Why the surge in Transmile's share prices?
- Speculation is rife that the air cargo transporter is disposing its four wide-bodied MD-11 aircraft, an exercise that will improve its balance sheet, which was severely impacted by massive provisions and write-downs last year
- One industry player reckons that Transmile should keep its MD-11 which are better than its fleet of 727s in terms of fuel efficiency
- It was also said that it wasn't a wise move to shift from intercontinental routes to regional destinations as the long-haul routes are considered as the main revenue driver
- However, after the MD-11s disposal, Transmile would be able to fetch an extraordinary gain and keeps its balance sheet asset light
- Proceeds would also enable Transmile to meet its convertible bond redemptions
- Another speculation was also rife that Transmile may see a new shareholder emerging: DHL, POS, Konsortium Logistik, MASKargo and Tan Sri Syed Mokhtar are some names speculated
- However, one need to remember that it may take a while before investors start looking at the stock again if Transmile remains without a solid turnaround plan
Singapore's GK Goh buying local steel stocks
- GKG Investment Holdings (Singapore's Goh Geok Khim private vehicle) is now a substantial shareholder of Lion Industries Corp Bhd (5.3% shares as of March 19)
- According to brokers, GKGI also recently acquired shares in Kinsteel, but its shareholding has not reached the 5% level
- GKGI is also said to have met Ann Joo Resources management for a possible investment in the company
- According to the EDGE, GKGI is advised by OSK Investment Bank, which has aggressively promoting Malaysian steel industries
- OSK Research group believes that with China imposing higher export duties, there will be a shortage of the material in this region (China previosuly provided 75% of the regional demand)
- OSK stated that Malaysia 's 5 listed integrated steel millers has the available capacity to fill the void, and that the local steel producers are potentially riding a steel super cycle.
- Reasons given for GKGI making Lion Industries its preferred investment are its ample spare capacity in steel-making plants, and its cheaper valuation compared to its more popular peers
- Lion Industries utilisation rates at the downstream rolling mills is also low; hence the huge earning upside
Picking the right banking stocks
- Banking stocks have weathered the KLCI well; the decline in the Kuala Lumpur Financial Index has been comparatively marginal -0.1% (not taking into account Maybank which has recently acquired BII)
- Most of them have recovered since the March 10 sell-off; with some even higher before the March 8 election
- Considering the projected slower economic growth (based on Bank Negara latest figures) , the future is said to be challenging for this sector as banking stocks are a natural proxy for the economy
- According to CLSA, credit growth wil moderate but will not fall off the cliff; the main concern lies with provision risks especially in auto finance
- In the previous 3 slowdowns, provisions jumped sharply in tandem with the magnitude of the economic slowdown
- CLSA expects banks that are most exposed to hire-purchase lending to be particularly vulnerable in a downturn
- However, CLSA still rates Public Bank and Maybank as the most resilient banking stocks, as they have the lowest non-performing loans ratios and have the highest loan-loss coverage
- The foreign house has an underperformed on AMMB and BCHB, and a sell on EON Capital
- Another banking analysts says investors should look at dividend-yielding banking stocks in the current delicate market conditions
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