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Sunway (SWB MK)
by Wei Sum
Wong
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Share
Price:
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MYR2.96
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Target
Price:
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MYR3.24
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Recommendation:
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Hold
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Buys industrial
land in KV
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We are positive on Sunway’s latest land acquisitions in
Kelana Jaya and Subang. These are industrial land with development
worth MYR210m in total GDV. We estimate they could churn out an annual
net profit of MYR13m (+0.8sen EPS) from 2018 onwards. We maintain our
earnings forecasts, MYR3.24 RNAV-based TP for now. HOLD.
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FYE Dec (MYR m)
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FY13A
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FY14A
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FY15E
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FY16E
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Revenue
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4,733.7
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4,841.9
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5,494.1
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6,177.1
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EBITDA
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563.1
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504.2
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718.4
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721.9
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Core net profit
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482.7
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591.7
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522.3
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489.2
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Core FDEPS (sen)
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26.9
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32.5
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28.7
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24.3
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Core FDEPS growth(%)
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(0.8)
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20.7
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(11.7)
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(15.3)
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Net DPS (sen)
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10.0
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11.0
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35.1
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8.1
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Core FD P/E (x)
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11.0
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9.1
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10.3
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12.2
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P/BV (x)
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1.0
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0.9
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0.9
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0.7
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Net dividend yield (%)
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3.4
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3.7
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11.8
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2.7
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ROAE (%)
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10.9
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10.5
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8.8
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7.6
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ROAA (%)
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4.9
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4.9
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4.0
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3.5
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EV/EBITDA (x)
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10.4
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15.6
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10.9
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11.4
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Net debt/equity (%)
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23.9
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30.4
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36.7
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32.8
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Share
Price:
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MYR4.75
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Target
Price:
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MYR4.97
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Recommendation:
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Buy
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Massive
turnaround in 2Q
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IOI Corp posted a sharp earnings rebound in 2QFY16 that
beat expectations. This was underpinned by unrealised forex translation
gains on its US debt, better plantation earnings, and strong downstream
contributions. This sector bellwether is the best proxy for an El Nino
trade in 1H16. Our contrarian BUY and TP of MYR4.97 are unchanged.
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FYE Jun (MYR m)
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FY14A
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FY15A
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FY16E
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FY17E
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Revenue
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12,664.1
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11,621.0
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11,577.3
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12,211.1
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EBITDA
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2,376.3
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847.4
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1,579.3
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1,762.0
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Core net profit
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1,549.4
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860.1
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927.6
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1,069.3
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Core FDEPS (sen)
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24.0
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13.3
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14.4
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16.6
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Core FDEPS growth(%)
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(6.9)
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(44.6)
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7.8
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15.3
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Net DPS (sen)
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20.0
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9.0
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7.2
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8.3
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Core FD P/E (x)
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19.8
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35.7
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33.1
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28.7
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P/BV (x)
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5.1
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6.1
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5.6
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5.1
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Net dividend yield (%)
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4.2
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1.9
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1.5
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1.7
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ROAE (%)
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15.7
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15.5
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17.5
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18.5
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ROAA (%)
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7.9
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6.0
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6.9
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7.7
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EV/EBITDA (x)
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15.8
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36.9
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22.4
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20.0
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Net debt/equity (%)
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58.6
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96.1
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82.5
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70.9
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Share
Price:
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MYR1.59
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Target
Price:
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MYR1.80
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Recommendation:
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Buy
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Minor dividend
suspense
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FY15 net profit was in line despite an EBIT shortfall.
Management’s deferment of the announcement of 2015’s final DPS is a
surprise, but does not construe a dividend shortfall. With a CEO yet to
be appointed, new projects are unlikely in the near-term. Nevertheless,
the stock’s c.5% dividend yield is both attractive and sustainable. BUY
rating retained with a lower TP of MYR1.80, after lowering earnings
forecasts.
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FYE Dec (MYR m)
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FY14A
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FY15A
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FY16E
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FY17E
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Revenue
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5,594.5
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5,302.0
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6,365.0
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6,515.2
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EBITDA
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2,407.1
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2,468.8
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2,972.8
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2,896.6
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Core net profit
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341.5
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453.2
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571.5
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494.9
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Core EPS (sen)
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9.7
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9.1
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11.4
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9.9
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Core EPS growth (%)
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111.4
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(6.8)
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26.1
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(13.4)
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Net DPS (sen)
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4.5
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6.8
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8.0
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7.9
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Core P/E (x)
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16.4
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17.5
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13.9
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16.1
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P/BV (x)
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1.4
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1.4
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1.3
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1.3
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Net dividend yield (%)
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2.8
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4.3
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5.0
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5.0
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ROAE (%)
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8.7
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9.3
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9.7
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8.2
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ROAA (%)
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1.2
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1.5
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1.9
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1.6
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EV/EBITDA (x)
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na
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8.9
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6.9
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6.5
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Net debt/equity (%)
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361.6
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238.9
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205.8
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175.3
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Share
Price:
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MYR1.54
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Target
Price:
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MYR1.50
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Recommendation:
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Hold
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Results below
expectations
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Despite a 38% YoY increase in FY15 headline PATMI, results
were below expectations due to delay in completion of land sales and
operational shortfall. Nonetheless, this was made up by a surprise 4th
interim DPS of 3sen, bringing FY15 DPS to 13sen (or 8.4% net dividend
yield). We expect fresh land sales in 2016 to sustain its DPS payout as
55%-majority shareholder Boustead Holdings (Not Rated) is in need of
cash. HOLD for its dividend with a revised RNAV-based TP of MYR1.50
(-4%).
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FYE Dec (MYR m)
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FY14A
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FY15A
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FY16E
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FY17E
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Revenue
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717.3
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615.2
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710.7
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754.2
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EBITDA
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169.8
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112.7
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141.7
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166.4
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Core net profit
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62.8
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31.4
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59.1
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78.8
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Core EPS (sen)
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3.9
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2.0
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3.7
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4.9
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Core EPS growth (%)
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(36.7)
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(49.9)
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87.8
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33.4
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Net DPS (sen)
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6.0
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13.0
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3.7
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4.9
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Core P/E (x)
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39.3
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78.3
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41.7
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31.3
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P/BV (x)
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1.1
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1.1
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1.1
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1.1
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Net dividend yield (%)
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3.9
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8.4
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2.4
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3.2
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ROAE (%)
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3.4
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1.4
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2.6
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3.4
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ROAA (%)
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1.9
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1.0
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1.8
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2.3
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EV/EBITDA (x)
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16.7
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26.4
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20.8
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17.7
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Net debt/equity (%)
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17.9
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22.3
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16.2
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16.2
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SECTOR RESEARCH
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Sector Note
by Wei
Sum Wong
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While Penang properties are set to gain from the
infrastructure boom over the longer term, indicators are pointing
towards challenges continuing in the short term. Property demand will
continue to moderate on slower economic momentum, cautious bank lending
and high volume of new properties come on stream. We prefer the
construction sector for now as it will be the major immediate
beneficiary from the infra works.
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MACRO RESEARCH
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Technical Research
by Lee
Cheng Hooi
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The FBM KLCI surged 31.14 points WoW to close at
1,674.88, as global markets rebounded and buying activities emerged.
The weekly volume rose from 1.54b to 1.80b shares.
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NEWS
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Outside Malaysia:
U.S: Core consumer prices rise by most in over four years,
reflecting broad-based gains that signal companies may be getting some
pricing power. The so-called core consumer-price measure climbed 0.3%,
more than forecast and the most since August 2011, after a 0.2% gain the
month before, a Labor Department report showed in Washington. Total
prices were little changed, depressed by the continued plunge in energy
costs. (Source: Bloomberg)
U.K: Cameron challenged by Johnson as London mayor backs
‘Brexit’. London Mayor Boris Johnson, one of the U.K.’s most popular
politicians and prominent Conservatives, said he’ll campaign for Britain
to leave the European Union in June’s referendum, putting himself in
direct opposition to his party leader, Prime Minister David Cameron. The
pound fell the most in more than a month against the dollar. “I have
decided after a huge amount of heartache,” Johnson told a throng of
reporters outside his home in London. “I will be advocating Vote Leave,
or whatever the team is called, because I want a better deal for the
people of this country: to save them money and take back control, I think
really this is what this is all about.” (Source: Bloomberg)
China: Eases via lower rates on medium-term loans amid
outflows. The People’s Bank of China eased monetary conditions by
offering medium-term loans at lower rates as it walked the tightrope of
maintaining credit growth, while preventing an excessive drop in the
yuan. The central bank offered CNY 163b (USD 25b) via its Medium-term
Lending Facility with 20 financial institutions, the authority said on
its official Weibo account. It lowered the rate on six-month loans to
2.85% from 3% and the one-year rate to 3% from 3.25%, while keeping the
three-month rate at 2.75%. (Source: Bloomberg)
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Other News:
Axiata: Buys Nepal’s Ncell for MYR6.5b. Axiata has
announced it was acquiring a 100% stake in Reynolds Holdings Ltd from
Telia Sonera UTA Holdings BV and SEA Telecom Investments BV for USD1.37b
(MYR5.67b), which gives Axiata an 80% stake in Ncell. Ncell is the market
leader in a duopolistic mobile market with a 48.8% subscriber market
share and a revenue market share of 57.5%. The proposed acquisition is
expected to close by first half of 2016. (Source: The Star)
Econpile Holdings: Infrastructure works to prop up
earnings. The company is currently bidding for some MYR1b worth of piling
jobs mainly in the infrastructure sector and looks to secure 15% of it.
Econpile are likely to secure some jobs such as piling works from the
East Klang Valley Expressway and the Mass Rapid Transit Line 2 (MRT2)
projects and are also bidding for piling jobs from the Sungai Besi-Ulu
Kelang Expressway, the Damansara-Shah Alam Elevated Expressway and the
Duta-Ulu Kelang Expressway. Executive Director, Pang also noted that the
group is exploring more opportunities to work with its existing Chinese
partners, which have a strong cash position and local expertise. (Source:
The Edge Financial Daily)
I-Bhd: Appoints Setiakon to build 50-storey MYR1b 8Kia
Peng. I-Bhd has appointed Setiakon Builders Sdn Bhd as the master
contractor to oversee the development of 8Kia Peng condominium in Kuala
Lumpur after a stringent tender award process. The project with a GDV of
MYR1b is slated for completion in three years and will be I-Bhd’s maiden
high-end development project outside i-City. (Source: The Star)
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