Stocks to Watch Banking stocks, Plantation stocks, Manufacturing stocks, AEON Co, DRB-Hicom, Sumatec

Business & Markets 2014
Written by Jonathan Gan of   
Thursday, 10 July 2014 19:43

KUALA LUMPUR (July 10): Based on newsflow and corporate announcements today, the following stocks may draw market interest tomorrow (July 11).

Banking stocks such as Hong Leong Financial Group Bhd, Alliance Financial Group Bhd and Public Bank Bhd have seen climbing in the morning trades today in anticipation of Bank Negara Malaysia’s (BNM) decision on raising the overnight policy rate (OPR) by at least 25 basis points to 3.25%.

Later this evening, the central bank raised its key interest rate by 25 basis points for the first time in more than three years, as widely expected.

In a note to clients today, Affin Investment Bank said it does not discount the possibility of subsequent merger and acquisition (M&A) activities such as a merger between Malayan Banking Bhd and Public Bank, hence creating an even bigger entity with a combined asset size of RM890.5 billion.

This follows news reports that CIMB Group Holdings Bhd is commencing negotiations with RHB Capital Bhd and Malaysia Building Society Bhd (MBSB) on a possible three-way merger and creation of a mega Islamic bank.

Plantation stocks such as Genting Plantations Bhd, Kuala Lumpur Kepong Bhd, IOI Corp Bhd and IJM Plantations Bhd may see movements tomorrow due to a fall in palm oil inventory.

The Malaysian Palm Oil Board (MPOB) today released its monthly palm oil data tabulating palm oil stocks, which showed palm oil inventory, comprising crude palm oil (CPO) and processed palm oil, in June 2014 declined 10.03% to 1.66 million tonnes from 1.84 million tonnes in May this year.

“We reckon that the steep fall of palm oil inventory in June to a one-year low is a positive surprise to the plantation sector and would support CPO prices,” said analyst Jessica Low Jze Tieng of JF Apex Securities.

“Besides that, the strengthening of ringgit to seven-month high in June that was sparked by the anticipation of hiking OPR had reduced orders from refiners as the ringgit-denominated feedstock became pricier to oversea refiners,” she added.

Manufacturing stocks particularly those from the semiconductor industry might see further movement, following encouraging figures from Malaysia’s production index.

Malaysia’s industrial production index (IPI) grew 6% year-on-year in May 2014, underpinned by manufacturing, mining and electricity output growth.

Affin Investment Bank Bhd economist, Alan Tan told that the IPI was “better than expected”, supported mostly by the gain in the manufacturing index and the electricity index.

He added that the stronger global demand for semiconductors will support the recovery of Malaysia’s exports as Malaysia is a major producer of semiconductors, while domestic demand remains healthy.

AEON Co (M) Bhd announced that it will build and operate a new shopping mall on land acquired from Genting Plantations Bhd for RM34.8 million in Batu Pahat.

Under the agreement, AEON said it would construct and operate a shopping centre with car parks and departmental stores along with a supermarket.

“The acquisition is in line with AEON’s corporate strategy of accelerating the expansion of its retail business, through opening of new malls and outlets,” said the retail group in a filing with Bursa Malaysia today.

DRB-Hicom Bhd has announced that it would sell 51% equity interest in its unit Scott & English trading (Malaysia) Sdn Bhd (SEM) to Shinline Corp Sdn Bhd for RM648,892 cash.

The rationale for the disposal was to streamline DRB-Hicom’s businesses and investments.

“The proposed disposal will enable the group to utilize the necessary funds as working capital for its business operation, under the group,” said the company in its announcement.

SEM is a 70- owned subsidiary of Hicom Holdings Bhd, and is involved in the trading of heaving machinery and equipment, spare parts and electrical appliances.

Sumatec Resources Bhd has appointed Datuk Ahmad Johari Abdul Razak, brother of Prime Minister Datuk Seri Najib Razak, as an independent and non-executive director of the company.

The oil and gas group, in which tycoon Tan Sri Halim Saad holds a 25% stake, announced the appointment of Johari who has a direct interest of 1.92% in the company as at June 30.

The company said that it would submit its application to uplift itself from its Practice Note 17 status by August this year.