MONEY MASTER

KLCI Eases Ahead of GDP Data The  FBM KLCI  slipped  0.35% to 1,581.05  as investors stayed cautious before Malaysia’s Q2 GDP release. Analysts expect growth to undershoot the 4.5% target, but downside risk to the index remains limited unless the miss is significant. Wall Street Mixed on Hotter PPI US stocks closed mixed after July  Producer Price Index  rose  3.3% YoY , the highest since February, tempering Fed rate cut hopes. September cut odds fell to 92.6% (from 100%) via CME FedWatch. Stocks to Watch RHBBANK (1066.MY) Signed 20-year exclusive bancassurance partnerships with  Tokio Marine Life Insurance  &  Takaful Malaysia worth  RM1.6B  in access fees. Extends existing 10-year deal expiring end-2024. F&N (3689.MY) 3QFY25 net profit down 30%  to  RM84.82M , revenue fell 4.5% to  RM1.25B . Weaker consumer sentiment, reduced Thai tourist arrivals, and dairy farm start-up losses weighed on results. WPRT...

RHB Bank Bhd is expected to report stronger results in the upcoming quarter, driven by widening margins and robust loan growth , according to Hong Leong Investment Bank . The bank’s net interest margin is projected to hold up well, even amid recent currency fluctuations, with loan growth remaining solid at 6.5%-7.0% for 2024. Following a recent meeting with RHB, Hong Leong expressed optimism, raising its net profit forecasts by 4%-5% for FY2024-FY2026 and increasing the target price (TP) to RM7.30 from RM6.75 . This revision reflects expectations of sustained loan growth and strong non-interest income . RHB shares have risen 15% this year, and the bank continues to attract positive sentiment from analysts, with nine 'buy' ratings and a consensus 12-month TP of RM6.65 . The research house also highlighted RHB’s focus on issuing cheaper sukuk , reducing fixed deposit rates, and maintaining its market share in key segments like mortgages and auto finance . Looking ahead...

Lower valuations matched by lower ROE projections The mood conveyed by management teams at recent bank analyst briefings has generally been a somber one, the consensus being that 2016 will continue to be a challenging year. We project 5% 2016 core earnings growth and while valuations have come off across the board, these are matched by lower ROE projections. We remain NEUTRAL on the sector – BUY AFG, HL Bank and HLFG; SELL AMMB. No growth in 2015 Though 2015 was challenging in many ways, banks’ operational performance was decent, with a 7% YoY growth in operating profit on an aggregate basis. NIMs held up better than expected towards year end while NOII growth was robust, aided in large part by forex income/gains. Profitability was nevertheless crimped at the net level due to the jump in credit costs and other allowances, resulting in aggregate core net profit coming in flat YoY. All banks saw core earnings drop YoY except for CIMB (from a low base) and Public Bank. ...

Maintain Neutral with a higher target price of RM22.55 Petronas Gas Bhd PGas’ operating expenses are expected to remain elevated in FY16 amidst its ongoing plant rejuvenation and revamp (PRR) project. We mildly tweaked our FY16F earnings by -4.5% while keeping our FY17F earnings largely unchanged. Maintain NEUTRAL with a new TP of MYR22.55 (from MYR22.40, 0% upside) as we roll valuations forward. It is investing in a new MYR2.7bn regasification terminal at the Pengerang Deep Water Terminal, which would significantly boost FY18F earnings upon commissioning. However, this has been largely priced in. Maintain NEUTRAL. Despite Petronas Gas’ (PGas) higher-than-expected opex in FY15, we believe its stable earnings outlook remains largely intact. We like PGas for its defensive earnings and strong long-term fundamentals, which are backed by the continued industrialisation in Malaysia that should see a rising demand for gas. However, we believe there are limited catalysts for it...

Maintain Neutral, Public Bank as top pick The 4Q15 results season, while mixed, reinforces our view that sector ROE has yet to bottom out with most banks guiding for lower ROEs ahead. We continue to see a challenging environment ahead for banks with: i) asset growth likely constrained by tighter liquidity and soft macroeconomic conditions, ii) NIMs still under pressure, iii) capital markets yet to recover meaningfully, and iv) higher credit costs ahead – all of which should keep bottomline growth muted, in our view. We keep our NEUTRAL sector call. Banking sector 4Q15 a mixed quarter for the banks . Three out of the seven banking stocks that we cover reported results that were in line with our estimates. Affin and Hong Leong Bank (HL Bank) both missed our and consensus estimates with the main variances being weaker-than-expected associate contribution (Affin and HL Bank) and lower-than-expected net interest margin (NIM) (HL Bank). CIMB’s results were in line with our expe...