Oil falls after industry report shows surge in U.S. crude stocks

Oil prices fell on Wednesday after data from an industry group showed a larger-than-expected build in U.S. crude inventories last week, fanning worries over global oversupply, even as a slightly weaker dollar provided some support.

Brent crude for December delivery had fallen 9 cents to $48.62 a barrel by 0313 GMT after settling up 10 cents in the previous session.

U.S. crude for December delivery dropped 24 cents at $46.05 a barrel after settling up one cent at $46.29. The November contract, which expired on Tuesday, finished down 34 cents at $45.55 per barrel.

"Concerns over the potential for a further build (in U.S. crude stocks) in official data (were driving prices lower)", said Michael McCarthy, chief market strategist at Sydney's CMC Markets.

http://www.reuters.com/article/2015/10/21/us-global-oil-idUSKCN0SF06W20151021

hello abang duit, long time no see.....thank you for your support.

coldrisks, thank you & you are most welcome, hopefully all make money from bursa.

Trading Buy with FV of RM1.68. All in, we are projecting the group to register NP of RM84.9m in FY16E, followed by a robust NP of RM150.1m in FY17E, with key earnings assumptions being 2-year revenue CAGR of 82% on the back of: (i) the recent two major contracts secured, (ii) Tecnic’s full revenue contribution from FY16, and (iii) 5% YoY organic growth assumptions for its existing businesses, as well as NP margins assumption of 7.2%-7.4% in FY16E-FY17E (which is in the mid-range NP margins of 6.8%-9.4% for the past three financial years). We value SKPRES at RM1.68/share based on a 12.0x FY17E PER, a valuation which is in line with the EMS industry players’ average PER. Coupled with the net dividend yield of 5% in FY17E (DPR assumption of 50%), our TP of RM1.68 suggest a total upside of 23% from here.

http://klse.i3investor.com/blogs/kenangaresearch/84725.jsp

SKP Resources - Full Steam Ahead

A re-look in view of emerging major catalysts. Recall that we had previously advocated a Trading Buy call on SKPRES at the price of RM0.49 on 26th June 2014 (report title: Bouncing Back) and managed to lock in a capital reward of 22.4% (at RM0.60) a month later. Since then, the share price has continued to rally to RM1.42 (as of the closing price yesterday) which we believe was mainly driven by: (i) positive market perception on the acquisition of Tecnic, (ii) expectations of earnings boost from various contracts secured, (iii) decent financial results, and (iv) the emerging of institutional funds as major shareholders. Even with the robust YTD gain of 122%, we still see more potential, with a series of major catalysts emerging.

· Long-term contracts to anchor robust 2-year revenue CAGR of 82%. We came away from a recent company visit to both its old and new plants in Johor feeling POSITIVE, having learnt that its expansionary plan is on track. Recall that the group had acquired a 2ha land in Senai Johor (for RM6.8m back then on March 2014) and allocated a total capex of RM34.0m for an additional capacity expansion of 90% in FY17 (which implies an evenly distributed 30% additional new capacity over the next three years). Since then, the group has secured two major contracts from its major customer Dyson, with the first one being announced on May 2015 (contract value of RM400m/year over the next five years for the first model of cordless vacuum cleaners) and another 5-year contract worth RM3.0b (or RM600m/year over the next five years for the second model of cordless vacuum cleaners) which was announced recently. Note that the official production for the contract announced on May 2015 has commenced and will start contributing in 3Q16. Meanwhile, the production for the second contract will only commence from Jan 2016 onwards (or 4Q16). Collectively, the production from these two contracts will take up the first 30% of the additional capacity expansion mentioned above. We are sanguine with these new contracts being secured as this signalled Dyson’s confidence in SKPRES’s capability, which should also warrant higher chances of it securing other contracts in the near to medium term.

· Positive spillover from Dyson’s aggressive expansion plans. Dyson had on end of 2014 promised a massive GBP1.5b (c.RM9.8b) investment for the development of four new ranges of technology which will eventually launch 100 new products around the world in the next four years. Positively, this Malmesbury (UK)-based company has now become the top player in the home of appliances technology, Japan. Back home, we see SKPRES, being the key manufacturer partner to Dyson in these recent years, is poised well in winning other contracts at least for the next three years given its growing presence with Dyson. Recall that SKPRES has already started its manufacturing commitment for Dyson (RM34m invested) by getting its capacity ready, to align with Dyson’s vision. Currently, Dyson contributes 55% to SKPRES’s total sales and the percentage is expected to be more given the robust orders secured.

· Full consolidation of Tecnic in FY16. Note that Tecnic’s financials have already been consolidated into the group earnings from 1Q16. We understand from the management that the FY14 revenue of Tecnic (FYE December) stood at c.RM300m. In terms of Tecnic’s prospect, management is confident of achieving at least 8% revenue growth YoY, to be driven by resilient demand in automotive industry, electrical and electronics industry, industrial packaging and consumer packaging. Meanwhile touching base on the synergistic benefits brought by Tecnic, the group has started leveraging on Tecnic’s leading precision, mould design and fabrication technologies to increase its ranges of value-added services to its customers.

· Sheltered from currency fluctuations. We understand from the management that the group is not benefitting nor adversely impacted from the current strong USD trend as it is operating on a cost pass-through business model with its customers. We see this as a blessing in disguise as this business model means stable group’s margins in spite of the currency/raw material prices fluctuations.

cont.

Market Outlook as at October 20, 2015

For the past 2 weeks, FBMKLCI has been pressing against the upper line ('AC') of its medium-term upward channel, ABCD. Buyers were reluctant to bid too aggressively but sellers were also hesitantly to sell off their shares. This stalemate must be resolved by either a breakout above the upper line, AB or a pullback towards the lower line, BD. The market was down by 14 points to 1704 as at 4.30pm and we will sign a test of the buyers & sellers' resolve tomorrow. If the index breaks below the psychological 1700 mark, it may slide down to test the horizontal line 1690. Beyond that, the index will find support at the lower line, BD (of the medium-term upward channel, ABCD) and the intermediate downtrend line, RR at 1650.

http://nexttrade.blogspot.my/

Support Line

Insas

INSAS recovered strongly from an almost two-year low of 58 sen on Aug 25 to reach a high of 82 sen during intra-day session amid continuous bargain-hunting buying momentum. A push above the 85-sen barrier would signal the end of the recent correction process, clearing the way for more advances. If that happens, the immediate target would be to challenge the 95-sen hurdle. The next strong resistance is expected at the RM1.05 level. Current support is envisaged at the 75-sen floor.

Mikro MSC

MIKRO MSC shares rebounded to a near 2½-month high of 39 sen in the wake of renewed buying. Based on the daily chart, prices will extend the upward thrust on follow-through interest as long as the short-term ascending line, now resting at the 36-sen level, continues to support the bulls. Immediate resistance is seen at the 42-42.5 sen range, of which a decisive breach would lead to a re-test of the historical peak of 47.5 sen, set on May 27.

TDM

TDM mended from the recent lows of 51 sen on Aug 25 to a high of 68.5 sen on Oct 5 before turning range-bound. Despite the recovery, the short-term trend is still bearish, with initial support resting at the 63-sen level. The next lower floor is lying at the 58-59 sen band. To the upside, a clear breakout of the short-term descending line of 72 sen would see the fortune of this counter changing for the better, en route to the 90-sen mark.

Cramer: China is doing better domestically

China's GDP numbers could be a sign that the economy is stabilizing, said CNBC's Jim Cramer on Monday.

"I continue to think that, domestically, China is a little bit better," he said on an interview with CNBC's "Squawk on the Street." "China has pluses and minuses versus six months ago when I thought it only had minuses."

China's economic growth eased to 6.9 percent in the third quarter from a year earlier, beating expectations but still the slowest since the global financial crisis, putting pressure on policymakers to roll out more support measures as fears of a sharper slowdown spook investors.

http://www.cnbc.com/2015/10/19/cramer-china-is-doing-better-domestically.html

Moody's downgrade 2016 oil prices estimates

Ratings agency Moody's has cut its price outlook for the both Brent crude and WTI, believing the rise in prices will take place at a much slower pace than originally forecast as oversupply and demand issues show no signs of waning.

The agency downgrade it price assumption in 2016 for Brent crude to $53 per barrel, down from $57. WTI was cut to $48 from $52 per barrel

http://www.cnbc.com/2015/10/19/oils-fundamentals-are-changing-goldman.html

Morgan Stanley retains ‘upgrade’ outlook for plantation sector

KUALA LUMPUR: Morgan Stanley has reaffirmed its industry view upgrade for the plantation sector and advised investors to have an “overweight” view despite a poor third quarter earnings ahead.

That’s because the research house expected the current excessive stocks to drop below key thresholds by the second quarter next year based on its supply-side deficit forecasts.

“We recently hosted a call with Golden Agri’s senior agronomist, who commented that yields had fallen 5% in recent weeks due to the haze and would likely fall by as much as 20% to 30% in the first half of next year as drought conditions impair oil palm flowering,” it said on Monday.

http://www.thestar.com.my/Business/Business-News/2015/10/20/Morgan-Stanley-retains-upgrade-outlook-for-plantation-sector/?style=biz

Property market to pick up in 2016: Survey

KUALA LUMPUR: A better property market is expected for 2016 as buyers are more interested in buying properties in one to two years onwards, according to the iProperty.com Asia Property Market Sentiment Survey (H2) 2015.

The survey polled over 15,000 respondents and 43% were from Malaysia. The majority were between 21 and 30 years old.

"The year 2015 is analysed by property experts to be the slums of property market slowdown for the decade, and discussions have it that the property market will begin to pick up in the year 2016, and will again reach its height in the year 2018," the survey report said.

http://www.thesundaily.my/news/1586485

CIMB Research’s top picks for long term

KUALA LUMPUR: CIMB Research has picked RHB Capital Bhd (RHBCap) ( Valuation: 1.65, Fundamental: 1.40), Only World Group Holdings Bhd (OWG) ( Valuation: N/A, Fundamental: N/A), MY EG Services Bhd (MyEG) ( Valuation: 1.10, Fundamental: 2.30), GHL Systems Bhd ( Valuation: 0.40, Fundamental: 1.20) and Hovid Bhd ( Valuation: 1.70, Fundamental: 2.10) with the highest potential share price upside for a three- to five-year investment horizon.

The research outfit projects that the five stocks have an upside that ranges from 114% to as high as 545.8%.

In a strategy note last Friday, CIMB Investment Bank Bhd ( Valuation: 1.65, Fundamental: 1.05) head of equity research Terence Wong said the purpose of his report was to identify stocks that investors can buy and hold for long periods of time without worrying too much, while at the same time enjoying significant price appreciation.

Wong is of the view that despite its large market cap and position within the mature and highly competitive banking sector, RHBCap (fundamental: 1.4; valuation: 1.65) is currently trading on low valuations, with end-FY16 (ending Dec 31, 2016) forward book value per share (P/BV) of 0.7 times and FY16 forward price-earnings (P/E) of seven times.

“We are excited about its long-term prospects (given its drive for regional expansion, backed by a strong management team and the Employees’ Provident Fund as its shareholder). RHBCap is ranked fifth highest on our list in terms of upside to long-term target price. The other four stocks ahead of it are all smaller caps, and OWG is in pole position,” he said.

Wong said OWG is a unique combination of captive food and beverage and a tourism play on Genting Highlands and Penang.

“If the company executes well, the upside to its share price, according to our calculations, is massive over the next three to five years,” he said.

As for MyEG (fundamental: 2.3; valuation: 1.1), Wong said although the stock has appreciated many fold over the past three years, he believes that the company’s outlook remains bright and it has several aces up its sleeve.

Wong likes GHL Systems (fundamental: 1.2; valuation: 0.4) as its new business model of acquiring merchants and sharing fees charged for credit card usage could potentially transform the company tremendously in the coming years.

Meanwhile, Wong said Gamuda scored highest in its long-term stock-picking matrix because of its proven capability to better leverage its strength and expertise into executing larger-scale projects over longer periods of time.

“Assuming that the execution of the Penang transport master plan kicks off with the RM5.3 billion high-priority light rail transit project and is completed within the next five to six years, this could translate into new potential reclaimed land bank of 800 acres (323.7ha) based on RM150 per sq ft break-even reclamation cost.

“Imputing this component based on the group’s (Gamuda’s) 60% stake in the project delivery partner joint venture would raise the target price further to RM7.20 based on a similar discount to revised net asset value,” he added.

CIMB Research’s end-2018 target price for RHBCap is RM13.12, which is more than double yesterday’s closing price of RM6.22. “We think that the target price is reasonable, as it only implies a FY19 price-earnings ratio of 10 times and end-FY18 price to book value of 1.2 times,” said Wong. The end-2020 target price is set at RM15.28.

OWG is given a 2018 target price of RM6.67, and RM14.66 for 2020, while CIMB IB has a 2018 target price on MyEG at RM6.65 and 2020 target price of RM9.65.

CIMB Research’s 2018 target price on GHL is RM2.40, more than double the closing price of RM1.13 yesterday. The stock’s 2020 target price is set at RM3.65.

In the healthcare field, CIMB Research plucked drug maker Hovid to have the best long-term earnings upside, with a major assumption that the clinical trials for its Tocovid Suprabio vitamin will enjoy some positive progress. The stock’s 2018 target price is RM1, while 2020’s target price is RM1.30.

Yue Xiu plans to promote Malaysia stocks to China investors

Hong Kong-based Yue Xiu Securities Holdings Ltd, which is part of the Yue Xiu Group-owned by the Guangzhou municipal government, is looking to buy about 10% stake in Malaysia’s largest independent investment bank K&N Kenanga Holdings Bhd, according to sources.

Yue Xiu plans to take over Deutsche Bank AG’s 8.84% stake in the bank, and buy the remainder from the open market, said the sources.

The Yue Xiu Group is the largest state-owned enterprise in Guangzhou in terms of asset size, with total assets exceeding 300 billion yuan (RM196bil) as of end-2014. Its core business areas are in real estate, finance, and transport and infrastructure.

Deutsche Bank AG, which currently holds 8.84% or 64.74 million shares in K&N Kenanga, has made known its intention to dispose of minority interests in small financial institutions as part of a plan to optimise its capital structure under the Basel III regulations.

http://www.thestar.com.my/Business/Business-News/2015/10/13/Hong-Kong-firm-eyes-stake-in-KN/?style=biz

Higher toll rates from Thursday on six major highways

KUALA LUMPUR: Toll rates along six major highways will go up between 20 sen and RM3 from Thursday, Oct 15.

The highways are the Kajang Traffic Dispersal Ring Road (SILK), Duta-Ulu Kelang Expressway (DUKE), Maju Expressway (MEX), Kuala Lumpur-Karak Highway (KLK), KL-Kuala Selangor Expressway (Latar) and the SMART tunnel.

Silk Holdings Bhd said on Monday that it would raise the toll for cars to RM1.80.

For vehicles with two axles and five or six wheels (except for buses), the new rate is RM3.60.

The toll rates for cars using the DUKE will be increased to RM2.50 at the Ayer Panas, Sentul Pasar and Kampung Batu toll plazas respectively.

MEX will increase its rates for cars to RM2 and RM3.50 at the Salak South toll plaza and Putrajaya toll plaza, respectively.

Motorists will also see an increase in charges for the KLK. Road users will be required to pay RM6 at the Gombak toll plaza and RM3.50 at the Bentong toll plaza.

For Latar, the new rates will be RM2.50 at the Ijok, Kuang Timur, Kuang Barat, Templer plaza toll and RM1.30 for Kundang Timur, Kundang Barat.
As for SMART tunnel, the new rate is RM3.

http://www.thestar.com.my/Business/Business-News/2015/10/12/Toll-rates-along-DUKE-SILK-Highway/?style=biz

Insider Asia’s Stock Of The Day: SKP Resources

SHARES for SKP have done very well over the past one year. Confidence in the company was boosted after it bagged two contracts to manufacture cordless vacuum cleaners for UK-based Dyson.

We believe much of the good news is already priced into its shares, which are now trading at a trailing P/E of 29 times. Nevertheless, investors can still look forward to rising dividends with good earnings visibility and solid balance sheet.

SKP is based in Johor. It manufactures plastic parts and components, precision mould making, sub-assembly of electrical equipment and other secondary processes for customers including Sharp, Sony and Hewlett-Packard. Prior to the new Dyson contracts, SKP had been manufacturing vacuum cleaners, hand dryers and bladeless fans for the former.

The new contracts are worth RM400 million and RM600 million over 5-years, the first starting this month while the second is scheduled to commence January 2016. Hence, the first full-year impact will be felt in FYMar2017.

Back of the envelope calculation — assuming current net margin of 7% (SKP is not exposed to forex movements) — suggests an annual profit contribution of RM70 million. Add that to annualised 1QFY16 results, net profit would total some RM142 million — meaning its FY17 P/E will drop to 10.4 times.

Importantly, SKP has a long track record of paying out around 50% of annual profits as dividends. At this payout ratio, yield would rise from the current 1.4% to about 4.8%.

Looking ahead, there is room for further growth. Including the latest contracts, its new plant in Senai is only 35% utilized.

Note that its 1QFY16 earnings included contributions from three newly acquired subsidiaries from Tecnic Group ( Valuation: 2.10, Fundamental: 1.95), which was completed in March 2015. The subsidiaries produce commercial lubricant packaging and tool fabrication for clients including Petronas, Nestle and Unilever. The new businesses account for some 25-30% of SKP’s revenue and are expected to see steady 8-12% annual growth.

http://www.theedgemarkets.com/my/article/insider-asia%E2%80%99s-stock-day-skp-resources

OKA (7140) - Biggest pipe manufacturer in Peninsular Malaysia

http://fatta888.blogspot.my/

The Biggest Winner From TPP Trade Deal May Be Vietnam

Vietnam, whose low-wage economy relies on exports, is likely to be the biggest winner of the Trans-Pacific Partnership that slashes an estimated 18,000 tariffs among the dozen participating countries.

In a decade, the country’s gross domestic product will be boosted 11 percent, or $36 billion, as a result of the world’s largest trade pact. Exports may soar 28 percent in the period as companies move factories to the Southeast Asian country. Here’s what analysts and economists say about Vietnam’s economic prospects and challenges under the deal.

http://www.bloomberg.com/news/articles/2015-10-08/more-shoes-and-shrimp-less-china-reliance-for-vietnam-in-tpp

Fed minutes: Members worried about slower global growth

The U.S. Federal Reserve thought the economy was close to warranting an interest rate hike in September but policymakers decided it was prudent to wait for evidence a global economic slowdown was not knocking America off course.

The minutes from the Sept. 16-17 meeting released on Thursday showed the Fed's policymaking committee was unsettled by signs of a global economic slowdown but didn't think this had "materially altered" the outlook for the economy.

"Nevertheless, in part because of the risks to the outlook for economic activity and inflation, the committee decided that it was prudent to wait for additional information," the Fed said in the minutes.

http://www.cnbc.com/2015/10/08/fed-minutes-members-worried-about-slower-global-growth.html

TPPA could boost Malaysia GDP by 5%, says Credit Suisse

KUALA LUMPUR (Oct 8): Malaysia could be among the biggest long-term economic beneficiaries from the Trans Pacific Partnership Agreement (TPPA) and experience a 5% boost to its gross domestic product, behind Vietnam’s 10%, according to Credit Suisse.

In a report Oct 7, Credit Suisse said the while details of the details of the agreement were still fuzzy, and ratification was not a given, the manufacturing sector should see the most positive impact in Malaysia.

It said the sectors in Malaysia which could gain the most were electronics, apparel and footwear.

“The impact on non-TPPA Asian countries is likely to be slightly negative due to diversion of trade flows and foreign direct investment,” it said

Opcom secures RM68 million Telekom job

KUALA LUMPUR (Oct 6): Opcom Holdings Bhd ( Valuation: 1.40, Fundamental: 2.20) has secured a RM67.8 million award byTelekom Malaysia Bhd ( Valuation: 1.10, Fundamental: 0.80) to supply, deliver, install, test and commission the Line Plant Network project from Oct 1 this year to Sept 30, 2018. In a filing with Bursa Malaysia today, Opcom said its subsidiary Opcom Cables Sdn

Templeton bets on multi decade opportunity in Mexico, Malaysia currencies

NEW YORK: The recent selloff in emerging-market assets, including Mexico and Malaysia's currencies, has opened up investment opportunities not seen for decades, according to Franklin Templeton's Michael Hasenstab, who's well known for making contrarian bets.

“On a valuation basis, this is not a once-a-decade, this is a multi-decade opportunity to be buying very cheap assets,” Hasenstab, who oversees 30 funds with $143 billion in assets, said in an interview posted on YouTube Monday. “We are not buying everything,” but “there are a handful that have been caught up in the turmoil that we think are diamonds in the rough,” he said.

The San Mateo, California-based money manager said he's buying the Mexican peso, Malaysian ringgit and Indonesian rupiah, while avoiding assets in Turkey, South Africa and Russia. He's also betting on an increase in U.S. Treasury yields and sees the dollar strengthening against the euro, yen and the Australian currency.

http://www.thestar.com.my/Business/Business-News/2015/10/06/Templeton-bets-on-multi-decade-opportunity-in-Malaysia/?style=biz

FLBHD: Breaking higher

One of the stocks that impressed me a lot over the past few days has been FLBHD. It rallied from an intra-day low of RM1.27 in mid-August to an intra-day high of RM1.99 today. That's very commendable for a stock that did not drop sharply in the recent selldown.

I must admit that I was more surprised to discover that I had called a BUY on this stock in late August and forgot about it. I racked my brain, wondering why did I make such a call since I was rather bearish at that point of time. After re-reading my earlier post again, I understand why. Go ahead and read it for yourself.

Anyway, FLBHD has broken above the neckline of its inverted head and shoulders formation (which strangely appeared not at the end of a downtrend). This means the head and shoulders formation is now a continuation pattern (not a reversal pattern) and the stock will likely go higher. I have projected a target price of RM2.35 for the current move.

Based on the above, FLBHD could be a trading BUY. Good entry level could be at RM1.80-1.85. Immediate resistance at the psychological RM2.00 mark. Good luck!

http://nexttrade.blogspot.my/2015/10/flbhd-breaking-higher.html

Market Outlook as at October 6, 2015

FBMKLCI rallied to an intra-day high of 1662 before correction set in. Looking at Chart 1, we can see that FBMKLCI nearly tested the upper line of its downward "channel". An upside breakout of this downtrend line as well as the neckline of the Head and shoulders top at 1690-1695 could herald the end of the downtrend. Since it did not happen today, we will have to wait a while longer

http://nexttrade.blogspot.my/2015/10/market-outlook-as-at-october-6-2015.html

Yee Lee sees beverage revenue doubling with Red Bull

KUALA LUMPUR (Oct 5): Yee Lee Corp Bhd ( Valuation: 1.40, Fundamental: 1.00) expects revenue derived from its beverage segment to double, with the addition of its exclusive right to distribute Red Bull energy drinks in Malaysia.

“The addition of Red Bull is expected to double the group beverage [segment] revenue. As for profits, we don’t know how much it will contribute yet, but it would definitely contribute positively to Yee Lee’s future profits,” its group chief executive officer Lim Ee Young told a press conference that was held to announce the successful transition of distribution services of Red Bull energy drinks in Malaysia today.  

Currently, Yee Lee distributes Spritzer and Cactus brand bottled water. Spritzer and Cactus brands are bottled bySpritzer Bhd ( Valuation: 1.40, Fundamental: 1.40).

Yee Lee’s 32.69% associated company, Spritzer, raked up a total revenue of RM253.67 million for its financial year ended May 31, 2015.   

Meanwhile, Yee Lee’s segment report for the cumulative six months ended June 30, 2015, showed that its associated company Spritzer contributed RM4.57 million to the former’s bottom line.  

The bottled water segment is categorised under its trading division. Within its trading division, Yee Lee also distributes other agencies' products such as Campbell brand and Old Town products, as well as edible oils.

Red Bull's exclusive agent Allexcel Trading Sdn Bhd's general manager Charles Wong said the company is targeting to sell five million cartons — 24 cans per carton — of Red Bull energy drinks this year.

Yee Lee was appointed by Allexcel to distribute and sell the Red Bull Gold, Red Bull Less Sugar and Red Bull Bottle energy drinks in Malaysia for a period of five years, beginning Aug 1, 2015.

Yee Lee's shares closed up 4.73% or 8 sen at RM1.77 today, bringing it's market capitalisation to RM311.04 million.

Time to invest in individual stocks that perform well

WITH the stock markets generally on a downtrend, it may be timely to look at individual stocks that have shown consistent performance on their own.

“These are stocks that are not moving in line with the market. They are individual stocks whose returns do not depend on the market direction,’’ said Pong Teng Siew, head of research, Inter-Pacific Securities.

With a recent “buy” call on Luxchem, he said the stock’s risk profile had been steady, with a tendency to not track the market trend.

As for Teo Seng, Pong said it had strong returns on shareholders’ funds while experiencing good demand for eggs for which prices were climbing.

Kossan was another consistent performer, Pong said, while Hartalega could be considered a long term stock.

Vincent Khoo, head of research, UOB Kay Hian, is looking at plantation stocks with IOI Corp being his top pick. Even though IOI Corp is trading at above 100 times price earnings (PE) ratio, Khoo maintains that historical PE is irrelevant; one has to look forward to better earnings from IOI Corp based on optimism over crude palm oil (CPO) prices as well the company’s potential re-entry into the syariah list.

After making a loss in the third quarter of financial year (FY) 2015, IOI Corp registered a profit of RM155.7mil for the fourth quarter of FY 2015.

How long will this plantation stock wave last? The El Nino spell that brings about substantial dry weather may possibly last six months, according to an analyst.

Besides the El Nino factor boosting palm oil prices, revenue from sale of CPO, denominated in US dollars, will be good as long as the value of the ringgit is falling faster than the US dollar value of competing oils, according to Pong.

Some recommend a mixed portfolio with markets at current levels.

This could comprise some dividend stocks and some with potential upside such as utilities, plantations and construction, said Chris Eng, head of research, Etiqa Insurance & Takaful.

Eng still sees some newsflow in construction, some strength in CPO prices while utilities remains oversold.

There may be some stocks that are relatively more stable than others although in general, stocks are not spared from the recent volatility due to sentiment and liquidity issues, according to Danny Wong, CEO, Areca Capital. These more stable stocks include REITS, port operators, special purpose acquisition companies (SPACs), companies in healthcare, pharmaceuticals and non-consumer sectors.

Currently, there are only oil- and gas-related SPACs listed on Bursa Malaysia; these are cash rich Cliq Energy and Reach Energy.

Non-consumer sectors deal with companies producing basic necessities such as Nestle and Dutch Lady.

On top of that, the thematic performers for the year are glove, electrical and electronic as well as technology companies, said Wong.

http://www.thestar.com.my/Business/Business-News/2015/10/05/Time-to-look-at-individual-stocks-that-perform-well/?style=biz

Investors brace for stocks to fall again ahead of earnings

The global market volatility of the past month that sent U.S. stocks to their worst quarter in four years shows no signs of letting up just because the calendar turned to October.

Investors say they are bracing for another leg down in the S&P 500 stock index despite its positive showing last week by increasing cash and other defensive positions in their portfolios.

"Do I think we go into a bear market? No. Can we inch toward it? Absolutely," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

With the backdrop of slowing jobs growth in the U.S. and the collapse of global commodity prices, third quarter corporate results will take on a heightened significance when companies begin reporting them next week, analysts said. Alcoa Inc, traditionally the first company to report its results, is scheduled to announce its third quarter earnings after the market closes on Oct. 8.

Overall, corporate earnings are expected to fall by 4.1 percent, according to Thomson Reuters data. That figure is skewed, however, by an expected 65 percent fall in energy sector results.

"The single most determinant variable is going to be earnings at this point," said Mark Freeman, chief investment officer at Dallas-based Westwood Holdings Group. He has been raising his cash levels, and at the same moving more of his portfolio into healthcare and technology companies that show signs of growth.

"The market continues to narrow and narrow. We're not about to fall into a bear market, but I'm starting to think the raging bull market is over," he said.

A weaker than expected U.S. employment report for September on Friday diminished inflation expectations, and the prospects for a dim U.S. corporate earnings season, are all factors fanning worries that the economic recovery could be derailed.

Concerns about the global economy has fueled a series of deep declines and snap-back rallies over the last month, as investors look for surer footing. The S&P index had fallen more than 10 percent from the record high it reached May 20, and after starting with a selloff on Friday, closed up 1.42 percent, still down 8.6 percent from its recent high.

Investors pulled $22 billion out of U.S. equity funds in the third quarter, while putting a record $17 billion into U.S. Treasury funds, according to Bank of America Merrill Lynch.

Those investors have had few places to hide. Of the 21 major financial asset benchmarks tracked by Reuters, only two - the U.S. dollar and 10-year U.S. Treasury bonds - have posted positive returns so far this year, leaving investors with the worst financial market returns since the financial crisis in 2008.

http://www.reuters.com/article/2015/10/03/us-markets-stocks-usa-weekahead-idUSKCN0RW1XD20151003

Bhd name effective Oct 7, 2015, while its warrants will also be re-named to O&C Resources Bhd-Warrants 2011/2016.

Mercedes-Benz Malaysia Sdn Bhd, the joint venture between Daimler AG and Cycle & Carriage Bintang Bhd ( Financial Dashboard), recorded year-to-date sales of more than 8,000 passenger cars, surpassing last year’s 6,932 units.

Year-on-year, Mercedes-Benz Malaysia sales and marketing vice president Mark Raine said the premium car maker had seen a sales growth of 40%.

“We have had a fantastic first half in 2015, and I believe that we have a great positioning for our products in the market,” Raine told theedgemarkets.com during the launch of the new Mercedes-AMG C 63 S model today.

Despite the current challenging economic climate, Mercedes-Benz Malaysia had achieved record-breaking monthly sales so far, according to Raine.

He said the record-breaking monthly sales were due to “the successful sales of all types of Mercedes-Benz models”.

Is now a good time to buy?

KUALA LUMPUR: After global markets nose-dived in the previous quarter, most companies' stocks have been left in the doldrums, trading at multi-year, if not record, lows. Malaysia is no exception.

The low share prices, coupled with a ringgit that's plumbing depths that were only last seen during the Asian financial crisis 17 years ago, are making stocks on Bursa Malaysia good bargain buys for multinational corporations looking to widen their footprint to this side of the world through mergers and acquisitions (M&A) - particularly for non-protected sectors where local shareholding is not a must.

Some cash-rich controlling shareholders may also want to grab the opportunity to take their companies private since prices have fallen so low, with companies increasingly trading below their book value, according to The Edge Malaysia in its latest cover story (Oct 5-Oct 11), 'Ripe for privatisation, M&A?'

Privatisation opportunities, it wrote, arise when the market does not value a company fairly over a period of time. Hence, taking it private will enable the controlling shareholder to unlock its value - either by asset-stripping, if it has multiple businesses, or by asset disposals.

http://www.theedgemarkets.com/my/article/now-good-time-buy

The worst may be over for Malaysia’s debt markets

WITH markets gripped by fear of further capital outflows out of Malaysia, investors have been bracing for a further decline across major asset classes.

The pullback in capital from the bond market in particular has exacerbated the ringgit’s decline this year.

Trading volume for bonds largely remained cautious since August as the markets braced for an interest rate hike by the US Federal Reserve in September, which did not materialise.

According to Hong Leong IB Research, RM56.8bil worth of Malaysian government securities (MGS) were traded in August, compared to RM84.8bil in January.

However, with valuations for Malaysian bonds looking more attractive, it makes sense for foreign investors to stay put, say analysts.

For example, the recent maturity of RM11bil worth of Malaysian sovereign debt on Sept 30 did not indicate a capital flight among foreign investors, says RHB Banking Group’s credit strategist for fixed income research Fakrizzaki Ghazali.

“While yields are still on an upward trajectory, it looks like the worst of the outflows is over. The more significant capital pullback happened in August, which coincided with the yuan devaluation and the decline in global markets.”

Concerns over a massive capital flight caused the yield on 10-year MGS to spike to 4.5% on Sept 29, the day before the maturity of some RM11bil worth of government bonds. However, the yield swiftly contracted to 4.1% on Oct 1 as the market stabilised.

http://www.thestar.com.my/Business/Business-News/2015/10/03/The-worst-may-be-over-for-Malaysias-debt-markets/?style=biz

Big boost to SunCon order book

RM1.6bil Putrajaya job has better margin due to design-and-build concept

SUNWAY Construction Group Bhd (SunCon) is excited over its latest project award, the RM1.6bil Parcel F in Putrajaya for three main reasons – it’s the company’s biggest contract year-to-date, with a better margin due to its design-and-build concept and, it is going to be the final building to be developed in the administrative capital.

“Our order book is at RM4.3bil with this new award and as it is a design and build concept that includes technical proposal, the margin should be double digit.

“This is quite high compared to the standard open tender construction jobs such as rail infrastructure that commands a 5%-10% margin.

“We have been awarded jobs in Putrajaya quite consistently since 2000 and we are glad to be developing Parcel F, the final building in Putrajaya,” senior managing director Kwan Foh Kwai tells StarBizWeek recently.

SunCon was awarded the Parcel F job in mid-September. Works will involve the proposed design, construction and completion of government office buildings consisting of office towers, podium parking and external works.

They would include all temporary and permanent works but not limited to architectural, interior design and fit out, landscape, building maintenance system, building facade, civil, structural, mechanical, electrical and system works.

Kwan explains that design-and-build job such as this would also fully utilised its capabilities of its complete end-to-end construction services and products parked under five business units.

Besides construction that controls about 85% of its revenue, SunCon, that was re-listed less than two months ago after a decade since its privatisation, is now equipped with in-demand industry’s services and products such as foundation and geo-technical engineering services, mechanical, electrical and plumbing services as well as the manufacturing of pre-cast concrete products.

SunCon also owns ten bore piling machines that are vital to the initial stage of any urban rail elevated construction jobs.

On upcoming awards, Kwan expects Malaysia’s focus on infrastructure development, especially in urban rail systems and highways a clear earnings visibility at least for the next five years.

“I expect some of the viaduct contracts of mass rapid transit system two (MRT2) and light rail transit system 3 (LRT3) will start their award process by the first quarter of next year.

“We are also expecting to hear positive news on the awards on highways in the Klang Valley and the Pan-Borneo Highway somewhere next year,” he says.

Kwan says his management team has returned from east Malaysia after searching for partners to bid for the Pan-Borneo Highway.

http://www.thestar.com.my/Business/Business-News/2015/10/03/Big-boost-to-SunCon-order-book/?style=biz

ManagePay to operate retail chains’ e-wallet, loyalty card programme

KUALA LUMPUR: ManagePay Systems Bhd ( Valuation: 0.00, Fundamental: 1.30) has been appointed the managing operator of local retail chains’ electronic wallet (e-wallet) and cashback loyalty card programme.

In a statement yesterday, ManagePay said its wholly-owned unit ManagePay Services Sdn Bhd will be responsible for issuing, acquiring and operating the Malaysia Retail Chain Association’s (MRCA) Ringgit Rewards Card — a MasterCard co-branded prepaid card — programme.

The appointment is subject to approvals from all relevant authorities and participating merchants.

The MRCA represents some 250 leading retail chain store operators and franchisers with about 20,000 outlets throughout Malaysia.

However, ManagePay did not specify what the potential financial benefits of the partnership are.

Under the Ringgit Rewards Card programme, consumers can load cash value to be used in lieu of cash at participating MRCA outlets and get purchase benefits, such as immediate discounts or cashback.

The accumulated cashback earned can be used to redeem the consumers’ desired reward or next purchase at participating MRCA outlets.

ManagePay shares, which peaked at 36 sen on May 15, closed at 24.5 sen yesterday, half sen or 2% lower from Wednesday’s close, with a market capitalisation of RM174.06 million

CIMB Research retains Add rating for GHL System

KUALA LUMPUR: CIMB Equities Research has recommended investors accumulate GHL Systems as its earnings growth prospects are intact and it is confident of its execution strategy, despite some teething issues which have been resolved.

It said on Tuesday it would monitor GHL’s Malaysian credit card transaction payment acquisition (TPA) performance from 3Q15 onwards.

“We maintain our Add rating while raising our target price to RM1.65 as we roll it forward. Our target price basis is 23 times CY17 P/E, a 30% premium over the sector average of 18 times,” it said.

CIMB Research said GHL’s management highlighted that its card TPA deployment was gaining traction following the partnership with CIMB Bank.

In 3Q15, GHL acquired an average of 338 merchants with a monthly throughput of about RM7,500. While this is still below the monthly target of 500 merchant acquisitions, the research house expected it to improve from 3Q15 onwards when GHL completes its system integration with Global Payments.

“GHL also revealed that it has finally received approval from its Philippines banking partner; Metrobank to begin its card TPA deployment in the Philippines. It started merchant acquisition in September 2015.

“This is positive for GHL as we view the Philippines as an important market as it offers the highest merchant discount rate (MDR) given the lack of competition. We expect its Philippines card TPA to deliver 1,000 merchants by end-2015.

“We are also excited about GHL’s new driver, its online merchant acquirer business through e-GHL, an online payment gateway for small and medium enterprises. As of August 2015, GHL has an online base of about 590 merchants. It aims to grow it to 4,000 to 5,000 merchants in the next three years and become one of the largest online merchant acquirers in the region,” it said.

Feeling Bearish? Try FBMKLCI Puts

As at 12:00pm, FBMKLCI was trading at 1598. This means that it is barely hanging onto the psychological 1600 level.If this support is violated, then FBMKLCI may decline to the next support at 1550-1560.

Despite crawling back some lost ground yesterday, MYR is again weakening. It traded at 4.443 against USD or 3.115 against SGD. If the MYR were to weaken any further, the floodgate will open.

In the face of these negative outlook, some may consider buying insurance to protect their portfolio. This insurance comes in the form of put option (or we call them put warrants). If the market drops, your stock portfolio would lose value but the put warrant will rise to reduce the loss. Below is the list of FBMKLCI put warrants for your consideration.

You should aim to buy put warrants with lower premium & longer expiry dates. I have highlighted in bold 4 put warrants that are not too exorbitantly priced. They are FBMKLCI-H1, FBMKLCI-H19, FBMKLCI-H3 and FBMKLCI-HK.

Just a word of caution for traders. Put warrants - like every other structured warrant - are leveraged instruments. They magnified your gains as well as your losses. Use them carefully! Good luck!

http://nexttrade.blogspot.my/2015/09/feeling-bearish-try-fbmklci-puts.html

Consumer confidence rises in September

U.S. consumer confidence rose and was higher than expected in September, according to a private sector report released on Tuesday.

The Conference Board, an industry group, said its index of consumer attitudes rose to 103.0, the highest since January, from a downwardly revised 101.3 the month before. Economists had expected a reading of 96.1, according to a Reuters poll.

http://www.reuters.com/article/2015/09/29/us-usa-economy-confidence-idUSKCN0RT1PQ20150929

SKPRES: Rising in a Vacuum

Background

SKP Resources Bhd ('SKPRES') is involved in the manufacture & sales of plastic parts and components, precision and engineering plastic parts. In early 2015, it acquired similar businesses from its sister company, Tecnic Group Bhd.

In the past 6 months, SKPRES had managed to secure 2 significant contracts from one of its big customers, Dyson Ltd. The details of these 2 contracts are as follows:

1) RM2 billion to manufacture new cordless vacuum cleaner spanning five years from October 2015 to September 2020. This translates to an annual revenue of RM400 million.

2) RM3 billion to manufacture new cordless vacuum cleaner spanning five years from January 2016 to December 2021. This translates to an annual revenue of RM600 million.
These contracts would boost SKPRES's revenue for FY16 & FY17 to RM1.3 billion & RM2.3 billion respectively. The company is expected to achieve net profit margin of 7.5% in these 2 years due to enlarged business size and improved efficiency.For more, check out The Edge Daily report.

Historical Results

We can see the gradual improvement in the Top-line & bottom-line for SKPRES for the past 10 years. With the jump in revenue & profits projected for the next 2 years, this uptrend will rise exponentially.

Valuation

SKPRES (closed at RM1.35 last Friday) is now trading at a PER of 25 times (based on last 4 quarters' EPS of 5.3 sen). Based on projected earnings of 10.8 6.8 sen & 19.2 12.0 sen for FY16 & FY17, the high PER will pull back to an attractive 12.5 19.9 times & 7.0 11.2 times, respectively.

(Note: The EPS & PER for FY16 & FY17have been revised.)

Technical Outlook

SKPRES is in an upward channel with support at RM0.85 & resistance at RM1.60.

Conclusion

Based on projected sharp rise in earnings & bullish technical outlook, SKPRES could be a good growth stock to consider for investment in the event of price weakness.

http://nexttrade.blogspot.my/2015/09/skpres-rising-in-vacuum.html

contn,

Frozen flatbread maker Kawan Food Bhd ( Valuation: 1.10, Fundamental: 3.00) is also worth a look. The locally groomed frozen paratha and chapati maker has presence in 35 countries globally. Unlike Oriental Food and Apollo Food, Kawan Food (fundamental: 3; valuation: 1.1) saw a growth in both its revenue and net profit in its latest quarterly financials.

In 2QFY15 ended June 30, revenue gained 8.7% to RM44.29 million from RM40.75 million a year ago, while net profit rose 34.6% to RM7.27 million from RM5.4 million, which Kawan Food attributed to higher turnover and a favourable ringgit-to-US dollar exchange rate.

Exports make up 62.8% of Kawan Food’s revenue, with North America taking up about half of that, at 30%.

The subdued trend in global commodity prices is also favourable to Kawan Food, according to Kenanga Research in an Aug 20 report.

“As of 1H15 (first half 2015), prices of wheat and skimmed milk powder had fallen by 26.5% and 44.7% respectively. Note that flour (by-product of wheat) is the largest component of Kawan Food’s raw material costs at 50%, followed by margarine (by-product of milk powder) at 30%,” noted Kenanga Research.

The research house forecast Kawan Food’s gross margin to expand to 44.5% for FY15 from 42.6% in FY14. It also expects the flatbread maker’s net profit to grow by 19.2% in FY15 and FY16.

Kawan Food is currently trading at 16.79 times, based on last Friday’s share price of RM2.38. Year to date, the counter has risen 70%.

http://www.theedgemarkets.com/my/article/food-exporting-counters-find-favour-ringgit-falls

Food-exporting counters find favour as ringgit falls

KUALA LUMPUR: Export-oriented counters seem to be the flavour of the year as the ringgit continues falling against the US dollar amid a seemingly endless oil price rout and commodities slump.

Year to date, the ringgit has depreciated 25.4% against the US dollar. Last Friday, it ended the trading hours at 4.3863 against the greenback, and at 3.0808 against the Singapore dollar.

Aside from glove makers, semiconductor companies and furniture exporters, food manufacturers with overseas market exposure have also been making a tidy profit from the favourable exchange rate, sparking investor interest as they scorn old favourites like oil and gas counters.

One such counter is snack food and confectionery manufacturer Oriental Food Industries Holdings Bhd ( Valuation: 1.10, Fundamental: 2.80) (fundamental: 2.8; valuation: 1.1), the producer of the famous cheese-flavoured Super Ring corn-based snack and Jacker potato chips, which has seen its year-to-date share price more than double (up 117.4%) to RM1.50 last Friday.

The company derives more revenue from its overseas market compared with local market. In its financial year 2015, overseas sales made up 54.7% of its total revenue, while the domestic market contributed the remaining 45.3%.

“Potato-based products are the largest contributor to Oriental Food’s export market as 70% of the potato chips produced are exported,” said Kenanga Research in its report dated April 16, 2015.

In its first quarter ended June 30, 2015 (1QFY16), Oriental Food’s revenue declined 6.4% to RM56.65 million from RM60.55 million in the previous year, as local demand for snack food declined.

But lower cost of sales, cheaper selling, distribution and administrative expenses — together with significant gains from foreign exchange — were enough to compensate for the lower local sales contribution and pushed its 1QFY16 net profit up by 88% to RM6.09 million, almost double that of RM3.24 million seen in 1QFY15.

The latest quarter also showed that its home market contributed only RM22.21 million or 39% of total revenue, while its overseas market trumped it with RM34.45 million revenue, or 61% — comprising 42% from Asian markets ex-Malaysia, and 19% from other markets.

If the ringgit weakens further, it’ll only be good news for the company. Kenanga Research noted in its report that every 10 sen increase to buy one US dollar will result in an extra RM1.5 million profit for the company.

It is also noteworthy that Oriental Food has a dividend policy of paying out at least 35% of its net profit, which it has been consistently adhering to each financial quarter. In FY15, its dividend payout totalled 13 sen per share, above the 9.5 sen paid in FY14.

As at June 30, 2015, the company’s cash and cash equivalents stood at RM35.6 million, while gross borrowings stood at about RM10.99 million.

In May, the company declared a bonus issue of 60 million shares on the basis of one bonus share for one Oriental Food share held to reward loyal shareholders, followed by a share split of every one share into two new ones.

It currently trades at a price-earnings ratio of 14.38 times.

Apollo Food Holdings Bhd ( Valuation: 2.40, Fundamental: 1.95) (fundamental: 1.9 ; valuation: 2.4), which produces chocolate confectionery products and layer cakes, is another snack food manufacturer with a substantial export market.

According to Asia Analytica Sdn Bhd’s report on Sept 4, Apollo Food derives about 40% to 50% of its revenue from exports, which are mainly denominated in US dollars.

The company’s net profit for 1QFY16 ended July 31 surged 95.7% to RM11.19 million from RM5.72 million a year ago, propped up by foreign exchange gains and lower operating cost, even though revenue declined 3.3% to RM49.9 million.

“The stronger earnings were anticipated as the company is a beneficiary of the weakening ringgit and lower commodity prices (hence lower raw material cost),” said Asia Analytica’s report.

Apollo Food dividend yield also looks attractive. For FY15, it declared a dividend of 25 sen per share, equivalent to a yield of 5.3% based on last Friday’s share price of RM4.72.

Asia Analytica opined that Apollo Food would be able to sustain its 25 sen dividend payout until at least FY16, given its cash-rich balance sheet and low capital expenditure requirements; as at July 31, 2015, Apollo Food’s cash balance totalled RM100.03 million; it has no borrowings.

Apollo Food’s price-earnings ratio is currently at 12.27 times, based on its closing price of RM4.72 last Friday. Its share price has risen about 7.27% year to date; the counter has hovered largely between RM4.98 and RM4.30 throughout the year.

SKP Resources sees RM2.3b annual sales by FY17

KUALA LUMPUR: Electronics cum plastic parts manufacturer SKP Resources Bhd ( Valuation: 1.10, Fundamental: 2.10) expects to achieve an annual revenue of RM2.3 billion by the financial year ending March 31, 2017 (FY17), with a targeted average profit margin of 7.5%.
“We just closed FY15 with about RM600 million [revenue]. For FY16, we will probably do RM1.3 billion, and then followed by about RM2.3 billion in FY17,” the group’s executive director Ivan Gan Poh San told The Edge Financial Daily after the group’s annual general meeting last Friday.

Gan explained that FY16 sales would be driven by consolidation of the businesses that it had acquired from sister company Tecnic Group Bhd ( Valuation: 2.10, Fundamental: 1.95), which was just concluded earlier this year.

The move was to enable SKP Resources to transform into a more diversified player in the plastics industry.

The group is justifiably confident about its FY17 target as it has already clinched two five-year contracts this year totalling RM5 billion from its major customer, British-based Dyson Ltd.

Recall that on May 18, the group bagged a RM2 billion job from Dyson to manufacture the latter’s new cordless vacuum cleaner. The contract, which spans five years and begins from October, is worth RM400 million per annum.

On Sept 14, SKP Resources secured another RM3 billion contract from Dyson, scheduled to start in January 2016 — again with a tenure of five years — worth RM600 million per annum for the same product.

Further, Gan, who is also son of SKP Resources and Tecnic’s common controlling shareholder Datuk Gan Kim Huat, revealed that SKP Resources’ current average profit margin across all its assembly lines is about 7% to 7.2%, and that the management intends to raise the figure to 7.5% by FY17 by enhancing the group’s production efficiency.

“As of now, we are not in talks for additional orders yet. This is because we are putting more attention on the businesses on hand as the company has grown so much [after acquiring Tecnic’s businesses],” Gan said when asked if SKP Resources is in any talks for more jobs.

“Of course we will still proactively seek to replenish our orders, but with this significant growth of business size, we will concentrate on more improvements [in efficiencies] first,” Gan said.

SKP_price-chart

Still, Gan said there is potential for more jobs from Dyson, as the latter is investing £1.5 billion (RM10.02 billion) into research and development over the next four years.

“This will indirectly create a lot of new products, so these will be things that hopefully SKP Resources can work with them on,” he added.

Following the acquisition of Tecnic’s businesses, SKP Resources has broadened its customer base to include Exxon Mobil Corp, Petroliam Nasional Bhd, Nestle (M) Bhd ( Valuation: 1.50, Fundamental: 1.15), Unilever plc, Sony Corp and Panasonic Corp.

For the first quarter ended June 30, 2015 (1QFY16), SKP Resources’ net profit jumped 85.55% year-on-year to RM17.9 million from RM9.65 million. Revenue ballooned 84.51% to RM243.06 million from RM131.74 million in 1QFY15.

Last Friday, SKP Resources shares (fundamental: 2.1; valuation: 1.1) closed unchanged at RM1.35, with a market capitalisation of RM1.46 billion. Year to date, its share price, which was trading at 64 sen on Dec 31, 2014, has more than doubled.

http://www.theedgemarkets.com/my/article/skp-resources-sees-rm23b-annual-sales-fy17

Oil prices fall on slowing global economic growth outlook

Oil prices dropped in early trading in Asia on Monday despite a fourth weekly fall in U.S. drilling activity, with analysts pointing to the weak economic outlook as the main reason for low crude prices.

The International Monetary Fund is likely to revise downwards its estimates for global economic growth due to slower growth in emerging economies, IMF head Christine Lagarde said in a newspaper interview.

http://www.reuters.com/article/2015/09/28/us-markets-oil-idUSKCN0RS00Y20150928

Efficient E-Solutions to sell two units to Canon Singapore for RM75m

KUALA LUMPUR (Sept 25): Efficient E-Solutions Bhd, an electronic business process outsourcing (BPO) service provider, is disposing of its entire equity stake in two wholly owned subsidiaries to Canon Singapore Pte Ltd for RM75 million, cash, to unlock the value of its investments.

The proposed disposal is expected to result in a one-off gain of RM51.7 million or 7 sen per share, the company said, from which it plans to distribute RM12.1 million as special cash dividend to reward its shareholders, according to its filing on Bursa Malaysia today.

The deal is expected to be completed by the end of this year, after which it intends to distribute the cash dividend to shareholders within three months.

Efficient E-Solutions entered into a conditional share purchase agreement today with Canon Singapore, a wholly owned unit of Canon Inc, for the disposal.

http://www.theedgemarkets.com/my/article/efficient-e-solutions-sell-two-units-canon-singapore-rm75m-0

Myeg - contn

Cardbiz – new income stream

On another significant development, MyEG announced on Aug 28 that the proposed acquisition of 61.61 million shares or a 55% stake in Cardbiz for RM6.23mil has been completed, and that Cardbiz Holding Sdn Bhd has become a subsidiary of MyEG.

A few months earlier, MyEG announced that it was entering the card payment and terminal business by acquiring Cardbiz. This appeared to be a move to lessen its reliance on government contracts and go into the commercial side of business.

In fact, so positive was MyEG over its new commercial endeavour, that in a previous interview, managing director T.S. Wong told StarBizWeek the company would consider listing this division as a separate entity over the next few years.

“We will never enter a particular market space if we don’t believe that we can disrupt the existing model, more so for a mature segment like credit and debit card terminals,” Wong had said back then.

Cardbiz is an investment holding company with five key subsidiaries namely CardBiz Solutions Sdn Bhd, CardBiz Payment Services Sdn Bhd, CardBiz Technologies Sdn Bhd, Buy Now Asia Sdn Bhd and Cardbiz Payment Services Pte Ltd.

Exit or stay with MyEG?

MYEG Services Bhd has been on an almost non-stop upward trajectory since 2013. It was the best performing stock in 2014, and even this year with the FBM KLCI underperforming the region, MyEG is still up 27.01% on a year to date basis at its last done price of RM2.68.

The company piqued investor interest when it started making its mark as a concessionaire for Malaysia’s various electronic government flagship applications. In 2012, the company was hovering around the 30-sen level, By March 2013, the stock started its upward trajectory from 40 sen, and well, this uptrend has apparently yet to end.

At RM2.68, the stock has made patient investors who held at the 40-sen level 5.7 times richer.

Is it time to call it quits or is there more upside?

At its current price, the stock is trading at a rich price earnings ratio (PER) of 47.02 times. However, this PER is estimated to drop significantly to 18.48 times for its next financial year (FY) ending June 30, 2016. Analysts are forecasting a large jump in its earnings by next year on contributions of its foreign workers permit renewal services (FWPR).

Currently there are only two research houses covering the stock, CIMB and Macquarie Research. Both have buy calls, with CIMB giving a target price of RM3.92, while Macquarie has a target price of RM3.17.

MyEG has been recording above average margins due to the nature of its service business. For instance, net profit margins recorded in FY12, FY13 and FY14 were 40.9%, 45.6% and 43.7% respectively.

While margins were growing, so was the company’s revenue. Over that same period, revenue grew by 13.8%, 14.3% and 43% respectively. Its revenue grew as the company won new contracts. This could be perhaps why the stock’s higher PER is somewhat justified.

The stock today has a market capitalisation of RM3.22bil and a five-year dividend growth yield of 25.73%,

Moving forward, the catalysts for MyEG are its FWPR services as well as its newly-acquired card payment and terminal business. In fact, MyEG is aiming for the card payment and terminal business to contribute some 70% of its total revenue over the next three years.

MyEG is Malaysia’s e-Government services provider. The group’s services facilitate e-Government services between the public and various government agencies, namely Jabatan Pengangkutan Jalan, Jabatan Pendaftaran Negara, Polis DiRaja Malaysia and the Immigration Department among others.

For the fourth quarter to June 30, 2015, MyEG’s net profit was up 37.99% to RM22.95mil on the back of a 27.4% jump in revenue to RM45.06mil.

The revenue expansion during the period was attributable to higher volumes from services related to the online renewal of foreign workers’ permits, continued growth in volume from online renewal of motor insurance and road tax and a gain from revaluation of its start-up investment.

Thus basic earnings per share jumped from 4.2 sen to 5.7 sen after taking into consideration the adjustment arising from the bonus issue during the current financial year.

MyEG also declared a final dividend of 1.4 sen per share. Together with the interim dividend of 0.5 sen per share paid on May 21 2015, the group’s total dividend declared in respect in FY15 amounts to 1.9 sen, translating to dividend payout of RM22.8mil, or 30.5% of its FY15 full year income.

In one of its latest announcements on Sept 4, MyEG announced that a consortium of companies, of which MyEG is one of the member, has received an appointment letter from the Immigration Department to undertake the registration of illegal foreign workers in the country.

The project will be an extension of the scope of service provided by the company to the Immigration Department of Malaysia.

The tenure of the project commences from Sept 4 to March 4, 2016.

This project is expected to contribute positively to the earnings of the company, as it is expected to increase the total number of legal foreign workers in the country, hence increasing the fees generated from the online renewal of foreign workers permit.

In May, the government appointed MyEG to monitor, build and maintain a database for foreign workers in the country, which the company does via its online FWPR services.

According to CIMB Research, there are currently about 2.5 million documented and 4 million to 5 million illegal foreign workers in the country.

Working together with the authorities, CIMB Research estimates that MyEG will at least register an additional 1 million undocumented workers over the next few months.

“In our forecasts, we are only assuming a conservative additional 1 million undocumented workers using the FWPR services. Every additional 1 million FWPR transactions should boost MyEG’s revenue by RM100mil annually or RM47mil in net profit,” said CIMB Research.

This would translate to an earnings per share boost of 3.9 sen or a 24% rise in its FY16 earnings.

Malaysia deserves junk status like Brazil, says Moody’s

Six developing nations, including Malaysia and South Africa, deserve to follow Brazil into junk status, if credit-default-swaps traders are to be believed.

Two weeks after the Latin American country’s credit rating was lowered, CDS investors are punishing other emerging markets facing similar challenges, sending their implied sovereign ratings at least five levels below their official grades, according to data from Moody’s Corp.

Malaysia is A3 at the company, though traders see it six levels lower at Ba3. South Africa, which is a Baa2, is viewed as a B1 borrower. Three Aa3 nations, including China, are perceived by the markets as deserving the lowest investment grade.

Most developing nations are confronting the same issues that saw Brazil losing its investment-grade rating at Standard & Poor’s – a plunge in commodity prices, a slumping currency and political turmoil.

http://www.themalaysianinsider.com/malaysia/article/malaysia-deserves-junk-status-like-brazil-says-moodys/malaysia/article/malaysia-deserves-junk-status-like-brazil-says-moodys

UOB Kay Hian Research sees more upside for MyEG Services

KUALA LUMPUR: MyEG Services promises robust earnings growth through FY17, as it builds a significant activity chain on its online renewal services for foreign workers and will soon roll out telco services as part of a joint venture for foreign workers, says UOB Kay Hian Malaysia Research. 

MyEG has also started to extend its online renewal services to eligible illegal workers, which coupled with the planned commencement of its GST project, also promises significant incremental earnings growth, it said on Wednesday. 

“MyEG is expected to achieve net profit CAGR of 72% in FY15-FY18 and it is trading at 15.2 times/10.8 times 2016/2017 PE, based on consensus forecast,” it said. 

UOB Kay Hian Research said with the government’s decision to build and maintain a database of foreign workers in Malaysia, the Immigration Department had decided to do all renewals online and appointed MyEG as the sole service provider effective as of April 29, 2015 until 2020. 

It is mandatory for all foreign workers’ employers to use this online platform, unlike previously when employers could opt to renew the permit online or at the Immigration Department’s counter. 

The research house said MyEG would soon extend its service to register eligible undocumented workers, following the authority’s appointment early this month. There are currently 2.1 million legal foreign workers and an estimated two million and four million illegal workers in Malaysia. 

“Tapping into its database of information on the country’s foreign workers, MyEG’s potential joint marketing initiative with Celcom could be the next growth leg. The scope of the JV would involve providing sim cards to foreign workers for identity verification purposes by the government. 

“The potential benefits from this JV could be huge if MyEG manages to secure the benefit of recurring profit sharing from Celcom should the foreign workers reload this particular SIM card. If this materialises, this JV would be rolled out in phases, starting from SIM card distribution to eligible illegal workers upon their registration with MyEG. 

“About RM100mil of net profit estimated to come from legal workers permit renewals. On a full scale basis, MyEG would be able to clinch RM100 million net profit from permit renewals for Malaysia’s existing 2.1 million legal workers, based on average revenue of RM100 per person (mandatory RM35 processing fees and optional RM130 insurance commission) and 50% net margin. Since this contract started in May 2015, MyEG has processed 130,000 cases a month,” it said.

BornOil Q2 turnover surges

LABUAN: Borneo Oil Bhd (BornOil) put on another strong showing, posting a higher turnover of RM51.18 million for the second quarter compared with RM19.32 million a year earlier, thanks to better contribution from the group's oil, gas, mining and related activities, as well as its fast food division.

For the first half year, revenue soared to RM65.81 million from RM27.39 million while net profit climbed to RM3.41 million from RM845,000 a year before.

BornOil executive director Raymond Teo said progress has been encouraging and that production sharing agreements secured are the start of bigger things to come.

"We are fast reinventing our company as a proxy for the Malaysian gold mining industry," said Teo.

From an operations perspective, he said the timing of the company's entry into gold mining couldn't be more ideal.

He said the weakening ringgit has worked in BornOil's favour as the direct cost of production has gone down (since production cost is incurred in ringgit).

To-date, BornOil has signed exclusive production sharing agreements to carry out mining works at five sites on 1,500ha in Pahang. The mining arrangements do not carry any acquisition cost as infrastructure and development facilities were already in place at the two sites.

As a result, BornOil saved a great deal on capital expenditure in terms of infrastructure and pre-mining preparations, said Teo.

Gold prices recently ran up to a six-week high as investors globally sought the commodity as a safe haven amid the backdrop of currency uncertainties and falling stock markets.

Last month, HSBC in a report predicted that the price of gold will rise by some 10% by the year-end to US$1,225 an ounce. Gold closed at US$1,135 an ounce 

Teo also estimates that there are low hanging fruits in the form of available alluvial ores of about 300,000 tonnes at Merapoh and 500,000 tonnes at Bukit Ibam, together with a combined tailing inventories of 1.7 million tonnes at Merapoh and 1.6 million tonnes at Bukit Ibam.

These available ores/tailings will keep BornOil busy for the next three years, while the quest for hard rock lode gold will continue through an exploration programme on both the areas, he elaborated.

Preliminary assessments have been conducted on the volume and grades of gold on both the alluvial and tailings and, once confirmed independently by a third party geologist, an announcement will be made by the company.

Meanwhile, BornOil shareholders have approved the company's renounceable six-for-one rights issue together with free detachable Warrants on the basis of one warrant for every two rights shares subscribed to.

BornOil's substantial shareholders Victoria Ltd and Hap Seng Insurance Services Sdn Bhd have subscribed in full for their respective entitlements. - Bernama

ManagePay to diversify into cybersecurity business

KUALA LUMPUR (Sept 23): ManagePay Systems Bhd ( Valuation: 0.00, Fundamental: 1.30) is acquiring a 29.5% stake in a cybersecurity firm Trustgate Bhd for RM1.8 million cash, to tap into the online security business.

In a filing with Bursa Malaysia today, the electronic payment specialist said it has entered into a conditional share purchase agreement with Trustgate chief executive officer Lo Nyan Tjing to acquire 8.84 million shares (29.5%) in Trustgate.

Lo holds a 33.33% stake in Trustgate, according to the filing. The remaining 66.67% is held by Sigmaview Diversified Sdn Bhd.

Based on the audited consolidated financial statements of Trustgate for the financial year ended Dec 31, 2014, Trustgate registered a loss of RM612,756 while its net assets then was RM5.49 million.

More importantly, Trustgate owns 94.43% of MSC Trustgate, one of only three licensed Certificate Authorities approved by the Malaysian Communications and Multimedia Commission.

MSC Trustgate, said ManagePay, has been in the business of providing cybersecurity products and services for over 10 years in Malaysia and has established strong clientele which includes major financial institutions in Malaysia.

ManagePay said the acquisition "will enable the group [to] leapfrog into the cybersecurity business supplying [such service] to financial institutions and payee organisations".

Aside from providing the group with additional revenue source, ManagePay said the deal will enable it to tap into a trusted and proven platform for securing internet of things (IoT) devices and infrastructure in Malaysia for the near future.

"The acquisition will enable us to derive business synergies through the cross selling and bundling of product offerings. The acquisition will enable ManagePay to offer its existing customers a proven security product solution to preserve the integrity of the clients' data and infrastructure," it said.

The purchase consideration will be satisfied in cash and funded through internally generated funds, it added.

"Barring any unforeseen circumstances, the acquisition is expected to be completed in the fourth quarter of 2015," it said.

The group expects the deal to contribute positively to its earnings in the ensuing financial years.

Shares in ManagePay surged six sen or 30% higher to close at its one-month high of 26 sen today, after some 11.85 million shares changed hands.

The current price gives it a market capitalisation of RM177.62 million.

Eco World buys 2,198 acres of land for RM1.1bil

KUALA LUMPUR: Eco World Development Group Bhd has proposed to buy 2,198.4 acres of land in Kuala Selangor for RM1.181bil mixed eco township with a gross development value (GDV) of about RM15bil.

The group said on Tuesday its unit Paragon Pinnacle Sdn Bhd (PPSB) had signed  five sales and purchase agreements (SPA) with Mujur Zaman Sdn Bhd, Ringgit Exotika Sdn Bhd, Liputan Canggih Sdn Bhd, and LBCN Development Sdn Bhd, to buy the land in Kuala Selangor.

Eco World said the acquisitions will provide it with sizeable tracts of lands in the North-Western growth corridor of the Klang Valley.

“This will enable Eco World to establish a dominant presence in this area with access to a new market catchment to complement its strong township positioning in the South-Western and South-Eastern corridors,” it said. 

It has so far identified three projects to develop including a 1,400 acres mixed eco township development to be known as “Eco Gardens” consisting mainly landed and high rise residential homes, among others. 

Also, it intends to build a 518 acres integrated gated industrial hub to be known as “Eco Business Park V”, and about 280 acres of affordable homes to be known as “Laman Indah”. 

The estimated gross development value to be generated is approximately RM15bil over a 15-year development period based on preliminary management estimates. 

The purchase consideration represents a discount of approximately 0.70% to the market value of the lands.

The lands are located at the North West of Klang Valley and are approximately 45km from Kuala Lumpur city centre, 40km from Petaling Jaya city centre and 18km from Sungai Buloh town centre. 

http://www.thestar.com.my/Business/Business-News/2015/09/22/Eco-World-buys-land-for-RM1bil/?style=biz

Bank Negara’s international reserves up 0.63% to US$95.3b

KUALA LUMPUR (Sept 22): The international reserves of Bank Negara Malaysia have increased by 0.63% to US$95.3 billion (RM360.1 billion), as at Sept 15, from US$94.7 billion (RM357.7 billion) on Aug 28, 2015.

In a statement today, Bank Negara said the reserves’ position as at Sept 15 is sufficient to finance 7.3 months of retained imports and is 1.1 times the short-term external debt.

Short-term external debt refers to short-term offshore borrowing, non-resident holdings of short-term ringgit debt securities, non-resident deposits with the banking system, and other short-term debt, according to the statement.

This is the second consecutive increase in international reserves recorded by the central bank since June 30 this year.

The first increase was to US$94.7 billion (RM357.7 billion) as at Aug 28 from US$94.5 billion (RM356.4 billion) at Aug 14.

Analysts have previously raised concerns over Bank Negara’s international reserves, which had declined below US$100 billion on July 31, to stymie the further decline of the ringgit.

The ringgit retreated 0.75% to 4.3042 against the US dollar. Compared to the Singapore dollar, the ringgit weakened 0.2% to 3.0400.

The FBM KLCI also veered into negative territory today, closing 4.1 points or 0.3% at 1,635.37 points due to selling pressure on banking and plantation stocks such as Public Bank Bhd ( Valuation: 1.80, Fundamental: 2.80) and Kuala Lumpur Kepong Bhd ( Valuation: 0.50, Fundamental: 1.00).

http://www.theedgemarkets.com/my/article/bank-negara%E2%80%99s-international-reserves-063-us953b

Ringgit to continue upward momentum next week

KUALA LUMPUR: The ringgit is likely to continue its upward momentum next week despite the US Federal Reserve's (Fed) decision to maintain its interest rates.

Affin Hwang Investment Bank Vice-President/Head of Retail Research, Datuk Dr Nazri Khan Adam Khan said that as the Fed maintained the status quo in the interest rates, it would give less pressure to Bank Negara Malaysia as well as the local currency.

Speaking to Bernama today, he said the ringgit's current level and uncertainty in the US economy would encourage more foreign investors to come to invest in Malaysia, besides boosting the export industry.

Meanwhile, MIDF Research Head Zulkifli Hamzah said the Fed's decision to maintain the interest rate received mixed reactions from the market.

"The ringgit has been a beneficiary based on the appreciation today (Friday), as the delay accords a breathing space for the currency to consolidate. Indeed, sentiment towards the ringgit appears to be turning for the better.

"In the offshore market, the speculative element is receding," he said.

However, he said the movement of the local currency moving forward depended on the direction of oil prices and the local situation.

"It is a combination of events...which are within and beyond our control," he added. For the week just-ended, the ringgit strengthened against the US dollar to 4.2030/2110 from 4.3150/3200 last Friday.

The local unit appreciated against the Singapore dollar to 3.0211/0273 from 3.0510/0569 last Friday and rose against the yen to 3.5242/5315 from 3.5812/5868 last week.

It strengthened against the pound sterling to 6.5697/5831 from 6.6576/6679 last week and went up against the euro to 4.8112/8208 from 4.8716/8781 last Friday. – Bernama

- See more at: http://m.thesundaily.my/news/1557602#sthash.xpqUftN0.dpuf

Good times ahead for SKP

Bright days are ahead for SKP Resources Bhd, as the company is set to see an earnings expansion with RM5bil worth of contracts being clinched from Dyson Ltd to produce its popular cordless vacuum cleaner.

Amid the challenging climate, SKP grabbed the first RM2bil contract in May, valued at RM400mil annually and subsequently secured another RM3bil job valued at RM600mil per annum. The tenure for both contracts are five years.

“This is a feather in our cap, as we are seen as Dyson’s core strategic partner in producing the cordless vacuum cleaner.

“And the latest contract marks another milestone for SKP and is expected to contribute significantly to the company’s annual revenue for five years, beginning 2016,” executive director Ivan Gan (pic) told StarBizWeek in an interview recently.

SKP has been working with Dyson for the past 13 years, of which the first six years it was involved in complete assembly works for the British-based company’s upright vacuum cleaners, hand dryers and bladeless fans.

Ivan says with the job wins, SKP’s revenue is expected to grow from RM600mil now to about RM1.3bil for financial year 2016 (FY16), with net margins of about 7% to 7.5%.

It grew 50% in FY15 from RM400mil to RM600mil.

The 40-year-old Gan attributes the contract wins to Dyson’s expansion plan in increasing its digital motors. The digital motors are one of the many components in the cordless vacuum cleaners.

“We have started production for the first job this month, while the second job is expected to begin in January 2016,” says Gan.

In March, Dyson was reported to have pumped in US$100mil into its West Park plant in Tuas, to increase the plant size to 143,000 sq ft and increase its yearly motor production to 11 million units by year-end from the four million units annually.

These advanced, compact digital motors power all of Dyson’s cordless vacuum cleaners, which are sold in more than 75 countries.

In 2014, Dyson’s patented cordless vacuum technology sales grew by 68% globally.

Dyson is indeed on a growth mode as it announced a four-year investment drive of £1.5bil that includes funding for research and development on design innovations at a new campus in Dyson’s UK headquarters, according to Bloomberg.

“Dyson’s expansion bodes well for SKP, as production is ramped up to meet the global demand for cordless vacuum cleaners,” says Gan.

He points out that even with the latest job, the group’s RM40mil plant in Senai, Johor is only running at a 35% utilisation rate.

The plant has a built-up area of about 400,000 sq ft and is expected to be fully operational by 2017.

Although Gan didn’t wish to divulge on the production capacity for the new product range, he says the group has set aside about RM20mil in capital expenditure for new machinery annually.

Aside from Dyson, SKP’s customers include Sony and Hewlett Packard, among others.

“With new manufacturing techniques and solutions, we are now able to house more production lines in our facilities to meet the demands of our customers,” says Gan.

SKP’s first 10 year-old plant is located adjacent to its second plant and running at full capacity.

Gan says contract wins will inevitably open doors to other new jobs, but for now SKP is content with working with Dyson.

On plans to diversify, Gan says the group made strategic acquisitions in Plastictecnic (M) Sdn Bhd, Bangi Plastics Sdn Bhd and Sun Tong Seng Mould Tech Sdn Bhd that are primarily involved in the automative, oil and gas, food and beverage as well as consumer product industries.

“These subsidiaries are into commercial lubricant packaging and tool fabrication, and deal with customers like Axon Mobile, Shell, Petronas, UniLever, Nestle, Tupperware, Santori Group of Japan, among others,” Gan says, adding that their contribution to the group’s revenue is about 25% to 30% and is seeing steady growth of about 8% to 12% annually.

On whether the slowdown in China had any impact on Dyson or SKP, Gan says Dyson’s major markets are Japan, Australia and Singapore, among others, while China is not its main market.

http://www.thestar.com.my/Business/Business-News/2015/09/19/Good-times-ahead-for-SKP/?style=biz

Additional profit from Dyson contract (RM2b in March & RM3b in Sep 2015)
RM5billion X 7% = RM350m/5 yrs = RM70m per year.
Existing profit about RM70m + add profit RM70m = RM140m/year from FY2016 ownwards.