Thursday, February 23, 2017

Local govvies market today saw very strong 2-way price action across the curve and very healthy liquidity amongst benchmark stocks. Local Islamic accounts were driving the buying flows in the morning over the GII benchmarks while foreign flows were concentrated in the MGS space, especially the back end of the curve. Many traders took the opportunity to take

Today’s trade recap by our trading desk:-

·         Local govvies market today saw very strong 2-way price action across the curve and very healthy liquidity amongst benchmark stocks. Local Islamic accounts were driving the buying flows in the morning over the GII benchmarks while foreign flows were concentrated in the MGS space, especially the back end of the curve. Many traders took the opportunity to take profit on their inventory nearing the end of the month which kept liquidity healthy and yields range bound throughout the day. Malaysia’s CPI for Jan2017 rose 3.2% YoY vs a 2.7% expected rise. This was mainly contributed by the rising fuel pump prices last month. The bond market was unmoved by the higher than expected CPI number while MYR strengthened slightly by 50 pips to 4.4530 level.


Malaysia Government Bonds Benchmark Issues
MGS
Closing Level (%)
Change (bp)
Volume (RM m)
3-yr
3.325
-0.5
25
5-yr
3.710
0.0
2
7-yr
3.915
+1.0
224
10-yr
4.045
-0.5
187
15-yr
4.480
-1.0
726
20-yr
4.620
0.0
17
30-yr
4.735
-3.5
77
Source: BondStream, AmBank
Interest Rate Swap Closing Rates
IRS
Closing Yield (%)
Change (bp)
1-yr
3.495
0.0
3-yr
3.625
0.0
5-yr
3.790
1.3
7-yr
3.900
0.5
10-yr
4.065
0.5
Source: Bloomberg, AmBank

v Fed may raise rates much sooner


Highlights of today’s AmBank FX Daily Outlook as follow:-

v   Fed may raise rates much sooner
v  MYR to fluctuate in the range of 4.4482-4.4647 against US Dollar
v  Key watch:(i) Singapore CPI, (ii) US initial jobless claim, & (iii) ECB Praet speech

MBM Resources (MBM MK; BUY; TP: MYR3.15): 4Q16 trounced expectations

We have a results note on MBM today.

MBM Resources (MBM MK; BUY; TP: MYR3.15): 4Q16 trounced expectations
  • A strong jump in JV and associates’ income. A 70% QoQ jump in JV and associates’ income cumulatively lifted MBM’s 4Q16 core net profit to MYR36m (record profit in the last 14 quarters) to surprise the market on the upside.  We lift our FY17/18 net profit forecast marginally by 1%-3% on higher associates’ income and introduce our FY19 earnings forecast. Rolling forward our valuations to FY18, our TP is raised to MYR3.15 (+5%) on an unchanged 10x PER peg. Reiterate BUY on MBM.
  • Yet another major launch by Perodua. The story of Perodua’s success will not stop at the Bezza model as positive sentiment on Perodua-related companies should carry into  2017, riding on (i) the economical car theme amid high living  costs and (ii) the launch of a new Myvi. Also, potential job wins to supply alloy-wheels for the new Myvi could finally lift MBM’s loss-making OMI above its breakeven point, staging a meaningful earnings recovery in 2017.
  • A potential M&A target? Recent restructuring exercises among large automotive conglomerates could be a catalyst for MBM, a potential synergistic M&A target, primarily for its 22.6%-associate stake in Perodua. Trading at just 8x FY17 PER and 0.6x FY17 P/BV, MBM is deep in value; further enhancing its appeal as a M&A target.  We believe that MBM’s 22.6%-effective stake in Perodua alone is worth ~MYR1.3b or MYR3.34/MBM share (based on 10x FY18E earnings of MYR577m) outweighing MBM’s current market cap by 37%.

Oil and Gas: Petronas, Saudi Aramco may sign new deal on refinery project. Petroliam Nasional Bhd (Petronas) and Saudi Aramco are expected to sign an agreement to collaborate in the country's Refinery and Petrochemical Integrated Development (RAPID) project, two industry sources said yesterday. Both parties appear to be closer to agreeing to terms after sources told Reuters last month that Aramco had decided to suspend its partnership with Petronas in the refining and petrochemical complex in the southeast of the country. The signing is expected to take place on Monday






Alliance Financial Group | 3QFY17 results within expectations
Desmond Ch'ng







Telekom Malaysia | Subdued earnings outlook
Chi Wei Tan







Genting Plantations | A strong finish in 2016
Chee Ting Ong







AirAsia X Bhd | Fabulous 2016 but more challenging 2017 looms
Mohshin Aziz







MBM Resources | 4Q16 trounced expectations
Ivan Yap







Oldtown | 3QFY17: FMCG the main driver
Liew Wei Han







MSM Malaysia | Better from here on?
Liew Wei Han














Lafarge Malaysia | Competition eases
Yen Ling Lee









break





Malaysia | Shot up to 3.2% YoY
Suhaimi Ilias







Malaysia | Steady at USD95b
Suhaimi Ilias







Malaysia | Phi, the golden ratio
Tee Sze Chiah








break


COMPANY RESEARCH





Results Review





Alliance Financial Group (AFG MK)
by Desmond Ch'ng





Share Price:
MYR3.95
Target Price:
MYR4.50
Recommendation:
Buy




3QFY17 results within expectations

While higher investment costs are likely to contribute to flat earnings in FY18, we view these investments as a necessary step towards extending the group’s overall value proposition and reach to the SME/retail customer segments. We expect FY18 ROE to hold up above 10% and for its strong fundamentals and niche in the SME segment, we continue to rate AFG a BUY with an unchanged TP of MYR4.50 (CY17 PBV of 1.3x).



FYE Mar (MYR m)
FY15A
FY16A
FY17E
FY18E
Operating income
1,383.0
1,424.1
1,501.7
1,542.6
Pre-provision profit
736.1
735.2
801.6
813.8
Core net profit
530.8
522.0
531.4
529.3
Core FDEPS (MYR)
0.35
0.34
0.35
0.35
Core FDEPS growth(%)
(5.3)
(1.7)
1.8
(0.4)
Net DPS (MYR)
0.15
0.14
0.17
0.16
Core FD P/E (x)
11.4
11.6
11.4
11.4
P/BV (x)
1.3
1.2
1.2
1.1
Net dividend yield (%)
3.9
3.7
4.2
4.2
Book value (MYR)
2.95
3.17
3.35
3.53
ROAE (%)
12.3
11.2
10.7
10.1
ROAA (%)
1.0
1.0
1.0
0.9










Results Review





Telekom Malaysia (T MK)
by Chi Wei Tan





Share Price:
MYR6.14
Target Price:
MYR5.90
Recommendation:
Hold




Subdued earnings outlook

FY16 results were within expectations, and reflected the ongoing impairment of Webe’s legacy assets. Near-term earnings outlook remains subdued with Webe likely remaining EBITDA-negative in 2017-18. TM’s investment case continues to straddle between concept (fixed-mobile convergence) and reality (the associated earnings drag). Maintain HOLD with a lower TP of MYR5.90 (-5%).



FYE Dec (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
11,721.6
12,060.9
12,488.0
12,990.4
EBITDA
3,677.0
3,820.0
3,921.2
4,156.9
Core net profit
894.9
847.9
764.5
783.6
Core EPS (sen)
23.8
22.6
20.3
20.9
Core EPS growth (%)
(8.1)
(5.3)
(9.8)
2.5
Net DPS (sen)
21.4
21.5
18.6
18.8
Core P/E (x)
25.8
27.2
30.2
29.4
P/BV (x)
3.0
3.0
3.0
2.9
Net dividend yield (%)
3.5
3.5
3.0
3.1
ROAE (%)
9.1
10.0
9.9
10.1
ROAA (%)
3.8
3.4
3.0
3.1
EV/EBITDA (x)
7.9
7.1
7.4
7.1
Net debt/equity (%)
45.7
64.0
77.0
79.9










Results Review





Genting Plantations (GENP MK)
by Chee Ting Ong





Share Price:
MYR11.08
Target Price:
MYR11.20
Recommendation:
Hold




A strong finish in 2016

Core PATMI was above expectations while reported PATMI was further boosted by land disposal gains. While we look forward to a better 2017, its recent price appreciation has reflected its near term growth potential. GENP remains a HOLD, given limited upside to our new TP of MYR11.20 pegged at 26x 2017 PER, its 5-year historical mean (previously RNAV-TP of MYR10.18). We change our valuation method as we believe the PER method will better reflect its earnings expectations.



FYE Dec (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
1,374.9
1,480.1
1,662.2
1,901.8
EBITDA
358.7
536.3
566.8
735.3
Core net profit
205.7
295.3
342.2
469.5
Core EPS (sen)
26.3
37.2
43.1
59.1
Core EPS growth (%)
(46.7)
41.5
15.9
37.2
Net DPS (sen)
5.5
21.0
8.6
11.8
Core P/E (x)
42.2
29.8
25.7
18.7
P/BV (x)
2.1
1.9
1.8
1.7
Net dividend yield (%)
0.5
1.9
0.8
1.1
ROAE (%)
4.7
8.3
7.1
9.1
ROAA (%)
3.2
3.9
4.3
5.6
EV/EBITDA (x)
24.9
17.6
16.6
12.5
Net debt/equity (%)
8.1
11.8
7.4
3.2










Results Review





AirAsia X Bhd (AAX MK)
by Mohshin Aziz





Share Price:
MYR0.41
Target Price:
MYR0.45
Recommendation:
Hold




Fabulous 2016 but more challenging 2017 looms

2016 core net profit was MY206m (vs. loss of MYR210m in 2015) after adjusting for one-off items, FX-translation and AAX’s share of losses in associates. This was ahead of our expectations but in-line with consensus. We raise our FY17-18 earnings forecasts by +6.9% and +3.9% on the latest capacity output and fuel hedge ratio guidance. As such, we raise our TP to MYR0.45 (+3 sen) based on an unchanged 8x 2017 PER, which is the bottom of the typical airline cycle of 8-15x. Maintain HOLD.



FYE Dec (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
3,062.6
4,006.5
4,190.3
4,531.2
EBITDAR
813.4
1,235.6
1,284.8
1,343.8
Core net profit
(209.6)
206.0
248.0
299.3
Core EPS (sen)
(6.2)
5.0
6.0
7.2
Core EPS growth (%)
nm
nm
20.4
20.7
Net DPS (sen)
0.0
0.0
0.0
0.0
Core P/E (x)
nm
8.4
6.9
5.8
P/BV (x)
2.3
1.6
1.3
1.1
Net dividend yield (%)
0.0
0.0
0.0
0.0
ROAE (%)
(49.1)
24.8
21.8
21.1
ROAA (%)
(5.5)
4.8
5.4
5.9
EV/EBITDAR (x)
2.1
1.8
1.7
2.2
Net debt/equity (%)
179.7
68.5
36.4
75.8










TP Revision





MBM Resources (MBM MK)
by Ivan Yap





Share Price:
MYR2.42
Target Price:
MYR3.15
Recommendation:
Buy




4Q16 trounced expectations

A 70% QoQ jump in JV and associates’ income cumulatively lifted MBM’s 4Q16 core net profit to MYR36m (record profit in the last 14 quarters) to surprise the market on the upside. We lift our FY17/18 net profit forecast marginally by 1%-3% on higher associates’ income and introduce our FY19 earnings forecast. Rolling forward our valuations to FY18, our TP is raised to MYR3.15 (+5%) on an unchanged 10x PER peg. Reiterate BUY on MBM for its exposure to Perodua.



FYE Dec (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
1,815.1
1,680.7
1,878.1
1,980.9
EBITDA
49.7
(21.6)
33.3
34.2
Core net profit
87.6
97.6
118.2
123.0
Core EPS (sen)
22.4
25.0
30.2
31.5
Core EPS growth (%)
(21.9)
11.5
21.0
4.1
Net DPS (sen)
10.0
6.0
8.0
8.0
Core P/E (x)
10.8
9.7
8.0
7.7
P/BV (x)
0.6
0.6
0.6
0.5
Net dividend yield (%)
4.1
2.5
3.3
3.3
ROAE (%)
5.4
3.9
7.2
7.1
ROAA (%)
3.7
4.2
4.9
4.9
EV/EBITDA (x)
28.2
nm
44.1
42.6
Net debt/equity (%)
8.8
10.9
10.3
8.6










Rating Change





Oldtown (OTB MK)
by Liew Wei Han





Share Price:
MYR2.03
Target Price:
MYR2.25
Recommendation:
Buy




3QFY17: FMCG the main driver

3QFY3/17 results came in above expectations mainly due to stronger-than-expected FMCG export sales. Moving forward, we expect FMCG to continue to be the main driver of growth, riding on the expansion of export sales into Greater China. As for F&B, we believe that cost management is crucial as consumers continue to economize. We raise our earnings forecasts by 13-15% for FY17-19. Our TP is raised to MYR2.25 on rolling forward valuations (+30sen; unchanged 14.8x mean FY18 PER).



FYE Mar (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
397.7
393.4
438.7
480.3
EBITDA
82.9
84.7
102.1
107.9
Core net profit
51.0
55.3
65.7
70.4
Core EPS (sen)
11.2
11.9
14.2
15.2
Core EPS growth (%)
4.2
6.1
18.8
7.2
Net DPS (sen)
6.0
9.0
7.8
8.4
Core P/E (x)
18.1
17.0
14.3
13.4
P/BV (x)
2.7
2.6
2.4
2.2
Net dividend yield (%)
3.0
4.4
3.8
4.1
ROAE (%)
14.2
15.0
17.4
17.3
ROAA (%)
11.8
12.5
14.0
14.0
EV/EBITDA (x)
8.2
6.4
7.6
6.9
Net debt/equity (%)
net cash
net cash
net cash
net cash










Rating Change





MSM Malaysia (MSM MK)
by Liew Wei Han





Share Price:
MYR4.45
Target Price:
MYR4.10
Recommendation:
Hold




Better from here on?

4Q16 results came in below expectations on higher-than-expected raw sugar costs. Into 2017, we believe margins could gradually improve on better ASPs through cost past through (eg. to the industries segment; 39% of volume mix). Upside risk would include the upward adjustments or the removal of domestic retail ceiling sugar prices (MYR2.84/kg).



FYE Dec (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
2,307.3
2,658.4
2,744.8
3,068.9
EBITDA
384.1
191.6
261.3
322.3
Core net profit
271.1
120.7
151.8
177.3
Core EPS (sen)
38.6
17.2
21.6
25.2
Core EPS growth (%)
5.5
(55.5)
25.7
16.8
Net DPS (sen)
26.0
10.3
13.0
15.1
Core P/E (x)
11.5
25.9
20.6
17.6
P/BV (x)
1.5
1.6
1.5
1.5
Net dividend yield (%)
5.8
2.3
2.9
3.4
ROAE (%)
13.8
6.0
7.5
8.5
ROAA (%)
10.3
4.1
4.3
4.5
EV/EBITDA (x)
9.9
19.4
14.2
11.5
Net debt/equity (%)
14.9
8.0
28.4
27.5










Results Review





Glomac (GLMC MK)
by Wei Sum Wong





Share Price:
MYR0.71
Target Price:
MYR0.76
Recommendation:
Hold




9MFY4/17 results below expectations

Glomac’s 9MFY4/17 results came in below expectations, with weaker core net profit -53% YoY. Glomac sold MYR204m worth of properties in 9MFY4/17 and sales are expected to pick up in 4QFY4/17 supported by MYR696m worth of new launches. We lower our earnings forecasts by 16-26%. We maintain HOLD with a lower RNAV-TP of MYR0.76 (-6sen) on an unchanged 60% discount to MYR1.91 RNAV (-14 sen).



FYE Apr (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
473.3
598.9
535.2
829.4
EBITDA
172.0
157.0
191.6
168.9
Core net profit
54.8
70.2
52.8
87.9
Core EPS (sen)
7.6
9.7
7.3
12.2
Core EPS growth (%)
(41.2)
28.7
(24.8)
66.6
Net DPS (sen)
4.3
4.0
2.2
3.7
Core P/E (x)
9.4
7.3
9.8
5.9
P/BV (x)
0.6
0.5
0.5
0.4
Net dividend yield (%)
5.9
5.6
3.1
5.1
ROAE (%)
na
na
na
na
ROAA (%)
3.1
3.6
2.5
3.8
EV/EBITDA (x)
6.8
6.2
4.3
5.5
Net debt/equity (%)
42.1
30.2
21.5
29.1










Results Review





Lafarge Malaysia (LMC MK)
by Yen Ling Lee





Share Price:
MYR6.49
Target Price:
MYR4.55
Recommendation:
Sell




Competition eases

4Q16 operational earnings remained weak but bottomline surpassed expectations on the recognition of a huge tax credit. While we think LMC’s earnings have bottomed, any meaningful recovery will be capped by capacity overhang as cement demand is only expected to grow by only 3% in 2017 (2016E: c.-6%). Maintain our earnings forecasts, SELL call and TP of MYR4.55 (26x 2017 EPS), pending an analyst briefing today.



FYE Dec (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
2,750.8
2,552.2
2,609.6
2,816.6
EBITDA
509.4
302.1
427.1
500.7
Core net profit
251.0
84.9
148.8
202.1
Core EPS (sen)
29.5
10.0
17.5
23.8
Core EPS growth (%)
(1.9)
(66.2)
75.2
35.9
Net DPS (sen)
31.0
5.0
16.6
22.6
Core P/E (x)
22.0
64.9
37.1
27.3
P/BV (x)
1.8
1.8
1.8
1.8
Net dividend yield (%)
4.8
0.8
2.6
3.5
ROAE (%)
8.1
2.5
4.9
6.6
ROAA (%)
6.0
2.0
3.5
4.7
EV/EBITDA (x)
14.9
20.7
13.1
11.0
Net debt/equity (%)
1.0
4.6
2.8
0.2








MACRO RESEARCH






Shot up to 3.2% YoY
by Suhaimi Ilias


Economics Research





Headline inflation rate in Jan 2017 jumped to +3.2% YoY (Dec 2016: +1.8% YoY) while core inflation rose moderately to +2.3% YoY (Dec 2016: +2.1% YoY). Revised our full-year inflation rate forecast to 3.0%-3.5% from +2.5% previously (2016: +2.1%).












Steady at USD95b
by Suhaimi Ilias


Economics Research





External reserves as at 15 February 2017 was the same as at end-Jan 2017 i.e. USD95b, indicating offsetting outflows and inflows amid the implementation of BNM’s measure to boost external reserves via repatriation of export earnings, net foreign buying of Malaysian equities and net foreign selling of Malaysian bonds. The latest count equivalent to 8.4 months of retained imports and 1.1 times of short-term external debt












Phi, the golden ratio
by Tee Sze Chiah


Technical Research





FBMKLCI rose 1.53pts to close at 1,708.08 amid a renewed interest in key blue-chip stocks. Broader market was also positive with gainers outpacing losers by 474 to 389. Trading volume of 2.69b worth MYR2.75b was recorded yesterday. Despite yesterday’s rebound, FBMKLCI is still vulnerable to further correction as follow-through was not convincing. We maintain our expectation that the benchmark index may head lower, possibly towards our expected range of 1,700 to 1,712.







NEWS


Outside Malaysia:

U.S: Existing home sales rise more than forecast as supply drops, indicating housing-market momentum will extend into 2017, National Association of Realtors data showed. Contract closings rose 3.3% to a 5.69 million annual rate in January (forecast was 5.55 million), the highest level since February 2007. Median sales price jumped 7.1% YoY to USD 228,900, the fastest gain since January 2016. Inventory of available properties fell 7.1% YoY to 1.69 million, making it the 20th consecutive year-over-year decline. (Source: Bloomberg)

Germany: Business confidence unexpectedly improved, underpinning the Bundesbank’s prediction that economic growth strengthened at the start of the year. The Munich-based Ifo institute’s business climate index rose to 111 in February from a revised 109.9 in January. (Source: Bloomberg)

Germany: January tax revenue rises 4% YoY, finance ministry says. Germany’s increase in January revenue driven by income tax and value-added tax, Finance Ministry says in monthly report. German economy’s expansion likely to continue in 2017, with consumer spending a main source of growth, boosted by continued hiring and wage gains. Low interest rates, euro’s exchange rate benefit domestic demand. (Source: Bloomberg)

U.K: Economy grew more than previously estimated in the final three months of 2016 but it may be the last hurrah. GDP rose 0.7% instead of 0.6%, the Office for National Statistics said. It followed growth of 0.6% in the previous two quarters. Trade and consumer spending provided the biggest contributions as business investment fell. The willingness of consumers to spend has kept the economy going since the Brexit vote but signs of strain are now appearing as accelerating inflation squeezes household incomes. Credit growth slowed sharply in December and retail sales grew at their slowest annual pace in more than three years in January, recent figures showed. (Source: Bloomberg)

Japan: Bought net JPY 48.2b in overseas debt last week. Japanese investors were net buyers of foreign bonds during the week ended Feb. 17 according to figures released by the Ministry of Finance in Tokyo. Local investors bought JPY 48.2b (USD 425) in overseas bonds & notes and JPY164.9b in overseas stocks. Foreign investors sold JPY 141.2b in Japanese bonds while selling JPY127.9b in Japanese stocks. (Source: Bloomberg)





Other News:

Oil and Gas: Petronas, Saudi Aramco may sign new deal on refinery project. Petroliam Nasional Bhd (Petronas) and Saudi Aramco are expected to sign an agreement to collaborate in the country's Refinery and Petrochemical Integrated Development (RAPID) project, two industry sources said yesterday. Both parties appear to be closer to agreeing to terms after sources told Reuters last month that Aramco had decided to suspend its partnership with Petronas in the refining and petrochemical complex in the southeast of the country. The signing is expected to take place on Monday, said one of the sources with knowledge of the matter who declined to be identified, during a visit by Saudi Arabia's King Salman to Malaysia. Saudi Aramco declined to comment and Petronas was not immediately available for comment. (Source: Reuters)

Econpile Holdings: Clinched MYR570m contract from Malton, order book at record high. The company has clinched its single-largest contract to date, worth MYR570.4m, for works at the Pavilion Damansara Heights development here. The contract, which would see it undertake piling and basement substructure works for the mixed project, was awarded to its wholly-owned unit Econpile (M) Sdn Bhd on Feb 21, from Domain Resources Sdn Bhd. The contract is for a duration of 28 months. With the new contract, its order book is now at a record-high of MYR1.4b, to be recognised over the next two years. (Source: The Edge Financial Daily)

SapuraKencana: Secures USD1.5b financing facilities. Through its unit SapuraKencana TMC Sdn Bhd, has signed a seven-year USD1.5b (MYR6.68b) multi-currency financing facilities with a consortium of Malaysian, regional and international banks. In a statement yesterday, the oil and gas service provider said the proceeds from the facility would be used to partially refinance existing borrowings. It involves raising about USD658m (MYR2.93b) via a new conventional term loan facility and issuing about MYR3.6b of unrated sukuk under the existing 30-year multi-currency sukuk programme of up to MYR7b in nominal value. The refinancing exercise is part of the group’s proactive capital management initiative that will support their global operations. (Source: The Star)


Related Posts with Thumbnails