Economy

US: Housing seesaws to recovery despite May starts setback. Through all its ups and downs, the US homebuilding industry is making slow progress. While housing starts declined 11.1% in May to a 1.0m annualized rate, it followed a revised 1.2m pace the prior month to cap the best back-to-back readings since late 2007, Commerce Department data showed. Permits for future projects climbed to the highest level in almost eight years. (Bloomberg)

Economy

US: Housing seesaws to recovery despite May starts setback. Through all its ups and downs, the US homebuilding industry is making slow progress. While housing starts declined 11.1% in May to a 1.0m annualized rate, it followed a revised 1.2m pace the prior month to cap the best back-to-back readings since late 2007, Commerce Department data showed. Permits for future projects climbed to the highest level in almost eight years. (Bloomberg)

Markets

AirAsia (Outperform, TP: RM3.08): Not rushed into issuing bonds. AirAsia group CEO Tan Sri Tony Fernandes has denied the budget airline was rushed into issuing bonds. Fernandes said the airline is already in talks with certain parties for the USD300m bonds issue that is expected to happen within three months, and plans to use half of the proceeds to reduce debts at its Philippine and Indonesian associates. (Financial Daily)

SapuraKencana: Aims RM6bn to maintain top, bottomline. SapuraKencana Petroleum aims to secure RM6bn this year in order to maintain its top and bottomline. Its president and group CEO Tan Sri Shahril Shamsuddin said it would need that kind of job replenishment to maintain its financial numbers. He conceded that charter rates have come down but it would resort to cost cutting measures internally to preserve the margins. (StarBiz)

MAA Group: To sell 75% equity interest in MAA Takaful. Bank Negara Malaysia has granted MAA Group the greenlight to commence negotiation to sell its 75% equity in takaful unit, MAA Takaful, to Zurich Insurance Company Ltd. (Financial Daily)

Boustead Plantations: Expects RM122m gain from Kulaijaya land sale. Boustead Plantations expects a gain of RM122m from the sale of 247 ha of land in Kulaijaya, Johor for RM143m. The sale included selling 88 ha of land in Kulaijaya which was recently announced in May 2015. Boustead Plantations vice chairman Tan Sri Lodin Wok Kamaruddin said the proposed disposals would enable the group to unlock and realise further value in its investments, in line with its strategic plans. (StarBiz)

Press Metal: Executes amended agreement with Sesco. Press Metal has executed an amended and restated power purchase agreement (PPA) with Syarikat Sesco for the supply and delivery of 500MW power in one stage by the last quarter of 2015. (StarBiz)

Century Logistics: Gets special incentive package from MIDA. Century Logistics Holdings’ wholly owned unit Century Total Logistics SB (CTL) has been approved by the Malaysian Investment Development Authority to receive a special incentive package. The incentive package will enable CTL to qualify for income tax exemption via the investment tax allowance (ITA) of 60% of its qualifying capital expenditure within a 5-year period, from the 2015 year of assessment. (Financial Daily)

Brahim’s: To diversify business interests. Brahim's Holdings will reduce its revenue dependency from the airline catering business up to 50% within the next three years from over 90% of the company's topline. Chairman Datuk Seri Ibrahim Ahmad Badawi said the company is aggressively pursuing non-airline catering business following the conclusion of the new agreement with Malaysia Airlines (MAS). (SunBiz)

MBM Resources: To ramp up alloy wheel production. MBM Resources expects to ramp up its alloy wheel production to 200,000 units per month by end of 2015 from 34,000 units last year, driven by the completion of third phase capacity expansion of its alloy wheel facility in Rawang. (SunBiz)

MARKET UPDATE

Global markets saw temporary relief from Greek-related concerns and snapped two-day losses to close mostly higher for the day. Both the Dow Jones Industrial Average and S&P 500 gained 0.6% despite May housing starts numbers declining versus the previous month, encouraged instead by the surge in new building permits to a an almost eight-year high which indicated that any declines are temporary and that recovery remains firmly on track. Eyes continue to remain fixed on the Federal Reserve’s policy meeting this week for rate-related clues. European bourses also brushed off (for now) the very real possibility of Greece leaving the Eurozone with the country hurtling toward default as no deals remain forthcoming. It’s even more interesting to read about the Greek Prime Minister ratcheting up negative rhetoric which the country is obviously in no position to do so. Pandering to the country would set a dangerous precedent – be irresponsible with debt funding, change the leaders, get out of trouble as it was someone else’s doing. Hankering on the country (with a new anti-austere administration) for further reforms may very well drive it out of the economic bloc. Which is worse? (Musings for another time). For the day however, most benchmarks were higher. Both the IBEX 35 (Spain) and FTSE MIB (Italy) were 0.3% higher while the DAX (Germany) and CAC 40 (France) gained 0.6%. UK’s FTSE 100 slipped 0.4% however.

Earlier in the day, Asian markets tumbled however as investors wasted no time in scurrying out of equities ahead of Federal Reserve and Greek debt decision days, both of which would be seemingly negative. The Shanghai Composite Index slumped 3.5% on on-going valuation concerns following the bourse’s sharp rise in the last one year alone while the Hang Seng Index fell 1.1%. Singapore’s Straits Times Index declined 0.8% with the FBM KLCI ending another day relatively unchanged, gaining 0.08 points. The MAA Group announced that it has obtained Bank Negara approval to commence negotiations with Zurich Insurance Company for the sale of its 75% stake in MAA Takaful, a move which would see it all but end its involvement in the insurance industry after 3+ decades. Parkson Holdings’ move to pare down its stake in the Hanoi operations is a positive move, though relatively inconsequential in financial terms at this juncture, as it signals the company’s strategic focus on exiting loss-making setups while re-positioning itself in the region. More details are in the accompanying report today. Meanwhile, Astro Holdings reported a healthy 31% jump in its 1QFY16 net profit on better earnings and lower depreciation expenses.

Source: PublicInvest Research - 17 Jun 2015