0.5% for the week. The S&P 500 lost 0.77 or less than 0.1% to 2,035.94, for a weekly fall of 0.7%. The Nasdaq Composite gained 4.64 or 0.1% to 4,773.50, shedding 0.5% for the week. Across the Atlantic, European stocks slumped for a fourth straight day, with Germany’s DAX 30 fell 1.7% to 9,851.35, France’s CAC 40 was pushed 2.1% lower to 4,329.68 and the U.K.’s FTSE 100 index dropped 1.5% to 6,106.48.

Back home, the FBM KLCI ended lower following an entire day of trading in the red, in tandem with the regional markets. Sectors ended in negative territory led by Construction which eased by -1.01%. At the closing bell, the bellwether index lost 9.02 points to 1,715.53 with 1.69bn shares changed hands valued at RM1.88bn. Asian shares also slipped after the US dollar strengthened against regional currencies. Performance-wise, the Shanghai Composite Index closed down 1.6%, Japan’s Nikkei Stock Average ended 0.6% lower, South Korea’s Kospi closed down 0.5%, and Australia’s S&P/ASX 200 finished down 1.1%. Elsewhere, Hong Kong’s Hang Seng Index ended down 1.3%. In China, stocks sank after Premier Li Keqiang said that the country was working to address volatility in its economy. He added that Beijing wouldn’t deliberately weaken the Yuan to boost exports. The Shanghai market pared losses after his speech but declined in the afternoon.

Source: PublicInvest Research, 25 March 2016