Highlights from TheEdge 22nd January

Malaysia

• SARS-alike virus Coronavirus outbreak in Wuhan,China that can possible rewind us to the disastrous H1N1 event back in year 2009 and 2003’s SARS. All gloves counter surged with SuperMAX leading with 10.5% gains (RM1.45), Topglove with 5.8% (RM5.11), HARTA with 4.7% (RM5.82), COMFORT and KOSSAN with 6.1% (RM0.82) and 5.84% (RM4.47) respectively. In medical industry, the most commonly used glove is latex and nitrile glove. With the current global utilization rate of gloves at around 85%, increment in glove demand will only push the profit margin of the gloves, as there is only limited amount of gloves the sector can provide. TopGlove and Supermax were seen as largest beneficiaries as they have excess capacities to load up their plant utilization rate. For me, I always like glove sector especially Harta for its extremely great profit margin (>10%) and good return of equity (ROE). Glove sector’s profitability are affected by a few factors like natural gas price, US/Malaysia Exchange Rate, with uncertainties in natural gas share price and RM getting stronger versus US dollar, there should be considerable risk present in this incident. I still think it will be on an uptrend until CNY, unless there are more news regarding the Coronavirus. If the news turned out to be just an overreaction, mind yourself to sell it at the right timing.
• Country Garden Malaysia laid off nearly 400 hundred after the company’s recent restructuring, with option to leave the company within 48 hours or lower their company’s compensation.
• CIMB Thai’s net profit improved marginally from 1.49 billion to 1.502billion baht in latest quarter (31/12/2019). CIMB Thai only contributes 7% in CIMB Malaysia’s total profit, as calculated from last CIMB’s quarter report. Not going to have much effect.
• Perodua keen to maintain its current market share of 40%, with its President stating that they expect its 2020 sales to at least the same as its 2019’s record high, as sales this year will be mainly driven by its third generation Myvi and facelifted Bezza. Perodua wants to boost its production by 4%, to 254,000 to 244,000. With his local counterpart Proton’s X70 performing better than Perodua’s Aruz, Perodua is expected to ramp up mildly to not oversupply in the market. Bear in the mind UMW and MBMR both own Perodua 38% and 20% respectively.
• SCOMI Energy Practice Note 17 (PN17) status is confirmed, as its shareholder’s equity dipped below 50% of its issued capital. If you don’t have a lot of cash to gamble, stay away from these counters.
• RHB Bank, the fourth largest financial services group in Malaysia has provided SME the highest amount of capital last year under the government’s guaranteed financing scheme. Its managing director say they will continue to commit towards financing SME.
• RAM Rating, the largest credit rating agency in Malaysia says inflation in December 2019 expect to reach 1.2%, as compared to 0.9% in November 2019. It also lowered overall inflation forecast to 1.7% from 1.9%, as government delayed the targeted fuel-subsidy programme which would raise the consumer fuel price to market level effective January 1^st. As tensions are rising in the Middle East with crude oil prices raising, RAM emphasize that the price spike will not prolong as OPEC members currently has surplus in oil inventories.
• Sources said AirFrance-KLM wants a 49% stake in Malaysia Airlines, while Japan is looking for a 25% stake. LionAir and AirAsia has also submitted its proposals, but Khazanah seems to find AirFrance-KLM and Japan’s deal more attractive with more comprehensive and strategic solutions. Another source says government wants to get the deal finalized by this quarter.
• Axis REIT continue to express its interest in acquiring new assets worth of 140 million, adding more under their giant RM3.09 billion total assets. Its focus is in properties sought by the manufacturing and logistic sectors. Its Net Property Income (NPI) dropped to RM48.19 million, from RM55.11 million for 4Q19.
• Rohas Technic wins RM58million water supply contract in Vietnam.
• Malaysia’s total industry volume (TIV) growth will be marginal around 600,000 to 610,000 should there be no major catalyst in automotive industry this year, according to Perodua’s President. TIV is usually used to represents the total number of automobiles sold in a year.

Globally

• Microsoft CEO Satya Nadella emphasize the importance of US and China working together in one supply chain as working separately will increase the transaction cost, which is bad for both nations. He considers rollbacks on tariffs are still inefficient for any good progress.
• Bank of Japan left its main policy rate unchanged and raises its growth forecast following Prime Minister Shinzo Abe’s effort to boost Japan economy. He last announced the economy package of $120 Billion US dollar.
• Greta Thunberg the TIMES person of the year says planting are still not enough after Trump announced US would join an initiative to plant one trillion trees.
• Thailand has the largest automotive industry in SEA region, with its vehicle export taking more than 50% of the total industry production.
• EasyJet, the British low-cost airlines says its performance in the upcoming quarter will improve, given the robust travel demand and an ease in the competition between the European short-haul aviation industry.
• Uber sells its Uber Eat segment to India’s local river Zomato for $176Million US dollar. The move marked another way of consolidation in the food delivery sector, as more and more food delivery company aim to reduce losses.
• China to see slowdown in most of its provinces, which shows China’s ongoing gradual downward trajectory. However, its output growth was 5 trillion yuan (RM3 trillion), an increase bigger than Switzerland’s GDP, even under a slowdown.
• China suspect the root of the Coronavirus potentially deadly lung virus is from fresh chicken meat. The Wuhan virus is suspected to have emerged from the local wholesale market. Up to date, four people have died, and more than 200 people was infected.

Disclaimer: This is simply to note down the major incidents that I should take note in TheEdge NewsPaper. I cover as much local news as possible and do not include global news that do not interest me. Please subscribe and read the original TheEdge for more information.