Oct 27, 2016

MIDF’s Top 5 Picks For Oct/Nov 2016 Cycle

Turn of the Month effect
KLCI: 1,673.92 points.   2016 Year-end Target: 1,750 points

Turn of the Month effect. Wealth of studies regarding the “Turn of the Month” effect is statistically conclusive that stock prices generally rise during the last four days and the first three days of each month. Therefore it is possible to capture a substantial part of equity return only during this fraction of market time.

87% of FBM KLCI constituents exhibited Turn of the Month effect. Based on our 10-year quantitative studies, 26 out of the 30 FBM KLCI Index stocks performed better during the “Turn of the Month” strategic days as compared to the rest of the month days.

The 4 Stocks that did not perform according to strategy, in which the strategic days’ returns were less than the rest of the month’s return based on our 10-year studies, were Public Bank, IHH Health Care, Maxis and Hong Leong Bank.

Top 5 picks.
The “Turn of the Month” strategic days for the current cycle (Oct/Nov 2016) shall begin tomorrow. Based on our (i) quantitative findings (Refer to APPENDIX), and endorsed by our (ii) fundamental views (i.e. stocks with BUY recommendation), we list below our top 5 stocks recommendation for the current cycle of the turn of the month strategic days:

IOI Corp (BUY; TP: RM5.05)ioicorp
AMMB Holdings (BUY; TP: RM5.10)
KL Kepong (BUY; TP: RM27.38)

Telekom Malaysia (BUY; RM8.18)

CIMB Group (BUY; RM5.50)

FBM KLCI year-end targets. We reiterate our FBM KLCI 2016 year-end target at 1,750 points which equates to PER16 of 17.5x as well as our 2017 year-end target of 1,830 points which equates to PER17 of 17.0x.

source: MIDF – 27/10/2016

Oct 25, 2016

HIBISCS – Positive Short To Longer Term Trend


Stock Code: 5199 RM0.30

hibiscs chart analysis

Yesterday, HIBISCS surged 4.5 sen (17.6%) to finish at RM0.30 on high volume (98.0m shares). Last Wednesday, the company announced that it will buy Shell’s 50% interest and operator-ship in the 2011 North Sabah Enhanced Oil Recovery production sharing contract for US$25.0m. From a charting perspective, HIBISCS' short to longer term trend is positive with the share price already broken out of its sideways range at RM0.22 earlier in the month. Coupled with the rising momentum indicators, we can expect the share price to be positively biased from here. Major resistances to take note includes RM0.31 (R1). Should this level be taken out next, HIBISCS would then have a clear path towards RM0.425 (R2) further up. Downside support levels are RM0.23 (S1) and RM0.20 (S2).

source: Kenanga Research – 25/10/16

The Company intend to establish as a junior independent Malaysian oil and gas E&P company with the sole focus on developing small oil and gas fields in the South Asia South East Asia and Oceania regions. The Company plan to achieve this by identifying and acquiring target company assets which participate in upstream oil and gas E&P activities. Upstream oil and gas activities consist of exploration development and production of oil and gas resources.

Oct 24, 2016

Malaysia Budget 2017: Sector Commentary

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Malaysia Budget 2017Malaysia 2017 Budget: By Sector and Industry Comments: Agribusiness. Automotive, Aviation, Banking & Finance, Construction & Building Materials, Consumer, Education, Gaming, Healthcare, Media, Property, Rubber Glove, Semiconducter, Small and mid-cap stocks. Telecommunication, Tobacco, Tourism

RM286m is provided to increase exports of palm oil, rubber, cocoa and pepper.
RM50m is allocated to conduct scientific research to enhance the quality of palm oil products. A grant of RM30m will be provided through Malaysian Palm Oil Board (MPOB) for replanting of palm oil by smallholders.
RM20m is provided to upgrade estate roads, to facilitate palm oil smallholders.

Plantation companies may be disappointed that the government has not granted their wish for a lower windfall profit levy tax on palm oil. However, this is partly offset by the RM50m grant for scientific research and RM20m allocation to upgrade roads, which could help improve the quality of palm oil products. A grant of RM30m for replanting will help smallholders to replant old estates. Assuming RM7,500 per ha of replanting grant is provided, the replanting fund will be sufficient to replant 4,000 ha of oil palm estates that belong to smallholders, representing around 0.45% of smallholders’ total palm oil estates.    - Ivy NG, CFA

Grants for new taxi purchases positive for TIV, while Proton sales to get a slight boost from first-time car buyers in B40

The taxi industry was given a slight boost, with an allocation of RM60m. A grant of RM5,000 to purchase new vehicles and individual taxi permits were offered, which will benefit 12,000 qualified taxi drivers. This will potentially boost the Total Industry Volume (TIV) by 12,000 units, 2% of our FY17 TIV forecast.

First car-buyers in the B40 group will get to enjoy a RM4,000 rebate, on top of being able to use the BR1M payout as down payment for the purchase of the Proton Iriz. We expect the incentive to be well received by eligible recipients. This is because the rebate and the payout will be more than enough to cover the down payment for the Iriz. This is positive news for Proton and DRB-Hicom.

Other incentives and measures announced include those to boost overall disposable income, especially for the low- to middle-income households, potentially resulting in better consumer confidence. This could have a carrythrough effect on the automotive sector. In this case, we believe the automakers that are most likely to benefit are the national automakers, Proton and Perodua, due to their lower entry-level model pricing and car ownership costs. DRBHicom and UMW Holdings will be the biggest beneficiaries. Overall, we are positive on the incentives and measures announced for the industry. - Mohd Shanaz NOOR AZAM

Introduction of eVisa facility for South Asians is positive

The government plans to introduce the eVisa facility to the South Asian region, encompassing India, Pakistan, Bangladesh, Sri Lanka, as well as Nepal, from next year. South Asia is an important source of tourists for Malaysia. As a proportion of total tourist traffic (excluding traffic from Singapore), South Asia accounted for 8.5% of tourists in 2015 (1.1m visitors), which is about the same as European tourist numbers, and second in size only to China, which accounted for 13% of the visitor numbers last year (1.7m visitors).

Despite its importance as a source of tourists, the South Asian region contributed fewer tourists to Malaysia over the past 18 months, with 2015 visitors declining 16% yoy, and 1H16 visitor numbers falling 14% yoy. Something clearly had to be done to stimulate traffic from South Asia, and the government’s move to introduce the eVisa facilities will certainly help, in our view.

eVisa facilities for Chinese tourists were introduced from 1 March 2016 and will end on 31 December 2016, and the results to-date have been very successful. During 1H16, Chinese tourists visiting Malaysia rose more than 30% yoy, due to the ease of applying for visas through the eVisa facility, although it must be said that the weakening ringgit relative to the Chinese yuan also played a part.

If similar growth in tourist traffic can be achieved for visitors from South Asia, the government may stand a chance of achieving its target for 32m visitor arrivals in 2017. Malaysia achieved 13m arrivals during 1H16 (including 6.6m arrivals from Singapore), up only 3.7% yoy, suggesting that it may miss its target of 30.5m arrivals for 2016, which was an ambitious target for 18.6% yoy increase. We believe the eVisa move for South Asia will likely help with the lagging momentum.

Airlines that have flights to the South Asian region will be prime beneficiaries of this initiative. At the moment, AirAsia has 27% market share of airline seat capacity between Kuala Lumpur and South Asia, Malaysia Airlines also 27%, Malindo Air 24%, AirAsia X 7%, with the rest of the capacity operated by the South Asian carriers. - Raymond YAP, CFA
Banking & Finance  The stamp duty exemption will be increased to 100% on instruments of transfer and housing loan instruments, to help reduce the cost of firsthome ownership, compared to 50% at the moment. The exemption is limited to houses with the value up to RM300k for first home buyers only for the period between 1 Jan 17 and 31 Dec 18.

This would be mildly positive in stimulating the growth of housing loans for certain participating banks. However, we believe its impact on the industry’s overall loan growth would be minimal. 

The rate of stamp duty on instruments of transfer of real estate worth more than RM1m will be increased from 3% to 4% effective 1 Jan 18.

This would be negative for the growth of mortgages for properties worth RM1m and above. But we think this could be partly offset by the greater demand for the financing of lower-valued properties.

Government-linked investment companies will allocate a special fund up to RM3bn to fund managers licensed under the Securities Commission to invest in potential small and mid-cap companies.

This would help to lift the trading value of the equity market, which could benefit Bursa Malaysia and investment banks. However, the impact is expected to be minimal considering that the additional fund of up to RM3bn is small relative to the market capitalisation of RM1.7tr for Bursa Malaysia. 

Effective 2017, the government proposes to introduce a one-off increase of the existing RM500 incentive to RM1,000 to private retirement scheme (PRS) contributors with a minimum accumulated investment of RM1,000 during the period of two years. For this, an allocation of RM165m will be provided.

This measure would encourage more people to put their funds in PRS. As a result, certain banks will benefit from higher asset management fees. Nevertheless, the impact on banks’ overall revenue and earnings should be minimal.  - Winson NG, CFA.
No hike as expected

As expected, there was no increase in excise duty for the brewery sector. As the previous hike was only in Mar 2016 (after 10 consecutive years of no excise duty hike), another hike would be detrimental to the sector as beers turn more unaffordable. This will, in turn, lead to lower government tax receipts from excise duties. Plans for the government to ramp up efforts to reduce illicit trade is encouraging but not new. Overall, no surprises in the budget. Hence, a neutral impact on the sector, in our view. - Walter AW.
Construction & Building Materials 
Upgrade of public transport that will benefit rural areas. This will be done through the implementation of:
1) East Coast Rail Line (ECRL), in phases. This is a 600km railway line that will connect townships such as Port Klang, ITT Gombak, Bentong, Mentakab, Kuantan, Kemaman, Kertih, Kuala Terengganu and Kota Bharu. Total cost is RM55bn. 
2) Pan Borneo Highway in Sarawak (RM17bn) and Sabah (RM11bn) which will be accelerated in 2017. 
3) Restoration of part of the East Coast rail line (Gua Musang – Tumpat) that was destroyed by floods (RM100m). Implementation of various (undisclosed) private finance initiative (PFI) projects worth RM10bn. 

Allocation of RM2.1bn to all growth corridors, namely Iskandar, Northern Corridor Economic Region (NCER), East Coast Economic Region (ECER), Sabah Development Corridor (SDC) and Sarawak Corridor Renewable Energy (Score) for infra and socioeconomic needs. 

Combined allocation of RM5.9bn for road (non-tolled) projects including a sizeable RM4.6bn budget for the maintenance of state roads. Other projects with undisclosed values include 1) upgrade of Jalan Lok Kawi – Pengalat – Papar in Sabah and 2) upgrade of Jalan Kampun Keruak – Gua Musang – Kuala Berang in Peninsula Malaysia. 

Water-related projects (water supply, flood mitigation and water treatment) mainly for rural areas. Total value of RM1.9bn.

The 600km ECRL project is not new, and is the main initiative to upgrade rural rail infrastructure under the 11th Malaysia Plan (11MP). This project will mostly benefit the east coast states of Pahang, Terengganu and Kelantan. As for the RM55bn cost, this is higher than the previous estimate of RM30bn. This project will be executed in phases from 2017. We believe the first few phases would involve the recently-approved RM700m rail upgrade along a selected stretch of the ECRL. Various press reports have indicated the possibility that Chinese contractors could participate. For local contractors, potential large-cap beneficiaries under our coverage include Gamuda and IJM Corp. We would not discount the possibility of the participation of small- and mid-cap players, including the unlisted ones. However, no details and timing of the tender process have been provided.

The acceleration in the implementation of the Pan Borneo Highway in Sarawak and Sabah is within expectations, as there are about 4-5 more packages to be awarded for the Sarawak stretch, while the Sabah portion has not commenced tenders yet (likely in 1H17). We estimate that the total outstanding value yet to be awarded amounts to RM21bn for both Sarawak and Sabah. We think Gamuda, WCT and Binapuri (NR) could be among the early bidders.

We also observed a larger number of non-tolled road related projects under Budget 2017. The RM4.6bn allocation for the maintenance of state roads (78% of the total allocation for road jobs) appears to be a positive for road maintenance contractors. This may be particularly so for Protasco (NR) which is arguably the largest non-tolled road maintenance contractor and is bidding for bigger road maintenance jobs this year.

Major jobs highlighted under Budget 2017:
budget 2017 major projects

Overall, our compiled value of jobs highlighted in Budget 2017 totals RM99bn. This does not include MRT 2 (RM30bn) and LRT 3 (RM9bn) which have been approved. The RM50bn KL-Singapore HSR project was not mentioned in the budget as the contract is still in the early stages. We maintain our Overweight stance on the construction sector. Gamuda remains our top big cap pick for exposure to rail jobs. We also prefer Muhibbah Engineering and Salcon within the small/mid-cap space. Of the RM99bn compiled value of jobs, we estimate that 45% of the total value would directly benefit smaller contractors. Separately, the roll-out of more infra jobs in 2017 should benefit the building material players too (cement and steel) as it should mitigate the slowdown facing the property/residential market. - Sharizan Rosely

Increased BR1M from RM1,000 and RM1,050 to RM1,200 for households with monthly income of less than RM3,000; increased BR1M from RM800 to RM900 for households with RM3,000 – RM4,000 monthly income; increased assistance from RM400 to RM450 for single individuals aged 21 and above with less than RM2,000 monthly income; and to continue Bereavement Scheme of RM1,000 given to next of kin of BR1M recipients for households and the elderly category.

The increase in BR1M assistance is expected to subsidise 7m households and single individuals of Malaysian households who earn less than RM3,000 per month. Given the increase in living costs, we believe that these incentives and measures to boost the overall disposable income of the lower-income households could potentially result in better consumer confidence in 2017. Thus, this is a positive for the consumer sector and as the increases are to aid the lower-to-middle income population, we could potentially see F&B companies, such as F&N, Nestle and QL Resources, benefit from these measures.   - Kristine WONG

Education RM4.6bn will be allocated for additional capacity for TVET institutions and RM270m to upgrade educational equipment in TVET institutions. Nine unused Teachers’ Training Institutes (IPG) will be transformed into four polytechnics, four vocational colleges and one training institute for TVET trainers. Capex will be RM400m. RM132m is provided to improve access to preschool education in government schools for free, benefitting 200,000 children. The government is also extending the English language proficiency in schools through Cambridge English, dual language and highly immersive programmes with the provision of RM90m.  RM1.4bn is allocated to four university hospitals, RM300m is also allocated for empowerment of five research universities. Scholarships will continue to be awarded with an allocation of RM4.3bn in 2017, of which RM2bn would be through Majlis Amanah Rakyat (MARA). 

The RM2bn scholarship through MARA is positive for Prestariang as MARA has proposed to buy 30% of Prestariang’s university, UniMY. We believe MARA would be enrolling some of its students under scholarship, to enroll into UniMY. With likely enrollment of MARA students into UniMY, UniMY should break even from 2017 onwards. Currently, UniMY is losing around RM1.6m quarterly.  - Nigel FOO
No change in taxes.

Changes in gaming legislation and taxes are not normally addressed during the budget as gaming is a sensitive topic in Malaysia. Any changes are done quietly. We see little risk of gaming taxes increasing in the coming year. Resorts World Genting will spend over RM10bn on the Genting Integrated Tourism plan, which will create more jobs and bring in more tourist dollars. The government is also not likely to raise taxes for NFO operators as the NFO industry has been losing market share to illegal syndicates. Increasing taxes will lower the tax receipts from the industry even further, in our view. As it stands, NFO operators are already paying five levels of taxes – GST, gaming tax, pool betting duty, income tax and social contributions such as National Sports Council contributions by Sports Toto.  - Marcus CHAN, CFA.

Higher overall healthcare budget allocation but lower allocation for drugs

Overall, the budget allocation for the Health Ministry for 2017 at RM25bn is slightly bigger yoy by 8-10%. However, we understand that the budget allocated for the supply of drugs, consumables, vaccines and reagents to all government hospitals and clinics has declined by 13% yoy to RM4bn. This is negative for pharmaceutical players in our coverage that are highly dependent on orders from government hospitals such as Pharmaniaga.  - Walter AW
No new details on the digital terrestrial television broadcast project.

There was no update on the digital terrestrial television broadcast (DTTB) project which is targeted to transform the national broadcasting system from analog to digital by 2017. This is not totally unexpected as we learnt that existing free-to-air TV players, such as Media Prima, have yet to agree on the revised broadcasting fee for the new digital platform. Hence, we see the risk of a delay in the completion of the DTTB implementation in 2017. -  Mohd Shanaz NOOR AZAM
Public servants’ housing loan eligibility will be raised from RM120,000600,000 to RM200,000-750,000. However, the stamp duty rate on transfer of real estate worth more than RM1m will be increased from 3% to 4% effective 1 Jan 2018.

The Ministry of Urban Wellbeing, Housing and Local Government (KPKT) will build 9,850 houses under the People’s Housing Programme (PPR). Syarikat Perumahan Negara Bhd will build 5,000 units of People’s Friendly Home. The government will provide vacant land to GLCs and Perumahan Rakyat 1Malaysia (PR1MA) to build more than 30,000 houses. Around 10,000 houses will be built in urban areas for rentals to eligible youths at lower-than-market rental rate.

The increase in public servants’ eligibility for housing loans is positive for homebuyers’ purchasing power, in our view. Currently, the government employs c.1.6m public servants, which represent c.11% of the country’s total employed workforce. Based on an average salary of RM4,000 a month, a typical government servant could borrow up to RM540,000 from the government (assuming a monthly installment of 60% of basic pay, 4% p.a. interest rate and 35-year loan tenure). We expect the higher loan eligibility will have a small positive impact on the housing demand.

We believe the negative impact of the higher stamp duty on transfer of real estate worth more than RM1m is likely to be limited. In 1H16, while the transactions of residential properties worth RM1m or higher accounted for 25% of the total transaction value, they made up only 4% of the total transaction volume. On top of that, the impact of higher stamp duty on the total purchasing cost is small. For instance, the total purchase cost of a RM2m residential property will be only 0.5% higher following the increase in stamp duty rate.

The government’s plan to build more public housing units in this budget is similar to those in the previous budgets. While this will increase the supply of housing, we believe it will create limited competition for private developers, as public housing and private housing players cater to homebuyers of different income groups. - SAW Xiao Jun, CFA

Rubber Gloves 
No positives other than a reduction in income tax

As the glove sector has consistently shown earnings growth, the glove makers will enjoy a reduction in income tax (for 2017 & 2018) based on a percentage increase in income yoy. However, we expect this to benefit earnings minimally (<1% earnings). Other than that, a potential benefit in the budget would be the immediate establishment of a Water Supply Fund with an allocation of RM500m to address supply issues throughout the nation. This would aid glove manufacturers that were facing water supply issues, especially in the Selangor areas. However, there was no announcement of an extension or expansion in reinvestment allowances (RA) that would support glove makers’ efforts to focus on automation. Overall, a neutral impact on the sector, in our view. - Walter AW
Osram has announced a EUR1bn (or nearly RM5bn) investment in the world’s largest and most advanced LED chip production site, to be located in Kulim, Kedah. 

Reduction in income tax for companies which had been successful in increasing their revenues in 2017 and 2018. 

We see the new investment by Osram as a positive for the Malaysian semiconductor sector given that it will hire local semiconductor players to provide the back-end manufacturing services, such as assembly, packaging and testing of its advanced LED chip. This will be especially positive for Penang-based manufacturers given the island state’s proximity to Kulim.

As we expect the semiconductor sector to show earnings growth in 2017 and 2018, semiconductor players will enjoy a reduction in income tax based on a percentage increase in income yoy. However, we expect minimal net earnings improvements (<1% net earnings) given that the companies already enjoy a lower effective tax rate due to the Pioneer Tax status accorded to most of their product portfolio.  - Mohd Shanaz NOOR AZAM 

Small and mid-cap stocks  Small and mid-Cap PLC research scheme will be introduced to conduct research on 300 companies. Government-linked investment companies will allocate a special fund of up to RM3bn to fund managers licensed under SC to invest in potential small and midcap companies. In addition, Capital Market Research Institute will be established with initial funding of RM75m, provided through Capital Market Development Fund.

In the past, most of the major government-linked investment companies focused very little on investing in small and mid-cap companies. All this should change with the special fund of up to RM3bn to invest in this market segment. Our three top small and mid-cap picks: MyEG, Prestariang and Only World Group, should benefit with more investments into this sector. -  Nigel FOO

Higher fixed broadband speeds for the same price in 2017 and cheaper by 2019

The government announced that fixed line broadband service providers will offer services at a higher speed for the same price, effective Jan 2017. For example, a 5Mbps package subscriber will be upgraded to 10Mbps for the same RM149/month. 

We understand from Telekom Malaysia (TM) that this applies to UniFi (fiber-tothe-home), rather than Streamyx (ADSL). We believe this is unlikely to result in a decline in TM’s Fixed Broadband revenues. Subscribers that are upgraded to higher speeds are likely to stay with their revised packages (instead of downtrading to save money), in our view, as online apps/content/services have become increasingly rich and traffic intensive (e.g. over-the-top video streaming services such as iFlix and NetFlix). Moreover, the majority of TM’s UniFi subs are on the 5/10Mbps packages (RM149/179 per month), with no options to downgrade as TM’s lowest speed UniFi package on offer today is 30Mbps for RM199/month. Nevertheless, this budget proposal could cap upselling opportunities for TM in the next 2-3 years, as subscribers may defer any decision to further upgrade to even higher-speed packages.

The government also proposed that within the next two years, for the 5Mbps package, the speed will double while the price will be reduced by 50%. There are currently little details available as to exactly how this would be implemented. Assuming a straight price cut to RM75/month, the potential revenue impact could be c.RM300m p.a. (based on the estimated c.300k-350k residential UniFi subs on 5Mbps currently). This would translate into a manageable 2.2% hit on our current FY19F revenue forecast for TM. Nevertheless, TM may be able to further mitigate this risk by structuring a new plan that meets the Budget 2017 proposal but that would have minimal financial impact. For example, TM could offer a new 10Mbps plan for RM75/month which comes with limited monthly data quotas. Telekom Malaysia will host a conference call on Monday afternoon to provide more details.

The government also announced that the Malaysian Communications and Multimedia Commission (MCMC) will provide RM1bn to ensure the coverage and quality of the nationwide broadband reaches speeds of up to 20Mbps. Meanwhile, the government will extend the Computer Loan facility to encompass the purchase of smartphones for public servants. This facility can be utilised once every three years with a maximum loan of RM5,000.

We believe the RM1bn is part of the existing HSBB2 and SUBB grant, and not a new grant. While the extension of the Computer Loan facility to cover smartphone purchases would help encourage further adoption of smartphones and mobile data services, we believe it is unlikely to have a major positive impact on telcos’ revenues and earnings because 1) smartphone penetration is already quite high and is expected to reach c.70% by end-2016 and 2) this is still a loan, and is unlike the RM200 rebate that was given to Youths for 3G smartphone purchases under the 2013 Budget. - FOONG Choong Chen, CFA

No hike is the right move The absence of an excise duty hike is expected given that the industry was hit by a sharp increase in excise duty of 40% in early Nov 2015.

Since then, legal cigarette market volumes have continued its declining trend while the percentage of contraband cigarettes in Malaysia over total market volume was at an all-time high of 45.6% (as at 1QCY16). Hence, we believe that smokers are unlikely to be able to put up with another increase which will further increase cigarette prices. Overall, no surprises in the budget for the tobacco sector, in our view. - Walter AW
Tourism sector  RM400m will be allocated, among others, for clean air and ecotourism initiatives.  Pioneer Status promotion and Investment Tax Allowance for new 4 and 5 star hotels will be extended to end-Dec 2018. Increase in tax deduction from RM500,000 to RM700,000 will be given to encourage sponsorship by the private sector in local and foreign arts, culture and heritage shows and performances.

The government will promote Malaysia through Visiting ASEAN@50 Year Campaign and Malaysia as the host for the 2017 SEA and Para ASEAN Games. To achieve the target of 32m tourist arrivals next year, the Government will extend eVisa to countries in the Balkans and South Asia regions.  The government’s focus on boosting domestic tourism should generally benefit the airline, hotel, F&B, shopping mall and transportation (bus, taxis and UBER/GRAB) industries. In our universe, the stocks that could benefit from the tourism boost include Genting Malaysia (opening of 20th Century Fox theme park in end-2017), Only World Group (opening of Komtar’s themed attractions in Dec 2016), Berjaya Food, Fraser & Neave, REITS (CCMTS, Sunway, IGB and Pavilion REIT) and AirAsia.   - Nigel FOO

source: CIMB Research 24/10/16

Oct 20, 2016

PESONA: 11 Month Breakout

pesona technical analysis

PESONA (Stock Code: 8311). Yesterday, PESONA gapped up 1.5 sen (3.6%) to close at RM0.43 to break out from its 11-month ‘rounding bottom’ chart pattern formation. The underlying trend looks encouraging as the share price is currently trading above all its key moving averages. MACD histogram has also staged a bullish convergence to rebound away from the zero-line, while the up-trending RSI is reflecting the incremental bulls. From here, follow-through buying interest could carry the share price towards a higher high at RM0.455 (R1) and possibly RM0.490 (R2) in the near-to-mid-term. Nonetheless, we observed that the RSI and Stochastic are close to their respective overbought threshold. Hence, we do not discount possibilities of a slight retracement in the near-term to neutralise the aforesaid condition. Any retracement towards its immediate support level of RM0.42/0.40 (S1) would be a good entry opportunity. Next support level is RM0.37 (S2).

Source: Kenanga Research – 20/10/16

The Company is principally an investment holding company. The principal activities of the subsidiaries are manufacturing and trading of bricks; and trading of polyurethane products; dealer and distributor of bricks and building materials; and Property management and related services.

Oct 19, 2016

JTIASA: Poised To Retest RM1.65 Zones


Technical perspective: JTIASA poised to retest RM1.65 zones following the positive cup & handle formation

jayatiasa analysis

  • A young planter comes to the fore and slated for strong long term growth. According to Bloomberg, JTIASA’s earnings is expected to regis ter a s olid 40% CAGR from FY16-18, spurred by 1) rising primed mature estate areas under the group’s planted areas of ~69,500 ha (FY12: 58k ha); 2) young average palm tree age profile of approximately 7 years over 64% in FY17-18 (FY16: 54%); 3) improving FFB and CPO production amid rising yields and 4) benefiting from strong FCPO prices. Overall, the bullish palm-oil division’s contribution will anchor future earnings growth for the group, offsetting the weakness in timber division, mainly due to lower timber product prices and production amid the stringent environmental safeguards and the diminishing natural resources in Malaysian forests.
  • Undemanding valuations. JTIASA is trading at 14.1x P/E, which is 7% below its peers P/E of 15.4x, supported by a robust FY16-18 earnings CAGR of 40%. In terms of P/B, current valuation of 0.72x is trading at a huge 53% discount to its peers 1.55x.
  • A bullish cup & handle formation. The cup and handle formation suggests that the next leg up is likely taking place now. A decisive handle pattern breakout in the near term could spur prices higher, supported by upticks in indicators. A strong breakout above RM1.37 (29 Sep & 17 Oct high) will push share prices above RM1.42 (50% FR) and RM1.55 next. We are targeting RM1.65 (the potential pattern breakout). Key supports are RM1.31 (10-d SMA) and RM1.27 (30-d SMA). Keep a stop at RM1.25.

Source: Hong Leong Investment Bank Research – 19/10/16

The Company is a fully-integrated timber producer in Malaysia with access to 1.76 million acres of timber concessions in the state of Sarawak Malaysia.The principal activities of the Company are investment holding provision of management services extraction and sale of logs manufacturing and sale of timber products reforestation and oil palm plantation.

Oct 18, 2016

Malaysia 2017 Budget Preview

Malaysia Budget 2017

Fiscal thrust to boost growth and win electoral support


Fiscal thrust. The government is expected to tilt towards employing more fiscal measures to support the economy amid growing global uncertainties

Mildly expansionary. Along with the expectation of a General Election next year the Government is expected to design the 2017 Budget to be slightly expansionary while retaining its grip on consolidation.

Striking a balance. Such would require objective fiscal discipline of cutting unnecessary spending while reallocating funds towards targeted social and infrastructure development. Hence, the Government is expected to project a fiscal deficit of 3.0% of GDP in 2017 slightly better than its target of 3.1% in 2016.

Cautiously optimistic. Official growth projection is expected to be slightly higher in 2017 (4.5% -5.0%) in line with IMF prediction of growth improvement in the ASEAN region on the back of better domestic demand growth and a gradual recovery in commodity prices.

Expect big giveaways to benefit the targeted general public in order to win electoral support by addressing issues regarding high cost of living, housing affordability and reducing inequality.

A bigger allocation towards development expenditure of at least RM50.0b to be channelled towards rural development e.g. building roads, highways, bridges, schools, as well as on growth areas like public transport, logistics, ports, digital economy, value-added exports, tourism.

Consolidating Opex. Reducing emoluments, cutting discretionary spending and reallocating funds to growth areas and social welfare to be top priority to avoid risk of sovereign rating downgrade

To address the higher cost of living we expect more BR1M cash hand outs, tax relief for middle income earners, as well as affordable housing targeting the bottom 40% (B40) and middle 40% (M40) households as well as civil servants.

Corporate tax cut can wait. Unlikely as more funds needed to repair fiscal account following election year. If improvement in commodity exports continues along with steady rise in GST, a corporate tax cut of one percentage point to a standard rate of 23.0% a possibility from 2018 onwards.


Let's get fiscal. The three main objectives in the upcoming 2017 Budget under the theme of “Accelerating Growth, Ensuring Fiscal Prudence, Enhancing Well-being of Rakyat” suggests that while the budget will continue to be slightly expansionary it will still commit to fiscal prudence. As in previous years, major sections of the budget will address concerns over the cost of living, inequality and housing affordability. More importantly as central banks the world over are facing limitations to deal with the current global financial and economic issues mainly dominated by low interest rate, weak growth and low inflation environment we expect the government to give more emphasis on fiscal policy over monetary policy as a tool to deal with the current economic malaise. All in, the budget’s main focus will be regaining investor and consumer confidence while striking a balance between the need to consolidate and, if need be, raise development spending to ensure the economy becomes more resilient to face growing instability in the global economy.

Source: Kenanga Research – 18/10/16

Oct 12, 2016

Technical Buy - CAB


CAB CAKARAN Stock Code: 7174

cab chart

  • Target Price RM1.75, RM1.80
  • Last closing price RM1.64
  • Potential return 9.8%
  • Support RM1.57
  • Stop Loss RM1.56

Gap-up. CAB shares opened with a gap-up yesterday indicating strong buying interest, which further pushed the share price higher throughout the day. Traded volume was substantial at 0.4m shares compared to previous 14-day average of 0.1m shares. Positive buying momentum was further signified by bullish RSI indicator and MACD golden crossover, which may suggests price appreciation ahead. Should resistance level of RM1.70 be broken, CAB shares may be lifted further to the next resistance level of RM1.75, followed by RM1.80.

However, failure to hold at support level of RM1.57 may indicate weakness in the share price and hence trigger a cut-loss signal.

source: Public Invest – 12/10/2016

The Group is an integrated poultry group with its principally activities in breeding of parent stock hatching of eggs into DOCs breeding of broilers slaughtering and processing of fresh chicken and other value-added food products right down to retailing and the operations and management of a fast food chain and franchising of fast food business.