AmWatch -DRB-Hicom : 1QFY15 meets consensus; AV8 to the fore BUY, 29 Aug 2014

STOCK FOCUS OF THE DAY

DRB-Hicom : 1QFY15 meets consensus; AV8 to the fore BUY

We maintain BUY on DRB-Hicom Bhd, with an unchanged fair value of RM3.60/share – a 15% discount to our SOP value of RM4.25/share. DRB-Hicom’s 1QFY15 core net profit at RM133mil (+13% QoQ; +434% YoY) was within expectations, making up 27% of consensus estimate. It beat our expectation, representing 33% of our forecast. As expected, no interim dividend was declared for the quarter (1QFY14: Nil). At the operating level, EBIT at RM206mil was within our expectations, accounting for 23% of our forecast. As had been anticipated, its auto division’s showing has improved further due to contributions from the RM7.5bil AV8 defence project. Defence and aviation jobs accounted for 14% of the auto division’s turnover in 1QFY15 vs. only 2% in 1QFY14. Auto component and distribution made up 5% and 81%, respectively, in 1QFY15. Additionally, DRB-Hicom’s 34% associate Honda Malaysia has garnered additional share – from 8.9% in CY13 to 12.5% (37,203 units) in 1HCY14. Honda sales more than doubled to 21,576 units in 1QFY15 from 9,856 units a year earlier. Notably, DRB-Hicom said Lotus’ turnaround was on track, with sales growing by 31% to 505 units in 1QFY15 from 386 units in 1QFY14. We maintain our FY15F-FY16F numbers and our BUY call.

Others :

Bonia Corporation : Earnings recovery intact        BUY

Genting Malaysia : Loss in UK on low win % and bad debts            BUY

Genting Bhd : Cushioned by plantation and GenS             BUY

Ann Joo Resoruces : Making a stand against cheap imports          BUY

IHH Healthcare : Inpatient admissions and revenue continue to grow      HOLD

Sunway : 1HFY14 in line with expectations            HOLD

Lion Industries : Hampered by a huge EI loss       HOLD

Kimlun Corporation : Margin contraction in 1H    HOLD

Malayan Banking : Resilient earnings in 2Q           HOLD

YTL Power : Lower forecasts despite one-off UK tax credit reversals        HOLD

Media Chinese : Further weakness due to weak sentiment and higher base in the previous year               HOLD

Tan Chong Motor : 1H14 was bad, brace for tougher 2H SELL

QUICK TAKES

Al-Aqar Healthcare : Steady organic growth         HOLD

Malaysia Airline System : Boosted by lower cost and “other income”       ACCEPT OFFER

NEWS HIGHLIGHTS

Bumi Armada : 214 million Bumi Armada shares traded off-market

Mah Sing Group : Mah Sing swoops on 105ha Puchong prime land, plans RM9.3bil project

Malayan Banking : Farid says Maybank still open to mergers and acquisitions

RHB Capital : RHBCap mulls sale of investment bank post-merger