Friday, August 29, 2014

RHB | Philippines | GDP Growth Strengthened In 2Q As Growth Momentum Improved

Economic Research
29 Aug 2014

Economic Highlights

The Philippine’s real GDP growth strengthened to 6.4% y-o-y in 2Q 2014, from a revised +5.6% recorded in
the 1Q and compared with +6.3% in 4Q 2013, on the back of a resurgence in manufacturing activities and exports. Despite the 2Q GDP figures coming in above the consensus median estimate of +6.1%, it was, however, below our estimate of +6.9%. Nonetheless, we are retaining our full-year GDP projection at 6.5% for 2014 and expect growth to pick-up to +7.1% in 2015.

Economist:  Peck Boon Soon  | +603 9280 2163

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

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

Al-Aqar Healthcare : Steady organic growth         HOLD
Malaysia Airline System : Boosted by lower cost and “other income”       ACCEPT OFFER

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


Top Calls

Results Note Maybank (BUY, maintain)

- Not a bad 1HFY14, more drivers likely in 2HFY14

Maybank reported a 1HFY14 net profit of RM3,117.1m (+3.4% yoy) while PBT was RM4,454.6m (+5.7% yoy). Lower impairment allowances and a writeback in impairment bolstered Maybank's otherwise flat pre-provision operating profit (PPOP). Although annualized results were below our forecast and the consensus, we continue to look forward to a better 2HFY14, driven by corporate loans growth and IB deals, potential realization of AFS gains, stable NIM, and on-going cost management strategies. Maybank has declared an interim dividend of 24 sen (DRP 20 sen; cash 4 sen). Maintain BUY on Maybank with an unchanged PT at RM12.00 (13.6% ROE, 7% growth rate, and 10.3% cost of equity, translating into a P/BV target of 2.0x). Maybank remains a solid banking group, well-capitalised at a CET1 at 11.4% and a key beneficiary from the roll-out of key fiscal projects.

Other Calls

Results Note Genting (BUY, maintain)

- Dragged down by losses in GENM

Results Note Genting Msia (ADD, maintain)

- Bad holds in Malaysia and UK, a negative suprise

Results Note YTL Power (BUY, upgrade from ADD)

- 10 sen surprise DPS made up for earnings shortfall

Results Note AEON Co. (ADD, maintain)

- 2QFY14 slapped by higher costs

Results Note - MAS (ADD, upgrade)

- Swelling core net losses clipping wings of MAS

Results Note - Tropicana (BUY, maintain)

- Results inline, land sales to boost 2H14 earnings

Results Note - MCIL (REDUCE, downgrade from ADD)

- Another dissappointing quarter

Results Note - Eversendai (BUY, maintain)

- Lower billings and higher costs

Results Note - Ann Joo Resources (SELL, maintain)

- Oversupply issue remains a threat to steel industry

Results Note - Gabungan AQRS (ADD, maintain)

- Commendable 1H14 results, within expectations

Results Note - WTK (BUY, maintain)

- Expecting a stronger 2H14, largely within expectations

Results Note - Tong Herr (ADD, maintain)

- 2Q14 core net profit improved on higher margins

Economy ASEAN Outlook Weekly Wrap (22 28 August 2014)

- Is Spores July PMI pointing to stronger IPI growth?

Debt Market Research

- Sustain buying interest underpinned by healthy auction

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