Stocks To Watch Tenaga, Unisem, Malaysian Pacific Industries, Tech sector, Banking stocks, Bina Darulaman and Guan Chong

Business & Markets 2014
Written by Jonathan Gan of   
Monday, 14 July 2014 18:47

KUALA LUMPUR (July 14): Based on newsflow and corporate announcements today, the spotlight may be on the following stocks on Wednesday (July 16), following the public holiday tomorrow for Nuzul Al-Quran — Tenaga Nasional Bhd, Unisem, Malaysian Pacific Industries, tech sector, banking stocks, Bina Darulaman and Guan Chong.

Tenaga Nasional is expected to announce its third quarter financials on Wednesday.

According to CIMB Investment Bank, Tenaga's net profit for the quarter ended May 31, 2014 (3QFY14), might have come in below expectation. This was due to higher-than-expected cost from the burning of more liquefied natural gas (LNG) and distillates.

CIMB analyst, Faisal Syed Ahmad, in a note today, said that CIMB however, believed the state-controlled utility's lower earnings in 3QFY14, could be offset by independent power producer savings of some RM500 million.

Shares of semiconductor manufacturers like Unisem (M) Bhd and Malaysian Pacific Industries Bhd, may be closely-watched, ahead of earnings announcements by major US technology companies. 

Reuters reported that earnings from some of the biggest US technology companies, will take centre stage this week, giving investors a chance to re-evaluate the sector's health.

Big tech names set to report include Intel Corp and Yahoo Inc on Tuesday, eBay Inc on Wednesday and Google Inc on Thursday.

The tech sector has the highest projected earnings growth rate among the 10 S&P sectors for the second quarter, at 12.3% — its best quarter since the first quarter of 2012. This forecast marks a sharp rebound from a drop of 3.2% just a year ago, according to a Thomson Reuters poll.

Banking stocks continue to remain in focus, with Hong Leong Bank Bhd (HLBB) raising interest rates and Fitch Ratings moving to provide its opinion on the CIMB Group’s proposed merger with RHB Capital & MBSB.

Hong Leong Bank is expected to see some interest in trading activity, following the bank’s move to raise its BLR to 6.85% from 6.6%. Hong Leong Islamic Bank (HLISB) is likewise raising its Islamic Financing Rate to 6.85%, from 6.6%.

“Concurrently, HLBB and HLISB’s fixed deposit (FD) and term deposit-I (TD-i) will be revised upwards, by 25 basis points. The new FD and TD-I rates for 1, 6 and 12 months, will be increased to 3.05% to 3.2%, and 3.30% respectively,” said the bank.

Fitch warned today that the merger between the three banks — CIMB Group, MBSB and RHB Capital — could be “fraught with risk”.

"Furthermore, weakening credit growth and asset-quality pressures in the overall banking system, will not make the process any easier. Combining entities as large as CIMB and RHB, will be lengthy, and the addition of MBSB is likely to make the integration even more complex," it said.

The new proposed group would stand out as the largest bank in Malaysia and the fourth-largest lender in Southeast Asia, with total assets of $194 billion and a 23% market share of domestic loans, versus current Malaysia top bank Maybank's 18%.

Bina Darulaman Bhd has acquired a land totalling RM204 million, in a move to expand its land bank for propery development.

“In line with our corporate objective to increase land bank for property development, the proposed acquisition will increase total land bank to approximately 2,700 acres or 1,092 hectares in Kedah,” said Bina Darulaman.

According to the company, the parcels of land acquired are located in Langkawi, Kubang Pasu, Kuala Muda, Pokok Sena and Kulim. 

It said that the purchase price consideration may be satisfied by cash, shares in Bina Darulaman, or a mix of cash and shares in Bina Darulaman, pursuant to mutual agreement with Perbadanan Kemajuan Negeri Kedah — the company’s holding company.

Guan Chong Bhd, Malaysia’s only listed cocoa company, may see some interest in trading, on news that Malaysia’s second quarter cocoa grindings slid 9.9% to 65,046 tonnes, from 72,191 tonnes in the same period last year.  

News reports stated that overall, the cocoa grindings in Malaysia for the first half of 2014, showed a reduction of 11.8%, as compared to the same corresponding period.

Analyst Tou Hui Ling of SJ Securities, said in a recent report that the company is expected to register normalized margins and earnings in FY2014, on the back of stronger average selling prices.

“The Group is working forward to reduce its inventory of cocoa solids, which was built up, during demand shortage and price competition in FY13. We are positive towards the Group’s efforts, considering supply shortage for the industry as a whole. Due to supply shortage, we expect cocoa solids ratio to gradually recover, in the near term,” said Tou.