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Share
Price:
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MYR2.19
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Target
Price:
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MYR2.40
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Recommendation:
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Buy
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Below
expectations
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BAuto’s 3QFY4/16 earnings also fell short, similar with
its peers UMWH and TCM, on the back of deferred purchases by dealers
and unfavourable forex. We cut FY16-18 earnings forecasts by 10%-25% on
lower volume sales and unfavourable JPY/MYR forex. Rolling forward our
valuations to CY17, our revised TP is MYR2.40 (-16%), pegged on new
11.5x PER (+1SD) vs 12.5x. Maintain BUY; yields remain decent at 4+%.
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FYE Apr (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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1,450.8
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1,830.4
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2,301.8
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2,922.2
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EBITDA
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172.1
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290.1
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268.3
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295.0
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Core net profit
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140.8
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222.9
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193.9
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210.9
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Core EPS (sen)
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12.4
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19.5
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16.9
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18.4
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Core EPS growth (%)
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186.4
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58.0
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(13.4)
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8.8
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Net DPS (sen)
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3.8
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12.1
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8.5
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9.2
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Core P/E (x)
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17.7
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11.2
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12.9
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11.9
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P/BV (x)
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7.3
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5.3
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4.4
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3.7
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Net dividend yield (%)
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1.7
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5.5
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3.9
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4.2
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ROAE (%)
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56.0
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54.5
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37.1
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33.8
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ROAA (%)
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25.6
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32.9
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23.3
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21.0
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EV/EBITDA (x)
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8.8
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10.4
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8.4
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7.7
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Net debt/equity (%)
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net cash
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net cash
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net cash
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net cash
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Share
Price:
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MYR2.78
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Target
Price:
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MYR4.35
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Recommendation:
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Buy
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Delays sale of
non-O&G biz
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Management updated that the planned divestment of its non
O&G businesses will see a slight delay of about 2 months. This is
mainly due to technical issues related to the transfer of its Vietnam
assets (i.e. ports operations). It assured that the matter will be
resolved by May and the special DPS payment of up to 15 sen remains
intact; a short term catalyst. Maintain BUY and MYR4.35 SOP TP.
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FYE Jan (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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941.9
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1,083.4
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1,121.0
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1,153.1
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EBITDA
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94.7
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225.8
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242.5
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243.3
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Core net profit
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66.4
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142.6
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181.7
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184.2
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Core EPS (sen)
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6.4
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13.8
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17.6
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17.8
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Core EPS growth (%)
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52.1
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114.7
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27.4
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1.4
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Net DPS (sen)
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1.7
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2.0
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2.0
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2.1
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Core P/E (x)
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43.2
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20.1
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15.8
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15.6
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P/BV (x)
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4.7
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2.0
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1.8
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1.6
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Net dividend yield (%)
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0.6
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0.7
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0.7
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0.8
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ROAE (%)
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14.9
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13.9
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11.9
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10.8
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ROAA (%)
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4.4
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6.1
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7.2
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7.0
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EV/EBITDA (x)
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36.6
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15.1
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13.4
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13.2
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Net debt/equity (%)
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168.1
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31.6
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23.4
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18.5
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MACRO RESEARCH
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Economics Research
by
Suhaimi Ilias
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Good start to a
tough year
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Industrial production (IP) growth picked up in Jan
2016 to +3.2% YoY on expansions in all three sectors. However, put
together with the fall in exports, narrower trade surplus and slower
money supply and loans growth in Jan 2016, data suggest the slowing GDP
growth momentum since 2Q 2015 is continuing into 2016, which is
proving to be a challenging year thus far as global economy and world
trade remains sluggish, underpinned by China’s slowdown.
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Suhaimi Ilias
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Zamros
Dzulkafli
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Technical Research
by Lee
Cheng Hooi
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The FBM KLCI rose 4.05 points WoW to close at
1,696.54, as global markets and crude oil continued to rebound. The
weekly volume rose from 1.63b to 2.44b shares.
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NEWS
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Outside Malaysia:
China: PBOC chief cites credit risk while reassuring on
growth. People’s Bank of China Governor Zhou Xiaochuan warned banks about
increased credit risk amid rising real estate prices in the biggest
cities, while adding the country can achieve its economic growth targets
without too much monetary stimulus. Property prices have begun to diverge
severely from values in less-populated areas, Zhou said at a briefing in
Beijing. He said the country faces “relatively big’ downward pressure
from efforts to eliminate excess housing inventory, which may suppress
prices nationwide. (Source: Bloomberg)
India: Said to need an extra USD 3.7b in risk to deficit
goal. Prime Minister Narendra Modi’s administration plans to ask Indian
lawmakers later this year for about INR 250b (USD 3.7b) more to cover a
proposed salary increase, according to Finance Ministry officials with
knowledge of the matter. The federal budget unveiled last month has
accounted for about 70% of the INR 1.02tr (USD 15b) salary hike proposed
by a pay panel, said the officials, who asked not to be identified
because they weren’t authorized to speak with the media. The plan to
implement the once-in-a-decade wage increase for 4.7 million workers and
5.2 million pensioners has been seen as crucial to the budget’s
credibility. (Source: Bloomberg)
Hong Kong: Tsang defends economy after Moody’s outlook
cut. Hong Kong Financial Secretary John Tsang defended the city’s economy
after Moody’s Investors Service cut the city’s long-term debt outlook
because of its links to China. Moody’s maintained Hong Kong’s long-term
debt and issuer ratings at Aa1 and downgraded the outlook to negative
from stable because it sees the city’s credit profile tracking China’s,
the agency said. The firm lowered China’s credit-rating outlook on March
2 as a rising debt burden, falling foreign-exchange reserves and
uncertainty about authorities’ capacity to implement reforms weigh on its
economy. (Source: Bloomberg)
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Other News:
Property: Unsold residential units to rise in 2016.
Property developers are expected to see more unsold residential units in
2016, as launches over the past two years are expected to come on stream,
amid a slowdown in demand. The local property market has seen some
dampening since the introduction of cooling measures by the government in
2014 to curb speculative activity, while the introduction of goods and
services tax (GST) in April 2015 had significantly affected consumer
sentiment. (Source: The Edge Financial Daily)
MISC: MISC, AET to merge chemical, clean petroleum product
fleets. MISC will merge its chemical fleet with the clean petroleum
products (CPP) fleet operated by its petroleum unit AET to create a
consolidated products business. Under the new arrangement, AET will take
over the 13 chemical vessels and one LPG tanker currently owned and
operated by MISC and combine them with its own fleet of eight CPPs to
create a new, single entity. This will involve transferring MISC’s seven
‘Bunga A’ class vessels (38,000 dwt) which are owned by the company along
with six ‘Bunga L’ class (19,900 dwt) and one LPG vessel (20,613 dwt)
which are all currently operated on long-term bareboat charters. These
vessels will combine with AET’s eight CPP tankers. (Source: The Sun
Daily)
Bintai Kinden: Eyeing turnkey projects in Melaka. Bintai
Kinden Corp is attracted by the tourism potential in Melaka, and the
company intends to tender for more turnkey projects there. The company is
focusing to get more contracts in Melaka. Currently 60% of the total
revenue is derived from overseas, while the remainder comes from domestic
contracts. The company hopes to derive about 50% of revenue from local
jobs. (Source: The Edge Financial Daily)
Scomi Engineering: Sets up rail manufacturing facility in
Brazil. Scomi Engineering (SEB) manufacturing facility in Sao Paulo,
Brazil, modelled after its main facility in Kuala Lumpur, is expected to
strengthen the group’s position in the market. The 50 million real
(MYR56.8m) facility, which would be built on a 98,000-sq-metre piece of
land, would be used to manufacture monorail trains, including rolling
stock and bogies. The site was awarded to SEB by the Sao Paulo state
government in recognition of its commitment to develop Brazil’s urban transport
infrastructure. (Source: The Star)
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