Will the Olympics Help BURSA (KLSE) like Nike (NKE) Stock?

Will the Olympics Help BURSA (KLSE)

With the 2016 Summer Olympics just over a week away, the eyes of the world will soon turn towards Rio de Janeiro, where the best athletes on the planet will compete for Olympic glory. Although this year’s Games have already been marred with controversy, the competition will surely still captivate audiences from around the globe.

It is these global audiences that will also be the target of an onslaught of Olympic-themed advertising. All sorts of companies will be incorporating sports, athletes, and patriotism into their commercials in order to tug on the heartstrings of fans.

Olympic sponsorships don’t just come in the form of commercials. For example, Nike (NKE ) is an official sponsor of Team USA, meaning that jerseys, warmups, and licensed apparel will prominently feature the Nike swoosh logo.

In fact, the stakes are incredibly high for Nike, which is currently a Zacks Rank #4 (Sell) stock. After a relatively disappointing earnings report last month, Nike will need an impressive Olympics season to turn things around.

While one might think that Nike’s Olympic success is a near guarantee based simply on the exposure the company will have during the Games, this hasn’t necessarily been the case for Nike during international competitions in the past. 

In fact, Nike shares tend to struggle in the lead-up to things like the Olympics, dropping in 75% of earnings releases preceding a major event over the past decade. It can be easy to forget that becoming an official Olympic sponsor is incredibly expensive, which can put a dent in profits.

This trend continued when Nike reported its fourth-quarter earnings on June 28. Despite posting earnings of 49 cents per share, which beat the Zacks Consensus Estimate by a penny, Nike fell 7% in after-hours trading on weak revenues and margins. The company’s gross margin contracted 30 basis points to 45.9% in the quarter.

Looking ahead, Nike expects first-quarter revenue growth to be in the single digits, with currency headwinds continuing to cause problems. In the past 60 days, we have seen nine negative revisions for Nike’s current quarter earnings, and its EPS is currently expected to fall about 16.9% from the same quarter last year.

With spending on Olympic advertising coming in both the fourth-quarter and the current quarter, this earnings data shows that Nike isn’t an automatic winner during the Games. It appears that Olympic spending can indeed contribute to short-term headaches for the company.

Nevertheless, it’s important to remember that something like the Olympics also kick starts a new period of design and innovation for Nike. The new styles of shoes, uniforms, and other gear that Nike designed for use at the Games will continue to be used and sold going forward.

Traditionally, Nike’s struggles prior to the Olympics don’t continue in the long-term. Between the 2012 and 2014 Olympics, shares of Nike gained over 50%, and the stock is currently up about 57% since the 2014 Games.

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Malaysia Stock Market Momentum -Velocity or Speed

http://www.mmfsolutions.sg/malaysian-intraday-stock-picks-klse/

Market Update

- Velocity in the Malaysia equity market has fallen from around the 40% level early this year to as low as 19% on 6 Jul and is currently trending around the median of 29%.Velocity is a function of trading value vs.. market value – we note that average trading value (for Jun-Jul) has fallen 16.0% since end-2010 but we note that market value has risen  by around 4.7% over the same period (even after stripping out new listings). This suggests that the market has not hit a roadblock and that investors are not in a hurry to sell. 

 
- Looking at the sectors’ YTD performance, timber (including all four plywood plays) and media stocks were strong outperformers, despite negative returns in the  last two months. More consistent outperformers for the YTD and last two months were telecom and  banks, while utilities and technology consistently underperformed. We believe this trend may continue for a few more months but technology stocks could see a turning point in the 4Q as inventory is depleted and sales begin to pick up. 

 
- We counted five oil & gas stocks among the top 20 YTD outperformers, but this was balanced by price declines for KNM and Perdana Petroleum. Nevertheless we expect offshore activity to continue picking up, which will likely lead to improved performance for vessel and downstream plays over the next 6-12 months. 

 
- We anticipate there may be earnings disappointments for some sectors this quarter, including motor (supply chain disruption), technology (weak demand/supply chain disruption) and education (delays in student enrolment), but the reasons are already known. 

 
- We also see investors weighing the risks of: 1) M&A deals that are pending completion, concessions that need to be renewed, and ETP projects that are pending execution and this will continue to affect related stocks. In our view, the risk/reward equation has not changed. 

 
- As we move forward, we expect sceptics to disappear, thereby lifting the market. Nevertheless, to bridge the gap in investor confidence in  the near term, we believe alpha+ stocks offer a measure of comfort in terms of estimated returns from capital upside and dividend yield.

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#DBS emerges as #DeutscheBank’s only ‘buy’ in challenging bank sector

MALAYSIA/SINGAPORE (July 25): Despite signs of improved lending and expectations of stable 2Q16 results among Singapore’s bank sector, Deutsche Bank says challenges could be plentiful if low interest rates persist in 2H16.

Hence, a lack of strong re-rating catalysts makes DBS its only “buy” rated bank at a target price of S$19.80, for its “undemanding valuation and better risk/reward dynamics”.

OCBC and United Overseas Bank (UOB) have been rated at “hold” with target prices of S$9.50 and S$20.00 respectively.



In a Friday report, analysts Franco Lam and Sukrit Khatri say they expect the general sector’s earnings to be flat q-o-q, after a seasonally stronger 1Q.

Overall, they forecast that key trends will include flat-to-down net interest margin (NIM) with loan demand remaining soft; continued flat fee income q-o-q; stable cost-to-income ratio; as well as resilient asset quality and stable credit costs due to limited commodity-related concerns in the quarter.

Lam and Khatri have also predicted the following for Singapore’s banks:

DBS 2Q16 net earnings — around S$1,100 million (-6% q-o-q, -2% y-o-y)

Look out for: Progress in DBS’s partnership with Manulife, asset quality trends including those in China, as well as the oil and gas (O&G), property and SME sectors.

Due to recovery in loan demand in the quarter, the analysts expect DBS NIM to have held in 2Q16. The drop in interbank rates after 1Q16 will only be felt by 2H16, they add, as the bank’s sensitivity to domestic interest rates would likely to have lagged behind domestic peers. Strength in fee income is expected to continue, while growth rate and trading income could have been weaker in the quarter. Also, bad debt provisions are projected to be sequentially higher q-o-q, partially due to RMB depreciation.

OCBC 2Q16 net earnings — around S$870 million (+2% q-o-q, -8% y-o-y)

Still-weak loan demand and lower interbank rates may have led to slightly lower q-o-q margin, with the non-interest income line experiencing continued volatility due to GE contribution. Other fees, especially wealth-management related ones, would have remained under pressure, say the analysts. “Asset quality issues in MY and IDK, and SME book, O&G and the commodity sectors need to be watched,” they add.

UOB 2Q16 net earnings — around S$805 million (+5% q-o-q, +6% y-o-y)

More margin pressure is expected as Deutsche observes that UOB is faster in re-pricing earning assets on changes to interest rates. NIM is projected to have fallen 5bps q-o-q. The analysts expect a better recovery for UOB in 2Q in terms of fees and trading income, after a soft 1Q16 fee income. “Commodity sectors continue to require an intense watch, as they are vulnerable to (UOB’s) asset quality,” add Lam and Khatri, who foresee that credit cost has remained close to the guidance of annualised 32 bps for the year.

As at 11:05 a.m., shares of DBS were trading 0.12% lower at S$16.27; OCBC was down 1% at S$8.89; and UOB was down 0.26% at S$19.

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• FGV
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IEA says oil costs may have bottomed out

Oil costs may have bottomed as yield in the United States and other non-OPEC makers is starting to fall rapidly and an expansion in supply from Iran has been not exactly sensational, the International Energy Agency said on Friday.

The IEA, which arranges vitality approaches of industrialized countries, said it now accepted non-OPEC yield would fall by 750,000 barrels for every day (bpd) in 2016 contrasted with its past appraisal of 600,000 bpd.

U.S. creation alone would decrease by 530,000 bpd in 2016, it said.

"There are clear signs that market powers ... are working their enchantment and higher-cost makers are cutting yield," the Paris-based IEA said.

It said yield from the Organization of the Petroleum Exporting Countries fell by 90,000 bpd in February because of generation blackouts in Nigeria, Iraq and the United Arab Emirates.

"In the interim, Iran's arrival to the business sector has been less emotional than the Iranians said it would be; in February we trust that generation expanded by 220,000 bpd and, temporarily, it gives the idea that Iran's arrival will be progressive," the IEA said.

It said that as an aftereffect of these variables, inventories in industrialized part nations of the Organization for Economic Cooperation and Development (OECD) had declined without precedent for a year albeit rough in skimming stockpiling expanded.

The IEA said it in any case saw worldwide oil and item stocks rising intensely in the main portion of 2016 in the range of 1.5-1.9 million bpd yet easing back to only 0.2 million bpd in the second half, versus appraisals of a work of 0.3 million bpd in its past report.

"At costs there might be light toward the end of what has been a long, dull passage, yet we can't be accurately certain when in 2017 the oil business sector will accomplish the highly craved equalization. It is clear that the present heading of travel is the right one, in spite of the fact that with far to go," the IEA said.

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Oil costs fall as oversupply stresses return

Oil fell in Asia on Thursday, finishing a brief rally fed by news US fuel inventories fell after OPEC kingpin Saudi Arabia shot down trusts in a yield cut.

Costs climbed the earlier day as brokers looked past an expansion in US business unrefined inventories to a record high to a fall in supplies of refined items such as fuel.

Be that as it may, stresses over overflowing supplies immediately came back to the fore as trusts the world's top makers had wrapped everything up to confine their yield were quickly dashed.

"OPEC is not going to have the capacity to do anything, that is the truth of it," said Michael McCarthy, boss business sector strategist at CMC Markets Australia.

"It has no ability to facilitate the activities of its individuals so any oil bulls that are depending on OPEC to get together will be extremely frustrated."

At around 0415 GMT, the US benchmark West Texas Intermediate (WTI) for conveyance in April fell 24 pennies, or 0.75 percent, to $31.91. Worldwide benchmark Brent for April facilitated 32 pennies, or 0.93 percent, to $34.09 a barrel.

Rough bounced after significant makers Saudi Arabia and Russia proposed to stop yield in the event that others went with the same pattern, quickly dragging costs from the doldrums after they hit 13-year lows this month.

Oil costs have fallen somewhere in the range of 70 percent from a mid-2014 high over worries of an enduring overflow of supplies, during an era when development in top buyers such as China is abating.

Trusts the Organization of the Petroleum Exporting Countries may trim generation were dashed on Tuesday when Saudi Oil Minister Ali al-Naimi said individuals were rather wanting to stop yield at January's abnormal states.

Key maker and OPEC part Iran, which is inclining up creation after atomic connected Western financial approvals were lifted, has additionally responded coldly to the stop proposition.

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