Daily
18 May 2015
ECONOMICS
1Q 2015 Real GDP
Domestic demand vs external demand
Steady growth momentum of+5.6% YoY 1Q 2015 (4Q 2014: +5.7% YoY; 3Q 2014: +5.6% YoY).
Pick up in domestic demand � including pre-GST consumer spending rush � offset by drop in net external demand.
Adjust full-year real GDP growth forecast to +4.9% from +4.5%.
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Rebasing GDP
From 2005 to 2010 base year
Department of Statistics (DOS) revised the base year for GDP statistics from 2005 to 2010 with the release of 1Q 2015 GDP.
This is to incorporate recent economic developments, methodological improvements, industrial reclassification and to reconcile data from various census.
The rebase resulted in changes in GDP values and some key economic ratios.
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Balance of Payments 1Q15
Bigger current account surplus
Current account surplus widened to MYR10b or +3.6% of GDP in 1Q 2015 on sustained merchandise trade surplus and smaller deficits in services trade and income account.
Financial account remains in deficit as portfolio and direct investment continued to register net outflows.
Expect current account surplus to narrow to +MYR40.4b or +3.5% of GDP in 2015 (2014: +MYR47.3b or +4.3% of GDP).
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RESULTS REVIEW
Sarawak Oil Palms: Maintain Buy
Weak results priced in Shariah-compliant
1Q15 results disappointed on low output, ASP. Opportunity to BUY as share price has fallen 14% YTD; priced in.
Production to be strongest in 2H15. We keep our earnings forecasts, expecting a catch up then.
Maintain BUY with an unchanged TP of MYR6.72 on unchanged 15x 2016 PER peg.
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COMPANY UPDATE
Inari Amertron: Maintain Buy
Staging for an even better FY16 Shariah-compliant
RF (radio frequency) division�s success to be replicated on new products to be outsourced by Avago Technologies.
Strong earnings visibility remains intact with potential boost from new product line and positive USD/MYR forex exposure.
Forecasts unchanged post briefing. Reiterate BUY with an unchanged MYR4.05 TP, pegged on unchanged 16x CY16 PER.
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CIMB Group Holdings: Maintain Sell
MSS for Malaysia and Indonesia
MSS for Malaysia and Indonesia not a surprise.
Would aid in MYR400m-600m cost savings initiative.
Maintain SELL with an unchanged TP of MYR5.70 (1.2x FY15 P/BV, ROE 10.2%).
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Carlsberg Brewery Malaysia: Maintain Hold
Disposing stake in Luen Heng
Financial impact manageable � Luen Heng contributed ~3% to FY14 net profit.
Proceeds to be deployed for core business; MYR10.9m one-off loss this year.
Maintain HOLD an with unchanged TP of MYR13.60. Dividend yield of 6% provides support to share price.
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Technicals
Firmer Dow lifts the FBMKLCI
The FBM KLCI rose 4.27 points WoW to close at 1,811.92, as some minor buying activities persisted. The support levels of 1,774 and 1,811 may be areas to nibble. Liquidation at the resistance areas of 1,813 to 1,867 will cap rebounds. The index may trade in a narrow range of 1,795 to 1,867 in the forthcoming weeks.
Our short-term buy pick is EATECH with upside targets of MYR1.10, 1.33,1.45 and 1.69.
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Other Local News
Telekom Malaysia: Eyes SME, individual online business. Telekom Malaysia (TM) is going all out to get small and medium enterprises (SMEs) and individual online business to use information and communication technology (ICT) solutions in their operations. TM Consumer and SME executive vice-president Imri Mokhtar said there were thousands of SMEs and online businesses that did not fully utilize ICT solutions. (Source: The Star)
Bumi Armada: Confident of earnings visibility due to long term jobs. Oil and gas services firm Bumi Armada has insisted that the company has good earnings visibility due to the long-term nature of its contracts despite profits having halved in the financial year ended Dec 31, 2014 (FY14). According to its annual report, revenue had seen a rise due to the large order book of committed and extension contracts across all three business units: the floating production storage and offloading, offshore support vessel and the transport & installation segments. This could be the main reason the company remained confident of earnings visibility. (Source: The Star)
Outside Malaysia
U.S: Factory output stalled in April on machinery cutbacks. The unchanged reading in manufacturing followed a 0.3% MoM March gain that was larger than previously estimated, a Federal Reserve report showed. Total industrial production declined for a fifth consecutive month amid mining and utilities cutbacks. (Source: Bloomberg)
U.S: Consumer sentiment plunge lowers odds of growth rebound. The University of Michigan's preliminary sentiment index for May plunged to 88.6, the lowest since October, from 95.9 the prior month. News that the world's largest economy sputtered last quarter, combined with uneven employment gains, shook households this month, raising concerns that spending will be slow to pick up. A strong dollar and weak oil prices also are holding back manufacturing, further denting the likelihood of a quick rebound in the rate of expansion. (Source: Bloomberg)
Russia: Economy contracts first time since 2009 after ruble rout. Gross domestic product contracted 1.9% YoY in the first quarter after a 0.4% YoY gain in the previous three months, the Federal Statistics Service in Moscow said. (Source: Bloomberg)
China: Calls On banks to support state projects as economy slows. China urged banks to continue funding local government projects under construction and refrain from calling in loans as the country works through an economic downturn. Banks shouldn't refuse funds to projects approved before the end of 2014 even if borrowing agencies are unable to meet payments, the State Council said in joint announcement with Finance Ministry, central bank and regulator. The council, China's Cabinet, also urged local governments to use fiscal support as short-term working capital for ongoing projects to prevent or reduce risk. (Source: Bloomberg)
Singapore: April home sales climb to highest in 11 months as developers offered more affordable projects. Developers sold 1,124 units last month compared with 613 units in March, according to data by the Urban Redevelopment Authority. April's sales were the highest since May 2014. (Source: Bloomberg)
Key Indices
Value
YTD (%)
Daily (%)
KLCI
1,811.9
2.9
0.2
JCI
5,227.1
0.0
(0.4)
STI
3,463.1
2.9
0.2
SET
1,512.2
1.0
1.0
HSI
27,822.3
17.9
2.0
KOSPI
2,106.5
10.0
(0.7)
TWSE
9,579.5
2.9
(0.3)
DJIA
18,272.6
2.5
0.1
S&P
2,122.7
3.1
0.1
FTSE
6,960.5
6.0
(0.2)
MYR/USD
3.565
1.9
(0.5)
CPO (1mth)
2,199.0
(4.0)
0.0
Crude Oil (1mth)
59.7
12.1
(0.3)
Gold
1,224.8
3.4
0.3
TOP STOCK PICKS
Buy rated large caps
Price
Target
Tenaga Nasional
13.94
16.00
Sime Darby
9.04
10.20
Genting Malaysia
4.30
4.60
Gamuda
5.21
6.00
SP Setia
3.45
4.07
AFG
4.78
5.30
Inari
3.39
3.95
MBM Resources
3.41
4.20
Vitrox
3.60
4.05
Axiata
6.75
7.60
Normal
0
false
false
false
EN-US
JA
X-NONE
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