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Share
Price:
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MYR1.15
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Target
Price:
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MYR1.15
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Recommendation:
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Buy
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Next catalyst
just around the corner
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We believe the expected injection of Menara Shell (MS) in
early-2017 could significantly lift earnings while MQREIT’s long-term
earnings outlook is supported by its anchor tenants. We think that MS
injection will also be value-accretive. We maintain our forecasts
pending the confirmation of MS’ funding structure. We maintain our BUY
call with an unchanged DCF-TP of MYR1.15 (WACC: 6.6%, terminal yield:
7%); FY16 net yield remains attractive at 6.1%, with valuations upside
from MS.
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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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70.2
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115.2
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124.4
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128.9
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Net property income
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53.3
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90.3
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100.3
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103.5
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Distributable income
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34.2
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54.0
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56.9
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60.6
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DPU (sen)
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7.5
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6.9
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7.0
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7.4
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DPU growth (%)
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0.0
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(8.1)
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0.8
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6.5
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Price/DPU(x)
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15.2
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16.6
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16.5
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15.5
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P/BV (x)
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0.8
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0.8
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0.8
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0.8
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DPU yield (%)
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6.6
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6.0
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6.1
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6.5
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ROAE (%)
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6.4
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7.5
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6.3
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6.7
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ROAA (%)
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4.0
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4.3
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3.5
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3.7
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Debt/Assets (x)
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0.4
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0.4
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0.4
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0.4
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Share
Price:
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MYR1.79
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Target
Price:
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MYR1.70
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Recommendation:
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Hold
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Wins contract
from KVMRT 2
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Kimlun won a precast contract for KVMRT 2 worth MYR200m,
leading its outstanding precast order to MYR280m (+250%). Although the
contract value was below expectation, there is further potential
precast job win from the other rail projects in Malaysia and Singapore.
Our earnings forecasts are unchanged but we lift our TP to MYR1.70
(+13%) based on a higher 11x 2017 PER on its strong job win prospect.
Maintain HOLD.
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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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1,206.4
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1,053.6
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1,095.3
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1,079.8
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EBITDA
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90.7
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114.5
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92.5
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92.8
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Core net profit
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33.8
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64.4
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49.4
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45.6
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Core EPS (sen)
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11.3
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21.4
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16.4
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15.2
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Core EPS growth (%)
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(5.3)
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90.5
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(23.3)
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(7.7)
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Net DPS (sen)
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3.5
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6.4
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4.4
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4.1
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Core P/E (x)
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15.9
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8.3
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10.9
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11.8
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P/BV (x)
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1.3
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1.2
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1.1
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1.0
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Net dividend yield (%)
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2.0
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3.5
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2.5
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2.3
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ROAE (%)
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9.7
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15.0
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10.3
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8.9
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ROAA (%)
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3.8
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6.8
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5.0
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4.4
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EV/EBITDA (x)
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5.0
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4.2
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6.5
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6.2
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Net debt/equity (%)
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23.2
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14.7
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12.2
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7.8
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MACRO RESEARCH
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Technical Research
by Lee
Cheng Hooi
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Window dressing
test of 1,726?
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The FBMKLCI gained 12.63 points to close at 1,715.04
yesterday, while the FBMEMAS and FBM100 rose 80.22 points and 81.14
points respectively. In terms of market breadth, the gainer-to-loser
ratio was 417-to-376, while 375 counters were unchanged. A total of
1.65b shares were traded valued at MYR2.16b.
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NEWS
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Outside Malaysia:
U.S: Yellen says caution in raising rates ‘especially
warranted’. Federal Reserve Chair Janet Yellen said it is appropriate for
U.S. central bankers to “proceed cautiously” in raising interest rates
because the global economy presents heightened risks. The speech to the
Economic Club of New York made a strong case for running the economy hot
to push away from the zero boundary for the Federal Open Market
Committee’s target rate. “I consider it appropriate for the committee to
proceed cautiously in adjusting policy,” Yellen said in the text of
prepared remarks. “This caution is especially warranted because, with the
federal funds rate so low, the FOMC’s ability to use conventional
monetary policy to respond to economic disturbances is asymmetric.”
(Source: Bloomberg)
U.S: Consumer confidence rose more than forecast in March
as American households grew upbeat about prospects for the labor market
and economy. The Conference Board’s sentiment index rose to 96.2 this
month from a revised 94 reading in February that was higher than
previously reported, the New York-based private research group said. The
survey reflected responses received through March 17. (Source: Bloomberg)
U.K: Bank of England raises buffer rate as stability risks
grow. The Bank of England said banks should begin building up capital
earmarked to support lending when the economy turns down, as the outlook
for U.K. financial stability worsens. The BOE’s Financial Policy
Committee raised the countercyclical capital buffer rate for U.K.
exposures to 0.5% of risk-weighted assets from zero, becoming binding
from March 29 next year. The buffer applies to U.K. banks and building
societies, as well as to branches of other European Union banks that lend
into the country. (Source: Bloomberg)
Japan: Industrial output declines as falling exports sap
demand. Japan’s industrial production dropped the most since 2011 in
February, as falling exports sapped demand and a steel-mill explosion
halted domestic car production at Toyota Motor Corp. Output slumped 6.2%
after rising 3.7% in January, the trade ministry said. The data adds to
signs of a weak recovery from last quarter’s contraction, with overseas
shipments dropping for the last five months and domestic demand weak.
With pressure building on policy makers to bolster growth, Prime Minister
Shinzo Abe said that the government would front load spending after
parliament passed a record budget for the 12 months starting April 1. He
resisted calls for a supplementary fiscal package. (Source: Bloomberg)
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Other News:
Felda Global Ventures: Names Zakaria Arshad as new CEO.
Felda Global Ventures Holdings (FGV) has appointed Datuk Zakaria Arshad,
a son of a Felda settler, as its new group president and CEO effective
April 1, 2016, ending months of speculation over Datuk Mohd Emir Mavani
Abdullah’s term. Mohd Emir ends his three-year tenure as head of the
plantation giant on March 31, 2016. Zakaria has served Felda group for
the past 32 years since 1984. (Source: The Sun Daily)
Sunway: Property arm offers buyers financial help amid
softer economy. Sunway’s property arm is providing financial assistance
under its guaranteed loan scheme to help buyers own its products. Under
the Sunway Property Certainty Campaign, the group offers three packages
which include the guaranteed loan, deferred payment and voluntary exit
plan. This was to address issues arising from economic uncertainties that
were affecting buyers, especially in terms of getting loan approvals.
Buyers were given the additional option of applying for loans with Sunway
besides with commercial banks, provided they meet the basic criteria.
(Source: The Star)
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